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Armenian Authorities Scale Back Gas Price Hikes


Russia – A stop sign is fixed in front of the Russian Gazprom company's headquarters in Moscow, January 21, 2020

Public utility regulators rejected on Friday sizable increases in domestic prices of natural gas demanded by Armenia’s Russian-owned gas distribution network.

The Public Services Regulatory Commission (PSRC) only allowed the Gazprom Armenia network to raise its prices set for corporate consumers by an average of 4.5 percent. It said the gas price for households will not go up for now.

The network fully owned by Russia’s Gazprom requested an 11 percent cumulative rise in its retail tariffs on April 1. It argued that the cost of Russian gas supplied to Armenian consumers has remained unchanged since Gazprom raised its wholesale price for Armenia from $150 to $165 per thousand cubic meters in January 2019. Gazprom’s Armenian subsidiary has incurred major losses as a result.

Gazprom Armenia offered to slightly cut the gas price for the majority of households, which currently stands at an equivalent of $290 per thousand cubic meters. However, it demanded the scrapping of a 36 percent price discount enjoyed by low-income families.

The PSRC objected to this demand even before formally ruling on the tariff application. It also urged the gas operator to settle for a more modest rise in tariffs set for manufacturing and agricultural firms.

Gazprom Armenia’s chief executive, Hrant Tadevosian, responded by warning on June 4 that the commission could put continued supplies of Russian gas to the country at risk.

Not surprisingly, Tadevosian criticized the PSRC’s decision on Friday, saying that the commission should have raised the average tariff by at least 7.8 percent. But he did not warn of supply disruptions this time around.

Tadevosian indicated instead that his company will have to cut planned expenditures, presumably including capital investments. It pledged earlier to invest 230 billion drams ($474 million) in in the Armenian gas infrastructure over the next 10 years.

Shortly before Gazprom Armenia requested the price hikes, the Armenian government urged the Russian energy giant to cut its wholesale gas price for Armenia. It argued that global energy prices have collapsed because of the coronavirus pandemic.

Armenian Prime Minister Nikol Pashinian and Russian President Vladimir Putin discussed the matter by phone on April 6. They apparently failed to reach an agreement.

Speaking at a May 19 video conference with fellow leaders of the Eurasian Economic Union (EEU) member states, Putin rejected Armenia’s and Belarus’s calls for the Russian-led trade bloc to set uniform energy tariffs which would reduce the cost of Russian natural gas imported by them.

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