As the Armenian government marked its first 100 days in the office with a massive public rally in Yerevan on August 17, the country witnessed a dramatic increase in political tension. Former Armenian President Robert Kocharian publicly declared plans to return to politics after his release from pre-trial detention. Although Pashinyan government remains generally popular and its anti-corruption drive only continued to bolster its reformist credentials, Kocharian’s threat raised new concerns over a possible political counter-revolution in Armenia.
Domestic Policy
Former president vows political comeback
In the wake of the court decision to release former Armenian President Robert Kocharian from detention on August 13, political tension in the country dramatically increased. The initial decision to arrest the former president late last month sparked a heated debate over the issue of presidential immunity. But it actually centered on the Armenian government’s pledge to reopen a full investigation of the deaths during the March 2008 crackdown on opposition protesters by the police and the military units that triggered the post-election crisis. Although the investigation is widening, the precise legal scope and parameters of the process have yet to be defined or presented.
After his release, in the interviews with Armenian and Russian TV stations, the 63-year old former President Kocharian accused the Armenian government of “incompetence and unbridled populism” and threatened to mobilize his own political supporters. In what was seen as “return” to politics, the interview was widely criticized by the former president’s critics and speaking at a rally on August 17 timed with the first 100 days of the new government, Prime Minister Nikol Pashinian defended the ongoing criminal investigation into the post-election bloodshed and dismissed Kocharian’s threats.
Parties prepare for key local election
With an extraordinary municipal election set for September 23 for the city council of the capital Yerevan, several political parties prepared their lists of candidates. The election is also the key to replace the mayor of Yerevan, Taron Markarian, who resigned on July 9 under intense pressure after the new government uncovered a number of cases of municipal government corruption during his tenure.
While the new city council elects the mayor, the former ruling Republican Party was the only political power not to put any candidates forth. Another surprise, however, was the decision by Prime Minister Pashinyan’s Civil Contract party to offer a slate of candidates separate from their parliamentary bloc partners, the Bright Armenia and Republic parties, which offered their own list of candidates.
Economy
Armenia seeks gas price discount
In a rather surprising announcement on August 29, the Armenian government promised to secure a discount in the price for natural gas supplied by Russia’s Gazprom energy company. According to Energy Minister Artur Grigorian, Armenia will seek the discount during negotiations with Gazprom planned for November and seek to lower the $150 price Armenia pays per thousand cubic meters (tcm) of imported Russian gas. That price already reflects a Russian subsidy for Armenian gas imports and is significantly lower than the $230 per tcm that Russia charges European consumers. The surprise stems from expectations that Russia may actually seek a slight price increase for its gas exports to Armenia, reflecting a degree of tension between Moscow and the new Armenian government in Yerevan. Armenia currently imports Russian gas that accounts for about 80% of its gas needs, with another 20% of demand met by gas imports through the natural gas pipeline from Iran.
Parliament approves government move to counter water shortage
In a rare move to support a request by the Armenian government, on August 28 the parliament approved the request to allow an increase in the amount of water from Lake Sevan that can be used for irrigation. The parliament, still comprised of a leadership dominated by the former ruling Republican Party despite a pro-government working majority, voted to approve the measure to utilize some 210 million cubic meters of water from Lake Sevan, reflecting an increase of 40 million cubic meters over the previous legal limit on water usage. Lake Sevan serves as a major source of irrigation water for agriculture in the Ararat Valley through the Hrazdan River. The move is aimed at addressing a serious water shortage and near-drought conditions amid an unusually hot and dry summer that harmed tens of thousands of farmers and their crops. It was initially opposed by the Armenian Ministry of Environment Protection and the vote was also opposed by a number of demonstrations by environmental activists critical of the move.
Armenian government pledges tax cuts
Reflecting earlier campaign promises, the Armenian government pledged a new set of sweeping tax cuts, arguing that the new taxes will specifically benefit “most workers” and “some small businesses.” In what has become his traditional habit, Prime Minister Nikol Pashinian used a Facebook video address to explain that “very serious changes” to the tax code would be leveraged to simplify and reduce the rate of the personal income tax. According to the current tax code, companies with an annual turnover of up to 115 million drams ($237,000) are exempt from profit and value-added (VAT) taxes that are assessed on larger businesses, and are instead required to meet a “turnover tax” roughly equivalent to 2% of their revenue. That tax code was amended as recently as 2017, but given the fact that those changes were imposed by the former Armenian government, may now question if not challenge several key provisions, including an increase in monthly income tax from 26% to 28% for monthly incomes of between 150,000 drams to 2 million drams ($310-$4,150).
Foreign Policy
German Chancellor Visits
In the first-ever visit to the South Caucasus by a German Chancellor, Angela Merkel praised Armenia on August 24 during her time in Yerevan, highlighting the role of Armenia as “a good example of how one can simultaneously cooperate with Russia and the European Union,” reflecting Armenian ties to the EU and membership in the Eurasian Economic Union (EEU). Merkel’s visit to Armenia was viewed as particularly significant as both an endorsement of the country’s November 2017 Comprehensive and Enhanced Partnership Agreement (CEPA) agreement with the EU and as encouragement for the reform programme of the Armenian government of Prime Minister Nikol Pashinyan. Although the visit follows a similar one last month by the Italian president, the German Chancellor’s regional tour was especially welcomed in Armenia due to Germany’s role as the leading donor and third largest trading partner for Armenia and as the highest level visit of a foreign official to Armenia since the Pashinyan government came to power in May 2018.
Armenia Bolsters Border Security
In an unprecedented move by any Armenian government, the first of several large units of Armenian interior troops were deployed to border areas to bolster military units already positioned to defend the Armenian border with Azerbaijan. Although the move, ordered in mid-August, comes as a response to a serious increase in ceasefire violations and several attempted military incursions by Azerbaijani forces over the past several months, the exact mission or specific mandate of such interior forces along the border areas remain vague and unclear. The units will serve on a limited two-week rotational deployment.
