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Russian-Armenian Tycoon Expanding Influence in Armenia

Russian tycoon Samvel Karapetyan (left) has made no secret of his strong support for Armenia’s Prime Minister Karen Karapetyan (right), raising questions about potential Russian meddling in Armenian politics and the future of this South Caucasus nation. (Photo: Government of Armenia)

Samvel Karapetyan, an Armenian-born billionaire who has built a business empire in Russia, is increasingly investing in Armenia and, in particular, its energy sector where he is becoming a key player. And his close ties to Armenia's prime minister are raising questions about Russia's influence on Armenian politics as the Caucasus country approaches a delicate political transition next year.
 
The 52-year-old tycoon has made no secret of his strong support for Prime Minister Karen Karapetyan (no relation), who took office in September 2016 and has a reputation as a technocratic reformist.

The prime minister's early success has potentially placed him in competition with President Serzh Sargsyan. Armenia will switch to a parliamentary system of government in April 2018 immediately after Sargsyan completes his second and final term. Sargsyan has yet to clarify whether he intends to hold on to the country's top position as prime minister after he leaves the presidency. In any case, Sargsyan is widely expected to remain chairman of the governing Republican Party of Armenia.
 
Karen Karapetyan, meanwhile, has repeatedly indicated his desire to retain his position as prime minister. This creates the possibility of a clash of two political titans over the country’s leadership position. While it is still not clear how everything will shake out, Samvel Karapetyan’s growing economic influence in Armenia has clearly boosted Karen’s chances of retaining power.
 
Born and raised in Tashir, a small town in northern Armenia, Samvel Karapetyan studied mechanical engineering in Yerevan before moving to Russia in the early 1990s. He parlayed success in retail in the provincial city of Kaluga into buying a local contractor of Gazprom, Russia’s state natural gas company, in 1997. He then expanded his business empire into Moscow real estate, and the financial crisis of 2008 boosted him into the ranks of Russia’s super rich, as he bought up newly affordable properties for development.
 
He also benefited from close government ties, in particular with officials in Kaluga, some senior Gazprom executives, and current Moscow mayor Sergey Sobyanin. Russia’s RBC business news agency estimated that in 2014-2015 alone, Karapetyan-controlled firms won roughly $2 billion worth of construction and supply contracts from Gazprom, the Moscow municipality and other state entities.
 
The media-shy tycoon’s net worth more than tripled from $1.4 billion in 2011 to $4.4 billion in October 2017, apparently making him the wealthiest ethnic Armenian in the world, according to Forbes magazine. Through his Tashir Group, which comprises over 200 firms, he also owns a Russian commercial bank and dozens of shopping malls, office buildings, hotels and restaurants across Russia.
 
Until a few years ago, Karapetyan’s activities in Armenia and Nagorno-Karabakh were largely confined to philanthropy. In particular, he financed the $22-million construction of a new hospital in Karabakh’s capital, Stepanakert.
 
Karapetyan’s first major business asset in Armenia was a sprawling shopping mall built in Yerevan in 2012. He will inaugurate a similar American-style retail and entertainment complex in the Armenian capital on November 13.
 
Two years ago, Tashir bought Armenia’s heavily indebted and mismanaged power distribution network from Inter RAO, a state-owned Russian giant. In August 2017, the Armenian government announced that the national electricity transmission company will also be managed (and, it says, modernized) by Tashir. The term of the deal is for at least five years.
 
Karapetyan is also planning to build two major hydroelectric plants and one waste-to-energy facility through a separate investment fund, the Investors Club of Armenia (ICA), which he set up in early 2017. The ICA estimates that the combined cost of those three investment projects is about $470 million. “Together with partners, the ICA is investing in Armenian projects that are worth over $1.1 billion,” the fund declares on its website. The site does not offer any details of where the remainder of its investments is going.
 
The ICA has so far offered to invest only about $80 million of its own money in them, hoping to raise the rest from international lending institutions and private investors from Russia and even the West. The Robbins Company, an American manufacturer of tunnel-boring equipment, has expressed willingness to invest in one of the new hydroelectric plants, due to be constructed in Armenia’s northern Lori province. On October 25, it signed a memorandum of understanding to that effect with a Karapetyan-owned energy firm.
 
“We are guided by strategic priorities set by the Armenian government, and energy security is one of them,” said Paruyr Amirjanyan, the chief executive of Fora Capital, the ICA’s managing company. In an interview with EurasiaNet.org, Amirjanyan said greater reliance on domestic renewable sources of energy will make Armenia less dependent on imported fossil fuels.
 
The Moscow-based press office of Tashir Group said, for its part, that Armenia has always been a “priority region” for Karapetyan’s conglomerate. “The Group intends to expand the geographic range of its activities, including in Armenia,” it told EurasiaNet.org.
 
The office declined to comment on whether the Tashir owner pursues any political goals in Armenia, or whether he considers Prime Minister Karapetyan’s continued tenure essential for his business projects there. The Russian-Armenian billionaire voiced strong support for the premier when they jointly announced the creation of the ICA in Yerevan in March. “We are going to defend and support him [the prime minister], and I’m sure that very soon goals will be scored every day,” he told reporters.
 
The two men most probably struck up a friendship when Karen Karapetyan held senior executive positions in Gazprom subsidiaries in Russia from 2011-2016. Highlighting their close relationship, Karen sat next to Samvel at the recent extravagant wedding of the latter’s younger son.
 
The tycoon was behind a joint statement issued by three dozen Russian entrepreneurs of Armenian descent during Karen Karapetyan’s official visit to Moscow in January. They praised “profound reforms” promised by the prime minister and pledged to “participate in business projects with the Armenian government.”
 
The politically inexperienced premier has repeatedly pledged to improve living standards in Armenia by attracting large-scale foreign investment and improving the domestic business environment. Samvel Karapetyan’s growing economic presence in Armenia could therefore strengthen his hand.
 
David Petrosian, a Yerevan-based veteran analyst who closely monitors Russian-Armenian dealings, suggested the Russian government is “encouraging” such investments out of a belief that they will bolster the Kremlin’s strong position in Armenia. Russian leaders, Petrosian said, want Karen Karapetyan to remain prime minister next year for the same reason, even though the latter is “not the kind of guy who will duly obey everything he is told to do.”

Russian Prime Minister Dmitry Medvedev signaled Moscow’s continuing support for the former Gazprom executive when he visited Yerevan on October 24. At a joint news conference with Karapetyan, Medvedev lauded Russian-Armenian ties as “developing in all directions,” adding that Gazprom will avoid a planned gas price increase for Armenia in 2018. Days later, Russian news network Rossiya-24 aired a 13-minute report on Armenia that praised the Karapetyan government’s economic policies and painted a rosy picture of the economic situation there.
 
Just how far Moscow is prepared to keep Karen Karapetyan in the prime minister’s post should become clearer in the coming months. At any rate, Armenia’s struggling economy will have a new and very wealthy actor who will be in a position to foster its faster growth.

Emil Danielyan is a Yerevan-based journalist.

Russian-Armenian Tycoon Expanding Influence in Armenia

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