Armenia’s exports to Russia surge and fuel suspicions of sanctions evasion

Armenian exports to Russia increased by 187% in 2022 compared to 2021. Furthermore, more than half of these exports were re-exports from other nations, fueling speculation that Armenia plays a crucial role in redirecting Western products to Russia to help Moscow escape sanctions.

Since the implementation of Western sanctions on Moscow, Armenia has emerged as a critical transit route for commerce between Western nations and Russia due to its strategic location, Intellinews reported.

The European Commission proposed a new mechanism to penalize nations perceived to be doing insufficient to prevent Russia from circumventing limitations on sensitive exports. Armenia is one of the nations under consideration for potential EU sanctions.

Read also: Russia acquires Western technology for war via Armenia, bypassing sanctions

To date, the EU has used diplomatic pressure to try to enhance third-country sanctions implementation in terms of commerce with Russia, with dual-use commodities, goods that can be diverted from civilian industry consumers to use by military producers, being of particular concern. If that pressure is ineffective, a mechanism will provide EU member countries with authority to impose export limits on critical items.

The United States has also recognized Armenia as one of the five nations that provide obstacles to avoiding sanctions.

During a special hearing of the National Assembly’s Standing Committee on Financial, Credit, and Budgetary Affairs, Armenian Minister of Finance Vahe Hovhannisyan stated that items manufactured in Armenia represented 47% of total exports to Russia.

Hovhannisyan further stated that the tourism industry enjoyed a 90% increase, primarily due to Russian visitors. The increased inflow of money transfers contributed significantly to the dram’s appreciation.

The Armenian economy has become increasingly reliant on commerce with Russia. The Armenian economy has risen rapidly since the Russian invasion, gaining an impressive 12.6% last year. This development exceeded early estimates since the state budget 2022 projected an 11% growth rate, while the government’s aim for the same year was set at 7%.

The services sector emerged as the primary driver of GDP growth. However, significant development was also seen in the manufacturing and construction sectors.