"NOBODY SPEAKS ABOUT THE REAL REASONS BEHIND THE SANCTIONS"
The Messenger, Georgia
Nov 17 2006
At this time of impending winter woes and a continued deadlock in
Georgia-Russia relations, The Messenger’s Keti Sikharulidze asked
Vladimer Papava, senior fellow at the Georgian Foundation for Strategic
and International Studies and deputy chair of the parliamentary
Committee for Finance and Budget, to give his unique insight into
the crisis, and the wider economic outlook for the country.
How do you make sense of Russia’s actions towards Georgia?
Russia will do everything it can to use the levers available to
achieve its interests, the price hike on natural gas is one example
of those levers.
It is not just the embargo, but it is a range of serious economic
sanctions that Russia has used against Georgia, however, nobody speaks
about the real reasons behind the sanctions-behind wine and mineral
water stood something quite different. Falsification is a worldwide
problem, not only a Georgian problem.
Everything began much earlier, when the Georgian government announced
early this year that it might sell its main gas pipeline to Gazprom,
which connects Russia to Armenia via Georgia. Gazprom, of course, was
ready to buy it to maintain its economic influence in the region as
the main pipeline is extremely important for Gazprom. At that time,
the Georgian government did not object to them buying it at all,
because they could get a large sum of money for it. But the deal
didn’t go through because of the Americans. The American side not
only disrupted negotiations, but demanded that Georgia stop talks
altogether on the issue.
Right after the deal fell through, Russia announced the embargo on
wine and mineral water.
Russia’s anger towards Georgia grew even greater after Georgia’s
declaration that it wanted to join NATO and the final blow was the
arrest of the GRU officers. The Kremlin could simply not stomach
Georgians daring to blame GRU officers of espionage and in response
they used the harshest measures they could: deportation of Georgians,
even those ethnic Georgians with Russian citizenship.
How is the embargo and deportations influencing the Georgian economy?
Deportation of Georgians, if we discuss it from the economical
standpoint, means stopping money transfers. I do not mean bank
transfers, but those transfers that were delivered by people personally
who travelled between these two countries.
Some think that the Russian embargo would be a big economic blow
for Georgia
In the long-term, it might be good for our entrepreneurs. It might
somehow wake them up, make them start finding alternative markets apart
from Russia, though it is not easy to do and I don’t think they’ve
succeeded so far. It speaks to those problems that our businesses
are having in general, struggling to follow those market economic
principles accepted in the West. However, I do not rule out that some
companies will overcome these barriers and succeed in their business.
But if we speak about the short-term impact, closure of the
Russian market of course is a great blow to the Georgian economy
and businesses, but however strong the hit is, we should endure it,
in order to maintain our sovereignty and independence, which is so
important for building a normal state.
How successful are Georgian businesses in searching for new markets?
The main buyer of Georgian wine and mineral water is no surprise
for anybody. The Russian market and its closure to Georgian wine and
water companies was a great blow.
Each product has its market. Business owners should study the markets
and determine where it is relevant to sell their product.
I think our businesses are not ready to conquer developed markets.
The faster they research other markets and learn how to enter these
markets, the better it is for our economy, especially when our country
has such positive economic indicators. It can be said that Russian
embargo was a good advertisement for us.
What do you think about the Statistics Department being moved into
the Ministry of Economic Development?
Georgia has no Statistics Department now that it has become one of
the departments of the Ministry of Economic Development, which was
the greatest institutional mistake.
But there is a hidden conflict of interests. As we know, the government
works out a plan for governing the country, which should be tracked
using concrete data researched and published by the Statistics
Department. This enables the government to show its failures and
successes in figures to society.
If the department is under the government’s control, it is much easier
to control it institutionally and report figures that are favourable
for the government. I personally cannot trust the information reported
by this department.
What should be done to solve this problem?
The only way to avoid state influence on the statistics department is
to put it under the presidential administration again, as it was during
Shevardnadze’s administration. Such changes are vitally important for
the country, and especially for the president, in order to evaluate
the government’s activities and get a real picture of what is going
on. In short, the government should not have the right to poke its
head into the Statistic Department’s activities.
Rising inflation has been worrying many in Georgia, what are the
major causes of the inflation we have seen recently?
There are number of reasons. One version is the price on energy
products on world markets caused the inflation we have seen in
Georgia. While this might be one reason, we should also find reasons
look for answers elsewhere.
I suppose the main problem was the government expenses allotted
for public works. It does not mean that government should not build
roads, fountains or decorate schools or buildings, but money dumped
into the economy for these kinds of activities harms the economy and
causes inflation.
For instance, the president’s three month employment programme to
employ 50 000 people is one of the main causes of the inflation.
Governmental bodies dealing with the economic sector should have
informed the president of the possible risks this programme could
have created for the economy.