Country overview

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​​​The Republic of Armenia is a landlocked country in the southern Caucasus region between the Black and Caspian seas, bordered by Turkey on the west, Georgia to the north, Azerbaijan on the east and Iran to the south. The country is approximately 29 800 square kilometres (km2) large with a population of 3 million​.

Yerevan, the capital, is the largest city with 1.1 million inhabit​ants. Armenia’s economy has undergone numerous reforms since the economic crisis of the early to mid-1990s. It has evolved from having a Soviet-era centralised structure to a partially market-oriented economy, with privatisation of most enterprises. An influx of foreign capital and funding from donors since the early 2000s has contributed to healthy economic growth, and Armenia’s real gross domestic product (GDP) increased 6.04% per year from 2002 to 2015 (measured in US dollars [USD] at purchasing power parity [PPP] 2011 prices). Real GDP per capita was USD 7 907 in 2015, double what it was in 2002.

Armenia’s reliance on export-oriented industries and high remittances from Armenian diasporas (remittances accounted for 14% of GDP in 2015) expose the economy to price and demand fluctuation risks. During the latest global financial crisis, the country’s real GDP fell 15% and poverty rose from 27% in 2008 to 35% in 2011. However, targeted social expenditures and pension increases have induced economic growth and the poverty level was reduced to 30% as of 2016.

Lacking indigenous resources, Armenia ​imports natural gas and oil for most of its energy needs (75% of total energy supply), mainly from the Russian Federation (Russia). Natural gas is imported from Russia via pipeline through Georgia, but also from Iran through a barter agreement under which it exports electricity in exchange.

Electricity is also traded with Georgia, though volumes are low since the countries’ networks are not synchronised. Energy interconnections with Azerbaijan and Turkey are currently inactive for political reasons.​​

Prompted by a severe electricity supply crisis in the mid-1990s, Armenia has revamped its energy sector over the past 20 years. Parts of the sector have been privatised, some companies have been restructured, most households now have access to gas, and cost-reflective tariffs have been introduced.This has led to ample investment in capacity and networks, which has considerably improved reliability; funding came mainly from the donor community, upon which Armenia still relies for support.

Energy policy is now focused on developing indigenous energy sources, mainly renewables, and on replacing the nuclear reactor that supplies nearly one-third of the country’s electricity. The government has begun to pay more attention to energy efficiency issues, and in 2015 the second National Energy Efficiency Action Plan (NEEAP) was prepared and submitted.

Armenia’s regional policy focuses on strengthening its position and broadening market integration. The European Union and Armenia completed negotiations for the Association Agreement and the Deep and Comprehensive Free Trade Area (DCFTA) in July 2013; soon after, however, implementation was suspended because Armenia expressed strong interest in joining the Customs Union with Russia, Belarus and Kazakhstan. Armenia became a member of the Eurasian Economic Union (EAEU) in January 2015 with Russia, Belarus and Kazakhstan, and Kyrgyzstan joined in August 2015. It has been an observer to the Energy Community since 2011 and a member of the Eastern Partnership since 2009.

See also Energy Policies Beyond IEA Countries - Eastern Europe, Caucasus and Central Asia 2015

Go to the Balance's Sankey Flow of Armenia​

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 Focus area



Energy Markets Markets
Energy Security Security
Sustainable Development Development