Armenia on the verge of economic collapse - sanctions fraud failed

Commenting on the adoption by the Armenian parliament of a draft law on the start of the EU accession procedure, Russian Deputy Prime Minister Alexei Overchuk said that if Armenia is going to Europe, then, accordingly, it will be necessary to review the entire range of economic relations between Russia and this country. And this will affect the standard of living in this country. In any case, Overchuk warned, it would not be possible to sit on two chairs. Armenia will have to make a choice.

The figures given by the Russian Deputy Prime Minister speak for themselves. Armenia's trade turnover with Russia increased by 50 percent last year to $12.7 billion, while turnover with the EU, on the contrary, decreased by 12 percent and amounted to only $2 billion.

It is no secret that the European Union is not interested in Armenia economically at all. The 2 billion that we managed to scrape together last year is the limit of possibilities. However, the fantastically increased trade turnover with Russia is not based on the real capabilities of Armenia and the interests of the Russian side. And with the easing of anti-Russian sanctions, experts expect a sharp decline in indicators.

It has been written and said many times over the past three years how the Armenian economy and the trade turnover between Armenia and the Russian Federation have grown. The "Armenian economic miracle" is a soap bubble, and today it is impossible to hide it.

Recently, the RA Statistical Committee reported that in January-February, economic activity in the country increased by 4.1 percent. However, economists advise against rushing to rejoice, because industry has collapsed at the same time - by 19.4 percent! There is no detailed decline yet, according to experts, it is a matter of reducing the volume of roughing of gold. According to Armenian media, since the end of 2023, gold bars have been actively processed in Armenia, from which blanks were made for further export to third countries. That is, the growth of indicators was ensured by re-export. And now the volume of this activity is decreasing. Because of this, the indicators of foreign trade began to decline, which has fallen 2.5 times since the beginning of the year, while imports decreased by 45.8 percent.

Armenian experts state that the Armenian economy is entering a phase of gradual subsidence after a period of rapid growth caused by external factors, in particular, the influx of Russian relocators due to the war in Ukraine. According to expert Emmanuel Mkrtchyan, about 20 percent of businesses opened or relocated to Armenia remained in the country, having established their offices and infrastructure. However, this positive effect was accompanied by significant stress for local producers, especially exporters. And the sharp strengthening of the Armenian dram led to an increase in the price of export products and a decrease in their competitiveness.

According to Armenian media, in addition to the relocation of Russian capital, the war in Ukraine has led to Armenia becoming one of the main transit routes for importing goods produced in Western countries to Russia and exporting Russian precious stones and gold to third countries. This line of business operations increased dramatically at the end of 2023 and reached its peak in mid-2024, when the re-export of gold and precious stones reached more than 70 percent of total Armenian exports.

Today, many Armenian analysts are writing about the sad fate of the "economic miracle" in Armenia. Aghasi Tavadian, a member of the Eurasian Expert Club, believes that the bubble of economic growth in Armenia, which has inflated amid the worsening situation in Ukraine, is gradually deflating, and exports are expected to decline this year compared to 2024. So far, the re-export of gold from Russia has largely offset the decline in exports to other countries. So, in 2024, exports to the EAEU countries decreased by 15 percent, and to the EU countries - by 25 percent. And now the re-export of gold has "sunk" almost 10 times: if in March 2024 gold was exported (re-exported) for $ 1.4 billion, then in November last year this figure "slipped" to $ 110 million. According to the economist, 95 percent of Armenia's industrial growth was accounted for by the production of re-exported gold. Tavadian bitterly states that the share of industrial production in the Armenian economy is negligible and it mainly lives off the 17 percent increase in trade and services last year, which together accounted for about 70 percent of the total growth.

It is noteworthy that the international rating structures, publishing their forecasts for Armenia in the previous three years, made it clear that the West is aware of where everything comes from. They know that Armenia's fantastic economic performance is just a soap bubble inflated by Yerevan's violation of sanctions imposed on Russia by the United States and the European Union. In other words, Armenia's violation of sanctions was tacitly welcomed.

In November last year, Armenian media published an interview with Elisabetta Falcetti, Managing Director of the European Bank for Reconstruction and Development (EBRD) for Turkey and the Caucasus. According to Ms. Falcetti, the EBRD expects that after several years of ultra-high growth, Armenia's GDP growth will be moderate in the short term, with real GDP growth falling to 6.2 percent in 2024 and 4.8 percent in 2025. The representative of the European Bank diplomatically noted that "temporary capital inflows related to the war in Ukraine have decreased," and "geopolitical uncertainty poses significant risks to the prospects for economic development." She also carefully advised Armenia to open its borders as soon as possible.

The EBRD saw that due to the outflow of Russian capital and relocations from Armenia, as well as a reduction in transfers from the Russian Federation, the Armenian economy is facing a collapse in indicators. Armenia is one of those countries that profited from the war in Ukraine, but its name has never been mentioned in this list by international organizations and world capitals, remaining only a line in analytical ratings. Although the facts are obvious and simply egregious. Last year, the German DW conducted an investigation into a complete ban on direct imports of non-industrial natural and synthetic diamonds and diamond jewelry from Russia to the European Union. According to the information received, billions of dollars worth of Russian gold is exported by Armenia under the guise of Armenian. This affects the fantastic performance of exports and imports, as well as the rise of the manufacturing industry. In addition to the re-export of Russian gold, Armenia also supplies mobile phones, household appliances and cars of European, American and other production to the Russian Federation on the basis of murky schemes.

How will the Armenian economy turn out when the easing of anti-Russian sanctions begins (which is just around the corner)?