Date first published: 16/07/2026
Key sectors: all; agriculture; logistics; energy
Key risks: supply chain disruptions; political stability; regional conflict
Risk development
On 2 July the European Union (EU) unveiled a package of trade measures that will liberalise around 80 per cent of Armenia’s exports to the bloc. The package, an addition to the EUR52m announced in June, aims to support Yerevan’s export diversification amid Russian trade curbs. Moscow restricted imports of most food, seeds, flowers and fertilisers around the 7 June parliamentary elections, widely seen as economic coercion. Separately, on 1 July Brussels announced a Global Gateway investment package of EUR200m for connectivity projects across the South Caucasus, with EUR20m earmarked for a peace-fostering programme for local populations in Armenia and Azerbaijan.
Why it matters
The push is the EU’s most concerted in years, but remains uneven. European Commission President Ursula von der Leyen visited Baku and Yerevan but skipped Tbilisi as ties with Georgia have frayed. The grants, intended to mobilise up to EUR2bn, target a corridor whose central node has distanced itself from Brussels. Rail freight from Baku to Europe must transit Georgia, where EU accession talks have been frozen and the Commission suspended visa-free travel for officials on 6 March. Brussels has frozen bilateral assistance while including Georgia in connectivity projects, implicitly conceding that the route cannot avoid Tbilisi.
The EU’s tools are slow and conditional. The package for Armenia still requires adoption by the European Parliament and the Council; exporters must meet EU standards, and Armenia’s harvest is already underway. The intended offset of disruptions therefore will come with a delay and leave Moscow’s structural leverage largely intact. Brussels is also competing for an outcome Moscow no longer opposes, with the assumption that Russia profits from regional instability now dated. Moscow seeks to shape a connected region serving as a strategic rear – sanctions-resilient routes, the North-South corridor to Iran and the 3+3 platform convening Moscow, Ankara and Tehran.
Background
Armenia relied on Russia for 82 per cent of its gas imports in 2025, hosts Russian bases and remains in the Eurasian Economic Union (EAEU) and the Collective Security Treaty Organisation (CSTO), although Yerevan froze its membership in the latter in February 2024. However, in the weeks before the Armenian vote, Moscow escalated coercive measures, threatening to suspend discounted natural gas, petroleum products and rough diamonds if Yerevan pursued EU accession. Russia, Belarus, Kazakhstan and Kyrgyzstan also signalled that Armenian EU preparations would endanger the economic security of remaining EAEU members, demanding a referendum on whether to join the EU or stay in the bloc. Still, on 7 June Armenian Prime Minister Nikol Pashinyan’s Civil Contract won 64 of 105 seats, albeit short of the two-thirds needed to amend the constitution in parliament. Baku conditions the signing of a peace treaty on removing constitutional references to Nagorno-Karabakh, requiring a referendum expected for 2027.
Brussels is meanwhile recalibrating towards Baku, which sends roughly half its gas exports to the EU, with talks underway to replace the 1999 framework agreement. Conversely, Georgia’s ruling Georgian Dream party suspended accession talks until 2028 after the disputed October 2024 elections, and EU foreign policy chief Kaja Kallas has stated Tbilisi has no viable path absent dramatic change. The pro-Western versus pro-Russian framing warrants caution throughout. Armenia adopted a law initiating EU accession in 2025 but has not applied to join the bloc, and Pashinyan describes the bid as theoretical while calling his relations with Russian President Vladimir Putin close.
Risk outlook
Further Russian measures against Armenia are likely but will likely remain calibrated, resorting to sanitary bans and gas pricing rather than a cut-off, leaving agricultural exporters exposed through the 2026 harvest. Moscow has limited incentive to break a peace it expects to shape. The binding constraints on the EU’s corridor are political rather than financial, namely Armenia’s referendum and Georgia’s estrangement, neither of which is expected to resolve soon.