Monday, October 7 2013

Mr.
Sandoyan, the political leadership of Armenia seems to have made its final
choice in the geo-strategic orientation of the country. We are facing the
Customs Union membership with future accession to the Eurasian Union. Passions
over the issue continue and will probably continue until it is clear by 100%
that there will be no Armenian delegation at the Vilnius Summit. How fateful
will be that decision of official Yerevan?

 

There is no
easy answer to that question. As an economist, I will take the liberty to
deviate from facts, speak of what motivated the leadership to adopt such
decision, and will not seek any cloud-built close-and-effect relationships.
First and foremost, it is not a secret that over the last 23 years Armenia had
and will continue to have tangible problems hindering economic growth and the
life quality. The problems are both objective and subjective. The objective
problems are the small capacity economy, insufficient resources, and, finally,
our history. The subjective problems stem from two major reasons: exogenous and
endogenous. Exogenous problems and reasons do not depend on us, but we are
reluctant to reckon with them. Meanwhile, there could be no endogenous reasons
if we managed the processes in the country more efficiently.   

 

I have got
an impression that our concerns, doubts, and risk fears are a result of our
inefficient activity for the years of independence, as we have failed to
establish an efficient state. Meanwhile, an efficient state – effective
institutes of economic regulation, effective balance of the population incomes,
effective system of human rights and freedoms, feedback mechanisms and
grassroots democracy - would bring maximum efficient formation of the
government structures based on checks and balances and our constitutional values.  Neither have we succeeded in the
international cooperation and integration into the world economy and political
processes. Essentially, we made and still make mistakes that are accumulating
and leading to new problems that we could avoid. In this light, I think, if we
had an efficient state, high level living standards, high-technologies and
relatively competitive economy, the problems we are facing would not be so
acute. The population is seriously concerned over the dilemma the country has
faced: Europe or Russia. The people perceive any of the integration vectors as
the only hope for external help. This is a very serious reason for concern. We
should seek the roots of the problem in ourselves and not in the exogenous
approach.  If anyone thinks that
appealing to the EU we will receive aid, he is mistaken. It is a psychology of
a bum. The latest developments in Europe showed that the world has changed and
we should not live with illusions. No one is eager to help Armenia. We must
keep sober. 

 

Well,
it is easier to have hindsight than foresight… The country has missed its
chance to become a politically and economically self-sufficient subject. We
cannot reverse time to correct our mistakes. Actually, European structures are
well aware of that and offer themselves as a driving force to speed up domestic
political processes and economic reforms in our country…

 

Nevertheless,
I think that the European Union will not give us anything either today or in
future. I am due to think that everything may be even worse. Why? Here are some simple arguments. Look
at the countries that have integrated into Europe much deeper than just
association. They have even joined the area of Euro currency.  And what? They have found themselves in an extremely
heavy situation now.

 

Sorry
for interrupting you, but I think the current temporary crisis in those
countries is not a matter for a verdict. Some of those countries entered the EU
with an established effective model, while others had just formal
macro-economic indicators. The crisis affected the latter most of all.
Nevertheless, all those countries have a relatively high political culture.
Look at Bulgaria. What has happened there when one of the local oligarchs and
tycoons was offered a ministerial portfolio? What about the weakened Italy? The
former president Berlusconi is facing a life sentence…

 

I don’t
argue. I just speak of a different problem, of an institutional
incompatibility. It is a very serious issue. Take Latvia, Greece and some other
EU states. Actually, the European Union made an attempt to combine and unite
incompatible institutions. It is a very essential factor when it comes to
national economies.  For instance, Greece
earlier than the other ‘weak links’ of the EU launched modernization reform and
lived allegedly in European conditions much longer then others. However, Greece
lost a very important institute of monetary policy when it entered the
eurozone. That country faced a situation when its economy incomparable with the
economy of Germany failed because of assuming as high commitments Germany
did. 

 

Eventually,
Greece and Spain, had tried not to yield to Germany for many years having no
relevant resources and accumulating debts. Consequently, their budgets have
been exhausted. The soap bubble burst.  The
global financial and economic crisis speeded up that process. This means that
deep integration should not be treated so carelessly. For instance, Latvia’s
institutional incompatibility with the EU has led to problems that seem
unsolvable today. Take the migration problem. It is necessary to settle a range
of vital issues i.e. to increase the living standards, payment for labor,
create jobs, and settle the justice problem to make everyone equal before the
law. In short, we know what our problem is. It is quite another matter that
problems are not settled because of some known reasons. 

 

In the case
of Latvia, not everything is clear. They gave the people having living
standards lower than in big Europe a European passport, all kinds of freedoms,
access to western education. Naturally, it will be impossible to stop migration
from that country. As regards the level of economic development in Latvia, it
proved to be incomparable with that of Europe. It was not easy to bring it in
line with European standards, because regulatory institutions are not created
overnight.  It requires relevant culture
and change of generations.  Latvia proved
an inefficient country, at least, comparing with European “monsters.” This is
what we have now.  Let’s not speak about
Cyprus. It was a curious mistake. Therefore, we must take into account also the
negative economic integration experience of Romania, Bulgaria, Hungary, Latvia,
Greece, and Cyprus.

 

I am
afraid, with our institutions of economic competition, judicial system, education
quality, state governance, and the corruption culture directly connected with
informal public institutions, we will find ourselves “knocked-out”. Our
information public institutions are, unfortunately, backbone. Aspiration for
state power stems from aspiration for corruption and corrupt practices. This is
a serious factor that may lead us into a deep crisis, which we will not be able
to get out off.  This is the first and
the key risk factor, which I call incompatibility of institutions or institutional
incompatibility. It is a first level risk.

 

The second
risk factor is connected with ethnoculutural and ethnophysological factors. We,
as a nation, have occurred on the crossroad of Asia and Europe throughout our
history and development. This is the so-called Eastern Christianity.  As representatives of Eastern Christianity,
we are a classical example of ancient peoples of the Middle East. At the
junction of one of the key routes of the Silk Road, Armenians were providers of
Asian philosophy institutions in Europe and leading European values, starting
from human rights up to lifestyle– in Asia. We were providers because we were
bearers of the European mentality and Asian values, life and the notorious
information institutions at the same time.

 

Sure,
this is exogenous impact. After all, we are mostly a “Diaspora nation” united
by the Church and not the state, which we had lost centuries ago. We lost our
ability to live within our own country. As a Diaspora nation that lived in
spots in India, Poland, in many other lands yet long before the Genocide, we
have obtained peculiar ethnic eclectics with combination of various views,
behaviors, ideas, principles and theories…        

 

You are
quite right. Our literature, culture and mentality had been formed for
centuries and “genetically encoded.” That is why, we understand Asia better
than Europeans do, and understand European better than Asians do. This is our
mission.  Our advantage is that we are
the bearers of such non-material values. This is why Armenian merchantry
historically had one of the leadership positions in the world. Actually, we are
the very Eurasians, if it is possible to speak of a generalized character of
Eurasians. Russians consider themselves Eurasians. They have in them much from
Europe and Asia. It is a huge country uniting the cultural and religious
heritage of many nations and ethnic groups. Armenians are the bearers of
European values, but the Eurasian space is our space. We have always provided
European ideas to Asia and the vice versa. That is why the Eurasian space has
no alternative for us from the viewpoint of economic benefits. 

 

We feel
ourselves more comfortable in Russia rather than in the USA. After all, there
are 2.5 million of Armenians in Russia. The USA is a very comfortable country,
but there is no ‘soul’ there. We are an emotional choleric nation. We feel
ourselves good where our ‘soul’ feels good.  

 

I
would find difficulty to quarrel with your views. Unfortunately, today we are
not offered a heart-to-heart talk. We are offered a specific institution –
Customs Union and then the Eurasian Union…

 

What the
Customs Union is and what benefits we will have from joining it is relatively
clear to us. The Customs Union is an already functioning institution.
Meanwhile, we know very little about the Association membership and the DCFTA.
When in the 15^th century a girl married to a man without even
knowing him, it was normal. Meanwhile, it is not normal when in the 21^st
century a country is offered so sign a ‘marital contract’ without reading its
terms and conditions. Therefore, it is necessary to inform the people of the
conditions of the agreements, firstly, and put the issue on a nation-wide
referendum, secondly. I support this mechanism. Since nothing of the kind is
observed in the country, all this is alarming.

 

The
political decision to access the Customs Union has already been adopted. From
the viewpoint of the national security, our relations with Russia have been
historically prior for us. All the remaining that may contradict the
Armenian-Russian relations is of secondary importance.  Theoretically, I support any integration
processes that may expand our development possibilities.  The European vector may restrict our
possibilities, as we cannot sustain competition in the world market of goods
and services. As a result, we will be reluctant to give them all the little
things left to us. 

 

The
grave experience of Bulgaria occurs here. Opening its borders that country has
actually lost one of its most development sectors of industry – agricultural
processing.  Maybe, it is a primitive
argument, but they in Bulgaria share this viewpoint.  Now, the main brand of that country is
inexpensive real estate on the Black Sea coast.

 

This is the
risk. We can enter the equispaced field and lose our last resources. What we
will lose, first, is not known to anyone, because we are known familiar with
the documents. If there are any restrictions to development of the relations
with Russia – there are probably such, as they talk on the “either-or”
principle  - it will arouse many
questions.

 

We
have said nothing about the military and political component of our
geopolitical vector. Do you remember the talk about the “Russian outpost in the
Caucasus” or the more primitive statement “Where will you, Armenians, escape
from us?” Certainly, both of these statements are square stupidity and a bright
example of obscurantism and cynicism. The question is how such statements
emerge in the squares’ brains?

 

Russia
needs us as much as we need Russia. In addition, we are the reliable side of
this partnership and we should not lay down such values at stake, no matter
what the squares say. Many of them do not even know what religion Armenian
people have. Armenians feel very comfortable in Russia. Putin’s joke was well
considered – the number of Armenians in Russia is equal to the number of
Armenians living in Armenia. Unlike Armenia, Russia has no unemployed
Armenians. Once a Jewish friend of mine joked: “It is only Israel that lacks
Jews”. That it to say, Jews live quite well everywhere, but if you want to see
a poor Jew, go to Israel. The same can be said about us. Where should we go if
we are so slow-witted, if the Armenian economy depends on transfers and if 90%
of the transfers come from Russia? The real trouble is that we cannot and don’t
want to use these immense resources correctly. It is the same Dutch disease in
the economy without oil and gas, and it demonstrates our incompetent economic
policy.   

 

On the
subconscious level we realize that Russia is not a leader in the global
economic development. We consider Russia as a world power and we don’t
understand why it yields its positions in the world economy and geopolitics.
Sometimes it seems to us that Russia is becoming an outsider. But if we look at
the issue more attentively, it will be clear that Russia is becoming the most
important partner of the West. The political discrepancies are not so important
here. Today the world without Russia is a different world. Certainly, in terms
of development of our public and economic institutes, we should strive for
European integration, but it will be easier to reach Europe together with
Russia. Otherwise, we face the prospect to be left behind. We should realize
that we have no right to lay this vector of development at stake. It’s another
matter that neither the Russians nor we are pleased with the pace and format of
Russia’s development. However, this big country is moving forward, though with
some difficulties, and we are at least 10 years late. The living standards in
Russia are already 3.5-4 times as high as in Armenia. The institutes are almost
the same – culture, history, everyday life are very much alike; therefore, it
will be easy to integrate into that system. As regards the accession to the Customs
Union, at first we may lose nearly 150-300 mln USD in state revenues because of
the commodities and services imported from the Customs Union countries. But we
should prepare for that to find the smooth transition format so that our export
could compensate for that loss. We should work day and night, negotiate with
the Customs Union countries on regimes and tariffs, and find the solutions that
will allow compensating for our initial losses. We have set up a research group
headed by Rector of the Russian-Armenian (Slavonic) University Armen Darbinyan
to study the possible ways of Armenia’s development in the format of Eurasian
integration. Certainly, political decisions are important, but it is necessary
to develop institutional solutions!

 

No one kept
us from developing the institute of competition protection. Did Europe or
Russia do that? These are our internal problems and we should have solved them
instead of eyewashing. Since we have absolutely no accomplished institutes, we
need to develop them at least with Russia. Has anyone thought what will happen
to Nagorno-Karabakh or whether we integrate into Europe with or without
Karabakh? With open or closed borders with Turkey? We are a member of the World
Trade Organization; so is Turkey. What will Europe give us in this regard? Has
it solved this problem? No, it hasn’t! There are so many questions, and we need
to treat them rationally, without any illusions. Even if anyone grants Armenia
10 bln EUR, will we solve our problems? This money will be lost or eaten away,
because the system is inefficient. So, it is necessary to talk of the system,
not the money.

 

As
opposed to this opinion, those who advocate European integration point at
Georgia’s example. Despite all the disadvantages, our neighboring country has
achieved big success over the past few years, specifically, in the
anti-corruption fight, institutional reforms, and investment climate…

 

I know
Georgia well enough. Certainly, Saakashvili has solved the problem of retail
corruption. There is almost no corruption across the track in Georgia. It is
really so. He has improved the business environment, developed the cities and
created an efficient system of governance. He has saved big resources for
economic growth. But who kept us from doing the same? Georgia simply had a
political will and the problems were settled. Georgia is ahead. The most
important thing is that people of Georgia have changed and the society cannot
stand falsehood any more. On the other hand, I can say that even one
non-upgraded element in the system can start destroying the whole system. In
this context, Saakashvili has made some mistakes. Saakashvili’s first mistake
was that he conceited himself to be Lee Kuan Yew. He triggered fear in the Georgian society and introduced some elements from Beria and Stalin. Therefore, many people in Georgia do not even
want to see the positive things he has done. Many people have been insulted by
this impudent attitude towards the human personality and Saakashvili came off a
loser. As for us, we do not resist, we just pack our suitcases and leave.
Georgians have turned out to be different. They
are more self-reliant and ready to represent and protect their own interests in
the political processes. This has nothing to do with the West. The second mistake
of Saakashvili was that he placed the stake not on the people, but on the
buildings, though the residents of Tbilisi, unlike the residents of Yerevan,
love their city. Saakashvili started shady undertaking. He aggravated the
relations with Russia and this eventually resulted in his fiasco. He has simply
lost out to history. It’s good we have not made such mistakes, but on the other
hand, we did nothing real.

 

Those
who criticize Eurasian integration point at the so-called imperial ambitions of
Russia, which can be unpredictable in this mission. They speak of Russia’s
innuendoes against Belarus, the closest country to Russia. Today Onishchenko
has found germs in the Byelorussian milk, which is the best in the world.
Tomorrow he will find ethyl in the high-class Armenian brandy….

 

One should
not make a fetish of this process. The biggest enemy of Russia is the imperious
attitude of mind. As soon as Russia realizes that it should become a big,
developed and innovative power, it will become a winner. Russian Finance
Minister Alexey Kudrin has arranged everything in orderly pigeonholes in his
recent interview. It will be good if Russia chooses the path of development of
its own economy, social institutes, human rights institutes, etc. and the
allied relations. But it will be wrong to continue exerting force impact.
Russia has missed many things. In Georgia, for instance, it missed the moment
when the Russian language and the Russian literature started “leaving” Georgia.
In our country the situation is different, but the level is gradually dropping.
Russia should strengthen its scientific, educational, cultural and economic
impact, not the force impact. It should give up its imperial severe tools. As
for us, we should cardinally change the system of partner relations and make
the Russians understand that countries with small populations are not small
countries. Roughly speaking, we remain beggars and demand respecting us. Things
do not just happen. If we fail to create an effective state, we will have no
full-fledged independence. There is nothing more valuable than independence and
there can be no effective decisions in an inefficient state.