Legacy of Armenia’s ‘Assets-for-Debt’ Hinders Economic Decoupling from Russia (Part Two)

Legacy of Armenia’s ‘Assets-for-Debt’ Hinders Economic Decoupling from Russia (Part Two)

Executive Summary:

• Armenian Prime Minister Nikol Pashinyan’s government has taken steps to diversify Armenia’s economic partners by withdrawing Russian companies from the telecommunications sector, nationalizing the electricity distribution network, developing renewable energy, and expanding cooperation with the European Union. 
• Gazprom Armenia’s monopoly over the natural gas supply chain, the continued railway concession agreement with South Caucasus Railway, and the Metsamor Nuclear Power Plant’s continued dependence on Russian technology and nuclear fuel show that the “Assets-for-Debt” agreement’s most enduring legacy remains firmly intact. 
• Without stable, reliable alternatives, reducing or ending Russia’s dependence, dominance, and monopoly over Armenia’s economic infrastructure could trigger significant consequences, including severe economic shocks, Russian sanctions, and pressure.

Armenia has been diversifying its economy as it moves away from Russia, both domestically and in its foreign relations. On October 13, at the Warsaw Security Forum, Armenian Foreign Minister Ararat Mirzoyan emphasized the growing relationship between Armenia and the European Union, especially in security and resilience, connectivity, energy, mobility, and sectoral integration (Armenpress, October 13). In recent years, Armenia has worked to reduce its dependence on Russia in telecommunications, electricity distribution, and transit. In telecommunications, Armenia has taken cautious steps since 2020 to reduce direct Russian ownership and economic influence. Russian–Dutch company VEON (owner of the Beeline Armenia brand) finalized the sale of its subsidiary, VEON Armenia, to the domestic company Team LLC in 2020, ending more than a decade of the group’s direct presence in Armenia’s communications market. After the transfer, Team Telecom Armenia continued operating as a domestic telecommunications operator (VEON, October 29, 2020). This process was completed in 2024 with the sale of 100 percent of the shares of MTS Armenia (the owner of the Viva-MTS brand) by the Russian company MTS to Fedilco Group Limited (MTS PJSC, January 24, 2024). As a result, two major Armenian mobile operators, previously owned by Russian companies, moved out of direct Russian control. This development does not eliminate Russian influence in Armenia’s information and communications technology sector. These changes are an important example of Armenia’s efforts to diversify ownership and reduce structural dependence in strategic economic sectors.

In the electricity sector, the Armenian government took its first practical step toward reducing Russian influence in 2025. Yerevan approved a law nationalizing the country’s electricity distribution company. President Vahagn Khachaturyan signed the law on July 9, 2025, enabling the state to take ownership of the Electric Networks of Armenia (ENA) (ARKA News Agency, July 9, 2025). This move quickly became one of the most controversial issues in Armenia’s domestic politics, as Samvel Karapetyan—a prominent opposition figure and one of the most significant challengers to Armenian Prime Minister Nikol Pashinyan in the recent June 7 parliamentary elections, owner of ENA, the Hrazdan Thermal Power Plant, and Tashir Group—had been arrested shortly before this development (TASS, June 18, 2025). Karapetyan’s continued detention led opposition groups to accuse the government of using economic instruments to exploit politics in its decision to nationalize the electricity distribution company. 

Pashinyan’s government has expanded cooperation with the European Union and other Western partners to develop the electricity sector (ARKA News Agency, July 2). These efforts have focused on electricity market reforms, developing renewable energy—particularly solar and wind power plants—and strengthening the interconnection of Armenia’s electricity grid with Georgia and Iran. In recent years, the European Union, the European Bank for Reconstruction and Development, the European Investment Bank, and other international financial institutions have provided financial and technical support for clean energy projects, energy efficiency improvements, and the modernization of Armenia’s electricity transmission infrastructure (Armen Press, July 22). 

The Armenian government has initiated studies to build a new nuclear power plant with support from the United States and some Western partners. Armenia will have no practical way to end its technical and fuel dependence on Rosatom, however, until it builds and brings online a replacement for the Metsamor Nuclear Power Plant (Mehr, July 9, 2024; ARKA News Agency, July 23). This process will likely take more than a decade. Therefore, the Metsamor Nuclear Power Plant, which supplies a significant share of Armenia’s electricity, will remain dependent on the Russian state-owned company Rosatom for nuclear fuel, technical services, and engineering support. In contrast, Karapetyan’s Tashir Group still owns Units 1 to 4 of the Hrazdan Thermal Power Plant. Gazprom Armenia continues to control the plant’s fifth unit. Ending Russia’s structural influence over Armenia’s electricity sector will remain extremely complex and difficult. 

Efforts to end Russia’s dominance and monopoly over Armenia’s railway sector are also underway, although they have not yet been implemented. On February 13, Pashinyan announced that Armenia was prepared to transfer the concession rights to operate the railway network to a country that maintained friendly relations with both Armenia and Russia. His reference to countries such as Kazakhstan, the United Arab Emirates, and Qatar indicates that the Armenian government is seeking to reduce its dependence on Russia’s exclusive management (OC-Media, February 16; see EDM, March 31). At the same time, Yerevan is trying to ensure this transition happens without confrontation with Moscow and through the gradual transfer of operating rights to a third-party actor.

Pashinyan said he had asked Russia to place the urgent reconstruction of railway sections adjacent to Azerbaijan’s Nakhchivan exclave and the Turkish border on its agenda. This request covers three important railway segments: the Yeraskh–Nakhchivan, Gyumri–Kars, and Ijevan–Gazakh railway lines (OC-Media, 16 February). The Armenian government, however, appears to support Russian participation and investment only in parts of the railway network outside the Trump Route for International Peace and Prosperity (TRIPP), which connects Azerbaijan to Nakhchivan through Armenia’s Syunik Province. Responding to a question about the possibility of Russian involvement in this project, Pashinyan emphasized that TRIPP is a joint initiative between Armenia and the United States, and that any third-party participation could be considered only through a bilateral agreement (OC-Media, February 16). 

This approach suggests that, at this stage, Pashinyan is not seeking to completely remove Russia from Armenia’s railway sector, especially since he still meets with Russian Railways officials (Armenpress, October 14). Rather, he is seeing  a form of “geographical division of responsibilities.” The Armenian government is prepared to let Russia’s role in rehabilitating old railway lines within the Crossroads of Peace project continue, while seeking to limit Russian management and influence over TRIPP and develop the route through bilateral cooperation with the United States.

The legacy of the 2002 “Assets-for-Debt” agreement remains a major obstacle to Armenia’s economic disengagement from Russia. The agreement gave Russia direct ownership of some Armenian infrastructure assets and later expanded to other critical and strategic sectors—including telecommunications, railways, gas, electricity, and nuclear energy. The Pashinyan government’s efforts to reduce economic dependence on Russia across various sectors have produced mixed results. 

In the telecommunications sector, the gradual withdrawal of major Russian companies from the Armenian market and the transfer of ownership to domestic investors have noticeably reduced Moscow’s direct influence. In the electricity sector, the development of renewable energy projects, expanded cooperation with the European Union, and efforts to diversify investment sources indicate signs of a gradual reduction in dependency, although reliance on Russian nuclear technology and fuel remains intact. 

By contrast, the gas and railway sectors remain dominated by structures established over the past two decades. Gazprom Armenia’s monopoly over the gas supply chain and the continuation of the long-term operating agreement for the railway network by South Caucasus Railway have preserved Armenia’s dependence on Russia in two vital sectors of the national economy. These arrangements continue to act as “heavy weights,” preventing Armenia from disengaging economically from Russia, particularly a potential withdrawal from the Eurasian Economic Union.