Monday, 28 September 2015

New agreements reached during Sargsyan's visit to Moscow

Published in Field Reports

By Erik Davtyan

September 28th, the CACI Analyst

On September 7, Armenia’s President Serzh Sargsyan visited Moscow and met his counterpart Vladimir Putin. This meeting, which took place nearly two years after President Sargsyan declared Armenia’s decision to join the Russia-led Customs Union, is the fourth in this year. The first meeting in 2015 took place in April, when Putin attended the events dedicated to the commemoration of the Armenian Genocide Centennial. The second and third meetings took place in May and July when Sargsyan attended the events in Moscow dedicated to the 70th anniversary of the victory in the Great Patriotic War and then during the joint summit of BRICS, the Eurasian Economic Union (EEU) and SCO leaders in Ufa. 

During the one-day visit, Sargsyan and Putin discussed a wide range of issues in bilateral and multilateral relations, including cooperation in the political, humanitarian and economic fields, and integration processes within the EEU. During his speech, Putin stressed “the special nature of relations between Russia and Armenia,” and its consolidation through Armenia’s membership in the two main post-Soviet integration structures – the EEU and the Collective Security Treaty Organization (CSTO). Putin also welcomed the fact that Russia is Armenia’s first economic partner and at the same time deplored the negative change in bilateral trade for the first half of 2015.

In turn, Sargsyan underlined that there is “plenty of work to do so that the content of that integration union is filled with works significant to our people” and that Armenia is “keen on bringing to life the principles of free movement of goods, capital, services and labor as quickly as possible.” Armenia’s President thanked his Russian counterpart for transferring the criminal case of Valery Permyakov, charged with murdering seven Armenian civilians, to Armenian jurisdiction. The case of the former soldier of the Russian 102nd military base in Gyumri is followed closely in Armenia and has previously been discussed at the presidential level.

One of the most important outcomes of the working visit was the signing of a new agreement in the energy field. Russia’s Minister of Energy, Alexander Novak, and the Armenia’s Minister of Energy and Natural Resources, Ervand Zakharyan, signed a contract according to which Russia reduces the gas prices for Armenia from US$ 189 to US$ 165 per 1,000 cubic meters. In comparison with other importing states, Armenia’s imports of Russian gas are exceptionally cheap. For example, in 2013 the average gas price for Western Europe was US$ 380 per 1,000 cubic meters.

Another important theme for the meeting was the Nagorno-Karabakh issue and the current situation on the border. Sargsyan explained that Azerbaijani Armed Forces use not only large-caliber firearms, but also artillery, and stated his intention to bring up this issue during the CSTO summit in Dushanbe. In early September, tensions along the Armenian-Azerbaijani border in Armenia’s Tavush region escalated and caused some casualties from both parties. Simultaneously, Russia’s Minister of Foreign Affairs Sergey Lavrov paid a short visit to Baku on September 1 and discussed Nagorno-Karabakh with Azerbaijan’s President Ilham Aliyev and Minister of Foreign Affairs Elmar Mammadyarov.

In this context, the issue of Armenian-Russian military cooperation received considerable attention during the meeting. The two states concluded a preferential loan agreement worth US$ 200 million, which will be used for Armenia’s military expenditures. Sargsyan said the contract “will allow Armenia to upgrade the arsenal of its armed forces.”

Sargsyan also brought up the correlation between tariffs on power-generating materials and currency fluctuations and expressed hope that Armenia and Russia would find solutions to this problem and avoid possible negative effects. According to Aram Safaryan, a member of the Eurasian Expert Group, energy is one of the major areas of bilateral cooperation that can be addressed directly through the dram-ruble relationship, thereby excluding U.S. currency from all contracts and deals between Armenia and Russia.

This solution was proposed by Armenia’s Prime Minister Hovik Abrahamyan at the EEU Intergovernmental Council meeting in Grodno, Belarus on September 8. Abrahamyan suggested to exclude the dollar from trade in strategic goods among EEU member states and use the ruble instead. According to Armenia’s First Deputy Minister of International Economic Integration and Reforms Suren Karayan, this change will reduce transaction costs between member states and will stabilize the ruble, which will in turn have a positive impact on Russia’s trade with other EEU member states, including Armenia.

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