Armenia Insists on Lower Russian Gas Price

The Gazprom-Armenia company headquarters in Yerevan. (Source: Photolure)
The Gazprom-Armenia company headquarters in Yerevan. (Source: Photolure)

The Gazprom-Armenia company headquarters in Yerevan. (Source: Photolure)

YEREVAN (RFE/RL) — Prime Minister Hovik Abrahamian on Thursday publicly pressed Armenia’s Russian-owned gas distribution network to help his government convince Russia to cut the price of its natural gas delivered to the South Caucasus country.

Abrahamian appealed to the Gazprom-Armenia operator three weeks after announcing that Yerevan is seeking a lower cost of Russian gas in view of the sharp drop in international oil prices. Russian-Armenian negotiations on the matter have yielded no agreement yet.

“The decrease in the volume of gas consumption [in Armenia] clearly shows that the [Gazprom-Armenia] company can have more earnings in case of lower prices,” Abrahamian said as he opened a weekly session of his cabinet.

“I think that the Gazprom-Armenia management has a lot of work to do in presenting this business logic to the public and its superiors, as a result of which the mutually beneficial nature of our negotiation proposal will become clear to both the Gazprom company and the Russian Federation,” he said.

“I think that global economic and geopolitical developments are making obvious not only the necessity but also the possibility of reducing the gas price,” added the premier.

Abrahamian did not disclose the extent of a price reduction sought by the Armenian government or specify whether the Russians are reluctant to accept it. His unusual appeal to Gazprom’s Armenian subsidiary might have been an indication that Moscow is driving a hard bargain in the ongoing negotiations.

Energy and Natural Resources Minister Yervand Zakharian declined to shed light on those talks when he addressed the Armenian parliament on Wednesday. “I can only say at this point that those negotiations are continuing,” he said.

Zakharian would also not be drawn on the Russian gas price that would now be acceptable to Yerevan.

Gazprom, which supplies at least 80 percent of Armenia’s gas, lowered the price from $190 to $165 per thousand cubic meters less than a year ago. It had previously cut the tariff in 2013 in return for Yerevan’s decision to join the Russian-led Eurasian Economic Union (EEU). At that time the Russian giant charged European countries an average of almost $350 per thousand cubic meters of its gas.

The subsequent collapse of oil prices, which also determine international gas tariffs, offset much of the Russian discount for Armenia. Gazprom’s tariff for Europe averaged $238 per thousand cubic meters last year. It is expected to fall to $180 next month.

Abrahamian said on Thursday that cheaper gas is “essential” for the competitiveness of Armenian manufacturers using it. Those of them that are heavily reliant on exports to Russia have been hit hard by a sharp depreciation of the Russian ruble caused by the decreased oil prices.

Late last month Zakharian dismissed suggestions that Armenia will be better off it cuts back on Gazprom supplies and significantly increases instead the presently modest volume of gas imports from Iran. He insisted that Russian gas is cheaper for Armenia even at the current price.

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