Economic Impacts of Re-opening the Armenian-Turkish Border

The border between Turkey and Armenia on the Akhurian River. Will the bridge be rebuilt?
Photo: Jean & Nathalie. This image is subject to a Creative Commons licence

May 13, 2009
By Haroutiun Khachatrian
By Haroutiun Khachatrian

The economic consequences of a re-opening of the Armenian-Turkish border will take rapid effect and will mean an improvement for both countries, but especially for Armenia.

The current economic relationship between Armenia and Turkey can be characterised as follows: Turkey exports goods to Armenia worth some 260 million dollars a year, whereas the import of Armenian goods to Turkey reaches a mere 1.9 million dollars (as of 2008). In other words, the Armenian market is open for Turkish goods, while Turkey runs a de-facto embargo against imports from Armenia. All transfer of cargo between the two countries is channelled through third countries, mainly Georgia. Thus the first possible benefit for Armenia, once the de-facto embargo is lifted, would be access to the huge Turkish market of 70 million.

Turkey - a market of 70 million

Right now, the only regional markets accessible to Armenian producers are the Armenian domestic market of 3.2 million people and Georgia with its 4.5 million inhabitants. As both countries are poor this poses weighty restrictions on Armenia’s economic activity. Two other neighbours, Azerbaijan and Iran, are well-nigh inaccessible to Armenian exports, the former for political reasons, the latter because of its high trade barriers. Thus, opening the Turkish market to Armenia would greatly improve the country’s investment rating which is presently stymied by the narrow limits imposed on its foreign trade.

The second major benefit for Armenia would be the opening up of another avenue of transportation and communication with the outside world. Transport by rail would undoubtedly profit, as currently Armenia’s only rail link is through Georgia. Moreover, once Turkish railways become accessible for Armenia, it will be possible to use Turkish shipping, which is safer and cheaper than the vessels running out of the Georgian ports of Poti and Batumi. Transport by boat is the most important mode in which Armenian exports reach Europe and Russia, its major trading partners.

New avenues of transportation

The opening of the Turkish-Armenian border would benefit Turkey, too. First of all, it would stimulate the regions of Turkey bordering Armenia. The provinces of Erzerum and Agri are among the least developed in Turkey with a per capita GDP less than half the Turkish average (and also less than in Armenia). The population of these depressed regions has repeatedly expressed its support of opening the Turkish-Armenian border. However, the fact that these regions are underdeveloped might also pose a serious challenge to Armenia. An open border might open the Armenian labour market to unemployed Turks, a perspective which is especially alarming in the current economy climate. The other potential challenge is that, once the borders are open, Turkey might become to dominate the Armenian market. Yet, since the Armenian market is already open to Turkish goods, it is unlikely that serious consequences for Armenia’s economy will entail.

The second obvious benefit for Turkey would be access to the Armenian rail network, i.e. easier access to Georgia, Azerbaijan and the whole of Central Asia.
From the above-mentioned it is evident that good Armenian-Turkish economic relations do not necessarily require a full normalisation of bilateral political relations. Armenian-Turkish normalisation that can be implemented in at least three different ways:

  • First: Turkey can lift the ban on imports from Armenia without opening the land border. The seeming agreement on the export of electricity from Armenia to Turkey points in such a direction. Shortly after president Gül’s visit to Armenia, in September 2008, it was reported that such exports might commence in the spring of 2009.

  • Second: Turkey can open the border between the two countries without a full normalisation of Armenian-Turkish relations. This, in order to fully benefit both countries, should include free mutual access to communication and transport networks.

  • Third: Turkey can decide to fully normalise its relations with Armenia, i.e. in economic as well as political terms.

For Armenia, of course, the third option is best, yet the economies of both countries will still benefit should Turkey choose the first or second route.

Haroutiun Khachatrian is an analyst and editor with the Yerevan-based news agency Noyan Tapan.