Georgia’s Pending GazProm Deal Stirs Political Controversy
The Russian energy giant GazProm set to strongly enter the Georgian market. While the government sees a good way to alleviate its recurring energy shortages, the United States sees the move as a danger to the East-West energy projects.
On May 28 President Eduard Shevardnadze and Chairman of the Board of GazProm Alexey Miller decided to sign an agreement on strategic partnership in gas sphere already in a coming month.
The agreement is to include joint projects of supply and distribution of gas on the Georgian market as well as transportation of gas through Georgia. International Gas Corporation and Fuel and Energy Ministry of Georgia are upbeat about the prospects.
“The company offers us long-term cooperation in gas supply… Therefore such cooperation will be very beneficial for Georgia” – spokesperson of the Fuel and Energy Ministry Nino Asatiani told Civil Georgia.
Meetings of the State Minister Avtandil Jorbenazde and General Director of the Georgian International Gas Corporation Alexi Gotsiridze with GazProm officials in April and May preceded the agreement.
Transportation of gas through Georgia attracts the highest international attention. Nino Asatiani confirmed that the agreement includes rehabilitation of two gas pipelines. One runs from Russia to Adjara with a prospect of increasing gas supply link from Russia to Turkey. Another one runs from Russia to Armenia.
Russian sources say “rehabilitation” in this case means virtually full overhaul of outdated pipes and equipment, with only Russia-Armenia portion costing around 250 million USD. At the same time, the capacity of the pipeline will increase from current 2.5 billion cubic meters per year to 16 billion. No information is yet available about the possible volumes of gas supply to Turkey, but this direction has long formed a crux of Russia’s “energy diplomacy” in the region, which competes with the US policy of supporting the east-west energy pipelines from Central Asia and Caspian to Turkey and Europe.
Georgia has long been among the chief proponents of the US pipeline plans, with the first major oil pipeline – Baku-Tbilisi-Ceyhan – inaugurated last week. But Georgia’s government is plagued by recurring energy shortages in winter, that largely result from termination of the gas supplies from Russia.
Until now, ITERA – a daughter company of GazProm – has had a monopoly on supplying Georgia with Russian gas. Interruptions in gas supply by ITERA were reported to have been used as a political stick by the Russian leadership.
“We can not say whether we will be able to cooperate with GazProm, because we do not know what are their plans and what are they going to do. We have our business and are not afraid of competitors and are ready for cooperation” – Tamaz Pataridze, ITERA representative to Georgia told Civil Georgia.
“We also are not against GazProm’s investments or rehabilitation of the pipeline by the company. It’s their business. It’s their matter. We have plenty of work apart supplying Tbilisi with gas” – Pataridze said.
It seems that a direct GazProm link is clearly in a political interest of both Russia and Georgian leadership. Russia advances its foreign policy agenda and after having made several security moves in Central Asia attempts to curtail the US influence in regional hydrocarbon projects.
The US has already reacted to the pending deal, as the US Ambassador Richard Miles met State Minister Avtandil Jorbenadze. News agencies report Miles has expressed fears that the GazProm deal may hinder the Baku-Tbilisi-Erzerum gas pipeline project.
For these tangible political benefits Russia seems to express readiness to change a gas “stick” for a carrot. Miller, speaking in Georgia hinted about possible price discounts, saying that as the plans for Georgia are “strategic” GazProm will consider “establishing of the gas price according to the purchase power of the Georgian consumers.”
The Georgian government, facing the hard elections in fall, would like to have guarantees for improved energy supplies. Otherwise, another year of blackouts in Tbilisi may trash already slim hopes for electoral success. It has also been rumored that some high-ranking officials in the executive that control the energy resource have personal interests in favoring GazProm.
Because of such accusations and the opposition pressure, the talks on creating a joint-stock venture with GazProm to supply gas to the capital Tbilisi were suspended in 2002. This time, Georgian officials and Alexey Miller have stressed no joint venture has been discussed.
The GazProm deal is likely to be heavily contested in the coming month before final signing of the agreement. The government will have to prove the need for and the political viability of the deal to the Georgian opposition in the media and to the US officials behind the scenes.
Tea Gularidze. Civil Georgia