EurasiaNet, NY –
Nov 25 2006
GEORGIA: PRIVATE COMPANIES CARRY BURDEN FOR GAZPROM GAS PRICE TALKS
Diana Petriashvili 11/24/06
As temperatures drop below freezing in Georgia, the problem of the
country’s winter gas supply appears to remain unresolved. While
Georgian officials emphasize that they will not pay a "political
price" for gas from Russian company Gazprom, responsibility for
negotiations with the energy giant has been placed on regional
distributors. Meanwhile, some local experts and opposition members
are blaming the Georgian government for a passive response to the
proposed price hike.
For now, the Georgian energy ministry has restrained from commenting
on the Gazprom negotiations, saying that price talks are to be held
by Georgian gas-distributing companies alone. On November 15,
however, Georgian President Mikheil Saakashvili stated that Gazprom’s
desired price of $230 per 1000 cubic meters of gas was politically
motivated. Speaking to reporters in Strasbourg on November 14 at a
session of the European Parliament, Saakashvili stated that Georgia
should not pay the new price.
"The price is not the commercial one," Saakashvili stated, the
Georgian news agency Black Sea Press reported. "Some of our neighbors
pay $65, others $110, and only some of them pay $130. There must be a
reason why Georgia, the closest neighbor to Russia, pays more than
remote states," the president argued.
At the same time, the Georgian leader expressed no concern about the
capability of the Georgian energy system to handle power and heating
needs this coming winter. Saakashvili praised the energy sector’s
recent development, adding that it had bypassed that of other
countries.
"We have started building the economy from the very beginning […]
the new economy is more effective in the energy field compared with
other states," Saakashvili said. "2006 was the first year after 1991
when Georgia not only imported, but also exported electric power
[…] We can now partially compensate for the lack of gas with
electricity in the winter." Power outages in Tbilisi, as well as in
the regions, however, nonetheless persist.
B ased supplies from Azerbaijan, facilitated by the start of gas
flows through the Baku-Tbilisi-Erzurum pipeline by late 2006, as well
as potentially from Iran. (For background see the Eurasia Insight
archive.)
The Turkish newspaper Zaman, however, recently reported that
Azerbaijan has approached the Turkish government about delaying the
start of gas flows from Baku for one year. The report has not yet
been confirmed.
Energy Minister Nika Gelauri could not be reached for comment. Like
Saakashvili, however, Gelauri has also recently praised conditions in
Georgia’s energy sector, telling a November 10 session of parliament
that "Georgia has all the chances for becoming an electric power
center for the entire region." Gelauri stated that repair work at
several power generating stations means that Georgia plans to start
exporting electricity to Azerbaijan and Turkey in 2007.
Gelauri’s statement, however, irritated some opposition MPs, who
claimed that the minister never answered their question about whether
Georgia will be supplied with gas in 2007.
"The minister failed to answer the most important question of the
Georgian population, and this is . . . what kind of winter do you
expect? One without snow and with a temperature that does not fall
below zero?," charged Conservative Party parliamentarian Zviad
Dzidziguri.
The Georgian opposition has also again raised the question of the
possibility that Georgia would sell its main gas pipeline, a conduit
that supplies Armenia as well as Georgia with gas from Russia. In
2005, local media reported that the government was allegedly
considering selling the pipeline to Gazprom, but officials later came
out strongly against the idea. "They say they won’t sell the pipeline
to Russia, but I’m interested in whether they will sell it to someone
else," Zurab Tkemaladze, a member of the Industry Will Save Georgia
party, commented to reporters after parliamentarians’ meeting with
the energy minister.
Gelauri himself, however, has refused to share details from the talks
with Gazprom, removing the energy ministry from responsibility for
price haggling with the Russian gas supplier. Instead, Gelauri told
reporters on November 14, Georgia’s individual gas distributor
companies "are the ones who are negotiating."
State Minister for Coordination of Reforms Kakha Bendukidze, however,
has explained the decision by saying that gas purchases fall outside
the government’s control. "[The] Georgian government itself does not
and did not buy gas from Gazprom," Rosbalt news agency quoted
Bendukidze as saying on November 15. "All deals are done by private
companies involved in gas distribution or [in the] use of gas in
industrial process[es]."
While the government’s decision to look to distributors to negotiate
the terms of their contracts with supplier Gazprom is not unusual,
noted one expert, the government should more actively supervise the
process. Failing to do so suggests that the government wants to
escape blame if agreement with Gazprom cannot be reached and supplies
to Georgia are cut, commented Giorgi Mchedlishvili, head of the
Georgian Transition non-governmental organization.
"The government seems to be trying to put all the responsibility on
the distributing companies," said Mchedlishvili. "If the population
does not get gas this winter, they will have someone to blame."
"Every single Georgian wants to know what happens with gas this
winter," he continued. "The government should be more active in the
talks, as it must answer all the questions that appear. Saying `no
comments’ is not a good idea."
One local gas distributor, KazTransGas-Tbilisi, a Kazakhstani company
that owns Tbilisi gas distributor Tbilgazi, however, hopes to reduce
Gazprom’s proposed price at least for its own contract.
"We hope that the final price will be significantly lower than the
initially proposed one," the company’s director general, Giorgi
Koiava, stated at a press conference on November 16. The company
plans to complete its negotiations with Gazprom by mid-December, he
said.
Recently, arrests, resignations and staff changes have marked
Georgia’s gas distribution sector. On November 8, state-run gas
distribution company International Gas Corporation General Director
Revaz Urushadze and two of his deputies were arrested on charges of
corruption, and sentenced to a two-month pre-trial detention.
Two days later, David Ingorokva, head of the International Gas
Corporation, resigned, saying that law enforcement agencies’
inspection of the Corporation’s financial documents motivated his
decision. The newly appointed Gas Corporation chief, Irakli
Chogovdaze, previously minister of economic development, resigned
from the post on November 18, just after over a week on the job,
without naming his reasons.
Meanwhile, Russian energy giant Gazprom has given little indication
that it is willing to compromise on Georgia’s gas price. Without a
contract on a new price by January 1, 2007, Gazprom Vice President
Alexander Medvedyev told a November 7 press conference in Moscow, the
company will cut gas supplies to the South Caucasus state. "No
contract, no supplies," the Russian news agency Interfax reported
Medvedyev as saying. Gas, however, would continue to be supplied "to
our Armenian partner," he said. The price hike for Georgia – from
$110 to $230 per 1,000 cubic meters – is being applied equally to
other clients as well, the Gazprom executive continued. "None of the
post-Soviet states will be getting gas at reduced price."
If Gazprom elects to cut all gas to Georgia, while continuing its
Armenian shipments, the government needs to ensure that transit
tarrifs are paid to Georgia by Gazprom for allowing the gas to pass
through its territory to Armenia, Mchedlishvili said. So far, the
government has not indicated how it would address this scenario.
The possibility of a gas crunch has offered one Tbilisi insurance
company an entrepreneurial opportunity. In cooperation with
KazTransGas, GPI-Holding announced on November 16 the launch of a new
$150 insurance policy for existing clients against a possible
increase in city gas tarrifs in response to a Gazprom price hike. To
help juggle their gas bills, the company promises to pay
policyholders 50 lari (about $27) per month from January to March
2007 if Gazprom prices increase.
Editor’s Note: Diana Petriashvili is a freelance reporter based in
Tbilisi.