Kezerashvili Controls Petrol Market

Mariam Todadze, presage.tv

“Like our president’s loud statements in foreign countries that we have defeated corruption in Georgia, I will also state loudly that there is corruption in our country, Georgia” a leader of Free Democrats Levan Izoria said at the press-conference and presented the scheme of monopolization of market of oil-products and artificial increase of petrol price.

“Saakashvili created one-person government, whose most significant element is so-called senior corruption; that means monopolization of everything including petrol business,” Izoria said.

According to his calculations, fuel price is about 20-25 tetri higher than its real value. In Georgia, 1 liter of regular petrol is 2.05-2.10 Gel while in Armenia, which imports fuel through Georgia, the price is lower at 15-20 tetri. Free Democrats believe the maximum price of 1 liter of fuel must be 1.85 GEL in Georgia including its VAT and income tax.”

According to Izoria, first of all President Mikheil Saakashvili is guilty in monopolist activities and restriction of competition, because he created a system which expelled over 100 importers from market and accumulated import-realization business of petrol in Georgia in the hands of five companies. The former defense minister of Georgia and businessman Davit Kezerashvili has shares in two of those five companies.

Fuel Price

The permanent increase of fuel price in Georgia is usually explained by increased price of raw petrol-products in the world; sometimes it is connected with the fall of National Currency Rate or political problems in the East. Those clarifications are for people, but in fact, permanent increase of fuel price is caused only by monopolized market.

Although ideologist of the Georgian economy Kakha Bendukidze does not agree with us, many experts and economists think fuel and diesel are essential products and their increased prices reflect on all other products and service. Finally, consumers are damaged, who have to pay increased prices on food products or pay increased transportation fees.

According to spread information, petrol-importing companies sell petrol on the local market and it farther increases the price on fuel.

According to official data, 45% of fuel is imported from Azerbaijan, 55% is imported from Europe. Unofficial sources claim the biggest part of fuel is in fact imported from Azerbaijan.

The importers state Super and Premium Petrol are completely European product, but we know that Azerbaijan also produces these sorts of petrol. So, it is easier to avoid extra transportation expenses by importing petrol from Azerbaijan, instead Romania, Italy, Bulgaria and Greece. Moreover, the interest of extra-profits is very strong on the governmental level.

When the price is fixed, they envisage price of international plats of fuel, together with transportation and other expenses. We would like to clarify that according to experts, the company can have maximum 5% of income from the petrol sale.

European countries use petrol of much higher quality - Euro 5 Standard. While in Georgia, which mostly uses Azerbaijan oil, cannot meet the standards of even Euro 1 (it contains 50 times more sulfur, so it pollutes the environment 50 times more). However, nobody cares about it in Georgia and the fuel price is calculated in accordance to international plats.

According to Levan Izoria, if we take a price of one tone of petrol [it is about 1340 liter of petrol on 15-200 ]– 1 595 GEL (960$), and add 40 GEL of transportation fee to it, as well as maximum 150 GEL - that is 10% of import expenses, 5% of profit to the price –75 GEL, and 18% VAT – 380 GEL, finally we will receive the final price of one tone of petrol that makes 2 590 GEL. If we divide the price for 1 340 liters, it will make 1, 85 GEL. So, including all expenses and profit tax the price of one liter petrol in Georgia must be 1.85 GEL.

Levan Izoria clarified that they calculated the price including maximum expenses and considering the fact that companies always try to cut off charges, the real price can be 10-15 tetri cheaper than the above calculation and the companies might pay only 1.70 GEL for one liter of petrol.

Levan Izoria: “They receive maximum profit. So, there is a concrete circle of senior officials whose representative is Kezerahsivli as a trustee of the President Saakashvili. Companies agree prices with him – one company sells 1 liter of fuel at 5 tetri cheapter than another - in order to create a picture of competitive market. In fact, there is no competition. I know a lot of people who wish to import fuel in Georgia but they are not allowed to. One road was blocked from Azerbaijan where Socar is dominant importer. The second road is via Poti Terminal and political elite controls it.

There is a question – is it worth for a state to run such a risk, but there is logic, easy and clear answer too. The extra profits are within the interest of several persons and not the state; and their interests are particularly important for Georgia - illuminated with roses and glassy buildings.   

According to Izoria, about 60-70 million liters of fuel is spent in Georgia every year; the companies have about 15-20 million GEL profit per month. Sometimes, difference between real and market price is 30-35 tetri, so in this case their profit amounts to 30-35 million GEL.  Roughly say, the companies have about 300 million GEL profit annually.

Senior Corruption

Ltd SocarEnergy Georgia holds exclusive right to import fuel from Azerbaijan in Georgia. Azerbaijan State Oil Company owns 51% in the Company. It is interesting who owns another 49% of the Georgian share. However, the owner hides in off-shore zone like the owners of many other companies in Georgia.

Former minister of economics of Georgia Vano Chkhartishvili owned 24.5 % of Socar and Company PetroTrans owned another 24,5% of it. Last summer, Vano Chkhartishvili sold his share to the PetroTrans for five million USD. The latter ran the 49% of shares only four months. In the fall of 2011, the Comapny faced “serious problems” and sold half of its share for 5 million USD and the second (24, 5%) part for 245 000 USD. The shares were procured by the Companies Heritage General Trading FZE and Intersun Holding FZCO, who are registered in the off-shore zone.

Vano Chkhartishvili and people from the National Movement are no longer owners of the Socar Company. However, Davit Kezerashvili is still important person, who was declared to be a monopolist in the advertising market by the Transparency International – Georgia short time ago.

Today, five companies control oil market in Georgia; they are: Wissol, Socar, RomPetrol, Gulf and Lukoil. Izoria states Kezerashvili is on top of all of them.

Levan Izoria said, according to the October, 2011 data of the Industrial Registration Agency, Kakhaber Ninua owns 100% of Gulf: “Ninua is a childhood friend, class-mate and best man of Davit Kezerashvili. In fact, no decisions are made in the company without Kezerashvili’s direct interference and permission.”

“On January 18, 2012 the so-called consolidated competition was held and in accordance to Protocol #2, three companies won it – two of them “Gulf” and “UniGroup” (Lukoil’s Distributor Company) belong to Kezerashvili. He officially owns 50% of the Unigroup,” Izoria said and clarified that it means the state will procure petrol only from those companies without official competitions.

Nevertheless, when state controls all companies, we should not expect fair competition there. Izoria said the owners of other companies were also selected based on their political views. For example, owner of Rompetrol is former MP and member of the National Movement Liparteliani; the owners of Wissol Company – brothers Pkhakadzes intend to participate in the upcoming parliamentary elections as single mandate candidates. As for Lukoil, since Kezerashvili’s company procures and distributes the petrol imported by them, it is evident that it is also under his control.

According to the scheme presented by the Free Democrats, two companies Socar and Gulf control the petrol market in fact. According to Izoria’s clarification, although Rompetrol and Wissol import fuel, the prices in Georgia are estimated at round table whose members have very strict rules and those, who will not obey them, will be punished.

“Previously, there was combined form of corruption which included lower and higher layers of authority. Police officers, custom officers and high-ranking governmental officials were involved in it. Nowadays, the corruption has acquired elite character. Police and custom departments are not involved in the process in order to show-off as a non-corrupted government; they do not need extra people in “the affair” when the total profit from artificially increased prices go into their pockets,” Izoria said.

It is to answer where the income is accumulated. Of course, Saakashvili could not have put the reputation of uncorrupted country in danger for Kezerashvili’s sake.

Levan Izoria clarified that there are two ways to adopt funds. One of them is - transferring money to the state budget, funding various infrastructural projects with the funds and finally recoil the funds from the projects. The second way – certain amount of money is accumulated in the budget and the rest of it goes to pockets, though it does not need internal inspection. Izoria said, in future, when they have chance to inspect the budget, the details of senior corruption will be published as well as names of the involved governmental officials.

It is paradox that several days ago an interesting book “How Georgia Defeated Corruption” was presented in the World Bank, where Mikheil Saakashvili proudly accepted applauses. At least, Georgian National TV-Channels showed him to be proud. Indeed, it would have been pleasant to see such a country, but unfortunately, Georgian people have to live in completely different country.