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georgia

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  GEORGIA

REPUBLICAN REFERENCE

Area (sq.km)
69,700

Population
5,471,000

Principal
ethnic groups

Georgians 68.8%
Armenians 9%
Russians 7.4%

Capital
Tbilisi

Currency
Lari

President
Eduard Shevardnadze

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Background:
Georgia was absorbed into the Russian Empire in the 19th century. Independent for three years (1918-1921) following the Russian revolution, it was forcibly incorporated into the USSR until the Soviet Union dissolved in 1991. Russian troops remain garrisoned at four military bases and as peacekeepers in the separatist regions of Abkhazia and South Ossetia (but are scheduled to withdraw from two of the bases by July 2001). Despite a badly degraded transportation network - brought on by ethnic conflict, criminal activities, and fuel shortages - the country continues to move toward a market economy and greater integration with Western institutions.

UPDATE January 2002

The president of the Georgian republic, Eduard Shevardnadze, is in trouble for the first time in his tenure. People are getting fed up with the inept administration, the scale of corruption and the endlessly delayed benefits of reform.
Reform there has been. Recently there has even been growth, GDP rising in double figures last year. But this has had little effect on the pinched living standards of the mass of the population outside the capital, Tbilisi.
The disaffection came to a head in October when the government tried to close down an independent TV station, provoking street demonstrations and the resignation of several ministers, while some hotheads demanded that of Shevardnadze himself. But he is pre-eminently a survivor.
By now most of the population see him as a fixture and the one man who can give Georgia an international status. For he was after all the Soviet foreign minister under Gorbachev. He knows everybody and can talk to potential foreign investors as an experienced figure. Moreover, he is on warm personal terms with neighbouring presidents - the Russian connection being in a different category.
The problem is that the economy is in poor shape, booming but from a low base. The republic was disrupted by two civil wars in the early 1990s and there are still rumblings from one of them, in the breakaway province of Abkhazia. Moreover, there is a spillover from the Chechen conflict, with Chechen fighters operating from the mountains in the north, being blamed for downing a UN helicopter the other day, killing all on board, possibly from a mistake in identification, although there is no shortage of conspiracy theories.
Countries ravaged by civil war can take a long time to recover. That Georgia had 10% growth in GDP last year has not brought back prosperity (and it was one of the most prosperous republics of the old USSR).
The office of prime minister is to be created for the first time, which will give Shevardnadze the chance to groom a successor. Another major figure, Zurab Zhvania, the parliamentary speaker, resigned on November 1st. He has founded with the ex-justice minister, Mikheil Saskashvili, the "National Movement," which could become a political party. Zhvania is a young reformer, who is clearly preparing his own bid for the succession. Shevardnadze at 75 cannot expect to stand again in 2004, or rather to be sure of it. The race for his succession is already on.

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ENERGY

CanArgo invests US$17m in GAOR


CanArgo, an American-Canadian oil-refining company has announced its intention to modernise the Georgian-American refinery GAOR by investing an additional amount of US$71m in the company.
Citing official sources, Sarke News Agency has reported that the company believes that the production of low-octane fuels which is produced as a result of adding pirolize pitch, bought from Azerbaijan, to oil extracted in Georgia, is unprofitable.
Taking into consideration the ecological damage inflicted by the use of pirolize products, the company has announced its intention to re-equip the refinery in order to produce Normal and Super brand petrol. CanArgo in its reports on the performance in the past nine months, notes that the company's refinery operations are currently suspended pending resolution on certain issues relating to excise duties on produced product which has resulted in an unprofitable profile for the company.

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INTER-REGIONAL RELATIONS

Russian change may lead to break through on Abkhazia


Russia has changed its position on the breakaway Georgian region of Abkhazia, opening the way for a potential breakthrough in peace talks after nine years of conflict, a senior United Nations diplomat said on 10th December, the Financial Times has reported.
Dieter Boden, the special representative of the UN secretary-general in Georgia, said the five countries over-seeing negotiations - including Russia - had agreed a draft document recognising Abkhazia as a sovereign entity with the rule of law within the state of Georgia.
The move appears to reflect an important shift in Russian policy towards Georgia and Abkhazia, which has taken place at senior levels in the Kremlin in the wake of the September 11th terrorist attacks.
The document still requires approval by both the Georgian and Abkhaz authorities, but it could represent a significant change in relations between the countries in the Caucasus and a shift in policy towards Russia's own breakaway region of Chechnya.
Russia has long backed the separatist leadership of Abkhazia, where the currency is the rouble and it maintains a 2,000-strong peacekeeping force on behalf of the Commonwealth of Independent States.
Tensions between Russia and Georgia have flared up again in the past few weeks after Russian aircraft bombed the Pankisi Gorge on the Georgian side of the border with Chechnya.
That followed the movement over the summer of Chechen fighters into Abkhazia, in a move some observers say was implicitly supported by Georgian officials in an effort to stir up trouble and justify fresh Georgian military intervention. The ensuing scandal destabilised the government of Eduard Shevardnadze, the Georgian president.
Mr Boden said he had managed to achieve agreement in New York between the five-strong so-called "group of friends of the UN secretary-general" which oversees the Abkhaz negotiations. The group includes Russia, France, Germany, the UK and the US.
He said he would now submit the document for approval in the near future to the leaders of Georgia and Abkhazia, while indicating that he had already seen signs that they would be willing to negotiate.
The breakthrough follows a lengthy stalemate. A civil war starting in 1992 and an uneasy ceasefire in September 1993 led to a peace treaty in 1994 - the terms of which both Russia and Georgia have since violated.
Up until now, Abkhazia has refused to recognise that it is part of Georgia, formalising its independence in a referendum in 1999. The UN's position is that the territorial integrity of Georgia should be respected and it has called for the return of 250,000 or more people who fled the region.

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