AFTER FIVE YEARS OF BLOCKADE, ARMENIA TURNS THE CORNER

AFTER FIVE YEARS OF BLOCKADE, ARMENIA TURNS THE CORNER

The only way to get goods into Armenia these days is via three single-lane, rutted roads and an electrified rail line that goes dead several times a day.

But even that is a big improvement.The former Soviet republic of 4 million people has spent five years locked in by an economic blockade that practically destroyed its economy. Trade collapsed, and without energy imports, factories ground to a halt.

Thanks, however, to some stabilization in the region and some brave transporters, a trickle of normal commercial trade is now flowing in and out of the country. Excluding aid, Armenia had $60 million of imports in 1994 against $254 million of exports.

Christopher Principle, president of Connecticut-based Battles Universal Inc., who came to Armenia's capital of Yerevan to ensure delivery of a cargo of medical goods, is proof that some trade routes are more or less open.

"I would not have dared to do this three or four months ago," he said.

The blockade still closes most of the border access to Armenia, a landlocked, rocky plateau at the intersection of Asia and Europe. To the east, Azerbaijan has been at war with Armenia over the Nagorno-Karabakh enclave and still occasionally lobs shells across the border. To the west, Turkey, Armenia's hereditary enemy, has closed its borders in sympathy with Azerbaijan.

But Armenia has been busy finding solutions, including increased use of air freight, which has grown 300 percent since the start of the blockade. More importantly, over the past year Armenia has been able to make better use of its two land lifelines: from the north, over mountain passes to Georgia, and

from the south via a 22-mile border with Iran.

The Georgian route, which is threatened by sabotage from Azerbaijan and chronic political instability in Georgia, has become safer.

A cease-fire in the Nagorno-Karabakh war has reduced Azeri sabotage. Moreover, anarchy has subsided in Georgia, easing the problem of banditry and improving the power supply to the only electrified rail line that leads out of Armenia.

Although roads are snowbound in winter and have decayed into rubble in places, they are generally open, and so is the rail line. Joe Crowley, Caucasus manager for Sea-Land Service Inc., said the carrier is now able to use the approaches from Georgia to bring in commercial cargo, mostly cigarettes and alcohol, and to ship out exports such as containerized wool.

"One-and-a-half years ago, the roads and rail were impassable. Today, they are safe," he said.

The other major trade route into Armenia runs from Iran up a sliver of land between two Azeri-controlled enclaves. Although there was no access in Soviet times, Armenia has opened a temporary bridge and a road. Since then, Iranian consumer goods - from tissue paper to candies - have started flowing into the Armenian market, and Armenia is becoming a route for Iranian exports to the world. In addition, Iran recently opened the first foreign bank in Armenia.

Signs of growing commerce can be seen on Yerevan's once-barren streets. Coca-Cola and German beer can be bought at street-side stalls. Housewives buy kerosene to replace natural gas that has been cut by Azeri sabotage of Armenia's import pipeline from Georgia. In September, Britain's Midland Bank will open a branch.

After a 60 percent collapse in 1992 and 1993, Armenia's economy actually grew 5 percent last year. The government has followed Western advice on stabilizing the currency.

A key to the economy's growth has been a huge aid program from the West - over $190 million last year, including $83 million from the United States alone. Multilateral banks have pledged or issued another $500 million in loans, and Armenia's influential, million-strong diaspora in California and France gives huge unofficial assistance.

Economics Minister Armen Yezyagaryan said he expects the economy to grow 10 percent in 1995. He is trying to attract investment, especially in mining, food processing and electronics, which were major industries during the Soviet era.

Despite the lively interest from diaspora Armenians, the blockade is an obstacle to trade and investment. Mr. Yezyagaryan admits that it adds between 15 percent and 40 percent to the cost of goods.

He said peace talks aimed at ending the blockade are proceeding, but the only concrete result so far is that Turkey has opened a corridor in its airspace for flights to Armenia.

The biggest Western investor in Armenia so far is the Salt Lake City-based Huntsman Chemical Corp., which put several million dollars into a factory to make cement slabs. David Horne, Huntsman's director for Eastern Europe, said the factory was intended as aid after the earthquakes that devastated the country in 1988.

But he said the plant no can operate at just 25 percent of capacity,

because demand in the construction industry is still depressed. While he has started to see a turnaround over the past year, Armenia remains a struggling, aid-dependent country, he said.

On the other hand, the blockade matters little to Heuristic Physics Laboratory of San Jose, Calif., whose Armenian-American chief executive carefully chose an industry that can operate regardless of the state of the borders.

Hovanes Ghoukasian, HPL Armenia's director, said the company soon will employ 30 people developing computer software for the U.S. semiconductor industry.

Although the elevator does occasionally come to a halt in the downtown Yerevan building where the company has a 14th-story office, transport is no problem. When it comes to exporting the software his company makes, Mr. Ghoukasian just dials up the Internet on a satellite phone and presses ''send."