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Georgia’s Economic Dependence on Russia Increased in 2021, Report Says

A new report by Transparency International Georgia, a local watchdog, says Georgia’s economic dependence on Russia increased in 2021 following the COVID-19 pandemic-related downturn of 2020.

The report, issued today, says however that the dependency has not fully reached pre-pandemic levels due to the persistence of the decline in tourism.

Still, TI Georgia warns that Georgia’s links with Russia including in trade, tourism and remittances “carry a risk for the country.”

Specifically, the report says Georgia earned about USD 1.3 billion from exports to, and remittances and tourist inflow from Russia, amounting to 6.7% of the country’s GDP in 2021.

Data from TI Georgia report. Sourced from Geostat.

With regards to trade, the report notes that in 2021 Russia was the second biggest importer of Georgian goods after China. It adds that Georgia’s exports to Russia grew by 38% year-over-year, reaching USD 610 million – higher than before the pandemic.

The value of ferro-alloys exports topped the list of exported products with USD 172 million, according to the study.

Also, TI Georgia says 55% of total exports of Georgian wine went to Russia in 2021, which “carries political risks.” In this context, the report cites Russia’s ban of several types of Georgian products in 2006 as well as State Duma’s consideration of banning wine imports from Georgia following the anti-occupation protests of June 2019 in Tbilisi.

Data from TI Georgia report. Sourced from Geostat.

Meanwhile, the document says Russia was the biggest exporter to Georgia after Turkey in 2021. Georgia imported from Russia products valued at over USD 1 billion, more than in 2019 by USD 51 million, according to the report.

Georgia, according to the report, is dependent the most on imports of Russian wheat and wheat flour, which constitute 94% of total wheat imports.

In recent years, the report says, natural gas imports from Russia have increased “significantly.” In 2021, the share of Russian natural gas in Georgia’s relevant imports was 23.1%, a spike compared to 2.8% in 2018.

As of the remittances from Russia, the report finds that their share in the total amount received by Georgia is declining, but still remains “an important source of income for the Georgian population.”

Data from TI Georgia report. Sourced from National Bank of Georgia.

Last year, USD 411 million was transferred from Russia to Georgia, which is 17.5% of the total remittances to Georgia from abroad. In 2019, the number was about 25%, according to TI Georgia.

The document says that in 2021, 213 thousand Russian tourists traveled to Georgia, that is 11.3% of the total number. While more Russians entered Georgia in 2021 than in 2020, the number is still short of pre-pandemic levels by 86%.

The watchdog also says around 7,000 companies in Georgia are either entirely or partially owned by Russian companies or citizens.

According to the research, some 1,230 of the companies were registered between 1995 and 2021, while around 5,500 – in 2013-2020. Record 1,200 registrations were recorded in 2018.

The report also said that large Russian companies are represented in all sectors of the Georgian economy, including energy, heavy and light industry, transport infrastructure, financial sector, communications, gambling business, restaurants and hotels.

The document lists IDS Borjomi, a mineral water giant, Veon Georgia, a digital operator, Lukoil Georgia, an oil company, and Yandex Taxi as some of the primary examples.

In 2011-2021, 410 Russian-owned companies participated in the state procurement, receiving contracts worth up to GEL 590 million, which is about 1.4% of the amount spent on public procurement in Georgia during the period.

The TI report comes as Georgia has refused to join Western sanctions on Russia over its war on Ukraine. Prime Minister Irakli Garibashvili argued on February 28 that sanctions would harm Georgian residents by depriving them of income from tourism, trade and remittances.

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This post is also available in: ქართული (Georgian) Русский (Russian)

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