Russo-Ukrainian standoff: Experts see consequences for Armenian economy

Russo-Ukrainian standoff: Experts see consequences for Armenian economy –

The escalation of tensions between Russia and Ukraine, according to experts, will also affect the Armenian economy as remittances wired by migrant workers abroad are likely to reduce. 

After the ouster of President Viktor Yanukovych and the formation of a pro-Western government in Kyiv late last month Russia effectively moved to establish its military control over Crimea, an autonomous republic in the south of Ukraine with a predominantly ethnic Russian population that hosts Moscow’s strategic naval base on the Black Sea. The Russian parliament also empowered President Vladimir Putin to use military force as appropriate to defend the ethnic Russian and Russian-speaking population elsewhere in the territory of Ukraine.

About 100,000 Armenians live in Ukraine, according to official figures, but unofficial accounts put their number at between 400,000 and 600,000.

According to the Armenian National Statistical Service, in 2012, among former Soviet countries the top trade partner of Armenia was Russia, followed by Ukraine. According to the data of the Central Bank Bulletin, in 2013 alone, Armenia received $1 billion, 607 million via the banking system through individuals, with the bulk of the transfers made from Russia. Some of the transfers were also made from Ukraine. 

Member of the opposition Armenian National Congress party, economist Vahagn Khachatryan says that Ukraine is an important partner for Armenia and any event taking place there will also have its impact on Armenia. The economist says that at this moment the situation is still uncertain, there is no publication about how the events of recent days will impact the Ukrainian economy.

The economic situation appears to be worsening in Russia, too. Armenian oppositionist David Shahnazaryan says in the last couple of days the country lost more on its stock exchanges than it spent during the recent Olympics in Sochi that cost the Russian budget $52 billion. During a meeting with journalists on Tuesday Shahnazaryan said that the main reason for that is that “the accounts of Russia’s political elite have already been frozen in Western banks.”

A devaluation of securities by some 13 percent has been observed on Russia’s stock market, which also led to the depreciation of the Russian ruble. The Russian currency also lost its grounds in Armenia. Since February 24, it depreciated by about 4 percent against the dram.

Economist Vahagn Khachatryan believes that the devaluation of the ruble will also have a negative impact on Armenia.

“There was a similar thing happening during the 2009 crisis, when Russia was in trouble and the amount of transfers from there dramatically decreased, and Armenia’s construction sector then also shrank significantly. And now there are two compelling circumstances – one is the tightening of immigration laws in Russia, and the other is the policy of the Russian Central Bank regarding the national currency exchange rate, which will result in the reduction of remittances from Russia,” says the economist.

 By Gohar Abrahamyan

ArmeniaNow