By Atom Markarian and Harry Tamrazian in Yerevan
The Russian-Armenian equity-for-debt deal agreement signed earlier this week didn't address the issue of whether the market value of the four enterprises that Armenia agreed to hand over to Russia will in fact cover the country's $98 million long-standing debt. The cost of the deal is still in question as Russia unexpectedly announced that an independent international auditor will decide whether the Market value of four Armenian enterprises would amount to $98 million. There is no guarantee that international auditors would come up with the figure that could equalize the value of the debt and the enterprises offered to the Russian side. The market value of the enterprises could be rather less than more, since the market conditions for the energy sector has deteriorated worldwide and most importantly an international audit firm will be hired by the Russian side.
The deal angered the Armenian opposition members in the parliament. The most outspoken critic of government's privatization policy, Arshak Sadoyan harshly criticized the deal, saying that the value of four Armenian enterprises is much higher than Armenia's $98 million debt to Russia. "This is an illegal, unconstitutional deal and abuse of power. The deal is very dangerous for Russian-Armenian relations. It doesn't deepen Russian-Armenian economic cooperation as the government claims", Sadoyan told RFE/RL. According to the opposition parliamentarian,the Hrazdan electricity power plant produces 30 percent of Armenia's energy and has a capacity to increase its production. The other company "Mars" that would be given to Russia has equipment and machinery that could be valued at $250
million according to Mr.Sadoyan.
Another opposition leader, the first Prime Minster of independent Armenia, Vazgen Manukian had also a critical view on the Russian-Armenian deal. "Assets-for-debt deal is a very outdated business model. I am not excited about this deal. I also think that strengthening Russian-Armenian economic ties are very important, but this kind of deals would not improve the economic relations of the two countries", Manukian said. The leader of National Democratic Union believes that authorities used equity-for-debt deal to show to the Russian side their loyalty, to convince Moscow that thecurrent regime is good for Russia.
"The deal is legal and normal, because the debt is real money", the
head of the National Democratic Union of Armenia Seyran Avagian said.
According to the parliamentarian the initial investment of $300
million in the "Mars" company, which was a promising high-tech undertaking for the Military industrial complex of the former Soviet Union, says nothing for today's market conditions. There are many other economic factors that are much more important than the initial value of invested capital. The company is not operational and has no profit.
Some opposition newspapers also criticized the debt-for-equities deal blaming the government for selling-off national assets for nothing. It was rather a political issue than economic necessity for the Armenian government, which was eager to show to Russia that it has unconditional loyalty to its big brother (Russia) not to the West, "Aravot" daily said in its Wednesday editorial.
But the government defended the Russian-Armenian agreement, saying that it was a very successful business deal, which will deepen cooperation between the two countries and attract more Russian investments in the Armenian economy.
Independent observers and economists also differ on the economics of the deal. According to Movses Aristakesian, the head of the Center of Economic Law, the equities-for-debt agreement has violated Armenian law on privatization of state owned companies. Russia has recently written off $2 billion debt of some African countries but didn't
want to write off the debt for one of its most loyal allies, Armenia, Movsesian said.
Another independent analyst Hovsep Aghajanian argues that assets-for-debt deals are acceptable only in case if there are projects supporting them, and the profitability of future investments is not questionable. "In this case there are no such projects" Aghajanian said.