By ANDREW E. KRAMER
Published: April 6, 2006
MOSCOW, April 6 — The latest natural gas squabble in the former Soviet Union was settled today, as Armenia negotiated cheap natural gas supplies from Russia with prices well below European averages locked in until 2009. In exchange, the agreement calls for it to surrender to Russia a small but crucial section of pipeline linking it to Iran.
Armenia will pay $110 per 1,000 cubic meters of gas, or about half the European average, but twice what the country pays now, Gazprom, the Russian monopoly, said in a statement.
Gazprom, in turn, will buy a 24-mile section of pipe connecting Armenia to Iran — the tiny and energy-poor country’s only plausible alternative to Russian energy supplies. Also under the agreement Gazprom, through a joint venture, was granted a concession to build a second larger pipeline along this route.
While monetarily small by Gazprom standards, the pact is potentially strategically important in Eurasian natural gas trading that the company aspires to dominate. The gas sales will bring about $187 million annually.
The pipeline route from Iran through Armenia that Gazprom now controls with its 24-mile section was sometimes floated by energy analysts as a possible export corridor for Iranian gas to Europe.
“Gazprom is strengthening its competitive advantages in the republics,” said Roman G. Elagin, an oil and gas analyst at Renaissance Capital, a Moscow brokerage, referring to the former Soviet republics.
Armenia, he said, effectively bargained away its prospects for diversifying its sources of energy in the future for cheap prices now.
“Gazprom is the only supplier of gas to Armenia,” Mr. Elagin said. “Armenia could try to diversify its supply. But with control of this pipeline, Gazprom now controls the competitors’ supply.”
A spokesman for the Armenian embassy in Moscow declined to comment today.
With the deal, Gazprom — the world’s largest natural gas producer — was operating at the intersection of corporate interests and geopolitics, as it has in demanding price increases from other former Soviet states.
Armenia is traditionally loyal to Moscow as a fellow Christian state. Moscow favored Armenia — although officially acting as a peacekeeper — during the conflict with neighboring Azerbaijan over the ethnic Armenian enclave of Karabakh. The feuding precludes energy exports from this oil-rich neighboring country. Also,Russia’s support is crucial for Armenia in its talks on Karabakh this spring.
That leaves Iran, home of the world’s second-largest natural gas reserves after Russia, and Russia itself as Armenia’s only energy sources.
A Gazprom spokesman declined to explain why the company had negotiated to purchase the pipe section leading from Iran. The company’s stated policy is to control gas pipelines for the distribution of its own product. At the same time, the spokesman, who spoke on condition of anonymity, denied Gazprom intended to block possible Iranian gas exports.
“Why would we buy a pipe and turn it off,” the spokesman said.
Still, Gazprom’s attempts to control the export pipes of potential competitors have precedent in earlier agreements.
In Ukraine, Belarus and Georgia, Gazprom has leveraged gas prices in attempts to buy pipelines for its own gas, with partial success only in Belarus. To the east, in Turkmenistan, Uzbekistan and Kazakhstan, Gazprom gained operational control of the Central Asia-Center pipeline, and controls pipelines crossing Russia, thus holding blocking power over these potential competitors for exports to Europe.
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