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Georgia Tries To Keep Lid On Russian Water Row

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  • Georgia Tries To Keep Lid On Russian Water Row

    GEORGIA TRIES TO KEEP LID ON RUSSIAN WATER ROW

    Lloyds List
    Apr 25, 2006

    Tensions fizz between countries over exports ranging from citrus
    fruit to mineral water, writes James Brewer.

    AS IF fears over Gazprom's grip on gas prices were not enough, a
    bubbling dispute over bottles of mineral water that everyone these
    days loves to tote, or to sip at table, could turn relations toxic
    between Russia and its neighbour Georgia.

    Russia seems to be sending its messages in rejected bottles of wine,
    brandy and potentially of water.

    Tbilisi is already quavering over the head of steam built up by the
    giant Russian energy company in raising its charges. Just a short
    time after Gazprom almost doubled its price to $110 per 1,000 cu m,
    there are fears in Georgia, as there are in several other countries,
    that worse is to come.

    It is possible that Russia's next move will be to take the fizz
    out of the huge import trade in Borjomi mineral water, produced by
    a renowned spa in central Georgia, after centuries in which it has
    been gulped in quantity byRussians of all walks of life. They enjoy
    its taste and detoxicant powers.

    Trade rows have been escalating since the beginning of 2006, and the
    speaker of the Georgian parliament, Mrs Nino Burjanadze, has been
    raising her country's concerns in European capitals, most recently
    in London, where she discussed them, alongside seeking support for
    Georgia's application to join NATO, with defence secretary John Reid,
    foreign office minister Douglas Alexander, and many other politicians
    during more than a dozen meetings.

    Bottled water worries have bubbled to the surface following three
    serious blows to the Georgian economy. In September 2005, Russia
    introduced phytosanitary measures against imports of fruit and
    vegetables.

    In January 2006, at the height of winter, the gas and electricity
    supply to Georgia was briefly cut off. Then on March 7, Russia banned
    the import of wine from the mountainous Black Sea republic on the
    grounds of 'violation of health norms' by wines containing pesticide.

    Russia's federal consumer protection inspectorate has impounded
    more than 9,000 bottles of Nabeghlavi-brand mineral water in Moscow
    district, to the outrage of producer Tsqali Margebeli.

    Earlier the directorate announced that it had found a large quantity
    of counterfeit and low-quality Borjomi mineral water. Georgia says the
    ban on wine, and the fuss over mineral water Borjomi and Nabeghlavi
    have licences from Russian laboratories is political, and a reprisal
    for its pro-Western stance.

    Mrs Burjanadze stressed that Georgia had offered dialogue with
    the Russian Federation, but she said that Moscow had cancelled and
    refused top level meetings. She said: 'We appeal to the international
    community to give adequate evaluation to Russia's actions and ability
    to behave as a reliable trade and energy partner in good faith, and
    to honour its participation and commitments in the various agreements
    and international organisations through predictable and transparent
    trade policy.'

    She added that lack of progress during bilateral and multilateral
    talks created serious difficulties for Georgia's support for Russia
    joining the World Trade Organisation.

    Action over gas 'shows that Russia is trying to use its gas and oil
    resources as the major mechanism for political pressure,' warned
    Mrs Burjanadze.

    Such fears were underlined both by the dramatic shutdown of supplies
    to Ukraine at the turn of the year, and more recently when Gazprom
    executive Alexander Medvedev declined to rule out a further rise in
    prices for Armenia and Georgia (pricing is similar for both countries)
    towards European levels.

    Representatives of European Union member states who were given a verbal
    reminder of the power of Gazprom by its leader Alexei Miller recently,
    will have had an ear to its attitude toward Georgia and other former
    Soviet republics, given that the huge company controls almost all
    the gas needs of central and eastern Europe.

    Mrs Burjanadze has been at the centre of political life for the last
    few years; she came to international attention when she was acting
    president of Georgia after the downfall of Eduard Sheverdnadze,
    welcoming what was known as the Rose Revolution. She is a law
    graduate who studied in Tbilisi and Moscow, where her thesis was on
    international maritime law, organisations such as Inmarsat, and the
    export of oil. She told Lloyd's List that part of her mission in
    London was to inform the UK government about the way Georgia was
    strengthening reforms and democracy, and striving for a peaceful
    solution to the conflicts in the separatist influenced regions of
    South Ossetia and Abkhazia.

    The future of these regions is highly sensitive, and both Russia and
    Georgia are keen to maximise leverage.

    Paradoxically, Georgia is pleased with the progress made by Russia in
    withdrawing from its military bases, but Mrs Burjanadze is concerned
    the instability that could be caused by trade difficulties might
    deter Western investors, at a time when a 12% uniform tax and more
    liberal licensing has brought in growing foreign money.

    BP has been the leading investor for the past few years, and is
    expected to be so again in 2006, to the tune of $195m.

    Mamuka Khazaradze, chief executive and owner of Georgian Mineral
    Water ' Glass Co, told Lloyd's List by telephone that he welcomed
    the presence of Russian inspectors at his warehouses, but was anxious
    about a potential ban.

    His company is planning to export a total of 250m bottles of water
    in 2006, of which it was planned to send 40% or 50% to Russia.

    He pointed out that his company was one of the biggest taxpayers
    in Russia.

    In an attempt to strengthen energy supply security, meanwhile,
    president Mikheil Saakashvili and his government are pressing for
    the opening of new gas pipelines to transport Azerbaijaniangas from
    Shah Deniz field via Georgia to Turkey, which will run parallel to
    the Baku-Tbilisi-Ceyhan oil pipeline.

    This is likely to prove just as political as the Russian decision a
    short time ago to suspend entry visas for Georgian nationals.

    Earlier this year, Russian president Vladimir Putin had something to
    say about the crisis. It was this: 'I feel very sorry, very sorry,
    for the Georgians. This beautiful people to whom we feel close are
    currently in a difficult situation,' he told journalists.

    'Georgia is experiencing great economic difficulties and if some
    people deem it possible to solve these kinds of problems by diverting
    people's attention into looking for external enemies, I think they
    are on the wrong track.'
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