CONFLICT AFFECTS RUSSIAN, GEORGIAN ECONOMIES
Financial Express
Aug 27 2008
India
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.
Until the end of the last year, Russia was the main supplier of
electricity to Georgia, which received 100 megawatts of electricity
per year via the Kavkasioni transmission lines. But after the electric
power station in Inguri reached capacity last November, deputy minister
of Energy Archil Nikoleishvili reported that Georgia would not need
supplies from Russia anymore. Nonetheless, Saakashvili has failed to
break all links between the two economies. Like most former Soviet
republics, Georgia is overpopulated, and estimates…