|Author: Hasmik Grigoryan|
ARMENIA BETWEEN THE EUROPEAN UNION AND RUSSIA
Sudden Change in Foreign Policy of Armenia
The joint statement of September 3, 2013 by President of Armenia Serzh Sargsyan and President of Russian Federation Vladimir Putin in Moscow on joining the Customs Union was astonishing and unpredictable among the Armenian society and in the European Union (EU).
With this step Armenia not only stopped the process of European integration and chose a different orientation in the international arena but it lost its chance to become a country with rule of law, the name and the trust which the international actors (mainly the EU) had built towards Armenia. By the sudden change in its political view Armenia showed that it wasn't serious enough towards the cooperation with the EU, the steps, work and reforms undertaken during the years of cooperation in the framework of the Eastern Partnership (EaP). Obviously Armenia stopped being perceived as a reliable partner and it ceased getting considerable economic and political support from the European Union.
It should be noted that in the framework of the Eastern Partnership Armenia has been negotiating with the EU on the Association Agreement (AA) since 2010 and in July of 2013 the authorities of Armenia declared that the negotiations over the Association Agreement including DCFTA (Deep and Comprehensive Free Trade Agreement) are finished and are ready for initialing. This was noted by all the first figures of the country: by the President, Minister of Foreign Affairs, the Secretary of National Security Council and other officials.
After the statement to join the Customs Union, it was obvious that nothing serious, no particular document will be signed during the third EaP Vilnius Summit in November 28-29, 2013. During the Vilnius Summit joint statement between Armenia and the EU was adopted. “The EU and Armenia acknowledge that they have completed negotiations on an Association Agreement, including a Deep and Comprehensive Free Trade Area, but will not proceed with its initialing due to Armenia's new international commitments”. The statement clearly declared that Armenia undertook new international commitments and it meant that Armenia would not continue the way towards European integration now.
One should pay attention that it is obvious that Russia has big influence in Armenia and it is well known in Armenian society. The change in Armenian politics was not, therefore, much surprising. However, surprising was the fact that Armenian government started to work with the EU actively and deeply in the framework of the EaP during the last 3 years and signed many documents, prepared the Association Agreement and only then, after getting deeper in the cooperation froze its negotiations with the EU. A question rises why Armenian government went so deep with its cooperation with the EU.
Factors Influencing on Change in Foreign Policy of Armenia: Balancing of Power is no Longer Essential?
There were different factors and circumstances that affected the decision of joining the Customs Union. Before the statement of September 3, 2013 Armenia was successfully leading the politics of balancing of power. Armenia managed to have good relations and active cooperation with North Atlantic Treaty Organization (NATO) and at the same time is a member of Collective Security Treaty Organization (CSTO) and has Russian bases. Perceiving Russia as its economic, political and military partner Armenia has managed to cooperate with the EU since 1990s and later on through the European Neighbourhood Policy (ENP) and in the framework of the Eastern Partnership.
However, Armenia already went too deep in the EaP cooperation. Armenia was getting a chance to be a strong international subject and more significant political actor. Further cooperation within the EaP would bring to new responsibilities and a level of cooperation that would move Armenia away from Russia. In case of continuation and initialing of the AA Armenia would be able to become a democratic country and gain its independence in international market. It was becoming a country that was a negotiating part in international processes of the EaP and a country where in one year all the EU officials made an official visit. It also meant that Armenia could become a bit more independent from Russia.
Further cooperation in the framework of the EaP meant an unpredictable outcome for Russia. This was the way how Russian government perceived the situation. Despite this view of Russia, it is worth to note that in the AA there was no word regarding the security or military cooperation. EU was taking into consideration Armenia's membership in CSTO.
If the EaP countries continue their cooperation, Russia will gradually lose its leverages and will not be able to control processes ongoing in those countries.
Russia could not admit its gradual lose in the post-Soviet space, hence it used all its leverages of control in order to put pressure on those countries. In the aspect of geopolitics Armenia came across dilemma: it was the moment when Armenia was to choose between Russian led Customs Union and the European Union.
As Russia had much more influence in Armenia than in other EaP countries, it was easy for Moscow to make Armenia to stop the process of the EaP.
So, one factor that influenced Armenia's choice towards the Customs Union was the geopolitical aspect: Armenia could no longer lead balancing politics in its foreign policy with Russia and the EU.
The second aspect was the existence of unresolved conflicts in the South Caucasus. Armenia still has an unresolved conflict with Azerbaijan over Nagorno Karabakh. Russia is considered to be a country that insures the safety of Armenia. Russia has its military bases in Gyumri, in the second large city of Armenia. Armenia has a military agreement with Russia for 50 years till 2049. This is already a big factor through which Russia can easily play its political game in the region.
The third factor was that Armenia's authorities solved the small internal issues that did not see long-term interests but were only of short-run. The authorities were realizing that in case of further cooperation with the EU monopolistic economy of Armenia would break down. The only way to save the monopoly was to go towards the Customs Union.
Is the Customs Union Beneficial for Armenia?
There is a common view that Russia insures Armenia's security. There is also the opinion that as soon as Russia withdraws its bases from Armenia, Azerbaijan and Turkey will start a war against Armenia.
On December 2, 2013 president of Russia V. Putin was in Armenia with official visit. He visited the military bases in Gyumri and then he took part in official meetings in Yerevan. During his speech V. Putin announced: “Russia will never leave this region. On the contrary, we will make our place here even stronger. (Applause) We will strengthen our position here, drawing on the best of what our forebears left us and with the support of good relations with all countries in the region, including Armenia.” It was already obvious that Putin's visit to Armenia should show to the world that South Caucasus is the region where Russia plans to continue dominating.
It is necessary to note that particularly thanks to Armenia Russia manages to keep its impact in the region. Georgia has changed its foreign orientation long ago, Azerbaijan is leading an independent politics (since 2012 Russia has not had military representation in Azerbaijan: Gabala Radiolocation station was closed). As soon as Armenia solves its conflict with Azerbaijan or the reconciliation process with Turkey successes and borders with Turkey are open, there will be no sense to keep Russian military bases in Armenia and impact of Russia in the region will diminish.
It is a bit difficult to predict whether the Customs Union will bring any positive things to Armenia. Russia is an economic and strategic partner of Armenia. In case of Armenia joining the Customs Union one would expect that there would be better prices of gas and economic trade support. However, things are going in the opposite direction.
According to the 3rd Article of the Agreement between Russian Federation, Kazakhstan and Belarus on formation of common customs space and creation of Customs Union (2007), the tariffs and quotas on goods will be abolished. This is the main goal of the Customs Union. From the first sight this seems positive for Armenia as the market will be developed among the member states of the Customs Union without tariffs. But Armenia does not have common borders with the members of the Customs Union which makes trade cooperation more difficult. Armenia is a landlocked country. Armenia transports its goods to Russia via Georgia and the Black Sea. Indeed, Armenian goods will be imported to the Customs Union member states without tariffs. But the main expenses of Armenian entrepreneurs are in the field of transporting goods and transit fee. In order to transport those goods till the borders of the Customs Union Armenian entrepreneurs have transport costs, and also pay transit tariff to Georgia. All this spending will diminish the positive side of the trade without tariffs in the Customs Union for Armenia. The costs of transportation and transit fee to Georgia are much more than tariffs on goods that will be abolished in case of membership in the Customs Union.
According to the working paper conducted by the European Bank for Reconstruction and Development the changes in tariff policy are generally twofold. On the one hand, the removal of the internal tariffs could lead to trade activation. On the other hand, regional customs unions can also result in “too much” trade between the countries involved and not enough trade between the bloc and the outside world (trade diversion). This leads to the increase of tariffs on external goods outside of a union. And this happened with the members of the Customs Union, especially in Kazakhstan.
The Customs Union consists of three countries. Such a number is not sufficient for creation a stable market in a globalizing world of 21st century. In the world market economy the Customs Union has 4% of GDP, whereas the EU has 25% of GDP. From this data one can see that the EU has a larger scale of numbers in trade and production in the world economy.
We should also note that in case of membership in the Customs Union tariffs will become higher for the goods coming to Armenia from third countries. Concerning import Armenia's first trade partner is the EU. Goods to Armenia are coming from the EU countries, Turkey, Iran and China. And if Armenia becomes a member of the Customs Union the tariffs on goods from third countries will be regulated by the regulations of the Customs Union. And if these tariffs become higher (depending on regulations defined by the Customs Union) it will bring to the growth of prices on goods coming from countries outside of the Customs Union. This automatically will bring to difficult social-economic situation in the population of Armenia.
This fact was confirmed by the deputy minister of economy of Armenia Garegin Melkonyan during a press conference.
Garegin Melkonyan said that for 60 per cent of 11,553 types of products that Armenia is importing, the tariffs of the Customs Union are higher than in Armenia. For 14.5 per cent of products the tariffs are lower, and for 17 per cent – the same.
Currently Armenia is a part of GSP+ (Generalized System of Preference) which provides preferential access to the EU market economy. GSP+ allows Armenia to export to the EU 7 200 products without any customs duties. When Armenia becomes a member of the Customs Union the system of GSP+ will have to be modified.
Overviewing the investigation done by the European Bank for Reconstruction and Development we can see that the biggest percentage of import to Russia is from the EU (42.5%). So it means that the EU is the main economic and trade partner of Russia. Russia exports to the EU energy resources and raw materials and gets from the EU products of high quality. If Russia itself is importing a big amount of products from the EU then it means Russia doesn't have so many qualified own products. It turns out that Armenia won't find products with high quality produced by members of the Customs Union. In case of Kazakhstan EU is in the second place in importing the goods (28.9%). Only in Belarus the largest import share has the Customs Union (58.8%) and the EU has 28.9% coming in second place, but it is mainly because in 58.8% is included gas import from Russia. And also the EU puts sanctions on Belarus because of political difficult situation in Belarus.
According to the Agreement on Commission of Customs Union a part of sovereignty of some of the state bodies will be delegated to the Commission of the Customs Union. This means that the Customs Union has features of supranational organization.
The problem is that Armenian constitution does not have any provision on giving away a part of sovereignty to supranational bodies. The Article 114 of the constitution of Armenia prohibits making changes in Article 1 and 2 which refer to the sovereignty of Armenia and sovereign rights of people. In fact in case of joining the Customs Union Armenia must adopt a new constitution.  This means membership in the Customs Union contradicts the Constitution of Armenia. There will be a need to change the Constitution which can be done only through a referendum. Otherwise Armenia will face serious problems.
Customs Union as a tool of Russia for domination
Let's investigate different aspects of Armenian-Russian cooperation. Since its independence Armenia has precisely declared its partnership with Russia. In 1997 Armenia and Russian Federation signed the Agreement on Friendship, Cooperation and Mutual Support.
Armenia is a landlocked country and does not have energy resources, it is depending on external energy supply. Armenia has been involved in unresolved conflict with Azerbaijan and has closed border with Turkey therefore it is not participating in any of the international energy projects. The only gas supplier is Russia. Iran is Armenia's alternative gas importer. Iranian gas has been supplied to Armenia since 2008.
In the sense of energy security at present Russia has a strategic importance for Armenia. But Armenia lost its whole share in ArmRosGazprom. On December 24, 2013 the Head of the Parliament of Armenia Hovik Abrahamyan signed the decision of the Parliament of ratifying the agreement on gas with Russia according to which 20% of the ArmRosGazprom shares will be sold to Russia’s Gazprom. The Agreement was sent for signature by President of Armenia as a final step. Before V. Putin's visit to Armenia on December 2, Armenia had 20% percent of share, and 80% belonged to Russia. So the strategic point, energy security, key element in Armenia's statehood was given to Russia. A positive part in energy security was not ensured.
During last 10 years Russia has led politics of "assets for debt" towards Armenia. In return of debts of Armenia for gas Russia is taking plants and energetic capacities of Armenia. But Russia has not done any investments in those plants. For instance Sevan-Hrazdan hydroelectric station is owned by United Energy System of Russia but so far no investments have been done by Russia. Moreover, one can see the same in other spheres: Yerevan Scientific Research Institute of Mathematical Machines (Mergelyan Institute) also belongs to Russia but the Institute does not function.
In 2010-2011 Armenia signed agreements with Russia on construction of new Armenian nuclear power station but on December 2 of 2013, V. Putin in his speech in Armenia did not say anything on the new power station but spoke of reconstruction of the old one in order to prolong its operation.
Russia is promising to start to rebuild Armenian part of the railway road and open the railway through Georgia and Abkhazia, as a support on Armenia's statement to join the Customs Union. However, the Armenian part of railway road is already belonging to Russia and cannot be connected with Armenia's decision on joining the Customs Union.
Russia is a country with a regime which is very close to authoritarian. Situation in other countries-participants of the Custom Union is similar. Belarus is obviously totalitarian. Kazakhstan despite the fact that positive steps have been done, has also dark sides and is not near to democracy. Hence Armenia by joining the Customs Union will for sure go towards authoritarian regime and become less transparent.
Russia uses the Customs Union and creation of so called Eurasian Union for implementation of its plans. However, since the declaration by Armenia nothing is done towards development of the Customs Union. It was always declared that Armenia was heading towards the Customs Union, although, steps which have been done yet have led rather towards Russia's hegemony in Armenia than towards the Custom Union.
The only step towards the Customs Union was done on December 24, 2013 when Serzh Sargsyan signed the roadmap of membership in Customs Union but it is unclear what the roadmap includes. It is important to note that Kyrgyzstan that also declared its will to join the Customs Union in October 2013, refused to sign the road map in Moscow on December 24.
There is also Eurasian Economic Community (EurAsEC) which is an organization with similar aims as the Customs Union. The difference is that it consists of Tajikistan and Kyrgyzstan together with Russia, Kazakhstan and Belarus. At the meeting of the Supreme Eurasian Economic Council in Minsk on October 24, 2013 president of Kazakhstan N. Nazarbayev suggested dismissing the EurAsEC and expanding the Customs Union.
Indeed there is no sense to have two separate organizations with the same goals and there is also no reason to make up a new organization when EurAsEC already exists. The agreement of Customs Union with Belarus was signed long ago in 1995. But nothing has developed yet. A mountain gives birth to a mouse and the effort to establish the Customs Union looks rather like an attempt to re-orientate the Eastern Partnership countries. The Eurasian Union looks also rather wishful thinking than a real project. If in case of Eastern Partnership we know how the EU operates, what kind of mechanisms it uses, in case of the Customs Union everything is vague. However, the final aim is more or less evident.
Position of Civil Society and Political Parties
When Armenian President Serzh Sargsyan declared that Armenia was going to join the Customs Union this decision surprised Armenian society. No one was expecting this sudden change. The Armenian government has been declaring of signing the Association Agreement and claiming that Armenia was not interested in the Customs Union. After presidential elections in February of 2013, Serzh Sargsyan firstly paid visit to Moscow and Brussels, to the two capitals of the world where Armenia has its key interests: Moscow as a strategic and military partner and Brussels as the crucial economic and political partner. After those two visits Serzh Sargsyan held press conference where he was asked whether European integration was compatible with the Customs Union. The president's answer was clear: "I am telling this to underscore that we will continue our integration processes also with the European structures. And that was the very purpose of visiting Brussels". But the recent events showed that Armenian higher representatives did not manage to continue its politics of balancing and stopped the European integration.
However, the sudden change did not trigger so stormy reaction in Armenia as in Ukraine. This fact has its reasons. Probably the biggest reason why Armenian people did not start big protests is a large propaganda based on statement that Azerbaijan, supported by Turkey, will start war as soon as Russia withdraws its military forces from Armenia. There is a wide spread view and opinion in Armenia that Russia is the only reliable sponsor of Armenia's security.
The second reason is the blockade of the country and dependence of Armenia on Russia in energy sector. Indeed Armenia depends on Russia in this aspect but the government of Armenia should be strong enough to show its people that Armenia is independent to decide its own political way.
Another reason why Armenians did not protest lies in geographical aspect. The EU is far from the region of South Caucasus and historically people accustomed to the view that Russia has played a big role in the region. Armenia is in completely different situation than Ukraine, having borders with 4 EU countries or Georgia experiencing war with Russia. All those factors bring to a fact that Armenians do not connect their identity with Europe so strongly.
However, the reaction of Armenians should not be underestimated. When Vladimir Putin visited last time Armenia, hundreds of people marched in protest against the Customs Union, V. Putin's policy and for sovereignty of Armenia. During this protest a lot of civil activists were arrested. It was an ominous sign where Armenia could head joining the Customs Union.
Armenian civil society is not weak but it is not strong enough to stop current development. On the other hand, taking into consideration population size in Armenia mentioned protest was not negligible. However, a problem is that today´s Armenia does not have a strong elite, either in the government or in the opposition, that could join the protesting people change running tendency. There haven't been conducted any surveys yet on the attitudes of Armenian society towards membership in the Customs Union. So we can't see the precise picture of the moods existing in the society. But the main problem is that Armenian people show their disagreement by leaving Armenia. It doesn't mean that the decision to join the Customs Union is the main factor influencing the migration but it is the disappointment, psychosocial and socio-economic situations that have their impact on the decision of Armenians to leave their country. And of course the sudden change in the foreign policy of Armenia towards the Customs Union also influences on the moods of the society. This is another reason why not so many people are gathering for protests. The dissatisfaction and disagreement of Armenians is performed by migration.
On December 20, 2013 hearings were held at the Armenian parliament to discuss intergovernmental agreements on gas and vote on the agreement, according to which remaining 20 percent of the ArmRosGazprom shares will be sold to Russia’s Gazprom. But it showed that deputies have different views and positions on this issue. The three political parties that are not in the coalition, "Dashnaktsutyun", Heritage and Armenian National Congress party, declared that they would not participate in the voting. At the same time people were protesting in front of the Parliament. The interesting fact was that some of the parliament members of the ruling Republican party were not present and the voting was postponed till the 23rd of December.
While people were protesting since the morning of 23rd, Armenian parliament in the second reading approved the agreement with 71 votes. Members of four non-coalition parliamentary factions were absent and the Parliament members of these four factions who were in the counting commission of the Parliament were not present either. Such approval of the agreement is doubtful.
The voting process showed that some political parties have a problem with the signature of the Agreement. Also some part of Armenian society was against the Agreement but its voice was not taken into consideration. The agreement has been supported only by the ruling party.
On one hand one can see that so crucial Agreement has a lot of opponents in Armenian society but on the other hand Russia is doing everything to fasten the process of signing the Agreement.
On December 24, 2013 Serzh Sargsyan signed the roadmap towards membership in the Customs Union. If one looks at the interviews by well-known experts in Armenia, one can see that most of them do not agree with so fast signing of the Roadmap without making any kind of changes or modifications or discussions in it. Besides, According to the Article 81 of Armenian Constitution, international agreements are ratified by the Parliament. Armenia has made a serious decision to go towards the Customs Union, to become a member of the Organization. But so far no hearings, discussions were organized by the Parliament on joining the Customs Union.
At the same time another aspect should be raised as well. Though we don't have any survey reflecting the public opinion in Armenia regarding joining the Customs Union one can also state that there are people who are in favor of becoming a Customs Union member. Probably the main reason for that is the common history that Armenia had during the Soviet times. During the Soviet Union Armenia was the part of the USSR. Russia and Armenia were considered as brother countries. After the collapse of the USSR this spirit of brotherhood was saved. Some people in Armenia indeed consider that Armenia had a common history and also a common culture of Soviet times. And they steel feel ties with Russia. And in 1990s one indeed could consider that Russia was the strategic partner of Armenia. Especially taking into consideration that at that time NATO was not interested in the South Caucasus region and the EU was just starting to build its cooperation with Armenia. Meanwhile with Russia Armenia was signing deep and comprehensive political, military and economic positive agreements. However later on the sense of the strategic partnership did not continue as Russia stared its policy of "assets for debt" towards Armenia. And I would rather assess that Armenian-Russian relations were transformed from strategic partners towards more Russia's hegemonic relations with Armenia. But definitely the fact that there are people who consider Russia as a brother state that insures Armenia's security and has close historical, cultural ties cannot be ignored as well.
On the other hand keeping in mind that Armenia has an unresolved conflict with Azerbaijan, the tension still strong between the two countries, and looking at the current situation in Crimea, doubts raise: mainly if Armenia continued its cooperation with the EU and refused going towards the Customs Union, a war could be provoked between the conflicted sides Armenia and Azerbaijan.
The recent developments between Ukraine and Russia, Russia and the EU are very tensioned. This happened when Ukrainian former authorities refused to sign the Association Agreement and people started to protest. In the result of the protests the regime led by V. Yanukovich broke down. The current situation in the world shows that for the post-Soviet countries including Armenia it is indeed difficult to make a choice in their foreign policy orientation.
On September 3, 2013 with the joint statement by President Serzh Sargsyan Armenia changed its orientation in its foreign policy. Armenia made a decision to continue its foreign policy towards the Customs Union. Armenian Officials were declaring about the readiness of initialing the Association Agreement with the EU, however these processes regarding the AA were frozen, due to new international commitments of Armenia. On December 24, 2013 the President of Armenia Serzh Sargsyan signed the roadmap towards membership in the Customs Union. Armenia's change towards the Customs Union has different reasons. One was the fact of existing conflict between Armenia and Azerbaijan. It is considered that Russia is the country that ensures the security of Armenia. Another factor was the unwillingness of Armenian authorities to go forward with the democratic reforms that were needed in the framework of the EaP.
The reaction of Armenian society in regard to this issue can be perceived differently. The visit by V. Putin to Armenia on December 2 provoked a protest of hundreds of people in Armenia. While on December 20 and 23, 2013 there were hearings at the Armenian parliament to discuss intergovernmental agreement on gas and vote on the agreement, according to which 20 percent of the ArmRosGazprom shares will be sold to Russia’s Gazprom, there were protests outside against the agreement. The Agreement was supported only by the Ruling party. But still these protests did not transform into a large scale rallies. The reason for that is Russia's strong influence in Armenia and the ties on one side and on the other side the existing unresolved conflict between Armenia and Azerbaijan.
Analyzing the recent events, Armenian authorities should follow the Constitution of Armenia. In case of serious changes and signing of international agreements a discussion should be organized on both parliamentary and social levels in order to see where the vital interests of Armenia are.
 Joint Statement between the Republic of Armenia and the European Union, 29.11.2013, Vilnius, Lithuania (available at http://mfa.am/en/press-releases/item/2013/11/29/eu_js/)
 Agreement between Russian Federation, Kazakhstan and Belarus on formation of common customs space and creation of Customs Union, article 3, 6.10.2007 (available at http://www.customs-union.com/%D0%B4%D0%BE%D0%BA%D1%83%D0%BC%D0%B5%D0%BD%D1%82%D1%8B/
 Asel Isakova, Zsoka Koczan and Alexander Plekhanov "How much do tariffs matter? Evidence from the customs union of Belarus, Kazakhstan and Russia" working paper No154 conducted by the European Bank for Reconstruction and Development, January 2013, p 4 (available at http://www.ebrd.com/downloads/research/economics/workingpapers/wp0154.pdf)
 EU Delegation to Armenia http://eeas.europa.eu/delegations/armenia/eu_armenia/trade_relation/pref_reg_gsp/index_en.htm
 Interview with the Ambassador of Poland Zdislaw Rachinski to Armenia http://regnum.ru/news/fd-abroad/armenia/1753389.html
 Asel Isakova, Zsoka Koczan and Alexander Plekhanov "How much do tariffs matter? Evidence from the customs union of Belarus, Kazakhstan and Russia" working paper No154 conducted by the European Bank for Reconstruction and Development, January 2013, p 5-6 (available at http://www.ebrd.com/downloads/research/economics/workingpapers/wp0154.pdf)
 Agreement on Commission of Customs Union, Article 2, 9.12.2010 (available at http://www.customs-union.com/%D0%B4%D0%BE%D0%BA%D1%83%D0%BC%D0%B5%D0%BD%D1%82%D1%8B/
 "Kazakhstan’s President suggests granting Turkey admission into the Customs Union", Tengri News, 25.10.2013 (Available at http://en.tengrinews.kz/politics_sub/Kazakhstans-President-suggests-granting-Turkey-admission-into-the-Customs-Union-23559/)
 Serzh Sargsyan's meeting with the representatives of the Mass Media, 18.03.2013, Yerevan, Armenia (available at http://www.president.am/en/interviews-and-press-conferences/item/2013/03/18/President-Serzh-Sargsyan-press-conference/)