President Kocharian Promises to Punish Currency Speculators

According to ARCA, during the traditional meeting of Robert Kocharian with the 60 big entrepreneurs, the President has remarked, that the unreasonable abrupt fluctuations of the national currency, which lasted several days are among the most important events of 2007. Kocharian has informed the businessmen, that research has been conducted and the authors of speculations will soon be revealed and will be held accountable.

Let me remind once again, that from the beginning of the current year the USD has devaluated against AMD by more then 16%. At the start of the year each USD traded for 360 AMD, whereas today 1 USD is equal to 304.22 AMD.
Interestingly, in a very recent post, the Armenian Economist was arguing, that “there is little at this stage that the government, or the Central Bank (CBA) more correctly, is able to do to reverse this appreciation”, and asking “why are government critics focusing on the Dram, where the government has little control, and not continuously hammering the regime on the other issues?”.
It seems, that unlike the Armenian Economist, President Kocharian has finally decided to focus on the Dram, and check what is happening with currency speculators, to, very possibly, punish them. I guess it doesn’t take a PhD in Economy to understand, that AMD rate appreciation is not only “hurting exporters and endangering the country’s competitiveness”; but is also quite paradoxically, it is not resulting in lowering the price of imported products in any way. So it seems, that in the end, media have been doing a pretty good job of focusing on Dram, and drawing Government’s attention to it. It remains to be seen, however, who will be punished in the results of the check ups. There is a widely circulated perception in the society, that the AMD rate speculations are planned and carried out by the Central Bank of Armenia, and many are speaking, that President Kocharian is among those, benefiting greatly from the Rate fluctuations. However, I’m pretty sure, that the small currency speculators, who are striving to make a living by trading a dollar or two, will in the end bear the cost of the “just punishment”.

Artur Papyan

Journalist, blogger, digital security and media consultant


  1. Well, there are just two things here, I suppose. The first is that the dollar is apparently weakening worldwide and Armenia is no exception. The second is that there was that rumor about currency speculators from a neighboring counter who have been detained, the fact of which might be used to attack Ter Petrosian.
    Not sure if that’s true, and while I’m not happy with the currency exchange rate here, I would like to know how abnormal it is given that elsewhere in the world some people are refusing to take payment in dollars and are requesting euros instead. For example, this document ( says that the euro has also appreciated 17 percent against the dollar.
    Indeed, while I also suspect that this situation is not normal, it has to be said that Armenia is not alone in this situation:

    The dollar has fallen to all-time/multi-year lows against a number of the word’s leading currencies in recent months, including the pound and euro. Both cyclical and structural factors have been at play. The cyclical downturn of the US economy makes investing in US assets appear less attractive and puts the greenback under pressure. From a structural standpoint, the dollar had to decline to help the US reduce its persistently high current account deficit.

    Of course, the dram is not a “leading currency,” but because Armenia is so politicized, and is even more so before the election, I don’t know what to believe here anymore. Kocharian’s statement, incidentally, might yet be seen to be something political too. Let’s see.

  2. I don’t think Kocharyan would opt for blaming Ter-Petrossian on anything exchange related, although, once you think of it…
    On the other hand, the problem with AMD is – the price of INPROTED GOODS is not declining, despite the fact, that AMD value against USD is growing, and most of the trade outside of Armenia is done in USDs, at least that’s what we’re told.

  3. Well, the prices not changing to reflect the strengthening of the dram or weakening of the dollar is an issue, but that’s maybe more of an issue with people exploiting the situation or rather, having no competition and thus no need to do. Anyway, my point is that I’ve now given up belief in both what the government and the opposition (including civil society) says and I urgently need independent and objective assessments of such issues, especially in the period leading up to the election.
    Like they say, if a politician’s mouth moves, it means he’s lying, and I’d say that pretty true for all of them. Again, I have to say that I don’t believe in civil society either, the most vocal of which has been largely inseparable from the radical opposition since the parliamentary election. Same goes for the media which is either pro-opposition or pro-government. It seems that there is now no room for any inbetween.

  4. The appreciation of Dram is closely related to the concept of Dutch Disease:
    While Dutch Disease is a theory about the exploitation of natural resources, in Armenia’s case it is the export of labor force that occurred in the late 90-s and continues to this day. If the government can do something about the situation if the foreign currency inflows are from oil or any other resource by establishing a fund to keep the dollars from hitting the local exchange markets, the proceeds of the Armenian labor abroad are not and cannot be centrally controlled.
    The CB chairman realizes what the causes of the situation are and has urged productivity increase to combat the effects of the currency inflows. But since CB does not have any leverage on the government policies, he cannot affect the Armenian competitiveness. Tax policies, corruption, social and political repression that are the current policy of the Armenian government cannot create confidence in the Armenian economy which would bring in investments and boost productivity.
    Unless Armenia has fundamental reforms ( like creating pro-business environment; red tape reduction or elimination, establishing free market ideology, reduction of the government size and the ensuing tax cuts that would be possible because of small government, etc.), Armenia is pretty much screwed and has a doubtful future as an independent state. The only way out would be to sell the independence and cling to the tit of Russia. We have seen the initial steps taken towards this during the last couple of years.

  5. Nazarian, I understand what you say about foreign remittances although even in a best case scenario it is likely that as with other former Eastern bloc countries, many among the population would still work outside the country. Forgetting that, everyone is speaking about the appreciation of the dram as if it is the only currency affected. However, the dollar is weakening worldwide so I’d like to hear a convincing argument persuading me to believe that the appreciation of the dram is abnormal even in this situation. Really, can someone write about this free from party politics? I think we all need to try to work out whether this appreciation is abnormally higher than other currencies, for example. Meanwhile, about reform, to be honest, countries such as Armenia are too small, poor and weak ever to be “independent” if you mean free from any foreign influence. Sorry, I think that’s a problem facing many countries who have to choose — be under the influence of, and be economically tied to, the U.S., Europe, or Russia.

  6. Onnik, Nazarian,
    Like I’ve mentioned in the post, even President Kocharian has been finding rate flactuations abnormal and has mentioned that investigation is in process to find and punish the guilty.
    When everyone – government, opposition, neutral experts speak of abnormalities, why do you guys defend the AMD rate? Do you perhaps know something Kocharian doesn’t? :))))

  7. Onnik, there is nothing abnormal about the appreciation of AMD given the circumstances. Yes, the US$ has lost value against the other currencies but AMD has not only strengthened against the dollar but the other foreign currencies which means that this is an appreciation of the exchange rate of AMD and not only the depreciation of the dollar.
    And independent does not mean ‘free from foreign influence’, or any other influence but the ability to make sovereign decisions that are in the interest of the nation and not solely in the interest of the foreigners.

  8. Observer, what Kocharian is doing is a publicity stunt. There is nothing wrong with that – he does what politicians are supposed to do – he is taking advantage of the situation to gain political ground and use it for his ends (be it increased ratings, discrediting the opposition, etc.).
    I have spelled out the causes of the AMD appreciation in my earlier comment (too much foreign currency chasing too little AMD) and the possible solution and the consequences of inaction. The professionals realize this but so far they have been unsuccessful in convincing the government to take concrete actions to minimize the negative impact.
    Any abnormalities can only be short term fluctuations – somebody creates panic or excitement and then takes advantage of the resulting change. But beyond a blip, the market bounces back. If the market does not correct itself, or the volatility continues, then there are more fundamental issues in the system.

  9. Well, one pro-governmental source told me that some Turkish citizens were detained attempting to launder money through Yerevan currency exchanges. Not sure if that’s true, but if it was, I can see why Kocharian might say what he has. All he needs to do is for him or Serzh to find someone to punish and he can be seen to have kept his word.
    It would also be quite tasty for a black-pr campaign against those wishing to normalize relations with Turkey. Rerad Ter Petrosian here, although until the NSS announces the detention then it should be treated simply as a rumor although I have no reason to doubt the source of this information.
    On the other hand, with so many dollars coming into the country from abroad and with the dollar losing value worldwide, it’s interesting to note that yes, people here still consider something else might be behind this. As I’ve said, I’d like an impartial objective view from an Economist on this matter. For example, how has the manat or lari appreciated compared to the dram? Has it?
    I mean, these are real measures we can use from two countries similar in terms of having an absent workforce although not totally. I mean, Armenia has more people abroad, Azerbaijan has it’s oil, and Georgia, I suppose, is in the middle. Incidentally, your opening paragraph stated that Kocharian is concerned by the fluctuation in the dram over several days.
    Is this to mean that is ONLY what he was referring to. i.e. he was not referring to the dram being around 300 to the dollar, but more when it fell drastically below that. This should also be clarified.

  10. According to the archives of the, AMD has appreciated against the other currencies as well.

  11. ArmeniaNow has an article on the appreciation of the dram:

    The usual explanation of the strengthening of the dram against major currencies is that Armenia is absorbing an increased number of private remittances from Armenians who live and work abroad.
    Some data suggests that private transfers from Armenians abroad to relatives in Armenia have tripled in the past five years to some $1.2 billion a year. The tendency is expected to continue, since more and more dollars are needed to bridge the gap in purchasing power caused by the decline of the American currency.
    Multimillion dollar investments in the construction industry, which represents 26 percent of Armenia’s gross domestic product, have also produced an inflow of foreign currency. The dram has room to strengthen further against the American currency, some economists say.

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