Georgian port is focal point of standoff with Russia

McClatchy NewspapersAugust 29, 2008 

POTI, Georgia — Weeks before Russia invaded Georgia earlier this month, excavators in this key Black Sea port began to lay the ground for a $200 million tax-free zone to triple the port's capacity and create, Georgian officials said, the Dubai of the Caucasus.

Some of that soft green earth now is occupied by Russian tanks and soldiers camped behind huge, freshly dug trenches, within firing range of ships approaching the port. A second Russian checkpoint is about a mile away, along a river that's sometimes used to ferry goods into eastern Georgia.

The Russian presence is a stark illustration of how this 150-year-old port, which handles millions of tons of cargo moving between Europe and Central Asia, is now a key pressure point in the standoff between Russia and the West.

The port is functioning normally again, despite numerous news reports to the contrary and the claim by Georgian President Mikhail Saakashvili — most recently in Thursday's Financial Times — that Russia continues "to occupy" Poti.

The Persian Gulf-funded expansion project is now on hold, however, and major questions remain about the Kremlin's intentions here. On Wednesday the United States shelved plans to unload 38 tons of humanitarian cargo at Poti, not because the port was closed but to avoid a potential confrontation with Moscow. The U.S. Coast Guard cutter Dallas delivered its cargo instead to Batumi, 50 miles to the south.

Poti is a key element in a network of seaports, railroads, highways and energy pipelines to Azerbaijan and Armenia that makes Georgia a major transit link between East and West. The U.S. Commerce Department has described the sleepy, working-class town of 50,000 people as the most important port in the mountainous Caucasus region, which stretches east and west along Russia's southern border.

The expansion of the port has enhanced Georgia's strategic importance, and some U.S. analysts think that Russia wants to dominate its former Soviet neighbor to seize control of those transportation assets or to stifle Western commerce in the region.

"It's a huge deal,'' said Ariel Cohen of The Heritage Foundation, a conservative research center in Washington. "What Russia is trying to do is to plug the east-west transportation corridor that includes railroads and pipelines.

"By controlling Poti, they're controlling the strategic bottleneck of the southern Caucasus."

After overwhelming Georgia's military in a brief war that drew condemnation from Western nations, Russia scaled back its military presence under a French-brokered cease-fire pact. But its troops remain scattered in Poti and dozens of other locations throughout the country, prompting U.S. and European officials to accuse the Kremlin of failing to abide fully by the cease-fire.

While Russian forces haven't stopped cargo from entering or leaving Poti, port officials are worried about what could happen if the forces were provoked or after world attention on Georgia fades.

"Poti is the biggest supplier to Georgia and the region, and they (the Russians) are at the entrance of the city," said Eduard Machavariani, the port's director of commerce. "Anytime you don't know your enemy's intentions, you have to be a little scared."

Russian forces bombed the port at the start of the conflict on Aug. 8, killing five Georgian workers, damaging the container dock and knocking the port offline for nearly three days. On Aug. 19, Russian troops seized the port for several hours and captured 22 Georgian soldiers who were standing guard there. The soldiers later were released.

The bombing of a bridge near Kaspi severed east-west rail traffic until an alternate rail line opened in recent days. The rail breakdown and military blockades on the roads forced cargo to stack up in the port, and officials say that some cargo ships diverted to ports in Turkey and elsewhere.

Amy Denman, the executive director of the American Chamber of Commerce in Georgia, said that the transport delays, along with minor interruptions at Batumi, had put companies in danger of breaching agreements on shipping contracts. Poti is Georgia's transit center for dry goods; Batumi is a transshipment point for oil from the Caspian Sea.

"Goods are moving," Denman said, "but there is still a backup."

"For a week the port was closed and therefore our vessels were not able to call the port,'' said Michael Storgaard, a spokesman for the Denmark-based Maersk Line, one of the world's biggest container fleets. "After the port resumed operations, there have naturally been some backlog issues. We are confident that these soon will be cleared.''

More than 7 million tons of cargo passed through Poti last year, a 16 percent increase over 2006, and trade increased another 10 percent in the past year.

In April, the Georgia government sold a 51 percent stake in the port to a United Arab Emirates investment fund to develop a free economic zone. The RAK Investment Authority plans to spend $200 million to build a new port, spawning additional development that's expected to generate up to 20,000 jobs over the next five years, according to news reports.

Analysts say that transit tie-ups could cause merchants and manufacturers to think twice about shipping into Georgia, raising the prospect of future shortages in the country.

"What is it going to be in two weeks, three months?" said Rick Lussen, the director of Tbilisi's American Academy, which serves Georgian and American students. "It's a question of how interested people are in wanting to do trade with Georgia."

An executive with a major shipping company that uses the Poti port, speaking on the condition of anonymity because of company policy, said the port had operated without serious problems despite the Russian attacks. When he drove there several days ago, he said, he saw a group of soldiers clustered around four or five armored vehicles at a checkpoint.

The soldiers, he said, "just sit there" and "don't interfere with traffic."

They've had a couple of run-ins with residents, however. One night last week, a Poti man, reportedly drunk, wandered near the checkpoint and was assaulted by Russian soldiers. Another night, a group of Russians, themselves drunk, raided a nearby meat-processing plant and ran off with sausages and other products, residents said.

The behavior worries port officials.

"It's very hot, and those soldiers drink a lot of vodka," Machavariani said. "You don't know what can happen."

(Montgomery reported from Washington.)

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McClatchy Newspapers 2008

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