Georgia to maintain terms of existing contract with Gazprom in 2016, energy minister says

By bne IntelliNews March 7, 2016

Georgia will maintain the terms of its existing agreement with Gazprom, Georgian Energy Minister Kakha Kaladze has said, adding that "what is left is signing the contract".

Georgia currently receives a 10% transit fee on Russian gas that crosses its territory to Armenia. Talks between Gazprom and Tbilisi in 2015 to renegotiate the contract in order to increase gas deliveries were highly unpopular in Georgia, where opposition parties and the population opposed it because they perceived Gazprom as an extension of the Kremlin. Georgia receives some 87% of its gas supplies from Azerbaijan, and had asked Baku to increase gas volumes to cover its increasing demand but Baku was unable to do so initially. However, after Azerbaijani national gas company Socar confirmed that it would increase gas exports by 22.7% y/y to 2.7bn cubic metres (bcm) on February 29, Georgia no longer needs increased supplies of Russian gas in the short term.

Negotiations to monetise the Georgia-Gazprom agreement would have been disadvantageous for Tbilisi, as the money Gazprom would pay for transit would not be enough for Tbilisi to purchase an equivalent volume of gas.

"According to the agreement, this year we remain within the scope of the existing contract, which has been enforced for years, and which envisages receiving 10% of the natural gas transported [from Russia to Armenia] as a transit fee,” Kaladze has said. "If next year Gazprom raises the issue [of monetising the fee] again, we will have a stronger position," he added.

As Georgian Foreign Minister Mikheil Janelidze went to Baku to meet his counterpart Elmar Mammadyarov on March 6, with gas exports expected to feature on the agenda, the opposition United National Movement (UNM) party organised a protest against Gazprom in Tbilisi. The event, announced on February 24, attracted "thousands" of demonstrators that held hands and waved European Union (EU) flags. Defence Minister Tina Khidasheli likened the event with "pushing against an open door".

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