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Georgia wants Russian gas needle more than Azerbaijan's gas

Georgia wants Russian gas needle more than Azerbaijan's gas

Date: 11 January 2016 22:07

Baku, Azerbaijan, Jan. 11

By Maksim Tsurkov – Trend:

Reports of secret and open talks between Georgia and Russia on gas supplies, which appear more often as of recent, cause confusion and a number of questions.

Georgia has no issues with Azerbaijan regarding gas supply, so why does it seek to disrupt the already established relations with a reliable supplier that is Baku? Who will lose more from a such policy – Georgia, or Azerbaijan?

Another news about the meeting of Georgian Energy Minister Kakha Kaladze with the representatives of Russian “Gazprom” has appeared in Georgian media today. It is difficult to understand why Georgian leadership has decided to get back on Russian gas needle at the time when the entire Europe is trying to get off it.

One thing is for sure – the problem is not with Azerbaijan, which has long-term commitments with Georgia, and executes them. Meanwhile, Georgia's growing gas consumption remains an important factor. Currently, the annual gas consumption in Georgia is about two billion cubic meters (bcm).

Growth of consumption in Georgia is only 8-10 percent per annum - the amount that Azerbaijan can supply additionally without any problems.

Azerbaijan supplies about 80 percent of gas consumed in Georgia, and for 11 months of 2015, the country supplied 1.5 bcm of gas to Georgia. At the same time, Georgia receives gas from Azerbaijan within the framework of the Shah Deniz project at a discounted price of $55 per thousand cubic meters.

One shouldn’t overlook the social factor as well: Azerbaijan's SOCAR conducts active gas supplying in Georgia and intends to increase the supply level to the country to 82 percent by 2017. Will “Gazprom” carry out such work in Georgia?

The most likely cause of such a policy of Georgia is an attempt to create the appearance of competition in the gas market by holding negotiations to make SOCAR lower down prices for the supplied gas, which are already quite low.

So, currently the tariff for natural gas for the population of Tbilisi is $190 per thousand cubic meters, in the regions - from $170 to $210 per thousand cubic meters. The price for natural gas for commercial customers of SOCAR Georgia is $350 per thousand cubic meters.

At the same time, SOCAR had no plans to increase gas tariffs for the population of Georgia. Meanwhile, it is important to understand that if Georgia does come to an agreement with Russia, the Azerbaijani gas will be in demand.

Azerbaijan will be able to redirect the same gas volumes to Turkey and Europe, which now go to the gas distribution network of Georgia, selling it at a better price for itself. Both Turkey and the European importing countries will be happy to receive additional volumes of gas, which is alternative to that of Russia.

In such situation, the answer to the question who will lose more if Georgia replaces Azerbaijani gas with that of Russia, becomes obvious.

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