Armenia has long maintained close economic ties with Russia, though it had been rather hesitant on the Customs Union issue. Moscow has sought to expand membership of the union (which it launched with Belarus and Kazakhstan in 2010) to other states in the former Soviet periphery, with Armenia serving as a leading candidate for expansion. However, Sarkisian remained aloof on such a proposal, preferring to cautiously expand trade ties with the European Union and other countries like Iran in order to diversify the country's economic options.
But Russia has been trying to dissuade countries on its periphery from expanding cooperation with the European Union, particularly as a key Eastern Partnership summit approaches in November. Moscow has pursued a stick-and-carrot approach in this regard, which in Armenia's case involved raising the price of natural gas exports while offering investment and trade benefits for closer integration. Sarkisian's announcement therefore reflects a success in Russia's strategy on the part of Armenia. Armenia's decision likely means that plans to initial the agreements with the European Union in November will be canceled. Though some Armenian officials have held the door open to the EU deals, both Russian and European officials have said that Customs Union membership necessarily precludes further integration with the European Union. Meanwhile, the already close links between Armenia and Russia can be expected to become even stronger, especially since the Customs Union is set to evolve into the Eurasian Union by 2015.
Armenia's potential membership (actual accession will likely take at least 1-2 years) will also have regional implications. Armenia does not share a physical border with Russia, necessitating a transit state for closer customs and trade links. Armenia's border with Azerbaijan is closed over the Nagorno-Karabakh issue, leaving Georgia as the logical candidate to serve as a transit country. Indeed, Georgia has already seen a slow but significant opening to Russia under the leadership of Prime Minister Bidzina Ivanishvili, with trade and visa links seeing limited resumptions. There have also been initial talks on reopening rail traffic between Russia and Armenia through Georgia and the breakaway territory of Abkhazia. Armenia's membership in the Customs Union will likely increase the prospects of such projects even further.
However, there are still many elements that could derail a complete transformation in regional economic and political dynamics. Armenia has already seen protests over the Customs Union announcement led by the opposition Heritage Party, though these have so far remained small. And while Ivanishvili has oriented Georgia more closely toward Moscow (he recently said that the details of Georgia's potential Eurasian Union membership are ''worth examining''), Georgia's political landscape remains fractured and such moves would be contested by other political elements, particularly those loyal to Georgian President Mikhail Saakashvili. Azerbaijan, another regional country with close energy and economic ties to Georgia and one opposed to Customs Union membership, will try to dissuade Tbilisi from taking any bold moves that threaten its interests in the country.
Ultimately, Armenia's announcement shows that the battle between Russia and the European Union over the former Soviet periphery is intensifying, as countries feel pressured into making a choice between the two camps. Yerevan has chosen Moscow over Brussels, with both immediate and long-term implications for the other countries in the Caucasus region.