On December 5th, 2014 Economic Policy Research Center (EPRC) Georgia and Regional Studies Center (RSC) Armenia held a joint discussion panel: Regional Divergence: The European Union and the Eurasian Union. The discussion was moderated by Keti Khutsishvili – Executive Director of the Open Society Georgia Foundation.
At the event, EPRC presented its new report Georgia and the Neighbors: FOCUS on Armenia – Eurasian Customs Union (ECU) Crawling Closer to Georgia. The report was published with the financial support of the Open Society Foundation’s Think Tank Fund.
Georgia and the Neighbors is an analytic periodical covering economic, financial and business trends in Georgia’s neighboring countries and in the major trade partners. The aim of the brief is to scrutinize the potential implications of the key political and economic developments taking place within the region or in the world.
The South Caucasus has once again re-emerged as an arena of competition, as Georgia has successfully signed its Association Agreement with the EU, while Armenia has chosen to seek membership in the Russian-led Eurasian Union. In light of this new regional divergence, in its new report EPRC examines the implications for the region, with an added focus on the political economy dimension of the possible ramifications for bilateral Georgian-Armenian relations.
The report prepared and presented by Giorgi Bakradze Senior Research Advisor of the EPRC
highlights that for Georgia, risks associated with the Armenia’s ECU integration are more political then economic. With Armenia in the ECU, Customs Union is crawling closer to Georgia. Moreover, issue of better land connection between Russia and Armenia touches upon two extremely sensitive issues for Georgia’s security – Abkhazia-Georgia railway and Dagestan-Kakheti highway road construction. In the long term perspective, given Russia’s crawling expansion in the countries of former Soviet Union, Georgia can expect more political pressure in the coming years. Russia will certainly push for an uninterrupted all-year round land connection with the Armenia and the most important pressure point will be the re-opening of Abkhazian railway.
As for the economic threats, report concludes that they are less significant and mostly related to decrease in motor vehicle re-export to Armenia due to drastic increase in corresponding tariffs. Automobiles comprise 38 % of exports to Armenia and diminishing this market means that Georgia will have to find its substitute to avoid negative effects in the economic growth.
The invited guest, Director of the Regional Studies Center (RSC) Richard Giragosian provided the broader background of the Armenian president’s decision to sacrifice the Association Agreement with the European Union in favor of his commitment to joining the Russian-led Eurasian Economic Union. Richard Giragosian then focused on the implications of the decision, with an assessment of the ramifications for bilateral Armenian-Georgian relations and the economic consequences for Armenia.
Richard Giragosian considers that Armenia’s experience carries a number of important lessons for Georgia:
1. No excuse for CSOs to be passive – as Armenia led successful negotiations with Brussels for more than 3 years, Armenian CSOs became reluctant and were completely unprepared to face dramatic U-turn in Armenian policy.
2. Negative effects of lack of public awareness on EU – Government was unsuccessful to elaborate effective communication and information strategy in the sphere of EU integration. Lack of information regarding EU promoted disinformation and gave power to Russia.
Without any real changes in the policy, Armenia was sacrificed by Russia to send strong message to Ukraine, Georgia and Moldova. For Georgia to succeed, it is extremely important to decrease dependency on individuals and strengthen institutions instead.
Recommendations for Georgia:
1. Work intensively to de-escalate risks in Samtskhe-Javakheti (populated by ethnic Armenians) and Kvemo Kartli (populated by ethnic Azeris) regions of Georgia;
2. Closely monitor increasing Russian troops in Armenia and try to build deep bilateral military cooperation;
3. Form special bilateral working groups on energy security, car market, etc.;
4. Advance democratic goals and strengthen democratic institutions (as Russia greatly benefits from vendetta politics in Georgia, as well as deepening conflict between the head of state and the head of government, etc.);
5. Provide information to the population of Georgia on the advantages related to the EU integration process and on the commitments that Georgia has undertaken in this respect in order to avoid manipulation of public opinion by the mushrooming pro-Russian NGOs, especially in the rural areas;
6. Increase public awareness on the benefits of DCFTA;
7. Activate CSOs to keep Georgian government accountable to implement Association Agreement.
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Regional Studies Center (Armenia) is an independent, nonprofit think tank offering a wide range of strategic analysis and objective research, and implementing a number of educational and policy-related projects.
Economic Policy Research Center (Georgia) aims to improve the welfare of citizens through expert guidance of decision makers in various issues of economy, capacity-building of public institutions, and civil oversight of budgetary expenditures.
