Page 1 georgiatoday

Issue no: 1018/114

• JAN. 30 - FEB. 1, 2018



In this week’s issue... Georgian Wine Agency Presents Wine Development Strategy NEWS PAGE 2

Trade, Not Consumption or Investment, to Be Largest Source of GDP Growth for Georgia in 2018 ISET PAGE 4


The merging of technological giants: Silknet buys Geocell


Georgia to Host Int’l Forum of Innovations for Hospitality & Tourism BY NINO GUGUNISHVILI

Vinotel Wins Best Luxury Small Hotel in Eastern Europe Award BUSINESS PAGE 5

PMC Research Presents Research Findings on Georgia’s Potential within Belt & Road Initiative BUSINESS PAGE 6

Davos: Brazil is Back BUSINESS PAGE 10


eorgia is to host an International Forum of Innovations for the Hospitality and Tourism Industry this autumn. This comes after a Memorandum of Understanding that was signed between the Ministry of Economy and Sustainable Development of Georgia, the Copenhagen based Creative Business Cup, and CBC Georgia on January 23, at Techo Park Tbilisi. The MOU focused on organizing an upcoming large-scale innovation forum, together with a ‘start-ups competition’ and the possibility to bring investors from the hospitality industry together. Continued on page 2

Putin’s Imperial Coronation POLITICS PAGE 11 Prepared for Georgia Today Business by

Markets Asof26ͲJanͲ2018


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


































































































































































Georgia & Serbia Eager to Boost Economic Cooperation Photo source: Wines of Georgia Facebook

Georgian Wine Agency Presents Wine Development Strategy BY THEA MORRISON


he Georgian National Wine Agency (GNWA) gave a presentation of the Wine Development Agency, which included a review of the wine sector of Georgia and an analysis of the current situation, as well as the vision for development of the wine industry countrywide. The long-term strategy consists of several lines, with appropriate strategic goals and action plans. Activities and events planned for 2018 in the wine industry were also presented. The strategy aims to create a favorable environment for quality Georgian wine and to develop awareness and competitiveness within the industry. The document includes various directions, including diversification of export markets, development of the local market, and sustainable viticulture, wine tourism, and other fields. The GNWA reports the document was prepared with the support of Berthold

Zaitz, an integrated expert from the Center for International Migration and Development (CIM) of the German International Cooperation (GIZ), who was the advisor of the National Wine Agency in 2016-2017. Zaitz presented the Georgian wine development strategy on January 26, at the joint GIZ-GNWA event "Private Sector Development and Vocational Education Program in the South Caucasus," celebrating successful cooperation between Georgia and Germany in the wine sector. The event was attended by representatives of the German Embassy in Georgia, international and donor organizations, state agencies and private companies. According to the GNWA, cooperation between Georgia and Germany will continue in future. “With the support of the Government of Germany, in 2018-2019, integrated CIM expert Ana Luge is invited to the National Wine Agency to assist the development of the national cadastre system of vineyards in Georgia,” the Agency announced.

Rusiko Chikvaidze’s Personal Exhibition Opens in Washington DC

Davit Bakradze, Ambassador of Georgia to the US and Rusiko Chikvaidze



he exhibition of prestigious Georgian artist Rusiko Chikvaidze was opened at the Georgian Embassy HQ in Washington, DC, USA, on January 19. The exhibition features 20 of the painter’s new works, which will be on display there until March 31. While addressing guests at the reception, Davit Bakradze, Ambassador of Georgia to the US, stated that apart from being a famous Georgian artist, Chikvaidze is also a member of the family of Georgian diplomats.

Many of her works are kept in private collections and galleries worldwide, and she holds Silver and Gold Medals from UNESCO for promoting culture, received in 2005 and 2007. At the opening, as well as enjoying the exhibition itself, guests also had a chance to taste Georgian wine and cuisine, and listen to Georgian music.



ntensification of cooperation in various areas, including the importance of stepping up the existing economic potential between Georgia and Serbia, were the key issues discussed by the Georgian Prime Minister Giorgi Kvirikashvili and the Speaker of the National Assembly of the Republic of Serbia, Maja Gojkovic, during their meeting in Tbilisi last week. The sides pointed out that the joint business forum, to be held in Tbilisi this spring, will boost economic ties. “We are expecting the opportunity to host Serbian business representatives at the business forum in Tbilisi this year. The point that we do not have intensive trade relations also gives us an opportunity to give a fast boost to our bilateral trade and investment relations," the Prime Minister of Georgia said. Kvirikashvili thanked Gojkovic for Serbia’s supporting Georgia’s territorial integrity and sovereignty. “I would also like to thank you for your political decision to open a visa-free travel opportunity for Georgian citizens. It is an honor to have this opportunity

to host you, and we welcome the intensification of our bilateral relations,” he said, addressing the Serbian National Assembly Speaker. Gojkovic in turn highlighted that the intensification of bilateral relations and boosting of mutual cooperation was one of the key goals of her visit to Georgia. "We are the ones who directly represent our citizens, and they are the ones who want us to establish closer relations. This visit should be understood as an initial visit to strengthen our further cooperation both at the parliamentary level and, in general, at the political

level," she emphasized. Cooperation within the formats of international organizations and challenges facing the two countries' territorial integrity were also discussed by the officials. The parties emphasized the dynamics of developing inter-parliamentary ties sustained by the work of groups operating under the two countries' legislative bodies. Gojkovic arrived in Georgia on January 26, and also met the President of Georgia, Georgian Parliament Speaker and the Minister of Foreign Affairs.

Georgia to Host Int’l Forum of Innovations for Hospitality & Tourism Continued from page 1 The Memorandum of Understanding was signed by Dimitry Kumsishvili, First Vice Premier, Minister of Economy and Sustainable Development of Georgia, Rasmus Tscherning, Founder and Executive Director of Business Cup Foundation, and Gela Suli, Founder and Director of Business Cup Georgia. Following the Memorandum of Understanding, Georgia is to host the final round of the competition of innovations for the hospitality and tourism industry and the investors’ forum in October 2018. The competition, which is set to run annually by The Creative Business Cup Foundation from 2012, is set to reveal the winners of high-tech start-ups from different categories. For the first time this year, the decision was made to organize a competition in a single sector of the hospitality and tourism industry, as Georgia was chosen to be the host for the final competition round, as a country of popular tourist destinations. Before the many Georgian start ups and students of a number of higher education institutions gathered at the memorandum signing ceremony, the Minister of Economy and Sustainable Development of Georgia, Dimitry Kumsishvili, highlighted the importance of innovative projects to be initiated in the hospitality sector of the country, which, according to the Minister, is a great generator of income, and creates additional employment opportunities. He then gave an example of several tech start-ups that initiated massive changes in the hospitality industry. “I think that Georgian start-ups have a huge potential in that direction, not only in Georgia, but globally,” Kumsishvili stated. “Hosting an International Forum of Innovations for the Hospitality and Tourism Industry in Georgia is hugely important for us. All the best innova-

tive ideas generated in the hospitality industry globally will be discussed in Georgia during the forum, whilst on the other hand, it will give us the possibility to organize competitions in the country, fostering new ideas. Overall, this will bring our country improved and better services that we could offer to our tourists,” Dimitry Kumsishvili said, after the memorandum signing. “Our goal is to transform Georgia into a tourism mecca, both in the region and globally, and this project will help put Georgia on the map as a major center for new ideas and innovations,” Giorgi Chogovadze, Head of National Tourism Administration of Georgia said. “With the initiative of the Georgian government and involvement from us, we aim to bring start-ups to Georgia, in the most competitive sector, which is, of course, the tourism industry. Start-ups with new, innovative ideas will be arriving to Georgia, and together with them and the investors, we’ll have a chance to establish a tradition of gathering all of them every year, in the month of October” Gela Suli, Founder and Director of Business Cup Georgia commented. Georgian businessman Guja Narimanishvili have also introduce his product, a mobile tourist application

called Travel Guide, as the attendees of the event will have a chance to get acquainted with an innovative prototype created by the Georgian company VREX Immersive, a device that offers potential tourists to see the tourist destination virtually and then, if they like what they see, they will be able to book their trip. As Dimitry Kumsishvili noted, these devices will soon be available at the tourism information centers across Georgia. Every November, CB Foundation organizes a huge international event for creative start-ups called Creative Business Cup, in which businesses from over 65 countries, leading international companies and investors participate. Within the International Forum of Innovations for Hospitality and Tourism, numerous masterclasses and boot camps are to be organized, together with project competition and investor screenings. The local and international businesses set to attend the forum will have the possibility to invest in the projects take their interest, and implement them internationally. The memorandum signing ceremony was also attended by Giorgi Zviadadze, Director of Innovations and Technology Agency and businessmen Saba Kiknadze.





Prime Minister of Lithuania Arrives on Official Visit to Tbilisi BY NINO GUGUNISHVILI

S Police Force Their Way into Office of Opposition Leader Alexei Navalny BY TOM DAY


olice forced their way into the Moscow office of Alexei Navalny, political opposition leader, on Sunday and began questioning people, according to images broadcast online by his supporters. This move was instigated when hundreds of supporters gathered for a nationwide day of protests against the Russian authorities, which was called for by Navalny to boycott what he calls “pseudoelections” happening on March 18. Roman Rubanov, a Navalny supporter, wrote on social media that the police said they were looking into reports that there was a bomb in the office, something he said came as a surprise to him. Navalny called on Russian citizens to gather at rallies in the center of Moscow and Saint Petersburg with placards and leaflets, a move he knew would be likely to provoke police forces. Further protests have been planned in over 100 cities across the country. In most cities, permission to

stage rallies was received, Navalny said. “Your life is at stake,” he told supporters in a video message. “How many more years do you want to live with these thieves, bigots and perverts in power? We’ve already endured this for 18 years.” Navalny sent out a warning as the protests approached, in the form of a tweet, saying that the authorities planned to target his younger supporters. The message implored parents not to allow their children to attend the protests. “Raids are possible,” it read. Mr. Navalny is seen as the only man capable of beating Putin in the upcoming election in March 2018. However, due to a criminal conviction, election officials have banned him from running for president. He claims the conviction is corrupt and politically-motivated. Putin hopes to secure his run for a fourth term and, if he succeeds, this will make him the longest-serving Russian Leader since Joseph Stalin. Navalny spoke at one of his electoral campaigns outside Moscow, labelling Mr. Putin a “poor leader”. "It is you, Vladimir Putin, who's turned

this country into a source of personal enrichment for yourself, your family and your friends. That's why you should no longer be president. You are a bad president." Mr. Navalny is, for many Russians, the man to rid their country of corruption. He highlighted Putin’s alleged wrongdoings, saying he has taken "from poor people, oil, gas and metal worth trillions of dollars, sold it abroad, rewarding those people by turning them from poor to destitute" Navalny has said that he will use his following to organize “voters’ strikes” to encourage people to stay away from polling stations on election day. In a message released by Mr. Navalny minutes after the decision to ban him, he called on his supporters to boycott the vote. “Going to the polls right now is to vote for lies and corruption.” “The procedure that we’re invited to take part is not an election,” he said. “Only Putin and the candidates he has hand-picked are taking part in it.”

aulius Skvernelis, Prime Minister of Lithuania, arrived on an official visit to Tbilisi on Monday, welcomed by Giorgi Kvirikashvili, Prime Minister of Georgia, at the government’s administration office. Following the one-to-one meeting between the Georgian and Lithuanian Prime Ministers, an extended meeting with the Lithuanian delegation members took place. Saulius Skvernelis met the Georgian PM and Parliament Chairperson Irakli Kobakhidze. On Tuesday he visited Odzisi village near the occupation line, and the IDP settlement in Phrezeti. Also during his official visit, Skvernelis visited the

heroes’ memorial, and laid a wreath in memory of Georgian heroes, and took a tour around Old Tbilisi and Georgia’s ancient capital of Mtskheta. At the joint press-conference with Kvirikashvili, Skvernelis said Georgia is the main trading partner in the South Caucasus region for Lithuania. “Georgia absolutely deserves the title of the Eastern Partnership leader, and we are sure that Georgia will maintain its leading position. This is the result of sustained efforts of the Government of Georgia, and we will always support Georgia's European and Euro-Atlantic integration,” the Lithuanian PM stated, adding that Georgia has made a lot of progress in terms of reforms and the implementation of Association Agreement with the EU. Continued on page 10





Trade, Not Consumption or Investment, to Be Largest Source of GDP Growth for Georgia in 2018



SET-PI has updated its forecast of Georgia’s real GDP growth rate for the fourth quarter of 2017 (the final update) and the first quarter of 2018. Here are the highlights of this month’s release: • Based on November 2017 data, the forecast for GDP growth in the fourth quarter of 2017 remained at 4.6%. • Real GDP growth rate reached 3.7 % y-o-y in November 2017. As a result, estimated real GDP growth for the first eleven months of 2017 was 4.8%. • Annual growth for 2017 is still expected to be 4.8%. • According to the most recent (second vintage) forecast for 2018, the growth rate in the first quarter is predicted to be 3.3%. Based on the available data from November,thegrowthforecastfor2017-2018remains largely stable. While the changes in the current GDP forecast do not appear to be significant, a few variables deserve our attention. In particular, rapidly increasing money supply, improved external trade statistics,highercrudeoilprices,andcheaper domestic currency all played important roles in forming the current GDP forecast.

MONEY SUPPLY The first set of variables that had a significant positive effect on our forecast is related to currency in circulation. In November, all of the monetary aggre-

gates from the broadest (up by 18% yearly) to the narrowest aggregate (up by 13% yearly) experienced double-digit growth in yearly terms. Moreover, the currency in circulation itself increased by 0.4% monthly and 13% yearly. According to standard macroeconomic theory, an increase in money supply should lower interest rates, leading to more lending/borrowing, consumption and rapid economic growth. However, there are some papers that find no significant correlation between money supply and real GDP growth, even in the short-run. The long-run effect is even more difficult to predict without knowing how well this excess money supply is allocated in the domestic economy. Our empirical model confirms the standard economic theory - the rapidly increasing money supply positively contributed to Georgia’s growth forecast.

EXTERNAL SECTOR STATISTICS Georgia’s neighboring countries continue their recovery from the recent regional crisis, followed by significant slowdowns in growth, and even painful recessions. In November,theArmenianeconomyadvanced by 9.2% yearly, while the real GDP of Azerbaijan contracted by only 0.2% compared to the same month of the previous year. It worth noting that, based on the nine months of data in 2017, the non-oil industry in Azerbaijan was on the rise (increased by 2.5%), while growth in the oil industry remained negative (decreased by 6.5%).


Improved economic activity in the region increased demand for Georgian goods and services, but at the same time it increased the demand for imported goods in Georgia – leading to a deterioration of the trade balance. Exports grew significantly in November, but the growth rate was less than the double-digit growth we saw in previous months. In fact, November was the only period in 2017 when exports increased by less than double-digits (8% yearly). Geostat has already published preliminary data about Georgia’s external trade in 2017. According to the report, distribution of exports by major commodity groups did not experience any notable changes – the share of copper ores and concentrates, ferro-alloys, and re-export of motor cars in total exports still exceeded 30% . The only category that suffered significant decline during 2016 was the export of hazelnuts and other nuts - reduced by more than 53% yearly.

NOMINAL GDP BY CATEGORIES OF USE Increases in private consumption and gross capital formation were the main contributors to nominal GDP growth in the first quarter of 2017. The situation changed dramatically in the following two quarters, when net-exports started playing a more significant role in growth decomposition (see figure above).


Source: Geostat

the forecast. In November, the Brent Crude Oil price increased by 9% monthly and 40% yearly.

EXCHANGE RATE The Georgian Lari depreciated against all main trading partner currencies in November. The most significant depreciation was observable with respect to the Euro (5% in month and 16% in annual terms) and USD (5% in month and 6% in yearly terms). See the figure below to understand the USD/GEL exchange rate dynamics during 2017. In addition, the Real Effective Exchange Rate (REER) depreciated by 5% relative to the previous month, and by 6% relative to the same month in the previous year. Notably, during the whole of 2017, NBG did not sell foreign exchange reserves (despite the phase of Lari depreciation in OctoberNovember), and purchased 129.75 million

USD worth of foreign reserves during the entire year. 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 the 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.

Remittances, together with foreign direct investment (FDI), represent the main sources of external funding for Georgia. In November, remittances increased by 25% relative to the same month of the previous year. Moreover, there was a dramatic increase in the number of visitors (14%) and number of tourists (22%) yearly. This had a moderate, but still positive impact on projected real GDP growth in Q4 of 2017 and Q1 of 2018.

BRENT CRUDE OIL PRICE The increase in the Brent Crude Oil price in November, which put upward pressure on the prices of imported goods and, therefore, the general price level in Georgia, had a slight negative effect on

10 Galaktion Street

Source: NBG

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The Merging of Technological Giants: Silknet Buys Geocell BY MÁTÉ FÖLDI


n January 26, the largest transaction in the history of Georgia was created by a full spectrum telecommunications company merging: Silknet (internet, cable television and landline) merged with mobile phone operator Geocell. Silknet announced the deal after an agreement was reached with Geocell’s shareholders, Telia Company (STO: TELIA) and Turkcell (NYSE: TKC, IST: TCELL). The value of the transaction amounted to $153 million. Pending the approval of the Georgian National Communications Commission, the acquisition is to be completed in the first half of 2018. With regards to funding, Silknet said that it would use its own funds along with extra finance from TBC Bank. Houlihan Lokey and Erneholm Haskel served as the financial advisers on the transaction, and Dentons served as the legal adviser. Silknet is a member of the Orange Alliance, which promotes the development of international telecommunication companies, and their work efficiency and enables them to use the experience and technologies of the world class leading operator. The merging of the two telecommunications giants will enable Georgian customers to access internet, cable television, mobile and fixed telephone services, including mobile access to

exclusive Silknet content. "The transaction allows us to create an integrated telecommunication operator that owns fixed and mobile networks,” said Giorgi Ramishvili, Chairman of Silknet and its founding company Silk Road Group Supervisory Board. “The increased scale will provide better access for the company to international financial markets, which allows for the continuous development of additional investments and new technologies. Our subscribers will benefit from this, because our main goal is to provide Georgian customers with even higher quality products, services and content. We welcome the merits of Silknet and Geocell with high professionalism and corporate culture. This transaction continues the long-term tradition of our group which implies Georgia’s integration with the rest of the world, and we are confident that it will contribute significantly to the development of digital infrastructure in Georgia.” Telia Company’s sale of the Georgian mobile operator followed its policy of offloading its non-Scandinavian operations in order to focus on its core market. “I’m happy to announce another step in our effort to, over time, leave Eurasia and focus on the Nordic and Baltic regions within the framework of our new generation telco strategy,” said John Dennelind, President and CEO of Telia Company. “I would also like to thank Geocell’s employees for their outstanding contributions and wish them all the best in the company’s next phase.”

SILKNET Silknet is the country's largest fixed network, offering customers internet, broadcasting transit (cable TV) and fixed telephone services, in addition to fixed and mobile CDMA services. It has a 41% market share of the internet market, and a further 48% of the fixed telephone market. Since 2015, Silknet has provided 4G LTE fixed internet services and is now the largest wholesale operator in the region. Silknet is a Silk Road Group company founded by Giorgi Ramishvili in 1997.

Shareholders of Silk Road Group are Giorgi Ramishvili, Aleksi Topuria and David Borgeri. Silk Road Group is one of the leading private investment groups operating in the Caucasus and Central Asia, and in Georgia it is represented in different sectors including transport, real estate, hotel business, telecommunication and more. Nowadays, Silk Road Group companies employ about 5,000 people. Over the last decade, Silk Road Group, with its partners, invested $500m into the Georgian economy.

GEOCELL Geocell, Georgia’s second-largest mobile operator, is owned through Fintur, a holding company in the possession of Telia Company and Turkcell. Finnish-Swedish Telia Company is a leader in the telecommunications sector. It has operations in Nordic and Baltic countries, Eurasian markets including Russia, Turkey and Spain. Telia Company and its partner companies have more than 185 million subscribers in 17 countries.

Vinotel Wins Best Luxury Small Hotel in Eastern Europe Award BY NINO GUGUNISHVILI


uxury boutique hotel Vinotel recently won the Best Luxury Small Hotel in Eastern Europe Award at an annual award ceremony held in St. Moritz, Switzerland. The event was the 11th such ceremony celebrating the hospitality sector, organized by the British ‘World Luxury Hotels Award Organization,’ which brought together 2000 nominees from around 80 countries worldwide. While the award category was determined by country, regional and global level, Vinotel was the only one to receive an international, regional award from Georgia. It won Best Luxury Small Hotel Award as a regional winner from Eastern Europe, in “recognition of a sustained commitment to excellence in hoteliering and outstanding achievement in the international luxury hospitality industry,” - the award reads. Already open three years, the hotel is located within a historic building which is a classic example of traditional Tbilisi architecture, in the old part of the capital city on the left embarkment of the Mtkvari River at the gateway of the old Avlabari district. Vinotel is frequented by numerous high-profile guests, artists, and international political and business figures. There are 13 guest rooms and a restaurant with five separate chambers, each featuring a unique style, from the main hall, winetasting chamber with its oval oak bar table, and traditional chamber

in an arched brick wine cellar, to a formal dining hall with a French fireplace for business dinners and a green terrace overlooked by an old church, another fine example of the hotel’s connection with history as it at the same time presents all modern comforts. “The Vinotel concept is exceptional and unique,” Nanuka Chanturia, Vinotel CEO, tells us. “It’s designed to represent the long, rich hospitality traditions of our country, and the history of winemak-

ing, strengthened with the relevant expertise. As with the geographical location of Georgia, Vinotel also harmoniously combines the European and Asian styles allowing our guests a real taste of true Georgia. Vinotel leaves everyone satisfied, from tourists to businessmen and high-ranking officials. VINOTEL was made a 2017 Travelers’ Choice Award Winner by Tripadvisor, based on reviews and opinions from millions of travelers,” she says.

As well as offering traditional Georgian cuisine to guests, Vinotel also offers them the chance to taste a selection of some of the finest Georgian wines from both small Georgian wineries and the well-known Georgian wine brands. As the Vinotel CEO notes, the unique concept and style of the hotel is based on its offering everything that is natural to visitors, from its wines, to its warm, “living” environment, with all construction materials used natural, the hotel

walls hand-painted and even latex mattresses in the rooms being hand made. “We’ve discovered that clients are very perceptive, and we’ve managed to make Vinotel comfortable for all possible visitors, no matter their rank,” Chanturia says. “We’ve made sure they’ll feel at home while enjoying healthy products and healthy wine, accompanied by the sounds of Georgian folk music. Our prices are tailored to any segment and adjusted to any budget, and we take serious note of all feedback given by guests with the aim to constantly upgrade our services.” “I believe that in unique concept and high-quality service, Vinotel is the first of its kind in Georgia, and it well-deserved the Best Luxury Small Hotel Award won in Switzerland in December. This is not just Vinotel’s success: this is a success for our country, Georgia, which is taking huge strides towards developing its hospitality industry. Of course, we at Vinotel are also a part of this sphere, and it’s a great responsibility for us. Georgia hosted 7 million tourists in 2017 and for all hotels it serves as a motivation to improve services and establish new, better standards. In the long-term perspective, this will without doubt assist to tourism development in Georgia,” the Vinotel CEO concluded.





PMC Research Presents Findings on Georgia’s Potential within Belt & Road Initiative BY NINO GUGUNISHVILI


n January 25, PMC Research hosted a public discussion and a presentation introducing the findings of the research on ‘Georgia as a Transit Hub and its Increasing Potential in the Implementation of the Belt and Road Initiative.’ The study findings presented by PMC Research researchers Mariam Zabakhidze and Rezo Beradze, focused on highlighting Georgia’s role and potential in the framework of the Belt and Road Initiative (BRI), and gave recommendations regarding the possible future steps to be undertaken for the country to be better integrated in the abovementioned BRI. It is widely regarded as an important opportunity allowing the country to become a transit hub and benefit from the increased trade possibilities between China and Europe. The study claims there is a “clear interconnection between the BRI and Georgia’s economic development strategy in terms of infrastructure development and trade facilitation,” and advises “Georgia to leverage the advantages of its trade agreements (DCFTA with the EU; FTA with China) and favorable business environment to become an important transit hub in the South Caucasus region and beyond.” The study also notes that, notwithstanding the clear political will from the Georgian government to become a part of BRI, the country has yet to undertake a number of steps “to utilize its strategic location, facilitate investment and become more than a transit country.” It says the Georgian government “needs to be proactive and develop a strategy at the regional and national level,” and goes on to present several recommendations in this regard, which center on establishing working groups involving public and private sector stakeholders to discuss setting a common vision on increasing TRACECA corridor competitiveness, work on simplifying border –crossing procedures through the TRACECA corridor; developing a national strategy document with a “clear message underpinning Georgia’s stance on becoming a transit hub to the stakeholders of BRI,” and establishing a BRI harmonization unit, ensuring effective usage of Georgia’s potential and opportunities beyond being a transit hub. The study suggests the China-Central Asia-West Asia corridor could encom-

Photo source: PMCG

pass TRACECA, offering various opportunities for Georgia. The study points out that despite Georgia’s growing involvement in BRI, and the increased interest of China in the South Caucasus region, there are a number of barriers for both countries, from the lack of modernized and developed hard infrastructure to challenges related to the lack of soft infrastructure tools. On the positive side, the authors of the study highlight that Georgia can use its advantages, notably its business-friendly environment, liberal trade policy and low rates of corruption, “to attract more foreign investment and to create more added value within the country”. Noting China and Georgia’s FTA agreement signed in 2017, the Anaklia Deep Sea Port construction, the Baku-TbilisiKars Railway project and the expansion of the country’s East-West highway as some of the milestones of Georgia’s growing engagement in BRI, alongside the Tbilisi Belt and Road Forum held in 2017, during which numerous memorandums of understandings were signed with China, the report goes on to analyze China-Europe economic cooperation trends. The research authors suggest that, “while assessing the potential of Georgia to derive economic gains from being a transit hub, the current situation regarding trade corridors should be investigated.” “Georgia can offer a platform to China through which it can more efficiently trade with Europe. However, for this platform to become competitive, and a number of some complex and interre-

lated issues need to be addressed. Georgia’s success in this regard will largely depend on the success of coordinated hard and soft infrastructure development and the taking full advantage of the BakuTbilisi-Kars railway link to Turkey and Anaklia Deep Sea Port. In this vein, convergence between the BRI and Georgia’s economic development trajectory is linked to infrastructure development. At the same time, Georgia can utilize the advantages of its trade agreements and business environment to become an important transit hub in the South Caucasus region and beyond,” the study emphasizes, noting that one of the major challenges for the country might be the significant decrease of transit in Georgia. “Although it is too early to evaluate the impact of BRI-related infrastructure development on Georgia’s potential transformation into a transit hub, current evidence suggests the existence of clear opportunities for Georgia to modernize its infrastructure. To ensure that the full potential of this new connectivity is achieved, old infrastructure needs to be modernized. In addition, soft infrastructure tools need to be put in place.” In terms of recommendations and conclusions, the study suggests that “Georgia needs to be proactive and should determine how to derive maximum benefits from the BRI for its economic development. To do so, a coherent, coordinated and complementary strategy based on national development goals, reflecting the comparative advantages of different development partners, needs to be put into place,” alongside a recom-

mendation for the Georgian government to develop a strategy on both a regional and national level. Another recommendation underlines the need to create simplified bordercrossing procedures, while creating a soft infrastructure tool regionally and introducing a unified tracking and tracing system. The study also recommends the “strengthening of currently limited regional cooperation and identification of complementarities of each country through the TRACECA corridor.” The authors of the study say that, on a regional level, Georgia needs to focus on the “competitiveness of the corridor

that passes through it. The strengths and weaknesses of each corridor need to be examined very carefully and future actions should be based on the advantages of TRACECA compared to its rivals. Thus, Georgia needs to establish working groups involving key public and private stakeholders within the country and in the region to discuss and establish a common vision.” Recommendations on the national level, according to the study, include working on a national transportation strategy document and creating a BRI harmonization unit, under the Ministry of Economy and Sustainable Development of Georgia, that will study the advantages of the country as well as find areas for improvement. “Georgia could be an attractive partner for BRI countries as it is the only country in the region to have signed a DCFTA with the EU and an FTA with China,” the study notes. “From Georgia’s perspective, the most significant expectation relates to the improvement of its hard infrastructure connectivity. This corresponds with some of the infrastructure projects forming part of Georgia’s national development strategy, such as building a new deep-water sea port on the Black Sea, improving Georgia’s railways, and expanding road transport in Georgia, thus creating an opportunity for “‘winwin’ cooperation,” the paper concludes. The study was conducted by PMC Research, as part of the project ‘Public Policy Discourse and Dialogue Platform,’ with the support of Policy and Management Consulting Group (PMCG).

Armenian PM Speaks on Armenia’s Regional Plans at Davos BY DIMITRI DOLABERIDZE


rime Minister of Armenia Karen Karapetyan discussed Armenia’s plans for economic development in the margins of the World Economic Forum

in Davos. “We will continue to implement our

reforms in order to make Armenia more attractive from the point of view of a comfortable business environment. We recognize that the local market can become a platform for doing business in our region by using our trade regimes,” Karapetyan told Euronews. He noted that the Armenian government is trying to create a common future for the region, aiming to “turn the country into a hub for regional relations.”




Georgia’s Minister of Economy Opens Extended Enterprise



he first Vice-Premier, Minister of Economy and Sustainable Development of Georgia, Dimitry Kumsishvili, has opened an extended enterprise in Tbilisi, financed by the state program ‘Produce in Georgia.’ The Ministry reports that Dream Ltd, which previously engaged in the import and sale of building and repair materials, has set up its own wood and metal door enterprise with the support of the program Produce in Georgia, and is now rolling out its own production under the name Megadoors. Currently, 42 people are employed in the factory, yet, with the increase in productivity, the company plans to create an additional 20 new jobs by the end of the year. The enterprise boasts modern equipment and claims to be the leader in its segment, producing for the local market. At this stage, the company manufactures more than 100 types of high quality wood, MDF and metal door, and individual orders are also accepted.

According to the Ministry of Economy, the current production capacity of the company is 2,000 items per month, but in the near future, the volume of production is expected to double, allowing the company to export products to Turkey, Armenia, Azerbaijan and Kazakhstan. “This is a very high-standard enterprise, producing ecologically friendly doors. It is important that the materials used in manufacture are of European quality,” the Minister of Economy stated, adding that the company enjoys all the benefits of the state-led program. He noted that it had received a 5.184 m2 plot from the National Agency of State Property for a symbolic price of GEL 1 for construction of the enterprise. “The company uses the financial and infrastructure component within the program Produce Georgia, which means that in the first two years, the interest of the company’s loan will be co-financed by ‘LEPL Produce in Georgia,’” Kumsishvili explained. The owner of the enterprise, Raul Gabaidze, said that for years they were importing doors from China and Turkey. “We decided to substitute imported production with locally-made doors, manufactured by us. The support from the State was a great motivation,” he added.






50% of Russian Sausages Marked as “Substandard” BY DIMITRI DOLABERIDZE


recent study by Russian quality control body Roskontrol has revealed that numerous sausages sold in stores are substandard. 17 samples were sent to the laboratory, including brands Malakhovsky, VELCOM, Dymov, Cherkizovo, Ostankino, Rublevsky and Klinsky. “Roskontrol checked the most popular types of sausage products: Moscow, Servelat and Braunschweig sausages,” organization representative Alina Osmak said. “All samples are made in accordance with GOST guidelines, and none of them comply.” Servelat, under the brands Ostankino and ‘Daily,’ now find themselves on Roskontrol’s blacklist. These are products that the organization does not recommend consumers to buy. Starch was found in the Ostankino sausage, and in the sausage ‘Daily,’ poultry meat, as well as phosphates. "Phosphates are used in the meat industry as consistency stabilizers, water retaining agents, and acidity regulators," Roskontrol explained. “Technical regulations allow the use of phosphates in meat products, but total content should not exceed 0.8%.” If it does, the manufacturer must indicate this on the label. Yet, Roskontrol noted, the use of phosphates is not necessary if the product is made in accordance with GOST. "Phosphates hold water in the body, which has a bad effect on mineral-bone metabolism," explained dietician Elena Tikhomirova. “A person can develop many health problems, for example, diseases of the musculoskeletal system [from excessive phosphate consumption].”

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“In three samples (Rublevsky, Ostankino, Cherkizovo), the phosphorus level is higher than the natural level for this type of product. This leads us to assume the phosphates were added as a food additive,” reports Roskontrol.

Sausages under the brands Cherkizovsky and ‘Remit’ were also blasted by Roskontrol following tests, though, the organization noted, they did note improvement in the quality of these sausages compared to past testing.

In the sample of the brand ‘Near Hill,’ experts established clear signs of spoilage and inconsistency with the standards in a number of factors, Roskontrol announced. In the sample of the brand Welkom, wheat fiber was found, though the manufacturer did not indicate its presence on the label. “Wheat fiber is a wheat bran which absorbs water and increases the mass of the sausage,” Tikhomirova said. “Sausages under the brands Malakhovsky and Dymov did not meet the standard for the level of moisture content and consistency of minced meat, which contradicts the marking of the sample,” Roskontrol noted. Sausages from brand Klinsky were the only ones to pass the test with only minor remarks. According to Roskontrol, more than 50% of sausages tested are on its black list for violations of varying severity. "The most common problem is the falsification of the content," the organization said. “Meat is replaced with cheaper ingredients of a protein nature (cartilage, skin, poultry meat, collagen and soy protein, etc.).” Both the cheapest and most expensive sausages can be found on the black list, which once again confirms: it's dangerous to choose only for the cost, as there is not always a relation to quality. "A huge amount of salt is contained in any sausage products," said Elena Tikhomirova. “The daily dose of salt for an average person is 500 mg, and 100 grams of sausage contains three times that. The consequences are increased pressure, swelling, and potential obesity.” Roskontrol is a system of independent quality control. The supervisory board of the organization includes representatives of public organizations of consumers, industrial associations of producers and sellers of products.

JANUARY RETAIL FPI | Food Prices Going Up, Up, Up!


t the end of January, ISET’s Retail Food Price Index increased by 5.2% y/y (compared to January 2017). On a monthly basis (compared to December 2017), food prices in Tbilisi’s major supermarkets decreased slightly by 0.3%. According to data from the last two weeks of January, prices dropped the most for buckwheat (-6%), rice (-6%), and bananas (-2%). Among the sharpest price increases was an 8% rise in the price of wheat flour and tangerines, while milk and frozen chicken climbed 3%.

WORLD FOOD PRICES ON THE RISE ISET’s Retail FPI ended the year on a high note: retail food prices picked up in December 2017, showed a significant rise of 10% year-on-year, and had the highest reading in three years (since the Index was launched in November 2014). After facing expensive Christmas dinners, Georgian consumers might have been relieved as food inflation

cooled to 5.2% in January 2018 (compared to January 2017). International prices also exhibited an upward trend in 2017. The Food Price Index, measured by the Food and Agriculture Organization (FAO), showed a significant 8.2% hike in 2017, compared to the previous year. According to FAO, this was the highest annual average record since 2014. The main drivers were meat and dairy prices. In 2017, the FAO Meat Price Index gained 9% from 2016, while the FAO Dairy Price Index showed the sharpest increase at 31.5%. Reflecting international prices, meat and dairy products have become more expensive in Tbilisi’s retail supermarkets. Prices increased the most for beef (20% up), butter (17% up), cheese (16% up), and milk (7% up). According to the World Bank, food prices are expected to increase further in 2018. This might be welcome news for producers and the food industry, but not so much for budget-conscious consumers.





Hartwig Schafer: World Bank Vice President, Global Themes try’s heavy dependence on hydropower generation and agricultural production suggests that quite realistic future impacts of climate change on the water balance should be taken seriously. Investing in sustainable management of water and forest resources would be crucial in mitigating expected impacts. Georgia obtained a grant from the trust fund established in support of the Nationally Determined Commitments (NDC) Partnership, which is an international coalition working to enable countries to achieve their climate and sustainable development goals. This grant will be used to assist Georgia in the development of a National Action Plan for Adapting to Climate Change Impacts on the Black Sea Coastal Zone. This is an example of an operation specifically targeting climate challenges. However, following the World Bank policy, any investment and technical assistance delivered to Georgia will be expected to identify and maximize, as relevant, its climate co-benefits in order to maximize the cumulative impact of the portfolio.



artwig Schafer became Vice President, Global Themes last year, a position which has him overseeing the World Bank’s engagement in the corporate priority areas of Fragility, Conflict and Violence (FCV), Gender, Infrastructure/PPPs/Guarantees, Climate Change and Knowledge Management. As Vice President, Operations Policy and Country Services, Mr. Schafer was responsible for the World Bank’s business policies, practices and procedures for lending products and knowledge services for client countries. He led a number of key reforms, including roll-out of the Bank’s new policies on procurement and environmental and social safeguards and innovation of the Bank’s lending and knowledge instruments. GEORGIA TODAY interviewed him to find out more.

TELL US ABOUT THE GLOBAL THEMES UNIT AND ITS FOCUS The Global Themes Vice Presidency brings together the big development issues of our time, including Climate Change, Gender, Fragility, Conflict & Violence, Infrastructure, PPPs & Guarantees, and Knowledge. These groups existed separately within the World Bank, and it made sense to bring them together to leverage the synergies among these themes and encourage greater collaboration and knowledge-sharing among them, considering the Sustainable Development Goals.

GEORGIA IS DEVELOPING QUICKLY AND WANTS TO BE PUT ON THE MAP IN TERMS OF BUSINESS. WHAT ADVICE CAN YOU GIVE THE GEORGIAN GOVERNMENT TO ACHIEVE THIS? Enhancing a business-friendly environment, financial sector development, enhancing social and financial safety nets, and spurring innovation and trade lie at the center of Georgia’s private sector growth agenda. In this regard, developing effective mechanisms for consulting with the private sector on economic policies, and communicating new reforms, would help improve the predictability of the business environment and strengthen the partnership between public and private sector.

WHAT ARE THE MAIN CHALLENGES FACING THE PRIVATE SECTOR IN GEORGIA? So far, what I’ve seen is the willingness of the private sector and the willingness of the respective government entities to partner, with a shared ambition to diversify economic growth and enhance employment opportunities. There are several important initiatives underway, such as the PPP law, which are central to this partnership and to attracting private investment.


longer-term perspective, Georgia should be aware of risks associated with water scarcity. Because the country is rich in water resources, it may not seem a real challenge today, however, the coun-

While Georgia is making important strides towards closing gender gaps, there still remains a lag in gender equality. 11% of GDP is lost because women don’t have the same access as men to career and entrepreneurship opportunities. Since women represent half the population, their active participation in the economy is imperative, especially in the rural areas, as this would significantly contribute to the gross domestic product (GDP) generally and their livelihoods particularly. The active participation of women in the economy also means equal treatment and equal wages in the workplace, with more women taking on decision-making roles.

Maximizing Finance for Development, or MFD, entails leveraging the private sector in ways that optimize the use of scarce public resources. The approach is to explore private sector solutions when possible, or to help the government put in place a regulatory and institutional environment that allows private sector players to engage, and to allocate scarce public resources to sectors and investments where the private sector would not engage.

INEQUALITY REMAINS A BIG PROBLEM IN GEORGIA, HIGHER THAN IN MOST OTHER FORMER SOVIET STATES. WHY DO YOU THINK THIS IS, AND HOW CAN IT BE CHANGED? Indeed, inequality remains a big challenge in many countries in the region and in Georgia, where large gaps between urban and rural areas persist. Learning from other countries that have reduced inequality is important. Key interventions that stand out are vigorous investment in early childhood development, universal healthcare, quality education, conditional cash transfers, and investment in rural infrastructure. Strengthening equal opportunities for all and targeting social assistance to the poorest will be key to reducing inequality and improving living standards across the various segments of Georgian society. Georgia’s progress towards improving coverage and targeting of social benefits moves in the right direction. Implementation of a universal healthcare reform has resulted in over 90% coverage of the population to access healthcare services. Targeted Social Assistance (TSA) coverage of the poorest decile was estimated to be on average at 58% in 2015. Pension and deposit insurance system reforms are underway for completion in 2018. Targets were achieved on teacher effectiveness evaluation tools, while the school-based quality assurance reforms still have a long way to go. Support through the Inclusive Growth Development Policy Operation (DPO) series led to improvements in the budgeting and financial management.

WHAT IS GEORGIA’S GREATEST CLIMATE CHALLENGE? WHAT IS THE CLIMATE PORTFOLIO? The impacts of climate change most evidently experienced in Georgia at present are the increased occurrence of extreme weather changes and growing frequency of natural disasters. Flash floods, landslides, hailstorms, strong winds on the coast and inland result in significant economic loss and affect the livelihoods of the people involved. In a

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

Address: 11 Grishashvili Str., 4600, Kutaisi, Georgia TEL 219 71 00

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



Prime Minister of Lithuania Arrives on Official Visit to Tbilisi



Davos: Brazil is Back

Continued from page 3 Skvernelis thanked Georgia for actively contributing to global security, and for participating in NATO-led peacekeeping missions. “This contribution should become an important argument for granting Georgia NATO membership,” the Lithuanian PM noted, going on to express his country’s firm support to Georgia’s sovereignty and territorial integrity. “We firmly support Georgia's territorial integrity and strongly condemn Russia's creeping annexation of Georgian regions - Abkhazia and Tskhinvali. We continuously raise this issue at the international forums, and demand that Russia fully comply with the six-point ceasefire agreement,” he added. Georgia’s PM thanked Skvernelis for his visit,and underlined the friendly and long-lasting relations between Georgians and Lithuanians. He said that this year, the two countries mark the 100th anniversary of restoring independency of Lithuania and declaring the first Republic of Georgia. “Lithuania is a close ally and friend of Georgia. We have many times underlined how faithful Lithuania has been towards supporting Georgia's sovereignty and territorial integrity, our country's rapprochement with the EU and the Euro-Atlantic integrations,” the Georgian PM said. Kvirikashvili stated that bilateral cooperation in various fields with Lithuania deepens every year, adding Georgia shares Lithuania’s experience in Twinning programs, which helps in the process of carrying out reforms. “At today's meeting, we paid particular attention to the deepening of our economic relations. There is a great potential in this direction, and our priority is to fully exploit this potential to ensure that our economic indicators comply with high levels of political relations,” he added. The Georgian PM also said that the number of Georgian students studying in Lithuania has significantly increased. “Lithuania's government annually allocates state scholarships, and now more than 200 Georgian students are studying in Lithuania's higher education institutions. I am sure that these 200 young people will, in time, become Lithuanian cultural ambassadors in Georgia,” he noted.



ast week saw numerous businesspersons, opinion-makers and high-ranking political players unite at the World Economic Forum in Davos, in Switzerland. GEORGIA TODAY received the following speech from the President of Brazil in which he speaks about the reform program which has been transforming Brazil. President Temer: We have turned the page of the economic crisis because we were able to say no to populism and act responsibly. Moved by a long-term vision, our government has been building, through a permanent dialogue with the National Congress and society, the foundations of an efficient State, which provides its citizens with quality services within a balanced budget. These also constitute the foundations for sustainable growth, indispensable to advance the development of Brazil and effectively get millions of Brazilians out of poverty. In a little less than a year and a half of management, we have corroborated our commitment to fiscal balance. The results are here. Inflation has fallen and is once again under control. The exchange rate has been stabilized. The interest rates have shrunk to their lowest historical levels. It was with achievements and not voluntarism that we succeeded in restoring the confidence in the Brazilian economy, confidence which has already reflected upon increasing industrial activity, vitality of foreign trade and renewed job creation. An investor observing Brazil today is able to see a government working with precise diagnostics, applying solutions

which actually work. They will note that it is an administration engaged in making the business environment ever more dynamic. Everywhere, we have been removing bureaucratic obstacles, which used to obstruct the pathways for entrepreneurs, and it has become easier to start a business, import and export. The modernization of employment law, which has already come into force, is a particularly relevant milestone in our efforts to tune Brazil into the realities of the current economy, without affecting workers` rights. On our horizon, tax simplification is still to come in order to make tax payments swift and rational. In all of those actions, what the trend heralds is a Brazil where there is ever-increasing economic freedom. Public accounts in good order and a competitive private sector are essential for sustainable growth as much as is quality infrastructure, consistent with the vast economic potential of our country. That is why, in Davos, I presented the various opportunities of the Advancing Partnerships Program (`Avançar, Parcerias`), comprising Federal Government concessions and privatizations. The model which we have instituted offers clearly defined and stable rules, assuring legal security. It is not by chance that it has attracted attention throughout the world. To date, we have completed

over 70 projects, including roads, ports, airports, power transmission lines, gas and oil fields. Investments have been estimated at R$142 billion. In 2018, there will be another 75 project proposals, which also include railways, likely to attract over R$130 billion. The reform will strengthen the credibility of the economy, enabling it to join in an enduring growth cycle. The changes which Brazil has been undergoing, which have indeed better prepared it for the 21st century challenges, are not exhausted at the domestic level. In the foreign area, we have acted in the spirit of openness, considering that it is fallacious to think that there can be development in an environment of a closed economy in the current world. Our endeavor in achieving more and better integration begins in our region, in the Mercosul: jointly with all other partners, Brazil has been setting in motion a program which advances free markets as one of its key pillars. In addition to removing inter-block trade barriers, we have been fostering a rapprochement with the countries of the

Pacific Alliance. For the first time in twenty years, we have a realistic perspective to conclude the MercosulEuropean Union trade agreement, an agreement which we wish to be wideranging and balanced, and which is truly able to cater for the interests of Brazilian society. In addition, we have been opening new negotiation fronts with partners from a variety of quarters. An undeniable fact for those who keep a sense of objectivity is that Brazil has already travelled a long way under our government, and at speed. We have achieved a great deal, always on the basis of dialogue, the raw material of democracy; with a genuine disposition too, aimed at bringing alignments closer and articulating efficient solutions for the needs of the country. The challenge which remains now, and to which we are fully committed, is the Social Security reform. At Davos, I ratified my commitment to a fair and sustainable social security system, able to correlate with the demographic evolution of our population. This is a commitment which I renew, firstly, before the Brazilian people, and particularly the less privileged; after all, the system as it is, transfers income from those who have less to those who need it the least. The reform will abolish privileges and will ensure the payments of all current and future pensions. It will reinforce the credibility of the Brazilian economy enabling it to join in a lasting growth cycle. Bravely and with renewed resolve, we have been facing the issues with which the historical juncture presents the whole nation. I am left without any doubt whatsoever, that once again, the challenges will be overcome and common good prevail. Brazil is great country which garners assets of all sorts. It is a consumer market with over 200 million people, with abundant natural resources. Our people are creative and hard-working. We have a diversified industry, a highly productive agriculture. Our energy matrix is one of the cleanest in the world. We are a country with continental dimensions, located far from geopolitical tensions. These are the reasons which have always made Brazil an attractive destination for investors. In recent times, the problem was that the country had somewhat lost its bearings. What our government did again was to bring Brazil back on course. From the outset, we were clear about the course we needed to follow: the course of responsibility, of openness, of freedoms. And we will not divert from such a course; nor will we divert ourselves from it. This is the message which I conveyed to the Brazilian people and which I took to Davos. First published in ‘Valor Econômico’ on January 22, 2018





Putin’s Imperial Coronation Dodon), has declined. The country once characterized as being openly pro-Russian, is trending towards becoming pro-European. Up in the north, in Belarus, Russia still enjoys a predominant position. But even in this often considered “most pro-Russian” country, sentiments towards Moscow are not always positive. Paradoxically, the war in east Ukraine and the annexation of Crimea by Moscow, meant to send direct political messages to all countries across the former Soviet space, has led to rather different thinking in Minsk. President Alexander Lukashenka, with his acute understanding of the balance of power in the region, a couple of years ago initiated a policy of rapprochement with the West. The latter has accused him of autocratic rule and regularly imposed sanctions on the country since the 1990s, but over the past two years there have been some positive steps towards lifting some of the sanctions and extending closer economic ties. Thus, although it is true that Putin is at the apogee of his power, on the ground we see that Russia in fact experiences troubles keeping its fragile post-Soviet satellite empire across Eurasia. Putin will be President, but it will a different presidency from the past, beset with more geopolitical challenges than ever.

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n March, Russia will hold its presidential elections, in which the incumbent President is widely expected to retain his post. Putin has reached an apogee of power. He’s already been in power for 18 years either as President or PM of Russia. Under his rule, Russian military power has experienced a definite resurgence through military campaigns across the Eurasian landmass, while internally the country, although experiencing economic difficulties, is more stable than it was in the 1990s. Everyone understands that Putin’s fourth term as President will probably be his last, as he is already quite advanced in age. He has worked hard to cleanse his way to the office through systematic campaigns to boost his popularity. According to the state-run pollster VTsIOM, 66% of voters are prepared to vote for Putin. Reputable, independent pollster Levada also shows high numbers for Putin’s popularity. Indeed, Putin’s unchallenged victory is also guaranteed by the fact he lacks serious opposition. Alexey Navalny, a major anti-corruption campaigner in Russia, has been barred from running for presidency for alleged corruption charges. Moreover, Navalny’s foundation was closed several days ago. Another candidate, Ksenya Sobchak, famous Russian socialite, enjoys only minor popularity. However, if there is any semblance of viable opposition, quite surprisingly, it comes from the

Putin will be president, but it will a different presidency from the past, beset with more geopolitical challenges

Communist party. Last December, technocratic party (since 1993) leader Gennady Zyuganov, which has been nominated many times in presidential elections, stepped back, leaving his place to Psvel Grudinin, whose natural charisma is new for the Communist Party. This may help fuel a revival of Communist nostalgia. Grudinin represents a modern version of socialism, while, according to a recent Levada poll, 58% of Russians regret the Soviet Union’s collapse. However, this does not mean that Grudinin will somehow be able to challenge Putin. Indeed, although Grudinin is in fact second to Putin, he still holds just 6% of the electorate. All points to the fact that Putin will remain in office for another six years. He even chose the date of the elections, 18 March, to coincide with the anniversary of his takeover of the Crimean Peninsula in 2014. March 18 will be an imperial coronation for Putin.

ALL NOT GOOD ON THE GROUND As rosy as it seems, Putin’s fourth presidential term will be markedly different from what he has experienced so far. In fact, under Putin, Russian foreign policy has experienced deep crises on the global stage. By the early 2000s, for instance, Moscow enjoyed pretty much uncontested political and military influence in its neighborhood, except for Estonia, Lithuania and Latvia. But under Putin, in the South Caucasus, Russian foreign policies have led to a deterioration of relations with Tbilisi, particularly after the revolution of 2003 (seeing the coming to power of the overly ambitious Mikheil Saakashvili), resulting in an open military confrontation in 2008. Moscow built its military bases in Abkhazia and South Ossetia, but its southern flank remains vulnerable as Tbilisi has been quite successful in moving towards western military and political integration. Moving to the north-west, to the modern Ukraine, one could easily see how the political landscape dramatically changed and not in Moscow’s favor. Where, before 2014, through Ukraine’s neutrality, the Russian position in the country was well secured both economically and politically - and in case of necessity Moscow could even project its influence to the furthest points of western Ukraine and thus reach the heart of Europe nowadays Russian control only extends to east Ukraine and parts of the Black Sea through the incorporated Crimea. Further west in Moldova, too, Russian influence, although it has been somewhat on the rise recently (because of the elected pro-Russian Igor



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Profile for Georgia Today

Issue #1018 Business  

January 30 - February 1, 2018

Issue #1018 Business  

January 30 - February 1, 2018