Former Armenian President Robert Kocharyan
The former president of the Republic of Armenia Robert Kocharyan gave an interview to www.2rd.am, his unofficial website where he speaks about the January 12 murder of seven members of the Avetisyan family in Gyumri, as well as the devaluation of the currency and the economic situation in the country.
Mr President, first of all we want to talk about the Gyumri tragedy. Literally, from the moment the murderer was arrested, a huge wave of outrage arose in Gyumri. Clashes with the police force took place in an atmosphere of extreme tension. It is obvious that there are two unanswered questions behind all of this and the increasing discontent : Which country’s jurisdiction will the accused be subjected to and in which country will he serve his sentence? In your opinion, what could the authorities do in such a situation?
The crime that happened in Gyumri, which shook all of Armenia, is striking in its brutality. It is obvious that the anger of the people can turn into massive protests with unpredictable consequences. Fast, preventative operations by the authorities were necessary to prevent that. First of all, certain assurances that the murder would be investigated by Armenian law enforcement bodies and the murderer would stand trial in front of an Armenian tribunal (moreover, we have a precedent of similar a decision in 1999). I am sure that was as much necessary for the Russian side as it was for the Armenian side, because it would have prevented all the attempts to view Armenian-Russian relations in the context of the tragic incident. The vague, contradictory and confused statements of our officials added more fuel to the fire, and gave the already complex situation a tune of national humiliation. This was already an explosive combination, and, unfortunately, people’s anger was poured on the police. One way or another, what happened in Gyumri was a horrific tragedy. My family and I are deeply shocked and we share the grief with everyone.
The sharp decline in the currency exchange rate, which happened at the end of last year, caused a real shock. Such a decline in the national currency exchange rate in Armenia hasn’t taken place for a long time. Government representatives cited geopolitical reasons, especially with the decline of the Russian ruble and oil prices as a result of sanctions against Russia, etc. What do you think? Is it true that the so-called “Black December” was a result of external factors? Do you think that the steps taken by the authorities were up to the challenge? And shall we expect further decline in the currency exchange rate?
This is the second case in the last five years. Of course it is very easy to blame everything on external factors and pose as a victim of geopolitical processes. During the 1998 economic crisis, the Russian economy was in a worse situation. It experienced a six percent decline, while the ruble lost its rate against the US dollar three times. It was much more severe than now, besides Russia has considerable reserves of foreign currency and gold now, which rules out the default of the country. Even in those conditions, the Armenian Dram preserved its stability, although Armenia’s economy and banking system were weaker.
Naturally, external factors have significance, but they didn’t cause our economy to breakdown last December, they just highlighted the weakness that already existed. There shouldn’t have been such a relativity between the dram and the ruble. However, in case of the prevailing sentiments on our side and the negative expectations, slight speculations on the currency exchange rate variations could cause panic among the people and have a decisive role, even in case of seemingly financial stability.From a formal point of view, the stability of the dram is the responsibility of Armenia’s Central Bank, which was making certain efforts to stabilize in its range of power. But it was obviously not enough in the days December. Urgent and coordinated actions by all of the institutions of the authorities were necessary, as well as using monetary, fiscal and administrative tools which could have had an impact. Judging from the results, these actions were late and deficient. It is a common opinion among economists that “the reputation of the authorities during the crisis and governmental efficiency are usually more important than the fundamental factors.”
You also mentioned the decline of oil prices as a negative factor. On the contrary, oil importing countries gain from the decline of the price. Taking into consideration the multiplicative effect of cheap energy resources on the economy, cheap gasoline and diesel are good incentives for economic growth and it can compensate the losses of the decline in remittances from Russia. Of course, if there is healthy competition in the energy market — the price of gasoline in Armenia is exceptionally a subjective factor that reflects the level of the monopolization of the market. By the way, taking international tendencies into consideration, the price of imported gas to the country could be reviewed, of course, if the recently signed controversial contract with Gazprom allows that.
What will happen with our Dram? The exchange rate of the Dram reflects the country’s economy and the general situation of the balance of payments. Their deterioration would cheapen the Dram, while their improvement would strengthen it. The Dram cannot live alone and detached from the general economy. In any case, the sharp exchange rate fluctuations are unacceptable. They are risking the financial system of the country, undermining the trust towards the national currency and decreasing the pocket money of our citizens.
Last year, in one of your interviews you had foreseen that the country is entering a period of negative expectations. Unfortunately, some of those expectations came true. Except that, just a few days ago Moody’s Agency lowered Armenia’s sovereign credit rating and changed its rate prediction into negative. How do you evaluate the economic situation of Armenia today and in the near future?
Sadly, I cannot say anything hopeful. If the economic policy doesn’t change, then it is totally incomprehensible that at what expense the economic situation would improve, or what would be the engine of economic growth and increase its efficiency. Lowering Armenia’s sovereign credit rating by Moody’s would increase the price of our foreign loans, moreover, in the case of foreign debts. In the mid-term future, the Eurasian Economic Union (EEU) economy will be in recession, therefore it would be very difficult to assume any significant role there. A severely devalued ruble will seriously change Russia’s structure of commerce not in favor of our goods. The possibility of serious investments from Russia is low. They themselves have a problem refinancing their western credits because of the sanctions. We are not particularly attractive for Western companies because of EEU accession. It is not clear what will be done with trade volumes between us and Iran. According to forecasts, the international prices of non-ferrous metals will not grow, maybe even the contrary. The recently applied tightening of standards for Republic of Armenia banks will result in increasing the prices of converting funds, and that means that the price of business crediting will also increase. Looking at the construction sector, having such a macroeconomic situation, population drain and a condition of a depressive mood, we cannot even dream about it. The monopolization of the economy is growing, the amount of investments are steadily decreasing, Investment activity is declining. In case of preservation of the political monopoly, the domestic political situation will not recover. Without radical changes it would be very difficult to solve these various problems. Aside from speeches about that, saying that everything is fine or will be fine, we are not hearing any practical words from officials. It is obvious that the assessment of the authorities and the society about the situation in the country are completely different. Therefore, the authorities, or the society, is not able to adequately comprehend the reality. Perhaps the authorities are really thinking that everything is good, or they have convinced themselves that it is not possible to change anything. In both cases they are not leaving any room for optimism.
What do the authorities have to do to come out of this difficult economic situation?
First of all, accepting the existence of fundamental problems and being ready for an honest dialogue between society and business about potential ways to come out of the current situation and the crisis. The most important requirement for success for the actions by the authorities is trust, which is absent today. The country needs radical changes, but this is definitely not about constitutional reform. I don’t want to count all of the obvious and necessary steps. In Armenia, and specifically in the government, in my opinion, those, who at least understand what to do first, are not few. The biggest obstacle on the way to success would be the conflict of interests between the economic benefits of the political elite and the long-term interests of the country.