Institute for War and Peace Reporting | Giving Voice, Driving Change

Armenia-Iran Pipeline Inches Ahead

Armenian officials hope to finalise pipeline deal with Iran in the next few months.
By Peter Magdashian

Armenia is confident work can begin this year on a much-delayed gas pipeline from Iran to meet the country's energy needs, despite the emergence of serious obstacles.


"The construction of the Iran-Armenia gas pipeline will finally begin in 2002," said Karen Karapetian, the general director of ArmRosgazprom, the Armenian gas monopoly, earlier this month.


Energy minister Armen Movsisian told IWPR on April 16 that in the next two months he hoped to sign a final document with the Iranians, which would allow work to begin and increase the participation of Turkmenistan in the scheme.


Big obstacles remain, however: Washington opposes the project and the financing has not yet been found for it. "We've made a lot of progress," Armenian foreign minister Vartan Oskanian told IWPR on April 17. "The agreements are ready and signed, the technical work is pretty well ready. What's still missing is money."


The cost of building the pipeline is estimated at around 120 million US dollars. "If we can get funding, we can begin soon," said Oskanian, who estimates the construction would take around a year and a half.


Oskanian, who himself lived in the US for many years, said Yerevan would continue to pursue good relations with Tehran, despite the "roller coaster" of US-Iranian relations. His government is looking to put together an international consortium to finance the pipeline.


Armenia currently receives its natural gas from the mainly Russian-owned firm Itera, via Georgia to the north. But the government is unhappy both at relying on a monopoly source of energy and it passing through an unstable region.


"The pipeline, from which Armenia receives Russian gas, runs through a region, where stormy political events are occurring," said Armenian energy minister Armen Movsisian. He said it had frequently been disrupted by explosions in the early 1990s, and he was concerned that that might happen again.


These worries led to negotiations with Iran, in both 1992 and 1995, on the construction of a gas pipeline from the south. Last December, Armenian president Robert Kocharian signed an accord in Teheran to begin work on the new scheme.


The agreement is for a 140 km pipeline, 100 km of which is inside Iran and 40 km of which runs inside southern Armenia. It should carry one million cubic metres of gas a year.


Gas director Karen Karapetian said the three million cubic metres which Armenia currently receives via Georgia cover its energy needs, but the new gas pipeline would provide welcome diversification. In the first years of independence Armenia suffered from acute energy shortages. Its electricity problems were only solved with the re-opening of the Metsamor nuclear power station in 1996.


For most Armenians, a permanent energy link with its most friendly neighbour, Iran, is highly desirable. "It seems to me that this gas pipeline is simply essential to Armenia, otherwise we will never feel calm," said Khachatur Gabrielian, an engineer from Gyumri. "Although the US is against the project we have to go through with it."


The US ambassador to Armenia John Ordway told the Azg newspaper last month that Washington opposed any economic cooperation with what it calls a "sponsor of terrorism". "We realise very well Armenia's difficult situation concerning energy security and we work with the government of the US to help improve this situation," the ambassador said. "However, our position is not to support any investment in construction of a pipeline coming from Iran or through Iran."


Moscow, despite its excellent relations with Tehran and Yerevan, also appears to have cooled towards the project. The Russian gas giant Gazprom, which owns a 45 per cent stake in ArmRosgazprom, has expressed no interest in financing a scheme, which would compete with its exports to Armenia.


However, Armenia is selling the pipeline as part of an attractive new south-north route for gas to reach Georgia and Ukraine. If it is built, it will be possible for gas to run from Iran directly to Ukraine's Black Sea coast. This explains the interest of the French gas giant Gaz de France and companies in Ukraine and even China.


Karepetian hopes that the new pipeline could make Armenia a gas-exporter to the wider region. Under the European Union's Inogate programme, a new gas station is being built on the Georgia-Armenia border and an underground gas storage facility is being constructed at the cost of three million euros.


If, as is expected, volumes of gas from Turkmenistan to Iran????? and Iran's own gas supplies, begin to increase significantly over the next few years, this will also make the project much more attractive to foreign investors. By 2005 energy experts expect that Iran's gas output may increase from 300 to 500 million cubic metres a day.


Levon Dayan is a freelance journalist in Yerevan. Peter Magdashian is IWPR's project coordinator in Armenia. Thomas de Waal is IWPR's Caucasus Editor.