ArmeniaNow Despite the fact that Armenia’s external debt will have exceeded the level of 50 percent of its Gross Domestic Product by 2012, the country’s government still has to borrow again. This time the matter concerns half a billion dollars to be provided by the Eurasian Economic Community, or EurAsEC, a Russia-dominated international organization.

Remarkably, in Armenia, as it is in Belarus, a sort of struggle for creditors is taking place, with the choice being between the West and Russia. Belarus leader Alyaksandr Lukashenka admitted that the conditions of Russian loans are tougher – in return Moscow demands the transfer of major assets. But apparently, the West no longer provides loans, and countries have to turn to Russia.

Russian Finance Minister Alexei Kudrin stated about the possibility of providing Armenia with a loan of $400 million. The credit is expected to be directed at restructuring a number of branches of the Armenian economy. “We have determined several conditions that are required for the provision of this loan,” Kudrin said without elaborating.

Earlier, the EurAsEC Anti-Crisis Fund approved the allocation of a $3-billion loan to Belarus on condition of the privatization of Belarus assets worth approximately $7.5 billion within three years. Among the priority objectives of privatization are Belarus’ shares in major companies, such as VTB, Sberbank, Rosneft and some others.

The EurAsEC loan to Armenia may be directed at the reconstruction of a Yerevan chemical giant, Nairit. “It is not excluded that the loan will be provided directly to Nairit and the government of Armenia will act as a mediator, as in this case the terms of the loan will be substantially improved,” the government press service said.

As Armenian Minister of Energy and Natural Resources Armen Movsisyan stated earlier, the modernization of the Nairit plant will require an investment of approximately $400-500 million. In 2006, 90 percent of the shares of the Nairit Company were sold to the British consortium, Rainoville Property Limited, for $40 million, the remaining 10-percent stake is held by the government of Armenia.

It is still unclear what conditions for the loan have been put forward to Armenia by Russia, which plays a key role in EurAsEC. The conditions for the acquisition of a loan from the EurAsEC Anti-Crisis Fund are acceptable to the Armenian side, said Aram Ananyan, an aide to the Armenian prime minister.

At the same time, an Armenian government delegation led by Prime Minister Tigran Sargsyan on June 7 left to Vienna, Austria, with a working visit to attend a regional summit of the World Economic Forum on Europe and Central Asia affairs. The head of the Armenian government is due to visit the headquarters of the OPEC Fund for International Development (OFID) where he will attend the ceremony of signing the Loan Agreement for the Rural Capacity Building Program between Armenia and the Fund.

So far Armenia has been mostly unsuccessful in attracting foreign investments for the modernization of production. According to the National Statistical Service, the inflow of foreign investment to the real sector of Armenia’s economy in January-March decreased by 19.5 percent, down to $130.6 million, compared with the same period in 2010, whereas the country’s state debt as of March 31 this year increased by 2.8 percent compared to December 31, 2010 – the entire debt of the Republic of Armenia (including domestic debt) amounted to $3.884 billion.

In terms of bilateral credit facilities Armenia’s largest lender is Russia – $500 million, or 14.8 percent of the country’s total external debt. Armenia owes $371.9 million (11 percent of its total external debt) to Japan, $143 million (4.2 percent) to Germany, $31.8 million (0.9 percent) to the United States, $4.3 million (0.1 percent) to France.