Publication:  N28 / Review period:  July 1 – August 31, 2023 / Author:  Arsen Araqelov 

Review of Russia’s Economic Relations with Abkhazia and the Tskhinvali Region is being prepared within the framework of the project - Roadmap to Kremlin's Policy in Abkhazia and the Tskhinvali Region. The purpose of the publication is to provide an overview of economic relations between Russia and Abkhazia and the Tskhinvali region. The review is a monthly publication and will be useful for everyone – decision-makers, public employees, media representatives and other people who are interested in the Kremlin policy in the occupied regions of Georgia.

Economic Relations Between Russia and Abkhazia

Visit of Maxim Reshetnikov

On July 4, the Minister of Economic Development of Russia, Maxim Reshetnikov, paid a working visit to the occupied Abkhazia. The de facto Minister of Economy, Kristina Ozgan, met the guest in Gagra.

Russia has developed an investment program for the promotion of the socio-economic development of the Russian-occupied regions of Georgia - Abkhazia and the Tskhinvali region. Representatives of the Russian government periodically visit the occupied regions to monitor the progress of the program, and Reshetnikov's visit was of the same nature.

Reshetnikov visited the construction of several facilities under the investment program, such as: the Alakhadzi electric substation, water supply and drainage system, which should be completed in 2024. In addition, Reshetnikov inspected area surrounding the Moskva Resort hotel in Bichvinta which is being constructed with the involvement of a Russian businessman, the former governor of Krasnodar Krai. As planned, the hotel will be launched in 2026.

Reshetnikov also met with the de facto president, Aslan Bzhania, and the so-called Prime Minister, Alexander Ankvab. The meeting discussed the prospects of economic cooperation between the de facto republic and Russia.

Astoria Grande

On August 2, the President of the de facto Republic of Abkhazia, Aslan Bzhania, responded on the arrival of the Russian cruise liner Astoria Grande in the Batumi port. Bzhania invited the liner to the occupied Abkhazia saying that “Abkhazia is ready to host the liner with warm welcome, the experience of which already exists.” In June, the liner Knyaz Vladimir visited Abkhazia. The ship was ceremonially welcomed in the de facto republic; however, according to the local media, the liner was not fully loaded and its profitability is doubtful.

Meeting with the Minister of Sports and Tourism of Belarus

On August 5, Minsk hosted a meeting between the de facto Minister of Tourism, Teimuraz Khishba, and the Minister of Sports and Tourism of Belarus, Sergey Kovalchuk. The meeting which discussed the prospects of cooperation in the field of tourism. Meetings between representatives of Belarus and the de facto government have become more frequent recently. This became noticeable after the visit of the Belarusian leader to Abkhazia in September 2022.

Bridge Reconstruction  

On August 7, a video conference on the implementation of the “intergovernmental” agreement between Russia and the de facto republic was held in the Russian Federal Road Agency. The conference discussed the reconstruction of a bridge connecting the two sides of the Psou River. The reconstruction of the bridge is critically important since the scale of movement across the so-called border has increased in recent years.

Abkhazia - a Popular Tourist Destination

According to the Russian Association of Tour Operators, in August, the occupied Abkhazia was one of the most popular holiday resorts in the Black Sea region for Russian tourists. The region periodically shared the second-third place with Sochi and Anapa. The Association statement reads that the number of vacationers from Russia to the occupied Abkhazia has not significantly changed compared to the previous year.

Fuel Crisis

In the summer, an increase in the price of oil products and a certain crisis was observed in regions of the occupied Abkhazia and Russia. The de facto Ministry of Economy responded to the issue stating that the increase in the price of fuel in the de facto republic was caused by a number of economic factors, as well as the tourist season, which leads to an increase in demand.

According to the de facto Ministry, Abkhazia bought a liter of AI-92 fuel from Russia for RUB 33-35 in February-March and for RUB 40-41 in April.  In July-August the price for a liter totaled RUB 51-52, which caused fuel price increase in the de facto republic itself. In August, the price for a liter of AI-92 in the occupied Abkhazia was RUB 55-59, for comparison, this figure equaled to RUB 40-42 in February.

Economic Relations Between Russia and the Tskhinvali Region

Gasification of the Region

On July 11, the de facto President, Alan Gagloyev, met with the residents of the occupied Java region. During the meeting he announced that Russia would allocate RUB 2.7 billion (approx. USD 28 million) for the full gasification of the region. As he reported, gasification to the district centers of the de facto republic will be done by Gazprom, and pipelines will be laid in small settlements with the resources allocated by the Russian government.

Currently, only Tskhinvali and surrounding settlements are gasified in the occupied region. Gas to the Tskhinvali region is supplied only from Russia, through a pipeline.

Investment Program

On July 13, the chairman of the de facto government, Konstantin Jusoev, visited and inspected ongoing works under the Russian-funded investment program in the occupied Tskhinvali region. He noted that the Investment Program will be implemented by 100 percent this year.

Ossetian Wine in Russia

According to the so-called Trade Representative of the Tskhinvali region in Moscow, Taimuraz Goginov, the sales area of Ironsan Winery (locates in the Tskhinvali region) has expanded in Russia, and the Ossetian alcoholic beverage will be sold in Vinlab chain stores as well. The company is the only major producer of wine and brandy in the region, and the project was implemented with Russian investments.

Alan Gagloyev on Economic Relations Between Russia and the Tskhinvali Region

On August 26, at an event dedicated to the 15th anniversary of the recognition of the Russian-occupied regions, Abkhazia and the Tskhinvali regions, as republics, Alan Gagloyev spoke about economic cooperation with Russia.

As the de facto president stated, the export of products from the region to Russia increased by 40% in 2022. Gagloyev singled out several companies which make a big contribution to the export increase: Tskhinvali-based tailoring enterprise - BTK 4, Ironsani Winery and Южный сад company.