Today.Az » Analytics » Bringing Russian and Iranian gas to the Georgian market: Challenges
12 February 2016 [17:21] - Today.Az
By Bartosz Mendyk
After the disintegration of the Soviet Union, the three
South Caucasus countries found themselves in a power vacuum, which led to
various geopolitical events and even catastrophes (such as territorial
conflicts and separatism)
However, this vacuum also enabled two of the newly
independent South Caucasus countries – Azerbaijan
and Georgia – to jointly
implement major oil and gas projects, the Baku-Tbilisi-Ceyhan oil pipeline and
Baku-Tbilisi-Erzurum gas pipeline, both of which bypassed Russia.
Initially, the two states were dependent on Russia
which was a key transit country for Azerbaijan
and a major gas supplier to Georgia.
After August War in
2008, Georgia suspended its
gas imports from Russia,
except the volume received as a “transit fee” for the gas supplied to Armenia. Since
2007, Azerbaijan, by virtue
of its vast energy resources, has been supplying the majority of Georgia oil and
gas demand and almost completely met its strategic ally’s energy needs when the
Russian supplies were cut down during 2008 war. However, a statement by
Georgia`s Energy Minister Kakha Kaladze in September 2015 on the purchase of
Russian and potentially Iranian gas by Georgia raised some questions.
This article will
examine the extent to which the purchase of Russian gas is realistic and
compatible with Georgia`s national interests and to what extent it poses the
risk to its relations with Azerbaijan, as well as the feasibility of bringing the
Iranian gas to Georgia given the technical shortcomings and political backlash
displayed by Russia.
The authors` arguments are based on the reliability of Azerbaijan as both supplier and neighbor, as
well as the technical difficulties and political repercussions respectively of
bringing Iranian and Russian gas to Georgia.
After gaining independence from the Soviet Union in 1991,
both Azerbaijan and Georgia
launched their independent energy policies. The energy cooperation between
Azerbaijan and Georgia through the realization of the Baku-Tbilisi-Ceyhan
(BTC), Baku-Tbilisi-Erzurum (BTE), Baku-Supsa pipelines and other energy
projects had a significant impact on the wider region.1 The BTC, BTE and
Baku-Supsa are essential .
For the West, finding the alternative routes to bring
Caspian oil and gas to Europe was crucial. The
strategic vision of the government of Heydar Aliyev created the initial
foundations of the East-West corridor, the development of which is proceeding
smoothly today with new energy projects and initiatives.
Today, this strategy
is led by President Ilham Aliyev, who has paved the way for the implementation
of the TransAnatolian Pipeline (TANAP) and the Trans-Adriatic Pipeline (TAP).
An additional potential gas project that will link Azerbaijan and Georgia is
the socalled Azerbaijan-Georgia-Romania-Interconnector (AGRI), which envisages
bringing Azerbaijani gas to Georgian ports, converting it to LNG in
liquefaction terminal and transferring it to Romania`s Constanta port in the
Black Sea. The Memorandum of Understanding was signed back in September 14,
2010 between the presidents of Azerbaijan,
Georgia and Romania in order to create a Joint Company to
study the export possibilities from Azerbaijan
and Georgia via Black Sea to
The Azerbaijani gas
will be delivered from Azerbaijan via pipeline to the Georgian port of Kulevi,
where it will be liquefied and delivered to Romania and re-gasified.3 The
nationalist vision and territorial irredentism of Armenia means that Yerevan
has been excluded from regional integration while Georgia and Azerbaijan have
been developing their relations in many areas, especially in the energy sector.
This pragmatic approach has deepened Georgian-Azerbaijani relations, while Armenia remains isolated due to its bellicose
policy toward Azerbaijan
and occupation of Nagorno-Karabakh region (including seven adjacent districts)
of the latter. Thus far, Azerbaijan and Georgia have consolidated their
bilateral energy relations through projects and investment initiatives by
Azerbaijan`s State Oil Company (SOCAR) in Georgia. Georgia annually receives millions
of dollars from the tariff payments for the BTC and BTE pipelines.
SOCAR Georgia Petroleum, a subsidiary of SOCAR, is one of
the largest taxpayers in Georgia and a major investor in Georgia`s oil/gas
terminals and warehouses, as well as the retail and wholesale of oil/gas and
their products. SOCAR owns hundred gas stations, operates the natural gas
distribution network, and owns and operates the Black Sea port of Kulevi.
It is currently Georgia’s main supplier of crude
oil, oil products and natural gas. SOCAR has invested billions in the Georgian
economy, including the development of the Kulevi terminal and port.5 Moreover, Azerbaijan, Georgia
are in the process of realizing the BakuTbilisi-Kars (BTK) railway project. The
BTK will effectively open a new railway corridor from the Caspian Sea through
the territories of Azerbaijan,
Georgia and Turkey to Europe, eventually precluding the need
for sea transportation, once the planned railway tunnel under the Bosporus Strait
in Istanbul is
complete. 6 Following the BTC and BTE pipelines, the BTK project will be third
trilateral project between Azerbaijan,
Georgia and Turkey that isolates Armenia in terms of transport
routes. It will also form part of the network of routes that connect Asia and Europe, known as the Iron Silk Road.
However, political transitions in Georgia
in 2003 and 2012 have tested bilateral relations between Azerbaijan and Georgia. Both of the previous
governments of Georgia had
very close relations with Azerbaijan.
The power transition from the United National Movement to Georgian Dream
coalition in 2012 led by billionaire Bidzina Ivanishvili created an uneasy
political environment in Georgia.
Ivanishvili`s political inclinations and decisions, including request for a
price discount on Azerbaijani gas imports, a statement on the alleged
inefficiency of Baku-Tbilisi-Kars railway, comments on the restoration of the
transit railway system through Abkhazia to Armenia, 8 plus former Economy
Minister George Kvirikashvili`s statement on the revision of oil and gas
contracts with SOCAR, could harm Georgia`s national interests and bilateral
relations with Azerbaijan. The possible opening of railway system through
Abkhazia would only serve Armenian interests, and is not compatible with Azerbaijan`s
‘isolation policy’ towards Armenia, due to the latters occupation of
Azerbaijan`s territories. Meanwhile, it would endanger Georgia`s preferred
partner status in the region for Azerbaijan. In 2013, Ivanishvili visited Baku to repair the situation, and Baku was able to demonstrate a stronger
position on the impossibility of opening Abkhaz railway, and did not make any
compromise regarding the price of gas
You can read the full article at : http://cire.pl/item,124610,2,0,0,0,0,0,bringing-russian-and-iranian-gas-to-the-georgian-market-technically-challenging-economically-unfeasible-and-politically-costly.html