Iranian President Mahmoud Ahmadinejad has inaugurated a new gas pipeline to transport Iranian gas to Armenia in exchange for the Caucasian country’s electricity supplies.


Ahmadinejad and his Armenian counterpart Robert Kocharyan lit a torch to mark the opening of the US$200mn pipeline at the Armenian village of Agarak, on the Iranian border.


Iran will use the 141km pipeline, 100km of which run along its territory, to deliver 450mn cubic metres of gas per year to Armenia under the first stage of the project.


The deliveries are to rise to 2.3bn cubic metres after the middle of 2008, when Armenia hopes to complete an expansion of its domestic pipeline system, to which the new link is connected.


To pay for the supplies, Armenia will provide Iran with 3kW per hour of electricity for every cubic metre of gas it receives.


The two countries signed a gas supply deal in 2004 to run for 20 years with the option of prolonging the agreement for a further 25 years.


Currently, Armenia gets most of its gas from Russia. Gazexport, a unit of Russia’s gas monopoly Gazprom supplies the ex-Soviet state with 1.7bn cubic metres (cm) of gas a year. The deliveries are expected to reach 2bn cm this year, a Reuters report said.


Russian-Armenian company ArmRosGazprom – in which Gazprom owns 57.6%, the Armenian government holds 34.7% and Russian gas producer Itera owns 7.7% – is expected to operate the new pipeline.