Armenia's Rule of Law Crisis Chills Investment and Market Stability

WASHINGTON, DC – December 05, 2025 – A deepening political crisis in Armenia, marked by the recent arrest of a fourth high-ranking archbishop, is sending shockwaves through the international community and raising critical questions about the nation's commitment to the rule of law. The detention of Archbishop Arshak Khachatryan follows that of three other senior clergymen and a prominent businessman, Samvel Karapetyan, igniting accusations of a politically motivated campaign against the influential Armenian Apostolic Holy Church. As the government in Yerevan pursues charges ranging from orchestrating a coup to narcotics trafficking, investors and Western partners are watching closely, weighing the stability of a market now fraught with legal and political uncertainty.

International law firm Amsterdam & Partners LLP, representing the detained businessman Karapetyan, issued a sharp condemnation this week. “There is no room for silence on Armenia,” declared founder Robert Amsterdam, arguing that the government is using “fabricated charges and judicial intimidation to silence dissenting voices and dismantle the independence of the Church.” The firm’s outcry frames the events not merely as a domestic issue, but as a direct challenge to the democratic principles that underpin a stable investment climate.

A Widening Net of Arrests

The situation escalated dramatically with the December 4 arrest of Archbishop Arshak Khachatryan, who now faces two months of pre-trial detention on charges of illegally selling narcotics in 2018. His legal team has labeled the accusations “absurd,” highlighting them as the latest move in a systematic effort to neutralize opposition figures. This follows a pattern seen over the past several months.

• Archbishop Bagrat Galstanyan, a dual Canadian citizen and leader of the “Sacred Struggle” opposition movement, was arrested in June on charges of plotting to overthrow the government through alleged terrorist attacks.
• Archbishop Mikayel Ajapahyan was sentenced to two years in prison in October for inciting a coup based on statements made in media interviews.
• Bishop Mkrtich Proshyan was detained in October on a slew of charges, including coercing citizens to participate in protests and large-scale theft.

These arrests mean that half of Armenia's archbishops are now imprisoned. They are joined by Samvel Karapetyan, a major supporter of the Church and owner of Electric Networks of Armenia, who has been in custody since June. Initially arrested for publicly calling for the overthrow of the constitutional order, he now faces additional economic charges of money laundering, fraud, and tax evasion. His lawyers maintain that all charges are baseless and designed to silence a powerful voice of dissent.

State Justification and Economic Undercurrents

The Armenian government, led by Prime Minister Nikol Pashinyan, has vigorously defended its actions. Pashinyan has publicly accused the head of the Armenian Apostolic Church, Catholicos Karekin II, of being a “foreign agent” and claimed that security services successfully thwarted a plot by “criminal oligarch clergy” to seize power. The state's Investigative Committee has formally confirmed the charges, framing the arrests as standard law enforcement procedure against criminal activity.

However, the government's narrative is complicated by significant economic undercurrents. Prime Minister Pashinyan himself has publicly linked Karapetyan’s arrest to the potential nationalization of his company, Electric Networks of Armenia. This statement, connecting a criminal proceeding to a major strategic asset, has sent a chill through the business community. For international investors, the specter of asset seizure tied to political dissent undermines the very predictability and protection of property rights essential for market confidence. The move is seen less as a regulatory action and more as a political weapon, creating a high-risk environment for both domestic and foreign capital.

International Aid and Diplomatic Pressure

The crisis unfolds against a complex backdrop of international relations and foreign aid. Just days before Archbishop Khachatryan’s arrest, the European Union pledged €15 million to Armenia as part of a new Strategic Agenda. The funds are designated to support border management, de-mining, and, critically, to counter “growing disinformation efforts by Russia and its proxies” ahead of the 2026 parliamentary elections. This financial commitment is part of a broader EU partnership aimed at bolstering Armenia’s democratic reforms, rule of law, and human rights.

This juxtaposition has drawn sharp criticism from observers like Robert Amsterdam, who argues the EU funding violates its own treaty obligations to promote human rights. The firm's press release highlights the recently released White House National Security Strategy, which affirms religious freedom as a “core right” and pledges to “oppose elite-driven, anti-democratic restrictions on core liberties.”

Human rights organizations within Armenia have also condemned the arrests as a “gross violation of fundamental human rights,” while Russia and Canada have taken note, with Moscow stating it is monitoring the situation around Karapetyan and Ottawa confirming it is providing consular services to Archbishop Galstanyan. The escalating events are forcing a difficult conversation in Western capitals about the effectiveness of aid and diplomatic engagement when a partner nation appears to be backsliding on core democratic values.

For a nation at a geographic and political crossroads, the perception of judicial independence is paramount. The ongoing clash between the Pashinyan government and the ancient institution of the Armenian Apostolic Church, now ensnaring major business interests, creates a volatile landscape. While the government portrays its actions as a necessary defense of the state, the appearance of politically motivated prosecutions threatens to erode the trust required to attract the technology, healthcare, and infrastructure investments Armenia seeks for its future.