Who is responsible for Nairit devastation?

Read on the website Vestnik Kavkaza

A former Soviet chemical giant – the factory for the production of chloroprene rubber 'Nairit', where more than 2 thousand people worked until recently, has become a serious economic and social problem for Armenia. As a result of almost five years of incompetent business management of the British company Rhinovile Property (RP), which owned a 90% stake (the government owned the remaining 10%) technological, industrial and financial problems were added to huge salary, electricity and gas arrears.

According to the Minister of Energy and Natural Resources, Yervand Zakaryan, the RP company, which exploited the plant from 2006 to 2010, has debts of 126 billion drams (according to the current exchange rate of AMD 477.5 per dollar it's about $263 million). Its debt to the CIS Interstate Bank amounted to 79 billion drams, 5.4 billion drams in salaries, about 10 billion drams to the state budget, and the rest are debts to the Yerevan Thermal Power Plant, the Electric Networks of Armenia company (ENA) and Gazprom Armenia. According to the Minister, the reason for such a huge debt is that the company has implemented a chloroprene rubber below its cost.

The debt to the CIS Interstate Bank deserves special attention. In 2006, this bank opened a credit line of $70 million for the RP, which the company did not close. In January 2014 the Moscow Arbitration Court upheld the claim of the bank for the recovery of 90% of the shares for its debts. As a result of long negotiations of the Armenian Government with the bank, it refused to receive liabilities in favor of the government. In the near future the government will take legal ownership of the Nairit assets.

However, there are no answers to key questions – who, when and why was the decision to sell products below its cost? Why did the government, which should have been monitoring the activities of the British company, allow it to be done?

It turns out that the owners of the company were producing and selling rubber, but instead of making a profit, they suffered losses and debts? The owners of the company in 2010 managed to leave the company somehow and disappear with such a huge debt. Why has the government, which using the mouth of the Minister of Energy says that the further sale of rubber below its cost is suicide, still done nothing and kept silent about what is happening in the factory?

The Armenian press has repeatedly pointed to the presence of a specific corruption scheme between the RP and the former Prime Minister Tigran Sargsyan. In the winter of 2014 the parliamentary opposition accused Sargsyan and his brother, who headed Nairit in 2006-2010, of deliberately bankrupting the factory.

In 2011 the leader of the Liberal Democratic Party Harutyun Arakelyan wrote in an open letter to the Prosecutor General and the head of the National Security Service about a suspicious transaction between the Government and an RP company registered offshore. The politician named Tigran Sargsyan as one of the main initiators and responsible persons. Harutyun Arakelyan was later forced to leave Armenia because of persecution from the authorities, and Armenian society has not received an explanation about the allegations of theft which Arakelyan levelled at the former prime minister and his brother.

Today there are two versions about the future of the plant. Some experts believe that the government will close the company even after the promises to restore the factory and to find investors. The supporters of this version justify their point of view by the results of a study commissioned by experts of the World Bank. The experts noted that they didn't see any possibility of the exploitation of Nairit and advised that the plant be liquidated. The exploitation of Nairit requires $210-350 million, while production costs will be higher than world prices because of high prices for gas and electricity. It is interesting that after naming the main suppliers of rubber to the world market – Japan and Germany – the authors forget that the price of gas in these countries is much higher than the discounted price for Russian gas supplied to Armenia ...

The supporters of the second version are claiming that the state will not allow the closure of the plant. It is proposed to develop a special law for Nairit, providing big tax exemptions for potential investors. The head of the parliamentary commission for the economy, Vardan Ayvazyan, assured that the parliament is ready to prepare and approve a bill on serious tax exemptions for Nairit.

It is possible that the loss of interest in the plant by the Russian company Rosneft, which once expressed the desire to invest in the company, became a serious signal to the government, which realized how difficult it is to find an investor for this plundered company.

However, cheerful statements by government members about the fate of the plant do not inspire confidence, because the authorities have not responded to many questions related to the activities of the company and, more importantly, it's still unclear whether they willl bear responsibility for their actions, which have ruined Nairit.