Georgia: What Would the Grinch Say About Allegations of Christmas Tree Funny Business?

Christmas trees have emerged an unexpected source of controversy about how the Georgian government handles logging licenses for the country's forests. Given that foreign investment is critical to Georgia's economic growth campaign, officials in Tbilisi are strongly denying the accusations that a "forest mafia" controls the licensing process.

Forests cover 40 percent of Georgia's territory, or some 3 million hectares -- approximately 130,000 hectares of those forests are available for licensing, according to the government. And when it comes to Christmas trees, one tree from those forests stands in a class by itself.

The Nordmann Fir (Abies nordmanniana), a towering evergreen native to Georgia, Turkey and Russia, is arguably Europe's most popular Christmas tree variety. Reaching heights of 61 meters in the wild, or 12-18 meters under cultivation, it is prized as a house-friendly tree, with strong needle retention and no stickiness.

This is one market that Georgia dominates. Seed from Georgia's Nordmann Firs accounts for roughly 90 to 95 percent of the Western European market for Nordmanns, according to informal estimates by one seed company. The Georgian government could not put an immediate number on the amount of revenue it collects annually from seed harvesting licenses, but prices at its last license auction, in 2007, reached into the millions of dollars.

In 2008, though, Georgia's expected cone harvest from key Nordmann sites fell to roughly five percent of its usual yield -- reportedly, the fault of a spring frost and strong winds -- and interest in a license auction dwindled, the government claims.

That meant no harvest, under Georgian law. But the government needed to retain its reputation among outside investors for "a high-quality, value-added product," according to Giorgi Tskhakaia, an advisor to Prime Minister Grigol Mgaloblishvili and former deputy minister of economic development who oversaw the licensing process.

With the push on to retain foreign investment in the wake of Georgia's August war with Russia, that need had become critical.

Meanwhile, several Danish companies were watching closely. The Nordmann Fir is critical to Denmark's position as Europe's top Christmas tree exporter, accounting for most of the 12 million trees the country exports each year, according to the Danish Christmas Tree Growers Association.

One Danish company, ABIES Frø, came under particular scrutiny. To let companies harvest existing tree seed, the Georgian government opted to extend the license of the lone company that had paid for a 2007 license -- ABIES -- to sites nationwide. Other seed companies could operate on allocated sites only by signing a contract with ABIES. The license extension ran only for the 2008 harvest.

Under the terms of the agreement, ABIES was not allowed to collect fees for this service -- a condition it terms "unfair" -- nor claim the right to preferential treatment, Tskhakaia said. "There is only equity or there is nothing," he said. The only exclusive harvesting right ABIES held was to its original licensed plot in the remote mountainous region of Racha, the Mecca for Georgia's Nordmann Firs. Seeds exported from Georgia were exported under the ABIES name.

Tskhakaia presents the decision as the best option to keep foreign investors happy. But not everyone is.

The license extension has sparked a flood of protests from Bols-Georgia, a local seed-gathering company associated with Bols Forstplanteskole, a Danish nursery that produces and sells Christmas trees throughout Europe.

Marianne Bols, one of the proprietors of Bols Forstplanteskole, states that her company was subjected to strong-arm tactics during the 2007 auction for Christmas tree seed lots in Racha. She charges that correspondence from Georgian and other Danish companies implicate economic development ministry officials in an organized effort to keep the family from purchasing all 28 lots then up for licensing.

The family eventually won 12 lots with a total bid price of 31.6 million Danish krone (about $5.67 million based on current exchange rates), but, outraged, never paid for the licenses.

The government rejects the claims of funny business. Refusing to extend ABIES's license would have been a question of possibly seeing Georgia's Christmas tree seed business "go to another place, like in Russia," said Tskhakaia.

"Several thousand" local jobs would also have been affected, he continued. "I'm interested in the macro-economic effect . . . but I'm not interested in the personal," he said, in reference to the decision to extend ABIES' 2008 license. "[I]t could be ABIES, it could be another Danish company like Bols, it could be General Motors or anyone else."

Børge Klemmensen, who represents ABIES in Georgia, maintains that his firm "made it possible for our company and all the companies to do business this year, because otherwise there would have been no business at all." The company told the government, he continued, that it would "take no responsibility for controlling" other companies' activities; ABIES Seed registered harvesting plans, delivered them to the government, but played no role in handling related fees, Klemmensen said.

Companies operating under the ABIES license could not be reached for comment.

Meanwhile, attention is focusing on the 2009 auction for Georgia's tree seed lots -- expected by August at the latest, according to Tskhakaia.

But the attention is not limited to Christmas tree seeds alone. Newly appointed Minister of Economic Development Lasha Zhvania has recently expressed interest in reviewing the terms for all of Georgia's forest licenses, with an idea to keeping woodland "under the maximum state control," according to a December 12 article in the Rezonansi newspaper.

Under a reformed licensing process, the onus is on the winning bidder for Georgia's 20-year forest licenses to prepare an official tree inventory and a strategic development plan. That situation has sparked an outcry from environmentalists that the government has no idea what it is selling. The last large-scale official inventory of Georgia's forests was conducted two decades ago.

Dr. Irakli Matcharashvili, the biodiversity program coordinator at Green Alternative, a Georgian environmental activist group, termed the role given to private companies "a very clear conflict of interest " and "an example of a very strong forest mafia in our country."

Political groups have also started to criticize the process. In a December 11 interview with Rezonansi, Gia Gachechiladze, head of the Green Party, asserted that the government is more interested in selling Georgia's forests to stave off a financial crisis than in protecting them.

But prime ministerial aide Tskhakaia, speaking at the time as a deputy minister for economic development, stressed that the government knows "exactly" what it is putting on the auction block. The government reportedly uses the 20-year-old inventory data, coupled with aerial photographs and a yearly "preliminary inventory," to decide how much woodland to allot for licensing.

Tskhakaia noted that officials from the Ministry of Environmental Protection's Forest Department monitor where license holders can cut prior to completion of their strategic plans and inventories, and limit the territory that can be logged until the plan is approved.

A representative of the Georgian Wood and Industry Company, a Georgian-Chinese joint company which owns most of the long-term licenses sold to date, stated that the firm decided to cut only half of the 30,000 cubic meters of trees authorized by the government during the company's first inventory preparation process.