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Cablegate: Armenia: Fuel, Food Shortages Predicted Due To

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OO RUEHBC RUEHDE RUEHDIR RUEHFL RUEHKUK RUEHKW RUEHLA RUEHROV RUEHSR
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O 111014Z AUG 08
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C O N F I D E N T I A L SECTION 01 OF 02 YEREVAN 000639

SIPDIS

E.O. 12958: DECL: 08/10/2018
TAGS: PREL MOPS ENRG EAIR ELTN ECON EAGR EWWT PBTS
GG, RU, AM
SUBJECT: ARMENIA: FUEL, FOOD SHORTAGES PREDICTED DUE TO
GEORGIA-RUSSIA CONFL...

C O N F I D E N T I A L SECTION 01 OF 02 YEREVAN 000639 SIPDIS E.O. 12958: DECL: 08/10/2018 TAGS: PREL MOPS ENRG EAIR ELTN ECON EAGR EWWT PBTS

SUBJECT: ARMENIA: FUEL, FOOD SHORTAGES PREDICTED DUE TO GEORGIA-RUSSIA CONFLICT; MFA ASKS OUR HELP

Classified By: CDA Joseph Pennington, reasons 1.4 (b,d) 1. (C) AN URGENT CALL FOR HELP: Deputy Foreign Minister Gharibjanian -- acting on behalf of the vacationing foreign minister -- urgently called in Charge d'Affaires first thing the morning of August 11 to solicit assitance in freeing cargo shipments which he said Georgian authorities were holding up. He said that some 30 railroad cars of grain, diesel fuel, and kerosene (jet fuel), were being held up by Georgian officials at the Georgian-Armenian border crossing point of Sadakhlo-Bagratashen, and an unspecified volume of cargo was likewise being held up at or near the port of Poti. The implication was that Georgian authorities were at least considering commandeering these kinds of critical staple goods for Georgian national needs during the crisis. Gharabjanian asked for U.S. help in persuading Georgian authorities to allow Armenian-bound shipments to pass freely onward to Armenia.

2. (C) FUEL AND FOOD SHORTAGES FEARED: Armenian authorities are quite concerned about meeting their own critical food and fuel needs in the event of a protracted crisis in Georgia, given that a majority of Armenia's food and fuel consumption is imported via Georgia. Gharibjanian noted that Armenia could face serious shortages, especially in diesel fuel, jet fuel, natural gas, grain, and sugar. He noted that natural gas imports via the Russia-Georgia-Armenia natural gas pipeline have already been interrupted (see paragraph 4), and Armenia is functioning off of its stored natural gas reserves. (NOTE: Post has learned from prior natural gas supply scares that Armenia's reserve storage capacity contains sufficient gas to supply Armenia's normal consumption for anywhere from three to six weeks, depending on season. Post is checking with local experts to obtain updated estimates, based on how close to capacity the Armenian reserves were when the current crisis started and current consumption estimates. END NOTE)

3. (C) JET FUEL ALREADY SHORT: CDA spoke on Saturday, August 9, with Mikhail Baghdassarov, the Armenian oligarch who owns the national airline and also holds a monopoly on Armenia's jet fuel imports. Baghdassarov said that five days previously, his jet fuel suppliers in Poti and Batumi abruptly announced a more than threefold price increase. Baghdassarov had delayed jet fuel purchases since, while trying to negotiate a more favorable price. Thus, Armenia's aviation fuel stocks were already low before the current crisis. Baghdassarov estimated that as of the August 9 conversation, Armenia had approximately six days worth of jet fuel on hand in the country. Post is following up to seek more detailed and updated information on jet fuel availability and price. Armenia's civil aviation director, Artyom Movsesian, was slightly more sanguine about jet fuel availability, but declined to estimate the amount of fuel stocks on hand and also asked USG help in persuading Georgian officials to let jet fuel shipments through. He hypothesized that if fuel supplies become short, the GOAM may start blocking flights/passengers diverted from Georgia, since the recent uptick in Georgia transit passengers had become a big part of current fuel demand. Movsesian was reached on vacation, and may be less up to date about the true state of jet fuel stocks than Baghdasarov. 4. (C) ENERGY DILEMMA: Post obtained an update on the implications of the natural gas shortage on Armenia's energy situation. Our expert said that in fact the Russia-Georgia-Armenia gas pipeline has not be shut off altogether, but the volume of gas being shipped has been cut in half, from roughly 6 million cubic meters of gas per day to about 3 mln c.m. It was not immediately clear whether the reduced volume is a result of Russia shipping less, or of Georgia taking up a greater share upstream from Armenia. In response to this supply reduction, Armenia will shut down one of its two natural gas-fired power generation units at the Hrazdan Thermal Power Plant, and will cut off deliveries of electricity exports south to Iran. (NOTE: Under Armenia's seasonal power swap arrangement with Iran, Armenia exports power south in the summer, and receives electricity from Iran in winter, when Armenian consumption is high and hydropower generation is low. Every watt that Armenia fails to export YEREVAN 00000639 002 OF 002 south in the summer is another watt that Iran will not send back north come winter, so Armenia will quickly start piling up an energy deficit for the wintertime. With rising natural gas prices and December 31 expiration of Armenia's concessionary gas contract with Russia's GasProm, an energy price/availability crisis this coming winter was already a serious concern. END NOTE) The Iran-Armenian natural gas pipeline remains incomplete, and its completion date continues to slip. The official estimate now is that it should be completely by April/May 2009, but our very well-informed local energy analyst believes this to be extremely optimistic. The more southerly portion of the pipeline could be operational by the end of 2008, but would be capable of delivering up to 1 million c.m./day only as far north as the southern Armenian town of Kajaran for local consumption in the southern Syunik region of Armenia. This would ease Armenia's shortages somewhat, but far from eliminate the need for Russian gas via Georgia. PENNINGTON

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