Armenian News

Year 2008: Political upheavals, intensified negotiations
By Aris Ghazinyan
ArmeniaNow reporter
Published: 26 December, 2008
2008 ends with a year full of political tension for Armenia.

The fifth election of the head of state was marred by dramatic events of March 1 when clashes between
police and supporters of the radical opposition protesting the election outcome resulted in 10 deaths.

The starting positions of the new president Serzh Sargsyan could hardly be viewed as enviable. Neither
Levon Ter-Petrosyan nor Robert Kocharyan were faced with such challenges when they took their presidencies.

The third president of Armenia must achieve drastic changes in the socio-economic life of the public in the
near future, and these changes must be incomparably more tangible than the double-digit economic growth
that Kocharyan often boasted of – indices that were as concrete for the authorities as abstract for the population.

The March 1 civil unrest became only the first manifestation of such activity which, while characteristic of many
regions and countries of the world, might be destructive for Armenia in view of its vulnerable geopolitical position.

It was in March, perhaps when Armenia appeared most vulnerable, that the Azerbaijani army made an attempt to
launch an offensive against the Armenian positions. The situation had not been so tense on the front ever since
the warring parties signed a Moscow-brokered ceasefire agreement in May 1994.

In November, the presidents of Russia, Azerbaijan and Armenia signed a declaration on the principles of the
Karabakh conflict settlement at the castle of Meiendorf just outside the Russian capital. The peculiarity of the
document was that it was signed during the period of escalation of tensions in the region when the political
re-division of the South Caucasus entered a crucial phase.

The Moscow document does not determine a political status for Nagorno-Karabakh. It does, though, imply a
withdrawal of Armenian troops from currently controlled positions, the return of displaced persons and holding of
a referendum on independence in the territory of not only Nagorno-Karabakh, but possibly in adjacent districts.
The third step, probably, is the lifting of communications blockades by Azerbaijan and possibly Turkey.

The Moscow declaration elicited varied responses in Armenia. It is possible that next year it is Nagorno-Karabakh
that will become a jumping ground for the formation of “a third force” represented by the Armenian Revolutionary
Federation (ARF, Dashnaktsutyun) and second president Robert Kocharyan.

Never during the past 10 years have political processes in the Caucasus been developing so swiftly as they
have in 2008. Against the backdrop of new realities, even such issues as the negotiating process mediated by
the Organization for Security and Cooperation in Europe’s (OSCE) Minsk Group and presidential elections in the
region’s countries were engulfed in the whirlpool of fresher concepts of regional re-division.

Turkey has become noticeably more active. It, in particular, proposed signing a so-called “South Caucasus Stability
and Security Pact” and expressed readiness to become a mediator in the Nagorno-Karabakh settlement process.

The September visit of Turkish President Abdullah Gul to Yerevan (responding to his Armenian counterpart’s
invitation to ‘enjoy together’ a World Cup qualifier between the two national soccer teams) became an
unprecedented event altogether. It was around that time that the term “soccer diplomacy” applicable to an
Armenian-Turkish rapprochement was coined. The visit evoked different estimations in Armenia. Actions of
protests timed to the Turkish leader’s visit were staged.

Armenia’s ex-foreign minister Vardan Oskanian also spoke in connection with the developments in the relations
between the two estranged nations. He stated that Turkey has no right to offer its services as a mediator in the
Karabakh conflict until it opens a border with Armenia and resumes railway traffic with it.

Oskanian did not exclude that there is a secret at this stage regarding the possibility of opening the
Armenian-Turkish border that is yet the knowledge of only President Sargsyan and Foreign Minister Edward Nalbandyan.

Oskanian, who had served as Armenia’s top diplomat for 10 years in the Kocharyan administration, in his turn founded
a political think-tank, Civilitas, and became its head. Interestingly, the Civilitas board of trustees also includes Georgia’s
ex-parliament speaker Nino Burjanadze, who has been increasingly viewed as an alternative opposition to the country’s
controversial president Mikhail Saakashvili.

Certain difficulties in the outgoing year have also been exposed along the axis of Armenian-Russian strategic partnership.

Russia’s new President Dimtry Medvedev arrived in Yerevan on October 20. NATO’s special representative for the South
Caucasus and Central Asia Robert Simmons was visiting the Armenian capital on the same day. It was a symptomatic
coincidence.

Sargsyan’s statement in the morning that “the European direction remains one of the priorities on Armenia’s foreign
policy agenda and cooperation with NATO is a major element of it” was followed by the Russian president’s reaction
in the evening that actions of strategic allies must be more coordinated.

Medvedev hinted that Armenia is, after all, a declared strategic ally of Moscow rather than of NATO.

The coming year promises a new inflow of emotions for Armenia. The main news may become the formation of the
mentioned “third force” inside the country that may mount serious opposition to Sargsyan, who will thus have to do
serious work in 2009.

The ending year has also been eventful elsewhere in the world with relevance to Armenia. The most ‘global’ of the world
events has been the continuing economic crisis that has affected all countries in one way or another.

Incidentally, the number of countries in the world has increased by another three in 2008. Despite the fact that neither the
former Serbian province of Kosovo nor the former Georgia republics of Abkhazia and South Ossetia are yet members of
the United Nations, their independence has already been recognized by a number of countries.



Facing the Storm: Is Armenia ready for financial fallout?
By Richard Giragosian

Published: 09 January, 2009
Already weakened by a continuing domestic political crisis of confidence, the Armenian government is facing a new
challenge as the global financial and economic crisis threatens to destabilize Armenia’s economy. The vulnerability of
the Armenian economy, despite the cushion of closed borders and limited links to the broader global economy, is rooted
in its inherent structural fragility.

This structural fragility is composed of three elements: a dangerous dependence on the influx of remittances, or money
from Armenians working abroad, a weak and declining economy that is supported by the superficial dominance of the
country’s service, commodity and construction sectors, and, most distressing, a closed oligarchic economic network
centered on several commodity-based cartels or monopolies.

But even more troubling is the Armenian government’s rather short-sighted refusal to even recognize the country’s
vulnerability to the global economic crisis. Although government officials admit that economic activity has already
contracted considerably, they have tended to downplay the significance of the downturn in construction and the shortfall
in the amount of remittance flows, the latter providing an essential cash influx for most Armenians.

Such unfounded optimism was most recent expressed by Armenian Prime Minister Tigran Sarkisian, whose recent
year-end press interviews reflected his desire to deflect criticism and reassure an already worried public.

According to the prime minister, the Armenian government plans to embark on large projects involving an “aggressive
spending policy by the state” to “neutralize” the impact of the global economic crisis by creating jobs and proving
expanded credit to small- and medium-sized businesses.

Sarkisian asserted that the planned increase in public spending on road and housing construction, which is to include
some $250 million for infrastructure projects in the earthquake damaged areas of northern Armenia, will create more
than 5,000 new jobs. In addition, the government also plans to seek some $250 million in new loans from the World
Bank for the planned expansion of business credit.

Sarkisian also noted that Armenia would need more than $1 billion in additional foreign funding to finance the
construction of a new nuclear power plant to replace the aging, Soviet-era Medzamor plant, and for the planned railway
link to Iran. But in the wake of a global credit crunch, with lenders much more reluctant to take on such new financing, it
remains unclear from where Armenia can obtain such foreign assistance.

Echoing the prime minister’s optimism, Armenian Economy Minister Nerses Yeritsyan argued that “Armenia overcame
the first wave” of the global financial-economic crisis because Armenia’s banking system remained untouched by the
financial crisis and free from global risk. He added that the Armenian government was taking “every measure to overcome
the negative impacts of the crisis.”

For his part, Finance Minister Tigran Davitian dismissed worries about a subsequent reduction in the amount of tax revenue,
arguing that the “economic crisis has not affected tax collection in Armenia as yet.” Nevertheless, the Armenian government
needs a minimum 20 percent increase in tax collection simply to meet the recently adopted 2009 state budget. With an
over-reliance on the value-added tax (VAT) as the single largest source of budgetary revenue in the country, there is a real
danger that the state will be unable to meet its revenue targets, especially given recent promises of a 40 percent rise in salaries
for customs and tax officials.

Despite these official claims, the Armenian public remains concerned, however. As a recent public opinion survey conducted
by the Armenian Marketing Association revealed, some 47 percent of those polled felt that the economic crisis will impact
Armenia, with 43 percent believing that the impact will financially harm their families.

Mounting Job Losses

The most significant demonstration of Armenia’s vulnerability to the global economic crisis has been in the sudden closure of
several key firms. Tied to the related downturn in global commodity markets, the recent decline in prices for non-ferrous metals,
Armenia’s number one export item, has sparked the loss of several hundred mining jobs and the suspension of operations at
Armenia’s two largest chemical enterprises, including the Nairit plant, which has forced almost three thousand workers to be
abruptly laid off.

In addition to the job losses from these closures, the budget implications are also serious. For example, one of the largest
mining companies to downscale operations was the German-owned Zangezur Copper and Molybdenum Plant, which is one
of Armenia’s leading corporate taxpayers. According to the company’s chief executive, Maxim Hakobian, the firm now projects
a 20 percent cut in its contributions to the state budget in 2009.

The Link between Armenian Politics & Economics

Just as there are serious political repercussions to the impact of the global economic crisis on Armenia, political considerations
have also played a role in the Armenian government’s handling of its economic reform program.

For one of the more obvious examples, the closure of several Armenian businesses by tax officials was linked more to their owner’s
political activities than to any overt tax violations. The inspection and subsequent closure of the Bjni mineral water company, owned
by millionaire businessman Khachatur Sukiasian, an open supporter of the opposition, raised questions over the government’s
arbitrary use of the law, seemingly used more to punish than to regulate business activity. The rare decision to close and auction
the company for allegedly engaging in tax evasion was additionally dubious due to the obvious discrepancies with other even more
notorious business interests owned by other wealthy “businessmen” with openly close ties to the government.

The closure of the Bjni bottling, one of the country’s largest such enterprises, also deals a serious blow to the local economy.
Located in Charentsavan, a generally impoverished and unemployment-ridden town outside of Yerevan, the decision now threatens
the livelihood of more than 400 local employees.

Two other Sukiasian-owned firms, elements of his larger SIL Group, were also targeted by the authorities, as the executives of both
a pizza restaurant chain and a printing house were arrested on tax evasion charges. A third Sukiasian-owned firm, which held the
exclusive distribution rights for Phillip Morris cigarettes in Armenia, was also forced out of business in 2008 after state customs
officials reportedly held up several large shipments of its imported products.

The linkage between Armenia’s domestic political instability and economics was further demonstrated by the decision last month
by the U.S. Millennium Challenge Corporation (MCC) to maintain its suspension of $236.5 million in economic assistance on the
grounds that the Armenian government has failed to address its concerns about “the status of democratic governance” in the country.
The decision followed a similar move in May 2008, when the latest installment in the five-year Millennium Challenge Account (MCA)
program was frozen in the wake of Armenia’s post-election political crisis.

The most recent suspension was justified by the U.S. because of “concerns” and unmet “expectations that the government of Armenia
fulfill commitments to implement substantive reforms.” Commenting on the freeze, U.S. Deputy Assistant Secretary of State Matthew
Bryza noted last month that Washington was “seriously worried” about the continuing imprisonment of dozens of opposition members
arrested during the post-election crisis.

A Worrisome Prognosis

Beyond the limited parameters of the Armenian government’s optimism and public apprehension, a recent report by a leading diaspora
group has highlighted the dangers of the implications of the global crisis for Armenia. In a report issued last month (available online at:
www.pf-armenia.org), the “Policy Forum Armenia” group warned that “the ongoing financial crisis will have a deep and prolonged impact
on a wide range of economies” and noted that such a negative impact would “also likely to be true for a peripheral economy like
Armenia’s, regardless of how isolated its relevant sectors are from the rest of the world.”

As an independent professional non-profit association, the Policy Forum Armenia group seeks to “strengthen discourse on Armenia’s
economic development and national security and through that helping to shape public policy,” with a main objective of offering “alternative
views and professional analysis containing innovative and practical recommendations for public policy design and implementation.”

The Policy Forum Armenia report confirmed that “there is ample evidence of a serious crisis in the making,” and added that “in this
context, Armenia’s economy is likely to be significantly affected.”

The report provided a set of several policy recommendations, going well beyond the limited scope of the Armenian government’s
seemingly inadequate preparations and reflecting a more realistic recognition of the need to take action now to better protect the
Armenian economy for the most severe effects of the economic crisis.

The report adds new policy recommendations that have been disappointingly absent from public policy debate to date. And in this
light, the Armenian government should, most of all. incorporate the report’s call for an enhanced and expanded “social safety net”
through the adoption of measures to review poverty guidelines, targeting the next layer of the country’s socially vulnerable strata of
population, taking “credible steps” in eliminating corruption, and enhancing existing unemployment insurance and providing assistance
to employees that have lost jobs due to crisis-related closures and downsizings.”


NEW HOPE FOR RELATIVES OF KARABAKH MISSING
Azeris and Armenians set aside differences to trace thousands of soldiers who went
missing in the war of the early Nineties.
By Gita Elibekian in Yerevan, Karine Ohanian in Stepanakert and Zarema Velikhanova
in Baku (CRS No. 475, 8-Jan-09)

Azeris and Armenians are as divided over Nagorno-Karabakh as they were at the
ceasefire 14 years ago, but cooperation has started in an unexpected quarter - among
those who are still searching for lost sons, fathers and husbands.

Over 4,000 people are still listed as missing on both sides of the conflict over the South
Caucasus region, which is majority Armenian-inhabited but internationally considered to
be part of Azerbaijan.

Joint efforts to locate them ended in the late 1990s as political differences between
Karabakh's Armenians, who have declared independence, and Baku became insuperable.

But last April, the International Committee of the Red Cross, ICRC, gave new hope to
mothers and wives by agreeing with Azerbaijan's government to spearhead efforts to
uncover the fates of the missing men. The agreement was followed in October by one with the
Armenian government, increasing the likelihood that this will become a genuinely cross-border
effort.

Lyatifa Mamedova has visited the ICRC office in Baku every year on October 31 - the birthday
of her son, Mamed, who would have been 41 this year but who has been missing since June
1993 - but never with much hope before.

"This year I was cooking in the kitchen, and while laying the table I felt his presence very strongly.
I felt as if he was near, behind my back or coming from a neighbouring room, as if I could turn
round and see him," said the 72-year-old.

"One of the first organisations we appealed to was the International Committee of the Red Cross.
And I must say that, for 15 years already the Red Cross staff members are the only ones who
still remember us."

After the ICRC and the government in Baku agreed, a series of adverts were made appealing
for information to help resolve the fate of the more than 3,000 Azerbaijanis still missing.

"Fourteen years have gone by since the ceasefire was announced between Armenia and
Azerbaijan, yet it remains unclear what happened to over 4,000 people who are still missing,"
said the head of the ICRC's delegation in Azerbaijan, Martin Amacher.

"Without news about the fate of their loved ones, these families will continue to remain stuck
between hope and despair. It's a source of endless pain for them."

Hundreds of people have called a special hot line, including Mamedova. The Azerbaijan Red
Crescent has already collected 700 detailed questionnaires about their missing relative's
characteristics.

"We live in hope," Mamedova said. "I don't want to die without seeing my son."

Her hopes are repeated by families in Armenia and Nagorno-Karabakh itself. The region has
its own de-facto government, but Azerbaijan refuses to deal with it and the ICRC provides a
crucial intermediary for talks.

In November, it arranged for the handover of the remains of an Azerbaijani soldier in the Agdam
region, which borders the breakaway province, and in May it organised the return of a captured
soldier to Azerbaijan.

ICRC plans to take the 200-question, 36-page questionnaire around Karabakh's villages in a
quest to find as much information about those people still missing as they can.

"I think this and all such plans are very good, because every time we gain new hope that we will
hear just one bit of news, which can bring us some kind of certainty," said Vera Grigorian,
chairwoman of the committee of relatives of missing Karabakh soldiers.

But most officials in Karabakh are under no illusions that the search will primarily revolve around
identifying bodies, rather than living people. Both sides have declared that they are holding no
more prisoners of war.

Viktor Kocharian, chairman of the Karabakh government's commission for prisoners of war,
hostages and missing people, said the ICRC had already sent some state officials on special
courses in Yerevan for the hard work ahead.

"There are of course expectations from this project, but it is not now connected with a search,
but with identification of body parts, considered to belong to missing people, from both the
Armenian and the Azerbaijani sides," he said.

Television adverts also went out in Armenia, after it agreed to work with the ICRC in October,
with viewers being asked to "help resolve the fate of these people". The information gathered
will be stored in a central database, and then used to check against any remains found.

"This initiative allows us to create a detailed information base, which will help in confirming the
identities of the missing and to give final details to their families: the relatives of the missing must
in the first place know if they are alive or not," said Dzyunik Aghajanian, head of the foreign ministry's
department for international organisations.

In the past, relatives hunting for their missing loved ones have relied on word of mouth, photographs,
or chance video clips for evidence. Manvel Eghiazarian, commander of Karabakh's Arabo division,
said that he had seen a video on the popular website YouTube which showed that 79 fighters of the
Zeitun division, who are now listed as among the missing people, had been killed and buried in a
common grave on June 29, 1992.

"Now for unknown reasons we can no longer find this clip on youtube: but we are working on it, and
many of us have other video clips. But some people don't want to put them on the internet, because
it is upsetting for the lads," he told IWPR.

But, upsetting or not, such videos often provide the only contact that relatives have with their missing
sons or husbands. Samara Grigorian. 68, is convinced that her son Vrezh - who went missing from
the Arabo division - is shown on a video she managed to obtain.

"Look, you can't see his face, but that's Vrezh's hair, his shape, his shoulders and his height," she
said, her voice trailing off. She carefully put the tape back in a cupboard already containing Vrezh's
photographs and possessions when she finished watching.

With such traumatised relatives waiting for news, some human rights activists worry that the ICRC's
programme to collect information on the missing men could serve only to re-open old mental wounds,
for little real gain.

They say Karabakh and Azerbaijani groups have already been unofficially gathering and sharing
information for years, while a system of prisoner exchange has come into being through necessity
since a handful of prisoners are still taken every year. This means the ICRC initiative will not do
anything knew.

"I think questionnaires are just an additional trauma for the relatives of the missing, and will just raise
new hopes. These questionnaires have been filled in several times already and there are many
documents in different archives already," said Karen Ohanjanian, chairman of the Nagorno-Karabakh
Helsinki committee.

"I think that good results are only possible after a final resolution of the Karabakh problem, because
only then can Nagorno-Karabakh and Azerbaijan really start searching for mass graves, and we can
only talk about getting real results through identification via DNA analysis," he said.

The ICRC is forging ahead despite such objections, however. In February, it wants to move into areas
closer to the frontlines and it expects to have completed the questionnaires of Azerbaijani families in
Baku, Sumgait and in the Apsheron region by the summer. It expects to finish the collection of information
in 2010, and is conscious that as time passes, it will become ever harder for surviving relatives to
remember exact information.

"We are working with all families, among whom some have learned to live with their loss and do not want
to stir up the past. But even in this case we do not close the case. The problem remains," said Suzana
Spasojevic, the ICRC's regional tracking delegate.

Psychologists say that people waiting for the return of their relatives often suffer from insomnia, depression,
a sense of hopelessness and struggle to take an interest in life.

The ICRC has to work to overcome these problems in their quest to gain the information they need.

"Every time the [ICRC] call me, I think that they will have some news about my husband, but they don't tell me
anything, probably because their information hasn't been confirmed yet," said Susanna Voskanian, a
53-year-old in Yerevan.

"My heart almost bursts when I speak about this. It opens the old wounds. I start explaining it all over again,
and my husband still isn't here."

Zarema Velikhanova is a freelance journalist. Karine Ohanian is member of IWPR's Cross Caucasus
Journalism Network Project. Gita Elibekian is a journalist from Public Radio's Radiolur News programme.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~