April 19. 2024. 8:51

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How Armenia is helping Russia evade Western sanctions


The war has triggered tough sanctions against Russia imposed by the European Union (EU), the United States (US) and other pro-Western states. The sanctions included restrictions on Russia’s financial industry, its central bank and its energy sector. Recently the European Council has decided to cap the price for Russian oil at 60 USD per barrel. In addition, foreign companies have withdrawn voluntarily from the Russian market as a result of a ‘self-sanctioning’ trend. All sanctions aimed at weakening the Russia’s wartime economy, and its ability to continue military operations in Ukraine.

After tough sanctions on Russia’s energy sector, Russia has lost traditional energy markets going back to the Soviet era in Europe and looked for new markets in south-east Asia. Since the start of Russia-Ukraine war, India’s seaborne crude exports from Russia increased steadily, reaching 959,000 barrels per day by November 2022, a 14-fold increase. Also, China’s seaborne crude oil imports from Russia reached 1.1 million barrels per day in November of the last year.

Other important regions for Russia are Central Asia and South Caucasus. Sanctions have been imposed on different sectors of the Russian economy, and therefore, Moscow cooperates closely with some countries to deepen economic ties and achieve economic diversification. During the first summit of the Central Asian countries and Russia in Astana on 14th October 2022, important issues such as ensuring common trade and economic interests, regional security were discussed among leaders.

Moscow is interested to deepen bilateral relations with Central Asian states to implement joint projects in the fields of energy, industry, transport, logistics and the agro-industrial complex. To this end, the possibility of supporting Central Asian states of Russia’s import substitution programs is very crucial for Moscow. The numbers show that trade turnover between Russia and Central Asian nations are growing. Trade turnover with Kazakhstan grew by 10 percent in the first ten months of the last year, 40 percent with Uzbekistan in the first nine months, more than 22 percent with Tajikistan in the first eight months, 40 percent with Kyrgyzstan in the first six months and 45 percent with Turkmenistan in just the first quarter of 2022. Economic revival between Russia and Central Asian nations is a result of the ongoing war and Russia’s ambition to deepen trade relations with regional states.

In the South Caucasus region, Armenia is a traditional ally of Russia and even failed to display a low-profile neutrality on the issue by supporting the Russian military campaign in Ukraine. Armenia cooperates with Russia on different platforms such as the Eurasian Economic Union (EEU), the Collective Security Treaty Organization (CSTO) etc. As noted by Russian Prime Minister Mikhail Mishustin; “Together with our Armenian partners, we are making operational decisions aimed at protecting our trade and economic cooperation in particular in the face of illegal sanctions against the Russian Federation”.

These two countries are successfully implementing bilateral trade and economic cooperation. According to the Armenian Statistical Committee, Russia is leading not only in terms of the total volume of foreign trade, but also in terms of exports and imports in particular. Foreign trade turnover between Armenia and Russia exceeded USD 2.6 billion in January-August 2022 with a sharp acceleration in year-on-year growth from 11.8 percent to 71.7 percent, mainly due to multifold growth in exports.

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In particular, the volume of exports of goods from Armenia to Russia significantly accelerated the year-on-year growth from 30.9 percent to 2-fold, which, at a slightly less restrained upward pace, was also observed in the volume of imports of goods from Russia to Armenia — from 4 percent to 55.3 percent, with the volumes of USD 1.062 million and USD 1.580 billion, respectively.

Economic growth is also linked to the mass Russian exodus in Armenia. Data provided by the Armenian Migration Service shows that 372,086 Russian citizens arrived in Armenia between January and June of 2022. According to Vahan Kerobyan, minister of economy of Armenia; “As a result of the relocation, 300 large companies with Russian capital and about 2,500 small businesses have been registered in Armenia”.

Among the representatives of big business is also the well-known Russian oligarch Ruben Vardanyan, a billionaire of Armenian origin. His name was included to the sanctions list under “Putin Accountability Act” of the USA House of Representatives’ Bill. Ruben Vardanyan renounced his Russian citizenship and moved illegally to Karabakh region, which is under the temporary control of Russian peacekeepers. His business interests in Armenia include various start-ups and technology platforms. Touching upon Armenia-Russia relations, Vardanyan talked about how Armenia can now become a “window” for numerous Russian enterprises as well as how the current situation opens up new prospects for Armenia. In addition, in a 23 January with BBC HARDtalk, he refused to condemn the war in Ukraine.

The U.S. Department of Treasury sanctioned a transnational network procuring technology that supports the Russian military-industrial complex. Some Armenia-based companies were included in list of entities subject to new US sanctions against Russia. To this end, the Armenia-based affiliate of Milandr, Milur Electronics LLC (Milur Electronics), was initiated for the purpose of placing orders from foreign factories, producing integrated microchips, and conducting overseas sales. Milur Electronics has been used as a Milandr front company as a means to conduct Milandr’s business with foreign partners. Another Armenian company — Taco LLC, wholesale of electronic and telecommunications equipment and parts, has been designated for supporting Radioavtomatika, a Russian company has been sanctioned, because Radioavtomatika pays Taco for importing components and handling the procurement process within Armenia.

Azerbaijan is the country in the region that supports the global financial system during Russia-Ukraine war. Since the beginning of the war, Baku has provided humanitarian and energy assistance to Ukraine. SOCAR Energy Ukraine has been providing free fuel at its stations in Ukraine for ambulances and fire service vehicles. Baku also sent 45 power transformers and 50 generators to Ukrainian regions. The total amount of humanitarian aid provided by Azerbaijan to this country is about 30 million manat. Briefly, Western sanctions will cripple Russia’s wartime economy in 2023, however, thanks to some countries/allies Moscow will “maneuver” to ease sanctions and further improve trade relations.

In the end, Azerbaijan has become one of the countries assisting Europe to ensure its energy security during the energy crisis. Currently, the EU and Azerbaijan look forward to deepening the cooperation, and Azerbaijan is seeking to show it is the West’s strategic partner in the South Caucasus.

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