The economic development of a country with a small domestic market, such as Armenia, depends heavily on integration with larger economies and on opportunities to sell Armenian goods and services in their markets. Economist Suren Parsyan believes Armenian producers cannot achieve steady growth, strong profitability and higher wages by relying solely on domestic demand. Expanding links with foreign markets should therefore be a central part of the country’s economic policy.
The economist considers the development of services and the attraction of investment important alongside exports of goods. International trade, however, is one of the main ways to raise a country’s profile and create opportunities for cooperation in other fields, he says.
“Trade is, one might say, the main calling card that makes a country known in the international market. Then come investment and various educational, cultural and scientific programs. Countries have long come to know one another through trade, and I think that connection remains highly important today,” Parsyan said, stressing that Armenia should develop trade links in every direction.
EAEU and EU: access to markets is the central issue
Discussing Armenia’s economic relations with the EAEU and the European Union, Parsyan said public debate often presents the issue solely as a political choice. In his view, the primary question is access to markets.
The economist said political preferences should be distinguished from economic interests. Armenia needs opportunities in both large markets, taking into account existing trade links, demand for Armenian products and the structure of its exports.
“At present, our main market is the EAEU, but we also have the EU market. Over the past year, there have been quite interesting changes in both directions,” he said.
The structure of EAEU trade is more favorable to Armenian production
From the standpoint of economic security, Armenia should avoid excessive dependence on any one direction. Parsyan believes economic dependence can also become a means of influencing political and military decisions. Armenia therefore still has considerable work to do to balance its external economic relations.
The economist noted that Armenia’s dependence on the EAEU, particularly Russia, has grown substantially over the past decade. “Last year, the EAEU accounted for approximately 35–36% of our total trade. This year, that has declined a little, reaching 29%,” Parsyan said.
In his view, an important feature of Armenia’s trade with the EAEU is the range of goods it exports. Exports to that market consist mainly of finished consumer products, including canned goods, alcoholic beverages, juices and other products of Armenia’s processing industry.
The economist considers this significant because exporting processed products is a key condition for developing the economy and expanding the country’s production capacity.
For Armenian manufacturers, the EAEU market is therefore more than a destination for sales. External demand also offers a way to develop local production and increase its scale.
More trade with the EU does not yet mean a better export mix
Parsyan described a different picture in Armenia’s trade with the European Union. According to him, the EU’s share of Armenia’s total trade had tended to decline over the previous eight years, although the situation changed somewhat over the past year.
The EU accounted for 13% of Armenia’s total trade last year, he said, while its share has reached 19% this year.
The economist’s concern, however, is less about the volume of trade than about the types of goods exported. Armenia mainly sends mining products and raw materials to the EU, including blister copper, molybdenum and other commodities.
Parsyan believes this structure shows that Armenian exports to the European market are predominantly raw materials, which he does not consider a healthy model for economic development. “This shows that Armenia’s exports are raw materials. In this respect, Armenia is becoming a source of raw materials, which does not indicate a healthy economy or a healthy trading partnership. We should try to export finished consumer products in that direction as well,” the economist emphasized.
In his view, expanding trade with the EU should go together with a change in the composition of exports. Moving from raw materials to finished goods would allow more economic value to be created within Armenia through the development of its processing industry.
Financial services exports grow amid sanctions on Russia
Turning to services, Parsyan said the statistics are fairly complicated, but growth in services exports to Russia has been particularly noticeable in recent years. One of the main reasons is the new situation in banking and finance.
Following the sanctions imposed on Russian companies and banks after 2022, Armenian banks and financial institutions began servicing Russian financial flows. According to the economist, this contributed significantly to the profitability of Armenia’s banking system.
He also said Russian funds are transferred to Europe and the United States through Armenia’s financial system, emphasizing that international financial institutions know where the money originates.
“Armenia has become a means of getting money from Russia to the EU and the US. This benefits both sides; both the EU and Russia need it,” Parsyan said.
At the same time, the economist disputed the view that Armenia’s economy has made large profits from the economic changes caused by the war in Ukraine.
In his assessment, Armenia’s income from financial intermediation is limited because its role is largely to collect fees, while the main beneficiaries of the flows are elsewhere.
“People often think Armenia is making money from Ukraine’s tragedy in this way. Armenia’s earnings may be one or two percent. Russia is among the beneficiaries of these financial flows, while Armenia earns only a few percent in commission. It is not as though Armenia made enormous profits, completely solved poverty or achieved double-digit economic growth,” he said.
Parsyan nevertheless considers the growth of financial and banking services exports an economic opportunity for Armenia. He believes the experience could open new prospects for the information technology sector as well.
Armenia as an intermediary for goods and services
In the economist’s view, the substantial inflow of Russian IT specialists and companies into Armenia after 2022 also helped create new avenues for services exports. Those specialists established IT companies in Armenia and began selling their products to the US, EU and other markets.
Armenia could therefore serve as an intermediary economic platform not only for goods, but also for financial and technology services.
According to Parsyan, goods generally flow toward Russia, while services and financial activity move in the opposite direction. In particular, goods imported into Armenia from the EU and US may be re-exported to Russia, whereas services linked to Russian financial and technological activity may reach Western markets through Armenia.
“Armenia is an intermediary not only for goods — for example, large numbers of phones and various devices are exported to Russia through Armenia — but also for IT services and finance. In other words, goods come from the EU and US and go to Russia, while services move in the opposite direction,” the economist said.
He believes Armenia should assess and preserve the economic opportunities that have developed in both directions.
Leaving the EAEU could mean losing trade opportunities in both directions
Parsyan believes maintaining links with both the EAEU and the EU is essential to Armenia’s economic development. He warned that setting the two relationships against each other and demanding a choice of one could cause economic losses for Armenia in both directions.
In particular, if Armenia breaks its economic ties with the EAEU, it could lose both the opportunity to re-export goods from Western countries to Russia and the opportunities associated with servicing services exports and financial flows from Russia to the EU.
In the economist’s assessment, these directions are interconnected for Armenia’s economy. Giving up one could also restrict economic activity linked to the other.
“The key to Armenia’s development and achievements is maintaining ties with both at the same time. When Armenia faces an either-or choice, that means risking the loss of both at once,” Suren Parsyan concluded.
👉 Economy