RFE/RL – Armenian Agricultural Loans Restructured Due To Russian Sanctions

Moscow imposed the bans in late May and early June as it pressed Yerevan to quickly choose between continuing to seek membership of the European Union and remaining part of a Russian-led trade bloc. Russia has long been the main export market for Armenian fruits, vegetables, mineral water, flowers, fish and alcoholic beverages.

Armenian greenhouses and fish farms employing thousands of people are especially dependent on the Russian market. The Armenian government has scrambled to help their owners as well as the other affected entities by subsidizing their exports to other countries. The measure appears to have had a limited impact so far, as evidenced by a 20 percent year-on-year drop in Armenia’s overall exports recorded in June.

The government has also encouraged the banks to extend agricultural loan repayments due to the sanctions.

“We have current statistics showing that more than 30 billion drams worth of loans have already been restructured,” Hovannes Khachatrian, the Central Bank’s deputy governor, told a news conference.

“In the worst-case scenario, the portfolio that needs restructuring may increase several times,” he said.

Khachatrian estimated the Armenian banks’ combined agricultural credit portfolio at roughly 400 billion drams ($1.1 billion). According to Daniel Azatian, the chairman of the Armenian Union of Banks, it rose by a record 23 percent in the first half of this year. The bulk of the new agricultural loans were most probably extended before the Russian sanctions.

Prime Minister Nikol Pashinian and other Armenian officials have downplayed their impact on the Armenian economy. By contrast, the World Bank expressed last month concern at possible consequences of the embargo, saying that they “could spill beyond trade and affect growth, prices and social conditions.” Both Khachatrian and Azatian insisted they do not pose a serious threat to the Armenian banking sector.

“Our banking system is so well capitalized and has so much liquidity that we can withstand any risks,” Azatian assured reporters.

Moscow has threatened to take other punitive measures against Yerevan such as a sharp rise in the price of Russian natural gas supplied to Armenia, curbs on Russian tourists visiting the country and tougher requirements for hundreds of thousands of Armenian migrant workers in Russia.

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