Yesterday it was announced that Russia’s state-run railway operator formally took over the long-term management of Armenia’s rail network. The winner of the bid became the Russian Railways Company.
Ever since last year the RA Government expressed a wish to pass the management of the Armenian Railways to concession management rumors were spread that the manager is going to become the Russian Railways. Of course the officials of the sector didn’t deny those rumors. However in order to keep the process transparent they decided to announce a tender, where unfortunately the only applicant was the Russian Railways CJSC. In 2007 another company RITES also expressed a wish to manage the Armenian Railroads, which ended up not taking part in the bid. Thus, the only participant and of course winner of the tender became the Russian company. Yesterday the RA Transport and Communications Minister Andranik Manukyan signed a 30-year management contract with Vladimir Yakunin, the visiting chief executive of the Russian Railways company, after officially declaring the latter the winner of an international tender. The Russians, who have the option of extending the deal by another 20 years, are to make a one-off payment of 1 billion 700 million AMD ($5.5 million) to the Armenian government and invest at least $570 million in the Armenian railway. Of that, $220 million is supposed to be invested in the next five years. The government will also get 2 percent of its annual operating revenues. Manukyan said the deal is the only way to prevent the cash-strapped and underused network from collapse. “Please understand that if we left the railway in the current state, we would have no train fleet a few years later,” he told reporters during the signing ceremony. “And you also know the state of rail tracks and other infrastructure.” Manukyan also argued that Russian Railways’ investment commitments exceed the $170 million minimum set by the government in its bidding specifications. “That is why I believe we are making a very good deal,” he said. Under the terms of the agreement, the Russian investments will jump to $1.8 billion if Armenia restores its rail communication with Turkey and Azerbaijan. The sum is to total about $2.2 billion in the event of the reopening of the Abkhaz section of Georgia’s railway linking the region to Russia. Manukyan also added that the Canadian CPS Transcom company also assisted them in the conduct of the concession bid. The latter has a 30-year experience of conducting such bids. According to the evaluation of the Canadian Company this transaction deserved 94.4 points out of maximum 100. “Please get us right. If we left the Armenian Railways in the shape it used to be in several years we wouldn’t have a trains and the rails are in miserable conditions as you all know,” said Manukyan. As we mentioned the Russian Railways anticipates different amounts of investment if the communication means with neighboring countries are resumed. Will the Russian Railways negotiate with the relevant bodies of our neighboring states to open the whole communication? But Yakunin made it clear that reopening those rail links, closed in 1992-1993 because of the conflicts in Nagorno-Karabakh and Abkhazia, is “not our job.” “We are not politicians, we are railway workers,” he said. “What we are saying is that we will do everything in our power to help end the isolation of the Armenian railway.” Yakunin also added that their goal is to make money. He already knows that the Armenian Railways has profits from its operation. In 2007 it received about a 300-million USD income, which in the current currency rates amounts to 1 million USD. This is low income for not only a Russian company but also an Armenian one. In that case, what would be the purpose of the Russian company to manage our railroads for the coming 50 years especially in conditions of the current construction of the Kars-Akhalkalak-Tbilisi railroads, which is going to be an alternative in the region? Why would the unprofitable railroad system lure the Russians to purchase it for 50 years? If the Armenian Railways was an attractive deal then other parties would be included as well? Or at least the mentioned Indian company wouldn’t deflect from the tender. No matter how hard the Russian company tries it won’t be able to multiply the revenue of the Armenian railways because it is accumulated due to the cargo shipment of our country only. In general the railroad system receives incomes due to transit shipments. Our country doesn’t have such pre-requisites and it’s still unknown when we will have the chance to accept transit shipments. Therefore, in this case we must find political reasons. Russia wishes to possess all the strategic structures of Armenia. Our senior strategic ally, Russia controls 80% of our energy sector. We have the same situation in transportation and communications sectors. Prior to possessing all these objects the Russian had promised to make great investments and activate the system. In fact the Russian-owned Viva Cell, Armentel, Armenian Energetic Networks and other companies submit reports of major investments. However the sector still remains miserable. When the energy system starts to work in heavy duty then we witness numerous malfunctions; if the number of subscribers of the phone companies starts to increase then the quality of communication deteriorates. The best evidence of that is the past holiday season. However, let’s remember that all these sectors provide super revenues for the owners. If the Russian refuse to make the promised investments in those sectors then what’s the guarantee that the promised investments will be made in the railroad sector. In this case the only consolation is that Yakunin promised that if they change the fees then they will ensure that the Armenian economy suddenly doesn’t die.