Economy Minister Claims Georgia's Tourist Numbers up 17% Since

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Issue no: 876/43 • SEPTEMBER 6 - 8, 2016 • PUBLISHED TWICE WEEKLY PRICE: GEL 2.50

In this week’s issue... Sparklabs Founder on Georgia, the "California of the Caucasus" PAGE 2 Georgian Pension Reform – an Experiment in Libertarian Paternalism? ISET PAGE 4 5-Star Hotel FOCUS Planned for ON AGRICULTURE Georgia’s Prior to stepping down, Agriculture Minister Otar Danelia Kakheti Region sums up a term of achievements PAGE 9 PAGE 5 ProCredit: Economy Minister Claims Georgia’s Living Green Finance Tourist Numbers Up 17% Since January PAGE 7

BY THEA MORRISON New Geopolitical Reality in the South Caucasus & The

ore than 4 million tourists Georgian Dilemma have visited Georgia during since January 1, Vice Prime Minister and Min- ister of Economy Dimitry MKumsishvili reported on Friday. Kumsishvili added that the number of tourists visiting the country had increased 17.4 percent since the start of the year He also said the National Statistics Ofﬁ ce of Georgia had registered 5.9 million foreign visitors arriving in Georgia since January 1, a 7 percent year-on-year increase. Continued on page 2 POLITICS PAGE 12

Prepared for Georgia Today Business by Markets Asof02ͲSepͲ2016 STOCKS Price w/w m/m BONDS Price w/w m/m BankofGeorgia(BGEOLN) GBP29.32 +2,6% +9,4% GEOROG04/21 105.25(YTM5.45%) Ͳ +1,1% GHG(GHGLN) GBP2.95 +15,7% Ͳ4,8% GEORG04/21 112.24(YTM3.94%) +0,2% +0,9% TBCBankGroup(TBCGLN) GBP11.38 +6,3% na GRAIL07/22 112.31(YTM5.27%) +0,2% +0,7% BGEOLN07/23 102.88(YTM5.49%) +0,1% +2,2% COMMODITIES Price w/w m/m CrudeOil,Brent(US$/bbl) 46,83 Ͳ6,2% +12,0% CURRENCIES Price w/w m/m GoldSpot(US$/OZ) 1325,21 +0,3% Ͳ2,8% GEL/USD 2,2870 +0,1% Ͳ2,7% GEL/EUR 2,5469 Ͳ0,5% Ͳ3,3% INDICES Price w/w m/m GEL/GBP 3,0483 +1,6% Ͳ2,8% FTSE100 6894,60 +0,8% +3,7% GEL/CHF 2,3363 Ͳ0,0% Ͳ4,0% FTSE250 18016,45 +0,5% +5,6% GEL/RUB 0,0350 Ͳ0,8% Ͳ0,3% DAX 10683,82 +0,9% +5,3% GEL/TRY 0,7749 +0,1% Ͳ1,3% DOWJONES 18491,96 +0,5% +1,0% GEL/AZN 1,3499 Ͳ0,1% Ͳ8,0% NASDAQ 5249,90 +0,6% +2,2% GEL/AMD 0,0048 Ͳ Ͳ2,0% MSCIEMEE 127,53 Ͳ1,1% +3,7% GEL/UAH 0,0858 Ͳ4,3% Ͳ9,5% MSCIEM 899,61 Ͳ0,2% +2,6% EUR/USD 0,8964 +0,4% +0,6% SP500 2179,98 +0,5% +1,1% GBP/USD 0,7522 Ͳ1,2% +0,5% MICEX 2003,77 +0,5% +4,8% CHF/USD 0,9809 +0,3% +1,7% MSCIFM 2565,61 Ͳ0,5% Ͳ0,1% RUB/USD 65,1577 +0,9% Ͳ2,5% GTIndex(GEL) 842,35 +5,6% Ͳ0,0% TRY/USD 2,9512 Ͳ0,1% Ͳ1,3% GTIndex(USD) 725,46 +5,3% +2,4% AZN/USD 1,6800 +0,4% +4,0% GEORGIA TODAY 2 BUSINESS SEPTEMBER 6 - 8, 2016 Economy Minister Sparklabs Founder on Georgia, the Claims Georgia’s Tourist Numbers Up "California of the Caucasus" 17% Since January Continued from page 1 BY NINO GUGUNISHVILI The majority of visitors came from EU members Latvia, the Czech Republic and Hungary. The number of travellers arriv- tartup Georgia is a part of the ing from Russia, Israel, Kazakhstan, Iran, State’s Partnership Fund, imple- Jordan and Saudi Arabia also increased mented with the support of the signifi cantly. Ministry of Economy and Sus- Kumsishvili credited the substantial tainable Development of Geor- growth in the tourism industry to an giaS and Georgia’s Innovation and Tech- online campaign launched by the National nology Agency. At the end of August the Tourism Administration. winners of a competition for funding “During the last eight months, more were announced. Experts from the US’ than 200 articles, blogs, and TV shows Silicon Valley chose 20 winners from the about Georgia were published and 150 applications. One member of the jury, screened for an international audience,” Nat Jacobson, co-founder and partner of he said. Sparklabs Global Ventures and a former He was also quick to point out that 172 Facebook Executive, wrote on his blog of new hotels began operating in the last his experience while in Georgia. year, hinting that the ruling Georgian “Georgia has been described as the Dream coalition should be given full California of the Caucasus and it is not credit for expanding Georgia’s hospital- diffi cult to see why. The country has an ity industry by overseeing the construc- 8000-year-old tradition of wine-making, tion and opening of 508 new hotels since and is a culinary party zone surrounded 2013. by amazing lush green mountains,” “More than half of the existing hotels Jacobson wrote. He went on to openly in Georgia were created by our govern- share with his readers that at fi rst he had ment. This is the result of our hard work,” no high expectations, but was pleasantly Kumsishvili said while adding that an surprised with what he discovered in additional 60 hotels will be built in the Georgia. From the Georgian traditional next year. supra, to “natural mountain water that In addition to building new hotels you can sip off a cliff,” and the Tech Park, throughout the country, Georgian Dream “an amazingly designed modern build- claims a new terminal at the Tbilisi Air- ing, sort of Finnish design meets Georgia, port will be fi nished by no later than located in a lush forest.” He even noted 2017. the fact that “most Government build- The party hopes this will boost the ings are glass structures in order to radi- supporting entrepreneurs, fast, effi cient “The reward of getting out of your that is diffi cult to fi nd in Silicon Valley. local economy by providing hundreds ate transparency.” and most importantly, focused on serv- own comfort zone and connecting with “I found a very warm, hospitable and of temporary and full-time jobs. The Sparklabs founder seemed genu- ing its people.” other entrepreneurs around the world passionate people serious about making The construction of a new terminal inely impressed with the country’s devel- Jacobson said he was happy to see is something I can never get enough of,” a difference, improving Georgia and put- would be a signifi cant boon for Georgia’s opments, client-oriented and fast public the enthusiasm and energy of Georgian he said. The award ceremony of the pro- ting Georgia on the map. The passion, tourism industry, which still relies on services, and the government itself that, entrepreneurs, and was positively sur- ject felt very emotional, he noted, with talent and its entrepreneural government relatively small Soviet-era airports in in his opinion, is “in many ways…a model prised with both the creativity and every participant- be they winner or give it all the necessary components to Tbilisi, Batumi and Kutaisi to service for how a government should operate: pitches. loser- happy for each other, something make a dent in the world.” international travellers. GEORGIA TODAY SEPTEMBER 6 - 8, 2016 BUSINESS 3 Construction on Georgia’s First Wind Plant Enters Final Stage

Turography Contest Announced by GNTA & SOCAR Petroleum Georgia in both directions in our country. It is BY NINO GUGUNISHVILI vitally important to support private sector and in this case SOCAR Petro- leum Georgia, that, with this new pro- Turography contest has ject, will enhance local tourism devel- been announced by the opment.” Georgian National Tour- The fi rst prize winner will get a two and Gas Corporation is in charge of the the Georgian Energy Development Fund. ism Administration person, fi ve day tour package to Borjomi USD 35 million Kartli Wind Power pro- “We fi rst signed on to take part in the (GNTA) and SOCAR and Samtskhe -Javakheti staying in the BY TAMAR SVANIDZE ject in the Gori and Kareli municipali- construction at the beginning of 2016. APetroleum Georgia with the aim of best hotels and including sightseeing ties in central Georgia. This is the fi rst project of its kind in the introducing and motivating travelogue of Sapara, Rabat, the Green Monastery, “The Gori site will support the gov- Caucasus. Gori is one of the most attrac- writers who can share their stories and Zarzma, and Vardzia. The second prize eorgia’s fi rst wind power ernment’s strategy to foster low carbon tive places in the world regarding wind discover the many unique places that winner will get a professional Canon plant – the fi rst wind farm generation and cover the country’s sea- energy,” EBRD regional director Bruno exist throughout the country. camera. Winners of the contest are to in the Caucasus region – sonal demand for power during the Balvanera said. “We are putting into effect various be announced on September 15, 2016 is entering its fi nal stage winter period,” Kaladze said. Norwegian company Meventus, a projects to ensure a dynamic fl ow of The contest is open to anyone eager of construction, Georgia’s The European Bank for Reconstruc- leader in the wind power industry and foreign tourists to Georgia,” said George to share their personal experience of EnergyG Minister Kakha Kaladze tion and Development (EBRD) allocated a key advisor to the project, recom- Chogovadze, Head of the GNTA. “At traveling through Georgia. Potential announced. USD 24 million to the project, or 70 mended a six-turbine scheme for the the same time our goal is to strengthen participants are invited to the site: www. A subsidiary of the Georgian Energy percent of the total cost of the project, site with a designed capacity of 20.7 and stimulate local tourism. We’re turography.ge to upload their stories. Development Fund and Georgian Oil with the remaining 30 percent paid by MW. delighted to witness considerable growth Closing deadline, September 7, 2016. GEORGIA TODAY 4 BUSINESS SEPTEMBER 6 - 8, 2016 THE ISET ECONOMIST A BLOG ABOUT ECONOMICS AND THE SOUTH CAUCAUS www.iset-pi.ge/blog

The ISET Policy Institute (ISET-PI, www.iset-pi.ge) is an independent think-tank associated with the International School of Economics at TSU (ISET). Our blog carries economic analysis of current events and policies in Georgia and the South Caucasus region ranging from agriculture, to economic growth, energy, labor markets and the nexus of economics, culture and religion. Thought-provoking and fun to read, our blog posts are written by international faculty teaching at ISET and recent graduates representing the new generation of Georgian, Azerbaijani and Armenian economists. Georgian Pension Reform – an Experiment in Libertarian Paternalism?

couraged with high fi nes levied on BY MAKA CHITANAVA employers. The Georgian Government AND YASYA BABYCH is planning to introduce such fi nes and sanctions, but it is not clear whether such sanctions will be effective. Employ- rom October 1, 2017, a private ers may use subtle methods to pressure retirement savings system will their employees: discrimination at work be launched in Georgia as part or unfair dismissal may be hard to link of a broader pension reform. to a person’s pension scheme choices. This reform has been discussed Employees are also quite likely to self- byF Nino Doghonadze and Yaroslava censor their behavior in order not to Babych in Decent Income in Old Age: create problems for employers. Georgian Dream or Reality? on the ISET • Burden of contributions. Obligatory Economist. Today, we will focus on one employer contribution may be perceived very interesting aspect of the reform – as a tax levied on labor. Economic theory the “opt-out” principle and its imple- tells us that no matter who pays the tax, mentation in the Georgian realities. the tax burden is inevitably shared by both parties. Who will bear more of the WHAT’S IN THE “OPT-OUT”? burden and who will bear less of it will The proposed private retirement savings depend on labor supply and demand system is based on the “opt-out” princi- elasticities. Following this logic, we can ple, according to which all hired employ- expect that low skilled workers will bear ees are automatically enrolled in the a higher share of the burden by taking system, but have the opportunity to opt- pay cuts and or being forced to opt-out out, should they wish to do so. In this of the pension scheme. sense, the libertarian ‘freedom of choice’ • Trust towards the national currency. virtue is maintained – employees have According to the ATC study, stability of the right to stay in or leave the system. the national currency was another impor- At the same time, employers will not tant consideration in the savings behav- enjoy the same freedom – once a worker ior for 69% of respondents. Last year’s decides to stay in the system and pay devaluation of the Georgian Lari defi - his/her defi ned contribution (2% of the nitely caused many depositors to shift nominal salary), employers have no their money to dollar-denominated choice but to match it. accounts. As pension savings will be held in GEL, a lack of trust in the national WHY “OUT” AND NOT “IN”? Source: Wikimedia/Commons currency may prove a serious obstacle The “opt-out” principle can be a very for the proposed pension reform scheme. powerful tool for policy makers to nudge WILL “LIBERTARIAN Among people who are very close to According to this study, an individual Finally, the degree of trust in the man- citizens to make better choices. PATERNALISM” SAVE GEORGIAN retirement (50-65) nearly half (47%) whose family’s monthly income exceeds agement of the new pension system will • First, it uses people’s natural inertia WOULD-BE-PENSIONERS? realistically assess that they will depend 700 GEL is 2.9 times more likely to be also be a key factor. A question in the to encourage saving. Behavioral econom- The proposed “opt-out” principle is an on relatives or on meager state pensions. saving than an individual whose family ACT study about institutions preferred ics suggests that people tend to stick to example of the so-called libertarian In the youngest (18-33) age cohort, income falls short of 700 GEL. This study as potential deposit insurers can be used defaults, i.e. the pre-selected options, paternalism – a policy which affects however, only 12% thought that they was focusing on general savings, but its as a proxy for the level of trust people and are usually too “lazy” to switch to people’s behavior while at the same time would depend on relatives or on publi- fi ndings are very relevant for analyzing have in the government, at least when anything else. The “opt-out” principle respecting their freedom of choice. The cally-provided retirement benefi ts. Young retirement savings as well. it comes to pensions. In the survey, 24% is thus a sneaky way for the policymak- term was coined by Richard Thaler and Georgians optimistically plan to live on • High unemployment. With unem- of respondents preferred to have a large ers to encourage desirable choices. Cass Sunstein in their 2003 American income from real estate rental (22%). ployment standing at 12.4%, according Georgian bank as the deposit insurer, Madrian and Shea (2001) studied the Economic Review article. According to They are also optimistic about their abil- to the latest available data (2014), Geor- 21% preferred insurance offered by a power of default options and inertia in the authors, the “opt-out” principle is ity to save – 17% are planning to live off gian employers have much more market foreign bank, 20% by the Georgian Gov- case of savings behavior by employees paternalistic in the sense that "it tries to bank savings as compared to 9% and 6%, power than their employees. The latter ernment, and 12% by the National Bank in a large US corporation. They fi nd that, infl uence choices in a way that will make respectively, among those in the 34-49 may opt-out of the system in order not of Georgia. controlling all other variables, the switch choosers better off, as judged by them- and 50-65 age brackets. to compromise their position at work. Based on this evidence we can say that from active to automatic enrollment selves". These results suggest that Georgia’s This is more likely to happen in low- as many as one fi fth of the Georgian dramatically changed the savings behav- Indeed, for many young (and not so young adults have rather unrealistic productivity sectors and in small and people still tend to trust the government ior of employees. young) people, old age seems to be some- expectations as to their ability to gener- medium size enterprises, which account with their savings, but it is not at all clear • Second, automatic enrollment may thing that is far and away. Students or ate retirement income from alternative for 36.9% of all hired employment in that this level of trust will be suffi cient generate the so-called “endowment young adults do not usually think of sources, justifying a paternalistic action Georgia. Thus, the opt-out principle may to overcome all other obstacles and help effect” (a situation when a person’s val- retirement savings as their top priority by the government. not work for a very large portion of hired people stay in the pension system. This uation of a good increases once s/he because they fi nd it diffi cult to imagine employees. Using the market power to is a question that the policy makers still comes to own it). Once a person is already their old age or because they have unre- THERE IS NO SUCH THING “force” employees to opt-out of pension need to answer. in the private pension system, s/he will alistic expectations about their sources AS A FREE LUNCH schemes is a problem in many developed Of those Georgians who save, only 6% tend to value it more than before. Thus, of income in retirement. Gently nudging The libertarian “opt-out” principle comes countries, where this behavior is dis- are saving for retirement. thanks to automatic enrollment, indi- such forever young optimists to increase at a price. In particular, it puts the entire viduals who may otherwise not have retirement savings may be in their own pension reform at risk of failing to achieve enrolled may be convinced to stay in the interest. its stated objectives if the majority of system. In this respect it is interesting to look Georgians do indeed opt-out. If these behavior economics ideas are at the results of a recent survey which What may force people out of the pen- proven right in Georgia, the “opt-out” ISET helped conduct. sion scheme? principle could go a long way towards The table provides data on how people • Low income. Clearly, in order to save, solving the problem of low private sav- in three different age groups view poten- one has to have suffi cient income to at ings in the country. tial sources of their retirement income. least cover the current household expenses. If your salary is not enough to Age Depend Depend Rent out Save or Will work in Do not live on, the “opt-out” principle will not on on real will save retirement know work. In this case the reform will cover pension relatives estate in bank age only a small portion of employees with 18-33 7% 5% 22% 17% 23% 26% high incomes who may already be saving 34-49 14% 12% 19% 9% 27% 18% today. The Saving Behavior Assessment Survey in Georgia, conducted by ACT in 50-65 28% 19% 9% 6% 26% 12% 2011, showed that low income is the major Source: 2016 survey, done in cooperation with ISET obstacle for saving (70% of respondents). Source: Saving Behavior Assessment Survey in Georgia, February 2011 GEORGIA TODAY SEPTEMBER 6 - 8, 2016 BUSINESS 5 New Restaurant Keti’s Bistro Opens on Chovelidze Street

BY NINO GUGUNISHVILI

eti Bakradze, who represents the new generation of Geor- gian chefs, founder and owner of the ‘The Dining Room’ in Vake, has recently Kopened her second restaurant ‘Keti’s Bistro’ offering guests a delicious variety of food. Also host of a new and popular TV show ‘Keti’s Culinary Adventures’ (chan- nel Rustavi 2), Keti is ambitious enough to fearlessly experiment with different fl avors and tastes, adding something unique and slightly different to almost any recipe. Her culinary preferences range from traditionally Georgian to European. She says she tries not to follow the rules while cooking and never makes any dish exactly the same. Back in 2008 she opened her fi rst restaurant The Dining Room, having in mind a concept of a cozy ambiance; a place that would make you feel as if you had been there before. This no doubt FOR SALE: BMW – 321 model explains its current popularity among Date of issue 1936 locals and tourists alike. PRICE 10.000 USD As a former co-owner of Atelier 10’ managing a show room of some of Geor- gia’s most famous fashion designers, Keti Keti often cooperates closely with According to Keti, the evolution of was afforded great travel opportunities, the Georgian Culinary Academy, which customer and client is visible nowadays. fi nding inspiration in the countries and she considers a very important institu- The attitude has changed a lot. A person cultures she visited. tion in that it gives a chance for young deciding to dine out is much savvier and This time, in Keti’s Bistro, the chef Georgian chefs to develop to such a willing to take a risk; and eager to follow decided to do something different from level that they fi nd themselves in high Keti into any adventure she creates, her Dining Room and according to the demand both within the country and which she does with both passion and reviews, she has succeeded so far. abroad. gusto.

CONTACT PERSON 557 12 38 90 5-Star Hotel Planned for Georgia’s Kakheti Region

heart of Georgia’s viticulture, with hun- According to the Head of the Part- BY THEA MORRISON dreds of small and large-scale vineyards nership Fund, David Saganelidze, the scattered throughout the countryside. hotel will promote tourism develop- The USD 30 million investment pro- ment for Georgia’s wine industry. 5-star Radisson Blu Hotel ject between the Partnership Fund and “This will be the fi rst branded hotel of international standard the Silk Road Group was signed in Tsi- in the Kakheti Region… able to service will be in built in Tsinan- nandali on Sunday at an event dedicated tourists who want to visit this bril- dali, a village in eastern to the 230th anniversary of Chavchavadze’s liant, ancient region,” Saganelidze Georgia’s Kakheti region. death. stated. AThe hotel will be constructed near the The Partnership Fund will contribute Georgia’s Economy Minister, Dimitry former home of Alexander Chavchavadze, USD 10 million to the hotel while the Kumsishvili, attended the signing cer- a 19th-century Romantic poet, aristocrat, Swiss-registered Silk Road Group will emony and noted that similar projects and general. He is widely considered fund the remaining USD 20 million. are critical to the development of the one of Georgia's greatest literary fi gures. The 120-room hotel will have confer- country’s regions. The estate is situated close to the ence halls, indoor and outdoor restau- The new hotel is scheduled to open regional capital Telavi, 79 kilometers rants, as well as a spa, pool and fi tness in early 2018 and will create more than east of Tbilisi. The Kakheti region is the club. 200 jobs in the Telavi district. GEORGIA TODAY 6 BUSINESS SEPTEMBER 6 - 8, 2016 The First Georgia International Maritime Forum to Promote Georgia Maritime Potential to develop the maritime industry and services, BY NINO GUGUNISHVILI for our seafarers to be in demand on international markets, and for the Georgian fl ag to be more attractive for foreign ship owners, such initia- he fi rst Georgia International Mari- tives and projects as the International Maritime time Forum (GIMF) is to be held on Forum need to be held regularly. September 12-16 in Batumi, under the patronage of Prime Minister Giorgi CAN YOU TELL US ABOUT THE Kvirikashvili. The Forum aims to REFORMS IN THE INDUSTRY positionT Georgia as a Maritime nation; a reliable, IN RECENT YEARS? strong partner that shares common values with There are numerous signifi cant achievements the global international maritime community. that I would like to underline: First of all, the We had a chance to speak to Captain Mamuka European Union resumed acceptance of certifi - Akhaladze, Director of the Maritime Transport cates of competency for Georgian seafarers. For Agency of the Ministry of Economy and Sustain- the fi rst time in Georgian history, the Georgian able Development of Georgia, IMO Maritime Maritime fl ag is fi nally off the black list and the Ambassador to Georgia, Master Mariner, and competitivness of the country’s tonnage has AFNI, IFSMA. increased on the world market by quality ships. The Maritime Transport Agency (MTA) of Geor- CAPTAIN AKHALADZE, HOW DID THE gia has been successfully audited (EMSA) (IMSAS), IDEA OF THE GIMF COME ABOUT? has commenced a quality management system, WHAT ARE YOUR EXPECTATIONS? and has implemented customer oriented services. The idea of organizing the International Mari- The Maritime legislaton base has been improved time Forum in Georgia belongs to the First Vice and updated. MTA offers a 24/7 service to ship Prime Minister, Minister of Economy and Sus- owners. Ship registration fees have been reduced. tainable Development of Georgia, Dimitry Kum- The Agency issues new documents for seafarers sishvili. He introduced it in his speech at the that are safe from forgery. We’ve also created a 29th Assembly of the International Maritime state electronic database for seafarers. The fees Organization (IMO) while talking about the recent for certifi cations are 50% lower. MTA has signed reforms in the Georgian Maritime industry and memorandums of understanding with 46 coun- their positive outcomes. It was there that 170 tries. The administrative building of the Agency member states of the IMO were invited to attend was relocated to the country’s maritime center, the Forum in Batumi. which enabled us to plan our activities duly and On September 12-16, Georgia’s maritime gate- effectively. MTA staff consists of highly qualifi ed way, Batumi, will become a meeting point for the personnel, offered professional trainings peri- major international maritime, shipping and fi nan- odically. The Agency is using any available pla- cial institutions, with discussion topics ranging torm to promote Georgia as a country for poten- from commercial operations of ships, to techni- tial fi nancial investment. The Maritime Rescue cal regulations and environmental safety stand- Coordination Center unit, responsible for dealing ards for the seas, with high-profi le guests from with oil spills at sea, is equipped according to 140 countries attending. Such events are of cru- current standards. The Agency is ready to react cial importance for positioning Georgia as a to perform necessary sea rescue operations 24/7. maritime country to the wider international At the same time, MTA introduced modern sys- audience. In order to be considered as a country tems for vessel traffi c service in the ports. And Captain Mamuka Akhaladze, Director of the Maritime Transport Agency of the Ministry of Economy and of high investment potential, with possibilities these are just our success stories since 2012. I Sustainable Development of Georgia

would also like to mention that MTA’s future plans are largely centered on promoting Geor- gia’s Maritime ﬂ ag, through increasing the number of Georgian vessels on the international Maritime scene. It is also a top priority for our agency to provide the highest quality education to our seafarers. Another very important issue is ensuring safety at sea.

WHAT CAN YOU SAY ABOUT OUR COUNTRY’S RELATIONS WITH THE IMO? HOW DO YOU THINK MUTUAL COOPERATION WITH THE IMO CAN BE DEEPENED? Georgia has been a member of the IMO since 1993. I’m honored to be IMO’s Maritime Ambassador in Georgia. Since 2010, Georgia has received invaluable support from the organization through its expertise and consultancy, together with assistance in providing professional educational training to Agency staff members. The fact that the IMO secretary general is attending our Forum and that the working sessions of two of the global projects realized under the aegis of IMO (Global Maritine Energy Effi ciency Project) and the meeting of Black and Caspian Sea administration offi - cials, on the topic of Maritime policy formation and implementation, speaks for itself. Georgia tends to be a leader on a regional level, being the only country regionally involved in the GloMEEP, project, which concerns implementation of Mar- itime energy- effi ciency on the national level.

WHAT CAN GEORGIA OFFER INTERNATIONAL PARTNERS? WHAT NEEDS TO BE DONE TO PRESENT IT MORE EFFECTIVELY AS A RELIABLE AND STRONG PARTNER? The Georgian Maritime industry plays a crucial role in the economic development of our country. Georgia historically is a part of the Silk Road transport corridor and among one of the oldest Maritime countries in the world. As Georgia’s unique geographical location gives it an important transit status, Georgia has the potential to become a Maritime center for the Black Sea region. Intergovernmental agreements and belateral memorandums are expected to be signed during the Forum, together with some very important meetings to be held with the representatives of leading foreign maritime companies. Yet it is crucial to make Georgian legislative and tax systems more ﬂ exible for international shipping companies, thus bringing ﬁ nacial investments to the country. GEORGIA TODAY SEPTEMBER 6 - 8, 2016 BUSINESS 7 ProCredit: Living Green Finance

us and our shareholders, responsibility BY KATIE RUTH DAVIES for the environment is an integral part Borislav Kostadinov, chairperson of of social responsibility,” said Kostadinov. the supervisory boards of the ProCredit banks in Albania, Bosnia “Take our key strategic shareholder, and Herzegovina, Kosovo, irst off, I’d like to say I’m not Zeitinger Invest which emerged from Macedonia and Serbia and member writing this article as any part IPC, for example. When IPC was launched of the Management Board of of a paid advertisement in the early 1980s, the initial focus of its ProCredit Holding, the mother (though I was taken to Thes- consultancy work was on what was then company of ProCredit Bank in saloniki early summer to hear called alternative energy. Another pri- Georgia theF information live- but I wrote other vate sector shareholder is the DOEN fascinating articles to cover that privi- Foundation, whose stated aim is ‘to con- lege!). I’m writing this because I am truly tribute to the transition of a green and impressed by the mind-set and working innovative economy where inspiring practise of ProCredit Bank, as described entrepreneurs contribute to a better by their top and middle management world for the people and the planet.’” and clients, and I would like to bring them as an example of how your busi- EVERYDAY BARRIERS ness can become greener in both thought So, your thoughts and ideas are starting and deed. to have green tinges? But everyday issues “When you do business, do you think still seem to make those ideas hard to about the environment? Or resource realize, right? So what exactly are we up management? Or the impact of climate against? Kostadinov suggests “short- change on your business?” asks Borislav termism,” incomplete knowledge, mis- Kostadinov, chairperson of the supervi- understandings, and lack of confi dence sory boards of the ProCredit banks in in economic recovery. prehensive Environmental Management ing green activities part of its internal paper than in 2014. Energy is another Albania, Bosnia and Herzegovina, Kosovo, “Short-termism is often the single most System aimed at reducing the environ- standards and procedures. By educating main resource we consume. In 2015, the Macedonia and Serbia and member of powerful force swaying the hand of the mental impact of the ProCredit banks. staff on the importance of green think- total energy used by the ProCredit banks the Management Board of ProCredit decision-makers in banking,” he says. IPC was given a mandate to advise the ing and by investing in infrastructure decreased by 15 percent compared to the Holding, the mother company of Pro- “But if you’re short-sighted, the stealthy Group how to institutionalize the green and effi cient equipment, the process of previous year. Credit Bank in Georgia. and creeping nature of environmental concept and together they built up new change is made easier. This was achieved by installing new Good questions. I can answer “yes,” risk will escape your attention. Its com- structures and defi ned new processes. Over to Kostadinov: “The most sig- or renovated heating and ventilation but at the same time I must admit to plexity, interconnectivity, its randomness; “We established Environmental Manage- nifi cant resources used by us are paper, systems, effi cient inverter air condition- rather too much inaction in implement- the sudden and disproportionate impact ment Units at both the Group and Bank electricity, and fuel for transportation. ers, LED lighting etc., and by making ing change in my own working environ- it could have on your operating context. level. We created committees, wrote Printing optimization projects started improvements to the building envelope. ment. Motivation is the key factor, of It is intuitively clear that if you operate procedures – and our competitors prob- at most of our banks some years ago, I would like to emphasize that, in addi- course. In my offi ce, as well as in most in a country or in an industry with high ably thought we were crazy, because this with signifi cant results, and improve- tion to reducing our overall greenhouse businesses, the desire to be more envi- energy intake, high resource consump- was the peak of the crisis for Eastern ments are still ongoing, as our ultimate gas emissions, the measures we have ronmentally responsible, and the demand tion and high pollution, you will likely Europe,” Kostadinov says. aim is to have paperless banking opera- taken also result in substantial cost sav- for it to be a permanent fi xture, must be at a disadvantage compared to your tions. Technical upgrades, multifunc- ings.” come not only from management but competitors operating in an environ- MAKING IT STANDARD tional printing equipment, streamlining So my little offi ce is looking a little bet- also from staff and customers. ProCredit mentally-sound setting.” In order to reduce its impact, ProCredit and automation of processes, and a series ter: energy-saving light bulbs switched Bank is no different. Set to make a difference, in 2011 the has done something any company can of internal awareness-raising campaigns off when not in use (check), new PVC “The main impulse for doing green ProCredit Group decided to institution- do- implemented in-house energy and for staff have led to further decreases in windows ensuring minimal heat loss and fi nance, and for “living” it the way we alize its approach to “green-ness,” aim- resource effi ciency measures which apply paper consumption. In 2015, the Pro- used in good balance with the air-con- do, comes from our shareholders. For ing to develop and implement a com- to both technology and behaviour, mak- Credit banks consumed 29 percent less Continued on page 8 GEORGIA TODAY 8 BUSINESS SEPTEMBER 6 - 8, 2016 ProCredit: Living Green Finance Continued from page 7 management at an institutional level,” says Kostadinov. ditioning (check), two clearly marked exits (check),… but the bin is still full of PRACTISE WHAT YOU waste paper (even though we do print PREACH & GREEN LOANS on both sides) and there are magazines Many banks, when addressing “green- piled up around the offi ce. Hmm. Pro- ness,” often focus on environmental and Credit would have a few words to say… social issues at the transactional level in “We are seeking to work with forward order to mitigate credit risk or reputa- looking entrepreneurs and require that tional risk. ProCredit, however, takes our borrowers comply with the relevant their environmental responsibility one rules and regulations regarding environ- step further and will actually reject loan mental protection as well as health and applications if the activity seeking fund- safety standards. We are very well aware ing is harmful to the environment or if that social and environmental factors the applicant fails to manage the envi- have material relevance for our own risk ronmental risks correctly. Yet for those

facing a “rejected” stamp from ProCredit, hydropower plants, wind power turbines there is still hope: and biogas and biomass applications. “Our approach implies engaging in dia- One example of a client that has invested logue with our clients and incentivising in energy effi ciency is the Georgian them to reduce the environmental impact company Bedegi, a ProCredit client since of their activities,” Kostadinov says. “We 2003 and a manufacturer of high quality do our best to share our observations.” building materials. And it’s working. “Over the last few “ProCredit Bank Georgia disbursed a years we have been steadily building up Green Loan to fi nance Bedegi, a project our green portfolio. So far we have dis- that was environmentally friendly in a bursed green loans totalling almost half dual sense: the installation of energy effi - a billion Euro,” he says. By the end of cient machinery to produce insulation June 2016, the Group’s green portfolio blocks, which themselves help to improve amounted to EUR 296 million, with energy performance and minimize the around 10,000 outstanding credit expo- cost of heating and cooling the buildings sures. The lion’s share of these loans – constructed with them,” Kostadinov says. 71% of the total amount– was granted to Looking back to my offi ce, I again see fi nance investments in energy-saving that for any business the success of an measures. environmental management system ulti- Frequent investments by ProCredit mately depends on the staff and their atti- include energy effi cient space heating, tude towards the environment. That means ventilation systems, heating and cooling continuous staff training, internal aware- processes, lighting systems and trans- ness-raising and in-house expertise- aspects port; and renewable energy technologies, which are central components of the Pro- primarily in solar water heating tech- Credit business philosophy. Maybe it nologies, photovoltaic installations, mini should be central to yours, too. GEORGIA TODAY SEPTEMBER 6 - 8, 2016 BUSINESS 9 Georgia’s Agricultural Minister Summarizes Achievements Prior to Leaving Post

TBC Bank Holds Media Seminar

leading Swiss fi nancial groups, who made a pres- BY NINO GUGUNISHVILI entation on the investment fund recently created by TBC. While speaking about the importance of being n September 2, at Rooms Hotel in the premium listing of the London Stock Tbilisi, TBC Bank held a seminar Exchange (LSE), both Butskhrikidze and Shagidze for Georgian media representatives underlined the crucial impact of this fact for the on the topic of the Stock Exchange. country and its economical development. Enter- The fi rst part of the introductory ing the premium listing is not only benefi cial to Oseminar focused on TBC Bank achieving the the Banks and their clients and customers, but London Stock Exchange Premium listing, with also has a strong positive impact on Georgia’s presentations made by Vakhtang Butskhrikidze, image internationally. Two of the country’s major CEO of TBC Bank and Giorgi Shagidze, Deputy banks, TBC and Bank of Georgia, are listed on adding that around 23,600 hectares of land plots CEO of TBC Bank. the LSE, which for TBC means that over 100 BY TAMAR SVANIDZE were insured during 2014-2016 within the agricul- The second part of the seminar covered the investors are either collaborating already or plan tural insurance reform. work and mission of TBC Capital - presented by to do so in the future, “a result of the hard work Georgia’s Prime Minister, who attended the report Avtandil Gigineishvili, Head of TBC Capital and that TBC Bank has carried out over its years of eorgia’s Minister of Agriculture, Otar hearing, emphasized that despite his successes Former Managing Director of Jefferies Interna- existence,” the TBC representatives said. Danelia, on Monday presented a sum- there are still challenges facing the country’s agri- tional, and Temo Cheishvili, a former team mem- During his presentation, Gigineishvili explained mary report to the Prime Minister cultural sector. ber at world- leading banks: Barings and ING, the necessity of developing the capital market and members of the Cabinet, ahead "This fi eld is very important for the country in together with Vasil Revishvili, a former team in Georgia, with TBC Capital having a major of his leaving to compete as a major- terms of economic development. It also carries member of Pictet Asset Management, one of the objective and role in fostering the process. Gitarian candidate in Samegrelo, western Georgia, important social signifi cance, since more than half prior to the October 8th Parliamentary Elections. of our population is employed in the agriculture During his fi nal report as acting Minister, Dane- sector,” the Prime Minister noted. lia summed up his implemented works and on- The report presentation was further witnessed going projects. by Diplomatic corps accredited in Georgia, NGOs, “150 new and 700 expanded enterprises, and more and donor organizations. than 1,600 agricultural cooperatives were established in Georgia during my term,” he claimed,

The United Nations Development Programme (UNDP) and the Government of Georgia in August pledged to invest Euro 2.63 million (GEL 6.8) into a project aimed at assisting rural development in Georgia’s western Adjaria region on the Black Sea

The Ministry of Agriculture of Georgia, in partnership with the United States Agency for International Development (USAID), launched a new ‘Growth in Georgia’ project to support the rural population GEORGIA TODAY 10 BUSINESS SEPTEMBER 6 - 8, 2016 Britain’s New Ambassador Starts Mandate in Georgia

Agile Spirit Military Drills in Southern Georgia ritain’s new Ambassador to Prior to his appointment as British Georgia, Justin McKenzie Ambassador to Georgia, Mr. McKenzie Smith, arrived in Tbilisi on Smith worked in a range of roles in the armored vehicles, artillery pieces, guided TOW missile systems. BY NICHOLAS WALLER Thursday to take up his role. British diplomatic service. His most amphibious assault vehicles and Hum- Agile Spirit was originally a joint US- McKenzie Smith will fully recent post was as Deputy Head of Mis- vees across the Black Sea from NATO- Georgian military exercise that began Bassume his Ambassadorial duties once sion and Director for Trade and Invest- member Bulgaria to take part in the in 2011. In 2015, the combat drills were he presents his Letters of Credence to ment at the British Embassy in Mexico ome of the US military’s most exercises, code-named Agile Spirit. expanded to include other NATO mem- the Georgian President and to the Geor- City. hi-tech combat equipment The two-week exercises are taking bers and NATO-associated countries. gian Ministry of Foreign Affairs. Previous overseas postings include appeared in Georgia for the place at a fi ring range close to the town This year’s exercise is the fi rst to include “It is a pleasure to be in Georgia and Moscow and the UK Mission to the second time in less than six of Akhaltsikhe, with personnel from the units from the elite US Marine Corps. an honor to be appointed as Her Maj- United Nations in New York. In the For- months, as combat exercises US, Georgia, Bulgaria, Latvia, Romania Agile Spirit 2016 is the second major esty’s Ambassador. I have been fortunate eign and Commonwealth Offi ce in Lon- withS the Georgian Armed Forces and and Ukraine. military exercise to be held in Georgia. to visit Georgia several times in the past. don, Mr McKenzie Smith worked on other close allies began in the small The focus of the training will include US, UK and Georgian forces took part I am delighted now to have the chance issues relating to Eastern Europe, Central South Caucasus nation’s southern Samt- live-fi re exercises, with the participa- in the Noble Partner drills in May at to live and work here,” Justin McKenzie Asia, the EU, OSCE, human rights and skhe-Javakheti region on Friday. tion of Georgian tanks and US armored Georgia’s Vaziani military base – home Smith said. the media. The US’ European Command ferried vehicles, as well as drills with anti-tank of NATO’s training center in the country. Armenian Government Eyes Changes to Controversial Tax Reform Bill

Abrahamyan added that if the amended BY NICHOLAS WALLER bill passes in its second reading, the reforms would be gradually phased in over a period of three to fi ve years. he Armenian government Tax collection remains a thorny issue is discussing the possibility in Armenia despite signifi cant improve- of making major changes ments in recent years. The total amount to a controversial tax reform of tax revenue collected in the country bill that was passed by the still only accounts for one-fi fth of Arme- Tcountry’s parliament in June. nia’s Gross Domestic Product – far If passed, the bill would increase the behind its neighbors Georgia, Turkey income tax for those with a monthly and Azerbaijan. salary over USD 250 from 26 percent A deep-rooted culture of tax evasion to up to 33 percent, while decreasing and systemic corruption contribute to the income tax for those earning USD the country's poor track record when 4,200 or more from 36 percent to 33 it comes to tax collection. percent, and from 24.4 percent to 23 In its June report, the IMF sharply percent for those earning less than USD criticized Armenia’s government for 250, RFE/RL reported. not doing more to crack down on those Armenian Prime Minister Hovik Abrahamyan discusses amendments to tax bill. Photo: RFE/RL Armenia’s main opposition parties who avoid paying their taxes and advised and several deputies from the ruling bill, saying that it would profoundly sized businesses. Minister Hovik Abrahamyan has vowed President Serzh Sargsyan’s government Republican Party have joined forces cripple the private sector by hinder- In response to the openly hostile push- to amend the bill ahead of its second to implement major structural reforms with business owners in opposing the ing the growth of small and medium- back by the bill’s opponents, Prime reading in September. that include higher tax collection.

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TIFLIS 7.5x6cm ING.indd 1 13/06/16 15:16 GEORGIA TODAY SEPTEMBER 6 - 8, 2016 BUSINESS 11 Dechert OnPoint: Georgia to Foster Innovations through New Legal Framework

echert Georgia, through INFRASTRUCTURE the contribution of part- According to the Law, state bodies or ners Archil Giorgadze and other persons may establish various infra- Nicola Mariani, joined by structure hubs to promote innovation. senior associate Irakli The range of types of infrastructure DSokolovski and associates Ana Kostava defi ned by the Law include Scientifi c/ and Ana Kochiashvili, is partnering with Technological Parks, Business Incubators, Georgia Today on a regular section of Business Accelerators, Technology Trans- the paper which will provide updated fer Centers, Industrial Innovation Labo- information regarding signifi cant legal ratories (FabLab) and Innovation Labo- changes and developments in Georgia. ratories (ILab), and Innovation Centers. In particular, we will highlight signifi cant Scientific/Technological Parks are issues which may impact businesses expected to provide infrastructure and operating in Georgia. professional services to universities, scientifi c/research establishments and other interested parties, facilitating cooperation INTRODUCTION between such parties to foster innovation. On 22 June 2016 the Parliament of Geor- Business Incubators provide workspace, tor. However, it’s left up to the Govern- the patent within a reasonable time; of cumstances for your business. gia adopted the Law on Innovations (the administrative assistance and other tech- ment to elaborate the rule of establishing (ii) the uses of the patent do not meet Dechert’s Tbilisi offi ce combines local “Law”), a piece of legislation that aims nical support to persons carrying out the amount and granting such guaranteed health and safety requirements. service and full corporate, tax and fi nance to create national innovation ecosystems innovative activities (the “Subjects”) for share to the inventor. In some cases, support with the global knowledge that to facilitate social and economic devel- a limited period of two years. The Sub- where the Government has provided CONCLUSION comes with being part of a worldwide opment. These ecosystems are based on jects shall be selected for this purpose on financing, the relevant Government In sum, the Law intends to promote legal practice. knowledge and innovation, facilitating a competitive basis. A Business Accel- agency or authorized legal entity may Georgia’s knowledge and innovation Dechert Georgia is the Tbilisi branch the application of technologies devel- erator mainly focuses on providing a require a share of the revenues for seven economy via the establishment of a num- of Dechert LLP, a global specialist law oped by other countries and spreading workspace to the Subjects, developing years following the fi nancing; that share ber of new mechanisms. Legislators aim fi rm that focuses on core transactional intellectual property and technologies and refi ning their business ideas and busi- should not exceed 5% per annum. to provide various instruments to estab- and litigation practices, providing world- developed in Georgia in order to increase ness models and making certain invest- Patent holders may be required to lish complex infrastructure and support class services to major corporations, the competitiveness of all fi elds of tech- ments on their behalf as necessary. The license out certain Government-funded education and sciences. While the prac- fi nancial institutions and private funds nology, science and economics. In par- benefi ciaries of this kind of support from patented innovations to other applicants tical aspects of the Law are still to be worldwide. With more than 900 Lawyers ticular, the Law Government involvement Business Accelerators should also be chosen by the Government. If the Gov- tested, the Law itself provides a promis- in our global practice groups working in the innovative sector, provides for selected via a competitive process. The ernment and patent holders fail to agree ing set of tools for persons working in in 27 offi ces across Europe, the CIS, Asia, several types of infrastructure to sup- Law also concerns the services that other on the license transfer, the Law allows the innovation sector. the Middle East and the United States, port innovation and regulates related types of infrastructure should provide to the Government to deliver a decision on Dechert has the resources to deliver intellectual property issues, among other competitively-selected businesses. Such issuing a license to another benefi ciary * * * seamless, high quality legal services to things. This edition of OnPoint brings services include the transfer of innova- following the established procedure. Note: this article does not constitute clients worldwide. For more informa- light to the major aspects of the new tions, business modelling, concept devel- However, the Government may only legal advice. You are responsible for tion, please visit www.dechert.com or Law while providing an overview of the opment, fi nancial support, trainings and exercise this authority granted by the consulting with your own professional contact Nicola Mariani at nicola.mari- new tools and institutions that it intro- establishment of employment platforms, Law if: (i) the patent holder does not use legal advisors concerning specifi c cir- [email protected]. duces. among other things. According to the Law, the Government, GOVERNMENT INVOLVEMENT Agency, scientifi c/research and educa- The Law introduces two key state bod- tional institutions or other interested ies tasked with aiding the development persons may undertake or participate in of innovation: the Innovation and Tech- co-fi nancing innovative projects, activi- nology Agency (the “Agency”) and the ties or infrastructure on transparent, Research and Innovation Board (the impartial and public fi nancing basis. “Board”). As an advisory body of the Govern- INTELLECTUAL PROPERTY RIGHTS ment of Georgia (the “Government”), The Law regulates the intellectual prop- the Board has been charged with coor- erty rights attached to innovations. In dinating the creation of the State Strategy particular, it grants intellectual property of Innovations and its submission to the rights to inventions created by employ- Government. The Government approves ees or recipients of orders during the the State Strategy of Innovations and course of employment or contractual defi nes the bodies in charge of imple- obligations within a project funded by menting the strategy. Other functions of the Agency to the employer or the cli- the Board include coordinating the ent, unless otherwise agreed in the development of national and regional employment contract. The Law requires innovation ecosystems between state indication of the inventor’s name when bodies as well as the state, private, edu- a patent is registered for an innovation. cational and scientifi c sectors and report- The Law defi nes new terms such as ing to the Government regarding inno- Innovation and Commercialization of vative activities. Innovation. Innovation covers not only Operating in the form of a legal entity innovative products but also innovative of public law under the Ministry of processes, organizational innovations Economy and Sustainable Development and innovative marketing schemes. The of Georgia, the Agency has been commercialization of Innovations entails assigned to support innovation. It will innovation that in practical use has pos- work to commercialize research work, itive economic or social effects. Accord- stimulate the application of innova- ing to the Law, a share of revenue from tions and provide various incentives the commercialization of intellectual for innovation. property rights shall belong to the inven-

PUBLISHER & GM Journalists: Photographer: ADDRESS Reproducing material, photos George Sharashidze Tony Hanmer, Tamar Svanidze, Giorgi Pridonishvili 1 Melikishvili Str. and advertisements without Zviad Adzinbaia, Beqa Tbilisi, 0179, Georgia prior editorial permission is COMMERCIAL Kirtava, Meri Taliashvili, Eka Layout: strictly forbidden. DEPARTMENT Karsaulidze, Zaza Jgarkava, Misha Mchedlishvili Tel.: +995 32 229 59 19 The author is responsible for Commercial Director: Maka Bibilashvili, Karen E: [email protected] all material. Rights of authors Iva Merabishvili Tovmasyan, Dimitri Webmaster: F: GeorgiaToday are preserved. The newspaper Marketing Manager: Dolaberidze, Maka Sergey Gevenov is registered in Mtatsminda Mako Burduli Lomadze, Tim Ogden, ADVERTISING & district court. Ana Akhalaia, Robert Isaf, Circulation Managers: SUBSCRIPTION EDITORIAL DEPARTMENT: Joseph Larsen, Will Cathcart, David Kerdikashvili, +995 595 279997 GEORGIA TODAY Editor-In-Chief: Vazha Tavberidze, Nugzar B. David Djandjgava E-mail: marketing@ Reg. # 06/4-309 Katie Ruth Davies Ruhadze georgiatoday.ge GEORGIA TODAY 12 POLITICS SEPTEMBER 6 - 8, 2016 New Geopolitical Reality in the South Caucasus & The Georgian Dilemma

that the regional hegemonic actors - Rus- are to be ousted from the “Silk BY DR. VAKHTANG MAISAIA sia, Iran and Turkey are settling on com- Road” program. mon geopolitical interests, thus trying • Fostering Iran-Russia strategic to harmonize their energy security and cooperation on a bilateral basis. his August delivered new pursuing joint efforts to cope with inter- The cooperation has transformed geopolitical shifts in the national terrorism. In reality, it also into a concrete geostrategic pro- regional security dimension translates into fostering their efforts on ject. Iran and Russia set up a new of the South Caucasus and South Caucasus regional geopolitics formal military alliance for the Caspian Basin areas by against USA involvement in the region. Middle East with the involvement Tlaunching a new geopolitical long-dis- Despite the fact that Turkey is thought of the Assad regime, Iraq, Iran and tance race. On 7-8 August, a tripartite to be a part of the Western community, Russia against ISIS and the Jab- summit was held in Baku where Azer- at least being a Member State of NATO hatFatkh-ash-Sham coalition (cre- baijan, Iran and Russia focused on regional and being granted Associate Member- ated lately). security arrangements in the South Cau- ship status-quo since 1963, the incumbent As for the Russian-Turkish relations, casus, trying to force yet another step Turkish authority is seeking to downplay after the Sankt-Petersburg bilateral Sum- towards making progress regarding the its own “selfi sh great game,” reorienting mit, the parties agreed to promote a Caspian Sea legal status disagreements its geopolitical priorities from West to common geopolitical agenda, including among the littoral states. The longest East, clashing with some EU member- geopolitical axis is not a myth but a real- President Hassan Rouhani has the construction of gas undersea pipe- talks were given by the leaders of Russia states in the process, for instance, with ity. What and how the regional powers proposed to invite all other actors line “South Stream-2,” capable of deliv- and Iran and very soon the results were Germany and Austria. reached a “geopolitical consensus” on to engage in the regional security ering more than 60 billion cubic meters at hand. It is blatantly obvious that Turkey is to various drastic topics is a real question discussions; of gas to the EU market and to Turkey On the second day of the Summit, Tur- an extent reconsidering its relations with for international society to ponder. The • Promoting the new geo-economic itself. In addition, the development of key’s President Erdogan paid an offi cial the USA due to the results of the failed Baku Summit was a prelude for further project “North-South” transport- another important mega-energy project visit to Sankt-Petersburg and entered coup (according to Belgian information strategic partnership between Iran and transit corridor for transposing has been discussed- the construction of into more long-standing bilateral nego- agency EurActiv.com, the US started Russia, stabilizing relations between goods and merchandize from China a nuclear reactor worth USD 20 billion tiations with the President of Russia, transferring nuclear weapons, around Azerbaijan and Iran and making positive and South East Asia towards West- in the southern part of Turkey. whom he now considers as his “best 20 tactical nukes, from Turkey into what is already more than a “warm” ern Europe under the aegis of the Moreover, Turkey offi cially offered its friend.” And somewhat unsurprisingly, Romania following the failed coup of political relationship between Azerbai- “Silk Road” project, worth USD apologies for the Russian jet incident of all this was followed by another high- July 2016, when Incirlik’s Air Force base jan and Russia. In short, these are the 22 billion and launched by China last year and reached an agreement, level micro-Summit between Iran and power was cut and the Turkish govern- missions the Baku Summit seems to have in 2010. The corridor provides including a secret memorandum, on Turkey – Erdogan and Rouhani in Tehran ment prohibited US aircraft from fl ying accomplished: opportunities for involved parties combating terrorism and coordinating to discuss concrete aspects of relations in or out). More concretely, lately the • Institutionalize a framework for (Iran and Russia) to directly trans- joint efforts to fi ght ISIS. Considering between the nations, as well as regional Turkish Minister of Foreign Affairs even setting up an informal grouping fer all cargos via their territories all the above-mentioned, it stands to security issues. threatened that Turkey could withdraw of Iran, Azerbaijan and Russia and to the EU member-nations via the reason that Georgia is entering a “geo- This “tripartite” geopolitics has already from NATO if the Alliance did not pro- seeking to combine their interests shortest land routes, and for Azer- political deadlock” and will soon face a endorsed some kind of new paradigm vide more necessary assistance to his toward Caspian Sea legal problems, baijan it gives an opportunity to serious dilemma at the regional security for regional security development in the country (according to British newspaper and pursuing the identifi cation of get the craved status of so-called level. Hence, the situation is grave and South Caucasus and has already had a ‘Daily Express’). common interests toward energy “Transit Hub” for disseminating only the further development of the big impact on processes taking place in A new regional security agenda is security provisions. The next Sum- cargo in a “North-South” direction Euro-Atlantic foreign policy can help the Middle East, namely in Syria. It seems evolving: the Moscow-Ankara-Tehran mit will be held in Tehran and meaning Georgia and Armenia them to escape said “deadlock”.