The Gas Supply Agreement Expires on March 31: Why is the Armenian Delegation Going to Russia Today?

On March 15, 2021, Prime Minister Nikol Pashinyan signed a decision to send a delegation to the Russian Federation. Although the purpose of the delegation's mission is not specified in the decision, it becomes clear from the composition of the delegation and the chosen time period (March 16-18, 2021) that the current authorities are negotiating with the Russian side regarding gas prices. This was stated by Suren Parsyan, the head of the Economic Research Office of the Armenian Revolutionary Federation Bureau, on his Facebook page.

“Included in the delegation are Deputy Prime Minister Mher Grigoryan, who has led failed gas negotiations in recent years, during whose tenure the gas price at the border rose by 10%, Deputy Minister of Energy and Natural Resources Hakob Vardanyan, and the Chairman of the Public Services Regulatory Commission Garegin Baghramyan. I remind you that the gas supply agreement expires on March 31, and in the absence of a new arrangement, the Russian side may supply gas at even higher prices than the current $165 per 1,000 cubic meters,” Parsyan wrote.

During this period, Moldova and Belarus are receiving gas at $120-127, which is about 30% cheaper than from Armenia. Setting aside the current government's pre-election promises regarding the reduction of natural gas and electricity tariffs, it should be noted that the price of natural gas for businesses has increased by 6% since July 19, 2020, and the electricity tariff rose by 8% starting February 1, 2021, resulting in unprecedented high inflation.

It is no secret that many economic and political factors affect gas negotiations. Nevertheless, it is hoped that this time our authorities have better prepared for these negotiations, which will allow for a reduction in the border gas price. Otherwise, in the context of rising energy costs, our economy and businesses will continue to lose competitiveness, and the crisis will deepen further,” Parsyan concluded.