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Review & Outlook - 01/28/2006

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Armenia questions the benefits of strategic alliance with Russia

Armenian News Network / Groong
January 28, 2006

By Grigor Hakobyan


Background

With the coming of the New Year, Armenia came face to face with a
problem that may undermine its national security as a viable and
sovereign nation-state. The problem in question is the role played by
major business monopolies in Armenia and their ability to undermine
the positive performance of Armenia's economy. Among many, the problem
that is most acute is Armenia's heavy reliance on Russian gas
monopoly, Gazprom, for the deliveries of its natural gas to the
country. Despite the fact that the Armenian government was able to
postpone an almost 100% hike in the price of natural gas until April
1st of 2006, that is less than sufficient solace for a country whose
federal budget is rather meager in size, compared to those of Eastern
European countries like Poland, Bulgaria or Romania. Very little was
attained from the January 22nd meeting of President Kocharyan with
Russian President Vladimir Putin in Moscow and the rise in the price
for natural gas is currently viewed by the Armenian leadership as
inevitable.

As a result of the price hike, public moods prevailing in Armenia
toward the neo-imperial policies of economic expansion and colonial-
style dependence being implemented by the Russian government in the
region began to change rather quickly. Public statements of various
government figures in Armenia and other Armenian intellectuals and
political figures outside of the ruling government ranged from
suggestions to charge for the difference in price from the stationing
of Russian troops in Armenia to their rapid withdrawal from the
country.[1] Although representatives of Gazprom have recently offered
to maintain the current prices of natural gas delivered to Armenia for
some undetermined time in exchange for acquisition of additional
Armenian assets, such as the 5th block of the Hrazdan's thermal power
plant owned by the Armenian government and currently being renovated
by Iranian specialists on a $150 million dollar loan and taking part
in the construction of Iran-Armenia gas pipeline [2], the Armenian
officials in their turn have rejected such offers and argued that
multi-million dollar loans under much favorable conditions could be
easily attained from a range of donors in the west [3].


Analysis

At this point of course, it is rather naove to expect any significant
changes in the foreign policy orientation of Armenia, but nonetheless
it would be plausible to expect further qualitative changes in
Armenia's growing relations with the west as the country continues its
gradual integration with the western political and economic
infrastructures. As the interaction between Armenia and the west
intensifies, while bullying by neo-imperialist Russian continues, the
probability of Armenia expressing an interest to join NATO could
become more pronounced than it is currently observed. Strengthening of
democratic institutions in the country and the opening of the decades
long railroad blockade of Armenia, - that is so tenaciously maintained
by the neighboring Turkey, as it is demanded by the European Union and
often encouraged by the United States, - could significantly expedite
Armenia's integration with the west and further erode Russian
influence in the region.

Another process actively taking place in the country is the ongoing
effort by the ruling government of Armenia to diversify its energy
sources and rapidly introduce a range of alternative sources of energy
so readily availably in the country. Among them is the ongoing
construction of Iran-Armenia gas pipeline expected to be completed by
the end of 2006, much sooner than originally envisioned. The gas
pipeline is expected to stretch out 141 km (87 miles) and deliver 36
billion cubic meters of natural gas within the 20 years of its
operation. [4] The possibility of extending the gas pipeline into
Georgia, Ukraine and further into Eastern Europe can certainly become
a future development scenario of the project. The cost of the
Iran-Armenia gas pipeline is $170 million dollars. It is being
financed by the Iranian government in exchange for future deliveries
of electricity generated in Armenia and subsequently transmitted back
to Iran as a form of repayment of the loan.

Yet another form of energy diversification implemented by the Armenian
government is the large number of hydroelectric power plants currently
being operated in Armenia. At this point there are 32 minor
hydro-electric power plants being constructed in the country in
addition to those that already exist in Armenia. Another 24 hydro
electric power plants are planned to be constructed in the foreseeable
future. According to a recent study conducted by the World Bank [5],
Armenia's total hydroelectric capacity is estimated at about 400 MW,
which is enough to secure nearly 10% of the country's inner demand for
electricity [6]. Creation of yet another nuclear power plant in 2016
as a replacement to the one that is already being utilized at Metsamor
is also widely anticipated.

Meanwhile, in the fall of 2005, with the help of Iranian engineers,
first time ever, Armenia was able to construct its first energy
generating wind farm, located in the Pushkin Pass, north-eastern
Armenia. [7] It is comprised of 4 turbines with initial capacity of
660 KW, however, the government of Armenia is envisioning enlarging
the existing power plant and subsequently increasing its energy
generation capacity. More wind farms are planned for construction
throughout the country in the near future. Special programs are being
implemented by the government of Armenia to promote the increasing use
of solar energy in the country, while harnessing the geothermal
energy. In addition, biomass continues to be of growing interest for
the authorities. [8]


Conclusions

The sudden rise in prices for deliveries of Russian gas into the
country and subsequent rise of transit fees initiated by Georgia
toward Armenia has created a two-fold situation in the country. One
that threatens to undermine Armenia's continuous economic growth and
another one which pushes Armenian creativity to its limits, making
Armenia the region's pioneer in the field of engineering and
utilizations of alternative sources of energy. Continuous progress in
the fields of echo technologies promises a brighter energy future for
Armenia.

The geopolitical consequences of a rift in public opinion prevailing
in Armenia toward its Russian counterpart as a result of economic
pressures applied by the Russian government toward Armenia may set a
stage for a doubling of Armenia's efforts for faster integration with
Euro-Atlantic structures. Furthermore, continuing Russian efforts to
dominate the region may boomerang and further undermine the Russian
influence in the south Caucasus.


Sources

1) PanARMENIAN.Net-12/26/05

2) PanARMENIAN.Net-12/08/05

3) Arminfo-12/18/06

4) Armenpress-03/04/05

5) http://wbln0018.worldbank.org/esmap/site.nsf/files/070-05+RE+Potential+Final+P044440.pdf/$FILE/070-05+RE+Potential+Final+P044440.pdf

6) Arminfo-01/16/06

7) Armenpress-11/02/05

8) Arka News Agency-12/22/06


--
Grigor Hakobyan is an independent political analyst residing in
Scottsdale, AZ.

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