Government Actions and Words Appear to Show Its Support for Poti at the Expense of Anaklia and Raise Questions About Whether it has been Misleading Georgian Public as well as International Communities
TBILISI, GEORGIA, 27 October, 2020 – Recent actions and comments by the Georgian Government appear to have exposed its true intentions to promote Poti and to turn its back on Anaklia as the location of a future world-class seaport. In the process, the Government has damaged its reputation in the global investment community by misleading investors and diplomats who were led to believe that the Government is still committed to a project at Anaklia. By every measure, it appears the Government has no interest in such a project at Anaklia.
Government Puts Its Support Behind Poti at the Expense of Anaklia
As reported in the media on 18 October, Georgian Prime Minister Giorgi Gakharia said at a political event sponsored by Georgian Dream, "We have to agree and be honest with each other that there are many problems in Poti, but nevertheless, I want to tell you that the next 4 years will be the years of Poti reconstruction, specifically the years of Poti reconstruction. Because that is what necessary not only for Poti but the entire country.”
Separately, Davit Ebralidze, Chief Executive Officer of Poti Free Industrial Zone (FIZ) said in an interview with Georgia Today “Initially when thinking about location of new FIZ, the most significant location was chosen strategically, not only in Georgia but in the Black Sea and Caucasus Region. Poti FIZ is located in the centre of the Silk Road and international transport and logistics corridors. Its location is one of the distinctive advantages over other free industrial zones in the country… The Poti Free Industrial Zone is one of the most strategic and successful companies within Smart Capital Group.”
Taken together, these comments suggest that the Government are now committing themselves to Poti as the future home of the long-anticipated deepwater seaport, contradicting prior statements from the Government.
The 23 October announcement by APM Terminals Poti (APMT) and Poti New Terminals Corporation (PNTC) that they have signed an agreement for the joint development of a new bulk cargo facility on the northern side of the Poti Sea Port reinforces the belief that the Government has been telling two conflicting stories: One that it is still committed to Anaklia; the second that it is focused solely in Poti. PNTC’s website suggests their intent is to see “a new deep-water harbor (greenfield) for dry bulk and container handling north to the existing Poti Port.” In other words, an alternative to Anaklia.
The interests of Georgian Dream Supporters Intersect with those of Poti FIZ
Based on public records, there appears to be close financial interests between Poti FIZ and high-level people connected to Georgian Dream:
- Poti Free Industrial Zone is managed by Euro-Asian Management Group, which is jointly owned by a subsidiary of the Chinese company CEFC and Eurasian Invest LLC.
- Both David Ebralidze and Ivane Chkhartishvili are on the Supervisory Board of Eurasian Invest, which itself is owned by two companies registered in the British Virgin Islands, where laws make it difficult to track who owns them.
- Davit Ebralidze was previously Head of Administration for Georgian Co-Investment Fund, a fund set up by Georgian Dream leader and former Prime Minister Bidzina Ivanishvili to manage some of his personal investments.
- Chkhartishvili is also co-chairman of Euro-Asian Management Group and owns Smart Capital Group which, as noted above, is involved with Poti FIZ. Chkhartishvili “has been connected to several corruption cases” according to Democracy and Freedom Watch
- George Bachiashvili, who served on the board of directors of Eurasian Invest and appears to be the sole director of one of the BVI companies behind Eurasian Invest. He previously served as CEO of Georgian Co-Investment Fund and has long been connected to Bidzina Ivanishvili as a financial advisor.
Government Admits That Anaklia is Unlikely
As further evidence that the Government has no interest in seeing a port developed at Anaklia, it included language in its proposed 2021 budget that would be certain to scare away any potential investors. On pages 517-518 of the proposed budget is the following passage regarding the intended new tender for an Anaklia Port Project: “Potential risks – as it currently stands, due to the potential arbitration dispute, an investor of high reputation and experience may not be selected. Also, other unforeseen circumstances.”
Government Abandons Anaklia Site and Creates Health and Environmental Risks
The Government has also abandoned the site of the proposed Anaklia project after it unlawfully seized the land from ADC in February 2020. While ADC had invested considerable resources to begin site preparation work, including clearing 110-hectare area where soil was removed and cleared of waste, the Government’s failure to maintain the site has led to significant and chronic circulation of dust and particulate emissions, causing damage to the environment as well as threatening nearby residents with potentially serious respiratory health problems.
ADC had advised the Government of the need and means to mitigate these risks. However, the Government has ignored this, causing problems for the people of the region and signaling its lack of any further interest in the site.
Statement from Anaklia Development Consortium
“The current Government has misled the people of Georgia and the international community about its intentions for Anaklia port. Since unlawfully terminating the investment agreement with ADC in January 2020, Government ministers have said multiple times that the Government will issue a new tender for a port project at Anaklia. Based on its actions, however, it seems the Government has chosen to promote Poti and the related Free Industrial Zone, at the expense of the Anaklia Port.
“Most troubling is the Government’s duplicity, which will only serve to discourage foreign investors who feel they cannot trust the Government, and Georgian citizens who fear that the scourge of corruption will once again tarnish Georgia’s reputation and undermine their trust in the Government. One has to question whether the Government is acting in the best interests of the people of Georgia. Regardless of its motives, however, it certainly appears the Government is not being honest about its intentions with Anaklia.”
Why Poti Cannot be an Adequate Alternative to Anaklia
The Government’s initial decision to develop Anaklia was taken in 2013 after the Government hired a consortium of international consultants to compare and contrast the options in Georgia for a deep sea port. Anaklia was chosen because it held a number of advantages over every other location in Georgia, including the geo-technical conditions of the site, its financial feasibility and most importantly, the significant economic, social and geopolitical impact the project would have both on the Abkhazia region and the wider country.
The consultants’ report clearly outlined that the existing ports in Georgia (including Poti) are limited in their capacities and hinterland connections, and any expansion would have only short-term impact for the national maritime sector. The consultants advised the Government of Georgia to consider the development of the greenfield and large-scale deep sea port at Anaklia to ensure long term advantages for the country and phased capacity developments to serve Georgia’s needs in long-term perspective.
The existing port in Poti has numerous disadvantages and is not suitable for expansion, and the proposed new site at Poti is equally flawed, as explained by ADC.
Further details of the Anaklia Port project and ADC can be found at http://anakliadevelopment.com
 The full set of documents submitted by the Government to the Parliament of Georgia together with the draft Law on 2021 State Budget are available at:
Anaklia Development Consortium Statement Regarding Government’s Own Admission That Any New Port Tender will Likely FailThursday, 08 October 2020 16:44
TBILISI, GEORGIA, 8 October, 2020 – The Anaklia Development Consortium (ADC), the company originally
selected by the Government of Georgia to develop the strategic Anaklia Port Project, today issued the
following statement regarding the 2021 State Budget:
Ruling Georgian Dream Party Reversed its Support for Vital Project,
Wiping Out Economic Benefits for Georgia
TBILISI, GEORGIA, 9 September, 2020 – The Anaklia Development Consortium (ADC), the company originally selected by the Government of Georgia to develop the strategic Anaklia Port Project, today shared additional details of the Government’s campaign, directed by the ruling Georgian Dream party, to undermine the project by dissuading potential project investors, lenders, contractors and suppliers from joining the project in order to kill it.
The following statement is issued on behalf of the ADC Supervisory Board:
“All infrastructure projects of such scale require government support; namely the encouragement of lenders and investors, the assistance in permitting, regulatory approvals and a favorable tax regime, and providing any ancillary support; in this instance, the provision of land and the construction of road and rail infrastructure. For a government to actually oppose an infrastructure project that it had itself approved is highly unusual in the global economy.
“The Georgian Government’s campaign to strangle ADC’s ability to develop the Anaklia Port Project represents a self-inflicted wound for itself and considerable injury to Georgia’s economy and its role in the region.
“Taken together, the Georgian Government's specific actions are part of a deliberate and well-orchestrated campaign to destroy a project which the Government itself originally sponsored and endorsed, but subsequently chose to destroy as a result of what appear to be the political and economic self-interests of the Georgian Dream Party and its principals.
“The Government manufactured all sorts of excuses for not wanting to see various investors, lenders and partners involved in the project, but the Government really only had one purpose: to choke the project to death by scaring away everybody who might have an interest in supporting it.
“Also, is it beyond coincidence that government ministers – including two Prime Ministers -- who voiced support for the project or otherwise expressed concern about the growing controversy with the project were tendering their resignations shortly after such comments were made?
“The damage to Georgia caused by the Government goes well beyond the potential loss of the Anaklia Port and the associated Special Economic Zone. The conduct of the Government is scaring away investors at a time when Georgia cannot afford to lose any more foreign investment. According to the National Statistics Office of Georgia, the amount of foreign direct investment in Georgia has fallen from nearly US$ 2 billion in 2017 to just over US$ 1.3 billion in 2019, and in the first quarter of 2020, stood at only US$ 171.8 million - a catastrophic decrease even before the Covid crisis began to take effect. As Retired U.S. Lt. Gen. Ben Hodges of the Center for European Policy Analysis said, ‘the government only has itself to blame.’”
Some examples of the Government’s efforts to strangle ADC and the Anaklia Port Project include:
- Georgian Dream party leader Bidzina Ivanishvili requested to meet with ADC to discuss the Anaklia Port Project and asserted that the expansion of Poti Port could achieve the same objectives of the Anaklia Port at a far lower cost.
- During a June 12 meeting of the Georgian Dream party, attended by more than 100 party officials, Party Leader Bidzina Ivanishvili personally blamed Prime Minister Giorgi Kvirikashvili for his actions in support of the Anaklia project and for having close ties to ADC investor Mamuka Khazaradze. Mr. Kvirikashvili resigned the day after that meeting.
- In February 2019 ADC learned that during an October 2018 meeting with senior U.S. State Department officials in Tbilisi, Mr. Giorgi Gakharia (then Minister of Interior) advised the U.S. officials that the Anaklia Port project was not in Georgia’s interests.
- SSA Marine, which was selected as the Anaklia Port operator and was a potential investor, alerted ADC of its concerns about what seemed to be the Government’s support of an expansion of the Poti Port. (Following detailed studies sponsored by the Government back in 2013-14, it had been determined that Poti Port could never meet Georgia’s needs for a Deepwater Port, which is why the government itself selected Anaklia for development at that time. The Government’s subsequent expressions of support for expansion at Poti was a clear signal to the lending and investment community that the Government was no longer supportive of Anaklia.)
- A sovereign European development bank advised ADC that it had decided against supporting the project because of the negative actions of the Georgian Government, and the possible shift of support to the Poti Port.
- Another sovereign European development bank advised ADC that it was withdrawing its support because one of its counterparts had just done so (above) due to the state’s apparent shift of support from Anaklia to Poti.
- It has been reported that Infrastructure Minister Maya Tskitishvili, in ministerial hearings before Parliament, undermined SSA Marine as a potential investor and as the port operator, claiming the company lacked experience and financial capacity. These assertions were not true. In the process of her speech, the minister also breached legal obligations of confidentiality that were associated with the investment agreement.
- SSA Marine advised ADC that it was suspending its activities related to the Anaklia Port project.
- Mr. Giorgi Kobulia, Minister of Economy and Sustainable Development, told “Forbes Week” that the negative public discussions and media reports of the Anaklia project were having a negative impact on the business climate within Georgia. He subsequently resigned within days of the interview.
- A major U.S. private equity firm which was in advanced negotiations with ADC to join the project revealed to ADC that Government officials warned the firm to stay away from the project.
- Prime Minister Mamuka Bakhtadze, in a trade visit to the U.S., met separately with SSA Marine, the leadership of the U.S. private equity firm that were interested in investing in the project, and with U.S. Secretary of State Mike Pompeo in Washington, D.C. Secretary Pompeo expressed support for the Anaklia project with the prime minister standing next to him, saying it would “strengthen Georgia’s ties with free economies and not allow Georgia to be under the economic influence of Russia or China.” Upon his return to Georgia, Mr. Bakhtadze resigned, and this again put the project in unchartered waters.
- At a meeting in Tbilisi, a large Hong Kong-based private equity group with significant Central Asian transportation synergies that was considering joining the project was told bluntly by Infrastructure Minister Tskitishvili that the Government did not desire their participation in the project. At this same meeting Ms. Tskitishvili reaffirmed the Government’s seeming opposition to SSA Marine’s involvement in the project.
- Giorgi Volski, Vice Speaker of Parliament, falsely claimed that the Hong Kong private equity group mentioned above is a “Russian” company, with the intention either of disparaging it or sowing further confusion about the government's position in respect of the project.
- In a meeting between Prime Minister Gakharia and an Anaklia Supervisory Board member, Mr. Gakharia stated that “things had to get quiet” before he could reassure the major potential U.S. investor of the state’s support for the Anaklia Project, which the board member understood to be a condition that ADC and Mr. Khazaradze stop criticizing the government publicly on its opposition to the Anaklia Project, and the government would stop criticizing ADC.
- Also, the Supervisory Board was promised a letter of support to a U.S. investor from the highest levels of the Government, but this never materialized, even though ADC did comply with the Government’s request.
- A delegation from the U.S. (in Tbilisi to participate in the 5th annual Tbilisi International Conference sponsored by the McCain Institute) met with new Prime Minister Giorgi Gakharia, and subsequently with Mamuka Khazaradze. Representatives of the delegation told Mr. Khazaradze that Prime Minister Gakharia told them the Anaklia project was not commercially viable when this was patently not the case.
- Fadi Asly, chairman of the International Chamber of Commerce in Georgia, is quoted in the media saying, “No one will invest in Anaklia project as long as Bidzina Ivanishvili wants to destroy it.”
Taken together, these are only a selection of the instances where the Government of Georgia actively undermined the project in an effort to prevent ADC from developing the project. ADC intends to present evidence during the upcoming arbitration proceedings to demonstrate the degree to which the Government took such steps.
Further details of the Anaklia Port project and ADC can be found at http://anakliadevelopment.com
Implementation of the project of future of Georgia begins - an investment agreement implicating construction and operation of Anaklia Deep Sea Port between the Government of Georgia and Anaklia Development Consortium has been concluded.
Prime Minister of Georgia Giorgi Kvirikashvili participated in laying the groundwork for one of the most strategically important projects of the country.
Project of epochal importance for our country, - the head of Government assessed the Anaklia Port and elaborated on its advantages.
"Strategic location, high throughput, ability of developing logistical services, prospects of expansion and development as well as other benefits will provide a solid foundation for Georgia to perform its historical function within the frames of New Silk Road corridor. At the same time, Anaklia Deep Sea Port will have every opportunity of becoming the central maritime gateway of our country and, more importantly, region's one of the key logistical centers. Anaklia Port is in complete compliance with the most large-scale component of the Government's four-point reform plan - spatial planning and represents the most important infrastructural project under its umbrella," - Prime Minister stated.
Anaklia Port will be the largest port not only in Georgia, but on the Northeast coast of the Black Sea.
"This is the project of future of Georgia and I am happy to be participating in initiating the positive changes of such a scale in the economy of Georgia," - Prime Minister noted.
Anaklia Development Consortium was selected as a result of reviewing the bidding offers on development, construction and operationalization of Anaklia Deep Sea Port.
The head of the Government believed that cooperation with the company will make the project exemplary for the whole Georgia and the region.
Anaklia Deep Sea Port will be constructed in several stages; it encompasses 9 phases and its ultimate throughput may go up to as many as 100 million tons.
Anaklia Development Consortium will perform its obligations before the state in several stages. 586 million USD will be invested during the first phase of the project administration.
According to the Prime Minister, the scale of draft investment agreement sets a new standard in drawing up a contract of such kind.
"Leading international legal, technical and financial experts from various countries participated in drafting the document. It prescribes the rights and obligations of the parties as well as aspects of constructing and operating Port in a detailed manner. Each of the provisions - starting with the general plan and ending with insurance and regulating law - are stipulated in a way to ensure implementation of the project in the best possible manner. It is noteworthy that the investor will fund development of training center requalifying local residents for their future employment at the port. The list of trainings that will be free for the citizens of Georgia has already been defined. You will agree that this will be a sizeable relief and a stimulus for our citizens and the residents of this region," - Giorgi Kvirikashvili indicated.
According to the Prime Minister, it is of utmost importance that Anaklia Deep Sea Port will create thousands of workplaces in Georgia,
"I believe that many people look forward to implementation of this project as a source of stable income for the residents. Anaklia Port inspires completely realistic hopes in the community. This project will create growing number of the workplaces and many families will be relieved. I would like to name one more important aspect of the contract - an investor accepts the responsibility to fund construction of various facilities, including ambulatory hospital, kindergarten, business center and playgrounds for the purpose of further transferring them to the state. This all will benefit local residents and whole country," - Prime Minister noted.
Giorgi Kvirikashvili believes that Anaklia Deep Sea Port will be a project providing qualitatively new capacities for the country.
"Many countries cannot afford implementation of such projects. We have to seize this opportunity. Anaklia project is an investment that serves wellbeing of the country, irreversible progress of our economy and significant increase of the role of Georgia," - Prime Minister noted.
Founders of Anaklia Development Consortium Mamuka Khazaradze and Kurt Conti as well as Regional Director of Van Oord Govert Van Oord also attended the ceremony. They thanked the Prime Minister and the Government of Georgia for supporting the project.
Anaklia Deep Water Port project will be implemented by Anaklia Development Consortium. Exactly this company became the winner in the competition.
As the Prime Minister Giorgi Kvirikashvili noted, Anaklia Development Consortium is created by TBC Holding and US company Conti International. Conti International is the US infrastructure and capital projects development company.
“The contractors of Anaklia Development Consortium are marine companies too, one of them is Moffat and Nicole and second - Merry Time and transport business solutions.