MAY 29 2003,INTERFAX. Armenia and Iran are considering two options for the construction of a gas pipeline between the two countries, a source in the Armenian Energy Ministry told Interfax.

The first option, costing $120 million, involves laying a 141-km gas pipeline with a capacity of 1.5 billion cubic meters of gas per annum, to meet Armenia's energy requirements.

The second option involves expanding the project, with the pipeline from Iran being extended to the Armenian-Georgian border. In this event, the cost of the project would increase to $306 million and the pipeline would be 550 km in length and have a capacity of 4.5 bcm per annum.

During a recent visit to Yerevan Iranian Foreign Minister Kemal Kharrazi told journalists that there are several options at the moment for supplying gas to Armenia from Iran and the one that will be implemented is the one that will be most expedient for both countries.

Kharazi said that the Iranian Foreign Investment Association is ready to finance large joint projects. It is expected that a range of questions connected with the construction of the gas pipeline will be resolved during an upcoming official visit to Yerevan by Iranian President Mohammad Khatami, for which a debate has yet to be set.

The Iran-Armenia gas pipeline has been discussed since 1992. Other than the main participants in the project, Russia, Turkmenistan, Ukraine, the European Union and China are also interested in laying the pipeline. The European Bank for Reconstruction and Development has announced its readiness to finance the project.

Armenia and Iran signed an intergovernmental agreement in 1995 establishing the route of the pipeline (41 km through Armenia and 100 km through Iran) and also the cost of the gas - $84 per 1,000 cubic meters.

Resolving financial issues was made the responsibility of the Armenian side, and it tried to set up an international consortium at the end of the 1990s with participation by interested organizations in Armenia, Iran, Russia and Europe. These plans were confirmed in a memorandum signed in December 2001 during a visit to Teheran by Armenian President Robert Kocharian.