Russia Turns the Screws After Georgian Provocation
Original Article
Russian President Vladimir Putin issued a statement Oct. 1 declaring that the Georgian government’s arrest of seven Russian officers was needlessly provocative, and suggesting a U.S. hand in the incident. “There seem to be some powers which specialize in creating a new crisis every day, thinking it will distract attention from the old problems,” Putin said. “In the short term it might have some effect, but it absolutely will not help in resolving old and very serious crises around the world.” Putin compared the Georgian government’s actions to the paranoia of the U.S.S.R. under Stalin and his secret police chief Lavrenty Pavlovich Beria (both Georgians by birth). Now Putin has asked the Russian Parliament to levy economic and travel sanctions against Georgia that would amount to a blockade.
Putin’s veiled suggestion that Washington had a hand in Georgia’s actions prompted a diplomatic phone call from President George W. Bush to Putin. A few hours after this presidential talk, international observers from the Organization for Security and Cooperation in Europe came to a Georgian prison in Tbilisi to monitor the release of the seven jailed Russian officers. The freed Russians were driven first to the Russian embassy, and then on to the airport for a flight to Moscow.
Moscow views Georgia as a U.S. client state, but it is still unclear if Washington authorized the arrests of the officers, or if Saakashvili overplayed his hand in a clumsy attempt to force the withdrawal of Russian military outposts. The Georgian government is known for making sensational allegations — last year they accused Russian agents of planting a grenade to assassinate George W. Bush when the American president visited Georgia. Now it looks like the sanctions machine started by Russia cannot be stopped, and the biggest loser in this confrontation is Georgia. It is time to ask: What has Georgia gained from this latest conflict?
On Oct. 6, the Russian Ministry of Transportation cut off all communications with Georgia — via mail, air, rail, road and the Black Sea. The Russian embassy in Tbilisi stopped issuing visas on Sept. 29 and evacuated all personnel. The Duma is working on a bill to block any financial transactions with Georgia. Given the anti-Georgian mood in Parliament, the bill could easily become law in just a few days. The Georgians have argued that it is impossible to stop financial flows between the two nations, because Russia cannot block transactions sent via international wire services. However, a spokesman for Western Union (one of the largest money wiring services used by Georgian immigrants working in Russia) said that the company will obey the laws of the countries where it operates.
Georgia’s economic losses have already reached $40 million from the Russian embargo on Georgian wine and mineral water. Russia is Georgia’s main trading partner and is responsible for 67.4 percent of the money transferred to Georgia annually. Georgia’s second largest “contributor” is the United States, but money from the U.S. government and private sector provide only 9.5 percent of Georgia’s cash flow. For the first half of 2006 alone, Georgians received $220 million in wire transfers from Russia. Officially, another $350 million was brought from Russia to Georgia in cash and deposited in banks. These transfers equal 20 percent of the Georgian federal budget, which is $2 billion a year, or roughly 5 percent of the nation’s GDP.
Like many other economies of the former Soviet republics, official bank transfers only tell part of the story. The unofficial estimate of money brought into Georgia every year from Russia is over $1 billion. In June 2006, President Putin mentioned an even higher number during his meeting with President Saakashvili. Putin said that, according to varying statistics, “Georgian citizens who live in Russia send 1.5 to 2 billion U.S. dollars to Georgia per year; this is much more help than from any other country in the world.” According to the Russian Federal Migration Service, there are 320,000 Georgians working in Russia; other sources put the number as high as one million, but only 4,500 of them are legal immigrants.
Besides financial and travel blockades, Russians have other ways to influence events in Georgia. The state-owned giant Gazprom is a monopoly importer of natural gas into Georgia. Another Russian company, Itera, owns all the pipelines on Georgian territory. Russians also own a lot of stock in the Georgian energy market. Russian RAO ES owns 75 percent of the Tbilisi-based energy company Telasy and 50 percent of AES-TransEnergy, which exports electricity from Georgia to Turkey. RAO ES also owns parts of Georgian power plants, and it owns 20 percent of the electric production and 35 percent of the energy distribution in Georgia.
Georgia’s main exports are wine and mineral water, and its main customer has always been Russia. Given the state of Georgian viniculture, however, it is hard to imagine Georgian wine competing with wines from France, Australia, Chile or, for that matter, California and Washington State. Georgia’s second largest trading partner, the United States, has plenty of spring water as well, and the well-known Georgian mineral water “Borjomi” probably will not be seen on the shelves of your local Costco or Safeway anytime soon.
Wealthy Georgian business leaders residing in Russia are trying to stay away from this conflict, but it has already hurt their businesses. Many casinos and night clubs in Moscow, including the popular “Golden Palace” and “Metelitsa,” are owned by Georgian businessmen. In the past, police and sanitary inspectors had an understanding with the owners and overlooked multiple code violations. Last week, many Georgian-owned nightclubs and casinos were closed for running gambling tables and machines without permits, and operating unsanitary kitchens.
On Friday, Oct. 6, 143 illegal immigrants from Georgia were deported by plane to Tbilisi. The same day, 175 Russian citizens were evacuated from Georgia; another evacuation flight is scheduled to pick up Russians in Georgia on Oct. 9. Georgian artists from the national ballet group Suhishvili-Ramishvili canceled their tour in Russia — they could not fly into the country due to the transportation blockade.
Many policy experts and commentators in Russia doubt that America instigated this conflict, and President Bush’s phone call suggests that the White House has no interest in seeing it escalate. While America and Western Europe clearly would be happy to see Russian peacekeeping troops out of Georgia so NATO can move in, the Georgian government’s actions have failed to benefit anyone. Some think that Saakashvili’s administration has been “high” on nationalism since the Rose Revolution’s success, and took a discreet White House suggestion to increase pressure in negotiations with Moscow over Russian military outposts too far. Given the fact that Georgia has so few economic ties with the rest of the world besides Russia, it is hard to imagine the United States or any Western European country risking their lucrative business deals with Moscow by supporting Saakashvili’s inept administration.
If Gazprom decides to call in Georgian government debts and cuts off the gas early this winter, Saakashvili’s government may fall and be replaced by one that wants better relations with Moscow. This is not idle speculation, considering that thousands of people have joined anti-government rallies in Tbilisi. These demonstrations have not been taken seriously in Western capitals and have been underreported by the international media.
The average state pension in Georgia is now between $4 and $5 a month. The already desperate poverty in Georgia has been exacerbated by needless confrontation with the great power next door. Just as the Orange government in Kiev discovered earlier this year, Saakashvili may find nationalism and the prospect of NATO membership poor substitutes for money and warmth when winter comes.
Yuri Mamchur is a Senior Foreign Policy Fellow at Discovery Institute in Seattle, WA, and creator of Russia Blog (www.russiablog.org). This article was modified from a post at Russia Blog.