Armenia will struggle to gain substantial economic benefits after joining the Russian-led Customs Union unless it restores its rail links with the outside world, according to a regional development bank mostly financed by Russia.
In a recent report, the Eurasian Development Bank (EDB) said that while membership of the union is potentially good for the Armenian economy its positive effects hinge on reducing the high cost of shipping goods to and from the landlocked country. It singled out the need to re-launch a railway that used to connect Armenia to Russia via Georgia.
The railway passing through Abkhazia has not been operational ever since the start of a bloody war in the breakaway republic in 1992. Georgia’s new political leadership expressed readiness last year to restore cargo and passenger traffic through the transport link. But with Russian-Georgian relations still far from being normalized, there are no indications yet that this will happen anytime soon.
The EDB report also stressed the importance of building a railway running from Armenia to Iran. The two neighboring states have long been discussing ways of implementing the expensive project that would cost them at least $1.5 billion. The project is unlikely to get off the drawing board in the coming years.
“Without a solution to the transport problem, Armenia’s membership in the Customs Union and the Common Economic Space cannot produce maximum positive results for the Republic of Armenia and the integrated troika: Russia, Belarus and Kazakhstan,” concluded the report.
The EDB, which is headquartered in the Kazakh city of Almaty, thus appeared to acknowledge that the absence of a common border between Armenia and any of the union’s three member states is a serious hindrance to their economic integration. Armenian officials and Prime Minister Tigran Sarkisian repeatedly emphasized that fact when they spoke out against joining the Russian-dominated bloc before a dramatic policy U-turn announced by President Serzh Sarkisian in September.
The EDB was founded by Russia and Kazakhstan in 2006 to promote closer economic ties among ex-Soviet states. The Russian government contributed almost two-thirds of its charter capital currently exceeding $1.5 billion.