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West’s sanctions helped Russia get rid of oil dependence: opinion

Finance Minister of Armenia Vardan Aramyan. Photo: tert.am

Russia is a very important partner of Armenia from viewpoint of economic development. It is a large market where Armenian goods are always in demand. This demand is much higher than Armenian exporters can supply, said Finance Minister of Armenia Vardan Aramyan commenting to EADaily on Russian Prime Minister Dmitry Medvedev’s ongoing visit to Yerevan.

The Russian prime minister will attend a meeting of the Eurasian Intergovernmental Council in Armenia on October 25. Prior to it, Medvedev will discuss a broad range of issues of trade and economic, investment, industrial and humanitarian cooperation with his Armenian counterpart Karen Karapetyan. “Karapetyan and Medvedev will discuss implementation of large joint projects in various fields,” the government press office reported earlier.

According to the finance minister, trade is an important component of the Armenian-Russian economic agenda. “Russia’s market is very receptive. Often our producers fail to supply as much products as big actors in the Russian market demand,” the minister said.

Russia (along with the EU) is a major trade partner and sales market of end products manufactured in Armenia, especially in the agriculture. Agriculture accounts for about 24% of foreign trade balance of that South Caucasus state. By data of the Federal Customs Service of Russia, in 2016, foreign trade turnover of Russia and Armenia totaled $1.33 billion, of which Russian export totaled $957 million, import - $378 million.

According to the same source, foreign trade turnover of Russia and Armenia for the 1st half of 2017 totaled $726.6 million, of which Russian export totaled $523 million and import - $203 million.

At present, Aramyan says, within Eurasian Economic Union, Armenia should work to increase its production capacities. The minister recalled logistic problems creating obstacles to trade and economic cooperation of the allies. “For instance, Upper Lars checkpoint on the Russian-Georgian border is regularly closed due to unfavorable weather conditions that paralyze the traffic. We have been seeking alternative routes to reach the Russian market for a long time already. One of such alternatives is ferry,” Vardan Aramyan said. He is sure this option will reduce risks and costs in the trade with Russia.

“This is done to let producers or potential investors plan their production volumes and increase capacities, when necessary,” the minister said. “The Ministry of Transport and Communications of Armenia is working on that option,” he added.

Accumulated capital investments of Russia in economy of Armenia account for about 40% of total foreign investments. Russia is an absolute leader here. About 1.3 thousand of enterprises with Russian capital (one – third of all JVs) operate in Armenia, including such giants as Gazprom PJSC, Rosatom PS, Russian Railways OJSC, GeoProMining Gold OJSC, Bank VTB OJSC, RUSAL UC. Russia is the key ‘money transfers donor’ of Armenia as well. By official data alone, private money remittances to Armenia for the past 8 months totaled $1.07 billion (about 85% from Russia). As compared to the same period of 2016, this indicator grew for 17%.

At the same time, high economic dependence of Armenia and other EAEU countries on Russia amid the West’s war of sanctions against Russia affects the entire structure of economic cooperation, including within the Eurasian Economic model.

The sanctions may turn Russia into a source of shock scenarios for its closest allies and partners. There is always a risk of new sanctions that will affect both economy of Russia and other EAEU countries.

“Sanctions had a very negative impact on the Russian economy and it was felt rather acutely in the period from the middle of 2014 up to May 2016. Afterwards, symptoms of stabilization and then restoration have been observed. One can see that on the Russian currency rate (as against hard currencies - dollar and euro). As compared to the situation two years ago, the Russian ruble is stable now and the economy has been adjusted to it,” the Armenian minister said.

The Russian economy-related forecasts are positive now, the minister said. “Even the last set of sanctions approved by U.S. Congress did not have any serious impact on them. I do not anticipate any serious fluctuations comparable to what happened two years ago in Russia’s economy. The country has managed to live in such conditions through developing the sectors of economy not depending on energy resources,” Aramyan said.

Eventually, the minister said, the sanctions and the measures to mitigate their impact have resulted in, first, higher competitiveness of the sectors not depending on gas and oil, and second, increase of those sectors’ share in economy.

“In 2013-2014, more than half of the Russian budget revenues were generated from energy resources, whereas in 2016, energy resources accounted, if I am not mistaken, about 36% of total budget revenues. Actually, revenues generated in other sectors dominate now. This is an evident example of how economy is being transformed in crisis conditions. Will that stability and development be long-term? Everything depends on efficiency of reforms to be taken and efforts to be exerted to that end,” Aramyan said for conclusion.

By Arshaluys Mghdesyan

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