Citing economic considerations, the Armenian government decided on Thursday to use only 60 percent of a $270 million Russian loan designed to finance the ongoing modernization of the Metsamor nuclear power plant.
The plant’s sole functioning reactor went into service in 1980 and was due to be decommissioned by 2017. Armenia’s former government decided to extend the life of the 420-megawatt reactor by 10 years after failing to attract billions of dollars in funding for its ambitious plans to build a new and safer nuclear facility.
In 2015, the Russian government decided to provide Yerevan with a $270 million loan and a $30 million grant for major safety upgrades at Metsamor. The ensuing modernization process led by Russia’s Rosatom atomic energy agency was due to be completed by the end of last year. However, it fell behind schedule, preventing the full disbursement of the Russian funds.
Armenian Minister for Local Government and Infrastructures Suren Papikian put the amount of the unused credit at $107 million. Papikian said Moscow offered to extend the lending time frame by two years on the condition that the Armenian side agrees to use 80 percent of it for commissioning equipment and services from Russian companies.
Prime Minister Nikol Pashinian’s government backed Papikian’s proposal to reject the condition and finance the remaining Metsamor upgrades from the Armenian state budget. The government said it will spend 63 billion drams ($130 million) for that purpose over the next two years. The Armenian Finance Ministry will raise that money through government bond sales, it said.
“We are giving up part of that loan and going to attract funds from internal sources,” said Pashinian. “They will be attracted on undoubtedly much better terms and will give the government more leverage to increase the efficiency of the use of that loan.”
Pashinian stressed the fact that the government will now be free to select the equipment and service suppliers for Metsamor. This will “substantially” lower the cost of those supplies, he said.
The Soviet-built plant located 35 kilometers west of Yerevan generates roughly 40 percent of Armenia’s electricity. The European Union and the United State have long pressed for its closure, saying that it does not meet modern safety standards. Successive Armenian governments have sought to allay these fears.
The current authorities in Yerevan also have no plans to decommission Metsamor anytime soon. Papikian suggested in December that the nuclear facility is safe enough to remain operational until 2036.