Issue #804 Business

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IIssue Is ssue no: 804/7

• DECEMBER 22 - 24, 2015

• PUBLISHED TWICE WEEKLY

PRICE: GEL 2.50

In this week’s issue...

Turkish Businessman Transfers 500 000 GEL to the Solidarity Fund of Georgia PAGE 2

Give Your Country a Holiday Gift: Buy Small, Buy Local, Buy Georgian!

FOCUS ON CHANGE Georgia getting ever closer to its European roots

PAGE 5

NDI Poll: Georgians Have Firmer Political Position

BY EKA KARSAULIDZE

T

he latest Euro Commission’s positive report on Georgia’s visa liberalization looks good to Georgian citizens, as most of them (58%) see benefits from the country’s proWestern aspirations, according to the latest National Democratic Institute (NDI) poll. In addition, the study shows that with the approach of the parliamentary elections in autumn 2016, more and more residents are determined by their choice of who to vote for.

The most recent poll by NDI focused on the most important topics for Georgia: national issues and foreign affairs. It indicates that 69 % of Georgians support NATO membership, primarily citing security then economic benefits as reasons for their support. Most Georgians (56%) agree that Georgia will benefit from closer

ties with the United States, while only 19% disagree. When choosing between the European Union (EU) and Eurasian Union, support for the EU has increased from 47% to 58% since the August 2015 poll.

Georgians do not know which party they trust most to handle foreign relations. Those with an opinion trust the United National Movement (UNM) and Irakli Alasania-Free Democrats (FD) to handle relations with the U.S., EU, and NATO, whereas they place greater trust in the Georgian Dream (GD) and United Democratic Movement (UDM) to handle relations with Russia.

18% of citizens identified GD as the party closest to them, with 14% for UNM, and 9% for FD. The number of “no party” supporters has dropped from 42% to 30% since the August poll. In determining electoral choices, both decided and undecided voters place greatest importance on the party’s past performance, trust towards specific members in the party, and electoral platforms.

“It is important that people make choices based

ISET PAGE 4

Qatar Airways Offers Exclusive Fares Departing From Georgia PAGE 5

Dried Fruit Factory to Open in Georgia PAGE 6

Compared to NDI’s August poll, more Georgians express an interest in voting, with likely voters having risen to 64% from 49%

on the activities of parties, past achievements and election programs. We also can see a positive trend that people are more determined by their choice, but 60% are still undecided,” said Laura Thornton, NDI’s senior country director in Georgia.

Continued on page 6

Factory 27 Review: Something Out of the Ordinary PAGE 8

Georgian-Kazakh Relations to Deteriorate Further?

PAGE 12 Prepared for Georgia Today Business by

Markets As of 18ͲDecͲ2015

STOCKS Bank of Georgia (BGEO LN) GHG (GHG LN) TBC Bank (TBCB LI)

COMMODITIES Crude Oil, Brent (US$/bbl) Gold Spot (US$/OZ)

INDICES

Price

w/w

w/w

m/m

GBP 19.60

+7,2%

+2,8%

GEOROG 05/17

101.69 (YTM 5.60%)

Ͳ

+0,3%

GBP 1.60

Ͳ5,7%

Ͳ11,0%

m/m

GEORG 04/21

BONDS

104.30 (YTM 5.92%)

Ͳ1,3%

Ͳ2,6%

US$ 10.00

+3,6%

+17,2%

GRAIL 07/22

102.00 (YTM 7.36%)

Ͳ1,3%

Ͳ3,0%

GEBGG 07/17

103.94 (YTM 5.05%)

Ͳ0,3%

Ͳ0,1%

Price

w/w

m/m

36,88

Ͳ2,8%

Ͳ16,4%

1 066,25

Ͳ0,8%

Ͳ0,4%

CURRENCIES

Price

Price

w/w

GEL / USD

2,3850

Ͳ0,4%

Ͳ0,2%

GEL / EUR

2,5928

Ͳ1,2%

+1,8%

m/m

Price

w/w

m/m

GEL / GBP

3,5564

Ͳ2,6%

Ͳ2,3%

FTSE 100

6 052,42

+1,7%

Ͳ3,6%

GEL / CHF

2,4062

Ͳ1,4%

+2,7%

FTSE 250

17 105,87

+1,4%

+0,1%

GEL / RUB

0,0336

Ͳ1,2%

Ͳ8,9%

DAX

10 608,19

+2,6%

Ͳ3,2%

GEL / TRY

0,8202

+1,9%

Ͳ1,8%

DOW JONES

17 128,55

Ͳ0,8%

Ͳ3,4%

GEL / AZN

2,2796

Ͳ0,4%

Ͳ0,2%

4 923,08

Ͳ0,2%

Ͳ3,0%

GEL / AMD

0,0050

+2,0%

Ͳ

NASDAQ MSCI EM EE

110,65

+1,0%

Ͳ11,2%

GEL / UAH

0,1008

+0,2%

+0,4%

MSCI EM

789,71

+2,1%

Ͳ4,0%

EUR / USD

0,9202

+1,2%

Ͳ1,9% +2,3%

SP 500

2 005,55

Ͳ0,3%

Ͳ3,7%

GBP / USD

0,6713

+2,2%

MICEX

1 719,16

Ͳ0,1%

Ͳ5,0%

CHF / USD

0,9922

+1,0%

MSCI FM

2 309,18

+0,3%

Ͳ3,7%

RUB / USD

70,7529

+0,5%

+9,2%

GT Index (GEL)

885,86

Ͳ

Ͳ

TRY / USD

2,9073

Ͳ2,5%

+1,6%

GT Index (USD)

729,65

+0,2%

+0,1%

AZN / USD

1,0462

Ͳ0,0%

Ͳ

Ͳ2,7%

2

BUSINESS

GEORGIA TODAY

DECEMBER 22 - 24, 2015

Turkish Businessman Transfers 500 000 GEL to the Solidarity Fund of Georgia

BY ANA AKHALAIA

T

urkish businessman and philanthropist Galip Ozturk expressed the desire to transfer an additional 500 000 the Solidarity Fund as a charitable donation.

According to the Fund, the decision was announced at the meeting between the Prime Minister of Georgia, Irakli Garibashvili and the founder of Metro Atlas, Galip Ozturk. They discussed the issues of cooperation, current invest-

ment projects and the activities of the Solidarity Fund of Georgia. The head of the Solidarity Fund, Mariam Jashi, attended the meeting.

According to the Prime Minister, this donation will help the Solidarity Fund to non-stop finance the diagnostics and treatment of children and young people under 22. The Solidarity Fund, with the Ministry of Health, coordinates governmental, non-governmental and international organizations to cooperate in order to establish a stronger Pediatric Oncology Service in Georgia for the next two years.

According to Ozturk, the discussion

at the meeting revolved around ongoing and new projects; the biggest hotel in Georgia, to be built with 1200 rooms, future plans in Tbilisi, tourist potential, and Georgia’s new strategic meaning.

“We agreed to found a Tourism College in Batumi, where young people can receive an education in tourism. We have handed over a symbolic check to the Prime Minister. Our second transfer provides a donation of 500 000 GEL to the Solidarity Fund,” commented Galip Ozturk.

The Solidarity Fund was established under the aegis of the Prime Minister of

From right to left: Irakli garibashvili, Galip Ozturk and Mariam Jashi, the head of the Solidarity Fund

Georgia, Irakli Garibashvili in 2014. The fund aims at providing an alternative (non-budgetary) resource mobilization and addressing it to priority social needs of children and families that are socially vulnerable or are facing the risk of disastrous social expenses, through joint

participation of the private and state sectors.

Galip Ozturk’s holding has already carried out a USD 75 million investment in Georgia. After finishing the projects, USD 200 million will be invested and 2500-3000 people employed.

Second BitFury Data Center Opens in Tbilisi FIZ

BY ANA AKHALAIA

G

lobal Bitcoin Blockchain infrastructure provider and transaction processing company BitFury has opened a data center equipped with an energy-efficient cooling system in Tbilisi.

The opening event was attended by the Prime Minister of Georgia Irakli

Garibashvili, the Minister of Economy and Sustainable Development, Dimitri Kumsishvili, the Minister of Finance, Nodar Khaduri, as well as representatives of the diplomatic corps and company officials.

The company BitFury carried out its first successful project in Gori and then decided to expand its business in Georgia. It began an independent project developing the Tbilisi Free Industrial Zone (FIZ) on around 18 hectares of land.

The company has invested USD 30 mil-

lion with the support of the Co-Investment Fund.

The goal of the project is to attract and bring successful international companies of the IT sector which encourages direct foreign investment flow in the country.

“The entry of such a company in Georgia indicates that the investment climate in our country is even more improved than it was before. The Free Industrial Zone of Tbilisi will be an additional stimulus for other companies to make investments,” said the Prime Minister.

The mega processing data center is equipped with latest generation 28nm and 16nm ASIC chips. BitFury uses Allied Control’s innovative third generation cooling systems for its servers to save electricity and reduce water consumption.

The Tbilisi FIZ Development Agreement was signed by the Minister Kumsishvili, and General Director of Georgia Technology Park, Giorgi Tabidze.

“We have created a free industrial zone where we will have the opportunity to

For Reservations, please call: +995 322 221 221

attract the world’s leading companies.

A USD 30 million investment has already been made and in the future we are expecting investment growth to USD 100 million. The FIZ and data center are also important because it shows Georgia on the world technological map. We are sure that this will be followed by other companies,” said Kumsishvili.

The BitFury data center is the first leaseholder of the Georgia Technology Park FIZ which was established for a 49-year term.

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BUSINESS

GEORGIA TODAY

DECEMBER 22 - 24, 2015

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.

Give Your Country a Holiday Gift: Buy Small, Buy Local, Buy Georgian!

President Obama and his daughters shopping at Politics and Prose, a popular Washington bookstore, on a “Small Business Saturday” on November 29, 2014. Photo: AP

BY CHARLES JOHNSON

O

nce again, Georgians across the country are preparing for the holiday season, making travel plans, crushing walnuts for gozinaki, and buying gifts for their friends and families. Gifts are an important part of celebrating the New Year and Christmas, signifying the importance of friendship and allowing us to treat our loved ones to something to start a brand new year in style. It is therefore no coincidence that November and December are some of the strongest months for purchasing consumer goods in Georgia, not to mention across Europe and America.

A quick look at statistical data reveals that Georgia’s imports are concentrated at the very end of the year, in December.

On the one hand, this follows from the last-minute spending pattern of many public and private sector organizations, which tend to delay major procurement decisions until the very end of the budget year. On the other, the end-of-the-year spike in imports is also affected by people’s collective tendency to go on a spending spree as part of the New Year/

10 Galaktion Street

Christmas routine. And since most Georgians shop for imported gifts – be it branded watches, gadgets or clothing – the result is a yawning gap in the country’s trade deficit.

In January-October 2015, Georgia’s trade deficit – the difference between the value of goods Georgia imports and those it exports – reached almost 4.5bln USD. And accounting for what is coming in the last three months of 2015, this figure will easily exceed last year’s record high trade deficit level of 5.73bln USD.

CONSUMERS’ PRIDE AND PREJUDICE Georgian consumers and businesses may not have any domestic options as far as cars, machinery and manufacturing equipment are concerned. However, this is not true when it comes to many consumer goods produced by Georgia’s small businesses and artisans, and, most certainly, gifts.

While not providing any kind of silver bullet, buying Georgian goods, especially from small businesses, could go a long way in helping the health of the economy.

Nearly 100% of the money spent on local products stays in the Georgian economy, going to salaries of Georgian workers, buying source material from Georgian

suppliers, and providing Georgian entrepreneurs with the capital needed to expand and innovate.

Yet, Georgia does not yet have a culture of buying small and local. According to Tariel Zivzivadze, founder of the www.

Kar.ge website that seeks to promote Georgian producers, “people don’t feel any pride from buying Georgian.” One’s ego is better served by buying an expensive foreign electronic device as a gift (see our earlier work on the Economics of Boasting („მარიაჟობის“ ეკონომიკა), not in the least because the quality of production and brand management by Georgian companies still leaves much to be desired.

Some progress can be noticed in recent years. Mister Zivzivadze’s Kar.ge runs an annual challenge for Georgians to buy local products in December and post their descriptions and pictures online.

Tariel hopes that his initiatives will create a social movement whereby “people think to first buy Georgian and only if there is no high quality alternative, revert to foreign products.”

That said, convincing a larger portion Georgians to buy small and local – and thus make a generous holiday gift to the country – may require a concerted effort by businesses, consumers, and the gov-

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

ernment. The problem we are looking at is a vicious circle which could only be overcome by simultaneously encouraging businesses to invest in properly branded, higher quality products, and removing the stigma that buying a Georgian product is somehow cheap and not cool.

2014’s Small Business Saturday, according to Forbes. Moreover, the trend is catching on worldwide. The UK, Japan, and even Turkey now have social and investment campaigns centered on local producers as well.

SMALL BUSINESS SATURDAY: AN EXAMPLE FROM ACROSS THE ATLANTIC

Small Business Saturday became a stunningly successful endeavor in the United States because it addressed a real need and had the support of major private sector players, small businesses, communities and government. According to Mr. Zivzivadze, a similar coordination effort would be required to encourage buying small on Georgia’s own Small Business Saturday, right after Giorgoba, when people start to consider their holiday shopping needs. Political declarations alone would not do it.

On the small business side, there is the need to focus the energies of Georgian agricultural smallholder communities, artists and artisans in developing unique, locally branded products, be it chacha, wine or honey, specials kinds of churchkhela or tklapi, pottery or wood carving, wicker baskets or furni-

As we buy our gifts this season, we may consider an excellent overseas tradition of spending holiday money on local goods and buying from small businesses.

In America, the tradition of buying Christmas gifts after the Thanksgiving holiday is almost as powerful a symbol of the country as the bald eagle – or so it seems when watching the horrendous scenes of Black Friday shopping with people clamoring over each other at large chain stores to buy a TV set that’s 50% off or a $10 sweater sewn in Thailand.

Starting in 2010, a credit card company American Express started a new and more benevolent trend in American holiday shopping – Small Business Sat-

urday. They encouraged card-holders to skip the mayhem of Black Friday and instead shop at small and local businesses for their gifts the next day. Additionally, the company worked with small businesses on how to structure competitive sales, and market their good deals out to consumers.

The idea was a smashing hit, and in 2011 the US Congress officially recognized it and committed its support. Today, on the Saturday after Thanksgiving, social media buzzes with stylized hashtags and examples of people “buying small.”

Even President Obama gets in the spirit each year and visits an independent bookstore in Washington DC to pick up his reading list for the next year.

According to a 2014 report by the US Small Business Association, small businesses (having fewer than 500 employees) account for almost a half of all private sector jobs in America. Thanks to a successful media campaign and government support, Small Business Saturday shopping is now providing a massive injection of revenue for this critical portion of the American economy. About 88 million “small shoppers” spent nearly $14.3 billion on independent retailers on

BRINGING “BUYING SMALL” TO GEORGIA?

ture. Georgia already has many examples of specialized communities. What is lacking is a national branding and marketing effort to be modeled, for example, after Japan’s One Village One Product movement.

To nurture a culture of buying small, Georgian businesses and government will have to work together to develop and protect local brands, on the one hand, and organize bazaars and marketing events like the upcoming exhibition at the Karvasla shopping center, on the other. Educating local producers and consumers would require a protracted and well-coordinated effort, yet, even a journey of a thousand miles begins with a single step… * * * The coming holidays are a great opportunity to vote with our wallets for innovative, entrepreneurial, middle-class Georgian business owners who not only can provide our families with gifts of quality, but, more importantly, gifts with purpose and meaning. Isn’t that what the holidays are all about!?

Merry Christmas and a happy New Year!

BUSINESS

GEORGIA TODAY DECEMBER 22 - 24, 2015

EU Ambassador to Georgia: Roughly Six Months Left Until Georgians Can Travel Visa-Free

Qatar Airways Offers Exclusive Fares Departing From Georgia

H

EU Delegation, it is a great honor to be involved in this process. All EU member countries will also be happy and share this feeling. We congratulate everyone who participated in this important success,” Herman stated.

He also named the approximate time left until the introduction of visa-free travel for Georgian citizens.

“Given the experience of Moldova, the period that lasted from the progress report to the introduction of visa liberalization lasted 4-5 months. However, there might be a considerable difference between the countries,” the EU Ambassador added.

“I can only name an approximate time when Georgian citizens will be able to move visa-free in the Schengen area. The Commission will present its proposal to the EU Council and then discussions will be launched.

Progress on this path depends on the EU member states and MEPs,” he concluded.

Georgian President Declares 2016 Year of Europe

T

he year 2016 will be the year of Europe, President of Georgia Giorgi Margvelashvili declared at the 25th anniversary ceremony of the National Guard.

“The Georgian National Guard was

founded 25 years ago and it played a very important role in developing Georgia as a modern and new state after the collapse of the Soviet Union. Next year we will celebrate the new Georgian statehood, the independence that we achieved together. In 2016 we’ll see new

egularly offering customers in Georgia incredible sales promotions on selected UAE destinations, Qatar Airways now through to 24th of December 2015 is giving customers in Georgia the chance to enjoy significantly discounted fares when booking at qatarairways.com/ge or in Qatar Airways offices.

R

awarded World’s Best Airline, Best Business Class Airline Seat, and Best Airline in the Middle East.

Qatar Airways has seen rapid growth in just 18 years of operation and today flies a modern fleet of 173 aircraft to 153 key business and leisure destinations across Europe, the Middle East, Africa, Asia Pacific, North America and South America.

Qatar Airways, the national carrier of the State of Qatar, is one of the fastest growing airlines operating one of the youngest fleets in the world. Now in its 18th year of operations, Qatar Airways

Destinationsincludedinthesaleare:Dubai, Abu Dhabi, Sharjah and Ras Al Khaimah.

The sale is for the period through 24th December 2015, with travel from 6th January 2016 through 31st March 2016.

“This is a special promotion for Qatar Airways passengers to travel on board the World’s Best Airline and to experience our signature premium service,” Qatar Airways Country Manager Nazir Abduvakhidov said. “Through this promotion, we would like to extend our gratitude to our customers for their continued support and loyalty in choosing Qatar Airways as their preferred airline.”

Qatar Airways serves key business and leisure destinations around the world with 173 modern aircraft, including the destinations of Mumbai, Bangkok, Singapore, Hong Kong, Colombo, and Dubai via the airline’s state-of-the-art hub, Hamad International Airport.

At the annual Skytrax 2015 World Airline Awards in June, Qatar Airways was

has a modern fleet of 166 aircraft flying to 153 key business and leisure destinations across six continents.

Qatar Airways won Airline of the Year, Best Business Class Airline Seat and Best Airline in the Middle East at the 2015 Skytrax Awards. This is the third time the airline won the accolade of Airline of the Year.

Qatar Airways is a member of the oneworld global alliance. The award-winning alliance was named the World’s Best Airline Alliance 2015 by Skytrax for the third year running. Qatar Airways was the first Gulf carrier to join global airline alliance, oneworld, enabling its passengers to benefit from more than 1,000 airports in more than 150 countries, with 14,250 daily departures.

Qatar Airways recently launched Oryx One, an enhanced interface for its inflight entertainment system, increasing the number of movies and TV shows on board from 950 to up to 2,000.

BY TAMAR SVANIDZE

BY TAMAR SVANIDZE

ead of the EU Delegation to Georgia, Janos Herman, spoke with genuine pleasure at a press conference on Friday regarding the European Commission’s positive report on Georgia’s visa-liberalization: “Today we have enough reason to celebrate.”

He emphasized that the European Commission will continue to monitor how Georgia fulfils its commitments under the Action Plan on Visa Liberalization and announced that the European Union (EU) will support Georgia in all its efforts related to visa liberalization.

“Let me say one thing – today we have enough reason to celebrate. For us, the

5

goals and opportunities,” he said.

According to Margvelashvili, Georgia aspires to becoming a member of the European Union, no valid alternative exists, and to become member of the EU family is Georgia’s main goal.

6

BUSINESS

Bank of Georgia to Become New Link of Clearstream in Caucasus

GEORGIA TODAY

DECEMBER 22 - 24, 2015

Dried Fruit Factory to Open in Georgia

BY ANA AKHALAIA

BY TAMAR SVANIDZE

C

learstream, the international central securities depository (ICSD) of Deutsche Börse Group, will expand its international coverage by opening a new domestic link to Georgia on 11 January 2016.

The link will help foreign investors to access the local market and enables Clearstream to offer Georgian government bonds and supranational bonds via the Bank of Georgia, which acts as local custodian and cash correspondent bank.

“I am pleased that Bank of Georgia has become the local custodian and cash correspondent bank (CCB) for Clearstream and am excited about our prospects of partnering with Clearstream in expanding its international coverage by opening a new link to Georgia,” said Murtaz Kikoria, CEO, JSC Bank of Georgia. “It is an important step forward in terms of market coverage for Clearstream and another major boost for the Bank of Georgia to be at the forefront

of capital market development in Georgia.”

According to the Clearstream website, Georgia is its 55th domestic link, affirming its leading position in terms of market coverage as an ICSD. “The new link to Georgia is an important milestone as it marks another step in Clearstream’s strategic aim to increase access for our global customer base to the Caucasus and CIS region. It also demonstrates Clearstream’s commitment to support efforts made by the Georgian authorities and market participants to align their domestic market infrastructure and legal framework with international standards,” said Berthold Kracke, Head of Business Management and Member of the Clearstream Executive Board.

The product offering will include internal free of and against payment settlement in all settlement eligible currencies, including the recently accepted Georgian Lari (GEL).

Further available services are external free of payment settlement, custody and reconciliation as well as asset servicing.

A

dried fruit processing factory is set to open in the Kareli region, Georgia, in 2016. Their high-quality products, packaged to Euro-

pean standards, will be on the local market and will also be exported.

According to the factory director, Giorgi Kvirikadze, at the moment dried fruit is only being produced in Georgia in very small numbers with the market dominated by imported products. Negotiations have started with several countries including Germany, Israel and Ukraine.

The factory will receive fruit not only from its own gardens but also from the local population.

In total more than 1 million GEL was spent on the factory, including 650,000 GEL on refrigeration and processing machinery installation.

The factory will open in May and expects to employ 30 people.

NDI Poll: Georgians Have Firmer Political Position Continued from page 1 Compared to NDI’s August poll, more Georgians express an interest in voting, with likely voters having risen to 64% from 49%. Of likely voters, 18% would vote for the Georgian Dream coalition, 12% for UNM, and 7% for FD. Thornton also highlight that for the first time, NDI conducted its poll with an experimental section about foreign policy.

“We divided our respondents into three, equal, representative groups and asked the same questions about foreign policy.

The goal of the experiment was to determine whether a specific narrative about foreign policy would change the way people respond to questions. As a result, we found that it had no impact on their

decision – the Georgians have a clear position about their choice,” she noted.

The fact that residents have a strict political position allows representatives of the parties to focus on the most important issues. Economic conditions are still leading problems in Georgian minds, with jobs (57%), poverty (29%), and pen-

sions (28%) selected as most important issues, as is territorial integrity, with 29% of Georgians ranking it as important.

Georgians identify human rights, fair elections, rule of law, freedom of speech, and citizen participation as key ingredients for democratic development, but consistently rank Georgia as falling short on those indicators.

NDI surveys public opinion to help Georgian stakeholders diagnose and address issues of public concern by providing accurate, unbiased and statistically-sound data. The results reflect data collected from November 17 to December 7, 2015 through 1881 face-to-face interviews. The average margin of error is +/- 1.8 percent.

8

BUSINESS

GEORGIA TODAY

DECEMBER 22 - 24, 2015

Factory 27 Review: Something Out of the Ordinary

BY JOSEPH LARSEN

T

bilisi doesn’t do much manufacturing these days.

But in Mtatsminda, at least one factory is open for business. That’s Factory 27 at Zandukeli 27 (the café’s name comes from the industrial concept; the number, you can figure out for yourself). The basement location means it doesn’t get a lot of attention from passersby, but once inside, you’ll notice that both the décor and menu are unique in Tbilisi.

“The idea is to bring something from Berlin and mix with new American,” says Maiko Burduli, the PR manager for Factory 27. Walking in, the first thing I notice is the restaurant’s visual aesthetic: 1960s pop art from Roy Lichtenstein, graffiti by Tbilisi-based street artist Tamuna Oz, a modernist image of the New York City skyline, and a Christmas tree that looks right out of American suburbia.

The décor is “industrial style,” says Burduli. “When they [the owners] were in Berlin and New York they were

inspired by these kinds of places.” The owners originally intended to open a shop at Zandukeli 27, but ultimately realized the visual concept would work better in a café.

Factory 27 opened about a year ago.

According to Burduli, a large chunk of the clientele is younger people and foreigners. It has a loyal following, but ownership feels it hasn’t yet reached its potential.

“It has a concept, but not many peo-

ple know about it,” Burduli explains.

“We want to make it more popular.”

The café now hosts meetings and cultural events, and soon the kitchen will start offering a special lunch menu.

As for the food, it’s almost as good – and just as modern – as the ambience.

The menu is a blend of European, American, and Middle Eastern dishes, with things like bruschetta, burgers, pita with hummus and falafel, a sizeable vegetarian menu – “for foreigners and for fasting,” Burduli says – and even a few Tex-Mex offerings.

I notice that the bar is well-stocked with wine – Georgian and Italian varieties – and beer, as well as an impressive selection of whiskeys (Scotch, Irish, and Bourbon). There are plenty of liquors and cocktails. In the warm summer months, patrons can enjoy the outdoor seating while sipping homemade lemonade.

Trusting the waiter’s recommendation, I order the restaurant’s namesake burger: The Factory 27. It comes topped with mozzarella, bacon, tomato, lettuce, and pickles. While a bit too welldone for my taste, I’m not disappointed.

The waiter also brings a heaping pile (enough for two people) of perfectly-

seasoned fries. Plus, the food is served on a block of wood rather than a plate.

Yes, even the dishware is part of the concept.

On Burduli’s recommendation, I pair the burger with Tvishi, a semi-sweet white wine from Telavi Wine Cellar. I don’t know my Cabernets from my Rieslings, but I do know that the sweet wine goes well with a burger and fries.

Bombshell: They serve mulled wine.

A welcome after-dinner treat on this cold December night, the wine is served with orange and just the right amount of spice. The tasty dessert drink takes the edge off my burger-swollen stomach and warms me up for the chilly walk home.

Overall impression? Factory 27 isn’t the cheapest restaurant in Tbilisi (an entrée will cost 18-25 GEL, including VAT), but it’s definitely worth an evening out. The Euro-American menu is a welcome change of pace from standard Georgian fare, the bar is impressively stocked, and the concept is unlike anywhere else in Tbilisi.

It may not be for everyone, but it’s certainly for me. Next time, I think I’ll try the highly-recommended chicken quesadilla.

10

BUSINESS

GEORGIA TODAY

DECEMBER 22 - 24, 2015

Mamuka Bakhtadze on Chinese Transit Train Arrival

BY KATIE RUTH DAVIES

G

eorgian Railway Director General, Mamuka Bakhtadze, has appraised the arrival of the Chinese transit train to Georgia as a historical fact.

“This is an important and historical event. We have worked on the project implementation for two years along with completing many technological and logistics projects. We have successfully finished all these projects.

We have transported cargo through the Silk Road corridor for the first time.

The starting point is in South Korea and

the corridor crosses China, Kazakhstan, the Caspian Sea, Azerbaijan and Georgia and ends in Istanbul, Turkey,” Bakhtadze noted.

DHL and Vestel companies were among the clients of the transit train from China.

“This fact signifies that the world’s major companies are interested in our corridor,” Bakhtadze said, adding: “Our route’s efficiency is four times stronger than the traditional seaborne route and ensures considerable insurance for the cargo owners.”

As reported in last week’s Georgia Today/Business, the first transit train (with 21 containers) set off from the Chinese seaport terminal of Lianyungang on November 29 and arrived in Georgia on December 13. The train reached its

final destination three days later. The cargo transportation was carried out as part of the NOMAD Express project.

It was the first transit cargo train and a clear implementation of the Silk Road project. In the future, the transit train will connect Asia with Europe in the shortest period, with cargo from Chinas’ far eastern Lianyungang seaport reaching Istanbul in 14-15 days. Seaborne transport takes 40-45 days.

In 2013 on the initiative of Georgia, Azerbaijan and Kazakhstan railway companies, a tariff committee was established with the aim of enhancing the TransCaspian corridor’s competitive capacity.

Later, Aktau, Baku and Batumi seaports joined the new logistics project ‘TransCaspian International Transport

Route.’ Transparent tariffs were set on various consignments as part of this union and this has considerably decreased and simplified the transportation in the Corridor.

In 2015 the participant countries established a consortium that united Mishgeng Logistics transportation company (China), (Kazakhstan), Caspar Caspian Sea Maritime Company

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Wendy’s and Dunkin’ Georgia Offer Customers Fresh Local Products

Soso Pkhakadze, Wissol Business Group President

BY TAMAR SVANIDZE

T

he Georgian branch of the American fast food restaurant chain Wendy’s and Dunkin’ Donuts is to offer its customers fresh meals made using local products.

Wendy’s and Dunkin’ Donuts will cooperate with local companies Smart, Marshe, Badagi, Milko and Puris Samkaro (Bread World).

Wissol Business Group President Soso Pkhakadze, who manages these two companies in Georgia, highlighted that

promoting national production, safe products, healthy food and agricultural development are strategic goals of the company.

“Within the project titled ‘Buy Georgian,’ we are visiting all the regions of Georgia and purchasing seasonal fruits and vegetables from local farmers and small entrepreneurs, and then we sell it to Smart Supermarket at a non- commercial price. We are completely replacing imported goods into Georgia in chains of Wendy’s and Dunkin’ Donuts, which means that we can offer our customers fresh, high-quality and delicious dishes and desserts made from organic ingredients,” Pkhakadze said.

Wissol Group started development of the American fast food chain Wendy’s in 2013 and since then Wendy’s restaurants have been opened in almost all central areas of the Capital city Tbilisi.

Dunkin’ Donuts is an American global donut company and coffeehouse chain based in Canton, Massachusetts, in Greater Boston. It was founded in 1950

by William Rosenberg in Quincy, Massachusetts. Since its foundation, the company has grown to become one of the largest coffee and baked goods chains in the world, with 11,000 restaurants in 33 countries. The chain’s products include donuts, bagels, other baked goods, and a wide variety of hot and iced beverages.

and Karavan Logistics (Azerbaijan), and TransCaucasus Terminal (Georgia). Turkey joined the consortium as an associated member.

“It is worth noting that at the end of 2015 another transit train will arrive in Georgia, while several thousand containers will be transported as part of the project starting 2016. Georgia’s transit potential will double,” Bakhtadze said.

BUSINESS

GEORGIA TODAY DECEMBER 22 - 24, 2015

Don’t Cut Down Your Christmas Tree: Ministry of Environment Asks Citizens to Act Responsibly

BY ANA AKHALAIA

A

special briefing entitled ‘Don’t Cut Down Your Christmas Tree’ was held at the National Forestry Nursery by the Minister of Environment and Natural Resources, Gigla Agulashvili, in regard to the approaching New Year.

In order to prevent the illegal logging and sale of pine trees, the Environmental Supervision Department will implement preventive measures across the country.

Destroying and damaging trees and bushes and forest crops in the State For-

est Fund area will be fined from 200 to 400 GEL. If this happens in protected areas, the fine will be from 400 to 500 GEL. Violation of the law of national parks, natural monuments, wetland of international importance, or of the Red List species, will be fined from 500 to 600 GEL. In addition to administrative liability, environmental damage compensation will be imposed on violators. If the damage amount equals or exceeds 1000 GEL, the violator will have legal liability.

Christmas trees can be bought from nurseries, plantations, private agricultural lands or imported. In such cases it is necessary for the seller to present relevant documents, while in the case of private agricultural plot, a certificate issued by the local municipality.

The crew of the Environmental Supervision Department will carry out preventive measures in hotspots such as in the surrounding areas and access roads of State Forest Funds, settlements and the entrances of the city, as well as alongside roads.

The Ministry of Environment and Natural Resources Protection of Georgia is offering citizens specially bred fir trees at the National Forest Nursery and calls on citizens to refrain from the illegal sale of pine plantations.

11

First Georgian Corn Oil Factory to Open

BT ANA AKHALAIA

T

he first corn oil factory is to open in Khobi, west Georgia which will offer customers three types of products and will replace 30% of the corn oil that is currently being imported.

The author of the project is vegetable oil company Karva (Qarva). The project in Khobi will be carried out by Kolkha.

Karva was opened in 2005 and since then produced sunflower oil. Corn oil from Khobi will be branded as Karva on the market.

According to the company, if the factory works at 90% of its capacity it will be able to process 50 tonnes of corn grain with modern equipment.

Kolkha construction started in July 2015. There has already been a $1 million investment. Kolkha has an obligation to use local corn for the first two years.

12

BUSINESS

GEORGIA TODAY

DECEMBER 22 - 24, 2015

Georgian-Kazakh Relations to Deteriorate Further?

BY DIMITRI DOLABERIDZE

T

he Board of Directors of JSC KazTransOil has made the decision to sell the company Batumi Oil Terminal Limited - one of the most important Georgian enterprises, which, since 2008, has belonged to Kazakhstan. Batumi Oil Terminal is considered to be a backbone enterprise, alongside Tbilisi gas distribution network Tbilgas, also owned by the Kazakh ‘KazTransGas-Tbilisi’ - “daughter” of energy giant KazMunaiGas. The fate of the company is being argued in Tbilisi and Astana at a fairly high level. The introduction of the direct rule in KazTransGas-Tbilisi has caused the apparent dissatisfaction of Astana, the more so because, in spite of intensive negotiations, the parties did not manage to achieve a lasting compromise. Not surprisingly, the Kazakh owners are thinking of selling KazTransGas-Tbilisi. According to unofficial data, they lead on this issue in talks with their Azerbaijani and Russian counterparts.

Kazakhstan expresses doubts about the prospects of the Georgian direction for transporting Kazakh energy resources, especially oil, through the Black Sea ports of Poti and Batumi. But Georgia, since independence, considered their “transit function” one of the most important preconditions for strengthening statehood and gaining “a geopolitical tool”. This line of Georgia’s foreign policy remains unchanged. Both Eduard Shevardnadze

and Mikhail Saakashvili repeatedly declared Kazakhstan a “priority partner”, welcoming Kazakhstani investment and creating “special conditions” for Kazakh investors. Shevardnadze called Kazakhstan a “great power” and offered them the chance to enter the Black Sea with its merchant fleet and a base in Batumi and Poti, and Mikhail Saakashvili, after the first visit to Astana, spoke with admiration about the new capital of the Central Asian country: “I would like to wrap up these beautiful skyscrapers built by Nursultan and take them home with me.”

Controversy has surrounded KazTransGas-Tbilisi for several years, eroding the relationship and, in the end, leading to a decision in principle on the

It is a fact that the investment activity of Kazakhstan in Georgia has sharply reduced.

Nothing good can come of it Giorgi Khukhashvili, Independent Expert to the Government of Georgia

sale of Batumi Oil Terminal. This decision could mean that Kazakhstan refuses to transport oil from the corridor through the South Caucasus.

Independent Expert to the Government of Georgia, Giorgi Khukhashvili, confirmed this possibility.

KHUKHASHVILI: Sadly, Kazakhstan has decided to sell the Batumi Oil Terminal. If Georgia wants to realize its potential “bridge between Europe and Asia”, this cannot be allowed. Kazakhstan plays an important role in building the “East-West” communication corridor. Port infrastructure is of strategic importance. It is not difficult to understand that in the event of a sale of this infrastructure, Kazakhstan will have less interest to transport oil through Batumi. Moreover, Kazakhstan is selling not only the terminal, but KazTransGas-Tbilisi.

There is also the problem of the public debt of Georgia to Kazakhstan. So, the tendency, to put it mildly, is a concern.

DO YOU THINK THAT THE GEORGIAN AUTHORITIES HAVE MADE SYSTEMIC ERRORS IN THIS REGARD? The government should have been more attentive

to the problems that have arisen with Kazakhstan investors. We’re talking about the “daughter” of the state company KazMunaiGaz.

CAN THESE PROBLEMS LEAD TO THE AGGRAVATION OF INTER-STATE RELATIONS? I would not like to dramatize. But it is a fact that the investment activity of Kazakhstan in Georgia has sharply reduced. Nothing good can come of it.

WHO CAN REDEEM THIS STRATEGIC SITE? EXPERTS IN THIS REGARD MENTIONED AZERBAIJAN AND RUSSIA Buyers in any case will be found. The main thing is what the price will be. In terms of liquidity, Batumi Oil Terminal is an even more valuable asset than KazTransGas-Tbilisi. Kazakh investors still cannot sell the Tbilisi gas distribution network because they cannot return to management - the company appointed an external control.

These two issues are closely linked, since KazTransGas-Tbilisi and the Batumi Oil Terminal have one owner - the government of Kazakhstan.

BUSINESS

GEORGIA TODAY DECEMBER 22 - 24, 2015

Police Eviction Repealed by Parliament, Business Sector Concerned

BY ANA AKHALAIA

T

he Parliament of Georgia has adopted a bill on the third reading repealing the so-called police eviction institution. The draft law ‘Amendments to the Civil Code of Georgia’ was voted in 82 in favor and none against at the plenary session on December 11th.

According to the Amendments, eviction from a residential area will only be possible following a decision from the Court. Paragraph 3 of Article 172 of the Civil Code was repealed, according to which eviction by police is possible.

Withdrawal of real estate from the owner by the buyer will be repealed from the applicable Articles.

The bill was initiated by the Parliament’s Legal Affairs Committee. Relevant amendments will be made in the police and the execution laws. Legislative changes will concern civil and procedure codes as well.

The bill was opposed from the beginning of discussion by the Business Association, Business Ombudsman, Association of Banks and NGO sector.

The representatives of the Business Association of Georgia and Association on Banks of Georgia met with the head of the presidential administration, Giorgi Abashishvili. and discussed the new law. They are asking the President of Georgia to veto the Amendment. If the bill becomes law, they are planning to appeal in the Constitutional Court.

According to the CEO of Business Association of Georgia, Irakli Aslanishvili, there are several arguments on why adopting this law will create problems. First of all, when property ownership ends, it will automatically result in a revising of the prac-

tice of the real estate business, pricing policy and lead to a rise in price, in general.

He states that the banking sector, which finances the real estate market, will consider a new risk assessment system which, eventually, will be reflected in an increase of interest rates because both will automatically change under increased risks.

The third argument is that the new law will alter rental standards for legal companies which are involved in renting commercial office spaces, who will begin offering spaces to customers at increased prices. This will result in a decrease in demand, potential increase of income for the people in this business and change in the behavior of investors globally.

“These changes pose serious problems for the

The agency which is responsible for enforcement, and which has this single function, deals with the task faster and more efficiently than the police

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country’s economy. The sector which is active in the market will not have a chance to grow. Further, it will create problems for the private and legal real estate business firms. These arguments were addressed at the meeting. The head of the presidential administration has promised to look through our arguments and discuss them with the President,” said Irakli Aslanishvili.

The initiator of the bill, Deputy Chairman of Legal Affairs Committee, Paata Kiknavelidze, stated in his interview with Commersant, that businessmen’s arguments are not based on any factual grounds and eviction by police is not a quick and efficient way for the protection of property rights in the first instance.

Kiknavelidze stated that “nowhere in the world do police solve ownership or any private legal disputes. None of these statements are based on statistics about police eviction.” He said the statistics did not exist and the Ministry of Internal Affairs found the following only on his request: in 2014 just 31% of eviction applications were fulfilled, in 9 months of 2015 only 28% of them were fulfilled.

13

“I, as the Deputy Chairman of the Legal Affairs Committee, receive dozens of applications which show that requests for police eviction have not been executed- going back five years now. So the belief that police eviction is an effective mechanism to protect property rights is a lie,” said Kiknavelidze.

He further offered the statistics of the Bureau of Enforcement in the same time period: in 2014 the enforcement rate was 79%, and 82% in 9 months of 2015. “So everything points to the fact that the agency which is responsible for enforcement and which has this single function, deals with the task faster and more efficiently than the police,” he said.

The Deputy Chairman explained that this law does not have a direct connection to social issues and the most essential aspect is the legal issue. In particular, according to Article 20 of the Constitution of Georgia, no one has the right to enter an apartment or other premises against the will of the owner if there is no court decision or urgent necessity backed by law. He said police eviction was an unconstitutional concept.

14

BUSINESS

GEORGIA TODAY

DECEMBER 22 - 24, 2015

Public Service Development Agency and Beeline Sign Agreemen

BY ANA AKHALAIA

T

he Public Service Development Agency in Georgia will support mobile operator Beeline to introduce electronic signature supported services. The agreement was signed between Public Service Development Agency and Mobitel Ltd at the new

able to set a user’s electronic signature for an electronic document containing biometric data and confirm exactly when the document was signed.

According to Shio Khetsuriani, the Chairman of the State Services Development Agency (SSDA), the SSDA has already started to offer this innovative product support service, in particular the time indication service, to private sector representatives who are oriented on introducing modern technologies and

The electronic document containing the biometric data of electronic signature allows individual electronic signatures to be examined and the signers to be identified.

“We are very pleased to have been given the opportunity to provide a new concept sales office for users, a demonstration space for digital modern technology, where, with the support of Public Service

Development Agency, we will offer innovative digital services to customers which will enable us to make our services easier and quicker to get,” said Giorgi Tkeshelashvili, General Director of Beeline.

Language: Russian Start time: 21:30, 19:10 Language: English Start time: 15:00 Ticket price: 9.00 – 13.00 Lari

ARCHAEOLOGICAL TREASURE PERMANENT EXHIBITION

HERE, VISITORS CAN ENCOUNTER THE STATE’S PERSONAL FILES OF “SUBVERSIVE” GEORGIAN PUBLIC FIGURES, ORDERS TO SHOOT OR EXILE, AND OTHER ARTIFACTS REPRESENTING SOVIET-ERA CULTURAL AND POLITICAL REPRESSION IN GEORGIA.

Giorgi Tkeshelashvili, General Director of Beeline

concept sales office of Beeline.

This service will provide easier and quicker mobile operator services for users. Futhermore, organizations will be

creating comfort for users. This service will enable companies to significantly reduce service time which is very convenient for users.

WHAT’S ON IN TBILISI THEATRE

TBILISI ZAKARIA PALIASHVILI OPERA AND BALLET THEATRE Address: 25 Rustaveli Ave. Telephone: 2 99 04 56 December 24 THE NUTCRACKER Peter Tchaikovsky Tbilisi Opera and Ballet Theatre Orchestra will be performing in the play Conductor: Revaz Takidze Start time: 20:00 Ticket price: From 10 Lari Venue: Tbilisi Concert Hall, 1 Melikishvili Ave. TBILISI VASO ABASHIDZE MUSIC AND DRAMA STATE THEATRE Address: 182 D.Agmashenebeli Ave. Telephone: 2 34 80 90 www.musictheatre.ge December 22, 23 CHRISTMAS TALE Directed by Davit Doiashvili Musical Start: 19:00 Ticket price: From 8 Lari CINEMA

AMIRANI CINEMA Address: 36 Kostava Str. Telephone: 2 99 99 55 www.kinoafisha.ge December 22-24 STAR WARS: THE FORCE AWAKENS Directed by J.J. Abrams Cast: Daisy Ridley, John Boyega, Oscar Isaac Genre: Action, Adventure, Fantasy Language: English Start time: 17:05, 20:00, 22:50 Language: Russian Start time: 11:45, 13:45, 16:45, 19:45, 22:45 Ticket price: 8.50 – 14.50 Lari

MACBETH Directed by Justin Kurzel Cast: Michael Fassbender, Elizabeth Debicki, Marion Cotillard Genre: Drama, War Language: Russian Start time: 14:45, 22:00 Ticket price: 9.50 – 14.50 Lari IN THE HEART OF THE SEA Directed by Ron Howard Cast: Chris Hemsworth, Cillian Murphy, Brendan Gleeson Genre: Action, Adventure, Biography Language: Russian Start time: 15:00 Ticket price: 9.50 – 10.50 Lari CAVEA EAST POINT Address: 2 Tvalchrelidze Str. December 18-21 STAR WARS: THE FORCE AWAKENS (Info Above) Language: Russian Start time: 13:00, 16:30, 19:30, 22:00 Language: English Start time: 22:30 Ticket price: 13-19.00 Lari IN THE HEART OF THE SEA (Info Above) Language: English Start time: 22:00 Language: Russian Start time: 12:00, 14:30, 18:15, 19:45, 22:30 Ticket price: 8-14.00 Lari MACBETH (Info Above) Language: Russian Start time: 13:00, 17:00, 21:00 Language: English Start time: 19:30 Ticket price: 5–14 Lari SICARIO Directed by Denis Villeneuve Cast: Emily Blunt, Josh Brolin, Benicio Del Toro Genre: Action, Crime, Drama

VICTOR FRANKENSTEIN Directed by Paul McGuigan Cast: Daniel Radcliffe, James McAvoy, Jessica Brown Findlay Genre: Drama, Horror, Sci-Fi Language: Russian Start time: 22:00 Ticket price: 13.00 – 14.00 Lari SPECTRE Directed by Sam Mendes Cast: Daniel Craig, Christoph Waltz, Léa Seydoux Genre: Action, Adventure, Thriller Language: Russian Start time: 13:30, 16:30, 22:00 Ticket price: 4.00 – 6.00 Lari THE HUNGER GAMES: MOCKINGJAY – PART 2 Directed by Francis Lawrence Cast: Jennifer Lawrence, Josh Hutcherson, Liam Hemsworth Genre: Adventure, Sci-Fi Language: Russian Start time: 13:00, 19:00 Ticket price: 8 – 14 Lari TBILISI STATE UNIVERSITY Address: 1 Chavchavadze Ave. Telephone: 595 85 00 90 December 22 FILM CENTER APKHAZETI PRESENTS: ‘SOPELI – 0.047% OF THE LAND’ Directed by Gela Kandelaki Start time: 18:00 Free entry MUSEUM

GEORGIAN NATIONAL MUSEUM SIMON JANASHIA MUSEUM Address: 4 Rustaveli Ave. Telephone: 2 99 80 22, 2 93 48 21 www.museum.ge

November 17 - May 1 GEORGIAN NATIONAL MUSEUM AND ALEXANDER KARTVELI ASSOCIATION PRESENT AN EXHIBITION DEDICATED TO THE GREATEST MILITARY AIRCRAFT DESIGNER IN HISTORY. Exhibition will demonstrate life and merits of the Georgian emigrant, an innovator of American and World’s aviation - Alexander Kartveli (Kartvelishvili /1896-1974/).

December 21 – January 30 THE EXHIBITION THE TRAVELING MUSEUM OF THE CAUCASUS SHALVA AMIRANASHVILI MUSEUM OF ART Address: 1 Lado Gudiashvili St. Telephone: 2 99 99 09 www.museum.ge December 16 – January 15 THE JANI MEDZMARIASHVILI’S SOLO EXHIBITION IOSEB GRISHASHVILI TBILISI HISTORY MUSEUM - KARVASLA Address: 8 Sioni Str. Telephone: 2 98 22 81 December 17 - 26 EXHIBITION OF GRAPHIC ARTWORKS BY IRAKLI TOKLIKISHVILI December 10 - January 5 PROMOTING THE CULTURAL COOPERATION BETWEEN GEORGIA AND JAPAN, THE GEORGIAN NATIONAL MUSEUM IOSEB GRISHASHVILI TBILISI HISTORY MUSEUM INVITES YOU TO THE PHOTO EXHIBITION OF HIROTAKE MAEDA. MUSEUM OF SOVIET OCCUPATION Address: 1 Rustaveli Ave. Telephone: 2 99 80 22

GALLERY

THE NATIONAL GALLERY Address: 11 Rustaveli Ave. www.museum.ge Georgian National Museum Dimitri Shevardnadze National Gallery invites you to THE KETEVAN MATABELI RETROSPECTIVE EXHIBITION. BAIA GALLERY Address: 10 Chardin Str. Telephone: 2 75 45 10 December 17-24 LEVAN MARGIANI EXHIBITION December 25 TRADITIONAL TURKISH EXHIBITION The Exhibition will last one day THE EUROPE HOUSE Address: 1 Freedom Sq. Telephone: 2 47 03 11 December 15-January 17 PSILOCYBIN MUSHROOMS A multimedia project by Tato Akhalkatsishvili The psychedelic trip is one of the practices of structuring ‘another’ reality, beyond which the ‘real’ world becomes a mirage and the border between facts and personal interpretations is blurred.

FACTORY 27 Address: 27 Zandukeli Str. Telephone: 595 27 99 97 December 19-28 ZURA BALANCHIVADZE EXHIBITION

BUSINESS

GEORGIA TODAY DECEMBER 22 - 24, 2015

How Much Oil Is Needed To Power Santa’s Sleigh?

BY MICHAEL MCDONALD OF OILPRICE.COM

E

very year around the world, hundreds of millions of children wait anxiously for Santa Claus to arrive and bring presents and good cheer. But what if Santa never came? What if this year the reindeer all fall ill, perhaps due to Crazy Reindeer disease (the analog to Mad Cow) and Santa is forced to cancel Christmas? The result would be devastating.

Fortunately, for any children reading, official word from the North Pole is that Santa’s sleigh has some new upgrades this year that allow it to run on good old fashioned jet fuel if the reindeer fail. And with the current glut of oil around the world, fuel prices are so affordable that even if the reindeer are feeling up to their usual task, Old Saint Nick might just give them the night off and choose to fly with fuel nonetheless.

SO HOW MUCH OIL DOES SANTA NEED FOR HIS ROUNDS ON THE NIGHT OF THE 24TH? Well the answer is complicated by a number of factors most importantly, we just don’t know a lot of about Santa’s rounds, the shape of the sleigh, the air speed of the craft, or the weight of all those presents. But, we can take some educated guesses.

RELATED: HOW FAR WILL OIL SINK BEFORE CHRISTMAS? One 42 gallon barrel of oil is typically used to make a variety of different products. About 51 percent of the average barrel ends up being used for gasoline, while 12 percent ends up being used for jet fuel. Let’s assume then that Santa’s going to use standard jet fuel, and that 12 percent ratio holds – so for each gallon of jet fuel, we need around 8 gallons of oil. Recognizing that the byproducts of a processed barrel of oil are greater than the original 42 gallons, this 2:1 ratio is still a good place to start

as a rough rule of thumb.

Next we need to get a rough idea of Santa’s fuel economy. How many miles does he go on a gallon of jet fuel? It’s not clear how much Santa’s sleigh weighs, or what it is shaped like, but we can probably envision it as something like a cross between a Suburban, a C-5 Galaxy fright aircraft, and an F-22 Raptor fighter jet. The sleigh looks blocky like a Suburban, carries about the same level of cargo as much as C-5 might, yet has the speed of a fighter jet. The fighter jet and c-5 achieve a fuel economy around the range of 0.1 miles per gallon to 0.5 miles per gallon. A 747 for instance burns around 5 gallons of fuel per mile.

1.5 billion households around the planet based on around 5 people per household.

Now not everyone celebrates Christmas of course, but many Christians and nonChristians alike do. By some estimates, perhaps 45% of the world’s population celebrates Christmas. That means that Santa needs to visit about 675 million households. With about 7 households per square mile, and assuming that households celebrating Christmas are clustered (which seems logical given religious clustering), that means that Santa has to cover around 94 million square miles of households.

RELATED: THE END OF THE OIL MAJOR?

The most efficient mechanism for

Santa on his sleigh.

Source: festivalsadvices.com

presents to the world’s children. This assumes minimal idle time on each rooftop (he’s got to scarf down those cookies quickly), and abstracts away from the extra fuel needed for each takeoff.

Given our 5 miles per gallon of jet fuel efficiency calculated above, that means Santa needs around 45 million gallons of jet fuel for his annual voyage. With jet fuel going for around $1.20 a gallon right now on the spot market, and prices looking historically low, this puts the total fuel cost of Santa’s journey at a bit less than $54 million for one night. On second thought, maybe it’s time to break out the hay for those 8 reindeer.

Reprinted with permission of the Editor of Oilprice.com

But of course, those aircraft are all much larger than Santa’s sleigh. (Imagine poor Rudolph trying to pull a Dreamliner!) A Lear Jet uses around 1 gallon of fuel per 2.75 miles (based on a speed of 465 knots or 535 miles per hour). A Piper Cub uses about 1 gallon per 15 miles. Santa’s fuel economy is going to fall off the faster he goes, and to get to all the children of the world in one night, he is going to need to go a lot more than the Piper cub’s 65 knots per hour. Just to take off, Santa is going to need to hit about 180 miles an hour, and probably more than that given the sleigh designer’s seem to have a weak grasp on Bernoulli’s principle. Thus the Suburban is probably a good size comparison for Santa’s sleigh, and one might estimate the sleigh gets about 5 miles to 1 gallon of jet fuel (8 gallons of oil).

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Now how far does Santa need to go?

There are around 7.3 billion people in the world, which works out to around

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RELATED: IS THE OIL AND GAS FIRE SALE ABOUT TO START?

Santa to cover these households is a very complex mathematical problem.

But assuming Santa wants to fly diagonally over each square mile (for a distance of 1.41 miles based on the Pythagorean Theorem), and households are on average distributed proportionally across this each 1 mile block, then Santa will have to fly over 2.41 miles of ground to cover each square mile as efficiently as possible.

(You can use a variety of mathematical algorithms to model the most efficient flight path depending on population dispersion – this is just a reasonable approximation based on the assumptions outlined above).

As a result, Santa needs to travel around 226 million miles to deliver all of the

15

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