Why Armenia has become an attractive business haven for Russians

In a speech on Armenia's economic performance in 2022, Prime Minister Nikol Pashinyan said that the original growth target of 7% had been surpassed thanks, in part, to this wave of relocation, and that Armenia's GDP had grown by close to 13%.

Several Russian citizens who have relocated to Armenia have set up businesses in the HoReCa industry, which is the country's new bustling IT sector that has attracted new investments.

"Compared to neighbouring countries, Armenia's IT sector is much more developed. This helps companies who relocated to Armenia easily hire local talent," said Kerobyan in an interview with Forbes in the summer of 2023. 

"We don't mind (the entry of competing companies from Russia). It's actually better that companies are coming from other countries and competing with our local enterprises, and forcing them to improve. The businesses that don't adapt and improve quickly enough will die, and that is completely normal."

Is Armenia the best choice?

Armenia is a convenient location for Russian citizens to seek a new life. There are several dozen flights from Yerevan to various Russian cities on any given day, and Russians do not even need passports to come to this country; their national identity cards are enough. Additionally, many Armenians have a working knowledge of Russian, making everyday life easier.

Although Armenia's prime minister said in 2023 that his country is not Russia's ally in its war against Ukraine, Russians are generally treated with less hostility in Aremenia than they would experience elsewhere.

Armenia and Russia are military allies and Yerevan depends on Moscow to help defend its borders and for peacekeeping in Nagorno-Karabakh, a conflict-ridden territory that has a significant Armenian population.

An attractive business destination

Armenia is also an attractive business destination.

"These relocated companies can expect complete support from the Armenian government," said Ruben Yenikolopov, head of the Russian Economic School, ICREA Research Professor at UPF and Barcelona Institute of Political Economy.

"Taxes are comfortably low, even close to zero for some parts of the country. And Armenia maintains more comfortable business ties with Russia than anywhere in Europe."

This is not to say that Armenia is providing ways for Russians to bypass the sanctions placed by other governments.

In July 2023, eight out of 18 banks in Armenia announced the termination of operations involving the Unistream payment system— which earlier provided quick and convenient money transfer solutions between Armenia and Russia — because its operating bank had come under US sanctions.

The Deputy Chairman of the Central Bank of Armenia, Armen Nurbekyan, said in August that six banks now continue to work with Unistream only in Russian rubles and Armenian drams.

Weighing the pros and cons

More than 500 days since Russia launched its invasion of Ukraine, a lot of uncertainty remains, and many Russian citizens living in Armenia have no idea what the future holds. They continue focusing on the present and the positive aspects of their new life in Armenia.

Denis, who was unwilling to provide his last name but mentioned that he worked remotely from Armenia for a large IT company, said, "It's great here. It's warm, the food is good, and the people are nice."

"When we first came here and were trying to look up directions on our phone, some local people approached us and asked if we needed help. This is something I had not seen in Russia for a long time – the human side."

But he also pointed out some areas where Armenia needed to improve.

"Service and some technologies here are outdated. Banking applications, for example, are still quite basic. As an engineer, I can't help but notice these things. From an economic point of view, I was surprised that some prices here in Yerevan are at the same level as in St. Petersburg or even Moscow," he said.

Indeed, Armenia's inflation rate stood at 8.6% in 2022, and the average price per square meter for an apartment went up by 14%.

The new influx of immigrants has strained the country's economy and raised the prices of many products and services. At the same time, the increased flow of foreign currency from IT companies in the West now paying freelancers and employees in Armenia has brought exchange rates down.

One US dollar is worth 19.5% less in August 2023 than in February 2022, while the Euro has dropped by 23.2%. Naturally, for those who work remotely from Armenia for international companies, this has meant a significant decrease in purchasing power.

In July 2023, Fitch stated that it expects the dram to depreciate in 2023-24 moderately, but remain stronger than it was before the start of the Ukraine conflict. Core inflation is also decreasing and was 1.5% year-on-year in June 2023.

It remains unclear what many Russians who have relocated to Armenia will do when the war in Ukraine ends. But for those here now, many choose to focus on the positives.