Posted on December 14, 2022
Georgia’s government says it will revive a multi-billion-dollar deep sea port project at Anaklia, on the Black Sea coast, as the country sees a steep rise in demand for cargo transportation amid Russia’s war on Ukraine.
Prime Minister Irakli Garibashvili announced on December 12 that the state will own a controlling share in the new port, though he provided few details about how the project would be financed. The decision comes almost three years after Tbilisi withdrew from Anaklia amid political controversy and fears of the economic risks.
“The Anaklia Port will be built with the co-participation of the state, where the state will own 51 percent [of shares] while we will announce an international call for the rest and select the partner companies,” Garibashvili said during the government session.
The construction of what should have been the country’s first deep sea port began in the village of Anaklia close to the de facto boundary with Georgia’s breakaway Abkhazia region in 2017. Backers promised the project would significantly boost the country’s cargo handling capacity and elevate its position as a transit hub between Europe and Asia. While the government previously was ready to invest $100 million, control was to be held by private investors.
But the Georgian government canceled the $2.5 billion contract with Anaklia Development Consortium, the main contractor, in early 2020, alleging it had failed to attract sufficient investments while placing heavy and unrealistic demands on the state to underwrite huge loans from international financial institutions.
Political scandal also plagued the project. The consortium and its founder, banker-turned-opposition politician Mamuka Khazaradze, alleged in 2019 that the Georgian Dream-led government was sabotaging the project, including by bringing money laundering charges against him. That year Khazaradze founded an opposition party, Lelo for Georgia, months before the government officially canceled the contract. (A court earlier this year found Khazaradze and a business partner guilty of fraud, but released them without prison time, claiming the statute of limitations had passed.)
Many critics also attributed the project’s failure to Tbilisi’s fear of Russia; this argument hinged on the widespread belief that Moscow would not welcome competition in what it sees as its backyard.
Though the government continued to claim it wished to find a new partner and go ahead with the project, Anaklia was viewed as left for dead amid mixed messages from Georgian officials who have also floated the idea of expanding the existing Poti port, a potential rival to Anaklia.
Authorities’ interest returned to the Anaklia project this year as demand for transit across Georgian territory spiked with Russia’s invasion of Ukraine: Many shippers diverted trans-Eurasian freight that previously crossed Russia to the south, to the so-called Middle Corridor, which crosses Kazakhstan, Azerbaijan and Georgia. As the country faced a surge in traffic and trucks started queuing at Georgia’s borders, experts warned that the country desperately needs a deep sea port to take advantage of the opportunity.
The government hopes construction can resume as early as next year.
“Over the past year, work has been ongoing, meetings were held with potential investors, mainly with port operators and logistics companies which can be engaged in the process of project fulfillment alongside the state,” Economy Minister Levan Davitashvili told reporters following the December 12 government session. The minister has previously mentioned interest from Central Asia and the Persian Gulf.
“We hope that we will complete the selection process in January next year in accordance with the law so that by 2023 we can start immediate construction works and port development,” Davitashvili said.
Anaklia has returned to headlines as Georgia faces two ongoing arbitration disputes from previous investors, including the Anaklia consortium, which is demanding $1.62 billion in compensation. But Davitashvili said the disputes are directed at the state and do not concern the project itself, insisting their outcomes will not affect future investors.
“We will thus not wait for the [arbitration] decisions and will begin to carry out the project quickly,” the minister said.
But in a statement released following Garibashvili’s announcement, the consortium dismissed the idea of the government finding a “serious investor” in this new arrangement as “absurd.”
“No serious investor and no international financial institution will participate in or lend to a major project such as this if it is majority controlled by the Georgian state, especially given the Georgian state’s demonstrated unreliability as a partner in numerous business cases,” the consortium said.
The consortium suggested that the government was unable to find a private investor to lead the project. According to the statement, what motivated Garibashvili’s announcement was the release of a new documentary about the project, “The port that never was,” recently premiering as part of the Tbilisi International Film Festival. The documentary, the consortium says, “unveils the deceit of the Government in killing this project.”
“This latest scheme from the Government has no chance of success, and we think the Government knows this,” the consortium said. “It’s another case of the Government stalling, and wanting to blame others for its failure.”