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Energy Minister Briefs MPs on Deals with Gazprom, SOCAR
Civil Georgia, Tbilisi / 9 Mar.'16 / 23:51

Energy Minister, Kakha Kaladze, told lawmakers on March 9 that Georgia has completely secured gas supplies after striking a new deal with Azerbaijan’s state energy company SOCAR.
He was speaking at a joint session of parliamentary committees on foreign affairs and sector economy.

Opposition lawmakers summoned Kaladze in the parliament to brief lawmakers on talks with Russia’s state-controlled energy group Gazprom for several times over the past few months, but the Energy Minister was dragging his feet to appear before MPs.

He arrived in the legislative body only after Georgia secured extra 500 million cubic meters of gas from Azerbaijan in a deal reached on March 4 according to which the additional volumes should be supplied to Georgia through South Caucasus Pipeline.

The new deal with Azerbaijan, according to the Energy Ministry, removes the need for buying extra gas from Gazprom. 

Before the deal with SOCAR, Tbilisi seemed yielding to Gazprom’s demand to monetize transit fee for the gas transported from Russia to Armenia via Georgia with the Energy Ministry leadership, citing international practice, saying that Tbilisi had to accept Russian energy giant’s offer to pay cash instead of 10% of transported gas.

In case of monetization, Georgia would not have receive enough cash to buy the same amount of gas it is now receiving as a transit fee, requiring Tbilisi to buy more gas from Gazprom, consequently increasing the latter’s share in country’s total gas supplies; gas price and other terms of the contract were also part of the negotiations, according to the Energy Ministry officials.

But after securing extra gas supplies from SOCAR, Kaladze told lawmakers, Georgia gained negotiating leverage with Gazprom which allowed Tbilisi to stand its ground and “to send them our firm final proposal involving maintaining existing transit terms” – 10% of gas transported via Georgia.

Kaladze said that Georgia now has “a verbal agreement” from Gazprom on keeping these terms and he expects the contract, which will run until the end of this year, “to be signed in coming days, in the nearest future.”

He said that even though there is no contract with Gazprom yet, Georgia has already consumed about 140 million cubic meters of gas from the portion the country is entitled to receive from Gazprom as a transit fee. Last year Georgia received about 200 million cubic meters from Gazprom as a transit fee.

During the committee hearing Kaladze hinted that Tbilisi’s talks with Gazprom triggered more competition, which also helped to secure new deal with SOCAR. When speaking about competition, he evoked his experience as a footballer and said that when playing for AC Milan there was a huge competition among players to secure a place in starting line-up and this competition was helping the team to succeed.

When asked by opposition UNM lawmakers about his previous remarks that he does not consider it to be “a crime” if Georgia starts buying more gas from Gazprom, Kaladze responded: “If my country needs additional volumes [of gas] and there is no possibility to bring it from other sources, then I do not see any problem to secure those volumes from Gazprom. But of course it will be bad to replace our strategic partner Azerbaijan.”

While welcoming the new deal with SOCAR and keeping existing transit terms with Gazprom, opposition MPs from the UNM party were also telling the Energy Minister that he was forced to achieve such result only because of public protest; otherwise, UNM MPs claimed, the government tried to lobby Gazprom and its entry on the Georgian market.

During the committee hearing opposition lawmakers were frequently referring to, what they said were, Kaladze’s conflicting statements he was making throughout the talks with Gazprom. A senior UNM lawmaker, Giorgi Gabashvili, told Kaladze that initially the Energy Ministry wanted to keep talks with Gazprom in secret and the public learned about it in September, 2015 only after it was reported by the Russian energy giant and the Russian media. MP Gabashvili said that initially government members were talking about the need to “diversify” the gas supplies, but then changed the narrative by claiming that Georgia had to buy more Gazprom gas because Azerbaijan had no capacity to provide extra volumes of gas, which, Gabashvili said, was denied by SOCAR.

Denying making contradictory statements, the Energy Minister responded that his remarks were in line with what was discussed at any specific stage of negotiations. He also reiterated that SOCAR did have “technical” problems to supply extra gas as one of the pipelines through which Georgia receives gas (another one is the South Caucasus Pipeline) cannot handle additional volumes. Increase of capacity of this pipeline was among the topics discussed when head of SOCAR visited Georgia in January.

Kaladze, who is also secretary general of the Georgian Dream-Democratic Georgia, the largest party within the GD ruling coalition, dismissed UNM’s criticism as “demagogy.”

“It seems that statements made by me and the Prime Minister about readiness to cooperate constructively makes no sense in respect of UNM,” Kaladze said in his closing remarks at the committee hearing. “These people are not only obstructing us, but are also trying to blame us for their mistakes done [when UNM was in power].”

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