The Most Rev Justin Welby told the Lords that religious freedom was currently "threatened on a global scale".
He said attacks on religious freedom were linked to many factors including economic circumstances, sociology and history.
"If we want to defend religious freedom around the world - and the freedom to have no religion - don't sell people guns who oppress religious freedom.
"Don't launder their money. Restrict trade to them and confine the way we deal with them - and above all speak frankly and openly, naming them for what they are."
In a debate on the need to uphold religious freedom and belief at a time of growing world strife, the Archbishop said: "Where a state claims the ultimate right of oppressing religious freedom, it stops the last and the strongest barrier against tyranny."
From the beginning of time, the world had needed religious freedom as a "global defence of freedom," he said.
The Archbishop added there were many examples of "horrific situations" around the world where people were persecuted for their religion or for their absence of religion.
"I myself have witnessed such persecution, in its rawest forms, during my visits to the 37 other provinces of the Anglican Communion. Almost half of these provinces are living under persecution. They fear for their lives every day."