EVN Report Takes on the Washington Accords at MIT

Speaking at the event, MIT Associate Professor of Nuclear Science and Engineering Areg Danagoulian said that Armenia’s electricity generation is split into three parts, nuclear, hydro and gas. On the one hand, one-third of its electricity comes from Russian natural gas, also used for heating, so that about half the energy in Armenia comes from Russia. However, though Armenia imports its nuclear fuel from Russia too, its nuclear power plant only has to be refueled every two years, which, Danagoulian said, gives Armenia quite a bit of flexibility and independence.

Given the size of Armenia’s gross domestic product (GDP), Danagoulian said that it has a remarkably small amount of energy consumption because it does not have heavy industries such as textile production, car manufacturing, or smelting. Armenia has a lot of tourism and agriculture, and its growing IT sector so far has been energy-light (though this will change with the expansion of AI operations).

The Metsamor plant is a pressurized water reactor, with about half a billion dollars’ worth of safety and security upgrades, so while not the safest in terms of what is internationally acceptable, Danagoulian said it cannot be compared with the Chernobyl plant, which was a graphite moderated reactor with an antiquated design, built cheaply and sacrificing safety features. Nevertheless, as Metsamor ages, it will eventually start having breakdowns that increase the cost of operations and so will have to be decommissioned. The problem, Danagoulian said, is what to replace it with.

At present, overall electricity generation in Armenia averages about 900 megawatts, including the output of Metsamor, while traditional nuclear power plants produce somewhere between 1,000 and 1,400 megawatts. This is a problem. Technically, Danagoulian said, you cannot put a plant in Armenia which produces over 1,000 megawatts because that source would have to run at half-capacity, and that would be very inefficient.

One possible alternative, he said, would be a small modular reactor (SMR). In an attempt to get economies of scale, after the 1960s, global efforts focused on building larger nuclear power plants, but it became evident that the increased complexity of such plants actually also increased costs. Now there are a number of efforts throughout the world to build SMRs but none have yet been built or tested anywhere.

Another problem is determining what Armenia will require down the road. Metsamor produces 600 megawatts, but Armenia’s energy consumption has risen 20 percent in the last ten years, and if AI expands there, it will need a great deal more energy. Danagoulian explained that it takes five years to prepare to build a reactor, and five years to build, but this reactor could be around for 80 years before the decommissioning process. In other words, this is almost a century of commitment and it is difficult to estimate what will be needed in 20 years or so.

Another more general problem Armenia faces, Danagoulian said, is the lack of a Ministry of Energy. It used to have such a ministry which became lumped into the Ministry of Territorial Administration, but there is not even a deputy minister for energy yet. He stressed that an entire government agency is needed focusing on nuclear power. Furthermore, it needs to develop a new generation of reactor operators and nuclear engineers.

He said that as part of the MOU Armenia signed with the US, there was the understanding that Armenia would become a signatory of the so-called 123 Agreement (referring to Section 123 of the US Atomic Energy Act) and accede to certain conditions in order to acquire US civilian nuclear technologies. Danagoulian said that accepting these constraints is necessary.

The big risk that remains, he said, is that if Armenia does install a small reactor, there will be many unknowns as it will be a first of a kind.

High Tech and the MOU

Raffi Kassarjian, a board member of EVN Report, is the CEO and principal advisor at Sensyan, a boutique advisory firm focused on the growing Armenian tech sector. Titizian called him “our tech guru, our tech entrepreneur.”

He spoke about the tech industry in Armenia and the new MOU. He said that this industry contributes about nine percent now to the Armenian GDP, having grown considerably over the last few years.

He called attention to the focus in the MOU on cooperation on artificial intelligence and semiconductors, and in particular to a line in it saying that the US and Armenia will work together to facilitate or streamline export controls for the supply chain of semiconductors and AI.

He said that the US divides countries into four categories when it comes to sharing of technology — A, B, D and E. Category A countries are NATO allies with access to the most sophisticated US technology and Category B includes non-NATO friendly states with a little bit less access. Category D countries are viewed to have some level of security risk so they need to go through special processes to get access to sensitive commercial technology or military technology. Armenia falls into Category D, so in addition to not getting access to military technology, companies like AMD, Nvidia, Synopsys and Microchip Technology, all semiconductor companies that have significant research and development operations now in Armenia, face significant challenges to enable Armenian engineers to work on certain things.

They need to constantly ask for waivers of export controls and go through all kinds of hoops, he said, to separate operating infrastructures. If what is in the MOU is worked out, the aforementioned companies will be able to do more advanced work in Armenia. Kassarjian said that this will result in Armenia becoming a more important part of the global supply chain for semiconductors and artificial intelligence, and more squarely on the US  side of the competition between the West and China in artificial intelligence.

Kassarjian said that this is not only a question of more investment going into Armenia but more importantly, a form of soft deterrence against violence, as “the more we work on things that matter, the more likely it is that if something were to happen, the West would collectively — and particularly the United States — might take a different stance than it otherwise might.”

As one step in this direction, Kassarjian mentioned Firebird, an AI cloud company, and the Armenian government, with support from Nvidia, to build and operate an AI data center in Armenia in a $500 million project. What is particularly important, he stressed, is that Nvidia will provide its new Blackwell H200 CPUs, which are in short supply throughout the world, once the US government approves the release of these chips. Armenia will have a competitive advantage in being one of the first to market, and especially the first to market in the region, and so will get customers abroad and, as Kassarjian said, a very healthy business.

The number-one challenge Armenia faces in this situation, Kassarjian said, is not enough qualified candidates coming out of universities to fill the jobs being created in the tech expansion, which is affected by both the level of the Armenian educational system as well as the ability to get enough people to choose STEM fields as opposed to other areas. The private sector he said, has tried to step in with programs to help.

Furthermore, he said Armenia is no longer just an outsourcing country but has had a serious startup ecosystem for some 10-12 years now. He said, “What is missing now is the ability to scale and the ability to produce leaders that have the vision and the ability to be able to not just grow their own teams but grow an entire ecosystem.”

International Comparative Perspective

Anna Ohanyan, the Richard B. Finnegan Distinguished Professor of Political Science and International Relations at Stonehill College in Easton, was asked by Titizian to compare Armenia’s approach and situation to other small states.

Ohanyan started by giving her key conclusion on the Washington Accords: “So the agreement provides very specific tools for transforming the South Caucasus from a post-soviet battleground to a Eurasian gateway.” It could help turn Armenia’s century-old rivalry with Azerbaijan to a cold peace and create pressures for change inside Azerbaijan.

She said that the specific language in the accords on norms against conquest and for territorial integrity are important for pacification, with the US involvement helping take territory off the table for all the states. Secondly, she said that the accords should be viewed as part of a broader shift in Eurasian continentalism, meaning that what happened is very much about US-China rivalry. The accords are about enhancing and diversifying connectivity and infrastructure in the South Caucasus.

At the state level, this interconnectivity, especially in the digital and energy realms, elevates Armenia’s position in the region, giving it something to offer, Ohanyan said. At the regional level, Ohanyan said the Armenia-Azerbaijan relationship is a dangerous dyad, where Armenia is a nascent democracy but Azerbaijan is an authoritarian petrostate, which is personalized. Studies show that this is the hardest type of authoritarian system with which to negotiate, she observed. But the accords allow Armenia to managing its rivalry by creating stakeholders for connectivity beyond Armenia.

Opening the region to the outside would be a threat to dictatorial systems, Ohanyan said, because economic openness would lead to a more diversified Azerbaijani economy, but it would also create new economic power centers interested in broader regional markets, and this could be a risk to the Ilham Aliyev regime. This is why Aliyev was dragging his feet in signing the accords, let alone a peace agreement.

On the continental level, Russia lost its strategic position as intermediary or bridge between East and West, especially after the Russian invasion of Ukraine, Ohanyan said. With Russia in decline, it will be more difficult for it to continue to exercise its new imperial forms of engagement with its periphery. This opens the way for peripheries like the South Caucasus and countries like Armenia in particular, to navigate and manage relations with Russia in such a way that Armenia can escape its satellite condition. She said now it could “start behaving like a small state with all the benefits, benefiting from the opportunities and managing the risks that small states face in the world system.”

At the same time, Ohanyan said that Russia’s capacity for producing weakness for the states in the post-Soviet system is quite significant, and there are specific ways in which neoimperial geopolitics are played out. Finland as a small state managing relations with Russia applies “strategic reassurance,” and Ohanyan said that she thought Armenia was doing this too. Many small states face similar balancing acts, such as those in East Asia trying to maintain security relations with the US while engaging economically with China.

Audience Reactions

Some audience members at the end of the presentations expressed skepticism about the benefits of the Washington Accords. One person pointed out that Azerbaijan, with Turkey’s backing, has much more resources and experience to take advantage of TRIPP while Armenia lacks the same capacity for its development. Kopalyan replied that, “implicit in the Washington accords is the understanding that the US is going to be funding, supporting, providing knowhow, knowledge and logistical support [to Armenia] in making this happen.” The US and Armenia will be developing working groups to address the various issues at hand. Right now, seven such groups are being created and two weeks ago the first such group visited Armenia and set up feasibility studies in southern Armenia, with a small tranche of 145 million dollars allocated as a small part of an economic package the US State Department is putting together.

In other words, the US will be helping Armenia enhance its institutional capabilities through a long term process of learning and engagement, Kopalyan said. The MOUs state the US will be providing support and training for Armenian university programs in the nuclear energy field. Information will be shared in the tech domain too. “So not to oversimplify it, but in many cases, the US basically will be holding Armenia’s hand in supporting some of these things to happen,” Kopalyan said.

When pressed on the risks of relying on the seemingly short attention span and personalized approach of the current US administration, Kopalyan pointed out that many aspects of the Washington Accords were actually present in the Antony Blinken-led State Department during President Joe Biden’s term, so there has been continuity in foreign policy through the institutionalized process. There are two very large teams in the State Department right now working on these projects, so the US is investing a lot of resources in making this a reality. In fact, the US, Kopalyan said, will be investing potentially billions of dollars in TRIPP as a low-cost, high dividend investment in Armenia, turning the US into the dominant geopolitical player in the region and giving it a vested interest in the success of the accords and TRIPP.

Ohanyan noted that American foreign policy has been in the midst of a dramatic shift, becoming transactional and personalized. Yet she saw opportunity as well as risk in this change, declaring: “The United States can have the capacity, and seems to have the willingness and the interest, to structurally change the environment of the rivalry that exists. Instead of focusing on ‘let’s find a peace agreement that will work, and then it will trickle down,’ the opposite approach is taken. ‘Let’s change the structure and within this context relations can improve.’”

Ohanyan said that the current Trump administration has greater willingness to push to see quick results compared to the previous one. Furthermore, she said that the South Caucasus now is “an easier region for the United States” to navigate after the ethnic cleansing of Armenians since the US, and for that matter Russia, do not have good track records in protecting minority rights.

Kopalyan declared that there was no naivety in the process to initially diminish the threat of violence and have de facto peace. He stated, “There is no trust towards Azerbaijan. There is no trust towards the Aliyev regime.” That is why having American vested interests will put forward systemic constraints or guardrails limiting the possibility of belligerent or irredentist Azerbaijani actions, he said.

Looking at it from this perspective, he said that the real question is not whether peace can be achieved through the Washington Accords, but rather will Armenia be able to achieve a stability which will enhance its economic capacity, and also how well can Armenia be integrated into the transatlantic system. He said, “From a very, very pragmatic perspective, the normalization process is being used as basically a conducive environment in which we can accelerate our objectives as opposed to being consistently stuck in an impossible security environment. Will Aliyev sign 3 ½ years from now? I don’t know. Very likely not.”

Instead, this normalization process, he said, “gives Armenia a sort of an umbrella of protection until you enhance your deterrence capabilities.”

Kassarjian agreed, declaring that Armenia essentially had a 3 ½ year window of relative peace and stability to deliver on the key types of soft and hard deterrents needed to guarantee Armenian security.

When asked how a peace could be possible with prisoners of war still in Baku, continuing Azerbaijani human rights violations and territory of the Republic of Armenia remaining occupied, Kopalyan reiterated that it is a process. Occupation of land and POWs and other issues will be addressed subsequently, but initially the goal is the absence of interstate violence and the creation of a situation where the use of force becomes very, very difficult for Azerbaijan, he said.