A WTO deal for Russia but what will Georgia get out of it?

By bne IntelliNews November 4, 2011

Molly Corso in Tbilisi -

The long-awaited agreement with Russia over its entry to the World Trade Organization (WTO) is a "victory" for Georgia, according to Gerogian President Mikheil Saakashvili. But analysts caution it is still unclear what - if anything - the deal will give Tbilisi.

After nearly two decades waiting in the wings, Russia is just days away from cinching a deal to finally enter the WTO; a final agreement is anticipated by November 10. The only obstacle standing between Moscow and joining the international trade body was Georgia, Russia's tiny southern neighbor. Relations between the two have been strained by a war in 2008 and a Russian-imposed trade embargo on Georgian goods. On November 3, however, both Moscow and Tbilisi announced they were close to a deal reached via Swiss negotiators, because diplomatic relations between the two countries were terminated during the August 2008 war.

The deal, which has not been publicly released, has been praised by Saakashvili and his western allies. According to press reports, the plan revolves around Swiss-guaranteed international monitors on the ground outside three trade "corridors" that span the Abkhaz and South Ossetian conflict zones - two breakaway regions of Georgia, which are backed by Moscow. While Moscow has recognised the two de-facto governments as independent states, Tbilisi has not. Trade traffic along the corridors would be reported to both Moscow and Tbilisi.

The monitors are a "diplomatic victory" for Georgia, claimed Saakashvili during televised comments about the deal on November 3. "I believe that this is our diplomatic victory. Of course, our eventual diplomatic and any other kind of victory will be when our customs service will be deployed on this side of the border," Saakashvili said, referring to the border Russia shares with Abkhazia and South Ossetia. "But what we achieved today is the first important affirmation what represents Georgia's customs borders."

Analysts and economists in Georgia, however, caution that it is too soon to consider the deal a success. "If it works in reality, it will be good really... because of monitoring, because of control. And it is also a security issue as well," notes Tina Gogheliani, a political analyst at the International Center on Conflict and Negotiation. "It is also an element of controlling the whole Georgian territory for the Georgian authorities."

The Russian side has not spoken about the monitors' position or how the deal would jive with Abkhaz and South Ossetian objections to monitors checking trade traffic heading into and out of their de-facto borders.

It is also unclear how much of an economic impact the Russian WTO deal will have on Georgia.

Moscow banned Georgian wine and mineral water in 2006 as a backlash against Tbilisi's decision to deport several alleged Russian spies. The embargo was a severe blow to the Georgian economy, and it has taken five years for the wine industry to establish new trading partners.

While nominally the agreement should signal a return of Georgian wine and mineral water to the Russian market, the deal won't signify any major shifts in trade policy - or an immediate return for Georgian products to the Russian market, argues Kakha Baindurashvili, head of the Georgian Chamber of Commerce. "Regarding Russia's market possible opening, I would not be excited too much... Also I would not set it up as our external trade priority, because there is much attractive market [in Europe]," he says.

Georgian wine producers should be cautious about going back, reckons Tina Kezeli, head of the Georgian Wine Association. She says that while the Russian market is "important," companies should create "a very careful strategy how, who and when" to reengage with it.

Baindurashvili stresses that WTO membership alone is not a guarantee that Moscow will fulfill its membership obligations and reopen its market for Georgian goods. "Membership itself does not prohibit any violation unfortunately, and there are many examples when countries violate WTO rules," he tells bne in an email interview. "[Judging by] past experience with Russia, I doubt it [will] prevent Russia's government against trade wars, however definitely that will serve additional barrier and costs will be higher for the Government of Russia."

Gogheliani also cautions that Moscow has a long history of ignoring bilateral and international agreements it signs with Tbilisi. "It was said that this company will guarantee the fulfillment of this agreement - we'll see. Because there are many agreements, even between Sarkozy and Medvedev, [that are] interpreted [according to] Russia's interest."

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