The government of Georgia has criticized Russia’s OAO Rosneft for signing an exploration and development agreement with the breakaway Republic of Abkhazia, calling the document a violation of Georgia’s laws and territorial integrity.
“This step of the Russian national company Rosneft is yet another proof evidencing Russia’s aggressive policy against Georgia,” the Georgian foreign ministry said in a statement.
The Georgian statement was referring to the 5-year agreement signed by Rosneft and Abkhazia on May 26 under which two companies will be established: one to manage upstream operations and the other to focus on downstream operations.
“The Russian authorities, as well as representatives of both public and private structures, need to be reminded that any deal or agreement...is a violation of Georgian law...and will be declared null and void,” the Georgian foreign ministry said.
“When the territorial integrity of Georgia is restored, operations of such companies as Rosneft as well as of other Russian companies in Abkhazia and South Ossetia will be annulled,” said Georgia’s Minister of Economic Development Lasha Zhvania.
“They will suffer significant financial losses,” said Zhvania, referring to Rosneft’s agreement with Abkhazia as well as an earlier one under which Russia’s OAO Gazprom is building a natural gas pipeline directly connecting Russia with South Ossetia.
Georgia considers both Abkhazia and South Ossetia as parts of its territory, while Russia stands accused of helping both regions rebel from central government control—a point underscored by Rosneft.
Rosneft responds
In response to the Georgian criticism, Rosneft openly acknowledged that it is an arm of Russian state policy and said it intends to work in Abkhazia as in a sovereign state.
“As a state company, Rosneft is a ‘carrier’ of the Russian Federation’s official policy in the fuel and energy sector,” a company source told Russian state media. “We have been selected as a state company to work in Abkhazia which Russia has recognized as a sovereign state.”
Rosneft Pres. Sergey Bogdanchikov played down the political aspect of the agreement, however, saying it represented a sound business decision.
“We don’t want to expand to Abkhazia to take over someone else’s businesses, but to promote their development,” Bogdanchikov said. “We see booming development in the republic and its exceptionally mild tax climate, which determines an investor-friendly environment.”
“Rosneft will start oil prospecting and drilling on Abkhazia’s shelf to appraise its oil reserves,” said Abkhazia President Sergei Bagapsh. “If the reserve of oil is sufficient for commercial extraction, a separate agreement will be signed to define the principles of oil extraction.”
Abkhazia’s view
Even before any formal exploration, Abkhaz officials were speculating on the amount of oil in the region. “Oil reserves on the Abkhaz shelf total 350-500 million tonnes according to preliminary estimates,” a source in the Abkhaz government told Russia’s Interfax news agency.
At the same time, concerns have already been voiced over the potential impact of exploration and development on Abkhazia’s environment—an issue addressed by the country’s Minister of Economy Kristina Ozgan.
“Rosneft promises to employ advanced methods and technologies in developing offshore deposits,” said Ozgan. “When the implementation of specific projects begins, the parties concerned will determine the rules, the legal form and the payment terms—everything that concerns ecological security.”
“All project documents are to undergo examination by experts and Abkhazia’s state ecological service will have a say in this,” Ozgan said.
Earlier this year, Georgia and the US, concerned over Russian aggression, agreed to step up physical security of energy transit across the trans-Caucasus to European markets as part of the US-Georgia Charter on Strategic Partnership signed on Jan. 9 (OGJ, Jan. 19, 2009, Newsletter).
Russia invaded Georgia in August 2008 after the Tbilisi government tried to retake the breakaway region of South Ossetia by force. The conflict saw considerable disruption in the transit of oil and gas across the region, with Russian warplanes said to have targeted pipelines and railways.
