Last reviewed 16 May 2019

Armenia, a small Christian country in the mountainous Caucasus region, is transitioning to a more open political system, which bodes well for trade, investment and the economy. Martin Clark reports.

Armenia on the agenda

A small country of just over 3 million people, Armenia has slowly been rekindling ties with the UK and the West ever since its independence from the Soviet Union back in 1991.

The landlocked nation is positioned to the north of Iran and shares a long border with Turkey to the west, Georgia to the north, and Azerbaijan to the east.

The whole area remains a region where competing interests vie for influence, just as they have for centuries.

While there are still strong links with Moscow — Russian is one of the two main languages spoken, alongside Armenian — business interests have, to some degree at least, been realigned westwards, towards Europe.

The European Union (EU) is now Armenia’s leading single export destination.

The US too has certainly expanded its influence with investment that spans energy and mining, information technology, agriculture, tourism, construction, beverages and textile production.

Indeed, one of Armenia’s leading ambassadors on the American stage is reality TV celebrity family, the Kardashians, who are proud Armenian Americans.

Other famous Armenian names include Arsenal soccer ace, Henrikh Mkhitaryan, and legendary French-Armenian crooner, Charles Aznavour, who passed away in 2018.

Not that Armenia’s was an easy transition in the aftermath of communism — now almost 30 years ago — with the country soon embroiled in a bitter post-independence conflict with Azerbaijan over the mainly Armenian Nagorno-Karabakh region.

The UK Foreign & Commonwealth Office still advises against all travel to the north-eastern border area between the two countries.

Even today, the border remains closed and tensions over Nagorno-Karabakh continue.

Armenia has, however, always been a strategic land, falling under Byzantine, Persian, Mongol or Turkish control throughout the ages.

Today, this Christian country is reinventing itself once more, with an economy that has become a notable exporter of diamonds, machinery and foodstuffs, and one that treads a careful path between Moscow and the West, like many other central Asian republics.

That includes another recent political transition with the election last year of a new prime minister, Nikol Pashinyan, a former newspaper editor and protest leader.

His success marked a break from a line of rulers at the helm in Armenia since the 1990s, potentially opening the door to new liberal reforms and a more open economy.

In December 2018, the UK’s Minister for Europe, Sir Alan Duncan, congratulated Mr Pashinyan on his success, adding that the elections “mark an important new stage in Armenia’s democratic development.”

Challenging market

This uneven transition provides some context and insight into modern day Armenia, though.

And yet there are clear signs of change and progress in 2019, a message underlined recently by Mr Pashinyan himself, who clearly has an eye on the future, one underpinned by his country’s undoubted potential.

A land of both beguiling medieval monasteries and Soviet relics, all set amidst a dramatic and beautiful natural landscape, Armenia is certainly unique.

The main arrival point, Yerevan, is perhaps one of the region’s least-discovered capitals though, certainly for UK visitors.

It is, in fact, one of the world’s oldest cities and a historical intersection between East and West.

New investment is putting it more on the map, with the opening of plush new hotels seeking to attract an influx of international visitors.

They include the The Alexander, a Luxury Collection Hotel from Marriott, just moments away from the city’s famous Republic Square.

This exclusive 114-room site in Yerevan’s historic centre includes a collection of bars and restaurants that have become a hub for business travellers and an emerging pool of tourists.

Announcing the opening of the hotel this year, Anthony Ingham, global brand leader of The Luxury Collection, said that Armenia remains a “mostly unchartered destination” for travellers.

“The Alexander will allow our guests to connect with the fascinating capital city of Yerevan, marked by grand Soviet-era architecture and historic landmarks such as the Matenadaran library,” he said.

Another new arrival is the Ramada Hotel & Suites by Wyndham Yerevan, located close to Republic Square, with panoramic views of Mount Ararat and the scenic city centre.

It also marks the group’s first hotel project in Armenia, another positive signal for investors.

Situated just 13km from Zvartnots International Airport, the 202-room hotel is set in an ideal location for travellers who want to sample the best that the city has to offer, including the National Gallery, the History Museum and the Opera and Ballet Theatre of Armenia.

“Yerevan is increasingly attracting business and leisure travellers,” noted Chilingaryan Karen, general director of City Central LLC, the hospitality management group that will run the hotel.

New investment

Despite transitions, this new investment underscores the fact that the Armenian economy is expanding, growing at a robust 5.2 per cent in 2018, according to the World Bank.

This has been aided by improvements to the business climate, with the country climbing up the ranks in the bank’s own Doing Business 2019 guide.

Armenia moved up from 47th to 41st position, “largely due to improvements in the business regulatory environment,” the bank noted.

Its ranking lists it between two EU member states, Slovenia and Slovakia, and only two places behind Japan, one of the world’s top economies.

Yet businesses still face challenges in key areas such as obtaining construction permits or resolving insolvency, the bank adds.

While tourism remains in its infancy — though no doubt buoyed by new hotel developments — other investment is finding its way in too, across a host of other industry sectors, including from multilateral lenders such as the World Bank’s private finance arm, the International Finance Corporation (IFC).

The IFC’s recent portfolio includes an emphasis on clean energy, with the promotion of the Vorotan hydro project to boost power supplies, and expanding lending capabilities among local financial institutions to nurture small businesses and the private sector.

These areas reflect the World Bank’s new 2019-2023 country priorities for Armenia, which include clean energy and sustainability, and exports and improvements to the business environment.

The country will also see a new 250 megawatt (MW) combined-cycle gas-fired thermal power facility begin operating in 2021 in the south of Yerevan, which will help replace electricity produced by ageing power plants.

The new plant is expected to be about 50 per cent more efficient, thereby reducing the cost of imported gas by around US$25 million per year, as well as improving the reliability and security of Armenia’s domestic energy supply.

This project is being developed by a group of German and Italian companies, underlining an expanding European presence in the area.

Indeed, it can be viewed as part of a broader strategic shift, given that the country remains heavily dependent on fuel imports for power generation and, hence, reliant on gas-rich Russia.

Doing business

For British companies and visitors, Armenia can make for a challenging market, with an infrastructure in need of upgrade and investment, and a bumpy transport network where a deluxe Mercedes Benz car might easily share the road with an Eastern Bloc-era Lada.

Then there is the language issue, with English-speaking visitors at a distinct disadvantage compared to Armenian and Russian speakers.

That said, trade with the EU now accounts for almost a quarter of Armenia's total trade.

Significantly, the EU is Armenia's single biggest export market with a 26.7 per cent share in the country’s total exports.

Major EU imports from Armenia include manufactured goods, and beverages, tobacco and miscellaneous articles.

In the other direction, EU exports include machinery and transport equipment, manufactured goods and chemicals.

For the UK, there have been clear attempts to expand the scope of business too.

That includes official sponsored events such as a Best of British Education show in 2017, hosted by the British Embassy in Yerevan with the British Council, to drum up further business and raise awareness.

The first ever exhibition of British education opportunities to be held in Armenia, it attracted representatives from world-famous publishing names like the Oxford University Press, Cambridge University Press, Dorling Kindersley and Longman/Pearson.

Among the other exhibitors was the University of Sheffield which launched an MBA taught in Armenia in 2016.

And for those UK travellers that do make the nine hour flight to Yerevan, then this remains an unspoilt destination with plenty of appeal.

As well as its rich history and culture, Armenia’s natural landscape includes Lake Sevan, which covers more than a tenth of the country’s surface area, and provides plenty of beach options.

It also includes the Caucasus Mountains, and the chance to test the Transcaucasian Trail, a long-distance hiking trail under development through Georgia, Armenia and Azerbaijan.

Armenia is also a big wine producer and home to the famed Yerevan Brandy Company, hailed as the best of the best by the late Sir Winston Churchill.

Daily tours are available of the brandy site, first established in 1887, which is now owned by the French Pernod Ricard company, a further indicator of Armenia’s growing ties with Europe.