Author: Valeri Chechelashvili, Senior Fellow at Rondeli Foundation 

On February 19, 2020, the occupied Tskhinvali region discovered itself at the verge of a consumer crisis with the most painful components being manifested in providing the population with food and medicine. This fact is not surprising. The region’s economy is in a deep crisis, completely dependent on the Russian Federation. With the Russian ruble in circulation, a financial resource flowing in from Moscow is returning back to Russia as payment for critical import. Now it turns out that there are problems with the transfer of goods on the “South Ossetian” segment of the Georgian-Russian border.

In addition to bureaucracy and corruption, well-known characterizing features of the Russian public service; in particular, the customs administration, there are additional reasons that create problems for the transfer of goods from the Russian Federation to occupied South Ossetia, Georgia. For instance, the region’s market is very small and it is necessary to combine goods of different categories in one load which creates procedural problems of customs clearance. This argument is valid for the trade of the Russian Federation with occupied Abkhazia as well.

However, the general situation that has developed in regional trade after the establishing of the Eurasian Union is more interesting for analysis. The fact is that with the signing of the Eurasian Union documents; in particular, its Customs Code, the situation in regional trade has radically changed.

The Agreement on the Eurasian Economic Union Customs Code was signed in Moscow on April 11, 2017. The Code is very serious document consisting of 1,169 pages, two annexes and exhaustingly covering the whole field of customs matters and regulating all spheres of the signatory countries’ customs activities. It contains references to the Eurasian Economic Commission as an institution entrusted to rule the process of the implementation of the Code’s provisions. It is worth mentioning that according to the Eurasian Economic Union’s regulations, the Commission is a supranational institution responsible for many areas of international cooperation and equipped with an impressive variety of instruments. The Commission has many areas of responsibility such as macroeconomic, competition and energy policies, etc. Among others, and this fact is of particular interest for our case, the establishment of trade regimes with anу third countries belongs to the Commission’s areas of activities.

This means that the foreign trade of the Russian Federation with occupied “South Ossetia” is in fact an integral component of a broader subject – trade of the Eurasian Union with Georgia. This reality has already affected the volume of our trade. For example, this year Georgia’s exports to Armenia will suffer from the decisions of the Eurasian Union; in particular, as a result of restrictions on the re-export of vehicles. It turns out that the bilateral Free Trade Agreement between Georgia and Armenia does not work in this part.

But if we get back to the trade relations of the Russian Federation with the occupied Tskhinvali region, the documents of the Eurasian Union (having in mind its responsibility and legal competence to establish a foreign trade regime with the third countries) create additional space for Georgia for diplomatic maneuvering. Together with Russia, members of the Eurasian Union are four Georgia-friendly states:  Belarus, Armenia, Kazakhstan and Kyrgyzstan. It would be quite expedient to initiate consultations with our partners in order to bring to their attention the following messages:

  • Russia’s trade with the occupied Tskhinvali region is in fact foreign trade of the Eurasian Union with Georgia;
  • Trade of the Eurasian Union with the occupied Tskhinvali region, as an integral part of Georgia, is illegal without the appropriate consent of Georgia and is incompatible with the friendly nature of relations between Georgia and the four member states of the Eurasian Union;
  • In the case that the Russian Federation annexes the already occupied Tskhinvali region, the Eurasian Union will face the responsibility for the consequences of such an act at least in the field of trade relations.

In addition to bilateral meetings with the member states of the Eurasian Union, these theses could also become the topic for consultations of the representative of the Georgian Government (for example, the State Minister for Reconciliation and Civic Equality) with the Chairman of the Board of the Eurasian Economic Commission, Mikhail Myasnikovich. He often travels from Moscow to the capitals of the member states. Such a meeting could take place either in his native Minsk or in Yerevan …

It is clear that the arguments provided in this article fully apply to the trade relations of the Eurasian Union with Abkhazia, Georgia as well as with Crimea, Ukraine, some districts of the Donetsk and Luhansk regions of Ukraine, Transnistria, Moldova, etc. This creates a capacity for the states that have signed Association Agreements with the European Union (including the Deep and Comprehensive Free Trade Area) to elaborate a common strategy vis-à-vis the Eurasian Union.

As a general conclusion, it is worth re-emphasizing that the existing situation is one more vivid demonstration of the well-known fact that the economy of the Tskhinvali region cannot keep sustainability when isolated from the Georgian market. Its perspective lies in the development of transit and tourism – two priority sectors of the Georgian economy. This compatibility is the recipe for the well-being of the Tskhinvali region’s population. There is no such interoperability with the Russian Federation, especially under occupation conditions, for the simple reason that the region captured by Russian aggressors has become a dead-end, with all of the respective consequences. Therefore, the current crisis in the Tskhinvali region is not the last one.