Against the backdrop of Moscow’s political disagreements with Yerevan, the possible revision and increase in Russian gas tariffs could have a severe multiplier effect on Armenia’s macroeconomic stability, leading to a sharp drop in consumption, loss of competitiveness of local producers, and weakening of the energy system. Economist Vardan Aramyan gave such a warning in a conversation with VERELQ.
Referring to the observations that the disruption of trade and economic ties with Russia may cause the GDP to fall by 10-20%, the expert refrained from precise percentage forecasts, noting that they require serious calculations, but detailed the main ways of impacting the economy.
Moscow’s warning and Yerevan’s assurances
Russia has warned Armenia in an official letter that it may suspend or cancel the agreement on the supply of natural gas, oil products and rough diamonds signed in December 2013, if Yerevan continues its political course of joining and approaching the European Union. The agreement envisages duty-free supplies of gas and oil products from Russia to Armenia, with domestic consumption volumes and without the right to re-export to third countries.
Statistics show that Armenia is highly dependent on Russia in terms of energy. In 2025 alone, Gazprom supplied the country with about 2.7 billion cubic meters of gas, while another 476 million cubic meters were obtained from Iran under the gas-for-electricity scheme. The price of Russian gas for Armenia is currently highly preferential and is 177.5 dollars for 1000 cubic meters.
In response to the warnings from Moscow, the Armenian side is trying to ease the tension. The RA government responded that they do not expect an increase in gas prices at the moment. Official Yerevan assures that there are existing contracts, and relevant departments are working intensively and daily with the Russian side to discuss the issues that have arisen in a partnership atmosphere and to ensure the fulfillment of obligations.
Double price increase of gas
Despite the government’s reassuring statements, independent analysts warn of impending dangers.
According to Aramyan, despite the government’s assurances about the existing contracts, the possible doubling of the price of gas on the border (for example, from $177 to $350 per 1,000 cubic meters, which is still below the exchange rate of $400-600), will directly double the final price for both the population and businessmen.
“If in the past 570 million dollars were flowing out of our country to import gas, now that number will reach more than 1 billion dollars,” the economist noted. He added that only the non-market subsidy of the gas tariff will cost the state at least half a billion dollars in annual losses.
Referring to the aid packages offered by the European Union, Aramyan described them as insufficient in comparison to the ongoing damages. He reminded that the announced package of 270 million euros is intended for 3-4 years, a significant part of which is technical support, and the cash allocation is only 50 million.
A hit to consumers and producers
According to the expert, the increase in the price of energy carriers will trigger an economic chain reaction, first of all through the reduction of consumption. Doubling of utility payments will force citizens to reduce spending in other areas with the same income, which will affect the demand for local products.
In parallel, business production costs will increase sharply. As a risk zone, Aramyan pointed out the greenhouse farms, which will lose their competitiveness in the event of an increase in energy prices and will be pushed out of the market by cheaper Central Asian, particularly Uzbek and Tajik agricultural products (tomatoes, watermelons, etc.). As a result, many businesses will be forced to cease operations.
Energy security and the price of “tolerability”.
Vardan Aramyan drew special attention to the vulnerability of the country’s energy system. About 30% of electricity in Armenia is produced in gas-fired thermal power plants, of which Russian fuel serves as raw material for at least half, and Iranian gas for the other half.
The economist critically approached the position of the Public Services Regulatory Commission (PSRC) that the possible impact of inflation would be “tolerable” for the economy. He warned that the severity of the consequences depends on whether the pressure will be one-time or consecutive.
“When a person gets a stroke and is confined to bed, the situation may be ‘tolerable’: he is still alive, but he cannot move, and even after recovery, his body will not be the same again,” the economist noted, concluding, “Therefore, we must clearly understand whether it is worth the political price that we are going to pay today.”
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