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The findings of a research study entitled “Prospects for Armenia’s Economic and Institutional Engagement in Different Economic Systems” were presented and analysed at a discussion organised by the Konrad Adenauer Foundation and the Economic Journalists’ Club on 14 October.
Speakers examined the development of Armenia’s economy and its main trends since the country joined the Eurasian Economic Union, as well as the current situation and future prospects.
Jakob Wöllenstein, head of the regional programme “Political Dialogue South Caucasus”, drew parallels between the current situation in Armenia’s economy and economic developments in Belarus around seven years ago.
“Armenia has various economic dependencies. These are not necessarily negative in themselves. However, two important warnings arising from my previous experience should be taken into account. First, if the system on which a country depends enters a crisis or collapses, the consequences can have a knock-on effect on the dependent country. Second, economic interdependence can become an instrument of political pressure,” he said.
How can Armenia diversify its ties across different economic environments? Answering his own question, Wöllenstein said:
“I think one of the main conclusions is that Armenia can strengthen its position by diversifying its economic partnerships. When we examine the politicisation of membership of the Eurasian Economic Union, we see that economic instruments can be used to exert political pressure. Energy prices, for example, can become a means of pressure, while membership itself can serve as a lever of political influence. Armenia is therefore right to consider diversifying its economic ties.”
Wöllenstein also noted that closer relations or integration with the European Union had their own characteristics and conditions: economic cooperation could also entail the risk of sanctions.
“The European Union also has experience of using economic dependencies and trade relations as instruments of sanctions. The difference is that EU sanctions are generally linked to violations of democratic standards, a state’s conduct in matters of peace and war, or a failure to fulfil its commitments. In other words, when a country faces EU economic sanctions, there are usually specific grounds for them.
“The same applies to product quality. We often hear claims that a particular product no longer meets requirements. If, for example, the European Union suddenly announces that a product, including water, no longer meets the established standards, it is worth checking whether there is a genuine problem. Diversifying economic dependencies while recognising that every alliance has its own conditions and limitations is therefore a sensible approach,” he said.
Sos Khachikyan, Dean of the Faculty of Informatics and Statistics at the Armenian State University of Economics, then presented the study’s findings. He said the research had examined the main directions of economic relations and the opportunities that could arise under different forms of economic integration.
“Armenia’s opportunities for economic integration with the European Union remain limited in some sectors. At the same time, the energy sector is particularly significant because it involves substantial resources and volumes of imports and exports.
“Armenia’s economic relations with its various partners are not equally developed. In some areas, dependency is considerable, while economic ties are limited and not particularly stable. These trends must also be taken into account when developing economic policy for the coming years,” he said.
Khachikyan said particular attention should be paid to the structure of the energy market. According to him, some indicators presented in the research showed that, for certain products or markets, dependence on a single source could reach 92% or even higher.
“This means that these markets are not sufficiently diversified. Such a situation can have serious consequences for economic security, industry and the country’s overall development,” he said.
Discussing recent changes in petrol and diesel prices and supplies in Armenia, Khachikyan said the situation could have been much more difficult without opportunities to import from other countries, including Romania, Bulgaria and Egypt. This demonstrated that alternative import routes and partners could reduce the impact of external shocks.
In Khachikyan’s assessment, diversifying the natural gas market was a much more complicated challenge, with fewer alternative options.
The study also examined the possibility of replacing gas with electricity. It was noted that, although using electricity could be more expensive than gas in some cases, it could provide an alternative in the event of supply disruptions.
The discussion highlighted that options for avoiding disruptions to energy markets and supply restrictions were more limited in the case of natural gas. Gas import sources could not be changed through a political decision alone: the necessary infrastructure was also required.
In particular, implementing the option of importing gas from Iran required both suitable infrastructure and the resolution of several technical and contractual issues.
Khachikyan also identified limited transport and logistics infrastructure as a significant obstacle to expanding economic ties with the European Union. He said Armenia currently lacked sufficient capacity to establish large-scale supply chains with the EU because of its infrastructure, geographical position and the accessibility of its borders. He believed the situation could change substantially with the opening of the Armenia–Türkiye border, creating shorter and more efficient transport links.
The importance of the financial system in economic integration was also highlighted. It was noted that developing Armenia’s financial system and bringing it into line with international requirements could support cooperation with European markets.
During the panel discussion that followed the presentation, Khachikyan, Head of the Investment Council of Armenia’s office Hovsep Patvakanyan, Economic Development Centre co-founder Gagik Makaryan, and Karen Azaryan, an expert in EU trade policy, economic cooperation and political dialogue, examined aspects of the subject in greater detail and answered questions from several participants.