As the European Union, the United States and a host of other nations gear up to cut Iran off, Armenia is pursuing joint projects with Tehran that could potentially open new conduits to the outside world.
On January 23, the EU decided to impose an embargo on Iranian oil, to start in July, provided Tehran continues to obstruct international efforts to monitor its nuclear program. The United States, meanwhile, in late December tightened its sanctions on Iran.
A nation like Armenia, which receives tens of millions of dollars annually in US assistance, might be expected to quickly align itself behind the Western-spearheaded embargo. But Armenia has been itself blockaded since the early 1990s by two of its four neighbors, Turkey and Azerbaijan. Given that circumstance, policymakers in Yerevan view Iran as a lifeline.
The centerpiece of Armenian-Iranian cooperation is a planned 365-kilometer-long oil pipeline, which would originate in Tabriz and be capable of delivering 1.5 million liters of gasoline and diesel daily to the southwestern Armenian town of Yeraskh. Work on the pipeline, estimated to cost $160 million -$180 million, is slated to begin this year, and to be completed by 2014. Tehran has agreed to pay for the section of the oil pipeline that runs through Iranian territory; Yerevan would cover the Armenian section.
US sanctions can target a $20-million-plus investment “that directly and significantly contributes to the enhancement of Iran’s ability to develop petroleum resources,” as well as related interactions with certain Iranian financial institutions, such as the Central Bank of the Islamic Republic of Iran. But, even as the Obama administration intensifies efforts to rally countries around the Iran embargo, no official word appears to have been given on whether the Iranian-Armenian oil pipeline project is “sanctionable.”
At present, Armenian leaders say the international embargo campaign against Iran won’t stop Yerevan’s plan to build the pipeline, which experts at the Armenian Energy Ministry estimate will save the country up to 30 percent per year in energy costs. “They [Iran] always have problems, but we continue to work,” Energy and Natural Resources Minister Armen Movsisian told EurasiaNet.org. The project, he added, will begin “soon.”
Movsisian did not specify whether or not the Armenian government has discussed with Washington how the sanctions would apply to the Iranian oil pipeline, or other Armenian projects with Iran. The US Embassy in Yerevan did not respond to questions from EurasiaNet.org in time for publication. An alleged 2006 cable from the embassy, published by Wikileaks, noted that it would be “extremely difficult” for Armenia to agree to US sanctions against Iran, “given the critical energy links between the two counties and Armenia's geo-political situation.”
Representatives from Armenia’s Ministry of Foreign Affairs and Ministry of Economy declined to comment on the prospects for any of the country’s projects with Iran.
Armenia already makes use of a 140-kilometer-long natural gas pipeline from Iran that has a delivery capacity of 2.3 billion cubic meters per year. A hydropower project and a railway project, both dependent on Iranian financing, are also in the works. A 2.64-megawatt Iranian-Armenian wind farm exists in the northern region of Lori.
As it has for the gas pipeline, some Armenian analysts believe that Washington will turn a blind eye to the potential construction of a Tabriz- Yeraskh pipeline. Energy cooperation with Iran has been touted by Armenia as a way to diversify its energy supplies away from Russia – a key regional priority for the United States. “Because the West is well aware of the fact that Armenia, not by its fault, is in a two-sided blockade, and in the case of war [against Iran] might find itself up against a wall, a more lenient approach is shown to us, and under these circumstances, the projects might be continued,” argued Armenian National Academy of Sciences senior researcher Gohar Iskandarian, an Iranian studies specialist.
By contrast, a gas pipeline from Pakistan to Iran has produced discussions on how the project could affect US aid to Islamabad, the US State Department announced on January 3. The Russia factor is most likely why Armenia’s own Iranian pipeline has not led to similar discussions about the status of Yerevan’s roughly $40 million in aid from the United States. That factor also appears to play a role elsewhere in the region.
On January 23, The Wall Street Journal cited an unidentified congressional aide as saying that US legislators would agree to exempt the BP-led Shah Deniz II natural gas project in the Caspian Sea from sanctions, even though it involves a minority Iranian stake. The Journal reported the aide as saying that a “broad-based consensus” exists in the US Congress “that our sanctions policy should impose maximum economic pain on the Iranians without allowing Russia to hold Eastern Europe hostage for energy supplies.”
In the wake of the European Union’s decision to ban new oil contracts with Iran and freeze Iranian Central Bank assets, questions are arising about Tehran’s ability to finance any of its Armenian projects. Stepan Safarian, a former political analyst who now heads the opposition Heritage Party’s parliamentary faction, believes efforts to tighten an international embargo could spur Iran to cooperate with Armenia. “Iran’s priority today is to break through the isolation surrounding it, and, for that, Iran might put aside economic interests and implement the projects purely out of a political motivation,” reasoned Safarian, who attributed Iranian President Mahmoud Ahmadinejad’s December 23 visit to Yerevan to such an interest.
During his trip, the Iranian leader asserted that no “negative or prohibiting circumstance … could hinder the development of [bilateral] relations.”
Iskandarian, the Iran expert, reasons that if Tehran lacks funds to pursue the projects with Armenia, Iranian leaders could look for private financing, or possibly obtain investments from China or India, two countries which oppose US sanctions and which have evolving interests in the South Caucasus.
Similarly, Energy Minister Movsisian maintains that international wariness toward Iran is unlikely to frustrate Armenia’s plans to use private investors to finance its own $100-million share of the oil pipeline project. “It won’t be hard to raise the money,” he said. “This project has great economic prospects and so finding investors is not a problem.”
Gayane Abrahamyan is a reporter for ArmeniaNow.com in Yerevan.