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  • Russia could use economic leverage against Georgia

    The Russian Oil and Gas Report (Russia)
    August 13, 2008 Wednesday



    RUSSIA COULD USE ECONOMIC LEVERAGE AGAINST GEORGIA


    There are four major pipeline systems in Georgia: the
    Baku-Tbilisi-Ceyhan oil pipeline, the Baku-Supsa oil pipeline, the
    Baku-Tbilisi-Erzurum gas pipeline, and the North-South gas
    pipeline. Russia controls only one of the four: the North-South
    pipeline, used to transport Russian gas to Armenia. As of this year,
    Georgia has minimized its consumption of Russian gas in favor of
    cheaper fuel from Azerbaijan. The other three pipelines transport fuel
    from Azerbaijan, Kazakhstan, and Turkmenistan. And it would be
    somewhat inaccurate to talk of Russia using energy as a weapon in this
    situation - but neither can we say for certain, at this stage, that
    Russia will not cut off supplies. Gazprom has not made any statements
    as yet about its plans for transporting fuel across Georgian
    territory. When we approached Gazprom Export yesterday, we were unable
    to obtain confirmation that the full volume of gas supplies is
    reaching Armenia.



    Experts disagree on the likely effectiveness of an embargo. Mikhail
    Aleksandrov, head of the Caucasus Department at the CIS Countries
    Institute, says that the sanctions Russia lifted in January 2007
    should be re-imposed immediately.

    This opinion is not shared by Leonid Grigoriev, president of the
    Energy and Finance Institute. The Regnum news agency quotes Grigoriev
    as saying: "given the current situation, I see no possibility of
    substantial economic sanctions. Georgia simply does not have the kind
    of economy that might be affected by sanctions."

    Analysts are also noting Russia's lack of success with imposing
    economic sanctions on Georgia in 2006. Statistics indicate that
    Russia's economic boycott was not as effective as expected. According
    to the IMF, the Russian embargo had no substantial impact on the
    Georgian economy: Georgia's GDP growth rate was 8% in 2006. Russian
    sanctions reduced that figure to 6-7% in 2007, also raising Georgia's
    balance of payments deficit by $250-300 million. But the negative
    consequences of these processes were more than made up for by foreign
    aid, according to analysts. A similar assessment of the
    Russian-Georgian conflict's results comes from Kakha Bendukidze,
    former Georgian state minister for economic reforms: "Everyone knows
    what Georgia lost from the Russian embargo: 1-1.5% of GDP growth, or
    $150 million. That is not much."

    This time, however, Georgia's financial losses look like being far
    more significant. There have already been reports from Tbilisi of
    Russian efforts to disable Georgia's energy arteries. Georgian Prime
    Minister Lado Gurgenidze stated that Russian aircraft had struck at
    the Baku-Tbilisi-Ceyhan (BTC) oil pipeline on August 9, and the
    parallel Baku-Tbilisi-Erzurum pipeline - Georgia's two energy
    backbones. The Georgian government's official statement says: "Out of
    30 bombs dropped, 28 exploded - several exploded in direct proximity
    to the oil pipeline, only five meters away." The statement goes on to
    say: "This attack goes beyond bombing one of Georgia's strategic
    facilities - since this pipeline delivers oil to Turkey, Europe, and
    the United States, these attacks pose a threat to the strategic
    interests of those countries." Note that no independent sources have
    confirmed this information as yet.

    As well as the pipelines, Georgia's oil ports - Poti, Batumi, Kulevi -
    are being targeted by air-strikes. Due to fighting in those districts,
    the State Oil Company of Azerbaijan (SOCAR) has suspended crude oil
    and petroleum products exports via these terminals and evacuated its
    personnel. SOCAR CEO Rovnag Abdullayev said that imports and exports
    of oil via Georgian ports were suspended as of August 7, since tankers
    could not enter the ports due to bombing. Tanker-loading resumed at
    Kulevi yesterday, but SOCAR spokespersons said that the final decision
    on continuing or suspending the company's operations in the region
    will be made today: "The tanker-unloading situation at the Georgian
    ports of Poti and Batumi remains unclear. This is a force majeure
    situation. We expect the situation to be more comprehensible by
    Monday, and we shall decide what measures to take for exports of Azeri
    petroleum products and crude oil."

    Source: Gazeta, August 11, 2008
    Translated by InterContact

    From: Emil Lazarian | Ararat NewsPress
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