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Journal number 2 ∘ Solomon Pavliashvili Zurab Garakanidze Nata Garakanidze
The spatial harmonization of the global gas market


At present, the only place where Caspian and Russian gas transport network intersect is in Geor-gia. In that country, the North-South Trunk Pipeline, which runs from Russia to Armenia via Georgia,crosses the South Caucasus Pipeline (SCP), which is currently pumping gas from the first stage of Shah Deniz (SD1) and which will direct gas into Nabucco or the Trans-Anatolian Gas Pipeline. Thepoint of intersection is near the village of Jandara, near Gardabani. The North-South Trunk Pipelinebegins in the southern Russian city of Mozdok in Russia and terminates at the Armenian-Georgianborder. The 235-km conduit includes two pipes—one with a diameter of 1,200 mm and a second orspare tube with a diameter of 700 mm. Most of the gas transited through these pipes is now deliveredto Armenia, as Georgia has been receiving SD1 gas since 2007. Following the collapse of the SovietUnion, the pipeline operated far below capacity. While the design capacity of both pipes comes to18 bcm per year, the network pumped only 1.7-1.9 bcm per year in 2007-2010. (Even in Soviet times,the maximum annual transit volume was 9.5 bcm per year.) If it were connected to the SCP, this pipe-line could be used to channel some of the gas that Russia might have exported via South Stream intoNabucco or the Trans-Anatolian pipeline. Increasing gas transits would also be profitable for Geor-gia. The country already receives 10% of the gas pumped through the North-South Trunk Pipeline asa transit fee. In recent years, gas consumption in Georgia has averaged about 1.73 bcm per year, whileArmenia has used about 1.93 bcm per year. This implies that the state-owned Georgia Oil and GasCorporation (GOGC) receives approximately 190-193 million cubic meters per year of free gas,equivalent to about 11.0-11.2% of the country’s gas consumption, which it then monetizes throughsales to the local population.The volume of gas transited through Georgian territory is slated to rise in 2017, when SD2 be-gins production. At that time, the SCP link, which has only been pumping 4.7 bcm in 2011, will seeits capacity increase dramatically to 20 bcm per year. An agreement signed between Turkey and Azer baijan on the transit and volume of SD2 gas in June 2010 provides for the pipeline to operate at fullcapacity. Linking the SCP to the North-South Trunk Pipeline would improve the latter’s prospects,while also giving Russia access to a new high-capacity export route and improving access of theNabucco and Trans-Anatolian pipelines to gas supplies. Making the connection would be easy andwould not restrict supplies to Armenia, especially since that country is now able to receive gas fromanother supplier—namely Iran. If this can be done, the competition between Southern Gas Corridor’sprojects and South Stream would subside, and the two projects would instead complement each other.That is, rather than working against the Southern Gas Corridor, Gazprom would be able to use theEU’s pipelines to acquire a new export route to Europe. We fully agree with the idea, according towhich “...harmonizing gas pipelines is even more important given that it is far from clear whether theRussian gas transport system will be sufficient to transport expanded volumes of Central Asian gasduring the first part of the next decade.”

Moreover, connecting the SCP to the North-South Trunk Pipeline would allow the creation of a wider network in which Iran could serve as a supplier, as long as western anti-Iranian sanctionsare against the oil exports and do not extend to Iranian gas. Iranian gas pumped through the Tabriz-Meghri line to Armenia could then be pumped to the Georgian village of Jandara, near Gardabani, viathe Armenian network and redirected into the SCP for loading into the Trans-Anatolian or any of theSouthern Gas Corridor’s gas lines, just as gas from Russia could be pumped through the North-Southline for transfer to the SCP. This would be cost-effective, as it would make use of existing pipes ratherthan require the construction of new lines.

Thus, not only is energy a source of economic wealth, it also translates into political power. However,coercive energy diplomacy is not the only source of leverage that Russia has against Georgia. Havingassumed responsibility for mediating Georgia’s separatist conflicts with Abkhazia and South Ossetia,Moscow has the ability to manipulate these internal disputes for political gain.

Now Georgia has a chance to use its geographical location to promote the country’s reunifica-tion. Development of the Central Asian energy projects and growing shipments of Kazakh oil via theTurkish Straits give Tbilisi the chance to start a dialog with Russia on the topic of using Georgianterritory, including the occupied regions, in which the West could be involved. For that purpose, theNovorossiysk-Supsa-Ceyhan oil pipeline project must be revived. Also, according to the Georgiangovernment’s strategic plan, in the coming years the country should become a regional energy andtransportation hub. To that end, the EU Southern Gas Corridor’s projects, via the SCP as an intercon-nector, must be linked up with the Russian-Armenian North-South Gas Pipeline, which can also beused as leverage for using Iranian and Armenian economic interests in future Georgian-Russian energy Cooperation.