Accessibility links

Breaking News

Russia/Armenia: Gas Companies To Sign A Deal Affecting Turkey

Prague, 27 August 1997 (RFE/RL) - Armenia and Russia's Gazprom are expected to sign within a few days an agreement to set up a joint venture to export Russian gas via Georgia and Armenia to Turkey.

The signing is likely to take place during Armenia's President Levon Ter-Petrossyan's three-day visit to Moscow where he is to sign a new bilateral treaty on friendship and cooperation. The visit starts tomorrow.

Under the terms of the agreement to be signed between Gazprom and its Armenian equivalent, Armgazprom, the volume of Russian gas supplies to and via Armenia is to increase rapidly (from 3 billion cubic meters in 1999 to 9 billion in 2003).

Russia is to receive most of the profits (55 percent and Armenia 45 percent). Work on construction of an export pipeline, and on renovating the existing pipeline network within Armenia, is likely to create thousands of new jobs. Armenia will also receive Russian gas for domestic consumption at prices lower than those it formerly paid for gas from Turkmenistan.

Russia and Armenia agreed already in January 1997 to cooperate in exporting Russian natural gas. In late June, Gazprom Chairman Rem Vyakhirev went to Yerevan to discuss the project with Armenian Prime Minister Robert Kocharyan. Vyakhirev hinted at that time that Gazprom might help financing construction of the new pipeline through Armenia. The new joint venture will put those plans in motion.

In addition to underscoring Moscow's enduring interest in economic ties with Armenia, the creation of this joint venture also highlights Turkey's increasing dependence on gas imports to meet its growing energy needs.

During a meeting of presidents of Black Sea Economic Cooperation member states in Istanbul in late April, Vyakhirev and Turkish Energy Minister Recai Kutan signed a 25-year contract valued at13.500 million dollars, whereby Turkey will increase fivefold (from the current 6 billion cubic meters p.a. to 30 billion in the year 2010) its purchases of Russian natural gas.

Kutan said then that this will satisfy approximately half of Turkey's total gas needs. Turkey plans to construct several new gas-fired power-stations, increasing its reliance on natural gas for 38 per cent of its total energy requirement. (The current figure is 13 percent.)

Russia will remain the largest single supplier of gas to Turkey, followed by Iran. (Turkey, in turn, is the second largest purchaser of Russian natural gas, Germany being the largest.)

Kutan and Vyakhirev also agreed to create joint ventures to repair and upgrade the existing pipeline that supplies Russian gas to Turkey via Ukraine, Romania and Bulgaria.-- Turkey will pay1.500 million dollars towards the construction of new stretches of pipeline and compressor stations -- and to build a new pipeline, either from Izobilnaya, 100 km east of Krasnodar, via Dzhubga and thence under the Black Sea to Samsun on Turkey's Black Sea coast, or overland through the Caucasus.

Gazprom board member Vladimir Rezunenko said that his company has approached European banks to discuss credits for financing the under-water Black Sea pipeline.

The technical difficulties involved in implementing this project are daunting. The 385 km (240 miles) underwater pipeline would be laid at a depth of 2.1 kilometers in places, making it the deepest in the world. This would of necessity mean that the diameter of the pipe itself would have to be quite narrow in order to withstand both external and internal pressure, which in turn would limit throughput capacity.

At a press conference in Moscow in early August, Vyakhirev affirmed that Gazprom still intends to proceed with the trans-Black Sea pipeline, but gave no indication of how long construction might take once funding is secured.

That Moscow and Yerevan agreed in January to build the overland pipeline suggests that Gazprom never considered the Black Sea under-water and Caucasus overland options as mutually exclusive. Nor, apparently, did Turkey:

At the April Black Sea Economic Cooperation summit in Istanbul, Turkish President Suleyman Demirel assured Georgia's Eduard Shevardnadze that Ankara's commitment to the under-water Black Sea pipeline did not mean that the overland alternative through Georgia had been "removed from the agenda". Georgia as a transit country stands to earn tariffs from this pipeline.