Shale Gas Reserves Could Widen Armenia’s Horizons – World Politics Review
14:48 – 10.09.11
By Michael Cecire
A memorandum of understanding between the Armenian Ministry of Energy
and Natural Resources and the Isle of Man-registered International
Minerals & Mines Ltd. is paving the way for the exploration of
Armenia’s shale reserves. Should large-scale commercial extraction
proceed, Armenia’s energy find could grant the landlocked Caucasus
nation a measure of energy independence and, with it, newfound
geopolitical freedom.
The Aug. 3 deal comes on the heels of another agreement between the
Energy Ministry and the US State Department in June to cooperate in
energy exploration, commercialization and investment. This agreement
plans “cooperative assessment and technical studies of Armenia’s
energy resources, including any potential shale gas resources.”
According to the Armenian energy ministry, the August agreement is the
result of an international shale gas conference sponsored by the US
government, which has offered exploration grants to Armenia and other
countries.
Previous assessments suggest Armenia’s hydrocarbon reserves are small.
The US Geological Survey, which is identified in the June memorandum
as a technical partner in the joint effort, identified 44 million tons
of in-place shale oil reserves in the Aramus region based on a 1994
study (.pdf). The Armenian government, however, raised the figure in a
2005 report (.pdf), listing 17 million to 18 million tons of shale oil
reserves in Ijevan, Shamut and Jermanis and 128 million tons in
Dilijan.
Armenia’s brightening shale estimates coincide with rising
expectations for unconventional hydrocarbon sources in Europe.
According to a May report from the European Center for Energy and
Resource Security, unconventional sources “might be able to cover
European gas demand for at least another 60 years.” With the high
price of conventional fossil fuels, more-aggressive exploration
efforts and improved extraction techniques, shale and other
unconventional sources have become increasingly economically viable.
The report also stresses how new European energy sources could reduce
the continent’s dependence on imports, specifically from Russia. That
parallels the situation confronting Armenia, which is heavily
dependent on imported energy from Russia. The vast majority of
Armenia’s natural gas comes from a Gazprom pipeline through Georgia
from the north, and it is estimated that Russia controls nearly 80
percent of Armenia’s energy system.
Armenia’s position is further complicated by its landlocked geography,
wedged between historical adversary Turkey to the west and its chief
foe, Azerbaijan, to the east. Russia, which in the 1990s supported
Armenia during its war with Azerbaijan over the disputed
Nagorno-Karabakh territory, is geographically separated from Armenia
by staunchly anti-Kremlin Georgia. This combination of geography and
circumstances leaves Armenia relatively isolated and with minimal room
to maneuver.
While Armenia has sought to emulate the Kazakhstan model of aligning
with Moscow while remaining engaged with the West, Yerevan’s
dependence on Russia — which also provides economic and military aid
— is considerable and operationally essential. Even when the
Yerevan-Moscow alliance is tested by controversy, such as with Russian
arms sales to Azerbaijan, Armenia has had few alternatives
Armenia’s isolation and near-total reliance on Russia makes achieving
greater energy independence a worthy goal for policymakers in Yerevan.
Attempts to diversify imports have had some success: Iran supplies
Armenia with both oil and natural gas, the latter through a pipeline
completed in 2008. However, allegations have been leveled that Russia
has used its political influence and commanding position in the
Armenian energy sector to disrupt and minimize energy diversification
through Iran, Armenia’s only local alternative. But even if Yerevan
succeeded in allowing Iran to take on a greater role in the Armenian
energy market, diplomatically isolated and instability-prone Tehran
would remain a less-than-ideal ally.
Shale exploration, on the other hand, presents Yerevan with the
opportunity to further develop an independent energy capacity that
would simultaneously reduce its reliance on foreign energy and limits
its ties to a revanchist regional power. The US, due to its
longstanding interests in the South Caucasus and significant Armenian
diaspora population, has long been committed to Armenia’s economic
development and its gradual entrance into the Euro-Atlantic system. By
backing shale development, Washington furthers both of these goals.
With increased prosperity and reduced foreign dependence, Yerevan
should be able to craft a more independent foreign policy. Such a turn
of events could help to shake up regional dynamics enough to propel
normalization talks with Turkey, reduce tensions over Nagorno-Karabakh
and spur on domestic reforms. While energy wealth has historically
carried few guarantees, increased energy independence could put
Armenia in a better position to choose its friends and partners based
on their broader merits, rather than purely on their ability to ensure
the country’s basic economic survival.
Gerard Libaridian, director of the Armenia Studies Program at the
University of Michigan in Ann Arbor, says that a more diverse energy
supply could grant Armenia increased geopolitical leeway.
“No doubt Armenia’s energy dependency has had implications for its
foreign and security policy,” notes Libaridian. “Diversity of energy
sources, particularly if that involves locally produced hydrocarbon
resources, will give the government more room to maneuver, even if
that is not necessarily translated into a bigger role in the region.”
However, Libaridian cautions that a considerable shale discovery would
be required for any major realignment to occur.
Increased domestic sources of energy could also help offset an ongoing
rise in natural gas prices — a major source of social discontent —
while spurring additional economic activity.
Libaridian acknowledges this possibility, but says that extra energy
independence could also produce an opposite reaction: “Depending on
the amount of proven reserves that are discovered and begin to be
exploited and on the kind of government in place at the time such
sources become available, Armenia may want to integrate in the
regional system or, on the contrary, become more entrenched in its
regional and larger isolation.”
Armenian energy independence is by no means around the corner, and
it’s still an open question what impact shale exploitation will have
on Armenia’s geopolitical trajectory. Exploration may find existing
reserves too small or too impure to be commercially viable, much less
able to remake Yerevan’s foreign policy. But for the moment, the
prospect of domestic hydrocarbon resources offers a tantalizing
glimpse into a possible future where Armenia is free to go its own
way.
Tert.am