GEORGIA: ECONOMIC AND POLITICAL DEGRADATION


06.10.06
MOSCOW. (RIA Novosti political commentator Alexander Yurov)
The Georgian leaders have recently worsened relations with Russia to an extent that it is possible to speak about their degradation. As a result, the Georgian economy is in a very poor condition.
Here are official figures to illustrate this statement: In Russia the GDP is approaching $1.5 trillion, whereas in Georgia is barely $7 billion; a year ago the Georgian economy was annually adding 10% to its GDP, whereas now its economic growth is close to zero; a ban on selling wine and mineral water in Russia alone cost Georgia $40 million. At the same time, Georgia has lost its main trade partner.
The prospects of wine exports to Russia are very bleak. Georgia is losing chances to return to the Russian market with every passing day. The Georgian authorities have done nothing since the start of the year to improve the quality of wine and match the established standards. Instead of Georgian surrogates, Russians are buying inexpensive real wine from Latin America, and will soon get used to it.
In the estimate of the Russian federal customs service, bilateral trade amounted to $349.6 million in January-July 2006. Despite the wine scandal and political differences, this figure is almost 53% higher than in the previous year. This growth was mostly generated by Russian exports, which have now reached $298 million. Russia supplied Georgia with 88% more goods. The latter’s share in bilateral trade has gone down by 26%.
Russia supplied Georgia with oil ($44.3 million), grains ($18.7 million), machines and equipment ($5.9 million), products of ferrous metallurgy ($4.2 million), vehicles ($4.5 million), and energy equipment ($4.2 million). Georgia delivered to Russia $3.5 million worth of hardware items, and $900 thousand worth of fruit, nuts, and coffee. This was all. Trade balance in Russia’s favor is striking.
In building its relations with Russia, Georgia is not being rational. Its government seems to believe that Russia is obliged to supply Georgia with whatever it needs like it did in the past, and in exchange…
Judging by everything, the Georgian leaders are not worried about economic degradation. They will probably continue provoking Russia until their compatriots go into subsistence farming. True, they receive some foreign aid (worth $350 million), but not from Russia.
But it is pointless for Georgia to rely exclusively on selfless aid of its tender hearted wealthy partner. The amount of this aid is comparable to what its economy stands to lose if its government continues fanning passions in interstate relations. In official Russian estimates, if Russia toughens the blockade and prohibits money transfers to Georgians working in Russia, the Georgian economy may lose the same $350 million.
The Georgian leaders are clashing with Russia although economic logic suggests a contrary line – if Georgia wants to prosper, it has to adapt itself to its promising economic neighbor, which has all the makings for becoming a global economic giant again. -0-