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
International observers about the presidential election in Georgia
The presidential election took place on the 28th of October in Georgia.
First Ladies of Independent Georgia
The presidential election took place on the 28th of October in Georgia. It was the last election in which the president will be selected by popular vote.
Funny incidents on Election Day in Georgia
The presidential election took place on the 28th of October in Georgia.
Deadline for the second round of presidential elections in Georgia is December 2
Presidential elections were held on the 28th of October in Georgia. None of the candidates managed to get majority of votes, so the second round of elections is to be appointed.
The USA National Security Advisor John Bolton is in Georgia
National Security Advisor of the United States John Bolton visited Georgia today.
People are detained at the Cannabis Festival
Today, Georgian political movement Girchi holds an event in the Dedaena Park called the Cannabis Festival.
Top safest countries and Georgia is among them - new survey says
Georgia is among the safest countries in the world. This fact is substantiated by various surveys and researches.
Who is interested in the cultivation of cannabis in Georgia?
Several weeks ago the government announced about its initiative to legalize the cultivation of medical marijuana in Georgia.
Fight in Gori – head of administration uses a bin full of manure
There was an incident yesterday in Gori municipality, Georgia at the entrance of the municipality building.
2 Georgian detainees freed from the Tskhinvali prison
Georgian detainees Maia Otinashvili and Akaki Dotiashvili are freed from the Tskhinvali prison. They had been accused of illegally crossing a so-called the borderline into the occupied Tskhinvali region.
Georgia might provide Far East countries with armored vehicles
LEPL State Military Scientific-Technical Center "Delta" might provide several Far East countries with armored vehicles, - “Delta” has informed InterPressNews about it.
Who can be the next first lady of Georgia?
On the 28th of October, presidential elections will be held in Georgia. The last elections in October 2013 resulted in a victory for Giorgi Margvelashvili, a candidate of the Georgian Dream (the ruling party).
Another Georgian kidnapped at the occupational line, stays detained
Maia Otinashvili (a mother of three children) was detained in her own garden on the 19th of September. Eyewitnesses claim that she was kidnapped by armed people with masks.
Fight broke out in the Georgian TV show
Fight in the Georgian Show Archevani (a choice) broke out between the guests yesterday.
7 amendments that come in force today in Georgia
On the 1st of October, 7 new amendments come in force in Georgia.
Speaker of the parliament plays Knockin' on Heaven's Door
What do the politicians do when they have free time? It is an interesting issue in every country.
What are the new New Year decorations for Tbilisi
New Year decorations and its price in Tbilisi is always a matter of discussion in the capital.
Mamuka Bakhtadze gives a speech at the 73rd session of the UN General Assembly
Mamuka Bakhtadze, the prime minister of Georgia is attending the 73rd session of the UN General Assembly from the 24th of September.
Georgia will ban use, import and production of plastic bags
The Georgian government has decided to tighten rules regulating use of plastic bags in Georgia.
The parliament returns to Tbilisi
The Parliament of Georgia will continue working in Tbilisi, the capital of Georgia from January 2019. Currently, the building is located in Kutaisi (west Georgia).
Mamuka Bakhtadze is visiting the USA within the working visit
The Georgian PM Mamuka Bakhtadze Brought a wreath to the tomb of the Georgian military serviceman John Malkhaz Shalikashvili.
Use of plastic bags to be reduced from the 1st of October
Within the framework of the Green Economics and Environmental Protection Policy the Georgian government has approved new regulations
Four Russian Journalists have not been allowed to enter Georgia
Three members of the Russian delegation were not allowed to enter Georgia as this would have violated the Law on the Occupied Territories of Georgia.
Tbilisi sign may appear on the Funicular hill
Hollywood has become a source of inspiration for many people worldwide. A similar idea from a Tbilisi citizen sounds very clever and attractive.
Russia was at an undeclared war with Georgia for years - Matthew Bryza
I think anybody who has observed how Russia has been conducting its war in Ukraine should realize that Russia was at war with Georgia, an undeclared war for years,
PHOTO OF THE DAY
Exchange Rates
GEL Exchange Rate
Convertor
12.11.2018
13.11.2018
USD
1
USD
2.7146
2.7166
EUR
1
EUR
3.0800
3.0602
GBP
1
GBP
3.5325
3.4900
RUB
100
RUB
4.0430
4.0131
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
2.7166
EUR
1
EUR
3.0602
GBP
1
GBP
3.4900
RUB
100
RUB
4.0131
November 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