Armenian railways can be involved in the network of geopolitical combinations

The remote (for now) dispute between Yerevan and Moscow about the future administrative and legal status of the railway system of Armenia is entering a new phase. Regarding the hints made by Prime Minister Nikol Pashinyan, who was re-appointed to his post, about confiscating up to 2 billion dollars from SCR, the Russian side responds with a legal boomerang, warning of countervailing financial demands.

Thus, General Director of Russian Railways Oleg Belozerov on July 30 announced, that if they decide to unilaterally break up in Yerevan «South Caucasian Railway» 30-year concession agreement with CJSC (2008) or change its conditions separately, R:student railways have the right to expect a return on investment, that is, “… all the rights and obligations of the parties are fixed in the concession agreement, to which the Government of Armenia is also a party. From our side, we intend to firmly and from now on remain loyal to it, and if the Armenian side independently considers the possibility of terminating it or changing its conditions, we have the right to expect the return of the invested investments.

At the same time, “Russian railwaysin” the head announced the amount of investments within the framework of the concession agreement regarding “South Caucasian Railway”. “From 2008 to 2025 inclusive” Russian Railwaysin” from the means of OJSC and “South Caucasian Railway” itselfand“Investments from revenues amounted to 146 billion drams (145.77 billion drams), or about 396.3 million dollars, which is fully confirmed by documents.” In turn, the Minister of Economic Development of the Russian Federation, Maxim Reshetnikov, announced on July 31 that “South Caucasian Railway” is not a free asset of the Russian company, but an enterprise in which more than 30 billion rubles have been invested to date, and if Armenia unilaterally revises its obligations, thereby causing damage to the investor, then the Russian side will have grounds to demand compensation.

Note՝ Currently in Syunik Marz, not unknown, supported by the European Union, Turkey and Azerbaijan «Trump Corridor» under the name, the railways of Armenia (through the territory of Georgia or Turkey) Baku-Tbilisi are developed–Akhalkalak–To connect to the Kars Corridor and now reconstruct the section from Gyumri to Kars between China, Central Asia, Turkey and Europe, aso called, «Middle corridor» projects to include. At different times, concessions were announced in Yerevan to Kazakhstan, UAE or Q:atheideas to pass on. According to profile sources՝ the realization of that idea will meanin: Actual integration of Armenia’s railway network and related projects externally «careto the tyranny”, which, to put it mildly, hardly corresponds to Russia and, in particular, «Russian railways» interests.

To remind, the contract between “Russian Railways” and Armenia on concession management of railway infrastructure was signed in 2008 for a period of 30 years. The answer to the question whether it provides an unconditional return of all investments made by the concessionaire is not so obvious. The contract fee is 2 percent of gross revenue, excluding passenger fees: Last year SCR transferred 312.2 million drams (about 800 thousand US dollars) to Armenia. It seems the contract implies the possibility of claiming compensation, but its amount and legal grounds depend on the reasons for termination of the contract, possible violations committed by the parties, the amount of profit received by SCR, the volume of investments confirmed by the audit. At the same time, changing the terms of the contract itself does not imply an automatic obligation to return the investment.

Article 17 of the Concession Agreement համաձայն՝ the compensation mechanism depends onand:from different circumstances.

• which party terminates the contract,
• on what basis is it dissolved,
• has SCR properly fulfilled its obligations,
• What kind of profit has the company already made?
• What is the value of the rolling stock as of the agreed termination date of the contract?

Thus, if the Armenian government terminates the contract with the concessionaire (i.e. «South Caucasian Railwayand”) due to a violation committed, that violation must be proven in an international legal instance. The Armenian side will be obliged to pay only 50 percent of the difference between the investment in infrastructure and the profit received by the company at the time of termination of the contract. themoreover, that amount must be confirmed by an independent auditor.

In the case of rolling stock, it is not its initial value that is compensated, but the residual (actual) value at the time of termination of the contract, which is determined and approved by an independent appraiser. At the same time, “South Caucasus Railway” is obliged to pay Armenia the final amounts stipulated in the contract, including the actual costs of organizing a new concession tender-management, but not more than 2 million USD. Therefore, even then, it is not a question of compensation for all the investments made.

And if “South Caucasus Railway” terminates the contract due to a violation by the Armenian government, then in that case it is first necessary to record a specific violation of the contract, inform the other party about it and give him the opportunity and time to eliminate the violation. If the violation is not eliminated within the specified period, “South Caucasus Railway” has the right to send a notice about the termination of the contract (but not automatically terminate the contract). In this case, “South Caucasian Railway” has the right to demand:

• compensation for costs and damages caused by early termination of the contract,
• gross profit payments received during the three years preceding the termination of the contract,
• payment of the difference between the infrastructure investment and the total profit received before the termination of the contract.

For example, if “South Caucasian Railway” invested 120 billion drams in the infrastructure and received a total profit of 30 billion drams before the termination of the contract, then with the official investment component it can claim 90 billion drams instead of the initial 120 billion drams, and only in the absence of profit, this component can be equal to the entire amount of investments in the infrastructure. However, even in that case, the initial cost of the vehicle is not compensated. it is acquired at the residual value determined at the time of contract termination.

Considering these factors, it is problematic to equate the above-mentioned 145.77 billion drams “returnable” amount with the possible financial obligations of Armenia in that case. This number includes the total amount of investments made at the expense of the funds of “Russian Railways” and the own revenues of “South Caucasian Railways”, while the contract, to repeat, considers investments in infrastructure, rolling stock and other expenses differently.

The mentioned factors seem to be taken into account by the Armenian side (and its “advisors” from foreign shores) in its developing discourse on the status of the “South Caucasian Railway”. after all The initiation of the information and propaganda campaign against the “South Caucasian Railway” is most likely aimed at the transition of the Armenian railway network (especially transit) and its development projects under the direct or at least indirect control of the collective West with the participation of Turkey. By various legal and illegal means, the current authorities of Armenia are trying to aggravate the conflict, trying to worsen the relations with Russia as much as possible, following the indisputable instructions of Brussels and other external stakeholders.

Dmitry: Nefiodov

Translation by Zhanna Avetisyan

—