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: 272 - (29/08/03)
The Georgian economy is picking up; GDP grew by 10% in 2000 and 4.5% last year, while inflation in 2001 came in at 3.3%, well under a 6% target for the year. But growth is from a very low base, due to the debilitating effects of two ethnic conflicts, one of which is still rumbling in Abkhazia, the north-western province.
A UN initiative, backed by Russia, might break the Abkhaz logjam. It declares Abkhazia to be part of Georgia and calls for the return of 150,000 refugees. The support of Russia is the key, now opposed to the independence, which the Abkhaz declared in 1999, obviously mindful of the parallel with Chechnya next door.
The Georgian president since 1992 has been the wily old fox, Eduard Shevardnadze, Gorbachev's right hand man as foreign minister until he resigned, warning of a coming coup, in December 1990. Everybody in Georgia knows and respects him as a sharp operator, who has the added advantage of an international profile. He puts Georgia on the map. However, there is a weariness in the population - a reaction to so many past years of depressed living standards and economic stasis perhaps now due to change at long last.
In January he 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. This bold conception is already being partly implemented, with an oil pipeline from Baku to Supsa on Georgia's Black Sea coast for the AOIC consortium in the Azeri sector of the Caspian 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.
Shevardnadze's vision tends to the grandiose, as befits someone who bestrode a great stage at the height of his power when the USSR was still indisputably No 2 to the US. Georgia is small beer by comparison. But at least he is in power.
However, at just turned 74 he cannot be expected to remain so for very much longer. The succession issue is one that everyone is conscious of in Georgia.
The republic had a crisis in October last year when the government tried to close down an independent TV station. People took to the streets, demanding and obtaining several ministerial resignations.
Shevardnadze reacted with dispatch, removing the offending ministers and creating the office of prime minister. Another major figure, Zurab Zhvania, the parliamentary speaker, resigned in November, but not in disgrace. He has founded with the ex-justice minister, Mikhail Sashashisbi, the National Movement, which could become a political party, Zhvania is a young reformer and clearly a candidate for the presidency sooner or later.
Another big figure is Miko Lekichvili, who left the State Minister's office in 1998. He must be the favourite to succeed, being the leader of the 'red directors' and new businessmen. He is free from the besetting vice of Georgian politicians, the charge of corruption. But he is not averse to those who are so charged, giving him considerable leverage over them. Another big figure is the Ombudsman, Nena Deviarian, a leader of the Socialist Party. Elections for the presidency are not on, however, until 2004.
Georgia to keep Russian natural gas and electricity imports
President Eduard Shevardnadze has announced the Georgia will continue to import natural gas and electricity from Russia, according to Interfax News Agency.
"We will always buy natural gas and electricity from companies in neighbouring Russia," the Georgian leader said. "We are actively cooperating with them and the cooperation will go on."
Georgian government confirms sale of power distribution company
The Georgian government has officially confirmed that the Russian joint-stock company, Unified Energy System, has bought the 75 per cent of shares the American energy company, AES, owned in the electricity distribution company],Telasi.
Minister of Fuel and Energy Davit Mirtskhulava told journalists on 1st August that AES had the right to sell the 75 per cent of shares it owned in Telasi, Prime News News Agency has reported.
At the same time, the chairman of the energy regulatory commission, Elizbar Eristavi, has said that under the 1998 agreement AES did not have the right to sell even a fraction of its shares without approval from the Georgian government.
He said that according to the agreement, the US company could sell its shares only five years after the purchase of Telasi. He also said that the Georgian government had not given this right to the US company.
FOREIGN ECONOMIC RELATIONS
Menargarishvili unconcerned about influx of Russian businesses
Georgia's course towards the Western markets will not be hindered by the entry of big Russian businesses into the country, Georgian Foreign Minister, Irakly Menagarishvili, said commenting on reports of heightened concern by opposition leaders, according to Interfax News Agency.
"All of Georgia's foreign policy measures comply with this position," Menagarishvili said in an interview with the news agency. With respect to stronger economic ties with Russia, Menargarishvili said: "If everything proceeds in accordance with the law and with due account taken of the two countries' interests, Tbilisi will welcome it." The minister added that economic ties with Russia will not obstruct his country's willingness to forge relations with the West and the Euro-Atlantic organisations.
"The Georgian leadership has stated on many occasions that good neighbourly relations with Russia are Georgia's geopolitical imperative, although that does not imply a departure from the strategy of integration with Europe or NATO, which is expected to strengthen Georgia's state system and security," he was quoted as saying.
Asked to comment on the US' reaction to the arrival of Russian gas giant, Gazprom, and utility, UES, in Georgia, Menagarishvili said: "There was no negative reaction. But we were given recommendations not to jeopardise other major strategic economic projects already in progress."
WB loan supports agro developments
The World Bank will allocate a US$15m loan to Georgia in 2003 for agriculture development, Interfax News Agency quoted Agriculture Minister, David Kirvalidze, as saying. The loan will be allocated for 40 years with a 10-year grace period at 0.755 annually.
The International Development Association (IDA), which is financing the project, has allocated a US$670,000 grant for preparation work. The funds will be put to use from September 2003.
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