Armenia is proceeding cautiously as it strives to wean itself off economic dependence on Russia.
But there are signs that efforts to decouple Armenia’s economy from Russia’s are making some progress.
On March 29, Armenian banks announced they would stop processing transactions involving Russian bank cards in order to align themselves with Western sanctions on Russia. The announcement drew the ire of Russian officials, including Foreign Ministry Spokesperson Maria Zakharova, who chided Yerevan for “[bowing] to Western pressure.” She went on to predict that it would be harder for Armenians residing in Russia to send money back home.
Data shows that the ban may well be impacting remittances. At an April 30 press conference, Armenian banking officials announced that remittances from Russia – which have generated an equivalent of as much as 5 percent of GDP in recent years – were plummeting. Bank statistics show that remittances from Russia during the first quarter of 2024 totaled $657 million, down from $1.1 billion during the same period in the previous year.
The head of the Armenian Central Bank, Martin Galstyan, attributed the decline to changes in the “settlement and payment system.” But he also made clear that “geopolitical” forces were at play, which could be changing the longstanding labor migration dynamic between the two countries.
“Some prefer to return to Armenia and work here, as the difference in salaries now is much smaller than, for example, 10 years ago,” he was quoted as saying by Armenian media.
Other economic indicators show that trade trends are not keeping pace with the government’s desire to shift the country’s geo-economic center of gravity westward, away from Russia. The European news outlet Euractiv published a report on trade between Armenia and Russia: in 2023, Russia accounted for almost 36 percent of Armenia’s overall trade turnover, while the European Union accounted for 13 percent.
Meanwhile, Prime Minister Nikol Pashinyan in recent months has touted a plan with Western leaders called “Crossroads of Peace,” a project that would see Armenia enhancing its role as a hub for East-West trade. In April, EU and US officials agreed to provide Armenia with more than $350 million in funding to help with recovery from war in Karabakh and to reduce economic dependence on Russia.
Pivoting Armenia’s trade orientation, however, cannot be achieved overnight. Officials in Yerevan may be disinclined to rock the boat too much economically at a sensitive point, when Yerevan is trying to negotiate a lasting peace deal with Azerbaijan. In an interview with a regional media outlet, economist Suren Parsyan said that a sudden move away from the Russian market could have disastrous economic consequences for Armenia.
“We need to buy time, work with different countries, strengthen the country’s economy and diversify connections,” Parsyan told JAMnews.
“Politics is one thing, numbers are another,” he added. “Numbers don’t lie. They demonstrate Armenia’s significant dependence on Russia.”
Another factor that the Armenian government must consider: Russia maintains other means of economic leverage over Armenia, including control of critical infrastructure.
