Georgian government maintains contract with Frontera

By Natalia Kochiashvili

Friday, July 24

Frontera has already agreed to return 99% of the search area, while the state decided to allow the company to continue its activities on the remaining 1% of the area. Photo: State Agency of Oil and Gas

“Relations with the United States are important for us, which in no case should be overshadowed by the defense campaign launched by one company,” Economy Minister said. Photo: 1tv.ge

The Georgian government has decided not to terminate its contract with Frontera and to allow the company to resume operations in the part of the original contract area where oil production has been underway since Soviet times.

According to the Ministry of Economy and Sustainable Development, about 1% of the state's exploration territory is in question, as about 99% of this territory has already been returned to the state by Frontera, according to an arbitral award.

The official statement of the Ministry says that the decision of the state is conditioned by the strategic tasks facing the country:

“It is important for Georgia to have an international reputation related to the country's investment environment, which constantly receives high marks, and despite the absolute position of the state in the dispute with Frontera, it is inadmissible to cast a shadow on this feature in any way.”

According to the document, relations with the United States, which is our country's main strategic partner, are fundamental for the country. And although the issue of Frontera is not a topic of discussion in official relations at all, it is unequivocally undesirable for Georgia to have an excuse in the highly diverse political spectrum of the United States to use this absolutely routine commercial dispute to the detriment of strategic relations between our countries.

“Georgia's investment image and close relationship with the United States are important, first and foremost, for its relationship with the American business community, because special attention is always paid to attracting American investment to Georgia,” reads the statement

According to the Ministry of Economy, the government's decision allows Frontera Resources Georgia Corporation to stop mobilizing and dealing with lobbyists, instead of concentrating on fulfilling its obligations to employees. With multiple lenders and pursuit of search engine optimization, the Ministry emphasizes Georgia's sincere desire to have an open and transparent relationship with Frontera.

According to Minister of Economy and Sustainable Development of Georgia, Natia Turnava, a liquidator was appointed in Frontera Group some time ago, there are signs of insolvency and the company has a lot of creditors.

According to her, a few days ago the Georgian State Oil and Gas Corporation received a message that one of the creditors of the Frontera won the lawsuit and now the execution of its property at the auction begins.

“It seems that this is the general style of Frontera's activity, it is not fulfilling its obligations, and this is a problem not only in Georgia but all over the world,” Turnava said.

According to Turnava , the decision regarding Frontera was not easy, since the state had full grounds to terminate the contract on July 27th because the contract was due to expire and these territories could be returned to the state. However, the opposing decision was made in the sake of strategic partnership between countries. The Minister also stated that Georgia is an attractive place for foreign investors in all ratings.

According to the Minister of Foreign Affairs of Georgia, David Zalkaliani, the decision of the Government of Georgia related to Frontera was first of all dictated by the strategic tasks of the country. According to the Minister, it is important for Georgia to have an international reputation related to the investment environment and relations with the United States, a key strategic partner.

The Government of Georgia announced the termination of the contract with Frontera in April 2020 and named the arbitral award as the basis. According to the Ministry of Economy, on April 17th, the International Arbitration Tribunal ruled in a dispute between the Georgian Oil and Gas Corporation and the State Oil and Gas Agency, as well as Frontera Resources Georgia Corporation and Frontera USA, which is based on the contract of distribution of products and processing plant of June 25th, 1997. Georgia had accused the company of violating the terms of their contract signed in 1997. They claimed that Frontera refused to return state land they were no longer using for extraction.

Frontera, along with a number of other companies, has been cited by US politicians in Georgia or in numerous letters to US authorities as an example of harassment of American business in Georgia.

In early June, Chairman of the Board of Directors of Frontera Resources Corporation, and President of the company, sent a letter to the PM Giorgi Gakharia, stating that anti-American sentiments were growing in Georgia, investment and business environment were deteriorating.

A number of protests against Frontera itself have been held by dismissed employees who accuse the company of violating their rights.

The American gas and oil company has been operating in Georgia, in particular, in Dedoplistskaro and Marneuli since 1997.