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facebook.com/ georgiatoday

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

BUSINESS PAGE 5

PAGE 2

EBRD to Support Enguri HPP Rehabilitation

BUSINESS PAGE 6

BY NINO GUGUNISHVILI

British Superstar James Blunt to Visit Georgia During World Tour

W

ithin the Climate Resilience Upgrade Project, an agreement between the European Bank for Reconstruction and Development (EBRD) and the Georgian government was signed on January 6 by Minister of Finance of Georgia Mamuka Bakhtadze and EBRD Director for the Caucasus, Moldova and Belarus, Bruno Balvanera; following which, the European Bank for Reconstruction and Development is to provide $28 million* for the Enguri Hydro Power Plant rehabilitation. “Our relations with the EBRD are truly exemplary, as EBRD supports us in such spheres as energy, transport, tourism, water supply,” Minister Bakhtadze stated after signing the agreement. “The Enguri Hydro Power Plant is criti-

Attracting More tourists to Tusheti's Mountainous Villages

cally important to our economy.” “This is about the maintenance of Enguri HPP; the grant is $28 million*. We are very happy: it’s the first week of the year and we already have a new commitment and new activity with Georgia,” Balvanera said, further noting that in 2017, EBRD saw record activity in Georgia, close to $300 million, $50 million more than the previous year.

“The most impressive is that we participated in 20 new transactions as opposed to 15 from the previous year, so we are very happy about our involvement in Georgia, and also about the economic performance of the country,” he added. *Mr Balvanera was filmed saying ‘dollars,’ although the MIF and Georgian media have since reported it as ‘Euros.’

BUSINESS PAGE 7

Calls for Prisoners to be Freed Following Protests in Iran POLITICS PAGE 10 Prepared for Georgia Today Business by

Markets Asof05ͲJanͲ2018

STOCKS BGEOGroup(BGEOLN) GHG(GHGLN) TBCBankGroup(TBCGLN)

COMMODITIES CrudeOil,Brent(US$/bbl) GoldSpot(US$/OZ)

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Price

w/w

Price

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m/m

GBP36.44

+2,4%

+9,7%

GEOROG04/21

107.86(YTM4.17%)

+0,1%

+0,3%

GBP3.55

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+1,2%

m/m

GEORG04/21

BONDS

112.18(YTM2.93%)

Ͳ0,1%

Ͳ0,2%

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%

Price

w/w

m/m

67,62

+1,1%

+7,6%

CURRENCIES

Price

w/w

m/m

1319,59

+1,3%

+4,3%

GEL/USD

2,5894

Ͳ0,3%

Ͳ3,8%

GEL/EUR

3,1142

Ͳ0,4%

Ͳ2,3%

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%

7136,56

+3,4%

+5,5%

GEL/AMD

0,0054

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NASDAQ

Ͳ3,6%

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% Ͳ1,3%

MSCIEMEE

MICEX

2207,41

+4,6%

+4,4%

CHF/USD

0,9747

+0,0%

MSCIFM

3079,54

+3,1%

+7,1%

RUB/USD

56,9297

Ͳ1,3%

GTIndex(GEL)

1582,68

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TRY/USD

3,7353

Ͳ1,7%

Ͳ2,8%

GTIndex(USD)

1208,13

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AZN/USD

1,6998

Ͳ0,0%

+0,0%

Ͳ3,1%


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NEWS

GEORGIA TODAY

JANUARY 9 - 11, 2018

Georgian New Year Tree 'Chichilaki' Featured on BBC

Record Number of Tourists Visit Georgia in 2017 BY THEA MORRISON

I

n 2017, 7,554,936 international travelers visited Georgia, an unprecedented number and 1,194.433 more travelers compared to the same period of 2016. Head of the Georgian National Tourism Administration (GNTA), Giorgi Chogovadze, says there was 18.8% growth in the number of tourists in 2017, adding that it is a record number. Chogovadze expects that around 8 million tourists will visit Georgia this year, adding this will bring around $3 billion income to Georgia.

BY NINO GUGUNISHVILI

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BC’s Russian channel has featured a story about the Georgian New Year tree called Chichilaki, a Georgian alternative of Christmas tree traditionally made from dried walnut tree branches, its production dating back hundreds or even thousands of years. As Gia Datashvili, Chichilaki master, says in the BBC story, nearly every family in Georgia knew how to make a Chichilaki, but the tradition is now fading away. “To make Chichilaki, there’s no need

to cut down trees, as Chichilaki’s are made from dried nut branches that are usually cut during the winter period,” he says He adds that Georgian Chichilaki tradition probably started in the region of Guria in Georgia, in pre-Christian times, when Gurian’s had a god named Aguna, a god of fertility and wealth, and when you brought Chichilaki to a family as a gift, it meant you were bringing well-being along with it. “Tangerines, Churchkhela, apples and sweets were used as Chichilaki decorations, but it’s getting trendy to hang dollars on it now,” he says in the story. As BBC reports, Datashvili made almost 2000 Chichilaki trees to sell this year.

“In 2017, the seven million tourists visiting Georgia brought $2.7 billion income to the country. This year, we have even more positive expectations,” he added. The Head of the GNTA says the largest number of visitors came from Armenia - 1,718.016 (+ 14.8%), followed by 1,694.998 (+ 11.2%) from Azerbaijan, 1,392.610 (+34.1%) from Russia, 1,246.745 (-0.8%) from Turkey and 322,938 (+ 118.3%) from Iran. Chogovadze added that this upward trend was also maintained from European Union countries. Moreover, the number of arrivals in Georgia increased in January-December from the United Kingdom + 39.9%, Netherlands + 31.1%, Spain + 29.9%, France + 29.6% and Germany + 25.7%.

Foreign Credit Card Transactions at $2.2 bln in 2017

http://www.rentmaster.ge/en/ E-mail: georentmaster@gmail.com Tel: ( +995 ) 591 930 303

BY NINO GUGUNISHVILI

RENTMASTER OFFERS: VIP Car Services (pick-up and drop/transfer) Daily Car Rentals Tours in Georgia

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he overall amount of income received from international tourism amounted to $2.2 billion, in the 1st to 3rd quarters of 2017, the National Tourism Administration reports, $489 million more than the previous year. Transactions from foreign credit cards made by international tourists in January-November 2017 totaled GEL 1,927.566, which is 30.3 % higher than the same period of 2016.

Promotional activities aimed at introducing Georgia’s tourism potential and attracting new visitors to the country in 2017, comprised of participating at 21 international tourism exhibitions, online marketing campaigns in 19 targeted countries, and marketing campaigns on BBC, Euronews, and Discovery. Georgia last year also found itself in the spotlight of National Geographic, Forbes, Le Monde, The Guardian, Observer, Elle, Conde Nast, Huffington Post, Vogue and more. 99 international press tours were organized, seeing 683 media representatives visiting the country. Further, 14 informational tours were organized for 239 tour operators.


NEWS

GEORGIA TODAY JANUARY 9 - 11, 2018

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Waste Separation Corner Opens at GTC Carrefour Through the implementation of the WMTR II program, USAID supports sustainable development and inclusive economic growth by the facilitation of waste separation and recycling. The creation of waste recycling opportunities, education and awareness-raising campaigns help local residents to learn modern approaches to waste management and become actively involved in environmental processes. Within the WMTR II program, waste separation

I

n January 2018, a sixth waste separation corner was opened in Tbilisi, at GTC Carrefour on Kolmeurneobis Square. Local residents and supermarket staff can now bring sorted waste: paper, glass, plastic and aluminium to the separation corner. Transportation of the sorted waste to recycling companies is provided

by Clean World Ltd. Sorted waste is then recycled at different enterprises and is transformed into new products. The separation corner was implemented implemented by CENN within the Waste Management Technology in Regions, Phase II (WMTR II) program supported by USAID.

37 New Hotels to Open within State Produce in Georgia Program

BY NINO GUGUNISHVILI

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n the framework of the Produce in Georgia’s ‘Host in Georgia’ component, 37 new hotels will be built in Borjomi, Bakuriani, Gudauri, Poti, Ureki, Nikortsminda, Kazbegi, Sagaredjo, Gonio, Telavi, Shekvetili, Tskaltubo, Kutaisi, Zugdidi, Mestia, Gurjaani and Gori, with an overall investment of GEL 108 million, expected to create 1133 additional hotel rooms and over 1200 new work places. Development of the hotel industry was added to the Produce in Georgia program back in 2016 with

the purpose of supporting entrepreneurs in promoting hospitality businesses, attract new visitors and assist the overall development of the regions. The Host in Georgia component of the Produce in Georgia program is said to enable entrepreneurs locally to receive financial and consultancy support while establishing and running a hospitality business. Through the co-financing of “franchising agreements,” the program aims for successful practices of international hospitality industry brands to be implemented in Georgia. The state agency Enterprise Georgia’s Produce in Georgia program had, as of December 2017, financed 323 projects, with a total investment of GEL 786 million.

corners are already functional at different locations throughout Tbilisi. Look through the waste separation corners on the map of Tbilisi, find a location near you, start the sorting of waste and save natural resources. https://www.google.com/maps/d/u/0/viewer?mid =1uwGAAP7G8AC0hri4fyp5fGeC8Q8&ll=41.7003 9101467624%2C44.85569337199718&z=11


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BUSINESS

GEORGIA TODAY

JANUARY 9 - 11, 2018

The Galt & Taggart Research team comprises Georgian and Azerbaijani finance 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 fixed income corporate research. For free access to Galt & Taggart Research, please visit gtresearch.ge or contact us at gt@gt.ge.

Electricity Market Watch FOR GEORGIA TODAY BY MARIAM CHAKHVASHVILI

S

ector research is one of the key directions of Galt & Taggart Research. We currently provide coverage of Energy, Healthcare, Tourism, Agriculture, Wine, and Real Estate sectors in Georgia. As part of our energy sector coverage, we produce a monthly Electricity Market Watch, adapted here for Georgia Today’s readers. Previous reports on the sector can be found on Galt & Taggart’s website - gtresearch.ge.

REVISION OF REGULATED TARIFFS GNERC has set tariffs for TPPs, regulated HPPs, transmission companies, and distribution licensees. Tariff changes go into effect January 1, 2018. Prior to setting the tariffs, GNERC approved the regulated companies’ investment plans for the corresponding period, as dictated by the tariff methodology. Investment plans for distribution licensees – Telasi and Energo-Pro – are approved at GEL 66.2mn and GEL 278.4mn, respectively, for 2017-2019. As a result, the tariffs will increase by 1.56 tetri/kWh for Telasi subscribers and 1.28 tetri/kWh for Energopro consumers, on average, for 2018-2020.

CHANGE IN HPP TARIFFS Enguri and Vardnili tariffs are set until the end of 2020. Enguri and Vardnili HPPs will invest GEL 94.3mn and GEL 37.6mn, respectively, over 2017-2019, causing increases in their tariffs by 1.818 tetri/ kWh (+21.5%) for the former and 4.002 tetri/kWh (+39.0%) for the latter. The three-year rehabilitation plan for Enguri involves the closure of Enguri for three to six months in spring 2019, along with other rehabilitation works during 20182020. According to the market rules, the Enguri tariff is the new balancing electricity price that deregulated power plants will receive for electricity sold to ESCO without a contract May through August. Notably, Enguri and Vardnili HPPs generated one third (33.9%) of total electricity supplied to the grid in 11M17. Tariffs were revised for five other HPPs,

all owned by Energo-Pro. Only Dzevruli HPP got a tariff decrease (-24.1%). Tariffs were increased for the other four HPPs by 0.5 tetri/kWh, on average. The tariffs will allow a reasonable return on investments amounting to GEL 43.6mn over 2017-2019. Regulated HPPs of Energo-Pro Georgia accounted for 10.2% of total generation in 11M17. Another five of Energo-Pro’s HPPs, with a total installed capacity of 118.8MW, will become deregulated as of January 1, 2018, as the deregulation threshold increases from the current 13MW to 40MW, per recent changes in the Law on Electricity and Natural Gas.

proportion to their consumption. The differentiated tariff for Energo-Trans is eliminated and a unified tariff set at 0.38 tetri/kWh until end-2020. Transmission fees for the other two transmission licensees, SakRusEnergo and GSE, were increased to 0.278 tetri/kWh (+54.4%) and 1.323 tetri/kWh (+51.7%), respectively. The dispatch fee for GSE will increase to 0.092 tetri/kWh (+12.2%) through May 1, 2018 and 0.412 tetri/kWh thereafter. The total transmission and dispatch fee will amount to 2.393 tetri/ kWh to cover GEL 596.6mn of investments in the rehabilitation of the transmission grid over 2016-2020.

TPP TARIFFS AND GUARANTEED CAPACITY FEE FOR 2018

ELECTRICITY CONSUMPTION AND GENERATION – NOVEMBER 2017

TPP tariffs have also been revised for 2018, both for electricity generated (tetri/ kWh) and guaranteed capacity. Tariffs were lowered 1.5% and 0.5% for GPower and Gardabani CCGT, respectively. Tariffs for the other TPPs increased by 3.8% on average. The guaranteed capacity fee was raised for Gardabani CCGT (+11.6%), GPower (+6.2%), Block 3 (+6.4%), and Block 4 (+11.0%) and lowered for Mtkvari Energy (-10.0%).

TRANSMISSION AND DISPATCH FEE Exporters will no longer pay an extra charge for transmission. Exporters used to pay a transmission fee to Energo-Trans (0.496 tetri/kWh in 2017) in addition to other transmission fees payable by direct consumers and distribution licensees in

to Turkey through Georgia declined 82.7% y/y to 22.8GWh, while electricity exports were negligible (0.851GWh) in November 2017. Growth in demand was met by electricity imports from Azerbaijan (48.7%), Russia (46.5%), and Armenia (4.8%). Electricity import increased 8.7 times y/y (+32.1% compared to November 2015) to 110.2 GWh, or 10.2% of total electricity supplied to the grid in November 2017. Notably, electricity import was 4.2% below the planned level. Domestic generation was roughly flat, with HPP generation up 2.5% y/y (61.1% of total) and TPP generation down 14.2% y/y (28.2% of total). The wind power plant accounted for the remaining 0.5% of electricity supply. Enguri/Vardnili generation was down 7.1% y/y, while generation of other regulated and deregulated HPPs increased 3.3% y/y and 30.0% y/y, respectively, in November 2017. The GC fee was down 22.6% y/y to USc 0.6/kWh. The reasons behind

the decrease were higher consumption, which serves as the base for GC fee allocation, and a week of maintenance works on Mtkvari Energy. Gardabani CCGT and Mtkvari Energy operated at full power for most of the month, while the other three TPPs were mostly on standby.

ELECTRICITY PRICES IN GEORGIA AND TURKEY Average import price was down 12.8% y/y to USc 4.8/kWh. However, the high share of imports in the electricity supply mix resulted in an increase in the wholesale electricity price to USc 5.3/ kWh (+22.9% y/y). Electricity traded at the wholesale price through the market operator accounted for 19.6% of total electricity supplied to the grid in November 2017, with the rest traded through bilateral contracts. Average monthly market clearing price in Turkey decreased 2.9% y/y to USc 4.6/kWh in November 2017.

Domestic consumption increased 6.7% y/y in November 2017 and 8.6% y/y in 11M17. The growth in November was driven by 6.0% y/y growth in consumption of distribution companies and a 31.9% y/y increase in direct consumption, largely driven by 48.2% y/y growth in Georgian Manganese usage. Consumption by Energo-Pro Georgia subscribers, including former Kakheti Energy Distribution subscribers, increased 9.9% y/y, while Telasi consumption was down 0.7% y/y, albeit from a high base in November 2016 (+21.5% y/y). The Abkhazian region’s electricity usage was down 1.1% y/y, accounting for 18.8% of domestic consumption and 75.6% of electricity generated by Enguri/Vardnili HPPs. Electricity transit from Azerbaijan

10 Galaktion Street

Tel: (995 32) 2 45 08 08 E-mail: info@peoplescafe.ge


BUSINESS

GEORGIA TODAY JANUARY 9 - 11, 2018

Georgia-China Free Trade Deal Comes into Effect

Photo: Georgia and China finalized a Free Trade Agreement in May 2017. Source: intmassmedia.com

BY THEA MORRISON

T

he Free Trade Agreement (FTA) between Georgia and China, signed in May 2017, took effect on January 1, 2018, meaning that the world's largest market, which unites approximately 1.4 billion customers, is now open to the goods and services of Georgia. The China-Georgia FTA is the first FTA China has signed with a Eurasian country, and is the first such agreement China has initiated and achieved since the Belt and Road Initiative was put forward. The Chinese FTA Network reports that now that the agreement has gone into effect, in terms of trade in goods, Georgia will impose zero tariffs on 96.5% of China's products immediately, covering 99.6% of the total imports from China; China will impose zero tariff on 93.9% of Georgia’s products, covering 93.8% of China's total imports from Georgia, of which 90.9% (comprising 42.7% of imports) will have zero tariffs immediately and the remaining 3% (comprising 51.1% of imports) will have zero tariff within 5 years. In terms of trade in services, both sides will further open their markets to each other on the basis of their WTO commitments. In addition, both sides have reached a broad consensus in many fields, including environment and trade, competition, intellectual property, investment, and e-commerce. “By taking advantage of the agreement

coming into effect, China and Georgia will comprehensively improve the practical cooperation level of both sides, thus firmly promoting the Belt and Road construction and achieving common prosperity,” the Chinese FTA Network reported. In 2017, Georgia exported 7,585,407 bottles of wine to China, a 43% increase compared to 2016, making China one of the largest importers of Georgian wine after Russia (47,778.920 bottles) and Ukraine (8,502.554 bottles). Further, China is one of Georgia’s top trading partners. Georgia’s top 10 trade partners in January-November 2017 made up 66.5% of the country’s total trade turnover, with Turkey ($1.41 billion), Russia ($1.05 billion) and China ($834.3 million) filling the top three spots. So far, Georgia has made Free Trade deals with the European Union, Turkey, European Free Trade Association (EFTA) countries - Switzerland, Norway, Iceland and Liechtenstein, and with the Commonwealth of Independent States (CIS) countries - Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan, Moldova, Turkmenistan, Uzbekistan and Tajikistan. China has signed 14 Free Trade agreements with more than 24 states and regions throughout the world. Free trade negotiations between Georgia and China were launched in 2015. The Memorandum of Free Trade Agreement was signed in October 2016, and after seven months, the deal was finalized, making Georgia the first country in the region to have such an agreement with China.

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JSC MFO Crystal Successfully Issues 10mln GEL of Unsecured Bonds

M

FO Crystal JSC, rated B by Fitch Ratings, successfully completed an inaugural GEL 10 million offering of notes due December 2019 (the Notes). The

annual coupon rate was set at 4.5% over the National Bank of Georgia’s refinancing rate. Senior unsecured Notes were issued and sold at an issue price of 100.00%. Galt & Taggart acted as the lead manager for the issuance. The

Notes are expected to be listed on the Georgian Stock Exchange. The issuance is the first local currency bond offering in the microfinance sector in the country. This issuance represents a landmark transaction for Georgia 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, Chairman of Supervisory Board of Crystal. “This Lari-denominated bond is an important step toward the diversification of the company’s funding sources and contributes to the de-dollarization of Georgia’s financial sector. The proceeds will be utilized for on-lending to Crystal’s micro-entrepreneurs and farmers 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 first public placement of a fixed income instrument in the Georgian microfinance 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 & Taggart 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 financial institutions.”


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BUSINESS

GEORGIA TODAY

JANUARY 9 - 11, 2018

Attracting More Tourists to Tusheti's Mountainous Villages Tusheti has become an example of development for mountainous regions of Georgia

BY VAZHA TAVBERIDZE

F

or the first time ever, I found myself in Tusheti in 2001, when some of my friends and I equipped ourselves with tents and sleeping bags and went down the most difficult road in this beautiful corner of Georgia. At that time, it was possible to get to Tusheti only by Soviet truck “KAMAZ”, and it took almost half a day to cover a 85-kilometer road from Alvani to Omalo. Once in Omalo, we were finally convinced that this spectacular corner of Georgia was absolutely cut off from the outside world, civilization and modernity. There was no water, no power, no hotel, nor even a way to buy some bread in the villages of Tusheti. I traveled to Tusheti for the second time this summer. I can honestly say that I did not expect special changes there, but my unforgettable visit 16 years ago was radically different from what I found in the now modernized region. Almost all locals in Tusheti have a guesthouse. In the hotels, there is electricity and running hot/cold water; in the villages, you will find food without problem. In short, all the conditions now exist to ensure that tourists leave with an unforgettable impression. That is why the number of tourists is increasing from year to year, and in parallel, it is obvious that the employment of Tushetians in this field is growing. Czech Development Agency and NGO 'Caritas Czech Republic in Georgia' (CCRG) greatly contributed to devel-

oping the agriculture in Tusheti and rousing the locals’ interest in the tourism field. It was due to their assistance that in the villages of Tusheti they began to develop solar energy a few years ago. The project was funded by the Czech Development Agency. Installing solar panels and batteries allowed Tushetians to start their own small business and to become employed in the tourism field. As a result, family run hotel appeared, where there is also electricity and hot water. Another project implemented by CCRG is the development of cooperatives in Tusheti. The cooperatives allowed the locals to grow more agricultural products using the correct agro-technical approaches, and to offer tourists natural products. Together - solar panels, cooperatives and guest houses have made Tusheti even more attractive for tourists, and the locals received a stable source of income. Natia Bakuridze is one of those Tushetians who expanded her business with the help of CCRG. Natia opened one of the most popular hotels in Tusheti, “Shina,” in 2010. Her two children and several local residents also work there. A few months ago, Natia purchased an oven with the help of Caritas, making it possible to cook different pastries, bread and pizza. So if Georgian cuisine is not to your taste, you can now give Tushetian pizza a try instead. "After the purchase of the oven, the number of guests in the hotel increased by 15%, as we offer freshly baked bread and pastries. All this has reflected in the growth of income," says Natia, who supplies the neighboring hotels and

cafés with pastries. "Shina" is already well known worldwide. Today, before booking anywhere, we all read reviews online. In this case, on the world's number one portal Booking.com, hotel “Shina” has 9.2/10 points for cleanliness and 9.2/10 points for location. Another resident of Omalo, Eteri Markhvaidze, is the owner of hostel and store "Tishe", which offers a variety of products to customers. With the help of the Czechs, Eteri purchased solar panels. The permanent power allowed the hostel to work at full capacity. Hostel guests and guests who stay in tents are supplied with laundry facilities, showers and Wi-Fi. "After I had power, revenue went up. I can purchase more products and store it in refrigerators. I used to ferment matsoni, but in a very small amount and I didn’t earn anything from it. Now that I have refrigerators, I started to make money. It has also enabled me to improve the quality of service," Eteri said. The cooperative "Tusheti 2015" was founded and developed thanks to the assistance of CCRG. The cooperative comprises of six families from Omalo. In addition, CCRG contributed to the construction of a shopping booth in the village of Omalo. A few months ago, CCRG gave a shopping booth to ‘Tusheti 2015’, where members of the cooperative sell their produce. The members of "Tusheti 2015" mostly possess potato and cucumber farms. Last year, they grew 900kg of cucumbers. Makvala Melaidze, Chairwoman of the cooperative, says that in Tusheti, the owners of hotels bring potatoes

from the valley because local potatoes come only in late September. Apart from the cooperatives, other families started to grow different varieties of potato and are pleased with the fact that despite the drought, they had a better harvest than in previous years using good seed material and a proper agro technique. Onise Ichirauli, who is a ranger in the Tusheti National Park and knows Tusheti's conditions well, decided to engage in beekeeping and when CCRG announced a business grant program to help the locals in Tusheti, he applied for it. Today he owns 15 hives. “Our honey stands out for its qualities and there’s a great demand for it. Next year, I plan to produce 300 kilograms of honey and to supply it local hotels,” said Onise. In addition, he plans to produce candles and raw propolis chunks. Tusheti also needs the boldness of youth: 27-year-old Dato Mosaidze and 22-year-old Giorgi Ichuaidze are from Omalo. Giorgi was educated in Europe, but returned to his homeland to connect his future with Tusheti. Young

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. By tradition, women are not allowed to go to the brewery and at traditional Tushetian festivities, men and women’s beer is brewed separately. This season, the young people sold 100 liters of beer, a good indicator for one touristic season, which lasts only 4 months in Tusheti. 64-year-old Irakli Bukvaidze is well known in Tusheti and beyond. He, along with his wife, are the only residents in the village of Shenako who remain in Tusheti throughout the year. The couple are employed in various fields – they run the guesthouse, cultivate vegetables and potatoes. "Potatoes were planted on an area of 0.4 hectares. I would have planted more, but the absence of techniques prevented me from doing so. Last year, I sold my seed potatoes in the villages of Shenako and Omalo for 2 GEL. With the help of CCRG, I also purchased a dryer that dries up herbs in a way that keeps their color and aroma. We sell our products year-round," says Irakli Bukvaidze. "Tusheti has become an example of development for mountainous regions of Georgia," says Ekaterine Meskhrikadze, Head of the Czech Republic Caritas Mission in Georgia. "With the support of the Czech Development Agency, we contributed to the improvement of the economic situation of the local population by implementing various activities and carrying out financial interventions." "CCRG continues to work in the region, and hopefully we will have more important results in cooperation with other donors during the next one year," she added.


BUSINESS

GEORGIA TODAY JANUARY 9 - 11, 2018

Black Pearl Live’s Managing Director Kuun De Beer

British Superstar James Blunt to Visit Georgia During World Tour

F

amous and beloved British superstar, James Blunt is to visit Georgia during his world tour. The concert will be held on May 26, Georgian Independence Day, at the Mikheil Meskhi (Locomotive) stadium. The singer and composer will perform songs from his latest album ‘Afterlove’. The event is organized by New International Promotion Company Black Pearl Live. We spoke to Black Pearl Live’s Managing Director Kuun De Beer to find out more.

BLACK PEARL LIVE WAS FOUNDED IN GEORGIA, RIGHT? Yes. It’s an international promotion company which cooperates with the world's leading performers, and is based in Georgia. This means taxes are paid according to the country's legislation and that it operates in Georgia. At the same time, the main purpose of the business is to create and ensure festivals, concerts and events of current international standard.

TELL US ABOUT THE COMPANY’S AMBITIONS The company has ambitious goals in the Georgian market, but these goals are not groundless. Black Pearl Live plans to turn Georgia into a host country of global cultural events. But everything depends how things will develop and how we work today to achieve success in the future.

HOW ARE YOU GOING TO ACCOMPLISH THESE GOALS? We want to establish our company as an international player and show that productions in Georgia can be on the same level as any high-profile show worldwide. That is why the James Blunt ‘Afterlove’ world tour is so important for us; we want to show other artists that Georgia deserves to be part of every world tour.

WHY DID YOU DECIDE TO OPERATE IN GEORGIA?

WHY JAMES BLUNT AND WHY MAY 26? James Blunt is the first international star to sing on May 26 at the Mikheil Meskhi Stadium. This show is part of his world tour ‘Afterlove’ and his fifth studio album presentation, created after the multi-platinum album ‘Moon Landing.’ James Blunt is a multi-platinum album-selling world superstar. He also has a very big and diverse fan base, which makes it a great show for a wide age range. We wanted Georgia to be part of his world tour.

TELL US ABOUT THE MAY 26 SHOW Of course, fans can expect all their favorite hits, including his last single, ‘Love Me Better.’ What’s more, some fantastic local singers and special guests from South Africa are to participate with him. Invited group - The Parlotones – a Rock Band from Johannesburg (South Africa), will perform songs based around love and life motifs. The event will be hosted by energetic and strong rock groups Young Georgian Lolitaz and Loudspeakers. Young Georgian Lolitaz is an all-male band which represented Georgia at Eurovision. The Loudspeakers are a famous Georgian rock band who gained immense popularity with the Tbilisi Altervision Music Festival. We want to merge the event with this festival. It’s a wonderful way to celebrate the Independence Day of Georgia.

WERE YOU FAMILIAR WITH THE GEORGIAN MARKET? DOES JAMES BLUNT HAVE FANS IN GEORGIA? We do intensive market research before booking any artist, and statistics revealed that James Blunt is a very well-liked performer here.

HOW ARE YOU GOING TO COMPETE WITH OTHER POPULAR EVENTS? We don’t focus on competition, we just serve the market. We don’t see them as competition, rather as partners serving the Georgian music industry.

Because we have the capabilities to arrange world class events, and our research showed there is such a chance to do so in Georgia.

WHO WILL BE NEXT?

WHY THE NAME ‘BLACK PEARL LIVE’?

TELL US A LITTLE ABOUT YOUR FUTURE PLANS

The team was in Batumi in summer to carry out market research, and as Georgians say, Batumi is the pearl of the Black Sea. This was very relevant for us, because we saw the whole of Georgia as a Pearl: full off opportunity. The ‘Live’ part is because of Live entertainment.

That’s a secret, of course; so you’ll have to wait! I doubt you’ll be disappointed.

We have already been approached by a few agents wanting to send more top-class talent. Currently, our focus is on the James Blunt show.

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BUSINESS

GEORGIA TODAY

JANUARY 9 - 11, 2018

Georgian Wine Export in 2017 Reaches Record Breaking Number BY NINO GUGUNISHVILI

T Lithuania Not Happy with Ukrainian Workforce BY DIMITRI DOLABERIDZE

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he political and economic crisis in Ukraine, as well as the new visa-free regime, inevitably led to a mass migration of citizens to neighboring European countries, such as Poland, Hungary and the Baltic countries. Despite the official support of Kyiv from politicians in Brussels, ordinary inhabitants of the EU are not happy with this outcome. According to the statistics of DELFI, in 2017, around 20,000 labor migrants from Ukraine entered Lithuania. This is twice as much as a year earlier. The residents of Nezalezhnaya (part of Ukraine) need to support themselves and their families,

he National Wine Agency of Georgia (GNWA) claims that Georgian Wine Export in 2017 reached a record-breaking number in almost 30 years. Following the data published on the National Wine Agency site, 76.7 million bottles of Georgian wine were exported to 53 countries worldwide in 2017, which is 54% higher than in 2016. In 2017, wine export amounted to $170 million US, showing a 49% increase compared to previous years. The export growth, according to the Georgian National Wine Agency, is seen in China, with 43% (7,585, 407 bottles); Russia, with 76% (47,778, 920 bottles) Ukraine, with 46% increase (8,502, 554 bottles of Georgian wine exported), Poland with 15% increase (676,440 bottles exported), Latvia with 20% growth (1,505,138 bottles of wine exported), Belarus, 56%, (1,827,130), US with 56% (457 920 bottles exported), Germany, 38% (404,538), Israel, 150% (213,074), Mongolia 82% (168,162), France 178%

(99,796), Azerbaijan 75% (141,294) amongst others. The top five countries for Georgian wine export, the National Wine Agency says, are Russia, Ukraine, China, Kazakhstan and Poland. As for the top Georgian locally produced wines exported in 2017, Kinzmarauli tops the list with 12.8 million bottles exported, followed by Mukuzani 4.2 million bottles, Tsinandali, 3.4 million bottles, Akhasheni with 1.5 million bottles, Khvanchkara with 887,500 thousand bottles and Tvishi with 308,800 thousand bottles. The GNWA states that almost 250 Georgian companies exported wine in 2017. Furthermore, 18.4 million bottles of brandy were exported to 26 countries, a result 78% higher compared to 2016. Overall, the export of brandy in 2017 amounted to $39.4 million, with a 70% increase seen. 288,000 bottles of Georgian Chacha was exported to 23 countries worldwide, with export growth reaching 180% and $846.3 thousand received in income from the export. The overall income received from exporting alcoholic beverages such as wine, Chacha, and brandy, amounts to $283.8 million, showing a 46% growth compared to 2016.

which is why they go to neighboring countries to find work. For Lithuania, the influx of migrants from Ukraine was set to save the economy, as many young Lithuanians, just like Ukrainians, head westwards for a better life, resulting in a State lacking young specialists. A similar situation can be seen in many post-Soviet countries, especially in the Baltics. However, the Lithuanians are not happy with this scenario. Many critics oppose the influx of Ukrainian labor migrants, saying it will lead to a halt in the growth of wages in the country. In the words of critics there is a logic: Ukrainian guest workers are satisfied with a lower monetary reward than the necessary minimum for Lithuanian citizens. Similar thoughts have already been voiced in Poland and Hungary.

Georgian Woman Wins Sexual Harassment Court Battle Over Employer

BY TOM DAY

T

atia Samkharadze, a 25-year-old TV host, has become the first Georgian woman to sue her boss for sexual harassment. Following the accusations made against her boss, Shalva Ramishvili, he has been ordered to pay 2000 GEL in compensation. Ramishvili was ordered to pay for non-pecuniary damages, but was acquitted of the pecuniary part. Although the court only partially sustained the claim, Georgian human rights workers said that this was “an unprecedented case.” The say that the important thing is that the court assesses the case as sexual harassment.

Baia Pataraia, a leading women’s rights advocate 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. “[I hope] this case will set a precedent for other victims of sexual harassment, so that they won’t be afraid of filing lawsuits against their abusers”. Samkharadze expressed her satisfaction with the court ruling. “The most important part was that the court confirmed the fact of sexual harassment and imposed compensation for non-pecuniary damages. I think it’s important for any person who has ever faced such a problem,” Samkharadze told reporters. Meanwhile, Ramishvili claims that he was the winner. “The matter had nothing to do with either discrimination or sexual harassment,’ he said.


BUSINESS

GEORGIA TODAY JANUARY 9 - 11, 2018

9

Georgian Military Modernization: Two Steps Forward, One Step Back OP-ED BY EUGENE KOGAN

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he article focuses on the current modernization of the Georgian military. Whatever happened before the appointment of Levan Izoria, the current Minister of Defense, is history. Izoria was appointed Minister of Defense on 1 August 2016. At a press conference on 7 November 2016, Izoria announced plans to reform the country's armed forces, air force and air defense, but concluded that the construction of a new naval capacity was too costly. The Navy was disbanded in 2009 and merged with the Coast Guard, which is part of the Border Guard Division and reports to the Ministry of the Interior (MIA). It should also be emphasized that Izoria's reform plans were not the first and probably will not be the last. His predecessors tried to pursue the same reform and, idiomatically speaking, “they keep treading on the same rake.� During the reign of the Georgian Dream Coalition between 2012 and 2016, two ministers resigned, the third was removed from office and the fourth, the current minister Izoria, retained his previous position as minister. It remains to be seen for how long. The frequent change of ministers has hampered efforts to build robust and effective armed forces, as each minister has his or her own vision of the armed forces he or she tried to implement without learning from the mistakes of his or her predecessors. As a result, the reforms have not yielded tangible results and the country's military capabilities give little hope, even though Georgian Dream's officials claim otherwise. It is not yet clear whether the current reform will be more successful than the previous ones.

THE CONTOURS OF REFORM During the press conference, Izoria added that the basic training of conscripts will in future be similar to that of professional soldiers, in order to create a larger pool of qualified personnel, which can be used either as contracted servicemen or in the reserves. In the past, army conscripts only exercised logistic and support functions; they were not trained for combat and did not participate in combat. At the same time, Izoria stressed that the army will continue to consist primarily of professional soldiers. Professionals currently account for 90% or around 13,000, all of them deployed in Afghanistan as part of combat operations. However, conscripts currently account for only 10% or around 2,000. For example, the current army has about 15,000 soldiers without the Ministry of Defense and the General Staff personnel, as well as civilian staff of the Ministry of Defense, which according to various open sources consists of 36,000 to 37,000. Izoria also announced plans to optimize the General Staff, the army, the air force, the air-defense forces, and the military police. The plans envisage abolishing an unspecified number of departments within the General Staff and emphasizes the use of combat helicopters and UAVs as there is no Georgian air fleet. Because of this optimization, 1,750 civilian personnel from the MoD and 340 military personnel from the Georgian Armed Forces (GAF) were dismissed in December 2016. Who will supply combat helicopters and UAVs to Georgia is currently unknown, as the West is not yet ready for such deliveries and Israeli companies might not step in as they do not want to provoke Russia’s ire. After the August 2008 war, Israeli companies halted the supply of weapon systems to Georgia, while neighboring Turkey did not provide any arms at all. In the meantime, the number of infantry brigades was cut from five to four. But it is a fact that even nine years since the August 2008 war, the West remains reluctant to sell arms to Georgia, also due to concerns about provoking Russian ire. Thus far, Western reluctance has resulted in serious impairment of the country’s air-defense and anti-tank capabilities. As long as the West is unwilling to sell these weapon systems to Georgia, the Georgian military inventory will consist of obsolete Soviet equipment, some Georgian-made equipment and some Western arms like US-donated helicopters. As a result, the Georgian military remains vulnerable vis-à -vis the heavily armed Russian military stationed in Abkhazia and South Ossetia which has been increased in strength since August 2008. More than 8,000 Russian soldiers are stationed in Abkhazia and South Ossetia – the occupied regions of Georgia. The integration of the

Abkhazian and South Ossetian troops under Russian command further increased the numbers and agility of the deployed forces. Despite Western reluctance to sell arms, it was reported in February 2016 that American military assistance to Georgia, known as Foreign Military Financing (FMF), would decrease under a budget proposal from $30 mln in 2016 to $20 mln in 2017. The 2017 funding is intended “to advance Georgia’s development of forces capable of enhancing security, countering Russian aggression, and contributing to coalition operations. This will include support in areas such as upgrades to Georgia’s rotary wing air transport capabilities, advisory and Defense reform, and modernization of Georgia’s military institutions.� Yet, as late as July 2016, it was not entirely clear what type of weapon systems Georgia would be allowed to acquire as a result of the aforementioned funding. American officials were tight-lipped regarding the provision of weapon systems. Even in September 2017, uncertainty about acquisitions persisted. It appears, however, that JAVELIN ATGMs and F-92 STINGER MANPADS are unlikely to be sold to Georgia. Despite a wealth of information in open sources about Georgia’s likely acquisition of French air-defense systems nothing has materialized thus far. In April 2017, it was reported that Izoria plans to visit France to negotiate with his French counterpart about purchasing air-defense systems. The final piece of the current reform announces the establishment of reserve forces. Previous ministers of defense have tackled this issue with little success. Another initiative should be taken with a grain of salt: the Reserve Forces. Georgian military expert Vakhtang Maisaya said, “Forming robust military reserve forces remains the most important and challenging step in the army reform. Currently, the main objective should be to make use of the reserves and work out mobilization plans that signal the defensive strength of the country. The government has worked out the concept, and it fully corresponds with NATO standards.� Indeed, in March 2016, Georgia’s top military commanders discussed the mobilization and reserve forces draft concept. According to the concept, the main mission of the GAF reserves is to support the armed forces in wartime, during crisis and in peacetime. The draft includes three categories of the reserve system: army, territorial and specialists’ reserve. In May 2017, the aforementioned categories were elaborated. The first category is to be composed of demobilized servicemen or servicemen who completed a five-year military contract and are willing to serve for another five years in a reserve unit. The second category is to be the territorial reserve, established on the basis of the existing Georgian National Guard with its current 1,600 active reservists that is used as reserve for the GAF. In the event of hostilities, its members will be deployed only in their home district and serve for five years. The third category is to consist of civilian experts whose knowledge and experience can be useful to the army in peacetime or wartime. The active army reserve is to number 1,500 people, and the territorial reserve will be 10,000 strong. The specialized reserve units will not be limited in size, and will be dynamically formed based on GAF’s developing needs. Unlike the current reserve system, the new concept envisions manning a reserve on a voluntary basis only. Women up to 55 years of age will also be allowed to serve. Under this proposed system, members of the reserve who sign a

five-year contract will undergo an annual 45-day retraining course and will receive financial compensation equaling 20% of the salary of a military service member of similar rank and grade. Details surrounding the refreshing course are not clear and, as a result, there are questions as to whether or not the proposed idea is feasible. Izoria said that if the legislature adopted this reserve concept, a ‘pilot’ program for selecting participants and concluding service contracts would start in 2018. It is a good idea to carefully evaluate the pilot program before continuing with the rest of the aforementioned reserve components. Back in 2012, a similar ‘pilot’ project was launched and 13,000 volunteer reservists (of an envisaged 100,000) were recruited. At the time, the new recruits accounted for less than 1% of Georgia’s defense budget ($3.5M). The author does not know

whether Izoria took recent experience into account 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 Maisaya agree, with the latter stating, “Georgia still does not have an overarching comprehensive military strategy to replace the now outdated one adopted after the August 2008 war and that would define the role of the reservist force vis-Ă -vis the regular army.â€? And, as long as such a strategy has not been prepared, reforms of the reserve forces are likely to fail. To conclude, there are currently more questions than answers. What is clear is that even the good intentions in the West translating into training of the GAF for missions in Afghanistan is not sufficient help for Georgia at this crucial juncture for training in homeland defense. The meagre defense budget and its improper allocation, namely 67% for salaries and social benefits, while the rest goes towards military equipment and so on, impair the country's abilities to purchase urgently needed modern arms. Western reluctance to sell modern arms lessens the ability of GAF to defend Georgia. Whether or not Izoria’s negotiations would ultimately lead to the signing of a contract for the purchase of French-made air-defense systems is not a foregone conclusion. Thus far, Emmanuel Macron, President of France, has not given any hints about the signing of a contract. Therefore, the issue of Georgian air-defense capability remains unresolved and the country remains unprotected. In addition, even if the aforementioned reform with the reserve forces looks great on paper, there is no guarantee of its success. It should be remembered that past experience showed that reform of the reserve forces ended in failure and no conclusions were drawn from that experience. And finally, it remains unknown whether or not the current Minister of Defense will retain his position, or be dismissed as his predecessors were, in favor of another wave of reforms to be initiated.

FIRST BRAND HOTEL IN KUTAISI UNDER BEST WESTERN INTERNATIONAL Within the framework of the Georgian Hotels’ Regional Network Development Project “12 hotels in 12 regionsâ€? by GHYHORSPHQWFRPSDQ\Âł6LPHWULD´WKHÂżUVWEUDQGKRWHOKDV been opened in Kutaisi under the Best Western International brand. The hotel accommodates 45 guest rooms, including 40 standard rooms and 5 suites. The hotel was designed taking into consideration special conditions and safety for guests with disabilities.

Address: 11 Grishashvili Str., 4600, Kutaisi, Georgia TEL 219 71 00 info@bwkutaisi.com

Three mobile conference halls are available with a total capacity of about 100 persons. (XURSHDQFXLVLQHFDQEHHQMR\HGLQWKHJURXQGĂ€RRUFDIp and a grill-bar menu in the roof top restaurant with panoramic views over the city. The International Hotels Management Company “T3 Hospitality Management,â€? providing the hotel management, has 20 years’ experience in hotel management in different countries globally.


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POLITICS

GEORGIA TODAY

JANUARY 9 - 11, 2018

Calls for Prisoners to be Freed Following Protests in Iran BY TOM DAY

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t was announced last week that the violent protests that accumulated a total death-toll of 21 had ended. The mass protests had erupted over economic issues in the city of Mashhad on December 28. The unrest spread like wildfire across the whole country, turning against the regime in more than 80 cities. Over 500 people were arrested in the capital Tehran alone, and local media says that more than 1,000 were detained throughout the country. The average age of those arrested is under 25, Deputy Interior Minister, Hossein Zolfaghari, said. Over 100 people gathered outside the notorious Evin Prison in Tehran on Sunday, calling for their friends and family to be released. One man insists that his son was arrested by mistake. “I don’t want trouble. I just want my son released.” Another man was waiting in the harsh winter conditions outside Evin Prison for his friend Hossein, who was arrested on December 29, to be released. Hossein participated in the protests because “he was angry, like many people,” his friend said. Hossein saw a man had grabbed the cellphone of a woman who had been filming the protesters and “chased him, but he turned out to be a plainclothes police officer,” Ali said. “I’m bringing the deed of his house, so he can post for bail.”

Photo source: theduran.com

According to reports from friends and family members outside Evin Prison on Sunday, mere dozens have been released,

while hundreds remain. The country’s declining economic conditions, corruption and a lack of personal

freedom have now been brought into the spotlight. A group of reformist activists wrote a

letter, published on the front page of the newspaper Etemaad on Sunday, calling for the release of those protesting. They said that Iranians have a right to protest. “People feel belittled and hopeless,” the letter said. A makeshift camp was even setup under one of the prison’s watchtowers on Sunday, where protestors gathered around a campfire, having brought an ample supply of wood and tents in which to sleep. “The political prisoners must be freed,” they chanted, as people filmed them with their phones, and as guards carrying machine guns on their shoulders looked down from walls and watchtowers above. Iran is said to be a repressive country where activism often leads to punishment, such as imprisonment or other charges. Hundreds of journalists, bloggers and activists have been detained over recent years. Charges can be imposed on those who are seemingly not doing anything wrong, like Jason Rezaian, a reporter who was held in Evin Prison for 544 days on charges of espionage, a claim he strongly denies. During Iran’s last big anti-government demonstrations, thousands were arrested, and temporary prisons had to be established because Evin was full. In one, the Kahrizak detention center in Tehran, several protestors were tortured and three even died. A full investigation of the case was called for by Iran’s supreme leader, Ali Khamenei. Several officers were sentenced to jail time, though not all served the sentence.


POLITICS

GEORGIA TODAY JANUARY 9 - 11, 2018

11

The Economic Interconnectedness of the South Caucasus Economic interconnectedness through the creation of supply chains will move economic prosperity to the forefront and could replace geopolitics

OP-ED BY EMIL AVDALIANI

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ooking at the history of Russia over the past centuries, one constant peculiarity of the country’s foreign policy has been ideology. Under the Romanovs, Orthodox Christianity was an important instrument in exerting Russian influence over Christian peoples of the Balkans and the South Caucasus. When the Russian Revolution happened almost 101 years ago, the religious aspect of foreign policy was gradually replaced by communism. However, after the breakup of the Soviet Union in 1991, the Russian political elite was no longer able to provide an important ideological back up to the Kremlin’s foreign policy. Not until the late 1990s, when the so-called Eurasianists (those who believe that Russia is neither in Europe nor in Asia, but in order to successfully compete with western powers in the Middle East, it needs Teheran and Ankara) appeared.

A region as complex as the South Caucasus could in fact become a land where competing powers can balance each other

Although the Russian government did not follow the Eurasianists’ policies officially, and even broke with their most vocal representative Alexandr Dugin, nowadays we see that Moscow does what was prescribed in closer cooperation with Turkey and Iran. I have written in the past that it is in all three countries’ common interests to cooperate in obstructing western military encroachment in the South Caucasus and the Middle East. The three countries have their own disagreements too, but this triangle could, quite surprisingly, actually lead to a certain stability in the South Caucasus, a region ridden with perennial ethnic conflicts in Abkhazia, South Ossetia and Nagorno Karabakh.

A POSITIVE PICTURE FOR THE SOUTH CAUCASUS A region as complex as the South Caucasus could in fact become a land where competing powers can balance each other. One of the recipes for this is economic interconnectedness. Turkey-GeorgiaAzerbaijan already enjoy significant cooperation in the economic realm, with new railways and pipelines being built, while Iran, Russia and Azerbaijan are developing the North-South Economic Corridor which will potentially enable reconnecting Russian railways with the Iranian. Apart from the immediate neighborhood of the South Caucasus, big stakes are made by such large powers as China, with its Belt and Road Initiative. The very fact that the South Caucasus is a convenient transit passage could make several major powers regard the region as more or less free of geopolitical struggle. Economic interconnectedness through the creation of supply chains (via new railways, sea ports such as Anaklia, and pipelines) will move economic prosperity to the forefront and could replace geopolitics as a primary driver of cooperation between the countries. Indeed, economic interconnected-

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ness can even resolve the most difficult problems such as the seemingly unresolvable Abkhazia, South Ossetia, and Nagorno Karabakh conflicts. 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. There are already some signs that economic progress tramples geopolitics: Russia and Georgia are close to opening economic corridors, with Tbilisi’s control, through Abkhazia and South Ossetia. In the modern world, where economic competition is intense, and the globe is becoming an increasingly interconnected place, regions left out are guaranteed eventual backwardness. This brings us back to Russia, which has been experiencing important developments in its foreign policy – closer cooperation with Turkey and Iran. Georgia should adjust its foreign policy to new scenarios and one of them could be to play a transit role as much as possible in order to reduce geopolitical competition.

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Issue #1012 Business  
Issue #1012 Business  

January 9 - 11, 2018

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