PSCRP-BESA Reports No 127 (April 22, 2025)
by Alexander Shpunt
In the first part of the study, we showed that it was the position of Georgia’s business elites that influenced the country’s political course, shifting its vector from European integration to the Russian direction. This position is in no way connected with any phobias or personal preferences of Georgian-Russian magnates – it is driven by the structure of business processes on which their economic well-being depends.
The situation in Armenia is partly similar to Georgia, but has some peculiarities. We will talk about these peculiarities in detail and specifics in the second part of the publication.
As of April 8, 2025, the population of Georgia is 3,806,901 and Armenia is 3,017,528; in demographic terms, the situation is very similar. However, in terms of the economy, the situation is different.
According to the National Statistics Office of Georgia, in 2024, the country’s real GDP growth compared to 2023 was 9.4% – in the first part of the publication, we showed that it was the relocation of Russian businessmen and their businesses, along with the exponential growth of their interest in cooperation with Georgian businesses that largely accounted for this almost double-digit growth. In current prices, GDP in 2024 was 91.9 billion lari (33.8 billion dollars).
According to 2024 data, Armenia’s nominal GDP was $25.408 billion (only three-quarters of Georgia’s, with an equal population, let us recall), GDP growth in 2024 compared to 2023 is almost half that of Georgia, only 5.9%. Although in many ways – we will show this further – this growth is also explained by the relocation of Russian businesses and Russian entrepreneurs.
What allows the Georgian economy to be a quarter larger than the Armenian one and grow at almost twice the rate? Political geography.
Georgia has the potential to be a transit country with a developed port infrastructure, some of it Soviet, some of it built more recently. The port of Poti, the country’s largest port in terms of cargo turnover (it handles about 65% of the country’s cargo), is located at the mouth of the Rioni River. The second most important port, Batumi, combines trade and passenger functions (cruise ships). It specializes in oil products, grain, and containers. Located near the city of Supsa (Guria region), the port specializes in oil exports (Baku-Supsa oil pipeline). The depth of the port waters is up to 7.5 meters, which allows handling tankers of significant size. And the new deep-water port, Kulevi, located near Poti (sometimes called Poti-2). The new port (opened in 2021) is capable of receiving large vessels up to 100 thousand tons.
Armenia has no access to the sea; moreover, its land borders connect the country with Azerbaijan and Turkey — both diplomatically hostile — and Iran, a pariah state. In fact, the country’s only transport window is the border with Georgia — a competitor in the regional economy more than an ally.
It would seem that the absence of a land border with Russia and, at the same time, the absence of access to sea communications with the Russians on the Black Sea should cool the interest of Armenian business in Moscow. But the opposite has happened — simply because none of the major economic powers has provided Yerevan with a real alternative in the decades since the fall of the USSR.
The second Karabakh war not only did not change the situation, it sharply aggravated Yerevan’s dependence on Moscow. Armenia’s foreign trade with Russia continued to grow at an exorbitant rate in January-April 2024 – 3.1 times (versus 2.3 times a year ago), with a volume of $6.3 billion. However, imports are now the driver of trade turnover growth, while a year ago exports dominated, which were associated with transit trade (Armenia was a convenient “window” for legalizing the supply of sanctioned goods and technologies to Russia). According to data from the Statistical Committee of the Republic of Armenia, exports to Russia decreased by 21.4% year-on-year, with imports from Russia jumping by 5.6 times. A year earlier, both items were growing, but in the opposite configuration: exports increased by 3.8 times and imports by 55.9%. As a result, import volumes began to significantly dominate export volumes – $5.5 billion versus $844.1 million. As a consequence, Russia’s share in Armenia’s foreign trade turnover increased over the year from 35.2% to 45.9%, accompanied by a decline in the share of exports from 49.5% to 14.1% and an increase in the share of imports from 26.8% to 70.6%.
In fact, this fact alone – that three-quarters of Armenia’s imports are now provided by Russia – would be enough to show the size of Moscow’s keyboard of influence on Yerevan’s policies. But the dependence of Armenia’s economy (and, more importantly, influential business) on the mood in Moscow is not limited to this.
Armenia is the only country in the South Caucasus that is part of the EAEU. This is not only access to a single customs area, but also the opportunity to do business in Russia on almost the same terms as Russian companies, and even a free labor market for Armenian citizens who want to earn money in Russia, where the income level is incomparably higher (as of March 2, 2025, the monthly salary after taxes in Moscow is $1,546, and in Yerevan it is three times lower, $548).
As a result, a factor of pressure of the trend of Armenian politics in favor of Moscow is formed, which is almost absent in Georgia: voters from families that are decisively dependent on the income received by someone in the family in Russia. According to the Unified Interdepartmental Information and Statistical System (EMISS), in the first three quarters of 2024, more than 140 thousand citizens of Armenia came to Russia as labor migrants – a huge number, given that, according to Trading Economics as of December 2024, the employed population of Armenia is 731 thousand people. Even taking into account that the EMISS figures are considered by some experts to be somewhat overstated, we are talking about tectonic proportions in terms of national employment.
But the influence of “Russian money” on consumption in Armenia is not limited to these 140,000 households. Unlike migrants from Central Asia, Armenian workers in Russia often retain strong family and legal ties — they already have a simplified right to bring their families, as citizens of an EAEU country. Therefore, labor migration from Armenia to Russia differs from that of Kyrgyzstan or Uzbekistan: typically, one family member — usually the man — goes to Russia, while his income supports the household back home. Thus, “Russian money” provides for not only the life of this family but also that of many neighboring families — those who benefit indirectly from this money.
These processes form a second, grassroots layer of support for maintaining strong ties with Russia — a layer largely absent in Georgia.
At the same time, the desire of big business to maintain good relations with Moscow is no less strong than that of their counterparts in Tbilisi.
In 2024, the volume of Armenia’s trade with EAEU countries — primarily, as shown above, with Russia — increased and reached $12.7 billion. At the same time, trade with the European Union decreased by 14% and amounted to only $2 billion — just 7% of the country’s total foreign trade turnover.
Russian business is not just present in Armenia — it dominates the national economy. Four companies with Russian capital were among the top twenty largest taxpayers in Armenia in 2024.
The Zangezur Copper and Molybdenum Plant (ZCMP) retained its top spot in the list of Armenia’s largest taxpayers in 2024, according to a report from the State Revenue Committee, which unites the tax and customs services. The company paid about 102 billion drams ($256 million at the current exchange rate) in taxes to the state budget over the year. The Russian Industrial Company, a wholly owned subsidiary of GeoProMining Armenia, acquired 60% of ZCMP shares in October 2021, transferring 25% of the shares to the Armenian government. As a result, the government’s share in the total capital of the plant amounted to 15% and increased to 21.9% in August 2022.
Not only taxes, but even the national infrastructure of Armenia largely belongs to Moscow. Among Russian companies operating in Armenia’s energy sector, the most significant is Gazprom Armenia. For almost thirty years — in accordance with the Decree of the Government of the Republic of Armenia No. 404 of June 26, 1998 — the country’s gas transportation system has been transferred to the ownership of ArmRosGazprom. Also of systemic importance is the Russian company Tashir, which owns and manages the power distribution systems, the Sevan-Razdan cascade of hydroelectric power plants, and power units 1–4 of the Razdan thermal power plant. Russia is also the owner of the Armenian section of the Iran-Armenia gas pipeline.
The Russian joint-stock company RusHydro owns 90% of the shares of the International Energy Corporation, which operates a complex of seven hydroelectric power plants on the Hrazdan River from Lake Sevan to Yerevan — essentially controlling all of Armenia’s hydroelectric power industry.
Formally, the Armenian Nuclear Power Plant (Metsamor NPP) belongs to Armenia, but its operation is entirely dependent on Rosatom. Although it was supposed to be closed in 2017, its operational life is constantly extended. In December 2023, the Armenian government signed an agreement with the Russian state corporation on the modernization and reconstruction of the NPP to keep it operational until 2036. Metsamor covers about a third of Armenia’s domestic energy needs and even allows the country to export some electricity to Georgia and Iran.
On January 16, 2008, it was officially announced that Russian Railways had won the tender for concession management of Armenian Railways. The concession term is set at 30 years, with the right to extend it after the first 20 years for another 20. Management functions were assigned to the South Caucasus Railways company, a specially created subsidiary of Russian Railways, fully owned by the Russian side.
The short format of this article does not allow us to continue this list. In fact, it is difficult to name a single sector of Armenia’s national economy that does not belong — either fully or dominantly — to the Russian state or Russian business.
In this situation, the pro-Western grassroots political sentiments of the population and intellectual elites — and even the cooling of Armenians’ positive attitude toward Russia following the second Karabakh war — fade into the background in the face of a natural alliance between big capital and ordinary citizens, both equally interested in preserving the economic privileges — let’s use the right word — that Armenia enjoys compared to its competitors in the South Caucasus region: Georgia and Azerbaijan. In fact, this is Yerevan’s only geopolitical advantage.
Alexander Shpunt is Israeli and Russian researcher and expert in theory and practice of information and analytical work in the field of politics, resides in Haifa. Since 2016 he served as a professor at the National Research University “Moscow Higher School of Economics. In 1999 – 2011 he also served as the Executive director of the “Effective Policy Foundation”, the largest think-tank in the RF at that time, and in 2011 founded and headed the Institute of Political Analysis Tools, specializing in systems for monitoring political behavior.