Saakashvili Says Georgia Open to Russian Firms

TBILISI, Georgia — President Mikheil Saakashvili said he would not prevent Russian companies, including power trader Inter RAO and gas producer Itera, from investing in Georgia, rejecting criticism that their control of utilities was a threat to security.

“We’re not going to hinder Russian companies from coming to Georgia,” Saakashvili said in an interview in the Black Sea port of Batumi. “The more business interest we get, the less political pressure there will be. I’ve never said that Georgia doesn’t need Russian business.” 

A proposed agreement with Inter RAO, a utility controlled by Russian state nuclear corporation Rosatom, would give it “management control” of the 1,300 megawatt Inguri hydropower plant on the border with Abkhazia for 10 years.

The deal has met with criticism from Georgian opposition leaders, who say it would violate a law on the “occupied territories” of South Ossetia and Abkhazia and damage Georgia’s national interests.

Georgia’s $12.8 billion economy is still recovering from about $1 billion in damage from a five-day war with Russia in August over separatist South Ossetia. Russia routed Georgia’s army in the conflict and later recognized both South Ossetia and Abkhazia as independent.

On Friday, about 7,000 people rallied in the capital to demand the resignation of Saakashvili, whom opponents criticize for sparking the war with Russia and the country’s worsening economic situation.

Another 2,500 protested on Sunday in downtown Tbilisi, calling for Saakashvili to resign.

“We’ve never said we’re against Russian business or investors,” opposition lawmaker Levan Vepkhvadze said by telephone. “But privatizing crucial assets — like water systems, power stations and God knows what else — is different. And selling Inguri to a Russian state company? This is a terrible idea, and more than that, it’s dangerous.”

Saakashvili said the government has no timetable for concluding the hand over of Inguri to Inter RAO. “We’re working with the Russians to get the best deal,” he said.

“The Russians are trying to replace Georgian wine with Italian or Spanish,” Saakashvili said, referring to a Russian ban on wine imports from Georgia, part of an economic embargo imposed in 2006 that remains in effect. “But there’s no way they can replace Georgian electricity. We both have an interest in Georgia exporting power, and Georgia will gain extra revenue. I think the Inguri deal will be perfect.”

Inter RAO owns or controls several Georgian utilities, including Telasi, the country’s largest electricity provider, which serves Tbilisi. The utility controls about 35 percent of Georgia’s power market, spokesman Boris Zverev said.

“When I was prime minister, we encouraged all companies, including Russian, to invest in Georgia, and if I had to do it all over again I’d do the same,” Zurab Noghaideli, who served as prime minister from February 2005 to November 2007, said in an interview.

“The issue is what you allow investors to own,” he said. “I made a decision not to privatize strategic assets for security reasons, and that was when our relationship with Russia was relatively good. Our relations began to deteriorate in 2006, and that’s when people began to question Russian investment.”

Telasi spokesman Valery Pantsulaia said the company concentrated on providing power for Tbilisi and “has never gotten involved in politics.” Telasi has productive working relationships with Tbilisi City Hall and Georgian companies, he said.

Other major Russian companies working in Georgia include gas producer Itera, which owns gas distribution facilities across the country.

VTB Bank Georgia, a unit of VTB Group, has been in Georgia since 2005 and has at least 15 outlets in Tbilisi and 14 more throughout the country. VTB Group owns 77.6 percent of the Georgian unit, according to its web site.

Russian investors also have a stake in GeoProMining, which owns Madneuli, Georgia’s largest miner, spokeswoman Tamar Liluashvili said.

Two former economic development ministers, Kakha Bendukidze and Eka Sharashidze, echoed Saakashvili in downplaying the threat posed by Russian strategic investments in Georgia eight months after the war and even as Russian economic sanctions remain in place.

They also said the opposition ignores the fact that companies from other countries — including Kazakhstan, Azerbaijan, Turkey, Israel, Ukraine and the United Arab Emirates — have investments equal to or exceeding those from Russia.

“Our opponents say that Russia will use its investments as leverage to sabotage us, but I can assure you that if the Russians cut off water or electricity, they’ll get a big bang on the head,” Bendukidze said in an interview. “We won’t put up with that.”

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