Russia and Georgia: The 2023/24 Trade and Investments Dynamics

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By Emil Avdaliani

Russia and Georgia have endured a troubled past, due in part because of the short war in 2008 and the ensuing intermittent political tensions. Nevertheless, the two countries have maintained a certain pragmatic stability in bilateral relations, and both surprisingly and increasingly so following the start of the conflict in Ukraine. For example, Georgia has abstained from joining anti-Russian sanctions, neither has it openly criticized Moscow for its actions. Moscow has responded by restoring direct flights between the two countries and abolishing the visa requirements imposed on Georgian nationals in the early 2000s. Russian officials have repeatedly praised the current political stance of the Georgian government.

The backbone of these developing relations is the growing pace of economic cooperation. As Russia re-orients its trade away from the West toward the Middle East and Asia, its neighbors are benefiting from the shift and Georgia is no exception. Though the two countries maintained trade ties after their 2008 war, the growth that Moscow and Tbilisi have seen over the past 18 months is a direct result of the shifting trade patterns in Eurasia.

Russia–Georgia Bilateral Trade

In 2022, Russia and Georgia traded approximately US$2.5 billion worth goods, up by 52.3% in comparison with 2021. Exports from Georgia to Russia increased by 6.8% (US$652 million), and imports from Russia to Georgia – by staggering 79.4% (US$1.8 billion). The numbers are spectacular as they mark the highest level of bilateral trade for the past sixteen years.

The trend is continuing and accelerating in 2023. The trade turnover between the two countries over the first six months of this year has already exceeded US$1.2 billion, an increase of 75% more than the same period in 2022. This was closely followed by Turkiye with US$1.1 billion, itself an increase of 16% more than in the same period in 2022. China comes third: Georgia’s trade turnover with it reached US$623 million, a 20.5% decrease compared to the same period in 2022, suggesting that some Russian exports are now competing successfully with Chinese sales to Georgia.

The majority of Georgia’s exports to Russia include wine, ferroalloys, re-exported cars from Western countries, mineral waters, and natural waters. In 2022 Georgia’s 67% of wine exports went to Russia, 57% of its mineral waters, and 53% of all Georgian ferroalloys were exported to Russia. This situation has remained constant, in H1 2023 almost 60,000 tons of mineral and fresh water, 45,600 tons of water containing sugar additives, 36,000 tons of ferroalloys, almost 30,000 tons of wine, as well as 3,800 cars were exported from Georgia to Russia. Important sectors of the Georgian economy are largely dependent on the Russian market.

As discussed, much of Georgia’s wine produce is sold in Russia, as it is cheaper to produce than elsewhere and viniculture is very well established in Georgia’s national culture and identity. Russia has been a primary market for Georgian wine for centuries, while viniculture history in the country goes back nearly 5,000 years. In terms of contemporary competitiveness, the average export price of one litre of Georgian wine exported to Russia currently stands at US$2.75, while for the European Union the figure is US$3.16 and reaches US$6.58 dollars when imported from the United States. In other countries of the Commonwealth of Independent States, including Armenia and Azerbaijan, also both wine making countries, the price is US$3.08.

As concerns Russian exports to Georgia, the country remains the largest supplier of grain and flour to Georgia. Other major exports include natural gas, oil and various oil products, glass containers, and construction materials. In the first half of 2023 Russia exported to Georgia 462,300 tons of oil and oil products, more than 329,000 tons of natural and associated gases, 85,800 tons of wheat and wheat-rye flour, 52,500 tons of bottles and glass containers, and almost 50,000 tons of coke and semi-coke from coal.

Given the Western sanctions imposed on Russia, and filling in the void in its trade budget, Moscow is selling its natural resources with significant discounts. Over the past year, Russia’s share of Georgia’s import of gas/oil and other energy resources has significantly increased. In January-April 2023, Russia’s share of Georgia’s total gasoline and diesel imports increased to 85%. In the same period the import of natural gas to Georgia also increased by 116%. Most of this gas is imported for commercial use, as Georgia’s main supplier is neighboring Azerbaijan. Similarly, there is approximately a 96% dependence on Russian share in flour and wheat imports.

Along with growing trade, tourism is also expanding. For instance, in 2019, the share of Russian citizens among the number of visitors to Georgia reached 19% of the total, while in 2023 the number has grown to 24.1%. In 2022-2023 nearly 33.5% of Georgia’s tourist income came from Russian visitors.

Remittances have also seen a sharp increase. Just over a decade ago, in 2012 the total share of remittances sent to Russia from Georgian expatriates stood at 56%, but a gradual replacement from other countries in terms of manual labour requirements in Russia saw this decrease to 18% by 2021. But following the outbreak of the conflict in Ukraine the situation has dramatically changed. In 2022 US$4.37 billion was sent from Russia to Georgia – nearly US$2 billion more than sent in 2021. In the first several months of 2023 remittances from Russia to Georgia constitute nearly 54% of the total incoming money into the country. Russia’s current industrial labour shortages as the economy has rapidly geared up has meant new factory and agricultural work opportunities for Georgians at more attractive salaries than they can obtain at home. The average GDO per capita in Russia is over US$12,000, nearly double Georgia’s average US$7,600.


As a similar to Russia’s investment dynamic in other neighboring countries across the CIS, the scope of Russian financial involvement in Georgia’s economy is quite limited. In 2022, foreign direct investment in Georgia rose by 61.1% more than in 2021 amounting to US$2 billion. The biggest investor was the UK with US$428.3 million, followed by Spain with US$367 million and the United States with US$163.9 million. Russia invested only a minuscule amount of approximately US$71 million.

A similar trend is observable in the first quarter of 2023. Overall foreign investment level decreased in Georgia by 13.7% compared to the same period of 2022. The Netherlands tops the list with US$239.6 million followed by Japan US$63.2 million, and the United States with US$54.7 million. Russia invested only US$28.2 million.

Russian investments mostly go to Tbilisi, being the capital city, and the Adjara region on the Black Sea coast in western Georgia, which is being developed in terms of both ports and tourism facilities, and is closer to the Russian border. The majority of Russian investment goes focuses into real estate. Among the developments specifically focused on the Russian investment market are Dreamland Oasis, Orbi Ginza, Ambassador Batumi, and many others. Russians also buy restaurants in Tbilisi and Batumi.

Yet when it comes to investing into major, big ticket infrastructure projects, overall tense political relations and most of all mutual distrust (and especially public opposition in Georgia) will likely remain a major hindrance for improvement of ties beyond the existing level. Georgia will continue to abstain from participating in Moscow-led economic and military multilateral organizations. It will also abstain from restoring full diplomatic relations with Russia severed in 2008. This ambiguous situation will maintain positive bilateral trade levels, but it will largely remain a major roadblock for Russia investment into Georgia for the coming years.

Emil Avdaliani is a professor of international relations at European University in Tbilisi, Georgia, and is a scholar of the silk roads.

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