Outcomes of Gazprom-Georgia talks: monetization and reduction of gas price

The Government of Georgia has accepted Gazprom’s offer to make a new deal to transit Russian natural gas to Armenia and agreed on monetization. Besides, Georgia will be receiving gas from Russia for $185 per 1,000 cubic meters instead of $215, should the need arise, Energy Minister of Georgia Kakha Kaladze said at a press briefing in Tbilisi.

“The government discussed the offer and decided to make the contract. I would like to emphasize that with the contract Georgia’s dependence on Russian energy resources will not increase. What has changed is the payment method i.e. monetary payment instead of previous payments with raw materials in line with the international practice,” Kaladze said after the Georgian government’s meeting.

According to the deputy prime minister, the monetary payment for transit Georgia will receive will be one of the highest in Europe.

“It is a short-term deal – a two-year long, but in the first year the payment with raw materials will be maintained partially. Then the sides will shift to monetary payment in line with international practice. Should the need arise, if we need additional volumes of gas – as you know consumption is growing – the price will be $185 instead of $215,” Kaladze said.

As EADaily reported earlier, Minsk hosted another round of talks between Energy Minister – Deputy Prime Minister of Georgia Kakha Kaladze and the management of the Russian Gazprom Export LLC on January 10. The sides met to discuss and sign a new year-long deal on transit of the Russian gas to Armenia. It was already third meeting since December 2016.

At previous meetings, the sides failed to agree on a new transit deal, as Georgia called “unacceptable” Gazprom’s offer to shift to monetary payment for transit of gas to Armenia. However, prior to his recent visit to Minsk, the Georgian deputy prime minister softened his rhetoric certainly saying Georgia insists on a “very simple” option i.e. “even in case of shifting to financial compensation for transit, the country must receive as much benefit as it received in terms of natural gas.” After January 10 meeting, Kakha Kaladze said Gazprom’s negotiators suggested Georgia new “interesting” terms of Russian transit to Armenia to be discussed by the Georgian government.

Georgia stopped importing gas from Russia in 2007. Since then, the key supplier of gas to Georgia is Azerbaijan. At present, Georgia receives 10% of the gas transited to Armenia as payment for transiting via its territory. In 2016, the extension of the contract was delayed until April, since Gazprom insisted on monetary payment for transit. Eventually, in early March 2016, Azerbaijan agreed to increase supplies and Russia’s offer was declined. The previous contract of Georgia and Gazprom Export was valid by the end of 2016.