News - Armenia’s Potential EEU Exit Poses Significant Economic Risks

In a significant development, exiting the Eurasian Economic Union (EEU) could lead to Armenia facing a dramatic economic downturn. According to Russian Federation Security Council Deputy Secretary Alexey Shevtsov, Armenia’s Gross Domestic Product (GDP) might shrink by an alarming 15.1%, translating to approximately $3.65 billion. He further elaborated that inflation could rise by 14.3 percentage points. The most heavily impacted sectors would likely be metallurgy, beverage production, and food industries, each facing a potential decline of up to a third of their outputs. Shevtsov emphasized that an EEU exit would mean Armenia losing access to collective benefits, including relaxed trade restrictions and unified production standards. With the restoration of full customs checks, Armenian producers, especially in the agricultural and alcoholic beverage sectors, would be compelled to seek new markets due to diminished competitiveness led by the imposition of tariffs. Additionally, production in Armenia’s chemical and textile sectors is projected to decrease by a fifth and 15% respectively. Employment may suffer as well, with increased unemployment anticipated at 6.4 percentage points. Strategic implications extend beyond local industry. The geopolitical landscape will see Armenia navigating complex relationships, with the return of export constraints and the cessation of preferential regimes for Armenian migrants in other EEU states. Shevtsov highlighted that, conversely, other EEU countries would experience minimal economic impacts, losing merely hundredths of a percent in GDP. The political angle underscores critical geopolitical dynamics, where Russian President Vladimir Putin, in a meeting with Armenian Prime Minister Nikol Pashinyan, opined that belonging to both the EEU and EU is incompatible. Pashinyan acknowledged these challenges but expressed intent to maintain balancing these relationships while feasible, indicating a strategic yet precarious diplomatic path forward for Armenia. As the discussion over Armenia’s strategic alliances continues, the ramifications of any decision could hold substantive impact for its national economy, revealing deeper ties between economic concerns and international affiliations.