In February Armenia faced renewed fighting over Nagorno-Karabakh, although the country managed to conclude a new agreement with the EU.
Domestic Policy: Two serious challenges
With Armenian voters set to go to the polls in order to elect a new parliament on 2 April, the country has once again become immersed in primitive politics, with little in terms of policy alternatives and even less as fresh ideas. With a record of tainted elections, when it comes to an average Armenian citizen the ballot is usually met with a degree of frustration and resignation. And as politics in Armenia have been long dominated by strong personalities with weak policies, most voters have become accustomed to having little choice and no voice in determining the outcome.
Moreover, before the ruling Republican Party was dangerously over-confident in its ability to garner an overwhelming majority of seats in the new parliament. However, unlike that in the past, with this election, there may be a surprise in store for the government. More specifically, beyond an electorate that is no longer content with flawed elections. And with apathy replaced by activism, the risk of instability following another tainted election is especially serious. This is also affirmed by an unexpected level of unrest in the country’s violent two-week hostage standoff in July 2016 and confirmed by the deepening level of simmering discontent in Armenia.’
For Armenian Prime Minister Karen Karapetian the priority is to target corruption through a sweeping reform of the tax code
On the other hand, the incumbent party is challenged by a new opposition coalition, “Yelk” (or “Exit”), that offers a fresh set of younger faces. It may be too soon for this new opposition coalition to gain more than a small, yet significant, number of seats in the new parliament though. Nevertheless, this force does represent the political future and bears watching. At the same time the oligarch-led “Prosperous Armenia” party is the “stalking horse” of Armenian politics. It may end up undercutting support for the Republicans, especially as they recruit defectors, including, most notably, the former Prime Minister Hovik Abrahamyan.
Economy: Reforms too little, too late?
In addition to the domestic political tension, the fragility of the Armenian economy, driven by a serious reduction in remittances from abroad (mainly from Russia), and widening disparities in wealth and income suggest yet another internal crisis looming large for the country.
In response, the government is intent on accelerating reforms, improving tax collection and seeking a new round of external financing. Yet these measures, which do little to combat the country’s entrenched corruption, may be too little too late to hold off a serious economic downturn.
For Armenian Prime Minister Karen Karapetian, however, the priority is to target corruption through a sweeping reform of the tax code, which is supposed to put an end to “endemic” corruption carried out by “unhealthy elements” within the tax and customs service. Yet the bigger challenge for the prime minister will be to meet higher expectations for the economy. And it was the premier himself who raised the bar for these expectations, most dangerously with his promises for significant new investments, based on claims that he is considering some $8.5 billion in investment proposals. This will be very hard, especially as foreign direct investment (FDI) in Armenia has rapidly fallen, most recently declining by almost fifty percent in January-September 2016, to a meager $93 million.
Foreign Policy: The risk of renewed hostilities
For Armenia, foreign policy once again was determined by the escalating risk of renewed hostilities over Nagorno-Karabakh, as serious fighting broke out on 24-25 February when Azerbaijani military reconnaissance units launched a limited operation targeting the south-eastern and eastern sections of the heavily militarized “line of contact.” The Azerbaijani operation was more than the usual probe of defensive positions, but involved a targeted mission to conduct more in-depth reconnaissance after overcoming a small minefield. The operation was fairly quickly discovered, however, and resulted in at least five Azerbaijani casualties before being fully repulsed in a more serious counter-offensive.
This latest escalation follows a pattern of increasingly intense clashes in the previous few weeks despite an earlier period of relative calm since heavy fighting in April 2016. And as the risk of renewed hostilities over Karabakh is clearly escalating, a repeat offensive by Azerbaijani forces within the coming two months is ever more likely. Similar to April 2016 offensive, the temptation for Azerbaijan to seek a repeat military success, aimed at seizing and securing territory and combined with the effective distraction from Azerbaijan’s domestic economic problems, suggest a dangerous and destabilizing fresh round of fighting.
However, there are two distinctly different factors that will limit potential gains from any renewed offensive by Azerbaijan. First, the element of surprise is no longer an advantage. And second, the defending Armenian and Karabakh sides are better equipped to repulse any attack.
Therefore, the next round of fighting may be more deadly, as the Azerbaijani offensive will quickly stall, becoming more of a drawn out battle of attrition that may trigger the deployment and use of more deadly offensive weapon systems, including artillery, multiple launch missile launchers and (rotary wing) air power. Sadly, as diplomacy remains deadlocked, there is no real deterrence to such a scenario.
Armenia-EU: A rare “second chance”
However, there was some good news as well, as the final stage of negotiations over a new legal framework agreement enhancing Armenia’s relations with the EU concluded late on 26 February. Timed with the official state visit of the Armenian president to Brussels, this new agreement represents a rare “second chance” for Armenia “to restore, regain and rebuild relations” with the EU. This is especially important after the 2013 decision of the Armenian president to sacrifice the earlier Armenia-EU Association Agreement in favor of committing Armenia to join the Russian-led Eurasian Economic Union.
The new agreement is a strategic achievement for Armenia, and also for the EU, as a demonstrable success for the Eastern Partnership program. And unlike 2013, Russia is likely to allow this to proceed for several reasons. First, the agreement is not a threat to Moscow, as it is not an Association Agreement and with Armenia now being a part of the Eurasian Economic Union, hence, it is ensured that Moscow retains substantial leverage over Armenia.
In addition, this round of negotiations also represents a different time and different context, as in 2013 when Armenia was merely a “sacrificial pawn” for Moscow to send a strong message to other former Soviet states. And the third factor stems from the possibility of the new agreement being seen in Moscow as a way for the Eurasian Economic Union to garner greater credibility in the notable absence of being taken seriously even by its members.
