EurasiaNet Business & Economics - Georgia: Black Gold, Hard Times?

BUSINESS & ECONOMICS

GEORGIA: BLACK GOLD, HARD TIMES?
Bruno De Cordier 2/18/05

The Baku-Tbilisi-Ceyhan pipeline could prove a vital source of revenue for cash-strapped Georgia, pumping an estimated $50 million per year into government coffers. Yet as construction on Georgia’s portion of the 1,760-kilometer-long pipeline winds down, residents affected by construction are wondering whether the benefits of the project will outweigh the costs to them.

Sections of pipe litter a BTC construction site near Ag�takla in southern Georgia. (Bruno De Cordier for EurasiaNet)

"Look, we’re not against this pipeline. The only thing we would like to know is the status of our compensation money," said Zura, one of about a dozen protestors taking part in a November 2004 picket at one of the pipeline’s construction sites near the village of Agtakla in southwestern Georgia.

With a completion date slotted for the second half of 2005, the litany of complaints shows no sign of decreasing. Orchards have been damaged and grazing meadows for cattle and sheep blocked by construction work, Zura said. "The sums we were alloted by the local government and British Petroleum [a leading member of the pipeline consortium] are a joke, really," he said. Compensation for landowners ranges from $1,500 to $5,000 � a hefty sum in a country where annual per capita income hovers around $2,300. At the same time, many compensation recipients remain frustrated.

Much of that frustration comes down to misguided expectations, said Manana Kochladze, who leads the Tbilisi-based non-governmental organization Green Alternative Georgia. With some 60 percent of the population grappling with poverty, jobs in Georgia, whether for casual laborers or university graduates, can be hard to come by. When local authorities initially announced plans for the Baku-Tbilisi-Ceyhan (BTC) pipeline, Kochladze said, "they made a big deal about employment, and soon you had these rumors about up to 100,000 jobs that were going to be created. Britsh Petroleum is not fully to blame for that."

The rumors are in keeping with the project’s economic weight. Only 245 of the pipeline’s total 1,760 kilometers will pass through Georgia, but related construction still accounted for most of the country’s 8.4 percent economic growth rate in 2004, according to the Georgian Economic Trends, a quarterly report issued by the Tbilisi-based Georgian-European Policy and Legal Advice Centre. Once the pipeline is complete, the Georgian government will receive an estimated $50 million per year in transit fees, about one percent of its gross national income for 2003.

Recently, the project, long dogged by controversy over its environmental impact, cost and technical shortcomings, has made efforts to show that it is giving more than transit fees back to Georgia’s economy. [For background see the Eurasia Insight archive]. In late 2004, the BTC consortium signed two protocols with the Georgian government that envisage grant programs totaling more than $46 million to fund social and economic projects in the pipeline area. British Petroleum has also announced that it will invest $10 million in Georgia in a range of projects, including education, healthcare, cultural heritage, energy sector revitalization and the promotion of business and civil society links between Georgia and the European Union. On February 1, the Georgian government received the first $9 million of the BTC grant.

But in the Akhaltsikhe-Vale sector, the last Georgian portion of the pipeline before it crosses into Turkey, little benefit is expected from the BTC project once construction ends. In this impoverished, relatively remote border area the pipeline has become a magnet for job seekers, who otherwise depend on small-scale agriculture, animal husbandry, remittances from migrant workers and limited border trade for their cash. "Well, of course I’m glad to have this job. There’s not an overload of alternatives around here," said 23-year-old construction worker Sergei, one of an estimated 250 locally hired temporary employees on the project. "Our part of the job will soon be done, however. I have no idea yet what will come for us after that."

An employee of one international organization who asked not to be named agreed that the pipeline "has not brought much sustainable employment" to the region. The income derived from renting apartments and houses to non-Georgian pipeline construction staff evaporated when the project decided to relocate their staff to a trailer camp on the edge of town, commented one Akhaltsikhe-based businessman who gave his name as Samuel. At the same time, he said, the fact that fewer jobs were created than expected � locals cite an initial figure of 1,000 � have caused many residents to feel shortchanged.

The presence of about 300 foreign workers, mainly of South Asian origin, in the Akhalkitskhe-Vale sector provide further cause for dissatisfaction. Residents claim that the imported laborers performs tasks that Georgians could do just as well. The BTC project’s Public Affairs Office in Tbilisi did not respond to requests for comment about hiring practices in Georgia, but, according to British Petroleum, a total of 5,308 people worked on the pipeline in Georgia as of mid-2004. About one-third of these workers were locally recruited, mainly as manual workers, welders, machine operators, drivers, night watchmen and cleaners. Once construction is completed, maintenance and operation of the pipeline and related installations will require only 200 local staff.

Potentially positive changes, however, have resulted from the project, the international organization employee added. When the Baku-Tbilisi-Ezurum natural gas pipeline comes online in 2006, local residents hope to benefit from cheap natural gas for heating � an environmentally friendly alternative to the firewood currently used. British Petroleum has also repaired bridges and roads, and the amounts landowners have received as compensation for property loss could be put to good use as investment in local agriculture, observers say.

Samuel, the businessman, agreed. "[A] couple of hundred people hired is not that bad, really. If they manage to save some money and invest it well that will be good for the area. However, there’s no guarantee that that is going to happen on a large scale. "

"I’m indeed worried about what’s going to happen once we’re gone," said one foreign, Akhaltsikhe-based British Petroleum engineer who asked to remain anonymous. "Once the pipeline is ready and operational, the number of sustainable jobs will remain even more limited than they are now. I can imagine that it will lead to more frustration."

Editor�s Note: Bruno De Cordier is a research assistant at the University of Ghent’s Conflict Research Group in Ghent, Belgium.

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