Armenia’s exports to Russia raise concerns over sanctions circumvention

Despite deteriorating political relations between Armenia and Russia, bilateral trade has flourished, leaving Western partners wondering over Yerevan’s approach to sanctions.

In the aftermath of the sanctions against Moscow, Armenia’s exports to Russia tripled in 2022 and then doubled between January and August 2023, providing ground for accusations about the South Caucasus country’s compliance with the Western sanctions regime. 

While the political relations of Armenia with Russia have largely deteriorated in the last few years, bilateral trade with Russia flourished.

Risky trade partner

Since Armenia’s accession in 2014 to the Russian-led Eurasian Economic Union, Russia has become Armenia’s number one trading partner. Russia’s share in foreign exports of Armenia further increased in the aftermath of the invasion of Ukraine.

In 2023, trade with Russia accounted for over 35% of the country’s foreign trade, compared with the EU’s 13% share in the total.

The Armenian economy’s high dependency on its trade with Russia has made it practically impossible for the country to join the sanctions against Moscow without risking unprecedented economic downfall.

This growing economic dependency on the Russian market does not, however, impede the Armenian government’s attempts to slowly shift the country’s geopolitical orientation towards the West.

Quite the contrary, the tensions between the Kremlin and Yerevan, including Armenia’s open disagreement with the Kremlin’s war of aggression, continue to grow in parallel with the increase of trade numbers.

Many in Armenia are worried that the Kremlin can use Armenia’s economic dependency as political leverage, with recent opinion polls conducted by the International Republican Institute (IRI) showing that 40% of Armenians view Russia as the most significant political threat to their country, after Turkey and Azerbaijan.

Meanwhile, Russia has in recent months already blocked on several occasions the import of Armenian products on its ground checkpoint with Georgia.

Increase in re-exports

In 2022, the volume of trade between Armenia and Russia nearly doubled, reaching $5.3 billion, according to Armenia’s state statistics agency. This trend continued apace in 2023 and in the early months of 2024. The increase in Armenia’s exports to Russia is largely due to the re-export of products from third countries.

According to the UN Comtrade Database, the list of products exported from Armenia to Russia in the last two years includes but is not limited to, mobile phones, computers, headphones, and other technical equipment.

In recent months the re-export of diamonds and gold has also been on the rise.

To avoid possible issues with compliance with the sanctions regime, the Armenian government has made the data on trade with Russia publicly available and has invested in providing almost real-time updates on imports and exports to the Russian Federation.

“There is a rise in re-exports, the products being re-exported are not currently under sanctions, or at least not yet,” Seda Hergnyan of Investigative platform, specialising in monitoring Armenia’s compliance with sanctions, told Euractiv.

“However, if tomorrow the collective West decides to consider the re-exports to Russia as sanctions circumvention, all of Armenia’s exports will be put at risk, but the primary risks associated with increased re-exports are risks for Armenia’s economic development itself,” Hergnyan said

“There are growing concerns that Armenia’s economic growth rate is becoming even more dependent on the Russian market. This economic growth process is not stable and is reliant on external factors rather than internal economic development and increased production rates. These external factors can change overnight,” she cautioned.

For now, however, according to Hergnyan, the re-export process is transparent and is openly documented by Armenia’s public statistics service.

She is not the sole journalist in Armenia who agrees that the data is transparent and updated almost in real-time. This transparency is supposedly helping the Armenian government to dispel doubts regarding its intentions.

Meanwhile, to increase oversight of possible sanctions circumvention by Armenia-registered companies, the country’s authorities introduced in 2023 mandatory government licenses for shipments of microchips, transformers, video cameras, antennas, and other electronic equipment to Russia.

A contradiction of views

Since February 2022, the increased export figures are occasionally presented in Western media as proof that Armenia is deliberately helping Russia circumvent the sanctions regime.

“We regularly see waves of English language posts on X, often initiated by Azerbaijani users, that accuse Armenia of deliberately helping Russia to circumvent the sanctions,” Ani Grigoryan, the editor and founder of #CivilNetCheck, told Euractiv.

In addition, she said, some foreign experts, genuinely concerned with the compliance of third parties with sanctions against Russia, also sometimes present data on Armenia’s trade with Russia as proof of non-compliance.

“The numbers are often presented without any context or with no reference to the particularities or vulnerabilities of Armenia’s context. Even if the numbers are not fake, their representation without relevant context analysis can become a manipulation,” she said.

The accusations of Armenia’s sanctions circumvention have recently been addressed even by Prime Minister Nikol Pashinyan. In an interview with France 24, he stressed that neither the European Union nor the United States have any reservations regarding Armenia’s compliance with sanctions.

The US and EU officials have indeed stated on several occasions that Armenia’s authorities are cooperating with Western partners.

During a US House of Representatives Foreign Affairs Committee’s hearing in November, Assistant State Secretary James O’Brien praised the reforms undertaken by the Armenian government that allow the US administration to track the trade with Russia.

“In almost real-time, they can see which firms are involved in this circumvention trade, and then we’re able to take measures to stop that trade. It works remarkably well,” he stated.

In March 2024, the European Parliament assessed positively Armenia’s overall record of cooperation in the context of sanctions.

In its resolution on closer ties between the EU and Armenia, the European Parliament noted that despite the increased exports to Russia the EU’s Special Envoy on Sanctions, David O’Sullivan, has not voiced any concern over Armenian authorities’ cooperation with the EU on preventing sanctions circumvention.

“There appears to be a divergence of opinions between the Western expert community and officials from the US and EU on this matter,” Hovhannes Nazaretyan of EVN Report, a prominent Armenian analytical media platform, told Euractiv.

“While some experts occasionally accuse Armenia of attempting to circumvent sanctions, officials from both Brussels and Washington commend Armenia for its transparency in providing information and for its compliance with the requirements of the sanctions regime,” Nazaretyan told Euractiv.

However, despite the positive statements of relevant EU and US bodies specialised in monitoring sanctions implementation, Armenian experts stress the need to monitor both the Armenian government’s policies on sanctions and the media manipulation waves on English language media platforms.

This article is part of the FREIHEIT media project on Europe’s Neighbourhood, funded by the European Media and Information Fund (EMIF).

[Edited by Alexandra Brzozowski/Zoran Radosavljevic]

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