(FYI)IWPR: Georgia: Russian gas deal concerns
- 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
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.