Azernews.Az

Armenia`s authorities have reportedly begun informal talks with the Russian government to allocate a large loan to Yerevan ranging from $800 million to $1 billion.

The start of negotiations coincided with the cancellation of a meeting of European Union donor states, which were dissatisfied with the latest parliamentary elections held in Armenia in May this year.

According to Arzu Naghiyev, a commentator for the Baku-based Trend news agency, the EU demands that Armenia hold free presidential elections in 2013 and says that in return it will raise the issue of allocation of funds from donor countries worth about $1.5 billion. In addition, before the presidential elections problems and shortcomings that were observed during the parliamentary elections should be eliminated. Another condition is to carry out judiciary reform, step up the fight against corruption and, most importantly, increase efforts to implement the Basic Principles, a peace outline on a settlement of the Armenia-Azerbaijan conflict over Nagorno Karabakh proposed by the OSCE Minsk Group`s mediators.

Avoiding the fulfillment of all of these conditions, Armenia is trying to get from Russia before the end of the year part of the loan under the highest interest, which constantly changes depending on the situation in international markets, Naghiyev wrote.

Why before the end of the year? Because in the present situation in Armenia, President Serzh Sargsyan is even ready to agree to early elections. The absence of opposition in the country is a favorable condition for Sargsyan`s second term in office. It is more advantageous to go to early elections in fall than to hold them in cold February. It is not only about weather conditions, but also about social problems. The price of gas currently purchased from Russia has increased $60 and is now $240 per 1,000 cubic meters. Because of serious problems and to preserve before presidential elections in 2013 the current tariffs in the domestic market, the government has to transfer 10 percent of its stock in ArmRosGazprom to Russian gas giant Gazprom, the article says.

Today, Armenia`s public debt is 43 per cent of Gross Domestic Product (GDP), of which 86 per cent, or $4 billion, is foreign debt. Besides, if $1 billion is borrowed from Russia, the public debt will be higher than 55 percent of GDP. This is an extremely high figure, and a serious problem for the economy.

In addition, the daily devaluation of the country`s national currency continues, and the debt should be settled in foreign currency. So, until the end of 2012 the living standards of the population will worsen significantly, and therefore costs, and in parallel, the debt, will grow.

Currently, it is relatively easy to solve social problems in Armenia with cheap agricultural and daily consumption products, but a significant increase in prices at the end of the year may lead to social tensions and stand-off in the country, according to Naghiyev.

``Therefore, the current political situation could be considered favorable for Serzh Sargsyan, so, probably, he would rather prefer to hold presidential elections before due time than to wait for an exacerbation of social conditions in the country. But only on one condition -- if necessary funds are allocated.``