by : Andrew Neff

Global Insight
October 29, 2012

Armenian energy and natural resources minister Armen Movsisyan
on 24 October rejected an allegation by the country's political
opposition that the government has sold its remaining 20% stake in
Armenia's monopoly gas importer and distributor ArmRosGazprom (ARG)
to Russia's Gazprom. Levon Zurabyan, head of the parliamentary faction
of the oppositional Armenian National Congress (HAK), claimed during
a parliamentary session on 24 October that the government had cut what
amounts to a secret deal with Gazprom, agreeing to sell Armenia's 20%
stake in ARG to the Russian gas firm in exchange for a commitment by
Gazprom - which already owns the remaining 80% of ARG - to leave the
gas price for Armenian household consumers unchanged until March 2013.

ARKA News Agency reported that Zurabyan alleged that the government
has kept the agreement quiet in order to avoid turmoil before Armenia's
next presidential election, which is due in February 2013.

Movsisyan denied the allegation, saying that, "at the moment, no
such decision was made," adding that negotiations with Gazprom are
proceeding behind closed doors as Armenia seeks to clinch a new gas
supply agreement with Gazprom, which is Armenia's sole supplier.

Significance:The explosive allegation by Zurabyan could heighten
tension in the run-up to Armenia's presidential election, even as
Movsisyan has sought to dismiss the claim as baseless. The notion that
the government has sold its stake in ARG to Gazprom for a deal to keep
prices frozen for domestic consumers until after the election plays
into the idea that the government is playing politics with Armenia's
gas prices, aiming to forestall a seemingly inevitable increase in
Armenia's import price (and the onward price for end-users), since
Gazprom has held prices for Armenia frozen at USD180 per 1,000 cubic
metres (cm) since 1 April 2010. A price increase could see Armenia
paying as much as USD320 per 1,000cm for its gas supplies from Russia.

Armenia imported 1.3225 bcm of gas from Russia in the first of this
year, up 24.3% year-on-year. Interestingly, shortly after the claims
and counter-claims of the share sale, the Armenian government stated
that following bilateral negotiations with Iran, it will be looking
into increasing the amount of imported Iranian gas. Questions remain,
however, about Iran's capacity to export more to Armenia and whether
the Russian-led ARG would agree to import Iranian gas which could
potentially undermine Russian bid to increase the gas price for
Armenia in the future.

From: A. Papazian