Russia and other leaders of the Eurasian Economic Union (EEU) are toughening their rhetoric towards Yerevan, publicly warning of the dire economic consequences of choosing a Western vector and possible withdrawal from the EEU.
While the political elite tries to ease the tension and calculate the price of redirecting exports to Europe, Armenian farmers are already suffering the first heavy blows of the actual restrictions of the Russian market.
EATM ultimatum and election price
Russian President after his visit to Kazakhstan on May 29 Vladimir Putin clearly outlined the “red lines” and economic losses that await Armenia in case of leaving the integration structures. Moscow is clearly transitioning to a tough geopolitical vocabulary.
“In case of leaving the EAEU, Armenian citizens will have to obtain a work permit to work in Russia,” Putin stated during the press conference. He emphasized that the severance of economic ties will also lead to the closure of markets for agricultural products. “Participation in free trade agreements will be closed.”
The Russian leader expressed skepticism about Western promises, stressing. “Europe only promises 2.5 billion euros of investments in Armenia, while Russia has already made significant investments in the country’s economy.” The most severe warning, however, concerned energy carriers. according to Putin, the increase in the prices of Russian energy carriers may cost around 14 percent of Armenia’s GDP.
At the same time, at the summit of the Eurasian Supreme Economic Council held in Astana, EAEU leaders called for a referendum on EU membership in Armenia as soon as possible, effectively putting systematic pressure on Yerevan to clarify its orientation. Putin concluded his speech with a meaningful message. “Do what you think is best… Whatever you say will be done.”
Yerevan’s response. The EU market is still not an alternative
Official Yerevan is trying not to escalate the conversation, avoiding sharp reversals and escalation of the situation. The ruling “Civil Pact” party declares that Armenia will remain a member of EAEU as long as EU membership reforms are compatible with it.
However, the representatives of the economic bloc indirectly admit that the European market is not able to replace the Russian market at this stage, mainly because of the uncompetitive cost. RA Minister of Economy Gevorg Papoyan clarifies that although Armenian products meet European standards in terms of quality, they lose in terms of price.
“The Armenian producer buys strawberry seedlings from the same Dutch store as the French farmer. But the Armenian producer pays money to bring that seedling to Armenia, then he has to pay more money to take that strawberry to Holland or France, to which are added the customs duty and… transportation costs,” Papoyan said in a conversation with CivilNet, adding that European farmers receive up to 50% compensation and various subsidies from the state. According to the minister, within the EU, as well as in the neighborhood (Turkey, Morocco), there are much cheaper producers.
The government has also calculated the potential burden of compensation. According to the minister, only to subsidize and redirect the export of flowers, tomatoes and peppers, around 20-30 million dollars will be required by the end of the year. “That burden is a bearable burden,” assures the minister, but the reality of the farmers proves the opposite.
Farmers’ concern. losses and loans of millions
In the shadow of loud political and election campaign announcements, Armenian farmers have collapsed. Against the background of restrictions on the Russian market and trucks returning from the border, the domestic market has become oversaturated and the price of the product has depreciated.
One of the flower growers of the Ararat Valley, in a conversation with “Armlur”, desperately destroying his own crops, describes the pests. “Now everything is blocked. Damage runs into millions. Once we took cheap loans to start a business, now we have to take new, more expensive loans… And this is not only the problem of flowers. Greens and strawberries are also brought back from the border in furs.
The farmer calls the prospect of exporting to Europe unrealistic. “We bring the flower seedlings from Europe, what should we sell them now? Europe will find hundreds of defects on our choicest, healthy flower. And the Russian road is closed.” In the domestic market, the prices have fallen so much that 5-6 bunches of flowers are sold for 1000 drams, which does not even cover the cost of the expensive cellophane.
Vegetable growers are experiencing the same crisis. One of the greenhouse owners, who took a loan of 40 million drams (which increased to 43 million with interest), reports that the 4-5 tons of tomatoes he collected in the greenhouse are spoiling. Due to the presence of cheap Persian products in the market and lack of export, the price of tomatoes has dropped from 1000 drams to 200 drams.
“Every day, money is added to it… We cannot sell that plant to pay our loans, to support our family,” warns the farmer, reports news.am. He considers the government’s proposal to sell the product in small points of Yerevan to be ridiculous. “A person will come and buy 1 kilogram, I sell 100 kg. I will pour 99 kg. We will not be able to sell our products in Armenia, it is impossible… We will already have a problem with bread.”
Energy shot
The situation will reach its conclusion when the main lever is put into action – the price of energy carriers – gas. Armenia’s agriculture, especially greenhouse farms, is built on the model of consumption of cheap Russian gas and state subsidies.
If the increase in gas prices is added to the closing of the market, the reduction of exports and the credit burden of farmers, all the necessary ingredients for the “perfect storm” will be formed. Without alternative competitive markets and the operation of the insurance system, the country’s agrarian sector may face serious problems, which will become a serious socio-economic challenge for Yerevan in the coming months.
—