September 30, 2022

Armenia looks to Gulf for energy investments

Monday, May 24, 2010

Gulf News

A former Soviet technology hub Armenia has opened its doors to foreign investors and has singled out the UAE as its ideal partner

Senior official seeks capital for new nuclear plant as country tries to tide over uncertainty in gas supply

Imagine spending a long and severely cold winter without heating to keep you warm.

Armenians encountered the experience in the early ’90s when they didn’t receive enough gas for the badly needed heating systems for three terribly cold winters in a row. This was a result of the dire political and security situation in the region.

The incident reflects the vulnerability of the former Soviet state in the field of energy and its dependence on its neighbours. This despite the fact that the country has a nuclear plant that produces nearly half of the energy it needs.

“Energy and electricity deficiency is a concern for the region,” Armenian energy minister Armen Movsisyan said.

Referring to the incident that happened in the early ’90s in Armenia, Movsisyan recalled, “The situation was very tense, and [no gas] made it to the country in the years of 1993, 1994, and 1995.”

Severe shortages

“During those years, electricity was provided for only a couple of hours a day, and I am talking about heating in winter,” he explained through an interpreter to a group of visiting journalists from the UAE.

Armenia depends on its nuclear plant and natural gas imports, largely from Russia, for its energy needs. Thermal and hydroelectric energy accounts for the rest of the energy production.

Seismic complications

The country’s nuclear plant, established in 1976 was shut down in 1989 — a year after a powerful earthquake hit the country and left tens of thousands dead and displaced.

The Metsamor plant was reopened in 1995, and until today it depends on nuclear fuel it receives from Russia.

The Metsamor nuclear power plant provides about 40 per cent of the country’s domestic electricity supplies by generating nearly 2.7 gigawatt hours (GWh) of electricity every year.

Over the past couple of years, the country has invested $100 million (Dh367.3 million) to improve the plant’s safety and on safeguarding it from seismic shocks, officials said.

Moscow also used to provide Armenia with gas to meet its needs. However, these supplies stopped for a few years after the break-up of the former Soviet Union. Supplies are still unreliable as the pipeline passes through Georgia, which waged a brief war with Russian forces in 2008.

Armenia is also connected to Iran by a pipeline. But there is a possibility that this option would be affected by the outcome of the current controversy over Tehran’s nuclear programme and the possibility of more economic sanctions against Iran.

Armenian officials are concerned that “in case of any problem with Iran, Armenia will face a problem and won’t be able to import the nuclear fuel,” Movsisyan said referring to other regional border disputes which led to the closure of many borders and airspace between some countries.

However, the upgrade of the existing nuclear plant is another option for the government in Yerevan.

Armenian deputy prime minister and minister of territorial administration, Armen Gevorgyan, said a company had been contracted to do the design work on a possible upgrade.

“We are done with the planning and implementation work and in few weeks will announce the results of our work. Then our talks with investors will start,” Movsisyan said.

The International Atomic Energy Agency (IAEA), which has been participating in safety improvements at Metsamor, is also conducting annual inspection visits to monitor security and safety at the plant. Metsamor is scheduled to close by 2016. Before that day, a new plant should be up and running.

Asked about their plan “B”, in case work on the second nuclear plant is delayed for any reason, Movsisyan hinted without hesitation that this was not an option on the table.

“We are working hard so there will be no delay,” he said.

However, “raising capital is a very important process,” Gevorgyan noted.

“Construction is the easier part of the process.”

Foreign investment in the new nuclear plant is more than welcome, officials have pointed out. They are equally open to other investments for the building of new energy plants, including investment from the UAE and other Arab countries in the Gulf.

Energy, the conducting of research and feasibility studies, and cultural and sciences education are among the fields of great potential for cooperation between the two sides.

Armenia likes to boast of its “traditional strength” in the fields of information technology (IT), which is hopes could constitute a “gateway” for further bilateral cooperation. It is also keen to make its relations with the Gulf region a “two-way-street” in trade.

“For the first time this year, 10 students from Armenia are to take part in the technology programme at the Masdar Foundation [in Abu-Dhabi],” Armenian deputy prime minister and minister of territorial administration Armen Gevorgyan said.

Armenian economic minister Nerses Yeritsyan said the country was also strong in physics and mathematics. That strength explains the reason for the rising of many research and development projects from Armenia during the Soviet era.

“The biggest computer during that era was based in Armenia,” Gevorgyan added.

“Armenia produced chips for the entire Russian industry, both military and civilian purposes. The best-designed chips are coming from Armenia,” Yeritsyan said

“This country used to be the Silicon Valley for the Soviet Union,” Yeritsyan said.

“We designed and built computers in this country… Physical accelerators were built in Armenia, and we are going to consolidate this science base into a well-established national science lab which will have innovative directions, such as nuclear medicine and energy.”

Armenia envisions its future economy as a catalyst economy, where it “will build a new economic infrastructure and put the brain on top of it. This is how we see the Armenian economy 10 to 15 years down the road,” Yeritsyan said. Yeritsyan seems to be a strong believer in the concept of “brain circulation”, which aims to make use of tens of thousands of “originally-Armenian brains” in some of the top educational institutions in the world — Stanford, Berkeley, UCLA and MIT.

“In 15 years, we believe that this country will become a knowledge hub for the neighbourhood,” the economic minister said.

Armenia’s College for Engineering and Mathematics provides education to between 20,000 and 22,000 students. Their target for the next 10 years is to double the labour force in this sector and the government is going to intervene and support entrepreneurs of Armenian origin in the diaspora.

Armenians are “also good in providing complex engineering services,” while the country is good in synchronising hardware and software even to some giant Asian clients.

However, this doesn’t mean the country is “yet in competition with the sharks,” the economic minister said in reference to the big Asian economies.

Armenia’s economic minister said his country’s initial plan is to make the country the region’s internet hub.

“We target to build the best internet [broadband] coverage not only in the region, but also in the world. Currently we are finalising a project of 100 MB per second to every single village in two years. In five years we will have cables [in] homes. This is a huge investment opportunity that is coming from an Armenian mentality,” Yeritsyan said.

As investments are welcomed, Yerevan is facilitating more and more the procedures for investors. “The country has changed a lot,” said Jerai, a half-Armenian, half-Syrian entrepreneur who decided to move to Yerevan, where he has started his own business — a restaurant. “Armenia, from the Soviet Union days, has had the reputation of being a monopoly country,” he said. “This is very untrue,” Jerai added. “Today, things on the ground are different.”

So far, Russia tops the list of investors in Armenia, followed by the United States, Europe and then the rest of the world. Armenia’s investments abroad are estimated at “couple of dozens of millions at least,” according to economic ministry figures.

There are also number of other products the country is looking to send abroad.

“I can assure you there are Armenian products which [we] could place in the UAE markets, and the Arab market,” Gevorgyan said.

While Armenia is known for the growing of certain kinds of fruits and vegetables, such as apricots and pomegranates, Gevorgyan said fresh fruit and vegetables, as well as processed food items which meet European food standards on safety and quality, are among possible exports to the UAE and the Gulf region.

Known as a “country of stone,” Armenia could contribute to the construction boom in the Gulf region, officials said, as they referred to the fact that Armenia is known for some of the most expensive stone such as basalt.

Investments from the UAE and the rest of the region to Armenia are welcomed for many reasons other than the concept of welcoming funds to an emerging economy.

First, “investors from UAE have financial capacity,” Gevorgyan said.

“They come with [the] latest technology. They come with the best management capacity. Given the three factors, investments from [the] UAE are of particular interest,” he added. Already UAE investments have started to be directed towards Armenia. A multi-million-dollar shopping centre is under way in the country. Construction in another key investment area, with UAE funds channelled towards the construction of a housing complex in one of the fashionable neighbourhoods in Yerevan. UAE exports to Armenia reached $518 million in 2008, according to official figures. However, they were scaled down slightly owing to the international financial downturn that struck in 2007.

40%

of power needs generated by nuclear plant

$518m

UAE exports to Armenia in 2008

Jumana Al Tamimi/Gulf News

Nerses Yeritsyan

Jumana Al Tamimi/Gulf News

Armen Movsisyan

By Jumana Al Tamimi?Associate Editor

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