Georgia and the Role of Oil Transit

by Joshua Foust on 4/19/2007 · 1 comment

Last week, I mentioned that Georgian Prime Minister Zurab Nogaideli, often hailed as the world’s godfather of political reform, was giving a talk on how he went about turning his country from just another barely-functioning ex-Soviet state into a success story. Unsurprising to the more libertarian minded among us, a combination of rigidly enforced anti-corruption laws, a greatly reduced tax burden, and a preference for more free market mechanisms are what have spurned the incredible growth in Tblisi.

BTC Pipeline Map

Or has it? In the last decade, Georgia has made itself almost as indispensable to Caspian energy exports as Azerbaijan, culminating most recently in the completion of the BTC and BTE pipelines, which have successfully cut Russia’s threatening monopoly power over Georgia’s energy supplies. They have been so effective at pissing off Moscow, in fact, that rumors have flown fast and free of Russian agents actively trying to sabotage it. All in all, it’s very reminiscent of that terrible geographically-confused James Bond movie.

Anyway, so it’s not entirely clear that all this oil transiting its territory has necessary been good for Georgia.

Tbilisi has long promoted the pipeline as the magnet for investment in other areas. In a 2004 television interview, Saakashvili stressed that BTC “is helping” attract other foreign companies and investments. But Gia Jandieri, a Georgian economist, says it is open to interpretation how much credit the pipeline deserves for attracting outside investment. In 2006, foreign investment in the country more than doubled, with purportedly 60 percent of the total going into BTC-related ventures. “I don’t think there is a direct link,” Jandieri said. “[Y]ou cannot paint it directly as a magnet for other projects. … But I suppose it gave some push to other companies to start [to invest in Georgia].” …

Manana Kochladze, founder of the environmental NGO Green Alternative, suggested that the Georgian government bears a significant share of responsibility for existing discontent among Georgians. Monitoring groups have found that a significant share of the money generated by BTC — in the form of taxes, grants and other social outlays — is not making it back to the communities. This means that transparency remains an issue. Another problem appears to be rooted in a communications breakdown.

How can we square these two stories of Georgia? On the one hand, it is a stunning success of anti-corruption, transparent government, healthy regulation, and strong economic growth. On the other hand, it’s money-grubbing, possibly not transparent, and unresponsive to citizen needs. Which story should we trust?

Neither, of course. The World Bank funded Private Sector Development Blog has its own agenda just as surely as the George Soros funded EurasiaNet does. And their agendas are not necessarily the same. Hell, knowing that EurasiaNet regularly runs Ted Rall’s cartoons makes me want to instinctively discount everything else the run; just as knowing the specific free market agenda of the World Bank makes me raise my eyebrows every time they release some breathless study about the absolute moral power of markets.

So what’s the real deal? Is Georgia lagging, or is it a success story?

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This post was written by...

– author of 1848 posts on 17_PersonNotFound.

Joshua Foust is a Fellow at the American Security Project and the author of Afghanistan Journal: Selections from His research focuses primarily on Central and South Asia. Joshua is a correspondent for The Atlantic and a columnist for PBS Need to Know. Joshua appears regularly on the BBC World News, Aljazeera, and international public radio. Joshua's writing has appeared in the Columbia Journalism Review, Foreign Policy’s AfPak Channel, the New York Times, Reuters, and the Christian Science Monitor. Follow him on twitter: @joshuafoust

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{ 1 comment }

johnnie b. baker April 19, 2007 at 9:39 pm

the answer? neither. compared to azerbaijan and armenia, it is a success. but compared to the club of countries georgia wants to be a part of, it is not. while life may be getting better in georgia, the country still has a long way to go. it is simply to premature to call it a success or failure.

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