Armenian exporters have recently faced a growing number of restrictions imposed by Russia. The measures primarily affect products in which Armenia holds a comparative advantage, including agricultural goods, dried fruits, greenhouse products, and other export-oriented sectors.
In response, Armenian authorities have begun exploring alternative export destinations. One of the most important initiatives involves expanding access to European Union markets through duty-free exports and partial subsidies for transportation costs. However, can Europe realistically become an alternative to Russia? Economist Vardan Aramyan offers his assessment.
Armenia’s Export Structure Has Shifted Toward Russia
According to Aramyan, Armenia’s export structure has changed significantly over recent years in favor of Russia rather than Europe.
Exports to the European Union amounted to approximately $683 million in 2018. By the end of 2025, that figure had slightly declined to around $667 million. Meanwhile, exports to Russia increased more than fourfold, rising from roughly $666 million to $2.9 billion.
Even after excluding re-export operations, which Aramyan estimates at around $1 billion, Russia remains by far Armenia’s most important export market.
Dependence Extends Beyond Trade
The economist notes that Armenia’s economic ties with Russia go well beyond exports.
Private transfers to Armenia total roughly $1 billion annually, with nearly half originating from Russia. This dependence further limits the country’s ability to quickly redirect economic activity toward alternative markets.
Tariff-Free Access Alone Is Not Enough
Aramyan argues that eliminating customs duties does not automatically guarantee successful entry into European markets.
“Market access is not just about tariffs. Business relationships, brand recognition, and competitive conditions matter as well. European markets are far more saturated and competition is significantly tougher. Armenian companies will need substantial marketing investments to establish a presence,” he explains.
Economic Distance Matters
The economist refers to the widely used CAGE Distance framework developed by NYU Stern professor Pankaj Ghemawat.
The model evaluates not only geographic distance but also cultural, administrative, and economic differences between countries.
According to Aramyan, these factors often determine how easy or difficult it is for companies to enter a foreign market.
Shared language, cultural familiarity, similar business practices, and legal compatibility make Russia a more accessible destination for Armenian exporters. By contrast, European markets involve additional barriers linked to language, regulation, and business culture.
Diversification Will Take Time
Aramyan notes that the CAGE framework is commonly used by companies when assessing investment, production, and export opportunities.
Its findings suggest that diversification toward European markets is possible, but it will require time, investment, marketing efforts, and significant adaptation by Armenian businesses.
In conclusion, the economist argues that Europe can become an important component of Armenia’s export diversification strategy. However, in the foreseeable future, it is unlikely to replace the scale and economic significance of the Russian market.