The International Chamber of Commerce in Georgia to help Georgian Wine makers explore new markets

International Chamber of Commerce in Georgia is the largest global Business Association in the country, housing over 350 corporate and youth members as well as 28 business associations. On June 27, the Chamber of Commerce issued an official announcement, stating that the Chamber has mobilized its resources both domestically and internationally to ease the effects of the fresh Russian sanctions on Georgian Businesses.

“A dedicated team was created to assist the Tourism Department of Georgia in its efforts to mitigate the drawbacks of those sanctions and to help Georgian wine producers find other markets internationally via the ICC global network in 130 countries,” reads the statement.

Multiple research groups have already published their predictions on how this ban will affect the economy of Georgia. Most of them stating the long-term effect will not damage the overall state of the economy drastically. According to the result of the research conducted by Galt & Taggart recent Russian sanctions are expected to weigh on Georgian economy, but unlike 2006 Russian embargo, the country is better placed to deal with negative shocks.

The ban that started with the flight suspension from Russia to Georgia, later the reports surfaced that multiple batches of Georgia wine were stopped at the Russian customs. Russia’s consumer protection agency announced on June 24 that Georgian wine exports to Russia, which by some estimates reached 50 million bottles in 2018, have markedly deteriorated. Promising to step up quality control, it revealed that batches from eight Georgian wine producers had already been stopped at customs.

Over 200,000 liters of wine imported in 2018 fell below “necessary standards,” the Russian custom’s agency said.

But the Russian officials keep stating that this has nothing to do with the current political situation between Russia and Georgia.

“There’s no political conflict here,” said Kremlin spokesman, Dmitry Peskov about the extra checks on Georgian wine, “these are preventive measures to ensure the safety of our citizens,” concluded the spokesman.

But some experts are stating this not only is this a political move but it also serves to demonstrate Russia’s economic power over its smaller neighbors.

Mikhail Troitskiy, a foreign-policy analyst, based in Moscow, said the Kremlin’s motivation might not be about Georgia itself as much as about demonstrating its power.

“Russia is keen to show it has economic clout, that it can operate by economic statecraft just like the United States and its allies,” Troitskiy said in an interview with Eurasianet.

Russia’s consumer protection agency’s warning regarding the “decline in quality” of alcohol products coming from Georgia come just in time of the ongoing protests in front of the Georgian Parliament. A demonstration that started as a stance against the Russian MP, Sergei Gavrilov taking the seat in a chairman’s place in the Georgian Parliament, soon turned into a larger protest against Russia as a whole and hence sparked Russia’s adverse reaction.

Georgia is the second-largest importer of still wines into Russia in January-April 2019, said Vadim Drobiz, the head of the Research Center for Federal and Regional Alcohol Markets. Vadim Drobiz says that about 10 million bottles of Georgian wine remain unsold in Russia today. And if the ban affects imports as well as the right to sell the remaining products, this wine will be sold illegally, as it was in 2006, he argues.

The restrictions will lead to an increase in the illegal import of Georgian wine from Belarus and Kazakhstan, the expert predicts. According to him, the main negative consequences of a possible new ban will be primarily for Georgian wine producers, who will have to close two-thirds of their plants. According to Mr. Drobiz, 65% of all sales accounted for the Russian market.

This is why the ban on wine is a bigger threat than the termination of flights. And this is the reason why the Chamber of Commerce is dedicating a special group to the search and the exploration of new markets. It is evident that the demand for Georgian wine is increasing across the globe, and the chance to enter new markets is now. With the right approach and the support of Georgia’s international allies, it will be possible to minimise the dependency on Russia for the Wine export.

Overall, Georgian wines make up 7.5 percent of Russia’s alcohol sector.

In the article from “Kommersant,” the undisclosed source stated that after the call for the increase in quality checks, officials began collecting information from retail chains about the proportion of this alcohol on the shelves. The procedure can be a preparation for the introduction of a ban on the importation of wine from Georgia, which today occupies 17% of Russian imports. Restrictions threaten the growth of illegal imports and the closure of part of Georgian wineries, experts warn.

Official appeals on this issue have not yet been reported, he said. Another source of Kommersant in the alcohol market also heard that retail chains received similar questions from Russia’s consumer protection agency.