Issue #1118 Business

Issue no: 1118/164

• JANUARY 22 - 24, 2019

• PUBLISHED TWICE WEEKLY

PRICE: GEL 2.50

In this week’s issue...

Weekly Entrepreneurial News @entrepreneur.ge NEWS PAGE 2

Georgia’s GDP Growth Softens at Year-End, Exports, Remittances, & Tourism Continue to Expand

FOCUS

ISET PAGE 4

Georgia-Gazprom Agreement on Gas Transit to Armenia Expires

ON GEORGIA'S Q3 2018 CURRENT ACCOUNT SURPLUS Tbilinomics reports on what the surplus actually means

BUSINESS PAGE 5

PAGE 8

WorldAtlas Lists Georgia among Countries with Worst Education Systems

BY THEA MORRISON

HUAWEI Presents HUAWEI P Smart 2019, Sporting the Latest Technologies & Design BUSINESS PAGE 7

German Bundestag Includes Georgia on Safe Country List

A

head of the UN-initiated International Day of Education on January 24, international organization WorldAtlas has published a list of countries with the worst education systems, which includes Georgia.

On the list of countries with poor education, which is led by Equatorial Guinea, Myanmar and the Central African Republic, Georgia takes 25th place.

Continued on page 2

POLITICS PAGE 11

Image source: mes.gov.ge

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NEWS

GEORGIA TODAY

JANUARY 22 - 24, 2019

WorldAtlas Lists Georgia among Countries with Worst Education Systems Continued from page 1 @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: Wine company Badagoni recently launched a new concept, named ‘Badagoni Home,’ aiming to create and manage hotels, restaurants, shops, recreation complexes, and to restore historical tourist centers and wine cellars – a huge project interesting for commercial, cultural and economic reasons.

Badagoni’s upcoming spacious tourist complex of 260 hectares will feature a 5-star hotel, a hotel for pilgrims, three historical wine cellars, forest, wine restaurants and wine shops.

Tempered glass is used in construction, furniture production and façades. New entrant to the Georgian market, ‘Glass Service,’ is soon to open in Tbilisi within the scope of the ‘Enterprise Georgia’ project with an investment of 1.800,000 GEL. Glass Service will produce at least 120,000 sq.m of glass, initially for the local market. 3 507 sq.m was given to the company by the National Agency of State Property to support the business.

Brand-new company ‘TATARA’ from David Ramazashvili, operating under the label of the ‘Grape’ company, will be a hit with those who love Georgian sweets. After Germany and Austria, packaged tatara (boiled grape juice thickened with wheat flour) has been launched on the US and Polish markets and will appear in France soon.

Approximately 200-300 kilos of tatara is produced daily.

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

WorldAtlas says that government expenditure on education as part of each country’s Gross Domestic Product (GDP) is an indicator of the importance nations place on education in their budgetary considerations.

“This figure is achieved by summing the total of all government expenditures for educational purposes, both public and private. This is not limited to instruction services, but also includes any ancillary services provided for students.

Provisions for research performed by educational institutions may also be included,” the report reads.

The organization noted that many countries have demonstrated a great deal of oversight by underestimating the importance of education, and thus have failed to invest adequately in their educational infrastructures.

Georgia’s Education Minister Mikhail Batiashvili admits that there are flaws in the education system, but says he

doubts the accuracy of the WorldAtlas statistics.

“This is not an organization which has a high reputation in the education field…

Countries which have the best education systems were also included on the list, so this survey raises doubts about the trustworthiness,” Batiashvili said.

Analysts believe that Georgia needs to increase funds for education in order to improve the system as a whole.

Education researcher Mariam Mosiashvili believes not only funding but also efficiently using the allocated money is very important for the proper functioning of the education system.

“How the government spends money on education and whether it implements education development programs is of utmost importance for advancing the education quality and level in Georgia,” she noted, adding that it is necessary to decentralized schools rather than increase control of them. “This would reduce the existent political influence on our schools,” she said.

Analyst Revaz Apkhazava says equipping schools with modern technologies is not enough when the country lacks good teachers.

“If the teachers do not use the latest equipment bought by the schools, the money is wasted. It is necessary to increase the salaries of the teachers to motivate them. We also need to introduce new specialists who use different programs to teach the students,” he said.

The Georgian education system consists of the following main fields: • Early and pre-school education • Secondary education • Higher education • Vocational education • Science, Technology and Innovations The Unified Strategy for Education and Science for 2017-2021 of Georgia reads that ensuring a quality and affordable education and science system is one of the main priorities of the Government of Georgia and has been declared the cornerstone of the development of the country.

New Student Campus to Be Built in Tbilisi

BY AMY JONES

A

new student campus will be built in Didi Digomi district in Tbilisi as part of education reforms.

The new campus on David Agmasheneveli Alley will include science laboratories, a library, art school, indoor recreational space, outdoor stadiums, conference rooms, sports halls, a kindergarten and a residential campus.

The 129,778 square meters of land will also house a science museum, technopark and natural science laboratories.

Announcing the new project, Tbilisi Mayor Kakha Kaladze said, “all this is being done for the future generation,

Photo source: Study Breaks Magazine

and for there to be as many educated young people as possible so they can use their knowledge for the country’s well-being."

The new education reforms hope to

improve educational infrastructure, national exams, security, innovation and technology, financial support, and ensure better quality in institutions of higher learning.

BUSINESS

GEORGIA TODAY JANUARY 22 - 24, 2019

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Southern Gas Corridor to Be Completed by 2020

BY AMY JONES

T

he Southern Gas Corridor, a major construction project for a natural gas supply route, is due to be completed by 2020. The European Commission’s initiative will reduce Europe’s dependency on Russian gas and diversify energy supply sources by creating a gas supply route from the Middle Eastern and Caspian regions to Europe.

The route, expected to cost a total of $45 billion, has secured $4.4 billion of funding to complete the final segment, the Trans Adriatic Pipeline. The final section runs 878 kilometers from the Greek-Turkish border through Albania and the Adriatic Sea before terminating in Southern Italy.

The Southern Gas Corridor is made up of three pipelines: the South Caucasus Pipeline through Azerbaijan and Georgia, the Trans-Anatolian Pipeline through Turkey, and the Trans-Adriatic Pipeline through Greece, Albania, and Italy. Together, the pipelines are 3,500

kilometers long.

17 commercial banks, as well as the European Investment Bank, the European Bank for Reconstruction and Development and export credit agencies from France, Germany, and Italy, are funding the project.

TAP is highly important to the EU. Currently, the EU depends largely on other countries for its energy; approximately 54% of the EU’s gross inland energy is imported from abroad, espe-

cially from Russia. “Many countries in Central and South-East Europe are dependent on a single supplier for most or all of their natural gas,” reads a statement on the European Commission's website. “To help them diversify their supplies, the Southern Gas Corridor aims to expand infrastructure that can bring gas to the EU from the Caspian Basin, Central Asia, the Middle East, and the Eastern Mediterranean Basin.”

Nonetheless, the project is not without

controversy. Fossil fuels are known to be a huge contributing factor to climate change. The EU aims to cut its greenhouse gas emissions by 40% in 2030 compared to 1990 as part of its climate policy. Moreover, the European Investment Bank, an investor in the corridor, has committed to fighting climate change.

Yet, the project facilitates using gas as a source of energy, instead of looking at environmentally-friendly alternatives.

In addition, many NGOs and watchdog

organizations have criticized the project as it contributes financially to Azerbaijan’s government. The Azerbaijani government is regularly condemned for its repressive treatment of journalists and activists, as well as its corruption. In 2015, the International Federation for Human Rights wrote: “for more than a decade, Azerbaijan has made shameless use of caviar diplomacy to charm European governments, its more important oil and gas clients.”

The construction of the pipeline has been met with protests in some countries. In Italy, environmentalists protested TAP due to its environmental impact. In March 2017, more than 300 protestors blocked a construction site to prevent trucks from entering. Over 60 olive trees have been removed from historical olive groves due to TAP construction works.

The Southern Gas Corridor is expected to have an annual capacity of 10 billion cubic meters of gas, enough to provide energy to around 7 million European households. In the future, the European Commission hopes to increase this to 80 to 100 billion cubic meters. It is expected to begin operating in 2020.

Economy Minister Meets with Representatives of Investors' Council

BY THEA MORRISON

Image source: Ministry of Economy

G

eorgia’s Minister of Economy and Sustainable Development, Giorgi Kobulia, met with the representatives of the Investors' Council to discuss challenges and topical issues facing the tourism sector.

The Investors’ Council is an independent consultative body of the Prime Minister of Georgia aimed at creating a dialogue between the private business community, international organizations, donors and the Government of Georgia for the development of a favorable, nondiscriminatory, transparent and fair business and investment climate in Georgia.

During the meeting at the Ministry, Kobulia made a presentation to the audience and introduced in detail the strategy of the Ministry of Economy, which implies numerous important directions for the development and promotion of

the tourism sector.

“We are glad to know that the Investors’ Council approved our vision, confirming that our strategy for tourism development is correct and that we are well-aware of the aspects that need more attention. We talked about such infrastructure projects as the creation of large capacity conference spaces in Tbilisi and Batumi. Of course, we are

ready to take into consideration all the comments of the Council and I believe that joint efforts with tourism sector representatives will provide grounds for better outcomes,” he stated after the meeting.

Head of the Investors’ Council Secretariat, Mariam Meghvinetukhutsesi, stated that the Tourism Working Group of the Council exchanged ideas with the

Minister about solving issues related to the further rapid and sustainable development of the tourism sector.

Moreover, one of the members of the Tourism Working Group, the founder of the CBC Georgia Saba Kiknadze, noted that the meeting was fruitful as the parties discussed all the challenges the tourism sector in Georgia is facing.

“It was agreed that we need to switch

to high solvent markets, develop infrastructure and promote the growth of staff qualification in order to provide higher quality services in the tourism sector,” he stated.

Georgia hosted 8,679,544 international travelers in 2018, showing an increase of 9.8% year-on-year. Of these travelers, 4,756,820 were tourists, which is 16.9% more compared to 2017.

PM: Debt Forgiveness Program Successfully Completed

BY THEA MORRISON

G

eorgian Prime Minister Mamuka Bakhtadze stated that the loan annulment program of black-listed bank debtors has been successfully completed.

Starting on December 15, 2018, the Government of Georgia began annulling the debts of over 600,000 citizens, 150,000 of whom are socially vulnerable, whose loans at banks do not exceed 2000 GEL ($748).

Cartu Foundation, established by the Founder and Chair of the ruling Geor-

gian Dream Bidzina Ivanishvili, agreed to take full responsibility for paying off the debts of those 600,000 people on the financial black list.

The PM noted that 38 financial organizations participated in the process within the period of December 15-31, 2018, while 14 more creditors expressed their willingness to engage in the initiative in the period of January 1-15, 2019.

"Unfortunately, a small number of financial organizations were left beyond the scope of the project. We call upon them to write off the loans of their black-listed debtors on their own, as those did that already announced willingness to follow the initiative,” he said.

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BUSINESS

GEORGIA TODAY

JANUARY 22 - 24, 2019

Georgia’s GDP Growth Softens at Year-End, Exports, Remittances, & Tourism Continue to Expand

BY DAVIT KESHELAVA AND YASYA BABYCH

I

SET-PI has updated its forecast of Georgia’s real GDP growth rate for the fourth quarter of 2018 (final update), and the first quarter of 2019. These are the highlights of this month’s release:

HIGHLIGHTS • Geostat updated its preliminary estimate of real GDP growth for the third quarter of 2018. The Q3 estimate was

revised downward to 3.7% (0.3 percentage points lower than the previous estimate).

• The real GDP growth rate reached only 2.2% year-on-year for November 2018. Consequently, the estimated real GDP for the first eleven months of 2018 was revised downward to 4.7%.

• ISET-PI’s real GDP growth forecast for the fourth quarter of 2018 was reduced to 3.4%.

• Based on November’s data, annual growth in 2018 is expected to be 4.5%.

• According to the most recent (second vintage ) forecast for 2019, the growth rate in the first quarter is expected to be 2.8%.

• The National Bank of Georgia’s forecast for real GDP growth in 2018 remained the same at 5.5%, while the World Bank predicts 5.3% growth. It is notable that NBG has maintained the growth forecast at 5% for 2019. This number coincides with the WB’s recent estimate.

In the ISET-PI GDP forecast model, very few variables changed in a mean-

ingful way between the months of October and November. The most significant changes were observed for variables related to national and foreign currency deposits, monetary aggregates, the real effective exchange rate, and external sector statistics.

NATIONAL AND FOREIGN CURRENCY DEPOSITS, MONETARY AGGREGATES The first set of variables that have had a significant positive effect on our forecast relate to national currency deposits in commercial banks. In November, all types of national currency deposits expe-

rienced double-digit growth in annual terms. In particular, the national currency total deposits increased by 20% in yearly terms. The main contributors to this growth figure were national currency time deposits (12 percentage point increase) and national currency demand deposits (6 percentage point increase).

Moreover, national currency deposits allocated by legal entities also increased by 16% yearly, while short-term and longterm deposits of legal entities increased

by 42% and 34%, respectively. According to our model, these variables have a significant positive contribution to estimated GDP growth. Such a significant increase in deposits by legal entities can be in part due to changes in the tax code (as a consequence of the corporate income tax reform which came into effect in 2018). This reform effectively increased the amount of liquidity available to firms by shifting the timing of profit tax.

In contrast to domestic currency deposits, all types of foreign currency total deposits increased moderately by 4% compared to the same month the previous year. Moreover, foreign currency current accounts had a negative contribution to this growth figure (-3 percentage points), while time and demand deposits accounted for 3 and 4 percentage points of the growth in foreign currency total deposits. In addition, foreign currency total deposits allocated by legal entities went down by 10% yearly - shortterm deposits were reduced by 6%, while long-term deposits increased by 14%. As a result, deposit dollarization was reduced to 64%, compared to 67.5% in the same period of the previous year. According to our model, the trends in foreign currency deposits put a downward pressure on overall economic growth.

In addition, all the monetary aggregates, including the largest - broad money M3 (9% increase YoY) and M2 (14% increase YoY) – continued the upward trend.

Moreover, currency in circulation (CCIR) increased by 9% in yearly terms. Improved monetary statistics positively contributed to the growth estimates.

IMPROVED EXTERNAL STATISTICS After a rapid recovery period, Georgia’s neighboring countries are struggling to maintain high growth rates. In November, the Armenian economy advanced by only 3.6%, yearly, while the real GDP of Azerbaijan increased by only 1% compared to the same month of the previous year. According to the Eurasian Development Bank (EDB), Armenia’s economic growth will continue to slow down, but will remain at a rather high level of 5.9% at the end of 2018. In addition, the main reasons for the GDP growth slowdown were a decline in agricultural production caused by unfavorable weather

REAL EFFECTIVE EXCHANGE RATE

conditions and a decrease in ore mining due to increased requirements for compliance with environmental standards .

The State Statistics Committee of Azerbaijan claims that in the first three quarters of 2018, growth was observed in all sectors of the economy except construction (the construction sector decreased by 15.9% yearly in January-September 2018) . The Russian economy was up by 1.8% in November, however, government officials expect a slowdown in the first quarter of 2019 due to the volatility of financial markets, sanctions and a devalued ruble which puts further pressure on the inflation rate . Lastly, Turkey’s economic growth is expected to hit 2.8% for 2018 with record-high inflation and the lingering effects of a currency crisis.

The main contributor to the positive growth figure in Turkey was high positive net exports .

Another set of variables which had a significant positive effect on our GDP growth forecast was related to external trade. Georgia’s exports continued to expand, increasing by 19.6% yearly in November (the main contributors were growth in export of motor cars, cigarettes, and cigars to Azerbaijan), while imports shrunk by 3.1% (due to reduced imports from Azerbaijan, the EU and China). As a result, the trade deficit declined by 13.3% year-on-year and amounted to 454.7 million USD. Furthermore, other external variables, such as remittances (9% increase), number of international visitors (5.8% increase) and tourism (14% increase) maintained their growing trends in November.

The Georgian lari appreciated against the majority of trading partner currencies in November. The most significant appreciation was observable with respect to the ruble (2% in monthly and 14% in annual terms), euro (1% in monthly and 5% in annual terms) and US dollar (0.5% in monthly and 1% in annual terms).

Furthermore, the lari appreciated against the Turkish lira by 24% in yearly terms, but depreciated by 7% in monthly terms.

In addition, the real effective exchange rate (REER) depreciated by 1.7% relative to the previous month, and appreciated by 4.6% relative to the same month in the previous year. Notably, the NBG purchased 20 million USD worth of foreign exchange reserves in November (which may have contributed to the slight weakening of the national currency in monthly terms). Overall, REER-related variables had a small negative contribution to the real GDP growth projections.

Our forecasting model is based on the Leading Economic Indicator (LEI) methodology developed by the New Economic School, Moscow, Russia. We constructed a dynamic model of the Georgian economy, which assumes that all economic variables, including GDP itself, are driven by a small number of factors that can be extracted from the data well before the GDP growth estimates are published.

For each quarter, ISET-PI produces five consecutive monthly forecasts (or “vintages”), which increase in precision as time goes on. Our first forecast (1st vintage) is available about five months before the end of the quarter in question. The last forecast (5th vintage) is published in the first month of the next quarter.

Smart Cameras Detect 6,654 Uninspected Cars in 4 Days

BY THEA MORRISON

F

rom January 14 to January 17, when the so-called smart cameras were involved in detecting uninspected cars, police imposed 6,654 fines on drivers.

“Until the activation of smart cameras, the number of fines from January 1 to 15 was 2,420,” said Beka Liluashvili, Head of the Ministry of Internal Affairs Research and Reforms Division.

He said the aim of the smart cameras was to increase the efficiency of execution mechanisms.

“Many cars had a legal obligation to go through technical inspection, but it did not happen, so we got the smart cameras going alongside the work done by police

officers,” he said, noting that the tightened measures had increased the number of cars that were taken to technical inspection centers for obligatory inspection.

“Where before there were around 600 records of technical inspection in the centers, after the measures were tightened, this indicator has increased fivefold,” he added.

If a car has not undergone technical inspection, the driver will be fined GEL 50 and legal entities by GEL 200 every month until they undergo inspection.

Obligatory technical inspection of vehicles took effect on January 1, 2018.

The first stage required trucks of over 3.5 tons and passenger cars with more than eight seats to undergo safety checks.

The second stage launched on July 1, 2018, required all vehicles registered to state entities to undergo a mandatory

check, which was followed by the third stage from October 1.

From October 1, 2018, the third stage of mandatory technical inspections of vehicles was launched in Georgia, envisaging inspection of all automobiles with 3.0 engines and above.

From January 1, 2019, the government launched the final phase of the campaign that requires all other vehicles to undergo mandatory testing.

Vehicles which are four years old or less do not have to undergo an inspection. Cars that are four-six years old have to undergo testing once every two years and cars older than six years have to be tested every year.

Under the Georgia-EU Association Agreement signed in 2014, Georgia is obligated to ensure all vehicles are in line with EU standards.

BUSINESS

GEORGIA TODAY JANUARY 22 - 24, 2019

Georgia-Gazprom Agreement on Gas Transit to Armenia Expires

Image source: Gazprom

BY THEA MORRISON

G

eorgia’s agreement with the Russian energy giant Gazprom on gas transit to Armenia expired on December 31, 2018.

The agreement was reached on January 10, 2017 under which Georgia, as a transit country for the transportation of Russian gas to Armenia, during 2018 received payment from Gazprom.

Under the previous agreement, which expired on December 31, 2016, Russia was paying Georgia for gas transportation by supplying natural gas to the amount of 10% of the volume of the transported gas.

The recently expired agreement was many times criticized by the opposition and non-governmental sector, which claimed that for Georgia it was more profitable when it was getting gas, and not money, in exchange for transit to Armenia.

At present, the transit of natural gas from Russia to Armenia continues without an agreement and it remains unknown what kind of agreement will be reached between the sides, and when.

While commenting on the issue, Georgian Prime Minister Mamuka Bakhtadze told reporters that Georgia has no plans to abandon the function of being a transit country for Russian gas, and that

it will continue to receive benefits.

The Prime Minister noted that Georgia receives quite a significant benefit from the transit, which complies with the interests of the country.

Asked whether Georgia plans to sign a new transit treaty with Gazprom, Bakhtatdze said if a new agreement is signed, the economy ministry will report the details.

Speaking about the future deal with Gazprom, Bakhtadze said as far as he knows, no changes have been made to the agreement.

Georgian Economy and Sustainable Development Minister Giorgi Kobulia confirmed that Georgia expects to complete talks on a new deal with Gazprom on the transit of Russian gas.

"At present, we are discussing a new agreement on the transit of Russian gas to Armenia. The terms of the previous contract will remain in force pending the end of those negotiations," he said.

"After the talks with Gazprom, which are expected to be completed within the coming two weeks, we will make the results public," he added, noting that the exact details of the negotiations themselves will be confidential.

Russia’s Gazprom owns the world’s largest gas transmission system with a total length of 172.1 thousand kilometers.

Gazprom sells more than half its gas to Russian consumers and exports gas to more than 30 countries within and beyond the former Soviet Union.

Airbnb to Remove Abkhazia and South Ossetia Listings

Photo source: airbnb

BY AMY JONES

T

he Airbnb booking platform has released a statement confirming they will remove all listings from Abkhazia and South Ossetia.

Airbnb allows customers to rent accommodation in 191 countries and more than 81,000 cities. However, they have developed a

framework which evaluates how they should handle listings in disputed territories, realizing that their operation could increase tensions.

“In applying the global framework of these disputed territories, Airbnb determined that the existence of the listings in these disputed territories has a direct connection to the larger conflict in the region,” read the statement.

In accordance with this framework, they are to remove listings from South Ossetia, Abkhazia, and settlements in the West Bank.

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BUSINESS

GEORGIA TODAY

JANUARY 22 - 24, 2019

When ‘New Normals’ Become Abnormal

BY VICTOR KIPIANI

T

he old world has died but has by no means died completely. Equally, a new world is emerging but its outlines remain imprecise; its borders and contours are unclear. Its content, however, is forcing us to revert to the Hobbesian theory that hostility and disorder are the natural state of mankind (something that is painful to contemplate and even more painful to admit). Indeed, history continues to alternate between a state of complacency and a sense of fear that tends to magnify risks and perils. The end of the Cold War seemed to indicate that we were moving in the right direction, and we recalibrated our expectations accordingly—but the last decade or so has proven that our expectations were based upon the far-fetched illusion of an increasingly peaceful and prosperous world. The real world is turning out to be much gloomier and more precarious. The 2008 war between Georgia and Russia was a volte-face event that directly underlined the rosiness of our world view, and Russia’s 2014 annexation of Crimea was the final proof that our expectations of a post-Cold War world were far in excess of the possibilities available to the new world order. Moreover, there are of course those who selfishly welcome the emergence of a new world with new rules that will suit their own interests, those who wish for an increasingly disunited world ruled by revisionism, betrayal, conflict and force.

This world is arriving at a startling rate of speed: wisdom’s seat is increasingly (irretrievably?) vacant, and hubris is increasingly meeting nemesis.

NEW WORLD, NEW RULES Our highly fractured modern world is made up of several disentangled poles seeking to ‘enlighten’ the global system according to their preferences. Their policy-making toolkits are firmly grounded in realpolitik, but the more transactional the system becomes, the more tempting it becomes for them to brush aside the complexities of political and historical differences and to ignore the technocratic expertise which is so badly needed when seeking to strike foreign-policy bargains. And besides, the system’s capacity to reconcile engagement with containment is unpredictable.

Furthermore, what makes the process idiosyncratic is the fact that attempts to achieve stated goals are not based upon preserving and furthering value-based alliances, but instead upon ‘running the show’ through functional power-sharing on a case-by-case basis. As a result of the demise of the post-Cold War order

As a result of the demise of the post-Cold War order, we are living in a world in which no clear and universal system exists for major powers to efficiently react to

and the powerful aftershocks that have followed, we are living in a world in which no clear and universal system exists for major powers to efficiently react to and deal with ongoing challenges.

There also seems to be no (geo)political willingness to attempt to redesign our world in a spirit guided by the nineteenthcentury ‘Concert of Europe’, i.e. seeking to reverse the apparent decline of the international system and prevent it from collapsing entirely. Instead, each major power is striving to rebuild the world’s ‘security’ architecture according to their own whims and to suit their own reasons and resources, disregarding the interests of others and, perhaps most importantly, ignoring the painful lessons of the past.

Let us now touch upon the geopolitically ‘egocentric empires’ that are fracturing the world by making it increasingly multipolar, disconnected and in conflict.

The Sino-centric World: The history of our world is one of power shifts, and our era is no exception. We are witnessing a new version of the Thucydides trap with China's active efforts to acquire the international status it believes it is entitled to on the world stage. This makes sense, considering the political and economic might of the world’s largest population, but is a cause for concern when one considers the system of government the country has developed at home and exports abroad. China’s quest for leadership is not limited to her immediate neighbourhood, and reaches out to a number of locations across the world.

Naturally, China’s leaders regularly claim that their foreign policies are guided by good intentions, but it is vital to never stop monitoring how this mega-country is increasingly shifting away from the guiding principle of ‘hide your strength, bide your time’ towards undisguised efforts to increase its military and nonmilitary means of coercion. In this regard, various changes to the structure of the People’s Liberation Army aiming to increase the operational capabilities of the country’s armed forces when deployed far from mainland China are of particular interest, as the 2018 Report to Congress of the US-China Economic and Security Review Commission notably underlines.

Even the most cursory glance at China’s effective implementation of her wellpublicized Belt and Road Initiative, with USD 400 billion already spent, raises serious questions in terms of commercial soundness. Numerous cases of ‘debt diplomacy’, the funding of projects that fail to meet bankability tests, disbursing

loans with no strings attached, imposing Chinese standards and criteria when measuring work performance, etc. are all serious concerns that Beijing must do her best to allay. In addition, the potential ‘dual-purpose’ use of commercial ports leased or owned by Chinese companies around the world also needs to be carefully considered. When expanding abroad, China tries to skilfully follow a ‘cherrypicking’ approach to the existing international order rather than simply trying to dismantle and substitute it, e.g. by using her right of veto at the UN Security Council, World Bank infrastructure facilities, etc.

A World with little Order: Essentially, this is a world in disarray rather than any kind of order. The proponents of this type of order are states ranging from the clear champion of the ‘disorderly ordered’, Russia, to those qualified as ‘rogues’ (e.g. North Korea). The ideology of this camp, as expressed in real deeds and actions on a regular and daily basis, has already been discussed extensively and need not be repeated here.

The U.S.-led Order: Many are wondering whether the Pax Americana has finally and irretrievably been shelved— an acutely pressing question, particularly given the foreign-policy implications of ‘America First’.

This type of order has organically been related to the notion of a liberal order, since the latter is deemed to be the perfect modus operandi by which the United States can incentivize (mostly non-communist) countries to accept its primacy and ensure that Western gains following World War II remain clear and tangible.

Once recognized as a ‘liberal leviathan’ and an ‘empire by invitation’, the US-led order is disintegrating under the onslaught of external pressure and domestic policy U-turns—the latter strangely opposed to Washington’s postWWII policy of global engagement.

Instead of recoiling and retrenching herself, it would be in America’s (and the world’s) best interests to focus her efforts upon strengthening and improving remaining elements of the old order and upon introducing new elements capable of coping with current challenges. The current administration should reverse its course, returning from a zerosum to a positive-sum outlook by creating new platforms for partnership, by leading regional democracies and by stepping up economic programmes for key regional allies (an equivalent of Marshall Plan for Georgia?). Since the U.S.

played such a major role in designing the system that is currently crumbling, it is her moral duty to not only resist its dismantling but also to pool her resources with those of other Western democracies, to more actively fight the ‘Finlandization’ (or worse) of countries by revisionist states, and to prevent some of her allies from sliding away from liberalism towards more authoritarian forms of government.

It is also clear that the so-called RulesBased Order—the model currently under debate as a result of ‘America First’, and comprising Western democracies such as the EU and Canada—would not be as firm and sustainable due to these countries’ limited political and military resources, and should be considered as a last-chance option in a desperate attempt to save the remnants of the liberal order.

The Liberal Order: Two decades ago, the international liberal order (primarily led by the U.S.) seemed to be on the rise, ensuring an even distribution of powers and equality among the members of global institutions. Most importantly, this was the order which stood out for its adherence to the universally recognized norms of international comity, non-interference in sovereign matters, the promotion of free and non-politicized trade, unfettered development and (reasonably) free financial flows. But this order is no longer on the rise, and its principles are now sadly reminiscent of the bipolar days when the free world co-existed with the totalitarian. The bright hopes that followed the Cold War are crumbling one by one.

IN BRIEF The bipolarity of the world after the Second World War has been superseded by the interwoven duo of unipolarity and (somewhat unsuccessful) attempts to establish a liberal world order. This combination is now steadily receding, replaced by an increasingly multipolar world characterized by competition between great powers. Another feature of the current system is that this competition is mainly fought along the periphery (e.g. Georgia, Ukraine, Syria) with little or no direct contact between major powers. Not yet.

The existing system is also marked by proxy wars fought through ‘rollbacks’— e.g. attempts to prop up regimes locally or on the contrary to topple them in various ways for a variety of pretexts. All in all, however, the lessons of history demonstrate that rising powers are almost always keen to overtake dominant ones, and that gains and losses in ‘major power’

status very often determine the viability of the prevailing order. Promotion to such status can be achieved by peaceful means (e.g. as a reflection of ‘soft power’), by pursuing hybrid geo-economic methods (e.g. by adopting a ‘sharp power’ approach), or through the shameless exercise of hard power (e.g. ‘humanitarian interventions’, ‘restoring peace’, etc.) if the conditions are right and impunity guaranteed. Last year showed us that the worst consequence of the ongoing competition between major powers, as reflected through their instinctive transactionalism, is states trying to grab everything in reach. More than ever, international relations are about winning instead of cooperating, and interdependence and interconnectedness, as well as bonds of trust, are waning.

OUR OWN RULES As we suffer from the effects of a highly fluid (and somewhat chaotic) situation in international relations—one whose politics have no fixed lines between ‘white’ and ‘black’ but instead a wide grey area of uncertainty—it is more important to adhere to an emerging strategy rather than to a ‘grand’ one.

Doing so would grant Georgia the tactical mobility and flexibility that the country would need to effectively pursue its strategic national interests on the regional stage and beyond. A ‘transactional curve’ would certainly involve better and deeper foreign-policy ties with our allies, notably on matters of security. As far as the latter domain is concerned, partnership packages could involve a wide range of questions including intelligence-sharing and joint contingency planning—and ideally more regular military drills. Even if the relative small scale of such exercises would render them largely symbolic, they would demonstrate commitment to the country. Beyond matters of security, the level of Georgia's international ‘game’ could also be raised by a return to a deep (but not overly protocolic) diplomacy, pursued through a politically neutral and professional diplomatic cadre. Such resources would be a precondition to Georgia defending her national interests and pursuing her longterm foreign policies based upon functional groupings. Ideological dogmatism must be abandoned. Stronger national security, a more favourable geopolitical environment, better means at the country’s disposal and true statecraft must be made the real lodestars of Georgia’s national agenda.

BUSINESS

GEORGIA TODAY JANUARY 22 - 24, 2019

HUAWEI Presents HUAWEI P Smart 2019, Sporting the Latest Technologies & Design

BY MARIAM MERABISHVILI

T

he screen size and improved shooting function have been increased again in the latest budget-class smartphone from HUAWEI with the HUAWEI P Smart 2019.

Its main cameras boast Artificial Intelligence support and it comes equipped with the latest 8-kit chipset Kirin 710 (also possessing AI), which allows the smartphone to identify more than 500 scenes and objects.

Through the latest HUAWEI P Smart 2019, HUAWEI is offering a more sophisticated and more capable smartphone, using both technology and design that differ from its predecessors and guaranteed to satisfy the dynamic needs of today's users.

SO, WHAT DOES THE DISPLAY LOOK LIKE? Comparing the HUAWEI P smart 2019 with its predecessors, consumers will immediately recognize the more expansive viewing area made possible by the 6.21-inch 19.5:9 HUAWEI Dewdrop Dis-

play.Furthermore, the 415ppi high pixel density of the panel affords a higher FHD+ (2340x1080) resolution, which combined with the support for 85 percent of the NTSC color gamut, makes for a truly compelling viewing experience. Given how consumers are spending more and more time with their smartphones, HUAWEI P smart 2019 includes a new TĂœV Rheinland-certified Eye Comfort Mode, which effectively filters high-energy blue lights to alleviate user eye fatigue during extended session.

A NEW SMARTPHONE WITH NEW AI AND AR CAPABILITIES Alongside a premium quality screen, the HUAWEI P Smart 2019 is equipped with improved front and rear cameras. It is distinguished by a wide-range 16MP front-facing camera that has new AI and AR capabilities and useful features such as gesture control function and improved quality of photos taken in portrait mode, which will please selfie lovers. The HUAWEI P Smart 2019's front camera can also see and optimize eight categories of Selfie backgrounds, so users can freely snap high-quality and distinguished selfies for their social networks.

The HUAWEI P Smart 2019 is designed to provide more comfort for consumers, in any situation and without hassle.

The new budget smartphone's internal 64 GB memory can be increased up to 512 GB. The 3400mAh battery provides all-day battery life for everyday users of the HUAWEI P Smart 2019 is designed for everyday smartphone users. According to the company's internal testing results. The battery supports up to 10 hours of Internet browsing on 4G networks, up to 18 hours of continuous video playback, and up to a groundbreaking 96 hours of continuous music playback.

HUAWEI products and services are available in more than 170 countries and are used by a third of the world's population. There are 16 research and development centers operating worldwide in the USA, Germany, Sweden, Russia, India and China. HUAWEI Consumer BG is one of HUAWEI's three business units, mainly focusing on smartphones, personal computers, tablets and cloud services. HUAWEI Global Network is based on 20 years’ experience in the telecommunications business and serves to provide innovative technologies to customers around the world.

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BUSINESS

GEORGIA TODAY

JANUARY 22 - 24, 2019

It’s Russia, Stupid!

improved its monetary position, and strengthened investors’ confidence in the Georgian economy.

BY ERIC LIVNY AND REZO SURGULADZE

T

he red headline in last week’s “Georgian Weekly Market Watch” by Galt & Taggart was something of a shock: “Georgia recorded its first ever quarterly current account surplus since 1995.” Mind you, Georgia’s current account was far from positive before 1995 either. Until then, Georgia simply had not maintained a balance of payments records worthy of the name.

The G&T headline referred to Georgia’s achievement in a single quarter, Q3 2018, in which the country’s current account balance reached positive USD 11.9 million, compared with negative USD 124.9 million in Q3 2017. And even though it is about a single quarter, this achievement may represent a watershed event in Georgia’s economic history.

Why is this important, you ask? Well, a current account surplus implies that the country is no longer borrowing from the rest of the world in order to finance its consumption. Put differently, in Q3 2018, Georgia received more revenues from exports, foreign aid, and money sent home by Georgian workers abroad (“remittances”) than it spent on imports and interest payments to foreign lenders. Thus, the country was left with extra foreign currency reserves, which, in turn,

FREE TRADE AGREEMENTS WORKING IN GEORGIA’S FAVOR? One possible explanation for the upswing in Georgia’s current account balance is the country’s success in leveraging the free trade agreements it has signed in recent years with the European Union (the so-called Deep and Comprehensive Free Trade Area agreement, or DCFTA) and the European Free Trade Association (EFTA), consisting of Iceland, Liechtenstein, Norway, and Switzerland.

Let us examine the data. According to GeoStat, Georgia’s total exports in 2018 stood at USD 3.362 billion, an increase of 22.9% year-over-year. Our leading export products were copper ores, beverages, ferro-alloys, pharmaceuticals, and tobacco.

Contrary to our logic, however, the share of EU in total exports comprised only 22%, a two-percentage point decline relative to 2017. In the meantime, the share of Russia and CIS in Georgia’s total exports increased from 43% to 50%.

Moreover, instead of improving, Georgia’s trade balance with European markets has actually worsened. Net exports of goods covered by DCFTA and EFTA agreements, for example, dropped from negative USD 978.7 million in Q3 2017 to negative USD 1,004.5 million in Q3 2018. Thus, Georgia has become more

of a net importer from Europe since the previous year and has only slightly improved its position since Q3 2014 when net exports of goods stood at negative USD 1,099.8 million.

The DCFTA agreement with the EU and EFTA are worth further scrutiny. Of Georgia’s total exports to the EU, only about 11% were foodstuffs and agricultural products that can be said to have directly benefited from the DCFTA. Exports to Europe are dominated by copper ores, beverages, gold, and nitrogen fertilizers. Most of these products could be exported to Europe custom-free under the GSP+ regime which Georgia enjoyed since late 2000s.

While growing in value, food and agricultural exports to Europe are not having a great impact on Georgia’s current account or its economic development.

The country was able to penetrate the (Eastern) European market with some of its premium wines and mineral waters, but it had no success whatsoever with animal products, including the much touted Georgian honey, which at some point was thought to have the potential to “sweeten Tbilisi’s EU dream”.

The reasons for Georgian failure in this regard are quality and consistency of supply, on the one hand, and price competitiveness, on the other. Georgian mandarins, to take one example, are more expensive than their Spanish equivalent, and their flavor and visuals are not suitable for the European market. Georgian

milk or meat products are not produced in sufficient quantity to supply even the local Georgian market, and are way too expensive for European consumers.

Georgia is competitive in the production of nuts, which were the greatest early success story of Georgia-EU economic relations in 2014 and 2015. Since then, however, hazelnut production has been decimated by the infamous “marmorated stink bug”. In the first 10 months of 2018, hazelnut exports to Europe decreased by 16.5 percent, after a whopping 64% drop in 2017. What’s more, as reported by JAM news, in November 2018, “Russia replaced the European Union as the main destination for Georgian hazelnut exports.”

Exports to Russia and other CIS countries did contribute to balancing Georgian current account. As these countries recover from the crisis of 2014-2016, they are able to absorb a larger share of Georgian traditional products, such as wine, mineral water, fruit, greens and vegetables. But is it necessarily a good thing?

IT’S TRADE IN SERVICES! As we have seen, Georgia’s success in balancing its current account in Q3 2018 cannot be attributed to any breakthroughs in customs-free exports of agricultural or any other products to Europe. The country is still very far from becoming a modern agriculture paradise or an export platform for manufactured goods.

In fact, the main driver of Georgia’s current account surplus – and of the Georgian economy as a whole – is exports of services, not products.

A closer inspection of the structure of the current account shows that the positive trade balance in services is actually mostly due to the USD 1.2 billion inflow from the travel and tourism sectors, which constitutes a 12.3% increase yearover-year. According to the Georgian National Tourism Administration, the number of international visitors increased by 720,520 people in 2018. Of these extra visitors, 37 percent were from Russia, while 35 percent were from Azerbaijan, Turkey, and Israel, combined.

EVERY CLOUD HAS A SILVER LINING The great news about Georgia being able to balance its current account (even if only in a single quarter) comes with serious questions concerned with the manner in which this feat has been achieved. Instead of product and market diversification, the Georgian economy appears to be increasingly dependent on one particular sector of the economy – tourism and hospitality. Instead of reaching out to new markets, Georgia follows the easy road to its traditional buyers in Russia and other CIS countries.

Such development comes with serious risks. The Georgian economy cannot afford to put all of its eggs in the Russian basket. Any shocks to the Russian economy, such as recessions, financial crises, or political sanctions, can have adverse effects on the Georgian current account and push the economy back into the net borrower position from which it has barely escaped.

The share of Russian visitors has been steadily increasing since 2011. At about 1,4mln in 2018, Russian visitors constituted almost 20% of the total

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BUSINESS

GEORGIA TODAY JANUARY 22 - 24, 2019

9

Turkmenistan & Russia: Resuming Economic Partnership

BY EMIL AVDALIANI

R

ussian economic influence in the Central Asia has rebounded over the past six months. A focal point in Russia’s advances in the region is Turkmenistan and the economic woes the country is experiencing.

Both countries have had difficult relations since the break-up of the Soviet Union. First, the Turkmen government interpreted the role of the country in the modern world as neutral. This resulted in Ashgabat avoiding membership in any military blocs, such as the Russian-led Collective Security Treaty Organization (CSTO). Yet all major infrastructure projects have always been directed from Turkmenistan to north Russia’s mainland - heritage from Russian imperial and Soviet times.

In the late 2000s, energy cooperation was brought to a minimum. Additionally, in early January 2016, Gazprom officially stopped purchasing Turkmen gas, which made Turkmenistan solely dependent on its revenues from gas export to China (albeit sold at a low price).

Relations started to improve after 2016.

Arguably, this was caused by a major shift in Russian geopolitics seeing problems with the West and chances opened for it to increase its influence in Central Asia.

There is also the issue of Afghanistan, where the security situation, according to reports, has worsened. The TurkmenAfghan border is a primary focus, seeing Moscow regularly question Turkmenistan and Tajikistan’s ability to contain Afghan

threats. Turkmenistan too has much to worry about as, following 2001 (when the US-led coalition began operations in Afghanistan), the northwestern provinces had remained relatively calm, yet now, with the US planning to pull out at least a portion of its troops from Afghanistan, this may create additional troubles for Ashgabat. Indeed, there have been reports of small-scale clashes between Turkmen troops and militants from Afghanistan, but Turkmen authorities have denied, or more often said nothing about such incidents, insisting that the Afghan frontier is secure.

Russia aside, Turkmenistan is also currently interested in improving relations.

Ashgabat has economic problems and in 2017, Turkmenistan suspended supplies of natural gas to Iran (claiming Tehran owed some $1.8 billion accumulated over 10 previous years). This actually left Turkmenistan with just one gas customer – China, which had loaned Turkmenistan billions of dollars to develop gas fields that would supply it and build the pipelines to carry that gas to China.

Russia has developed several large fields since then and added thousands of kilometers of gas pipelines. Russia and Gazprom did need Turkmen gas in the first decade of this century, but that is arguably no longer true.

At the same time, over the past several months, Russia has initiated a veritable economic offensive. This changed on October 9, 2018 when Gazprom CEO Aleksei Miller visited Turkmenistan and both sides agreed Gazprom will resume buying Turkmenistan’s gas from January 1, 2019. It is also interesting that the

Image source: azernews.az

agreement follows the resolution on the Caspian Sea. Officially, no third party can intervene if Turkmenistan and Azerbaijan decide to build the Trans-Caspian Pipeline (TCP). Fear on the Russian side that Ashgabat might succeed in selling its resources to other regions might have been a driver behind Miller’s visit and the agreement.

Viewed from a global perspective, these Russian moves, although also likely caused by Turkmenistan’s openness at this particular moment, are nevertheless a result of Russian troubles elsewhere.

The successful western expansion into what was always considered the “Russian backyard” limited Moscow’s projection of power and diminished its reach

to the north of Eurasia. The only region where Russia can more or less freely operate is the Central Asian region. Other geopolitical competitors such as China are also present and might hinder Russian advances, but still there is a much larger space for Russian actions in comparison with Ukraine or the South Caucasus.

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BUSINESS

GEORGIA TODAY

JANUARY 22 - 24, 2019

More than 170 UK Business Leaders Support a Second Brexit Referendum

Image source: The Guardian

BY AMY JONES

M

ore than 170 business leaders in the UK announced their support for a second referendum on Brexit.

Brexit has heavily divided the UK. On 16 January, British Prime Minister Theresa May’s Brexit agreement was defeated by MPs by an overwhelming majority of 230, the heaviest defeat for any British PM of the democratic era in the UK. Brexiteers argued that her Brexit agreement could keep the UK tied to the EU indefinitely whilst losing its say over its rules. Both Remainers and Leavers argued that the deal is worse than staying in the EU. The move by the business leaders aims to demonstrate growing support for a “people’s vote” regarding Brexit. “Many businesses backed the Prime Minister’s Brexit deal despite knowing that it was far from perfect,” reads the letter from the business leaders to The Times newspaper. “But it is no longer an option. The priority now is to stop us crashing out of the EU with no deal at all. The only feasible way to do this is by asking the people whether they still want to leave the EU,” it continues.

The business leaders represent more than £100

billion of annual contributions to the UK economy.

They warn that a ‘chaotic crash-out from the EU,’ could damage the UK economy further. Although some of said business figures had previously supported Brexit, they now believe a people’s vote is the only way to avoid a no-deal Brexit.

Signatories of the letter include renowned designer Terence Conran; Lord Foster, the architect of the iconic Gherkin skyscraper in London; architect Sir David Chipperfield; Nobel laureate and research scientist Paul Nurse; and former chairman of British Telecomunications Mike Rake.

Both political parties in the UK have so far dismissed the prospect of a second referendum. The leader of the Labor party, Jeremy Corbyn, is pushing for a general election after the vote of no confidence in the government marginally lost last week.

The Prime Minister, on the other hand, has pledged to speak to senior MPs to find a compromise deal.

Many fear that the UK is heading for a catastrophic no-deal Brexit on 29 March, 2019, after the dismissal of May’s Brexit plan, an event that could heavily affect the UK economy. Indeed, the UK economy is already approximately 1.5% smaller than it would have been without the Brexit vote due to the uncertainty surrounding Brexit, according to the Financial Times. The export industry, creative businesses and property businesses are expected to be hit especially hard.

2 KazTransGaz Employees Arrested for Deadly Explosion in Tbilisi

BY THEA MORRISON

G

eorgia’s Ministry of Internal Affairs (MIA) reports that two employees of the KazTransGaz company were arrested in connection with the deadly gas explosion that took place in Tbilisi on the evening of January 16, claiming the lives of four, including a minor.

The MIA says the detainees checked the building several hours before the explosion after they had

been called by the residents.

“Two specialists of KazTransGaz– V.M. and T.T. improperly checked the building and told the residents that the smell they suspected to be gas was actually paint. The explosion came a few hours after the employees left, leaving four people dead,” the ministry reports.

An investigation into the case is underway under Articles 240 and 220 of the Criminal Code of Georgia.

The Ministry says all persons involved in the case will be identified and proper measures will be taken after the expertise is concluded.

POLITICS

GEORGIA TODAY JANUARY 22 - 24, 2019

11

German Bundestag Includes Georgia on Safe Country List

BY AMY JONES

O

n 18 January, the German Bundestag, the lower house of Germany’s government, voted to include Georgia on its safe countries of origin list with a resounding 509 votes to 138. The vote will make it easier for German authorities to deport Georgian migrants arriving in the country without a visa. The northern African states of Tunisia, Algeria, and Morocco were also added to the list.

Countries are deemed to be a ‘safe country of origin’ when there is believed to be no political persecution, inhumane or degrading treatment of citizens. The 1951 German Refugee Convention states that people are entitled to seek asylum based on a wellfounded fear of persecution, for example, discrimination on the basis of sexual orientation or torture, in their home country.

The Georgian Ambassador to Germany Elguja Khokrishvili announced, “the bill will simplify processing of asylum seeker applications from Georgia and other countries as well as fasten the readmission process of those who were rejected for asylum.”

The move is designed to deter Georgians from moving to Germany to claim asylum.

Helge Lindh, a politician from Germany’s Social Democrats Party, SPD, announced that the move was necessary to eliminate false hope that citizens from the listed countries can apply for asylum or refugee status in Germany.

The new measure was supported by the Christian Democrats Union and Social Democrats.

However, representatives of the Greens and Left parties were critical of the move.

Luise Amtsberg from the Greens believes the vote to be motivated by political concerns as the number of asylum applications from the four countries has significantly decreased. In the second half of 2018, the number of Georgian asylum seekers in Germany dropped due to close cooperation between German and Georgian governments.

Politicians from the CSU-SPD coalition tried to pass the bill in 2017 but failed due to political resistance. The Bundesrat, the upper house of the German parliament, must still approve the bill, which is expected to appear before the Bundesrat as early as February 15.

The number of Georgians seeking asylum in EU countries increased massively when Georgia was granted visa-free status to visit EU countries. German news outlet Deutsche Welle reported that 2,976 Georgians applied Image source: Diem 25 for asylum in 2018.

Armenia & Azerbaijan to ‘Prepare the Populations for Peace’

Mamuka Bakhtadze on Official Visit to Lithuania

BY KETEVAN KVARATSKHELIYA

T

he Prime Minister of Georgia, Mamuka Bakhtadze, has commenced his official visit to Lithuania. Bakhtadze and his delegation were welcomed by the Minister of National Defense of the Republic of Lithuania, Raimundas Karoblis at the International Airport of Vilnius.

There are various high-level meetings scheduled within the scope of the official visit. The Georgian official will be received by his Lithuanian colleague - Saulius

Skvernelis. Negotiations will have direct and extended formats, followed by press statements to be made by both leaders.

The Head of the Georgian Government will also have a meeting with the President of Lithuania Dalia Grybauskaite.

Mamuka Bakhtadze will pay a visit to the Vilnius University within the framework of his official trip to Lithuania, where he will meet with Georgian and Lithuanian students and answer their questions.

The Prime Minister of Georgia is accompanied by David Zalkaliani, Minister of Foreign Affairs of Georgia and MP Beka Odisharia, Head of Parliamentary Friendship Group between Lithuanian and Georgian lawmakers.

Photo source: MFA Azerbaijan

BY AMY JONES

Z

ohrab Mnatsakanyan and Elmar Mammadyarov, the head of Ministries of Foreign Affairs in Azerbaijan and Armenia have agreed to ‘prepare the populations for peace’, marking

a breakthrough in the long-running Eurasian conflict. Meeting in Paris for the fourth time, the ministers spoke for more than four hours on the Karabakh conflict.

The pair made plans for the leaders of Armenia and Azerbaijan to meet.

Nonetheless, both sides are still cautious about the breakthrough and the positive statement by the ministers.

Strong public opinion hampers the pros-

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pect of a peace deal on both sides.

The Foreign Ministers met with the OSCE Minsk Group. In their official statement, they underlined “the importance of possibly mutually beneficial initiatives designed to fulfill the economic potential of the region.”

Despite the potential mutual benefits of peace in the region, whether real progress occurs remains to be seen.

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