Exports quadrupled in three years and then plunged by a third in a single year. Yerevan calls it growth, Moscow sees it as a profitable deal, while customs statistics show something far more mundane: ordinary transit with an Armenian label.
In July 2026, Armenia set a record. Its foreign trade deficit reached $699.1 million in a single month, the largest gap between imports and exports since January 2003, when the country began keeping such monthly statistics. From January through August, the deficit totaled $4.03 billion. Exports fell by 7.9% in the first seven months, while imports rose by 7.7%.
The numbers are dull. Politically, they are explosive.
Just two years earlier, Armenian officials and the media platforms serving them were describing a country that had increased its exports more than fourfold in three years. In 2021, Armenia sold roughly $3 billion worth of goods abroad. Three years later, according to official data, that figure had reached $13.1 billion, while some calculations put it at $13.4 billion, with the difference attributable to accounting methodology. Economy Minister Gevorg Papoyan reported that average GDP growth in 2021–2025 was about 8.13%, compared with the government’s target of 7%. Growth of 12.6% in 2022 and 8.3% in 2023 was presented as proof that a small country without oil or gas had discovered its own formula for success.
A formula was indeed found. It simply was not Armenian in origin.
Strip the transit flows out of Armenia’s statistics, and underneath them is an economy that throughout those years grew at roughly the same pace it had before 2022. No surge, no breakthrough, no miracle. What was layered on top was a multibillion-dollar stream of Russian gold, Asian electronics, and Western automobiles, for which Armenia became a convenient address in a suitable jurisdiction. That stream arrived because of decisions made elsewhere and disappeared because of decisions made elsewhere. In this story, Yerevan was a warehouse, a notary, and a cashier collecting a percentage for storage.
Thirteen Billion Dollars Out of Thin Air
Let us begin with a curve no propagandist would ever draw. Commodity group 71 under the Harmonized System, precious metals, gemstones, and products made from them, was barely noticeable in Armenian exports before February 2022. Beginning in mid-2022, it shot almost vertically upward. By early 2024, Armenia was importing more than $1.3 billion worth of precious metals each month and exporting $1.5 billion worth. Imports and exports moved along almost parallel lines, and the narrow strip between them represented what actually remained inside the country.
According to customs data uncovered by Armenian investigative journalists, Armenia imported about 66 metric tons of gold worth roughly $4.4 billion in the first half of 2024 alone. Almost all of it came from Russia. By the end of that six-month period, Russia accounted for 95.9% of Armenia’s gold imports, while the United Arab Emirates absorbed 84.2% of Armenian gold exports and 82.7% of its diamond exports.
The next step is almost embarrassingly obvious. The Emirates, which had shown virtually no interest in Armenian goods before 2022, displaced Russia in 2024 for the first time as the leading buyer of Armenian exports. Armenia’s trade with the UAE increased more than fivefold in the first ten months of 2024, approaching $5 billion. At the same time, exports to China nearly tripled to about $1 billion, with a significant share of the remaining gold going there.
The geometry is simple. On the left is Russia, cut off by sanctions from London and Zurich. On the right are Dubai and Hong Kong, where gold can be converted into money without uncomfortable questions about its origin. In the middle is Yerevan, through which the metal changes its passport.
Even Armenian Finance Minister Vahe Hovhannisyan acknowledged in 2024 that growth in exports and imports during the first nine months of the year was driven primarily by a sharp increase in gold reexports. The admission was made casually and disappeared beneath a flood of triumphant reports. That was unfortunate for the official narrative: this single statement is enough to dismantle the entire story of an economic miracle.
Sixty-Six Tons of Russian Gold: Anatomy of the Scheme
The mechanics of the transaction can be explained in two paragraphs. After February 2022, the London Bullion Market Association removed Russian refineries from its list of accredited suppliers, while Western exchanges and banks closed their doors to Russian metal. A discount relative to the world price emerged on Russia’s domestic market. An Armenian intermediary could buy a bullion bar at that discounted price, put it through local processing, documentary or physical, and sell it to a buyer in the Emirates or Hong Kong at close to the prevailing market price.
Yerevan economists who analyzed monthly statistics estimate that 10% to 15% of the value of these flows remained in Armenia. That included storage, refining, financial services, logistics, and insurance. My rough estimate is that at peak annual turnover of several billion dollars, the amount involved ranged from several hundred million dollars to as much as $1 billion a year. For an economy of roughly $25 billion, that is meaningful money. Against claims of national production, however, it is negligible.
There is another important detail that Yerevan prefers not to discuss. According to those same Armenian investigative journalists, more than a dozen Armenian companies participated in the large-scale import and reexport of Russian gold, and one of them, according to their reporting, was connected to the family of Khachatur Sukiasyan, a businessman and member of parliament from the ruling Civil Contract party. No one has faced charges in court, and I will not present a journalistic finding as an established legal fact. The coincidence nevertheless helps explain why the authorities were so eager to trumpet record figures and so reluctant to separate transit from domestic production.
Diamonds are a separate matter. Armenia did have a genuine historical base in this industry: diamond cutting operated there during the Soviet period, and part of that capacity survived the 1990s. After 2022, Russian rough diamonds were added to this foundation, entering alongside shipments from India and Hong Kong. In the first half of 2024, India accounted for 45.2% of Armenia’s diamond imports, Russia for 21.4%, and Hong Kong for 19.7%. Statistics do not show where Armenian cutting ended and the replacement of certificates of origin began. They do show the outcome: the number of diamond cutters in the country did not rise, while exports of gemstones multiplied.
A Smartphone with an Armenian Passport
Gold was the largest lane on this highway, but it was not the only one. The second lane ran north and consisted of everything the West was prohibited from selling directly to Russia: smartphones, processors, microchips, computer equipment, household appliances containing semiconductors, and automobiles.
The mechanism here was even simpler than with gold. Armenia belongs to the Eurasian Economic Union, which means that goods legally imported into Armenia can move within the union without customs barriers. Purchases from China, the UAE, or Europe are registered to an Armenian company, after which the shipment travels through the Upper Lars crossing into Russia. According to estimates cited in Western analytical studies as early as 2023, Armenia increased imports of new automobiles by 170%, electronics twofold, and machinery and mechanical equipment by 52%. In some product categories, as much as 97% of what had been imported was subsequently shipped to Russia.
Washington noticed this early. In the summer of 2022, CIA Director William Burns, during a visit to Yerevan, warned the Armenian leadership against assisting Russia in circumventing sanctions, particularly restrictions involving technology. In March 2023, the United States included Armenia among the countries through which illicit supplies were reaching Russia. On April 12, 2023, the US Treasury Department’s Office of Foreign Assets Control sanctioned the Yerevan-based company TAKO, which had been registered in May 2022, was wholly owned by a Russian citizen, and traded in electronics and telecommunications equipment. According to US authorities, the company supplied electronics to Russia’s defense industry through cooperation with the Radioavtomatika concern. On May 19, 2023, the US Department of Commerce added the Armenian company Medisar to its blacklist. A company representative who requested anonymity acknowledged in a conversation with journalists that the firm imported chemicals and laboratory equipment from the United States and the European Union and resold them to Russia, while insisting that it had violated no Armenian laws and that the authorities were aware of its activities.
That last qualification deserves special attention. The Armenian authorities knew.
On June 23, 2023, the European Union adopted its eleventh sanctions package, introducing a new instrument aimed at combating the circumvention of restrictions through third countries. Among 87 companies subjected to tighter export controls for supplying dual-use goods to Russia were, for the first time, entities registered in Armenia, alongside firms from Hong Kong, the UAE, Syria, and Uzbekistan. In European documents of that period, Armenia was mentioned alongside China, Turkey, and Kazakhstan as one of the gateways undermining the effectiveness of export bans.
It was not Europe or the United States that brought the automotive lane to an end. In August 2023, Georgia restricted the transit of sanctioned automobiles through its territory, and Armenian exports of vehicles and equipment fell almost immediately, within two months. Yerevan has no alternative route north. The border with Turkey has been closed since the early 1990s, as has the border with Azerbaijan. Geography, which Armenian propaganda had described for decades as a blockade, functioned in 2023 as a valve shutting off the sanctions pipeline.
One qualification is necessary here. A briefing circulated in expert circles estimated the share of Armenian production in exports of machinery and equipment at less than 5%. That figure cannot be verified from publicly available data: neither Armenia’s State Revenue Committee nor its Statistical Committee publishes separate statistics on exports of goods of Armenian origin. Electrical equipment and electronics accounted for approximately $1.12 billion in exports in 2025. How much of that was actually assembled in Armenia and how much was merely repackaged appears to be unknown even to the Armenian government itself. Or perhaps it knows and does not want to say.
What Remains When Someone Else’s Goods Are Subtracted
An honest analysis requires acknowledging what Armenia genuinely has. Its mining industry is real: copper and molybdenum concentrate from the Zangezur combine, zinc, and domestically mined gold are exported primarily to China and Europe. Food products, brandy, wine, dried fruit, and canned goods are produced inside the country. Aluminum foil from the Armenal plant, electricity exported to Iran, and garment workshops operating under tolling arrangements for brands that left the Russian market are also part of the real economy.
The problem is that this real sector experienced no dramatic leap. Monthly data show that traditional Armenian exports grew slowly and steadily both before and after 2022. There was no breakthrough in 2022 and no collapse in 2025. Transit income was simply layered on top without penetrating the productive fabric of the economy. Armenia did not acquire new major factories on a scale capable of explaining the export figures. Nor did it suddenly acquire an army of specialists capable of accounting for those numbers.
Consider how Armenians themselves argue over the figures. In February 2026, Economy Minister Gevorg Papoyan said Armenia had exported approximately $4.5 billion worth of goods of Armenian origin in 2025. Total exports, according to the Statistical Committee, amounted to $8.395 billion. Even under the minister’s version, almost half of Armenia’s exports were not Armenian. Armenian investigative journalists went further and argued that Papoyan’s figure was overstated: it appears to have included jewelry that was, in reality, the same Russian gold in another form. In 2025, most of this “jewelry” went to the UAE, with the rest shipped to Hong Kong.
Compare the two estimates. If the minister is correct, the transit share in 2025 was about 46%. Calculations based on comparing Russian gold imports with exports to the Emirates suggest something different: in peak year 2024, foreign goods accounted for more than half of total exports, while in some months gold and diamonds represented as much as three-quarters of all sales abroad. The discrepancy between these estimates is substantial. The conclusion from both is the same: half of the Armenian “economic miracle” consisted of someone else’s metal.
There is another detail the Armenian authorities prefer to avoid. In 2025, the European Union accounted for only 7.9% of Armenian exports, the Eurasian Economic Union for 38.4%, and other countries for 53.7%. The EU share declined noticeably over the preceding decade. The government that speaks more loudly than any other in the region about a European choice was, in practice, trading less with Europe than it had ten years earlier. Russia remained Armenia’s largest export market in 2025 at $2.9 billion, the Emirates ranked second at $2.05 billion, and Hong Kong fourth at $536 million. The export table by country reads more like a map of sanctions transit than a map of diversification.
The Main Beneficiary Is in Moscow
The propaganda picture in Yerevan suggests that Armenia outsmarted everyone and profited from global turbulence. The actual accounting tells a different story.
Russia obtained the principal benefit. Through the Armenian corridor, it moved tens of metric tons of gold onto the world market at prices close to prevailing market rates rather than selling it at a sanctions discount or placing it in storage. The foreign currency proceeds went into the budget and economy of a country at war. Through the same corridor, Russia obtained electronics, components, and dual-use equipment without which its defense industry would have functioned less effectively. Armenia received a commission.
Russian Deputy Prime Minister Alexei Overchuk noted at the Kyrgyz-Russian Economic Forum in August 2026 that bilateral trade had reached a record of approximately $12 billion in 2024, adding, “That is an enormous figure.” A year earlier, at the Eastern Economic Forum in September 2025, he had given a more precise figure of $12.4 billion. For comparison, before the war in Ukraine, in 2021, trade between Russia and Armenia was several times smaller. A doubling or tripling of mutual trade in two years cannot be explained by growth in Armenian orchards and vineyards.
The second group of beneficiaries is less visible but no less important. European and Asian suppliers of electronics, automobiles, and equipment preserved sales to the Russian market while formally avoiding direct violations of restrictions: the goods were sold to an Armenian buyer, and what that buyer did with them afterward was supposedly no longer the supplier’s concern. Gold traders in Dubai and Hong Kong obtained metal accompanied by clean documentation. Banks, logistics companies, and insurers all took their share along the chain. An Armenian address provided cover for everyone. This is precisely why Western pressure on Yerevan remained remarkably mild throughout those years: a dozen companies placed on sanctions lists against a backdrop of multibillion-dollar flows.
Iran forms a separate line in this story. For decades, Armenia has served Tehran as a window for circumventing Western restrictions. A branch of Iran’s Bank Mellat, which has been under US sanctions since 2007, operates in Yerevan and primarily serves Iranian clients. In 2025, Armenia imported approximately $680 million worth of Iranian gas, 55% more than in 2021. Experience in servicing one sanctioned neighbor proved readily transferable to another.
The Miracle That One Decree Abolished
The most humiliating episode in this story for Armenian propaganda did not occur in Yerevan. According to calculations by Armenian economists, Russia changed its own gold export rules in April 2024 by abolishing the export duty. The commercial logic of the Armenian route disappeared. Volumes began to decline within months.
After that, the statistics merely recorded the consequences of someone else’s decision. From January through August 2025, Armenian exports fell by 48.8% to $5 billion. In August 2025, the year-over-year decline was 40.8%, but only 6.1% when reexports of precious metals and gemstones were excluded. Trade with the UAE fell by 69.9% during the first eight months of 2025. For the full year, exports totaled $8.395 billion, down 36.1% from 2024. Total foreign trade fell by 29% to $21.43 billion. The decline continued in 2026: from January through July, trade with the Emirates dropped by another 72.1% to $356.5 million.
A miracle that can be canceled by a Russian government decision on an export duty is not a miracle. It is a lease.
Moscow is now using the same leverage in reverse. According to Overchuk, trade between Russia and Armenia in 2026 fell by roughly two-thirds compared with the 2025 level. “The situation is such that the decline will undoubtedly continue,” he said. Armenian statistics paint a less dramatic picture: from January through July 2026, trade with Russia declined by 20.5% to $3.12 billion, while imports from Russia fell by 28.3%. Estimates for 2025 also differ. In some statements, Overchuk cited roughly $8 billion; in others, $6.4 billion. The gap between Moscow’s and Yerevan’s figures is too large to attribute solely to methodology. Both sides are selecting statistics to suit political objectives: Moscow needs to show Yerevan the price of flirting with Europe, while Yerevan needs to persuade voters that nothing serious is happening.
The political backdrop is transparent. In 2026, Russia blocked the sale of 70,000 bottles of Armenian water, while Papoyan acknowledged that exports of Armenian products to the Eurasian Economic Union fell by about 5% from January through August to $943 million, partly because of Russian restrictions. The Russian market remains the primary destination for Armenian brandy, fruit, and canned goods. The very sector that was genuinely Armenian proved the most vulnerable to Moscow. The transit billions disappeared, while the dependence remained.
They Have the Oil, We Have the Miracle: Anatomy of a Dangerous Myth
Why was this entire construction of record figures necessary in the first place? The answer lies at the intersection of domestic politics and revanchist mythology.
The first objective was pragmatic. The government was heading into the June 7, 2026 parliamentary election. According to the final results released by Armenia’s Central Election Commission, Nikol Pashinyan’s Civil Contract party received 49.75% of the vote and 64 of 105 seats. The pro-Russian Strong Armenia bloc of billionaire Samvel Karapetyan received 23.27%, while Robert Kocharyan’s Armenia bloc won 9.92%. Turnout was nearly 59%. The ruling party’s victory was aided, among other things, by the image of a competent government under which the economy was growing faster than those of all neighboring countries. Export and GDP figures served that image better than any campaign poster.
The second objective is more dangerous. Armenian public discourse has long circulated a comforting formula for explaining defeat: Azerbaijan won because it had oil, while Armenia will eventually prevail because it will create its own economic miracle based on the talent and antiquity of the nation. The formula is flattering. It absolves Armenian society of responsibility for three decades of occupation and for the war it lost. It promises revenge without requiring anyone to explain with what money or with what army.
The myth of an Armenian economic miracle serves as fuel for this construct. If exports quadrupled, then time must be on Armenia’s side and Azerbaijan’s oil advantage must be temporary. The ruling party itself does not openly advance revanchist slogans, but it has created fertile ground on which revanchists can easily build. The image of an “Armenian breakthrough,” amplified by official statistics, is eagerly embraced by diaspora and opposition platforms for which the peace process remains synonymous with betrayal.
The problem with this formula is that both halves are false. Azerbaijan’s victory in 2020 was not the victory of an oil derrick. Oil revenue was the result of decisions made decades before the war: the Contract of the Century was signed on September 20, 1994, and the Baku-Tbilisi-Ceyhan oil pipeline began operating in 2006 and has since transported more than 4.7 billion barrels. That money was transformed into an army, military reform, alliances, and infrastructure because the state consistently pursued that objective for more than two decades. Azerbaijani President Ilham Aliyev articulated the goal of turning black gold into human capital as early as the mid-2000s. During those same years, Armenia held other people’s lands and lived on remittances from Russia and donations from the diaspora.
The second half of the formula, the “Armenian miracle,” consists, as we have seen, roughly half of Russian gold and Asian smartphones. A revanchist project built on arbitrage involving someone else’s metal will go bankrupt the day Moscow changes its customs duty again.
Baltic Deja Vu
There is a precise historical precedent for this story, and people of my generation remember it well. In the early 1990s, Estonia suddenly became one of the world’s major exporters of nonferrous metals despite having no copper or nickel deposits of its own. According to available information, metals from the collapsing Soviet economic space were shipped west through Tallinn, while Estonian statistics recorded them as national exports. The wave subsided when Russia tightened export controls. What remained in the Estonian economy were several private fortunes and port infrastructure.
There was one important difference. Estonia never tried to build a national myth of superiority on the transit of metals. It used the money it earned to integrate itself into European institutions and joined the European Union roughly a decade later. Armenia, for now, is using transit figures for domestic self-consolation.
The second precedent is more recent. Among the countries of the Eurasian Economic Union, only Kyrgyzstan showed a larger increase in GDP growth relative to its prewar average after 2022 than Armenia. For the Armenian economy, the difference was 4.3 percentage points. Bishkek received its own sanctions windfall through the same reexport model.
What Comes Next: Two Scenarios Without a Miracle
The first scenario is a soft normalization. The Armenian economy returns to its potential growth rate, which the International Monetary Fund estimated at roughly 4.5% annually. As early as January 2025, the World Bank stated directly that the slowdown reflected the exhaustion of one-off factors from 2024, including reexports. Construction, which grew by 20.2% in 2025, tourism, and government investment partially compensate for the loss of transit income. GDP growth of 7.2% in 2025, cited by the authorities, would in this scenario remain the last surge, driven by capital inflows, including Iranian capital, and construction rather than exports.
The second scenario is harsher. Russia continues pushing Armenian goods out of its market, targeting brandy, fruit, and mineral water, in other words the only genuinely Armenian export sector. The trade deficit expands, the dram loses support, and a government that proclaimed a miracle is forced to explain to voters where that miracle went. Western regulators, meanwhile, obtain far greater compliance from Yerevan than before and begin asking questions about earlier schemes, although in the past they had largely confined themselves to current practices.
I am prepared to put forward verifiable forecasts. By the end of 2026, Armenian exports will not exceed $8 billion and will remain below their 2025 level. Armenia’s trade deficit in 2026 will exceed $5.5 billion and become the largest in the history of independent Armenia. Monthly exports under commodity group 71 will not once return to the $500 million level before the end of 2026. If even one of these forecasts proves wrong, I will readily acknowledge that I underestimated the Armenian economy.
One question remains for which I have no answer. How much of the commission that remained in Armenia in 2022–2024 went into productive investment, and how much went into real estate, offshore accounts, and campaign budgets? Armenian statistics do not show this. The Armenian authorities are in no hurry to calculate it.
A Receipt Instead of a Miracle
Over three years, Yerevan received what the owner of a warehouse receives when someone else’s cargo passes through it: a storage fee, increased business in nearby cafes, and the illusion of wealth. The warehouse emptied when the owner of the cargo found a cheaper route. Export figures returned to roughly where they would have been without the war, except now accompanied by a massive trade deficit and damaged relations with the country’s principal export market.
In that same year, 2026, when the ruling party celebrated an election victory built in part on the story of unprecedented growth, Russia refused to allow 70,000 bottles of Armenian water onto its market. The water was real. It was Armenian. It came from Armenian springs. The gold on which the legend had been built for three years was never Armenian at all.