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Armenia - Relations with Russia

Armenia on 01 January 2015 became a full-fledged member of the Eurasian Economic Union [EEU], the Russia-led trade bloc, which also includes Belarus, Kazakhstan and Kyrgyzstan. The EU-like integration project includes a common customs policy, free trade, free movement of labor and other measures aimed at boosting the economies of member states.

Armenian leaders have repeatedly stated that they are not seeking NATO membership and will remain part of the Collective Security Treaty Organization (CSTO), the Russian-dominated alliance of six ex-Soviet states. Russia counts on Armenia to be its ally in the Caucasus. Armenia recognizes its reliance -- even dependence -- on Russia's continued support on security and trade issues and will remain a loyal supporter of Russian policies where it counts. Russia can rely on continued Armenian support for its military presence and for the majority of its positions in international fora such as the OSCE. Armenia can count on Russia for its role as mediator in the Nagorno-Karabakh conflict. Complementarity remains the watchword of Armenian foreign policy, but when push comes to shove, Russia remains Armenia's key ally.

Russia has a closer relationship with Armenia than with any other country in the South Caucasus. After the Soviet Union collapsed, Armenia's national security continued to depend heavily on the Russian military. The officer corps of the new national army created in 1992 included many Armenian former officers of the Soviet army, and Russian institutes trained new Armenian officers. Two Russian divisions were transferred to Armenian control, but another division remained under full Russian control on Armenian soil.

For the Christian Armenians remaining in what at that time was just the central and eastern parts of an ancient Armenian kingdom, the Russian victory in the 1826-1828 war ended centuries of oppressive Muslim rule and their status as second-class subjects of the Persian Empire. It also laid the groundwork for the eventual establishment of the modern-day Republic of Armenia, a successor to one of the 15 Soviet republics. The Armenian nationalist groups which emerged in tsarist Russia in the late 19th century generally professed loyalty to the Russian state. The 1915 mass killing of Armenians in Ottoman Turkey, which many historians and about two dozen countries have recognized as genocide, only reinforced this geopolitical orientation.

Armenia's location between two larger states, Russia and Turkey, has long forced it to orient its policies to favor one or the other. Until the late Soviet period, Armenia generally favored its coreligionist Orthodox neighbor and depended on the Russian or Soviet state for its national security. In 1945 Stalin raised the matter of regaining Armenian territory from Turkey, but the issue quietly expired with the dictator in 1953. After independence was officially proclaimed in 1991, Armenia's membership in the new CIS became a national security issue because it seemingly prolonged Russian occupation. The prevailing view in the early 1990s, however, was that isolation from reliable alliances was the greater threat.

Russia was able to intensify its three-way diplomatic gambit in the Transcaucasus, steadily erasing Armenians' memory of airborne Soviet forces landing unannounced as a show of strength in 1991. In the first half of 1994, Armenia moved closer to Russia on several fronts. A February treaty established bilateral barter of vital resources. In March Russia agreed to joint operation of the Armenian Atomic Power Station at Metsamor, whose scheduled 1995 reopening is a vital element in easing the country's energy crisis. Also in March, Armenia replaced its mission in Moscow with a full embassy. Then in July 1994, Russia extended 100 billion rubles (about US$35 million at that time) for reactivation of the Metsamor station, and Armenia signed a US$250 million contract with Russia for Armenia to process precious metals and gems supplied by Russia. In addition, Armenia consistently favored the Russian peace plan for Nagorno-Karabakh, in opposition to Azerbaijan's insistence on reviving the CSCE plan that prescribed international monitors rather than combat troops (most of whom would be Russian) on Azerbaijani soil.

During his last press conference before the end of his posting, 08 April 2005, Russian Ambassador to Armenia Anatoliy Dryukov cited the large influx of Russian capital to Armenia during his tenure, saying that Russia had invested more than USD 300 million in Armenia since independence. Dryukov went on to say that Russian capital is behind nine of Armenia's 20 banks and makes up one third of Armenia's total authorized capital stock of Armenia's banking system. A significant proportion of the investments that Dryukov mentioned were made by Russian firms that are largely state-owned and have Russian government seats on the board. Still, even excluding these assets, many of which were the results of the debt-for-equity swaps of 2003, Russian private investment accounts for an important share of Armenia's financial sector. Russian foreign investment tends to be equity investment with little Russian control on the ground and, also, less transparency in ownership and corporate governance than seen in other foreign investments.

In March 2005, Russian President Vladimir Putin visited Armenia on a short trip that was billed by the Armenians as the most important official visit in recent history. During the visit, Putin and Kocharian announced the Year of Russia in Armenia. The next eight months were marked by numerous high-level visits between the two countries, including visits to Armenia by Head of the Russian Presidential Administration Dmitry Medvedev (May), Minister of Internal Affairs Rashid Nurgaliyev (September), and Russian Transport Minister Igor Levitin (October). Russian Prime Minister Mikhail Fradkov traveled to Yerevan on December 2-3 to mark the end of the Year of Russia in Armenia. His visit coincided with a Russian-Armenian business forum attended by over 300 Russian businessmen, and a visit by the Speaker of Russia's Federal Assembly Sergey Mironov who opened a conference on future prospects for Armenian-Russian cooperation at the Armenian National Assembly on December 9. While the Armenian press seems to be swallowing the "special relationship" line, we note that other countries in the old near abroad are also getting lots of high-ranking attention from Moscow.

Paradoxically, strengthening of Russia's positions and influence in the South Caucasus after the August 2008 war with Georgia alienated the military and political ally of Yerevan. In particular, the communications linking Armenia and Russia and supplying the Russian military base in Armenia have actually been closed. Military transit via Georgia to Armenia is not possible either. Other cargo traffic from Russia to Armenia and back to Russia via Georgia has become uneasy as well.

The Russian military presence in Armenia is a major component of Armenian security. The Russian 102nd Military Base, headquartered in Gyumri, dated from Soviet times and was intended to defend against the Turkish Third Field Army, which he contends is still considered a significant security threat to Armenia. The Turkish Third Army was not subject to CFE inspections. These forces and the Turkish support to Azerbaijani military forces stationed in Nakhichevan posed the greatest security threat to Armenia because they could easily cut Armenia into two.

Armenian strategists were unanimously chagrined by Russia's mid-2007 plan to withdraw from the Conventional Forces in Europe (CFE) treaty, believing that a functioning CFE is very much in Armenia's national interests to restrain a regional arms race. MFA experts raised concerns with Moscow. Respected local think tanks echoed the MFA's fears that Russia's withdrawal would offer Azerbaijan political cover to do the same. Armenians complain that Azerbaijan already blatantly violates CFE limits on armored vehicles, but nonetheless felt the treaty still provided some restraint on Azerbaijani arms acquisitions.

Armenia is highly dependent on the import of energy fuel, mainly from Russia. The Armenia Nuclear Power Plant (ANPP) at Metsamor provides around 40% of electricity generation for the country, and hydro and thermal plants provide roughly 30% each. Armenia imports most of its natural gas from Russia, which provided significant discounts to Armenia until 2009. Russian import gas prices rose from $110 to $154 per thousand cubic meters in April 2009, and increased further to $180 in April 2010. The gas price was set to further rise in April 2011 to approach the international market price, but this has been temporarily averted as a result of extensive negotiations between the Russian and Armenian governments. However, the current price is still below the international average of over $300, and in the coming years the price is expected to converge with market prices.

Russia and Armenia on 20 May 2009 signed a long-anticipated agreement under which Russia will provide Armenia a USD 500 million loan aimed helping the GOAM mitigate the impact of the global financial crisis. A GOAM official has told us these funds will be used primarily for infrastructure projects and SME lending. The GOAM has consistently denied that the loan carries any non-financial conditions. Given Russia's own financial difficulties, the loan, however welcome by the Armenians, also had strategic benefit as Russia sought to enhance ties with its CIS neighbors. Russian companies already owned significant sectors of the Armenian economy. While in principle observers gave little weight to GOAM denials that it might transfer assets to Russia to repay the loan, it is useful to recall the comment of a GOAM official several months ago, who noted "there is nothing left to sell."

On 20 August 2010, Russia and Armenia signed amendments to a 1995 bilateral treaty extending Russia's use of the 102nd Military Base in Gyumri near Armenia's border with Turkey through 2044. The document was signed by the countries' defense ministers as a result of negotiations between Russian President Dmitry Medvedev and Armenian President Serzh Sargsyan. The protocol stipulated that the term will be automatically extended every five years unless one of the parties notifies the other about the annulment of the treaty six months in advance. The base is under the command of Russia's North Caucasus Military District and is part of the CIS integrated air defense system. The Russian Federation Council, the upper chamber of the parliament, ratified the protocol on 22 June 2011 extending Russia's use of a military base in Armenia.

Armenia decided in September 2013 to join the Moscow-led Customs Union of Russia, Belarus and Kazakhstan. A roadmap on Yerevans admission was signed on 24 December 2013. In early December 2013, Russia and Armenia signed an intergovernmental agreement to cancel export duties for supplies of natural gas, oil products and rough diamonds to the South Caucasus nation.

Russia may be on the brink of losing one of its staunchest ex-Soviet allies. Such speculation was stoked by the February 2015 furious street protests outside the Russian consulate in Armenia's second largest city of Gyumri over the gruesome killing of a local family, which a Russian soldier is accused of having carried out. It intensified further during the 2015 summer's demonstrations in Yerevan against an electricity price hike engineered by the country's Russian-owned power distribution network. The so-called "Electric Yerevan" campaign was so dramatic that it raised Russian fears of another "color revolution" against a Moscow-friendly government in the ex-USSR, leading the Kremlin to hastily make a number of major concessions to the Armenian government.

Russian President Vladimir Putin instructed the government to sign an agreement with Armenia on the creation of a joint regional missile defense system in the Caucasus, according to the decree published 11 November 2015. Accept the proposal by the government of the Russian Federation on signing an agreement between the Russian Federation and the Republic of Armenia on creating a Joint Regional System of Anti-Air Defense in the Caucasus region of collective security, the document reads. Putin instructed the Russian Defense Ministry to sign the agreement with Armenia on behalf of the Russian Federation. According to the Council of CIS Defense Ministers, creating joint missile defense systems in Eastern Europe, Caucasus and Central Asia regions is a key objective for the Commonwealth of Independent States.




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