Ukraine war brings Georgia’s troubled deep sea port back on to the agenda

Ukraine war brings Georgia’s troubled deep sea port back on to the agenda
One rendering of how Anaklia, a major seaport project on Georgia’s Black Sea coast, might turn out. The government cancelled the construction contract for the project. / Anaklia Development Consortium
By Nini Gabritchidze for Eurasianet October 28, 2022

With international transit demand rising as a result of the Ukraine war, the Georgian government has revived discussions about constructing the controversial Anaklia deep sea port project.

Georgia, the only South Caucasus country with access to the Black Sea, does not have a deep sea port that would allow it to reach its full transit potential. The multibillion-dollar Anaklia megaport project was supposed to fill that gap, but the government withdrew from the project in early 2020, citing a failure to attract investment. 

Now, though, as interest in Georgia’s role in international transit is soaring, the port is back on the agenda.

“We want to have a modern port infrastructure which would meet the country’s transit potential, which would serve the interests of our country, and, of course, will further increase cargo flows in the Georgian corridor,” Economy Minister Levan Davitashvili told reporters in mid-September.

Davitashvili said that the government has been studying the port's potential since it pulled out of the project, and said that the project is increasingly coming up in the government’s discussions with foreign partners, citing specifically Central Asian officials and port officials from Abu Dhabi. 

While implementation of the project still appears a long way off, the revival of discussions is a remarkable change of fortune after the project appeared to be left for dead in 2020. 

Anaklia Development Consortium, the main contractor in the project, started building the port, at the village of the same name just next to the de facto boundary with Abkhazia, at the end of 2017. Hailed as Georgia’s “project of the century,” boosters hoped the new port would significantly increase the country’s capacity to handle cargo traffic and make Georgia a key hub in Asia-Europe transit.

In January 2020, however, the Georgian government cancelled the contract with the consortium. The authorities said that the consortium had failed to attract enough investments and funds while placing heavy and unrealistic demands on the state to underwrite huge loans from international financial institutions.

But to many, the government’s decision seemed to be the result of domestic political considerations. The consortium’s founder, Mamuka Khazaradze, was a well-known banker who in the process of establishing the port had become a political rival of Bidzina Ivanishvili, the founder of Georgia’s current ruling party, Georgian Dream. Khazaradze argued that the ruling party was deliberately sabotaging the project, including by charging him with money laundering. After those charges were filed, he formed an opposition political party, Lelo for Georgia.

Other critics also attributed the government’s decision to a fear of Russia, which was thought to not welcome such a strategic, competitive port in what Moscow sees as its backyard. 

But Georgian authorities have since repeatedly offered assurances that the project was not dead, but merely in hibernation. And, ironically, it is Russia that might be finally waking it up. 

As Russia has come under heavy sanctions as a result of its invasion of Ukraine, significant volumes of international freight that had previously relied on Russian transit routes have been rerouted to the so-called Middle Corridor. The corridor, connecting China and Central Asian countries with Europe, passes through Azerbaijan and Georgia.

Over the past months, the Georgian railway and ports in Poti and Batumi have reported rising freight flow, while long lines of international trucks at Georgian borders have become one of the most noticeable effects of the Ukraine war in Georgia.

But experts have long warned that infrastructural flaws could prevent Georgia from using its full transit potential, with the absence of a deep sea port at the top of that list. 

The Middle Corridor “has become more valuable due to the current situation in the region,” David Songulashvili, head of the Georgian parliament’s economics committee, told Georgia’s public broadcaster in September. “It is precisely for this reason that the construction of Anaklia port is today more on the agenda and it is for this reason that with the government’s decision and efforts, preparatory works have started to select a proper investor.”

On a recent visit to Tbilisi, Azerbaijan’s President Ilham Aliyev spoke of the need to boost regional transportation capacity. “Increasing the volume of cargo transferred from Central Asia and Asia as a whole to the West and back using Georgian ports creates a new reality. We have to be ready for that,” Aliyev said at a joint appearance with Georgian Prime Minister Irakli Garibashvili on October 24. 

Government officials say they hope to find a new investor by next year, but things may be complicated by two ongoing arbitration disputes from previous investors. This includes a claim from the Anaklia Development Consortium itself, which sued Georgia demanding $1.62 billion in compensation. 

But Khazaradze, who has tried to position himself and his party as a force less polarising than the other major opposition parties, has pledged to not stand in the way should the authorities be serious about their intentions.

“I don’t know what guarantees the state must present, how they will support it, but I am ready to [withdraw the lawsuit] if only something gets done in the country,” Khazaradze told Business Media Georgia in June. He added, though, that the fact that the state did not appear interested in discussing the project with the previous investors suggested a lack of seriousness.

“So, I don’t see a real chance of the Anaklia port being constructed under this government, but today is not the time for a fight,” he said.

Nini Gabritchidze is a Tbilisi-based journalist.

This article originally appeared on Eurasianet here.