US embassy cable - 05YEREVAN329

UNCLAS SECTION 01 OF 02 YEREVAN 000329 
 
SIPDIS 
 
COMMERCE FOR 3150/PBRADLEY/BSMITH 
COMMERCE FOR 4201/ITA/IEP/OEERIS/BISNIS/EHOUSE 
EMBASSIES - PLEASE PASS FCS 
DEPT FOR EUR/CACEN, EB/CBA 
ANKARA ALSO FOR CFC/ SNYDER/BALLINGER 
PASS TDA-STEIN, OPIC, EXIM-TUMMINIA/PANARO 
 
E.O. 12958: N/A 
TAGS: KTDB, BBSR, BEXP, BTIO, AM 
SUBJECT: (IMI) ARMENIA, COMMERCIAL NEWS SUMMARY: 
FEBRUARY, 2005 
 
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SUMMARY 
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1.  This cable summarizes press reporting on commercial 
developments in Armenia for February 2005.  Major 
headlines include: 
 
-- Austrian bank to finance Armenian metals company; 
 
-- Armenia to start negotiations on new IMF program; 
 
-- Central Bank of Armenia licenses new foreign bank; 
 
-- Japanese firm to launch emissions trading business 
in Armenia; 
 
-- World Bank to provide USD 55 million to Armenia in 
2005; and 
 
-- Armenia January economic highlights. 
 
End Summary. 
 
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AUSTRIAN BANK TO FINANCE ARMENIAN METALS COMPANY 
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2.  Austrian bank Raiffeisen will provide USD 1.5 
million in credit to the Armenian Copper Program (ACP) 
closed joint-stock company, a copper mine and 
processing plant.  This will be part of a USD 4.5 
million credit program managed by the European Bank for 
Reconstruction and Development (EBRD). 
 
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ARMENIA TO START NEGOTIATIONS ON NEW IMF PROGRAM 
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3.  In March 2005 the International Monetary Fund will 
start talks with Armenian authorities on the terms of a 
new multimillion-dollar loan program to support 
Armenia's macroeconomic stability.  According to the 
IMF Resident Representative, it will be another three- 
year program with two reviews and tranches each year. 
The new program will focus on reforms of the tax and 
customs services and the financial sector. 
 
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CENTRAL BANK OF ARMENIA LICENSES FOREIGN NEW BANK 
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4.  Armenia's Central Bank Board approved licensing of 
a newly established partially foreign-owned bank, BNF. 
Its shareholders include both local and foreign 
investors:  one of the key shareholders is a Canadian 
entrepreneur.  The bank's initial capitalization will 
be USD 5 million.  Currently 20 banks are operating in 
Armenia. 
 
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EMISSIONS TRADING BUSINESS STARTS IN ARMENIA 
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5.  Japanese corporations Shimizu Corporation, Mitsui & 
Co. and Hokkaido Electric Power Co. plan to start a 
greenhouse gas emission rights trading business in 
Armenia.  The project is awaiting approval as a clean- 
development-mechanism (CDM) business under the terms of 
Kyoto Protocol, which will give it emission rights 
elsewhere in exchange for reducing emissions in 
Armenia.  According to the plan Shimizu will build a 
power generation plant to produce electricity from 
methane gas from a waste disposal site.  The facility 
would eliminate 135,000 tons of carbon dioxide each 
year, which the Japanese corporations could use to 
offset emissions elsewhere or sell to other companies 
for the same purpose.  The company intends to invest 
some USD 8 million in this project. 
 
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WORLD BANK TO LOAN USD 55 MILLION TO ARMENIA IN 2005 
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6.  According to the World Bank's Yerevan Office, the 
Bank will provide three loans in 2005 for the 
implementation of economic reforms in Armenia.  Under 
this program the World Bank will direct USD 20 million 
to the improvement of the water supply system in 
Yerevan.  Another USD 20 million will support the 
development of the agricultural sector, including SMEs 
involved in agribusiness.  The final USD 15 million 
help establish a new heat supply system in Yerevan and 
other cities throughout the country.  The World Bank's 
Armenia portfolio includes 17 credit programs, of which 
six programs were approved last year. 
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ARMENIA JANUARY ECONOMIC HIGHLIGHTS 
----------------------------------- 
 
7.  According to the Armenian National Statistical 
Service, Armenia's real GDP in January 2005 grew by 3.6 
percent compared to January 2004.  Compared to the same 
period in 2004, Armenia's foreign trade in January 2005 
increased by 32 percent to USD 160.7 million.  The 
inflation rate during January 2005 was 4.9 percent, 
higher than the 3 percent target for the entire year. 
Inflation in Armenia is cyclical, and January is 
typically the most inflationary month. 
GODFREY