OREANDA-NEWS. June 29, 2010. Armenia is seeking as much as USD 1 billion in loans from China to finance the construction of a railway that would link it with neighboring Iran, Transport and Communications Minister Manuk Vartanian said.

After years of discussion, the Armenian and Iranian governments formally agreed to start working on the extremely ambitious project in April 2009. They have claimed to be making steady progress towards its implementation.

However, they have yet to secure concrete sources of funding for the 470-kilometer rail link, the bulk of it passing through Armenian territory. Unofficial estimates of the project’s total cost have varied from USD 1.2 billion to USD 4 billion.

According to Vartanian, the Armenian government has been negotiating with Iran, Russia and China for that purpose. It hopes that China alone will provide more than USD 1 billion of the required funding, he said.

“Negotiations are being conducted with three states, including financial companies,” Vartanian told a news conference. “I have also talked to the Asian Development Bank (ADB), which has expressed readiness [to assist in the project] after we meet some demands.”

The ADB agreed in 2008 year to provide USD 1.5 million for feasibility studies on the project. However, the sum has still not been disbursed. Vartanian gave no reason for the delay.

Analysts and politicians critical of the Armenian government have questioned the feasibility and cost-effectiveness of the project ever since its inception. One of them, former Yerevan Mayor Vahagn Khachatrian, insisted on Monday that the project, which President Serzh Sarkisian declared a top economic priority shortly after taking office, is a political publicity stunt designed to “distract” Armenians from the main problems facing the country.

“That project will not be implemented,” Khachatrian told RFE/RL’s Armenian service. “You can’t implement it even if you have the utmost desire.”

Khachatrian, who is a senior member of the opposition Armenian National Congress (HAK), said he will strongly oppose the railway construction even if the government succeeds in borrowing massive loans comparable to Armenia’s state budget. He argued that the country’s debt burden is already close to a “dangerous threshold.”

“First of all, we are not taking the loan yet,” Manukian said, countering such arguments. “Secondly, that is going to be a fairly long project. I presume it will be a 10-year project.”

President Sarkisian sought to promote it during a visit to Germany last week. He said that the Armenia-Iran rail link as well as the unfolding expansion of Armenian highways leading to Iran could have “a truly revolutionary significance” for the wider region.