The Controversial Company That Opened The Door For China's Growing Influence in Georgia
- By Reid Standish and
- Luka Pertaia
A stint several years ago by the Georgian prime minister as an adviser to a controversial Chinese company has caught the attention of Western observers as Georgian-Chinese ties continue to tighten.
Before returning to politics as defense minister in 2019, current Prime Minister Irakli Garibashvili worked for 18 months as an adviser to the board of the firm that managed projects for CEFC China Energy, one of China's largest conglomerates that gained prominence after inking billion-dollar deals with Tbilisi under the guise of Beijing's global infrastructure project, the Belt and Road Initiative (BRI).
"China has long been overshadowed by Russian influence in Georgia, and we haven't paid much attention to [China in Georgia] or Garibashvili's past work with this Chinese company," a senior EU official who requested anonymity told RFE/RL. "But given what we're seeing today, perhaps we missed something."
Garibashvili's time with the Euro-Asian Management Group, which began in February 2018, received little attention in Georgia or abroad at the time. Few details are available about his tenure with the firm, apart from a public disclosure filed before he returned to politics stating that he was paid 410,702 lari (about $156,000) for his work. He has not commented publicly about the job.
CEFC’s $44-billion business empire -- which included a major investment linked to the Georgian shipping port, Poti -- has since unraveled, and its founder and chairman hasn't been seen since he was detained in China on corruption charges in the spring of 2018.
Before that, the company was known for its meteoric rise that left behind a trail of high-profile commodity deals, politically linked acquisitions, and scandals across Europe, the Middle East, Central Asia, and Africa that analysts say are representative of the blurred lines between lofty investments and China’s geopolitical ambitions.
Those past connections -- and CEFC's controversial business practices in Georgia -- are now being seen in a new light as Garibashvili's government deepens ties with Beijing at an accelerated pace.
"Today, we see a nonstop commitment to having the Chinese everywhere," Tinatin Khidasheli, who was Georgian defense minister from 2015 to 2016, told RFE/RL. "But everything related to China in Georgia took off when CEFC arrived."
Since returning as prime minister in 2021 (Garibashvili previously held the post from 2013-2015) -- Chinese companies have steadily won contracts for lucrative infrastructure deals.
China's footprint in the Caucasus country reached a new level in late July when Garibashvili traveled to China and signed a strategic-partnership agreement with Beijing that upgraded bilateral ties, pledging Tbilisi to an assortment of global Chinese initiatives, and getting promises of preferential lending from Chinese banks for large-scale infrastructure projects in return.
During the trip to China, Garibashvili also sat down for a wide-ranging interview with CGTN, the Chinese state television channel, in which he vowed to grow Georgia's burgeoning ties with Beijing, calling the new agreement a "historic" decision and lauding Chinese leader Xi Jinping as "an exemplary leader."
The interview and the new pact with Beijing got the attention of observers in Tbilisi and in Brussels, where Georgia has long aspired to join the European Union and is awaiting a decision in December on whether it will be granted candidate status by the bloc.
Khidasheli -- who now chairs the Civic Initiative for Democratic and Euro-Atlantic Choice, a Tbilisi-based NGO -- was the first to call attention to CEFC's work in Georgia and Chinese investments in the country. According to the NGO's research, every infrastructure project in Georgia worth more than $100 million since Garibashvili returned as prime minister in 2021 has involved Chinese firms.
"Garibashvili's cooperation with CEFC -- however brief -- gave the foundation for further connections and opened new doors for him with the Chinese that we are seeing today," Khidasheli said.
CEFC's Entry Into Georgia
Garibashvili's office did not respond to RFE/RL's request for comment about the prime minister's work with the Euro-Asian Management Group or CEFC.
The episode, however, highlights the complex ways a Chinese company can wield influence abroad through business and political connections -- something that is growing in importance as China's presence in Georgia shifts from small-scale to being focused on strategic investments within the so-called Middle Corridor, a global trade network shipping goods between Europe and Asia.
"For China it is all about Georgia's geographic position as a Black Sea actor and the emerging Middle Corridor hub," Emil Avdaliani, a professor at European University and the director of Middle East studies at the Georgian think tank Geocase, told RFE/RL.
Larger investments first gained steam in 2015 and 2016, when Tbilisi formally joined the BRI before inking a free-trade agreement with Beijing in 2017.
Since then, China's trade turnover has increased every year and Chinese firms have opened trade zones and secured lucrative and strategic contracts for railways, highways, power plants, and other infrastructure projects.
CEFC's major foray into Georgia was perhaps the most consequential to date, when it secured a massive stake in the Poti Free Industrial Zone, a tax-free manufacturing base near the Poti port on Georgia's Black Sea coast in 2017. Through CEFC Euro-Asian, the Chinese conglomerate's regional branch, it took a 75 percent ownership stake in the project, which was then managed by Euro-Asian Management Group, the company Garibashvili would work for.
That deal would be the culmination of efforts that were started by Garibashvili at the end of his first stint as prime minister in 2015, when he initiated talks with representatives from CEFC.
Meetings continued under Garibashvili's successors and, at the Chinese-Georgian Business Forum in Beijing in late 2016, CEFC announced it would open a regional office in Tbilisi and that it aimed to acquire a substantial stake in the Poti Free Industrial Zone.
Georgia was represented at the forum by Ivane Chkhartishvili, a controversial businessman, former economy minister, and close ally of Bidzina Ivanishvili, the billionaire former prime minister who founded the ruling Georgian Dream party and still wields major influence behind-the-scenes over the country's political and business worlds.
Chkhartishvili would prove pivotal to CEFC's entry into Georgia and in fostering ties with Beijing over the years.
In 2016, the businessman founded the Georgia-China Economic and Cultural Development Center, which along with the Georgian Chamber of Commerce and Industry would establish the Georgia-China Friendship Association that same year. Chkhartishvili is the friendship association's president and named Jianjun Zang, the executive director of CEFC, as its honorary president after it was founded.
By 2017, when CEFC's 75 percent ownership in the Poti Free Industrial Zone was formally transferred, the Chinese company was already embroiled in controversy around the world that would ultimately destroy it.
Patrick Ho, a former Hong Kong official who headed CEFC's NGO that managed to gain accreditation with the United Nations, was arrested in New York and charged with offering millions in bribes to African and UN officials, among them Idriss Deby, the former president of Chad, and Sam Kutesa, a former Ugandan foreign minister who was president of the UN General Assembly at the time. CEFC was also accused of weapons trading and evading trade sanctions imposed on Iran.
The company moved quickly to distance itself from Ho, but its problems continued to mount.
Ye Jianming, CEFC's founder and chairman who had visited Georgia and was purported to have family connections to the leadership within China's People's Liberation Army (PLA), vanished while in China. It was later revealed that he was charged with bribery. He has not been seen publicly since 2018, and his whereabouts are unknown.
Much of CEFC's operations remained in limbo following Ye's disappearance until a Shanghai Court declared the company and its subsidiaries bankrupt in April 2020.
In September 2020, the Tbilisi City Court ruled the Euro-Asian Management Group would take possession of CEFC's Georgian assets.
Money, Politics, And Murky Connections
Like with CEFC's work elsewhere around the world, the reasons behind its rise and fall in Georgia are not completely clear.
Sandro Kevkhishvili, the manager of the anti-corruption program at Transparency International's Georgia office, says that regardless of the exact details of the company's undoing, the case of its majority ownership in the Poti Free Industrial Zone highlights that Georgian elites had no qualms about doing business with a controversial firm like CEFC that held a global track record of well-documented corruption allegations.
"This deal collapsed because of problems the company had inside China, not because the Georgian side didn't want it," Kevkhishvili told RFE/RL. "This shows that they have zero problems doing business with a company that is mired in corruption allegations."
These concerns are only extended, says Kevkhishvili, when considering that by the time the 75 percent stake was transferred to the CEFC, the firm was already embroiled in controversy abroad. Similarly, when Garibashvili took up his advisory role in February 2018, Ho had already been arrested in New York and, only one month later, in March 2018, Ye disappeared.
"It's definitely a red flag for us that the prime minister has knowingly worked on behalf of a corrupt Chinese company," Kevkhishvili said.
The web of murky connections between Georgia's elite and CEFC's work in the country grew in 2021 with the release of the Pandora Papers, a massive leak of nearly 12 million documents from 14 offshore service providers. Among the various leading political and business figures included in the trove, the leak contained files documenting Ivanishvili's secret financial stakes.
Among the revelations, the files showed that the Euro-Asian Management Group’s ownership was evenly split between two companies: China International Group Corporation Limited and Eurasian Invest.
China International Group Corporation Limited is a Hong Kong-based holding company owned by a CEFC affiliate and Eurasian Invest, which was established in October 2016, has Chkhartishvili as a board member and Rati Ghvamberia -- a well-known business partner of Chkhartishvili -- as its director.
Moreover, a 51 percent ownership stake of Eurasian Invest is held by the British-based Brightstone Finance Limited and a 49 percent stake by Ecliton Commerce Corporation.
Both companies were established in the British Virgin Islands and are subject to high confidentiality, and their exact ownership structures are unknown. But the Pandora Papers showed that Brightstone's controlling ownership is connected to Ivanishvili's Georgian Co-Investment Fund, which he set up to invest more than $1 billion of his own money into the country.
The documents show that Giorgi Bachiashvili, the former head of the Co-Investment Fund, was also director of Eurasian Invest.
Embezzlement charges were brought against Bachiashvili in July for misappropriating $39 million worth of cryptocurrency from the fund in 2017 while he was director. His legal case is ongoing.
A New Era For Georgia
For longtime observers of CEFC, the company's track record of blending business and political influence is a cautionary tale that Georgia doesn't appear to be heeding.
In the Czech Republic, Ye and CEFC quickly made inroads in 2015 thanks to political connections to then-President Milos Zeman.
Ye bought the country's oldest soccer team, Slavia Praha, a brewery, a publishing house, a stake in an investment bank, a building in Prague for its European headquarters, and other deals. Ye also served as a special adviser to Zeman, despite the Chinese tycoon's vast business holdings and suspected connections to the Chinese Communist Party's elite.
Martin Hala, a China expert at Prague's Charles University and the director of Sinopsis, a project that tracks Chinese influence across Europe, says CEFC's push in the Czech Republic ultimately backfired. Today the Czech Republic is forging closer ties with Taiwan, and President Petr Pavel is one of Europe's most hawkish politicians on China.
Hala told RFE/RL that CEFC's work in the country and Zeman's signing of a strategic partnership agreement with China -- like the one recently inked by Georgia -- showed an effort "by a cohort of businessmen and their politician friends to turn around Czech foreign policy." A similar set of circumstances seems to have unfolded in Georgia.
"What's amazing to me about Georgia is that all the revelations about CEFC's corrupt practices that have made headlines globally do not seem to register much in Tbilisi," Hala said.
Against this backdrop, questions are raised about how substantial of a geopolitical reorientation Tbilisi's deepening relationship with China really is.
Sari Arho Havren, an associate fellow at London's Royal United Services Institute, told RFE/RL that while strategic partnership agreements are central to Chinese foreign policy to "expand Beijing's network of China-friendly countries," they are not formal treaties or alliances. How it develops in Georgia, she added, will depend on how eager the country's leaders are in opening doors for Beijing.
Such considerations have also been registered in Brussels.
"We have taken note of the agreement with China," a senior EU diplomat told RFE/RL. "It's disappointing and confirms the negative tendency the Georgian government has taken. It will definitely not improve their standing during enlargement talks."
Democratic backsliding under the ruling Georgian Dream party, along with concerns over high-level corruption and the overlap between politics and business in the country's ruling elite, have strained Tbilisi's ties with the West in recent years and been cited by Brussels as problems that could derail Georgia's accession hopes.
Brussels-Tbilisi relations have also taken a hit amid Russia's full-scale invasion of Ukraine, as the Georgian government has refused to join Western sanctions against Russia and has taken steps to repair ties with Moscow, while also accusing the United States of trying to drag Georgia into a military confrontation with the Kremlin.
A senior European Commission official told RFE/RL that Tbilisi's ties to China are being watched closely but also noted that "foreign policy is not one of the 12 main recommendations set out by the Commission for Georgia to get candidate status, [although] decisions like this can have an impact [on gaining candidate status]."
"Of course, we are more concerned by Georgia's relations with Russia than China," the official added.
For Khidasheli -- the former defense minister who has raised the alarm about China's business practices in Georgia -- the focus on Moscow instead of Beijing is also a frustration in Georgian domestic politics, where she said the issue has at times been brushed aside.
"For most political parties here, China is a far-away country with a big market, and there isn't much understanding about how Beijing operates," she added. "As long as it's not the Kremlin, most people don't think it is a problem."
