The Republic of Abkhazia sits just a short distance from Sochi, Russia.  In fact, many of the event venues and the airport (at Adler) that services Sochi are only several kilometers from the border with Abkhazia.  So, with Russia's commitment of billions to the 2014 Winter Olympiad that will be held in Sochi and the nearby mountains, there is a tremendous amount of development occurring on Abkhazia's doorstep.  

When traveling from Sochi to Abkhazia, there is a very noticeable change from Russia.  The Russian side of the border is overwhelmed with construction and traffic,  There is only one main north-south arterial in the largest and most important Russian Black Sea resort city.

Abkhazia has far fewer people than Sochi, but has a spectacular coastal road that follows the sea down to Gagra.  It is reminiscent of a sub-tropical Big Sur, California. 

 Abkhazia does not have the hotels and resorts that have sprung up on Russia's coastline.  Due to isolation from the international community, Abkhazia has very few quality rooms.  But with the security guarantee from the Russian government, Russian, Ukrainian and other tourists feel safe to return to what many view as the ultimate vacation spot.  In 2009, tourism in Abkhazia rose more than 100%.  I don't think too many places in the world experienced that kind of growth.  

Abkhazia has an estimated $10 billion in investment needs.  There was very little done in the late Soviet period and through the 1990's the country was isolated, despite its tremendous physical beauty and warm climate. Now all of that has changed and the government has a number of projects that they are seeking investment for.  Since most tourists stay in modest guest homes near the beach, there is an obvious need for quality hotels to accommodate the millions of tourists flooding across the border.  The port in Sukhum needs to be redeveloped, there are partially finished apartment buildings and with mountains to 14,000 feet there are locations for ski resorts, also.  Much of Abkhazia's infrastructure needs to be rebuilt.   There are no real shopping centers there for the locals or the tourists.  A Russian firm has rebuilt the rail line and it is currently being used to transport gravel to Russia for construction purposes. Limited passenger rail service from Russia just started this summer.  The government hopes that flights from Russia will begin this year and a firm is already revamping the passenger air terminal at the airport in Sukhum.  Until this summer, tourists came by train or airplane to Sochi (both the station and the airport are located very close to the border) or took cars and buses to Abkhazia from all over Russia.  Many people will travel by train for 3 or 4 days from all over Russia to enjoy the beaches and spectacular mountain scenery.  But with expanded transportation links, more visitors will come  particularly from the colder northern and Siberian cities.

The Rodina Hotel in Sochi has summer rates from about $1,200 to $5,000 per night.  This is just a few miles away from the most spectacular coast on the entire Black Sea- Abkhazia.  It is only a matter of time until there are competitive properties in Abkhazia.  Commercial property in central Sochi costs at least $3 -$$ million per acre.  And luxury apartments may run $1million for a 1,000 square feet.  Abkhazia is far less costly and has a much greater upside.

I met with Prime Minister Sergei Shamba in his office in Sukhum, May 28, 2010.  We spoke about Abkhazia's developing economy.  There are plans for airline flights from Russia into Abkhazia and passenger rail service should begin this summer.  Abkhazia is poised for a flood of tourists that will continue to grow for the foreseeable future.  There is a much pent up demand from Russia, especially, as well as Ukraine and the Baltic states.  A problem is the lack of infrastructure and accommodation for tourists due to damage in 1992-93 and the lack ond investment since then. The Republic of Abkhazia has a number of state-owned projects (including seaside resorts) that could be developed, but they lack the investment capital.  Another issue is the dearth of knowledge about Abkhazia in investing circles.  The Prime Minister is aware of my history working in American capital markets and in property ownership in Russia.  I told him that a real impediment to attracting outside investors was the lack of specific information on projects.  I said that I thought that a firm based in Sukhum that had could research projects, utilize 3rd party reports, negotiate terms with the government and write deal proposals in business English would be necessary to attract outside institutional capital.  I also told him that I would like to open the firm and to put summaries of specific projects along with photos, videos and maps on a website devoted to development and investment opportunities in Abkhazia.  The Prime Minister thanked me for my interest in Abkhazia's future and invited me to open a firm in order to bridge the gap between Abkhazia and the capital it needs.

I took the late train from Krasnodar to Adler on May 26th and arrived early the next morning.  Then I took the short cab ride to the border.  The border crossing was the easiest and fastest I have ever had.  I always walk across the border with my bag, rather than sitting in traffic.  The morning of the 27th, I arrived before 6 at the border, so there were almost no people at the border and none of the small peddlers taking fruit and nuts from Abkhazia and consumer goods from Russia.  After walking across the bridge into Abkhazia and passing control there, I took another cab down the coast past Gagra to Sukhum.  It was very clear and the bright early morning sun cast shadows from the mountains on the Black Sea.

 It is about 20 kilometers from the border to Gagra.  After passing Gagra, we followed the road down another 80 kilometers to Sukhum.   Most of the way, the sea is visible.  However, the mountains are never far away.

That afternoon, I met with Nadir Bitiev, his second cousin and a friend that Nadir knew from his days in the army.  We had a long Abkhaz lunch at a restaurant with views to the sea.  Later that day, I returned to the Hotel Ritsa where I stayed that night and the next.   A group of mostly older men were playing dominoes across the street and near the water.  They gather every afternoon, weather permitting.  

After my meetings in Sukhum, I went back to Gagra and spent several days viewing prospective projects and enjoying the beach in my free time.  I noticed several things on this trip.  The number of guest homes in Gagra continues to grow.  Because there are not enough accommodations for the tourists, locals have modified their homes to add guest rooms and turned their yards into cafeterias.  The beach area continues to add new cafes.  A few years ago, there were a handful along the beach in the center of town.  Now this zone is many blocks long.  Abkhazia's restaurants would benefit from diversity of food and better service.  But it is plain that with the beaches, sea and spectacular setting tourists are flocking there.  Since Gagra is only about 15 miles south of the border with Russia (and the Sochi Olympics) tourism is going to continue to grow rapidly.  I was told that 2009 saw an increase of over 100% in tourism over 2008.  A big reason for that is the Russian Army base and the security that gives tourists.

April 25- 27, 2010, I attended and spoke at the World Russia Forum http://www.russiahouse.org/wrf/wrf2010.html in Washington D.C.  Monday the 26th a session was held at the Hart Senate Building.  That evening the Russian Embassy hosted a cocktail party.  April 27th, Nadir Bitiev, Assistant to the President of the Republic of Abkhazia and I spoke at the Forum.  That day's event was held at George Washington University.  Nadir gave an overview on Abkhazia and the opportunities for outside investment.  Afterwards, we took questions from the audience for about an hour.  The questions revealed the audience to be well-informed about Abkhazia.  One of the most interesting things to me was the very strong reaction that most of the Russians have to Abkhazia.  Several of the audience spoke about Abkhazia in the same way that an American might speak about Hawaii or even Tahiti. There is clearly a strong cultural memory of Abkhazia as a subtropical tourist paradise for Russians.

Immediately after the session, I had the opportunity to speak to Nicholas V. Sluchevsky, Chairman of the non-profit Stolypin Memorial Center.  He had interesting insights into Russian business and the differences in business practices in the Caucasus, specifically as to how Abkhazia's international isolation and their desire for integration makes it safer to invest in for western investors than many would assume.

I was grateful to have the audience and the opportunity to speak about Abkhazia.  Thanks to Edward Lozansky for inviting me to speak. Nadir was interviewed several times afterwards and we were jointly interviewed by Joshua Kucera of EurasiaNet.org.  

Russian Northern Palmira Navy Band performs at the Lincoln Memorial, April 25, 2010