Latvia should strengthen old-age safety nets and raise the basic state pension in order to reduce pensioner poverty, especially among women, and address the challenge of a fast declining population, according to a new OECD report.
The OECD Review of the Pension System in Latvia highlights the challenges facing the pension system. Latvia’s working-age population (people aged between 20 and 64 years) is expected to fall by about 20% over the next two decades, due to low fertility rates, increasing life expectancy and high emigration. The pension system is designed to automatically adapt to demographic trends. While this will secure the system’s financial stability over time, it will also reduce pension benefits.
Already today, Latvia’s old-age poverty rate is the second-highest in the OECD, after Korea: more than 25% of people aged 65 and older have an income below the relative poverty line. Older women are especially vulnerable: more than one-third of females over 75 live in poverty and the notional defined contribution (NDC) scheme does not offer survivor benefits for spouses.
At 64 euros per month in 2017, the basic pension represents 8% of gross average earnings against the OECD average of 19% and has not increased in nominal terms for more than 10 years. There is substantial room to increase the level of old-age safety nets, according to the report. In order to avoid a negative impact on work incentives, the minimum pension should be set so that each year of contribution increases the benefit.
The normal retirement age is 63 years and 3 months for both men and women and will reach 65 in 2025. As benefit levels decline when life expectancy increases, linking the future retirement age to life expectancy gains will help prevent too many people retiring with too low entitlements.
The Latvian NDC scheme meets its objective of delivering pension benefits that depend on contributions made during the working life in a financially sustainable way. However, the current practice of transferring funded defined contribution (FDC) assets to the NDC scheme to compute regular pension payments, the so-called annuities, should be eliminated as the two schemes are based on different rules and principles.
The design of the mandatory and voluntary funded pension schemes should be improved. Introducing a default investment strategy so that the amount of risky assets invested falls as people get closer to retirement would help.
Administrative fees charged by private financial service providers for the management of the FDC scheme are high in international comparison. In part, this may reflect the relatively recent introduction of the system, but it is mostly due to a lack of competition between pension providers. Recent reforms introduced in early 2018 to rein in costs go in the right direction but require strong monitoring to be effective.
Armenia’s position blurred the progress for the Nagorno-Karabakh conflict and leads to an escalation
The conflict between two South Caucasus countries – Armenia and Azerbaijan over the Nagorno-Karabakh became as one of the bloodiest and long-lasting conflicts contributing to instability in the region. After a ceasefire agreement signed in 1994 halting the armed skirmishes in the Nagorno-Karabakh conflict zone, Armenia and Azerbaijan pursued, albeit a fragile, diplomatic negotiations to reach a peaceful end to this bloody conflict.
However, peace talks between Armenia and Azerbaijan mediated by the OSCE Minsk Group co-chairing countries (namely the US, France and Russia) have been lasting for decades without any tangible results to achieve total peace. The current status-quo in the conflict zone was mainly favored by Armenian leadership until today in order to continue illegal activities in the occupied territories and seek for legitimacy for its occupation policy. However, four-day April 2016 fights demonstrated once again that status quo in the Nagorno-Karabakh conflict zone is very indeed dangerous.
All these developments clearly show that the status quo in the conflict zone should be changed as soon as possible, because such situation cannot be kept “frozen” any more. Any tangible result on the conflict resolution requires, first of all, Armenia to take finally result-oriented actions in order to achieve peace and prosperity in the region.
Following the government change in Armenia in 2018 with the fall of the government of Serzh Sargsyan composed of so-called “Karabakh clan” and take-over of ruling by Nikol Pashinyan (as a new Prime Minister) through mass protests against corruption and cronyism in Armenia, there was hope that the new government in Yerevan would change the situation and choose peace instead of sticking to the previous government’s policy of occupation.
The first high-level meeting (since the velvet revolution in Armenia) between Azerbaijan and Armenian foreign ministers took place on 11 July 2018 in Brussels with the mediation of the OSCE Minsk Group Co-Chairs. Actually, in the first meeting the Ministers discussed the certain parameters for re-engaging in substantive negotiations and vowed to take confidence-building measures. These meetings were conducted regularly until and after the first official meeting of head of states of Azerbaijan and Armenia in Vienna in 2019.
The first official meeting between Azerbaijan’s President Ilham Aliyev and Armenia’s Prime Minister Nikol Pashinyan was held on 29 March 2019 in Vienna. In an interview to the Russian TASS news agency President Ilham Aliyev noted “we have discussed the issues related to strengthening trust measures during contacts between people and the negotiating process should be supported by humanitarian measures”. President Aliyev also emphasized that “it is of huge importance that the format of talks remained unchanged and only Armenia and Azerbaijan discuss their problems as it was many years before”.
Prime Minister Pashinyan also regarded “the meeting as positive”, but he ruled out “that there has been a breakthrough in the negotiation process, or an evolution”.
Unfortunately, despite all aforementioned talks and positive thoughts, Pashinyan changed his position and started to support the previous Armenian policies on the conflict. Later, he even said that he will not engage in any discussions of “land for peace”. Pashinyan also demands that the format of negotiations should be expanded from the current bilateral format to include officials from the separatist regime (so-called “Nagorno-Karabakh Republic”) established in the occupied territories of Azerbaijan. It is very obvious that Pashinyan’s that proposal aims to maneuver in the negotiations or to preserve the status-quo in the conflict zone. Whereas, it seems unacceptable for Azerbaijan when Azerbaijani population of Nagorno-Karabakh region, which were forced to leave their homes and became refugees, are not considered in this regard.
The process clearly illustrates that new Armenian government is not ready for compromise to reach a peace with Azerbaijan. Instead of constructive engagement, they opted for sticking to hate speech. For instance, during the UEFA Europa League Final in Baku (29 May 2019) Arsenal’s player Henrikh Mkhitaryan (of Armenian origin) refused to visit Baku despite all high security guarantee promised by Azerbaijani government. His choice was regarded as being part of a “dirty” political game instead of playing football. Nikol Pashinyan even hailed his position in his twitter feed. Whereas, until now, many Armenian athletes participated at the Baku 2015 European Games, and many others at the international events hosted by Azerbaijan, and there were no threats and incidents for them.
In general, sportsmen may have a very positive role in conflict and hate situations. For instance, according to researchers from Stanford University, Liverpool’s Egyptian football striker Mo Salah effect is having an impact beyond the stadium walls, who found a drop in hate crimes around Liverpool since Salah signed with the club in June 2017. Mo Salah often celebrates goals by dropping to his knees and touching his forehead to the grass in the sujood (an Islamic prayer position), while Liverpool fans have a chant that goes: “If he scores another few, then I’ll be Muslim, too”. Henrikh Mkhitaryan with arrival to Baku could also use this opportunity to convey a peace message to other Armenians.
The short-term environment of peace was deteriorated by another provocation by Armenia against Azerbaijan. On 30 May 2019, during the OSCE Minsk Group co-chairs’ visit to Azerbaijan, Azerbaijani officer was killed by an Armenian sniper shot. On 9 June 2019 another Azerbaijani soldier was killed by the Armenian side, and Armenian Defense Minister awarded that who executed the Azerbaijani servicemen. These military incidents were followed by proportional casualties in Armenians’ side as well. Moreover, on June 12, 2019, Azerbaijan’s trainer plane has been detected and targeted by Armenian anti-aircraft missile system at the frontline (on Fizuli direction), but no incident was registered.
All aforementioned facts confirm that Armenian new government sticks to old mechanism, and all attempts to change the format of negotiations to present de-facto Nagorno-Karabakh as an independent party are just a maneuver to maintain the status-quo in the conflict. It is necessary to consider that, the conflict hitherto causes violence and human suffering for both nations, and without tangible results, further civil and military causalities will be from both sides. Both Armenian and Azerbaijan people suffered enough from this bloody conflict, and it is very time to achieve a peace in the region. As the Armenian journalist, social activist Susan Jaghinyan emphasized – “Sargsyan and Kocharyan destroy[ed] the people, if they continue[d] their rule, the Armenian people [would] not exist in the future”. After Velvet Revolution, Armenian people managed to change a regime, and now Armenian new government has all chances to prepare its population for peace and benefit from the regional economic cooperation. As soon as the Nagorno-Karabakh conflict resolves, the Armenian people will be able to benefit from the opportunities of the current regional economic cooperation of Azerbaijan with other partners.
Armenia-Iran: Good neighbourly relations absolute necessity
Some experts believe that Iran’s cooperation with Armenia could become costly for the latter owing to the ever increasing hostility demonstrated by US President Donald Trump towards the Islamic Republic of Iran. They predict that American sanctions and extensive pressure on Iran could throw Armenia into a kind of blockade.
What comes to mind in connection with this is the words that are thought to have been said by Napoleon Bonaparte: geography is destiny. Even though it could not always be the case but it definitely is with the Caucasus. There are few if any regions whose military, strategic and economic significance would combine with unprecedented ethno-religious diversity on a fairly small territory with historically conditioned disputable issues. This naturally creates all the conditions for an atmosphere of permanent tension which over the last two centuries has repeatedly exploded in armed conflicts and wars.
In the 21st century, the situation in the Caucasus is formed by a most sophisticated political gamut of bilateral and multilateral relations among three former Soviet republics of Transcaucasus – Azerbaijan, Armenia and Georgia, and also, not in the last place, by the Caucasian states of Russia, Turkey and Iran. Besides, one should not forget about the military and political influence of non-regional countries, first of all, the United States, the European Union and Israel.
Undoubtedly, today we are witnessing the influence of multiple forces in different areas of Caucasian politics, and these forces are dragging Caucasian states into various alliances. Moreover, the regional policy of each of the South Caucasian states is determined by a variety of factors that spring from the specifics of bilateral and multilateral relations.
But we will not analyze the whole spectrum of complicated and entangled relations between groups of countries and within groups proper. We will focus on relations beween Iran and Armenia.
What is the role of Armenia, taking into account the US anti-Iran sanctions?
Iran is the largest multi-ethnic state in the Middle East. Present day Iran is home to more than 40 nationalities, each at a different level of socio-economic development. The multi-million population of Iran is ethnically related to the peoples of the Transcaucasus and Central Asia, the Middle East, and South Asia.
For centuries, Iran has been maintaining close economic and cultural ties with the peoples of the Transcaucasus. But its relations with Armenia stand out as somewhat specific.
Significantly, the first state formations of Armenia and Iran appeared in the VII – VI centuries BC, that is, nearly 3 thousand years ago. Since then their territories and regimes have undergone numerous changes, but Armenians and Persians, as state-forming ethnic groups, have passed through the centuries unchanged.
An idea which is deeply rooted in both the Iranian and Armenian consciousness is that Persians and Armenians boast ancient culture that cannot be thrown into oblivion. This explains cultural ties between the two nations and a comprehensive respect for the specifics of each other’s national and religious mentality.
At present, Iran is home to more than 200 thousand Armenians. Iranian Armenians enjoy substantial rights. Under the Constitution of Iran, they have guaranteed representation in parliament and local councils. Not so long ago, Russian Orientalist Karine Gevorkian reported that in 2018, a young Armenian woman was appointed head of the financial department of the Iranian oil company.
The Armenian Christian community is the largest of its kind in Iran. Functioning throughout the country are about 200 Armenian churches and about 30 Armenian schools. Some universities have departments of the Armenian language and culture. Iran publishes books and magazines in Armenian. Also, there are Armenian theatrical, cultural, and sports societies, and the Armenian Club.
It should be pointed out that Iranian Armenians are taking an active part in the social and political life of the country.
Naturally, Iranian Armenians maintain permanent ties with the Republic of Armenia, which undoubtedly cements Iranian-Armenian relations at the state level.
Although Iran and Armenia are not comparable in their scope and position, as history and current geopolitics show, they need each other.
Iran is interested to maintain ties with Armenia, in the first place, because, as it was already mentioned above, the country is home to an influential Armenian community. Secondly, given that the Armenian diaspora exists in many countries of the world, it could become a kind of bridge connecting Tehran with the capitals of other, not always friendly, states where an Armenian community is also active. Also, it is through authoritative Armenian lobbies that Iran could secure favorable political and economic solutions. Thirdly, the territory of Armenia, as a neighboring country, is important for Iran as a corridor to the North (through Georgia) and further to Russia, which is clearly beneficial for Iran considering the current geopolitical situation.
Armenia, in turn, is also interested in friendly relations with neighboring Iran, not only on account of links between the Armenian diaspora and the Islamic Republic of Iran. Iran assumed a fairly balanced position regarding the Nagorno-Karabakh conflict between Armenia and Azerbaijan, by refraining from backing fellow believers from a neighboring country and complying with the Minsk format, the decisions of the Minsk Group (OSCE).
Moreover, the continuing trade and economic ties between Armenia and Iran have become, to a certain extent, a lifeline for Yerevan. Blocked by Turkey and Azerbaijan from two sides, Armenia has only two windows to the outside world: via the borders with Georgia and Iran. Therefore, for Armenia Iran is of vital importance. The Armenian-Iranian border, running through the Araks River, is the shortest for two countries – a mere 35 km. Nevertheless, this border is of great importance, both for Armenia and for Iran, being used for developing trade and economic relations between the two countries and promoting touristm. Statistical data say Iranians (and not only Armenian) enjoy visiting Armenia.
In recent years, Armenia and Iran have seen a successful implementation of various economic programs. One of the first projects was a bridge erected across the Araks River. Also, two high-voltage power transmission lines have been built, a third one is currently under construction.
One of the key areas of economic cooperation between Armenia and Iran is provided by an interim agreement signed in May 2018 between Iran and the Eurasian Economic Union (EAEU) on the creation of a free trade zone. Thus, there have appeared opportunities for merging the 180-million market of the EEU with the 80-million Iranian market. Since Armenia is the only EAEU country that has a land border with Iran, it plays a crucial role in cooperation between the EAEU and Iran, which provides it with an opportunity to develop its relations with Iran.
Undoubtedly, Armenia and Iran’s shared interest in bilateral cooperation envisages good prospects for the future. However, it is not that simple, as there have arrived new times, both for Yerevan, and Tehran.
In 2018 Armenia saw a change of government, as a result of which Nikola Pashinyan was elected Prime Minister. There have been changes in domestic policy. As for foreign policy, at least in relation to Iran, there have been no particular changes and, in all likelihood, there will not be any. Given the present-day conditions, good-neighborly relations between Yerevan and Tehran are not a luxury, but an urgent need.
In this regard, Nikola Pashinyan’s official visit to Iran in February 2019 is of special significance. During the visit the two parties held high-level talks with the participation of Iran’s Supreme Leader Ayatollah Khomeini, who rarely receives foreign guests. The negotiations were held in a fairly warm atmosphere, with both sides underscoring the importance of bilateral relations and expressing readiness to exert efforts to develop them.
In the course of above-mentioned talks, representatives of Armenia and Iran signaled the high level of political cooperation, emphasizing yet again that the current level of economic cooperation does not match the full potential of the parties involved. Although by the end of 2018, trade turnover between Armenia and Iran had reached $ 364 million, which is the highest figure since 1991.
Among major projects of the Armenian-Iranian bilateral economic cooperation program is the construction of the third power line, the implementation of the Meghri hydropower project, the North-South highway corridor, trilateral and quadrilateral economic cooperation with Georgia and Russia.
What makes the visit to Iran by Armenia’s Prime Minister Pashinyan special is that Iran is under the US sanctions. In 2018, a transitional year for Armenia, the United States subjected Iran to unprecedented pressure. In addition, the US “secondary sanctions” were imposed against all countries, legal entities and physical persons of foreign countries which dare to maintain relations with Iran. This meant a challenge for Armenia, in many ways economically connected with Iran.
In October 2018, US National Security Advisor John Bolton visited Armenia, Azerbaijan and Georgia to secure support for US plans to further isolate Iran. Reports say Washington is lobbying for the closure of the Armenian border with Iran through opening the border with Turkey.
While in Yerevan, Bolton told Prime Minister Pashinyan that since the United States will pursue the policy of sanctions against Iran, the Armenian-Iranian border is a “big problem.” Pashinyan responded by saying the following: “We respect the requests and national interests of any country, but Armenia has its own national interests, which do not always coincide with the interests and ideas of other countries.” But as they say, there could be options.
It is necessary to emphasize that Washington, despite its hostile policy towards the IRI, has always had to tolerate cooperation between Armenia and Iran. Such tolerance is due to the US awareness of the geo-economic situation of Armenia, which, without extensive ties with Iran, will face social and economic problems. In addition, as said before, the Armenian lobby has a lot of sway in Washington, especially in the US Congress, which does not give much say to Iran’s opponents with regard to Armenia. That this is true is confirmed by the absence of any US sanctions against Armenia. That’s why John Bolton all but voiced proposals, and not warnings or threats. Suren Sargsyan, Chairman of the Armenian Center for American Studies, said recently, “Washington is fully aware of the situation and the realities that exist in the region. This means that the United States will never pressure Armenia into rejecting Iran or Russia. And this is good, because Washington knows that we will not survive without Iran and Russia … “
As is known, besides the United States Iran has another “big friend” – Israel. Apparently, the strengthening of Armenian-Iranian relations is not welcome in Jerusalem, and Yerevan is aware of this. The Armenian diplomacy has taken sophisticated measures to neutralize the negative Israeli reaction. Right after Prime Minister Pashinyan’s visit to Iran, Armenian Deputy Foreign Minister Grigor Hovhannisyan paid a visit to Israel, where he discussed opening an embassy in Israel “in order to bring bilateral relations to a new high”. The Armenian delegation also focused on organizational issues related to the upcoming visit to Israel by Armenian Prime Minister Nikola Pashinyan and Armenian Foreign Minister Zohrab Mnatsakanyan.
In all likelihood, the main point of Prime Minister Pashinyan’s foreign policy agenda and the main goal of his government is tolerance and absence of problems in relations with foreign countries: with Moscow, with Tehran, th Washington, with Brussels, with Jerusalem.
Thus, it is possible to conclude that the change of government in Armenia and large-scale US sanctions against Iran and its partners did not affect the stable nature of Armenian-Iranian relations. In these conditions, the Armenian-Iranian border is unlikely to ever be closed – a complete blockade of Armenia is highly impossible. Moreover, the small Armenia, pursuing a multi-vector foreign policy, has become an important factor in ensuring security in the South Caucasus.
From our partner International Affairs
China Set to Increase its Influence in Georgia
China-Georgia relations since the break-up of the Soviet Union in 1991 have been positive in both the economic and overall political sense. However, they are often overestimated by analysts in Georgia and elsewhere. Bilateral trade growth as well as a gradual increase in Chinese investments in Georgia have oft been hailed as exceptional and a marked sign of increased Chinese influence over Tbilisi.
True, economic growth has been taking place, but this has been but a small portion of the real potential. In fact, despite analysts’ positive views, Georgia and the South Caucasus transit corridor has yet to feature in official versions of the Chinese Belt & Road Initiative (BRI). Overall, China has been cautious. Russia’s factor too might have been at play when Beijing only minimally involved itself in the economy of Georgia. But the biggest obstacle has been geographic barriers such as the Caspian Sea, the Caucasus range, difficult Georgian terrain as well as the Black Sea.
Still, in a number of articles for GT, I have suggested that the Belt & Road Initiative (BRI) is not static in nature and, like any other trade routes in ancient or medieval periods, it does respond to rising challenges and opportunities. Another suggestion was that Georgia, if it improves its railroads, roads and ports infrastructure inside the country, will become more attractive to China and its BRI.
Indeed, there are signs proving this scenario. On 24 May, the Chinese Foreign Minister Wang Yi visited Georgia. This is crucial as it is the first official visit of a Chinese foreign minister to Georgia in 23 years. According to the Georgian Ministry of Foreign Affairs, the focus of the minister’s visit was to understand more about Georgia’s future and its potential as an important transit state.
The visit to Georgia came as a part of the Chinese delegation’s regional trip. China and Armenia on Sunday signed an agreement for mutual visa exemption for ordinary passport holders.
The Georgian Ministry of Foreign Affairs said that the visit to Georgia confirmed the “clear vision” of China regarding Georgia and its role in China’s plans for large-scale projects. Here, most likely BRI was meant, a clear emphasis on Georgia’s potential as a transit state. “Trade, investments, transport, as well as partnership within the frames of international organizations, were set as the major priorities for future cooperation,” states the Georgian Foreign Ministry.
The Chinese Foreign Minister said that “China is implementing a foreign policy which is based on the principles of peaceful coexistence. We are ready to develop friendly relations between our countries further. We have a firm position that all countries are equal, regardless of their size. We respect the independence, sovereignty and territorial integrity of Georgia and other countries.”
China’s interests in Georgia are also intricately linked to the latter’s territorial problems with Russia. For Tbilisi, it is important that China supports it on the issue of Abkhazia and Tskhinvali. Indeed, the issue of the Georgian occupied territories was also raised during the meetings and Georgian officials mentioned the “high importance” of Chinese support for Georgia’s sovereignty and territorial integrity.
The Chinese delegation’s visit follows the Georgian Minister of Infrastructure and Regional Development, Maya Tskitishvili’s, trip to Beijing, where she attended the second Belt and Road Forum for International Cooperation. More importantly, she signed an agreement on cargo and passenger transportation with Chinese Minister of Transport Li Xiaopeng.
Overall, the Chinese Foreign Affairs Minister’s visit to Tbilisi has been important, but attention in the Georgian media was only paid to official statements; no analysis has yet been made. However, what is crucial is the timing of the visit, as China and the US are locked in a geopolitical battle over influence in the Indo-Pacific world. Since Georgia is close to the US in terms of military and political cooperation, it will be interesting to see how far China-Georgia cooperation will go. One thing is likely to happen: Beijing will try to increase its influence in Georgia through economic and various political moves.
Author’s note: first published in Georgia Times
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