Wednesday, September 1, 2010

Will Gas End a War?

The Georgian main North-South gas pipeline--which is Armenia's primary source for natural gas--is on the bidding block. In 2006 Gazprom offered $250 million for the system. According to Vugar Bayramov, President of the Azerbaijani Center for Economic and Social Development, Georgia wanted a billion dollars and rejected the bid (, August 23, 2010.)

Now a new bidder has surfaced. Bayramov said that the State Oil Company of the Azerbaijan Republic (SOCAR) is preparing to offer $500 million for the pipeline. Such a move would give the Azerbaijani government control over the Armenian economy, and enable it to pressure Armenia to surrender its hold over Nagorno-Karabakh.

According to Armenian Energy and Natural Resource Minister Armen Movsisian, however, Georgia won't sell the pipeline at any price; and, even if it does, it would not threaten Armenia's energy security (Oil and Gas Eurasia, July-August 2010).

Movsisian may have a point. As reported by this blog on July 8, 2010, Georgian Prime Minister Nika Gilauri promised that if Georgia sold shares of the pipeline, that the government would keep controlling interest. Since the Azerbaijani $500 million is approximately half of Georgia's asking price, Georgia might only be willing to sell 50% minus one share to Azerbaijan.

On the other hand, Georgia might have reason to surrender control of the pipeline to Azerbaijan. It might reason that giving Azerbaijan the means to force a Russian ally to surrounder territory it is occupying as revenge for Russian occupation of the Georgian territories of Abkhazia and Ossetia, could be a strategic stroke to weaken the Kremlin's position in the Caucasus.

Dr. James J. Coyle is available to speak to your organization or at your event. Please contact him at