The Armenian government on Thursday refused to reverse a controversial electricity price hike, sparking fresh anger among thousands of demonstrators who have rallied in the capital for a week.

Under pouring rain, some 7,000 protesters rallied Thursday evening near the presidential palace after Prime Minister Hovik Abrahamyan said his government would proceed with raising power tariffs despite anger in a country already hard hit by the economic crisis in Russia.

Waving national flags, singing patriotic songs and chanting "We will win!", protesters vowed to keep pressuring the government until their demands are met, an AFP journalist at the scene said.

Earlier Thursday, hundreds of protesters blocked traffic on the capital Yerevan's main thoroughfare, while over 9,000 protesters had rallied late Wednesday near the presidential palace.

Anger has long simmered in Armenia over poverty and corruption, but the government's decision to raise electricity tariffs by more than 16 percent from August in the country of 3.2 million proved the last straw.

President Serzh Sarkisian, who is on a visit to Brussels, has so far made no public comment, but Abrahamyan said the authorities would raise the tariffs to "ensure the country's energy security."

He said the planned hike is aimed at avoiding "cyclic power cutoffs which will lead to irreparable consequences for the country's economy."

Abrahamyan insisted the increase would only cost an average household some $3 (2.7 euros) per month, with the government pledging to allocate over $5 million (some 4.5 million euros) in aid to the neediest families.

But the government's response stirred fresh anger after a week of protests in a country where former master Russia controls some of the most prized assets including the power-distribution grid.

"The man must not get on people's nerves," protester Vaginak Shushanyan told AFP at the rally.

Others called the prime minister's words an "insult," saying the authorities risked galvanising the protest movement further if they kept turning a deaf ear to its demands.

"People will get angry and their social demands will become political," 31-year-old IT specialist Hakob Balayan said.

Armenia's cash-strapped power distribution company said the hike was needed due to a sharp devaluation of the national currency, the dram.

The company is owned by the Russian state holding Inter RAO, which is controlled by one of Russian President Vladimir Putin's closest allies, Igor Sechin.

- 'Mad level of corruption' -

The protests started on Friday and gained momentum after hundreds of riot police moved in early Tuesday to break up a rally using water cannon and attacked journalists, in the most serious confrontation between protesters and police in years.

Washington, Brussels and the Organization for Security and Co-operation in Europe (OSCE) all expressed concern over the violence.

Analysts chalked up the crisis to rampant corruption, among other things.

"One of the main factors behind the current situation is the mad level of corruption in the country," economic analyst Manuk Mkrtchyan told AFP.
"The current crisis concerns the power distribution sector, but tomorrow it may spread to other spheres of the economy."

Another analyst, Hayk Gevorgyan, added: "People think that mismanagement is the true reason and that the money goes into the pockets of corrupt officials."

Some in Russia expressed fears the protests could grow to resemble Ukraine's anti-government rallies that ousted a Moscow-backed government last year.

"Protests may not be anti-Russian but they're a threat to Russia simply for their democratic nature," researcher Karena Avedissian said on Twitter.

Moscow's ally Armenia has been hit hard by the economic crisis in Russia brought on by falling oil prices and Western sanctions over Ukraine.

In January, the country joined the Russian-led Eurasian Economic Union, further increasing Yerevan's dependence on its onetime master.