Monday, November 20 2017 17:58
Alina Hovhannisyan

Gagik Aghajanyan: There is no need to look for alternatives - it is necessary to work and develop actual   directions

Gagik Aghajanyan: There is no need to look for alternatives - it is necessary to work and develop actual   directions

ArmInfoFor Armenia, artly staying in the transport blockade ,  the only overland direction for the delivery of Armenian exports to the Russian market, which is Armenia's key export partner, is the pass of the Caucasian ridge -Upper  Lars checkpoint. Considering  the low level of capacity, in particular, in the winter, recently in terms of export growth, a lot of talk is being done about searching for alternative ways. From time to time, experts present their vision to the public regarding freight forwarding from Armenia to the Russian market, indicating alternative directions, in particular, repeatedly mentioning in this vein a transport section passing through the territory of Abkhazia. According to Gagik Agadzhanyan, executive director and co-founder of the freight-forwarding company of APAVEN, who has been involved in cargo transportation for 25 years, Armenia "runs ahead of the locomotive" in this matter. In the conversation with the correspondent of ArmInfo G. Aghajanyan explained this his position, trying to objectively, and not otherwise, to present the situation and ways of its solution.

 

Mr. Aghajanian, recently there has been a lot of talks  about the ferry crossing Kavzkaz-Poti" as an alternative, in which cargo transportation is carried out at reduced tariffs. Does this ferry service justify itself? In particular, is there any interest from customers? And can this crossing become a competitor to auto carriers?

 

 The matter is that after the transfer of the ferry complex under the SCRW  management the international railway ferry communication of Kavkaz-Pot port  started to operate quite flexibly, that is, there are no stiff tariffs. Having good opportunities, the company is flexible enough to solve the problem and it gives good results Of course, there are certain cargoes that it is advisable to import exclusively by this ferry crossing and then by railway to Armenia,  and in particular, it is a question of large orders. But if we focus on the needs of the medium and small  business,  there is no need for SMEs to send or receive cargoes of 60 tons at once. Such an entrepreneur needs to bring in and carry out one wagon and not more than once every two weeks or 10 days in a month. In fact, although the ferry crossing itself is competitive, it is not alternative .

 

Although, you know, for some reason we are always looking for an alternative to Upper Lars. We like very often to use this word - "alternative", although in each of the types of transport messages for freight traffic there are pluses and minuses.

 

But, in fact, quite recently the Prime Minister spoke about the alternative. And the speech, presumably, was about a transport section, which was supposed to pass through the territory of Abkhazia. What is heard today about this possible transit, are there any arrangements, progress? And how do you personally assess the feasibility of this project?

 

When the Prime Minister started talking about the alternative, to be honest, very few people understood what he meant. I have an agreement signed between Georgia and Russia on November 9, 2011 in Geneva. What is this agreement and where did his idea come from, you ask? The fact is that in 2009, Russia was in the process of joining the WTO, consent to membership in which it was necessary to get from all member states. After the Georgian-Russian conflict in 2008 in South Ossetia, the international community expected that Georgia would put a "veto" on Russia's aspirations for the WTO, and it was extremely important for Russia to join this organization. And the West also suited it. The obstacle could only be Georgia's intransigent position. Therefore, with the then Georgian President M. Saakashvili, Western leaders began to work actively. As a result of this work, the Georgian side agreed on Russia, but on the condition that Georgian goods will go unhindered to the Russian market. But the question is: "How?" The fact is that Upper Lars was never perceived by normal transport companies as an economic road through which cargo can be carried. Too many risks, too much seasonal instability. But along the sea in Abkhazia you can travel all year round: around the clock, safely, without any restrictions, always warm, the road does not close, high throughput. That is, in terms of risks and throughput, it can not be compared to the Upper Lars. Naturally, the question arose, but how can this be done? It is clear that to recognize Abkhazia as a territorially-state unit through which territory it is possible to transport cargoes, Georgia would never agree. Then there was the idea of creating a transport corridor. In this agreement, there is not a single mention of Abkhazia. The whole idea was precisely in the creation of this corridor. Therefore, when I read in our press about the "Abkhaz road" I feel uneasy, there is no such thing!

 

 

This Agreement, which I am talking about, contains the following: "We, Georgia and Russia agree that there will be a transport corridor between us through a third party". A third party is determined by the operator of these shipments. In this case, participation in the project of an international Swiss company SGS was implied.

 

That is, the cargo reaches a certain point, say, in Samtredia. In this city the Swiss company was supposed to take the cargo under its control and hand it over to the Russian side, say, already in Sochi. That is, here we are talking about Russia, Georgia and the third operator - SGS, and Abkhazia does not appear there. As soon as we say "Abkhazia", the Georgians answer: "we are not there." And they can be understood. In a word, a mechanism was developed, quite original and working. And this could be fully realized.

 

But we hurried and did not take into account that this project - the corridor had many opponents. Here, the Armenian side had to work very intensively with the Russian Federation, so that she still kept her word. And the corridor did not work just because, having received membership in the WTO, the Russian side froze this project. At the same time, the Russian media wrote a lot that the talks allegedly could not have been successful, since the Georgian side raised the issue of the territorial integrity of Georgia. I declare to you responsibly that there was no such thing. It's all a lie! It was just necessary to transfer the arrows to Georgia.

 

Thus, becoming a member of  WTO, Russia put the project under the cloth and all about it was successfully forgotten. But Armenia, as an interested party, needed not only to remember, but also actively promote it. After all, it was not even about expensive rail service, but only about the automobile. So, the parties approached the project as closely as possible, but "thanks," including our lack of participation, forgot about it. And we, who are in the semi-block condition, had to do everything possible to achieve the implementation of the project and thereby cut another, much more stable, window to the North. Yes, on the one hand, Russia is our strategic partner and ally, and on the other - Georgia is our kind and closest neighbor. After all, from an economic point of view, the better our neighbor lives, the better for us and, conversely. In a word, we could not cope with this most important task.

 

What is your opinion on the negotiations between Georgia and Iran on the construction of a transport corridor between the Persian Gulf and the Black Sea through Armenia. Do you have any data on the implementation of this project?

When discussions were held in Iran about the construction of this transport corridor, headed by the Prime Minister, I was in the delegation and was present at the talks. He also had the opportunity to communicate with the Iranian side, with Kazakh colleagues on the supply of goods between the countries of the EEMP and Iran.

 

As a result, nothing new could be discovered. We carried out such transportations. They are real. But everything depends on the price. Yes, there is a possibility from Aktau to deliver a container to Anzali, say, ferries, and from there already by car - to Yerevan. But when you look at how competitive it is with the traditional scheme, it turns out that this is times more expensive. Here the situation is as follows: as an alternative in the case of an emergency, this path can be considered and used. But today it is irrelevant, because there are no such goods. As for the interest of the Iranian side to find a direct outlet to the Black Sea via Armenia - yes, there is such interest. I'll tell you more - we have signed contracts for the carriage of certain goods just this way. As there are specific cargoes, the customers of which do not wish to import them through the territory of Turkey. That is, in comparison with the direction of Iran - Turkey - Europe, the  Iran - Armenia - Georgia - Europe  is preferable. So, it just needs to be used. We have a great interest in using Armenia as a transit country between Russia and Iran. Moreover, there is such an experience. To date, carried out specific transportation. Yes, these are small volumes so far. But in this case we are competing with the existing Azerbaijani line, when the goods from Iran come to Azerbaijan and then to Russia. In the case of transportation of goods through us, the cargo from Iran is sent to Armenia, then to Georgia and only then to Russia. And here the key role is played exclusively by the tariff policy. Earlier it was generally impossible for a number of reasons. In particular, because of the transit legislation of our country. And since the EAEU legislation is working now, new opportunities for work in this direction have been opened. Very pleased with the fact that the entrepreneurs of Armenia are establishing work between such two large markets, earning money and paying taxes. Relatively speaking, there would be more such cargoes and everything would be fine. We methodically began to work in this direction. But our neighbors made appropriate decisions. For example, Iranian transport in Azerbaijan is no longer subject to road tax since 2017. That is, Azerbaijan provided a full carde blanche, if only this road was more attractive. And this is a serious competitive bid. In the end, and we should take appropriate measures. And, unfortunately, Iranian motor transport is heavily taxed by road tax. At transit transportation per unit of cargo, the tax is about $ 350. This is a very high price, which must be radically revised. In this direction we take an active position and lobby both in the government and in the Ministry of Transport the issue of revision of road and customs duties and fees. But so far nothing has been done, although the prime minister understands exactly what situation we are in. I have every reason to believe that in the near future we will have positive changes in this issue.

 

And what about supplies to the Russian market? What role did membership play in the EEMP?

 

New realities and a new political component of the EAEC led to the fact that economic ties with Russia are growing and becoming more relevant for us. Therefore, for our part, we began to develop this direction. Working on the territory of Russia, our company opened warehouses in Vladikavkaz, in particular, delivering a large-scale cargo, for example, timber, reinforcement, grain, aluminum. According to the old scheme, the cargo was delivered to Novorossiysk, then it was reloaded into a container, after which it landed on a ship. Due to all this, the container sailed to Poti, as a rule,  for 10-12 days  Then they loaded them onto the cars, delivered to Yerevan. In connection with the new economic realities, we have created a new logistics chain. Wagons aluminum goes to Vladikavkaz, there it is reloaded into motor vehicles and delivered immediately to the plant. First, we reduced time, and, secondly, costs. In particular, with one ton of financial costs decreased by $ 10-15. Considering that the plant receives up to 3 thousand tons per month, it can be said about a significant reduction in costs. The customs legislation of the EAEC also made it possible to simplify the process of cargo transportation. Machines today are more profitable, they do not stand idle, they pay faster than themselves, and, accordingly, the business develops better.

 

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According to the National Statistical Service of Armenia, the volume of cargo transportation in Armenia in January-September 2017 increased by 40.7% to 19 940.8 thousand tons by the same period of the previous year. Of these, 16,700.9 thousand tons (83.7% of the total) accounted for road transport, which increased by 48.5% year-on-year. According to statistical data, rail freight traffic for the reporting period increased by 4.4% - to 1 976.8 thousand tons. Air transportation also increased - by 48.7% - to 17.1 thousand tons. The main pipeline supplied 1,246 thousand tons of natural gas, which is 22.1% more than the same period last year. Freight turnover increased by 17.2% - up to 3,023.4 million tons / km.

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Taking into account the intensification of economic ties, the tax legislation has been changed, within which business entities are not subject to double VAT. These simplified schemes certainly give their results. In view of the fact that there is a large Armenian diaspora in Russia, there is a need for small-sized cargo transportation. And today, on average, a week two cars are loaded from our warehouse in Moscow, and consolidated cargoes are delivered to Armenia. The medium and small business of Armenia actively use this new service. The need to buy tons of equipment or raw materials has already disappeared and to freeze money for a long period. These are the needs that have emerged today, and we react accordingly.

 

And what about the Kazakh colleagues? Judging by export volumes - cargo transportation in this direction is not so active. Here membership in the EAEU does not play a significant role in the organization of supply chains?

 

In fact, in Central Asia, we have a rather complex scheme for the delivery of goods. To sustain the transport component can the goods, the cost of which is high. Therefore, Armenian cognac, jewelry products, etc. go there. Well, take the mineral water there. Can you? Who will buy mineral water, the cost of which will be several times higher than the prices of world brands. Yes, the transport component to Kazakhstan is really expensive. Only absolutely, as you can see, this is not due to the lack of sea. Delivery of goods to Kazakhstan is objectively expensive.

 

We spoke with  Kazakh and Iranian side at the level of the railway chiefs, their deputies, Mr. Valko (the director general of the SCR - ed.) Was also present. There are some proposals related to Iran. But as practice shows, at present it is very difficult to organize the delivery of goods in the direction of Armenia - Kazakhstan. Our desire is not enough. Until certain infrastructure is developed - roads, railroads, etc., this will not work. At least for today, I do not see any opportunities for activating work with Kazakhstan.

 

And, nevertheless, how much increased freight traffic, given the fact of increased economic ties?

 

If earlier our businessmen imported goods from European markets, today we work more with Russia. In fact, the export quantity of cargoes increased slightly due to the growth of the mining industry. Our mining plants, which for some time were almost idle due to falling prices for raw materials, are already giving a certain significant amount. In this respect, the mining industry in Armenia has taken a very serious approach, and as a freight forwarding company, we see these obvious improvements.

 

Given your tremendous experience in the freight industry, what trends have you noticed in recent years? In your opinion, how much is the transport sphere in Armenia today?

 

 For 25 years of work, I noticed one regularity - comparing prices in the context of 5 years, 10, 15, etc. - everything has risen in price. But when you look at the transport sphere - prices fell a multiple. In the early 2000s, the cost of transporting one container from Yerevan to Moscow cost $ 4.5 thousand, today it can be done for $ 2 thousand. That is, everything is becoming more expensive - and the transport component is falling, which is due to very serious competition in Armenia's transport sector, and in the same Russia, Georgia. The sphere is certainly growing. Well, in the end, if we look at the situation ten years ago in Armenia, probably there was not a single car that could work on international flights and meet the necessary standards. And today we have hundreds of such cars. I'm not talking about the railway, which is developing, and today it looks absolutely different in everything. Many believe that SCR is a stiff structure, but it is not. SCR began to respond flexibly to the needs. They want to work and are able. Today, a large number of vehicles already compete with many directions of the railway. Ultimately, this is beneficial for consumers, the state, and the economy.   

 

And what about the situation with air cargo transportation against the backdrop of the flexibility of rail transport? 

 

The expectation that the policy of the open sky will bring some dividends to us and the market will be saturated with air carriers, that prices will fall sharply - were justified only partially, but exclusively in the direction of Russia. Unfortunately, not everything is so good with European destinations. Almost the largest airlines - Czech, British, Italian, etc., who previously worked in Armenia - eventually left. Naturally, the main reason is the price of local service. In order to be objective in my assessments, I met several times with representatives of large airlines who wanted to work in Armenia. I heard one very interesting proposal: "We are ready to work in Armenia, and we do not ask for exclusive prices and conditions. But we present a list of the services of the 10 largest airports in the world - Skipl, Zurich, Charles de Gaulle, Frankfurt and see that the average prices for services here are lower than in Armenia. If you offer at least an average figure by European standards, we will come to Armenia. But you have enough inflated prices. " And this, I believe, is quite a serious argument.

 

In general, the air freight market mirrors the situation in the economy. There are no stable cargo transportations. They are single, and as orders are received. Basically, this is a small amount of small-sized cargo carried by air carriers engaged in passenger transportation. That is, there is no great need for air cargo transportation in Armenia. Therefore, the market did not take place and for a long time will not be able to take place, I think.

 

 

In Armenia, almost everything is transported by railway, and by highways. There are specific loads, but in a quantitative sense they are so insignificant that they do not play any role in the pricing of products and goods. Ultimately, here the role is played by those bulk goods that are transported by land vehicles. Then do not forget, we use Georgian ports very seriously, and in part, thanks to the Iranian port of Bandar Abbas, we were able to cover the whole world. For our company there is no such thing as "unattainable zones", the goods are delivered and brought from anywhere in the world.

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APAVEN Company was founded in 1993. The purpose of the company was to arrange the delivery of humanitarian goods to Armenia. At first, the company had to face a number of difficulties: the poor quality of communication with neighboring countries, the scarcity of telecommunications opportunities, the unformed customs and lack of specialists in this field. However, all this was offset by the willingness to help the country and the personal ties of the company's founders in neighboring countries, in particular, in Georgia. At the moment, APAVEN is a large forwarding company with full and advanced technical equipment, with its large client and partner base. The company currently has a central office in Yerevan, representative offices in Tbilisi, Poti, Istanbul, Novorossiysk, in addition its own auto enterprises in Tbilisi, Yerevan, a container terminal in Yerevan, with its storage facilities, customs guard. Warehouses are also located in Moscow, Vladikavkaz. The main focus of work - container, auto- and rail transportation, the provision of warehousing services, customs brokerage services. In addition, there is an agent system covering 40 countries, which makes it possible to carry cargo almost all over the world.

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And one more thing I want to emphasize is that our society should begin to react normally to the fact that Armenia does not have access to the sea. This is not a tragedy, absolutely. The lack of access to the sea still does not solve anything. In this case it is necessary to be a member of the convention concerning the inland states and have access to the sea, which we have in the territory of Georgia. Yes, we pay for the service, but we would in any case pay for the services rendered and it does not matter whose sea it is, because you are not restricted either at the entrance to it or when leaving. There are relevant contracts, contracts, there is a sufficient number of vehicles. That is, our state is working in this regard quite successfully. And we - freight forwarders - use these ports, no one interferes with us. It is a wrong choice  to justify any lack of talent with the absence of the sea.

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