ARMENIA'S SOUTHERN PROVINCE: DEAD END?

UNCLAS SECTION 01 OF 04 YEREVAN 000857

SIPDIS

SENSITIVE

DEPT FOR EUR/CACEN, EUR/ACE

E.O. 12958: N/A
TAGS: ECON KHDP PHUM PGOV PREF ETRD AM IR
SUBJECT: ARMENIA'S SOUTHERN PROVINCE: DEAD END?


1. (U) This cable is sensitive but unclassified.
Please protect accordingly.

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SUMMARY
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2. (SBU) Armenia's Southern region of Syunik is a
narrow swath of remote mountainous land, bound by the
closed historical borders with Azerbaijan to the East
and West, and stretching South to a 40 km wide border
with an equally remote region of Iran. Syunik's
winding mountain road and hard winter weather create a
natural obstacle for trade; its border with Iran feels
more like a dead-end than a crossroads. Human poverty
-- measured by lack of access to clean water,
electricity and education -- is higher than elsewhere
as Syunik has failed to capture the benefits of
Armenia's recent growth. Still burdened by land mines
and refugees, Syunik region's isolation and poverty
are a bleak reminder of Armenia's bifurcated
development: as Yerevan grows the regions stagnate,
having a more difficult time overcoming the effects of
the Karabakh war and their (and Armenia's) geographic
and political isolation. End Summary.

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THE HIGH ROAD SOUTH
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3. (SBU) The road to Armenia's remote Syunik region
and on to Iran winds through Syunik's three high
mountain passes, the Sisian (2345 meters),the Vorotan
(2344 meters),and the Tashtun (2400 meters),which
separate Syunik's four primary cities. Perilous in
fair weather, the road was still burdened by heavy
snowfall when we traveled it the last week of March
and was hit hard by a snowstorm as late as May 3.
There is little traffic besides the occasional truck
from Iran or trucks carrying ore from the copper
molybdenum plants high in the mountains by the Kajaran
pass. When we passed, a wreck involving a 22-ton
Iranian lorry had lain uncleared for several days,
blocking a lane of traffic.

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IRAN - ARMENIA BORDER: MORE A DEAD-END THAN A
CROSSROADS
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4. (SBU) The great surprise of the Syunik region is
how little its proximity to Iran affects it.
"'Proximity' is not a word we use when talking about
Syunik," quipped the Deputy Marzpet (Governor).
Despite being one of Armenia's two open borders, trade
with Iran is oddly slow. According to the Armenian
Department for Migration and Refugees, on average
fewer than 1,000 people cross the border each month(in
both directions). In December 2004, their statistics
show three hundred crossing into Armenia and 300
crossing out. At the border there are few stores
catering to Persian drivers (or any drivers, for that
matter) and the duty-free border market that lies in
between the two customs houses was nearly still: we
counted 3 people wondering among the metal stalls.
(Note: By contrast the border market at the Georgian
- Armenian border is a busy place, with hundreds of
vendors selling a broad range of goods and lines of
merchants hauling teaming carts of duty-free goods
across the customs point. End Note.)


5. (SBU) The mayor (and former customs official) of
the border village Agharak complained that besides the
duty-free markets between the customs points, any
goods from Iran must be taken to the regional customs
clearing house in Sissian, 166 km and three mountain
passes away. Iranian goods are thus more expensive in
the border town than they are in the capital Yerevan,
410 km away.

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NORTH-SOUTH CORRIDOR?
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6. (SBU) The Marzpet and an official from the Ministry
of Transport and Communication expressed frustration
about the difficulty of reestablishing the North-South
trade corridor that traditionally ran from Iran to
Yerevan. Once the region's main North-South highway,
the Soviet road and railroad ran through the border
towns of Meghri and Agharak and then West of Syunik
into the territory of Nakhchivan, Azerbaijan, through
the low-lying Araxes valley, and back into Armenia
more than 300 km north. That route is now blocked by
closed borders, and work has begun on a new "low road"
from Iran through Syunik region that would avoid the
mountain passes, but the government has not yet
decided how or if it will finance the mountain
tunnels. While the Ministry of Transport and
Communication told us that they are considering a
feasibility study of laying rail from Yerevan to
Syunik region then on into Iran (in response to
Azerbaijan's recent efforts to connect its railway
with Iran's) they acknowledge that the overwhelming
distance and extreme terrain make building a railway
prohibitively expensive.


7. (SBU) According to Syunik Marzpet and his deputy,
the region is taking steps to increase its trade with
Iran, but things are developing slowly. He commented
that the marz has looked to Iran as a market for its
local produce which is easier to transport to Northern
Iran than to Armenia's capital. But he said that the
lack of traditional trading ties and cultural
differences are an impediment to trade. "Iranians are
difficult to do business with," he said, adding that
the nature of bargaining was different that even the
systems of payments caused difficulties. (There is no
commercial bank in Agharak, the border town of 4,000
people, and one commercial Armenian bank in the
nearest town Meghri.) He added, "As remote as we are
from the rest of Armenia, the neighboring part of Iran
is even more remote from its capital."

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ECONOMIC GROWTH BYPASSES REMOTE REGIONS
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8. (SBU) While construction and trade drive double-
digit growth for Armenia's urban areas, the benefits
of economic growth have bypassed Armenia's remote
rural regions like those in Syunik. Two foreign owned
copper-molybdenum mines, from which nearly all the
proceeds go directly abroad or to the capital, employ
4,500 of Syunik's 164,000 residents and account for 90
percent of Syunik region's economic output. Small
hydro-electric plants that generate electricity for
the region account for another 6 percent of the
region's output, which is to say that there is little
other business to speak of. The Soviet-era
electronics factories that once powered Southern
Armenia's economy are now defunct, giving Syunik
Armenia's highest rate of unemployment. The Meghri
cannery, Syunik's ninth largest business, appeared
empty and idle when we visited on a Wednesday at noon.
In the towns of Goris, Kapan and Meghri, the only
small or medium sized businesses in sight are
bookmaking parlors where residents place bets (usually
around USD 10) on European soccer matches.


9. (SBU) Besides Syunik's four towns, Syunik's
villages are either high in the mountains or scattered
along the old Azerbaijani border region that was
heavily damaged by artillery shelling during the war.
Most families rely on simple agriculture, although
their agricultural inheritance is weak. Roads are
poor, and farmers cannot easily take their produce to
market. Many villages must bring clean drinking water
from wells in other villages. Basic fixed or mobile
telephone service is dodgy. The electricity supply is
sporadic and there is no natural gas. Villagers still
heap separate piles of dried dung for fuel and straw
for animal feed outside the front doors to see them
through the winter.

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STILL WOUNDED BY THE WAR
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10. (SBU) Syunik Marz suffered heavily during the
military conflict with Azerbaijan. During the initial
stages of hostilities, Syunik's border with Azerbaijan
was the front line of the conflict. Nearly all towns
and cities in the province came under intense
artillery shelling (and some aerial bombardment),and
many buildings remain pockmarked with shrapnel.
Syunik's roads are still badly damaged from wartime
bombings and military uses. Although Armenia occupies
the territory on the other side of the historical
border with Azerbaijan, both the Azeri side and the
adjacent areas of Syunik remain heavily mined. The
mines have presented an obvious obstacle to the
settlement of the occupied territories by Armenians.
Syunik residents told us that while the GOAM has not
discouraged them from farming or grazing in these
territories, any such move would be infeasible and
certainly deadly with the large amount of ordnance
currently underground.

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DE-MINING PROGRAM DORMANT
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11. (SBU) Named for an 18th century rebel leader
against Persian rule, the village of David Bek was an
initial focus of demining efforts in Armenia. From
his office in the center of the village, David Bek's
mayor pointed out a small hill rising approximately
half a mile distant as the border between Armenia and
Azerbaijan. Most of the surrounding countryside
remains uncultivated due to the heavy concentration of
mines, primarily large Soviet anti-tank mines laid by
Armenian forces in 1992.


12. (SBU) During the summer of 2003, the first
Armenian Army mine-clearing forces began clearing
village land of the mines. The effort was suspended
last year, with focus shifting to other communities in
Armenia despite the fact that only 15 percent of David
Bek's mined land had been fully cleared. In the past
two years, only a few individuals who had purchased
the farmland during a 1991 privatization push have
been able to finally occupy their property. The mines
also continue to cause deaths and serious injuries in
David Bek. During its limited mine-clearing activity
in the area, the Army did not undertake a survey of
mine locations. Consequently, citizens of David Bek
still do not know the full scope of their mine
problem. The mayor told us that recently a mine had
exploded underneath his car as he drove along a road
thought to be clear; although his vehicle was
destroyed, the mayor escaped with minor injuries.

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REFUGEES: FAILING TO MAKE NEW LIVES
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13. (SBU) Refugees have also had a substantial effect
on the population of Syunik. Thousands of Armenians
from Baku and other parts of Azerbaijan have re-
settled in Syunik's hotels, dormitories and asylums.
The village of Syunik, located 5 miles from the city
of Kapan near the wreckage of a bright yellow
Azerbaijani helicopter shot down in 1991 (which is
something of a local monument),highlights the
problems of refugee integration seen throughout the
region. Ninety-three refugee families live in Syunik
village, and, unlike in many areas of Armenia, live
intermingled with the local population. Most of the
refugees are from Baku, where they held jobs such as
engineers, factory workers and ship-builders. In the
village, they have had to adapt to a primarily
agricultural lifestyle, farming the limited amount of
land and selling produce locally. Such is the case
for most refugees in Syunik Marz, whose technical
expertise cannot be employed with the limited
resources of the impoverished region. The village
administration has sought to employ a limited number
of the refugees as Russian language teachers in the
local schools, but is otherwise unable to find long
term and viable employment for them.

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COMMENT: ARMENIA'S GROWTH LEAVES OUT THE REGIONS
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14. (SBU) Armenia's most remote region, Syunik
portrays Armenia's bifurcated development: Yerevan
grows and elsewhere the economy is stagnant.
Armenia's double-digit growth has bypassed its
regional cities. While construction booms across
central Yerevan, Syunik's capital Kapan looks like a
quiet Soviet city, devoid of much that resembles
employment. Like Armenia's northern regions bordering
Georgia, Syunik has failed to capitalize on its
regional link to Iran in order to profit from transit
or even local trade. Like other border regions,
Syunik has moved on more slowly from the war, and the
people still consider the war, albeit proudly, as the
source of their poverty. Yerevan businessmen and
Yerevan based ministries control the few valuable
resources the region has, notably two copper plants
and a single textile factory, and the region's hope
for new investment is focused on new projects from
Yerevan's public or private sector. Perhaps most
telling, it is the oligarch marzpet, appointed by the
President, who wields power in the region, not the
elected mayors of the cities and villages, who tend to
be otherwise unemployed.
EVANS