Economy (2005)
GDP: $4.867 billion.
GDP growth rate: 13.9%.
Per capita GDP: $1,514.
Inflation: 0.06%.
Natural resources: Copper, zinc, gold, and lead; hydroelectric power; small amounts of gas and petroleum.
Agriculture: Products--fruits and vegetables, wines, dairy, some livestock.
Industry: Types--chemicals, electronic products, machinery, processed food, synthetic rubber, and textiles.
Trade: Exports--$950.4 million: diamonds, scrap metal, machinery and equipment, brandy, copper ore. Export partners (2004)--Belgium 18%, Israel 15.3%, Russia 12.5%, U.S. 8.1%, Netherlands 7.2%, Iran 5.5%, Georgia 4.3%. Imports (2004)--$1.767.9 billion: natural gas, petroleum, tobacco products, foodstuffs, and diamonds. Import partners--Russia 11.3%, Belgium 10.1%, Israel 8.4%, Iran 7.1%, U.S. 7.6%.

ARMENIA ECONOMY
Armenia is the second most densely populated of the former Soviet republics. It is a landlocked country between the Black and the Caspian Seas, bordered on the north by Georgia, to the east by Azerbaijan, on the south by Iran, and to the west by Turkey. Up until independence, Armenia's economy was based largely on industry--chemicals, electronic products, machinery, processed food, synthetic rubber, and textiles--and highly dependent on outside resources. Agriculture accounted for only 20% of net material product and 10% of employment before the breakup of the Soviet Union in 1991. Armenian mines produce copper, zinc, gold, and lead. The vast majority of energy is produced with imported fuel, including gas and nuclear fuel (for its one nuclear power plant) from Russia; the main domestic energy source is hydroelectric. Small amounts of coal, gas, and petroleum have not yet been developed.

Like other New Independent States of the former Soviet Union, Armenia's economy suffers from the legacy of a centrally planned economy and the breakdown of former Soviet trading patterns. Soviet investment in and support of Armenian industry has virtually disappeared, so that few major enterprises are still able to function. In addition, the effects of the 1988 earthquake, which killed more than 25,000 people and made 500,000 homeless, are still being felt. Although a cease-fire has held since 1994, the conflict with Azerbaijan over Nagorno-Karabakh has not been resolved. The consequent closure of both the Azerbaijani and Turkish borders has devastated the economy, because of Armenia's dependence on outside supplies of energy and most raw materials. Land routes through Azerbaijan and Turkey are closed; routes through Georgia and Iran are inadequate or unreliable. In 1992-93, GDP fell nearly 60% from its 1989 level. The national currency, the dram, suffered hyperinflation for the first few years after its introduction in 1993.

Nevertheless, the Government of Armenia, helped by the cease-fire that has been in effect in Nagorno-Karabakh since 1994, has been able to carry out wide-ranging economic reforms that paid off in dramatically lower inflation and steady growth. Armenia has registered strong economic growth since 1995, building on the turnaround that began the previous year, and inflation has been negligible for the past several years. New sectors, such as precious stone processing and jewelry making, information and communication technology, and even tourism are beginning to supplement more traditional sectors such as agriculture in the economy.

This steady economic progress has earned Armenia increasing support from international institutions. The International Monetary Fund (IMF), World Bank, European Bank for Reconstruction and Development (EBRD), as well as other international financial institutions (IFIs) and foreign countries are extending considerable grants and loans. Total loans extended to Armenia since 1993 exceed $1.1 billion. These loans are targeted at reducing the budget deficit, stabilizing the local currency; developing private businesses; energy; the agriculture, food processing, transportation, and health and education sectors; and ongoing rehabilitation work in the earthquake zone.

Continued progress will depend on the ability of the government to strengthen its macroeconomic management, including increasing revenue collection, improving the investment climate, and making strides against corruption. A liberal foreign investment law was approved in June 1994, and a Law on Privatization was adopted in 1997, as well as a program on state property privatization. The government joined the World Trade Organization on February 5, 2003.

Environmental Issues
Armenia is trying to address its environmental problems. It has established a Ministry of Nature Protection and has introduced a pollution fee system by which taxes are levied on air and water emissions and solid waste disposal, with the resulting revenues used for environmental protection activities. Armenia is interested in cooperating with other members of the Commonwealth of Independent States (CIS--a group of 12 former Soviet republics) and with members of the international community on environmental issues. The Armenian Government has committed to decommissioning the Armenian Nuclear Power Plant as soon as alternate energy sources can be identified.

DEFENSE AND MILITARY ISSUES
Armenia established a Ministry of Defense in 1992. Border guards subject to the National Security Service patrol Armenia's borders with Georgia and Azerbaijan, while Russian Border Guards continue to monitor its borders with Iran and Turkey.

The Conventional Armed Forces in Europe (CFE) Treaty was ratified by the Armenian parliament in July 1992. The treaty establishes comprehensive limits on key categories of military equipment, such as tanks, artillery, armored combat vehicles, combat aircraft, and combat helicopters, and provides for the destruction of weaponry in excess of those limits. Armenian officials have consistently expressed determination to comply with its provisions. Armenia has provided data on armaments as required under the CFE Treaty. There are indications that Armenia is trying to establish mechanisms to ensure fulfillment of its arms control obligations. Armenia is not a significant exporter of conventional weapons, but it has provided substantial support, including materiel, to separatists in Nagorno-Karabakh.

In March 1993, Armenia signed the multilateral Chemical Weapons Convention, which calls for the eventual elimination of chemical weapons. Armenia acceded to the nuclear Non-Proliferation Treaty as a non-nuclear weapons state in July 1993. The U.S. and other Western governments have discussed efforts to establish effective nuclear export control systems with Armenia.