Armenia sells gas monopoly stake to Gazprom

By bne IntelliNews January 17, 2014

bne -

Armenia has sold its 20% stake in monopoly gas operator ArmRosgasprom to Gazprom following approval of the deal at a meeting on January 16. The sale gives the Russian gas giant total control over the Armenian company.

The deal had already been agreed between Armenian President Serzh Sargsyan and his Russian counterpart Vladimir Putin at a meeting on December 2, 2013, as Russia increases its influence in Armenia. The government's 20% stake in ArmRosgasprom will be sold to Gazprom, which already holds 80% of the company, for $156m.

The purchase price will cover around half the $300m debt Armenia ran up between 2011 and 2013, when Yerevan decided against passing on a gas price increase to consumers ahead of elections. The 50% rise in the cost of Russian gas had come in the run-up to presidential and local elections in February and May of last year, ARKA reports. However, the price rise was reversed in late 2013 after Armenia agreed to join the Russian-led Customs Union.

In December, Armenia's Energy and Natural Resources Minister Armen Movsisian effectively acknowledged that opposition accusations the government had been keeping the price rise secret until after the elections were correct. The government did not announce the increase until after President Serzh Sargsyan was re-elected, and an 18% price hike was only passed on to consumers in July.

By September, Yerevan had announced it would turn away from its road to closer ties with the EU to join the Russian project instead. By October, Russia cut 30% off the original price hike, to leave Armenia paying $189 per 1,000 cubic metres. European customers pay around $450-500.

The latest deal illustrates Armenia's rapid move into the Russian sphere of influence. An agreement giving Gazprom the sole right to supply gas to the Armenian market until 2043 was also signed during Putin's meeting with Sargsyan.

The agreement was signed by Gazprom's CEO Alexei Miller and Armenian Energy and Natural Resources Minister Armen Movsisyan, reports Prime. Gazprom said it will rebrand ArmRosgasprom as Gazprom Armenia.

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