The Power Should Be Returned to People


The events of July 2016 will undoubtedly have repercussions for Armenia’s political life for months, if not years, to come. There is still a healthy amount of inquiry into what took place during those important two weeks in Armenia’s modern history and we will continue shedding light on those and related developments in the coming months.

Below we present an open letter from the coordinator of the Founding Parliament, the political wing of the “Daredevils of Sassoon”, a highly decorated Artsakh war veteran and former commander Jirayr Sefilian (arrested by the Sargsyan regime in June), written from prison on the final day of the stand-off. Translated from the original for our English-speaking audience, this letter is critical for understanding the thinking behind the steps taken by the “Daredevils of Sassoon” and the (tactical) objectives they tried to accomplish.

*  *  *

Since I still have not been given an opportunity to clarify the demands of “Daredevils of Sassoon” directly with them, knowing that the authorities are not taking any rational steps to avoid bloodshed, and realizing the need for people to be informed about the content of negotiations, below I will outline the range of issues around which I think I will be able to persuade the “Daredevils of Sassoon” to lay down their arms.

To do this, I will need to meet with them directly. If the authorities fear that I will not leave the police compound and I too will take up arms, I am ready to provide any guarantees they require. In this tense situation, I have repeatedly stated that I am ready to do everything in my power to help resolve the situation in a peaceful way.

To satisfy the requirements given bellow it is necessary to form a “government of people’s trust”, which cannot come a day too soon. This government shall be mainly engaged in a smooth implementation of the following steps:


  • The main objective of the state’s activity in this critical area should be to declare Artsakh an integral part of the Republic of Armenia within pre-April 1, 2016 borders and to achieve its international legal recognition. This is the absolute minimum, which should not ever be reduced.
  • Other tactical and strategic steps needed for the resolution of the Armenian-Azerbaijani conflict will be presented subsequently.

Defense and Security Sector

Armed forces

  • The approach to active-duty armed forces should be significantly altered in a direction that would require fewer human resources for the defense of borders of Armenia and Artsakh.
  • The use of inexperienced young recruits for combat duty should be prohibited. These positions should be filled only on a voluntary basis by (experienced) contractual soldiers. (Single/unmarried) contractual soldiers without children too should be banned from carrying out combat duty.


  • All police commanders presently in office should be removed. In addition, the chief of police and all his deputies should be brought before the criminal court for their recent actions.
  • The new police chief must be appointed from the outside the (police) system. He and his deputies should not have any connection to the events of March 1-2, 2008 and July 29, 2016. This should send a signal to others that spilling blood of civilians will no longer be tolerated in Armenia and everybody proven guilty for taking part in those activities should be punished by law.
  • Police personnel should be substantially replaced. Instead of employing them in de facto mercenary units aimed at fighting own civilian population, personnel of those units should be given an opportunity to sign up for contractual military service (for higher salary) to defend the homeland while maintaining their ranks.

Sovereignty and border defence

  • Negotiations on transferring the control of Armenia’s boarders from Russian to Armenian border troops should start immediately. The fate of the remainder of Russian armed forces in Armenia can be negotiated in the future. Armenia’s borders should only be controlled by Armenia’s armed forces and intelligence services.
  • The Russian border guards should transfer the resources allocated to them for the control of Armenia’s borders, including the intelligence and counterintelligence networks, to the Armenian side, to the extent possible.

Political prisoners

  • All political prisoners—including Haik Kyureghyan, Shant Harutyunyan, Volodya Avetisyan, Gevorg Safaryan, and others—should be released.
  • All individuals detained during the latest events (in connection with rallies organized in support of “Daredevils of Sassoon”) should be released and free and fair trials should be started.
  • All persecution and harassment in connection with recent events should be stopped.
  • Apart from the issue of political prisoners, taking into account widespread violations in the judicial system, the states should consider initiating a broad amnesty. The conditional early release from prison of those serving life sentences should be made possible, if it corresponds to the standards required by the law.

Election reform

  • First and foremost, the lists of citizens who voted in elections should be made public. This will serve as a certificate of legitimacy, which no government in Armenia since 1996 has had. No individual or a group has the right to claim power in the country without this certificate. Claiming power without this certificate is tantamount to usurping it, which is what we have been witnessing for the past twenty years.

Restoring justice

  • All members of judicial, executive, and legislative branches, who have had any involvement in illegal use of force against civilians on March 1-2, 2008 and July 29, 2016 as well as subsequent political persecutions should be irreversibly removed from service. If their actions were obtained under threat or pressure, the details of that should be made public, clarifying those circumstances, mentioning names of individuals involved, and providing other relevant information as well as offering a public apology for the wrongdoings;
  • A committee with a mandate to examine all cases involving takeover of private property by the government “for the needs of the state” (e.g., Northern and Main Avenues, Lori and Syunik regions, etc.) should be formed. The committee should provide recommendations on measures to restore justice.

Environment and social issues

  • Embezzlement of Armenia’s natural resources and nature must be stopped. The natural resources should be used carefully and exclusively for the state interests, excluding illegal use and with the strictest control by public agencies and civil society.
  • The government and the Central Bank should initiate activities aimed at easing the debt burden of poorest highly-indebted households.
  • Achieve a reduction of electricity and gas tariffs by increasing the efficiency of resource use. In these areas, the government should immediately resume negotiations to restore Armenia’s shares in major distribution entities, taking into account its legal obligations.


  • Small businesses should be exempt from direct taxation.
  • Medium-sized business should be exempt from direct taxation up to two years.
  • Monopolies must be eliminated, except for those that are of strategic importance to be determined by the National Assembly. These monopolies should be state-owned and regulated.
  • Tax and customs administration must be carried out exclusively by the bodies under the public and civil control, strictly preserving equality, legality, and transparency in their approach.

The enforcement of these requirements is an issue of national security. These demands are an outcome of my detailed discussions with members of the “Daredevils of Sassoon”, and I am sure we share a common view on these. For years, different players within civil society too have presented similar demands, but they remained ignored and neglected.

These demands have been presented to the government in the interest of the Armenian State. The failure to follow, delay the application of these measures, or worse an imitation of their application, will eventually lead to the destruction of the state, turning it into an entity governed by ignorance and arrogance.

I call on our people and political parties to take these demands and make them their own. By doing so, they will form a legitimate process of putting these demands forth and help dismiss accusations that it is being done by the use of arms.

Jirayr Sefilian

“Vardashen” Prison

July 31, 2016

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Is Armenia Becoming a Failed State?

Stop corruptionBy Annie Demirjian, Senior Fellow

It is quite shocking to see the pictures of handcuffed peaceful demonstrators in the streets of Yerevan but for a Canadian it was doubly shocking for me to see the pictures of the Canadian actress Arsinee Khanjian handcuffed and taken away at a Yerevan public square. Twenty some years after the fall of the Soviet Union,  we hoped that gradually, the country will move more toward democratic system and respect for rule of law, moving away from outdated autocratic regime. Well, looking at these pictures that went around the world, it looks like Armenia is moving backward and not forward.

In 2009-2013, I worked in Armenia when I was heading the Democratic Governance portfolio for UNDP’s regional center. Like other post-soviet countries in the region, Armenia was struggling from many social, political and economic malaise. Agreed that the country is in a hostile neighborhood (and Syria, Chechnya conflicts are not that far away from their borders), but the home-grown problems of the country was astounding.  It was blatantly evident that the country had all sorts of corruption problems: oligarchyism imported from Russia, political cronyism, weak judicial system, poor human rights record, most specifically vis-a-vis women, elderly, children, and extremely weak and ineffective public institutions and administration at all levels—national regional and local. The list goes on….. In addition, there is a macho-machismo culture so outdated almost caricaturist, like the attitude of the country towards LGBT community.

But there were also many positive developments in the country. Armenia continued to have one of the most active, well organized civil society – from media, to NGOs, to women’s groups to community based organizations. In the absence of official, institutional checks and balances in the country, the media and the civil society organizations play the oversight role and are holding the government accountable – hence we see the daily demonstrations against the governing elite, clamoring for police, social and economic reform. But the Armenian civil societies alone cannot act as an oversight instrument and drive the reform agenda. These checks and balances have to be established and implemented from within and for that to happen the government has to have the serious political will to establish transparent and accountable governance system and institutions that can implement reform.

Last 20 years, many multilateral institutions have come to Armenia’s assistance to help establish decent, functioning and professional institutions and systems. Among them were EU, OSCE, WB, UN/UNDP and many others. Some of these international institutions paid lip service to Armenia’s public sector reform, others provided skeleton support that was meaningless, yet others tried and later gave up due to the absence of the political will to truly exert reform.  In my dealings with senior officials I worked with well meaning officials who were committed to reform. On one occasion, after several false starts I worked with the office of the president to establish an anti-corruption mechanism and process based on the UN convention against corruption.

These young officials, who wanted to push for anti-corruption reform were political appointees  but with limited institutional or public management experience. And yet, there was a disconnect between the political appointees and the old guard, the soviet era bureaucrats with management experience, but the two simply did not talk the same language and there was no system, process, communications to bridge the old and the new guard to get the reforms going.  In many ways, the Armenian experience reminded me of Libya in 2011 after the fall of Gaddafi. In Libya, I met many senior officials who were eager to establish a new Libya, a new system of governing the country. But alas, the country soon realized that there were no national or local institutions that could build the new Libya, and the country has since fallen to a failed state status.

This absence of effective institutions—credible and independent judiciary, accountable police force, competent parliament, responsible executive—is a challenge to many authoritarian regimes that are struggling to transit to a more democratic and accountable system. Armenia has an advantage. The country has a huge competent and capable human capital to drive the governance reform agenda. This is evident in the high-tech, education, CSO, media and other areas. Some world-class partnerships have been established to make the country a hub for innovation and high-tech. The small-and medium size entrepreneurship could be on the rise, if only the government/oligarchs would give them a break.  But the country’s disrespect for the rule of law, inability to reform the criminal justice system (making the police more professional) that is breaking the Armenia’s back and driving the society backwards.

To push forward for institutional reform and to install good governance principles the Armenian Government has to commit to work with the national institutions (with committed leaders and managers), CSOs, media and drive the reform agenda. International institutions can help but at the end if Armenia wants to avoid to be seen around the world as yet another authoritarian and hopelessly corrupt failed state, with thuggish police harassing the peaceful demonstrators, they need to start the internal reform process and start it fast.

The demonstrators are demanding very basic services that the government refuses to provide: affordable electricity for all! A recent research by Policy Forum Armenia stated that “certain categories of clients largely connected to the political elite have over the years not paid for their electricity bill”.  It also highlight the government’s irresponsible pricing policy that keeps electricity prices intentionally high for the average consumer while turning a blind eye to those elite users who refuse to pay their bills.

This is absolutely outrageous as it underlines the gross inequality in the country that citizens continue to endure. Indeed, when walking in the streets of Yerevan one cannot help but notice the poor conditions of housing in certain parts of the city next to colossal, in-your-face new housing structures of the rich, usually in vulgar architectural design and taste.

PrintThe Author of “Why Nations Fail: Origins of Power, Prosperity, and Poverty”—a must read for students of economics—Daron Acemoglu, in his endorsement of PFA’s report on “Corruption in Armenia” states,

“Some say that Armenia is doomed to fail economically because of its geography or location in the world. But like so many other countries around the world and throughout history, its failure is due to corruption, unscrupulous politicians and weak institutions. It’s not lack of opportunities but squandered opportunities that are at the root of Armenia’s ills, and it can make progress only by confronting this fact and holding accountable those responsible for the failures.”

This is a sign of a country going downhill – see Venezuela, Iraq, Syria, Libya…..

The young generation will not wait while the old guard continues to act irresponsibly, they will vote with their feet and move on, or move out.  Or worse, Armenia will join the perpetually troubled failed states.

Posted in Annie Demirjian, POLITICS, SOCIETY | Leave a comment

Silence and Hypocrisy—Killers of Hope

Burb wire Armenia--2
An urgent call for our Diaspora to demand democracy and human rights in Armenia.

While many foreign and outside entities had appealed for a non-extreme response to the extreme actions taken by an armed group at the Yerevan police station, the Diaspora largely remained silent.

By contrast, the rulers in Armenia have engaged in wholesale mass arrests and detention of anyone they suspect as the opposition, including peaceful protesters exercising their constitutional right to assemble, whether to appeal for moderation or express their grievances against government policies and practices.

The Armenian Diaspora at large has not adequately spoken out against these government actions. At this point, it is difficult to fathom the motivations for such silence.

Could it be the belief that we, in the Diaspora, have no business interfering in internal affairs of a foreign country—except when it comes to the Karabagh question and Armenia-Turkey relations? Or is it the notion that it’s the Armenian government’s job to serve the needs of its people—except when it comes to the sick, the needy, the poor, the military, elderly, public schools and children?

Only the ruling elite seem to have their needs addressed while living lavish lives supported by ill-begotten funds sheltered in the names of family members and off-shore shell companies.

Recently the Catholicos of All Armenians himself thought it appropriate to condemn the violent acts of these “Daredevils”, but he has not condemned the injustices perpetrated by the ruling party against the flock– such as systemic election fraud and gross human rights violations, including unleashing the over-aggressive police and infamously brutal thug brigades.

Many community leaders in the Diaspora have acknowledged, behind closed doors, that it’s no secret to them that Armenia is severely corrupt, but they could not speak truth to power because it might have compromised the good work they were doing to instill “hope for a better future” among the people—except when that hope was for a clean government that evens the economic playing field, allows for free and fair elections, and insists on an independent judiciary and Rule of Law. Perhaps they considered those minor issues compared with poverty and hunger. Yet we all have witnessed on many occasions that the people were not protesting against poverty and hunger but demanding democracy and human rights.

So while we were patting ourselves on the back for working to instill hope, our silence and hypocrisy were killing that hope, rendering much of our time, money and efforts in Armenia futile and ineffective–posh hotels, fancy restaurants and high tech “showcase” schools notwithstanding.

Most of us thought time was the cure for Armenia’s ills and that somehow, magically, the leaders would come to their senses and live up to the promise of the new Armenia.

Yet two decades is long enough to prove that corruption only breeds corruption, leading to a failed state and cynical society that has nothing left to lose. As John F. Kennedy wisely admonished, “Those who make peaceful revolution impossible will make violent revolution inevitable.”

If we are truly honest, it may already be too late to overcome the high stakes and perilous road ahead. Yet, if ever the Diaspora had an opportunity to show its true mettle, the hour has come.

All who recognize this crisis point, should urge our community representatives and organizations, charitable, religious and political, to publicly decry those responsible for the rampant abuses of human rights and dignity and support those that seek electoral reform and an accounting of unlawful police tactics. The former would include the public inspection of voter lists, and a meaningful investigation of violations committed during last December’s constitutional referendum and those who have to date blocked such an effort.

We should no longer consider the alternative an option—that is, trying to preserve a fabricated and false sense of law and order that cripples Armenia’s ability to meet challenges at home and at the border while inciting civil violence.

Taking a clear stand on the side of human rights and justice won’t instantly solve the deeply entrenched problems that plague the country. But it’s a first step in a new direction, that, if made courageously, wholeheartedly, unequivocally and boldly, will instill hope among the people as never before.

They’ve been waiting for us to answer their call but, as we’ve witnessed from recent events, they can’t wait forever.


Armenian Bar Association

Justice Armenia

Professor Simon Payaslian
Charles K. and Elisabeth M. Kenosian
Chair in Modern Armenian History
and Literature, Department of History,
Boston University

Anny Bakalian, Ph.D.
Associate Director of MEMEAC,
The Graduate Center, CUNY

Policy Forum Armenia

Armenian Scientists and Engineers Association (AESA), NY-NJ Section

Vahe Berberian (USA)
Painter, Author, Playwright, Humorist

Ara Dinkjian (USA)
Musician and Composer

Armenian Renaissance – New York Chapter

Armenian Renaissance – Los Angeles Chapter

Vicken Cheterian (Switzerland)
Writer and University Lecturer

Vahe Tachjian (Germany)
Chief Editor of Houshamadyan

Nora Armani
SR Socially Relevant Film Festival NY,
Founding Artistic Director

Vicken Tarpinian (France)
Singer and Composer

Garo Ghazarian, Esq.
Dean & Professor of Law
Peoples College of Law
Los Angeles, California

Maro Matosian
Women’s Support Center

Nurhan Becidyan (USA)

Berc Araz (USA)

Rafi Hovsepian
President, New York Armenian
Students’ Association
Adjunct Instructor, New York University

Mario Yazidjian (USA)

Harout Chatmajian (USA)
Actor, Director and Community Activist

Ara N. Araz (USA)

Posted in Admin, POLITICS, SOCIETY | 2 Comments

Letter to President Obama

The north side of the White House looking at the Rose Garden

The north side of the White House looking at the Rose Garden

The members of the Armenian community of Washington, DC, who took part in the public protest action on July 31 in front of the White House, sent the following letter to President Obama.

The Honorable Barack Obama

President of the United States of America

July 31, 2016

We, members of the Armenian community of the greater Washington area, are profoundly concerned about the events taking place in Armenia. The takeover by a group of political activists and former freedom fighters—the “Daredevils of Sassoon”— on July 17 of a police compound in downtown Yerevan has highlighted in the strongest possible ways the problems of Armenia and its population.

The ruling criminal-oligarchic regime has brought Armenia’s economy to its knees and caused nearly half of the country’s population to migrate. Poverty is widespread; systemic corruption is unprecedented; and human rights are systematically violated. The de facto president Serge Sargsyan came to power by means of fraudulent elections and subsequent massacre of demonstrators in 2008. Citizens of Armenia have been left without real options to express their grievances and demand better governance. While arguably extreme, the actions of the Daredevils are a direct manifestation of the lack of options and a self-defense against the state of terror imposed by the ruling regime on its citizens for years.

The group is demanding the release of all political prisoners and a resignation of Sargsyan administration and has succeeded in galvanizing an unprecedented civil society movement. However, the regime continues to use threats and deception to deal with the civil movement, several leaders of which have been arrested and abused while in detention.

We, therefore, call on your administration to use all powers under its disposal to:

  • Prevent further bloodshed and widespread human rights abuse by the Sargsyan regime;
  • Impress upon the regime that further violations of basic human rights and fundamental freedoms will not be tolerated;
  • Take a more active role in the mediation process and ultimately ensure that peaceful negotiations with the leaders of the protest movement take place;
  • Halt all foreign funding for the Armenian police, as recommended by the Transparency International, and investigate all violations of human rights by police and security forces, as recommended by the UN Office in Armenia.

As a potential valuable ally for the United States in the region, Armenia needs a good government to overcome significant challenges to its development, largely due to systemic corruption and theft.

We hope that your administration will continue upholding the values of democracy and good governance for the benefit of people of Armenia and the US-Armenia relations.


Singed           Members of Washington, DC Armenian Community (Signatures of file)


Cc:      The Department of State Armenia Desk.

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30 Armenians

30 ArmeniansBoth ancient and modern writers have used the Battle of Thermopylae in 480 BC between the Greeks and the Persians as an example of the power of a patriotic army defending their native soil. The Spartan King Leonidas, who was in charge of the Greek forces, aware that his troops were outflanked, remained to guard the retreat of its army with 300 Spartans (and a few hundreds of others), most of whom were eventually killed by the advancing Persian troops. These men gave the most precious asset they had—their lives—to save their country.

On July 17, 2016, 30 Armenians decided to do something similar: stop their country from an imminent economic and demographic demise and prevent a future military defeat believed to be orchestrated by the country’s ruling elite. In an act of ultimate sacrifice, a group of activists and former freedom fighters calling themselves the “Daredevils of Sassoon” took over a key police compound in downtown Yerevan to ring the bells and trigger an uprising. What ensued was a strong outpouring of support and a series of mass protest rallies across the country supportive of the gunmen and against the regime. Having squandered much of the country’s wealth and manipulated the results of every single election since 1991, the regime has little, if any, support among its population.

The takeover revealed interesting facts about the life on the police base. The gunmen found pornographic materials and evidence of a prostitution ring being housed on the base. This came as little surprise to the general public, given the largely negative image of the Armenian police within the society due to ties with organized crime, politics, and corruption.

The occupiers have a clear political program devised by their political wing, the Founding Parliament, to guide the country out of this impasse. A national unity government is proposed to be formed to replace the Sargsyan regime and prepare the ground for free elections following an interim period. Details of new economic, social, and foreign policies are also outlined in the program. The Founding Parliament is expecting to rely on the vast human capital of the Diaspora for forming the temporary administration, thus making sure the new team is representative of the world-wide 10 million Armenians.

The public support of the desperate actions of the gunmen has been very strong. Virtually everyone interviewed by BBC in a recent poll approved the actions of the Daredevils, calling them “heroes”. The social media is full of opinions essentially stating that people have the right to defend themselves against the state terror and to help put the country on a more meaningful path

The history of mankind essentially consists of a series of exogenous structural shifts that helped societies propel to new levels of progress. Examples are many throughout the modern history, some of which were associated with the use of arms. Could anyone possibly imagine today what the United States would have been if the Founding Fathers did not oppose the British rule and called for an armed rebellion, or what France would have looked like today if the heroes of Bastille decided to stay on the fence? The world would have been a much worse place today if it weren’t for the willingness of the best and bravest to put their lives on the line for the common good.

In the Armenian context, taking up arms against the state terror is self-defense and effectively the only way to uphold the Constitution, which has been consistently abused by the regime that came to power by hook or crook every single time it had to go through an election process.

The overly cautious and ambiguous position of the Western powers to what was happening since July 17 has been disheartening for those, who have watched the corrupt regime and its Nazi-style police force to get more powerful using western dollars. This is when the same Western governments have offered relatively little support to civil society and opposition institutions in Armenia over the years, leaving them without much hope for survival in the face of state oppression and abuse.

The Western powers have also fallen victim to the regime’s tricks and deception, the most significant being the commitment to sign the Association Agreement with the EU in 2013, subsequently reversed overnight by the regime. This time the lies are reinforced by age-old dogmas of the first president and founding father of Armenia’s corruption, Levon Ter-Petrosyan, and are very dangerous. His insistence that territorial concessions to Azerbaijan are the only way for Armenia to avoid war (a clearly outdated thinking that allows no room for improved governance to help the country out of the current deadlock) is as far from the reality or experience of the rest of the world as it can be. Aided by Ter-Petrosyan, the regime’s propaganda machine is now most likely trying to convince the Western powers that the Daredevils are Kocharyan-style hardliners unwilling to compromise on the issue of Nagorno Karabagh and are therefore not worthy of their support.

Unfortunately, whatever the regime’s propagandists are doing seems to be working. The latest statement by the US Embassy in Armenia was a disappointment, clearly putting the perpetrator on the same scale with the victim and not offering any real solutions. In an ironic way, this must reflect a fundamental shift in policy following the (open and transparent) support of anti-government forces in places like Libya, Syria, Ukraine, among others, in recent years. Armenia must indeed be somehow different to be singled out in such a manner.

This and previous statements failed to acknowledge the fact that the actions of Daredevils are intended to be (and has worked as) a trigger for a nation-wide peaceful protests, and is not per se a mechanism for overthrowing the regime. They also—and perhaps more importantly—do not serve the best interests of the United States in an important geopolitical region: sweet-talking with counterparts from Baghramyan 26 is facing a serious risk of losing the support of people of Armenia and pushing them back into Russia’s hands.

The Erdogan-style heavy-handed tactics with respect to peaceful protests by Sargsyan, nevertheless, did get the attention of some Western politicians. Thorbjørn Jagland, the Secretary General of the Council of Europe, reportedly called on the Sargsyan regime to respect the right of assembly and protest. More will undoubtedly follow as the video footage from the July 29 brutal police action—showing plain-clothed officers and criminal thugs dispersing men, women, and children with tear gas, hand grenades, and metal bars—are disseminated by international media outlets, such as BBC.


The sacrifice of 30 Armenians should not go in vein. The regime that is arresting its citizens off the streets just to suppress dissent cannot live long in the 21st century. The pressure from within the country, international community, and the Diaspora will mount and eventually result in the fall of the regime and its leaders. However, given its precarious geopolitical situation all sides should do the best to help the country’s leaders avoid the fate of Ceausescu and Gaddafi. More importantly, the Daredevils will not have to die, like their 300 Spartan brothers in spirit 25 centuries ago, just to make a case. If we all wake up from our sleep and support them, they will become the force to help avoid an upcoming disaster and to lead Armenia to stability, freedom, prosperity, and unity.

Posted in Foreign policy, POLITICS, SOCIETY | Tagged , , , | Leave a comment

When People Are Fed Up

Erebuni protests

Perhaps since the takeover of Bastille in Paris in July 1789, much of the humanity has chosen non-violent methods for settling political discourse. On the one hand, times were changing and the use of arms looked increasingly uncivilized even while dealing with oppressive and corrupt regimes. Besides, people knew they will fall anyway, despite a few attempts here and there to “expedite the process”. On the other hand, the development of democratic governance across the world in the subsequent centuries provided examples of smoother and much less costly transition opportunities.

Fast forward Armenia in 2016…

At early hours of July 17, a group of gunmen attacked a large police compound in Erebuni district of Yerevan and took several police officers hostage. All hostages were subsequently released within days in a show of good will, including a general, deputy police chief of Armenia, and a colonel, deputy chief of Yerevan police. One senior police officer was killed in a shootout, having reportedly fired nine bullets at the attackers despite repeated warnings to cease fire.

In a written statement, the attackers—political activists and “freedom fighters” from the war in Artsakh (Armenian for Nagorno Karabagh) calling themselves the “Daredevils of Sassoon” per a medieval Armenian heroic epic poem—mentioned that they were left without options to channel dissatisfaction with the handling of the country’s affairs and achieve a meaningful change in the country’s governance. Every single nation-wide election in Armenia since 1991 has been considered fraudulent by independent observers, with the one in 2008 leading to 10 deaths of protesters daring to question the outcome. Policy Forum Armenia’s research since 2008 confirms this.

Demands of the gunmen are straightforward: (1) release of all political prisoners, including their leader Jirayr Sefilian (Lebanese-born highly decorated field commander of the first Artsakh war) and (2) resignation of Serge Sargsyan and his regime.

The statement issued by the Presidential palace on the 5th day of the events in response to these demands read much like an ultimatum of someone, who has difficulties grasping the new reality on the ground. It essentially said to the gunmen: “Lay down your arms and you will be tried by the country’s laws and Constitution.” Although some senior members of the junior coalition partner and a key Sargsyan ally in suppressing Diaspora dissent—the socialist ARF-Dashnaktsutyun—criticized the use of force by the group, few took them seriously, coming from a party that has been charged by an Armenian court for preparing to assassinate country’s first (and only) legitimately elected president in 1993.

International response to the police compound takeover has been strong. Both the US and the EU condemned the use of force by the attackers while at the same time calling on the regime to exercise restraint in handling the situation. The Russian Foreign Ministry condemned the takeover of the police base and called on the authorities to “unblock the situation as soon as possible, release the hostages, carry out a full investigation of the incident and punish the responsible persons”.

In the meantime, the public support for the gunmen has been gaining momentum despite the regime’s intimidation tactics, mass arrests, and use of force. A committee has been created—consisting of opposition politicians and independent intellectuals—to coordinate the activities of protesters in coordination with the attackers (who have cut a deal with the police to have communication with the rest of the world). The outpouring of support from Diaspora communities—largely spearheaded by the Armenian Renaissance network—continues, with rallies (albeit still small) held in some cities abroad. This is turning into a significant challenge for Sargsyan (and his ARF propagandists), something that he cannot easily resolve without putting his political career and/or life on the line.

The regime has moved full force—including using tear gas, stun grenades, and hundreds of plainclothes officers—to suppress the protests that erupted in Yerevan. Over 200 activists are reportedly in police custody following the clashes with riot police and protesters on July 20. The leader of the Founding Parliament (FP), the political wing of the “Daredevils of Sassoon”, is in hiding with a case pending against him. Another senior member of the FP, Garo Yegnukyan, has been arrested and charged with aiding the gunmen.[1] The Transparency International Armenian Anti-corruption center has asked for a cease of all foreign funding to the Armenian police amid evidence of serious abuse of power and brutality.

Events in Yerevan demonstrated a clear disconnect between the rhetoric of Serge Sargsyan’s administration and the reality on the ground. The disastrous economic and social policies conducted by Sargsyan administration (which nevertheless made a few on the top very wealthy) and constant promises for political reform followed by a series of fraudulent nation-wide elections, altogether fueling the belief that nothing can be changed in Armenia via political discourse. Moreover, the dissatisfaction with the handling of economic and political affairs of the country (which are seen as the main factors behind Armenia’s crippling emigration) was recently exacerbated by the discovery of massive embezzlement of funding within armed forces during the 4-day war with rival Azerbaijan in April (which ended with minor territorial losses for the Armenian side), creating a serious dissatisfaction with the regime’s handling of nation-wide affairs.

The events also revealed an apparent disconnect between the army and police in Armenia. The former has been increasingly nervous about the Russia-orchestrated plan to hand over the territory liberated by Armenia in the 1991-94 war back to Azerbaijan (as issue mentioned repeatedly by the gunmen in their statement), in what is widely believed an attempt by president Putin to lure Azerbaijan into the Eurasian Economic Union. The police, on the other hand, is believed to be primarily concerned about the growing internal instability and continues to remain loyal to the Sargsyan regime, which has provided them with all perks, including overblown size, relatively high and stable salaries, and ability to go unpunished for rampant abuse and (highly profitable business of) covering up corruption by high-ranking officials, among other misdeeds.

In Conclusion…

In his endorsement of Policy Forum Armenia’s report on “Corruption in Armenia”, Daron Acemoglu—the Elizabeth and James Killian Professor of Economics at Massachusetts Institute of Technology, recipient of the Bates Clark medal in Economics, and author of “Why Nations Fail: Origins of Power, Prosperity, and Poverty”—said:

“Some say that Armenia is doomed to fail economically because of its geography or location in the world. But like so many other countries around the world and throughout history, its failure is due to corruption, unscrupulous politicians and weak institutions. It’s not lack of opportunities but squandered opportunities that are at the root of Armenia’s ills, and it can make progress only by confronting this fact and holding accountable those responsible for the failures.”

Armenians have not had their Bastille—they have been too busy confronting external enemies for pretty much as long as they existed, without paying much attention to the enemy from within. This might just be their chance to have it, a chance to break the vicious cycle of squandered opportunities and the continuous fall into oblivion by standing tall and calling for better governance and independence from a foreign rule.

Regardless of whether or not these events will directly bring about a political change in Armenia, one thing is clear: maintaining the status quo in Armenia for Serge Sargsyan and his Diaspora partners will be next to impossible. The 30-odd heavily armed and experienced fighters surrounded by thousands of sympathetic civilians in downtown Yerevan are unlikely to go away (without creating a mayhem for the Sargsyan regime) and may just become the trigger for both political and foreign policy reform that citizens of Armenia have been longing for.

[1] Mr. Yegnukian is also an Executive Board member of Policy Forum Armenia.

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Mismanagement and Corruption in Armenia’s Electricity Sector

Executive Summary: Armenia has one of the highest shares of inexpensive hydroelectricity generation; the lowest shares of expensive natural gas generation; and a high share of inexpensive nuclear power generation. Yet it has the highest electricity tariff among the comparator countries reported here. The study conjectures that: (i) forced transfers of funds by energy companies to state-owned chemical plants and foundations controlled by government officials; (ii) non-payment of electricity bill by privileged customers; and (iii) irresponsible pricing policy to be behind Armenia’s high electricity tariff. At current rates, it estimates that the lower bound of losses for population from these corrupt practices are at least $250 million per year (or roughly 2.5 percent of Armenia’s Gross Domestic Product), much of which will likely accrue to the bank accounts of corrupt government officials engaged in regulating and managing the electricity sector.

A. Background

Despite an unsuccessful start, the privatization of Armenia’s Distribution Network in early-2000’s and the subsequent story were lauded as a major success.[1] However, things have changed dramatically after about a decade, with events culminating in a series of protests coined “Electric Yerevan” in June 2015. This article tells a story of mismanagement—policy failures and corruption—that brought Armenia’s electricity network to its knees. We begin by providing a brief overview of the electricity sector and its problems.

Electricity generation

Table 1 shows the structure of the electricity generation in Armenia and individual unit costs. Roughly a quarter of Armenia’s electricity is produced by large hydroelectric plants (Sevan-Hrazdan HPP and Vorotan Cascade) at a fraction of the cost of much more expensive gas-fired facilities (Hrazdan TPP, Hrazdan-5, and Yerevan CCGT).

Recently, the Vorotan Cascade—a profitable state-owned hydroelectric plant—was sold to a little known US company, Contour Global, for $180 million. While few details of the deal, including how the deal itself came to be, were shared with the public, it is known that Contour Global runs two hydropower plants in Brazil with the size of one-tenth of that of the Vorotan Cascade, leaving doubts about the suitability of this operator and the underlying rationale behind the deal. Prior to privatization, the Government received a €50 million loan from German KfW fund to rehabilitate Vorotan.

Table 1. Electricity Generation Cost and Output, 2014

Table 1Source: WB (2014); and PFA estimates.

The Armenian Nuclear Power Plan (ANPP) is the crown jewel of the system, currently under Russian management. It generated nearly 30 percent of Armenia’s electricity in 2014 and is considered the backbone of the system. The World Bank (2014) estimated that if ANPP is closed for maintenance there will be peak hour shortages of electricity supply in Armenia.[2] According to the World Nuclear Association, “an application for life extension will be made (by the Armenian NPP) in September 2016, and the $300 million upgrade of the plant is to commence in 2017 in order to extend its operation to 2026.” It is not clear where the funding for this will be coming from given Armenia’s disastrous budget situation and ongoing economic crisis.

Armenia trades electricity for Iranian gas: 1 m3 of gas is traded with 3 kWh electricity on average during the day. What had initially started as an electricity-to-electricity swap during peak/off-peak hours, has turned into an electricity-to-gas swap the details of which are nearly impossible to understand given the lack of public information.

Electricity distribution

The Russian owned and operated Electricity Networks of Armenia (ENA) is the link between electricity producers and consumers in Armenia and was caught up in a controversy that erupted in June 2015. Starting off as a profitable company under the management of Midland Resources Holding (prior to the takeover by Russian energy giant Inter RAO UES in 2005), it became loss making in 2012: its net profit margin declined from 3.2 percent in 2010 to negative 9.2 percent in 2012. The 2013 audit of the ENA showed significant losses and debt accumulation.

While technical losses declined somewhat over the years (see ENA presentation), the reliability of service remained low. In 2012, outages per transmission line and outage duration were 2.5 and 4 times higher than the average for well-performing utilities (in the US and Europe), respectively. The company’s capital investment had a lot to do with it: it declined from AMD28 billion in 2009 to AMD8 billion in 2012.

In the most recent and controversial development, the ENA proposed an increase in tariff by AMD17 (or 40 percent). During its June 17, 2015 session, the Public Services Regulatory Commission (PSRC) countered this and proposed an increase of nearly AMD7, bringing the daytime tariff to AMD48.8/kWh and the nighttime tariff to 38.8 AMD/kWh. This has marked the beginning of the “Electric Yerevan” movement.

The ENA does not have the resources to adequately maintain facilities (and electricity supply) in the medium term and neither does the government. Some analysis, therefore, wondered if the protests in June 2015 were “encouraged” by the government to bring attention to the upcoming danger and put the blame for the company’s sorry state of affairs on its Russian management. Section C below provides some rationale behind this claim.

B. Cross-country comparison of electricity tariffs

To better understand issues/problems surrounding Armenia’s electricity distribution sector and its cost structure, it is important to compare Armenia with relevant comparators in the Commonwealth of Independent States (CIS). Table 2 presents data on electricity generation, efficiency indicators, and electricity tariffs for residential use across some countries.

The following observations are noteworthy:

  • Armenia has a high share of (relatively inexpensive) hydro generation, third after Georgia and the Kyrgyz Republic.
  • Armenia has one of the lowest shares of (relatively expensive) natural gas generation.
  • Armenia’s share of (relatively inexpensive) nuclear power generation is greater than that in Russia; no other comparator country has nuclear generation capacity.[3]
  • Like Belarus, Georgia, the Kyrgyz Republic, and Moldova, Armenia too imports a significant share of its energy generation inputs (almost 73 percent). In case of Armenia these are gas and nuclear fuel.
  • In 2012, Armenia was in the middle in terms of power transmission and distribution losses (at 12.4 percent) and at par with the average for the developing countries of Europe and Central Asia, at 12.2 percent (not shown in the table).

Despite all of these rather favorable factors, Armenia’s electricity tariff is the largest among the comparator countries.

Table 2. Electricity Generation and Use in Select CIS Countries

(Data as of 2012; unless otherwise noted)
Table 2

Source: World Bank’s World Development Indicators (WDI) Database.

C. Main Factors Behind Electricity Sector Troubles

The following is a list of factors that have contributed to the formation of the high tariff and the deterioration of the sector’s financial conditions in recent years:

  1. Transfers of funds to, and non-payments by, Nairit and Vanadzor chemical plants. State-owned power generating companies (i.e., ANPP, Yerevan TPP, Vorotan, and High Voltage Electricity Network) were used as “cash cows” for quasi-fiscal transfers to those chemical plans.[4] The total debt of those two plants to the power sector was estimated at AMD22 billion (see WB (2014), p. 43). It is noteworthy that Nairit’s debt to the power sector came with government guarantees, which were never called. This situation created significant holes in the financial position of the electricity generating companies, forcing them to take lots of expensive short-term debt, and resulted in subsequent increases in the cost of electricity generation.The following is a list of factors that have contributed to the formation of the high tariff and the deterioration of the sector’s financial conditions in recent years:
  2. Transfers to foundations controlled by government officials. The electricity companies and ENA were forced to transfer massive sums of money to government-connected foundations and entities. A Eurasianet report confirms that ENA made millions of dollars in transfers to a charitable organization chaired by Serge Sargsyan, among others. To this day, the power sector pays for operation and capital renovation of a large center used for official government receptions (see WB (2014), presentation; p. 43).
  3. Non-payment of electricity bill. Certain categories of clients largely connected to the political elite have over the years not paid for their electricity bill. Estimates of this are difficult to come by from public sources, but the problem is believed to be serious among experts that the authors of this note interviewed.
  4. Irresponsible pricing policy. ENA’s financial position has been undermined on a regular basis by the PSRC using the following scheme: in calculating the end-user tariff, the PSRC (intentionally) overstated the amount of electricity generated by (inexpensive) hydro and nuclear generators to keep the tariff artificially low. The actual outcome had much more gas-generated electricity resulting in higher costs for ENA while it was stuck with (artificially) low tariff. In addition, in the past couple of years, in order to keep the tariff under control, the PSRC refused to approve ENA’s much needed investment plans.

A corollary to this is ENA’s regulator-imposed cost structure. ENA pays to the generating companies a fixed cost and a variable cost. Instead, it can only charge a variable cost to its customers. This creates a situation that when the demand for electricity drops to a certain level, revenues are not enough to cover the costs, resulting in loss for ENA. This has had negative financial implications for ENA and may jeopardize reliability of electricity supply in the future due to lack of resource to undertake adequate maintenance.

A critical factor often overlooked while discussing the electricity issue is that of the population dynamics. Since the average/marginal cost of electricity generation are declining as a function of output/demand, if the demand continues to fall, it will push the average/marginal cost of electricity up. This will subsequently push the tariff higher, which will reduce the demand and increase the cost even further in a spiral. Implications of this for the financial viability of the system can be devastating.

Finally, it should be noted that exchange rate depreciation could not have had a significant impact on electricity cost in Armenia. The reason is that only a small portion of total cost originates from abroad (and is therefore subject to exchange rate fluctuations). Box 1 below explains why the price for nuclear electricity—a seemingly import-intensive type of energy—is not very elastic to changes in exchange rates.

Box 1. Economics of Nuclear Electricity

Much of the costs of electricity generated by nuclear plans are due to the cost of capital, since they are very capital intensive. In the case of the Armenian Nuclear Power Plant (ANPP), its investment had largely been depreciated years ago, making the electricity produced there relatively inexpensive. The cost of fuel for operating nuclear plants is 30-40 percent of total cost (because the share of capital cost is very low). 1/

The World Nuclear Association (2015) notes that price for nuclear energy is not very elastic to changes in the cost of fuel. 2/ Based on a study conducted in Finland, a doubling of fuel prices would result in the electricity cost for nuclear rising by just about 9 percent. For the US, the same source states that doubling the uranium price (say from $25 to $50 per lb U3O8) takes the expected cost of generation from 1.3 US cents per kWh to 1.42 cents per kWh (an increase of less than 10 percent).


1/ Details for ANPP can be obtained here. 2/ “The Economics of Nuclear Power”, available here.

D. Calculating Corruption Mark-up: A Cross-Country Analysis

As noted above, the electricity tariff in Armenia is higher among the comparator CIS countries. The following Figures show by how much Armenia’s tariff differs from that of comparator countries, if we take into account the supply factors (e.g., generation structure: hydro, nuclear, and gas) and demand factors (e.g., purchasing power of population).[5]

Figure 1: Hydroelectricity and Electricity Tariff

Figure 1                   Source: Table 2 above.

 Figure 2: Gas–generated Electricity and Electricity Tariff

Figure 2                   Source: Table 2 above.

Figure 3: PPP-adjusted per Capita Income and Electricity Tariff

Figure 3                   Source: Table 2 above.

All three Figures show that Armenia’s tariff is significantly higher than what it should have been—it is located significantly above the fitted lines representing the relations between the tariff and its determinants. The predicted value of the residential tariff using Figures 1-3 is between AMD34/kWh and AMD35/kWh, instead of the current AMD48.8/kWh. The estimated tariff will be even smaller once (relatively inexpensive) nuclear power generation and (low) generation/distribution losses for Armenia are incorporated into the analysis.

A tariff at AMD35/kWh appears reasonable also because the system actually worked under this kind of tariff for years ago (once inflation is adjusted for). However, whether this tariff will cover the system’s sizable investment needs going forward will largely depend on its ability to reform and use its resources productively.

The difference between AMD48.8/kWh and AMD34-35/kWh (i.e., AMD14-15, or approximately 40 percent markup over the expected tariff using cross country comparisons) is the corruption markup effectively charged by Armenia’s regime to its population. In a typical year (with production at average 7.8 billion kWh per year), this will generate nearly $250 million (or approximately 2.5 percent of Armenia’s Gross Domestic Product) of excess revenue/surplus per year. How this surplus will be distributed between government officials, ENA, and generating companies depends largely on the complex relations and the bargaining power between those entities.

E. Implications of Excessive Electricity Tariffs

This markup has important economic and social implications. High electricity tariffs have negative impact on economic activity across a broad range of sectors since they increase the cost of manufacturing and services for all companies/producers.

In addition, high electricity tariffs reduce the household income available for spending on food and other necessities and contribute to increase in poverty. [6] Using Armenian household expenditure data, World Bank (2014) found that: (i) energy spending is already estimated at 10 percent of total household expenditures, which is considered the energy poverty level internationally;[7] (ii) as a result of 2013 gas and electricity price hikes, energy expense share increase was highest for the poor (by 13.6 percent); (iii) the tariff hikes are estimated to have increased poverty by 3 percent.

Apparently, Armenian households are among the most vulnerable ones to an energy price shock among a wide-cross section of CIS countries according to another recent World Bank study. Ruggeri, Olivier, and Trimble (2013) find that the poverty rate in Armenia will increase by 6 percent as a result an energy tariff increase (standard for the group of countries used in the study), one of the highest increases in the group.

Figure 4. Poverty Incidence and Estimated Increase Due to Tariff Hike

Figure 4                    Source: Ruggeri, Olivier, and Trimble (2013), p. 89.

Finally, increase in electricity (and gas) tariff will also push the low-income households (unable to afford gas- or electricity-power heat) to use wood for heating, which will have negative consequences for public health and Armenia’s already very low forest cover. Poor households reported cutting down on expenses for healthcare and children’s education to cope with energy price increases.

The leaders of the “Electric Yerevan” movement against the proposed increase in electricity tariff must have had these concerns in mind, at least implicitly. However, not only they did not succeed in their demands, but the resulting outcome was economically and socially inferior. Instead of reducing corruption and inefficiencies in electricity regulation, generation, and distribution, the events in June 2015 led to a government subsidy to the sector (to cover losses partially generated by privately-owned companies) using budget resources. In a classic example of “privatizing the gains and socializing the losses”, Armenia’s taxpayers were forced to pay for the bad deeds of the past, without achieving any meaningful change in the way the electricity sector operates.



Sargsyan, Gevorg, Ani Balabanyan, and Denzel Hankinson, 2006. “From Crisis to Stability in the Armenian Power Sector.” World Bank Working Papers 74.

World Bank, 2014. “Armenia Power Sector Policy Note,” December; Washington, DC.

Ruggeri Laderchi, Caterina, Anne Olivier, and Chris Trimble, 2013. “Balancing Act: Cutting Energy Subsidies While Protecting Affordability,” The World Bank, Europe and Central Asia Reports, Washington, DC.  Available via:


[1] The 1997 Law on Privatization provided the legal foundation for the privatization of the power sector in Armenia. Gradually, between 1997 and 2002, privatization of 25 small hydropower plants took place. However, privatization of the distribution network took more time. The first attempt to privatize the network in 1999-2000 failed, allegedly due to flaws in the tender documents and legal framework. Five major international energy companies had expressed interest with four having prequalified, but none submitted bids. The government revised the tender documents and appointed new transaction and legal advisers. It also revised the Energy Law to reduce potential government interference in sector operations. A second tender was held in 2001, but failed. In 2002, a rather inexperienced (financial) company, UK-based Midland Resources Holding, presented an offer and eventually assumed ownership of the distribution in the fall of 2002 (Sargsyan, Balabanyan, and Hankinson, 2006).

[2] To avoid these in 2016 (due to a planned maintenance-related shut-off of the ANPP), the government was planning on turn on some old gas-fired facilities, which as noted above are very expensive.

[3] Ukraine, the only other CIS country that generates nuclear electricity (not shown in Table 2) has a share of 49.4 of its electricity produced by using nuclear generation in 2014.

[4] For example, Vorotan Cascade financed AMD400 million worth of payroll of Nairit (WB, 2014).

[5] While a multi-variate regression analysis would have been a more precise analytical tool to use (that would have allowed for controlling of all factors simultaneously), the results will be almost identical given that all three bi-variate factor analyses (which would have been combined in the multi-variate analysis) individually point to the same range for the estimated tariff (34-35 dram/kWh). The benefit of using bi-variate analysis (such as figures/charts) is that it provides for a better visual understanding of the factors involved and their values.

[6] It should be noted that the household welfare will also decline as a result of reduced consumption of electricity (due to higher tariff).

[7] The term energy/electricity poverty refers to households spending more than 10 percent of their budgets on energy/electricity.

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