Construction of a major new highway is underway in one of Georgia’s most historic valleys. While the international financial institutions (IFIs) that have backed the project say it will benefit Georgia’s economy, improve traffic safety and make local people’s lives easier, its critics argue it will destroy the potential for tourism in the Khada Valley and increase Georgie’s vulnerability to its big northern neighbour Russia. 

The construction of the new Kvesheti-Kobi road started last year. The 23km road includes a 9km tunnel as well as a stretch that runs along the Khada Valley. When completed, the travel time between Kvesheti and Kobi will be slashed from one hour to just 15 minutes, and it will be drivable in all weathers. The developers note that currently residents in the area are cut off from the outside world for over three months every year, and the current road is often closed due to heavy snowfall in the winter.

The route will be part of the North-South Road Corridor, connecting Georgia with its northern and southern neighbours, which officials hope will help turn the country into a regional trade and tourism hub. This development potential encouraged two major IFIs to back the project. 

Construction of the $559mn road section is to be financed by the Asian Development Bank (ADB) with $415mn and the European Bank for Reconstruction and Development (EBRD) with $60mn, with the remainder to be financed by Georgian government. The tunnel alone will cost $306mn. 

Environmental concerns 

However, there are growing concerns about the impact of the project on the environment of the valley and the daily lives of its inhabitants. 

Peter Nasmyth, co-chair of the National Trust of Georgia, told bne IntelliNews that local residents are “quietly unhappy”, especially since construction started. He shared pictures from a recent visit to the valley, showing cement plants jutting out of the landscape and construction works close to local houses. 

Initially, some villagers supported the project, but Nasmyth argues they were not fully informed about the impact: “Villagers were given the impression the road would give wonderful access to the city and they would no longer get snowed in in winter, but they were not told the damage it would do to the valley, not told the proximity of the road to buildings, [about the] access roads, cement works, noise, pollution, all the things that come with the road.” 

Further controversy concerns land compensation. A CEE Bankwatch Network report argues this was “one of the project’s most serious issues from the beginning”. While some issues were solved through “extensive communication” with the investors, others remain. 

“Local residents highlight project risks such as a complete change in the landscape of the Khada Valley, increased pollution, intensification of seismic processes, increased threats to cultural heritage and the loss of sustainable development prospects for the valley,” says the Bankwatch report. “Locals believe that they will no longer be able to grow clean agricultural products or collect and process medicinal plants because of the project.” 

Thus, on a visit to the valley earlier this year after construction started, Nasmyth says, “we couldn’t find anybody who supported it anymore”. 

He acknowledges the need for an alternative to the current route so that trucks will no longer have to drive over 2.4km-high mountain passes. However, he questions why the next valley — sparsely populated, without heritage sites and fully treed — was not chosen instead. 

“It looks like they [the IFIs funding the project] just haven’t researched this project as they should have done,” he claims.

Eco-tourism potential 

One of the arguments made in favour of the project was that it will help develop the tourism potential of that part of Georgia, and it’s true that it will make the area — which is close to one of Georgia’s biggest ski resorts, Gudari — much more easily accessible. At just over an hour’s drive from Tbilisi and with a rich collection of historical monuments, the valley is already a popular destination. 

The NGO Bankwatch has been campaigning for a rethink of the project for a few years. It says studies have been insufficient and that a key report has not been shared with stakeholders. According to Bankwatch, the environmental permit for the Kvesheti-Kobi road issued by the Georgian government in 2019 was based on only a general overview of heritage studies in the Khada valley. It identified only 34 cultural heritage sites and objects in the area, the NGO says. 

After objections were raised, the government funded another round of cultural studies in Khada the following year, which identified another 155 historic sites. However, says Manana Kochladze, responsible for democratisation and human rights at Bankwatch: "What these new sites are, how they will be affected by the construction and the plan to protect them remain unknown.”

Nasmyth agrees that the project will put the valley’s historic monuments at risk. “The valley is one of the most historic in Georgia, the site of the original Russian military highway. It was the main route through the high Caucuses taken by Genghis Khan, by Tamerlane, by the Greeks, by the Russians. It is an extraordinarily historic valley … it has about 60 medieval towers, 15 still standing, the rest in various states of disrepair, all in a 9km section. That’s unique for Georgia,” says Nasmyth, also citing churches and archeological sites, as well as the valley’s exceptional beauty. 

Tourism is important for Georgia, making up a substantial share of the country’s GDP. It has a lot to offer, not least the Black Sea beaches and historic cities, but ecotourism is a growing area too. Nasmyth argues that construction of the road right through the historic Khada Valley will knock out its potential for ecotourism before it even gets properly started. 

“Georgia is always on the cusp of being discovered as a wonderful tourist destination, then something happens,” he says. 

Moreover, he fears the construction of the road in the Khada Valley could set a precedent for the construction of a road up to the remote Tusheti region — accessible over a 3km-high pass and cut off from the rest of Georgia for eight months of the year. So far Tusheti has developed naturally as an ecotourism destination, albeit with a small amount of funding from the World Bank. 

Building a road up to Tusheti "would ruin an even more precious ecotourism resort. That’s why we are active in Khada — we feel this is a dangerous precedent for Georgia,” argues Nasmyth. 

Linked to Russia 

The road will mean a better trade link with Russia as well as facilitating transit trade to and from Armenia and Iran. However, building a new road to Russia would increase the country’s economic dependence on Russia, argues Bankwatch.

“This for us has been quite concern from 2008 [and after] the conflict with Ukraine started in 2014,” says Bankwatch’s Kochladze. “We were concerned that, especially after signing the Association Agreement [with the EU], Georgia really needs to be more diverse in its trade relations. Georgia has very few products to export to Russia.” Georgia is particularly dependent on Russia in the energy sector, with a large share of its fuel coming from Russia. 

“The ongoing war between Ukraine and Russia and the introduction of sanctions against Russia raise questions about the purpose of the Kvesheti-Kobi Road and the whole North-South Corridor of which this road is a part. In this context, international financial institutions bear responsibility for encouraging Georgia’s government to increase trade and transit toward Russia, at the expense of the country’s budget,” argues a May 2022 report from Bankwatch. 

“In light of Russia’s invasion of Ukraine … Georgia’s Kvesheti-Kobi Road could be considered indirect support for Russia’s future dominance in the region. In addition, the project’s economic viability is an increasingly greater question, as it is expected that trade with Russia will drop significantly due to the war and sanctions.”

Kochladze believes Georgia would benefit from seeking to diversify its export markets, especially by exporting more to the EU, where producers have to meet quality standards. There was already an increasing tend of exporting to the EU in 2016-17. 

“Georgia has been actively seeking other markets but wth the reopening of the Russia market the exports to Russia increased but are in general not that nice in terms of the quality. The best thing for Georgia’s wine sector was when Russia banned the import of Georgian wine to their market, which gave a stimulus to local enterprises to improve the quality of their wine, which is now going to more than 96 countries,” she says. 

Bankwatch has also raised the issue of the new road making Georgia more vulnerable to a potential Russian invasion. This harks back to the war that started in the Russia-backed separatist region of South Ossetia in 2008, in which Georgian forces were driven back in five days of fighting. After Georgian soldiers took control of the separatist capital Tshkinvili, Russian forces flooded in through the Roki Tunnel, forcing the Georgians to withdraw. 

While there is no imminent risk of a new invasion today, Kochladze warns of the potential. “The current road forms a kind of natural barrier, first because during the winter it is often closed and it is also very narrow,” she says. Once the underground tunnel is built, this barrier disappears and the only way to shut it down would be to blow it up. "But to construct a tunnel which costs half a billion [dollars] and then explode it does not look like a very good investment,” says Kochladze.

Alternative routes

Bankwatch says it did not receive a satisfactory answer from IFIs on why they didn’t use alternative routes. The feasibility study prepared by the World Bank has never been published, making it difficult to assess the alternatives. However, Kochladze says, “We think it could have been done through less expensive options”. 

She also points out that the current project is just one section of a larger road project, which could be “unbearably” expensive as well as having an even impact bigger on the environment. “what is also problematic this approach does not give the possibility to understand the overall impact on the country’s social and economic situation, not to speak about the environment.” 

Nasmyth also questions why an alternative route via the next valley had not been chosen. He calls the project “a complete disaster” and the “largest event funding mistake of the whole Caucasus”. 

IFIs’ response 

Contacted by bne IntelliNews, the ADB and EBRD confirmed they had received complaints about the project and outlined their procedures for handling them. 

An EBRD spokesperson says that the Environmental and Social Policy (ESP) and the associated Performance Requirements (PRs) set out the ways in which the EBRD implements its commitment to promoting “environmentally sound and sustainable development”. This includes a grievance mechanism “to receive and facilitate resolution of stakeholders’ concerns and grievances, in particular, about environmental and social performance of the client and the project”. 

There is also the Independent Project Accountability Mechanism (IPAM) in case efforts to address environmental, social or public disclosure concerns with the client or the bank are unsuccessful. This “independently reviews project issues that are believed to have caused (or to be likely to cause) harm”. 

For the North-South Corridor (Kvesheti-Kobi) “there has been a formal project complaint from the non-governmental sector. And yes, there are mechanisms to act on valid concerns,” the spokesperson says.

A spokesperson for ADB told bne IntelliNews that given the project is a large and complex one, there are several mechanisms for receiving and responding to complaints. “These are designed to enable a range of stakeholders, including people living in the local area, to express their concerns and seek resolution.”

According to the ADB, the bank’s community liaison officer interacts with the local community on a daily basis. A Grievance Redress Mechanism (GRM) has also been set up to allow affected people and all stakeholders to appeal disagreeable decisions, practices, or activities at any stage of the project cycle. If complainants have sought redress through the GRM and with ADB but are still not satisfied, they can access the ADB’s Accountability Mechanism.

“A number of complaints have already been addressed since the start of works on the Kvesheti-Kobi road, some leading to modifications and improvements to the project, and we expect this process to continue as part of our commitment to continually improving the project,” the spokesperson says. 

The spokesperson also notes that “there have been wider concerns about the impact of this road on the environment and local population at a landscape level. One complaint is currently being considered under the compliance review function of the Accountability Mechanism. Depending on the outcome of the process, this could lead to remedial actions that would be undertaken during implementation.”