News just come in that it might get very cold in Georgia and Armenia soon: Explosions on the main Russian-Georgian gas pipeline halted supplies and it might take several days until normal operations resume. These news come at a time of tense gas diplomacy throughout the region.

The Russian-Ukrainian gas dispute has fuelled fears in Tblisi that Georgia itself might see Moscow using gas supplies as an instrument to exert political pressure. Georgian President Saakashvili has already accused Moscow of being behind the blasts this morning. So it becomes a matter of urgency that Georgia diversifies its energy sources as soon as possible. Tblisi will mainly be looking towards Kazakhstan and Iran for achieving that aim and has encouraged Kazakhstan to participate in the Baku-Tblisi-Ceyhan pipeline.

Sending a clear sign that strict market rules apply, Kazakhstan has announced that it will not subsidise gas supplies to Georgia, despite recent love signs being sent between Astana and Tblisi*. 1000 cubic meters will cost $110 and no cent less. Saakashvili is reported to have said that he doesn’t mind higher prices as long as the gas keeps flowing. It seems that little by little, Soviet-inherited gas deals between the constituent republics are being softened, paving the way for both potential confrontation and co-operation.

Also, taking into account that Armenia will be without Russian gas supplies very soon, Yerevan would have to look towards other sources in order to keep supplies steady. Whereas Georgia has already commenced talks with Azerbaijan, that option looks hardly like a feasible option for Armenia. Unfortunately for Yerevan, the Iran-Armenia gas pipeline is still under construction.

Kazakhstan seems to benefit most from the New Year’s gas turmoil. Astana’s petrodollar bonanza will inevitably translate into further purchases of foreign energy utilities, given that domestic investment opportunities seem saturated due to the high amount of cash already being spent. TbilGaz, Tblisi’s monopolistic gas supplier was recently bought up by KazTransGaz. Also, Kazakhstan seems keen on buying a Lithuanian oil complex. This direct engagement in foreign energy markets will safeguard a diversified demand base for Kazakh hydrocarbon resources, Astana’s ultimate goal. The Lithuanian deal also seems interesting inasmuch it looks like a clear sign that Kazakhstan wants a chunk of the large European market for its products, challenging Russia’s quasi monopoly for eastern gas supplies.

Kazakhstan’s policy of a ‘multi-vectored’ foreign policy makes it less suspectible to using oil as a political tool as long as the cash is right.

*Georgia sees Kazakhstan as an honest broker and asked Astana to take up a mediating role in talks between Russia and Georgia over the separatist territory of South Ossetia. Also, Georgia supports Kazakhstan’s bid to the OSCE presidency in 2009.

Cross-posted on the homebase.