Armenia’s energy sector is facing a crucial choice. At its July 24 sitting the Armenian government considered, but not yet approved several major deals concerning the sphere. As it turned out, the ArmRosgazprom company, which owns almost the entire domestic gas distribution network in Armenia and earlier this year was renamed Gazprom-Armenia, has considerable debts. In particular, the company owes to Vorotan HPP Cascade CJSC, which is to be sold to an American company, Contour Global, although the deal is not completed yet.
The government is considering the possibility of transferring the assets of Gazprom in Armenia on account of settling part of the debts to Vorotan HPP and the Armenian government. In particular, it is planned to transfer 53.3 percent of the assets of Nairit-2 and 3.6 percent of the assets Nairit Plant to Vorotan HPP Cascade CJSC. The budget loans and other liabilities of Armgazprom to the Ministry of Finance of Armenia will be repaid through the transfer of the Tegh-Stepanakert gas pipeline, as well as 46.73 percent of the assets of Nairit-2.
These planned deals have raised a number of questions in Armenia, first of all, whether Vorotan HPP, already together with over half of the shares of Nairit-2 (which is an operating chloroprene rubber production shop), will finally be sold to an American company. The thing is that the deal, which was concluded last November, has not been finalized yet. Moreover, Russian energy giant Rosneft also aspired to get Nairit, but it apparently set the condition that it would buy Nairit only with Vorotan HPP.
The Armenian government does not yet specify who will get the two major energy enterprises – an American company or a Russian one. U.S. Ambassador to Armenia John Heffern believes that the transfer of Vorotan HPP to an American firm will be a powerful message for Western investors that Armenia is ready to work with them.
Meanwhile, if Armenia reconsiders the deal and sells debt-free Nairit and Vorotan to a Russian company, it will be another powerful message that Armenia has finally “surrendered” to Russian companies.
Prime Minister Hovik Abrahamyan gave the government several days to “think” about what to do.
But there is also another aspect here – the transfer of the Tegh-Stepanakert pipeline from Gazprom to the Armenian government. This is the only pipeline through which Nagorno-Karabakh receives natural gas. It is possible that Gazprom has given up this asset at the request of Azerbaijan, which is doing everything for foreign companies not to work in Karabakh officially.
On the other hand, there is an opinion that Rosneft is simply ousting Gazprom also in Armenia. As is known, in Russia these two giants are engaged in tough competition, and Rosneft is aggressively trying to acquire the assets of Gazprom.
The deal on the sale of Vorotan HPP, already with Nairit, may be an indicator of Armenia’s foreign-policy orientation. Armenia will either diversify its energy system by letting Americans to its mostly Russian-dominated market or will admit that it has completely lost the sovereign right to take even economic decisions.
If Armenia takes a step towards Americans it may be followed by a visit of the energy minister to Iran, where he can negotiate about the transit of Iranian gas to Europe via Armenia and Georgia, buying cheap Iranian gas and, accordingly, refusing to buy more expensive gas from Gazprom. If Armenia chooses the Russian company, however, it will have to forget, for a long time, about its being a political entity even on the regional scale.