A simmering rivalry between the Armenian president and the prime minister drives a new degree of the domestic political discord, with an added distraction from a surprisingly scathing attack on the EU by some government officials. Yet the deeper and more demonstrable concern was the contradiction between the Armenian government’s optimism over the economy and the statistical reality of the ballooning debt. Meanwhile, Armenian foreign policy continued to face the challenges of a mounting tension and a heightened risk of the renewed hostilities over the Nagorno-Karabakh conflict, only exacerbated by more Russian weapons deliveries to Azerbaijan
Domestic Policy. Biting the hand that feeds you
Even after a round of the parliamentary and municipal elections in April-May, domestic politics in Armenia continued to be dominated by the perception of a rivalry between the President Serzh Sarkisian and the Prime Minister Karen Karapetian. This perception is particularly well-grounded, however, for two main reasons.
First, with the country’s looming transformation to a full parliamentary form of government, a pivotal moment will come in April 2018, when the incumbent president completes his final second term, thereby openly fueling speculation over his political future. Although the President Sarkisian will continue to hold sway as the leader of the ruling Republican Party, some expect him to hold on to power by moving from the presidency to the prime ministerial position, which will become the new “head of the state” in Armenia. And with a series of several contradictory statements and vague hints as to his own plans, the President Sarkisian has only added to the speculation.
A second reason for this perceived rivalry between the president and the prime minister is driven by the background of the emergence of the premier. More specifically, the Prime Minister Karen Karapetian’s arrival in Yerevan from Moscow in September 2016 can be interpreted as an appointment forced on Sarkisian by Russia. And in the wake of this month parliamentary approval of the premier’s new five-year policy program, some see 53-year old Karapetian as personally ambitious and politically invested in carrying out his own vision for the economic development of Armenia in the years to come.
Meanwhile, a surprising new political war of words erupted this month, when the Justice Minister Davit Harutiunian strongly criticized the Ambassador Piotr Switalski, the Head of the Delegation of the European Union to Armenia, for questioning the credibility of the country’s Central Election Commission (CEC). While the EU ambassador publicly recommended changes in the composition of the CEC, including adding some members of the Armenian civil society, his statement merely reflected the recognition of the need to restore and regain public trust and confidence, something that is clearly without doubt. Yet the government’s swift and strident reaction were surprising not only for rejecting the message of the obvious need for public trust but also for its personal attack of the messenger. And this attack on the EU envoy, allegedly for the “interference in the Armenia’s internal affairs”, was especially egregious and disingenuous, as the EU provided more than $7 million for the Armenian authorities to purchase the voter authentication devices and other election observation equipment. In fact, that aid was crucial for the Armenian government to implement the anti-fraud measures from its own amended Electoral Code. And further highlighting that inherent hypocrisy of the government as a “vindictive victor” was the recent announcement by the Armenian Deputy Foreign Minister Shavarsh Kocharian welcoming the 27.7 million Euros in budgetary support for the Armenian government from the EU last year.
Economy. Dangerously high expectations
The Armenian parliament formally approved a sweeping new government policy strategy presented by the Prime Minister Karapetian. The roughly 100-page strategy covers a five-year period and is predicated on the increased economic growth and reduced poverty. Despite the passage by the parliament in a 64 against 31 vote, the opposition “Yelk” (“Exit”) and the second largest fraction, the Tsarukian bloc, voted against the government’s plan, largely based on the recognition that the plan is flawed by two inherent factors.
First, the strategy is overly optimistic, as it is based on an economic model of an average annual rate export-driven growth around 5% and promises a 12% cut in poverty, which now stands at about 30%, with little detail or justification for either projection.
Domestic politics in Armenia continued to be dominated by the perception of a rivalry between the President Serzh Sarkisian and the Prime Minister Karen Karapetian
A second flaw stems from the sweepingly ambitious range of the strategy, reverting to a Soviet-style five year plan, that fails in regards of the inescapable change in the government in April 2018 or such key variables as volatility in global commodity markets, that impacts the crucial Armenian mining sector, and spillover from the Russian economy that directly effects remittances into Armenia.
Beyond the government’s strategy, the dangerously high public expectations for an improved economy pose additional pressure. Much of these higher expectations stems from the government’s election campaign promises, centered on rather unrealistic pledges of some $850 million investments this year, roughly equivalent to 7% of the Armenia’s GDP.
An additional concern relates to a significant increase in the country’s foreign debt. Although the Armenia’s public debt is set to surpass $6 billion (or over 55% of the GDP) by the end of this year, the Finance Minister Vartan Aramian struggled to reassure some worried legislators during a Parliament session, vowing to secure the external borrowing and to rely on the economic growth to manage the rapid rise in debt, which was less than $2 billion before the 2008-2009 global financial crisis triggered a severe recession in Armenia. With debt service commitments projected to reach $1 billion in 2020, the country will be burdened with an especially serious debt obligation, given that the country’s entire state budget is currently worth around $3 billion.
Foreign Policy. Armenia as safe haven
After taking in some 22 thousand Syrian Armenians who fled to Armenia since the outbreak of the war in Syria, the Armenian officials reported that an additional 300 Syrian Armenians arrived in the first half of 2017. The refugees influx into Armenia also promoted some fresh assistance from the EU, which this month announced a new aid package of more than $3 million for the “access to health and psychosocial services, improving housing conditions, increasing access to the economic opportunities, and by facilitating the integration of schoolchildren and students”.
At the same time against the backdrop of a steady escalation over Nagorno-Karabakh, the Armenian and Azerbaijani foreign ministers will hold their next summit meeting on 12 July. Despite the value in meeting, expectations remain meager, especially as the mounting casualties and the detention of an Armenian villager by the Azerbaijani forces hamper any return to the diplomatic engagement. Moreover, the recent delivery of a fresh shipment of the Russian anti-tank missile systems to Azerbaijan only exacerbates the risk of the renewed hostilities. And as part of a broader series of the Russian arms deals, Azerbaijan has procured some $5 billion worth of tanks, artillery systems and other weapons, prompting an Armenian reaction, reflected in a recent statement by the deputy Foreign Minister Shavarsh Kocharian warning that “we should not exaggerate our expectations from Russia”.