Main directions of economic cooperation

I n the context of the formation and development of economic relations between countries within the global economy, the establishment and continuous implementation of trade and economic ties is of primary importance. In this context, studying economic relations with Armenia’s main trade and economic partners, as well as exploring possibilities for their further development becomes particularly important.  Based on the official data of 2023, the United Arab Emirates (UAE) is the second in this list.

Generally, Armenia’s economic ties with the UAE are diverse and multi-layered. Particularly, alongside the deepening of diplomatic relations between the two countries which have spanned more than 2 decades, bilateral cooperation has also developed in areas such as commerce, finance, investment and other fields. Several cooperation memoranda and agreements signed between Armenia and the UAE have provided a legal basis for joint projects in information technology, renewable energy, agriculture, tourism, and other fields, which continue to be implemented within this framework.

Bilateral trade and economic relations

T he formation and expansion of trade relations are essential prerequisites for developing mutually beneficial economic ties between the countries. Therefore, we consider it necessary, to first refer to the study of the volume of mutual trade turnover between RA and the UAE.

According to data from the RA Statistical Committee (SC), in the volume of trade turnover in 2023, the UAE ranked as Armenia’s second-largest trade partner, with a trade turnover exceeding 2 billion 297.8 million US dollars, an increase of 3.9 times compared to the previous year.

It should be noted, that the volume of trade turnover of the 2 countries reached its maximum level last year. Moreover, the volumes of both imports from the UAE to Armenia (24.6%) and exports from Armenia to the UAE (4.2 times) increased significantly in 2023, compared to 2022. It is also noteworthy, that during the period considered, the trade balance was positive, with the volume of exports from Armenia to the UAE exceeding imports by about 2 billion 151 million dollars.

It is clear from the presented statistical data that in the last 10 years, trade relations between Armenia and the UAE have become more active since 2016 when Armenia began to export more to the UAE than imports (except for 2018, when imports exceeded exports), however it should be noted that especially in the last 2 years, the volumes of exports from Armenia to the UAE have increased progressively. According to the 2023 data, the share of the UAE in the entire volume of mutual trade turnover of RA was more than 11%, and according to the data of the first half of the current year, it was 20.1% compared to 5.5% in the same period of the previous year.  The fact, that this trend continued in 2024 also deserves special attention, according to the data of the first half of the year, the UAE became the first export partner of Armenia,  surpassing the traditionally ranked first place, the Russian Federation. Therefore, in the first half of the current year, 46.3% of the total volume of exports from Armenia was directed to the UAE, and 17.8% to the Russian Federation.

For a more thorough study, let’s first look at the structure of exports from Armenia to the UAE by product groups. According to the data published by the State Revenue Committee, precious metals accounted for the largest share of exports from Armenia to the UAE in 2023, comprising 94.3%. In particular, gold (about 1.302 billion US dollars), jewelry products and their components (410 million US dollars), and diamonds (318 million US dollars) were the most exported products. During the same period, the second largest group of exported goods was cigarettes, with a customs value of 110 million dollars. The export of aircraft and their parts also represented a relatively high share, totaling over 5.3 million dollars. It should be noted that during the observed period, products worth more than 2.224 billion dollars were exported from Armenia to the UAE, representing an increase of  4.2 times compared to the previous year. Thus, the significant increase in the volume of exports from Armenia to the UAE can largely be attributed to the rise in exports of precious metals, particularly gold. A contributing factor to this situation is that, due to the Russian-Ukrainian conflict, traditional supply chains have changed significantly, and trade mechanisms have diversified. As an example, Armenia has turned into an important transit entity for economic and trade relations with many countries, including the UA. This reality led to a structural change in Armenia’s main trading partners list, resulting in the UAE becoming Armenia’s second-largest partner, behind only the Russian Federation.

On the other hand, when looking at the structure of imports from the UAE to RA by product group, we observe that during the considered period, precious metals accounted for the largest share of both exports and imports, making up 53.1%. Diamonds (41.2 million dollars), gold (about 15 million dollars), jewelry products and their components (more than 7 million dollars) were the most imported from this product group. The second largest group of products consists of mineral fuels, oils, and refined oil products, with a customs value of approximately 25 million dollars. Tobacco and industrial tobacco substitutes also held a significant share in this category, amounting to 6.7 million dollars. During the same period, cotton was also a product with a relatively high customs value, totaling 5.4 million dollars. It should be noted that various goods are imported from the UAE to Armenia, but not in large volumes. However, as shown in the chart, 2023 is also notable for an increase in the volume of imports from the UAE to Armenia.  

It is also noteworthy that in 2023, the UAE became not only the second-largest trade partner of Armenia but also led in both total investments and foreign direct investments (FDI), surpassing Russia, which has traditionally ranked first in investment volume. In 2023, total investments from the UAE reached about 104.3 billion AMD, with direct investments amounting to 100.8 billion AMD, increasing by approximately 49 and 68 times respectively, compared to the previous year. In terms of sector, we notice that direct investments from the UAE were mainly concentrated in financial intermediation, alongside insurance and pension security. 
 

In the context of Armenia’s economic relations with the UAE, it is necessary to consider the overall picture of remittances. The volume of these remittances is not as large as it is with Russia. Additionally, the UAE is among the countries with which Armenia has a negative balance of money transfers, that is the volume of money transfers from individuals in Armenia to the UAE is greater than from the UAE to Armenia. As seen in the chart below, the largest outflow of remittances from Armenia to the UAE over the past 10 years, was recorded in 2023, amounting to more than 571 million US dollars, which increased by about 2.1 times compared to the previous year, and 26.7 times compared to the lowest figure recorded in the given period. Shifting from remittances from Armenia to the UAE to remittances in the opposite direction, we should note that during the observed period between 2014-2023, the highest figures for both outflows and inflows were recorded in 2023, nearly doubling compared to the previous year. The net inflow of remittances from the UAE to Armenia, which shows the difference between inflow and outflow, has been mostly negative over the last 10 years, except for 2017, 2018 and 2020. In this context, it is noteworthy that the net inflow increased in 2022 and 2023 more sharply in the negative direction, as the outflow in both years registered a progressive increase compared to the inflow, by  7.2 and 7.7 times, respectively.

In the study of the economic relations between the UAE and the Republic of Armenia, tourism is also highlighted as an important sector, playing a significant role in the economies of both countries. Especially recently, there has been a noticeable trend of increasing tourist flows, attributed to the availability of budget flights between Armenia and the UAE, after the entry into force of the decision to cancel the visa regime between Armenia and the UAE from February 1, 2024. Reciprocally, the exemption from the visa requirement has already found its positive reflection in the statistical data describing the tourist figures.  Thus, as evidenced by data from the Ministry of Tourism of the Republic of Armenia, 3,341 tourists from the UAE visited Armenia in the first half of the current year, making an increase of 31.1% compared to the same period last year. As a result of the increase in tourists from the UAE to Armenia, the share of tourists from the UAE in the total number of visitors to Armenia has also changed. In the first half of 2024, it was 0.4 %, instead of 0.3% in the same period of 2023. As a result of this change, further strengthening of business and economic ties is expected, which will naturally enhance the strengthening and deepening of investment and economic cooperation.    

In this context, it is also important to consider the statistics of border crossings between these countries. According to the results of the Orbeli Center’s surveys, based on data available in the RA border electronic management information system, there were 165,416 registrations from the Republic of Armenia to the UAE and 185,758 registrations in the opposite direction in 2023. In comparison, during the first half of the current year, there have already been 107,340 and 110,439 registrations, respectively.      

Thus, trade and economic relations between Armenia and the UAE have begun to develop and improve, especially in the last few years, as a result of which the UAE has become the second largest trading partner of Armenia. Since 2022, the investment environment among the partner countries has improved, leading to a significant increase in tourist flows and remittances from individuals. Despite the positive developments mentioned above, it should be noted that there is still a great potential for revitalizing economic ties, both in the diversification of trade and investments, tourism, real estate market, information technology, and other areas.