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BREAKING THE GRIP OF THE OLIGARCHS
BY LIANA AGHAJANIAN
Foreign Policy
Nov 5 2012
How a tragic twist of fate is fueling a revolt against Armenia's
overweening tycoons.
On a summer evening in late June, three military doctors ventured into
a lavish restaurant on the outskirts of Yerevan, Armenia's capital, to
have dinner. With its marbled beige floors and crystal chandeliers,
the restaurant, known as Harsnakar, is a favorite for weddings,
anniversaries, and friendly get-togethers.
But things didn't go according to plan for 35-year-old Major Vahe
Avetyan, one of the army doctors accompanying his colleagues on a
night out. The man allegedly got into an argument over inappropriate
dress code with security staff from the restaurant, which is owned by
Ruben Hayrapetyan (pictured above), a business tycoon and then-member
of parliament. Avetyan was brutally beaten and hospitalized with
severe head injuries. Soon, grim photos of the doctor emerged on
social networks. Bandaged and unconscious, he lay on a bed in the same
hospital where he had worked, in critical condition. Twelve days later,
he died.
The public outrage was unprecedented. It isn't uncommon for the
employees of business tycoons to engage in violence. But this was the
first time that someone like Avetyan -- a married father of two whose
job involved caring for Armenia's highly respected armed forces --
had inadvertently felt their wrath, and paid for it with his life.
The death of Avetyan at the hands of bodyguards employed by Hayrapetyan
has become a catalyzing event. Shocked Armenians mobilized in large
numbers throughout the summer. The frustrations with a culture of
bodyguards whose brutish behavior had become notoriously violent over
the years spilled onto the streets and social networks.
Legislation to regulate the private use of bodyguards has been
introduced in parliament: The draft law stipulates that private
security personnel will be required to don uniforms, to apply for
weapons permits, and to register their weapons with law enforcement.
The ongoing trial of those involved in Avetyan's murder has opened
a window onto the excesses of a tiny ruling class that until now has
felt largely untouched by the law. Since the collapse of the Soviet
Union in 1991, Armenians -- like many other inhabitants of the old
USSR -- have watched as the lion's share of the country's wealth has
fallen under the control of a privileged elite. The leading Armenian
oligarchs, a group numbering around 40, dominate industries ranging
from banking to mining, and that economic edge has translated into
privileged political status as well. Just as in Russia and Ukraine,
tycoons here have parlayed their wealth into public office -- to an
extent that it's often hard to tell where business ends and politics
begins.
Though political apathy is widespread in Armenia, the Avetyan case has
fueled resentment and anger towards the men who have accumulated vast
wealth and influence while much of the country's population remains
in dire poverty. But now, thanks to the criminal case surrounding the
death of the army doctor, something seems to be changing. After months
of public pressure, Hayrapetyan finally submitted his resignation from
the legislature in early September, ending his foray into politics.
Six of his bodyguards have been arrested in connection with the murder.
After two postponements, the trial formally got underway last month.
The defendants, who initially faced lesser charges, have been formally
accused on three counts of assault that could result in lengthier
prison sentences than the five to ten years of imprisonment they
previously faced. Hayrapetyan, known by the nickname "Nemets Rubo,"
has repeatedly denied responsibility for the actions of his employees.
Calls for Hayrapetyan to face trial in the case have gone nowhere.
Armenia's search for stability and democracy since the collapse of the
Soviet Union has been difficult. The country achieved its independence
just three years after a 1988 earthquake that left upwards of 25,000
dead. No sooner had Armenians embarked upon statehood than they found
themselves locked in a debilitating war with neighboring Azerbaijan
over the Nagorno-Karabakh region. That war resulted in the closing of
the country's borders with Azerbaijan and Turkey, cutting Armenia off
from normal trade. These straitened circumstances brought hardship to
most Armenians, but to those sufficiently ruthless and well-connected
to take advantage, the war economy meant a path toward instant riches.
It was then that many of today's tycoons began to build their fortunes.
The culture of oligarch immunity is certainly nothing new. The Avetyan
murder has struck a sensitive chord owing to its chilling resemblance
to the 2001 incident in which a bodyguard of then-President Robert
Kocharyan attacked and killed a man in a bathroom for making a
disrespectful remark to the leader. But even then, most Armenians --
whether too apathetic, too scared, or too willing to emigrate --
refrained from mounting an open challenge to the tycoon establishment.
Now, in dramatic contrast, broad swathes of society have shown the
will to stand up and resist. In the months following Avetyan's murder,
the anti-oligarch protests began to attract attendance from regular
citizens who are rarely seen at demonstrations. A candlelight vigil
honoring the late doctor saw over 600 people surround the restaurant,
which has come to symbolize the broad web of impunity shared by
Armenia's tycoons. Police cordoned off the restaurant and clashed
with protestors, breaking up demonstrations by force. "I only had
one bruise, but some people were beaten," said Tsovinar Nazaryan,
an activist and journalist who attended the rally.
But the demonstrators kept coming back. They marched to the
Prosecutor's General Office after Avetyan's funeral, chanting "Nemets
is a murderer" and "I am Vahe Avetyan." Then a montage of video clips
from two press conferences Hayrapetyan gave last year surfaced on
YouTube (with English subtitles), showing the tycoon threatening
reporters, claiming responsibility for beatings, and confessing to
tampering with ballots in an election. "I wouldn't advise people to
try to punish me," he says at one point in the video. "Whoever tried
it, something terrible happened to them."
Anti-oligarch activism spread outside the country's borders, where
the far-flung Armenian diaspora held protests in front of consulates.
Online petitions were organized. Street art around the capital demanded
that Hayrapetyan be tried in court.
"Many people are sick and tired of their power," said activist
Nazaryan. "You can see how violent they are, in their business, in
their everyday actions. They're violent to our journalists. They're
really dangerous. They don't care. They know they won't be punished,
and this is the problem."
This latest series of events represents the first small challenges to
the seemingly impregnable edifice of oligarch power that has dominated
this country since the collapse of the USSR. Functioning like early
twentieth-century robber barons, Armenia's tycoons prefer to be
called "businessmen" (though most Armenians tend to refer to them with
cartoonish nicknames). The oligarchs drive fleets of flashy vehicles;
their Hummers and Rolls Royce's are fitted with custom license plate
numbers to simultaneously identify their families and close associates
and deter harassment from traffic police.
Their ostentatious mansions multiply, and their business assets grow
as they hold the Armenian economy hostage by eliminating competitive
markets for everything from mineral water and asphalt to soft drinks.
The economic elite flex their power in the political sphere despite a
constitutional ban on members of parliament being involved in owning
or running businesses. The political parties that have dominated
recent elections in the country are closely associated with leading
oligarchs who enjoy parliamentary immunity and remain virtually
untouchable. According to a recent report by the International Crisis
Group, for example, the ruling Republican Party had two dozen wealthy
businessmen elected to the ranks of parliament in 2007. The same report
notes that oligarchs routinely use their charitable foundations to
sponsor concerts or hand out free potatoes in order to secure voter
support, though the businessmen deny using charity for the purposes
of political leverage.
Take Samvel "Lfik Samo" Aleksanyan, a millionaire with strong ties to
the government. A 2003 U.S. State Department cable referred to him
as a "semi-criminal" oligarch who "maintains an army of bodyguards"
and controls the import of sugar, wheat, and butter into the country.
Dubbed "the Sugar Baron" in local media, Aleksanyan's domination of
the industry and ownership in a chain of supermarkets has created the
conditions for a series of sugar crises in which prices unpredictably
skyrocket. Aleksanyan recently bought and partially destroyed the
famed, almost century-old bazaar-style indoor market and national
treasure, "Pak Shuka," amid widespread speculation that he intends
to turn it into part of his supermarket empire.
Other oligarchs play prominent roles in the lucrative mining industry.
Armenia is rich in molybdenum and gold, and that has led to
considerable competition among the oligarchs to grab their shares of
the resulting profits. National Assembly Chairman Hovik Abrahamyan and
member of parliament Tigran Arzakantsyan are both shareholders in one
leading mining company. One of the most prominent tycoons linked with
mining is former Minister of Environmental Protection Vardan Ayvazyan,
who was in charge of regulating large parts of the industry during
his stint in government. In September, a U.S. court ordered Ayvazyan
to pay $37.5 million in damages to a U.S. mining company that accuses
him of corruption relating to his own business interest in the sector.
(Ayvazyan has denied all the allegations and rejects the American
court's jurisdiction over him.)
Oligarchs are also accused of tampering with elections. Armenian
elections have long been plagued by irregularities, reportedly ranging
from intimidation to ballot stuffing. Garo Yegnukian, an executive
board member at Policy Forum Armenia, a U.S.-based think tank, says
that oligarchs play an outsized role in elections: "They're the ones
who distribute election bribes, who intimidate, who break people's
knees, if they have to."
A U.S. embassy cable leaked in 2009 described business elites as
"deeply intertwined with political power and vice versa," each
having an incentive to preserve the status quo out of the fear that
a regime change could mean an economic redistribution at the "expense
of today's oligarchs."
Reports have linked oligarchs to assaults and murders. But their
activities have other pernicious effects as well.
The International Crisis Group report pinpointed oligarch benefits from
tax and customs advantages as a reason why the government collects only
about 19.3 percent of GDP in taxes, compared to a 40 percent average in
the European Union. A 2007 International Monetary Fund study reflected
this, arguing that despite double digit growth since the beginning
of the millennium, Armenia's tax to GDP ratio remains very low.
Prime Minister Tigran Sarsgyan who has previously criticized several
ministries within the government for corruption, recently announced
that he will head an anti-corruption council, and extended a rare
invitation to opposition parties to participate.
"We are not satisfied with the state of the fight against corruption,"
Sargsyan said, according to local press reports. But graft in Armenia
doesn't seem to have seen any significant decline. Over the last five
years, Armenia has sharply fallen on Transparency International's
Corruption Index for Armenia by 30 places, from a ranking of 99 in
2007 to 129 in 2011.
Analysts predict that the path to economic success in Armenia means
eliminating monopolies and minimizing the interference of oligarchs in
policymaking; poverty and a high emigration rate (some 70,000 people
leave the country every year) compound the problem. As the fallout
from the death of an innocent army doctor continues, the Armenian
government faces critical choices when it comes to its future and how
it chooses to act, if at all, toward those enjoying immunity from
the law. But it's clear that, even in the best of cases, reducing
the power of the country's tycoons will be a long and arduous process.
http://www.foreignpolicy.com/articles/2012/11/05/breaking_the_grip_of_the_oligarchs
BY LIANA AGHAJANIAN
Foreign Policy
Nov 5 2012
How a tragic twist of fate is fueling a revolt against Armenia's
overweening tycoons.
On a summer evening in late June, three military doctors ventured into
a lavish restaurant on the outskirts of Yerevan, Armenia's capital, to
have dinner. With its marbled beige floors and crystal chandeliers,
the restaurant, known as Harsnakar, is a favorite for weddings,
anniversaries, and friendly get-togethers.
But things didn't go according to plan for 35-year-old Major Vahe
Avetyan, one of the army doctors accompanying his colleagues on a
night out. The man allegedly got into an argument over inappropriate
dress code with security staff from the restaurant, which is owned by
Ruben Hayrapetyan (pictured above), a business tycoon and then-member
of parliament. Avetyan was brutally beaten and hospitalized with
severe head injuries. Soon, grim photos of the doctor emerged on
social networks. Bandaged and unconscious, he lay on a bed in the same
hospital where he had worked, in critical condition. Twelve days later,
he died.
The public outrage was unprecedented. It isn't uncommon for the
employees of business tycoons to engage in violence. But this was the
first time that someone like Avetyan -- a married father of two whose
job involved caring for Armenia's highly respected armed forces --
had inadvertently felt their wrath, and paid for it with his life.
The death of Avetyan at the hands of bodyguards employed by Hayrapetyan
has become a catalyzing event. Shocked Armenians mobilized in large
numbers throughout the summer. The frustrations with a culture of
bodyguards whose brutish behavior had become notoriously violent over
the years spilled onto the streets and social networks.
Legislation to regulate the private use of bodyguards has been
introduced in parliament: The draft law stipulates that private
security personnel will be required to don uniforms, to apply for
weapons permits, and to register their weapons with law enforcement.
The ongoing trial of those involved in Avetyan's murder has opened
a window onto the excesses of a tiny ruling class that until now has
felt largely untouched by the law. Since the collapse of the Soviet
Union in 1991, Armenians -- like many other inhabitants of the old
USSR -- have watched as the lion's share of the country's wealth has
fallen under the control of a privileged elite. The leading Armenian
oligarchs, a group numbering around 40, dominate industries ranging
from banking to mining, and that economic edge has translated into
privileged political status as well. Just as in Russia and Ukraine,
tycoons here have parlayed their wealth into public office -- to an
extent that it's often hard to tell where business ends and politics
begins.
Though political apathy is widespread in Armenia, the Avetyan case has
fueled resentment and anger towards the men who have accumulated vast
wealth and influence while much of the country's population remains
in dire poverty. But now, thanks to the criminal case surrounding the
death of the army doctor, something seems to be changing. After months
of public pressure, Hayrapetyan finally submitted his resignation from
the legislature in early September, ending his foray into politics.
Six of his bodyguards have been arrested in connection with the murder.
After two postponements, the trial formally got underway last month.
The defendants, who initially faced lesser charges, have been formally
accused on three counts of assault that could result in lengthier
prison sentences than the five to ten years of imprisonment they
previously faced. Hayrapetyan, known by the nickname "Nemets Rubo,"
has repeatedly denied responsibility for the actions of his employees.
Calls for Hayrapetyan to face trial in the case have gone nowhere.
Armenia's search for stability and democracy since the collapse of the
Soviet Union has been difficult. The country achieved its independence
just three years after a 1988 earthquake that left upwards of 25,000
dead. No sooner had Armenians embarked upon statehood than they found
themselves locked in a debilitating war with neighboring Azerbaijan
over the Nagorno-Karabakh region. That war resulted in the closing of
the country's borders with Azerbaijan and Turkey, cutting Armenia off
from normal trade. These straitened circumstances brought hardship to
most Armenians, but to those sufficiently ruthless and well-connected
to take advantage, the war economy meant a path toward instant riches.
It was then that many of today's tycoons began to build their fortunes.
The culture of oligarch immunity is certainly nothing new. The Avetyan
murder has struck a sensitive chord owing to its chilling resemblance
to the 2001 incident in which a bodyguard of then-President Robert
Kocharyan attacked and killed a man in a bathroom for making a
disrespectful remark to the leader. But even then, most Armenians --
whether too apathetic, too scared, or too willing to emigrate --
refrained from mounting an open challenge to the tycoon establishment.
Now, in dramatic contrast, broad swathes of society have shown the
will to stand up and resist. In the months following Avetyan's murder,
the anti-oligarch protests began to attract attendance from regular
citizens who are rarely seen at demonstrations. A candlelight vigil
honoring the late doctor saw over 600 people surround the restaurant,
which has come to symbolize the broad web of impunity shared by
Armenia's tycoons. Police cordoned off the restaurant and clashed
with protestors, breaking up demonstrations by force. "I only had
one bruise, but some people were beaten," said Tsovinar Nazaryan,
an activist and journalist who attended the rally.
But the demonstrators kept coming back. They marched to the
Prosecutor's General Office after Avetyan's funeral, chanting "Nemets
is a murderer" and "I am Vahe Avetyan." Then a montage of video clips
from two press conferences Hayrapetyan gave last year surfaced on
YouTube (with English subtitles), showing the tycoon threatening
reporters, claiming responsibility for beatings, and confessing to
tampering with ballots in an election. "I wouldn't advise people to
try to punish me," he says at one point in the video. "Whoever tried
it, something terrible happened to them."
Anti-oligarch activism spread outside the country's borders, where
the far-flung Armenian diaspora held protests in front of consulates.
Online petitions were organized. Street art around the capital demanded
that Hayrapetyan be tried in court.
"Many people are sick and tired of their power," said activist
Nazaryan. "You can see how violent they are, in their business, in
their everyday actions. They're violent to our journalists. They're
really dangerous. They don't care. They know they won't be punished,
and this is the problem."
This latest series of events represents the first small challenges to
the seemingly impregnable edifice of oligarch power that has dominated
this country since the collapse of the USSR. Functioning like early
twentieth-century robber barons, Armenia's tycoons prefer to be
called "businessmen" (though most Armenians tend to refer to them with
cartoonish nicknames). The oligarchs drive fleets of flashy vehicles;
their Hummers and Rolls Royce's are fitted with custom license plate
numbers to simultaneously identify their families and close associates
and deter harassment from traffic police.
Their ostentatious mansions multiply, and their business assets grow
as they hold the Armenian economy hostage by eliminating competitive
markets for everything from mineral water and asphalt to soft drinks.
The economic elite flex their power in the political sphere despite a
constitutional ban on members of parliament being involved in owning
or running businesses. The political parties that have dominated
recent elections in the country are closely associated with leading
oligarchs who enjoy parliamentary immunity and remain virtually
untouchable. According to a recent report by the International Crisis
Group, for example, the ruling Republican Party had two dozen wealthy
businessmen elected to the ranks of parliament in 2007. The same report
notes that oligarchs routinely use their charitable foundations to
sponsor concerts or hand out free potatoes in order to secure voter
support, though the businessmen deny using charity for the purposes
of political leverage.
Take Samvel "Lfik Samo" Aleksanyan, a millionaire with strong ties to
the government. A 2003 U.S. State Department cable referred to him
as a "semi-criminal" oligarch who "maintains an army of bodyguards"
and controls the import of sugar, wheat, and butter into the country.
Dubbed "the Sugar Baron" in local media, Aleksanyan's domination of
the industry and ownership in a chain of supermarkets has created the
conditions for a series of sugar crises in which prices unpredictably
skyrocket. Aleksanyan recently bought and partially destroyed the
famed, almost century-old bazaar-style indoor market and national
treasure, "Pak Shuka," amid widespread speculation that he intends
to turn it into part of his supermarket empire.
Other oligarchs play prominent roles in the lucrative mining industry.
Armenia is rich in molybdenum and gold, and that has led to
considerable competition among the oligarchs to grab their shares of
the resulting profits. National Assembly Chairman Hovik Abrahamyan and
member of parliament Tigran Arzakantsyan are both shareholders in one
leading mining company. One of the most prominent tycoons linked with
mining is former Minister of Environmental Protection Vardan Ayvazyan,
who was in charge of regulating large parts of the industry during
his stint in government. In September, a U.S. court ordered Ayvazyan
to pay $37.5 million in damages to a U.S. mining company that accuses
him of corruption relating to his own business interest in the sector.
(Ayvazyan has denied all the allegations and rejects the American
court's jurisdiction over him.)
Oligarchs are also accused of tampering with elections. Armenian
elections have long been plagued by irregularities, reportedly ranging
from intimidation to ballot stuffing. Garo Yegnukian, an executive
board member at Policy Forum Armenia, a U.S.-based think tank, says
that oligarchs play an outsized role in elections: "They're the ones
who distribute election bribes, who intimidate, who break people's
knees, if they have to."
A U.S. embassy cable leaked in 2009 described business elites as
"deeply intertwined with political power and vice versa," each
having an incentive to preserve the status quo out of the fear that
a regime change could mean an economic redistribution at the "expense
of today's oligarchs."
Reports have linked oligarchs to assaults and murders. But their
activities have other pernicious effects as well.
The International Crisis Group report pinpointed oligarch benefits from
tax and customs advantages as a reason why the government collects only
about 19.3 percent of GDP in taxes, compared to a 40 percent average in
the European Union. A 2007 International Monetary Fund study reflected
this, arguing that despite double digit growth since the beginning
of the millennium, Armenia's tax to GDP ratio remains very low.
Prime Minister Tigran Sarsgyan who has previously criticized several
ministries within the government for corruption, recently announced
that he will head an anti-corruption council, and extended a rare
invitation to opposition parties to participate.
"We are not satisfied with the state of the fight against corruption,"
Sargsyan said, according to local press reports. But graft in Armenia
doesn't seem to have seen any significant decline. Over the last five
years, Armenia has sharply fallen on Transparency International's
Corruption Index for Armenia by 30 places, from a ranking of 99 in
2007 to 129 in 2011.
Analysts predict that the path to economic success in Armenia means
eliminating monopolies and minimizing the interference of oligarchs in
policymaking; poverty and a high emigration rate (some 70,000 people
leave the country every year) compound the problem. As the fallout
from the death of an innocent army doctor continues, the Armenian
government faces critical choices when it comes to its future and how
it chooses to act, if at all, toward those enjoying immunity from
the law. But it's clear that, even in the best of cases, reducing
the power of the country's tycoons will be a long and arduous process.
http://www.foreignpolicy.com/articles/2012/11/05/breaking_the_grip_of_the_oligarchs