Armenians know how much energy dependence can cost because they have lived through its worst form. When the Soviet Union collapsed in the early 1990s, two neighbouring countries – Azerbaijan and Turkey – closed their borders, and the fuel that kept the country running stopped flowing. Heating was switched off for entire winters. Electricity was available for only a few hours a day. People burned their own furniture and cut down trees in parks to survive the cold. At the same time, the economy was collapsing: within just a few years, domestic production fell by more than half. The memory of those events remains vivid, which is why one word returns in every serious discussion about Armenia’s energy sector: dependence.
How did Armenia end up here?
Dependence is a word used rather too freely, so it is worth explaining precisely what it means in this particular case. To understand how vulnerable Armenia is, we need to look at how the country generates its own electricity. The answer has four parts, each carrying a different kind of risk.
The safest element of the system is hydropower – generating electricity from water. Armenia built its hydroelectric plants decades ago on its own rivers. These include, above all, the large cascades on the Vorotan and Hrazdan rivers, supported by around 189 small privately owned plants scattered across the country, with a combined capacity of approximately 389 megawatts. This is the only component that does not depend on anyone outside Armenia’s borders.
Its weakness is seasonality. Rivers swell in spring as mountain snow melts, but in summer, when conditions are dry, water levels fall. This means that domestic energy sources may cover only around a third of demand at certain times of the day. The system depends on nature and cannot simply be switched on whenever required.
A larger and more stable share of Armenia’s electricity comes from the country’s only nuclear reactor, at Metsamor, west of the capital. It supplies around one-third of all electricity consumed in the country, and at times even more. The nuclear plant is reliable and relatively cheap to operate and, in that sense, is precisely what a small country needs. However, it is temporarily shut down for maintenance and refuelling for between one and three months each year, and every gram of fuel it uses comes from Russia. In this case, reliability therefore also means maintaining good relations with Moscow.
The third component of Armenia’s energy system, also supplying roughly a third of demand, consists of gas-fired thermal power stations. The gas is imported, making this the weakest link in the entire chain. The newest part of the system is solar power, which now provides around 15–17 per cent of domestic demand.
Taken together, these elements reveal the scale of the problem. Because the reactor uses Russian fuel and thermal power stations rely on gas imported from Russia, close to 70 per cent of the electricity reaching Armenian homes depends on supplies from abroad – overwhelmingly from Russian sources.
How did Russia gain control of the taps?
At the heart of this dependence is gas. Russia supplies around 85 per cent of the natural gas consumed by Armenia – approximately 2.7 billion cubic metres in 2025. Yerevan pays $177 per thousand cubic metres, while ‘market’ prices for European buyers can reach $600.
It is precisely this low price that makes Russian gas so difficult to give up, particularly because its significance extends far beyond power stations to individual consumers. Around 93 per cent of Armenia’s population is connected to the gas network. Between a quarter and a third of all gas consumed in the country is used by households. Most cars on Armenian roads – around 73 per cent – run on gas because it is 25–40 per cent cheaper than petrol. Even factories producing food such as canned goods, dairy products and juices use gas to heat their facilities, just as households do.
In other words, this dependence is woven into heating, cooking and transport. It is not concentrated in a handful of industrial smokestacks.
And the issue is not simply who sells the gas. During the difficult years following independence, Armenia repaid some of its debts to Russia by transferring energy assets to it, while Russian companies purchased others. As a result, a large part of the country’s energy system ended up in Russian hands.
The company that sells the gas – Gazprom Armenia – is Russian. It also owns the pipeline network through which the gas flows. The same company supplies the commodity and controls the infrastructure, and that company ultimately answers to the Russian state. The low price therefore always comes together with control.
When dependence becomes leverage
How quickly that control can turn into pressure became clear in 2026. When Armenia took a step towards beginning the long process of European integration, Moscow immediately issued a warning through its energy minister.
In essence, the message was that if Armenia continued drifting towards Brussels, the 2013 agreement guaranteeing it cheap gas, fuel and diamonds could be suspended or terminated. The threat carried weight because Russia supplies not only most of Armenia’s gas, but also more than 60 per cent of the fuel used in the country and half of its diamonds.
The government in Yerevan did not back down. To reassure the public, the domestic regulator froze energy prices until the end of the year, maintaining the household gas price at 140 drams – around PLN 1.50 – per cubic metre.
By mid-2026, Moscow had not carried out its threats, and the Kremlin softened its language, describing the discount as a ‘commercial matter’ while suggesting that it might return to the issue later. The pressure eased, but the lesson remained. A country that buys most of its energy from a single supplier can be squeezed when it steps out of line.
Escape routes that remain blocked
Armenia has options. It knows what they are, and all of them are being discussed. The difficulty is that each runs into a different wall. Some obstacles are geological, others financial or political – and some are simply the result of ageing infrastructure.
The obvious way to loosen Russia’s grip is to look south, towards Iran, a major gas producer with which Armenia shares a border. Formally, the two countries are already connected. Iran sends gas across the border, Armenia uses it to generate electricity and Yerevan pays not in money but in electricity, returning around three kilowatt-hours for every cubic metre of gas.
In practice, however, this cooperation remains small in scale – and not by accident. When the pipeline was being built, its diameter was reduced under pressure from Moscow, from 1,200 mm to 700 mm. The aim was to prevent Iranian gas from potentially becoming a competitor. Even today, it supplies only one unit of the Russian-owned Hrazdan thermal power station.
Iranian gas also has a slightly lower calorific value than Russian gas – around 7,900 kcal per cubic metre compared with 8,200–8,400 kcal for the Russian product. Armenia’s room for manoeuvre is also narrowing because Iran’s own gas consumption is increasing, while its appetite for Armenian electricity may decline as it develops more generation capacity of its own. The Iranian door is therefore only partly open.
That opening could become wider, although not quickly. Following a visit to Tehran in late July 2026, Armenia’s infrastructure minister announced that the two countries had agreed to double the volume of gas and electricity exchanged under the barter arrangement.
The catch is that Armenia cannot send more electricity south without a third high-voltage transmission line to Iran – a project first announced in 2010 and still unfinished. For now, therefore, the agreement remains a political declaration waiting for infrastructure – more specifically, for power lines.
Price is another obstacle. Iranian gas is sold on international markets at rates well above the Russian price offered to Armenia, reaching Turkey at around $400 per thousand cubic metres, although Tehran could offer Armenia different terms if it chose to do so.
The situation is a miniature version of the wider problem: the political will exists, the infrastructure does not, and the arithmetic still favours Moscow.
The nuclear dilemma
Nuclear energy appears to be a more stable pillar and, for the time being, it is. But it too involves dependence on Russia, as well as a difficult decision Armenia will soon have to make.
The country’s only reactor at Metsamor was built during the Soviet period and cannot operate indefinitely. Its lifetime has been extended until 2036, and it was shut down for much of 2026 for modernisation work, one of the reasons behind the increase in domestic gas consumption.
When Metsamor is finally retired, Armenia will have to replace it, and every scenario is problematic.
A modern, full-scale Russian reactor would have a capacity of around 1,000 megawatts – more than twice that of Metsamor today. For Armenia, that would be more electricity than the country consumes. Such a facility would cost around $4.6–6 billion, a crushing burden for an economy worth approximately $20 billion. It would be comparable to a relatively poor family taking out a mortgage several times larger than its annual income.
An alternative could be a newer type of plant using small modular reactors, or SMRs, which can begin with as little as 15 megawatts and expand as the budget allows. These smaller reactors offer genuine advantages that go well beyond price. They can be located closer to the cities they serve, reducing the roughly 8–12 per cent of electricity normally lost during long-distance transmission, while allowing the country to increase capacity step by step instead of staking everything on one giant project.
However, SMR technology remains relatively untested in civilian use, and a single unit costs around $1.5 billion. Armenia would still have to import fuel, meaning continued dependence on its supplier. Although the country has an experienced nuclear engineering workforce, it lacks practical experience in operating modular reactors.
For a state too small to absorb a major mistake – as one expert put it – this is not a decision that should be driven by emotion or politics. It must be based on cold arithmetic: costs, fuel supplies and long-term security. A choice of model and supplier is not expected before 2027.
Solar power succeeded – but the grid could not keep up
If there is one bright spot in all of this, it is the sun.
Armenia receives around 1,720 kWh of solar energy per square metre annually, compared with approximately 1,000 kWh across much of Europe. This natural advantage has triggered a boom that outpaced government planning.
Cumulative installed solar capacity exceeded one gigawatt by the end of 2025 and reached around 1.1 GW, with approximately 615 MW added in that year alone. More than 50,000 households and businesses now generate their own solar electricity, while small rooftop and commercial systems alone account for almost 490 MW.
The state spent almost nothing to make this happen. Generous regulations and favourable tariffs made solar panels a sensible private investment, and people paid for them out of their own pockets.
Yet this rapid expansion has run into another wall – the electricity grid.
Solar energy arrived in the twenty-first century, while Armenia’s network of power lines and substations remained in the twentieth. Solar panels generate electricity in the middle of the day, precisely when demand is lowest, and produce nothing in the evening, when families return home and switch on their appliances.
To protect the ageing system and the large hydroelectric and nuclear plants around which it was built, the state has begun withdrawing some of the privileges it previously granted to solar installation owners. The previous arrangement, under which households could feed excess daytime electricity into the grid and take it back free of charge at night, is gradually being phased out. Anyone who now wants to store their own solar energy must invest in batteries.
Energy storage is the missing piece of the entire system, not just a problem for individual households. Armenia is only beginning to address it. The country is running a pilot programme and preparing a tender for large-scale battery storage facilities with a capacity of around 1,200 MWh.
At the same time, it is examining the possibility of building a pumped-storage hydroelectric plant on the Vorotan Cascade, where water would be pumped uphill during the day and released to generate electricity at night.
Wind power could also help balance daily fluctuations. But transporting the enormous blades used by modern turbines along Armenia’s mountainous roads is extremely difficult. As a result, the sector barely exists.
The high price of cheap gas
Nuclear reactors take a decade to build, while pipelines require complicated diplomacy. Yet there is one area in which Armenia could act independently and on its own – and it is precisely the area where the least is being done.
Energy efficiency.
The strangest feature of Armenia’s dependence is that the country is helping to deepen it itself. Because Russian gas has been cheap for so long, Armenia wastes enormous amounts of energy. Buildings consume considerably more energy than, for example, those in Europe, partly because of low prices and subsidies.
When energy is almost free, few people are going to insulate their buildings or service their boilers. Waste becomes normal, maintaining high demand for Russian gas. In this sense, low prices are the enemy of conservation.
Individual building-insulation programmes have been implemented in Armenia with support from the United Nations and international climate funds, but they have not developed into a broader movement. Getting the residents of a single block of flats to agree on a joint renovation is culturally difficult in Armenia, which is why some specialists argue that the country needs a housing agency that could act as an intermediary.
The situation is worst in schools. A study examining around 1,400 schools across the country found that almost 40 per cent are inadequately heated. In the wealthier capital, conditions are better and the challenge is to reduce energy use. In villages near the border, the situation is the opposite: the problem is not efficiency but simply a lack of heat.
Escaping will take time – and the clock is ticking
There are ways out of Armenia’s dependence, but every one of them will take years, and some will take decades. Meanwhile, the temptation to continue buying cheap Russian gas returns every winter.
Some experts argue that an honest first step would be to liberalise energy prices and design them in a way that reflects the cost of the risk associated with dependence on a single supplier, while simultaneously supporting poorer households. Such an approach would reward energy saving and generate resources that could be used to finance alternatives.
For years, Armenia has been trying to replace broad subsidies with targeted support for those who need it most, but these programmes remain underdeveloped.
Everything else is a matter of patient construction. There are no shortcuts.
Energy that appears cheap today is, in reality, quietly costing Armenia a great deal, because its true price is paid in independence. Regaining that control will take much longer than giving it away did.
