Eurasianet.org
US CONCERNED BY ARMENIA’S ENERGY TIES WITH IRAN
Emil Danielyan 6/21/07

The United States has expressed concern about Armenia’s deepening economic
relations with neighboring Iran, with a senior American diplomat warning
that they might run counter to international sanctions imposed on Tehran
over its controversial nuclear program.
In an equally significant development, the US charge d’affaires in Yerevan,
Anthony Godfrey, also indicated that Washington is ready, in principle, to
help the South Caucasus nation build a new nuclear power plant. "We are very
concerned about the increasing relations with Iran," Godfrey told a news
conference on June 15, commenting on multimillion-dollar energy projects
planned or already implemented by the two countries.
"We are working with the rest of the international community to push Iran to
comply with its international obligations [on nuclear non-proliferation],"
he said. "And two new [United Nations] Security Council resolutions deal
directly with investments in Iran, financial dealing with Iran. We have
expressed our concerns to the government of Armenia on all levels."
Armenia has until now maintained strong political and economic ties with
Iran, while being a leading per-capita recipient of US government
assistance. The Islamic Republic has served as one of Armenia’s few conduits
to the outside world ever since the economic blockades imposed on the small
landlocked country in the early 1990s by its more hostile neighbors,
Azerbaijan and Turkey. Armenian leaders hope that joint projects with Tehran
will also reduce Armenia’s strong dependence on Russia for energy resources.
Godfrey was apparently the first senior US official to publicly and
explicitly voice alarm over Armenian-Iranian cooperation. His remarks
contrasted with what the former US ambassador in Yerevan, John Evans, said
on the matter in February 2006. Washington, Evans said at a news conference,
is "very sympathetic to Armenia’s efforts to diversify sources of energy,"
not least because they have not yet breached long-standing US sanctions
against Iran.
"Up to now, so far as we can tell, the American legislation has not been
triggered by anything that Armenia has done," he said at the time.
The Armenian-Iranian relationship, largely covering the energy sector, has
since gained new momentum. The presidents of the two countries inaugurated
last March the first Armenian section of a pipeline that will pump Iranian
natural gas to Armenia. Armenian President Robert Kocharian hailed that as a
"historic event," while his Iranian counterpart Mahmoud Ahmadinejad said the
pipeline will "further reinforce friendship and ties between our peoples."
Work on the pipeline’s second, much longer section is due to be complete by
the end of next year. Armenia will then be able to import up to 2.3 billion
cubic meters of Iranian gas a year, or nearly twice the current level of its
gas deliveries from Russia. It is expected that the bulk of the imported
Iranian gas will be converted into electricity that will in turn be exported
to Iran.
To that end, the Armenian and Iranian governments agreed last year to build
a third high-voltage transmission line connecting the power grids of their
countries. Construction of a major hydro-electric plant on the Arax River,
which marks the Armenian-Iranian border, is also planned.
In addition, Armenian, Iranian and Russian officials are scheduled to meet
later this year to discuss an ambitious proposal to build an oil refinery in
Armenia that would process Iranian crude. An oil subsidiary of Russia’s
Gazprom energy conglomerate has shown interest in financing most of the
project, which has an estimated cost of more than $1 billion.
In Godfrey’s words, the US government is worried about these developments.
"We do appreciate the transparent way in which the government of Armenia
conducts its energy relations with Iran, and we appreciate the
straightforward way that they tell us where they are going with their
relations," he said.
But the diplomat went on to urge the Kocharian administration to be a "more
active partner" in US-led international efforts to prevent Iran from
developing nuclear weapons. The Armenian government has avoided any
criticism of Tehran’s nuclear program, contenting itself with general calls
for a peaceful resolution of the dispute.
Speaking to journalists on June 19, Armenian Foreign Minister Vartan
Oskanian refrained from directly responding to the US concerns. He said only
that they will not damage US-Armenian relations. For his part, Deputy
Parliamentary Speaker Vahan Hovannisian, whose Armenian Revolutionary
Federation party is a junior partner in the governing coalition, argued that
Armenia is right to forge closer links with Iran. The country "doesn’t have
much of a choice," given the continuing Azerbaijani and Turkish blockades,
he said.
Washington seems to have somewhat widened Armenia’s energy security options
by publicly indicating its readiness to help the country replace its aging
Metsamor nuclear power station with a new nuclear facility. [For background
see the Eurasia Insight archive]. As Godfrey said, "We are working with the
Armenian Ministry of Energy to develop a feasibility study as to just what
would be the best replacement for this capacity."
US diplomats, however, say that support for the project would not be
conditional on Armenia putting the brakes on its energy cooperation with
Iran. "Our position on Armenia’s need to replace Metsamor with a new power
plant is independent of our concerns over Armenia’s cooperation with Iran,"
one State Department official told EurasiaNet.
The Metsamor plant, which generates about 40 percent of Armenia’s
electricity, was built in the late 1970s and was shut down following a
catastrophic 1988 earthquake. It was reactivated in 1995 to end a severe
energy crisis caused by the war with Azerbaijan over the disputed territory
of Nagorno-Karabakh. The United States and the European Union strongly
opposed the decision, saying that Metsamor’s Soviet-designed reactor is
inherently unsafe. They both have spent tens of millions of dollars on
upgrading the plant’s safety systems, while pressing successive governments
in Yerevan to close the facility as soon as possible.
The Kocharian government announced last year that Metsamor will be
decommissioned by 2016. It also embarked on a search for potential foreign
investors interested in providing an estimated $1 billion need for the
construction of a new nuclear plant. The Russian government and energy
companies promptly expressed their readiness to help to put the project into
practice. The issue was high on the agenda of a late April visit to Yerevan
by Sergei Kiriyenko, head of Russia’s Federal Agency on Atomic Energy.
Kocharian reaffirmed his government’s far-reaching intentions as he chaired
an annual meeting of his Council on Atomic Energy Security on May 30. The
project to build a new plant is "justified both in terms of energy security
and economically," he said.