East Meets West

President Mikheil Saakashvili of Georgia won’t soon forget the last fifteen months. His political whirlwind began with the nation’s “Rose Revolution” of November 2003, a nonviolent popular uprising that served as a model for last fall’s Ukrainian “Orange Revolution.” Led by Saakashvili, the Georgian opposition ousted Kremlin-backed President Eduard Shevardnadze after he attempted to manipulate the legislative elections. The next year, the charismatic Saakashvili received over 95 percent of the vote in the presidential election, an indisputable indication of his national appeal. In January of this year, US Senators Hillary Clinton and John McCain nominated him and his Ukrainian counterpart, Victor Yushchenko, for the Nobel Peace Prize, writing, “We believe that the actions of Presidents Saakashvili and Yushchenko testify to the power of peace and human rights in their battle against oppression.” Yet despite the reforms, the battle for Georgia’s future continues to rage. The conflict can be traced to a deceptively simple question: Is Georgia a European state or an Asian one? Geographically situated between Russia and Turkey, it may appear irrefutably Asian. But this question will be resolved not by cartographers but rather by an array of perilous diplomatic maneuvers and drastic economic reforms.

Georgia’s central government yearns for the benefits of a closer relationship with the West. At the same time, Russia shows far greater interest in Georgian affairs than any single western power. Moreover, the enthusiasm for Russia in Georgia’s breakaway provinces, Abkhazia and South Ossetia, suggests that there is still considerable support for maintaining the deeply ingrained relationship with Russia.

The answer to this question will likely have ramifications well beyond Georgia. “If Georgia fails,” said Cory Welt, a fellow at the Center for Strategic and International Studies, “dictators in the region will be able to point to Georgia and say ‘we can’t have a revolution. Look what happened to them.’” The degree to which Georgia can avoid this fate will depend heavily on how it balances its increasingly westward orientation with its ties to Russia.

In the fifteen months since the Revolution, Saakashvili has had a number of economic successes, including the introduction this past January of a flat tax that must make the White House swoon. Other eff o r t s , however, have yet to materialize. First among these is the issue of foreign direct investment (FDI), which dropped sharply during Shevardnadze’s final years in office. The extent to which Saakashvili’s government can draw foreign investors into Georgia will be essential to determining its long-term economic success.

The greatest diplomatic challenge facing Georgia is the issue of Abkhazia and South Ossetia, both of which border Russia. Though included in Georgia following the dissolution of the Soviet Union in 1991, the populations of the two provinces are ethnically distinct from the rest of the country, a fact that is the source of continuing tensions. Both provinces have repeatedly demanded independence and sought Russia’s support for their efforts. This has generated tremendous resentment within Georgia, since many believe that Russia is using the provinces to reassert its influence over the government.

Going West?

Stronger relations with the West have the potential to address the issue of FDI and, albeit indirectly, that of the breakaway provinces. Saakashvili has been particularly successful at finding investors. Stephen Jones, a professor of Russian and Eurasian studies at Mount Holyoke College, points to the recent announcement of Georgia’s inclusion in the Millennium Challenge Account, a $1 billion fund provided by the US from which eligible countries can draw money to pay for development activities, as “evidence of Saakashvili’s ability to get more money into the country more effectively.”

But more important for Georgia’s long term economic success will be Saakashvili’s ability to fight the endemic corruption that characterized Georgia for the past decade and continues to plague most of the Commonwealth of Independent States (CIS), a grouping of former Soviet republics formed in 1991 following the breakup of the USSR. There is considerable reason for optimism: tax revenues rose 43 percent in 2004 compared to 2003, thanks largely to better enforcement, reduced corruption, and a restructured financial police force that discourages bribes.

The Georgian government hopes that these changes will be interpreted by western companies as a signal that Georgia is once again a desirable place to do business. Currently, most signs point to prosperity. Armstrong Holding ISP, a British-Australian investment group, has emerged as the leading candidate to purchase Georgia’s national shipping company, and a Georgian government official recently announced that Armstrong would invest $150 million in Georgia’s oil infrastructure.

Georgia also hopes that deeper ties with western institutions such as NATO and the European Union will protect it from Russian interference. “Georgia’s central foreign policy plank,” said Welt, “is to get the US and EU to exert pressure and offer incentives in order to get Russia to withdraw support for the separatist movements.” He noted that, “as a result, gaining NATO membership has become Georgia’s number one goal.” The importance of such a relationship became even clearer this past summer when Georgia and Russia almost went to war following a series of attacks carried out by rebels in the breakaway provinces.

Despite the cautious optimism in Georgia, integration with western institutions may not occur at the rapid pace of the country’s recent political transformations. Robert Cutler, a research fellow at Carleton University, argues that “the EU is going to be digesting its various recent enlargements for some time to come— likewise NATO.” And while the US has offered both diplomatic and economic support, its attention will remain predominately on Iraq and the situation in the Middle East for the foreseeable future.

The Traditional Route

Regardless of what happens between Georgia and the West, Russia’s influence won’t disappear. This is partly a matter of necessity. “Georgia is still dependent on Russia for energy, infrastructure, and investment,” three of the most important considerations for any developing country, said Peter Sinnott, a lecturer at the Columbia University School of International and Public Affairs. Moreover, said Sinnott, Russia “has interests in keeping Georgia dependent on [its] electricity,” in part because Georgia contains the Pankisi Gorge, an area rumored to hold Chechen rebels.

Sinnott also suggested a more Machiavellian reading of Russian intentions: “Georgia represents not only a political challenge in terms of its Rose Revolution; it represents a state that is trying to overcome Russia’s meddling.” He added that “any real independence by any constituent ethnic republic, threatens a chain reaction which would change the borders of every state.” Russia’s actions may be a sign of its fear that Georgia’s actions constitute the first step in a larger movement capable of threatening Russia’s hegemony in the CIS.

While this interpretation is widely held in Georgia, few advocate abandoning Russia entirely. “Saakashvili is a smart politician with a nationalist streak, but he is also pragmatic,” said Jones. “He recognizes that Georgia cannot function without Russia right now. So he is seeking a partnership that will protect Georgia’s interests.” Any such partnership would have to account for Georgia’s concern over its economic independence and its territorial integrity.

The economic issue is the more promising of the two, since Russia is a lucrative source of FDI. In the past, Georgia has been leery of heavy Russian involvement in key sectors of the economy out of fear that it would result in greater dependence on Russia. The construction of two new oil pipelines may partly allay that fear. Although both were constructed with an eye towards exports, the pipelines will likely provide Georgians with sufficient energy security to allow greater Russian involvement. Some of this seems to be happening already; just last summer Saakashvili invited some of Russia’s most prominent energy “oligarchs” to discuss investment opportunities in the country. This kind of meeting has significance on both political and economic levels. As Jones said, “Accepting Russian FDI is part of Saakashvili’s attempt to normalize relations.”

The problem of the breakaway provinces is likely to prove more contentious. “Many Georgians feel Russia is to blame for the separatist conflicts and there is some truth to that,” said Welt. Russia has certainly been supportive of the provinces’ bids for independence and has even provided South Ossetians with Russian passports. In addition, Russia has peacekeepers in both provinces and is in charge of maintaining the fragile peace, a position Georgia accuses it of abusing. Perhaps more worrisome is the perception that Russia has abused its position in order to slow reunification talks, thus prolonging its influence on Georgia. “As long as [Russia] keeps the conflict in South Ossetia and Abkhazia unresolved,” said Welt, “Georgia will have to remain close to Russia.”

Going Forward

Russia’s attitude toward Georgia is dictated largely by the fear that Georgia will follow the path taken by the Baltic States in the 1990s, which ignored Russia and pursued complete integration into Europe. Jones argues that such an occurrence is unlikely because “Georgia sees itself as a bridge between Europe and Russia in much the same way as Turkey sees itself as bridge to the Middle East.” While Georgia may not constitute a physical bridge the way Turkey does, it could be the state that effectively bridges the East-West divide. Unlike the Baltic countries, Georgia is physically separated from Europe and, as a result, is commercially more dependent on and culturally closer to many of the former Soviet states. Yet at the same time, the Rose Revolution has provided Georgia with an almost unprecedented opportunity for a member of the CIS: the chance to meet the West on equal terms.

Should Saakashvili succeed in bringing the West to Georgia while at the same time maintaining a close relationship with Russia, it might force Moscow to increase its involvement in the CIS. Striking a balance of this sort could show Russia that its interests are the promotion of stable institutions capable of generating economic growth rather than the meddlesome policies it pursued during the Ukrainian election. While such a result is probably a long way off, Georgia’s current path could encourage other former Soviet states to consider radically altered relations with Russia and the West. Georgian failure, however, could cement Russian influence for years to come.