[GGP] Gas Diversification Policy of Georgia: Role of External Actors - Azerbaijan, Russia and Iran
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The following is an introduction to a research paper originally published by SAM - Center for Strategic Studies under the President of the Republic of Azerbaijan in October 2017.
Georgia is geographically located in the South Caucasus region between, on the one hand, the Caspian basin and, on the other, the Black Sea shores. Such a position renders the country a significant transit spot for the transportation of energy resources from the Caspian Sea, specifically for the delivery of Azerbaijani gas and oil to Turkish and world markets. The realization of the Baku–Tbilisi– Ceyhan and Baku–Supsa oil pipelines provided the first visible representation of Georgia’s transit importance, and this pattern was later consolidated with the construction of the Baku–Tbilisi–Erzurum (South Caucasus) Gas Pipeline— the first segment of the Southern Gas Corridor, which will deliver Azerbaijan’s Shah–Deniz–II gas through Georgia and Turkey to Europe (Greece, Albania, Italy and the Balkans). If the Trans-Caspian Gas Pipeline is ever built, Georgia could become a transit country for the abundant natural gas resources of Turkmenistan and even Kazakhstan.
Albeit rich with the hydro and other mineral resources, Georgia lacks its own tapped oil and gas resources, thus making Georgia strongly dependent on imported oil and gas resources. In this regard, Azerbaijan is a main, and to certain extent Russia a supplementary, player in meeting Georgia’s gas needs. Although Russia was previously, until 2007, the main gas supplier for Georgia, Azerbaijan emerged as the key gas supplier after that date. Shifting gas supply from Russia to Azerbaijan enabled Georgia to reduce its dependence on Russian gas and the dominant share of Gazprom in the country’s gas imports, as well as providing sustainability of gas supply and consumption. The Georgian policy of import diversification and the Azerbaijani policy of export diversification helped both Azerbaijan and Georgia to strengthen their geopolitical independence as a supplier state and transit state, respectively. The regional energy projects also consolidated rational interdependence and strategic cooperation between Azerbaijan and Georgia.
However, seasonal consumption patterns and subsequent demand imbalance pushed Georgia to explore alternative gas sources, such as Iran or enhanced the gas purchases from Russia. After international sanctions on Iran were partially lifted, numerous news stories went viral on an alleged Georgia–Iran “gas purchase agreement,” which was denied by the Georgian side. On the other hand, lack of technical infrastructure and financial opportunities makes it arduous to bring a larger volume of gas through Armenia to meet Georgia’s seasonal gas demand. Talks between Georgia and Gazprom on additional gas supplies to Georgia, along with negotiations on the renewal of the gas transit service for gas flow from Russia to Armenia, caused a public outcry within the country on the political/economic compatibility of the new agreement with the country’s energy security. Unlike the previous contract, the new transit agreement ensures a step-by-step monetization of gas transportation service. Our analysis, however, proposes that the Georgian government had a certain rationale, vis-à-vis talks with Russia’s Gazprom that led the country to make such a decision, despite the new deal’s apparent unfavorable implications.
The ultimate purpose of this research paper is to examine Georgia’s gas diversification policy options from the standpoint of economic attractiveness, political likelihood, transportation (infrastructure) connectivity and energy security. The paper encompasses five chapters on Georgia’s energy sector including discussion of energy balance, energy demand, gas suppliers, sources, etc.; the role of Azerbaijan in Georgia’s energy market and existing pipelines and contracts; Russia’s interest in Georgia’s gas sector, including recent talks and renewal of the transit agreement, as well as public reactions thereto; and the possibility of Iranian gas exports to Georgia, including the role that Armenia is enthusiastic to play in this regard.
Gulmira Rzayeva and Ilgar Gurbanov
The statements, opinions and data contained in the content published in Global Gas Perspectives are solely those of the individual authors and contributors and not of the publisher and the editor(s) of Natural Gas World.