Conflict affects Russian, Georgian economies

Font Size

Print

Feedback

Email

Discuss

: In international conflicts economic levers are sometimes more effective than military moves. Blockading supplies of strategic raw materials, freezing money transfers, and strikes at the businesses of the national diaspora may deal as much damage as tank attacks and air strikes. Since coming to power Georgian president Mikheil Saakashvili has repeatedly complained about Russian economic pressure, and has done much to separate the economies of the two countries.

Today, economic relations between Russia and Georgia have been reduced to the minimum. In conditions of tough confrontation, not to mention armed conflict, this situation is in many respects favorable to Georgia because it reduces the threat of economic pressure.

Georgia needs about 1.8 billion cubic metres of gas per year, but unlike many countries in the region it does not depend on Russia for it. It receives almost all of its oil and gas from Azerbaijan. However, a pipeline pumping Russian gas to Armenia passes through Georgian territory. This year, Armenia is to receive 2.1 billion cubic metres of gas. Georgia gets 10%, or 210 million cubic meters, as a transit fee.

Despite the recent conflict the supplies have not been stopped. Georgian minister of energy Alexander Khetaguri said recently that there was no threat to the pipeline at all. However, on August 11, Georgian gas workers reduced supplies by 30%, later explaining that this was because they needed to conduct some tests.

Armenia, meanwhile, has no grievances against either side. The reductions do not affect its consumption, and the deficit can be compensated by gas from its underground depot. If the conflict escalates, however, Georgia may lose 210 cubic metres of gas, which amounts to 11.6% of its consumption. The Armenian economy would lose much more. There have been no reports of fuel shortages in Georgia. After Georgia reported a bombing in the vicinity of the Baku-Tbilisi-Ceyhan oil pipeline, Azerbaijan’s state oil company announced it would suspend oil imports through sea ports.