Conflicts in the South Caucasus led to closure of a number of trade routes, resulting in increased freight transportation costs, which hit economies of not only South Caucasian republics, but also Russia. A quarter of a century ago, the main route, which served as the basis for cargo transportations between Armenia and Russia, passed through the territory of Azerbaijan. This infrastructure, which existed in the Soviet time, was supposed to be developed over many years.
According to the CIA Directory of Countries, closer to the end of the Soviet period, about 85% of goods in inter-republican trade were received by Armenian SSR through Azerbaijani SSR, and only 15% were transported through Georgian SSR. Today, despite all the necessary costs, over 80% of goods are supplied to Armenia from Russia through the route that passes through the old Georgian Military Highway, while the rest is transported through Iran. Due to weather conditions and other factors, transportation through this route, which includes Verkhny Lars chechpoint, is extremely hard and often leads to disruption of supplies to and from Armenia, causing dissatisfaction among customers.
Armenian experts are considering several alternatives to this route: sea route through Poti; two road routes (corridor through South Ossetia and the Avar-Kakheti road through Dagestan); as well as railway line running through the territory of Abkhazia via the Zugdidi - Sochi route. Railway linking Russia with Armenia, which passes through the territory of Abkhazia, as well as highway through Tskhinvali, has been closed for 25 years, and their opening is not expected in the near future. Armenia borders with four countries, the longest borders are with Azerbaijan and Turkey, both of which are closed. That's why reanimation of the route through the territory of Azerbaijan can be one of the most realistic and safe routes for both Russia and Armenia.
Exports from Armenia mostly consists of raw materials. Average annual growth rate of exports from 1992 to 2017 reached just 1.2% (1.6% for imports). Blockade significantly reduced industrial potential of Armenia, leading to a change in structure of foreign trade. Based to the most modest estimates, simply because of high cost of transportation of metal ores through Batumi, which allows to bypass routes through Turkey or Azerbaijan, Armenia annually lost up to $20 million. Transportation of other raw materials, including agricultural products, is almost 25-30% more expensive for Armenian exporters due to the blockade.
Meanwhile, the route for heavy vehicles in the direction of Russian border through Azerbaijani territory functions today. The Agstafa-Baku-Derbent route, which once connected Dilijan-Ijevan-Agstafa route, is much longer, so trip from Armenia to Russia through Azerbaijan will take several hours more than the current route, but there shouldn't be any difficulties of force majeure situations associated with natural conditions. Wide multi-lane road, bypassing difficult mountain passes, runs through the regions of Azerbaijan, and then passes along the coast of Caspian Sea right to Makhachkala.
Problem of transit highways will remain until Yerevan will make compromises on the Karabakh settlement. For the time being, the position of Armenian leadership in this matter prevents expansion of the land communication.
