Economic cooperation and energy were the focus of the Pashinyan-Putin negotiations held in Moscow on April 1. The statements of the Russian side about the supply of cheap gas to Armenia and uninterrupted consumption of Armenian agricultural products on the Russian market once again raised the topic of Armenia’s economic dependence. What do these messages mean in the language of numbers and facts, is the diversification of the economy and energy real in the current geopolitical conditions, and what shocks could the possible closure or restriction of the Russian market lead to?

Around these issues VERELQ– spoke to an economist, head of economic analysis site tvyal.com Agassi Tavadyan with. According to the analyst, the unprecedented economic growth of recent years is not the result of qualitative development, but of external factors and quantitative indicators, especially from Russia, which requires serious “homework” from the state and producers.

 

Agassi Tavadyan is in the photo, the source is ejc.am

VERELQ: Mr. Tavadyan, during the recent high-level Armenian-Russian meetings held in Moscow (in particular, between Prime Minister Pashinyan and President Putin), the issues of economy, gas prices and energy were especially emphasized. It was emphasized that Russia supplies gas to Armenia at an affordable price (in contrast to the European market, where prices are significantly higher), and that Armenian agricultural products are mainly consumed in the Russian market. What is the significance of these statements from an economic point of view? And if restrictions are suddenly introduced in those areas, how painful will it be for Armenia’s economy?

Agassi Tavadyan. Let’s approach the issue from a purely economic point of view and separate political statements, which often have to be considered in pre-election or situational logic, from reality.

The statistics document. Since 2018, Armenia’s exports to Russia and the Eurasian Economic Union (EEU) have increased five-fold or more, while the increase to the European Union (EU) was only 5 percent. In other words, regardless of political statements, our economy is now much closer to the Russian economy than it was years ago. If 10 years ago our exports were evenly distributed: about 30% to the EU, 30% to the EAEU and 30% to other countries, today the EAEU’s share exceeds 40%, and the share of the European Union has decreased to 7-8%. Therefore, giving up the Russian market at this stage will be much more painful for us.

In addition, one must understand the nature of the economic growth we have experienced. In 2022, we had 12.6% economic growth. It is necessary to clearly understand at what expense it was generated.

• Capital and labor flow. As a result of the Russian-Ukrainian conflict, a large amount of capital and labor left Russia, a significant part of which ended up in Armenia.




• Growth of IT and banking sectors. Half of the economic growth was ensured at the expense of these sectors, which grew dramatically due to the above-mentioned flows, also taking advantage of the opportunity of free movement of capital, labor and services within the EAEU.




• Tourism. The main driving force behind the growth of this sector is again those from Russia.

All this indicates that we should actively work to diversify our exports and export products with higher added value to the Russian market.

VERELQ: In other words, is diversification of the economy an urgent necessity today?

Agassi Tavadyan. Undoubtedly. But we must note that the five-fold increase recorded in recent years was mainly due to the quantity of exports, and not the quality. The Russian market is not so demanding, it is quite easy and affordable for Armenia, which is why we mostly export products there, which do not shine with their quality. 

As a small economy with landlocked and closed borders, we have to focus on producing high value added and low weight products rather than quantity. A simple example: we should export not raw apricots, but dried apricots, jam or other processed products. Or, instead of exporting two-dollar wine to Russia, we should produce quality wine that will cost $20 and more. If we can build a strong brand reputation, other markets will open up for us, regardless of which economic associations we belong to.

VERELQ: It turns out that we have some serious “homework” to do.

Agassi Tavadyan. Undoubtedly. But as of now, the numbers show something else. we have become even more connected to the Russian economy. Let me repeat the numbers, if previously only one third of exports went to Russia, now that figure has reached 40-50 percent, and the share of the European Union has decreased to 7 percent.

VERELQ: It is clear. Mr. Tavadyan, let’s talk about energy, especially gas. What problems may Armenia face if the price of gas increases, and does Armenia have the opportunity to compensate for it?

Agassi Tavadyan. The global picture should be taken into account. In recent years, serious energy crises have been going on in the world, the full weight of which has not reached us yet. For example, in the USA and Australia, there were periods when the price of gasoline increased by up to 80 percent, and in some countries even shortages occurred. It was not felt acutely in Armenia for the simple reason that we get our oil products, gas and even agricultural fertilizers from Russia by land.

As for energy alternatives, one should be realistic. in today’s conditions, the search for alternatives has more political implications than purely economic or logistical logic.

VERELQ: In other words, do we currently have problems with alternatives? And Iran can’t be such an alternative in terms of gas? At least there are such discussions in Armenia.

Agassi Tavadyan. Iran is an important actor, but there are nuances here as well. First, the gas pipeline coming from Iran is also managed by a Russian company (Gazprom Armenia), which already raises some questions. Second, its diameter is small, so the volume of supplied gas will be limited. 

But on the other hand, Iran really has a key role in our energy balance and security. We have a “gas for electricity” agreement with Iran. we receive Iranian gas, turn it into electricity and export it back to Iran. If our main gas supply fails, we will have serious problems in maintaining the energy frequency and stability of the country.

VERELQ: And in terms of export of agricultural products, how vital is the Russian market, and is there a possibility of replacing it? How painful will it be to apply restrictions, for example, due to the EATM GOST or other standards?

Agassi Tavadyan. The numbers are telling. most of our high-value-added products go to Russia. 80-90 percent of agricultural products, including brandy, are consumed in the Russian market (the exception is tobacco, which is mainly exported to the Middle East and Asian countries). In general, 70-80 percent of exports of locally produced goods go to Russia.

Therefore, if the Russian market suddenly starts to be closed or restricted, it will be an extremely painful blow. As I already mentioned, that market is understandable for our producers, and also “taught” them not to focus too much on quality. The unprecedented growth of our exports in recent years has been driven solely by emphasis on quantity rather than quality, which poses serious risks to the long-term stability of the economy.

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According to the preliminary investigation carried out in the criminal proceedings examined by the RA Anti-corruption Committee, it was found that the person occupying the position of the head of the territorial division of the Cadastre Committee, using the official position against the interests of the service, in the absence of legal grounds, carried out the process of illegal registration of land ownership rights.

In particular, it was found that the said official registered the ownership right of a citizen in violation of the procedure established by the RA Land Code and in the absence of relevant documents to the land area of ​​0.2200 ha allocated by illegal decision with the right of indefinite use from the section adjacent to the Yerevan-Sevan highway, citing the non-existent decision of the head of the village of Arinji on October 1, 1996 as the basis.

As a result of the criminal actions of the above-mentioned official of the Cadastre Committee, the land with a market value of AMD 15,900,000 was illegally removed from the balance sheet of Abovyan community.

In addition, based on the outlines of buildings with an area of ​​3965.65 square meters presented by another employee of the Cadastre Committee, the above-mentioned official included false data in the ownership certificate and without legal grounds registered the same plot with an area of ​​0.08 ha more.

As a result, land with a market value of 9,760,000 AMD was illegally removed from the balance sheet of Abovyan community, without any legal basis, and the community was deprived of the opportunity to use this land according to its intended purpose and to serve the interests of the public.

During the preliminary investigation, a criminal prosecution was initiated under Article 308, Part 2 of the RA Criminal Code adopted on April 18, 2003, and Article 314, Part 1 of the same Code (corresponding to Article 441, Part 2, Clause 5 and Part 2, Article 445, Part 1 of the RA Criminal Code adopted on July 1, 2022).

The preliminary investigation in the criminal proceedings has been completed, and the materials of the proceedings have been sent to the RA Anti-Corruption Court with an indictment.

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At the final session of the 29th extraordinary Supreme Assembly of the ARF and at the congress of the “Forward” party, the first three dozen of the pre-election list of the alliance of “Armenia” parties were approved.

The order of names of the MP candidates is as follows:

Robert Kocharian
Prince Saghatelyan
Anna Grigoryan
Sevak Khachatryan
Arthur Khachatryan
Christine Vardanyan
Aghvan Vardanyan
Gegham Manukyan
Agnesa Khamoyan
Levon Kocharian
Arthur Sargsyan
Lilit Galstyan
Mesrop Manukyan
Garnik Danielyan
Christine Nazaryan
Boris Tamoyan
Narek Mantashyan
Lusine Karamyan
Gerasim Vardanyan
Karen Simonyan
Anush Arakelyan
Arman Ghazaryan
Arthur Ohanyan
Armenuhi Kyureghyan
Mihrdat Madatyan
Igor Sargsyan
Rubina Petrosyan
Samvel Hakobyan
Artsvik Minasyan
Anush Brutyan

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Armenia does not plan to reduce cooperation with the Commonwealth of Independent States (CIS) or withdraw from it. CIS General Secretary Sergey Lebedev informed “Izvestia” about this.

“No, reduction of [Armenia-CIS cooperation] is not planned. [Yerevan is interested in contacts with the CIS] in many directions: in the economic, political and, of course, humanitarian spheres. In the military-political sphere, in connection with the Collective Security Treaty Organization (CSTO), they have certain doubts and complications. In the rest of the issues, as far as the CIS is concerned, there are no problems,” he noted.

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The Armenian government announces zero compromise in the quality of infrastructure construction. Due to poor quality work, the state not only refuses to pay the contractors, but also forces to rebuild the facilities built with defects from scratch with its own funds.

Minister of Territorial Administration and Infrastructures at the government session on April 9 Davit Khudatyan announced that the construction company will suffer a loss of about 500 million drams due to the violations recorded as a result of the joint inspections of the Urban Development Committee and independent laboratories. According to the minister, the road should be of high quality during the entire period of its operation, and not disintegrate a month after its commissioning.

Accordingly, he pointed out as an example a newly built road, whose 20 km section will be completely demolished, because it does not meet the established quality standards. 

Control over imported building materials has also been tightened. In particular, as a result of laboratory checks of bitumen quality, eight out of ten trucks that crossed the border of Armenia recently were returned.

According to the minister, this strict control also has its objective consequences. savings from tender processes have been reduced. If previously about 40% of participants offered a price lower than the estimated value, now that figure has decreased to 20%. In addition, former market leaders, who in previous years carried out up to 50% of road construction works, today are satisfied with only 10-12%. Khudatyan directly conditions this fact with the state’s principled position of not accepting low-quality work.

“We don’t pay for low-quality work. Last year, we demolished and rebuilt about 30 km of roads at the expense of the builders. In 2025, that number will be higher. In the near future, I ordered to demolish a road, which is good even according to the impression of the citizens, but we are dissatisfied with the quality, and we will demolish the entire 20-kilometer road again,” Khudatyan announced.

The executive is also transitioning to a new model of road maintenance, excluding companies with small capacities and insufficient equipment from participating in tenders through enlargements. Unified quality standards are implemented in both state and Yerevan municipal budget funded programs.

Prime Minister Nikol Pashinyan, in his turn, reaffirmed the policy of excluding compromises in the matter of quality. As a precedent, he mentioned the construction of the sports complex named after Artur Aleksanyan in Gyumri, where complete sections were also demolished due to insufficient quality.

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The Armenian government intends to introduce state-of-the-art technologies working with artificial intelligence in the field of road construction, which will allow to ensure “surgical precision” in repair works.

At the same time, the executive announced the return of an unprecedented amount of about 4 billion dollars to citizens with unplanned social and assistance programs since 2018.

Minister of Territorial Administration and Infrastructures at the government session on April 9 Davit Khudatyan announced plans to acquire a unique piece of equipment of regional significance: a road stratification system, or “road tomograph.” This technique, worth about 500-600 million drams ($1-1.5 million), will use artificial intelligence to analyze the road surface up to 70 centimeters deep.

According to the minister, the equipment will automatically assess the hidden cracks and injuries while passing the road, suggesting what type and depth of repair is needed in the given area. According to Khudatyan, they bring paving closer to the accuracy and logic of surgery, which will help to clearly separate the need for average and major repairs.

Referring to the introduction of new technology, Prime Minister Nikol Pashinyan noticed that the acquisition of such expensive equipment is not a loss of finances, but a long-term saving, because due to quality and competent repair, the costs of further operation will be significantly reduced.

During the session, the head of the government also spoke about the economic results of the support programs implemented after 2018. He reminded that the state has implemented a number of non-compulsory, incentive programs, including leasing of agricultural equipment, support for border villages, loan subsidies, energy-efficient renovations and income tax refunds.

“As a result of the revolution, since 2018, the state budget has generated an additional amount of around 6 billion dollars. We can record that out of those 6 billion, we have returned 4 billion to the citizens through various programs,” the Prime Minister announced, adding that the increases in pensions and other mandatory payments are not included in this calculation.

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Armenia has been ready for any scenario of the development of events for a long time, but the technical problems emerging in the Armenian-Russian trade and economic relations should not be politicized. As for the supply of Russian gas, it is regulated by long-term contracts. This was announced by Prime Minister Nikol Pashinyan, responding to the questions about the obstacles to the export of Armenian products (in particular, brandy and flowers) and the possible increase in the price of gas.

During the briefing following the April 9 cabinet meeting, the Prime Minister refused to comment on hypothetical scenarios regarding the intensification of economic pressures, stating that one should be guided by the facts. According to Pashinyan, the problems related to export are mostly technical and refer to product quality and standards.

He reminded that since 2018, the government has been talking about the need to modernize the economy and standardize products, for which the state has allocated millions of dollars to businesses.

“We support and will continue to support economic operators in modernization, but we also do not agree that an attempt is made to present technical issues under a political umbrella,” Pashinyan emphasized. He also added that there are clear rules for the free movement of goods, services, capital and labor in the Eurasian Economic Union, and as a member of the Higher Economic and Intergovernmental Councils of the Eurasian Economic Union, he will be consistent in their smooth operation.

Referring to the risks of the possible price increase of Russian gas and the termination of contracts, the head of the government emphasized that Yerevan and Moscow have long-term contracts, and there is no basis for such assumptions.

“We cannot relate to Russia or any other country with the logic that one of the parties thinks that the other will violate all its agreements. That would mean that the violating party is not a contractual entity at all. How can such a thing happen?” concluded the RA Prime Minister.

Why did the gas price issue arise?

Discussions about the possible increase in gas tariffs intensified after the Pashinyan-Putin meeting held in Moscow on April 1. During the meeting, Russian President Vladimir Putin specially emphasized that Russia supplies gas to Armenia at preferential prices. According to him, when the price of 1000 cubic meters of gas in Europe exceeds 600 dollars, Armenia receives it for 177.5 dollars. The Russian President also noted that he is familiar with the approaches of the Armenian side regarding pricing mechanisms, over which the parties often “debate”. 

Let us also add that Russia, represented by Gazprom, is the de facto monopolist supplying natural gas to Armenia. According to the data of 2024, Armenia imported a total of about 2.7 billion cubic meters of natural gas, the vast majority of which, about 2.3 billion cubic meters (or about 84% of the total volume), fell to Russia. The rest is imported from Iran, providing only 16% of the country’s domestic demand (mainly through the “gas for electricity” barter program).

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Justice in Armenia operates regardless of political affiliation, and being a member of the ruling party does not give anyone immunity. Prime Minister Nikol Pashinyan announced this at the April 9 briefing, referring to selective justice and criminal cases against former teammates.

According to the Prime Minister, a situation often arises when people close to the “Civil Contract” (CP) party or the ruling team think that they have an indulgence and can take bribes with impunity or engage in personal business (for example, import and export of livestock) using their political position.

“Justice in Armenia works both for the representatives of the ruling party and for other persons. People start beating their chests from the pulpits not because they became oppositionists and are being judged for that, but on the contrary, they become oppositionists when they are being judged,” Pashinyan emphasized.

The head of the government noticed that many people used to take oaths of loyalty, hoping that it would absolve them of responsibility, but when faced with the force of the law, they immediately change their political camp, presenting themselves as political victims.

Referring to the future plans of the ruling power, the Prime Minister reminded that the political agenda issues will be included in the KP pre-election program and will be submitted to the people’s court, and the upcoming elections will have concrete consequences.

Answering the journalist’s clarifying question about the party affiliation of one of the former teammates and his role in the team, Pashinyan stated that he is not aware of his formal status, but assured that the person in question is not currently involved in any work in the party.

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Voters’ lists will be published both on Elections.am and Elections.mia.gov.am with the possibility of searching and downloading.

The preliminary list, according to the election precincts, will be posted before April 28, with the possibility of downloading. This will give citizens an opportunity to identify possible inaccuracies and apply to the Migration and Citizenship Service of the Ministry of Internal Affairs. And the final lists will be published before May 31.

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