Are Tbilisi and Baku good friends?

Relations between republics of South Caucasus play an important geopolitical role for Russia given that this near-border region is ethnically close to citizens of Russia's south and is highly integrated into Russia's economy. On one hand, establishment of new states in the territory of Soviet republics drastically changed relations between them making it possible for the West to set up a base to put pressure on Russia's south. We considered Georgian-Turkish relations and it is much more important how Georgia and Azerbaijan, two close neighbors, communicate.

Traditionally, Georgia and Azerbaijan have been considered allies and partners. These are important links for oil extraction and transportation as well as military transit. Besides it's the region that the West may take advantage of to put pressure on Teheran and Moscow which brought together the USA, Great Britain, Georgia and Azerbaijan.

The idyll was supplemented by another element - oil, or a pipe, to be more exact. Since 2005 Tbilisi and Baku have been facing serious contradictions started with the end of construction of two crucial supply facilities: Baku-Tbilisi-Jeykhan oil pipeline and Transcaucasian gas pipeline Shakhdeniz - Erzurum  plus old  Baku-Supsa oil pipeline forming the main system of energy communications in South Caucasus that connect Azerbaijan and Georgia.

Despite Azerbaijan's considerable concessions over distribution of profit from operation of the facilities above, the regional effect from these energy supply systems was absolutely different to the sides. Azerbaijan's incomes that depend on functioning of the said supply pipelines are tenfold higher than Georgia's gain as a transit territory in overall energy complex of Caucasus.

If at the design stage the projected income Georgia was supposed to have seemed much higher now this is just a small part of the country's state treasury. If in 2002 Georgia's state budget was not more than USD 370 mln - today it is not more than USD 100 mln at maximum transit capacity!

However, as estimated by the International Monetary Fund Azerbaijan will earn USD 175 bn in coming 20 years.

These incommensurable figures were particularly irritating to Georgia that incurred serious economic loss staring severe confrontation with Russia for the sake of construction of energy facilities and oil transportation westward. The damage can't be compared to the oil and gas transportation incomes.

We have mentioned political damages already. It would seem Azerbaijan depends on Georgia for the operation of oil and gas pipelines while Georgia depends on Azerbaijan's transit resources. In reality, both countries depend on their Western partners, main owners of oil deposits and relevant transportation infrastructure - not on each other. This circumstance became "a basis" to raise various issues like the status of Azerbaijani population in Georgia, interstate trade, cultural and historic issues.

Azerbaijan treated Georgia's problems in power and gas supplies rather egoistically especially when gas supplies from Russia were brought into question because of high prices. Upon completion of Shakhdeniz-Erzurum gas pipeline construction Georgia found itself in rather an awkward position since this large enterprise will not be able to furnish even approximate volume of gas Georgia will need in coming years.