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Sunday, February 25, 2018

Deal of Georgia with Gazprom is beneficial to both parties

Georgia agreed to Russia’s proposal to change the scheme of payment of transit of Gazprom’s gas to Armenia through Georgian territory. Instead of barter Gazprom will pay in cash. For the poor of Georgia’s economy, the extra money does not interfere. So why official Tbilisi for a year, denied Moscow in this deal?

The government of Georgia has decided to sign the contract with “Gazprom export” on the transit of Russian gas to Armenia on new terms providing for the transition to monetary payment for its cost.

“$185 per thousand cubic meters – this is even lower than the prices at which today could buy Russian gas Ukraine”

Last year Gazprom’s offer Georgia didn’t like. Official Tbilisi insisted on keeping the old barter when the transit fees Russia gives 10% of the total volume of gas supplied to Armenia.

But returned from Minsk, where on the eve of a third round of negotiations with Gazprom, Deputy Prime Minister, Minister of energy Kakha Kaladze said that “the government has decided to execute the contract with Gazprom”. According to him, it was the best decision for Georgia.

Kaladze assured that the energy independence of Georgia from Russia will increase, “changing only the form of payment”. Now, if Georgia has not signed the transit agreement, Russia could appeal to international courts that was fraught with danger for Georgia in the financial plan, said Deputy Prime Minister.

According to him, Georgia will receive for the transit of Russian gas one of the highest fees by European standards. The Minister did not specify the cost of transit of Russian gas, but said that “from a financial point of view, we (Georgia) got approximately the same result as when you pay its cost by nature.”

Moreover, Gazprom is ready to provide Georgia with extra gas volumes at a lower price is 185 dollars for 1 thousand cubic meters instead of $ 215.

The agreement will be signed for two years (the date of the signing in Tbilisi is not specified). This year the payment for transit will be partly gas, partly in cash. In 2018 – cash only.

Why are Georgia and Russia are unable to agree on the same time last year, in the previous negotiations? Tbilisi delayed the decision, although there agreed that Gazprom does not require anything impossible, that is, in principle, was ready for a change in the payment scheme.

However, 2016 politically had a very difficult – approaching elections to the Parliament, so the government did not want the opposition had extra reason for manipulating and playing the card of “concessions to Russia”.

Now the opposition party of ex-President Mikheil Saakashvili “United national movement”, which in the past year was marked by protests against Gazprom, if only slightly weakened. After the defeat in the October elections to the Parliament the nationals are busy with internal squabbling, the party is divided into those who will stay with Saakashvili, who will leave. Thus, the ruling “Georgian dream” has gained more space in all directions. Including in the negotiations with Gazprom Kakha Kaladze has not experienced serious political obstacles from the opposition.

Although the representative of “nationals” MP Roman Gotsiridze, former President of the National Bank, did not fail to speak in that spirit that the government of the Georgian dream “capitulated” on the gas negotiations, “they shouldn’t have to change the form of payment, but our government is incompetent and corrupt”. “The results of the negotiations with Gazprom have shown that Georgia is under Russia’s pressure. Should we expect that we will now give in and give up Russian “Tbilgas”, then the Abkhazian section of the railway,” said Gotsiridze live prozaicheskie of the company.

“We have preserved energy independence from Russia. Our main strategic partner in the gas field is Azerbaijan”, – said the first Deputy Prime Minister and Finance Minister Dmitry Kumsishvili.

However, one providing a discount for the Russian gas it is easy to discredit political demagoguery Gotsiridze.

“Despite some warming of relations between Russia and Georgia after the departure of Saakashvili’s team, we cannot say that Georgia is fully normalized relations. And the reason is clear – is Ossetia and Abkhazia. Until this issue is resolved, we talk about full partnership with Georgia will not work. Now rather we can say that we have moved from a period of open hostility. However, when done some sort of deal or history, in which there is Russia in Georgia be willing to say that there is a “sale of the Motherland”. And here the poor economic calculations and common sense, the main thing – to find a reason for speculation. Here I see only a political factor,” – says the newspaper VIEW CEO of national energy security Fund Konstantin Simonov.

The dependence of the Georgian economy on Russia has traditionally been high in all spheres, including in energy. However, the situation has changed and not for the better for the Georgian economy and prosperity of the population.

After the war began mass hysteria, including in the energy sector. Georgia turned in the direction of Azerbaijani gas under the sauce of rejection afraid of Russia, so much so that she now needs Russian gas to not depend entirely on Azerbaijani gas.

Georgia consumes about 2.5 billion cubic meters of gas. Russia is a small market. For ten years as Georgia nearly all gas purchases in Azerbaijan. As payment for the transit of fuel from Russia to Armenia, Georgia has received only about 200 million cubic meters of Gazprom’s fuel.

The cost of gas from Azerbaijan to Georgia varies. As a transit country for Azeri gas, Georgia has the right to purchase 500 million cubic meters of Azeri gas for $ 64, 250 million – for $ 55, and about 500 million Georgia receives over 189$, the rest of the gas is purchased at market price for 237 dollars for 1 thousand cubic meters. “The cost of Azerbaijani gas is higher than Gazprom’s. And that goes for both Europe and Georgia”, – said Konstantin Simonov.

Finally, without those 200 million Gazprom’s gas Georgia would have appeared in a complete dependence from Azerbaijan. Kaladze himself has repeatedly stressed the merit and the role of Gazprom in what is today Georgia can trade to lower the price of gas from the Azerbaijani company SOCAR.

Georgia strongly relied on the development of the second stage of Azerbaijani field Shah-Deniz and the construction of gas pipeline Tanap (TRANS Anatolian pipeline) and Tap (TRANS-Adriatic). According to him, the Azerbaijani gas via Georgia will come to Europe. These pipelines – competitors of the Russian “Turkish stream”.

Georgia is important for Azerbaijan projects, as it promised to invest $ 2 billion in the pipeline through its territory, as well as additional volumes of natural gas at a discounted price. Azerbaijani projects do best for Georgia. The only problem is that the implementation of these projects each year is deferred. Second, the additional gas for Georgia could not be. “It turned out that the potential of Azerbaijani gas was unfair as a whole. At the first stage of Shah-Deniz all the gas distributed, extra there. And the second phase of Shah Deniz was to earn first in 2018 now until 2022,” – said Simonov. If the consumption in Georgia will grow in the coming years, to help her cope with demand will only be able Russia.

Finally, Gazprom has offered Georgia to earn money on transit, which in a crisis would be beneficial for the country.

In addition, Georgia’s rejection of this deal in the past year could have not only political, but economic motives. Tbilisi could haggle over the price and demand discounts. Moreover, the market situation was favourable gas prices fell due to low cost of a barrel.

“In the end, the price for Georgia provided by guests. 185 dollars for 1 thousand cubic meters – this is even lower than the prices at which today could buy Russian gas Ukraine”, – said Simonov.

For Russia, the schema change is important for two reasons. First, it makes a profit, it’s not subsidized scheme, Gazprom makes it. Second, Russia is important to show the return to the Georgian market, dominated by Azeri gas. “Georgia is for us a small market, but I remember the story of the transition of Georgia from Russian to Azerbaijani gas was used extensively, with the image point of view: “Look, even Georgia can live without Russia.” From this point of view the fact that Georgia is back is a big plus. She kicked, muzzle to the cheeks, but now we have agreed to continue to conduct our business,” – said Simonov.

Georgian experts do not see risks for Georgia in the transition to settlements with Russia in payment for transit. Former Prime Minister Tengiz Sigua says that “the whole world is so calculated”. He recalled that the share of Russian natural gas to the Georgian economy, and so insignificant – for the tenth year Georgia buys gas only in Azerbaijan. So for average consumers in Georgia the issue price for gas will not change anything.

“No tragedy and no risks, both political and economic, I do not see” – agreement, the former head of the parliamentary Committee for economy, demur, Giorkhelidze. “Russia for all its gas policy moves to commercialization, that’s the widely accepted norms,” he said. According to him, is not expected and growth in the energy dependence of Georgia and Russia. Political risk is also zero. “And so we have a bad relationship, more of them to ruin it anymore. So all this is pure Commerce,” he concluded.

Sigua said “very good” agreement according to which Georgia will be able, if necessary, to buy Gazprom gas at reduced prices: “It may be useful in the case of the growth of our economy, which, consequently, will increase the need for gas.” He did not rule out that Russia may be interested in the possibility of purchasing 25% shares of Georgian gas pipeline leading to Armenia. The Georgian government is preparing to implement them on international markets.


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