Gas hysteria

Many experts now speak about a "gas fever" to characterize the current situation in Armenia. Statements about a 64 per cent rise in Russian gas prices have triggered another political and economic crisis in Armenia. The Novosti Armenia-News.am website has reported that given expected changes in the balance of generated electricity, possible changes in natural gas tariffs, changes in US dollar rates in relation to the Armenian dram and a number of other factors, the commission for regulating public utilities services made a unilateral decision to reconsider tariffs for the generation of electricity and the provision of services to energy companies, as well as electricity tariffs to subscribers. Experts believe this will lead to a sharp rise in primary goods prices. 

Several opposition parties have already staged protests in Yerevan. After dissatisfaction poured out in the street, the head of the Armenian government joined the discussions. Prime Minister Tigran Sargsyan sent an official letter to the regulatory commission, requesting that it reconsider gas prices. He said that in accordance with the ArmRosGazprom agreement, Russian gas will be sold at the prince of 270 dollars per 1,000 cubic meters. "The letter says that the Armenian government subsidizes gas prices by 30 per cent. In addition, socially vulnerable families will receive welfare benefits to ensure that increased gas prices do not affect their family budget," Sargsyan said. The prime minister added that open and public debates will be held on the matter in which all political parties and public organizations will take part.

Nevertheless, how gas tariffs will be calculated is still unclear. Popular newspaper, Novoye Vremya, wrote: "The press service of the ArmRosGazprom (daughter enterprise of Russian Gazprom) said: "calculations for the new price for subscribers were made from the sale price of 270 dollars per 1000 cubic metres. The current tariff had been calculated from the 180 dollar per 1,000 cubic meter correlation. This means a 50 per cent rise in Russian gas prices. Does this mean that the natural gas price increases by another 17 per cent in the process of the distribution of natural gas to houses and companies within the country? Is this justified?" "There were cases when parts of new tariffs (for gas, water or electricity) would be slashed at the insistence of members of the commission," the paper said. "Some experts make pessimistic forecasts." The head of the Association of Consumers of Armenia, Armen Bogosyan, said in an interview with Panorama.am: "It is possible that the tariffs will be slightly reduced, possibly by 12-15 per cent. This however will not resolve the problem."

It appears Armenia does not have an articulate plan for regulating the price rise. Due to its aggressive policy it has forfeited a chance to receive Azerbaijani gas. Theoretically, gas supplies from Iran could be an alternative to Russian gas, but in practice this was impossible to materialize. The point is that Russian Gazprom is not just a monopolist in gas supplies - through its daughter enterprise, ArmRosGazprom it owns gas-distributing networks as well. Despite the fact that there is a gas pipeline between Armenia and Iran, Gazprom reduced its capacity to an extent that it is impossible now to talk about a real alternative to Russian gas. At the moment, Russian Gazprom acts in the way any other monopolist would act in its place: it increases prices and justifies this by its own commercial interests. 

Armenia has drawn political conclusions from the increased gas prices. While the authorities refrain from making strong statements, independent experts are much more open in their assessments. Lragir.am website said that Gazprom's decision has triggered a wave of anti-Russian sentiments in Armenia. "The Armenian people in the past years had stopped believing in the myth about the Russian saviour. Now Moscow's policy is destroying the final remains of this trust. Moscow is distancing itself from Armenia whose population has traditionally maintained friendly relations with Russia. Armenia and Russia are linked by numerous bonds, including human, business, and economic but these bonds are being gradually severed by Moscow," the paper wrote. Musa Mikaelyan, analyst of the opposition website 1in.am, linked the increased gas prices to "strategic aggression against Armenia". He said that "what Russia, a strategic partner, is doing to Armenia is nothing but a political adventurism. Russia has increased its tariffs so much that this will create serious problems for our economy, something that will trigger a new wave of emigration or force the government to accumulate fresh foreign debts to mitigate the social consequences. In short, Russia is dealing a strong economic blow to Armenian security from which Armenia will find it hard to recover. All this is being done at a time when Armenian economy is starting to recover after the crisis. This is happening amid a number of regional challenges: economic sanctions are increasing against Iran; Armenia is accepting refugees from Syria and it is expected that a new wave of refugees will arrive soon." The expert concludes that, in all likelihood, Russia is simply trying to punish Armenian authorities for strengthening the relations with Europe. He adds that a country that acts in such a manner cannot be called Armenia's strategic partner. 

As was expected, there have been numerous statements that suggest that the "bad" Russia is pushing Armenia to join the Eurasian Economic Community. Armenian social networking sites are actively discussing an article published by Kavkaz Online, called "Armenia may join Russia". The author of the article, CIS affairs commentator Roman Agarunov, says that Russian political circles are considering the prospect of Armenia joining Russia. According to some reports, Moscow has already secured a preliminary consent from Armenian President Serzh Sargsyan. 

"Armenia has been economically dependent on Russia in recent years. A number of spheres and businesses have been transferred to Russia to secure them against debt. Large Armenian companies are going under Russian ownership, the way this happened with the Armavia national air carrier which suspended its operation. It is believed that Russia will purchase Armavia," the author says. The Armenian Foreign Ministry dismissed the article as "inconclusive". 

Nevertheless, it is evident that Armenia is deeply offended by Russia. This is not just about gas prices. Apparently, there is serious misunderstanding between Moscow and Yerevan regarding the basis for commercial relations between the two countries. Russian companies control not only gas networks but also the energy system, the railway and mobile communications. Russia views these agreements with Armenia as purely commercial. However, the current "gas hysteria" shows that Armenia had handed over all possible strategic facilities to Russian management in an effort to secure political preferences. Yerevan believed this would translate into Russia's withdrawal from the Kars and Moscow agreements that define the current borders between Turkey and Armenia. Proceeding from "historical obligations" and "historical relations" between the two countries, Armenia did not suspect that Russia would increase gas prices to this extent. 

However, now that increased prices have become a reality, Armenia is experiencing a shock. This is not only because the local, slowly dying economy can simply not withstand new gas realities. Yerevan is more concerned about the fact that the hopes it had pinned on Russia eventually fell through. One can only guess where this insult will lead to.