Georgian affairs

The sudden eruption of conflict in Georgia over South Ossetia highlights how volatile our world can be – and how vulnerable trade and economic life can be in particular.

Of course, all those that have suffered as a result have our every sympathy, but the political ins and outs are for other magazines to debate.

Economically, however, Georgia plays host to an oil pipeline from Azerbaijan and a pipeline carrying gas from Central Asia to the Turkish coast through Georgia has long been mooted, too. These are valuable assets at a time of widespread energy anxiety.

Furthermore, the conflict broke out just weeks after the leaders of Azerbaijan, Georgia and Turkey met to conclude a deal over the Baku-Tbilisi-Kars (BTK) railway that could eventually connect Caucasia – and eventually Central Asia and China – to Turkey and Europe. Completion is scheduled for 2010.

Railway lines may sound very 19th century, but the existing line in Georgia also takes oil from Azerbaijan to the port of Poti, too, while Georgia itself has benefited greatly from rising trade between Turkey and Azerbaijan, shuttled across its territory.

How the affair works out in the longer term remains to be seen. Certainly, some of the banks that had started to invest with more confidence in Georgia – Deutsche Bank cutting some award-winning deals in the past year or two, for example – will no doubt proceed with greater caution.

Hopefully, that will not hamper reconstruction, nor constrain the growth rates that Georgia has enjoyed in recent years.

Graeme Burton
Managing editor

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