'By the time of Serzh Sargsyan’s election much of Armenia was already sold.'

Home of the Royal Institute of International Affairs, Chatham House has published its 2012 report - The Long Goodbye: Waning Russian Influence in the South Caucasus and Central Asia.

In his report, the author, James Nixey, states that Russian influence in the independent states of the South Caucasus and Central Asia is weakening; the drift is inexorable but Russia employs multiple instruments to counter this. “In the South Caucasus, Armenia has already succumbed to Russia economically, with ramifications for its sovereignty. But Azerbaijan and Georgia, via different paths, have moved away from Russia’s embrace,” the report states.

“The levers of Russian influence here vary. They are economic and military in Armenia, scarcely present in Azerbaijan, and essentially related to negative publicity as well as economics with regard to Georgia. Russian influence in Armenia is so great that lack of sovereignty should be Armenia’s number one concern,” the author says.

According to the report, Russian influence in South Ossetia and Abkhazia has increased. The costs and problems associated with these dependencies suggest to some that Abkhazia and South Ossetia are millstones around Russia’s neck. However, the Rs7.7 billion ($250 million) Russia spends on them each year is a trivial sum.

The author writes that a full-blown renewal of the Nagorno-Karabakh conflict would jeopardize Russia’s position in Azerbaijan and Turkey, particularly if the Armenians required military assistance. Pipeline security would also be affected, and Russia prioritizes energy security and financial profit over conflict manipulation.

Through Gazprom’s ownership of its Armenian subsidiary, ArmRosGazprom, 80% of Armenia’s energy structure is Russian-controlled, including the majority of the Iran–Armenia gas pipeline, thus ensuring that Armenia cannot become an independent transit country should Iranian gas ever reach European markets. Russia has also bought up all but two of Armenia’s hydroelectric and nuclear power stations, in exchange for writing off Armenian debt. The extent to which Russia has acquired concrete political gains from energy and infrastructure ownership is a source of debate within Armenia. Kocharian’s successor, Serzh Sargsyan, is ostensibly less pro-Russian but by the time of his election in 2008 much of his country had already been sold,” the report states.

According to it, in the non-energy commercial sectors, the Russian airline Sibir owns 70% of the Armenian airline Armavia. The state-controlled Russian bank Vneshtorgbank owns 70% of the Armenian Saving Bank. “Russia has effectively bought up Armenia’s national railway network with a $570 million investment. Russia’s greatest economic lever with Azerbaijan and Armenia is in the form of migrant workers and their remittances,” the report states.

Tert.am