Car wheels pulled by four legs, Armenia / image via

Car wheels pulled by four legs, Armenia / image via

Crisis in Armenia: Questions for Levon Zurabian

by | April 13th, 2011 | 1 comments
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Levon Zurabian is a former analyst at ICG (The International Crisis Group) and served as Adviser and Chief Press Secretary for Levon Ter-Petrossian, the first President of Armenia’s Third Republic, from 1991 to 1998.  He is currently the Coordinator of the Armenian National Congress, which unites 18 opposition parties in a broad civil movement for democracy, including Ter-Petrossian’s ANM (or HHsh, as it is known in Armenian), Stepan Demirchian’s People’s Party and Aram Sargsian’s Republic Party.

As a historical reminder, Levon Ter Petrossian and the ANM led the transition from a Soviet republic to a Western state with a market-driven economy. Ter-Petrossian was a member of the original Karabagh Committee and imprisoned by the Soviets in 1988 for his role in the national movement for the independence of Karabakh from Azerbaijan, dismantling Communism in Armenia and establishment of democracy.

Members of the Armenian diaspora and others have become increasingly troubled by the current state of Armenia’s moribund economy and authoritarian governing structures, both of which pose concrete threats to the Armenian state’s future existence.

I spoke to Zurabian in order to hear his views on the state of the Republic of Armenia today, its prospects for the future and what the diaspora can do to effect positive change.

* * *

Christopher Atamian: What is the current economic situation in Armenia now? Are people building factories or starting companies — hi-tech or otherwise — and is the economy improving?

Levon Zurabian: The Armenian economy is currently in its worst shape since it began its impressive growth in 1994-1996 after the end of the military hostilities between Armenia/Karabakh and Azerbaijan in May 1994 and reformation from the Soviet-style government-planned and state-owned economy to the one based on free market and private ownership. The main reason for that was the establishment in 2000-2010 of a vicious economic model, based on the centralization of the economy in the hands of a few privileged families and exploitation of the inflow of capital into Armenia — huge transfers from abroad by Armenian nationals and money-laundering schemes with participation of Armenian criminal organizations in the United States and Russia — for the sake of personal enrichment of Armenia’s incumbent rulers.

The biggest beneficiary of that model is a narrow circle of monopolist importers, loyal to the president of the country. To make super profits, they were illegally given monopoly positions in the basic goods consumption, as well as tax and custom privileges. Since fair competition has been eliminated and businessmen without strong government connections are subject to constant harassment and arbitrary interference from the tax and custom authorities and the police, the Armenian entrepreneurial class is effectively being squeezed out of the country. In fact, what we see now in Armenia is a process by which the middle class entrepreneurship is being eliminated. People are closing factories and shops en masse.

During the past year, for instance, hundreds of businesses switched their operations to the territory of neighboring Georgia, where they found a much friendlier and more lawful business environment. More than 100,000 people emigrated from Armenia in the last year alone. The Armenian economic decline was one of the biggest (18% alone in 2009, 5% during 2008 and 2010) in the world during the international economic crisis. Armenia’s economic development and, given external security threats, the country’s very survival is endangered by the current corrupt, illegitimate and incompetent system of governance.
CA: Some analysts maintain that growth rates cited by the Armenian government are inflated and that only the oligarchs who control Armenia have benefited from whatever actual growth there has been. Would you care to comment?
LZ: I agree that the Armenian National Statistical Agency is an instrument of propaganda rather than a valuable source of information for decision makers. They constantly make up new methodologies to estimate GDP in order to make it look as if the government works effectively. However, though largely inflated, there was real economic growth in 2003-2007, mostly due to the growth of transfers from Armenian nationals working abroad to their families and relatives.
Those transfers form the purchasing power of the Armenian population. Since the corrupt ruling regime of Armenia suppresses competition and domestic production, the transfers only boost imports of consumption goods. Contrary to what any reasonable government would do under such economic conditions, the state authorities, for more than a decade, have artificially been strengthening the Armenian national currency, a policy that strangled the development of export-oriented industries or substitution of imports by domestic production.
In 2009 alone, the Central Bank used more than $700 million for such purposes. This has only one explanation: the Armenian state has been acting exclusively in the interests of importer oligarchs. It would not be an exaggeration to claim that, in fact, the state machine has been hijacked by a bunch of criminals and used as an instrument of robbery and personal enrichment for the rulers of the country and a narrow circle of loyal monopolist importers. And this is being done in a very brazen, overt manner. For instance, the fact that one of the most prominent oligarchs — Samvel Alexanian — controls 97% of sugar imports has been officially confirmed by the government’s anti-trust agency; however, he continues to illegally run his monopoly with impunity. It comes as no surprise that consumption good prices skyrocket, and in 2008-2010 the average yearly inflation rate exceeded 7%, while in the same period the world’s average rate was close to zero.

CA: What is the situation in terms of democracy and human rights in Armenia?

LZ: For more than three years, the Armenian National Congress has spearheaded the efforts of tens of thousands of people in their struggle for the establishment of democracy and restoration of basic democratic freedoms and human rights. Exactly for that reason we have been the primary target of the government’s brutalities and oppression, meaning, unfortunately, that we are best positioned to answer the question. In the last three years, we have witnessed everything: fraudulent elections, in which hundreds of proxies and reporters were beaten and kicked out of electoral precincts; a brutal crackdown on peaceful demonstrators; the killings of March 1, 2008; thousand of activists beaten and tortured in police stations.

Despite the demands by the Council of Europe and the European Union to release political prisoners, eight of them are still in prison, among them the famous hero of the Karabakh war Sasun Mikaelian and the editor-in-chief of the prominent newspaper The Armenian Times, Nikol Pashinian. Mr. Pashinian has been physically assaulted in prison on numerous occasions. The assailants demanded that he stop writing for his own newspaper and, when Mr. Pashinian refused, he was moved into a remote detention center and denied his constitutional right of correspondence.

Freedom of speech is also restricted in Armenia. Although we enjoy an independent print media, television, with all of its 18 channels, is under the strict control of the presidential office, and political news coverage is managed by supervisors approved by the President’s office. Liberty Square is now occupied by police forces in order to prevent the opposition from holding rallies there, exactly as was the case more than 20 years ago when Soviet troops occupied it.

To summarize, the Armenian people’s freedoms of speech and assembly and the right to elect its own government are systematically being denied, resulting in the formation of a repressive and abusive government, which is not accountable to its own people.

CA: What concerns you the most in Armenia today and what should concern the diaspora the most?

LZ: I understand that the picture I present may sound rather shocking to many diasporans. Armenians all over the world would prefer to hear only good news from Armenia and take pride from the affiliation with their historic homeland. Many would also like to believe that turning a blind eye to the corruption and violations of human rights and democracy in Armenia is justified, since, as they would probably argue, presenting an untarnished democratic image of Armenia to the international community is crucial to successfully lobbying for Armenian interests all over the world. I think this attitude should be revised. We should all understand that the state of Armenia is in deadly danger. The corrupt, undemocratic and predatory system of power in Armenia cannot secure an adequate response to the growing military threat by Azerbaijan, which pumps billions of oil dollars into an enormous military buildup. The strategic balance between Armenia and Azerbaijan, the most important factor of stability and peace in the region, has in recent years been rapidly changing in favor of Azerbaijan. This makes Russia, the powerful strategic ally of Armenia, which was once eager to help maintain the status quo, seek changes on the ground in Karabakh and pressure Armenia into concessions in its dispute with Azerbaijan.

It is time to understand that the only way out is the victory of the democratic movement in Armenia, the dismantling of the oligarchic regime strangling its economic development, and the unleashing of the democratic energy of the Armenian people. Only that can be an adequate response to the Azerbaijani challenge and the continuing decline in both Armenia and Karabakh.

Facing corrupt practices, nepotism and cronyism, investors from the diaspora withdraw their businesses from Armenia. Feelings of disappointment and unwillingness to engage have become widespread among diasporan Armenians. Instead, I think, the diaspora has to come to terms with reality and understand that self-isolation and disengagement is not the best response. What all Armenians need to realize in both the Republic and the diaspora is that we all need to unite around one goal: the creation of a powerful and democratic Armenian state. Hundreds of thousands of Armenians have been struggling for years to establish democracy in Armenia. Where are the diaspora Armenians in this struggle? Why don’t the established diasporan organizations support this democratic movement, the success of which is crucial for the very survival of Armenian statehood?

CA: What are the bright spots?

LZ: What inspires me the most is the resilience of our people, the determination to overcome all the hardships, deprivation, intimidation, and brutalities of the regime for the cause of liberating Armenia from its kleptocratic regime.

By absorbing the strongest blows and reprisals of the regime, the movement has enabled tens of burgeoning NGOs and protest groups to raise a range of important issues. We are witnessing the rise of civil society buoyed by a strong political movement, able to challenge the oppressive government in the street, in the Armenian and European courts, and elsewhere. We have an unprecedented consolidation of society, NGOs, grass-roots activists, and political parties in a broad civil movement for democracy, and this gives hope for a better future to the whole nation.


  1. Ed Armenian says:

    “Levon Ter Petrossian and the ANM led the successful transition from a Soviet republic to a Western state with a market-driven economy”? Successful transition, Western state, market-driven economy? Are you serious?