Jilting EU, Armenia Ties Knot With Moscow

By Naftali Bendavid And Laurence Norman Connect

European diplomats were stunned this week by word that Armenia, which had been heading toward strengthening ties with the European Union, will instead join a customs union led by Russia—handing the Kremlin a victory in its tug of war with Brussels for influence in the region. The question now is whether Armenia's move foreshadows similar decisions by other former Soviet republics.

Armenia's shift was announced Tuesday in a statement posted on the Kremlin website during a meeting between Russian President Vladimir Putin and his Armenian counterpart, Serzh Sargsyan.

Reuters

Armenia's president, left, and his Russian counterpart ahead of a signing ceremony Tuesday outside Moscow.

"This is a rational decision, it is a decision based on Armenia's national interests," President Sargsyan said afterward, according to a transcript on the Kremlin's website. "The decision is not a rejection of our dialogue with European institutions."

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The small country in the South Caucasus region had been expected to initial an "association agreement" with the EU at a summit in November, in Vilnius, Lithuania, strengthening trade relations while committing Armenia to democratic changes.

But Mr. Putin has been turning up the pressure on the countries sandwiched between Russia and the EU to join forces with its own nascent customs union, which already includes Belarus and Kazakhstan. Russia is widely seen as the dominant partner.

Countries in the Moscow-led customs union can't be integrated into the EU, European officials say, because they have effectively ceded sovereignty over trade issues to Russia.

While Mr. Putin said Tuesday it was Armenia's decision to join the bloc, few in Brussels doubt that Armenia's abrupt policy change came because Moscow raised the costs of pursuing closer EU ties.

Russia has powerful leverage because it's the country's natural-gas supplier and can determine the price of fuel. Thousands of Russian troops are based in Armenia and Moscow has formal security guarantees in place, which have bolstered Armenia in its bitter conflict with neighboring Azerbaijan over the disputed territory of Nagorno-Karabakh.

Even so, the intensity of what Europeans see as Russian pressure tactics and the speed of Armenia's U-turn have spooked EU officials.

It was just six weeks ago—July 24—that the European Commission completed years of talks with Armenia on the association accord, and Armenian officials were assuring their Brussels counterparts that there would be no stepping back.

"The pressures on Armenia were known, and in that sense it is not a surprise," said Jacek Saryusz-Wolski, a Polish member of the European Parliament's foreign-affairs committee. "But the fact that the pressure succeeded in getting Armenia, under force if you wish, to change its decision—that is a surprise, and we profoundly regret it."

In terms of trade, Armenia is not a huge prize for either side. Its economy is relatively small, with a gross domestic product of €7.5 billion ($10 billion).

But EU leaders had apparently seen the conclusion of the association deal as a diplomatic victory.

Swedish Foreign Minister Carl Bildt reflected the widespread frustration among European leaders in a tweet: "Armenia negotiated 4 years to get Association Agreement with EU. Now President prefers Kremlin to Brussels."

One Western diplomat with knowledge of the situation said Armenia had negotiated with the EU in good faith, but "they themselves did not expect this kind of pressure from Russia."

He said that the EU will continue to work with Armenia on issues like easing visa procedures, and that Armenia could change direction yet again as it confronts Russia's dominance within the customs union.

Moscow's customs union is supposed to evolve in 2015 into a more comprehensive Eurasian Economic Union, which Russian leaders foresee as a counterweight to the EU.

Armenia's move illustrates the pressure on countries that find themselves pulled between East and West, and could mean trouble for others considering linking with the EU.

Ukraine, for example, is expected to sign its own long-awaited EU association agreement at the November summit, and Moldova and Georgia are scheduled to tentatively initial such deals at the same time.

"It is the general context which is so worrying," Mr. Saryusz-Wolski said. "This pressure concerns all the four countries (including Armenia) on the road to association. It's part of the wider picture, and the fear that it might provoke a domino effect."

EU officials' surprise was evident Wednesday in their hesitant initial responses. "We are seeking further clarification from the Armenian side," said Maja Kocijancic, an EU foreign affairs spokeswoman. "Then we will be able to assess the implications."

A European diplomat called Armenia's switch a "wake-up call" on Russia's intentions. But he said it doesn't necessarily follow that other countries will spurn the EU; Georgian leaders remain deeply angry over Russia's 2008 invasion of their country, while Ukraine and Moldova have made strong public commitments to Europe.

The battle over the EU's Eastern Partnership—which includes Armenia, Ukraine, Georgia, Moldova, Azerbaijan and Belarus—is only one of the current flash points between Europe and Russia.

Russia has complained about EU rules that force the splitting of giant energy utilities, with Mr. Putin repeatedly accusing Brussels of "confiscating" Russia's investment in some EU countries.

The EU, for its part, became the first entity to take Russia to the World Trade Organization over special taxes Moscow imposes on vehicle imports. European officials also criticize Moscow for blocking efforts to isolate Syrian President Bashar al-Assad.

Write to Naftali Bendavid at naftali.bendavid@wsj.com and Laurence Norman at laurence.norman@dowjones.com

A version of this article appeared September 5, 2013, on page A9 in the U.S. edition of The Wall Street Journal, with the headline: Armenia Jilts Europe, Ties Trade Knot With Moscow.

http://online.wsj.com/article/SB10001424127887324577304579054931777439514.html?KEYWORDS=armenia