- War defeat to Azerbaijan crushes ruling My Step, making return of old elite possible
- Anti-corruption strategy, fiscal consolidation may be abandoned
- Political impasse likely after election
Armenia's political cycle was abruptly bent by the defeat to Azerbaijan in the 2020 war in Nagorno-Karabakh. The ensuing political struggle between the ruling My Step bloc of PM Nikol Pashinyan and the opposition resulted in the scheduling of early parliamentary elections for June 20. For Pashinyan, the aim is not to allow a reversal to the old corrupt regime, which Pashinyan toppled in 2018.
But Armenia's key economic and security partner, Moscow, would gain from the old guard's return. Prior to Pashinyan, all the prime ministers and presidents had tight links to Russia, which helped the Kremlin dominate Armenia even after the break-up of the USSR in 1991. After the latest war with Azerbaijan last autumn, Armenia's dependence on Russia has increased significantly again. Pashinyan is now tamed and as dependent on Russia as his predecessors, much to his dislike. In effect, any government after the June election will play along with Russia, even one led by Pashinyan again, as only Russia can guarantee Armenia's security in the region. Russia has placed some 5,000 troops in the Lachin corridor, which is now the only link between Armenia and Nagorno-Karabakh, to stay there for at least five years.
Using its role as a peacekeeper, Russia has begun pressuring Armenia for closer economic integration. It wants to cement the monopoly status of Russian companies in the transport, energy and finance sectors. Russia is trying to get Armenia to facilitate the de-blocking of the transport network in the South Caucasus. As two of landlocked Armenia's four borders are closed – those with Turkey and Azerbaijan – as a result of the war in Nagorno-Karabakh in the 1990s, Armenia stands to gain from the re-opening of trade and transport links and the construction of new routes, as does Azerbaijan.
The Kremlin has continued backing its proteges in Armenia after the regime change in 2018. The Russian leadership apparently prefers ex-president Robert Kocharyan (1998-2008) to Pashinyan. Charismatic Kocharyan may be a strong competitor to Pashinyan, whose popularity is on the decline. Furthermore, Kocharyan enjoys solid support among Nagorno-Karabakh Armenians, so with developments around the disputed region being pivotal in the campaign, Kocharyan has an edge over Pashinyan.
Although support for Pashinyan and My Step has dwindled, the acting PM still has a base. Also, My Step's decline does not automatically translate into growing support for another party or politician. Armenians have generally become distrustful of the political elite, after decades of corrupt rule by the Republican Party (HKK) and most recently due to the defeat in Nagorno-Karabakh. This frame of mind among Armenians may result in a hung parliament.
The current polarised political environment will likely be reflected in the next legislature, which would in turn jeopardise the formation of a cabinet. An impasse in parliament would definitely put on hold My Step's ambitious anti-corruption agenda. This agenda and judiciary reform were the cornerstones of My Step's campaign three years ago, and although the ruling party had mixed success in implementing the reform, some advances were made, and Western partners noticed. This boded well for the My Step cabinet, and IFIs, including the IMF, channelled funds in support for the reform agenda. My Step managed to a great extent to fulfil its tax reform plan, transitioning to a three-tier taxation system from a five-tier one, reducing corporate profit tax to 18% and gradually introducing a flat income tax of 20%. Also, higher taxes for the gambling segment and incentives for micro firms and exporters were put in place. These fiscal measures will most likely not be reversed though how much a new leadership would adhere to the new fiscal rule and the fiscal consolidation stance, adopted by My Step, is an open question at this point. There is also no clarity on how a new cabinet would manage the COVID-19 response, amid a slow vaccination roll-out, as well as struggling real sector. It is probable that My Step's fiscal and social measures during the pandemic will be revised by a new administration.
Armenia's parliament is a unicameral body comprising at least 101 MPs elected for a five-year term. Currently, there are 132 MPs in the legislature. This number came about due to the need to comply with the constitution and the previous changes to the electoral code which included a requirement for one-third of mandates to be taken by opposition deputies. As My Step received 70% of the votes (88MPs) in 2018, way above the 54% needed or a stable majority, the number of seats in parliament was increased in order to accommodate the one-third of seats for the opposition. In April, lawmakers passed the electoral code changes which switched the electoral system from a semi-proportional to a fully proportional one. This was done by scrapping the district lists which had in the previous election enabled any candidate running from a party to bring their votes directly to the political party. The scrapping of those lists does not change the electoral system proper, but it should formally change the way votes are turned into mandates in terms of geographical representation. The electoral code allows also for a second round of voting to be held, should a stable parliamentary majority not be formed after the first round. This is a viable scenario in the current political situation, in our view. This relates to a party or alliance failing to win 50% of the total number of mandates or not getting that share in the post-election attempts to form new coalitions. In such scenarios, a second round will be held between the two political parties or blocs with the highest number of valid votes in the first round.
Parliament is also considering lowering the threshold for parties and coalitions for the June election, though it is not clear whether this will be done in the short time before the vote. Currently, the threshold for parties is 5% and for blocs 7%. Such a move would improve smaller parties' chances of making it into parliament, effectively making the legislature a multi-partisan body.
Political parties and blocs
Civil Contract is the party headed by Nikol Pashinyan which, together with the Mission Party and independent representatives of civil society, formed the currently ruling My Step bloc in 2018. The party's popularity has been driven chiefly by Pashinyan's high approval ratings. It is a reformist, liberal party. Initially, Civil Contract seemed to lean closer to Western partners and was sceptical of Armenia's pro-Russian stance and the integration into the Eurasian Economic Union. However, over the past two years and particularly after the latest war with Azerbaijan, Pashinyan has led the party closer to Russia, while still maintaining good relations with the EU.
The Armenia bloc was created in early May by the Armenian Revolutionary Federation (ARFD) and the recently-established Reviving Armenia party. The bloc is headed by former president Robert Kocharyan, who has emerged as the most prominent opponent of Pashinyan in this campaign. Kocharyan's trial for alleged overthrowing of the constitutional order during post-election protests in 2008 was a test for Pashinyan's anti-corruption agenda, and Kocharyan won. As a stern critic of Pashinyan, Kocharyan's bloc stands to gain from the public discontent with Pashinyan. The Reviving Armenia party was founded by former governor of Syunik province Vahe Hakobyan. Note that Pashinyan's approval ratings have hit rock bottom in Syunik, which after the defeat in the war with Azerbaijan in 2020 came to border Azerbaijan directly on almost all sides. The ARFD is a centre-left, nationalist party set up in 1890. It is very active in the Diaspora.
Prosperous Armenia (BHK)
The BHK was founded in 2005 by tycoon and former sportsman Gagik Tsarukyan. It positions itself as a conservative party and owes its popularity to Tsarukyan's charismatic persona and populist rhetoric. After the regime change in 2018, the BHK gradually moved into opposition to My Step, while Tsarukyan was targeted by prosecutors as part of Pashinyan's anti-corruption campaign. At the previous election in 2018, the BHK lost five seats and filled 26 seats in parliament, though it still remained the second political force there. Some of the support lost to Pashinyan in the 2018 election may be regained at the upcoming vote.
I Have Honour alliance
The alliance was set up recently by the HHK and the Homeland party of ex-National Security Service (NSS) head Artur Vanetsyan. The HHK was considered the 'establishment party' in Armenia. It was effectively ousted after the 2018 'velvet revolution', failing to make it into parliament in 2018, after decades at the helm. The HHK has always maintained tight contacts with the Kremlin. Its leadership is largely viewed as Russian puppets, which still affects its approval ratings, making a good election result unlikely. At the same time, the alliance may be reinforced by the Homeland party and its leadership. Vanetsyan was initially on good terms with Pashinyan but fell out with him in 2019. Vanetsyan became a very vocal critic of Pashinyan and My Step after resigning as NSS head.
Armenian National Congress
The Armenian National Congress was a prominent opposition party after 2008, led by Armenia's first president Levon Ter-Petrosyan. It was formerly known as the Armenian National Movement and was part of a broad opposition alliance, the Armenian National Congress. The bloc was very popular in 2008-2012 but has not won any seats since the 2012 election. It did not participate in the 2018 election. Ter-Petrosyan has pursued a centrist and liberal agenda. His political career is tightly knit with Nagorno-Karabakh. Armenia won the first war for the disputed territory in the 1990s, when Ter-Petrosyan was president, which at the time boosted his popularity.
Free Homeland bloc
Free Homeland consists of four small parties - Union of National Self-Determination, Justice, Democratic Homeland Party and Armenian Constructive and Conservative Party. It is a mixture of the long-established parties (Union of National Self-Determination, Democratic Homeland Party) and the newer ones, which overall are centrist and pro-democracy. The bloc is united around the idea that Pashinyan should not be in power.
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