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Jan 5, 2022
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EAEU and Armenia – preliminary results

On January 2, 2015, Armenia became a full member of the Eurasian Economic Union (EAEU).

The first years of Armenia’s membership in the EAEU were successful for the economy of the republic both in terms of internal trends and taking into account the deepening of integration processes within the EAEU. For example, the growth rate of economic activity in the country in 2017 was 7.7% (for comparison: the last time the country’s economic growth at about 7% was recorded back in 2012). This was due to the growth of industrial production (by 12.6%), trade (14%), services (14.4%), as well as the recovery of the construction sector (2.2%). At the same time, Armenia provided a record export volume of USD 2,242.9 million (an increase of 25.2% compared to 2016). The increase in the level of the country’s competitiveness was facilitated by:

  • signing an agreement with the EAEU on the removal of customs duties;
  • simplification of all procedures in the EAEU – from obtaining export licenses to customs clearance;
  • lower prices for Russian gas, which enabled the Armenian government to lower the domestic gas price for greenhouses and processing industry enterprises by a third. As a result, the prime cost of Armenian agricultural products decreased by 10%.

Upon joining the EAEU, Armenia received temporary preferences on import duties on goods such as cars, colored stones, textiles and others; From January 1, 2020, the norm for deducting import duties to the budget of Armenia has been set at 1.22% – in an amount that is almost twice the share of Armenia in the Union’s GDP (0.7%). As a result of joining the Union, Armenia’s GDP in purchasing power parity increased by almost 1.5 times – from $ 29 billion in 2014 to $ 42.1 billion in 2019.

Already at the initial stage of membership in the Union, Armenia received new opportunities to acquire raw materials and resources without paying export duties and tariffs. A positive role was played by the mutual recognition of documents issued by the state bodies of the EAEU countries, the beginning of the implementation of the principles of free movement of goods, services, capital and people. Now we can talk about the potential of traditional, but partially forgotten Armenian production traditions – first of all, it is light industry (knitwear, footwear production). The main advantage of Armenia’s accession to the EAEU was not tariff preferences, but uniform rules for non-tariff regulation of the common market, which guarantees Armenia long-term non-discriminatory access to the large EAEU market.

As part of the Union, Armenia became a party to agreements on a free trade zone (FTA). The Republic of Armenia also benefits from the conclusion of memorandums of understanding between the Eurasian Economic Commission and the governments of third countries. In particular, an important area of ​​activity of Armenia within the framework of its membership in the EAEU is interaction within the framework of the Interim Agreement leading to the formation of a free trade zone of the Union with the Islamic Republic of Iran dated May 17, 2018. Armenia is the only EAEU country that has a land border with Iran, and Armenian economists emphasize the prospects for cooperation with Iran in areas such as transport and energy. In cooperation with Iran, at the end of 2017, a free economic zone (FEZ) “Meghri” was created to organize joint production of a number of goods on its site.

The preferential investment loans provided by the Eurasian Development Bank (EDB) have played an important role in the development of the republic’s economy. In total, the EDB investment portfolio as of early October 2021 included 16 Armenian projects totaling $ 262.5 million, another 8 projects worth $ 521 million were in the investment portfolio of the Eurasian Fund for Stabilization and Development (EFSD) … At the expense of these loans, the Armenian government finances, in particular, the implementation of projects for the construction of the Mastara reservoir, the modernization of irrigation systems, and the construction of the North-South road corridor. The interest rate on approved loans for Armenia was 1.5-2.1%.

The Eurasian Economic Commission, in close contact with the business community of the Union countries and the member states, is working to remove barriers, exemptions and restrictions on the EAEU internal market. On a number of them, the representatives of all five countries have already reached a consensus and the order of further actions has been determined.

Already in the first year of Armenia’s membership in the EAEU, despite the reduction in the volume of mutual trade in the internal market of the Union by 25.5%, there was a significant increase in the supply of textile products from Armenia (by $ 26.7 million, or 29 times). dairy products (by $ 18.3 million, or 4.8 times), fruits and vegetables (by $ 4.8 million, or 3.3 times), tobacco products (by $ 2.2 million ., or 2 times), leather goods (by $ 1.8 million, in 2014 practically were not supplied), pharmaceutical products (by $ 1.3 million, or by 53.8%).

Dynamics of mutual trade in goods of Armenia with the EAEU member states

2017 Nov.
(USD million)

2018 Nov.
(USD million)

Dec 2019
(USD million)

2020 g.
(USD million)

2020/2019

%%

EAEU (total),

incl. Armenia

54,711.6

571.0

60,261.5

688.5

61,634.0

769.2

55,053.9

709.9

89.3

92.2

Armenia-Belarus

Armenia
Belarus

41.4

6.9
34.5

49.1

11.7
37.4

70.6

17.9
52.7

78.8

21.3
57.5

111.7

119.0
109.2

Armenia-Kazakhstan

Armenia
Kazakhstan

9.3

4.9
4.4

17.3

9.8
7.5

9.8

5.4
4.4

13.0

6.6
6.4

132.3

122.0
144.9

Armenia-Kyrgyzstan

Armenia
Kyrgyzstan

1.8

1.8
0.0

1.1

1.0
0.1

3.4

3.2
0.2

2.1

1.6
0.5

63.0

51.3
in 2.2 g.

Armenia-Russia

Armenia
Russia

1,773.5

541.6
1,231.9

2,007.9

666.5
1,341.4

2,433.6

742.7
1,690.9

2340.8

680.4
1,660.4

96.2

91.6
98.2

Armenia’s accession to the EAEU has created new opportunities for the development of the republic’s energy sector. The EAEU already has a common electricity market, and the common markets for oil, oil products and gas are planned to be launched in 2025.

The Union also has good opportunities for creating joint ventures in the defense industry, mechanical engineering, electrical engineering, instrument making, attracting investments in the production of building materials and the construction of copper smelters, in the chemical and light industry, agriculture and food industry, in the production of medicines and in the development of tourism. …

These are the first integration effects of Armenia’s membership in the EAEU.

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