skip to Main Content
Poti Vs Anaklia Game Sinks Georgia’s Hopes For A Deep Sea Port

Poti vs Anaklia game sinks Georgia’s hopes for a deep sea port

Poti Vs Anaklia Game Sinks Georgia’s Hopes For A Deep Sea PortSource: Anaklia Development Corporation

Anaklia, Georgia (PortSEurope) April 2, 2019 – Anaklia Deep Sea Port, the Georgia Black Sea construction project, was again put in doubt after last week’s announcement of Georgian government support for a rival project in the nearby port of Poti, and the almost immediate denial by the Economy Minister, claiming that the document for the construction of a deep sea port in Poti has been cancelled.

Based on the history of both projects, it is very likely that a foreign power, most probably Russia, doesn’t want Georgia to have a deep sea port.

The first announcement was the construction of a new port in Poti at a first-phase cost of $250 million. A day later Natia Turnava, Georgian Minister of Economy and Sustainable Development, said that the “construction permit” for a new port in Poti has been cancelled. She added that the Head of the Construction and Technical Supervision Agency in her ministry has been dismissed.

“First of all, I would like to say that this document is not a construction permit. This is the document on the pre-conditions for land use issued by one of our agencies, namely, by the order of the Head of the Agency for Construction and Technical Supervision, so that this issue was not agreed with any member of the government or with me, personally, Turnava was quoted as saying by Georgian media.

“The document was issued due to violation of certain procedures. Therefore, we have made a decision to cancel this document, and the head of the agency has been dismissed from his position. We have repeatedly stated that Anaklia port is of strategic importance for us. This project enjoys unprecedented support from the government, including with GEL 300 million (€96.3 million) worth infrastructure, GEL 70 million (€22.5 million) for buying back privately owned land plots and with additional GEL 100 million (€32.1 million) worth of funds.

We are actively working, including with international banks and have high hopes that a private investor – Anaklia Development Consortium (ADC) will meet its obligations amid such support. We call on it, not to look for various reasons, but to concentrate on fulfilment of existing obligations in order the Anaklia project and the construction to be launched in time”.

But Turnava did not say that the northward expansion of Poti’s port will not happen at a later stage. ADC warned on May 30 that it was “on the verge of stopping” its project in Anaklia because Georgia’s economy ministry might issue a permit for port construction in Poti.

ADC which won the state tender to construct the Anaklia Deep Sea Port and signed a deal with the government in 2016, 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 and seems to operate as an offshore investment vehicle).

Anaklia Deep Sea Port is to be constructed in nine phases, the last one to be completed in a very 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 main reasons for the lack of progress in the construction of Anaklia Deep Sea Port 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. Russia already controls the oil terminal at Poti port. Moscow also has other political and territorial issues with Georgia.

Russia might be trying to sabotage the Anaklia port project by pushing for the launch of a competing one in Poti. This will inevitably block the construction of both deep sea ports in a delay that might stretch well into the end of next decade.

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.

China’s strategy is to buy – via state controlled companies – smaller or less developed ports and turn them into part of OBOR. Anaklia fits perfectly into this concept.

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 ADC behind the port project, is also a possibility, but looks less likely.

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 – together handled some 18 million tonnes in 2018! The hope is that Anaklia will attract cargo from China, but again, even China’s westward exports cannot generate such a volume of cargo.

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, and/or delays in the construction of connecting railways and roads.

The Georgian government claims that it supports the Anaklia port project, but support is a very different thing from offering state guarantees for a project that already has unrealistically optimistic assumptions.

Since the launch of the project in 2016, five million m³ of sand has been dredged 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.

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 km of road and rail, six ports, and 11 logistics centres.

ADC 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 by the end of 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 will restore 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.

Last March, 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 in March, 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.

The new Poti port also has very unrealistic ambitions – 50 million tonnes of cargo and two million TEUs per year. As in Anaklia, the Poti project envisions an adjacent industrial and free trade zone.

APM Terminals Poti, controlled by Maersk group, presented in January the Poti deep sea port project to be realised in partnership with Poti New Terminals Consortium (PNTC). The first stage of the design includes construction, development, and operation of a new breakwater and 700 metres of quay wall for dry bulk, containerised, and general cargo.

The project plan entails a 14.5-metre water depth at the 700-metre quay wall and 25 hectares of dedicated land for the bulk operation for yard and covered storage facilities for various cargo types including grain, ore, and minerals.

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) PortSEurope. All Rights Reserved. 2019.

Back To Top