Georgia Nationalises Iconic Mineral Water Due to Russian Sanctions

Tuesday, 14 June, 2022

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Maradia Tsaava

Tbilisi-based journalist & documentary filmmaker

Surrounded by the breathtaking nature of the Borjomi-Kharagauli National Park, a crowd of angry employees defied the burning sun this week to protest the government’s decision to partly nationalise Borjomi mineral water, Georgia’s most iconic brand.

The June 13 announcement followed a prolonged strike by about 400 workers of the region’s largest employer over unpaid wages and an uncertain future since its parent company was hit by sanctions following Russia’s invasion of Ukraine.

The agreement means that Borjomi’s controlling shareholder will transfer a 7.73 per cent share to the Georgian government, free of charge and losing its controlling function.

On April 29, IDS Borjomi issued a statement saying it was “temporarily suspending” the operations of two of its bottling plants in Georgia due to the “ongoing hostilities in Ukraine”. Bottling stopped and 49 employees were laid off.

“We won’t back up, we will fight till the end,” Andro Bablidze, one of the leaders of the protest, told IWPR, while on the large area in front of the bottling factory. The 54-year-old has been working at the factory since 1985.

Borjomi water, containing a mix of minerals and salts considered the perfect cure for a hangover, is one of Georgia’s most treasured products, but its ownership has become a symbol of the country’s bellicose relations with Russia.

A favourite among Russians since the springs were discovered in the 1830s in what was then the Russian empire, the water gained popularity during the Soviet era and Georgia continued to export it after gaining independence in 1991. In 2006, as relations between Moscow and Tbilisi chilled, Russia banned its import citing health and safety reasons. Before the ban, Borjomi’s share of the Russian mineral water market was 13 per cent.

The instantly recognisable, slender green bottle returned to Russian tables in 2013 when Russia’s largest private financial institution Alpha Bank bought Borjomi’s controlling stake of 60 per cent from a fund controlled by the family of late Georgian billionaire Badri Patarkatsishvili. The family still retains a minority stake. Alfa was co-founded and is owned by Mikhail Fridman, a Ukraine-born Russian-Israeli oligarch with close ties to the Kremlin.

"Our identity is in the hands of a Russian oligarch and therefore sanctioned.”

Since the sale, valued at 300 million US dollars, Borjomi has been one of several different Ukrainian and Russian mineral water products operating under the name of IDS Borjomi International, which include the other Georgian brands Likani, Mitarbi and Bakuriani.

After Russia invaded Ukraine, Alfa was included on the list of sanctioned entities on April 6. The EU added Fridman to its list of sanctions on February 28. According to the company, sanctions were accompanied with limited access to bank accounts, which meant it could not receive foreign exchange earnings or settle its debts.

The Russian ownership is a painful point. Tbilisi and Moscow fought a war in 2008 over the breakaway region of South Ossetia and Russian troops are stationed on about 20 per cent of the country’s territory. 

“Borjomi has been exported and sold as a Russian product. This is a huge insult to Georgian identity and one of the biggest failures of our government,” Otar Abesadze, professor of economics at Tbilisi State University, told IWPR.

“The government is always involved in the trading process of the country’s natural resources,” he continued. “This is a huge fiasco of the ruling party: our identity is in the hands of a Russian oligarch and therefore, sanctioned.”

After stopping the operations, workers were offered new contracts. Some signed them, but most did not agree on the new terms, claiming that the company was using the ongoing war to reduce salaries, for example cutting wages by 50 per cent on days off and changing them from a monthly fixed rate to an hour-base one. Those who refused the new contracts have been waiting for their salaries for two months.

“We agreed to the new terms since we understand the crisis, but we want assurances that once it is over, in three or six months, salaries will go back to normal. They [the company] do not accept. They want to keep reduced salaries forever,” Bablidze said.

On May 19, the company proposed to transfer part of IDS Borjomi International to the state, free of charge, to allow production to restart. The Georgian government was slow to react.

“This step will allow the government of Georgia to participate in the management of IDS Borjomi International and upon acceptance of the proposal the company will be able to continue its operations in the ordinary course,” read the statement by the company.

Mamuka Gegeshidze, a 32-year-old employee who has been working at the bottling plant for over 15 years, told IWPR that “the new salaries won’t be enough to cover bank loans alone. We have spent all our lives here and they treat us like nothing”.

Giorgi Diasamidze, spokesman of the Georgian union for agriculture, trade and industry, was adamant that the war had served as an excuse for the company’s actions.

“The company had been over-producing for two months before the war broke out, so now that the factories are closed, they have enough stocks for future months,” he told IWPR.

Approached for a response, the company told IWPR that it would not make additional comments to the media except for official statements.

The plant is a key income source in the southern-central municipality. It employs about 600 people at the two bottling factories in the town of Borjomi out of a population of 10,500 people. In 2019, the company reported 140 million dollars in revenue, 59 million in Russia, and a net profit of 17.3 million dollars.

“If they can’t pay us 1,500 Georgian lari (500 US dollars), how can they pay us 1,200?,” 38-year-old Marina Dvalashvili told IWPR. “This is just an excuse, to cut our salaries. I’m not asking for a high salary in a bakery or a grocery shop. I’m asking a high salary from a company worth millions of dollars.”

“They haven’t paid previous month’s salaries to those who don’t sign the new contracts and those 49 people who are already fired were the main activists last year. This is revenge and what they do is against our constitution, they’re breaking the law,” Diasamidze added.

With the agreement with Alfa Group, the Georgian government becomes co-owner of the country’s emblem and will chair the board of directors. The administration has pledged to negotiate with the workers over their contract requests.