Gazprom's Extravagant Gift to Prime Minister Karapetyan

  • Comments - 07 November 2016, 20:10
Gazprom Armenia has announced about its application on reducing the gas price, its purpose and justification. Gazprom states that the purpose of the application on reducing the gas price is to stabilize the natural gas market and boost levels of consumption, enlarge the activities of gas consumers.

The company also notes other factors, including decrease in price of natural gas transit via Georgian territory, expected growth of consumption levels in the result of reduction of natural gas tariffs, optimization of expenses of Gazprom Armenia CJSC aimed at reducing the Company’s liabilities and reviewing investment programs, funding by Gazprom, the sole shareholder of Gazprom Armenia.

Prime Minister Karen Karapetyan who put forth the issue of reducing gas price who had been the CEO of ARG for ten years and prior to his appointment as prime minister he was the deputy of one of the companies of Gazprom.

After his appointment as prime minister Karen Karapetyan announced about the necessity to take steps towards reducing gas price. He gave such an assignment to the ministry of energy. Karapetyan announced that this reduction should be at the expense of economic operators, not the budget. In addition, the logic of the assignment was to reduce the price for families at risk and economic operators.

Now Gazprom Armenia submits an application which envisages price cut for households. This is commendable, considering that the price of gas consumed in households is one of the highest in the world though at the border the price is one of the lowest options in the world.

Prior to the application of Gazprom Armenia, Armenia greeted the head of Gazprom Alexey Miller. He and Serzh Sargsyan discussed the issue of reducing the gas price for households. A few days later Gazprom Armenia submitted its application.

Now the so called justifications are being presented. These give rise to questions: let us assume that the Armenian government had not changed, and Hovik Abrahamyan remained prime minister or someone else, not Karen Karapetyan had been appointed. Would Gazprom Armenia have had submitted the same application with the same justifications, irrespective of the personality of the prime minister? Would the prime minister have had gone for sustainable development of the gas market and increase in consumers?

Or is the problem not on the prime minister but also the parliamentary election ahead of which an attempt is made to produce a tangible social effective?

Otherwise, it may appear that Gazprom Armenia which is a monopoly in Armenia is presenting an extravagant gift to its ex-employee Karen Karapetyan. Of course, it is good that ordinary consumers and economic operators will also benefit from this gift, it is even very good but the problem is how this monopoly is regulated and how the gas price forms.

Another question is whether the Public Services Regulatory Commission which confirms prices could have not initiated a process of gas reduction.

There is another interesting circumstance. A few days ago the head of that Commission Robert Nazaryan announced that they have studied the gas price and they cannot suggest ways of reducing the gas price.

It turns out that Gazprom Armenia can suggest ways and the Public Services Regulatory Commission can’t. How has the Commission studied the situation that it does not know any ways of cutting the price while Gazprom Armenia knows? It turns out that either the Public Services Regulatory Commission is not competent and has not studied the sector it regulates well enough or this commission has no voice, it is a formal agency that confirms Gazprom’s decisions or the agreements reached between the Armenian government and Gazprom.

This is the main issue, in other words, the natural monopoly in Armenia and, at the same time, the lack of an effective mechanism for regulating it. There is a monopoly defined at a state level. However, it is not regulated by a state, that is a public mechanism, but the agreements between the government and the owner of the economic operator.

And it leads to a system of pricing which is not accountable, and all the society can do is to hope that its interests may be in line with the interests of the operators involved in this mechanism.