Armenia: Debt-Ridden Power Company Ranks as Top Donor to Presidential Fund

The Russia-operated Electricity Networks of Armenia, the country's main power supplier, claimed to be so cash-strapped that it had to raise rates, an announcement that sparked massive protests. But the company's revenue woes did not prevent executives from authorizing millions of dollars in donations to a charitable organization chaired by Armenian President Serzh Sargsyan.

Sit-in protests over the rate hike erupted in the Armenian capital Yerevan in June, and revived briefly on September 11 before being stopped by police. The initial demonstration, which spread nationwide, quickly moved beyond the issue of electricity prices to focus on suspicions that Armenian officials maintained cozy relationships with corporate cronies and misused taxpayer money. The protests dissipated only after the government offered to cover the increased power costs for consumers.

ENA, the power company, is operated by Russia's Kremlin-linked Inter RAO UES and has claimed it has accumulated debts of around 15.8 billion drams (nearly $33 million), dating back several years. The losses prompted its request to increase power prices to 48.78 drams (10 cents) per kilowatt hour. In addition, the company's purported fiscal fragility contributed to a decision by regulators in August not to impose a fine of 75 million drams (about $154,613) for allegedly failing to meet contract obligations to customers.

An investigation conducted by the Armenian news website Hetq.am shows that while ENA was claiming operating losses it was making substantial charitable donations. In 2014, it ranked as the largest donor (1.5 billion drams, or over $3.1 million) to the Luys Foundation, an organization established in 2008 by President Sargsyan and then-prime minister Tigran Sarkisian mainly to promote education. A slightly smaller amount was donated in 2013. Donor details for 2015 have not yet been made available.

ENA's donation to a fund overseen by the president raises fresh questions about financial ties between the company and the administration. Aside from President Sargsyan, presidential Chief of Staff Vigen Sarkisian also sits on the foundation's managing board. Reasons why senior officials prefer to act via a charitable foundation rather than utilize government agencies to undertake educational reforms have not been clearly explained.

In an interview with EurasiaNet.org, ENA spokesperson Natalya Sarjanian said the company's donations had nothing to do with President Sargsyan or ex-prime minister Sarkisian. Decisions, she said, were made by ENA's owner, Inter RAO UES, and reflected the utility company's interest in charitable giving.

"Although we operated with a loss in recent years, the decision was made not to stop funding the Luys Foundation," Sarjanian said. Whether such donations will continue this year depends on ENA's financial situation, she added. ENA announced in late August a tender for an audit of its books.

A representative of another powerful corporate player in Armenia, GeoProMining Gold Ltd., a Cyprus-registered, Russian-founded gold-mining company, told EurasiaNet.org that its own donations to Luys came after a specific request from top officials.

"We do not decide ourselves how much to provide to the Luys foundation," GeoProMining Gold spokesperson Ruzanna Grigorian said. "It comes from the top, from the very high level."

In 2014, according to the foundation's annual report, GeoProMining Gold gave Luys 208 million drams, or about $513,644.

Varuzhan Hoktanian, director of the Armenian branch of anti-corruption watchdog Transparency International, expressed concern about the risks of corrupt practices, "if it turns out that businessmen are forced to make donations" to Luys. Hoktanian called for an independent investigation.

Representatives of the Luys Foundation, whose name means "light" in English, did not respond to questions from EurasiaNet.org about its financial operations, or about Electricity Networks of Armenia's role as a donor.

A major program undertaken by Luys involves scholarships for study-abroad opportunities. The foundation reportedly provided over $2.9 million to more than 100 students to attend top universities around the world. Students who have received assistance from Luys could not be reached for comment.

Education is not the foundation's only sole interest. It also finances the Chess Federation of Armenia, which the president chairs, the Artsakh Freedom Fighters' Union (the president headed breakaway Nagorno-Karabakh's military forces from 1989-93), and the Armenian Philharmonic Orchestra. (First Lady Rita Sargsyan, a former music teacher, is a patron of the Orchestra's annual international music festival.)

Nearly 556.2 million drams, or over $1.15 million, of Luys' 2014 donations were spent on what is only characterized as "similar programs and social services."

ENA and GeoProMiningGold are not the only corporate donors to Luys. Mega-players from the country's moneymaking mining sector also feature prominently. And in 2013, Alex Grig, the country's largest food importer, reportedly gave 203 million drams ($502,973) to the foundation.