EurasiaNet Eurasia Insight - Russia Set to Retain Hold on Georgian Gas Supplies

EURASIA INSIGHT

RUSSIA SET TO RETAIN HOLD ON GEORGIAN GAS SUPPLIES
Diana Petriashvili 2/14/06

Just weeks after pledging to diversify energy supplies away from Russia, Georgian officials have cut off gas imports from Iran and Azerbaijan, stating that Russian natural gas deliveries are now sufficient to cover the country’s needs.

The decision comes as an about-face from earlier statements by Georgian President Mikheil Saakashvili and Prime Minister Zurab Noghaideli that suggested that Georgia would pursue its relationship with Iran and Azerbaijan. The two countries began supplying Georgia with natural gas after two explosions on January 22 severed gas and electricity supplies from Russia, the country’s sole natural gas supplier.

In a January 31 speech to the nation, President Saakashvili argued that the Iranian and Azerbaijani gas imports allowed Georgia to decrease its energy dependence on its powerful northern neighbor, and stated that Georgia "will continue working in this direction." Prime Minister Zurab Noghaideli had added to the refrain, implying that receiving gas from three separate sources � Russia, Azerbaijan and Iran � would prevent a repetition of the energy crisis that crippled the country in late January. "This [Iranian gas] is very important for us and we want to maintain, and we will maintain, this alternative," Prime Minister Noghaideli said on January 29, the online news service Civil.ge reported.

Government officials maintained throughout the crisis that Russia had staged the pipeline explosions to impose an "energy blockade" on Georgia. The supply of gas from alternative sources, particularly Iran, was portrayed as prompting Russia to repair the damaged pipelines more quickly than otherwise.

But in an interview with EurasiaNet, Deputy Fuel and Energy Minister Alexander Khetaguri stated that the possibility of further cooperation with Iran would depend on future negotiations.

The energy ministry ended gas imports from Iran and Azerbaijan ended on February 6 � a run of less than one week for Iranian gas and roughly two weeks for Azerbaijani supplies. Gas supplies from Russia were restored on January 29.

In explaining the decision, the ministry announced that Georgia now has no need for additional sources of gas apart from those supplied by Russia. The ministry added, however, that imports from alternative sources could easily be restored if required.

In discussing the January 30 deal with Iran, Fuel and Energy Minister Gelauri had stated that Iranian imports could run for anywhere from 15 days to one month, depending on supplies from Russia. The Iranian news agency IRNA had reported that Iran would supply Georgia with 30 million cubic meters of gas over a month.

Khetaguri suggested that Georgia may look elsewhere than Iran to make up for any future shortage, however. The most likely potential natural gas sources for Georgia are Azerbaijan and Central Asia, he stated, "because of the convenient technical infrastructure," though added that "[W]e will always work on alternative sources [of gas]."

Russian media sources have speculated that price was the reason for Georgia’s decision to end Iranian gas imports. "Iranian gas turned out to be twice as expensive as Russian," the newspaper Vremya Novostei wrote on February 2.

On February 1, Iranian Deputy Oil Minister for International Affairs Mohammad-Hadi Nejad-Hosseinian told IRNA that Iran would export 30 million cubic meters of gas to Georgia for a lump sum payment of $7 million. According to the report, Georgia was obliged to pay cash in advance for the supply. Based on this information, Georgia is believed to have agreed to pay $230 per 1,000 cubic meters of Iranian gas, compared with $ 110 for the same amount of Russian gas.

Georgian officials, however, have declined to name the price the government agreed to pay Tehran for the gas. "I will not comment on the price," Khetaguri said. "Nobody knows the details of the deal, including myself."

One local analyst characterized the government’s ongoing reticence as "strange."

"It is not money paid by a private company [for imports], it is [state] budgetary funds and people have a right to know the details," commented Ramaz Sakvarelidze, an independent political analyst who has been critical of the Iranian deal. A high price brokered for emergency gas supplies could well change for a longer term deal, he said.

Opposition members of parliament have demanded that government ministers answer questions about the price paid to Iran during parliament’s February 23 government hour.

Other observers contend that Georgia, a strong US ally, found the gas partnership with Iran too sensitive to maintain for long. Iran remains at odds with both Washington and the United Nations over its nuclear research program, a program that the White House claims has military purposes.

A strategic, long-term partnership with Iran would not be logical for Georgia, argued Giorgi Khelashvili, chairperson of the international relations department at Tbilisi State University. "Iran can not be considered a reliable energy supplier to Georgia," he said.

Sakvarelidze echoed that view, adding that Tbilisi had no guarantees that Iran would not exercise as much pressure as Russia on Georgia on energy issues. "It is unknown what will be Iran’s reaction to Georgia in the case of increased tensions with the US, which is Georgia’s strategic partner," he said.

The government’s reluctance to reveal the price contracted with Iran could be a desire to not further irritate Russia, which supplies Georgia with much cheaper gas, Sakvarelidze added.

The US embassy in Tbilisi could not be reached for comment about Georgia’s decision to end Iranian gas supplies. In neighboring Armenia, however, US envoy John Evans told a February 3 news briefing that the US "understands" that country’s decision to cooperate with Iran on construction of a gas pipeline, the Mediamax news service reported.

Meanwhile, other efforts are being made to revamp Georgia’s derelict energy system. On February 13, the economy ministry announced plans to privatize three electricity distribution companies and six hydropower plants by May 16.

Editor�s Note: Diana Petriashvili is a freelance writer based in Tbilisi.

The Central Eurasia Project aims, through its website, meetings, papers, and grants, to foster a more informed debate about the social, political and economic developments of the Caucasus and Central Asia. It is a program of the Open Society Institute-New York. The Open Society Institute-New York is a private operating and grantmaking foundation that promotes the development of open societies around the world by supporting educational, social, and legal reform, and by encouraging alternative approaches to complex and controversial issues.

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