Why is Gazprom Increasing Gas Prices?

The newspaper "Past" writes: "The issue of gas prices in Armenia is a topic that the public is overly sensitive to. The problem is that gas tariffs are closely linked to serious social issues, and their increase could trigger a chain reaction of price hikes throughout the republic, further complicating citizens' financial situations. This is why the topic of gas price hikes has been a subject of heated discussions since last year.

On January 1, 2019, the price of gas increased by $15 or 10% per 1,000 cubic meters at the border, but this did not affect consumers as the price increase was offset by the internal resources of "Gazprom Armenia". Following this, the authorities assured the public that gas prices would not increase until spring 2020. Prime Minister Nikol Pashinyan declared that discussions with the Russian side resulted in an agreement to set prices that would not harm the Armenian economy.

However, it has now become clear that "Gazprom Armenia" LLC has approached the Public Services Regulatory Commission and intends to change gas prices starting July 1, 2020. Overall, it seems that gas would become cheaper by 3.5 drams for consumers.

However, notable is the section of the application submitted to the PSRC, which proposes to increase the price of natural gas for consumers entitled to family or social benefits for up to 600 cubic meters per year, from the current 100,000 drams per 1,000 cubic meters to 135,909.6 drams. This means that the discount intended for the socially vulnerable group is being eliminated, resulting in a 36% increase in gas prices for them.

This indicates that the gas price increase will primarily hit the socially disadvantaged, who usually consume less than 600 cubic meters. Meanwhile, the country's socio-economic conditions are already poor due to the state of emergency, the spread of the pandemic, and the suspension of operations in certain sectors of the economy, which will negatively impact the ongoing processes even during the summer months.

If we add to the social-economic difficulties the prospect of higher gas prices in summer, we can predict a sharp decline in the living standards of the population and an increase in social tension.

However, it is important to note that global energy prices have significantly decreased. Moreover, the price of oil has dropped to its historical low due to disagreements between Russia and Saudi Arabia. This circumstance cannot have any impact on the gas price formation in Armenia.

It was also noteworthy that during a phone conversation on March 31, Belarusian President Alexander Lukashenko and Armenian Prime Minister Nikol Pashinyan noted the high level of natural gas prices, pointing out that it clearly does not align with the global level and the overall created situation. On the same day, it became clear that Deputy Prime Minister Mher Grigoryan had sent a letter to Gazprom CEO Alexey Miller regarding the initiation of new negotiations about gas prices.

However, the fact that instead of starting new negotiations, "Gazprom Armenia" has submitted an application for a gas price hike already indicates the presence of some issues in Armenian-Russian relations. There are deep-rooted problems. How is it possible that for Bulgaria, Gazprom reduces the gas price by 40% all at once, yet does not accommodate the proposals of its strategic ally, Armenia? This raises critical questions for the Armenian authorities, as well as for the society itself."