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Putin Concerned About Russia’s Falling Trade With Armenia


Russia - President Vladimir Putin meets with his Armenian counterpart Serzh Sarkisian, Novo-Ogaryovo, 7Sep2015.

Russia - President Vladimir Putin meets with his Armenian counterpart Serzh Sarkisian, Novo-Ogaryovo, 7Sep2015.

Russian President Vladimir Putin expressed concern at a sharp fall in Russia’s trade with Armenia registered this year as he met with his Armenian counterpart Serzh Sarkisian near Moscow late on Monday.

Putin singled out the current state of Russian-Armenian economic ties in his opening remarks at the talks held in his Novo-Ogaryovo residence.

Sarkisian’s office said that the two men also discussed the Nagorno-Karabakh conflict but gave no details. The Armenian leader blamed Azerbaijan for recent weeks’ upsurge in truce violations in the conflict at the start of the meeting held a week after Russian Foreign Minister Sergey Lavrov’s unexpected visit to Baku.

The visit and Sarkisian’s subsequent departure to Moscow fueled speculation in the Armenian press that the Kremlin could force Yerevan to make more concessions to Baku as part of its putative efforts to anchor Azerbaijan more closely to Russia. Russian officials have given no such indications in their public statements.

Putin did not mention the Karabakh dispute when he welcomed Sarkisian at Novo-Ogaryovo. In his opening remarks publicized by the Kremlin, he spoke instead of the economic component of Russia’s “special” relationship with Armenia.

Armenia -- Russian President Vladimir Putin attends a commemoration ceremony for the 100th anniversary of the Armenian genocide at the Tsitsernakaberd Memorial in Yerevan, April 24, 2015

Armenia -- Russian President Vladimir Putin attends a commemoration ceremony for the 100th anniversary of the Armenian genocide at the Tsitsernakaberd Memorial in Yerevan, April 24, 2015

“It’s nice that Russia remains Armenia’s leading trading partner,” Putin said. “Last year, our commercial exchange rose significantly compared with 2013, but unfortunately the first half of this year saw a downward trend.”

“We will probably also talk about that today,” he went on. “There are certain nuances there to which I have no answers yet. I would like to discuss these issues with you.”

According to official Armenian statistics, Russian-Armenian trade plummeted by almost 22 percent to $491 million in the first half of 2015. Particularly drastic was a drop in Armenian exports to Russia, reflecting a sharp depreciation of the Russian ruble which began in June 2014.

The ruble has lost almost half of its value against the U.S. dollar since then due to collapsing oil prices and Western economic sanctions imposed on Moscow. This has slashed the dollar-denominated value of Armenian goods sold in the Russian market.

The Armenian government reported a similarly sharp drop in Armenia’s trade with the European Union, which totaled $582 million in January-June. Nevertheless, the falling volume of Russian-Armenian trade is undermining the government’s earlier assurances that Armenia’s accession in the Eurasian Economic Union (EEU), effective from January 2015, will give new impetus to the domestic economy. It is also giving more ammunition to Armenian critics of the EEU membership and Yerevan’s broader ties with Moscow.

Sarkisian implied on Monday that the Russian-led economic bloc has yet to live up to his expectations. “We have lot of work to do in order to fill that grouping with content, with accomplishments perceptible to our peoples,” he told Putin.

“In this context, Vladimir Vladimirovich, the price of energy resources for Armenia remains the key issue,” he said. “In this crisis situation, exchange rate fluctuations have a very painful impact on [energy] tariffs, and I very much hope that we will find new solutions, good solutions.”

A nearly 17 percent depreciation of the Armenian dram, another consequence of the Russian currency meltdown, was the main official rationale for state regulators’ decision in June to raise electricity prices in Armenia for a third time in two years. Officials in Yerevan argued that the weaker dram has pushed up the cost of Russian natural gas generating around 40 percent of Armenia’s electricity.

That explanation did not satisfy most Armenians. Thousands of them demonstrated in Yerevan against the price hike on a daily basis in late June and early July. The protests forced the Sarkisian government to subsidize the energy tariffs for households and some small businesses.

Armenia - Armenians demonstrate on Yerevan's Marshal Bagramian Avenue against a controversial electricity price hike, 26Jun2015.

Armenia - Armenians demonstrate on Yerevan's Marshal Bagramian Avenue against a controversial electricity price hike, 26Jun2015.

The so-called “Electric Yerevan” movement also raised Russian fears of yet another Western-backed another “color revolution” in the former Soviet Union. In what was widely seen as an attempt to bolster Sarkisian, it was announced at the height of the protests that Russian law-enforcement authorities have agreed to let Armenian courts try a Russian soldier accused of murdering an Armenian family in Gyumri in January. The Russian government also disbursed a $200 million low-interest loan which Armenia will spend on buying more Russian-made weapons for its armed forces.

Sarkisian made a point of thanking Putin for the decision to place the Gyumri massacre case under Armenian jurisdiction. He also stressed the importance of the Russian loan.

It was not immediately clear whether Sarkisian sought an even greater discount on Russian natural gas deliveries to Armenia. Russia’s Gazprom monopoly already agreed in April to cut the gas price from $190 to $165 per thousand cubic meters. The Russian giant charged European countries more than $300 per thousand cubic meters as of late last year.

That tariff reduction, which was formalized by a Russian-Armenian intergovernmental agreement signed in Moscow on Monday, will not translate into lower gas prices for Armenian households. It seems designed to enable Armenia’s Gazprom-owned national gas distribution network to reverse losses incurred as a result of the dram’s depreciation.

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