ArmInfo. Gazprom's consent to prolong the gas price discount for Armenia depends on the Putin-Sargsyan negotiation results, according to the Kommersant sources in Gazprom and Russian Ministry of Energy.
The March 10 talks of the Armenian and Russian Presidents in the Kremlin covered a number of issues, including energy cooperation, particularly, the price formation for the Russian natural gas supplied to Armenia.
Meanwhile, on March 10, the Armenian government approved amendments to the protocols to the Russian- Armenian agreements (dated 2013) on the gas price and terms of sale of the Armenian government's stake in ArmRusgasprom. Under the amendments, the gas price for Armenia will remain at 165 USD per 1,000 cu m until 1 April 2016. Afterwards, the gas price for Armenia is to get back to its initial level - 189 USD.
The interlocutors of Kommersant think that Armenia is likely to get a discount given that the growth in tariffs in Armenia is a politically painful issue. At the same time, it is still unclear how to settle the problem in the long-term outlook amid the rather low profitability of Gazprom's supplies to Armenia.
Armenia annually consumes about 2 bln cu m of gas and if Gazprom retains the discount, it will lose more than 48 mln USD in revenues. At the same time, Armenia remains a major and the most reliable market in the Transcaucasia after Azerbaijan stopped importing Russian gas in 2006 following the launch of the Shah Deniz field development. No Russian gas is supplied to Georgia either.
Vitaly Kryukov, an analyst from Small Letters, says that the discount is necessary for Armenia for political reasons - low gas prices are included in the standard package of support measures Russia offers to all its allies within the Eurasian Economic Union.
To recall, in September 2015 Gazprom - the owner of the Armenian monopolist Gazprom Armenia - reduced the price for Armenia from $189 to $165 per 1,000 cu m. The reason was the sharp AMD depreciation against USD, when Gazprom Armenia suffered losses while purchasing gas in dollars and selling it in drams. An arrangement was reached to retain the tariffs unchanged for the Armenian consumers.