On the evening of January 22, 2006, Armenian and Russian presidents Robert Kocharyan and Vladimir Putin met in Moscow. The official report on the results of the meeting stated that the heads of state “expressed satisfaction with the successful start of the Year of Armenia in the Russian Federation and discussed the issue of Russian gas supplies.”
The next day, the Moscow-based Kommersant published an article entitled “Armenia exchanges the Iranian gas for the Russian one,” which particularly read:
“Moscow presented an ultimatum to its strategic ally: whether gas prices rise up to $110, or Armenia hands over the gas infrastructure to Gazprom and consumes the cheap gas for one more year. As we have learnt, Robert Kocharian accepted the ultimatum and is ready to hand over 45% of Iran-Armenia gas pipeline to Russia.”
The same day spokesman for Armenian president Viktor Soghomonian said that “this information is inconsistent with the reality,” and added that “the parties agreed to continue the talks.”
Viktor Soghomonian’s statements at the briefing in Yerevan on January 24 testified to the fact that the situation caused poorly concealed irritation in Yerevan.
He, in particular noted that the “situation over supplies of Russian gas to Armenia “arouses our regret.”
“Taking into consideration the strategic character of our relations with Russia we thought that the issue of Russian gas prices could be solved more easily and wouldn’t require so long negotiations,” presidential spokesperson said, not ruling out that “energy component of Armenian-Russian relations will be revised.”
At the end of March 2006, he again refuted the publication of Kommersant - this time that Armenia would buy arms from Russia at reduced prices as compensation for the increase in the price of Russian gas.
On April 6, 2006, the Armenian government and the Russian gas monopoly issued press releases on the agreements reached within the framework of the solution of the “gas problem.”
The first version of GazProm’s press release said that according to the agreements Gazprom would buy from the Armenian government the 40-kilometer-long section of Iran-Armenia pipeline as well as receive guarantees that ArmRosGazprom would build the second 197-kilometer-long section of the pipeline.
Meanwhile, the press release issued by the Armenian government made no mention of Iran-Armenia gas pipeline at all. The governmental press service reported that ArmRosGazprom would pay $248,8mln for the 5th unit of Hrazdan Thermal Power Plant, and this sum would be used to compensate for the increase in gas prices within the coming 3 years.
On April 7, a new version of the press release was published on Gazprom’s website, in which the Iran-Armenia gas pipeline was no longer mentioned.
On April 11, Gazprom head Alexey Miller arrived in Yerevan. He discussed with ArmRosgazprom head Karen Karapetyan the implementation of the agreement on principles of strategic cooperation signed between Gazprom and the Armenian government on April 6.
Meanwhile, there was no more clarity. Thus, Armenian Foreign Minister Vartan Oskanian said in Yerevan on April 20: “Frankly speaking, I don’t know whether the Iran-Armenia gas pipeline will be handed over to the Russian side or not.”
On April 28, the deal to sell Unit 5 of the Hrazdan TPP to Gazprom received support from where it was probably least expected. The head of the World Bank Yerevan Office, Roger Robinson, described the deal “very lucrative for Armenia.” Commenting on the reports that the Russian side in fact receives monopolistic rights in Armenia’s energy sector, WB official said: “Russia supplies fuel for the Armenian Nuclear Power Plant and gas - this is the reality.”
Roger Robinson noted that “it’s not important to whom this or that enterprise belongs. It’s much more important to correctly supervise the management.”
A month later, on May 22, 2006, Robinson’s words were repeated almost word for word by Karen Karapetyan, General Director of ArmRosGazprom. He stated that the sale of the 5th unit of Hrazdan Thermal Power Plant to Gazprom “is the most lucrative deal for Armenia.”
He was saying that the deal would enable Armenia to have fixed gas and electricity tariffs during 3 years, which were the most effective ones in CIS. Besides, Karen Karapetian stressed, “Gazprom presented a good investment program and assumed all the risks.”
On June 30, 2006, Gazprom Deputy Chairman Alexander Ryazanov said at the annual meeting of the shareholders that the Russian monopoly intended to buy the Iran-Armenia gas pipeline. According to him, this desire was conditioned by the need to increase the reliability of supplies to Armenia because of the unstable situation with the transit of the Russian gas through the territory of Georgia.
Few months later, on October 31, Karen Karapetian stated that “ArmRosGazprom” was interested in purchasing the Iran-Armenia gas pipeline but it was the Armenian government who should determine to the possible options (the sale of the gas pipeline or the handing over of its management).
A month later, on November 30, 2006, Russian Kommersant published an interview with Armenian Prime Minister Andranik Margarian who, in particular stated:
A week later, Gazprom’s official representative Sergey Kupriyanov confirmed that the price of gas for Armenia would not change next year.
“The price will remain on the level of $110, as we have agreed upon that and have signed a corresponding agreement, which provides for the fact that the price should not change for 3 years and should remain on the level of $110 in 2006, 2007, and 2008,” Sergey Kupriyanov stated. He recalled that according to the agreements reached, “Gazprom” increased its share in the “ArmRosgazprom”, which realized supplies to Armenia and distributed gas.
“We increase our control. At present we have 45%, but we will have the control packet of the shares. It is a package agreement, within the framework of which we get strengthening of our positions in Armenia, we get those assets, which we are interested in, and Armenia gets a fixed price for three years,” Kupriyanov concluded.
Ara Tadevosyan
Photolure and REUTERS photos were used in this chapter
