The Armenian Velvet Revolution : will Armenia break the post-Soviet mold and shape its own future ?

Protesters attend a rally in support of opposition leader Nikol Pashinyan in Yerevan. Some soldiers and officers can be seen.

The Republic of Armenia was born on 21st September 1991 following the collapse of the USSR. Since its birth, this small country isolated by its geography and its neighbors has known and knows blockades (both military and economic) and war. But the danger has not only came from outside its borders: in fact, until now, Armenia has been struggling with the legacy of the soviet curse both economically and politically. On 31st March 2018, the Armenian Velvet Revolution, so named because no shots were fired, began in Armenia. This revolution put an end to the reign of Serj Sargsyan, for many a power-hungry politician, and placed the opponent and former journalist Nikol Pashinyan, who promised to eradicate corruption from Armenia, at the head of the country.

The economic history of the Republic of Armenia began long before its independence. The consequences of the NEP (Stalin’s new economic policy), perestroika (from Mikhail Gorbatchev), the destructive 1988 earthquake in Spitak and Azerbaijan's 1988 blockade concerning Nagorno-Karabakh's independence are all events that explain the current economic situation. Nevertheless, the heaviest burden of the Soviet legacy is, as it was for many post-Soviet countries at the time of their independence, the planned economy and the privatization programmes of previously nationalized companies, which have generated their share of injustice due to a lack of preparation and knowledge of the liberal doctrine. In Armenia as in Russia, a handful of people have become richer by taking over natural resources and industry. These new oligarchs, who sometimes held the economic power well before independence, were able to access political power and influence the various governments to strengthen their monopoly.

Armenia's imports by category in 2018

Already dependent on energy imports under the USSR, the prolonged economic blockades of Turkey and Azerbaijan have pushed Armenia to remain close to Russia for the sake of its economy (imports of raw materials) and its borders (imports of arms), thus plunging the country into immobility and making the Russian Federation its main partner in almost all categories. It has also been largely dependent on international aid (from the IMF), foreign direct investments (from France, the United States or Canada where the Armenian diaspora has been strong since the genocide) and the support of its diaspora. Since its independence, Armenia's economic freedom has also been hampered by customs and administrative barriers, but more specifically by corruption, which is the source of most of the imbalances.

Armenia's imports (left) and exports (right) by country in 2018

This corruption has brought disillusion to the hearts and minds of the Armenian people, restricting them in entrepreneurial creation and pushing Armenians with high levels of qualification to migrate to more economically free countries. All aid attempts have been seized by the political or criminal elites operating in the country, such as the global fundraising campaign following the 1988 earthquake or, more recently, the fundraising campaigns for the young autonomous republic of Artsakh. Any attempt to change (through opposition) was considered "pro-Western" by Moscow's henchmen, in the same way as the revolution in Georgia, which had the consequences we know.

But today, all that must change. Despite the request by Russian diplomats to provide evidence of Armenia's "fealty" to Russia, Nikol Pashinyan says he will favour neither Europe and the United States - with which Armenia has gradually moved closer in recent years (via the IMF, WTO, Council of Europe) - nor Russia. "Unfortunately, Armenia was a very corrupt country in the last 25 years," Pashinyan said in an interview, following which he stressed that the fight against monopolies and those who have repeatedly violated the law will be his economic and political priority. It is clear that according to this statement, Russian political and economic interests, which have flourished thanks to previous governments, are going to be challenged.

Evaluation of Armenia by the COFACE (French organization)

Today, Armenia is classified between B1 and C (depending on the organization) in terms of political risk and business climate. If Nikol Pashinyan shows the world his willingness to reform the country to make it freer, both politically and economically, this can only reassure investors and motivate citizens to participate and undertake. Especially since the primary (agriculture, agri-food) and industrial (minerals) sectors represent a significant share of GDP, therefore showing the urgent need to diversify the economy. As part of this objective, Nikol Pashinyan has made the judiciary more independent and it has already begun its work of sanctioning corruption. Nevertheless, the new Prime Minister advocates national unity and wishes to put an end to the division that has been operating for too long among the Armenian people, wounded by the memory of the genocide and its quest for recognition. His desire to avoid stigmatizing the political parties that have operated in recent years, to see the return of Armenian emigrants and to be transparent towards the diaspora are steps towards this goal of stability.

Stabilizing the country politically both in the face of its opponents and on the international scene will make him able to improve the economy of Armenia.

Ultimately, this event proved that democratic reforms can triumph even in Moscow’s shadow, but it remains to be seen if Nikol Pashinyan will be able to break the post-Soviet mold and maintain a good relationship with Russia at the same time. However, his first measures are a long desired glimmer of hope for this small landlocked country.

Antoine L.