World Markets Research Centre
Global Insight
August 12, 2008

Talks on Iranian Gas Supplies to Armenia to Recommence Next Week

by Catherine Hunter

Iran is planning to hold talks with Armenia next week to discuss the
start-up of gas supplies through the Iran-Armenia gas pipeline that
was commissioned in early 2007, but has still to commence
operations. The Iranian Oil Ministry website said that discussions
would take place in Armenia. Under the 2004 agreement, Armenia was set
to receive 300-400 mmcm of gas from Iran annually via the pipeline in
its initial stage, with volumes eventually slated to increase to 2.3
bcm per year.

Significance:Failure to start operations at the Iran-Armenia link has
left Armenia wholly dependent on Russian supplies and given it little
room to bargain in recent price negotiations (seeArmenia: 1 August
2008:). However, with Iran suffering significant shortages itself,
most notably in winter, it is unclear how much gas will be available
to the Armenian market in the near term (seeIran: 18 January
2008:). Nevertheless, Iran would like the option to get export prices
for gas beyond current Turkish deliveries, making ongoing commitment
to realising the Armenia link probable, even if reliability is likely
to prove a factor in the winter months.