"Unresolved conflicts - Georgia's existential problem - will find their solution" Zviad Zhgerenaya for Caliber.Az

Georgian expert and member of Return Movement Zviad Zhgerenaya answers Caliber.Az's questions on the impact of the Russian-Ukrainian conflict on the economy of South Caucasus.

- What consequences may the Russian-Ukrainian war have for the world financial system in general and the economy of the South Caucasus and Georgia in particular?

- The consequences of Russia's war with Ukraine have already caused upheaval not only in those countries, but throughout the region and even the world, and they speak to the importance of having a global financial safety net and regional mechanisms to protect economies. Although some of the consequences may not become fully apparent until many years from now. All of this is very important for a small country like Georgia, with a population of 3.5 million people, 20 percent of whose territory is occupied by Russia.

Most CIS countries, including the South Caucasus, are heavily dependent on the Russian economy through trade and finance, including direct investment, and some of them also rely on remittances from migrant workers. Therefore, the inevitable economic downturn in the Russian Federation will have a negative impact on these countries. On the other hand, some companies, particularly in finance and information technology, moving out of the Russian Federation in order to avoid the effect of sanctions could be positive for the countries to which they have moved.

At the same time, I would like to emphasize that in the current situation, all forecasts are very tentative.

- Georgia has been striving to join the EU for a long time. What will it give to the country's economy?

- We know that 85% of the population of Georgia supports the European path of the country and it's stated in its Constitution. Recent events, when people took to the streets to defend European values, proved that the aspiration of the state to become a member of the European family is close to reality. We should not forget about the Ukrainian factor, which accelerated many processes.

The European Union supports Georgia in the development of its economic potential through international cooperation. This includes assistance in accordance with the legal standards of this international organization. In 2014, the EU and Georgia signed an association agreement, including a Deep and Comprehensive Free Trade Area (DCFTA). It is seen as a special type of agreement because it envisages the ambitious goal of integration into Europe's internal market. The DCFTA is the axis of the association agreement and helps modernize and diversify Georgia's economy. In 2014, the trade aspect of the agreement, including the DCFTA, began to be implemented. The DCFTA deepens Georgia's economic ties with the EU and covers such issues as public procurement, common customs rules, technical and sanitary standards for foodstuffs, intellectual property, and competition rules.

At the same time, the EU supports our government in the process of increasing the country's export potential and maintaining competitiveness by building management systems and quality infrastructure, thereby ensuring compliance with global standards.

And yet, in my opinion, the main thing is that Georgia will be able to develop and prosper at the expense of the huge EU trade system.

- The US has accused a number of countries, including Georgia, of circumventing sanctions against Russia. Do you think this kind of concern from Washington is legitimate?

- There is one characteristic feature of economic sanctions - they are adopted quite quickly, but they are lifted very slowly because such a decision requires political consensus. It should be noted that among the Caucasus countries only such energy supplier as Azerbaijan has access to oil export markets, and Georgia, which is not an exporter of strategic raw materials, is largely dependent on Russian tourism.

But this is one side of the coin. The other is that by not sharing Washington's political pathos, Georgia's leadership risks losing the trust of its major partners and friends. Aware, however, that the line between these two states is very thin.

- Georgia, indeed, is a country with rapidly developing tourism. Recently, however, visitors to Georgia have expressed dissatisfaction with a marked increase in prices, especially in restaurants - as much as 20-30%. What is the reason for this increase and how will it affect the tourist flow?

- As I have already noted, one of the factors that Georgia has not joined the sanctions is the expectation of tourist flow from Russia and Belarus. But the Russian Federation is not the only country from which the flow of travelers has increased. According to the Georgian National Tourism Administration, the number of tourists from Armenia, Azerbaijan, the United Arab Emirates, and European countries has increased significantly. As for the prices, in comparison with European prices and taking into account the quality and conditions of service, we can say that they are quite acceptable. However, the Ukrainian-Russian war has led to an increase in real estate prices, which is caused by the growth in the number of long-term visitors to the country.

- How does the influx of citizens from Russia and Ukraine after the start of the war affect Georgia's microeconomic indicators?

- I would really like to answer this question, noting positive expectations, and saying that the influx of citizens from Russia and Ukraine will have a positive impact on the welfare of the country. But despite the statements of the authorities that we have double-digit economic growth, unfortunately, all this does not affect the improvement of the lives of ordinary citizens in any way, and in general, everything is not so good.

- What impact has the so-called "military special operation" in Ukraine had on remittances from Russia to Georgia?

- Money transferred from Russia is still a significant stimulant for the Georgian economy. But at the same time, there are risks that money caught up in sanctions will be sent in this way. Nevertheless, according to the latest statistics, the dynamics of remittances from Russia have not changed significantly.

- How do you assess the current level of Georgia's cooperation with Azerbaijan and Türkiye?

- Georgia considers Azerbaijan and Türkiye as its historical neighbors, allies, and friends. Naturally, its policy cannot change in this regard. Georgia has unresolved conflicts - this is its existential problem, which will definitely be solved. And the consistently clear policy of the Georgian state towards its closest neighbors will play a huge role in this.