Despite a rapid and robust response to the onset of the coronavirus pandemic, Armenia has staggered and stumbled over a surge in cases after an overly ambitious decision to ease restrictions and reopen the economy. Attempting to preempt the surge in cases that would overwhelm the country’s health care system, the government moved to limit the number of hospitalized cases but has been unable to both ensure proper care at home and maintain significant testing.
Domestic Policy
Armenia Struggles to Contain COVID-19
Late on 31 May, Armenian Prime Minister Nikol Pashinyan announced that he has been infected with COVID-19, along with his wife and three daughters, becoming one of the first world leaders to have been infected. Working from home under self-quarantine, neither the prime minister nor his family have any symptoms of the virus yet.
Amid a record-setting spike in the daily cases of the coronavirus (COVID-19) infections, last month the Armenian government defended its decision to ease restrictions and reopen the economy, dismissing mounting calls on May 28 for a renewed “lockdown” to prevent the spread of the virus. With more than 400 new cases reported each day, the end of May suggested that the crisis was far from over, leading many to expect a surging “second wave” of infections, mainly due to fresh outbreaks in newly reopened factories and businesses and a general failure by much of the public to adhere to prudent precautions of social distancing and self-isolation. All businesses were allowed to reopen in the first week of May, although under a regime of strict precautions. Meanwhile, Health Minister Arsen Torosian warned of the danger that the country’s public health system would be quickly overwhelmed, defending the May 22 decision to limit hospitalization to only the most serious and life-threatening cases. As of May 29, some 150 of only 200 beds at intensive care units in hospitals treating COVID-19 patients were full.
Anti-Corruption Campaign Continues
The Armenian government’s concerted anti-corruption campaign continued with an arrest warrant issued on May 27 for Ruben Hayrapetyan, a wealthy businessman with close ties to the former government, on charges of kidnapping and assault. Although the charges are not directly related to corruption, the criminal case arose from the broader anti-corruption campaign that investigated accusations of extortion and fraud by Hayrapetyan. Although several officials of the former government, including the notorious former Finance Minister Gagik Khachatryan, are currently in detention awaiting trial, Hayrapetyan, along with many others, fled Armenia and sought refuge in Moscow to avoid trial, as the Russian authorities have consistently blocked efforts at extradition.
Armenian Parliament Moves to Cancel Constitutional Referendum
After the scheduled April 5 national referendum on changing the constitution was suspended by the introduction of a state of emergency in response to the COVID-19 crisis, the pro-government majority in parliament prepared legislation on May 27 that would formally cancel the referendum. The original intention of the referendum was to offer a set of constitutional amendments that would modify the composition of the Constitutional Court and remove seven of the nine judges on the Court who were appointed by the previous government. This confrontation between the government and the Constitutional Court has dragged on for nearly a year, after attempts to induce or pressure the legacy justices to resign all failed. According to this modified plan, the parliament will no longer rely on the referendum but will now seek to enact legislative changes to the court structure, while relying on the technical and legal expertise of the Council of Europe’s Venice Commission and other relevant international organizations.
Under the terms of this new attempt, the pro-government bloc will seek to adopt a legislative compromise involving an indirect and gradual change to the court’s composition, imposing new 12-year term limits on the justices that would be applied retroactively, and thereby force the removal of two judges that were appointed in the mid-1990s. The move would also seek the removal of Hrayr Tovmasyan as chairman or Chief Justice, to be replaced in a vote by the majority of the new justices, and a further term limit-based move to remove two other sitting judges by 2022. The plan, therefore, is focused on garnering a working majority of new justices, to weaken the power and position of the legacy judges inherited from the previous government. The legislation is set to be considered in June, after consideration of the official recommendations from the Venice Commission.
Parliament Moves to End Direct Local Elections
Deputies from the pro-government majority joined the small parliamentary opposition on May 26 in formulating new legislation that would effectively end direct local elections. The legislation would introduce indirect elections based on “party lists” for all local communities with a population of 4,000 residents or more, with the town councils in turn choosing the mayors. Such a system is already in place for the country’s three largest cities, Yerevan, Gyumri and Vanadzor, and is defended by the government as a way to “strengthen democracy… by increasing the role of political parties and alliances.”
“Amid a record-setting spike in the daily cases of infections of the coronavirus, the Armenian government defended its decision to ease restrictions and reopen the economy”
Economy
Planned Property Tax Increase
The Armenian government announced on May 27 that it intends to introduce a sharp increase in property taxes for homeowners. The move, to be gradually imposed over three years, is more than a way to increase tax revenue but will also adjust the relatively low tax rate in effect compared to other similar countries. The plan is to significantly increase the tax on expensive or “luxury” homes by introducing a new progressive tax system. While the government seeks to maintain the existing progressive tax rates of between 0.05 and 1%, it aims to modify the methodology for calculating the market value of property, which is to be conducted by the state Cadaster Committee. According to the IMF, the current property tax is long overdue for an increase, as it accounts for a mere 0.2% of GDP, well below the level in both the West and among post-Soviet countries. Finance Minister Atom Janjughazyan estimated that property tax revenue, which is largely allocated to local community budgets, would likely quadruple as a result of the change.
Difficult Negotiations with Russia Over Gas Price
Deputy Prime Minister Mher Grigoryan reported on May 21 that ongoing negotiations with Russia over the price for Armenian imports of natural gas remain complicated, adding that the Armenian side will continue to press Russia for a discount after the global slump in energy prices. Armenia, joining Belarus, is seeking the gas price discount as a member of the Russian-led Eurasian Economic Union (EaEU), although Russia continues to insist that both countries must agree to even deeper economic integration with Russia as a prerequisite. For Armenia, such Russian demand would require acceptance of a “single budget and system of taxation” for all EaEU members. At the same time, the Russian-owned gas distribution network, Gazprom Armenia, is seeking a further increase in its wholesale gas tariff, despite raising its charges by 10% increase in January 2019. Armenian utility regulators will rule on that further requested increase in mid-June.
IMF Approves Disbursement of Emergency Assistance
The International Monetary Fund (IMF) disbursed on May 18 a $280 million emergency loan to help Armenia cope with the coronavirus outbreak and mitigate the negative economic consequences. The IMF noted that the COVID-19 pandemic and related global crisis “have disrupted Armenia’s above-trend growth and favorable economic conditions,” adding that “the near-term outlook has significantly weakened, with fiscal and current account deficits widening considerably this year.” The aid package includes the $248 million “stand-by arrangement” that was allocated in May 2019, and the Armenian government is expected to request additional IMF support over the coming months. To date, the government will borrow around $540 million in external financing for 2020, to offset a tax shortfall, meet the over $310 million in spending needs for fighting the virus, and in anticipation of a near-certain projected decrease in economic growth, as the IMF and EBRD estimate a sharp contraction of Armenian GDP in 2020 with a recovery in 2021 dependent on broader external factors.
Foreign Policy
ECHR Ruling on Murder of Armenian Officer
The European Court on Human Rights (ECHR) issued a ruling on May 26 that determined that Azerbaijan violated a key European convention by pardoning, rewarding and glorifying an Azerbaijani army officer who brutally murdered an Armenian officer in a barbaric attack with an axe during a NATO course in Hungary in 2004. This ruling found that Azerbaijan’s actions amounted to the “approval” and “endorsement” of the “very serious ethnically-biased crime” committed by the officer, Ramil Safarov. Even beyond the murder, the reaction and response by the Azerbaijani authorities were as vicious and primitive. For example, after a Hungarian court convicted and sentenced Safarov to life imprisonment in 2006, his later extradition in 2016 was followed by a pardon from Azerbaijani President Ilham Aliyev and a gesture that rewarded the convicted murderer with money, free housing and military rank.
Photo: Roadblocks were introduced as part of the new quarantine system.
Photo credits: www.kavkaz-uzel.eu
