Concerns over National Oil Company Privatization

The government is planning to decrease the state's share in the National Oil Company. The amendment was initiated at a parliamentary session on September 12. Currently the Law on Oil and Gas stipulates that the Georgian state owns 75 % of shares in the National Oil Company, while as per the amendment, the state will own just over 50% of shares.

Accordingly, if until now only 25% of the shares of the Georgian National Oil Company (which controls gas pipelines and other infrastructure) could be floated on the market, after the adoption of this amendment the number of floated shares will increase, leaving only about 50% of shares under government ownership. This, however, guarantees that the government will maintain a controlling stake in the company.

Economic analyst Nodar Khaduri criticized the government’s decision to sell up to 50% of the company’s shares. “In fact, the government is selling 50% of the gas pipeline [via which Russia supplies gas to Armenia], which is of strategic importance for Georgia. Moreover, currently the environment on international markets is not particularly benign,” Khaduri said.

The Free Democrats expressed their concern over the aforementioned amendment, opposing the government’s decision to float parts of the stock of the country’s strategic objects, and demanded a response to an open letter from Irakli Alasania on the matter from prime minister Nika Gilauri. The party’s leaders emphasized once again that the selling off of such objects contradicts the country’s interest.

“We are certain that the government is trying to covertly privatize these objects, as a result of which an investor initially will hold a small package of the shares, but later will have the possibility to buy a controlling stake, since it is in the interests of our investor neighbors to see the complete privatization of objects of strategic importance,” stated the head of the Free Democrats Economic Council, David Onoprishvili.

Irakli Alasania’s party questions why strategic objects such as Georgian Railways, gas pipelines, and the electrical grid should be sold on the stock market, given that current international markets are far from optimal. This raises the possibility of underselling the objects. Furthemore, “no serious investor will wish to acquire either 15 or 20 percent stakes. Such a proposal might be interesting only to dubious investors,” Alasania said.

The National Democrat Party (NDP) also called on the government not to carry our privatization, bypassing parliament and society. The MP and leader of the National Democrats Guram Chakhvadze stated at a briefing on September 12 that the legislative changes regarding the privatization of strategic objects initiated in parliament raised doubts.

“The NDP wants to receive information and guarantees on the legislation regarding energy routes and Georgian Railways, that Georgia will not lose the control over these objects,” Chakhvadze stated.

According to Chakhvadze, consultation with parliament and experts is necessary, since as a result of the government’s privatization policy Georgia may lose its role as a regional player and reduce its independence. He further argued that the policy opens the door to a Russian imperialistic policy towards Georgia’s economy. “When the issue refers to objects of strategic importance, which is related to the state’s sovereignty, the government should have security plans,” added Chakhvadze.