Institute for War and Peace Reporting | Giving Voice, Driving Change

Russians to Take Over Major Armenian Chemicals Plant

The Nairit factory is running up massive debts just by standing idle, but opposition politicians are unhappy with Rosneft’s acquisition plan.
  • Workers at Armenia's rubber factory demanding payment of wage arrears, February 2014. (Photo: Photolure agency)
    Workers at Armenia's rubber factory demanding payment of wage arrears, February 2014. (Photo: Photolure agency)

Armenian officials are hoping that half a billion US dollars of investment from Russian state oil company Rosneft will finally restart production at the mothballed Nairit rubber factory, which was once a major supplier to the Soviet Union.

Speaking to reporters after a government meeting on March 27, Energy and Natural Resources Minister Armen Movsisyan announced that talks on the final details of the deal were near completion, and surveyors had gone into the factory to check the state of its equipment.

“The British company conducting an audit in the factory has come back with a positive assessment of the manufacturing technology currently there,” he added.

Opened in 1940, the Nairit plant in the Armenian capital Yerevan supplied synthetic rubber and other chemical products to the whole of the Soviet Union. It closed in 1989 because of concerns over pollution, but re-opened in 1992-93.

In 2006, the Armenian government sold the factory to a consortium that included Polish, United States and Russian companies, retaining a ten per cent stake. The factory’s debts continued mounting until they exceeded the value of the shares, so control reverted to the bank which had underwritten the investment.

In 2009, an explosion struck the factory and it subsequently closed.

Artak Davtyan, a member of parliament from the government’s Republican Party, says the closure of Nairit was a major blow to the national economy, and he is looking forward to its relaunch.

“Now there won’t only be jobs; one of the main foundations of our economy will function again, significantly shifting the [economic] structure… towards industry and exports,” he told IWPR.

The acquisition by Rosneft has proved controversial, and opposition politicians have questioned both the terms of the new deal and the past management of the Nairit plant.

Four opposition parties submitted a motion in parliament to set up a commission to investigate the original privatisation and the reasons why Nairit ran up such huge debts, but this was rejected by a majority of members.

The opposition is just as unhappy with the Rosneft purchase. Artsvik Minasyan, a Dashnaktsutyun parliamentarian, said experts from his party had examined the terms of the deal and concluded that it was very suspect. He said the plan was to shift Nairit’s main product from profitable chloroprene rubber to the less profitable styrene-butadiene rubber, which made no commercial sense.

In a speech in parliament, Aram Manukyan of the Armenian National Congress, alleged that the factory had been deliberately run down.

“They have found their method – weakening and undermining it, making investments and taking out debts, and then saying that since it’s bankrupt, it should be sold off at a very low price, for next to nothing,” he said.

The minister in charge, Movsisyan, dismissed claims that the factory had been allowed to decline, and accused government opponents of exploiting the issue for political gain.

“There are 2,500 people working at the factory so it’s natural that any problems there gain a certain amount of traction. But I don’t agree that this should become a political matter. It becomes political when they say the government wants to bankrupt Nairit, sack the workers and plunder the factory,” he said. “If the government wanted to bankrupt the factory, the means to do that were available three or four years ago. It could have used them and sacked all the workers with just two months’ pay.”

Mikael Melkumyan, an economist who represents another opposition party, Prosperous Armenia, in parliament said that while the factory might have a future, it was uncertain whether Rosneft would be happy to assume its debts.

Officials say it would take 512 million US dollars to get Nairit back on its feet – 146 million to pay off past debts, and 366 million for a modernisation programme. The management currently has to find one million dollars a month for its wage bill, even though staff are being paid at least a year in arrears. The factory accumulates debts of 73,000 dollars for every day it sits idle. (See Anyone Want a Factory? from last year.)

Davtyan, however, is confident that these debts can easily cleared given the potential revenues once the factory is up and running.

“I believe that if the factory starts working, all this debt will be paid off within in a few months. Nairit’s products are in demand on the world market,” he said.

Gayane Mkrtchyan is a journalist who works for ArmeniaNow.com.