The West Must Offer Armenia Incentives Rather than Decry its Ties with Russia

[dropcap]O[/dropcap]n October 10, after lengthy heated debates, Armenia signed a treaty to join the Eurasian Economic Union (EEU), composed of Belarus, Kazakhstan and Russia. The agreement goes into effect on January 1, 2015, subject to ratification by parliaments of the four countries. Kyrgyzstan and Tajikistan have also expressed an interest in joining the Union.

The intended objective of forming EEU is to facilitate the free movement of goods, services, capital, and labor across member states, and to implement a coordinated policy in the energy, industrial, agricultural and transport sectors.

Views of analysts on the merits of Armenia’s membership in EEU diverge depending on whether they are proponents or opponents of the country’s leadership. The arguments advanced by opponents of EEU include the possible loss of Armenia’s independence and isolation of Artsakh (Karabagh) through the establishment of customs checkpoints at the border. EEU proponents, on the other hand, are stressing Armenia’s geostrategic and economic interests. It remains to be seen which of these arguments will eventually prevail.

Meanwhile, there are some basic facts that are self-evident. Armenia has had long-standing and multifaceted links to Moscow going back to the Tsarist era, the Soviet Union, and today’s Russian Federation.

It is imperative to recall that the livelihood of hundreds of thousands Armenian migrants in Russia will be impacted by Armenia’s EEU membership, in terms of their ability to reside and work in that country. Furthermore, Armenian businesses would be able to expand their small domestic market, exporting their products with favorable tax terms to over one hundred million potential consumers in Belarus, Kazakhstan, and Russia. Armenia would also serve as an easy gateway for foreign investors interested in entering the vast and complex EEU markets.

In the final analysis, three essential questions need to be raised on Armenia’s membership in EEU:

1. Given the ongoing Artsakh conflict and Azerbaijan’s multi-billion dollar military spending spree, which country has sold and will continue to sell Armenia advanced weapons to mitigate the growing threat from Baku? Not the Unites States, Great Britain or France, but Russia!
2. Which country can provide Armenia with desperately-needed natural gas at any price, let alone at subsidized prices? Russia and Iran to a lesser extent through a small pipeline.
3. Since Russia is Armenia’s largest trading partner, it makes more economic sense to have favorable tax terms with that country than with Europe. Not joining EEU would place Armenia at a serious tax disadvantage with devastating economic consequences.

While these are compelling reasons for Armenia’s decision to join EEU, no one should conclude that Yerevan has to remain exclusively in the Russian economic zone. Clearly, it is in Armenia’s interest to develop multilateral ties with the rest of the world, including Western Europe, North America, Middle East, and Asia. Armenian officials have repeatedly stated their interest in developing closer economic, political, and even military relations with Western countries, but not at the expense of Armenia’s historical ties with Russia.

Meanwhile, it would be far more productive if Western countries, particularly the United States, rather than urging Armenian leaders to cut off vital relations with Russia, would actually offer tax privileges and other incentives to their investors in Armenia, thus reducing Yerevan’s exclusive dependence on Russia. Similarly, U.S. criticism and warnings issued to Armenia for its commercial ties with Iran are manifestly counter-productive. It would be far more helpful if the Obama administration could muster the courage to press Turkey and Azerbaijan into lifting their joint blockade of the Armenian Republic which has been in effect for over 20 years.

In the light of the foregoing existential strategic and economic realities, Western countries would be better served to use carrots rather than sticks to help steer Armenia toward a more balanced relationship between East and West.