The European Union continues to offer support to Armenia while Russian trade restrictions threaten to disrupt the country’s increasingly vulnerable economy.
Moscow introduced the measures during last month’s election campaign, citing apparent food safety concerns with various Armenian goods. This appears to be a punitive measure following the re-election of prime minister Nikol Pashinyan, who has overseen a pivot away from Russia and towards greater alignment with the West.
With Russia now effectively blocked off, Armenia must find other markets for its exports. So far, the EU has pledged support, announcing a €50 million package to help Armenia weather the storm of the Russian embargo.
In an indicator of growing support, European Commission president Ursula von der Leyen will visit Armenia on Thursday, followed by enlargement commissioner Marta Kos later in the week. No strangers to the region, they had both come when Armenia hosted its inaugural EU Summit in May.
The EU has acted with relative immediacy in what has emerged as the latest geopolitical battleground between Russia and the West. Last month, von der Leyen went as far as describing Russia’s actions as economic coercion. “We know this playbook all too well,” she said. “This is why Europe stands firmly with Armenia.”
Though Brussels has pledged its support, Armenian exporters will have to push to establish themselves in competitive European markets. Fewer than 8 per cent of Armenia’s exports reach Europe, while more than 35 per cent go to Russia. Despite Armenian producers increasingly meeting international quality standards, Europe’s protected markets remain difficult to penetrate.
Ever since Russia imposed the restrictions, the EU has facilitated the import of Armenian goods, with shipments of fruit and flowers arriving in the last few weeks. Though largely symbolic, it signifies increased economic integration between Armenia and Europe.
Buoyed by European support, Armenia’s economy has largely withstood Russian pressure so far. However, Armenia’s central bank governor has sounded the alarm, warning that the restrictions could cause inflation and weaken the national currency.
Moscow’s failure to deter Azerbaijani military aggression in 2020 severely damaged Armenia’s trust in Russia
As the pressure mounts, Russian president Vladimir Putin has threatened to annul a 2013 energy agreement which guarantees Armenia discounted rates in return for Russian control over natural gas distribution. The reliance on Russian energy exposes Armenia’s vulnerability to leverage from Moscow.
Russia has previously used similar methods to keep its neighbours in check. As tensions escalated with Georgia in the mid-2000s, Moscow blocked the sale of Georgian goods while also deporting Georgian workers from Russia.
Deprived of both export and remittance income, the Georgian economy suffered a temporary shock. However, with the support of the EU, Georgia managed to modernise its production standards and diversify exports over time.
In a similar move, Putin has cautioned that Armenians in Russia will require work permits if the country decides to leave the Eurasian Economic Union. An estimated 70,000 Armenians work in Russia, with their remittances accounting for nearly 12 per cent of the country’s GDP.
The trade dispute represents the latest juncture in Armenia’s complex relationship with Russia. After the collapse of the Soviet Union in 1991, Armenia remained largely under Russian influence, with the new oligarchic elites sidling up to Moscow in exchange for cheap energy and security guarantees.
However, Moscow’s failure to deter Azerbaijani military aggression in 2020 severely damaged Armenia’s trust in Russia. Since then, Armenia has looked to diversify its regional security, recently entering a strategic partnership with the US amid normalisation talks with Azerbaijan.
Either way, Putin has called time on Armenia’s diplomatic balancing act – demanding a referendum to decide whether Armenia remains in the Eurasian Economic Union or breaks ranks and joins the EU. Ultimately, Armenia stands at a crossroads, faced with a changing geopolitical landscape that presents both risks and opportunities for the country’s future.