Energy, Arms Trade Clouds Armenia's View of Moscow

When Armenian president Serzh Sargsyan visited Moscow earlier this month, his talks with Russian president Vladimir Putin touched on some difficult issues, for example the poor state of bilateral trade. But officially, at least, they did not discuss another major Armenian concern – Russian arms sales to Azerbaijan, a particular irritant in the context of clashes taking place along Armenia’s border with that country.

“In the last two weeks, the situation on the border has been tense. The Azerbaijani side is using artillery as well as [other] large-calibre weaponry,” Sargsyan said at a joint press conference after his September 7 meeting with Putin. “We are of course forced to respond, and I will say more about this at the Collective Security Treaty Organisation summit in Dushanbe.”

Foreign minister Edward Nalbandian touched on the Russian arms sales more directly, but still tactfully, in a BBC interview a week later.

“Of course I can’t say we are very pleased that Azerbaijan is acquiring weapons. But this is probably a question of  business and trade,” he said.

In August 2013, Azerbaijani president Ilham Aliyev announced that he had signed arms deals worth four billion US dollars with Putin. Arms deliveries have included modern tanks, artillery systems and attack helicopters. Armenia, a longstanding ally of Moscow which plays host to a Russian military base, also buys weapons but cannot hope to match Azerbaijan’s oil revenue-funded spending. Armenia’s total government budget is smaller than its neighbour’s defence expenditure.

Armenia and Azerbaijan have maintained a truce since the Nagorny Karabakh war ended in 1994, but have never signed a peace treaty. Karabakh is controlled by a separate Armenian administration, and its future status is the subject of protracted negotiations led by the Organisation for Security and Cooperation in Europe.

The ceasefire is intermittently broken by bouts of shooting across the “line of control” surrounding Karabakh and across the Azerbaijani-Armenian state border. More intense, sustained periods of fighting raise concerns of a return to full-scale conflict, and the latest outbreak is being taken particularly seriously in Armenia because of allegations that the Azerbaijanis are using heavier weapons than usual.

As Sargsyan promised, he raised the issue at the September 15 summit of the Collective Security Treaty Organisation (CSTO), a defence bloc of post-Soviet states.

“I will not repeat myself, but will simply note that if Azerbaijani attempts to inflame the situation do not engender an appropriate response from the international community, they risk destabilising the whole region,” the Armenian leader told Putin and other heads of states at the meeting in Dushanbe, Tajikistan.

Sergei Minasyan, a political scientist and deputy director of the Caucasus Institute in Yerevan, believes that the Armenian president probably did discuss the arms sale controversy at their earlier meeting on September 7.

“It is clear that they discussed the Karabakh conflict and matters relating to Russian-Azerbaijani cooperation,” Minasyan he told IWPR.    

Other difficult issues on the agenda covered the limited benefits Armenia has gained from joining the Eurasian Economic Union in January. The pact was supposed to break down borders and free up trade between member states Russia, Belarus, Kazakstan, Armenia and late joiner Kyrgyzstan. That has not happened, as Russia’s economic contraction affects its neighbours’ economies, particularly the weaker ones in Armenia and Kyrgyzstan.

Armenian exporters have found it harder to sell at competitive prices in Russia because the ruble is so much weaker than the dram. Imports from Russia have also fallen as regional economies head towards zero growth or recession. (See Eurasian Union Fails to Deliver for Armenia  for more.)

Manvel Sargsyan, director of the Armenian Centre for National and International Studies, says that the Eurasian union’s lack of success is now an open secret, but that at Sargsyan’s meeting with Putin, “nothing was said about what needs to be done to stop the decline in bilateral trade”.

One of the benefits Armenia hoped to gain from closer economic union with Russia was cheap energy. This too has failed to materialise. Poor in energy resources, the country gets most of its natural gas from Russia, and its gas and electricity networks are now wholly owned by Russian firms.

In a deal signed in June, Russia agreed to cut the price at which it sells natural gas to Armenia from 189 to 165 US dollars per 1,000 cubic metres. But Gazprom’s wholly-owned subsidiary in Armenia, the monopoly provider, does not intend to pass the reduction on to the consumer.

This summer, the national power company, which belongs to the Russian firm Inter RAO UES (United Energy Systems), announced a steep rise in electricity prices for the third year running. Public anger over the issue led to weeks of protests in central Yerevan. (See Armenia Electrified on the protests.)

Sargsyan referred to the issue after his talks with Putin, although he blamed the price rise on “currency fluctuations” rather than what he himself has previously acknowledged is flawed management at the power company.

Alina Vardanyan is the pseudonym of a journalist in Armenia.