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Gazprom Checkmates Georgia

Agreement that Georgian Government has signed with Gazprom still remains relevant and sharp. As reported, under this agreement, Georgia will receive money remuneration in exchange for Russian natural gas transit to Armenia, instead of previous practice of payment by raw material.

For many years, Gazprom used to pay natural gas transit fee by means of natural gas. Namely, Georgia and Gazprom concluded a due agreement in 2003 and the payment principle was not subjected to revision till today.

Naturally, Gazprom always aspired for revising the mentioned agreement details in order to replace the existing payment mechanism by money payment method. It is worth noting that, based on current geopolitical and other aspects, it is impossible to supply natural gas to Armenia without Georgia, in practice. To be precise, alternative route comes from Iran, but current technical conditions of the Iranian pipeline do not enable Armenia to receive natural gas from the alternative route.

Maximum capacity of the Iranian pipeline  is 1.1 billion cubic meters, while Armenia consumes 2 billion cubic meters a year. Consequently, North-South gas pipeline that transports Russian natural gas to Armenia via Georgia has no alternative. This factor was Georgia’s key leverage for many years in the process of negotiations with Russia and naturally, the mentioned geopolitical factor always enabled our country to firmly defend its own positions. It should be also noted that Gazprom controls 100% of Armenia’s natural gas market, in practice. This signifies that continuous supply of natural gas to Armenia is of strategic importance for Gazprom.

Government has named potential legal disputes as one of the arguments for justifying the new agreement with Gazprom. According to Government statements, these disputes would be activated if Georgia had not signed a new agreement with the Russian gas giant. The mentioned legal dispute would damage Georgia’s reputation, they assert. Naturally, this argument is ungrounded and unreal, because legal and civil disputes cannot damage either reputation or specific interests. This argument could be applied by only embarrassed state officials trying to justify their decisions, who have no clear idea how to explain real state of affairs to the population and how to interpret the factors that have made them sign such a self-defeating agreement.

The agreement details are classified and this factor raises many questions. Government of Georgia has classified the agreement with Gazprom  and made this process absolutely non-transparent. Naturally, this fact strengthens doubts that Georgian Authorities have signed a losing agreement and conceded their own business interests, in practice. Even government officials cannot refuse this consideration.  This time Georgia did not have as winning positions as previously for many years, they assert.

The negotiating process is a very important issue too. It is necessary to conduct similar high-level negotiations under institutionally valuable regulations. Naturally, these high-level negotiations were not to be conducted by Ministry of Energy  and various branches of state structures were to have taken active part in the negotiating process.

We know that Gazprom is not only a commercial organization. Naturally, Russian Authorities always employ this company as a political leverage in the negotiation process with other countries. Consequently, negotiations with Russian Gazprom were to be considered in political light and therefore, the negotiation process was to involve Ministry of Foreign Affairs and all state structures responsible for state security issues.

Increased natural gas consumption is another argument named by Government officials. According to them, increased gas consumption has necessitated to seek additional natural gas supply sources. It should be noted that Azerbaijan is a stable source of natural gas supply for Georgia. Therefore, arguments as if Georgia needs Russian natural gas are absolutely unreal. To be precise, last year, during Georgia-Gazprom negotiating process, Azerbaijan increased natural gas supply to Georgia by 500 million cubic meters. Therefore, even this argument is ungrounded and unreal.

One significant detail around the new agreement is the fact that in November 2016 one of the influential editions “Natural Gas World” published an article: “Armenia Reduces Natural Gas Price again”. According to the article, natural gas price for Armenia decreased after Gazprom agreed with Georgia to revise natural gas transit fee payment method, namely, 10% of transited natural gas will be replaced by money payment mechanism.

The fundamental moment in this article is that decision on the mentioned changes were taken far earlier and this factor raises  doubts that the 2016 “achievement” on maintaining the existing conditions was related to the 2016 parliamentary elections  and Russian Authorities preferred not to worsen political positions of the ruling Authorities. Therefore, the 2016 agreement “achievement” could not be preconditioned by efficient  negotiations of Georgian delegation.

Thus, Georgia-Gazprom agreement may be appraised as a concession of positions and decision taken against the interests of our country.