In Whose Interests? The Political Economy of Armenian-Turkish Relations

This mansion belongs to just one of many millionaire oligarchs in Armenia

BY SEROUJ APRAHAMIAN and ALLEN YEKIKAN

The Turkey-Armenia Protocols ushered in an unprecedented wave of international outcry against the policies of the Armenian government.

Massive demonstrations took place in almost every major city of the Diaspora; 60,000 protestors took to the streets in Yerevan; leading Armenian academics and Genocide scholars forcefully spoke out against the Protocols; two former Foreign Ministers of Armenia came out against the measure; 14 political parties and dozens of organizations within Armenia signed a statement against ratification of the documents; and the sole opinion poll taken on the issue showed that 52.4%[1] of the population in Yerevan was against the signing.

Nevertheless, the Foreign Minister of Armenia traveled to Zurich on October 10 and signed the Protocols with his Turkish counterpart. Today, the Armenian government vehemently calls on Turkey to ratify the agreement, after which it promises to immediately follow suit.

Given the widespread opposition and detrimental effects the Protocols are deemed to have on such pan-Armenian interests as Genocide recognition, legal claims to the Armenian homeland, and the liberation of Artsakh, many people have been left to wonder why Yerevan has pushed forward with this controversial policy with such vigor.

Why would the Armenian government risk going against the will of the majority of its people and give up so much in return for mere Turkish promises of normal relations?

Who Gains, Who Loses

To find answers to this question, it’s essential to look beyond just technical issues about what the Protocols entail and the arguments of both its proponents and opponents. We must look, instead, at the core interests of those in Armenia who hold the levers of power. To put it more simply, in order to understand how policy is formed, it is important to understand those who form policy.

By now, it should be common knowledge that decision-making in Armenia is controlled by a small circle of elites, who dominate the country’s political and economic landscape. Whether we look at the President’s administration, the makeup of the National Assembly, or the heads and support-base of political parties in the coalition government, we find an easily distinguishable lineup of oligarchs that have woven their noose around Armenia’s institutions and its society. What’s unique about this social class is the magnitude of power they command, far surpassing the influence of any other segment of the general population. These oligarchs also share a common set of economic interests, living standards, values, and norms of behavior. They are, in fact, a distinct social class with tight links to one another, who operate on a political plane detached from the general public.

When looking into the business interests of this group of people, we find that a large number of them have made their wealth by dominating key commodity imports (e.g. gas, wheat, oil, butter, sugar, and so on). These business interests of the oligarchic class reflect the makeup of Armenia’s skewed economic landscape as a whole, with imports making up 40% of GDP, while exports only account for 10%. Meanwhile, 70% of exports are comprised of raw materials, minerals, and stones. A large fraction of this class became rich through controlling the mining and exporting of Armenia’s diamonds, copper, and gold, to name a few. That virtually all of these individuals have also acquired large tracts of land and property throughout the country is no coincidence either, as 40% of Armenia’s annual growth is accredited to construction and real-estate. [2]
As such, a considerable level of power is in the hands of these oligarchs whose monopoly over key sectors of the economy has significantly stymied the country’s economic development.

The lifting of the Turkish blockade is anticipated to further enrich these dominant figures by allowing them to directly bring in products over the Turkish border, rather than the more costly route currently used through Georgia. In turn, opening the border is anticipated to provide new opportunities for those seeking to sell Armenia’s natural minerals in the international market. Property values and foreign investments are also expected to rise once relations are normalized with Turkey, placing many of those in Armenia’s oligarchic class who possess major real-estate and retail interests in a privileged position to reap profits.

The majority of Armenians, on the other hand, who struggle to make ends meet as farmers, wage laborers, or small businessmen are not likely to see much of the gains from opening the border. On the contrary, agricultural workers and local producers stand to suffer greatly under the weight of cheaper imports flooding in from Turkey, while laborers are likely to witness declining or stagnating wages under the pressure of foreign capital. Furthermore, rampant corruption and tax evasion ensure that whatever financial gains do accrue at the top will not be distributed down to the majority of the population.

The chairman of the Union of Domestic Manufacturers of Armenia, Vazgen Safarian, recently explained, “On the one hand, our consumers [and importers] will benefit from the cheap goods, but on the other hand, this will doom our local producers to having to shut down or to suspend operations.” Another Yerevan businessman, who actually imports fabrics from Turkey, stated “Then, many people will start importing goods, maybe the prices will go down. [T]his will hit everyone, [but] I think my business will suffer.”[3]

Vardan Ayvazyan, the head of the National Assembly’s Standing Committee on Economic Issues has exploited his position to secure mining licenses for himself and his family.

Edgar Helgelyan, an expert with the Mitk Analytical Center, also weighed in on the issue. “We are seriously concerned that the opening of the border will considerably damage the Armenian economy. Imports from Turkey to Armenia account for about $178 million, while exports from Armenia to Turkey do not surpass $1.8 million,” he said during a press conference releasing a report submitted to the Armenian government on the subject.[4]

In other words, the much-touted “growth in GDP” or “improvement of the Armenian economy” that IMF technocrats and government apologists alike parrot as the silver bullet behind supporting the Protocols, is likely to provide a boom for the oligarchic elite but a bust for nearly everyone else. This might help to explain why many average citizens in Armenia are opposed to the Protocols on economic, in addition to national, grounds; they fear having to bare the economic costs of the agreement while the elite reap the benefits.

This reality also helps to explain why Armenia’s leading class has lent its unflinching support to the Protocols, with many being vocally in favor of the move, both in parliament and in business circles.

To give one of many examples, a leading proponent of the agreements in Armenia is Vardan Ayvazyan, the current head of the National Assembly’s Standing Committee on Economic Issues. Throughout his years in government, Mr. Ayvazyan has secured various mining licenses for himself and his family, including an ironstone mine in Hrazdan and two mines for his brother in Syunik and Lori provinces. It therefore comes as no surprise that he repeatedly boasts about the benefits of the protocols, claiming that, “Opening of the border can lead to 4 percent growth of GDP” or that the Protocols will “ensure a new economic path for our country.”

For individuals such as Ayvazyan, who have used Armenia’s legislative process towards their economic gains, opening the border provides new opportunities to capitalize on the exploitation of Armenia’s natural resources. [5] The mere fact that the agreement has advanced this far is itself a testimony to the backing the government—many of who themselves make up the oligarchic class—has received from Armenia’s wealthy elite.

Indeed, in a recent interview to an Armenian newspaper, President Serzh Sargsyan smugly stated, “I have not heard from any serious businessperson in Armenia that has doubts of the economic benefit of opening the border.”

Capitalism Over Nationalism

Significant profits are surely anticipated to be made in the upper echelons of Armenian society once the borders are opened. But at what cost are Armenia’s oligarchs willing to pursue their pocket books? Would they be willing to give in to Turkish conditions and renounce Armenia’s national rights for the sake of lifting the blockade? Unfortunately, for many of the Armenian elite, national interests such as Karabakh’s self determination, justice for the Armenian Genocide or legal claims to historic lands do not seem to be as much of a concern as they are for the general population.[6]

This was perhaps most famously demonstrated by the head of the Armenian Football Federation (AFF), well-known oligarch Ruben Hairapetyan.[7] In the run-up to the Turkish president’s visit to Armenia for the much-touted soccer match between the two nations, Hairapetyan suddenly removed the image of Ararat from the AFF’s official logo, sparking a major outcry within Armenia. Although he was later forced to reinstate the original logo with Ararat as the centerpiece, the inherent disregard for Armenia’s national rights and dignity was blatantly exposed by the scandal.

It should be pointed out that such a dismissive attitude towards pan-national interests is not a new phenomenon among the ruling class in Armenia. We saw similar sentiments expressed during the tenure of Armenia’s first president, Levon Ter-Petrosyan, who was the chief architect of the system of autocracy and oligopoly we presently see in Armenia.[8] It was, thus, not surprising to see Ter-Petrosyan’s newly formed opposition immediately suspend their protest actions against the government in September 2008, when they learned that the Turkish president would be coming to town for a soccer match.[9] More recently, despite his earlier bitter denunciations of the government, Ter-Petrosyan has praised the Sargsyan regime’s policy on Turkish-Armenian relations and has even expressed his desire to establish cooperation with the ruling regime.[10]

Russia’s Backyard

In addition to the economic incentives and tendency to compromise national rights, there is an equally powerful factor to be considered when examining the ruling elite’s support for the Protocols: alignment with Russia.

Most of the prominent business and political elites in Armenia have direct personal ties to business and political interests in their former Soviet patron. We find that they either have major business ventures in Russia or serve as the overseers of Russian capital investments in Armenia. As one member of the ARF Western US Central Committee recently put it, “If Armenia is Russia’s backyard, then they [oligarchs] are the gardeners.”[11]

Indeed, Russia itself has a controlling stake in many of Armenia’s most strategic assets—gas, oil, nuclear power, electricity, telecommunications, rail, and finance, to name a few. It is estimated that Russia has over $2.5 billion of economic interests in the country. Given Armenia’s vulnerability to any instability Russia could potentially cause in these strategically important sectors, no major decision on the magnitude of the Protocols could be made without the blessing of the “Big Uncle.” The ruling elite in Armenia must pay special heed to the wishes of Moscow if they want to avoid any unwanted disruptions to the state and economy. Thus, it was no accident that President Sargsyan, during a state visit to Moscow in June 2008, extended an invitation to his Turkish counterpart to come to Armenia for the first soccer match.

For its part, Russia has openly expressed its support for the Protocols, with many analysts pointing out that it would be the main beneficiary of potential energy and transportation projects between Armenia and Turkey. Russia’s Deputy Foreign Minister, Grigori Karasin, was recently quoted as saying, “The Russian Inter RAO EES Company, which has energy facilities in Armenia, is exporting electricity to Turkey and the Russian Railway CJSC is ready to ensure uninterrupted rail communication between the two countries through the Dogukapy-Akhuryan checkpoint.”[12] Interestingly enough, two of the main initial projects expected to develop following the implementation of the Protocols are the sale of Armenian electricity to Turkey and the opening of joint railroad transportation–both of which are Armenian industries dominated by Russia.

The Path Forward

Of course, the West is also keen to see rapprochement between Armenia and Turkey. The heavy dependence Armenia has on Western loans and the desire to deflect attention away from the state’s crackdowns of March 1 is surely another motivation for Armenia’s pursuit of the Protocols.

Yet, blame for the Protocols cannot be laid at the door of foreign pressure (whether from Russia, Turkey, or the West). As Armenia’s Foreign Minister himself explained, “All states except for one or two supported the process and did not pressure us. It was Armenia’s initiative. We reached the agreement jointly with Turkey.”[13]

The responsibility, thus, lies with the ruling elite in Armenia. These elite hold the reigns of power in the country and have obvious motivations for seeing the Turkish blockade lifted despite its costs. In the end, the Protocols and the ensuing establishment of relations between Armenia and Turkey are a direct reflection of the interests of this tiny set of powerbrokers within Armenia.

The question, then, becomes how can the people act to prevent the ruling class from negotiating away Armenian national rights? The answer to this question lies partly in the international public opposition against the Protocols witnessed in recent months.

The unprecedented wave of mass demonstrations organized against the Armenian government pointed to a potential constraint on government decision-making. Hence, the public awareness raised against the Protocols, the delay by Nalbandian during the signing ceremony in Zurich, and President Sargsyan’s televised public address hours before the signing were a direct consequence of people taking to the streets in Yerevan and capitals throughout the world.
To date, these demonstrations have been the most serious disruption to the Armenian government’s plans for pushing through the Protocols. Indeed, the constant secrecy, media control, and deceptive statements issued by the government indicate their concern over the Armenian public’s negative reaction to their policies.

By putting into question the reality of the Armenian Genocide through a so-called historical commission, recognizing the existing illegitimate border that forfeits legal claims to the Armenian homeland, and compromising Armenia’s ability to defend the freedom of Artsakh, the Protocols pose a grave threat to the Armenian Cause–a cause considered to be paramount in the hearts and minds of Armenians around the world.

However, protests and negative opinion alone are likely not to be enough to stop the regime from ratifying the agreements. Public opposition must be translated into serious organization and concerted action in order to raise the costs high enough to be heeded by the administration in Yerevan. The system of centralized, elite power in Armenia must be checked by a vigilant and organized populace in order to restrain the wreckage of the self-interested schemes of the oligarchic elite.

The Diaspora has a special role to play in this battle. Through its relative freedom and more abundant resources, it has an important obligation to stand in support of those in Armenia who are genuinely struggling to create a more just and equitable future in the Homeland. As in the past, only by coming together collectively and reaching beyond artificial divisions will the Armenian people succeed in defending their pan-national interests.

Editor’s Note: This article is featured in the Winter 2010 issue of Haytoug, a quarterly publication by the Armenian Youth Federation. The upcoming issue is set for release in late January. It will be available, free, at community centers, schools and local Armenian book stores. You can also download it in PDF or sign up to receive a free copy in the mail at http://www.haytoug.org/subscribe/

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[1] “Yerevan Survey Finds Majority Opposed to Protocols,” ArmInfo, September 29, 2009.
[2] Ara Nranyan, “Neoliberalism and Armenia: 18 Years of Integration with Capitalism,” presentation delivered at the 2009 Armenians and Progressive Politics conference in Glendale, CA
[3] Marianna Grigoryan, “Is Yerevan Caught in a Trade Trap?” Eurasianet, October 5, 2009. See also Hasmik Hambardzumian, “Armenians Wary of Turkish Trade,” Asia Times, September 29, 2009.
[4] “Opening of Border with Turkey Will Devastate Armenian Businesses,” PanArmenian.net, September 25, 2009. See also the thorough, 192-page study commissioned by the ARF Bureau on the economic impact of opening the border: Mher Dzadourian, Pavel Hovhannisan, and Albert Babayan, “Economic-Trade Issues Surrounding the Opening of the Armenia-Turkey Border,” June 2009, Yerevan.
[5] Gayane Abrahamyan, “Parliament Debates Diplomatic Normalization with Turkey,” Eurasianet, October 1, 2009. For a background on Ayvazyan’s interests in the mining industry, see Edik Baghdasaryan, “Vardan Ayvazyan’s Business Project,” Hetq, April 2, 2007.
[6] Despite the constant propaganda meted out to the contrary, people within Armenia consistently express their support for the cause of Genocide recognition and reparations from Turkey. See Serouj Aprahamian, “Armenia vs. Diaspora: The Myth of Diverging Interests Over the Genocide,” Haytoug, Spring 2009, 6-9. In the most recent opinion poll taken after the announcement of the Protocols, 52.4% of Yerevan residents rejected the terms of the agreements and 41% insisted that they want the Turkish-Armenian border to remain closed. “Poll Finds Turkey Deal Unpopular in Yerevan,” Asbarez, October 19, 2009.
[7] Hayrapetyan owns several businesses and is the Chairman of the Armtobacco Company. Most recently, he took ownership of the Bjni Mineral Water Factory in a controversial deal following the original owner’s (oligarch Khachatur Sukiasyan) fall out with the government over his support of Levon Ter-Petrosyan and his alleged role in the March 1st events. See Gayane Mkrtchyan, “The Politics of Table Water: ‘National Treasure’ Bjni Changes hands in Disputed Sale,” Armenia Now, September 2, 2009.
[8] See Ian Bremmer and Cory Welt, “Armenia’s New Autocrats,” Journal of Democracy, Vol. 8, 3, July 1997, 77-91.
[9] Marianna Grigoryan, “Armenia, Turkey Put Differences Aside for Soccer,” Eurasianet, September 5, 2008.
[10] “Armenian Opposition Leader Backs President on Turkey,” RFE/RL, November 12, 2009.
[11] Town Hall Meeting on Pan-Armenian Challenges. November 19, 2009. Encino, CA. Personal notes.
For a more historical perspective of this same phenomenon, we are reminded of the following quote from Armenian revolutionary hero, Aram Manukian: “That [exploitative] class is the capitalist class, which by descent is Armenian but in fact serves as the defender of foreign and Russian interests. They pretend to pose as the leaders of our people, but they consider Armenians to be only a pedestal under Russian tutelage for them to use to advance a more vibrant life. This class has turned into a threat to the Armenian people’s unity. They have become bait for our neighbors to use against us. They have become a ‘fishing hook’ in the hands of the Russians with which to ‘catch’ Armenians. Although they may possess Armenian names, this class is, in fact, our enemy.” Roupen Der-Minassian, Memoirs of an Armenian Revolutionary, Vol. 2.
[12] “Russia to Support Armenia-Turkey Ties With Economic Projects,” Asbarez, November 4, 2009.
[13] “Nalbandyan Does Not Feel ‘Embarrassed and Insulted’”, News.am, October 30, 2009.