How dependent is Armenia on Russia? – Part II

According to the report of the international group Tasnim news agency, in the first part of the report “How dependent is Armenia on Russia?” to Armenia’s dependence in military, border security, gas fields We paid electricity and money transfer to Russia. In this section, we will discuss other dimensions of these dependencies.

The flow of Russian labor migrants in Armenia

According to the latest statistical data, a quarter of the 12.6% annual economic growth in Armenia is ensured thanks to Russian immigrants. They came to Armenia after the declaration of partial mobilization in connection with the Russian military operations in Ukraine.

Many use Armenia as a transit country, but about 100 thousand people remain in the country.

Martin Galestyan, head of the Central Bank of Armenia, said at the annual conference of the International Monetary Fund: We are witnessing a 25% increase in human capital in the field of information technology. Talented and educated people migrate to Armenia and this can have a long-term impact.

Indirect foreign investment accounts for 5% of Armenia’s GDP structure. In 2022, the country attracted a record one billion dollars, most of which is from Russia. Many immigrants set up their own businesses in Armenia.

Due to population growth, incomes have increased, especially in the service sector, which accounts for 50% of GDP.

The influx of immigrants has had a positive effect on the profitability of 18 commercial banks operating in Armenia.

Compared to last year, in 2022, banks’ income from Currency conversion and other services for non-residents have tripled.

Fitch credit agency reports that Russian-Armenian trade has grown significantly since the start of Russia’s war in Ukraine.

Goods exports to Russia have increased by 300% since 2021, 51% of this country’s exports to Russia and 30% of imports from Russia in the first 9 months of last year.

The flow of immigrants to Armenia has reached 13% instead of the planned 1.6%. Because the majority of immigrants are educated and mainly people with high incomes.

This factor especially promotes the development of the public service sector, cafes, restaurants and hair salons.

However, it is difficult to predict how sustainable this demand will be. Due to the increase of immigrants, the price and rent of apartments in this country has increased 2-3 times and some of them go to other countries with cheaper living conditions. Creates more favorable conditions for qualified professionals.

A special certificate is given to companies that have more than 90% of their revenue from the IT sector or more than 90% of their employees are IT specialists. .

This certificate is fully exempt from the tax rate and value added tax, the dividend tax is 5% and the income tax is 10%, while the ordinary income tax in Armenia is 21 percent.

This certificate applies to companies with less than 30 employees.

From an interview with RBC by the Minister of Economy of Armenia, Vahan Karobian It is clear that the Armenian government intends to take maximum advantage of the geopolitical situation.

Only at the beginning of September 2022, 50 IT specialists from Russia came to Armenia.

Railways

In 2008, Armenian Railways for 30 years It was assigned to the management of the concession of the Russian Railway Company. Currently, the Armenian Railways is under the management of the South Caucasus Railway Company, which is a part of the Russian Railways Company. With the agreement of the parties, after 20 years, the contract can be extended for another 10 years.

In 2023, the total length of the railways of Armenia is 1252.5 km, of which the main roads are 759.8 km.

South Caucasus Railway Company consists of 74 stations, but only 55 stations are in operation.

South Caucasus Railway Company is closed due to non-compliance Its commitment to infrastructure development has been criticized, the construction of the 32 km branch of the Vanadzor-Fioltovo line has not yet been completed. This will shorten the route from Yerevan to Tbilisi and Black Sea ports by 112 km.

Construction was supposed to start in 2011, but the South Caucasus Railway Company more than doubled the cost of the project. And in 2012 it reached 200-250 million dollars, and the project was subsequently forgotten. In addition, according to the statement of the International Airports Company of Armenia, due to the inactivity of the South Caucasus Railway Company, another project – the construction of a railway line from Charbakh Metro Station in Yerevan to Zvartnots Airport – remains on paper.

In 2018, the company was accused of tax evasion, and the country’s tax committee reported that the company’s premises were searched and some documents were seized. Prime Minister Nikol Pashinyan received the head of the South Caucasus Railway Company the next day.

Pashinyan said in an interview with the newspaper “Kommersant” that according to preliminary information, a tax deficit of 60 million dollars by the South Caucasus Railway Company it has not been paid. The company explained that the inspections were carried out according to the orders of the investigative authorities.

There was no announcement about the results of the inspections, but based on the results of 2018, the amount of taxes paid to the state budget of Armenia by South Caucasus Railway Company exceeded 8 million dollars.

Upper Lares Road

The only land route for the export of Armenian goods passes through the “Upper Lars” point on the border of Georgia and Russia. In winter, the road is sometimes closed due to frost. However, sometimes Armenian trucks have to wait for days for the road to open or return for other reasons – mainly on the orders of the Russian side.

Last year in late November when the Prime Minister of Armenia He refused to participate in the Summit of the Minsk Collective Security Treaty Organization, Armenian cargo companies also faced problems at the Lares Alia checkpoint. Hundreds of products, including perishables, fish and fruit trucks, have been stopped at the checkpoint as Russian health controls tighten their requirements for Armenian products.

Russia and Armenia are members of the Commonwealth of Nations. and they cooperate with each other in the form of collective security agreement organization. Since January 2015, Armenia is a member of the Eurasian Economic Union, which includes Russia, Belarus, Kazakhstan and Kyrgyzstan.

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