{"id":6271,"date":"2026-05-28T19:59:35","date_gmt":"2026-05-28T15:59:35","guid":{"rendered":"https:\/\/www.pressclubs.tv\/?p=6271"},"modified":"2026-06-11T20:51:30","modified_gmt":"2026-06-11T16:51:30","slug":"28-05-2026-eng-analiz","status":"publish","type":"post","link":"https:\/\/www.pressclubs.tv\/en\/2026\/05\/28-05-2026-eng-analiz\/","title":{"rendered":"REGIONAL TRANSPORT INFRASTRUCTURE IN THE SOUTH CAUCASUS: HISTORY AND PROSPECTS (Parts 12, 13, 14, 15 and 16)"},"content":{"rendered":"\n

Samvel Meliksetian<\/strong><\/em><\/p>\n\n\n\n

(Continued. Beginning\u2026<\/mark><\/a><\/em>)<\/strong><\/em><\/p>\n\n\n\n

Part 12<\/strong><\/h4>\n\n\n\n

Armenia\u2019s Adaptation to Closed Borders: Unrealized Projects and the Deterioration of Old Infrastructure<\/strong><\/h4>\n\n\n\n

The Armenian side made attempts to adapt to closed borders and the changing transport geography of the region, shaped by Azerbaijan through the development of transport routes across Georgian territory. Under these conditions, Yerevan put forward its own transport and transit projects aimed at overcoming isolation and securing Armenia\u2019s status as a transit country. Given the closure of the borders with Azerbaijan and Turkey, the implementation of such initiatives was possible only through a combination of two open routes\u2014via Georgia and Iran.<\/p>\n\n\n\n

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A pontoon bridge across the Araks River on the Armenian-Iranian border, 1992 (photo by Armenpress).<\/em><\/strong><\/p>\n\n\n\n

The relevant projects covered both the energy sector (in particular, the construction of the Iran\u2013Armenia gas pipeline) and the development of rail and road transport. The attempt to diversify gas supply sources and turn Armenia into a transit country for Iranian gas supplies to Georgia and, potentially, Ukraine, following the 2002 announcement of the construction of a 1,420-mm-diameter gas pipeline from Iran, led to a conflict of interests with Russia. This resulted in a sharp increase in the price of gas for Armenia (from $54 to $110 per thousand cubic meters), after which the Armenian side made concessions: the pipeline\u2019s diameter was reduced to 770 mm, and the controlling stake in \u201cArmrosgazprom\u201d was transferred to Russia\u2019s \u201cGazprom\u201d in 2006. Subsequently, \u201cGazprom\u201d increased its share in Armenia\u2019s gas sector to 100% (2014). Attempts by Russia to expand its influence in Georgia in a similar manner, using price blackmail, proved fruitless. Taken together, this demonstrated Russia\u2019s desire to maintain control over the region\u2019s critical infrastructure and prevent the emergence of alternative gas supply routes to Europe through the South Caucasus.<\/p>\n\n\n\n

At the same time, the announcement of the construction of the Baku\u2013Tbilisi\u2013Kars railway spurred the Armenian side to seek solutions for modernizing the existing railway network and to propose alternative projects for integration into regional transit flows.<\/p>\n\n\n\n

The sharp decline in rail freight volumes in the 1990s (from 33.9 million tons in 1989 to 0.7 million tons in 1998) created critical conditions for the sector\u2019s operation. A turning point came in 1999, when freight volumes doubled to 1.4 million tons. In the subsequent period up to 2008, steady growth was observed, reaching 2.93 million tons in 2007.<\/p>\n\n\n\n

International programs played a certain role in this relative stabilization. In 2002\u20132004, with $14.5 million in World Bank financing, the Ani\u2013Ayrum line (72 km) was partially modernized, and with European Union support, Siemens upgraded the signaling systems. Nevertheless, according to an assessment by the Asian Development Bank (2008), Armenia\u2019s railway infrastructure remained significantly worn out, and without large-scale investments, a significant portion of the rolling stock and key infrastructure elements could become inoperable by 2018.<\/p>\n\n\n\n

In this regard, the World Bank and the ADB recommended transferring the railways to concession management with mandatory investments of at least $170 million over the first 10 years, as well as active state participation in improving the sector\u2019s efficiency, including the development of infrastructure for transporting bulk cargo. If these measures were implemented, freight traffic was projected to grow to 4 million tons by 2018, and upon the opening of the border with Turkey\u2014to 9 million tons.<\/p>\n\n\n\n

Special attention was given to the need to subsidize passenger transport, which had been steadily declining: from 3.5 million passengers in 1990 to 1.1 million in 2003 and 0.7 million in 2006. It was also recommended to optimize staffing levels: by 2006, the workforce numbered about 4,750 people (compared to 12,000 in the late 1980s), which was considered excessive.<\/p>\n\n\n\n

In 2006, the Armenian government announced its intention to put the railways out to concession. By 2007, two companies had been admitted to the tender\u2014Russian Railways (RZD) and Rail India Technical and Economic Services, the latter of which subsequently withdrew from the tender. As a result, the Russian side emerged as the winner, offering terms that exceeded the recommendations of international institutions: investments of $230 million over the first 5 years (compared to $170 million over 10 years), and the total investment over 30 years was to amount to $572 million ($170 million for rolling stock and $400 million for infrastructure).<\/p>\n\n\n\n

At the insistence of the Armenian side, the concession agreement enshrined key provisions such as the principle of open access for other operators (primarily the Georgian side\u2014an important measure in light of the potential opening of the Kars\u2013Gyumri\u2013Tbilisi line), as well as the government\u2019s right to regulate tariffs for strategic cargo.<\/p>\n\n\n\n

In the initial phase, following the agreement\u2019s entry into force in 2008 and the establishment of the South Caucasus Railway (SCR) company, the Russian side demonstrated a willingness to expand the investment program. In particular, Russian Railways announced the possibility of increasing investments to $610 million upon the opening of the border with Turkey by the end of 2009, to $1.8 billion with Azerbaijan, and to $2.1 billion upon the restoration of the Abkhazian railway section.<\/p>\n\n\n\n

During the same period, additional projects were actively discussed, including the construction of a railway line to Zvartnots International Airport, the Vanadzor\u2013Fioletovo line, and one of the most ambitious projects\u2014the Armenia\u2013Iran railway as part of the North\u2013South transport corridor, which became a key part of Serzh Sargsyan\u2019s campaign promises in 2008, alongside the construction of a new nuclear power plant.<\/p>\n\n\n\n

By 2010, the project to build the Fioletovo\u2013Vanadzor railway was in the stage of practical discussion and preparation for implementation. The idea for this line dates back to the early 1920s and was viewed as a logical extension of the railway project through the Aghstev River valley, aimed at shortening the Yerevan\u2013Tbilisi route. The project was subsequently revisited in the 1960s and in the late 1980s, and in independent Armenia it became one of the most realistic and high-priority areas for optimizing the railway network.<\/p>\n\n\n\n

In 2004, the construction cost was estimated at $30\u201350 million, but by 2008 it had risen to $91 million. By the end of 2010, three route options were under consideration, with lengths of 28, 31.4, and 33 km; in 2011, the government approved the 31.4-km option.<\/p>\n\n\n\n

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One of the projects for the Fioletovo\u2013Vanadzor railway (length: 31.4 km).<\/em><\/strong><\/p>\n\n\n\n

The construction of the Fioletovo\u2013Vanadzor railway would reduce the distance between Yerevan and Tbilisi (and thus the route from Julfa to the Black Sea ports) by approximately 70 km. Moreover, upon the opening of the Armenian-Azerbaijani border and the restoration of the line through the Aghstev River valley, this section would provide the shortest railway route between Kars and Baku\u2014about 730 km, compared to 889 km via the Kars \u2013 Gyumri \u2013 Nakhichevan \u2013 Baku line and 829 km via the Baku \u2013 Tbilisi \u2013 Kars route. According to an estimate by the Asian Development Bank (2008), the project could have reduced the cost of transporting each ton of cargo from Black Sea ports to Yerevan by approximately $2. Despite this, as well as the South Caucasus Railway\u2019s initial willingness to begin construction on a co-financing basis, the project was never implemented . As early as 2012, the company\u2019s management declared the project unprofitable, even though the Armenian authorities had continued to assert the relevance of constructing this section for another two years.<\/p>\n\n\n\n

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An illustration of the role of the Vanadzor\u2013Fioletovo line in creating the shortest rail routes between the Black Sea ports and Iran, and between Kars and Baku. The basis for this map and all similar maps was the 1994 map of the Caucasus region from the University of Texas Library —https:\/\/maps.lib.utexas.edu\/maps\/commonwealth\/caucasus_region_1994.jpg<\/mark><\/a><\/em><\/strong><\/p>\n\n\n\n

By this point, the estimated costs had also risen significantly: while in 2008 the cost of the 32-kilometer section was estimated at $91 million, by 2012 Russian Railways was citing a range of $250\u2013500 million. One of the reasons for the Russian side\u2019s initial interest was likely the expectation that the border with Turkey and Azerbaijan would open as part of so-called \u201csoccer diplomacy,\u201d which could transform the Vanadzor \u2013Fioletovo\u2013Hrazdan and Vanadzor\u2013Ijevan into a key transport system for the region along the north\u2013south and west\u2013east axes. A more ambitious project was the idea of building an Armenia\u2013Iran railway as part of the north\u2013south transport corridor (the so-called Southern Armenian Railway). This project became one of the central elements of Serzh Sargsyan\u2019s 2008 election campaign and was viewed as a response to the launch of the Baku\u2013Tbilisi\u2013Kars railway, representing an attempt to overcome the country\u2019s transport isolation.<\/p>\n\n\n\n

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Visual comparison of competing North-South projects across the territories of Armenia and Azerbaijan, 2016. Source — https:\/\/worldview.stratfor.com\/<\/mark><\/a><\/em><\/strong><\/p>\n\n\n\n

Despite the interest of Russian Railways, the World Bank, and the Armenian government, as well as the signing of a concession agreement with the company \u201cRussia FZE\u201d in 2012 and a memorandum with Iran in 2016\u2014which envisaged the start of construction on the Iranian section after 30% of the work had been completed on the Armenian side\u2014the project was never implemented.<\/p>\n\n\n\n

Various route options were considered, of which the most promising were deemed to be the routes Yeraskh\u2013Yeghegnadzor\u2013Sisian\u2013Kapan\u2013Meghri and Gagarin\u2013Gavar\u2013Martuni\u2013Jermuk\u2013Sisian\u2013Meghri. The latter, stretching 304 km across Armenian territory, would have required large-scale construction: more than 60 tunnels with a total length of 102 km (over a third of the route), 84 bridges and overpasses, as well as 27 stations. The capacity was estimated at 15.4 million tons by 2025, increasing to 18.3 million tons by 2035, with a potential expansion to 25 million tons, and a planned annual passenger traffic of 1.2 million people. Additionally, the construction of approximately 60 km of railway within Iran was envisaged.<\/p>\n\n\n\n

The project\u2019s cost rose from $1.6 billion (2008 estimate) to $3.2\u20133.5 billion. The plan was to finance 60% of the project through loans from Chinese banks and 40% through investments from the participating countries (Russia, India, Kazakhstan, and China). Among the key factors hindering implementation was the lack of guarantees from Iran regarding its refusal to build an alternative Rasht\u2013Astara line, which could reduce the project\u2019s profitability.<\/p>\n\n\n\n

The third, and smallest-scale, project was a railway branch line from the \u201cCharbakh\u201d metro station to Zvartnots International Airport. Its length was to be 7.8 km (of which 2.45 km was an existing line and 5.35 km was new construction, including an 810-meter tunnel). Despite its relatively low cost (about $2.7 million in 2012), the project was also not implemented, as the South Caucasus Railway deemed it unprofitable. Discussions of the idea resumed in March 2026 with the possible participation of Italian companies. The only major transportation project whose implementation actually began during the period of the frozen conflict was the North-South Highway (Bavra\u2013Agarak). The 556-km project, with an initial cost of about $1 billion, was intended to create a modern road link between the Black Sea ports and the Persian Gulf (Indian Ocean).<\/p>\n\n\n\n

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The North-South International Transit Highway Project through the territory of Armenia.<\/em><\/strong><\/p>\n\n\n\n

Despite the start of construction, the project timeline was significantly disrupted: the planned completion in 2019 was postponed, according to current estimates, to 2033, and its cost rose to $3\u20135 billion. By 2025, only about 17.5% of the route had been completed.<\/p>\n\n\n\n

Thus, despite the launch of individual infrastructure initiatives, primarily the North\u2013South project, Armenia has failed to implement its strategy of establishing its own transit corridors amid closed borders with Turkey and Azerbaijan. The implementation of key projects has been unreasonably delayed and has not led to a qualitative change in the country\u2019s transport role in the region.<\/p>\n\n\n\n

Part 13<\/strong><\/p>\n\n\n\n

Problems with the Russian concession of Armenia\u2019s railways<\/strong><\/h4>\n\n\n\n

Although the signing of the concession agreement with Russian Railways in January 2008 made it possible to maintain the operational condition of Armenia\u2019s railways and stabilize freight volumes for a certain period, the agreement itself contained a number of problematic provisions that, over time, led to the accumulation of disagreements and conflicts between the parties.<\/p>\n\n\n\n

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Armenia\u2019s railways transferred to the concession management of South Caucasus Railway (SCR) on the map. Source — https:\/\/www.railway.am\/infrastructure\/arm\/havelvac_3.pdf<\/mark><\/a><\/em><\/strong><\/p>\n\n\n\n

According to the concession agreement, the transferred assets included the entire Armenian railway system, including the Hrazdan\u2013Dilijan\u2013Ijevan section up to the Barkhudarlu station. However, as early as 1994, due to a landslide on the Teghut\u2013Haghartsin section, the line was effectively divided into two isolated segments: Hrazdan\u2013Dilijan and Haghartsin\u2013Ijevan\u2013the border with Azerbaijan. Nevertheless, by the time the concession was transferred in 2008, the section up to Dilijan Station remained operational.<\/p>\n\n\n\n

This is confirmed, in particular, by the railway map published by the South Caucasus Railway, where Dilijan Station is indicated as the final operational point of this route. Meanwhile, the Meghradzor\u2013Dilijan (Meghradzor\u2013Fioletovo\u2013Dilijan) was characterized as one of the most challenging in terms of operation: a 15.3-km climb with an elevation gain of approximately 490 m required the use of double traction.<\/p>\n\n\n\n

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The Hrazdan\u2013Dilijan branch line on the schematic departmental map of the South Caucasus Railway, listed among the operational lines, including the Dilijan\u2013Meghradzor section, is marked as requiring double traction (blue arrow).<\/em><\/strong><\/p>\n\n\n\n

Irregular train service, the dead-end nature of the route, a lack of freight demand, and the need for significant investment to maintain the infrastructure\u2019s operational capability led to the suspension of operations on the line and the subsequent mothballing of the Meghradzor Tunnel. The Hrazdan\u2013Meghradzor section was used for an even longer period to serve the Meghradzor gold deposit, but it has also been abandoned in recent years.<\/p>\n\n\n\n

At the same time, maintaining profitable transport operations could theoretically have been ensured by developing passenger services, primarily focused on tourism. However, implementing this scenario would have required significant investments in modernizing the locomotive fleet; addressing the ventilation issue in the Meghradzor Tunnel, as well as constructing the Vanadzor\u2013Fioletovo line, would have turned the line into a through route.<\/p>\n\n\n\n

At the same time, the concession agreement explicitly sets forth the operator\u2019s obligations. In particular, the agreement states that \u201cthe Concessionaire must ensure the operational condition of existing railway lines and trains.\u201d Furthermore, Article 9, Paragraph 3(1) provides that:<\/p>\n\n\n\n

\u201cThe Concessionaire is obligated to return the Concession Assets to the Grantor (the Government of Armenia \u2013 S.M.<\/strong>) in a condition that allows for the operation of the railway network and the continued provision of services for at least three (3) more years without additional investments, except for routine maintenance.\u201d<\/em><\/p>\n\n\n\n

However, by 2024, according to a Factor TV investigation, 30.2 billion drams of the planned 174.6 billion drams in investments remained unspent. Given the needs for the restoration of the Hrazdan\u2013Dilijan section and other capital-intensive projects, this amount appears insufficient to meet the contract requirements by the time the concession expires. This makes the concessionaire\u2019s failure to fulfill one of its key obligations inevitable.<\/p>\n\n\n\n

The status of the Dilijan\u2013Ijevan\u2013Barkhudarlu. Despite its formal inclusion among the concession assets, it remains unclear what specific obligations the concessionaire bears regarding this segment in the absence of plans for its restoration and operation. Thus, a legal \u201cgray area\u201d is emerging, calling into question the prospects for restoring this route under the current concession model.<\/p>\n\n\n\n

While the initial phase of the concession was marked by active statements and discussions of large-scale infrastructure projects, as the limitations of their implementation became apparent, relations between the Armenian government and the South Caucasus Railway gradually deteriorated.<\/p>\n\n\n\n

One of the first manifestations of the conflict was the 2014 dispute between the South Caucasus Railway and the State Commission for the Protection of Economic Competition, in which the Armenian side accused the company of overcharging for the transportation of petroleum products and conducting sham tenders.<\/p>\n\n\n\n

After the events of 2018, the tensions intensified. In August 2018, searches were conducted at the company\u2019s offices, and the Prime Minister of Armenia announced violations amounting to approximately $60 million. In response, the Russian side denied the allegations, and Russian Deputy Minister of Transport Vladimir Tokarev stated that Russian Railways might terminate the concession agreement. Despite the legal proceedings, the conflict did not lead to a revision of the management model.<\/p>\n\n\n\n

A new phase of tension arose in December 2025, when Armenian Prime Minister Nikol Pashinyan stated the need for accelerated restoration of the Akhurik\u2013Turkish border and Yeraskh\u2013Azerbaijani border sections. It was emphasized that if the concessionaire is unable to implement these projects, the state is prepared to remove the relevant sections from the concession and finance their restoration independently (estimated cost: $10 million for the Yeraskh\u2013Azerbaijani border section and $32.4 million for the Gyumri\u2013Akhurik\u2013 the border with Turkey).<\/p>\n\n\n\n

In January 2026, the Armenian side reiterated these demands, additionally noting the need to restore the line in the direction of Ijevan. In subsequent statements, Nikol Pashinyan also noted that the Russian concession model is perceived by Armenia\u2019s international partners as a factor that reduces the investment attractiveness and competitiveness of Armenian railway routes, in particular the Yeraskh\u2013Gyumri route, compared to alternative projects such as Kars\u2013Diluju. One of the solutions considered was the possibility of transferring the concession to a third party (for example, the UAE or Kazakhstan).<\/p>\n\n\n\n

The Russian side\u2019s reaction was immediate. Sergei Shoigu, head of Russia\u2019s Security Council, stated that without the participation of a Russian company, Armenia\u2019s railway system could face collapse, citing current operational figures: approximately 500,000 passengers, 1.6 million tons of cargo, and 2,500 employees.<\/p>\n\n\n\n

It should be noted, however, that at the time the railways were transferred to a concession in 2007, key indicators were higher: the workforce numbered about 4,300 people, and transport volumes were at a higher level.<\/p>\n\n\n\n

Year<\/strong><\/td>Freight traffic, million tons<\/strong><\/td>Passengers, <\/strong>million people<\/strong><\/td><\/tr>
2007<\/strong><\/td>2<\/strong>.<\/strong>98<\/strong><\/td>0<\/strong>.<\/strong>6<\/strong><\/td><\/tr>
2008<\/td>2.75<\/td>0.7<\/td><\/tr>
2009<\/td>2.94<\/td>0.8<\/td><\/tr>
2010<\/td>3.06<\/td>0.8<\/td><\/tr>
2011<\/td>3.27<\/td>0.6<\/td><\/tr>
2012<\/td>3.46<\/td>0.6<\/td><\/tr>
2013<\/td>3.27<\/td>0.4<\/td><\/tr>
2014<\/td>3.05<\/td>0.4<\/td><\/tr>
2015<\/td>2.53<\/td>0.4<\/td><\/tr>
2016<\/td>2.61<\/td>0.4<\/td><\/tr>
2017<\/td>2.64<\/td>0.4<\/td><\/tr>
2018<\/td>2.88<\/td>0.4<\/td><\/tr>
2019<\/td>3.2<\/td>0.4<\/td><\/tr>
2020<\/td>3.2<\/td>0.3<\/td><\/tr>
2021<\/td>3.12<\/td>0.4<\/td><\/tr>
2022<\/td>3.5<\/td>0.5<\/td><\/tr>
2023<\/td>2.1<\/td>0.5<\/td><\/tr>
2024<\/td>1.42<\/td>0.6<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Table. Volume of freight and passenger traffic in Armenia in 2007 and after the transfer of the railways to the concession management of the South Caucasus Railway.<\/em><\/strong><\/p>\n\n\n\n

The concession agreement for the Armenian railways provides for specific termination mechanisms, which means there are formally sufficient legal grounds for terminating the agreement. In particular, Article 17 of the agreement stipulates that the concession agreement may be terminated before its expiration in several cases: in the event of a material breach of obligations by one of the parties, in the event of force majeure, and by mutual agreement of the parties.<\/p>\n\n\n\n

Of key importance is Article 17-5, which defines what specifically constitutes a breach by the concessionaire. Such grounds include, in particular, prolonged non-payment of concession fees, suspension of railway operations for more than 30 days, a significant decline in the quality of services provided, bankruptcy, and the transfer of rights under the agreement without the consent of the Government of Armenia.<\/p>\n\n\n\n

At the same time, the agreement establishes a fundamentally important provision: the Government of Armenia, as the grantor, has the right to terminate the agreement unilaterally at any time, regardless of the existence of breaches, subject to payment of appropriate compensation to the concessionaire. The amount of compensation depends directly on the grounds for termination.<\/p>\n\n\n\n

Thus, the agreement provides for two basic mechanisms for termination:<\/p>\n\n\n\n