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Global Insight
November 9, 2012
Armenia seeks closer energy co-operation with Iran
by Andrew Neff
Armenia and Iran sealed a number of energy and transport
infrastructure projects during a top-level meeting on 8 November,
which will help Armenia to diversify its energy imports, and Iran, to
push back increasing international isolation.
Energy dimension
Armenia and Iran yesterday (8 November) launched construction on a
joint hydropower plant (HPP) on the Arax River that forms the border
between the two countries. Armenian president Serzh Sargsyan and
Iranian energy minister Majid Namjoo symbolically laid the first stone
for the 130-MW plant in a ceremony in Meghri, on the Armenian side of
the border. The joint HPP, which is estimated to cost USD253 million,
is expected to be completed in five years and will supply energy to
Iran for the first 15 years of its operation before being handed over
to Armenia. The project is part of an agreement reached between the
two governments back in 2007 to construct two new plants on the Arax
River, one on each side of the river, with the Armenian plant to be
built first (seeWorld Markets Energy: Armenia - Iran: 21 March
2007:andArmenia - Iran: 17 September 2010:).
In addition, Armenia and Iran announced their commitment to develop
further joint energy projects including the construction of a rail
link and an oil products pipeline that will deliver gasoline (petrol)
and diesel fuel from Iranian refineries and possibly other Persian
Gulf countries via Tabriz to the Armenian city of Yeraskh, according
to Armenian energy minister Armen Movsisyan reported in RIA Novosti.
Armenia plans to invest USD100 million to finance the construction of
the Iran-Armenia pipeline on its territory. Armenia's main objective
is to find alternative transportation routes for much-needed petroleum
products and other commodities and open up its potential to access
external markets towards its south given that relations to its eastern
neighbour Azerbaijan and Turkey remain sore. Nevertheless, Movsisyan
made clear that he and his Iranian counterpart are keen to explore
these projects in the near future in the hope of raising the level of
economic co-operation between the two neighbours. Notably, both energy
ministers are co-chairmen of the Armenian-Iranian inter-governmental
commission on economic co-operation. However, given that Armenia and
Iran initially planned to start the construction of the oil products
pipeline in 2011 and finish it in 2014, it remains to be seen whether
this recent pledge will be realised or remain political rhetoric.
Unique dynamics
Armenian - Iranian relations appear to be decoupled from Iran's wider
international troubles concerning its nuclear programme. Tehran has
come under UN sanctions in 2006 and 2010 which are not very stringent
compared to those unilaterally imposed by the US and the EU, which
came into effect on 28 June and 1 July of this year, respectively. The
US and EU sanctions particularly target Iran's oil sector (which has
caused a major drop in Iran's crude exports to under 1 million b/d of
crude or more than half compared to the year before) as well as the
Central Bank of Iran, which makes it difficult for Iran to access US
dollars and trade foreign currencies. From a geopolitical standpoint,
Russia and by extension its main South Caucasian ally Armenia, remain
important partners for Iran. At the same time Armenia has close
relations with the US and is involved in NATO missions in Afghanistan
and Kosovo. Still, it is not wider geopolitical considerations but
more pragmatic national interests that have driven the complementary
relations between Yerevan and Tehran since Armenia gained independence
in 1991. A small but influential Armenian community in Iran has served
as a link for forging close commercial relations.
For the past two decades, Iran has provided a lifeline to Armenia,
which remains under blockade by two of its four neighbours - Turkey
and Azerbaijan - over the Nagorno-Karabakh conflict. Russia is another
important economic and security partner for Armenia. But unlike Iran
it does not share a common border with Armenia, and the August 2008
war between Georgia and Russia once again proved the need for energy
import diversification for Armenia.
The energy deal follows a rare security pact signed in July this year
between the two countries, which includes fight against organised
crime, drug smuggling and strengthening the common border. The deal
was also an attempt by Iran to send a signal to Azerbaijan that is
remains uneasy about Baku's USD1.6-billion arms supply deal with
Israel (seeCountry Intelligence: Azerbaijan - Israel: 27 February
2012:) and speculations that Azerbaijan may provide its airfields to
Israel against potential military anti-Iranian strike.
Outlook and implications
Armenia and Iran not only share geography, but also face similar
external pressures on which they continue to find common ground and
co-operate on energy-related matters. Iran continues to be squeezed by
international sanctions over its controversial nuclear programme that
have stifled investment in its oil and gas sectors, while Armenia
remains subject to a long-running blockade by Turkey and Azerbaijan
over the frozen Nagorno-Karabakh conflict. Against this backdrop,
Armenia and Iran agreed to proceed with the HPPs, which will bolster
the energy supply situation for both countries by providing additional
generation capacity that can also be used to bolster electricity trade
between Armenia and Iran (seeWorld Markets Energy: Armenia - Iran: 7
November 2011:). This is why the two countries are also discussing
joint projects to build a rail link and an oil products pipeline to
strengthen their economic ties and energy co-operation.
November 9, 2012
Armenia seeks closer energy co-operation with Iran
by Andrew Neff
Armenia and Iran sealed a number of energy and transport
infrastructure projects during a top-level meeting on 8 November,
which will help Armenia to diversify its energy imports, and Iran, to
push back increasing international isolation.
Energy dimension
Armenia and Iran yesterday (8 November) launched construction on a
joint hydropower plant (HPP) on the Arax River that forms the border
between the two countries. Armenian president Serzh Sargsyan and
Iranian energy minister Majid Namjoo symbolically laid the first stone
for the 130-MW plant in a ceremony in Meghri, on the Armenian side of
the border. The joint HPP, which is estimated to cost USD253 million,
is expected to be completed in five years and will supply energy to
Iran for the first 15 years of its operation before being handed over
to Armenia. The project is part of an agreement reached between the
two governments back in 2007 to construct two new plants on the Arax
River, one on each side of the river, with the Armenian plant to be
built first (seeWorld Markets Energy: Armenia - Iran: 21 March
2007:andArmenia - Iran: 17 September 2010:).
In addition, Armenia and Iran announced their commitment to develop
further joint energy projects including the construction of a rail
link and an oil products pipeline that will deliver gasoline (petrol)
and diesel fuel from Iranian refineries and possibly other Persian
Gulf countries via Tabriz to the Armenian city of Yeraskh, according
to Armenian energy minister Armen Movsisyan reported in RIA Novosti.
Armenia plans to invest USD100 million to finance the construction of
the Iran-Armenia pipeline on its territory. Armenia's main objective
is to find alternative transportation routes for much-needed petroleum
products and other commodities and open up its potential to access
external markets towards its south given that relations to its eastern
neighbour Azerbaijan and Turkey remain sore. Nevertheless, Movsisyan
made clear that he and his Iranian counterpart are keen to explore
these projects in the near future in the hope of raising the level of
economic co-operation between the two neighbours. Notably, both energy
ministers are co-chairmen of the Armenian-Iranian inter-governmental
commission on economic co-operation. However, given that Armenia and
Iran initially planned to start the construction of the oil products
pipeline in 2011 and finish it in 2014, it remains to be seen whether
this recent pledge will be realised or remain political rhetoric.
Unique dynamics
Armenian - Iranian relations appear to be decoupled from Iran's wider
international troubles concerning its nuclear programme. Tehran has
come under UN sanctions in 2006 and 2010 which are not very stringent
compared to those unilaterally imposed by the US and the EU, which
came into effect on 28 June and 1 July of this year, respectively. The
US and EU sanctions particularly target Iran's oil sector (which has
caused a major drop in Iran's crude exports to under 1 million b/d of
crude or more than half compared to the year before) as well as the
Central Bank of Iran, which makes it difficult for Iran to access US
dollars and trade foreign currencies. From a geopolitical standpoint,
Russia and by extension its main South Caucasian ally Armenia, remain
important partners for Iran. At the same time Armenia has close
relations with the US and is involved in NATO missions in Afghanistan
and Kosovo. Still, it is not wider geopolitical considerations but
more pragmatic national interests that have driven the complementary
relations between Yerevan and Tehran since Armenia gained independence
in 1991. A small but influential Armenian community in Iran has served
as a link for forging close commercial relations.
For the past two decades, Iran has provided a lifeline to Armenia,
which remains under blockade by two of its four neighbours - Turkey
and Azerbaijan - over the Nagorno-Karabakh conflict. Russia is another
important economic and security partner for Armenia. But unlike Iran
it does not share a common border with Armenia, and the August 2008
war between Georgia and Russia once again proved the need for energy
import diversification for Armenia.
The energy deal follows a rare security pact signed in July this year
between the two countries, which includes fight against organised
crime, drug smuggling and strengthening the common border. The deal
was also an attempt by Iran to send a signal to Azerbaijan that is
remains uneasy about Baku's USD1.6-billion arms supply deal with
Israel (seeCountry Intelligence: Azerbaijan - Israel: 27 February
2012:) and speculations that Azerbaijan may provide its airfields to
Israel against potential military anti-Iranian strike.
Outlook and implications
Armenia and Iran not only share geography, but also face similar
external pressures on which they continue to find common ground and
co-operate on energy-related matters. Iran continues to be squeezed by
international sanctions over its controversial nuclear programme that
have stifled investment in its oil and gas sectors, while Armenia
remains subject to a long-running blockade by Turkey and Azerbaijan
over the frozen Nagorno-Karabakh conflict. Against this backdrop,
Armenia and Iran agreed to proceed with the HPPs, which will bolster
the energy supply situation for both countries by providing additional
generation capacity that can also be used to bolster electricity trade
between Armenia and Iran (seeWorld Markets Energy: Armenia - Iran: 7
November 2011:). This is why the two countries are also discussing
joint projects to build a rail link and an oil products pipeline to
strengthen their economic ties and energy co-operation.