Russian Railways subsidiary raided in Yerevan

From midnight to 08:00 on Wednesday morning, Armenia’s State Revenue Committee raided the offices of South Caucasus Railway (SCR), a subsidiary of Russian state-owned Russian Railways, seizing documents and information. The company said authorities are probing tax evasion of ֏9.7 million ($20,000). The State Revenue Committee has yet to release details of the inquiry.

According to the company, the raid was carried out in violation of Armenian law, as law enforcement officials did not present identification documents, searched through staff’s personal belongings, and involved a special forces unit ‘with the purpose of [inducing] psychological pressure’.

In a statement, SCR stressed that it ‘works in strict conformity with the laws of the Armenian Republic’ and ‘intends to constructively cooperate with Armenian law enforcement agencies’ throughout the investigation.

Later on Wednesday, Prime Minister Nikol Pashinyan met with Sergey Valko, the General Director of SCR. According to an official press release, they discussed ‘questions concerning the activity, current state, and future plans of the company’. Vardan Aloyan, the press secretary of SCR, confirmed to Armenian news outlet Verelq that the meeting was connected to the raids.

On 16 August, State Revenue Committee head Davit Ananyan called allegations that his office was engaged in ‘tax terror’ ‘groundless’. Ananyan told reporters the SCR raid was conducted overnight because a warrant was only obtained late the day before, and officers were masked to more securely transport seized documents. He refused to comment further on the operation, citing ‘confidentiality’. On the same day — the eve of his 100th day in office — Prime Minister Nikol Pashinyan spoke extensively about his government’s achievements. His remarks did not publicly address the Revenue Committee search or his meeting with Sergey Valko.

The Russian President’s administration said that Russian President Vladimir Putin and Nikol Pashinyan spoke on the phone, ‘at the initiative of the Armenian side’, to discuss ‘several relevant topics’, including  ‘cooperation within common integrational unions, specifically within the framework of the Collective Security Treaty Organisation’. The press release did not mention the SCR raid.

Thirty-year contract

In a statement on 15 August, SCR publicly outlined its annually-increasing state taxes, citing growth from ֏1.6 billion ($3.3 million) in 2007 — before assuming management of Armenian Railways — to ֏3.9 billion ($8 million) in 2017.

South Caucasus Railway was founded as a subsidiary of Russian Railways in 2008, in response to a government-issued tender for a company to take over the state-owned Armenian Railways and modernise the country’s rail infrastructure. The contract stands for 30 years, with the possibility of 10-year renewals after the first 20 years.

South Caucasus Railway said their profits were exclusively channelled into the development of Armenia’s railway infrastructure, as ‘the ultimate goal of the company is to further integrate the Republic into the Eurasian transport network, among others, via ferry line between Kavkaz and Poti ports’.

Georgia’s Black Sea ports, including Poti, are some of the few gateways for imports and exports to and from Armenia, while its borders with Turkey and Azerbaijan are closed. Port Kavkaz, located on the Kerch Strait of Russia’s Black Sea coast near Crimea, ferries cargo freight transport to Europe via the Bulgarian port of Varna.