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Georgia Challenges West on Sea Port and Financial Strategy

The nation may want to think again.

I visited the Republic of Georgia and the North Caucuses many times, and advised the people there on investment and political strategy. I had an opportunity, likewise, to be an observer and provide counsel on Georgian elections. Georgia is our ally in the Caucuses.

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It has boldly embraced democracy beyond rhetorical platitudes about freedom that often serve as a hollow echo from other former Soviet republics.

I have noticed that Georgia may be straying from the rule of law and principles of free market. This trend is troubling, and two recent examples of derailed investment projects are of particular concern.

Georgia’s government has recently terminated agreements to construct what would have been its first deep sea port – the Anaklia project. The promising project would have turned Georgia into a global port of entry for the entire region, encompassing China’s Belt and Road initiative. According to experts, the $2.5 billion project is now mired in so much political controversy and intrigue that it will be next to impossible to attract foreign investment without major corrective measures by the Georgian government.

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Another example of heavy-handed government action comes on the heels of Anaklia. Azerbaijan’s government signed intergovernmental agreements with Kazakhstan and Turkmenistan to build out the required broadband subsea fiber optic infrastructure to connect Europe to Asia. NEQSOL Holding, a privately held Azerbaijani investor, in partnership with Kazakh and Turkmen telecom companies, has launched two projects to lay down the fiber optic cable in the Caspian Sea and connect those two countries to Azerbaijan.

In pursuit of this major undertaking, last year, NEQSOL completed the purchase of Georgia’s largest internet service provider, Caucasus Online. The purchase was coordinated with Georgian authorities to ensure that all the required approvals are in place. The project would yield connectivity solutions to the region, improving GDP and mitigating the region’s escalating economic woes. Additionally, it would be the basis for connectivity integrity, as the looming alternative of Russia-Iran route may pose serious challenges to stability and sovereignty of various countries in the Caucasus and beyond.

In a series of disappointing and surprising moves, just as with Anaklia, Georgian regulators, after initially approving NEQSOL’s purchase of the internet operator, have constructively begun an expropriation of Caucuses Online. In recent weeks, regulators have sought to muscle through parliament a law that would drastically increase the Georgian National Communications Commission’s control over Georgia’s telecom industry, specifically targeting Caucasus Online with a threat to appoint an external administrator with unlimited authorities.

Tbilisi’s moves are confounding since Georgia is positioned to be one of the Digital Silk Way’s (as the project is referred to) mega winners. Tech giants such as Google and Amazon would flock to Georgia with the right infrastructure in place, and with assurance that their investments will be safe from expropriation. Even Georgian business community voiced its dismay at the extrajudicial government measures against Caucuses Online.

The reasons for Georgia’s sudden hostility to investors in Anaklia and Caucuses Online is not clear. Local, short sighted political rivalries could be one reason. Pro-Russian media in recent months has criticized the Digital Silk Way, as it bypasses Russia and other nations in Kremlin’s orbit. Not every country wants to see a free and fast Internet surging through the Caucuses.

With Georgian elections looming, it would be encouraging to see Georgian politicians engage in constructive efforts to rebuild Georgia’s reputation as a country that welcomes foreign investment and embraces rule of law, fairness and transparency. As a beacon of some of the most cherished free market values, the West continues to support Georgia’s nascent democracy, and hopes that it does not disappoint.

Yuri Vanetik
meet the author

Yuri Vanetik is an American attorney, political strategist, and investor. He is Lincoln Fellow at the Claremont Institute.

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