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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 No: 267 - (27/03/03)
The hedgehog and the fox
The British philosopher, Sir Isaiah Berlin, who died five years ago, enunciated a theory of intellectual history, drawing on Ancient Greek mythology. There are two types of thinkers, hedgehogs, who know one big thing and relate everything else to it; and foxes who know many small things, at least small by comparison. The hedgehogs put all their eggs in one basket and so woe-betide them if they are wrong. The foxes may not be world-shattering figures; but statistically they have more chance of achieving something.
Well, applying this schema to politics today, there is one notable hedgehog on the scene, George Bush junior, and one pre-eminent fox, Eduard Shevardnadze of Georgia. Indeed 'the fox' is the Georgian president's knick-name in his own land. Bush and Shevardnadze have formed an uneasy alliance.
Bush has put all his eggs in a Pentagon basket; and he is going to break them to make an unholy Mesopotamian omelette. Actually, this is subservient to his one unique big idea; that the US now acquires "full spectrum dominance," i.e. rules the world. He is not engaged in nation-building, but planet-building.
For Georgia's neck of the woods this means the US having a military presence there to counter the al-Qaeda taking refuge in Chechnya. At first it looked as if Shevardnadze would go right over to the American camp, lock, stock and barrel. But the wily fox has not done so. He realises that once you let the Americans in they don't go quickly and that it can change everything for the host nation.
He is resisting the idea of the US having military bases totally under their control in Georgia. US troops are allowed in and offer material and training, but on Georgian terms. Basically these are to equip and train Georgian forces operating against terrorists in the Pansiki Gorge. No more.
World Bank to the rescue
The World Bank is offering help that would never be refused or qualified in the same way. It is talking of granting Georgia US$90m in financial and technical assistance packages in 2004-2006.
Officials from the World Bank's representative office in Georgia and the Georgian government discussed the strategy for the period at a recent meeting. The strategy calls for a SAC-4 structural adjustment loan to go towards public sector and executive branch reforms.
Georgia bids for 100% of Tbilaviastroi management
Georgia recently called a tender for the right to completely manage the state-owned Tbilaviastroi aircraft manufacturing company for 10 years. "The whole government-owned stake will be placed in trusteeship in a bid to forge closer ties with leading foreign aviation companies and to make products competitive on the external markets," Director General of Tbilaviastroi, Vazha Tordia, said, Interfax News Agency reported.
The winner of the tender must preserve Tbilaviastroi's profile, which are the design, production and repair of military and civilian aircraft. The trustee must also ensure that the company develops and produces new types of civilian industrial goods. The winner must invest US$20m in the 10 years, half of it in the first five, in new technology and management. Output must grow by at least 40% over the 10-year period, including 20% in the first five. The government undertakes not to sell, transfer or alienate the shares in any other way for the duration of the trusteeship without the consent of the trustee itself. The trustee and the property ministry may also agree to extend the trusteeship period.
IMF wants Georgia's cooperation in exchange for supporting debt rescheduling
The IMF is refusing to support Georgia at the Paris Club at this stage on the issue of deferring the beginning of the repayment of the country's main external debts for another year because the Georgian side has not fulfilled a number of obligations envisaged by an IMF programme, Prime-News News Agency has reported.
The head of the IMF mission to Tbilisi, Paolo Neuhaus, an aide to the director of the IMF's Second European Department, told journalists following the meeting behind closed doors with members of the Georgian cabinet that improving tax collection, structural reorganization of the government and reforms in the energy sector were still problems.
He said that the IMF would continue to cooperate with the Georgian government during the current year and it is the results of the cooperation that would determine the IMF's support for Georgia at the Paris Club....
Georgian Minister of State, Avtandil Jorbenadze, told journalists that cooperation with the IMF would continue. He said that the Georgian government would be successful in this area in the near future and this would ensure the support for the country at talks at the Paris Club.
Georgian minister says IMF against creation of free economic zones
The International Monetary Fund [IMF] is against the creation of free economic zones in Georgia, State Minister, Avtandil Jorbenadze, told journalists on 3rd March after a meeting with representatives of an IMF mission that was visiting Tbilisi, Prime-News News Agency has reported.
Avtandil Jorbenadze noted that, according to the IMF position, the creation of free economic zones will create additional problems for Georgia.
The Revival parliamentary faction has already submitted a draft law to the highest legislative body on the creation in the country of free economic zones. Seventy-nine votes of parliamentary deputies are required for it to be adopted.
As Hamlet Chipashvili, a Revival faction representative told Prime-News, his faction supported the draft law of the Democrats' faction raising the minimum wage to 115 lari and hopes that the Democrats will support the Revival initiative on introducing free economic zones.
FOREIGN ECONOMIC RELATIONS
Russia, Georgia propose economic projects to help resolve Abkhaz conflict
The Russian and Georgian presidents, Vladimir Putin and Eduard Shevardnadze, have proposed economic projects as a way to help Georgia settle its conflict with its breakaway Abkhaz region, Interfax News Agency has reported.
Putin and Shevardnadze voiced their proposals during meetings in Sochi. An Abkhaz delegation led by Gennadiy Gagulia took part in discussing practical points related to the issues, a summary statement on the summit said on 7th March.
The statement says Putin and Shevardnadze discussed Russian-Georgian cooperation, the Georgian-Abkhaz conflict and international and regional issues. They advocated the earliest possible completion for the drafting of a Russian-Georgian framework treaty.
They singled out as priorities the return of refugees to Abkhazia, above all to its Gali District, the launching of direct railway traffic between Sochi and Tbilisi, modernization of Georgia's Inguri hydroelectric power plant and the drawing up of plans to build other hydroelectric plants in the upper reaches of the Inguri river, possibly with foreign investment.
The statement says Sochi-Tbilisi rail traffic will be opened in parallel with the return of refugees to Abkhazia. Commissions will be appointed to tackle these matters.
The presidents expressed confidence that economic projects "would help to build confidence between the Georgian and Abkhaz sides, to stabilize the situation and to resume negotiations on a full-scale settlement of the conflict."
Georgia courts foreign investors for domestic energy sector
Georgia, already working to establish itself as a transit route for Caspian Basin energy exports, is also looking to develop its own oil and gas potential. Tbilisi is preparing to host a major energy development conference March 13th-14th. Georgian officials hope the meeting will help the country's domestic energy industry overcome scepticism on the part of major oil conglomerates, eurasianet.org has reported.
Giorgi Chanturia, president of the Georgian International Oil Corporation (GIOC), says the second annual Georgian International Oil, Gas, Energy and Infrastructure Conference (GIOGIE) aims to establish links between Georgian and foreign companies and to showcase Georgia as a potentially lucrative opportunity for energy investors.
Georgia is mainly known as a transit country for Caspian oil and gas. The Baku-Tbilisi-Ceyhan oil pipeline and South Caucasus Pipeline, which will transport natural gas from Baku through Georgia to Erzurum, will require investments totalling an estimated US$3.9 billion. Only a small percentage of this investment will benefit Georgia. Yet, the projects constitute the largest investment programmes in the country.
Georgia's oil and gas industry holds comparatively little interest for investors. Georgia has potential resources of some 2 billion tons of oil, said Nika Chitadze of the State Agency for the Regulation of Oil and Gas. Proven reserves, however, are a modest 5 million tons. In 2002, Georgian oil production amounted to 73,900 tons - 25.2 per cent less than the previous year. Besides oil, there may be about 125 billion cubic metres of gas in Georgia, with proven reserves of 8.5 billion cubic metres.
According to a source within one of the oil companies active in Georgia, foreign companies already engaged in energy development in Georgia tend to be smaller players on the global market. These firms are searching for partners to share in the financial risks associated with energy exploration and development. But, the source adds, with huge oil and gas reserves in nearby Azerbaijan and Kazakhstan, Georgian officials, along with these smaller Western companies, are finding it difficult to interest major energy companies in investing.
The foreign firms active in Georgia include: US Frontera Resources Corp.; Canadian CanArgo; British JKX; Swiss National Petroleum; and German GWDF. The Swiss and German companies have formed joint ventures with the Georgian State Oil Company, Saknavtobi, plus the US-based Anadarko Petroleum Corp.
According to Chitadze, the outlook for Georgia's Black Sea potential is "positive." But in the event that high hopes are confirmed by proven reserves, drilling in the Black Sea would require considerable investment. "A large, modern rig will have to be brought into the Black Sea via the Bosporus. And the bridges there will make it necessary to saw the derrick off first - adding to the costs," the source explained. Anadarko declined to comment on its Black Sea project although a spokesperson confirmed that they were "doing something" concerning Black Sea exploration.
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