Pandemic may be Georgia’s chance to reduce its economic dependence on Russia

Weak links

Tourism, foreign trade and money transfers from abroad are three vulnerable areas in the Georgian economy. The weakest links among them is wheat imports, wine exports and tourism. These are the areas where Georgia is most dependant on Russia, as stated by the report “Georgia’s Economic Dependence on Russia: Trends and Threats,” which was recently published by the organization Transparency International. 

The authors of the study pay particular attention to the following statistics from 2019.

• Georgian wine producers made $133,000,000 on wine exports to Russia. This comprises 57% — more than half of Georgian wine exports.
• 70% of the wheat consumed in Georgia is imported from Russia.
• Russian tourists spent $700,000,000 in Georgia.
• The total sum of money transfers from Russia was $429,000,000.
  

Same old problems

The authors of the study note that economic dependence on Russia poses great risks for Georgia, and they are not new.

Recent examples include the ban on air travel with Georgia, which Russia imposed in the summer of 2019, after the high-profile protests in Tbilisi that were directed against the pro-Russian policies of the Georgian authorities.

“In 2006, Russia gradually cut off gas and electricity supplies to Georgia, then banned the export of Georgian products, and by the end of the year began to deport Georgian citizens from the country.”

This boycott dealt a painful blow to the Georgian economy, but with the efforts of the acting authorities at that time, the country managed to get out of the crisis and even achieve energy independence. It is largely due to the energy block of 2006 that Georgia is not dependent on Russian gas and electricity suppliers today.

Georgia also managed to use Russia’s refusal to buy Georgian wine in its favor: Georgian products were actively advertised abroad, and winemakers were able to find new markets.

Pro-Russian politics

Russia lifted the embargo in 2013, after power changed hands in Georgia: Mikheil Saakashvili and his team were replaced by the Georgian Dream Party and its oligarchical founder, Ivanishvili.

Georgian products—primarily wine and mineral water—returned to Russia. And to this day, Georgia’s dependence on Russian buyers only continues to grow.

“In 2013, the government not only failed to warn Georgian businesses of the risks of selling on the Russian market. On the contrary, it took pride in returning to this market and argued that there should be a separation between political and economic affairs,” JAMnews said in an analytical review, which was written while Georgia waited for the next round of Russian sanctions in the summer of 2019.

The same article notes that from 2013 to 2018, the Georgian government spent 13,000,000 lari [about $4,500,000] on advertising Georgian destinations to Russian tourists.

It is worth adding that a significant part of this sum went towards the budgets of the Kremlin’s propaganda television channels, which was another reason for indignation from those who criticize the government.

What doesn’t kill makes us stronger

The closure of Russian markets due to the pandemic may offer the Georgian economy a new chance, say the authors of the Transparency International study:

“…the share of tourism, including Russian tourists, in Georgia’s economy will decrease and it may take several years to return to the level of 2019. Georgia’s economy will suffer far more from Covid 19 than Russia can potentially economically hurt us. This will give the Georgian population and government an opportunity to be less vulnerable to economic sanctions expected from Russia, and develop some sort of immunity,” states the report.

Economists agree, in part, with this message. But some point out that producers themselves must actively participate in order to diversify markets.

“The business sector itself must be truly interested in entering new markets,” said Salome Gelashvili, senior researcher at Tbilisi State University’s International School of Economics, in an interview with RFE/RL, “but some Georgian producers are more interested in short-term benefits than long-term plans.”