Tbilisi, 23 december 2005 - Georgia has become the latest former Soviet satellite state to be stung with a big price hike from incumbent Russian gas supplier Gazprom.

State owned Gazprom, which is currently engaged in a dispute with Ukraine over price increases, has agreed a deal with Georgia that will see the eastern European nation pay almost double current prices when its new gas supply contract with Gazprom kicks in.

Following meetings between deputy Gazprom chairman Alexander Ryazanov and Georgian Prime Minister Zurab Nogaideli, the new contract was announced. Under the new deal Georgia's gas will cost $110 for 1,000 cubic meters of gas in 2006 compared to the $64 for 1,000 cubic meters it pays now.

However, in addition, if Georgia wants to avoid costs rising to $200 for 1,000 cubic meters of gas in 2007, it must agree to sell its pipelines linking Russia to Armenia to Gazprom. If Georgia agrees to sell 2006 prices will be held for ten years. The condition reflects Russia's increasing impatience with demands from transit countries at a time when it is significantly increasing shipments to the west.

Mr Nogaideli said that Georgia would receive 2.3 billion cubic meters of gas next year compared to 1.3 billion cubic meters in 2005.

Published by DATAMONITOR, selected by Luc MATHIAS