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The Armenian government is not subsidizing – in an open or concealed manner – an expected reduction of natural gas prices offered for the country’s households and businesses by a Russian monopolist’s local subsidiary earlier this week, Prime Minister Karen Karapetian assured the public on Thursday.

Gazprom Armenia submitted an application to the Public Services Regulatory Commission (PSRC) on Tuesday, suggesting a 5-percent decrease in tariffs for consumers in Armenia as well as offering new tariffs to low-income families and several types of businesses.

The move came days after President Serzh Sarkisian and Prime Minister Karapetian met with visiting Gazprom chief Alexey MIller to address the matter.

Karapetian, who himself served as a Gazprom executive before assuming his duties as the head of the Armenian government in September, explained that by offering lower tariffs the Russian company tries to “motivate the expansion of the market so that businesses can become profitable at the expense of the reduction of self-cost.”

Gazprom Armenia did not immediately explain in its statement at what expense it was going to reduce the tariffs, triggering speculations that it would again come “at a cost” for Armenia. In 2013, the Armenian government ceded its remaining 20-percent stake in the gas distribution network to Gazprom on account of debts accumulated over several years when, as it turned out, the government had subsidized the price for consumers.

Karapetian indicated four sources using which Gazprom Armenia can afford to lower its prices today. “The [company’s] transit agreement with Georgia ends on January 1 and there are expectations that the transit fee will be lowered. Secondly, as a result of tariff reductions Gazprom Armenia expects the expansion of the consumer market, which will compensates for the loss of margin. Thirdly, it is optimization of certain financial costs and decrease in the share of loans at Gazprom Armenia. And fourthly, in order to stabilize and expand the market the founder of Gazprom Armenia is going to take on certain financial risks,” the head of the Armenian government said.

If approved by the PSRC, the new gas tariffs are likely to become effective in Armenia already on January 1, 2017.

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