Armenia increases subsidies for South Caucasus Railway, Russia concession remains on Hold
Armenia increases subsidies for South Caucasus Railway
The Armenian government will increase its subsidy to South Caucasus Railway CJSC by 65.22 million drams (about $178,000).
The move is not unprecedented. Under the concession agreement signed between Armenia and Russian Railways in 2008, the government partially compensates the railway operator each year for losses incurred on agreed passenger routes.
Armenia’s railway network has been operated under concession by South Caucasus Railway since 2008. The company is a wholly owned subsidiary of Russian Railways. The agreement grants the operator a 30-year concession. Since then, however, freight volumes on Armenia’s railways have halved, several routes have ceased operations, and mandatory investment commitments have largely remained unfulfilled.
Economist Suren Parsyan argues that the government should exercise closer oversight over both the amount of the subsidy and the mechanism for allocating it.
“The government should not approve the subsidy every year using the same wording. It should conduct thorough economic assessments to determine whether the subsidy is effective,” Parsyan said.
The latest developments concerning Armenia’s railway network were announced by Prime Minister Nikol Pashinyan, who said the government had launched the process of restoring the railway sections linking Gyumri-Akhurik and Yeraskh.
Yerevan had previously asked Russia to restore these sections, which lead towards the borders with Azerbaijan and Turkey. Reopening them would enable Armenia to achieve the full unblocking of its transport links.
So far, Moscow has neither fulfilled Armenia’s request nor indicated any willingness to do so. At the same time, Russia has made clear that it has no intention of relinquishing the railway concession. Yerevan, for its part, has suggested transferring the concession to a country that maintains friendly relations with both Armenia and Russia. Among the countries mentioned were Kazakhstan, the United Arab Emirates, and Qatar.
Regional affairs analyst Armen Petrosyan believes there is currently no need to terminate the concession agreement or escalate tensions with Russia.
Instead, he argues, Armenia should begin reconstruction work on its own and postpone any decision on the future of the concession.
“The cost of restoring the railway lines towards both Azerbaijan and Turkey is not so high that the Armenian government cannot finance the work itself. Later, a situation may arise in which the Russian side compensates these expenses in one way or another. The process should be approached step by step,” Petrosyan said.
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Commentary
According to Armen Petrosyan, a regional affairs analyst and expert on the Middle East, the Armenian government is planning a separate project to restore those sections of the railway network that are currently operated under the Russian concession. The aim, he says, is to ensure that Armenia’s transport unblocking does not depend on Russia’s political decisions or goodwill.
Petrosyan believes Russia is likely to deliberately delay the restoration of certain railway sections. At the same time, he argues, the Trump Route—the Armenian-American joint transport initiative—would be significantly more effective if Armenia’s transport links were fully restored. Although the proposed transit corridor is intended primarily to connect Azerbaijan with its exclave of Nakhichevan, he says Armenia should not allow progress on the project to hinge on Moscow’s position:
“If the opportunity exists—and it does, because we are talking about relatively short stretches of railway [the Gyumri-Akhurik and Yeraskh sections]—the Armenian government can carry out the restoration work without difficulty. Moreover, there is interest from the European Union.
These railway lines should be rebuilt now. I am convinced that Russia currently lacks the resources to repair or construct railway infrastructure in Armenia. It is not going to invest in these projects. Armenia should do so itself. Everything Armenia is capable of undertaking independently, or together with partners willing to cooperate, should be done.”
As for the possibility of stripping Russian Railways of its railway concession, Petrosyan does not see it as an urgent issue. For that reason, he believes there is “no need to create a confrontational atmosphere.”
“What would Armenia gain by raising this issue now, when Russia is in such a sensitive, tense and volatile position? Moscow could easily take steps that would create serious problems for Armenia, forcing it to put TRIPP aside and deal with those challenges instead,” he said.
Applying the same logic, Petrosyan argues that Armenia should also refrain from putting the question of a possible withdrawal from the Eurasian Economic Union (EAEU)—the Russia-led economic bloc—on the political agenda. He believes that, as long as Armenia has no viable alternative, there is no point in escalating tensions with Moscow.
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Armenia increases subsidies for South Caucasus Railway
