GEORGIA REJECTS GAZPROM’S COMPROMISE GAS PRICE OFFER, READY FOR ROW

MosNews, Russia
Nov 9 2006

On Wednesday, Nov. 8, Georgia rejected a compromise deal with the
Russian state-controlled gas monopoly Gazprom. The deal offered
by Gazprom would see Georgia hand over control of its domestic gas
distribution network to Russia. Now Georgia is left with the prospect
of either paying twice the current price or having supplies cut off.

Georgia is currently paying $110 per 1,000 cubic meters of Russian
gas and Gazprom already announced that in 2007 it wants Georgia
to pay $230, which is the average price that the Russian monopoly
charges its European customers. Gazprom has already warned that if
no contract is signed, supplies will be cut on Jan. 1, 2007.

Gazprom offered to soften the increase if Tbilisi handed over control
of its domestic gas distribution network to Russia. The same scheme was
used with Russia-friendly Armenia that will continue to pay $110 price
until the end of 2008 in exchange for its energy distribution assets.

Unlike his Armenian colleague, the Georgian Prime Minister Zurab
Nogaideli rejected that offer. "I want to repeat once again — we are
not going to bow to blackmail," he was quoting by Reuters as telling
a cabinet meeting.

Energy Minister Nika Gilauri, asked by reporters if Georgia might
cede energy infrastructure to Gazprom, replied: "Never."

Russia supplies almost all of Georgia’s gas needs. The Georgian
government is seeking alternative suppliers in Azerbaijan and Iran,
but they are not ready to replace Russian gas in full.

Tbilisi says Moscow is using gas as a political tool to punish it
for its pro-Western policies. Gazprom says the increase is purely
commercial.

If the price stays at $230, Georgia — where the average monthly
income is just over $100 a month — would pay the same for its gas
as rich countries such as Germany and Italy.

Alarmed at the prospect of a gas cutoff, a leading Georgian opposition
figure urged Nogaideli to seek a compromise.

"The prime minister should explain if his statement means Georgia
will be left without gas this winter because for now there is no real
alternative to Russian gas," Interfax news agency quoted lawmaker
David Berdzenishvili as saying.