Iran-Armenia Gas Pipeline Deal Permits Gazprom Full Control of Aremian Gas Transmission System

On June 4, 2015, a senior Armenian official announced the sale of the 41 kilometer-long section of the Iran-Armenia natural gas pipeline, stretching from Meghri to Kajaran, to Gazprom. This sale was outlined in an April 2006 agreement signed between Gazprom and the Government of Armenia, which stipulated that ArmRusGazprom (which later became Gazprom-Armenia) would eventually acquire the 41-kilometer section of the pipeline as well as the fifth power generating unit at the Hrazdan Thermal Power Plant (TPP).  The agreement also made Gazprom the majority shareholder in ArmRusGazprom (ARG), and stipulated that ARG would build and operate the second, 197-kilometer section of the pipeline in Armenia. A Gazprom spokesperson confirmed that the hand-over of the pipeline to Gazprom is based on a tentative contract signed in 2007 and that a $30 million prepayment had already been made.  An additional $9 million will likely be required to complete the purchase.

When the Iran-Armenia pipeline was first constructed, many viewed it as an opportunity for Armenia to lessen its dependence on Russian natural gas. Moscow shared that perception and initially tried to force limits on the diameter of the pipe, a gambit that was reportedly successful. In 2014, when Armenia announced that it was planning to increase its gas imports from Iran to 2 billion cubic meters (roughly a 75% increase) the government encountered no opposition from Moscow. The reason for Moscow‘s silence has become increasingly clear.

Gazprom-Armenia, a wholly owned Gazprom subsidiary, holds a local distribution monopoly in Armenia and, aside from Iran, is the only supplier of natural gas to Armenia. The import numbers are, however, highly skewed in favor of Gazprom. In 2014, Armenia imported roughly 2.451 billion cubic meters of natural gas from Russia and Iran, with 2.062 billion cubic meters of that coming from Russia and the remaining 389 from Iran. Once this sale is completed, Gazprom will be in full control of Armenia‘s two major natural gas supply routes.