Georgia should not rush with sanctions against Russia
10 April, 2014
Georgia should not rush with sanctions against Russia
Georgia should join sanctions against Russia only if the international community requires this, an overwhelming part of Georgian economic analysts believe. While some active Georgian Facebook users call on boycotting Russian products at Georgian retail networks, following the Ukrainian example that banned the import of confectionery and canned fish as well as some dairy products from Russia as of 4 April, economic analysts recommend Georgia not to rush any kind of adverse economic activity against Russia ahead of the West.
Georgia is a little country with immediate borders and long-lasting political tension to Russia which brings in “the jungle rules against the rules of the law,” as German Chancellor Angela Merkel worded Russia’s policy after incursion to Crimea recently. And it remembers very well the Russian provocations leading to the August War in 2008 which put 20% of Georgian territory under Russian occupation. Georgia does not have the luxury of making mistakes again, analysts say and it should make moves only after and in compliance with its big strategic partners of the US and the EU this time.
“This is a fight between big countries like the US and Russia over political influence in the world and we should not forerun the actions and decisions of the US and EU. The Georgian economy is just fledgling and it cannot survive such strikes. Unlike Ukraine, Georgia has no industry developed. It is an import-dependent country. 80% of goods are imported in Georgia and the country that lives on import cannot afford joining economic sanctions against one of its key trade partners,” Lia Eliava, a financial market analyst says. “Even the West does not impose any really strict sanctions as of yet.”
Washington and Brussels imposed targeted economic sanctions just on several Russian officials, including visa bans and asset freezes. The EU has not announced a final decision on further sanctions, but has threatened to impose them if the situation around Ukraine escalates further. However, even international payment systems Visa and MasterCard, which blocked services to seven Russian lenders including SMP Bank and Investcapitalbank on 21 March, resumed their service after a couple of days. The losses were too big and besides, it did not have a desirable effect because Russia took the challenge and announced the start of its own nation-wide payment system soon. The German association of businessmen opposes the sanction idea as it may put 6200 German companies which run business in Russia on bankruptcy. Sergei Glazyev, an adviser to Russian President Vladimir Putin, said on 7 April in an interview on the Russian RT TV channel that if broad economic sanctions are imposed against Russia, the EU’s financial losses may reach trillions of Euros. And that if Russian financial transactions are blocked, European banks will suffer as “hundreds of billions in payment obligations will be suspended,” and such a destabilization of the entire European financial system could risk another world war.
And as nobody in the West hurries with decisions so far, analysts believe Georgia should keep quiet and join economic sanctions only after the international community requires this. In the trade war with Russia Georgia is an apparent loser. Georgia’ share in Russian trade is insignificant while Russia is the number three trade partner to Georgia and a top two export market today. Russia was just number six-seven within 2006-2012 of the trade ban years to Georgian product. However, since the summer of 2013 when the Russian market reopened it took the third position. The Russian share in import is less important, but in export Russia takes almost 10% and comes after 16.9% of Azerbaijan and 10.5% of Ukraine. And although the trade with the EU is expected to be unfettered starting this June, it will take much longer until Georgia streamlines its standards with the EU and becomes able to export there. Keeping the Russian market in the meantime is crucial to Georgia, while Russia will hardly notice if Georgia disappears from its trade map. Moreover, as Soso Archvadze, an economic analyst fears, Georgia may lose almost 68% of money transfers making up USD 800 million in 2013 coming from Russia if Russia activates some internal regulations and deports thousands of Georgians working in Russia.

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