WHAT TO DO BEFORE THE PRICE OF GAS GOES UP
Hakob Badalyan

Largir
Sept 5 2007
Armenia

The Armenian government, the government which will be shaped, or
will most probably reproduce with some transformations before the
presidential election of 2008, will have to go through a serious
trial. In the pre-election period which started in Armenia after the
parliamentary election the government has been conducting a policy of
control of the economy. In other words, on the one hand, they have to
display that the two-digit growth continues, on the other hand, they
have to keep the inflation and the revaluation of the dram low. It
is clear that on the eve of the election the purpose is to prevent
social protest. Apparently, they hope that thereby they will calm
the protest electorate and hold a successful election, and then let
everything go, the economy, the prices, the revaluation of the dram,
and in case of social protest against these hold on to power with
the same methods as on April 13, 2004. All we need is the approval
of the election by the world, the rest is our problem.

However, on January 1, 2009 Armenia will again be facing the problem
of the boosted price of the Russian gas, which will have a major
impact on the economy. Currently we pay 110 dollars per 1000 cu m of
gas. It was a discount, in return for which Armenia sold the fifth
generating unit of the thermal power plant of Hrazdan to Russia for
250 million dollars half of which was directed at subsidizing Armenian
consumers, both households and industries. Besides, Armenia gave its
section of the Iran-Armenia pipeline to Russia in return for cheap
gas and the condition that the price will not be reviewed for three
years. January 1, 2009 is the end of these three years end. It would be
ingenuous to think that Russia will keep the price low when the world
raises the price of gas and does not even spare Lukashenjko. Russia
may leave the price the same or review it slightly, so slightly as
not to cause a spasm in the Armenian economy, only in case Armenia
gives some other strategic thing to Russia. In this context, we must
note that perhaps two strategic things remain, one is on the ground,
the other is under the ground, the underground and the mountains. We
cannot give away the underground because very soon there will be no
traffic jams under the ground only. The mountains remain. Therefore,
it is possible that Armenia will give away the mountains. We will sell
them or give them to the Russians to have them keep the price low, and
not to push the economy of Armenia walking along the edge of the abyss.

Meanwhile, the consequence of the high price of gas will be equal to
plunging into the abyss, considering that even with the government
subsidy, local production is not profitable any more. In other words,
the economy is little competitive. Consequently, one may imagine what
will happen if the price of gas goes up. In addition, it is a serious
problem for which we must get ready now. In fact, the government does
not have time because there are a number of other issues which need
to be solved to raise the popular rating of Prime Minister Serge
Sargsyan. It is not time for far-reaching plans. For instance, if
the government now deals with the price of gas in 2009 and prepares
the country for the new reality, the society will see the results on
January 1, 2009. Meanwhile, the presidential election is ten months
before. Therefore, it is more expedient now to raise the pensions,
delay enactment of the taxi license regulations, visit building sites.

In fact, it should not be ruled out that our government deals with
the problem of gas, simply we cannot see it. There is a precedent,
however, when the government said the same in November and December
of 2006 that everything is OK with gas, but it took months to make
a deal with Russia in return for property. It became known that the
Armenian government had been ready for something else. Consequently,
it is difficult to tell what the government is preparing for in
reality in preparing for the problem of gas.