Economic Embargo on Georgia: Why Would Russia Like to Lift It?

By Giorgi Kvelashvili

Tbilisi has been under Russian embargo since the fall of 2006 when Moscow imposed sanctions on Georgia’s major agricultural products such as wine and mineral water and almost simultaneously severed all transportation and postal links with its southern neighbor. The aim of the punitive measures was to make Georgia change its Western foreign policy orientation and return to the Russian fold. Both economic measures and the 2008 military intervention failed to elicit the result that the Kremlin expected in return.

Since Russia started to openly entangle itself with Georgia’s pro-Russian forces led by ex-premier Zurab Noghaideli and ex-speaker of parliament Nino Burjanadze, it appears now that the time has come for Moscow to offer some incentives to the Georgian public and lifting the economic embargo could be one of those incentives. But the government in Tbilisi remains unchanged regarding its pro-Western policies. Can the Kremlin’s tactic of first creating the problem and then offering to solve it work as an efficient Georgia strategy?

On March 19, the Russian foreign ministry issued a press release on the “Russian Response to Georgia’s Request Concerning Bilateral Trade Issues.” In it, the Russians once again reiterated that given Georgia’s withdrawal from the Commonwealth of Independent States (CIS) in August 2008, the rules of determination of origin of goods adopted in the Commonwealth “are no longer in force.” The statement also alleged that the Georgian foreign ministry in July 2009 had sent the Russian side via the Swiss Embassy in Tbilisi “a note expressing concern about possible problems” with the implementation of the bilateral agreement and inviting the Russians “to settle them.”

In the concluding portion, the Russian foreign ministry asserted that “in the interests of mutual trade and responding to the Georgian side’s wishes,” Russia was ready to find “a way out of this situation” by offering bilateral negotiations“ but until then would give “Georgian goods previous preferential tariff treatment subject to observance of certain rules of origin.”

The Georgian foreign ministry denied it had ever formally requested to resume trade with Russia and viewed Moscow’s claims as “not corresponding to the reality.” A Georgian foreign ministry official instead argued that the Russians were trying “to mislead the international community” and what happened in reality was that last year Tbilisi “had appealed to all CIS countries, including Russia, requesting information on documentation needed for Georgian products to enter those markets.”

It appears, contrary to the Russian expectations, that the Georgians see the possible lifting of the embargo not as good will or as an incentive but as a realization on Moscow’s part that its policy has failed. Georgian President Mikheil Saakashvili said on March 12 that Georgia managed “to diversify its exports” against all odds and “no longer depended on the Russian market.” That the embargo has become “meaningless” and “counterproductive” could indeed be one reason why Moscow might want to lift it.

A second possible reason could be Russia’s customs union with Belarus and Kazakhstan, which will become effective on July 1. Both Belarus and Kazakhstan are Georgia’s trading partners and by the time the customs union becomes official either they have to have severed trade with Georgia or Russia has to have tolerated Georgian products which will end up on the Russian market anyway. Given the political and economic risks associated with the embracing of Moscow’s anti-Georgian policies, the second outcome seems more probable. Hence, Russian media have already flashed with headlines predicting Georgian wine’s and mineral water’s return to Russia by July.

A third reason could be the pressure Russia feels as a member of the Council of Europe and the Organization for Security and Cooperation in Europe (OSCE). Moscow might be willing to show these organizations that by lifting the trade ban it tries to tangibly improve relations with Georgia, notwithstanding Tbilisi’s firm position that any normalization or improvement is only possible after Russia meets all of its international obligations under the 2008 ceasefire agreement and withdraws its troops from the occupied Georgian territories. Tbilisi has also made it clear that Moscow’s respect for Georgia’s sovereignty and territorial integrity is a mandatory prerequisite for Tbilisi’s consent for Russia’s membership in the World Trade Organization.