Armenia refuses loan from Russia to repair nuclear power plant

Armenia refused a loan from Russia to repair the Metsamor nuclear power plant, which is a critical source of power for the country.

The government will finance the remaining work on modernizing the Armenian nuclear power plant using its own funds. A budgetary loan of 63,200,000,000  drams ($130,000,000) will be allocated to the nuclear power plant for repairs.

Armenia received a loan to extend the life of the nuclear power plant until 2026. The total loan amount is 270,000,000 USD. In addition, a grant of 30,000,000 USD will be allocated to the project.

The decision to refuse the loan was made in light of complications in the relationship between Russia and Armenia.

In particular, this refers to two criminal cases brought against the South Caucasian Railways Company, which is a 100% subsidiary of Russian Railways. In August 2018, a search was conducted in the company’s office. Documents were seized and the personal belongings of employees were inspected. Moreover, the special forces were involved.

In addition, Yerevan recently initiated negotiations with Russia to lower the price of gas supplied to Armenia. In response, Russian Foreign Minister Sergei Lavrov recalled the lawsuits launched in Armenia against Russian companies, including the South Caucasus Railways.

More details on why Armenia decided to turn its back on Russian funding.

• Russia agrees to defer loan payments for repairs of Armenian atomic power station
• Metsamor – nuclear power plant

The reasons behind the decision

Armenian Minister of Territorial Administration and Infrastructures Suren Papikyan recently said that throughout the past year, the idea of extending the loan repayment term has been discussed, as well as the possibility of providing more funding at a discount.

In the end, Armenia was unable to come to an agreement with Russian, and therefore, in the words of the minister, “we had to refuse the unused loan balance”:

“A large amount of the work has already been done, but due to a number of objective and subjective issues, the modernization program has ended up running later than scheduled…The rest of the work will be financed by the Armenian government from its own funds.”

At the same time, the minister emphasized that this situation has nothing to do with Armenian-Russian relations:

“Our relationship is a stable, strategic partnership, but that being said, there is also the issue of using our loans effectively.”

As for the continuation of the work of modernizing the nuclear plant, Suren Papikyan confirmed that the state corporation Rosatom “remains Armenia’s main partner.” The Russian company Rusatom Service, which is part of the Russian state corporation Rosatom, is still the main contractor for the repairs.

“We have agreements with our partners, and as financial resources have been provided, the work on the nuclear station will continue in due course.”

In turn, the Armenian Prime Minister stated that the sum and conditions of the existing loan are not particularly suitable for the project of repairing the nuclear power plant.

Nikol Pashinyan says that continuing to repair the plant at his own expense will allow him to purchase goods and services at his discretion according to current market prices:

“In the past, we had some restrictions, including on who we bought from and how we sold. Now, we are able to leave the process entirely up to the market, and purchase products on a competitive basis. In this case, prices will be lower for us, and we hope that the quality will not be inferior to that of the products we purchased before. For many years, the nuclear power plant was a project that sucked more financial resources than it gave back. We are faced with the task of improving the efficiency of nuclear power plants, both in terms of management and in terms of energy security.”

Expert opinions

Expert in the field of energy production Vahe Davtyan claims Armenia will need to complete the project of modernizing its power plant by 2021. Otherwise, serious problems may arise, since Yerevan has taken on many international obligations:

“It would be nice if the Armenian authorities, when they make statements about refusing Russian loans, would continue on to say where they plan raise funds from, and what is meant by the phrase, ‘our own funding.’”

The expert also confirms that in refusing the Russian loan, Armenia is not refuse the contract with the state corporation “Rosatom.” This is still the company that must complete the modernization of the nuclear power plant:

“Here, Armenia has no alternative to cooperation with Russia.”