Russia’s state-run gas company Gazprom is in talks with the authorities of Georgia over the extension or renegotiation of a contract regulating gas transit through the country, Black Sea news reported.
Tbilisi and Moscow had reached the previous deal on gas transit to Armenia back in January 2017, after long and difficult negotiations.
For almost 25 years, since 1992, Gazprom paid Tbilisi for the shipment of gas to Armenia not with money, but with a portion of this transited energy fuel: Georgia was receiving 10 percent of the Russian gas in lieu of a monetary transit fee. According to Georgian officials, the previous contract was much more profitable because, under a “monetized” transit fee scheme, Tbilisi would have had no guarantees of still being able to purchase the same volume of Russian gas—that is, the 10 percent of gas shipped to Armenia.
Georgia’s then–energy minister, Kakhi Kaladze, promised to “protect Georgian interests” in the negotiations with Gazprom. But ultimately, he was forced to sign the new contract with a monetized transit fee scheme (effective after one year) after Moscow threatened to divert all of its Armenia-bound gas from Georgian pipelines to the Iranian network.
The Georgian government feared that, under the new transit payment regime, it would not be able to procure enough substitute gas from Azerbaijan to satisfy domestic demand. Georgia consumes approximately 2.7 billion cubic meters of natural gas annually. And as a transit fee, the country received 200 million–250 million cubic meters of gas from Russia. The previous contract was also quite “comfortable” since it did not depend on international energy prices.
Still, during 2017–2018, Azerbaijan was able to find an opportunity to increase the volume of natural gas supplied to Georgia. As a result, Georgia did not buy a single cubic meter of gas from Russia last year. But the costs incurred by Azerbaijan’s State Oil Company (SOCAR) forced it to increase prices for Georgian consumers, which Tbilisi refused to pay.
The disagreement over the price of gas has not yet led to serious tensions between Azerbaijan and Georgia, but bilateral relations could start to suffer as the growing Georgian economy starts to need ever larger energy inputs, the report says.