The Kazakh company KazTransGas, which owns the gas distribution network of the capital of Georgia, has officially warned the Georgian government that if the differences between the sides are not resolved soon through negotiations, KazTransGas reserves the right to appeal to the International Arbitration Court. In principle, the Kazakh side has always had such a right, as an opportunity to appeal to the International Arbitration Court is provided by the investment agreement. But until recently, Astana and Tbilisi attempted to peacefully resolve all the disagreements that have arisen since 2013. [See VK - 'Gas cloud' and 'Kazakhstan sells KazTransGas-Tbilisi company'].
After the Georgian Dream coalition came to power, the Tbilisi court entered a public administration into the Kazakh company to collect debts to the Georgian Oil & Gas Corporation (GOGC), which imports natural gas from Azerbaijan. KazTransGas-Tbilisi, which invested 108 million dollars (a very large amount by Georgian standards) in the reconstruction of the gas distribution network, considered the government's decision to be unfair. Without denying the existence of a specific debt, Kazakh investors insisted on the restoration of their rights, that is, return to the management of the company, promising to pay the debt. At the same time, the investors insisted on raising tariffs for the population. It would be suicide for Georgian Dream, which came to power with a promise to reduce the utility costs of citizens, to agree to this.
The situation has been further complicated in the last six months, when the Georgian national currency depreciated against the dollar by almost 50%. The Kazakh tenge has also experienced difficulties. Astana has decided that it's time for radical steps, because the conflicts and mismatch of interests have reached a level when it is almost impossible to resolve it through mutual compromise. As a consequence, KazTransGas warned about its readiness to file a claim to the International Arbitration Court, to withdraw their investments from Georgia.
Tbilisi's reaction to the demarche of their colleagues was outwardly calm. The Minister of Energy, former defender for Milan FC Kakhi Kaladze, told reporters that the decision of the Kazakh side to file a claim was a big surprise to him. According to him, the Georgian side is "not against the return of KazTransGas to the management, but it is necessary to hold further talks." And the Minister of Economy and Sustainable Development, Dmitry Kumsishvili, is confident that it won't come to the withdrawal of investment and the arbitration court: "At this stage, negotiations on KazTransGas-Tbilisi are actively under way." Of course, all the parties have a right to different opinions. But I still think all this will be resolved by means of negotiations. The issue of the withdrawal of investments wasn't discussed at any official talks," the Minister noted.
However, his position is overly optimistic. In fact, whatever diplomatic statements were made by the ministers, the Tbilisi government does not rule out the development of events in the worst-case scenario. The problem is not that KazTransGas will win the case. It may lose. In any case, Georgia will have its own arguments (after all, it is difficult to deny the existence of the debt) and the trial may be delayed. But Tbilgaz is not the only Georgian company in which Kazakhstan has invested – in fact, public investment, and the Georgian authorities really do not want to lose such an investor and partner. Among other things, it could have a negative impact on the investment attractiveness of the country.
Therefore, the government of Garibashvili is looking for other painless ways out of the situation. One of the options is the replacement of KazTransGas with another investor, so Georgia has not lost anything and the Kazakh side could return its money.
In this regard, Kakha Kaladze's recent meeting with the head of Gazprom Alexei Miller attracts attention once again. [See VK - Is Georgia changing its energy orientation?]
It was confirmed that the sides actually negotiated on increasing the supply of Russian gas to Georgia. Kaladze officially announced it as soon as there were reports of a possible lawsuit brought by KazTransGas to the International Arbitration Court. "We want to buy more gas from Russia, because soon there will not be enough volume for the energy needs of the country," the minister said, stressing that Azerbaijan is still the main supplier of natural gas to Georgia, but "these volumes will not be enough soon."
According to Vestnik Kavkaza, not only the option of the transfer of the strategic Vladikavkaz-Tbilisi-Yerevan pipeline to Gazprom will be discussed during future negotiations with the Russian energy giant, but also the purchase of the Tbilisi gas distribution network from KazTransGas by Gazprom. In this case, it's possible to run with the hare and hunt with the hounds, i.e. the conflict will be resolved to everyone's satisfaction.
But the problem is that Gazprom is not interested in buying the Tbilisi network, and Kakha Kaladze apparently failed to convince Alexei Miller of the benefit of such a transaction. In addition, the Georgian opposition, which fiercely opposed any agreements with Gazprom, cheered right away.
According to the former president of the National Bank, Roman Gotsiridze, the country must be patient for just a few years, in order not to become Gazprom's slave: "The Azeri project Shah Deniz-2 will start to operate soon, the volume of Caspian gas will triple and Georgia will get sufficient energy at a reduced price, as well as a payment for transit," Gotsiridze considered the bright prospect.
