Armenia Faces Opposition over Gazprom Deal

Bottom Line: Armenia's plans to hand over the state's remaining stake in its natural gas monopoly to Gazprom has opposition politicians furious over the prospect of ceding total control of energy supplies to Russia.

Analysis: Last month, the Armenian government let it slip that it was considering handing over its remaining stake in ArmRusGazprom, a joint venture already 80% owned by Russia's Gazprom. The reason for the deal is to secure concessions for lower gas prices charged by Gazprom. The opposition sees the deal as a free ride for Gazprom, and views the government has handled recent price rises very poorly and has underplayed its hands. Certainly the statement from Armenian Energy Minister Armen Movsisyan after a meeting with Gazprom chief Alexei Miller on 17 June was not encouraging: "We have discussed handing the shares to Gazprom. We will of course find a proportionate, proper way to obtain something from them in return," Movsisyan said.  In return, Russia will "consider."

Recommendation: This is a typical Gazprom power play. The government's' dilemma is that retail gas price rises went into effect on 7 July, and consumers aren't happy (even though the price is still lower than Gazprom charges as the government is subsidizing it). This will also spark higher electricity prices. The government's knee-jerk reaction was to give Gazprom what it wants-and what it has always been shooting for-as a way to appease consumers by (hopefully) engineering cheaper prices. But the opposition is stirring things up enough that it may succeed in engendering public protest over the Gazprom deal, so for the government, it's a lose-lose situation.