ARKA Armenia Weekly: Key Events of the Week: Politics, Economy, and Markets (September 7–13)
YEREVAN, September 14. /ARKA/. C
SUMMARY
The main dynamic of the week was the gradual transformation of diversification policies into a set of concrete economic decisions. Armenia is expanding economic dialogue with France and the UAE, negotiating with Iran to simplify customs procedures, and discussing new logistics projects, all while maintaining its membership in the Eurasian Economic Union (EAEU) and attempting to resolve trade restrictions arising within the union.
The domestic economy maintains strong activity in industry and construction, but the foreign trade picture is less clear.
The overall signal for businesses is that opportunities are expanding along with regulatory and infrastructural changes.
POLITICS
Armenian-French economic cooperation received additional political impetus. At a meeting between Armenian Prime Minister Nikol Pashinyan and French President Emmanuel Macron, the economy was named one of the priorities of the strategic partnership. The parties discussed deepening cooperation in the space sector and advancing infrastructure projects, including the Bargushat Tunnel. For businesses, this confirms Yerevan's commitment to expanding the European component of its technology and investment policies.
Energy diversification is also becoming part of its foreign economic strategy. Pashinyan stated that, should the opportunity arise to receive gas from multiple countries, Armenia will move toward diversifying its supplies. The significance of this issue extends far beyond energy: the price and reliability of gas supplies directly impact industry, tariffs, inflation, and the competitiveness of the economy.
At the same time, relations with the EAEU remain systemically important. Armenia filed a complaint within the union regarding Russia's restrictions on the supply of certain types of Armenian products and hopes to utilize EAEU mechanisms to remove these barriers. At the same time, Sargis Khandanyan, head of the parliamentary committee on foreign relations, stated that Armenia remains a full member of the EAEU and has no plans to leave the union in the near future. For businesses, this means maintaining the Russian and Eurasian routes while simultaneously seeking alternative markets.
The southern route has received a specific infrastructure component. Armenia and Iran have agreed to launch the Norduz-Meghri simplified customs corridor, develop advance electronic exchange of cargo information, and gradually transition from paper-based to digital procedures. This could reduce border clearance times for foreign trade and increase Iran's importance as an alternative logistics route for Armenia.
ECONOMY AND MACRO SIGNALS
Industry maintains significant growth rates. Industrial production in January-July increased by 9.5% year-on-year to 1.79 trillion drams. Manufacturing grew by 7.2% to 1.13 trillion drams. Importantly, the positive momentum continues in the manufacturing sector and is not limited to services and consumer demand.
Construction remains one of the fastest-growing segments of the economy. Over the first seven months, construction volume increased by 25% to 369.2 billion drams. The sector continues to support domestic demand and related industries, but the sustainability of this growth will depend on the cost of financing, investment demand, and the real estate market situation.
Foreign trade is sending a more cautious signal. Armenia's foreign trade turnover from January to July grew by 1.7%, exceeding $11.53 billion. At the same time, the Ministry of Finance reported that the trade deficit widened by 20%, or approximately $480 million, in the first half of the year. This indicates that strong domestic activity has not yet been accompanied by a comparable improvement in the foreign trade position.
Export diversification is achieving its first practical results. Armenia has begun exporting up to 40 tons of fresh fruits and vegetables per week to the UAE, while authorities are simultaneously discussing mechanisms for Armenian companies to enter the UAE market and major retail chains in Dubai. The scale of the exports is still limited, but the economic significance lies in the creation of a new sales channel for the agricultural sector.
BUSINESS AND CORPORATE SECTOR
One of the most significant infrastructure developments of the week was the Dry Port project in Gyumri. The Ministry of Economy discussed the possible participation of the international logistics company DP World in its implementation. The project is expected to be linked to Shirak Airport, the railway, and the North-South transport corridor. For businesses, the potential participation of an international operator increases the project's value as a tool for reducing logistics costs and developing multimodal transportation.
In the energy sector, the government has moved to the next stage of the process surrounding the Electric Networks of Armenia. A draft law recognizing 100% of the company's shares as an object of prevailing public interest has been submitted for public discussion. The document provides for the subsequent alienation of the shares, although they have not been transferred to the state at this stage. For investors, this issue is important as a precedent for ownership changes in systemically important infrastructure and a test of the predictability of the regulatory environment.
Agricultural and winemaking businesses will receive an additional financial mechanism for the grape procurement period. Starting September 15, the government intends to provide budget guarantees for grape purchase loans with insufficient collateral, up to 50% of the required collateral, subject to established conditions. This measure should ease short-term financial constraints for companies during a period of mass raw material procurement.
The banking sector continues to move toward digitalization. At the 4Future Banking conference, Armenian companies presented solutions in customer service automation, artificial intelligence, and digital financial services. For the sector, this reflects a transition from the basic digitalization of banking operations to competition around the technological ecosystem and the quality of the customer experience.
MARKETS AND FINANCE
The Central Bank reaffirms its commitment to an open financial market. Deputy Chairman of the Central Bank Hovhannes Khachatryan stated that Armenia's policy is based on the principles of a free market, open borders, and open transactions with partner countries. For investors, this is an important institutional signal amid the changing configuration of the country's foreign economic relations and the expansion of its financial ties.
European trade remains a key driver of business expectations. On September 15, the European Parliament is scheduled to consider temporary trade liberalization with Armenia. The EU Council previously supported a proposal to abolish duties on approximately 80% of current Armenian exports to the EU. For companies, the potential impact will depend not only on tariffs but also on compliance with standards, logistics, and the ability to scale production.
Global stock markets remain strong, but high asset valuations and interest rates are increasing investor sensitivity to deteriorating corporate performance. Landmark Capital CEO Gor Gevorgyan, in an interview with ARKA, noted that current growth is supported by robust corporate profits and economic activity, but the combination of high market multiples and elevated yields on long-term US bonds leaves increasingly limited margin for error. He highlighted a specific opportunity for Armenia: developing capital markets beyond the traditional deposit/loan model, including corporate bonds, equity and private equity financing, and, potentially, a more active IPO market.
WHAT DOES THIS MEAN?
1. Armenia is moving from a political declaration of diversification to the creation of specific trade, energy, and logistics mechanisms.
2. High domestic economic activity is currently combined with weaker foreign trade dynamics.
3. Infrastructure is becoming a key driver of competitiveness—from electricity grids and gas to dry ports and customs corridors.
4. The EAEU remains a systemically important market, but businesses are increasingly encouraged to reduce export concentration.
5. Regulatory predictability in energy and other strategic sectors is becoming a key driver of investment expectations.
RISKS OF THE CURRENT WEEK
• Investors will be monitoring the European Parliament's consideration of temporary trade liberalization with Armenia and the practical parameters of a possible new regime.
• The developing dispute over restrictions on Armenian products in Russia could influence exporter expectations and stimulate further market diversification. • Further steps regarding the Electric Networks of Armenia project will be important for assessing regulatory and property risks in strategic infrastructure.
• Prospects for gas supply diversification will depend on the economics of alternative routes and the maintenance of current supply conditions.
• Strong construction growth remains a positive factor for domestic demand, but markets will assess its sustainability against the backdrop of capital costs and real estate dynamics.
• The real impact of new logistics initiatives—the Norduz-Meghri corridor and the Gyumri Dry Port project—will depend on the implementation timeframe, infrastructure investments, and the connection of businesses to the new routes.
