Anaklia, Georgia (PortSEurope) April 21, 2019 – The project for the future biggest deep sea port in the Black Sea, Anaklia, has reportedly secured financing promises, but no cash yet, for the first stage of its development, which resulted in a flurry of activity and media speculations.
The consortium behind one of the biggest ever projects in Georgia is believed to have obtained conditional assurances from international lenders for $600 million (€533 million) which would be almost enough to cover the estimated $620 million cost to complete the first phase of the port’s development.
Anaklia Development Consortium (ADC), which won the state tender to construct the port and signed a deal with the government in 2016 with TBC Holding as its principal partner, has faced problems in attracting funds for the $2.5 billion (€2.23 billion) project. ADC consists of TBC Holding from Georgia, Conti International (USA), SSA Marine (USA), British Wondernet Express working in Central Asia, and G-Star Ltd. from Bulgaria (the company has Georgian owners, but no further information about it is available in Bulgaria).
General Director of ADC Levan Akhvlediani claimed earlier that the consortium has attracted $400 million ($357.03 million) in pledged loans from four international financial development institutions: European Bank for Reconstruction and Development (EBRD), the Overseas Private Investment Corporation (OPIC), the Asian Development Bank (ADB), and the Asian Infrastructure Investment Bank (AIIB).
But before providing the money, these banks want the Georgian government to underwrite their loans, and if the Anaklia port project is not successful, the Georgia state budget should repay them. The banks want an insurance for their risks in case of lack of enough cargo for the port, which has unrealistically high forecasts, and delays in the construction of connecting railways and roads.
State guarantees issue might be at least partially solved since Georgia’s Minister of Regional Development and Infrastructure, Maia Tskitishvili, has said that the government is ready to meet investors of the Anaklia port project and their banks. The minister said that negotiations were underway with the ADC and investor banks about the date of the meeting.
At a press briefing on March 8, Georgian Prime Minister Mamuka Bakhtadze called the Anaklia Deep Sea Port a strategically important project and part of his strategy for turning Georgia into a regional transport and logistics hub.
Commenting about information that the authorities are not willing to implement the Anaklia Port Project, he said that this was political speculation and irresponsible. He added that Anaklia is a priority project and it is key that the EU has included the port on the list of priority projects under the EU Trans-European Transport Networks (TEN-T) project.
Russia does not want a competitor for its Novorossiysk port, the nearest Black Sea deepwater port, luring to Anaklia west-bound Asian cargo that currently transits via Russia. Moscow also has other political and territorial issues with Georgia.
After the collapse of the Soviet Union, ethnic Abkhaz with Russian military support fought a war against the Georgian government in 1992-93. In August 2008, Russia recognised the territory as independent – all major countries consider it part of Georgia.
China could be trying to take over the Anaklia project, the first deep-water port on the eastern shore of the Black Sea, and might be pressuring Tbilisi to oust the Georgian-American developers, replacing them with Chinese state-owned companies. This would allow China to add a jewel in the crown of its new Silk Road project and receive a strategic foothold in the Black Sea.
The new Silk Road (part of the Belt and Road initiative also known as One Belt, One Road, or OBOR) is a Chinese economic strategy to seek better access for Chinese-made products in European markets, which includes acquiring stakes in ports and other transport facilities, and cooperation agreements with countries along the Silk Road routes.
For the United States, the future Anaklia deep sea port is an opportunity to send its big navy ships close to Russia in a port that is in a country aspiring to join NATO. The ports of Batumi and Poti are not deep enough for such visits.
The Ankalia project has strategic importance for Georgia’s economy and the country’s status as a trade hub between Europe and Asia. Georgian ports currently have the capacity to receive approximately 25% of the world trading fleet, as Poti, the biggest port in the country is only 9 metres in depth. Anaklia (20.5 metres) will allow Georgia to service cargo ships with capacity of 1,400 tons and more. Another benefit of the port could be enhanced interaction between Georgian and Abkhaz communities as the town is next to the Inguri line that divides Georgia and Abkhazia.
Landlocked Georgian neighbour Armenia can also benefit from the future Anaklia port.
A personal vendetta by Bidzina Ivanishvili, the billionaire former Georgian prime minister, against Mamuka Khazaradze, Georgia’s most well-known banker and the founder of the Anaklia Development Consortium (ADC) behind the port project, is also a possibility. It is also possible that Russia is behind this animosity. Consortium insiders hint at sabotage attempts without elaborating who is behind it.
The new port is designed to handle 100 million tonnes of cargo per year after five decades, an unrealistically huge amount considering that the four Georgian ports – Batumi, Poti, Kulevi, and Supsa – handled together less than 1 million tonnes in 2018! The 100 million tonnes might well be only a theoretical capacity, while more realistic but still huge figure is 5 million tonnes. The hope is that Anaklia will attract cargo mostly from China.
Since the launch of the project in 2016, five million m³ of sand have been dredged up from the seabed, and a private investment of $70 million ($62.48 million) has been made, Akhvlediani said. Maritime construction started at Anaklia port in the second half of 2018. The Dutch maritime contractor Van Oord NV is carrying out dredging and reclamation work.
Anaklia Deep Sea Port is to be constructed in nine phases, the last one to be completed in a distant 2069, when the port will have depth of 20.5 metres, 32 berths and a free trade and industrial zone of 600 hectares.
The port, when finished, will be able to accommodate 10,000 TEU ships, the largest that can pass through the Bosporus – the gateway to Black Sea. Existing Georgian ports can handle ships that are up to 1,000 TEU.
The project will receive for the second stage of its construction European Union (EU) financing of about €233 million ($266 million) as one of the major infrastructure projects in the EU Eastern Partnership (EaP) countries. In addition, the EU will also provide €100 million ($114 million) for the construction of a new railroad that will connect Anaklia to the railroad network of Georgia. Anaklia also needs improved highway connection to the rest of Georgia.
The inauguration of the 16-metre deep port of Anaklia with two container berths and one for bulk goods like fertiliser (stage one of the project development), expected in 2021, will re-open the region to international shipping. With 75% of Black Sea vessels having nowhere to dock on the eastern shores, overland trade is only accessible by truck, or through Russia.
Anaklia would restore multimodal access to Central Asia and the Middle East, all the way to India and China. In 2016, then Georgian Prime Minister Giorgi Kvirikashvili said that the port would be able to receive ships of any size and keep pace with the growing dynamic of freight transit.
But Kvirikashvili is out of office and government officials are now increasingly questioning the project’s viability. The Anaklia consortium is busy parrying government accusations that it is failing to complete construction and attract investment on time. The consortium’s founder, Mamuka Khazaradze, is under investigation by state financial regulators and then the prosecutor’s office for financial fraud.
At the end of last month, the Georgian Chief Prosecutor’s Office released new details regarding the high profile money laundering case involving Georgian TBC Bank founders Khazaradze and Badri Japaridze.
Georgian Infrastructure Minister Maia Tskitishvili said that there is no connection between the Anaklia Deep Sea Port project and the ongoing money laundering investigation involving the founders of TBC Bank.
In March, Georgia, together with Romania, Azerbaijan and Turkmenistan, signed a declaration for the promotion of a multimodal corridor for the transport of goods between the Black Sea and the Caspian Sea (Caspian Sea – Black Sea International Transport Corridor project – ITC-CSBS).
The project was launched by Romania and Turkmenistan to create an intermodal transport route for maritime, river, road and rail freight transport between central and northern Europe and the southern Caucasus and central Asia, with the prospect of connecting to the Asia-Pacific region. Both countries have modern multimodal ports which, by and large, stand idle.
The corridor is based on the geographic contiguity between Romania, Georgia, Azerbaijan and Turkmenistan and the services offered by the ports of Constanţa (Romania), Poti (Georgia), Baku (Azerbaijan) and Turkmenbashi (Turkmenistan).
The new transport route is being created on the basis of the Trans-Caspian (Kazakhstan, Azerbaijan, Georgia and Turkey) and Lazurite/Lapis Lazuli (Turkey, Georgia, Azerbaijan, Turkmenistan and Afghanistan) corridors.
Currently there are three land corridors between China and Europe: a southern one, via Iran, made impractical by American sanctions; a middle one, via the Caspian Sea and then across Georgia to the Black Sea, made impractical by the lack of modern deep-sea Georgian ports; and a northern one, via Russia, on which most east-west land trade currently flows. Anaklia proposes to change that by giving the middle corridor the deep-sea port it lacks and removing the bottleneck.
Australian SMEC, member of the SJ Group, has won the tender for the development of a project for new railway and road links to Anaklia, Georgia’s Regional Development and Infrastructure Ministry said on April 1. The construction documentation and cost estimates are expected to be ready by end 2019. SMEC contract is worth about $2.6 million (€2.31 million). SMEC has expertise in preparing projects for airports, tunnels, bridges, railways, roads.
The banks’ demands
In March, the Regional Development and Infrastructure Minister Tskitishvili described the demands of the international financial institutions that should be fulfilled in order for them to invest in Anaklia port project: the project should have a feasibility study for each phase of its development; the port development should not be linked to any specific date and should start only after the feasibility study is done and approved by the banks.
The banks also want to significantly reduce the state impact mechanism as well as the power of the state owned “golden share” in the project; compensations and political force majeure are also issues for the lenders; the banks require that works, resettlement and all the process to be developed for the new road and railway that will be connected to the port have to follow the investors’ rules, which was not initially envisaged. And above all, the banks insist on state guarantees for the money they will lend the private Anaklia Development Consortium.
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