Overview
 

Latest news:
ENPI Country Strategy Paper 2007-2013 & National Indicative Programme 2007-2010 adopted 07/03/07

1. Political Situation

Georgia was among the first republics of the former Soviet Union to declare independence in 1991. Before independence, the country had a relatively strong economy, with a prosperous agricultural sector, and specialized in the export of agricultural products (almost exclusively to the other Soviet Republics), and energy-intensive industrial products. A number of armed internal conflicts broke out after independence precipitated by secessionist movements in South Ossetia and Abkhazia. The economy collapsed under the impact of the open combats and the loss of both, preferential access to the markets of the former Soviet Union, and large budget transfers from Moscow. The conflicts abated by the end of 1993, when a cease-fire came into effect. Nevertheless conflicts between the Tbilisi based government and the breakaway regions Abkhazia and Tskhinvali/South-Ossetia persist until today.

Recent Events

Protests against the fraudulent parliamentary elections in November 2003 led to the resignation of President Shevardnadze. Presidential elections on 4 January were won by Mikheil Saakashvili, who had led the November protests, with a resounding 96.27% of the votes on an 80% turnout. Constitutional amendments were rushed through Parliament in February strengthening the powers of the President to dismiss Parliament and creating the post of Prime Minister. Zurab Zhvania, the second of the triumvirate of opposition leaders, was appointed Prime Minister. The third member, Nino Burjanadze the interim President, became Speaker of Parliament.

The results of the parliamentary elections for the 150 seats decided by proportional representation held on 28 March mean that the governing Saakashvili/Zhvania National Movement-Democrats party will dominate the new Parliament (with about 135 seats going to the Rightist Opposition Coalition, the only other party to cross the 7% threshold). Relations between Tbilisi and the autonomous region Ajara, ruled by Aslan Abashidze, are likely to remain tense in the post election period.

The challenges facing President Saakashvili during the next few years are daunting: tackling endemic corruption and high levels of organised crime and insecurity, rebuilding non-functioning state institutions, reducing the high level of poverty, dealing with Georgia’s separatist regions, establishing a new relationship with Russia.

Foreign policy

President Saakashvili views membership of the EU and NATO as a long term priority. As he does not want Georgia to become an arena of Russia-US confrontation he seeks to maintain close relations with the United States, at the same time underlining his ambitions to advance co-operation with Russia.

Georgia’s relations with Russia since independence have been complicated by three interconnected sets of issues: Russia’s perceived support for the separatist regions of Abkhazia and South Ossetia, the lack of agreement on a timetable for the withdrawal of the remaining Russian bases in Georgia following the commitments of Russia at the OSCE Istanbul Summit of 1999, and Russia’s perception of Georgia as a safe haven for Chechen rebels. Saakashvili has stated that better relations with Russia would be one of his foreign policy goals. He has paid a successful visit to Moscow in February 2004 offering enhanced border cooperation with Russia as a sign of his commitment to tackling terrorism. The remaining Russian bases are in Batumi in Ajara and Akhalkalaki in the Javakheti region where the base is the major employer for the predominant ethnic Armenian community.

The growing US influence in Georgia notably through the Train and Equip military assistance programme and the construction of the Baku-Tbilisi-Ceyhan pipeline have made Tbilisi’s relations with Moscow frequently strained. The US has announced that the programme will come to an end in early Summer 2004 and will be replaced by more regular military support activities. US Foreign Minister Colin Powell has announced that it is not the US intention to establish military bases in Georgia.

Georgia maintains good relations with its direct neighbours Armenia, Azerbaijan and Turkey and participates actively and regional cooperation fora such as the Black Sea Economic Council and the GUUAM Grouping.

Human rights

Georgia became a member of the Council of Europe in 1999. Georgia has developed a relatively vibrant civil society and a free media during the last years. Two sets of human rights concerns have been voiced by Georgian NGOs and the international community: persecution of religious minorities by state authorities and the Georgian orthodox church; and torture and maltreatment in the penitentiary system. In addition, the Meskhetian Turks, a minority deported to Siberia by Stalin during the 2nd World War, have yet to be repatriated as called for by the Council of Europe commitments.

Internal Conflicts

Gorbachev’s policies in the 1980s encouraged both separatist movements in Abkhazia and South Ossetia and nationalist feelings among Georgians.

Georgia’s parliament abolished South Ossetia’s autonomous status in late 1990 following sporadic violence. The move helped spark a broader confrontation, which ended in a cease-fire in July 1992. Under the agreement, a joint Russian-Georgian-Ossetian force was created to oversee the cease-fire under the aegis of the Commonwealth of Independent States, and with OSCE oversight. Observers have argued that a major obstacle to a stable peace settlement has been the lucrative market for smuggled goods.

Following the Abkhaz vote for independence in 1992, the city Sukhumi was occupied by Georgian armed forces with the Abkhaz leader fleeing to the Russian base at Gudauta. An Abkhaz counter-offensive later resulted in the expelling of the majority of the Georgian population from Abkhazia - (around 250,000 Georgians). A cease-fire was brokered in 1993 and enforced by CIS (Russian) peacekeeping forces overseen by the UN military observer mission. Further military activity in the Gali region in 1998 resulted in more displacements and heightened tensions between Tbilisi and Sukhumi. The UN SG’s Group of Friends leads the efforts to find a conflict settlement. In 2000, the UN produced the so-called Boden Document on a division of competences between Tbilisi and Sukhumi which has however never been officially accepted as a basis for negotiation by Abkhazia.

2. Economic Situation

Georgia is located as a transit corridor in the Caucasus, between Europe and the countries of Central Asia, and between Russia and the Middle East. Agriculture is the leading sector of the economy. The country has strong export potential because of its competitive labour force, a high amount of natural resources, and its strategic location.

Georgia’s economy has been struggling hard to recover from the economic collapse of the early 1990’s, following independence in 1991. Although the economy has suffered a series of economic shocks, there have been periods of strong economic growth between these shocks. The economy has undergone a cumulative expansion of 45 percent since 1995, largely due to the expansion of the private sector as a consequence of liberalization.

Georgia approved its Economic Development and Poverty Reduction Programme in 2003. High growth rates (8% over first 9 months of 2003 largely due to the construction of the Baku-Tbilisi-Ceyhan pipeline) are combined with high levels of poverty, particularly among families with children. (50% of population below poverty line). Unemployment within the Georgian population remains high, with agriculture and industry, traditionally major sources of exports and employment, having little recovered from their post-independence collapse. The health of the poor parts of the population is deteriorating, with a rise in the prevalence of chronic diseases. The quality of education is widely perceived to have declined. Although enrolment rates in basic education remain close to 100 percent, the drop-out rate of the poor is increasing at the basic and upper secondary levels. (Source: Worldbank country briefs 2003).

The National Bank has ensured stable exchange rates. Expenditure under the 2003 budget exceeded revenues by 30% and unpaid salaries and pensions constitute an acute problem.

3. EU-Georgia Relations

General

Based on the Partnership and Cooperation Agreement (PCA) entered into force on 1 July 1999, the EU's cooperation objectives are to build a relationship with Georgia in which the respect of democratic principles, the rule of law and human rights, as well as the consolidation of a market economy are fostered and supported. The PCA provides for trade liberalisation and cooperation in a wide range of areas. Tacis is the main financial instrument supporting the implementation of the PCA and providing grant assistance for projects in priority areas that are defined on a biannual basis.

The EU has an interest in Georgia developing in the context of a politically stable and economically prosperous southern Caucasus. In this respect, the conflicts in Abkhazia and Tskhinvali region/South Ossetia remain a major impediment to development in Georgia and contribute to regional instability. The EU supports the principle of Georgian territorial integrity. The decision by the Council of Ministers in 2001 with respect to conflict resolution in the southern Caucasus has intensified the EU's political commitment to the region in the following years. EU’s involvement is yet limited to the South Ossetia conflict where the EU provides support to the Joint Control Mission but it stands ready to look for further ways in which it could contribute to conflict resolution, as well as post-conflict rehabilitation.

The appointment in July 2003 of a European Union Special Representative for the South Caucasus (the Finnish diplomat, Amb Heikki Talvitie) was a further step in the deepening of relations with Georgia and the other two countries of the region, Armenia and Azerbaijan. It is however Georgia’s “rose revolution” in November 2003 which has opened up new perspectives for EU-Georgia relations. The EU has offered its political support to the new regime in Georgia through declarations and visits. President Prodi met interim President Nino Burjanadze in December 2003, HR Solana visited Georgia on 14-15 January 2004, Irish Foreign Minister, Brian Cowen, attended Saakashvili’s inauguration on 25 January, and EU SR Talvitie has visited Georgia on numerous occasions often accompanied by high level Commission officials. He visited both Abkhazia and South-Ossetia and went to meet Ajara’s leader, Aslan Abashidze, before as well as after the parliamentary election on 28th of March.

The Commission is preparing a recommendation on the relationship of the 3 South Caucasus countries with the European Neighbourhood Policy (ENP). The Council will discuss the issue in June 2004.

Besides, the Commission is co-chairing with the World Bank a Donors Conference for Georgia in Brussels on 16-17 June 2004.

Trade

Georgian trade with the EU is covered under Title III of the Partnership & Cooperation Agreement (PCA). Georgia benefits from the EU's General System of Preferences (GSP) and its economic status as Most Favoured Nation (MFN) put down in the PCA.

Nevertheless Trade between Georgia and the EU have yet remained at very low levels - in 2002 accounting for only 0.03% of the EU's external trade (with EU imports amounting to €266 million and EU exports amounting to €287 million). Conversely, trade with the EU amounted to about 26% of Georgia's imports and 43% of Georgia's exports.

Georgia joined the WTO in 2000.

Assistance

The new Country Strategy Paper 2004-2006

In the light of the serious problems of governance in Georgia, highlighted in 2002 by kidnapping cases, the Commission decided to review the Country Strategy Paper (CSP) for Georgia, outside the regular cycle of CSP adaptations. A new CSP for Georgia was therefore prepared, together with a new Indicative Programme for 2004-2006. These were adopted by the Commission on 23 September 2003. The main lines of the CSP revision are that EU assistance should reach its objectives, including through:

Thematic priorities for EU assistance 2004-2006 (all instruments):

The Commission has responded to the “rose revolution” by providing some immediate assistance and by examining how its instruments can best be mobilised in the new situation including the possible allocation of additional resources. In December 2003 the Commission decided to provide €2 million from the Rapid Reaction Fund for support, via the UNDP, for the Presidential and Parliamentary elections (4 January and 28 March respectively) and to rapidly disburse €5 million from Georgia’s Food Security Programme as budgetary support during the winter months.

Georgia will also benefit from the continuing assistance provided under the Tacis Regional Cooperation Programme (Interstate programme).

Past assistance

Since 1992, the EU has supported Georgia through a range of instruments. The main instruments have been: ECHO humanitarian assistance: (€92 million 1992-2002); Food Security Programme (€59 million 1992-2002); Tacis National Programme (€84 million 1992-2002). Total EU assistance has amounted to €370m (not including Tacis Regional or member states’ assistance).

Tacis Programme

The 2000-2001 Tacis National Action Programme (AP, total € 15 million) concentrated on three priority areas, namely: (1) support for institutional, legal and administrative reforms; (2) support to the private sector development and assistance for economic development and (3) development of infrastructure networks.

In 2002-2003 Tacis, with an indicative budget of € 14 million, was focusing on support for institutional, legal and administrative reform, as well as on support in addressing the social consequences of transition. This included continued support to the approximation of legislation for the implementation of the PCA. Support in addressing the social consequences of transition was targeting the health sector, including investments to support the primary healthcare restructuring programme.

Georgia also participates in Tacis regional programmes like Traceca, Inogate and the Regional Environmental Centre for Southern Caucasus, based in Tbilisi.

Exceptional financial assistance

In July 1998, Georgia settled the remaining amount of its arrears towards the Community (€ 131 million). The country subsequently benefited from a new assistance package consisting of a loan of € 110 million and a total grant amount of € 65 million that was to be disbursed over the 1998-2004 period.

Food Security Programme (FSP)

Over the period 1996 to 1999 the FSP disbursed € 24 million to Georgia. Since 2000, the FSP has partially reoriented the support in favour of a complementary poverty alleviation component through the social safety net in the form of: (a) allocation of resources and further targeting of the family poverty benefit; (b) institutional care. €13 million has been disbursed in the period 2002-2003.

Rehabilitation

EU assistance to Georgia under the rehabilitation programme concerned both the Tskhinvali region (South Ossetia, SO) and Abkhazia (Enguri hydropower plant and dam).

SO. In 1997, the EC proposed to grant € 5 million for the rehabilitation of infrastructure in the post conflict area of SO, and in order to stimulate the peace-process between SO and Georgia proper. In 1999 the EC proposed a new grant of € 2.5 million, upon the approval and fulfilment of conditionalities. Given the dynamics created by its programme, the EC has provided financial assistance for and participated in the Joint Control Commission (JCC) on SO since April 2001. This quadripartite body (with Georgia, SO, North Ossetia and Russia) is conducted with the OSCE.

Enguri. In 1997, the EC proposed to grant € 10 million for urgent repairs at the Enguri hydropower plant and dam (repair of generator Nr. 3 and provision of stop log at the dam), in two tranches of € 5 million and under its rehabilitation budget. This assistance was complementary to the rehabilitation program of Enguri financed from an EBRDR loan of some € 44.5 million.

Humanitarian Assistance (ECHO)

ECHO has been present in the NIS region since the early 1990s, in accordance with its core mandate (humanitarian assistance in response to natural or man-made disasters). From 1993 to 1999, ECHO’s operational funding in the southern Caucasus has been considerable, with € 64.255 million of humanitarian aid going to Armenia, € 83.34 million to Georgia and € 82.96 million to Azerbaijan.

ECHO’s withdrawal from post-emergency programmes in southern Caucasus started in 1996 and was completed in 2000 with a last allocation of € 3.855 million for the three countries.

In 2000, 2001 and ECHO provided a total € 2.35 million as a contribution to alleviating the consequences of the drought in Georgia.

Support to the Georgian Border Guards

Through a Joint Action in the framework of Common Foreign and Security Policy, the EU provided equipment worth € 1.045 million to the Georgian Border Guards (GBG) in 2000 and 2001, aimed at protecting the unarmed OSCE monitors at the border between Georgia and the Chechen Republic of the Russian Federation.

European Initiative for Democracy and Human Rights (EIDHR)

With an allocation of € 1.9 million Georgia was a focus country for the EIDHR in 2002.

Total EU grants to Georgia 1992-2003

* Disbursed

** Allocation for 2002-2003

4. Basic Data

Independence: 9 April 1991 (from Soviet Union)

Constitution: adopted 17 October 1995 (amended on 4 February 2004)

Legal System: based on civil law system

Suffrage: 18 years of age: universal

Executive Branch: President Mikheil Saakashvili (elected as president on 4 January, inaugurated on 25 January 2004) The president is elected for a five-year-term and is both the chief of state and head of government; Prime Minister: Zurab Zhvania; Cabinet: Cabinet of Ministers

Legislative Branch: unicameral Supreme Council (235 seats, members are elected by popular vote to serve four-year-terms); Speaker of Parliament: Nino Burjanadze; last elections held on 28 March 2004

Government type: republic

Capital: T'bilisi

Population: 4,934,413 (July 2003 est.)

Population growth rate: -0.52% (2003 est.)

Birth rate: 11.79 births/1,000 population (2003 est.)

Death rate: 14.71 deaths/1,000 population (2003 est.)

Life expectancy at birth: total population: 64.76 years male: 61.33 years, female: 68.36 years (2003 est.)

Net migration rate: -2.3 migrant(s)/1,000 population (2003 est.)

Ethnic groups: Georgian 70.1%, Armenian 8.1%, Russian 6.3%, Azeri 5.7%, Ossetian 3%, Abkhaz 1.8%, other 5%

Religions: Georgian Orthodox 65%, Muslim 11%, Russian Orthodox 10%, Armenian Apostolic 8%, unknown 6%

Languages: Georgian 71% (official), Russian 9%, Armenian 7%, Azeri 6%, other 7%: Note: Abkhaz is the official language in Abkhazia

GDP - purchasing power parity : $16.05 billion (2002 est.)

GDP - real growth rate: 5.4% (2002 est.)

GDP – per capita: purchasing power parity - $3,200 (2001 est.)

Population below poverty line: 54% (2001 est.)

Previous news:

€2 million in humanitarian aid for victims of the Abkhazia conflict in Georgia 14/12/06
ENP Action Plan for Georgia 14/11/06
‘Frozen Conflicts’: Transnistria, South-Ossetia, and the Russian-Georgian dispute
speech by B. Ferrero-Waldner 25/10/06
President Barroso and Commissioner Ferrero-Waldner to meet Georgian Prime Minister 29/11/05
€4 million to victims of Abkhazia/Georgia conflict 27/08/04

Latest update: June 2004