A Pipeline May Pump Up Georgia...If Ethnic War Doesn't Ignite Again
The games may be over in Atlanta, but in the other Georgia, the "oilympics" have only begun. In lane one is Sarkatvelo, better known as the former Soviet Republic of Georgia; the other contender is the Russian Federation. The prize is a $275 million pipeline that is to bring the black gold of the Caspian Sea to world markets.
At first glance, tiny Georgia, with a population of only 5 million, would seem to be the underdog. But thanks to a strange configuration of geography, determination, and ethnic conflict along the alternative routes, chances are good that Georgia will win the black gold, and with it, the construction jobs, transit revenues, and foreign investment that may translate into stability. "In terms of distance, cost, and political balance, I think Georgia is our best option," says Terry Adams of the Azerbaijan International Operating Company (AIOC), when asked how his company means to pump some $50 billion of Caspian oil to market.
TAILSPIN. Such words are balm to the ears of Georgia President Eduard Shevardnadze. The former Soviet Foreign Minister returned to his native land four years ago, only to watch it pitch into such chaos that many openly wondered whether it would survive as a state. At the height of the troubles, in September, 1993, "Shevy" almost lost his life when Russia-backed Abkhaz separatists conquered the city of Sukhumi on the Black Sea. In the wake of that disaster, Shevardnadze was forced to sign an odious agreement with Moscow that allowed Russian military bases to be reestablished in the country, and Georgia had to grovel for international aid as what was left of its tattered economy went into a tailspin.
But both Georgia and Shevardnadze have bounced back. For starters, there's electricity (most of the time), running water (most of the time), and a free press (most of the time). For those with sufficient salaries, a range of products and services is available that would have been unthinkable not long ago. Much of this is due to the jobs created in the capital, Tbilisi, by aid organizations. Another factor is that Georgia has become the conduit for hundreds of millions of dollars in "suitcase" trade--casual commerce ranging from nylons to busloads of eggs--from Turkey to other parts of the former Soviet Union.
But Georgia's best hope is the pipeline--and its chances of landing it have been boosted by the tragedy in Chechnya. Twenty months of war there have distracted Moscow from meddling in Georgian affairs and have scotched the Russian alternative. The "northern route," from Baku to the Russian terminal of Novorossisk, runs through the destroyed Chechen capital, Grozny--and the Chechens have made it clear that not one drop of oil will flow without their O.K.
To pave the way for winning the pipeline, Shevardnadze and his backers are doing their best to clean house. "We have come to understand that democracy is an incremental process," says Mikhail Saskashvili, chairman of the parliamentary commission on legal affairs. "At this stage, we are replacing blatantly corrupt officials with those who only suffer from a conflict of interest."
The thorniest problem facing Shevardnadze is the breakaway province of Abkhazia. Situated on the shores of the Black Sea, Abkhazia is Georgia's most beautiful area and the former playground of the Soviet elite. But in 1993, the "autonomous republic" declared independence. Some 300,000 ethnic Georgians were flushed out of their homes by the Abkhaz army, leaving the Abkhaz--who formerly made up only 17% of the population--the masters of a depopulated Eden.
But Abkhaz independence was a lurch into the void. The state is recognized by no one, and now its chief patron, Russia, seems to be pulling out the rug lest its support of separatists in Sukhumi encourage the nationalists in Chechnya. If Shevardnadze can manage to negotiate a settlement with the Abkhaz, most likely an association of governments that would allow for trust-building, the chances of Georgia becoming a successful democratic state with a retooled economy are good. But the alternative--never to be discounted in the hot-blooded Caucasus--is another round of violence that would send Georgia back to square one.
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.