Gazprom Granted Partial Control of Gas Pipeline

Gazprom has signed a 25-year agreement with the former Soviet republic of Armenia that includes provisions granting the Russian natural gas giant control of part of an Armenian-Iranian gas pipeline and a power-generating unit at the Razdan-5 power plant.

The agreement also obliges Armenia to give ownership rights to Gazprom's Armenian joint venture for the yet-to-be-constructed, 197-kilometer stretch of the pipeline to Iran, as well as the right to export electricity produced at the Razdan-5 plant.

The agreement sets a price for Armenia of $110 per thousand cubic meters of gas up to Jan. 1, 2009, according to a Gazprom statement. The deal was certain to draw fire from Armenia's opposition, which has expressed concern over Russia's control over the country's energy infrastructure.

Gazprom has recently sharply raised prices for Ukraine, Georgia and Moldova, arguing it is ending subsidies to ex-Soviet republics and bringing the rates closer to market prices, but this move has drawn fire from critics who say the Kremlin is using Russia's energy wealth as a political weapon.

Armenia is Russia's main ally in the strategic Caucasus Mountain region, partly thanks to its acceptance of a Russian military base on its territory.

Russia already largely controls the Razdan-5 plant, the country's main electricity producer, and Armenia is wholly dependent on Russia for gas supplies.

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Posted 07/04/06

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