Betrayed Promises of the Karabagh Movement: A Balance Sheet

NOTE: This is a draft of a talk I presented in May, 1998 at a conference in Cambridge, Massachusetts on the Karabagh Movement. I revised the draft slightly in December 1998, and except for minor changes, I have not bothered to update it since. I should point out, however, that an abundance of new research material has come to light recently, including revelations about massive emigration from the Republic of Armenia. (Some reputable sources have claimed that, by the year 2000, the population of the country had been reduced to one-half of what it had been ten years earlier.) These revelations confirm and reinforce the assessment presented below.


In addition to the demand for self-determination in Nagorno Karabagh, leaders of the Karabagh Movement also rallied popular support by advancing other demands, including calls for national sovereignty, environmental protections, cultural renewal, democratic reforms and prosperity. One of the handiest ways of assessing the ten-year career of the Movement might be to adopt these demands as standards of evaluation of subsequent developments. This is what I propose to do, putting special emphasis on class formation and macroeconomic developments in post-Soviet Armenia.

Focus and Scope of the Discussion:

In Spring 1997, I happened to pass by an opposition demonstration in Yerevan's Independence Square. It was a small demonstration, compared to the demonstrations of the past--a huddle of several hundred ragged men--and the tone was bitter. Such gatherings were not uncommon at that time. The Yerevantsi accompanying me reflected not on the angry words swirling in the air, but on the sunflower seeds scattered across the square like confetti. Ten years earlier, she recalled, hundreds of thousands of demonstrators occupied the city squares for days and nights on end. People's faces were radiant. They shouted Gharabaghu mern eh! "Karabagh is ours!" in unison, like an enormous choir. Neighbors brought trays of coffee to share with the first demonstrators they met. The protesters picked up their litter, and when they dispersed the squares were cleaner than they had found them.

"Now look at this place," my Yerevantsi companion said sadly, "They ought to rename it 'Sunflower Seed Square'."

Instead of the bracing chant Gharabaghu mern eh! and demands for clean air, national sovereignty, democracy and freedom, the speakers (as I noticed later, on the local TV report) hurled angry charges and counter charges against government personalities, while the sullen audience gnawed on sunflower seeds. The tone of bitter recrimination was a far cry from the exalted rhetoric of the "heroic period" of the (Nagorno) Karabagh Movement--roughly, say, from early 1988 through 1991. Even more significantly, perhaps, few passers-by bothered to take notice of the demonstration. Few Yerevantsis, it seemed, still had the stomach for high-blown oratory.

It might seem curious that this scene of demoralization and lassitude would have taken place in Independence Square, of all places: Only seven years earlier, jubilant throngs had gathered there, surrounded by the architectural achievements of the Soviet era, to celebrate their victory over what was advertised as a ruthless and all-mighty Evil Empire, "the most criminal regime in human history," according to the hyperbole of the day. The crowds were supposed to have been welcoming a new era of freedom, happiness and unforced civic responsibility. So what happened in the intervening seven years?

In this presentation, I will offer an approximation to an answer to that question, as I revisit the main goals of the Karabagh Movement and consider whether or to what extent they have been achieved(1). It is not my purpose to engage in the sort of desultory criticism that characterized public oratory in the final years of Soviet Armenia. During the course of this presentation, I hope the prospective, cautionary character of my remarks will become clear.

In order to make my evaluative task a bit more manageable, I will narrow my discussion in two ways: First, I will limit my remarks to the Yerevan-based Karabagh Movement, the Karabagh Committee and their successor, the Armenian National Movement (ANM). Despite the fact that the movements in Yerevan and Karabagh had "intertwined trajectories," they were in fact distinct, at least geographically and, to some extent, tactically. For these reasons, my remarks below should not necessarily be taken to apply to the contemporaneous military and political leadership in Karabagh.

Secondly, I will limit my view to the Karabagh Committee and its successors as they developed since May 1988. At that time, it will be recalled, stridently anti-Soviet leaders, including the future President and Prime Minister of the Republic of Armenia and the future mayor of Yerevan, eclipsed Igor Muradyan, Zori Balayan, Silva Kaputikyan and others who earlier had been prominent in the Karabagh Committee. The new leaders were most readily associated with the Committee (which by Spring 1988 was leading the Movement), and they have widely been credited for giving the Movement its momentum and policy direction.

Balance Sheet:

One of the most obvious items to place at the top of a balance sheet of the Karabagh Movement might be the recognition that it succeeded in achieving a goal which, only ten years ago, seemed unachievable. That goal, of course, was Armenia's formal independence as a nation-state. I will begin my survey, then, with a few remarks about (1) the achieved goal of formal political independence. Since some of the first mass demonstrations in late 1987 were protests against air polluters and a nuclear power plant, I will then turn to (2) the Movement's environmental demands. After that, I will review the goals of (3) "re-nationalizing" Armenian culture; (4) advancing democratic reforms and human rights; and (5) achieving economic prosperity(2). Questions about reforms undertaken in the name of achieving prosperity are inextricably tied up with questions about class formation and the macroeconomic trajectory of the country. Towards the end of the presentation, I will say a few words about Yerevan's sustained commitment to (6) the goal of self-determination in Nagorno Karabagh. (3)

1.) Political Independence:

The Republic of Armenia has a new national anthem, its own currency, a flag flying at UN Plaza, a number of embassies abroad and a number of foreign embassies in Yerevan. The country is a member of various multinational organizations and arrangements, including the OSCE, the IMF and the World Bank, and has acceded to the WTO and numerous other multilateral arrangements. Thus, the Republic of Armenia would seem to have met the requirements to qualify as what passes for an independent country these days.

National independence, of course, is relative, especially in this supposedly new epoch of globalism, an epoch Marx and Engels described with stunning accuracy one hundred and fifty years ago, in the proleptic first section of the Communist Manifesto. The term economic interdependence is often used to describe the global relationships among a large number of countries relevantly similar to, say, Ghana, Jamaica and Bangladesh, on the one hand, and a small number of countries relevantly similar to Germany, the United States and Japan, on the other hand. The word interdependence, however, masks at least two patterns of power relationships on the ground today: private appropriation of surplus value, in the domestic and transnational arenas, and neo-colonialism, in the international arena. As far as I can determine, a great part of the vaunted "realism" of the leaders of the Karabagh Movement consisted in pretending that these two patterns of domination do not exist. This, at least, is the impression one gets after reading some of the public statements of these leaders. Consider the following statement, made in early 1990 by Karabagh Committee member Vazgen Manukyan:

Currently the dominant course in the development of world affairs is the strengthening of [nation] states [through] scientific, technical, economic and cultural development. One magic word describes the foundation of that course: Freedom. (4)

Manukyan and other leaders of the Karabagh Committee customarily described Armenia's previous relationship to Russia as one of "slavery" (kerootyoon; sdergootyoon)(5). At the same time, they also insisted that "It is necessary not only to encourage joint ventures but also the direct investment of foreign companies in our republic." (6) According to Manukyan's "realistic" account, this is the path "which has been traveled by many other nations and which leads to happiness." (7) It would be instructive to consider the experiences of other countries that have embarked upon the path that Manukyan has described as "leading to happiness," starting with such acclaimed "economic miracles" as Chile, Mexico, Indonesia and Brazil. But alas, this would take us too far afield.

It is a safe bet, in any case, that, despite the renewed popularity of slogans calling for closer relations with Russia, Armenians remain overwhelmingly in favor of national statehood. If my account is at all near the mark, however, the form that Armenia's independence has taken and the international context in which it was achieved have contributed at least indirectly to the erosion of popular support for the ANM administration. I will return to the topic of national sovereignty towards the end of this discussion. First, however, I would like to turn to other public goals of the movement, beginning with the early ecological demands.

2.) Green Demands:

The mass demonstrations that began in late 1987 focused attention on a number of environmental concerns, including the Medzamor Nuclear Power plant near Yerevan. Protesters made it clear that they did not feel secure living in close proximity to a potential Chernobyl located in an earthquake zone and near a highly militarized border. As we know, the Karabagh Movement eventually succeeded in shutting down Medzamor. The power plant may or may not have represented an unacceptable risk, in the estimation of Western inspectors and the International Atomic Energy Agency: Specialists on both sides have argued the point back and forth. What is less obscure, however, is that, as long as the demand to shut down Medzamor helped undermine Soviet authority, the Karabagh Committee and the ANM did little to quell the hysteria about evil Russians imposing a nuclear power plant that created "a generation of birth defects" in Armenia. In the aftermath of the 1988 earthquake, authorities shut down Medzamor, reducing Armenia's electrical output by 816 megawatts, or twenty-three percent of its electrical capacity(8). In the course of a couple of bitterly cold winters with only sporadic electricity, however, the popular mood shifted and Ter-Petrosyan came out in support of putting Medzamor back on line. After both units at the power plant were reopened in 1995, the President's supporters pointed to the re-commissioning of Medzamor as one of the accomplishments of his administration! (9)

A similar scenario played out when it came to demands to shut down the sprawling Nayarit chemical complex in Yerevan. Yerevantsis justifiably blamed the complex for much of the degradation of their city's air quality. Nayarit produced some 100 different kinds of products used in more than 150 factories in Armenia. Closing the facility in1988 improved air quality, but cost 10,000 workers their jobs. Once the latter point began to sink in, ANM leaders began backpedaling on the issue of closure. The plant resumed production in July 1994. If today it is still operating at far less than full capacity, this has more to do with a lack of inputs than to concern about air quality.

Lake Sevan, the largest lake in the Republic, also became a powerful symbol of Soviet diminishment and despoliation of Armenia. Over the decades Soviet authorities severely disrupted the biostasis of the lake, destabilizing the indigenous aquaculture and reducing water volume to an alarmingly low level. Under the new regime, however, the problem only got worse, as the government drew water from the Sevan-Hrazdan Cascade for hydropower generation, to compensate for the loss of Medzamor. As a result, the lake's water level has diminished to such an extent that, according to the CIA Factbook for 1997, Yerevan's drinking water supply is now endangered. (10)

These, then, were the three main ecological demands of the Karabagh Movement: closure of Medzamor and Nayarit, and reversing the biostatic damage to Lake Sevan. In the case of the first two demands, as we have seen, the Movement promptly achieved its aims, only to backpedal on the issues once the economic and human price of their successes began to sink in. In the case of the third demand, the Movement helped set the stage for a worse and more rapid deterioration of the original problem.

As I have emphasized, Armenia's problems, environmental and otherwise, did not originate in 1988. Many of them date back decades and may to a large extent be laid at the foot of the Soviet leadership. The wasteland that was the Aral Sea stands as a stark reminder of the scale of environmental degradation during the Soviet years. Decades of ruinous Soviet environmental practices, however, do not diminish the damage that can fairly be billed to the ANM account. Armenia's high profile at the Rio Summit notwithstanding, and despite the establishment of a Ministry of the Environment and the adoption of environmental protection legislation, the green demands that lent urgency to the Karabagh Movement and attracted warm bodies to the city squares have either been reversed or abandoned. Aside from accelerated environmental degradation, the most salient effect of the Karabagh Movement's ecological component has been its role in disrupting production and galvanizing anti-Soviet, anti-Russian and pro-capitalist forces. Once these developments had run their course, the green demands quietly dropped from the public agenda. Indeed, the ANM government exacerbated the environmental problems it inherited and brought on new problems, including severe deforestation, additional loss of topsoil, salinization and further pollution of the Hrazdan and Aras Rivers. (11) Unlike its Soviet predecessors, moreover, the ANM regime managed to do its environmental damage at a time when industrial production in the country was at a near standstill.

3.) "Re-Nationalizing" Culture:

The Karabagh Movement adroitly connected issues of environmental abuse to issues of abuse of power. In the heady final days of the Soviet era, leaders of the movement blamed Russians for various and sundry "crimes committed against humanity and against our people." (12) These crimes included "enslaving" Armenians, of course, as well as losing Kars and Ardahan, and criminally wresting from Armenians their "natural aptitude in business." (13) Vazgen Manukyan has even insinuated on the record that Russia was largely to blame for the 1915 genocide. (14)

As we know, the ANM's best diplomatic efforts to take a greater distance from Russia and to draw closer to Washington and Ankara yielded little in the way of benefits to Armenia, and events finally forced the administration to revert, however regretfully, to a "North-South," Moscow-Tehran alignment(15). These events included Ankara's blockade and active support of Azerbaijan on the issue of Karabagh, and the fact that close relations with Ankara were inimical to long-standing Russian policy objectives in the region. By the time ANM leaders ruefully relinquished their hopes for a policy alignment along the "East-West," Ankara-Washington axis, they had squandered much precious time and political capital.

While the secessionists were courting Ankara in the final years of the Soviet era, they were also calling for "de-russification" of Armenia. Whatever "de-russification" may mean, however, and to whatever extent it has taken place in Armenia, it has not resulted in the Armenian cultural renaissance that many people had expected.

Not so many years ago, Armenians from the diaspora would come to Yerevan on state scholarships, to study everything from Armenology to medicine at the State University and the Polytechnical Institute. Today, by contrast, a new generation of native-born citizens may no longer look forward to the sort of free university education that the mathematicians, historians and philologists on the Karabagh Committee enjoyed. As part of the standard package of "fiscal restraint" requirements of the IMF and the World Bank, the ANM administration consolidated schools, reduced the number of teachers, introduced student payment for textbooks, facilitated the development of private schools and introduced fees for higher education. It should not have come as a surprise, then, that as the government itself has reported, "the quality of education has dramatically deteriorated in recent years, reflecting severe budgetary constraints." (16) The erosion of the educational infrastructure, together with the brain drain, have stripped Armenia of the educated, inexpensive labor force that Western analysts counted among the country's best assets as it entered an environment of global economic competition. (17)

The ANM's record, then, provides little in the way of consolation to the "re-nationalizers" of Armenian culture. On the contrary, its policies have swept away subsidies for education and the arts and have opened the country more completely to Western--that is, non-Armenian--cultural commodities and popular entertainment. Eight years ago, a giddy crowd pulled down Lenin's statue in the central square. Since then, the erstwhile protectors of the purity of the Armenian nation have conducted their daily affairs under the inscrutable but reassuring gaze of the Marlboro Man, and Yerevantsis have discovered that it is considerably more difficult to feed their families than to topple the statue of a great man.

4.) Democratic Reforms and Human Rights:

Armenians, like Russians and other peoples of the former Soviet Union, were fed up with decades of arbitrariness, arrogance and abuse on behalf of apparatchiks and the nomenklatura. As such, they embraced appeals in the name of democracy, human rights and the rule of law. These terms, of course, are far from ambiguous. A study conducted by an international program entitled "Democracy and Local Authorities" confirms this point, with reference to the word democracy. The study concluded that in Armenia and other CIS countries "democracy" is taken to refer to negative freedoms, such as the freedoms of speech, the press, conscience and so on. By contrast, in Western and Central European interpretations, according to the study, "democracy" is taken to refer preeminently to "the participation of the population at all levels of decision-making, i.e. their participation in the process of government." (18)

If we take "democracy" in the former sense, it would not be difficult to make the case that the ANM regime has, at best, a tarnished record on this count. True, Armenians have scored notable advances when it comes to the freedoms of association, expression, conscience and so on. However, Western observers and native dissidents have leveled a wide range of charges against the ANM regime, including complicity in persecution of religious sects(19), attacks against opposition figures, and widespread bribery, embezzlement and nepotism. Not all of these charges have been convincingly documented; nevertheless, it would be hard to deny that the ANM regime jailed citizens under questionable circumstances, shut down opposition newspapers and expelled political opponents. In the eyes of many Yerevantsis, moreover, the regime forfeited it's last democratic credentials in Fall 1996, when it violently suppressed demonstrators protesting election results many people believed were falsified.

If, on the other hand, we take "democracy" to refer to "participation of the population at all levels of decision-making," then there is no dearth of evidence that, like the goal of cultural revival, the goal of democracy has also proven to be harder to achieve than to demand: I have spoken to former wage-earners in Armenia who were surprised to find out that, in the West, "participation in all levels of decision-making" does not include decision-making in the workplace. But even if one were willing to accept this limited conception of democracy, there is good reason to view Armenia's proclaimed democratic reforms with skepticism: In view of the role multilateral credit institutions and foreign aid providers have come to play in defining the country's domestic policies, the question Who elected the bankers? raises serious doubts about the efficacy of representative democracy in Armenia.

The new decentralized system of regional governance, consisting of eleven provinces (or marzes) divided into 930 communities, may result in greater popular control and oversight at the local level. This system is advertised as strengthening the salutary role of non-governmental organizations (NGOs) in the democratic life of the country. (20) It should be noted, however, that the 1,400 groups registered as NGOs in Armenia are a mixed bag: Some of them are genuinely grassroots operations manned by volunteers, while others are primarily conveyor belts and propaganda mechanisms for foreign corporations and state agencies. A stronger role for the latter sort of NGO would not necessarily enhance to "participation of the population at all levels of decision-making." In conformity with the prescribed neo-liberal model, state institutions in have been successively stripped down and dismantled. At the same time, however, and as a partial consequence, state institutions of the G-7 have increased their power, and (with the help of the multilateral credit institutions and NGO's) have extended their scope to their new satrapies, the former soviet republics. These developments are deleterious to the cause of even the most narrowly-conceived representative democracy.

As a final alternative, we may take the word democracy in its "Central American" signification, to designate the ritualistic endorsement once every several years of one or another candidate pre-selected by a handful of oligarchs. Even at this, however, it has become difficult, especially after the 1995 parliamentary elections and the 1996 presidential election, to ignore charges that ANM candidates, including the former President himself, have won elections thanks to large-scale fraud. Whatever merits these charges may have ANM leaders clearly have implicated themselves in the same sorts of anti-democratic activities for which they reviled their Soviet predecessors.

Unrealistically high initial expectations, together with narrowly prescribed democratic practices and a merely pro-forma reality--these considerations go a long way in helping to explain why it is that, as the UNDP has put it, "Democratic principles are not held in high esteem" in Armenia these days. (21)

Passing to the issue of human rights, the question of responsibility for war-related violations on both sides of the conflict in Karabagh, of course, is highly charged, controversial and far too complicated an issue to broach in this discussion. For present purposes it will suffice to register the following point: By denying self-determination to the people of Karabagh for decades, successive Soviet regimes and intransigently chauvinist leaders in Baku set the stage for the escalating violence in Karabagh, and accordingly they deserve a large portion of blame for the subsequent bloodshed and destruction.

Having said this, however, it should be acknowledged that in the late 1980s and early 1990s the Karabagh Committee, the ANM and other secessionists benefited from the escalating violence, at least to the extent that the fighting further discredited and destabilized Soviet rule. Without delving into details, suffice it to note that, in the early days of the conflict, the Committee time and again balked at or rejected attempts to find a peaceful solution to the conflict within the framework of Soviet institutions. Truculent orators in the city squares did nothing to improve the prospect for a peaceful change in the legal status of Nagorno Karabagh.

As we know, Karabagh became a liability to Movement leaders almost as soon as they achieved their chief aim of dismantling the Soviet Union. When it became clear that the conflict was obstructing the new regime's overtures to Ankara and the West and inhibiting attempts to attract foreign investment, the new leaders began backtracking on their earlier professions of commitment to Karabagh. It would be easy to run through a litany of realpolitik rationales for Ter-Petrosyan's signature of documents acknowledging Baku's sovereignty over Karabagh, and his administration's inability to formally recognize the Nagorno Karabagh Republic. His former supporters, however, refused to accept similar rationales from Ter-Petrosyan's Soviet predecessors, and they likewise refused to accept his rationales. As we know, this eventually contributed to the downfall of the ANM as a ruling party.

Another human rights concern the Karabagh Movement barely acknowledged was women's rights. Over the course of the past ten years, the status of women in Armenia has plummeted from deplorable to abominable. High rates of unemployment for women (22) and cutbacks in state-subsidized health services (which had always been poor by Western standards) translated into a lack of access to prenatal care and contraception, higher rates of infant mortality(23), and declining birth rates, marriages(24), and life expectancies for both sexes(25). Inflation, the disappearance of consumer-price subsidies and shortages of reliable electricity and cooking fuel have made daily housework harder and more time-consuming for most housekeepers. Suicide figures for women are almost three times those for males. (26) User fees for higher education have translated into declining enrolment figures for women, and prostitution (which, of course, was widespread in Soviet times) has grown into an export industry. Keeping these developments in mind, it is hard not to conclude that in Armenia, as in Russia, Eastern Europe and Afghanistan, a movement which proclaimed itself for freedom has significantly vitiated the status, personal security and life options of fully half the population.

5.) Prosperity:

With the possible exceptions of the former President's more recent pronouncements on Karabagh and his regime's reputation for corruption, his dismal record on the economy probably converted more former supporters into opponents than did any other item on our balance sheet. The Armenian economy registered a cumulative decline in measured output between 1990 and 1993 of 75 percent(27), and in 1992-3, alone, GDP fell nearly sixty percent from its 1989 level(28). After 1991 and prior to privatization of mid- to large enterprises (about 1994 to the present), the level of capacity utilization in the industrial sector was about fifteen to twenty percent. Unemployment soared, and wages and salaries declined. (29)

This decline would have been disastrous even if the 1989-90 levels were high; however, by the time Ter-Petrosyan assumed office, the country's economy already was a shambles. The December 1988 earthquake had destroyed between one tenth and one third of Armenia's industrial base; protest strikes and Azerbaijan's economic blockade had accelerated the disintegration of the republic's economy, and some 200,000 refugees had flooded into the country from Sumgait, Baku and Karabagh. (30)

Without daring to imagine that there is any alternative to Armenia's "transition," the UNDP report blandly concedes the obvious: "Armenia," the report states, "is a country in the process of impoverishment." (31) No wonder, then, that so many people have left the country to seek their fortunes elsewhere. According to a figure that has appeared in print more than once, some 700,000 Armenians have left Armenia in the past ten years. (32) A 1997 estimate cited in the CIA World Factbook reported a net migration rate of &endash;8.32 migrants per 1,000 and a negative population growth rate of &endash;0.33%. (33)According to the UNDP, thirty percent of the economically active population has left Armenia. (34) Most Armenian emigration of the past several years has taken place for "economic reasons," and most of the traffic has been to Russia. (35) Some of those who have left will return, of course; nevertheless, as a recent report by Western analysts put it, "The exodus of qualified labor has a negative impact on the entire economy of the country, and may represent an irretrievable loss of manpower over the medium-term." (36)

There is, of course, an "upside" to emigration, namely, "transfers from abroad." The UNDP estimates that private transfers to Armenia total $250 million annually. (37) The average monthly per capita income in Armenia is equivalent to a dollar figure in the low two-digits (38) and the per capita GDP is reportedly $450. (39) Whatever the exact figure on foreign remittances may be, then, it is safe to conclude that they have come to play a significant role in the domestic economy.

In the past several years, the country has scored positive growth rates (5% in 1995; 4% estimated real growth rate in 1996), as a result of an ambitious IMF-sponsored program of economic reform. According to a recent World Bank/IMF forecast, moreover, the Armenian economy will enjoy projected growth rates of about 6.5% per annum until the year 2000, and 6% per annum thereafter. (40) Ominously, however, these optimistic forecasts were voiced prior to the Russian financial crisis in the late summer of 1998.

A further cautionary note is in order: Neo-liberal assumptions notwithstanding, economic growth as measured by the GDP, in abstraction from other considerations--such as resource distribution, consumption levels and infant mortality rates--does not indicate very much about the prevalence of poverty in a country. A quick review of IMF "success stories" will amply confirm the following point: Even assuming that Armenia's energy problems can be resolved soon, and that this will translate into significant economic growth, higher growth rates will not necessarily improve the lives of the country's inhabitants or stem the tide of emigration.

Not everyone in Armenia, of course, has stood to lose as a result of neo-liberal policies. Available statistics abundantly bear out the UNDP's conclusion that "An intense process of economic stratification is underway" in Armenia, and that "the nation is increasingly polarized by income and wealth." (41) On the same page, the report notes that five percent of Armenia's population owns most of the country's wealth. (In this, it might be noted, Armenia's record is comparable to that of some of the wealthiest capitalist countries.) After decades of abuse by Soviet officialdom touting "universal human values," the explicit discourse of class is reasserting itself in the harsh post-Soviet reality. It might be worthwhile, then, to examine the process of class formation a bit more closely.

In Armenia as elsewhere in the former Soviet Union and the South, privatization has been a major component of the structural adjustment reforms that have dominated the government's macroeconomic goals.(42) In the agricultural and retail sectors, as well as small-scale manufacturing, the government has largely achieved its privatization goals: By October 1995, ninety percent of arable land was privately owned; by March 1996, more than half of the housing stock had been privatized; and by mid-January 1997, 975 mid- to large enterprises had been privatized. Of the remaining 650 mid- to large enterprises, 120 were scheduled to be privatized as part of the 1998-99 program. Once this process is completed, the private sector will encompass about ninety percent of the country's firms, and account for about seventy-five percent of the GDP. (43)

Privatization of mid- to large-enterprises has taken place in large part (eighty percent, according to the privatization plan) by means of auctioning privatization vouchers. Each citizen was entitled to a voucher, and about 3.10 million vouchers were distributed in late 1994. The face value of a voucher was originally set at 10,000 dram (about twenty-five dollars at the time), but it was raised to 20,000 dram in early 1995. There was a free market in vouchers, however, and the price adjusted downward to reflect asset overvaluation. The market price for enterprises was further depressed, as citizens sold vouchers for cash to meet immediate expenses, and when mass privatizations ran into foreseeable market absorption problems. As a result, market prices of the vouchers varied between 2,000 and 8,000 dram, and only an estimated seven percent of the population participated in the privatization process beyond simply selling off whatever vouchers they received. (44)

In Armenia, as in Russia, the process of privatization had predictable results: Less than two years after voucher distribution, a survey reported that insiders, mostly managers of the enterprises, manipulated profits before privatization to reduce the asset values at revaluation. The report concluded that, "The vouchers are now owned by primarily the managers of the enterprises to be privatized." (45) Thus, as the UNDP report puts it, "The national wealth was swiftly and in great disproportion redistributed to the benefit of the rich strata of the population." (46)

Clearly, a new capitalist class is in formation. The question of the day, however, is: What sort of capitalist class has come to control the larger part of the country's productive assets?

One way to approach this question is to take a look at what has happened to the mid- to large-scale industrial enterprises that, in the Soviet era, played such an important role in the republic's economy. These enterprises, especially in the chemicals, machine tools, food processing, construction, transport, light industry and furniture making sectors, represented a large portion of fixed-capital investment in the republican economy (much of it subsidized from All-Union funds). Once the former managers of these enterprises bought controlling interests--usually for a song, as we have seen--they typically withheld capital investment and did not re-capitalize or modernize. Rather, they ran them for short-term profit, at the expense of minority stockholders and creditors (including tax creditors). "Out of the 50 enterprises surveyed," Western analysts reported,

Éonly three have shown any investment since privatization. The remaining enterprises show ever increasing arrears, near-zero return on assets and, unless massive restructuring and reorientation takes place, the vast majority should be pushed into bankruptcy proceedings by their creditors before all the tangible assets with some value are stolen. (47)

The analysts added that, "Éalmost all industrial enterprises here are worth more as scrap metal than as going concerns." (48)

According to the U.S. State Department, Armenian exports in 1996 totaled $264 million, of which thirty-nine percent went to countries outside the former Soviet Union. (49) Some twenty-two percent of the total export figure is categorized as "machinery and equipment" and another thirty-five percent is categorized as "minerals and metals." According to U.S. State Department figures, Iran, with a total thirteen percent share of export trade with Armenia, is the country's third-largest trading partner, after Russia (with twenty-four percent) and Turkmenistan (with twenty percent).(50) It is a safe bet that a large portion of Armenia's exports to Iran consists of scrapped industrial infrastructure. Fledgling capitalists appear to be running extractive industries, strip-mining the old Soviet infrastructure, exhausting inputs, selling off inventories, and then closing shop to scrap the machinery. (51) Visitors to Meghri may watch the Mercedes trucks with Iranian plates haul ton after ton of scrapped industrial infrastructure out of the country.

Thanks to the imposition of a liberal trade regime and the elimination of currency restrictions, much of the cash generated in these ventures has ended up in foreign bank accounts. (52) When reinvestment has taken place at all, it has typically been directed to: (a) joint ventures with foreign capital (Midland Armenia Bank jsc, Armentel Company, the Shant Jermuk Mineral Water Bottlers, and so on); (b) the import-export sector, and (c) small retail operations and services for domestic markets. (53)

At present, of course, "informal activity"--everything from bribe-taking and bank fraud to extortion and assassination-for-hire (54) --permeates the public and private sectors, from top to bottom. The prevailing environment of illegality in Armenia (55) reflects the absence of what pro-privatization literature refers to as "a modern market-oriented legal system." Judging from local initiatives and from the experiences of other countries under IMF/World Bank tutelage, however, this situation is not likely to persist indefinitely. As the new owner-managers and the old regional clan leaders draw closer together to form a proper class for itself, they will eventually reconstruct the legal and law-enforcement systems in their own image. In the coming years Armenia will gradually acquire the trappings of a modern capitalist state, including a re-organized judiciary, effective civil and contractual law, a competent police apparatus and a functioning tax system.

6.) Self-Determination in Karabagh:

In Armenia as elsewhere, many managers of industrial firms also sit on the boards of commercial banks. (56) If the experiences of other countries offer any insight, these banks and their board members will increasingly play the role of brokers for global finance capital: As the owner-managers of privatized firms maneuver for commanding positions within Armenia's economy, it is a good bet that they will also consolidate their commanding positions politically. In so doing, they are likely to become what the former Director of the World Bank's Health Department and former Acting Vice-President of Personnel, Michael Irwin, has referred to as the local "autocrats," with whom World Bank "bureaucrats" regularly consult.

Armenia joined the World Bank and the IMF in 1992. (57) The decision to join took place with very little in the way of officially encouraged debate by the population of Armenia--a population that will bear the burden of these decisions for years to come. Armenian officials announced that membership in these institutions would enhance Armenia's independence and sovereignty. People in countries with more experience in these matters, however, have expressed a very different view of things. Martin Khor, director of the Third World Network in Malaysia, observed that, "Economically speaking, we [countries in the South] are more dependent on the ex-colonial countries than we ever were. The World Bank and the IMF are playing the role that our ex-colonial masters used to play." (58)

It is important to understand that the dependency Khor has described is not limited to economics: Structural adjustment programs, conditionalities and bilateral foreign "aid" facilitate the steady transfer of wealth, through debt repayment, from poor debtor countries to bankers in the most highly industrialized countries. As such, these policies perpetuate power relationships and the subordinate status of the poorer debtor countries. In this sense, then, the multilateral financial institutions and trade organizations that promote these policies reproduce relations of political domination. (59)

I have just hinted that the ascendant capitalist class in Armenia--a class-in-formation that has been a leading beneficiary of ANM policies--is crucially different from the national classes of the great bourgeois revolutions of past centuries and the anti-colonial movements of the twentieth century. Opposition to protectionism, promotion of production for export rather than domestic markets; public subsidies for foreign capital--these are a far cry from the traditional tasks of national bourgeoisies.

Yervant Odian's literary creation, the doctrinaire Comrade Panchoonie, brought calamity to one Anatolian village at a time. The new Panchoonies--spiritual heirs of the Karabagh Movement and organic intellectuals of the new ruling class in formation--may continue to invoke nationalist themes and appeal for legitimacy to nationalism from below. To the extent that their constituents function as brokers for multilateral financial institutions and foreign investors, however, they are functionally capitalist internationalists, or what one might call "internationalists from above." And to that extent, they disqualify themselves as bearers of a national program, a program that aims to unify the country, protect domestic industries and markets and defend national sovereignty.

As long as the Soviet bogey remained in place, the Karabagh Movement and the ANM benefited from nationalism from below. Even in the early years of the Movement, however, the "new thinkers" did not conceal their priorities. (60) As with environmental demands, so also in the case of Nagorno Karabagh, the organic intellectuals of the Movement quickly came to view these struggles as costly distractions from the genuine historical tasks of the day. (These tasks they variously described as "economic reform," "competitiveness," "attracting foreign investment," "integration into global markets," and so on down the list of neo-liberal incantations). At least as early as September 23, 1991, for example, representatives of the Ter-Petrosyan government agreed to renounce territorial claims to Karabagh, as part of an Armenian-Azeri concord jointly brokered by Russian President Yeltsin and Kazakh President Nazarbayev. Since then, the ANM administration has refused--for obvious prudential calculations of averting the threat of escalating military engagement with Azerbaijan--to officially recognize the Nagorno Karabagh Republic. (61) Moreover, the administration has set a post-Soviet precedent for "compromise" on the issue by signing a number of multi-lateral documents which acknowledge Baku's sovereignty over Nagorno Karabagh. Thus, after ten years of bloodshed and deportations on both sides of the trenches in Nagorno Karabagh, the same leaders in Yerevan who reviled their Soviet predecessors for subordinating the region's fate to political and economic expediencies have indicted themselves for exactly the same offense.

One of the most surprising results of the first round of balloting in the March 1998 presidential election--even more surprising, perhaps, than Demirjian's rapid rise in the polls--was the increased popularity of the candidate of the titular Communist Party, Sergei Badalyan. Even running against former Soviet boss Karen Demirjyan, Badalyan came in fourth place, winning eleven percent of the votes cast on the first round. That was almost twice as large a share of the vote as the CP candidate received in 1996, and it was only 1.24 percent less than third-place candidate, Vazgen Manukyan--the candidate many Yerevantsis believe won the Presidential election only a year and a half earlier. (62)

These election results and the demoralized scene in Independence Square that I described at the beginning of this discussion become more comprehensible when one reflects on the Karabagh Movement's poor record of achieving its announced goals. Moreover, as I have hinted and as we shall see below, subsequent developments endanger even the goals that have been achieved so far, notably self-determination in Nagorno Karabagh.

Bibliography of Sources (63)

Adalian, Roupen (ed.). Armenian & Karabagh Factbook. Washington DC: Armenian Assembly of America, 1996.

Armenian Authorities, in collaboration with the staffs of the International Monetary Fund and the World Bank. "Republic of Armenia: Policy Framework Paper, 1996-1998." January 22, 1996 (incomplete publication information).*

BISNIS(a). "Energy Sector Profile--Armenia." Yerevan: Business Information Service for the Newly Independent States, February 4, 1997.*

BISNIS(b). "Armenia: Economic and Trade Overview." Yerevan: Business Information Service for the Newly Independent States, June 1997.*

CEPRA. "Mass Privatisation of Enterprises in the Republic of Armenia: An Early Assessment." College Park, Maryland: Center for Economic Policy Research and Analysis, (1997?).*

Central Intelligence Agency. CIA World Factbook: Armenia. 1998 (incomplete publication information).*

Danaher, Kevin (ed.). 50 Years is Enough: The Case against the World Bank and the International Monetary Fund. Boston: South End Press, 1994.

Hekimian Arzoumanian, Kim. "Infant Nutrition and Foreign Aid: Changes in Postpartum Practices and Improvements in Breastfeeding in Armenia," in Armenian Forum, No.2 (Summer 1998), pp. 1-15.

Kurkchiyan, Marina. "Health Care in Armenia: The Human Cost of the Transition," CACP Briefing Number 16. London: The Royal Institute of International Affairs, March 1998.

Libaridian, Jirair (ed.). Armenia at the Crossroads: Democracy and Nationhood in the Post-Soviet Era. Watertown, Massachusetts: Blue Crane Books, 1991.

Meguerian, Barbara J. and Jafferian, Doris D. (eds.). Armenian Women in a Changing World: Papers Presented at the First International Conference of the Armenian International Women's Association (September 19-21, 1994). Belmont, Massachusetts: AIWA Press, 1995.

Sarafian, Ara. "The New Thinking Revisited," in Armenian Forum, No.2 (Summer 1998), pp. 139-142.

UNDP. Human Development Report: Armenia 1997. United Nations Development Project, (1998?) (incomplete publication information).

United States Department of State, Bureau of Public Affairs. "Background Notes: Armenia" Washington, DC: U.S. Department of State, March 1996.*

World Bank, Operations Evaluation Department. World Bank Structural and Sectoral Adjustment Operations. 1992 (incomplete publication information).*


  1. I presented a first draft of this paper in early May 1998 to the Zoryan Institute conference entitled "The Karabagh Movement, 1988-1998." Since then, the loudly lamented financial crisis in Russia has provided a rare (though no doubt temporary) opening for discussion in the mainstream press of the broader effects of a decade of neo-liberalism in the former Soviet Union. Reports that the IMF has failed miserably to live up to its advertised claims have prompted more than one academic interviewee, exasperated to the point of sacrilege, to suggest out loud and on the record that it should be abolished. Since heresy appears to be in the air, at least for the moment, my remarks may not appear as controversial as they did in Spring 1998. Still, I hope that the presentation will prove instructive by way of synopsis and synthesis.
  2. Compare this list with the similar list of goals in the statement by Levon Ter-Petrosyan (then candidate for Presidency of the Armenian Supreme Soviet), published by Armenpress on August 10, 1990, and included in translation in Libaridian (pp. 96-105, especially pp. 96-97). (Libaridian's collection of documents will serve in this discussion as a handy English-language reference for the views of the leaders of the Karabagh Movement in its early "heroic phase.")
  3. A more comprehensive balance sheet, of course, could include many other topics not included as separate items in this discussion. Such topics might include the ANM's record on international diplomacy, relations with the diaspora, technological modernization, official corruption, and so on. Aside from constraints on time and space, I will not discuss these topics under separate headings because they did not constitute major public goals of the Karabagh Movement during its years of ascendancy.
  4. Vazgen Manukyan, in Libaridian, p. 56.
  5. Refer, for example, to Rafael Ishkhanian, in Libaridian, p. 28.
  6. Manukyan, in Libaridian, p. 71.
  7. Manukyan, in Libaridian, p. 52.
  8. Adalian, p. 50. Cf. Business Informaiton Service for the Newly Independent States, "Energy Sector Profile&emdash;Armenia" (henceforth BISNIS(a)), p. 3.
  9. Authorities have announced that at least one of Medzamor's two reactor units is scheduled for retirement in 2004 (BISNIS(a), p. 2).
  10. Over the years (both Soviet and subsequent), there has been a cumulative reduction of Lake Sevan's water level of eighteen meters, leading to a forty-one percent loss in water volume (Armenian Authorities, p. 12). Also refer to BISNIS(a), p. 2; United Nations Development Report, "Human Development Report: Armenia 1997" (henceforth UNDP), p. 47.
  11. Central Intelligence Agency (henceforth CIA), p. 2. Due to the deteriorating municipal wastewater treatment infrastructure, only about ten to fifteen percent of sewage water was being treated, as of early 1996.
  12. Manukyan, in Libaridian, p. 52.
  13. Ter-Petrosyan, in Libaridian, p. 116.
  14. Manukyan, in Libaridian, p. 54.
  15. Apparently, Jirair Libaridian, an advisor to Ter-Petrosyan from 1991 to 1997 and one of the chief advocates of the "new thinking," admitted (in a May 9, 1998 talk at Princeton University) what in any case had become pretty obvious: The "new thinking" failed. Curiously, however, Libaridian persists in describing Russophobia and unilateral appeasement of Ankara as a "revolution in Armenian political thought" (Sarafian, p. 139).
  16. Armenian Authorities, p. 13.
  17. Center for Economic Policy Research and Analysis (henceforth CEPRA), p. 35.
  18. Cited in UNDP, p. 23.
  19. Strangely, few western reports on conditions of religious minorities in Armenia make mention of the long-established Muslim minority in the country. The UNDP report, for example, mentions Jehovah's Witnesses, Seventh-Day Adventists and followers of the Krishna Consciousness movement, each more than once, but lacks even a passing reference to the fate of Muslims.
  20. Refer, for example, to UNDP, p. 62.
  21. UNDP, p. 16.
  22. UNDP, p. 16.
  23. According to an estimate in the CIA World Factbook for 1994, infant mortality in Armenia as of 1994 was 27.1 deaths per 1,000 live births. According to a 1997 estimate reported in a later edition of the CIA World Factbook, the infant mortality rate had risen to 40.4 deaths per 1,000 live births. Also refer to Kim Hekimian Arzoumanian's valuable discussion, "Infant Nutrition and Foreign Aid: Changes in Postpartum Practices and Improvementss in Breastfeeding in Armenia," in Armenian Forum, Number 2 (Summer 1998), pp. 1-15.
  24. According to Violetta Aghbabian, secretary-general of the Armenian National commission of UNESCO at the Armenian Ministry of Foreign Affairs (Meguerian and Jafferian, pp. 204-205).
  25. Adalian reports that, "In the last few years general mortality has increased by 5,500 (from 22,000 to 27,500) or by 24 percent" (Adalian, p. 52). According to the UNDP report, the life expectancy in Armenia has fallen from 79 years in 1992 to 76 years in 1994 (UNDP, p. 20). For an overview of deteriorating healthcare provisions in Armenia, refer to Marina Kurkchiyan's report entitled "Health Care in Armenia: The Human Cost of the Transition."
  26. Figures for 1996 (the most recent figures I have seen), are: 3.4 female suicides, as compared to 1.2 male suicides, per 100,000 people (UNDP, p. 83).
  27. Armenian Authorites, p. 2.
  28. U.S. Department of State, p. 5.
  29. CEPRA, pp. 2, 27; cf.: UNDP, pp. 49, 80.
  30. This might be the place to add another item to this balance sheet: In the immediate aftermath of the earthquake, Movement supporters loudly criticized insufficient relief efforts in the earthquake zone. Seven years after Movement leaders assumed office, however, thousands of refugee families still have no permanent housing.
  31. UNDP, p. 47.
  32. The UNDP reports Armenia's "permanent population" as 3.7 million, but paranthetically notes that "the number of the actual population is less than 3.0 million because of large-scale migration" (UNDP, p. 13). Refer, also, to U.S. Department of State, p.1. I am not sure how this figure was determined, nor how reliable it is. As far as I am aware, neither Armenian officials nor the Federal Migration Service of Russia has released definitive figures on immigration. Refer to S. Karapetiyan, "Migration from Armenia in the Post-Soviet Period, 1991-1995," report to the UNDP, Armenia office, 1996 (cited in Kurkchiyan, p. 1).
  33. CIA, p. 3.
  34. UNDP, p. 22. Many of the young men who emigrated might have done so to avoid being drafted into military service. In many of these cases, the decision to emigrate might have been an economic decision, especially in view of the fact that military pay is insufficient to support a family, and that public health and welfare programs for elderly parents on fixed incomes have been slashed.
  35. Snark News Agency report of December 8, 1997. Russia, however, is facing its own negative population growth: According to Richard Paddock, a Los Angeles Times staff writer in Moscow, Russia's population has fallen from nearly 149 million to 146.5 million in the past five years, while the average life expectancy of Russian men has fallen to fifty-seven years (Los Angeles Times, December 18, 1998, p. A5).
  36. CEPRA, p. 31.
  37. UNDP, p. 45. Also refer to Armenian Authorities, p. 12. I am not sure what to make of other published claims, such as Selina Williams' claim that Armenia received over $350 million from the diaspora in 1997 (The Financial Times, May 19, 1998, p. 4).
  38. According to one source, per capital income in 1995 amounted to thirty dollars a month (Adalian, p. 41).
  39. U.S. Department of State, p. 1.
  40. BISNIS(a), p. 4.
  41. UNDP, p. 18.
  42. Structural adjustment is the name for a series of policies imposed by the multilateral financial institutions on debtor countries, for the purpose of reducing domestic consumption and redirecting resources to manufacturing exports and the repayment of debts. In poor debtor countries like Armenia, structural adjustment has involved: (a) selling off state enterprises to the private sector; (b) removing price controls for agricultural goods; (c) devaluing local currencies, to make exports more competitive in foreign markets; (d) reducing government budget deficits by cutting consumer subsidies and charging user fees for social services such as health care and education; (e) dropping protectionist measures and reducing regulation of the private sector; (f) creating incentives, such as guarantees, infrastructure, tax breaks and wage restraints, to attract foreign capital; and (g) dismantling foreign exchange restrictions (which, however, allows wealthy locals to export funds overseas, as capital flight, worsening balance of payment deficits). (Refer to: Danaher; World Bank, Operations Evaluation Department.)
  43. For figures on privatization, refer to: Armenian Authorities, pp. 10-11; BISNIS(b), p. 2; U.S. Department of State, p. 5; CEPRA, p. 1.
  44. The description of the privatization process in this paragraph is drawn largely from the discussion in CEPRA and UNDP, pp. 39-40.
  45. CEPRA, pp. 1, 4. The results of privatization in Armenia closely parallel the results in many other countries: The UNDP has charged that privatization has primarily benefited multinational corporations and local brokers.
  46. UNDP, p. 40.
  47. CEPRA, p. 1. The report, which consists of findings of a research project initiated in Fall 1996, presents results, analysis and policy recommendations based on CEPRA's survey of fifty mid- to large newly privatized enterprises in Armenia.
  48. CEPRA, p. 3.
  49. U.S. Department of State, p. 2.
  50. U.S. Department of State, p. 2. (The UNDP reports that Iran is Armenia's third-largest trading partner, after Russia and Belgium.) According to the Department of State report, Armenian imports exceeded exports by $305 million (U.S. Department of State, p. 2). Of the total $669 million imports, humanitarian assistance amounted to some $152 million&emdash;41.8% of the value of total exports. This percentage is even higher, if we accept CIA World Factbook figures, which estimate total imports in 1996 at $830 million, and total exports at $273 million.
  51. A similar process took place under neo-liberal tutelage in Bangladesh a generation earlier: Undervalued state-owned enterprises were sold off to entrepreneurs who, instead of re-capitalizing these facilities, just sold the machinery and sent their money abroad.
  52. Restrictions on interbank foreign exchange transactions and on cash withdrawals from banks were eliminated in 1995, thus facilitating cash transfers out of the country.
  53. The scale of this sort of investment is limited, however, in part because so many local products are not competitive with foreign products on the domestic market (CEPRA, p. 30).
  54. News of questionable "suicides" and murders in Yerevan found a distant echo on November 20, 1998, when Galina Starovoitova was gunned down in a stairwell in St. Petersburg. Apparently, the "principled liberal" advocate of free enterprise and the rule of law was killed by a hit man employed by one of the enterprising "New Russians" she helped elevate to power.
  55. According to the UNDP report, for example, about seventy-five percent of income is not currently taxed in Armenia (UNDP, p. 45).
  56. CEPRA, p. 8.
  57. The Republic of Armenia became the 169th member of the World Bank on September 16, 1992, and the 163rd member of the IMF on May 28, 1992.
  58. Quoted in Danaher, p. 4. Actually, the current "South-to-North" resource flow outstrips that of the colonial period. According to the World Bank's 1992 Annual Report, the Banks' two lending arms paid out $16.441 billion in gross disbursements to borrowers that year. However, net disbursements&emdash;that is, gross disbursements, less the amount of money repaid to the Bank on outstanding loans and credits&emdash;totaled $6.258 billion. In the same year, the Bank's borrowers paid companies in rich OECD countries $6.547 billion for procurement of goods and services on outstanding World Bank loans. Thus, that year, borrower countries paid $198 million more to OECD economies for Bank-associated procurement than the borrowing countries received from the Bank. This was not an atypical year: Between 1984 and 1990, there was a net transfer of financial resources of $155 billion from the "South" to the "North."
  59. The case of Bangladesh illustrates just how totalitarian that domination can be: In that country, the World Bank decides what the domestic policy and budget will be (earmarking two percent of funds for education, four percent to womens' healthcare, and so on); liberalizes trade laws, thereby promoting export-oriented policies; allocates funds to the various sectors, and determines the country's domestic priorities, right down to population policy, which the Bank controls entirely. The Bank even goes so far as to set targets for the number of various types of contraceptive devices that are to be distributed in the country.
  60. Refer, for example, to Libaridian.
  61. Refer to Sarafian, p. 140. It will be recalled that the Republic proclaimed its independence from Azerbaijan on September 2, 1991, and that it has yet to be officially recognized by any other government.
  62. Kocharyan received 38.76 percent of the vote on the first round and Demirjian received 30.67 percent. Sixty-five percent of eligible voters cast ballots.
  63. Only sources cited in the preceding text and footnotes appear in this bibliography. Page references in footnotes referring to bibliography items marked with an asterisk (*) reflect pagination of the individual documents as they are retrievable on the internet.

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