Armenian banks generated a record 421 billion drams — approximately $1.1 billion — in net profit in 2025, a 17 percent increase over the previous year that reflects how comprehensively the Western sanctions regime against Russia has redrawn the financial geography of the South Caucasus.
The figures, reported by Hetq, reveal a banking sector transformed since 2022. Before Russia's full-scale invasion of Ukraine, annual net profits across all 17 Armenian banks rarely exceeded 90 billion drams. The figure surged past 250 billion drams in 2022 alone — the year Western sanctions began reshaping capital flows across the post-Soviet space — and has continued climbing. All 17 banks closed 2025 in profit.
The Sanctions Windfall
The arithmetic of this transformation is not difficult to trace. With Russian banks severed from the SWIFT messaging system and Western financial markets, and with large sections of the Russian economy unable to access dollar- and euro-denominated transactions directly, Armenia emerged as a transit point of choice. Its banking system, not subject to Western sanctions, became a conduit for Russian capital seeking international liquidity. The volume of Russian funds flowing through Yerevan's financial institutions, combined with a surge in Russian migration that brought both deposits and spending, created conditions for extraordinary profit margins.
Ardshinbank leads the sector decisively, with 137 billion drams in net profit — a figure, as Hetq notes, that equals the combined earnings of the next three largest banks. Ameriabank follows with approximately 73 billion drams, up 21 percent year-on-year, while Akba Bank recorded 36 billion drams, a 26 percent rise. Interest income has been the primary driver: Ardshinbank's interest revenues grew from 144 billion drams in 2024 to 194 billion drams in 2025.
The sector's tax contribution has grown proportionately. Banks paid 38 percent more in taxes in 2025 than the prior year, providing the Armenian state with a fiscal windfall that has eased the government's budget position at a moment of significant geopolitical uncertainty.
The Sanctions Circumvention Question
What makes this story internationally significant is precisely what goes largely unspoken in the domestic coverage: Armenian banks are operating, to varying degrees, in a zone of profound tension between Western sanctions enforcement and the country's economic self-interest. Washington and Brussels have been tightening secondary sanctions pressure, targeting third-country financial institutions that knowingly facilitate Russian sanctions evasion. Several Armenian banks have already attracted scrutiny from the U.S. Treasury's Office of Foreign Assets Control.
The sustainability of this windfall is genuinely uncertain. Economist Haykazh Fanyants has flagged concentration risk — the dominance of a single bank raises monopolization concerns — but the more fundamental structural risk is geopolitical. If Western enforcement agencies move more aggressively against Armenian financial institutions deemed to be facilitating Russian access to the global financial system, the sector's exceptional profitability could unravel rapidly, potentially triggering broader economic disruption.
The EU Approximation Paradox
For Armenia's government, the banking boom creates a paradox at the heart of its foreign policy. Prime Minister Nikol Pashinyan has committed Yerevan to an EU approximation track, signing a landmark trade agreement with the bloc and pursuing visa liberalization. That trajectory requires compliance with Western norms — including, increasingly, alignment with the sanctions architecture that targets Russia.
Yet the banking profits that are filling state coffers and stabilizing the economy derive in significant measure from Armenia's willingness to remain open to Russian capital. The political dependency this creates is real: an abrupt decoupling from Russian financial flows, however much it might please Brussels, would impose severe short-term economic costs that no Armenian government could absorb without domestic political consequence.
Tbilisi faces a structurally similar dilemma, as does Baku to a lesser extent — all three Caucasus states have profited from the economic dislocation Russia's war has generated, and all three are navigating the same fundamental tension between Western integration aspirations and the immediate economic gains that Russian isolation has paradoxically delivered.
