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Thursday, November 1, 2012

Georgia and Russia seem intent on resuming trade

by Nino Patsuria
 
31.10.2012. Georgian wine and water may reappear on Russian market soon as both countries appear ready to resume trade relations. Georgian wine and spirit producers gird loins to undertake the quality-related procedures put out by Russian side in order to admit Georgian product back after 7 years of trade halt.

Genadi Onishchenko, head of RosPotrebNadzor, the chief sanitary service of Russian Federation, sent inviting signals past week and official Tbilisi said yes.

Based on Russian media, Onishchenko appears ready to discuss applications of Georgian wine and mineral companies in order to admit them on Russian market if new Georgian government does not hamper the process. He also reminds Georgian entrepreneurs that the essential precondition for approval is arrival of trusted Russian specialist in Georgia to carry out on-spot inspections of applicant companies.

In response, Davit Kirvalidze, a new Minister of Agriculture of Georgia, stated quite clearly on October 29, that Georgian government is interested to support the idea (see Agriculture Minister: Georgia ready to create a working group on trade with Russia).

“Georgian side will not hamper the process, moreover, we are interested to support each company willing to get to Russian market as much as possible. We are ready to discuss creation of working group, get experts [from Russia] if they arrive and accelerate this process,” Kirvalidze said adding that the entire world fights for getting a foothold at Russian market and it is important to Georgia to get there too.

Russia hurled Georgian agriculture product [including wine, water, fruit and vegetables] off the market in 2006 for alleged quality problems. However economic and political analysts believed the real reason behind the trade embargo laid in political tension between countries aggravated since 2004 after the Rose Revolution government took the office term and chose a verbally incontinent diplomacy. Georgian President Mikheil Saakashvili sent offensive messages [even calling humiliating nicknames to Russian president] to the Kremlin and Irakli Okruashvili [now in exile], ex-economic minister of Georgia, said Russian market was suit to sell even fecal masses.

The abusive policy led to a short-lived war with Russia in August of 2008 when Russia routed Georgia and occupied 20% of its territory that ended up by seizure of diplomatic relations between the two countries. Only in fall of 2011 when Georgia, already a member of the World Trade Organization (WTO) and able to veto Russian enrolment within the WTO, admitted Russia to the global trade club the trade embargo was canceled automatically [as far as the WTO regulation prohibits any trade restrictions between its member-states]. However no actual trade resumption ensued in practice for sides still remained quite hostile.

On the one hand the special quality-related procedures required by Onishchenko would never end even to such reputable companies as Davit Sarajishvili Brandy and IDS Borjomi International [producing Borjomi mineral water] both holding number of internationally acknowledged quality certificates and awards allowing both companies to export their product to the most pretentious EU market.

On the other hand Georgian ex-government pressed on the business latently to prevent their appearance at Russian market. For example Borjomi that filed its application at Russian sanitary body as soon as Onishchenko verbally lifted embargo in summer of 2011 makes no comment on the issue for around a year.
Sarajishvili behave more bravely. It has been permanently reporting how the application procedures were progressing if it can be said so as far as the application was practically frozen since past fall in spite of the fact that Onishchenko personally approved the Sarajishvili brandy as Elguja Bubuteishvili, Head of Sarajishvili Company, said in the interview to Georgian Journal. According to him, the onlyhmissing factor was the intergovernmental agreement.

Due to the similar reason most companies inquired by GJ since fall of 2011 appeared uncertain to reappear at Russian market as found it risky for political reasons. Entrepreneurs still remember losses they faced when the market closed down in 2006 and Georgian export almost by 90% depending on that market went flat. Although nobody denied that Russian market [been traditional to Georgia for centuries in fact] still lured Georgian companies for their product was popular and sold easily unlike the EU market.

“I would like to get back to Russian market as 90% of my sales came on Russia before embargo, but I prefer to wait,” Shalva Khetsuriani, President of Khetsuriani Cellar, told GJ in spring. So did Nabeghlavi mineral water and Tbilvino.

The shift of power encouraged Georgian entrepreneurs to think of getting back to Russian market especially after Onishchenko’s last message.

“Russian experts inspected my enterprise two months ago and approved everything, potential clients from Russia are already here willing to take my product but am still expecting for the final answer that depends on decision of governments I believe,” Bubuteishvili said this time. According to him, he has trustful information that Sarajishvili brandy is already on sale in Moscow restaurants but he has no idea how the product achieved that place.

“I plan to submit an application, am just finding out what papers are necessary,” Khetsuriani, been quite wary for a long period, said decisively this time. However he expects the approval procedure to be long and tiresome due to Russian red-tape.

Demur Giorkhelidze, an economic analyst, believes now when the governmental pressure is removed the trade restoration issue between Georgia and Russia will go smoothly in spite of the notorious Russian red tape. “Now the issue will be solved automatically as creation problems to trade for counters according to the WTO regulation,” he said adding that Georgian entrepreneurs who had sluggish competition years ago at Russian market should be prepared to a strenuous competition now as Russian market changed a lot and the best product of the world infested it lately. “But it still keeps in memory our product and Georgian entrepreneurs who need huge investment to advertise their product on the EU market, may reach similar result by much less efforts in Russia as they miss familiar Georgian product,” he said.

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