Arthur Khachatryan - Armenia Azerbaijan Talks, 2025 State Budget, Internal Political Developments | Ep 385 - Nov 10, 2024 [EP385]

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Guest:

• Mr. Arthur Khachatryan

Topics:

• Armenia Azerbaijan Talks
• Draft 2025 State Budget
• Armenian Internal Politics

Episode 385 | Recorded: November 13, 2024

Show Notes

Armenia - Azerbaijan “Peace Treaty”

Azerbaijan Leaks Points of Disagreement

Farid Shafiyev, head of a think tank funded by the office of the Azerbaijani president, revealed the 3 points that have not been agreed upon yet:

1. Change of Armenia’s constitution through referendum
2. Renounce all legal claims against Azerbaijan in international courts
3. Withdrawal of EU mission in Armenia

In addition, Shafiyev talks about the “demilitarization of Armenia”:

• “I have also heard some arguments that the peace treaty cannot guarantee any sustainable security, just like the Budapest Memorandum of 1994 failed to guarantee Ukraine’s territorial integrity despite the written commitments from signatory parties. Thus, the only guarantee is the situation on the ground - which means that Armenia should be limited in its military capacity - i.e. demilitarized.”

Questions:

• Shafiyev is highly connected. How reliable are these claims, and why is Aliyev’s office essentially leaking this information now?
• Shafiyev talks about demilitarizing Armenia, because he says that no peace treaty can guarantee security. What is Azerbaijan’s vision and plan to demilitarize Armenia?

Meanwhile, Ararat Mirzoyan is talking about “cautious optimism”, and the Armenian MFA is full of vague answers to questions about the points of disagreement.

Questions:

• Why is the MFA not clarifying the Armenian positions, when Azerbaijan is tweeting about the differences publicly?
• Is it possible that at the last minute, something will be signed at #COP29, which is in progress now, since yesterday until Nov. 22?

Trump Elected President of the US

Trump will take over as president of the US on January 20th. He has promised to end the Ukraine war, the Israeli wars on Gaza and Lebanon; he has promised to “restore PEACE” between Armenia and Azerbaijan; and he has referred to Artsakh and the ethnic cleansing of its Armenian Christian population.

Questions:

• Would Pashinyan’s’ government have preferred to see Kamala Harris win?
• How should Armenia engage Trump?
• What should the Armenian American diaspora engage Trump?

Draft 2025 State Budget

The parliament is discussing the government’s draft 2025 budget.

Summary:

• Budget expenditures of $8.93B
• Ongoing expenses of $7.05B
• Capital expenditures of $1.88B
• Budget revenues of $7.37B, of which $7.08B in tax revenues.
• Budget deficit of $1.56B.
• Economic growth of 5.6%
• Inflation rate of 3.5%

Questions:

• What are your thoughts about this budget?
• Given that the government has a dismal record of hitting its targets both in expenditures, as well revenues, do these targets look reasonable?
  • Note: as far as tax revenues are concerned, the government thinks it can increase revenues by 25% through “improvements in tax administration, fight against shadow economy, as well as other tax policies.”
• The government has been including the gold re-export trade in its GDP calculations. Since May this sector has been cut to less than half of its size in February. Was Armenia’s tax base benefiting from this sector?
• Given that the economy has been slowing down since the start of 2024, is a 5.6% economic growth rate in 2025 a reasonable expectation?
• According to economists, consumer debt has become a concern because most peoples’ wages haven’t kept up with their borrowing, especially mortgage debt. At what point does this issue become alarming?

The National Debt

On the macro level, the national debt is rising sharply. The government expects a debt-to-GDP of 53.5%, which is a manageable level, but just in the past month we’ve read of at least another $5-600 million in international loans.

Questions:

• What is fueling all the borrowing, and is the money going towards expanding the economy, or just operational expenses?
• Is the war in Ukraine ending a risk to Armenia’s re-export economy?

The Defense Budget

A 20% growth in the defense budget is earmarked to “increase resilience” of Armenia’s security. So in 2025 the defense budget will be $1.7B, compared to Azerbaijan’s $5B. (Revised up from $3.9B). (Note: Russia is also boosting defense spending by over 30% to $142B in 2025)

Questions:

• Did the government fulfill last year’s $1.3B defense budget?
  • Are we safer for having spent that budget on defense? What do we have to show for those $1.3 billions?
  • Last year Armenia and the US held so-called military exercises named Eagle Partners. Many outlets reported that it was mostly crowd control type drills. Is the money being reallocated for transforming the armed forces into a national guard to keep the people pacified and quiet. Remember Eagle Partner, which turned out to be a police and crowd control training exercise, instead of a war drill.

Armenian Internal Politics

New Law for Retired Officers

Parliament recently passed a new law encouraging retired low and mid-level officers to rejoin the Army, yet keep their pensions. Before the law those who would rejoin would lose their pensions.

Question:

• Why is this law needed now? Is there a manpower shortage in the armed forces, and in which positions?

New Justice Minister

Minister of justice Grigor Minasyan resigned on October 1. Supposedly the calls for his resignation started because he had appointed a deputy minister of justice who had allegedly been seen with Robert Kocharyan’s daughter in 2019.

After a month of intra-party drama, Civil Contract appointed Srbuhi Galyan as the new minister of justice.

Question:

• What were the real reasons behind this shuffle?
• The struggle to find a new minister of justice was rather long and heated. Highly qualified names, like Yeghishe Kirakosyan, were passed over. Who is Srbuhi Galyan, is she capable, qualified, etc?
• At one point this issue was threatening to engulf the head of the supreme judicial council, Karen Andreasyan, but that seems to have passed?

Legislative Changes In Preparation For Elections

There is evidence that the authorities are preparing for elections, two potential legislative measures spearheaded by Civil Contract are drawing speculation and criticism.

There are attempts to change the Armenian constitution, via parliamentary vote, to remove the “stable majority” clause from the constitution. According to the current Armenian constitution, the party or alliance that gets the majority of votes will automatically receive sufficient bonus mandates to give it 54% of the vote. The council examining constitutional changes voted in favor of a proposal by the Union of Informed Citizens, headed by Daniel Ioanisyan, to remove this “stable majority” clause, However, the council also voted against separating this issue from the general packet of constitutional reforms, so that it can be expedited and voted on by the National Assembly ahead of the 2026 scheduled elections.

The other, potentially more concerning issue, is a measure by Civil Contract to allow the cancellation of election results if martial law (or state of emergency is declared). This measure has already passed in the first reading.

Questions:

• First, can you let us know what the issue with this “stable majority” system is and why are pro-government forces working to remove it?
• Can you tell us how the proposed law on cancellation of election results, in case of state of emergency, works? What are the dangers if it is adopted?

Notes:

• The Armenian government has used state of emergency to prevent elections (constitutional referendum in 2020) before;
• The government can find reasons to cancel elections this way. For instance, Azerbaijan can start a shooting on the border and the Armenian government can declare a state of emergency and cancel elections. This can be done either in coordination with Azerbaijan’s Aliyev.

Wrap-up

That’s our show! We hope you found it useful. Please find us on Social Media and follow us everywhere you get your Armenian news.

Thanks to Laura Osborn for the music on our podcasts.

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