Tag: Georgia

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Russian Aggression in Georgia and Ukraine: Powerful and Worrying Parallels

Introduction

Ever since Ukraine was attacked on 24 February, the Georgian people have expressed their full support for the besieged country through protests, volunteering, donations, etc. Ukrainian flags can be seen hung on every balcony, window and door in the downtown area, the suburbs, and so on. Every evening, thousands gather in the city center to display solidarity with Ukraine.

Parallels between the invasion of Ukraine and Georgia (2008)

For many Georgians, including myself, this invasion of Ukraine is eerily similar to that of the Russian invasion of Georgia in 2008. The parallels are indismisible. During the 2008 war, Russia recognised two Georgian breakaway regions – Abkhazia and South Ossetia – and stationed its troops there. Since then, Tbilisi has pushed even more strongly for closer integration with the West, via closer ties to the European Union (EU) and the North Atlantic Treaty Organization (NATO), even if membership in neither body seemed immediately likely. Similarly, in Ukraine in 2022, Russia recognized the independence of two breakaway regions, Luhansk and Donetsk. In order to “defend” the two proclaimed independent states, Russia then conducted a “special military operation,” which lead to the current situation.

Georgia’s reaction

Despite these parallels and the broad public backing for Ukraine, the Georgian government has tiptoed around the crisis, fearing the consequences of provoking its powerful northern neighbor, Russia. The day after Russia invaded, Georgian Prime Minister Irakli Gharibashvili said his government would refuse to join any Western sanctions on Moscow, dismissing them as unproductive. Despite citizens’ anger, Gharibashvili has remained cautious. This is partly due to the real economic crisis that could occur if Georgia imposes sanctions, as well as the Georgian Dream Party’s proclivity to support Russian actions. But despite the government’s hesitance, its divisions with the Kremlin are increasingly on display. On 28 February, the National Bank of Georgia said it would act “in accordance with the international resolutions and standards and cannot and will not help evading implementing these sanctions”. On 3 March, Georgia, along with Moldova, followed Ukraine’s lead in filing a formal application for EU membership.

While building more contacts with Russia, Georgia has been feeling increasingly frustrated with the lack of real prospects of joining the EU or NATO. Since 2014, when Georgia signed an Association Agreement with the EU, it started adjusting its laws and economic policies to meet Europe’s criteria for accession. In an attempt to build support among NATO powers for its bid to join the alliance, Georgia kept its troops in Afghanistan until the very last weeks before the U.S. withdrawal. But these investments were not enough to overcome resistance among European and U.S. officials and politicians who see the downsides of Georgian membership in either organization as outweighing any benefits. Many existing members argue that Georgian membership would anger the Kremlin and deepen its conflict with the West, reducing rather than increasing security for all.

Conclusion

Georgians can feel the agony that a Russian invasion brings, having fought our own war with Russia almost fourteen years ago. But many in the country’s leadership believe saber-rattling and diplomatic protests could put Georgia high on President Vladimir Putin’s radar, leading to problems in the long-term. Hours before Russian tanks rolled into Ukraine, a senior Georgian official told civil society representatives that the leadership often has to choose between a “bad option and a worse option. Unfortunately, this is our reality”.Russia can easily, cheaply and effectively harm Georgian stability by leveraging its influence in the breakaway regions whose pursuit of self-rule Moscow champions and where its troops are already stationed. Its border guards patrol the South Ossetian line of separation with Georgia, including within a few hundred meters of a major highway linking Tbilisi to Georgia’s Black Sea coast and in close proximity to the Baku-Tbilisi-Supsa pipeline that delivers oil from Azerbaijan to Europe and elsewhere. The line of separation in this area seems to be creeping steadily forward into the Georgian government-held areas – and there may be little Georgians can do about it.

These aggressive tactics make the Tbilisi leadership wary. A small shift of the line that brings more territory under the control of the breakaway regions could displace thousands of people. Even more worrying to Georgian officials is the possibility that Moscow could exploit any small incident along the line to resume a military invasion and take even more Georgian territory. Georgia, like several other former Soviet states, can ill afford, militarily or economically, to pick a fight with Russia. Despite the show of Western resolve over Ukraine, as far as sanctions and military equipment are concerned, Georgia, smaller, less significant and farther away, fears being left alone to face Russia.

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Analysis

Georgia’s Ambitions for a Regional Transit Hub

Introduction

Since the dawn of time, Georgia has remained at the crossroads of Europe and Asia. It lies in the Caucasus and is the only country in the region that has access to the sea. The government of Georgia has realized the full potential of turning Georgia into a transit powerhouse. 

Over the past few years, Georgia has been heavily investing in improving it’s connectivity with its neighbors, including Russia, by building higher capacity highways and repaving pothole-ridden roads. By 2032, it is expected that Georgia’s main economic artery, the E60, will be motorized. This corridor will allow for more traffic on the E60, or S1, the only artery that links west to east Georgia. 

A picture of the E60 currently in Zestafoni. 

Present Situation

Currently, the E60 is full of heavy duty trucks while being an open access two-lane road. The road is prone to damage and often closed due to the weather. This weakens Georgia’s main economic artery as it limits the ability to exchange capital and goods. Therefore, it also raises the costs of companies to ship across the country or to other countries. This results in many shortcomings such as limiting Georgian exports and hampering the prospects for many companies here.

In turn, this makes Georgia reliant on foreign imports, which means that Georgia consistently runs a current account deficit. To be honest, Georgia has been running a trade deficit since gaining independence. Therefore, the Georgian Lari must be strong in order to make imports cheaper, otherwise there will be imported inflation triggered by rising import prices. 

Plans of the Georgian Government

With this in mind, the Government of Georgia has decided to convert the E60 into a motorway which will allow for faster transits between Azerbaijan and Turkey, as well as improving the Georgian military road S3. 

Current roadmap of Georgia 

This will reduce the cost of transportation of goods and capital, therefore, reducing the likelihood of imported inflation, along with increased competitiveness of Georgian firms as costs will be reduced. Other smaller upgrades on the S12 and S2 are underway which will further reduce the costs of transportation in Georgia which will help Georgian firms and make Georgia a transit powerhouse in the Caucasus.

Conclusion

A comparison of Georgia to its neighbors. 

Regardless, there is much work to be done as shown above. This can be touted as a success in increasing the potential output of Georgia, but it is hard to say this will help increase it to its full potential as Georgia still needs a lot of work in many areas of infrastructure which the Government, in its new 10 year plan, has laid out. With further improvements in these fields, it is safe to assume Georgia will increase its potential output and keep growing at a rapid pace. 

Sources

https://tradingeconomics.com/georgia/current-account

https://agenda.ge/en/news/2021/2082

https://www.oecd-ilibrary.org/sites/c9c594ac-en/index.html?itemId=/content/component/c9c594a%20c-en

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A Noisy Return to a Post-Pandemic Normal

Introduction

As COVID-19 infections throughout the world rise, especially with the Delta variant — a mutated version of the virus — it brings into question, when will we get back to a new ‘normal’. While parts of the world are already returning to a pre-pandemic norm, countries in Africa still lag behind in securing vaccines for their healthcare workers. Until the world can ensure a safe and equitable distribution of vaccines, there will be no normal — for a while. 

The United Kingdom

Dubbed “Freedom Day,” the United Kingdom is returning to pre-pandemic normalcy. All restrictions have been lifted, and with 68.8% of the population having received a 2nd dose, all is going well, until you start to take into account the steady rise in infections — especially with the transmissible Delta variant, which killed thousands in India a few months ago. Like Shakespeare’s play on words, this is another gamble with the economy. For the past few months, the British economy has been stagnating, recent consumer trends show that household expenditures decreased by 11% when compared to Q3 2020-2021, and a loss in consumer spending hurts aggregate demand in the UK. This has a negative effect on the GDP and led to a loss in income, rise in unemployment, and consistent failures to meet monetary policies set forth by the Bank of England. 

Downing Street is now trying to get people back out: partying, eating, drinking, and working; and throughout the western world, governments have taken similar approaches. Across the pond, the United States is, for the most part, open, while Canada is coming out of lockdown. Lockdowns have hurt local business, people are frustrated and government debts and deficits have taken a toll on the state. However, in most of the Western world, we see that vaccines are readily available, but most countries still do not have enough vaccines to return to a ‘new’ normal. 

Georgia

Countries such as Georgia, Ukraine, or Belarus for example are not relatively poor states — in comparison to the rest of the world — but lag behind in vaccination rates. Vaccine hesitancy is rampant among the public and even with government encouragement, few people volunteer to take it, and in order to save their economies, prematurely opened up. This leaves them vulnerable to COVID-19, which delays the world’s return to normal, and raises a philosophical question: do the ends justify the means for some countries that are opening up prematurely due to vaccine shortages? For example, the IMF predicts Georgia will grow at 7.7% this year due to opening up prematurely, but amid rising delta infections, hospital beds filling up, and exhausted medical and financial resources, it is very possible many will die in the next wave. 

However, Georgia isn’t alone. There are a hundred other countries facing the same question. Do the ends justify the means? What to prioritize? Nonetheless, getting the jab is important — no matter where you live — as it means you are one less person to vaccinate and more vials can be donated to other, lesser developed countries. The faster vaccines can be secured for poorer, lesser developed nations, the faster we will return to a ‘new’ normal because a dozen nations don’t represent the world. The longer it takes to vaccinate any human, the longer this pandemic drags on, and the longer you’ll wear a mask. So, if you have the opportunity to do so, take your dose as it’ll help strengthen the world from a virus which churned the world to a halt.

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Analysis

The Georgian Miracle (Opinion)

After the collapse of the USSR, Georgia experienced an economic crisis. In the USSR, it was known as one of the most beautiful republics of the Soviet Union. The cobblestone-lined streets of Tbilisi and the scenic mountain views of Kazbegi, attracted millions. However, after the downfall, there were no tourists. This was just a piece of what Georgia lost, of course it lost Abkhazia and South Ossetia too. The country slipped into civil war, millions lost their jobs, factories closed, and inflation rose exponentially. 

GDP Deflator, Inflation, World Bank, CC BY-4.0

GDP Per Capita [PPP], current US$, World Bank, CC BY-4.0

This led to most of the economy shutting down, and millions going hungry. After 1993, Georgia went through en masse political unrest, and there were some reforms, but it was after the Rose Revolution that the economy witnessed severe changes. During Saakashvili’s reign, he made sure he grew the economy and this is seen by GDP per Capita rising. It was then that investment into Georgia rose, tourist arrivals, and the lost industry developed. Shown by the graphs below.

International Tourist Arrivals, Data from World Bank, CC BY-4.0

FDI Inflows into Georgia [in % of GDP], World Bank, CC BY-4.0

Saakashvili promised economic reforms and delivered, however, he did turn into a totalitarian, Draconian dictator. In 2008, Georgia fought over its territory. Nonetheless, one of his most important legacies were reducing corruption, increased trade, development — e.g., making it easy to do business — and cooperation with the west. Then came another party, which continued his legacy, and continued to develop Georgia with the same tactics he had used — for example the IT sector, and exports. [Happened because of the country’s low crime rate increasing investor psyche, therefore giving them the thumbs up to invest].

Georgia’s trade rating 2005-2013, [1 = low, 6 = high], World Bank, CC BY-4.0

Georgia’s Exports in Billions [current US$], World Bank, CC BY-4.0

Two years ago, Georgia crossed into the very high HDI category. This marks a new era as the country prepares to potentially enter the European Union in the future, and enhances its relations with Brussels. But it stands testament to the Georgian miracle. By far, Georgia is not like the Korean, Singaporean or Japanese miracles, but its fast rise from a war-torn nation in the 1990s to a modern, prosperous, free republic in the Caucasus is miraculous albeit a small victory, but compared to other former-soviet states, and one with no resources, Georgia is a celebratory success story.