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F A S T Update

Armenia

Semi-annual Risk Assessment

July to November 2006 T

FAST Update

Armenia | July to November 2006 | Page 2

Contents

Country Stability and Conflictive Events (relative) 3

Conflictive and Cooperative International Events (average weighted) 5

Conflictive and Cooperative Domestic Events (average weighted) 7

Appendix: Description of indicators used 9

The FAST International Early Warning Program 10

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Contact FAST International: Country Expert: Phone: +41 31 330 12 06 Richard Giragosian Fax: +41 31 330 12 13 mailto:[email protected] www.swisspeace.org/fast

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Armenia | July to November 2006 | Page 3

Country Stability and Conflictive Events (relative)

Average number of reported events per month: 91 Indicator description: see Appendix

Risk Assessment: • The graph reveals a generally consistent trend of Country Stability, bolstered by an overall decrease in the level of Conflictive Events from September to November 2006. Although there was a spike in Conflictive Events in July and August 2006, this was subsequently corrected in a consistent decrease from August to November 2006. • Longer term stability in Armenia remains hindered by continuing socioeconomic disparities of wealth and income. Despite several years of double-digit GDP growth, there has been only limited improvement in the daily life of the average citizen. There is also a set of economic challenges, ranging from pronounced un- and under-employment to systemic corruption, which only fosters a degree of political apathy and distrust of the government. Armenia is also marked by a deepening urban-rural divide, which is further demonstrated by a concentration of economic and political power in the capital Yerevan. These inherent socioeconomic problems have only been exacerbated during the period under review by a steady rise in the value of the Armenian national currency, the Dram, which has impacted local exporters and millions of Armenian citizens dependent on external remittances for daily expenses. From December 2003 to August 2006, the value of the Armenian Dram, in U.S. Dollar terms, increased by some 40 percent, and has gained more than 30 percent in value against the Euro in the same period. • There were signs of a downward trend in media rights during this period, as a Yerevan court sentenced Arman Babadjanian, the jailed editor of the independent newspaper “Zhamanak Yerevan,” to a four-year prison term in September 2006. The 30-year old Babadjanian was sentenced after his conviction on charges of evading Armenia’s compulsory two-year military service, although the usual sentence for such convictions is significantly less. He was arrested just weeks after returning to Armenia to publish the newspaper in June 2006. Subsequently he issued a statement from his prison cell accusing the authorities of trying to silence an “independent and incorruptible media outlet supporting the removal of the illegal regime and the establishment of a legitimate government in Armenia.” The most recent incident regarding media rights occurred in September 2006 when the editor of an independent newspaper was attacked outside his Yerevan home. • In response to signs of attacks against the media, the Yerevan office of the Organization for Security and Cooperation in Europe (OSCE) announced that it is “deeply concerned over recent incidents of violence and intimidation against local journalists which have obstructed their professional duties and infringed upon the freedom of expression” in Armenia. The OSCE statement added that it “considers it extremely important for these cases to be properly investigated” and called for “the perpetrators to be punished in full accordance with the law,” urging Armenian law enforcement bodies “to undertake prompt measures to ensure the safety of media professionals in order to promote freedom of expression in the country.”

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• The Armenian parliament voted in early October to reject a controversial government bill that sought to reform a powerful state body regulating television and radio broadcasts in the country. In a vote of 131-46, the bill was soundly defeated after being strongly criticized by Armenia’s leading media associations. The bill sought to transform the National Commission on Television and Radio (HRAH) into a more independent body in accordance with one of the provisions of the recently enacted amendments to the Armenian constitution. Under existing law, Armenian President Robert Kocharian holds the power to appoint all nine of the commission’s members. Aligned in opposition to the bill, the Yerevan Press Club, the Armenian Union of Journalists and three other media groups argued that the legislation’s proposed changes failed to adequately ensure the commission’s independence and criticized it for taking far too long for the proposed changes to be implemented. • The Armenian government unveiled a new rural poverty eradication program in September 2006, seeking to leverage more than U$235 million in U.S. aid aimed at developing the country’s infrastructure and seeking to alleviate rural poverty by modernizing dilapidated irrigation networks and by repairing rural roads. The new program was announced at the September 2006 annual economic conference involving representatives of the global Armenian diaspora. At this occasion, President Kocharian called on the visiting Armenians to help bridge the “huge” gap in development between urban and rural Armenia, which he noted as contributing“ to the concentration of the population in Yerevan” and “depopulating the already weak rural regions.” Prime Minister Andranik Markarian also appealed for diasporan support for the rural development program, arguing that with just over a third of the population living in villages and small towns, “economic growth has mainly had a positive impact” but has been largely limited to the capital Yerevan, as demonstrated by the over 40 percent poverty rate for rural areas of Armenia. • Despite Armenia’s close alliance with Moscow, relations somewhat worsened as Armenia was impacted by the Russian imposition of a blockade of neighboring Georgia in October 2006, the principal trade route between Armenia and Russia. Although gas supplies from Russia to Armenia were not affected, there was an immediate, week-long decrease in the level of bilateral commerce. A wave of ethnic-violence in Russia targeting migrant workers from the Caucasus, including the murder of several Armenians, further complicated Armenian relations with its traditional Russian ally. • Russia’s Unified Energy Systems (UES) acquired complete control of the Armenian power distribution network in September 2006, as shares in the Electricity Networks of Armenia (ENA) were formally transferred to an offshore-registered subsidiary of the state-controlled RAO Unified Energy Systems (UES). The U$73 million deal followed the September 2005 approval by the Armenian government but with the stipulation that the new Russian owners assume the investment commitments and liabilities of the network’s previous owner. With the completion of this takeover, UES enhances its control over several of Armenia’s major power plants, including the country’s sole nuclear power station. • As the process of diplomatic mediation by the OSCE continued during this period, with a series of meetings between the Armenian and Azerbaijani foreign ministers and presidents in October and November 2006, earlier domestic criticism waned substantially. Despite the fact that there is a degree of apprehension within Armenian society over the future of the unresolved Nagorno-Karabakh conflict and regarding the international peace talks seeking its resolution, there remains little likelihood of any significant instability in Armenia over this issue. • Despite the Armenian government’s failure to adequately address longer term challenges of socioeconomic disparities and endemic corruption, the outlook for continued Country Stability, based on this reporting period, remains firm. An outlook for continued stability is fostered by the Armenian leadership’s demonstrable capability to meet the more immediate challenges posed by the country’s domestic political opposition and from the adverse implications from recent tension with Russia, both of which can be seen as manageable challenges for Armenia. The longer term trends of economic inequality and corruption will, however, be of increasingly concern to the country’s overall stability unless they are effectively addressed, especially as the country prepares for parliamentary and presidential elections in May 2007 and 2008 respectively.

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Conflictive and Cooperative International Events (average weighted)

Average number of reported events per month: 91 Indicator description: see Appendix

Risk Assessment: • The graph reveals a consistently stable and pronounced level of Cooperative International Events in this reporting period. In contrast, the level of Conflictive International Events was marked by two serious downward trends in August and October 2006, although there was an overall positive, upward trajectory since March 2006. • Armenian relations with Iran reached a new level of cooperation during this period, with a September 2006 announcement of a new trilateral agreement on energy cooperation between Armenia, Iran and Georgia to “synchronize” and link the electrical power grids of the three countries. At the same time, Iranian Energy Minister Fattah announced that a section of a transmission line currently being constructed by the Iranian Sanir company in Armenia is expected to become operational by the end of 2006. • During a September 2006 visit to Armenia, Iranian parliamentary speaker Gholam-Ali Haddad-Adel reiterated Iran’s interest in expanding bilateral relations and expressed his support for a proposal to build a second pipeline to supply Armenia with natural gas from Iran. The Iranian speaker added that although the construction of the U$220 million gas pipeline is still ongoing, the construction of a second pipeline would allow Armenia to export Iranian gas to third countries. The current pipeline, which will have an initial capacity of 1.7 billion cubic meters of gas, is much smaller in diameter than the original specifications, thereby preventing any transshipment of Iranian gas beyond the Armenian market. • Armenia’s relations with the European Union (EU)also deepened significantly during this period, culminating in the November 2006 signing of the EU’s formal “action plan” with Armenia. The signing of the action plan, which serves as a guide for the EU’s engagement in Armenia, as part of its broader Greater Neighborhood Policy, was also welcomed by Armenia as a step closer to Armenian integration with the EU in the economic, political and security fields, and as a five-year process offering “a precise guide” for Armenia “to become more democratic and our state more stable.” The current draft action plan was formulated after roughly 18 months of intensive negotiations and was formally adopted in Brussels during the annual meeting of the EU-Armenia Cooperation Council in mid-November 2006. Armenian ties with individual EU member states were also expanded by the September 2006 visit of French President Jacques Chirac to Armenia in September. • Armenian military and security ties with both NATO and the United States were also strengthened during this period, as Armenia hosted a visiting U.S. military delegation led by Lieutenant General William Ward, the Deputy Commander of U.S. European Command (EUCOM), in September 2006 and participated in a series of counter-terror and emergency response exercises with NATO in Armenia in October and November 2006.

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The Armenian defense minister also discussed plans to increase military cooperation with the U.S. and reviewed “Armenia’s participation in international stabilization initiatives,” including the deployment of Armenian peacekeepers to Kosovo and Iraq. • Armenian-Russian military ties intensified in this reporting period, with a significant proportion of Russian military equipment being withdrawn from its bases in Georgia and transferred to the Russian base in Armenia in September and October 2006. Additionally, Armenia also concluded a new bilateral agreement on military cooperation with Bulgaria in September 2006 during an official visit by the Armenian defense minister, which provides for an expansion of military cooperation that includes an increase in the number of Armenian officers studying in Bulgarian military institutions, specific Bulgarian assistance in the formulation of Armenia’s military doctrine and national security strategy, as well as the preparation of an annual defense budget. In addition, the Armenian government announced that it intends to further increase defense spending by another 22 per cent, projected to reach U$212 million for 2007, following a similar increase in 2006 to U$166 million, representing a 21 percent increase over 2005. • Following a regional visit to meet with leaders in Armenia, Azerbaijan and Nagorno-Karabakh in October 2006, the senior French, Russian and U.S. co-chairmen of the OSCE Minsk Group announced that both Armenia and Azerbaijan have agreed to resume peace talks. The OSCE mediators effectively succeeded in restarting the stalled peace process, culminating in a meeting between the Armenian and Azerbaijani foreign ministers held in Moscow in October. This new round of talks sought to prepare the ground for the subsequent presidential summit on the Karabakh conflict in November and notably followed a diplomatic row in September 2006 during which Armenia warned that a recent Azerbaijani diplomatic initiative in the United Nations “diverts attention” from the Nagorno-Karabakh peace process and may even “slow it down.” The foreign minister’s comments referred to an Azerbaijani-led initiative of the GUAM group seeking to add the issue of the region’s “frozen” conflicts to the agenda of the UN General Assembly. Armenia has long opposed any UN involvement in the Karabakh peace process and has remained committed to maintaining the OSCE as the primary international body empowered to mediate the Karabakh conflict. • After tension between Russia and Georgia escalated during this period, Armenia faced a new challenge in October and November with the imposition of a virtual Russian blockade of Georgia. Faced by a dual East- West blockade by Azerbaijan and Turkey respectively, Armenia is, therefore, highly dependent on its northern neighbor Georgia as the sole link to Russia and is hostage to any downturn in Russian-Georgian relations. This vulnerability was further exacerbated by an August 2006 round of demonstrations by several hundred traders at a major border-crossing post along the Armenian-Georgian border, protesting the closure of a well-known local market frequented by traders from Armenia, Georgia, and Azerbaijan engaged in vibrant cross-border commerce. Armenian customs officials closed the Armenian side of the market in the border village of Bagratashen last week after Georgian customs officials closed the Georgian side in the village of Sadakhlo. Both Armenian and Georgian customs officials argued that their respective closures were necessitated by the need to combat large-scale smuggling of goods via the market. Participants blocked roads and impeded traffic traveling the main Armenian highway leading to the Georgian border before their demonstration was broken up by police. • The outlook for Armenia’s Cooperative International Events, as evident in this reporting period, will most likely continue along a steady and consistently positive trajectory. In terms of Conflictive International Events, the rather erratic swings in recent months are due more to temporary, passing factors than any fundamental and lasting developments. While there seems to be no real evidence of any looming breakthrough in the international mediation of the unresolved Nagorno-Karabakh conflict, there is even less likelihood of any abrupt resumption of open hostilities serious enough to threaten the May 1994 ceasefire regime in effect in the region. Armenia’s relations with its neighbors, although still somewhat strained by the imposition of energy, trade and transport blockades, are, nevertheless, stable and quite predictable, with little chance for any significant confrontation.

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Conflictive and Cooperative Domestic Events (average weighted)

Average number of reported events per month: 91 Indicator description: see Appendix

Risk Assessment: • This period has seen an upward trend in the level of Cooperative Domestic Events with only two minor decreases. The level of Conflictive Domestic Events also remained at a consistent level throughout this period. • Although there was an increasing degree of political competition between the country’s various political leaders and parties, domestic stability throughout this period has continued to remain well within the limits of democratic discourse and political debate. There were some signs, however, that the political jockeying for position in anticipation for the country’s approaching cycle of May 2007 parliamentary and 2008 presidential elections may lead to more open public tension that may impact institutional stability. • The most recent new political party, “Prosperous Armenia,” continued to expand its influence throughout the country during the period under review. Founded in early 2006 by prominent businessman and parliamentary deputy Gagik Tsarukian, this new party consolidated its power by recruiting a growing number of new members, and opened new offices and chapters throughout the country during September and October 2006. The pro-government party is seen to enjoy the personal backing of President Kocharian and has already grown to challenge the country’s main ruling Republican Party. • In August 2006, the leadership of the Armenian National Movement (HHSh), announced that the party will seek to align with other allies of former President Levon Ter Petrosian to contest next year's parliamentary elections and return to mainstream politics. However, the center-right party is hindered by both a lack of popular support and internal dissension and has also suffered from a series of widespread defections in recent years. • The return of Armenia’s former ruling Armenian National Movement to participate in the country’s May 2007 parliamentary elections demonstrated new vigor in September 2006, as the former ruling party of former President Ter Petrosian reaffirmed plans to form an electoral alliance with other opposition groups and resumed the publication of its “Hayk” newspaper after a seven-year hiatus. But it remains unclear whether the mainstream leadership of the party will also seek to include its own dissident factions. • A new strategy to unify the country’s opposition was initiated in September 2006, as representatives of a dozen Armenian opposition parties met to discuss ways to craft a new political agenda based on proposed measures to counter what they termed the growing role of “criminal elements” in Armenian politics. The opposition representatives, including leaders from most of the parties aligned in the opposition Artarutiun (Justice) bloc, pledged that the meeting marks the start of a new coordinated effort to forge a collective approach to address the recent spike in murders and other serious crimes in Armenia.

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• Some participants called for the creation of a broad “anti-criminal movement” that would highlight the absence of the rule of law as a campaign issue in the country’s May 2007 parliamentary elections. The crime issue was also raised during the opening of the new session of the Armenian parliament, as opposition leader Aram Sarkisian demanded a special parliamentary debate to examine the performance of the law enforcement authorities in combating the series of recent crimes. • In August 2006, opposition leader and former Foreign Minister Raffi Hovannisian sought to mobilize Armenians with a call to become more engaged in civic activism. In an address to a meeting of his opposition Zharangutiun (Heritage) party, Hovannisian criticized the increasingly open pattern of vote buying and influence peddling in preparation for the parliamentary elections set for next year. Following an escalating and public confrontation between Hovannisian and President Kocharian, the leadership of the party was evicted from its Yerevan headquarters last March and remains unable to reclaim its offices in a state-owned building despite a court verdict that effectively declared the eviction illegal. The party congress, which was limited to only some 200 party activists in a small conference hall of the Armenian Writers Union, followed the September 2006 launch by Hovannisian and another prominent opposition leader, Vazgen Manukian, of a broad-based “apolitical” movement aimed at encouraging greater “civic engagement and mobilization.” • The outlook for the country’s domestic dimension has been bolstered by the positive management of the internal political crisis during this reporting period. The domestic situation will only become more dominated by the political maneuvering and jockeying for position prior to the country’s parliamentary election set for May 2007, but there is no real chance of any outbreak of political violence. The political process remains well within the parameters of Armenia’s democratic institutions and, despite the rather closed political system of the country, suggests that democratization and domestic political reform will continue to advance, although on a frustratingly gradual, evolutionary track.

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Appendix : Description of indicators used | Page 9

Country Stability The Country Stability index reflects three independent factors: (i) challenges by non-government actors to the state's monopoly of force; (ii) state repression; and (iii) violence entailing physical force against persons or property. The index is scaled between 0 and 1, where 1 means high and 0 low stability. Conflictive Events (relative) Number of Events (i) that have a negative value on the IDEA conflict- cooperation scale* divided by the number of all reported events. The Indicator has a range between 0 and 1. Conflictive International Events Based on the IDEA cooperation-conflict scale: Average weight of Events (i) (average weighted) that have a negative value on the IDEA conflict-cooperation scale* and (ii) where at least one actor comes from outside the country. The Indicator has a range between -13 and 8. Cooperative International Based on the IDEA cooperation-conflict scale: Average weight of Events (i) Events (average weighted) that have a positive value on the IDEA conflict-cooperation scale* and (ii) where at least one actor comes from outside the country. The Indicator has a range between -13 and 8. Conflictive Domestic Events Based on the IDEA cooperation-conflict scale: Average weight of Events (i) (average weighted) that have a negative value on the IDEA conflict-cooperation scale* and (ii) where all actors come from inside the country. The Indicator has a range between -13 and 8. Cooperative Domestic Events Based on the IDEA cooperation-conflict scale: Average weight of Events (i) (average weighted) that have a positive value on the IDEA conflict-cooperation scale* and (ii) where all actors come from inside the country. The Indicator has a range between -13 and 8.

*The IDEA cooperation-conflict scale is a general weighting scale that attaches a weight to every event. The scale has a range from –13 to +8. Event types that are regarded as cooperative have positive values, conflictive event types have negative values.

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The FAST International Early Warning Program | Page 10

Who are we? FAST International is the early warning program of swisspeace, based in Bern, Switzerland. The program is funded and utilized by an international consortium of development agencies consisting of the Austrian Development Agency (ADA), Canadian International Development Agency (CIDA), Swedish International Development Cooperation Agency (Sida), and the Swiss Agency for Development and Cooperation (SDC).

What do we want to achieve? FAST International aims at enhancing political decision makers’ and their offices’ ability to identify critical developments in a timely manner so that coherent political strategies can be formulated to either prevent or limit destructive effects of violent conflict or identify windows of opportunity for peacebuilding.

How do we work? FAST International uses both qualitative and quantitative methods, with the combination of methods being determined in each case by customer needs. The centerpiece of FAST International is the collection of single cooperative and conflictive events by means of a web-based software, applied by local staff using a coding scheme called IDEA (Integrated Data for Event Analysis), which is based on the WEIS (World Interaction Survey) coding scheme. The monitoring by FAST International is done independently from Western media coverage, thus providing for a constant influx of information. This information is collected by FAST International’s own Local Information Networks (LINs). The quantitative empirical analysis is based on composed indicators developed within the IDEA framework. Since even the most profound quantitative analysis requires interpretation, FAST International cooperates with renowned country/area experts.

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