Gazprom fears to lose Armenia

Pan Armenian Network, Armenia
Feb 13 2005


The management of the Russian gas monopolist finds it necessary to be
involved in the construction of Iran – Armenia gas pipeline not to
lose control of the situation.

Negotiations between “Gasprom” and Turkmenian government can have a
negative impact on the price policy of the Russian gas monopolist.
Official Ashgabat has refused to sell gas to “Gasprom” for the same
price as before and the new prices offered by Turkmenistan were not
convenient for Russians. The failure of this deal will decrease the
income of “Gasprom” in 2005. It is believed that the State will not
allow “Gasprom” to solve its problems at the cost of local consumers.
Analysts suppose that the problem will be solved by means of
increasing export prices. It should be reminded that the head of
“Armrosgasprom” company recently confirmed that if “Gasprom” again
reviews its price policy, the rise in prices will be inevitable in

/PanARMENIAN.Net/ Turkmenistan sold gas to “Gasprom” for 44 dollars
per 1000 cubic meters. “Gasprom” resold the gas for 55-77 dollars
covering the costs for transit through the territory of Kazakhstan.
It is quite possible that at times “Gasprom” supplied Armenia with
the same Turkmenian gas which we could purchase without mediators as
it was done early 90s. Conditions offered by Turkmenbashi were much
more favorable than those currently dictated by “Gasprom”. The
Russian monopolist has forced out not only foreign exporters but also
Russian “Itera”. Turkmenistan will be very glad to supply gas
directly to Armenia but it is impossible due to communication
problems. Ashgabat seeks for alternative means of export and they
evidently mean that since firstly they looked quite confident in
negotiations with Russians and secondly they are going to increase
their gas production by 20 percents.

Turkmenistan still has only one alternative to the western route of
gas transportation. That is the gas pipeline to Iran. In 2004 about
five milliard cubic meters of gas were supplied through this pipeline
but the diameter allows to pump one half as much again. Turkmenistan
sells gas to Iran for 42 dollars, that is to say a quarter less than
the price that Russians offer to their strategic partner – Armenia.
For today the only way of supplying Turkmenian gas to Armenia is the
northern route passing through Russia. But this situation can change
after the construction of Iran – Armenia gas pipeline. The management
of “Gasprom” cannot help worrying about this perspective. The
emergence of an alternative to Russian gas in the region is menacing
not only for the commercial interests of “Gasprom” but also the
political interest of Moscow.

During the recent discussion held in the upper chamber of the Russian
parliament the deputy president of “Gasprom” joint stock company
Alexander Ryazanov called the authorities to sanction the
participation of “Gasprom” in the construction of Iran – Armenia gas
pipeline since it is the only way the keep control of the situation.
“If we do not take part in the construction of Iran – Armenia gas
pipeline no one knows where that gas will go”, Ryazanov said.
According to him the Armenian – Iranian project can compete with the
“Blue stream” project on which “Gasprom” sets high hopes. At the same
time Ryazanov did not ignore Armenian market which “Gasprom” can
lose. But Mr. Ryazanov anyway did not state his main worry. It is
known that the Russian gas monopolist is extremely worried about the
possible perspective of Iranian gas pipeline extension to Ukraine
through Georgia and Black Sea. The emergence of a competitor in the
European gas market may have extremely undesirable consequences for

It is notable that yet not long ago the management of “Gasprom”
showed great caution in talking about the possibility of joining the
construction of Iran – Armenia gas pipeline. In July, 2004 the same
Alexander Ryazanov announced in Yerevan that the payback terms of the
project are above the norms accepted by “Gasprom”. “Gasprom” prefers
short-term investments but the conflict between commercial and
political interests are always solved in favor of political
interests. As it seems the political decision has already been made
since the second figure in the company confidently speaks about the
necessity of joining the project. It should be noted that the
technical-economical justification of the investments was finished
long ago so in case of the final approval of the idea by Kremlin the
involvement of “Gasprom” in the project will take just a few weeks.
Maybe the only thing that can prevent that is the possible
intensification of the conflict between Iran and the United States.

Artyom Yerkanyan