OPINION: SUSPENSION OF SUBSIDIES FOR GAS PRICES NOT TO REDUCE COMPETITIVENESS OF ARMENIAN GOODS

ARKA
April 16, 2008

YEREVAN, April 16. /ARKA/. Suspension of subsidies for gas prices
in Armenia will not reduce competitiveness of Armenian goods in the
world market, Acting Minister of Energy of Armenia Armen Movsisian
said in his interview to the country’s Public Television. Currently
Armenian prices are still at a lower and reasonable level than in
the neighboring countries, Movsisian said.

In particular, gas price for population in Azerbaijan that is an
exporter of gas itself is about $185 per 1,000 cubic meters and for
industrial enterprises – $305.

$300 per 1,000 cubic meters for domestic consumers and $210 and more
for industrial enterprises are set in Georgia, whereas in Armenia
gas prices are $245 per 1,000 cubic meters and $153 respectively.

Compared to other countries with no energy and gas resources, great
difference can be seen; particularly in Bulgaria gas prices are $435
per 1,000 cubic meters for domestic consumers and $250 for industry,
in Latvia and Lithuania – about $400 and in Turkey – $350 per 1,000
cubic meters, Movsisian said.

On April 6 2006 "Gasprom" open joint stock company and the Government
of Armenia signed an agreement setting strategic principles of
cooperation in gas and energy projects on the territory of Armenia
for 25 years. Under the agreement, the price for Russian natural
gas supplied to Armenia is to rise from $56 to $110 for every 1,000
cubic meters. In this respect, the Government decided to mitigate
the prices through subsidies and allocated $188.8mln for partial
compensation. According to the decision, the government provides
subsidy of 25,000 Drams for 1,000 cubic meters for citizens with
monthly consumption of up to 10,000 cubic meters and $52.01 of the
$146.51 price for industrial enterprises consuming over 10,000 cubic
meters of gas monthly.

But due to unprecedented rise in gas consumption volume the subsidies
were expired as early as in January 2008 and the Government took
measures to prolong subsidizing till the end of the heating season
to prevent the population and industrial enterprises from additional
financial burden in the winter months.

Effective from May 1 new prices for gas approved by Armenia’s Public
Services Regulatory Commission will come into force, that is – 90,000
Drams (including VAT) per 1,000 cubic meters for population and $146.51
(in Dram equivalent, including VAT) for subscribers consuming over
10,000 cubic meters of gas monthly.