The first official visit of the Armenian President Serzh Sargsyan to Iran on April 13-14 has resulted in the establishment of closer political and economic relations between the two countries. The Armenian leader, accompanied by a large delegation of ministers, parliament members and other officials, had meetings with top Iranian leaders, including his Iranian counterpart Mahmoud Ahmadinejad, Iran’s Supreme Leader Ayatollah Ali Khamenei, Parliament Speaker Ali Larijani and Secretary of the Supreme National Security Council Saeed Jalili. The friendly relations between the two countries were emphasized many times, and, as judged by the coverage of the visit and its results in the Iranian media, Tehran sees Armenia as a friendly partner. A wide range of issues was reportedly discussed during the talks, and the positions of the sides were seemingly free of serious disaccords, including on the issues of Nagorno Karabakh and Armenia-Turkey relations.

The main outcomes of the meeting were in the economic sphere. The representatives of the two countries signed eight joint memoranda of understanding concerning different aspects of their economic cooperation negotiated earlier. The joint energy projects were the most advanced issues. They include the construction of a hydropower station on the Araxes border river, the construction of a third high-voltage power line (400 kilovolt) for supplying Iran with electricity from Armenia, and the construction of a pipeline for supplying Armenia with Iranian oil products. Another document envisages performing joint work on establishing a free trade regime, the preparatory work of which will take at least one year. If implemented, this regime will greatly benefit Armenian exporters, as Iran’s significant trade barriers will be reduced or eliminated for Armenian goods.

The project Armenia is most interested in is the railroad connecting the two countries. This line would provide Armenia with access to Iran, the Gulf region and East Asia, and would break Armenia’s reliance on the Georgian railroad network for its external communications, which, as shown by the war in August 2008, is not always safe. By signing the respective memoranda, Iran expressed its commitment to participate in the construction of this 447 km rail link (which will bypass the existing railway connecting the two countries, now blocked as it goes through the Nakhichevan exclave of Azerbaijan), as it would provide Iran with reliable access to the Black Sea region. The future of this project is less clear, however, since a study still needs to be performed on its feasibility, for which funding is expected through a US$ 1 million grant from the Asian Development Bank later this year. This railway project is nevertheless unlikely to commence before 2010, and its implementation will require five years and funding amounting to at least US$ 1,5 billion, implying a need for securing other investors to realize the project.

According to a separate memorandum, the Iranian Exports Development Bank will provide a US$400 million credit line to Armenia for these projects, and work on their implementation (the railroad exempted) may start this year. Iran is expected to invest a total of US$1 billion in Armenia in the several years to come, and Armenia will redeem these loans with supplies of electricity. Armenia's interest in launching these projects is especially high as the government sees them, among other, as an important component of its anti-crisis strategy, aimed at creating new jobs and enhancing infrastructure. Iran has also expressed its commitment to the realization of another infrastructural project, namely, the motorway connecting the city of Meghri at the Iran-Armenian border with the Georgian Black Sea port of Batumi, a project that has already gained the support of the Asian Development Bank.