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Gazprom increases price of gas
By M. Alkhazashvili
The Messenger, Georgia
25 Oct. 2004
Gazprom's export arm has increased the price of natural gas to the
South Caucasus by USD 18, a 30 percent increase that will begin January
1, 2005.
The increase coincided with an article in the Washington Post, which
described Russian energy policies as "the new OPEC." In Russia's hands,
the paper wrote, "natural gas has become a geopolitical weapon."
Currently, Tbilisi's gas distributor Tbilgasi buys 1,000 cubic meters
of gas for USD 60 from Gasexport, a Gazprom affiliate supplying the
South Caucasus. Georgian newspaper 24 Saati reports that in addition to
a total price of USD 78, Gazprom is demanding partial prepayments from
Georgia, a notoriously delinquent payer for energy resources.
Russian companies justify the increase by saying it is more profitable
for them to sell the gas in Europe where 1,000 cubic meters of gas goes
for USD 120. To produce this gas for the South Caucasus at half price,
they say, is commercially unviable.
Tbilgasi has responded in shock saying that there is no way to prevent
this hike from passing on the consumers. According to them, "such an
increase in the price of gas is a catastrophe," and they hope that it
will be possible to change something through negotiation.
Both the west and Georgia have increasingly felt Russia's utilization
of its energy assets in the political arena. Nearly 28 percent of the
world's gas supply is in Russia; at the same time Russia controls the
gas supply out of Central Asia. In April 2003, Gazprom reached an
agreement with Turkmenistan according to which it will purchase Turkmen
gas for 25 years. The agreement gives Russia full control over Turkmen
gas export beginning 2009.
In June 2004, Russian President Putin and Uzbek President Islam Karimov
signed a 35-year agreement according to which Gazprom will be able to
control, explore and mine gas deposits in Uzbekistan. In return for
this, Gazprom purchased 44 percent of the shares of the state gas
company Uzbekistantransgas.
Also in June 2004, Gazprom announced that it had reached a contract
with Kazakhstan that is connected with the exploitation of the rich
Kara Hagan gas deposit for a timeframe of 5-7 years. Gazprom has
expressed interest in buying part of the Kazak gas pipelines, as well
as pipelines in Kyrgyzstan and Tajikistan.
The commentary in the Washington Post wrote, "In Russia's hands,
natural gas has become a geopolitical weapon. Citing a 'lack of
payments,' the Kremlin, via Gazprom, has shut off gas supplies to
Belarus, Ukraine, Georgia and Armenia when the domestic or foreign
policies of those countries have run counter to its interests."
And as President Mikheil Saakashvili noted during the visit of his
Armenian counterpart, Georgia is now in the middle of the battle for
energy independence and must negotiate for a steady position in the
energy sector. Georgia's relationship with Gazprom will be pivotal in
this arena.
By M. Alkhazashvili
The Messenger, Georgia
25 Oct. 2004
Gazprom's export arm has increased the price of natural gas to the
South Caucasus by USD 18, a 30 percent increase that will begin January
1, 2005.
The increase coincided with an article in the Washington Post, which
described Russian energy policies as "the new OPEC." In Russia's hands,
the paper wrote, "natural gas has become a geopolitical weapon."
Currently, Tbilisi's gas distributor Tbilgasi buys 1,000 cubic meters
of gas for USD 60 from Gasexport, a Gazprom affiliate supplying the
South Caucasus. Georgian newspaper 24 Saati reports that in addition to
a total price of USD 78, Gazprom is demanding partial prepayments from
Georgia, a notoriously delinquent payer for energy resources.
Russian companies justify the increase by saying it is more profitable
for them to sell the gas in Europe where 1,000 cubic meters of gas goes
for USD 120. To produce this gas for the South Caucasus at half price,
they say, is commercially unviable.
Tbilgasi has responded in shock saying that there is no way to prevent
this hike from passing on the consumers. According to them, "such an
increase in the price of gas is a catastrophe," and they hope that it
will be possible to change something through negotiation.
Both the west and Georgia have increasingly felt Russia's utilization
of its energy assets in the political arena. Nearly 28 percent of the
world's gas supply is in Russia; at the same time Russia controls the
gas supply out of Central Asia. In April 2003, Gazprom reached an
agreement with Turkmenistan according to which it will purchase Turkmen
gas for 25 years. The agreement gives Russia full control over Turkmen
gas export beginning 2009.
In June 2004, Russian President Putin and Uzbek President Islam Karimov
signed a 35-year agreement according to which Gazprom will be able to
control, explore and mine gas deposits in Uzbekistan. In return for
this, Gazprom purchased 44 percent of the shares of the state gas
company Uzbekistantransgas.
Also in June 2004, Gazprom announced that it had reached a contract
with Kazakhstan that is connected with the exploitation of the rich
Kara Hagan gas deposit for a timeframe of 5-7 years. Gazprom has
expressed interest in buying part of the Kazak gas pipelines, as well
as pipelines in Kyrgyzstan and Tajikistan.
The commentary in the Washington Post wrote, "In Russia's hands,
natural gas has become a geopolitical weapon. Citing a 'lack of
payments,' the Kremlin, via Gazprom, has shut off gas supplies to
Belarus, Ukraine, Georgia and Armenia when the domestic or foreign
policies of those countries have run counter to its interests."
And as President Mikheil Saakashvili noted during the visit of his
Armenian counterpart, Georgia is now in the middle of the battle for
energy independence and must negotiate for a steady position in the
energy sector. Georgia's relationship with Gazprom will be pivotal in
this arena.