For the South Caucasus, Russian policy has been both clear and consistent, driven by a strategic goal of maintaining and consolidating power and pressure over the former Soviet states. This assertive policy is based on the premise of the former Soviet space as Russia’s natural sphere of influence. And for Moscow, there can be no acceptance of any challenge or contest over Russia’s position over the “near abroad.” Within that context, Armenia was also a pivotal foothold in the South Caucasus, demonstrated by its sole position in the region as the host of the only Russian base and as a member of the Collective Security Treaty Organization (CSTO) and, most recently, of the Eurasian Economic Union (EEU).
Since the collapse of the Soviet Union, independence for Armenia has faced a daunting trade-off of sovereignty for security. With the insecurity from a war with neighbouring Azerbaijan over Nagorno-Karabakh that erupted even before independence, Armenia has long relied on Russia as its “strategic partner” and security provider. The reliance on Russia, however, has devolved into a transactional relationship that has only steadily mortgaged Armenia’s independence and subverted its sovereignty.
Over time, especially after Russia’s acquisition of key sectors of the Armenian economy, Armenia’s mounting over-dependence on Russia was matched by an equally serious Russian hold over the country. This was most evident in Armenia’s unique role as the sole Russian ally in the region, as the only host of a Russian military base, and the one country of the South Caucasus with membership in the Russian-led Collective Security Treaty Organization (CSTO) and most recently, to join the Russian-dominated Eurasian Economic Union (EEU).
Yet over the past few years, there has been a belated but demonstrable crisis in Armenian-Russian relations. Driven by a set of factors, the deepening crisis between Armenia and Russia comprised a decline in remittances and a related loss of jobs in a Russian economy constricted by sanctions, consisted of resentment over Russian arms sales to Azerbaijan, and culminated in frustration over the inadequacy of Russian security guarantees after the April 2016 “four-day war” over Nagorno-Karabakh. But the real test for Armenia is yet to come and, more specifically, includes two looming challenges. First, it remains unclear whether this crisis in relations with Russia and Armenia’s rather rare challenge to Moscow over the terms of the relationship may be too little or too late of a response. And second, an additional uncertainty stems from just how Moscow will respond to any such challenge that only undermines its power and position in both Armenia and the wider South Caucasus region.
Shifts in Russian Strategy
In what began as an Armenian embrace of Russia as a security provider, the relationship steadily expanded and deepened, as Armenia’s threat perception and inherent insecurity from the unresolved Karabakh conflict only drive the country closer to Russia. For Moscow, Yerevan was seen as a vulnerable supplicant, especially as Azerbaijan embarked on a serious arms buildup that was matched by a surge in defense spending and procurement and an escalation in violations in an already fragile ceasefire agreement.
At the same time, Armenian dependence on Russia also expanded to include an important economic element, through three specific areas. First, Russia steadily acquired outright ownership or control of several key sectors of the Armenia economy, including energy, transport, telecommunications, and most recently, in the mining sector, as well as full control of the national railway network. The second aspect of this economic dependence was, as with many post-Soviet states, driven by a tradeoff of Armenian energy security in exchange for subsidized imports of Russian natural gas. An additional vulnerability stemmed from a sizable number of Armenian migrant and seasonal workers, dependent on jobs in Russian urban centers and responsible for a sizable and significant level of remittances into Armenia.
But the military and security elements of the relationship have long served as the crucial driver. Over the past five years, however, Russia’s approach to its role as Armenia’s security patron shifted significantly, eventually reaching a turning point whereby Russia emerged as the primary arms supplier to both sides, continuing to offer sizably discounted weapons to Armenia while selling more advanced, and much more expensive weapons systems to Azerbaijan. Although this Russian policy modification sought to maintain a general parity or crude balance of forces between the sides, nevertheless, it did contribute to a steady shift in the balance of power.
Beyond the irritant of Russian arms sales to Azerbaijan, a re-assertive bid by Moscow to taking the diplomatic initiative over the Nagorno-Karabakh conflict also sparked concern in Yerevan. Despite rather limited success in such a move, there were two significant advantages for Russia from taking a lead in diplomatic engagement. First, by assuming a lead role, Russia forced fellow mediators France and the United States to basically accede and accept the premise of Russian power and influence in the South Caucasus. And second, the resulting perception in Azerbaijan was similar, affording Moscow a degree of respect and increasingly seeing Russia as the key to the conflict. Both factors also tended to bolster Russia’s position as a regional power, a Russian objective that is far too often underestimated or misunderstood.
Armenia’s Policy Response
Against this backdrop of mounting dependence on Russia, Armenian sensitivity to slights to its sovereignty and limits on its independence has only been exacerbated, especially given the record of asymmetry and arrogance in the relationship with Russia. But the tipping point came in April 2016, when a serious Azerbaijani military offensive only demonstrated the limits of both the Russian security guarantee and the Collective Security Treaty Organization (CSTO). For Armenia, however, the country’s cumulative over-dependence and its inherent vulnerability to relying on imports of both guns and gas from Russia dictate a prudent policy of caution.
Yet any Armenian pause or prudence in managing its relationship with Russia is still offset by a demonstrable crisis in the Armenian-Russian relationship. And the crisis continues, as confidence in military promises and security pledges wanes and the economic relationship is strained by declining remittances and the loss of jobs held by Armenian migrant workers amid the sanctions-prone constricting Russian economy. Although the crisis necessitates caution for Yerevan, there are additional challenges to attempting any needed but risky “reset” of relations with Moscow. First, and most notably, it remains unclear if Armenia’s challenge to the asymmetrical terms of the relationship is a policy response that is too little or too late. A second challenge, which stands out as an additional uncertainty, stems from concerns over Russia’s possible reaction. And if an Armenian move that is perceived as too aggressive or assertive, Moscow may feel compelled to respond harshly against what it may interpret as an unacceptable challenge to its position in both Armenia and the wider South Caucasus region.
At the same time, when considering Russian soft power, Armenia stands out more as an exception than as an example. More specifically, Russia’s approach toward Armenia has tended to rely overwhelming on instruments of hard power, exploiting Armenian military insecurity over the unresolved Nagorno-Karabakh conflict and exploiting the reality that the Karabakh conflict remains the simplest instrument for Moscow to maintain leverage over both Armenia and Azerbaijan.
And perhaps most interesting, it is the lack of any effective Russian soft power in Armenia that has tended to reinforce Moscow’s preference to pressure a submissive Armenian government rather than to invest directly in politics or to back individual parties or politicians. But it is precisely this absence of Russian soft power that is counter-productive for Moscow, as it only tends to confirm a perception that Russia takes Armenian submission for granted, thereby undermining a longer term and underlying Russian weakness in Armenia.
The outlook for any easy and quick resolution to this crisis in Armenian-Russian relations is neither assured nor promising. But counter-intuitively, it is Russia more than Armenia that faces a difficult and daunting “paradox of power,” for two significant reasons. The first underlying challenge for Moscow in dealing with Yerevan stems from the need for delicate restraint and measured response, neither of which is a hallmark of traditional Russian policy. More specifically, the imperative of delicate restraint in Russia’s reaction is illustrated by the underlying weakness and exposed isolation of Russia’s position in the region. From that perspective, Russia needs to more carefully consider any moves that may alienate Armenia, given the reality that Armenia stands out as its only foothold, but with neither a direct land border nor a maritime connection, as well as problematic access by air, Russia’s own capacity for power projection is far from easy and not to be taken for granted.
A second related consideration is that without a measures response, Armenia may be driven away, and compelled to a commit to a strategic orientation that explores limited, yet attractive alternatives ranging from the European Union to China’s Belt Road Initiative (BRI). Moreover, now a member of the Russian-led Eurasian Economic Union (EEU), Armenia holds a newly elevated strategic significance for delivering the credibility and capacity that the EEU lacks, namely as the only member with a strategic agreement with the EU and as the only friendly stable neighbor of a re-emerging Iran.
Each of these unique assets enhances Armenia’s position and places it in a position that may very well reverse the asymmetry of the relationship with Russia. And each of these factors contributes to Russia’s “paradox of power,” whereby anything beyond a prudent policy and restrained response to a crisis in relations with Armenia may serious erode Russia’s longer term power and position in the South Caucasus.
 The Russian concept of the “near abroad” or blizhneyezarubezhye (ближнеезарубежье), serves as an integral element of Russian strategy; see: Porter, Bruce and Carol Saivetz, “The Once and Future Empire: Russia and the Near Abroad,” The Washington Quarterly, 17 (1994), 75–90.
 Giragosian, Richard, “The South Caucasus: The Limits of a Resurgent Russia,” Heinrich Boell Foundation, Tbilisi, Georgia, 24 February 2014. https://ge.boell.org/en/2014/02/24/south-caucasus-limits-resurgent-russia
 For more, see Giragosian, Richard, “Soft power in Armenia: Neither soft, nor powerful,” European Council on Foreign Relations (ECFR) Commentary, 12 August 2015. www.ecfr.eu/article/commentary_soft_power_in_armenia_neither_soft_nor_powerful3094