We already see the difficulties. Expectations were different, many were expecting that opportunities would open up immediately, whereas it turns out that while you are in a political system which limits your freedom of actions, its opening bypasses you, in other words, your neighbor countries may benefit whereas you may not benefit at all.
Interview with the economist Ashot Yeghiazaryan
Mr. Yeghiazaryan, what negative impact may the increase of the dollar rate, as well as the fast devaluation of the ruble have on the Armenian economy?
As in the previous stage of the fast devaluation of the Russian ruble, this time too, it will impact remittances sent to Armenia. People receive their salaries in rubles, the ruble is devaluating, hence the amounts of remittances are cut. Besides, the general economic decline in Russia directly impacts the Armenian economy because the Armenian economy depends heavily on the Russian economy. The first factor of devaluation of the Russian ruble is the dropping oil price. Now is the next stage of decline of oil prices, and it has started to affect the exchange rate of the Russian ruble immediately. Later, along with the weakening of the Russian economy, the state of the general economy will also affect the devaluation of the ruble. Such a process may start at this stage.
What will happen to the Armenian dram?
The dram is also under the pressure of devaluation. The dram will enter into a stage of devaluation.
A lot of economists predict that the dollar rate will rise to 520-560 drams by December. What are your estimates?
At the end of the day, the dram rate depends on the Central Bank policy. I mean at this stage the Central Bank sells foreign currency from the reserves on the open market but the state of reserves is no good either. In other words, to maintain the exchange rate, the source is the Central Bank’s reserves but in this sense the Central Bank is in a difficult state. It is not correct to guess to what point it will devaluate. But yes, the dollar will cross the line of 500 drams in the next quarter, I think.
Experts say that Iran also impacts the dropping prices of oil which has huge oil reserves which it has retained to sell later for a higher price. Is it possible to forecast that by entering the Iranian market Russia as an oil exporting country will suffer losses?
Yes, because the Russian economy entirely depends on the world oil prices. In other words, the decline of oil prices immediately affects the Russian economy. Even decline by 1 dollar has a negative impact on Russia’s payment balance, budget revenues and the entire economy. Iran’s entry to the market, certainly creates additional pressure on the world prices of oil because, Iran being under sanctions could not export oil to the world market to all its potential. After the elimination of sanctions, I think, Iran will gradually increase the levels of export to the world market. As far as I know, Iran is planning to boost oil production to 4 million barrels. Although one million barrels is, in fact, about 1% of total world consumption, the oil supply at the moment exceeds the demand, which means that soon the oil prices will drop.
After sanctions on Iran are lifted, what economic opportunities will open up for Armenia and will we be able to benefit from them?
We already see the difficulties. Expectations were different, many were expecting that opportunities would open up immediately, whereas it turns out that while you are in a political system which limits your freedom of actions, its opening bypasses you, in other words, your neighbor countries may benefit whereas you may not benefit at all. I don’t think that in the future it is possible to expect that the elimination of sanctions on Iran will have a positive impact on us. In the long-term perspective may be but in the short-term perspective it will hardly have any positive impact on Armenia. On the contrary, the isolation of Armenia is deepening. In fact, at the moment Armenia is isolated from Iran as well because Armenia is a member of the EEU, and EEU itself is a brake for the regional expansion of Iran. It means that Armenia cannot be viewed as a partner for Iran.
Will the EEU be an obstacle to the Iran-Armenian relations?
I think that for the regional and neighboring countries, including China, Iran and Turkey, the EEU is an obstacle, i.e. it has been created to prevent the expansion of the neighboring regions which Russia views in the domain of its interests.
Is improvement of Russia-Iran relations possible at this stage, which will make way for us?
I think not. It is beyond doubt that Iran will prefer the West after the sanctions, and Iran’s negotiations were mainly with the West. In other words, the lifting of sanctions depended on the West, and the policy of the West is a policy of isolation of Russia. Moreover, the West will be trying to involve in the policy of isolation of Russia such countries as China, Iran and Turkey.