Armenia’s nuclear choice carries heavy debt trade-offs, says GlobalSource

Armenia’s prospective shift towards US-backed small modular reactor (SMR) technology could add as much as 30% of GDP to public debt in a worst-case scenario, even as it reduces the country’s long-standing strategic reliance on Russia, according to Ivan Tchakarov of GlobalSource Partners.

In a report published on February 20, Tchakarov wrote that the recently announced US-Armenia nuclear co-operation should not be misconstrued as foreign direct investment. The headline figure of $9bn “is certainly not a direct US investment in Armenia, but rather a credit vehicle most likely to be arranged as a sovereign or government-guaranteed loan” .

He noted that Reuters had referred to “about US$5bn in initial U.S. exports and another US$4bn in fuel and maintenance contracts”, while Bloomberg described the envelope as “potential investment”. In reality, the $9bn represents the maximum value of possible contracts should Armenia proceed with a US-supplied nuclear project .

Tchakarov compared three financing models: a Russian build-own-operate (BOO) scheme, a Russian state loan, and a US/Korea export credit agency (ECA) structure. Under the BOO model, “there is no addition to sovereign debt as the host country does not assume any debt responsibilities”. By contrast, both the Russian state-loan and US/Korea ECA approaches would increase public indebtedness, with sovereign debt rising by between around 5% and as much as 30% of GDP depending on reactor size and financing terms. 

Armenia’s starting position is already stretched. Nominal public debt has more than doubled during Prime Minister Nikol Pashinyan’s tenure, from $6.9bn in 2018 to $14.5bn, although robust growth and currency appreciation have reduced the debt ratio from 65.6% of GDP in early 2021 to 53.4%. Even so, “public indebtedness is still the highest in the Caucasus and Central Asia”, and interest payments have climbed from 5.6% of budget expenditure in 2015 to almost 12% in 2025.

Tchakarov cautioned that a US-designed SMR would also carry technological risk. “There is no US-designed SMR operating commercially anywhere in the world” as of early 2026. Choosing such a path would involve “first-of-kind country deployment, cost uncertainty, schedule and regulatory risk”.

He concluded that the decision facing Yerevan is fundamentally strategic. “Overall, the selection is a strategic trade-off for Armenia between minimising debt (BOO), having a balance of ownership and cost (state loan), and geo-political diversification (ECA)”.