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Armenian Economy at the Beginning of 20th Century

by Juan Angel, March 2001

The Armenian economy was heavily influenced by the conflict of power between Russia and Turkey. This pressure led the country to divide into two parts: the western part of Armenia, which followed the doctrines imposed by the Ottoman Empire, and the eastern part, that became communist under Soviet influence. In 1918 Armenia became independent and eliminated this division. However, the lack of organization led communist Russia to take over after World War I and integrate Armenia to the Union of Soviet Socialist Republics.

In the late nineteenth century, the division between the east and the west became more apparent. The Armenians under Turkish control became poorer and less educated than those people under Russian Armenia. The development could only be felt in cities in which the wealthy class lived. These cities were primarily Constantinople and Smyrna. The rest of the people were mainly peasants and had little contact with the urban population. The business class controlled most of the region’s output. Many monopolies were established and controlled by Armenians and the Turks had a small participation.

In Russian Armenia the cities were less stratified. More people were moving to the cities to construct railroads and work in the oil fields and refineries. This overall improvement in the infrastructure led to an increase in productivity. The tsarist officials controlled most of the output.

The physical distance and the isolation of Armenians decreased when new forms of transportation and communication appeared. Small regions were linked with the cities with the improvement of roads. This caused the replacement of the autocracy prevalent in the village economies and spread the idea of a market economy. Armenians started implementing the capitalist ideas of division of labor and developed a system of exchange.

Due to these improvements in communication, the expanding relations between Armenians led to a sense of nationalism among them. When both the Russians and the Turks realized that this was occurring, they attempted to force Armenians to begin discriminating against themselves. However, the policies implemented failed and nationalism increased. Both the Russian and the Ottoman governments faced the problems of militants who wanted to win Armenia’s independence. The Russian government tried to deal with the problem by disarming the revolutionaries in a peaceful way. In contrast, the Turkish were more violent and carried out a series of massacres, military attacks, and eventually implemented a policy of genocide. After many years of violence, Armenians finally became independent in 1918.

However, although Armenia succeeded in becoming independent, its economy was rapidly deteriorating. There were thousands of starving refugees and people were dying of cholera and typhus. The economy was unable to stabilize itself, there were high levels of inflation, and the currency was rapidly losing its value. The Armenian independence only lasted two years. In December 1920, Russian troops invaded Armenia and took over the economy. Many people hold the belief that Armenia became independent only because both Russia and Turkey lost considerable strength during World War I. They knew that as soon as one or both nations recovered they were going to retake control of the country.

On December 2, 1920 the control of Armenia was given to the Revolutionary Committee (REVKOM), which was formed mainly out of communists. As soon as the REVKOM arrived in Erevan, all governmental institutions of the old republic were abolished and the policy of “war communism” was implemented. The banks and major industries were nationalized, and the legal statutes of the Soviet Russian Republic replaced the imperial law. The Bolshevik regime ordered the army to confiscate food from the peasants, which led to a revolts and civil unrest. When “war communism” proved to be a disaster, a new government led by Alexander Miasnikian replaced the REVKOM, and the New Economic Policy (NEP) was imposed.

In the early 1920’s, the Armenian economy was in crisis and needed all the help it could get from Russia and their immediate neighbors, such as Georgia and Azerbaijan. In December 13, 1922, the federation of republics was unified to a single republic (ZSFSR). The final stage of the unification was in 1923-24 when all the Soviet republics united and formed the Union of Soviet Socialist Republics (USSR). The Russian government centralized foreign policy, foreign trade, as well as defense and economic policy. Armenia was completely absorbed into the USSR in 1924

It is interesting to observe how in less than 20 years Armenia went from being a divided nation that was influenced by both Russia and Turkey, to declaring its independence, to eventually integrating into one of the nations that they had declared independence from some years earlier. This incorporation was caused not only because of Russia’s strength, but also because Armenians were not able to overcome the famine and economic struggle that often results after a country gains its freedom. It is clear that Armenia was more successful under Russia’s rule than as an independent country. This is evidenced by the stable economy that arose under communist rule while still retaining a sense of nationalism. In addition, during the 70-year period in which Armenia remained under central control, they enjoyed a better standard of living, health and educational services than other countries that were part of Soviet Union.


  • Aslanyan, A.A., and Bagdasaryan, A.B. "Soviet Armenia.", Moscow: Progress Publishers, 1971.

  • Krikorian, Mesrob K. "Armenians in the service of the Ottoman Empire 1860-1908." London: Routledge & Kegan Paul, Ltd, 1977.

  • Suny, Ronald G. "Armenia in the Twentieth Century." California: Scholars Press, Inc., 1983.





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