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TI – Georgia Reveals Georgia’s Increased Economic Dependency on Russia

The civil society organization Transparency International – Georgia released a study on 8 November revealing that in comparison with previous years Georgia’s economic dependency on Russia has “significantly increased” but has not reached the stage where Georgia would find itself in a “deep crisis” if the relations were suspended.

According to the research, in January-September 2022, Georgia received about USD 2.2 billion in income from Russian remittances, tourism, and goods exported, which is 2.6 times more than the income received from Russia from the same sources in the same period last year, and 64% more than January-September 2019.

The document also states that in January-September 2022, income from Russian remittances, tourism, and export of goods amounted to 12.6% of the Georgian economy. In 2021, that figure was 6.3%, while in 2019 – when the figure was at its highest point before 2022 – it was 10.4%.

“This means that Georgia’s economic dependence on Russia is increasing compared to previous years. This growth is mainly due to the jump-like increase in remittances,” TI – Georgia noted.

Russian Companies Registered in Georgia

According to the civil society organization, up to 17,000 Russian companies are registered in Georgia, with more than half of them registered in the country after Russia invaded Ukraine.

For example, in March-September 2022, about 9,500 companies were registered in Georgia, which is 10 times more than in all of 2021. According to the organization, 97% of these companies are individual enterprises. “This indicates that a part of Russian citizens moved to Georgia to live and do business for a long time,” the organization emphasized.

Export to Russia

According to the study, in the first 9 months of 2022, Georgian exports to Russia increased by 11% and amounted to USD 473 million, while in March-September, exports to Russia increased by 6.3%, which was “mainly caused by a 4.4-fold increase in the re-export of automobiles.”

“Traditionally, Georgian wine exports are highly dependent on the Russian market. In January-September 2022, USD 109 million worth of wine exported to Russia equaled 63% of Georgia’s total wine exports,” they remarked.

Imports from Russia

As for imports from Russia, TI – Georgia reported that they increased by 73% to USD 1.2 billion in January-September 2022. “The share of Russian imports in relation to the total imports to Georgia was 13.1% which is the highest in the last 16 years,” the organization underscored.

According to the study, since the start of the war in Ukraine, the import of oil products (fuel) from Russia increased by 350% (USD 329 million) and amounted to 44% of total fuel imports to Georgia. In addition, the import of coal and coke increased by 3 times and totaled USD 57 million.

While the import of electricity from Russia increased by 3.6 times, the organization noted that Russian electricity only accounts for 3.3% of Georgia’s domestic consumption. Significantly, imports of Russian natural gas decreased by 32%. Currently, Russian gas amounts to 7% of Georgia’s domestic consumption.

Per TI – Georgia, Georgia’s dependence on Russian wheat and flour is still high, and in the first 9 months of 2022, the share of Russian wheat and flour amounted to 96% of Georgia’s total imports of the product. “Up to 78% of the wheat flour consumed in Georgia comes from Russia,” they said.

Visitors from Russia

According to the study, in 2022, the rate of visitors from Russia “accelerated significantly” and amounted to 780,000 visitors between January-September. Although, it should be noted, that this figure is still 35% lower than the figure for the same period in 2019. “However, in August-September alone, 6% more visitors came from Russia this year than in August-September 2019.”

According to the same research, in January-September 2022, Russians accounted for 20% of total visitors to Georgia, which is twice the rate in 2021.

Per TI – Georgia, the available data – which dates back to 2011 – shows that the share of Russians in comparison to the number of total visitors has never reached 20%.

According to their assessment, some of the Russian visitors are actually immigrants and have plans to settle in Georgia for a long time. “This is indicated by both the registration of companies and the statistics of the two-way crossing of the Georgian-Russian border, as well as the opening of tens of thousands of accounts in Georgian banks by Russian citizens,” they said.

Remittances and FDI

According to TI – Georgia, “In April-September 2022, remittances from Russia to Georgia increased 5 times and amounted to USD 1.135 million. The main reason for such high growth is the Russian citizens who have moved to Georgia, and are receiving money from Russia.”

The organization also denoted that in the first half of 2022, foreign direct investments (FDI) from Russia amounted to USD 12 million.

Recommendations

In order to reduce the Georgian economy’s dependence on Russia, TI – Georgia called on Georgia authorities to:

  • more actively and quickly begin work on signing free trade agreements with all strategic partners with whom we do not yet have such an agreement;
  • subsidies from the state budget should not be given to businesses that increase economic dependence on Russia;

Additionally, the organization believes that in order to prevent the use of Georgia to evade sanctions, the registering of Russian companies in Georgia should be regulated through different norms. In particular, before receiving approval for company registration, the organization stated that the applicant should be thoroughly reviewed to establish whether they are connected with any sanctioned companies or people.

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

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