09TBILISI122, GEORGIA OKAYS GAS TO SOUTH OSSETIA, ITERA ONLY

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Reference ID Created Released Classification Origin
09TBILISI122 2009-01-23 14:34 2011-08-30 01:44 CONFIDENTIAL Embassy Tbilisi

VZCZCXRO3691
OO RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSR
DE RUEHSI #0122/01 0231434
ZNY CCCCC ZZH
O 231434Z JAN 09
FM AMEMBASSY TBILISI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0822
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHAH/AMEMBASSY ASHGABAT PRIORITY 0855
RUEHTA/AMEMBASSY ASTANA PRIORITY 0026

C O N F I D E N T I A L SECTION 01 OF 02 TBILISI 000122 
 
SIPDIS 
 
E.O. 12958: DECL: 01/22/2019 
TAGS: PREL ENRG PGOV RU GG
SUBJECT: GEORGIA OKAYS GAS TO SOUTH OSSETIA, ITERA ONLY 
AWAITS RUSSIAN APPROVAL 
 
Classified By: Ambassador John F. Tefft for reasons 1.4 (b) and (d). 
 
1.  (C) Summary:  On January 20, the Georgian Government 
issued an exception to the Law on Occupied Territories to 
Itera-Georgia in order to provide gas to South Ossetia. 
Itera-Georgia General Director David Beradze confirmed that 
Itera concluded a commercial contract with South Ossetia on 
January 22 and are now only waiting on the Russian 
bureaucracy to allow gas to flow to Tskhinvali.  The gas 
supplied to South Ossetia will come from GazProm and be sold 
on a commercial basis to South Ossetia at 645 GEL per 
thousand cubic meters (tcm).  South Ossetia has prepaid a 
portion of the contract already.  Beradze said that once he 
receives confirmation that the Russian Customs Service has 
provided the necessary documents to allow for the gas 
transfer, Itera will immediately begin to pump gas to 
Tskhinvali.  He hoped gas could be flowing as soon as January 
24, but thought perhaps January 26 might be more likely.  End 
Summary. 
 
2.  (C) Comment:  Despite claims by some to the contrary, it 
was the South Ossetian and Russian refusal to allow OSCE 
technical experts and Georgian Oil and Gas Company engineers 
to manually examine and repair the line following the August 
conflict that slowed the return of gas to Tskhinvali.  During 
the last Geneva discussion in mid-December, the Georgians 
pledged to move quickly to resolve the problem, noting that 
only South Ossetian cooperation was required.  After a 
continued lack of access to the pipeline in disputed 
territory, the Georgians, with OSCE assistance, conducted two 
pressure tests to locate additional leaks.  Once a second 
leak was discovered on undisputed Georgian territory and 
repaired, gas was again able to flow and the Georgian 
Government quickly approved an exception to legislation to 
allow gas to be commercially sold to Tskhinvali.  While 
Itera-Georgia has received pre-payment from the South 
Ossetians, Beradze clearly gave the impression that Itera 
might not be paid for all of the gas.  While he didn't say 
that Itera was receiving gas at lower cost from GazProm in 
order to sell it to South Ossetia, it was clear that deals 
had been made in Moscow with Itera-Russia.  End Comment. 
 
GEORGIANS QUICKLY PERMIT GAS FLOW TO TSKHINVALI 
 
3.  (C) Beradze stressed that the Georgian Government has 
been very cooperative in returning gas to South Ossetia, 
noting that it was the South Ossetian refusal to allow the 
line to be repaired following the conflict that caused 
delays.  He stressed that his company lost considerable money 
in both Gori and South Ossetia during and directly following 
the conflict, as significant amounts of gas were lost due to 
war damage to the pipeline.  Beradze said that Itera only 
requested an exemption from the Law on Occupied Territories 
on Thursday, January 15.  He pointed out that given the 
weekend and local religious holiday on January 19, Itera 
received an answer from the Georgian Government in only two 
working days. 
 
ITERA AND OSSETIANS REACH A COMMERCIAL AGREEMENT 
 
4.  (C) Itera and the South Ossetians reached a commercial 
agreement on January 22.  Beradze said that Itera will sell 
Russian gas, purchased from GazProm, to South Ossetia at the 
commercial rate.  This will be the only commercial gas Itera, 
or for that matter any other gas distribution company in 
Georgia, will be purchasing from Russia.  Beradze said that 
currently Azeri gas from SOCAR is selling anywhere from 10 to 
Qcurrently Azeri gas from SOCAR is selling anywhere from 10 to 
20 USD cheaper per tcm, making it much more commercially 
attractive. 
 
5.  (C) Beradze confirmed that GazProm helped rehabilitate 
part of the gas pipeline within South Ossetia and installed a 
new regulator valve in Tskhinvali that reportedly can 
withstand 10 bar pressure.  He said the South Ossetians are 
asking for Itera to provide gas at 10 bar.  Even with 
renovations, Beradze said he believes this amount of pressure 
will eventually blow the line.  Due to this concern, and in 
part because his company has been unable to inspect the line 
itself, he said Itera has informed the South Ossetians that 
they only intend to provide gas at five bar until they can be 
assured the line can handle the pressure. 
 
WAITING FOR THE RUSSIANS 
 
6.  (C) Beradze said that the only barrier that is now 
keeping the gas from flowing is the Russian bureaucracy.  He 
said that the agreement is currently with Russian Customs 
which must issue an order allowing the gas to be sold and 
transited through Georgia.  Beradze said that only when 
Itera-Moscow receives these documents will the company 
 
TBILISI 00000122  002 OF 002 
 
 
repressurize the line and send gas into South Ossetia.  When 
Itera-Georgia receives the necessary assurances, it will 
immediately begin to pump existing commercial gas from 
non-Russian sources into
the pipeline to speed delivery in 
South Ossetia.  Beradze said this process will take no more 
than two hours in order to build the necessary pressure and 
start delivery to end users. 
TEFFT

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