Iran won't be able to take Gazprom-Armenia's place

Iran won't be able to take Gazprom-Armenia's place

Recently several analysts from Armenia tried to make society believe that competition between Russian and Iranian gas in the Armenian market will happen, and that Iran can drive out Gazprom-Armenia from the market. One of the evidences of that, as they noted, are statements of Iranian officials about possible increase in volumes gas, supplied to Armenia, as well as price that's acceptable for Yerevan.

Experts consider these statements of Iranian side to be vague, devoid of specifics. They also stress that forecasts of competition in gas supplies to Armenia between Russia and Iran are far from real.

Several media outlets also reported about reduction of the cost of Iranian gas, supplied to Armenia. However, even these expectations are excessively positive, considering the fact that Iranian side refrains from publicly naming any favorable price. "The problem is that Iranian side didn't state its final proposal, and it's wrong to view the statements of Iranian ambassador as business proposal," expert on energy issues Vahe Davtyan said.

According to Hayk Harutyunyan, Deputy Minister of Energy Infrastructures and Natural Resources of Armenia, Iranian side indeed voiced a number of proposals during private conversations. But there were no offers as favorable as the price of Russian gas. Russia annually exports about 2.5 billion cubic meters of gas to Armenia at a price of 150 dollars per thousand cubic meters. Russia sells gas at such a low price only to Armenia and Belarus. The entire gas transportation system of Armenia is also operated by the Gazprom-Armenia company.

As for Iranian gas, the "Gas in exchange for electricity" program still exists. Iranian gas is used by the Yerevan thermoelectric plant and in small volumes by fifth bloc of the Hrazdan TPP. Some of the electricity produced at TPPs is exported back to Iran, while the other part is used by Armenia. It's a barter - in exchange for a cubic meter of gas from Iran, Armenia supplies three kWh of electricity. The total volume of supplies of Iranian gas to Armenia is about 400 million cubic meters per year.

Energy experts consider talks about possible purchase of a cheaper in comparison to Russian Iranian gas by Armenia purely theoretical. The problem is that Iran lacks volumes of gas necessary for export. Even such strategically important country for the future Iranian transit like Turkey pays about 400 dollars per thousand cubic meters of gas. Although Iranians want to double gas production by 2020, experts believe that it's unrealistic. "In my opinion, Gazprom can use Iranian-Armenian gas pipeline and it will be profitable, since Russian gas sold to Armenia can be sold in international markets at much higher price. With the appearance of a real prospect of low price, Iranian gas can replace Russia's gas at the initiative of Russian side itself. If this doesn't happen, then there are no prospects," Iranian expert Sevak Sarukhanyan noted.

According to experts, technically, Armenia doesn't need large volumes of Iranian gas as long as gas pipeline from Russia functions. When it comes to Yerevan's energy policy in the field of gas supplies and their diversification, it makes decision based on all factors that were mentioned above, and, most importantly, based on the price of Russian gas supplied to the country.