Armenia’s surge in exports to Russia raise concerns about sanctions circumvention

Bilateral trade between Yerevan and Moscow has surged despite Armenia and Russia’s worsening political relations, raising concerns among Western allies about Armenia’s respect for the sanctions against the Kremlin for Putin’s war in Ukraine.

Armenia’s exports to Russia surged in 2022-23

Following the imposition of sanctions on Moscow, exports from Armenia to Russia increased threefold in 2022 and then again doubled between January and August of 2023, giving rise to allegations regarding the former Soviet nation’s adherence to the Western sanctions policy, according to Euractiv.

Armenia’s governmental statistics agency reports that trade between Armenia and Russia will almost double to $5.3 billion in 2022. This pattern persisted rapidly throughout 2023 and the first several months of 2024. Moreover, the re-export of goods from other nations is primarily accountable for the rise in Armenia’s exports to Russia.

Cell phones, laptops, headsets, and other technical equipment are among the goods that Armenia has sold to Russia during the past two years, according to the UN Comtrade Database. Armenia does not produce these items.

Armenia re-exports to Russia electrical machinery and equipment made by third nations

As to the TradeMap data, Armenia achieved a significant surge in exports to Russia of two categories of non-domestic products in 2022. Armenia increased its exports to Russia by 38 times, from 12,168K to 462,349K, for the goods under the category “Electrical machinery and equipment and parts thereof; sound recorders and reproducers; television.” Also, Armenia boosted its exports to Russia by 30 times, from 9,615K to 290,779K, in the category “Vehicles other than railway or tramway rolling stock, and parts and accessories thereof.”. 

Microchips and advanced electronics, produced mainly by Wetsern companies and used by Russia in its missiles and attack drones, fall into these two categories. It prompts concerns that Russia may be utilizing businesses with headquarters in Armenia to bypass Western sanctions and get the parts it needs for its weapons manufacturing.

Data for 2023 is not yet available on the platform. The transactions grow in the other direction at the same time. Following the sanctions on Russian raw materials, Armenian entities have begun to re-export Russian diamonds and gold in recent months.

Armenian government implemented mandatory permits for shipping of dual-use goods

The Armenian government has invested in providing almost real-time information on imports and exports to the Russian Federation and has made trade data publicly available in order to prevent any potential problems with adhering to the sanctions mechanism.

In the meantime, Armenian government implemented mandatory government permits for shipping of microchips, transformers, video cameras, antennas, and other electronic equipment to Russia in 2023 in an effort to tighten monitoring of potential sanctions circumvention by enterprises registered in Armenia. Its efficiency is yet to be confirmed.

Armenia’s reliance on trade with Russia

Russia has emerged as Armenia’s top trading partner following its 2014 entry into the Moscow-led Eurasian Economic Union. Russia’s share in the foreign exports of Armenia rose further in the months following the invasion of Ukraine by Putin’s troops.

Compared to the EU’s 13% share of all international commerce in 2023, trade with Russia constituted almost 35% of the nation’s total.

Due to Armenia’s economy’s heavy reliance on trade with Russia, joining the sanctions against Moscow would almost certainly result in an unprecedented economic collapse.

Armenians fear that the Russian government may use their country’s economic reliance as political leverage; according to recent International Republican Institute (IRI) opinion polls, 40% of Armenians believe that Russia poses the biggest political threat to their country, second only to Turkey and Azerbaijan.

On the other hand, as commerce increases, tensions between the Kremlin and Yerevan, including Armenia’s rapprochement with the EU, continue to rise.

Monitoring of Armenia’s trade with the West and re-exports to Russia

Western media periodically cite the higher export numbers since February 2022 as proof that Armenia is deliberately helping Russia evade the sanctions.

Armenian Prime Minister Nikol Pashinyan has lately addressed the allegations of Armenia’s circumvention of sanctions. Pashinyan emphasized that neither the US nor the EU had any concerns about Armenia adhering to the sanctions in an interview with France 24.

It is true that representatives from the US and the EU have said multiple times that the Armenian government cooperates with their Western allies.

The European Parliament gave Armenia’s cooperation a good review in March 2024 in the face of sanctions.

The EU’s Special Envoy on Sanctions, David O’Sullivan, has not expressed any concerns about Armenian authorities’ cooperation with the EU in preventing sanctions evasion, as the European Parliament noted in its resolution on closer ties between the EU and Armenia. This is in spite of the increased exports to Russia.

There is still a need to analyze export data from Armenia to Russia, especially re-exports of Western goods, and to identify trade in dual-use goods. Furthermore, to prevent Moscow’s continued circumvention of sanctions from prolonging the war and undermining the West’s support for Ukraine, the EU and the US must closely monitor the exports of sensitive technologies from Western countries to Armenia.

Moreover, the supply of advanced technologies to Russia raises the threat of a direct war between Russia, NATO, and the EU. Ensuring the effectiveness of sanctions and halting the supply of dual-use goods is much more cost-efficient than a potential war with Russia.

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