Matthew Bryza: "I think it’s a shame if Georgia doesn’t participate in this digital hub project"
17 July, 2020
Matthew Bryza: "I think it’s a shame if Georgia doesn’t participate in this digital hub project"
Matthew Bryza worries new telecommunications law targets Caucasus Online and will block major investments that could make Georgia the strategic center of a “digital silk road”
In an exclusive interview with Georgian Journal, former US Deputy Secretary of State Matthew Bryza talks about the problems between Caucasus Online and the Communications Commission. He refers to the draft amendments to the Law on Electronic Communications, as well as to the large regional digital project, one of the main components of which
is the fiber-optic cables owned by Caucasus Online under the Black Sea.

- As far as I’m concerned, Azertelecom, which owns Caucasus Online, is suing the government of Georgia at the international arbitration court in Stockholm. What more can you say about this?

- Just to be clear, actually, the owner of the Caucasus Online, is company called Neqsol, an Azerbaijani holding company, which, in turn, is owner of the Azertelecom. Neqsol owns a bunch of other companies, and a bunch of things in the oil sector. It has business operations in the USA, UK, Turkey, Georgia and Azerbaijan. So, what happened was, Neqsol conducted negotiations or discussions with the Georgian government, beginning in 2018, when it decided it wanted to buy Caucasus Online as part of the a much larger digital hub, digital silkway project. And so, the seller, Kvicha Makatsaria, and the buyer – Neqsol, its representatives met with the prime minister Bakhtadze, met with the head of the Georgian National Communications Committee, met even with the head of Georgian Security services, and even with Mr. Ivanishvili, to inform them all what the plan was – and there were no objections, this was in 2018. Then, last August, 2019, suddenly, the Georgian national communications committee, said that it wanted to nullify the sale of Caucasus online to Neqsol, which had happened – Neqsol paid 61 million dollars for Caucasus Online. The GNCC said they wanted to nullify that sale because supposedly, Neqsol, as I understand, had not informed the Georgian National Communications Committee of the planned sale in the way the Committee wanted. As I just said, that is absolutely untrue, given that Neqsol had so many discussions with top Georgian officials, letting them know the plan, giving them updates, as the purchase was moving forward. So after a series of meetings with the GNCC and other Georgian officials, after last August, but there was no progress toward a solution, Neqsol then finally decided, “This is going nowhere, so we’re going to take our case to the international arbitration court in Stockholm. Because we see no other recourse, we see no other way that we can resolve this dispute.” Neqsol says’ “We paid this money, the transaction has happened, this is our asset.” So that’s a normal business practice, right? If two parties, even if one is a government, can’t come to an amicable solution about the business dispute, then ok then, it’s often the case that you go to arbitration. So that’s what happening now, unfortunately.

- Yes, but even today, communications committee chairman, Kakha Bekauri said that the committee was not informed about this at all…

- As I was saying, I was not present, of course, but my understanding is that the seller of Caucasus Online and the buyer met with the head of the GNCC and informed him of this transaction being under way before it happened. And as I say, other senior Georgian officials, including then prime minister Bakhtadze, were also informed. So, it may be that the GNCC is saying, “Well, you informed us orally, but you are supposed to do it in writing.” And by the way, there have been disputes like this with other transaction,s which took place, involving asset sales, in the telecommunications sector – there were 9 other ones, in fact, but in each one the GNCC said that “Ok, ok, we understand, we would have liked you to have informed us maybe in writing or in some other way, you say that you informed us orally, but don’t worry about it, ok, we’ll let the transaction go.” But this is the only case, only case where the GNCC said no, we’re going to cancel the transaction. It’s the only case where a foreign company is involved, and it happens to be Azerbaijani. And given my history in the Caucasus, for me it’s incredibly important that Georgia and Azerbaijan get along well together, beginning with the energy sector. Azerbaijan needs Georgia to reach Europe, Georgia needs Azerbaijan’s investments and its energy as well, for its economy to prosper. So, this whole situation is very strange for me, a, again, given my history, trying to build that cooperation between Georgia and Azerbaijan.

- The new law on telecommunication companies raises some eyebrows in Georgia, but what about your perspective – do you have some doubts about this law and do you think it is somehow connected with Caucasus Online case?

- Well, there’s something very strange about the way the law has been pushed forward. You know, there have been hearings late at night, well after midnight, in a great hurry. Why, why is there such a hurry, why not have normal deliberations, what’s the hidden agenda that is causing this law to be pushed forward so quickly? It’s one concern. But the other concern is in substance. Let me back up – a few days ago, I guess, on Saturday, there was a hearing or meeting of the Georgian parliament’s economic committee, which is the committee that has has to approve the draft law before the parliament approves it. The meetings I’ve been talking about late at night, have been in that committee. Last Saturday, there was a protest by several Georgian telecommunications companies, saying that this law contradicts other Georgian laws, saying that it may even be unconstitutional. In fact, they wrote a letter of protest, and they said this law should not pass and there’s a great concern, I think, among them, that this law may be used to restrict internet freedom, and damage all these companies’ businesses. And I must say, privately, the representatives of these companies have said that this law seems to be focusing specifically on Caucasus Online for some reason. As I said, there have been nine other cases where telecommunications companies and the GNCC had a dispute about the transaction, because the GNCC said it had not been properly informed that the transaction was coming. But in all of those cases the transaction was allowed to happen. This is the only case, Caucasus Online, when the GNCC is not allowing the transaction go forward. And then now, after Neqsol decided to go to arbitration with the Georgian government, with the GNCC, suddenly there is this new law, that comes into existence. So, these are suspicious circumstances. I’m not a lawyer, I’m certainly not a specialist on the Georgian constitution, but I can just refer to the letter of protest by this other telecommunications companies, who do say the law is inconsistent with the Georgian constitution. And they also say that the remedy for any infraction committed by the seller and the buyer Neqsol, meaning, not informing in the proper way the GNCC, is totally disproportional. Meaning, canceling the sale, nationalizing or confiscating the shares of Caucasus Online, is an extreme measure, andg really, you know, it doesn’t make sense that you would take such an extreme measure if all you were saying was, well, “You didn’t inform the GNCC according to proper procedures.”

- What can you say about the scale of the Regional Digital Hub Project, and what kind of benefits will Georgia have from this project?

- I really don’t know what the motivation is of the GNCC, in taking these actions, other than to take control of the Caucasus Online. And I think it’s a shame if that happens and then Georgia doesn’t participate in this digital hub projet that you mentioned. This is a very exciting project. That’s why I really care about this issue. The digital hub project is like a digital silk way. I was very involved in the development of East-West corridor on energy, meaning the Baku-Tbilisi-Ceyhan oil pipeline, the south Caucasus gas pipeline which is now expanding into the EU’s Southern Corridor. These are projects I spent over 20 years of my own career working on. I believe these are in interests of Azerbaijan and Georgia, and of the US and the EU, in the way that they bring Georgia, Azerbaijan, together with NATO, via Turkey, and thent onward into the EU. So the digital hub project is the same idea, except in the digital space. The idea is to build a network of fiber optic cables, stretching from Europe - so from Frakfurt, Germany, to Shanghai, China. Caucasus Online is a central piece of that, because the initial connection between Bulgaria and Georgia is a fiber optic cable under the Black Sea that CO owns. So the idea is to acquire, or build, or lease fiber optic cables along the route from Europe, under the Black Sea, then across Georgia to Azerbaijan, then under the Caspian Sea (thanks to an agreement between Azerbaijan and Kazakhstan), and then into Central Asia. There’s nothing like this, nothing exists like this. Now, one alternative is through Russia, which can be expensive and creates concerns in some Georgian people’s minds about what might happen to their internet traffic that passes through Russia. Other alternatives are via the Red Sea, and then into the Middle East or even around South Africa and the Cape of Good Hope. But those are much longer routes; they are not always reliable; there are sometimes outages in some of the sub-sea cables. So the Digital Hub Project would be the straightest, fastest, least expensive way to get internet data from the big servers in Europe to the Caucasus and Central Asia. Beyond that, for Georgia, there’s something really big that could happen. Because there would be this highly efficient, high-speed fiber optic network going right through Tbilisi, the hope is to build large data centers in Tbilisi that would attract the content of the companies like Amazon, like Netflix, like, all the Google services, because the closer computer servers are to the consumers, the better the service. Believe it or not, when the electrons and data are passing through fiber optic cables, the longer the data has to travel, the slower the service. We think of the data as travelling at the speed of light, but the further away the data is from the consumer, the worse is the service. So, Tbilisi is located in a great place to be able to serve the Caucasus and Central Asia, and the plan is to attract significant investment into Georgia, into Tbilisi, so that all these global and US internet content providers could be basing their information in Tbilisi and using this fiber optic network. What a shame it would be if that was not possible because of the cancellation of the Caucasus Online transaction.

- Would you compare this project with Anaklia Deep Sea Port Project in some way?

- Well, I don’t know that I would, because I’m not entirely sure I know everything that was behind the cancellation of the Anaklia Port Project, but what I can say is that I know that in Washington DC powerful people do make this comparison. Powerful people, you know the ones, members of Congress, who had threatened sanctions against Georgia during the whole dispute about the electoral reform law think the Anaklia port project was canceled, as you know, because of some sort of pressure from Russia. I think the Anaklia Port issue is very complicated. That all said, given the strategic importance of this digital hub project, given the fact that would be competing with Russian fiber optic networks, I know that people in Washington are worried that wow, maybe, the cancellation of this project has something to do with Russia. I’m not saying that I know this; I haven’t seen any evidence of that. But I do know what the opinions are like in Washington.

- Do you see Russian interests when talking about hampering this project?

- I don’t know that, All I know is that some very influential people in Washington are worried that that is the case, and they look at the reality that this project is something Russia would not like, the Kremlin would not like a project that would compete with Russia’s slower and more expensive digital infrastructure. Just in the same way, Russia has said its new policy is to maximize the use of Russian East-West transit corridors, whether it be for energy, which has always been Russia’s policy, whether it be for rail and road transport, or whether it be for a digital information transport. So, I’m not making an accusation, I’m just saying, of course, the digital hub project is not in Russia’s interests from Moscow’s perspective, and people from Washington are taking notice and assuming that Russia’s not in favor of this project.

Author: Eka Abashidze

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