The Armenian government has effectively acknowledged that it secretly subsidized the increased price of Russian natural gas up until Armenia’s last presidential election, running up mountains of debt to Russia as a result.
According to Energy and Natural Resources Minister Armen Movsisian, the government has cleared the debt worth at least $300 million by ceding its 20 percent stake in the ARG national gas distribution network to the Russian gas monopoly Gazprom.
The price of Russian gas imported through neighboring Georgia has been a subject of intense speculation in Armenia for the past two years. The government insisted until last May that it remains unchanged at $180 million per thousand cubic meters.
The Armenian customs service called these claims into question last year with its quarterly reports on the volume and cost of goods imported to the country. In particular, it reported in October 2012 that ARG bought 304.6 million cubic meters of Russian gas for $74.4 million in the third quarter. This translated into a wholesale gas price of roughly $244 per thousand cubic meters. The retail price for Armenian households remained unchanged, however.
This led economic analysts and opposition politicians to suggest that the gas price was unofficially raised earlier in 2012 or in 2011. They speculated that the authorities are secretly subsidizing it to prevent a popular backlash against President Serzh Sarkisian and his Republican Party (HHK) in the May 2012 parliamentary elections, the February 2013 presidential ballot and the May 2013 municipal polls in Yerevan.
ARG announced a 50 percent surge in the price just over a week after the HHK secured a disputed victory in the Yerevan vote.
Government officials and Movsisian in particular repeatedly denied this speculation. But they never clearly explained the discrepancy between their assurances and the customs data.
President Sarkisian blasted government critics in televised remarks about a year ago. “Those people do not care that Armenia now imports gas at half the prices paid by Ukraine and Moldova,” he said. “They spread lots of slander and gossips about a price hike.”
Nevertheless, Movsisian declared late on Wednesday that the government has incurred a $300 million debt to ARG and Gazprom since April 2011. He said that the Russian giant, which until now owned 80 percent of the Armenian gas network, agreed to write off half of it during lengthy negotiations with Yerevan.
The rest of the debt was repaid by the government through the transfer of its 20 percent share in ARG to Gazprom. The two sides signed a corresponding agreement during Russian President Vladimir Putin’s visit to Armenia on Monday.
Movsisian claimed that he never denied a rise in the cost of the gas purchased from Gazprom. “What I said was that [gas] has not become more expensive within Armenia,” he told reporters.
“We have never concealed anything,” insisted the minister. “A negotiating process was in progress. We always said that we will make an announcement at a certain moment. That $300 million [debt] was determined during the negotiations. It could have been much higher.”
Not surprisingly, opposition representatives accused the Sarkisian administration of lying to the public for political purposes.
“They did not dare to raise the gas price amid social tensions,” said Aram Manukian of the opposition Armenian National Congress (HAK). “If they raised it before the elections the society would have exploded. So they constantly asked the Russians not to raise the price, running up debts in the process.”
“The authorities are ready to do anything to cling to power,” Manukian told RFE/RL’s Armenian service (Azatutyun.am).
Meanwhile, Vache Gabrielian, the chief of the government staff who served as finance minister from December 2010 through May 2013, claimed on Thursday to have been unaware of financial aspects of Russian-Armenian gas dealings. Speaking to RFE/RL’s Armenian service, he referred all questions about the newly disclosed gas debt to Movsisian.
Asked whether the gas tariff was secretly subsidized because of the elections, Gabrielian said, “It’s a very interesting theory. I think you have the right to discuss it. But I personally am not inclined to believe in it.”