Russia’s War and Sanctions Economic Impact on Armenia

Date

April 2022

Location

Armenia

Sectors

Economic Growth

Contract

In response to the Russian invasion of Ukraine, the United States, the European Union (EU), and many other countries have imposed severe sanctions on Russia and Russian entities, some of which are unprecedented and exacerbated by international corporations either suspending their operations there or leaving the country altogether. Russia is one of Armenia’s key trading partners, accounting for a third of Armenia’s overall international trade turnover, with just under $1.0 billion exported to and $1.8 billion of goods imported from Russia.

USAID asked Integra to conduct a study to roughly estimate the impact of Russia’s sanctions on the agricultural and tourism sectors of the Armenian economy. Agriculture is a key sector of the Armenian economy, accounting for 12% of the country’s GDP, with more than 300 thousand employed and around 1 million people estimated to be directly dependent on income from agricultural and agribusiness activities. Armenia has traditionally depended on Russia to import critical inputs for farming and strategic commodities like wheat. Armenia has been the main export market for Armenian processed food and beverages. Besides, Russia’s direct investments in the Armenian economy exceed $3 billion. The study analyzed the sanctions’ immediate and possibly longer-term direct impact on the two economic sectors. In contrast, the so-called “follow-on” impact elements, including indirect, induced, and catalytic were revealed and mentioned, with no quantitative estimates produced. The findings of the study were summarized in an analytical report, including the write-ups of interviews with key informants, rough quantitative estimates of the short- and long-term impact of the mentioned aspects on the two sectors of the Armenian economy, and estimates on the likelihood and severity of the impact.

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