Georgia Considers the 'Zero Option'

Monday, 29 January, 2001

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Zurab Tchiaberashvili

President Eduard Shevardnadze is facing bitter opposition over proposals to renounce Georgia's Soviet-era assets in return for a restructuring of its debt to Russia.

Shevardnadze argues that ratification of the so-called "zero option" will put Georgia in line for a $141 million loan from the International Monetary Fund.

However, opposition politicians claim that Georgia stands to lose around $2 billion in assets whilst its debt to Russia stands at just $158 million.

The IMF approved a new initiative aimed at "helping Georgia out of its poverty trap" on January 13. Under the terms of the programme, the fund will allocate $141 million to the former Soviet republic between 2001 and 2003.

However, the IMF wants guarantees that the money won't be used to pay off Georgia's foreign debts and has demanded that Tbilisi settles its ongoing financial dispute with Moscow.

But relations between Russia and Georgia have never been so tense. In December, Moscow imposed a visa regime on the former Soviet republic following claims that Georgia was allowing Chechen rebel fighters to take refuge in the notorious Pankisi Gorge. Russia has also cut supplies of natural gas to Georgia which is currently locked in a crippling energy crisis.

However, Moscow has agreed to restructure the $158 million debt if the Georgian parliament ratifies the "zero option" under which it will forfeit its claim to 1.62 per cent of former Soviet assets. Otherwise, Georgia will be obliged to make a payment of $45 million of its debt over the coming year.

The Georgian parliament will consider the "zero option" bill in its spring session which begins next month. President Shevardnadze claims that Georgia will renounce only "ephemeral assets" which would be impossible to realise as hard cash in the next 20-30 years. Foreign debts, he argues, have to be paid here and now.

The government insists that, if the "zero option" is not ratified, Russia may persuade the Paris Club group of creditors to refuse any restructuring of Georgia's debts.

Georgy Baramidze, chairman of the parliamentary committee for defence and security, said the Paris Club was currently considering proposals to restructure a total of $80 million - a move which would free up desperately needed funds in the 2001 budget.

Roman Gotsiridze, head of the government's budgetary office, said that Georgia was on the brink of defaulting on its foreign debt repayments which currently stand at over $2 billion.

However, many leading Georgian politicians remain unconvinced. Yelena Tevdoradze, chairman of the parliamentary committee on human rights, said the proposed bill had "no substance whatsoever". She added that it gave the impression the government was deliberately concealing the real facts of the matter.

And Irakly Gogava, chairman of the parliamentary subcommittee on ties with other CIS countries, agreed that it was impossible to make a final decision until definitive figures had been produced.

Others remain suspicious of any dealings with Russia. Zaza Shatirishvili, a lecturer in Western languages and cultures at Tbilisi State University, said, "Our executive powers are more concerned with smoothing relations with Russia than with protecting the interests of the country."

His opinion was shared by Emzar Dzhgerenaya, deputy director of the Georgian National Library, who said, "While the West continues to offer considerable financial and psychological support, our government lets Moscow call the shots."

And Levan Kelauradze, political analyst for the daily newspaper Rezonans, added, "It's time to put an end to the 'politics of concession' in our dealings with Russia. Especially since, after each concession, Moscow just responds by imposing new demands [on Tbilisi]."

However, Georgia can apparently count on a measure of support from the United States. Bill Clinton's recent moves to strengthen trade links between the USA and Georgia can be seen as a clear backlash against Moscow's aggressive economic policies.

The US government is also planning to send a special consultant to Tbilisi who will advise the Georgian president on fiscal issues and the proposed ratification of the "zero option".

Opinion polls published in the Georgian media show that most people are strongly opposed to the idea of renouncing Soviet assets in a bid to secure a comparatively modest IMF loan.

National Democratic Alliance leader Ivlian Khaindrava says, "Having pushed the nation deeper and deeper into debt, the Georgian leadership is now renouncing billions of dollars just to pay off $158 million."

Khaindrava claimed the move was simply aimed at ensuring that the "bankrupted Georgian government survived another winter" and called on Shevardnadze to "raise $158 million from amongst his relatives and at least give the next generation the chance to keep what is theirs by right."

Meanwhile, Ukraine - which has a claim on 17 per cent of the assets and liabilities of the former USSR -- is urging Tbilisi not to ratify the "zero option" until it has settled its own disputes with Moscow.

The Ukrainian government believes that any decisions by the Georgian government to support the Russian proposal would constitute a gross infringement of international law.

Furthermore, leading Georgian politicians are looking towards Ukraine for support over the question of Soviet military assets which were removed from Georgia between 1991 and 1993.

Georgy Baramidze said that Tbilisi should never renounce its claim to part of the Black Sea fleet "even if the chances of getting our dues are minimal".

A Georgian parliamentary delegation under vice-speaker Eldar Shengelay flew to Moscow last week to air these grievances with President Putin, the State Duma and the Russian foreign ministry.

Zurab Tchiaberashvili is a regular IWPR contributor

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