Clash of interests in the energy sector
By Mher Ohanian

Yerkir/arm
April 15, 2005

Judging by the increased interest of Russian energy giants, Gazprom
and RAO ES, in Armenia one can assume that these companies are
really concerned with the possibility of losing their influence in
the energy projects in the region. This is why they are doing their
best to increase their presence in Armenia, Georgia and Azerbaijan.

The aspirations of RAO ES and Gazprom

Some concerns regarding the possible extension of the gas pipeline
from Iran to Armenia to Europe do exist if not among the Russian
political circles then at least in the energy sector. This might
be the reason for Gazprom’s suddenly increased interest in the 5th
energy block of Hrazdan power station.

It is interesting that the project for modernization of the 5th
energy block was jointly presented by the two Russian energy giants.
The Russian companies have come up with an unexpected solution
suggesting that the 5th block should be modernized so that it can
give an output of 450mWt instead of the existing 300mWt while at
the same time fuel consumption will stay at the level of 250-270
grams per 1kWt/h instead of the current consumption of 428 grams .
The approximate budget for the modernization investment is 120
million dollars. An Iranian company has also presented a proposal
for modernization of the 5th energy block of Hrazdan power station.

This investment proposal is kept secret but it can be assumed that
the Iranian proposal is not much different from the proposal made by
the Russian companies. It is difficult to say which of the proposals
will be accepted but it is clear that the Armenian government is
facing a rather difficult dilemma.

On the one hand, Russian RAO ES owns 4 energy blocks of Hrazdan
power station and its aspirations to get the 5th energy block are
quite natural. Gazprom is the main supplier of fuel for Hrazdan power
station, so this company’s aspirations are natural as well.

On the other hand, the Iranian companies that propose to modernize
the 5th energy block are in this way trying to interfere with the
Russian’s companies long-term plans not only in Armenia but in the
region in general.

The problem is that the project for modernization of another large
power station, Yerevan thermal power station, completely depends
on construction of Iran-Armenia gas line and gas supply from Iran.
However, it turned out that Gasprom participates in the construction
of the pipeline. Gazprom is the actual owner of the Armenian gas
distribution network: together with Itera company, it owns 55% of
Armenia’s gas network.