Georgian Refinery Accepts Russian Oil, Raising Sanctions Concerns

Executive Summary:

• On October 6, privately-owned Russian oil company RussNeft delivered 105,340 tons of Siberian Light crude to Georgia’s newly built, partially state-financed Kulevi refinery, its first full-cycle refinery capable of producing Euro-5 gasoline and diesel.
• Independent sources classify the vessel that delivered the oil as part of Russia’s shadow fleet, and investigations reveal connections between the Kulevi refinery’s owners and individuals tied to Russian intelligence and sanctioned businessmen.
• The shipment raised suspicions that Georgian Dream may be aiding Russia in circumventing international sanctions, fuelling fears that the refinery could indirectly support Moscow’s war against Ukraine and eventually expose Georgia to Western sanctions.

On October 6, the privately-owned Russian company RussNeft delivered its first oil cargo to the newly built Kulevi refinery on Georgia’s Black Sea coast. The Panamanian-flagged Kayseri vessel transported 105,340 tons of Siberian Light crude oil from the Russian Black Sea port of Novorossiysk to the Kulevi refinery (Reuters, October 21; Civil Georgia, October 22). The government officially announced the Kulevi refinery, Georgia’s first full-cycle facility for producing Euro-5 standard gasoline and diesel fuel, on October 22, 2024, at an event attended by Georgian Prime Minister Irakli Kobakhidze and then-Minister of Economy Levan Davitashvili (1tv.ge, October 22, 2024). In September, Davitashvili was appointed chairman of the company’s supervisory board (Business Media, September 26). The Kulevi oil refinery’s construction was financed by the state-owned Georgian Development Fund and a consortium of commercial banks, including Cartu Bank, which was established by billionaire Georgian Dream founder Bidzina Ivanishvili (Civil Georgia, June 29).

The Revenue Service of the Ministry of Finance of Georgia issued a statement on October 21 confirming an oil shipment from a Russian company. The statement did not disclose the name of the Russian company to prevent the “dissemination of information containing tax secrets” (Facebook/Revenue Service, October 21). The statement claimed that “the vessel, the shipowner, the sender, and the recipient of the cargo are not subject to international sanctions” (Facebook/Revenue Service, October 21). The Revenue Service is attempting to dispel Georgian and international suspicions that the ruling Georgian Dream is helping Russia circumvent international sanctions (Ifact.ge, January 22). Independent sources classify the Kayseri tanker as part of Russia’s so-called shadow fleet, which the Kremlin uses to avoid sanctions following its full-scale invasion of Ukraine (see EDM, January 27, April 28; Formula News, October  22). Georgian officials have not specified whether the Russian oil was loaded and stored at the new refinery in Kulevi or at the nearby Kulevi oil terminal, which belongs to the State Oil Company of the Republic of Azerbaijan (SOCAR) (Batumelebi.netgazeti.ge, October 23).

The Georgian government once presented the Kulevi refinery as a step toward reducing dependence on fuel imports from Russia, Türkiye, Azerbaijan, Romania, and Kazakhstan. Russia is currently the primary supplier of petroleum products to Georgia, accounting for 45 percent of the country’s total oil imports (Commersant.ge, October 18). The first shipment of Russian crude oil to be refined in Georgia has raised doubts about Tbilisi’s sincerity in reducing its dependence on Russian oil. Local experts are not ruling out the possibility that crude from Russia could be imported to Georgia for processing and then returned to the Russian market as gasoline (Ekho Kavkaza, October 23).

The Georgian opposition is already concerned that the ruling Georgian Dream party is on course to effectively become Russia’s ally in its war against Ukraine. The delivery of Russian oil to the new Georgian refinery coincided with a fuel crisis in Russia, caused by several months of effective Ukrainian attacks on Russian oil and gas infrastructure. Former President of the National Bank of Georgia Giorgi Kadagishvili believes that this represents Georgian collusion in Russia’s war against Ukraine (Formula News, October 21). Some in Georgia believe that the Kulevi refinery could become a legitimate target for Ukrainian drones since it will refine Russian oil that funds the Kremlin’s war against Ukraine (Tablo Media, October 22).

Roman Gotsiridze, another former president of the National Bank of Georgia and opposition politician, questions the production capacity of the new oil refinery in Kulevi. Gotsiridze notes that the construction of the refinery is not yet complete. It may only begin fuel production by the end of the year, likely in minimal quantities (Facebook/Formula TV, October 23). Kobakhidze estimates that the refinery will cost a total of $700 million. According to Georgian media, the plant’s initial capacity will be 1.2 million tons of crude oil per year, with the potential to increase to 4 million tons per year (Batumelebi.netgazeti.ge; Ekho Kavkaza, October 23).

The Georgian political opposition believes that refining Russian crude oil has both economic and geopolitical risks. Georgia could face Western sanctions for refining Russian oil, and the Georgian economy could become even more dependent on Russian energy supplies (Tvpirveli.ge, October 22). The opposition believes that becoming a market or transit territory for Russian oil facilitates the continuation of Moscow’s war against Ukraine (Formula News, October 22). Former Georgian President Mikheil Saakashvili, who is currently in prison, is confident that the United States will eventually sanction Kulevi (Facebook/Mikheil Saakashvili, October 23).

Despite Georgia’s refusal to join international sanctions against Russia, it refrains from cooperating with sanctioned entities and closely monitors restricted trade. On October 22, the United States sanctioned Rosneft, Lukoil, and their subsidiaries, including Lukoil Georgia. In response, Georgian National Bank President Natia Turnava claimed that Georgia’s financial sector strictly complies with international sanctions and has seen no violations in three years (Business Media, October 23).

Refining Russian oil poses a serious threat to Georgia’s international reputation. Shortly after reports emerged of Russian oil supplies to the Kulevi refinery, it surfaced that the refinery is owned by Black Sea Petroleum, whose main shareholder is Georgian businesswoman and fashion designer Maka Asatiani. According to an investigative journalists from the “Project” (Proekt, Проект) outlet, Asatiani’s son is business partners with the son of the first deputy chief of the Main Intelligence Directorate of the General Staff of the Russian Armed Forces (GRU), Vladimir Alekseyev (Batumelebi.netgazeti.ge; Ekho Kavkaza, October 24). Alekseev’s son worked directly for RussNeft, the same company that supplied oil to the new Georgian refinery, before starting his own business with Asatiani’s son (Batumelebi.netgazeti.ge; Ekho Kavkaza; Agentsvo, October 24). Georgian opposition politician Khatia Dekanoidze stated that Russian businessman Mikhail Gutseriev, who owns a large stake in RussNeft, has long-standing ties to Ivanishvili. He is under European Union sanctions, and his son is under U.K. sanctions (Facebook/khatia.dekanoidze, October 26). These associations have raised suspicions in Georgia.

The controversy surrounding Georgia’s refining of Russian oil arose amid reports that Georgian citizens were being recruited into the Russian armed forces. The Russian website “Power of the Motherland” recruits contract soldiers for the Kremlin’s war against Ukraine. Georgian citizens recently appeared on the list of desired mercenaries. According to the advertisement, Georgians are “brave warriors” whom Moscow invites to join the Russian military. The website promises a signing bonus of 2.5 million rubles ($3,100), a monthly salary of 210,000 rubles ($3,000), Russian citizenship, and “the honor of serving Russia” (Ekho Kavkaza, October 20). These advertisements have caused confusion and outrage in Georgian society, as most Georgians consider Russia their main enemy following the 2008 Russo–Georgian war (Ekho Kavkaza, October 20). Since 2022, some Georgians have been fighting for Ukraine, and as of August, more than 80 Georgians have died fighting against Russia in Ukraine (Radio Tavisupleba, August 5).

Shipments of Russian oil to the Kulevi refinery complicate Georgia’s choices amid Russia’s war against Ukraine, reflecting the country’s growing alignment with the Kremlin. This pivot risks eroding Western partners’ trust in Tbilisi and undermining Georgia’s national security. Officials such as Foreign Minister Maka Bochorishvili assert that “the only guarantee of security that our country has today is the government’s prudent and cautious policy” in response, while offering no alternative security guarantees (Facebook/Night Courier, October 20). Georgian Dream acknowledges this drift toward Russia, which has resulted in the country losing key security guarantees from the West.