1. (U) On April 27, the Armenian National Postal Operator "Haypost"
signed a membership agreement with the Eurogiro Network, allowing
Haypost offices to provide electronic money transfer services to and
from more than 60,000 post offices across Europe. Under this
agreement, accountholders will be able to send and receive money in
a reliable, fast and low-cost manner to any of the 900 communities
serviced by Haypost in Armenia.



2. (SBU) In November 2006 "HayPost Trust Management," a Dutch
company in which ING Bank is the leading shareholder, assumed trust
management of Haypost, with a mandate to transform the Armenian
postal system into a modern entity offering international-quality
postal, banking and financial services. Previously, customers could
only transfer funds via cumbersome paper transactions at Haypost
offices or through other, higher-cost commercial providers (e.g.
banks and specialty wire transfer services). Haypost recently
introduced electronic transfers, but the vast majority of Haypost's
current financial services are utility and tax payments. Adding
international-quality money transfer services through the Eurogiro
Network is seen as the first step towards Haypost becoming a
fully-functional postal bank.



3. (SBU) Remittances account for 25% or more of GDP in Armenia and
many local banks rely -- in some cases almost exclusively -- on
hefty money transfer fees to generate their profits. There are 21
commercial banks operating in Armenia, almost all of which offer
money transfer services through various systems, including Western
Union, Privatemoney, MoneyGram, MIGOM and Unistream. Haypost's
Eurogiro membership will significantly increase competition in the
money transfer market and provide previously unavailable low-cost
financial services to many of Armenia's remote rural communities.



4. (SBU) COMMENT: Armenia is the first Commonwealth of Independent
States (CIS) country to join Eurogiro. We expect the new service to
grab a considerable market share, and we see this as probably a good
thing for Armenian consumers, for financial sector development, and
for anti-money laundering/terrorist financing concerns. We presume
that having the well-respected Dutch international financial
services giant ING at the management helm should ensure appropriate
scrutiny of potentially suspicious transactions. We also welcome
the pressure that this will put on Armenian banks, once they are
weaned from dependence on lucrative money transfer fees, to devote
greater attention to what should be their core business: business
and consumer lending.

GODFREY