Gas Prices Prompt Armenia to Debate Alliance with Russia

Demands from energy giant GazProm for a gas price hike have prompted an unprecedented debate in Armenia about the value of the country's strategic partnership with Russia.

On January 22, the day that explosions severed gas pipelines linking Russia with Armenia via Georgia, Armenian President Robert Kocharian and Russian President Vladimir Putin met in the Kremlin to reaffirm their commitment to a military and political alliance. [For background see the Eurasia Insight archive].

Plans by the Russian state-owned GazProm company to increase gas prices from $56 per 1000 cubic meters to $110 per 1000 cubic meters had foreshadowed the meeting. Armenian officials had taken umbrage at the fact that GazProm's December 2005 decision was announced after Armenia's 2006 state budget had already been approved. The two countries' long-term alliance prompted many to expect that the price change would not apply to Armenia or that at least the country would be forewarned well in advance. Armenia receives all of its gas from Russia, which also controls an estimated 70 percent of the country's energy network.

But though the gas price dispute was reportedly discussed during the meeting, it was not featured in either leader's official statements.

For now, gas prices have been frozen at their current levels until April 2006, and negotiations between Armenia and GazProm are ongoing. But officials say that the best they expect is a price lower than that paid by neighbors Georgia and Azerbaijan. A final agreement is expected by mid-February.

Meanwhile, the squabble has put Armenia and Russia's long-term alliance up for debate. Speaking to Kentron TV on January 13, Prime Minister Andrani Margarian said that GazProm's plans to nearly double prices meant that Yerevan needs "to clarify with Russia what is meant under