Saturday, May 18 2013

As anticipated, the authorities in power made
an unpleasant surprise for us, ordinary citizens, immediately after elections.
This time, they surprised us with news on upcoming gas price hike for
Armenia.  Given the heavy social and
economic situation in the country that has been deteriorating over the last
years, the upcoming gas price hike will affect all the sectors of public life,
starting from economy up to environment.

 

On May 14 ArmRusgasprom CJSC applied to the Public
Services Regulatory Committee (PSRC) for revision of the effective tariff for
gas for small consumers from 132 to 221,000 drams ($532) per 1000 cu m of gas.
The tariff for big consumers (over 100000 cu m of monthly gas consumption) will
be increased to $392.

 

On May 16 some civil activists organized a
picket in front of the Government, PSRC, and the president’s residency, against
ArmRusgasprom’s claims and submitted a relevant application to the Committee
and the President’s Administration. In response, Head of PSRC Robert Nazaryan
said that major reason of the gas price hike is the growth of the import price
from $180 to $270 per 1000 cu m. In the meanwhile, the report by the State
Revenue Committee says that ArmRusgasprom has purchased the Russian gas for the
customs cost - $247 per 1000 cu m since Q1 2012. Nevertheless, the authorities
declared in December 2012 that gas is imported to Armenia for $180. This means
that the authorities have been concealing that the gas tariff was increased
over a year go not to ramp up the social tension on the threshold of the
parliamentary, presidential, and municipal elections.  By unofficial data, the authorities did it at
the expense of ArmRusgasprom, which had an unofficial agreement with the
Republicans to suffer losses till the very end of the election cycle in the
country.  Now, when Mayor Taron Margaryan
has retained his post and the Republicans have finally monopolized the power in
the country, at least for the coming 4 years till the next elections, nothing holds
the authorities from telling the truth to the once again deceived voters.

 

 

However, even in such situation Prime Minister
Tigran Sargsyan has managed to show how the authorities care for the people and
promised to subsidize the new gas tariff by 30 percent. In addition, the prime
minister declared that the country will start issuing eurobonds to the world
equity market. It appears that the government intends to do it by means of
another borrowing.

 

 

Theoretically, a 30% subsidizing of the new gas
tariff at the expense of internal resources and through issue of eurobonds
could become a reality. Prevalence of the country’s foreign debt over the
internal debt is a ground for it. Given the specific Armenian mentality when
nearly all businessmen, a significant part of the population, salt away money
or keep it in banks for a rainy day. In other words, there are possibilities to
mobilize internal funds.  However, there
is nothing that would motivate the population to withdraw their funds and help
Sargsyan implement a new financial scheme for the country.  Over the 20 years of independence, the
Armenian people have been deceived by the authorities too many times to trust
in any initiative of those in power. As for the foreign investors, including
institutional investors, the target audience of those securities, they will
hardly display interest in the Armenian securities amid actual stagnation of
economy and high political risks of the last years even in case of very
attractive interest rates.

 

 

It is noteworthy that the pro-western,
anti-Russian political figures in the country have already taken advantage of
the rising price of the Russian gas. 
Articles slamming Gazprom and its subsidiary ArmRusgasprom and, naturally,
official Moscow have already flooded the press. Although the authorities urge
Mass Media not to seek political motives in the given issue, journalists say
that the Kremlin once again used the gas price as a political instrument. This
sounds quite probable, considering that Yerevan has not given any exact answer
either to Moscow or to Brussels regarding its involvement in the Eurasian
integration projects. It is especially relevant considering Moscow’s tough
stance on possible diversification of import of Russian energy resources with
Iranian ones, which is within the national interests of Armenia. Anyway,
Gazprom’s decision could not but arouse a new wave of anti-Russian sentiments
in Armenia. It would be naïve thinking that Russia’s western ‘partners’ would
not ride on the wave.

 

In addition, ArmRusgasprom that demands raising
the gas price higher than necessary should not pin too much hope on
compensation of its losses (mentioned above). It is not a secret that with
every new rise of the gas tariff, consumption falls in Armenia. More and more
people start using firewood, especially in rural areas. Consequently, over the
last years, firewood consumption in Armenia has been gradually growing and will
soon reach the level of those ‘dark, cold and starving’ 90s, despite the fact
that the country’s gas infrastructure is developed by 95%. The only difference
is the price. In the winter of 2012, firewood cost 15,000-17,000 drams per cu
m, while this year it may cost the people 20,000-25,000 drams. In the
meanwhile, according to the survey by the German Society for International
Cooperation (GIZ) , the country’s forests cover only 11.1% of the total
territory of Armenia. This winter will become a reason for more destruction of
forests, which will cause new problems to the long-suffering environment of
Armenia.

 

In the meanwhile, the Public Services
Regulatory Committee of Armenia displayed a surprising endeavor and initiated
revision of electric power tariffs not waiting for official applications by
power engineers. Local producers have already responded to the upcoming rise of
tariffs by price hikes. Evidently, this time the rise of the gas tariff will
not pass by the transport sector, which operates on compressed gas nearly by
100%. What is especially strange about this entire price hikes that the people
and the political parties calling them opposition almost do not protest. This
circumstance one more time shows the contrariness of the Armenian political
field and culture, in general. Unfortunately, the only explanation is that the
people still have an alternative – migration.