The Armenian government has formally completed the sale of its remaining 20 percent stake in Armenia’s natural gas distribution company to Gazprom, giving the Russian gas monopoly full ownership of the vital utility.
Energy and Natural Resources Minister Armen Movsisian and Gazprom Chairman Alexei Miller signed a corresponding agreement in Moscow late on Thursday.
“As a result of the deal, Gazprom will raise its share in the ArmRosGazprom (ARG) closed joint-stock company to 100 percent. The enterprise will be renamed Gazprom Armenia,” the Russian energy conglomerate said in an ensuing statement.
“This deal fully corresponds to the spirit of strategic cooperation between Russia and Armenia,” the statement quoted Miller as saying. “Gazprom has always been and remains a reliable partner of Armenia,” he added.
The deal stems from a package of Russian-Armenian energy agreements that were signed during President Vladimir Putin’s December 2 visit to Yerevan. They defined the basic terms of the share acquisition and set the price of Russian natural gas for Armenia at almost $190 million per thousand cubic meters.
The new tariff, which will be valid for the next five years, is well below international gas prices currently exceeding $300 million per thousand cubic meters. Russian officials have attributed the price discount to Armenia’s plans to join a Russian-led customs union.
The Armenian government ceded its minority share in ARG in payment for a $300 million debt to Gazprom, which it incurred as a result of secretly subsidizing the Russian gas price from 2011-2013. In return for writing off the debt, Gazprom was also granted 30-year exclusive rights in the Armenian energy market.
Armenia’s leading opposition parties have condemned these unprecedented privileges as a serious blow to national sovereignty. They tried hard to scuttle Armenian parliamentary ratification of the energy agreements with Russia last month. The pro-government majority in the National Assembly approved them with what opposition lawmakers consider serious procedural violations.
The opposition insists that the agreements are therefore null and void. The government and parliament majority leaders deny this.
The Armenian state and Gazprom gained 45 percent of ARG each when the network was founded as a Russian-Armenian joint-venture in 1997. The remaining 10 percent was given to ITERA, another Russian firm that was subsequently purchased by Gazprom.
Gazprom’s share in the Armenian gas network rose to a commanding 80 percent in 2006 as a result of a complex deal that kept Russian gas relatively cheap for Armenia and committed the Russians to making large-scale investments in the country’s energy sector.
Miller described his company’s operations in Armenia as a success. He argued that 96 percent of Armenian households currently have access to gas.
The Russian gas is used for producing over one-third of Armenia’s electricity, heating homes in winter and powering, in the liquefied or pressurized form, the majority of vehicles in the country.
Miller described the widespread use of the gas by Armenian motorists as “another important direction of our cooperation.” “We have something to learn from our colleagues,” he said in that context.