Authorities expected Russian restrictions to end after the elections, but those expectations were not justified, economist says

Prime Minister Nikol Pashinyan held a telephone conversation with Russian President Vladimir Putin yesterday, during which he asked Putin to take steps to resolve the restrictions on Armenian exports to Russia.

During the pre-election period, Pashinyan had urged businesses not to worry, saying the government would provide subsidies and that products could be redirected to EU markets.

Economist Aghasi Tavadyan believes Armenia must diversify its export markets.

“Our products should not be destined exclusively for the Russian market. However, if we are talking about goods affected by the restrictions, around 90% were intended for Russia. The initial expectation was that these restrictions would remain in place until the end of the elections and that the situation would then stabilize. Instead, we see that they continue. This is clearly not in the government’s interest, which is also reflected in the recent telephone conversation,” Tavadyan told Aysor.am.

He noted that this is the peak season for stone fruit exports, with 94% of production destined for the Russian market:

“The same applies to tomatoes, while about 95% of cut flowers are exported to Russia. Businesses never planned to sell these products to the EU because they do not meet European standards and other market requirements. There are also logistical challenges. Even when shipments have been sent to the EU, there have been cases where the goods spoiled in transit.”

Tavadyan said that some exporters have found alternative routes to the Russian market:

“They transport their products through Georgia, where they are relabeled as Georgian goods before being exported to Russia. This involves paying customs duties and creates additional costs. At the same time, the depreciation of the ruble has significantly increased exporters’ potential losses.”

According to Tavadyan, Armenia’s economic ties with the Eurasian Economic Union have strengthened considerably since 2018:

“Our exports to Russia and the EAEU have increased almost eightfold over the past eight years, while exports to the EU have remained virtually unchanged and have even declined by about 1%. This shows that, regardless of political statements, the government’s main growth strategy has been focused on the EAEU market. Otherwise, we would have seen a very different trend.”

Asked why the government made optimistic statements during the election campaign if this was the reality, Tavadyan replied:

“The government’s main expectation was that the restrictions would remain in place only until the elections and would then be lifted. Those expectations were not justified.”
Commenting on the restrictions affecting dairy products, Tavadyan said they account for a relatively small share of Armenia’s exports:

“The sectors suffering the most are fruit exporters, cut flower producers and fish farmers. The cut flower industry was developed specifically for the Russian market, so exporting to the EU makes little sense. Because of sanctions, European flowers cannot enter Russia directly. We import European bulbs to Armenia, grow the flowers here and export them to Russia, which has been a profitable business model. If this issue is not resolved, the flower industry, which has experienced significant growth, will face serious difficulties. Fish farming is also under severe pressure. If the current situation continues, it is reasonable to expect that by the end of the year many fish farms will have shut down.”