An American “millennium challenge” faces a test in turbulent Georgia

Eurasianet Organization
Aug 19 2004

Alec Appelbaum: 8/19/04

The United States intends to use Georgia as a proving ground for a
new foreign aid strategy. Whether or not Tbilisi can take full
advantage of the US-backed Millennium Challenge Account program
remains questionable given that Georgia is fast becoming entangled in
another round of separatist conflict.

Fighting in South Ossetia has steadily escalated in the past week,
with Georgian government troops battling separatist forces. Overnight
clashes August 18-19, left three Georgian troops dead as government
forces reportedly drove South Ossetian fighters from several key
strategic locations in the region, according to the Civil Georgia web
site. According to some reports, Georgian forces have started
shelling the outskirts of Tskhinvali, the regional capital. At least
12 Georgian soldiers have died in action over the past week while
dozens of South Ossetian militia members have reportedly been killed.

South Ossetia has operated beyond Tbilisi’s control since the early
1990s, when Georgia was consumed by separatism, along with domestic
political and economic turmoil. [For background see the Eurasia
Insight archive]. Georgian President Mikheil Saakashvili has made the
restoration of Georgian territorial integrity one of his top policy
priorities. [For background see the Eurasia Insight archive]. While
Tbilisi appears to enjoy a strategic advantage at present in South
Ossetia, there are signs that Russia is not willing to remain a
silent witness to a Georgian reconquista. On August 18, Russian
President made his first public comments on the deteriorating
Ossetian situation, cautioning Georgia to eschew force in favor of a
negotiated settlement to the region’s political status.

“We [Russia] are particularly concerned at the explosive development
of events in connection with South Ossetia, and an alarming situation
in connection with Abkhazia,” Putin told Russian television. “We are
unanimous that today, as never before, it is important for the sides
to show their readiness to settle the conflict by peaceful means. A
threat is a method which leads to a dead end.”

Russia has long acted as the protector of Abkhazia’s and South
Ossetia’s interests, and many residents in the regions have been
granted Russian citizenship. [For background see the Eurasia Insight
archive]. Already, reports are circulating about the presence of
Russian mercenaries in the ranks of the South Ossetia militia. If the
fighting continues, Russia could feel compelled to adopt a more
active interventionist stance. Greater Russian involvement, in turn,
could bog down Georgia in a conflict that it cannot really afford.

The South Ossetian crisis is overshadowing domestic reform efforts,
including Saakashvili’s anti-corruption campaign. Some political
observers worry that reform progress made since Saakashvili took
office in January could be lost, as the government appears
increasingly preoccupied with South Ossetia.

Georgia’s reform efforts are largely dependent on foreign economic
assistance. A major potential source of aid is the Millennium
Challenge Account system, which began operating in May. Georgia was
among 16 nations designated by the United States as eligible to tap
into a $1 billion development fund controlled by the Millennium
Challenge Corporation (MCC). The US government has indicated that it
will contribute billions of more dollars to the fund in coming years.
Also among the original 16 MCC eligible nations are Armenia and
Mongolia. Overall, 74 nations applied to participate in the
Millennium Challenge Account system.

US President George W. Bush characterized the system as “a new and
hopeful approach in America’s aid to developing nations,” linking aid
“to clear standards of economic, political and social reform.” The
Bush administration hopes that MCC will enable the US foreign aid
apparatus to become more flexible. The new system’s distinctive
feature is that it places the onus on the potential recipient
governments to shape aid programs. As such, the 16 eligible nations
will only be able to receive assistance after submitting detailed
proposals to the MCC and having them approved. Bush, during a May 10
ceremony honoring MCC eligible nations, stressed that “funding is not
guaranteed for any selected country.”

“To be awarded a grant, nations must develop proposals explaining how
they will further address the needs of their people, and increase
economic growth – proposals that set clear goals and measurable
benchmarks,” Bush added.

In June, the MCC’s head, Paul Applegarth, visited Georgia to hold
talks with government officials and civil society activists on
potential MCC program proposals. “It [the Millennium Challenge
system] is really built on the thought that … the [recipient]
country gets to choose what the priorities are … and how we provide
assistance to make it happen,” Applegarth said in a statement.

Applegarth’s visit occurred before the latest flare-up of tension
with South Ossetia. Now, some political observers wonder whether the
Ossetia issue will hamper Georgia’s ability to access MCC grant
money. Others believe the crisis will have little bearing on the
level of MCC support. They cite the fact that Georgia’s inclusion
among the original 16 MCC eligible states appeared heavily influenced
by geopolitical considerations. Washington, they believe, is eager to
utilize Georgia as an outpost to defend its strategic interests in
the Caucasus, including the Baku-Tbilisi-Ceyhan pipeline. [For
background see the Eurasia Insight archive].

Judging purely by the political, social and economic criteria
standards established by MCC, Georgia would not seem to qualify for
inclusion on the list of 16 aid-eligible nations. For example,
despite Saakashvili’s efforts to combat corruption, Georgia ranked
124th out of 133 countries on a corruption index compiled by
Transparency International. [For additional information see the
Eurasia Insight archive].

The Millennium Challenge Corporation acknowledged that Georgia’s
statistical qualifications may be lacking, but it argued in a
statement submitted to the US Congress that the existing data did not
accurately reflect the reform potential in Tbilisi. The MCC said that
Saakashvili’s administration had made great strides in 2004 in
restoring political and economic order, and could be expected to
continue the present trend. During his June visit to Georgia,
Applegarth said Tbilisi’s inclusion in the Millennium Challenge
system was “recognition of the steps taken by the new government.”

Editor’s Note: Alec Appelbaum is freelance writer based in New York.