Armenia, a small republic high in the Caucasus mountains, had a problem. Since it emerged from the Soviet Union the economy had fared badly and it owed Russia massive debts it could not pay back.
Last year it hit upon a solution: Moscow would take over Armenian industrial assets equal to the value of its borrowings from Russia and the 100-million-dollar (93.5-million-euro) debt would be written off.
But now, with the crown jewels of its economy in the hands of its former imperial masters in Moscow, analysts and pro-Western politicians are asking if Armenia has paid its debt with its political independence. "These assets-for-debt swaps... put into question, on a conceptual basis, the sovereignty of the republic of Armenia," said Raffi Hovannisian, a former Armenian foreign minister who now heads a think-tank.
Armenia is not an isolated case. More than a decade after the Soviet empire collapsed, Russia is using its resurgent economy to re-assert political control over the weakest of its former satellite states, say analysts.
They claim that similar scenarios are also being played out in other former Soviet republics including Ukraine, Belarus, Moldova and Kyrgyzstan.
"Armenia has become the first case study in... Russia's strategy to regain political dominance over post-Soviet countries by taking over their economic infrastructure," said Vladimir Socor, a fellow with the Washington-based Institute for Advanced Strategic and Political Studies.
Armenia has welcomed Russian investment because it has had little success attracting businessmen from anywhere else.
Western investors have been scared away by a protracted conflict with neighbouring Azerbaijan that has left Armenia isolated from its markets, and by rampant official corruption.
The list of assets now controlled by the Russian government under the debt-for-assets deal is substantial.
Six generating units at the Hrazdan power station, which account for 15 percent of Armenia's energy supply, the Mars electronics plant in the capital, Yerevan, and three other high-tech factories were all handed over.
Armenia's government argues there is nothing unusual about any of this. Foreign ownership of businesses is a feature of the global economy, they say, and the World Bank has backed the arrangement.
"We are doing this for the good of our people," Serge Sarkissian, Armenia's defence minister who also chairs a commission formed to oversee the debt-for-assets swap with Russia, told AFP.
"No one is going to take equipment out of this country. If they buy into the electricity network, they are not going to strip out the transformers and take them away," he said.
"On the contrary, these businesses will be given a boost by the new investment and they will, most importantly, bring in big tax revenues for the Armenian budget."
"You don't hear anyone saying that since Armenia sold its airport to the Argentinians it lost its sovereignty, or if it sold shares in its enterprises to other investors that it lost its sovereignty."
But what worries sceptics is that the latest acquisitions by Moscow join a long roster of other Armenian assets already in Russian hands which, taken together, make up a big chunk of the country's tiny economy.
For example, Armenia's gas distribution company is already 55-percent owned by a Russian firm and Russian metals giant Russian Aluminium holds a 74-percent stake in the Kanaker Aluminium Factory.
In addition, Armenia depends on Russia to supply fuel rods for its creaking Metzamor nuclear power station and though officials deny it, western diplomats say Moscow may own the station itself.
In the background are major Russian military bases on Armenian territory and the fact that almost every Armenian family depends on cash sent home by a relative working in Russia.
"Armenia is integrating so closely with Russia you could even say it is becoming part of Russia," wrote the opposition Haikakan Zhamanak daily.