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ARMENIA SURRENDERS TO RUSSIA...
Fikret Ertan
Zaman Online, Turkey
Nov 6 2006
Georgia is not pleased with its dependence on its enemy, Russia,
for natural gas; neither is Armenia which is Russia's ally.
As a matter of fact, both countries are looking for alternative
natural gas sources. In this context, Georgia is holding meetings
with Azerbaijan, Turkmenistan and Iran. And Armenia believes that the
Iran-Armenia natural gas pipeline, still under construction over the
last several years, would curb its dependence on Russia.
The construction of this natural gas pipeline started in 2004 after
an agreement between Armenia and Iran's national natural gas company,
NIGC. The pipeline which starts from the vicinity of the Iranian
city of Tabriz, will end in the Iran-Armenia border and then will be
linked to Armenia's own natural gas pipeline. Forty kilometers of the
160-kilometer pipeline, extending from Kacaran to Mergi, is expected to
be completed next month. The second part of the pipeline, which extends
to Armenia's Ararat region, will be completed in 2007 and is expected
to be linked to the existing ArmRosGazprom (ARG) pipeline there.
As the name suggests, ARG is a joint natural gas pipeline project.
Until early November, Armenia owned 45 percent of this pipeline,
Russian natural gas giant Gazprom 45 percent and the remaining 10
percent belonged to an obscure intermediary company called ITERA.
However, the percentage of shares has changed after a deal between
Armenia and Gazprom in early November.
According to the agreement reached early this month during Armenian
President Robert Kocharyan's visit to Moscow, Armenia increased its
shares in the ARG Company from 45 percent to 58 percent. This increase
took place after ARG announced new shares amounting to $119 million
and Gazprom bought these shares. With these new shares, Gazprom has
effectively taken control of the 5th unit of the Hirazdan electricity
plant along with the Iran-Armenian natural gas pipeline.
The basis of this recent development lay in the agreement signed
between Armenia and Gazprom in April 2006. Under the deal, Gazprom
raised the natural gas price for its ally, Armenia, from the
preferential $54 per 1,000 cubic meters to the still preferential
$110 per 1,000 cubic meters, which will remain in force until Jan. 1,
2009. This in fact was a favorable price for Armenia, which is highly
dependent on Russia for natural gas.
However, there was a price to Russia's compromise. In return, Russia
demanded concessions from Armenia as regards the acquisition of the
Iran-Armenia pipeline and the 5th unit of the Hrazdan electricity
generating plant. Russia particularly insisted on limiting the
Iran-Armenia pipeline's diameter to 700 millimeters instead of 1.420
millimeters as stipulated in the original agreement reached with
Iran. The reason is obvious. Russia was trying to block the transfer of
Iranian natural gas via Armenia to Georgia and Ukraine in particular,
and to Europe through the Black Sea, by keeping the diameter of
the pipeline limited. The recent deal and latest news reports show
that Russia achieved its goal and prevented use of the Iran-Armenia
pipeline for the transfer of natural gas to other countries.
Armenian Prime Minister Andranik Markaryan defended the recent
agreement and said it would be illogical to have a separate ownership
for the Iran-Armenia pipeline since Gazprom already controlled natural
gas supply in Armenia, thereby trying to rationalize the deal.
This recent deal I have dwelled upon is a geo-political achievement
for Russia (thanks to this deal Russia has limited the potential
significance of the Iran-Armenia pipeline in the future) while sealing
Armenia's dependence on Gazprom, and consequently on Russia.
This is the picture the recent geo-political success of Russia,
using its natural gas card.
Fikret Ertan
Zaman Online, Turkey
Nov 6 2006
Georgia is not pleased with its dependence on its enemy, Russia,
for natural gas; neither is Armenia which is Russia's ally.
As a matter of fact, both countries are looking for alternative
natural gas sources. In this context, Georgia is holding meetings
with Azerbaijan, Turkmenistan and Iran. And Armenia believes that the
Iran-Armenia natural gas pipeline, still under construction over the
last several years, would curb its dependence on Russia.
The construction of this natural gas pipeline started in 2004 after
an agreement between Armenia and Iran's national natural gas company,
NIGC. The pipeline which starts from the vicinity of the Iranian
city of Tabriz, will end in the Iran-Armenia border and then will be
linked to Armenia's own natural gas pipeline. Forty kilometers of the
160-kilometer pipeline, extending from Kacaran to Mergi, is expected to
be completed next month. The second part of the pipeline, which extends
to Armenia's Ararat region, will be completed in 2007 and is expected
to be linked to the existing ArmRosGazprom (ARG) pipeline there.
As the name suggests, ARG is a joint natural gas pipeline project.
Until early November, Armenia owned 45 percent of this pipeline,
Russian natural gas giant Gazprom 45 percent and the remaining 10
percent belonged to an obscure intermediary company called ITERA.
However, the percentage of shares has changed after a deal between
Armenia and Gazprom in early November.
According to the agreement reached early this month during Armenian
President Robert Kocharyan's visit to Moscow, Armenia increased its
shares in the ARG Company from 45 percent to 58 percent. This increase
took place after ARG announced new shares amounting to $119 million
and Gazprom bought these shares. With these new shares, Gazprom has
effectively taken control of the 5th unit of the Hirazdan electricity
plant along with the Iran-Armenian natural gas pipeline.
The basis of this recent development lay in the agreement signed
between Armenia and Gazprom in April 2006. Under the deal, Gazprom
raised the natural gas price for its ally, Armenia, from the
preferential $54 per 1,000 cubic meters to the still preferential
$110 per 1,000 cubic meters, which will remain in force until Jan. 1,
2009. This in fact was a favorable price for Armenia, which is highly
dependent on Russia for natural gas.
However, there was a price to Russia's compromise. In return, Russia
demanded concessions from Armenia as regards the acquisition of the
Iran-Armenia pipeline and the 5th unit of the Hrazdan electricity
generating plant. Russia particularly insisted on limiting the
Iran-Armenia pipeline's diameter to 700 millimeters instead of 1.420
millimeters as stipulated in the original agreement reached with
Iran. The reason is obvious. Russia was trying to block the transfer of
Iranian natural gas via Armenia to Georgia and Ukraine in particular,
and to Europe through the Black Sea, by keeping the diameter of
the pipeline limited. The recent deal and latest news reports show
that Russia achieved its goal and prevented use of the Iran-Armenia
pipeline for the transfer of natural gas to other countries.
Armenian Prime Minister Andranik Markaryan defended the recent
agreement and said it would be illogical to have a separate ownership
for the Iran-Armenia pipeline since Gazprom already controlled natural
gas supply in Armenia, thereby trying to rationalize the deal.
This recent deal I have dwelled upon is a geo-political achievement
for Russia (thanks to this deal Russia has limited the potential
significance of the Iran-Armenia pipeline in the future) while sealing
Armenia's dependence on Gazprom, and consequently on Russia.
This is the picture the recent geo-political success of Russia,
using its natural gas card.