“I do not think we should speak about a possible increase in gas prices with an apocalyptic mindset. Furthermore, I do not believe it would have catastrophic consequences,” Finance Minister Vahe Hovannisian told an opposition lawmaker concerned about the socioeconomic impact of such a scenario.
“I just want to remind you that last year there was also similar talk of a possible increase in the price of gas, and now there is similar talk again,” he said at a meeting in the Armenian parliament.
Economy Minister Gevorg Papoyan acknowledged, meanwhile, that a gas price hike is a real possibility. He said the Armenian government is making contingency plans for it.
Armenia imports from Russia the bulk of natural gas used by its power plants, households and some sectors of the domestic economy, paying the Gazprom monopoly $177.5 million per thousand cubic meters of the fuel. By comparison, the market-based gas price in the European Union currently exceeds $1,100 per thousand cubic meters.
Russia officially threatened to end this discount with a letter sent to Yerevan by Russian Energy Minister Sergei Tsivilev in May. It came as Russian authorities began banning imports of Armenian agricultural products and pressuring Yerevan to quickly choose between seeking to join the European Union and remaining part of a Russian-led trade bloc.
In a joint report released earlier this month, the governments of Russia, Belarus, Kazakhstan and Kyrgyzstan said the gas price for Armenia would soar by at least 69 percent in case of a suspension of the South Caucasus nation’s membership in the Eurasian Economic Union (EEU) effectively recommended by them. They said that this, coupled with a loss of Armenian exporters’ tariff-free access to the Russian market, would cause the Armenian economy to shrink by more than 15 percent.
Papoyan claimed that the economic contraction would not be so drastic even if Moscow were to quadruple the gas price.
“They made an incorrect calculation and submitted an incorrect document,” he told journalists.
Russian President Vladimir Putin and the leaders of other EEU member states are expected to discuss the report at their next summit slated for December. Prime Minister Nikol Pashinian plans to meet with Putin separately before the summit.
Russia is Armenia’s number one trading partner and export market, having accounted for 27.5 percent of its external commerce in the first half of this year. Armenian exports to Russia and the EU stood at $1.23 billion and $516 million respectively during that period.
While downplaying the cost of Armenia’s possible exit from the EEU Yerevan is keen to prevent such a development. Echoing Foreign Minister Ararat Mirzoyan’s statement made last week, Papoyan insisted that that Russia and its ex-Soviet allies have no legal grounds to suspend his country from the bloc.
“Doing such a thing would be unlawful,” he said.