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4 Sep, 2013 12:48

Armenia chooses Russian trade deal over EU

Armenia chooses Russian trade deal over EU

Armenia has decided to hang its hat with its former Soviet ally Russia instead of joining a European free-trade agreement, President Serzh Sarksyan announced after meeting with Vladimir Putin.

Armenia said it would join Russia in the Customs Union, as well as engage in the Eurasian integration process instead of negotiating a free trade agreement with the EU. The move is seen as a political victory for Putin, who has been rounding up former Soviet states to rival the EU, promising lower gas prices and other trade perks.

"Russia supports the decision by Armenia to enter the customs union ... We will fully work for this to happen," Putin said at the bilateral talk at his countryside house outside of Moscow .

Russia is Armenia’s largest trading partner and the largest foreign investor in the small, landlocked Caucasus country. Trade in 2012 reached $1.2 billion and Russian capital investment was over $3 billion, or nearly half of Armenia’s foreign investment, Putin said.

In July Armenia engaged in technical talks on a ‘deep and comprehensive free-trade agreement' (DCFTA) with the EU, and observers largely expected the country  to initiate a free trade agreement with the EU at the Vilnius summit in late November. The EU has stated both publicly and privately membership of the Russia’s Eurasian Customs Union is “incompatible” with DCFTA.

The three-member customs union of Russia, Kazakhstan and Belarus was founded in 2010 as a counterweight to the EU. Putin hopes to expand it into a ‘Eurasian Union’- a political and economic union of post-Soviet states like Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan.

While President Putin said earlier the Eurasian Union would be built upon the 'best values of the Soviet Union', critics claim that the drive towards integration aims to restore the ‘Soviet Empire’.

It has been suggested the Eurasian Union could also include other countries that have been historically or culturally close, such as Finland, Hungary, the Czech Republic, Bulgaria, Vietnam, Mongolia, Cuba and Venezuela. This is expected to incorporate the countries into a common body where Russian would be the common language of communication and economic cooperation.

Russia has so far failed to lure Ukraine away from an EU trading alliance and relations with Belarus have soured after they detained and jailed the CEO of Russia’s largest potash producer, Uralkali.