Abkhazia: Economic and Political Situation and Perspectives

Viacheslav CHIRIKBA


The collapse of the Communist regime, and of the huge state with which this regime was associated, put all the peoples of the former Soviet Union before difficult choices, connected with re-establishing or re-creating their identities, and with working out viable political and economic regimes fit for new realities. Georgia and Abkhazia, too, were confronted with all these challenging dilemmas. But unlike many other regions of the former Soviet Union, the economic collapse caused by the break-up of a highly centralised economic mechanism was accompanied there by a cruel war. Two Caucasian peoples, who for millennia had enjoyed good neighbourly relations and close co-operation, took the path of war in order to resolve their political differences. I will not dwell here upon the history of this bitter conflict, but will speak rather in terms of its political and economic repercussions for Abkhazia, as well as perspectives for Abkhazia's economic development after a peace settlement is achieved.

Abkhazia is a small mountainous country. Its territory is 8,7 thousand sq. km, somewhat smaller than Cyprus. Only coastal areas and foothills, characterised by a mild subtropical climate, are populated and cultivated. The rest of the country consists of high mountains and deep ravines. According to the last Soviet census of 1989, the population of Abkhazia was somewhat more than 524 thousand. The main population groups were the Georgians (242,3 thousand, 45.7%), Abkhazians (93,3 thousand, 17.8%), Armenians (76,5 thousand, 14.6%), Russians (74,4 thousand, 14.3%) and Greeks (14,7 thousand, 2.8%).

During the Soviet times, Abkhazia was one of the most prosperous regions of the former Soviet Union. The national economy was based on agriculture, light industry, mining, electric power production, and tourism. The main agricultural products were citrus fruits, tea, tobacco, oil-bearing plants, olives, figs, nuts, laurel leaf, wine and other beverages, honey, and cheese. Forestry and fishery were also of importance. In the Soviet times, Abkhazia met up to 20% of the USSR's demand for tea. Abkhazian peasants produced more than 120,000 tons of citrus fruits (mostly mandarins), 110,000 tons of tea leaves, up to 14,000 tons of aromatic tobacco, some 14,000 tons of grapes. For the most part, these products were exported. Light industry manufactured copy machines, gas-bags, radios and telephones, mixed feed for cattle, chemical products, textiles, and shoes. There were coal mining and house-building plants besides. Abkhazia's economy was oriented mainly towards the huge Soviet market, its economical cooperation with Georgia being prominent only in the energy and transport sectors.

The subtropical nature of Abkhazia, the high snow-covered mountains and the warm Black Sea used to attract hundreds of thousands of tourists every year. Hotels and sanatoriums could accommodate up to 25,000 visitors at once. The private sector was also oriented toward providing accommodation for tourists. The famous high-elevation lake Ritsa was visited by 10,000 tourists daily. The cave at New Athos, one of the deepest in the world, was seen by 3,000 people a day. The Sukhum monkey depository was visited by 5,000 tourists a day.

Today, the country produces a grim picture. The lush nature cannot conceal burned and destroyed houses, schools and kindergartens, looted factories, blown-up bridges, roads and tunnels. The majority of the enterprises are at a standstill now. Many plants are destroyed. For the rest, there are no supplies of raw materials, and no cash to pay the workers' salaries. During the war, Abkhazia was mercilessly looted. Planes, locomotives, train coaches, trucks, buses, personal cars, ships, computers, industrial and scientific equipment, and other items with resale value, were taken from territories under Georgian military control in Abkhazia and transported to Georgia.

In the agricultural sector, many plantations and farms have been destroyed by the war, and their restoration and re-cultivation will need no fewer than 6-7 years of work and appropriate levels of investment. Moreover, the plantations in southern Abkhazia are heavily mined. Mines are being laid even now by Georgian subversive groups, rendering their exploitation a deadly business.

The overall damage inflicted to the economy of Abkhazia by the war amounts, by Abkhazian estimates, to more than US$100bln in current prices. The Gross Domestic Product (GDP) in 1994 was US$60.3mln, which, compared with 692.5mln in 1988, makes up only 14% of the pre-war level. Exports of citrus fruits, tea, and tobacco have plummeted to less than 19% of their 1989 levels. Industrial production has declined by 93.2%, gross agricultural production by 75.3%, and per capita income by 90%.

Material destruction can be repaired or replaced, but the human losses are irreparable. The wartime human losses of the Abkhazian side are estimated at 5,000, the majority of them between 18 and 40 years of age. Apart from those who perished, 1256 young people became disabled. More than 6,000 children became orphans, and most of them suffer from post-traumatic stress disorders. All these people, the invalids and the disabled, the children and the elderly, badly need qualified medical care and psychological rehabilitation, food and medicines, prostheses and wheelchairs. All of these are in very short supply. Despite urgent needs, most of the international humanitarian and financial aid destined for the post-Soviet states, in particular, for Georgia, do not reach the civilian population of Abkhazia.

The Blockade

The dire situation of the war-ruined economy has been further exacerbated by a Russian-Georgian blockade. In 1995, the leadership of the CIS countries, under the insistence of Georgia, sanctioned a wholesale economic, trade, educational, cultural, and informational blockade of Abkhazia. Losses caused by the economic blockade in basic branches of Abkhazia's economy from the time of its introduction until now amount to US$500mln, roughly equaling the pre-war GDP of Abkhazia.

Since 1995, the citizens of Abkhazia have been subjected to severe restrictions on travel outside Abkhazia. This contravenes the International Covenant of Civil and Political Rights in obvious ways, for its paragraph 12(2) states: "Everyone shall be free to leave any country, including his own." Ironically, at the end of the 20th century, the people of Abkhazia have effectively found themselves behind a new Iron Curtain, created by the leader who is internationally credited with helping dismantle the old one.

It is noteworthy that the economic embargo and travel restrictions were imposed without the approval or formal endorsement of the UN Security Council. The recent United Nations Needs Assessment Mission to Abkhazia (February 1998) negatively assessed the blockade. As noted by the Mission, the embargo restrictions "tend to solidify political positions without encouraging political compromise or facilitating economic integration." The Mission suggested that these restrictions be eased in the interest of promoting reconciliation and of creating a better negotiating climate.

Indeed, having brought additional economic deprivations to the multi-ethnic population of Abkhazia, the Georgian-Russian blockade failed to reach its strategic political goals. Instead of destabilising the regime, it is, on the contrary, strengthening it, uniting the people around the leadership in the face of military threat and harsh economic embargo. It is not the leadership, but the multi-ethnic civilian population of Abkhazia, the refugees included, who are the direct victims of this continued policy of intimidation and confrontation.

Current Political Position of Abkhazia

As a result of the Georgian military defeat and the subsequent secession of Abkhazia, the latter has established itself, and has functioned for more than 5 years now, as a de facto independent state. Though the international community still regards Abkhazia as a part of Georgia, Abkhazia is sovereign and is not controlled by Georgia or any other foreign power. It has its own Constitution, adopted in 1994, its own army, and its own foreign policy. Abkhazia concluded agreements with federated republics of the Russian Federation (with the Republic of Tatarstan, the Republic of Bashkortostan, the Kabarda-Balkar Republic, and the Republic of Adyghea), with the Transdnestr Republic and Gagauzia within the Republic of Moldova, which can be regarded as international agreements.

As described by the UN Needs Assessment Mission to Abkhazia (March 1998), "The de facto authorities in Abkhazia refer to these [political] structures in terms of an independent state; thus, Abkhazia is headed by a president and a prime minister who is responsible for the overall conduct of government business. The government is divided into ministries, each headed by a minister. A parliament exists and consists of members who were elected in November 1996 for five-year terms. In an effort to decentralize, the government has scheduled local elections for March 1998, and it is expected that these will lead to the establishment of village-level councils, each with one representative at the rayon level" (pp. 7-8).

Abkhazia has been engaged in peace negotiations with Georgia since 1993. However, the current state of affairs in the relations between Georgia and Abkhazia inspires little optimism. The gulf between the peoples created by the war and the atrocities is very difficult to overcome, and there is no trust between the respective political elites either. On the one hand, we have the de facto independent Abkhazian state, the self-sustained Abkhazian economy which runs even in the harsh conditions of the Russo-Georgian blockade, considerable stability in the Abkhazian government, the Abkhazian army which is capable to effectively defend the republic's territory and borders and, above all, the Abkhazian public's non-acceptance of any close reintegration with Georgia. On the other hand, though Georgia receives a considerable amount of political support from international organisations and individual states vis-a-vis its dispute with Abkhazia, the current state of the Georgian economy and of its military force, as well as the absence of an external military power willing to send its soldiers to fight (and to die) for Georgian goals in Abkhazia, will not allow Georgia in the foreseeable future to forcefully, or in any other way, return Abkhazia to its control. The majority of the Abkhazians perceive reunification with Georgia as a deadly threat to their small nation's survival. They have no other real incentives to reunite with a menacing Georgia than harsh Russian pressure and intimidation. The current "no war, no peace" situation can therefore be sustained for an indefinitely long period of time, to the great detriment to the population of both states, as well as to regional stability and economic development.

Under such circumstances, the role of non-partisan international mediators and guarantors is expected to be of utmost importance. However, both Georgian and Abkhazian sides often accuse Russia in assisting the other party, while it is obvious that Russia regards this conflict, and, consequently, its mediation in it, through the prism of its own political interests in the area. The other mediators (both the UN and OSCE, as well as the so called "Friends of Georgia" diplomatic group) have so far demonstrated even less impartiality, strongly advocating, as is firmly believed by the Abkhazian side, the interests of the Georgian side only.

Negotiations on two major issues - the political status of Abkhazia and the refugees issue - are effectively deadlocked, as the positions of the sides still remain far from each other. The propaganda war is at its height. In such a context, the importance of economic co-operation between Georgia and Abkhazia, conducive for the creation of atmosphere of rapprochement, cannot be overestimated. The activity of the Coordinating Council, created by the sides during talks in Geneva in November 1997, and supervising three Abkhazian-Georgian working groups (on security issues, economic issues and refugees issues), has been positively assessed by the leadership of both Georgia and Abkhazia. Another field of cooperation is the joint exploitation of the Ingur Hydroelectric power station, which has facilities situated on both sides of the Georgian-Abkhazian border.

Current Economic Situation

Despite all odds, the life does not stand still in Abkhazia. The five years which have passed since the end of the war proved that Abkhazia has enough potential and the will to survive. Even during the Soviet times, under most unfavourable conditions, its population never lacked a spirit of enterprise and ability for economic activity even. During the post-war years the economic growth in Abkhazia was 15-20% per year. As described by the UN Needs Assessment Mission to Abkhazia, "There are signs of an incipient economic turnaround. The informal sector in Abkhazia has shown healthy growth. The area of cultivated land in 1997 was substantially larger than in earlier years, the rural incomes appear to have held up fairly well".

A first round of privatisation is being completed, as a result of which a large number of state-run trading and public service enterprises and collective and state-run farms will be transformed into joint-stock companies, small private enterprises, and firms. During the second round, the share of state sector will be put at 45-50% of all enterprises.

Currently, Abkhazia's major trade partners are Turkey and Russia. About 62% of imports come from Turkey, 45% of Abkhazian exports are destined for Turkey, and 54% for Russia.

Perspectives for economic development

Once the the conflict with Georgia is settled, perspectives for economic development of Abkhazia are rather promising. Abkhazia occupies a strategically important position as a land bridge linking Russia and Europe with Georgia, Azerbaijan and Armenia, as well as with Turkey and the countries of the Middle East. Automobile and railway lines going through Abkhazia can serve as crucially important transit routes for the movement of people and goods. Abkhazia has two large modern airports of international importance (in Sukhum and Gudauta). Its three seaports in Sukhum, Ochamchyra and Pitsunda, are conveniently situated in the proximity of railway and road lines, and can be used both as passenger and cargo ports.

The geographic position of Abkhazia allows it to serve as an important transit route for the transportation of oil, gas, and many items of trade for the Black Sea countries, Europe, Mediterranean and Indo-China directions. One prospective project is the building of a Transcaucasian highway pass road, which would connect Abkhazia with the republics of the Northern Caucasus and will provide the access to the sea for the North Caucasian republics. This highway would give Turkey and other countries of the Middle East a convenient, short way towards the North Caucasus and Russia. Other projects, such as East-West Transport Corridor and the Silk Road, can also involve Abkhazia as their important element.

Another global project of prime economic significance is the building of the Novorossiysk-Abkhazia-Poti-Ceyhan (in Turkey) oil and gas pipelines. The transformation of the former Russian military base in Ochamchyra into a major oil terminal can be regarded as a project of prime economical importance. The Ochamchyra bay is deep and capable of serving large oil tankers. The weather conditions throughout the year are better there than those of Novorossiysk. This project, which can have importance for both Georgia and Abkhazia, as well as for Turkey and Russia, is being currently discussed by the Georgian, Russian and Abkhazian sides.

Abkhazia is self-sustained in coal, has reasonable deposits of high quality oil and gas, and considerable reserves of timber. The most important mineral export items of Abkhazia are mineral water, coking coal, marble, limestone, granites, cement, copper, lead, zinc, arsenic, gold, silver, and barite.

The combination of a mountainous and a subtropical coastal climates, and the abundance of sunny days even in winter, can serve as an attraction for tourists from all over the world. Abkhazia has trained personnel and many hotels, which will, of course, need modernization. The entire tourist infrastructure can be restored in a relatively short time, and Abkhazia is even now ready to accommodate over 1 million tourists per year.

The economic policy of Abkhazia gives priority to the development of the agricultural, fuel and energy, and tourist sectors, the development of transport infrastructure, and state support for small business. In accordance with these directions, economic reform is likewise given a major priority, and will include the restructuring of the economic mechanism, based on the implementation of the principles of marketing, competitiveness, the development of small businesses, and the activation of external economical relations. The legislative basis for the governing of the economy of Abkhazia in the conditions of a free economic zone is being finished. This will also mean the creation of favourable legal conditions for foreign investments. The result of these reforms will be the integration of Abkhazia's economy into the world economic mechanism.

One might conclude that Abkhazia, either recognised as an independent state, or becoming a member-state within the common Georgian-Abkhazian State, will represent an economically viable system. Even now, in the conditions of blockade and intimidation, Abkhazia has resources and capabilities to sustain itself as a sovereign polity. Under normal conditions, with borders open for free movement of people, goods and capital, Abkhazia can successfully heal the damage inflicted by the war and will re-establish itself as one of the most prosperous parts of the former Soviet Union. Given its natural wealth, important strategic position, and active and enterprising population, one can positively assess the perspectives for dynamic economic development. The numerous Abkhazian diaspora communities all over the world will undoubtedly also contribute to the economic recovery and prosperity of Abkhazia.