The government will lend $40 million to the ArmRosGazprom (ARG) national gas distribution company to support its ongoing capital investments in Armenia’s energy infrastructure.
The loan, repayable in six months at the annual interest rate of 11 percent, was approved by ministers during a cabinet meeting held in the northern Armenian city of Vanadzor on Thursday. A government statement issued after the meeting said it will be allocated from the state budget “in the fourth quarter of 2009.”
“Prime Minister Tigran Sarkisian noted with regard to the matter that ArmRosGazprom is successfully implementing its investment program and that the loan will accelerate this process,” said the statement.
ARG spokeswoman Shushan Sardarian told RFE/RL on Friday that the company controlled by Russia’s Gazprom monopoly, will mainly use the loan for financing the ongoing construction of a major thermal-power plant and renovation of natural gas pipelines connecting Armenia to Iran.
Gazprom acquired the incomplete Fifth Block of the Hrazdan plant, the largest in the country, as part of a complex 2006 agreement with the Armenian government that raised its controlling stake in ARG to 80 percent. As part of the deal, the Russian giant pledged to spend more than $200 million on finishing the protracted construction of the facility by 2011.
ARG said in a statement on Thursday that it has invested over 37 billion drams ($96 million) in the Fifth Block as well as its nationwide gas distribution network this year. The company announced the previous day that it has completed capital repairs south of Yerevan which doubled the capacity of a newly built pipeline pumping natural gas from Iran. It said Armenian can now import at least 6 million cubic meters of Iranian gas per day, a figure that roughly matches the current volume of Armenia’s gas deliveries from Russia.
The government decided to help the Gazprom subsidiary despite a serious shortfall in its budgetary revenues resulting from the economic crisis. In its monthly budget report released this week, the Armenian Finance Ministry said aggregate state revenues fell by 14 percent year on year in the first eight months of 2009.
Deputy Finance Minister Vahan Aramian said earlier that the government will likely have to cut its projected 2009 expenditures by about 4 percent despite the large-scale anti-crisis loans provided by foreign governments and financial organizations. Its draft budget for 2010 calls for even sharper spending cuts.
The loan to ARG was most probably made possible by a $500 million credit disbursed to Armenia by Russia’s government in June with the aim of mitigating the impact of the global recession. The government tapped that money to lend $44 million in emergency loans to three mining companies hit hard by the downturn.