WikiLeaks –Armenia
2007 March 19, 13:50 (Monday)
Classified By: EconOff E. Pelletreau for reasons 1.4 (b,d).
SUMMARY:
- (C) On March 16, we met with ArmRusGasProm (ARGP) General Director Karen Karapetyan to discuss the Iran-Armenia pipeline, Russian ownership of ARGP and future developments in the Armenian energy sector. Karapetyan reported that the “second phase” of the Iran-Armenia pipeline would be complete by late 2008, allowing Armenia to make maximum use of the recently-inaugurated Meghri-Kajaran pipeline and told us that ownership of the pipeline, be it Russian or Armenian, was ultimately unimportant. He said that the best way forward for the Armenian energy sector would be improved cooperation with neighboring countries, particularly Turkey and Azerbaijan.
END SUMMARY
INTERNAL “SECOND PHASE” PIPELINE UPGRADES BY 2008
- (C) The Iran-Armenian pipeline, dedicated March 19 (septel), runs 42 km from the border crossing at Meghri to Kajaran. (NOTE: We understand that some additional steps are still needed to make the pipeline operational. END NOTE.) The pipeline is 700 millimeters in diameter and, according to Karapetyan, capable of carrying a supply sufficient to meet Armenia’s current annual natural gas needs (1.7 billion cubic meters (bcm)) and projected future needs (2.3 bcm). The pipeline’s current capacity is limited by two factors — inadequate gas pressure on the Iranian side and the poor quality of the connecting Kajaran-Ararat pipeline on the Armenian side (ref A). Karapetyan confirmed what we had heard earlier from Deputy Energy Minister Areg Galstyan, that under current conditions the pipeline cannot transfer more than a relatively modest 300 million cubic meters (mcm) annually of usable gas as far as Yerevan (ref A). He added, however, that ARGP was already upgrading an additional 200 kilometers of pipeline connecting Kajaran through Sisian and Jermuk to the power-hungry central Ararat valley, which includes Yerevan. The upgrade, which will cost more than USD 280 million, is scheduled to be complete in late 2008. Once the upgrade is complete, Armenia will have the ability to replace Russian gas imports with Iranian ones. Karapetyan said that he would never support relying exclusively on the Iran-Armenia pipeline, however, because it would leave the country in the same vulnerable position as it currently is with Russia.
OWNERSHIP OF MEGHRI-KAJARAN PIPELINE STILL UNDER DISCUSSION
- (C) In June 2006, GazProm announced plans to buy the Iran-Armenia pipeline then under construction (ref B). In November 2006, GazProm became a majority shareholder in ARGP opening the possibility that the GOAM could transfer ownership of the pipeline to ARGP and still remain true to its earlier statement that there would be no direct sale to the Russians (ref A). According to Karapetyan, the GOAM has yet to respond to ARGP,s purchase offer. Karapetyan said it would be logical for the GOAM to sell the pipeline to ARGP because any product shipped through the Iran-Armenia pipeline would have to connect to the rest of Armenia’s ARGP-owned network. He said it did not make sense for the GOAM to establish a separate company just to manage 40 km of pipe. Previously, the Armenian Minister of Finance Khachatryan told us Armenia would “sell the pipeline to the devil” if he would pay for the second phase of construction (the crucial Kajaran-Ararat connection) (ref C).
- (C) When we raised the question of whether Russian control of the Armenian energy sector was becoming excessive, Karapetyan replied GazProm ownership of ARGP or the pipeline created little risk for Armenia. “The pipes will stay in Armenia, whoever owns them,” he said. He added that the European Commission had recently signed an agreement with GazProm and that agreements with GazProm should be seen as business deals, not in terms of politics. Finally, he said that other companies or the GOAM could have bid on the supplemental ARGP shares which GazProm purchased to become majority shareholders, but had failed to do so.
OPEN TO DO BUSINESS WITH NEIGHBORING COUNTRIES
- (C) At the end of our conversation, Karapetyan said that the best way forward for the Armenian energy sector would be to integrate Armenia into the Baku-Tbilisi-Erzerum (South Caucasus Pipeline) gas pipeline. He said that economically it made sense for Armenia to buy gas from Azerbaijan or Turkey and that his company would be happy to pursue such agreements if it were politically feasible. He also said that he had proposed selling Armenian electricity to the Azerbaijani exclave of Nakhichevan at 2.5 cents per KW/h, significantly less than the current price Nakhichevanis pay for electricity from Iran (3.85 cents per KW/h). Karapetyan said his Azeri counterpart was so flummoxed by the proposal, that he hung up the phone and never called back.
GODFREY
