Transparency International Georgia continues to highlight events unfolding around Anaklia Port as the construction of this port is important for Georgia’s national interests. We published the first article concerning this issue on 15 February 2019, when the government’s orchestrated attack on TBC Bank was a topical event. It seems that Mamuka Khazaradze was the main target of the campaign launched against TBC Bank, since he is the main implementer of the Anaklia Deep-Water Port construction project.

TBC Bank deemed unfair both the fine imposed by the National Bank of Georgia as well as its demand that Mamuka Khazaradze resigned as the chairman of the Supervisory Board. However, considering the bank’s corporate interests, it eventually agreed to the payment of the fine and to Mamuka Khazaradze’s resignation. The events unfolding around Mamuka Khazaradze failed to hamper the development of the Anaklia project, specifically – finding donors.

After that, the government shifted its attention directly to the Anaklia Port project and started talking about Anaklia Development Consortium failing to properly fulfil its obligations. In turn, four large donors set out conditions which imply the provision of certain guarantees by the state. As a result of negotiations, an agreement was reached on seven out of eight key demands. The government refrained from insuring against the risks related to cargo turnover.

For a certain period, the relations between Anaklia Development Consortium and the Government of Georgia became business as usual, and it can be said that the stir raised around this issue decreased. However, it suddenly became known on 29 May that, on 2 May, LEPL Technical and Construction Supervision Agency subordinated to the Ministry of Economy and Sustainable Development of Georgia, based on the application submitted by Poti Sea Port Corporation JSC, on 11 October 2018, approved the conditions of using a land plot for the construction of a new deep-water port in the town of Poti.

Anaklia Development Consortium immediately responded to the dissemination of this news, stating that this threatens the construction of Anaklia Port. This would cause the loss of trust on the part of the international financial institutions involved in the Anaklia project since this had not been mentioned during the most recent negotiations held with the government on 21 May.

The following day, 30 May, the Ministry of Economy annulled the document which contained the conditions of constructing a deep-water port in Poti and the Minister Natia Turnava said that this issue had not been agreed with her or other members of the government.

Considering the fact that the crucial aspect of the Anaklia Port project at this point is the guaranteed cargo turnover, it is natural that the construction of the second port complicates this issue. Despite the fact that the construction of the new deep-water terminal in Poti has been suspended, this matter is not off the table, and Poti Sea Port Corporation JSC hopes that it will be able to build the new terminal.

The Dutch company APM Terminals Poti owns Poti Sea Port Corporation JSC since 2011. On 1 December 2017, Klaus Laursen, general director of APM Terminals Poti, stated that he did not see the need for a deep-water port since the Silk Road in this part of the world goes through the Black Sea in the direction of Bulgaria, Romania or Ukraine, and large ships do not choose the Black Sea for their routes. “I have no idea what bankers know about transportation. Within the industry, we truly do not understand why we are building a port for additional 2 million containers when the entire market today is about 400,000 containers,” - the APM Terminals Poti director said.

On the same day, Mamuka Khazaradze responded to Klaus Laursen’s statement. He said: “APM Terminals is secretly lobbying against Anaklia Port not only in Georgia but also abroad.”

On 12 January 2018, APM Terminals Poti and Poti New Terminals Consortium (PNTC) signed a memorandum of understanding which envisaged investing of over USD 100 mln into the construction of a new bulk cargo terminal. The land owned by APM Terminals Poti is considered to be the location for the construction of the new terminal.

Poti New Terminals Consortium unites Georgian and foreign businessmen. Tamaz Chkhikvishvili is involved from the Georgian side; he is a partner in the firm which has owned a long-term lease of Terminal 5 of the port since 2005.

On 7 June this year Klaus Laursen, APM Terminals Poti’s Director General, said: “No one thinks that the country needs two deep-water ports. There is not enough cargo for this.” It is possible to assume that APM Terminals miscalculated the cargo turnover prospects several years ago.

In 2017-2018, the weight of cargoes processed in Georgian ports (in tonnes) decreased by 14 percent, although the number of containers (TEU)_[1] processed during the same period increased by 38 percent, reaching 454,000 TEU. In January-April this year, compared to January-April 2018, the number of containers increased by 37 percent. The volume of processed cargoes in terms of weight increased by 10 percent.

The oil terminals in Poti Port are also owned by Petrocas. Rosneft, the Russian state-owned company, is the holder of 49 percent of Petrocras shares. Rosneft operates on the territory of occupied Abkhazia, too, thus likely violating the law of Georgia On Occupied Territories.

In Poti Port, PACE Group owns eight docks and a terminal. PACE Group unites nine companies which provide various services. Irakli Kervalishvili, one of the main partners in the companies that comprise PACE Group, raised public interest last year, when he bought 100 percent of shares of BSR-CDG Development LLC from Otar Partskhaladze, the former General Prosecutor, for GEL 2 mln. Irakli Kervalishvili (owner of 38 percent of PACE Georgia LLC) as well as other partners in the companies comprising PACE Group have made sizeable donations to the Georgian Dream party. In 2017, Irakli Kervalishvili donated GEL 60,000 to Georgian Dream and, in 2018, another GEL 60,000 to Salome Zurabishvili, the Georgian Dream supported presidential candidate. Laura Larioni, who owns 38 percent in PACE Georgia, also donated GEL 60,000 to Georgian Dream and another GEL 60,000 to Salome Zurabishvili in 2017-2018. Irakli Tateishvili, another partner of Kervalishvili, who owns 10 percent of PACE Georgia, made a similar donation. Teimuraz Kervalishvili (10 percent of PACE Georgia) donated GEL 60,000 and GEL 50,000. Tamaz Kapanadze (4 percent of PACE Georgia) donated GEL 60,000 to Georgian Dream in 2017. Apolon Bzhalava, director of Transford LLC, a subsidiary of PACE Georgia LLC, donated GEL 30,000 to Georgian Dream in 2017 and GEL 20,000 – to Salome Zurabishvili in 2018. Davit Nadareishvili, the director of PACE Terminal LLC, donated GEL 30,000 to Georgian Dream in 2017 and GEL 10,000 to Salome Zurabishvili in 2018. Overall, in 2017-2018, all shareholders of the business group donated the total of GEL 620,000 to the ruling party and the candidate it backed.

A Chinese company also has a stake in Poti Port. In 2017, CEFC China Energy became the owner of 75 percent of shares in Poti Free Industrial Zone. The operation of the Industrial Zone largely depends on the cargo turnover in Poti Port. In 2014-2016, CEFC was a fast-growing company whose turnover amounted to USD 40 bn in 2016. However, in 2017, one of the heads of CEFC, Patrick Ho, was arrested in New York. He was charged with bribing officials in African countries to promote the interests of the Chinese company. CEFC was also accused of trading in weapons and evading sanctions imposed on Iran. The company founder and former head, Ye Jianming, who came to Georgia and met with the prime minister in 2016, is on the wanted list.

At the time when CEFC was already involved in international corruption scandals, in February 2018, Georgia’s former Prime Minister Irakli Gharibashvili was appointed an advisor to the Supervisory Board of the company managing regional projects of CEFC Energy Company Limited. On 5 March this year, Irakli Gharibashvili resumed political activities becoming Georgian Dream’s political secretary.

Ivane Chkhartishvili, a Georgian businessman, was involved in negotiations on CEFC’s entry to Georgia. Chkhartishvili is the executive director of the Georgia-China Economic and Cultural Development Centre, which was founded on 3 October 2016. The Georgian Chamber of Commerce and Industry and the Georgia-China Economic and Cultural Development Centre jointly founded the Georgia-China Friendship Association, electing Jianjun Zang, the executive director of CEFC China Energy, as its honorary president on 18 October 2016.

The likelihood of Chinese interests being stepped up with regard to Anaklia Port was accompanied by quite serious complications in the US-China relations. Michael Carpenter, the former assistant deputy secretary of defence and director of the Biden Center, said that “if US investors are forced out of the Anaklia project in favour of Chinese companies, this would send a chill and potentially even freeze future US and Western investments in Georgia.”

On 11 June, at the briefing held after the meeting with Prime Minister Mamuka Bakhtadze, the US Secretary of State Mike Pompeo expressed hope that Georgia would see the [Anaklia] project through to the end. He said that the port would deepen Georgia’s relations with free economies and help it to avoid the Russian and Chinese economic influence.

The next day after Pompeo’s statement, the minister of Economy and Sustainable Development said that the technical and economic substantiation of the Anaklia Port project is strong, and this is a strategic and commercially attractive project for Georgia. In recent months, the government members were saying that the port project had commercial problems.

On 12 June, it was reported that the government would defer the financial closure of the project for Anaklia Development Consortium by six months. According to Anaklia Development Consortium, it has fully mobilised the capital required for the project and will make an official statement when the Government of Georgia and international financial institutions reach an agreement.

Transparency International Georgia will continue following the events unfolding around Anaklia Port.