Although Armenia has no energy resources of its own, it is rich in electricity-producing capacities and other energy infrastructure and is therefore anxious to become a regional hub in the operation of energy transmission and transportation, as well as in transportation of goods. In energy programs, it enjoys the support of two major energy producers, Russia and Iran.

In late 2010 to early 2011, it was reported that four joint Armenian-Iranian projects would be launched in 2011. These are, first, the construction of a third high-voltage electric power line connecting the two countries; second, the construction of a hydro power station on the border river of Araks; third, the construction of a pipeline for transporting oil products from Iran and the Gulf region as a whole to Armenia; and fourth, the construction of the Iran-Armenia railroad. None of these programs had been initiated by November 2011. The main reason for this delay is a lack of funding on the part of Iran, which is supposed to be the principal investor.

For the high-voltage line of 400 kV, an inauguration ceremony was even held in October 2010 in Armenia’s Gegharkunik province, where the Energy ministers of both countries participated. The problems facing the construction of the Meghri hydropower station should have been resolved during the official visit of Iranian President Mahmud Ahmadinejad to Armenia last summer. But the visit planned for June 6 was canceled on an extremely short notice. No explanation was presented for the cancellation other than the official acknowledgement that “the visit was postponed by agreement of both sides.” The Iranian President evidently had serious problems on both the domestic and international arenas, which forced him to postpone the visit. However, it was evident that some joint projects with Armenia, including the Meghri hydro power station, have seriously suffered from these events.

It was stated in November that the Iranian President will visit Armenia this year, but the problems of the Meghri station are no longer on the agenda. As for the oil pipeline, whose construction was originally planned to be completed over the last three years, the Ministry of Energy and Natural Resources of Armenia states that feasibility studies are under way; however this statement could not be independently verified. Therefore, it can be concluded that no progress in this project has been made.

The same assessment is valid for the Iran-Armenia railroad, a very complicated project involving many participants, including the Armenian and Iranian governments as well as investors. In addition, the railroad will run in a mountainous part of southern Armenia, complicating the construction work. If successful, this railroad will connect the Gulf region with Armenia’s rail network and further to Georgia and the Black Sea region. Armenia’s President Serzh Sargsyan attaches significant importance to this project as the planned railroad will bypass the Azerbaijani exclave of Nakhichevan, thus eliminating an important leverage on Armenia due to the Nagorno-Karabakh conflict. Azerbaijan has since the early 1990s closed the rail link between Armenia and Nakhichevan, thus cutting Armenia’s railroad connection to Iran and the Gulf region.

During 2011, none of these projects display any signs of progress. The Iranian side generally has a slow track record in implementing such projects – suffice it to say that the first agreement on the third high voltage power line was signed in 2004, and the first document about the Meghri station was signed as early as in 2001. Meanwhile, these projects are of vital importance to Armenia, which has a strong interest in starting them as soon as possible.

One important factor hindering progress over the past years has been the fact that all of these projects must be funded, either partly or completely, by the Iranian side. However, the required funding is not available to Iran due to the sanctions imposed on Iran by the U.S. and the UN. In particular, the funds are transferred from Iran to Armenia through the Yerevan branch of the Iranian bank Mellat. Such transfers were already complicated due to the sanctions, and have now become even more difficult because of recently imposed sanctions specifically on this bank. The economic contacts between Armenia and Iran are therefore likely to become even more restrained in the near future.