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AN OUTLOOK FOR IRANIAN GAS IN ARMENIA
http://www.noravank.am/eng/articles/detail.php?ELEMENT_ID=12541
06.02.2014
Sevak Sarukhanyan
Head of the Centre for the Political Studies of the Noravank Foundation
In December 2013, after the Armenian-Russian gas agreement was signed,
there have been some intense discussions on importing gas from Iran to
Armenia. The main discussion topics are the price of the Iranian gas
and the nature of the Armenian-Russian gas agreement, which allegedly
might prevent Armenia from increasing volumes of the imported gas
from Iran.
The price of the Iranian gas
For discussions on the Iranian gas price, one may consider the price
of gas exported from Iran to Turkey and Nakhichevan, as well as the
Iranian experiences with exporting gas to Pakistan and Georgia.
Since 2001 Iran, Pakistan and India constantly negotiate over a gas
pipeline construction project and the main issue in these negotiations
is the gas price. Tehran refuses to set the price below international
market price levels, arguing that the gas price is something like
the oil price, to be calculated by a formula and not to be otherwise
changed. And this is stated under circumstances, where construction and
operation of the pipeline is a matter of a vital economic importance
for Tehran. In addition, as in case with Iran and Armenia, Iran,
India and Pakistan also have some common values (regardless of the
political situation).
However, since 2001 Iran did everything to dissuade Pakistan of any
false assumptions that Tehran might export gas Pakistan at prices lower
than the international ones. It has to be noted though, that Iranian
officials have stated on numerous occasions that cooperation between
the countries should develop not only based on economic categories,
but also under a priority of friendship values.
In 2012 Pakistan made the last attempt to get cheap gas from Iran:
taking advantage of the international sanctions against Iran and
realizing well that Tehran needs additional revenue sources, Islamabad
offered a long-term gas agreement to Iran, with a price somewhat
lower than the international level. However, this tactical offer was
again turned down by Iran, apparently due to the consideration that
sanctions will eventually come to an end, while long-term contractual
obligations for energy supply would remain.
The Iran-Georgia negotiations on gas trade are another good example.
Since 2004, former Georgian president Mikheil Saakashvili made several
attempts to make an Iran-Georgia gas agreement. Hardly anyone remembers
that pro-Western former Georgian president M. Saakashvili twice held
high-level negotiations on exports of Iranian gas to Georgia with
M. Ahmadinejad, who had a negative image in the West.
Both times Iran expressed interest, but negotiations ended with no
specific agreement due to the very reason of high price for the Iranian
gas. This circumstance is often ignored in discussions taking place
in Armenia, during which an opinion is expressed that had there been
no pressures from Russia, Armenia could have become a transit country
for the Iranian gas. It can be said in this case that Moscow is not and
has never been interested in the seeing Iranian gas enter international
markets, although in practical terms there also has never been a real
opportunity for its transit through Armenia, since the Iranian gas
had no buyers anyway. This is because of its high price and Tehran's
negative response to the idea of selling it below international levels.
The same price issue was subject to Iran-Ukraine negotiations that
ended with no positive outcome, regardless of what Russia and Gazprom
thought about it.
In this context it seems dubious that all of a sudden Iran would
significantly lower the gas price for Armenia, thus giving a pretext
to India, Georgia, Turkey, Europe and Pakistan to discuss the natural
gas pricing mechanism. As for the Iranian ambassador's remark that
gas can be sold for $400 to one buyer, and for $100 to another one,
it is just a classic diplomatic statement, which again, has not been
confirmed in any way.
Is it possible to increase the imports of Iranian gas?
As far as this story is concerned, it does gave some objective
grounds. To date Armenia and Iran have not held actual negotiations
over the price. Despite this, the issue whether Armenia would
be able purchase natural gas from Iran after concluding the
new Armenian-Russian energy agreement has become a subject for
discussions. Moreover, even some opinions are voiced that Armenia
assumes obligation to buy only Russian gas.
In reality, the agreement does not imply Russian gas monopoly in
domestic market of Armenia, but rather, Russian monopoly in gas
transportation system. The system and market are quite different things
and equating them would be the same as, for example, equating airport
and airline company. Although an airport receives aircrafts flying into
the country, it may not regulate who and for what purpose arrives. The
same goes for the gas system: the Armenian-Russian agreement regulates
cooperation in gas infrastructure, but not gas sources.
Under these circumstances increase of the Iranian gas imports to
Armenia may not encounter any difficulties. In fact, if there is a
buyer, then the ArmRusGazprom-owned Iran-Armenia gas main have to
be used, for which either the buyer or seller would have to pay for
transit, which in case of a small country like Armenia would have a
negligible impact on the natural gas price.
However, it has to be realized that an increase of the Iranian gas
imports to Armenia may happen only in case of significant economic
development rates, especially in the quite energy-consuming industrial
sector. In absence of such prospect import volumes of gas will remain
low and natural gas imports from two sources will hardly be worthwhile
in economic terms.
"Globus" analytical journal, #1, 2014
________________________________ Another materials of author
JOINING OF ARMENIA TO THE CUSTOMS UNION WILL ALLOW PROVIDING LOW GAS
RATES - EXPERT[13.09.2013] CSTO AND COMMUNICATION SECURITY[01.08.2013]
IRAN AFTER THE PRESIDENTIAL ELECTIONS[01.07.2013] "IRANIAN GAS
CAN REPLACE RUSSIAN BUT IT IS MUCH MORE EXPENSIVE"[10.06.2013]
KARS-AKHLKALAKI-TBILISI RAILWAY AND ITS REGIONAL PROSPECTS
[25.04.2013] QAZVIN-RASHT-ASTARA OR IRAN-ARMENIA? [21.02.2013] IRAN
AND SANCTIONS[10.12.2012] SIGNIFICANCE OF NUCLEAR ENERGY FOR ARMENIA
[27.09.2012] ON THE REGIONAL POLICY OF IRAN[28.06.2012] TURKISH FACTOR
IN "LEVIATHAN" AND "APHRODITE" ENERGY "WARS"[03.05.2012]
http://www.noravank.am/eng/articles/detail.php?ELEMENT_ID=12541
06.02.2014
Sevak Sarukhanyan
Head of the Centre for the Political Studies of the Noravank Foundation
In December 2013, after the Armenian-Russian gas agreement was signed,
there have been some intense discussions on importing gas from Iran to
Armenia. The main discussion topics are the price of the Iranian gas
and the nature of the Armenian-Russian gas agreement, which allegedly
might prevent Armenia from increasing volumes of the imported gas
from Iran.
The price of the Iranian gas
For discussions on the Iranian gas price, one may consider the price
of gas exported from Iran to Turkey and Nakhichevan, as well as the
Iranian experiences with exporting gas to Pakistan and Georgia.
Since 2001 Iran, Pakistan and India constantly negotiate over a gas
pipeline construction project and the main issue in these negotiations
is the gas price. Tehran refuses to set the price below international
market price levels, arguing that the gas price is something like
the oil price, to be calculated by a formula and not to be otherwise
changed. And this is stated under circumstances, where construction and
operation of the pipeline is a matter of a vital economic importance
for Tehran. In addition, as in case with Iran and Armenia, Iran,
India and Pakistan also have some common values (regardless of the
political situation).
However, since 2001 Iran did everything to dissuade Pakistan of any
false assumptions that Tehran might export gas Pakistan at prices lower
than the international ones. It has to be noted though, that Iranian
officials have stated on numerous occasions that cooperation between
the countries should develop not only based on economic categories,
but also under a priority of friendship values.
In 2012 Pakistan made the last attempt to get cheap gas from Iran:
taking advantage of the international sanctions against Iran and
realizing well that Tehran needs additional revenue sources, Islamabad
offered a long-term gas agreement to Iran, with a price somewhat
lower than the international level. However, this tactical offer was
again turned down by Iran, apparently due to the consideration that
sanctions will eventually come to an end, while long-term contractual
obligations for energy supply would remain.
The Iran-Georgia negotiations on gas trade are another good example.
Since 2004, former Georgian president Mikheil Saakashvili made several
attempts to make an Iran-Georgia gas agreement. Hardly anyone remembers
that pro-Western former Georgian president M. Saakashvili twice held
high-level negotiations on exports of Iranian gas to Georgia with
M. Ahmadinejad, who had a negative image in the West.
Both times Iran expressed interest, but negotiations ended with no
specific agreement due to the very reason of high price for the Iranian
gas. This circumstance is often ignored in discussions taking place
in Armenia, during which an opinion is expressed that had there been
no pressures from Russia, Armenia could have become a transit country
for the Iranian gas. It can be said in this case that Moscow is not and
has never been interested in the seeing Iranian gas enter international
markets, although in practical terms there also has never been a real
opportunity for its transit through Armenia, since the Iranian gas
had no buyers anyway. This is because of its high price and Tehran's
negative response to the idea of selling it below international levels.
The same price issue was subject to Iran-Ukraine negotiations that
ended with no positive outcome, regardless of what Russia and Gazprom
thought about it.
In this context it seems dubious that all of a sudden Iran would
significantly lower the gas price for Armenia, thus giving a pretext
to India, Georgia, Turkey, Europe and Pakistan to discuss the natural
gas pricing mechanism. As for the Iranian ambassador's remark that
gas can be sold for $400 to one buyer, and for $100 to another one,
it is just a classic diplomatic statement, which again, has not been
confirmed in any way.
Is it possible to increase the imports of Iranian gas?
As far as this story is concerned, it does gave some objective
grounds. To date Armenia and Iran have not held actual negotiations
over the price. Despite this, the issue whether Armenia would
be able purchase natural gas from Iran after concluding the
new Armenian-Russian energy agreement has become a subject for
discussions. Moreover, even some opinions are voiced that Armenia
assumes obligation to buy only Russian gas.
In reality, the agreement does not imply Russian gas monopoly in
domestic market of Armenia, but rather, Russian monopoly in gas
transportation system. The system and market are quite different things
and equating them would be the same as, for example, equating airport
and airline company. Although an airport receives aircrafts flying into
the country, it may not regulate who and for what purpose arrives. The
same goes for the gas system: the Armenian-Russian agreement regulates
cooperation in gas infrastructure, but not gas sources.
Under these circumstances increase of the Iranian gas imports to
Armenia may not encounter any difficulties. In fact, if there is a
buyer, then the ArmRusGazprom-owned Iran-Armenia gas main have to
be used, for which either the buyer or seller would have to pay for
transit, which in case of a small country like Armenia would have a
negligible impact on the natural gas price.
However, it has to be realized that an increase of the Iranian gas
imports to Armenia may happen only in case of significant economic
development rates, especially in the quite energy-consuming industrial
sector. In absence of such prospect import volumes of gas will remain
low and natural gas imports from two sources will hardly be worthwhile
in economic terms.
"Globus" analytical journal, #1, 2014
________________________________ Another materials of author
JOINING OF ARMENIA TO THE CUSTOMS UNION WILL ALLOW PROVIDING LOW GAS
RATES - EXPERT[13.09.2013] CSTO AND COMMUNICATION SECURITY[01.08.2013]
IRAN AFTER THE PRESIDENTIAL ELECTIONS[01.07.2013] "IRANIAN GAS
CAN REPLACE RUSSIAN BUT IT IS MUCH MORE EXPENSIVE"[10.06.2013]
KARS-AKHLKALAKI-TBILISI RAILWAY AND ITS REGIONAL PROSPECTS
[25.04.2013] QAZVIN-RASHT-ASTARA OR IRAN-ARMENIA? [21.02.2013] IRAN
AND SANCTIONS[10.12.2012] SIGNIFICANCE OF NUCLEAR ENERGY FOR ARMENIA
[27.09.2012] ON THE REGIONAL POLICY OF IRAN[28.06.2012] TURKISH FACTOR
IN "LEVIATHAN" AND "APHRODITE" ENERGY "WARS"[03.05.2012]