Armenia Finalizes Sale of Gas Infrastructure

The deal will cede complete control of Armenia's gas infrastructure to Russia's state-run gas company, Gazprom

YEREVAN (Arka)—At its Thursday meeting, Armenia’s government approved an agreement to cede its 20 percent stake in ArmRosgasprom – the join Armenian-Russian company that operates Armenia’s gas infrastructure – to Russia’s Gazprom.

According to the agreement, Armenia’s ministry of energy will hand over its 20 percent of shares to Gazprom, increasing the Russian state-run company’s share from 80 percent to 100 percent.

The deal was laid out in an agreement signed between Armenian and Russian presidents Serzh Sarkisian and Vladimir Putin on Dec. 2, 2013, Armenia’s Deputy Minister of Energy Yosif Isayan said.

The Armenian parliament ratified the deal at its sitting on Dec. 23, 2013, amid great controversy and opposition objection that lead to disorder and procedural confusion.

On Dec. 2, it was revealed that the sale was part of a deal to write off $300 million of debt that the Armenian government owed to Russia as a result of the Sarkisian administration secretly subsidizing Russian gas prices from 2011 to 2013.

Under the new agreement, the Russian gas monopoly will be supplying 2.5 billion cubic meters of gas per year to Armenia from 2014 to 2018. The price of that gas will be determined by a formula which is used to determine prices for domestic consumers in Russia. In 2012, Gazprom supplied 1.7 billion cubic meters of gas to Armenia.

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2 Comments

  1. Armenian said:

    Sell your country for short-term gas and political gains. Serj is an excellent diplomat!

  2. GT said:

    I’ve seen so much criticism of this, but never any mention of the alternatives.
    If the gas is all coming from Russia, it doesn’t make much difference if they own the pipes in Armenia.
    If there is to be an alternative, it has to take in the big picture, and actually be pursued.
    If you’re not talking alternatives, then no better solution is being proposed,
    and it is just about causing a pointless “domestic dispute” with the partners that Armenia does have.

    The only realistic alternative/additional source of gas besides Russia is Iran.
    Which has plenty, and it might make sense to sell more to Armenia,
    and ship more THRU Armenia to be sold via Russian export pipelines.
    (possibly supplying Russian market, with Russian gas saved for export, to avoid sanctions on Iran)

    In that case, a 50/50 partnership between Russia and Iran would make sense,
    since Iran would still be depending on Russia for further export to other markets beyond Armenia/Georgia.
    Serving as an export pipeline for markets beyond Armenia is really the only ‘value added’ Armenia offers,
    and having some ‘value added’ is the solidest way to get a better deal in an international market for gas.

    Armenia’s market is not so large that Russia is truly interested in it as a major cash cow,
    and would somehow refuse to cooperate with any VIABLE prospect under a different arrangement.
    But not proposing a different viable concept isn’t really a productive way to achieve anything.
    Yet I never saw such a scheme proposed or discussed as an alternative, even though
    Iran is/was the ONLY other possible partner, whose involvement was always needed to be credible.

    Armenia shouldn’t depend SOLELY on Iran either… but serving as an export corridor (not just consumer),
    inherently increases the value of Armenia and would be a multi-partner relationship, not just bilateral.
    The total economic value of that export pipeline can be leveraged when pricing Armenia’s own consumption, taking into account the whole project value…
    Not just relying on political goodwill, although that can continue to be leveraged as well.

    The same logic may still appeal to Gazprom in order to participate in Iran gas exports thru Armenia,
    which would not be surprising considering they (or other Russian state firms, can’t remember)
    are involved in the Iran-Pakistan-India gas pipeline as well, so routing Iranian gas thru South Stream, etc,
    seems perfectly within the scope of Russia/Gazprom’s strategic perspective.
    So that may still happen, but Armenia missed the chance to help foster that quicker,
    and in a way that made itself maximally USEFUL and POLITICALLY VALUABLE to these partners…
    Not to mention having more of a role in determining the JV format between Gazprom and Iran,
    to help ensure that the Armenian consumer can maximally benefit from the value of the export route,
    even if it is disrupted and the flow of gas must be reversed to supply Armenia solely from Russia.

    So much easier to criticize rather than create…

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