Georgian gov’t cancels Anaklia Development Consortium contract for construction of deep sea port on Black Sea coast
The Georgian government has decided to cancel its contract with the Anaklia Development Consortium that was tasked with building the first deep-sea port in the country.
Minister of Infrastructure and Regional Development Maia Tskitishvili officially announced today that the government is terminating the agreement with the Anaklia Development Consortium.
Tskitishvili said the reason is that the consortium has not fulfilled its obligations to bring in investments for the project.
However, the opposition believes that the informal leader of the country Bidzina Ivanishvili is behind this process, and that he is trying to stop the construction of the port of Anaklia for two reasons.
The first is that Ivanishvili is fighting with his political opponent, founder of the Anaklia Development Consortium and head of the country’s largest bank, TBC Bank, Mamuka Khazaradze. In 2020, parliamentary elections are going to be held in Georgia. Khazaradze’s political movement Lelo is one of the main opponents of Ivanishvili and his Georgian Dream party in this election.
Secondly, the opposition claims, Ivanishvili is taking into account the wishes of the Kremlin. Moscow has repeatedly openly stated that it does not like the idea of the construction of a port in Anaklia.
Experts suggest that the decision calls into question the future of one of the largest projects for Georgia in recent years – the construction of the port of Anaklia.
Infrastructure Minister Maia Tskitishvili says the government is looking for a new investor to build the Anaklia port.
“According to the investment agreement, by the end of 2020 we were going to have a [deep sea] port in operation, [but] as you can see, we did not achieve this result and there are no prospects for achieving it,” she said, adding “Georgia needs this project, so we will start looking for a new partner to quickly implement this project.”
The consortium declares that it has been difficult for them to fulfill their obligations precisely because of the state’s interference.
In particular, on January 8, 2019, the Georgian prosecutor’s office opened a criminal case against the former chairman of the Anaklia Development Consortium Mamuka Khazaradze and his deputy Badri Japaridze.
Khazaradze and Japaridze are accused of money laundering $17 million.
Anaklia port is the largest infrastructure project implemented in Georgia. Some even compare it with the Baku-Tbilisi-Ceyhan oil pipeline.
The United States is interested in the success of the port, and many private American companies were considering investing in the venture.
The port is an important infrastructure project for Georgia, as it paves the way for Chinese and Central Asian cargo to Europe and vice versa. The first Georgian deep-sea port under construction in Anaklia would stand to become a serious competitor to the ports of Turkey and other countries of the region.
The consortium says the initiation of the money laundering case from 11 years ago was an alarming signal sent to potential investors so that they would beware of participating in the project.
However, Mamuka Khazaradze says that, despite the “organized attack” of the authorities, the consortium still managed to fulfill its obligations:
“It is a lie that the consortium has not fulfilled its obligations. Even today there is an investor and all the requirements that were set out in the contract, I declare with all responsibility that they have been met,” he says.
He said that Ivanishvili is carrying out the the Kremlin’s task:
“The government, under the leadership of Bidzina Ivanishvili, completed the first stage of a special operation to stop the project of the port of Anaklia. I would like to personally tell Bidzina Ivanishvili that at this stage he has completed the Kremlin’s task, but the Georgian people will not forgive him for stopping the most important project for our country,” Khazaradze said.
Opposition, experts sound off on government’s decision
Other opposition party members have also linked the decision of the Georgian government to terminate the agreement with the interests of Bidzina Ivanishvili and Russia.
“There are only two governments in the world that oppose the Anaklia project. This is the Georgian government – which says one thing, but actually undermines the project, and the second – the Russian government,” Giorgi Kandelaki, a member of the European Georgia Party, told reporters.
Giorgi Vashadze, leader of the New Georgia party, called the government’s decision politically motivated:
“Anaklia should play a decisive role in the development of the Georgian economy, but Georgian Dream is not interested in developing the economy and creating jobs, they are driven solely by personal interests.”
Gia Khukhashvili, an expert on economics, calls the government’s decision “cheating,” and that it is detrimental to the country’s interests.
“What happened today was the logical end of the ‘cheating game’ that the government played throughout 2019. While declaring support for the project, it did everything possible to discredit the consortium...”, Khukhashvili said.
Anaklia Development Consortium intends to sue the government, director of the consortium Levan Akhvlediani said.
Gia Khukhashvili says foreign investors involved in the project will also sue, which could cost the country hundreds of millions.
“And most importantly, it makes the future of this project unclear,” Khukhashvili said.
Background. Government fight with Anaklia port
The idea of building a port in Anaklia belongs to the third president of Georgia, Mikheil Saakashvili.
After coming to power in 2012, the Georgian Dream began a fierce struggle against all of Saakashvili’s projects. However, the port of Anaklia was an exception.
A tender was announced in which the Anaklia Development Consortium won in 2016, and received the right to build a deep-sea port. One of the founders of the consortium is TBC Holding. Its owner is one of the most successful businessmen in Georgia, the former chairman of the supervisory board of the largest bank in Georgia, TBC Bank, Mamuka Khazaradze.
Khazaradze founded the consortium with American company Conti International LLC. The participation of the American company in the project was one of the requirements of the government. An interested American company was found quickly, as official Washington expressed open interest and support for the project.
Georgia today has two main ports on the Black Sea: Poti and Batumi. However, due to insufficient depth, not all types of vessels may enter these ports. Therefore, they cannot compete with either Turkish or Russian Black Sea ports.
If the port in Anaklia is built, the picture will change dramatically, since the draft plan says that Anaklia will be able to accept vessels with a capacity of up to 10,000 containers (the main port of Poti can accept vessels with a capacity of only 1,500 containers).
The total estimated cost of the Anaklia project is $2.5 billion.
The construction of the port began in December 2017. In July 2018, in Anaklia, with the help of special equipment, work began to dredge out the bottom.
At this stage, work in Anaklia has been suspended and the future of the project is unclear.
Problems with the project began in 2018 and became apparent after the resignation of then Prime Minister of Georgia Giorgi Kvirikashvili.
After the resignation of the former favorite of Ivanishvili, a review of all the projects begun during his tenure began. In particular, problems began with the Anaklia Development Consortium, which won the tender during the presidency of Kvirikashvili.
Mamuka Khazaradze and his deputy Badri Japaridze were then charged with money laundering.
The opposition and experts argue that the government’s struggle with Khazaradze was a clear negative signal for investors who may have otherwise become potential partners of the Anaklia Development Consortium.
“When the consortium’s leadership is accused of the worst crime, not a single investor risks or invests money,” says expert Gia Khukhashvili.
He said that if the processes developed in a healthy direction, the first phase of the project would have been completed.
Foreign enemies and friends of the Anaklia project
The main foreign enemy of the Anaklia project is Russia. The Kremlin does not hide that the construction of a port in Anaklia is not in its interests.
The Kremlin sees it as a geopolitical threat, since the U.S.-supported Anaklia deep-sea port, which is being built near the administrative border of Abkhazia, can, if necessary, deploy U.S. warships, US submarines and NATO warships.
Secondly, it is economically disadvantageous for Russia, since the new port will compete with Russian Black Sea ports for cargo from Asia to Europe. Moreover, the existence of a deep sea port in Anaklia would make the viability of a so-called Middle Corridor – a hypothetical shipping route that would allow for the transport of freight from China to Europe – all the stronger.
Former Russian Deputy Foreign Minister Grigory Karasin, commenting on the construction of the Anaklia port, directly threatened Georgia:
“Tbilisi needs to be decide: either it chooses an atmosphere of regional stability in the South Caucasus or a Euro-Atlantic agenda. And if Georgia chooses the other, it may face the same problems as Ukraine in 2014”, Karasin said.
Neighboring Turkey is also not included in the list of countries supporting the project, since the port of Anaklia will weaken its influence in the Black Sea and will compete with Turkish ports.
Anaklia port is a Georgian-American project, respectively, the United States is the largest international lobbyist and supporter of this project.
US Secretary of State Mike Pompeo made a statement in support of this project.
“These and other projects will strengthen Georgia’s relations with countries with market economies and avoid the danger of becoming a victim of the economic influence of Russia and China. These imaginary friends do not care about the interests of Georgia,” said Mike Pompeo after meeting with the Georgian Prime Minister in Washington in June.