“Nairit” production union was founded in 1940, and during the period of the Soviet Union it produced 34 types of chemical products for the Soviet market. The factory was unique due to the fact that it was the only one in the Soviet territory that produced rubber (chloroprene) and latex. This giant company was closed by the decision of the Soviet Supreme Council in 1989, due to which Armenia lost billions.
“Nairit” company produced raw materials for a number of chemical factories. Later, in 1991, “Nairit” was re-opened by the decision of the Supreme Council, but it didn’t operate with its full capacity as before. During the blockade period the production line for butadiene rubber was closed, as the raw materials were imported from Russia. Indeed, due to an unstable natural gas supply, the company lost much and its debt capacity increased much. This problem has not been solved so far.
It doesn’t mean that the government of those times did not do anything to save the company. Firstly, the government offered this company to the Russians under the “property against debt” agreement, but the Russians refused to take it. Later, in 2001, the government tried to find an alternative and developed a revival program for “Nairit”. Initially the government separated the fixed assets and founded a separate company, “Nairit 1”, which inherited a debt capacity equal to AMD2.5 bln (salaries and social payments). This new company was not responsible for the debt to the energy plants. In 2002, the English company “RanSat group” expressed interest in the program and agreed to invest about $25 mln. This company also agreed to cover the $10 mln outstanding debt balance of “Nairit”. What did this company gain? In fact, they didn’t invest much since “Nairit” produced 6 thousand tons of rubber, which was fully enough for making a profit. It is worth mentioning that the mentioned British company agreed to take the management of “Nairit”, under the stipulation that the prices for natural gas and steam would be decreased. We don’t understand why the government had to subsidize that company and set other prices for other companies. Now it is clear that the government has not made any exceptions and thus “Nairit” has not made any investments, due to which the dept capacity is increasing. “RanSat” company had another argument, which was connected with the fact that one of the production lines for drying and packing had been taken out and sent to China. The new management of the company thought the existing facilities and production lines were not enough for organizing a proper production process. As for this dispute, the responsible officials explained that they had clarified, in a timely manner, the terms a joint program with the Chinese in “Nairit2” for the purpose of making joint investments in it. “ChinArmenpres” company was planned to start operating in 2004 and provide $4 mln income each year. Where is that money? Where is the third production line of “Nairit” company?
In a word, as a result of the revival program for “Nairit”, it now has a new owner, but more debts. By the way, according to the contract between the manager of the company and the government, in case of new debts the manager had to cover all the debts from its own assets. In the period of its operation, the “RanSat group” incurred huge debts to “Haykapbank”, which operates in the system of the transport and communication ministry, and which became the new owner of “Nairit”. Following this transfer, Russian “Volgaburmash” company became interested in “Nairit”. This organization, which was called “Nairit trust”, finished its mission in 2004. “Haykapbank” ended the contract with this company due to the fact that the Russian company was not carrying out the management effectively. In 2004 the ministry of energy issued obligations against the debt for the purpose of covering the outstanding debt owed to “Haykapbank” and was given 80% of the “Nairit” share. In the period of 2004- 2006 the factory produced 8 thousand tons of rubber without any investments. Most of this production was sold in the European market and only 20% of that was exported to Russia. If this company was able to produce and export such large volumes, it means that it operated with a profit. This company, which has a status of a state-owned company, was able to increase the price for its production from $2000 up to $2500 per ton. Currently this domestic production is effectively competing with the production of the German “Baier” company, which is quite well known in the market. This competition may stop soon as the price for natural gas is increasing in Armenia. In order to produce this rubber the company needs three components: natural gas, water and air. Almost 80% of the net price of this product is paid for the energy resources used for its production.
In 2006 the government decided to do something with “Nairit” again and sold it to “Rhinoville Property Limited” (an English-Irish company). It is worth mentioning that this company consists mostly of Russian capital too, and the CIS international bank has a share in it. The state budget has not gained anything from this deal; the “Rhinoville Property Limited” just agreed to cover the debt of $40 mln and invest $120 mln during the upcoming five years and double the production capacity in the first year. We tried to get information about this “dream program” from “Nairit”, but the officers were always telling us that their director was either in a meeting or was out. Accordingly, we tried to get information from the chair of the “Nairit” company board of directors. The chairman of the board of directors, Mr. Grigor Stepanyan, assured us that they were preparing a press release, and once it was ready he would meet us and answer all our questions. Also, Mr. Stepanyan told us that he was in charge of the board’s chair’s responsibilities permanently and could not answer our questions, as he was not well informed about the issue. Mr. Stepanyan advised us to request information from the spokesman of the company (press secretary). It is quite amazing that their press secretary has more authority than the chairman of the board. Anyway, they asked us to send them all our questions in written form since the person in charge of those issues had taken a business trip, saying they would send the answers once he was back. We also wonder why Mr. Vahan Melkonyan, who is a board member and representative of the CIS international bank and makes decisions in “Nairit”, doesn’t act solely in the board chair’s position. It is worth mentioning that before that the board chair was Armenian, but a citizen of France. This was Andre Nersisyan, who died recently. According to the rules of civil business, after someone dies their relatives may inherit the position. We wonder whether Mr. Nersisyan’s relatives know about their share in “Nairit”. We hope Mr. Melkonyan will answer this question as well.
As we noted above, the prices for the products produced by “Nairit” factory have significantly increased in the international market. Despite the fact that the international price for one ton of rubber is about $3800, this domestic company sells its product to “InterCauchouce” intermediary company. The price for transporting one ton of rubber to Europe is about $200. It is clear that the intermediary company earns much more than the producer. This tradition of doing business with an intermediary was applied at “Nairit” in 2005, but before that time they used to export their products directly to their clients. This means that the owner of this company is trying to reduce the income of the factory as much as possible since the less the income is, the less the tax obligations are. The factory is experiencing difficulties with covering its debts to the suppliers of water and energy resources despite the fact that they don’t have any problems with exporting and selling their products (the demand for their products is significantly more than the capacity they are able to provide). The best solution out of this situation is to increase the production capacity, which needs more investment. By producing 2-2.5 tons per month, they can reduce the net price of their product, since the production capacity that the factory is able to provide is 800-900 tons. In 3 years these calculations will no longer be reasonable, as the price of natural gas will increase again. According to the investment program, the production of butadiene rubber that was potted in 1992 had to be re-started, but with new technologies that will save the energy expenditure. We still have to wait for five years to see whether this program is fulfilled or not. However, it is worth mentioning that in case the company fails to do that program, the government is eligible to end the contract without reimbursing the investments.