Eurasian Union Fails to Deliver for Armenia

Against expectations that Armenia’s economy would be boosted by membership of the Eurasian Economic Union, the figures show the country worse off than before.

Many Armenians hoped that improved customs and trading terms would open the way to a boom in exports to other members of the bloc, which came into being in January 2015.

When President Serzh Sargsyan formally signed the accession treaty in October 2014, he was upbeat about the prospects.

“It’s obvious to us that together, we are stronger economically and it’s easier for us to respond to global challenges,” he said. “The Eurasian union is huge in terms of geographical reach. We are certain that there’s enormous untapped potential there to boost our position on the map of the world.”

But in 2015, Armenia’s weak economy has struggled to compete against giants Russia, Kazakstan and Belarus.

A weak ruble has made Armenian goods relatively expensive in Russia, and imports from that country are correspondingly cheaper. The fifth bloc member, Kyrgyzstan, is also suffering a disappointing start. 

The head of the Union of Exporters, Raffi Mkhjyan, says the promised benefits of accession have yet to arrive.

“In recent years, we’ve constantly been told that the 170-million-strong market of the Eurasian union countries will open up colossal opportunities for us and that we’ll get easier access to the Russian market,” he told IWPR. “But what do we see now? The same queues and problems at the Russian border. That country thinks only about its own companies. The ruble has been devalued so much that it’s quite simply unprofitable for us to sell there. As a result, our exports are falling.”

Armenian’s statistical office reports that exports to Russia fell by a whopping 47 per cent year on year in the first half of 2015, and by 33 and 30 per cent to Kazakstan and Belarus, respectively.

Imports from Russia might have been expected to rise, since a weaker ruble has made them cheaper for Armenians. But instead they too fell, by 15 per cent, as spending power contracted due to the general economic situation, and specifically a reduction in spending power as Armenian migrant workers in Russia send less money home. Nevertheless, Armenia’s imports from Russia still dwarf exports to that country, at 420 million US dollars against 70 million in January-June.

The fall in Russian imports fits a pattern of slowing trade among all Eurasian bloc members, as regional economies slow down as a result of recession in Russia caused by low oil prices and Western sanctions.

International Monetary Fund figures from June predict the Russian economy will contract by 3.8 per cent this year, while Armenia will see zero growth.

Figures for January to May (the month Kyrgyzstan joined) show that trade between Russia, Belarus, Kazakstan and Armenia fell by 26 per cent compared with the same period in 2014. 

The ruble has fallen to 50 per cent of its value against the US currency at the start of 2014, whereas the dram has fallen by only 17 per cent over the same period – and almost not at all in the last seven months.

Gagik Makaryan, chairman of the Armenian Employer’s Union, says Russia has gained an unfair advantage over its Eurasian bloc partners because a cheaper ruble makes its goods so much more competitive than theirs.

“If the Russian economic slump continues, other countries will experience growing disappointment with the Eurasian Economic Union,” he said.

Stepan Safaryan, head of the Armenian Institute for International Affairs and Security, said the government in Yerevan should be doing a lot more to protect domestic businesses.

“We now see that when important economic decisions are discussed within the [Eurasian] union, the Armenian government’s voice isn’t heard,” he said.

Armen Karapetyan is the pseudonym of an Armenian journalist.