Issue #1226 Business

Issue no: 1226/218

• FEBRUARY 11 - 13, 2020 • PUBLISHED TWICE WEEKLY

In this week’s issue...

FOCUS ON TUSHETI

This week's ISET blog takes a look at how a community network is fueling Tusheti's development

PRICE: GEL 2.50

Weekly Entrepreneurial News @entrepreneur.ge NEWS PAGE 2

PAGE 4

Passenger Flow in Georgian Airports Down 3% in January BUSINESS PAGE 3

WHO Experts Leave for China As Mainland Deaths Rise Above 900 BUSINESS PAGE 3

Area Expo2020: A TwoDay Only Huge ExhibitionSale of Real Estate BUSINESS PAGE 5

EU Regards Georgia as Key Partner in the Region

State Audit Finds Flaws in Tbilisi Transport Company BUSINESS PAGE 7

Talakvadze Says Anaklia Port Must Go Ahead

BY TEA MARIAMIDZE

BUSINESS PAGE 10

T

How the Demotion of Medvedev & Surkov Will Affect Georgia & Why Kadyrov Left Chechnya

he European Union says it considers Georgia a key partner in the region and continues to fully support its sovereignty and territorial integrity within its internationally recognized borders.

The statement was made in a report which assesses Georgia’s fulfillment of the EU-Georgia Association Agreement (AA), covering the period since the Association Council meeting in March 2019 and ahead of the next meeting in 2020.

POLITICS PAGE 11 Prepared for Georgia Today Business by

Markets As of 07ͲFebͲ2020

STOCKS

Image source: balcanicaucaso.org

Price

w/w

Bank of Georgia (BGEO LN)

GBP 16.08

+6,3%

+2,6%

Georgia Capital (CGEO LN)

GBP 7.72

Ͳ4,0%

Ͳ13,2%

Continued on page 6

BONDS

Price

w/w

m/m

GEOROG 04/21

104.52 (YTM 2.91%)

+0,1%

+0,0%

GEORG 04/21

105.53 (YTM 2.06%)

Ͳ0,02%

+0,1%

GBP 1.23

Ͳ

+4,2%

GRAIL 07/22

109.99 (YTM 3.41%)

Ͳ0,02%

+0,1%

GBP 12.50

+0,8%

Ͳ0,5%

GEBGG 07/23

106.25 (YTM 4.04%)

+0,2%

+0,7%

COMMODITIES

Price

w/w

m/m

CURRENCIES

Price

w/w

m/m

Crude Oil, Brent (US$/bbl)

54,47

Ͳ6,3%

Ͳ20,2%

GEL / USD

2,8575

Ͳ1,1%

Ͳ0,0%

GEL / EUR

GHG (GHG LN)

The report speaks about the economic situation in Georgia, its place in international ratings, major political activities, the media environment and the involvement of the non-governmental sector in decision-making processes.

The document underlines that Georgia continues to be fully committed to and actively participates in the Eastern Partnership multilateral architecture, and adds that the country has provided a contribution. Their expectations are then outlined for the future policy framework.

Regarding the economic situation, the report says that the macroeconomic outlook remains stable, with some downward risks.

m/m

TBC Bank Group (TBCG LN)

1 570,44

Ͳ1,2%

Ͳ0,2%

3,1275

Ͳ2,4%

Ͳ2,0%

GEL / GBP

3,6828

Ͳ3,5%

Ͳ1,9%

INDICES

Price

w/w

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GEL / CHF

2,9216

Ͳ2,5%

Ͳ1,0%

FTSE 100

7 466,70

+2,5%

Ͳ1,4%

GEL / RUB

0,0448

Ͳ0,9%

FTSE 250

21 499,29

+1,7%

Ͳ1,5%

GEL / TRY

0,4748

Ͳ1,7%

Ͳ1,0%

DAX

13 513,81

+4,1%

+2,2%

GEL / AZN

1,6846

Ͳ0,9%

+0,1%

DOW JONES

29 102,51

+3,0%

+1,8%

GEL / AMD

0,0060

Ͳ

9 520,51

+4,0%

+5,0%

GEL / UAH

0,1164

+0,3%

Ͳ3,4%

185,07

Ͳ0,02%

Ͳ4,9%

EUR / USD

0,9136

+1,3%

+1,9%

Gold Spot (US$/OZ)

NASDAQ MSCI EM EE

Ͳ3,0%

Ͳ

1 091,64

+2,8%

Ͳ2,2%

0,7761

+2,5%

+1,9%

SP 500

3 327,71

+3,2%

+2,8%

CHF / USD

0,9777

+1,5%

+0,8%

MSCI FM

2 696,22

+1,2%

Ͳ1,3%

RUB / USD

64,0542

+0,1%

+3,4%

GT Index (GEL)

1 582,68

Ͳ

Ͳ

TRY / USD

6,0146

+0,5%

+0,7%

GT Index (USD)

1 208,13

Ͳ

Ͳ

AZN / USD

1,6980

Ͳ0,04%

Ͳ

MSCI EM

GBP / USD

2

NEWS

GEORGIA TODAY

FEBRUARY 11 - 13, 2020

@entrepreneur.ge Gamarjoba! I’m the Editor-in-Chief of the Georgian edition of Entrepreneur magazine and I’m here to share the top weekly Entrepreneurial news with you:

Ex-Prosecutor General Again Selected for the Post

BY ANA DUMBADZE

T

Bushet is a Georgian brand founded by Irakli Ghoghoberidze near the end of 2017. The brand’s service is exclusive: customers can customize the wine label on Bushet wines of limited bottling. As of February 1, Bushet offers wine bottles in not only the standard 0,75 litres, but 1,5 and 3 liters too.

Goalchecker is a Georgian journal, made to help you formulate your small and big goals, and turn them into reality. With the mind-set that "a goal is a dream with a deadline," Goalchecker was created a few years ago, when the team behind it started actively working in the field of coaching and mentoring. "We often came across similar planners but they were never perfect. So we decided to create an improved version ourselves.

Goalchecker's main concept is that, by using it, we can easily turn our dreams into goals," say the founders of the start-up.

Despite the ever-changing tendencies, leather and accessories made from it are always in style.

Georgian brand bestMark has been responding to the international trends for years, creating handmade chic accessories from natural leather. “Made in Georgia, and always will be” is the phrase that presents the major principle of the brand.

Follow the Entrepreneur Georgia Instagram page to get the latest updates from Georgian Entrepreneurs. For doing business with Georgian Entrepreneurs, write us on business@entrepreneur.ge

he Prosecutorial Council has selected Irakli Shotadze's candidacy for the position of the Prosecutor General of Georgia. He received 11 out of a total 12 votes. The Council will submit the candidate elected through a secret ballot to the Parliament of Georgia for approval.

The Council held individual interviews with the candidates on February 6 and selected four for the post, including the former Prosecutor General of Georgia.

The three other candidates were Sophio Shengelia, Valerian Vacharadze and Dariko Tordia. Shotadze received 11 votes, Shengelia - 9 votes, Vacharadze - 8 votes and Tordia - 7 votes from 12 members of the Council.

Ex-Prosecutor General, lawyer Irakli Shotadze, resigned on May 31, 2018, amid protests over the high-profile “Khorava

Street” murder case involving teenagers.

Recently, he was again nominated for the vacant position of Prosecutor General of Georgia by the LEPL Georgian Technical University.

During an interview, Shotadze noted that it was not easy for him to decide to participate in the competition and that the decision was made after much consideration.

Georgia Rapidly Expands Export to Countries with Free Trade Agreement

BY ANA DUMBADZE

I

n 2019, the net export reached a historic high of $2.35 billion, which is 62.3% of the total export,- Deputy Minister of Economy Genadi Arveladze said at a meeting with media representatives on DCFTA matters.

He noted that the greatest share of net export is distributed to countries with

a free trade agreement, which proves that decisions about the free trade agreements were right.

"Georgia exports 87% of net export to countries with whom it has free trade agreements: the choice to make said agreements was the right one," he said.

The Deputy Minister added that in 2019, the most significant shares of domestic export were distributed among the following countries: The Commonwealth of Independent

States (CIS) – 36.4% The European Union – 31.3% China – 8.8% Turkey – 8% Georgia's net export to China in 2014 was 1.2%, which increased to 8.8% in 2019.

Georgia's net export to the EU rose from 22% to 31% in 2019.

The above information was released by the Ministry of Economy and Sustainable Development of Georgia.

BUSINESS

GEORGIA TODAY FEBRUARY 11 - 13, 2020

3

WHO Experts Leave for China As Mainland Deaths Rise Above 900 iceberg," Ghebreyesus said in a series of tweets on Monday morning.

Ghebreyesus made a trip to Beijing for talks with President Xi Jinping in late January, coming back with an agreement on sending an international mission led

by WHO. An advance team of experts flew into Beijing on Monday to help assess the latest outbreak.

Other US organizations are likewise sending medical supplies to the epicenter of the coronavirus outbreak in China, as part of US efforts to assist with the deadly disease.

“The world needs strong public-private partnerships to help contain the spread of this deadly virus and the UPS Foundation is expanding its humanitarian relief network to support our partners in providing supply-chain expertise and air transport,” said Eduardo Martinez, President of the UPS Foundation, which is also assisting in the joint effort.

President Trump announced January 29 the creation of the ‘President’s Coronavirus Task Force’ to lead the US fight against the pneumonia-like virus. The group is composed of specialists from the government and the private sector.

BY ELENE DZEBISASHVILI

C

hina reported 97 new fatalities from the coronavirus on February 9, making Sunday the deadliest day so far.

Despite efforts to contain the new virus, a total of 40,171 infections have been confirmed nationwide; roughly 6,100 cases are considered severe.

Overall deaths from the novel coronavirus have now surpassed 900 in mainland China, urging the World Health Organization (WHO) to deploy an expert team to the country to investigate the outbreak.

With ever-increasing cases being identified around the world, WHO Chief Tedros Adhanom Ghebreyesus emphasized the "concerning instances" of the spread of the virus among persons who have never visited China, saying all countries should be on alert.

"The detection of a small number of cases may indicate more widespread transmission in other countries; in short, we may only be seeing the tip of the

Passenger Flow in Georgian Airports Down 3% in January

BY ANA DUMBADZE

G

eorgian airports served a total of 314,079 passengers in January 2020, a 3% decrease compared to the same period of last year, the Georgian Airports Association of the Ministry of Economy and Sustainable Development reports.

In January, passenger traffic growth was observed at all international airports of the country, except Tbilisi (-16%).

The reason is the Russian flight ban to and from Georgia imposed by President Vladimir Putin in July 2019, and the sus-

pension of direct flights to and from China as a preventive measure against the spread of the new coronavirus.

Last month, Kutaisi International Airport served 79,759 passengers in January, which is 43% more than the same period last year (55,895 passengers in January 2019).

Unlike the Tbilisi airport, the growth trend was also maintained at Batumi International Airport. In January, 22,001 passengers used the service of the Batumi airport, which is a 38% increase year-onyear (15,973 passengers in January 2019).

Georgia has temporarily suspended flights with China due to the growing risk of the spread of coronavirus (2019nCoV).

The Clean Region Awards, Supporting a Tidier Georgia

BY NINI DAKHUNDARIDZE

O

n January 27, the awards ceremony of the Clean Region 2019 contest took place on the premises of the Tbilisi City Assembly.

Organized by the Greens Movement of Georgia/Friends of the Earth-Georgia, and supported by Tbilisi City Assembly, and the Ministry of Environmental Protection and Agriculture of Georgia, the competition was announced in 2018 under the scope of the project “Keep Georgia Tidy.” However, the idea of awarding Georgia’s cleanest regions goes back to 2015.

The idea of organizing such a contest came about in 2015 within the frames of the ‘Clean Up Georgia’ campaign, which on its end, aimed to encourage all regions of Georgia to reduce waste, the number of uncontrolled dumpsites, and to involve the citizens in planned and self-organized clean-up activities. The competition sparked interest and excitement, the increase in the number of nominations in subsequent years standing as proof of it.

The list of nominations for the 2019 contest and its winners are: Nomination "Clean Region" - Kakheti Region Nomination "Clean City" - City of Zugdidi Nomination "Clean Municipality" -

Image source: Greens Movement of Georgia

Zugdidi Municipality Nomination "Clean Village/Community" - Orsantia village (Zugdidi Municipality) Nomination Beautiful Balcony - Lili Kapanadze’s balcony (Mtskheta) Nomination - "Clean Street" - S. Zakariadze Street, Tbilisi Nomination “Beautiful Yard of Enterprise” - Wine Company ‘Shumi’ (Telavi) Nomination "Beautiful Yard" - Iza Gabitashvili’s yard (Gurjaani) Nino Chkhobadze, Chairperson of the Greens Movement of Georgia/Friends of the Earth-Georgia, summed up the recent competition and the accomplishments of the project.

“We have in many ways accomplished the initial goal that we had when founding the contest: the people of Georgia now feel they have a claim on living in a clean environment,” she told GEORGIA TODAY. “We have seen an annual increase in the number of those interested in the project. But we want to get more people involved. We have to remember that each of us has a responsibility for the environment, from the government to the citizens. We all have to take care of it”.

The contest, which was open to both individuals and institutions, was held for the fourth time in eight nominations.

For those interested in the competition

and who might be inspired to take part in it next year, we can walk you through.

Contest participants must send photo/ video materials for their chosen nomination to The Greens Movement of Georgia/Friends of the Earth-Georgia.

The winners are revealed by a special commission established within the framework of the contest (Ministry of Environmental Protection and Agriculture, representatives of CSOs) which analyzes the submitted materials.

The Clean Region contest was carried out under the scope of the “Keep Georgia Tidy” project, with the financial support of the Government of Sweden and implemented by NGO consortium "Keep Georgia Tidy” (KGT), The Greens Movement of Georgia/Friends of the Earth Georgia, Georgian Society of Nature Explorers ‘Orchis jointly with local and Swedish partner organizations and in collaboration with the Ministry of Environmental Protection and Agriculture, LEPL “Environmental Information and Education Center,’ and the Solid Waste Management Company.

While summing up the contest, the Head of the Greens Movement also highlighted the Swedish side’s contribution.

The Swedish Government’s support enables the Greens Movement of Georgia to actively address the problem of harmful waste, raise awareness of the importance of protecting the environment among Georgian society, and carry out such contests as Clean Region.

Exclusively for GEORGIA TODAY, the

Swedish Ambassador to Georgia and Armenia, Ulrik Tideström, underlined the importance of such projects in Georgia and worldwide, calling the Clean Region contest a “good example” for making necessary changes.

“Pollution and littering is a global problem. It has to be stopped, and in this truly beautiful country, Georgia, where unique nature is one of the biggest assets. To succeed, good examples are necessary.

This is what the Clean Region contest is all about: celebrating and promoting good examples of efforts for a clean and green environment, as an inspiration to others”.

Ambassador Tideström also then revealed a “key area for Swedish-Georgian cooperation.”

“I want to congratulate all the nominees and winners from the regions, municipalities, villages, communities, private companies and individual people countrywide. Reducing pollution and littering is, and must be, a joint undertaking of engaged citizens, civil society, the private sector, and the authorities.

We are here to highlight the need for a clean and green environment. Something very close to my heart, and a key area for Swedish-Georgian cooperation. Environment, energy, and climate reforms are also an essential part of Georgia’s continued European integration. Sweden will continue to support Georgia! ერთად დავიცვათ საქართველოს სისუფთავე! (Keep Georgia Tidy!),'' the Ambassador said.

4

BUSINESS

GEORGIA TODAY

FEBRUARY 11 - 13, 2020

THE ISET ECONOMIST A BLOG ABOUT ECONOMICS AND THE SOUTH CAUCAUS

www.iset-pi.ge/blog

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

Tusheti Community Network Drives Development into the High Mountainous Regions of Georgia

Source: Tusheti Development Fund

BY RATI KOCHLAMAZASHVILI

eti villages, leaving most communities disadvantaged in terms of both communications and economic opportunities.

B

TUSHETI INTERNET AS A “COMMUNITY NETWORK”

ack in 2005, as there was no mobile coverage, my uncle drove dozens of kilometers to the Jvarboseli village in Tusheti to inform me that I had been enrolled in university. Now, in 2020, there is still no mobile signal in most Tusheti villages, including Jvarboseli, however, people can use broadband internet to reach out the world!

Previously known only for its sheep farming and tasty Guda cheese, today Tusheti is also a famous touristic destination, being home to one of the largest protected areas in Europe, covering three types of IUCN protected areas: the Tusheti National Park, Tusheti National Reserve, and Tusheti Protected Landscape (and a UNESCO Biosphere Reserve is under consideration). In addition, Tusheti is a nominee of UNESCO World Heritage for its biodiversity and cultural legacy.

This stunning region attracted over 15 thousand tourists in 2019 (APA, 2019), though as the only road leading to Tusheti crosses the 2900-meter Abano Pass that closes in snowfall, it is reachable for only 4-5 months a year (June-October).

This road is moreover considered one of the most dangerous on the planet (BBC, 2014).

Not only are the roads challenging for locals and visiting tourists, but the region also has limited connectivity: only around 40% of villages are covered by a mobile signal, and the remainder are detached, hindering development in those areas.

As a result, tourism is very much concentrated and benefits only a few Tush-

Modern communications services (mobile, internet, etc.) are usually delivered by private companies. However, provision of the seservices in remote regions is expensive, as the lack of users and of general infrastructure (e.g., roads) and utilities (e.g. electricity) increases costs. Thus, deploying communication into such places is not profitable and the private sector is often reluctant to enter the market. Consequently, there is what economists often call a “market failure” in providing such services to the high mountainous regions. Affordable com-

munication services, though, are in turn important for reducing the transaction costs of economic activities and for expanding markets (e.g., high-value chains in agriculture or tourism).

In order to respond to market failure in the telecommunication sector, “Community Networks” have been created worldwide. This entails the setup, ownership, and management of the communication systems, all carried out by a local community: “the communication networks are built, owned, operated and used by citizens in a participatory and open manner” (GISWatch, 2018). Because such Community Networks are often based on volunteering and do not have a commercial interest, they are more cost-effective in responding to challenges.

The world’s leading internet organiza-

tion, the Internet Society (ISOC), supports the concept of Community Network development in order to connect isolated areas around the globe. In 2017, Georgia was able to benefit from this concept and deliver wireless broadband internet to deprived and underserved populations in the mountainous valleys of Tusheti. The Tusheti project was thereafter implemented and is run by the community organization the Tusheti Development Fund.

Their seed-funding and technical support came from the Internet Society (ISOC) and its Georgian chapter, including the Small and Medium Telecom Operators Association of Georgia. In addition, the project is supported by the Georgian National Communication Commission, the Ministry of Economy and Sustainable Development, and local selfgovernment (the Akhmeta municipality).

In 2019, further funding support came from the Czech Embassy in Georgia, helping to strengthen and expand the internet ecosystem in Tusheti.

The Tusheti wireless internet system is built around 12 masts and repeaters, located between 1800 to 3000 meters altitude, all of which are solar-powered.

As a result of this innovative project, broadband internet is now available in almost all Tusheti villages. Consequently, locals can benefit from new development opportunities in the key economic sectors: tourism, agriculture, and authentic handicrafts (ISOC, 2018). Moreover, as the internet is the only source of connectivity for more than half of Tusheti villages (without mobile coverage), it offers many opportunities, including opening essential communication channels not only for business development, but also for healthcare and other emergency sectors (ISOC, 2017).

The Tusheti Internet project is a truly successful example of a public-private development partnership (PPDP); this project (often called #wifitusheti) also demonstrates a sustainable (social) busi-

ness model that is the result of: a) community-based development (via the Tusheti Development Fund), where community members understand the importance of volunteering and how this can contribute to the development of their community and region; b) strong internet users (mostly the private sector), who benefit from the internet and can afford the monthly fee for the service (50 GEL/month, equal to a one-night tourist stay). While for a few dozen permanent Tusheti residents, wintertime (November-May) internet provision is free!

According to the TDF, almost all guesthouses currently use the internet and the number of users has been steadily increasing over the last three years; it is estimated that it will reach 120 by 2022, extending to all Tusheti villages.

The Tusheti Internet project has been widely recognized as a successful, innovative project. Its case study has been published on the ISOC and GISWatch websites, and it has been profiled by certain world media giants – the New York Times and Deutsche Welle. Moreover, it was the subject of a TEDx talk in Tbilisi 2018, among other presentations and discussions. This promotion is believed to have increased awareness of Tusheti and attracted more travelers to this breathtaking Georgian region.

As a successful pilot project, the Tusheti Community Network has been replicated in other high mountainous regions of Georgia (Pshavi, Khevsureti, and Gudamakari) and Kyrgyzstan.

THE TUSHETI DEVELOPMENT FUND In order to contribute to the sustainable development of Tusheti, in 2015, Tushetians established an NGO, the Tusheti Development Fund (TDF).

TDF’s mission is to facilitate the social-economic development and environmental protection of Tusheti by improving the livelihood of Tushi communities and preserving the unique nature of Tusheti.

TDF implements donor-financed projects and raises funds via donations, primarily from Tushi community members living abroad (emigrants), but also from Tushi living in Georgia.

Therefore, the TDF has a high level of support and reputation within the Tushi community, by the government (local, regional, central), and the donor community working in Tusheti.

In the four-and-half years since its establishment, TDF has raised over 600,000 GEL; financed and implemented over 25 projects, with TDF management working pro-bono. The innovative projects the TDF runs are: the provision of wireless broadband internet to Tusheti; and operation of heavy machinery to clean up Tusheti roads.

BUSINESS

GEORGIA TODAY FEBRUARY 11 - 13, 2020

5

Area Expo2020: A Two-Day Only Huge Exhibition-Sale of Real Estate

T

he real estate exhibitionsale Area Expo will take place on April 4-5 at the Sheraton Grand Tbilisi Metechi Palace. The event is being held for the third time in Tbilisi with the aim to create a unified platform for developers to meet target audiences in the context of a highly competitive environment.

As part of the exhibition, developers will be presenting the pricing and other unique conditions pertaining to their products.

Area Expo is a space where, once a year, key players in the real estate market, developers and construction companies, architects and designers, investors and retailers, come together to facilitate the exchange of information and the attainment of win-win deals.

The event is part of a business forum that is habitually held on the weekends, with industry experts discussing real estate market trends, exciting innovations, enhanced approaches and the overall development potential of the sector.

Sundays are dedicated to a series of so-called ‘talk shows’ where experts provide useful tips for fruitful selection of real estate, the best choice of home acoustics, the generation of extra income by renting real estate using digital platforms, and more.

Issues for the business forum and users change every year, always answering the demands and novelties of the year.

Area Expo, due to its unique platform, is always under the spotlight of media and international associations.

Unchanged partners of the event are GEORGIA TODAY, Kommersant and Marketer. Entrepreneur and Business Partner recently joined that list.

The event is likewise supported by government agencies. The Ministry of Economy and Sustainable Development of Georgia, as a state property management agency, as such represents a stateowned investment property.

Area Expo provides unprecedented access to development projects and real estate in Georgia. In 2019, it was held on May 4-5 at the Sheraton Grand Tbilisi Palace. 30 developers participated, presenting more than 100 projects in total.

The developers included Unix Developer, Binary, Own Capital, York Towers, as well as developers working in Batumi.

The number of interested visitors shot from 1500 to 2000 over the course of just two days.

AREA EXPO - A BRIEF OVERVIEW Attendees to Area Expo include real estate retail buyers, office/commercial real estate buyers, / renters, investors / investment groups, real estate brokers / agents / service companies, Embassies and state structures representatives, business sector representatives, business unions / associations, press and media.

Its participants are development / construction / brokerage companies, architectural / design / real estatservices companies, state structures, banks / financial institutions.

The event is organized by real estate services company Area Group. The Official Supporter of the event is the Ministry of Economy of Georgia.

Participation in the exhibition gives you the opportunity to establish direct connections with customers, increase sales, attract investments and partners, establish new business connections, increase brand awareness, learn about industry news, and observe customers

/ competitors / market trends.

You should attend the exhibition if you want to: • Get acquainted with current and completed development projects in Georgia in one space • Get acquainted with and buy residential/ commercial / office real estate • Take advantage of unprecedented discounts on real estate • Find investment projects • Establish meaningful connections • Attend thematic forums and listen to interesting speakers Attendance is free.

PARALLEL EVENTS For two days, in parallel with the exhibition-sale, a forum will be held with

In the very heart of the city

Address: 17 Wine Ascent Tbilisi, Georgia Tel: (+995) 322 22 11 16 www.facebook.com/BricksTbilisi/

relevant topics pertaining to the real estate industry, featuring interesting local and international speakers.

The first day of the event will have speeches by leading real estate experts and international speakers, who will discuss the latest trends and challenges in the field.

The second day of the event is dedicated to interesting and practical topics for retail customers.

Forum speakers and topics can be found at: www.areaexpo.ge/forum Generating and selling leads: Find your potential customers and establish a direct connection; Increase sales in the short term; Present your product and service directly; Use exhibition days to offer special terms and encourage sales.

Branding: Make a direct promotion for your brand; Present the best aspects of your brand; Get feedback from customers.

Market research: Observe / analyze real estate customer requirements; Get acquainted with industry players and news; Explore market prices / conditions / projects; Customize market trends.

Be where your customer is looking for you! Increase your brand awareness!

Increase your sales!

PARTICIPATION PROCEDURES Area Expo2020 welcomes all to benefit by the most preferred offers from major real estate players on market during these two days. For the attendance, do not forget to visit areaexpo.ge and make a registration.

6

BUSINESS

GEORGIA TODAY

FEBRUARY 11 - 13, 2020

TANAP’s Launch Increases the Role of the South Caucasus Energy Corridor OP-ED BY EMIL AVDALIANI

O

n November 30, Turkish, Georgian, Azerbaijani leaders and several Balkan and east European politicians inaugurated a link between the Turkish and Greek gas grids, which marks the completion of the TransAnatolian Pipeline (TANAP). Though it has continued to be viewed by many as insufficient for Europe’s growing energy needs, TANAP has always had modest aims and is set to play an important role in Turkey’s energy sector and help increase Azerbaijan’s geopolitical weight as an alternative and reliable energy source.

Azerbaijani gas is an alternative source of gas to the Russian source for the European market. Though for the next decade Azerbaijani gas supply levels will be marginal compared to Europe’s overall consumption, which will be mostly covered by Russia, the project will boost Azerbaijan’s geopolitical importance as well as influence Turkey’s energy dependence on Russia.

TANAP is one of the most important (and actually the longest) sections of the $40 billion Southern Gas Corridor. The latter is a series of pipelines which transport the gas from the Shah Deniz II (Azerbaijan) field to Europe. TANAP is owned by Azerbaijan’s state energy company SOCAR (51%). Other shareholders are Turkish pipeline operator BOTAS, BP and SOCAR Turkey. Politically and financially, the Southern Gas Corridor is supported by the European Commission and World Bank, European Bank for Reconstruction and Development (EBRD), and Asian Infrastructure Investment Bank (AIIB). TANAP goes through the center of Turkey and has the potential to carry up to 16 billion cubic meters (bcm) of gas each year from Azerbaijan to the European mainland. Europe will be allocated 10 bcm, while 6 bcm is ear-

marked for the Turkish market. The transportation capacity could be increased to 31 bcm with additional investment.

Nevertheless, the potential supply volumes are limited. TANAP has an overall capacity of 16 bcm per year, of which 6 bcm will be taken by Turkey. For the EU as a whole, 10 bcm is unlikely to have a definitive impact on the supply structure of the continent. For example, in 2018, Russia’s Gazprom delivered 176.81 bcm to European markets, including the Western Balkans. Moreover, TANAP’s overall capacity is much lower than Moscow’s two large pipeline projects – Nordstream 2 (55 bcm) and TurkStream (31.5 bcm).

Still, dismissing the TANAP project would be a mistake. Gas from Azerbaijan can shore up Ankara’s bargaining posi-

tion in its growing energy dependence on Moscow. Agreed, for Turkey, the amount it will be receiving as a part of TANAP is only about 25% of the gas it gets from Gazprom, yet the Russian state-owned company’s market share is gradually shrinking as Ankara switches to cheaper liquefied natural gas (LNG).

At a time when the Turkish Lira is experiencing troubles and both households and businesses are faced with rising energy bills, Turkey needs diversification of its energy supplies. TANAP will play this role in Turkey’s geopolitical calculus.

With TANAP, Turkey will be left with no energy supply problem, and it is highly likely that Turkey will move forward with more gas investments on its path to becoming a regional energy hub.

TANAP will also benefit Greece and

Bulgaria. Bulgargaz and Greece’s DEPA have each signed a contract for 1 bcm with the Shah Deniz consortium. In Bulgaria’s case, that accounts for roughly one-third of its annual intake.

There is also a purely geopolitical dimension to the TANAP project. After completion, Azerbaijan’s gas will be transmitted directly from the Caspian Basin to the European market for the first time in history. “Thus, in addition to being Europe’s new gas supplier, we aim to become Turkey’s second-largest gas supplier,” said SOCAR President and TANAP Chairman of the Board, Rovnag Abdullayev.

In many ways, completion of the project constitutes a geopolitical development, as it strengthens east-west energy links opposed to Moscow-sponsored

north-south energy projects. Though TANAP is not an energy game-changer for Europe, the project is nevertheless a part of a potentially larger energy corridor emanating from the Central Asia region, namely Turkmenistan. This gasrich state would welcome any opportunity to diversify its export options, and there are frequent positive noises from the EU. However, the necessary link, the TransCaspian Gas Pipeline, will remain a long way off as Russia and Iran are likely to prevent such an important gas supply alternative from reaching the European market.

The country which benefits most from the project is Azerbaijan, as TANAP increases its strategic role as a source of energy resources in the Caspian Sea.

EU Regards Georgia as Key Partner in the Region Continued from page 1 “The economy continued to grow (by more than 4.5% year-on-year in the first ten months of 2019) but it remains vulnerable to domestic political risks and spill-over effects from external developments, including growing global trade tensions, the economic performance of key trade partners (e.g. Turkey) and financial market volatility,” the document reads.

It also noted that Georgia is doing well in international business environment rankings, and it now ranks 6th out of 190 countries in the World Bank’s ‘Ease of Doing Business’ index, but added that challenges remain with regard to the independence of the judiciary, legal certainty and ongoing investigations of certain major businesses.

The report notes that tourism is a growing and increasingly important industry in Georgia, accounting for 7.7% of GDP in the first two quarters of 2019. According to the document, the second quarter saw a record 1,896.104 international visitor trips, which represents a growth of 13% in comparison to the second quarter of 2018. The third quarter of 2019 also saw a record number (2,753.207), but

growth had slowed to 4% in comparison to the third quarter of 2018, primarily as a result of restrictions on tourism imposed

by Russia from July.

The report underlines that Georgia is gradually aligning its accounting and auditing practices with EU and international practices in order to improve the investment climate and the competitiveness of local businesses.

Unemployment, named in the report as a major challenge, is said to remain high, at 11.1% (QII), while more than 40% are self-employed in subsistence farming.

Summarizing mutual trade, the report reads that in the first ten months of 2019, trade turnover between the EU and Georgia amounted to €1.3 billion, down by 4% compared to the same period in 2018. EU exports to Georgia remained stable, at €1.7 billion (0.7% lower than in the first ten months of 2018) and EU imports from Georgia fell by 15%, to €475 million.

On technical barriers to trade, it is noted that Georgia has continued to improve the national quality of infrastructure, in particular in the fields of: standards and metrology, accreditation and market surveillance, where the Tech-

nical and Construction Supervision Agency is progressing with the provision of market surveillance services for a range of industrial and consumer products, in particular regarding toy safety.

On the Deep and Comprehensive Free Trade Agreement (DCFTA), the Association Implementation report reads that Georgia continues to implement the DCFTA provisions on competition, focusing on amending the Competition Law in order to increase the investigative powers of the Competition Agency, adopt antitrust procedures and introduce a two-phase merger procedure.

“In addition, these amendments aim at ensuring coherence in the application of competition law in the regulated sectors (communication, energy and finance) and other sectors of industry, and to make structural changes to make investigations more efficient,” the report says.

It also underlines that Georgia continues to approximate its public procurement legislation to the EU acquis, adding, with regard to intellectual property protection and the enforcement system, that Georgia has advanced its reforms in order to bring Georgian laws in line with the Agreement.

Regarding the visa-free regime, the report says it is in place for Georgian citizens to visit Schengen and Schengen associated countries and almost 900,000 visits have been made by Georgian citizens since its entry into force.

“However, the number of asylum requests made by Georgians in EU/ Schengen countries remained high in 2019, exceeding the overall number of asylum requests in 2018 and 2017, ranking Georgian nationals amongst the top nationalities requesting international protection in the EU,” The European Commission said, highlighting, however, that Georgia has continued to pro-actively address the challenge of increased unfounded asylum applications.

Among the major political events of 2019, the European Commission spotlighted the by-elections for one parliamentary seat and five mayoral posts, as well as mass public protests since the summer and a busy parliamentary session in the autumn to adopt the key legislation relating to democratic consolidation.

The report stressed that the coming months will be decisive for Georgia in tackling the increasing political polarization and for it to demonstrate its con-

tinued reform commitment, particularly in the areas of electoral and judicial reform.

Deputy Minister of Economy and Sustainable Development Genadi Arveladze said that the EU 2019 report highlights various areas in which Georgia is progressing, including export dynamics, economic growth, as well as the country's progress in international rankings.

“Exports of Georgian products to the EU are significantly increasing. In 2019, we had a record growth in exports to the EU countries, as well as a 40% increase in the number of exporter companies compared to 2014. The report also speaks of both economic challenges and much higher economic growth than expected in 2019,” he said.

The deputy Minister noted that the report also mentions the Foreign Direct Investments.

“We saw a growth of over 13% in the third quarter of last year. The 100% increase in reinvestment contributed significantly to this. This means that investor confidence in our country is growing. It is also important that FDIs in relation to GDP amounted to 7.6%,” Arveladze said.

BUSINESS

GEORGIA TODAY FEBRUARY 11 - 13, 2020

7

State Audit Finds Flaws in Tbilisi Transport Company

BY TEA MARIAMIDZE

T

he State Audit Office (SAO) of Georgia released its report on the Tbilisi Transport Company, which notes that the company does not comply with the basic requirements of the Labor Code of Georgia, according to which the working time of employees should not exceed 48 hours per week.

The agency found that the overwhelming majority of bus drivers in Tbilisi worked overtime in 2017-2018, which in turn also poses a threat to passengers.

The document says that the company, whose total revenue is GEL 548,138 ($191,992) thousand and expenses GEL 386,858 ($135,501) thousand, makes the drivers do overtime, which can be risky in terms of occupational safety.

SAO also says that in 2017, 1379 bus drivers of a total 1398 worked more than 48 hours per week, and in 2018, 1420 bus drivers did overtime, out of a total 1438 drivers. Most of them worked 17 hours or more per day.

The audit underlined that increasing the working hours of those categories of employees may pose risks to the safe transfer of passengers.

“Overtime is also financially unprofitable for the company because when working more than the set 48 hours a week, the employees’ hourly wage rate is increased by 25%,” the report reads, adding that in 2017-2018, the company paid GEL 1,310.9 ($459.16) thousand just

in increased tariffs.

SAO added that due to the improper functioning of the control mechanisms introduced by the Tbilisi Transport Company and the City Hall in 2017-2018, City Hall had wasted a significant amount of budgetary resources and reimbursed preferential travel costs inflicted on the company due to the violation of existing payment rules.

“Due to shortcomings of the travel tariff system and the management system of the company services, the proper functioning of the travel discount system has not been ensured,” the agency concluded.

The document says the City Council’s legal act does not specify how many times during a 90 minute period it is allowed to travel for free by travelcard after making the first payment, which has caused problems. According to SAO, after paying for one kind of public transport, the cardholder can obtain multiple free rides when scanning the card on different card machines.

“This flaw of the payment mechanism is actively used by both preferential and standard travelcard holders. Specifically, the interested person uses different payment methods to get benefits by scanning their travelcard at a bus service machine located near a metro station and thereafter obtaining a free onward trip,” the agency stressed.

The audit concluded that the transport company has not exercised sufficient control and has not introduced proper measures to prevent possible violations when obtaining free travels. In addition,

Image source: Georgian Journal

it says the tariff system established by the City Hall, and the management mechanism of the company, contain shortcomings and cannot ensure the proper functioning of the travel discount system.

“Because of these shortcomings, Tbilisi

City Hall had to pay GEL 414 ($145) thousand to cover the financial damage inflicted due to violations of preferential travel benefits in 2017-2018,” reads the audit report.

SAO added that as a result of the company management’s decision-making

process, the transport company suffered significant additional costs in 2017-2018.

In particular, the company unlawfully dismissed employees from their posts and based on court rulings had to pay compensation to these people without fully exercising the company’s interests.

8

BUSINESS

Opposition Leader Ugulava Sentenced to Three Years in Prison

BY ANA DUMBADZE

T

he Supreme Court has found one of the opposition leaders, Gigi Ugulava, guilty of embezzling funds, in particular, GEL 48 million, and sentenced him to three years in prison.

The Court satisfied the prosecution's motion, according to which, Ugulava embezzled funds from the Tbilisi Development Fund, a non-commercial legal entity founded by the City Hall, the purpose of which is to preserve the historic look of the City and promote the growth

of real estate value.

The opposition leader was initially arrested in July 2014 for the misappropriation of funds and embezzlement. He was sentenced to seven-month pre-trial detention. After this, in September 2015, he was found guilty and sentenced to nine years in prison. This prison term was commuted to four years and six months.

On January 4th, the Appellate Court re-qualified the article and his sentence was shortened by three years and three months.

He was released from prison on January 6, 2017, on the basis of a verdict by the Tbilisi Appellate Court.

GEORGIA TODAY

FEBRUARY 11 - 13, 2020

German Embassy & the National Bank of Georgia Meet to Discuss the Georgian Currency

BY BEKA ALEXISHVILI

O

n February 6, at the Sheraton Grand Hotel, the German Embassy alongside the National Bank of Georgia, in the framework of the DWV (Deutsche Wirtschaftsvereinigung) business forum, held a presentation about the Georgian currency and the obligations of the National Bank.

The official title of the presentation was ‘Monetary Policy Development and Recent Challenges of the National Bank of Georgia’.

The event was opened by Mr. Thomas Kimmeswenger, the Executive Director of the DWV, the German Business Association. He spoke about Georgia’s hospitable environment in doing business, as well as the challenges and trials faced by the private sector. He also introduced the framework of the project and talked about the context of the business forum, from which this get-together was made possible.

The stage was then given to the German Ambassador to Georgia, Mr. Hubert Knirsch, who spoke about imperative and actual economic and political conditions in the country. Mr. Knirsch gave a short overview of the fiscal and monetary situation and furthermore underscored the activities and the achievements which have been made during his time in office.

Mr. Koba Gvenetadze, the President of the National Bank of Georgia, then gave an in-depth presentation about Georgia’s unstable currency and the problems that it faces in the global market. One of the main themes of discussion was the problem of dollarization and how it deteriorates already unstable and weak currencies.

In the first part of the presentation, the head of the National Bank talked about the history of the Georgian currency,

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how it has transformed throughout the years with high inflation and immense outside influences. The second part of the presentation was about the external and internal factors which worked to either strengthen or deteriorate the National currency. The second part was also conceded to interesting economic indicators of 2019 and the exchange rate issues.

“If we look at Georgia’s economy in a pie chart, the biggest sector is the services sector with 69%, Manufacturing 14%, Construction 8%, Agriculture 8% - although we have more than 50% of the workforce occupied in agriculture, this indicates that this segment has much bigger potential which has to exploited wisely,” Mr. Gvenetadze said.

In an important macro-economic outline of Georgia’s economy, one of the biggest challenges Georgia faced after the fall of the USSR is the large current account deficit. In 1992, when the Soviet Union officially ceased to exist, Georgia’s inflation rate skyrocketed to 15000%, which was the biggest among former USSR countries. When the Central Bank of Russia rejected the plea to aid Georgia, Coupons were introduced. A couple of years later, the Georgian Lari was introduced to the public. Georgian Lari or GEL decreased the inflation rate sub-

stantially over time, and the Georgian economists call the time after 1995 the ‘stabilization’ period.

In today’s world, which is based on commerce and the development of trade, this negative balance is the cause of the unstable economic environment in Georgia. According to the President of the National Bank, it is important to stabilize this factor.

“For three consecutive years, the current account deficit has been decreasing and at present, it has reduced by about 13%,” Mr. Gvenetadze noted.

Georgia follows the examples of New Zealand and Canada in purposely targeting inflation. Mr. Gvenetadze stressed at the forum that before any of the above national banks were applying this, German Bundesbank had been practicing it since the 1990s.

Mr. Gvenetadze concluded his presentation with the achievements in which Georgia can take satisfaction.

“When experts discuss developments in the economic sector, they always mention Georgia’s economic stability, progression in different economic fields, independence of the National Bank, the exchange rate, the monetary policies, fiscal stability and the increasing of the National Reserve funds,” Mr. Gvenetadze said.

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9

How EU4Business Helps Georgian SMEs

BY NINI DAKHUNDARIDZE

L

aunched in 2009 as a joint policy initiative, the Eastern Partnership (EaP) aims to deepen and strengthen relations between the European Union (EU), its Member States and its six Eastern neighbors: Armenia, Azerbaijan, Belarus, Georgia, the Republic of Moldova and Ukraine. This initiative includes various supporting programs to help the EaP countries develop their economies and overall standard of living.

Commitment to a stronger economy through economic development and support for market opportunities is one of the key priorities of the European Neighborhood Policy framework, which focuses on increasing the stabilization and resilience of the EU's Eastern neighbors. The European Union’s EU4Business initiative is an umbrella initiative that covers all EU activities supporting small and medium-sized entreprises (SMEs) in the Eastern Partnership countries.

Taking a look at the statistics, the SMEs are indeed a key ingredient of economic life. In Georgia, Armenia, Azerbaijan, Belarus, the Republic of Moldova and Ukraine, SMEs represent between 83% and 99% of all firms, and account for 50% of all jobs, according to the OECD in 2017. This, however, still lags behind EU countries, where SMEs account for over two-thirds of employment, and 85% of new employment created in the past five years. The EU, with its programs, aims to realise the full potential of SMEs

Image source: EU

in EaP countries, to create further jobs and to drive economic growth. To accomplish this, the EU claims that “dangerous” obstacles to growth must be tackled: limited access to finance, red tape, and difficulties entering new markets.

“EU4Business includes 43 projects in the Eastern Partnership region, implemented both on a regional and bilateral level. The overall active portfolio amounts to almost €320 million of EU support under EU4Business, and has triggered a total of more than €1.96 billion in loans

granted by partner banks to SMEs in the region,” reports the official website of the EU4Business project.

In Georgia, the EU4Business program supports SMEs and BSOs (Business Support Organisations: organizations such as Chambers of Commerce, sectorial and other business associations). The EU4Business gave out over 39,000 loans worth over €1 billion to SMEs in Georgia over 2009-2018.

With the help from EU, small and medium-sized entrepreneurs can have

special access to markets, finance and training. It was exactly this part of the project that helped Levan Eristavi, a 27-year-old entrepreneur, give new life to an abandoned building in Telavi, Kakheti.

Having received €2.6 million through the EU4Business-EBRD credit line in 2017, near the end of 2019, Eristavi and his partners had already completely renovated a derelict building. Holiday Inn Telavi is now an EU-standard hospitality business, generating 65 new jobs and attracting thousands of tourists to the region.

Holiday Inn Telavi is fully adapted to EU standards, both in terms of infrastructure and in the training of its professional staff.

“By investing in upgrades of basic components, such as heating and cooling, communications, sewage, water and electric systems, Holiday Inn Telavi increased its product and service quality while exercising environmental responsibility and decreasing operating costs: the new machinery consumes less energy and emits less carbon,” writes EU4Business about the recently-opened hotel in Telavi.

What’s more, Eristavi claims that after carrying out their plans successfully, the hotel co-founders got a 15% cash-back funded by the EU, which they later reinvested in business growth.

The open calls for applicants for the various EU4Business projects can be viewed online on their website.

The EU-funded EU4Business Facility Project ensures a coherent and coordinated approach to the implementation of EU4Business, as well monitoring and reporting of projects and programs, and communication and visibility for the initiative.

The EU-funded EU4Business Facility Project is implemented by a GFA-led Consortium, GFA being one of the leading European consulting firms active in the development cooperation sector, consisting of four partners – GFA Consulting Group GmbH, Action Global Communications, CARSA (service provider for businesses and public sector organisations), and ECORYS (one of the oldest economic research and consulting companies in Europe)

10

BUSINESS

GEORGIA TODAY

FEBRUARY 11 - 13, 2020

They Are Now Saying that Economic Growth Is Bad OP-ED BY NUGZAR B. RUHADZE

I

n my previous article on economics, I was falling over backwards to prove that growth is good because there exists a viable general notion that the world needs economic growth for survival. This is at least what I have deemed right my entire life. I was taught to take it for granted that economic growth enhances quality of life and promotes social stability. But all of a sudden, I come across a curious publication by a competent author who says that part of the contemporary world is taking growth as a dilemma, emphasizing that currently, a number of world leaders, prominent economists and wealthy individuals are rebuffing the idea of boosting material well-being because it is much more important to take care of the world’s endangered environment.

This statement comes across as a humongous discrepancy compared to our not-very-long-ago thriving theory of economic development. The newlyhatched economic idea says that a reasonably acceptable standard of living could easily be sustained without any growth in material resources, badly needed to feed and clad people around the globe. In a word, what has always been taken as the highest good in Mankind’s material life right now is declining in importance for the sake of physically salvaging the world from destructive human hands; the social concept of concentrated growth is receding and the idea of slow or no-growth is its substitute. “The greater material progress, the better the quality of life” is no longer an undeniably practicable declaration, accentuating that growth has desisted to be an unquestioned priority.

The modern environmentalist lingo is becoming replete with new terms and notions, like: degrowth, growth danger, green agenda, green capitalism and green piousness, environmental piety and environmental left, climatistas, carbon legacy, maggot sausages, tree-huggers, feudal economy comeback, reduction of economic wealth, return to a more primitive state of existence, carbon emission reduction via recessions, and what not. All these neologisms and views have been coined by overly exulted green zealots and belligerent progressives who

think that quality of life is a second-rate concern compared to keeping up the environment which is deteriorating “on an hourly basis”. Well, this might be fair enough, except it is totally contradictory to human welfare and security. Imagine Georgia without economic growth and its people remaining forever in darkness and stagnation without any prospect of a better life, including healthier nourishment, improved housing, nicer cars, longer leisure time, cleaner air, lower unemployment, superior education, affordable entertainment, pleasurable rest, hi-tech medication, enhanced usage of modern gadgets and more comfortable retirement. Well, we are not exactly an environmentally-conscious nation, but we know the price to wholesome food and a salubrious environment.

We are also aware of the value of a heightened standard of living, as cherished and awaited as it has been in the last hundred years, since the time of Georgia’s sovietization in 1921. Georgia respects Mankind’s environmental concerns and knows that the situation with pollution here is more than dire, but Georgia cannot afford slow or no-growth even if the environment suffers greatly due to indispensable economic growth. Georgia has myriad reasons for this kind of attitude: slow growth is like a timebomb: it can easily trigger social disorder; it is perilous for livelihood; it threatens retirement facilities; instigates economic uncertainty, followed by higher prices on almost everything, and perceptible disparity between the members of our society in every walk of life.

To compound the suggested analysis, degrowth means elimination of our stable future even in terms of our physical survival. So the propensity of progressives to discard the significance of economic growth is acutely conflicting with Georgia’s chances of wellbeing no matter how removed this idea seems to be from contemporary understanding of wellbeing by a green zealotry. Tree hugging and kissing might sound like regular human romanticism elevated into a freshened, albeit slightly weird world order, but it smells like disaster for this country. How about looking after the fox and the geese at the same time to keep them both intact?

This might be an ideal case for Georgia to stay alive and kicking. As President Reagan would put it, there is no such thing as a limit to growth.

Talakvadze Says Anaklia Port Must Go Ahead

BY NINI DAKUNDARIDZE

A

rchil Talakvadze, the Chairman of the Georgian Parliament, summed up his visit to Washington, saying one of the topics discussed was the American side was the Anaklia Deep Sea Port.

Talakvadze reported that during his meeting with the assistant of Mike Pompeo, the US Secretary of State, the representatives of the strategic partner countries talked about the Anaklia project.

“We have been talking to the Department of State about the economic projects that our government has planned, including the Anaklia project,” said Talakvadze.

“Our main goal is to find a new, reliable partner investor, who will be able to implement this [Anak-

lia] project. We are ready to support this project in the future too,” the Parliament Chairman stated.

On January 14, the Georgian government again ruled out that it would restore the terminated contract with the Anaklia Development Consortium (ADC), naming the ADC’s “failing obligations” as the reason for this final termination. The Anaklia Deep Sea Port Development Agency is now a subordinate of the Ministry of Economy and Sustainable Development.

POLITICS

GEORGIA TODAY FEBRUARY 11 - 13, 2020

11

How the Demotion of Medvedev & Surkov Will Affect Georgia & Why Kadyrov Left Chechnya BLOG BY VAKHTANG MAISAIA

T

he situation in the post-Soviet space is changing quite drastically and unusually. This is especially true for the changes in Russia that began earlier this year. The Russian President, who is soon likely to introduce the title of "Supreme Ruler", like Kazakh Elbasy, is making changes that obviously have a specific goal. While our society mainly focuses on why Dmitry Medvedev was demoted and Mishustin was appointed prime minister, I think it is no less interesting that Ramzan Kadyrov has not performed the duties of the leader of Chechnya for a few weeks now, and in the meantime, Vladislav Surkov, known as the kingmaker, left his position. It is logical to ask what the purpose of these political changes is. According to the general hypothesis, these changes aim at strengthening Russian hegemonic positions in the post-Soviet space and keeping Putin in Russia until at least 2035.

The government vertical in the Russian Federation is changing in an interesting way, which will be quite different during Putin's fourth presidential term. Where, during the Yeltsin era, Chubais and Berezovsky were kingmakers, Surkov is a true kingmaker, having developed the concept by which Putin reinforced his system. Surkov, in fact, oversaw the projects in the North Caucasus, Abkhazia and the Tskhinvali region; was one of the authors of Tskhinvali war, and he managed to create Putin's regional clan groups that balanced well the relations within the Kremlin. After the decision made at the Normandy Summit, however, and taking into account the fact that Surkov’s vertical in the breakaway regions of Ukraine was demolished and his poor work during the annexation of Crimea, it seems that Putin could not forgive him the fact that the political situation in de facto Abkhazia has gradually moved out of the sphere of influence of the Kremlin; a situation that will be reflected directly on the situation in that region.

The story of criminals echoes more an unstable and chaotic situation in Abkhazia. The involvement of the so called “thieves-in-law” is more related to controlling the cash flow from Russia.

The Kremlin did not like it either, not being a fan of the interference of the said "thieves". At the time, Putin made a deal with "Grandpa Hassan" and others over the Sochi Olympics, making a temporary truce with them, but you know how that ended. "Grandpa Hassan" was attacked, several criminals were imprisoned, and before that well-known "thief-in-law" Ivankov was eliminated.

Naturally, this would not have happened without the involvement of the special services. No, the Kremlin does not like it when others interfere in the political processes.

The interference of "thieves-in-law" in Abkhazia was also seen as a disadvantage to Surkov. It was no accident that Nurgaliyev, the first deputy secretary of the Security Council, who is a member of the team of Patrushev and Sechin, paid a visit to Sokhumi. It seems that the so called “Siloviki” have taken over and will control the North Caucasus and the whole Caucasus as well. I said earlier that Putin had reinforced the liberal group, but I think I was wrong: he also reinforced the “Siloviki”. He simply gave a carte blanche to the “Siloviki” to oversee the regional policy. This new political situation in the North Caucasus will have an impact on Georgia.

Surkov and Kadyrov were focused on the situation in the North Caucasus and had little time for Georgia, being less interested in what was going on here. The de facto situation that existed in Georgia and Armenia was profitable to them. Surkov was also in charge of Armenia, and Pashinyan’s revolution was not considered to be his asset. Russia now seems to be stepping up in order to exert pressure on Georgia. US-Georgian relations have become strained and have taken on a geopolitical

color. Here's one nuance: the Trump administration is less concerned about what's going on in the Caucasus. President Trump is listening to the advice of the group working on Georgia, a fact evidenced in 2018 by Trump’s removing the term "Caucasus" from the national security strategy and replacing it with "Central Asia", while under the previous three administrations, namely during Clinton, BushJr. and Obama, the Caucasus enjoyed a geostrategic status. That is why the ruling “Georgian Dream” party does not know or does not want to know how Realpolitik is done. So far, they have not been able to reach that group in the USA making decisions on Georgia. This cannot be helped even by the contract signed with the US lobbying company Chartwell Strategy Group on January 27, which is close to the Trump administration. I think this step comes too late. Those who criticize Georgia today made that decision. Even members of the Trump team have started using the wording of the neoconservatives. That is, a political consensus on Georgia may be reached between Trump and the neoconservatives. This is the biggest danger.

Impeachment has been Trump's main concern of late, but not the only one: he has many other problems, too, namely, Iran and Ukraine. And Trump has some pretty bad associations with Georgia, not least because Mikheil Saakashvili dumped him.

This fact was confirmed during the official visit of US Secretary of State Michael Pompeo to Kiev, when he refused categorically to meet Mikheil Saakashvili and, according to some, asked who Saakashvili was. Given the geopolitical situation, and in light of the congressional pressure, the neocons might make Trump Administration agree with their criticisms.

There is also an important fact to be explained here, namely that the US has several "red lines".

Specifically, their interests are classified into four types: vital interests, major, important and peripheral. Major interests are, for example, protecting US business interests anywhere and supporting geostrategic projects, and the Anaklia project is one such project. Georgia refrained from escalating its relations with Russia and did not join the sanctions. I am not saying that this was against our national interests, because we are victims of Russian aggression and therefore it would require more caution from us than from any other country. But it happened that Russia became our main trading partner and the number of Russian tourists increased. This was not overlooked by the Americans and they always criticized us for that.

Pompeo also said that the Anaklia project was important to them, but the Anaklia port project failed. All this crosses those "red lines", and noone knows what the Trump administration will do at such a time. Moreover, there are amateurs in Georgian Dream. How can Irakli Kobakhidze be sent to the US when he has a communication problem in Georgia?! We saw the result of this.

And as soon as the US-Georgia relationship entered an undesirable stage, the Kremlin immediately reinforced the Chekist direction in the region.

Dmitry Kozak is now to oversee the Abkhazia and Tskhinvali regions. Surkov was replaced by Kozak, the chief negotiator of the same Minsk Treaties.

Prior to that, Kozak was able to solve the Transnistrian problem and was distinguished for his rigid approaches. Replacing the relatively liberal Surkov with Kozak, who is also a good negotiator, already reveals Russia's attitude to us in the wake of a slightly complicated relationship with the US. Kadyrov seems to have received a signaling message: either know your place and role, or you will be replaced with a more loyal figure acceptable to the Chekists. I do not rule out that Kadyrov might be offered any position at the federal level.

With that in mind, Kadyrov appears to have stepped back temporarily because he is afraid of being eliminated. If I am not mistaken, there were several attempts to eliminate him in 2016-2017, which were further portrayed as if attacks by the Islamic Caliphate, but apparently, the Chekists were behind it. It is a fact that Kadyrov's enemies in the North

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Ramzan Kadyrov. Image source: voanews.com

Caucasus have become stronger, and Kadyrov knows this. It is not so easy to eliminate Kadyrov; Putin is not omnipotent. Kadyrov's removal is risky for the Kremlin, as he created his vertical in Chechnya, and nothing can be resolved without him. Chechnya's loyalty to Russia depends on Kadyrov. At the same time, Kadyrov has a 24,000-strong paramilitary group that could oppose to Moscow and launch a third war if Kadyrov is ousted. It is possible that his paramilitary group might well join the Islamic Caliphate of the North Caucasus and no-one knows how the situation will develop then.

There are also significant upheavals in Ingushetia, and the Kremlin has been working hard to

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neutralize the situation. This may blow up the North Caucasus and how the scenario will unfold is already a topic of a separate discussion, and will directly affect Georgia. This is confirmed by the mere fact that the Chekist clan has already taken over the Caucasus, including Georgia, and not just occupied Abkhazia and the Tskhinvali region. So, we should expect some surprises in the next 2-3 months. Negotiations with Kadyrov now seem to be underway. In my opinion, it is very likely that Kadyrov will be persuaded and reconciled with the Chekists. It is possible that Kadyrov will be charged directly with Georgia. Especially since the Kremlin will be trying to use Georgia's confrontation with the US to its advantage.

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