U.S. Department of State

Annex A: Assessments of Progress in Meeting the Standards of Section 498A of the Foreign Assistance Act of 1961

The Armenian Government has stated its commitment to building a parliamentary democracy based on rule of law and civil society. However, serious problems remain. The Armenian constitution was adopted by referendum in July 1995, coincident with the election of a transitional 190-member legislature. The parliamentary elections and constitutional referendum were called "generally free but not fair" by international observers. Presidential elections were held in 1996 and 1998. Fraud in the 1996 vote tabulation process allowed then-incumbent President Ter-Petrossian to avoid a run-off election he might have lost. In February 1998, Ter-Petrossian was forced to resign. Current President Kocharian took office in April 1998, following elections that were marred by numerous irregularities, including block voting by the military and ballot box stuffing, which cast doubt on the voting and vote-counting processes. Nevertheless, the 1998 elections were an improvement over those of 1996 in that a pluralistic group of candidates was able to campaign more freely, and with access to the media. Elections in May 1999 for a restructured 131-member Parliament demonstrated some areas of improvement over previous elections as well as continuing serious shortcomings. Improvements included the authorities' respect for freedom of speech and assembly, parties' and candidates' ability to enter the race and campaign freely, the neutrality of media coverage, and the functioning of domestic election observers. Notable shortcomings were the poor state of voter lists (which kept many people from casting ballots), problems with voting by the military, insufficient number of independent election commissions, and problems with the tabulation and publication of vote counts. Accuracy of voter lists continued to be a problem in the October 2002 local and municipal elections, although legal procedures for election-day additions to the list have been made simpler and faster. The Organization for Security and Co-operation in Europe (OSCE)/Office of Democratic Institutions and Human Rights (ODIHR) observers found both the 2003 presidential and parliamentary elections to be well below international standards. Serious irregularities marked both rounds of the presidential poll and the parliamentary elections. Opposition supporters were detained between the two rounds of the presidential elections under dubious legal pretexts.

The Constitution provides for freedom of the press, but the Government exercises some restrictions on the media. Official censorship is not practiced, but journalists appear to engage in self-censorship to avoid problems with authorities. Many subjects considered sensitive for national security reasons receive circumscribed coverage. The Government maintains the dominant role in nationwide television and radio broadcasting, and national TV provides very favorable coverage to the President and Government, with limited access to and coverage of the political opposition. Non-governmental media by contrast often criticize the country's leaders and government policies. A media law passed in November 2000 substantially reduces government control over the media, but still left some loopholes that are cause for concern. In a step back from the development of independent media, in September 2001 and again in April 2002, two prominent independent television stations, including A1+, lost their licenses in a tendering process required by the new media law. In December 2003, the Radio and Television National Commission rejected the application of A1+ for the last television frequency available until 2008. Critics of this decision called it retribution for A1+'s critical reports on President Kocharian's administration.

Fourteen laws designed to improve the legal and judicial systems took effect in January 1999 but have not completely remedied judicial shortcomings. Even though the prosecutors' supervision of cases has been significantly reduced, prosecutors still greatly overshadow defense lawyers and judges during trials. In addition, serious concerns remain regarding the independence of the judiciary, the functioning of the legal system, and police treatment of detainees. The beating of pre-trial detainees remains a routine part of criminal investigations. The Government has not conducted investigations of abuse by security forces, except in rare cases where death has resulted and under pressure from human rights groups.The Government of Armenia, with some input from the World Bank and an international working group chaired by the OSCE, developed a comprehensive anti-corruption strategy, adopted in late 2003. The U.S. Government and other donors are currently examining the strategy.

Some public demonstrations occur without government interference. The Government did detain, however, over 200 opposition supporters between the two rounds of the presidential election in late February 2003 for participating in unsanctioned campaign rallies.The police appeared to selectively apply the law only to the opposition.

Section 498A(a)(2): "make significant progress in, and is committed to the comprehensive implementation of, economic reform based on market principles, private ownership, and integration into the world economy, including implementation of the legal and policy frameworks necessary for such reform (including protection of intellectual property and respect for contracts)."

Since 1994, Armenia has pursued macroeconomic stability and structural reform, with the support of international financial institutions, donors and the Armenian Diaspora. Economic performance since 2000 has been impressive, reflecting prudent monetary and fiscal policies. Growth was strong in 2003, at approximately 12 percent. The fiscal deficit is continuously decreasing, down to 2 percent of GDP from 6 percent in 1999. The external current account deficit, at 7.5 percent of GDP, is less than half of its size in 1999. The external debt-to-export ratio has fallen from 130 percent of GDP in 2002 to about 94 percent of GDP in 2003. Inflation remains low.

Armenia has succeeded in privatizing almost all agricultural land and housing stock. An aggressive voucher privatization program placed approximately 70 percent of Armenia's enterprises in private hands by 1997. The Government of Armenia estimates that 80 percent of economic output is now produced by the private sector. The electrical power distribution network was privatized by sale to a Channel Islands-registered company in September 2002 in a non-transparent process. However, this company's performance appears to be driven by commercial rather than political incentives. Most of the thermal power company was turned over to Russian control as part of a debt-for-equity swap aimed at paying off Armenia's large remaining debt payments to Russia, some of which dated back to the break-up of the USSR.

Armenia needs to increase tax collections to meet social spending goals and reduce poverty. Consistent tax collection performance has been weak, and fundamental steps are needed on public and private governance issues to improve tax and customs administration. The authorities acknowledge that corruption remains a serious issue in Armenia, preventing an effective allocation of resources and compromising efforts to reduce income inequality. Payment discipline in the electricity, water and irrigation sectors has improved, in large part due to U.S. assistance in metering and billing systems and extensive privatization.

Armenia is working to establish legal and institutional frameworks that will facilitate further economic development and foster an environment attractive to foreign investment. Armenia was dropped from the Special 301 Watch List in 2003 because of improvements in its IPR protection regime. A liberal foreign investment law was approved in 1994. Armenia has a bilateral trade agreement providing for reciprocal Normal Trade Relations with the U.S. and has been determined to be compliant with the freedom of emigration provisions of the Jackson-Vanik amendment (subject to a semi-annual reporting requirement on its continued compliance with these provisions). Armenia also has an OPIC agreement, and a bilateral investment treaty with the United States. After long negotiations and hard work, Armenia acceded to the WTO in February 2003. Compliance with WTO obligations required that the Government of Armenia adopt extensive legislation changes (including amendments to the customs code and copyright law). Armenia is receiving technical assistance from the U.S. to revise its tax structure. Armenia is a member of the International Monetary Fund, the World Bank, and the European Bank for Reconstruction and Development.

Section 498A(a)(3): "respect internationally recognized human rights, including the rights of minorities and the rights to freedom of religion and emigration."

Armenia's 1995 Constitution contains broad human rights protections. Implementation, however, has been poor and serious problems persist in several important areas. The Constitution grants national minorities the right to preserve their cultural traditions and languages, and current law specifically provides linguistic minorities the right to publish and study in their native tongues. Armenia has ratified important international human rights treaties and shown a willingness to engage in international and bilateral discussions regarding human rights.

The Constitution provides for the right to practice the religion of one's choice, but current laws grant special status to the Armenian Apostolic Church, which has legal status as the national church. All other religious denominations and organizations must register with the state Council on Religious Affairs. Although only the Armenian Apostolic Church may by law proselytize, in practice, there have been no restrictions imposed on most other religious bodies. Funding from sources outside Armenia is prohibited for non-apostolic faiths. The State Council on Religions, which regulated the relations of religious denominations with the Government from 1996 until it was abolished by presidential decree in March 2002, was replaced in August 2002 by a committee attached to the Prime Minister's office. As of November 2002, registered religious groups had reported neither adverse consequences from the law nor denial of re-registration under the amended law. Although Jehovah's Witnesses have not been allowed to register as a religious denomination, the group operates in a fairly open manner. Despite being harassed by local officials and denied access to their religious publications, they report gains in converts. In 2002, several Jehovah's Witnesses were in jail charged with draft evasion or desertion. By the end of 2003, 18 members of the Jehovah's Witnesses remained in prison and 2 members were in pretrial detention charged with draft evasion. The Council of Europe maintains that those imprisoned for conscientious objection must be released immediately as part of a government undertaking to enact legislation to provide alternative military service, one of the predicates for membership in the Council. The Armenian National Assembly passed its first alternative military service law in December 2003, providing conscientious objectors the ability to do their national service in a civilian institution. The law attracted some criticism from local human rights groups, but appears to have satisfied Armenia's Council of Europe commitments. No member of the Jehovah's Witness community has yet been released as a result of this new law.

The Constitution provides for freedom of foreign travel and emigration, and these rights are generally recognized in practice. A 1997 law mandates that representatives of religious organizations other than the Armenian Apostolic Church must obtain prior permission from the State Council on Religions to travel abroad. However, this requirement has not been enforced since the initial year of its enactment. Since independence in 1991, upwards of one million Armenian citizens, approximately one-fourth of the population at independence, have emigrated or reside semi-permanently outside the Republic of Armenia.

Discrimination based on race, sex, religion, disability, language, or social status is prohibited by the Constitution, but cultural and economic factors prevent women, persons with disabilities, and some ethnic and religious minorities from participating fully in public life.

Section 498A(a)(4): "respect international law and obligations and adhere to the Helsinki Final Act of the Conference on Security and Cooperation in Europe and the Charter of Paris, including the obligations to refrain from the threat or use of force and to settle disputes peacefully."

In November 1999, Armenia joined the other OSCE states in signing the Charter for European Security, which reaffirms full adherence to all OSCE documents already in force. However, Armenia does not recognize the borders of Azerbaijan as defined in OSCE documents at the time of accession. Armenia facilitated the opening of an OSCE office in Yerevan in 2000. As a result of the continuing conflict over Nagorno-Karabakh, Armenian military forces occupy a portion of the territory of Azerbaijan. Both Armenia and Azerbaijan periodically violate the cease-fire that has been in effect since May 1994; both countries participate actively within the OSCE Minsk Process, an initiative aimed at resolving the conflict. President Robert Kocharian and the late Azerbaijani President Heidar Aliyev engaged in bilateral talks for several years whose goal was a negotiated settlement of the conflict. In 2002, they met in Sadarak, Azerbaijan, in August; in Chisinau, Moldova, in October; and in Prague in November. The Armenian and Azerbaijaini foreign and defense ministers also have met several times to discuss aspects of a settlement, and in 2002, special representatives of the two Presidents met several times, opening yet another negotiating track. Through the auspices of the OSCE, Armenia and Azerbaijan continued in 2002 to exchange POWs. In 2002, the Presidents of Azerbaijan and Armenia continued a series of private meetings in an effort to resolve their differences and help bring about a resolution of the conflict. Progress slowed in 2003 as presidential elections in Azerbaijan and Armenia dominated government attention in both countries. The President of Armenia and the new President of Azerbaijan, Ilham Aliyev (Heidar's son), met for the first time bilaterally in December 2003. Through the auspices of the OSCE, Armenia and Azerbaijan continued in 2003 to exchange POWs.

Section 498A(a)(5): "cooperate in seeking peaceful resolution of ethnic and regional conflicts."

The OSCE created the Minsk Group in spring 1992 as the forum for a peaceful, negotiated resolution to the conflict over Nagorno-Karabakh. The Government of Armenia continues its participation in the OSCE peace process. There has also been intermittent direct dialogue between the Armenian and Azerbaijani Governments. This dialogue and the Minsk Group process continue to hold the promise of achieving comprehensive settlement of the conflict. Both Azerbaijan and Armenia have expressed a commitment to continue working with the OSCE Minsk Group Co-Chairs to achieve a resolution of the conflict.

Section 498A(a)(6): "implement responsible security policies, including--

(A) adhering to arms control obligations derived from agreements signed by the former Soviet Union;

(B) reducing military forces and expenditures to a level consistent with legitimate defense requirements;

(C) not proliferating nuclear, biological, or chemical weapons, their delivery systems, or related technologies; and

(D) restraining conventional weapons transfers."

Armenia ratified the Conventional Forces in Europe (CFE) Treaty in October 1992 and the 1996 CFE flank agreement in May 1996. Armenia participated actively in negotiations to adapt the Treaty and, along with the other 29 CFE States, its representatives signed the Adapted CFE Treaty at the Istanbul Summit in 1999. Armenia has provided data on equipment as required by the Treaty. Armenia also has hosted on-site inspections, as provided for in the Treaty, and participates in the CFE Joint Consultative Group, the Treaty's implementation body, which meets in Vienna. Armenian compliance with CFE has been uneven. In addition to Armenia's longstanding failure to properly notify or carry out reductions required by the Treaty, there are serious concerns about the completeness of Armenia's data on equipment holdings. Also of concern are: evidence that Armenia may have failed to notify increases in unit holdings involving CFE Treaty limited equipment transferred from Russia, the fact that Armenia continues to station troops and CFE limited equipment on the territory of Azerbaijan without Azerbaijani permission, and evidence that Armenia made a late notification of the entry into service of multiple rocket launchers purchased from China. Another area of concern is Armenia's failure to report the apparent transfer of TLE from Russia in the mid-1990s. There has been no change in this issue by the Armenians. Armenia has taken no new steps toward resolving this issue since the Trilateral Commission, established in 1997 to investigate the transfers, stopped meeting in April 1998. Both Armenia and Azerbaijan have maintained that it is impossible for them to meet certain Treaty obligations because of security concerns associated with the Nagorno-Karabakh conflict. This said, Armenia is engaged in discussions both in the CFE context and in the context of the Minsk Group process that may help to address a number of these issues.

Armenia is a participating State to the OSCE Vienna Document 1999 and its predecessor Vienna Document 1994. The Vienna Document is an OSCE regime of confidence and security building measures. Armenia submitted CSBM annual data declarations for 1996-2000 and has willingly undergone CSBM inspections and evaluation visits in accordance with the OSCE Vienna Document (1994 and 1999). In August 2000, Armenia hosted an air base visit and visits to a military facility in accordance with Vienna Document 1999 provisions. In September 2002 the Government of Armenia hosted a joint exercise in mountain rescue techniques with the U.S., Georgia and Russia, to which Turkey and Azerbaijan were also invited but did not participate. In summer 2003 Armenia hosted a successful Partnership for Peace (PfP) ground forces exercise, which included the participation of Turkish forces.

Armenia acceded to the Nuclear Nonproliferation Treaty (NPT) as a non-nuclear-weapon state on July 15, 1993. It has had a full-scope safeguards agreement in force with the International Atomic Energy Agency since May 5, 1994. Armenia signed the Additional Protocol on September 29, 1997. The United States and other Western governments have discussed efforts to establish effective export control systems with Armenia. Armenia is a State Party to the Chemical Weapons Convention (CWC) and the Biological Weapons Convention (BWC), which seek to eliminate chemical and biological weapons, respectively. Armenia provided an annual voluntary BWC-related CBM Data Declaration the past four out of five years, including in 2001. Armenia also signed a bilateral agreement to cooperate in the area of WMD nonproliferation with the United States in July 2000. It ratified the agreement on February 21, 2001, and exchanged formal notifications with the United States to bring the agreement into force. Additionally, Armenia has acknowledged it is a successor to the former Soviet Union's obligations under the Intermediate and Shorter Range Nuclear Forces (INF) Treaty and continues to observe the Treaty's obligations. Armenia has not yet subscribed to the International Code of Conduct Against Ballistic Missile Proliferation (ICOC), but tells us that it is reviewing the issue.

We have received occasional reports of transfers from Armenia potentially related to proliferation of weapons of mass destruction technology or equipment, which we carefully review and pursue in light of the global war on terror, our efforts on Iraq/other states that sponsor terrorism and our legal obligations under the various nonproliferation sanctions laws. Based on U.S. diplomatic efforts in 2002, Armenia worked cooperatively with the United States Government to stop and detain a shipment of dual-use equipment originating in Armenia that was destined for Iran. On May 9, 2002, the U.S. imposed sanctions on two Armenian entities - Lizin Open Joint Stock Company and Armenian national Armen Sargasian - pursuant to the Iran Nonproliferation Act for the transfer of Australia Group-controlled items to Iran in the second half of 2001. The Armenian Government also worked with the USG to ensure transparency regarding this matter. Armenia approved a WMD-related export control system in December 2003 and has worked with the United States and other countries toward this goal.

Armenia is not a significant exporter of conventional weapons, but has provided substantial support, including materiel, to separatists in the Nagorno-Karabakh region of Azerbaijan. It provided both ammunition and weapons to support the U.S. led effort to train and equip the new Afghan National Army as part of Armenia's participation in Operation Enduring Freedom.

Section 498A(a)(7): "take constructive actions to protect the international environment, prevent significant transborder pollution, and promote sustainable use of natural resources."

Armenia faces serious environmental problems. Water pollution caused by industrial wastes discharged into rivers has contributed to a serious decline in public health. Armenia's major freshwater lake, Lake Sevan, has a declining water level due to use of its water for irrigation and hydroelectric generation. Overuse of the country's forests and poor irrigation and water management practices has led to increased soil erosion and loss of arable land. The Government of Armenia, however, has taken some steps to establish public policy mechanisms to address environmental issues, including the establishment of a Ministry of Environment. Environmental action plans are being developed with the assistance of the World Bank. National environmental NGOs are gaining access to the policy-making process on environmental issues. In 2000, Armenia joined Georgia in signing the charter for and establishing the Regional Environmental Center in the Caucasus, located in Tbilisi, Georgia. The United States and the European Union are supporting and co-financing the establishment of this independent, non-profit, and non-political organization, the mission of which will be to strengthen civil society and support sustainable development by promoting public awareness and participation in regional environmental decision-making. In 2002, Armenia passed a new water code that involved participation by citizens' groups.

Armenia has shown an interest in regional cooperation on environmental issues, and has agreed to the establishment of a coordination and information-sharing mechanism as a first step toward fuller cooperation on transborder and international environmental issues.

Section 498A(a)(8): "deny support for acts of international terrorism."

The Government of Armenia does not grant sanctuary from prosecution to individuals or groups that have committed acts of international terrorism or otherwise support international terrorism. Armenia is party to six of the twelve UN International Terrorism Conventions and has indicated that it is willing to sign three more by early 2004. In November 2002, Armenia introduced a terrorist financing law that allows Armenian banks to question the source of cash deposits and to freeze accounts of individuals and organizations suspected of terrorist financing. Allegations in the Turkish and Azeri media that the Government of Armenia supports anti-Turkish Armenian and Kurdish terrorist groups remain unsubstantiated. The PKK (now Kadek) however, does have a presence in Armenia. In October 2001, several hundred PKK supporters attempted to demonstrate in front of the U.S. Embassy but were prevented from doing so by local authorities.

Armenian President Kocharian has pledged full support for the United States' efforts against terrorism and has offered intelligence support, overflight and landing rights, additional security support to U.S. facilities in Armenia during times of terrorist alert, and emergency medical assistance to U.S. troops that operate in Armenia. Armenia also offered weapons and ammunition to the new Afghan National Army.

Section 498A(a)(9): "accept responsibility for paying an equitable portion of the indebtedness to United States firms incurred by the former Soviet Union."

In October 1991, shortly before the Soviet Union dissolved, Russia and nine other Soviet republics signed a Memorandum of Understanding declaring themselves jointly and severally liable for the foreign debts of the former Soviet Union (FSU). In December 1991, Russia and seven other republics, including Armenia, signed an agreement, which assigned to each of the newly independent states a share of all the external assets and foreign debt of the former Soviet Union. Beginning in 1992, Russia sought to replace the joint and several liability principle by seeking full liability for the debt in return for all the external assets. In September 1993, Armenia signed a "double zero option" agreement with Russia under which Russia agreed to assume Armenia's share of the former Soviet Union's foreign debts in exchange for Armenia's share of the FSU's external assets.

Please see section 498A(a)(9) of the Russia assessment regarding indebtedness to the United States incurred by the former Soviet Union.

Section 498A(a)(10): "cooperate with the United States Government in uncovering all evidence regarding Americans listed as prisoners-of-war, or otherwise missing during American operations, who were detained in the former Soviet Union during the Cold War."

The U.S. effort to uncover evidence of American POWs and MIAs in the former Soviet Union is being conducted through the U.S. - Russia Joint Commission on POWs/MIAs which was established in March 1992. The U.S. side of the Commission visited Armenia in August 1993 to expand contacts with Armenian officials and to visit the crash site of a C-130 that was shot down over Armenia in 1958. The delegation received much support from the people and officials of Armenia, who cooperated during the investigation.

Section 498A(a)(11): "terminate support for the communist regime in Cuba, including removal of troops, closing military and intelligence facilities, including the military and intelligence facilities at Lourdes and Cienfuegos, and ceasing trade subsidies and economic, nuclear, and other assistance."

We have no evidence from which to conclude that the Government of Armenia is providing military, intelligence, economic, nuclear, or other assistance to the Government of Cuba.

CHECKLIST FOR GROUNDS OF INELIGIBILITY UNDER SECTION 498A(b) OF THE FOREIGN ASSISTANCE ACT OF 1961

ARMENIA

Section 498A(b)(1): Has the President determined that the Government of Armenia has "engaged in a consistent pattern of gross violations of internationally recognized human rights or of international law"?

No. The President has not made such a determination at this time. However, there have been serious shortcomings in human rights observance (as discussed above).

Section 498A(b)(2): Has the President determined that the Government of Armenia "has failed to take constructive actions to facilitate the effective implementation of applicable arms control obligations derived from agreements signed by the former Soviet Union"?

No. The President has not made such a determination at this time.

Section 498A(b)(3): Has the President determined that, after October 24, 1992, the Government of Armenia "knowingly transferred to another country --

(A) missiles or missile technology inconsistent with the guidelines and parameters of the Missile Technology Control Regime; or

(B) any material, equipment, or technology that would contribute significantly to the ability of such country to manufacture any weapon of mass destruction (including nuclear, chemical, and biological weapons) if the President determine[d] that the material, equipment, or technology was to be used by such country in the manufacture of such weapon"?

No. The President has not made such a determination at this time. (See report on Section498(a)(6) regarding activities by private Armenian entities.)

Section 498A(b)(4): Is the Government of Armenia "prohibited from receiving such assistance by section 101 or 102 of the Arms Export Control Act or sections 306(a)(1) and 307 of the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991"?

No. We do not have information from which to conclude that the Government of Armenia is prohibited from receiving assistance under these sections.

Section 498A(b)(5): Has the President determined and certified to the appropriate congressional committees that the Government of Armenia "is providing assistance for, or engaging in non-market-based trade (as defined in section 498B(k)(3)) with the Cuban Government? If so, has the President taken action to withhold assistance from Armenia under the Foreign Assistance Act within 30 days of such a determination, or has Congress enacted legislation disapproving the determination within that 30-day period?"

No. The President has not determined that the Government of Armenia is providing assistance for, or engaging in any non-market-based trade with, the Cuban Government.