Economist and founder of the analytical portal Tvyal.com Agasi Tavadyan considers Armenia’s participation in the BRICS summit “quite natural”, as more than 70% of Armenia’s foreign trade is currently conducted with member countries of this structure or those close to it. These are Russia, the United Arab Emirates and China. Speaking to VERELQ, the expert talks about the geo-economic reasons for Armenia’s participation in the BRICS summit.
— Mr. Tavadyan, Armenian Prime Minister Nikol Pashinyan has announced his agreement to participate in the BRICS summit. How economically justified is this decision?
— Armenia has economic benefits in the BRICS. I would like to note that the bulk of Armenia’s foreign trade turnover falls on the EAEU countries, and if we add the BRICS countries to this, the picture becomes more complete. A significant part of investments and tourists in Armenia come from the Russian Federation. There is already a certain economic relationship between Armenia and the EAEU countries. I would like to note that at the beginning of 2024 our neighbor Iran also became a member of the BRICS+ union of states, which is also an opportunity for Armenia.
The fact is that between the BRICS member countries and the EAEU member countries there is a reduction or liberalization of customs duties, which stimulates interstate trade. This especially concerns products of animal origin, which Armenia will be able to export to Iran without customs duties. Currently, about 37% of the world’s GDP comes from the BRICS+ countries. Now 34 states have expressed their desire to join the BRICS+ format, which shows in which direction the geo-economic vector is developing at the moment.
Recently, Turkey and Azerbaijan have expressed their desire to join the BRICS+ group of states, which has caused concern among the collective West, especially with regard to Turkey. In general, this shows the direction of inclination of the geopolitical vector. If we look at the facts, in our region the Russian Federation and Iran are included in the BRICS+ group of states.
The second fact is that Armenia is a member of the EAEU, the main driving force of which is Russia, which, in turn, is a member of the BRICS. And the third fact is the question of membership of Azerbaijan and Turkey in the BRICS. And Georgia has established quite dynamically developing trade and economic relations with two BRICS member states: the Russian Federation and China.
This also shows where the geoeconomic and geopolitical vector is leaning in our region. This is just a statement, without exaggeration or judgment.
— There is a lot of talk in Armenia about the need to diversify the economy and foreign trade relations. Does BRICS offer an opportunity for Armenia in this regard?
– Yes, this is an opportunity. Look, according to the first half of 2024, almost half of Armenia’s exports go to the UAE. At first glance, this is very good; Armenia seems to have diversified its exports, before that it was dominated by Russia; However, in reality this is an illusion, since it is about the re-export of gold from Russia to the UAE. This is a temporary phenomenon. Armenia clearly needs economic diversification, since dependence on one country is wrong from the point of view of economic development. In this sense, the BRICS+ format is an opportunity for Armenia.
Armenia’s neighbour Iran is a member of this format and we have recently established quite close political and economic ties with India, and ties with China are also strengthening and developing. Another important economic partner of Armenia, the United Arab Emirates, has also joined this format.
— Look, there are several megaprojects under development in Eurasia right now. These are the EAEU, the BRICS and the Shanghai Cooperation Organization (SCO). There is constant talk about the possibilities of combining these formats. What economic results can their combination lead to?
— The more open the borders and the stronger the economic ties, the more profitable they are. Therefore, the more Armenia participates in global economic partnerships, the better for Armenia. Cooperation already exists between the BRICS+ format and the EAEU, and it has a certain cumulative effect. EAEU states can export certain types of goods, especially those of animal origin, with low or zero customs duties to the BRICS+ countries, in particular to the Islamic Republic of Iran. These formats are also an opportunity for Armenia to become part of international logistics projects, strengthening the country’s logistics accessibility and developing the national road network to suit the needs of international cargo transportation.
— The logistics part is interesting, please clarify. In Armenia there is a lot of talk about European integration, but economically and logistically the country is more committed to the Global South and wants to participate in the new trade corridor connecting India with Europe and the Russian Federation, the Chinese “One Belt, One” project, the “Highway” project, etc.
“We need to clearly assess our economic situation. No matter how hard we strive for Europe in political and value terms, the markets dictate otherwise. Currently, European markets are oversaturated. It is very difficult to enter there; in addition to logistics and market competition, there are obstacles to standardization. For example, Georgia has signed an Association Agreement with the European Union, one could say that it operates in the same customs space, but its exports to the European Union have not increased significantly. Just as it previously exported minerals, concentrates and metals, it now exports mainly the same products to Europe. However, the same agreement allows European manufacturers to export their products to Georgia with low or zero customs duties.
This is a problem of developing internal capacities. If a country can produce and export a high-quality product at a reasonable price, having an Association Agreement is no longer essential. Under these conditions, chasing the European market is unrealistic. Therefore, Armenia and countries similar to Armenia should look for other, less saturated and easier-to-enter markets. This is the direction in which the geo-economic vector is now moving.
