Tension in Georgia may harm economy

12 July
Georgia, Washington and Moscow: a Nuclear Geopolitical Poker Game
(GlobalResearch.ca)Moscow has stepped up ties with the two small republics against the backdrop of Georgia’s NATO bid and Western recognition of Kosovo’s independence from Serbia. Russia, however, has not formally recognized Abkhazia or South Ossetia.
Moscow has long backed Abkhazia’s de facto independence however. It has granted Russian citizenship to many of its residents and recently legalized economic ties with the separatist republic. For Russia, the conflict provides a source of leverage on both Abkhazia and Georgia. The more Georgia seeks to distance itself from Russia, the more Russia throws its weight behind Abkhazia.
However Georgia under Washington’s man, strongman President Mikhail Saakashvili—a pretty ruthless dictator as he recently showed against domestic opposition—refuses to back off its provocative NATO bid.
Georgia is also a strategic transit country for the Anglo-American Caspian oil pipeline from Baku in Azerbaijan through Georgia to the Turkish port Ceyhan. As well, the Baku-Tbilisi-Erzurum gas pipeline has been key to Azerbaijan as an alternative to the control of the Russian state monopoly Transneft in order to convey its oil and gas resources toward the West. The entire Caucasus is part of what can be described as a new Great Game for control of Eurasia between Washington and Russia.
8 July 2008
Rice Criticizes Russia Over Georgia Tensions
(VOA News) U.S. officials have been dismayed by a series of Russian actions involving Georgia’s breakaway regions of Abkhazia and South Ossetia [which]
declared independence from Georgia in the early 1990s, sparking fighting and the dispatch of Russian peacekeepers to the region.
Georgia has vowed to bring the territories back under central government control.

8 November 2007
By Konstantin Rozhnov
(BBC News) The recent unrest in Georgia, which has led to a state of emergency being imposed, has come at a time when the former Soviet republic’s economy was reported to be expanding quite remarkably.
According to International Monetary Fund estimates, Georgia’s economy will grow 11% this year and 9% in 2008.
Some experts fear that the latest political developments could slow Georgian President Mikhail Saakashvili’s reforms and undermine the country’s economic performance.
Mr Saakashvili won the 2004 presidential election after what has become known as the “rose revolution” in November 2003.
He replaced Eduard Shevardnadze, Georgia’s long-time president, whose unpopularity stemmed largely from the serious problems in the economy.
The new government had to try to solve the problems related to some of the worst corruption in the former Soviet Union, lack of investment and poverty.
In an attempt to boost the country’s development, Kakha Bendukidze, a Russian tycoon, was given a post as Georgia’s state minister for economic reforms.
Some welcomed the appointment, but others were concerned that it could lead to strengthening Russian influence in Georgia, which is an energy importer and one of the smaller countries in the former Soviet Union.
Mr Bendukidze pledged to “remove all the obstacles that are holding back investment” and open the whole economy to privatisation.
‘Committed to reforms’
In 2006, Georgia was named the leading global reformer in a report by the World Bank and the International Finance Corporation, called Doing Business. … The country “improved its business start-up procedures, dramatically improved its customs procedures, introduced specialised courts, streamlined labour regulations, introduced a credit bureau, and cut the number of licences enormously”.
Doubts
But there are those who do not share the optimism shown by the Georgian government and those international organisations [saying that] … international organisations rely on Georgian government data, which does not show the whole picture – including extremely high inflation, unremarkable industrial output and high unemployment. [and that] business in the country is virtually non-existent as the economy is in oligarchs’ hands, and most foreign investments is in the form of state capital from Russia and Kazakhstan.
Relations with Moscow
… relations with Russia have been worsening since pro-Western President Saakashvili came to power in Georgia in 2004. In 2006, Moscow banned imports of Georgian wine and mineral water, citing health fears, and imposed an air, sea and postal blockade of Georgia after Georgian officials arrested several Russian officers for alleged spying.
Russia, which is Georgia’s main energy supplier, also dramatically raised gas prices for the country. … Russian businesses [own] at least 50% of Georgia’s economy, mostly in energy and infrastructure monopolies.
Despite that, Moscow maintains its air blockade of Georgia, saying the country owes money for air traffic services, as well as the ban on Georgian wines.
There are already enough internal and external factors which can undermine the country’s economic development. Now it is up to politicians not to hurt Georgia’s economy further. Complete Story