Fears over Plan to Sell Strategic Georgian Pipeline


By Michael Mainville

TBILISI (AFP) — Plans by Georgia to sell off at least part of a major gas pipeline from Russia are raising fears among both Georgians and Armenians that the strategically vital asset will fall into the hands of political foes.

Georgia’s parliament last month approved the lifting of a legal ban on the privatization of the North-South pipeline which runs from Russia to Armenia and was previously listed as a “strategic asset” that could not be sold.

Georgian officials insist that only a minority stake could be sold.

But the potential sale has nonetheless sparked concern among some in Georgia, who fear Russia could be a likely buyer, and in Armenia, who worry that archrival Azerbaijan could purchase a stake in the key supply route.

Its sale could exacerbate tensions in the volatile South Caucasus region, a crucial link in Western-backed efforts to ship oil and gas from the Caspian Sea to Europe, bypassing Russia.

Previous talk of privatizing the pipeline raised deep concerns in the West, where some fear a Russian purchase would extend Moscow’s grip on gas supplies in the region.

Prime Minister Nika Gilauri said the Georgian government is looking at only a partial privatization of the pipeline and downplayed political concerns.

“We might consider in the future an IPO (initial public offering) or something like that on the London Stock Exchange, of approximately 10-20 percent. But we will never, ever sell a majority stake in the pipeline,” he said.

“It will be fully controlled and managed by the Georgian government,” Gilauri said.

But Georgia’s opposition worries that even if the current government insists it will retain a majority stake, removing the legal ban on selling the pipeline opens the door to a possible full privatization in the future, with Russian state gas giant Gazprom seen as the main potential buyer.

Russia and Georgia fought a brief war in August 2008 and many here fear the country’s giant northern neighbor is determined to eventually retake control of Georgia.

“There is a fear that if it is sold it will be bought either directly by Gazprom or by a subsidiary,” said Levan Vepkhvadze, a member of parliament with the opposition Christian Democratic Party, which opposed the lifting of the ban.

“The problem is that — and actually this is what we are demanding — such decisions must not depend on the government’s will but be regulated by law,” he said.

Critics have also warned that selling the pipeline to Gazprom, which earlier expressed interest, could even give Russia a legal justification for military intervention in Georgia.

“Russia has recently passed legislation allowing it to use military force abroad to defend its foreign assets,” said Lado Papava, an analyst with the Georgian Foundation for Strategic and International Studies. “Gazprom is a state company. If it buys the pipeline that is not a privatization but a nationalization by a foreign country,” he said.

In Armenia, the potential sale has sparked fears that oil-rich Azerbaijan, which is already Georgia’s major energy partner, could purchase the pipeline as a means to put pressure on Yerevan.

“There is a real possibility that Azerbaijan could acquire shares in the Georgian pipeline and this is very dangerous for Armenia as long as the Karabagh conflict is not resolved,” Armenian political scientist Stepan Grigorian said.

“Azerbaijan would use this gas pipeline as a tool to put pressure on our country,” he said.

Analysts said that if Georgia does go ahead with a sale, Western governments may try to influence Tbilisi to ensure the pipeline ends up in friendly hands.

When Georgia first floated the idea of privatizing the pipeline in 2005, the United States provided $50 million in funds for urgent repairs instead, in a move analysts said was aimed at keeping it out of Russian hands. Georgia agreed under the deal to a five-year ban on selling the pipeline, which expires in April 2011.