Page 17 - FSUOGM Week 22

FSUOGM POLICY FSUOGM
Armenia-Russia relations under strain
ARMENIA
Russia has a near- monopoly over Armenia’s gas supplies.
ANALYSTS fear that the usually close relations between Russia and Armenia might be affected by falling gas prices due to the coronavirus (COVID-19) pandemic, the Institute for War and Peace Reporting (IWPR) has reported.
Armenia is reliant on Russia for gas. Gazprom Armenia, a subsidiary of Russian giant Gazprom, holds a monopoly on supplies that amount to 2bn cubic metres (bcm) annually. With oil and gas prices falling globally amid the hit to demand around the world dealt by the effects of the pan- demic, Yerevan has asked Moscow to lower the price of the gas sent to Armenia. Simultaneously, Gazprom Armenia is pushing for a gas tariff increase for Armenian consumers.
Russia sells gas to Europe for $60 per thou- sand cubic metres, but for Armenia the price is $165 per thousand cubic metres. In the domes- tic market, Armenian consumers receive gas for around $285 per thousand cubic metres.
Armenia’s deputy prime minister Mher Grig- oryan is Armenia’s prime negotiator with Russia on gas issues. The IWPR quoted him as saying that the price experienced by Armenia was due to a particular bilateral agreement.
“We have a fixed price of 165 dollars per thousand cubic metres at the border, which is the result of a political agreement between Yere- van and Moscow,” he said. “Russia sells gas to Europe according to market principles, that is, the market determines the price, which is now declining.”
The gas price issue is important to Armenia partly because around 35% of the country’s elec- tricity is generated in thermal power plants that operate on natural gas.
The pricing issue has been raised within the Moscow-led Eurasian Economic Union (EEU). Armenia and Belarus have both voiced discon- tent at what they perceive as the high cost of Russian gas, while another bloc member, Kyr- gyzstan, has also asked Russia to lower its prices.
Grigoryan at the end of March addressed the management of Gazprom about the pricing, while the issue was also discussed by Russian President Vladimir Putin and Armenian Prime Minister Nikol Pashinian on April 6. Pashinian has said a gas tariff hike for Armenian consumers was unacceptable, especially during a pandemic.
Armenia also wants to change the terms of its gas supply agreement with Russia to shift from a fixed price to a market pricing mechanism. Yerevan would also prefer to pay in national cur- rency rather than US dollars, which has been the practice so far.
The news service quoted Russian energy expert Igor Yushkov as saying he believed that Moscow may be amenable if the pricing formula is changed.
“Gazprom may agree to a price reduction if Yerevan and Moscow switch from a fixed price to market price mechanism, the way it works with Europe,” he said. “The chances of lowering the price will be higher if Belarus, Armenia and Kyrgyzstan act united within the framework of the EAEU [EEU]. All three countries are now unhappy with the high prices of Russian gas.”
Yushkov added that in this case, Armenia must be ready for floating market prices. “They are now at a low level, but in the future, with the stabilization of the situation in the global econ- omy, prices may rise,” he concluded. ™
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