Armenia Energy Crisis

Armenia's energy sector survived the tough post-Soviet years but is now running out of steam

Armenia Energy Crisis

Armenia's energy sector survived the tough post-Soviet years but is now running out of steam

Scan recent press headlines in Yerevan and you will notice that Armenia's supposedly successful energy sector is not doing as well as you were led to believe.


The collapse of common markets following the dissolution of the Soviet Union in 1991 brought to a standstill entire sectors of the Armenian economy, but not the country's energy producers who emerged successfully from crisis.


But now, workers' salaries are not being paid - unheard of over the past 20 years when the government was fully aware and appreciative of the strategic importance of the sector.


On June 22, workers at the Razdanski thermo-power plant wrote an open letter to Prime Minister Andranik Markarian, threatening industrial action if their five-month-old arrears were not cleared.


The employees could not understand why they weren't receiving their salaries when the electricity bill collection rates for Armenia are around 90 per cent. Energy Minister Karen Galustryan offered an explanation - the unpaid wages were due to outstanding debts to international donors, he said.


He added the problem was further compounded by Armenia's debt to Russia, a 54 million US dollar loan used to buy nuclear fuel and ensure better safety standards at Razdanski. Finance and economy minister Vardan Kharchatyan said the loan "squeezes us more than all other debts together".


Analysts say Russia is using its monopoly on gas and nuclear fuel supplies to Armenia to bolster its political influence in the country. For, although Yerevan's debt appears miniscule compared to what other CIS countries owe Moscow, Armenia has faced intensified pressure during the past year to pay up.


Political observer Stepan Grigoryan, a member of the Armat think-tank, says although Russia's influence in the region is on the wane, it can never be written off, especially when it comes to tightening the economic noose.


This explains, for instance, Moscow's active participation in recent talks in Moscow on the 140 km Iran-Armenia gas pipeline - an inter-governmental project estimated to cost 120 million US dollars.


Signed in 1992, and expanded in 1995, details of the project still remain inexplicably shrouded in secrecy. Russian, French and Belgian companies have expressed interest in building the pipeline, but no one has given the go-ahead and Yerevan itself complains of being kept in the dark by the Russians and the Iranians.


It appears both sides are discussing possible contractors, but no agreement has been announced. And, as if further complication were needed, the media is giving contradictory reports on the talks.


Iran's state radio said last week that Russian giant Gazprom and energy company Itera were likely to participate in building the pipeline. But Gazprom chairman Rem Vrakhirev denied this, saying they still preferred Black Sea and Eastern European routes.


The pipeline is of vital importance to Armenia, whose population has, for several years now, been forced to rely on electricity - four times more expensive than gas.


The European Union has lent its support to the project, especially as it urges Yerevan to close its nuclear power station on safety grounds. The European Commission wanted the plant decommissioned by 2004, but Armenian officials say that date has now been postponed.


Armenian energy bosses say the grid must be privatised for the energy sector to function properly. However, a government tender failed to attract any interest and a new one is to take place later this year. Iranian, Russian and Western European companies are likely to take part.


Susanna Petrosyan writes for the Noyan Topan news agency in Yerevan


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