Messenger.com.ge, Georgia
Aug 27 2004

Georgian pipelines for sale?
By Messenger staff

Georgia has a very sophisticated network of natural gas pipelines.
The first natural gas pipeline started functioning in Georgia during
Soviet times on December 25, 1959. The first influx of natural gas
came from Azerbaijan. Later this pipeline was extended to the north
towards Russia. Then this pipeline was joined to the Iranian gas
being pumped through Azerbaijan into the north.

Later another pipeline was added for the purpose of pumping Russian
natural gas through Georgia into Armenia. Fortunately today the
country still has this complicated network and has the capacity to
pump natural gas in many different directions, sometimes consuming
the gas itself or for serving as a transit unit.

In couple of years it is planned that, after Tbilisi-Baku-Ceyhan is
ready, the Baku-Tbilisi-Erzerum natural gas pipeline will be finished
as well.

Up until now, the main supplier of natural gas to Georgia has been
Russia. It provides all of the gas used, 10 percent of which Georgia
earns from the pipeline leading to Armenia and Georgia receives this
during transit.

Recently, during his Iranian visit, President Saakashvili raised the
issue of providing Georgia with Iranian gas as an alternative to
Russia. As soon as the Baku-Tbilisi-Erzerum, also known as the Shah
Deniz pipeline, starts, Georgia will have a concrete alternative
supply from Russia and therefore, it can always look for better
prices and a reliable partnership.

With the country entirely dependent on Russia, Georgia experiences
discomfort as Russian politicians threaten to cut off the gas supply
and thus weaken Georgia. Even in the recent past they did so, always
excusing their behaviour, hypocritically, as a problem of gas
shortage with various technical explanations. Georgia must also deal
with its significant debts to Russia and lacks an alternative
supplier with to improve its negotiating position.

Complicating the situation, in one of his interviews with the
newspaper Akhali Versia the Minister of Economy Kakha Bendukidze
responded to the question of whether the main natural gas pipeline
should be sold or not and said: “Give me a good buyer who will give
me a good price and I am going to sell it.”

Experts think, however, that at the moment the natural gas pipeline
in the condition that it is in now will need several hundred million
USD for its rehabilitation and few investors will be attracted to buy
this network.

However one possible investment might appear from Russia because it
needs the connection with their Armenian ally as well as Iran. And of
course, as current practice shows, if Russia becomes the owner of
these pipelines, it could exercise its complete influence much
stronger than now and in particular in situations of crisis for
Georgia.

Therefore, the opinion of the Georgian political and economic
analysts is that selling the main natural gas pipelines to investors
and in particular to Russians will be dangerous from the prospect of
Georgia’s energy security and furthermore to Georgia’s state
security.