Russian expert speaks about possible collapse at Armenian Railways

ARKA, Armenia

Sept 30 2019

YEREVAN, September 30. /ARKA/. The Russian Railways and Russia's transport ministry are "in the process of boiling", Pavel Ivankin, Chairman of the Expert Council, Railway Transport Research Institute, said in an interview with ARKA News Agency. On September 20, RTVI reported that Russian Railways, a Russian fully state-owned railway company, was going to denounce its agreement with the Armenian authorities, since they were hobbling the work of its subsidiary – the South Caucasus Railway, which runs the Armenian Railways.

The relations between the Russian Railways and the Armenian authorities have become tense because of searches and the criminal cases opened against the South Caucasus Railway. "Today the South Caucasus Railway's office is paralyzed, some papers are seized and they are not given bank," Ivankin said. "The key claim of the Armenian side is non-purpose use of financial means. But everything is still not confirmed by evidence."

He said no official changes had been brought so far, but pressing from the Armenian side was increasingly being intensified and the claimed amount was growing – everything started from a ridiculous sum, but it has grown to USD 60 million.

In his words, terms of the concession contract are quite transparent, and if there are claims, it is possible to look through it.
"Taking into account the fact that the administration of the South Caucasus Railway has been changed trice by Russia, I guess there could be some management mistakes, but this all is mostly connected with clams of the managing company, i.e. the Russian Railways toward the South Caucasus Railway, but there never were faults in complying with requirements from the Armenian side," Ivanking said.

Before the arrival of the new Armenian government, he said, all problems were considered at an international level and "everybody was happy about that".

Ivanking said that it is impossible to operate under such a pressure and that the matter will be solved this or other way before the beginning of the next year.

"Taking into consideration how things are developing now, I can say that this will not last for years, and it is necessary to understand that one year has already passed since the moment when this began, and later Russia may receive real claims from Armenia for breaching the concession terms, and if so, considerable fines may be imposed," he said. "And therefore, the Russian side want to race against time not to give grounds to Armenia to place on record any failure of fulfillment of concession terms."

If the situation develops to absurd, he said, and concession contract terminates, then Armenia will be left with two options – to take trains back on leasing with a right of repurchase or without it, or to purchase them elsewhere.

Any case, he said, these are quite significant additional expenses for Armenia, and to prevent that it would be reasonable to go back to retain the contract and continue cooperating. But if everything is driven to absurd, then a certain collapse will happen in three to six months.

South Caucasus Railway, a subsidiary of Russian Railways, runs Armenian Railway, which was handed over to the South Caucasus Railway on February 13, 2008 for 30-year concession management with a right to prolong the management term for other 10 years. –0—