Baku, Azerbaijan, Sept. 9
By Dalga Khatinoglu- Trend:
With the expectation that sanctions on Iran will be suspended later this year, Armenia is eyeing opportunities to boost ties with Iran.
One of the projects is the Iran-Armenia railway. Both sides are expecting Chinese financing.
China Civil Engineering Construction Corporation (CCECC) has designed the project, while Rasia FZE registered in the United Arab Emirates, awarded $3.2 billion for the 305km railway project, aimed to link the ports of the Persian Gulf and the Black Sea within six years.
Armenian Prime Minister Hovik Abrahamyan will discuss the Iran-Armenia Railway on a visit to China during his two-day visit to Beijing on Sept. 23 Armenian News Agency NewsAm reported Sept.8.
The Iranian railway in Jolfa needs to be extended 90 km to the Armenian border city of Meghri. However, construction of the 120 km Armenian side, which needs building 86 bridges, 60 tunnels and 27 stations will be more complicated and costly.
And, the Iran-Armenian railway will have to compete with the North-South transport corridor, connecting Russia's rail grid to Iran through Azerbaijan.
Iran will complete the construction of Qazvin-Rasht-Astara (Iran) railway in three years to connect this route through an existing national rail grid to both Bandar Abbas in Persian Gulf and Turkmenistan borders.
The Iran-Turkmenistan-Kazakhstan railway was inaugurated in 2014, providing opportunity to connect the east of Caspian Sea to both the west of the sea and the Persian Gulf.
The investment, needed for completion of Qazvin-Rasht-Astara is about $600 million, 6 to 7 times less than the Armenian railway.
While the railway between Armenia and Russia has been blocked by Georgia since 2008 after the intervention of Russian troops led to separation of South Ossetia and Abkhazia, the only destination for a Iran-Armenia cargo route is restricted to Georgia's Batumi port.
Gas delivery
The other project is boosting Iranian gas deliveries to Armenian power plants. According to a gas-for-power deal between the two nations, Iran will barter about 1.1 to 1.2 million cubic meters of gas with Armenian electricity based on the 25-percent efficiency of power plants. In other words, Iran agreed to barter a cubic meter of gas for 3 kWh of Armenian power by 2019.
Yet, Iran seems hesitant to force Armenia to increase the power volume, because Iran's only rival Russia currently delivers gas to Yerevan at $168 per 1000 cubic meters, much lower than the Iranian gas price.
Iran and Armenia sealed the gas-to-power deal after 12 years of negotiations in 2004. After the first time Iran delivered gas to Armenia in 2008, they were to increase this volume to 1.5 billion cubic meters per annum (bcm/a) in 2011 and then increase this volume to 2.6 bcm/a gradually, 6 times more than the current level.
Complicating matter is that Iran-Armenia has no thermal power plant construction project to open space for more Iranian gas delivery to this country.
Besides the gas-to-power bartering deal, Iran and Armenia has a power exchange deal.
During 2013, Iran exported 1 billion Kwh of electricity energy (+25 percent Y/Y) to Armenia, while it imported 1.15 billion kWh (-27 percent Y/Y) from this country.
In total, Iran's power imports and exports during 2013 was 3.718 billion kWh and 11.774 billion kWh, of which Armenian share was 30.9 percent and 6 percent respectively.
Edited by CN
Dalga Khatinoglu is an expert on Iran's energy sector, head of Trend Agency's Iran news service. Follow him on @dalgakhatinoglu