Russia sanctions and Armenia: Possible Advantages and disadvantages

Russia’s economic decline, caused by the western sanctions, is highly likely to have its impact on Armenia, a lawmaker of the ruling political force has said, not ruling out the possibility of advantages from the process.

“The sanctions have really effected a cutdown in remittances. But in case of pursuing more far-sighted economic policies. it is possible to gain advantages and derive economic benefits,” Gagik Melikyan of the Republican faction in parliament told Tert.am.

Asked why then those policies aren’t pursued and whether he doesn’t think that the absence of interest is the reason for such a passiveness, Melkyan said the past two months (since the sanctions were issued) are too short a period for estimating possible outcomes. “The sanctions are absolutely new; it’s just two months they have been applied. So we need to use the two-month period for implementing economic policy changes to be able to benefit from the advantages Russia offers to importers, especially those delivering agriculture produce.” he noted.

Melikyan said he thinks that the advantages will be temporary and last exactly as long as the sanctions continue.

But he said he observes a progress in economic policies, especially in the agricultural export.

Addressing the problem, Mikael Melkumyan of the Prosperous Armenia faction said the sanctions are sure to have their serious impact on the country (which largely depends on money transfers sent by the estimated 3 million compatriots working in Russia).

Melkumyan pointed out to three key directions to which he said the sanctions are likely to apply most. “First, Russia doesn’t get the high technology devices which were formerly used to produce other equipment in the country. Secondly, they imported pressure-resistant high technology components which they used in military industry, but there is none of these today. And the third important thing is that the Western financial institutions used to fund Russia’s major transactions, for example with China and Japan. And they do not any longer,” he added.
 

Melkumyan said he sees that the sanctions effected a high profitability decline also in many European companies, causing stagnation on the agricultural market due to the unexported surplus.

“So they, as a matter of fact, suffer bigger losses than Russia, as Russia manages to fill that gap due to [the import] from other countries. But its losses do exist as far as crediting and high technologies are concerned,” he said, adding that the situation leads to a slowdown in the country’s economic growth and slump in the national currency.
 

Melkumyan said further that the cross-effect process influences many world countries and organizations. “What Armenia suffers is of very trivial significance against the backdrop of this big game’s rules: there’s just a decline in the Russian transfers. We annually received 1.5 billion [US] Dollars from Russia, so now it will be less. But instead. Armenia has a chance to export products to the Russian market. The Russian market seeks goods in big volumes, but our manufacturers aren’t ready for that,” he said, noting that loan interest rates are too high in Armenia to offer any advantages to major exporters (whose loan burden is heavy as it is).


Mellumyan said he finds that the negative impact will be inevitable in the country. “The prices of products will surge, but the economic decline and slowdown is too low to make a further collapse possible,” he noted.

“All that will lead to a certain negative impact in Armenia, causing a surge in the prices of products, but the economic decline and slowdown is so low that no further collapse is possible,” he added.