Russia’s Unfit to Run Armenian Power Grid World Bank Repeats

YEREVAN (RFE/RL)–Russian firms seeking to gain control of Armenia’s power distribution networks–put up for sale–lack the appropriate track record and financial strength to develop the sector unlike four Western companies short-listed from scores of bidders–a senior World Bank official indicated on Wednesday.

According to Salman Zaheer–a senior energy economist at the World Bank–alternative offers made by the Russia’s to the Armenian authorities recently–if accepted–will not address chronic problems facing one of the main sectors of the Armenian economy and bring badly needed capital investmen’s. "The reason why these four [Western] companies were selected is that they were able to demonstrate a track record of performance in these two areas," Zaheer told a news conference in Yerevan. "If the alternative is the continuation of loose financial discipline with assets being swapped for gas supplies and other materials or equipment–we don’t think it’s good for Armenia," he said.

Zaheer–who oversees the World Bank’s energy projects in Europe and Central Asia–alluded to reports that Russia’s biggest utility–RAO UES–and the Rosenergoatom nuclear operator–have suggested that instead of being privatized the country’s four electricity companies be turned into joint ventures between them and the Armenian government. Under the proposed deal–the Russian share in the venture–$400 million–would be paid in the form of natural gas supplies.

Together with a subsidiary of the Russian gas monopoly Gazprom–Rosenergoatom was last April left off the short-list of foreign bidders participating in the international tender at the urging of the World Bank and other Western donors. The defeat provoked a negative reaction from Russian officials.

The Russia’s are now trying to take advantage of a recent decision by the Armenian parliament to suspend the process until the adoption of a special law setting the main terms of the sell-off. Russian Ambassador to Armenia Anatoly Dryukov on Tuesday reaffirmed Moscow’s interest in the power grid of its ex-Soviet ally. Speaking at a meeting with leaders of an alliance of small pro-Russian parties–Dryukov argued that Russia is better placed to take over the power distribution networks because it can replace their aging Soviet-made equipment at a much lower price. Besides–he said–Russia currently supplies 80 percent of Armenia’s energy resources. This mainly includes natural gas and nuclear fuel.

The authorities in Yerevan are believed to face an increasingly difficult choice between maintaining close relations with Moscow and securing more crucial loans from the World Bank and the International Monetary Fund. Zaheer said: "The government has committed to staying on the strategy which was adopted late last year. That is–to attract companies which have demonstrated a good and effective performance in the power distribution in other countries and have the financial strength to improve the condition of the [Armenian] networks."

The World Bank’s regional director–Judy O’Connor–made it clear earlier this week that fresh budgetary loans will not be made available before winners of the international tender are chosen from among the four Western firms.

In the words of Zaheer–all "administrative measures" to boost the efficiency of the sector have been exhausted and their "proper privatization" is the only solution. The situation with the enforcement of electricity bills and the repayment of other outstanding bills worsened in the first quarter of the year–he said. "Assume that for our own assistance strategy–we’re saying that you can continue to not to pay energy bills and keep building up the financial gaps in the power sector–while we keep filling the gap in the budget sector. But that clearly would not be supported by our board of directors."

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