Gazprom hikes Gas price, Georgia negotiates

Georgian Prime Minister Zurab Nogaideli said on Friday that they will not only negotiate gas prices with Russian supplier Gazprom, who have nearly doubled the prices, but will also seek to branch out its energy imports.

Gazprom’s company official informed on Thursday that according to a new unsigned deal with Georgia, Gazprom will charge $230 for every 1,000 cubic meters of natural gas supplied to Georgia next year, more than doubling the current price of $110.

In a cabinet meeting, Nogaideli said that the hike in the prices is political because other former Soviet Union nations are paying far less.

"If Georgia is going to buy gas in Russia, the price should be appropriate for the region," but the proposed price is significantly different than the price for other countries in the region”, Nogaideli said.

He pointed out in the meeting that Ukraine and Armenia had got a price of $130 and $110 respectively for next year. Even the European Union Nations paid less than $230 and Nogaideli hopes that Gazprom will reduce the price if requested.

"This is another confirmation that the price of gas proposed to Georgia is blatantly political," he said.

Georgian President Mikhail Saakashvili criticized the intended swelling of prices. "I don't expect any catastrophe, but certainly it's a bad precedent for everybody. Energy cannot and should not become a political tool," he said during a terrorism conference in Monaco.

Nogaideli said that talks are going on with Gazprom to fix an acceptable price, and at the same time, authorities are working to find alternative sources of supplies. Energy Minister Nika Gilauri informed that they are verbalizing with Azerbaijan, Iran and Turkey to secure alternative supplies of gas.

Analysts in Georgia have given a warning signal and are hoping that all this doesn’t lead to a repeat of the gas war between Russia and Ukraine at the start of this year when Gazprom cut off supplies.

Due to the supply cut off amid negotiations, Ukraine’s pro-Western policies suffered. Deliveries to Europe was also interrupted, who were over dependent on Russian energy supplies.

After the Russian Prime Minister Viktor Yanukovych took over as head of government, Ukraine has managed to limit the price for 2007 to $130.

Gas supply to Belarus has increased four folds. However, Gazprom has agreed to cut down the price if the state agrees to hand over 50% of the pipeline through which Russian gas transits to Western Europe.

"Russia is increasingly using the energy weapon for political reasons," said Georgian political analyst Ramaz Sakvarelidze. "There is only one aim, to punish Georgia for its policy of integration with NATO and European structures."

Gazprom is Russia’s largest company and World’s biggest natural gas extractor, furnishing gas needs of Central Europe, Eastern Europe and former Soviet Union.

As of 2004, Gazprom accounts for about 93% of Russian natural gas production and controls 16% of the world's gas reserves. It has 119 billion barrels of reserves, and ranks behind Saudi Arabia and Iran, who have 293 and 133 billion barrel reserves respectively.

It has the world’s longest pipeline network with 150,000 km and also controls assets in banking, insurance, media, construction and agriculture.

As of May 2006, Gazprom has market capitalization of $269 billion, becoming the world's 3rd largest corporation.