Armenia and the Eurasian Economic Union

12.08.2020 | Case Studies | Vahagn Khachaturyan

This resource is part of the series, “Joining the Eurasian Economic Union: Perspectives from the Eurasian Business Community,” which features analysis from renowned economists from EAEU member states and Uzbekistan. This series follows the CIPE-supported virtual roundtable held on October 13, 2020 in partnership with the American Chamber of Commerce in Uzbekistan. The event recording is available in both English and Russian

 

This paper presents the efforts over the past five years to integrate the member economies in the Eurasian Economic Union, the impact on the economy of the Republic of Armenia, the prospects of the Union, and the obstacles to development and further integration.

In developing this paper, the author employed statistical, comparative, grouping, and summarization methods to conduct an analysis of official publications related to the EAEU, analyses made by local and foreign specialists, official statistical data, and reports from international organizations.

The main takeaways of the paper are as follows:

Armenia’s decision to join the EAEU was not only an economic choice, but also a political one. Objectively, Armenia could not act in any other way, considering its political and economic relations with Russia.

Despite the lack of real alternatives, Armenia, in recent years, has been able to use its EAEU membership to expand its trade opportunities, which create favorable conditions for business and lead to a more competitive economy.

Prior to joining the union, there was a fairly liberal customs regime in Armenia. Import rates were 5-10%. After EAEU accession, new procedures were introduced, resulting in an increase in the average entry rate of goods by 2.7 times.

At the same time, local producers gained an advantage in exporting goods and services to EAEU member states, which increased their competitiveness. Exports of beverages, agricultural products, and minerals increased significantly. As a result of integration, agriculture, processing of agricultural products, light industry, and technology sectors obtained more favorable conditions for growth.

The lack of a common land border with any of the EAEU member states remains a problem for Armenia. This has resulted in a small volume of trade with other EAEU members, except Russia, thus exacerbating the country’s dependence on Russia.

Overall, the EAEU needs to consider how to best deepen integration between member states and eliminate all obstacles to trade, transportation, and technical aspects of integration as much as possible. The further development of Eurasian economic integration depends on the success of real integration on the ground, e.g., the growth of mutual trade in goods and services, cross-border investments, and labor migration. This requires both the establishment of uniform “rules of the game” among the EAEU economies and the elimination of exemptions from the common market.

 

Vahagn Khachaturyan is an international economist at the Political, Legal, Economic Research and Forecasting Centre based in Yerevan, Armenia. He is the author of numerous books, articles, and translations from other languages into Armenian of works on philosophy, ideology, and theory of liberal values and economics.