Price of Russian natural gas for Armenia remains uncertain
It seemed as though the issue regarding the price of Russian natural gas would eventually be solved during the visit of the President of the Russian Federation to Armenia, and it was assumed that the Nikol Pashinyan-Vladimir Putin meeting would finally give the answer to the troubling question.
The meeting is over, but the price of natural gas remains uncertain. There was no information about the agreements reached or whether or not there were agreements.
Nikol Pashinyan also dodged the issue in his Facebook post, though he probably would have rushed to say something, if there was something to say.
The fact that there is nothing to say is already a bad sign. This means that the parties still haven’t managed to find solutions, but there is almost no more time. As Deputy Prime Minister Mher Grigoryan had declared before the meeting of the President of the Russian Federation and the Prime Minister of Armenia, the talks over the price of natural gas must be over by the end of this year.
This statement was not by chance since the current price of Russian natural gas for Armenia will be in effect this year only.
This means that the parties must be able to come to terms by the end of this year. If setting a new price leads to revision of internal tariffs, then it appears that the parties must come to terms earlier so that the Public Services Regulatory Commission of Armenia has time to revise the tariffs. This is why the internal tariffs need to be approved at least a month before they enter into force, that is, no later than November 30, 2019.
It turns out that Armenia has maximum two months to end the talks. However, what is not clear is what agreement the parties will reach.
Nevertheless, there is one thing that seems to have been specified, and that is the fact that there will not be a 30% increase. “The information that there will be a 30% increase of the price of natural gas does not correspond to reality,” Deputy Prime Minister Mher Grigoryan declared, even though it is clear that the discussions are on increase of the price of natural gas. If the talks were not over increase, they would have ended a long time ago. The issue lies in the amount of increase which, regardless of everything, is a painful issue for Armenia, especially if the increase leads to the revision of internal tariffs.
Last time when Russia raised the price of natural gas for Armenia by 10%, this wasn’t too painful for the public because there was no need to change internal tariffs. However, this time, there is almost no chance that the internal tariffs won’t change. No matter how much they say there are no talks over 30% increase, it is assumed that even a small increase of import will have an impact on internal tariffs. It has been declared several times that the internal resources of the gas supplying company are not unlimited in order to restrict the increase of tariffs.
However, the problems that may arise by not incorporating the impact of the previous price increase in the internal tariffs remain unclear. In this stage, the aim was to disallow the increase of tariffs because the consequences would appear later. This might also be expressed in the form of emergence of another debt to the gas supplying company.
Time will tell. For now, the primary issue is the new price of import of natural gas. Consumers are interested in how this will impact the internal tariffs, and the economy and social conditions of the society are extremely sensitive towards this.
Consumers will be the ones who will carry the burden of inflation, no matter how heavy it is. The increase of internal tariffs is an additional expense for both the economy and especially the population. This has an impact on several sectors of economy and leads to the increase of prices of goods and services. The competitiveness of domestic products drops, and this is already a serious problem for the realization of Armenian products in foreign markets.
These are problems that the government must focus on. However, this does not mean that the government has a lot of resources for maneuvering. Even though Armenia has an alternative opportunity for import of natural gas thanks to the former authorities, namely the Iran-Armenia gas pipeline, nevertheless, at this moment, Russian gas is the most competitive for Armenia. This will most probably be after the expected inflation. There is no doubt that Russia will not raise the price of natural gas for Armenia to an extent that it is no longer competitive with Iranian natural gas.
However, even without that, Iran is not inclined to assume the task of supplying natural gas to Armenia. No matter how many times it is declared that Iran is ready to supply natural gas to Armenia for a low price, this is not the case. Currently, the natural gas-for-electricity supply plan is the best option for cooperation between Iran and Armenia, in spite of the fact that it seems as though this has also caused problems.
While Nikol Pashinyan was talking about deepening and expanding the economic ties between Iran and Armenia and bringing a new sweep to the current programs during his visit to Iran in the beginning of this year, not only have there been fewer exchanges of natural gas and electricity, but they have also decreased during the year. In the first semester of the year, Iran supplied natural gas to Armenia, but it was 35,000,000 cubic meters less than the natural gas that was supplied in the same period of last year. The import of Iranian gas, which is carried out exclusively through the specified plan, has been reduced by 16%.
Armenia has delivered less electricity, meaning it has delivered 700,000,000 kilowatts per hour to Iran in exchange of natural gas supplied in the course of seven months (the drop was more than 30%).
No matter how big of a role is attached to Iranian-Armenian economic ties with the natural gas-for-electricity supply plan, there are a lot of problems in this regard. There is no way to end construction of the third Iran-Armenia high voltage power line in order to make it possible to expand the plan. However, until then, the issue of the price of Iranian natural gas also needs to be solved since it lies at the core of the natural gas-for-electricity supply plan.
HAKOB KOCHARYAN
