Russia to Capture Armenian Industry

Russia may write off Armenian debts in return for large slices of the republic's industry.

Russia to Capture Armenian Industry

Russia may write off Armenian debts in return for large slices of the republic's industry.

A proposed deal that will see Russia cancelling the country's debt in exchange for control of many Armenian industries has met with a mixed reception here.

Some members of the Armenian governing elite have hailed the planned agreement as a step forward, giving the country a much-needed boost at a time when it does not have the revenue or resources needed to kick start its flagging industries. They believe it will bring in Russian investment, expand the market for Armenian goods and encourage industrial growth.

Others are more sceptical and are interpreting the move as a bid by the Yerevan government to strengthen its shaky grip on power with Moscow's support.

Under the terms of the agreement, Moscow will write off Armenia's 100 million US dollar debt and gain control of the Razdan hydroelectric station, the Mars factory and two scientific research institutes.

"An agreement on transferring a series of Armenian factories to Russia in return for the cancelling of debts will be signed in the near future," Anatoly Dryukov, Russia's ambassador to Yerevan, said earlier this month.

A joint Armenian-Russian intergovernmental commission on economic cooperation struck the deal last December. "This is the first really powerful integration between Russia and Armenia to happen in ten years," said Ilya Klebanov, co-chair of the commission.

Yerevan-based political scientist Alexander Iskandarian believes Moscow is reconsidering its relationship with Armenia, its oldest ally in the Caucasus. For more than ten years the emphasis was on military and political cooperation, with economics playing a secondary role. However, there is now a growing feeling in Moscow that Russia must use other methods to exert influence over regions it considers of strategic importance.

That is why the communique signed between presidents Putin and Kocharian in Yerevan last September was mostly devoted to the economic and trade relationship between the two countries. Putin declared that it was a good moment to develop such relations because Russia was experiencing an economic boom.

"Today an effort is going on to push Russia out of the regions, like the Transcaucasus, where traditionally it had undisputed influence," said Eduard Simoniants, former Armenian national security chief who is now one of the leaders of Socialist Armenia, a block of five small extra parliamentary left-wing parties. "Russia is looking for ways of staying in the Transcaucasus in whatever way it can and defending its interests."

Moscow expressed alarm over the arrival of US troops in Georgia to train the country's army counter-insurgency forces. It has also voiced concern at Azerbaijan's developing relationship with the West.

While Yerevan remains Moscow strongest ally in the region, some observers here warn that what is in Russia's best interests may not be helpful for Armenia.

For example, Armenia is pursuing a number of economic projects with Iran, including a tunnel and gas pipeline connecting the two countries and a hydroelectric station on the River Araxes.

Although Russia has formally welcomed the Iran-Armenia gas pipeline project, Moscow has an interest in not seeing the plan come to fruition, as it currently has a monopoly on gas supplies to Armenia via Georgia.

Yet, Iskandarian suggested, Russia may not be as powerful as it thinks it is in the region and the growing economic cooperation between the south Caucasian countries and their southern neighbours, Iran and Turkey, may be unstoppable. "We are returning to a period when there is Russian influence in the region, but the region is not part of Russia," he said.

Susanna Petrosian is a journalist with Noyan Tapan news agency.

Support our journalists