“Needle eye for world trade”: How Russia, China and the EU are vying for Georgia

Since the war in Ukraine, new trade routes between Europe and China have become increasingly important in order to avoid transit through Russia. Georgia is a critical bottleneck. The Caucasus country is therefore planning a new Black Sea port. But the project has geopolitical explosive potential.

Climatic health resort and status object for the president, then a short-term party stronghold, and now the scene of geopolitical power games: This is the story of Anaklia, a small town on the Georgian Black Sea coast. Only a few hundred meters separate the town of 1,300 inhabitants from Abkhazia, the breakaway region in northwest Georgia that is supported by Russia.

Former President Mikhail Saakashvili showered Anaklia with money at the turn of the millennium to make it a popular holiday destination and health resort on the Black Sea. But the concept didn’t work. After Saakashvili lost power in 2013, Georgia’s new leadership abandoned the plans.

Afterwards, the city tried to attract young Black Sea partygoers. In 2014, Kazantip, the largest techno festival in the post-Soviet space, was moved here. The annual event could no longer remain in Crimea due to Russian annexation. However, the new location on the Georgian coast was not a success, Kazantip in Anaklia remained a one-off affair. The festival has not been held since then.

The former prime minister and Moscow act in the background

The government finally changed course in 2016. A large Black Sea port was to be built in Anaklia. The Georgian government budgeted $2.5 billion for this, but the project was quickly canceled. “There is an accusation that this was prevented through political influence. Mainly by the Georgian government and by Bidzina Ivanishvili and the influence of Russia,” reports political scientist Hannes Meissner in the ntv podcast “Learned something again.”

As a risk analyst, Meissner is primarily active in the post-Soviet space and advises, among other things, companies that are considering investing in those markets. He knows Georgia well from many visits, he has good contacts in the country in the Caucasus and knows about the special role of Bidzina Ivanishvili. The oligarch was himself Prime Minister of the small country from 2012 to 2013, and to this day he is the mastermind of the ruling Georgian Dream party.

A Georgian-American consortium actually won the contract for the deep-water port in Anaklia in 2016. But construction quickly stalled because Georgian members of the consortium were charged with money laundering and the American investor then withdrew. In 2019, the port plans were stopped for the time being.

Today Anaklia is a quiet place. Only a few hotels, restaurants and a large aqua theme park still bear witness to the grand plans of the past. Otherwise you see a lot of vacancies and half-finished construction projects.

Alternative to Russia transit

After Russia invaded Ukraine a year and a half ago, the Georgian government put its ambitions for Anaklia out of the drawer again. A smart strategy because the war changed the trade routes. The so-called “Middle Corridor” has become an important alternative to bypass transit through Russia. The trade route leads from Europe to China via the Black Sea, Georgia, Azerbaijan, the Caspian Sea and Kazakhstan.

A route that could make Georgia an important player in international trade policy and bring the country a lot of money.

So far, Georgia has not been able to exploit its potential, partly because of major political risks for investors. “This is primarily due to the unresolved territorial conflict with Russia over the breakaway regions (Abkhazia and South Ossetia, editor’s note). In 2008, Russia sent the unmistakable signal in the August war that they could overthrow the government in Tbilisi at any time. For “It’s a nightmare for investors from the West,” says Meissner, analyzing the situation in Georgia.

In addition, Georgia is a difficult place to invest due to constitutional problems and violations of investment protection laws and property rights.

Georgian ports not deep enough

The Georgian government wants to paper over the problems with the construction of the new port. Anaklia is intended to become an important hub in the far east of Europe. Anaklia could “revolutionize Georgia’s role as an important transit country between Europe and Asia,” analyzes “Radio Free Europe” in a report on the country’s ambitions. So far, Georgia has been a “bottleneck for world trade”.

This is because the two current Georgian Black Sea ports – Poti and Batumi – are not deep enough for the largest container ships. That is why for years the cargo has had to be laboriously reloaded at other Black Sea ports in Istanbul or in Constanta, Romania.

But it will still take several years before the major project in Anaklia is realized. It is not even clear who will finance the construction of the port. Georgia’s incumbent Prime Minister, Iraqi Garibashvili, describes Anaklia as his government’s “most important and ambitious project.” Tbilisi should retain the majority of the shares and strengthen Georgia’s role on the world market. But who gets the remaining 49 percent of the shares?

“Russia has increased pressure”

The tender process has only been running since the beginning of the year. Chinese investors have most likely also applied. China has already invested $50 million in strategic planning for the deep-water port.

From a geostrategic perspective, the debate about port construction is highly explosive because Georgia is a potential candidate for EU membership, but the current government is seeking proximity to China and has also moved closer to Russia in recent years – with the covert support of ex-head of government and oligarch Bidzina Ivanishvili.

“We have the following situation in Georgia: The ruling political elite exploits its own position of power to covertly pursue political and economic interests that are often not in the interest of the general public,” explains expert Meissner in the podcast. “As part of this, there are clear signs that Russia is exerting pressure here through the Ivanishvili network.”

Russia is aware that the “Northern Corridor”, the transit route through Russia, is losing global importance. That is why Moscow is trying to expand its influence outside its own borders. The “Middle Corridor” plays an important role here. Since the Ukraine war, Russia has increased the pressure on Georgia, reports Meissner. “There are very strong indications of this. Be it the ‘agents’ law, which has failed for the time being, or the charges against the pro-European President Salome Zurabishvili, who is now being subjected to impeachment proceedings.”

Brussels in competition with Beijing

It is conceivable, but not particularly likely, that the European Union will also enter the competition for the port location in Anaklia. The offers from “several international companies are currently being examined,” said David Javakhadze, who is responsible for the port project in the Georgian Ministry of Economy, on “Radio Free Europe.”

After all, Georgia may soon be part of the EU; the country has been a potential candidate for membership since last year.

Brussels wants to compete with the Chinese Silk Road Initiative and counter it with its own infrastructure projects as part of the “Global Gateway” concept. The Georgian Black Sea coast plays a major role in this. The port of Poti – about 25 kilometers south of Anaklia – is operated by the Dutch company APM Terminals and is currently the largest in the country. Larger ships should also be able to enter here in the future. The operator wants to double the capacity in Poti.

“We are in an extraordinary moment of geopolitical risk around the Black Sea because of the Russian invasion,” Romana Wlahutin, visiting researcher at the German Marshall Fund and former EU special representative for connectivity, was quoted as saying by “Radio Free Europe”.

China, Russia, the EU – they are all vying for Georgia, a country no bigger than Bavaria, but which has long since become the scene of geopolitical power struggles.