Today I had the pleasure to attend the EPRC’s (the Economic Policy Research Center) webinar “Sharks, Herrings, and Mermaids of the Black Sea”. Conversation with Lieutenant General (Retired) Ben Hodges, the Pershing Chair in Strategic Studies at the Center for European Policy Analysis, was moderated by Ambassador Shota Gvineria, and it also featured introductory remarks by the US Ambassador to Georgia Kelly C. Degnan.
The discussion addressed the security in the Black Sea Region, the analysis of the current geopolitical events, and the shifts of the power in the Black Sea, which affects the formation of security in the region. Very productive and interesting 2 hours, indeed – so, in this EDITOR’s NOTE I would like to put together the analysis that concerns Georgia’s long-time - and lately, ardently highlighted by the PM Irakli Gharibashvili – the aspiration to serve as a commercial hub between East and West.
At some point, while elaborating on the prospects that the Black Sea Region and Georgia could have had with the Anaklia Port in place, Lieutenant General (Retired) Ben Hodges said when you come to Kentucky, there is a big sign – Welcome to Kentucky! We are open to business. And then he asked: “Is Georgia open for business?”
It is a very simple question, but some seconds before Ambassador Kelly Degnan proceeded with the importance of Anaklia Port for Georgia, I remember thinking that looking at different rankings, we have somehow taken it for granted that Georgia is the country that is open for business. On the other hand, Anaklia, Namakhvani – are the big names to raise the eyebrows of investors.
Lieutenant General (Retired) Ben Hodges remembered his first visit to Georgia, in 2013 and his meeting with the President of Georgia. “I asked him, I said – it was kind of a dumb tourist question but it was my first time here and he seemed approachable – Mr. President what kind of country is Georgia? How would you describe Georgia to a new person like me? And I think he had waited all day to be asked that question – he says we are not a Post-Soviet Caucasus nation, we are an Eastern European nation that is the portal between Europe and Eurasia. I remember it as it was just yesterday. It snapped at me how he saw Georgia’s role as a European Nation that looked East and West and the geography allowed you to be this gateway – portal for all that trade” – Ben Hodges said.
According to Ambassador Kelly C. Degnan, unfortunately, because Anaklia got tangled up in political and economic difficulties Georgia is behind the curve in what it can contribute to regional network opportunity. The Ambassador shared her emotions while visiting the Anaklia site, after Poti where she had attended the opening of Pace Terminal. “It just broke my heart – she said - because of course this year there's supposed to ship going in and out of that [Anaklia] Port, it’s supposed to be open for business”.
The Ambassador called it a missed opportunity for Georgia: “This year could have had the project continued as planned and I think it’s a real missed opportunity. We see now as the region is opening up with the conflict in Nagorno-Karabakh, creating opportunities to work as a region; we see what Georgia could have put on the table with something as significant as Anaklia. I hope someday, in addition to Poti and Batumi, Georgia will have something significant to contribute”.
As the Ambassador said now, Georgia’s got plans on paper and if investors are going to come in and see this as the general set they need to see that the government is 100% behind this project. “Number of people at the port terminal opening said – you don’t wait for the cargo to be coming before you build the Port, you build the Port and the cargo comes – Kelly Degnan continued - So, I think that different feasibility studies support the idea of having Poti and Anaklia and Batumi serving different needs but encouraging that kind of view of the Black Sea as of a commercial hub. And the PM mentioned at the [Poti] Port opening, this concept, this vision of Georgia as the East-West hub not just for ports but for other kinds of connectivity for moving goods from Central Asia through to Europe. But you have to have more than words”.
BMG believes that having good investors investing in strategic projects - that’s what could serve as more than words. This is not only the matter of the economic development of the country but the security issue as well. I had the chance to ask about the need for Georgia’s trade diversification for it not to be dependent on Russia, as it’s the nearest biggest market since Russia uses its economic leverage as a political weapon to strengthen its malign influence on Georgia.
Addressing hybrid threats coming from Russia, Lieutenant General (Retired) Ben Hodges said that this is all about transparency and legal systems and processes that investors trust. “If they put money somewhere they want to know if they are going to get their money back or that they don’t have to pay extra hidden costs that are perhaps illegal – Ben Hodges said - So the most important thing is to make a legal system work as an enabler to doing business”.
He drew a very interesting parallel with the UK where a huge part of real estate is owned by Kazakh and Russian owners. “The UK has to now overlook their laws to make sure that there is transparency because they have a terrible problem with dirty money right now” – Ben Hodges said, adding that very active media and the inquisitive parliament are the keys to make sure that Georgia doesn’t have that sort of malign influence in its financial systems.
To be honest, it was new for me to find out that the US has been working with Georgia on developing a critical infrastructure – that is an investor screening mechanism appropriate for Georgia – to make sure that Georgia knows who is investing in its critical infrastructure and who owns it. “There are layers and layers before you can sort out who’s got a piece of some of the main infrastructure here that is not only potentially vulnerable but that is then critical to the idea of East-West Hub” – The Ambassador explained.
Kelly Degnan believes that getting that infrastructure now as Georgia is starting to get back to developing its critical infrastructure and receiving money flowing though not always from good and clean sources is very important. “Our goal here is to get good investors to invest in Georgia – the Ambassador said - There’s a lot of potential here but again as a General said first thing investors look at it –is my money going to be safe in here? Is this a good return on my investment but also if I have a dispute is there a legal system that is a level playing field – am I going to get a timely resolution of the contract dispute if I have it? Is the bidding process – somebody’s got their thumb on the scale so that all the contracts going to certain people and not to foreign investors? All of that is critical to be able to attract good investment and investors here to Georgia. That’s one reason why we and others put so much emphasis on developing that at this point”.
According to the Ambassador, everybody’s impressed with how much progress Georgia has made in thirty years with the help of the US, EU, other friends of Georgia. However, “those same friends are the ones who are saying look, let’s not stop, please, Georgia keep moving forward, get these oversight institutions put in place, give your Parliament the authority to serve it in an oversight capacity and function as a multi-party Parliament that a healthy democracy needs” – Kelly Degnan said.
The Ambassador used the example of Georgia’s energy security to show how diversification might decrease the dependence on Russia citing the investment in BTC and other pipelines back 20 years ago as the right steps taken in this direction. “It’s just an example of why it’s so important for Georgia to look for diversifying its markets – The Ambassador said - It has been developing its new markets so it’s not as reliant on Russia even though Russia remains an important trading partner but at least it has less leverage over Georgia at critical times like this. So I think it is very wise for Georgia to continue to diversify to be more secure”.
The specific focus of my question on Georgia’s economic diversification was on the prospects of the FTA with the US. Kelly Degnan did not leave out this aspect of the question from her answer as well.
According to the Ambassador, anybody who has been following US developments knows that trade agreements have not been on the top of the agenda for any country recently. “I think that there is a great symbolic value in an FTA between US and Georgia, more so than probably an economic value and we continue to raise it but again as you see in US trade agreements are not the top of the agenda right now. So we will continue to have that as one of our talking points” – Kelly Degnan promised BMG.
So, if we want to have Georgia serve East and West as a commercial hub – the main question that needs to be asked very frequently is exactly what Lieutenant General (Retired) Ben Hodges asked – Is Georgia open for business?
Transparency, Rule of Law, inquisitive Parliament, strong media, good skills of differentiating between friends and foes, and fewer missed opportunities – everything has its role and its price.
Simple Yes is not enough.
