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                                                                    EXHIBIT 10.4




                                PLEDGE OF SHARES

                       IN NINOTSMINDA OIL COMPANY LIMITED




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                                PLEDGE OF SHARES

THIS AGREEMENT is made the 25th day of July, 2005

BETWEEN

(1)  CANARGO LIMITED, a company incorporated under the laws of Guernsey, having
     its registered office at P.O. Box 291, St. Peter Port, Guernsey (the
     "Pledgor") and

(2)  INGALLS & SNYDER VALUE PARTNERS, LP, a limited partnership with offices at
     61 Broadway, New York, NY 10006, together with the other Purchasers listed
     on Schedule A to the Note Purchase Agreement (collectively, in such
     capacity "the Pledgee").

WHEREAS

(A)      NINOTSMINDA OIL COMPANY LIMITED is a limited liability company
         incorporated under the laws of Cyprus, under registration number 74623
         (hereinafter called "NOC"), having an authorised share capital at the
         date hereof comprising of 10,000 shares of Cyp1.00 each of which 9,424
         shares have been issued;

(B)      The Pledgor is the registered owner of 9,424 issued shares in NOC;

(D)      CANARGO ENERGY CORPORATION, a Delaware corporation ("CanArgo Energy")
         and the Pledgee have executed and delivered that certain Note Purchase
         Agreement, dated as of even date herewith (the "Note Purchase
         Agreement"), pursuant to which CanArgo Energy has issued and the
         Pledgee has purchased US$ 25,000,000 of CanArgo's Senior Secured Notes
         due in 2009 (the "Notes");

(D)      To induce the Pledgee to enter into the Note Purchase Agreement and to
         purchase the Notes and for other good and valuable consideration, the
         receipt and sufficiency of which are hereby acknowledged, the Pledgor
         has agreed to pledge and grant a security interest in the Collateral,
         as defined below, as security for the Secured Obligations, as defined
         below.

NOW THEREFORE IT IS HEREBY AGREED

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1.       DEFINITIONS

1.01     Each capitalized term used herein but not otherwise defined herein
         shall have the meaning assigned to such term in the Note Purchase
         Agreement. In addition, the words and expressions specified below
         shall, except where the context otherwise requires have the meaning
         attributed to them below:

         "Collateral" has the meaning assigned to such term under Clause 2
         hereinbelow.

         "Pledged Shares" means     (i) the shares in NOC listed in Schedule I
                                    hereto;

                                    (ii) any further shares in NOC at any time
                                    issued to the Pledgor or to its nominees or
                                    to any other person on its behalf.

         "Cyp" means the lawful currency of the Republic of Cyprus;

         "Secured Obligations" means all Indebtedness and other monetary
         obligations of CanArgo Energy under or in respect of (i) the Loan
         Documents, whether for principal at the applicable Redemption Price,
         interest (including, without limitation, interest that accrues after
         the filing of a petition initiating any action or proceeding under the
         U.S. Federal Bankruptcy Code or any other bankruptcy, insolvency or
         similar law or statute protecting creditors in effect in any
         jurisdiction, or is an allowed claim in any such action or proceeding),
         fees, premia, indemnifications, liabilities, expenses or otherwise, and
         in each case as amended, supplemented, modified, extended, restated or
         renewed, in whole or in part, from time to time, and without limitation
         as to amount, terms, conditions, covenants and other provisions; and
         (ii) to the extent permitted under the Note Purchase Agreement, any
         instrument or other agreement governing Indebtedness or other monetary
         obligations of CanArgo Energy incurred to refinance, refund or replace,
         in whole or in part, any of the Indebtedness or other monetary
         obligations referred to in clause (i) above, together with any related
         notes, guarantees, collateral documents, instruments and agreements
         executed from time to time in connection therewith.

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         "Termination Date" shall mean the date on which the Pledgee shall have
         received final payment in full of all Secured Obligations and all
         amounts owing to the Pledgee under each of the Loan Documents.

1.02     Clause headings are inserted for convenience of reference only and
         shall be ignored in the interpretation of this Agreement. References to
         clause are to be construed as references to clauses of this Agreement.
         Words importing the plural shall include the singular and vice versa.

2.       PLEDGE

2.01     As collateral security for the prompt payment in full in cash when due
         (whether at stated maturity, by acceleration or otherwise) of the
         Secured Obligations, the Pledgor hereby charges, assigns, pledges,
         hypothecates and transfers to the Pledgee, and hereby grants to the
         Pledgee, a security interest in all of such Pledgors' rights, title and
         interest in, to and under the Pledged Shares held by such Pledgor and
         the certificates representing such Pledged Shares, whether now owned or
         hereafter acquired by such Pledgor, wherever located and whether now or
         hereafter existing or arising (collectively, the "Collateral").

3.       REPRESENTATIONS AND WARRANTIES

3.01.    The Pledgor hereby represents and warrants to the Pledgee that:

         (a)      NOC is duly incorporated and validly existing under the laws
                  of the Republic of Cyprus and has power to carry on its
                  business as it is presently conducting same and to own its
                  property and assets;

         (b)      the Pledgor is the legal and registered owner of all of the
                  Pledged Shares charged by the Pledgor pursuant to this
                  Agreement, has full right and title to such Pledged Shares,
                  and such Pledged Shares are free from any charge, lien or
                  encumbrance of any kind save as created pursuant to (or
                  referred to in) this Agreement or in the Note Purchase
                  Agreement;

         (c)      other than recording the existence of the security interest in
                  the books and records of the Company, no filings or
                  registrations are necessary under Cyprus law to perfect the
                  security interest in the Collateral of the Pledgor created
                  under this Agreement, and this Agreement creates in

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                  favor of the Pledgee, under Cyprus law, a valid and perfected
                  first priority security interest in the Collateral, securing
                  the payment of the Secured Obligations;

         (d)      any and all necessary governmental authorisations, approvals,
                  licenses, consents or waivers for the Pledgor to (i) grant the
                  security interest granted hereunder; (ii) perfect the security
                  interest created hereunder (including without limitation the
                  first priority nature of such security interest); and (iii)
                  enter into and perform its obligations under this Agreement
                  have been obtained and, as of the date of this Agreement, no
                  further consents or authorities are necessary for any of the
                  matters described in (i), (ii) and (iii) above;

         (e)      the Pledgor has the full power and authority to execute,
                  deliver and perform its obligations and duties under this
                  Agreement, the execution delivery and performance by the
                  Pledgor of this Agreement and the consummation of the
                  transactions contemplated hereby have been duly authorized by
                  all necessary corporate action by the Pledgor, and this
                  Agreement constitutes the legal, valid and binding obligation
                  of the Pledgor, enforceable in accordance with its terms;

         (f)      the execution and delivery of, and the performance of the
                  provisions of this Agreement by the Pledgor does not and will
                  not (i) require any consent or approval from any Person that
                  has not already been obtained; (ii) violate any provision of
                  the Charter Documents of the Pledgor or of any statute,
                  regulation, order, injunction or judgment applicable to the
                  Pledgor; (iii) violate, result in a breach of or constitute a
                  default under any mortgage, indenture or any other material
                  agreement to which the Pledgor is a party or by which it or
                  its property may be bound, except for any such violation or
                  breach which could not be reasonably expected to have a
                  Material Adverse Effect; or (iv) contravene any applicable law
                  or regulation existing at the date hereof or any contractual
                  restriction binding on the Pledgor, except for any such
                  contravention which could not be reasonably expected to have a
                  Material Adverse Effect;

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         (g)      the authorised share capital of NOC is Cyp 10,000.00 divided
                  into 10,000 ordinary shares of Cyp 1.00 each, out of which
                  9,424 shares have been issued;

         (h)      there are no options or rights outstanding nor is there any
                  other agreement by virtue of which any person is entitled to
                  have issued or transferred to him or it any shares of NOC,
                  including without limitation the Pledged Shares;

         (i)      there are no actions, suits, litigation, administrative
                  proceedings or other proceedings at law or in equity, or by or
                  before any governmental authority or arbitral tribunal now
                  pending, or to the best Knowledge of the Pledgor, threatened
                  against or affecting the Collateral which could reasonably be
                  expected to have a Material Adverse Effect.

4.       DEPOSIT

4.01     The Pledgor has deposited with Ingalls & Snyder LLC, acting on behalf
         and for the ratable benefit of the Pledgee (in such capacity,
         hereinafter referred to as the "Security Agent"):

         (a)      the share certificate for the 9,424 shares in NOC which are
                  registered in the name of the Pledgor;

         (b)      an instrument of transfer in blank of the 9,424 ordinary
                  shares of NOC referred in Clause 4.01(a) above, duly executed
                  by the Pledgor;

         (c)      an irrevocable proxy from the Pledgor in respect of all the
                  Pledged Shares, substantially in the form annexed hereto
                  marked as "Appendix A".

4.02     The share certificate described in Clause 4.01(a) above shall be held
by the Security Agent until the Termination Date, subject to Clause 7.01.

5.       COVENANTS

5.01     The Pledgor hereby covenants and agrees that, unless authorised in
         writing by the Required Holders, until the Termination Date:

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         (a)      the Pledgor shall not vote in favour of any resolution for the
                  increase of capital of NOC or for the issue of any shares in
                  the capital of NOC or for the variation of any of the rights
                  attaching to the Pledged Shares;

         (b)      the Pledgor shall not sell, assign, transfer, charge, grant
                  any option with respect to, pledge or encumber in any manner
                  any part of the Collateral or agree to do any of the aforesaid
                  or suffer to exist any charge, pledge or encumbrance on the
                  Collateral, other than as expressly permitted by the Note
                  Purchase Agreement;

         (c)      the Pledgor shall defend the right, title and interest of the
                  Pledgee in and to the Pledged Shares against all claims,
                  demands or otherwise of any third person or parties and
                  generally to protect the interests of the Pledgee;

         (d)      the Pledgor agrees that it will pledge hereunder, immediately
                  upon its acquisition (directly or indirectly) thereof, any and
                  all additional shares of stock or other securities of NOC.

6.       RIGHTS OF PLEDGOR

6.01     Until the occurrence of an Event of Default which is continuing, the
Pledgor shall be entitled to:

         (a)      exercise all voting, consensual and all conditional or
                  preferential rights attaching to the Pledged Shares, subject
                  to Clause 5.01 above, and the Pledgee shall (at the request
                  and expense of the Pledgor) deliver to the Pledgor such
                  proxies and authorisations as may be necessary to enable the
                  Pledgor to exercise such rights; and

         (b)      receive any dividends, principal, interest or other
                  distributions paid or to be made in respect of the Pledged
                  Shares.

7.       REMEDIES

7.01     Upon the occurrence and during the continuance of an Event of Default,
         the Security Agent may, upon written instructions from the Required
         Holders (i)

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         transfer to or register in the name of the Pledgee or in the name of
         the Pledgee's nominees any or all of the certificates and instruments
         representing or evidencing the Pledged Shares; (ii) receive, endorse
         and collect all checks made payable to the order of the Pledgor that
         represent any dividend, payment or other distribution in respect of the
         Collateral, or any part thereof; and (iii) sell all or any part of the
         Pledged Shares to a third-party, on such terms as to price and
         otherwise and to such person and in such manner as the Required Holders
         may in their absolute discretion think fit, and Pledgee shall be
         entitled to recover from the proceeds of such sale all expenses and
         disbursements of the Security Agent relating to such sale and the
         balance of such proceeds shall be applied in discharge of the
         obligations in relation to the Secured Obligations in such manner and
         at such time as the Required Holders may see fit in their absolute
         discretion.

7.02     The Pledgor agrees with the Pledgee that it will from time to time
         execute and sign all transfers, powers of attorney and other documents
         which the Required Holders may require for perfecting the Pledgee's
         title to any of the Pledged Shares or for vesting or enabling the
         Pledgee to vest the same in itself or in any purchaser.

8.       APPOINTMENT AS ATTORNEY

8.01     The Pledgor hereby irrevocably appoints the Security Agent, acting at
         the direction of the Required Holders and upon the occurrence and
         continuance of an Event of Default, to be its attorney-in-fact, to
         insert the name of the Security Agent or its nominees or the name of
         any purchaser (or to make any alteration or addition as regards the
         particulars of the Pledged Securities affected thereby or any other
         addition which such attorney may consider desirable) in any transfer or
         other documents which the Required Holders may require for perfecting
         the Pledgee's title to or for vesting or enabling it to vest the
         Pledged Shares in the Pledgee or its nominees or in any purchaser and
         to redeliver the same after any alteration or addition has been made
         thereto and to present the same for registration in the name of the
         Security Agent or its nominees or of any purchaser and otherwise
         generally for the Pledgor and in its name in its behalf and as its act
         and deed or otherwise to execute seal and deliver and otherwise perfect
         and do any such transfers and other documents as aforesaid and all such
         deeds, assurances, agreements, instruments, acts and things which may
         be required for the full exercise of all or any of the powers hereby

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         conferred or which may be deemed proper on, or in connection with, any
         sale, disposition or getting in by the Pledgee of any of the Pledged
         Shares. The Pledgor hereby ratifies and confirms and agrees to ratify
         and confirm any instrument, act or thing which any such attorney may
         execute or do under the provisions of this Clause 8.01.

8.02     Without prejudice to any other provision hereof:

         (a)      the obligations of the Security Agent to the Pledgee and to
                  the Pledgor shall not be and/or shall be deemed not to be
                  fiduciary in nature; and

         (b)      the obligations of the Security Agent to the Pledgee and to
                  the Pledgor shall be limited (a) to its obligations as
                  expressed in this Agreement and (b) in accordance with the
                  written authorisation of the Required Holders, where such
                  authorisation is required.


9.       ISSUE OF CERTIFICATE

9.01     The Pledgor undertakes to promptly and in any event not later than 10
         days from the execution of the present Agreement procure the delivery
         to the Security Agent of certificates in the form set out in the
         Appendix hereto, signed by the Secretary of NOC, confirming the
         endorsement in the Registry of Members of NOC of the security hereby
         constituted.

10.      SECURITY

10.01    It is declared and agreed:

         (a)      that this Agreement shall be held by the Pledgee as a
                  continuing security for the payment of the Secured
                  Obligations, and that the security so created shall not be
                  satisfied by any intermediate payment or satisfaction of any
                  part (but not all) of the Secured Obligations, and that the
                  security so created shall be in addition to and shall not in
                  any way be prejudiced or affected by any collateral or other
                  security now or hereafter held by the Pledgee for all or any
                  part of the Secured Obligations and may be enforced by the
                  Required Holders without prior recourse to any such other
                  security or to any other surety and that every

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                  power and remedy given to the Pledgee hereunder shall be in
                  addition to and not a limitation of any and every other power
                  or remedy vested in the Pledgee and that all the powers so
                  vested in the Pledgee may be exercised from time to time and
                  as often as the Required Holders may deem expedient;

         (b)      that the security created by this Agreement shall not be
                  impaired affected or discharged by reason of time or other
                  indulgence granted by the Required Holders or any forbearance
                  (whether as to payment time performance or otherwise
                  howsoever) which might but for this provision have any such
                  effect or by reason of any variation in the terms of the Note
                  Purchase Agreement or any other related agreement thereto or
                  any of them or by reason of the unenforceability invalidity or
                  termination of or any irregularity in the Note Purchase
                  Agreement or any other related agreement thereto or any of
                  them or the execution thereof by Pledgor or any other party
                  thereto or any deficiency in the power of any party thereto to
                  enter into and perform their respective obligations thereunder
                  and should any obligation or purported obligation of any such
                  other party which if enforceable or valid or continuing would
                  be secured by this Agreement be or become wholly or in part
                  unenforceable or invalid or terminated for any reason
                  whatsoever the Pledgor shall keep the Pledgee and the Security
                  Agent fully indemnified against any loss suffered by the
                  Pledgee or the Security Agent as a result of any failure by
                  any such party to perform any such obligation or purported
                  obligation; and

         (c)      that until all Secured Obligations have been paid, discharged
                  and satisfied in full (which expression shall not embrace
                  payment of a dividend in liquidation or bankruptcy of less
                  than 100%) and notwithstanding that the security created by
                  this Agreement may have been realised, the Pledgor waives all
                  rights of subrogation and agrees not to demand or accept
                  repayment in whole or in part of any loan or advances at any
                  time owing to the Pledgor from NOC or to demand or accept any
                  security in respect thereof or to assign the same or charge
                  the same as security or to take any step to enforce any rights
                  against NOC or to claim or prove in competition with the
                  Pledgee or have the benefit of any share in any payment or
                  composition from NOC or any

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                  other person or in any other guarantee or security now or
                  hereafter held by the Pledgee.

10.02             On the Termination Date, the Pledgee shall, at the Pledgor's
                  request, discharge the security interest created by this
                  Agreement and the Security Agent shall return the Pledged
                  Shares to the Pledgor, in a form transferable by delivery,
                  free and clear of all Encumbrances arising by, through or
                  under the Security Agent or the Pledgee, and in connection
                  therwith shall take such actions and shall execute and deliver
                  such documents as the Pledgor may reasonably request to
                  implement the foregoing.

11.      NOTICES

11.01    Every notice or demand under this Agreement shall:

         (A)      be in writing, delivered by hand, registered letter or
                  telefax;

         (B)      be deemed to have been received, subject as otherwise provided
                  in this Agreement, in the case of hand delivery, at the time
                  of delivery, in the case of a telefax, at the time of despatch
                  with confirmed answerback or transmission report of the
                  address appearing at the beginning and end of the
                  communication (provided that if the date of despatch is not a
                  Banking Day in the country of the addressee it shall be deemed
                  to have been received at the opening of business on the next
                  such Banking Day), and in the case of registered letter post
                  four (4) days after it has been put into the post.

12.      LAW

12.01    This Agreement shall be governed by and construed in accordance with
         Cyprus Law.

12.02    In relation to any dispute arising out of or in connection with this
         Agreement, and for the exclusive benefit of the Pledgee, the Pledgor
         hereby irrevocably and unconditionally submits to the non-exclusive
         jurisdiction of the Cyprus courts and waives any objection to
         proceedings with respect to this Agreement in such Court on the grounds
         of venue or inconvenient forum.

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12.03    Nothing in this Clause shall effect the right of the Pledgee to serve
         process in any manner permitted by law or limit the right of the
         Pledgee to take proceedings with respect to this Agreement against the
         Pledgor in any jurisdiction nor shall the taking of proceedings with
         respect to this Agreement in any jurisdiction preclude the Pledgee from
         taking proceedings with respect to this Agreement in any other
         jurisdiction, whether concurrently or not.

13.      COUNTERPARTS

         This Agreement may be signed in any number of counterparts, all of
         which taken together and when delivered to the Pledgee shall constitute
         one and the same instrument. Any party may enter into this Agreement by
         signing any other counterpart.

14.      AMENDMENT

         No variation or amendment of this Agreement shall be valid unless in
         writing and signed by or on behalf of the Pledgor and the Security
         Agent.

15.      ASSIGNMENT

15.01    The Pledgee may grant a participation in, make an assignment of,
         transfer or otherwise dispose of the whole or any part of its rights
         and benefits under this Agreement.

15.02    The Pledgor shall not assign or transfer all or any part of its rights,
         benefits and obligations under this Agreement without the Required
         Holders' prior written consent.

16.      NO WAIVER

No failure or delay by the Security Agent or the Required Holders in exercising
any right or power hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such right or power, preclude any other or
further exercise thereof or the exercise of any other right or power.

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17.      SEVERABILITY

The unenforceability of any provision of this Agreement shall not invalidate the
remaining provisions of this Agreement.

18.      SUCCESSORS AND ASSIGNS

All covenants and other agreements contained in this Agreement shall bind and
inure to the benefit of the respective successors and assigns of the parties
(including without limitation any subsequent holder of a Note or any of the
Secured Obligations).



               The remainder of this page is intentionally blank.

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IN WITNESS whereof the parties hereto have caused this Agreement to be duly
executed the day and year first above written.

PLEDGOR

SIGNED FOR AND ON BEHALF OF
CANARGO LIMITED


------------------------------------------

in the presence of:

1.  Witness: .............................

2.  Witness: .............................



PLEDGEE

SIGNED FOR AND ON BEHALF OF
INGALLS & SNYDER VALUE PARTNERS, LP


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Thomas O. Boucher Jr.
General Partner

in the presence of:

1.  Witness: .............................

2.  Witness: .............................

                                      S-1
<PAGE>

------------------------------------------
Nikolaos D. Monoyios

in the presence of:

1.  Witness: .............................

2.  Witness: .............................



------------------------------------------
Thomas L. Gipson

in the presence of:

1.  Witness: .............................

2.  Witness: .............................



------------------------------------------
Arthur Koenig

in the presence of:

1.  Witness: .............................

2.  Witness: .............................



------------------------------------------
Thomas L. Gipson IRA

in the presence of:

1.  Witness: .............................

2.  Witness: .............................

                                      S-2
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------------------------------------------
Evan Janovic

in the presence of:

1.  Witness: .............................

2.  Witness: .............................



------------------------------------------
Arthur Ablin

in the presence of:

1.  Witness: .............................

2.  Witness: .............................


Fledgling Associates, LLC
By:  Hartz Trading, Inc., Manager


------------------------------------------
Edward Stern
President

in the presence of:

1.  Witness: .............................

2.  Witness: .............................

                                      S-3
<PAGE>


------------------------------------------
Adam Janovic

in the presence of:

1.  Witness: .............................

2.  Witness: .............................



------------------------------------------
Neil Janovic

in the presence of:

1.  Witness: .............................

2.  Witness: .............................



------------------------------------------
Anthony Corso

in the presence of:

1.  Witness: .............................

2.  Witness: .............................



------------------------------------------
John Gilmer

in the presence of:

1.  Witness: .............................

2.  Witness: .............................

                                      S-4
<PAGE>

------------------------------------------
Martin Solomon

in the presence of:

1.  Witness: .............................

2.  Witness: .............................


SECURITY AGENT

AGREED AND ACCEPTED ON BEHALF OF
INGALLS & SNYDER LLC


------------------------------------------

                                      S-5
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                                    SCHEDULE

                        NINOTSMINDA OIL COMPANY LIMITED

                                   CERTIFICATE

It is hereby certified that a Memorandum has been made in the Register of
Members of NINOTSMINDA OIL COMPANY LIMITED ("the Company") to the effect that
the share certificates in respect of the shares described in the Schedule
hereunder have been pledged to INGALLS & SNYDER VALUE PARTNERS, LP together with
the other Purchasers listed Schedule A to the Note Purchase Agreement
(collectively, in such capacity "the Pledgee"), in accordance with the terms and
conditions of a Pledge of Shares dated July 25, 2005 due notice of the said
pledge having been given by the Pledgee to the Company accompanied by a
certified copy of the said Pledge of Shares.

It is further certified that we have not heretofore received any notice of
pledge in relation to the same shares.

                                    SCHEDULE

9,424 ordinary Shares of CYP 1,00 par value each, numbered from 1 to 9424 both
inclusive, held by CANARGO LIMITED, of Guernsey.


Dated this ....... day of ......................................., .............





                                            ....................................
                                            NINOTSMINDA OIL COMPANY LIMITED


                                    Schedule
<PAGE>


                                   APPENDIX A

Irrevocable proxy referred to in clause 4.01 (c)

The undersigned, being the registered owner of the one hundred percent of the
issued shares of NINOTSMINDA OIL COMPANY LIMITED (the "Company") hereby make,
constitute and appoint INGALLS & SNYDER LLC (the "Security Agent") the true and
lawful attorney and proxy of the undersigned with full power to appoint a
nominee or nominees to act hereunder from time to time to vote the number of
shares of the issued share capital of the Company set against our names at the
foot of this proxy at all annual and special meetings of the Shareholders of the
Company with the same force and effect as the undersigned might or could do and
the undersigned hereby ratify and confirm all that the said attorney or his
nominee(s) shall do or cause to be done by virtue hereof.

The said shares have been pledged to INGALLS & SNYDER VALUE PARTNERS, LP,
together with the other Purchasers listed on Schedule A to the Note Purchase
Agreement, pursuant to a Pledge of Shares dated July 25, 2005

This power of attorney and proxy is coupled with an interest and is irrevocable
and shall remain irrevocable as long as the Pledge of Shares is outstanding and
is in full force and effect.

Shareholder                                                   No. of Shares


CANARGO LIMITED                                               9,424 shares

IN WITNESS WHEREOF this instrument has been duly executed this .......... day of
................................, 2005

SIGNED, SEALED AND DELIVERED
by CANARGO LIMITED
in the presence of:

1.  Witness: .............................................


2.  Witness: .............................................

                                   Appendix A