The master chess game of regional geopolitics puts Armenia’s strategic prowess to the test
By Gevorg Mnatsakanyan
Asia is experiencing tectonic shifts that are sending ripples far beyond its borders with a potential to upset the established world order.
Leading the way is China. Over the past four years, the Chinese economy has grown 10 times faster than that of the United States. Moreover, China now leads the world in the number of homeowners, college graduates, Internet users, and billionaires. In the wake of this shifting balance of global power, many geopolitical stakeholders predict the 21st century will belong to China.
But the People’s Republic doesn’t hold all the keys to the Asian realm. Japan, conceding to China’s ranking as the second largest economy after the United States, remains a key player in regional and international politics as a major source of global capital and credit and is one of the world’s most active foreign aid donors. Other rising economies such as Vietnam and Singapore are also positioned to have more sway in the shaping of regional affairs.
In Southeast Asia, the Indian subcontinent is looking to strengthen its economy to rival that of China, while aiming for the moon with the Chandrayaan-2 mission.
As Asia continues to develop at such breakneck speed, outpacing the West by three-to-four percentage points in real GDP according to the International Monetary Fund, Armenia, advantageously positioned at the junction of East and West, is watching carefully, thinking strategically, and acting promptly to leverage the opportunities, manage the sensitivities, and come out ahead of the game over the next critical years.
By forging new ties with Asia today, Yerevan is expanding the playing field on which to maneuver itself among the key global players—the U.S., Europe, Russia, and Iran. And with Asia’s star continuing to rise in the Caucasus and beyond, Armenia gains a second chance to prosper and thrive.
New Silk Road 2020
In recent years, China has initiated a string of new projects designed to position itself at the center of global commerce and increase its stake in world affairs. Most notable is its flagship Belt and Road Initiative (BRI), unveiled by President Xi Jinping in September 2013. The initiative aims to connect Asia with Africa and Europe through a complex network of highways, rail and shipping routes along the original Silk Road in a bid to stimulate economic integration and cultural exchange across the region and “embrace a brighter future together,” according to China’s government.
Such ambitious aspirations have put China further at odds with the U.S. superpower, who is looking to curb China’s ascent in the region. In the meantime, Russia has taken an ambiguous quid pro quo approach based on its mutual interests.
Armenia’s neighbor Iran is also looking to China to mitigate the crippling effects of an American oil embargo and other economic sanctions on its already bleeding economy. The launch in May 2019 of a new freight train connection is destined to accelerate trade between Bayannur in China’s Inner Mongolian Autonomous Region and the Iranian capital, Tehran—the latest indication of a growing rapprochement between the two countries.
Meanwhile, smaller states in the region continue to foster closer relations with the People’s Republic for assistance in their own economic and infrastructural development—Armenia among them.
While Armenia may visibly be excluded from the overland routes of the BRI, it remains integral to the Silk Road Economic Belt, which, together with the 21st-Century Maritime Silk Road, comprises the BRI enterprise. Armenia’s deputy foreign minister Avet Adonts points out that “Armenia can also benefit from cooperation in environmental protection and climate change, as well as people-to-people contacts, educational, and cultural exchange. Even the visa facilitation regime signed between Armenia and China in recent months can be viewed in the logic of BRI.”
As for involvement in transport systems, the deputy minister adds: “Once completed, the long-delayed North-South Road Corridor stretching from Armenia’s southernmost city of Agarak to Gyumri and onto the Georgian border will also be used for transport communication with the whole region to the benefit of multiple beneficiaries, including our partners in the Asia-Pacific.”
Launched in 2012, the 550-kilometer, $1.5 billion USD highway will connect to Georgia’s East-West Highway that leads to the port cities of Poti and Batumi on the Black Sea, providing Armenian cargo trucks faster and safer access to seaports linking to Europe, Russia, and Turkey. The corridor is also part of both the Asian Highway Network of the UN Economic and Social Commission for Asia and the Pacific, and the EU’s TEN-T extended network.
With Armenia once again at the center of the Eurasian geopolitical chessboard, this may be the country’s quintessential challenge, calling upon it to step up its game even further to prevail in what has become a very crowded playing field.
Strategic Moves for China
With Armenia’s longstanding focus on Russia and the European Union, the rise of China is increasingly prompting Yerevan to turn its gaze eastward. Armenia’s leaders are particularly keen on promoting closer economic and political ties with China, which would provide access to much-needed investment and low-rate financial assistance from Chinese banks, as well as diversify its foreign policy, reducing its dependence on other power centers to achieve its political and national security goals. It also understands the importance of cultural exchange in supporting and promoting opportunities in education, business, and the arts to fortify cross-cultural engagement.
The forced Sovietization of Armenia under the imminent threat of Turkish invasion in 1920 brought Sino-Armenian historical exchanges to a virtual standstill. Less than 30 years later, the formation of the People’s Republic of China in 1949 completed the mass exodus of Armenians from the newly formed socialist country that began with Japan’s invasion of China some 12 years prior, with most Armenians migrating mainly to the U.S. and Australia. Much of their legacy, including the Armenian Church in Harbin, was later demolished during China’s Cultural Revolution in 1966.
Diplomatic relations between the two countries resumed only with the coming of Armenia’s independence. In April 1992, Armenia and China signed a joint communiqué on the establishment of diplomatic relations that paved the way for the opening, in July 1992, of the Chinese Embassy in Yerevan and an Armenian Embassy in Beijing in August 1996.
In his first-ever visit to the People’s Republic on May 14, 2019, upon invitation from President Xi, Prime Minister Pashinyan reiterated that China is among Armenia’s foreign-policy priorities and expressed renewed interest in furthering bilateral relations in trade and other areas like transportation, energy, and information technologies.
In the Armenian capital, symbols of China’s growing interest in the Caucasus are increasingly apparent. Construction of a sprawling new 40,000 square meter Chinese embassy compound is well-underway and, when finished, will be the second largest Chinese diplomatic mission in the former Soviet Union. Beijing also recently donated 200 ambulances outfitted with modern medical equipment as part of its continued economic assistance to Armenia, which has totaled $50 million USD since 2012.
But China’s expanding political and economic engagement with Armenia and the Caucasus has also brought it into close proximity with the geopolitical ills of the region, the Nagorno-Karabakh conflict among them. And while the BRI has forced President Xi and the ruling Communist Party to adopt a more active stance vis-à-vis conflict mediation to protect its interests and citizens along the New Silk Road, the nation’s leadership has maintained a traditionally neutral stance on the status of Nagorno-Karabakh.
In a recent visit to Armenia that closely followed Prime Minister Pashinyan’s earlier visit to China, its state counciller and foreign minister Wang Yi reasserted that his government believes in the exclusively peaceful resolution of the nearly 30-year-old conflict within the existing format of international mediation sponsored by the OSCE Minsk Group.
Trade and Finance
On the economic front, China quickly became one of newly independent Armenia’s first trade partners with a trade agreement between Yerevan and Beijing in the early days of 1992. This was quickly followed by the creation of a Sino-Armenian intergovernmental trade commission a few years later. By 2010, China was Armenia’s third largest trading partner behind the Eurasian Economic Union and the European Union, with a 29.3% increase in trade turnover compared to the previous year, according to Armenia’s ministry of economy.
And although Chinese foreign direct investment in Armenia still trails behind the hundreds of millions invested in Georgia and Azerbaijan, the significant shift in Armenia’s way of doing business after the Velvet Revolution has prompted the first-ever Chinese company, New Yida, to invest $5 million USD in a new mineral water production and bottling factory in the country’s Gegharkunik region.
As for finance, Arshaluys Margaryan, head of the Public Debt Management Department of the Ministry of Finance, reports that, as of February 2019, Armenia’s debt to China was just over $23 million USD dollars—a mere 0.33% of Armenia’s total public debt. The purpose of the single loan, transacted in 2015, is to help Armenia modernize its technologies and equipment used for customs inspections.
Armenia will begin repaying the loan in 2020 at a fixed rate of 2%, considered favorable when compared with the average 2.39% interest rate on foreign loans. The average term to maturity of the loan is 16 years, twice that of the typical 9.62 years average term of other foreign government loans to Armenia. For these reasons, the Ministry is optimistic that the debt can be serviced at minimum risk.
Chinese interest in Armenia transcends the political and economic spheres. In August 2018, Chinese officials formally opened the Chinese-Armenian Friendship School, a $12 million USD, state-of-the-art facility where up to 500 Armenian children will learn Mandarin and study Chinese culture in addition to the regular Armenian curriculum.
During the official opening ceremony, Prime Minister Pashinyan affirmed that the Friendship School represented a new page in Chinese-Armenian relations marked by many common interests. “This school will become a channel through which Armenians will gain more in-depth knowledge of the enormous influence which China and Chinese civilization have had on the development of humankind,” said Pashinyan.
The new school joins a growing list of teaching institutes and centers in Yerevan dedicated to the promotion of Chinese language and culture, including the Confucius Institute of Yerevan State University of Languages and Social Sciences, established in 2009. The school’s Armenian director Gor Sargsyan described the center as “a platform for the promotion of Chinese-Armenian mutual understanding, friendship, and communication,” while his Chinese counterpart Yan Meihua claimed that the Institute helps Armenians “understand, identify with, and eventually love China.”
The first of its kind in the region, the institute has attracted nearly 300 students—a 60-fold increase from its five students in 2009. It is part of a network of non-profit learning institutions headquartered in Beijing and financed by the Chinese Ministry of Education-affiliated Office of Chinese Language Council International.
Casting a Wider Net
With China standing center stage in the region, there are other primary actors with valuable potentials for Armenia. The “Big Three” economies of India, Japan, and South Korea each have an interest in Armenia, whether for its human capital, educational resources, or tourist attractions.
The signing in 2017 of a visa facilitation agreement between India and Armenia has since caused a spike in Indian visitors to Armenia—a remarkable 169% increase, according to Armenia’s Tourism Committee.
Yogeshwar Sangwan, who was India’s Ambassador to Armenia for the past
three years, explains that many of his compatriots who visit Armenia come to stay to explore business opportunities and study, chiefly medicine. More than 6,000 Indians have today established permanent residence in Armenia. “Because of a similar mindset, Indians feel at home in Armenia,” said Sangwan.
But a greater Indian presence in Armenia has also had a surprisingly positive effect on the number of Armenians residing in India, explains Armen Martirosyan, Armenia’s Ambassador to India.
He explains that, in the 17th century, India boasted a small, but wealthy community of Armenian merchants and tradesmen who had migrated there from the Iranian city of Isfahan. But two world wars, India’s independence, and the consolidation of the Armenian Diaspora in Europe, Australia, and the U.S. in the 20th century led to the exodus of Armenians from India, leaving behind only historical monuments as manifestations of bygone wealth and prosperity. A spike in the number of mixed marriages in recent times, with many Indians returning home with Armenian spouses after completing their studies in the country, has begun to revitalize the dwindling settlements of Armenians in India.
And while Armenians continue to remain relatively absent from the landscape of present-day India, according to Martirosyan, the current state of bilateral political relations and prospects for
collaborations in such areas as artificial intelligence, telecommunications, pharma-
ceuticals, and genetics, along with talks of direct flights between Yerevan and New Delhi will enable Armenia to more effectively explore the potential of this rising economic power and “revive the erstwhile high profile of Armenians in this beautiful country.”
Japan and South Korea
In the Pacific Ocean, Armenia draws on its booming IT sector and national treasures as the legendary composer Komitas and the classical music virtuosos produced in current-day Armenia. Since its opening in 2010, the Armenian Embassy in Tokyo has sponsored performances of Armenian classical greats such as Sergey Khachatryan (violin) and Narek Hakhnazaryan (cello), and has helped establish the Komitas Music Society of Japan, presided over by Japanese pianist Takahiro Akiba, who has since become the ambassador of Armenian music in Japan.
In Armenia, Japan has become synonymous with development assistance, affording over half a billion US dollars in grant aids, technical assistance, and low-interest yen loans for large and medium-scale development programs after Armenia gained independence and was included in the Official Development Assistance programs of Japan International Cooperation Agency (JICA). During his recent visit to Armenia—the first by a sitting Japanese foreign minister, Taro Kono also announced the launch of Caucasus Initiative, a two-way program aimed at human resource development for state building, infrastructure, and business environment improvement in Armenia.
The new initiative comes on the heels of two separate all-inclusive investment liberalization, promotion, and protection agreements signed in 2018 between Armenia and Japan, and Armenia, and South Korea, and provides for political and judicial development assistance, something Japan had traditionally shied away from according to Japan’s ambassador to Armenia Jun Yamada.
In Seoul, South Korea, a small group of Yerevan State University students and young tech-wizards from Armenia study in top Korean universities and work with tech giants such as Samsung and others to bolster their professional skills, while promoting Armenia as “a country strong in IT and rich in young talent,” according to Grant Pogosyan, the Ambassador of Armenia to Japan and South Korea.
Enter Vietnam and Singapore
Beyond the Big Three Asian countries, Armenia is also reinvigorating ties with partners of a bygone era. Prime Minister Pashinyan, during his first state visit to Vietnam and Singapore this July, talked about “new, more dynamic relations” between Armenia and its Asian counterparts, eyeing collaboration prospects in trade, education, health, tourism, IT, and other sectors.
In Vietnam, Armenia’s prime minister and his counterpart Nguyân Xuân Phúc, highlighted the efforts of the Armenian-Vietnamese Intergovernmental Commission on Economic, Scientific, and Technical Cooperation in furthering relations in these key areas and revealed that an Armenia-Vietnam Business Forum would be held in Yerevan together with the Commission’s next session later this October. The forum will bring high-ranking government officials and representatives of Vietnam’s business world to Armenia to discuss investment opportunities and stimulate trade between the two nations.
Extended negotiations between the Armenian and Vietnamese delegations produced cooperation agreements in education and tourism, with a view to cultivating additional agreements to exclude double taxation and set up a facilitated visa program in October.
A raft of similar agreements was signed two days later between the Armenian and Singaporean governments to do away with double taxation and combat tax evasion, as well as strengthen cooperation in tourism, culture, and education.
The Armenian delegation also met with other members of Singapore’s political elite, in addition to the city-state’s Economic Development Board and Business Council to discuss investment opportunities, including in engineering education, which aligns with Armenia’s priority to grow an economy driven by the IT sector.
And while trade turnover with Vietnam and Singapore remains below the one million mark in exported goods, Prime Minister Pashinyan is confident that the qualitative transformation of Armenia’s economic and investment environment will soon upset that trend. Talking to his Singaporean hosts during the state dinner on July 8, he boasted of “no barriers for the activities of foreign companies” and vouchsafed for the necessary legal conditions for the protection and stimulation of foreign investment in Armenia, going so far as to say that “Armenia no longer suffers from the ills that plague other post-Soviet countries.”
Through the Eurasian Lens
Shortly before the Velvet Revolution, then President-elect Armen Sarkissian held an open dialogue with the Armenian community of New York on the prospects of Armenia’s economic growth in the divided framework of East and West. He explained what it means to have access to the financial support, liquidity, and technology from relations with Europe, applying those inputs to Armenian talent and ingenuity, and selling that output to the custom free market of the Eurasian Economic Union (EAEU) over which Armenia now presides. “We are the only country in the region that has good relations with both the European Union and Eurasia. It’s a fantastic opportunity and if we are smart, we will use it.”
This perspective was reiterated in his speech to foreign dignitaries from across Asia and Europe attending the XVI Eurasian Media Forum in Almaty, Kazakhstan in May 2019. This time, President Sarkissian characterized Armenia as “a small country, but a global nation,” which has learned to work with everyone. He urged the international community to take advantage of Armenia’s relations with the European Union on the one hand, and its proximity to Russia and Eurasia on the other to explore new economic and trade opportunities.
Many in the East have already taken heed of the President’s words, for whom Armenia represents a vital commercial corridor to lucrative markets in Europe, Russia, and Iran, with the Middle East not far behind.
Free Trade Opportunities
According to its Ministry of Economy, Armenia benefits from the Generalised System of Preferences (GSP) of the United States, Canada, Switzerland, Japan, and Norway, and the Generalised System of Preferences Plus (GSP+) of the European Union, which reduce export duties from thousands of Armenian products traveling to these countries. The GSP+ scheme also lets foreign investors, including those from Asia, set up shop in Armenia and export locally made products to the 500 million consumer market of the EU.
At the same time, Armenia’s unrestricted access to the 170-million strong common market of the EAEU, which joins Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia into one common economic area, means that it enjoys the right to the duty-free import of raw materials from these countries, while Asian investors can use Armenia to access the new market more easily, explains the ministry. It also cited Armenia’s tax-free economic zones as potential new platforms for cooperation.
Under Armenia’s current presidency of the EAEU, a temporary, three-year free trade agreement (FTA) with Iran was ratified, opening up increased trade with the Middle East via the Armenian-Iranian border. Likewise, Singapore and Vietnam are also now betting on Armenia to sign or expand on existing FTAs with the Union to promote economic integration in the wider region. Vietnam was the first country to sign an FTA with the EAEU in 2015.
In his official speech to the visiting delegation from Armenia, Prime Minister Lee Hsien Loong of Singapore said, “We appreciate Armenia’s strong support for the FTA [between Singapore and the EAEU] and hope to be able to conclude it as soon as possible to catalyze business and economic relations between our two countries.” Vietnam’s Nguyân Xuân Phúc also referred to the Vietnam-EAEU FTA as key to Armenian-Vietnamese relations.
In May 2019, Prime Minister Pashinyan, speaking at the Conference on Dialogue of Asian Civilizations in Beijing, China, declared, “Armenia sees its path toward progress in close collaboration with all regional and global players.”
Whether this announcement signals Armenia’s intent to draw back from its strategic alliance with Russia in favor of a more diversified partnership portfolio remains an open question. But the foreign influences, both old and new, will test Armenia on ever more challenging and sophisticated levels of diplomacy, always with an eye toward its ultimate win: To live in peace with all its neighbors along a 21st-century Silk Road, engaging in trade, cultural exchange, and political alliances.
“Armenia is fully aware of the complex and potentially conflicting interplay of interests between these players,” states Armenia’s deputy foreign minister Adonts. “It is well known that our geographical location has predisposed us to be open to various regional cooperation formats and engagements. In this sense, our strategy is anchored in an approach that accommodates different interests in our region without creating fault lines and minimizing the influence of conflicting interests. The same is true of our relations with our partners in Asia-Pacific.”
Armenia’s citizens, in concert with the worldwide Armenian Diaspora, must also be aligned with these new realities, working in tandem to ensure that the homeland retains its independence and distinctive national characteristics, burnishing its modern image at home and abroad. As Asia rises or falls over the coming decades, Armenia must both follow its own North Star while mastering the geopolitical dynamics that have long contributed to its trials and triumphs.