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WHY IS RUSSIA SILENT ON IRAN'S GAS COURTSHIP OF ARMENIA?
EurasiaNet.org
April 2 2014
April 2, 2014 - 1:23pm, by Marianna Grigoryan
Natural gas flares at a processing facility of the South Pars gas
field near the Iranian town of Kangan in January 2014. Armenia
recently announced an agreement to increase its import of natural
gas from Iran to two billion cubic meters per year - an increase of
75 percent. (Photo: Behrouz Mehri/AFP/Getty Images)
Mystery is swirling around a deal to boost Iranian natural gas exports
to Armenia: why does the Kremlin seem to be going along with the idea?
On March 19, Armenian Energy Minister Armen Movsisian announced that
Armenia plans to increase its imports of gas from neighboring Iran
to 2 billion cubic meters per year, an increase of nearly 75 percent
over the current annual volume. In exchange, Armenia would export
electricity to Iran.
The announcement marked a sudden turnabout for Armenia: just late
last year, officials in Yerevan rebuffed Iranian overtures concerning
additional gas sales. Armenian leaders have not commented about what
prompted them to change course. Further details are expected when the
two countries' intergovernmental commission meets this May, and if
Iranian President Hassan Rouhani, as announced, visits Armenia "soon."
A curious aspect to the new Iranian-Armenian relationship is the
Russian reaction, or lack thereof: Gazprom, the state-controlled
energy giant that now controls Armenia's entire gas-pipeline system
and furnishes most of the country's gas, has not commented on the
deal. Its current silence is a sharp departure from the behavior of
Russian officials back in 2007, when they pushed forcefully to limit
the diameter of the 140-kilometer-long Iranian-Armenian pipeline
to preclude the possibility of large-scale exports beyond Armenian
borders.
Local observers offer a variety of explanations for Russia's current
position.
Some believe that Russia's silence is connected with its desire
to bring Armenia into the Moscow-led Customs Union by 2015. While
the Armenian government is committed to joining the union, popular
enthusiasm for it appears to be lagging. Going along with larger and
cheaper Iranian gas sales, then, may be a way for the Kremlin to help
the Armenian government "sell" the Customs Union to the population.
>From Moscow's perspective, the importance of Armenian membership in
the Customs Union has increased in the wake of the winter's events
in Ukraine, where an EU-oriented government replaced the disgraced,
pro-Moscow administration of Viktor Yanukovych.
"Since it was the Iranian side who first spoke about the low prices
of their natural gas, Russia had to give its 'permission' to Armenia
... as a strategic ally," said political analyst Styopa Safarian,
a member of the opposition Heritage Party. "Otherwise, it would turn
out that Moscow was not a friend, but an enemy who acted against our
national interests."
The price of the proffered gas has not been determined, but Iranian
Ambassador Mohammad Raiesi described it as "incomparably low."
Other observers in Yerevan suggest that Moscow's silence is the product
of the recent, radical change in geopolitical conditions: given the
widening divide between Russia and the West over the Crimea crisis,
the Kremlin is reshuffling the deck of energy cards that it plays in
order to further its diplomatic aims.
"The situation has changed and Russia has to adjust itself to those
transformations," commented Manvel Sargsian, director of the Armenian
Center for National and International Studies.
An unanswered question surrounding the Iranian exports concerns the
potential for Armenia to re-export a portion of Tehran's gas. Such
a possibility would seem to go against Moscow's interests, given
that the European Union is now heavily dependent on Russian gas,
thus providing the Kremlin with considerable diplomatic leverage.
Conversely, the United States and EU likely wouldn't mind seeing
Armenia serve as a corridor for Iranian exports to Europe, something
that would contribute to the EU's goal of diversifying its sources
of gas imports.
"The United States seems much more willing to have Iranian gas and
oil brought to the market, as both a reward for the positive talks
with Iran and as a way to hurt Russian President Putin and exploit
Russian dependence on high energy prices," said Richard Giragosian,
director of the Regional Studies Center.
The United States, which announced in November 2013 a six-month break
in its sanctions on Iranian crude-oil exports, has not commented
about the intended Iranian gas sales to Armenia. In recognition of
the economic impact of Turkey and Azerbaijan's blockades of Armenia's
western and eastern borders, Washington has tended to turn a blind
eye to Yerevan's trade dealings with its southern neighbor, Iran.
Representatives of the Ministry of Energy could not be reached for
comment about any discussions with the US about the Iranian deal.
Galust Sahakian, a senior member of President Serzh Sargsyan's
Republican Party of Armenia, told EurasiaNet.org that any US objections
would be "a matter for negotiation."
Responding to a query from EurasiaNet.org, a US Embassy representative
in Yerevan emailed the following statement: "We have direct discussions
with the Armenian government concerning US and international sanctions
against Iran. We are in constant communication on what activities
and transactions are sanctioned and what are not, and we appreciate
Armenia's cooperation in this area."
Armenia's reason for seeking "cheap" Iranian gas is clear: the consumer
price of Russian gas is a painful issue for Armenians.
Consumers currently pay 158,000 drams or $391 per 1,000 cubic meters,
a huge sum for a country where one-third of the population of roughly
2.97 million people lives in poverty. Adding irritation to frustration,
that price is at least 7.5 times higher than consumers pay in Belarus,
a non-gas-producing member of the Customs Union.
Prices could soar still higher if an expected 4.2-percent-increase
in the wholesale price of Russian gas goes through on July 1.
Already skittish about demonstrations after election-related political
upheaval last year, the Armenian government has no interest in seeing
energy again become a cause for protests. Nonetheless, questions
still persist about how Armenia can import a large volume of Iranian
gas and keep Russia, its prime economic and military partner, happy.
On March 28, President Sargsyan described the border price ($189) paid
for Russian gas as " the lowest possible price that Russia sells to
any country," and claimed that "no one" talks anymore about the price
of gas. He called on Energy Ministry officials to do a better job of
raising public awareness that the cost of overhauling infrastructure
is responsible for the dramatic difference in the border price and
consumer cost, the Regnum news agency reported.
With no attempt at irony, Sahakian, the senior Republican Party
official, called Iranian gas Armenia's "reserve program."
Analysts doubt that Yerevan makes any decisions on its own about gas.
Even if Iran, as promised, supplies bargain-basement-priced gas to
Armenia, Gazprom, with its control of distribution, will influence what
consumers ultimately pay. "The real question is how much freedom and
flexibility Moscow will allow Yerevan to have in terms of expanding
its relations and energy deals with Tehran," said Giragosian.
Editor's note: Marianna Grigoryan is a freelance reporter based in
Yerevan and editor of MediaLab.am.
http://www.eurasianet.org/node/68226
EurasiaNet.org
April 2 2014
April 2, 2014 - 1:23pm, by Marianna Grigoryan
Natural gas flares at a processing facility of the South Pars gas
field near the Iranian town of Kangan in January 2014. Armenia
recently announced an agreement to increase its import of natural
gas from Iran to two billion cubic meters per year - an increase of
75 percent. (Photo: Behrouz Mehri/AFP/Getty Images)
Mystery is swirling around a deal to boost Iranian natural gas exports
to Armenia: why does the Kremlin seem to be going along with the idea?
On March 19, Armenian Energy Minister Armen Movsisian announced that
Armenia plans to increase its imports of gas from neighboring Iran
to 2 billion cubic meters per year, an increase of nearly 75 percent
over the current annual volume. In exchange, Armenia would export
electricity to Iran.
The announcement marked a sudden turnabout for Armenia: just late
last year, officials in Yerevan rebuffed Iranian overtures concerning
additional gas sales. Armenian leaders have not commented about what
prompted them to change course. Further details are expected when the
two countries' intergovernmental commission meets this May, and if
Iranian President Hassan Rouhani, as announced, visits Armenia "soon."
A curious aspect to the new Iranian-Armenian relationship is the
Russian reaction, or lack thereof: Gazprom, the state-controlled
energy giant that now controls Armenia's entire gas-pipeline system
and furnishes most of the country's gas, has not commented on the
deal. Its current silence is a sharp departure from the behavior of
Russian officials back in 2007, when they pushed forcefully to limit
the diameter of the 140-kilometer-long Iranian-Armenian pipeline
to preclude the possibility of large-scale exports beyond Armenian
borders.
Local observers offer a variety of explanations for Russia's current
position.
Some believe that Russia's silence is connected with its desire
to bring Armenia into the Moscow-led Customs Union by 2015. While
the Armenian government is committed to joining the union, popular
enthusiasm for it appears to be lagging. Going along with larger and
cheaper Iranian gas sales, then, may be a way for the Kremlin to help
the Armenian government "sell" the Customs Union to the population.
>From Moscow's perspective, the importance of Armenian membership in
the Customs Union has increased in the wake of the winter's events
in Ukraine, where an EU-oriented government replaced the disgraced,
pro-Moscow administration of Viktor Yanukovych.
"Since it was the Iranian side who first spoke about the low prices
of their natural gas, Russia had to give its 'permission' to Armenia
... as a strategic ally," said political analyst Styopa Safarian,
a member of the opposition Heritage Party. "Otherwise, it would turn
out that Moscow was not a friend, but an enemy who acted against our
national interests."
The price of the proffered gas has not been determined, but Iranian
Ambassador Mohammad Raiesi described it as "incomparably low."
Other observers in Yerevan suggest that Moscow's silence is the product
of the recent, radical change in geopolitical conditions: given the
widening divide between Russia and the West over the Crimea crisis,
the Kremlin is reshuffling the deck of energy cards that it plays in
order to further its diplomatic aims.
"The situation has changed and Russia has to adjust itself to those
transformations," commented Manvel Sargsian, director of the Armenian
Center for National and International Studies.
An unanswered question surrounding the Iranian exports concerns the
potential for Armenia to re-export a portion of Tehran's gas. Such
a possibility would seem to go against Moscow's interests, given
that the European Union is now heavily dependent on Russian gas,
thus providing the Kremlin with considerable diplomatic leverage.
Conversely, the United States and EU likely wouldn't mind seeing
Armenia serve as a corridor for Iranian exports to Europe, something
that would contribute to the EU's goal of diversifying its sources
of gas imports.
"The United States seems much more willing to have Iranian gas and
oil brought to the market, as both a reward for the positive talks
with Iran and as a way to hurt Russian President Putin and exploit
Russian dependence on high energy prices," said Richard Giragosian,
director of the Regional Studies Center.
The United States, which announced in November 2013 a six-month break
in its sanctions on Iranian crude-oil exports, has not commented
about the intended Iranian gas sales to Armenia. In recognition of
the economic impact of Turkey and Azerbaijan's blockades of Armenia's
western and eastern borders, Washington has tended to turn a blind
eye to Yerevan's trade dealings with its southern neighbor, Iran.
Representatives of the Ministry of Energy could not be reached for
comment about any discussions with the US about the Iranian deal.
Galust Sahakian, a senior member of President Serzh Sargsyan's
Republican Party of Armenia, told EurasiaNet.org that any US objections
would be "a matter for negotiation."
Responding to a query from EurasiaNet.org, a US Embassy representative
in Yerevan emailed the following statement: "We have direct discussions
with the Armenian government concerning US and international sanctions
against Iran. We are in constant communication on what activities
and transactions are sanctioned and what are not, and we appreciate
Armenia's cooperation in this area."
Armenia's reason for seeking "cheap" Iranian gas is clear: the consumer
price of Russian gas is a painful issue for Armenians.
Consumers currently pay 158,000 drams or $391 per 1,000 cubic meters,
a huge sum for a country where one-third of the population of roughly
2.97 million people lives in poverty. Adding irritation to frustration,
that price is at least 7.5 times higher than consumers pay in Belarus,
a non-gas-producing member of the Customs Union.
Prices could soar still higher if an expected 4.2-percent-increase
in the wholesale price of Russian gas goes through on July 1.
Already skittish about demonstrations after election-related political
upheaval last year, the Armenian government has no interest in seeing
energy again become a cause for protests. Nonetheless, questions
still persist about how Armenia can import a large volume of Iranian
gas and keep Russia, its prime economic and military partner, happy.
On March 28, President Sargsyan described the border price ($189) paid
for Russian gas as " the lowest possible price that Russia sells to
any country," and claimed that "no one" talks anymore about the price
of gas. He called on Energy Ministry officials to do a better job of
raising public awareness that the cost of overhauling infrastructure
is responsible for the dramatic difference in the border price and
consumer cost, the Regnum news agency reported.
With no attempt at irony, Sahakian, the senior Republican Party
official, called Iranian gas Armenia's "reserve program."
Analysts doubt that Yerevan makes any decisions on its own about gas.
Even if Iran, as promised, supplies bargain-basement-priced gas to
Armenia, Gazprom, with its control of distribution, will influence what
consumers ultimately pay. "The real question is how much freedom and
flexibility Moscow will allow Yerevan to have in terms of expanding
its relations and energy deals with Tehran," said Giragosian.
Editor's note: Marianna Grigoryan is a freelance reporter based in
Yerevan and editor of MediaLab.am.
http://www.eurasianet.org/node/68226