Pashinyan to have tough talk in Moscow

Pashinyan to have tough talk in Moscow

Armenia's acting Prime Minister Nikol Pashinyan will pay a working visit to Moscow today, where he will be received by Russian President Vladimir Putin. Due to a number of circumstances, some tension has arisen between Armenia and Russia in recent months, and Pashinyan’s visit is obviously intended to help overcome it. It's safe to say that the uncertain future price for Russian gas will be the central topic on the agenda of Pashinyan's talks. This issue is extremely important not only for Armenia's economy, but also in the context of the Armenian population's evaluation of their new government's performance.

After the 'My Step' bloc, easily winning an absolute majority in the National Assembly, won the parliamentary elections, the burden of responsibility for the republic's socio-economic situation has been imposed on the Pashinyan government. "Tame opposition" in the person of Prosperous Armenia party and Armenian Renaissance party cannot interfere with government initiatives even theoretically. The extra-parliamentary opposition in the person of the discredited Republican Party of Armenia would be even less able to influence the government's actions - these are "political dead bodies", as the Armenian Prime Minister says. Thus, only the 'My Step' bloc and personally Nikol Pashinyan will be accountable - ultimately, the PM's block gained over 70% of the vote in the last election precisely because his personal rating.

In order to understand the importance of Russian gas for the Armenian economy, let's look at some data of the Armenian Energy Ministry for 2017. Then the volume of Russia's gas imports to Armenia increased by 7% and amounted to 1 billion 996 million cubic meters, while Iran's imports - by 2.9% and amounted to 382 million 700 thousand cubic meters by the end of the year. In 2017, total gas consumption increased by 5.3% in Armenia.

Now Gazprom-Armenia, a subsidiary of Russia's Gazprom, receives gas at the Armenian border at the price of $150 per 1000 cubic meters, but the current agreement expires on December 31, 2018. Taking into account Gazprom-Armenia's extra charges and VAT, households (and others consuming up to 10 thousand cubic meters per month) pay $290 per 1000 cubic meters of gas. On the whole, considering benefits for socially disadvantaged groups of the population, large consumers and agricultural enterprises, the average gas price is $255 per 1000 cubic meters in Armenia.

On the eve of Pashinyan's trip to Moscow, Armenia's 168 Zham wrote that Russia plans to increase the price to $215 per 1000 cubic meters citing the alleged letter sent by Deputy Prime Minister Dmitry Kozak to his colleague Tigran Avinyan. It was refuted by Avinyan's office. In fact, such a sharp increase in price seems unlikely. However, the fact that the office of Armenia's  Deputy Prime Minister didn't rule out the possibility of increasing gas prices is interesting. In general, a certain rise in Russian gas prices for Armenia seems likely against the background of a sharp drop in world oil prices. It is difficult for Russia to be generous when its own revenues decline. Especially is the light of some allies' inadequate behavior, like Armenia in the CSTO, which initially discredited the organization by arresting its secretary general, and now blocking the appointment of his successor, effectively opposing its ambitions to the demands of all the other participants of the bloc.

It is noteworthy that against the background of the Russian-Armenian gas negotiations, Armenian Ambassador to Iran Artashes Tumanyan said that Armenia plans to import more gas from Iran. It is technically possible, since only 20% oft he Iran-Armenia gas pipeline's capacity is used now. But is it beneficial for Yerevan in economic and political terms? In May, Armenia's Minister of Energy Infrastructures and Natural Resources Artur Grigoryan said that Iran is ready to offer Armenia the gas price of $165 at the border. Grigoryan recalled that Russian gas is 10% cheaper. "In addition, Gazprom Armenia annually invests $27-28 million in the modernization of the network," Grigoryan said.

There is also a geopolitical factor: a significant increase in Iranian gas imports to Armenia, especially in the context of U.S. National Security Adviser John Bolton's statements regarding Armenia’s cooperation with Iran, will be very negatively perceived overseas. Washington’s opinion cannot be ignored by the Armenian leadership, especially when we talk about the Nikol Pashinyan team, which has a soft spot for the West.

Finally, the extent to which Iran is ready to increase gas supplies to Armenia is still unknown. First, Tehran has much more attractive markets, for example, Turkey, which buys gas at a price of $400 per 1000 cubic meters. Second, it is far from certain that, given the high demand for gas in the domestic market, Iran would decide to increase gas exports to Armenia dramatically, thereby interfering in the sphere of Russian interests.

Thus, half blockaded Armenia does not have any real alternatives to the Russian gas, and Iran’s assistance is not forthcoming. Nikol Pashinyan can keep talking about the "Armenia's independent policy" and the need for Russia to "adapt to new realities". But in Moscow he will listen to Russian conditions and will be forced to agree to them, since the Kremlin still has key leverage over Armenia's politics and economy. The agenda is broad - Armenia's actions in the CSTO Secretary General’s issue, resembling outright sabotage, flirting with NATO, artificially inflated hysteria around the 102nd Russian base, trying to disown the agreement on prohibiting foreign military access to biological laboratories in the country, and even the closure of the last Russian-language program on Armenian television. All these negative trends have begun eight months ago, and they cannot but cause growing concern in Russian society. In Moscow, Nikol Pashinyan will have to give convincing answers to a number of delicate questions.

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