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Russia, Georgia Reach New Deal On Gas Supplies To Armenia


Georgia -- Georgian Energy Minister Kakha Kaladze (C) speaks with delegates during the14th Georgian International Oil, Gas, Infrastructure and Energy Conference in Tbilisi, March 25, 2015

Georgia -- Georgian Energy Minister Kakha Kaladze (C) speaks with delegates during the14th Georgian International Oil, Gas, Infrastructure and Energy Conference in Tbilisi, March 25, 2015

After almost one year of negotiations, the Georgian government and Russia’s Gazprom monopoly have reached a new agreement on the transit through Georgia of Russian natural gas delivered to Armenia, it was announced on Wednesday.

Armenia imports roughly 2 billion cubic meters of Russian gas annually, meeting more than 80 percent of its demand for the energy resource. Transit fees charged by Georgia have until now taken the form of free Russian gas equivalent to 10 percent of that supply volume.

Last year, Gazprom offered to pay the authorities in Tbilisi in cash. The two sides have held a series of negotiations since then. The last round of the talks was held in Belarus’s capital Minsk on Tuesday.

Georgia’s Energy Minister Kakha Kaladze announced the following day that Gazprom’s representatives proposed fresh financial terms for the transit. The Georgian government has accepted the proposal, he said after a cabinet meeting in Tbilisi.

Kaladze did not disclose the new, dollar-denominated cost of Gazprom’s use of a Soviet-era pipeline passing through Georgia, saying only that it will be “one of the highest in Europe.” He said Georgia will also be able to buy more Russian gas at a discounted price.

“Gas consumption in Georgia is rising and we will be able to buy, if necessary, [Russian] gas for $185, rather than $215, per thousand cubic meters,” Kaladze was reported to tell journalists.

Russia -- Participants walk in front of the logo of Russian gas company Gazprom, during the ENES 2016 Energy Efficiency and Energy Development Forum & Exhibition in Moscow, November 23, 2016

Russia -- Participants walk in front of the logo of Russian gas company Gazprom, during the ENES 2016 Energy Efficiency and Energy Development Forum & Exhibition in Moscow, November 23, 2016

Georgia currently buys the bulk of its natural gas from Azerbaijan. Over the past year, the Georgian government has signaled its desire to ease the country’s dependence on Azerbaijani gas, prompting strong criticism from opposition groups favoring a harder line on Russia. The latter say that increased gas supplies from Russia could only give Moscow additional leverage against Georgia.

The Russian gas price for Armenia currently stands at $150 per thousand cubic meters. It did not go down after Armenian utility regulators approved in November a sizable reduction in the domestic gas prices. The price cuts were requested by Gazprom-Armenia, the country’s Russian-owned gas distribution network.

Gazprom-Armenia’s chief executive, Hrant Tadevosian, said the company hopes to make up for an anticipated loss in revenue through cost saving and greater consumption expected as a result of cheaper gas. Tadevosian also said the Armenian gas operator will save more money if Georgia agrees to lower its transit fees. “We expect those figures to be significant,” he said.

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