The recent move by the Armenian government to bring its negotiations on free trade agreement with the EU to an abrupt end surprised many. But should it have really been that unexpected? Vladimir Sarkisyants says that, in retrospect, the possibility of signing a promising agreement with the EU when Russia was advancing its own regional project seems too unrealistic a perspective to ever materialise.
A combination of economic, military and geo-strategic factors combined to force Armenia to shun a deal with the European Union and commit to joining the Russian-led Eurasian Union.
Russia plays a huge role for Armenia – being one of its biggest economic partners, a strategic ally and the de-facto guarantor of its security. Russia is one of Armenia’s largest trade partners. One under-appreciated factor in its decision is Yerevan’s unfavourable trade imbalance: Armenia depends heavily on imports from Russia, whilst its own exports are miniscule. Russia is also a very important natural gas provider and the biggest foreign investor into Armenian economy – its companies own large parts of the Armenian energy sectors. Furthermore, Russia is Armenia’s biggest labour market, providing jobs for hundreds of thousands of Armenian citizens. In January-July 2013, the total amount of remittances to Armenia – the overwhelming majority of which come from Russia – amounted to almost $1 billion. By comparison, Armenia’s annual budget revenues are estimated at slightly over $2 billion.
Armenia is a member of the Commonwealth of the Independent States (CIS) and the Russian-led Collective Security Treaty Organization (CSTO). It hosts a Russian military base, the only remaining Russian base in the South Caucasus (There are Russian military bases in Abkhazia and South Ossetia but the status of these territories is controversial). In 2010, both sides agreed to extend the lease on the base until 2044. President Vladimir Putin has recently announced an initiative for setting up a joint air defence system, an integrated system akin to one between Russia and Belarus. Moscow promised Yerevan help in strengthening the latter’s modest air force.
The importance of military matters for Armenia derives from the precarious situation that it found itself in upon the breakup of the USSR. The conflict in Nagorno-Karabakh (an overwhelmingly Armenian-populated enclave within Azerbaijan) and the subsequent ceasefire (1994) perpetuated what is referred to as a “frozen conflict”. The tenuous ceasefire held chiefly due to local balance of power. Although there is an on-going shoot-out between the opposing Armenian and Azerbaijani units that results in scores of casualties on either side each year, the ceasefire largely held with a rather limited OSCE monitoring.
However, in the last few years the overall balance of power has shifted. Azerbaijan’s government spent its massive oil and gas revenues aggressively modernising and expanding its armed forces. It signed arms deals worth billions of US dollars. Interestingly, some of the most lucrative contracts were signed with Russia. Armenia has no natural resources to match Azerbaijan’s spending spree, but it managed to keep up in this arms race thanks to its CSTO membership and discounted rates on procurement of Russian military ware that this entails.
Even so, in the last couple of years the military balance tipped significantly in Azerbaijan’s favour. This is not all. Azerbaijan’s strategic partner, Turkey, has been keeping its borders with Armenia shut since 1993 and is unwilling to open diplomatic relations with Armenia until the latter concedes to Azerbaijan’s demands pertaining to Nagorno-Karabakh. The geopolitical situation of the landlocked and resources-poor Armenia is virtually hopeless. Russia, whilst officially allied with Armenia, is not inclined to lose out on potential revenues and is selling advanced offensive weapon systems to Azerbaijan – thus helping to create an ever more explosive regional powder keg. Such arms sales irritate many in Armenia. Despite that, however, and in the absence of any alternative source of security guarantees, these deals also bind Armenia closer to its only ‘protector.’ Russia thus kills two birds with one stone. Armenia’s multidimensional dependency on Russia is greater than anyone in Yerevan, or in the Western capitals, would have liked to admit.
Curiously, before its late and sudden decision not to proceed with the EU talks, the Armenian Government tried to keep its options open and did not express much of an interest in the Russian-led Custom Union (the regulations of which are incompatible with those of the EU). Now, however, it seems as if Yerevan is trying to play catch-up and is pushing Moscow for a quick entry into the Custom Union.
Geopolitically, the South Caucasus is a periphery for Brussels. For Moscow, on the other hand, the region is a part of what used to be called the ‘near abroad,’ which the Kremlin views as the sphere of its legitimate interest. This isn’t a mere rhetoric, and when pushed too far Russia is willing to bring real pressure to bear, as the world witnessed in the 2008 war with Georgia.
As far as Armenia is concerned, the Russian policy of carrot and stick seemed to have succeeded in blending the economic and security elements. Given the unwillingness of the Obama administration to actively engage in the volatile South Caucasus, Russia is the factual regional power broker. With hindsight, then, Armenia’s signing of the free trade agreement with the EU was never really on the cards. It is surprising that Armenia managed to go as far with the negotiations as it actually did. The credit does not entirely belong to the Russians, however. Arguably, the Armenian elites were just as instrumental in fashioning a strait-jacket the country is currently placed into.