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Ömer Engin LÜTEM, Retired Ambassador
16 March 2006 - ?KSAREN
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!Şæ0 ="justify">The sale price of natural gas that Russia had maintained with some of its former provinces received a 50% increase. Among these former provinces, that are now independent states, is Armenia.

The fact that Russia chose not to sanction this price increase across the board, points to an underling political agenda which is further strengthened by the fact that Belarus was not subject to this new standard.

This new price was ill received in Armenia; alongside the added strain on the economy it made it clear that Armenia was no longer in Russia’s good graces. Whereas the Armenians had always had close ties to Moscow and had been its only ally in the Caucasus, even going as far as to accommodate a Russian military base in the region. The Armenians had assumed that they would receive special privileges.

President Kocaryan’s attempt to patch things up with Putin and ultimately revoke the new prices failed, but Russia did postpone the new levy until the first of April.

Russia’s disposition on the matter greatly disillusioned the Armenians. Many newspapers and television stations close to the Armenian central authority commenced a media campaign against Russia, but failed. Armenia was heavily dependent on Russia in respect to its antagonistic policies towards Azerbaijan and Turkey. This fact left Armenia with no alternatives; being markedly dependent on Russia meant bowing to her will. 

The Armenian Prime Minister Markaryan had announced in late January that they would do everything in their power so as to not allow the new gas prices to affect the consumer. March 10th would prove that this was not the case. Natural gas for personal / home use shot up fifty percent. Industrial natural gas on the other hand took on an enormous 85% price increase. Also there is an expected 15% increase in the price of electricity that is as of yet undisclosed.

Armenia will receive Iranian natural gas from a pipeline that is scheduled to be online in 2007. An effort is being made to have this pipeline working by late 2006. Even though this will maneuver Armenia away from the doldrums of natural gas dependency to a single supplier it will none the less put her in the same boat as Turkey, who has had problems related to project deadline infringements and issues regarding the quality of Iranian natural gas.

In conclusion it can be said that the era of cheap natural gas for Armenia is closed. Pricy energy means that energy production will also suffer, ultimately slowing the Armenian economy.

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