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Friday, September 22, 2017
Economy
Inside
THE ECONOMY IN ARMENIA
BEFORE
UNCHARTED TERRITORY
CURRENT ECONOMIC SITUATION
FOREIGN TRADE
POTENTIAL
GENERATIONS

THE BANKING SYSTEM IN ARMENIA
THE TAX SYSTEM IN ARMENIA



Links
Armenian Economy at the Beginning of 20th Century
CIA Factbook: Armenia
Interfax: Armenia
UNDP Report
IMF Armenia Report


BEFORE
"It used to be we had money, but nothing to buy. Now we have everything for sale, but no money to buy it."
Tour Armenia
Updated 2017

One of the most wealthy of the former Soviet Republics, Armenia has suffered through a virtual meltdown of the economy, beginning with Gorbachev's Perestroika plan, which began the steady erosion of the Soviet economy. Armenia was heavily dependent on the former Soviet Union for its trade.  Raw materials were shipped from as far away as Siberia and the Central Asian republics to the country, where it was processed, and then exported back for sale.

With Perestroika, the command economy began to dissolve. It reached a critical mass in 1988, with the Spitak earthquake on December 7 of that year.  The earthquake was devastating as it was, but it became horrific as it demonstrated the inability of the centralized powers in Moscow to alleviate the situation.  Promises were made to immediately import hosing materials, construction workers and to "rebuild the entire region within 18 months".  The promises were never kept, and up to 40% of the earthquake zone population still live in temporary shelters.

The problems were still localized to the earthquake zone when Azerbaijan imposed an energy blockade against the country in 1989, as reparation for Nagorno Karabakh's declaration of independence.  Energy rationing began, and factories were forced to cut down production.  Meanwhile, ethnic tensions in Georgia at Abkhazia severed the primary land and rail transportation routes to Russia, while Azerbaijan refused alternate routes through their territory.

With no rail and road connections via Abkhazia or Azerbaijan, the country lost every trade agreement it had in one blow.  It has taken years of negotiation to re-establish traditional trade partners, while transportation has been restricted to air freight and shipping via Georgian ports.

The total collapse of the economy came with the dissolution of the Soviet Union in 1991. Newly independent republics woke up to find that though they were perhaps free from Moscow's dictatorship, they were also completely cut off from traditional trade partners, who lay sometimes thousands of miles away through several new countries, each with its own customs and border laws.  Ironically, the only part of the Soviet Union to benefit from the situation is Moscow, which has witnessed a real seven-year boom that shows no signs of stopping.

Taking advantage of the situation were a number of enterprising individuals who began a trading sector, which now forms the bulk of the current economy.  From simple street-side stands and markets, tiny kiosks sprang up almost overnight, as notoriously empty shelves at state stores began to fill up with imported goods.  Within a year, the purchasing power of the population--which had stuffed away rubles since there was so little stock available during Soviet times--shrank, and in October of 1992, the ruble collapsed, making currency less valuable than the paper it was printed on.  A reflection of the time was a joke common among locals, "It used to be we had money, but nothing to buy.  Now we have everything for sale, but no money to buy it."




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