GOVERNMENT SIGNALS RUSSIAN CONTROL OF IRAN-ARMENIA PIPELINE
By Ruzanna Khachatrian

Radio Liberty, Czech Rep.
Oct 25 2006

Prime Minister Andranik Markarian on Wednesday effectively confirmed
reports that Russian energy companies are set to gain a controlling
stake in a key pipeline which is due to start pumping Iranian natural
gas to Armenia next year.

Markarian indicated that his government will likely sell the first
Armenian section of the under-construction pipeline to ArmRosGazprom
(ARG), the Russian-Armenian joint venture that owns Armenia’s gas
distribution network.

The 40 kilometer section was reportedly covered by a controversial
April agreement that allowed Armenia to temporarily avoid a surge
in the price of gas imported from Russia in return for handing over
more energy assets to Gazprom, the state-run Russian monopoly. The
most important of them is the incomplete but modern Fifth Unit of
the country’s largest thermal power plant located in the central town
of Hrazdan.

Gazprom initially confirmed but later refuted reports that it will
also get hold of the Armenian pipeline from Iran as part of the deal.

Officials in Yerevan also denied that.

However, the Yerevan daily "Haykakan Zhamanak" reported last week
that the Russians will after all win control of the pipeline through
the ARG operator, in which Gazprom and the Russian-owned group ITERA
hold 45 percent and 10 percent shares respectively. The remaining 45
percent belongs to the Armenian government. The paper cited a Russian
document which presented the takeover as a fait accompli that will
be formalized by January 1.

Markarian appeared to confirm the information as he spoke to
reporters after his cabinet’s regular question-and-answer session
in parliament. "We are not talking about the sale [of the pipeline]
as such," he said. "It’s just that Armenia may invest in the charter
capital [of ARG] or we will jointly make investments because it would
be illogical to have two gas distribution networks in Armenia."

Markarian added that Moscow and Yerevan hope to reach agreement on
the issue by the time the pipeline comes on stream later this year
or early next.

Defense Minister Serzh Sarkisian, who has been actively involved
in Russian-Armenian energy dealings, also strongly hinted at the
pipeline’s imminent transfer under ARG control. He said he will ask
the ARG chief executive, Karen Karapetian, to publicly "explain the
situation in great detail."

The pipeline from Iran was supposed to end Armenia’s strong dependence
on Russian gas and other energy resources. Critics say that by putting
it under de facto Russian control the Armenian government would only
deepen that dependence. Moscow is thought to have already made sure
that the pipeline’s diameter is not large enough to re-export Iranian
gas to Georgia and other countries.