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GEORGIA



 
Key Economic Data
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 3,324 3,100 3,000 124
         
GNI per capita
 US $ 650 590 590 151
Ranking is given out of 208 nations - (data from the World Bank)

REPUBLICAN REFERENCE

Area (sq.km)
69,700 

Population 
4,989,285 

Principal 
ethnic groups 
Georgians 68.8%
Armenians 9% 
Russians 7.4%

Capital 
Tbilisi 

Currency 
Lari

President
Eduard Shevardnadze

  

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 No: 274 - (27/10/03)

The Chechen problem
Georgia is in. the forefront of world politics. A military alliance has been forged between the Georgians and the Americans. The US immediately after 9:11 sent 10 helicopters and other equipment, plus 200 Special Force troops to train and assist the Georgians in anti-terrorist operations. Two years later there are still thought to be a number of al-Qaeda members remaining in the lawless Pankisi Gorge in the north-east of Georgia, who have fled from Afghanistan and sought refuge there. The gorge, in wild country has long been suspected by the Russians of harbouring Chechen fighters.
It has certainly been the refuge of 2,000 or more Chechen civilians. In the aftermath of victory for the pro-Russian candidate in the elections to the Chechen presidency on October 5th, Akhmad Kadyrov, there were hopes that some of the refugees could be persuaded to return to Chechnya. The problem is that they still have every reason to fear for their security back home, the very reason they fled in the first place.

US ousting Russia
The Russians, who have four military bases in Georgia and have long viewed it as in their `sphere of influence,' are still highly distressed at the US intrusion into it. But there is little they can do about it. Putin realised this in the first place quicker than his top brass, chastened by his experience in September 2001 when he at first urged the Central Asians not to allow the Americans in, only to find that they fully intended to and there was nothing he could do to prevent it.
The US move into Georgia needs to be seen in a wider context. It certainly portends a re-alignment of power away from Russia and towards the US within the former's own sphere of influence. It is the decisive moment at which the Central Asian states and now the Caucasus ones are attaining and showing their independence. There has been a whole string of visits by Rumsfeld, Tommy Franks, US C-in-C for the region, and many others to Armenia and Georgia, the two states formerly most under the Russian umbrella. The US is diplomatically speaking of all this activity as 'temporary' (to help Putin with his hardliners), but in private officials admit it is for the long term.
The Caucasus is important of course for its energy and Georgia as a transit route for Caspian Sea oil to world markets independent of Russia. Georgia is now the centre of attention in the Caucusus, as the vital corridor for black gold, oil, to flow from the Caspian Sea to the Black Sea and beyond. That is making it the key battlefield in the region between Russian and American geopolitical interests.
For the last two years it looked as if the US was having everything its own way. The Georgians are keen to cooperate in the US campaign against terrorism and if any al-Qaeda fugitives are captured, they are handed over to the Americans.
The US military presence is obviously primarily directed at securing energy routes. The flow of oil from the Caspian is what is at stake.

Russia strikes back with energy deals 
The Russians have found a more effective way of striking back at the new US military presence in the region than just insisting on boosting their own bases there. They are countering US encroachment by a subtle strategy of their own.
This summer over a period of two weeks two meetings transferred control of Georgian energy infrastructure to the Russian government. The first, held in July, was between Alexei Miller, head of Gazprom, and the Georgian minister of energy, Davit Mirtskulava, ending in an agreement to give Gazprom wide-ranging powers to modernise and eventually control Georgia's gas pipeline system and distribution from it.
The second held in August, was again in Tbilisi, held between Anatoly Chubais, head of United Energy Systems, a massive conglomerate in which, as with Gazprom, the Russian government is the main shareholder, and the energy ministry. It resulted in the Russian acquisition of 75% of the Telasi energy distribution network, which supplies electricity to Tbilisi and parts of Turkey. This gives the Russians a stranglehold over the energy system of the country, one which they have not scrupled to use in the past to bring about shortages in winter to press their geopolitical agenda in the region.
The vital question is the bearing these deals will have on two projects, the Baku-Ceyhan oil pipeline taking Caspian Sea oil to Turkey and beyond going via Georgia, and the planned export gas pipeline transiting Baku to Erzurum in Turkey. They are key to the future of Europe's energy future.
As two recent analysts well put it, Ilan Berman and Artem Agoulnik of the American Foreign Policy Council, the EU and the US " have paid far too little attention to securing the independence of the Georgian energy system, Moscow has not made the same mistake. And now that it has acquired sweeping control over Georgian energy, the real question is no longer whether Georgia can remain a reliable ally of the West. It is whether it can do so without heat and in the dark."
This may seem a melodramatic way of putting things. But it helps explain why Washington and the EU capitals treat Moscow with such kid gloves over Chechnya. There are more important matters happening in the Caucasus for the hard-headed planners of the West.

Shevardnadze's compromise
President Eduard Shevardnadze, formerly Gorbachev's right hand man as Soviet foreign minister, has suggested a compromise. He has proposed that Georgia become a pivot of a common energy system for south-east Europe. The system "should be formed with the participation of Russia, Ukraine, the Balkan countries, Azerbaijan, Turkey, Armenia, Moldova and other more distant countries," he says. "Georgia will gain a lot if it initiates the common energy system." Georgia's role would be to be the country across which energy pipelines would flow from the Caspian Sea to world markets in several different directions. 
This bold conception is already being partly implemented, with the oil pipeline from Baku to Supsa on Georgia's Black Sea coast for the AOIC consortium in the Azeri sector of the Caspian Sea. The oil then goes in tankers across the Black Sea. But it faces a rival in Russia and its desire to see Caspian Sea energy flow to Russian Black Sea ports or across the expanse of the Russian Federation to Europe. It remains to be seen if a spirit of cooperation and compromise will prevail.

Coming elections
James Baker, the former US Secretary of State, came to Tbilisi in early July to meet the president and coordinate Georgian-US policy. On the agenda was not just the fight against international terrorism, but the upcoming parliamentary elections in Georgia, to be held on November 2nd. It is important that they are seen as free and fair. Baker presented a ten-point proposal, now known as the "Baker Scorecard." President Sheverdnadze accepted it. The most important point is that the Central Election Commission (CEC) should be reconstituted with the opposition appointing nine members and the government five, while a respected non-political figure should be chosen by the OSCE as the CEC chairman. 
The Georgian parliament, however, disliked this proposal and seemed bent on watering it down. Parliament truncated the plan later, full as it is of unpopular tycoons and fixers
Referendum on downsizing of number of MPs proposed
They are also likely to look askance at the idea of a referendum to be held at the same time as the elections on whether their numbers should be reduced.
A plan to hold a referendum to cut the number of deputies to 150 from 235 with Georgia's parliamentary elections on November 2nd has put a smile on President Eduard Shevardnadze's face. Shevardnadze told national radio that by approving the referendum, he "was guided by the interests of voters, most of whom, up to 90 per cent, support the suggestion on cutting the number of deputies." The state leader said the new parliament must give a green light to make this plan fruitful. "Georgia's new parliament will also have to look into some other proposals, which include creating a bicameral parliament and introducing a cabinet of ministers," he said.

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AVIATION

British firm in talks with Georgians on purchase of 12 small aircraft

A group of British businessmen arrived in Georgia on 6th October to negotiate with the management of the Tbilaviamsheni joint-stock company [aircraft factory in Tbilisi] the purchase of 12 five-seat business aircraft assembled at the Tbilisi factory that are similar to the American Maverick jet, Prime-News News Agency was told by Tbilaviamsheni Director-General, Nodar Beridze. 
"Negotiations are under way on concluding an agreement," he said, adding that "the aircraft price is dictated by the market." The price of the American business aircraft exceeds US$1m and, according to Beridze, the quality of aircraft assembled in Tbilisi is not inferior to that of the American jet. He said that the British group was not interested in buying the Scorpion upgrade of the Su-25 attack aircraft, manufactured in Tbilisi with the help of the Israeli company, Elbit.
Beridze said that other countries had shown interest in buying the attack aircraft, although he did not specify which.
The Tbilisi aircraft factory opened in 1941. In Soviet times, apart from attack aircraft, it manufactured cruise missiles and other military equipment.

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ENERGY

Trouble for Itera supplies to Georgia via Uzbekistan

Itera may lose the contract for continuing natural gas supplies to Georgia from Turkmenistan, which it has been carrying out since 1996, New Europe reported, quoting a source in the Georgian government office who was commenting on a letter received the previous day by the Georgian President, Eduard Shevardnadze, from the Uzbek President, Islam Karimov. 
In his letter the Uzbek president warned his Georgian colleague that, in the near future, Itera will not be able to transport gas from Turkmenistan to Georgia through the Uzbek pipeline, as the function of operator for Uzbek gas transit has been transferred to Gazprom. The letter said Itera's right to transport gas through Uzbek territory expires at the end of 2003. "It is not ruled out that from January 2004 Itera will no longer be able to supply Georgia with Turkmenistani gas through our pipeline," the Uzbek president said.

Russia to supply power to Georgian capital in winter "without interruption"

Unified Energy System of Russia [UES] is ready to supply electricity to Tbilisi without interruption. Telasi's [Tbilisi power grid] debt to Russia for March alone amounted to US$3.15m.
Despite this, UES has agreed to guarantee a steady supply of electricity to Tbilisi throughout the winter, it was announced by the fuel and energy minister at a news conference on 12th October, Rustavi-2 TV has reported. 
Mamuka Nikolaishvili had just returned from Moscow where he attended a meeting of CIS energy ministers and also met UES chief, Anatoliy Chubais.

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FINANCIAL NEWS 

Planned talks between Georgia and IMF not to take place

The International Monetary Fund (IMF) board of directors will not consider the Georgia issue in Washington on 12th October.
Deputy State Minister of Georgia, Giorgi Isakadze, told Kavkasia-Press that, despite an agreement to do so, the Georgian side did not send a delegation to Washington and, therefore, the consideration of the Georgia issue has been postponed.
Georgia has already started bilateral talks with creditor-countries on debt rescheduling. Georgian Finance Minister, Mirian Gogiashvili has signed an agreement with his counterpart in Azerbaijan on the rescheduling of Georgia's US$16.5m debt to Azerbaijan. Talks with Kazakstan are under way.
The head of parliament's Budget Office, Roman Gotsiridze, has told Kavkasia-Press that the reason for a Georgian delegation not going to Washington is that the recommendations of the IMF have not been fulfilled. "The Georgian side has not fulfilled a single recommendation. Obtaining assistance would be impossible in this case, something the government knows well," he said.

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