Monday, January 08, 2007

Armenian energy monopolists defraud Armenian populous of $36 MILLION per year in natural gas sales

Those who monopolize natural gas in Armenia are cashing in on the artificial devaluation of the U.S. Dollar in Armenia.

First let’s establish that natural was being purchased in US Dollars for $56 per 1,000 cubic meters. Of course there are distribution and operation cost and for argument sake we will estimate that the total cost to the Armenian supplier at $58 per 1,000 cubic meters. Armenia purchases 1 billion cubic meters of natural gas annually and using the total cost estimate given, paid $58 million.

A couple of years ago when the dollar was worth 550 Drams, the price to the consumer for natural gas was set at 51 Drams per cubic meter. This equated to $0.0927 per cubic meter. This meant that natural gas was being sold to the consumer at a 60% markup, with annual sales at $92.7 million, leaving hefty profit of $34.7 million.

Following the start of the sudden devaluation of the Dollar, the price of gas to the Armenian suppler almost doubled to $110 per 1,000 cubic meters. Again for argument sake we will estimate that the total cost including distribution and operational costs increased to $112 per 1,000 cubic meters, costing the Armenian supplier $112 million annually.

With the present day value of the Dram at 362 to the Dollar, the price per cubic meter of natural gas was set to 65 Drams, this equating to $0.18 per cubic meter to the consumer. This means that the supplier of natural gas is still selling at a 60% markup, and now, selling to the end user for $180 million annually, profiting $68 million, an increase in profits of $33.3 million from when the Dollar was worth 550 Drams.

According to various estimates, based on Armenia’s economic state and world markets, one US Dollar should be worth 450 Drams. This means that natural gas at the price in Drams presently set should cost the consumer $0.144 per cubic meter, bringing the annual sales to $144 million, and bringing the profits close to what they were before the artificial devaluation of the US Dollar at $32 million.

If what is being stated above is accurate, then the Armenian public is being overcharged annually $36 million. This may not sound like much to some for a country of 3 million, but if you consider that the same scenario holds true for propane, gasoline and diesel fuels, then we are talking about HUNDREDS OF MILLIONS OF U.S. DOLLARS being “legally” overcharged to the Armenian public.

The energy monopolist are for the most part fellow Armenians, many who claim to be patriotic and thinking of the peoples well being. If they are so patriotic, then they should mark up natural gas by 20% and be happy with a $10 million annual profit, since the same people also control propane, gasoline and diesel fuels and make much more from their sale.

One of the energy monopolists at a press conference a while back when asked about the sudden drop of the value of the US Dollar in Armenia was quoted as saying that “in the future it will drop slower,” indicating that he and his cronies have control over what direction the value of Armenian currency will take.

And who are the monopolists of energy in Armenia? Well for starters the President of Armenia, Robert Kocharian and Minister of Defense, Serj Sarkissyan, hold a very large share of the energy sector. The others are for the most part Armenian mafia figures and members of Parliament. These are also the same people who were behind the ripping up of the electrical transportation system we had in Yerevan to make us more dependent on the imported fuel they control.

A friend of mine told me that this artificial devaluation of the dollar has put Armenia out of the race for claiming their share of product exports, since the dollar can’t buy what it can in China for instance. Armenian exports are down in 2006 by 30% due to the artificial devaluation of the dollar.

In short, so a few people in power can make a few million dollars, they have artificially devaluated the dollar and destroyed many of Armenia’s export markets. I know a few people who were exporting from Armenia and dealing in U.S. Dollars, who are now closing up their factories that were employing many people in Artsakh. A can and bottling factory was offered to me in Stepanagert the other day due to the owners death and the bank foreclosing on in the days to come due to their inability to being able to pay the $600k loan which is at 18% interest annually. One of their markets was the United States and with the devaluation of the U.S. Dollar, they could no longer profit what they were from those sales, thus were unable to cover their loan. I have one friend who instead of making a 30% profit, is now having to supplement his operation by about 8% to cover his operating costs in order to honor a contract he has signed into with a company in the United States. Because his market buys and sells in U.S. Dollars, once the contact he is loosing money is completed and after loosing thousands of dollars, he will be closing down his operation and Artsakh and we will loose more much needed jobs here.

Bravo Robert and Serj. You once again have shown your true patriotic colors and how incompetent and/or crooked you both are. Shame on you!!!

In all fairness, for the first 3 months of this year, the price of natural gas to the consumer has been reduced to 59 Dram per cubic meter, this bring it closer to the 52 Dram price it presently should be based on what it use to be. If the price remains at this level, then the Armenian public will only be getting ripped off for $19.3 million annually in sales of natural gas.

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