Gazprom Deal Puts Georgia at Risk of Becoming Energy Dependent on Russia

2016 / 02 / 11

While eyes are on Russian antics in Ukraine and Syria, Gazprom – the energy tentacle of the Kremlin's imperial ambitions – is feeling around for a tighter grip on Georgia. Moscow always times its nefarious activities when Western attention is diverted.

Both the West and Georgia stand to lose big on this Russian gambit. However, remarkably, at least some Georgian officials appear attracted to Gazprom's indecent proposal. 

Georgia's energy minister, former A.C. Milan football star Kakha Kaladze, has been meeting with Gazprom chief Alexey Miller, a member of Russian President Vladimir Putin's inner circle. They have met in Milan, Vienna and Luxembourg. The Georgian public learned of the peripatetic discussions through the Russian press. Confronted by Georgian journalists, Kaladze averred that his meetings with Miller were routine, annual and technical. Then he explained that Georgia is seeking energy diversification.

That explanation is worthy of the Orwellian Ministry of Truth's "Newspeak." For Georgia, diversification used to mean freedom from Russia's energy grip; now it apparently means the opposite. Fortunately, most ordinary Georgians aren't so gullible, and "No to Gazprom" protests erupted in Tbilisi. People remember too well freezing in the dark at the hands of Moscow.

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Gazprom is no doubt counting on the fact that the discussions are pretty hard to follow, so let's demystify the situation. Today, Gazprom supplies gas to Armenia through a Georgian-owned, American-financed north-south pipeline. As a transit fee, Georgia gets 10 percent of the total gas that transits its pipeline – about 200 million cubic meters. Georgia also buys 75 million cubic meters from Russia. Together, the 275 million cubic meters represent about 12 percent of Georgia's current annual gas consumption. The remaining 88 percent comes from the South Caucasus Pipeline that links Azerbaijan's Shah Deniz field with Erzurum, Turkey. There, it connects with Turkey's gas distribution system and Western European pipelines, beyond.

Shah Deniz gas is a major geopolitical prize for Georgia, guaranteeing against Russian energy blackmail.

Gazprom now demands to monetize Georgia's transit fee – that is, it would pay Georgia money in exchange for supplying gas to Armenia through the Georgian pipeline. Georgian energy experts calculate that the amount Gazprom will pay will fall far short of the cost of the forfeited 200 million cubic meters. Then, Georgia would buy all of the 275 million cubic meters from Gazprom. Moreover, as Georgian gas consumption increases, so would the amount it buys from Gazprom. The percentage of gas that Georgia gets from Russia would rise from 12 percent to 20 percent, all paid for in cash. "It's a dodgy scheme," said Nikoloz Vashakidze, former president of Georgian International Oil Company, "and it's no doubt just the tip of the iceberg."

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Kaladze told Rustavi-2 television that his discussions with Gazprom's Miller are necessitated by Georgia's increasing gas consumption. Moreover, if Georgia refuses Miller's proposal, the energy minister said, Gazprom will just supply Armenia with gas from Iran.

"Absurd," retorted Roman Gotsiridze, former president of the National Bank of Georgia, also on Rustavi-2 television. "Armenia's dependence on Iranian gas is neither technically feasible at this stage nor will Russia allow this to happen." Russia will not expose its strategic partner, Armenia, to such a risk, Gotsiridze argued, particularly since Russia's 102nd military base is situated in that country. It would contradict Moscow's strategic interest.

But Kaladze insisted that Azerbaijan cannot supply Georgian gas needs during winter, so Russian gas is the only alternative.

But director general of Azerbaijan's State Oil Company, Mahir Mammadov, said, "We are fully meeting Georgian demand for gas. ... We will increase the supply of gas up to seven million [cubic meters] a day."

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For Georgia, the answer is not to pass again under the Russian yoke. Tbilisi should insist that Gazprom adhere to its current deal to transit Armenian gas supplies through Georgia in exchange for 10 percent of the transited gas. Meanwhile, Georgia should negotiate with Azerbaijan's State Oil Company and BP for more gas from Shah Deniz II, available from 2018. Right now, the South Caucasus Pipeline is being expanded to triple the gas that flows from Shah Deniz I, with first gas already slated for delivery to Georgia.

Why would Kaladze do otherwise? Why would Bidzina Ivanishvili – former Russian oligarch, former big Gazprom shareholder, former Georgian prime minister and now the man behind everything that the current Georgian government does – approve? Who gains from this? 

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Russia failed to cow Georgia with economic embargoes, blackmail, political subversion, terrorism and even military invasion and occupation. So now, the Kremlin seeks to re-establish energy leverage over Georgia. It is part of a strategy dubbed "liberal imperialism" by Anatoly Chubais (former Russian privatization czar and later chief of the government energy holding company UES), aimed at keeping the post-Soviet space economically dependent on Russia.

"This will be a big geopolitical shift in Georgia," said Nicholas Rurua, former vice-chairman of the Defense Committee of the Georgian Parliament. "It will erode Georgia's Euro-Atlantic orientation, push Western interest from the region and strengthen Russia's fifth column inside Georgia. Gazprom is the main financier of Russian propaganda. Bringing Putin's powerful political weapon will be disastrous for Georgia."

Georgians have seen this film before – but this time, they must join with their Western allies and demand a different ending.

Source:  http://www.usnews.com/opinion/blogs/world-report/articles/2016-02-10/gazprom-deal-puts-georgia-at-risk-of-becoming-energy-dependent-on-russia

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