If plans for an agricultural comeback ever bear fruit, the Saakashvili administration is betting that Georgian vineyards will lead the way. And nowhere in Georgia do vineyards mean more than the eastern region of Kakheti, the country’s viticulture capital.

At first glance, the outlook appears positive. In 2004, grapes and wine brought in $36 million in export revenues, an amount second only to scrap metal, and accounted for 8 percent of total exports. In the latest version of Georgia’s business tax code, which went into effect in January 2005, taxes on the wine industry decreased from 20 percent to 15 percent. One financial institution, the People’s Bank, recently offered Kakhetian vineyard farmers loans worth a total of 1 million laris (about $548,000); other banks have echoed that show of interest.

In theory, that could stand to benefit Kakheti, which supplied three-quarters of the grapes used for Georgian wines in Soviet times. But, for now, observers say, it is unlikely that this wine-dependent region will be able to enjoy the same success it had during the Soviet period for some time to come.

In the ten years since Georgian wine production hit rock bottom, Kakheti has struggled to recover, its economy weighed down by deteriorating, outdated machinery, highly competitive export wine markets and widespread wine counterfeiting. The region, dependent on its grapes, has seen a two-thirds decline in wine production since Soviet times.

At the same time, politics could play havoc with Kakheti’s wine industry as well. As Georgia’s new leadership aligns the country with the West, and differences mount with Russia over Abkhazia, South Ossetia, and the withdrawal of two military bases from Georgian territory, local wine producers say that they expect trade with the country’s largest export market, Russia, to suffer.

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“Our main importer is Russia,” stated Jumber Bathiashvili, general director of the Shumi Wine Factory, one of Georgia’s leading wine manufacturers, “but the politics [between Georgia and Russia] make this exchange very difficult.”

At the same time, however, fresh wine markets are emerging. Shumi Wine Factory’s exports to Ukraine increased by 20 percent after Georgia’s November 2003 Rose Revolution, Bathiashvili said. This, along with steadily expanding international markets – other than Russia and Ukraine, sizeable destinations for Georgian wine include Switzerland, China, Kazakhstan and a small US market -- could encourage a comeback for Kakheti’s economy

That, at least, is the theory. But to make that possibility a reality Georgian winemakers must first do battle with counterfeiters. The Agriculture Ministry estimates that international markets contain some 17 million bottles of two top Georgian red wines – Kakheti’s Kindzmarauli and Racha’s Kvanchkara – even though Georgian wineries can produce only 2.4 million bottles of the two wines annually, the American Chamber of Commerce Magazine reported in January 2005. The Russian wine market, Georgia’s largest, contains some 120 million – 150 million bottles of wine branded as Georgian, according to the ministry, but as little as 16 percent of that total is actually produced in Georgia.

To fight back competition from counterfeiters, in January the government established the Wine Quality and System Formation Fund to curb wine falsification and restore the reputation -- and price -- of Georgian wines. The Fund will do battle alongside a $1.7 million wine testing laboratory funded by the German government-run development agency, GTZ, and opened in December 2004. The government has also attempted to put its legal weaponry in order, with the adoption of the 1958 Lisbon Agreement for the Protection of Appellations of Origin, an international treaty that obliges signatories to ensure that products are sold in their countries are branded with the correct country of origin.

Yet some Kakhetians argue that the government’s concern with counterfeiting is misplaced. “The central authorities seem to only be paying attention to the falsification issue,” charged Tonike Vepkhishvili, the gamgebeli, or prefect, of Tsinandali, a small village outside of Kakheti’s capital, Telavi, that manufactures one of Georgia’s best-known white wines, Tsinandali. “But we have other problems as well. Most of our peasants [sic] grow white grapes, but the factories only want red grapes. These people cannot just switch their crops over without government assistance.”

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The supply of Kakheti’s white grapes vastly outstrips demand – meaning that the top price a local grower could command is just one lari (about $0.55) per kilogram. The amount of white wine purchased by Kakhetian farmers, wine-bottling factories or wine enthusiasts at home or abroad has done little to boost demand.

At the same time, other income-generating opportunities are being pursued, though so far only in the planning stage. Tourism to Georgia has increased by some 300 percent since 1998 to roughly 300,000 visitors per year, and region officials hope that Kakheti’s wineries could prove a draw.

The infrastructure hurdles that are common throughout Georgia pose one hurdle, but some of the oddities of the immediate post-Soviet era present another.

“This factory is a great spot for tourism,” said winemaker Gio Giorgadze, head of the ethnographic wine factory in Kakheti’s Alexander Chavchavadze Museum, the family home of 19th century Georgian poet Alexander Chavchavadze, and one of Kakheti’s largest tourist draws.“[Ex-president Eduard] Shevardnadze had his 65th and 70th birthday parties here.”

But a legal battle that has dragged on for more than a decade means that no one knows who owns the wine factory. Privatized before Georgia adopted the lari as its national currency, the factory may have been sold in coupons – the lari’s predecessor – for essentially nothing. As a result, the factory, along with other tourist destinations in the region, may have been bought for virtually nothing.

Nonetheless, despite the obstacles, Kakhetian optimism dies hard. “We cannot sell our grapes for much at the market,” mused one farmer in his field, “but we can still make wine for ourselves. This is who we are. We are Georgians.”

Editor’s Note: John Mackedon is a Tbilisi-based writer who works for the online publication Civil Georgia.

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