Armenia and Eurasian Economic Union

Eurasian Economic Union (EAEU) of Russia, Belarus and Kazakhstan is an emerging union that is gaining more actuality and relevance in the post-Soviet territory with joining of additional countries as Armenia and Kyrgyz Republic. While it was seen as another not effective project of post-Soviet Union, it appeared to be a new-style project bringing tangible gain to its members and becoming a center of attention in the neighborhood and a viable alternative to the EU (Dragneva and Wolczuk, 2015). While some Central Asian countries as Kazakhstan and Kyrgyz Republic have been analyzing their costs and benefits by joining the EAEU, Caucasian countries (Armenia, Azerbaijan and Georgia) have been planning to join the EU. 

Armenia is a small landlocked former Soviet Union country with population of around 3 million people. With an estimated per-capita GDP of US$ 3,619, Armenia is a lower middle-income country. After the dissolution of the Soviet Union, Armenia experienced a difficult transition period. Armenia’s economic difficulties were due to the collapse of the Soviet Union and the situation worsened by the war in Nagorno-Karabakh and the subsequent closure of its borders with Azerbaijan and Turkey. Furthermore, Armenia's closed borders led to increased transport costs (WTO TPR, 2010).  

Armenia’s geopolitical and economic situation is a challenge for its leaders. Armenia stands in the cross road of Russia on one side and European Union on the other. On the eve of signing an Association Agreement (AA) with EU, it declined to do so and instead, joined the Russian-led Eurasian Economic Union. Why did it do so? The Nagorno-Karabakh conflict keeps Azerbaijan and Armenia in a state of de jure war and challenges regional security. The EU had to keep neutrality over the conflict due to its interest on cooperation both with Armenia and Azerbaijan. Since Azerbaijan, Turkey and Georgia have taken steps to strengthen political, economic and security cooperation, Armenia has become further isolated and more dependent on Russia (Paul, 2015).

The geopolitical landscape of South Caucasus remains a region of significant tensions. The issues with Nagorno-Karabakh, Armenia’s relations with Azerbaijan and Turkey, and Georgia along with economic slowdown of Armenia’s partner – Russia, as well as slow growth in emerging partners China and Europe, are not optimistic. Russian - Armenian relations suggest that these tensions affect interest and investment in the region.