The Armenian economy will remain heavily dependent on Russia in the foreseeable future, according to credit rating agency Fitch.
“Armenia’s economy is highly dependent on Russia for trade and energy, and Fitch does not expect meaningful diversification away from Russia in the near term,” it said in a weekend statement that reaffirmed its “BB-“ rating for the country.
Fitch noted that Russian-Armenian trade has increased dramatically since the start of Russia’s war against Ukraine.
“Armenia continues to implement Western sanctions targeted at Russian entities within its banking sector,” it said. “Nevertheless, goods exports to Russia increased by nearly 300 percent since 2021, and Russia accounted for 51 percent of exports and 30 percent of imports in [the first nine months of 2023.]”
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Russia accounted for more than one-third of Armenia’s foreign trade in January-November 2023, with bilateral commercial exchange rising by over 40 percent to $6.3 billion, according to Armenian government data.
Armenian re-exports of used cars, consumer electronics and other Western-manufactured goods remained the main driving force behind this growth. They are included in overall Armenian exports to Russia that totaled about $3.2 billion in that period, up by 50 percent year on year. These and other cash inflows from Russia are a key reason why the Armenian economy was on course to expand by over 8 percent last year.
Economy Minister Vahan Kerobian said recently that his government is trying to “diversify” Armenia’s foreign trade by helping local manufacturers find new export markets. He said they should export “products of high standards and quality” that can find buyers “in many countries of the world and not just a small circle of countries.” It is not clear just how the government will go about achieving this declared objective.
Russian-Armenian commercial ties have been deepening despite Yerevan’s strained relationship with Moscow noted by Fitch. Citing food safety concerns, a Russian government agency blocked the import of many food products from Armenia for more than a week in November. Observers believe that Moscow thus underlined its strong economic leverage against Armenia to warn Prime Minister Nikol Pashinian against further reorienting the country towards the West.