Armenia takes another step towards Customs Union

By bne IntelliNews November 7, 2013

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Armenia signed a memorandum on deeper cooperation with the Eurasian Economic Commission on November 6. The agreement paves the way for Armenia's planned entry to the Customs Union, at a crucial time for the Russian-led project.

EEC chairman Viktor Khristenko said after the signing ceremony that the document "ensures involvement of all Armenian institutions in the activity of the Customs Union". It will also see the appointment of an Armenian permanent representative to the trade bloc, which currently features Russia, Belarus and Kazahkstan.

"We should also assess the activity to be done for Armenia to become a full-fledged member of the union," Armenian Prime Minister Tigran Sargsyan told a press briefing.

President Serzh Sargsyan surprised on September 3 when he told journalists that Armenia would join the Custom Union. The announcement, which came following a meeting with Russian President Vladimir Putin, was unexpected since previously Yerevan had been increasing ties with the European Union.

However, the decision followed heavy pressure from Russia, including a substantial hike in gas prices. The likes of Ukraine and Moldova, which insist they will continue on a route towards the EU, continue to feel the weight of gas prices and trade restrictions.

The crunch comes at summit in late November, with Ukraine - as the second largest economy in the former Soviet space a vital lynchpin in construction of the Customs Union - set to sign off on an association and trade pact with Brussels.

Moscow says it will be forced to implement strict trade restrictions on Kyiv should it open its markets to the EU. However, since Armenia plumped for the east rather than west, Moscow has turned generous benefactor.

The latest bonus came in the form of a soft loan - expected to total up to $160m - from Russia to help Yerevan with efforts to extend the life of the Metsamor nuclear power plant. Armenia wants to keep the Soviet built plant operating until it can build a replacement. However, it has been struggling to raise the $5bn or so it would need to finance a new facility.

The secretary of the Nuclear Energy Safety Council of Armenia said on November 6 that the government will be able to confirm the cost of renovating Metsamor as soon as the project has been approved. The project will allow the reactor to continue operation until 2016. Russia's Rosatomservice is expected to sign a contract to take part next year.

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