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27.10.2006

Baku-Erzurum oil pipeline and the problems of Georgia’s energy policy

   

Sevak Sarukhanyan 

It is supposed that the construction of Baku-Erzurum oil pipeline will be over by the end of 2006, giving an opportunity to transfer Azerbaijani gas from Shah Deniz gas field to Turkey. The regional significance of the gas pipeline is mainly conditioned by its ability to satisfy Georgia’s energy needs.

The importance of the issue of providing Georgia with Azerbaijani gas is conditioned by the following circumstances.

  1. Acquisition of alternative gas will give Georgia an opportunity to reduce its energy dependence on Russia, which could principally influence on Georgia’s regional, as well as “Abkhazian” and “Ossian” policy.
  2. Acquisition of alternative gas from Georgia will strengthen Azerbaijan-Georgia-Turkey axis.
  3. And, at last, Georgia will spare less effort to get gas from Iran, if it gets enough amounts from Azerbaijan.

For considering the prospective of all these possible consequences, one should briefly touch upon the problems of technical and legal character Georgia may have in connection with Azerbaijan-Turkey gas pipeline.

  • Baku-Erzurum gas pipeline will have a capacity of exporting 20 billion cubic meters of gas from Azerbaijan to Turkey. According to already reached agreements, instead of transit fees, Georgia will get 5% of exported gas. This will approximately make up 500 million cubic meters per year, but only in case the gas pipeline works with all its might, which is quite doubtful to happen at least till 2008. In 2005 Georgia’s demand for gas was 1, 3 billion cubic meters. In 2008 this showing may reach up to 3 billion.
  • The announcements of Georgia’s energy ministers that Azerbaijan has expressed willingness to sell extra gas to Georgia by lower price for $56-64 thousand cubic meters. It is obvious that the US will show interest in reducing Georgia’s dependence on Russian gas. And from this standpoint one should expect Washington to “persuade” Baku to meet Georgia’s request to bye inexpensive gas. However, such an approach of Washington shatters the most important of the cornerstones of American energy policy in South Caucasus. Gas and oil carriers are called to play not only regional but also international significant role. “Settling” a great quantity of Azerbaijani perspective gas in Georgia doesn’t coincide with one of the energy elements of the US great regional tactics: reduce Turkey’s willingness to get gas from Russia and Iran. From this standpoint, insurance of Georgia’s energy security and reduction of Russia’s role in this country are supposed to encourage the construction of “the third blue stream” Russian-Turkish gas pipeline, also influencing on Iran-Turkey energy dialogue.

As for Georgia’s expectations, let’s point out that the latest developments, furthering Georgia-Iran relations, has come to prove that Georgian authorities began doubting in the possible role of Baku-Erzurum pipeline in ensuring Georgia’s energy security.

It is obvious that even if Georgia renounces Russian gas, it will never put an end to its energy dependence on Russia. It is explained by the fact that gas dependence is only one, though important part of energy dependence. Insufficient power of thermoelectric power stations in Georgia will not allow it to quit importing Russian electric power still for a long period of time, which provides for about 21% of Georgia’s need for electric power. Armenian-Georgian-Iranian declaration on mutual understanding in the energy field is probable to be one of the attempts to weaken Georgia’s energy dependence on Russia, the success of which is quite doubtful. The reasons of possible failure may be considered:

  1. Georgia is in the axis of Iran-Russia and Armenia-Russia transnational cooperation and the Iran-US conflict. Deployment of the US military units in Georgia may turn Georgia into an indirect participant of the US-Iran possible confrontation. From this standpoint Georgia, with its limited energy market and political instability, may become a victim of Russian-Iran possible energy agreements and Iran-US strained relations.
  2. Russia’s presence in Armenia’s energy field, which will increase after the construction of the fifth block of Hrazdan’s thermoelectric power station, will indirectly include Russian companies, which will perceive Russia’s influence in Georgia with comparative success by carrying out quite successful price policy both in Armenia and Georgia. The purchase of Iran-Armenian gas pipeline by Hayrusgasard will have great importance for perceiving this influence.
  3. As a result of Georgia’s rejection of Russia’s gas supply and further tension in Russian-Georgian relations, Georgia may stop supplying Russian gas to Armenia, which may be an outcome of the approaches of Azerbaijan, Turkey and the US. However, in this case Georgia will have a problem with both buying electric power and getting Iranian gas from Armenia. The Iranian gas and electric power produced from it may be used to satisfy only Armenian energy needs.
  4. Even if it is succeeded to get Iranian gas through the territory of Armenia, it is doubtful whether it may be directed to the territories of Georgia more dependent on Russian electric energy supply. The matter concerns Svanetia and Mengrelia with ethnic and cultural specify: economic and energy instability here may cause a great wave of dissatisfaction.

Thus, it is obvious that Baku-Erzurum pipeline and Armenian-Georgian-Iranian agreements can’t solve the problem of Georgia’s dependence on Russian energy carriers. However, it may have quite dangerous outcome for Georgia. At the same time in spite of the fact that Armenia may become a victim of Russian-Georgian political conflict, Yerevan faces a new perspective of successful outcome of negotiations on constructing the third gas pipeline with Iran. In the future the new gas pipeline is sure to be used in relations with Georgia, especially taking into account the fact that the problems in Russian-Georgia relations and Baku-Erzurum gas pipeline don’t solve Georgia’s energy security problems.


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