Armenia: Washington Cuts Millennium Challenge Funding

By Joshua Kucera

The United States has cut aid for a $67-million road construction program in Armenia, due to displeasure over the slow pace of democratization in Yerevan, US officials say. But some in Armenia and in the Armenian diaspora dispute that rationale, and instead suggest that Yerevan is being punished for geopolitical reasons.

The Millennium Challenge Corporation, an aid program that explicitly ties aid to progress made in democratic reforms, announced June 10 that it was cutting the Armenian road program. "The responsibility for this outcome remains with the government of Armenia, whose actions have been inconsistent with the eligibility criteria that are at the heart of the MCC program," Rodney Bent, the corporation’s acting executive director, said in a statement.

The MCC action was specifically responding to the May 31 municipal elections in Yerevan and nationwide elections in February 2008, the conduct of which many observers, including the US Embassy in Yerevan, criticized. [For background see the Eurasia Insight archive].

The MCC has been talking with Armenian leaders about its concerns, with little results, and the most recent elections simply brought the situation to a head, said Frances Reid, deputy vice president of the MCC. [For background see the Eurasia Insight archive].

"There was a long history of discussions between the MCC and the government of Armenia before and after the elections last year. After the elections last year the MCC made it very clear what responses they were looking for from the government of Armenia, and effectively there was no substantive response in the view of our board. And the more recent elections underlined that," she said.

But some Armenian sources complained that Armenia was being held to an unfair standard, especially when events in Yerevan are compared to those in neighboring states -- Azerbaijan and Georgia. The Armenian National Committee of America sent a memo to members of Congress under a subject line of "Double Standards." The group objected to the cut, complaining that Armenia’s aid -- even before the MCC decision -- was reduced by 38 percent, more than any other country in Europe or Eurasia, while that to Georgia and Azerbaijan increased. Georgia saw its MCC aid increase by $100 million after the war with Russia over South Ossetia. [For background see the Eurasia Insight archive].

The move also got poor reviews in the Armenian press. "If you compare Georgia and Armenia and their troubled electoral experiences over the last couple of years, and Georgia actually had a war in South Ossetia, you see how the MCC reacted in terms of aid," said Emil Sanamyan, the Washington bureau chief for the newspaper Armenian Reporter. "There has to be some political explanation of why the US government decided to reward Georgia and slap Armenia with the aid cut."

Armenia Map

Sanamyan also noted that Armenia just received a $500-million low-interest loan from Russia and the United States might be punishing the country for that. "If Armenia became a NATO candidate that might have changed some thinking in the US government. But that hasn’t happened in the case of Armenia. So they’re being punished," Sanamyan alleged.

Reid rejected the notion of a double standard. "There are a number of distinctions [between Armenia and Georgia]," she said.

"There isn’t the same history of exchanges between the MCC and the government in Georgia with respect to failing indicators," she pointed out. "Secondly, Georgia passed three of the six indicators in the ruling justly category and has demonstrated marked progress in the control of corruption and government effectiveness categories, and in comparison Armenia passed one of the six indicators. Thirdly, the Armenian elections, which precipitated the MCC’s response, have no parallel in Georgia. There were demonstrations [in Georgia] which led to the government calling elections and there were no widespread criticism of the election that was subsequently held."

The MCC uses data from other organizations, including Freedom House and the World Bank Institute, to assess a country’s adherence to its criteria, she said. In the most recent Freedom House rankings, Armenia had an aggregate ranking of 4.5, while Georgia’s was slightly better at 4.0.

The MCC’s criteria for aid have come under fire recently in Nicaragua as well. The MCC cut $62 million in aid to that country after it elected as president Daniel Ortega, a former Cold War enemy of the United States and now an ally of Venezuelan President Hugo Chavez. Nicaragua is also the only state, excluding Russia, to have recognized the independence of the Georgian separatist territories of Abkhazia and South Ossetia. The MCC insists the aid was cut because of fraudulent municipal elections.

One Armenian publication, Armenian Weekly, said "the most immediate impact of the cancellation of the MCC’s rural road program will be felt by Armenia’s destitute farmers who need an improved infrastructure to grow, transport, and sell their produce."

The newspaper also suggested that the MCC’s move would drive Armenia into the hands of Washington’s adversaries. "This latest development may have far-reaching and unintended consequences beyond Armenia’s farmers. Armenia’s leaders may conclude that catering to the United States is going to neither provide a cover for the regime’s shortcomings in the area of democratic governance, nor result in any tangible benefits to the country in terms of opening the border with Turkey," the publication wrote. "The Armenian government may formally abandon its nominal policy of complementarity between East and West, and rely more heavily than ever before on Russia and Iran."

MCC officials regretted the fact that Armenia’s farmers would not benefit from the road program, but said that was the fault of the Armenian government.

"MCC was seriously concerned about the potential impact of this kind of decision on the beneficiaries, particularly poor people, who have limited ability to affect the kinds of actions and policies to which we object. Of course the fact that they have a limited ability to do so goes to the heart of the problem," Reid said.
Editor's Note: Joshua Kucera is a Washington, DC,-based freelance writer who specializes in security issues in Central Asia, the Caucasus and the Middle East.