It’s China’s turn in Georgia

IT’S bang on the crossroads of Western Asia and Eastern Europe. The word strategic could have been invented for Georgia – Black Sea to the west, Russia north, Turkey and Armenia south and Azerbaijan to the southeast. It was prized by the Soviet Union (to whom it gave Josef Stalin and Eduard Shevardnadze), and in recent decades Russia has fought two Chechen wars in the region and in 2008 invaded Georgia itself to bolster pro-Russian Ossetians in the north. Is it now China’s turn to show an interest? David Edgar investigates in this special report for Global Sources Magazine.

IN asserting it’s self-declared rights in places like Chechnya, Georgia and Ukraine, the Russia of Vladimir Putin unashamedly favors tanks and guns. Now, amid signs that it might be China’s turn to become a player in Georgia, it should be emphasized that The Asia economic giant favors the less strident strategy of “soft power.”

Georgia is a key piece in Beijing’s New Silk Route (NSR) mosaic and was one of the first states to sign up to the Asian Infrastructure Investment Bank (AIIB), holding 0.05 percent in China’s giant new financial institution. Ties between China and Georgia have been growing for a decade and official statistics show that in 2015 China has become the largest investor in its economy, outstripping Russia. Sino-Georgian trade has grown from around $115 million in 2006 to $820 million in 2014 with the country’s exports accounting for $90 million of this figure.

Chinese investment in Georgia has also blossomed, increasing more than 20-fold between 2011 and 2014 to $200 million. This is around 20 percent of the total foreign direct investment (FDI) Georgia reports. China is now keen to invest further in energy, transportation, healthcare and infrastructure.

Building bridges (and railways)

China has pinned great hopes on the Trans-Caspian transport route, Georgia being an important link. The two countries are now connected by rail as part of a project that is likely to transform the way Asia and Europe do business with each other – Georgia is the shortest and fastest trade route between China and Europe. Containers arrived in Georgia earlier this year, having travelled for the first time from China by rail, taking nine days, instead of 40 days at least by sea.

The Trans-Caspian route also brings oil and gas from the Caspian to world markets through the Baku-Tbilisi-Ceyhan (BTC) crude pipeline and the Baku-Tbilisi-Ezerum gas pipeline, which will extended into Europe. For Beijing, the route equates to exporting consumer goods, plus electrical and heavy machinery, over this so-called land bridge that brings Asia and Europe closer.

For now, the energy flow gives Georgia a privileged position for a state so devoid of hydrocarbon resources. The Georgian gas transit route will be pivotal for a Europe trying to diversify its supplies away from Russia.

Mariam Valishvili, Georgia’s Deputy Minister of Energy.
Mariam Valishvili, Georgia’s Deputy Minister of Energy. [Photo: ENPI Info Centre]
“The EU has a very clear policy of diversifying energy supply sources and routes,” Mariam Valishvili, Georgia’s Deputy Minister of Energy told Global Sources Magazine. “Preference and special attention is given to the development of Southern Gas Corridor – and a number of projects are under development,” she said. These include the Trans Anatolian Pipeline (TANAP) across Turkey, the Trans Adriatic Pipeline (TAP) into Europe, the South Caucasus Pipeline (SCPX) and the long-contemplated Trans-Caspian Gas Pipeline (TCGP), which would include gas producer Turkmenistan.

“Georgia is a small country and all of these routes depend on it being a reliable transit partner, unburdened by the complications of, for example, Armenia-Azerbaijan relations,” Valishvili said. Poor relations between the two countries have prevented energy pipelines from being routed through Armenia.

Within Georgia’s borders at least, pipeline operations have so far not been affected by attacks from Islamic extremists. Radical Islamic groups in the region operate under the Caucasus Emirate (Vilayat Kavkaz), a branch of the Islamic State group. (See relevant article).

Valishvili conceded that there is a constant threat from these groups.

“This is definitely the issue for the wider region and extremists may try to affect major infrastructural projects. Pipeline operations were targeted a number of times [by terrorists] on Turkish territory this summer. Although no specific threat is identified against pipeline operations in Georgia, this is still a very critical issue and a common effort for security and preventive measure needs to be elaborated by the countries in the region,” she said.

Development

Chinese construction firms in Georgia are involved in a number of development projects – including the rail sector for the Silk Road, Anaklia Port and Tbilisi Sea New City – all of which the government is keen to advance. A project to provide electricity to remote parts of the country was recently completed.

Nika Gilauri, former Georgian Prime Minister (left) and Zhang Dejiang, Chairman of the Standing Committee of the National People's Congress.
Nika Gilauri, former Georgian Prime Minister (left) and Zhang Dejiang, Chairman of the Standing Committee of the National People’s Congress. [Photo: agenda.ge]
“Georgia is almost 100 percent electrified,” Valishvili said, and 95 percent of Georgia’s electricity demand is produced from domestic sources, particularly hydro-power, which supplies 80 percent.

“During the deficit winter months, electricity is imported from neighboring countries, depending on the price competitiveness and interconnection capacity,” she said.

Bearing down. A typical Georgian war cartoon from 2008.
Bearing down. A typical Georgian war cartoon from 2008.

Growth may have been stunted by years of conflict and instability but now Georgia is eagerly grasping the opportunity presented by cooperation with China.

Its acceptance of a role as a transit country has been an important step, and it is now set to benefit from new allegiances with China and Europe.

A side benefit, of course, is that Georgia can steadily distance itself from any further dependence on Russia.

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