Yerevan does not rule out sale of Iran-Armenia pipeline – ministry

Interfax News Agency
Russia & CIS Business and Financial Newswire
April 20, 2006 Thursday

Armenia has not ruled put the possibility of selling the Iran-Armenia
gas pipeline, which is currently under construction, to Russia,
Armenian Foreign Minister Vardan Oskanian said at a Thursday press
conference.

“At the moment nothing should be ruled out,” he said.

“It is difficult to say whether the gas pipeline will be sold or not,
as in essence there is no pipeline yet, it is only being built,”
he said. Talks are currently underway about who will invest money
and who will build the pipeline. It is likely that whoever invests
money will become the owner,” he said.

Commenting on the planned sale of the fifth power-producing unit
at Razdan thermal power plant to Gazprom (PTC: GAZP), the minister
said that this does not run counter to Yerevan’s plans to diversify
sources of electricity. “Diversification of energy does not depend
on who owns energy production infrastructure. The ownership is not as
important as the diversification of fuel supplies themselves,” he said.

“The energy infrastructure transferred to Russia will remain in
Armenia. It will be handed over with clear conditions and there will
be points in all contracts that protect our energy security,” he said.

In turn, Austrian State Secretary Hans Winkler, who is on a visit to
Yerevan, commented on the sale of the power-producing unit by saying
that the EU cannot interfere in a sovereign Armenian decision.

“Diversification is important as an idea. We also note the development
of alternative energy sources and, as a result, opportunities for
investment are being created,” he said.

He also said that the EU is interested in closing Armenia Nuclear
Power Plant. “The technology used at Armenia Nuclear Power Plant
is obsolete and does not meet European safety standards. The EU is
working in this area and is interested in cooperating with Armenia
in specific programs,” he said.

Meanwhile, Armenian Energy Minister Armen Movsisian said earlier that
the Iran-Armenia gas pipeline would remain the property of Armenia.

The Armenian government has decided to sell the Razdan-5 power unit
to Russian gas monopoly Gazprom for $248.8 million, he said. Of this
total the government will use $188 million to subsidize domestic gas
consumers until December 31, 2008. Gazprom and the Armenian government
signed a strategic agreement for 25 years, establishing the strategic
principles for cooperation in gas-energy projects in the republic,
the Russian company said in a statement. The agreement fixes the
price for Russian natural gas for Armenia at $110 per 1,000 cubic
meters until January 1, 2009.

The document also deals with the acquisition by ArmRosGazprom from the
Armenian government of a 40-km section of the Iran-Armenia pipeline,
currently under construction, and the fifth power-producing unit
at Razdan thermal power plant. Also, according to the agreement the
Armenian government is obliged to give ArmRosGazprom the function of
client for the 197-km second section of the Iran-Armenia gas pipeline.

Preliminary purchase and sales agreements should be signed by April
14, 2006 and the final transfer of right of ownership for these assets
should be carried out by January 1, 2007.

After the deal the Gazprom share in ArmRosGazprom’s charter capital
will amount to a qualified majority. At the moment Gazprom and
the Armenian Energy Ministry own 45% each in the company and Itera
owns 10%.

The Razdan thermal power plant is the largest in Armenia, with a
capacity of 1,100 megawatts, of which up to 800 megawatts is used
during peak production in winter.

The plant was handed over to Russian ownership in 2003 as payment for
Armenian state debt. To attract investment to modernize the Armenian
energy system, in 2004 the republic’s government announced plans to
sell the incomplete fifth power-producing unit at the plant, with a
capacity of 300 megawatts.