Georgia’s economic dependence on Russia has decreased in 2023 compared to 2022, although, in comparison to 2021, economic dependence on Russia is still considerably higher. In 2023, the decrease of economic dependence on Russia was mainly brought about by a decrease in remittances.  

In 2023, Georgia received a revenue of USD 3.1 billion from Russia through remittances, tourism and export of goods, which is 13% lower than the respective figure of 2022. In 2023, the revenue received from Russia was 10.3% of the Georgian economy (GDP), while in 2022, this figure amounted to 14.5%. In 2021, this figure equaled 6.3%, and before the pandemic, in 2019, it amounted to 9.7%.  

From the specific findings of the study, we should mention the following:  

• In 2023, Russian citizens registered 11,552 companies in Georgia, while they have registered 26,339 companies since the start of the war in Ukraine. Since March 2022, 3.6 times as many Russian companies have been registered in Georgia as in the years 1995-2021;
• 96% of the companies registered in the years 2022-2023 are sole proprietorships. This indicates that a part of the Russian citizens have moved to Georgia for living long term and doing business;  
• In 2023, 1.4 million visitors entered Georgia from Russia, which is 30% more than the figure of 2022, while it is lower than the figure from before the pandemic, 2019, by 3.6%. The share of Russian visitors in the total number of visitors has increased from 20% to 20.1%;
• A part of the Russian visitors are, in fact, immigrants and have settled in Georgia for a long time. According to Geostat, 62,300 Russian citizens stayed to live in Georgia in 2022;
• In 2023, USD 1.5 billion was transferred from Russia, which is 26% lower than the figure of 2022, although it exceeds the figure of 2021 3.7 times. The settlement of Russian migrants in Georgia has brought about a considerable increase in remittances;
• In 2023, Georgia’s exports to Russia increased by 2.3% and amounted to USD 657 million. The share of Russia in the total exports was 10.8%, which is 0.7 percentage point less than the figure of 2022;
• The export of Georgian wine is still distinguished by its high dependence on the Russian market. In 2023, the exports of wine to Russia have increased by 5% and reached USD 168 million. The Russian market takes up a 65% share of the Georgian wine exports, which is the highest figure since 2005;
• In 2023, the imports from Russia decreased by 5% to USD 1.7 billion. However, they are up by 71% compared to 2021. The share of Russia in Georgia’s total imports amounts to 11.3%, which is 2.2 percentage points lower than the figure of 2022;   
• In 2023, the biggest decrease – USD 70 million (11%) – took place in the imports of oil products from Russia. However, compared to 2021, the imports of oil products are up 4 times. The imports of wheat and wheat flour have decreased by USD 36 million (28%);
• In 2023, the imports of natural gas from Russia increased by 15%, and the share of the Russian natural gas in Georgia’s internal consumption reached 20%, whereas it amounted to 17.3% in 2022 and 16% – in 2021. The share of Russian electricity in Georgia’s internal consumption was 0.1%, as Georgia practically didn’t consume any imported electricity in 2023;
• In January-September 2023, FDI of USD 67 million entered Georgia from Russia, which is 17% higher than the figure of January-September 2022. From the FDI of USD 67 million, USD 20.3 million was directed to the finance and insurance sector, while USD 19.8 million went to the real estate sector.  

Recommendations

Economic dependence on Russia poses a threat to Georgia because Russia traditionally uses economic relations as a lever for political pressure on independent countries. For this reason, the goal of the Georgian authorities should be to minimize economic dependence on Russia. For this, it is necessary to carry out the following:  

• To decrease trade with Russia, the Government of Georgia should work more actively to conclude free trade agreements with all strategic partners with which we do not yet have such an agreement;
• As it is difficult to diversify the export market of wine and this cannot be accomplished quickly, the government should have a strategy for decreasing dependence on the Russian market in the next years;
• Assistance from the state budget should not be given to businesses that increase economic dependence on Russia. The introduction of this rule will play an important role in decreasing Georgia’s dependence on Russia, which will enhance Georgia’s economic and political security.   

1. Introduction

Georgia’s economic dependence on Russia contains a threat, because since the dissolution of the Soviet Union, Russia has used economic levers against Georgia, Ukraine, Moldova and other countries on many occasions. For example, in 2006, Russia first stopped the provision of natural gas and electricity to Georgia and then practically prohibited export of products from Georgia to Russia, and at the end of the same year, started to deport Georgian citizens.

Due to this, it is important to know the level and tendency of the dependence of the Georgian economy on Russia. The ongoing Russia-Ukraine War has made observation on Georgia’s economic dependence on Russia even more relevant.

Transparency International Georgia (TI Georgia) published the latest study on the economic dependence on Russia^[1] in September 2023, which explored the situation of the first half of 2023. The present study fully reflects the data and trends observed in 2023.

II. Key Indicators of Georgia’s Economic Dependence on Russia

1. Foreign Trade                           

In 2023, Georgia’s trade turnover with Russia decreased by 3% in comparison to 2022 and amounted to USD 2.4 billion. The decrease in the trade turnover was caused by the decrease in imports by 5%. However, in comparison to 2021, the trade turnover with Russia is up by 47%. In 2023, the share of Russia in Georgia’s total trade turnover amounted to 11.2%; this figure was 13.1% in 2022 and 11.4% in 2021.      

In 2023, exports of Georgian products to Russia rose by 2.3% and amounted to USD 657 million (Figure 1). The share of Russia in Georgia’s total exports was 10.8%, which is 0.7 percentage point lower than the figure of 2022.

Data source: GeoStat

In 2023, the biggest increase took place in the exports of soft drinks from Georgia to Russia – by USD 32 million (36%). The exports of alcoholic beverages rose by USD 20 million (42%) and those of citrus fruits – by USD 14 million (131%). The only significant decrease was in the exports of ferroalloys – by USD 62 million (57%). From March 2023, Russia imposed an anti-dumping tax on the import of ferroalloys, which stopped the export of ferroalloys from Georgia to Russia.

From August 1, 2023, the Government of Georgia banned the re-export of vehicles brought from the U.S. to Russia. And from September 26, a similar ban was also extended to the re-export of vehicles brought from EU countries.^[2] This decision of the Government of Georgia was brought about by the toughening of the sanctions imposed on Russia by the U.S. and the EU. In January-July 2023, the re-exports of vehicles from Georgia to Russia had increased by 200% compared to the analogous period of 2022, while in August-December they decreased by 98%. In total, in comparison to 2022, the re-exports of vehicles to Russia decreased by 11%.

The stoppage of the re-export of vehicles to Russia was followed by an increase in the re-export of vehicles from Georgia to Kirgizstan and Kazakhstan. Presumably, a part of these vehicles are ultimately sold on the Russian market. In August-December 2023, four times as many vehicles went to Kazakhstan and Kirgizstan as had gone in August-December 2022.   

In 2023, wine ranked first in the exports of goods to the Russian market with USD 168 million; soft drinks ranked second with USD 123 million, followed by vegetables and fruits with USD 107 million (Figure 2).

Data source: GeoStat

Traditionally, the export of Georgian wine is distinguished by high dependence on the Russian market. In 2023, Georgian wine worth USD 168 million was sold in Russia, which is 5% more than in 2022. The share of Russia in the total wine exports of Georgia has also risen and reached 65%, which is the highest figure since 2013, when Georgian wine returned to the Russian market (Figure 3).

Data source: GeoStat

As for imports, in 2023 the imports of Russian goods to Georgia decreased by 5% to USD 1,744 million (Figure 4). The share of Russia in Georgia’s total imports was 11.3%, which is 2.2 percentage points lower than the figure of 2022. In comparison to 2021, the imports from Russia are up by 71%.

Data source: GeoStat

The biggest decrease in 2023 was observed in the imports of oil products (fuel) from Russia – by USD 70 million (-11%). In comparison to 2021, the imports of oil products are up 4 times. The decrease in the imports of Russian fuel in 2023 was caused by two factors: 1. Russia had stopped the export of gasoline from September 21 to November 17; 2. Russian gasoline had become more expensive.  

The imports of petroleum coke have increased considerably – by USD 28 million (8 times), the imports of steel rods – by USD 22 million (60%), and those of natural gas – by USD 19 million (17%).

In 2023, oil products ranked first in terms of imports from Russia with USD 552 million. Various food products ranked second with USD 285 million in total, and natural gas ranked third with USD 131 million (Figure 5).   

Data source: GeoStat

Georgia’s dependence on Russian wheat and wheat flour is still high. In 2023, wheat and flour worth USD 92 million was imported from Russia, which was 97% of the total wheat and flour imported to Georgia. However, compared to 2022, the imports of wheat and flour decreased by 28% in 2023. A particularly large drop was observed in the imports of wheat flour (-46%). The main reason for the decrease in imports is a tax imposed by the Government of Georgia on the import of flour from Russia. The tax on the import of flour was imposed in accordance with the requirement of wheat producers in Georgia, and it will be in force until March 1, 2024.

In recent years, Russian electricity takes up an insignificant share of the electricity consumed in Georgia. With the exception of the electricity flowing to the occupied Abkhazia, the share of Russian electricity in Georgia’s internal consumption in 2023 was 0.1%^[3], which was caused by the fact that Georgia practically didn’t consume any imported electricity in 2023.

The situation is different in the consumption of Russian natural gas. In 2019, natural gas imported from Russia took up 6.5% of Georgia’s internal consumption. From 2020, imports of natural gas from Russia increased every year, and in 2022, we consumed three times as much Russian natural gas (520 million cubic meters) as we had in 2019. In the total consumption, the share of Russian natural gas amounted to 17.3%. In 2023, the imports of natural gas from Russia increased by 15% in comparison to 2022 and reached 596 million cubic meters (worth USD 131 million). The share of Russian natural gas in Georgia’s internal consumption rose to 20%.^[4] Eighty percent of the natural gas in Georgia’s internal consumption is imported from Azerbaijan.  

To summarize, since the start of the Russia-Ukraine War, the dependence of Georgian export on the Russian market has decreased, because Georgia’s exports to other countries have increased more than to the Russian market. However, taken separately, the dependence of the wine export on the Russian market has increased, which contains high political risks. The dependence on the import of Russian goods has mainly increased due to the increase in the import of vehicle fuel, ferrous metals, and food products.      

2.       Tourism and Remittances

Before the COVID-19 pandemic, Georgia’s dependence on Russia in terms of revenues was the highest in the tourism sector. Due to the pandemic, in the years 2020-2021, the number of visitors from Russia decreased by 85%.

In 2022, due to the end of the pandemic and the breakout of the Russia-Ukraine War, the flow of visitors from Russia increased considerably. In 2022, 1.1 million visitors entered the country from Russia, which exceeds the figure of 2021 five times, but is 26% less than the figure of 2019.

In 2023, 1.4 million visitors entered the country from Russia, which is 30% more than the figure of the 2022 and 3.6% less than the figure before the pandemic, in 2019.

In 2022, the share of Russian visitors in the total number of visitors to Georgia was 20%, while in 2023, it increased to 20.1%. The statistics of visitors is available from 2011, from which we learn that the share of Russian citizens in the total number of visitors has never exceeded 20% before (Figure 6).

Accurate statistics of the visitors from Russia who stayed to live in Georgia long term is only available as of 2022. According to Geostat, in 2022, 62,300 Russian citizens stayed to live in Georgia, i.e., were registered as immigrants. The data of the migration of 2023 will be released in April this year. According to the Ministry of Internal Affairs, in 2023, 1,856,000 visitors entered Georgia from Russia and 1,887,000 left the country.  ~

Data source: National Tourism Administration of Georgia

According to the National Bank of Georgia, in 2023, Russian visitors spent USD 938 million in Georgia, which is 5.3% more than the figure of 2022.

In the total revenue received from visitors, the share of the revenue received from Russian visitors was 25.3% in 2022 and it decreased to 22.8% in 2023.

Data source: National Bank of Georgia

Remittances from Russia are an important source of revenue for Georgia. In the years 2015-2021, remittances from Russia were decreasing. The situation changed considerably from 2022 as a result of the Russia-Ukraine War. In 2022, USD 1.2 billion was transferred from Russia to Georgia, which is five times as much as the figure of 2021. The main reason for such high growth is Russian citizens relocated to Georgia who receive money from Russia.   

In 2023, USD 1.5 billion was transferred from Russia, which is 26% less than the figure of 2022, although it exceeds the figure of 2021 3.7 times. Remittances started to decrease in comparison to 2022 in the second half of 2023.

In 2023, the share of amounts transferred from Russia in the total remittances was 37%, which is 10.3 percentage points less than the figure of 2022 (Figure 8).

Data source: National Bank of Georgia

3. Foreign Direct Investments   

In the years 2017-2023, the share of Russian investments in the total FDIs attracted by Georgia was 5%. However, about 37% of the FDIs enter Georgia from offshore zones,^[5] and, in certain cases, they are also connected with money of Russian origin.^[6] In 2022, FDIs of USD 108 million entered Georgia from Russia, which is a record number of FDIs from Russia during a single year. From the USD 108 million, USD 71 million was invested in the real estate sector, USD 27 million – in construction, and USD 15 million – in information technologies.

In January-September 2023, FDIs of USD 67 million entered Georgia from Russia, which is 17% more than the figure of January-September 2022. From the investments of USD 67 million, USD 20.3 million was directed to the finance and insurance sector, USD 19.8 million went to the real estate sector, USD 6.4 million was invested in information technologies, and USD 5.2 million – in healthcare.

Data source: GeoStat

III. Russian Business in Georgia

From the Business Registry of Georgia, we obtained information on the business entities whose full or partial owners are legal persons or citizens of Russia. It is such entities that we call Russian companies. However, this may not be a complete list, because there are cases when the owner of a company registered in Georgia is registered in offshore locations, which makes it difficult to ascertain the real owners of the company.

As of December 31, 2023, up to 34,000 companies had been registered in Georgia whose owners are legal persons and/or citizens of the Russian Federation. Seventy-seven percent of these companies (26,339 companies) were registered after the start of the war in Ukraine, from March 2022 to the end of 2023. In 2022, citizens of Russia registered 14,977 companies in Georgia, and in 2023, they registered 11,552 companies (Figure 10).

Ninety-six percent of the Russian companies registered in the years 2022-2023 are sole proprietorships. For the sake of comparison, among the Russian companies registered in 2021, the share of sole proprietorships was 51%. Ninety-nine percent of the sole entrepreneurs have non-Georgian last names.

Data source: Business Register of Georgia

In Georgia, it is not required to indicate the field of operation when a business entity is registered. However, after some time, the field of operation becomes known to Geostat. Currently, we know the field of operation of 4,276 Russian companies registered in the years 2022-2023, from which 3,107 companies (73%) operate in the IT sector. Ninety-nine percent of these companies are sole proprietorships. This is followed by the sector of design and advertising, in which we have identified 231 companies at this stage. We have identified 170 companies in the trade sector, 157 companies – in the sector of restaurants and hotels, and 155 companies – in the sector of education, arts, and entertainment.     

Data source: Business Register of Georgia, Geostat