Relations between Russia and Armenia have soured in recent years. Armenia is increasingly looking westward for political, economic and security support. That presents a problem in the rail area: Russian Railways (RZD) subsidiary South Caucasus Railway (SCR) operates all of Armenia’s rail network through a 30-year concession. Armenia now wants it all back.
Armenia had already floated changes to the South Caucasus Railway concession. For example, the government in Yerevan proposed selling it to a third country friendly to both Armenia and Russia. Moscow rejected that proposal.
Russian Deputy Prime Minister Aleksey Overchuk stated that the country sees “no objective reasons for selling the South Caucasus Railway concession to a third party”. Overchuk warned that removing the Russian business presence could trigger retaliatory measures. These would target Armenian businesses operating in Russia “under the principle of reciprocity”.
In February, Prime Minister Nikol Pashinyan claimed that Armenia was “losing strategic positions and competitive advantages” as a result of the Russian management of its rail network. The stakes have become even higher recently, since Armenia wants to restore rail connections to Türkiye and Azerbaijan. This is not in the interest of Moscow, and SCR manages the Armenian rail infrastructure. Armenia has since then started to restore a railway to Türkiye independently.
An amicable resolution?
Everything points to Yerevan wanting to reclaim control over its own rail network. On 30 July, Prime Minister Nikol Pashinyan did not rule out a turn to the courts over the issue. “We want to resolve the issue amicably. It will be resolved in any case. If any disagreements arise, we’ll discuss them later in arbitration”, Pashinyan stated.
Pashinyan also refused to rule out charging SCR for the use of infrastructure. The Prime Minister reportedly said that Armenia could charge $2 billion annually for the concession. “We learned with surprise and bewilderment from the press about the Armenian side’s statement regarding demands to the Russian side regarding the possible collection of rent for Armenia’s railways”, Russian Railways CEO Oleg Belozerov is quoted as saying in Russian media.
RZD invested approximately $396.3 million in the Armenian railways, according to Belozerov. The SCR concession exempted Armenia from rail maintenance costs.
The Russian rail operator says that it wants all of that money back in case Armenia takes back control over its rail network. “For our part, we intend to firmly adhere to it [the concession deal], and if the Armenian side considers the possibility of terminating it or changing its terms, we have the right to expect a return on the investments made”, Belozerov said.