IRAN TO SUPPLY ARMENIA WITH GAS AND ARMENIA TO EXPORT ELECTRICITY TO IRAN

The first, 24.6 mile (41-kilometer) Armenian section of the pipeline was inaugurated by the presidents of Armenia and Iran in March 2007, more than a decade after the two governments agreed to launch the multimillion-dollar project. The national gas distribution company ARG has since been busy building its second and final section. Armenian President Serzh Sarkisian announced on September 3 that work on the almost 120-mile (200-kilometer) stretch, passing through the country’s most mountainous region, was essentially complete; and that the pipeline would go on stream “in late October or early November” (Armenian Public Television, September 3).

Armenian Energy Minister Armen Movsisian confirmed this later in September, saying that ARG specialists only needed to conduct testing and other technical operations on the facility within the next few weeks. “Iran will pump three million cubic meters of gas [a day] to Armenia during this winter,” the head of the Iranian Gas Export Company, Reza Kasaei-Zadeh, was reported to have announced last week (www.panarmenian.net, September 23).

The pipeline project has given a massive boost to the close political and economic relations that the Islamic Republic has maintained with its sole Christian neighbor since the break-up of the Soviet Union. Iranian President Mahmoud Ahmadinejad reaffirmed Tehran’s intention to deepen those ties when he received Armenian Foreign Minister Eduard Nalbandian in mid-September. “There is no limit to the expansion of relations with Armenia,” the Iranian media quoted him as saying. Armenian-Iranian cooperation, said Ahmadinejad, should serve as a model for the rest of the world (IRNA news agency, September 16).

Successive Armenian governments have keenly sought this cooperation in order to mitigate the effects of the economic blockades that its two other neighbors, Turkey and Azerbaijan, have imposed on it because of the unresolved conflict over Karabakh. The war in Georgia, which temporarily disrupted the vital transit of Armenian cargo through Georgian territory, has only enhanced Iran’s geopolitical significance for Armenia in the eyes of local policy-makers and the public in general. As Movsisian put it, the Iran-Armenia pipeline will “guarantee” his country’s energy security in “cases of crisis” in the region. It was an obvious reference to the continuing Russian-Georgian conflict and its possible consequences for Armenia.

The most severe of those consequences would be a Russian decision to end gas supplies to Georgia through a pipeline that also feeds Armenia. With Georgia still heavily reliant on Russian gas, such a move is arguably the most powerful weapon in Moscow’s arsenal of sanctions against Tbilisi. Should the Russians decide to use it, they will almost certainly be unable to pump gas to Armenia through Georgian territory. Both South Caucasus countries use Russian gas for winter heating and for generating a large part of their electricity.

The launch of the pipeline from Iran could thus hardly come at a better time for Armenia. Access to Iranian gas will not only give Yerevan a viable alternative to Russian deliveries but could strengthen its bargaining position in difficult tariff negotiations with Gazprom. The Russian monopoly plans gradually to raise its gas price for Armenia, which is currently set at $110 per thousand cubic meters, to international levels. Under an agreement signed by Gazprom and ARG executives in Moscow on September 17 and disclosed by the Armenian government a week later, the price will rise to $154 per thousand cubic meters in April 2009 and on to $200 in April 2010. Yerevan’s bargaining position will be limited, however, by the fact that Gazprom has a controlling share in ARG. Whether the Armenian gas company will be ready to cut back on supplies from its parent company if the Iranians offer it a better deal remains to be seen.

According to energy officials in Yerevan, the new pipeline will have the capacity to pump at least 2.3 billion cubic meters of Iranian gas per annum. That is slightly more than the 2007 volume of Armenia’s gas imports from Russia, which was enough for meeting its energy needs. Officials say that Iranian gas will therefore be mainly converted into electricity at Armenian thermal power plants which will then be exported to Iran. In preparation for a surge in Armenian electricity exports, the two countries are currently building a third high-voltage transmission line linking their power grids.

Armenia might also need extra gas if it starts selling electricity to Turkey, with which it has no diplomatic relations or open border. According to Movsisian, a relevant agreement was reached during Turkish President Abdullah Gul’s historic September 6 visit to Yerevan that marked an unprecedented rapprochement between the two historical foes. “The Turkish side has asked for four months to complete their part of the [preparatory] work, after which we will start electricity supplies experimentally for a few days and then on a regular basis,” he said (RFE/RL Armenia Report, September 11). Armenia’s state-run power transmission company said that it would deliver 1.5 billion kilowatt/hours of power to a Belgian utility firm in Turkey in the next two years with the option of more than doubling the supply in 2011 (Arminfo news agency, September 16). The Turkish government has yet to confirm the agreement.