Knight Ridder Washington Bureau
Distributed by McClatchy-Tribune News Service
August 29, 2008 Friday

Georgian port is focal point of standoff with Russia

By Shashank Bengali And Dave Montgomery, McClatchy Newspapers
POTI, Georgia

POTI, Georgia _ Weeks before Russia invaded Georgia earlier this
month, excavators in this key Black Sea port began to lay the ground
for a $200 million tax-free zone to triple the port’s capacity and
create, Georgian officials said, the Dubai of the Caucasus.

Some of that soft green earth now is occupied by Russian tanks and
soldiers camped behind huge, freshly dug trenches, within firing range
of ships approaching the port. A second Russian checkpoint is about a
mile away, along a river that’s sometimes used to ferry goods into
eastern Georgia.

The Russian presence is a stark illustration of how this 150-year-old
port, which handles millions of tons of cargo moving between Europe
and Central Asia, is now a key pressure point in the standoff between
Russia and the West.

The port is functioning normally again, despite numerous news reports
to the contrary and the claim by Georgian President Mikhail
Saakashvili _ most recently in Thursday’s Financial Times _ that
Russia continues "to occupy" Poti.

The Persian Gulf-funded expansion project is now on hold, however, and
major questions remain about the Kremlin’s intentions here. On
Wednesday the United States shelved plans to unload 38 tons of
humanitarian cargo at Poti, not because the port was closed but to
avoid a potential confrontation with Moscow. The U.S. Coast Guard
cutter Dallas delivered its cargo instead to Batumi, 50 miles to the
south.

Poti is a key element in a network of seaports, railroads, highways
and energy pipelines to Azerbaijan and Armenia that makes Georgia a
major transit link between East and West. The U.S. Commerce Department
has described the sleepy, working-class town of 50,000 people as the
most important port in the mountainous Caucasus region, which
stretches east and west along Russia’s southern border.

The expansion of the port has enhanced Georgia’s strategic importance,
and some U.S. analysts think that Russia wants to dominate its former
Soviet neighbor to seize control of those transportation assets or to
stifle Western commerce in the region.

"It’s a huge deal," said Ariel Cohen of The Heritage Foundation, a
conservative research center in Washington. "What Russia is trying to
do is to plug the east-west transportation corridor that includes
railroads and pipelines.

"By controlling Poti, they’re controlling the strategic bottleneck of
the southern Caucasus."

After overwhelming Georgia’s military in a brief war that drew
condemnation from Western nations, Russia scaled back its military
presence under a French-brokered cease-fire pact. But its troops
remain scattered in Poti and dozens of other locations throughout the
country, prompting U.S. and European officials to accuse the Kremlin
of failing to abide fully by the cease-fire.

While Russian forces haven’t stopped cargo from entering or leaving
Poti, port officials are worried about what could happen if the forces
were provoked or after world attention on Georgia fades.

"Poti is the biggest supplier to Georgia and the region, and they (the
Russians) are at the entrance of the city," said Eduard Machavariani,
the port’s director of commerce. "Anytime you don’t know your enemy’s
intentions, you have to be a little scared."

Russian forces bombed the port at the start of the conflict on Aug. 8,
killing five Georgian workers, damaging the container dock and
knocking the port offline for nearly three days. On Aug. 19, Russian
troops seized the port for several hours and captured 22 Georgian
soldiers who were standing guard there. The soldiers later were
released.

The bombing of a bridge near Kaspi severed east-west rail traffic
until an alternate rail line opened in recent days. The rail breakdown
and military blockades on the roads forced cargo to stack up in the
port, and officials say that some cargo ships diverted to ports in
Turkey and elsewhere.

Amy Denman, the executive director of the American Chamber of Commerce
in Georgia, said that the transport delays, along with minor
interruptions at Batumi, had put companies in danger of breaching
agreements on shipping contracts. Poti is Georgia’s transit center for
dry goods; Batumi is a transshipment point for oil from the Caspian
Sea.

"Goods are moving," Denman said, "but there is still a backup."

"For a week the port was closed and therefore our vessels were not
able to call the port," said Michael Storgaard, a spokesman for the
Denmark-based Maersk Line, one of the world’s biggest container
fleets. "After the port resumed operations, there have naturally been
some backlog issues. We are confident that these soon will be
cleared."

More than 7 million tons of cargo passed through Poti last year, a 16
percent increase over 2006, and trade increased another 10 percent in
the past year.

In April, the Georgia government sold a 51 percent stake in the port
to a United Arab Emirates investment fund to develop a free economic
zone. The RAK Investment Authority plans to spend $200 million to
build a new port, spawning additional development that’s expected to
generate up to 20,000 jobs over the next five years, according to news
reports.

Analysts say that transit tie-ups could cause merchants and
manufacturers to think twice about shipping into Georgia, raising the
prospect of future shortages in the country.

"What is it going to be in two weeks, three months?" said Rick Lussen,
the director of Tbilisi’s American Academy, which serves Georgian and
American students. "It’s a question of how interested people are in
wanting to do trade with Georgia."

An executive with a major shipping company that uses the Poti port,
speaking on the condition of anonymity because of company policy, said
the port had operated without serious problems despite the Russian
attacks. When he drove there several days ago, he said, he saw a group
of soldiers clustered around four or five armored vehicles at a
checkpoint.

The soldiers, he said, "just sit there" and "don’t interfere with
traffic."

They’ve had a couple of run-ins with residents, however. One night
last week, a Poti man, reportedly drunk, wandered near the checkpoint
and was assaulted by Russian soldiers. Another night, a group of
Russians, themselves drunk, raided a nearby meat-processing plant and
ran off with sausages and other products, residents said.

The behavior worries port officials.

"It’s very hot, and those soldiers drink a lot of vodka," Machavariani
said. "You don’t know what can happen."

___

(Montgomery reported from Washington.)