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GEORGIA



 

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Key Economic Data
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 3,937 3,324 3,100 126
         
GNI per capita
 US $ 830 650 590 145
Ranking is given out of 208 nations - (data from the World Bank)

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Update No: 316 - (26/04/07)

Dire predicament
Georgia's economy is in dire straits, having experienced a contraction in the 1990s that was the worst in the FSU, bringing GDP per capita down to under 30% of the 1989 level. That has certainly not yet been regained. 

It is beset by frigid relations with Russia, that make for very cold spells in winter, as Moscow cuts off the gas.
That is why it is looking further afield for allies.

NATO entry named soon
President Mikhail Saakashvili has no doubts that Georgia's integration into NATO is inevitable. He expects Georgia to be named an official candidate within a year, he declared at the opening of the three-day NATO Parliamentary Assembly's 65th Rose-Roth seminar hosted by Tbilisi. 
"We are waiting for a positive decision for Georgia to become an official candidate for NATO membership, receiving a Membership Action Plan [MAP] within the year with the role of the MPs here being decisive," Saakashvili stated to the conference participants. 

The president said Georgia will complete the Intensified Dialogue stage in autumn and said the last NATO missions had yielded extremely positive conclusions. He boasted that Georgia had perfectly implemented the technical part of its plan, so it was time for political decision-making. He expressed hope that the decision would be made by those politicians "capable of giving positive answers to the most serious issues". 

In the same context, Saakashvili warned no matter what obstacles Russia tries to put in Georgia's way they will not be deterred on their course towards NATO. He said, "Our course isn't based on the price put on our gas." He says, of course, Georgia is not a rich country but sometimes a country has to follow higher principles along a more difficult path rather than always looking for short-term solutions. 

Saakashvili emphasized the majority of Georgians support accession into the alliance, including ethnic minorities, and most opposition forces pointing to the declaration adopted in March by the Georgian parliament.

The President declared that Georgia is ready to reconnect with Europe and now the country is coming to a very historical moment close to fulfilling this dream, "this [dream] will be fulfilled by our generation of politicians, through your assistance and recommendations," Saakashvili addressed the seminar audience. "It's notable that not only Georgia needs NATO, but NATO needs Georgia as well," he added.

In his half-hour address, the president touched on his administration's "successful" reforms and issues related to Georgia's secessionist conflicts. According to the president, the key to the solution of the conflicts is the unconditional return of the IDPs to their homes.

Saakashvili's new plan for South Ossetia 
One bone of contention with Russia is South Ossetia, where the majority crave to join Russia, with its oil and gas wealth, whereas Georgia's penury is plain.
Nevertheless, Saakashvili believes he has found a way to break the stalemate over the renegade territory of South Ossetia, enabling Tbilisi to re-establish its authority there. But Russian officials warn that Saakashvili's latest maneuvre will likely inflame tensions in the region. 

Saakashvili presented a reshaped peace plan for South Ossetia in late March, the central element of which is the creation of a new Georgian administrative entity on South Ossetian territory. Prior to the separatist fighting in the early 1990s that left South Ossetia beyond Tbilisi's control, the territory enjoyed the status of an autonomous republic. Saakashvili's initiative would re-establish a formal connection between Tbilisi and roughly 40 percent of South Ossetian territory, encompassing villages inhabited primarily by ethnic Georgians. 

Although the initiative is not yet a law - it passed on its second reading in parliament on April 11 by a 162 -1 vote - Saakashvili has already tapped South Ossetia's alternative, de-facto leader, Dmitri Sanakoyev, to head the administrative body. According to media reports, final passage of Saakashvili's initiative should come within days. 

As currently formulated, the draft law specifies that the new administrative entity should serve as a vehicle for: the "peaceful resolution of the conflict; restoring constitutional order in the area; protecting the rights and interests of people and ethnic groups living there; and creating appropriate conditions for democratic elections." 

Last November, Sanakoyev was elected as the leader of South Ossetia's Georgian community in an unrecognised election. He proceeded to establish an 'alternative' government in Kurta, a village four kilometres to the north of Tskhinvali, the capital of the separatist South Ossetian leadership. Saakashvili visited Sanakoyev on March 19, noting that the alternative de-facto leader has a "unique opportunity" for peace. 

Tbilisi has stopped short of recognizing Sanakoyev's administraton as a legal political entity in South Ossetia, preferring to refer to him through his political movement, South Ossetian People For Peace. In an interview with Vremya Novostei on April 5, Gela Bezhuashvili, the foreign minister, noted that South Ossetian People For Peace has a "constructive attitude," contrasting sharply with an attitude in Tskhinvali that is "plainly destructive." 

"We are prepared to continue the talks with our Abkhazian and South Ossetian compatriots, but the separatists turn down all our suggestions and put forth patently impossible demands," Bezhuashvili told Vremya Novostei. "South Ossetian People For Peace, the movement headed by Sanakoyev, is an organization promoting interaction." 
Sanakoyev's de facto prime minister, Uruzmag Karkusov, maintains that Saakashvili's initiative will give Kurta-based authorities the ability to create the political and economic conditions necessary for peace. "We are working [already] four months, and in those four months we have started to realize projects that our opponents did not start to realize in 16 years," he told EurasiaNet in a telephone interview. "So to say that we can't do anything is not correct." 

Russia, which serves as the South Ossetian leadership's chief sponsor, has heaped scorn on Saakashvili's plan. In a statement published March 29, the Russian Ministry of Foreign Affairs accused the Georgian government of attempting to sabotage the peace process and referred to the proposal as criminal. The Russian ambassador in Tbilisi, Vyacheslav Kovalenko, expressed concern that the move will whip up an already hostile atmosphere, possibly causing a "new surge in hostilities," the Russian business daily Kommersant reported on April 12. "It's a serious step. I don't think it was made in the right direction," Kommersant quoted Kovalenko as saying. 

The South Ossetian leadership, headed by Eduard Kokoiti, has let it be known that it will not engage Sanakoyev, or any other representative of the movement he leads, in talks about the territory's future. 
Saakashvili's move is not universally popular in Tbilisi. Gocha Jojua, a MP with the opposition National Forum party, was one of two votes against the draft law during the first parliamentary vote on April 5. Jojua maintains the initiative is nothing more than a "PR campaign" that will not enhance the peace process. 

While members of the Georgian government maintain they will continue to negotiate with Kokoiti, Théa Kentchadze, project manager at The Georgian Foundation for Strategic and International Studies, noted it will be "very difficult" to balance both sides. "In the light of this draft law it would be difficult to balance the two tracks - further engagement with the Tskhinvali de-facto government, and continuous support of Kurta authorities," she said. 
Kentchadze noted that the success of Saakashvili's latest peace plan will depend heavily on support from the international community - which to date has been wary of acknowledging Sanakoyev. According to her, the international community is currently in "waiting mode," wanting to see evidence of progress toward peace before throwing its support behind the initiative. 
"Any attempt, any development that will clarify the situation more, any event that will prove that the Sanakoyev government is better at responding to the needs of the population _ the international community will see that," she said. "There is a lot of pressure to make this initiative a success story and I believe that everyone [in the Georgian government] recognizes this." 

Saakashvili on successful reforms
If Georgia is to recapture any allure for the South Ossetians, however, its economy will have to improve. This will not be easy. 
Nevertheless, Saakashvili said while addressing the NATO Parliamentary Assembly's 65th Rose-Roth seminar in Tbilisi that Georgia is one of the leading countries in terms of implementation of reforms.
Georgia has become not only a real state in a very short period of time, but it has become one of the most rapidly developing and interesting countries in terms of reforms. And this is confirmed not only by the fact that the World Bank ranked Georgia number one reformer," President Saakashvili said on April 19. 

He said Georgia has huge plans and "we want Georgia to become Hong-Kong, Singapore or Dubai in this region [Caucasus]." This is rather far-fetched; all three are maritime powers on the world's great seas, whereas the Black Sea is a backwater. Still that may change.
"We will continue to implement radical reforms and I am glad that many countries are also implementing the reforms similar to those ongoing in Georgia... Georgian people and its consolidated leadership expressed a political will to implement reforms and we will continue these reforms to yield particular results," Saakashvili said. 

He also spoke about the recently observed integration of various nationalities in Georgia. 
"Hundreds of thousands of people, who are not ethnic Georgians, learnt the Georgian language; they felt for the first time - all these ethnic Azerbaijanis, Armenians, Russians, Ukrainians, Estonians and others - that they are members of this uniform state and all of them have an important function in developing our country," Saakashvili said. 
He also stressed a role of Georgian non-governmental organizations in the successful development of Georgia. 
"This is the strata of the society, which has a moral influence on public development and public interests... These people are very important allies for any democratic authorities of Georgia," President Saakashvili added. 

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ENERGY

Three foreign companies search for gas, oil in Georgia

Kazakstan's Akcai BMC and two British companies - Global Oil and Energy and Strait Oil and Gas - have begun searching for oil and gas in Georgia after winning an international tender, Andro Kotetishvili, head of the Georgian state agency's oil and gas resources regulation department, said, Interfax News Agency reported on April 5th.
These companies have signed agreements stipulating that they are receiving licenses to carry out activities at specific geological locations for a period of 25 years, he said. In accordance with the terms of the agreement, the companies are to invest more than US$150 million in these projects over the first four years they are operating. The companies will be responsible for reviving oil wells and drilling new ones at their respective sites. Akcai BMC has received the right to explore the V block covering 5,770 square kilometres. Strait Oil and Gas Ltd, registered in Gibraltar, will explore the VI-A and VI-B blocks, covering respectively 3,300 and 3,470 square kilometres. Global Oil and Energy Ltd will explore the VII-B and VIII blocks that cover 1,175 square kilometres and 4,760 square kilometres.

Development of energy and transport corridors in the Caucasus

Kazakstan is increasing its presence in the Caucasus through aggressive promotion of its business and investments in that region. This is the conclusion that can be drawn from the outcome of the visit of the Kazak Prime Minister, Karim Masimov, to Baku and Tbilisi on April 3-4th, New Europe reported.
There will be enough oil for all. The main items on the agenda of the Kazak premier’s discussions in Azerbaijan and Georgia concerned the development of energy and transport corridors, in particular, the delivery of Kazak hydrocarbons to the international markets.
Kazakstan produces about 68 million tonnes of oil a year. In five to seven years the production will more than double to reach 150 million tonnes. With this prospect in mind, Astana is looking at all possible routes to move its oil and gas.
The much talked about diversification of supplies will become a reality in a year or a year-and-a-half. Already up and running is the Baku-Tbilisi-Ceyhan oil pipeline, and another pipeline is on the way: Russia is planning to build a pipe from Bourgas to Alexandroupolis in a record time. These two pipelines can be expected to compete fiercely in the future. 
In this connection, Masimov indicated that Kazakstan had no intention to give up the old routes that go through the territory of Russia: “All aspects of transportation of energy resources will be regarded from the point of view of all interested parties in the Caspian region.”
Anyway, there’s hardly any reason for all interested parties to be concerned about it. In a private discussion with New Europe during the Kazak premier’s visit in the Caucasus, one of the Kazak oil experts assured: “By 2015, we will have so much oil that it will be enough for everyone! And we will require the capacities of all the existing and future pipelines.”
So the priority question for discussion during the Kazak Prime Minister’s visit to Caucasus was not how to transport such strategic goods as oil, gas and grain through that region (the development of the transport routes has come to a practical stage), but how economic it will be.
By the way, in Tbilisi this theme made the headlines of the Georgian newspapers. For instance, the Batumi oil terminal (50 percent of which is owned by KazTransOil) has lost US$ one million this year alone because of the high tariff. The Georgian media believe that Azerbaijan is responsible for this situation by establishing high transit rates in its territory. 
The Kazak side has initiated the adoption of a reasonable tariff policy. And one of the main results of the Kazak Prime Minister’s visit to Caucasus was that for the first time in the history of the independent former Soviet republics the heads of the three governments sat down at a meeting table in Baku to resolve a common problem. Good that both Tbilisi and Baku showed their commitment to find a mutually acceptable solution to the issue. A transport tariff reduction meeting of representatives from Kazakstan, Azerbaijan and Georgia is now scheduled to be held in Aktau in May of this year. 
But prior to that, the Azerbaijan’s Prime Minister, Artur Rasizade, will pay a return visit to Astana where discussions on this theme will be continued. The climax of these discussions will be a meeting of the heads of Kazakstan and Azerbaijan, Nursultan Nazarbaev and Ilham Aliev, which is planned for this summer. 
“I am sure that the forthcoming visit of the President of Azerbaijan to Kazakstan will give a new impetus to our relations,” Masimov concluded.
However, it would be wrong to say that the visit of the Kazak prime minister to Caucasus dealt only with energy and transport. Trade, finance, tourism, and agriculture are the areas for possible cooperation.
For the first time, a governmental delegation included a considerable contingent of Kazak businessmen. They have ambitious plans for expansion of their presence in Caucasus. For instance, the head of AO Astana Group, Nurlan Smagulov, told the journalists that, based on an analysis of the Azeri and Georgian markets, they have decided to build, in Baku and Tbilisi, supermarkets similar to the mega-centre that opened recently in Almaty. “We also plan to build there a pasta factory that will use Kazakhstan grain which is famous for its quality,” he added.
Kazakstan’s bankers, as well, talk about their advance into Caucasus. The ex-chief banker of Kazakstan, Grigori Marchenko, told New Europe that Halyk Bank is planning to open its branches in Baku and Tbilisi to finance major joint projects. Such projects will include the construction of four- and five-star hotels along the Black Sea coastline, residential complexes, and industrial facilities. In this connection, there is a telling example: Georgia has allocated a lot in the very heart of Tbilisi to a Kazak investor for construction of a Radisson hotel. 
On the whole, according to the statistics department of Georgia, Kazakstan is among the three major investors in that country apart from Great Britain and the United States. The share of these three countries in the total investments is almost 50 per cent. In particular, British investments in 2006 were US$182.1 million, US’s – US$181.9 million, and Kazakstan’s – US$152.3 million. 
If the implementation of the plans of Kazak businessmen are successful and the major projects that Kazakstan’s President, Nursultan Nazarbaev, and his Georgian counterpart, Mikhail Saakashvili, have agreed on –- a grain terminal in Poti and a refinery in Batumi – are realised, Kazakstan is likely to become the first among the three leaders.
“But I am more concerned about exports. We should come to the Caucasus not only with our money but also with our goods,” the Kazakstan’s Minister of Industry and Trade, Galym Orazbakov, told New Europe.
According to him, with all the dynamics, the goods turnover between our three countries is well below its potential. For example, the goods turnover with Azerbaijan is USD 147 million, with Georgia – about US$45 million.
“This is miniscule! And the reason for this is that we do not have sufficient information about the needs of these countries. It appears Georgia imports 100 million worth of cotton alone, and US$50 million worth of printing production. Our businessmen could provide these goods, too,” Orazbakov said. 
To fill the information and organisational vacuum, a national counsel for competitiveness will be set up. This is a project of the Kazak Ministry of Industry and Trade. The new structure will include representatives of public and private businesses.

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