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Privatization of Energy Sector


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I don't think so. But it sure may cause serious problems to the entire Armenian economy, if the deal is as sloppy as with ArmenTel.

 

For example, one of the American giants of power industry - the TXU, owns major part of the UK system, parts of Australian system, and currently is bidding for similar systems in other European countries. Apparently those countries have not found these actions threatening their national security.

 

As always, Armenians are frequently more Catholic in this issue than the Pope.

 

The ownership of the system is one issue, but the regulations are another.

 

In the united states there are at least two regulatory bodies Federal Energy Regulatory Commission (FERC) and National Energy Reliability Council (NERC), which regulate the market, and impose constraints for the purpose of guarantying the reliability and the stability of the system, as well as the open access to the system. There are problems because of the bad regulatory judgments exercised by the states, but it is primarily created by the incompetence of the state governments (like California).

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Too bad. Zealousy and incompetence lead nowhere. But our fellow compatriots on the other side of the fence are not unique on this capacity.

If the Armenian economy revives, and develops further, the energy demand would increase. Then, most likely, much like in California, the existing transmission/distribution network may not suffice to deliver power. I wonder what plans/means do they have for investing in the upgrading of the Armenian transmission/distribution network?

Additionally, due to its geographic location, the Armenian high-voltage lines may be of very high value, if they may be utilized on a capacity of interconnect. DO these protesters thing that they have the capacity of capturing the value of the interconnect?

 

[ April 23, 2001: Message edited by: MJ ]

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Economy

 

ARMENIA FACED WITH DILEMMA

 

A two-year long marathon for the privatization of Armenia's power distributing

networks was supposed to come to an end April 19 by disclosing the tender packages, but the government had to put it off until April 23.

 

Instead thousands of people, led by political forces, opposing the

privatization, gathered on Thursday in a Yerevan square in another attempt to stop selling off the country's power grid. The rally will continue today in front of the government building. However, there are some concerns over this date as the finale, as this was not the first time when the government had to postpone the tender in two last years. The privatization of networks has turned from an economic question

into a geo-political one.

 

No one doubted that some political forces would raise clamor about the networks' privatization. The government aim was to make the deal as transparent as possible and prove its expediency, along with provision

of serious economic substantiation. However, until now the government's explanation was the following: "if the networks are not privatized the World Bank will not allocate SAC loans," giving thus reasons for

endless speculations. The fresh example of it is prime minister Andranik Margarian's answer to a parliament member Arshak Sadoyan's question during a recent question and answer parliament session. The prime minister restricted himself to the following: " It is not you that have to tell

me what I must do, I will decide it myself," which was followed by "you are afraid of giving an explanation to the people." Energy minister Karen Galustian cannot be located either, as he is on constant business

trips, but the finance and economy minister turned out to be more available and said last week that " it is illiterate to consider the power distributing

networks as having strategic importance."

 

The idea of selling off the networks was actually born in late 1999, when Vazgen Manukian was the prime minister. After a 1999 September visit to Washington where he met with World Bank President James Wolfensohn, he announced several times not only about the necessity of selling off the networks, but also about making changes to several Armenian laws and strengthening the Armenian Development Agency. Actually,

privatization of the networks was one of the issues that was supposed to be presented

to potential investors at an international conference on Armenia investments, first planned to be held in London, but later transferred to New York for May 10-11, 2001. Since the idea of international tenders in Armenia has become distorted in the eyes of the public, the World Bank set a condition before the government- to conduct the entire process of privatization as transparently as possible. These are the arguments of the World Bank, whereas the forces, opposing the deal, say that the World Bank assisted the government with the aim of paving way for

US AES Silk Road to become the winner of the tender.

 

When looking deeper into the entire process of the networks privatization, one sees that it was advancing at a high speed before October 27, 1999 killings and slowed down, as many other projects, after it. And it

is not excluded that the networks would have been long ago privatized if the bloodbath in the parliament had not occurred. When Vazgen Sargisian's brother Aram came to succeed him, the networks were removed from the list of enterprises, subject to privatization in 1998-2000 and was brought back to the parliament in the form of a special law by prime minister Andranik Margarian, who was appointed to replace the sacked Aram Sargisian. The law on privatization was adopted last July 28, but until now it has not been thoroughly discussed to find out what the deal will give Armenia.

 

The strongest circulated argument against selling off the networks is that "the foreigners will raise the energy tariffs," but the government has not said whether it is true or not. To find it out, let us look

through the Law on Energy. Actually, the retail sale of energy is a strictly regulated area, in which both the tariffs, volume of investments and expected returns are defined by an independent body- the Energy Commission. The Commission has many levers, fixed by the law, not only to supervise, but also dictate its will in the market. Even if we imagine that the Commission does not exist, and we look at this sector from a business point of view, it becomes evident that none of the investors

or owners will desire to raise the price of its product knowing in advance that the consumption volumes will decrease because of the people's low solvency.

 

"The Armenian authorities have sold themselves to international organizations

and selling the networks to the US AES Silk Road will be destructive," this is being circulated as another main argument against privatization. But when we log to AES Internet pages we see that this company has,

before coming to Armenia, "captured" such countries as Great Britain, Australia, the Netherlands, Ireland, China, Argentina, Brazil, Mexico, India and many others. Moving ahead we see that it has also "captured" some former Soviet republics-Azerbaijan, Georgia, Kazakhstan, Moldavia

and Ukraine.

 

"The World bank's aim is to ruin Armenia's power grid," is voiced at mass rallies. Leafing through the lists of loans provided to Armenia by the World Bank, we shall see that it allocated $13.8 million in 1994 for reconstruction of Armenia's power grid and another $21 million worth loan in 1999 for raising the efficiency of power distributing

networks. The question arises- why did the World Bank allocate such huge sums if it strives to ruin the Armenia's energy system. Of course, the efficiency of the loans' usage is another question.

 

After all this we have to conclude that this deal has also been spoiled. The issue of networks selling has demonstrated the incompetence of Armenian political circles. The failure of the government to conclude

the deal would become the final verdict on Armenia's further investment policy and no matter how hard we try to persuade the world that we have adopted free market policy and that our doors are open to all foreign investors, no one would believe us.

 

Gayane Mukoyan

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The should just sell the energy sector including the power companies and the power grid to the companies that run the power system in California. I am sure these guys will take care of everything...
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Armenia Fails to Sell Energy Grid, Says Energy Minister

 

YEREVAN, Apr 22, 2001 -- (Agence France Presse) Armenian authorities have failed to sell off the state-held energy distribution network due to a lack of bids, according to energy minister Karen Galustyan.

 

"The tender's participants did not make any offers, so I must declare that the tender did not take place due to lack of bids," Galustyan announced Saturday, adding that the result had come as no surprise.

 

"The participant companies were in doubt all this time, and had not played an active part in the process for months," the minister said.

 

U.S.-based AES Silk Road Inc and Spanish Union Fenosa Acex had been among the companies initially interested in the energy grid.

 

Armenia had offered investors 75 percent of the shares in all four of its energy distribution grids. The European Bank of Reconstruction and Development (EBRD) holds 20 percent, and the state would retain five percent under the privatization proposal.

 

"We regret the fact that our energy distributor networks, which are among the best in the former Soviet republics, did not attract investors," Galustyan said. Privatizing the energy grid was vitally important for Armenia, he added.

 

However, protesters gathered near the energy ministry greeted the announcement with a round of applause.

 

Over the past month, thousands have protested the impending sale in rallies organized by dozens of political groups and organizations. (© 2001 Agence France Presse)

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  • 5 months later...

It seems like the heated privatization process of energy networks in Armenia is entering it's final stage. Instead of considering econimic factors the not so competent government of Armenia is giving in to Russian pressure and is inclined to sell the energy networks to UES, a Russian company which is almost bankrupt. That company doesn't even have audited financial statements. During the era of multinational corporations the government is not taking into consideration the expertise of the bidder and financial statements, but the country where it's located. Do you think the privatization of energy network will lead to another debacle like the privatization of Armentel did? What's a possible solution for such a vital sector of economy that is in dire need of investment?

 

 

Here is an article from AZG

ARMENIA GIVES IN TO RUSSIAN PRESSURE

 

The Russian ITERA group announcement to suspend supplies of Russian

natural gas to Armenia was not unexpected. Similar announcements had

been made in the past as well, especially at the beginning of the year,

when the first international tender for privatization of four energy

distributor networks was nearing the final stage and at the end of

March the Armenian government was supposed to announce the winner,

one of the three competing companies, either US AES Silk Road,

Swiss-Sweden

ABB or Spanish Union Fenosa.

 

The Russian ITERA, which was also bidding for the networks, was dropped

out of the tender at that very stage, which prompted several parties-

the Communists, the People's Party of Armenia and some other minor

ones to start staging rallies to demand cancellation of the decision

to sell off the networks.

 

As there was already the precedent, it was not difficult this time

to predict what has caused the ITERA to once again remind that Russia,

the main supplier of both nuclear fuel and gas for energy generation,

was the dominant force in the Armenian energy sector. The news about

suspension of gas deliveries was dismissed, gas inflow has not been

completely cut, but its volumes are being gradually decreased. Russia

seems to have reached the desired impression and influence, making

the Armenian government to clear way for another Russian company, RAO

UES to be eligible to bid for the networks.

 

Now a notorious parliament member Arshak Sadoyan and the leader of

pro-Russian Democratic Party Aram Sargisian (not to be confused with

former prime minister) will not be criticizing the authorities for

selling out the networks. Now Mr. Sadoyan must feel quite satisfied

as out of all the bidders, only the Russian company has remained and

there is virtually no doubt that it will take hold of the networks,

as the AES Silk Road and ABB have officially notified the government

about their decision to pull out and the Union Fenosa is most likely

to also withdraw from the tender.

 

The ongoing privatization process has proved that the Western companies

are not excited by the Armenian networks, and second, the Armenian

authorities, for a recurrent time, have given a political solution

to a purely economic issue, which, however, was not easy to avoid.

 

It was becoming clear, event at the start of the year, that the issue

of the networks' sale, was going to develop from an economic issue

in a global strategic one. The government then found itself in a dubious

position. On the one side, the Russian factor and huge, $117 million

debt, accrued in the last ten years and on the other side, the pressure

coming from the World Bank, USAID and the European Bank for

Reconstruction

an d Development (EBRD). The first two have been acting in the role

of main advisors to the government, having secured significant sums

of money and staffers, the EBRD was planning to purchase 20 percent

of shares.

 

The World Bank was the most persistent of the three, putting forward

its preconditions that the tender should be open and transparent, that

it should become "an exemplary" one to attract other foreign investors.

The World Bank also made disbursement of the last, the so-called

"floating"

$20 million tranche of the SAC-4 credit conditional on the networks'

privatization. Now the Bank continues keeping silent, which looks like

disappointment.

 

As regards the economic efficiency of the deal, the authorities

explained

that the sale would reduce huge losses, something near $40-$50 million

a year in the sector, which are ascribed to outdated equipment and

lack of money for its upgrading. Today it is not difficult to suppose

that handing the networks over to Russia, in which 75 percent of shares

still belong to the state, will rather become a deal to cover Armenia's

debt to Russia. In any case, the government's behavior provides enough

reasons to think that it is tending towards it. To recap, the situation

became critical in mid-summer when Russia began insisting on return

of energy debts. The issue was formulated very clearly, either the

debt or the power grid. The question actually got its solution during

Russian Putin's visit to Armenia in mid-September.

 

Privatization of the networks reminds the sale of Armentel to Greek

state-owned OTE which used to say that taking over Armenia's outdated

telephone network for $142 million was rather a political move than

an economic one to demonstrate Armenian-Greek friendship. There is

no need to remind what was the outcome and how dear it cost Armenia.

 

By Gayane Mukoyan

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Yes... Unfortunately, this way, step-by-step they may surrender the Armenian Sovereignty back to Russia - and all this for the sake of questionable ideological/political gains.

 

Just think of it - surrendering the power network for the sake of having a debt of $75 mil forgiven. What a perspective...

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Just came across the following material:

 

ARMENIA'S POWER-CABLE NETWORK IN CRITICAL STATE

YEREVAN, July 5. The electric-cable network is worn-out in Armenia, and its technical caracteristics do not meet the modern standarts, which results in a sharp increase in the energy losses and higher probability of accidents. The problem of reducing the energy losses was raised at the enlarged meeting of the Presidium of the Armenian National Academy of Science (ANAS). The meeting was attended by specialists from other departments concerned.

 

The meeting participants presented the calculation of the losses, which confirms the necessity for laying new the polyethylene-insulated cables. ANAS President, Chairman of the ANAS Energy Council Fadey Sargssian drew the meeting participants' attention to the more frequent accidents. According to him, a moment will come when accidents will occur one after another.

 

Specialists advanced a number of proposals for the organization of production of polyethylene-insulated cables in Armenia. The arguments in favor of such production are as follows: such cables are in demand on the international market; the copper which is exported from Armenia as row material will be worked on the spot.

 

Assuming as a basis the presented calculations, the meeting participants decided to submit the aforementioned proposals to the government, after thoroughly discussing them.

http://www.sci.am/news/eng/2001/Ee050752.html

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  • 10 months later...

Finally the energy sector has been privatized, but as the example of leading industrial countries shows privatization will not solve the problem. State shouldn't just get rid of a burden by simply transfering the assets to some other entity. Getting rid of a sector that's a financial drain on state budget, yet is the pillar of country's development will only increase the problems. If the management of the entity has long history of successfully managing electricity sector, than the country can trust management of such a vital sector, but if it's an offshore company with shady connections than its nothing but a crime against state.

 

The article in today’s NY Times portrays the result of privatization in Britain. It clearly did not the energy woes of Great Britain. The changes should be structural not simply transfer of ownership.

 

British Reopening the Debate Over Privatization

By SUZANNE KAPNER

 

ONDON, Aug. 28 — Sizable losses by one of Britain's largest nuclear power companies have reopened debate here over the limits of privatization.

 

The company, British Energy, is the latest example of the problems Britain has had with its privatization program. Facing declining energy prices and tough regulations, British Energy has lost millions in the last two years.

 

 

Last October, the Railtrack Group, which owns the nation's railroad tracks, signals and stations, was declared insolvent and effectively renationalized through a public-private partnership. In addition, the former air traffic control monopoly has struggled since it was privatized last year.

 

In the 1980's, under Prime Minister Margaret Thatcher, Britain started turning state-owned entities into private companies, often by selling shares to the public. Private business, the thinking went, would be more efficient than the government at running businesses and providing services, and opening industries to competition seemed like the ideal way to pass savings on to consumers.

 

Analysts say that for the most part, that thinking holds true. They maintain that most of Britain's privatized industries — ranging from telecommunications to coal and steel — have worked.

 

But they also say that the recent trouble underscores important lessons that will serve as a bellwether not just for Britain, but for other European countries in the process of privatizing their industries.

 

"We've learned that not everything is right for privatization," said Philip Collins, director of the Social Market Foundation, a research institute here.

 

For British Energy, which was privatized in 1996 and produces 20 percent of the country's electricity, the limits came largely in the form of regulation that put nuclear generating companies at a disadvantage to other energy producers. Nuclear plant owners are required to pay a share of a climate control tax intended to limit carbon dioxide emissions, even though they do not produce the gas. And they also pay higher rates on property leases than fossil-fuel plants do.

 

British Energy has been lobbying for exemption from the tax and for revised property rates, which if changed could result in savings of £100 million (about $154 million) a year, analysts said.

 

Partly as a result of these restrictions, British Energy is losing money at its eight plants in Britain. Over all, the company lost £39 million ($59.9 million) in the most recent fiscal year, after losses of £23 million the year before.

 

The financial situation took on fresh urgency this week, when the company shut down two reactors in Scotland after problems with gas circulators were discovered. Two other plants in England are closed for scheduled maintenance. The total cost of the shutdowns could approach £80 million, the company said, though insurance will probably pay some of it.

 

Such losses are unsustainable, analysts said, especially if British Energy is to put away enough money to shoulder the cost, estimated at £14 billion over the next 15 years, of taking older plants off line.

 

The problems at British Energy come amid a broad review of the nation's energy policy.

 

Although electricity prices initially fell sharply, recent results have been mixed. A report by Credit Suisse First Boston estimates that since 2000, wholesale electricity prices, the prices at which British Energy sells its power, have dropped 36 percent, yet domestic retail prices remain flat — a poor scorecard for a free-market system that is supposed to benefit consumers.

 

Advocates of privatization said there was typically a lag between changes in wholesale and retail prices. But even free-market advocates agreed that the government would probably have to act if British Energy was to remain solvent.

 

Analysts said renationalizing the company would be an embarrassment, particularly after the Railtrack debacle. But there are less direct ways the government can help. One option is to transfer some reactor contracts from another company, British Nuclear Fuels, to British Energy, bolstering its revenue. The two companies said they were discussing such a proposal. But if wholesale electricity prices remain low, additional steps may be needed.

 

"It's almost inconceivable that the government would let British Energy go into receivership," Roger Reynolds of Credit Suisse First Boston said.

 

Eamonn Butler, director of the Adam Smith Institute, said that for free-market advocates, the solution is to limit politicians' involvement. But for others, issues of free markets are inextricable from matters of social justice.

 

"Whose responsibility is it when a commercial company doesn't provide for things that are socially necessary in the public realm?" Mr. Collins of the Social Market Foundation asked. "Where there are public goods at stake, a private market on its own hasn't delivered."

 

He and others suggest that the solution lies in public-private partnerships, like the model being tested with the railway system. In such a case, the company remains private, but the money it earns is put back into the services it provides. The Railtrack model is being scrutinized, analysts said, by Germany and the Netherlands, both of which are restructuring their rail systems.

 

Still, there is no guarantee that joint ownership will work, Mr. Collins said, mainly because it removes a pillar of free-market efficiency — "the threat of bankruptcy."

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Dear Alpha,

Here is an article from todays ArmeniaNow.com that talks a little more about this shady deal that was made and actually how it may even hurt Armenia in getting international aid.

 

-----

 

Disputed Deal: Energy Privatization Upsets Western Donors

 

By Emil Danielyan

Special from Radio Free Europe/Radio Liberty

 

Despite objections from Western donors, the Armenian government on Monday (August 26) sealed a $37 million sale of its low-voltage power grids to an obscure offshore firm.

 

Midland Resources Holding, a company registered in Britain's tax-free Channel Islands, was declared the winner of an international bid for a controlling stake in the Armenian power-distribution network, despite having little experience with energy business. Donors say the company lacks the expertise to reverse the sector's huge losses.

 

The controversial deal has cast doubt on the fate of some tens of millions of dollars in additional loans promised to Armenia by the World Bank. It could also complicate Yerevan's relations with the International Monetary Fund, which has questioned the selection of Midland Resources as the new utility owner.

 

The agreement on the sale of a commanding 80 percent stake in the state-run Armenian Electricity Network (AET) was signed in Yerevan by four Armenian ministers and a top executive from Midland Resources. It came immediately after an emergency meeting of Prime Minister Andranik Markaryan's cabinet formally endorsed the results of the international tender, in which the British-registered firm was alone in submitting a bid.

 

The Armenian Energy Ministry had originally estimated the distribution network's value at $250 million, but ultimately the sale was made for just $37 million.

 

Armenian officials hailed the privatization as an opportunity to reform the power grids, which are operating at a huge loss. Finance and Economy Minister Vartan Khachatryan says Midland Resources is up to the task: "If they don't fulfill their commitments we can reconsider the agreement within a month or so. The agreement is very strict. So it looks like we are not taking any risks."

 

But Western donors, who themselves pushed for the sector's privatization, say this is not quite so. One Western diplomat told RFE/RL (www.rferl.org): "The donor community is not happy with the deal because the way it was handled was fishy."

 

The spokesman for the World Bank's Yerevan office, Vigen Sargsyan, agreed: "It should be clear that you cannot explicitly approve the victory of a company that has no experience with the energy sector."

 

The International Monetary Fund (IMF) office in the Armenian capital also voiced serious misgivings about the wisdom of choosing Midland Resources as the new owner of the local electricity network.

 

One official familiar with the privatization process told RFE/RL the World Bank is likely to again delay the release of a $20 million budgetary loan to Armenia pegged to the successful privatization of the power grids. The money is the third and final installment of the bank's $50 million Structural Adjustment Credit (SAC) that was due to cover about half of the country's 2001 budget deficit.

 

In a bid to dispel donor concerns, the Armenian government has written to the World Bank, promising to have Midland Resources hire a team of experienced energy managers from the West to run the electricity company. According to one diplomat from a Western donor state, "the deal may not be a disaster" if the government fulfils its pledge.

 

The donors' strong interest in the Armenian energy sector results from the fact that the sector is one of the biggest drains on the nation's scarce public resources. The sector already underwent substantial reform and restructuring in the mid-1990s. That helped Armenia to end severe power shortages and begin exporting electricity to neighboring Georgia and Iran.

 

Still, the state-owned Armenian power-generation and distribution companies remain plagued by widespread corruption and mismanagement that cost the impoverished country more than $60 million in damages each year. Government efforts to stamp out those practices have failed, reinforcing the belief that privatization is the only realistic way of tackling the losses.

 

The government twice attempted to privatize the power distribution network last year but found no foreign company interested in buying them. It subsequently decided to try to place them under foreign management. Preparations, overseen by the World Bank, were under way as recently as last May for an international tender for a management contract. The bidding was expected to be called this autumn.

 

However, as Sargsyan of the World Bank explains, the authorities then abruptly changed their plans.

 

"Early this summer, the government informed us that it was holding negotiations with the Midland Resources company registered in the English offshore zone," he said. "So I wouldn't say this outcome was unexpected to us."

 

Midland Resources' principal activity is trading in ferrous metals and other raw materials used in manufacturing. The company owns two steel factories in England and Ukraine. It also has other holdings in Ukraine.

 

According to documents obtained by RFE/RL, Midland Resources' board of directors is composed of four persons. However, it is not clear who owns the company. Nor is it clear what the company plans to do with the Armenian electricity distributor. The senior executive from Midland Resources who signed the takeover agreement yesterday declined to comment.

 

Finance Minister Khachatryan said the Armenian government expects Midland Resources to invest at least $100 million in modernizing the sector in the next seven to eight years.

 

http://www.armenianow.com/2002/august30/ne...s/disputeddeal/

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  • 1 year later...

Eurasianet Organization

Sept 25 2003

 

RUSSIAN MOVES IN CAUCASUS ENERGY AND POWER SECTORS COULD HAVE

GEOPOLITICAL IMPACT

Haroutiun Khachatrian: 9/25/03

 

An acquisition binge has put a Russian company in position to

dominate potential Caucasus power exports. At the same time, the

business moves can enhance the Kremlin's ability to project its

political power in the region.

 

The Russian expansion into the Caucasus, led by the state-controlled

electric company RAO Unified Energy Systems (UES), has accelerated in

recent months. Of late, the chief acquisition target has been

Armenia. Two recent debt-for-equity swaps left nearly a 50 percent

stake in Armenia's electricity generation capacity in Russian hands.

Among the entities now under Russian corporate control are the

1100-megawatt Hrazdan thermal power plant and six hydropower

stations, totaling 556 megawatts, on the so-called Sevan-Hrazdan

cascade.

 

In addition, the Armenian government formally approved a deal on

September 17 that will allow Russia's UES to act as the "financial

manager" of the Medzamor nuclear power plant. The five-year agreement

stipulates that Armenia remains the titular owner of the nuclear

facility, responsible for maintaining a safe operating environment at

the plant.

 

Russian concerns have also made a high-profile push into Georgia. UES

obtained a controlling interest in the operation of Georiga's power

grid in August, while also purchasing a majority share in the

power-generating joint venture AES Silk Road. [For background see the

Eurasia Insight archive]. Those deals give the Russian electric giant

virtual control over Georgia's domestic power market. Last May,

Gazprom, the Russian gas conglomerate, established a dominant

position in Georgia's energy distribution infrastructure by

concluding a partnership agreement with the Georgian government.

 

Observers believe the next step for Russian companies could be into

the Armenian energy market. Gazprom and ITERA, another Russian

company, hold key stakes in Armenia's gas distribution company.

Russia's new weight in Armenian electric generation could lead to

broader control in the Armenian gas sector.

 

Underpinning the recent burst of activity is a clearly stated desire

by Russian concerns to boost regional power and energy exports.

Anatoly Chubais -- the UES chief who gained fame as Russian

privatization supremo under former president Boris Yeltsin -- has

stated that his company aims to make inroads into the underserved

markets of eastern Turkey. Experts generally agree that Armenia has

sufficient generation capacity to export electricity. However,

Armenia is unable to export power to Turkey directly given the lack

of full diplomatic relations. [For background see the Eurasia Insight

archive]. Any Armenian power exports would thus have to flow through

Georgia.

 

If Chubais' scenario plays out, a UES move into Turkey could benefit

Gazprom, giving the conglomerate potentially increased leverage in

future negotiations with the Turkish government over gas deliveries

via the Blue Stream pipeline. [For background see the Eurasia Insight

archive].

 

In the broader scheme of Caspian Basin energy exports, the recent

Russian moves in the Caucasus could help Moscow frustrate the

US-backed Baku-Tbilisi-Ceyhan (BTC) pipeline from fulfilling its

economic potential. [For background see the Eurasia Insight archive].

Russia has long opposed BTC, largely because it would circumvent

Russia's oil and gas pipeline network. [For additional information

see the Eurasia Insight archive].

 

Beyond the potential economic advantages gained by Russian companies,

some officials and experts in both Armenia and Georgia have expressed

alarm about the political impact of the deals. Indeed, some question

whether the recent Russian acquisitions in the Caucasus were based

more on political factors than on purely economic grounds.

 

In Tbilisi, the sense of concern is perhaps greatest, given the

tension that has marked Georgian-Russian relations of late. [For

background see the Eurasia Insight archive]. President Eduard

Shevardnadze has generally welcomed the Russian acquisitions in

Georgia. But his political opponents say the president's position is

a reflection of his political desperation, as his supporters face an

uphill struggle to retain control of the Georgian parliament in

elections scheduled for November 2. [For additional information see

the Eurasia Insight archives].

 

Separately, some observers now worry that Russian companies are

eyeing Georgian telecom assets for takeover. The Russian newspaper

Nezavisimaya Gazeta recently quoted Roman Gotsiridze the head of the

Georgian Parliament's budget committee, as stating that Russia sought

control of Georgia's strategic infrastructure. Moscow's overall aim,

Gotsiridze indicated, was to restore is geopolitical dominance over

Georgia. "This time {Russia is] using banks rather than tanks," he

said.

 

While Armenia has historically enjoyed a special relationship with

Russia, some Armenian political observers have voiced similar

concerns that their country's sovereignty is potentially jeopardized.

A September 19 editorial in Aykakan Zhamanik, an independent

newspaper founded by the opposition Democratic Homeland party,

asserted that UES operates outside international corporate standards.

"A great part of its activities are a Russian state secret," the

editorial said.

 

 

 

Editor's Note: Haroutiun Khachatrian is a Yerevan-based writer

specializing in economic and political affairs.

 

 

 

http://groong.usc.edu/news/msg74427.html

-------------------------------------------------------------------------------

 

PS: Who said "re-privatization"?

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