Russian Trade Restrictions Expose Armenia’s Economic Vulnerability

Listen to the AI generated audio article. 

Just weeks ahead of Armenia’s pivotal parliamentary elections, Russia placed import restrictions on a variety of Armenian goods, suspending the sale of certain food products, flowers, alcohol and mineral water. 

Russia has laid down the gauntlet, effectively imposing a trade embargo in a brazen display of geopolitical bully ball. By attempting to place Armenia in an economic chokehold, Moscow has issued a stark reminder of how much leverage it still holds. Though faced with economic disruption, this could also provide the impetus for Armenia to accelerate European integration and reshape its economy. 

Officials from both countries have traded jibes as tensions escalate. When the Kremlin’s deputy foreign minister, Mikhail Galuzin, warned Armenia not to “dance at two weddings,” Armenia’s Minister of Economy, Gevorg Papoyan hit back, asserting that “we cannot trade sovereignty for tomatoes.” 

As Armenia looks to build ties with the West, its economy continues to rely on Russia with as much as 35% of its total exports going there last year. The Russian authorities have cited apparent food safety concerns as cause for the restrictions, though many observers believe they represent punishment for the government’s pro-Western stance.  

On the back of their recent election victory, the Armenian government has resolved to contest the restrictions, claiming they violate the terms of Armenia’s membership in the Eurasian Economic Union – the Russian-led free trade area.  

“We’ve contacted the Eurasian Economic Commission to have them review the barriers and restrictions being applied to us,” said Minister of Economy, Gevorg Papoyan. Nonetheless, Russia’s dominance within the customs union suggests that restrictions are likely to be upheld. 

During the build-up to the election, Moscow had in fact threatened to suspend Armenia’s membership of the economic bloc. Putin has ramped up the pressure, pushing Armenia to hold a referendum to decide between remaining in the Eurasian Economic Union or joining the European Union.  

“Over the last couple of years, Russia has lost its influence on Armenia,” says Haykaz Fanyan, an economist at the Armenian Center for Economic Studies. “The only way that they can significantly impact our country is through the economy.” 

Though Armenia remains some way off EU accession, Brussels has offered Armenia temporary economic support to mitigate the impact of the restrictions. President of the European Commission, Ursula von der Leyen, announced an initial €50 million aid package just days before the election. “Moscow is weaponizing economic relations for political pressure,” she said. “This is why Europe stands firmly with Armenia.” 

The EU relief program subsidizes the cost of tariffs as Armenia looks to diversify its exports. Since the restrictions have started some Armenian products have already entered Europe, with over 960,000 flowers exported to the Netherlands and Latvia in this month alone. 

It remains unclear whether this represents little more than a well-meaning gesture from Europe, or a longer-term economic measure that could transform Armenia’s economy. “We are just at the beginning of a long journey to the European market,” says Fanyan. “We are not fully ready yet.”  

Historically, Armenian producers have struggled to enter Europe’s protected market because of high import duties and exacting quality standards. Before the aid package, Armenian flower exporters had to pay an 8.8% tariff to sell their goods to Europe, notwithstanding other logistical expenses. 

In a recent statement, the Ministry of Economy said that the challenges surrounding export diversification “are related more to logistics, transportation costs, and market access than to product quality.” 

Prior to the restrictions, most agricultural exports went to Russia, though the European market has opened up over time. Just last year, the European Union authorized the sale of Armenian fish products across Europe, while the sale of Armenian spirits has steadily increased, reaching a value of €11 million in 2025.

Armenia’s agricultural produce increasingly meets European quality standards with many local exporters attaining Global G.A.P certificates – an internationally recognized quality standard. Minister Papoyan, has expressed confidence about Armenia’s future integration into European markets. “The quality of our products is not inferior to the most demanding European standards,” he said. “Our greenhouses are literally Mercedeses.’’  

Despite only accounting for less than 8% of total GDP, agriculture remains an important part of Armenia’s economy. According to data from the Ministry of Economy, agricultural workers make up nearly 18% of the national workforce. 

Armenian cherry farmers could be among the worst affected by the Russian restrictions. According to Ashot Khachatryan, an agronomist and farmer in the Ararat region, Armenia exports at least 80% of its cherries to Russia, while the European market remains very competitive. “Our cherries are good,” he said. “But Spanish cherries aren’t any worse.” 

Overall, most Armenian farms make up less than 3 hectares, and tend to have low overall output. “Small farms have smaller production and are less competitive in the export market,” says Khachatryan. He warns that until Armenia secures new export markets, farmers will continue to suffer. “This could have a really bad influence on rural areas,” he says. “Few people can even make a good living as a farmer.” 

Aside from agriculture, Russia has also imposed restrictions on Jermuk – Armenia’s leading mineral water brand. The Russian Food Safety Authority cited “excessive levels of bicarbonate ions, chlorides and sulfates” in the water. Jermuk’s executive director, Vladimir Margaryan, has refuted the claims, stating that “we have all the proof that our products have no danger.”  

According to him, Jermuk exports nearly 40% of its total production to Russia. With the Russian market now effectively shut off, Jermuk hopes to diversify its exports. “We have to focus on developing other markets now that we have a surplus of products,” said Margaryan. “There is a lot of competition in Europe, so it will take time and effort for our water to become known.” 

This is not the first time that Russia has flexed its economic muscles against Armenia. In 2023 Russia suspended imports of Armenian dairy – an early indicator of deteriorating relations following Russia’s failure to protect Armenia from territorial incursions by Azerbaijan. 

Russia has previously used similar tactics against Georgia. As tensions escalated in the mid-2000s, Russia introduced restrictions on Georgian imports, citing food safety concerns in another instance of so-called “sanitary diplomacy”. 

Though the restrictions disrupted Georgia’s economy, the wine industry managed to diversify its exports while also improving the quality over time. According to a study, Georgia succeeded in tripling its wine exports to the European Union between 2005 and 2012. 

Though this offers some hope for Armenia, it took years for the industry to fully recover.  “We can’t expect to change our trade structure overnight,” says Fanyan. “We need time to develop alternate markets.” 

Beyond exports, the Armenian economy also relies heavily on Russian energy. Ever since independence in 1991, Russia has supplied Armenia with natural gas at discounted rates. Gazprom Armenia, the Armenian subsidiary of the Russian parent company, supplies the majority of the country’s energy.  

In the buildup to the election, Putin threatened to cancel a 2013 bilateral agreement which provides Armenia with duty-free energy imports in return for Russian ownership of national gas distribution. Armenia currently purchases natural gas at less than half the price that Russia sells it to Europe. “The privilege that Armenia receives is always at someone’s expense,” said Kremlin spokesperson, Dmitry Peskov. “It did not fall from the sky.” 

Armenia’s reliance on Russian energy stands at the heart of its economic vulnerability. Since last year, Armenia has started importing gasoline and diesel from Azerbaijan, though it still makes up only a fraction of the country’s total energy supply. “As long as we continue to import most of our energy from Russia, it will be impossible to change the structure of our economy,” says Haykaz Fanyan.  

Outside of energy and trade, Armenia has managed to drastically reduce its military dependence on Russia. After establishing partnerships with India, China and France, Armenia has successfully diversified its military arsenal, away from nearly total reliance on Russia. According to the Security Council of Armenia, the share of Russian arms imports has dropped from 96% in 2021 to just 10% by 2024. 

Nonetheless, Armenia’s economy continues to rely on remittances from migrant workers in Russia. Though the number has declined since the start of the Ukraine War, nearly 70,000 Armenians work in Russia, with their remittances amounting to $3.37 billion in 2025 – nearly 12% of Armenia’s gross domestic product.

As members of the Eurasian Economic Union, Armenians can live and work in Russia without visas. However, Moscow has recently tightened migration policies with the introduction of new medical examination requirements and quotas on employing foreign nationals.  

The large Armenian labor force represents another potential avenue for Russia to exert economic pressure. Putin has warned that if Armenia withdraws from the Eurasian Economic Union, Armenian citizens will require work permits to live in Russia. 

In the build-up to the 2008 war with Georgia, Russia launched a mass deportation campaign of Georgian nationals from Russia. The subsequent loss of remittance income caused a shock to the Georgian economy. 

As the election campaign reached its peak, Putin continued to mount pressure on Armenia. In a birthday phone call with Pashinyan, just days before the vote, he reminded him that “the crisis in Ukraine began with efforts to move towards EU accession.”  

Meanwhile, Pashinyan has called for calm, promising to discuss the restrictions with Putin once the election has concluded. Just last week he offered congratulations to Putin on Russia Day, citing “the ties between our peoples that will continue contributing to strengthening of cooperation,”. Putin has yet to return the favor, withholding any congratulations on Pashinyan’s recent election victory. 

With no sign of the restrictions easing, some Armenian officials have voiced their concern. Armenia’s Central Bank Governor, Martin Galstyan, has warned that a decrease in exports could lead to inflation and a depreciation of the national currency. He also cautioned that “if the price of gas suddenly increases, it will naturally lead to inflation and have secondary effects.”

Armenia’s economic future hangs in the balance, oscillating between potential catastrophe and opportunity. While Europe may be riding to the rescue, only time will tell if it is Russia that still holds all the cards.  

Recently published

With the parliamentary elections over and a new government set to take shape, what does PM Nikol Pashinyan’s renewed mandate mean for Armenia’s security, foreign policy and place in a rapidly changing geopolitical landscape?