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Anatoly Chubais. Photo: FIRST Magazine

On 22 January 2006, in the midst of a cold winter, two nearly simultaneous explosions wrecked parts of the North Caucasus – Transcaucasus and Tbilisi-Mozdok gas pipelines, cutting Georgia off from gas supplies.[332]  Most Georgians saw these incidents as Russian sabotage against the background of worsening relations between the two countries and Gazprom's demands to raise the gas price for Georgia. In the aftermath of the blasts, Georgian opposition deputies called on Saakashvili to dismiss Kakha Bendukidze. He was, they suggested, a Russian pawn willing to sacrifice Georgia's security to the Russian interests.[333]

It was not the first time that Bendukidze had faced such accusations. Throughout his time in government, one of the most common charges levelled against Bendukidze by Georgian critics was the claim that he represented Russian economic interests – and that his libertarian policies would lead, intentionally or not, to the inclusion of Georgia within a Russian "liberal Empire".

The concept of "liberal empire" had entered the Russian debate in 2003 thanks to Anatoly Chubais, the father of Russia's mass privatization scheme. In an article on Russia's strategy for the 21st century, Chubais suggested that the Kremlin should make it its task to "facilitate the expansion of Russian business in neighbouring countries both in the area of trade and in the purchase and development of assets", thereby creating a zone of economic influence in its neighbourhood.[334] Energy would be a crucial part of the equation, tying the members of the CIS together, increasing Russian leverage and paving the way for the realisation of Russia's historic mission in the Caucasus and Central Asia.

It is easy to understand why the idea of Bendukidze as an instrument of Russian economic influence seemed plausible to Georgians concerned about the influence of the former colonial power. The Russian press itself, after all, had seen Bendukidze's June 2004 return from Moscow to Tbilisi as positive for Russian interests. Rossiiskaya Gazeta columnist Tretyakov wrote that part of Bendukize's mission in Georgia was "to prove the possibility of a non-antagonistic coexistence of Russian economic and political interests in the Caucasus with the political and economic interests of the United States."[335] Speaking on Russian TV in Vesti Nedeli, anchor Viktor Dyatlikovich said,

"Bendukidze is back in Georgia... Here, however, it is not clear which verb to use: was Bendukidze invited by Tbilisi or, rather, was he sent from Moscow? Perhaps both are partly true. And there are already some discussions on trade-offs such as: we give you Bendukidze and you give us the Batumi port."[336]

Bendukidze had been one of the most influential business figures in Russia for over a decade. He had given advice to Russia's highest-level policymakers, including President Putin. The May 2004 offer to join Saakashvili's government came after Bendukidze arrived in Tbilisi – for a Russian-Georgian investment forum – as part of a Russian delegation.  Bendukidze also asked Saakashvili to enlist Putin's support for his ministerial appointment.[337] Bendukidze argued that "money has no nationality" and that all investors were welcome in Georgia. Announcing his privatization programme, he stated:

"It makes no difference who will buy Georgian state-run facilities – Russians, Americans or others. The important thing is to receive as much money as possible from the privatization of these enterprises."[338]

Bendukidze stressed that even the energy sector was no "holy cow."[339] As Russian business daily Vedomosti reported, he saw "good prospects" for Russian investors in such areas as "the privatization of the Batumi Sea Port, oil and gas pipelines, and the implementation of projects in the energy and tourism sectors."[340]

Vladimer Papava
Vladimer Papava, Georgia's former Economy Minister and
MP and one of Bendukidze's critics. Photo: papava.info

One of the most sophisticated critics of Bendukidze's "all's for sale" approach was Vladimer Papava, a prominent economist, economy minister under Shevardnadze and an MP in Saakashvili's National Movement Party from 2004 to 2008. Papava supported many of the early reforms after the Rose Revolution.[341] In 2006, however, he warned that by overexposing Georgia to Russian capital, Bendukidze was bringing the country back into the Russian orbit.[342] The sale of major electricity assets to Russian electricity monopoly RAO (its chairman none other than Anatoly Chubais); the sale of Georgia's biggest gold and copper mines to Russian companies; the acquisition of the Georgian United Bank by a Russian state-controlled bank; as well as attempts by Russian gas monopolist Gazprom to seize control of Georgia's gas distribution network - all of these, Papava noted in a 2007 article, were evidence of Russia's "snaring Georgia in the Liberal Empire's net."[343]

Criticism of Bendukidze and his policies gained more currency as relations between Tbilisi and Moscow began to deteriorate dramatically after 2005. How was it possible for somebody with such close ties to Moscow's economic and political elite to remain so influential within a government whose anti-Russian rhetoric became increasingly strident? To find the answer, one needs to take a closer look at the actual evolution of Russian-Georgian relations after 2004 – and at the real impact of Bendukidze's economic reforms.

When Bendukidze joined the Georgian government in June 2004, relations between Russia and Georgia seemed to be on the mend. The newly elected Mikheil Saakashvili, although clearly pro-Western, had chosen Moscow as his first visit abroad in February 2004. Having met Vladimir Putin, he publicly stated that he intended to improve bilateral relations. The Russian Prime Minister at the time, a liberal economist named Mikhail Kasyanov, was eager to discuss opportunities for economic cooperation with Georgia.[344] A friend of Bendukidze and fellow libertarian, Andrei Illarionov, was Putin's chief economic advisor.

The positive atmosphere went beyond friendly rhetoric. In May 2004 Russia did not intervene when the Georgian government successfully restored control over the semi-autonomous region of Adjara, home to a large Russian military base and a pro-Russian leader, Aslan Abashidze. It was the head of Russia's National Security Council, Igor Ivanov, who flew to Adjara's capital Batumi to convince Abashidze to leave.[345] Progress was also made on one of the thorniest long-standing issues between Russia and Georgia – the removal of Russian military bases from Georgia. On 30 May 2005, Russian Foreign Minister Sergey Lavrov and Georgian Foreign Minister Salome Zourabichvili issued a joint statement specifying a timeline for closing the bases in Adjara and Akhalkalaki (in the majority-Armenian region of Javakheti in southern Georgia).[346] The process was to begin immediately and be fully completed by the end of 2008. This represented a diplomatic victory for the Georgian side. Russia had initially insisted on at least 7 years to complete the withdrawal.[347]

However, the tentative improvement in Russian-Georgian relations turned out to be short lived. Tensions started mounting in summer of 2004, when the Georgian government tried to forcibly reassert its control in the breakaway republic of South Ossetia. The effort was led by the Georgian Defence Minister Irakli Okruashvili, known for his hawkish stance against the separatists. Georgia's attempts to take control over the breakaway republics now went hand in hand with its increasingly visible resolve to pursue full NATO membership. Georgia started sending additional troops to join the coalition troops in Iraq. (The first Georgian contingent had been sent by Shevardnadze in 2003).

Russia, already concerned about NATO's March 2004 enlargement into Eastern Europe, including the Baltic States, looked on angrily as Georgia, which Moscow had always perceived as its own sphere of interest, pursued closer ties with the Western alliance and the US. As Putin saw it, Georgia's political manoeuvring would at best weaken Russian influence in the Caucasus, and at worst weaken Russia itself. The success of the Orange Revolution in Ukraine in the fall of 2004, which brought to power the pro-Western candidate Viktor Yushchenko, only heightened Russia's concerns. Kremlin advisors and analysts feared that the "colour revolutions", which they saw as US-orchestrated coups, might eventually arrive in Russia. As pro-government political expert Alexey Zudin wrote in March 2005, "America and Europe are actively participating in the power rotation in Russia's near abroad." [348]

At the same time, Georgia's leaders became increasingly outspoken about Georgia's role as an agent of democratisation in the post-Soviet region. They saw themselves as a vanguard in a new wave of revolutions, which would even include the Kremlin itself. One of Georgia's young revolutionaries, Giorgi Kandelaki, discussed early in 2005 whether "the new wave of democratization" would come to include Russia:

"even a tightly centrist government such as Russia's may be called to account for its actions. As in Tbilisi in 2003 and in Kyiv in 2005, the forecasts of nay-sayers were inevitably proven wrong once voters' eyes were opened to the need for democracy and the bankruptcy of authoritarianism. That realisation will come to the CIS. It's only a question of time."[349]

When George W. Bush came to Tbilisi in May 2005 and spoke about Georgia's Rose Revolution as a democratic inspiration for people "across the Caucasus, in Central Asia and the broader Middle East,"[350] alarm bells rang not only in Minsk and Baku, but also in Moscow.[351]

By 2006, Georgian-Russian relations had cooled drastically. Georgia's military build-up – now conspicuous – and its growing insistence on reintegrating Abkhazia and South Ossetia were harshly criticized by Russian authorities. Not long after the January 2006 gas pipeline explosions, Russia imposed a ban on Georgian wine and agricultural produce, citing quality concerns.[352] In September, Georgian authorities arrested four Russian military intelligence officers on espionage charges,[353] which Putin described as "state terrorism with hostage-taking." Russia responded with a full embargo, blocking all air, road, rail and sea links with Georgia, suspending postal communications and money transfers, and organising a crackdown on Georgian illegal immigrants in Russian cities.[354] In November 2006, Gazprom announced its plans to double the price of gas sold to Georgia in 2007. The situation was now very different from 2004, when both sides entertained hopes for a better relationship. "Despite all the political difficulties with Russia," Prime Minister Noghaideli felt it necessary to stress in 2007, "we have excellent relations with Russian investors."[355]

Meanwhile, important changes were taking place inside the Kremlin. In February 2004, Putin sacked Prime Minister Kasyanov, who then joined the opposition and prepared to run in the 2008 presidential elections.[356] In December 2005, Kakha Bendukidze's friend Andrei Illarionov resigned from his position as Putin's economic advisor, saying that "there are no more opportunities for a policy of economic freedom in the country." [357] He was soon to become one of the most vocal critics of the Putin regime. The Kremlin of 2006 was not the Kremlin Bendukidze had worked with back in 2003. Bendukidze's own ties to Russia were growing progressively weaker. In November 2005, Bendukidze pulled out of business activities in Russia, selling his share in OMZ to Gazprombank.  In May 2006, Mart Laar, a former prime minister of Estonia, an outspoken opponent of Russian neo-authoritarianism and one of Bendukidze's friends in Eastern Europe, became an advisor to the Georgian president. Laar was to work closely with Bendukidze.[358]  His circle of friends and colleagues now comprising outspoken critics of the Kremlin, the notion that Bendukidze would pursue a secret agenda of catering to Russian economic interests seemed increasingly implausible.

Contrary to expectations and suspicions, Bendukidze's years in government saw Georgia's growing independence of Russia both in trade and, crucially, energy. While Georgia had little choice but to accept Gazprom's 2006 price hike, it also succeeded in decreasing its reliance on Russian energy imports in 2007 by hammering out deals to purchase natural gas from Turkey and Azerbaijan.[359]  Georgia also took measures to decrease the share of gas in its energy mix. Endowed with significant hydropower potential, Georgia increased its domestic production. The government launched infrastructural rehabilitation programmes. The Czech company Energo Pro purchased electricity assets in Georgia at a significantly lower price than its initial offer (US$132 million versus $312 million) – but only under the condition that it would invest an additional $285 million in infrastructure, asset rehabilitation and new capacity.[360] In 2007, for the first time ever, Georgia became a net electricity exporter.[361]

Bendukidze's critics allege that his aggressive privatisation policy helped transfer important assets into Russian hands, undermining Georgia's security. Yet Russian investors had already been the most important investor group in Georgia before the Rose Revolution. Chubais' RAO UES, for example, had purchased electricity assets in Georgia in the summer of 2003, when Bendukidze was still in Russia. The assets in question had previously belonged to an American owner, AES Silk Road. Even prior to the deal with AES, RAO already controlled half of Georgia's power transmission lines.[362]

No other deals of comparable magnitude took place after Bendukidze's return to Tbilisi. The number of post-2004 actual privatisation deals involving Russian investors is not great. One took place in November 2005, when Stanton Equities Corp., a London-based subsidiary of a Russian group called Industrial Investors (Prominvest), purchased Georgia's main gold mine (Madneuli) and a subsidiary. The buyer paid $35 million for a 97 percent stake in Madneuli and an additional $16 million to the state budget to cover the company's debts.[363] The deal accounted for approximately one-fifth of total privatisation revenue in 2005.[364] A smaller sale involved "Azoti", a large mineral fertilizer plant in the city of Rustavi, acquired by the Energy Invest company for $20 million in September 2005.[365] According to its own website, Energy Invest was founded in 2004 by "Russian and Georgian business groups."[366] However, Azoti's largest shareholder since 2002 had been Itera, an independent gas producer from Russia. In 2004 Bendukidze announced that Itera had failed to meet its investment commitments for Azoti. A Rustavi court ruled that the plant was bankrupt, and in the subsequent auction Energy Invest offered $20 million for the controlling stake in Azoti – a much greater amount than the $5 million offered by Itera.[367]

Among other post-Rose Revolution deals mentioned by Bendukidze's critics is the takeover of the United Georgian Bank by the Russian state-controlled Vneshtorgbank in 2005. This did not, however, constitute privatisation: the United Georgian Bank had been privatised as early as 1995. The liberalisation of the economy led foreign investors from various countries to buy into Georgian banks or to establish their branches in Georgia. By the end of 2007, out of 20 commercial banks in Georgia, 14 featured the participation of foreign capital from diverse sources. The share of foreign investment in the capital stock of commercial banks was more than 64 percent.[368]

Finally, a few proposed privatisation deals involving Russian investors never actually took place. A much-discussed sale of the Chiatura manganese factory to Russia's industrial group Evrazholding did not materialise, as the potential buyer pulled out of the agreement. Due to the lack of full transparency in the Georgian privatisation process – the government's website on privatisation contains information on assets and sales, but the list is incomplete and information on buyers is often scarce – rumours circulated that many more enterprises were transferred into Russian hands on the sly. There is no evidence to support such claims, however, when it comes to larger, more visible and strategic transactions. One of Georgia's most significant privatisation deals took place in 2006. It involved the sale of several hydro power plants and energy distribution companies to the Czech company Energo Pro, which became the leading electricity distributor in Georgia. Some alleged that Energo Pro was acting as a faηade for Russian interests.[369] Nothing has come up so far to substantiate such claims, however, as a 75-percent stake in the company is held by Jaromνr Tesa, a Czech millionaire.[370]

Likewise, Gazprom was unable to obtain control over the Georgian gas transportation network in 2005, despite its offer of lower gas prices in exchange for these assets. (This plan had always been strongly opposed by the Georgian opposition, as well as the United States, for fear that it would give Russia too much influence in the Caspian energy sector. In February 2005, Steven Mann, the US State Department's senior adviser on Caspian Basin energy issues, stated that the sale of Georgia's gas pipeline "would mean that our chance to assure independent and alternative energy resources would be lost."[371]) Another sensitive sale that was discussed – that of the Georgian Railways to Russia – also failed to materialise.[372]

Finally, in late December 2008, Russia's state-owned electricity trader Inter RAO and the Georgian authorities signed a non-binding memorandum on joint management of the Enguri Hydropower Plant, Georgia's largest. The Georgian Energy Minister announced the news only two weeks later, in January 2009.[373] The opposition protested against the planned deal, saying it undermined Georgia's energy security.[374] The Abkhaz authorities, too, objected to the plan, claiming they were not involved in the negotiations (Enguri HPP's five generators are located on the territory of Abkhazia).[375] Despite attempts by the management of Inter RAO to find a compromise, the plans for joint management eventually fell through and, contrary to the provisions contained in the memorandum, no legally binding contract was signed so far.

At the same time, Bendukidze's privatisation policy made Georgia more attractive to a growing number of Western investors. Prior to the Rose Revolution, the latter had been few in number. (The only two worth mentioning were British Petroleum, a shareholder in the Baku-Tbilisi-Ceyhan oil pipeline project, and American-based AES, which pulled out of the country in 2003.) By May 2005, however, David Dumbadze, the Chairman of the Russian-Georgian Business Council, could conclude that "today's investment market in Georgia is dominated by Western investors."[376]

While total FDI for 2004-2008 was US$5.7 billion, the total volume of Russian FDI in Georgia stood at $232 million. If one includes all Cypriot investment into the overall Russian figure (since it is a common practice for Russian companies to be registered in Cyprus), the figure increases to $515 million, less than ten percent of total FDI for this period. This is still a substantial amount.  However, over the same period $702 million of FDI came from the UK, $531 million from the US, $438 million from the United Arab Emirates, $444 million from Turkey and $307 million from Kazakhstan.[377]

Describing his critics as "a group of idiots, according to whom my mission in the government was to strengthen Russia's levers here," Bendukidze has brushed aside the allegations of "selling out Georgia."[378] Consistent with his libertarian principles, he told Russian Forbes in 2007:

"Georgia is a country in which it is good to invest not only for Russian companies, but for any companies. By the way, one should note that despite the problems created by Russia, Russian companies enjoyed the same conditions here as all the rest. No one tried to interfere with them or limit them somehow."[379]

In numerous interviews given to the Russian press after he joined the Georgian government, Bendukidze supported the official Georgian stance on issues such as territorial integrity. He argued that the reintegration of the breakaway republics is rightfully a priority for Georgia:

"Our dream, our goal is to restore our territorial integrity and, simultaneously, to turn Georgia into a normal, developed, successful and prosperous state. These goals are not shared [by Russia]. We do not see how you can become a successful country if you have an unresolved territorial problem and we do not understand how you can solve this problem without turning Georgia into a successful country. That is what we want."[380]

Commenting on the loss of the Russian market for Georgian wine exporters due to the Russian embargo, Bendukidze scoffed at the "legends circulated in Russia, which said that Russia can bring Georgia to its knees by introducing an embargo."[381] Discussing divisive issues with Russia, including NATO membership, was impossible, he argued. After the August 2008 war, Bendukidze noted that Russian policy-makers were ignorant about the true internal developments in Georgia: "I have always said that one of the main problems of Russian authorities is the lack of objective information."[382] According to Bendukidze, Russia had initiated the August 2008 war in order to topple Saakashvili's regime – and failed.[383]

In the end, a closer examination of Bendukidze's four and a half years of influence in government does not show that Russian business interests in Georgia became significantly stronger. Bendukidze's privatisation policy and reforms attracted diversified inflows of FDI from multiple sources. In the energy sector, instead of becoming more dependent on Russia, as some had feared, Georgia did just the opposite, on its path to becoming an electricity exporter.

Ironically, if Bendukidze helped isolate Georgia from the EU, and made it more vulnerable to Russian influence, he did not do so by supporting Russian designs for a liberal empire but by importing – from Russia and a handful of conservative US think tanks – a sceptical and dismissive view of the European Union. It is to this, and to the more serious criticism of his libertarian revolution, that we turn next.

 


[332] "Pipeline Blast in Russia Cuts Gas to Georgia", Civil Georgia, 22 January 2006.

[333] Diana Petriashvili, "As Georgia Loses Gas, Rancor at Russia on the Rise", Eurasia Insight, 23 January 2006.

[334] Anatoliy Chubais, "Russia's Mission in the 21st Century" (in Russian), Nezavisimaya Gazeta, 10 January 2003.

[335] Vitaliy Tretyakov, "Bendukidze's Mission" (in Russian), Rossiiskaya Gazeta (Federal issue), no. 3492, Jun. 3, 2004.

[336] Viktor Dyatlikovich, "Bendukidze is back to Georgia" (in Russian), on Russia 1, Vesti Nedeli 06 June 2004.

[337] Alexander Bekker, "Interview: Kakha Bendukidze, the Minister of Economy of Georgia: 'Georgia Has Nothing to Lose'" (in Russian), Vedomosti 93 (1133), 2 June 2004; also available here.

[338] "Georgia Open to Privatization," Civil Georgia, 15 June 2004.

[339] Viktor Dyatlikovich, "Bendukidze Went back to Georgia" (in Russian, "Бендукидзе вернулся в грузины), Vesti Nedeli, 6 June 2004.

[340] Alexandr Bekker, Aleksey Nikolskii, "Georgia Borrowed Bendukidze" (in Russian), Vedomosti 93 (1133), Jun. 2, 2004.

[341] "Vladimer Papava: Curriculum Vitae," Vladimer Papava's personal website.

[342] Vladimer Papava, "The Political Economy of Georgia's Rose Revolution," East European Democratization, Fall 2006, p. 664.

[343] Vladimer Papava, "On the Essence of Economic Reforms in Georgia, or How European is the European Choice of Post-Revolution Georgia?", p. 3-4.

[344] ESI Interview with Mikhail Kasyanov, October 2009.

[345] "Russian Security Chief Mediates in Adjara Crisis," Civil Georgia, 5 May 2004.

[346] Ministry of Foreign Affairs of Russia, "The Joint Statement of the Ministers of Foreign Affairs of the Russian Federation and Georgia" (in Russian), 30 May 2005.

[347] Vladimir Novikov and Mikhail Zygar, "Ready for Exit: Russia Agreed to Liquidate Bases in Georgia" (in Russian), Kommersant, no. 97 (3181),  31 May 2005.

[348] "The Kremlin in an Orange Environment" (in Russian), Politcom.ru, 24 March 2005.

[349] Georgia Kandelaki, "You say you want a revolution?", Eurasianet, 19 January 2005.

[350] "Text: Bush's Speech in Georgia," BBC News, 10 May 2005.

[351] "Text: Bush's Speech in Georgia," BBC News, 10 May 2005.

[352] Vladimir Socor, "Russia Bans Georgian, Moldovan Wines and Other Products," Eurasia Daily Monitor, vol. 3, issue 60, 27 March 2006.

[353] "Georgia Arrests Russian 'Intelligence Operatives'", Civil Georgia, 27 September 2006.

[354] "How Russia Waged a Cold War with Georgia" (in Russian), Kommersant, no. 75 (3651), 4 May 2007.

[355] Isabel Gorst, "Foreign investment: Caucasus is scene of new chapter in the Great Game," Financial Times, 31 October 2007.

[356] Kasyanov submitted his candidacy for presidency but was denied registration, however. See: Mikhail Kasyanov, Without Putin (in Russian, Bez Putina), Novaya Gazeta, Moscow, 2009.

[357] Irina Granik, "I Didn't Come to Work in Such a State" (in Russian), interview with Andrei Illarionov, Kommersant no. 245 (3329), 28 December 2005.

[358] "Ex-Estonian PM Becomes Saakashvili's Aide for Reforms," Civil Georgia, 10 May 2006.

[359] "Georgia Will Buy Gas from Turkey," Kommersant, 24 December 2006. And Liz Fuller, "Caucasus: Georgia, Azerbaijan Seek Alternatives to Russian Gas," RFE/RL, 5 January 2007.

[360] "Czech Company Takes over Majority of Georgia's Energy Market," Civil Georgia, 5 February 2007.

[361] Government of Georgia, "About the Georgian Power Sector – Press Release", 24 December 2008, p. 2.

[362] "Shevardnadze Dismisses US Criticism, Hails UES Entry", Civil Georgia, 4 August 2003.

[363] "London-Based Stanton Equities Corp Wins Mining Company," Civil Georgia, 1 November 2005.

[364] Calculations made on the basis of the data available from privatization.ge.

[365] "Interview -Georgian fertiliser firm plans more investment," Reuters, 8 February 2008.

[366] Energy Invest, official website.

[367] "Georgia Sold Azoti" (in Russian), Kommersant, no. 173 (3257), 15 September 2005.

[368] These foreign investors included the European Bank of Reconstruction and Development (EBRD), International Financial Corporation (IFC), German "Deutsche Investitions und Entwicklungsgesellschaft" (DEG), German "Kreditanstalt fuer Wiederaufbau" (KfW), JSC "Procredit Holding", German "Kommerzbank", Russian "Vneshtorgbank", Kazakh "Bank Turan Alem", Austrian "Bank Austria Kreditanstalt", "International Bank of Azerbaijan", HSBC EUROPE (Netherlands) and others. Source: National Bank of Georgia, Annual report 2007, p. 48. Available at

[369] ESI Interview with Gia Khukhashvili, an independent economic expert in Georgia, 3 November 2008.

[370] "Svitavy's Energo-Pro purchases another hydro-electric power plant in Georgia", Financninoviny.cz, 21 December 2008,

[371] Diana Petriashvili, "Georgia: No Gas Pipeline Sale – For Now," EurasiaNet.org, 9 March 2005.

[372] "Georgian Railway Not Being Sold to Russia," Messenger Online, 15 June 2009.

[373] "Russia, Georgia to Jointly Manage Enguri Power Plant," Civil Georgia, 12 January 2009.

[374] "Opposition Cries Foul Over Enguri HPP Deal," Civil Georgia, 13 January 2009.

[375] "Abkhaz Leader 'Bewildered' over Russia-Georgia Enguri HPP deal," Civil Georgia, 20 January 2009.

[376] "Svyato mesto pusto ne byvaet: interview with the Chairman of the Russian-Georgian Business Council, David Dumbadze," (in Russian), REGNUM, 26 May 2005.

[377] All data taken from the Georgian statistical office, www.statistics.ge.

[378] Kakha Bendukidze, "Bendukidze On His Dismissal," Civil Georgia, 8 February 2009.

[379] (in Russian) Kirill Gorskii, "Interview with Kakha Bendukidze: I Am Useful" («Я приношу пользу»), Forbes, 15 November 2007.

[380] (In Russian) Boris Dolgin, "Interview with Kakha Bendukidze: There Won't Be Any Exchange of Political Views on Comfortable Life " ("Обмена политических взглядов на комфортную жизнь не будет", in Russian), Polit.ru, 10 October 2006.

[381] Vladimir Fedorin, "'Keynesianism Is a Phlogiston Theory': interview with Kakha Bendukidze" (in Russian), empedocl's LiveJournal blog, 23 April 2009.

[382] (in Russian) Dmitry Bykov, "Kakha Bendukidze: Russia Will Change When I Become Slimmer" (Каха Бендукидзе: «Россия изменится, когда я похудею»), Profile, no. 4 (607), 9 February 2009.

[383] (in Russian) Dmitry Bykov, "Kakha Bendukidze: Russia Will Change When I Become Slimmer" (Каха Бендукидзе: «Россия изменится, когда я похудею»), Profile, no. 4 (607), 9 February 2009.

Suggested readings

In October 2006, after the Russian economic embargo on Georgia, Bendukidze gave an interview to the Russian political online portal Polit.ru about the prospects for Georgian-Russian relations. For full article in Russian please see: Обмена политических взглядов на комфортную жизнь не будет."

On former Russian prime minister and current opposition politician Mikhail Kasyanov's book Without Putin ("Bez Putina") you can read a review in the New York Review of Books: Amy Knight, "Forever Putin" (February 2010)

Anatoly Chubais' concept of "Liberal Empire" as a new strategy for Russia is elaborated in his January 2003 article in Nezavisimaya Gazeta, entitled "Russia's Mission in the 21st Century." Chubais writes:

"I am deeply convinced that, in the visible historical perspective, Russia's ideology should become liberal imperialism, and Russia's mission – the creation of a liberal empire."

He lists three key elements of "liberal imperialism":

  1. Promoting Russian culture and the culture of other peoples in Russia; defending Russian and Russian-speaking citizens in neighboring countries;
  2. Economy and business. The Russian state can and must facilitate the expansion of Russian business in neighboring countries both in the area of trade and in the purchase and development of assets.
  3. Freedom and democracy. The Russian state is interested in supporting, developing, and if necessary defending, fundamental democratic institution, rights and freedoms of citizens in neighboring countries.

On Anatoly Chubais' ideas of a Russian "Liberal Empire" see Igor Torbakov, "Russian Policymakers air notion of 'liberal empire' in Caucasus, Central Asia," 27 October 2003. Torbakov notes how the concept was inspired by debates on a new American Empire taking place in Washington in the wake of the invasion of Iraq:

"Russian policy makers are relying on the precedents established by the US military campaigns in Afghanistan and Iraq to justify Moscow's own push to forge a "liberal empire" in the Caucasus and Central Asia. Recent Russian activity in Georgia and Kyrgyzstan underscores Russia's new imperial tactics … An example of this debate is a recent article by political scientist Stanley Kurtz published in the journal Policy Review. 'Today, Afghanistan may be the germ of a new American imperium,' wrote Kurtz, who added that the US-led ouster of Iraqi dictator Saddam Hussein brought the imperial question into greater focus. The current debate on an American empire largely centers on the question of whether postmodern imperialism is capable of being democratic in nature. Symptomatically, Kurtz's article is titled 'Democratic Imperialism'. Russian leaders have quickly seized on the notion of a liberal empire to refashion their own foreign policy agenda. To a great extent, since the collapse of the Soviet empire in 1991, a policy priority for Moscow has been retaining influence in the Caucasus and Central Asia."

Torbakov point out that "the leading spokesman for Russia's liberal imperial ambitions has been Anatoly Chubais":

"In late September, Chubais, who remains one of Russia's most influential politicians, delivered a broad policy speech, and later penned an article, arguing that Russia's top 21st century goal should be to develop "liberal capitalism" and build up a "liberal empire." "It's high time to call a spade a spade," wrote Chubais in a commentary published in the Nezavisimaya Gazeta daily. Economically and culturally, Russia is a "natural and unique leader" of the Commonwealth of Independent States (CIS)."

Vladimer Papava and Frederick Starr co-authored an article on "Russia's Economic Imperialism" in 2006. There they write:

"In Georgia, as in Ukraine, Russian President Vladimir Putin seeks to implement the doctrine of a 'liberal empire' put forward in October 2003 by Anatoli Chubais, the chairman of United Energy System (RAO UES), Russia's energy monopoly. According to Chubais, Russia will never find a place in either NATO or the European Union, so it must create an alternative to both, a new empire of its own. It can do this by using its huge and rich public-private monopolies to take over the key industries and economic institutions of former Soviet republics, thereby laying the groundwork for political domination. The resulting empire will be liberal, according to Chubais's definition, because it can be built with money rather than tanks."

Then they demonstrate how this applies to Georgia:

"Then came Georgia's "Rose Revolution." Many state-owned firms were privatized for ten times the sums yielded in asset sales under the previous government of Edvard Shevardnadze. But an utter lack of transparency allowed Russian companies, and their subsidiaries registered in third countries, to snap up most of the new offerings. Typical was the Russian holding company Promyslennye investory (Industrial Investors), which managed to get a major gold mine and then half of a plant producing gold alloys.

Russia's main foreign policy instrument in Georgia is Gazprom, the state-controlled gas monopoly. Gazprom's aim is to control not only the gas industry in Georgia, but also the only pipeline that feeds Russian gas to both Georgia and Armenia. Had the US not intervened in 2005 with $49.5 million to rehabilitate the pipeline, it would have ended up in Gazprom's hands."

Other articles by Papava include: "The Political Economy of Georgia's Rose Revolution," East European Democratization, Fall 2006; and "On the Essence of Economic Reforms in Georgia, or How European is the European Choice of Post-Revolution Georgia?"

Background on the different privatization deals discussed here can be found in this document: Transparency International, "Georgia's State Energy Policy in the Natural Gas Sector" February 2008.

April 2010

 Back Bendukidze and Russian economic imperialism - Next 
Reinventing Georgia: The story of a Libertarian Revolution
Georgia as a model
Georgia as a model
  Bendukidze and Russian capitalism
Bendukidze and Russian capitalism
     
Jacobins in Tbilisi
Jacobins in Tbilisi
  The future of Georgian libertarianism
The future of Georgian libertarianism

© European Stability Initiative - ESI 2017
15 April 2010, 00:00