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HOW RUSSIA PULLED ARMENIA INTO THE CUSTOMS UNION - OPED
Eurasia Review
Sept 6 2013
September 6, 2013
By Luke Rodeheffer
The European Union's Eastern Partnership was dealt a major blow
as Armenia's President Serzh Sargsyan made a surprise announcement
that his republic will join Russia's Customs Union during a visit to
Moscow in early September. E.U. leaders expressed shock and dismay
at the surprise about-face, while members of the Armenian opposition
protested the decision outside the presidential palace in Yerevan.
The announcement was all the more surprising given that Armenia's
leadership had appeared genuinely cold to Moscow only a few months
prior. President Sargsyan had snubbed the most recent meeting of
the Russia-led Collective Security Treaty Organization in Kyrgyzstan
in late May, as well as the subsequent Eurasian Economic Community
conference in Kazakhstan. Proponents of European integration had been
delighted with the news when it was announced at the beginning of the
summer that Armenia had completed the sixth round of negotiations on
a Deep and Comprehensive Trade Agreement with the European Union.
Yet Moscow played its cards well in the poker game between the
European Union and Russia for the former Soviet states of Eastern
Europe and the South Caucasus. Following the announcement of the
trade negotiation results, Russia threatened to raise Armenia's gas
prices by 60%. Armenia was forced enter into negotiations on a 18%
raise in exchange for allowing Gazprom to take the remaining shares of
ArmRusGazprom that belong to the Armenian government. Detente between
Moscow and Baku, manifested in the $1 billion worth of Russian weapons
sold to Azerbaijan since July and Putin's visit to Baku in August,
served as further warnings to Yerevan about the consequences of its
disobedience.
The energy crisis provoked by Russia's threats is a sign of how deeply
dependent Armenia has become on Moscow. Although the European Union
was Armenia's number one trade partner in 2012, much of Armenia's
economy has been sold off to Russian business interests since the end
of the Soviet Union. In addition to dominating the nation's gas market,
Russian companies own almost all of Armenia's power plants and many of
its mining operations. The Russian state also plays a heavy hand in
the Armenian economy, investing hundreds of millions into Armenia's
national railways. This fact was alluded to by Putin's announcement
of another $ 450 million into the network during his meeting with
President Sargsyan.
Furthermore, Armenia's economy remains in very weak shape following
the global economic crisis. In 2011, Forbes granted Armenia the
ignoble title of the world's second-worst economy as a result of
its GDP plunging by 15% during the global economic crisis. Russia
further increased control over Armenia by granting the South Caucasus
republic a $500 million loan in the wake of the crisis. With such a
fragile and Russia-dominated economy, Armenia is in no position to
leave Moscow's Collective Security Treaty Organization or demand the
end to Russia's military base in Gyumri, Armenia's second largest city.
Despite Russia's already heavy hand in the state and economy of
Armenia, even Russian experts admit that joining the Customs Union
will likely not provide the post-Soviet state with any real benefits.
Alexander Knyazev, an expert at the Russian Academy of Sciences,
recently noted that Armenia does not even share common borders
with Russia, Belarus, or Kazakhstan, the current Customs Union
member states. The Customs Union is built around the idea of a
common economic space with no customs controls at the border, but
trade between Armenia and the other member states must first move
through Georgia. The only benefit that Armenia stands to gain from
entering the Russia-dominated trade zone, according to Knyazev, is
the simplification of the migration process, making migration out of
Armenia and into Russia easier.
It is ironic that the major benefit for Armenia will be access to
Russia's labor market, as the Sargsyan's government has previously
viewed emigration of Armenians into the Russian Federation with deep
concern. Yet beyond lodging complaints, there is little that the
Armenian state can do, as remittances from Armenian guest workers in
Russia constitute a sizable portion of the Armenian GDP.
But what can Armenia's post-Soviet generation hope to get out of the
Customs Union, beyond an easier path from their homeland into Russia?
Sargysan's government has stated that corruption remains Armenia's
number one obstacle to reform, but choosing to join a Customs
Union dominated by highly corrupt post-Soviet states, as opposed
to continuing on a path to European integration that encourages
transparency and anti-corruption efforts, is certainly no way to
make inroads against the problem. Russia's increasingly stagnant
economy, with low levels of human capital, a terrible climate for
small business, capital outflows of $350 billion since the onset
of the crisis, and a heavy dependence on raw materials exports is
certainly no model to emulate and closer economic integration with
Russia will only hinder the modernization that Armenia and other
former Soviet economies so desperately need. Armenia's choice will
bring a few short-term benefits but will do little to improve the
country's standing in the long term. With the failure of European
integration efforts in Armenia, the pressure on other former Soviet
states, particularly Ukraine, to choose between Brussels and Moscow
is higher than ever before.
About the author:
Luke Rodeheffer is an MA candidate in International History at
Koc University in Istanbul and intern analyst at Wikistrat. He has
previously written for The Interpreter, NewEastEurope, and George
Washington University's International Affairs Review. He tweets on
Eurasian geopolitics at twitter.com/lukerodeheffer.
http://www.eurasiareview.com/06092013-how-russia-pulled-armenia-into-the-customs-union-oped/
From: Emil Lazarian | Ararat NewsPress
Eurasia Review
Sept 6 2013
September 6, 2013
By Luke Rodeheffer
The European Union's Eastern Partnership was dealt a major blow
as Armenia's President Serzh Sargsyan made a surprise announcement
that his republic will join Russia's Customs Union during a visit to
Moscow in early September. E.U. leaders expressed shock and dismay
at the surprise about-face, while members of the Armenian opposition
protested the decision outside the presidential palace in Yerevan.
The announcement was all the more surprising given that Armenia's
leadership had appeared genuinely cold to Moscow only a few months
prior. President Sargsyan had snubbed the most recent meeting of
the Russia-led Collective Security Treaty Organization in Kyrgyzstan
in late May, as well as the subsequent Eurasian Economic Community
conference in Kazakhstan. Proponents of European integration had been
delighted with the news when it was announced at the beginning of the
summer that Armenia had completed the sixth round of negotiations on
a Deep and Comprehensive Trade Agreement with the European Union.
Yet Moscow played its cards well in the poker game between the
European Union and Russia for the former Soviet states of Eastern
Europe and the South Caucasus. Following the announcement of the
trade negotiation results, Russia threatened to raise Armenia's gas
prices by 60%. Armenia was forced enter into negotiations on a 18%
raise in exchange for allowing Gazprom to take the remaining shares of
ArmRusGazprom that belong to the Armenian government. Detente between
Moscow and Baku, manifested in the $1 billion worth of Russian weapons
sold to Azerbaijan since July and Putin's visit to Baku in August,
served as further warnings to Yerevan about the consequences of its
disobedience.
The energy crisis provoked by Russia's threats is a sign of how deeply
dependent Armenia has become on Moscow. Although the European Union
was Armenia's number one trade partner in 2012, much of Armenia's
economy has been sold off to Russian business interests since the end
of the Soviet Union. In addition to dominating the nation's gas market,
Russian companies own almost all of Armenia's power plants and many of
its mining operations. The Russian state also plays a heavy hand in
the Armenian economy, investing hundreds of millions into Armenia's
national railways. This fact was alluded to by Putin's announcement
of another $ 450 million into the network during his meeting with
President Sargsyan.
Furthermore, Armenia's economy remains in very weak shape following
the global economic crisis. In 2011, Forbes granted Armenia the
ignoble title of the world's second-worst economy as a result of
its GDP plunging by 15% during the global economic crisis. Russia
further increased control over Armenia by granting the South Caucasus
republic a $500 million loan in the wake of the crisis. With such a
fragile and Russia-dominated economy, Armenia is in no position to
leave Moscow's Collective Security Treaty Organization or demand the
end to Russia's military base in Gyumri, Armenia's second largest city.
Despite Russia's already heavy hand in the state and economy of
Armenia, even Russian experts admit that joining the Customs Union
will likely not provide the post-Soviet state with any real benefits.
Alexander Knyazev, an expert at the Russian Academy of Sciences,
recently noted that Armenia does not even share common borders
with Russia, Belarus, or Kazakhstan, the current Customs Union
member states. The Customs Union is built around the idea of a
common economic space with no customs controls at the border, but
trade between Armenia and the other member states must first move
through Georgia. The only benefit that Armenia stands to gain from
entering the Russia-dominated trade zone, according to Knyazev, is
the simplification of the migration process, making migration out of
Armenia and into Russia easier.
It is ironic that the major benefit for Armenia will be access to
Russia's labor market, as the Sargsyan's government has previously
viewed emigration of Armenians into the Russian Federation with deep
concern. Yet beyond lodging complaints, there is little that the
Armenian state can do, as remittances from Armenian guest workers in
Russia constitute a sizable portion of the Armenian GDP.
But what can Armenia's post-Soviet generation hope to get out of the
Customs Union, beyond an easier path from their homeland into Russia?
Sargysan's government has stated that corruption remains Armenia's
number one obstacle to reform, but choosing to join a Customs
Union dominated by highly corrupt post-Soviet states, as opposed
to continuing on a path to European integration that encourages
transparency and anti-corruption efforts, is certainly no way to
make inroads against the problem. Russia's increasingly stagnant
economy, with low levels of human capital, a terrible climate for
small business, capital outflows of $350 billion since the onset
of the crisis, and a heavy dependence on raw materials exports is
certainly no model to emulate and closer economic integration with
Russia will only hinder the modernization that Armenia and other
former Soviet economies so desperately need. Armenia's choice will
bring a few short-term benefits but will do little to improve the
country's standing in the long term. With the failure of European
integration efforts in Armenia, the pressure on other former Soviet
states, particularly Ukraine, to choose between Brussels and Moscow
is higher than ever before.
About the author:
Luke Rodeheffer is an MA candidate in International History at
Koc University in Istanbul and intern analyst at Wikistrat. He has
previously written for The Interpreter, NewEastEurope, and George
Washington University's International Affairs Review. He tweets on
Eurasian geopolitics at twitter.com/lukerodeheffer.
http://www.eurasiareview.com/06092013-how-russia-pulled-armenia-into-the-customs-union-oped/
From: Emil Lazarian | Ararat NewsPress