To this day, no official announcement has been made about the exact time and standards for price increase. Russian Prime Minister Fradkov’s visit brought no news, besides the following announcement: “We are going to work according to market principles and the increase in gas prices will not affect the economic relations between our countries.” Nobody denies the fact that gas prices will increase. As to how much they will increase and how they will affect our economy-that is a different story. Taking into consideration the fact that small talk usually becomes reality, we can presume that Russia is going to double the price of gas. If we add that Georgia has decided to raise the price of the transit route by 5-6 times, then it turns out that instead of paying the regular 59,000 drams for gas, consumers will have to pay 80-85,000 drams for 1000 cubic meters.
How will this affect Armenia’s political/economic situation? Consumers are going to feel that change directly (for example, by using home gas appliances) and indirectly. If we consider that nearly 30% of electricity in Armenia is provided by the hydroelectric power stations of Yerevan and Hrazdan, then this will surely affect the prices for electricity. As a result, we will have inflation. Although Minister of Energy A. Movsisyan announced a couple of days ago that the increase in gas prices will not affect our economy, it is even “possible that that will not affect the price of electricity”, however, it is hard to imagine how the government is going to deal with the increase. Pay close attention: the minister is not claiming, he is simply saying that “it is possible”. Prime Minister of Armenia Andranik Markaryan also calmed the people down before his departure to Egypt by saying: “…during the next two years, citizens of Armenia will not feel the affect that increase in energy prices has. Even if Russia raises the price of gas exported to Armenia, then the Armenian government will make sure that that doesn’t affect the citizens of Armenia by using its own resources.” The Prime Minister of Armenia departed after this and did not answer to the question as to what resources the government would use. The fact remains that Russia will demand a higher price. Basically, Armenia has to pay a higher price to Russia. If the consumers are not the ones that are going to pay that price, how are the payments going to be made? It is hard to say that the government can put that burden on its shoulders when it doesn’t even have enough financial resources. There is another road to take: gas taxes can be reduced, particularly, the value added tax. But this is also hard. First of all, the World Bank will not go along with that because that means to apply dual standards in economy. Secondly, this will affect the income part of the state budget. Meanwhile, Mr. Markaryan said: “We have planned out our activities; we have passed our state budget and are not thinking about changing the scenario for our country’s development.” Let’s mention that even in this case, the 20% or 10% reduction of the value added tax will not really change anything.
In a word, it is difficult to say what the government will do, however, we do know one thing. If the government doesn’t do anything, then the increase in prices will be inevitable and inflation will exceed the 3-4% level foreseen in the state budget. This will give way to shortage of incomes which will make the people hate the authorities even more. In other words, Russia is helping out the opposition one way or another. Of course, our authorities will do everything they can to take some steps against this, or at least show that they are doing something. For now, there is still time to calm the people down and the ones to do that are Armen Movsisyan and Andranik Markaryan.