Saudi-Armenian Relations: Lack of Diplomatic Ties Hinders Bilateral Cooperation

Yerevan Offers an Attractive Environment for Investors with Tax Exemptions and Lenient Ownership Rules
Mnatskan Muradyan, the grandson of Martiros Muradyan, works in a field outside the village of Pokr Vedi, south of Yerevan, near the Ararat mountain, seen in background, in Armenia on February 24, 2015 shows (Getty)

Arab-Armenian relations have been lukewarm throughout history. In the early quarter of the 16th century, both the Arab World and Armenia were invaded by the Turks and became part of the emerging Ottoman-Seljuk Empire. After four centuries, the falling empire committed horrifying atrocities against Arabs, Armenians, Assyrians & Greeks in a series of genocides between 1914-1923. After the Armenian genocide, Arabs welcomed and naturalised tens of thousands of survivors in Lebanon, Syria, Iraq, Palestine, Jordan & Egypt.  Today, the GCC is home to thousands of Armenians from the Levant, but only three Gulf states have full diplomatic and political relations with the former Soviet republic. Saudi Arabia is not one of them.

While Saudi-Armenian relations have never been antagonistic, the absence of diplomatic representation between the two countries has translated into missed economic and political opportunities. 

Nerses Isajanyan, a Yerevan-based Armenian economic and legal expert, shares his insights on Armenia's economy post the Karabakh war and the countless potential opportunities for Saudi investors.

 

SAUDI-ARMENIAN RELATIONS

 

In September 2020, Saudi Arabia’s official press agency (SPA) released a statement in which the Kingdom called for the conflict between Armenia and Azerbaijan to be resolved by peaceful means. However, the Armenian political community wanted the Saudis and other Arab countries to take a stronger position against Azerbaijan and its main ally, Turkey, which is trying to revive their Ottoman ancestors' past glory.

“Armenia has visa-free regimes with the UAE and Qatar, while nationals of Bahrain, Kuwait, and Oman can get a visa on arrival (or an e-visa). Visas on arrival are also available to Indian nationals who hold a residence permit issued by one of these countries," Isajanyan told Majalla.

“The situation with Saudi Arabia is somewhat peculiar and is probably due to the lack of official diplomatic relations between the two countries. Saudi Arabia backed Azerbaijan's position in the Karabakh conflict. The political climate seems to be changing now and, hopefully, the visa regime will be removed after formal ties are established between the two countries,” he added.

 

Nerses Isajanyan, Armenian legal and economic expert. (Supplied)

 

WHAT DOES ARMENIA OFFER SAUDI INVESTORS?

 

Located at the crossroads between the Middle East, Europe and the Caucasus countries, Armenia has become increasingly attractive for foreign investors.

“Armenia is a member of the Eurasian Economic Union (EEU), a Russia-led economic block, with a single market of 180 million people. It also benefits from the human and financial resources of the Armenian diaspora - Armenian communities around the world numbering an estimated 7 million people. (Like Lebanon, Armenia’s diaspora population significantly exceeds the land-locked country’s resident population of just 3 million.) The adult literacy rate is 99.7%. The average monthly salary in the country is around $380,” Isajanyan explains.

Armenia's economy relies on tourism, agriculture, mineral exploitation and diamond-cutting, and has become one of the biggest emerging economies in Europe. In October 2020, the World Bank report on Armenia stated that the Caucasian country’s GDP is estimated at USD 13.7 bn.

“Armenia has an open market and nationals of all countries are welcomed to visit the country and invest in it. It is possible for foreigners to own real estate, land, and practically no industry is closed to foreign investors.  In 2019, Armenia's GDP grew by 7.6% - the highest rate in all of Europe”, says the Armenian expert who specialises in immigration and business law.

Foreign investors typically look for a transparent and stable business environment. Isajanyan explains why Armenia’s business climate is particularly attractive to Saudi investors: “Foreign business owners and investors appreciate the pace of the economic reforms, Armenia's safety, freedom, and openness. Zero-tax status is available to micro-businesses, IT companies, companies operating in free economic zones, industrial zones, certain border towns, and villages. Armenia generally does not tax capital gains on the sale of securities, real estate, or other assets. Insurance and pension payments are also exempt from taxes. There are no taxes on gifts, inheritance, net worth, etc. Armenia guarantees free repatriation of invested capital and profit. Foreigners are allowed to own land. Investment projects are encouraged with tax benefits and government assistance programs.”

“Practically all sectors are open, including real estate, agriculture, infrastructure and energy projects, mining, healthcare, and financial services,” he added.

Saudi Arabia has stepped up its investments in food security and agricultural infrastructure in several countries, including Argentina, the US, Australia, Brazil, Ukraine, and Egypt. Therefore, the topic of foreign ownership is of interest to many potential investors.

“The laws on foreign ownership of property are very lenient. There are no restrictions on owning buildings, residential, or commercial land. Ownership of agricultural land is generally reserved to Armenian nationals and special residents. However, it is possible to own agricultural land through a local or foreign legal entity controlled by foreign nationals,” Isajanyan assures.

 

THE ARMENIAN ECONOMY AND THE KARABAKH WAR

 

Although it too early to tell to what extent the fierce battle between Azerbaijan and Armenia has impacted Yerevan’s economy, Isajanyan believes that the conflict has scared away potential investors. “It is probably too early to assess the consequences of the war on the investment climate in Armenia. In the short-term, the impact will certainly be negative because the investors will perceive the Armenian market as vulnerable to both external threats and internal political risks,” the lawyer said.

In the long-term however, Isajanyan predicts that the economy will bounce as the country returns to relative stability. “The presence of Russian peacekeepers in the region and the opening of borders with Turkey and Azerbaijan should play a positive role in stabilising the region and boosting economic growth. Russia guarantees Armenia's security, and it is important to note that no military actions took place on the territory of Armenia itself. The government predicts a moderate growth of 3.2%,” he said.