How long-term loyalty to Russia cost Armenia dearly

Russia is a key strategic ally of Armenia. To win Moscow’s favor, Armenia literally had to pay dearly. It was on Russian aid that Yerevan counted most of all after the start of the second Karabakh war. However, these hopes were largely dashed. Novaya Gazeta analyzed Russian-Armenian relations in this context.

Full version of the material on the Novaya Gazeta website in Russian

In the summer of 2015, protests erupted in Yerevan against the rise in electricity prices. Electric Networks of Armenia was going to raise prices 150%, then bargained with the government by 17 percent, but people still went to Freedom Square in Yerevan.

By this time, Armenia was already a regional leader in electricity production, experts at that time assessed its prime cost as the lowest in the post-Soviet space. But payments by Armenian households and businesses were higher than those in neighboring countries.

The Armenians cursed the government. In fact, prices for electricity in Armenia were raised by the Russian state-owned company Inter RAO UES.

Electric Networks of Armenia is its 100% owned subsidiary.

Help – the Russian way

Armenia is a rather poor country. There is no outlet to the sea, there is no oil, there is not much of a subsoil. And in 1988 she also suffered from a monstrous earthquake, and still has not recovered from the blow.

A wave with a capacity of 6.25 points reached the city of Metsamor in the central part of the republic, where the Armenian nuclear power plant is located, which produces a third of all electricity in the country. The station, designed for nine-point tremors, withstood. But this happened two years after Chernobyl, in the midst of atomophobia. And the USSR Council of Ministers decided to stop the nuclear power plant.

Then the war for Karabakh began, hydroelectric power plants on mountain rivers and the main gas pipeline constantly went out of order. And after the collapse of the USSR, a real energy hunger began in Armenia.

Russia in a brotherly way extended a helping hand to the already independent Armenia. Armenia was recovering after the earthquake and the war, it did not have enough funds for this, so Russia supplied it with electricity on credit.

By 2001, $100 million had accumulated.

Every year 18 million from the Armenian economy were consumed by debt servicing. Servicing loans worth 800 million received from Western countries was one and a half times cheaper.

For reference.

In the same 2001, Russia forgave four billion dollars of Ethiopia’s debt.

In 2000 – nine billion to Vietnam.

In total, from 2000 to 2005, Russia wrote off about 30 billion to Tanzania, Iraq, Laos, Benin, Guinea-Bissau and other close friends.

Armenia, however poor it was, had constellations of businesses that could generate income, particularly the military-industrial complex of the times of the USSR. The Nairit chemical plant (the main product is rubber), the Mars plant (electronics), the Research Institute of Mathematical Machines, the Kajaran Copper-Molybdenum Combine and a number of smaller plants, the Sevan-Hrazdan cascade of hydroelectric power stations – eight hydroelectric power plants.

In 2001, President Vladimir Putin visited Yerevan. “Russia wants to invest in Armenian enterprises,” Deputy Prime Minister Ilya Klebanov said then about the purpose of the visit.

This was presented as another hand of brotherly assistance. That is, from that moment Russia extended both hands to Armenia.

The embrace was called the Property versus Debt program, and the agreement was signed in 2002. The Mars plant was estimated at $56 million, three research institutes and a chemical plant at less than $7 million, and the Hrazdan cascade at $31 million.

Then other enterprises that could bring at least some income to the budget of Armenia, almost all of its energy, railways, gold and molybdenum mines – everything became the property of Russian companies closest to the state: Rosneft, Gazprom, Russian Railways and others, smaller.

In January 2013, Gazprom became the 100% owner of Armenia’s gas facilities.

The “gas contract” signed by Presidents Putin and Sargsyan assumed that gas would be supplied to Armenia at domestic Russian prices.

In practice, it turned out like this: “Gazprom” actually sold gas at domestic Russian prices to its 100% subsidiary. But “on the border” of Armenia gas suddenly grew in price – and the “daughter” sold this gas to consumers twice as expensive.

Allies

For a long time, the Armenian authorities tried to sit on two chairs: to be friends with both Russia and the West. To cooperate with Russia in the EAEU (Eurasian Economic Union) politically, and to integrate into the European Union economically.

Negotiations were held with Russia on joining the Customs and Eurasian Economic Unions. At the same time, the alliance did not promise anything good economically for Armenia. For a simple reason: the lack of a common border with other members of the future EAEU nullified the perceived benefit from a common economic space.

Moreover, Armenia was expecting a serious rise in prices, it was necessary to develop a whole list of “sensitive goods”, whose rise in price would have to be compensated from the budget.

But two words – Nagorno-Karabakh – forced Armenia to make any concessions, and they expected Russia to be an “umbrella” for Artsakh.

At the same time, Armenia was negotiating with Europe on the Association Agreement. In July 2013, they were crowned with success; it was expected that the parties would sign an agreement in the fall. Then, in July, it became known that Russia had raised the price of gas for Armenia: from $ 180 per thousand cubic meters to $ 270.

They say that President Serzh Sargsyan, who was then on vacation, was urgently summoned to Moscow to report it. In September, he again met with President Putin – and announced that there would be no European integration yet, and Armenia expressed a desire to join the Eurasian Union.

At the beginning of 2014, this issue was considered resolved. But they were in no hurry to admit Armenia to the union – one of the reasons was Karabakh.

Armenia insisted that he, too, be taken into the union, and Russia seemed to even promise, but it turned out that this was impossible. Because Karabakh, Russia explained, is not recognized by the international community. We repeat: Russia said this in May 2014, that is, two months after the annexation of Crimea. And Armenia, let us note in parentheses, was one of the very few countries that welcomed the referendum in Crimea.

At one of the meetings of the Supreme Eurasian Economic Council of the EAEU, in the presence of the Armenian delegation, a letter from Azerbaijani President Ilham Aliyev was read out, asking to accept Armenia into the union “only within the framework of its internationally recognized borders.” That is, without Karabakh. Armenians perceived this as humiliation.

The next blow was the sale by Russia of another consignment of weapons to Azerbaijan. But Armenia tolerated this too, because they continued to promise it the main thing: an “umbrella” for Karabakh. The Armenians believed: if anything happened there, Russia would come and help. She didn’t come at the right moment and didn’t help.