Anatomy of a Process: The Kaps Reservoir, Four Decades On

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The implementation of large-scale public projects continues to be a major challenge for Armenia’s government. From transportation reforms and the construction of a new metro station to the rollout of universal healthcare, major initiatives have repeatedly been marked by delays, missed deadlines and unfulfilled promises.

The latest project to test the Armenian government’s ability to deliver on major infrastructure promises is the construction of the Kaps Reservoir in Shirak. Kaps is more than a stalled reservoir. Its history traces the difficulties Armenia has faced in carrying major infrastructure projects from ambitious plans to completion.

A Decades Long Project  

In its 2021–2026 government program, the government pledged to build 15 new water reservoirs to better manage water resources and avert a future water crisis. Under its current program, it now plans to begin construction of 10 new reservoirs, with completion targeted for 2033.

Yet, in the more than three decades since independence, Armenia has completed only one new reservoir, Vedi, which itself took eight years to build and was plagued by delays. Kaps was meant to become the second.

The project, however, predates Armenia’s independence. Originally conceived during the Soviet era, the original master plan envisioned a reservoir with a total capacity of 90 million cubic meters, retained by a 73-meter-high dam, capable of irrigating more than 30,000 hectares of land.

Construction began in 1985 but was interrupted by the devastating 1988 Spitak earthquake, the economic collapse that followed and, ultimately, the dissolution of the Soviet Union. By the time construction was officially halted in 1993, the dam had reached only 20 meters of its planned 73-meter height. For decades, the unfinished structure posed flooding risks to downstream communities.

According to hydrology expert Stepan Khachatryan, the Kaps Reservoir “has been considered an important project since the Soviet period.” Construction stalled after the Spitak earthquake because of concerns over the unfinished dam’s seismic safety, as well as the severe financial constraints of the 1990s. 

Twenty years after the project was abandoned, the Kaps Reservoir was relaunched under President Serzh Sargsyan.

In August 2013, the government adopted a decision to reconstruct and complete the reservoir. The following year, Armenia signed the core loan agreement with the German development bank KfW, securing a €60 million low-interest loan to finance construction of the dam and its gravity-fed irrigation network.

A supplementary agreement signed with KfW in 2017 finalized long-term debt servicing arrangements and tax exemptions, with the Armenian government agreeing to cover the project’s internal tax and customs obligations to maintain the financing package.

That same year, authorities announced that the design work would be completed by the end of 2017, with an international tender to be launched at the beginning of 2018. The winning contractor was expected to begin construction a few months later.

Officials also revised the project’s scope. Rather than immediately building the originally envisioned 90-million-cubic-meter reservoir, construction was divided into two phases. The first phase envisioned a 25-million-cubic-meter reservoir costing approximately $60 million. In the second phase, the dam would be raised to expand capacity to 60 million cubic meters.

However, by mid-2018, Armenia had a different government, and implementation of the project was postponed for several more years.

The project was revived under Prime Minister Nikol Pashinyan’s administration. Although construction was initially expected to begin in 2021 and last for 3.5 years, the COVID-19 pandemic and the 2020 Artsakh war delayed the project by two years.

In April 2023, the Armenian government and Germany’s KfW Development Bank signed a new agreement to move the project forward. It was initially budgeted at €97.8 million, including a €68.5 million loan from KfW, with the Armenian government financing the remainder. More recent official statements have placed the total cost at between €95 million and €120 million. The construction contract was subsequently awarded to the Chinese company Shanxi Construction Investment Group Co., the sole company that bid for the tender.

Construction officially began in May 2023, more than 30 years after work on the original Soviet-era project had stopped. The launch ceremony was attended by the German and Chinese ambassadors. 

Unlike the original Soviet design, which envisioned a 90-million-cubic-meter reservoir, the revived project retained the two-phase approach introduced in 2017. The first phase aimed to construct a reservoir with a capacity of 25 million cubic meters, while the second would expand it to 60 million cubic meters.

Once the first phase was completed, the reservoir was expected to provide irrigation water to approximately 17,000 hectares through the Akhuryan and Shirak irrigation canals, convert 2,280 hectares from mechanically pumped to gravity-fed irrigation and save an estimated 1.3 million kilowatt-hours of electricity annually.

Speaking at the groundbreaking ceremony, Minister of Territorial Administration and Infrastructure Gnel Sanosyan said reservoirs were essential because much of Armenia’s water is otherwise lost before the irrigation season. He said the Kaps Reservoir would not only improve irrigation and reduce electricity consumption, but also bring new land under cultivation and create opportunities for tourism and other economic activity.

Another Failed Project

The first phase of the Kaps Reservoir was scheduled for completion in April 2026. Instead, at the end of 2025, the Armenian government unilaterally terminated its contract with the Chinese contractor after concluding that the company had fallen so far behind schedule that the lost time could no longer be recovered.

By the time the contract was canceled in December 2025, the contractor had completed less than 15% of the planned work.

According to Khachatryan, the project was exceptionally difficult from the outset because it involved completing an unfinished Soviet-era structure rather than building an entirely new dam.

“Resuming construction on a partially built dam is far more difficult than building one from scratch,” he said. “There is always the risk that, while carrying out construction work on an unfinished structure, a weakened section could fail or collapse.”

Khachatryan said the design phase therefore took years, as engineers had to account for the condition of the existing structure before construction could begin.

Although the government has consistently said the contractor failed to meet the construction schedule and fulfill its contractual obligations, it has not publicly provided a detailed explanation of why the delays became irrecoverable. Officials have not specified whether the problems stemmed from technical challenges, shortcomings on the contractor’s side, design revisions or other factors. The government’s account therefore leaves unanswered what ultimately caused the project to fall so far behind schedule.

According to Khachatryan, the contractor eventually reached a point where it no longer appeared capable of delivering the project.

“I believe suspending the work was the right decision under those circumstances. The rate at which resources were being consumed was simply not proportional to the progress being made,” he said.

Still, the work that was completed will allow a future contractor to resume construction rather than start from scratch. The contractor excavated and concreted a diversion canal to redirect the Akhuryan River around the construction site, a necessary step before work could proceed on the dam itself.

The project’s most technically challenging component, however, remains unresolved: the main construction tunnel.

“One of the biggest outstanding issues remains the construction tunnel itself, which has always been the most problematic component of the project. We don’t know what condition it will be in several years from now.”

Any future contractor will therefore inherit the completed diversion canal but will first have to assess the condition of the tunnel and determine what rehabilitation work is needed before construction of the dam can resume.

Current Situation 

Following the termination of the contract with the Chinese contractor, the government began redesigning the project in preparation for a new international tender. Officials now plan to increase the reservoir’s capacity from 25 million to 60 million cubic meters before construction resumes, rather than proceeding with the original first-phase design.

Minister of Territorial Administration and Infrastructure Davit Khudatyan described Kaps as “our largest reservoir construction project” and one of the government’s top priorities. He said a new tender would be announced once the revised design and required technical assessments are completed.

Prime Minister Nikol Pashinyan has likewise maintained that the project will be completed, arguing that delays are not unusual for large infrastructure projects and that the government fulfilled its responsibilities throughout the procurement process.

There is, however, one final piece of the Kaps story that is easy to lose amid the decades of plans, financing agreements, tenders and delays. The reservoir is not being built on an empty landscape.

The residents of the small village of Jradzor have been waiting to move for four decades. Once the Kaps Reservoir is completed, much of the village will be submerged.

In 2020, Prime Minister Nikol Pashinyan announced that, for the first time in Armenia’s modern history, an entirely new village would be built to relocate Jradzor’s residents.

Six years later, neither the new village nor the reservoir has been built. Both remain on the drawing board, leaving residents waiting for a future that has been promised for generations.

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