How oligarchs are making profit from the pandemic
Zara Harutiunian
The Covid-19 pandemic reached Armenia with some delay. The very first case in the country was recorded on March 1st 2020, when the healthcare system of neighboring Iran was already in crisis mode and great excitement prevailed in Europe. To this time, the border with Iran was already impassable by land, but charter flights continued to take place. The first "Covid-19 patient" arrived in Armenia on such a flight. Some precautionary measures had been taken in line with the recommendations of the World Health Organization (WHO) as early as January, but they did not help to detect the first infected person or – in the early stages of the spreading of the virus – in the following cases.
The Armenian citizen who had entered from Iran on February 28th 2020 sought medical help voluntarily, thus expressing his personal sense of responsibility. He had himself tested and was then admitted to a hospital specialized on infectious diseases, which a little later was to turn into the most important site in fighting the pandemic. Around 30 contacts – and a dog –were accommodated in a five-star hotel in the resort town of Zechkadzor, which formerly belonged to one of the local oligarchs. After the "Velvet Revolution" of 2018 – and after criminal investigations into corruption began – the hotel was passed into state ownership as a "gift". On a symbolic level, this intermingling of different circumstances gives food for thought, especially in connection with the skepticism and ironic attitude that can be found on all sides in regard to the extent of the pandemic. Official statements from top-ranking officials, including Health Minister Arsen Torosyan and Prime Minister Nikol Paschanjan, testify to this. In retrospect, both found themselves rebuked profusely because of their former attitudes.
After mass protests and the change of power in 2018, a fragile but visible economic growth, the introduction of fragmentary reforms and the initiation of social programs in 2019, nothing seemed to indicate any major events having the potential to shake the foundations of society in 2020. Post-revolutionary Armenia, which inherited the fundamentally eroded political and social institutions from the previous regime and is completely absorbed by a lengthy process of dealing with an endless list of problems that cannot be postponed, faced the pandemic with a certain indifference. With far greater enthusiasm and tension, Armenian society followed the spectacular criminal investigations that had been initiated after the revolution and the tentative progress of the reforms. Additionally, in March society was absorbed by the campaign for a planned constitutional referendum. All of this pushed international news out of sight as well as the routine appeals to wash your hands regularly.
An Armenian wedding
The first virus spreading sites were isolated in time and the situation did not seem worrying until mid-March. But then a wedding took place. On March 13th, a woman from the city of Etchmiadzin, who had come from Milan to marry off her son, tested positive. In order not to spoil the festival for her children, the woman at first hid her symptoms of the disease, violated quarantine requirements and took part in the celebration. A few days later, she was hospitalized with pneumonia. Opinions differ about the extent of the feast. But it can be said with certainty that the number of people present was very high. Among the invited guests was a nurse who then infected some pupils during a prophylactic examination in their school. Workers of a large company, that then had to be completely quarantined a little later, were also infected. Even employees from the national airline attended the wedding and isolated themselves at work in one of the airport buildings.
This big Armenian wedding symbolizes an impressive start signal for the pandemic in Armenia – dozens of new infections were registered within a few days, hundreds of people went into self-isolation, educational and cultural institutions, department stores and leisure facilities were closed, major events were called off, flights canceled and the last remaining open border to Georgia was closed. Shortly afterwards, a state of emergency was declared and the referendum was canceled. Nevertheless, new sources of infection emerged. The Ministry of Health conformed to the guidelines of the WHO and isolated contact persons in hotels and pensions at the expense of the state. Infected people were brought to the hospitals. After 249 people, most of whom were connected to the wedding, were officially infected with the virus, a lockdown with restrictions on freedom of movement, the closure of thousands of companies and the suspension of transport connections were in place from March 24th on.
Covid 19 - a media issue for the opposition
Despite the overall high level of support for the government under Prime Minister Nikol Pashinyan, post-revolutionary Armenia has no independent media being sympathetic to its government. The vast majority of the local media is financially dependent on oligarchs of the old guard, who continue to exercise control over national capital. After the revolution of 2018, their investments in media increased – now to be seen in an undisguised political partisanship in the coverage. The dominant view in society is that the media market is controlled by Mikael Minasjan, son-in-law of ex-President Serzh Sargisjan and former ambassador of Armenia to the Vatican. He is under criminal investigation for corruption, which is why he is hiding from the authorities in Russia. Ex-president Robert Kocharyan also belongs to his media empire, who is accused of violating the constitutional order. In eleven of thirteen public television channels, rhetoric critical of the government increased significantly during the pandemic. Allegations that the new government had failed to fight Covid-19 rang out to a time in which the situation was by no means out of control. Television debates and interviews inflamed the public mood and were directed against an acceptance of the current Covid-19 measures or went so far as to question the existence of the virus.
Calls to temporarily abandon such discussions in order to join forces against the virus seemed to be naive in the face of these power constellations. A ban on the publication of medical information without reference to public sources was seen as the restriction of freedom of speech by government critics. The state's transparent treatment of Covid-19 related issues traditionally appeared as a sign of weakness of the new government in the news. Nevertheless, trust in official sources remained impressively high, reason for which was probably not least their transparent approach. State authorities did not even try to euphemize their own precarious situation – not even against the background of a pandemic, frightening because of all of its imponderables.
Economic Consequences and Poverty
Additionally and as in other places of the world, there is no economic perspective in Armenia. 23.5 % of the population of the country officially lives below the poverty line and a large part of society is threatened by poverty. Of all people, the pandemic affects the weak most and the decision to strongly restrict economic life therefore seems ambivalent. Against this background, the general misery of the Armenian labour market and the powerlessness of the state against large employers and local feudal lords showed clearly.
For example, the oligarch and then leader of the opposition faction "Flowering Armenia", Gagik Tsarukjan, declared during the lockdown that he was not ready to continue paying wage costs during the forced labour break due to the Covid-19 measures. He actually was able not pay by benefiting from the vaguely worded labour law. The management of one of his commercial malls forced rent payments to be fully met even for pavilions closed as part of the Covid-19 measures. Additionally, employees of a supermarket chain were forced to take unpaid holidays. “Gloria”, the largest textile manufacturer in the country, not only refused to pay wages, but even forced the workers to participate in protests against the Covid-19 restrictions. Although this resulted in penalties against the management and some of the protesters, its managing director threatened to close the entire factory and relocate production to another country if the government did not lift the restrictions. Other companies continued their work processes without paying heed to any restrictions. This happened in the places of work of the oligarch Samwel Aleksanjan, a former member of the Republican Party, having ruled before the revolution. During the lockdown, his employees were forced to work for 16 or even 18 hours a day, sometimes without bonuses.
The government responded with helplessness to these scandalous violations of labour law. It turned out that since 2013, the state has had no powers to regulate labour law issues. Even though amendments to partially restore the state's supervisory function were passed in the end of 2019, they will not be in effect until July 2021. Labour Minister Zarui Batojan called on those affected to go to court, but complaints remained an absolute exception. After all, the government then tried to revise its labour law, but the reforms dragged on and did not come into effect. Small and medium-sized businesses lacked the necessary reserves for compensation payments. Often enough, they were close to bankruptcy themselves, while large companies failed to meet the obligations. The state sanctioned these procedures and stepped into the breach itself by mainly using financial means coming from the reserve fund.
The support measures for Armenia's small national budget actually were of impressive proportions. As a result of the lockdown, the government launched 22 social programs directed against the current crisis. For example, they include one-time payments to recently unemployed parents equivalent to around 200$ per minor child. Long-term unemployed received 55$ and pregnant women 200$. All other officially registered private employees who were unable to work during the lockdown were twice allowed to claim assistance equal to the minimum wage of 140$. Compensation payments were also made for sectors particularly affected by Covid-19 measures, such as trade or tourism. In addition, the state subsidized expenses for utilities for the month of February. Everyone not dependent on this form of subsidy was expected to pay the specific amount into a special Covid-19 aid fund or to support needy neighbours and relatives with it. There were even subsidies for environmental protection programs which, as a side effect, were intended to secure seasonal jobs in rural areas. According to official figures, the unemployment rate fell from just under twenty percent in the first quarter to 17.5 in the second. In addition, separate conditions for cheap loans in favor of small and medium-sized enterprises applied. For example, special incentives were created with bonus payments for not dismissing staff or even for employing unemployed labourers. For a country with an annual budget of less than $4 billion and a deficit of $380 million, this is an enormous burden. And in the end, the described measures did not solve the problems either. Additionally, no remittances from employees abroad were made because they had often lost their own income and had returned to Armenia, many from Russia, on often free charter flights. While government employees and the small middle class – despite continued salary payments – complained of the isolation during working in home office, other social groups experienced the lockdown as barely reasonable. This provoked protests against the Covid-19 measures, fuelled by the opposition media.
The health care system
Armenia’s health care system, which has been largely privatized and works profit-oriented since the 1990s, has reached its limits due to the rapidly increasing number of new infections more than once. Since it was no longer possible to trace the chains of infection, the government changed its tactics and relied on the population to self-isolate when suspecting an infection instead of going to hospitals and quarantine centres. The government has however been working on a reform of the health care system since the 2018 revolution and the efforts made by the Ministry of Health during the pandemic have been impressive. Nevertheless, of all countries in the South Caucasus, Armenia has by far the highest infection rate with around 114,000 cases (as of mid-November 2020) in a population of less than three million. In this sense, the interim results are not very encouraging.
The facts presented here reflect the situation up to the late summer 2020. However, the beginning of the military conflict between Armenia and Azerbaijan over the Nagorno-Karabakh region at the end of September 2020 marked a decisive turning point. All reform efforts, including those in the health care system and in the fight against the pandemic, were destroyed at one stroke by the war. Against this background, achievements having been made in the past two years and even in the decades before will hardly produce any visible effects in the foreseeable future.