Armenia on the rocks as it loses its main agro sector Review by Caliber.Az

The systemic crisis of agriculture continues in Armenia. Problems with irrigation, rising prices for imported fuel, fertilisers and fodder have recently become even worse against the backdrop of falling purchase prices for local agricultural raw materials, loss of export markets, pest infestations, and the curtailment of subsidies for agricultural projects.

Speaking the other day at a meeting in the Ararat district (Develi), Armenian Prime Minister Nikol Pashinyan, in fact, publicly admitted the ineffectiveness of support for the local agricultural sector and the lack of prospects for the industry in its current form.

"Strategic solutions for effective organisation of the process of harvesting agricultural products are in demand. It is also necessary to move to more efficient agriculture with saving water resources, as the shortage of irrigation water is an objective problem. In general, the agrarian sector of the republic in its current form has no prospects for development," the premier said.

At the same time, Nikol Pashinyan did not disclose the recipe for "correct strategic decisions" that could bring the country's agricultural sector out of a prolonged slump. Nor did he mention the ways of solving the main problem of the sector - lack of irrigation water. According to experts, Armenia is among the countries with the highest level of technical water losses in the world. Here, out of 9 billion cubic metres of water collected on the surface, about 7 billion are lost due to massive deterioration of irrigation canals and loss of tightness of reservoirs that have not been repaired for decades, i.e. losses occur even before water is delivered to gardens and fields.

As Armenian Economy Minister Vahan Kerobyan recently noted in the Parliament, only about 10,000 hectares, or 2-3 per cent of cultivated land, are irrigated using modern methods. This figure, in fact, is nothing more than a mathematical error that has no impact on the overall picture of Armenia's agro-industrial sector, which has been experiencing a water crisis for many years.

The republic's budget simply does not have funds for a mass introduction of drip, aerosol, dispersed, beer and other economical irrigation systems, nor do the bankrupt farmers have them.

"In Armenia, there are subsidies for the installation of water-saving irrigation systems, but farmers have little interest in their implementation. They don't benefit so much financially from saving water, perhaps also because the government subsidizes a significant part of its production cost. Water should become more expensive so that farmers would be more motivated to save it," Kerobyan added.

That is, instead of material assistance to farmers, they want to deprive them of water subsidies. No comments here.

Not surprisingly, against this “joyful” background, the agricultural sector of the "Land of Stones" has been falling into a deep abyss since 2020. In 2022, the development of agriculture in Armenia ended with a decline of 0.7 per cent, and in the livestock segment, the decline amounted to 4.1 per cent, which led to a sharp decrease in milk production. Negative dynamics in the agrarian sphere were also recorded in the first half of 2023.

Overall, everything that is happening in the Armenian agro-industry today is a natural outcome of several decades of underfunding of the sector, as well as the plundering of subsidies and massive embezzlement of very scarce budget funds allocated for irrigation and other infrastructure projects. All this negativity was exacerbated by the loss of fertile land and other raw material base for Armenian food and processing enterprises in Karabakh and seven regions of Azerbaijan liberated from occupation.

After the victory in the 44-day war and the restoration of the territorial integrity of Azerbaijan, the predatory plundering of the agrarian resources of the republic was completely stopped. For the Armenian agricultural industry with its poor resource base, Azerbaijan's victory was the beginning of a protracted crisis from which the "country of stones" is unlikely to emerge soon.

All attempts by the Armenian government to pull the industry out of failure have been unsuccessful, and could not have been different due to increasing desertification, lack of access to cheap agricultural raw materials, and difficulties with logistics. But worst of all, the trend of losing export markets, first of all, the main one, the Russian one, has intensified in Armenia this year.

Thus, in April of 2023, Armenian enterprises lost the right to export dairy products to Russia because of manipulations with Iranian raw materials. And in May, under pressure from the French investor Pernod Ricard, which owns the flagship of the country's wine industry, the Yerevan Brandy Factory, the export of brandy to the main market for this product - the Russian Federation - was stopped.

Furthermore, in June, the same traditional Russian market began to lose Armenia's leading crop production sector - apricot production. The reason is the same low wholesale prices: in the country itself, the purchase prices for apricots in June collapsed to 300-250 drams ($0.77-0.64) and below, which deprives local farmers of any incentives for development.

This trend is related to difficulties with logistics, the situation in Ukraine, the collapse of the Russian ruble and, importantly, mass exports of high-quality and cheap apricot fruits from Uzbekistan, which have largely displaced Armenian products from the market.

"Uzbekistan has been working for 4-5 years on the selection of the apricot variety ‘shalakh’ [massively cultivated in Armenia], and this spring and summer Uzbek suppliers offered this product in Russia for 90 rubles, which is even less than 400 drams [$1,02]," agricultural expert and entrepreneur Harutyun Mnatsakanyan said recently.

The expert also noted that in order to sell apricots in Russia at the price offered by Uzbekistan, they should be purchased from farmers in Armenia for no more than 200 drams/kg ($1 - 386.19 drams). In turn, according to Mnatsakanyan, in the current season, the prices for transportation of fruit from Armenia have catastrophically increased: from $7,000 to $11,000 for one truck, while in normal times the cost of transportation is from $2,500 to $2,800. This circumstance has had an extremely negative impact on the cost of Armenian apricots, and in parallel the costs of packing, sorting, and other agricultural operations have increased.

Dissatisfied with the purchase prices of apricots, farmers blocked the Yerevan-Artashat (Gemerli) highway in mid-June in protest, and similar actions were held in other regions of Armenia. Of course, as always, the protesting farmers did not achieve any sensible results. The troubles of the ruined villagers were aggravated by frost and hail this spring, which destroyed about a third of the harvest of the main fruit of the "apricot" republic. In order to understand the scale of losses of Armenian producers, it should be recalled that apricots traditionally account for slightly less than half of the total export of fruit crops.

Things are equally doomed in the country’s viticulture and winemaking sectors, which are of no less importance for the "country of stones." For the third year in a row, there is a crisis of non-payment, when many wineries and cognac factories refuse to accept products from farmers, citing a lack of space in warehouses and unsold wine products of the previous harvest. Because of low purchase prices, disgruntled grape farmers block highways every fall, stage marches to the capital and protest outside the government building.

"Contracts for the purchase of grapes are concluded before July 1, and the Economy Ministry is trying to find a way out of the situation so that the farmers' crop is fully purchased. But the situation with the purchase of grapes in the 2023 season is not encouraging," Economy Minister Vahan Kerobyan told the Armenian National Assembly (parliament) not long ago, according to whom wineries were buying grapes from farmers at an extremely low price because of the decreasing demand in Russia for Armenian table grapes and alcohol.

In addition to all the hardships of Armenian farmers this spring-summer, a mass invasion of grasshoppers (polysarcus zacharovi), a pest of agricultural crops, caused the greatest damage to the land. In mid-July, the government urgently allocated 13 million drams ($33, 289) for pollination of fields with toxic chemicals using helicopters. Nothing is yet known about the effectiveness of these measures. However, a little earlier, uncontrolled use of pesticides resulted in the death of 70 per cent of bee families in the Ararat Valley and in the vicinity of Ashtarak city, where pesticides were sprayed over apiaries in fields and gardens without warning. 

In general, this would be funny if it was not so sad. The unprofessionalism of the officials of the Armenian Agriculture Ministry, colossal corruption and low efficiency of all the measures taken so far have not surprised anyone in the neighbouring country, which is at risk of losing the foundations of its food security, not to mention the loss of traditional export markets.