By Elen Muradyan

Armenia may reconsider parts of a long-running railway concession with Russia after the operator reported sharp financial strains and declining performance in the Armenian network, according to a report by Radio Free Europe/Radio Liberty’s Armenian service on Thursday.

Russian Railways (RZD), which has managed Armenia’s rail system through its subsidiary South Caucasus Railway since 2008, is facing a deep financial crisis at home, with debts estimated at more than $50 billion, Reuters has reported. The company has cut spending, sought state support and considered asset sales, underscoring pressures on one of Russia’s largest state-owned enterprises.

While RZD’s broader problems may be attributed to Russia’s war-strained economy, the impact is increasingly visible in Armenia, where the concessionaire has struggled to meet investment commitments and maintain profitability.

According to RFE/RL, South Caucasus Railway recorded a sharp drop in revenues in 2024, with income falling by nearly 20% year on year. The decline affected both freight and passenger services as well as revenues linked to concession assets. Over a four-year period, the company’s tax payments to Armenia’s state budget fell by more than half, dropping from about $15.3 million in 2021 to just over $5.3 million in 2024.

Passenger transport remains a major loss-making segment. In 2024 alone, passenger revenues stood at roughly $2.7 million, while costs exceeded $11.8 million, leaving losses of around $9.2 million. Part of that shortfall was covered by Armenian government subsidies.

The financial pressures come amid renewed political focus on key rail sections linked to potential regional reopening. Last month, Prime Minister Nikol Pashinyan said Armenia expects urgent restoration work on several strategic stretches, including lines connecting to Turkey and Azerbaijan’s Nakhichevan exclave. He warned that if the Russian side is unable to carry out the required works within a reasonable timeframe, Armenia could take back those sections and finance the construction on its own.

Under the 30-year concession agreement, RZD committed to invest around $570 million in Armenia’s rail infrastructure while ownership of the assets remained with the Armenian state.

See: Armenia may reclaim rail segments from Russian concession if investment lags 

For now, Armenia’s rail network has a connection with Georgia, while the borders with Turkey and Azerbaijan remain closed and the respective segments abandoned. But as regional transport discussions intensify, the combination of RZD’s financial woes and its underinvestment in Armenia is sharpening scrutiny of whether the current concession model can meet the country’s strategic and economic needs.