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Sebastian Staske

Economic exposure to Russia remains stable

In the wake of Russia’s war against Ukraine, some observers have argued that Georgia’s economic exposure towards Russia has risen sharply. However, an analysis of various indicators shows that in many cases there is no structural dependency, but rather temporary special factors are decisive.

  • Georgia
NL 53 July-August
International Trade and Regional Integration

For example, the strong increase in imports of oil products can be explained by the price discount on Russian Urals oil and the high increase in money transfers by immigration, among other factors. However, there is still a high exposure for exports of agro-food products, which can be explained by well-established business relations and regional brand recognition. The diversification of export markets, also towards the EU, is difficult to achieve in the short term, but remains an important goal.

Exposure through structural dependency

With the Russian war against Ukraine, Georgia’s economic relations with Russia have also come into greater focus. Some observers have argued that economic exposure has increased significantly. To check this claim, we have examined relevant indicators and their change in 2022. However, it is important to distinguish economic links from exposure. While the former is a broad concept, we define the latter more narrowly as a structural dependency that is difficult to replace in the short term. In other words, a rising indicator does not necessarily mean a higher exposure, as the reasons for this must also be considered. In this context, it is also important to distinguish between increases that are likely to be temporary and those that appear to be more permanent.

Goods exports: exposure declines, high for agro-foods

Goods exports to Russia reached USD 652 m in 2022, a modest increase of 7% yoy (other regions: +36%). The share in total exports fell to 12% (2021: 14%). Growth was driven mainly by re-exports of motor cars. A decline in exports of ferro-silico-manganese (-37% yoy) due to protectionist measures by Russia caused domestic exports to fall slightly (-3%). In addition to this commodity, domestic exports have traditionally been focused on agro-food products.

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Here, the importance of Russia has always been high and has been increasing in the last year: wine (64% of exports going to Russia), spirits (56%) and water (47%) show sizeable exposure. For wine and spirits, there has also been a notable increase in export volumes. This may be explained by reduced EU sales, which got substituted by additional Georgian exports. Other agro-food exports are limited in value, but the very high exposure (over 90% in some cases) continues.

Goods imports: discount for Urals oil explains increase

Goods imports from Russia amounted to USD 1.8 bn, accounting for 14% of total imports (2021: 10%). The sizeable increase (78% yoy) can be explained above all by a strong rise in imports of oil products. Before the war, these were well diversified: in 2021, Russia’s share was 18%. In 2022, the figure increased to 49% and currently stands at around 75%. On the international markets, Russian Urals oil has been trading at a discount compared to other types since the beginning of the war. The increased imports of oil products are thus a temporary reaction to the price development. However, due to Georgia’s location along the sea, oil products could be sourced relatively easily from other countries when the price differential subsides. The exposure has thus not increased, as re-diversification is possible.

Tourism: statistics inflated due to relocated people

For Georgia’s important tourism sector, Russia has always been an important country of origin, accounting for around 20-25% of tourism revenues. However, data for 2022 have been strongly influenced by the relocation of people from Russia. For the first year of their stay, these people counted as tourists (rather than residents) and thus inflating the revenue statistics. As a result, no conclusive statement on the development of the exposure can be made for 2022.

Money transfers: strong increase due to special factors

Another indicator that received substantial interest last year was money transfers. In 2022, they have quintupled to USD 2.1 bn, corresponding to 47% of the total volume. Usually, money transfers are a good indicator for remittances in a narrow sense (i.e. money sent home to support relatives in Georgia). However, the large increase can be explained by special factors related to the war against Ukraine, namely the relocation of people, capital flight and arbitrage opportunities. Additionally, Russia enacted restrictions on buying crypto assets which were circumvented by channelling the money through Georgia. Overall, the increase in money transfers does therefore not constitute higher exposure.

FDI: difficult to track, but indications for reduction

In general, Russia’s role in FDI is difficult to determine as many investors register their companies in countries with favourable tax and arbitration laws. This makes it difficult to establish the actual owner, which leads to an underestimation of Russia’s share in FDI.

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In 2022, however, there was a case study with Borjomi mineral waters. Before the war, the company was controlled by the Russian Alfa Group. This led to problems related to international sanctions. Production was stopped in April 2022 and exports of mineral water dropped significantly. As a solution, the government took over part of the shares of the Russian investor in June 2022, which reduced the exposure.

Comparison to Armenia: overall similar results

The German Economic Team also conducted a comparable study for Armenia. There are some similarities, as Armenia also experienced a sizable relocation of people from Russia in 2022 which influenced statistics on tourism and money transfers. In general, Armenia’s exposure has always been much higher. Particularly with regards to goods trade (Russia accounting for around 30% of total), exposure remains high, although recent increases in exports can be attributed to re-exports.


In summary, the overall exposure towards Russia has not increased, as the individual indicators show mixed results. In the long term, Russia’s role is stable or even declining (e.g. in money transfers). This trend seems to have been interrupted only temporarily. Nevertheless, some developments remain to be observed concerning exposure. Regarding tourism, this mainly concerns direct flights between Georgia and Russia, which resumed in May 2023 after a four-year Russian flight ban. Up to now, the impact is still low due to the limited number of flights and the relatively small aircrafts. Furthermore, the exposure for exports of agro-food products remains high. So far, well-established business relations and a stronger regional brand recognition facilitate exports to Russia. However, some observers fear that this could be at the expense of quality, for example in the wine sector. Diversification of export markets, also towards the EU, where higher prices can be achieved by meeting higher quality requirements, is therefore difficult in the short term, but remains an important goal.

This newsletter is based on the Policy Study “Georgia’s economic exposure to Russia: recent developments”. The analysis for Armenia is available here.

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