By Aza Babayan in Moscow and Shakeh Avoyan
Russia’s RAO Unified Energy Systems (UES) issued on Wednesday a confusing retraction of its own claims about the purchase of Armenia’s power distribution network which have prompted concern from the World Bank and apparently other Western donors.
A spokeswoman for the state-run Russian company, Tatyana Milyaeva, told RFE/RL that one of UES’s offshore-registered subsidiaries, Interenergo BV, will manage, and not own, the Armenian Electricity Network (AEN).
“No right of ownership was granted to the Interenergo company,” she said. “Interenergo is only the beneficiary of a management contract and there has been no change of ownership [at AEN].”
The statement contradicts an annual financial report issued by UES late last month. It announced that Interenergo has paid $73 million to buy AEN from Midland Resources Holding, a British-registered firm that privatized the Armenian power grids almost three years ago. AEN promptly denied the claim, saying that its parent company has only signed a management contract with the Russians.
“Midland Resources is not quite right,” the UES spokeswoman said without elaborating. But adding to the confusion, she said that the bombshell information contained in the UES report was wrong and has been removed the company’s website.
The World Bank has expressed serious concern about AEN’s alleged sale to the Russian-controlled obscure firm, saying that it can not go ahead without the consent of Armenia’s government and the Regulatory Commission on Public Services as is required by the law. Both the government and the commission say they have not been approached by Midland Resources.
The head of the World Bank’s Yerevan, Roger Robinson, demanded last week that the Armenian authorities provide a clear explanation of “what is going on.” He said on Wednesday that the issue is “right at the top of the radar screen of myself and many other members of the international community in Armenia,” including the local office of the U.S. Agency for International Development.
Speaking at a news conference, Robinson again cast doubt on the credibility of the AEN explanations. “There is a lot of confusion,” he said. “When you have a management contract you normally pay somebody to manage something. It seems in this case there is something all the way around.”
“If that process is not followed according to the law of Armenia, then we will be disappointed because it sends a very bad signal to the rest of the world and to Armenia about the belief in the rule of law,” he said. “The basis of a modern market economy is rule of law. If your society is not grounded in that rule of law … then it’s not going to go forward very well.”
The World Bank is by far the largest creditor of Armenia, having provided almost $900 million in infrastructure and budgetary loans since 1993. The controversy over the fate of AEN has not kept the bank’s governing board in Washington from approving two more loans to Yerevan over the past week.
The most recent one worth $15 million was disbursed late on Tuesday. The credit is designed to support a four-year government project to improve central heating in apartment buildings and public schools.
Robinson made it clear that the Armenian authorities’ handling of the AEN affair will have “complete implications” for continued World Bank lending, a key objective of which is to improve the country’s business environment.
“How do I improve the business environment if the rule of law is not going to be followed in the country?” he said, adding: “Either you follow the law or you don’t. It’s a choice.”