US-Gazprom Clash Over Pipelines In Georgia

On 28 May the Georgian President Eduard Shevardnadze and Alexey Miller, the head of Gazprom, the Russian gas monopoly, announced to sign a cooperation agreement on a strategic partnership to develop the Georgian gas sector. The agreement includes various projects to supply and distribute gas in the country, as well as transit ventures.

A core of the agreement is the revitalization of two gas pipelines. One should transport gas from Russia to the Georgian Adjara with a link to Turkey. The other runs from Russia through Georgia to Armenia. Russia claims that the pipelines will have to be rebuilt completely and only the Russian-Armenia connection will cost $250 million. Simultaneously, the capacity will also be increase by 2.5 billion cubic meters per year to 16 billion cubic meters.

The entering of Gazprom to the Georgian market should also ease the Georgian energy shortages. Until today, Itera, a Russian gas company, was supplying gas to the Georgian market on behalf of Gazprom. It has repeatedly cut its gas supplies in order to enforce payment. A steadier energy supply would be welcomed ahead of the elections in autumn, where it is already unlikely that the existing government will prevail.

Shortly after the announcement of the new cooperation, the United States of America reacted. US Ambassador Richard Miles met members of the Georgian government to express its concern that Gazprom would hinder the Baku-Tbilisi -Erzerum and the Baku-Tbilisi-Ceyhan pipeline projects. On 6 June, Stephen Mann, the US advisor on Caspian energy issues even mentioned the issue during his talks with Eduard Shevardnadze. The Georgian President was reminded to omit any actions which could hamper the construction of the east-west links.

Having come under such pressure, the country is likely to reconsider its stance on Gazprom. The US was also quick to point out that Georgia would receive 15-20 billion cubic meters gas per year, as transit payments from the two pipelines.
Furthermore, the gas from Gazprom is the most expensive in the region, which is also a strong point for the existing projects.

It has been mentioned, that Russia has other good reason, apart from economic ones, to increase its presence in the region. Until now, Gazprom has had the monopoly of gas transportation in the former Sowjet Union. Wit the completion of the Baku-Tbilisi-Ceyhan pipeline, this monopoly could be challenged for the first time. The threat is even more serious as gas from the Shah Deniz field in Azerbaijan is cheaper than Gazprom?s.

The whole issue can also be considered as an issue in the struggle to gain political influence in the Caspian Sea region and the Caucasus between Russia and the United States. The US has already sought close cooperation with Georgia and has built up a small military presence in the country. Officially, the US is only there to train the Georgian army in counter terrorism measures and in how to protect the future pipelines in the country.

Therefore, the latest Gazprom move might be intended to curtail the American influence in Georgia and on hydrocarbon projects in the region in general. Coincidentally, Russia urged last week Azerbaijan to use the Blue Stream pipeline, a link between Russia and Turkey, to bring its gas to Turkey and not to wait upon the completion of the Baku-Tbilisi-Ceyhan line.

At the end, it is seems however unlikely that Georgia will hamper its good relations with the US. The country perceives the world?s only superpower as crucial for survival, at least as long its territorial integrity remains unclear.

Author: Tatyana Zaharova