By Atom Markarian in Yerevan, Harry Tamrazian in Prague
There are high expectations in Armenia that the upcoming visit of Russian President Vladimir Putin could result in a major shift in the economic relations of two countries. "The future visit of President Vladimir Putin to Armenia could be a turning point in bilateral economic relations," President Robert Kocharian told reporters on Thursday. Russian President Vladimir Putin due to visit Armenia on September 16.
During his visit to Armenia last month, Russian Deputy Prime Minister Ilya Klebanov discussed the possibility of turning Armenia's $116 million debt to Russia into an invested capital in the joint Russian-Armenian enterprises that would be created in the future. Klebanov also discussed the prospects of increasing the size of the Russian investments in Armenia. Armenia hopes that the Russian investments could revitalize its economy.
The Armenian enterprises that are paralyzed mainly because of the absence of the markets for its products will recover if they integrate with their Russian partners. However, some local newspapers, which are skeptical about the prospects of the Russian investments, have suggested that Vladimir Putin might cancel his visit to Armenia, because of disagreement over the settlement of the Armenia's debt. Yerevan believes the share of the enterprises that Russia wants to have in exchange of forgiving Armenia's debt has much higher value. There is another important consideration that can't be ignored. The formula "assets in exchange of debt" could be unacceptable for the international financial institutions and especially for the World Bank.
The administration of Vladimir Putin has a pragmatic approach in dealing with the CIS countries in terms of economic issues. The economic pragmatism of the new Russian administration was also visible in case of Armenia. Moscow has adopted very tough position on the issue of Armenia's relatively small debt to Russia, refusing to reschedule it. The new shift was apparent after Russian "ITERA" company was disqualified from the initial phase of the international tender for privatizing Armenian energy distribution networks.
During his meetings with the Armenian leaders, the Russian Deputy Prime Minister reportedly has made very specific offer to restructure Armenia's debt to Russia as an investment in the Armenian big state enterprises, such as Kajaran Cupper and Molybdenum mining factory, "Mars" factory and some other major assets that are not privatized yet. Klebanov also discussed a possible participation of the Russian companies in the second tender for privatization of Armenian energy grids, which, according to some media reports, puzzled the World Bank officials.
As Russia tries to expand its position in the Armenian energy sector, final preparations for the privatization of the energy distribution networks are under way in Armenia. Experts believe that the Spanish company Union Fenoza has more chances to win the tender. The Armenian government wants to privatize the networks by the end of September.