In recent years, Armenia has come under scrutiny for its involvement in a sophisticated trade scheme that circumvents international sanctions imposed on Russia. As reports suggest, Armenian entities have been utilizing the sea route Batumi-Novorossiysk to re-export sanctioned goods to Russia, raising concerns about the enforcement efficacy of these measures.
The elaborate Russo-Armenian scheme revolves around the transportation of goods, including clothing, cars, spare parts, and medical equipment, produced by Western companies. Notably, vehicles, particularly American ones, make up a significant portion of the re-exported commodities. These vehicles are typically delivered to Armenia via Georgian ports, registered in the city of Gyumri, and then re-exported to Russia through Georgia. This deceptive process gained attention when it was highlighted in a summer article by the Financial Times.
To execute such operations, several entities collaborate, including C&M International LLC, which operates transportation along the Batumi-Novorossiysk sea route, the Armenian Shipping Company, the customer company in Armenia, and Black Sea Forwarding LLC, the Russian-based recipient firm. This intricate network also implicates Georgian entities, who might unwittingly facilitate sanctions evasion by not being aware of the goods’ origin, making it challenging for state authorities to enforce the sanctions regime effectively.
It comes as no surprise that claims regarding Armenia serving as Putin’s main logistics hub in the war against Ukraine have garnered substantial attention. Figures from the U.S. Bureau of Industry and Security reveal a significant increase in Armenia’s imports of microprocessors and chips from the U.S., reflecting a 500% surge between 2021 and 2022. Correspondingly, shipments from the European Union witnessed a rise of approximately 200%. Alarmingly, up to 97% of these parts were subsequently re-exported to Russia. These statistics only reinforce the growing trade volume between Russia and Armenia, which reached a staggering $5 billion in 2022, reflecting a considerable increase in trade growth percentage.
Acknowledging the severity of the situation, the U.S. State Department has addressed this issue, with focus on Russia’s replenished purchases of essential microchips and electronics, courtesy of alternative sources found by Moscow. In response, the United States Treasury has placed sanctions on entities like TACO LLC, a third-country supplier for “Radioavtomatika,” a major Russian defense procurement firm, due to its involvement in aiding Russia’s war effort in Ukraine. Similarly, Gazprom’s Armenia branch faced sanctions for facilitating money transfers related to the purchase of Russian gas in roubles.
Though there has been talk of Armenia shifting its geopolitical orientation away from Russia, the vibrant business between the two nations suggests that the current state of affairs remains mostly unchanged. Recent economic growth in Armenia further highlights the nation’s institutional attachment to Russia, as former Armenian Minister of Finance, Vardan Aramyan, emphasized. Aramyan stated that Armenia cannot withstand potential Russian sanctions, with much of the country’s growth in 2022 attributed to Russia. Moreover, Armenia’s integration into the Russian market is notably high, with a significant portion of Foreign Direct Investment and individual remittances originating from Russia.
While Western political circles and expert communities have addressed the Armenian-Russian economic axis, one cannot help but observe the relaxed reaction from the West, despite the prevailing notion of Armenia’s purported Westward drift. Notably, France, a NATO member, supplying weapons and air defense systems to Armenia, a Russian ally, raises questions about the security implications and the possibility of this equipment ultimately serving Russian interests.
The intricate trade route utilized by Armenia to re-export sanctioned goods to Russia via Georgian ports has raised concerns about the effectiveness of international sanctions. Despite talk of shifting alliances, Armenia’s deep economic ties with Russia persist. As this complex issue unfolds, it remains to be seen how the international community will address the interconnected challenges posed by trade, geopolitical interests, and sanctions evasion.
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