Western economic sanctions that could be imposed against Russia because of its military intervention in Ukraine would also hurt Armenia, Economy Minister Vahram Avanesian said on Tuesday.
“If sanctions affect the economy of our partner -- be it Russia, the European Union or the United States -- that cannot be good for us,” he told reporters.
Avanesian said that the Armenian government has not yet calculated potential damage to the domestic economy or made contingency plans for responding to possible U.S. and European Union sanctions.
“We cannot prepare for something which we don’t know yet,” he explained. “We can only say that Russia’s economy is very important to us and we are tied to it by many bonds. So any weakening of the Russian economy would certainly be bad for the Armenian economy.”
Russia is Armenia’s leading trading partner, accounting for around one-quarter of its external commerce. It is also by far the largest source of vital remittances sent home by hundreds of thousands of Armenian migrant workers. Those cash inflows were equivalent to 14 percent of Armenia’s Gross Domestic Product last year.
Avanesian singled out the dollar-denominated remittances when he first warned of the Ukraine crisis’s spillover effects on the Armenian economy last week. He said they could shrink in real terms if the Russian ruble continues to depreciate against the U.S. dollar and the euro.
Economic growth in Russia slowed considerably even before Moscow’s standoff with the West over Ukraine. This was one of the reasons why the Armenian economy grew by 3.5 percent in 2013, much slower than was forecast by the government a year ago.
Armenian growth is projected to accelerate to more than 4 percent this year. The International Monetary Fund stood by this forecast in a statement issued late last week. But it cautioned that the country’s macroeconomic performance remains “highly volatile.”
Avanesian made clear that despite the uncertain outlook for Russia, Armenia will not reconsider its plans to join the Russian-led Customs Union within the next few months. “I don’t think that what is happening now gives us reason to do that,” he said.