Georgian Product Back to Russian Market
11 November, 2011

Agreement on establishing international monitors at internationally acknowledged borders of Georgia, achieved as a result of Georgian-Russian talks over Russia’s bid for the  World Trade Organization, is expected to incorporate Russia in the WTO, make Georgian state borders more transparent and pave the way for Georgian product back to the Russian market.

The agreement is initialed and pending the final endorsement by November 10, 2011,  Nino Kalandadze, Deputy Foreign Minister of Georgia, informed media at the traditional Monday briefing on November 7, 2011.

She accentuated that the document is a breakthrough, which can provide control over economic borders of Georgia within its breakaway territories of Abkhazia and South Ossetia. In August of 2008 Russia routed Georgia in a five-day war and acknowledged sovereignty of its rebelling regions.

Georgia, already the WTO member, claimed that the trade turnover within the conflict zone is completely non-transparent, which poses security risks and withhold its consent to Russia’s WTO bid [that can be approved through consensus, the basic WTO membership principle] unless Russia agrees to restore Georgian customs check-points.

Under international pressure Georgia agreed to establish international monitors on the non-transparent trade corridors in order to allow Georgia to have just resemblance of economic border control. Russia hesitated first but agreed after a week-long time out on November 2, 2011.

The monitoring includes deployment of private monitor companies on both sides of questioned trade corridors, and exchange cargo turnover information between Georgian and Russian sides through third party in electronic format.

Georgian government trumpeted this agreement as a victory of Georgian diplomacy as far as through international monitors Georgia gets a lever to restore a legal control over its economic borders completely after almost 20-year interval.

“This is an underlined achievement taking into consideration that cargo turnover between Georgian-Russian borders was completely uncontrolled for past years and was not subject to any supervision,” Kalandadze stressed.

However Georgian analysts speak of other benefit Georgia can get from Russia WTO membership of which Georgian government prefers to be tightlipped – getting back to Russian market. Georgian agriculture product, wine and mineral water hurled out of Russian market in 2006 under alleged quality problems can find their way back as soon as Russia enters the WTO gate. All potential quality and standard-related disputes will be settled through the WTO dispute council in frames of the WTO regulations.

“The WTO regulates free international trade turnover between its member-states and Russian embargo on Georgian product will be removed automatically as well as the US will have to revoke the Jackson-Vanik agreement to Russia,” Demur Giorkhelidze, an economic analyst, told Georgian Journal.

Russia accounted for roughly 56% and 45% of Georgian wine and mineral water exports respectively before the 2006 embargo. Sales of wine and mineral water decreased almost by 90% in 2006-2007 and even today after hitting new markets Georgian wine and mineral water sales lag by 30-40% behind the pre-embargo statistics.

Georgian government’s standpoint is that Georgian entrepreneurs would better focus on the US and EU markets with fairer game rules rather than Russian market that may be unpredictable for political reasons.

Giorkhelidze thinks Russian market cannot be replaced completely in the near prospect as hitting new markets requires lots of money that Georgia cannot afford at the moment.

According to Soso Tsiskarishvili, a political-economic scientist, Georgia by its consent gained trust of its western partners as well as slight prospects that “its relationships with Russia will become normal within the frames of international communication.” Moreover, WTO will take over Georgia’s burden in difficult trade relationship with Russia.

He worries however that the consent between Georgia and Russia over the WTO bid may affect relationship of Georgia with its breakaway republics if wrongly interpreted. To escape problems he proposes to create a social monitoring group that should supervise the process over the international monitoring of disputed borders and include Abkhazians and South Osetians together with the official Tbilisi in it.

Davit Narmania, Board Chairman of Center for Economic Problems Research, approves Georgia’s and Russia’s agreement over the WTO bid, since Georgia will have an effective tool in trade relationships with Russia that it lacked before. He regrets however Georgia failed to satisfy its claim for deployment Georgian customs officers on its disputed borders.

“That’s not just geographic or political borders, it is economic borders of Georgia and Georgia’s claim to restore official Tbilisi’s control there was quite legal,” Narmania elaborated.

Giorkhelidze counters that Georgia got as much as possible in the WTO talks since it was a part of big political game, the entire world was interested to have Russia [the largest economic power outside the WTO] within the global trade club and Georgia could not and should not oppose the international opinion.