RUSSIAN RAILWAY BOOSTS INVESTMENTS IN ARMENIA

Asbarez
Dec 24th, 2009

YEREVAN (RFE/RL)-Russia’s state-run railway, RZD, reported on Thursday
a sharp increase in its capital investments in Armenia’s rail network
which it began managing almost two years ago.

Shevket Shaydulin, the Russian chief executive of the network called
the South Caucasus Railway (SCR), said RZD investments have totaled
almost $80 million this year. He said nearly half of the sum was
due to be invested in the SRC last year, under the terms of RZD’s
long-term management contract with the Armenian government.

The agreement, signed in late 2007, committed the Russians to investing
$230 million in Armenia during the first five years of operations
and another $240 million in the following years. The government has
repeatedly accused them of failing to honor this and other contractual
obligations.

Transport and Communications Minister Gurgen Sargsian complained in
March that only $11.5 million was invested in the SCR in 2009. In
particular, he said, the Russian management failed to repair and
replace rail tracks and purchase several new locomotives for the
cash-strapped and disused railway.

Speaking at a news conference, Shaydulin said the Russian side has
already fulfilled 94 percent of its obligations and will have fully
complied with the management contract by the end of next year. He
also stressed that the SCR did not raise its tariffs in 2009 despite
a surge in the electricity and fuel prices that took effect in April.

"We didn’t raise tariffs and shouldered the [increased] burden on the
Armenian economy, in order to enable local entrepreneurs, small and
medium-sized businesses to achieve proper results," Shaydulin said,
referring to the severe impact of the global economic crisis on the
landlocked country.

The crisis is clearly the main reason why cargo shipments to and
from Armenia substantially declined in the course of the year. But
that was mostly compensated by a doubling of passenger and cargo rail
traffic inside the country reported by the SCR.

Nonetheless, the company continued to suffer financial losses in 2009.

Shaydulin said it may well have to raise its prices to reduce them
in 2010. But he made clear that according to RZD projections, the
SCR will remain loss-making at least until 2016.