Neil Barnett

A faraway place we should care more about — as Gulf investors clearly do

Neil Barnett reports from Tbilisi

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You may have seen the recent Georgian marketing campaign on BBC World and CNN, which looks like a splicing of The Apprentice and the title sequence from The Professionals. Among the familiar names dropped in the ad, such as HSBC, is an enigmatic one, Rakia. And this, it turns out, is not Bosnian firewater, but the acronym of the Ras Al Khaimah Investment Authority, which is presumably a sovereign wealth fund from that microscopic Arab emirate — though its website presents it as an inward investment promotion body, something quite different.

Nevertheless, Rakia has become a major player in Georgia, buying strategic assets like the powerful media group Imedi and the free zone of the port of Poti. But that’s not all: in February, Gulf Daily News reported that Rakia intends to invest a further $2 billion in Georgia over the next five years. Given that foreign investment here fell a massive 80 per cent in the first six months of the year, Rakia and a couple of other UAE investors (one of which bought a leading bank) now have quite some clout in an impoverished country heavily reliant on aid.

The interesting thing is that Ras Al Khaimah (trans: top of the tent) is a tiny emirate of just 250,000 people that in the past received subventions from its big brother, Abu Dhabi. Aside from a substantial ceramics industry, it’s hard to spot any cash cows in Ras Al Khaimah. One can only assume that in stark contrast to its profligate neighbour Dubai, Ras Al Khaimah is an assiduous saver. I asked Rakia to explain the source of its funds and what other assets it might acquire in Georgia. Initially I contacted the splendidly named Dr Tapas, head of marketing, who passed me on to two colleagues, but illuminating replies were not forthcoming within the time available. Rakia also has real estate, mining and aviation interests in Congo, according to Gulf media, although a question on this was similarly unanswered.

Georgia’s significance beyond the peaks and gorges of the Caucasus rests on one thing: energy. The country lacks major oil and gas reserves, but it lies astride the route from the gas fields of the Caspian to the markets of Europe. Several new trans-Georgian pipeline projects are planned. One of them is White Stream: Giorgi Vashakmadze, its director of corporate development, explained the situation aptly. ‘The one great thing about Caspian gas is that Europe and the West are interested in it. And that means Georgia, a country with a transit role for Caspian gas which cannot be substituted in the foreseeable future, maintains the West’s interest in developing democracy. Georgian society aspires to democratic values, so this is a great combination.’

There’s little doubt that much of the vast energy reserves of the central Asian ’stans will end up in Europe; the question is whether or not Gazprom will secure control over their marketing and movement. Already, gas-rich Turkmenistan, central Asia’s answer to North Korea, acts as a feeder to the Russian behemoth. So while some Europeans hope that Caspian energy can break Gazprom’s grip on Europe’s windpipe, Moscow naturally wants to tighten that grip by returning ex-Soviet producer and transit states to vassal status. This goes a long way to explaining last year’s Russian invasion of Georgia and annexation of two of its enclaves, South Ossetia and Abkhazia. The Russians stopped short of taking the entire country, leaving energy transit routes intact. But with Brussels as pusillanimous as ever and Washington newly supine, will the Russians begin to think they have a green light to finish the job? It might be what financiers like to call a ‘tail event’, but we seem to be in a season of ‘tail events’. For their own long-term interests as much as anything, Europeans ought to care a little more about Georgia’s sovereignty.

There is something quite remarkable about Georgia, aside from its sublime food, unique language and spectacular scenery. Since President Mikhael Saakashvili took power in the Rose Revolution in 2004, low-level corruption has all but been eradicated. The example Georgians will usually give is that traffic police no longer operate as highwaymen, extorting bribes from citizens, and actually do their job as they are meant to do it. This is something that is still a long way beyond the horizon in EU countries such as Romania and Bulgaria. In business terms it means that the tax office and the licensing bureaux are not the sort of sleazy clip joints seen in Ukraine or Serbia, but dull, reasonably efficient bureaucratic operations, just as they ought to be. Saakashvili is a polarising figure, but even his fiercest critics concede this point. There’s equal admiration for the government’s scheme to send thousands of bright students to study in Oxford, Harvard and the Sorbonne. The objective is quite plain, admirable and ambitious in equal measure: to catapult Georgia from ex-Soviet sink to dynamic, proto-Western society in just a few years.

The ointment naturally has a fly in it. Saakashvili is sliding gently in the direction of megalomania. He has built a new presidential palace in a stunning spot overlooking the river Mtkvari in Tbilisi. Try to imagine the White House, the Gherkin and the Reichstag in a three-way shotgun wedding and you have this building in all its vulgarity before you.

More alarmingly, media freedom is vanishing fast. The Imedi media group was once the centre of opposition to Saakashvili. There was a bitter tug of war between the government and its owner, the late billionaire Badri Patarkatsishvili, in which NewsCorp briefly stepped in as custodian, presumably to assist in its defence. Now that the Patarkatsishvili empire is being picked over by a host of claimants (for more on this, look up Suzanna Andrews’s brilliant investigation in October’s Vanity Fair), Imedi came up for sale. And under the new owner, Rakia, Imedi seems to have found fresh enthusiasm for the Saakashvili government.

Perhaps the last bastion of red-blooded independent journalism is the US-funded Radio Free Europe, which maintains a well-staffed bureau in Tbilisi. Alas the BBC World Service does not broadcast in Georgian, and even its Russian service is enduring death by a thousand cuts. Has anyone noticed that as the world becomes more interconnected, government policy becomes increasingly provincial? Perhaps in the minds of our leaders, Georgia is one of those faraway places of which we know little — like, say, Czechoslovakia in 1938, or Sarajevo in 1914.