Georgia: Gas issues with Russia heat up the political landscape

Lasha Tughushi, Fund “Liberal Academy Tbilisi” (Tbilisi, Georgia)

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The split in the Georgian opposition ultimately set in after the establishment of a new party and parliamentary fractions. All focus in terms of international developments has been on gas talks with Russia and the controversial contract with Gazprom.

Domestic policy: A Christmas «gift» for Misha

The day before the Orthodox Christmas, Giga Ugulava, one of the United National Movement (UNM) leaders and the former mayor of Tbilisi, was released from arrest. A favorite of President Saakashvili in the past, he later joined the ranks of many those party fellows who split with the UNM. The dissenters set up a new party, European Georgia. The court’s verdict on the release of Ugulava came in time for the new party convention, an issue that sparked the most tensions yet within the UNM. The split affected the Parliament, too. Only 6 out of 27 MPs that got into the legislature with Saakashvili’s party remain in it. Another influential leader of the UNM, ex-Interior Minister Vano Merabishvili (he is still in jail, unlike Ugulava) remains silent and neutral. 

Shortly before, two other strong pro-Western parties also experienced the split, namely the Republican Party (led by Parliament Speaker David Usupashvili) and Free Democrats (a so-called party of former diplomats led by ex-Defense Minister Irakli Alasania). Surprisingly, some leaders of Free Democrats have switched to the ruling party and ended up in top offices. This ultimate demonstration of the split in the UNM, the strongest opposition party, deals another blow to the already weakened pro-Western political wing.

Economy: New gas contract proves costly

The cold political landscape in January was «heated» by the gas issue. Heavily depending on Russian gas, Georgia’s government dropped a convenient transit-based contract with Gazprom. Previously the country got 10% of the total amount of transit gas going from Russia to Armenia. The new contract remains a commercial secret, but the form of payment for transit was changed for exclusively monetary. Based on the available information, Georgia’s financial loss from the deal is nearly fourfold. This decision was followed by the sharp reaction of society as the Georgian side also faced increased political risks.

Georgia thus entered into a two-year contract with Gazprom. In two years from now Georgia will enter a new era: facilities built for the second phase of the Baku – Tbilisi – Erzurum pipeline will be launched. A cautiously optimistic forecast suggests that this will allow for nearly 20 billion cubic meters of gas to be transited through the territory of Georgia. This is important in terms of Georgia’s energy security since the project will meet much of the country’s demand for gas. The rest will be purchased directly from SOCAR, Azerbaijani state-owned company.

Foreign policy: Gas games

In this situation, Georgian experts are alarmed (1) by Russia’s great interest in acquiring the main gas pipeline which, once reconstructed, will allow the reverse transportation of Iranian gas to Europe. The problem is that such a pipeline would compete with the current Baku – Erzurum project.

In 2005 and 2006, the government of Georgia was close to a similar deal. Then, the US Administration interfered and blocked the contract. The Trump Administration does not view the strengthening of Iran’s position favorably as well. This might be the reason why the Russian government is rushing to acquire the Georgian segment of the pipeline before the situation in Washington stabilizes. The thing is that Gazprom has owned the Armenian section for a long time now. Once the deal is done with Georgia, the circle will close.

Other issues on the international agenda included the two-day visit of Israeli President Reuven Rivlin to Georgia. The visit took place despite of the terrorist attack in Israel shortly before it. This was the third official visit of the Israeli President to Georgia. The parties focused on economic cooperation, trade dynamics and direct investments.

By the end of January all eyes were on the European Parliament that prepares to grant visa-free regime to Georgia. Expectations were optimistic, even though debates focused on one question: what would happen after the EU takes the positive decision? What would Georgia’s and Europe’s position about the European prospect for the country be?