YEREVAN, Armenia —After 30 years of bilateral diplomatic relations, Azerbaijan—a predominantly Muslim nation that uses its vast oil wealth to buy Israeli drones and other weaponry—on Wednesday formally established its embassy in Tel Aviv.
Israeli Foreign Minister Eli Cohen and his counterpart from Baku, Jeyhun Bayramov, led the opening ceremony, with Bayramov highlighting their strong relationship built on “dialogue and mutual understanding.”
Yet with far less fanfare, the Jewish state is also quietly restoring its political and economic ties with Azerbaijan’s arch-enemy, Armenia.
Rising interest in this ancient landlocked nation coincides with Armenia’s booming economy, fueled by an influx of software engineers from nearby Russia who are eager to escape deteriorating conditions at home ever since their country invaded Ukraine more than a year ago.
At least 150,000 Russian professionals, and maybe more, have fled here—often with their families in tow—since the war broke out on Feb. 24, 2022. But Russia’s loss is Armenia’s gain. This mountainous, landlocked Caucasus republic of 3 million—an imperfect but lively democracy with an ancient alphabet and a fledgling tech sector—has benefitted handsomely from Russia’s brain drain.
For one thing, the new arrivals have helped push Armenia’s GDP growth to 13% last year, even as it remains mired in a simmering conflict of its own with neighboring Azerbaijan; the last major war between the two ex-Soviet republics erupted in 2020 and killed an estimated 6,000 people on both sides. Meanwhile, Armenian exports to Russia tripled to $2 billion in 2022 compared to a year earlier, and remittances in the other direction quadrupled to $3.2 billion.
“This influx of Russians is a mini-version of what happened in Israel after the Soviet collapse,” said Ashot Arzumanyan, a partner and co-founder at SmartGate VC, a venture capital fund that invests in startups involved in everything from AI and robotics to biotech manufacturing.
“So many scientists and engineers left the USSR and settled in Israel. That set off a very strong wave of talent and initiative,” said Arzumanyan, whose fund is currently seeking $15-30 million from high-net worth individuals, including many in southern California’s large and influential Armenian diaspora. “Something similar is happening in Armenia—lots of really talented people moving here and becoming part of Armenia’s tech scene.”