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Ex-Minister Warns Of Customs Union Pitfalls


Armenia -- Former Finance Minister Edward Sandoyan is interviewed by RFE/RL Armenian Service, 13 November 2013

Armenia -- Former Finance Minister Edward Sandoyan is interviewed by RFE/RL Armenian Service, 13 November 2013

Armenia will lose hundreds of millions of dollars in state revenue each year unless it negotiates preferential terms for its membership in the Russian-led customs union, a prominent Armenian economist who had served as finance minister warned on Wednesday.

In an interview with RFE/RL’s Armenian service (Azatutyun.am), Eduard Sandoyan estimated the potential revenue shortfall at $300 million, a sum equivalent to 10 percent of the Armenian state budget for this year.

Sandoyan argued that many Armenian importers will be tempted to reroute their deliveries through Russia, Kazakhstan or Belarus and thus avoid paying any duties to the Armenian customs service in accordance with the union’s rules.

“They might have an opportunity to pay less bribes or go through more lawful processes there,” he said. “So it’s possible that many entrepreneurs will decide to pay customs duties at the border of not Armenia but another member of the customs union”

Other Armenian analysts have also pointed to such risks in their largely negative reactions to the government’s decision to join the Russian-led bloc. They say that Armenian entry into the customs union will also push up the cost of many imported goods.

Armenian import duties are currently considerably lower than those jointly set by Russia, Belarus and Kazakhstan. The latter account for less than one-quarter of Armenia’s foreign trade.

Sandoyan, who is a senior economics professor at a Yerevan-based university, agreed that the cost of living and doing in business in Armenia could go up as a result. He said the Armenian government must therefore secure important concessions in its ongoing membership talks with the union’s executive body dominated by Russian officials.

“These issues require very serious negotiations,” he said. “I assume that our government is able to find such solutions. Although I am somewhat skeptical, I hope that they can hold negotiations as equals, without having a junior brother complex, and find ideal solutions.”

Citing unnamed sources privy to those talks, Sandoyan said Armenian and Russian officials are currently looking into the possibility of transferring between 0.5 and 1 percent of the union’s combined customs duties to the Armenian government. Yerevan should gain a more than 0.5 percent share in the total in order to avoid massive budgetary losses, he said.

In an interview with the Ukrainian newspaper “Segodnya” published last week, Prime Minister Tigran Sarkisian acknowledged that his country will face “some difficulties” after joining the customs union. “But on the whole, we can see that Armenia will benefit from membership of the customs union,” he said without elaborating.
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