Russian Trade with Armenia up 30 Percent Due to Eurasian Economic Union Impact

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Russian Foreign Minister Sergey Lavrov recently met with his Armenian counterpart, Zohrab Mnatsakanyan, with both parties saying that their membership of the Eurasian Economic Union (EAEU) has significantly boosted bilateral trade. Lavrov stated that “Russia remains a key economic partner to Armenia. Our trade turnover grew 30 percent in 2017, and the positive trend continues also this year, growth for the last three months is coming close to 40 percent.” Russia’s trade turnover with Armenia reached US$620.5 million (up 29.2 percent). Meanwhile, Armenia’s trade turnover with the Eurasian Economic Union for the first four months of this year amounted to US$640.5 million, showing a 29.9 percent growth. This means that Armenia’s trade with the other EAEU members Belarus, Kazakhstan, and Kyrgyzstan reached a rather more modest US$20 million in the period January-April 2018.

The Russian foreign minister said that he has discussed with Mnatsakanyan the implementation of joint Armenian-Russian projects in energy, telecommunication, and banking sectors of the economy.

Armenia sits in a somewhat curious geopolitical position at present. Although it is part of the Eurasian Economic Union, and is close to Russia, it does not enjoy positive relations with either of its neighbors – Azerbaijan to the north and Turkey to the south. There are both long standing land disputes as well as religious differences – Armenia is Orthodox while Azerbaijan and Turkey are essentially Muslim nations. This historic issue has meant that Armenia has been bypassed when it comes to the “Middle Corridor” section of China’s Belt and Road plans – hence, the relatively low trade volumes with Kazakhstan and Kyrgyzstan. Armenia is unable to access Baku’s Port infrastructure connections through to Kazakhstan.

This Middle Corridor route enters Azerbaijan at Baku from Kazakhstan, travels west through Tbilisi in Georgia and exits at Kars in Turkey. Also known as the “BTK Corridor”, it omits Armenia from the transportation of Chinese goods bound for Europe altogether. However, Armenia has instead opted to invest in a separate, north-south highway that connects with Georgia’s Black Sea Ports to the north and runs down south to Iran’s major sea port at Bandar Abbas. This means that Armenian fruit producers are now capable of dispatching a container of apricots in the Ararat Valley Monday morning and unloading them in Dubai Port (via Iran’s Bandar Abbas Port) before close of business Friday, taking 10-14 days off the shipping time via Georgia.

bandar-abbas-to-batumi

Route Bandar Abbas To Batumi passing via Azerbaijan

Chris Devonshire-Ellis of Dezan Shira & Associates comments: “Armenia’s continuing positive free trade relations with Russia and the EAEU has shown rapid growth. This, coupled with Armenia’s development of its own superior highway system and our understanding of this dynamic means that clients of our firm are well aware that the development opportunities in Armenia lie from north to south rather than east to west. This business intelligence is vital to understanding the region and knowing where the opportunities lie.”

 

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Russia Briefing is produced by Dezan Shira & Associates. The practice provides risk assessment, due diligence, legal, tax and operational advise to Governments and businesses throughout Russia and Eurasia and maintains both a Russian desk and a Belt Road desk as part of our 28 office organisational structure. Please email russia@dezshira.com or visit us at www.dezshira.com for assistance.

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China’s New Economic Silk Road

This unique and currently only available study into the proposed Silk Road Economic Belt examines the institutional, financial and infrastructure projects that are currently underway and in the planning stage across the entire region. Covering over 60 countries, this book explores the regional reforms, potential problems, opportunities and longer term impact that the Silk Road will have upon Asia, Africa, the Middle East, Europe and the United States.

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