Armenia's last-minute decision to join a Russian-led customs union at the expense of much closer ties with the European Union has been widely attributed in the West to strong pressure and bullying by Russia. The dominant view among policymakers, diplomats, and pundits there is that President Serzh Sarkisian had no choice but to cave in because of his country's heavy dependence on its main geopolitical ally.
The picture is more complex on closer inspection, however. Sarkisian's parochial interests appear to have been at least as much in play as economic and security considerations. The haste with which his administration is holding accession talks with the Customs Union of Russia, Belarus, and Kazakhstan and its reluctance to seek significant Russian concessions in the process suggest that he is driven at least in part by a deep sense of personal insecurity.
Moscow increasingly indicated its displeasure with Yerevan this summer as the latter intensified and completed negotiations with the EU over a far-reaching Association Agreement. EU representatives repeatedly made clear that the agreement was "not compatible" with possible Armenian membership in Moscow's customs union. Armenian leaders did not object to this precondition before the EU announced in late July the "substantive completion" of the association talks.
The stage was thus set for the agreement's initialing at the EU's November summit in Vilnius. Vyacheslav Kovalenko, Russia's ambassador to Armenia until March 2013, had joined a host of Kremlin-linked pundits in warning earlier in July that Yerevan would risk alienating Moscow if it stayed out of the Russian-led trade bloc.
Sarkisian's decision to opt for the customs union was privately communicated to Brussels on August 31 and made public following his September 3 talks with Russian President Vladimir Putin held near Moscow. Sarkisian has made only two brief public statements (none of them in Armenia) explaining his dramatic volte-face. "I have repeatedly said before that when you are part of one system of military security it is impossible and ineffective to isolate yourself from a corresponding economic space," he told a joint news conference with Putin.
Strong Enough Levers?
Russia does have strong economic and military levers to exert strong pressure on its sole South Caucasus ally, but their potential impact should not be overestimated. Armenia might have faced the kind of Russian trade sanctions that have been imposed on Moldova and Georgia in recent years had it pressed ahead with the EU accord. But Russia absorbs less than one-quarter of Armenian exports, mainly buying agricultural products, prepared foodstuffs and alcoholic beverages. A Russian ban on these imports would have hit Armenia's agriculture hard, but it would not have been enough to wreck the struggling Armenian economy as a whole.
According to Armenian government data, Russia accounted for 23 percent of Armenia's foreign trade in January-October 2013, compared with the EU's almost 29 percent share. Much of the Russian-Armenian trade volume is generated by supplies of Russian natural gas used for producing over one-third of Armenia's electricity, heating homes in the winter, and powering, in the liquefied or pressurized form, the majority of vehicles in the country.
Russia's Gazprom monopoly mostly reversed a 50 percent rise in the gas price, officially announced in April, shortly after Armenia decided to join the customs union. At almost $190 per 1,000 cubic meters, it is currently well below international market prices. Armenian Energy Minister Armen Movsisian has claimed that Armenia could not switch to large-scale gas imports from neighboring Iran because the latter would charge it as much as $400 per 1,000 cubic meters.
The Iranian ambassador in Yerevan, Mohammad Reisi, held two news conferences within four days early this month to effectively deny Movsisian's claims. Reisi implied that the Iranian gas price for Armenia might have been set lower than the current Gazprom tariff. The Armenian government has not even attempted to negotiate with Tehran over significant gas deliveries, he said.
Remittances sent home from Armenian migrant workers in Russia are a more important factor behind the Russian economic influence. They accounted for more than 80 percent of the $1.7 billion in noncommercial cash transfers to the country in 2012, a sum equivalent to over 16 percent of its gross domestic product.
There were fears in Armenia that Moscow could seek to halt those remittances, including by deporting en masse Armenians working in Russia. But most of Russia's estimated 2million-2.5 million Armenians are Russian citizens. The Russian Federal Migration Services puts the number of Armenian nationals who resided in the country as of October at around 500,000. Their mass deportation would have been both politically and technically problematic. Even Georgian and Moldovan migrants have not been sent home in their thousands to date.
...Or Dangerous Enough?
Russia's strongest leverage against Armenia has to do with national security. The unresolved Nagorno-Karabakh conflict has forced the Armenian side to rely heavily on close military ties with Moscow, enabling it to receive large quantities of Russian weapons at knockdown prices or even free of charge, and thus stay in an intensifying arms race with oil-rich Azerbaijan.
It emerged in June that Russia has begun delivering $1 billion worth of tanks and other offensive weapons to Azerbaijan. Putin raised Armenian fears of more such arms sales when he paid a high-profile visit to Baku in mid-August. Armenian pro-government politicians now say that the integration pact with the EU would have put the Russian-Armenian military alliance at risk and encouraged Azerbaijan to unleash another war for Karabakh. The implication is that the Russians threatened to end military aid to Armenia and sell more weapons to Azerbaijan.
Assuming that such threats were indeed made, they involved an element of bluff. Russia began selling weapons to Azerbaijan even before the start of the Armenia-EU association talks in 2010, and the recently disclosed Russian-Azerbaijani arms deliveries were reportedly signed in 2011. Besides, Russian arms supplies to Armenia intensified even when the Sarkisian administration was on course to conclude the Association Agreement.
Moscow is clearly not interested in an Azerbaijani military victory in the conflict as it would leave the Armenians with no major reason to host Russian troops in their territory and to maintain broader Russian-Armenian military cooperation. The Association Agreement could in no way jeopardize that cooperation as it offered Armenia no prospect of eventual membership of the EU, let alone NATO. Gagik Minasian, a senior lawmaker affiliated with the ruling Republican Party of Armenia (HHK), emphasized this fact when he ruled out the possibility of Russian economic sanctions in an August 20 interview with RFE/RL's Armenian Service.
A Personal Angle
Sarkisian's subsequent efforts to make Armenia part of the customs union as soon as possible -- without the kind of haggling engaged in by Ukraine and even Kyrgyzstan -- raised more questions about the theory that his strategic U-turn stems only from regional geopolitics. "We are struggling to keep up with our Armenian partners," Putin commented tartly on the accession talks during a December 2 visit to Yerevan.
The gas-price discount is the only major Russian reward announced so far. Yet even it comes with a catch: unprecedented privileges granted to Gazprom in the Armenian energy sector. Russia has not even rescheduled a $500 million debt extended to Armenia in 2009. The authorities in Yerevan repaid it in October with proceeds from the first-ever sale of Armenian eurobonds.
Sarkisian is giving the impression that he is keen to restore the Kremlin's trust, shaken by his European integration drive, at any cost and as quickly as possible. Concern for his power seems a plausible explanation for this tactic. Sarkisian succeeded in neutralizing his political opponents during his first presidential term. But virtually none of them has recognized the legitimacy of his disputed reelection in February 2013 and ruled out the possibility of challenging him in the streets.
An open confrontation with Moscow could have emboldened some opposition forces, notably the Prosperous Armenia Party of Gagik Tsarukian, a wealthy businessman close to Sarkisian's predecessor, Robert Kocharian, who reportedly spends much of his time in Moscow. Some local observers believe that the Kremlin is also in a position to engineer mass defections from the ruling HHK's parliamentary faction.
The Armenian president does not need a powerful external enemy, especially now that he seems intent on extending his rule beyond 2018. The day after announcing his customs-union U-turn he formed an ad hoc commission on constitutional reform. The Armenian media has since been rife with speculation, not denied by presidential allies, that Sarkisian wants to turn the country into a parliamentary republic and become a powerful prime minister after completing his second and final presidential term, just as former Georgian President Mikheil Saakashvili sought unsuccessfully to do.
The Armenian Constitution can be amended only through referendums. Sarkisian will not find it easy to muster the support of at least one-third of the country's 2.5 million eligible voters needed for the passage of amendments. Any attempt to rig the referendum would most probably spark street protests and unite the fragmented opposition against him.
-- Emil Danielyan
The picture is more complex on closer inspection, however. Sarkisian's parochial interests appear to have been at least as much in play as economic and security considerations. The haste with which his administration is holding accession talks with the Customs Union of Russia, Belarus, and Kazakhstan and its reluctance to seek significant Russian concessions in the process suggest that he is driven at least in part by a deep sense of personal insecurity.
Moscow increasingly indicated its displeasure with Yerevan this summer as the latter intensified and completed negotiations with the EU over a far-reaching Association Agreement. EU representatives repeatedly made clear that the agreement was "not compatible" with possible Armenian membership in Moscow's customs union. Armenian leaders did not object to this precondition before the EU announced in late July the "substantive completion" of the association talks.
The stage was thus set for the agreement's initialing at the EU's November summit in Vilnius. Vyacheslav Kovalenko, Russia's ambassador to Armenia until March 2013, had joined a host of Kremlin-linked pundits in warning earlier in July that Yerevan would risk alienating Moscow if it stayed out of the Russian-led trade bloc.
Sarkisian's decision to opt for the customs union was privately communicated to Brussels on August 31 and made public following his September 3 talks with Russian President Vladimir Putin held near Moscow. Sarkisian has made only two brief public statements (none of them in Armenia) explaining his dramatic volte-face. "I have repeatedly said before that when you are part of one system of military security it is impossible and ineffective to isolate yourself from a corresponding economic space," he told a joint news conference with Putin.
Strong Enough Levers?
Russia does have strong economic and military levers to exert strong pressure on its sole South Caucasus ally, but their potential impact should not be overestimated. Armenia might have faced the kind of Russian trade sanctions that have been imposed on Moldova and Georgia in recent years had it pressed ahead with the EU accord. But Russia absorbs less than one-quarter of Armenian exports, mainly buying agricultural products, prepared foodstuffs and alcoholic beverages. A Russian ban on these imports would have hit Armenia's agriculture hard, but it would not have been enough to wreck the struggling Armenian economy as a whole.
According to Armenian government data, Russia accounted for 23 percent of Armenia's foreign trade in January-October 2013, compared with the EU's almost 29 percent share. Much of the Russian-Armenian trade volume is generated by supplies of Russian natural gas used for producing over one-third of Armenia's electricity, heating homes in the winter, and powering, in the liquefied or pressurized form, the majority of vehicles in the country.
Russia's Gazprom monopoly mostly reversed a 50 percent rise in the gas price, officially announced in April, shortly after Armenia decided to join the customs union. At almost $190 per 1,000 cubic meters, it is currently well below international market prices. Armenian Energy Minister Armen Movsisian has claimed that Armenia could not switch to large-scale gas imports from neighboring Iran because the latter would charge it as much as $400 per 1,000 cubic meters.
The Iranian ambassador in Yerevan, Mohammad Reisi, held two news conferences within four days early this month to effectively deny Movsisian's claims. Reisi implied that the Iranian gas price for Armenia might have been set lower than the current Gazprom tariff. The Armenian government has not even attempted to negotiate with Tehran over significant gas deliveries, he said.
Remittances sent home from Armenian migrant workers in Russia are a more important factor behind the Russian economic influence. They accounted for more than 80 percent of the $1.7 billion in noncommercial cash transfers to the country in 2012, a sum equivalent to over 16 percent of its gross domestic product.
There were fears in Armenia that Moscow could seek to halt those remittances, including by deporting en masse Armenians working in Russia. But most of Russia's estimated 2million-2.5 million Armenians are Russian citizens. The Russian Federal Migration Services puts the number of Armenian nationals who resided in the country as of October at around 500,000. Their mass deportation would have been both politically and technically problematic. Even Georgian and Moldovan migrants have not been sent home in their thousands to date.
...Or Dangerous Enough?
Russia's strongest leverage against Armenia has to do with national security. The unresolved Nagorno-Karabakh conflict has forced the Armenian side to rely heavily on close military ties with Moscow, enabling it to receive large quantities of Russian weapons at knockdown prices or even free of charge, and thus stay in an intensifying arms race with oil-rich Azerbaijan.
It emerged in June that Russia has begun delivering $1 billion worth of tanks and other offensive weapons to Azerbaijan. Putin raised Armenian fears of more such arms sales when he paid a high-profile visit to Baku in mid-August. Armenian pro-government politicians now say that the integration pact with the EU would have put the Russian-Armenian military alliance at risk and encouraged Azerbaijan to unleash another war for Karabakh. The implication is that the Russians threatened to end military aid to Armenia and sell more weapons to Azerbaijan.
Assuming that such threats were indeed made, they involved an element of bluff. Russia began selling weapons to Azerbaijan even before the start of the Armenia-EU association talks in 2010, and the recently disclosed Russian-Azerbaijani arms deliveries were reportedly signed in 2011. Besides, Russian arms supplies to Armenia intensified even when the Sarkisian administration was on course to conclude the Association Agreement.
Moscow is clearly not interested in an Azerbaijani military victory in the conflict as it would leave the Armenians with no major reason to host Russian troops in their territory and to maintain broader Russian-Armenian military cooperation. The Association Agreement could in no way jeopardize that cooperation as it offered Armenia no prospect of eventual membership of the EU, let alone NATO. Gagik Minasian, a senior lawmaker affiliated with the ruling Republican Party of Armenia (HHK), emphasized this fact when he ruled out the possibility of Russian economic sanctions in an August 20 interview with RFE/RL's Armenian Service.
A Personal Angle
Sarkisian's subsequent efforts to make Armenia part of the customs union as soon as possible -- without the kind of haggling engaged in by Ukraine and even Kyrgyzstan -- raised more questions about the theory that his strategic U-turn stems only from regional geopolitics. "We are struggling to keep up with our Armenian partners," Putin commented tartly on the accession talks during a December 2 visit to Yerevan.
The gas-price discount is the only major Russian reward announced so far. Yet even it comes with a catch: unprecedented privileges granted to Gazprom in the Armenian energy sector. Russia has not even rescheduled a $500 million debt extended to Armenia in 2009. The authorities in Yerevan repaid it in October with proceeds from the first-ever sale of Armenian eurobonds.
Sarkisian is giving the impression that he is keen to restore the Kremlin's trust, shaken by his European integration drive, at any cost and as quickly as possible. Concern for his power seems a plausible explanation for this tactic. Sarkisian succeeded in neutralizing his political opponents during his first presidential term. But virtually none of them has recognized the legitimacy of his disputed reelection in February 2013 and ruled out the possibility of challenging him in the streets.
An open confrontation with Moscow could have emboldened some opposition forces, notably the Prosperous Armenia Party of Gagik Tsarukian, a wealthy businessman close to Sarkisian's predecessor, Robert Kocharian, who reportedly spends much of his time in Moscow. Some local observers believe that the Kremlin is also in a position to engineer mass defections from the ruling HHK's parliamentary faction.
The Armenian president does not need a powerful external enemy, especially now that he seems intent on extending his rule beyond 2018. The day after announcing his customs-union U-turn he formed an ad hoc commission on constitutional reform. The Armenian media has since been rife with speculation, not denied by presidential allies, that Sarkisian wants to turn the country into a parliamentary republic and become a powerful prime minister after completing his second and final presidential term, just as former Georgian President Mikheil Saakashvili sought unsuccessfully to do.
The Armenian Constitution can be amended only through referendums. Sarkisian will not find it easy to muster the support of at least one-third of the country's 2.5 million eligible voters needed for the passage of amendments. Any attempt to rig the referendum would most probably spark street protests and unite the fragmented opposition against him.
-- Emil Danielyan