By Alexander Pracht
Armenia’s foreign trade surged by 41.5% in 2024, surpassing $30 billion, according to the country’s National Statistical Committee (NSC), but the rapid expansion is losing momentum. Growth has slowed dramatically in the second half of the year, with trade figures weakening and signs of decline raising concerns about the sustainability of this boom. For several years, Armenia’s economy has leveraged Western sanctions against Russia, acting as an intermediary to re-export Russian jewelry and precious metals while also facilitating parallel imports into Russia. Now, shifting capital flows suggest these trade routes may be changing – as evident from a year-on-year NSC report, published in January, indicating that Armenia’s re-exports of Russian gold and precious stones to the UAE dropped by 60%.
Cherry-picking on parallel imports
Russia’s full-scale invasion of Ukraine in February 2022 triggered a significant wave of migration to Armenia, bringing both Russian émigrés and, to a lesser extent, Ukrainian refugees. Many of them arrived with substantial financial resources, leading to a surge in cash inflows that fueled economic growth. Consumption and demand skyrocketed, and new businesses sprung up across various sectors.
Though most of these new businesses were IT companies, some of those have become part of a broader trend of capital flows passing through Armenia to circumvent Western sanctions on Russia. This was particularly evident in Armenia’s export data in recent years. Surprisingly, the UAE surpassed Russia as Armenia’s largest export partner with trade volume exceeding $5.3 billion last year, largely due to the re-export of Russian precious metals and jewelry through Armenia to the Emirates. However, according to data from the National Statistical Committee, by the end of last year, this trade scheme had all but disappeared.
“The decline in the re-export of precious metals and gemstones from Russia to the UAE doesn’t mean the trade has stopped, it likely means that alternative routes have been found,” Emmanuil Mkrtchyan, an economic analyst and the General Director at the ArmInfo news agency, told CivilNet. Over the past year, Western countries have intensified pressure on Armenia’s banking sector to curb sanctions evasion. So far, this has primarily affected major banks, while smaller financial institutions and informal channels continue to facilitate transactions. Despite these restrictions, parallel imports to Russia through Armenia remain a reality.
Meanwhile, Armenia’s exports to China saw a staggering 160% increase last year as per the National Statistical Committee’s annual report, a surge that cannot be explained by organic trade growth alone. “This is clearly linked to parallel import schemes and re-exports for Russia,” Mkrtchyan said. China has become a key transit hub for sanctioned goods, and Armenia’s role in these networks shows how deeply its trade is entangled with shifting global supply chains. While some of these trade flows benefit Armenia’s economy in the short term, they also expose the country to risks as Western regulators tighten enforcement.
To have cake and eat it, too
Despite Armenia’s growing alignment with the European Union, most notably with its parliament now discussing a formal bid for membership, the country’s immediate focus appears to be on political and security benefits rather than economic ones. Trade data reflects this imbalance. According to the National Statistical Committee’s annual report, Armenia’s imports from the EU amounted to roughly $2 billion last year, while exports stood at just about $611 million. As a result, the EU’s share in Armenia’s total trade volume remains below 9%.
While the EU market is technically open to Armenia, significant barriers limit access in practice. “Armenia has a small economy, and although access to the European market exists on paper, in reality, it is restricted by EU certification requirements and technical regulations,” Mkrtchyan explained.
At present, Armenia’s only realistic prospect for increasing exports to the EU lies in its mining sector, particularly minerals produced at the Zangezur Copper Molybdenum Combine. “Theoretically, this could be expanded, but it would require a significant increase in extraction,” Mkrtchyan noted, adding that the EU’s share in Armenia’s foreign trade is unlikely to grow beyond 12% under current conditions.
Meanwhile, Russia has voiced growing discontent over Armenia’s EU aspirations, with several high-ranking officials publicly interpreting Yerevan’s shift as a step toward withdrawing from the Eurasian Economic Union. Armenian leaders, including Prime Minister Nikol Pashinyan, have repeatedly stated that Armenia views its EEU membership as beneficial and has no intention of leaving the bloc.
However, while Armenia clearly seeks closer ties with the EU, it also wants to retain access to the Russian-led Eurasian Economic Union (EEU) and the relatively cheap imports from post-Soviet countries. Armenia was effectively pressured into joining the EEU in 2015 under President Serzh Sargsyan and remains the only member without a direct land connection to its partners.
Stuck in Russia’s orbit
Regardless of shifting geopolitical dynamics, Russia has consistently remained Armenia’s most important foreign trade partner. Armenia relies on Russia across multiple economic sectors, not to mention its energy dependence, with personal remittances from Russia still playing a crucial role in many household incomes, though this factor has somewhat decreased in recent years. Despite Armenia’s gradual pivot toward the EU, its economic ties with Russia remain deeply entrenched, making any significant trade diversification difficult in the short term.
“The effect of what can be called ‘war Keynesianism,’ the wartime-driven economic boost, is already fading in Russia,” Mkrtchyan explains. As its economy adjusts to prolonged sanctions and shifting global conditions, its economic trajectory will inevitably have a major impact on Armenia as well. Any down- or upturn in Russia, whether due to sanctions developments, domestic economic strains, or changes in military spending, could directly affect Armenia’s trade, remittances, and overall economic stability. Whatever happens in Russia’s economy, Armenia will feel the consequences.
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