Russia-Armenia Trade and Investment Summary, 2023

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By Contantin Duhamel

Russia and Armenia are both members of the Eurasian Economic Union (EAEU) and Commonwealth of Independent States and share a common Orthodox Christian heritage. Russia and Armenia’s proximity at heart stems from their interaction in Russia’s 18th century expansion in the Caucasus. Similar to the Ossetians and to a lesser extent the Georgians, as a fellow Christian nation with the oldest Christian Church Armenia has long sympathetically looked at Russia for support against its Turkish and Turkic neighbours. In this article we explore the current status of the relationship between the two countries and examine trade and investment trends between them.

A relationship tested by time

Armenia has therefore been a natural candidate and enthusiastic member of the Eurasian Economic Union (EAEU) as the less than 3 million-strong nation gains access to a market more than 50 times its size. The EAEU contains both Armenia and Russia in addition to Belarus, Kazakhstan and Kyrgyzstan giving Armenian traders a unique reach into both European and Central Asia. The Armenian diaspora across the EAEU and in Russia particularly is almost as large as its own population – something that has proven conducive to fruitful commerce. Armenia is also a member of the Collective Security Treaty Organisation, a Russia-led security bloc.

Cold winds from the East?

An uptick in troubles in Armenia’s unrecognised Karabagh region have coincided with the start of conflict in Ukraine and set in a period of tension in Russian-Armenian politics. Russia stepped in to end bloodshed in extremis during the Armenian-Azerbajani war of 2020 and Armenia called upon the CSTO’s joint security clause – something akin to NATO Article 5 – not once but twice, most recently in the Summer of 2021 where it was almost ignored. Though CSTO forces could hardly deploy beyond internationally recognised borders, perceived lack of support from Russia has left Armenian PM Nikol Pashinyan sceptical of the potential of support from the Organisation and Russia in the future.

Flourishing economic relations

The opposite is true for economic and commercial relations. Part of the EAEU Customs Union and Free-Trade Area – marketed as a single-market-to-be – Armenia has been one of the main conduits of trade with Russia along with Turkey and Kazakhstan. The opportunism present in Russian-Armenian relations has here come bare, with Armenia acting as a parallel import hub and safe haven for Russian cash and a 100,000-strong Russian labour force seeking relative stability. Stories relating to sky-high rents in Erevan and volatile banking fees are widespread amongst the self-styled intelligentsia that has poured out of Russia over the course of 2022.

Towards less friction with the EU?

Armenia has also signed a Comprehensive and Enhanced Free Trade agreement with the European Union, including everything but customs and migration (currently covered by Armenia’s EAEU status). Armenia will eventually have to choose towards which market it will gravitate, whether cozing up to the EU or EAEU.

An extremely dynamic market

Armenia boasted 11% GDP growth for 2022, while GDP to capita to rise from USD 4000 to 7000: meanwhile development hurdles are being overcome as it benefits from the Russia-Ukraine arbitrage, with parallel imports a growing business in supplying Russian consumers with European goods.

1. 2022 Investment & Capital Markets summary

Fig. 1 Armenia FDI statistics

Source: CEIC, IMF, Lloyds Bank, author’s estimations for 2022 based on available information.

Russia holds top spot in Armenia-bound FDI

As of 2022, 40% of Armenia’s Foreign Direct Investment is of Russian origin, worth some USD 2 billion in projects last year. Russia is the top bilateral partner for Armenia in the financial sector and as a purveyor of funds.

Good reason to be bullish on Armenia’s FDI potential

Interestingly, the IMF has noted that Armenian FDI was projected to grow by 25% YOY – leading to a USD 7 billion figure in FDI – by the 2022 year-end. Although statistics collected during this exercise were not able to confirm this and perhaps for accounting reasons, few countries can boast such YOY figures for FDI. There have certainly been a record number of FDI projects announced, as will be discussed below.

Fig. 2   Armenian Bank Performance in USD million, 2022

Source: Arka, Armbanks

Record year for banks in Armenia

The Armenian banking system by year-end of 2022 processed no less than USD 3.2 billion in payments from Russia – a four-fold increase in the figures from 2021. Consequently, non-interest income (such as payment fees) rose 267% as interest income increased only 9 %.

2. Import-Export

Fig. 3   Total Armenia Trade in 2022, USD millions

USD billion Turnover Imports Exports Balance
Armenia 14.1 5.3 8.8 (3.4)

Source: Armstat

Russia remains top trade partner – by far

As a landlocked country surrounded by larger nations, Armenia is unsurprisingly a structural importer, running a deficit as visible above. Its top trade partner is by far Russia, equally over twice trade with the EU and nearly three times that with China. This is large part explains its political choices and the wish to remain close to Moscow.

Fig.4    Armenia main trade partners in decreasing order of importance 2022, USD billion

USD billion Turnover, 2022 Turnover, 2021 % change
EAEU 5.3 2.7 49
of which Russia 5.0 2.6 48
EU 2.3 1.6 30
China 1.7 1.2 29

Source: Armstat

2022 was a notable year

The YoY change in trade stuck around the +40% mark in terms of turnover – a testament to the importance of Armenia as a trading hub for the region. These are remarkable figures and reflect more than just supply chains for Russia re-routing via Armenia. It is really a testament to Armenia’s ability to use several levers and maximise its trade.

Fig. 5   Selected trade balances

USD billion Balance, 2022 Balance, 2021 % change
EAEU (0.2) (1.0) 80
of which Russia (0.2) (0.9) 77
EU (0.7) (0.3) (130)
China (1.0) (0.5) (100)

Source: Armstat

Deficit closed with EAEU and Russia, increases with EU and China

On account of the important figures in Armenian exports to Russia, Armenia no longer acts merely as a recipient of Russian resources. The relationship between the two parties has clearly levelled as a result of actions in 2022. Armenia continues to source goods from the EU and China – increasing its deficit to cater for Russian demand – and then sells this on to Russia at a mark-up.

Fig. 6   Russia-Armenia trade, by category

USD mln Value, 2021
Hydrocarbons 685
Precious metals and stones 91
Agricultural goods 83
Finished goods (machinery) 80

Source: Tradingeconomics, per last available statistics.

A traditional trade partner

In terms of trade by category, Russia and Armenia’s trade mix is typical: a vast majority of hydrocarbon products, followed by gold and precious stones (typically flowing into Armenia to be processed and sold). Agriculture (e.g. wheat) and machinery from Russia and niche agricultural products from Armenia to Russia complete the picture.

3.Future trends

Fig. 7 Key indicators

USD:AMD, official CB Interest rate Inflation rate GDP Growth GDP per capita (predicted)
392 12.25% 8% 11% USD 4000 (7000)


AMD = Armenian Dram. Source: IMF, valid as of 20/02/2022.

High-growth likely a mainstay – but at a cost

According to the IMF, the best performing sectors in the Armenian economy in 2022 were services, namely: accommodation, transport, banking (>35%), IT (>26%) and construction by circa 20%. The government certainly expects to keep these numbers up and court other countries to do so. Excess demand, however, has put pressure on prices in Armenia, especially by proxy Russian economic actors. The IMF notes that salaries grew by around 14% YOY and rents double that in H12022 – something local cannot view positively.

The Elephant in the room

Again according to the IMF, Russia’s USD 0.6 billion deposits in Armenian banks are a risk to local consumers, as movements in capital risk impacting the liquidity of lenders expanding credit on Russia-related collateral – should there be a payment run on these banks.

A Silicon Valley for the Caucasus

As per fDi Intelligence, 21 Foreign Direct Investment projects were announced in the first half of 2022 – a testament to Armenia’s attractivity with a highly-qualified labour force but (relatively) cheap cost of living. Technology is clearly the lead sector, but renewable energy is also part of the mix. Azerbaijan’s views on the Karabagh region remains the only real source of instability for investors considering the country.

Fig. 2 Overview of FDI projects in Armenia

Name of Project Sector Origin Comments
NVIDIA Tech USA Open centre in Yerevan
Advanced Micro Devices (AMD) Tech USA
Masdar Energy UAE 400MW solar plant
Eurasian Development Bank Energy International 11 Solar plants in Armenian regions for c. USD 50 million, generating 65MW

Source: fDi Intelligence


Despite Armenia’s problems with Azerbaijan and to some extent Turkiye, the country remains in a strategically advantageous geopolitical position and is well positioned to bridge trade between both Orthodox and Islamic markets. With Russia as a key supporter, its security is confirmed. How it can leverage the INSTC corridors remains an issue, however shrewd investment planning and examination of Armenia’s own trade corridors with Georgia and Russia especially provide direction as to how its economy can be expected to develop in the future. At present, the major trade drivers show Russia exporting energy, wheat and logistics related services, and Armenia exporting mainly agricultural based products, including large quantities of Armenian Brandy, a sought-after premium liquor in Russia.

Like many other countries in the CIS and EAEU, Armenia has gained from the conflict in Ukraine as Russian money and entrepreneurs have taken to Yerevan in particular to act as ‘go-betweens’ between a significant Russian consumer market and Western re-sellers who wish to remain one step removed from Russian commercial ties. Armenia is also developing as an IT hub as noted above, free of Western sanctions on items such as microprocessors and semi-conductors, yet able to feed into the Russian market with new ideas and designs. As such, Armenia is developing as a unique funnel for outbound finance from Russia, and increasingly, exports to it.

Constantin Duhamel is a Eurasia geostrategic analyst and may be contacted at

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