WITH AN OUTSTRETCHED HAND

Armenia is in search of another loan. This is an amount that can hardly be called astronomical for a public tranche - $ 1 billion, but for Armenia, with its quietly "collapsing" economy, it is perhaps a fateful question - the budget deficit continues to grow, and there are no real prospects of "filling" it.

The West will not help

Initially, as analysts point out, Yerevan clearly expected to get a loan from the EU. However, Brussels made it clear that the EU does not intend to hold a donors' conference in the near future to provide financial assistance to Armenia. The refusal was due to the May parliamentary elections. Peter Stano, the spokesman for EU Commissioner for Enlargement and European Neighbourhood Policy Stefan Fule, said that the EU will consider Armenia's request after the presidential elections scheduled for February 2013.

The EU's Eastern Partnership programme for new independent states is based on a simple principle: the EU offers its neighbours financial assistance and loans in return for the development of democracy and improvements in the human rights situation. But it seems that the latest Yerevan elections did not impress the European observers - even despite the bottle of brandy, which, according to the Armenian media, the Armenian ambassador to the UK, Karine Gazinyan, tried to give the head of the PACE delegation at the parliamentary elections, Emma Nicholson. Obviously, Brussels wants to get a clearer view of Armenia's future economic policy, and it depends on who takes over as president after 2013. At the same time, Europe, which is forced to save the euro, has no money for Armenia.

Whether it will be possible to exchange loans for human rights in the case of Armenia remains an open question. But what is undoubted is that Brussels dealt a very painful blow to Yerevan's financial system. Its margin of safety is known to be zero - back in 2008, local analysts said that the Armenian economy had no "safety cushion".

To Russia again

After the failure in the European sector, Armenian financiers are eyeing Russia again. Yerevan, apparently, has no doubt that Moscow is obliged to provide very generously for its "historical ally" and even "outpost". In any case, Yerevan immediately asked Moscow for a loan - from $ 800 million to 1 billion. As is well known, during a visit to Yerevan by the speaker of the Federation Council of Russia, Valentina Matviyenko, talks with Armenian President Serzh Sargsyan and Parliament Speaker Hovik Abrahamyan discussed not only strategic partnership between the two countries, but also Yerevan's request to postpone the increase in gas prices and allocate another loan to Armenia.

It is necessary to dwell in more detail on the "gas issue". For several weeks now, the Yerevan community has been discussing rumours that the price of Russian gas supplied to Armenia can be increased from the current $ 180 to 320 per 1,000 cubic metres in 2013. For Armenia with its moribund economy, it is more than a significant blow, especially after the EU refused to issue a credit. And here, Armenia's former foreign minister, Vardan Oskanyan, added fuel to the fire. He wrote on his Facebook page that "the gas purchased from Russia has risen in price by $ 60, but the government on the domestic market still keeps or will continue to keep the current price until the presidential elections in February, subsidizing it through transfers from its 20-per-cent stake in ArmRosGazprom and 10-per-cent stake in the JSC Gazprom. A sharp increase in domestic tariffs will inevitably lead to a rise in protest moods not only among the opposition, which will certainly use the situation to its advantage, but also among pensioners and low-income citizens that make up a significant portion of the electorate. In this regard, Yerevan should persuade Moscow as soon as possible to postpone the increase in gas tariffs until the spring, and secondly, not to make public information about the new prices.

But is Moscow ready for such a step? In any case, neither during Valentina Matviyenko's visit to Armenia, nor during State Duma Speaker Sergey Naryshkin's trip, were there any "signals" about Russia's willingness to allocate a loan or not to raise the gas prices.

Local analysts recall that a similar situation arose in 2005. Gazprom doubled the price of natural gas for Armenia at the time, and then said through its spokesman Denis Ignatyev that gas prices may remain "more affordable for Armenia", but to this end, it is necessary to consider Russian proposals on the "expansion of energy cooperation". The issue was about the 5th block of the Hrazdan HPP, the Iran-Armenia gas pipeline, as well as giving up a Russian loan. The then prime minister of Armenia, Andranik Margaryan, said that Armenia is not going to take a loan from Russia to compensate for the growth in the price of the gas supplied to the republic and that if there is a need for loans, Armenia may get them on more favourable terms from foreign partners or international organizations.

We all know how the talks ended: with an absolutely disadvantageous contract with Gazprom in terms of the diversification of raw materials and energy independence. Then, Armenia signed the contract due to the lack of funds in the state budget. Now the situation with funding is even worse, and in addition, the presidential elections are approaching, which makes the position of the Armenian side in the negotiations even more vulnerable. At the same time, the EU postponed the debate on financial assistance to Armenia to 2013. Now Armenia is forced to beg for a loan from Russia. Or is the Russian side itself offering a loan, creating a pretext for a new "equity for debt" deal?

The parallels are quite convincing. But Armenia has no valuable property left to offer in return for debts. The premature termination of Rosatom's contract with the Metsamor NPP shows that a real contact with the Armenian reality often leads to an overestimation of this "valuable" property.

There is quite a popular theory that in exchange for loans and a promise not to raise the price of gas, Armenia will be offered membership of the Customs Union. Moreover, during her visit to Yerevan, the head of the Federation Council, Valentina Matviyenko, said: "The president of Armenia appreciates the prospects of the republic's participation in Eurasian integration. He does not exclude Armenia's participation in the Customs Union and in the future of the Eurasian Union." According to Matviyenko, Yerevan has now requested a "road map" for the development of these forms of integration and continues to consult experts.

However, in April, Armenian Prime Minister Tigran Sargsyan said that there is no point for Armenia to join the Customs Union: "In world practice, there is no country without a border that became a member of a customs union. It would be pointless. The meaning of the Customs Union is to exchange goods without customs procedures. In our case, this is not possible, because we have to pass through the territory of neighbouring states and go through customs clearance twice. This makes the whole procedure of simplifying customs clearance pointless for businesses. Instead, we would get only problems associated with an increase in customs duties and taxes. In economic terms, it is not appropriate." In short, it seems that Armenia once again wants to sell Moscow its illusionary loyalty for a very real loan. Will Moscow want to buy this loyalty, especially considering the fact that Armenia recently tried to negotiate a loan from the EU and this "credit line" was clearly an attempt to diversify its foreign policy? Judging by the many signs, even if the Russian authorities - or at least the economic part of these authorities - do not intend to act on the principle of "friendship is friendship, but the money is apart", in any case they do not promise their "outpost" particularly generous support.

Credit is not salvation

Even if Armenia receives the coveted credit, it is unlikely to play the role of a "life buoy" for its economy - the country is simply mired in debt. Its "loan commitments" exceed half of the country's GDP, and this is, in fact, a default. According to analysts' estimates, the ratio of government debt/GDP in Armenia today, without taking into account the possible loan from Russia, could increase by 1 percentage point - to 42.6 per cent. The cost of servicing the government debt will increase by 54 per cent and reach 177.7 billion drams ($ 423 million at current exchange rate). Besides that, the lion's share in the structure of Armenia's public debt is foreign debt - it has already reached a very dangerous 36.1 per cent of GDP. But if they do get the credit, this figure will reach 46.2 per cent, the ratio of government debt/GDP will be 52.6 per cent and, thus, the country will fall into the risk zone.

In addition, experts note, Armenia is using the loans to service its old debts - the real sector of the economy does not get a penny. That is to say there will be no change for the better.

It goes without saying that the root cause of today's economic troubles in Armenia is its aggressive foreign policy, territorial claims against almost all of its neighbors and its non-constructive position in the negotiations on Karabakh. That's why Armenia's border with Azerbaijan and Turkey remains closed and the country itself is isolated from economic and infrastructure projects. Alas, no credit compensates for the lack of common sense.