Sunday, August 17, 2008

Transit fee for Russian gas

Local media has reported up to 30 percent reduction in the volume of Russian natural gas piped through Georgia beginning on August 7th (ArmInfo, 2008-08-11 15:37:00), with full service seeming to have been restored by August 13th. Regardless of the reasons why Georgia reduced the volume of gas transmitted, what I learned from the recent news is that Armenia pays 10 percent of the gas it receives as a transit fee; Georgia is not an importer of Russian gas.

This transit fee paid by Armenia, particularly given the relatively short length of the pipeline, is likely to be the highest price paid by any country. For a direct local comparison, Azerbaijan pays only 5 percent of the gas it transmits through Georgia to Turkey as a transit fee.

It is obvious why Armenia pays this high price. The country would otherwise freeze and much of the economic activity would come to a screeching halt; 30 percent of the cars run on natural gas.

Armenia is surrounded by big and little bullies. That it cannot help. But nevertheless, it should work hard to diversify its energy sources.


Kenaz Filan said...

How is the second Iran-Armenia pipeline progressing? It might be in Armenia's best interest to cultivate that relationship. It's in Armenia's best geopolitical interests to stay friendly with both countries, IMO. Having two suppliers of natural gas -- and, while we're at it, improved trade with the Islamic Republic -- could protect against Russian bully-boy politics.

Ideally, improving relations with Turkey would be best -- but I don't see that happening until Nagorno Karabakh and Nakhichevan are settled AND the Turkish government is willing to acknowledge the Genocide. In the meantime, Armenia is a more natural friend to Iran than Turkey or Azerbaijan.

David said...

I believe Armenia has not pursued the construction of a gas pipeline with Iran in deference to the US. Given the current situation, there is little doubt that gas imports will be considered. Getting gas to where it is needed will be an expensive proposition given the alpine terrain in southern Armenia and external funding will be a difficult issue.
Armenia does not have too many choices. When you’re small, you have to bend with the wind.