ARMENIAN GOVERNMENT TO STOP SUBSIDIZING THE RISE OF GAS TARIFFS ON MAY 1

Noyan Tapan
April 15, 2008

YEREVAN, APRIL 15, NOYAN TAPAN. On May 1st the Armenian government will
stop subsidizing the rise of gas tariffs. Tariffs to be established by
the RA Public Services Regulatory Commission will be valid. Meanwhile,
by instruction of the Armenian president, the government is developing
a program of complex measures aimed at preparing for the 2008-2009
winter season of gas consumption, the prime minister Tigran Sargsian
stated at the April 15 briefing.

He reminded that in April 2006, the government made a decision,
by which the executive body subsidizes gas tariffs, the purpose of
which was to reduce the negative consequences of the increase in
prices of gas supplied by Russia and to provide the enterprises
and households with the opportunity to prepare for the use of
new tariffs. ArmRusgazprom company allocated 188.8 mln USD to the
government for this purpose.

According to the prime minister, the indicated program of complex
measures aims to protect the vulnerable groups of the population
from the consequences of the rise in gas tariffs during the period
when gas and electricity consumption grows. First of all, attention
will be focused on 130 thousand families that receive social
benefits. The Armenian government prepared for such steps as early
as two years ago. In particular, the 2008 state budget envisages
allocating additional 1.2 bln drams (about 3 mln 871 thousand USD)
for mitigation of the negative consequences of the rise in gas tariffs
for the vulnerable groups, and these allocations have been provided
since January 2008. This sum exceeds almost twofold the losses of
the beneficiary families.

T. Sargsian said that in preparing for the 2008-2009 winter season,
the rise in both gas tariffs and food prices will be taken into
consideration. The respective funds will be envisaged by the 2009
state budget.

In his words, the rise in the price of gas imported from Russia is
conditioned by the tendencies in global market and Russia’s policy in
this market. In particular, Russia is liberalizing the activities in
this sector, and gas prices will reach international prices stage by
stage. "The chairman of Gazprom company’s board Alexey Miller will
visit Armenia in May. During negotiations with him, we will try to
clarify the strategy of our cooperation in the next three years,"
the Armenian prime minister said, adding that "our goal will be to
implement such a tariff policy in Armenia that will allow us not to
lose our relative advantage in competition with the region and the
countries like Armenia". It was explained that in Armenia the gas
tariffs are lower than in neighboring countries and "those comparable
with Armenia".

To recap, thanks to subsidizing, the users – households paid 59
thousand drams instead of 84 thousand drams for 1,000 cubic meters. As
a result of the unprecedented growth of gas consumption, the subsidies
have ended in late January of this year, and the Armenian government
took steps to continue subsidizing until the end of the heating season.