March 20, 2007
Iran, closer and closer
So the gas pipeline from Iran opened today.
There's a lot of backstory to that pipeline. Here's the short version. Armenia has no energy sources of its own -- no coal, no oil, no natural gas. They used to get oil and gas from Azerbaijan, but then they had a war with Azerbaijan, so no more oil or gas.
There's a gas pipeline from Russia. Unfortunately it goes through Georgia. The Russians and Georgians don't always get along, and that gas pipeline is prone to mysterious explosions. (The Georgians say the Russians do it; the Russians say it's Chechen rebels in the north Caucasus.) Also, Russia has been jacking up the price of natural gas in the last few years. Armenia used to be able to buy gas from Russia dirt cheap, well below world prices. No more -- now they have to pay like everyone else.
Fortunately for Armenia, there's a friendly country, rich in oil and natural gas, right next door. So the Armenians could turn to Iran for gas. Simple, right?
Ah ha ha ha.
The Russians absolutely hated this idea. After all, a pipeline from Iran to Armenia could easily be stretched a bit farther, to Georgia. That would make the Georgians independent of Russia for their gas supplies. And in Moscow's eyes, the Georgians are too damn independent already.
So Moscow set some conditions.
One, it restricted the size of the pipeline. Originally it was supposed to be 1.5 meters wide. The Russians told the Armenians it could only be 71 centimeters wide. That way, it can only carry enough gas for Armenia, not enough to sell on to Georgia.
Two, Armenia has already decided to sell the Armenian side of the pipeline to Gazprom. We all know Gazprom, right? The totally independent Russian energy company. So.
[But wait, you ask. Isn't Armenia an independent country? How can the Russians just come in and tell them what to do? Well, that's an interesting topic, but it really deserves a post of its own. Let's just note that they can, and they do, and move on.]
At first the pipeline will only deliver about 400 million cubic meters of Iranian gas per year. Since Armenia is currently importing about 1.5 billion cubic meters of Russian gas, that will only be a supplement. However, by 2009, when the pipeline is at full capacity, it will be able to deliver about 2.3 billion cubic meters per year. That figure is bigger than current Armenian needs, but the Armenians say they'll need more energy as their economy grows.
The Armenian side of the pipeline is being built with a loan from Iran. Armenia is supposed to pay the money back by exporting electricity to Iran. Who knows if that will work, but anyway the two countries are going to link up their power grids later this year.
-- I'm actually okay with this. Armenia gets some options. That's not a bad thing.
However, I had to roll my eyes at this:
President Robert Kocharian and his Iranian counterpart Mahmoud Ahmadinejad inaugurated on Monday a long-awaited pipeline that will allow Armenia to import natural gas from Iran and ease its strong dependence on Russian energy resources.Lighting a symbolic torch, the two leaders officially opened the first Armenian section of the pipeline during a ceremony held in Agarak, a small Armenian town on the Iranian border...
[Ahmadinejad] called the event a "big step" in the development of bilateral ties. "I am very happy and grateful to Almighty God for enabling us to open the Iran-Armenia gas pipeline and to provide a new service to the people of Armenia ," he said. "I told my good friend [Kocharian] that we are very happy because he is happy, the government of Armenia is happy, and the people of Armenia are happy," he added.
Bleah.
But people have to stay warm in winter somehow. So.
Posted by douglas at March 20, 2007 02:44 PMArmenia has no energy sources of its own -- no coal, no oil, no natural gas.
...
Armenia is supposed to pay the money back by exporting electricity to Iran. Who knows if that will work, but anyway the two countries are going to link up their power grids later this year.
Shipping gas next door to be turned into electricity and shipped back seems all wrong. So have they started building dams?
Posted by: Errol at March 21, 2007 01:44 PMTrading fuel for electricity is not an uncommon pattern.
I'll make a wild guess that the watershed vis-a-vis political boundaries and the climate patterns aren't real great for further Armenian hydroelectric power, otherwise the Soviets would have already done it.
In terms of use percentage, Armenia is pretty far up the nuclear power list, near 40%. I believe it's the poorest nation to have double-digit nuclear consumption. Soviet-era plants, woo.
Posted by: Carlos at March 21, 2007 06:59 PMErrol, it's not unusual. It can happen for a lot of reasons, some economically legitimate, some not. To give an obvious example, it may be cheaper to build and run a power plant in one country than another.
Carlos, there's some hydropower here, but you're right -- they're about up against the limits.
They have one nuclear power plant: Metsamor. Build in Soviet times, it sits on top of a major fault. The EU has been pressuring Armenia to close it, but without success.
Doug M.
... what doesn't sit on top of a fault in Armenia?
Metsamor, Kozloduy, Ignalina, Bohunice -- those were the last four sites where early dodgy Soviet reactor designs operated outside of the current boundaries of Russia. (There was a fifth site...) Those last three are now within the EU. Somehow, I don't see Armenia getting that carrot.
I'll guess that current operation of Metsamor is like the MIT student taking uppers: inspired flashes of brilliance in a very bad place. (IMS, at Kozloduy, in an attempt to introduce an institutional culture of safety, they had to turn over the staff. Twice.)
Posted by: Carlos at March 22, 2007 01:11 AMI didn't expect the market distortions to be so bad that they could pay back loans on the basis of converting the gas surplus to their own needs to electricity. It would be different if virtually all the gas was being shipped back as power, but if that was the case the Russians wouldn't be that upset.
That suggests that they can pay a LOT less to make powerfrom gas than the Iranians - 'real' costs presumably are different.
I can explain why it makes sense for NZ to import coal to the coal-fired plant sitting on a operating coal field, while exporting coal as well.
Posted by: Errol at March 22, 2007 06:28 AMI smell a case in here. So, Doug, why does Yerevan jump when Moscow says?
Posted by: Noel Maurer at March 22, 2007 06:19 PMNoel, because it's a small country that's surrounded by neighbors who are big, actively hostile, or both.
1) Russia has troops in Armenia, guarding the Turkish border. Turkey is not currently a threat to Armenia, but it's widely believed here that the Turks would side with Azerbaijan in the next war. (And a next war is a real possibility.)
2) Russia is neutral in the Armenia-Azerbaijan conflict, but at least they don't actively favor Baku. Since they're the big dog of the region, the Armenians want to keep them no worse than neutral.
3) Russia favors the status quo, which has Armenia and Azerbaijan in a frozen conflict over Karabakh. Armenia has problems with the status quo in some regards -- the closed borders on two sides are a bitch -- but, other hand, the status quo has them staying in control of Karabakh.
4) If Russia turned cool, Armenia would become -- at best -- a satellite of Iran.
Iran already exercises a certain amount of economic leverage. Half the goods on my shelves are from there. (And there's something slightly disorienting about a jar of Nutella with subtitles in Arabic/Persian.) And then of course, the large Armenian minority in Iran would be a hostage.
Russian friendship keeps Teheran honest, friendly without being too overbearing. Of course, Russian friendship comes at a price, but most things of value do.
Those are the strategic reasons. There are a bunch of others -- cultural attitudes, economic links, Armenians in the KGB, you name it -- but those for starters.
Doug M.