Iranian Foreign Minister Mohammad Javad Zarif, right, receives Armenian Prime Minister Nikol Pashinyan, left, as President Hassan Rouhani looks on, during a welcoming ceremony in Tehran on February 27, 2019. Photo: Iranian Presidency / AFP

Armenian Prime Minister Nikol Pashinyan has pitched his Caucasian nation as a conduit for Iranian gas exports, defying both Washington, which is seeking to tighten the economic noose on the Islamic Republic, and Moscow, which exerts near-total control over the Armenian gas sector.

“Armenia … is ready to become a transit country for Iranian gas. The creation of energy corridors has important significance both bilaterally and regionally,” Pashinyan said,  emphasizing that “a political will exists”.

The Armenian premier was given a red carpet welcome on Wednesday, with President Hassan Rouhani and Foreign Minister Javad Zarif – the latter clearly back in the saddle after resigning on Monday night, then gaining fresh diplomatic cover from hardliners – greeting him at Tehran airport.

Pashinyan was swept to power with the spring 2018 Velvet Revolution, and the choice of neighboring Iran as his first state visit as elected prime minister reflects the priority of his government to balance its over-reliance on Russia.

“Armenia desperately needs to diversify energy supplies, and Iran presents that important balancer,” said Anahit Shirinyan, a Yerevan-based foreign policy analyst.

“Russia was traditionally the only distributor to Armenia and acquired the entire distribution network. It has been very difficult for Armenia to diversify supply, even though it would be in Armenia’s interest,” Shirinyan told Asia Times.

Armenia currently holds the presidency of the Eurasian Economic Union. Pashinyan deftly linked his gas transfer proposal to a free-trade deal currently up for ratification between the Russian-led EEU and Tehran. 

“This [free-trade deal] will open new opportunities for enhancing our trade turnover and for the business communities of our countries. And we must encourage our business communities to use these opportunities,” Pashinyan said.

Russian spoiler

The idea of Armenia as a conduit for Iranian gas exports, namely to Georgia, is not a new one.

“Armenia once tried to be a transit country when it was commissioning the Iranian-Armenian gas pipeline in the early 2000s, but when this pipeline opened in 2007 it turned out it had a narrower parameter than it was supposed to be,” said Shirinyan.

It was initially slated to be 1,400 millimeters in diameter. Instead, it ended up half that size. At the time, there was speculation that Russian pressure had led to its downsizing so imports would be limited to domestic consumption.

Richard Giragosian, director of the Regional Studies Center in Yerevan, cautions the gas transfer proposal will be very difficult to see through.

Russia has a firm hold over the energy sector,” he told Asia Times. Gazprom owns and operates the gas distribution network in Armenia, holds roughly 80% of market share and may pressure Yerevan over pricing.

Shirinyan agreed that the primary obstacle is not US sanctions on Iran, but Russia, “which doesn’t want to abandon its monopolistic role” in the Armenian gas market. 

“But it’s not entirely unrealistic,” she adds. “Even this 700mm pipeline was not used to its fullest. I think only 20% of gas is being used.”

Prioritizing Iran, Georgia

With the 2018 Velvet Revolution in Armenia came a mandate to ease the country’s reliance on Russia and improve relations with neighboring Georgia and Iran. 

Iranian President Rouhani stressed on Wednesday that he and his Armenian counterpart were determined to pursue a policy based on their interests and resources, and not allow any third state to interfere in our bilateral relations”, Fars news reported

Rouhani referred specifically to Armenia’s relations with Tehran in the face of US sanctions, but when it comes to gas, that statement would also necessarily extend to Russia.

“Both sides have been interested in having this visit,” said Shirinyan, pointing out that Pashinyan chose Tehran for his first state visit since becoming prime minister in December. When he first rose to power in May 2018 in snap elections following the Velvet Revolution, his first state visit was to the Georgian capital Tbilisi.

As a testament to the importance the Iranians placed on the two-day visit, Pashinyan was warmly received his first night by Ayatollah Ali Khamenei.

“It is a relatively new notion in Armenian foreign policy thinking that Iran can serve as a balance when it comes to trying to overcome reliance on Russia,” said Shirinyan. For Moscow, she points out, Tehran may be a less offensive partner for Armenia than Western rivals.

Technically feasible

Beyond politics, the Armenian proposal is technically feasible, according to Lilit Gevorgyan, principal economist for Europe and the CIS at IHS Markit.

The current infrastructure would allow for limited gas transits,” she said, referring to the Armenian pipeline. 

Considering the relatively small size of the Georgian energy market, Armenia’s current infrastructure should be able to handle the transit shipment. The current capacity of the Armenian–Iranian [pipeline] is reported at 2.3 billion cubic meters, just under the estimated 2.6 bcm total annual Georgian gas consumption in 2018.

Gevorgyan notes that spare capacity may not even be fully utilized, as Georgia’s main supplier is Azerbaijan.

Still, energy diversification will strengthen Georgia’s negotiating position vis a vis Azerbaijan, which announced its decision to raise gas prices for Georgia, a move coming after becoming the supplier of 99% of the Georgian natural gas imports,” she said.

When it comes to regional energy politics, staunchly pro-Western Georgia has for years pegged its fortunes to the Turkey-Azerbaijan block. Armenia, reliant on Russia, was left economically isolated, with the Turkish and Azeri borders closed over a territorial dispute, Georgia disengaged, and Iran crippled by sanctions.

Should the energetic new Armenian leader Pashinyan succeed in bridging the divide between Iran and Georgia, without alienating traditional allies, it could open a new page in the Caucasus.

Corrections: This article originally stated the Armenia-Iran pipeline was completed in 2001. It was completed in 2007. The pipeline’s capacity was stated as 2.3 mmcm, just under the estimated 2.6 mmcm annual Georgian gas consumption. Both figures have been corrected upon the analyst’s request to bcm. 

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