Category: 2019

The two-year contract between the government of Georgia and the Russian energy giant Gazprom on natural gas transit from Russia to Armenia expired on December 31, 2018 (Georgia Today, January 21, 2019). And talks are now ongoing about extending or renegotiating this arrangement.

Tbilisi and Moscow had reached the previous deal on gas transit to Armenia back in January 2017, after long and difficult negotiations (see EDM, January 19, 2017). In December 2015, the then–minister of energy, Kakhi Kaladze (now the mayor of the Georgian capital), told this author that Gazprom presented Georgia with a particularly onerous demand: the South Caucasus country had to agree to “monetize” the payments it was receiving from Russia for allowing the transit of gas via its territory. Kaladze considered Moscow’s ultimatum to be particularly difficult and “heavy” for Georgia to accept (Author’s Interview, December 15, 2015).

For almost 25 years, since 1992, Gazprom paid Tbilisi for the shipment of gas to Armenia not with money, but with a portion of this transited energy fuel: Georgia was receiving 10 percent of the Russian gas in lieu of a monetary transit fee. Kaladze noted that the previous contract was much more profitable because under a “monetized” transit fee scheme, Tbilisi would have had no guarantees of still being able to purchase the same volume of Russian gas—that is, the 10 percent of gas shipped to Armenia (Author’s Interview, December 15, 2015). The energy minister promised to “protect Georgian interests” in the negotiations with Gazprom. But ultimately, he was forced to sign the new contract with a monetized transit fee scheme (effective after one year) after Moscow threatened to divert all of its Armenia-bound gas from Georgian pipelines to the Iranian network (see EDM, January 27, 2016; January 19, 2017).

The Georgian government feared that, under the new transit payment regime, it would not be able to procure enough substitute gas from Azerbaijan to satisfy domestic demand. Georgia consumes approximately 2.7 billion cubic meters of natural gas annually. And as a transit fee, the country received 200 million–250 million cubic meters of gas from Russia. The previous contract was also quite “comfortable” since it did not depend on international energy prices.

Nonetheless, during 2017–2018, Azerbaijan was able to find an opportunity to increase the volume of natural gas supplied to Georgia. As a result, Georgia did not buy a single cubic meter of gas from Russia last year. But the costs incurred by Azerbaijan’s State Oil Company (SOCAR) forced it to increase prices for Georgian consumers, which Tbilisi refused to pay. The disagreement over the price of gas has not yet led to serious tensions between Azerbaijan and Georgia, but bilateral relations could start to suffer as the growing Georgian economy starts to need ever larger energy inputs (Vestnik Kavkaza, December 20, 2018).

Many Georgian observers argue that, under such a situation, Gazprom could attempt to take advantage and propose a new ultimatum to Georgia—proposing even less favorable terms for future gas transit payments. “Gazprom is the Kremlin’s geopolitical instrument, and if Georgia finds itself in a difficult situation due to a lack of fuel in the spring, Moscow could put forward new, tough conditions,” an expert with the weekly Georgian newspaper Prime Time, Keti Khatiashvili, told this author. According to her, Moscow could try to offer the Georgian side better payment terms and, crucially, the opportunity to buy more Russian gas, in exchange for the consent of the Georgian government to begin direct negotiations with Abkhazia and South Ossetia on land transit from Armenia to Russia (Author’s Interview, January 22, 2019). Recently, during his visit to Georgia, the prime minister of Armenia, Nikol Pashinyan, discussed precisely the “development of trade” and further transit opportunities (Vestnik Kavkaza, January 17, 2019).

The opposition considers the government’s agreement to “monetize” the gas transit fee in 2017 as a crime against the interests of Georgia. One of the founders of the European Georgia party, parliamentary deputy Sergo Ratiani, noted that the opposition parties are demanding an investigation into why then-minister Kaladze had agreed to the unfavorable Russian conditions on transit fees. “The new contract has caused tremendous damage to Georgia and gave Moscow [new] tools to use against us,” the lawmaker argued (Author’s interview, January 20, 2019).

The opposition is demanding that the authorities not renew the contract with Gazprom and return to negotiations on an in-kind payment for gas transit. But as energy expert Georgi Khukhashvili explained, making such demands now is both unlikely and unrealistic: “The contract on the monetization of transit fees is very disadvantageous for Georgia, but it complies with international norms and international transit payment tariffs.” As he stressed, according to international practice, if the parties do not break the contract, its prolongation occurs automatically. “The government does not have the resources to terminate the contract with Gazprom, so it will be extended for another year,” Khukhashvili predicted (Author’s interview, January 22, 2019).

Economy Minister Georgy Kobulia assured journalists in a recent interview that the Georgian government will try to “improve the contract.” Negotiations with the Russian energy giant will begin soon. But Kobulia did not specify how Tbilisi would react to Moscow’s likely refusal to pay Georgia more for gas transit (Accentnews.ge, January 21, 2019).

Georgia has never considered the radical step of terminating the transit across its territory of Russian gas to friendly Armenia. Whereas, Moscow wields multiple military and economic instruments with which it can influence Tbilisi, such as by exacerbating at will the situation on Georgia’s de facto borders with the occupied territories of Abkhazia and South Ossetia or by threatening to cut off access to the Russian market. In this lopsided bilateral relationship, the current government in Tbilisi is, thus, unlikely to stand firm against Gazprom.

Over the past several decades, multiple disputes over historical monuments and the symbolism they carry have broken out across the post-Soviet region. Notably, Russia has vocally denounced the removal of any monument to “liberating Soviet soldiers” in other former Soviet states—most famously in Estonia and the other Baltic countries. But the erection of new monuments has also generated disputes between some of the closest partners in the former Soviet space. In 2012, for instance, Moscow condemned the raising of a memorial in Astana to 1.5 million victims of Joseph Stalin’s forced collectivization; and in 2014, Russia expressed anger when Armenia erected a monument to Garegin Nzhdeh, whom the Russian government considers a Nazi collaborator (Azatutyun.am, June 11, 2016). In the latest such case, a rare dispute has ignited between Azerbaijan and Georgia, two strategic partners in the South Caucasus, over the erection of a bust of Mikhail Avagyan. The individual being memorialized is an Armenian combatant who fought in the Nagorno-Karabakh War, and his bust was initiated and financed by an ethnic-Armenian businessman. On January 20, 2019, the statue was ceremoniously unveiled in the village of Bughasheni, south-central Georgia. In attendance were the mayor of nearby Akhalkalaki, Yurik Hunanyan; Armenian Ambassador Ruben Sadoyan; as well as two ethnic-Armenian members of parliament (MP) from the ruling Georgian Dream party, Enzel Mkoyan and Samvel Manukyan (Azernews.com, January 26). While few noticed this event in Georgia, it immediately became big news in Azerbaijan, drawing negative reactions from officials and MPs, as well as being widely discussed in the social media.

Avagyan himself was a native of Bughasheni. The village is a suburb of Akhalkalaki, part of the Georgian region of Javkheti, which is predominantly populated by ethnic Armenians. He later moved to Armenia, volunteered to participate in the Nagorno-Karabakh War against Azerbaijan and was mortally wounded in combat operations in 1994. He fought in Horadiz, Hadrut, and Fizuli, as well as Khojaly, where more than 600 Azerbaijani civilians were massacred by Armenian forces (Ekho Kafkaza, January 25). While cutting the red ribbon, The Armenian ambassador, said, “Thanks to such brave patriots as Mikhail Avagyan, our people managed to win important victories” (Azeritimes, January 24). After his death, Avagyan became a hero for Armenians, while remaining almost totally unknown to most Azerbaijanis and Georgians. But now he is at the center of media attention in all three South Caucasus countries. Armenians call him a hero, but Azerbaijanis consider him a murderer of civilians and demand the removal of his statue. Whereas, Georgia has found itself in a dilemma to come up with a solution that will keep from irritating its large ethnic-Armenian community while, at the same time, satisfying its even larger Azerbaijani minority as well as Tbilisi’s key strategic regional partner, Baku. It is also worth mentioning that the ceremonial unveiling of the bust of Avagyan occurred on the day of “Black January,” which, in Azerbaijan, marks the killing of hundreds of demonstrators in Baku by Soviet troops in 1990. This further angered Azerbaijanis. Moreover, the bust was unveiled just a few days after Azerbaijani and Armenian foreign ministers “agreed to take concrete measures to prepare the populations for peace” (Tert.am, January 17).

Georgia’s ambassador to Azerbaijan, Zurab Pataradze, was immediately summoned to the foreign ministry in Baku in order to urge Tbilisi “to take urgent measures to remove the statue, which does not meet the spirit of bilateral strategic relations,” said foreign ministry spokesperson Leyla Abdullayeva (Modern.az, January 24). Additionally, Azerbaijan’s ambassador to Tbilisi held a meeting at the Georgian foreign ministry to deliver the same request to the host government. Aflatun Amashov, an Azerbaijani MP and chairperson of the Azerbaijan-Georgia working group on inter-parliamentary relations, addressed his Georgian counterpart, Zviad Dziqziquri, on the issue as well. Amashov raised concerns in Azerbaijani society regarding the erection of a bust to a person “who directly participated in murders against Azerbaijani civilians.” Additionally, the deputy expressed hope that Georgian MPs will intervene to remove the monument (Report.az, January 25)

The Georgian government’s reaction so far has been indirect and ambiguous, reflecting the dilemma Tbilisi faces about what to do in this delicate situation. Officials from both the Ministry of Foreign Affairs and the parliament have mostly limited their response to repeating that Azerbaijan remains Georgia’s strategic partner and that no subject is off limits for bilateral discussion (EurasiaNet, January 29). In fact, Georgia’s cautiousness when it comes to its Armenian community is quite understandable. Armenians constitute 4.5 percent of the country’s population of 3.7 million—the third-largest largest ethnic community in the country after Georgians (86.8 percent) and Azerbaijanis (6.5 percent) (Census.ge, April 28, 2016). Interestingly, Armenians have also become the second-largest ethnic group in the breakaway Georgian territory of Abkhazia (Unpo.org, February 16, 2015), following the expulsions of ethnic Georgians from there during the 1992–1993 and 2008 wars. However, more importantly than its size, Georgia’s Armenian minority is also quite active politically. It has periodically demanded more autonomy and self-governance in Javakheti, thus making this area one of the most troublesome regions for Georgia’s central authorities in recent years (EurasiaNet, April 9, 2014; see EDM, May 24, 2005).

The other side of the story is the reaction of the Azerbaijani community in Georgia. Although more numerous, Georgia’s ethnic Azerbaijanis are much less active politically and are less integrated into wider Georgian society. That said, openness in Georgian politics since the 2003 “Rose Revolution” has gradually empowered the Azerbaijani minority and encouraged it to become more organized and vocal. In the last national elections (2016), and for the first time since Georgia regained its independence, Georgian Azerbaijanis managed to elect the same number of deputies to the parliament as Armenians—representatives of both ethnic groups now hold three seats each. Ali Babayev, the chairperson of the National Congress of Georgian Azerbaijanis, stated that the local Azerbaijani community strongly condemns the monument to Mikhail Avagyan and called it a provocation that will damage relations between Georgia and Azerbaijan (Report.az, January 25).

For now, Tbilisi’s position seems to be to “wait and see” until tempers calm down around the problem, and then decide what to do with this newfound headache. However, the situation once again demonstrates how deeply rooted are the conflicts in the South Caucasus and how sensitive and fragile the inter-ethnic situation is across the region.