Despite tensions, Georgian exporters anxious for trade with Russia

Four years of embargo, war and a perceived annexation of Georgian territory have not soured the excitement of Georgian entrepreneurs over the prospect of once again selling in the Russian market.

Russians and others in the former Soviet space that have been glugging down Georgian wine and mineral water for centuries represent Georgia’s best customers, and the companies producing these products have not been able to replace the Russian market since Russia slapped bans on all Georgian products in March 2006.

Georgia’s wine and mineral water producers now recognize that they relied too heavily on the Russian market, but they say they have now diversified and spread to new markets over the last four years, and most welcome a return to their old stomping ground.

One notable exception is Natakhtari, Georgia’s leading beer producer. Natakhtari, which was bought by Turkish beer maker, Efes, two years ago, still holds a grudge against Russia.

Before the August 2008 Russia-Georgia war, Natakhtari packaged its delicious beer at two bottling plants — one in the town that bears the company’s name, and the other in the disputed city of Akhalgori. In the aftermath of the war, Russia sat by as separatist Ossetian militiamen expelled thousands of Georgians from their homes in Akhalgori before burning, looting and taking control of the area.

That left the plant responsible for much of their overall production deep behind enemy lines, and it remains unclear who really controls it. Dr. Ina Verstl, who chronicles the international brewing industry in her blog, Beer Monopoly, looked into the issue a few months after the war.

Efes have resigned themselves to the fact that the plant has been lost even though they have the brewery guarded by security guys. Still, no one really knows when (or if ever) the South Ossetians will retreat from the area and how much of the brewery will be left. Scrap metal is Georgia’s (and South Ossetia’s) major export.

Efes’ executives have decided to put on a brave face: They say that this year their Alkhagori brewery contributed 3 percent to [Natakhtari parent company Lomisi]’s beer volumes. This must be small consolation: after all, Efes paid for the brewery. And more importantly, the Alkhagori brewery provided much needed jobs. In Georgia, unemployment is high.

I hoped to get an update on the situation but when speaking with an Efes representative a couple of weeks ago, the conversation ended abruptly as soon as “Russia” came up. They don’t even want to talk about it.

Anyways, here’s the story I wrote for the Asia Times that looks at the issue a little closer and also Georgian companies’ slow move towards growing markets in Asia.

TBILISI, Georgia – Exporters of Georgian goods to Russia, who had to seek new markets in Asia during a near four-year closure of the country’s border with their northern neighbor, are looking to a sales boost from the scheduled reopening of border crossings this month.

Despite lingering tensions between the two countries, Russia is due to allow imports of Georgian goods for the first time since 2006, when it was Georgia’s number one trading partner. It had cited impurities and health risks when it closed the border and initiated an embargo of Georgia’s main exports, wine and mineral water. The Georgian economy was flattened and companies exporting to Russia have yet to fully recover, a process further delayed by the brief war between the two countries in August 2008, which caused an estimated US$1 billion in damage.

Today, although Georgians remain highly suspicious of their huge northern neighbor, Vladimir Papava, senior fellow at the Georgian Foundation for Strategic and International Studies, said the benefits of reinitiating trade with Russia cannot be ignored.

“The Russian market is so huge, it’s really impossible for Georgian wine producers to replace the Russian market with other countries,” he said. “So, if the Russian market will be open for Georgian goods, it’s perfect for our business, for our economy.”

To read the rest of the article, click here.