As Iran And Armenia Agree On A New Rail Link, Russia Blocks Pipeline

AS IRAN AND ARMENIA AGREE ON A NEW RAIL LINK, RUSSIA BLOCKS PIPELINE DEVELOPMENT

Asia News, Italy
Feb 6 2015

by Armen Grigoryan

Plans to build the rail link date back to 2008. Iranian Foreign
Minister pushes for cooperation with Yerevan, seeking investors for
its section of the line. Russia, which operates Armenia’s existing
railroads, does not want Iran to export gas through Armenia. The
latter’s membership in the Eurasian Economic Union hinders NATO
military bases in Georgia.

Yerevan (AsiaNews) – During a press conference in Yerevan on January
27, Iranian Minister of Foreign Affairs Mohammad Javad Zarif said
that various opportunities for bilateral economic cooperation could
potentially be beneficial, and Armenia’s membership in the Eurasian
Economic Union (EEU) could represent one such opportunity. He noted
that trilateral discussions (apparently, with the participation of
Russian representatives) concerning the construction of a railroad
connecting Armenia and Iran had been successful, and that negotiations
concerning cooperation on energy and gas supplies may also prove
fruitful. Foreign Minister Zarif also noted Iran’s readiness to
complete the hydroelectric plant project on the Arax River, while
financial issues related to the other projects could soon be resolved
by the Armenian government (Aravot.am, January 27).

The construction of a railroad connecting Armenia with Iran was
first promised by Armenian President Serzh Sargsyan in an address
to the National Assembly (parliament) in October 2008. Financing
the construction, however, was a problematic issue: while Iranian
officials confirmed the commitment to build a link connecting Iran’s
existing railroad network to the Armenian border, a considerably larger
investment would be required to carry out the construction on the
Armenian side. The estimated cost of building the Armenian section of
the railroad is about $3.2 billion, which does not include the costs
of land acquisition and customs duties on equipment. The project’s
entire cost is on a level comparable to Armenia’s annual budget.

On August 7, 2014, the Armenian government approved an initial
project. A memorandum prepared by the Ministry of Foreign Affairs
suggested that the Export-Import Bank of China could provide a loan
for about 60 percent of the construction costs, with a 3.5-percent
annual interest rate (News.am, August 8, 2014). Later, in October 2014,
Armenian Prime Minister Hovik Abrahamyan replied to a parliamentary
inquiry that the government was still looking for investors, and no
specific decision had been made yet (Tert.am, October 22, 2014). Then,
Minister of Transport and Communications Gagik Beglaryan indicated that
negotiations with some prospective investors were going on, although
without concrete results so far. He added, an agreement signed during
Deputy Transport Minister Arthur Arakelyan’s visit to Tehran provided
that Iran would invest $400 million in the construction of a railroad
link to the Armenian border (Azatutyun.am, December 11, 2014). In turn,
Victor Rebets, the manager of the Russian company operating Armenia’s
existing railroads, the South Caucasus Railroad Stock Company,
announced that his firm plans to operate the Iran-Armenia link as
well, supposedly from 2022, when construction work is expected to be
finished. However, he did not indicate whether the Russian side had
planned to make an investment in order to accomplish the construction
works (Arka.am, December 22, 2014).

On the other hand, it will be difficult to realize Minister Zarif’s
recently specified Armenian-Iranian project on natural gas supply
cooperation, even though it is estimated to cost much less than the
aforementioned railroad’s construction. While Iran has consistently
shown interest in the possibility of exporting gas to Europe via
Armenia and Georgia, Moscow has consistently used its leverage
on Yerevan to prevent Iran’s development in that direction. The
Armenian section of the Armenian-Iranian pipeline launched in 2007
is 28-inch wide, instead 56 inches, as initially planned, while the
Iranian section built specially for this connection is 56 inches
wide. The Armenian government had decided to reduce its pipeline
section’s diameter under Russian pressure, and then sold its share to
ArmRosgazprom-the company operating Armenian gas distribution networks
with 80 percent of its shares owned by Russia’s Gazprom. In December
2013, Russia persuaded Armenia to sell the remaining 20 percent of
its shares as well, and a new bilateral agreement guarantees Gazprom’s
monopoly for a further 30 years. It may also be noted that while the
deal signed in December 2013 was being discussed, Iran’s ambassador
to Armenia, Mohammad Reyisi, announced that Iran was ready to provide
cheaper gas supplies than Russia (Lragir.am, December 6, 2013).

However, the Armenian government did not consider that opportunity,
choosing instead to fulfill Moscow’s demands.

Russia has consistently stood in the way of Iranian gas transit
via Armenia, considering such an outcome a threat primarily to
Russia’s geopolitical interests. After all, as a transit country,
Armenia would obtain some more room for maneuver and become less
dependent on Russia. Contrarily, Moscow does not object to the
proposed Armenian-Iranian railroad, although it is not yet clear
whether Russia plans to invest in this transportation project
directly. Russian representatives have been saying that Armenia’s
EEU membership should provide an additional pretext for persuading
Georgia to provide transport corridors to connect Russia with Armenia,
which would increase the strategic potential of the Russian military
base in Armenia. Moscow also intends to take control of the customs
service on the Armenian-Iranian border, replacing the Armenian custom
inspectors with a “Eurasian customs service.” Additionally, Russian
sources have openly indicated that Armenia’s EEU membership, as well
as Russia’s recent agreement with Abkhazia and the planned agreement
with South Ossetia, should help to prevent the North Atlantic Treaty
Organization (NATO) from establishing military infrastructure in
Georgia-not to mention block Georgia’s deeper economic integration
with the European Union (see EDM, December 11, 2014).

In summary, the possible construction of an Armenian-Iranian railroad
is primarily an economic issue for Armenia, although the potential
benefits will be limited without having a direct connection with
Russia, as the landlocked country’s border with Turkey remains closed.

At the same time, though Russia is interested in having a railroad
connection with Iran, it has an opportunity to use a route across
Azerbaijan as an alternative. Russia’s possible contribution toward the
construction of the Iranian-Armenian railroad is bound to be connected
to Russian geopolitical interests, as Moscow plans to strengthen its
grasp on the South Caucasus.

(Courtesy of the Jamestown Foundation)

,-Russia-blocks-pipeline-development-33396.html

From: Emil Lazarian | Ararat NewsPress

http://www.asianews.it/news-en/As-Iran-and-Armenia-agree-on-a-new-rail-link

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Emil Lazarian

“I should like to see any power of the world destroy this race, this small tribe of unimportant people, whose wars have all been fought and lost, whose structures have crumbled, literature is unread, music is unheard, and prayers are no more answered. Go ahead, destroy Armenia . See if you can do it. Send them into the desert without bread or water. Burn their homes and churches. Then see if they will not laugh, sing and pray again. For when two of them meet anywhere in the world, see if they will not create a New Armenia.” - WS