Fitch does not expect a fully-fledged escalation of the conflict between Armenia and Azerbaijan

ArmInfo. A comprehensive peace  agreement between Armenia and Azerbaijan will be difficult due to  Baku's demands for a transit corridor through its territory and  constitutional changes that will be politically difficult to agree  to. This is stated in Fitch Rating's report.

"Armenia is negotiating a peace agreement with Azerbaijan following  its complete loss of territorial control over Nagorno-Karabakh in  2023.

Our base case does not include an escalation of the conflict, even  though Azerbaijani troops continue to have a presence  in Armenia and  there have been sporadic exchange of fires," the report says.

The document also notes that despite the deterioration of political  relations with Russia, trade links  remain strong, and dependence on  Russia for energy security remains "very high."

However, Fitch does not expect US, UK or EU secondary sanctions on  Armenia and expects the Armenian financial sector to comply with  sanctions targeting Russia.