YEREVAN (Reuters)–The closure of trade routes due to the Nagorno-Karabakh conflict continues to hurt the revival of its once thriving heavy industries–the country’s industry minister said on Tuesday.
The Caucasus country of 3.8 million was a center of relatively-high-technology and machine-building industries when it was still part of the Soviet Union.
Eleven years of strife over Karabakh have shut off rail and road routes through Azerbaijan. Turkey–backing Azerbaijan diplomatically–also closed its frontier–forcing Armenia to rely on costly routes via Georgia or air cargo.
"This really is a barrier," minister Haik Gevorkian told Reuters in an interview. "It deprives us of contracts–because what we produce will be two or three times more expensive," he said.
He said closed borders made non-heavy industry sectors more important in the current environment. "If the ‘blockade’ ends tomorrow–then the priority sectors will change tomorrow."
Gevorkian said internal factors were also responsible for continuing industrial depression–not just closed export routes. "I wouldn’t want to over-exaggerate this factor."
Restructuring and greater specialization were necessities–he added.
Armenia’s gross domestic product grew by 7.2 percent in 1998 but industrial output slumped 2.5 percent–meaning the economy is being pushed along by growth in trade and services.
Some of the once-thriving enormous industrial complexes ringing the capital Yerevan are now crumbling and lifeless.
Gevorkian said some industrial sectors which produced now-obsolete Soviet-era components might never recover.
Yet he held out hope some heavy industry–especially machine-building–could be viable–especially in producing spare parts for equipment still in use across the former Soviet Union.
Gevorkian said bright spots have come in traditional Armenian crafts which do not require big export shipping costs.
One–he said–was the cutting and refining of precious stones like diamonds–which now employs 2,000 to 2,500 people.
Gold refining–mostly from re-processing discarded Soviet-era gold tailings–is also a positive spot. Canada’s First Dynasty Mines is in the first phase of a $200 million joint venture to develop mines and refine the tailings.
Gold bars are easily shipped by air.
Gevorkian said foreign investors were also interested in Armenia’s copper and molybdenum deposits and refining facilities–but the Soviet-era practice of locating the refineries far from mines made the sector less competitive.