By Skylar Yoder
The World Economic Forum released its 2024 Global Risks Report covering the potential impacts of conflict, climate change, and other factors on the global economy, including in Armenia.
In a survey that asked more than 11,000 business leaders to “identify risks that pose the most severe threat to each country over the next two years”, respondents noted interstate armed conflict, labor shortages, and geoeconomic confrontation as the top three risks for Armenia. Involuntary migration and a potential economic downturn were listed as risks four and five for the country.
The risk of interstate armed conflict in Armenia almost certainly refers to the present threats posed by Azerbaijan to the country. With Azerbaijan’s military offensive in September 2023 that forced nearly the entire Armenian population of the disputed Nagorno-Karabakh region to flee, concerns that they would invade sovereign Armenian territory have increased.
Recently reelected Azerbaijani President Ilham Aliyev’s public rhetoric on so-called peace negotiations has further exacerbated the issue, especially with him calling for an extraterritorial corridor through the Syunik province. While cross-border skirmishes have been common in recent years, the early February combat deaths of four Armenian soldiers raised concerns once again that Azerbaijan is preparing for further incursions into Armenian territory.
In terms of direct impact to business affairs, the shooting of two workers at a scrap metal plant being constructed in the border town of Yeraskh resulted in the Armenian-American company moving its operations elsewhere. Continued conflict along the border or further into Armenia would likely result in additional companies halting operations, putting Armenia at an economic disadvantage.
The risk of labor shortages in Armenia could be associated with the country’s overall population decline and fertility rate, in addition to the out-migration of citizens to Europe and North America. Some possible solutions to these demographic issues include retaining the recent influx of immigrants from Russia and India, who could help fill gaps in the labor market, and promoting immigration to the country.
The risk of geoeconomic confrontation is likely in reference to Armenia’s historical economic and security partner Russia. The relationship between the two countries has worsened dramatically in the last two years due to Russia’s unwillingness or inability to cooperate on security issues in line with their treaty obligations. One example of this is the inaction of Russian peacekeepers charged with monitoring Nagorno-Karabakh. With the loss of the enclave, Armenia has turned more to the West to diversify its partners. Moscow has openly stated its displeasure with Armenia’s shift in foreign policy and could retaliate economically, as it has done in the past. International sanctions against Russia in response to its ongoing war in Ukraine are further complicating its financial ties to Armenia, as many Russian companies are involved in the country’s economy.
Interestingly, the WEF’s report included Armenia in its “conflict contagion” section, suggesting it sees the country at a heightened risk of war compared with other parts of the world. However, explicit references to Nagorno-Karabakh or Azerbaijan were notably absent.
