Armenia explores Iran gas supplies as officials respond to Russia price hike

Armenia explores Iran gas supplies as officials respond to Russia price hike
Meghri, located by Armenia’s border with Iran, is home to a new special economic zone which Yerevan hopes will herald far bigger things to come where business with the small country’s big neighbour is concerned.
By bne IntelliNews January 8, 2019

Armenia remains in discussions on the potential for gas deliveries from Iran, Armenia’s Acting Prime Minister Nikol Pashinian told reporters on January 7 as Armenians digested news that Russia has pushed up the price of gas it sells to their country by 10%.

Pashinian’s comments appear to be a move to place some pressure on Russia not to go ahead with the politically painful price hike. Talks over the gas price were seen as key in assessing evolving relations between the new post-revolution government in Yerevan and Moscow, the small, impoverished nation’s big strategic partner. Prior to the announcement of the increase, the Armenian government had several times said it was aiming to have the gas price reduced.

"The issue of Iranian gas deliveries is always on the agenda. We will keep discussing this matter until we find a practical and advantageous solution," Pashinian said, according to Tass.

He added that Yerevan would maintain negotiations with Moscow over the Russian gas price.

"We continue the negotiations and will do our best to defend the interests of our country," he added.

Under the price increase announcement, in 2019 Russian state gas giant Gazprom will sell gas to Armenia at $165 per thousand cubic metres. The previous price was $150 per thousand cubic metres.

Armenia made bid for price cut
The announcement was made by Gazprom following a December 31 meeting between its chairman, Alexei Miller, and Armenian Deputy Prime Minister Mher Grigorian. Garegin Baghramyan, Armenia’s minister of energy and natural resources, said as late as December 27 that "Of course, we are holding talks on reducing the tariff, but I am unaware of Russia’s proposals. The best result for us must be to reduce the tariff."

Armenia imports the large majority of its gas from Russia. Its only other potential major supplier is Iran, which holds the world’s second largest gas reserves and is linked to Armenia via a 140-kilometre gas pipeline that runs from Tabriz to the Armenian border. There are plans to extend the pipeline to central Armenia.

The US might respond angrily to any move by Armenia to form a major gas supply arrangement with Iran, given Washington's sanctions regime reimposed on the Islamic Republic. Pashinian has said that he has made it clear to US officials that as a small landlocked nation of 2.9mn people with few trading options with neighbours, Armenia cannot afford to reject all trade and investment opportunities with Iran, a country of 81mn people. Yerevan has no diplomatic relations with neighbouring countries Azerbaijan and Turkey due to the longstanding dispute over the Nagorno-Karabakh breakaway region.

The Gazprom price increase comes as Armenia appears set to lose its position heading the Russia-led Collective Security Treaty Organization, and days after Russian President Vladimir Putin and Armenian Prime Minister Nikol Pashinian met in Moscow.

Putin’s holiday greetings for Pashinian nemesis
The day after the meeting, Putin pointedly sent public holiday greetings to former Armenian president Robert Kocharyan, a Pashinian nemesis currently in jail in Yerevan on abuse-of-power charges, eurasianet reported.

The price increase is “symptomatic of how the Kremlin is exploiting Armenia’s acute dependence on Russian hydrocarbons, using gas supply as a political instrument to put pressure on the Pashinian-led government,” Eduard Abrahamyan, a London-based analyst of Armenia, told the news website.

Pashinian’s enemies in the Republican Party of Armenia (HHK) that ruled the country before the country’s velvet revolution of April to May last year made political capital out of the gas reverse. “We are finishing the year not entirely proudly and fruitfully,” wrote Eduard Sharmazanov, the party’s press secretary, on his Facebook page the day the announcement was made. “Nikol [Pashinian], who for months has been accusing us of artificially increasing prices on gas and creation of a corrupt gas scheme, saying that since his becoming prime minister that Armenia-Russia relations have been wonderful, today reported that the price of gas is increasing.”

Pashinian claimed that consumers would be paying the same price for energy thanks to “our certain internal adjustments”. He did not detail those adjustments.

Pashinian commits to EEU integration
Separately, on December 27 Pashinian said Armenia was determined to continue "integration" within the Russian-led Eurasian Economic Union (EEU).

"We are committed to further integration within the Eurasian Economic Union and treat seriously our chairmanship in the EEU," Pashinian said during his meeting with Putin in Moscow.

"I am confident that after our chairmanship we will have even more effective integration in the union," Pashinian said, referring to Armenia's rotating presidency of the EEU that began on January 1.

The trade bloc brings together Russia, Belarus, Kazakhstan, Armenia, and Kyrgyzstan.

Putin praised the Russia-Armenia bilateral relationship, including "growing trade that increased by nearly 30 percent" last year.

He said that Russia was Armenia's largest economic partner, accounting for some 25% of Armenia's foreign trade.

Pashinian's My Step alliance won more than 70% of the vote in the snap parliamentary elections held on December 9.

Pashinian vowed to maintain close relations with traditional ally Russia, but at the same time said he would seek closer ties with the United States and the European Union.

Russia has a military base in Armenia. It sells defence hardware to both the Armenians and Azerbaijanis while also chairing peace talks over Nagorno-Karabakh.