CONFLICT WITH RUSSIA COST GEORGIA TWO BILLION EUROS: STUDY
by Luc Andre
Agence France Presse
Sept 3 2008
The Georgian-Russian conflict has cost Tbilisi roughly two billion
euros (2.8 billion dollars), according to a study by the Vienna
Institute for International Economic Studies (WIIW) published
Wednesday.
The figure takes into account material damage, which Georgian President
Mikheil Saakashvili last month valued at 1.4 billion euros, and future
losses in production, exports and investment, the report said.
"Georgia has experienced a real boom in recent years, noticeably from
the construction of an oil and gas pipeline. (But) investor confidence
risks being dented following the crisis," said one of the report’s
authors, Vasily Astrov.
He added that violence could also return to the Nagorny Karabakh
region, which crosses over the oil pipeline and is the subject of an
unresolved dispute between Georgia, Armenia and Azerbaijan.
The WIIW study said the crisis could jeopardise a European Union
project to bypass Russia for natural gas, because of investor concern
over the reliability of Georgia as a major transit country for gas
supplies into Europe.
In a bid to reduce its reliance on Russian supplies, the EU is pinning
its hopes on the construction of a 3,300-kilometre (2,050-mile)
pipeline, running from the Caspian Sea through the Caucasus via Turkey
and the Balkan states to Austria.
"It is possible that Kazakhstan and Turkmenistan are going to stop
transporting their hydrocarbons through Georgia. Moscow buys a lot
of hydrocarbons as well and can threaten to force down the price,"
the study quoted Astrov as saying.
But with strong backing from the West, the government in Tbilisi is
able to rely on international aid to help it repair the damage from
the fighting.
Last week, the United States pledged one billion dollars (691
million euros) to Georgia, while the International Monetary Fund
(IMF) allocated almost 519 million euros.
The EU also promised Monday 15 million euros to Georgia during
its extraordinary summit and promised to organise an emergency
international donor conference to help pay for the country’s
reconstruction effort.
The WIIW study also examined the future for the Georgian separatist
regions of South Ossetia and Abkhazia, whose calls for independence
following the conflict were recognised by Moscow, and on Wednesday,
by Nicaragua.
Astrov wrote that South Ossetia, with its 70,000 residents, is able to
rely on subsidies from Moscow, while Abkhazia can revive its tourism
sector, long healthy in Soviet times.
In the long term, the authors argue that a more defiant Russia could
inflict great economic harm on Georgia.
"Foreign investment is under threat. It is not so much an issue of
losing money, of which Moscow has a lot, but the loss of technological
contributions and information which come from these investments,"
Astrov said.
But it is not just the EU that stands to lose out in the event of an
energy dispute in the Causcasus. "Russia also relies on Europe for
its hydrocarbon exports. It is prepared to pay more, unlike China,"
the report added.