Price for Russian gas doubles in Armenia, talks continue

AP Worldstream; Apr 01, 2006

Armenia began paying about twice the previous price for Russian
natural gas on Saturday, but talks continued on rates and ways to
ease the blow for the small Caucasus Mountain nation, officials said.

Russia's state-controlled natural gas monopoly Gazprom, which has
been raising prices for ex-Soviet republics, initially demanded that
Armenia pay US$110 (A90) per thousand cubic meters as of Jan. 1,
but later agreed to hold off on the increase until April 1.

Officials at Gazprom's Armenian subsidiary and the Energy Ministry
said that while the increase took effect Saturday, the two sides were
still discussing prices and potential measures to lessen the impact
on the nation, which relies entirely on Moscow for its gas supplies.

The delay allowed Armenia _ Russia's chief ally in the strategic
Caucasus Mountain region, partly thanks to its acceptance of a
Russian military base on its territory _ to get through the cold
winter without a price increase. But the rate hike appeared set to
result in higher bills for Armenian consumers and companies.

As of April 10, the price of a cubic meter of gas is set to rise by
about 52 percent for domestic consumers and by about 85 percent for
industrial users. The country's main electric power station, which is
largely controlled by Russia, wants to raise its rates by 90 percent,
which would likely lead to hikes in electric bills.

"You don't need to be an economist to figure out how much this chain
reaction will affect the (pocketbooks) of citizens," said Ashot
Aramian, editor of an Armenian economic magazine called Basis. He
said the government might have to revise the 2006 budget.

Meanwhile, government opponents worry that the government will seek
to ease gas prices by handing further control over Armenia's energy
infrastructure to Russia _ including an under-construction pipeline
that is to carry natural gas to Armenia from neighboring Iran.

Gazprom has sharply raised prices recently for Ukraine, Georgia and
Moldova, arguing that it is merely ending subsidies to ex-Soviet
republics and bringing the rates closer to market prices but drawing
fire from critics who say the Kremlin is using Russia's energy wealth
as a political weapon.