BAKU (Combined Sources)–Georgia has transferred ownership of its natural gas distribution network to Azeri state oil firm Socar, effectively signing over control of a vital transit pipeline from Russia to Armenia, news agencies reported.
The deal, signed on November 14 during a Caspian energy summit of central and eastern European officials in Baku, was revealed the next day by Georgian President Mikheil Saakashvili.
Under the agreement, Socar will sell gas to Georgia over the next five years at a subsidized cost significantly below regional market prices.
Leaders from the Baltic, Black Sea and Caspian Sea states and senior energy officials from more than twenty countries had gathered together for the Summit to discuss energy security and the diversification of energy supply routes to Europe. The summit’s main focus, however, was to reaffirm support for the Nabucco pipeline, which will transport oil and gas resources to Europe by bypassing Russia through Azerbaijan
The move comes as a blow to Russian gas export monopoly Gazprom, which already sells gas to large consumers in the ex-Soviet state and is trying to create a bigger presence in the Caucasus region. Georgia had until now bought most of its natural Gas from Russian gas giant Gazprom.
Moscow, not represented at the weekend summit, was reportedly close to buying the Georgian gas network, but the offer was rejected by Tbilisi. The European Union is hoping to connect the network to its flagship Nabucco gas pipeline and both the EU and U.S. are backing efforts to link Central Asian countries to the network through a trans-Caspian pipeline.
Saakashvili said the contract would provide 80 percent of his country’s gas needs, estimated at 1.8 billion cubic meters of gas annually.