Russia Applies Significant Economic Instruments to Stage Political Pressure

A PhD in Economics, Rati Abuladze, appraises the social, economic and political aspects of Georgia-Russia relations.

Political mistakes have deepened the political confrontation, and Russia imposed a tourism embargo on Georgia.

This sanction will have an economic effect on the incomes of Georgian citizens, business, and consumers. Marketing campaigns, political and economic activities carried out by private and public sectors, will become useless (in the tourism sector, regarding exports and investments). Incomes will shrink for accommodation, food outlets, transport (land, railway, aviation), travel companies and the Georgian economy, in general, Rati Abuladze said. 

Political aspects - Political circles are responsible for society and economic and geopolitical situation. The international reputation of the country was damaged, international events became questionable, and the political orientation of the country and international partnerships were threatened (25 countries were represented in the assembly). At the same time, the economic and political outcomes of these developments are reflected in both long-term and short-term perspectives. 

Russian authorities hold significant economic mechanisms for staging political pressure. The statistics prove that Russian business receive more benefits than Georgia business, but in small economies, the lost revenues have a more painful impact on Georgian citizens and business. Consequently, amid the current embargo, additional sanctions (media agencies are spreading reports regarding additional measures) and the scales of economic damage will bring unfavorable, but not catastrophic outcomes, Rati Abuladze said. 

Today, Georgia-Russia economic relations demonstrate are as follows: 

• 1.4 million Russian citizens visited Georgia in 2018. The number of Russian visitors grows every year. In 2017, Georgia was visited by 1.12 million Russian tourists. It should be noted that each Russian visitor spends 88 USD a day on average. Consequently, marketing campaigns for attracting the Russian public should be reallocated to other markets, and revenues that were to raise Russian tourists should be compensated from other countries;
• Russia emerged as a major export market, and Georgia exported 218.5 million USD products to Russia in January-May 2019. The figure made up 437.3 million USD in 2018 and 396.6 million USD in 2017. Therefore, this exports market should be replaced by other markets as soon as possible, to save Georgian businesses and the whole economy; 
• Russia is considered a major importer country. Georgia has imported products worth 349.5 million USD in January-May 2019 from Russia. The figure made up 935.6 million USD in 2018, and 786.8 million USD in 2017. In the process of diversifying  imports markets, the prices of products imported from other countries (as well as the quality) should be affordable for our citizens; 
•  FDI inflows from the Russian Federation makes up 14.3 million USD (January-June 2019). The figure was at 60 million USD in 2018, and 43.7 million USD in 2017. This amount cannot be considered a major investment, but they play a certain role anyway; 

• We should also analyze the role of Russian capital in Georgian business, including in the power sector, transportation sector, telecommunications, industry, finance sector, development sector, oil products and food products market; 
• According to official statistics, 450,000 Georgian migrants work in the Russian Federation (2017). According to unofficial statistics, more than 1 million Georgians  work in Russia, and a lot of Georgian citizens depend on money transfers from this country; 
• Money transfers from Russia in the January-April period made up 128.9 million USD. The figure was at 457.1 million USD in 2018, and 455.5 million USD in 2017. Georgia will remain dependent on money transfers from other countries unless it sets about overcoming poverty and creating new job places; 
• The sum of these figures cannot outline the whole picture of economic losses. A slowdown in business and consumer activities, the suspension of contracts in the short-term and long-term, and the intensification of Russian aggression are expected to bring more economic losses. 

Regretfully, Georgian political circles could not make the necessary conclusions from past experience, and failed to ensure market diversification to prevent negative consequences from Russian pressure. As a result, the Georgian market and business suffer from negative economic effects that are expected to continue to increase, without urgent measures, Abuladze said.

We should also realize that the objective of the visit of Russian MPs was to strengthen their own political values and culture.