Rosneft’s Georgian Deal – Disgrace or Benefit?
08 January, 2015
Rosneft’s Georgian Deal – Disgrace or Benefit?
Russian state energy giant Rosneft will soon enter Georgias privately owned Poti oil terminal. The deal allows the Russian giant to control energy resources going to the EU market through the South Caucasian transit corridor. This corridor sends Caspian gas and oil resources to the European market bypassing Russia. Opponents see double standards in the Georgian government’s involvement in a deal that may not bring any economic or political benefit to Georgia.

By the end of 2014, Rosenft [the largest
publicly traded oil company] announced that it had reached an agreement with Petrocas Energy Limited [owned by Georgian businessman David Iakobashvili] to buy the company’s 49 percent stake and to launch a joint venture with the company for its oil shipment, storage, retail and logistics activities in South Caucasus. Petrocas owns the Poti oil terminal through its subsidiary Channel Energy and operates one of the largest chains of petrol stations under the Gulf brand in Georgia.
Located near Georgia’s Black Sea Poti Port, the Poti oil terminal is one of the four oil terminals operating in Georgia and handling the import/export of oil and oil products. Currently, it mainly offers storage infrastructure and is one of the major suppliers of oil products to the Georgian and Armenian markets. Rosneft claims it needs the Poti terminal to provide Armenia with oil products. The Russian company does not hide that it intends to gain a stronger foothold in the Caucasian market — something many Georgians find unsettling.

“Some see the deal as a disgrace in the face of the economic sanctions imposed by the West against Russia. It also poses risks to Georgia’s uniquely strategic energy transit route that so far has been free from Russian competition. Now the presence of the Russian state giant may taint the prospects of the South Caucasian corridor in the eyes of Georgia’s strategic partners in the West.”

Others believe that the deal is a success and that it will promote Georgian oil terminal infrastructure, which desperately needs investment.
“I think that the entrance of one of the largest oil companies at the Poti oil terminal will provide an impetus for this infrastructure’s development that will enhance production and that the country will eventually see more economic benefit,” Liana Jervalidze, an energy analyst, told Georgian Journal. She also hopes that an economic partnership with a Russian state-owned company that also conducts oil exploration in Georgia’s breakaway republic of Abkhazia may lead to some positive developments in the Georgian-Abkhazian relationship.
Some see the deal as a disgrace in the face of the economic sanctions imposed by the West against Russia. It also poses risks to Georgia’s uniquely strategic energy transit route that so far has been free from Russian competition. Now the presence of the Russian state giant may taint the prospects of the South Caucasian corridor in the eyes of Georgia’s strategic partners in the West.
“I think the Rosneft entrance in Georgia is absolutely bad news,” Dietrich Muller, a co-founder of Georgian Investment Group+, explains. “That Georgia did not join the Western economic sanctions against Russia was a huge mistake. And now another mistake is to allow Rosneft to use Georgia as a platform for blocking energy channels to the EU. Once it enters into the Poti terminal, Rosneft can hamper its competitor Caspian oil-producing countries such as Azerbaijan, Kazakhstan and Turkmenistan from exporting their product through the Poti channel. Of course there are three more oil terminals, but this is already a bad sign for Georgian transit potential, which looks forward to attracting more Caspian oil producers here.”
Vano Mtvralashvili, Chairman of the Union of Oil Product Importers of Georgia, thinks Rosneft cannot do any harm as long as the controlling stake in the Poti terminal remains in the hands of the private Georgian businessman Iakobashvili. On the other hand, Muller doubts that Iakobashvili, who made his fortune in Russia and has private interests in influential Russian organizations affiliated with the Kremlin, can make decisions in favor of Georgia.
“This private deal reveals weak points in the Georgian government. The state must have a law that obliges private companies to comply with the government when they plan to divest their stakes in entities of national strategic importance. All developed states do this, but Georgia does not. It is a disgrace when the strategic partners of Georgia impose economic sanctions on the state that is an enemy of Georgia [Russia has occupied Georgian territories], and then the Georgian government allows a Russian state-owned company into Georgia [to essentially evade those very sanctions]. The Georgian authorities should have prevented this. Otherwise this indicates double standards and will bring neither economic nor political benefit to this country,” Muller elaborates.

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