By Eka Janashia (05/08/2015 issue of the CACI Analyst)

In July 2015, Russia stepped up its policy of redrawing the border along the administrative line of South Ossetia, leaving around 100 families and a total of 1,605 meters of the BP-operated Baku-Supsa oil pipeline beyond the jurisdiction of the Georgian government.

The so-called “borderization,” implying the installation of barbed wire and metal-bar fences at sections of the administrative boundary line (ABL), started in 2008 after the August war and peaked in 2010 and 2013 (see the 02/10/2013 Issue of the CACI Analyst). It has separated the farmlands and orchards of the inhabitants dwelling across the ABL or left them within occupied territory. The recent expansionist move on July 10, however, also involved part of the Baku-Supsa pipeline and moved the border closer to Georgia’s strategic east-west highway.

Baku-Supsa, officially referred to as the Western Route Export Pipeline (WREP) has a transportation capacity of 100,000 barrels per day and earns Georgia around US$ 7 million annually in transit fees. It runs from Azerbaijan’s Caspian Sea shore and reaches Georgia’s Black Sea coast in Supsa. In the first half of 2015, the pipeline transported 16 million barrels of oil.

Georgia’s Energy Minister, Kakha Kaladze said the pipeline could be rerouted by constructing a separate 1,500–1,600-meter section of the WREP if a disruption occurs. Nevertheless, Azerbaijan has remained relatively calm in response to the developments, considering them a purely political issue. SOCAR, which is one of the contractors of the WREP, recently declared that “this [redrawing of the ABL] will not cause any problem for the pipeline.” Meanwhile, South Ossetia’s de facto authorities provocatively announced that BP should apply to them if the full functioning of the pipeline is in danger.
The Kremlin’s annexation of uncontested Georgian territory and its timing could well be intended as a response to recent actions taken by Tbilisi.
On July 8, the Multinational Military Exercise “Agile Spirit 2015,” with the participation of military servicemen from the U.S., Bulgaria, Romania, Lithuania and Latvia, started in Georgia. Moldovan and Armenian servicemen took part in the exercises in the capacity of observers. In recent months, Georgian military units have undergone training in the framework of NATO’s Evaluation and Feedback Program. Aside from these activities, the opening of the NATO training center is scheduled for the fall of 2015 as a part of the “substantial package” that NATO granted the country at last year’s Wales summit (see the 09/17/2014 Issue of the CACI Analyst).

Moreover, this summer Georgia struck two remarkable deals aiming to enhance country’s air defense system. On July 10, Georgia’s Defense Minister Tina Khidasheli signed a contract with the European missile manufacturer MBDA on the purchase of a “state-of-the-art defense system.” A month earlier, she carved out a separate deal with ThalesRaytheonSystems, a producer of ground-based surveillance radars and air defense command and control systems. France’s contribution to strengthening Georgia’s defense capabilities concerns Moscow especially in light of the upcoming NATO summit where Georgia hopes for a renewed chance of obtaining a Membership Action Plan (MAP). Moscow’s permanent representative to NATO, Alexander Grushko, threatened at the end of July that “any kind of political game over the issue of NATO expansion towards Georgia and Ukraine is fraught with the most serious and the most profound geopolitical consequences for the entire Europe.”

One tangible reflection of this statement is the renewed “borderization” just ahead of the European Youth Olympic Festival (EYOF), which started on July 26 and has been perceived as a prominent event for boosting Georgia’s international prestige.

Of greater concern for Tbilisi, however, is Moscow’s inching towards the main transit artery connecting Georgia’s east and west. Georgia’s east-west highway, the partially seized WREP, and the twin Baku-Tbilisi-Ceyhan and Baku-Tbilisi-Erzurum oil and gas pipelines are situated in close proximity of one another and create an important trading route linking the Caspian shore to Eastern Europe. The security of this strategic transport corridor determines to what extent Georgia can promote its status as a transit state. On the contrary, inability to fully control the infrastructure will severely damage Georgia’s economy and its ability to function as a state. Russia’s recent incursions can be understood in this perspective.
A resolution adopted by the Georgian parliament on July 24 condemned the construction of new demarcation signposts close to the east-west route and blamed Russia for “aggressive steps” directed against the peace and security of Georgia and the whole region.

Nevertheless, the opposition United National Movement (UNM) party slammed the ruling Georgian Dream (GD) coalition’s “capitulatory” policy and called on the government to cancel the “Abashidze-Karasin format” – a direct, informal dialogue between Tbilisi and Moscow. UNM insists that the format has falsely created the impression of improved relations between Georgia and Russia and contributed to the removal of Georgia’s occupied territories from the international agenda. UNM thus proposed that the government should request a UN Security Council session and seek to define the steps taken by the Kremlin in the breakaway regions as another justification for the Western sanctions imposed against Russia.

Yet, GD continues its policy of “strategic patience,” with the goal “not to make the country a victim of provocations.” Apparently, Tbilisi’s stance fits well with the EU’s view of Russia’s continuing “borderization” policy. Paying an official visit to Georgia on July 20-21, the President of the European Council Donald Tusk stated his appreciation for Tbilisi’s “responsible reaction” and advised the Georgian government to avoid “overreactions” in its response.
Whereas Georgia indeed needs to devise a shrewd response to these developments, it should also be remembered that by encroaching further into Georgian territory, Russia is testing Tbilisi’s ability to mobilize international support that could discourage further border shifts.

Image Attribution: BP

By Oleg Salimov (08/07/2015 issue of the CACI Analyst)

Tajik labor migrants are again at the center of political games between Russia and Tajikistan. At the end of June, Tajikistan’s Ministry of Foreign Affairs delivered a note of protest to Russia’s Ambassador in Tajikistan, objecting to an article in the Russian newspaper AiF, which describes Tajikistan as a country of labor migrants. Soon thereafter, the Russian government allowed the reentry to over 1,000 Tajik migrants earlier deported from Russia for violating immigration laws. This step, as well as the removal of the article from its original source, tempered the Tajik government’s reaction. However, the problem of Tajik labor migrants is far from resolved.
The original article published in the popular Russian newspaper was titled “The country of guest workers. AiF’s special report from Tajikistan.” The article’s central theme was the urgent need for a visa regime between Russia and Tajikistan. Tajikistan’s government as well as the Russia-based social movement Tajik Labor Migrants found the article highly derogatory and offensive. The official statement of Tajikistan’s Ministry of Foreign Affairs pointed to the destructive consequences of such publications on the Tajikistan-Russia relationship. The ministry appealed to the Russian government to prevent publications that distort the truth and contribute to a negative image of Tajikistan.
At the same time, Karomat Sharipov, the chairman Tajik Labor Migrants, published the group’s response to the article on its website. Sharipov asserted that the article was part of a dirty political campaign by Russian pseudo-patriots, aiming to discredit Tajikistan and denigrating the Tajik people. Sharipov agreed that the visa regime for labor migrants is needed, but mainly in order to protect Tajiks arriving in Russia as opposed to protecting Russia from Tajiks as argued in the article. He also noted that such publications are unacceptable for countries seeking to build a strategic partnership.
Following the public outrage in Tajikistan, the Russian government on July 2 pardoned over 1,000 Tajiks, who had previously been deported from Russia for violating the rules of their legal stay. According to Abdullo Kodiri, the press-secretary of Tajik Migration Services, the agreement was reached after negotiations between the two countries’ migratory services. Russia hosts close to a million Tajik migrants as of June 2015, according to Russian Federal Migratory Services. The number is about 200,000 lower than in December 2014.
The amount of money transferred from Russia to Tajikistan by labor migrants in the first quarter of 2015 is also down by 42.4 percent compared to the first quarter of the last year, according to Tajikistan’s National Bank (TNB). TNB reported a total of US$ 289 million transferred to Tajikistan from Russia in the first quarter of 2015. Russia’s Central Bank instead reported transfers of US$ 364 million from Russia to Tajikistan and a drop of 87 percent in the first quarter of 2015, as compared to the same period in 2014. The coefficient of money transfers from Russia to Tajikistan’s GDP is down from 30.8 percent in the first quarter of 2014 to 19 percent in the first quarter of 2015, according to TNB.
The lower number of Tajik labor migrants and the significant drop in money transfers to Tajikistan can be explained by the slowing Russian economy as a result of falling oil prices and economic sanctions implemented by the U.S., EU, and some other countries. While Tajikistan is not part of West-Russia confrontation, the country feels the effect of these sanctions firsthand. Tajikistan could have avoided this situation if the Tajik government would have been genuinely concerned about the problem of outmigration from Tajikistan, unemployment, and the dependency of its economy on money transfers from labor migrants.
While provocative, the AiF article describes a problem that the Tajik government continues to neglect. While expressing its outrage over the article, the Tajik government has failed to outline any actions to address the problem of labor migrants, whose input into Tajikistan’s economy reached 42 percent of the country’s GDP at its peak in 2013. Instead of negotiating with Russia on pardoning labor migrants, Tajikistan’s government should focus on fighting unemployment at home and building a self-sustaining economy. This will create a far more positive image of Tajikistan, which was the primary concern of the government’s protest.
Tajik Labor Migrants warns about the growing number of Tajik migrants disillusioned with their own government and the prospects of employment back home, which become radicalized and join extremist groups like ISIS. In the beginning of July 2015, Radio Ozodi/Freedom reported that Tajikistan’s embassy in Moscow had received a letter from Russian ultranationalists requesting the immediate return of all Tajik migrants to Tajikistan to avoid “dire consequences.” Tajik labor migrants are frequently treated as a point of leverage in political negotiations between Russia and Tajikistan, but are simultaneously a highly vulnerable group whose real needs are rarely recognized.

By Eka Janashia (08/07/2015 issue of the CACI Analyst)

On June 27, Georgia’s parliament passed, in the first reading, a bill that deprives the National Bank of Georgia (NBG) of its supervisory function of financial institutions, assigning these tasks to an independent agency.
The proposal, initiated by the Georgian Dream (GD) ruling coalition a month earlier, has faced a spate of sharp criticism not only from the political opposition but also from influential international financial institutions, civil society and the business sector. President Giorgi Margvelashvili pledged to veto the bill in case it was endorsed.
According to the amendments, a new body – the Financial Supervisory Agency (FSA) – will monitor and conduct oversight of Georgia’s banking sector and financial institutions, a function currently carried out by NBG. A seven-member board, including a representative and the president of NBG, as well as five government nominees, will run FSA after the parliamentary confirmation. The board members, in turn, will name the head of the agency, which should also be approved by the parliament.
The critics of the bill discern political motives behind the proposal, arguing that it is designed to undermine the position of NBG’s President Giorgi Kadagidze, who is affiliated with the formerly ruling United National Movement (UNM) party.
The legislation’s timing coincides with an escalating confrontation between senior GD politicians and Kadagidze. The initial attacks against Kadagidze took place in February last year, when the depreciation of Georgia’s national currency reached a dramatic level. Former Prime Minister Bidzina Ivanishvili lashed out at the NBG president, blaming him for inaction to prevent the currency crisis by using the national reserves (See 03/18/2015 issue of the CACI Analyst). Since then, Kadagidze, whose term in office will expire in February 2016, has become a frequent target of attacks from GD politicians.
Opponents of the bill also question the financial advisability of moving banking supervision from the NBG, arguing that there is no economic and financial rationale justifying the damage implied by the planned changes.
Reputable financial institutions, including the International Monetary Fund, World Bank, European Bank for Reconstruction and Development and Asian Development Bank have warned PM Irakli Gharibashvili and Parliament Speaker Davit Usupashvili that splitting the NBG’s functions will weaken “the independence and quality of banking supervision in Georgia” and challenge both stability in the banking sector and the sustainability of economic growth. In particular, they warn against empowering the parliament to appoint FSA Board members, which will undermine the principle of checks and balances practiced in the current appointment procedures for the NBG Board. Such a shift risks leading to a politicization of banking supervision, damaging its independence and autonomy, the institutions assert.
By contrast, GD argues that the amendments will grant “more independence” to the banking sector. A co-sponsor of the bill, GD MP Tamaz Mechiauri, who chairs the parliamentary committee for finances, explained that the proposal will lead to the de-politicization of NBG’s currently politicized board, which “do not reflect at all the interests of those forces, which are currently in power.”
Against the background of such statements, UNM insists that bill was initiated and backed by Ivanishvili, who aspires to obtain a “key” to the banking sector – the only sector that is not under his control.
The president’s office rejected the bill for its lack of professionalism and also lamented that the way it was elaborated contradicts Georgia’s commitments under the Association Agreement with the EU. According to the 2014-2016 Association Agenda, Georgia is obliged to boost the NBG’s independence by revising its legislation according to EU best practices and with the support of experts including from the European Central Bank. In fact, neither NBG, nor local or foreign experts, or representatives of Georgia’s business community, were invited to participate in the preparation process of the draft bill. Moreover, the sponsors of the bill failed to provide the political, financial and economic rationale justifying the prospective reduction of NBG’s functions and the need for creating a new agency.
If the bill is approved, GD will obtain real levers on the FSA Board, which will increase the perception of political motives behind the new amendments.
The president’s pledge to veto the bill will be largely symbolic since GD is well positioned to override it. The coalition holds 86 seats in parliament – 10 more than it needs to overturn a presidential veto.
Given the overall economic context – decreasing exports and investment as well as a slowdown of economic growth in Georgia, the endorsement of the bill will even further fuel speculations on the government’s agenda vis-à-vis NBG, and will complicate Georgia’s relations with financial donor organizations.