Analysis – Anaklia: The long shadows of Russia and China, money laundering, private or with state guarantees, personal feud between the rich

Anaklia, Georgia (Ports Europe) April 2, 2019 - Anaklia Deep Sea Port, the Georgia Black Sea construction project, is not progressing and the reasons could be behind the scene pressure from Russia and China, a personal vendetta between two of Georgia richest and most powerful men, a refusal of international banks to finance the private project without state guaranties and/or lack of future cargo volumes. Russia does not want a competitor for Novorossiysk port, the nearest Black Sea deep-water port, luring to Anaklia west-bound Asian cargo that currently transits via Russia. Moscow also has other political and territorial issues with 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. 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. 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. The new port is designed to handle 100 million tonnes of cargo per year, an unrealistically huge amount considering that the four Georgian ports - Batumi, Poti, Kulevi, and Supsa – handled together some 18 million tonnes in 2018! The hope is that Anaklia will attract cargo from China. Financing is the visible part of the iceberg: Anaklia needs $620 million to complete the first phase of the port development. General Director of ADC Levan Akhvlediani claimed 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, delays in the construction of connecting railways and roads. 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 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). Anaklia Deep Sea Port is to be constructed in nine phases, the last one to be completed in 2069, when the port will have depth of 20.5 metres, 32 berths and a free trade and industrial zone of 600 hectares. The project will receive for the second stage of its construction European Union (EU) financing of about €233 million ($266.38 million) as one of the major infrastructure projects in the EU Eastern Partnership (EaP) countries. In addition, the EU will also provide €100 million ($114.33 million) for the construction of a new railroad that will connect Anaklia to the railroad network of Georgia. The European Commission (EC) and the World Bank (WB) have co-authored a Trans-European Transport Network (TEN-T) Investment Action Plan that identifies priority projects across EaP countries. Together, the projects will require an estimated investment of almost €13 billion ($14.86 billion) and foresee a total of 4,800 kilometres of road and rail, six ports, and 11 logistics centres. The Anaklia Development Consortium is developing the Anaklia Deep Sea Port and the Anaklia Free Industrial Zone in the Black Sea to take advantage of China’s new Silk Road policy to develop Asia-Europe trade routes. The inauguration of the 16-metre deep port of Anaklia, expected in 2020, 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 restores multimodal access to Central Asia and the Middle East, all the way to China and India. An escalating battle between the Georgian government and private investors has plunged the landmark project into uncertainty. 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. 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, 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 Mamuka 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. At a press briefing on March 8, Georgian Prime Minister Mamuka Bakhtadze called the Anaklia Deep Sea Port a strategically important project for the country 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 Deep Sea 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 Anaklia Port on the list of priority projects under the EU Trans-European Transport Networks (TEN-T) project. 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. Copyright (C) Ports Europe. All Rights Reserved. 2019.

Analysis – Anaklia: The long shadows of Russia and China, money laundering, private or with state guarantees, personal feud between the rich

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Analysis – Anaklia: The long shadows of Russia and China, money laundering, private or with state guarantees, personal feud between the rich

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All news

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World’s first truck-to-ship ammonia bunkering

Association of Four Sea Ports is created in Europe

The Economist: Europe’s ports are drug hubs

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Our Expert Analysis

Latest Free Reads

Top Ports