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Armenia: Gazprom Puts Pressure On Debtor

Armenia and Russia face a serious test of their generally cordial relationship as a dispute over energy issues intensifies. After Armenia decided this week to disqualify a Russian company from bidding for Armenia's electricity distribution network, Russia's Gazprom demanded payment of Armenia's unpaid gas bill. RFE/RL correspondent Emil Danielyan reports from Yerevan.

Yerevan, 21 April 2000 (RFE/RL) -- Russia's Gazprom monopoly is threatening to stop natural gas deliveries to Armenia if the Armenian government does not pay $16 million in unpaid bills. Russia has already cut gas supplies to Armenia by more than half, and says it will shut them off completely unless Armenia clears its debt by 24 April.

Armenian Energy Minister David Zadoyan is flying to Moscow today to try to win a reprieve. Gazprom, together with its ITERA subsidiary, effectively controls Armenia's natural gas infrastructure through a 55 percent stake in the Armenian energy company Armrosgaz.

Armenia would face a crippling energy crisis should the Russians shut the tap on the pipeline running through Georgia. The prospect of a gas cut-off rekindles Armenians' memories of the dark days of the early 1990s, when severe energy shortages allowed for just a few hours of electricity a day.

Gazprom's threat follows Armenia's decision earlier this week (Tuesday) to exclude a company controlled by Gazprom from bidding in the privatization of Armenia's electricity distribution network.

And Gazprom's short deadline raises a number of questions among local observers. Armenia's debt is large, but other former Soviet republics owe much more. And Armenia is not the worst defaulter.

Turkmenistan's ambassador to Armenia, Toyli Kurbanov, defends Armenia's payment record. Armenia still owes Turkmenistan $14 million for earlier fuel deliveries. But Kurbanov said yesterday that Armenia meets its obligations much better than other ex-Soviet states.

"It is important to note that of all debtor-states, the Republic of Armenia was and is the most diligent and punctual payer."

Gazprom's demands that Armenia pay up came as Gazprom subsidiary ITERA was left off a short-list of foreign companies bidding to buy four Armenian electricity companies.

Deputy Energy Minister Karen Galustian announced this week (Tuesday) that ITERA does not qualify to bid in the tender because it did not submit an internationally certified audit to show its financial situation. Galustian said a government commission handling the tender left four Western companies in the race: the giant Electricite de France, the Swiss-Swedish group ABB, Spain's Union Feroza, and the U.S. operator AES Silk Road.

A tough message from the World Bank, which is Armenia's leading creditor, and reportedly from other Western agencies, may have been instrumental in the decision to reject ITERA as a bidder for Armenia's electricity network. Earlier this year, after Armenian media reported that Russia was pressuring Armenia to include the Gazprom subsidiary, high-ranking World Bank executives argued strongly against giving ITERA the right to bid, saying the company does not have adequate finances.

A U.S.-registered company, ITERA has never been engaged in energy distribution. Some Russian media allege it serves as a tool for Gazprom to channel its huge revenues to offshore accounts.

Russia's ambassador to Armenia, Anatoly Dryukov, promptly deplored ITERA's rejection. Local news agencies quoted DryuArmenia/21 kov this week (Wednesday) as saying the decision contravenes Russian-Armenian agreements on deepening economic cooperation.

In a statement released today (Friday), Rosenergoatom, a Russian company which runs a group of nuclear power stations and hoped to join ITERA in buying Armenia's electricity network, accused the Armenian government of discriminating against Russian firms. It said Armenia is giving in to U.S. pressure to further the interests of the American company AES Silk Road, which already owns the power grid in Georgia's capital, Tbilisi.

ITERA officials have been unavailable for comment, and it is not clear whether the drastic reduction of Russian gas supplies is related to the dispute over the privatization of Armenia's energy sector. But it appears the latest development in the bidding will complicate the Armenian government's efforts to keep vital gas supplies streaming in.