Russia Hikes Natural Gas Price For Georgia

Russia's state-controlled natural gas monopoly said Thursday that it would more than double the price it charges Georgia, further heightening tensions between the ex-Soviet neighbors.

The Georgian foreign minister said the price hike was the cost of his nation's turning away from Moscow and toward the West.

OAO Gazprom said in a statement that it will charge $230 per 35,314 cubic feet of gas, compared with the $110 that it charges now. The announcement signaled Russia's continued recalcitrant stance even as Georgian Foreign Minister Gela Bezhuashvili visited Moscow in the hope of easing relations between Moscow and Tbilisi.

The relationship has steadily deteriorated since the 2004 election of Georgian President Mikhail Saakashvili, who has sought to take the Caucasus nation out of the Russian orbit, bolster ties with the West and join NATO in 2008.

Tensions rose between the two countries after Georgia briefly detained four purported Russian spies in late September. Moscow responded with a transport and postal blockade on Georgia and a crackdown on Georgian migrants living in Russia, whose financial remittances help sustain their homeland's economy.

Moscow has shrugged off Western calls for lifting the sanctions against Georgia, saying it was acting because the Georgian government is plotting to bring the breakaway provinces of Abkhazia and South Ossetia back into the fold by force — allegations Georgia denies.

CBS News Moscow bureau chief Beth Knobel says the message to Georgia is clear: you can't fight with Moscow and expect them to subsidize the cost of your energy.

Bezhuashvili said he was not surprised by the announcement because Russia had been warning that it would put Georgia on the same payment terms as other European nations, and that he had received assurances that Moscow would not cut off gas or electricity supplies to his country.

But, he said: "They present it as a commercial deal, but there is a big portion of politics."

Bezhuashvili told reporters in Moscow that the new arrangement was "the price we pay for our choice" of setting pro-Western policies.

He said gas prices were the only tool Russia had to influence Georgia, "but we won't be pressured."

Russia has been widely accused of using its energy resources as a weapon, and the Georgians argue that that's exactly what is going on now.

But, Knobel says, if you look at the situation through Russian eyes, the price rise makes sense.

"The new price for Russian gas shows that Russia has no intentions of making concessions," Russian business newspaper Kommersant reported Thursday.

The price hike puts Georgia — which has almost no oil or gas resources of its own — in an awkward position. Tiblisi needs to buy most of its supply from abroad, and Russia has long been the primary source.

Knobel says Georgia is trying to diversify its energy supply by purchasing more from producers like nearby Iran, Azerbaijan and Turkmenistan. But creating those new relationships and infrastructures is a long and complicated process, meaning Georgia will remain dependent on Russian energy for some time to come.

Gazprom has consistently argued that price increases for former Soviet neighbors are a long overdue recalibration toward market pricing. However, the increases have been widely seen in the West as part of the Kremlin's attempts to rein in ex-Soviet neighbors.

Gazprom temporarily switched off the gas it supplies to Ukraine at the start of this year after Kiev refused to accept an abrupt price hike that was seen as a calculated blow to its Western-leaning government.

Since the appointment of Kremlin-friendly Prime Minister Viktor Yanukovich, however, Ukraine has been able to negotiate a much gentler price rise for 2007.

Georgia's economy already is struggling. Tbilisi was left freezing for a week this year after a pipeline explosion in southern Russia cut supplies. Saakashvili blamed Moscow for the interruption, charges Russian officials angrily denied.

Cuts would also deal a blow to Georgia's landlocked neighbor, Armenia, which receives its gas from Russia via Georgia. Armenian businesses already have been forced to organize costly new export routes to Russia due to the transport blockade.