Russia-Armenia conflict risks
A Russian military exercise held on 17 July in the village of Panik, outside an authorized training area, caused alarm among the local population.
- It is likely that the incident in Panik was intended as Russian government's warning to Prime Minister Nikol Pashinyan after he attended the NATO summit.
- The former ruling party and its allies are likely to launch a political comeback ahead of the general election in 2019 by rebranding themselves, while receiving financial support from the Russian authorities and the influential Armenian diaspora in Russia.
- Increased frequency of bellicose statements from both Armenia and Azerbaijan threatening attacks on each other's critical infrastructure increases likelihood of war risk escalation in the Karabakh conflict zone and along Azeri-Armenian border.
On 22 July, Armenian Minister of Defence David Tonoyan visited the village of Panik in Shirak province, where Russian troops based in Armenia had conducted a 'no-notice' military exercise on 17 July, causing alarm among in the local population. At the press briefing Tonoyan noted that the existing bilateral agreement on basing rights for the Russian military in Armenia was "not set in stone". He added that "with time problems emerge, which require legal and treaty changes" and that the incident in Panik could serve as their catalyst. Russia maintains its 102nd Military Base in Gyumri, Armenia's second-largest city, with a strength of 4,000-5,000 contract service personnel, rather than conscripts. The exercise in Panik was part of the maneuvers agreed at the level of the Collective Security Treaty Organization (CSTO), a military alliance that includes Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan. The ostensible purpose of the exercise was to practice ambushing a hypothetical adversary's advance in a friendly village, according to Tonoyan.
Russia's likely provocation in Panik
The commander of Russia's 102nd Military Base, Colonel Vladimir Yelkanov, offered Tonoyan apologies and explained that wrong location had accidentally been selected for the maneuvers, which had angered the Panik residents and resulted in a stand-off between locals and Russian soldiers. However, careful examination of a video recording of the incident, which quickly went viral in Armenian social media, casts doubt on Yelkanov's explanation. A Russian captain, who refused to identify himself, but said that he had been serving in Armenia since 2011, gave evasive answers when asked repeatedly by the angry locals how a military detachment ended up in a sleepy village firing blanks in a simulated ambush. Panik village is located near Alagyaz firing range, where Russian troops regularly train, making it hardly credible that the captain could have mistaken the location. In IHS Markit's view, the circumstantial evidence available makes it likely that the Panik incident did not involve human error or accident, but was deliberately intended by Russia to intimidate and damage the image of the revolutionary government led by Prime Minister Nikol Pashinyan.
Negative media coverage in Russia
Since Pashinyan became prime minister in May, he and his government have been the subjects of relentless negative coverage in Russian media, which is mainly state-controlled. As a rule, the tone of Russia's mainstream media (such as the primetime political talk shows with the Kremlin-connected anchors Dmitry Kiselev and Vladimir Solovyov) is a very good indicator of the foreign policy line directed by the Kremlin. In this regard, the level of vitriol directed at Pashinyan increased substantially following his participation in the NATO summit in Brussels on 11-12 July, which was portrayed as his "betrayal" of Russia. The widely read Russian online business portal Rosbalt.ru published an article on 16 July suggesting that the Armenian prime minister is trying to use NATO to "blackmail" Russia into stopping weapons sales to Azerbaijan. In this context, IHS Markit assesses the incident in Panik as both retaliation for Pashinyan's overtures to NATO, and a warning against any further approaches of this sort.
Increasing domestic political
The supporters of the former ruling Republican Party of Armenia (RPA) promptly used the incident in Panik to accuse Pashinyan's government of jeopardizing relations with Russia, the country's sole external security guarantor. This has resonated with some segments of the population, as reflected by the heated exchanges in social media amplified by RPA-linked bots. This is happening against the backdrop of increasing number of anti-corruption investigations targeting relatives of the former president, Serzh Sargsyan, and other important figures closely associated with RPA and the old government. Some of the representatives of the old government, including former prime minister Karen Karapetyan, have strong links to prominent members of Russia's influential Armenian diaspora, who have an interest in securing their return to power. In the unfolding societal polarization, all political forces are focused on preparations for the general election, which will be held no later than May 2019, according to Pashinyan's latest statement on 20 July.
Armenia and Azerbaijan exchange infrastructure
Although Armenia and Azerbaijan regularly exchange bellicose statements, the recent specific threats, made by both countries against their potential opponents' national critical infrastructure, in recent rhetoric is alarming. On 23 July, the spokesperson for Armenia's Ministry of Defense stated that if the Azeri side attempted to cut off Armenia's main transportation arteries connecting it to Georgia, Iran, or the Karabakh enclave, the Armenian military would target Azerbaijan-Georgian railway, power lines, and gas and oil pipelines in Azerbaijan proper. This was echoed in the statements made by the Karabakh's de facto defense minister, Levon Mnatsakanyan, who confirmed that attacks against critical infrastructure in Azerbaijan, such as the Mingachevir hydroelectric power plant, are included in the Karabakh defense forces' war contingency plans. Azerbaijan's electricity grid is vitally dependent on Mingachevir, as was demonstrated by the technical malfunction there on 3 July, which resulted in nationwide power blackout.
Outlook and implications
The Russian government is likely to be grooming a replacement for the RPA party, which has been thoroughly discredited by the nationwide peaceful civil disobedience campaign that brought Pashinyan and his supporters to power. Both the Russian government and influential members of Russia's Armenian diaspora are very likely to financially back the new parties that will emerge to compete in the 2019 general election with the objective of marginalizing Pashinyan and the political forces sympathetic to his reformist agenda.
On 22 July, Russia completed the delivery of advanced weapons to Armenia in the framework of the USD200-million credit line that Moscow extended to Yerevan for their purchase in 2015. One indicator of deteriorating bilateral relations, and indirectly increasing war risks with Azerbaijan, would be the Russian government's suspension, if not cessation, of either agreed weapons transfers to Armenia and/or of ongoing talks about acquisition of Russia's latest multi-purpose SU-30SM fighter jets. Meanwhile, in the period before the election, there is increased likelihood that Pashinyan's government will be tested by Russia both internally and externally. Indicators include Russia's introduction of selective import restrictions on Armenian goods, causing losses to Armenian exporters of perishable goods, which would, in turn, increase their dissatisfaction with Armenian government. Azeri military provocations along the Line of Contact and the Azeri-Armenian borders are also increasingly likely, especially from the direction of the Azeri exclave of Nakhchivan, where both the concentration of Azeri military equipment and intensified work on defensive fortifications have been observed in recent weeks.
- Indonesia industrial disruption
- India policy disputes
- GDP effect of a longer pause in 737 MAX production
- Weekly Pricing Pulse: Commodities move higher on restocking and trade-deal momentum
- Latin America and the Iran-US conflict
- Al-Shabaab attacks Kenya
- Capital Markets Weekly: Highly-active primary markets continue, reflecting seasonal factors
- Eurozone consumer staving off recession but watch the oil price