Title: PART I: Russo-Georgian Dystopia

“Georgians have always had a grievance complex, because Turks or Persians have always suppressed them. The lack of independence, the inability to have one’s own state — all this instilled in Georgians a sense of deprivation. Now they are hot-tempered, light up for any reason. Now flashed.” This is what Russia’s Liberal Democratic Party leader tweeted after riot police in Tbilisi fired rubber bullets against thousands of nonviolent protesters outside of the Georgian Parliament on June 20, 2019.

On that day, Georgian officials welcomed into the Georgian Parliament a Russian delegation, headed by member of the State Duma Sergey Gavrilov, within the framework of the Interparliamentary Assembly on Orthodoxy. Outside of the Parliament, civilians staged a snap protest against the ongoing Russian occupation of 20 percent of Georgian territory. Days before his scandalous appearance in the chair of the Speaker of the Georgian Parliament, Mr. Gavrilov gave an interview to the Georgian television network Rustavi 2 and stated, “We have recognized the independence of Ossetia and Abkhazia [two breakaway Georgian regions where Russian military forces are stationed] and we have to build our relations on new reality.” Soon after, Georgians saw him chairing an international assembly in the Georgian Parliament in Russian, an occurrence which was deeply humiliating for members of the Georgian public, many of whom lost friends and family members in the 2008 Russo-Georgian war.

To Russian politicians, however, the backlash against Gavrilov’s actions appeared to be Western-provoked “Russophobia.” Sergei Lavrov, the Foreign Minister of Russia, said, “Western curators are ready to close their eyes to the atrocities of ultranationalists [and] Russophobia, just to break all ties of the people of Georgia with our country [and] rewrite our common history.”

Days later, the ex-Speaker of the Georgian Parliament mirrored Mr. Lavrov in her interview to Russian television network NTV, claiming that everything that happens in Georgia is anti-Russian hysteria “fueled by the American special services.” She is not alone; fifth column forces have gotten more vocal in Georgia since 2012, when Georgian billionaire Bidzina Ivanishvili, leader of the Georgian Dream party (GD), won the general elections. Part of GD’s election campaign was built on the promise to “normalize” relations with Russia, which were at a historical low after the 2008 war. GD deployed a so-called “strategic patience” policy against Russia’s “creeping annexation,” and succeeded in returning Georgian products to Russian markets.

On June 21, Russian President Vladimir Putin discussed the mass protests in Tbilisi with his security council. The president’s spokesman summarized the Russian government’s official position on the situation: “The Russophobic provocation provoked by extremist elements against Russian parliamentarians was regarded as a very dangerous manifestation.” On the same day, Russia imposed an embargo on Georgia by presidential decree, banning Russian airlines from carrying out air passenger and commercial services from Russia to Georgia.

The next day, the Russian Ministry of Transport “discovered” overdue debts for Georgian air-carriers’ air navigation activities, and subsequently banned them from flying to Russian airports.

In effect, Putin also banned Russian tourists from visiting Georgia. Tourism is an important industry in Georgia, accounting for 7.6 percent of the economy. In 2018, 1.4 million Russians visited Georgia, making Russia the second biggest country of origin for tourists to Georgia; this amounts to roughly 1.8 per cent of the economy.

These changes have further fueled anti-Russian protests. Thousands participated in the “Freedom March” on June 29, protesting against the Russian occupation and those Georgian government officials who were involved in the violent dispersal of the previous peaceful demonstration.

This latest spark of Georgian anti-Russian protests did not come out of the blue; rather, it is a logical continuity of the falling popularity of the ruling GD party and the “normalization” policies it has taken toward Russia. A 2018 IRI survey showed that only 14 percent of the population supported pro-Russian policies, with a mere 2 percent in favor of pro-Russian foreign policy. This figure represents a decline from 4 percent in 2016. This is in contrast to the 77 percent of the population that is pro-Western, out of which 27 percent supports pro-European foreign policy. However, 76 percent still support dialogue with Russia, and 77 percent are in favor of NATO membership.

The overall mood is clear: the Georgian population assumes Russia is a threat and it is, therefore, looking for a defense. Georgians also understand the necessity, or unavoidability, of relations with Russia, especially in the business world. Recent developments show there is also a red line, which was crossed on June 20. The same IRI study showed only 5 percent of respondents rated Georgia’s relations with Russia very positively in 2018, as compared to 17 percent in 2015, and the percentage of those who rated it very negatively rose from 8 percent to 22 percent in that same time period.

On June 21, the Kremlin launched a heavy anti-Georgian media campaign, painting it as hazardous place for Russian citizens. It struck some Georgian nerves, but did not resonate much with Russians themselves. A Deutsche Welle journalist asked a group of Russians in Georgia if they were scared in Tbilisi, to which they responded, “a lot! – a scary lot of food and wine – not even the strongest can withstand.”

On June 24, Russian consumers and the market watchdog Rospotrebnadzor announced tightened controls on the quality of alcoholic products from Georgia imported into Russian territory. In an apparent move to create a base for further embargo enlargement, Rospotrebnadzor noted that “in the dynamics Georgian alcohol shows a deterioration in product quality”.

Putin’s spokesman, Mr. Peskov, assured the public that the strengthening of alcohol control from Georgia was not associated with an aggravation of relations with the Russian Federation. This occurrence was reminiscent of a past incidence: in the winter of 2006, Russia cut the gas supply to Georgia, but announced that both main gas lines to Georgia had been cut by bomb blasts that were allegedly the work of Chechen fighters. Georgians have never believed the story that both the gas pipelines and the electricity lines simply exploded within a few hours of each other on Russian soil; instead, many blame Russian officials, especially given that the occurrence was preceded by a nearly 500 percent price hike for Russian gas being exported to Georgia between 2004 and 2006.

Overall, these pre-war sanctions were very powerful. At that time, Russia still had energy dominance over Georgia, which it has since lost due to its own miscalculated policies. In 2006, Russia coupled energy sanctions with the trade embargo. Rospotrebnadzor forbade Georgian wine on “health” grounds, while Georgian mineral water was outright barred from the Russian market.

Additionally, Russia expelled a few thousand Georgians citizens, who were literally tracked down and pushed into Russian military cargo planes to be flown to Tbilisi. Three Georgians died during these raids. The European Court of Human Rights ruled in 2014 that the deportations had violated human rights and ordered Moscow to pay compensation.

The 2006 sanctions cost Georgia between $0.5 and $1 billion. For Georgia’s narrow economy, this was a big loss. In contrast, the tourism and transportation ban will ultimately cost $200 million, as estimated by the leading Georgian bank TBC Bank, which is in line with calculations done by Georgia’s central bank.

The long-term impact might be milder. The Georgian economy is more diversified and certainly far more resilient now. Unlike in 2006, Georgians are hardened to deal with the current sanction regime. Galt & Taggart, Georgia’s leading business and financial advisory, summarized the situation well stating that “dealing with Russian sanctions is not a new challenge for Georgia. The 2006 Russian embargo forced Georgia to redirect its focus from Russian market, which expanded export destinations and improved [the] quality of Georgian products.”

The managing partner of one of the biggest Georgian wineries, Tbilghvino, said of the economic relationship, “If a Georgian wine embargo [is] imposed, it will certainly be very bad. This fact has already taken place in the past and [Russia] can use this leverage again. Nowadays, about 20% of our products are exported to Russia. We strive to make their share of our portfolio diversified and it will not exceed 20-25%. The industry has once done it and will once again go through it.”

As of early July, it was obvious Russia had no serious appetite to cut all economic ties and, thereby, give up their only remaining economic weapon against Georgia. However, another blast in Russo-Georgian relations happened on July 7, when Georgian television anchor Giorgi Gabunia cursed Russian President Vladimir Putin in the worst possible swear words during a prime-time show.

On July 8, the anti-Georgian propaganda was back, and the Russian State Duma released a statement detailing “possible additional economic measures in connection with anti-Russian provocations in Georgia.” The next day, the Duma urged prohibiting the supply of Georgian wine and mineral water to the Russian market and suppressing the remittances flow from Russia to Georgia—a retribution worth $1 billion.

In a July 9 public interview, President Putin “declined” the State Duma proposal on the new sanctions. Despite pronouncing his “generosity” and “positive feelings” towards the Georgian people, he then insulted them in the worst possible way, by telling a factually incorrect history of Georgia, accusing Georgians of occupying Abkhazia, and staging genocide in South Ossetia. This interview exposed the true state of Russo-Georgian relations. As Georgian expert Gia Khukhashvili described it, “Russia acts like Yakuza [the Japanese-origin Mafia], now they ask the Georgian government to cut a finger to prove their loyalty to them.”

The Georgian government “welcomed” Vladimir Putin’s decision to avoid new sanctions. Instead of an official denunciation of his other remarks, the Prime Minister and the Minister of Foreign Affairs downplayed the the allegations’ importance. Foreign Minister Zalkaliani said, “we have repeatedly heard similar statements; this is an attempt to present the historical facts in a distorted way.” In an interview with television stations, Zalkaliani “explained” the government’s reconciliatory speech as resulting from the importance of Georgia’s economic relations with Russia.

Indeed, Georgia’s economic exposure to Russia is still significant; the Georgian policy institute ISET says it accounted for about 9.3 percent of GDP in 2018. In its calculation of the “Gavrilov’s Effect” on the Georgian economy, ISET explained that, since 2013, “Georgian exports to Russian market increased significantly as trade was restored. Georgia also gained popularity among Russian visitors.”

As a matter of fact, Russia’s restored ability to weaponize economic connections against Georgia is a direct outcome of the government’s normalization policy. The policy and the government itself may have fewer supporters in Georgia, but there are still plenty of Georgians who want to see Georgia in the Russian orbit again, and the ex-Speaker of the Parliament is not alone in her desires. Since Mr. Ivanishvili took power in 2012, pro-Russian politicians have become increasingly outspoken, something that would have put them in a jail during the Saakashvili administration. In an interview with Russian Komsomolskaya Pravda, the former architect of Ivanishvili’s 2012 elections victory, Vladimer Bedukadze, said, “I would send tanks in Putin’s place, as it was in 2008!”

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Kaha Baindurashvili is a research fellow at the New Europe College in Bucharest and formerly served as the Minister of Finance of Georgia (2009-2011). Kaha covers Eastern European and Central Asian politics and economics. He graduated from Williams College, Massachusetts, with a degree in Development Economics (MA). Kaha’s Twitter account is @kbaindur.