Scent of cheap gas
Yesterday “Gazprom Armenia” applied to Public Services Regulatory Commission of the Republic of Armenia (PSRC) for the review of gas tariff provided to Armenia’s consumers. As reported earlier, “Gazprom Armenia” made a decision to reduce the tariffs for those consuming up to 10 thousand m3 per month, as well as define 3 new groups (socially needy, greenhouses and processing companies), for which cheaper prices will be defined.
Judging from the interview of its head Robert Nazaryan, PSRC will satisfy that bid. Why not approve, if the company intends to drop prices on its own will, in favor of Armenia’s population?
Seemingly the population should openly rejoice, as this cheapening was a real surprise for the population complaining of constant rise in prices.
However, the very point, that we aren’t used to cheapening, moreover, on a personal will, by the gas monopolist, casts doubts on this initiative. Why should “Gazprom” have done it disinterested? Everybody remembers that early this September “Gazprom” decreased the price for the gas supplied to Armenia, defining USD 165 per 1m3 (instead of former 189). Cheapening of gas by USD 24 didn’t have any impact on the gas tariff supplied to final consumers. It was reasoned by the exchange rate of the Armenian dram (AMD)—by that “Gazprom Armenia” to some extent compensated the loss from Armenian dram depreciation.
“Gazprom Armenia,” defining a price both in that very period and prior to that, insisted that the offered tariff is the minimum they can afford.
And just a few months later this company on its own initiative applies to PSRC for tariff reduction. Naturally, the first question, which may arise, is the following: if there was an opportunity to reduce gas tariff, why didn’t they do it earlier, a month before? That’s why “Gazprom Armenia” closes that issue, hinting that today that possibility lacks and gas tariff is reduced at any cost. Moreover, of big losses.
Look, about 1921 million m3 natural gas has been consumed in the period of 2015. 526.6 m3 was consumed by the population, 484.5 m3 by filling stations, 327.8 m3—energy sector, 195.6 m3 —industry, 185.2 m3 —other consumers. Currently “Gazprom Armenia” intends to decrease price for 1 m3 by AMD 7.7 (from 147.6 to 139), for big consumers—by 1.55 cents or AMD 7.3 (price per 1000 m3 becomes 242.1 from 257.56). Through simple calculations we may see that in case of maintenance of current gas volumes “Gazprom Armenia” loses AMD 14 billion as a result of tariff reduction. Or maybe even more, on account of the fact that gas tariff reduces more for the socially needy, greenhouses and processing companies (upon the information at our disposal, those 3 groups altogether consume about 130-140 million m3).
AMD 14 billion is a serious figure. Does “Gazprom Armenia” have the resource to suffer that loss? Judging from the statement by the company, for the time being it doesn’t have. However, it’ll have. “Gazprom Armenia” has 3 means to fill that financial crack.
The first one is the possibility of reduction of gas transit price through the territory of Georgia. As the statement issued by the company reads, gas transit agreement terminates by the end of this year and a new agreement should be concluded between Armenian natural gas provider “Gazprom Export” LLC and “Georgian Gas Transportation Company” LLC. On account of this Armenian Government initiated new negotiations with “Gazprom-Armenia” CJSC, “Gazprom Export” LLC and the Georgian side on possible reduction of natural gas transit price. Besides, “Gazprom Armenia” intends to implement a program on optimization of financial expenditures and review of investment programs. And, finally, as a result of reduction of gas tariff for the consumers in Armenia, the company anticipates growth in consumption volumes.
By the way, it should be noted, that the first point isn’t clear yet. As stated, negotiations have been launched, and their result isn’t known yet. However, this is not all. If by these steps it won’t be possible to fill the financial crack of “Gazprom Armenia,” its shareholder “Gazprom” will finance it. As the statement reads, purpose of financing is stabilizing Armenian natural gas consumption market and boosting tendency of growth.
In short, “Gazprom Armenia” and its owner go against their interests to do something good for the Armenia population. It’s a bit difficult to believe in this. Especially, when “Gazprom Armenia” is a company functioning with a loss: 2015 was terminated with AMD 10.7 billion loss.
The company could take the abovementioned steps (transit conditions, optimization of financial responsibilities) to provide profitability. However, it prefers to give us the benefit anticipated from it.
Why? And more exactly, to whom is this gift addressed? There are opinions, that it’s the gift of “Gazprom” to PM Karen Karapetyan.
As from the very first days of his appointment he touched upon reduction of tariffs for the socially needy and other layers through diversification. And it turns out that one of the first promises made by the PM is rather quickly becoming a reality.
For which “Gazprom” should have made a gift to Karen Karapetyan? Maybe one may state: for the reason, that Karapetyan is a person, close to them and etc. However, “Gazprom” is very pragmatic to give way to such sentimentalism. Just the contrary, experience showed that tough business rules are functioning in our relations and debts are being completely repaid (in form of money or property).
In this regard, it’s worth reminding one point. A few days ago results of the quest by EDB (Eurasian Development Bank) Centre for Integration Studies have been issued, pursuant which Russia’s rating, as a friendly state, has sharply decreased among Armenians—by 17 points. Undoubtedly, Russia’s leadership knew this reality earlier and deeper, than the center’s research. And as it’s observed, one of the purposes of this “tariff” gesture is impacting on the attitude. And from this perspective “Gazprom” gives this gift not to Armenia or Karen Karapetyan, but to itself (Russia).
By Babken Tunyan
