Home / Economy / The Role of Russia in The Georgian Economy
The Role of Russia in The Georgian Economy

The Role of Russia in The Georgian Economy

A significant decrease in oil prices, geopolitical tensions and sanctions established by the western countries has resulted in retarding the pace of development of the Russian economy, which, on its part, has reflected on partner countries, among them is Georgia.

a) The Georgian export to Russia in January-September of 2015 has decreased from USD 212 to USD 112 million (by 47%) compared to the similar period in 2014, which was not caused by the deterioration of the quality of Georgian goods and/or reduction of production scales, but mostly by devaluation of the Russian Ruble and reduced demand on foreign goods in Russia.

b) In the same period the amount of monetary transfers has decreased by approximately 40% (from USD 555 to USD 323 million). This process was also triggered by devaluation of the Russian Ruble and reduction of the amounts of incomes of the Georgian emigrants residing in Russia. In spite of the reduction of such scales, the monetary transfers made from Russia makes 2/5 of total transfers and therefore, it occupies the first place.

c) According to the data of the first 2 quarters of 2015, foreign direct investments from Russia made USD 28 million, whereas the same index in the similar period of 2014 equaled to USD 43 million (less by 35%). In spite of the fact that Russia has never been distinguished by special amounts of foreign direct investments in Georgia, it should be indicated that the Russian direct investment in the given period has decreased not only in Georgia, but also in the whole world.

At the same time, Russian import to Georgia has increased by 11%. Namely, during the first 9 months of 2015 it made USD 418 million, whereas in the similar period of 2014, it made USD 370 million. This was very much facilitated by the crisis in Ukraine, which yielded is position in trade relations with Georgia.

The Russian Economy Actualities

According to the OPEC data of 12 November 2015, price of one barrel of oil made USD 40, 21 (please see table #1). As per forecast of International Energy Agency (IEA), the oil price per barrel will not exceed USD 80 in spite of the growing demand during the coming 5 years. According to the information of the same Agency, oil companies in the US, Canada and Brazil suffer the most because of the reduced prices on oil. At the same time, it should be stressed as well that in parallel to the reduction in prices on oil the fight for the oil market shares is being more and more intensified. Namely, Saudi Arabia is trying to retain its share on the European market, where the sales index has been reduced from 13% to 10% during the last 6 months.

As for Russia, it should be noted that in 2015 oil extraction has reached its maximum in Russia. At the same time, after limitation of oil export from Saudi Arabia by China, Russia has simply gained a leading position at China’s oil market and it is one of the main suppliers of China since May.

Dynamics (in %) of GDP of Georgia and the Russian Federation according to quarters of 2006-2015 shows that in 2008 and especially in 2009 the Russian Federation witnessed a sharp decrease in GDP in the indicated period (similar to Georgia), which was reflected in recession of the Georgian economy in this period and reduction in GDP by 3.7% instead of economic growth.

This was mainly caused by the Russo-Georgian war, reduction in volume of foreign investment in Georgia and negative results of the world economic crisis. As for the current year, based on the diagram it could be indicated that the Russian Federation’s GDP dynamics is characterized by negative index, whereas Georgia’s GDP index show a little, but stable growth tendency. In particular, GDP grew by 3.2% in the first quarter of 2015, whereas by 2.5% – in the second quarter. At the same time, the volume of Russian GDP in the same period was reduced by 1.9% in the first quarter and by 4.6% – in the second quarter.

Despite the fact on 9-10 November the Russian Ruble’s exchange rate was stable, the reduction in price of oil on 12 November have again reflected on the Ruble exchange rate. Therefore, on 13 November Ruble has devaluated and equaled to 65,4541 (against USD dollar) and 70,3370 (against Euro). However, it should be noted that the Central Bank of Russia is no longer trying to retain the rate and therefore, it avoids intervening through foreign currency at the market unlike it acted at the end of 2014 and beginning of 2015. Moreover, current policy of Russia is not oriented towards the strengthening of Ruble, but on application of a certain export advantage got as a result of devalued Ruble.


Despite tense Georgian-Russian political relations, development of the Georgian economy very much depends on normalizing the economic situation in Russia, which, on its part, may pose threats to Georgia.

Authors of the article: Kavtaradze Nona  (PhD in Business Administration,  Tbilisi State University) Charaia Vakhtang  (PhD in Economics, Tbilisi State University),Dgebuadze Salome (Student of Tbilisi State University)