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On January 4 Mikhail Saakashvili, the 36-year-old
American-trained lawyer who spearheaded the
bloodless ouster of Eduard Shevardnadze, won an
overwhelming victory in Georgia’s special presidential
election. While Saakashvili’s electoral margin (96
percent) invited comparisons with the super majorities
routinely compiled by authoritarian leaders in other
former Soviet republics, OSCE observers certified that
the Georgian election represented a clear improvement
over previous ones—including the fall parliamentary
election that precipitated Shevardnadze’s November 23
resignation. Meanwhile the leader of Adjaria, warning of
“destructive forces” within that breakaway republic,
responded to Saakashvili’s victory by declaring a state
of emergency—indicating that the separatist pressures
that bedeviled Shevardnadze will likely hinder the new
president’s efforts at national unification. However,
Georgia’s “Revolution of Roses” represents the best
opportunity for democratic consolidation and economic
stabilization in that impoverished country since the
Soviet collapse.
The Georgian revolution has important implications for
U.S. foreign policy and Western commercial interests in
the Transcaucasus:
U.S.-Russian Relations Georgia’s position as the
geostrategic fulcrum of the Caucasus has transformed
the tiny country into an object of rivalry between the
U.S. and Russia. To establish a Western alternative to
Russia’s Novorossiyk route, both the Clinton and Bush
Administrations endorsed construction of the BakuTbilisi-Ceyhan pipeline, which traverses Georgia to
transport oil from the Caspian Sea to southern Turkey.
Beyond its growing role in pipeline issues, Georgia’s
border with Chechnya (purported to host al-Qaeda
fighters) has sharpened the attention of U.S.
policymakers. Following Saakashvili’s victory, the Bush
Administration announced the renewal of its $65 million
military training program in the Pankisi Gorge,
previously scheduled for termination in March—which
together with the cultivation of U.S. relations with
Azerbaijan illustrates Bush’s determination to recruit
friendly ex-Soviet republics for the war on terror. The
alleged use of Georgian territory by Chechen fighters
has also piqued the interest of Vladimir Putin, providing
Copyright © 2004 Global Economics Company
a national security pretext for the maintenance of two
Russian bases in the country. The Putin government
has agreed in principle to close the bases, but declared
that the high costs of redeployment might prevent
Russia from fulfilling that pledge for 10 years—to which
end Putin is seeking $500 million in base closure
assistance from the Bush Administration. Regardless of
the outcome of the military base dispute, Russia’s
political and economic leverage in the region
(demonstrated by Moscow’s manipulation of Georgia’s
secessionist movements and exploitation of the energy
spigot as Georgia’s sole supplier of natural gas) will
enable Putin to continue his strategy of reasserting
Russian hegemony in the “Near Abroad”.
Economic Prospects In addition to its status as a
transit point for Caspian oil destined for European
markets, Georgia possess a number of assets of
potential interest to Western companies: A coastal
outlet to the Black Sea that confers an important
competitive advantage over the landlocked economies
of Transcausasia and Central Asia; a diverse industrial
sector that was once among the most advanced in the
USSR; varied climatic and soil conditions that permit
production of a range of specialized food products and
export-quality wines; and a rich array of cultural and
historical sites that offer substantial tourist potential. But
full exploitation of these assets demands heavy
infusions of developmental assistance to rebuild
Georgia’s shattered economy, which suffered the
largest GDP loss of any ex-Soviet republic and which
displays a per capita income ($650) that places Georgia
in the ranks of the poorest Soviet successor states. The
World Bank and EBRD have approved $500 million in
loans to begin construction of the BTC pipeline, while
the IMF (with which Georgian relations frayed during
Shevardnadze’s final years) announced the convening
of negotiations in February for a new standby program.
In addition to reconstructing Georgia’s infrastructure (in
ruins following years of neglect and civil strife), external
aid is critical to support Saakashvili’s plans to enact
sweeping reforms of Georgia’s civil service, judiciary,
and taxation systems—whose levels of corruption are
notorious even by post-Soviet standards, and whose
transformation is esse