In the wake of the Russian invasion of Ukraine, there have been multiple attempts in the West to contain and isolate the Kremlin both politically and economically. Apart from arms and monetary supply as well as humanitarian assistance to Ukraine, the G7 countries, the European Union, and a big number of multinational companies are actively pressuring the Russian economy by sanctioning key industries, the banking sector, etc. In the given realities, Russia seeks access to foreign markets to prevent a massive economic downturn and to some extent compensate for the economic damage caused by the West. This alignment not only changes the geopolitical environment in Eastern Europe but also affects the perception of long-term strategic and economic cooperation with Russia in the post-Soviet space. While some countries have refrained from making statements about the recent offensive, some still indirectly support the expansion of the Kremlin.
Armenia’s foreign policy to a large extent is based upon inter-parliamentary and inter-societal relations with Russia. As alliance partners within the Collective Security Treaty Organization, and also members of the Eurasian Economic Union, Russia and Armenia continue their communication within the framework of these organizations. Therefore, in the current circumstances, Armenia continues to remain committed to bilateral agreements with Moscow and not only displays military alignment with it, but it also helps the latter avoid the Western-imposed sanctions mitigating economic recession.
Sanctions on Russia
The annexation of Crimea in 2014 undermined the prospect of closer EU-Russia cooperation, at least for the duration of the Putin regime in power. Since March 2014, the European Union has progressively imposed a series of individual, economic, and diplomatic sanctions on the Kremlin and Russia in general. Despite the limited access to the primary and secondary markets of Europe for Russian state and private companies and further restrictive measures, the Russian leadership did not give up its expansive appetites and continued its attempts to destabilize Ukraine from within. As a result of the growing tensions on the border, the conflict escalated into a full-scale “military operation”, as the Russian side calls it. Following this move by the Putin regime, the EU has taken a series of restrictive measures against businesses, banks that operate on the territory of the Russian Federation, and individuals who are part of or have ties to the Russian government.
The largest foreign investors cut ties with Russia, and the EU and the U.S. restrict exports and jointly commit to more sanctions and isolation policies. In times of war, it is essential to have economic partners to finance military operations and secure the domestic market from externalities imposed from abroad. Under these conditions, Russia attempts to find support in the post-Soviet space to maintain bilateral ties and protect large and medium-sized businesses. Since Armenia positions itself as a loyal state to Russia in terms of strategic and economic partnership on the territory of the South Caucasus, it was quite logical to assume that it would not have wide room for political maneuver during the war.
Nevertheless, instead of taking a neutral ground, the official Yerevan policy keeps supporting the invasion militarily, financially and diplomatically. According to Turkish intelligence on March 25, Armenia handed over four Su-30 fighters with crews to Russia who will be presumably deployed to the battlefront. Recall that earlier Haber Global reported with reference to intelligence about the transfer of Syrian mercenaries to Ukraine, which was later confirmed by BBC and Russia itself. In fact, this step provides enough evidence for the direct involvement of Armenia in the war.
Armenia made its political position clear through its voting behaviour and a series of open diplomatic gestures. Earlier this month, the Armenian Catholicos hosted a delegation of high-ranked officials from Crimea led by the Deputy Chairman of the Council of Ministers of Crimea, Georgi Muradov. At the meeting the Catholicos expressed his gratitude to the Crimean officials and used this opportunity to bless the delegation. Additionally, Armenia is actively projecting Russia’s interests onto the international political stage by voting against resolutions condemning Russia’s offensive. For instance, Armenia was the only state party in the Council of Europe to vote against the suspension of Russia from the organization.
Armenia, Russia, and EAEU
In addition to the above-mentioned forms of military-strategic support, Armenia is interested in the recovery of the Russian economy. Over the past decades, Russia has acted in the South Caucasus not only as a guarantor of Armenia’s national security but also as its largest economic partner. For Armenia as a member state of the Eurasian Economic Union (EAEU), a regional organization predominated by Russia, the collapse of the Russian economy is a potent threat. Due to the relatively small size of the market and the war with Azerbaijan, Armenia’s investment environment has been significantly depleted. In this regard, Armenia considers the current isolation of Russian business as an opportunity for restoring its investment profile by attracting Russian firms and entrepreneurs. According to official data, 268 firms and about 1.5 thousand individual entrepreneurs moved to Armenia, mainly from Russia.
The Ministry of Economy encourages the relocation of business activities to Armenia and provides formal guidelines and the necessary know-how for Russian firms. On the other hand, the Russian investors, particularly from the IT industry, seek to consolidate and carry out their activities in the new business environment. As a number of Russian banks have been excluded from SWIFT, and with nearly half of the central bank’s assets frozen, banking has become one of the most limited sectors, which is tearing Russia away from liquidity and forcing it to move to other markets for transactions. The Ministry of Economy of Armenia consults/informs the Russian banks and other financial institutions on money transactions/investments via a telegram channel affiliated with it:
“In Armenia, it is very convenient to receive and withdraw cryptocurrency, terminals for withdrawing and receiving cash have even been installed. You can also pay for housing in cryptocurrency and even rent offices,”
In terms of bilateral trade, the Ministry of Economy predicts trade diversification and a general decline in trade volume, however there’s been no clear evidence observed, that could support this statement by the minister, Vahan Kerobyan. While new packages of sanctions amended by the EU and UK also include leather goods, clothing, perfume etc, the Armenian producers commit to supplying the Russian retail market with textile products to replace the sanctioned brands. At the same time, Armenian entrepreneurs supply the Russian automobile market, bypassing the Western sanctions which serves as an evidence for unconditional support not only on the part of the government but also from the private sector.
In the light of the ongoing war between Russia and Ukraine, the political establishment and society in Armenia, Azerbaijan and Georgia come up with different approaches to maintaining relations with both states, thereby demonstrating heterogeneity in the conduct of foreign policy in the region. Armenia’s supportive approach towards the Kremlin deviates from the official Baku and Tbilisi and contradicts the policy of the international community. It is logical to assume that in the near future, it is also possible that sanctions will be imposed against Armenia, or a warning will be given to it.
*About the author: Sinisa Pekevski is a journalist and political expert with more than 20 years of experience. He is covering the Balkan, Eastern Europe and Caucasus related political developments.