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REASSESSING ARMENIAN INDEPENDENCE
By Richard Giragosian
Institute for War and Peace Reporting IWPR
January 4, 2012
UK
Twenty years on, oligarchs control economy and have moved into
politics.
Looking back at the past 20 years of independence and state-building
in Armenia, it~Rs apparent that forging statehood and securing our
sovereignty hasn~Rt been easy. As a small, landlocked country with
few natural resources, Armenia has been hostage to both geography
and geopolitics.
Throughout its history, Armenia has undergone alternating periods of
isolation and strategic significance, as a central part of a region
that has been an arena for competition for much larger, more powerful
regional powers like the Persian, Russian and Turkish empires.
The country~Rs modern history has also been marked by the same
vulnerability. Armenia~Rs brief period of independence from 1918
to 1920 was quickly overtaken by its force incorporation into the
Soviet Union.
After subjugation within the union for seven decades, the abrupt
collapse of the Soviet system left Armenia neither prepared nor
predisposed to take on independence. Unlike the Baltic states, for
example, the reassertion of Armenian nationalism was expressed within
the context of the Soviet system, rather than in direct confrontation
with Moscow. Even the eruption of the Nagorny Karabakh conflict,
which antedated the collapse of the Soviet Union, was driven by a
strategy of conformity based on the Soviet constitution.
But with the sudden demise of the Soviet Union, Armenia found itself
facing the immediate challenges of independence. The infant state also
faced a grave and urgent threat to its survival, as the conflict over
Nagorny Karabakh grew into outright war with neighbouring Azerbaijan,
triggering a virtual blockade of trade, transport and energy by
Azerbaijan and Turkey.
In addition, Armenia was still struggling to cope with the devastation
caused by the powerful earthquake of 1988.
For Armenia, the early phase of independence was marred by war,
economic collapse and blockade, manifested as severe shortages of
food, electricity and fuel. These crises thwarted early attempts to
build democratic institutions and relegated political reform to second
place, after the Nagorny Karabakh conflict. The ongoing state of war
also shaped the political trajectory, as a new vibrant nationalism
dominated the political discourse in Armenia.
That first decade of independence was marked by two trends in
politics. First, the shift in discourse and debate from moderation
to militancy; and a second related factor, the transformation of the
political elite, as incomers from Nagorny Karabakh gained power and won
top positions in the leadership, eventually including the presidency.
These conditions also predetermined the longer-term development of
the economic system, and had a seriously distorting effect on the
reform process. The combination of a great scarcity of goods, the
powerful trade and transport blockade, and the severe disruption of
the energy infrastructure all led to the Armenian economy became
increasingly closed. Commodity-based cartels were effective in
eliminating competitors and came to dominate imports and exports of
key materials and foodstuffs.
The emergence of these cartels was initially a consequence of the
~Sconflict economics~T of the Nagorny Karabakh war, as they bolstered
the generally feeble state. The government was largely preoccupied
with economic measures in other areas, ranging from sweeping land
reforms to the introduction of a stable national currency.
The power of these cartels quickly expanded beyond commodities. And
as in most other post-Soviet states, they used their links with the
state to acquire inordinate wealth and assets during the privatisation
process. At the same time, they further consolidated their power by
positioning themselves at the top of rapidly developing networks of
patronage and corruption within the state system.
Over time, the cartels adopted more sophisticated means of expanding
their power, including collusion to fix and enforce commodity prices,
to prevent competitors from emerging, and to secure exclusive
procurement contracts from state institutions.
The birth of this closed, controlled economic system replaced the
Soviet system of centralised planning and distribution. Although
initially fostered by the economics of the early phase of the conflict,
the cartels~R subsequent entrenchment and consolidation of power
created a new commercial elite, the oligarchs. The Soviet centralised
command economy had been effectively supplanted by a different system
in which an oligarchic elite controlled the economy.
Against the backdrop of generally weak state institutions and a
pronounced lack of political will, the rise of the oligarchs can be
seen as one of the most devastating developments in the two decades
Armenia has been independent. The oligarchic system has a devastating
impact, eroding the power and authority of the state, which can neither
tax the oligarchs nor police their business interests. The state faces
an uphill battle if it is to regain control of the economic system.
The entry of many powerful oligarchs into the political system poses
more problems. It is most apparent from the pressure they can bring
to bear as parliamentarians, able to influence and impede reforms from
the inside. Their direct role within national politics also highlights
the risks posed by cosy relationships between business and politics.
Against this backdrop, Armenia appears to face further threats. The
cumulative effect of two decades of independence has been to create
greater dependence, with many missed opportunities.
The challenges are daunting. On top of an apparent lack of political
will and visionary leadership that could confront the oligarchs,
the state remains hamstrung by inadequate regulation, by inefficient,
poor tax collection, and by the underlying weak and arbitrary exercise
of the rule of law.
The future of Armenian independence over the coming 20 years looks
far from certain. The only realistic assessment one can make is that
Armenia faces a truly significant test of its statehood.
Richard Giragosian is the director of the Regional Studies Centre,
an independent think tank in Yerevan, Armenia.
By Richard Giragosian
Institute for War and Peace Reporting IWPR
January 4, 2012
UK
Twenty years on, oligarchs control economy and have moved into
politics.
Looking back at the past 20 years of independence and state-building
in Armenia, it~Rs apparent that forging statehood and securing our
sovereignty hasn~Rt been easy. As a small, landlocked country with
few natural resources, Armenia has been hostage to both geography
and geopolitics.
Throughout its history, Armenia has undergone alternating periods of
isolation and strategic significance, as a central part of a region
that has been an arena for competition for much larger, more powerful
regional powers like the Persian, Russian and Turkish empires.
The country~Rs modern history has also been marked by the same
vulnerability. Armenia~Rs brief period of independence from 1918
to 1920 was quickly overtaken by its force incorporation into the
Soviet Union.
After subjugation within the union for seven decades, the abrupt
collapse of the Soviet system left Armenia neither prepared nor
predisposed to take on independence. Unlike the Baltic states, for
example, the reassertion of Armenian nationalism was expressed within
the context of the Soviet system, rather than in direct confrontation
with Moscow. Even the eruption of the Nagorny Karabakh conflict,
which antedated the collapse of the Soviet Union, was driven by a
strategy of conformity based on the Soviet constitution.
But with the sudden demise of the Soviet Union, Armenia found itself
facing the immediate challenges of independence. The infant state also
faced a grave and urgent threat to its survival, as the conflict over
Nagorny Karabakh grew into outright war with neighbouring Azerbaijan,
triggering a virtual blockade of trade, transport and energy by
Azerbaijan and Turkey.
In addition, Armenia was still struggling to cope with the devastation
caused by the powerful earthquake of 1988.
For Armenia, the early phase of independence was marred by war,
economic collapse and blockade, manifested as severe shortages of
food, electricity and fuel. These crises thwarted early attempts to
build democratic institutions and relegated political reform to second
place, after the Nagorny Karabakh conflict. The ongoing state of war
also shaped the political trajectory, as a new vibrant nationalism
dominated the political discourse in Armenia.
That first decade of independence was marked by two trends in
politics. First, the shift in discourse and debate from moderation
to militancy; and a second related factor, the transformation of the
political elite, as incomers from Nagorny Karabakh gained power and won
top positions in the leadership, eventually including the presidency.
These conditions also predetermined the longer-term development of
the economic system, and had a seriously distorting effect on the
reform process. The combination of a great scarcity of goods, the
powerful trade and transport blockade, and the severe disruption of
the energy infrastructure all led to the Armenian economy became
increasingly closed. Commodity-based cartels were effective in
eliminating competitors and came to dominate imports and exports of
key materials and foodstuffs.
The emergence of these cartels was initially a consequence of the
~Sconflict economics~T of the Nagorny Karabakh war, as they bolstered
the generally feeble state. The government was largely preoccupied
with economic measures in other areas, ranging from sweeping land
reforms to the introduction of a stable national currency.
The power of these cartels quickly expanded beyond commodities. And
as in most other post-Soviet states, they used their links with the
state to acquire inordinate wealth and assets during the privatisation
process. At the same time, they further consolidated their power by
positioning themselves at the top of rapidly developing networks of
patronage and corruption within the state system.
Over time, the cartels adopted more sophisticated means of expanding
their power, including collusion to fix and enforce commodity prices,
to prevent competitors from emerging, and to secure exclusive
procurement contracts from state institutions.
The birth of this closed, controlled economic system replaced the
Soviet system of centralised planning and distribution. Although
initially fostered by the economics of the early phase of the conflict,
the cartels~R subsequent entrenchment and consolidation of power
created a new commercial elite, the oligarchs. The Soviet centralised
command economy had been effectively supplanted by a different system
in which an oligarchic elite controlled the economy.
Against the backdrop of generally weak state institutions and a
pronounced lack of political will, the rise of the oligarchs can be
seen as one of the most devastating developments in the two decades
Armenia has been independent. The oligarchic system has a devastating
impact, eroding the power and authority of the state, which can neither
tax the oligarchs nor police their business interests. The state faces
an uphill battle if it is to regain control of the economic system.
The entry of many powerful oligarchs into the political system poses
more problems. It is most apparent from the pressure they can bring
to bear as parliamentarians, able to influence and impede reforms from
the inside. Their direct role within national politics also highlights
the risks posed by cosy relationships between business and politics.
Against this backdrop, Armenia appears to face further threats. The
cumulative effect of two decades of independence has been to create
greater dependence, with many missed opportunities.
The challenges are daunting. On top of an apparent lack of political
will and visionary leadership that could confront the oligarchs,
the state remains hamstrung by inadequate regulation, by inefficient,
poor tax collection, and by the underlying weak and arbitrary exercise
of the rule of law.
The future of Armenian independence over the coming 20 years looks
far from certain. The only realistic assessment one can make is that
Armenia faces a truly significant test of its statehood.
Richard Giragosian is the director of the Regional Studies Centre,
an independent think tank in Yerevan, Armenia.