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AZERBAIJAN AND RUSSIA-ARMENIA GAS CRISES
Today's Zaman, Turkey
June 16 2013
ZAUR SHIRIYEV
[email protected]
The ongoing debate in Armenia over the increasing price of natural
gas sold by Russia has had an enormous impact on ordinary Armenians,
among whom dissatisfaction is growing.
A further complication in this ongoing debate arose when the president
of the Azerbaijan State Oil Company (SOCAR) declared in an exclusive
interview with local ANSTV on June 7 that Azerbaijan will be able to
supply Armenia with gas. Following this statement, another avenue of
discussion was opened, among the political experts and politicians
in Baku seeking to explain this statement, and the terms under which
Azerbaijan is prepared to help Armenia.
To understand the link between the two developments, we need to look
closer at political-economic development in Armenia, and the full
narrative of the Moscow-Yerevan gas crisis.
Russia's motives and Iran's role
The price of the gas that Russia sells to Armenia was an issue in
bilateral discussions before the February presidential elections, but
the discussion did not leak into the public sphere because Yerevan
was concerned about the possible negative implications for Serzh
Sargsyan's presidential campaign. Then in mid-May, once the rise
had already been approved, a group of civil activists held a protest
in front of the Armenian Parliament. They too were surprised at the
Armenian president's to keep such an important decision under wraps.
Notably, President Sargsyan did not attend the informal summit of the
Collective Security Treaty Organization (CSTO), on May 28, though the
official explanation was that the meeting it clashed with Armenia's
independence day celebration. One can argue that Russia's motives in
this case are clear: Moscow wants to push Armenian government into
action regarding joining Customs Union, as well as the so-called
Eurasian Union initiative. On June 7, following Russia's decision,
a big crowd protested in front of the Russian embassy in Yerevan,
under the slogan "Russia is weakening Armenia."
We can anticipate that the country will face an economic depression
in the coming months, due to the sudden increase from the current $180
per 1,000 cubic meters to $270; ArmRusgasprom, Armenia's domestic gas
distributor, has applied to the Public Services Regulatory Commission
of Armenia to increasing the domestic tariff from the current $316
to $374 per 1,000 cubic meters. The chairman of the Central Bank of
Armenia, Artur Javadyan, stressed that the increase will generate a
further 2-2.5 percent inflation. Considering that as of May 2013, the
12-month inflation was 5.2 percent in Armenia according to official
data, socio-economic conditions are looking bleak. At the very least,
it may lead to bankruptcy for small businesses.
Given these developments, then, it is perhaps not surprisingly that the
Iranian ambassador has told the Armenian public that Tehran is ready to
assist to Armenia in this difficult situation. In reality, however,
such assistance is impossible, at least in the short term.First,
Armenia currently buys gas from Iran under a "barter agreement" --
in exchange for gas, Armenia exports electricity.
Armenia's existing technical capacity makes it impossible to supply
more electricity, and the Armenia-Iran high-voltage electricity
transmission line is not ready. Additionally, the Armenian domestic
energy market is controlled by ArmRosgasprom closed Joint Stock
Company, the majority of which is owned by Russian Gazprom (80
percent). The Armenian government holds 20 percent of the shares.
Therefore, the decision to buy more gas from Iran cannot be made by
the Armenian government alone, but rather by Russian energy giant
Gazprom, and thus essentially by Moscow.
Second, the price of Iranian gas under a commercial agreement would
be even more expensive than the new price of Russian gas. Armenia
buys Iranian gas at $230-235 with the barter arrangement, but the
commercial price could be between $335 and $370, (compared with $270
from Russia). The final obstacle is political; the Armenian government
does not feel comfortable buying more gas, or becoming dependent on
Iranian gas, under current international conditions. With the West
applying sanctions to Iran and the generally unstable situation there,
Yerevan would like to look for safer alternatives.
Gas crisis and Nagorno-Karabakh conflict
Azerbaijan's offer to supply gas to Armenia was clearly the political
rather than commercial move. There are various explanations being
offered; this is my take on SOCAR's statement:
The main reason was to gauge public opinion in both Azerbaijan and
Armenia, where the gas crisis provoked public dissatisfaction with
Russia. The majority of Azerbaijanis public were asking under what
terms the government would be ready to assist Armenia; the precondition
as stated by many politicians is the ending of the Armenian occupation
of Nagorno-Karabakh. No one is questioning the technical side of
things, i.e., whether it is actually possible to supply gas to Armenia
energy expert Ilham Shaban, from the research website Caspian Barrel,
explains the possibility from a technical point of view.
Second, Baku was motivated by a desire to stimulate the
Nagorno-Karabakh conflict negotiations, which have stagnated. The
last time the Azerbaijan and Armenian presidents met was 17 months
ago, and while the two parties' foreign ministers have met to set the
agenda for the presidential meetings, they are still working just to
schedule the meeting. It is expected that in the coming days, during
the meeting of the three co-chairs of the Minsk Group, the countries'
presidents - the US, France and Russia -- will issue a joint statement
about the conflict resolution process at G8 summit.
The final reason is again political: From Baku's vantage point,
the increasing pressure that Moscow is putting on the region, could
hurt countries that are its strategic partners, and if Azerbaijan
can actually assist Armenia, there may be development on conflict
resolution.
Obviously, it remains unknown whether Baku's offer will be considered
by Yerevan. What is clear is that Russia's "gas is politics" principle
remains as powerful as ever.
http://www.todayszaman.com/columnistDetail_getNewsById.action?newsId=318463
Today's Zaman, Turkey
June 16 2013
ZAUR SHIRIYEV
[email protected]
The ongoing debate in Armenia over the increasing price of natural
gas sold by Russia has had an enormous impact on ordinary Armenians,
among whom dissatisfaction is growing.
A further complication in this ongoing debate arose when the president
of the Azerbaijan State Oil Company (SOCAR) declared in an exclusive
interview with local ANSTV on June 7 that Azerbaijan will be able to
supply Armenia with gas. Following this statement, another avenue of
discussion was opened, among the political experts and politicians
in Baku seeking to explain this statement, and the terms under which
Azerbaijan is prepared to help Armenia.
To understand the link between the two developments, we need to look
closer at political-economic development in Armenia, and the full
narrative of the Moscow-Yerevan gas crisis.
Russia's motives and Iran's role
The price of the gas that Russia sells to Armenia was an issue in
bilateral discussions before the February presidential elections, but
the discussion did not leak into the public sphere because Yerevan
was concerned about the possible negative implications for Serzh
Sargsyan's presidential campaign. Then in mid-May, once the rise
had already been approved, a group of civil activists held a protest
in front of the Armenian Parliament. They too were surprised at the
Armenian president's to keep such an important decision under wraps.
Notably, President Sargsyan did not attend the informal summit of the
Collective Security Treaty Organization (CSTO), on May 28, though the
official explanation was that the meeting it clashed with Armenia's
independence day celebration. One can argue that Russia's motives in
this case are clear: Moscow wants to push Armenian government into
action regarding joining Customs Union, as well as the so-called
Eurasian Union initiative. On June 7, following Russia's decision,
a big crowd protested in front of the Russian embassy in Yerevan,
under the slogan "Russia is weakening Armenia."
We can anticipate that the country will face an economic depression
in the coming months, due to the sudden increase from the current $180
per 1,000 cubic meters to $270; ArmRusgasprom, Armenia's domestic gas
distributor, has applied to the Public Services Regulatory Commission
of Armenia to increasing the domestic tariff from the current $316
to $374 per 1,000 cubic meters. The chairman of the Central Bank of
Armenia, Artur Javadyan, stressed that the increase will generate a
further 2-2.5 percent inflation. Considering that as of May 2013, the
12-month inflation was 5.2 percent in Armenia according to official
data, socio-economic conditions are looking bleak. At the very least,
it may lead to bankruptcy for small businesses.
Given these developments, then, it is perhaps not surprisingly that the
Iranian ambassador has told the Armenian public that Tehran is ready to
assist to Armenia in this difficult situation. In reality, however,
such assistance is impossible, at least in the short term.First,
Armenia currently buys gas from Iran under a "barter agreement" --
in exchange for gas, Armenia exports electricity.
Armenia's existing technical capacity makes it impossible to supply
more electricity, and the Armenia-Iran high-voltage electricity
transmission line is not ready. Additionally, the Armenian domestic
energy market is controlled by ArmRosgasprom closed Joint Stock
Company, the majority of which is owned by Russian Gazprom (80
percent). The Armenian government holds 20 percent of the shares.
Therefore, the decision to buy more gas from Iran cannot be made by
the Armenian government alone, but rather by Russian energy giant
Gazprom, and thus essentially by Moscow.
Second, the price of Iranian gas under a commercial agreement would
be even more expensive than the new price of Russian gas. Armenia
buys Iranian gas at $230-235 with the barter arrangement, but the
commercial price could be between $335 and $370, (compared with $270
from Russia). The final obstacle is political; the Armenian government
does not feel comfortable buying more gas, or becoming dependent on
Iranian gas, under current international conditions. With the West
applying sanctions to Iran and the generally unstable situation there,
Yerevan would like to look for safer alternatives.
Gas crisis and Nagorno-Karabakh conflict
Azerbaijan's offer to supply gas to Armenia was clearly the political
rather than commercial move. There are various explanations being
offered; this is my take on SOCAR's statement:
The main reason was to gauge public opinion in both Azerbaijan and
Armenia, where the gas crisis provoked public dissatisfaction with
Russia. The majority of Azerbaijanis public were asking under what
terms the government would be ready to assist Armenia; the precondition
as stated by many politicians is the ending of the Armenian occupation
of Nagorno-Karabakh. No one is questioning the technical side of
things, i.e., whether it is actually possible to supply gas to Armenia
energy expert Ilham Shaban, from the research website Caspian Barrel,
explains the possibility from a technical point of view.
Second, Baku was motivated by a desire to stimulate the
Nagorno-Karabakh conflict negotiations, which have stagnated. The
last time the Azerbaijan and Armenian presidents met was 17 months
ago, and while the two parties' foreign ministers have met to set the
agenda for the presidential meetings, they are still working just to
schedule the meeting. It is expected that in the coming days, during
the meeting of the three co-chairs of the Minsk Group, the countries'
presidents - the US, France and Russia -- will issue a joint statement
about the conflict resolution process at G8 summit.
The final reason is again political: From Baku's vantage point,
the increasing pressure that Moscow is putting on the region, could
hurt countries that are its strategic partners, and if Azerbaijan
can actually assist Armenia, there may be development on conflict
resolution.
Obviously, it remains unknown whether Baku's offer will be considered
by Yerevan. What is clear is that Russia's "gas is politics" principle
remains as powerful as ever.
http://www.todayszaman.com/columnistDetail_getNewsById.action?newsId=318463