GEORGIAN DREAM OF DIVERSIFICATION

In many regions of the world, energy has turned into one of the most important resources ensuring independence. A country having its own resources of oil and gas is in a position to implement its development strategy in a fully-fledged fashion and determine its foreign policy vector. 

This is why countries importing oil and gas resources seek to diversify both their sources and routes. Even putting aside the political influence of a supplier, no-one is guaranteed against technological accidents and natural phenomena that may damage the pipeline. 

From this angle, Azerbaijan is in an enviable position: this country has resources of oil and gas great enough not only to meet its own needs but also for export. It is Azerbaijani gas that will provide the opportunity in the near future to diversify the sources and routes of energy supplies to Europe. The purpose of the Southern Gas Corridor project being implemented by Azerbaijan is not only to meet the needs of Europe but also those of Turkey and Georgia. 

Azerbaijan has been providing for a large proportion of Georgia's gas needs for a few years now. Tbilisi is receiving only 200m cu.m. of gas from Gazprom in payment for Russian gas transit to Armenia.  

Although no problems have been registered as regards the reliability, volumes and price of Azerbaijani gas supplies, the Georgian government has been coming up with statements of late about the need to start gas purchases from Russia. Georgian Energy Minister Kakha Kaladze, who met Gazprom head Aleksey Miller in late September, has made a statement about the possibility of Russian gas imports. The purchases of Russian gas are aimed to diversify supplies, the Georgian minister explained. In the future, Georgia also intends to import Iranian gas but, in the first place, sanctions against Tehran should be lifted. 

Meanwhile the wish to buy gas from Moscow has drawn mixed reactions from the opposition camp in Georgia. The United National Movement, Free Democrats and the Republican Party have called on the Irakli Garibashvii government to answer why, having such a reliable supplier as Azerbaijan, the issue arose of buying gas from Gazprom. 

Irakli Alasania, the leader of Free Democrats, accused the Georgian government of pursuing their private rather than serving those of the state. 

"In these conditions, it is absolutely unclear for Georgian citizens why the emphasis is being shifted to Gazprom. The Azerbaijani side is supplying gas for us on the basis of a strategic agreement at preferential prices. I cannot see our authorities protecting this interest of the state, so the question arises: maybe there is somebody's personal interest behind this? I want the population of Georgia to understand that secret negotiations on matters such as energy security of our country, which is virtually the groundwork of the country's security and our independence, imply in the first place irresponsibility towards their own society. It is very important to know whether this is going to make us more dependent on Russian gas, which means in itself that we are surrendering new leverage, including political one, to Russia. These are questions to which we have got no answers as yet," Alasania said. 

According to him, in recent past, Russia repeatedly halted gas supplies in order to put political pressure on Georgia. In particular, when Gazprom suspended its gas supply to Georgia in winter 2006, Tbilisi got out of the hard situation thanks to Azerbaijan. 

On the whole, Georgia is rather wary of any attempts to expand cooperation with Russia, keeping in mind the August 2008 war and subsequent recognition of the independence of Georgia's separatist regions by Moscow. 

MP Zurab Melikishvili of the United National Movement thinks there are no grounds for buying gas from Gazprom. "Georgia has for many years received steady and unhindered supplies of cheap gas from Azerbaijan, its strategic partner. Meanwhile, having no problem getting additional volumes if asked for, they keep speaking to Gazprom which immediately represents the Russian state and is directly filled with political decisions. Naturally enough, it is harmful for the country's independence," Melikishvili said. 

Activists of the United National Movement of Georgia and members of he Free Zone non-governmental organization have protested against the Georgian authorities' negotiations with Gazprom outside Bidzina Ivanishvili's business centre. They held banners reading: "No to Russian gas invasion", "Invader will not warm you", "Ivanishvili has share in Gazprom", "Ivanishvili is agent of Gazprom", "No to energy dependence on Russia" and others. 

The ruling party of Georgia is also wary of this initiative, commenting that ensuring the country's interests should top the agenda. 

Against this background, the visit to Baku by Georgian Prime Minister Irakli Garibashvili where he held three-hour talks with Azerbaijani President Ilham Aliyev, came as a surprise to everybody. According to official information, the sides discussed political and economic subjects and matters of regional security. In particular, the importance was emphasized of cooperation in the fields of infrastructure, energy and transport. They also discussed prospects for deepening relations. 

After the meeting, Garibashvili said that replacing Azerbaijan with another gas supplier was out of the question. "There are no plans for any revision of our mutual relations with Azerbaijan. Strategic relations and partnership with Azerbaijan have been and will remain a major guideline for our state and our government," Garibashvili said. "How can some politicians even think about revision of our policy towards Azerbaijan? It is totally absurd! I am surprised at representatives of our opposition parties thinking up such an absurd theme. This is a theme of their responsibility. No diversification as substitution of Azerbaijani gas is at issue," Garibashvili said. 

Kakha Kaladze explained later that, speaking about gas purchases, he meant only supplies of commercial natural gas. "I think it would be somewhat inappropriate to speak about competition because it is known that Azerbaijan is our strategic partner. We are discussing only commercial gas here. As you know, the commercial market is streamlined so that any company can go to Azerbaijan, Russia, Iran, Turkey or Armenia and import natural gas at a price acceptable for them. This has not and will not have any restrictions," Kaladze said. 

Georgian President Giorgi Margvelashvili has asked the Governmental Administration to consider the issue of energy security and transit of energy supplies at a government meeting. However, Garibashvili and Kaladze see no need to hold separate hearings on the issue of negotiations with Gazprom. "It is unclear to me why this issue is on the agenda. We have no problems in this sector. If the president has any interests, I can provide the administration with the entire detailed information on the energy situation," Kaladze said. 

Meanwhile, SOCAR (State Oil Company of the Azerbaijan Repub-lic) has quite a normal attitude to the prospect of a new supplier entering the Georgian market and it is ready for competition. The company's Vice-President Suleyman Qasimov has told R+ that the company is in no way concerned about possible gas supplies to Georgia from a new source. According to him, Georgia is even now receiving gas from different sources at different prices including SOCAR's own gas, supplies from the international consortium developing Azerbaijani's Shah Deniz [Sah Daniz] oil field and Russian gas in payment for transit. 

At the same time Qasimov pointed out that SOCAR is the operator if Georgia's gas distribution network and any new gas on the market can affect change in the economic parameters of the gas distribution network's activity and therefore tariff formation. At the current stage though, the company has no intention to raise the issue of tariffs for Georgia's population. Moreover, the company is expanding its operation in Georgia's gas market intending to increase the gas infrastructure coverage to 82 per cent from the current 65 per cent by 2017. 

According to SOCAR Energy Georgia Director General Mahir Mammadov, the company is prepared for competition in the Georgian gas market. "This is a free market and the availability of other companies increases the level of competition on it and therefore the quality of services. If Georgia decides to increase Russian gas supplies, we will adapt to the new conditions and develop further. But on the whole, we are ready to compete," Mammadov told the Trend agency. The likely strengthening of Gazprom in the Georgian market will not have any strong effect on SOCAR's activity in Georgia. "Transit supplies of gas across Georgia's territory have already been there and they will have no impact. As regards gas supplies to Georgia itself, contracts have been signed for certain volumes of gas for social consumers for a certain period. As for commercial consumers, we use a system of short-term agreements - for three and six months," Mammadov said. 

Thus the current phase of gas tensions looks rather like playing a political game. The price of Azerbaijan's gas has not been made public but it is clear that Tbilisi just cannot complain about it as exorbitant. It is known that Azerbaijani gas is the cheapest in Turkey compared both to that of Russia and Iran. Moreover, SOCAR is the operator of the gas distribution network in most of Georgia's regions, so the company itself would not gain from setting an excessive export price which would reduce management efficiency and investment payoff under a system of regulated gas prices for consumers. 

Let it be recalled that the Georgian Dream government once tried to beat down Azerbaijan's gas prices in 2012 after its victory at the parliamentary election. Bidzina Ivanishvili, who had taken the office of prime minister, announced that Georgia was buying overpriced gas and voiced his intention to reduce the prices. However, immediately after his visit to Baku, he changed his rhetoric saying that, if there were any opportunities to reduce the gas tariffs, they should be sought for only inside the country. 

The Georgian government cannot but know that Gazprom is using its lowest prices only for Armenia and Belarus - countries which joined the Eurasian Economic Union and have a similar foreign policy vector. More than that, the gas transportation network in those countries belongs to Gazprom which also makes it possible to sell gas at lower prices. Preferential terms for Russian gas supplies will hardly be applicable to Georgia which has definitely opted for a policy towards Euro-Atlantic integration including its accession to NATO and the EU.