By Atom MarkarianGazprom, Russia’s state-run natural gas monopoly, has confirmed its strong opposition to potential exports of Iranian gas through Armenian territory, arguing that it would suffer losses as a result. Its deputy chairman Aleksandr Ryazanov also revealed that the Russian giant is seeking an exclusive right to use the fuel which is expected to be delivered to Armenia within the next two years.
In an interview posted on a Russian web site on Monday, Ryazanov specifically spoke out against the possibility of pumping Iranian gas to Turkey via Armenia and Georgia. “We believe that that project is economically inexpedient and will compete with the gas delivered to Turkey through the ‘Blue Stream’,” he said, referring to a Russia-Turkey pipeline running under the Black Sea.
“Turkey has enough gas and Gazprom would not benefit from such a situation,” he added. “As for delivering [Iran] gas to power plants in Armenia, I find it right and normal.”
Gazprom is Armenia’s and Georgia’s sole gas supplier. The situation should change after the construction of the first 42-kilometer section of the Armenia-Iran gas pipeline, which got underway in November and is due to be completed by 2007. Visiting Yerevan earlier this month, Georgia’s Prime Minister Zurab Noghaideli said his country would like to receive Iranian gas through that pipeline and even re-export it to other nations in the future.
The idea of extending the Iran-Armenia pipeline to third countries has long been discussed by Tehran and Yerevan. However, the diameter of the pipeline currently under construction is smaller than was originally planned, making re-exports of Iranian gas problematic. The decision to limit its capacity is believed to have been taken under Russian pressure.
Ryazanov said that even the agreed capacity is disproportionate and should have been twice as smaller. He further claimed that the pipeline will not be cost-effective unless Gazprom and Russia’s main power utility, RAO Unified Energy Systems (UES), are allowed to acquire an Armenian power plant for generating electricity with Iranian gas.
Armenia borrowed $35 million from Iran to finance work on its section of the pipeline and is supposed to repay the loan with electricity supplies. “In our view, the agreement with Iran is quite severe because one cubic meter of gas will have to be swapped for 3 kilowatt/hours of energy,” Ryazanov said, adding that electricity generated by Armenian power plants at present is too expensive.
Ryazanov said Gazprom and UES can solve this problem by taking over and finishing the protracted construction of the Fifth Unit of the Hrazdan power plant, the biggest in Armenia. The facility remains incomplete despite absorbing $57 million loan from the European Bank for Reconstruction and Development. According to Ryazanov, the Russians are ready to invest another $70 million in it if they get the exclusive right to use the Iranian fuel. UES already owns the four other, smaller, units of the Hrazdan plant.
The Gazprom executive pointedly avoided mentioning the ongoing massive reconstruction of another Armenian thermal plant which is financed with a $140 million loan provided by the government of Japan. The reconstruction will cut by half the cost of electricity produced by the Yerevan-based plant. The Armenian government is understood to view it as the main future supplier of energy to Iran.