Toward a More Prosperous Union

By Vilen Khlgatyan

President Serzh Sargsyan paid a visit to Moscow in early August to meet with his Russian counter-part, Vladimir Putin. While political, military, and economic matters were discussed, the visit was also a chance for Sargsyan and Putin to exchange their views on the proposed economic bloc, the Eurasian Union (EAU). It is no secret that the EAU is Putin’s project, and one which he is likely to devote much of his time in order to bring to a successful launch by the targeted date of 2015. Already, steps are being taken to incorporate the Customs Union of Belarus, Kazakhstan, and Russia with the EAU. The incorporation of the Collective Security Treaty Organization (CSTO) is another possibility, should Moscow decide to add a military component to the EAU. While Armenia does not share a common land border with any members of the Customs Union, Putin did say in the press conference after his meeting with Sargsyan, that international agreements signed by the members of the Customs Union could help overcome this. Likely, what this meant is the implementation of free trade agreements between the members and Armenia.

It is noteworthy that President Putin brought up the geographic isolation of Armenia from Russia and the other members of the Customs Union because thus far that has been one of the main arguments within the Armenian government and civil society against Armenia joining the proposed EAU. However, under closer review, this excuse alone is not enough to outweigh the positive outcomes of Armenian membership in the EAU. True, a common border would be advantageous, and tense relations between Tbilisi and Moscow do not help matters. Yet, such a union would provide Armenia with a large economic market that is easily accessible as well as familiar with Armenian products. Simply put, the Armenian market is too small for Armenian businessmen to expand and reach their full potential, and this is one of the reasons certain sections of the economy have been monopolized or oligopolies have taken hold. Russian and other businessmen would be unlikely to allow Armenian businessmen into their domestic markets without getting the same opportunity in Armenia. The Armenian market is in need of foreign direct investment, as well as competition in various segments. Businessmen from the EAU would provide this, particularly with a free trade clause in place. Another factor is the large Armenian diaspora in Russia, which is not only the largest in the world, but larger than all the Armenian diasporas of the European Union (EU) combined. The stimulus the Armenians residing in the member states of the Customs Union and proposed EAU would provide to furthering Armenia’s trade is immeasurable, assuming the Armenian government incorporated them in their plans.

A second reason thrown around by those opposed to Armenian membership in the EAU is the supposed benefits Armenia has to gain from closer integration and possible membership within the EU. A number of recent developments alone show this line of argument to be weak. First, the EU is facing a serious identity problem, not least of which is caused by the solvency crisis facing a number of eurozone members. This has prompted the major credit rating agencies to downgrade the status of several EU members, including the major players, Germany and France. Furthermore, Armenia’s trade turnover with the EU is barely more than its trade with Russia alone. This suggests, which indeed Presidents Sargsyan and Putin did, that there is still much room to improve trade between the two states. Therefore, more should be done in this direction to reach the desired levels, joining the proposed EAU is that step. Moreover, Armenia does not share a common border with the EU either, therefore if it is not feasible to join the EAU because Armenia lacks a common border with a member state, the same logic applies to the EU as well. Finally, there is no stipulation being presented by either the EU nor Russia that membership in one economic union precludes cooperation with another.

Of course Armenia should work with all states, and should keep its options open, but there are times when critical decisions must be made to go in either one direction or another, remaining undecided will not do. Thus, a serious study must be launched by the Armenian government to assess the positives and negatives of Armenian membership in the EAU.

Vilen Khlgatyan is the Vice-Chairman of Political Developments Research Center (PDRC)