Armenia May Hand Gas Monopoly to Russians

Opposition politicians in Armenia are furious that the government is considering handing over its remaining stake in the natural gas monopoly to the Russian corporation Gazprom. 

The share transfer is meant to secure concessions on the higher gas price now charged by ArmRusGazprom, a joint venture in which Gazprom holds an 80 per cent stake.

The opposition warns that the deal will cede all control of energy supplies to Russia, and is an ill-considered move by a government that failed to anticipated the price rise.

News of the share giveaway came from Armenian energy minister Armen Movsisyan, who spoke to RFE/RL on June 17 after meeting Gazprom’s chief executive Alexei Miller in Moscow.

“We have discussed handing the shares to Gazprom. We will of course find a proportionate, proper way to obtain something from them in return,” the minister said.

Movsisyan had earlier said that Armenia was asking Gazprom to grant a 30 per cent discount on the gas it supplied.

Speaking on June 28, Gazprom spokesman Sergei Kupriyanov confirmed that in exchange, the Russian gas supplier would consider cutting the prices it charged Armenia.

Retail gas price increases coming into force on July 7 mean that consumers are now paying 156 drams, 40 US cents, per cubic metre, up from 132 drams. That is far lower than the 221 drams Gazprom is charging, as the Armenian government is softening the blow by subsidising the retail price.

Because many power stations are fuelled by gas, electricity prices have gone up as well, and the increase is predicted to affect consumer prices across the economy. (See Gas Equals Power in Russian-Armenian Relations.)

Khosrov Harutyunyan, who belongs to the governing Republican Party and sits on parliament’s budget committee, insisted that the government had taken steps to reduce the impact on consumers both by subsidising gas prices and by raising the minimum wage.

“You have to acknowledge that,” he said. “Of course these steps aren’t enough; one can always demand more. However, the government is taking steps that can be implemented effectively,” he said.

Harutyunyan downplayed the possible loss of the government’s remaining stake in ArmRosGazprom, saying, “If 80 per cent of the shares already belong to Gazprom, you must agree that this 20 per cent doesn’t play an important role,” he said.

Opposition politicians accused the government of doing nothing to prepare for the price rises even though it had known they were coming for the past two years.

“The government loves to talk about a diversified economy and about alternative energy, but we are losing everything,” Vahagn Khachatryan, a parliamentarian from the Armenian National Congress. “The whole gas saga can be seen as the collapse of government.”

Artsvik Minasyan of the Dashnaktsutyun party said the country was becoming ever more reliant on Russia for its energy supplies.

“The government is not exploiting the potential of alternative energy sources, nor is it ensuring a diversification of the gas market. We could be using Iranian gas, but the government sees the problems associated with that as insurmountable,” he said.

Harutyunyan agreed that alternative energy might offer solutions. He said that part of the share transfer to Gazprom must included a promise not to raise prices again for the next five to seven years, giving the government a window to look for other energy sources like hydroelectric, solar and geothermal power.

He said hydroelectric schemes alone could potentially deliver 22 billion kilowatt hours a year, whereas at the moment they were contributing under a fifth of total domestic electricity production, which stands at eight billion kilowatt hours annually. The rest is generated by gas-fired and nuclear power plants, both running on imported fuel.

ArmRosGazprom owns the pipeline from Iran as well as the one coming from Russia via Georgia.

Minasyan argues that Armenia could make more use of a contract with Iran to supply gas for the Yerevan power station. Actual imports from Iran only amount to a third of the volume envisaged in the contract.

Hayk Balanyan, an energy expert at Yerevan’s Institute for Geopolitics and Geoeconomics, said that while the Iranian pipeline could partly offset Armenia’s increasing reliance on Russia-supplied gas, it could not replace it. For one thing, the pipeline did not have enough capacity, and for another, Iran appeared to have promised far more gas than it was able to deliver.

“You get the impression that the situation isn’t transparent. It isn’t clear what’s going on there,” he said.

Balanyan concluded, “People need to obtain real gas at accessible, sensible prices. Gas that doesn’t exist only on paper, ant that doesn’t come at prices that make it more sensible to go out and chop down a tree.” The reference is to the extensive logging for firewood that accompanied past energy shortages.

Movsisyan has indicated that a decision on the ArmRosGazprom share transfer is likely to be finalised by the end of this year.

Marianna Ghahramanyan works for Armnews TV.