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Government Under Pressure To Raise Gas Tariff


By Atom Markarian
The Armenian government faced growing pressure over the weekend from the country’s Russian-controlled natural gas distributor to drop its opposition to a major increase in the domestic gas price that has not changed since 1997.

The ArmRosGazprom company, in which Russia’s Gazprom giant holds a controlling share, submitted additional arguments to a state regulatory body explaining its desire to raise the tariff from the current $80 to $95 per thousand cubic meters.

The Commission on Natural Monopolies, which has the exclusive authority to set all utility charges in Armenia, was due to rule on ArmRosGazprom’s request at a meeting on Monday. However, the meeting was postponed after it received a 27-page report from the company which claims to be incurring substantial losses. The commission is to consider it and meet on December 20.

The commission chairman, Robert Nazarian, indicated earlier that the proposed measure is not justified and that the body will only agree to a modest tariff rise. This became even more likely after weekend televised remarks by President Robert Kocharian who said that ArmRosGazprom, which runs Armenia’s entire gas infrastructure, can move into profit without the highly unpopular remedy.

Company executives, however, argue that the existing price had been set on the assumption that Armenia will import at least 1.6 billion cubic meters of Russian natural gas each year. They complain that the overall gas consumption has steadily dropped in recent years, making the business less profitable.

The imports of gas, most of which is used by Armenian thermal power plants, totaled 1 billion cubic meters in 2002 and are unlikely to grow this year as Armenia increasingly relies on cheaper electricity generated by its hydro-electric plants.

The ArmRosGazprom spokeswoman, Shushan Sardarian, also pointed to the fact that since 1997 the Armenian dram has depreciated more than 10 percent against the U.S. dollar, the currency which it uses for buying the fuel from Gazprom.

Meanwhile, the government also appears to have abandoned plans for what would be an even more unpopular rise in electricity fees that was expected to come into force from January 1. Kocharian announced that they will remain unchanged for now, in an interview with state television largely devoted to the recent dramatic developments in Georgia and their implications for Armenia.

Armenian opposition groups that refuse to recognize Kocharian’s legitimacy welcomed the peaceful overthrow of Georgian President Eduard Shevardnadze and hint that they may launch a similar campaign of street protests this winter. Some observers believe that higher utility fees would deepen popular disaffection with the ruling regime and thereby play into the opposition’s hands.
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