EurasiaNet Business & Economics - With Flights to Moscow, Georgia Hopes Trade Ties Will Again Take Off

BUSINESS & ECONOMICS

WITH FLIGHTS TO MOSCOW, GEORGIA HOPES TRADE TIES WILL AGAIN TAKE OFF
Nino Patsuria 3/25/08

After an 18-month break, Georgia and Russia gave the go-ahead to a resumption of air traffic between Moscow and Tbilisi. In the Georgian capital, the hope is that where planes go, Georgian wine, mineral water, fruits and vegetables will soon follow. But, as yet, the country’s trade ties with Russia remain frozen.

The return to air traffic started with the take-off at 7 pm on March 25 of a Georgian Airways flight to Moscow. As a sign of the significance of the event for Tbilisi, the plane was piloted by the head of Georgia’s civil aviation service. Flights will run daily.

Attending the take-off, Georgian Minister of Economic Development Eka Sharashidze told journalists that the government expects further breakthroughs to follow. The absence of flights between Russia and Georgia added to economic woes created by a Russian embargo on Georgian wines, water, fruit and vegetables introduced between 2005 and 2006. "We hope that the visa regime will be also getting simpler," she said. "We expect further steps from the Russian government and are sure that the economic embargo will be also lifted soon."

To signal that hope, for the next several days Georgian wine company Teliani Valley will be offering wine to airport passengers traveling en route to and from Russia. The measure was designed "to attract extra attention to the wine export problem," said Teliani Valley Deputy Director Giorgi Khutsishvili. "I hope that after the restoration of transportation ties, Russia will lift the ban on Georgian wine," he said.

In an official announcement, the Russian Ministry of Foreign Affairs echoed Georgian hopes that the resumed flights will "play a large role in restoration of the traditional good neighbor relations."

Citing an outstanding debt of $3.7 million to its air traffic control, Moscow cut flights with Georgia in October 2006, following Georgia’s highly publicized arrest of Russian embassy employees that Tbilisi claimed were spies. After multiple claims and counter-claims about who owed what to whom, on March 10 Georgian Airways, Georgia’s main airline carrier, covered $2 million of the liabilities, originally incurred by defunct Georgian carriers during the 1990s. The payment followed a February 21 meeting between Georgian President Mikheil Saakashvili and Russian President Vladimir Putin.

The Kremlin deemed the payment sufficient to give a green light to flights from Tbilisi.

Georgian National Airlines (GNA), a smaller carrier, says that it plans to restore flights from April 15. The company will run flights to Moscow twice a week, and flights to St. Petersburg and from Kutaisi to Moscow once per week, according to GNA President Giorgi Kodua.

On the Russian side, carriers Aeroflot and S7 (Sibir) will resume flights to Moscow from Tbilisi as of March 27 and March 30, respectively. Aeroflot will run five flights per week between the two cities. S7, Russia’s largest domestic airline, says that it will fly to Tbilisi three times per week, regional center Kutaisi twice per week and the Black Sea port of Batumi once per week. The companies state that ticket sales have already begun.

At the same time, boat traffic between Batumi and the Russian Black Sea resort town of Sochi, site of the 2014 Olympics, is expected to resume by the end of March, television station Rustavi-2 reported.

But some Georgians - analysts and opposition members -- wonder about the political price they assume Tbilisi had to pay for the flights’ resumption. The opposition New Rights Party has suggested that perhaps President Mikheil Saakashvili’s administration agreed to slow its efforts to gain membership in the North Atlantic Treaty Organization. Given the strong official emphasis on securing a Membership Action Plan at the April 2-4 NATO summit in Bucharest, that scenario would appear unlikely, though.

As of December 2006, the latest date for which official figures are available, the Russian embargo caused estimated losses between $200 million and $250 million, or about 2.05 percent of Georgia’s 2006 Gross Domestic Product. At the time, the International Monetary Fund’s mission head in Tbilisi, John Wakeman-Linn, projected $250 million to $300 million.

Despite the resumption of flights, there are unresolved questions, in particular who will be responsible for paying the remaining $1.7 million balance reportedly still owed to Russia’s air traffic control. At a March 7 briefing in Tbilisi, Georgian Minister of Economic Development Sharashidze stated that the debt would be paid gradually by the end of 2008, based on a timetable agreed upon with Georgian airlines. Sharashidze, however, did not give the names of the participating companies.

Georgian Airways, which said that it paid the $2 million both to restore the flights and because it "falls in line with society’s interests," wants GNA to cough up $500,000 of the outstanding $1.7 million. The founders of the bankrupt airlines that incurred the debts to Russian air traffic control are now affiliated with GNA, according to Georgian Airways counsel Giorgi Molodinashvili.

He conceded that GNA, however, is not "a legal assignee" of the two bankrupt airlines. Kodua, the GNA president, asserts that he owes "not a tetri" to Moscow, and has demanded a public apology from Georgian Airways and $5 million in compensation for the alleged insult to his company’s "honor and dignity."

Meanwhile, Georgia, in theory, has its own claims. Russian airlines, according to Georgian officials, still owe $300,000 in fees to the Georgian air traffic control.

Editor�s Note: Nino Patsuria is a freelance reporter based in Tbilisi.

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