Economy, politics and geopolitics behind Georgia’s “Foreign Agents Law”

On May 28, the Parliament of Georgia has overcome a presidential veto over the controversial “foreign agents law.” Initiated by the ruling party Georgian Dream (GD) in March 2023, the law soon had to be withdrawn because of backlash. This year, however, the GD achieved their goal.

The legislation introduces mandatory registration for any “non-entrepreneurial (non-commercial) legal entities” as well as “broadcasting and printed media companies” in a special state registry of “organizations under foreign influence” if at least 20% of their income is received from abroad. Moreover, the law gives rights to the Ministry of Justice to monitor and request any kind of information, including personal data, on the basis of the “decision of a relevant authorized person” or “a written application submitted to the Ministry of Justice”—in other words, denunciation.

The law draws similarities to the Russian legislation on foreign agents adopted in 2012, despite the fact that the law in Russia is much more oppressive and overarching as a result of several changes during the past 12 years. After the amendments in 2022, the Russian foreign agents law now targets organizations as well as individuals, while grounds for recognizing someone as a “foreign agent” include not just foreign funding, but also the much more ambiguous “foreign influence” and “foreign support.” Although the draft proposed by the GD does not go that far in its initial form, the general fear is that it already sets the foundations for such a direction in the near future.

This legislation has caused widespread popular protests in Georgia as well as unprecedented confrontation between the Georgian government and its major political partners – the EU and the US.

In this text I will not dwell into in-depth criticism of western-backed influential NGOs who have been playing an important role in the ongoing “neoliberal experiment” in Georgia for the past three decades. Instead, I will rather outline the background that puts Georgia’s rulers in a position to pursue such assertive and aggressive steps, despite immense domestic and international pressure.

These events reflect much more than what is usually described with simplistic slogans, such as the “populist conservative turn” from liberals, or the “thrive for sovereignty” from conservatives. To interpret the bold moves from the ruling party and their patron, oligarch Bidzina Ivanishvili, former prime minister of Georgia, founder and shadow ruler of the GD party since 2012, and shed light on the complexities of current Georgian politics, I propose to look at two main dimensions: internal political-economic and external geopolitical. The combination of Georgia’s dominated internal political landscape and rising geopolitical importance constitutes a ground for such oppressive and risky domestic and foreign policies from Georgia’s ruling class.

The Georgian neoliberal experiment and its current form

After independence in 1991, Georgia witnessed an immense economic transformation, just like Russia and other former Soviet republics. Radical liberal economic policies and the tide of privatization in post-Soviet nations during the 1990s, known as “shock therapy,” resulted in an economic recession, regressive redistribution of wealth, hyperinflation, corruption, degradation of the productive sectors of the economy, and the emergence of the new capitalist ruling class.

This process was pushed to the limits in the 2000s after the Rose Revolution. Despite the change of political leadership, the evolutionary path of post-Soviet Georgia’s economic and social structure did not shift. The scale of privatization, downsizing of the public sector, reduction of taxes and liberalization of trade and labor market regulations in the 2004–2012 period has been labeled as “one of the most radical neoliberal experiments of all time.”

Despite the economic growth during the 2003–2007 and 2010–2012 periods, the economic policy of former president Mikheil Saakashvili and his United National Movement (UNM) party did not address the fundamental problems of Georgia’s working class—unemployment, poverty, uneven distribution of wealth, or backwardness of the national economy.

Up to this day, Georgia remains the most unequal country of the region.

Moreover, such neoliberal experiments usually depend on a strong repressive apparatus. “Politics of zero tolerance,” systemic violence in the prisons, and the brutal police regime created under Mikheil Saakashvili played a major role in the downfall of the UNM, resulting in the victory of Bidzina Ivanishvili and his party in 2012, who capitalized on the mistakes and scandalous crimes of their predecessors.

Since 2012, the Georgian political economic system has evolved with a few important and new peculiarities. Here, I will mention the ones that are not only intertwined but also help us to understand recent dynamics and the assertive turn of Georgia’s current rulers.

The first characteristic is the significant concentration of economic power. Ivanishvili, the richest man in the country, managed to successfully take monopoly control of the national economy and consolidate the big capital representing the major branches of the national economy. In certain key sectors, such as banking and finance, this goes hand in hand with the process of extreme monopolization (over 70% of the sector occupied by two banks) and elite corruption. The almost unequivocal support of the “foreign agents law” from Georgia’s main capitalists—from construction to energy sectors—was no surprise.

Bidzina Ivanishvili (left) chats with Ilham Aliyev in Davos 2013 World Economic Forum. The richest man in the country, managed to successfully take monopoly control of the national economy and consolidate the big capital representing the major branches of the national economy.

The second characteristic is the concentration of political power within the framework of, in Samir Amin’s terms, “low-intensity democracy.” Namely, the Georgian political system is a local peripheral example of a liberal multi-party system lacking in real democratic processes, where the entire spectrum of the political elite is representative of big national or international capital—in the case of the GD, under the nation’s richest oligarch. Moreover, within this framework of the so-called “democratic fraud,” the GD party managed to further impoverish and polarize the public political process into two centers, a false opposition between the “good” ruling party and the “Collective National Movement”—an umbrella term coined by the GD propagandists referring to the former ruling and now politically bankrupt party (UNM), currently in the opposition.

The aim is clear—to label any possible resistance to its policies as an offshoot of the former regime of Saakashvili. As a result, for ordinary citizens elections are not a way to participate in a real democratic process of any sort—something that would question the very fundamentals of the political-economic system from the position of their own material, class interests. Instead, the constant false polarization and scapegoating pushed by the ruling party empty out the political arena and represent an existential threat to any possible progressive movement outside of this binary. If passed, the “foreign agents law” might become yet another tool in the arsenal of Ivanishvili and the GD to sidestep democratic processes.

In addition to dominating the domestic economic and political life, Ivanishvili and the ruling party are gaining another leverage that goes beyond the borders of the nation-state. For this, we should take a look at the contemporary geopolitics of the region.

Georgia at the crossroads of the East and West

According to Wallerstein’s world system analysis, the current world has been undergoing a “structural crisis” since the late 1960s. The “crisis” involves a series of qualitative changes, and this process might last for many decades until the system slowly shapes into a new setting and state of balance. The emergence of new massive economies on the global periphery (India, Brazil, etc.) and more importantly, the rise of China as a global superpower lead to geopolitical unbalances throughout the world. China’s transformation from peripheral country to a new center of capital accumulation and its economic interdependence from Europe—the traditional global capitalist core—has strong effects on the political-economic landscape across the entire continent. Ambitious transnational initiatives, such as the “Belt and Road,” signal the new role of China in the global economy and reflect the primary goals of the second largest economy in the world—to build global infrastructural networks, trade routes, and value chains, to generate new markets, and to secure natural resources vital for the Chinese economy. We are witnessing how this historic process has also shaken the political economy and geopolitics in the post-Soviet space, including the South Caucasus region.

Such shifts on the crossroads of Europe and Asia grant Georgia extraordinary geopolitical importance.

Despite diplomatic tensions over certain issues, trade between China and the EU has been on a steady rise since 2013, reaching its peak in 2022, with a total transfer of goods and services of nearly 950 billion euros (average of 1.8 million euros trade exchanges per minute). China–EU trade witnessed a slowdown in 2023, however, with a recovery expected in 2024. Meanwhile, the war in Ukraine changed a lot for both Europe and China. Prior to the war, more than 80% of land trade between Europe and China transited through the “Northern Route,” that is to say, through Russia and Belarus. War in Ukraine not only makes the route less attractive for global trade but also motivates China to seek diversification of its export routes and forces the EU to deal with its reliance on Russia—to reduce Europe’s strategic vulnerability and bolster its security.

Such a turn of events grants significant geopolitical importance to the South Caucasus, and more precisely, the so-called “Middle Corridor”—the shortest possible land route under development linking China to Europe through the Central Asia and South Caucasus regions. In 2022, Turkish, Georgian, Azerbaijan, and Kazakhstan authorities signed a common “roadmap,” listing priority investments and actions for the development of the corridor infrastructure, while some of key Western international financial and investment institutions (EBRD, EIB, ADB, WB) showed their interest and readiness to support the project. In October 2023, Xi Jinping, the General Secretary of the Communist Party of China, confirmed in one of his official speeches that the development of the Middle Corridor is one of the main goals of the Belt and Road Initiative going forward.  The Strategic Partnership signed between China and Georgia in the summer of 2023 was a diplomatic manifestation of common geopolitical interests between the two parties.

Moreover, since the Russian invasion of Ukraine, the EU has been desperate to “turn its back on Russian fossil fuels and to diversify towards reliable energy partners,” to repeat the words of President Ursula von der Leyen. EU energy security also puts weight on Georgia and the Black Sea Energy submarine cable, a project under development that will transit electricity through Azerbaijan, Georgia, and the Black Sea to Europe. Currently, the EU commission is planning to provide 2.3 billion euros of investment for the project.

Besides exploiting the country’s geostrategic position, Georgian authorities have ambitious plans to double the national energy output until 2033, with a significant focus on hydroelectric plants. Four large and numerous smaller HPPs (hydroelectric power plants) are planned to be constructed in the period of 2023–2033. The major obstacle to large infrastructure projects is the popular grassroots opposition from the local population. The construction of Khudoni HPP was stopped by such mobilization in the 1980s. The controversial and shady project of the Namakhvani cascade was terminated as a result of successful grassroots opposition, which was unexpected and unprecedented in its origin, content, and scope in the history of protests in contemporary Georgia. Popular protests broke out after the agreement between the Georgian state and Turkish company ENKA Renewables was made public in 2021. The agreement granted the company almost unlimited rights to the natural resources of Rioni Valley while burdening the state with significant financial responsibilities. The GD members repeatedly stated that the “foreign agents law” is going to “inform the public about the foreign forces interested in sabotaging the Namakhvani HPP project to attack the nation’s energy security.”

Here, we can easily detect the true danger, as Rioni Valley Defenders (the local grassroots movement against Namakhvani HPP) were neither foreign-financed, nor were they an NGO. It is not difficult to predict how this law will target not just a few influential Western-backed liberal NGOs, but any possible progressive political movements: from independent labor unions that try to operate beyond the influence of the yellow Trade Union Confederation, to ecological grassroots movements resisting transnational and national capital interests.

Questions around “foreign agents law”

What are the primary motivations of the “foreign agents law”? Does Moscow play a central role in the process with the goal to manipulate Georgian politics and sabotage the country’s EU integration? If this mainstream liberal version is true, is the Georgian government intentionally and strategically drifting away from the West and allying with Russia, or are they doing it under threat and manipulation from the Kremlin? Is confrontation with the EU and the US part of the game of Georgia’s biggest oligarch to “trade something off” the Western powers, relying on the country’s geopolitical advantages? Maybe a guarantee to navigate the upcoming parliamentary elections without serious external pressure?

Can “Ivanishvili’s own money—2 billion USD, frozen by the West” as a part of wider “de-facto sanctions and blackmail strategy,” to quote PM Irakli Kobakhidze–play an important part in such negotiation? Or maybe the central goal is to silence and suppress any possible opposition to the political power of the GD party via such a legal instrument?

Some details are clearer, some less so. We should not be hasty and exclusively focus on a single variable and automatically exclude all the others. At the same time, the combination of internal and external factors constitutes a ground for the assertive turn of Georgia’s ruling party and its boss.

In my view, the ability to secretly and assertively “trade things off the west,” with the help of geopolitical leverages and homogenized domestic political-economic landscape, forces us to draw parallels not with Belarus, as is more common, but with Georgia’s neighboring country—Azerbaijan. A dominated domestic political arena allows the monopolistic ruling class of Azerbaijan to suppress its competitors and to prevent the formation of any kind of opposition, including a western-style civil society.

Simultaneously, geopolitical advantages and more importantly—natural resources, allow the same elites to enjoy more or less stable and fixed financial, trade, and economic ties with Europe. It is true that pro-western liberal NGOs—one of the architects and arbiters of the post-Soviet neoliberal capitalist reforms—are partially responsible for the current political-economic landscape in Georgia that is cruising through its extremely monopolistic phase. In general, the inherent monopolistic tendency of capitalism has been noted not only by Marx and Engels, but even by contemporary mainstream economists. This tendency is aggravated in the post-Soviet space because of the very nature of its capitalism, ruling class, and unstable political institutions. However, we are still forced to go beyond the traditional criticism of the US and the EU-backed liberal pro-market civil society and detect the looming danger of the current situation. Outside of the influential NGOs, there are up to 40,000 smaller-scale non-governmental organizations registered in Georgia. Purely as a legal form, the NGO is the only way of not just economic survival for many Georgians, but also the only way of civic engagement, in its very broad sense. Last, but not least, the “foreign agents law” in the hands of the local political capitalist class poses a threat for not just the NGO sector, but for a much wider sphere of socially and politically active citizens.

Under such circumstances, the “foreign agents law” is far from a step towards “decolonization“ or “state sovereignty“ (to quote the official propaganda), but more like a manipulative signal on the international level  (e.g., to push back the so-called “de-oligarchization” agenda pushed by the EU with the help of the influential pro-western civil society groups operating in Georgia) and an instrument of suppression on the domestic level, with one primary goal—to maintain the status quo as long as possible. In this sense, sovereignty means nothing but securing a monopoly control over the state for the capitalist class and safeguarding this state of balance from both domestic and international threats. This argument runs on the contrary of many commentators—from the populist right to even some leftists—who hardly go beyond the narrative which depicts Bidzina Ivanishvili and the GD as the defenders of “national interests” in the sea of “foreign agents.”

Photo:‌ The protest against foreign agents law, March 2024, Tbilisi. Source.

The text was first published by Left East.

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