EBRD to Support Enguri HPP Rehabilitation Villages

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Issue no: 1012/111 • JANUARY 9 - 11, 2018 • PUBLISHED TWICE WEEKLY PRICE: GEL 2.50

In this week’s issue... Georgian New Year Tree 'Chichilaki' Featured on BBC NEWS PAGE 3 Electricity Market Watch GALT & TAGGART PAGE 4 JSC MFO Crystal Successfully Issues 10mln GEL of Unsecured Bonds

FOCUS ON TOURISM Tourist numbers up and up, as are foreign credit card transactions PAGE 2 BUSINESS PAGE 5 Attracting More tourists to Tusheti's Mountainous EBRD to Support Enguri HPP Rehabilitation Villages

BY NINO GUGUNISHVILI BUSINESS PAGE 6 British Superstar ithin the Climate Resilience Upgrade Project, an agree- James Blunt to ment between the European Bank for Reconstruction and Visit Georgia Development (EBRD) and Wthe Georgian government was signed on Janu- During World ary 6 by Minister of Finance of Georgia Mamuka Bakhtadze and EBRD Director for the Caucasus, Tour Moldova and Belarus, Bruno Balvanera; follow- BUSINESS PAGE 7 ing which, the European Bank for Reconstruc- cally important to our economy.” “The most impressive is that we participated in 20 tion and Development is to provide $28 million* “This is about the maintenance of Enguri HPP; new transactions as opposed to 15 from the previ- for the Enguri Hydro Power Plant rehabilitation. the grant is $28 million*. We are very happy: it’s ous year, so we are very happy about our involve- Calls for Prisoners to be “Our relations with the EBRD are truly exem- the ﬁ rst week of the year and we already have a ment in Georgia, and also about the economic plary, as EBRD supports us in such spheres as new commitment and new activity with Georgia,” performance of the country,” he added. Freed Following Protests energy, transport, tourism, water supply,” Min- Balvanera said, further noting that in 2017, EBRD *Mr Balvanera was ﬁ lmed saying ‘dollars,’ ister Bakhtadze stated after signing the agree- saw record activity in Georgia, close to $300 mil- although the MIF and Georgian media have since in Iran ment. “The Enguri Hydro Power Plant is criti- lion, $50 million more than the previous year. reported it as ‘Euros.’ POLITICS PAGE 10

Prepared for Georgia Today Business by Markets Asof05ͲJanͲ2018 STOCKS Price w/w m/m BONDS Price w/w m/m BGEOGroup(BGEOLN) GBP36.44 +2,4% +9,7% GEOROG04/21 107.86(YTM4.17%) +0,1% +0,3% GHG(GHGLN) GBP3.55 Ͳ +1,2% GEORG04/21 112.18(YTM2.93%) Ͳ0,1% Ͳ0,2% TBCBankGroup(TBCGLN) GBP16.56 Ͳ5,4% Ͳ0,4% GRAIL07/22 112.78(YTM4.58%) +0,3% +0,4% BGEOLN07/23 105.26(YTM4.90%) +0,6% +0,8% COMMODITIES Price w/w m/m CrudeOil,Brent(US$/bbl) 67,62 +1,1% +7,6% CURRENCIES Price w/w m/m GoldSpot(US$/OZ) 1319,59 +1,3% +4,3% GEL/USD 2,5894 Ͳ0,3% Ͳ3,8% GEL/EUR 3,1142 Ͳ0,4% Ͳ2,3% INDICES Price w/w m/m GEL/GBP 3,5133 +0,1% Ͳ2,9% FTSE100 7724,22 +0,5% +5,4% GEL/CHF 2,6590 +0,0% Ͳ2,7% FTSE250 20932,56 +1,0% +5,3% GEL/RUB 0,0455 +0,9% Ͳ0,7% DAX 13319,64 +3,1% +2,1% GEL/TRY 0,6940 +1,5% Ͳ0,9% DOWJONES 25295,87 +2,3% +4,6% GEL/AZN 1,5328 +0,2% Ͳ3,3% NASDAQ 7136,56 +3,4% +5,5% GEL/AMD 0,0054 Ͳ Ͳ3,6% MSCIEMEE 174,02 +5,1% +8,1% GEL/UAH 0,0917 Ͳ1,0% Ͳ7,7% MSCIEM 1201,01 +3,7% +7,5% EUR/USD 0,8313 Ͳ0,2% Ͳ1,7% SP500 2743,15 +2,6% +4,3% GBP/USD 0,7370 Ͳ0,4% Ͳ0,9% MICEX 2207,41 +4,6% +4,4% CHF/USD 0,9747 +0,0% Ͳ1,3% MSCIFM 3079,54 +3,1% +7,1% RUB/USD 56,9297 Ͳ1,3% Ͳ3,1% GTIndex(GEL) 1582,68 ͲͲTRY/USD 3,7353 Ͳ1,7% Ͳ2,8% GTIndex(USD) 1208,13 ͲͲAZN/USD 1,6998 Ͳ0,0% +0,0% GEORGIA TODAY 2 NEWS JANUARY 9 - 11, 2018 Georgian New Year Tree 'Chichilaki' Featured on BBC

Record Number of Tourists Visit Georgia in 2017 “In 2017, the seven million tourists visiting Geor- BY THEA MORRISON gia brought $2.7 billion income to the country. This year, we have even more positive expectations,” he added. n 2017, 7,554,936 international travelers vis- The Head of the GNTA says the largest number ited Georgia, an unprecedented number and of visitors came from Armenia - 1,718.016 (+ 14.8%), 1,194.433 more travelers compared to the followed by 1,694.998 (+ 11.2%) from Azerbaijan, same period of 2016. 1,392.610 (+34.1%) from Russia, 1,246.745 (-0.8%) Head of the Georgian National Tourism from Turkey and 322,938 (+ 118.3%) from Iran. IAdministration (GNTA), Giorgi Chogovadze, says Chogovadze added that this upward trend was there was 18.8% growth in the number of tourists also maintained from European Union countries. in 2017, adding that it is a record number. Moreover, the number of arrivals in Georgia Chogovadze expects that around 8 million tour- increased in January-December from the United ists will visit Georgia this year, adding this will Kingdom + 39.9%, Netherlands + 31.1%, Spain + bring around $3 billion income to Georgia. 29.9%, France + 29.6% and Germany + 25.7%.

to cut down trees, as Chichilaki’s are made from Foreign Credit Card BY NINO GUGUNISHVILI dried nut branches that are usually cut during the winter period,” he says He adds that Georgian Chichilaki tradition prob- BC’s Russian channel has featured a ably started in the region of Guria in Georgia, in story about the Georgian New Year tree pre-Christian times, when Gurian’s had a god named Transactions at $2.2 called Chichilaki, a Georgian alterna- Aguna, a god of fertility and wealth, and when you tive of Christmas tree traditionally made brought Chichilaki to a family as a gift, it meant from dried walnut tree branches, its you were bringing well-being along with it. Bproduction dating back hundreds or even thousands “Tangerines, Churchkhela, apples and sweets of years. were used as Chichilaki decorations, but it’s get- bln in 2017 As Gia Datashvili, Chichilaki master, says in the ting trendy to hang dollars on it now,” he says in BBC story, nearly every family in Georgia knew the story. how to make a Chichilaki, but the tradition is now As BBC reports, Datashvili made almost 2000 fading away. “To make Chichilaki, there’s no need Chichilaki trees to sell this year.

http://www.rentmaster.ge/en/ E-mail: [email protected] Tel: ( +995 ) 591 930 303

Promotional activities aimed at introducing Geor- BY NINO GUGUNISHVILI gia’s tourism potential and attracting new visitors to the country in 2017, comprised of participating at 21 international tourism exhibitions, online mar- he overall amount of income received keting campaigns in 19 targeted countries, and from international tourism amounted marketing campaigns on BBC, Euronews, and Dis- to $2.2 billion, in the 1st to 3rd quarters covery. Georgia last year also found itself in the of 2017, the National Tourism Admin- spotlight of National Geographic, Forbes, Le Monde, RENTMASTER OFFERS: istration reports, $489 million more The Guardian, Observer, Elle, Conde Nast, Huff- Tthan the previous year. Transactions from foreign ington Post, Vogue and more. 99 international press VIP Car Services (pick-up and drop/transfer) credit cards made by international tourists in Jan- tours were organized, seeing 683 media represent- Daily Car Rentals uary-November 2017 totaled GEL 1,927.566, which atives visiting the country. Further, 14 informational Tours in Georgia is 30.3 % higher than the same period of 2016. tours were organized for 239 tour operators. GEORGIA TODAY JANUARY 9 - 11, 2018 NEWS 3 Waste Separation Corner Opens at GTC Carrefour Through the implementation of the WMTR II pro- corners are already functional at different locations gram, USAID supports sustainable development and throughout Tbilisi. inclusive economic growth by the facilitation of waste Look through the waste separation corners on separation and recycling. The creation of waste recy- the map of Tbilisi, ﬁ nd a location near you, start cling opportunities, education and awareness-raising the sorting of waste and save natural resources. campaigns help local residents to learn modern approaches to waste management and become actively https://www.google.com/maps/d/u/0/viewer?mid involved in environmental processes. =1uwGAAP7G8AC0hri4fyp5fGeC8Q8&ll=41.7003 Within the WMTR II program, waste separation 9101467624%2C44.85569337199718&z=11

n January 2018, a sixth waste separation cor- by Clean World Ltd. Sorted waste is then recycled ner was opened in Tbilisi, at GTC Carrefour at different enterprises and is transformed into on Kolmeurneobis Square. Local residents new products. and supermarket staff can now bring sorted The separation corner was implemented imple- waste: paper, glass, plastic and aluminium mented by CENN within the Waste Management Ito the separation corner. Transportation of the Technology in Regions, Phase II (WMTR II) pro- sorted waste to recycling companies is provided gram supported by USAID.

37 New Hotels to Open within State Produce in Georgia Program

the purpose of supporting entrepreneurs in pro- BY NINO GUGUNISHVILI moting hospitality businesses, attract new visitors and assist the overall development of the regions. The Host in Georgia component of the Produce n the framework of the Produce in Georgia’s in Georgia program is said to enable entrepreneurs ‘Host in Georgia’ component, 37 new hotels locally to receive fi nancial and consultancy sup- will be built in Borjomi, Bakuriani, Gudauri, port while establishing and running a hospitality Poti, Ureki, Nikortsminda, Kazbegi, Sagaredjo, business. Through the co-fi nancing of “franchising Gonio, Telavi, Shekvetili, Tskaltubo, Kutaisi, agreements,” the program aims for successful prac- IZugdidi, Mestia, Gurjaani and Gori, with an overall tices of international hospitality industry brands investment of GEL 108 million, expected to create to be implemented in Georgia. 1133 additional hotel rooms and over 1200 new work The state agency Enterprise Georgia’s Produce places. in Georgia program had, as of December 2017, Development of the hotel industry was added to fi nanced 323 projects, with a total investment of the Produce in Georgia program back in 2016 with GEL 786 million. GEORGIA TODAY 4 BUSINESS JANUARY 9 - 11, 2018

The Galt & Taggart Research team comprises Georgian and Azerbaijani ﬁ nance and economic experts who have broad experience of covering the macro and corporate sectors of the two countries. Our current product offering includes Georgian and Azerbaijan macroeconomic research, Georgian sector research, and ﬁ xed income corporate research. For free access to Galt & Taggart Research, please visit gtresearch.ge or contact us at [email protected]. Electricity Market Watch

FOR GEORGIA TODAY BY MARIAM CHAKHVASHVILI

ector research is one of the key directions of Galt & Tag- gart Research. We currently provide coverage of Energy, Healthcare, Tourism, Agricul- Sture, Wine, and Real Estate sectors in Georgia. As part of our energy sector coverage, we produce a monthly Elec- to Turkey through Georgia declined the decrease were higher consumption, tricity Market Watch, adapted here for 82.7% y/y to 22.8GWh, while electricity which serves as the base for GC fee Georgia Today’s readers. Previous reports exports were negligible (0.851GWh) in allocation, and a week of maintenance on the sector can be found on Galt & November 2017. works on Mtkvari Energy. Gardabani Taggart’s website - gtresearch.ge. Growth in demand was met by elec- CCGT and Mtkvari Energy operated at tricity imports from Azerbaijan (48.7%), full power for most of the month, while REVISION OF Russia (46.5%), and Armenia (4.8%). the other three TPPs were mostly on REGULATED TARIFFS all owned by Energo-Pro. Only Dzevruli proportion to their consumption. The Electricity import increased 8.7 times standby. GNERC has set tariffs for TPPs, regu- HPP got a tariff decrease (-24.1%). Tariffs differentiated tariff for Energo-Trans is y/y (+32.1% compared to November 2015) lated HPPs, transmission companies, were increased for the other four HPPs eliminated and a unifi ed tariff set at 0.38 to 110.2 GWh, or 10.2% of total electric- ELECTRICITY PRICES IN and distribution licensees. Tariff changes by 0.5 tetri/kWh, on average. The tariffs tetri/kWh until end-2020. Transmission ity supplied to the grid in November GEORGIA AND TURKEY go into effect January 1, 2018. Prior to will allow a reasonable return on invest- fees for the other two transmission licen- 2017. Notably, electricity import was 4.2% Average import price was down 12.8% setting the tariffs, GNERC approved the ments amounting to GEL 43.6mn over sees, SakRusEnergo and GSE, were below the planned level. y/y to USc 4.8/kWh. However, the high regulated companies’ investment plans 2017-2019. Regulated HPPs of Energo-Pro increased to 0.278 tetri/kWh (+54.4%) Domestic generation was roughly fl at, share of imports in the electricity sup- for the corresponding period, as dictated Georgia accounted for 10.2% of total and 1.323 tetri/kWh (+51.7%), respec- with HPP generation up 2.5% y/y (61.1% ply mix resulted in an increase in the by the tariff methodology. Investment generation in 11M17. Another fi ve of tively. The dispatch fee for GSE will of total) and TPP generation down 14.2% wholesale electricity price to USc 5.3/ plans for distribution licensees – Telasi Energo-Pro’s HPPs, with a total installed increase to 0.092 tetri/kWh (+12.2%) y/y (28.2% of total). The wind power kWh (+22.9% y/y). Electricity traded at and Energo-Pro – are approved at GEL capacity of 118.8MW, will become dereg- through May 1, 2018 and 0.412 tetri/kWh plant accounted for the remaining 0.5% the wholesale price through the market 66.2mn and GEL 278.4mn, respectively, ulated as of January 1, 2018, as the dereg- thereafter. The total transmission and of electricity supply. Enguri/Vardnili operator accounted for 19.6% of total for 2017-2019. As a result, the tariffs will ulation threshold increases from the dispatch fee will amount to 2.393 tetri/ generation was down 7.1% y/y, while electricity supplied to the grid in Novem- increase by 1.56 tetri/kWh for Telasi current 13MW to 40MW, per recent kWh to cover GEL 596.6mn of invest- generation of other regulated and dereg- ber 2017, with the rest traded through subscribers and 1.28 tetri/kWh for Energo- changes in the Law on Electricity and ments in the rehabilitation of the trans- ulated HPPs increased 3.3% y/y and bilateral contracts. Average monthly pro consumers, on average, for 2018-2020. Natural Gas. mission grid over 2016-2020. 30.0% y/y, respectively, in November market clearing price in Turkey 2017. The GC fee was down 22.6% y/y decreased 2.9% y/y to USc 4.6/kWh in CHANGE IN HPP TARIFFS TPP TARIFFS AND GUARANTEED ELECTRICITY CONSUMPTION to USc 0.6/kWh. The reasons behind November 2017. Enguri and Vardnili tariffs are set until CAPACITY FEE FOR 2018 AND GENERATION – the end of 2020. Enguri and Vardnili TPP tariffs have also been revised for NOVEMBER 2017 HPPs will invest GEL 94.3mn and GEL 2018, both for electricity generated (tetri/ Domestic consumption increased 6.7% 37.6mn, respectively, over 2017-2019, caus- kWh) and guaranteed capacity. Tariffs y/y in November 2017 and 8.6% y/y in ing increases in their tariffs by 1.818 tetri/ were lowered 1.5% and 0.5% for GPower 11M17. The growth in November was kWh (+21.5%) for the former and 4.002 and Gardabani CCGT, respectively. Tar- driven by 6.0% y/y growth in consump- tetri/kWh (+39.0%) for the latter. The iffs for the other TPPs increased by 3.8% tion of distribution companies and a three-year rehabilitation plan for Enguri on average. The guaranteed capacity fee 31.9% y/y increase in direct consumption, involves the closure of Enguri for three was raised for Gardabani CCGT (+11.6%), largely driven by 48.2% y/y growth in to six months in spring 2019, along with GPower (+6.2%), Block 3 (+6.4%), and Georgian Manganese usage. Consump- other rehabilitation works during 2018- Block 4 (+11.0%) and lowered for Mtkvari tion by Energo-Pro Georgia subscribers, 2020. According to the market rules, the Energy (-10.0%). including former Kakheti Energy Dis- Enguri tariff is the new balancing elec- tribution subscribers, increased 9.9% tricity price that deregulated power TRANSMISSION AND y/y, while Telasi consumption was down plants will receive for electricity sold to DISPATCH FEE 0.7% y/y, albeit from a high base in ESCO without a contract May through Exporters will no longer pay an extra November 2016 (+21.5% y/y). The Abk- August. Notably, Enguri and Vardnili charge for transmission. Exporters used hazian region’s electricity usage was HPPs generated one third (33.9%) of to pay a transmission fee to Energo-Trans down 1.1% y/y, accounting for 18.8% of total electricity supplied to the grid in (0.496 tetri/kWh in 2017) in addition to domestic consumption and 75.6% of 11M17. other transmission fees payable by direct electricity generated by Enguri/Vardnili Tariffs were revised for fi ve other HPPs, consumers and distribution licensees in HPPs. Electricity transit from Azerbaijan

Tel: (995 32) 2 45 08 08 10 Galaktion Street E-mail: [email protected] GEORGIA TODAY JANUARY 9 - 11, 2018 BUSINESS 5 Georgia-China Free Trade Deal Comes into Effect JSC MFO Crystal Successfully Issues 10mln GEL of

Photo: Georgia and China fi nalized a Free Trade Agreement in May 2017. Unsecured Bonds Source: intmassmedia.com coming into effect, China and Georgia BY THEA MORRISON will comprehensively improve the prac- tical cooperation level of both sides, thus fi rmly promoting the Belt and Road con- he Free Trade Agreement struction and achieving common pros- (FTA) between Georgia and perity,” the Chinese FTA Network China, signed in May 2017, reported. took effect on January 1, In 2017, Georgia exported 7,585,407 bot- 2018, meaning that the tles of wine to China, a 43% increase Tworld's largest market, which unites compared to 2016, making China one of approximately 1.4 billion customers, is the largest importers of Georgian wine now open to the goods and services of after Russia (47,778.920 bottles) and Georgia. Ukraine (8,502.554 bottles). The China-Georgia FTA is the fi rst FTA Further, China is one of Georgia’s top China has signed with a Eurasian coun- trading partners. Georgia’s top 10 trade try, and is the fi rst such agreement China partners in January-November 2017 made has initiated and achieved since the Belt up 66.5% of the country’s total trade and Road Initiative was put forward. turnover, with Turkey ($1.41 billion), The Chinese FTA Network reports that Russia ($1.05 billion) and China ($834.3 now that the agreement has gone into million) fi lling the top three spots. effect, in terms of trade in goods, Geor- So far, Georgia has made Free Trade gia will impose zero tariffs on 96.5% of deals with the European Union, Turkey, China's products immediately, covering European Free Trade Association (EFTA) 99.6% of the total imports from China; countries - Switzerland, Norway, Iceland China will impose zero tariff on 93.9% and Liechtenstein, and with the Com- of Georgia’s products, covering 93.8% monwealth of Independent States (CIS) of China's total imports from Georgia, countries - Armenia, Azerbaijan, Kazakh- of which 90.9% (comprising 42.7% of stan, Kyrgyzstan, Moldova, Turkmeni- imports) will have zero tariffs immedi- stan, Uzbekistan and Tajikistan. ately and the remaining 3% (comprising China has signed 14 Free Trade agree- 51.1% of imports) will have zero tariff ments with more than 24 states and within 5 years. In terms of trade in ser- regions throughout the world. vices, both sides will further open their Free trade negotiations between Geor- markets to each other on the basis of gia and China were launched in 2015. their WTO commitments. In addition, The Memorandum of Free Trade Agree- FO Crystal JSC, rated annual coupon rate was set at 4.5% over Notes are expected to be listed on the both sides have reached a broad consen- ment was signed in October 2016, and B by Fitch Ratings, suc- the National Bank of Georgia’s refi nanc- Georgian Stock Exchange. sus in many fi elds, including environ- after seven months, the deal was fi nal- cessfully completed an ing rate. Senior unsecured Notes were The issuance is the fi rst local currency ment and trade, competition, intellectual ized, making Georgia the fi rst country inaugural GEL 10 mil- issued and sold at an issue price of bond offering in the microfi nance sec- property, investment, and e-commerce. in the region to have such an agreement lion offering of notes 100.00%. Galt & Taggart acted as the tor in the country. This issuance repre- “By taking advantage of the agreement with China. dueM December 2019 (the Notes). The lead manager for the issuance. The sents a landmark transaction for Geor- gia and was very well received by local and foreign investors. The issuance was oversubscribed by more than two times. This transaction enables Crystal to establish an alternative source of GEL funding. The funds raised will allow the Company to further enhance its leading position on the Georgian market through portfolio growth. “We are pleased with Crystal’s successful debut on the corporate bond market,” said Archil Bakuradze, Chair- man of Supervisory Board of Crystal. “This Lari-denominated bond is an important step toward the diversifi ca- tion of the company’s funding sources and contributes to the de-dollarization of Georgia’s fi nancial sector. The pro- ceeds will be utilized for on-lending to Crystal’s micro-entrepreneurs and farm- ers across Georgia.” “I am pleased to highlight the role of Galt & Taggart in the successful issuance of JSC MFO Crystal’s bonds,” said Otari Sharikadze, Managing Director of Galt & Taggart. “This is the fi rst public placement of a fi xed income instru- ment in the Georgian microfi nance sector. The placement was very well received by our investor community. I would like to congratulate Crystal on this landmark transaction. I believe this transaction underpins Crystal’s leading position on the market and further strengthens the Company’s ability to attract funding in local currency. I would also like to congratulate the Galt & Tag- gart team on another successful transaction. Galt & Taggart has become the leading provider of investment banking services in the country to private and public companies, as well as international fi nancial institutions.” GEORGIA TODAY 6 BUSINESS JANUARY 9 - 11, 2018 Attracting More Tourists to Tusheti's Mountainous Villages people in Omalo run guesthouses and breweries. Tourists in Tusheti can participate in brewing and tasting takes place on location. We tasted Tushetian beer, and will not easily forget the taste of this beer. Tusheti has By tradition, women are not allowed to go to the brewery and at traditional become an Tushetian festivities, men and women’s beer is brewed separately. example of This season, the young people sold 100 liters of beer, a good indicator for development for one touristic season, which lasts only 4 months in Tusheti. mountainous 64-year-old Irakli Bukvaidze is well known in Tusheti and beyond. He, along regions of with his wife, are the only residents in the village of Shenako who remain in Georgia Tusheti throughout the year. The cou- ple are employed in various fi elds – from the valley because local potatoes they run the guesthouse, cultivate come only in late September. vegetables and potatoes. Apart from the cooperatives, other "Potatoes were planted on an area of families started to grow different vari- 0.4 hectares. I would have planted more, eties of potato and are pleased with the but the absence of techniques prevented fact that despite the drought, they had me from doing so. Last year, I sold my a better harvest than in previous years seed potatoes in the villages of Shenako using good seed material and a proper and Omalo for 2 GEL. With the help of oping the agriculture in Tusheti and cafés with pastries. agro technique. CCRG, I also purchased a dryer that BY VAZHA TAVBERIDZE rousing the locals’ interest in the tour- "Shina" is already well known world- Onise Ichirauli, who is a ranger in the dries up herbs in a way that keeps their ism fi eld. It was due to their assistance wide. Today, before booking anywhere, Tusheti National Park and knows Tush- color and aroma. We sell our products that in the villages of Tusheti they began we all read reviews online. In this case, eti's conditions well, decided to engage year-round," says Irakli Bukvaidze. or the fi rst time ever, I found to develop solar energy a few years ago. on the world's number one portal Book- in beekeeping and when CCRG "Tusheti has become an example of myself in Tusheti in 2001, The project was funded by the Czech ing.com, hotel “Shina” has 9.2/10 points announced a business grant program development for mountainous regions when some of my friends and Development Agency. Installing solar for cleanliness and 9.2/10 points for to help the locals in Tusheti, he applied of Georgia," says Ekaterine Meskhri- I equipped ourselves with panels and batteries allowed Tushetians location. for it. Today he owns 15 hives. kadze, Head of the Czech Republic tents and sleeping bags and to start their own small business and Another resident of Omalo, Eteri “Our honey stands out for its qualities Caritas Mission in Georgia. "With the Fwent down the most diffi cult road in to become employed in the tourism Markhvaidze, is the owner of hostel and and there’s a great demand for it. Next support of the Czech Development this beautiful corner of Georgia. fi eld. As a result, family run hotel store "Tishe", which offers a variety of year, I plan to produce 300 kilograms Agency, we contributed to the improve- At that time, it was possible to get to appeared, where there is also electric- products to customers. With the help of honey and to supply it local hotels,” ment of the economic situation of the Tusheti only by Soviet truck “KAMAZ”, ity and hot water. of the Czechs, Eteri purchased solar said Onise. In addition, he plans to pro- local population by implementing var- and it took almost half a day to cover a Another project implemented by CCRG panels. The permanent power allowed duce candles and raw propolis chunks. ious activities and carrying out fi nancial 85-kilometer road from Alvani to Omalo. is the development of cooperatives in the hostel to work at full capacity. Hos- Tusheti also needs the boldness of interventions." Once in Omalo, we were fi nally con- Tusheti. The cooperatives allowed the tel guests and guests who stay in tents youth: 27-year-old Dato Mosaidze and "CCRG continues to work in the region, vinced that this spectacular corner of locals to grow more agricultural prod- are supplied with laundry facilities, 22-year-old Giorgi Ichuaidze are from and hopefully we will have more impor- Georgia was absolutely cut off from the ucts using the correct agro-technical showers and Wi-Fi. Omalo. Giorgi was educated in Europe, tant results in cooperation with other outside world, civilization and moder- approaches, and to offer tourists natu- "After I had power, revenue went up. but returned to his homeland to con- donors during the next one year," she nity. There was no water, no power, no ral products. Together - solar panels, I can purchase more products and store nect his future with Tusheti. Young added. hotel, nor even a way to buy some bread cooperatives and guest houses have it in refrigerators. I used to ferment in the villages of Tusheti. made Tusheti even more attractive for matsoni, but in a very small amount and I traveled to Tusheti for the second tourists, and the locals received a stable I didn’t earn anything from it. Now that time this summer. I can honestly say source of income. I have refrigerators, I started to make that I did not expect special changes Natia Bakuridze is one of those Tushe- money. It has also enabled me to improve there, but my unforgettable visit 16 years tians who expanded her business with the quality of service," Eteri said. ago was radically different from what the help of CCRG. Natia opened one of The cooperative "Tusheti 2015" was I found in the now modernized region. the most popular hotels in Tusheti, founded and developed thanks to the Almost all locals in Tusheti have a “Shina,” in 2010. Her two children and assistance of CCRG. The cooperative guesthouse. In the hotels, there is elec- several local residents also work there. comprises of six families from Omalo. tricity and running hot/cold water; in A few months ago, Natia purchased an In addition, CCRG contributed to the the villages, you will fi nd food without oven with the help of Caritas, making construction of a shopping booth in the problem. In short, all the conditions it possible to cook different pastries, village of Omalo. A few months ago, now exist to ensure that tourists leave bread and pizza. So if Georgian cuisine CCRG gave a shopping booth to ‘Tush- with an unforgettable impression. That is not to your taste, you can now give eti 2015’, where members of the coop- is why the number of tourists is increas- Tushetian pizza a try instead. erative sell their produce. The members ing from year to year, and in parallel, it "After the purchase of the oven, the of "Tusheti 2015" mostly possess potato is obvious that the employment of number of guests in the hotel increased and cucumber farms. Last year, they Tushetians in this fi eld is growing. by 15%, as we offer freshly baked bread grew 900kg of cucumbers. Czech Development Agency and NGO and pastries. All this has refl ected in Makvala Melaidze, Chairwoman of 'Caritas Czech Republic in Georgia' the growth of income," says Natia, who the cooperative, says that in Tusheti, (CCRG) greatly contributed to devel- supplies the neighboring hotels and the owners of hotels bring potatoes GEORGIA TODAY JANUARY 9 - 11, 2018 BUSINESS 7

Black Pearl Live’s Managing Director Kuun De Beer

British Superstar James Blunt to Visit Georgia During World Tour amous and beloved British superstar, James WHY JAMES BLUNT AND WHY MAY 26? Blunt is to visit Georgia during his world James Blunt is the fi rst international star to sing tour. The concert will be held on May 26, on May 26 at the Mikheil Meskhi Stadium. This Georgian Independence Day, at the Mikheil show is part of his world tour ‘Afterlove’ and his Meskhi (Locomotive) stadium. The singer fi fth studio album presentation, created after the Fand composer will perform songs from his latest multi-platinum album ‘Moon Landing.’ James Blunt album ‘Afterlove’. The event is organized by New is a multi-platinum album-selling world superstar. International Promotion Company Black Pearl Live. He also has a very big and diverse fan base, which We spoke to Black Pearl Live’s Managing Direc- makes it a great show for a wide age range. We tor Kuun De Beer to fi nd out more. wanted Georgia to be part of his world tour.

BLACK PEARL LIVE WAS FOUNDED TELL US ABOUT THE MAY 26 SHOW IN GEORGIA, RIGHT? Of course, fans can expect all their favorite hits, Yes. It’s an international promotion company which including his last single, ‘Love Me Better.’ What’s cooperates with the world's leading performers, and more, some fantastic local singers and special guests is based in Georgia. This means taxes are paid accord- from South Africa are to participate with him. ing to the country's legislation and that it operates Invited group - The Parlotones – a Rock Band from in Georgia. At the same time, the main purpose of Johannesburg (South Africa), will perform songs the business is to create and ensure festivals, con- based around love and life motifs. The event will certs and events of current international standard. be hosted by energetic and strong rock groups Young Georgian Lolitaz and Loudspeakers. Young TELL US ABOUT THE Georgian Lolitaz is an all-male band which repre- COMPANY’S AMBITIONS sented Georgia at Eurovision. The Loudspeakers The company has ambitious goals in the Georgian are a famous Georgian rock band who gained market, but these goals are not groundless. Black immense popularity with the Tbilisi Altervision Pearl Live plans to turn Georgia into a host coun- Music Festival. We want to merge the event with try of global cultural events. But everything depends this festival. It’s a wonderful way to celebrate the how things will develop and how we work today Independence Day of Georgia. to achieve success in the future. WERE YOU FAMILIAR WITH THE HOW ARE YOU GOING TO GEORGIAN MARKET? DOES JAMES ACCOMPLISH THESE GOALS? BLUNT HAVE FANS IN GEORGIA? We want to establish our company as an interna- We do intensive market research before booking tional player and show that productions in Georgia any artist, and statistics revealed that James Blunt can be on the same level as any high-proﬁ le show is a very well-liked performer here. worldwide. That is why the James Blunt ‘Afterlove’ world tour is so important for us; we want to show HOW ARE YOU GOING TO COMPETE other artists that Georgia deserves to be part of WITH OTHER POPULAR EVENTS? every world tour. We don’t focus on competition, we just serve the market. We don’t see them as competition, rather WHY DID YOU DECIDE TO as partners serving the Georgian music industry. OPERATE IN GEORGIA? Because we have the capabilities to arrange world WHO WILL BE NEXT? class events, and our research showed there is such That’s a secret, of course; so you’ll have to wait! I a chance to do so in Georgia. doubt you’ll be disappointed.

WHY THE NAME ‘BLACK PEARL LIVE’? TELL US A LITTLE ABOUT The team was in Batumi in summer to carry out YOUR FUTURE PLANS market research, and as Georgians say, Batumi is We have already been approached by a few agents the pearl of the Black Sea. This was very relevant wanting to send more top-class talent. Currently, for us, because we saw the whole of Georgia as a our focus is on Pearl: full off opportunity. The ‘Live’ part is because the James Blunt of Live entertainment. show. GEORGIA TODAY 8 BUSINESS JANUARY 9 - 11, 2018 Georgian Wine Export in 2017 Reaches Record Breaking Number

(99,796), Azerbaijan 75% (141,294) amongst others. BY NINO GUGUNISHVILI The top fi ve countries for Georgian wine export, the National Wine Agency says, are Russia, Ukraine, China, Kazakhstan and Poland. he National Wine Agency of Georgia As for the top Georgian locally produced wines (GNWA) claims that Georgian Wine exported in 2017, Kinzmarauli tops the list with 12.8 Export in 2017 reached a record-break- million bottles exported, followed by Mukuzani 4.2 ing number in almost 30 years. million bottles, Tsinandali, 3.4 million bottles, Following the data published on the Akhasheni with 1.5 million bottles, Khvanchkara TNational Wine Agency site, 76.7 million bottles of with 887,500 thousand bottles and Tvishi with 308,800 Georgian wine were exported to 53 countries world- thousand bottles. The GNWA states that almost 250 wide in 2017, which is 54% higher than in 2016. In Georgian companies exported wine in 2017. Further- 2017, wine export amounted to $170 million US, more, 18.4 million bottles of brandy were exported showing a 49% increase compared to previous years. to 26 countries, a result 78% higher compared to The export growth, according to the Georgian 2016. Overall, the export of brandy in 2017 amounted National Wine Agency, is seen in China, with 43% to $39.4 million, with a 70% increase seen. (7,585, 407 bottles); Russia, with 76% (47,778, 920 288,000 bottles of Georgian Chacha was exported bottles) Ukraine, with 46% increase (8,502, 554 bot- to 23 countries worldwide, with export growth tles of Georgian wine exported), Poland with 15% reaching 180% and $846.3 thousand received in increase (676,440 bottles exported), Latvia with income from the export. 20% growth (1,505,138 bottles of wine exported), The overall income received from exporting alco- Belarus, 56%, (1,827,130), US with 56% (457 920 bot- holic beverages such as wine, Chacha, and brandy, tles exported), Germany, 38% (404,538), Israel, 150% amounts to $283.8 million, showing a 46% growth Lithuania Not Happy (213,074), Mongolia 82% (168,162), France 178% compared to 2016. with Ukrainian Workforce which is why they go to neighboring countries to BY DIMITRI DOLABERIDZE fi nd work. For Lithuania, the infl ux of migrants from Ukraine was set to save the economy, as many young Lith- he political and economic crisis in uanians, just like Ukrainians, head westwards for Ukraine, as well as the new visa-free a better life, resulting in a State lacking young spe- regime, inevitably led to a mass migra- cialists. A similar situation can be seen in many tion of citizens to neighboring Euro- post-Soviet countries, especially in the Baltics. pean countries, such as Poland, Hun- However, the Lithuanians are not happy with Tgary and the Baltic countries. Despite the offi cial this scenario. Many critics oppose the infl ux of support of Kyiv from politicians in Brussels, ordi- Ukrainian labor migrants, saying it will lead to a nary inhabitants of the EU are not happy with this halt in the growth of wages in the country. In the outcome. words of critics there is a logic: Ukrainian guest According to the statistics of DELFI, in 2017, workers are satisfi ed with a lower monetary reward around 20,000 labor migrants from Ukraine entered than the necessary minimum for Lithuanian citi- Lithuania. This is twice as much as a year earlier. zens. The residents of Nezalezhnaya (part of Ukraine) Similar thoughts have already been voiced in need to support themselves and their families, Poland and Hungary. Georgian Woman Wins Sexual Harassment Court Battle Over Employer

Baia Pataraia, a leading women’s rights advocate BY TOM DAY and the executive director of the Sapari union, said she hopes that the case will make it easier for women to come forward in the future. atia Samkharadze, a 25-year-old TV “[I hope] this case will set a precedent for other host, has become the fi rst Georgian victims of sexual harassment, so that they won’t woman to sue her boss for sexual har- be afraid of fi ling lawsuits against their abusers”. assment. Samkharadze expressed her satisfaction with the Following the accusations made court ruling. Tagainst her boss, Shalva Ramishvili, he has been “The most important part was that the court ordered to pay 2000 GEL in compensation. confi rmed the fact of sexual harassment and Ramishvili was ordered to pay for non-pecuniary imposed compensation for non-pecuniary dam- damages, but was acquitted of the pecuniary part. ages. I think it’s important for any person who Although the court only partially sustained the has ever faced such a problem,” Samkharadze claim, Georgian human rights workers said that told reporters. this was “an unprecedented case.” The say that the Meanwhile, Ramishvili claims that he was the important thing is that the court assesses the case winner. “The matter had nothing to do with either as sexual harassment. discrimination or sexual harassment,’ he said. GEORGIA TODAY JANUARY 9 - 11, 2018 BUSINESS 9 Georgian Military Modernization: Two Steps Forward, One Step Back

whether Izoria took recent experience into account OP-ED BY EUGENE KOGAN and it is unclear whether resources allocated to the reservists is money well spent. There is one very important point on which the author and he article focuses on the current mod- Maisaya agree, with the latter stating, “Georgia still ernization of the Georgian military. does not have an overarching comprehensive mil- Whatever happened before itary strategy to replace the now outdated one the appointment of Levan Izoria, the adopted after the August 2008 war and that would current Minister of Defense, is history. defi ne the role of the reservist force vis-à-vis the TIzoria was appointed Minister of Defense on 1 regular army.” And, as long as such a strategy has August 2016. At a press conference on 7 November not been prepared, reforms of the reserve forces 2016, Izoria announced plans to reform the coun- are likely to fail. try's armed forces, air force and air defense, but To conclude, there are currently more questions concluded that the construction of a new naval than answers. What is clear is that even the good capacity was too costly. The Navy was disbanded intentions in the West translating into training of in 2009 and merged with the Coast Guard, which the GAF for missions in Afghanistan is not suffi - is part of the Border Guard Division and reports cient help for Georgia at this crucial juncture for to the Ministry of the Interior (MIA). It should also training in homeland defense. The meagre defense be emphasized that Izoria's reform plans were not budget and its improper allocation, namely 67% the fi rst and probably will not be the last. His pre- for salaries and social benefi ts, while the rest goes decessors tried to pursue the same reform and, towards military equipment and so on, impair the idiomatically speaking, “they keep treading on the country's abilities to purchase urgently needed same rake.” modern arms. Western reluctance to sell modern During the reign of the Georgian Dream Coali- arms lessens the ability of GAF to defend Georgia. tion between 2012 and 2016, two ministers resigned, Abkhazian and South Ossetian troops under Rus- fi ve-year contract will undergo an annual 45-day Whether or not Izoria’s negotiations would ulti- the third was removed from offi ce and the fourth, sian command further increased the numbers and retraining course and will receive fi nancial com- mately lead to the signing of a contract for the the current minister Izoria, retained his previous agility of the deployed forces. pensation equaling 20% of the salary of a military purchase of French-made air-defense systems is position as minister. It remains to be seen for how Despite Western reluctance to sell arms, it was service member of similar rank and grade. Details not a foregone conclusion. Thus far, Emmanuel long. The frequent change of ministers has ham- reported in February 2016 that American military surrounding the refreshing course are not clear Macron, President of France, has not given any pered efforts to build robust and effective armed assistance to Georgia, known as Foreign Military and, as a result, there are questions as to whether hints about the signing of a contract. Therefore, forces, as each minister has his or her own vision Financing (FMF), would decrease under a budget or not the proposed idea is feasible. Izoria said that the issue of Georgian air-defense capability remains of the armed forces he or she tried to implement proposal from $30 mln in 2016 to $20 mln in 2017. if the legislature adopted this reserve concept, a unresolved and the country remains unprotected. without learning from the mistakes of his or her The 2017 funding is intended “to advance Georgia’s ‘pilot’ program for selecting participants and con- In addition, even if the aforementioned reform with predecessors. development of forces capable of enhancing secu- cluding service contracts would start in 2018. It is the reserve forces looks great on paper, there is no As a result, the reforms have not yielded tangible rity, countering Russian aggression, and contribut- a good idea to carefully evaluate the pilot program guarantee of its success. It should be remembered results and the country's military capabilities give ing to coalition operations. This will include sup- before continuing with the rest of the aforemen- that past experience showed that reform of the little hope, even though Georgian Dream's offi cials port in areas such as upgrades to Georgia’s rotary tioned reserve components. reserve forces ended in failure and no conclusions claim otherwise. It is not yet clear whether the wing air transport capabilities, advisory and Defense Back in 2012, a similar ‘pilot’ project was launched were drawn from that experience. And fi nally, it current reform will be more successful than the reform, and modernization of Georgia’s military and 13,000 volunteer reservists (of an envisaged remains unknown whether or not the current Min- previous ones. institutions.” Yet, as late as July 2016, it was not 100,000) were recruited. At the time, the new ister of Defense will retain his position, or be dis- entirely clear what type of weapon systems Geor- recruits accounted for less than 1% of Georgia’s missed as his predecessors were, in favor of another THE CONTOURS OF REFORM gia would be allowed to acquire as a result of the defense budget ($3.5M). The author does not know wave of reforms to be initiated. During the press conference, Izoria added that the aforementioned funding. American offi cials were basic training of conscripts will in future be simi- tight-lipped regarding the provision of weapon lar to that of professional soldiers, in order to cre- systems. Even in September 2017, uncertainty about ate a larger pool of qualifi ed personnel, which can acquisitions persisted. It appears, however, that be used either as contracted servicemen or in the JAVELIN ATGMs and F-92 STINGER MANPADS reserves. In the past, army conscripts only exer- are unlikely to be sold to Georgia. Despite a wealth cised logistic and support functions; they were not of information in open sources about Georgia’s trained for combat and did not participate in com- likely acquisition of French air-defense systems bat. At the same time, Izoria stressed that the army nothing has materialized thus far. In April 2017, it will continue to consist primarily of professional was reported that Izoria plans to visit France to soldiers. Professionals currently account for 90% negotiate with his French counterpart about pur- or around 13,000, all of them deployed in Afghan- chasing air-defense systems. istan as part of combat operations. However, con- The fi nal piece of the current reform announces scripts currently account for only 10% or around the establishment of reserve forces. Previous min- 2,000. For example, the current army has about isters of defense have tackled this issue with little 15,000 soldiers without the Ministry of Defense success. Another initiative should be taken with a and the General Staff personnel, as well as civilian grain of salt: the Reserve Forces. Georgian military staff of the Ministry of Defense, which according expert Vakhtang Maisaya said, “Forming robust to various open sources consists of 36,000 to 37,000. military reserve forces remains the most important Izoria also announced plans to optimize the Gen- and challenging step in the army reform. Currently, eral Staff, the army, the air force, the air-defense the main objective should be to make use of the forces, and the military police. The plans envisage reserves and work out mobilization plans that sig- abolishing an unspecifi ed number of departments nal the defensive strength of the country. The gov- within the General Staff and emphasizes the use ernment has worked out the concept, and it fully of combat helicopters and UAVs as there is no corresponds with NATO standards.” Indeed, in Georgian air fl eet. Because of this optimization, March 2016, Georgia’s top military commanders 1,750 civilian personnel from the MoD and 340 discussed the mobilization and reserve forces draft military personnel from the Georgian Armed Forces concept. According to the concept, the main mis- (GAF) were dismissed in December 2016. Who will sion of the GAF reserves is to support the armed supply combat helicopters and UAVs to Georgia is forces in wartime, during crisis and in peacetime. currently unknown, as the West is not yet ready The draft includes three categories of the reserve for such deliveries and Israeli companies might system: army, territorial and specialists’ reserve. not step in as they do not want to provoke Russia’s In May 2017, the aforementioned categories were ire. After the August 2008 war, Israeli companies elaborated. The fi rst category is to be composed halted the supply of weapon systems to Georgia, of demobilized servicemen or servicemen who while neighboring Turkey did not provide any arms completed a fi ve-year military contract and are at all. In the meantime, the number of infantry bri- willing to serve for another fi ve years in a reserve gades was cut from fi ve to four. But it is a fact that unit. The second category is to be the territorial even nine years since the August 2008 war, the reserve, established on the basis of the existing West remains reluctant to sell arms to Georgia, Georgian National Guard with its current 1,600 also due to concerns about provoking Russian ire. active reservists that is used as reserve for the GAF. Thus far, Western reluctance has resulted in seri- In the event of hostilities, its members will be ous impairment of the country’s air-defense and deployed only in their home district and serve for FIRST BRAND HOTEL IN KUTAISI UNDER BEST WESTERN INTERNATIONAL anti-tank capabilities. As long as the West is unwill- fi ve years. The third category is to consist of civil- Within the framework of the Georgian Hotels’ Regional Three mobile conference halls are available with a total ing to sell these weapon systems to Georgia, the ian experts whose knowledge and experience can Network Development Project “12 hotels in 12 regions” by capacity of about 100 persons. Georgian military inventory will consist of obsolete be useful to the army in peacetime or wartime. The GHYHORSPHQWFRPSDQ\³6LPHWULD´WKH¿UVWEUDQGKRWHOKDV been opened in Kutaisi under the Best Western International (XURSHDQFXLVLQHFDQEHHQMR\HGLQWKHJURXQGÀRRUFDIp Soviet equipment, some Georgian-made equipment active army reserve is to number 1,500 people, and brand. and a grill-bar menu in the roof top restaurant and some Western arms like US-donated helicop- the territorial reserve will be 10,000 strong. The with panoramic views over the city. ters. As a result, the Georgian military remains specialized reserve units will not be limited in size, The hotel accommodates 45 guest rooms, including 40 standard rooms and 5 suites. The hotel was designed taking The International Hotels Management Company “T3 vulnerable vis-à-vis the heavily armed Russian and will be dynamically formed based on GAF’s into consideration special conditions and safety for guests Hospitality Management,” providing the hotel management, military stationed in Abkhazia and South Ossetia developing needs. Unlike the current reserve sys- with disabilities. has 20 years’ experience in hotel management in different which has been increased in strength since August tem, the new concept envisions manning a reserve countries globally.

2008. More than 8,000 Russian soldiers are sta- on a voluntary basis only. Women up to 55 years of Address: 11 Grishashvili Str., 4600, Kutaisi, Georgia tioned in Abkhazia and South Ossetia – the occu- age will also be allowed to serve. Under this pro- TEL 219 71 00 pied regions of Georgia. The integration of the posed system, members of the reserve who sign a [email protected] GEORGIA TODAY 10 POLITICS JANUARY 9 - 11, 2018 Calls for Prisoners to be Freed Following Protests in Iran

letter, published on the front page of the BY TOM DAY newspaper Etemaad on Sunday, calling for the release of those protesting. They said that Iranians have a right to protest. t was announced last week that “People feel belittled and hopeless,” the violent protests that accumu- the letter said. lated a total death-toll of 21 had A makeshift camp was even setup under ended. The mass protests had one of the prison’s watchtowers on Sun- erupted over economic issues in day, where protestors gathered around Ithe city of Mashhad on December 28. a campfi re, having brought an ample The unrest spread like wildfi re across supply of wood and tents in which to the whole country, turning against the sleep. regime in more than 80 cities. “The political prisoners must be freed,” Over 500 people were arrested in the they chanted, as people fi lmed them with capital Tehran alone, and local media their phones, and as guards carrying says that more than 1,000 were detained machine guns on their shoulders looked throughout the country. The average age down from walls and watchtowers above. of those arrested is under 25, Deputy Iran is said to be a repressive country Interior Minister, Hossein Zolfaghari, where activism often leads to punish- said. ment, such as imprisonment or other Over 100 people gathered outside the charges. Hundreds of journalists, blog- notorious Evin Prison in Tehran on Sun- gers and activists have been detained day, calling for their friends and family over recent years. Charges can be imposed to be released. One man insists that his on those who are seemingly not doing son was arrested by mistake. anything wrong, like Jason Rezaian, a “I don’t want trouble. I just want my reporter who was held in Evin Prison son released.” for 544 days on charges of espionage, a Another man was waiting in the harsh claim he strongly denies. winter conditions outside Evin Prison During Iran’s last big anti-government for his friend Hossein, who was arrested demonstrations, thousands were arrested, on December 29, to be released. Hos- and temporary prisons had to be estab- sein participated in the protests because lished because Evin was full. In one, the “he was angry, like many people,” his Kahrizak detention center in Tehran, friend said. several protestors were tortured and Hossein saw a man had grabbed the three even died. cellphone of a woman who had been fi lm- A full investigation of the case was ing the protesters and “chased him, but Photo source: theduran.com called for by Iran’s supreme leader, Ali he turned out to be a plainclothes police According to reports from friends and while hundreds remain. freedom have now been brought into Khamenei. Several offi cers were sen- offi cer,” Ali said. “I’m bringing the deed family members outside Evin Prison on The country’s declining economic con- the spotlight. tenced to jail time, though not all served of his house, so he can post for bail.” Sunday, mere dozens have been released, ditions, corruption and a lack of personal A group of reformist activists wrote a the sentence. GEORGIA TODAY JANUARY 9 - 11, 2018 POLITICS 11 The Economic Interconnectedness of the South Caucasus

ness can even resolve the most difﬁ cult problems such as the seemingly unresolvable Abkhazia, South Ossetia, and Nagorno Karabakh conﬂ icts. Economic interconnectedness through supply chains eventually breaks down large Man-made military barriers which are, for instance, created between South Ossetia and the rest of Georgia. Economic There are already some signs that economic pro- gress tramples geopolitics: Russia and Georgia are interconnectedness close to opening economic corridors, with Tbilisi’s control, through Abkhazia and South Ossetia. through the creation of In the modern world, where economic competition is intense, and the globe is becoming an increas- supply chains will ingly interconnected place, regions left out are guaranteed eventual backwardness. move economic This brings us back to Russia, which has been experiencing important developments in its foreign prosperity to the policy – closer cooperation with Turkey and Iran. Georgia should adjust its foreign policy to new forefront and could scenarios and one of them could be to play a transit role as much as possible in order to reduce replace geopolitics geopolitical competition.

Although the Russian government did not follow OP-ED BY EMIL AVDALIANI the Eurasianists’ policies offi cially, and even broke with their most vocal representative Alexandr Dugin, nowadays we see that Moscow does what ooking at the history of Russia over the was prescribed in closer cooperation with Turkey past centuries, one constant peculiarity and Iran. of the country’s foreign policy has been I have written in the past that it is in all three ideology. Under the Romanovs, Ortho- countries’ common interests to cooperate in dox Christianity was an important instru- obstructing western military encroachment in the mentL in exerting Russian infl uence over Christian South Caucasus and the Middle East. The three peoples of the Balkans and the South Caucasus. countries have their own disagreements too, but When the Russian Revolution happened almost this triangle could, quite surprisingly, actually lead 101 years ago, the religious aspect of foreign policy to a certain stability in the South Caucasus, a region was gradually replaced by communism. However, ridden with perennial ethnic confl icts in Abkhazia, after the breakup of the Soviet Union in 1991, the South Ossetia and Nagorno Karabakh. Russian political elite was no longer able to provide an important ideological back up to the Kremlin’s A POSITIVE PICTURE FOR foreign policy. Not until the late 1990s, when the THE SOUTH CAUCASUS so-called Eurasianists (those who believe that Rus- A region as complex as the South Caucasus could sia is neither in Europe nor in Asia, but in order to in fact become a land where competing powers successfully compete with western powers in the can balance each other. One of the recipes for this Middle East, it needs Teheran and Ankara) appeared. is economic interconnectedness. Turkey-Georgia- Azerbaijan already enjoy signifi cant cooperation in the economic realm, with new railways and pipelines being built, while Iran, Russia and Azer- baijan are developing the North-South Economic Corridor which will potentially enable reconnect- ing Russian railways with the Iranian. Apart from the immediate neighborhood of the South Caucasus, big stakes are made by such large A region as complex powers as China, with its Belt and Road Initiative. The very fact that the South Caucasus is a con- as the South Caucasus venient transit passage could make several major powers regard the region as more or less free of could in fact become a geopolitical struggle. Economic interconnectedness through the crea- land where competing tion of supply chains (via new railways, sea ports such as Anaklia, and pipelines) will move economic powers can balance prosperity to the forefront and could replace geopolitics as a primary driver of cooperation between each other the countries. Indeed, economic interconnected-

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