It’s dated Gazprom and flirted with Iran, but, ultimately, when it comes to gas, Georgia has only one true love – its ambitious southern neighbor, Azerbaijan.
In the latest episode in one of the region’s longest-running geopolitical soap operas, Georgian Energy Minister Kakha Kaladze on April 12 announced that, as of this month, Georgia will look only to Azerbaijan for all its gas needs.
This may not hit as a major plot-development. Azerbaijan already supplies an estimated 90 percent of Georgia’s gas, with Russia’s state-run Gazprom finishing a distant second at some ten percent.
The larger significance for this all-Azerbaijan decision may lie in the future.
Kaladze’s declaration hit during a pow-wow of foreign ministers from Eurasian states partnered with the European Union, and from four Central European EU members (the Czech Republic, Hungary, Poland and Slovakia). Praise and pledges of support for the EU-backed Southern Corridor, a strategic gas route expected to start delivering Azerbaijani gas to the Gazprom-dependent EU by 2020, ran strong.
As one of the Corridor's hosts, Georgia, the region’s most enthusiastic EU-booster, of course, does its part to back Azerbaijan.
Two years ago, Energy Minister Kaladze predicted that Tbilisi would not look to Gazprom to top up its gas if, by 2018, Georgia would be able to buy an unspecified amount of “additional gas” from the second stage of Azerbaijan’s massive Shah Deniz energy project.
Russian state-run energy giant Gazprom is seeking $5 billion in reimbursements from Turkmenistan for gas supplied from 2010 to 2015, news agency Interfax reported on July 5.
Interfax reported that Gazprom is demanding a retroactive revision to the prices it paid for Turkmen gas as part of a legal suit going through the motions at the Arbitration Institute of the Stockholm Chamber of Commerce.
The aggressive move represents a remarkable disruption to the apparent recent outbreak of bonhomie between Moscow and Ashgabat. A delegation of high-ranking Russian military officials traveled to Turkmenistan last month with pledges to offer assistance in bolstering the Central Asian nation’s defense capabilities. And in May, Gazprom surprised many by hinting that it could resume buying Turkmen gas, which it formally stopped doing earlier in the year.
Deliveries of Turkmen gas to Russia reached a post-Soviet peak of 45 billion cubic meters in 2008, but that was when the trouble began. With a global economic crisis then gripping western economies, European demand for Russia’s gas began to flag and prices to fall. Since Moscow’s rationale for buying gas from Turkmenistan was to allow for additional export capacity, the arrangement stopped making sense.
The ending of international sanctions against Iran could soon send Iranian gas flowing across and through the South Caucasus, amping up the region’s strategic significance and possibly changing the dynamics of its energy trade.
For Azerbaijan, getting Iran on board with TANAP, the Trans-Anatolian Natural Gas Export Pipeline, could bolster Baku’s largest energy-export undertaking, the Southern Gas Corridor, a chain of three big pipelines, stretching across more than 3,400 kilometers and seven countries from the Caspian Sea into Europe. TANAP is the largest and costliest section of the Corridor.
As a transit country, Georgia would get a share of any Iranian gas flowing through the Southern Gas Corridor. But with more Iranian gas in the region, Tbilisi fears losing that share of gas it receives from another pipeline — run by Russian energy behemoth Gazprom for shipments to Armenia from Russia.
It's official. Georgia and Gazprom are going out. Georgian Energy Minister Kakha Kaladze, the former soccer star/pin-up staple, keeps getting spotted meeting Gazprom officials and he is running out of excuses for an entanglement that, some claim, threatens to upset the region's energy status quo, and possibly, its geopolitical layout.
Georgians mostly learn via foreign media about Kaladze’s trysts with the Russian gas monopolist in Milan, Brussels or Geneva. Each time the news breaks, the minister steps forth with claims that it was just some routine business meeting. Nothing to worry about.
But his line of reasoning has become sharply contradictory, stoking fears that Georgia is being seduced back into a dependency on Russian energy, which, in turn, critics say, could hamstring Georgia’s Western integration plans.
In his latest clarification, Kaladze said that his talks with Gazprom are about revising the terms for the transit of Russian gas through Georgia to Armenia. Instead of taking 10 percent of the gas (some 200 million cubic meters) as a transit fee, Tbilisi wants to get paid in cash, Kaladze said on January 11. The deal, if reached, will last for a year, the minister said, which, to his mind, means that the doomsday scenarios “painted by the so-called experts are nothing but delirious and wrong."
In the space of a week, the leaders of both Armenia and Azerbaijan have visited Georgia amid talk of a far-reaching potential shift in the region’s energy-transit status quo. Hovering over the discussions in Tbilisi are bigger players like Russia and Iran, both looking to increase energy exports via the South Caucasus.
Emerging after a long, November 5 meeting in Tbilisi, Georgian President Giorgi Margvelashvili and Azerbaijani President Ilham Aliyev reaffirmed the exemplary friendship between their two countries, but, reportedly, did not mention the bear in the room — Russia’s Gazprom, which many Georgians perceive as undermining this friendship by trying to pump more Russian gas into Georgia. It currently mainly runs on Azerbaijani gas.
“Our relations will resist any test,” Margvelashvili said. Also full of praise, Aliyev on November 6 rejoiced that the pair does not have “a difference of opinions [on] any issues . . .” Azerbaijani-Georgian cooperation in energy- transit “boosts the significance of our countries in the world,” he stressed earlier.
Aliyev missed just by a few days his Armenian counterpart, Serzh Sargsyan, who came to Tbilisi on October 30. Sargsyan also spoke of friendship with Georgia, but the widespread perception is that he really came to talk about gas. Armenia depends almost entirely on Gazprom’s supplies.
Hundreds of Georgians gathered on October 17 in Tbilisi to protest talks with Gazprom about increased supplies of gas to Georgia. Posters blamed the talks on former Georgian Prime Minister Bidzina Ivanishvili, a onetime Gazprom investor who supports closer trade ties with Russia.
Georgia could be on the cusp of a bargain with Gazprom, Russia’s device for exports of natural gas and foreign policy, that many Georgians deem Faustian. The Georgian government’s intention to increase its imports of Russian gas has been met with fervent resistance as a potential threat to the country's pro-Western track.
On October 17, a crowd gathered in front of Georgia’s central government building to protest ongoing negotiations with the Russian energy behemoth. Seeking more gas from Gazprom amounts to Georgia bucking the trend among “developed countries” to reduce Gazprom’s influence, declared former ombudsman Giorgi Tughushi, who served when Georgia’s Russia suspicions were at their height, under ex-President Mikhail Saakashvili.
“This is tantamount to relinquishing our statehood,” charged Tughushi, warning that Georgia should expect Russia’s President Vladimir Putin “to come out of that pipeline.”
Talks with Gazprom have taken many aback, and, some locals believe, also neighboring Azerbaijan, which provides the bulk of Georgia’s natural-gas supplies. Initially, a surprise September 25 meeting between Georgian Energy Minister Kakha Kaladze and Gazprom Chief Executive Officer Alexei Miller was put down to routine seasonal adjustments for gas transit to Armenia via Georgia. Later on, after Russia media reported plans for another meeting between Kaladze and Miller, the Georgian energy minister said that several Georgian corporate clients were interested in purchasing Russian gas.
Georgia plays no small role in Europe’s efforts to diversify away from Russian natural gas, but the South-Caucasus country itself could find it needs to diversify back toward its enemy’s energy. Late last week, Russia and Georgia held talks on gas shipments, but have offered only scant details about the negotiations.
Observers in Georgia pricked up their ears when Gazprom’s Chief Executive Officer Alexei Miller met Georgian Energy Minister Kakha Kaladze on September 25 in Brussels. Gazprom said that exports to and through Georgia were discussed, prompting some local concern over the chance that Georgia would take on additional volumes of Russian gas, which for Moscow is as much a foreign policy instrument as it an export commodity. In comments to Georgian media, Gia Volski, chairperson of Georgia’s ruling Georgian Dream parliamentary faction, suggested that Tbilisi treads carefully on the topic of Russian gas imports.
Granted, most of Gazprom supplies to Georgia only go through the country to reach neighboring Armenia, which relies on Russia for most of its energy needs. Georgia retains 10 percent of shipments to Armenia as a transit fee. Last year, Georgia received 200 million cubic meters of Russia gas, which accounted for only nine percent of the gas consumed by Georgia in 2014, the energy ministry told EurasiaNet.org. Gazprom puts the figure at 300 million cubic meters.
Four months after announcing it would slash the amount of gas it buys from Turkmenistan and Uzbekistan, Russian energy behemoth Gazprom has revealed the extent which its imports from Central Asia will fall this year.
On February 3, Vice Chairman Alexander Medvedev told an investment summit in Hong Kong that this year Gazprom will import two-fifths of the 10 billion cubic meters (bcm) it imported from Turkmenistan in 2014; it will buy less than a quarter of the roughly 4.5 bcm it bought from Uzbekistan last year.
Medvedev said the decisions had the blessings of both Central Asian states, while boasting that his company came to the agreements from a position of strength.
“For Gazprom, thanks to investment in extraction and transport infrastructure, there is no technological necessity for the purchase of foreign gas,” Medvedev said in comments picked up by state-run RIA Novosti. “Gazprom is in the situation to guarantee both the domestic demand in any region of the Russian Federation, and the delivery of gas to our customers in Europe, and in the future, Asia, with our own resources.”
The announcement came just hours before Moscow said Foreign Minister Sergei Lavrov would make a rare stopover in Ashgabat.
Moscow’s sanctions-struck energy giant Gazprom has announced it is no longer interested in buying Central Asian gas, leaving Turkmenistan and Uzbekistan dependent on exports to China.
Contractually, Gazprom officials have noted they are locked into obligations to buy from Ashgabat and Tashkent for the short term. But Gazprom is “working to annul these contracts,” Vsevolod Cherepanov, head of Gazprom’s Department for Gas Production, said at the St Petersburg International Gas Forum on October 7. Cherepanov did not explain the reasons for cutting back on purchases in Central Asia, but noted that Gazprom’s domestic production is expected to increase in the coming years.
According to Gazprom’s website, the official line remains that the production and import of “natural gas from Central Asia and the Transcaucasian region is an important element in the formation of [Gazprom’s] resource base, meeting the demands of Russia’s internal market, CIS countries and beyond. The business strategy of Gazprom in Central Asia rests on a strengthening of its position in this region. This will maintain and increase the share of Russian gas provided to its traditional markets in Europe.”
Gazprom’s exit will leave purchases of Central Asian gas an increasingly Chinese pursuit. In the two years prior to the opening of the China-Turkmenistan pipeline, which went into operation in late 2009, Gazprom imported an average of 63.4 billion cubic meters of gas (bcm) from Central Asia annually, over two-thirds of which came from Turkmenistan. In the years since, the company says, the volume going to Russia has shrunk to an average 34.1 bcm annually, less than a third of which is sourced in Turkmenistan.
When Russian state energy giant Gazprom took control of Kyrgyzstan’s gas network last month, the prime minister called the transfer a “historic event.” Gazprom chairman Aleksey Miller promised his company "guarantees a stable gas supply.”
Neither seems very reliable to residents of southern Kyrgyzstan today, the 24th day the region has been without gas.
Four days after the formal transfer ceremony, Uzbekistan cut gas supplies to southern Kyrgyzstan. Residents of Osh, Kyrgyzstan’s second-largest city, complain they have been forced to use expensive electricity or cook over wood or dung stoves. Fortunately, the weather is warm. One resident describes a previous cut-off, during winter, when he used seven candles to boil water to make tea for his children.
Gazprom was meant to end such outages. Under the deal, which the Kyrgyz parliament approved in December, for a symbolic $1 Gazprom snapped up Kyrgyzgaz and its property and gained rent-free use of land any facilities stand on. In exchange it took on Kyrgyzgaz’s estimated $38 million debt and pledged some $600 million to improve Kyrgyzstan’s crumbling gas grid. In the long-term, the Kyrgyz hope Gazprom can streamline energy supplies and ease the dire power shortages the country experiences every winter.