Armenia’s Railways: Hindered by Geopolitics and Economic Realities

Landlocked Armenia, surrounded on two sides by unrelenting foes, has limited access to the outside world. Railways could potentially help alleviate this isolation by providing reliable outside connections for trade and passenger traffic. But Armenia’s rail network remains highly isolated due to closed borders with Turkey and Azerbaijan. The situation is exacerbated by the country’s mountainous terrain, which makes railway construction, with long and numerous tunnels and bridges, very costly.

The Rise and Fall of Armenia’s Rails

The railway reached the modern territory of Armenia in 1899, during Russian Tsarist rule, when the Tbilisi-Gyumri (then called Tiflis-Alexandropol) line was completed. The Gyumri-Yerevan line was completed by 1902. Prior to the First World War, what is now Armenia had 362 km of tracks. It more than doubled to reach 760 km by the late Soviet period, when it was fully integrated with and regularly ran trains to neighbors Georgia and Azerbaijan, and Russia’s southern regions. Remote areas in Armenia’s south, namely the towns of Meghri and Kapan, were also linked with Yerevan with rail lines running through Soviet Azerbaijan.

The conflict over Nagorno-Karabakh and the war in Abkhazia in the early 1990s disrupted regional connectivity and limited Armenia’s sole outside rail link to Georgia. Լarge parts of the rail network fell into disuse and have been effectively abandoned. The 43 km long section of the former Yerevan-Baku line running along the Araks (Aras) river through the very south of Armenia, via the Meghri area, has been completely dismantled. The dismantling of much of it was commissioned by Armenia’s Defense Ministry and carried out in 2003. The tracks were mostly sold to the Zangezur Copper Molybdenum Combine for $320,000, which later likely exported it to Iran as scrap metal.

The Hrazdan-Dilijan-Ijevan line that used to run to Azerbaijan (Aghstafa) is in a derelict state. The tracks are largely intact, but parts of it have been destroyed by landslide, in other parts overhead lines and poles have been stolen, and the stations, including in Dilijan and Ijevan, are long abandoned.

Russian Ownership and Current State

For the past 16 years, Armenia’s railways have been operated entirely by South Caucasus Railway, a subsidiary of Russia’s state-owned Russian Railways. After winning an international tender as the sole bidder, it signed a 30-year operating concession agreement with the Armenian government in February 2008. Armenia kept ownership of the rail network. The Russian company officially took over on June 1, 2008. Armenian officials defended the deal by pointing to its underutilized and financially burdened state. The Russian company paid a one-off fee of $5.5 million and committed to invest a minimum of $570 million ($400 million on infrastructure, $170 million on vehicles), with $220 million in the first five years. 

Armenia’s Infrastructure Ministry told EVN Report that by 2023 South Caucasus Railway had invested 142.5 billion drams ($352.5 million at current exchange rate) or almost 82% of the total 174.6 billion drams ($431.9 million) it has committed for the 30 year period to 2038. Furthermore, the Armenian government receives 2% of the annual revenue generated from freight services.

South Caucasus Railway currently operates the Yerevan-Gyumri, Yerevan-Armavir (Araks) and Yerevan-Yeraskh lines connecting the capital with the second largest city, and a number of towns and villages in the Ararat plain, respectively. Additionally, in the summer, it runs the Yerevan-Shorzha line for vacationers to reach Lake Sevan. The sole international line connects Yerevan with Georgia’s capital Tbilisi. From June to October, it also runs trains to the Black Sea town of Batumi.

In 2023, passenger traffic was reported at 538,000, up from 426,600 in 2019. These included 481,000 domestic passengers and 57,000 international passengers (to and from Georgia). Freight transport by rail (both domestically and with Georgia) has fluctuated greatly in recent years between a low of 2.1 million tons in 2023 and a high of 3.5 m tons in 2022. Last year only 11.4% of total transport of goods was done by rail compared to more than 20% in 2019 and 2020.

South Caucasus Railway is one of Armenia’s largest employers with around 3,000 workers (down from 4,300 in 2008). Last year, it paid $9.8 million in taxes, making it the country’s 82nd largest taxpayer, on par with FlyOne airline, the Russian VTB bank, and the tech company Picsart.

Prospects for Development

Since the turn of the century, three projects have been proposed for the revitalization of Armenia’s railways and boost regional connectivity: a short link to Yerevan’s Zvartnots international airport, a 30-km link between Vanadzor and Fioletovo to connect the two main lines, and a very costly and (geo)politically-motivated rail link to Iran.

Airport Link

Since 2011, when it formally endorsed the project, the Armenian government has been considering the construction of a short railway connection from Yerevan’s southern outskirts to the Zvartnots airport. The plan involves linking the airport’s passenger terminal to the Yerevan Metro’s Charbakh station and the airport’s freight terminal to the Karmir Blur train station. Its total length was calculated at 7.5 km, including 3.9 km of new tracks, while the remainder would make use of the existing Masis-Nurnus line. At the time of inception, the project was estimated to cost $5 million, excluding compensations for properties expected to be expropriated through eminent domain.

In May 2012 Armenia’s transport ministry, South Caucasus Railway, and Armenia International Airports CJSC (the airport operator) signed a letter of intent. The airport operator, owned by the Argentine-Armenian billionaire Eduardo Eurnekian, confirmed its interest in the project, but by late 2023 the CEO of South Caucasus Railway argued that it was not economically justified.

By 2018, the project was dead, but has been revived in recent years. In July 2021, then French ambassador Jonathan Lacote told Azatutyun that his country was interested in a rail project that would connect Yerevan with the airport, and the towns of Ejmiatsin and Armavir, situated further to the west. Transport officials discussed the project with the French Development Agency (AFD) in November 2021. The government affirmed its interest in the project in December 2023, when the Ministry of Territorial Administration and Infrastructure said in a press release after Pashinyan’s visit that an investment program has been devised, which will be discussed in the near future. The ministry told EVN Report that it is currently reviewing the project, but no longer with the French.

Fioletovo-Vanadzor

A more ambitious and costly project, developed around the same time, was to connect the country’s two main lines. Spanning around 31 km between Vanadzor and Fioletovo, in the northern region of Lori, it would join the Yerevan-Gyumri-Ayrum and Yerevan-Hrazdan-Ijevan lines and thus cut the distance from Yerevan to the Georgian border by at least 70 km. It would also create a ring inside central Armenia, connecting most major cities.

As early as 2008, Armenia’s Minister of Transport and Communication raised the prospect of its construction within the context of establishing the shortest route connecting Iran and Georgia via Armenia. In October 2010, the Armenian government set up an interagency commission to examine the feasibility of the project. In January 2011, the government listed its planning as a priority, arguing that it had an economic and strategic importance for Armenia as it would significantly reduce time and cost of moving people and cargo within Armenia and to Georgia. In the same month, the government formally endorsed the project, but then-Prime Minister Tigran Sargsyan stated that it should be built without “state guarantees” (i.e. the government committing to support it financially).

A year later, in February 2012, then-Transport Minister Manuk Vardanyan stated that the planning phase would be completed within that year. He called it the ministry’s number one priority for the year. President Serzh Sargsyan discussed the project with the president of Russian Railways and his government again listed the project among its priorities, but a month later the new Transport Minister Gagik Beglaryan referred to unsolved issues in a meeting with IMF representatives. More bad news came in December 2012, when the CEO of South Caucasus Railway said that its construction was not economically justified.

In January 2011, Vardanyan, the minister, estimated its cost at $100 million and proposed the government pay 50%, with the rest coming from South Caucasus Railway. He later offered $120 to $150 million as the estimated cost. South Caucasus Railway CEO Viktor Rebets estimated $200 to $250 million in December 2012, but increased it to $220 to $500 million a year later.

In its 2012 budget report, the government noted that an assessment by a third party did not find the project economically viable taking into account projected cargo volumes in 2020-2025, which had led to difficulties in securing funds. However, the government insisted that because of its strategic significance, it would continue to seek out potential investors jointly with South Caucasus Railway. The government again listed it as a priority in the 2013 state budget, but it was omitted from the 2014 budget, essentially killing the project.

The current administration has given some thought to the idea. Transport officials discussed the project with the French Development Agency (AFD) in November 2021. The Ministry of Territorial Administration and Infrastructure told EVN Report that talks with AFD are currently not being held. Also in 2021, the Fioletovo-Vanadzor section was mentioned within the context of a possible high-speed line between Yerevan and Tbilisi, which would bring the train time between the two capitals down from nine to three hours or less. The plan was discussed with Georgian officials by Economy Minister Vahan Kerobyan, but the project was ultimately rejected by the government in December 2022, the Economy Ministry told EVN Report.

Rail Link With Iran

A rail link with Iran was considered as early as 1992, and the idea was actively discussed in the mid-2000s. Former President Serzh Sargsyan made it a key infrastructure project of his presidency. Just months after taking office, he announced in October 2008 that “in the coming year the construction of the Iran-Armenia railroad will be launched.” In April 2009, when Armenia and Iran signed a memorandum on the project, Sargsyan noted that the “unprecedented” project, despite its cost, will be implemented. “If not this year, I believe, next year we will start with the construction of the railroad,” he assured.

In 2013, the Armenian government, South Caucasus Railway and Rasia FZE, a little-known Dubai-based investment company, signed a concession agreement for the construction of the railway, which was estimated to be $3 billion. The project was dubbed “Armenia’s Southern Railway”. Its planning and feasibility study was commissioned by Rasia and carried out by China Communications Construction Company (CCCC). With a price tag of $3.8 billion, it would run 305 km from Gagarin (near Sevan) to the Iranian border through mostly mountainous terrain. In February 2014, the government said in a statement that its construction may start in 2016 and end in 2022. It said Chinese banks were interested in the project and were ready to provide 60% of its funding. The government formally endorsed the feasibility study in August 2014.

But by late 2015, Sargsyan seemed to have given up on the rail project and tried to promote the North-South highway instead. As late as 2016, Sargsyan said it was being discussed with Iranian partners. In January 2017, the government dissolved the agency it had set up eight years earlier to oversee the implementation of the project. The Minister of Transport and Communications then insisted that the government was not abandoning the project.

Skeptics argued from the beginning that the project was purely geopolitical and not economically viable. It was also the opinion of Vladimir Yakunin, CEO of Russian Railways, who in 2015 compared it with “cutting through a window in the wall leading nowhere … to the wall of the adjacent house.” In 2017, Armenian Prime Minister Karen Karapetyan implied that it was not economically justified, and that the North-South highway project should be prioritized. In mid-2018, the transport minister in the Pashinyan government said that it was “not part of our short-term plans” and that “if we can afford it in the future we could go for it, but it is not topical now.”

The Abkhazia Hurdle

Armenia lacks a railway connection with Russia, its largest trading partner. Consequently, most trade with Russia relies on trucks traveling through Georgia, navigating the mountainous and unreliable Upper Lars checkpoint. In the Soviet period, Armenia had two railway links to Russia — the first via Tbilisi and Abkhazia and the second via Baku and Dagestan.

Reopening the 200-km long Abkhazian section, shut down in the 1990s as the region broke away from Georgia, has been periodically discussed in the last decades. There was much official talk in 2013-14, but no tangible progress was made. Armenia’s Foreign Minister Edvard Nalbandian then said that Armenia “will spare no effort” to find a solution, while President Serzh Sargsyan said, after talks with Putin, that he has “great hopes” that it will reopen and called it “immensely beneficial” for Armenia’s economy. Sargsyan discussed it with Georgian colleagues and Georgia’s Prime Minister and de facto ruler Bidzina Ivanishvili endorsed the idea. But in Yerevan, Georgia’s Defense Minister was cautious, advising not to rush.

Most recently, in early 2021, Abkhazian officials sought to capitalize on the post-war efforts by offering a link between Armenia and Russia. In June 2023, Georgian Prime Minister Irakli Garibashvili stated that the Abkhazian railway “can be restored only when the country is reunified”, denying any back-door talks. In Georgia, its reopening may be perceived as de facto recognition of Abkhazia and raise concerns about growing dependency on Russia.

Regional Unblocking

Point 9 of the November 9, 2020 trilateral declaration signed by the leaders of Armenia, Azerbaijan, and Russia that ended the war in Nagorno-Karabakh (Artsakh), calls for the unblocking of “all economic and transport connections in the region.” It referred specifically to links between Azerbaijan and its Nakhichevan (Nakhchivan) exclave via Armenia. In an interview days later, Pashinyan said that Armenia hopes to secure, among other things, a rail link to Iran via Nakhichevan within this context. 

The three leaders formally reiterated their support for unblocking when they met again in January 2021. Though the joint declaration did not provide much details, the Russian newspaper Kommersant reported that the sides had given a green light to open all roads and railways, including the Nakhichevan section that would link Armenia with Iran. The leaders also set up a working group to coordinate unblocking of communications which meets regularly. 

The November 2020 declaration entails Russian Federal Security Service (FSB) control of transport connections (railway and highway) running through southern Armenia (the Meghri area). With the increasing alignment of Russian and Azerbaijani interests, the two countries continue to push for a Russian-controlled road, or what Azerbaijan controversially calls the “Zangezur Corridor”.

Russia’s Foreign Minister Sergei Lavrov has insisted on Russian control of the route and accused Armenia of “contributing to the problem” of lack of progress on the issue. He said Armenia does not want Russian border guards there despite Pashinyan’s signature. “He wants Armenia to run it, which contradicts the agreement,” Lavrov said in January. He insisted that the route would remain under Armenia’s sovereignty despite being “supervised” by Russia.

In a January interview, Aliyev explicitly stated his demand for cargo, citizens, and vehicles to transit from mainland Azerbaijan to Nakhichevan through southern Armenia “without undergoing any inspection and customs clearance.” He reiterated his support for Russian oversight of the route. “Russian border guards would provide security and control in the 42-43 km area, and this obligation must be fulfilled.” Like Lavrov, he insisted the arrangement “does not call into question the sovereignty of any country.”

But Pashinyan maintains that the November 2020 declaration has been effectively nullified. “Our signature is there, but does anything written there exist in reality today?” he asked rhetorically in December. He was more direct in his recent remarks, when he said that the document is no longer relevant as Russia and Azerbaijan have violated the rest of the provisions related to Nagorno-Karabakh (Artsakh).

Pashinyan has repeatedly said that Armenia will only agree to Armenian control and full sovereignty of all communications passing through its territory. In an attempt to counter the joint Russian and Azerbaijani demand for a Russian-controlled corridor, Pashinyan unveiled in October 2023 his Crossroads of Peace project. His first principle is that all infrastructure, including roads and railways should “operate under the sovereignty and jurisdiction of the countries through which they pass.”

Pashinyan’s Crossroads of Peace does not call for the construction of Vanadzor-Fioletovo or a rail linking Armenia and Iran. Instead, the project sees Armenia being linked to Iran via Azerbaijan’s Nakhichevan exclave.

As the threat of an Azerbaijani attack on Armenia with the aim of coercing a corridor remains possible, sustainable peace and unblocking of railways seem distant, including with Azerbaijan’s chief ally, Turkey. Within the ongoing normalization efforts with that country, Armenia has repeatedly signaled its readiness to reopen the Gyumri-Kars railway. During earlier normalization talks in 2008, Armenia’s President Sargsyan insisted that technically speaking, the Gyumri-Kars line can be put into service “in a matter of days”. The border remains sealed, however, and with Turkey’s continued support for Azerbaijan, even a symbolic move, such as enabling land border crossing for third-country citizens, agreed upon in July 2022, has yet to become a reality.

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