Ecnomic News from Armenia

The California Courier Online Edition

31 July 2008

Diaspora Armenians Pledge to Invest $770 Million in Armenia's Economy

YEREVAN -- Two weeks after Armenian President Serzh Sargsyan issued a public appeal for Armenians to invest more in Armenia, nine major businessmen have announced plans to invest a total of $770 million in Armenia's economy.

The pledges all came in response to Pres. Sargsyan's appeal made in an address on July 14 at the "BAZE" All Armenian Youth Jamboree in Jermuk, Armenia. In his remarks to the participants, the President had said Armenians must be more "active and imaginative" in their efforts directed toward the development of the homeland.

Totaling more than three quarters of a billion dollars, the investment pledges -- all but two of them from Russian based Armenians -- have already surpassed the total amount registered for foreign investments in Armenia both in 2006 and 2007, with about $600 million being invested each year.

The first statement of intent to invest in Armenia was made public on July 16, when in a letter to Pres. Sargsyan, Samvel Karapetian of the Tashir Group, pledged to allocate $200 million for various social and business projects in Armenia and another $50 million for the "implementation of symbolic projects that will support Armenian statehood and serve its future generations."

Another $270 million was pledged by Ara Abrahamian and Murad Muradian. Abrahamian, who is the Chairman of the Union of Armenians in Russia, said in his letter to Sargsyan that he planned to invest $150 million for "new economic initiatives," as well as science and culture. Muradian, the president of Russia's Bamo holdings, pledged $120 million, saying he was ready to continue investing in the construction industry and housing development programs. BAMO has been one of the leading investors in the ongoing construction boom in Armenia.

In a letter made public on July 22, Armenian-American businessman Serob Ter-Poghosian pledged to invest $50 million for the development of Armenia's northern Lori Province. In his letter to Pres. Sargsyan, Ter-Poghosian, who heads the US based "Metalprince" company, said that he and his partners are ready to invest over three years $50 million in the development of Lori's industry and tourism spheres.

The following day, the Russia based "ARCH" business group, headed by Vitaly Grigoriants, pledged another $50 million in investments for Armenia's banking, insurance, and construction and production industries. The $50 million pledge will add to $30 million ARCH has already invested in Armenia's construction, manufacturing and financial industries.

Smaller investments pledges also came from Sergey Hambardzumian of Monolitnaya Arkhitektura, Gagik Zakarian the chairman of Uniastrum Bank, and Sergey Sarkisov of the RESO-Garantia company. Hambardzumian pledged $10 million for the reconstruction and expansion of the Matenadaran repository of ancient manuscripts. Zakarian pledged to invest $30 million in the finance, mining and the construction spheres, while Sarkisov pledged at least $10 million for various insurance, health and social programs.

Another Armenian group from Slovakia pledged to invest $100 million in Armenia, bringing the total promised so far to $770 million.

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MACROECONOMIC STABILITY ARMENIAN GOVERNMENT'S PRIORITY TASK
ARKA
July 28
TSAKHKADZOR

Ensuring macroeconomic stability and maintaining high-rate economic growth is one of the priority tasks of the RA Government, RA Prime Minister Tigran Sargsyan stated at a business forum "Armenia's global competitiveness: national projects" held in Tsakhkadzor last Saturday.

"Quite high rates of economic growth have been recorded in Armenia over the last ten years. Our major achievement is macroeconomic stability, which is due to the control over on-budget expenditures and budget deficit, and low inflation rates," T. Sargsyan said.

The RA Premier said that it is macroeconomic stability that creates the most favorable conditions, and the Government's task is to maintain long-term stability.

"Of course, it is a necessary, but insufficient, condition, because in achieving macroeconomic stability we failed to achieve social integration, solidarity and social responsibility. So the
accomplishment of the tasks is the second issue on the agenda," T. Sargsyan said.

He pointed out that the social integration problem has hardly been considered over the last 15 years. The authorities believed that an emphasis on economic growth would subsequently resolve all the other problems, which proved to be false.

"The economic growth rates could be lower, but social responsibility and integration lay the foundations for long-term development and more favorable conditions for people. So social integration is of primary importance for Armenia, and we will direct our efforts to accomplish these tasks," the RA Premier said.

Armenia recorded 5.9% economic growth in 2000, 9.6% in 2001, 13.2% in 2002, 14% in 2003, 10.5% in 2004, 14% in 2005, 13.4% in 2004 and 13.7% in 2007.

10% economic growth is budgeted in Armenia for this year.

The per capita GDP reached $2,844 last year against $593 in 2000. The per capita GDP was $659.3 in 2001, $739.9 in 2002, $874.1in 2003, $1,112.8 in 2004, $1,523.7 in 2005 and $1,989 in 2006.

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Eurasia Daily Monitor
July 25, 2008 -- Volume 5, Issue 142
AZERBAIJAN, GEORGIA, TURKEY ADVANCE ON THE IRON SILK ROAD
by Vladimir Socor

Presidents Ilham Aliyev of Azerbaijan, Mikheil Saakashvili of Georgia, and Abdullah Gul of Turkey inaugurated on July 24 in Kars the construction work on the Turkish section of the Kars-Tbilisi-Baku (KTB) railroad. A project of inter-continental significance, connecting Europe and Asia through the South Caucasus, this `Iron Silk Road' is being built by the region's countries through their own efforts.

Azerbaijan is the real motor of the KTB railroad, as well as in the region-wide energy projects. Baku single-handedly finances the railroad's construction on Georgian territory, drawing on early oil revenues to invest in this strategic railroad. Azerbaijan rescued the project after the European Union, international financial institutions, and Turkey for various
reasons had declined to finance the Iron Silk Road. According to Turkish Transportation Minister Bineli Yildirim, `If Ilham Aliyev had not demonstrated resolve, this project would not have been possible. Azerbaijan's decision to finance the Georgian section is the most important step in the
implementation of this project' (Trend Capital, July 14).

The KTB project involves construction of 105 kilometers of new rail tracks from scratch, including 76 kilometers on Turkish territory to the Georgian border and 29 kilometers within Georgia. It also necessitates repair and upgrading of 183 kilometers of existing rail track on Georgian territory. The overall costs are estimated (in 2007 U.S. dollar terms) at $600 million, including $422 million for the railroad itself and nearly $200 million for associated infrastructure. The Turkish section will cost $241 million to build.

The International Bank of Azerbaijan has loaned $220 million for the Georgian section on uniquely preferential terms: 25-year repayment period, at only 1 percent annual interest. Georgia will repay the loan by using part of the revenue generated by the railroad on Georgian territory.

Azerbaijan, Georgia, and Turkey signed the intergovernmental agreement on KTB in February 2007. Construction work on the Georgian section started in November 2007, with Azerbaijan's Azerinshaat Service company acting as general contractor (see EDM, November 27 and 28, 2007).

Speaking at the groundbreaking event on the Turkish section on July 24, Saakashvili remarked that Azerbaijan is acting in practical terms as a `guarantor of Georgia's independence,' financing the railroad now after having supplied Georgia with low-cost gas during the Russian blockade of January-February 2006. `The Georgian people will never forget this,' Saakashvili stated (Kavkas-Press, July 24).

The railroad is scheduled for completion in 2011. It is expected to carry 1.5 million passengers and 6.5 million tons of cargo per year during the first three years of operation. Traffic is projected to increase to 3 million passengers and 15 million tons of cargo per year before 2015. This could stimulate a substantial expansion in the capacity of Turkish State Railways, which currently handles 19.5 million tons of cargo annually (Anatolia Agency, Turkish Daily News, July 20, 21).

Functionally interrelated with the KTB, although a distinct entity, is Turkey's Marmaray project to build a railroad tunnel under the Bosporus. With completion expected by 2011, the tunnel will enhance the KTB railroad's commercial attractiveness. Trains will be able to travel without interruption from any point in Europe (e.g., London) continuously to the Caspian Sea.

On the eastern Caspian shore, Kazakhstan is interested in a trans-Caspian linkup with KTB's terminal in Baku. The KTB railroad will open direct access for Kazakhstan to European Union territory for the first time. Kazakhstan plans a massive increase in its commodity exports to Europe, including grain exports. With this in mind, Kazakhstan is completing an 800,000-ton grain-handling terminal near Baku, for trans-shipment from barges to the railroad.

Asked about Armenia's absence from the KTB project, President Gul commented in general terms that countries wishing to participate in region-wide projects should respect the territorial integrity of their neighbors (Zaman, July 24). This diplomatic understatement reflects the ongoing feelers between Turkey and Armenia about a possible high-level meeting to ameliorate relations (see article by Gareth Jenkins below). In fact, Yerevan had actively opposed the KTB project and worked with its allies in the United States and Europe to block international funding for it.

Yerevan had hoped to force a change of route, diverting the KTB line from Kars to Gyumri in Armenia. This would have made no economic sense inasmuch as the Kars-Gyumri line (existent, but closed by Turkey due toYerevan's occupation of Azerbaijani lands) is a sideline, of merely local in terest. Earlier, and similarly, Yerevan and allied groups in the West had unsuccessfully opposed the Baku-Tbilisi-Ceyhan oil pipeline.

Thanks to KTB, Azerbaijan and Turkey will be linked with each other by railroad for the first time, albeit through Georgia. In addition, Baku and Ankara intend to connect Nakhchivan, the Azerbaijani exclave, with Turkey's railroad system. President Aliyev and Turkish Prime Minister Recep Tayyip Erdogan agreed during their recent meeting in Nakhchivan to go ahead with this project (Trend Capital, July 14).

In a related development, Turan Air company in Baku inaugurated on July 21 regular direct flights between Haidar Aliyev International Airport and Kars (Day.az, July 21). Azerbaijan, Georgia, and Turkey are beginning to form what amounts to a common economic region, increasingly connected with Europe and potentially with Central Asia, on either side of this region's territory.

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ANKARA AND YEREVAN LIFT THE BANS
Maria Rybakova, Victor Yadukha

WPS Agency
July 28, 2008 Monday
Russia

Details of Armenian-Turkish negotiations became known

HIGHLIGHT: THE US AND EUROPEAN UNION CAN RECONCILE TURKEY AND ARMENIA?;
Details of secret negotiations between representatives of Armenia and Turkey leaked to the Turkish press. Besides conditions for opening of the Armenian-Turkish border, the details dealt with the problem of genocide of Armenians, ways to resolve the Nagorno-Karabakh conflict
and Armenian-Azerbaijani relations in general.

Yesterday, details of secret negotiations between representatives of Armenia and Turkey leaked to the Turkish press. Besides conditions for opening of the Armenian-Turkish border the details dealt with the problem of genocide of Armenians, ways to resolve the Nagorno-Karabakh
conflict and Armenian-Azerbaijani relations in general.

According to the Turkish mass media, Ankara has been having unofficial meetings with Yerevan for a few years keeping them in secrect to avoid the negative reaction of Azerbaijan. Earlier, Azerbaijani Foreign Minister Ali Babacan confirmed the fact of periodic meetings with Yerevan but did not speak about the details.

The problems discussed during the negotiations are so closely intersected that it is impossible to achieve progress in solving of one of them without solving another. The US and the European
Union are persistently pushing Ankara towards opening the borders, which will enable Yerevan to get rid of its isolation. In response, the unofficial intermediaries promise that Yerevan will move the matter of the genocide of Armenians from the foreign policy level to the level of discussion by historians. Former President of Armenia, Robert Kocharyan, has refused to do this but possible signals have been coming from Yerevan lately.

Reconciliation is openly lobbied and, as in the case of Gyumri, it is financed by the US embassy in Yerevan. Analysts point out that Armenia called "the last ally of Russia in Transcaucasia" is prepared to listen to the calls of the West, especially if they are confirmed by financing.

At the beginning of the week, it became known that the US Congress approved the allocation of $52 million to Armenia and $8 million to Nagorno-Karabakh.

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