GSAC Election Analysis

American Investment In Georgia: “Dreams” vs. Reality

By Christina Pushaw #INVESTMENTS

In recent months, the Georgian government has faced several waves of criticism from the U.S. Congress. Prominent senators and congressmen have highlighted the ruling Georgian Dream party’s democratic deficiencies, informal rule by oligarch Bidzina Ivanishvili, and the mistreatment of American investors in Georgia. In particular, the case of Houston-based oil and gas company Frontera Resources -- the biggest U.S. investor in Georgia, which has worked in the country for more than two decades -- has drawn attention from the highest levels of the U.S. government. 

Senator Ted Cruz, one of the most influential U.S. politicians, on May 15 sent an open letter to the State Department and Treasury raising the alarm about the deterioration of U.S.-Georgian relations since Georgian Dream came to power in 2012. Members of Congress from both the Republican and Democratic parties have also endorsed a bill to sanction those Georgian authorities who treat American investors unfairly. A few weeks later, 13 members of the Republican Study Committee (RSC) signed a strategy document that called Ivanishvili “a close ally of Putin.” These lawmakers represent not only themselves but the largest ideological caucus in Congress, which counts 147 Congressmen and Congresswomen among its members. 

The Georgian government’s response to criticism from Washington has been appalling. Ruling party officials have crossed every red line in communicating with Americans: calling U.S. congressmen & Senators “lobbyists,” accusing congressmen who oppose Ivanishvili of taking bribes from Frontera, and claiming that half the congressmen who signed the RSC document “didn’t know what they signed.” While the Georgian government regularly asserts that the “strategic partnership” with the U.S. is stronger than ever, accusing U.S. lawmakers of serious crimes is totally unacceptable for a strategic partner. 

Moreover, the Georgian ruling party has launched a propaganda campaign to discredit the American lawmakers and investors who have raised well-founded concerns about the pressure on U.S. businesses in Georgia. Georgian taxpayers have footed the bill, to the tune of GEL 42 million, from the state budget to fight Frontera in court and on Capitol Hill. These funds may have been better used to create value for the country and for Georgian citizens, most of whom are facing unthinkable economic hardship in the aftermath of the COVID-19 pandemic. No amount of high-priced lobbying will help Georgian Dream in Washington, as long as the truth is not on their side.

Regrettably, several media outlets appear to be amplifying the Georgian government’s propaganda narrative. At least one of these, OC Media, is partially funded by U.S. taxpayers through the National Endowment for Democracy (NED). Nevertheless, OC Media regularly runs stories that serve the interests of Georgian Dream by discrediting Frontera, even publishing baseless accusations that the American company contributed to the suicide of a former employee. 

That OC Media piece, on July 10, was essentially a regurgitation of a Facebook post by Georgian labor organizer Irakli Petriashvili. Petriashvili’s credibility is questionable at best. Photos on social media show him marching in the 2017 Tbilisi May Day demonstrations alongside Georgian Communists, who are carrying banners with the hammer-and-sickle -- prohibited in Georgia as a symbol of hate. Thus, Petriashvili’s comments take the character of radical political agitation more than evidence-based criticism of American investors, and it is disappointing that they were reproduced wholesale by a presumably independent media outlet. Another frequent critic of American investment in Georgia, Sopiko Japaridze, is the founder of the self-declared “Marxist Feminist” organization Solidarity Network. Her thinly-sourced hit pieces about Frontera have been published by far-left outlets like Jacobin Magazine, and the Georgian government cites these agenda-driven opinions as unimpeachable evidence for their position. 

With the help of such ideological opponents of American investment, Georgian Dream does not allow the facts to get in the way of their agenda. On June 22, Georgian Minister of Economy Natia Turnava had a meeting with the U.S. Ambassador Kelly Degnan, in which Turnava claimed that U.S. investment in Georgia has increased by 34% in the first quarter of 2020. This claimed “increase in American investment” is quite suspicious and unexpected, because foreign investment in Georgia has dropped overall by 42% since Q1 of 2019. Indeed, foreign investment overall has fallen precipitously since Georgian Dream came to power and has now declined to its lowest level since 2006. Even the global financial crisis of 2008 -- also the year Russia invaded Georgia and occupied part of Georgian territory -- did not have such a devastating effect on foreign investment as Ivanishvili’s informal rule. 

Exactly how many American companies operate in Georgia today is a matter of debate. In a July 11 PR puff piece for U.S. publication The Hill, Georgian Dream MP Irakli Beraia wrote that “more than 300 American companies” are currently doing business in the country without problems. It is not clear where this inflated number came from, because Beraia provides no evidence to substantiate it. Meanwhile, the Georgian government has provided a list of over 200 registered companies that, according to the official position, are “American investors in Georgia.” This list is likely what Turnava was referring to, when she told Amb. Degnan that U.S. investment has increased by 34% this year. 

But in fact, not more than a dozen of those companies actually have majority-American ownership and physical operations in Georgia. The vast majority appear to be shell corporations or companies that can only be considered “American” in the loosest and most technical sense of the word. Many of the companies on the Georgian government’s list, so-called “U.S. investors” whom the ruling party officials boast about to the U.S. Ambassador and the people of Georgia, have majority owners of Georgian and other nationalities but have one American citizen as a minority shareholder. It is misleading, to say the least, that the Georgian government claims these companies as examples of U.S. investment in the country. 

For example, the TV channel POSTV, a ruling-party mouthpiece which is owned by convicted sexual harasser Shalva Ramishvili and primarily known for lambasting the pro-Western opposition, is considered by the Georgian government to be an “American company operating in Georgia.” POSTV features on the list of 200+ “American investors” because one of its minority shareholders, Nugzar Rukhadze, is a U.S. citizen. There are several companies which are majority-owned by Iranian investors, with 10% or less ownership by Americans, yet are still claimed as U.S. investments in Georgia. To use these companies as examples of how well the Georgian government treats American investors, is a textbook example of disinformation. 

What’s more, the Georgian government sometimes points to the ubiquity of American brands like McDonald’s, Wendy’s, and Hilton Hotels as examples of successful U.S. investment in Georgia. Of course, this does not correspond to reality, because these brands are franchised to local Georgian businessmen. An American brand name is not the same thing as American investment, and surely the Georgian Dream officials must understand this.  

Beyond these examples, there are innumerable myths about U.S.-Georgia relations and American investment in Georgia promoted constantly by Georgian Dream. These myths are mostly for domestic consumption, because it is hard to believe that U.S. policymakers would take them seriously. The people of Georgia deserve the truth about these important issues. And at the end of the day, they can look around at the reality in their country, in order to judge how “successful” Georgian Dream has been in attracting and sustaining the type of investment that would improve people’s lives.

Subscribe to receive our latest analyses weekly.