Vladimir Putin and the Armenian president Serzh Sargsyan, December 2013 © The Presidential Press and Information Office

An Offer Yerevan Could Not Refuse

In the run-up to the Ukraine crisis, Armenia rejected an association agreement with the European Union in favor of cooperation with Russia, Belarus, and Kazakhstan. Yet the country’s future in the Eurasian Economic Union seems uncertain – and the door to Brussels might not be completely shut.

On September 3, 2014 it was exactly one year that Armenia’s president, Serzh Sargsyan, announced that his country would seek membership in the Customs Union of Russia, Belarus, and Kazakhstan, a bid Russia’s Vladimir Putin promised to support. As of spring 2014 Armenia was still not a member of the bloc. Armenian officials argued that since the Customs Union would be transformed into the Eurasian Economic Union (EEU), Yerevan would join the latter as a founding member without taking the preliminary step of joining the former – however, when the treaty establishing the EEU was signed in Astana on May 29, 2014, Armenia was not among the signatories, and the date of its accession has since been postponed further. In August Sargsyan promised that the treaty would be signed before the end of this year.

There are several factors that could explain this delay. First of all, it is hard to assess the extent to which Armenia’s desire to join the economic bloc is genuine: before September 2013 the country was on track to sign a Deep and Comprehensive Free Trade Agreement (DCFTA) and an association agreement with the EU, which would have been mutually exclusive with membership in the EEU.

Russian influence may explain the shift. As late as February 2013, the Armenian president dismissed any allegations that the country was under pressure from Russia to ditch the EU deal in favor of Eurasian integration. However, in summer 2013 there were clear signs that Moscow was unhappy with Yerevan’s deepening integration with Brussels, as was evident when Russia concluded an arms deal with Azerbaijan, Armenia’s arch-rival, in June, and Putin visited Azerbaijan in August. Still, Sargsyan’s announcement on September 3, 2013 came as a surprise not only to international actors but to prominent members of his own government and party, who on the previous day were still denying rumors that Armenia might retreat from the EU deal.

The Ukraine crisis

Before 2013 Yerevan had been developing relations with both Russia and the West, maintaining close ties with Moscow – particularly in the area of security – while integrating further with Europe. Armenia was part of the EU’s Eastern Partnership program.

Moscow did not appear to object to Yerevan’s deepening relations with the EU, as its influence in Armenia seemed secure. It was based not only on military bases and Russian influence on strategic sectors of the Armenian economy – including energy – but also on the ubiquity of Russian media, the high number of Armenian migrants and guest workers in Russia, and the degree to which the Armenian economy depends on the remittances of those migrants and guest workers. It was also hard to see any substantial economic gains that Russia and other members could reap from Armenia’s membership in the Customs Union.

However, when offered a stark choice between Brussels and Moscow, Yerevan had to opt for the latter. By mid-2013, in light of the difficulties surrounding Ukraine’s membership in the Customs Umion, Moscow no longer tolerated Armenia’s soft-line approach to the EU. Sargsyan was given an offer he could not refuse, and opted for cooperation with his Eurasian partners at the expense of European integration.

The consequences of EEU membership for Armenia

Yet Yerevan’s decision to join the Customs Union/EEU was not an easy one. First, Armenia does not share a border with Russia, Belarus, or Kazakhstan, which calls into question the very feasibility of a customs union between these countries.

Second, Armenia has been a member of the World Trade Organization (WTO) since 2002, and full integration with the EEU would raise serious issues regarding this membership. EEU tariffs are much higher than those currently in place in Armenia. If Armenia changes them, it will have to compensate other WTO members. This would be a burden on the already strained Armenian budget, and it is unclear whether EEU partners would help.

Third, while Russia has been Armenia’s top trading partner for years, Armenia also has extensive trade relations with states outside the EEU, including EU countries and Ukraine, which have been major sources of imports, including essentials such as food and medicines.

Armenia is much poorer than any of the other Customs Union/EEU members. According to the latest edition of the Bertelsmann Transformation Index (BTI), in 2012 32% of Armenia’s population lived below the national poverty line, which means that about 1.2 million Armenians had to subsist on about $3 a day.

If Armenia rejects the liberalized trade regime it has employed so far – which would be necessary to enter the EEU – the increased price of imported commodities might have serious socioeconomic and political consequences. The BTI also shows that in Armenia, ”socioeconomic barriers are exacerbated by increased social pressure driven by rising costs for food, basic goods and energy. The state budget … lacks adequate budgetary measures to counter widening wealth disparities and deepening poverty.“

Moscow’s bargaining chip with Azerbaijan

Socioeconomic issues would be ameliorated if the more wealthy EEU members were ready to support Armenia, but this is uncertain at best. Apart from purely economic considerations, political factors come into play: Belarus and Kazakhstan may worry that Yerevan, vulnerable to pressure from Moscow, could act as a Russian proxy, thus shifting the balance in decision-making within the union.

In the case of Kazakhstan there is the additional complication of its close cultural and political ties to Azerbaijan. Kazakh president Nursultan Nazarbayev explicitly advocates Azerbaijan’s interests, demanding, for instance, that Armenia enter the block “in the borders recognized by the UN,” i.e. without the territory of Nagorno-Karabakh, a contested region in the South Caucasus between Armenia and Azerbaijan. In practice this would mean that products from Nagorno-Karabakh would be considered foreign-made in Armenia, and a customs checkpoint set up at the border between Armenia and Nagorno-Karabakh – which Armenian government officials have called unacceptable in the past.

The Nagorno-Karabakh conflict may also partly explain why Moscow itself is not in a rush to accelerate Armenia’s integration into the EEU. While Armenia is geopolitically important for Russia, in terms of the size of its economy it is no match for oil-rich Azerbaijan. By ditching the DCFTA with the EU Yerevan has already thrown its lot in with the Eurasian project, whereas Azerbaijan has so far refrained from committing strongly to either European or Eurasian integration. Convincing Azerbaijan to join the Eurasian project would be a major success for Moscow, and the terms and speed of Armenia’s integration into the EEU have become a bargaining chip to that end.

The door to Brussels is not shut

In spite of its reiterated commitment to Eurasian integration, Armenia’s prospects in the EEU seem bleak. It is clear that after so many declarations from both Yerevan and Moscow, abandoning the project completely is not an option for either side – yet at present Moscow does not have any specific incentive to speed up the process, and Minsk and Astana have serious reservations about it. In Armenia itself official rhetoric emphasizes Armenia’s participation in Eurasian integration, but it remains to be seen to what extent this rhetoric is supported by reality.

Finally, as the decision by Minsk and Astana not to support Moscow’s countersanctions in the wake of the Ukraine crisis suggests, the future of the EEU itself is not very clear at the moment. Of course, if the events of the first half of 2014 have taught us anything, it is that developments in the post-Soviet space tend to be unpredictable. Depending on what happens in and around Ukraine, the Eurasian project may either be abandoned completely or become a major priority for Moscow. In the latter case, Armenia’s accession to the EEU may be accelerated. However, if current trends continue, the most probable scenario is that the country will spend more time on the road to joining the EEU.

Regardless of where this path might lead, Armenia’s relations with the EU have suffered a serious blow as a consequence of Yerevan’s U-turn. However, the country remains part of the EU’s Eastern Partnership program, and Armenian officials still talk constantly about their readiness to develop relations with the EU – and, with the exception of some sharp language in the immediate aftermath of the September 3 reversal, Europeans have responded positively. The EU-Armenian visa facilitation agreement was signed in fall 2013, after Yerevan unilaterally abolished the visa requirement for EU citizens.

Of course, in the current climate of confrontation between Russia and the West it would be extremely difficult – and probably even dangerous – for Armenia to pursue integration with the EU further. Yet it seems both Armenia and the EU are looking for a form of cooperation that would be achievable in the present situation.

N.B.: According to Armenian and Russian officials, Armenia is now expected to sign the membership treaty joining the EEU on October 10, 2014. Given the numerous delays earlier, many observers remain skeptical. Even if some formal documents are signed in the upcoming weeks, it still remains to be seen to what extent Armenia’s membership of the EEU would be more than a formality.

Mikayel Zolyan is a historian and political analyst. Currently he works at the Regional Studies Center, a Yerevan-based think tank, and for the NGO Yerevan Press Club.

Related BTI

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