GOVERNMENT TO END SUBSIDIES FOR ARMENIAN GAS CONSUMERS FROM 1 MAY
by Andrew Neff

Global Insight
April 16, 2008

The Armenian government is planning to end subsidies to domestic gas
consumers from 1 May, according to the country’s ARKA news agency.

ARKA said that Prime Minister Tigran Sargsian announced that subsidies
will end but that the government will begin making preparations for
winter 2008-2009, when gas consumption is expected to jump for heating
purposes, in order to "protect socially unsecured layers from the rise
in prices". Under a 2006 gas supply deal with Russia’s Gazprom, Armenia
imports gas from Russia at a price of $110US per 1,000 cm. Gazprom
agreed to hold that price steady until 2009 in exchange for Armenia
agreeing to sell Gazprom the fifth unit of the Hrazdan power plant and
cede control of the Russian-Armenian gas distribution joint venture
that supplies the Armenian market, ArmRosGazprom, to Gazprom too
(seeCIS: 7 April 2006:).

Significance:The government has used part of the funds from the sale
of its energy infrastructure to subsidies gas prices for domestic
residential and industrial gas consumers until now. Currently, the
government provides a subsidy of 25,000 drams ($80US.61) per 1,000
cm for residential consumers with monthly gas consumption of up to
10,000 cm and $52US.01 of the $146US.51 per 1,000 cm of the price
for industrial consumers with consumption over 10,000 cm of gas per
month. The end of the subsidies will expose Armenian consumers to the
full brunt of higher gas prices, with the government focusing its
efforts instead on targeted subsidies it appears, as it says there
are 130,000 families that are entitled to social benefits. Gazprom is
expected to increase prices for gas supplies to Armenia from January,
so the government is hoping to prepare consumers now for even higher
prices from next year, although a significant price increase would
be likely to force the government to reintroduce subsidies in order
to avoid a major non-payment crisis.

From: Emil Lazarian | Ararat NewsPress