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State Department Documents and Publications
August 19, 2011
Background Notes : Armenia
Official Name: Republic of Armenia
PROFILE
Geography
Area: 29,800 sq. km. (11,500 sq. mi.); slightly larger than Maryland.
Cities: Capital--Yerevan.
Terrain: High plateau with mountains, little forest land.
Climate: Highland continental, hot summers, cold winters.
People
Nationality: Noun--Armenian(s). Adjective--Armenian.
Population: Estimates range from 2,967,004 (CIA World Factbook, July
2009 est.) to 3,259,000 (Armenia National Statistical Service, October
1, 2010 est.).
Ethnic groups: Armenian 97.9%; Yezidi 1.3%; Russian, Greek, and other 0.8%.
Religion: Armenian Apostolic Church (more than 90% nominally affiliated).
Languages: Armenian (96%), Russian, other.
Education: Literacy--99%.
Health: Infant mortality rate--20.21/1,000. Life expectancy--72.68 years.
Work force (1.481 million; 7.1% unemployed): Industry and
construction--15.6%; agriculture and forestry--46.2%; services--38.2%.
Government
Type: Republic.
Constitution: Approved in July 1995 referendum, amended in November 2005.
Independence: 1918 (First Armenian Republic); 1991 (from Soviet Union).
Branches: Executive--president (head of state) with wider powers
relative to other branches, prime minister (head of the ministerial
cabinet). Legislative--unicameral National Assembly (parliament).
Judicial-- Constitutional Court (constitutional matters exclusively);
Court of Cassation, Appeals Courts (Civil and Criminal), Courts of
First Instance.
Administrative subdivisions: 10 marzes (regions) and capital Yerevan.
Political parties represented in the National Assembly: Republican
Party of Armenia, Prosperous Armenia, Armenian Revolutionary
Federation Dashnaktsutyun (ARF), Country of Law (Orinats Yerkir), and
the Heritage Party. Other political parties and movements include: the
Armenian National Congress, People's Party of Armenia, National Accord
Party, Republic Party, New Times Party, United Labor Party, Dashink
Party, National Democratic Union, Armenian National Movement, Free
Democrats Party, and dozens of other registered parties, many of which
become active only during national campaigns, if at all.
Suffrage: Universal at 18.
Economy (2010)
GDP: $9.4 billion (National Statistical Service of Armenia).
GDP growth rate (National Statistical Service ): 2.6%.
Per capita GDP PPP (National Statistical Service): $2,900.
Inflation (National Statistical Service): 8.2%.
Natural resources: Copper, molybdenum, zinc, gold, silver, lead,
marble, granite, mineral spring water.
Agriculture: Products--fruits and vegetables, wines, dairy, some livestock.
Industry: Types--diamond-processing, metal-cutting machine tools,
forging-pressing machines, electric motors, tires, knitted wear,
hosiery, shoes, silk fabric, chemicals, trucks, instruments,
microelectronics, jewelry manufacturing, software development, food
processing, brandy.
Trade: Exports--$1billion: pig iron, unwrought copper, nonferrous
metals, diamonds, mineral products, foodstuffs, energy. Export
partners (2010)-- Russia 13%, Germany 16%, Bulgaria 15.3%, US 9%,
Netherlands 9%, Georgia 5%. Imports (2010)--$3.8 billion: natural gas,
petroleum, tobacco products, foodstuffs, diamonds. Import partners
(2010)--Russia 16%, UAE 9%, Ukraine 5.4%, Iran 5.2%.Turkey 4.7% .
PEOPLE AND HISTORICAL HIGHLIGHTS
Armenia first emerged around 800 BC as part of the Kingdom of Urartu
or Van, which flourished in the Caucasus and eastern Asia Minor until
600 BC. After the destruction of the Seleucid Empire, the first
Armenian state was founded in 190 BC. At its zenith, from 95 to 65 BC,
Armenia extended its rule over the entire Caucasus and the area that
is now eastern Turkey, Syria, and Lebanon. For a time, Armenia was the
strongest state in the Roman East. It became part of the Roman Empire
in 64 BC.
In 301 AD, Armenia became the first nation to adopt Christianity as a
state religion, establishing a church that still exists independently
of both the Roman Catholic and the Eastern Orthodox churches. Since
then, the Armenian nation has depended on the church to preserve and
protect its national identity. From around 1100 to 1350, the focus of
the Armenian nation moved south, as the Armenian Kingdom of Cilicia,
which had close ties to European Crusader states, flourished in
southeastern Asia Minor until it was conquered by Muslim states.
Between the 4th and 19th centuries, ethnic Armenians were conquered
and ruled by, among others, Persians, Byzantines, Arabs, Mongols, and
Ottoman Turks.
For a brief period from 1918 to 1920, Armenia re-emerged as an
independent republic. In late 1920, local communists came to power
following an invasion of Armenia by the Soviet Red Army, and in 1922,
Armenia became part of the Trans-Caucasian Soviet Socialist Republic.
In 1936, it became the Armenian Soviet Socialist Republic. Armenia
declared its independence from the Soviet Union on September 21, 1991.
GOVERNMENT AND POLITICAL CONDITIONS
Armenians voted overwhelmingly for independence in a September 1991
referendum, followed by a presidential election in October 1991 that
gave 83% of the vote to Levon Ter-Petrossian. Ter-Petrossian had been
elected head of government in 1990, when the Armenian National
Movement defeated the Communist Party. Ter-Petrossian was re-elected
in 1996 in a disputed election. Following public demonstrations
against Ter-Petrossian's policies on the predominantly ethnic Armenian
enclave of Nagorno-Karabakh that is located within Azerbaijan, the
President resigned under pressure in January 1998 and was replaced by
Prime Minister Robert Kocharian, who was subsequently elected
President in March 1998. Following the October 27, 1999 assassination
in Parliament of Prime Minister Vazgen Sargsian, Parliament Speaker
Karen Demirchian, and six other officials, a period of political
instability ensued during which an opposition headed by elements of
the former Armenian National Movement government attempted
unsuccessfully to force Kocharian to resign. Riding out the unrest,
Kocharian was later reelected in March 2003 in a contentious election
that the Organization for Security and Cooperation in Europe (OSCE)
and the U.S. Government deemed to have fallen short of international
standards.
The Government of Armenia's stated aim is to build a Western-style
parliamentary democracy as the basis of its form of government.
However, international observers have been critical of the conduct of
national elections in 1995, 1999, 2003, 2008, as well as the
constitutional referendum of 2005. The new constitution in 2005
increased the power of the legislative branch and allows for more
independence of the judiciary; in practice, however, both branches
remain subject to political pressure from the executive branch, which
retains considerably greater power than its counterparts in most
European countries.
The unicameral National Assembly has a total of 131 seats: 90 seats
are elected by proportional representation (party list), and 41 are
single mandate districts. Armenia held its most recent parliament
elections in 2007, when the Republican Party of Armenia (RPA) won 33
percent of the votes cast, followed by Prosperous Armenia (15
percent), the Armenian Revolutionary Federation Dashnaktsutyun (ARF)
(13 percent), Rule of Law (7 percent), and the Heritage Party (6
percent). This election as well was marred by irregularities. The RPA
and Prosperous Armenia joined to form a governing coalition which
secured an absolute majority of parliament seats. The ARF negotiated a
cooperation agreement with the governing coalition in exchange for
ministerial positions, but declined to join the coalition formally,
instead reserving the right to support its own candidate for the
February 2008 presidential election.
Following the 2008 presidential elections the Republican Party of
Armenia, Prosperous Armenia, the Rule of Law, and the ARF signed a new
coalition agreement on March 21, 2008. The ARF dropped out of the
coalition in April 2009 citing differences over the conduct of foreign
policy.
Armenia held presidential elections on February 19, 2008. While
originally deemed by the OSCE's Office for Democratic Institutions and
Human Rights (ODIHR) to be "mostly in line" with OSCE standards, the
elections were later seen to be marred by credible claims of ballot
stuffing, intimidation (including beatings) of poll workers and
proxies, vote buying, and other irregularities. Recounts were
requested, but ODIHR observers noted "shortcomings in the recount
process, including discrepancies and mistakes, some of which raise
questions over the impartiality of the [electoral commissions]
concerned."
Mass protests followed the disputed vote. For 10 days, large crowds of
pro-opposition demonstrators gathered in Yerevan's downtown Freedom
Square. Police and security forces entered Freedom Square early in the
morning on March 1, 2008, ostensibly to investigate reports of hidden
weapons caches. This operation turned into a forced dispersal of
demonstrators from Freedom Square by massed riot police. Following the
clearing of Freedom Square, clashes erupted in the afternoon between
massed demonstrators and security personnel, and continued throughout
the day and evening, leading to ten deaths and hundreds of injuries.
President Kocharian decreed a 20-day state of emergency in Yerevan
late on March 1, which sharply curtailed freedom of media and
assembly. Dozens of opposition supporters were jailed in the wake of
the violence, in proceedings that many international watchdog groups
have criticized as politically motivated. Armenia's media freedom
climate and freedom of assembly remained poor overall, though somewhat
improved after the state of emergency was lifted. In June 2009 and May
2011, President Sargsian proposed and the Parliament approved two
general amnesties which resulted in the release from jail of all those
detained in connection with the March 2008 events. In the spring of
2011, the leading opposition group was also able to resume -- after a
three-year prohibition -- the holding of authorized rallies in
Yerevan's Freedom Square. In April 2011, President Sargsian called for
a more meticulous examination of the violence that followed the
post-elections protests in 2008.
Upcoming elections will be held in May 2012 for the Armenian National
Assembly and February 2013 for the Presidency.
Principal Government Officials
President-Serzh Sargsian
Prime Minister-Tigran Sargsian (no relation)
Foreign Minister-Edward Nalbandian
Defense Minister-Seyran Ohanian
Ambassador to the U.S.-Tatoul Markarian
Ambassador to the UN-Garen Nazarian
Armenia's embassy is located at 2225 R Street, NW, Washington, DC,
20008; tel: 202-319-1976; fax: 202-319-2982.
ECONOMY
Armenia is the second most densely populated of the former Soviet
republics. It is a landlocked country between the Black and the
Caspian Seas, bordered on the north by Georgia, to the east by
Azerbaijan, on the south by Iran, and to the west by Turkey. Up until
independence [1991], Armenia's economy was based largely on
industry--chemicals, electronic products, machinery, processed food,
synthetic rubber, and textiles--and highly dependent on outside
resources. Agriculture accounted for only 20% of net material product
and 10% of employment before the breakup of the Soviet Union.
Construction, which was the leading sector of the economy for the past
eight years, constituting 27% of the country's GDP in 2008, declined
by 34.6% in 2009. In 2010, the sector continued to shrink, with a
decrease of three percent compared to the same period in 2009. The
beginning of the slowdown in construction coincided with the tense
political situation connected to the presidential election campaign
and the post-election civil unrest in 2008. Market saturation, a drop
in demand related to the global economic crisis, and a steep decline
in foreign remittances contributed to the further slowdown.
Like other New Independent States of the former Soviet Union,
Armenia's economy still suffers from the legacy of a centrally planned
economy and the breakdown of former Soviet trading networks. While
investment from these states in support of Armenian industry has
virtually disappeared, and few major enterprises are still able to
function, Russian entities have nevertheless increased their ownership
in the mining, energy, telecommunications, and transportation sectors.
In addition, the effects of the 1988 earthquake, which killed more
than 25,000 people and made 500,000 homeless, are still being felt,
though international donors and diaspora Armenian groups continue to
fund reconstruction efforts in the earthquake zone.
Although a cease-fire has held since 1994, the 20-year-old conflict
with Azerbaijan over Nagorno-Karabakh has not been resolved. While
intensive efforts by the OSCE Minsk Group is ongoing in pursuit of a
settlement, for the time being, the closure of both the Azerbaijani
and Turkish borders has prevented Armenia from realizing its economic
potential. Armenia's economy depends heavily on outside supplies of
energy and most raw materials. While land routes to Turkey are closed,
regular and charter air connections operate between Yerevan and
Istanbul and Antalya; land routes through Georgia and Iran raise the
risk and cost of transport.
The structure of Armenia's economy has changed substantially since
independence in 1991, with sectors such as construction and services
replacing agriculture and industry as the main contributors to
economic growth. The diamond processing industry, which was one of the
leading export sectors in 2000-2004 and a major recipient of foreign
investment, faced a dramatic decrease in output since 2005 due to raw
material supply problems with Russia and an overall decline in
international diamond markets. Other industrial sectors driving
industrial growth include energy, metallurgy, and food processing.
Despite the Nagorno-Karabakh conflict, the Government of Armenia has
been able to carry out wide-ranging economic reforms that have paid
off in dramatically lower inflation and relatively steady growth.
Armenia registered strong economic growth after 1995, with
double-digit GDP growth rates every year from 2002 to 2007.
After rapid expansion in 2001-2007, economic and financial conditions
worsened rapidly in Armenia in 2008, due to a drop in international
metals prices and a downturn in the Russian economy following the
collapse of oil prices in late 2008. The end of a remittance-fueled
construction boom that had driven growth in recent years resulted in a
14.4% drop of real GDP for 2009 (compared to 6.8% GDP growth in 2008),
with about 80% of this decline due to a plunge in the construction
sector. Since 2008, Armenia has experienced a significant drop in
investment, exports, and in real incomes primarily caused by the
global financial crisis. The Government of Armenia's (GOAM)
anti-crisis measures, additional loans and budgetary support from
international donors helped to avoid further economic decline in 2010.
However, economic indicators, while on the rebound, still fall short
of the pre-crisis growth trend for the two decades following
independence. Gradual recovery of remittance flows in comparison to
2009 also contributed to the slight upturn. Nevertheless, poverty and
prices remain high, and the sustainability of growth remains a
concern. Some of the major impediments for potential investors remain
the lack of transparency in the tax and customs administration, the
unpredictability of doing business in Armenia, and unequal competition
between domestic and foreign firms.
Armenia maintains a floating exchange rate regime with no explicit
exchange rate target. The nominal exchange rate of the Armenian dram
with major currencies was fairly stable between 1998 and 2003. During
2003-2007, the Armenian Dram appreciated sharply against the US dollar
by around 45%, mainly due to significant growth in remittances, growth
of exports in absolute terms, the de-dollarization of the economy and
weakening of the dollar in international markets. The appreciation of
the dram affected negatively the traditional export industries,
including information technologies, diamond cutting, the wine
industry, and textiles. Exporters responded to the increased costs by
either reducing their capacities of production or by reducing their
number of employees in order to stay afloat. During 2008, the exchange
rate was mainly stable at around 300 drams per dollar, until March
2009, when the Central Bank stopped its heavy intervention in the
foreign exchange market and announced that it would adopt a floating
currency regime. As a result, the Dram devalued by around 25%, and has
remained roughly stable at this rate of exchange.
Armenia is highly dependent on import of energy fuel, mainly from
Russia. The Armenia Nuclear Power Plant (ANPP) at Metsamor provides
around 40% of electricity generation for the country, and hydro and
thermal plants provide roughly 30% each. Armenia imports most of its
natural gas from Russia, which provided significant discounts to
Armenia until 2009. Russian import gas prices rose from $110 to $154
per thousand cubic meters in April 2009, and increased further to $180
in April 2010. The gas price was set to further rise in April 2011 to
approach the international market price, but this has been temporarily
averted as a result of extensive negotiations between the Russian and
Armenian governments. However, the current price is still below the
international average of over $300, and in the coming years the price
is expected to converge with market prices.
Since May 2006 Armenia has also received natural gas from Iran through
a direct pipeline between the two countries, in addition to tanker
trucks. As a result of a Gazprom-brokered deal, Armenia and Iran
participate in a program of direct exchange of natural gas for
electric power, which has diversified Armenia's supply of gas
products.
Armenia imports nearly all of its refined petroleum products through
Georgia. The August 2008 conflict between Russia and Georgia resulted
in periodic disruptions of fuel and food imports, and highlighted
Armenia's vulnerability to this primary transit corridor.
Armenia has received significant support from international
institutions. The International Monetary Fund (IMF), World Bank,
European Bank for Reconstruction and Development (EBRD), as well as
other international financial institutions (IFIs) and foreign
countries, particularly Russia, are extending considerable grants and
loans. These loans are targeted at reducing the budget deficit,
stabilizing the local currency; developing private businesses; energy;
and the agriculture, food processing, transportation, and health and
education sectors. In 2009 Armenia received more than $ 1.5 billion in
donor financing for budget support and different government-led
anti-crisis programs. In 2011, the Eurasian Economic Community
(EurAsEC), an economic organization in which Russia is a principal
participant, provided a loan of $500 million to finance Armenia's
external debt and restructure a number of branches in the Armenian
economy, in return for the transfer of major assets. Further, Russian
energy conglomerates have pledged to invest $71 million in natural gas
and electricity distribution networks in Armenia in 2011.
Continued economic growth will depend on the ability of the government
to strengthen its macroeconomic management, including increasing
revenue collection, improving the investment climate, and combating
significant corruption. A liberal foreign investment law was approved
in June 1994, and a Law on Privatization was adopted in 1997, as well
as a program on state property privatization. Armenia joined the World
Trade Organization on February 5, 2003. Armenia recently acceded to
the WTO's Agreement on Government Procurement which imposes an
obligation to improve its existing procurement practices.
See also U.S. Assistance to Armenia below.
Environmental Issues
Armenia is trying to address its environmental problems. The Ministry
of Nature Protection has introduced a pollution fee system by which
taxes are levied on air and water emissions and solid waste disposal,
with the resulting revenues used for environmental protection
activities. Deforestation by mining concerns in certain parts of the
country, especially the Teghut Forest in the Lori marz (region), have
resulted in periodic protests by environmental non-governmental
organizations (NGOs), and stirred controversy over government policies
to support investment in the mining sector. Armenia is interested in
cooperating with other members of the Commonwealth of Independent
States (CIS--a group of 11 former Soviet republics) and with members
of the international community on environmental issues. Armenia has
been under strong pressure from the international community to close
its thirty-five year old nuclear power plant (ANPP) at Metsamor by
2016. This pressure has only increased in the aftermath of the
Fukushima nuclear disaster in Japan in March 2011. Given that Armenia
depends on the ANPP for over 40% of its electricity, the Armenian
Government sees no alternative to construction of a new nuclear plant.
A U.S. Agency for International Development (USAID)-funded initial
planning study was completed in 2009, and concluded that a new nuclear
plant is the least-cost option to replace the existing facility:
however, construction of a new plant will still be expensive, costing
between $5 billion and $7.2 billion to complete, and will likely
require significant foreign investment capital. The Armenian
Government is continuing with the planning process for a new plant.
Beginning in 2010, USAID is providing technical assistance to the
Government of Armenia to ensure that the new nuclear plant meets
proper safety and environmental standards.
DEFENSE AND MILITARY ISSUES
Armenia established a Ministry of Defense in 1992. Border guards
subject to the National Security Service patrol Armenia's borders with
Georgia and Azerbaijan, while Russian Border Guards continue to
monitor its borders with Iran and Turkey. In August 2010 the
Government of Armenia signed an extension to this agreement with
Russia, providing for a continued Russian border guard presence until
2046.
The Conventional Armed Forces in Europe (CFE) Treaty was ratified by
the Armenian parliament in July 1992. The treaty establishes
comprehensive limits on key categories of military equipment, such as
tanks, artillery, armored combat vehicles, combat aircraft, and combat
helicopters, and provides for the destruction of weaponry in excess of
those limits. Armenian officials have consistently expressed
determination to comply with its provisions in spite of concerns they
have about Azerbaijan exceeding that country's treaty limits. Armenia
has provided data on armaments as required under the CFE Treaty and is
receptive to CFE inspections. Armenia recently passed laws to control
export of military and dual use goods to fulfill its arms control
obligations. Armenia is not a significant exporter of conventional
weapons, but it has provided substantial support, including materiel,
to ethnic Armenian separatists in the disputed and predominantly
ethnic Armenian enclave of Nagorno-Karabakh located within
Azerbaijan's borders.
In March 1993, Armenia signed the multilateral Chemical Weapons
Convention, which calls for the eventual elimination of chemical
weapons. Armenia acceded to the nuclear Non-Proliferation Treaty as a
non-nuclear weapons state in July 1993. In July 2008 the U.S. and
Armenia signed an action plan to partner on Combating Smuggling of
Nuclear and Radiological Materials under the U.S. Department of
State's Nuclear Smuggling Outreach Initiative (NSOI). In the same
framework, Armenia is participating in the U.S.-led Preventing Nuclear
Smuggling Program (PNSP). In April 2010 Armenia's President Serzh
Sargsian attended the first-ever Nuclear Security Summit (NSS) that
the United States hosted. Armenia also participates in the Global
Initiative to Counter Nuclear Terrorism (GICNT). The U.S. and other
Western governments continue to work with Armenia to strengthen export
control systems.
In September 2010, Armenia and the United States signed an agreement
to implement a Biological Threat Reduction Program, which will enhance
U.S.-Armenia cooperation in preventing the proliferation of
technology, pathogens, and expertise that could be used in the
development of biological weapons.
Armenia cooperates with NATO through the Partnership for Peace program
which it joined in 1994.
FOREIGN RELATIONS
Armenia is a member of the United Nations, the Council of Europe, the
European Neighborhood Program of the EU, the Organization for Security
and Cooperation in Europe (OSCE), the Commonwealth of Independent
States (CIS), NATO's Partnership for Peace, the Collective Security
Treaty Organization (CSTO), the Organization of the Black Sea Economic
Cooperation organization (BSEC), the Euro-Atlantic Partnership
Council, the International Monetary Fund, the International Bank for
Reconstruction and Development, and the World Trade Organization.
Turkey-Armenia Relations
Turkey closed its border with Armenia in 1993 as a show of support for
Azerbaijan in the conflict over Nagorno-Karabakh. On October 10, 2009,
the Foreign Ministers of Turkey and Armenia signed normalization
protocols that called for the opening of the Turkey-Armenia border,
establishing diplomatic relations, and the creation of a number of
sub-commissions addressing bilateral issues. However, the protocols
have not yet been ratified by either country, and Armenia formally
suspended parliamentary consideration of the protocols in April 2010.
The Armenian Government stressed its willingness to reactivate the
process "when there is a proper environment in Turkey and there is
leadership in Ankara ready to reengage in the normalization process."
Nagorno-Karabakh
In 1988, the territory of Nagorno-Karabakh, a predominantly ethnic
Armenian enclave within Azerbaijan, voted to secede and join Armenia.
This act was the catalyst that led Armenia and Azerbaijan into a
full-scale armed conflict that claimed the lives of over 30,000 people
on both sides. Armenian support for the separatists led to an economic
embargo by Azerbaijan, which has had a negative impact on Armenia's
foreign trade and made imports of food and fuel, three-quarters of
which previously transited Azerbaijan under Soviet rule, more
expensive.
Peace talks in early 1993 were disrupted by the seizure of
Azerbaijan's Kelbajar district by Nagorno-Karabakh Armenian forces and
the forced evacuation of thousands of ethnic Azeris. Turkey in protest
then followed with an embargo of its own against Armenia. A cease-fire
was declared between Azerbaijani and Armenian/Nagorno-Karabakh forces
in 1994 and has been maintained by both sides since then in spite of
occasional shooting along the line of contact. All Armenian
governments have thus far resisted domestic pressure to recognize the
self-proclaimed independence of the "Nagorno-Karabakh Republic," while
at the same time announcing they would not accept any peace accords
that returned the enclave to Azerbaijani rule. Approximately 572,000
of the estimated 800,000 ethnic Azeris who fled during the Karabakhi
offensives still live as internally displaced persons in Azerbaijan
(according to the Internal Displacement Monitoring Centre, quoting
Azerbaijani Government statistics, June 2008 ), while roughly 4,700 of
360,000 ethnic Armenians who fled Azerbaijan since 1988 remain
refugees.
Negotiations to peacefully resolve the conflict have been ongoing
since 1992 under the aegis of the Minsk Group of the OSCE. The Minsk
Group is co-chaired by the U.S., France, and Russia. Negotiations have
intensified since 2004. Ambassador Robert Bradtke became U.S. Co-Chair
in 2009.
U.S.-ARMENIAN RELATIONS
The dissolution of the Soviet Union in December 1991 brought an end to
the Cold War and created the opportunity for bilateral relations with
the New Independent States (NIS) as they began a political and
economic transformation. The U.S. recognized the independence of
Armenia on December 25, 1991, and opened an Embassy in Yerevan in
February 1992.
U.S.-Armenian Economic Relations
In 1992 Armenia signed three agreements with the U.S. affecting trade
between the two countries. They include an "Agreement on Trade
Relations," (which entered into force in April 1992) an "Investment
Incentive Agreement," (which also entered into force in April 1992)
and a treaty on the "Reciprocal Encouragement and Protection of
Investment" (generally referred to as the Bilateral Investment Treaty,
or BIT, which entered into force in March 1996). The 1973 "Convention
on matters of Taxation" concluded with the former USSR remains in
force with Armenia. The 1994 Law on Foreign Investment governs all
direct investments in Armenia, including those from the U.S.
In June 2011, the Department of State and the Ministry of Energy and
Natural Resources of Armenia signed a Memorandum of Understanding on
unconventional and conventional energy resources. The MOU aims to
enhance cooperation between U.S. and Armenian experts to assess
Armenia's potential energy resources, including shale gas.
Approximately 70 U.S.-owned firms currently do business in Armenia,
including Dell, Microsoft, and IBM. Recent major U.S. investment
projects include the Hotel Armenia/Marriott; the Hotel Ani Plaza;
Tufenkian Holdings (carpet and furnishing production, hotels, and
construction); several subsidiaries of U.S.-based information
technology firms, including Viasphere Technopark, an IT incubator;
Synopsys; a Greek-owned Coca-Cola bottling plant; jewelry and textile
production facilities; several copper and molybdenum mining companies;
and the Hovnanian International Construction Company.
U.S. Assistance to Armenia
The United States has made a concerted effort to help Armenia and
other NIS during their difficult transition from totalitarianism and a
command economy to democracy and open markets. The cornerstone of this
continuing partnership has been assistance provided through the
Freedom for Russia and Emerging Eurasian Democracies and Open Markets
(FREEDOM) Support Act, enacted in October 1992. In 2009, FREEDOM
Support Act funds were merged with another account and was renamed
Assistance to Europe, Eurasia and Central Asia (AEECA). Under this and
other programs, the U.S. to date has provided Armenia with nearly $2
billion in humanitarian and development assistance. An overview of
U.S. assistance to Armenia can be found at
http://www.foreignassistance.gov/OU.aspx?FY12andOUID2. In
addition, the U.S.-Armenia Joint Economic Task Force (USATF),
established in 2000, is a bilateral commission that meets annually to
review the progress and objectives of U.S. assistance to Armenia. The
Fall 2011 meeting will be held in Washington, DC.
U.S. assistance supports Armenia's transition into a stable partner at
peace with its neighbors, fully integrated into the regional economy,
where principles of democracy are respected, the benefits of economic
growth are shared by all segments of society, and Armenia's human
capital potential is fully realized. During the past year, the United
States provided multifaceted assistance to Armenia through a variety
of programs designed to promote economic growth, encourage democratic
governance, improve health and social protection systems, and enhance
Armenia's peace and security. The United States also provided
humanitarian assistance to the poor, elderly, and other vulnerable
groups. Assistance is provided through a "whole of government"
approach that involves a number of U.S. government agencies, including
the Departments of Agriculture, Commerce, Defense, Energy, Justice,
the Nuclear Regulatory Commission, the Millennium Challenge
Corporation (MCC), the Department of State, the United States Agency
for International Development (USAID), and Peace Corps.
On March 27, 2006, Armenia signed a five-year, $236 million Millennium
Challenge Corporation compact with the United States; the agreement
entered into force on September 29, 2006. The MCA-Armenia program is
focused on reducing rural poverty through a sustainable increase in
the economic performance of the agricultural sector. This goal is
being achieved through a five-year program of strategic investments in
rural roads, irrigation infrastructure and technical and financial
assistance to water supply entities, farmers, and commercial
agribusinesses. In 2009, MCC placed a hold on funding for a
significant portion of the rural road rehabilitation project because
of serious policy concerns about the 2008 presidential election. At
the June 2009 MCC Board meeting, the decision was made not to resume
funding for any further road construction and rehabilitation due to
concerns about the status of democratic governance in Armenia. Funding
for irrigation infrastructure and technical assistance, representing
nearly $180 million of the compact's value, remains in effect and
under implementation. The compact is expected to be completed in
September 2011. Beneficiaries will include 420,000 rural residents in
about 350 communities across Armenia.
(http://www.mcc.gov/pages/countries/overview/armenia)
Promoting Economic Growth
U.S. assistance addresses Armenia's economic vulnerabilities, which
have been exacerbated by the global economic crisis, while continuing
to support economic competitiveness. The U.S. continues to work
closely with international financial institutions like the
International Monetary Fund and the World Bank to help Armenia
continue its transition to a robust free-market economy. USAID and the
U.S. Department of Agriculture (USDA) implement the largest portion of
the United States' economic assistance activities. In addition to its
broader assistance programs, USAID implements a range of economic
assistance programs designed to enhance Armenia's macroeconomic
foundation for growth, promote trade and investment, and focus on
private sector competitiveness and workforce development in selected
industries, including information technology and tourism, and
development of the financial sector and fiscal authorities to achieve
a business enabling environment.
The USDA Caucasus Agricultural Development Initiative provides
targeted and sustained technical and marketing assistance to small and
medium-sized agribusinesses, farmer-marketing associations, and the
Government of Armenia. USDA's goal is to sustain the productivity of
the agricultural sector by expanding access to markets and credit,
increasing efficiency, and modernizing agriculture systems. USDA's
priority assistance areas are: Farm Credit, Food Safety and Animal
Health, support to the Armenian private sector through the NGO CARD,
Agricultural Statistics and Agricultural Education. Also, as a
training component of USDA projects in Armenia, the U.S. Department of
Agriculture's Cochran Fellowship Program provides training to Armenian
agriculturists in the United States.
Enhancing Democratic Governance
U.S. assistance programs enhance the Government of Armenia's capacity
to govern justly and democratically. The programs strengthen democracy
and the rule of law by improving legal education, promoting the
capacity of both prosecutors and the defense bar, raising judicial
ethics standards and human rights protections, fighting corruption and
improving the transparency, accountability and accessibility of
government entities (particularly at the local level), increasing
civic participation and government accountability by bolstering civil
society, strengthening independent media and increasing access to
information, and promoting free and fair elections and greater citizen
participation in the political process. U.S. assistance also
encouraged adoption of best practices within the criminal justice
system by reforming procedures to promote greater police
accountability, judicial independence, and fairness for those accused
of crimes. Additionally, U.S. programs support international and
domestic monitoring of Armenia's elections, thereby promoting
transparency and democratic values.
Educational exchange programs also play an important role in
supporting meaningful democratic and free-market reforms by instilling
important core values in Armenia's youth.
Professional exchange programs serve as a vehicle to share U.S.
experience with Armenian government officials, NGO activists, women
leaders, bloggers, journalists, lawyers, political party members,
business people, and other influential figures. These exchanges have
focused on a range of topics, including U.S. elections, law
enforcement, the American judiciary, women in business, conflict
resolution, the media, human rights, and youth leadership.
Principal U.S. Embassy Officials
Ambassador-Vacant
Charge' d'Affaires-Bruce Donahue
Political/Economic Chief-Barton Putney
Assistance Coordinator- RaeJean Stokes
Consular Officer-Robert Farquhar
Management Officer-Veronica Hons-Olivier
INL Chief--John Maher
EXBS Advisor--Earl "Fred" Carter
Resident Legal Advisor--Steve Kessler
Regional Security Officer-Timothy Leveque
USDA Marketing Assistance Project Director-Frederic Johnston
USAID Director-Jatinder Cheema
Public Affairs Officer-Karen Robblee
The U.S. Embassy in Yerevan, Armenia is at 1 American Avenue; tel:
374-10-46-47-00; fax: 374-10-46-47-42.
August 19, 2011
Background Notes : Armenia
Official Name: Republic of Armenia
PROFILE
Geography
Area: 29,800 sq. km. (11,500 sq. mi.); slightly larger than Maryland.
Cities: Capital--Yerevan.
Terrain: High plateau with mountains, little forest land.
Climate: Highland continental, hot summers, cold winters.
People
Nationality: Noun--Armenian(s). Adjective--Armenian.
Population: Estimates range from 2,967,004 (CIA World Factbook, July
2009 est.) to 3,259,000 (Armenia National Statistical Service, October
1, 2010 est.).
Ethnic groups: Armenian 97.9%; Yezidi 1.3%; Russian, Greek, and other 0.8%.
Religion: Armenian Apostolic Church (more than 90% nominally affiliated).
Languages: Armenian (96%), Russian, other.
Education: Literacy--99%.
Health: Infant mortality rate--20.21/1,000. Life expectancy--72.68 years.
Work force (1.481 million; 7.1% unemployed): Industry and
construction--15.6%; agriculture and forestry--46.2%; services--38.2%.
Government
Type: Republic.
Constitution: Approved in July 1995 referendum, amended in November 2005.
Independence: 1918 (First Armenian Republic); 1991 (from Soviet Union).
Branches: Executive--president (head of state) with wider powers
relative to other branches, prime minister (head of the ministerial
cabinet). Legislative--unicameral National Assembly (parliament).
Judicial-- Constitutional Court (constitutional matters exclusively);
Court of Cassation, Appeals Courts (Civil and Criminal), Courts of
First Instance.
Administrative subdivisions: 10 marzes (regions) and capital Yerevan.
Political parties represented in the National Assembly: Republican
Party of Armenia, Prosperous Armenia, Armenian Revolutionary
Federation Dashnaktsutyun (ARF), Country of Law (Orinats Yerkir), and
the Heritage Party. Other political parties and movements include: the
Armenian National Congress, People's Party of Armenia, National Accord
Party, Republic Party, New Times Party, United Labor Party, Dashink
Party, National Democratic Union, Armenian National Movement, Free
Democrats Party, and dozens of other registered parties, many of which
become active only during national campaigns, if at all.
Suffrage: Universal at 18.
Economy (2010)
GDP: $9.4 billion (National Statistical Service of Armenia).
GDP growth rate (National Statistical Service ): 2.6%.
Per capita GDP PPP (National Statistical Service): $2,900.
Inflation (National Statistical Service): 8.2%.
Natural resources: Copper, molybdenum, zinc, gold, silver, lead,
marble, granite, mineral spring water.
Agriculture: Products--fruits and vegetables, wines, dairy, some livestock.
Industry: Types--diamond-processing, metal-cutting machine tools,
forging-pressing machines, electric motors, tires, knitted wear,
hosiery, shoes, silk fabric, chemicals, trucks, instruments,
microelectronics, jewelry manufacturing, software development, food
processing, brandy.
Trade: Exports--$1billion: pig iron, unwrought copper, nonferrous
metals, diamonds, mineral products, foodstuffs, energy. Export
partners (2010)-- Russia 13%, Germany 16%, Bulgaria 15.3%, US 9%,
Netherlands 9%, Georgia 5%. Imports (2010)--$3.8 billion: natural gas,
petroleum, tobacco products, foodstuffs, diamonds. Import partners
(2010)--Russia 16%, UAE 9%, Ukraine 5.4%, Iran 5.2%.Turkey 4.7% .
PEOPLE AND HISTORICAL HIGHLIGHTS
Armenia first emerged around 800 BC as part of the Kingdom of Urartu
or Van, which flourished in the Caucasus and eastern Asia Minor until
600 BC. After the destruction of the Seleucid Empire, the first
Armenian state was founded in 190 BC. At its zenith, from 95 to 65 BC,
Armenia extended its rule over the entire Caucasus and the area that
is now eastern Turkey, Syria, and Lebanon. For a time, Armenia was the
strongest state in the Roman East. It became part of the Roman Empire
in 64 BC.
In 301 AD, Armenia became the first nation to adopt Christianity as a
state religion, establishing a church that still exists independently
of both the Roman Catholic and the Eastern Orthodox churches. Since
then, the Armenian nation has depended on the church to preserve and
protect its national identity. From around 1100 to 1350, the focus of
the Armenian nation moved south, as the Armenian Kingdom of Cilicia,
which had close ties to European Crusader states, flourished in
southeastern Asia Minor until it was conquered by Muslim states.
Between the 4th and 19th centuries, ethnic Armenians were conquered
and ruled by, among others, Persians, Byzantines, Arabs, Mongols, and
Ottoman Turks.
For a brief period from 1918 to 1920, Armenia re-emerged as an
independent republic. In late 1920, local communists came to power
following an invasion of Armenia by the Soviet Red Army, and in 1922,
Armenia became part of the Trans-Caucasian Soviet Socialist Republic.
In 1936, it became the Armenian Soviet Socialist Republic. Armenia
declared its independence from the Soviet Union on September 21, 1991.
GOVERNMENT AND POLITICAL CONDITIONS
Armenians voted overwhelmingly for independence in a September 1991
referendum, followed by a presidential election in October 1991 that
gave 83% of the vote to Levon Ter-Petrossian. Ter-Petrossian had been
elected head of government in 1990, when the Armenian National
Movement defeated the Communist Party. Ter-Petrossian was re-elected
in 1996 in a disputed election. Following public demonstrations
against Ter-Petrossian's policies on the predominantly ethnic Armenian
enclave of Nagorno-Karabakh that is located within Azerbaijan, the
President resigned under pressure in January 1998 and was replaced by
Prime Minister Robert Kocharian, who was subsequently elected
President in March 1998. Following the October 27, 1999 assassination
in Parliament of Prime Minister Vazgen Sargsian, Parliament Speaker
Karen Demirchian, and six other officials, a period of political
instability ensued during which an opposition headed by elements of
the former Armenian National Movement government attempted
unsuccessfully to force Kocharian to resign. Riding out the unrest,
Kocharian was later reelected in March 2003 in a contentious election
that the Organization for Security and Cooperation in Europe (OSCE)
and the U.S. Government deemed to have fallen short of international
standards.
The Government of Armenia's stated aim is to build a Western-style
parliamentary democracy as the basis of its form of government.
However, international observers have been critical of the conduct of
national elections in 1995, 1999, 2003, 2008, as well as the
constitutional referendum of 2005. The new constitution in 2005
increased the power of the legislative branch and allows for more
independence of the judiciary; in practice, however, both branches
remain subject to political pressure from the executive branch, which
retains considerably greater power than its counterparts in most
European countries.
The unicameral National Assembly has a total of 131 seats: 90 seats
are elected by proportional representation (party list), and 41 are
single mandate districts. Armenia held its most recent parliament
elections in 2007, when the Republican Party of Armenia (RPA) won 33
percent of the votes cast, followed by Prosperous Armenia (15
percent), the Armenian Revolutionary Federation Dashnaktsutyun (ARF)
(13 percent), Rule of Law (7 percent), and the Heritage Party (6
percent). This election as well was marred by irregularities. The RPA
and Prosperous Armenia joined to form a governing coalition which
secured an absolute majority of parliament seats. The ARF negotiated a
cooperation agreement with the governing coalition in exchange for
ministerial positions, but declined to join the coalition formally,
instead reserving the right to support its own candidate for the
February 2008 presidential election.
Following the 2008 presidential elections the Republican Party of
Armenia, Prosperous Armenia, the Rule of Law, and the ARF signed a new
coalition agreement on March 21, 2008. The ARF dropped out of the
coalition in April 2009 citing differences over the conduct of foreign
policy.
Armenia held presidential elections on February 19, 2008. While
originally deemed by the OSCE's Office for Democratic Institutions and
Human Rights (ODIHR) to be "mostly in line" with OSCE standards, the
elections were later seen to be marred by credible claims of ballot
stuffing, intimidation (including beatings) of poll workers and
proxies, vote buying, and other irregularities. Recounts were
requested, but ODIHR observers noted "shortcomings in the recount
process, including discrepancies and mistakes, some of which raise
questions over the impartiality of the [electoral commissions]
concerned."
Mass protests followed the disputed vote. For 10 days, large crowds of
pro-opposition demonstrators gathered in Yerevan's downtown Freedom
Square. Police and security forces entered Freedom Square early in the
morning on March 1, 2008, ostensibly to investigate reports of hidden
weapons caches. This operation turned into a forced dispersal of
demonstrators from Freedom Square by massed riot police. Following the
clearing of Freedom Square, clashes erupted in the afternoon between
massed demonstrators and security personnel, and continued throughout
the day and evening, leading to ten deaths and hundreds of injuries.
President Kocharian decreed a 20-day state of emergency in Yerevan
late on March 1, which sharply curtailed freedom of media and
assembly. Dozens of opposition supporters were jailed in the wake of
the violence, in proceedings that many international watchdog groups
have criticized as politically motivated. Armenia's media freedom
climate and freedom of assembly remained poor overall, though somewhat
improved after the state of emergency was lifted. In June 2009 and May
2011, President Sargsian proposed and the Parliament approved two
general amnesties which resulted in the release from jail of all those
detained in connection with the March 2008 events. In the spring of
2011, the leading opposition group was also able to resume -- after a
three-year prohibition -- the holding of authorized rallies in
Yerevan's Freedom Square. In April 2011, President Sargsian called for
a more meticulous examination of the violence that followed the
post-elections protests in 2008.
Upcoming elections will be held in May 2012 for the Armenian National
Assembly and February 2013 for the Presidency.
Principal Government Officials
President-Serzh Sargsian
Prime Minister-Tigran Sargsian (no relation)
Foreign Minister-Edward Nalbandian
Defense Minister-Seyran Ohanian
Ambassador to the U.S.-Tatoul Markarian
Ambassador to the UN-Garen Nazarian
Armenia's embassy is located at 2225 R Street, NW, Washington, DC,
20008; tel: 202-319-1976; fax: 202-319-2982.
ECONOMY
Armenia is the second most densely populated of the former Soviet
republics. It is a landlocked country between the Black and the
Caspian Seas, bordered on the north by Georgia, to the east by
Azerbaijan, on the south by Iran, and to the west by Turkey. Up until
independence [1991], Armenia's economy was based largely on
industry--chemicals, electronic products, machinery, processed food,
synthetic rubber, and textiles--and highly dependent on outside
resources. Agriculture accounted for only 20% of net material product
and 10% of employment before the breakup of the Soviet Union.
Construction, which was the leading sector of the economy for the past
eight years, constituting 27% of the country's GDP in 2008, declined
by 34.6% in 2009. In 2010, the sector continued to shrink, with a
decrease of three percent compared to the same period in 2009. The
beginning of the slowdown in construction coincided with the tense
political situation connected to the presidential election campaign
and the post-election civil unrest in 2008. Market saturation, a drop
in demand related to the global economic crisis, and a steep decline
in foreign remittances contributed to the further slowdown.
Like other New Independent States of the former Soviet Union,
Armenia's economy still suffers from the legacy of a centrally planned
economy and the breakdown of former Soviet trading networks. While
investment from these states in support of Armenian industry has
virtually disappeared, and few major enterprises are still able to
function, Russian entities have nevertheless increased their ownership
in the mining, energy, telecommunications, and transportation sectors.
In addition, the effects of the 1988 earthquake, which killed more
than 25,000 people and made 500,000 homeless, are still being felt,
though international donors and diaspora Armenian groups continue to
fund reconstruction efforts in the earthquake zone.
Although a cease-fire has held since 1994, the 20-year-old conflict
with Azerbaijan over Nagorno-Karabakh has not been resolved. While
intensive efforts by the OSCE Minsk Group is ongoing in pursuit of a
settlement, for the time being, the closure of both the Azerbaijani
and Turkish borders has prevented Armenia from realizing its economic
potential. Armenia's economy depends heavily on outside supplies of
energy and most raw materials. While land routes to Turkey are closed,
regular and charter air connections operate between Yerevan and
Istanbul and Antalya; land routes through Georgia and Iran raise the
risk and cost of transport.
The structure of Armenia's economy has changed substantially since
independence in 1991, with sectors such as construction and services
replacing agriculture and industry as the main contributors to
economic growth. The diamond processing industry, which was one of the
leading export sectors in 2000-2004 and a major recipient of foreign
investment, faced a dramatic decrease in output since 2005 due to raw
material supply problems with Russia and an overall decline in
international diamond markets. Other industrial sectors driving
industrial growth include energy, metallurgy, and food processing.
Despite the Nagorno-Karabakh conflict, the Government of Armenia has
been able to carry out wide-ranging economic reforms that have paid
off in dramatically lower inflation and relatively steady growth.
Armenia registered strong economic growth after 1995, with
double-digit GDP growth rates every year from 2002 to 2007.
After rapid expansion in 2001-2007, economic and financial conditions
worsened rapidly in Armenia in 2008, due to a drop in international
metals prices and a downturn in the Russian economy following the
collapse of oil prices in late 2008. The end of a remittance-fueled
construction boom that had driven growth in recent years resulted in a
14.4% drop of real GDP for 2009 (compared to 6.8% GDP growth in 2008),
with about 80% of this decline due to a plunge in the construction
sector. Since 2008, Armenia has experienced a significant drop in
investment, exports, and in real incomes primarily caused by the
global financial crisis. The Government of Armenia's (GOAM)
anti-crisis measures, additional loans and budgetary support from
international donors helped to avoid further economic decline in 2010.
However, economic indicators, while on the rebound, still fall short
of the pre-crisis growth trend for the two decades following
independence. Gradual recovery of remittance flows in comparison to
2009 also contributed to the slight upturn. Nevertheless, poverty and
prices remain high, and the sustainability of growth remains a
concern. Some of the major impediments for potential investors remain
the lack of transparency in the tax and customs administration, the
unpredictability of doing business in Armenia, and unequal competition
between domestic and foreign firms.
Armenia maintains a floating exchange rate regime with no explicit
exchange rate target. The nominal exchange rate of the Armenian dram
with major currencies was fairly stable between 1998 and 2003. During
2003-2007, the Armenian Dram appreciated sharply against the US dollar
by around 45%, mainly due to significant growth in remittances, growth
of exports in absolute terms, the de-dollarization of the economy and
weakening of the dollar in international markets. The appreciation of
the dram affected negatively the traditional export industries,
including information technologies, diamond cutting, the wine
industry, and textiles. Exporters responded to the increased costs by
either reducing their capacities of production or by reducing their
number of employees in order to stay afloat. During 2008, the exchange
rate was mainly stable at around 300 drams per dollar, until March
2009, when the Central Bank stopped its heavy intervention in the
foreign exchange market and announced that it would adopt a floating
currency regime. As a result, the Dram devalued by around 25%, and has
remained roughly stable at this rate of exchange.
Armenia is highly dependent on import of energy fuel, mainly from
Russia. The Armenia Nuclear Power Plant (ANPP) at Metsamor provides
around 40% of electricity generation for the country, and hydro and
thermal plants provide roughly 30% each. Armenia imports most of its
natural gas from Russia, which provided significant discounts to
Armenia until 2009. Russian import gas prices rose from $110 to $154
per thousand cubic meters in April 2009, and increased further to $180
in April 2010. The gas price was set to further rise in April 2011 to
approach the international market price, but this has been temporarily
averted as a result of extensive negotiations between the Russian and
Armenian governments. However, the current price is still below the
international average of over $300, and in the coming years the price
is expected to converge with market prices.
Since May 2006 Armenia has also received natural gas from Iran through
a direct pipeline between the two countries, in addition to tanker
trucks. As a result of a Gazprom-brokered deal, Armenia and Iran
participate in a program of direct exchange of natural gas for
electric power, which has diversified Armenia's supply of gas
products.
Armenia imports nearly all of its refined petroleum products through
Georgia. The August 2008 conflict between Russia and Georgia resulted
in periodic disruptions of fuel and food imports, and highlighted
Armenia's vulnerability to this primary transit corridor.
Armenia has received significant support from international
institutions. The International Monetary Fund (IMF), World Bank,
European Bank for Reconstruction and Development (EBRD), as well as
other international financial institutions (IFIs) and foreign
countries, particularly Russia, are extending considerable grants and
loans. These loans are targeted at reducing the budget deficit,
stabilizing the local currency; developing private businesses; energy;
and the agriculture, food processing, transportation, and health and
education sectors. In 2009 Armenia received more than $ 1.5 billion in
donor financing for budget support and different government-led
anti-crisis programs. In 2011, the Eurasian Economic Community
(EurAsEC), an economic organization in which Russia is a principal
participant, provided a loan of $500 million to finance Armenia's
external debt and restructure a number of branches in the Armenian
economy, in return for the transfer of major assets. Further, Russian
energy conglomerates have pledged to invest $71 million in natural gas
and electricity distribution networks in Armenia in 2011.
Continued economic growth will depend on the ability of the government
to strengthen its macroeconomic management, including increasing
revenue collection, improving the investment climate, and combating
significant corruption. A liberal foreign investment law was approved
in June 1994, and a Law on Privatization was adopted in 1997, as well
as a program on state property privatization. Armenia joined the World
Trade Organization on February 5, 2003. Armenia recently acceded to
the WTO's Agreement on Government Procurement which imposes an
obligation to improve its existing procurement practices.
See also U.S. Assistance to Armenia below.
Environmental Issues
Armenia is trying to address its environmental problems. The Ministry
of Nature Protection has introduced a pollution fee system by which
taxes are levied on air and water emissions and solid waste disposal,
with the resulting revenues used for environmental protection
activities. Deforestation by mining concerns in certain parts of the
country, especially the Teghut Forest in the Lori marz (region), have
resulted in periodic protests by environmental non-governmental
organizations (NGOs), and stirred controversy over government policies
to support investment in the mining sector. Armenia is interested in
cooperating with other members of the Commonwealth of Independent
States (CIS--a group of 11 former Soviet republics) and with members
of the international community on environmental issues. Armenia has
been under strong pressure from the international community to close
its thirty-five year old nuclear power plant (ANPP) at Metsamor by
2016. This pressure has only increased in the aftermath of the
Fukushima nuclear disaster in Japan in March 2011. Given that Armenia
depends on the ANPP for over 40% of its electricity, the Armenian
Government sees no alternative to construction of a new nuclear plant.
A U.S. Agency for International Development (USAID)-funded initial
planning study was completed in 2009, and concluded that a new nuclear
plant is the least-cost option to replace the existing facility:
however, construction of a new plant will still be expensive, costing
between $5 billion and $7.2 billion to complete, and will likely
require significant foreign investment capital. The Armenian
Government is continuing with the planning process for a new plant.
Beginning in 2010, USAID is providing technical assistance to the
Government of Armenia to ensure that the new nuclear plant meets
proper safety and environmental standards.
DEFENSE AND MILITARY ISSUES
Armenia established a Ministry of Defense in 1992. Border guards
subject to the National Security Service patrol Armenia's borders with
Georgia and Azerbaijan, while Russian Border Guards continue to
monitor its borders with Iran and Turkey. In August 2010 the
Government of Armenia signed an extension to this agreement with
Russia, providing for a continued Russian border guard presence until
2046.
The Conventional Armed Forces in Europe (CFE) Treaty was ratified by
the Armenian parliament in July 1992. The treaty establishes
comprehensive limits on key categories of military equipment, such as
tanks, artillery, armored combat vehicles, combat aircraft, and combat
helicopters, and provides for the destruction of weaponry in excess of
those limits. Armenian officials have consistently expressed
determination to comply with its provisions in spite of concerns they
have about Azerbaijan exceeding that country's treaty limits. Armenia
has provided data on armaments as required under the CFE Treaty and is
receptive to CFE inspections. Armenia recently passed laws to control
export of military and dual use goods to fulfill its arms control
obligations. Armenia is not a significant exporter of conventional
weapons, but it has provided substantial support, including materiel,
to ethnic Armenian separatists in the disputed and predominantly
ethnic Armenian enclave of Nagorno-Karabakh located within
Azerbaijan's borders.
In March 1993, Armenia signed the multilateral Chemical Weapons
Convention, which calls for the eventual elimination of chemical
weapons. Armenia acceded to the nuclear Non-Proliferation Treaty as a
non-nuclear weapons state in July 1993. In July 2008 the U.S. and
Armenia signed an action plan to partner on Combating Smuggling of
Nuclear and Radiological Materials under the U.S. Department of
State's Nuclear Smuggling Outreach Initiative (NSOI). In the same
framework, Armenia is participating in the U.S.-led Preventing Nuclear
Smuggling Program (PNSP). In April 2010 Armenia's President Serzh
Sargsian attended the first-ever Nuclear Security Summit (NSS) that
the United States hosted. Armenia also participates in the Global
Initiative to Counter Nuclear Terrorism (GICNT). The U.S. and other
Western governments continue to work with Armenia to strengthen export
control systems.
In September 2010, Armenia and the United States signed an agreement
to implement a Biological Threat Reduction Program, which will enhance
U.S.-Armenia cooperation in preventing the proliferation of
technology, pathogens, and expertise that could be used in the
development of biological weapons.
Armenia cooperates with NATO through the Partnership for Peace program
which it joined in 1994.
FOREIGN RELATIONS
Armenia is a member of the United Nations, the Council of Europe, the
European Neighborhood Program of the EU, the Organization for Security
and Cooperation in Europe (OSCE), the Commonwealth of Independent
States (CIS), NATO's Partnership for Peace, the Collective Security
Treaty Organization (CSTO), the Organization of the Black Sea Economic
Cooperation organization (BSEC), the Euro-Atlantic Partnership
Council, the International Monetary Fund, the International Bank for
Reconstruction and Development, and the World Trade Organization.
Turkey-Armenia Relations
Turkey closed its border with Armenia in 1993 as a show of support for
Azerbaijan in the conflict over Nagorno-Karabakh. On October 10, 2009,
the Foreign Ministers of Turkey and Armenia signed normalization
protocols that called for the opening of the Turkey-Armenia border,
establishing diplomatic relations, and the creation of a number of
sub-commissions addressing bilateral issues. However, the protocols
have not yet been ratified by either country, and Armenia formally
suspended parliamentary consideration of the protocols in April 2010.
The Armenian Government stressed its willingness to reactivate the
process "when there is a proper environment in Turkey and there is
leadership in Ankara ready to reengage in the normalization process."
Nagorno-Karabakh
In 1988, the territory of Nagorno-Karabakh, a predominantly ethnic
Armenian enclave within Azerbaijan, voted to secede and join Armenia.
This act was the catalyst that led Armenia and Azerbaijan into a
full-scale armed conflict that claimed the lives of over 30,000 people
on both sides. Armenian support for the separatists led to an economic
embargo by Azerbaijan, which has had a negative impact on Armenia's
foreign trade and made imports of food and fuel, three-quarters of
which previously transited Azerbaijan under Soviet rule, more
expensive.
Peace talks in early 1993 were disrupted by the seizure of
Azerbaijan's Kelbajar district by Nagorno-Karabakh Armenian forces and
the forced evacuation of thousands of ethnic Azeris. Turkey in protest
then followed with an embargo of its own against Armenia. A cease-fire
was declared between Azerbaijani and Armenian/Nagorno-Karabakh forces
in 1994 and has been maintained by both sides since then in spite of
occasional shooting along the line of contact. All Armenian
governments have thus far resisted domestic pressure to recognize the
self-proclaimed independence of the "Nagorno-Karabakh Republic," while
at the same time announcing they would not accept any peace accords
that returned the enclave to Azerbaijani rule. Approximately 572,000
of the estimated 800,000 ethnic Azeris who fled during the Karabakhi
offensives still live as internally displaced persons in Azerbaijan
(according to the Internal Displacement Monitoring Centre, quoting
Azerbaijani Government statistics, June 2008 ), while roughly 4,700 of
360,000 ethnic Armenians who fled Azerbaijan since 1988 remain
refugees.
Negotiations to peacefully resolve the conflict have been ongoing
since 1992 under the aegis of the Minsk Group of the OSCE. The Minsk
Group is co-chaired by the U.S., France, and Russia. Negotiations have
intensified since 2004. Ambassador Robert Bradtke became U.S. Co-Chair
in 2009.
U.S.-ARMENIAN RELATIONS
The dissolution of the Soviet Union in December 1991 brought an end to
the Cold War and created the opportunity for bilateral relations with
the New Independent States (NIS) as they began a political and
economic transformation. The U.S. recognized the independence of
Armenia on December 25, 1991, and opened an Embassy in Yerevan in
February 1992.
U.S.-Armenian Economic Relations
In 1992 Armenia signed three agreements with the U.S. affecting trade
between the two countries. They include an "Agreement on Trade
Relations," (which entered into force in April 1992) an "Investment
Incentive Agreement," (which also entered into force in April 1992)
and a treaty on the "Reciprocal Encouragement and Protection of
Investment" (generally referred to as the Bilateral Investment Treaty,
or BIT, which entered into force in March 1996). The 1973 "Convention
on matters of Taxation" concluded with the former USSR remains in
force with Armenia. The 1994 Law on Foreign Investment governs all
direct investments in Armenia, including those from the U.S.
In June 2011, the Department of State and the Ministry of Energy and
Natural Resources of Armenia signed a Memorandum of Understanding on
unconventional and conventional energy resources. The MOU aims to
enhance cooperation between U.S. and Armenian experts to assess
Armenia's potential energy resources, including shale gas.
Approximately 70 U.S.-owned firms currently do business in Armenia,
including Dell, Microsoft, and IBM. Recent major U.S. investment
projects include the Hotel Armenia/Marriott; the Hotel Ani Plaza;
Tufenkian Holdings (carpet and furnishing production, hotels, and
construction); several subsidiaries of U.S.-based information
technology firms, including Viasphere Technopark, an IT incubator;
Synopsys; a Greek-owned Coca-Cola bottling plant; jewelry and textile
production facilities; several copper and molybdenum mining companies;
and the Hovnanian International Construction Company.
U.S. Assistance to Armenia
The United States has made a concerted effort to help Armenia and
other NIS during their difficult transition from totalitarianism and a
command economy to democracy and open markets. The cornerstone of this
continuing partnership has been assistance provided through the
Freedom for Russia and Emerging Eurasian Democracies and Open Markets
(FREEDOM) Support Act, enacted in October 1992. In 2009, FREEDOM
Support Act funds were merged with another account and was renamed
Assistance to Europe, Eurasia and Central Asia (AEECA). Under this and
other programs, the U.S. to date has provided Armenia with nearly $2
billion in humanitarian and development assistance. An overview of
U.S. assistance to Armenia can be found at
http://www.foreignassistance.gov/OU.aspx?FY12andOUID2. In
addition, the U.S.-Armenia Joint Economic Task Force (USATF),
established in 2000, is a bilateral commission that meets annually to
review the progress and objectives of U.S. assistance to Armenia. The
Fall 2011 meeting will be held in Washington, DC.
U.S. assistance supports Armenia's transition into a stable partner at
peace with its neighbors, fully integrated into the regional economy,
where principles of democracy are respected, the benefits of economic
growth are shared by all segments of society, and Armenia's human
capital potential is fully realized. During the past year, the United
States provided multifaceted assistance to Armenia through a variety
of programs designed to promote economic growth, encourage democratic
governance, improve health and social protection systems, and enhance
Armenia's peace and security. The United States also provided
humanitarian assistance to the poor, elderly, and other vulnerable
groups. Assistance is provided through a "whole of government"
approach that involves a number of U.S. government agencies, including
the Departments of Agriculture, Commerce, Defense, Energy, Justice,
the Nuclear Regulatory Commission, the Millennium Challenge
Corporation (MCC), the Department of State, the United States Agency
for International Development (USAID), and Peace Corps.
On March 27, 2006, Armenia signed a five-year, $236 million Millennium
Challenge Corporation compact with the United States; the agreement
entered into force on September 29, 2006. The MCA-Armenia program is
focused on reducing rural poverty through a sustainable increase in
the economic performance of the agricultural sector. This goal is
being achieved through a five-year program of strategic investments in
rural roads, irrigation infrastructure and technical and financial
assistance to water supply entities, farmers, and commercial
agribusinesses. In 2009, MCC placed a hold on funding for a
significant portion of the rural road rehabilitation project because
of serious policy concerns about the 2008 presidential election. At
the June 2009 MCC Board meeting, the decision was made not to resume
funding for any further road construction and rehabilitation due to
concerns about the status of democratic governance in Armenia. Funding
for irrigation infrastructure and technical assistance, representing
nearly $180 million of the compact's value, remains in effect and
under implementation. The compact is expected to be completed in
September 2011. Beneficiaries will include 420,000 rural residents in
about 350 communities across Armenia.
(http://www.mcc.gov/pages/countries/overview/armenia)
Promoting Economic Growth
U.S. assistance addresses Armenia's economic vulnerabilities, which
have been exacerbated by the global economic crisis, while continuing
to support economic competitiveness. The U.S. continues to work
closely with international financial institutions like the
International Monetary Fund and the World Bank to help Armenia
continue its transition to a robust free-market economy. USAID and the
U.S. Department of Agriculture (USDA) implement the largest portion of
the United States' economic assistance activities. In addition to its
broader assistance programs, USAID implements a range of economic
assistance programs designed to enhance Armenia's macroeconomic
foundation for growth, promote trade and investment, and focus on
private sector competitiveness and workforce development in selected
industries, including information technology and tourism, and
development of the financial sector and fiscal authorities to achieve
a business enabling environment.
The USDA Caucasus Agricultural Development Initiative provides
targeted and sustained technical and marketing assistance to small and
medium-sized agribusinesses, farmer-marketing associations, and the
Government of Armenia. USDA's goal is to sustain the productivity of
the agricultural sector by expanding access to markets and credit,
increasing efficiency, and modernizing agriculture systems. USDA's
priority assistance areas are: Farm Credit, Food Safety and Animal
Health, support to the Armenian private sector through the NGO CARD,
Agricultural Statistics and Agricultural Education. Also, as a
training component of USDA projects in Armenia, the U.S. Department of
Agriculture's Cochran Fellowship Program provides training to Armenian
agriculturists in the United States.
Enhancing Democratic Governance
U.S. assistance programs enhance the Government of Armenia's capacity
to govern justly and democratically. The programs strengthen democracy
and the rule of law by improving legal education, promoting the
capacity of both prosecutors and the defense bar, raising judicial
ethics standards and human rights protections, fighting corruption and
improving the transparency, accountability and accessibility of
government entities (particularly at the local level), increasing
civic participation and government accountability by bolstering civil
society, strengthening independent media and increasing access to
information, and promoting free and fair elections and greater citizen
participation in the political process. U.S. assistance also
encouraged adoption of best practices within the criminal justice
system by reforming procedures to promote greater police
accountability, judicial independence, and fairness for those accused
of crimes. Additionally, U.S. programs support international and
domestic monitoring of Armenia's elections, thereby promoting
transparency and democratic values.
Educational exchange programs also play an important role in
supporting meaningful democratic and free-market reforms by instilling
important core values in Armenia's youth.
Professional exchange programs serve as a vehicle to share U.S.
experience with Armenian government officials, NGO activists, women
leaders, bloggers, journalists, lawyers, political party members,
business people, and other influential figures. These exchanges have
focused on a range of topics, including U.S. elections, law
enforcement, the American judiciary, women in business, conflict
resolution, the media, human rights, and youth leadership.
Principal U.S. Embassy Officials
Ambassador-Vacant
Charge' d'Affaires-Bruce Donahue
Political/Economic Chief-Barton Putney
Assistance Coordinator- RaeJean Stokes
Consular Officer-Robert Farquhar
Management Officer-Veronica Hons-Olivier
INL Chief--John Maher
EXBS Advisor--Earl "Fred" Carter
Resident Legal Advisor--Steve Kessler
Regional Security Officer-Timothy Leveque
USDA Marketing Assistance Project Director-Frederic Johnston
USAID Director-Jatinder Cheema
Public Affairs Officer-Karen Robblee
The U.S. Embassy in Yerevan, Armenia is at 1 American Avenue; tel:
374-10-46-47-00; fax: 374-10-46-47-42.