October 15, 2019 / 3:41 PM / a month ago

Consortium in Georgia accuses government of sabotaging major port project

TBILISI, Oct 15 (Reuters) - The consortium behind one of the biggest projects in ex-Soviet Georgia, the construction of the major deep sea port Anaklia on the Black Sea coast, has accused the government of sabotage and put the project on hold, its director general said on Tuesday.

The nine-phase project aimed at restoring multimodal access to Central Asia and the Middle East received support from Georgia’s strategic partner the United States, and the European Union, which included the Anaklia port on a list of priority projects.

Anaklia Development Consortium (ADC), which won the state tender to construct the $2.5 billion port in Anaklia and signed a deal with the government in 2016, secured pledged loans for $400 million from the 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).

Before providing the money, however, banks wanted to get state guarantees that the Georgian government would repay their loans if the project failed as well as insurance for their risks or delays in implementation of the project, which included construction of connecting railways and roads.

The government, which signed the 52-year concession agreement with the ADC, refused to provide such guarantees for the private project.

Some experts doubted the commercial viability of the project as the new port was designed to handle 100 million tonnes of cargo per year after five decades, while the four existing Georgian ports together handled less than one million tonnes in 2018.

ADC, which had already put $70 million of private investment into the project, received a blow in August when one of its main partners, U.S. company Conti International, decided to leave the consortium, while the government demanded it found a replacement for the American company before Oct. 15.

“Instead of supporting this project, the government sabotaged the project for months and weeks,” Levan Akhvlediani, the consortium general director, told a news conference.

He said the consortium attracted two new foreign investors, but the government rejected the chance to accept their proposals.

In addition, negative development for the consortium put its founder and a former head of Georgian TBC Group Mamuka Khazaradze under investigation for an alleged financial fraud.

“In my opinion, after all these events, not a single major investor will deal with this project and as a result, this project will stop,” Akhvlediani said.

Government officials were not available for immediate comment, but were expected to make a statement on the developments around the project.

POLITICAL INTERESTS

The project, aimed at opening the region for large international shipping, became the subject of political speculation.

The U.S. openly supported the project and some experts said that for Washington the deep sea port in Georgia, which is aspiring to join NATO, was an opportunity to send its big navy ships close to Russia.

Other ports in Georgia, which fought a war with Russia in 2008 and has had no diplomatic relations with Moscow since, are not deep enough for such visits.

“The United States sees this project as another very important strategic port on the Black Sea. This is part of NATO’s Black Sea security concept,” Levan Bodzashvili, an independent political analyst, told Reuters.

Experts and consortium members said Russia would not be happy if Anaklia was built.

“Anaklia will definitely compete with Novorossiisk port (in Russia) as it’s an alternative gateway to the Central Asia,” Akhvlediani told Reuters.

Russia’s partner China was also seen as a possible player and local media reported that China was trying to press Georgia to oust American developers, replacing them with Chinese state-owned companies in a move to seek better access for Chinese-made products in European markets. (Writing by Margarita Antidze; editing by Ed Osmond)

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