ARMENIA DEEPENS ECONOMIC TIES WITH IRAN

>

> Armenia and Iran have agreed to give new impetus to their

> bilateral relations and press ahead with the implementation of more

> multimillion-dollar energy projects. The agreements were announced

> in Yerevan after the July 20 meeting of their intergovernmental

> commission on economic cooperation, co-chaired by Iranian Foreign

> Minister Manuchehr Motaki and Armenian Energy Minister Armen Movsisian.

>

> Motaki also held separate talks with President Robert Kocharian

> and other Armenian officials. Official press releases cited them as

> praising the Armenian-Iranian relationship and stressing the need

> to utilize its untapped commercial potential. Motaki was reported to

> be satisfied with "thorough discussions" held during the commission

> meeting. He and Movsisian divulged key details of those discussion

> at a joint news conference.

>

> Movsisian revealed that in "one or two months" the two sides would

> start work on a third high-voltage transmission line linking the power

> grids of Armenia and Iran. The facility will enable a substantial

> increase in exports of Armenian electricity to the Islamic Republic,

> which is expected after the completion of a pipeline that will pump

> Iranian natural gas to Armenia. The pipeline's first Armenian section

> was inaugurated last March in the presence of Kocharian and Iranian

> President Mahmoud Ahmadinejad.

>

> Construction of its second, much longer stretch is due to be completed

> by the end of next year. That will allow Armenia to annually import

> up to 2.3 billion cubic meters of Iranian gas, or approximately twice

> the level of its current gas imports from Russia.

>

> It is expected that much of Iranian gas will be converted into the

> electricity that will be supplied to Iran.

>

> Another Armenian-Iranian energy project involves the construction of

> two big hydroelectric plants on either side of the Arax River, marking

> the border between the two countries. Movsisian announced that its

> construction would likely start early next year. It is still not clear,

> however, how the Armenian side will finance its share of the project,

> estimated at $200 million. Some analysts believe that it will borrow

> the required sum from the Iranian government. Tehran already lent

> Yerevan $34 million to construct the first pipeline section.

>

> Also on the agenda of the commission meeting was the Russian-backed

> ambitious idea of building a big oil refinery near Meghri, a small

> Armenian town close to the Iranian border. Kocharian reportedly

> discussed it with Russian President Vladimir Putin last January.

>

> Around that time an oil subsidiary of Russia's Gazprom monopoly

> confirmed reports that it is interested in the project and ready,

> in principle, to provide most of the hundreds of millions of dollars

> needed for its implementation. The project envisages that Iranian

> crude will be delivered to Meghri through a 200-kilometer pipeline

> before being turned into gasoline and other oil products that will be

> shipped to Iran by rail. Despite its vast oil reserves, the Islamic

> Republic lacks refining facilities and has to import gasoline to

> meet domestic demand. Officials have said the refinery would have

> the capacity to process about 3 million tons of oil each year.

>

> The governments of Armenia, Iran, and Russia recently formed an ad

> hoc working group tasked with looking into the matter. It is scheduled

> to hold its first meeting before the end of this month.

>

> According to Movsisian, high-level government officials from the

> three countries plan to meet in September to discuss the group's

> recommendations.

>

> It also emerged that Yerevan and Tehran plan to sign a free trade

> agreement soon in order to boost the volume of their commercial

> exchange, which remains quite modest in both absolute and relative

> terms. One of the apparent reasons for that is Iran's huge import

> tariffs that effectively keep the Iranian market off limits to Armenian

> manufacturers. A statement by the Armenian government quoted Motaki

> as telling Prime Minister Serge Sarkisian that facilitating imports

> from Armenia is now a "priority" for Tehran. Motaki sounded optimistic

> about broader Armenian-Iranian trade, telling journalists that its

> volume could more than double to $500 million this year.

>

> These developments come just over a month after the United States

> publicly expressed concern at Armenia's growing relations with Iran

> through its then charge d'affaires in Yerevan, Anthony Godfrey.

>

> Speaking at a June 15 news conference, Godfrey warned that those

> ties could run counter to U.S. sanctions imposed on Tehran over

> its controversial nuclear program. He said that although Washington

> appreciates the "transparent way in which the government of Armenia

> conducts its energy relations with Iran," it expects Yerevan to be a

> "more active partner" in US-led international efforts to prevent Iran

> from developing nuclear weapons.

>

> Armenia has until now managed to maintain close political and economic

> ties with Iran, while being one of the world's leading per-capita

> recipients of U.S. economic aid. The U.S. warning could make it

> more difficult for Yerevan to continue to pursue what it calls a

> "complementary" foreign policy. Still, Armenian Foreign Minister

> Vartan Oskanian insisted on June 19 that his country's growing

> cooperation with its large Muslim neighbor does not breach the U.S. and

> international sanctions and will not damage U.S.-Armenian relations.

>

> A warm rapport with Iran is a key element of Armenia's national

> security doctrine and a rare point of consensus among its main

> political parties. They believe that the landlocked South Caucasus

> state, blockaded by neighboring Azerbaijan and Turkey, has no choice

> but to be a close partner of what is one of its few conduits to the

> outside world.

>

> (Azg, 21 July; Regnum, July 20; Statements by the press services of

> Armenia's president and government, July 20; Arminfo, June 19)