All-in or Fold: Gazprom’s Geopolitical Card Play with Georgia
27 January, 2017
All-in or Fold: Gazprom’s Geopolitical Card Play with Georgia
There was much public outcry in Georgia as it emerged that the agreement signed by the government with the giant Russian oil & gas corporation, Gazprom, contained significant changes compared with its predecessor, and those changes weren’t exactly in Georgia’s favor, at least at first glance. Despite the commercial agreement coming under the “classified” tagline, it didn’t take long for the main details of the contract to become public knowledge.

The transit fee for the Russian gas supplied to Armenia that
Georgia was dully paid in natural reserves before, became of monetary value, it apparently being Gazprom’s make-or-break demand. So the 10 % that was due (2 billion cubic meters of gas) will be paid in money, with the fixed rate registered at the moment of the signing (this was most likely what the whole commercial secrecy was about).

Another thing that should very much worry Georgian society that the agreement is a short term one – two years, which gives Russia ample leverage to further bully Georgia into even more unfavorable demands in due time. What is also lamentable that the amount of gas supplied to Armenia is due to be increased by 0,3 billion cubic meters for 2019, which means that Georgia will have to settle for financial “royalties” for this, too.

According to the agreement, an additional supply of gas will be provided to Georgia for for social consumption – for a “preferential”, advantageous, price of $185, which when you look at how much Georgia has been paying Azerbaijan - $170, doesn’t look that advantageous all of a sudden.

The previous agreement, signed in 2002, lasted for 15 years and was seen as a coup as it provided a 10 % transit fee in natural resources, which satisfied 70 percent of Georgia’s annual needs (it needs to be mentioned that these needs have increased by 1.5 since 2015).

The talk about monetization isn’t new, either: In 2005, Russia offered a healthy sum and advantageous gas prices to the then Government of Georgia in exchange for selling major transit communication routes, but the offer was refused, not without the intervention and advice of the US administration. This in turn resulted in the 2006 Gas War between Georgia and Russia, suspension of the agreement for a year and purchasing gas for $230 from Iran, which the Georgian government announced amid much fanfare as a feat towards lessening energy dependence on Russia. Notably, Gazprom later played out the same scenario in Armenia.

Speaking of energy dependence, Georgia is very much dependent on gas consumption – according to the 2013 statistics, gas constituted 41 percent of the overall energy consumption in the country (compared to 29 percent in 2010). Furthermore, back in 2015, the government adopted a strategy document, “Georgia’s Energy Strategy 2015-2030”, where in the chapter dedicated to challenges and risks, one can read a rather bluntly put summary that Georgia is completely dependent on energy resources provided by Azerbaijan, especially the import of gas, and that the Azeri corporation Socar has an undisputed monopoly on the Georgian energy market (with more than 50 percent of the segment). The same sentiments were voiced by the Energy Minister and Vice Prime Minister, Kakha Kaladze, who maintained that a whopping 90 percent of Georgia’s gas consumption, that is, 2.5 billion cubic meters, originate in Azerbaijan. Therefore, it comes as no surprise that the Georgian government’s energy diplomacy overtures did not fool Gazprom, which pushed its own demands and, eventually, the Georgian side relented.

Now one might wonder to what end this whole ordeal really was and why Georgia accepted such disadvantageous terms, with a façade of perhaps reversing them in two years’ time. Yet, all the more interesting is what Gazprom’s cards are. 92 percent of the monopolistic corporation’s shares are owned by the Kremlin, while Prime Minister Medvedev acts as head of its executive board.

Here are the main gains that Gazprom is set to see from the agreement with the Georgian government:


1) Becoming a member of Eurasian Union, Armenia gets the full benefits of preferential tariff prices from 2017. This will undoubtedly see larger volumes of Russian gas supplied to Armenia, which is already dependent on the Russian gas market, with 60 percent of imported gas coming from Russia. Monetization will give Gazprom the opportunity to supply Armenia with the needed volume, all the while not allowing Georgia to reap its real benefits and also further outclass Iran as a potential provider (Armenia paid $190 for Iranian gas back in 2015). A win-win scenario for Gazprom, relative win for Armenia (if you discount them becoming even more dependent on Russia as a real alternative), failure for Georgia and inconvenience for Iran. There is also a hint of political blackmail in there – Georgia has its hands tied, as its refusal or stubbornness on this matter would surely aggravate relations with its Armenian neighbors.

2) Tying Georgia down to new agreement can make it easier for Gazprom and Russia to further purchase Azerbaijani Gas themselves, therefore becoming the only major energy provider in the region. Back in 2016, Gazprom voiced that it was ready to purchase the whole export capacity of Azeri gas – 16 billion cubic meters. Gazprom used the same ploy to wholesale purchase Turkmen gas, effectively annihilating the EU-supported Nabucco project before it even started to materialize. Whether Azerbaijan will accede to such requests remains to be seen, but the two sides already have a history of gas trade, with the biggest volume purchase coming exactly one year after the 2008 War.

3) The agreement, especially the fact of its being so short-term, may be a prelude to a joint geological venture on the Black Sea shelf which is reputed to be rich with natural resources, namely gas and oil. In Abkhazia, such endeavors are already carried out by another Russian giant, Rosneft, and it wouldn’t come as such a surprise to see Gazprom nab advantageous terms in delivering and distributing oil from the Black Sea.

Add to that the flash-royal of Russia’s geopolitical poker, the security blackmail, and one can see what choices the much-maligned Georgian side might have had in these negotiations – that is pretty much, none.

Vakhtang Maisaia

Source: Georgia Today
Print
Other Stories
Travel between Ukraine and Georgia for both countries’ citizens to be allowed only by electronic ID cards
The Prime Minister of Georgia Mamuka Bakhtadze has announced that the citizens of Georgia and Ukraine will be able to travel in and out of both countries using only electronic ID cards.
Why does the Georgians love John McCain?
John McCain, Senator, and former Presidential candidate of the USA died on the 25th of August, 2018. He was diagnosed with lioblastoma, an aggressive form of brain cancer last year.
The IBSU Conundrum
Teachers, students and students-to-be all took to the streets when the news broke that the International Black Sea University, one of the most highly regarded universities in the country, wouldn’t be admitting new students into its ranks this year.
Angela Merkel arrives in Georgia
German chancellor Angela Merkel has already arrived in Georgia.
German media about possible reasons for  Merkel’s visit to Georgia
As German Chancellor Angela Merkel visits Tbilisi today, expectations are high and both the Georgian and German media are speculating about the possible results of the visit.
Angela Merkel to visit Georgia on August 23
German Chancellor Angela Merkel will visit Georgia on the 23rd of August. Her plan is to visit the Caucasus states of Georgia, Armenia and Azerbaijan.
Georgian presidential candidate to Journalists –“Shake your brain!”
“Journalists should shake their brains” – said Georgian presidential candidate, Salome Zurabishvili to journalists.
What does Giorgi Margvelashvili own?
The presidential election will be held on 28th of October, 2018 in Georgia. The President Giorgi Margvelashvili has not yet confirmed his participation in the election.
"Father returned for mother ... then the bomb landed …”
10 years on, this is a different August. But this month is a time of remembrance and of hard memories and hurt.
The World talks about the 2008 war
On the tenth anniversary of the 2008 war between Russia and Georgia, 20% of Georgia continues to be occupied by Russian military forces who also seem intent of further encroachment on Georgian territory.
Georgia hosts high ranking guests for the 10th anniversary of the 2008 war
Ten years have passed since the Russian military intervention in Georgia,in August, 2008.
 10 Years Anniversary of the EU Monitoring Mission in Georgia – “Mission supports stability and security on the ground”
10 years have now passed since the August 2008 war between Georgia and Russia and still we face a huge daily threat. Certain parts of Georgia continue to be occupied even today.
Heroin seized near Georgia-Azerbaijan State Border
Border Police from the Georgian Ministry of Internal Affairs have arrested a 28 year old individual.
After ten years from the 2008 war, borderization continues
It is ten years since the 2008 August war between Russia and Georgia.
Multinational Noble Partner training 2018 has launched
The multinational Noble Partner training 2018 commenced on the 1st of August.
National Democratic Institute publishes the latest survey
Poll results released today by the National Democratic Institute (NDI) and CRRC Georgia show growing dissatisfaction about the state of the country’s economy, environment, and political climate going into the presidential election.
Georgian Prime Minister Mamuka Bakhtadze needs 5 more Regional Governors
At a recent Government press conference Mamuka Bakhtadze, the Prime Minister of Georgia, announced that new Governors for the following regions are required:
German government plans to recognize Georgia among safe countries
The German government will shortly approve a law, which enables the countries such as Georgia, Tunisia, Morocco and Algeria to be recognized as safe countries
Latvian MEP Andrejs Mamikins about Georgia’s prospects for EU membership
Georgia is a country that wants to become member of the EU, but how does it look from Brussels?
Military equipment and techniques created by Georgians
Delta is a Military, Scientific and Technical Provider.
What does Georgia contribute to the NATO alliance?
The idea that Georgia should join the NATO alliance was first suggested back in the 1990s. However nobody believed it would become a reality
Most liked and disliked ministers of Georgia
Mamuka bakhtadze, the Prime Minister of Georgia has announced structural changes in the government as a part of his plan to cut down on governmental spending.
Mamuka Bakhtadze officially submitted as a candidate for PM by the President of Georgia
President of Georgia Giorgi Margvelashvili has submitted Mamuka Bakhtadze as a candidate for Prime Minister.
Russia conducts military exercises in Georgia's occupied Tskhinvali Region
The sub-units of the 4th base of the Ministry of Defense of Russia are conducting military exercises in occupied Tskhinvali (so-called South Ossetia).
Candidate for PM’s position Mamuka Bakhtadze vows Georgia to become united, European country
Former Finance Minister of Georgia Mamuka Bakhtadze has been named as a candidate for the Prime Minister’s post, which became vacant after Giorgi Kvirikashvili's resignation.
PHOTO OF THE DAY
Exchange Rates
GEL Exchange Rate
Convertor
18.09.2018
19.09.2018
USD
1
USD
2.6156
2.6156
EUR
1
EUR
3.0498
3.0498
GBP
1
GBP
3.4259
3.4259
RUB
100
RUB
3.8379
3.8379
Other Stories
On 26 May, Jean-Claude Juncker, President of the European Commission, joined celebrations in the Georgian capital of Tbilisi
Violation of Georgia’s sovereignty and territorial integrity by Assad regime has been strictly criticized
Exactly one year ago, Georgia was granted visa-free travel with the European Union.
Georgia’s ex-president president Mikheil Saakashvili's supporters managed to free detained Mikheil Saakashvili in the center of Kiev.
The US Ambassador to Georgia Ian Kelly congratulates Georgia on Independence Day.
The regulations on the introduction of visa-free travel for citizens of Georgia have been officially signed in Brussels.
The entire Georgia is involved in Secret Santa game, which means that people are sending gifts to each other secretly
The Minister of Foreign Affairs of Georgia is taking part in NATO Ministerial underway in Brussels, Belgium.
A special squad has been mobilized at the 48th polling station in Marneuli, Kvemo Kartli region.
Two politicians in Georgia have come to blows during a live TV debate ahead of the country’s parliamentary elections, Euronews reports.
GEL Exchange
USD
1
USD
2.6156
EUR
1
EUR
3.0498
GBP
1
GBP
3.4259
RUB
100
RUB
3.8379
September 2018
Mon Tue Wed Thu Fri Sat Sun
1 2
3 4 5 6 7 8 9
10 11 12 13 14 15 16
17 18 19 20 21 22 23
24 25 26 27 28 29 30