Armenia’s central bank vows to keep inflation in check should Russia raise gas price

Armenia’s Central Bank will seek to keep inflation at its target level even if Russia raises the price of natural gas it sells to Armenia, Governor Martin Galstyan said Wednesday.

“If, for example, the price of gas rises by 69% or 79%, we will pursue a policy aimed at bringing inflation back to our target. We will see how things develop and, naturally, take appropriate measures, whether more aggressive or more moderate. That will depend on how events unfold and on the possible scenarios,” Galstyan told local publication Hetq in an interview.

Armenia has set an official inflation target of 3% in 2026 (with a permissible deviation band of ±1 percentage point), though actual annual inflation has tracked above this target, standing at 4.3% last month.

Natural gas is a key part of Armenia’s energy mix. It is used at thermal power plants to generate electricity, to heat most homes during the winter, fuel kitchen stoves and power greenhouses used for food production.

Gas supplies also give Russia significant leverage over Armenia. State-owned energy giant Gazprom owns Armenia’s gas distribution network and supplies more than 80% of the country’s natural gas needs.

In April, Russian President Vladimir Putin said the price of gas supplied to Armenia could be reviewed in connection with Yerevan’s pro-European course.

A price increase is expected no earlier than January, when Russia typically sets its gas prices for the year.

Earlier this month, Finance Minister Vahe Hovhannisyan told CivilNet that Armenia was prepared for a potential price increase.

“We need to pay a market price for what we buy. Whenever there is a subsidy, especially when it is provided from one state to another, there is a political and economic price to pay for it later,” Hovhannisyan said in an interview.

Prime Minister Nikol Pashinyan announced last month Armenia would seek to diversify its gas supplies even if Russia keeps the price flat.

“We will diversify no matter what, even if the gas price remains unchanged. If there is a chance to source gas from an alternative supplier, we will do exactly that. If there is more than one alternative, we’ll use that, too,” Pashinyan said.