IRANIAN ENERGY MINISTER'S VISIT TO ARMENIA -

C O N F I D E N T I A L SECTION 01 OF 02 YEREVAN 002118

SIPDIS

E.O. 12958: DECL: 12/05/2015
TAGS: ECON ENRG ETRD IR AM
SUBJECT: IRANIAN ENERGY MINISTER'S VISIT TO ARMENIA -
EVIDENCE OF STRENGTHENING TIES?

REF: A) YEREVAN 1992 B) YEREVAN 1095

Classified By: Amb. John M. Evans for reasons 1.4 (b,d).

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SUMMARY:
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1. (C) Iranian Energy Minister Parviz Pattah is currently
visiting Armenia to inaugurate the country's first wind power
plant and to tour the Fifth Unit of the Hrazdan Thermal Power
Station. In September, the Iranian Government (GOI) agreed
to provide USD 150 million to complete construction of the
Fifth Unit which is expected to generate between 150 and 450
megawatts of electricity by 2007. This visit comes on the
heels of Armenian Minister of Energy Armen Movsesyan's visit
to Tehran in mid-November and suggests strengthening ties
between the two countries in the energy sector. End Summary.

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WIND POWER: A SYMBOLIC MOVE TOWARDS RENEWABLE ENERGY
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2. (C) On December 6, the Iranian Energy Minister Parviz
Pattah and Armenian Energy Minister Armen Movsesyan presided
over the opening of the first-ever wind power plant in the
South Caucasus. The plant was built thanks to a USD 3.5
million grant from the GOI and was heralded by the two
Ministers as an example of the growing ties between the
energy sectors of Armenia and Iran. The total output of the
plant is minimal, approximately 2.6 megawatts. Deputy
Minister of Energy Areg Galstyan announced at the event,
however, that the GOAM plans to expand on this project,
increasing output to 20 megawatts and building similar
facilities around the country. While both sides agreed that
this plant represents a positive move towards increasing
renewable energy in Armenia, given the small output, the new
plant is more symbolic than it is a realistic alternative to
the Armenian Nuclear Power Plant or the gas that Armenia
currently receives from Russia.

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GOI FINANCING TO COMPLETE THERMAL POWER PLANT
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3. (SBU) Pattah was scheduled to visit the Hrazdan Thermal
Power Plant on December 7. In late September, the Iranian
government agreed to invest USD 150 million to complete
construction of Unit Five of the power plant. Under the
agreement, the GOI would complete construction of the plant
by 2007 and Armenia would pay back the investment by
providing an equivalent amount of energy to Iran over a ten
year period once the plant was brought on line. According to
press reports, the Fifth Unit's output would range from 150
and 450 megawatts. The vast majority of the Hrazdan complex
was given to Russia under a debt-for-equity agreement in
2003, but the GOAM retained control of the fifth unit.

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CLOSER ECONOMIC TIES
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4. (C) In mid-November Armenian Energy Minister Armen
Movsesyan and Presidential Chief of Staff and co-Chair of the
Armenia-Iran Joint Economic Commission Artashes Tumanyan
visited Tehran (ref A). According to Iranian press reports,
during the visit Movsesyan signed a contract for an
unspecified amount with Iran's Export Promotion Bank to help
finance construction of the Iran-Armenia gas pipeline (ref
B). The Armenian delegation also traveled to the Free
Economic Zone in Jolfa and discussed ways to promote trade
between the two countries. Shortly after the visit, the
Armenian Chamber of Commerce and Industry and the Chamber of
Industry, Mines and Commerce of the Iranian province of
Mazandaran signed a memorandum of understanding establishing
a fund to promote joint projects to facilitate and increase
trade.

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COMMENT: STRENGTHENING TIES WITH IRAN?
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5. (C) Pattah's visit to Armenia and Movsesyan's earlier
visit to Tehran are evidence that Armenia's ties with Iran in
the energy sector may be strengthening. The recent
announcement by Gazprom that it intends to double the price
charged for natural gas imports to Armenia (septel) is
another incentive for Armenia to deepen its energy ties with
Iran and, at the same time, to work towards greater energy
independence from Russia. The other key issue in the
Iran-Armenia relationship is the pipeline between the two
countries; that issue, however, is covered by the Iranian
Minister of Oil Kazem Vaziri-Hamaneh and Pattah's visit does
not appear to have resulted in any major changes concerning
the pipeline.
EVANS