Yerevan. (Interfax) - Armenia's government and Gazprom are discussing a role for the Russian gas giant in the construction of the Kadjaran - Ararat section of the gas pipeline between Armenia and Iran.

An Armenian government source told Interfax that Gazprom might be invited to build and renovate 200 km of pipeline at a cost of approximately $90 million.

Gazprom might receive the incomplete No. 5 generating unit at the Razdan power plant, in which Gazprom has shown an interest, to reimburse its costs.

Razdan is Armenia's biggest heat and power plant, producing 20% of the country's electricity. It has capacity of 1,100 megawatts and operating capacity of 800 megawatts.

The European Bank for Reconstruction and Development in 1994 provided a loan worth $61.5 million to build the fifth block at the Razdan plant. Work on the unit was halted in 1996 after $60 million had been spent on it. Another $60 million or so will be needed to complete the unit. Armenia is spending $500,000 in budgeted funds each year to keep the unit in mothballs.

Russia and Armenia signed a protocol at the start of this year to transfer the existing four units of the Razdan plant to Russia in payment for Armenia's state debt. ZAO Inter RAO UES assumed management of the plant. The fifth unit will be a separate legal entity.

Work on the Armenian stretch of the pipeline began at the end of November. Construction of Iran's 100-km stretch began in July. The Iranian Export and Development Bank set aside $30 million to finance the Armenian stretch.

Iran signed a deal to supply Armenia with 36 billion cubic meters (bcm) of gas per year over 20 years with the possibility of extending this by five years and gas supplies to 47 bcm in May this year.