ANALYSTS WORRIED, GOVERNMENT UNCONCERNED ABOUT

C O N F I D E N T I A L SECTION 01 OF 02 YEREVAN 000165

SIPDIS

SIPDIS

DEPT FOR EUR/CARC

E.O. 12958: DECL: 02/15/2017
TAGS: PREL PGOV GG TU AM
SUBJECT: ANALYSTS WORRIED, GOVERNMENT UNCONCERNED ABOUT
KARS-BAKU RAILWAY

REF: A) TBILISI 263 B) YEREVAN 102

YEREVAN 00000165 001.2 OF 002


Classified By: CDA A. F. Godfrey for reasons 1.4 (b, d).

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SUMMARY
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1. (C) GOAM officials' mild public statements about the
finalizing of the Kars-Akhalkalki-Baku railway agreement (ref
A) belie the significant resentment and frustration they feel
about it. Newspapers have been abuzz with analysts' gloomy
predictions of further Armenian isolation, and harsh
criticisms of the government for its tepid public reaction.
The MFA's CIS Director told us February 13 that the GOAM had
made a considerable effort to convince Georgia to stay out of
the project, but that Georgia did not view its participation
as a blow to Armenia. Foreign Minister Oskanian has said
publicly the situation won't affect Armenian-Georgian
relations. END SUMMARY.

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PUBLIC MOOD INDIGNANT AT LACK OF GOAM ACTION
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2. (C) The Armenian tabloid Haykakan Zhamanak editorialized
on February 9 that the Armenian government had done nothing
to prevent the railway agreement, and criticized officials
for not coming out more harshly against what the paper
considers "an open blow to the national security of Armenia."



3. (C) Media analysts largely agree that the railway is
motivated purely by political malice from its neighbors
(especially Azerbaijan and Turkey),and is being built solely
to tighten Armenia's noose. Victor Yakubyan of the Caucasus
Analytical Center went a step further, accusing Turkey and
Azerbaijan of putting Georgia in a tight spot, as well. "I
think the strengthening of the Azeri-Turkish 'belt' on
Georgia's neck is one of the urgent challenges to the
Georgian state system. Tbilisi, after
prolonging the negotiations, has yielded," Yakubyan said.


4. (C) A more sober commentator, Stepan Safarian, told the
press that he believed the agreement would actually harm
U.S.-Turkish relations more than it would harm
Armenian-Turkish relations, saying that the project creates
"dividing lines" in the region, which the U.S. opposes.


5. (C) Economist Edward Aghajanov reasoned darkly that the
railway agreement was not just a blockade, but a "final
casting-out from the regional projects" that would have
severe negative effects on the Armenian economy. He blamed
the Armenian government for not being more "diplomatically
aggressive" to stop the agreement.


6. (C) Visiting Commerce Department DAS Paul Dyck got an
earful on the railroad plan from Armenian and
Armenian-American business representatives at an AmCham
breakfast February 15. The project was practically all they
wanted to talk about, complaining that Armenian was being
shut out of regional development, potentially laying the
seeds for future conflicts for years to come. While many
expressed outrage on a purely geopolitical level, others took
a more pragmatic line, commenting that Armenia's freight
costs (because of closed borders and the lack of rail access
to the sea) are significantly higher than the regional
average, creating a disincentive for business investment.

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GOVERNMENT HOLDS ITS FIRE IN PUBLIC
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7. (C) FM Oskanian told the National Assembly February 7 that
Armenia would not suffer isolation or economic loss from the
construction of the railway. He also noted that the railway
agreement could only have been avoided if Armenia had been
willing to make impermissible concessions to Azerbaijan over
Nagorno-Karabakh. Oskanian said that, as Armenia is
unwilling to make such concessions, it cannot fault Georgia
for choosing to participate in the project. He also pointed
outQhat, while Georgia is of strategic importance to
Armenia, Armenia is not strategically important to Georgia.
He stated that the railway would not affect Armenian-Georgian
relations, noting that Georgia had joined the project for
economic purposes.


YEREVAN 00000165 002.2 OF 002



8. (C) Following considerable criticism in the press,
Oskanian released a statement February 9 reiterating his
argument that the railway's construction would not harm
Armenia economically. He noted that Armenia has been
sandwiched between blockading countries for 15 years, and
that this railway will not supplant or compete with a
currently-operational Armenian railway. He outlined the crux
of the problem: "All those who insist that the gas pipeline
or the oil pipeline or the railroad could have gone through
Armenia, should have known full well that that would have
been possible only by relinquishing our rights regarding
certain issues which constitute our national interest and a
national value. That is the price we would have had to pay;
yet we haven't." Deputy Foreign Minister Kirakossian
reiterated Oskanian's sentiment in a separate press
conference, noting that Armenia's two open borders prevent
complete isolation.


9. (C) Deputy National Assembly Speaker (and nationalist
ARF-Dashnaktsutyun member) Vahan Hovhannisian told reporters
that Armenia could still find a diplomatic way to "hamper"
the project. He also expressed optimism that financial
problems will slow the process, thanks to the U.S. Congress'
ban on U.S. Government financial support for the project, and
said he thought Armenian diplomats should concentrate on
securing a similar promise from the EU.

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PRIVATE EXASPERATION
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10. (C) DFM Kirakossian twice highlighted, during a meeting
with the CDA and polchief, that the railroad signing deal was
a provocative act aimed at Armenia which Azerbaijan, Turkey,
and, perhaps as a semi-reluctant partner, Georgia, were
undertaking, apparently without any consequences or criticism
from the international community. Vardan Hakobyan, the
director of the MFA's CIS desk, told us after the agreement
was signed that Armenia had made significant diplomatic
efforts to convince Georgia to stay out of the project. He
said Georgia had tried to stay on a neutral course, making
the point that it would have supported reopening the
Kars-Gyumri rail link, had that been a feasible option.
Hakobyan reiterated Oskanian's public statement that the
railway would not hurt Armenian-Georgian relations.

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COMMENT
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11. (C) Armenian anger over the Kars-Alkakhalaki-Baku
railroad plan is pervasive. The government's mild public
reaction is another example of top Armenian leaders' practice
not to appear weak by venting inflammatory rhetoric against
issues in which they know they can have little real
influence. Government leaders and average Armenians alike
take the railroad as a clear signal of Turkey's continuing
resolve -- with Azerbaijan -- to twist its knife in Armenia's
back.
GODFREY