The Chinese railway giant poised to dislodge Russia from Armenia’s railway system12 min read
On August 24, 2026, Armenian Prime Minister Nikol Pashinyan announced that his government would soon submit a formal application for European Union membership, advancing an accession process endorsed by Armenian law the previous year. That same day, he urged Russia to sell the concession under which Russian Railways (RZhD) has controlled Armenia’s railway system since 2008 via its subsidiary, South Caucasus Railway (YuKZhD), warning that continued Russian control could exclude the country from emerging international transit networks. Five days earlier, Armenia had announced an international tender for design work on its section of the long-closed Gyumri-Kars railway to Turkey, a line completed in 1899 under tsarist rule. As Armenia seeks to remove Russia from a critical sector and restore its westward rail connection, the resulting procurement opportunities could potentially give the Chinese state-backed rolling-stock conglomerate CRRC (China Railway Rolling Stock Corporation, not to be confused with Caucasus Research Resource Centers, which uses the same acronym) its first major foothold in the South Caucasus country.
Armenia looks beyond Russia
Armenia’s dispute with Moscow centers on the strategic costs of granting a foreign state-owned company exclusive control over the country’s railway network and its implications for Armenia’s European integration. The concession, awarded under a thirty-year agreement in 2008, placed operations, management, and investment under South Caucasus Railway, a wholly owned subsidiary of Russian Railways, and runs until 2038. Pashinyan argues that the parent company’s exposure to Western sanctions deters international partners and may cause new transit corridors to bypass Armenia. Modern Russian-built electric trains already serve the Yerevan-Gyumri route, although Soviet-era rolling stock remains conspicuous in long-distance passenger and freight services; equipment age alone, therefore, does not explain Yerevan’s challenge to the concession. For a small, landlocked country whose borders with Turkey and Azerbaijan have remained closed for decades, dependence on an authoritarian foreign power for rail access sharply constrains its geopolitical autonomy.
Reopening the Gyumri-Kars railway would require Armenia and Turkey to reconnect rail systems separated politically since 1993 and technically by different track gauges. Following a joint working-group meeting in Kars in April 2026, Armenia opened an international tender for design work on its approximately twenty-one-kilometer section. Although both sides of the line were built to Russian gauge under tsarist rule, Turkey later converted its section to the 1,435-millimeter European standard, while Armenia retained the 1,520-millimeter gauge inherited by the Soviet railway system. Through traffic would, therefore, require transshipment, bogie exchange, dual-gauge track, or variable-gauge rolling stock. CRRC manufactures trains for both gauge systems and has unveiled a variable-gauge prototype for international service, making it a plausible contender for any subsequent rolling-stock procurement should the line reopen.
China’s railway push into the South Caucasus
Chinese state-owned companies have participated extensively in Georgia’s and Azerbaijan’s railway sectors but remain largely prospective in Armenia. In Georgia, the state-owned China Railway 23rd Bureau spent more than a decade modernizing the central section of Georgia’s east-west main line, including the construction of the T9 (Kvisheti-Zvare) Tunnel, the longest railway tunnel in the South Caucasus. Another state-owned entity, China Railway Container Transport (CRCT), joined railway operators in Azerbaijan, Georgia, and Kazakhstan in 2025 to coordinate container traffic along the Middle Corridor between China and Europe. Chinese interest in Armenia has produced fewer tangible results: the majority state-owned China Communications Construction Company (CCCC) was commissioned in 2013 to study a proposed 305-kilometer Armenia-Iran railroad, while the state-owned China Civil Engineering Construction Corporation (CCECC) later explored participation, but the project never advanced to construction. Armenia consequently remains the only South Caucasus country without an established Chinese presence in its railway sector. Any CRRC entry would, therefore, be especially significant.
As China expands its footprint across the railway systems of the South Caucasus, CRRC’s position in the region has grown markedly since its first major Georgian deal in 2016. That preliminary agreement envisioned a factory near Tbilisi to assemble twenty-eight electric freight locomotives. In July 2025, Tbilisi awarded a local supplier a contract for 111 CRRC cars for the city’s metro, while Georgian Railway signed an agreement in June 2026 to modernize three Chinese-built passenger trains. Azerbaijan ordered seven CRRC diesel freight locomotives in May 2025; CRRC unveiled the first in June 2026, with the batch scheduled for delivery in September. Concurrent negotiations cover another fourteen freight locomotives, while a separate agreement provides for four passenger locomotives in 2027. CRRC is also a plausible contender for Georgian Railway’s $350 million tender for forty-five electric freight locomotives, with bids due on October 30.
From German colonial factory to Chinese railway giant
The port city of Qingdao is vital for China’s infrastructure engagement with the South Caucasus and connects CRRC’s railway expansion with the region’s maritime transit networks. Although CRRC is headquartered in Beijing, CRRC Qingdao Sifang is one of its core manufacturing arms and a direct corporate descendant of the city’s historic Sifang Locomotive and Rolling Stock Factory. Beyond rail, Qingdao Port and Baku Port – a key link along the Middle Corridor – established a sister-port partnership in 2023 to cooperate on digital technology, port management, and freight development. Qingdao Port International was also listed as a subcontractor in the Chinese-led consortium selected for the construction of Georgia’s Anaklia deep-sea port in 2024, although the consortium withdrew in July 2026. The origins of Qingdao’s railway prominence lie in Sifang Factory, established under German colonial rule more than a century before China unveiled the Belt and Road Initiative.
Although Qingdao’s most iconic German colonial legacy is its eponymous pale lager, Tsingtao (the anglicization of the city’s name), Sifang Factory was no less consequential for the city’s development. German authorities established the Shantung Railway Sifang Repair Works (Syfang Hauptreparatur-Werkstätte der Schantung-Eisenbahn) in 1900, less than three years after occupying Qingdao and three years before the founding of the brewery. Located near the cargo port north of the European quarter, the factory serviced the Qingdao-Jinan railway connecting the harbor with Shandong’s more populous and resource-rich interior. Although Germany formally controlled only the Jiaozhou Bay leased territory, its railway and mining concessions extended across much of Shandong, Germany’s zone of influence in China until the outbreak of WWI. Like the southern branch of the Russian Empire’s Manchurian Railroad, which connected Harbin with the leased port of Port Arthur, the Qingdao-Jinan corridor allowed a European imperial power based at a Chinese port to penetrate a much larger hinterland.
Under CCP rule, Sifang Factory grew from one of China’s oldest rolling-stock works into a vast state-owned industrial complex at the center of Qingdao’s economy, akin to a Soviet city-forming enterprise (gradoobrazuyushchee predpriyatie). From 1949 until its core assets were reorganized as a joint-stock company in 2002, it remained wholly state-owned. At its height, the factory’s workers and their dependents accounted for a sizable share of the city’s population. Its immense electricity consumption prompted staggered weekday rest days among its constituent units to ease pressure on Qingdao’s municipal grid. The complex encompassed production plants, research institutes, offices, housing compounds, schools, kindergartens, hospitals, cinemas, hotels, banquet halls, and monuments. The surrounding railway community also included a high school for factory employees’ children, transferred to municipal control in 2002. In the late 2010s, the school’s predominantly Uyghur “Xinjiang classes” came under international scrutiny as part of a boarding program associated with forced assimilation.
Railways as an instrument of Chinese power
Decades before the global expansion of Chinese infrastructure projects under the Belt and Road Initiative, Sifang Factory played an important role in Cold War-era Chinese infrastructure diplomacy through its extensive involvement in the Tanzania-Zambia Railway (TAZARA). The factory helped design and test the railway’s rolling stock and fitted its locomotives with a dual vacuum-air braking system developed for the project. Built between 1970 and 1975 to connect landlocked Zambia with the then-Tanzanian capital and Indian Ocean port of Dar es Salaam, bypassing white-minority-ruled Rhodesia or South Africa, TAZARA was Maoist China’s largest foreign-aid project and a powerful symbol in the CCP’s anti-colonial propaganda. The project also formed part of China’s competition with the Soviet Union for ideological leadership and political influence across the decolonizing world following the Sino-Soviet Split. Sifang Factory’s contribution established an early precedent for placing its industrial capabilities in the service of China’s geopolitical ambitions abroad.
Beginning in the late 1990s, Sifang Factory and its successor companies pursued overseas contracts on a substantially broader commercial scale. Sifang Factory’s successor enterprises and other manufacturers later consolidated into CRRC produce both long-distance rolling stock and urban metro cars, allowing the conglomerate to sell to national railway systems and municipal transit authorities alike. Sifang Factory began supplying diesel multiple units to Sri Lanka in 2000 and later delivered hundreds of commuter rail cars for Buenos Aires, while another manufacturer subsequently incorporated into CRRC won a 2012 contract for the Ankara Metro. CRRC’s more recently established overseas assembly operations include a Springfield, Massachusetts, facility that assembles subway cars for the MBTA subway system in the Greater Boston area.
Sifang Factory’s overseas expansion coincided with a state-directed corporatization of China’s rolling-stock industry. In 2000, Beijing detached the industry from direct Ministry of Railways administration and divided its factories and research institutes between two corporations, with Sifang Factory assigned to one of them. Both groups later created publicly listed companies from their principal manufacturing assets before the state reunited them in 2015 as CRRC, a conglomerate spanning locomotive, intercity, and urban metro production. These changes altered legal and managerial structures while preserving state ownership and political supervision: CRRC, the listed company’s controlling shareholder, remains wholly owned by a state-owned supervisory body. CRRC’s overseas expansion has, therefore, continued under official oversight and endorsement as an instrument of national industrial policy.
How China built a railway champion
Alongside the state-led corporate restructuring, Beijing used its control over the domestic market to acquire modern railway technology by conditioning foreign access on partnerships with Chinese manufacturers and technology transfer. The party-state simultaneously acted as regulator, purchaser, financier, industrial planner, and selector of the domestic companies permitted to receive foreign technology. Procurement advanced from fully imported trains to imported kits assembled in China, locally manufactured sets built under foreign licenses, and Chinese adaptations based on the acquired systems. The resulting packages encompassed train designs, engineering drawings, manufacturing processes, components, licenses, employee training, technical assistance, and specialized expertise.
China appropriated European, Canadian, and Japanese railway technology primarily by controlling market access rather than through the Chinese-majority ownership requirements imposed in other industries. Foreign-investment regulations restricted covered categories of railway-equipment manufacturing to Chinese-foreign equity or cooperative ventures, although some prominent partnerships were divided equally between Chinese and foreign shareholders. The decisive leverage came from procurement: the Ministry of Railways controlled the national order book and required foreign bidders to partner with approved domestic manufacturers, localize production, and transfer designated technologies. Foreign participation was, therefore, contractually voluntary but structurally coercive: manufacturers could reject these terms, but often at the cost of exclusion from the Chinese market. Beijing’s intended endpoint was import substitution and eliminating technological dependence on foreign suppliers. Beijing’s technology-acquisition program succeeded because Kawasaki, Siemens, Bombardier, and Alstom competed for orders large enough to justify the risk of cultivating future rivals. Through licenses, joint ventures, training, and localized production, these companies supplied much of the technological base later consolidated within CRRC. Kawasaki presents the clearest case: after transferring production technology to Sifang Factory’s corporate successor, it disputed Chinese claims that subsequent derivatives constituted proprietary domestic technology. Bombardier publicly welcomed extensive transfer as the price of market access, whereas Siemens initially resisted Beijing’s conditions, lost the 2004 tender, and returned the following year with a lower bid and a comprehensive transfer agreement. Competition among the foreign suppliers strengthened Beijing’s bargaining position, and each company favored immediate revenue despite the long-term commercial advantages granted to its Chinese partners.
CRRC’s technological foundations are overwhelmingly foreign-derived. Chinese engineers adapted, integrated, and standardized systems acquired from multiple foreign suppliers and mastered their mass production; these achievements required substantial technical competence but were not original developments of the underlying designs. CRRC patented many of the resulting modifications and promoted the composite platforms as products of domestic innovation before using them to compete against the foreign manufacturers that had supplied the core technologies. What Beijing calls technology transfer is, therefore, a state-engineered process of extraction, absorption, recombination, and appropriation.
Trading Russian dependence for Chinese dependence?
CRRC’s overwhelmingly foreign-derived technology may be secondhand, but its trains are not necessarily second-rate. Its low bids cannot be separated from Chinese state financing, state-protected domestic scale, and political support unavailable to non-Chinese competitors. In Boston, years-late deliveries and recurring mechanical and electrical defects repeatedly removed new MBTA cars from service, while Philadelphia terminated its contract in 2024 after CRRC failed to deliver a single car seven years after the award. These failures demonstrate weaknesses in CRRC’s international delivery and quality control, but the more recent and less documented performance of CRRC’s equipment in Georgia and Azerbaijan provides insufficient indication of the quality of its South Caucasus products.
Uzbekistan’s Spanish-built Afrosiyob high-speed intercity fleet offers a regional counterexample to CRRC’s model of secondhand technology. Introduced between Tashkent and Samarkand in 2011, the Talgo 250 trains cut the 215-mile (345-kilometer) journey from three and a half hours to two before Afrosiyob services expanded to Qarshi and Bukhara. Uzbekistan Railways reaffirmed the Talgo’s continuing role in January 2026 by awarding the Spanish manufacturer a major ten-year maintenance contract covering all six trains. The Afrosiyob sets were designed for Uzbekistan’s 1,520-millimeter gauge, inherited from the Soviet Union, while the discontinued Talgo-built Strizh service between Moscow and Berlin used automatic gauge changing between the 1,520- and 1,435-millimeter systems. Talgo’s model offers Armenia a solution to the technical divide without dependence on an authoritarian power.
In pursuing its European aspirations, Armenia would not necessarily secure strategic independence by replacing Russia’s monopoly over the country’s railway system with dependence on China, a similarly authoritarian and economically more potent power. CRRC’s overwhelmingly foreign-derived technology and state-supported bids could facilitate deeper Chinese penetration into the South Caucasus. Reliance on Chinese financing, equipment, maintenance, and technical support could reproduce the structural dependence that Yerevan seeks to escape in pivoting toward European integration. Any future CRRC proposal for the Gyumri-Kars line or Armenia’s broader railway system should be assessed as a geopolitical choice over whether another authoritarian power should gain a durable foothold in the country’s critical infrastructure.
