The government on Thursday acknowledged that Armenia’s imminent accession to a Russian-led trade bloc will push up the cost of many imported goods but insisted that the resulting inflation will not be as high as is claimed by its critics.
Speaking at a weekly cabinet meeting in Yerevan, Prime Minister Tigran Sarkisian dismissed media reports predicting sharp price hikes and told Economy Minister Vahram Avanesian to disprove them.
Avanesian assured reporters afterwards that membership of the Customs Union will raise the overall consumer price index by only 1.5 percentage points. “I don’t exclude price rises but … the Ministry of Economy does not anticipate that they will exceed 1.5 percent,” he said.
Armenia -- Minister of Economy Vahram Avanesian at a press conference, 3 June, 2013
“Just because a customs duty rises by 10 percent doesn’t mean that the price of that good will also rise by 10 percent. It will go up by 6 percent or 7 percent,” argued the minister.
The Customs Union’s three member states -- Russia, Belarus and Kazakhstan -- levy uniform import duties from some 11,500 goods. More than 60 percent of them are higher than corresponding tariffs set by Armenia, reflecting the latter’s traditionally liberal trade regime.
The South Caucasus nation will have to adopt the higher tariffs after joining the union, a fact that has prompted concern from local economists and entrepreneurs. An Armenian business association calculated recently that retail prices of imported meat, dairy products, wheat, cooking oil, sugar, potatoes and other vegetables will rise by up to 15 percent as a result.
One of Avanesian’s deputies, Garegin Melkonian revealed late last month that the government has asked the union to allow Armenia to continue applying its existing fees to as many as 850 imported items. Avanesian confirmed that. “We will do everything to get [these preferences,]” he said.
The minister admitted that Yerevan will not necessarily succeed in clinching such sweeping concessions. In any case, he said, the price hikes will be outweighed by economic benefits of Customs Union membership. Avanesian specified only one of them: a significant discount for the price of Russian natural gas delivered to Armenia.
Russia, Belarus and Kazakhstan account for less than one-quarter of Armenian foreign trade. Critics also argue that Armenia does not have a common border with any of those states and, unlike Russia and Kazakhstan, lacks vast natural resources that essentially shape the union’s protectionist trade policies.
Prime Minister Sarkisian himself cited these arguments when he spoke out against joining the union before President Serzh Sarkisian’s foreign policy U-turn announced last September.