Armenia braces for gas-fired inflation hike

By bne IntelliNews July 10, 2013

bne -

Armenia is preparing for a sharp inflation hike as consumer prices are already reported to be reacting to the large increase in energy tariffs implemented on June 7. That move was in turn motivated by the recent hike in the price of Russian gas imports.

Armenia's Public Services Regulatory Committee (PSRC) approved the tariffs increases last month, after Gazprom said it would raise the price of gas by 18% starting in July. The Armenian regulator ordered gas tariff price put up by 18.2%. The large share of Armenian electricity generated at gas-fired power stations means electricity bills have increased 26.7%.

According to local press reports, food prices have been quick to respond. Bread, for example, is already more expensive in the regions and the suburbs of the capital Yerevan. Although prices have so far remained constant in the city itself, bread producers say prices are also set to increase there, reports.

The Russian price hike is widely seen as an attempt to press Yerevan - one of its closest allies in the region normally - to drop its pursuit of an EU Association Agreement, and join the Moscow-led Customs Union instead. Gazprom is at the centre of a similar campaign in Ukraine.

Given Armenia's high poverty level, the move was politically unpopular, and even sparked a small protest against the Russian embassy in Yerevan. However, Armenia remains reliant on Russian gas. Although it has said it will look for alternatives, its option remain limited, with the leading candidate Iran charging even more.

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