Georgia sticking with its EU ambitions

Georgia sticking with its EU ambitions
The recent mass demonstrations against the "foreign agents" law gave Georgia's EU ambitions a black eye, but the government is fully committed to gain candidate status by the end of this year, say officials. / bne IntelliNews
By Ben Aris in Berlin March 22, 2023

Despite mass demonstrations in Georgia against the seemingly pro-Russian “foreign agents” law in March and growing trade turnover with Russia following the start of the war in Ukraine, the government in Tbilisi remains dedicated to its policy of deepening its integration with Europe and eventual accession to the EU.

The government continues to work on meeting a 12-point list of criteria the EU requires before granting EU candidate status on June 23, 2022, that officials say will be completed by the end of this year. The goal of joining the EU is enshrined in the constitution.

But the mass demonstrations in March have given Georgia, once considered the bastion of liberal reforms amongst the Former Soviet Union (FSU) countries, something of a black eye. At the same time, they showed how committed the citizens are to moving closer to Europe. Polls show that 85% of the population want to join the EU, forcing the ruling Georgian Dream to rethink its approach to EU integration and admit that trying to pass the law was a mistake.

The Director of International Economic Relations at the Georgian Foreign Ministry, Noshrevan Lomtatidze, told delegates at the recent Georgian Investment summit in London that Georgia is 100% committed to joining the EU but admitted that more work remains to be done to meet the 12 criteria the EU set before it is granted candidate status.

“We have to do our homework better to do all 12 points on the EU list,” says Lomtatidze. “All the major parties agree that we want to join the EU and there is now a competition to see who is the most pro-EU. I believe by the end of 2023 we will reach the end of the process and get candidate status.”

Since the Rose Revolution in 2003 Georgia has adopted a pro-EU policy and in those first years made very rapid progress with reforms. Then-president Mikheil Saakashvili’s foreign ties built much closer ties with the West, such as famously sacking the entire traffic cop force to end bribe taking. And legendary Georgian businessman and minister Kakha Bendukidze radically overhauled state regulation with an axe to propel Georgia to the top of the World Bank’s Ease of doing business ranking.

But in recent years progress has slowed due to foot dragging by the ruling Georgian Dream Party and the unfolding polycrisis.

Established in April 2012 by Georgian billionaire Bidzina Ivanishvili, who made a fortune in metallurgy in Russia, the pace of reforms slowed after Georgian Dreams first election victory in the same year, defeating Saakashvili’s United National Movement (UNM) on a platform of increased social spending and a more pragmatic foreign policy with Russia. Since then, Georgian Dream has cemented its hold on power as the dominant political party in the country. The party is currently led by Irakli Kobakhidze as Party Chairman and Irakli Garibashvili as Prime Minister.

The loss of momentum has taken the sheen off Georgia’s former poster boy image to the point where Tbilisi received a stinging rebuke last summer when the EU granted both Ukraine and Moldova candidate status in June, but pointedly left Georgia off the list. Even Bosnia has been granted candidate status in the meantime.

EU foreign policy chief Josep Borrell said in September that Georgia needs to accelerate reforms in areas such as the rule of law, the independence of the judiciary, and media freedom before it can be granted the sought-after candidate status.

However, the party and the country remain committed to the Euro-Atlantic direction and the mass protests in March highlight that one of the legacies of the Rose Revolution is the country has a vibrant civil society that can hold the government to account, similar to that in Ukraine, but almost entirely missing from Russia.

While reforms have slowed, they are still ongoing. Georgian Dream MP Irakli Chikovani said on November 11 that the “absolute majority” of conditions outlined by the European Union for granting Georgia membership candidate status would be completed by December.

And Georgia is still ranked at number seven in the World Bank’s Ease of Doing Business index after Bendukidze’s root and branch overhaul. Indeed, the panellists at the investment summit pointed out that technically Georgia remains one of the most advanced in reforms of all the CIS states.

“I think the question [of EU membership] has become over politicised, " says Vazil Hudak, an economic advisor to the Prime Minister. “We are told to “reduce polarisation in the country” but polarisation is part of democracy. The foreign agent issue was a mistake but now it is being reconsidered. Technically [as far as reforms are concerned] Georgia is far ahead of Ukraine.”

The recent demonstrations and Russia’s military aggression in Ukraine has highlighted the issue of political instability as an investment risk. About a fifth of Georgia remains under Russian occupation – the two northern regions of Abkhazia and South Ossetia were grabbed and annexed by Russia in the 2008 war – and there is the possibility that the Georgian government will use Russia’s distraction in Ukraine to retake these breakaway regions. But political analysts believe that is highly unlikely given the huge mismatch in military power between the two states.

“There are still occupied territories and we have to deal with our northern neighbour – including militarily – but our war is minimalistic. Stability is the key to reuniting the country – a strong economy and a strong democracy. It will eventually happen,” says Hudak.

“The government of Georgia has never been so close to the EU as today,” Hudak adds. “There is a high level of democracy in the country even if the region is unstable.”

Relations with Russia remain complex, as there are over one million Georgians living in Russia today and their remittances home also play an important role in Georgia’s economy. Despite the 2008 war and despite the fact that the two countries have not re-established diplomatic relations, trade between the two remains strong and is growing. Russo-Georgian trade expanded 48% in 2022 to set a new all-time high, despite the lack of formal diplomatic relations.

“Is Georgia pro-Russia? The Prime Minister is pro-EU and sees the country as part of Europe with close links to Nato,” says Hudak. “Does Georgia have a mandate to open a second front in the occupied territories? Georgia has had a bad experience with wars. Georgia should retain its strong ties with the West and the Prime Minister is prepared to continue to work with the West. Georgia is not pro-Russian.”

As bne IntelliNews has reported, Georgia is currently more economically dependent on Russia than at any time since independence; that is mainly due to the geography of diplomacy, Russia’s proximity and weight in the Caucasus, and the deep economic and cultural ties with Georgia. As part of this delicate balance, Georgia trade is growing with Russia, but the government claims no sanctioned goods are transiting the country.

“The Prime Minister has said that sanctioned goods are not transiting Georgia on their way to Russia,” says Hudak. There are no cases of a good that has been sanctioned passing through Georgia to Russia. Indeed, there are thousands of cases of sanctioned goods that were stopped at the border.”

To further complicate things, several hundred thousand Russians fleeing Putin’s repressive state have moved to Georgia, ironically giving it an economic bump in the process. Lomtatidze points out that Georgia has welcomed refugees from all the conflicts in the region, taking in Ukrainians fleeing the war, and Belarusians fleeing the repression of Belarusian President Alexander Lukashenko following the falsified presidential elections in 2020. The Russians are just the most recent arrivals. The government even offered a tax break to IT professionals to encourage them to come.

“We welcome anyone to come and live in Georgia who pays their taxes and contributes to its future,” says Lomtatidze. “There is a sense of growing integration of the Russian immigrants who have settled here.”