Russian Takeover of Armenian Rail Network
Railway Station, Yerevan, Republic of Armenia © Onnik Krikorian / Oneworld Multimedia 2007
Sure to concern many already alarmed at the near monopolization of strategic areas of the economy by Russian companies, RFE/RL reports that the next asset to go will be the railways. However, as the news item says, the railway system has really suffered since independence and is usually a last resort not only for internal travel, but also for visiting neighboring countries.
Specifically this means Georgia as the railway obviously doesn’t run through Nakhichevan or to Azerbaijan proper as well as Turkey. Armenia is also not involved in a regional railway project involving Turkey, Georgia and Azerbaijan because of closed borders with the former and the unresolved conflict over Nagorno Karabakh with the latter.
The director general of Armenia’s rail network on Tuesday effectively confirmed its impending takeover by Russia’s state-run railway, a deal which will place yet another chunk of the Armenian economic infrastructure under Russian control.
The Armenian government called last year an international tender for the exclusive right to manage the struggling network for at least 30 years. Only the Russian railway and an Indian firm showed interest in the bidding, sending relevant proposals to Yerevan earlier this year.
The Indians pulled out of the tender last month, all but predetermining its outcome. Armenian media had for months claimed that the contest is a mere formality as the state-owned Armenian Railway’s handover to the Russians was decided by Presidents Vladimir Putin and Robert Kocharian in Moscow last January.
[…]
The impending deal is certain to be criticized by those government critics who believe that Russia’s growing economic presence in Armenia is turning into a stranglehold. Russian firms already dominate the Armenian energy and telecommunication sectors and are keen to acquire other industries. One of them is understood to have effectively purchased recently Armenia’s largest gold mining company from an Indian operator that fell foul of the authorities in Yerevan in January.
But according to Khrimian, more important is the fact that the new railway manager will have to invest at least $170 million in the Soviet-era network that has been operating at a fraction of its capacity ever since Armenia’s rail communication with the outside world was disrupted in 1992.
“Working in these blockade conditions, we have been unable to generate sufficient revenues to make capital investments in our train fleet and other infrastructure,” said Khrimian. “The investments will considerably improve the condition of our railway,” he added.
The full item is here, while some more shots I took at Yerevan’s central railway station in the summer are here.
Railway Station, Yerevan, Republic of Armenia © Onnik Krikorian / Oneworld Multimedia 2007
They’ll sell the assets for scrap metal and be done with it. No sensible businessman can expect to turn a profit from its operations.
Comment by nazarian — December 13, 2007 @ 8:17 pm
Funny, privatization seems to “alarm” you only when it involves Russian companies.
Comment by Armen Filadelfiatsi — December 13, 2007 @ 10:13 pm
Firstly, you’re once again wrong because I voiced concerns about the ArmenTel monopoly and sale to the Greeks in the summer of 1998. Secondly, all the main strategic assets are going only to the Russians so who else is there to complain about?
Besides, I’ve also covered alleged corruption in World Bank projects and so on. Man, you just have no idea or ability to say anything constructive and your comments remain on moderation until you can actually offer something useful. Otherwise you just attack and criticize, usually while being totally off the mark.
Until that changes, none of your comments are going to be accepted so you’re just wasting your time until you can write something interesting or, shall we say, actually close to reality. Besides, while I’m sure that this privatization will probably prove as disastrous as others, I’d like to see the railway in shape again.
Of course, with closed borders that’s hardly likely, but as with ArmenTel going to the Greeks and then the Russians, I think a country such as Armenia can hardly afford to put so many strategic assets that will determine its future growth into the hands of one country.
Especially when we know that country will use those assets to yield influence and control over Armenia. And usually, in the case of privatization, it only works when there is competition. We saw that with ArmenTel and I guess we’ll see that with this too.
When the railways were privatized in England, for example, alternative services HAD to be set up. In my opinion, that’s the only way privatization works and services improved while costs are kept low and consumers/customers are kept happy.
Comment by Onnik — December 14, 2007 @ 1:54 am
The railway and any national assets belong to people and they shouldnt be handed out /privatised without receving an agreement from its owners that is, people.
I concider this an illegal and hostile action. teh peopel have the right to claim back all teh assets that were sold out by the State to private owners.
If there was a need for privatisation only in the capacity that 51% of shares should belong the public and some % to the railroad unions that represent the staff.
Comment by Haik — December 14, 2007 @ 9:02 pm
Yeah, well, excuse me for reading “Russian Takeover” as a statement that puts the emphasis on the—Russian takeover—part. A statement more focused on privatization would have been something like, “Armenia looses yet another asset to privatization,” obviously.
Comment by Armen Filadelfiatsi — December 14, 2007 @ 9:55 pm
Haik, I am not against the idea of privatization along as there are safeguards to prevent monopolies from being formed and the environment for competition which favors the consumers (people) in terms of services and prices is in place. This is what went wrong with ArmenTel, for example, and I’m sure there are other examples too.
Armen Filadelfiatsi, when a foreign country continues to control strategic assets you say it as it is. That is, if it makes it read any better, “another strategic asset has been lost to a country that now controls most of Armenia’s strategic assets — Russia. Once again, the transfer of assets through a questionable tender process comes before Armenians go to the polls for a presidential election.”
Anyway, like I said, if this wasn’t a monopoly and if it wasn’t again seen as just handing over control of the economy to Russia, I’d feel better about it. But it is a monopoly and I’m not. On the other hand, so much is now controlled by Russia in this country that this privatization won’t change the reality. However, it is a lesson in how not to run a country.
Most other functioning countries act against monopolies which threaten the possibility for development and competition. The others don’t and the consequences are always felt. They were with ArmenTel (Greeks) and they will be with the railway too (Russians). However, as there aren’t many places for the railways to go at present, those consequences won’t be immediate, but they will be in the future, especially as the process of regional integration picks up steam.
Anyway, time will tell. For now, almost everyone commenting on this takeover here in Armenia is concerned apart from one ethnic Armenian living abroad. I think that says it all, basically. The emphasis can only be on “Russian takeover” because that’s the story. It is not Greeks, Americans, Indians or whoever else. It is the Russians.
And if sectors of the economy were given to another country raising concerns about foreign control over key strategic assets, I’d also be concerned.
Comment by Onnik — December 15, 2007 @ 11:38 am
I used to be upset that all the state assets have become the property of Russian corporations. Then I realized that maybe nobody else wants them. Having seen how the non-Russian companies were treated by the state, I am surprised that even the Russians want to do business in Armenia.
Maybe it’s a part of a larger, more sinister plan than simply trying to make a buck.
Comment by nazarian — December 15, 2007 @ 9:17 pm
Onnik, please don’t mischaracterize what I said. I never said that what you call a “Russian takeover” is not an issue. It is. Privatization most certainly is an important issue, perhaps the most important issue. It is far more important an issue than the national identity of the private owner. In today’s globalized economy, national borders and the very concept of nations are becoming more and more meaningless. Capital doesn’t have a nationality.
You see, I’d be inclined to believe your “privatization is OK as long as it doesn’t lead to monopolies” piece of faith-based politics, except there are a few little details in the way. These little details are, oh, I don’t know—globalization, international corporations, and the 21st century.
You say “most other functioning countries act against monopolies which threaten the possibility for development and competition.” How one can look at the world today and come to that preposterous conclusion is really beyond me. Remember Enron? After California’s electricity was privatized, Enron took it over, hiked up the bill 1000%, blackmailed the government with blackouts, and finally engineered a virtual coup d’etat: it hired a PR firm to create a propaganda campaign that led to the recall of the state’s governor and installment of a Hollywood actor in his place.
Yet you say states somehow act to limit corporate monopolies. Why, I just gave you an example of a corporate monopoly destroying a state! The evidence is as ubiquitous as it is undeniable. The Bush administration has been systematically replacing the heads of every single oversight agency with lobbyists that used to lobby against them. The head of the Environmental Protection Agency is the former lobbyist for the coal industry; every member of the Bush administration, itself, was at one time time in the employ of a major corporation; and Blackwater is one of many privatized, corporate armies and intelligence agencies. Blackwater is the army, privatized. I truly hope you understand what that means.
It is no exaggeration to say that corporate power has subverted the government of the United States of America, the most powerful country in the world. The US no longer functions as a democracy. First, its executive branch has been taken over by a corporate fascist, but that’s old news. What is perhaps more important is that the government legislative branch has also been subverted. Congresspeople can no longer run for office without the kind of corporate-sized funding required for campaigns. The overwhelming amount of the money they raise goes to buying airtime, corporate network airtime. Today, nobody can compete against corporate-sponsored politicians because we no longer have the Fairness Doctrine. The Fairness Doctrine stipulated that for each hour of broadcast time given to one point of view, an hour of broadcast time must be given to the opposing point of view. The FCC abolished the Fairness Doctrine in 1987; thus was born the corporate takeover of the airwaves, and thus, too, was born the careers of people like Rush Limbaugh. And with a corporatist president, corporatist career politicians, and the airwaves completely taken over by unrestrained corporate propaganda the United States—died. It was heartbreaking watching it happen and not being able to do anything about it.
And make no mistake, what has happened in the US is happening all over the world, because, like I said, capital doesn’t have a nationality. Yet you claim, “most other functioning countries act against monopolies which threaten the possibility for development and competition.” Every time I read that sentence it makes my blood boil. I think I’ve adduced enough evidence to annihilate that idea, but just in case any of its alien tentacles are still living, let me finish with the example of Wal-Mart.
When people like you think about monopolies, you have at the back of your mind the example of Rockefeller and Standard Oil. The fact of the matter is that way back then, the state still retained enough power to break up a monopoly. But just 9 years later, Carnegie won against the state and his steel monopoly remained intact. Then, in 1982, the Sherman(anti-trust) Act was used by Reagen to, guess what, privatize AT&T. Did you get that? The anti-monopoly laws that you apparently have faith in were used to create the very privatized state services that you expect them to control!
So it is that your evaluation of the world as being made up of nation-states with functioning governmental institutions is a complete and utter fantasy, which, hand in hand with your apparent obliviousness to global capital, leads to your mistaken views. And of these mistaken views, the most serious and potentially dangerous one is the idea that Armenia exists in isolation and everything would be OK if we could only find the right politician.
Comment by Armen Filadelfiatsi — December 17, 2007 @ 2:25 am
So actually what you’re doing is backing up concerns about Russian control of the economy and key assets here, Armen. It would be the same as if companies such as Enron try to monopolize other areas of the economy. As I said, I spoke out about handing the strategic telecommunications network to OTE in 1998 so it’s more than just a Russian thing — at least until Kocharian came to power and had to hand over such assets to keep in favor with Moscow.
Of course, there’s one difference, perhaps. The media and various watchdogs kept an eye on companies such as Enron while in Armenia they don’t. Indeed, anyone who speaks out is shot down although I agree with Nazarian, few actually want to invest in countries such as Armenia. But, compared to Armenia, the process of privatization works with companies such as Microsoft facing problems, and the ATT example, of course.
In England, as I said, privatization of key national assets such as the telephone network and the rail system were accompanied by the obligatory encouragement of competition. Other than that, I think it’s fair to say that countries such as Armenia are in a real mess. Either they keep assets such as the railway in such a pitiful state because of regional isolation, or officials siphon of the funds to such an extent assets are destroyed.
Or they are privatized and without competition, oversight or diversity, we have similar problems.This is the point, unless anyone has any other solutions save for keeping strategic assets under national control, but used as a private slush fund by corrupt officials, or privatizing them without competition which will not see them reach their full potential and probably cost consumers dearly.
Comment by Onnik — December 17, 2007 @ 9:38 am
Well, Onnik, you’re saying that in 1998 you spoke out about a non-Armenian company becoming the private owner of an Armenian asset that had theretofore been public.
How is that different from you speaking out about a non-Armenian company becoming the private owner of another, formerly public, Armenian asset?
There’s the rub, isn’t it?
It seems to me that if you want to refute what I’ve said, you need to point to a time when you’ve spoken out against — Armenian — privatization, and as far as I know, you have not.
Comment by Armen Filadelfiatsi — December 19, 2007 @ 1:28 pm
Where did I say it was different? You accused me of singling out the Russians, and I told you that you were wrong and pointed to an example of another privatization which created a monopoly, but this time by the Greeks.
Um, no I don’t need to do anything because you were wrong (again) in the first accusation. Besides, I won’t speak out against privatization because I am not against it. However, I am against privatization which creates monopolies, especially when not only do they lack competition, but also proper oversight mechanisms.
And it doesn’t matter whether they’re local or foreign companies doing the privatization. Monopolies are dangerous, full stop. When they’re key strategic assets that’s even more the case.
Comment by Onnik — December 19, 2007 @ 5:32 pm
My original point was that it was the Russian (or non-Armenian) part of Russian privatization that you were “alarmed” about, not the privatization part, so how was I wrong when you just fessed up to it? You tried to dodge the question, but I didn’t let you. Nice try.
Now lets get down to business. You say regulated privatization is a good thing. If this is the case, then I’m sure you wouldn’t mind giving up your nationally sponsored British health care, would you? And I’m sure you are all for privatized firefighting companies and privatized police, too, right?
Think of all the money you’ll save when the evil state isn’t extorting money from you to pay for firefighters and police. That way you wouldn’t have to pay the pesky (I’m guesstimating) 12% tax on your income. You could fully be the rugged individual that you are, pull yourself up by the bootstraps, and fight any fires that might break out in your house by your very own, privately owned — garden hose. You could live like a free man, like they do in, um, Afghanistan.
In the early 18th century, when pretty much everything except the police force truly was privately owned, every house used to have a plaque on it bearing the sign of the firefighting company that the homeowner had hired. If the house caught fire and the firefighters came out and didn’t see their company’s sign or saw another companies sign, they’d leave and that house would be burning down to the ground. But that sounds like a great idea to you, right?
I have complete confidence in the consistency of your arguments, but, at the same time, I am quite certain that you are not insane. Hence, you are probably finding yourself in a bit of bind right now. But maybe I’m wrong, so, by all means, please go ahead and tell me how in favor you indeed are of a privatized healthcare system, privatized police, and privatized firefighters.
Comment by Armen Filadelfiatsi — December 20, 2007 @ 4:44 am
Armen, you are a monotonous and tedious stalker who I no longer want disrupting my blog and you are now banned because you have no interest in engaging in discussion on key themes, but are more looking to making it personal. However, the last comment that you have made is allowed through above.
Regarding what is said in it, what to say? Firstly, your logic shows what an idiot you are plain and simple. Firstly, privatizing a key industrial asset is not the same as privatizing a service such as the police. Secondly, just because I believe in privatization does not mean I am against the State supporting other things such as healthcare or education. Even so, the consumer must have a choice.
On the other hand, I am against the putting out to tender of key health services to private companies which has occured in the U.K. and which has by and large failed due to the lack of oversight. As always, unlike many Armenians who remain polarized in their way of thinking, I am quite able to regulate my opinions and apply different approaches to different issues depending on the situation.
Indeed, as is the case in the U.K., I would instead favor a joint strategy or approach. That is, a national health service and the option of private care for those that want to take that route. Regardless, it is irrelevant to the issue at hand, and your track record so far shows just one thing. You are unable to participate in this blog without abusing others, making things personal, or manipulating what is written to achieve one or both of the first objectives.
It’s very monotonous, you’re very tedious, and I don’t have time to deal with your comments and nor will I allow you to continue to disrupt discussion between others with something more relevant to say. Basically, you’re now banned and your comments will only be scanned by this blog’s spam filter. Good riddance as you’re one of those Armenians in the Diaspora who think in terms of black and white only and are unable to see no gray.
Comment by Onnik — December 20, 2007 @ 2:02 pm
Excellent blog, Onnik. Privatization is a trend that effects us all. Thank you for this post.
I think what Armen is saying is that a contradiction occurs when one says that privatization leads to freedom of choice for the consumer, then denies that freedom of choice when it comes to vital services, such as health, firefighting, and police.
Comment by Arti — December 21, 2007 @ 3:56 pm