Why Azerbaijan halted carbamide factory construction in Georgia

Giorgi Kalatozishvili, Tbilisi. Exclusively for Vestnik Kavkaza
Why Azerbaijan halted carbamide factory construction in Georgia

Georgian ex-President Mikheil Saakashvili has expressed his personal opinion about the construction of a new carbamide factory on the Black Sea coast being put on hold. The Georgian government and the State Oil Company of the Azerbaijan Republic (SOCAR) reached an agreement to construct the factory in 2012, when Saakashvili was the president. On many occasions he called the construction 'another Project of the Century. A free economic zone was created near Kulevi, giving SOCAR the most favoured treatment to invest 700 million euros. Comparatively, all the foreign investment projects in Georgia put together are worth around $1 billion a year.


The investments of SOCAR are even more valuable and significant than their sum in cash. First of all, the mass construction created thousands of new jobs in Poti, one of the most depressed regions of Georgia. Secondly, the factory producing carbamide has become an important pillar in the fertilizer industry, granting access to new markets, boosting agriculture and many related industrial sectors.


The capacity of 700,000 tons of material a year at the factory was created to gain ground in the markets of Turkey and other Black Sea states. SOCAR was planning to build two factories producing fertilizers. One of them is in Sumgayit (Azerbaijan), the other one is in Georgia. The total volume of carbamide (the most eco-friendly nitrogen-based fertilizer) could reach 1.2-1.3 million tons a year.


The Azerbaijani side was preparing thoroughly: SOCAR specialists studied the experience of other states with established carbamide production. In particular, the specialists visited Egypt, Iran and Amman. The launch of the construction was delayed. A few days ago, SOCAR vice president for Processing, David Mamedov, said that the project has encountered serious problems. "The steep drop in oil prices is slowing down the realization of some projects in Azerbaijan a little. The situation in Georgia is different. If the situation in Azerbaijan is not critical, it is quite complicated in Georgia. The cost of fertilizers on the world market went down. In light of this, the problem of financing the project became more complicated," Mamedov said.


He noted that SOCAR had not and will not assign funds of the state budget, it financed only part of the project using its own funds. The SOCAR vice president emphasized that the Georgian government is interested in realizing the project because the country "will create industry of a new type of product, hence the state budget will be complemented by additional funds, moreover, new jobs will be created."
One of the chiefs of SOCAR does not accuse the Georgian government of failing the project, the diplomatic phraseology does imply the existence of some problems in the negotiations.


Ex-President Saakashvili erupted with a clarion criticism against Irakli Garibashvili's government, accusing it of ruining the key investment project. "The largest investment in the history of Georgia – the construction of a 700-million-dollar factory for carbamide production – was halted near Poti under pressure from the Georgian government," the ex-president wrote on his Facebook page. In his opinion, "SOCAR agreed to invest such an enormous sum because no one had asked for bribes before." But the current government "declared the construction unprofitable, demanding shares and bribes." "What suits thousands of Georgian families strengthens the international positions of Georgia, but it does not bring money to the pocket of billionaire Ivanishvili, it does not suit the oligarch," Mikheil Saakashvili concluded, rounding up the post with an urge to his compatriots: "Wake up!"


The Georgian authorities could not ignore the heavy criticism. Energy Minister Kakha Kaladze said that the cause of the halt of the construction process was "the inexpedience of the project in financial terms." The minister claims that the decision was collective, because the Azerbaijani side 'encountered problems with supplying natural gas.' However, SOCAR president Rovnag Abdullayev did not mention problems with signing a gas contract in a message published by Georgian media on Wednesday. In his words, the main obstacle was that the negotiations with Georgia "hit a dead end."


Vestnik Kavkaza found out that the main cause for the halt in the negotiations was the impossibility of reaching a compromise on financing the construction of infrastructure projects needed for the normal functioning of the factory. In an interview with me, Giorgi Khukhashvili, an ex-advisor to the Georgian prime minister, confirmed this: "There is no need to comment on Saakashvili's statement about 'shares', 'demands for bribes', 'cuts'. In reality, when realizing such high-scale projects, there are always numerous infrastructure complications: who builds the gas pipeline, who builds the road to the factory, there are problems with electricity, the financing of the infrastructure construction and so on."


In the expert's words, the temporary inability of the sides to reach a compromise in feasibility studies of the project does not mean a lack of prospects. "The negotiations have simply been halted, but they will most likely resume as soon as the conjecture on the markets changes. There is no reason for panic," the interviewee assures.

8425 views
Поделиться:
Print: