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Sunday, October 23, 2016

In Armenia argue about the economic effects of closer relations with Russia

In Armenia claim that the country has already felt the positive effect from accession to the EAEU. Customs statistics show a sharp increase in Armenian exports to Russia. However, in the money trade turnover with Moscow continues to fall, while the share of EU in total foreign trade exceeded the share of Russia. This gives the trump card in the hands of the supporters of the idea of rapprochement of Yerevan with the West.

As stated in weekend, held in Tsakhkadzor Armenian town economic forum “Eurasian economic Union – Armenia cooperation”, the Deputy Minister of international economic integration and reforms of Armenia Suren Karayan, membership in the EEU has already had a positive impact on the national economy.

“The growth of industrial production due to the growth of the mining sector by a third, but this area is linked with Europe”

“Armenia became a member of the EEU, the volumes of import and export surpassed Georgia and Moldova, which ratified the Association agreement with the European Union. In the first quarter of this year there was six percent growth in economic activity” – quote news agencies of the car. Also, according to him, Armenia has risen in the global ranking of ease of foreign trade from 31 points – from 58 th to 29-th place.

These statements have planted another batch of fuel in a heated discussion about the pros and cons of the EEU, which comes in Armenia since its accession in October 2014. The beginning of the Eurasian integration of Armenia coincided with the economic crisis in Russia, which is the main trading partner of Armenia, and it immediately affected the mutual trade turnover. According to the Ministry of economic development, last year the trade turnover in value terms has decreased by 11.6%, to $ 1.3 billion.

Cognac dipped by 40 percent

“We all understand that there were objective and subjective reasons. The first is the current global economic environment, which demonstrates a similar decrease in the entire global economy,” commented last year’s figures Karajan colleague, the Deputy Minister of economic development of Russia Alexander Tsybulsky at the end of April the meeting of the joint working group of the intergovernmental Commission of the Russian Federation and Armenia.

On some segments of the Armenian export to the sharp depreciation of the ruble against the dollar and the decline in the purchasing power of Russians affected are extremely painful. The most difficult situation with the cognac, the main consumer of which is Russia. According to the state revenue Committee of Armenia, last year the export of cognac to Russia fell by 39.6%. In the first quarter of the current year the trade turnover with Russia continued to fall, decreasing by 10.4% – according to the National statistical service of Armenia. At the same time, trade turnover with the EU has declined considerably less – just 3.2%, bringing the share of EU in the total foreign trade of Armenia was even higher than Russia’s share (25.1 per cent against 24.7 per cent).

All this constantly gives opponents of Eurasian integration, the grounds for criticism of the course of President Serzh Sargsyan, who at the last meeting of the Supreme Eurasian economic Council (SEEC) on may 31, in Astana, said about the need to increase the level of coordination of the approaches of the participating countries at the macroeconomic level to achieve the objectives of economic integration.

“I feel within the EEU is quite comfortable”

“The expectations of Armenia from the EEU are far from realization”, – commented the results of the summit in Astana the speaker of the Armenian public organization “Union of informed citizens” Vahe Ghukasyan. According to him, in the first trimester of this year, Armenia received 4 billion drams less taxes from the common basket of the EAEU than expected.

Ghukasyan claims that trade between Armenia and Russia are regularly confronted with obstacles – in particular, the Russian side restricts the import of Armenian agricultural products in connection with the phytosanitary norms. At the same time from Yerevan there is the so-called GSP+ preferential regime in trade with the European Union, according to which Armenia can export many goods to the EU on preferential terms. Supporters of reorientation of Armenia to the West argue that in the case of signing with the EU of the agreement on the deep and comprehensive free trade exports to Europe will grow by 15% – from the current $ 107 million a year to about $ 150 million. In December, Yerevan resumed talks on free trade zone with the European Union, which were interrupted in 2013, when Armenia decided to join the Customs Union and the EEU.

However, the first three months of this year showed that, despite a further reduction in the value of trade turnover, Armenian exporters are feeling in the framework of the EEU is quite comfortable. In the first quarter, exports to Russia increased 2.2 times in comparison with the same period last year from 32.2 to 67.7 million dollars. A drop in financial performance turnover kompensiruet increase of its physical volumes: last year, they increased by 2%, and without taking into account Russian export to Armenia, gas and petroleum products – 26%.

Armenia could replace Russia Turkey

This could easily make anyone who regularly travels to the Federal highway M29 “Kavkaz”, the main artery leading to the Caucasus: the Armenian road is filled with trucks. And many visitors of the network of supermarkets probably noticed the appearance on the shelves of a large number of Armenian food products, especially beverages, jams and canned vegetables.

It is curious that these segments will help some in dire situations cognac producers – for example, the export to Russia of vegetable canned food of own production mastered Brandy factory Proshian. In early March in connection with the entered Russia restrictions on import of products from Turkey Yerevan informed the Rosselkhoznadzor about the possibility of a potential increase of exports to Russia fruits and vegetables and other plant products.

“Accession to the EEU to Armenia positive about it and there is no dispute – said senior researcher of the Center for Caucasus and regional security MGIMO-University Nikolai Silayev. – It was unclear how quickly will the effects of integration: because of the crisis in Russia, he could appear later. But given the statistics indicate that the effect for Armenia is still high, despite the economic difficulties in Russia”. This effect is beneficial for Russia, adds strength, although to break it down into individual countries makes no sense, besides not all of the benefits the Eurasian integration is fully exploited.

However, according to Armenian political scientist, researcher at the Caucasus Institute Grant Mikaelyan, the first results of Armenia’s entry into EEU still look ambiguous. Regarding political results, says Mikaelian, while in General it is impossible to speak about any consequences. As for economic consequences, most commentators in the press and expert community of Armenia considers that they are negative. “However, these statements are usually politically motivated, not economically – but the conflicting statements politically motivated”, – says the analyst.

The IMF predicted the decline of Armenia’s economy in 2015, and moderate growth in 2016 due to the economic downturn in Russia, reminiscent of Grant Mikaelyan, but now the economy is showing growth of 6% in the first four months. There is a temptation to tie it with accession to the EEC, but in reality, this relationship is not obvious.

“The growth of industrial production due to the growth of the mining sector by a third, but this area is linked with Europe. Also increased agriculture and service sector, but in these areas the growth is connected mainly with the internal market”, – says Mikaelian, at the same time recognizing that the growth of exports to Russia was just a consequence of membership in the EEU.

“In my opinion, even at the end of this year will be too early to talk about the benefits or harm of Eurasian integration for Armenia, the expert says. – With one exception: if there will be a growth of direct foreign investments in the Armenian economy. At the moment the situation in this sphere is the opposite: Armenia in the last half year have lost investment and from Europe, and from Russia”.

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