Georgia - Balancing between the Eurasian and the European Unions
19 June, 2014
Georgia may lose the current trade benefits when the Eurasian Union made of Russia, Kazakhstan and Belarus will enter into effect next year.

While the Kremlin initiated Eurasian Union looks forward to enhancing its borders, the neighboring Georgia faces a challenge: to find a balance point between its pro-European political choice and the economic benefits the Eurasian Union holds for Georgia.
No matter how strong the political desire of Tbilisi to join the EU, the economic and political the reality
is something different: economically Georgia is much more affiliated with its former chums from the Commonwealth of Independent States. Although the EU market will offer free access to Georgia soon, the picture is unlikely to be changed in favor of the EU in near future.
The research of Ecorys and CASE (Councils for Advancement and Support for Education) made in 2012 predicts Georgian export to grow by 12 percent [while the import only by 7.5 percent] in a long-term prospect after the free trade with the EU becomes operational. But statistics of last decade show that the CIS makes up much of the export markets to Georgia at roughly 50 percent of the total Georgian export, whereas the EU countries make up less than 30 percent. In the meantime out of the total import to Georgia roughly 30 percent comes with the EU and less than 23 percent to the CIS space.
This is a result of the bi-lateral as well as the multi-lateral preferential trade agreements that Georgia enjoys with all CIS states. Aside from the high awareness of Georgian products within its traditional CIS markets, that cuts down marketing layouts there.
This is true particularly for Russia that quickly became the top three trade partner to Georgia within a year after six years of interval in Georgian-Russian trade. Georgian wine export increased by more than 300 percent since past June when Georgia restored its wine export to Russia, which stopped in 2006 after Russia banned Georgian agriculture products.
Georgia may lose the current trade benefits when the Eurasian Union made of Russia, Kazakhstan and Belarus will enter into effect next year.
The Russian, Belarusian and Kazakh presidents on May 29 already inked a treaty, setting up this common economic space that duplicates the EU model with no customs barriers within its territory and unified its import custom tariffs. Armenia, a close neighbor of Georgia will join this treaty soon. Kirgizstan and Tajikistan appear intent to join while Turkey, having been rejected by the EU for a long time, has already sent hints on its possible enrolment with the emerging Eurasian Union. Israel, India, China and Vietnam are also keeping in mind this Union that came into reality thanks to the Ukrainian crisis and the mistakes the West made.
As a matter of fact, Russia has been touting the Eurasian Union to Ukraine and other post-soviet republics including Georgia since 2010 when it set out a unified Customs Union with Belarus and Kazakhstan. However, Ukraine opted for the west and incubated a crisis. Kazakhstan and Belarus, had been pretty reluctant to sign the treaty on unified economic space before the Crimea events, learnt their lesson and gave consents. Armenia yielded much earlier when Russia bullied it before Vilnius Summit this past fall where Ukraine had to sign the associated membership with the EU. It did not keep its word and plunged into a revolution. Georgia and Moldova initialed the same agreement and will endorse it finally on June 27. The closer is the date, the more uneasy Georgia feels and expects possible pressure from the Eurasian Union side.
The Russian share in Georgian export exceeds 11 percent and comes after 20.2 percent of Azerbaijan and 11.5 percent of Armenia. And although the trade with the EU is expected to be unfettered starting this June it will take much longer for Georgia to streamline its standards with the EU and become able to export there. Keeping old traditional markets especially the Russian one is crucial for Georgia while Russia will hardly take notice if Georgia disappears from its trade map.
Dietrich Muller, a co-founder of Georgian Investment Group, believes that the Eurasian Union is a short-lived alliance that came to life by sabotage and blackmailing its member-states. Therefore he finds smart to stay away from this risky alliance that attracts members with lucrative economic benefits but implies political risks.
“Russia has never distinguished politics from the economy. The historical experience shows that Russia always use the economy to achieve its political goals and this new union will be no exception. This Eurasian Union is a honeypot and we will be back in the USSR if we take this risk. European countries offer a correct and stable market with civilized market rules while the Eurasian Union countries represent poorer democracy than Georgia. What can we learn from them?” Muller asks.
“Yes the EU free trade cannot bring immediate benefits in a short-run but in the long-term it will pay back immensely. It offers a market of 500 million consumers against the 170 million of the Eurasian Union, while the purchase power of Europe is by 5.67 times higher,” Giorgi Abashishvili, an Economic Adviser to the President of Georgia, said.
Whether or not the Eurasian Union will grow into an alternative economic union with important global market players like Turkey, China and India on its map depends on the regulations the Union will introduce, Demur Giorkhelidze, an economic analyst surmises. He does not rule out that Turkey [another close neighbor of Georgia] has been begrudged by the pending EU consent on membership may be diverted to the Eurasian Union eventually.