Institute for War and Peace Reporting | Giving Voice, Driving Change

Abkhazia: The Great Resort Sell-Off

Plans by the government in the breakaway republic of Abkhazia to privatise its Black Sea tourist resorts will bring in money – and new discontents
By Inal Khashig

The huge resort hotels of Pitsunda crowding down to the Black Sea still bear witness to how Abkhazia was once the holiday Riviera of the Soviet Union, attracting up to two million tourists a year.

Pitsunda, with its clear waters and the magnificent beach fringed by a park of old pine trees, was the jewel of them all and used to be the resort of choice for Soviet leaders, from Joseph Stalin - who had five villas in Abkhazia - to Mikhail Gorbachev.

Most of the resorts are faring badly because of the early Nineties conflict with Georgia. But for the war-scarred breakaway republic, which has no energy resources or industry, the holiday trade remains its main source of income. After the war ended in 1993, the local authorities took over all the tourist facilities - and, at the end of May, decided to put them up for sale.

Speaking at a session in the northern resort town of Gagra, Prime Minister Anri Djergenia expressed his unhappiness with the economic condition of his republic. Since the violence began in the region, the number of tourists has fallen sharply. Last year, only 25,000 visitors came to Abkhazia and as a result, all the holiday hotels, including the prestigious ones in Pitsunda, have been running at a loss.

“The state is incapable of keeping up a resort like Pitsunda with outdated infrastructure,” said Djergenia. “As a result, the government will take decisive steps to change the situation.”

By “decisive steps” Djergenia meant selling the resorts. Because local businessmen do not have the funds to acquire the tourist facilities, the only possible buyers are investors from outside Abkhazia, and in effect from Russia. Djergenia made this clear when he flew to Moscow on the day after his announcement and met leading businessmen.

The plans have provoked a furious reaction in Georgia. The foreign ministry released a statement, saying that the tourist infrastructure of Abkhazia is the property of Georgia and that therefore the privatisation was illegal.

Despite this, a spokesman for Moscow’s property ministry, Alexander Parshukov, said Russian companies might take part in the sell-off. He said that everything would depend on the competition rules and the transparency of the sale.

The path to a successful privatisation may not be smooth. In the past, there has been significant resistance to the idea, so much so that President Vladislav Ardzinba, who commands great authority here, worried that pursuing it might cause splits in his republic. Four years ago, he refused to sell the Pitsunda resort to the Russian businessman-turned-politician Boris Berezovsky, who was then dealing with the Georgia-Abkhazia dispute.

Another problem is the lack of a legal framework under which large enterprises can be privatised. The entity’s parliament has not even discussed this issue.

Many people in the entity who associate the word “privatisation” with the upheavals it caused in Russia in the early 1990s are worried. Residents of Gagra and Pitsunda, where tourism is the only source of income, are especially anxious.

“If a businessman comes from outside with a lot of money and buys the hotel, where I am renting a café, he will simply throw me out on the street,” said Agdur, a young local man in Pitsunda. “And yet it’s people like me who shed their blood for the motherland with guns in our hands. I cannot accept that.”

Agdur’s opinion is widely shared. “Every resident of Abkhazia should receive a piece of property from privatisation, otherwise it’s doomed and it will definitely lead to bloodshed,” he added.

Some older people, who have worked for years in the resorts and have no ambitions to be property owners, took a different view, saying that only a new influx of tourists could keep their jobs secure. But they have no guarantee of that.

Asida, who has worked as an administrator in one of Pitsunda’s hotels for 20 years, said that she was worried she would lose her job if a foreigner took it over.

There has already been one conflict between an incoming businessman and local staff. When a Russian rented out the Nestor Lakoba Sanatorium in Myusser, he sacked practically all the staff, from the director to the maids and replaced them with his own employees from his home region of Chuvashia in Russia. “And what will happen if the number of places like that increases?” asked Asida.

But if Abkhazia wants to compete with popular tourist destinations like Cyprus, Antalya or even nearby Sochi, there is no alternative but new development, say the experts.

“We need privatisation like air!” said Valery Kirtbaya, director of the Pitsunda resort. The old Soviet-era hotels there have one shower per floor, no televisions or air conditioning and dining rooms that serve stewed cabbage. The only option, Kirtbaya said, is to demolish them and build new ones.

Tamaz Gogia, head of Abkhazia’s state property and privatisation committee, said the holidaymakers who currently come to Gagra or Pitsunda mainly do so out of inertia, because they knew these places when they were flourishing, “But if we do not act now, we will lose these people.”

Gogia admitted, however, that he had not yet worked out how this process could be made acceptable to the population. “I do not want to become the Abkhazian Chubais, as I want to carry on living here,” he said, referring to the deeply unpopular pioneer of Russia’s privatisation programme, Anatoly Chubais.

The privatisation also has a political agenda - something Djergenia does not hide. He said that the Georgia-Abkhazia peace process has reached a stalemate and that big business could help his nation.

“Russian business and its investments in Abkhazia should tilt the scales in the conflict towards the Abkhazian side,” he said. “Investing in property means that businessmen who do not want to lose their capital will strengthen the defensive capabilities of the republic.”

Djergenia is currently regarded as the leading candidate from the governing party to succeed the gravely ill Ardzinba in presidential elections in two years’ time.

The prime minister is the main proponent of the idea of “associated relations” with Russia, a concept that is central to all his policies. Encouraged by Djergenia, thousands of Abkhaz are currently acquiring Russian passports ahead of a tightening of Moscow’s citizenship laws on July 1.

Government critics say they are also worried about the political implications of the mass privatisation. “The main task of the pragmatic Djergenia is to push Abkhazia further into Russia’s sphere of interests,” said Leonid Lakerbaia, the leader of the opposition. “But how can he do this without going too far and not putting our independence and the identity of our people under threat.” But even he did not have an answer to this particular problem.

Inal Khashig is BBC Caucasus and Central Asia Correspondent in Abkhazia.