Russia's Gazprom to buy Iran-Armenia gas pipeline

Karen Karapetian, director general of the ArmRosGazprom (ARG) network operator, said Gazprom will pay $118.8 million to raise its share in ARG from the current 45 percent to 58 percent.

The takeover was officially announced by the Russian energy giant on Friday and confirmed by President Robert Kocharian on Monday. It appears to be part of a broader Russian-Armenian agreement reached last April. That deal allowed Armenia to temporarily avoid a doubling of the price of imported Russian gas in exchange for ceding more energy assets to Moscow. Those include the incomplete Fifth Unit of the big thermal power plant in Hrazdan.

Karapetian revealed that Fifth Unit formally belongs ARG, another 45 percent of which has until now been owned by the Armenian government. That stake will be diluted to approximately 30 percent as a result of the latest deal.

"This is the sum needed for buying the Fifth Unit," Karapetian said of the $118.8 million to be paid by Gazprom. "Who is buying it? ArmRosGazprom. By what means? By means of the issuance of additional shares [in ARG]. Who is buying the new shares? Gazprom."

"Why not the government of Armenia? Ask the government," he added.

The government announced in April that the Russians will pay $248.8 million for the modern facility and spend an additional $180 million on completing it in the next few years. The lump sum may well be including the cost of the first Armenian section of the under-construction pipeline from Iran which is widely expected to be incorporated into the ARG network.

Armenian officials for months denied reports that Russian control of the Iran-Armenia pipeline is another, unpublicized provision of the April deal. Still, Prime Minister indicated last week that this is the case, arguing that "it would be illogical to have two gas distribution networks in Armenia." A leading Moscow daily, 'Kommersant,' described on Tuesday the anticipated Russian takeover of the pipeline as the Kremlin's "main, if not the sole, geopolitical victory in the region registered in the last several years."

Karapetian claimed, however, that the government in Yerevan has not yet decided who will own the pipeline. "Gazprom is right to be willing to buy the pipeline," he said. "But I don't know whether or not Armenia will agree to sell it."

The overall deal will reinforce Russia's already pervasive presence in the Armenian energy sector which government critics in Yerevan say is turning into an economic stranglehold. But Karapetian strongly defended it, downplaying the fact that the bulk of the Armenian gas infrastructure is now owned by Gazprom and another Russian energy firm, ITERA.

"We remain an Armenian company not only because we pay taxes and are registered in Armenia but because you will find few companies that have invested $83 million here in the last four years," he told a news conference.

Armenia's severe energy crisis of the early 1990s disrupted centralized gas supplies to virtually all individual consumers. ARG, which currently employs some 6,000 people, began slowly but steadily restoring them shortly after its establishment as a Russian-Armenian joint venture in 1997. The process gained momentum in 2002 and seems to be nearing completion.

According to the ARG chief executive, 84 percent of the country's households now have access to gas, saving at least $160 million in combined expenditures on winter heating each year. RFE/RL