Armenia negotiated an association agreement with the European Union from 2010 to 2013. And though a document was finally agreed as a result of the negotiations, Armenia’s membership in EAEU made signing of that agreement impossible.
The pivot of the Association Agreement negotiated with the EU was the establishment of deep and comprehensive free trade area (DCFTA) between the EU and Armenia. In case of ratification, this agreement would open the European market of 510 million people with high purchasing power to Armenian businessmen. It would also significantly increase the inflow of foreign investments, thus contributing to the economic development of Armenia.
More than two years after the failure to pre-sign the Association Agreement (on December 2015), the parties announced the launch of negotiations over a new framework document of cooperation between Armenia and the EU. It is envisaged that this new agreement will be signed during this year.
With this agreement, the EU and Armenia aim to deepen economic and political cooperation in all the possible sectors of mutual interest, taking into consideration Armenia’s new commitments to the Eurasian Economic Union, as well as the changed geopolitical situation. In this respect, it is interesting to discuss what importance the signing of such a document may have for Armenia.
EU as Armenia’s Largest Trade Partner
The European Union was and continues to be Armenia’s largest trade partner since 1998. Statistical data testify that Armenia-EU commodity turnover in the year 2000 made up 20.1%, and during the years following 2001, annual growth rates during some years reached 50%.
The figure shows the change dynamics of EU and EAEU shares in exports from Armenia during the last years. As it can be seen from the figure, in 2010, exports from Armenia to the EU formed around half (48.10%) of the country’s total exports, reaching almost 500 million USD. EU maintained its dominant position among Armenia’s trade partners even after the country became member of the EAEU. During the months of January to November of 2016, EU’s share in total exports from Armenia formed 26.6% compared to 21.98% share of the EAEU.
In other words, during the eleven months of 2016, exports to EU exceeded those to EAEU by 7.5 million USD. Such a picture was observed in circumstances when exports to Russia have been “artificially” increased by 54% due to re-export of Turkish goods from Armenia to Russia.
EU as a Source of Foreign Investments
The EU countries are among Armenia’s main partners with regard to foreign investments, leading the lists of largest investors by years. In spite of this circumstance, the Russian Federation has exceeded the EU countries in the volume of gross investment flows by years. At the end of 2015, the net investments from EU countries formed around 1.22 trillion AMD compared to those of 1.15 trillion AMD from EAEU member countries. This indicator shows that European capital investments have a more long-term nature and have strategic importance for the Armenian economy.
In 2014, the net investment inflows from EU countries formed 69% of overall flows compared to 14% share of the EAEU. In 2015, the net inflows from EU and EAEU suffered a sharp decline, reaching the negative level (capital outflow). However, in January to September of 2016, recovery tendencies were observed from EU’s side. During this period, net inflows from EU countries have reached approximately 86 billion AMD, while in Russia’s case, 72 billion AMD capital outflow has been registered.
The Future of Armenia-EU Relations
The aforementioned data testify that despite membership in the EAEU, Armenia continues to be connected to the EU by impressive economic indicators. In this respect, it is obvious that Armenia should be interested in the successful outcome of the negotiations process since in case of such quality of relations, the agreement aimed at deeper cooperation may serve an additional impetus for the development of Armenian economy.
“Union of Informed Citizens”