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The Messenger, Georgia
June 10 2005
Economic Analysis - Russian economic levers: a serious threat?
Russian paper says Russia does in fact need Georgia economically
By M. Alkhazashvili
Georgian-Russian relations have long been defined by one unspoken
law: economic trade with Russia is directly related to playing
Moscow's political games. However, recently a Russian newspaper,
Moskovskaya Pravda, took a hard look at the reality of economic
sanctions and they came to a startling conclusion: good relations
might be just as crucial for Moscow as they are for Tbilisi.
Russia is an economic heavy weight among former Soviet republics;
even the Baltic countries - despite membership in EU and NATO - can
be influenced if Moscow tightens the screws. But countries like
Georgia in an even more fragile position.
In the first three weeks of 2005 alone, Russia imported an estimated
USD 27 million in products from Georgia, over half of which were food
products such as wine and citrus fruit. However, Georgia's food
imports to Russia make up less than 1 percent of their over all food
imports. During the same time period, Georgia received an estimated
USD 78 million worth of imports from Russia, including a crucial
wheat shipments.
In addition to other imports, Georgia has historically been overly
dependent on Russia for energy. Not long ago, Russian Vladimir Putin
threatened to charge Georgia market prices for Russian energy
supplies; currently Georgia receives Russian natural gas at prices
2.5 times lower than European countries, albeit considerably higher
than other CIS countries.
However, although oil and natural gas imports from Russia are vital
for Georgia now, that is quickly changing. Currently, Georgia
receives a mere 20 percent of its oil supply from Russia, and now
that the Baku-Tbilisi-Ceyhan pipeline is up and running Tbilisi will
be able to receive Caspian oil for cheaper prices than Russia can
offer. There are also plans for new natural gas pipelines in the
Caucasus which will further help Georgia free itself from Russian
energy reserves.
Moscow has also realized the days of using energy embargos to
influence Georgia are numbered; Moskovskaya Pravda noted that if
Russia turns off the taps they will be adversely affecting their
allies as well. "But if we adopt full-scale economic sanctions
against Georgia, it will cause energetic problems for Armenia, as
energy supplies are transited there via Georgia," the newspaper
noted.
It also added that since negotiations regarding the transfer of
Russian military out of Georgia are still fragile, any sudden
overtures from Moscow could risk the chances of getting equipment to
Armenia.
While the threat still exists, Moscow would be wise to refrain from
implementing any radical, large scale economic embargo against
Georgia in reaction to Tbilisi's new, western political orientation.
It is true that for now Russia can still wreak havoc on the country
if it turns off the oil and gas supply or its citrus and wine
imports; however that will not be true for long. What will always
remain is Georgia's strategic location.
Not only will any actions against Tbilisi inadvertently adversely
affect Yerevan, but by risking good relations with Georgia to achieve
short term political goals, Moscow jeopardizes the long term benefits
of having a strong ally in the Black Sea region and the strategically
viable South Caucasus.
June 10 2005
Economic Analysis - Russian economic levers: a serious threat?
Russian paper says Russia does in fact need Georgia economically
By M. Alkhazashvili
Georgian-Russian relations have long been defined by one unspoken
law: economic trade with Russia is directly related to playing
Moscow's political games. However, recently a Russian newspaper,
Moskovskaya Pravda, took a hard look at the reality of economic
sanctions and they came to a startling conclusion: good relations
might be just as crucial for Moscow as they are for Tbilisi.
Russia is an economic heavy weight among former Soviet republics;
even the Baltic countries - despite membership in EU and NATO - can
be influenced if Moscow tightens the screws. But countries like
Georgia in an even more fragile position.
In the first three weeks of 2005 alone, Russia imported an estimated
USD 27 million in products from Georgia, over half of which were food
products such as wine and citrus fruit. However, Georgia's food
imports to Russia make up less than 1 percent of their over all food
imports. During the same time period, Georgia received an estimated
USD 78 million worth of imports from Russia, including a crucial
wheat shipments.
In addition to other imports, Georgia has historically been overly
dependent on Russia for energy. Not long ago, Russian Vladimir Putin
threatened to charge Georgia market prices for Russian energy
supplies; currently Georgia receives Russian natural gas at prices
2.5 times lower than European countries, albeit considerably higher
than other CIS countries.
However, although oil and natural gas imports from Russia are vital
for Georgia now, that is quickly changing. Currently, Georgia
receives a mere 20 percent of its oil supply from Russia, and now
that the Baku-Tbilisi-Ceyhan pipeline is up and running Tbilisi will
be able to receive Caspian oil for cheaper prices than Russia can
offer. There are also plans for new natural gas pipelines in the
Caucasus which will further help Georgia free itself from Russian
energy reserves.
Moscow has also realized the days of using energy embargos to
influence Georgia are numbered; Moskovskaya Pravda noted that if
Russia turns off the taps they will be adversely affecting their
allies as well. "But if we adopt full-scale economic sanctions
against Georgia, it will cause energetic problems for Armenia, as
energy supplies are transited there via Georgia," the newspaper
noted.
It also added that since negotiations regarding the transfer of
Russian military out of Georgia are still fragile, any sudden
overtures from Moscow could risk the chances of getting equipment to
Armenia.
While the threat still exists, Moscow would be wise to refrain from
implementing any radical, large scale economic embargo against
Georgia in reaction to Tbilisi's new, western political orientation.
It is true that for now Russia can still wreak havoc on the country
if it turns off the oil and gas supply or its citrus and wine
imports; however that will not be true for long. What will always
remain is Georgia's strategic location.
Not only will any actions against Tbilisi inadvertently adversely
affect Yerevan, but by risking good relations with Georgia to achieve
short term political goals, Moscow jeopardizes the long term benefits
of having a strong ally in the Black Sea region and the strategically
viable South Caucasus.