Economy of Armenia

Armenia is the second most densely populated of the former Soviet republics. It is situated between the Black Sea and the Caspian Sea, bordered on the north and east by Georgia and Azerbaijan and on the south and west by Iran and Turkey.

Until independence, Armenia's economy was based largely on industry--chemicals, electronic products, machinery, processed food, synthetic rubber, and textiles--and highly dependent on outside resources. Agriculture accounted for only 20% of net material product and 10% of employment before the breakup of the Soviet Union in 1991. Armenian mines produce copper, zinc, gold, and lead. The vast majority of energy is produced with imported fuel, including gas and nuclear fuel (for its one nuclear power plant) from Russia; the main domestic energy source is hydroelectric. Small amounts of coal, gas, and petroleum have not yet been developed.

Like other former States, Armenia's economy suffers from the legacy of a centrally planned economy and the breakdown of former Soviet trading patterns. Soviet investment in and support of Armenian industry has virtually disappeared, so that few major enterprises are still able to function. In addition, the effects of the 1988 earthquake, which killed more than 25,000 people and made 500,000 homeless, are still being felt. Although a cease-fire has held since 1994, the conflict with Azerbaijan over Nagorno-Karabakh has not been resolved. The consequent blockade along both the Azerbaijani and Turkish borders has devastated the economy, because of Armenia's dependence on outside supplies of energy and most raw materials. Land routes through Azerbaijan and Turkey are closed; routes through Georgia and Iran are inadequate or unreliable. In 1992-93, GDP fell nearly 60% from its 1989 level. The national currency, the dram, suffered hyperinflation for the first few years after its introduction in 1993.

Nevertheless, the Government of Armenia, helped by the cease-fire that has been in effect in Nagorno-Karabakh since 1994, has been able to carry out wideranging economic reforms which paid off in dramatically lower inflation and steady growth. Armenia has registered strong economic growth since 1995, building on the turnaround that began the previous year, and inflation has been negligible for the past several years. New sectors, such as precious stone processing and jewelry making, information and communication technology, and even tourism are beginning to supplement more traditional sectors such as agriculture in the economy.

This steady economic progress has earned Armenia increasing support from international institutions. The IMF, World Bank, EBRD, as well as other IFIs and foreign countries are extending considerable grants and loans. Total loans extended to Armenia since 1993 exceed $800 million. These loans are targeted at reducing the budget deficit, stabilizing the local currency; developing private businesses; energy; the agriculture, food processing, transportation, and health and education sectors; and ongoing rehabilitation work in the earthquake zone.

Continued progress will depend on the ability of the government to strengthen its macroeconomic management, including increasing revenue collection, improve the investment climate, and accelerate the privatization process. A liberal foreign investment law was approved in June 1994, and a Law on Privatization was adopted in 1997, as well as a program on state property privatization. The government has made major strides toward joining the World Trade Organization. By 1994, however, the Armenian Government had launched an ambitious IMF-sponsored economic liberalization program that resulted in positive growth rates in 1995-2005. Armenia joined the WTO in January 2003. Armenia also has managed to slash inflation, stabilize its currency, and privatize most small- and medium-sized enterprises. Armenia's unemployment rate, however, remains high, despite strong economic growth. The chronic energy shortages Armenia suffered in the early and mid-1990s have been offset by the energy supplied by one of its nuclear power plants at Metsamor. Armenia is now a net energy exporter, although it does not have sufficient generating capacity to replace Metsamor, which is under international pressure to close. The electricity distribution system was privatized in 2002. Armenia's severe trade imbalance has been offset somewhat by international aid, remittances from Armenians working abroad, and foreign direct investment. Economic ties with Russia remain close, especially in the energy sector. The government made some improvements in tax and customs administration in 2005, but anti-corruption measures will be more difficult to implement. Investment in the construction and industrial sectors is expected to continue in 2006 and will help to ensure annual average real GDP growth of about 13.9%.

Overview

Under the old Soviet central planning system, Armenia had developed a modern industrial sector, supplying machine tools, textiles, and other manufactured goods to sister republics in exchange for raw materials and energy. Since the implosion of the USSR in December 1991, Armenia has switched to small-scale agriculture away from the large agroindustrial complexes of the Soviet era. The agricultural sector has long-term needs for more investment and updated technology. The privatization of industry has been at a slower pace, but has been given renewed emphasis by the current administration. Armenia is a food importer, and its mineral deposits (gold, bauxite) are small. The ongoing conflict with Azerbaijan over the ethnic Armenian-dominated region of Nagorno-Karabakh (which was part of Soviet Azerbaijan) and the breakup of the centrally directed economic system of the former Soviet Union contributed to a severe economic decline in the early 1990s. By 1994, however, the Armenian Government had launched an ambitious IMF-sponsored economic program that has resulted in positive growth rates in 1995-99. Armenia also managed to slash inflation and to privatize most small- and medium-sized enterprises. The chronic energy shortages Armenia suffered in recent years have been largely offset by the energy supplied by one of its nuclear power plants at Metsamor. Continued Russian financial difficulties have hurt the trade sector especially, but have been offset by international aid, domestic restructuring, and foreign direct investment.

History of the modern Armenian economy

Armenia emerged from the umbra of the former Soviet Union in 1991 and migrated from a centrally planned economy (Communist system) to a market economy (capitalist system). Both the nation and the economy are nascent. Regional conflict retards economic growth. In addition, the border with Turkey is closed, making access to sea ports difficult and transportation logistics challenging to a country largely dependent upon imports. In 2003, Armenia became a member of the WTO (World Trade Organization). The nation is making substantial progress in privatizing ownership of what used to be State Owned industries under the former Soviet system. Despite marked progress, Armenia still suffers from a large trade imballance and is still largely dependent upon foreign aid and remittances from Armenian nationals working abroad, and members of the diaspora donating aid through NGOs (non-governmental organizations) such as the church. There are some foreign capital inflows, but no robust foreign investment. Despite progress since the Soviet era, the unemployment rate still hovers near 30% and there remains a huge gulf between actual and potential Gross Domestic Product.

Competitiveness

The Armenian economy's competitiveness is low and stagnating according to the Global Competitiveness Index, in which Armenia's ranking slipped from 80th out of 132 countries in 2006-2007 index to 93rd out of 131 countries in the 2007-2008 index (just below Libya, Namibia, Georgia, Serbia, and Pakistan). [ [http://www.weforum.org/pdf/Global_Competitiveness_Reports/Reports/gcr_2007/gcr2007_rankings.pdf "2007-2008 Global Competitiveness Index rankings and 2006–2007 comparisons"] , World Economic Forum.]

GDP

The Gross Domestic Product of Armenia is estimated in 2006 to be 6.6 billion US dollars per calendar year and the GDP per capita (purchasing power parity) is estimated at $5400 US. The growth rate is high at 13.4%, but the relatively low base must be considered. Low inflation is maintained around 2.6% annually. "Source:" CIA Factbook

Growth

According to official figures, Armenia’s economy grew by 13.8 percent in 2007. [http://www.eurasianet.org/departments/insight/articles/eav042408.shtml "ARMENIA: GAS PRICE HIKE POSES CHALLENGE FOR GOVERNMENT"] , EurasiaNet, April 24, 2008.] According to research funded by the USAID CAPS project, Armenia's exceptionally high rate of economic growth during the last decade has been largely dependent on external factors (e.g. remittances, assistance from international financial and donor organization). Furthermore, the study concluded that despite its record growth on most macro-economic metrics, Armenia is "low and lagging" in competitiveness. [http://ev.am/ACR.htm "2008 National Competitiveness Report of Armenia"] , Economy and Values Research Center, 2008.]

According to the National Statistical Service, the booming construction and service sectors remain the driving forces of the high growth rate of GDP. [http://www.armenialiberty.org/armeniareport/report/en/2007/09/ac00c04d-a570-479a-8d0c-9554e4acb7b6.asp "Armenian Growth Still In Double Digits"] , Armenia Liberty (RFE/RL), September 20, 2007.]

Cash remittances

Cash remittances sent back home from Armenians working abroad -- mostly in Russia and the United States -- are growing and contribute significantly to Armenia's Gross Domestic Product (between 15 to 30 percent). They help Armenia sustain double-digit economic growth and finance its massive trade deficit.

According to the Central Bank of Armenia, during the first half of 2008, cash remittances sent back to Armenia by Armenians working abroad rose by 57.5 percent and totaled $668.6 million USD, equivalent to 15 percent of the country's first-half Gross Domestic Product. [http://www.armenialiberty.org/armeniareport/report/en/2008/08/4CC57703-F346-4E3C-8CA4-CD1E571BEC5A.ASP "Cash Transfers To Armenia Jump To New High"] , Armenia Liberty (RFE/RL), August 5, 2008.] However, the latter figures only represent cash remittances processed through Armenian commercial banks. According to RFE/RL, comparable sums are believed to be transferred through non-bank systems, implying that cash remittances make up approximately 30 percent of Armenia's GDP in the first half of 2008.

In 2007, cash remittances through bank transfers rose by 37 percent to a record-high level of $1.32 billion USD. According to the Central Bank of Armenia, in 2005, cash remittances from Armenians working abroad reached a record-high level of $1 billion, which is worth more than one fifth of the country’s 2005 Gross Domestic Product. [http://www.armenialiberty.org/armeniareport/report/en/2006/02/70759614-25c5-449b-8ed9-91ac340adc17.asp "Survey Highlights Armenia’s Lingering Unemployment"] , Armenia Liberty (RFE/RL), February 9, 2006.]

Foreign aid

The Armenian government receives foreign aid from the government of the United States through the United States Agency for International Development and the Millennium Challenge Corporation.

On March 27, 2006, the Millennium Challenge Corporation signed a five-year, $235.65 million Compact with the Government of Armenia. The single stated goal of the "Armenian Compact" is "the reduction of rural poverty through a sustainable increase in the economic performance of the agricultural sector." The Compact includes a $67 million to rehabilitate up to 943 kilometers of rural roads, more than a third of Armenia's proposed "Lifeline road network". The Compact also includes a $146 million project to increase the productivity of approximately 250,000 farm households through improved water supply, higher yields, higher-value crops, and a more competitive agricultural sector. [http://www.mcc.gov/documents/factsheet-032706-armenia.pdf "Armenia and Millennium Challenge Corporation: Building a Dynamic Partnership for Poverty Reduction through Economic Growth"] , Millennium Challenge Corporation, March 27, 2006.]

Construction boom

According to the National Statistical Service, Armenia's booming construction sector generated about 20 percent of Armenia's GDP during the first eight months of 2007.

ervices sector

Along with the construction sector, the services sector is the driving force behind Armenia's recent high economic growth rate.

Industrial sector

According to the National Statistical Service, during the January-August 2007 period, Armenia's industrial sector was the single largest contributor to the country's GDP, but remained largely stagnant with industrial output increasing only by 1.7 percent per year. In 2005, Armenia's industrial output (including electricity) made up about 30 percent of GDP. [http://www.armenialiberty.org/armeniareport/report/en/2006/02/7a425352-3ed4-4b17-a352-e11d38026faa.asp "Government Downplays Economic Cost Of Russian Gas Price Hike"] , Armenia Liberty (RFE/RL), February 10, 2006.]

Agricultural sector

In 2006, agricultural production accounts for about 20 percent of Armenia's GDP. [http://www.armenialiberty.org/armeniareport/report/en/2006/08/218f6eeb-de6f-47e4-970e-dba7583d7d39.asp "Kocharian Orders Tax Exemption For Armenian Farmers"] , Armenia Liberty (RFE/RL), August 8, 2006.]

Trade

Deficit

During the first half of 2008, Armenia's widening current-account trade deficit grew by 66 percent to $1.39 billion USD, with a 40 percent rise in imports. Furthermore, Armenian exports fell by about one percent to $520 million USD.

According to the National Statistical Service, Armenia's trade deficit in 2006 was $1.2 billion with growth in exports being largely flat. [http://www.armenialiberty.org/armeniareport/report/en/2007/03/43d15c73-f5fe-49e8-a4ce-2d4234f33cf6.asp "Armenia Keeps Up Robust Growth"] , Armenia Liberty (RFE/RL), March 30, 2007.] During the first 11 months of 2006, net imports grew by 21 percent to $1.95 billion, while exports stood at $895 million, up 0.3 percent from the same period in 2005. [http://www.armenialiberty.org/armeniareport/report/en/2007/01/4b0b1a8a-57d2-4bfe-80a7-fe750c1c3ce9.asp "Armenia Posts Record-High Trade Deficit"] , Armenia Liberty (RFE/RL), January 8, 2007.]

Partners

European Union

During January-February 2007, Armenia’s trade with the European Union totaled $200 million. During the first 11 months of 2006, the European Union remained Armenia's largest trading partner, accounting for 34.4 percent of its $2.85 billion commercial exchange during the 11-month period.

Russia and former Soviet republics

During January-February 2007, Armenia’s trade with Russia and other former Soviet republics was $205.6 million (double the amount from the same period the previous year), making them the country’s number one trading partner. During the first 11 months of 2006, the volume of Armenia’s trade with Russia was $376.8 million or 13.2 percent of the total commercial exchange.

United States

During the first 11 months of 2006, U.S.-Armenian trade totaled $152.6 million.

Transportation Routes

Russian natural gas reaches Armenia via a pipeline through Georgia.

The Georgian Black Sea ports of Batumi and Poti process more than 90 percent of freight shipped to and from landlocked Armenia. The Georgian railway, which runs through the town of Gori in central Georgia, is the main transport link between Armenia and the aforementioned Georgian seaports. Fuel, wheat, and other basic commodities are transported to Armenia by rail. [http://www.armenialiberty.org/armeniareport/report/en/2008/08/F3509195-D04E-4187-AA45-23B61ACF430F.asp "Armenia Scrambles To Restore Vital Supplies Via Georgia"] , Armenia Liberty (RFE/RL), August 18, 2008.]

Armenia's rail network is managed by the Russian state railway.

An economic blockade with Turkey and Azerbaijan has cut Armenia's rail link between Gyumri and Kars to Turkey; the rail link with Iran through the Azeri exclave of Nakhichevan; and a natural gas and oil pipeline line with Azerbaijan. A new gas pipeline to Iran has been completed, and a road to Iran through the southern city of Meghri allows trade with that country.

Labor

Monthly wages

According to the state-owned Armenpress news agency, the average monthly wage in Armenia for the first half of 2007 was 70,700 drams (about $210 USD). [ [http://www.armeniandiaspora.com/archive/105751.html "Average Wage In Armenia Rises To $210"] , ARMENPRESS, August 3, 2007.]

As of April 24, 2008, the average monthly salary is 75,000 drams (about $242 US dollars). According to the ROA National Statistical Service, the average monthly salary during January - June 2008 is 86,850 drams (about $287 at the time). About 62% of officially registered wage earners earn at least the average monthly wage, while only 19.6% receive a monthly salary of over 100,000 drams (about $330 at the time). [ [http://www.hetq.am/eng/economy/8244/ "Mortgage Loans Beyond the Reach of the Middle Class"] , Hetq Online, July 28, 2008.]

Unemployment

According to research commissioned by the Yerevan office of the Organization for Security and Cooperation in Europe, at least one in three working-age Armenians was unemployed as of February 2005 despite several consecutive years of double-digit economic growth. The finding sharply contrasts with government's official unemployment rate of about 10 percent. A 2003 household survey conducted by the National Statistical Survey found that the real unemployment rate is about 33 percent.

Migrant workers

Since gaining independence in 1991, hundreds of thousands of Armenia's residents have gone abroad, mainly to Russia, in search of work. Unemployment has been the major cause of this massive labor emigration. OSCE experts estimate that between 116,000 and 147,000 people left Armenia for economic reasons between 2002 and 2004, with two-thirds of them returning home by February 2005. According to estimates by the National Statistical Survey, the rate of labor emigration was twice as higher in 2001 and 2002.

According to an OSCE survey, a typical Armenian migrant worker is a married man aged between 41 and 50 years who "began looking for work abroad at the age of 32-33."

Appreciation of the dram

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Government revenue

New VAT tax

Environmental Issues

Armenia is trying to address its environmental problems. It has established a Ministry of Environment and has introduced a pollution fee system by which taxes are levied on air and water emissions and solid waste disposal, with the resulting revenues used for environmental protection activities. Armenia is interested in cooperating with other members of the Commonwealth of Independent States (a group of 12 former Soviet republics) and with members of the international community on environmental issues. The Armenian Government is working toward closing the Armenian Nuclear Power Plant as soon as alternate energy sources can be identified.

Energy

Oil

Armenia has no proven oil reserves. Most of its oil demands are met through imports from Russia. Armenian oil demand is constrained, in large part, due to an economic embargo maintained by Azerbaijan to the East, and Turkey to the West. The embargo began shortly after the secession of Nagorno-Karabakh , an Armenian enclave within Azerbaijan in 1988, and has held, despite a cease fire declared in 1994. [http://www.eia.doe.gov/emeu/cabs/Caucasus/LocalIssues.html Official Energy Statistics from the U.S. Government - Caucasus Region] , Energy Information Administration of the U.S. Department of Energy]

Natural Gas

Natural gas represents a large portion of total energy consumption in Armenia, accounting for 50%. Armenia receives all of its natural gas from Russia (which controls about 70% of the country's energy network). [http://www.eurasianet.org/departments/insight/articles/eav013006.shtml GAS PRICES PROMPT ARMENIA TO DEBATE ALLIANCE WITH RUSSIA] , Eurasianet.org, January 30, 2006.] The Russian company Gazprom supplies Armenia with gas through a pipeline that runs through Georgia. In 2007, Gazprom provided Armenia with just under 2 billion cubic meters of natural gas. As a transit fee, Armenia pays Georgia approximately 10% of the gas that was destined to reach Armenia. [ [http://rfe.rferl.org/featuresarticle/2005/12/383827cb-b4db-4f24-a5fe-a9dbef3f6f72.html "Georgia/Russia: Both Sides Move Closer On Gas Issues"] , Armenian Liberty (RFE/RL), December 21, 2005.]

A new gas pipeline (owned and operated by ArmRosGazProm) linking Armenia to neighboring Iran is nearly complete, and will allow Armenia to import up to 2.5 billion cubic meters of Iranian gas by late October or early November 2008. [ [ http://www.armenialiberty.org/armeniareport/report/en/2008/09/629C6DA9-9EF2-4469-93EF-928D82ED758C.asp "New Russian Gas Price For Armenia Unveiled"] , [http://www.armenialiberty.org Armenian Liberty] (RFE/RL), September 23, 2008.] ArmRosGazProm (68% of which is owned by the Russian gas giant Gazprom) owns the natural gas pipeline network within Armenia that supplies gas to consumers and businesses.

Armenia's thermal power plants (which supply approximately 40 percent of Armenia's electricity needs) run on natural gas, making Armenia (at the present time) dependent on imported Russian gas to meeting its electricity needs. [http://www.armenialiberty.org/armeniareport/report/en/2008/07/9fe18bdd-bd7e-4231-9253-1716e191f7c4.asp "Armenian Power Utility Rules Out Price Rise"] , Armenian Liberty (RFE/RL), July 28, 2008.]

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Electricity

Despite a lack of fossil fuel, Armenia has significant domestic electricity generation resources. In 2002, non-thermal domestic electricity generation accounted for 56% of total generation: 32% nuclear and 26% hydroelectric.

Armenia has a total of 11 power stations and 17 220 kV substations. A map of Armenia's National Electricity Transmission Grid can be found at the website of the Global Energy Network Institute [http://www.geni.org/globalenergy/library/national_energy_grid/armenia/index.shtml here] .

Thermal Power Plants

Thermal power plants (running on natural gas) in Armenia have an established capacity of 1,756 MW. [http://www.unescap.org/esd/energy/information/electricpower/2001-2002/html/armenia.htm "Electric Power in Asia and the Pacific 2001 - 2002: Armenia"] , United Nations ESCAP.]

The following table lists the three thermal power plants which together account for 44% of Armenia's domestic electricity generation. [http://www.geni.org/globalenergy/library/national_energy_grid/armenia/armeniannationalelectricitygrid.shtml Map of Armenian Electricity Grid] , Global Energy Network Institute, September, 2000.]

Hydroelectric Power Plants

Hydropower plants have an established capacity of 1,038 MW.

The economically justified hydropower potential of Armenia is around 3.6 GWh/year. From this amount, 1.5 GWh/year (or about 42% of economically justified hydropower potential) has been developed already. [http://www.renewableenergyarmenia.am/content/view/41/112/lang,en/ "Hydropower Potential of Armenia"] , Renewable Energy Armenia (Danish Energy Management A/S).]

Armenia has 9 hydroelectric power plants which together account for 26% of its domestic electricity generation. The plants are grouped along two cascades: the Sevan-Hrazdan Cascade (privatized in June 2003 to the [http://www.mek.am/ International Energy Corporation CJSC] ) and the Vorotan Cascade (publicly owned).. The following table lists the details of each cascade:

Nuclear Power Plant and Nuclear Fuel

Armenia's controversial Metsamor Nuclear Power Plant, constructed in 1979, has an installed capacity of 815 MW, though only one unit of 407.5 MW is currently in operation. It provides about 32% of the country's domestic electricity generation. Nuclear fuel must be flown in from Russia and then taken along a dirt road from Yerevan because Armenia's border with Turkey is closed.

Wind Power

According to a study sponsored by the United States Department of Energy (DOE) and the United States Agency for International Development (USAID) in 2002-2003, the "theoretical" wind power potential of Armenia is 4,900 MW in 4 zones with a total area of 979 km². [http://www.renewableenergyarmenia.am/content/view/37/99/lang,en/ "Wind Power Potential"] , Renewable Energy Armenia (Danish Energy Management A/S).]

Banking

Armenia's financial system is not integrated into the global network. According to the head of the Armenian Central Bank’s (CBA) department for financial system policies and analyses (Vahe Vardanyan) Armenian banks have no large asset concentrations in foreign markets, particularly in capital markets. They nearly have no purchased securities (so-called securitized packages). For this reason, Armenia was virtually unaffected by the Liquidity crisis of September 2008. [http://www.armenianow.com/?action=viewArticle&AID=3280&CID=3168&IID=1203&lng=eng "Untouched and Out of Touch: Armenia not affected by US crisis due to relative insignificance"] , ArmeniaNow, October 3, 2008.]

Armenian banking assets are very low and make up only 25 percent of the Gross Domestic Product (GDP).

Takeover of Armenian industrial property by the Russian state and Russian companies

In implementing its strategy to regain political dominance over post-Soviet countries by taking over their economic infrastructure, the Russian state, since 2000, has acquired several key assets in the energy sector and Soviet-era industrial plants. Property-for-debt or equity-for-debt swaps (acquiring ownership by simply writing off the Armenian government's debts to Russia) are usually the method of acquiring assets. The failure of market reforms, clan-based economics, and official corruption in Armenia have allowed the success of this process.Socor, Vladimir. [http://www.iasps.org/strategic/socor12.htm "Armenia's Energy Sector, Other Industrial Assets Passing Under Russia's Control"] , "IASPS Policy Briefings: Oil in Geostrategic Perspective", November 13, 2002.]

In August 2002, the Armenian government sold an 80 percent stake in the Armenian Electricity Network (AEN) to Midland Resources, a British offshore-registered firm which is said to have close Russian connections.

In September 2002, the Armenian government handed over Armenia’s largest cement factory to the Russian ITERA gas exporter in payment for its $10 million debt for past gas deliveries.Danielyan, Emil. [http://www.eurasianet.org/departments/business/articles/eav050703.shtml RUSSIA TIGHTENS GRIP ON ARMENIA WITH DEBT AGREEMENTS] , "Eurasianet", May 7, 2003]

On November 5, 2002, Armenia transferred control of 5 state enterprises to Russia in an assets-for-debts transaction which settled $100 million of Armenian state debts to Russia. The document was signed for Russia by Prime Minister Mikhail Kasyanov and Industry Minister Ilya Klebanov, while Prime Minister Andranik Markarian and defense and security strongman Serge Sarkisian signed for Armenia. The five enterprises which passed to 100 percent Russian state ownership are:
* Armenia's largest thermal power plant which is in the town of Hrazdan and is gas-burning
* the Mars electronics and robotics plant in Yerevan, a Soviet-era flagship for both civilian and military production
* three research-and-production enterprises -- for mathematical machines, for the study of materials, and for automated control equipment -- these being Soviet-era military-industrial plants

In January 2003, the Armenian government and United Company RUSAL signed an investment cooperation agreement, under which United Company RUSAL (which already owned a 76% stake) acquired the Armenian government's remaining 26% share of RUSAL ARMENAL aluminum foil mill, giving RUSAL 100% ownership of RUSAL ARMENAL. [ [http://www.rusal.ru/en/armenal.aspx RUSAL ARMENAL] ]

On November 1, 2006, the Armenian government handed de facto control of the Iran-Armenia gas pipeline to Russian company Gazprom and increased Gazprom's stake in the Russian-Armenian company ArmRosGazprom from 45% to 58% by approving an additional issue of shares worth $119 million.Socor, Vladimir. [http://www.jamestown.org/edm/article.php?article_id=2371612 "RUSSIA CEMENTS CONTROL OF ARMENIA’S ENERGY SYSTEM"] , "Eurasia Daily Monitor", November 3, 2006.] This left the Armenian government with a 32% stake in ArmRosGazprom. The transaction will also help finance ArmRosGazprom's acquisition of the Hrazdan electricity generating plant’s fifth power bloc (Hrazdan-5), the leading unit in the country.

In October 2008 the Russian bank Gazprombank, the banking arm of Gazprom, acquired 100 percent of Armenian bank Areximbank after previously buying 80 percent of said bank in November 2007 and 94.15 percent in July of the same year. [fr icon [http://www.armenews.com/article.php3?id_article=44934 Gazprombank acquiert entièrement la banque arménienne Areximbank] ]

Controversy over non-transparent deals

Critics of the Kocharian government say that the Armenian administration never considered alternative ways of settling the Russian debts. According to economist Eduard Aghajanov, Armenia could have repaid them with low-interest loans from other, presumably Western sources, or with some of its hard currency reserves which then totaled about $450 million. Furthermore, Aghajanov points to the Armenian government's failure to eliminate widespread corruption and mismanagement in the energy sector – abuses that cost Armenia at least $50 million in losses each year, according to one estimate.

Political observers say that Armenia's economic cooperation with Russia has been one of the least transparent areas of the Armenian government’s work. The debt arrangements have been personally negotiated by (then) Defense Minister (and now President) Serge Sarkisian, Kocharian’s closest political associate. Other top government officials, including Prime Minister Andranik Markarian, had little say on the issue. Furthermore, all of the controversial agreements have been announced after Sarkisian’s frequent trips to Moscow, without prior public discussion.

Finally, while Armenia is not the only ex-Soviet state that has incurred multimillion-dollar debts to Russia over the past decade, it is the only state to have so far given up such a large share of its economic infrastructure to Russia. For example, pro-Western Ukraine and Georgia (both of which owe Russia more than Armenia) have managed to reschedule repayment of their debts.

Other Statistics

Investment (gross fixed): 19.8% of GDP (2004)

Household income or consumption by percentage share:
lowest 10%: 2.3%
highest 10%: 46.2% (1999)

Distribution of family income - Gini index:44.4 (1996)

Agriculture - products:
fruit (especially grapes and apricots), vegetables, livestock, Wine, Brandy

Industrial production growth rate:15% (2002 est.)

Electricity - production:6,492 GWh (2002)

Electricity - consumption:5,797 GWh (2002)

Electricity - exports:704 GWh; note - exports an unknown quantity to Georgia; includes exports to Nagorno-Karabakh (2002)

Electricity - imports:463 GWh; note - imports an unknown quantity from Iran (2002)

Oil - production:0 barrel/day (2001 est.)

Oil - consumption:5,700 barrel/day (2001 est.)

Oil - exports:NA (2001)

Oil - imports:NA (2001)

Natural gas - production:0 m³ (2001 est.)

Natural gas - consumption:1.4 billion m³ (2001 est.)

Natural gas - exports:0 m³ (2001 est.)

Natural gas - imports:1.4 billion m³ (2001 est.)

Current account balance:$-240.4 million (2004)

Exports - commodities:cut diamonds, mineral products, foodstuffs, energy

Imports - commodities:
natural gas, petroleum, tobacco products, foodstuffs, uncut diamonds

Reserves of foreign exchange & gold:$754.9 million (2005)

Debt - external:$1.819 billion (2005)

Currency:
dram (AMD)

Currency code:AMD

Exchange rates:
Armenian dram per US dollar - 310.00 (2008), 457.69 (2005), 533.45 (2004), 578.76 (2003), 573.35 (2002), 555.08 (2001), 539.53 (2000)

See also

* List of companies of Armenia

References

* [https://www.cia.gov/library/publications/the-world-factbook/geos/am.html CIA World Factbook]

Footnotes