SARGSIAN CONFIDANTE ON FOREIGN AND DOMESTIC

C O N F I D E N T I A L SECTION 01 OF 03 YEREVAN 000078

SIPDIS

E.O. 12958: DECL: 02/15/2019
TAGS: POGV ECON PREL AJ TU AM
SUBJECT: SARGSIAN CONFIDANTE ON FOREIGN AND DOMESTIC
POLITICS

REF: 09 YEREVAN 241

Classified By: Ambassador Marie Yovanovitch. Reason 1.4 (B/D)

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SUMMARY
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1. (C) In a wide-ranging recent discussion with Ambassador
and DCM, Armenian oligarch and Sargsian confidante Mikhail
Baghdassarov expressed optimism that the Turkish parliament
would ratify the normalization protocols, but insisted that
Armenia could not be expected to ratify first. He said
Armenia should have good relations with its neighbors,
including Turkey and Azerbaijan, adding that most of
Armenia's leading businessmen favored the opening with
Turkey. Armenia should continue to take steps to demonstrate
its goodwill to the Turks, but "will not jump without a
parachute." Speaking of the Turkey-Armenia and N-K processes,
Baghdassarov said bluntly that "Russia used to be more on the
Armenian side, but now the Russians are more with the Turks."
Baghdassarov cautioned that it would be wrong to push
President Sargsian further on N-K at this point given the
pressure he is under on Turkey-Armenia, and noted that former
president Ter-Petrossian fell from power over perceived
concessions on N-K. Baghdassarov argued for a more "active"
Armenian policy on N-K, including building settlements in the
surrounding territories to "show the Azerbaijanis they have
something to lose" - although he admitted that President
Sargsian "doesn't even want to think about that." On domestic
politics, Baghdassarov reiterated his skepticism over the
performance of Prime Minister Sargsian, and criticized
Armenia's governing institutions -- government, parliament,
and presidency -- for poor performance. He hinted at the
long-rumored rivalry between the President and National
Assembly Speaker Abrahamian, but backed off when asked if the
rivalry was being stoked by former President President
Kocharian, whom Baghdassarov claimed has taken himself out of
Armenian politics. End Summary.

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WHO IS MIKHAIL BAGHDASSAROV?
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2. (C) Ambassador and DCM met for lunch on January 21 with
Mikhail Bagdassarov, one of Armenia's leading businessman and
a loyal friend of President Serzh Sargsian. Baghdassarov is
the owner of Armavia, Armenia's national airline (discussion
of civair issues to be reported septel),and is a major
importer of gasoline for his extensive chain of filling
stations. He is also the monopolistic importer of jet fuel
for Yerevan's Zvartnots airport, and owns one of Armenia's
two cement plants. Baghdassarov also has significant
business interests in Russia, where he spends much of his
time. Baghdassarov is perceived as closer to the President
than any of Armenia's other oligarchs, and he sees Sargsian
frequently. Baghdassarov is originally from Baku -- his
first language is Russian, and he speaks just a few words of
Armenian. We believe Baghdassarov's comments to us often
represent the President's thinking, or at least reflect
issues that the two have discussed.

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ARMENIA NEEDS RELATIONS WITH NEIGHBORS
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3. (C) As in past conversations, Bagdassarov expressed strong
support for the normalization process with Turkey. He said
Armenia needs to establish "normal" relations with its
neighbors, including Turkey and Azerbaijan. Despite the fits
and starts of the process with Turkey, Baghdassarov said he
believed the Turks would eventually ratify the protocols.
Armenia would benefit more economically from normalization
and a border opening, he said, but Turkey would benefit
politically. He chalked up Turkey's delay in ratification to
the GOT "seeking a higher price" from Armenia for opening the
border. Baghdassarov asserted that all of Armenia's major
businessmen -- with the exception of "one or two illiterates"
-- support the Turkey-Armenia process.


4. (C) Baghdassarov argued that the GOAM should continue to
take steps that demonstrate Armenia's goodwill toward Turkey,
but cautioned that "we can't jump without a parachute."
Although he expressed no doubt that Armenia could easily
ratify the protocols in the National Assembly, Baghdassarov
said it is not realistic to expect Armenia to ratify before
Turkey. In this situation, he said, "the people will expect
the stronger country to go first." Baghdassarov said,
however, that it might be possible for the Government to
submit the protocols to the Armenian parliament, much as the

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Turks have done, as a further signal to encourage the GOT to
move forward.

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RUSSIANS "USED TO BE" ON ARMENIA'S SIDE
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5. (C) In a striking comment that Baghdassarov repeated
several times, he claimed that Armenia could no longer count
on Russia for support when it came to dealing with Turkey.
Referring to the Turkey-Armenia process, he said one problem
is that "Russia used to be on Armenia's side" but is now
"more with the Turks" because of Russian-Turkish economic
interests. When the Ambassador pointed out that both Putin
and Lavrov had publicly supported Armenia's position of no
linkage with N-K, Baghdassarov countered, "that's what they
say publicly." He then amended his argument slightly, saying
that while Moscow may not be on Turkey's side, it is at best
neutral when it comes to Turkey-Armenia. (Comment: This
conclusion is one that Baghdassarov probably didn't pull out
of thin air. There was at least a hint that he knew more
than he was willing to tell, but that he had heard this
frustration expressed by someone else -- most likely the
President. It is even possible that he had been asked to
deliver that message.
End comment.)

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DON'T PUSH TOO HARD ON N-K
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6. (C) Echoing what we have heard repeatedly from President
Sargsian in recent months, Baghdassarov warned that the
international community "should not push the President too
hard" on Nagorno-Karabakh at this time. He said that while
most Armenians support normalization with Turkey, there is a
lot of suspicion that something inimical to Armenians'
interest is brewing in the N-K settlement process. These
fears have been stoked by both the opposition and the
diaspora -- especially in the United States. Baghdassarov
recalled that former president Levon Ter-Petrossian fell from
power in 1998 for appearing to go too far, too fast on N-K,
and implied that President Sargsian would run a similar risk
if he accelerated the process under Turkish pressure.
(Comment: Baghdassasrov was particularly concerned that the
protocols did not establish final status for NK simultaneous
with Armenia's return of the territories and again recalled
Ter Petrossian's ouster. It is possible that he was sending
a message from the President with this statement.)

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SETTLEMENTS IN N-K?
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7. (C) Baghdassarov revealed that he had told the President
that Armenia should become "more active" in dealing with the
N-K issue and the Azerbajanis. Specifically, he had proposed
to the President that Armenia begin building settlements in
the occupied territories that surround N-K proper. "This
would show to the Azerbaijanis that they have something to
lose if they don't resolve the problem." Baghdassarov was
clear that the thinking behind his suggestion was not similar
to the Dashnaks' - who favor settlements as a way of
consolidating Armenia's hold on the territories -- but rather
to gain advantage in the negotiation process with Azerbaijan.
He lamented that the President "did not agree" with his
proposal. The Ambassador pushed back hard, arguing that
while settlements may theoretically strengthen a country's
hand in negotiations, the reality is that the government
becomes hostage to the settler community and cannot move
forward toward a peaceful resolution.

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DOMESTIC POLITICS: PM "DOING BETTER;" PRESIDENT "DOES TOO
MUCH"
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8. (C) In marked contrast to his harsh criticism of Prime
Minister Sargsian in the past (reftel),Baghdassarov was
careful in his comments regarding the PM. He said the Prime
Minister is "doing better" and that over the last two years
he had learned a lot. But Baghdassarov lamented that at the
Cabinet level, individuals should already be professionals
and not making mistakes at the expense of the Armenian
people. He also grumbled that during the last year of
economic crisis, the Prime Minister established policies that
were unfriendly to business - at a time when he should have
been creating the most welcoming conditions for business.
Baghdassarov claimed that with his recent investiture in the
ruling Republican Party, the "technocrat" PM is one step

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closer to his dream of a political career.


9. (C) For his part, President Sargsian wanted the PM in the
party to squelch criticism and unhappiness within the
Republican Party that the ruling party did not get the plum
PM position. Baghdassarov said the President had made a
decision to keep the PM on, because he was skilled at
handling foreigners and convincing the IFIs that Armenia
could repay the loans that the GOAM needed to stay afloat.
He claimed that the President handles "everything else," but
this isn't an ideal system, because the President travels
constantly and even when he is in Yerevan can't run every
ministry. In addition, the ministries don't have strategies
and a framework for decision-making, so Ministers aren't sure
what decisions to take. Everything waits for the President,
according to Baghdassarov. He added that another reason that
the government is dysfunctional is that the Cabinet is made
up of different parties. While the President wanted a
smoothly functioning government, that might not be the goal
of the non-ruling party; their goal was to weaken the
government and strengthen their own position before
elections.
YOVANOVITCH