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RR RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHYE #1073/01 2421046
ZNR UUUUU ZZH
R 301046Z AUG 07
FM AMEMBASSY YEREVAN
TO RUEHC/SECSTATE WASHDC 6205
INFO RUCNCIS/CIS COLLECTIVE
RUEHLMC/MILLENNIUM CHALLENGE CORP
RUEHNO/USMISSION USNATO 0421

UNCLAS SECTION 01 OF 03 YEREVAN 001073 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EUR/CARC 
 
E.O. 12958: N/A 
TAGS: PGOV PREL PHUM ECON ETRD EINV KCRM AM IR
SUBJECT: ARMENIA NEWS HIGHLIGHTS 
 
 
YEREVAN 00001073  001.2 OF 003 
 
 
(U) Sensitive but unclassified.  Please protect accordingly. 
 
¶1.  This is the inaugural issue of a new, periodic digest of news 
events which we hope will inform, educate, and perhaps occasionally 
amuse our readership. 
 
¶2. TABLE OF CONTENTS 
 
(U) POLITICAL NEWS: 
-- Chief Prosecutor Killed in Vanadzor 
-- Police stop opposition leafleting 
-- Iranian Vice-President Attends 4th Pan-Armenian Games 
-- When Minnows Mate:  Dashink/Ramkavar party merger 
 
(U) ECONOMIC NEWS 
-- Russian cell firm hungrily eyes Armenia's VivaCell 
-- New Taxpayers' Handbook published 
-- Armenian Economy grows 12 percent in January-July 
-- Russo-Georgian firm buys disputed gold company 
-- Canadian firm explores for natural gas 
-- European Commission funds education (15 million Euro) 
-- Can Russia's ALROSA restore sparkle to diamond trade? 
-- EBRD launches SME lending program 
 
¶3.  (SBU) CHIEF PROSECUTOR KILLED IN VANADZOR 
 
The chief prosecutor of Lori marz was shot to death in the regional 
capital of Vanadzor August 25.  Albert Kazaryan was walking home 
from work just after midnight when an unidentified assailant fired 
four bullets into him.  He died later in the hospital.  Four shells 
from a makarov pistol were found at the murder site.  President 
Kocharian said in a statement that he would personally oversee the 
investigation.  Some accounts allege that Kazaryan was notoriously 
corrupt, while others suggest he was hated by prominent local 
figures for disrupting their own corrupt dealings. 
 
¶4.  (U) POLICE STOP OPPOSITION LEAFLETING 
 
Police interfered with several opposition activists, among them 
Heritage parliamentarian Zaruhi Postanjyan, distributing leaflets 
August 18 to the participants and spectators at the opening of the 
Fourth Pan-Armenian Games.  The opposition movement Aylentrank 
(Alternative) said that police detained three of its members and 
later released them after confiscating all the leaflets, which 
called for the release of some government critics who are now in 
prison (most notably former FM Alexander Arzumanyan).  According to 
Postanjyan, she and her aide were jostled by police officers as they 
distributed the leaflets.  The Police refused to confirm or deny 
Alternative's information, but told RFE/RL they are looking into 
Postanjyan's allegations. 
 
¶5. (U) IRANIAN VP ATTENDS 4TH PAN-ARMENIAN GAMES 
 
On August 18, Iranian Vice-President and Chairman of the Iranian 
Athletic Organization Mohammad Aliabadi arrived in Armenia to 
participate in the launch of the Fourth Pan-Armenian Games. The 
event gathered 2500 amateur athletes of Armenian decent from 94 
cities around the world.  Notably, the Iranian delegation was the 
largest, numbering 321 persons.  Aliabadi met with President 
Kocharian, Deputy Prime Minister Hovik Abrahamian, Foreign Minister 
Vartan Oskanian, Sports and Youth Minister Armen Grigorian, and 
Armenian National Olympic Committee President Gagik Tsarukian.  He 
also signed a 5-year Memorandum of Understanding between the Iranian 
Athletic Organization and the Armenian Sport and Youth Ministry.  On 
August 20, after the signing ceremony, Aliabadi had a short press 
conference on the topic of sports.  He also referred to a public 
statement by Secretary Rice on talks about sanctions against Iran. 
Aliabadi said that if the U.S. and its allies were capable of 
imposing sanctions, they would have done so in the course of the 
last 30 years. 
 
¶6.  (SBU) WHEN MINNOWS MATE:  DASHINK/RAMKAVAR PARTY MERGER 
 
On August 21, Nagorno-Karabagh's former military leader Samvel 
Babayan, whose minor Dashink party ran unsuccessfully for Armenian 
parliamentary seats in May 2007, confirmed reports that his party is 
in talks to merge with small, diaspora-linked Ramkavar Azatakan (or 
HRAK) and the virtually unknown National Rebirth parties.  Media 
report the new party will bear Ramkavar's name and be led by 
Babayan.  A Dashink spokesperson told the press that his party will 
likely meet for an extraordinary congress in September to seal the 
merger.  Ramkavar's current leader Harutyuan Arakelyan said that he 
did not mind ceding his powers, as long as HRAK got stronger.  Like 
a penniless aristocrat marrying a rich commoner, the merger links 
Ramkavar's distinguished pedigree, dating back to Armenia's 1918 
Republic, with Babayan's money and NK war hero credentials.  Their 
de facto alliance in May 2007 yielded no electoral success, 
however. 
 
YEREVAN 00001073  002.2 OF 003 
 
 
 
¶7.  (SBU) RUSSIAN CELL FIRM HUNGRILY EYES ARMENIA'S VIVACELL 
 
Russia's top cellular operator, Mobile TeleSystems (MTS), is 
reportedly in talks to buy Armenia's leading mobile network 
provider, K-Telecom, operator of the popular and successful local 
VivaCell network.  K-Telecom, controlled by the Lebanese Fattouch 
Group, entered the Armenian market in 2005 and quickly overtook the 
stodgy former monopoly Armentel to seize a dominant market share in 
mobile telephony.  Vivacell has been coy, but company sources have 
told us privately that a deal seems close.  MTS' corporate parent, 
Sistema, confirmed its interest in mobile assets in the former 
Soviet republics, K-Telecom being one of the possible opportunities. 
 Sector analysts estimate the value of K-Telecom, which currently 
has over 1 million subscribers, at around $600 million. Last year 
Vimpelcom, MTS's key rival in Russia, bought Armenia's No.2 mobile 
provider Armentel for $488 million. Vimpelcom's client base in the 
country stands at 530,000. K-Telecom is closely related, but 
corporately independent, of the Fattouch-owned cellular provider in 
Nagorno-Karabakh. 
 
¶8.  (U) NEW TAXPAYERS' HANDBOOK PUBLISHED 
 
On August 10, the Armenian Commerce and Industrial Chamber presented 
a Taxpayers' Handbook, published with the support of the USAID.  One 
thousand copies of the book will be disseminated among Armenian 
businessmen and entrepreneurs.  The handbook will also be posted on 
the Chamber's and the State Taxation Service's websites.  Martin 
Sarkisian, the chairman of the Commerce and Industrial Chamber, said 
the handbook will help make the tax authorities' performance more 
transparent. 
 
¶9. (U) ARMENIAN ECONOMY GROWS 12 PERCENT IN JANUARY-JULY 
 
The Armenian Statistical Service reports Armenia's economy grew 12.1 
percent in January-July over the same period a year ago, and 
amounted to $3.6 billion (1USD equals to 356.7 AMD). Industrial 
output grew by only 1.3 percent, and agriculture grew by just 2.2 
percent. The biggest growth was again in construction, which saw 
$712 million in new investments.  Armenia's total foreign trade in 
January-July rose 37 percent from a year ago to $2.263 billion. 
Exports grew 21 percent to $631 million, and imports were up 44.5 
percent to $1.632 billion. 
 
¶10.  (U) RUSSO-GEORGIAN FIRM BUYS DISPUTED GOLD COMPANY 
 
The Russian firm Industrial Investors Group's Georgian subsidiary, 
Madneuli, signed a contract to buy the Canadian holding company that 
owns Ararat Gold Recovery Company (AGRC) on behalf of the Indian 
mining conglomerate Vedanta.  The price has not been announced, but 
observers suspect it may surpass $100 million.  Meanwhile, the 
August 20 trial date to resolve an underlying legal dispute for 
AGRC's rights to its major mine passed without action, as neither 
party to the action bothered to show up.  Armenian authorities have 
moved to seize and resell AGRC's mining rights, apparently to 
Madneuli, charging the Indian subsidiary with numerous counts of 
fraud, tax evasion, and other sins.  Many believe, however, that the 
GOAM sold AGRC its mining rights at bargain basement prices when 
gold prices were quite low, and now is simply engineering a 
lucrative "do-over" now that the assets are worth vastly more. 
 
¶11. (U) CANADIAN FIRM EXPLORES FOR NATURAL GAS 
 
Canadian company Transeuro Energy is to start exploration in the 
Armavir region for possible natural gas deposits.  It plans to spend 
about $10 million for preliminary exploration and well-drilling. 
The first-stage works should last 3-4 months, which should clarify 
whether commercially-worthwhile deposits exist. 
 
¶15. (U) EUROPEAN COMMISSION FUNDS EDUCATION 
 
The Education and Science Ministry has announced that the European 
Union will give Armenia 15 million Euros to help it reform its 
vocational and pre-school education systems.  The money will be 
spent in three stages in 2008-2010, and will be aimed at improving 
facilities, training 3500 teachers, and developing new teaching 
methodologies. 
 
¶16.  (U) CAN RUSSIA'S ALROSA RESTORE SPARKLE TO DIAMOND TRADE? 
 
ALROSA chairman Sergei Vybornov met with Prime Minister Serge 
Sargsian to sign a partnership agreement between the GOAM and 
Russia's ALROSA CJSC, one of the world's leading gold and diamond 
mining companies.  The joint venture will perform diamond cutting 
and jewelry manufacture.  Armenia's diamond-cutting industry has 
suffered a major slump in the past two years, and the government 
hopes this new iniative will lead the troubled sector back to 
health. 
 
YEREVAN 00001073  003.2 OF 003 
 
 
 
¶17. (U) EBRD LAUNCHES SME LENDING PROGRAM 
 
The European Bank for Reconstruction and Development (EBRD) has 
signed a contract with Armenian ACBA Credit Agricole Bank CJSC to 
provide 12 million Euros to finance an SME lending program.  EBRD 
will provide half of the total loan amount, with the remaining Euro 
6 million coming from Citigroup.  This is the first syndicated loan 
to a financial institution in Armenia, and will be directed to SME 
lending both in urban and rural areas. 
 
PERINA