Armenia: Gas Price Hike Poses Challenge for Government

While striving to repair the rift created by the March 1 political violence in Yerevan, Armenia's new government is confronting a new challenge over rising natural gas prices.

In his first press conference as prime minister, Tigran Sarkisian announced on April 18 that the government will lift natural gas subsidies beginning May 1, meaning retail gas prices will increase from the current 59 drams per cubic meter (about 19 cents) to 84 drams (about 27 cents).

In April 2006, the government opted to subsidize prices for imported gas in a bid to soften the burden placed on private consumers and companies. Officials indicated that roughly $190 million dollars from the 2006 sale of Unit No. 5 of the Hrazdan Thermal Power Plant would be allocated to cover the subsidy for three years. But now, almost a year ahead of schedule, the government is saying that funds for the subsidy have run out.

In April 18 remarks on Public Television, Energy Minister Armen Movsisian told viewers that "an unprecedented growth in gas consumption meant that just under $2 million from that amount remained by the beginning of this year.

"As a result, the compensation was to have been discontinued in January, but on [then] Prime Minister Serzh Sarkisian's immediate instruction, measures were taken to ensure the continuation of the compensation until the end of the heating season," Movsisian said.

Measures are reportedly in the works to provide compensation to 130,000 families "to protect the socially vulnerable strata [of society] from rising prices," according to Prime Minister Tigran Sarkisian. How these families will be defined is not yet known in detail.

Some economists say that the higher gas prices could carry heavy consequences for many Armenians. Over 26 percent of the population still lives beneath the poverty line, according to official figures. "No matter how much authorities speak about