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By Emil Danielyan and Aza Babayan in Moscow
Russia will lend $500 million to Armenia to help its regional ally cope with the effects of the global economic crisis, official Yerevan confirmed on Thursday.

The Armenian authorities asked Moscow for a “stabilization credit” late last year. Negotiations between the two governments on the size and terms of the assistance have been going on since then.

Speaking in London on Wednesday, Russian Finance Minister Aleksey Kudrin disclosed the amount of money his government is ready to allocate to Yerevan. “We will be helping neighboring countries that we work with,” Russian news agencies quoted him as saying. No further details were reported.

The Armenian Finance Ministry confirmed the news the next day. A ministry spokeswoman told RFE/RL that Armenian and Russian officials are now discussing the terms of the $500 million loan. She could not say just how the Armenian government plans to use it.

Large-scale external assistance is vital for the success of the government’s efforts to minimize the global downturn’s impact on the Armenian economy. The World Bank announced last week that it will provide Armenia with up to $800 million in loans in the next four years. More than $80 million of the promised funding is due to be disbursed this month. These loans will be used for rural infrastructure projects and channeled into small and medium-sized businesses through Armenian commercial banks.

Kudrin made the announcement just hours after Russia promised to contribute $7.5 billion to a rescue fund of five ex-Soviet republics on top of more than $3 billion already promised to some individual allies. The presidents of the republics making up the Eurasian Economic Community (Eurasec) met in Moscow on Wednesday. With Armenia having an observer status in the Russian-led grouping, President Serzh Sarkisian also took part in the summit.

Russian President Dmitry Medvedev made clear at a news conference held after the summit that Moscow will give no non-refundable handouts to its ex-Soviet allies. "Terms should be acceptable for the countries finding themselves in a difficult situation, similar to those under which international financial organizations issue their credits," he said, according to Reuters news agency.

Russia itself has been hit hard by the global recession and, in particular, the sharp decline in international prices of oil and other commodities. Its stock markets have lost three quarters of their value and gold and currency reserves plummeted to under $390 billion from more than $600 billion last summer.

“To think that this Russia can help someone now would be unserious,” Aleksey Malashenko, a senior analyst the Carnegie Moscow Center, told RFE/RL. “Because of the crisis Russia has found itself in a quite difficult situation.”

Malashenko said that Russian loans to countries like Armenia are therefore likely to come with strings attached. Moscow has already won major political concessions from Belarus and Kyrgyzstan. After securing a $2.15 billion Russian rescue package this week, the Kyrgyz government announced the impending closure of a U.S. military base in the Central Asian state.

Vartan Ayvazian, chairman of the Armenian parliament’s economics committee, acknowledged on Tuesday that Russian assistance will “help increase Russia's political influence in Armenia.” “Russia and Armenia are strategic partners,” he told journalists.

Armenia had borrowed heavily from Russia in the early and mid-1990s. The country’s largest thermal-power plant and four other enterprises were handed over to state-run Russian companies in 2003 in payment for Yerevan’s remaining $100 million debt to Moscow.

(Presidential press service photo: Sarkisian speaks at a joint news conference with Medvedev in the Kremlin on Wednesday.)
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