Armenia Braces for Economic Pain as Russia Tightens Grip

Russia's leverage over Armenia remains strong despite the June parliamentary election victory of the pro-Western Civil Contract party.

The party, led by Prime Minister Nikol Pashinyan, won just under 50% of the vote but still fell short of the constitutional supermajority it sought. However, the real story lies in the trade restrictions imposed by Russia on Armenia since April.

These restrictions have severely impacted Armenian agricultural exports, with a September World Bank report finding that vegetable exports had shrunk by 52% in July alone due to Russian import bans. The impact is expected to be felt throughout the economy, with the Central Bank warning of an 'egregious economic shock' from potential gas price increases.

The situation is further complicated by Armenia's dependence on Russian gas, which accounts for 82% of its natural gas supply. Gazprom, Russia's state-owned gas giant, has announced that it will reconsider preferential pricing for Armenia in January, a move that could lead to significantly higher costs for the country.

Russia's actions have been seen as an attempt to punish Armenia for its growing ties with Europe, and the situation is likely to escalate further. The opposition parties in Armenia, which are overwhelmingly pro-Russian, may benefit from the economic pain caused by Russia's actions, potentially strengthening their position in the country.