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Armenia: Debt Deal With Russia Delayed Again

The signing of a crucial agreement settling Armenia's $97 million debt to Russia, expected by the end of this month, has again been delayed, despite yearlong negotiations. The deal, which would place several state-run Armenian enterprises under Russian control in payment of the debt, was initially due to be sealed last autumn.

Yerevan, 27 June 2002 (RFE/RL) -- Russia and Armenia began negotiations on their unprecedented "equities for debt" arrangement early last year. The talks had been expected to yield an agreement by September 2001, in time for Russian President Vladimir Putin's official visit to Armenia.

However, the signing of the deal, aimed at clearing Yerevan's $97 million debt to Moscow, has been repeatedly delayed. Disagreements appear to center on the list and market value of Armenian companies to be handed over to Russia.

As recently as 31 May, Armenian Prime Minister Andranik Markarian announced that the two sides had settled their differences and only had to deal with "procedural issues." The announcement came after Markarian's meeting in Moscow with Russia's representative on the matter, Industry and Science Minister Ilya Klebanov.

The Armenian government announced that Klebanov would arrive in the Armenian capital by 20 June to "complete the negotiating process and sign the final documents."

The visit has been postponed indefinitely, however, fueling fresh uncertainty over the fate of the so-called "equities-for-debt" agreement between Russia and Armenia.

Influential Armenian Defense Minster Serge Sarkisian, who has represented Yerevan in the debt talks, immediately sought to distance himself from Markarian's earlier statement. Speaking to reporters, Sarkisian said: "I have always said that Ilya Klebanov will come to Armenia only when he gets clearance from appropriate Russian government agencies to make a final decision. That will happen pretty soon."

Sarkisian, who co-chairs with Klebanov the Russian-Armenian intergovernmental commission on economic cooperation, avoided giving specific dates.

Last December, Sarkisian and Klebanov reached a tentative agreement on the Armenian entities to be covered by the equities-for-debt scheme. They were Armenia's largest thermal-power plant, located in the central town of Hrazdan; an electronics factory in Yerevan; and three research institutes that used to perform work for the Soviet defense industry.

Moscow had reportedly tried to win control of other, more lucrative Armenian industries, such as copper mines and power-distribution companies, in return for writing off the $97 million debt. This fact raised concerns among some Armenian analysts that the deal could add to Armenia's economic dependence on Russia. Russia is already the sole supplier of natural gas, nuclear fuel, and other energy resources to Armenia.

But those concerns eased after it became known which Armenian companies would likely be handed over to Moscow. It was then the turn of Russian observers to question the wisdom of the planned accord.

Indeed, of the five mentioned enterprises, only the Hrazdan plant is seen as a major asset. It is also thought to be the main source of disagreement between Yerevan and Moscow.

According to Armenian Minister of Finance and Economy Vartan Khachatrian, the Armenian government has estimated Hrazdan's price at "around $100 million," and he said the Russians "seem to agree" with the figure.

Khachatrian said last week that Russia's state-controlled Unified Energy Systems power monopoly, the likely future owner of the plant, is now seeking guarantees that Armenian power grids will continue to buy electricity from Hrazdan after the change of ownership.

At the same time, Khachatrian, contradicting earlier statements by Sarkisian and other Armenian officials, revealed that Russia may not necessarily clear Armenia's entire debt as a result of the deal. Nor, he said, is the success of the ongoing negotiations a foregone conclusion. "These negotiations will or will not lead to a certain agreement as a result of which part of our debt will be fully or partly written off or will not be written off at all," Khachatrian said.

The Armenian finance minister also indicated that both countries are conducting tough bargaining in the debt talks, despite their close political and military ties. "Each party has its own interests. We want to clear as much debt as possible with as little property as possible, while they, I guess, want to achieve the opposite," Khachatrian said.

Defense chief Sarkisian, by contrast, has been more upbeat in his assessments. But his optimism on the issue has so far proved unfounded. Sarkisian, who is believed to be the second-most-powerful figure in the Armenian leadership, assured journalists in March that the debt agreement would be signed "within a month."

Sarkisian said the deal would eliminate Armenia's entire debt to Russia. The current uncertainty calls that claim into question.