According to the World Bank, Armenian Railways was in dramatic need of major investment, including the replacement of rolling stock, rehabilitation of the main line between Yerevan and the Georgian border, renewal of electrification, and bridge reconstruction.

[1] At present the only preexisting rail connection between Armenia and Iran is the line which passes through the autonomous region of Nakhchivan, an exclave of Azerbaijan.

In 2007, the government of Armenia conducted a tender process for the modernization and operation of Armenian Railways, with the intention of awarding a concession in 2008.

Rasia FZE announced its appointment of China Communications Construction Company as the "lead member of the development consortium" for the project and the commencement of the feasibility study.

Having reached this key milestone, Rasia FZE moved to secure essential regional cooperation for the financing, construction and operation stages of the project.

The feasibility study results indicated that the Southern Armenia Railway would cost approximately US$3.5 billion to construct, have a length of 305 kilometers from Gagarin to Agarak, and provide a base operating capacity of 25 million tons per annum.

The Southern Armenia Railway would establish a major commodities transit corridor between Europe and the Persian Gulf region, based on traffic volume forecasts of 18.3 million tons per annum.

At completion of railway construction and commencement of operations, transport costs and times for the region are expected to improve substantially, fostering greater regional trade and economic growth with extraordinary direct benefits for the Armenian economy including an alleviation of the economic pressures caused by the illegal [8] border blockade against Armenia by Turkey and Azerbaijan.