Via Stratfor (subscription required), a report that Russia and Georgia — whose relationship is still shattered after the war between them in August — are to start energy negotiations in mid-December. As the article notes:

“…Georgia currently relies on Russian natural gas to fulfill approximately 60 percent of its domestic demand, with neighboring Azerbaijan fulfilling the other 40 percent. Russia relies on Georgia to transport natural gas to Armenia and pays Tbilisi 0.2 billion cubic meters (bcm) annually for that service (a fraction of Georgia’s annual consumption of 1.5 bcm). Georgia pays well below what Russia charges its European customers for its natural gas supplies, paying $260 per thousand cubic meters (tcm). It pays even less for Azerbaijani natural gas — approximately $180 per tcm — and receives 0.2 bcm in payment for transporting natural gas from Azerbaijan to Turkey.

Russia has threatened to hike up the price Georgia pays for natural gas starting Jan. 1, 2009, as part of Moscow’s overall price hike to all its customers, including parts of Europe. But Moscow and Tbilisi have yet to agree on exactly what the new price will be. Following the war between the two countries, Russia threatened to raise prices to as much as $500 tcm — a price Georgia simply cannot pay.

Georgia has turned to Azerbaijan to ask for an increase in natural gas supplies, since Azerbaijan transports 8 bcm across Georgia to Turkey and on to Europe. Most of that natural gas comes from the massive Shah Deniz project, but nearly all of that natural gas is already contracted to Turkey. Thus far, Azerbaijan cannot increase natural gas supplies to Georgia — nor would it most likely want to, since Georgia pays less than Turkey. Construction has not yet begun on the second stage of Shah Deniz, which is expected to double output; but even when the second stage is up and running, Azerbaijan will most likely sell that natural gas to the highest bidder and not Georgia. Azerbaijan is in negotiations with Iran and Europe for that natural gas.

Much to Tbilisi’s dismay, it is stuck with Russia for the foreseeable future. Moscow will of course use this dependence as yet another tool to keep pressure on Tbilisi, as Russia’s relationship with Georgia is still in flames and Georgia is continuing to reach out to the West, which is not returning the attention. Raising the price for Georgia will be a small short-term help to Russia, since it will provide more energy income as other countries — like some in Europe — decrease their dependence on Russian supplies and thus pay less into Russia’s coffers.”