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Armenian Rail Operator Accused Of Fraud


Armenia - A railway bridge in northern Lori region.
Armenia - A railway bridge in northern Lori region.

Anti-trust regulators accused on Friday a Russian-owned company running Armenia’s railway network of inflating capital investments which it claims to have made in line with a management contract signed with the Armenian government in 2007.

Artak Shaboyan, the chairman of the State Commission on the Protection of Economic Competition (SCPEC), based the allegation on a six-month inquiry conducted by the SCPEC.

The commission began investigating the network called the South Caucasus Railway (SCR) after rejecting as unjustified a fresh rise in its cargo shipment tariffs. According to Shaboyan, it found that the company owned by Russia’s state railway, RZD, has for years portrayed current expenditure on its day-to-day needs as investments.

“Those expenditures cannot be deemed investments,” Shaboyan told RFE/RL’s Armenian service (Azatutyun.am). “That means the company has been inflating the amount of its investments.”

The 2007 agreement committed RZD to investing $230 million in Armenia during the first five years of operations and another $240 million in the following years. RZD claims to have invested only $250 million so far. Its Armenian subsidiary cited 9 billion drams ($19 million) in unexpected losses when it raised tariffs late last year.

Shaboyan claimed that those losses resulted, large measure, from mismanagement, inefficiency and possible fraud. In particular, he said, the SCR has rarely held tenders for the purchase of equipment and services used by it.

“Even when the company holds tenders, very often they are mere formalities,” he said. “We have detected cases where companies offering higher prices won its tenders.”

“We have already discussed this issue with our Russian [anti-trust] colleagues and they have expressed readiness to intervene in this matter,” added Shaboyan. “They have organized meetings with senior executives of RZD.”

The SCR spokesman, Vartan Aloyan, dismissed the allegations, saying that RZD has never voiced discontent with the operations of its Armenian subsidiary. He also questioned the SCPEC’s decision to raise the matter with relevant authorities in Russia.

“If there is a law that allows a foreign agency to inspect an Armenian company, let it do that,” Aloyan told RFE/RL’s Armenian service (Azatutyun.am). “We have nothing to hide.”

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