Will the de facto authorities of Abkhazia start large-scale privatization?
Abkhazia has de facto not been part of Georgia's legal-political or economic space for twenty-eight years now. During this time, the once economically prosperous region has collapsed and most of its residents live in the survival mode. According to the de facto authorities of Abkhazia, economic infrastructure was destroyed during the 1992-1993 war. The de facto authorities estimates the damage at $ 11 billion to $ 13 billion and expects compensation from the Georgian Government. However, apart from the war factor, the non-functioning of the local infrastructure after the withdrawal from Georgia’s economic space is no less important. Over the years, the abandoned infrastructure has turned into scrap.
Today's Abkhazian economy is represented by tourism and agriculture. Under the conditions of occupation, it is completely tied to the economy of the Russian Federation. Officially, 60% of the current budget of Abkhazia is financed from the Russian federal budget. According to various sources, after the 2008 Russia-Georgia war and the unilateral recognition of Abkhazia's independence by the Russian Federation, the de facto authorities of Abkhazia has received more than 40 billion rubles (more than half a billion dollars) in financial assistance alone. This does not include technical or infrastructural assistance flowing from the Russian Federation into the occupied territories in the form of vehicles, train tracks, construction materials, timber, etc. It also does not include the financial resources received from the sale of minerals and other raw materials obtained on the territory of Abkhazia, during the implementation of large-scale infrastructure projects in the south of Russia, such as the Sochi Olympics.
Is the assistance selfless? How long will the Russian Federation continue to send huge financial flows through non-transparent channels to the occupied region of Georgia? What will it demand in return, other than the loyalty and hostile stance of the de facto authorities of Abkhazia towards Georgia?
According to the Democracy Research Institute, large-scale privatization is already openly being discussed in Abkhazia. The latter involves the alienation of both economic infrastructure facilities and real estate to Russian businesses and Russian citizens. Most of the real estate in Abkhazia is abandoned. The personal property of more than 250,000 ethnic Georgians - land and buildings - may be of interest to many Russian citizens. However, agricultural land and Soviet-era tourist infrastructure will be much more valuable for Russia. In our opinion, we may see the first wave of privatization exactly in this direction, which, in the first place, will be a benefit for the Russian business and economic actors operating in the Russian Federation. This process will further deepen the annexation of Abkhazia by the Russian Federation.
This perspective was not met with enthusiasm in Abkhazia. Opposition forces have openly stated that large-scale privatization would allow ethnic Georgians displaced from Abkhazia, who have Russian citizenship, to acquire property in Abkhazia. In addition to this semi-official argument, Abkhazians fear that the acquisition of property in Abkhazia by a large mass of Russians will put local ethnic Abkhazians in the extreme minority. Given this, it is unlikely that the current de facto authorities of Abkhazia will start alienating property on an individual basis. It is more likely that it will transfer large assets to Russian businesses or the Russian state.
It is extremely difficult for Georgia to control this process in the current situation. However, it is necessary for the Georgian authorities to make it clear that they will use international legal leverage for disputes with the Russian Federation and to sanction economic actors who dare to acquire property in the occupied territory of Abkhazia.