The FINANCIAL — Fears of Russian Aggression force Georgian Government not to respond on new embargo imposed by Russia on Georgian goods. Georgian government said it’s not going to limit import of Russian products which dominate in Georgian supermarkets.
Over 90% of the products purchased daily at Georgian supermarkets are Russian-made. This list will remain unchanged by Georgia, despite suffering greatly from its negative trade balance. The return of the Russian embargo, just two years after it was lifted, has come as a surprise to Georgia’s officials, hitherto proud of having restored trade and economic relations with their northern neighbour.
The volume of export to Russia is almost four times less than the import.
Almost two years after the embargo on Georgian goods was lifted, last week the Russian consumer safety bureau Rospotrebnadzor started preparing the ground for imposing a ban on Georgian wine and spirits.
Rospotrebnadzor claimed in a statement that Georgian winemakers are systematically violating technological standards. The agency’s complaints against Georgian wine appeared simultaneously with Russian authorities pondering countermeasures against countries which joined the EU sanctions imposed against Crimea.
Georgia refrains from suspension of the future meetings of Mr. Abashidze and Mr. Karasin, Georgia’s and Russia’s special envoys established through the initiative of Russia made billionaire, Georgia’s former Prime Minister Bidzina Ivanishvili.
David Usupashvili, reportedly pro-Western politician who chairs Georgian Parliament said Abashidze-Karasin format is mainly focused on trade-economic issues and is not very effective. However, he highlighted that the source of negotiations is highly scored by the international community and the NATO member countries. He said NATO is not interested in Georgia’s confrontation with Russia.
Russia seized control of part of an international oil pipeline in Georgia by unilaterally redrawing Georgia’s border with a Russian-backed breakaway republic in July.
Russia and Georgia fought a five-day war over South Ossetia, a breakaway republic that seceded from Georgia following the collapse of the Soviet Union, in 2008.
Russia is the fifth largest trade partner of Georgia by export. Total export stood at USD 70,664,100 as of the first half of 2015. With USD 266,029,500, Russia has been the fourth largest trade partner of Georgia. Comparative figures of trade show that export to Russia is 3.7 times less than import, so the negative trade balance stands at USD 95,098,500.
Almost 90% of products being purchased daily at supermarkets across Georgia are Russian-made. From a total of 2,975 foreign trademarks registered in Georgia, 2,442 are Russian ones owned by residents of the Russian Federation, according to Sakpatenti, National Intellectual Property Center.
Among the most well known and daily-consumed brands imported from Russia are: Jubileinoe; Baltica Beer; Chistaia Linia; Cherni Zhemchug; Dacha; Winston; Picnic; Chudo; Alpen Gold; Sloboda; Greenfield; and Prichuda.
A total of 4,516 Russian brand products were sold at Carrefour as of 2014, the largest hypermarket in Georgia. That means that at least half of the products imported from Russia are not registered.
“Georgia is not considering the possibility of imposing restrictions on Russian products. We plan to continue trade and economic negotiations with Russia. These negotiations have brought about their results. One of the most tangible results of the dialogue was the restoration of trade-economic relations with Russia. Accordingly, at this stage we are disposed this way. We do not want to harm the trade and economic relations at this stage, in any way,” Zurab Abashidze, Prime Minister’s Special Representative for Relations with Russia, told The FINANCIAL.
Abashidze found it difficult to say how the two countries’ relations will continue if Russia re-imposes an embargo on Georgian products. He said that the recent statement about an embargo came as a surprise to him. “If Russia takes a step that will limit trade, it will not be the right decision. It will harm the results of our moving slightly ahead against a background of quite difficult conditions,” said Abashidze.
Ukraine, Georgia, Albania and Montenegro, as well as Iceland, Liechtenstein and Norway last week joined EU sanctions against Crimea. The sanctions came into force on 23 June last year, banning imports into the EU and other countries, including Georgia, of products manufactured in Crimea.
According to Georgian Prime Minister Irakli Garibashvili, Georgia has no plans to join the new anti-Russian sanctions. “As the head of the government, I have always thought, and keep thinking, that Georgia must not join the sanctions against Russia set by the EU,” the Prime Minister noted, adding that they had such an approach last year and they are not going to change that.
According to Garibashvili, Georgia appreciates that in recent years they have been able to re-establish and develop trade and economic relations with Russia, and this is the result of the constructive dialogue between the two countries. “We want to continue developing economic and trade cooperation with Russia,” he stressed.
Russia first imposed an embargo on Georgian wine and other products in 2006. The official reason was poor quality, but it happened shortly after Georgia detained four Russian diplomats on charges of espionage, and was therefore widely seen as a political decision.
Since then, the first step to reopen the Russian market for Georgian products was taken in late 2012, after the change in government. Informal negotiations between Georgia’s special envoy, Zurab Abashidze, and Deputy Russian Foreign Minister, Gregory Karasin, resulted in reopening the market for wine and other products from Georgia.
The reopening of the Russian market has brought the Georgian economy an additional USD 650 million mostly from export and increased number of Russian travellers since 2012.
The FINANCIAL has compared the volume of FDI, tourism and export from Russia to Georgia before and after the government change. With more than USD 444 million, the main benefit from Russia is due to the increased export.
The export of Georgian products to Russia was worth USD 91,379,300 during 2010-2011 and the first half of 2012. Export reached USD 535,729,100 during 2013-2014 and the first half of 2015. Comparison of the periods shows that the Georgian economy has gained USD 444 million in export alone.
The number of international travellers from Russia has shown an increase of 786,388 visitors during 2013-2014, in comparison with 2011-2012. A total of 1,579,017 Russians visited Georgia in 2013-14, up from 792,388 from 2011-2012. The average expenditure of one international traveller is GEL 600 (USD 258) per visit. This means that during 2013-2014 Georgia gained an additional USD 203 million (GEL 471,977,400).
Contrary to increased trade and number of international travellers, the new Georgian government has failed to attract increased FDI from Russia. During 2013-2014 and the first quarter of 2015, the volume of FDI from Russia to Georgia has amounted to USD 90,593,600. The figure was USD 108,306,900 during 2010-2011 and the first quarter of 2012.
