Georgian-Kazakh Relations to Deteriorate Further?

The Board of Directors of JSC KazTransOil has made the decision to sell the company Batumi Oil Terminal Limited - one of the most important Georgian enterprises, which, since 2008, has belonged to Kazakhstan. Batumi Oil Terminal is considered to be a backbone enterprise, alongside Tbilisi gas distribution network Tbilgas, also owned by the Kazakh ‘KazTransGas-Tbilisi’ - “daughter” of energy giant KazMunaiGas.

The fate of the company is being argued in Tbilisi and Astana at a fairly high level. The introduction of the direct rule in KazTransGas-Tbilisi has caused the apparent dissatisfaction of Astana, the more so because, in spite of intensive negotiations, the parties did not manage to achieve a lasting compromise. Not surprisingly, the Kazakh owners are thinking of selling KazTransGas-Tbilisi. According to unofficial data, they lead on this issue in talks with their Azerbaijani and Russian counterparts.

Kazakhstan expresses doubts about the prospects of the Georgian direction for transporting Kazakh energy resources, especially oil, through the Black Sea ports of Poti and Batumi. But Georgia, since independence, considered their “transit function” one of the most important preconditions for strengthening statehood and gaining “a geopolitical tool”. This line of Georgia’s foreign policy remains unchanged. Both Eduard Shevardnadze and Mikhail Saakashvili repeatedly declared Kazakhstan a “priority partner”, welcoming Kazakhstani investment and creating “special conditions” for Kazakh investors. Shevardnadze called Kazakhstan a “great power” and offered them the chance to enter the Black Sea with its merchant fleet and a base in Batumi and Poti, and Mikhail Saakashvili, after the first visit to Astana, spoke with admiration about the new capital of the Central Asian country: “I would like to wrap up these beautiful skyscrapers built by Nursultan and take them home with me.”

Controversy has surrounded KazTransGas-Tbilisi for several years, eroding the relationship and, in the end, leading to a decision in principle on the sale of Batumi Oil Terminal. This decision could mean that Kazakhstan refuses to transport oil from the corridor through the South Caucasus.

Independent Expert to the Government of Georgia, Giorgi Khukhashvili, confirmed this possibility.

Khukhashvili: Sadly, Kazakhstan has decided to sell the Batumi Oil Terminal. If Georgia wants to realize its potential “bridge between Europe and Asia”, this cannot be allowed. Kazakhstan plays an important role in building the “East-West” communication corridor. Port infrastructure is of strategic importance. It is not difficult to understand that in the event of a sale of this infrastructure, Kazakhstan will have less interest to transport oil through Batumi. Moreover, Kazakhstan is selling not only the terminal, but KazTransGas-Tbilisi. There is also the problem of the public debt of Georgia to Kazakhstan. So, the tendency, to put it mildly, is a concern.

Do you think that the Georgian authorities have made systemic errors in this regard?

The government should have been more attentive to the problems that have arisen with Kazakhstan investors. We’re talking about the “daughter” of the state company KazMunaiGaz.

Can these problems lead to the aggravation of inter-state relations?

I would not like to dramatize. But it is a fact that the investment activity of Kazakhstan in Georgia has sharply reduced. Nothing good can come of it.

Who can redeem this strategic site? Experts in this regard mentioned Azerbaijan and Russia

Buyers in any case will be found. The main thing is what the price will be. In terms of liquidity, Batumi Oil Terminal is an even more valuable asset than KazTransGas-Tbilisi. Kazakh investors still cannot sell the Tbilisi gas distribution network because they cannot return to management - the company appointed an external control. These two issues are closely linked, since KazTransGas-Tbilisi and the Batumi Oil Terminal have one owner - the government of Kazakhstan.

Dimitri Dolaberidze

21 December 2015 21:30