EBRD Invests $155 Million in Georgian Ammonia Production Development

Issue no: 864/37

MarketsAs of 22 Jul 2016

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PAGE 3

POLITICS PAGE 11

PAGE 4

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• • JULY 26 - 28, 2016 • PUBLISHED TWICE WEEKLY PRICE: GEL 2.50

In this week’s issue...

Import of Oil Products to Georgia Increases in H1 2016

Continued on page 2

Ministry of Finance Presents New Income Tax System at International Forum

Prepared for Georgia Today Business by

PAGE 5

Stability And Instability In Georgia

BY EKA KARSAULIDZE

Batumi City Hall announced that following rehabilitation works of the summer leisure area Green Cape in the city’s Botanical Garden, the new

pier has fi nally been opened. USD 425,455 (997,676 GEL) was allocated from the state budget to fi nance the recent stage of Green Cape rehabilita-tion works.

The newly restored 131.5 meter long pier utilizes refurbished wooden planks and comes with a sturdy metal railing and lights. According to the Batumi Mayor’s Offi ce, it is now again available for the local population and tourists to enjoy.

Batumi Botanical Garden Introduces New Pier

FOCUS ON FRIENDS IN US CONGRESSJason Chaffetz, Chairman of the Committee on Oversight and Government Reform, reaffi rms support to Georgia PAGE 4

GEORGIA TODAY JULY 26 - 28, 20162 BUSINESS

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Batumi Botanical Garden Introduces New Pier

“The Green Cape has clear waters and this coastal strip is very important for tourists, but the road and infrastructure were in poor condition follow-ing on from the Soviet collapse- for 25 years noth-ing was done,” noted Batumi City Hall representa-tives.

In order to make the Batumi Botanical Garden even more attractive for visitors, plans are in place to widen the streets in the Green Cape area, creat-ing pavements, proper drainage systems, curbs and protective walls. Decorative slabs and outdoor lighting will also be installed. Parallel to these works, the territory adjacent to the entrance to the Botanical Garden is also to be remodeled. The full works are expected to amount to an allocated USD 1.02 million (2.4 million GEL) from the Budget.

Continued from page 1

BY EKA KARSAULIDZE

Azerbaijan announced it has allocated USD 611.5 million (1435 million GEL) for the construction of the Georgian section of the Baku-Tbilisi-Kars (BTK) railway as of July 1, 2016, since the

start of fi nancing of this project by the country’s State Oil Fund (SOFAZ), reported Trend News Agency on July 23.

According to the agreement signed between the Azerbaijani and Georgian governments, the funds were transferred to Marabda-Kartsakhi Railway through the International Bank of Azerbaijan. The Marabda-Kartsakhi Railway was created to design, construct, rehabilitate, reconstruct and operate the Marabda-Turkish border railway section and rel-evant infrastructure projects.

Azerbaijan Spends Over $600 Million on BTK’s Georgian Section

In total, Azerbaijan allocated a loan of USD 775 million (1819 million GEL) for the construction of BTK’s Georgian section. SOFAZ is fi nancing the project in accordance with the Azerbaijani Presi-dent’s Decree of February 21, 2007.

The Baku-Tbilisi-Kars railway is being constructed on the basis of a Georgian-Azerbaijani-Turkish intergovernmental agreement. It is planned to be commissioned by late 2016.

The peak capacity of the railway will be 17 mil-lion tons of cargo per year. At the initial stage, this fi gure will be one million passengers and 6.5 mil-lion tons of cargo.

GEORGIA TODAY JULY 26 - 28, 2016 3BUSINESS

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BY EKA KARSAULIDZE

Deputy Finance Minister Lasha Khutsishvili par-ticipated in a roundtable about the mobilization of domestic resources in part-

ner countries and the Addis Ababa’s Tax Initiative in the framework of a United Nations high-level political forum last week, with the Deputy Minister sharing the Georgian experience.

The Addis Ababa Tax Initiative was established in 2015 between Germany, the Netherlands, the UK and the US governments, and yet it brings together more than 40 countries and organiza-tions that have expressed their readiness to increase efforts in partner countries

Ministry of Finance Presents New Income Tax System at International Forum

to support the mobilization of domestic resources. Georgia was one of the fi rst to join the initiative and actively coop-erate.

During the meeting, Khutsishvili spoke

about Georgia’s activities regarding Base Erosion and Profi t Shifting (BEPS) and named areas where the country needs help from donor countries. He also noted the importance of Georgia’s participa-

tion in current international projects like BEPS’ inclusive platform, which Georgia joined this June.

Involvement in this platform makes it possible for Georgia to have equal rights, along with the Organization for Economic Co-operation and Development (OECD) and G20 countries, in fi ghting tax eva-sion, as well as to be part of the BEPS' working group and the Global Forum’s Experts Group of Tax Transparency and Information Exchange.

Deputy Minister Khutsishvili reported on the already implemented tax reforms in Georgia and the new income tax sys-tem which will come into force from 2017. The Ministry of Finance claims that the organizers of the meeting marked Georgia’s involvement in international projects and the progress achieved by the tax reform.

BY EKA KARSAULIDZE

Georgia, Armenia, Iran, Bul-garia and Greece intend to create a transport corridor that will connect the Black Sea and the Persian Gulf.

Armenia’s Deputy Head of Ministry of Transport and Communication, David

Georgia to Create Transport Corridor with Key Neighbors

Melkonyan, said details will be discussed in Sofi a shortly.

It will be the second meeting of the countries involved after the fi rst took place in Tehran in June.

The existence of a new transport cor-ridor could allow Iran to become a trad-ing hub for Europe and Central Asia.

Bulgaria’s Prime Minister Boyko Bor-isov has already confi rmed that the country is ready to join the project.

Photo: Georgian Railways

GEORGIA TODAY JULY 26 - 28, 20164 BUSINESS

BY EKA JANJGAVA

Georgian Foreign Minister Mikheil Janelidze held a meeting with members of the US Congress del-egation on their visit to

Georgia.The sides discussed the strategic part-

nership between Georgia and the US, emphasizing the US Government’s sup-port for Georgia’s economic develop-ment, ongoing democratic reforms and foreign policy priorities. Discussions also focused on the situation in Georgia’s occupied territories and issues relating to regional security.

“We spoke about the strategic partner-ship between Georgia and the US, about the political support the US Congress shows for Georgia in its statements and resolutions, and most importantly, about the fi rm support from the US for Geor-gia’s sovereignty, territorial integrity and Euro-Atlantic aspirations. Special atten-tion was paid to the reforms the Govern-ment of Georgia is carrying out to bring the country closer to the North-Atlantic Alliance. The American side reaffi rmed that Congress will continue to strongly support Georgia on this path,” Janelidze said following the meeting.

The US delegation in Georgia is led by Jason Chaffetz, Chairman of the Com-

Mikheil Janelidze Meets Members of US Congress Delegation

mittee on Oversight and Government Reform. The delegation includes repre-sentatives from the committee as well as from the committees on Foreign Rela-tions, Budget and Finance.

The sides spoke extensively about the agenda of bilateral co-operation and the outstanding results that have been achieved under the US-Georgia Strategic Partnership Commission. Special accent was put on the importance of deepening co-operation with US legislative bodies with the Congress delegation reaffi rmed the fi rm support of the US legislative authorities for the further strengthening of strategic partnership between the

countries. “Georgia has wide bi-partisan support

from the US Congress,” said Chaffetz. “The delegations of the Congress will continue to visit Georgia in the future. Georgia has many friends in the US Congress, and we support what Georgia is doing and what it is going through in this tumultuous time.”

Within the framework of this visit to Georgia, the delegation of congressmen is to hold meetings with representatives of the executive and legislative branches of the Government. They have already visited the Administrative Boundary Line.

BY EKA KARSAULIDZE

Import of oil products to Georgia in June 2016 increased by 2.4 thou-sand tons compared to May of this year, amounting to 104.9 thou-sand tons. Georgia received most

oil products from Romania, Russia and Azerbaijan and diesel fuel was imported more than petrol, the Union of Oil Prod-ucts Importers (UOPI) claimed.

Growth of imports of petrol result from an increase in consumption as, due to lower prices for petrol, gas consumers have switched back to petrol, reported the UOPI. “Fuel consumption is also

Import of Oil Products to Georgia Increases in H1 2016

directly linked with the intensifi cation of the economy: agricultural works, infrastructure projects, construction and transit transport,” they said.

The largest volume of imported gaso-line and diesel fuel this June originated in Romania – 31,000 tons (29.6 percent of total imports), followed by Russia – 25,000 tons (23.8 percent), Azerbaijan – 22,100 tons (21.1 percent), Bulgaria – 12,000 tons (11.4 percent), Turkmenistan - 9,100 tons (8.6 percent), and Greece – 4,300 tons (4.1 percent).

In general, imports of oil products to Georgia in the fi rst half of 2016 increased by 14.3 percent compared to the same period last year, amounting to 519,300 tons.

GEORGIA TODAY JULY 26 - 28, 2016 5BUSINESS

BY EKA KARSAULIDZE

The European Bank for Reconstruct ion and Development (EBRD) on Tuesday signed an agree-ment to provide USD 155

million (270 million GEL) to Georgia’s Rustavi Azot Company, a producer of nitrogen fertilizers.

The EBRD will fi nance the company’s capital expenditure for the reconstruc-tion, modernization and recommis-

EBRD Invests $155 Million in Georgian Ammonia Production Development

sioning of an operational ammonia production line in order to cut energy consumption by 30 percent.

The program includes an overhaul of the old Soviet-era production pro-cesses. The project will signifi cantly improve the energy effi ciency and environmental performance of the plant and will set new standards in the region, the EBRD said in its state-ment.

Bruno Balvanera, the EBRD’s Regional Director for Caucasus, Moldova and Belarus, said the Bank’s investments for 2016 would be three times higher

than the previous year.“By signing this agreement, we reaf-

fi rm our belief in Georgia’s future,” said Balvanera.

Rustavi Azot Company is a producer of nitrogen-based fertilizers. It is the primary fertilizer supplier in the Cau-casus region with a production capac-ity of up to 220,000 tons per annum of ammonia and 14,000 tons of sodium cyanide.

In 2015, the company generated 84 percent of its sales from exports mak-ing it one of the largest exporters in the country.

BY TAMAR SVANIDZE

Georgia’s Defense Minister Tina Khidasheli issued a new order last week allow-ing Georgian military personnel to serve in units

near their place of residence.According to the Ministry of Defense

Press Offi ce, soldiers, sailors and air-men who have already completed their fi rst contracted service in the Georgian Armed Forces will be allowed to choose a unit close to their registered home address for the duration of their ser-vice.

Khidasheli had previously said she would ensure the rules be changed in order to help recruit more professional contract soldiers.

“One of the problems military ser-vicemen face is the prospect of having

Georgia’s Defense Minister Allows Military Personnel to Serve closer to Home

to serve far from home. We made a decision some time ago and promised the members of our Armed Forces that we would look into the matter. Fifty-two servicemen from the 31st Battalion based in Batumi have already been reassigned to units near to their home,” Khidasheli said in her offi cial statement.

The Defense Ministry also said those serving in the Armed Forces would now be required to pass a psychologi-cal and physical examination after sign-ing their recruitment papers after which they must undergo a vigorous 10-week basic military course.

People between the ages of 18-35 and young people who have already passed their compulsory military or contract-based service can now be recruited into the military on a four-year contract.

Military personnel then receive 950 GEL (USD 400) monthly during those four years. The salary increases based on rank, position and experience.

GEORGIA TODAY JULY 26 - 28, 20166 BUSINESS

Source: www.nationalreview.com

BY EKA KARSAULIDZE

Following the announcement that Georgia had supported the extension of EU sanctions against the Crimea and Sev-astopol on July 20, a member

of the Foreign Affairs Committee in the State Duma of the Russian Federation, Yan Zelinsky, spoke of the necessity to introduce a ban on imports of Georgian wine and mineral water to Russia. How-ever, both the Georgian and Russian sides later refuted this statement, high-lighting that the countries remain impor-tant trade partners.

“The restrictions on products produced in Crimea and Sevastopol were intro-duced by the EU in 2014. Georgia joined them the same year. Last year they were extended, and now extended again auto-matically,” said Zurab Abashidze, the Georgian Prime Minister’s Special Rep-resentative for Russian Issues. “Thus, it would be illogical for Russia to react this way to a decision which was adopted in 2014.”

After a Russian media outlet reported Zelensky’s statement, the Head of the Foreign Affairs Committee in the State Duma, Aleksey Pushkov, also said that Russia does not consider it necessary to respond to the decision of Georgia and other countries with regards the exten-sion of sanctions.

“Russia does not accept this step as friendly, but at the same time does not

Russia Hopes for Better Trade Relations with Georgia

consider it necessary at this stage to respond to it,” Pushkov told the Ria Novosti News Agency. “First of all, it is a political step, largely dictated by the Georgian leadership to demonstrate their unity with the West, which was the ini-tiator of these sanctions.”

Pushkov also noted that Russia is com-mitted to the gradual normalization of relations with Georgia and added that “there are [in Georgia] forces that are interested in it as well.”

The Duma member expressed hope that after the parliamentary elections in Georgia this October, it will be possible to create better foundations for the nor-malization of Russian-Georgian relations

across the board. “Recently, during our meetings with Georgian parliamentar-ians on international platforms, we have the impression that there is certain potential for the resumption of our inter-parliamentary relations, and Russia is ready for this," stated Pushkov.

Trade relations will naturally take one of the main roles in this issue. Accord-

ing to the latest data from the National Statistics Offi ce of Georgia (Geostat), Georgia’s foreign trade turnover with Russia this January-June grew by approx-imately 16.5 percent compared to the same period of 2015, amounting to more than USD 390.3 million- 6.8 percent of the total foreign trade turnover of Geor-gia.

To date, Russia remains the largest importer of Georgian wine, having imported wine to a total cost of USD 22.3 million, which is USD 4 million more than in January-June 2015. Additionally, export of Georgian mineral waters to Russia rose by USD 607,000, amounting to approximately USD 18 million.

Diplomatic relations between Russia

and Georgia were terminated following the military confl ict in 2008. At present, the dialogue between Russia and Geor-gia is supported by the Geneva Interna-tional Discussions and regular meetings between the Georgian Prime Minister’s Special Representative for Russian Issues, Zurab Abashidze, and the Deputy For-eign Minister of Russia, Grigory Karasin.

GEORGIA TODAY JULY 26 - 28, 2016 7BUSINESS

BY EKA KARSAULIDZE

The government of Azerbai-jan has given Georgia 30 combines to cope with a record-breaking harvesting season expected later this

year.The combines will be put to use by local

farmers within the next 20-25 days, reported Azeri business website ABC.AZ.

Photo: Ministry of Agriculture

A Bountiful Harvest! Georgia Receives 30 Combines from Azerbaijan

“Compared with the previous years, we are expecting a record-breaking harvest,” said Deputy Agriculture Min-ister Levan Davitashvili. “The average productivity per hectare has almost doubled to four tons per hectare. For this year alone, more than 80,000 hec-tares of land was being used to grow wheat and more than 40,000 hectares for barley.”

The Ministry of Agriculture will help farmers store the crops as they undergo stringent tests before being sold.

BY EKA KARSAULIDZE

The Ministry of Agriculture of Georgia, in partnership with the United States Agency for International Development (USAID),

launched a new ‘Growth in Georgia’ project to support the rural population. The project will focus on villages located near the confl ict zones (near the Admin-istrative Boundary Line, ABL). The presentation of Growth in Georgia took place in Nikozi village, Shida Kartli, near the South Ossetia ABL last week.

Ministry representatives stated that Growth in Georgia is to be implemented in 70 communities in fi ve regions of Georgia. The project will create 2000 jobs and increase incomes of 11 thou-sand families. As such, it is expected that it will signifi cantly improve the economic situation of the population.

Growth in Georgia is part of the fi ve-year project implemented by USAID in cooperation with the Ministry of Agri-culture of Georgia, the aim of which is to promote the sustainable economic development of the villages located near the dividing lines and confl ict zones, the growth of rural incomes, and the deepening of market relations between producers and buyers. According to the Minister of Agriculture, Otar Danelia, it is particularly important to have the support of states and international organizations in and near to ABL vil-lages.

2000+ Jobs: Growth in Georgia Project to Support Agriculture Development in ABL Villages

GEORGIA TODAY JULY 26 - 28, 20168 BUSINESS

Georgia’s Remote Regions to Receive Hi-Speed Internet AccessBY TAMAR SVANIDZE

More than 2,000 towns and villages throughout Georgia are to receive high-speed Internet network access, Georgia’s Prime Minister Giorgi Kvirikashvili announced at

a cabinet session last week.The government has already approved a state

program on broadband infrastructure development in Georgia and said the new program would be completely fi nanced by Cartu Fund, owned by Georgian billionaire and former Prime Minister Bidzina Ivanishvili.

Kvirikashvili said the USD 100 million charitable program would be implemented with the support of the Economy Ministry’s Innovation and Tech-nology Agency.

“This is a truly historic achievement as access to information is the main condition to creating a free

society. It is of critical importance for education and for the development of civil society," Kviri-kashvili said.

He also indicated that all interested private pro-viders will be allowed to use the infrastructure to provide Internet across Georgia.

According to the Georgian National Communica-tion Commission just 600,000 of Georgia’s 3.5 mil-lion people have regular internet access, 79 percent of which reside in the capital, Tbilisi.

The Caucasus Research Resource Center in 2015

said that young, educated Tbilisi residents use the Internet more frequently than other Georgians.

The same study highlighted that the most vocif-erous Internet users are 18 to 35-year-olds with a full 81 percent of them in Tbilisi, 61 percent in other urban settlements and 39 percent in rural settle-ments.

Only 1 percent of Georgians has never heard of the Internet, lower than in previous surveys which showed that as much as 6% of Georgians had no previous knowledge or experience with the Internet.

The USD 100 million charitable program would be implemented with the support of the Economy Ministry’s Innovation and Technology Agency

GEORGIA TODAY JULY 26 - 28, 2016 9BUSINESS

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BY TAMAR SVANIDZE

The results of a media mon-itoring report ahead of Georgia’s Parliamentary elections in October were released last week showing

areas of progress during the pre-election season by local media outlets.

Three non-governmental organizations, Internews Georgia, the Georgian Char-ter of Journalistic Ethics and Civic Devel-opment Institute, observed more than 40 local online, print, broadcasting and radio outlets over a six-week period to compile the results.

The European Union and United Nations Development Program (UNDP) supported the process of gathering infor-

Monitoring Report Says Georgian Media Making Progress in Pre-Election Coverage

mation for the monitoring report, as well as a series of monitoring rounds that will end in November, a month after the elections take place.

“We have been conducting the project for six years, with the support of the EU. We carried out several monitoring mis-sions before the previous fi ve elections…we can honestly say that there is progress regarding the overall media coverage of the pre-election process. We hope this trend will continue,” said Natia Natsv-lishvili, UNDP’s Resident Representative in Georgia.

The Journalistic Ethics Charter, which has been conducting monitoring of local TV channels, emphasized that Georgian TV programs had been focusing their attention on the conduct of the various branches of government.

Leading TV station Rustavi-2 focuses

on negative aspects of the government, while arch-rival GDS, owned by the rap-per son of the Georgian billionaire and former Prime Minister Bidzina Ivanish-vili, consistently praises the government’s performance.

Civil Development Institute represent-ative Giorgi Jologua said the main chal-lenge for Georgia’s media is the issue of constant violations of ethical standards.

According to the report, radio reports are the most balanced and unbiased among other local mediums for the media. Representatives of Internews Georgia noted that they objectively cover events that create the pre-conditions need to provide balanced information.

All reports are available online: www.Medi-aMonitor.ge and Facebook page: www.facebook.com/MediaMonitor.ge

New Metallurgical Plant to Be Built by South Korean Investors

market value.POSCO currently operates two inte-

grated steel mills in South Korea, in Pohang and Gwangyang. In addition, POSCO operates a joint venture with US Steel, USS-POSCO, which is located in Pittsburg, California, United States.

BY EKA KARSAULIDZE

South Korea’s largest multina-tional steel-making company POSCO has indicated its inter-est in investing USD 500 mil-lion in building an ultra-mod-

ern metallurgical plant in Georgia. The news was announced following a recent meeting of the POSCO Senior Vice President, Jin Sik Choi, and Georgia’s Deputy Foreign Minister, David Jalaga-nia, in Georgia’s capital, Tbilisi, on July 22.

The Ministry reported that during the

meeting the two parties introduced the investment project and revealed their future plans regarding Georgia. Georgia’s Deputy Foreign Minister welcomed Korea’s interest in Georgia and updated the Korean delegation on the political and economic situation and investment environment in Georgia, as well as on the increasing level of bilateral relations between Georgia and Korea.

POSCO is a multinational steel-making company headquartered in Pohang, South Korea. It had an output of 39.1 million tons of crude steel in 2011, making it the world’s fourth-largest steelmaker by this measure. In 2010, it was the world's larg-est steel manufacturing company by

GEORGIA TODAY JULY 26 - 28, 201610 BUSINESS

Contact: www.edelbrand.ge

Phone: 599 461908

BY THE COUNCIL OF EUROPE

Twenty fi ve years have passed since Armenia, Georgia and Azerbaijan – the Transcaucasian countries – came out from under Soviet rule and were able to develop their own independ-

ent public media. But twenty fi ve years on, how are they dealing with the challenges of maintaining a credible system of public service media? To help answer that, the European Audiovisual Observa-tory, part of the Council of Europe (CoE) in Stras-burg, has just released a unique new report entitled Public Service Media in Transcaucasian Countries.

This new IRIS Extra report is authored by Ekat-erina Abashina, a researcher at Lomonosov Mos-cow State University. She opens by analyzing the evolution of the public service broadcasting con-cept in Georgia, Armenia and Azerbaijan. Public service companies were fi rst established in this region in the early 2000s, replacing the Soviet model state-run broadcasters.

Moving on to look at the governance of public

Council of Europe Releases Assessment Report on Public Service Media in Armenia, Georgia and Azerbaijan

service broadcasting, Abashina makes a useful comparison of the three systems. Common ele-ments emerge from her analysis such as a declara-tion of commitment to public service broadcasting values through their stipulation in the relevant legal framework; the application of state funding, detailed regulation of appointment procedures of govern-ing bodies, and general content requirements (though these are formulated more as guidance principles).

She then focuses on programming policies in the three countries. In the cases of Armenia and Azer-baijan, their respective Boards are entitled to approve programming schedules and program structures but they do not communicate these to the public and do not announce or present them in any way. The Georgian PSB Board issues quite a detailed and annually updated programming concept (“Programming Priorities”) – made avail-able on the website of the broadcaster annually; the “Programming Priorities” of the Georgian PSB are indeed purely advisory in nature.

It is clear that the creation of PSB companies in Georgia, Armenia, and Azerbaijan was fostered by their joining the Council of Europe (CoE). The author focuses her penultimate chapter on the role

of international organizations such as the CoE and the OSCE Representative on Freedom of the Media (OSCE RFOM). Their membership of the CoE has imposed upon these countries the adoption of or

amendments to existing national broadcast-ing laws to incorporate the CoE principles

on PSB. In addition, regular evaluative CoE reports are written about the media in all their member states; although these rather play an inter-pretative and explanatory role for the regulation and operation of public broadcasting. For its part, the OSCE RFOM has designed spe-cifi c recommendations for the devel-

opment of PSB in this region and on the creation of an inter-regional platform for the exchange of ideas and experience on

PSB practice within the region.

Abashina concludes that PSB in these countries

has suffered from “common weak spots” such as “the lack of safeguards for the independence of PSB companies from political

interests due to loopholes in appointment mechanisms

for the governing bodies […]; unstable funding sources; lack of specifi c legal programming require-

m e n t s ; a n d absence of effec-tive mechanisms of interaction with its audi-ences and audi-ence research.” She does, how-

ever, underline the role of international

organizations like the CoE and the OSCE who, while they cannot directly influence PSB systems, “are active and con-sistent promoters of PSB values and best practice in

the Transcaucasian region.”

GEORGIA TODAY JULY 26 - 28, 2016 11POLITICS

GEORGIA TODAY

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Georgia’s path to greater stability is far from guaranteed, but there are indications of a signifi cantly smoother path than there was three, fi ve or ten years ago

BY LINCOLN MITCHELL

The Georgia Analysis is a twice monthly analysis of political and other major developments in Georgia. Lincoln Mitchell is a polit-

ical development, research and strategic consultant who has worked extensively in the post-Soviet space. He has agreed to share some of his analyses exclusively with GEORGIA TODAY.

Since once again achieving its inde-pendence in 1991, the Georgian State has faced innumerable challenges and obsta-cles. One of the most signifi cant of these was that Georgia found itself in a rough neighborhood. The confl ict between Azerbaijan and Armenia in the early 1990s, the proximity to Iraq in the fol-lowing decade, to the tumultuous Mid-dle East in general in recent years, as well as to confl ict-wrought parts of Rus-sia, such as Chechnya, all made the pro-ject of state and democracy building in Georgia even more diffi cult. Additionally, the Russian actions, most notably in Abkhazia and South Ossetia, but in Geor-gia more broadly as well, have only made life more arduous for Georgia.

Georgia’s immediate neighborhood remains riven with tumult and confl ict. The Middle East is becoming more unstable with refugee crises and violence from that region having an increasingly global impact. Armenia and Azerbaijan are still frequently on the cusp of renewed confl ict and the recent coup attempt in Turkey raised the specter of instability in a large neighboring country that is a member of NATO and has been an impor-tant trade partner and ally of independ-ent Georgia.

Interestingly, as Georgia’s region experi-ences even greater instability than in recent years, Georgia itself is slowly, and relative to only a few years ago, implausibly, emerg-ing as something of an island of stability. While Georgia is certainly still character-ized by contentious and polarizing politics, signifi cant economic challenges and a Russian presence in Abkhazia and South Ossetia, the State itself is more stable than at any time in recent memory, particularly when compared to the rest of the region. Today, Georgia looks more stable than much of the Middle East, Turkey, Ukraine or either of its South Caucasus neighbors. This is seen in the general tone of political life, the often overlooked continuity on key policies between this government and the previous one and even in electoral politics shortly before parliamentary elec-tions.

The coming elections in the autumn are expected to be very competitive. It is very likely that three or more parties will exceed the fi ve percent threshold for their party list to get into parliament, and possible that no party will win a clear majority of seats in the new parlia-ment, making it necessary to form a coalition government. Of course, four years ago the governing party lost the parliamentary election, but four sum-mers ago very few, other than Georgian Dream (GD) activists, thought that was possible. The defeat of the governing United National Movement (UNM) in

Stability And Instability In Georgia

2012 was as much a regime collapse as a peaceful transition.

The election this year, regardless of who wins, will not be a case of regime collapse or even regime change. This is evident by the encouraging reality that while rhetoric on both sides is strong, and will get stronger as the election approaches, the central dynamic of this election is not one of an opposition demanding regime change and a govern-ment presenting themselves as essential to the country’s future security and even survival. The recent six party declara-tion affi rming Georgia’s commitment to NATO is further evidence of this.

There are no guarantees that Georgia can maintain this stability. That is the nature of political stability in any coun-try. It can seem permanent and strong one moment and dissolve relatively quickly the next. Moreover the path to meaningful enduring stability is a dif-fi cult one; and Georgia still has some distance to go to achieve that. An elec-tion that runs smoothly and ends peace-fully in which the governing party may remain in power, but loses some seats, will help institutionalize this stability.

Stability, however, is about more than just elections. Institutions must be strength-ened, but there also needs to be a popular consensus around the nature of the Geor-gian State. This consensus is emerging, but it is not quite present yet. While the idea of democracy as the way to organize the Georgian State seems strong, fi ssures around the relationship between the State and Church, the struggle to fully incorpo-rate ethnic minorities into the modern Georgian State, external pressure from Russia, the role of unelected leaders and ongoing economic pressure are all factors potentially working against the further institutionalization of stability.

The sense of stability in Georgia is also partially a product of the GD’s style of governance. One of the most frequently heard criticisms of the GD government, particularly from those who are not strong UNM or GD supporters, is that the GD either has not done enough or is not working actively enough to solve Georgia’s problems. This assertion may or may not have some credence, but the contrast between the GD and the UNM in this respect is hard to miss. The UNM style of governance by adrenaline cer-tainly brought great energy to bear on Georgia’s problems, and helped make possible the wave of reforms during the two or three years immediately follow-ing the Rose Revolution, but it was also a handmaiden to the low to mid-level crises of stability that characterized the last half of the decade or so the UNM were in power.

As Georgia has become more stable it will continue to become more important to the West. Georgia has struggled to remain a top priority for the US and Europe since independence. Initially, this relevance rested largely on the fi g-ure of Eduard Shevardnadze. In the Rose Revolution period, Georgia sought to make itself relevant by being, in George W. Bush’s words a “beacon of democ-racy,” but once that was no longer plau-sible, it sought to position itself as an anti-Russian bulwark and libertarian paradise, but both of those concepts had

somewhat limited ideological relevance. Today, Georgia, whether the leaders recognize it or not, is arguing that stabil-ity is what makes it important and rel-evant. Georgia can only be an ally in the struggle against an aggressive Russia to its north, or against the wellsprings of Islamic terror to its south, if it is stable. Demonstrating this is no small part of the reason that Georgia continues to make steady, if slow, progress towards NATO and the EU.

Stability is both real and perception based. Therefore, it is important for Georgia to be both stable and perceived as stable. Moreover, as a given country becomes more broadly seen as stable, international actors behave in a way that helps that country become more stable, for example, by investing more, bringing Georgia even closer to NATO and the EU, and even sending more tourists here. However, to become more stable, and prompt this kind of behavior from west-ern countries, Georgia must continue to present itself to the world as more stable. Elections that are not presented or seen as an existential referendum on the country’s future, less talk of eminent Russian invasion, even as the threat from Russia remains real, and a politics that does not vilify opponents or make unre-alistic promises are all ways Georgia can make itself seen as more stable.

The current government has made steps in all these directions, but there is a good deal of work still to do, and not simply by the government. Election related violence of the kind in Kortskheli a few months ago endangers Georgia’s democratic evolution, but also sends the world a message that Georgia is less than stable. The frequent comments from the Governor of Odessa that he will return to Georgia in the near future is not exactly a harbinger of calm either. A defi nitive end to political reprisals, the continued reduction of the role of unelected indi-viduals in the country’s governance and

fewer cabinet shakeups would also con-tribute to greater stability here.

Stability, in Georgia, or anywhere else, is both diffi cult to predict and identify and also frustratingly transient. The space between stability for the foresee-able future and instability that is viewed as inevitable is frequently very limited. That should be particularly apparent to people who remember the last years of the Soviet Union. Nonetheless, there is reason to believe the movement is in the right direction for Georgia. This provides an important opportunity both to con-solidate some of its gains, but also to change the nature of the international discussion about Georgia. Ultimately, a reduction in discussions of whether a government has pro-Russian elements, or if the former government will seek to destabilize the country to return to power, is good for all Georgians.

The benefi ts of an increasingly stable Georgia are clear, but the drawbacks, at least for some, cannot be overlooked.

Those politicians, within both major parties and others who have built their political base by claiming that one gov-ernment or another is bent on destroy-ing Georgia, or who can only remain part of the political discussion by relying on cataclysmic rhetoric and fear mon-gering are among the domestic actors who lose out by greater stability. Mos-cow, would obviously be a big loser in a more stable Georgia, as would terrorist organizations to Georgia’s south who benefi t from instability everywhere, but particularly in the region. Georgia’s path to greater stability is thus far from guar-anteed, but there are indications of a signifi cantly smoother path than there was three, fi ve or ten years ago.

If you would like to be on the Georgia Anal-ysis mailing list or are interested in more research, analysis or consulting for your busi-ness, government, campaign or other organ-ization, please email lincoln@lincolnmitchell.com.