Russia focuses on gas
by Susanna Petrosyan, Yerevan. Exclusively for VK
Armenian and Russian media have been spreading rumours this month about Gazprom (Russia) and the Armenian Ministry for Energy and Natural Resources planning to increase prices for Russian gas supplies to Armenia. Gazprom plans to set new gas prices on October 1. The price for 1000 cubic meters of gas will increase from $180 to $280. It may further increase to $320 on January 1, 2013.
Minister for Energy and Natural Resources Armen Movsisyan confirmed the talks, but gave no details: “Negotiations will end soon. Details will be published after their conclusion”. Commenting on the rumours that gas prices increased to $220, the minister said that the public would have been informed if it were true.
The Russian monopolist owns 80% of shares in the joint Armenian-Russian enterprise ArmRosgazprom, the rest belongs to the Armenian government. The last time the gas prices in Armenia increased was on April 1, 2010. The price rose from 96 drams per cubic meters to 132 drams. The price for large consumers using over 10,000 cubic meters increased from 215 drams per cubic meter to 243.13 drams.
The increasing gas prices were caused by attempts to develop and implement new beneficial schemes of gas payments for poor families by the Armenian government. It was usually done after April 1, not at the upcoming winter. The prices are expected to rise twice.
Gazprom seems to have a harsh price policy. The company requested the Russian government to make a dramatic rise of prices for Russian gas in CIS states on October 1. It is a result of increased taxes for resource extraction. The company lost $2 billion. Gazprom provides gas for Europe at an average price of $415 per 1000 cubic meters. Ukraine buys it at about the same price. Other CIS states purchase it for $200-300.
Russia warned Armenia about a new increase of prices. Russian steps are quite reasonable, because gas has own price to be sold for all around the world. But this reason does not explain why ArmRosgazprom is such state. The company gasified over 90% of residential areas in Armenia in the last 10 years. The goals of Rosgazprom are unclear, its subsidiary has made enormous investments in gasification projects of Armenia.
Higher prices for gas may cause the poor part of the population to quit purchasing it. The number of poor families in the country has increased by 35% in the last years.
Moreover, ArmRosgazprom said that it had a loss of 15.4 billion drams ($1 = 408 drams). Losses were caused by strengthening dollars. It means that the company with deficit is making steps contrary to expanding the range of its consumers.
“If we are strategic partners and set issues at a political level, than the gas price should not be higher than it is in any other Russian region, because 80% of ArmRosgazprom belong to Gazprom. If it is a non-political issue, then we should ask why the enterprises Armenia gave Russia within the deal of “property for debt” are still idle? They need to open workplaces so that our citizens could pay such high prices”, as stated by MP Artsvik Minasyan, a member of the authorities of Dashnaktsutyun. He insists that Russia is trying to run a “slavery policy” in Armenia.
Expert Ayk Balanyan believes that Russia uses its monopoly positions at the gas market to achieve certain political preferences: “This policy is not only realized in Armenia, the same happened in Belarus, Ukraine and other neighbor states”, Balanyan explains.
Many Armenian analysts say that the gas tool has become a tested and an efficient means of Russian influence in neighbor states. The political context in Russia’s decision to increase gas prices for the upcoming winter and presidential polls set for February 2013 is obvious. Electoral campaigns in Armenia always focus on social programs. The elections in February 2013 are peculiar for President Serzh Sargsyan’s run for the second term. Thus, the social situation Is of great importance for the ruling party.
Such dramatic rise of prices would no doubt cause a chain reaction. Increase of energy and transport expenses would cause higher prices for goods and services. it would become a heavy burden for economy, which is in grave condition. The hard social situation will be the first target. Neither the state economy, nor the population are ready for such boost of prices. Presidential elections put additional pressure on the socio-economic situation. Tensions within the state may escalate in such conditions.
Armenian authorities would most likely do their best to ease the situation and convince Russia not to increase gas prices until the presidential polls to avoid social grievances.
It is hard to explain why Russia wants to treat its strategic partner that way. Some Armenian experts believe that Moscow wants to be secure about whether the president would be reelected or not. But it is only an assumption. The answer would most likely be given at the end of the “dead political season”.