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(FYI)IWPR: Georgia: Russian gas deal concerns

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  • mariuslab2002
    Georgia: Russian Gas Deal Concerns Government criticised for planning to allow a Russian energy giant to have a monopoly over the country s gas supply. By
    Message 1 of 1 , Oct 6, 2002
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      Georgia: Russian Gas Deal Concerns

      Government criticised for planning to allow a Russian energy giant to
      have a monopoly over the country's gas supply.

      By Giorgi Kalandadze in Tbilisi (CRS No.149, 04-Oct-02)

      The government's plan to join forces with the Moscow-based
      international energy concern Itera to set up a consolidated gas
      supply company in Tbilisi has provoked unease among parliamentary
      deputies and economic analysts.

      Should the joint venture materialise, the Russian energy giant would
      control Georgia's entire gas supply system, from source to
      distribution, at a time when relations between Moscow and Tbilisi
      have sunk to an all-time low.

      Russia has threatened military intervention in Georgia's Pankisi
      Gorge region where, it claims, large groups of Chechen guerrillas
      have found shelter. Georgia, in turn, is outraged by Russia's alleged
      support for the breakaway republic of Abkhazia, which Tbilisi
      considers its own.

      The country has been plagued by energy shortages for the last ten
      years, which have been most acute in the autumn and winter, when the
      provinces hardly get any electricity at all. At these times, power
      supply in the capital is rigidly rationed, with gas shortages
      sometimes lasting several months.

      "We always have a miserable time in winter, wearing warm shoes around
      the house instead of slippers," said Maya Gogoberidze, a
      schoolteacher from Tbilisi, resignedly. "Electricity is only turned
      on for so many hours a day, sometimes only four."

      The energy problem has come to a head this year as the condition of
      the gas pipes has rapidly deteriorated. Unable to raise enough cash
      to repair them, Tbilisi is facing the threat of a complete gas
      shutoff. As a result, many enterprises would come to a standstill and
      living standards would plummet.

      The Russian-Georgian venture will be formed with the assets of
      Sakgazi, Georgia's gas supply monopoly fully owned by Itera, along
      with those of some 40 of the country's local gas distribution
      companies, 12 of which are also owned by Itera. The Russian partner
      will hold 51 per cent of equity in the new company.

      "Georgia cannot take any more pressure from Moscow, such as this new
      joint venture," said Giorgi Baramidze, leader of the main opposition
      Democrats parliamentary faction. "It's a plain insult to be forming a
      partnership with Russia at this juncture."

      In his defence, the beleaguered minister of fuel and power David
      Mirtskhulava countered that Itera is the only buyer Georgia has been
      able to find for Tbilisi's derelict gas supply system which he
      said "is long due for retirement with leakages running at nearly 80
      per cent. A tragedy can happen any minute."

      He said Tbilisi's gas network would cost up to 100 million US dollars
      to rehabilitate, and another 7 million to winterise, "We do not have
      that sort of money, but if the joint venture is established, Itera
      will provide the funding."

      Itera moved into Georgia in 1996, and has since remained the only
      supplier of natural gas to the country, systemically buying up its
      local distribution facilities.

      The government, though, seems unconcerned about its growing monopoly,
      saying there's no other alternative. This would be understandable if
      Mirtskhulava were honest in saying no other buyer could be found for
      Tbilisi's gas system - the authorities have been negotiating the sale
      with the Tahal compnay, part of one of Israel's largest Holding
      groups, Kardan Ltd, since early 2002.

      Coincidentally, as soon as Tahal came on the scene in late 2001,
      Itera stepped up pressure on the gas distribution company Tbilgazi to
      pay off its debts arrears and introduced prepayment last spring. As a
      result, natural gas was cut off in most of Tbilisi and supply has not
      resumed to this day.

      In August, government minister Avtandil Jorbenadze unveiled a
      tentative plan to set up a joint venture with Itera.

      The problems awaiting the new owner of Tbilgazi go beyond the
      rehabilitation of decrepit piping. An estimated 50 to 60 per cent of
      the company's 160,000 subscribers either pay their bills infrequently
      or not at all.

      Tbilisi police have found out that the Chinese-made gas meters
      usually installed in Georgian houses are easily disconnected.
      Furthermore, according to police records, Tbilgazi inspectors are
      usually in cahoots with the tenants, who pay them to register low
      meter readings.

      The Georgian Audit Chamber agrees - its chief Sulkhan Molashvili
      telling IWPR that it had reported the scams to the prosecutor general
      a year ago. "This racket partly explains why gas losses in Georgia's
      other distribution networks never even come close to Tbilisi's," said
      Vladimir Ugulava, head of the government's anticorruption office.

      Itera is convinced it can handle all the challenges. "Let no one
      delude themselves they can continue not to pay for gas after we take
      over Tbilgazi. We will straighten everything out, and payments, too,"
      Leonid Deikalo, head of Itera-owned Sakgazi, told the press.

      But parliamentarians are unconvinced. "Georgia should have learned
      from its bitter experience of fostering a power monopoly. Having
      taken over the capital's electric network, the Americans jacked up
      the rate from 2 tetri (about 1 US cent) to 12.4 per kW, and are
      pushing for further price hikes in a country where the average
      monthly wage is 20 US dollars. What can we expect from the Russians?"
      said deputy Giorgi Baramidze.

      Other analysts say it's a mistake to allow the Russians to have a
      monopoly over gas supply, as Georgia could soon be able to choose
      from several other suppliers, such as Azerbaijan and
      Turkmenistan. "Our hands must be free so that we can take full
      advantage of that choice," said oil and gas expert Liana Jervalidze.
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