Cuban Recipe for Abkhazia

THIS MATERIAL (INFORMATION) IS PRODUCED AND DISTRIBUTED BY THE FOREIGN AGENT MEDIUM-ORIENT OR RELATES TO THE ACTIVITIES OF THE FOREIGN AGENT MEDIUM-ORIENT

Prague. 22 November. After a prolonged period of internal political confrontation between the President of Abkhazia and the opposition, which culminated in the seizure of government buildings, the president of the self-proclaimed republic, Aslan Bzhania, unsurprisingly resigned.

This is not the first case of an early resignation by an Abkhazian president. On June 1, 2014, Alexander Ankvab left his post, and on January 12, 2020, Raul Khajimba resigned after the Abkhazian Supreme Court annulled the results of the 2019 presidential elections.

Although these resignations were caused by different circumstances, they share a significant feature unique to Abkhazia: in each case, the Abkhazian people united against their elected leadership when the elites lost touch with the public and made fateful decisions without considering public opinion. Once again, the principle of Abkhazian grassroots democracy came into play.

History repeated itself with Aslan Bzhania, who made every effort to push an unpopular investment agreement with Russia through the Abkhazian parliament. The document proposed guarantees and tax benefits for major Russian businesses, including access to land and infrastructure.

Reading this agreement inevitably brings to mind Cuba, the “Island of Freedom,” and the relationship between Batista’s regime and major American capital before the Cuban Revolution of 1959.

Before the revolution, the American mafia and business elite controlled Cuba’s casinos, resorts, and nightlife, turning it into a playground for wealthy Americans. Privileges and benefits allowed American companies to exploit Cuba’s resources without significant contributions to the country’s development. The mafia prospered while Cubans languished in poverty.

Modern Abkhazia, which Cuban leader Fidel Castro visited during his trip to the USSR in 1963, risks following the same historical path as Cuba if this agreement is ratified.

Before the Cuban Revolution of 1959, the United States controlled much of Cuba’s sugar plantations and processing plants, making Cuba a monoculture economy dependent on sugar exports to the U.S.

American companies and investors owned large hotels, casinos, and resorts catering to American tourists.

American businesses controlled Cuba’s energy, transportation, and telecommunications systems, reaping significant profits from these monopolies.

They also received tax breaks, allowing them to channel most of their profits out of Cuba and back to the United States.

Cuba provided favorable tariffs for American imports, hindering the development of local industry.

The U.S. actively supported corrupt regimes, such as Fulgencio Batista’s dictatorship. American businesses funded police forces and politicians to ensure stability and protect their interests.

American companies took advantage of Cuba’s weak laws on environmental protection, labor, and human rights.

Figures like Meyer Lansky managed casinos, nightclubs, and brothels on behalf of the American mafia. Cuba served as an offshore base for money laundering and other illicit activities.

Batista allowed the mafia free rein in exchange for substantial bribes.

By the time of the revolution, more than 70% of Cuba’s agricultural land was owned by foreign, predominantly American, corporations.

It’s difficult to ignore these parallels with Cuba when one examines the realities of Abkhazia on the one hand and the content of the investment agreement, which essentially reflects the far-reaching plans of Russian oligarchs, on the other.

Now, let’s look at the main provisions of the agreement.

The agreement calls for the creation of a registry of investment projects. Projects included in this registry must meet specific criteria, the most notable being a minimum investment threshold of 2 billion rubles.

This high investment threshold effectively excludes local players. Moreover, if an unscrupulous investor is removed from the registry by the Abkhazian side, the agreement imposes significant financial obligations on Abkhazia for reimbursement, creating additional financial risks.

Reduced control over land distribution could lead to inefficient use of resources, particularly in recreational zones.

According to the agreement, Abkhazia is obliged to allocate land and other resources for project implementation, including infrastructure and favorable network usage conditions. This is despite the fact that Abkhazia faces acute problems with electricity distribution.

The agreement also provides for an eight-year exemption from taxes and duties, including VAT refunds financed by the Abkhazian side, which will inevitably lead to substantial budgetary losses over an extended period.

The political risks are evident: the dominant role of the Russian side in implementing agreements could create an imbalance, limiting the Abkhazian public’s influence on key decisions. Concentrating large investments in the hands of Russian legal entities through a Russian bank could also pressure local Abkhazian authorities.

When Fidel Castro’s revolutionary government came to power, it nationalized enterprises owned by foreign companies, including hotels, casinos, sugar mills, and energy companies. This policy eliminated American economic presence on the island and led to the U.S. blockade of Cuba.

Abkhazia has already experienced a 10-year blockade, which Russian elites prefer not to recall. (In 1996, the CIS imposed sanctions against Abkhazia).

Corruption remains a serious problem in Abkhazia, posing a threat to the republic’s independence. As in pre-revolutionary Cuba, corruption serves as a bridge between the interests of global players and the domestic economy.

Introducing projects that do not align with Abkhazia’s specific needs could lead to significant social unrest. Such protests may repeatedly shake and paralyze all governing bodies in the small republic, as has occurred recently.

Therefore, according to the Abkhazian opposition, despite potential economic benefits, the agreement creates substantial risks for Abkhazia, including financial obligations, loss of control over key resources, and increased dependence on external investors.

Today, dependence on Russia provides relative stability. However, if it hinders the development of an autonomous and diversified economy and exacerbates poverty, the principle of grassroots democracy will once again prevail in Abkhazia.

Russian capital must take this into account whenever attempting to implement familiar business models in Abkhazia.

Islam Tekushev, Editor of Caucasus Times