By Arshaluis Mgdesyan
Over the course of two years, Armenia suddenly transformed into a quiet haven for Russian gold. Amid sanctions, war, and Russia’s growing geopolitical isolation, Armenia became a major transit hub through which billions of dollars’ worth of precious metals flowed eastward — to Dubai, Hong Kong, and China.
This gold rush quickly inflated the Armenian economy with speculative growth. But, as in the classic case of the “Dutch disease,” the sudden profits were not followed by institutional reforms or sustainable development. Moreover, the inflows of foreign capital, funneled through semi-legal schemes, took on the traits of corrosive capital such as deepened economic dependency, increased opacity, and little more than a statistical footprint left behind.
What is Corrosive Capital?
Corrosive capital is not merely “dirty money” in the criminal-legal sense. Rather, it refers to investment and financial flows that, while technically legal, undermine the institutional, economic, and political resilience of the host country. Such capital reinforces dependency, distorts market competition, displaces sustainable growth models, and impedes the development of a fully functioning economy.
This is exactly what occurred in the case of Russian gold re-exported through Armenia. The capital entered the country suddenly, bypassing transparent mechanisms, concentrated in a limited circle of affiliated entities, artificially inflated macroeconomic indicators, failed to produce real development, and ultimately left behind institutional and structural distortions that Armenia must now confront.
The Golden Needle: From Russian Mines to Yerevan — Then Onward to Dubai
Sanctions imposed on Russia by the U.S., U.K., and EU in 2022 severely restricted the legal export of Russian gold. The U.S. labeled gold “Russia’s largest non-energy export commodity” and banned its purchase. Although the ban formally applied only to American imports, its impact was global: gold of Russian origin lost its status as “clean” on international markets, with major banks and investment funds refusing to buy it.
With western routes closed, Russia redirected its exports eastward to the UAE, Hong Kong, and Turkey. However, starting in April 2023, even these paths were formally blocked: according to reports by Hetq and The Insider, Russia ceased direct gold exports outside the Eurasian Economic Union. At that point, Armenia emerged as a new transit node through which gold was reintroduced into global markets.
Between 2023 and the first half of 2024 alone, approximately 111 tons of Russian gold worth $6.2 billion were imported into Armenia. That’s nearly one-third of Armenia’s annual GDP. Yet the metal scarcely remained in the country: in 2023–2024, nearly the entire volume was re-exported, primarily to the United Arab Emirates, but also to Hong Kong and China.
Armenia proved to be a convenient “window” due to its membership in the Eurasian Economic Union (which allowed it to bypass export duties), the absence of currency controls, and a weak regulatory framework for verifying the origin of gold. According to economist Agasi Tavadian, Russia used Armenian companies as intermediaries to sell gold to the UAE, where payments were often made in cash. The metal frequently underwent minimal formal processing: Armenian markings were applied, minor alterations made, and it was then presented as a product manufactured in Armenia.
Who Was Behind the Scheme: Business Tied to the Authorities
Private companies played a central role in the re-export of Russian gold through Armenia, some of which are affiliated with members of Armenia’s political and economic elite, according to investigative journalist Seda Hergnyan from Hetq.
“The largest importer and, simultaneously, exporter of Russian gold in 2024 was the Yerevan Jewelry Factory, a company linked to the family of influential ruling party MP Khachatur Sukiasyan,” she said in an interview with CivilNet. The company was established in 2022 and is located within the Yerevan wholesale jewelry market.
According to the data, the company received gold from dozens of Russian suppliers and repackaged the processed goods as if they had been manufactured in Armenia. In addition to this company, the major players in the scheme included TB Arm, Golden Line, Diamond Standard, and Win-Gold, firms which, as journalists uncovered, each imported gold worth tens or even hundreds of millions of dollars.
Most of these companies avoided public attention and refused to answer questions from the media. According to Hergnyan: “For example, the director of TB Arm communicated through an intermediary that he ‘did not wish to comment on the company’s operations.’ A representative of Diamond Standard, Anahit Chitchyan, stated that all transactions were conducted in strict accordance with the law and relevant licenses but declined to provide further details, adding that the company has not been active since mid-2024.”
Win-Gold director Zohrab Toroyan confirmed that the company ceased operations three months ago, noting that his firm was involved in the export of unprocessed gold. Some of these companies also appeared on the list of top importers and exporters of diamonds, another commodity that reached foreign markets via the “Armenian transit” route.
According to the Observatory of Economic Complexity and various analytical sources, gold re-export became a key driver of Armenia’s foreign trade in 2023–2024. In 2023, gold exports reached a record $1.82 billion, making it the country’s largest export item. By the first nine months of 2024, exports had already risen to $5.2 billion, with imports totaling $4.9 billion — highlighting the significant expansion of the scheme. Nearly all of the imported gold came from Russia, while exports were directed primarily to the United Arab Emirates, as well as to Hong Kong and China.
This mirrored efforts to bypass Western sanctions: the gold was either formally processed or rebranded with Armenian markings and then exported as a locally produced commodity. In essence, this trade structure was reduced to a transit operation, with minimal value added and artificially inflated macroeconomic indicators. The repeal of Russia’s export duties on gold and increased international scrutiny in mid-2024 triggered a sharp decline, exposing the Armenian economy’s vulnerability to external shocks after becoming heavily dependent on this “golden bubble.”
Windfall Money and Statistical Mirages
In 2023, Armenia’s gold exports reached a record $1.8 billion, and in just the first four months of 2024, they exceeded $2.5 billion. According to data from Armenia’s Statistical Committee and Central Bank, gold imports — primarily from Russia — also surged sharply during the same period. In the first quarter of 2024 alone, Armenia exported nearly twice as much gold as it had in the entire previous year.
Against this backdrop, the pace of economic growth appeared impressive, and macroeconomic indicators remained consistently positive. Media outlets began comparing Armenia to a regional economic “tiger,” while international financial institutions pointed to the country’s remarkable export dynamics. However, this growth was largely driven by re-export — a process that looked impressive on paper but was economically hollow.
Finance Minister Vahe Hovhannisyan openly acknowledged in an interview with CivilNet that a significant portion of the economic activity was artificial. He noted that “statistical distortions emerged,” especially in the jewelry sector, which formally showed growth but contributed little in the way of tax revenue. As a result, tax collection shortfalls in 2024 exceeded $500 million in monetary terms.
The main reason was VAT refund schemes: companies importing gold claimed to have processed and re-exported it, thereby receiving back the value-added tax they had paid without actually creating real added value.
As a consequence, GDP and economic activity figures were distorted, in which turnover volumes grew higher, but budget revenues did not. Economists describe this as a textbook case of the “Dutch disease,” where a sudden influx of easy money into one sector of the economy leads to macroeconomic imbalances without leaving a sustainable impact.
Finance Minister Hovhannisyan indirectly acknowledged the negative effects of the “gold rush” on Armenia’s economy during his conversation with CivilNet. He noted that the easy money funneled into the economy through re-export schemes removed the incentive for businesses to develop production or build complex value chains. In doing so, the minister effectively admitted the damaging effect of large foreign capital flows that caught Armenia’s economy off guard.
“Armenia’s economy was inflated, but it did not develop. In other words, we didn’t see any structural or qualitative changes,” said Bagrat Asatryan, former Governor of Armenia’s Central Bank (1994–1998), in a conversation with CivilNet, effectively pointing to the corrosive nature of this capital and its long-term risks for the economy as a whole.
Symptoms of the Disease: Growth Without Development
According to the World Bank, as of April 2024, precious and semi-precious metals and stones, primarily gold and diamonds, accounted for 82% of Armenia’s total exports. For comparison, in April 2023, their share was only 24%.
This indicates an unprecedented shift in the country’s export structure in favor of a single commodity category within just one year. At the same time, a decline was recorded across almost all other export sectors, from mineral raw materials and paper to agricultural products, including vegetables, meat, and dairy.
Particularly hard hit was the automotive and transport logistics sector, which had previously been one of the drivers of Armenia’s foreign trade growth. Thus, rather than stimulating the development of other sectors, the gold re-export boom effectively crowded them out, creating the illusion of export growth.
Economist and analyst Emanuel Mkrtchyan, in an interview with CivilNet, described the situation as the result of mismanaging temporary revenue inflows, comparing the economy to “a body on steroids.” According to him, the state collected taxes but failed to invest in the future: neither infrastructure nor industrial projects advanced significantly, and large-scale programs such as the construction of reservoirs or the modernization of utility networks were either postponed or frozen.
As the “golden” inflows began to dry up, the economy’s chronic structural weaknesses became more apparent, especially its dependence on external demand and lack of domestic investment. In this sense, the export boom did not become a “window of opportunity,” but merely delayed an inevitable reckoning with reality.
Political Risks and Lessons for the Future
Although Armenia did not formally violate sanctions regimes, its involvement in schemes for the re-export of Russian gold placed the country under close scrutiny from the West. In an official response to Hetq, Armenia’s Ministry of Economy confirmed that the export of sanctioned Russian gold indeed carries the risk of secondary sanctions, particularly if it is determined that the country effectively served as a “laundromat” for prohibited goods.
The ministry’s Secretary General, Haykaz Nasibyan, acknowledged that the situation is under constant monitoring. However, as of now, no actual instances of sanctions being imposed have been recorded. Nonetheless, even the hypothetical threat of secondary sanctions could undermine confidence in Armenia’s banking system and trade channels, especially from the European Union and the United States.
As economist Aghasi Tavadyan notes, this vulnerability is a typical sign of corrosive capital: flows that may be formally legal but ultimately erode a country’s economic and institutional resilience. In this case, foreign money disguised as re-export only deepened dependence on opaque schemes, damaged Armenia’s international reputation, and increased its susceptibility to political pressure.
According to economist and ASCES think tank director Haykaz Fanyan, the entire “gold cycle” was external by nature: Armenia controlled neither the origin of the resource, nor the terms of its inflow, nor the final capital flows. “This wasn’t organic growth. It was a bubble inflated by external factors. Once they disappeared, the economy returned to reality,” he said in an interview with CivilNet.
Fanyan emphasizes that the re-export boom did not create value chains, sustainable jobs, or investments in the sector. The system remained closed, concentrated in the hands of a narrow circle, precisely the kind of environment that enables corrosive capital to thrive.
Beyond institutional consequences, the gold re-export also triggered serious macroeconomic and currency distortions. The massive inflow of foreign currency into the country led to a sharp increase in dollar supply, resulting in the appreciation of the Armenian dram.
Between 2023 and 2024, the dram strengthened by several dozen percentage points, dealing a heavy blow to traditional export sectors, particularly agriculture. The rising value of the national currency increased production costs, making Armenian goods less competitive in foreign markets. “As a result, the ‘inorganic’ gold export, which by nature is not a real export sector, displaced the ‘organic’ export: the one that generates jobs and is linked to processing, logistics, and real production chains,” noted former Finance Minister Vardan Aramyan in a conversation with CivilNet.
The dram’s revaluation and the artificial surge in foreign trade also deepened Armenia’s dependence on Russia. Whereas just a few years ago the European Union was Armenia’s main trading partner, today it has fallen to fourth or fifth place in the country’s external trade structure. This has significantly weakened Armenia’s strategic diversification and undermined one of its key post-2020 goals — the development of a more balanced and multipolar foreign economic policy.
“As a result, the gold re-export, instead of strengthening Armenia’s position in global markets, has made it even more vulnerable to geopolitical and currency shocks,” explained former Finance Minister Vardan Aramyan.
A Missed Opportunity
The re-export of Russian gold through Armenia became a textbook example of a short-term, outwardly impressive, yet ultimately low-yield economic phenomenon. According to economists’ estimates, at the peak of the “gold boom,” gold and jewelry accounted for up to 80% of Armenia’s total exports, while the value added within the country remained minimal.
Economist Haykaz Fanyan notes that the majority of profits were concentrated among a narrow circle of individuals and companies, while most citizens and the real economy saw almost no direct benefit. Unlike, for instance, the automotive and transport sector, which involves tens of thousands of participants, the gold re-export scheme was highly centralized and closed, rendering its impact on employment and investment negligible.
The easy money that quickly entered the economy did not transform its structure, it merely created a temporary illusion of prosperity and macroeconomic stability. As is often the case with corrosive capital, it can inflate growth indicators in the short term, but undermines internal resilience, creating currency and institutional distortions. This scenario offers another clear example of how seemingly legal but systemically destructive financial flows can destabilize a national economy.
Once the gold flows dried up due to Russia’s repeal of export duties and increased international scrutiny, it became evident that Armenia was left without a strategic cushion for the future. Economist Emmanuel Mkrtchyan observed: “The potential was never created.”
The crisis unfolded quickly and sharply. According to Armenia’s Statistical Committee, in the first quarter of 2025, exports of precious metals and stones fell by 83.9% compared to the same period the previous year — from $3.3 billion to $532 million. Imports in the same categories dropped by 86.2%, from $3.1 billion to $436 million.
This was followed by a contraction in the processing industry: its output shrank by 26%, while jewelry production collapsed by 75.3%. Foreign trade with the main participants in the re-export scheme also declined dramatically: imports from Russia dropped by 75% ($918 million), exports to the UAE fell by 79% ($420 million), and shipments to China plummeted by 80% ($107 million).
Instead of achieving diversification and greater economic resilience, Armenia ended up with structural distortions, dependency on a speculative sector, and a loss of footing during an external shock. “This is the central risk of corrosive capital: it creates the illusion of growth, while eroding the system’s capacity for long-term development,” explains former Finance Minister Vardan Aramyan. In Armenia’s case, this manifested as a revaluation of the dram, a decline in traditional exports, growing reliance on Russian flows, and a reduced share of the EU in foreign trade.
Now that those flows have ceased, the country is confronting the consequences: a sharp slowdown in economic growth, fiscal strain, and heightened strategic vulnerability.
Excellent article! Well researched, very interesting and enlightening. Well done!!