LONDON, July 2 (The Conway Bulletin) — The impact of sanctions on Russia is hitting all the economies of the South Caucasus and Central Asia but none more so than Armenia.
Armenia is particularly reliant on Russia for both financial support and as a market for its export. Last month, the Armenian Central Bank said it would cut interest rates for the third time this year to a four year low to try and curb falling inflation.
The latest inflation numbers show just how much work the Central Bank needs to do to prop up the economy. Armenia’s statistics agency said that inflation for the first half of the year was 4%, at the bottom end of its range.
But even this figure hides the really worrying data. Average prices in June fell 1.8% against May.
For more evidence of Russia’s faltering economy hitting the more outlying regions of the former Soviet Union, cognac is as good a place to look as any other. Armenian cognac is famous around the former Soviet Union and Russia is its biggest export market.
The latest data showed that cognac production fell for the first five months of May by 11.1% to just over 5.5m litres compared to the same period in 2013 (June 30).
Although no official explanation has been given, the message is still fairly clear.
“In the first quarter of 2014 Armenia exported to Russia half the amount of cognac compared with the the same reporting period in 2013,” an Armenian business website reported.
“They [Russian cognac importers] are in an unstable financial situation and do not know what will the political conflict between Russia and Ukraine.”
>>This story was first published in issue 191 of the weekly Conway Bulletin newssheet. For information on the Bulletin, please click here