In a rapidly shifting geopolitical landscape, Armenia finds itself at an economic crossroads, balancing traditional partnerships while eyeing new, lucrative markets. In a recent broadcast of Noyan Tapan, host Gayane Arakelyan sat down with Levon Barkhudaryan—Head of the Finance Chair at the Armenian State University of Economics and former Minister of Finance and Economy—to dissect the nation's current economic pulse. From the ripples of the conflict in Iran to the tantalizing, yet complex, prospects of European integration, Barkhudaryan painted a picture of an economy operating far below its true capacity, held back by historical inertia but brimming with untapped potential.

 

The Iranian Lifeline Remains Steady

 

Despite the alarming escalation of hostilities involving Iran that began late last month, the anticipated economic shockwaves have yet to hit Armenian shores. Addressing the widespread anxieties, Barkhudaryan quickly dispelled the notion of a looming crisis. "There is no such disaster or crisis as many are propagandizing; everything seems to be continuing normally," he noted.

 

The economic ties between the two ancient neighbors remain deeply entrenched. In 2025, the total trade turnover between Armenia and Iran stood at approximately $700 million, comprising $600 million in imports from Iran and $100 million in exports from Armenia. A significant portion of this is driven by the strategic gas-for-electricity swap program. Barkhudaryan confirmed that the borders remain stable with no unusual accumulations of cargo, and the flow of essential goods has not been disrupted. He credited Iran's pragmatic foreign policy, noting that Tehran consistently honors its supply commitments to nations that have not joined anti-Iranian coalitions.

 

Furthermore, Barkhudaryan reminded viewers of Iran's vital role in regional security, explicitly noting that during the 44-day war, Iran was the primary deterrent keeping Azerbaijan and Turkey from attacking Armenia's southern Syunik province by deploying its best troops along the border.

 

The Imperative of Diversification and the Turkish Border

 

While the southern border remains a reliable economic conduit, Armenia's macroeconomic data tells a story of heavy northern reliance. Trade figures from January 2026 reveal that Russia still holds the status of Armenia's key partner, accounting for roughly 34.5% of exports and 27% of imports.

 

Barkhudaryan acknowledged this historical reliance, driven heavily by energy resources and grain, but strongly advocated for rapid economic diversification. A pivotal factor in this transition could be the potential opening of the Armenian-Turkish border, which Barkhudaryan suggested might occur within the next year, possibly before the next elections.

 

"This is a good opportunity also on the path to European Union membership," Barkhudaryan explained. "It is one thing to constantly say we are going in that direction, but another thing when we have no direct land route to Europe. Turkey is our neighbor, and we can use those roads". However, he cautioned that local businesses are currently too "comfortable" and must actively prepare to face fierce European competition, such as going head-to-head with Spanish wines or French cognacs.

 

Fair Competition: The Ghost of "Grandimolini"

 

Perhaps the most structural barrier to Armenia's economic expansion is internal. When asked to estimate how much of Armenia's true economic potential is currently active, Barkhudaryan suggested it could easily be doubled, implying the economy is running at merely 50% capacity.

 

Unlocking this dormant potential requires strict institutional reform and the eradication of market monopolies. Barkhudaryan emphasized that businesses can tolerate high taxes, but they cannot survive discrimination and uneven playing fields. He recounted a telling historical anecdote about an Italian company, "Grandimolini," which imported wheat and established milling operations in Armenia. The Italian investors were eventually driven out of the country because they were forced to pay full Value Added Tax, while a well-connected local importer was bypassing these taxes entirely. Unable to compete against systemic favoritism, the foreign investors relocated to southern Russia.

 

"The role of the state is the preservation of the dictatorship of the law, so that everything is within the bounds of legislation," Barkhudaryan stressed, noting that unpunished economic sabotage costs the nation hundreds of millions in lost investments.

 

Cultivating the Future: Organic Agriculture and IT Hubs

 

Looking forward, Barkhudaryan identified organic agriculture and the Information Technology (IT) sector as Armenia's premier avenues for growth. Armenian agricultural products, heavily favored for being ecologically clean, have massive potential in European markets. To scale this, he championed the concept of public-private partnerships at the municipal level. By having local governments provide essential infrastructure—such as roads, water, and electricity—in exchange for a minor equity stake in new processing plants, the state can de-risk investments and guarantee local employment.

 

Regarding concerns that open borders might flood Armenia with cheap, chemically treated Turkish tomatoes and ruin local farmers, Barkhudaryan offered a free-market retort. He argued that Armenia's food safety inspectorate must rigorously test all imports; if foreign produce is heavily treated with chemicals, it should be rejected. However, if the imported produce is genuinely clean and cheaper, Armenian producers must adapt, improve their technology, or form joint ventures. "This will stimulate competition for the domestic producer, and the consumer will only benefit from it," he concluded.

 

Ultimately, the Noyan Tapan interview highlighted a consensus: Armenia's economic survival and prosperity do not rely solely on surviving the geopolitical storms outside its borders, but on cultivating an uncompromising culture of fairness, innovation, and strategic readiness from within.

 

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