Armenia's geopolitical gamble risks regional stability as Yerevan plays both sides

The geopolitical chessboard of the South Caucasus is being reshaped as Armenia boldly shifts its orientation toward the West. January has witnessed a flurry of strategic moves: Yerevan approved a bill initiating its bid to join the European Union and inked a Charter of Strategic Partnership with the United States in Washington. While these developments signal Armenia’s deepening ties with Western powers, they have not gone unnoticed in Moscow. The Kremlin has issued stark warnings about the regional consequences of Armenia’s aspirations, questioning whether Yerevan’s balancing act between Russia and the West can endure.

Moscow has been quick to remind Armenia of the precariousness of its choices. Officials have cautioned Yerevan about the potential incompatibility of EU membership with its commitments to the Russia-led Eurasian Economic Union (EAEU). Furthermore, Moscow’s rhetoric suggests a looming threat of destabilization in the region if Armenia proceeds with its Western pivot. By signaling that Armenia’s coveted “Western security umbrella” might not offer the protection Yerevan envisions, Russia is clearly staking its claim in the unfolding geopolitical tug-of-war.

Despite expressing discontent, Moscow has refrained from unleashing heavy-handed tactics against Armenia. Russia’s approach appears calculated, leveraging Armenia’s economic dependency rather than resorting to overt coercion. The benefits of EAEU membership, including access to the Russian market and the inflow of remittances from Russian-based Armenian workers (amounting to 5% of Armenia’s GDP), remain key levers for Moscow.

But in reality how much does this economic dependency shine in numbers?

From 2021 to 2023, Armenia's trade turnover with Russia surged 2.6 times, reaching $7.4 billion. Imports from Russia doubled during this period, while exports quadrupled. This sharp rise is unprecedented in the region and reflects Armenia’s growing economic dependency on Russia. In fact, by 2023, 5% of Armenia’s GDP was derived from remittances from Russia. The upward trajectory continued into 2024. During this period, imports from Russia doubled, while exports to Russia quadrupled. This growth trend continued into 2024, where, in the first five months, Armenia's trade turnover with Russia was $190 million higher than the total for 2023. In just the first five months of the year, Armenia’s trade turnover with Russia surpassed the total trade for 2023. Unlike previous years, where export growth dominated, import growth played a key role in the 2024 increase. This suggests a deeper economic entanglement with Russia, despite Western narratives portraying Armenia as distancing itself from Moscow.

Notably, the sharp increase in the volume of imports played a crucial role in this growth in 2024. Specifically, imports soared by five times compared to the same period in the previous year, while exports saw a decline of 20.5%. This is a stark contrast to the previous years, where rapid growth in export volumes to Russia was the norm.[FOR STATS]. Changes in trade dynamics have also impacted Russia's share in Armenia's foreign trade. Russia's share of Armenian exports climbed from 28% to 45% in 2022, then fell to 40% in 2023 and 17% in the first five months of 2024. Meanwhile, Russia's share of Armenian imports decreased from 37.3% to 32.5% over the 2021-2023 period, but saw a dramatic rise to 69% in early 2024.

However, a notable shift occurred in 2024. While Armenia's exports to Russia began to decline, imports saw a significant increase. This shift might suggest a reduced role in re-exporting, but this interpretation oversimplifies Armenia's ongoing engagement in trade. In fact, Armenia has resumed participation in exporting products from Russia to third countries, particularly evident in the diamond trade. In 2023, Armenia imported approximately 3.5 million carats of diamonds, 48% of which originated from Russia. A staggering 96.2% of the diamonds exported by Armenia were re-exported, predominantly to the UAE and Russia.

Russian officials had also once sharpened their criticism of Armenia’s strategic partnership with the U.S. Viktor Sobolev, a member of Russia’s State Duma Defense Committee, has openly speculated about the risk of NATO bases being stationed in Armenia. “Undoubtedly, this threatens Russia’s interests,” he remarked, adding that such developments would force Moscow to bolster its defenses in the South Caucasus.

Russian Foreign Minister Sergey Lavrov echoed these concerns, warning that deeper U.S.-Armenian ties might compel Yerevan to adopt Western-imposed sanctions against Russia. Lavrov drew parallels to U.S. pressures on Serbia, suggesting that Armenia could face similar ultimatums in its bid to align with the West.

Lessons from Georgia and the Ukrainian precedent

History offers Armenia sobering lessons about the challenges of navigating alliances with the West. Georgia’s experience with the U.S.-Georgia Strategic Partnership Agreement of 2009 highlights the risks of relying on Western commitments. The agreement once touted as a cornerstone of Georgia’s EU aspirations, saw its implementation falter in 2024 when Georgia froze its EU accession process. Similarly, Ukraine’s 2021 strategic pact with the U.S. failed to deter Russian aggression, underscoring the limits of Western support in high-stakes conflicts.

Armenia must tread carefully. While Yerevan’s pivot to the West aligns with its current leadership’s goals, it risks alienating longstanding partners. For all its rhetoric about moving away from Russian influence, Armenia remains deeply intertwined with Moscow economically. Trade between Armenia and Russia has surged dramatically in recent years, with Armenian exports to Russia quadrupling between 2021 and 2023.

The West faces a dilemma in its approach to Armenia. While supporting Yerevan’s aspirations may seem strategically advantageous, overplaying its hand could exacerbate regional tensions and deepen Armenia’s isolation. Armenia’s growing reliance on Russia—despite its Western pivot—raises questions about the sincerity of its intentions.

The case of Georgia looms large. Should the West pressure Georgia too heavily, it may drive Tbilisi closer to Moscow, leaving Armenia more isolated than ever. Additionally, Donald Trump’s administration, known for its pragmatic approach to foreign policy, may deprioritize Armenia altogether. The absence of an invitation for Prime Minister Nikol Pashinyan to Trump’s recent inauguration is a subtle yet telling indicator of Armenia’s limited strategic value in Washington’s eyes.

Armenia’s balancing act is nearing its breaking point. By pursuing closer ties with the West while benefiting economically from Russia, Yerevan risks alienating both sides. While the U.S. and EU may offer political and financial incentives, these come with strings attached, including potential sanctions on Russia—an unpalatable prospect for many in Armenia’s leadership.

Simultaneously, Russia’s tolerance for Armenia’s dual alignment may be wearing thin. The Kremlin has refrained from escalating tensions, but its warnings grow louder with each Western overture from Yerevan. Should Armenia’s pivot to the West continue, Moscow may feel compelled to act, potentially reshaping the fragile stability of the South Caucasus.

Will Armenia succeed in its ambitious Western pivot, or will the weight of its economic and geopolitical ties to Russia prove too great?

Most likely, Pashinyan's multi-vector policy between the West and Russia indicates that he is more hopeful about the outcome of Russia's war against Ukraine and Europe. It is likely that whether Russia will finally raise the white flag will reveal its intention to become a complete vassal of the West. But still, cautious, Pashinyan is in no hurry to burn bridges with Russia just yet.