Armenia and Iran Seal Pipeline Deal

YEREVAN (Armenpress/RBC/RFE/RL)–After more than a decade of negotiations–the Armenian and Iranian governmen’s took the final step and signed an agreement on Thursday to begin construction of a pipeline which will be operational before January 1–2007–and will continue to operate for at least 20 years.

"Negotiations on this agreement have lasted for about 12 years and it has become a reality today," Armenian Energy Minister Armen Movsisian said at the signing ceremony–attended by Iran’s visiting Oil and Gas Minister Bijan Zanganeh.

The Armenia-Iran intergovernmental agreement covering the route of the 141 kilometer pipeline was signed in 1995.

The construction of the Armenian part of the pipeline linking the city of Meghri with Yerevan at a length of 100 kilometers is estimated at $96-100 million.

The Iranian portion of the pipeline will be 41 kilometers–and is estimated to cost $120 million.

Each of the two countries is responsible for constructing its part of the pipeline.

According to Movsisian–Iran has agreed to deliver no less than 1.1billion cubic meters of natural gas to Armenia–which will pay for gas with electric energy supplies.

The minister declined to comment on possible sources of financing the construction. His Iranian counterpart Zanganeh declined to name the agreed price of gas supplies. He stressed that under the 20 year agreement–Iran is to deliver 36 billion cubic meters of gas to Armenia.

Some estimate that the cost of gas supplies agreed to is $84 per 1,000 cubic meters.

The Iranian minister said that the Iranian part of the pipeline will be constructed by the National Gas Export Company. Movisian only said that construction of Armenia’s portion would be financed by Armenia’s–and that proposals put forth by Russia–Ukraine–Brazil–China–and the US would be considered.

Zanganeh arrived in Yerevan and met with President Robert Kocharian earlier in the day. A statement by the presidential press service said the gas project will double the volume of Armenian-Iranian trade–which stood at $90 million last year.

Armenian leaders say the pipeline will be of strategic importance for their country as it will provide it with an alternative source of natural gas–which is used for meeting approximately 40 percent of its energy needs. Russia has been Armenia’s sole supplier of the vital fuel since the mid-1990s and was–until recently–uneasy about having a major competitor in the Armenian energy sector 80 percent of which is controlled by Russian firms. "We regard this project as a serious question for Armenian energy security," the President Kocharian stressed.

Armenia imported about 1.2 billion cubic meters of Russian gas last year through a single pipeline running through Georgia–which is reportedly in poor condition and needs urgent repairs. The agreement commits it to buying almost as much Iranian gas in 2007. The annual volume of Iranian deliveries is due to jump to 2.3 billion cubic meters in the future–raising the question of whether there will be that much demand for the fuel inside Armenia.

Armenian and Iranian officials have indicated in the past that Armenia could serve as a transit route for Iranian gas exports to third countries–notably Georgia and Ukraine–an option reportedly opposed by Russia. The Ukrainian government has shown interest in the project ever since its inception–and the issue was on the agenda of Prime Minister Andranik Markarian’s visit to Kiev this week. Markarian was reported to call for Ukrainian involvement in the pipeline’s construction.

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