Moderate Protests, Business Disruptions Remain Likely in Georgia

Hundreds of people were injured on 20 June 2019 when protesters clashed with riot police in the Georgian capital Tbilisi. Protests persisted for several weeks, met with intermittent police crackdowns. Though the situation has largely calmed down, moderate protests and business disruptions remain likely through 2019. Impact for non-Russian businesses and visitors is likely to be minimal however.


Background

Hundreds of people were injured on 20 June when protesters clashed with riot police in the Georgian capital Tbilisi. Under the auspices of the Interparliamentary Assembly on Orthodoxy (a multi-lateral body based in Athens which promotes solidarity between predominantly Orthodox Christian counties), the government of the ruling Georgian Dream coalition hosted Russian Member of Parliament Sergei Gavrilov earlier that evening. Protestors began to gather after Gavrilov, a vocal supporter of the break-away territories Abkhazia and South Ossetia, was allowed to sit in the Speaker’s chair and hold an assembly meeting in the Russian language.

The initially peaceful crowd turned violent as the evening progressed, attempting to storm the parliament building. Riot police responded with rubber bullets and tear gas. Over 300 people were detained and at least 240 were treated in nearby hospitals by the end of the night. The Russian delegation was evacuated. In response to these events Moscow has suspended all flights to Georgia (effective 8 July) and has advised its citizens not to visit the country.   

Outlook

  • Business disruptions for non-Russian companies is very unlikely 

  • Localized political unrest in Georgia is likely to continue, though impact for visitors from outside Russia is minimal

  • The ruling Georgian Dream coalition will likely retain power, though changes to internal government processes are probable

  • Travel and trade disruptions between Russia and Georgia will likely persist for several months

Business Impact

Political disputes notwithstanding, Russia has long been one of Georgia’s largest trading partners. Russia is the largest destination for Georgian exports and the second largest source of imports across all economic sectors

This economic relationship is most pronounced in the tourism sector. Russia is among the highest sources of international visitors to the country, superseded only by neighboring Azerbaijan according to the Georgian National Tourism Administration’s (GTNA) 2018 statistics. In the first six months of 2019 Russia was on pace to be the highest source of tourists, boasting a 31.2% increase compared to last year’s figures. 

In a recent interview GNTA head Mariam Kvrivishvili estimated that the Russian travel embargo will cost Georgia approximately 1 million tourists in 2019 alone. This translates to about 2 billion Lari in economic losses, or around 715 million USD. Considering how tourism constitutes roughly 7 percent of total GDP, Georgia could experience a corresponding total GDP loss as high as 3.5%. It is unlikely that Georgia will be able to attract enough European tourists to make up this difference, despite government-sponsored efforts to do so. Georgian Parliament Chairman Archil Talakvadze confirmed that the government is expecting a significant economic slowdown in a 10 July interview with Imedi TV. 

Russian President Putin announced on 9 July that he is against imposing more comprehensive sanctions on Georgia, though it is unclear to what extent this will re-assure investors. Russian Members of Parliament meanwhile are calling for sanctions against key Georgian exports such as Borjomi Mineral Water and Georgian Wine. An official decision is yet to be made.  

Political Dimensions

Georgian Parliament Speaker Irakli Kobakhidze resigned in response to the protests and violent police crackdown. The head of the Georgian delegation to the Interparliamentary Assembly on Orthodoxy Zakaria Kutsnashvili followed suit shortly thereafter. Yet protests against the ruling coalition continue, including demonstrations outside the home of the Georgian Dream’s billionaire patron Bidzina Ivanishvili. 

However, supporters of the Georgian Dream government appear to be getting better organized. Demonstrators gathered outside the offices of the opposition Rustavi 2 television channel on the evening of 7 July, following an obscenity-ridden Russian-language rant by journalist Giorgi Gabunia. The rant was derided as a “provocation” by President Salome Zuribashvili, Prime Minister Mamuka Bakhtadze, and Tbilisi Mayor Kakha Kaladze. Rustavi 2 suspended Gabunia for two months and dismissed Director General Nika Gvaramia. 

The Georgian Dream government still enjoys significant popular support outside the capital and is likely to weather this storm, but not without making political concessions. Foremost among these is a switch to a proportional system for future parliamentary elections, long called for by the opposition United National Movement party.  

It is very unlikely that the current unrest and proposed political changes will negatively impact non-Russian business operations or travel in the country. Both the ruling coalition and opposition are eager for foreign investment and have pledged to support policies working toward this end. Localized travel disruptions in the capital Tbilisi are likely to persist but will have minimal impact on business activities.

 Photo courtesy of Wikimedia Commons