Trade Before Politics: Armenia and Turkey’s Quiet Path to Normalization

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From Kars railway station, the train rolls slowly east across the Anatolian plateau before stopping in Akyaka, the last Turkish town before the Armenian border. For now, the journey ends there. Just 20 kilometers away is Gyumri, Armenia’s second-largest city. Railway tracks have linked the two for decades, yet no trains have crossed the border since Turkey closed it in the early 1990s.

Few places illustrate one of the South Caucasus’ most enduring paradoxes more clearly. The two countries are separated by only a short distance. Politically, however, they have rarely been farther apart.

Yet the closed border never fully severed their economic ties. While diplomacy remained frozen and border crossings stayed shut, trade quietly found alternative routes. Turkish goods continued to reach Armenia. Companies kept buying and selling. Freight operators drove the same roads. Only the paperwork changed.

For more than three decades, Armenia and Turkey traded with one another without officially acknowledging each other as trading partners. Ankara’s decision to authorize direct trade has not reopened the border. It has, however, begun dismantling the administrative architecture that allowed commerce between the two countries to continue for more than 30 years. The question is no longer simply what this means for businesses, but whether bureaucratic reform can become the first tangible step toward long-delayed political normalization.

For years, bilateral trade survived through a complex network of intermediaries, primarily in Georgia, that allowed both sides to conceal, at least administratively, a commercial relationship that had never truly disappeared. Armenian companies could buy machinery, textiles, or construction materials manufactured in Turkey, but Turkish exporters could not declare Armenia as the shipment’s final destination. Instead, customs documents often listed a Georgian company as the initial consignee, with the cargo continuing to Armenia only after entering Georgian territory.

On May 11, 2026, Turkey’s Ministry of Foreign Affairs announced that it had completed the bureaucratic preparations needed to authorize direct trade with Armenia. From then on, customs declarations could officially identify Armenia and Turkey as the true origin and final destination of shipments, even while the land border remains closed.

The decision marks a significant shift in the administrative logic that has governed bilateral trade for decades. It is also part of a broader process. Since late 2021, when Armenia and Turkey appointed special envoys to explore normalization without preconditions, both governments have accumulated a series of incremental agreements that, viewed individually, may appear modest: regular meetings between the special representatives, Turkish Airlines’ role in facilitating air connectivity, a commitment to open the border to third-country nationals, joint restoration work on the historic Ani Bridge, technical studies to rehabilitate the Gyumri–Kars railway, and, most recently, authorization for direct trade.

That logic was visible again in Yerevan on September 3-4, when roughly 200 Armenian and Turkish business leaders gathered for a two-day conference focused on economic cooperation and cross-border ties. Participants from sectors ranging from information technology and tourism to construction, food production and transport discussed potential partnerships, supply chains and new areas of bilateral cooperation. The gathering, organized by Armenian and Turkish organizations under an EU-funded normalization program, offered another indication that private sector contacts are advancing even while the political process remains incomplete.

Yet the discussions also underscored the limits of economic normalization without physical connectivity. Armenian and Turkish business representatives called for the eventual opening of the common border, arguing that it would reduce transportation costs, facilitate direct trade, and create opportunities for joint investment. The conference also examined existing obstacles to transport links between the two countries, a reminder that although the administrative barriers to commerce are gradually being dismantled, much of the economic potential of normalization will remain unrealized as long as the border itself stays closed.

None of these developments has transformed the bilateral relationship on its own. Taken together, however, from administrative reforms and transport initiatives to increasingly direct contacts between the two countries’ business communities, they point in the same direction. That sequence helps explain why every economist, diplomat, and analyst interviewed for this article reaches essentially the same conclusion: the significance of the announcement should not be measured solely by the volume of goods that may eventually be traded under the new arrangement.

The more important question is whether an administrative reform can create the economic incentives that politics has failed to generate for more than three decades. Paradoxically, the answer to that question begins with a simple reality: the closed border never actually stopped trade. Although goods will continue to move through Georgia, authorizing direct trade could gradually reduce some of the costs created by years of administrative intermediation. 

For Hrant Akopian, economist and CEO of Converse Bank, that is precisely where the measure’s real significance lies. “At this stage, it is essentially an administrative change, albeit one with potentially positive economic consequences,” he says.

Akopian argues that direct commercial relations could lower transaction costs, simplify contractual arrangements, and streamline customs procedures. However, they are careful not to overstate the immediate economic impact. As long as trucks must travel hundreds of additional kilometers through Georgia, most logistical costs will remain. In other words, the measure makes doing business easier, but it does not yet change the geography of trade.

In Akopian’s view, its greatest value lies elsewhere. By introducing direct trade now, both countries are effectively preparing the administrative infrastructure for a scenario that does not yet exist: an open border. That preparation, he argues, is almost as important as the reopening itself. Should a political decision eventually be made, much of the institutional groundwork will already be in place.

Among the sectors most likely to benefit, Akopian points to businesses that rely on industrial machinery, spare parts, technical equipment, and raw materials imported from Turkey. Direct trade could reduce administrative delays, improve predictability, and make after-sales service more accessible. For a small economy that depends heavily on imports, geographical proximity is an advantage that is difficult to replicate. A replacement part that today takes weeks to arrive from Asia could be delivered within days if commercial supply chains with Turkey become fully operational.

“Turkey currently competes with China in several segments of industrial machinery and production equipment,” Adopian explains. “For Armenian companies, geographical proximity to Turkey could offer a significant advantage, not only in terms of price, but also logistics and after-sales service.”

Proximity, however, cuts both ways. The same geographical advantage that could benefit importers also poses significant challenges for sectors with limited capacity to compete against Turkey’s far larger economy.

Agriculture is perhaps the clearest example. Turkey’s highly mechanized agricultural sector enjoys economies of scale that many Armenian producers cannot match. “A broader influx of Turkish agricultural products could place considerable pressure on certain Armenian producers, particularly those operating with high costs or relatively low productivity,” Akopian acknowledges.

Turkish political scientist Cengiz Aktar shares that concern. In his view, the competitiveness of Turkish goods could have a profound impact on Armenia’s small and medium-sized producers. To illustrate the point, he compares Armenia to Syria and Iraq, where Turkish products have become deeply embedded in local markets, often at the expense of domestic producers.

For Akopian, the lesson is clear: unless Armenia adopts policies that improve productivity, expand access to financing, and encourage technological modernization, some sectors may soon face competition on a scale they have never experienced before.

At the same time, he sees opportunities beyond trade in goods. Armenia’s energy sector, he argues, could eventually become another area of cooperation. “Armenia has electricity generation capacity and possesses unique expertise in nuclear energy within the region,” he says. If the necessary interconnection infrastructure is developed, he believes Armenia could one day explore electricity exports to eastern Turkey.

Even so, Akopian cautions against allowing closer economic ties to become excessive dependence. “Turkey can become an important partner, but Armenia must continue diversifying both its export markets and its sources of imports,” he notes.

Without policies that strengthen domestic production, greater openness could simply lead to higher imports without comparable export growth. Current trade figures illustrate just how uneven the relationship already is. According to Trade Map, based on UN Comtrade data and national statistical agencies, Armenia imported $366.8 million US worth of goods from Turkey in 2025, while exporting just $6 million in return.

In practical terms, Armenia imported roughly 61 dollars’ worth of Turkish goods for every dollar it exported to Turkey, a stark illustration of the structural imbalance that already characterizes bilateral trade.

For Aktar, authorization of direct trade is nevertheless a positive development, particularly for communities along the border. Yet he also offers a clear warning: “The competitiveness of Turkish products could seriously harm Armenian small and medium-sized enterprises.”

He argues that the process continues to move at a frustratingly slow pace and ultimately requires something far more ambitious: a free trade agreement between the two countries, “something that is still nowhere on the horizon.”

The success of an open border will depend on far more than governments removing physical barriers, Aktar argues. It will depend on whether businesses, institutions, and societies on both sides are prepared to operate in an environment entirely unlike the one they have known over the past three decades.

This broader perspective shifts the discussion beyond economics alone.

“Trade certainly helps soften radical positions, but it cannot resolve long-standing disputes, grievances, and historical injustices, particularly from the Armenian perspective,” Aktar says. “Prime Minister Pashinyan’s overly conciliatory positions fit perfectly with Turkey’s century-old denial of the Genocide.”

At the same time, he warns against what he describes as a false reconciliation, one “embellished with hard currency.”

His criticism extends beyond economics. Aktar argues that what he calls “normalization through concessions” enjoys broad acceptance across large sectors of Turkish society and, in doing so, reinforces the persistence of official Turkish denialism.

Despite their sharply different assessments of how normalization should proceed, virtually every expert interviewed for this article agrees on one point: a third actor continues to shape every step of the process.

Normalization in Baku’s Shadow

Although direct trade has been presented as a bilateral decision between Armenia and Turkey, analysts inevitably point to a third actor: Azerbaijan.

Developments over the past several months have challenged the long-held assumption that normalization could move forward only once Armenia and Azerbaijan reached a comprehensive political settlement.

So far, virtually none of the concrete steps taken between Ankara and Yerevan has resolved the core disputes that continue to divide Armenia and Azerbaijan. Yet the normalization process has not stopped; it has simply advanced far more slowly than many had hoped.

None of the experts interviewed for this article believes the process has reached a dead end. Instead, they describe it as an exercise in strategic balance, in which every decision must be calibrated carefully to avoid unsettling an already fragile regional order.

For Benyamin Poghosyan, Senior Research Fellow at the Applied Policy Research Institute of Armenia (APRI), Baku remains one of the central variables shaping the entire process. In his assessment, the region has become trapped in a political loop.

Azerbaijan insists that Armenia amend its Constitution before signing a peace treaty. At the same time, it argues that normalization between Ankara and Yerevan should not be completed until such an agreement is reached. Each negotiation, therefore, has become dependent on  the other.

What Cengiz Aktar describes as a strategy of taking “small steps to manage Azerbaijan’s sensitivities,” Poghosyan views as political prudence, reflecting the deep economic, energy and strategic ties that inevitably limit Turkey’s freedom of action.

“Azerbaijan has invested more than $20 billion US in the Turkish economy, and President Aliyev maintains a close personal relationship with President Erdoğan,” Poghosyan says. He believes breaking this cycle will require more active American engagement with both Ankara and Baku before the 2026 U.S. midterm elections.

Former Turkish Ambassador to Azerbaijan Alper Coşkun offers a different perspective. In his view, Turkey today has considerably more room to act on its own initiative and to play a more active role in shaping a new regional balance.

“Until now, Ankara has largely followed Baku’s lead,” he notes. That, he argues, should now begin to change. Rather than simply accompanying developments, Turkey should actively help shape them.

Normalization between Armenia and Turkey and the Armenia-Azerbaijan peace process, he says, should move forward simultaneously, reinforcing one another rather than allowing either process to remain permanently hostage to the other.

Coşkun believes a different way of thinking is gradually emerging within parts of Turkey’s diplomatic and academic establishment. From this perspective, Turkey’s own strategic interests increasingly favor a stable relationship with Armenia, regardless of whether the peace process with Azerbaijan has reached its conclusion.

“Overcoming decades of hostility and rebuilding trust will undoubtedly take time, but Armenia and Turkey are closer than ever to establishing diplomatic relations and reopening their border,” Coşkun says. “Ankara’s desire to remain aligned with Baku, and to calibrate its relations with Armenia carefully, should not limit its ability to seize this opportunity and support the broader objective of consolidating regional peace in the South Caucasus.”

Having spent years helping shape Turkish foreign policy at the Ministry of Foreign Affairs, Coşkun argues that Ankara’s strategic calculations extend well beyond its bilateral relationship with Armenia. Among the factors driving this reassessment, he highlights the growing importance of the Middle Corridor—the trade route connecting China and Central Asia to Europe through the South Caucasus and Turkey—which has taken on new strategic significance since Russia’s invasion of Ukraine disrupted traditional transport routes.

Added to this are Turkey’s ambitions to strengthen Europe-Asia connectivity, diversify commercial corridors, and promote a more stable South Caucasus. From that perspective, authorizing direct trade appears less a political concession to Armenia than a decision fully consistent with Turkey’s own long-term strategic interests.

Now serving as an adjunct professor at Georgetown University, Coşkun argues that today’s regional landscape bears little resemblance to that of previous decades: “Azerbaijan has restored its territorial integrity, and Armenia has embarked on a qualitatively different and far more constructive path in its relations with both Azerbaijan and Turkey.” For that reason, he believes the South Caucasus may be entering an entirely new chapter.

“Pashinyan’s re-election has kept alive the prospect of lasting peace with Azerbaijan and normalization with Turkey,” he notes, adding that cautious optimism is echoed beyond diplomatic circles.

Speaking with Yervant Danzikyan, editor-in-chief of Istanbul’s Armenian newspaper Agos, there is a noticeable sense of patience, a perspective shaped by measuring this process in decades rather than election cycles. “Armenians in Turkey are waiting for progress on customs procedures and for the border to reopen, as this dialogue will make a significant contribution to the normalization process,” he says.

Danzikyan says officials in Turkey’s border communities share that expectation, aware of the economic opportunities reopening the frontier could create on both sides.

A Beginning, Not an End

For more than three decades, Armenia and Turkey traded without officially acknowledging it. Authorizing direct trade does not reopen a border that has been closed for over 30 years, nor does it alter the physical geography of commerce. It does, however, begin dismantling the administrative architecture that sustained this paradox for decades.

For now, the most significant change may not be the volume of goods that might eventually move between the two countries. It is more fundamental that both governments are beginning to formally acknowledge an economic relationship that, in practice, never ceased to exist.

Experience elsewhere in the region suggests, however, that opening markets alone does not guarantee balanced development. Unless Armenia adopts policies that strengthen domestic production, encourage innovation, expand export capacity, and support sectors most vulnerable to increased competition, an open border could deepen an imbalance that already exists. Armenia’s challenge, then, is not merely to gain access to a much larger neighboring market, but to do so without undermining its own competitiveness.

Ultimately, Ankara’s announcement appears less like the culmination of a diplomatic process than the beginning of a new one. For decades, normalization seemed to depend on sweeping political agreements. Today, it is advancing through far quieter decisions: a customs declaration, an administrative procedure, infrastructure waiting to be used again.

They are modest, almost bureaucratic steps. Yet in a relationship frozen for more than 30 years, even small administrative decisions can shape far larger political transformations.

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