Sparks Fly Over Armenian Privatisation

Friday, 18 August, 2000

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Artem Yerkanyan

New laws aimed at privatising Armenia's electricity industry have sparked heated protest from the political opposition in Yerevan.

Both the Right and Accord bloc and the Communist Party vehemently opposed any privatisation of the four state power companies, but were defeated by President Robert Kocharian's ruling regime.

They now plan to contest the law in the Constitutional Court, claiming that not enough votes were cast in parliament to pass it.

The government, meanwhile, is pressing ahead with its plans to sell shares in the enterprises through an international tendering system.

Plans for privatisation were initially hammered out with the World Bank in 1997. But the government, unhappy with the bank's conditions, shelved the proposals and went ahead with its own programme.

Earlier this year, World Bank officials made it clear that $45 million in credit would only be forthcoming if the privatisation proceeded with its blessing.

With a serious budget deficit, the government could not afford to be too independent-minded, and the final bill essentially conformed to the World Bank's demands. It was, however, only on the second attempt that the bill was passed in the Armenian parliament with a majority of just two votes. But at what cost?

The privatisation issue has done nothing to heal divisions between the parties that form the ruling Unity block. The Republicans supported the bill while a majority of the powerful People's Party vehemently opposed it. Those People's deputies who persisted in voting for the proposals were promptly expelled from the party.

In short, some observers have been tempted to speculate that the ruling coalition is on the brink of collapse.

Samvel Tumanyan, of the People's Party, said enigmatically, "It may be too early to talk about the dissolution of the union, but it's time to start thinking about certain moves."

Even the communists - famous for their strict party discipline - have been racked by internal disputes. Deputy leader Leonid Akopyan agreed with the bill, while a communist faction in parliament voted against it.

There were accusations, notably from Right and Accord MP Agasi Arshakyan, that authorities had fixed the vote by bribing deputies with promises of "interesting" personnel appointments. Iravunk, Yerevan's opposition newspaper, published the sum it alleged was paid to MPs in a bid to secure their support.

So what was so objectionable in the law that 40 MPs refused to vote for it? The list of controversial points is lengthy.

One obvious concern is that the new owners will raise electricity prices, which will have a knock-on effect on other goods and services. This, says MP Nauk Babukhanyan, could trigger a "social time-bomb".

Another concern is that new owners may buy in cheaper electricity from neighbouring Turkey. "I've no doubt about that," says MP and retired KGB colonel Gurgen Egiazaryan. "That will eventually destroy our domestic energy industry, and lead to economic dependence on a country which is far from friendly towards our own."

But the argument that has gained the most support amongst opponents is that the conditions of the tender limit the prospects of Russian investors.

"It was a choice between Russia and the West," believes political analyst Agasi Enokyan. "This time a decision was taken in favour of the West. It was a test to demonstrate that there are limits to Russia's influence."

"The president and the prime minister are attempting to change their foreign policy," agrees Artashes Gegamyan, the leader of Accord Party. "And the World Bank and the international financial organisations are helping them do it."

Artashes Gegamyan has few doubts about who will win the international tender. He's convinced the path has been smoothed for US company AES, as its head is principal advisor to the managing director of the World Bank.

The bank has also insisted on approving the mechanisms used to select candidates for strategic investment.

All of which serves to reinforce the opinion of pro-Moscow politicians that the proposed law has the specific aim of forcing Russia out of the region.

For it is in the energy sphere that links between Yerevan and Moscow are particularly close. Armenia's gas sector is owned by Russia's Gazprom, and its nuclear power stations are operated in partnership with the Russians, who provide the fuel. A project is also being developed for joint use of the Razdansk thermal electric power station which is capable of providing electric energy to three-quarters of Armenia.

Unsurprisingly, the World Bank's claim that Russians lack management experience in this complex sector of the energy industry has fallen on deaf ears in Moscow - the Russian-owned ITERA corporation recently announced its intention to submit a bid for two of the enterprises on sale, ensuring that this particular electrical storm has yet to run its course.

Artem Yerkanyan is deputy editor of the Novoe Vremya newspaper in Yerevan.