By Atom Markarian and Hrach MelkumianRussia’s state-owned Gazprom monopoly announced on Thursday that it will gain control over an under-construction pipeline, which will supply Armenia with Iranian gas, in addition to a major Armenian power plant as part of a controversial gas agreement with Yerevan.
The company said that it will also get a controlling stake in Armenia’s natural gas distribution network.
The deal, which seemed unlikely as recently as a week ago, will allow Armenian consumers to avoid a massive increase in the price of Russian gas until 2009. But it will also tighten Moscow’s grip on Armenia’s energy sector.
President Robert Kocharian on Wednesday confirmed reports that a big thermal power plant located in the central town of Hrazdan will be handed over to Gazprom in return for a more modest gas price hike. But speaking to state television, he said nothing about the pipeline running from Iran.
In a written statement, Gazprom said its first 40-kilometer section, slated for completion this autumn, will handed over to Armenia’s ArmRosGazprom (ARG) gas operator. Gazprom and another Russian energy company, ITERA, own a combined 55 percent of its stock, giving Moscow effective control the Armenian gas infrastructure.
ARG will also be awarded the right to build the second, 197-kilometer section of the Iran-Armenia pipeline, said the Gazprom statement. Furthermore, it added, the Russian gas giant’s stake in ARG will be raised to a “qualitative majority” as part of the swap agreement which was formally approved by the Armenian government on Thursday.
However, Energy Minister Armen Movsisian implicitly denied the information. “The Iran-Armenia pipeline has not yet been constructed and is not yet a functioning enterprise,” he told reporters. “There are still no shares in it and it therefore can not be sold. I am stating clearly that we are only talking about the Hrazdan plant.”
A separate statement by the Armenian government said Gazprom will pay a total of $248.8 million for the Hrazdan plant and complete its protracted construction within the next two years. Almost $189 million of that will take the form of free-of-charge supplies of Russian gas to Armenia that will be carried out until the end of 2008.
According to Movsisian, that means the price of gas for Armenian households will rise by only 10 percent to 65 drams (14.4 U.S. cents) per cubic meter this month. ARG had decided to set it at 90 drams per cubic meter before the announcement of Yerevan’s agreement with Gazprom.
Gazprom is to pay the remaining $60 million of the sum in cash, according to the government statement. The bulk of it, $50 million, will be transferred to the Armenian state treasury only in 2008.
Kocharian and Movsisian emphasized the lower-than-expected price of the gas as they sought to sell the deal to the public. “This will considerably ease the burden on both the population and enterprises [using gas],” said the energy minister.
Nonetheless, the deal is bound to draw strong criticism from those politicians and analysts who feel that Russian presence in the Armenian energy sector is already disproportionately strong. Stepan Zakarian, a parliament deputy from the opposition Artarutyun alliance, called it a “serious mistake” on Thursday. “No matter how strategic our relations with Russia are, Armenia must pursue its own interests in the first instance,” he said.
Also signaling his disapproval of the deal was Tigran Torosian, the deputy parliament speaker and a senior member of Prime Minister Andranik Markarian’s Republican Party of Armenia (HHK). “In general, temporary solutions are not always the best ones,” he told RFE/RL.
Torosian also indicated that Markarian, who personally spoke out against any asset handovers to Moscow earlier, should now give a public explanation. “I think the prime minister will have an occasion to comment on this deal and say whether or not it fits into the framework of his statement,” he said.
“We cannot compensate for anything with assets,” the Armenian premier told RFE/RL on January 13. “We would thereby sort things out only for one year. That would not be a fundamental solution.”