Armenia turns its eyes to the East

RIGA - The European Union received somewhat disturbing news last week, when it was announced in Moscow that the president of Armenia, Serge Sarkisian and the president of Russia, Vladimir Putin have signed agreements between the two signaling that Armenia will likely join the Eastern counterpart to the European Union, the Customs Euro Asia Economic Community (EurAsEC).

EurAsEC has become a top priority since 2008 for Russia, to offset the expansion of the European Union into what is believes to be Russia’s “'sphere of influence,” especially in Eastern and Central Europe.

The EU, as a unified 28-member economic powerhouse rivaling the biggest economy in the world, the United States, has seen Russia seeking to rekindle its dwindling influence since the demise of the Soviet Union as a world player, both politically and economically.

“Russia supports the decision by Armenia to enter the Customs Union (EurAsEC). We will fully work for this to happen,” Putin said regarding the bilateral talks conducted at his country house outside of Moscow.

Russia is Armenia’s largest trading partner, and the largest foreign investor in the landlocked country. Trade between the two reached $1.2 billion in 2012 and Russian capital investment was over $3 billion, nearly half of Armenia’s foreign investment, Putin said during the talks.

Back in July, Armenia concluded talks with the EU regarding a deep and comprehensive free trade agreement. Political observers fully expected the country to initiate a free trade agreement with the EU this November in Vilnius, the site of the upcoming European Union Summit. Lithuania holds the revolving chairmanship of the EU currently. However, the European Union will not allow member sates to participate in other non-EU memberships, considered “incompatible” with the EU Charter. Armenia is an invited guest to Vilnius.

Armenian President Sarkisian says, “This decision is not a rejection of our dialogue with the European institutions. Armenia is a considerably more effective and competitive state than it was years ago,” as result of negotiations with the EU. “We intend to continue these reforms also in the future,” he said.

Reaction in Yerevan and Brussels

From Yerevan, Hovhannes Igityan, former chairman of the National Assembly Foreign Relations Committee said, “I consider the statement made during the Sarkisian-Putin meeting retarded and a big mistake,” regarding EurAsEC. “I do not know the response of Europe, but I think it is an economic and political mistake. A question [arises] as to what the Customs Union will give Armenia and what we were deprived of in not joining the EU’s deep and comprehensive free trade area. We have a contract with Russian on free interaction and trade, and time shows that it does not provide us with economic growth. Russia is the number one investor country for Armenia, but Armenia’s only chance of quick development was the development of economic relations with the European Union, which failed.”

Vice-Chairman of the Heritage political party, and Yerevan City Council member Armen Martirosyan has been quoted as saying, “I will stay away from giving a final assessment because it is possible that a short while later, after meeting with high-ranking European officials, such statements [coming out of Moscow] are possible to be heard again that we will be signing the Association Agreement. However, after the decision to join the Customs Union, we will have the same corrupt, rotten system of governance. Nothing will change,” according to local press reports on www.en.aravot.am.

EU Enlargement Commissioner Stefan Fuele’s spokesman Peter Stano said, “currently consulting our Armenia partners on the latest developments and the potential implications will be examined when all necessary details are at hand.”

Mother Russia still to be reckoned with

For President Putin, this is considerable political victory. Former member states of the Soviet Union have tasted independence and found that not all is in harmony with the way it is done in the West. Economic considerations are always in play when political decisions are made.

Armenia, for example, has no adequate oil reserves or natural gas, and most of its energy demands are met through cheap imports from Russia. Nearly 80 percent of Armenia’s energy system is estimated to be under Russian control, according to www.eurasianet.org, a market reader on energy.

Ukraine, another potential aspiring member to the EU and expected in Vilnius come November, has recently felt political pressure as well. Officials accuse Russian customs of discriminating against their exports with tighter customs inspections that potentially could run into billions of dollars in losses. Kiev sees this bilateral trade war designed to discourage Ukraine to sign the Association Agreement.

Sergey Glazyev, a senior economic adviser to President Putin, has been quoted by Novosti: “We are preparing to tighten customs procedures in case Ukraine suddenly makes this suicidal step of signing the EU Association Agreement.” Ukraine’s exports to Russia totaled over $16 billion in 2012, with exports to Europe at just over $17 billion, according to EU trade data.

Georgia, likewise, is interested in joining the European Union, and only recently resumed trade following its contentious war with Russia, of which each side accuses the other of starting.

So, who will show up?

For Lithuania President Dalia Grybauskaite, fresh from the Baltic Summit with U.S. President Barack Obama in Washington, D.C., the task of EU leadership is daunting. The political landscape can and does change on a daily basis, and the G-20 that took place last week in St. Petersburg, Russia produced statements and agreements that will have an effect on EU decisions.

Vilnius will be an interesting place to be come November, to see who’s there and who’s not, from the south and east of Lithuania.