FUEL PRICING DEVIATION IN A LANDLOCKED STATE: THE IMPORT-TO-RETAIL MARKUP ANOMALY IN ARMENIA

Abstract

This paper documents severe market dysfunction in Armenia's fuel sector, characterized by an extraordinary 92.9% import-to-retail margin and persistent 21% price premium over neighboring Georgia. Using proprietary daily price data (2022-2025) and official customs statistics, we demonstrate that Armenian consumers face anomalously high fuel costs driven by systematic corruption at the Upper Lars border checkpoint (imposing an estimated 11-19 AMD/liter "corruption tax") and widespread quality enforcement failures (68% of stations engage in underfilling). We quantify welfare costs through price decomposition analysis and document macroeconomic consequences including 7.2% annual transport sector inflation. The findings contribute to literature on landlocked economies and border corruption costs while providing the first comprehensive empirical analysis of fuel pricing in an EAEU member state.