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Draft Law Lifts Restriction on Sale of North-South Gas Pipe
Civil Georgia, Tbilisi / 30 Jun.'10 / 19:21

A new draft law tabled by lawmakers from the ruling party, which, if approved, will allow the government to sell Georgia’s north-south gas pipeline system, is likely to revitalize debates on the country’s “strategic assets” already seen for number of times in the past.

MP Pavle Kublashvili, chairman of parliamentary committee for legal affairs and his deputy MP Lasha Tordia have sponsored a proposal, which envisages unification of four separate laws related to privatization of state assets into one legislature.

The draft law also envisages removing north-south gas pipeline from the list of those state assets, which are currently banned from being privatized.

Georgia’s main trunkline is used for the transmission of natural gas from Russia into Armenia and also to Georgia and the Georgian authorities have undertaken commitment before the United States in frames of large-scale infrastructure rehabilitation aid program not to sell the pipeline at least before April, 2011.

“In general, the principle is very simple – any enterprise is managed much better by a private sector then by the government. That’s the fact; that’s an axiom for those who are proponents of free economy. So there should be not a single enterprise excluded from privatization list,” MP Kublashvili told Civil.Ge on June 30.

Asked if his legislative initiative meant that the authorities plan to sell the north-south gas pipeline, MP Kublashvili responded: “That’s not an issue that requires to be decided today. I think that the law should not impose restrictions [on privatization]. When it may happen and how and when the government may decide to sell [the pipeline] that’s an issue for future [discussions]”.

He said that the Parliament would discuss his initiative in July and if approved it would go into force this September.

The issue of privatization of the pipeline was raised by the authorities for number of times in the past. Debates were triggered on the matter in February, 2005 when President Saakashvili told the Italian La Stampa that Tbilisi was discussing with Russia’s gas monopoly, Gazprom, possible sale of the pipeline.

At the time the U.S. officials have warned Tbilisi to show cautious before taking such a decision.

In September, 2005 Georgia and the United States, through its Millennium Challenge Corporation (MCC), signed an agreement on USD 295.3 million five-year aid program (further USD 100 million was added to this program in 2008). The program, among other infrastructure development projects, also envisaged rehabilitation of the north-south gas pipeline system.

Under that five-year agreement, which went into force in April, 2006, the Georgian government has undertaken commitment not to “sell or transfer, or permit to be sold or transferred” the pipeline or a controlling interest in the a state-run company which operates the gas pipeline system, until the expiration of this agreement term, hence until April, 2011.

Since then the U.S. has invested USD 35 million in rehabilitation at 22 sites of the pipeline.

In case the Georgian government does not comply with the non-transfer condition of the agreement with MCC, it will have "to reimburse promptly" to MCC funding allocated for the pipeline rehabilitation. In that case MCC will also have the right to suspend all or a portion of further disbursements in connection with the pipeline rehabilitation or other project activities under the Millennium Challenge Account aid program.

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