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Armenia: Historic Tensions Influence Pipeline Agreement With Iran

After months of delay, Iran may be ready to launch a gas pipeline to Armenia. RFE/RL's correspondent Michael Lelyveld says in this report that the new energy route is one of many that has been influenced by historic tensions in the region.

Boston, 7 September 2000 (RFE/RL) -- A reported agreement to build a gas pipeline from Iran to Armenia has highlighted the many complexities of politics, energy and debt that crisscross the region.

Last week, the RFE/RL bureau in Yerevan reported that Armenian Energy Minister Karen Galustian reached an understanding in Tehran that will clear the way for work on the 140-kilometer gas line from Iran this fall.

Russian, French, and Greek companies are said to be ready to finance the $150-million cost. According to earlier reports, negotiations have also been held with Chinese firms. While details remain sketchy, the project is believed to have been delayed for months by bargaining over Iranian tariffs for the gas.

In 1999, Iran agreed to provide Armenia with 1 billion cubic meters of gas per year, allowing the country to diversify its sources from Russia, which supplies most of its energy needs. Armenia's dependence on a single nation may have reached a practical limit. Multilateral lenders including the World Bank have advised against further swaps of Armenian energy assets for debt to Moscow.

But the country may have few alternatives, other than Iran. Aside from Armenia's location, its long conflict with Azerbaijan makes it unlikely that it will have access to Caspian gas, until peace is reached over Nagorno-Karabakh.

Political isolation, more than geography, has created a patchwork of supply routes throughout the region. The area's energy map has been drawn by the forces of avoidance rather than consumer needs. The options have been narrowed even further by accumulated energy debts.

In Azerbaijan's enclave of Nakhichevan, for example, Iran has been pressing for payment of debts for electricity supplies that have built up over the past three years. The territory's access to energy is limited because it is divided from the rest of Azerbaijan by Armenia. On Monday, a deadline for payment apparently passed without a cutoff, possibly because Iran is looking forward to a visit by Azerbaijani President Heidar Aliyev this month.

The situation has placed Iran in the position of supplying energy to both Azerbaijan and Armenia, which are unable to deal with each other.

Similarly last week, Russia's Unified Energy System reached agreement on supplying electricity to Turkey through Azerbaijan and Georgia. The route apparently bypasses Armenia because of historic tensions with Ankara.

On another front, Azerbaijan is now developing a gas line through Georgia to supply Turkey, competing with a parallel line from Iran. Azerbaijan may now have three reasons for pursuing a separate northern path for its gas.

First, a route through Iran has been opposed by the United States.

Second, a feud with Turkmenistan has stalled cooperation with Azerbaijan on a trans-Caspian pipeline to Turkey.

And now because of the deal with Armenia, Azerbaijan may have to avoid exports through Iran so that none of its gas can be said to be reaching Yerevan.

The result of such complex patterns is an untold economic cost of regional conflict. Expensive pipelines must be built, while other practical routes are denied.

Trade opportunities are narrowed, while the region's energy must be exported to markets that can afford it and where no conflict exists.

In a reminder of the high cost of non-cooperation, Turkmenistan last week pressed Azerbaijan for the payment of gas debts for deliveries six years ago.

Better ties with Turkmenistan could give Azerbaijan access to the gas it needs in the near term for winter fuel supplies. Instead, Baku may be forced to buy gas at a higher price from Moscow, which is also pushing Azerbaijan to ship its oil over Russian territory.

It is hard to see an end to the conflicts that distort the region's energy map. The benefits of its resources will also be limited as long as they have to follow roundabout routes.