Armenia is important to world energy markets because of its location as a potential transit center between the energy-rich Caspian Sea republics and Western markets.
To print this report, please download the PDF file and print it from Adobe's Acrobat Reader.
Armenia is slowly recovering from the devastation caused by years of ethnic strife and armed conflict with Azerbaijan beginning in 1988. Until a cease-fire in May 1994, fighting centered on Nagorno-Karabakh, an ethnic Armenian enclave in Azerbaijan, claimed over 25,000 lives, and created more than 1 million refugees. Armenian fighters eventually succeeded in occupying about one-fifth of Armenian territory. In late November 1996, Armenian separatists in Nagorno-Karabakh elected their first president despite strong opposition from Azerbaijan, which dismissed the election as illegitimate. In October 1996, riots broke out in Yerevan, Armenia's capital, after President Levon Ter-Petrosyan was re-elected despite opposition accusations of fraud.Since the 1994 cease-fire with Azerbaijan, Armenia's Gross Domestic Product (GDP) has begun to recover, after plummeting by over 60% between 1988 and 1993. In 1995, GDP actually grew by about 6.9 percent, and in 1996 it is expected to expand another 4-5 percent. This recovery is due partly to a revival of energy supplies, partly to foreign (mainly Western) aid, and partly to the government's economic program. In late October 1996 Armenia, along with 10 other Black Sea nations, signed a declaration pledging to build stronger economic ties among countries of the region.
Armenia's government has taken steps to reform itself from a planned economy into a market economy. Armenia has introduced its own currency, lifted most trade barriers, instituted its "Law on Foreign Investments" in July 1994, and introduced a wide-scale privatization plan. In February 1995, the United States government granted Armenia duty-free status under the Generalized Systems of Preferences, which is targeted at assisting developing nations. In 1996, Armenia began a 4-year economic program aimed at modernizing decaying infrastructure, refurbishing electric power plants, and generally reforming the economy in a market-oriented direction.
Armenia has no fossil fuel resources of its own, although it does contain hydroelectric and nuclear electric generating capacity. A natural gas pipeline from Georgia, along with small shipments of refined products from Georgia's Batumi refinery, have been the only other sources of fuel for Armenia since blockades by Azerbaijan and Turkey were imposed in 1991 and 1993, respectively. International pressure on Armenia and Azerbaijan has been applied to resolve their disputes in order to clear the way for transit of oil and gas from the Caspian Sea region.
With peace in the Caucasus, Armenia could become an important transit center for the region, particularly for oil exports from Azerbaijan and Kazakstan to Turkey and western markets. Armenia is a member (along with Albania, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, Russia, Turkey, Ukraine) of the Black Sea Economic Cooperation, or BSEC. The group has set up a Black Sea and Balkan regional economic center to help coordinate energy strategies, such as finding the best locations for pipelines through the region.
Hydropower is essentially Armenia's only indigenous source of energy. Currently, hydroelectricity accounts for about 60-70 percent of the country's electric power generation. Armenia has several hydroelectric plants on the Razdan River, with plans to develop additional hydro projects . To this end, the country is currently soliciting foreign participation in building and rehabilitating hydroelectric units, and in privatizing its state-owned utility, Armenergo. Hagler Bailly, a U.S. consulting firm, is providing assistance in attracting independent power producers to invest in Armenia.
In addition to hydroelectric and nuclear power, Armenia has 3 fully operational thermal power plants (Yerevan: 550 megawatts; Hrazdan oil and gas plant: 1,110 megawatts; Vanadzor: 96 megawatts). All three plants have exceeded their projected operating lifespans, are inefficient, and require renovation. In addition, acquiring fuel for these plants remains a challenge.
On December 4, 1996, the Armenian government announced that it would raise electricity prices by 40 percent in 1997, bringing them closer to world levels and stopping rationing. The decision to raise prices from .03 cents to .05 cents per kilowatt-hour was made in accordance with recommendations by the World Bank and other international lending institutions.
If you liked this Country Analysis Brief or any of our many other Country Analysis Briefs, you can be automatically notified via e-mail of updates. Simply click here, put in your e-mail address, and check the box labeled "Country Analysis Briefs" on the list of products. You will then be notified within an hour of any updates to our Country Analysis Briefs.
Return to Country Analysis Briefs home page
File last modified: December 1996
Contact:OIL
In an effort to become more self-sufficient in energy, Armenia has begun a $15 million oil and gas exploration program, contracted to Greece's state-owned DEP-EKY. Armenia also has considered allowing Russian enterprises to take part in domestic oil and gas exploration. In addition, Armenia plans to import crude oil directly from Russia, and has begun work to convert the never-utilized petrochemicals plant in Yerevan into a 20,000 barrels per day refinery. NATURAL GAS
Armenia currently receives all its natural gas -- about 57 billion cubic feet in 1995 -- from Turkmenistan. Over the past several years, these supplies have been cut off sporadically because of ethnic and civil unrest in the Caucasus, pipeline accidents, and non-payment of debts. In April 1996, Armenia and Turkmenistan agreed to convert Armenia's $34 million in gas debts from 1994 and 1995 into a 5-year loan. As an alternative to Turkmeni gas, Armenia has talked with Iran about building a $120 million, 90-mile pipeline to supply Armenia with Iranian gas.
ELECTRICITY
Faced with an acute energy crisis, Armenia resumed operation at Unit 2 of its Medzamor nuclear power plant at Yerevan during late-1995. Reopening the reactor boosted Armenia's electricity generation by 40%, enabling electricity to be supplied around the clock for the first time in years. Medzamor was closed in 1989 because of seismic and safety fears, and the controversial move to reactivate it was taken largely out of desperation. Armenia's government currently has plans to reactivate Medzamor's Unit 1 after performing extensive renovations. In the long-run, Armenia hopes to build a new nuclear plant to replace Medzamor, which has perhaps 7-8 additional years of life.COUNTRY OVERVIEW
President: Levon Ter-Petrosyan
Prime Minister: Hrant Bagratyan
Independence: September 23, 1991 (from Soviet Union)
Population (1995E): 3.8 million
Location/Size: Southwest Asia between Turkey and
Azerbaijan/11,500 sq.miles, slightly larger than Maryland
Major Cities: Yerevan (capital)
Language: Armenian (official)
Ethnic Groups: Armenian (93%), Azeri (3%), other (4%)
Religion: Armenian Orthodox (94%)
Defense (6/95): 60,000 total armed forces, plus 5,000 Russian
troops and 1,000 paramilitary
ECONOMIC OVERVIEW
Currency: Dram = 100 luma
Market Exchange Rate (10/96): US$1 = 400 Dram
Gross Domestic/National Product (GDP)
(1995E, market exchange rates -- $1987): $2.5 billion
Real GDP Growth Rate (1996E): 4-5%
Inflation Rate (consumer prices, 1996E): 20%
Unemployment Rate (1996E): 9% (official); 20% (unofficial)
Major Trading Partners: Russia, Turkmenistan, United States, European Community
Merchandise Exports outside former Soviet Union (1994):
$43 million
Merchandise Imports from outside former Soviet Union
(1994): $120 million
Major Export Products: Agricultural products, machinery and transport equipment, light industrial products
Major Import Products: Fuel, foodstuffs
ENERGY OVERVIEW
Minister of State for Energy: Steve Tashjian
Minister of Energy and Fuel: Miron Shishmanyan
Proven Fossil Fuel Reserves (1/1/95): Negligible
Fossil Fuel Production (1994): None
Oil Consumption (1995E): 5,000 barrels per day (bbl/d)
Crude Oil Refining Capacity: None
Natural Gas Consumption (1995E): 57 billion cubic feet Electric Generation Capacity (1/1/95E): 3 gigawatts
Electricity Generation (1995E): 5.6 billion kilowatthours (63
percent hydroelectric)
ENVIRONMENT OVERVIEW
Total Energy Consumption (1995E): 0.1 quadrillion Btu
Energy Consumption per $1987 of GDP (1995E): 40
thousand Btu
Energy Consumption per Capita (1995E): 26.3 million Btu
Energy-related Carbon Emissions (1995E): 0.9 million
metric tons (0.01 % of world carbon emissions)
Carbon Emissions per Thousand $1987 of GDP (1995E):
0.37 metric tons
Carbon Emissions per Capita (1995E): 0.2 metric tonsMajor Environmental Issues: Draining of Lake Sevan for
hydropower, deforestation, soil pollution from toxic chemicals and air pollution in Yerevan
ENERGY INDUSTRIES
State Gas Company: Armgazprom
Major Ports: None
Major Oil and Gas Fields: None; small fields
Major Pipelines: North Caucasus-Transcaucasus natural gas
pipeline from Russia through Georgia to Yerevan. A second gas pipeline from Azerbaijan was closed after fighting began between Azerbaijan and Armenia.
Major Refineries (crude oil capacity): None
State Electric Utility: Armenergo
Major Power Plants (capacity): Yerevan (Medzamor)
nuclear plant (2 units/815 MW total); Hrazdan oil/gas plant (1,110 MW); Yerevan heat/power plant (550 MW); Sevan-Hrazdan hydroelectric plant and smaller plants (925 MW).
Links to other sites:
Latest EIA Detailed Annual Data (1994)
1997 CIA World Factbook - Armenia
EIA Privatization Report - Caspian Region
Douglas MacIntyre
dmacinty@eia.doe.gov
Phone: (202) 586-1831
Fax: (202) 586-9753
URL: http://www.eia.doe.gov/emeu/cabs/armenia.htm