With a week left until what is considered to be an all-important parliamentary election in Armenia, the market consensus appears well-formed. It posits, first, that the vote might have wide-ranging economic and geopolitical implications for the country. More importantly, it anticipates that, in the case of the incumbent Civil Contract (and Prime Minister Nikol Pashinyan) carrying the day, there will be a positive market reaction given expectations for a continuation of the current drift away from Moscow and towards the EU.
Armenian assets have been benefiting for some time now from this geopolitics-centred view, with tightening spreads, an appreciating currency and increasing non-resident participation in the local government bond market. Alternatively, an opposition win is generally viewed with apprehension as this is associated with heightened uncertainty about the future path of political economy development, up to the possibility of a resumption of hostilities with neighbouring Azerbaijan.
It is fair to say that the outcome of this election is much harder to predict relative to the 2018 and 2021 ballots. Even within the ruling Civil Contract party there is an acknowledgement that the street mood is no longer what it was during the 2018 street protests that brought Pashinyan to power. Citizens now approach the prime minister with demands, complaints and difficult questions rather than the pure admiration that he was basking in before. The simulations that I have done based on the existing polls suggest that Civil Contract would be expected to win slightly more than half of the total 101 parliamentary seats — a clear majority, yet a far cry from its dominance in 2021 when it won 71 seats. However, this is by far not guaranteed. The wild card in the elections are the undecided voters, and there are many of them — roughly 35-40% of the electorate. In theory, undecided voters could swing the election. In practice, as my calculations have also shown, the bar for doing so might be quite high. In any case, this is not impossible, so that a vote count that brings Pashinyan down should definitely not be viewed as anything close to a surprise.
Opposition win would not be an economic, political or geopolitical disaster
The question then is to what extent market fears about an opposition win are justified. In my opinion, and in contrast to the consensus interpretation, even an opposition win may not be that market-disruptive. The alternative, as unlikely as it might appear at this stage, may actually offer an upside given current positioning. The core argument rests on the assumption that Armenia’s course is pretty clear for anyone who follows the geopolitics of the region. The country is now facing a fait accompli in the necessity of fully normalising its relations with Turkey and Azerbaijan even under conditions that it deems unjust and unfair. Losing the 2020 war, the emptying of Artsakh, and the weakening of its ally Russia may have essentially taken any suspense out of the elections. Even if the opposition wins, it will have to more or less continue the policy of this government (with some bells and whistles). The “4th Republic” and “Real Armenia” slogans represent the varnished and well packaged submission of Armenia to its eastern and western neighbours, and one should not necessarily be critical of it as it has little other choice. This is arguably the best Armenians can get (if they are lucky) at this point in history. Ultimately, the average Armenian on the street has no desire for another armed conflict with Baku, and I don’t think the opposition has either.
Let me flesh this idea out. Passions on the ground are running high and the debate about a possible opposition victory is highly polarised. Many supporters of the current government portray it as potentially catastrophic, which is probably best captured by Pashinyan’s dubbing of the opposition forces as “the three-headed war monster”. This is an extreme view that does not reflect reality. A more cautious, fair and balanced assessment would easily put away assertions of a state collapse and/or economic disaster. Armenia, after all, has functioning institutions, a pluralistic political system and experience with political change. Hence, an opposition victory would likely have the following implications:
1. Foreign policy and Russia: Pashinyan has banked on diversification and closer ties with the EU/US while drifting away from Moscow. The opposition favours rebuilding ties with Russia and is more skeptical of Western integration. By no means does this imply that Yerevan would turn outright pro-Russian again, especially given the less enthusiastic general mood towards the Kremlin that has set roots in the country in the last number of years.
2. Peace process with Azerbaijan: The current government says an opposition win would mean war, ostensibly with Azerbaijan. This could hardly be further from the truth. None of the three opposition forces has voiced anything remotely close to that assertion. While it has indeed criticised Pashinyan’s approach as one conceding too much and weakening Armenia’s bargaining position, it has simply called for a better security infrastructure around the pre-peace deal with Baku, namely explicitly involving the EU, US and Russia as formal guarantors of the final peace agreement. Going to war with Azerbaijan is not only not on the agenda of the opposition, but it would also be rather shortsighted given that Baku spends three times more on defence than Yerevan and given that Azerbaijan has powerful sponsors (read Turkey) while Armenia has mostly burned its bridges with any possible backers. There is no country, including Russia, that would send its troops to fight for Armenia in a possible new conflict with its neighbour. Finally, and most critically, there is no popular demand for a resumption of war hostilities in the country itself.
3. Economy: Herein the predictions about an imminent disaster are most overrated. Exactly the opposite is likely to transpire as an opposition win would mend relations with Armenia’s largest trading partner, Russia. Gas would keep arriving at preferential prices, remittances would continue to flow in (13.0% of GDP were sent from Russia in 2025), agricultural produce (98% of it goes to Russia with a hefty 25% of the population employed in agriculture) would be readily welcome, hard liquor (70% of the famous Armenian cognac also gets exported to Russia) would still be enjoyed in Moscow and St. Pete, and, more broadly, Armenia would continue to enjoy its status of benefitting enormously from Russia’s current constrained geopolitical position (as demonstrated, for example, by the well-known “diamond trade”). None of this would be guaranteed in the same manner and scope in the case of Pashinyan’s win.
The Georgia 2.0 scenario that the market has learned to at the very least accept, if not enjoy
Georgia has borne the brunt of European and US criticism in the last couple of years. The political cycle of 2024/2025 saw Georgian Dream emerging victorious in local and national elections, which has invited all kinds of accusations from the West, the most biting one probably reflecting the view of a pro-Russian drift. I have always resisted such premature conclusions. First, Georgia is too deeply integrated with the West to implement any kind of foreign policy reversal. Second, the political opposition is taking a radical position in rejecting Russian influence and demanding alignment with the West immediately. In contrast, the ruling party is of moderate hue, prioritising Western integration but conflict-averse towards Russia. The 2024 parliamentary elections and the 2025 local vote showed that ordinary Georgians are largely comfortable with this approach. Third, the Georgian authorities want to join the European Union by 2030, despite Brussels’ current attitude toward Tbilisi.
The West’s current dissatisfaction is not due to any pro-Russian stance by the Georgian authorities (there is none), but because Western capitals failed to turn Georgia into a “second front” against Russia by exploiting its territorial issues with Moscow. Georgian Dream is not, even remotely, a pro-Russian party. However, amid the broader confrontation between Russia and the West, even this moderate stance appears pro-Russian.
Critically, the market has now learned to look past politically motivated statements and, rather, focus on the strong fundamentals of the Georgian economy and the professionalism of its policy-makers. Georgia has been delivering upside growth surprises recently, including because tourism and income from foreign travel have been beating records. FDI has recovered, the currency has strengthened and FX reserves have reached record-high levels. I feel that Georgia is much better understood by the market than by politicians. The constant barrage of accusations of “democratic backsliding” by the EU (mostly) and US has little to do with Georgia’s strong economic performance, quality macro policy-making and astute pro-Georgian foreign policy. Concerns about democratic backsliding are now largely disregarded by financial markets, and correctly so.
To summarise, the current Georgian model implies a pragmatic balance between Russia and the West, avoiding hard geopolitical alignment, prioritising economic growth and stability and pursuing a country-first foreign policy. This has delivered well beyond initial expectations.
This is the kind of a paradigm that may likely emerge in Armenia in the case of an opposition win. Yerevan would transition from its current activist geopolitical posture to a more transactional, economy- and stability-focused model. In foreign policy, this would be tantamount to maintaining economic and diplomatic ties with the West, yet avoiding direct confrontation with Russia. In the sphere of economic policy, this would be best characterised by macroeconomic pragmatism, infrastructure and investment focus, and tourism and business development. The peace process with Azerbaijan would not be halted, but augmented by efforts to secure stronger guarantors, including possibly from the UN Security Council, to ensure non-recurrence of hostilities.
This kind of approach would fit well the movement centred around Samvel Karapetyan and his Strong Armenia party (the key opposition force). This is important, because the only realistic chance of the opposition to form a united movement is to coalesce around Karapetyan and form a government post-election. Karapetyan is a businessman, not a traditional ideologue and, hence, his government would mean more managerial type of governance, focus on infrastructure and investment, support for domestic enterprises, mending relations with Russia, but not at the cost of undermining ties with the West. Even if his government might be skeptical of concessions to Azerbaijan and Turkey, the peace process with Baku will not stop and there will be no war.
In essence, an opposition victory is unlikely to be an automatic disaster, economically, politically or geopolitically. Far from it. The initial market reaction would most likely be negative as markets are inherently averse to uncertainty, but, in a Georgia 2.0 scenario, such weakness could ultimately present an attractive buying opportunity.
Ivan Tchakarov is partner for the Caucasus and Central Asia at GlobalSource Partners.
https://www.intellinews.com/tchakarov-armenia-after-an-opposition-victory-georgia-2-0-445878/