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WELCOME TO IWPR'S CAUCASUS REPORTING SERVICE, NO. 24, March 24, 2000

PUTIN'S CAUCASIAN AMBITIONS In the event of his election victory, how will
Vladimir Putin go about reasserting Russia's political and military
influence over the South Caucasus? Leonard Amani reports.

A CHILLING FLASHBACK TO THE SOVIET PAST A tale of betrayal in Chechnya
prompts fears that the Russian people are once again being brainwashed by
Kremlin propaganda. Alexander Voronin reports from Moscow.

KARABAKH SHOOTING SPARKS WITCH-HUNT The attempted murder of president Arkady
Ghukasian is expected to seriously disrupt the Nagorny Karabakh peace talks.
Mark Grigorian reports from Yerevan and Vahram Aghajanian from Stepanakert.

KARABAKH'S DESPAIR Nagorny Karabakh won the war against Azerbaijan but is
now losing the peace. Vahram Aghajanian reports from Stepanakert.

AZERBAIJAN'S ETERNAL REFUGEES Although welcoming financial and material
incentives to return to their homes, Azerbaijan's refugee population appears
unwilling to give up their temporary status and return to Nagorny Karabakh.
Irada Guseinova comments from Baku.

GEORGIAN WINE INDUSTRY CORKED Georgia's once flourishing wine industry is in
perilous decline, as the loss of regional markets, under-investment and
rampant bootlegging take their toll. Sozar Subeliani reports from Tbilisi.

********** VISIT IWPR ON-LINE: www.iwpr.net **************

PUTIN'S CAUCASIAN AMBITIONS

In the event of his election victory, how will Vladimir Putin go about
reasserting Russia's political and military influence over the South
Caucasus?

By Leonard Amani 

Across the South Caucasus, political analysts are working round the clock.
Once their predictions were considered to be as reliable as throwing
chicken-bones or reading tealeaves. Now, as Vladimir Putin's election
victory seems increasingly certain, they have never been so much in demand. 

Beyond his hugely popular military campaign in Chechnya and an
uncompromising attitude to the West, Putin remains a political enigma. He
has yet to define clear foreign or domestic policies, or even produce a
coherent manifesto. While federal warplanes continue to pound rebel
strongholds to the north, the leaders of Georgia, Armenia and Azerbaijan are
waiting in an atmosphere of strained anticipation.

Much will depend on Putin's inner circle - and those responsible for
executing his policies. The politicians who manoeuvred the former KGB spy
into the Kremlin are likely to be sidelined: Putin cannot afford to have
them pulling the strings. They will be replaced by a cabal of new and as yet
unfamiliar faces. Then the political experts will have to start from
scratch.

Fortunately, however, for the flustered analysts, there are a number of
constants in the equation. In the event of an election victory, Putin will
become the only professional politician in history to have scaled the
Russian Olympus. His lightning success may be viewed with relief or with
trepidation, but Putin boasts an ideal political background for the job.

He is neither a former party bigwig from the provinces nor a
flash-in-the-pan reformer with a loose political programme. He has studied
Western economies and political developments in a global context. He can
read between the lines when international leaders trumpet their statements
of intent.

This background and experience are likely to have a strong bearing on
Putin's diplomatic relations with the South Caucasian states. If the
leitmotif of his foreign policy is the rebirth of Russia's global
preeminence and the reestablishment of her influence on neighbouring
regions, these former Soviet republics will become a crucial political
arena.

In the aftermath of the Chechen campaign, Putin cannot fail to understand
that the North Caucasus will remain a hotbed of instability until such a
time as he can build a buffer zone between his southern frontiers and the
anti-Russian forces which fuelled the Chechen resistance.

The new president will also be eager to crush anti-Russian sentiments across
the Caucasus and reassert influence in a region which has historically been
part of the Russian empire. Certainly, signs that neighbouring Turkey is
emerging as a major player on the international military stage will give
Putin cause for disquiet.

However, the task of reasserting Russian influence in the South Caucasus is
further complicated by the growing appetites of Western oil companies in
Azerbaijan and NATO's military-political interests in the area. But Putin is
a pragmatist and is likely to opt for one of two alternatives.

In the spirit of 19th century diplomatic manoeuvres, the future Russian
president may agree with the West to divide up spheres of influence in
Eastern Europe and Asia. 

For example, Russia would recognise NATO's complete control of Europe west
of Belarus and the Ukraine - with some limitations in the former Yugoslavia.
The Kremlin would agree to cut short its collaboration with Iran and Iraq
and abandon all overtures to other Arab nations.

In return, the West would acknowledge Russia's dominant role in Central
Asian affairs and halt all military-political programmes in the South
Caucasus. Western investment activities would be limited to regional
projects whilst plans to develop new oil-fields would be realised in
partnership with Russian companies. This alone would bring the South
Caucasus back under Russian patronage.

On the other hand, Putin could choose to destabilise the three South
Caucasian states and thereby seriously derail any Western development
programmes in the region. In Georgia, for example, Russian army
peace-keeping troops - stationed to "guarantee the republic's security and
provide for its sovereignty" - could take an active part in this subversive
process.

It would be enough for the Kremlin to declare political and economic support
for the Abkhazian regime and thereby unleash a political tidal wave in
Georgia where around 280,000 refugees are waiting for a resolution to the
conflict. This move would serve to torpedo the credibility of the Georgian
government which has failed to bring the region any closer to peace since
the 1997 ceasefire. In a few days, Abkhazia could become a springboard for
Russian military and political expansion into the South Caucasus. It is a
game that the West would be likely to lose.

The consequences of Russia's political victory would be far-reaching. Putin
would effectively secure the eastern coast of the Black Sea and scupper
Azerbaijan's plans to construct an oil pipeline from the Caspian to the
Mediterranean. He would be able to negotiate with the West from a position
of strength and would no doubt win further advantages for Russia.

But Putin's triumph would inevitably signal a new era of chaos for Georgia
and Azerbaijan. The collapse of existing regimes would usher in extremist
factions who in turn would trigger new civil unrest. The spectre of upheaval
will probably serve to persuade the West to agree to a division of spheres
of influence.
 
Russian observers have always interpreted the international community's
cautious relations with Georgia and Azerbaijan as a sign that the West
doesn't want to find itself, sooner or later, in conflict with Russia in the
region. 

If that is the case, then the West is already recognising the primacy of
Russian foreign policy in the South Caucasus. This can only mean that the
Western powers will be compelled to take on the role of observers as a
fallen empire begins to rise from the ashes.

Leonard Amani is a Georgian political analyst based in London


A CHILLING FLASHBACK TO THE SOVIET PAST

A tale of betrayal in Chechnya prompts fears that the Russian people are
once again being brainwashed by Kremlin propaganda

By Alexander Voronin, in Moscow

In post-Soviet Russia, stories of betrayal open up old wounds. They bring
back unwanted memories of the Red Terror and Stalin's purges. They
demonstrate the power of propaganda to erode the most basic human instincts.


It was for this reason that Russian society was rocked to the foundations
last week by the tale of a Vologda woman who betrayed her son to the Federal
Security Service (FSB). Coming on the eve of the presidential elections, the
frisson of collective guilt may have made some think twice about voting for
Vladimir Putin. It was, after all, his propaganda machine that had prompted
the woman's unmotherly behaviour.

The villain of the piece is Yelena Matrusyak, who hails from the small town
of Gryazovets. She was contacted in March by Zeinap Gashaeva, of the Union
of North Caucasus Women (UNCW), who revealed that her son, Vyacheslav, had
deserted from his regiment during a tour of duty in Chechnya and was hiding
from the authorities in Ingushetia.

Vyacheslav's tale is familiar enough - a phenomenon of both Chechen wars. He
was beaten and persecuted by his comrades for making the heretical remark,
"The Churki [Chechens] are people like us." His officers turned a blind eye
to the hazing. After his unit was deployed to Grozny, Vyacheslav slipped
away one night and headed for the Ingushetian border.

In the Chechen town of Samashki, he was taken in by an old Russian woman,
Lyuba, who kept him in her cellar for four months. Although she was living
in wretched conditions with no gas or electricity, Lyuba shared with him the
little food she had. In early March, she heard that interior ministry police
were planning a raid on the village and convinced her neighbour to take the
19-year-old conscript across the border in his car.

So they dressed Vyacheslav as a woman and smuggled him through four
successive checkpoints - risking arrest and summary execution in the event
of discovery.

In Ingushetia, Zeinap Gashaeva billetted the young man with a family in
Plievo and set about finding his mother, so that she could come and take him
home. But Matrusyak's reaction at discovering her son's whereabouts came as
something of a surprise. Complaining of poor health and a lack of funds, she
refused to make the journey and asked Gashaeva to hand over Vyacheslav to
the military commissariat.

Valentina Melnikova, of the Soldiers' Mothers' Committee, in Moscow, took up
the cause and offered to pay for the trip. Still, the mother remained
adamant.

Finally, just as the situation was becoming desperate, Matrusyak rang
Melnikova and announced that she was in Nazran, the capital of Ingushetia.
She said she wanted to meet with Gashaeva and would wait for her at the Assa
Hotel.

When Gashaeva arrived at the rendez-vous, she found Matrusyak in the company
of a nondescript young man, whom she introduced as her "relative". However,
when Gashaeva had recounted the whole story and described Vyacheslav's
whereabouts, the "relative" promptly signalled to a group of plain-clothed
accomplices who arrested the entire welcoming committee.

Matrusyak had reported her son's desertion to the FSB and lured the UNCW
representatives into a trap. "That's how it should be," she commented when
Vyacheslav was arrested. He is expected to serve up to five years in a
disciplinary battalion.

The story illustrates the difference between the two Chechen wars - and the
dramatic shift in mood which has swept across the country in the wake of
Putin's rise to power. 

In the 1994-1996 campaign, taking their cue from a promise made by Chechen
President Dzhokhar Dudaev, thousands of mothers flocked down to Chechnya to
reclaim sons who had been taken prisoner by the rebels. The Soldiers'
Mothers' Committee won a Nobel Prize for its part in these rescues while the
stories the mothers brought back played a large part in turning public
opinion against the military campaign.

The second war has enjoyed enormous public support, fuelled by righteous
indignation against the bomb attacks in Moscow and Volgodonsk which were
conveniently blamed on Chechen terrorists. Since then, the Russian
propaganda machine has made every effort to preserve this warlike spirit,
downplaying federal losses and highlighting Chechen defeats. In a more
recent development, the media has been banned from interviewing any of the
separatist leaders currently wanted by the federal authorities.

But people are only beginning to understand the extent to which Putin's
propaganda has been successful - particularly in the impressionable
provinces. Matrusyak was proud that her son had been called upon to take
part in the anti-terrorist campaign and appalled that he had shirked his
patriotic duty. The massive support for Vladimir Putin's presidential bid
would indicate that she is not alone.

If Vladimir Putin's regime is forming legions of Matrusyaks, then the
Russian people has every reason to fear the worst. Most can remember how the
Soviets held up the young Pavel Morozov as a role model - Morozov's parents
died in a labour camp after their son betrayed them to the authorities for
making anti-Soviet remarks. 

People still fear their hidden weaknesses. They fear that the spectre of
betrayal has not been eradicated but still lies dormant in the Russian soul.
And Vladimir Putin, the ex-KGB spy, seems intent on awakening the Hydra.

Alexander Voronin is a correspondent for Moskovsky Komsomolets


KARABAKH SHOOTING SPARKS WITCH-HUNT

The attempted murder of president Arkady Ghukasian is expected to seriously
disrupt the Nagorny Karabakh peace talks

By Mark Grigorian, in Yerevan, and Vahram Aghajanian, in Stepanakert

Police in Nagorny Karabakh have arrested up to 30 people including the
former minister of defence in connection with last week's assassination
attempt on the enclave's de facto president.

Arkady Ghukasian was seriously wounded when two gunmen wielding Kalashnikov
assault rifles fired at his Mercedes just before 1am on March 22. Bullets
punched through the doors and windows, hitting driver Sergei Sarkisian who
lost control of the car and crashed into a tree.

Ghukasian, who was being driven home from his Stepanakert office, was hit in
the legs. He was taken to the Professor Mikaelyan Hospital in Yerevan,
together with bodyguard Samvel Gabrielian who was also wounded in the hail
of gunfire. Both are expected to make a full recovery. Sarkisian is still in
a coma.

Nagorny Karabakh's attorney general, Mavrik Ghukasian, who has taken
personal charge of the investigation, swiftly announced that
Lieutenant-General Samvel Babayan, former minister of defence and
commander-in-chief of the Karabakh army, had been arrested in connection
with the shooting.

Babayan is one of an estimated 30 people to have been taken into police
custody since the attack. The Armenian news agency, Armenpress, claims the
total may be as high as 40. Sources close to the investigation say the
detainees also include Babayan's brother, Karen, who is mayor of
Stepanakert, civil servant Gurgen Nersesian, local businessman Eduard
Verdian and a Lebanese national, Vardan Tashchian. None of the suspects have
yet been charged.

Speculation over Babayan's arrest has been intense in Yerevan. The
35-year-old general, who has been outspoken in his criticism of Ghukasian's
policies, was sacked as minister of defence in June 1999. Several of his
allies were subsequently arrested on corruption charges. Until recently,
Babayan controlled the import of cigarettes and oil into the disputed
enclave.

However, the general's supporters have been quick to voice their outrage at
his arrest. Hrant Khachatrian, head of the Right and Accord parliamentary
bloc, said, "I have known Samvel Babayan for a long time and I am certain
that he is devoted to Karabakh and Armenia. I don't believe he could do
that." Right and Accord is thought to be financed by Lt.-Gen. Babayan.

Meanwhile, the government of Nagorny Karabakh has issued a statement
condemning this "unprecedented act of terrorism" which comes only five
months after gunmen shot dead eight leading politicians in the Armenian
parliament. The enclave's first president, Arthur Mkrtchian, was
assassinated in 1992.

The statement said, "The government pledges that all the organisers and
perpetrators of the crime will be punished to the full extent of the law.
The situation in the country is completely under control, and
law-enforcement bodies are doing everything possible to solve this monstrous
crime."

Armenia's president, Robert Kocharian, who has visited Ghukasian in
hospital, said, "I strongly condemn this terrorist action and express my
support to the president of Nagorny Karabakh, his government and their
policies." Kocharian has offered to help Karabakhi investigators to track
down the would-be killers. 

Paruir Hayrikian, head of the Presidential Human Rights Commission,
commented, "Terrorism is becoming an integral part of our daily lives."

Nagorny Karabakh has been at the centre of a territorial dispute between
Armenia and Azerbaijan since the late 1980s. Six years of fierce fighting
ended with a string of Armenian victories and a 1994 ceasefire. The enclave
now runs itself as a de facto independent state with political, economic and
military ties to Armenia. It is still recognised internationally as part of
Azerbaijan.

Azerbajiani president Heydar Aliev told TV viewers last week that the attack
on Ghukasian was "an internal affair" for Nagorny Karabakh. "We are not
interfering in these issues and must not interfere," he said. "I am
convinced that this incident has nothing to do with Armenian-Azerbaijani
relations and our ongoing peace talks." 

In a press conference in Tbilisi on March 23, Aliev added, "The
assassination attempt on the life of the president of the unrecognised
Karabakh republic will not change Azerbaijan's stance over the resolution of
the conflict." 

Alexander Iskandarian, a Moscow-based political analyst and the director of
the Institute of Caucasian Studies, said that, together with the October
1999 killings in Yerevan, the terrorist attack pointed towards a serious
imbalance within Armenian and Karabakhi political cabals.

He explained, "Any shift from a rigid power structure to a democratic
government is likely to have disturbing consequences. The ruling parties
lack the traditions of political and economic struggle within the framework
of the law."

The attempt on Arkady Ghukasian is likely to seriously disrupt the Karabakh
peace talks. 
Local leaders will inevitably have to devote considerable efforts to
quelling any political mutinies which may arise from the incident. This will
in turn weaken their forces at the negotiating table and lead to
concessions. Concessions of any description will certainly be unpopular.

Mark Grigorian is IWPR's project editor in Yerevan while Vahram Aghajanian
is a journalist based in Stepanakert 


KARABAKH'S DESPAIR 

Nagorny Karabakh won the war against Azerbaijan but is now losing the peace

By Vahram Aghajanian in Stepanakert

Over a decade after he went to war to liberate Nagorny Karabakh from
Azerbaijan, Vyacheslav Amirbarian's dream of an independent homeland has
soured. 

A fragile peace treaty has been in force now for six years, yet the Karabakh
government is no nearer resolving the conflict nor overcoming the enclave's
chronic economic problems. 

"We've been struggling for independence for 12 years and now all the Azeris
offer us is autonomy, " said Vyacheslav 

Disappointment and bitterness are widespread  - and understandable.
Karabakhis paid a heavy price for their freedom. There's hardly anyone who
didn't lose a bother, a husband, a son or a father in the conflict.   

Vyacheslav lost his son, Armen, a bright, ambitious boy who cut short his
studies in Yerevan to fight for his homeland. He impressed Karabakhi army
commanders and was about to take charge of tank squadron when he was killed.
Vyacheslav's other son, Arthur, fought in numerous battles and was wounded
several times. 

Laura Amirbarian is still struggling to come to terms with the loss of her
son. "Armen's death hit me very hard, " she said. "He left no son or
daughter for his parents to keep his memory alive."
 
"Our other son hasn't married either. He jokes that won't take a wife until
Karabakh properly divorces from Azerbaijan. My only consolation is my
daughter and her two children. I nurse them and shed tears - tears for my
Armen."

Peace has provided little relief from the suffering of the war years.
Economic reforms have largely failed, leaving factories idle and thousands
unemployed. 

Laura, her daughter and son-in-law have all lost their jobs. "The family
survives on Vyacheslav's salary, " said Laura. "Arthur helps out as much as
he can. But the money is not enough. We don't get any help from the
authorities. They gave our son a posthumous medal but they've forgotten his
family."

Notwithstanding their problems, the Amirbarians are a lot better off than
many families. They have a two-storey house, a car and small farm. But with
the economy showing no signs of improvement, they fear things will only get
worse. 

"We've had six years of peace yet the government has restored little of our
industrial capacity," said Vyacheslav. "They could if they wanted to because
there's enough will and resources in Karabakh."

Vyacheslav believes that the authorities should at least increase
agricultural production. Even in Soviet times, he says, Karabakh regularly
surpassed production targets for meat, milk, wheat and grapes. Now the
enclave has to import many basic commodities.

Karabakhis have sacrificed much in recent years in order to achieve their
goal of independence. But that dream is increasingly under threat. Peace
talks between the enclave, Armenia and Azerbaijan remain deadlocked, with
neither side prepared to make concessions. Vyacheslav is adamant that
Karabakh must accept nothing less than full sovereignty - even if the demand
precipitates another war.

"Both sides need to make concessions - but the Azerbaijanis aren't serious,
" he said. "They're always singing the same boring tune."

"I lost a son in the struggle for freedom. I cannot backtrack on
independence. What will I tell my son when I join him in heaven? 'Forgive
me, Armen, your father was frightened - he's unworthy of you.' I can barely
imagine doing such a thing. The shame of it would be too great."

Despite his anxieties over peace talks, Vyacheslav is confident that the
enclave's leaders will eventually break the deadlock, "We passed the test of
war with dignity, now I am sure we'll pass the test of peace. There is no
alternative." 

Vahram Aghajanian is a journalist based in Stepanakert


AZERBAIJAN'S ETERNAL REFUGEES

Although welcoming financial and material incentives to return to their
homes, Azerbaijan's refugee population appears unwilling to give up their
temporary status and return to Nagorny Karabakh.

By Irada Guseinova in Baku

The reluctance of Nagorny Karabakh refugees to return to their homeland has
hit the headlines in the Azerbaijan media this week. Such reports have
emanated in particular from Goradiz in the Fizulin region, immediately to
the south of the disputed enclave.

But to many in Azerbaijan, the reports barely qualified as 'news'. Talk of
refugees not wanting to return home has become commonplace, not least among
the refugees themselves.

The Fizulin region has, for a long time, been sheltered by an umbrella of
international organisations, including the United Nations and the Islamic
Bank for Reconstruction and Development.

In Goradiz houses have been rebuilt, schools repaired and a new electric
power sub-station opened -- an improvement much envied by the residents of
the capital Baku, who often spend days and nights working by kerosene lamps.

To help the refugees get back on their feet, the UN High Commission for
Refugees has promised refugees in the Fizulin region a one-off support
payment of $100. In addition the head of each family, depending on the
extent of material loss and the number of dependents, is to receive a
non-returnable payment of between $1,000 and $10,000. Finally, each family
will receive a cow.

The refugees are, of course, keen to take up these offers of financial help.
One Fizulin resident, Barat Mamedov, admitted that he would be heading back
to his hometown to collect his $100 and cow.

"My house was almost untouched, so I doubt I'll get anymore. I'll take
what's offered, sell the cow, which will be in demand on the eve of Eid and
then come back," Mamedov confessed. "Two of my sons have bought apartments
here. One of them travels to Kazakhstan to earn his money, the other has
bought a kiosk for $300 and sells all sorts of stuff - bread, biscuits,
dried milk, cigarettes, macaroni, sometimes even the contents of
humanitarian aid packages. We're more or less getting by, there's nothing to
go back to, and we're fine here."

Migration from the rural areas in and around Nagorny Karabakh to Baku was
already evident before the war. People came to study and find work in the
city's factories and workshops. 

Although no longer planning to return to their original villages, many
refugees will not openly reject the idea. Rather they nurture plans to use
their country homes as 'dachas' or holiday retreats when the situation
stabilises. These refugees have no intention of relinquishing their refugee
status.

And herein lies the paradox. The refugees do not want to return to their
homes, but neither do they want permanent residency elsewhere. They have
become accustomed to their status as displaced persons, a status, which can
affords them many advantages. 

A relaxation on the restrictions governing the purchase of property has
enabled refugees to buy apartments in Baku, a privilege previously limited
to permanent residents. Refugees are entitled to free higher education and
health care, and are exempt from tax and other social payments.

Unemployment is high among the refugee community and a dependency culture is
prevalent. Rather than waiting for "pay-day", many refugees wait for support
payments from the government and other humanitarian aid handouts. Government
payments are small, about $5 a month. But donations from humanitarian
organisations provide a supplementary income, if only through the resale of
such goods on the open market.

Of those refugees who do wish to return home, many are still afraid to do
so. Nizami Guseinov, from Goradiz, explained that he was forced to go home
seven years ago, but "when the Fizulin region was taken, 60 of the
inhabitants of my village were killed." Guseinov is reluctant to repeat the
experience.

One thing, however, almost all refugees are demanding from the government
and, especially from the president, are guarantees for their safety. The
leader of the Azeri Popular Front, former president Abulfaz Elchibei,
believes these demands are justified because the refugees voted
overwhelmingly for the current president, Heidar Aliev.

Zarduzht Alizade, leader of the Social-Democrat Party, argues on the other
hand that the refugees are not so much concerned with their safety, but with
the fear that the government will simply forget about them should they
return home.

"Here, while they have the status of refugees, they can put forward some
demands. There, they will be left to fend for themselves. And they know that
not only their own [government] will forget them, but also the others, that
is to say the international organizations," Alizade said. 

Alizade also points out that life back home would be difficult. There is
little employment and the influx of foreign agricultural imports has all but
killed off opportunities to make a living through commercial agriculture.
The refugees know this only to well.

Underpinning all of this is the reality that it is not, perhaps, even in the
government's interests to offer the guarantees of security and safety that
would encourage refugees to return to their homes. Without the presence of
refugees, the whole "industry" that has blossomed around providing for their
needs would die. The various humanitarian agencies, commissions for refugee
affairs, trade establishments and related government sub-organisations would
be robbed of their raison d'etre. And by providing shelter to around one
million refugees the Azerbaijan government holds an "ace" at the
international negotiating table, one it plays frequently in efforts to
secure financial and other material assistance.

Irada Guseinova is a correspondent for Monitor Magazine in Baku.


GEORGIAN WINE INDUSTRY CORKED 

Georgia's once flourishing wine industry is in perilous decline, as the loss
of regional markets, under-investment and rampant bootlegging take their
toll

By Sozar Subeliani in Tbilisi

Zurab Tkhemaladze believes Georgia's vineyards might be its salvation. An
award-winning wine producer, Tkhemaladze reckons the country's dire economic
problems could be solved overnight if the industry was allowed to realise
its full potential. "Wine by itself could have settled the export-import
imbalance," he declares.

Tkhemaladze's Chalice Wines illustrate that unrealised potential. The brand,
triumphant in several international competitions, has proved popular in
Europe, America and even Japan. But nevertheless sales are depressingly low
- so low, says Tkhemaladze, that the vintages are sold more for promotional
purposes than actual income.

Georgia's once flourishing wine industry is in a state of decline. From the
high point of the last decade of the Soviet era, when sales made up a third
of the country's earnings, the industry is struggling as a result of the
loss of regional markets, ethnic conflicts, under-funding and rampant
bootlegging.  

It's all a bitter blow for a nation with such a proud winemaking tradition.
Georgians boast that they invented viniculture. The archaeological record
throws up some corroborative evidence. Georgian legend plays its part too.
Noah, it is said, came down from Mount Ararat, planted a vineyard, made wine
and got drunk. The fact the summit is in neighbouring Turkey doesn't seem to
bother the myth-makers. 

Over the centuries, Georgian vintages acquired an impressive reputation. "I
am confident that there's no other country where such wonderful wines are
consumed in such great quantities," wrote a French merchant travelling
through the region in the late 17th century. 

The foundations of modern viniculture were laid in the 19th century.
Producers supplied much of the region and enjoyed a virtual monopoly in the
former Soviet Union. Georgian wine was the preferred tipple of the elite -
one brand, Kinzmarauli, receiving Stalin's personal endorsement. Then the
country boasted 150,000 hectares of vineyards and annually produced nearly
600 tons of grapes.

The industry's fortunes took a dive in the late eighties when president
Mikhail Gorbachev introduced a crackdown on alcoholic drinks. Georgia found
other eastern European markets, which earned it around $50 million a year.
But the Soviet leader intervened forcing winemakers to send their products
to Siberia, where they were distilled and used for military purposes.
Georgian producers received little compensation. 

Worst was to come in the early nineties when ethnic conflicts in Abkhazia
and South Ossetia led to economic isolation. Exporting became practically
impossible. At the same time, land privatisation broke up large-scale
collectives and state-owned wine farms into small peasant holdings. These
were unable to sell enough to maintain their vineyards. Many ended up
switching to other crops.

More recently, rampant bootlegging and under-investment have further
undermined the industry.         

Black-market trading has become a dominant feature of the Georgian economy.
Legitimate  winemakers are undercut by bootlegged vintages - up to a third
cheaper - and smuggled low cost foreign brands, mostly from Bulgaria. Their
few remaining former Soviet markets are now threatened by bootlegged wines -
which in Russia alone generate profits of around $1-1.5 billion a year. 
  
Georgia's long-suffering wine merchants have had their hopes raised by
emerging demand in western countries. But they have neither the funds nor
the resources to establish themselves there.
Producers grumble that the government does little to help them break into
these new markets. 

Zurab Tkhemaladze says he's envious of his counterparts in countries like
France and Turkey, where exporting activities are supported by large state
subsidies. "If I received as much help as my French colleagues I could be
challenging them in a few years," he said. "Georgian wines are competitive
but it is hard to establish them in new markets." 

Tkhhemaladze and others are nonetheless determined to raise the profile of
Georgian wines abroad, whether they get government backing or not. Recently
Chalice Wines almost secured an order to export two million bottles to the
UK. One of its rivals, Georgian Wines and Spirits, had a pavilion at last
year's London wine exhibition, Winepolis. It plans to hold a Georgian wine
festival at the event later this year.

Such efforts are commendable, but unless producers receive more support from
the authorities, they're unlikely to put Georgia back on the winemaking map.

Sozar Subeliani is the editor of Georgia's Kavkasioni newspaper 

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IWPR'S CAUCASUS REPORTING SERVICE, No. 24

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