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Chinese Firms to Build Controversial Black Sea Megaproject in Georgia

  • Georgia announced that Chinese state-owned firms will build a major port on the Black Sea, a move that could strain ties with the West.
  • The chosen companies have faced international controversies, including fraud and bribery accusations.
  • The port is part of the strategic Middle Corridor trade network, potentially giving China significant control over a key route between Europe and Asia.
Port

As global attention focused on the Georgian parliament’s attempts to pass a controversial “foreign agent” law, the government made another move that could strain ties with the West when it announced that a Chinese consortium would build a strategic port on Georgia’s Black Sea coast.

“The decision to make this announcement the day after the 'foreign agent' vote doesn’t look to be an accident,” Tinatin Khidasheli, the Georgian defense minister from 2015-16, told RFE/RL. “It’s been an open secret that the government has wanted to award this to the Chinese, but this choice of companies is very concerning, and the timing sends something of a message.”

The move came one day after the ruling Georgian Dream party’s May 28 override of a presidential veto that blocked the "foreign agent" bill.

The companies involved in the new port deal are all state-owned Chinese firms. While they have extensive global experience, they’ve also courted international controversy and scandal, from fraud accusations in the Philippines to bribery in Bangladesh. Two companies in the consortium have also been banned from participating in World Bank-financed construction projects.

The selection of Chinese companies with a track record of corruption accusations could also further inflame the country’s ties with the West and reshape the so-called Middle Corridor, a global trade network that ships goods between Europe and Asia in which Georgia serves as a strategic node.

“Anaklia is the crown jewel of the Middle Corridor,” Romana Vlahutin, a distinguished fellow at the German Marshall Fund and former European Union ambassador-at-large for connectivity, told RFE/RL. “If you have China building such a key point, then you are giving them the capacity and opportunity to control a very important route for trade between Europe and Asia.”

Few details have emerged about the deal so far, but Georgian Economy and Sustainable Development Minister Levan Davitashvili said on May 29 that the China Communications Construction Company and Singapore-based China Harbor Investment were the only bidders in a tender to build and operate a deep-sea port in Anaklia, a Black Sea resort town of some 1,500 people. He added that two other Chinese companies -- China Road and Bridge Corporation and Qingdao Port International -- would serve as subcontractors for the project.

A deep-sea port in Georgia -- which would allow larger ships to transport increased volumes at a more efficient rate -- would raise the Middle Corridor’s prospects as an alternative trade route that bypasses Russia, but China’s 49 percent stake in the project could also be a blow to Brussels’ strategy of looking to grow the corridor following Moscow’s 2022 full-scale invasion of Ukraine.

“This is not good news for the EU, and I think the fact that [China is now building] the port shows a lack of strategic thinking in Brussels,” Vlahutin said.

Who Are The Companies?

During a recent press conference, Davitashvili said that over months of consultations, a Swiss-Luxembourg consortium led by Terminal Investment Limited Holding, which operates shipping ports across Europe and Asia, was also involved.

But the minister said that only the Chinese-state companies submitted a final proposal and that while some technical formalities must still be carried out, “the application is complete [and] the relevant bank guarantees have been presented” by the Chinese consortium.

Terminal Investment Limited Holding did not reply to RFE/RL’s request for comment about why it didn’t submit a final offer.

China Communications Construction Company, which headlines the Chinese proposal, is a key player in Chinese leader Xi Jinping’s signature foreign policy project, the Belt and Road Initiative (BRI).

China's ambassador to Georgia, Chou Qian, told journalists on May 30 that the company is “one of the most famous and one of the strongest construction companies in the world” and has carried out projects in more than 153 countries.

But the company has also faced scrutiny for how it has conducted business overseas, in areas ranging from Malaysia to Equatorial Guinea.

From 2011 to 2017, the World Bank banned the firm and its affiliates from participating in World Bank-funded construction projects due to a fraud scandal in a road project in the Philippines in 2009. China Communications Construction Company is also the legal successor of the China Road and Bridge Corporation, which will work as a subcontractor on the Anaklia port and was also banned by the World Bank for the same incident in the Philippines.

China Communications Construction Company also had a contract to build a port in Tanzania terminated in 2014 after allegations surfaced that Tanzanian officials had inflated project costs to accommodate the demands of the Chinese firm.

In 2020, the United States also sanctioned the company for its involvement in constructing artificial islands and promoting militarization in disputed parts of the South China Sea.

China Harbor Investment is based in Singapore and is the overseas investment arm of China Harbor Engineering Company, which is an engineering contractor and subsidiary of China Communications Construction Company.

China Harbor Engineering Company was ensnared in a high-profile corruption case in 2018 where the company was blacklisted by the Bangladeshi government for attempting to bribe a senior official over a large contract to expand a major highway.

A Strategic Port On The Black Sea

Reaction to the Georgian government’s announcement about Anaklia has been limited, but a NATO official who spoke on condition of anonymity in order to speak freely raised concerns about China’s role in the deal.

“It’s well known that China has long sought influence in major overseas infrastructure projects. The Black Sea remains an area of strategic importance to NATO,” the official told RFE/RL.

A State Department spokesperson told RFE/RL that the United States “respects countries' sovereign decisions regarding who they want to engage or do business with,” but added that when doing business with Chinese entities that “it’s important to [exercise] due diligence, understand the potential impacts on critical infrastructure and sovereignty, and ensure the economic relationship is fair, transparent, and benefits Georgia.”

Georgia is no stranger to awarding high-profile infrastructure deals to Chinese firms.

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In addition to the deep-sea port in Anaklia, Chinese companies are building infrastructure across the country, including a large section of highway through Georgia’s mountainous countryside, a project whose growing price tag is approaching $1 billion.

Looking more closely at Anaklia, the government will retain 51 percent ownership of the port project, with 49 percent going to the other partners.

This deal marks the second attempt to build a deep-sea port in Anaklia.

Previously, a consortium formed between Georgia's TBC Bank and the U.S.-based Conti International was canceled by the government in 2020 after years of political controversy that saw TBC co-founders Mamuka Khazaradze and Badri Japaridze facing money-laundering charges.

The pair were charged but released without jail terms, and Khazaradze has claimed the authorities were trying to sabotage the project. The contract for that deal was worth $2.5 billion.

Davitashvili said that more details would be unveiled in the coming days when he spoke to reporters. Khidasheli, the former defense minister who now chairs the Civic Initiative for Democratic and Euro-Atlantic Choice, a Tbilisi-based NGO, said she will be watching events closely.

“To understand things deeper, we will need to see the actual contract,” she said. “Legally, the document is supposed to be made public, but you never know what will be made confidential by this government.”

By RFE/RL

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