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Economic Analysis: Gazprom relations with Georgia strained
By M. Alkhazashvili
The Messenger, Georgia
July 21 2005
The agreement reached between the Tbilisi government and Gazprom
subsidiary Gazexport on Wednesday should lead to an easing of tension
that culminated in Gazexport's Tuesday threat to switch off the
country's gas supply.
Gazexport threatened to halve its gas supply to the Georgian capital
on Wednesday and then switch off the supply and terminate its contract
with Tbilgazi in sixty days if an agreement on Tbilgazi's debts was
not reached.
An agreement has now been reached, with Tbilisi City Hall stepping
in to bail out the beleaguered Tbilisi gas distribution company and
pay GEL 5 million to Gazexport.
A number of issues remain to be discussed, however, including
Tbilgazi's unpaid debts from 2003-2004, which total USD 5.77 million
and Gazprom's planned increase in gas supply tariff from 2006.
The Russian government has decided to raise gas prices for former
Soviet countries seen as "anti-Russian" and officials such as Vice
Speaker of the Russian Duma Lyubov Sliska have made no effort to
hide that this is a political decision rather than an economic one,
and comes in response to countries leading Western-oriented foreign
policies.
There is no doubt that strained relations between Russia and Georgia
are affecting economic issues such as gas prices, and this can be seen
too in another issue that has created strain between Russia and Georgia
- that of the aborted sale of Georgia's trunk gas pipeline to Gazprom.
The Georgian government announced at the beginning of the year that
it was planning to privatize the pipeline, which runs north-south
across the county, and Gazprom immediately expressed interest in
its purchase. Russia exports a good deal of gas to Armenia, and the
pipeline would facilitate these exports.
The plan to privatize the pipeline was met with criticism from many
Georgians concerned that the pipeline could be used by Russia -
Gazprom is almost 100 percent state-owned - as a lever of political
influence. Senior American officials were also concerned that the
pipeline could become a competitor to the U.S. financed South Caucasus
gas pipeline.
With this is mind, the U.S. Millennium Challenge Corporation has
recently agreed to allot money for the rehabilitation of the pipeline -
the Georgian government had previously stated that the pipeline would
have to be privatized to find the necessary funds to pay for these
repairs unless an alternatives source of funding could be found.
The decision not to finance the pipeline, along with Tbilgazi's debts
and Gazprom's plans to increase the tariffs on Russian gas supplies-
from USD60 per thousand cubic meters to a reported USD90 - mean that
there are a number of issues creating strain between Georgia and the
Russian energy giant.
It is with this in mind that the government is currently looking to
build a gas storage facility in either Rustavi or Ninotsminda, and
is waiting with great anticipation completion of the South Caucasus
gas pipeline. In Azerbaijan Prime Minister Zurab Noghaideli came to
an agreement with the Azerbaijani PM that Georgia will import 300
million cubic meters of natural gas this year.
By M. Alkhazashvili
The Messenger, Georgia
July 21 2005
The agreement reached between the Tbilisi government and Gazprom
subsidiary Gazexport on Wednesday should lead to an easing of tension
that culminated in Gazexport's Tuesday threat to switch off the
country's gas supply.
Gazexport threatened to halve its gas supply to the Georgian capital
on Wednesday and then switch off the supply and terminate its contract
with Tbilgazi in sixty days if an agreement on Tbilgazi's debts was
not reached.
An agreement has now been reached, with Tbilisi City Hall stepping
in to bail out the beleaguered Tbilisi gas distribution company and
pay GEL 5 million to Gazexport.
A number of issues remain to be discussed, however, including
Tbilgazi's unpaid debts from 2003-2004, which total USD 5.77 million
and Gazprom's planned increase in gas supply tariff from 2006.
The Russian government has decided to raise gas prices for former
Soviet countries seen as "anti-Russian" and officials such as Vice
Speaker of the Russian Duma Lyubov Sliska have made no effort to
hide that this is a political decision rather than an economic one,
and comes in response to countries leading Western-oriented foreign
policies.
There is no doubt that strained relations between Russia and Georgia
are affecting economic issues such as gas prices, and this can be seen
too in another issue that has created strain between Russia and Georgia
- that of the aborted sale of Georgia's trunk gas pipeline to Gazprom.
The Georgian government announced at the beginning of the year that
it was planning to privatize the pipeline, which runs north-south
across the county, and Gazprom immediately expressed interest in
its purchase. Russia exports a good deal of gas to Armenia, and the
pipeline would facilitate these exports.
The plan to privatize the pipeline was met with criticism from many
Georgians concerned that the pipeline could be used by Russia -
Gazprom is almost 100 percent state-owned - as a lever of political
influence. Senior American officials were also concerned that the
pipeline could become a competitor to the U.S. financed South Caucasus
gas pipeline.
With this is mind, the U.S. Millennium Challenge Corporation has
recently agreed to allot money for the rehabilitation of the pipeline -
the Georgian government had previously stated that the pipeline would
have to be privatized to find the necessary funds to pay for these
repairs unless an alternatives source of funding could be found.
The decision not to finance the pipeline, along with Tbilgazi's debts
and Gazprom's plans to increase the tariffs on Russian gas supplies-
from USD60 per thousand cubic meters to a reported USD90 - mean that
there are a number of issues creating strain between Georgia and the
Russian energy giant.
It is with this in mind that the government is currently looking to
build a gas storage facility in either Rustavi or Ninotsminda, and
is waiting with great anticipation completion of the South Caucasus
gas pipeline. In Azerbaijan Prime Minister Zurab Noghaideli came to
an agreement with the Azerbaijani PM that Georgia will import 300
million cubic meters of natural gas this year.