Armenian energy minister denies deal to hand Russia control of gas
pipeline from Iran

AP Worldstream; Apr 07, 2006

Armenia’s energy minister denied Friday that the impoverished Caucasus
Mountain nation had struck a deal with Russia’s state-run gas monopoly
to hand it control of part of a new Armenian-Iranian gas pipeline.

OAO Gazprom a day earlier announced that it had struck a 25-year-deal
giving Gazprom’s Armenian joint venture ownership rights to the
Armenian segment of a planned pipeline bringing Iranian gas to the
country and an electricity power generating unit.

Energy Minister Armen Movsisian, said that the pipeline was still
under construction and therefore “it cannot be sold.”

He insisted that Armenia had only agreed to transfer control of the
country’s Razdan-5 gas-fired power plant for almost US$250 million
(A205 million).

The deal was expected to draw fire from Armenia’s opposition, which
has expressed concern over Russia’s already heavy control over the
small, landlocked country’s energy infrastructure.

But Movsisian said the proceeds from the deal _ which will give
Gazprom the right to export electricity from the power plant unit _
were needed to soften the effect for the population of a doubling in
the price of Russian natural gas supplies.

The agreement sets a price for Armenia of US$110 (A90) per thousand
cubic meters of gas up to Jan. 1, 2009, according to a Gazprom
statement _ roughly twice what Armenia has paid in recent years.

Armenia earlier had turned over control for its national gas transport
system to a Russia-Armenian joint venture, ArmRosGaz, in which Gazprom
and an affiliated company control 55 percent.

Gazprom has sharply raised prices recently for Ukraine, Georgia and
Moldova, arguing that it is merely ending subsidies to ex-Soviet
republics and bringing the rates closer to market prices. The gas
giant is the dominant energy supplier in the former Soviet Union, and
has sought to take over pipeline networks, power grids and other
energy infrastructure in neighboring states.

Critics, including some Western countries, say the Kremlin is using
Russia’s energy wealth as a political and economic weapon.

Armenia is Russia’s chief ally in the poor, but strategic Caucasus
Mountain region and hosts a Russian military base.

Russia already largely controls the Razdan-5 plant, the country’s main
electricity producer, and Armenia is wholly dependent on Moscow for
gas supplies.