EU to rethink relationship with Armenia

By bne IntelliNews October 11, 2013

bne -

The European Union is reconsidering relations with Armenia in the wake of Yerevan's decision to join the Russian-led Customs Union. Officials confirm the previous plan to sign an association and trade pact with the Caucasus country is now "impossible".

Poland's Ambassador to Armenia, Zdzislaw Raczynski, told a press conference in Yerevan on October 10 that the EU is looking for a new platform of cooperation with Armenia, after President Serzh Sargsyan on September 3 surprised by announcing his country will join the Customs Union.

Alongside several other former-Soviet states, Armenia was set to initial a Deep and Comprehensive Free-Trade Agreement (DCFTA) with the EU at a summit to be held in Lithuania in November. However, jealous of its influence in what it terms its "near abroad," Moscow wants its neighbours join its free trade club instead.

The likes of Ukraine and Moldova insist they will remain on course to step closer to the EU. Russia has issued stern warnings of economic meltdown for Ukraine, while launching trade wars against both states. Lithuanian trade has also been hit, while Polish interests have been regularly threatened in the run up to the summit.

EU officials expressed their disappointment last month when Armenia revealed its decision, and several have suggested deals with the EU and the Customs Union are not compatible. Armenian officials, including Sargsyan, have however continued to express hope that joining the Customs Union will not rule out closer association with the EU.

Now, with the other potential partners holding out under the Russian pressure, Brussels appears keen to underline that there are significant consequences for Armenia. Cooperation between the EU and Armenia as previously planned has become "impossible", Raczynski stated frankly, according to PanArmenian.

Meanwhile, Armenia's relationship with Russia has improved. A natural gas price subsidy agreement will be signed between Gazprom and Armenian subsidy ArmRusGazprom in the near future, Armenian Energy and Natural Resources Minister Armen Movsisyan announced October 8.

Yerevan appeared earlier this year to be moving away from the Russian sphere of influence. Moscow, however, moved quickly to bring Armenia - usually one of its closest allies - back into line. A steep hike in gas prices and a large arms deal handed to Armenian rival and neighbour Azerbaijan appear have done the trick.

Raczynski said that with an EU trade pact, "Armenia would have a €150m income annually. Now let's wait and see how much Armenia's GDP will grow after joining the Customs Union."

Russia is Armenia's largest trading partner, and bilateral trade grew 22% to $1.2bn (€910m) in 2012. Russia is also the biggest foreign investor with a total of $3bn investment last year in a country whose GDP totalled $9.9bn, according to the World Bank.

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