ARKA Armenia Weekly: Key Events of the Week: Politics, Economics, and Markets (May 18–24)
YEREVAN, May 25. /ARKA/. ARKA News Agency presents a digest of the week's key events.
SUMMARY
The week was marked by a tighter alignment of Armenia's foreign policy balance with economic conditions. Key topics included relations with Russia and the Eurasian Economic Union (EAEU), the opening of transport routes through Georgia and Turkey, and regulatory restrictions on the Russian market for Armenian goods. For businesses, the key message is the need to simultaneously maintain a focus on Russia, expand access to the EU, and improve compliance. Markets remain focused on gas, tariffs, energy strategy, and companies' ability to operate in a more complex regulatory environment.
POLITICS
Relations with Russia remained one of the central topics of the week. Armenian Prime Minister Nikol Pashinyan stated that Armenia would not take actions that would harm Russia's interests, but emphasized the priority of the country's own interests. On the Russian side, Russian Security Council Secretary Sergey Shoygu called cooperation with Russia the "driver" of Armenia's economic development, noting Russia's role in trade, tourism, energy supplies, and remittances. For businesses, this means that the Russian relationship remains a systemic factor, but is increasingly being discussed through the prism of national economic resilience and diversification.
The EAEU-EU integration agenda has once again become an economic topic. Russian Deputy Prime Minister Alexey Overchuk stated that customs duties may arise as Armenia moves toward EU accession. For companies, this shifts the foreign policy discussion to practical matters: tariffs, energy, logistics, and market access regulations.
Transport normalization has acquired a practical dimension. Pashinyan announced that the Akhalkalaki-Kars railway is open for exports from Armenia and imports to the country, and also announced plans to restore the Gyumri-Akhurik-Akyaka section and the Yeraskh railway junction in the context of the TRIPP project. For the economy, this potentially expands routes to the EU via Georgia and Turkey, although the practical impact will depend on tariffs, throughput capacity, and the sustainability of the agreements.
Armenia and Turkey held their first joint meeting of the commission on the use of the Akhuryan and Araks rivers. This is a technical but economically significant part of the normalization process: transboundary water resources are directly linked to agriculture, water security, and border infrastructure.
The domestic political landscape has become more measurable ahead of the parliamentary elections on June 7. A Gallup International Association poll showed that 28.8% of respondents are prepared to vote for the ruling Civil Contract party, 14.9% for the Strong Armenia bloc, and 12.1% for the Armenia bloc. Moreover, 59.3% of respondents stated that they would definitely vote. This is important for businesses as an indicator of political predictability and electoral mobilization in the pre-election period.
The trade balance remains sensitive to the normalization of re-export flows. According to the World Bank, the trade deficit increased by 4.7% in the first quarter, while in March, exports and imports decreased by 12.6% and 3.2%, respectively. However, excluding precious and semi-precious stones, machinery and equipment, exports increased by 33.6%, indicating a search for more sustainable commodity drivers.
Armenia's GDP grew by 4% in the first quarter, reaching 2.31 trillion drams. Growth remains uneven: mining and open-pit mining increased by 35.5%, construction by 20.6%, and transportation and warehousing by 12.2%. Financial and insurance activities declined by 13%, and agriculture by 1.6%. This confirms continued growth, but highlights dependence on certain capital-intensive industries.
In its May report on Armenia, the World Bank characterized economic activity in the country in the first quarter as resilient, despite heightened uncertainty: the indicator grew by 7.1% year-on-year, compared to 4.1% a year earlier. However, the WB noted a slowdown in industrial activity in March and a sharp weakening in manufacturing growth, making the structure of growth more important than the key indicator itself.
According to the WB, the trade deficit widened by 4.7% in the first quarter, while exports and imports declined by 12.6% and 3.2%, respectively, in March. However, excluding precious and semi-precious stones, machinery and equipment, exports grew by 33.6%, indicating a search for more sustainable commodity drivers.
Economy Minister Gevorg Papoyan stated that there are no "sharp edges" in economic relations with Russia, but statistics show a 17.2% decline in trade turnover with the Russian Federation in the first quarter, to $1.33 billion. Russia remains Armenia's largest foreign trade partner, but trade dynamics indicate a restructuring of flows and the need to avoid relying on a single source for critical goods.
Tax regulations have taken a step toward a more differentiated approach to business liability. The criminal liability threshold for large-scale tax evasion has been raised from 10 million to 30 million drams per tax year, and non-payment of over 50 million drams is now considered particularly large. For companies, this reduces the risk of criminalization of smaller tax disputes while simultaneously expanding tax enforcement tools.
The phytosanitary agenda has become part of the macroeconomic risks of foreign trade. Rosselkhoznadzor has reported problems not only with flowers, but also with fruits and vegetables; Temporary restrictions on the import of floral products from Armenia will be in effect from May 22 until the completion of inspections. Pashinyan noted that such restrictions have always existed and have been imposed dozens of times over the past eight years. For agribusiness, this signals stricter requirements for origin, traceability, and the integration of information systems within the EAEU.
The government has established limits on the duty-free import of goods for personal use from countries outside the EAEU. This decision is intended to clarify the rules for citizens and customs authorities, and for the market, it means a more formal distinction between personal imports and commercial deliveries.
BUSINESS AND CORPORATE SECTOR
Russian restrictions have become a major practical signal for exporters. Rospotrebnadzor (Rospotrebnadzor) suspended the import and distribution of all batches of Jermuk mineral water produced by Jermuk Group CJSC on May 22, citing non-compliance with labeling and the requirements of the EAEU technical regulations. Later, the agency announced the suspension of sales of certain batches of wine and cognac from three Armenian producers. For companies, this means an increased importance of laboratory testing, labeling, and documentary compliance.
In the pharmaceutical sector, amendments to the Law "On Medicines" have been proposed. The draft clarifies the regulation of imports, warehousing, parallel imports, certificates of good manufacturing and distribution practices, and the grounds for denial of import certificates. For the pharmaceutical market, this means a more stringent quality control infrastructure, but also the possibility of targeted flexibility for the import of certain unregistered drugs.
The technology sector has received an investment signal toward a product-based model. Integral Solutions has begun construction of a new office and R&D center in Engineering City, which will house infrastructure for microchip design and verification, including the Siemens Veloce emulator. The project provides 300-400 engineering jobs and reinforces the shift from IT services to high-tech products with higher added value.
The aviation market could receive a new boost in competition. Armenian Airlines has received a Boeing 737-800 and announced preparations to resume flights after a nearly year-long layoff; the schedule and destinations are to be announced separately. This is important for businesses due to business mobility, tourism, and the availability of international routes.
The situation surrounding Ararat Cement has become a test of the predictability of the legal environment. Pashinyan announced his intention to nationalize the company and appoint an interim manager, and the Prosecutor General's Office reported violations discovered during the 2002 privatization and criminal proceedings. For investors, the key factor will be not so much the political context as the legal process and the protection of property rights.
MARKETS AND FINANCE
Energy remained a fundamental market factor. PSRC Chairman Mesrop Mesropyan prioritized extending the lifespan of the existing Armenian Nuclear Power Plant (ANPP) for another 10 years, emphasizing that no final decision on a new NPP has yet been made. For investors, this means that the energy strategy will be assessed based on the reliability of existing capacity, the timing of new generation, and the cost of capital improvements.
Gas became the main tariff risk of the week. Minister of Territorial Administration and Infrastructure David Khudatyan stated that Gazprom had not raised the issue of revising gas prices, but Overchuk allowed for changes in gas and energy prices as Armenia moves toward the EU. The PSRC, in turn, warned that rising gas prices could lead to higher electricity tariffs, as 30-35% of the country's electricity is generated by gas-fired thermal power plants (TPPs).
The capital market continues to mature, driven by demand for strategy, risk management, and professional support. Khachatur Beglaryan, Director of Private Wealth Management at Freedom Broker Armenia, noted in an interview with ARKA that a typical mistake among novice investors is selling in panic and buying in euphoria, while the broker's role is shifting from simple exchange access to analysis, diversification, and risk management. For the market, this reflects a gradual growth in financial culture amid persistently limited liquidity.
New regulations are being prepared for fish and fishery product exporters to the EU. Armenia received permission to export aquatic crops to the EU as of April 2025, and draft laws establish the procedure for registering relevant companies in the TRACES system through the Food Safety Inspectorate. This represents an opportunity for the industry to enter the European market, but only if it complies with EU standards and localizes European requirements in national regulations.
Media Market
Against the backdrop of ARKA's 30th anniversary, representatives of the financial and economic community emphasized the importance of professional business information. Elisabetta Falchetti, EBRD Executive Director for Turkey and the Caucasus, noted the agency's contribution to shaping economic discourse and transparency. Artak Hanesyan, CEO of Ameriabank, called the partnership with ARKA part of shared trust and values. Daniel Azatyan, Head of the Union of Armenian Banks, emphasized the role of such resources in improving financial literacy and public awareness. For the media market, this is a signal that high-quality economic information is becoming part of the infrastructure for investment and management decisions.
WHAT THIS MEANS
Armenia maintains its multi-vector approach, but its economic price is becoming more concrete.
The Russian market remains key, but more demanding.
The transport agenda is gradually shifting from diplomatic to infrastructure-focused.
Economic growth remains robust, but uneven.
Energy has once again become a central theme for the markets.
RISKS OF THE CURRENT WEEK
Markets will be monitoring the rhetoric surrounding Armenia's Eurasian Economic Union (EAEU) and European agenda, particularly regarding potential tariffs, gas terms, and trade preferences.
Exporters will await the results of inspections by Russian regulators.
Energy risk will remain a key focus: any gas price signals could quickly be translated by markets into expectations for electricity tariffs.
The practical implications of the railway agenda will depend on the pace of infrastructure restoration, tariffs, and coordination with Georgia, Turkey, and other route participants.
Legal decisions surrounding major assets, including Ararat Cement, could impact perceptions of property protection and the predictability of the investment environment.
