For the most current version of this Note, see Background Notes A-Z.

PROFILE

OFFICIAL NAME:
Georgia

Geography
Area: 69,700 square kilometers; slightly larger than South Carolina; 20% of total territory is not under government control.
Cities: Capital--Tbilisi (pop 1.1 million 2002).
Terrain: Mostly rugged and mountainous.
Climate: Generally moderate; mild on the Black Sea coast with cold winters in the mountains.

People
Nationality: Noun and adjective--Georgian(s).
Population: 4.4 million (2002 census preliminary results. Does not include Abkhazia or South Ossetia.)
Population growth rate (2001 est.): -0.9%.
Ethnic groups: Georgian 70.1%, Armenian 8.1%, Russian 6.3%, Azeri 5.7%, Ossetian 3%, Abkhaz 1.8%, other 5%. (1989 est.)
Religion: Georgian Orthodox 65%, Muslim 11%, Russian Orthodox 10%, Armenian Apostolic 8%, other 6%.
Language: Georgian (official), Abkhaz also official language in Abkhazia.
Education: Years compulsory--11. Literacy--99%.
Health: Infant mortality rate (2001 est.)--52.37 deaths/1,000 live births. Life expectancy--64.63 yrs.

Government
Type: Republic.
Constitution: October 17, 1995.
Branches: Executive--president with State Chancellery. Legislative--unicameral parliament, 235 members. Judicial--supreme court, Constitutional Court, and local courts.
Subdivisions: 67 districts, including those within the two autonomous republics (Abkhazia and Ajara) and eight cities.
Political parties and leaders: National Movement [Mikhail Saakashvili]; Burjanadze-Democrats [Nino Burjanadze and Zurab Zhvania]; Revival Party [Aslan Abashidze]; Labor Party [Shalva Natelashvili]; New Rights [Davit Gamkrelidze]; Industrialists [Georgi Topadze]
Suffrage: Universal over 18.

Economy (2001)
GDP: $3.6 billion.
GDP per capita: $744.
GDP growth: 5.3%.
Inflation rate: 3.4%.
Natural resources: Forests, hydropower, nonferrous metals, manganese, iron ore, copper, citrus fruits, tea, wine.
Industry: Types--steel, aircraft, machine tools, foundry equipment (automobiles, trucks, and tractors), tower cranes, electric welding equipment, fuel re-exports, machinery for food packing, electric motors, textiles, shoes, chemicals, wood products, bottled water, and wine.
Trade (2001): Exports--$354 million. Partners--Russia, Turkey, Azerbaijan, Armenia. Imports--$737 million. Partners--Russia, Turkey, Azerbaijan, Germany, Ukraine, United Kingdom, Turkmenistan, United States.
Work force (1.72 million in 2000): Agriculture--52.1%; trade--10.0%; education--6.5%; public administration--6.0%; manufacturing--5.9%; health and social work--4.9%; transport and communications--4.1%; unemployment (2002--12.3% official - State Statistical Department).

PEOPLE AND HISTORY
Georgia's recorded history dates back more than 2,500 years. Georgian -- a South Caucasian (or "Kartvelian") language unrelated to any other outside the immediate region -- is one of the oldest living languages in the world, and it has its own distinctive alphabet. Tbilisi, located in the picturesque Mtkvari River valley, is more than 1,500 years old. In the early 4th century Georgia adopted Christianity, only the second nation in the world to do so officially, and Orthodox Christianity -- in combination with a unique language and alphabet -- proved to be key factors in preserving Georgia's separate identity for so many centuries. Georgia has historically found itself on the margins of great empires, and Georgians have lived together in a unified state for only a small fraction of their existence as a people. Much of Georgia's territory was fought over by Persian, Roman, Byzantine, Arab, Mongol, and Turkish armies from at least the 1st century B.C. through the 18th century. The zenith of Georgia's power as an independent kingdom came in the 11th and 12th centuries, during the reigns of King David the Builder and Queen Tamara, who still rank among the most celebrated of all Georgian rulers. In 1783 the king of Kartli (in eastern Georgia) signed the Treaty of Georgievsk with the Russians, by which Russia agreed to take the kingdom as its protectorate. In 1801, the Russian empire began the piecemeal process of unifying and annexing Georgian territory, and for most of the next two centuries (1801-1991) Georgia found itself ruled from St. Petersburg and Moscow. Exposed to modern European ideas of nationalism under Russian tutelage, Georgians like the writer Ilya Chavchavadze began calling for greater Georgian independence. In the wake of the collapse of tsarist rule and war with the Turks, the first Republic of Georgia was established on May 26, 1918, and the country enjoyed a brief period of independence under the Menshevik president, Noe Zhordania. However, in March 1921, the Russian Red Army re-occupied the country, and Georgia became a republic of the Soviet Union. Several of the Soviet Union's most notorious leaders in the 1920s and 1930s were Georgian, such as Joseph Stalin, Sergo Orjonikidze, and Lavrenti Beria. In the postwar period, Georgia was perceived as one of the wealthiest and most privileged of Soviet republics, and many Russians treated the country's Black Sea coast as a kind of Soviet Riviera. On April 9, 1991, the Supreme Council of the Republic of Georgia declared independence from the U.S.S.R.

Beset by ethnic and civil strife from independence in 1991, Georgia began to stabilize in 1995. However, almost 300,000 internally displaced persons present an enormous strain on the country. Peace remains fragile in the separatist areas of Abkhazia and South Ossetia -- overseen by Commonwealth of Independent States' (essentially Russian) peacekeepers, the United Nations Observer Mission in Georgia (UNOMIG), and the Organization for Security and Cooperation in Europe (OSCE). Considerable progress has been made in negotiations on the Ossetian-Georgian conflict. Negotiations are continuing on the stalemated Georgia-Abkhazia conflict under the aegis of the United Nations.

The Georgian Government stakes much of its future on the revival of the ancient Silk Road as the Eurasian energy transportation corridor, using Georgia's geography as a bridge for transit of goods between Europe and Asia. Georgians are renowned for their hospitality and artistry in dance, theater, music, and design.

GOVERNMENT
Georgia has been a democratic republic since the presidential elections and constitutional referendum of October 1995. The President is elected for a term of 5 years, limited to 2 terms; his constitutional successor is the Chairman of the Parliament.

The Georgian state is highly centralized, except for the autonomous regions of Abkhazia and Ajara, whose precise legal statuses have not been determined by law. Those regions were subjects of special autonomies during Soviet rule, and the legacy of that influence remains. In January 2004 Mikheil Saakashvili was elected to a 5-year term following the November 2, 2003 parliamentary elections which were marred by irregularities and fraud. As a result of popular demonstrations, former President Shevardnadze resigned on November 23, 2003, and the Speaker of Parliament Nino Burjanadze assumed the role of Interim President. President Saakashvili was inaugurated on January 25, 2004. New parliamentary elections have been called for March 7, 2004.

Principal Government Officials
President - Mikheil Saakashvili
State Minister - Zurab Zhvania
Chairwoman of Parliament - Nino Burjanadze
Acting Secretary of the National Security Council - Jemal Gakhokidze
Chairman of the Supreme Court - Lado Chanturia
Foreign Minister - Salome Zurabishvili
Ambassador to the United States - Levan Mikeladze

Georgia maintains an embassy in the United States at 1615 New Hampshire Avenue, NW, Suite 300, Washington, DC. 20009, telephone (202) 387-4537, fax (202) 393-4537.

POLITICAL CONDITIONS
After surviving assassination attempts in August 1995 and February 1998, then-President Shevardnadze consolidated his leadership and declared an ambitious reform agenda. Elections on November 5, 1995, described at the time as the freest and fairest in the Caucasus or Central Asia, gave him the presidency and resulted in a progressive parliament led by sophisticated reformers. Since 1998, however, the reform process has encountered serious obstacles and made limited progress.

The political status of the breakaway provinces of Abkhazia and South Ossetia is unresolved. Isolated outbreaks of violence continue to erupt in Abkhazia. About 300,000 people displaced by these conflicts have yet to return to home.

Renewed fighting in neighboring Chechnya (Russia) in late 1999 generated concerns that the conflict will spill over into Georgia. Several thousand Chechen refugees moved into Georgia's Pankisi Gorge in late 1999, adding to the refugee/internally displaced population. The Abkhaz separatist dispute also continues to absorb much of the government's attention. While a cease-fire is in effect, about 300,000 internally displaced persons (IDPs) who were driven from their homes during the conflict constitute a vocal lobby. The government has offered the region considerable autonomy in order to encourage a settlement, which would allow the IDPs, the majority of whom are ethnic Georgians from the Gali region, to return home, but the Abkhaz insist on independence.

Currently, Russian peacekeepers, under the authority of the Commonwealth of Independent States, are stationed in Abkhazia, along with UN observers. Their activities are hampered by land mines and guerrilla activity. Years of negotiations have not resulted in movement toward a settlement. Working with France, the United Kingdom, Germany, and Russia and through the United Nations and the Organization for Security and Cooperation in Europe (OSCE), the United States continues to encourage a comprehensive settlement consistent with Georgian independence, sovereignty, and territorial integrity. The UNOMIG observer force and other organizations continue to encourage grassroots cooperative and confidence-building measures in the region.

The parliament has instituted wide-ranging political reforms supportive of higher human rights standards, including religious freedoms enshrined in the constitution. Problems persist, however, largely as a result of the unwillingness of law enforcement and criminal justice officials to support constitutionally mandated rights. Violence against religious minorities and mistreatment of pretrial detainees are significant and continuing problems, as is corruption.

Political Parties
Following the seriously flawed November 2, 2003 parliamentary elections, popular street demonstrations led to the November 23, 2003 resignation of former President Eduard Shevardnadze. Nino Burjanadze, as Speaker of the Parliament, assumed the duties of Interim President. As a result, National Movement and the Burjanadze-Democrats emerged as the leading parties in Georgia. The former pro-government coalition For a New Georgia effectively dissolved. The Revival Party led by Jemal Gogitidze is overwhelmingly based in Ajara and is firmly under the control of that region's governor, Aslan Abashidze. Revival, New Rights, the Labor Party, and the Industrialist are significant opposition parties. The current composition of the Parliament remains undecided.

ECONOMY
Georgia suffered severe political and economic turbulence during the years following the re-establishment of its independence in 1991. In the mid-1990s Georgia began to experience modest but increasing levels of GDP growth and foreign investment. Until 1998 Georgia's economy grew on average 7%. This growth was attributable to the introduction of a new, stable currency, reduced rates of inflation, and the re-establishment of both economic and political stability. Economic growth and reform slowed in 1998, due to the Russian financial crisis, drought, and political events, including a major outbreak of hostilities in Abkhazia and an assassination attempt against the President. However, the period also saw completion of the first major infrastructure project, the Baku-Supsa early oil pipeline.

Growth through 2002 was positive, and Georgia's economic performance is slowly improving, with GDP growth of 3% in 1999, 2% in 2000, 4.5% in 2001, 5.3% in 2002, and 8.3% in the first nine months of 2003. Despite these setbacks, Georgia led the former Soviet Union in developing the legal infrastructure necessary for an attractive investment climate. Georgia maintains no currency controls, allows foreign investment in all but a few sectors deemed strategically important, and has implemented an impressive privatization program, including land privatization. Georgia was the second country of the former Soviet Union to join the World Trade Organization, which will provide additional opportunities for development.

Economic activity in Georgia remains below potential. The low level of increase in trade and GDP are due to fundamental economic problems that have eroded investor confidence in Georgia. The poor fiscal situation, pervasive corruption, and arbitrary implementation of laws and regulations have inhibited economic growth in the country. Georgia's electricity sector is in critical condition. Shortages of electricity have resulted in public unrest each year. In 1998, Georgia began to privatize its energy distribution system and hoped to privatize its energy generation system by 2000, an objective that remains unrealized.

Privatization is the only means to generate the capital needed to rehabilitate the economic sector. Due to a lack of investment, Georgia's transportation and communication infrastructure remains in very poor condition. The Ministry of Transport and Communication's agenda to privatize the telecommunications industry has been hampered by the lack of bidder interest.

Corruption in Georgia, both official and otherwise, has been a significant and persistent obstacle not only to domestic and foreign investment, but also to economic development. Its pervasive nature and high visibility have stunted economic growth and seriously undermined the credibility of the government and its reforms. In July 2000 the government created an Anti-Corruption Commission that made its report in the fall of 2000. Based on this report, an Anticorruption Coordinating Council (ACCC) was created in summer 2001 to implement recommendations of the Anti-Corruption Commission. Its recommendations include several measures that, if implemented, would improve the investment climate. However, few, if any, of the recommendations have been acted upon. The ACCC has, however, become more active, and in fall 2003 they recommended that members of the traffic police be removed and prosecuted based on reports of corruption.

Problems with fiscal policy affected macroeconomic conditions in recent years. An International Monetary Fund (IMF) program initiated in 1996 was put on hold in 1999 due to Georgia's failure to meet certain budgetary targets. However, an improved macroeconomic picture and a more realistic budget in the second half of 2000 paved the way for IMF Board approval of a new program for Georgia in January 2001. Though Georgia's fiscal performance since has been uneven, dialogue continues with the IMF and World Bank. The IMF program was halted repeatedly in 2001-02, following Georgia's continued difficulty in both reaching targets and complying with a number of requirements. Georgia reached a debt rescheduling agreement with the Paris Club in 2001, which covered its principal debts due in 2001 and 2002, and also contained a goodwill clause extending the agreement to the amounts falling due in 2003 conditional on the existence of an IMF program. In the summer of 2003, however, Georgia's IMF program (a Poverty Reduction and Growth Facility, which was scheduled to expire in January 2004) fell off-track, due to significant fiscal slippages in the first half of 2003 stemming from optimistic budget assumptions on certain receipts that did not materialize, and a slackening of the tax collection effort. The authorities were unable to obtain parliamentary support for a revised 2003 budget intended to fully close the emerging fiscal gap. Discussions on a successor IMF arrangement are expected to begin in January 2004.

Foreign direct investment (FDI) has declined in recent years to $61.8 million in 2001, compared to $83.65 million in 1999. Key sectors of economic activity in Georgia include energy, agriculture, trade, tourism, and transport, as well as significant projects in the food processing and telecommunications industries. The United States is the largest foreign investor in Georgia, annually contributing between 20%-34% of overall FDI in recent years. The construction of the Baku-Tbilisi-Ceyhan oil pipeline, which began in April 2003, and the Shah Deniz gas pipeline, expected to begin in 2004, will offer opportunities for investors in the energy sector as well as related infrastructure. Additional privatization is planned in the energy sector, including power distribution outside of Tbilisi and hydropower facilities.

Georgian agricultural production is beginning to recover following the devastation caused by the civil war and sectoral restructuring necessary following the breakup of the Soviet Union. Livestock production is beginning to rebound, and domestic grain production is increasing. Both will require sustained political will and infrastructure improvements to ensure appropriate distribution and return to farmers. Tea, hazelnut, and citrus production have suffered greatly as a result of the conflict in Abkhazia, an especially fertile area. Supported by European Union assistance, Georgia has taken steps to control the quality of and appropriately market its natural spring water. Georgian viniculture, well developed during Soviet times, is internationally acclaimed and has absorbed some new technologies and financing since 1994.

To encourage and support the reform process, the United States and other donors have shifted the focus of assistance from humanitarian to technical and institution-building programs. Provision of legal and technical advisers to various government ministries is paired with training opportunities for parliamentarians, law enforcement officials, and economic advisers, complemented by extensive educational exchanges programs. The United States and other donors have increasingly imposed conditions on assistance in order to encourage improved performance on key issues and in key sectors, including energy. The United States terminated two assistance programs in fall 2003 due to lack of progress and commitment for reform on the part of the Georgian government. Georgia continues to depend on humanitarian aid, which is increasingly targeted to most-needy groups.

FOREIGN RELATIONS
Georgia's location, situated between the Black Sea, Russia, Armenia, Azerbaijan, and Turkey, gives it strategic importance far beyond its size. It is developing as the gateway from the Black Sea to the Caucasus and the larger Caspian region, but also serves as a buffer between Russia and Turkey. Georgia has a long and close relationship with Russia, but it is reaching out to its other neighbors and looking to the West in search of alternatives and opportunities. It signed a partnership and cooperation agreement with the European Union, participates in NATO's Partnership for Peace program, and encourages foreign investment. China, France, Germany, Great Britain, Greece, Italy, Russia, Switzerland, and Turkey maintain embassies in Tbilisi. Germany is a significant bilateral donor. Georgia is a member of the UN, the OSCE, and the CIS. It is an observer in the Council of Europe.

U.S.-GEORGIA RELATIONS
U.S.-Georgia relations continue to be close. Georgian leaders note that U.S. humanitarian assistance was critical to Georgia's recovery from civil war and economic difficulties following independence. Extensive U.S. assistance is currently targeted to support Georgia's economic and political reform programs, with an emphasis on institution building. The U.S. also is working with the Georgian Parliament on draft laws and establishing procedures and standards consistent with the country's 1995 Constitution. The United States provided Georgia approximately $1.2 billion in assistance through 2001, averaging about $100 million annually.

The United States also provides Georgia with bilateral security assistance, including through the International Military Education and Training (IMET) program. Evolving U.S.-Georgia partnerships include the Georgia Train and Equip Program, intended to enhance Georgia's military capability and stimulate military reform, programs by the Georgia (U.S.) National Guard, visits by the Sixth Fleet and the Coast Guard to Georgia, and the Bilateral Working Group on Defense and Military Cooperation. The United States has declared its intention to more closely scrutinize the efficacy of its assistance monies. In September 2003, the United States completed an assistance review and announced cuts in two programs. The summer 2003 exit of the American firm AES, which had been engaged in the electricity distribution sector, was a major setback for the economy and investment in Georgia. On another front, in June 2003, Georgia was placed on Tier 3 status with regard to the Trafficking Victims' Protection Act, which could have led to a suspension of all non-trade, non-humanitarian related assistance. During a 90-day grace period the Georgian government took sufficient steps to warrant a reassessment, and subsequently was placed on Tier 2 and thus did not lose any assistance.

[Fact sheet on FY 2003 U.S. Assistance to Georgia.]

Principal U.S. Officials
Ambassador--Richard Miles
Deputy Chief of Mission--Patricia Moller
Political/Economic/Commercial Affairs—Elisabeth Brocking
Public Affairs—Rowena Cross-Najafi
Defense Attache—Mitchell Jackson
USAID Director—Denny Robertson

The U.S. Embassy in Georgia is located at 25 Antoneli Street, Tbilisi 380026, telephone 995-32-98-99-67, fax 995-32-93-37-59.

For the most current version of this Note, see Background Notes A-Z.

[This is a mobile copy of Georgia (01/04)]