Russia upset by decision to not privatize gas pipeline
By M. Alkhazashvili

The Messenger, Georgia
May 18 2005

One week before U.S. President George Bush’s visit to Georgia, Minister
of Energy Nika Gilauri announced that, following an agreement from
the Millennium Challenge Corporation (MCC) that USD 40 million will
be allotted by the corporation for repairs to the trunk gas pipeline,
the government had decided not to privatize the pipeline after all.

The government had initially suggested that the pipeline would need to
be sold as it was unable to pay for the cost of its rehabilitation. The
Russian energy giant Gazprom expressed its interest in buying the
pipeline, and this led to opposition both within Georgia and from
the United States to the sale.

Local experts expressed concern that selling the pipeline to a Russian
state-owned company would put Georgia in a position of even greater
dependence on energy imports from its northern and not always friendly
neighbor. U.S. officials, meanwhile, concerned that the trunk pipeline
might prove an eventual competitor to the U.S.-funded South Caucasus
pipeline, also expressed opposition to the pipeline’s sale.

Nevertheless, without any alternative course of financing the vital
rehabilitation work, the possible sale of the pipeline remained on
the agenda, leading critics to wonder about the presence of shady,
pro-Russian forces within the government, or else equally shady
figures with a personal interest in its sale.

Conservative MP Kakha Kukava, for example, said, “I am sure that the
Georgian government has corrupt and financial interests in the issue.
I do not think that the government came to such a decision because of
being pro-Russian. In this case it was not the political but corrupt
interests. If there exist pro-Russian interests in the government
than even these interests have financial rather than ideological or
strategic motives,” as quoted by Akhali Taoba.

The government of course denies such accusations, stating that it was
only possible to take the pipeline off the market once the Millennium
Challenge funding had been won. It could be added that, given obvious
U.S. animosity to the sale of the pipeline, keeping the sale on the
agenda was a useful way of persuading the MCC that rehabilitation of
the pipeline was a project worth supporting.

Following the decision not to sell the pipeline, the government was
eager to stress that it was not a “decision against the Gazprom or
Russia,” 24 Saati quotes Prime Minister Zurab Noghaideli as saying.

Nevertheless, the decision has clearly upset Moscow. Russian MP
Konstante Zatulin, for example, said that this was yet another U.S.
measure to drive a wedge between Russia and other CIS countries, by
reducing the level of dependence of countries like Georgia on Russia.

Russian expert Aleksandr Blokhinin complains that the U.S. has no
economic interests in the gas pipeline, and is merely interested in
interfering in reducing Russian influence in the Caucasus region.

Blokhinin underlines that through the pipeline Russian gas is transited
to Armenia – to the only country strongly loyal towards Russia in
the region. “The amount of transited gas to Armenia is not sufficient
for Gazprom. It should be mentioned that by refusing to sell the gas
pipeline to the Gazprom America is separating Georgia from Russia,”
Blokhinin said as quoted by 24 Saati.