1 Sep 2015
Armenia – August 2015
Constitutional reform proposal, new opportunities with Iran, fish ban and US investment in energy sector
August was marked with an increase in tensions surrounding the Nagorno-Karabakh conflict. Both Armenia and Azerbaijan reported that the shootings of August 22 included the use of large-caliber weapons, such as 60mm and 82mm mortars. The information regarding the casualties presented by the sides differed. Armenian officials claimed there were no Armenian victims, yet at least 4 Azerbaijani soldiers were killed and more than 15 were injured. On the other hand, Azerbaijani officials claimed that 5 Armenian soldiers were killed and 8 were wounded, adding that 3 Azerbaijani soldiers were injured. The number of casualties was not confirmed by any independent source.
Another issue remaining in focus on the August agenda was the Eurasian Economic Union (EEU). The topic of discussion has been the draft communiqué of the Russian Federal Service for Veterinary and Phytosanitary Surveillance (Rosselkhoznadzor) to members of the EEU including Armenia to ban fish imports from 14 farms in Norway. Russia banned food imports from countries imposing sanctions against it and is currently requesting the other EEU countries to follow its policy. In the first half of 2015, Armenia imported around 165 tons of fish from Norway according to the State Food Security Service. A reaction from the Armenian authorities has yet to be seen.
Another major political development in Armenia was the submission of the draft of the proposed constitutional reform to be put to a referendum by the President of Armenia to the National Assembly. The reform would turn Armenia into a parliamentary republic by 2018. Political parties and experts give different interpretations to the reform. Opposition parties and some observers argue that the reform is planned to allow President Sargsyan to retain power following the end of his second term, while pro-government voices argue that the aim is to increase democracy and the balance of power. The European Commission for Democracy through Law (Venice Commission) welcomed the draft and offered recommendations considering that Armenia is member of Council of Europe. One of the recommendations suggesting to remove language explicitly prohibiting same-sex marriages raised controversy in Armenia. The Armenian authorities, however, pledged to make “considerable changes” in response to the Venice Commission’s suggestions and will have the final text completed by the end of October.
On the economic scene, the Iran nuclear deal has opened new opportunities for Armenia to develop closer trade relations with its southern neighbor. A new energy agreement will be operational by the end of 2015, and it will result in the construction of the third power transmission line exporting electricity from Armenia to Iran. The Iranian side will provide around 80 percent of the needed total investment of €107 million. The project may link Iran also to the electricity networks of Georgia and Russia. Iran and Armenia are also discussing the possibility of a railway that, according to the Ministry of Transport and Communication of Armenia, interests China as a way of restoring the “Silk Road.” By the end of September, a visit by an Armenian delegation to China is planned with the railway talks on the agenda. An Iran-Georgia gas pipeline project is being discussed with Armenia as a possible transit route. A Free Trade Zone agreement between Iran and the Eurasian Economic Union is also in the works with a research group set by the Council of the Eurasian Economic Commission to study the economic rationale of this initiative.
Meanwhile, with all the recent major investments in Armenia’s energy sector coming from Russian companies, a large US private investment came as a sign of diversification. ContourGlobal and Armenia announced the completion of the acquisition of the assets of the Vorotan hydroelectric facility — three power plants with a total electrical capacity of 405 MW on the Vorotan River in southern Armenia. The Vorotan Hydro Cascade accounts for roughly 15 percent of the installed capacity of Armenia’s electricity grid and provides sufficient energy to power 250,000 homes. ContourGlobal will invest more than €50 million over the next six years in a refurbishment program to modernize the plants and improve their operational performance, safety, reliability, and efficiency. About 150 near-term jobs are expected to be created in addition to the 150 long-term technicians employed at the plants.
Another economic development in August that raised controversy was the selling without competition to the newly established NTAA Investment Group of a major Yerevan landmark, the Sports and Concert Complex with the surrounding land, for $30 million, which is half of the estimated price. The Group committed to invest $100 million into the Complex and the surrounding area over the course of four years in a renovation plan that will create 250 jobs. The Complex will be transformed into “a family oriented complex, the first in the region” including hotels, water world, concert halls, restaurants, shops and a casino. The Complex was previously sold to the Russian BAMO Holding Company for $5.7 million in 2005. However, the Armenian government transferred ownership to the Ministry of Defense in 2014 due to debts accumulated by the owners.
Society and sport
The “Electric Yerevan” social movement that started in Armenia in June to protest the decision of the Public Services Regulatory Commission (PSRC) to raise electricity prices by 16.7 percent was renamed “RiseUp Armenia.” Since July 27 the movement has been staging a sit-in at Republic Square, demanding that the decision on the electricity price hike be revoked. However, it could not stop the electricity price hike that went into effect on August 1. Following the June street protests, the Armenian government agreed to temporarily subsidize the price hike by using the money from the sale of the Vorotan Hydro Cascade, pending the outcome of an international audit of the Russian-owned Electric Networks of Armenia, a subsidiary of Russia’s Inter RAO.
On the sports scene, the closing ceremony of the Sixth Pan-Armenian Games in Yerevan took place on August 13 in Liberty Square. Launched on August 2, the Games brought together over 6000 athletes from Armenia and Armenian communities abroad. The Games, held every four years, are designed to foster closer relationships between Armenia and the Armenian Diaspora.
This news review reflects the major events of the month and is based on media publications. The views expressed in the Review may be different from the views of the editors of the Caucasus Edition.