Publication: N29 / Review period: September 1 – 30, 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 the Sokhumi “Mayor” to Moscow
On September 5-8, the so-called Mayer of Sokhumi, Beslan Eshba, was in Moscow, where he attended the Comtrans 2023 exhibition. The general sponsor of the exhibition was the KamAZ automobile factory. Reportedly, negotiations are underway with the company for the purchase of special equipment and buses for the Sokhumi City Hall.
Beslan Eshba in a Car of the GAZ Plant
Visit to Russian City of Kaluga
On September 9, Abkhazia's de facto Minister of Tourism, Teimuraz Khishba, visited the Russia city of Kaluga. During the visit, Khishba held a meeting with the General Director of Kaluga International Airport, Salavat Kutushev. The meeting discussed the issues of cooperation in the field of transport infrastructure which, according to Khishba, is an important aspect for the de facto republic in terms of tourism development.
It should be noted that on July 26, the de facto parliament ratified an agreement with Russia on the restoration and operation of the Sokhumi airport, by virtue of which the airport will be transferred to a Russian investor on a 49-year lease. In Abkhazia, they assume that the airport will receive its first passengers in 2024. As Kutushev stated, the Kaluga airport is ready to be the first to sign the cooperation agreement with the Sokhumi airport.
Fuel Crisis
Effective September 21, the Russian government limited the export of fuel. The de facto Ministry of Economy responded to the decision with a statement saying that the restriction will not affect the agreement already concluded between Russia and the de facto republic. According to the de facto agency, the occupied region will receive 70 tons of AI-92 fuel, 23 tons of AI-95 fuel and 30 tons of diesel in 2023.
Tourist Season
This summer, a total of 237,000 people visited the New Athos Cave in the occupied Abkhazia. This number is 8,000 less compared to the same period last year. In total, the revenue from sold tickets amounted to RUB 167 million (approx. USD 1 million 700 thousand).
In addition, the de facto Ministry of Tourism reported that a total of 439,060 people visited the Ritsa National Park from January 1 to September 1, and the revenue from the tickets sold amounted to RUB 289 million (approx. USD 2 million 900 thousand). In the same period last year, 492,954 people visited the park, and the financial profit amounted to RUB 309 million (approx. USD 3 million 100 thousand). The majority of tourists in Abkhazia are from Russia.
Economic Relations Between Russia and the Tskhinvali Region
Government Official’s Visit
On September 15, the Deputy Minister of Economic Development of Russia, Dmitry Volvach, and the Deputy Director of the Department for Special Programs and Projects of the Ministry, Anton Melnik, visited the Tskhinvali region.
During the long visit, Volvach inspected the ongoing construction and repair works within the framework of the investment program developed by Russia promoting the socio-economic development of the occupied regions of Georgia.
On the first day of the visit, Volvach, together with the Chairman of the de facto government, Konstantin Jusoev, checked the construction process of the Mziugomi camp which will accommodate 150 children. The camp is being built on the territory of a former tourist base in the Java region. As planned, the repair works will be completed in 2024.
On the same day, at a bilateral working meeting, Volvach noted that the region has resources and opportunities for tourism development, and that the region needs more private investors, big projects for which it is necessary to work, so that “neighboring-partner states see the interest in this.” The meeting also discussed the issue of repaying the debt to the Russian energy company Inter Rao. The company supplies the occupied region with electricity.
Volvach also held a meeting with the de facto president, Alan Gagloyev, and discussed several issues, among which was the production of construction materials in the Tskhinvali region. For this purpose, the Ir-Basalt company was established in the region and its plant was built with Russian funding. Although the construction work has been completed, the company has not yet started production. As per preliminary estimates, the plant will contribute over RUB 60 million to the “state budget.” At the meeting, Volvach emphasized that it is important for economic development that the plant starts operating soon and that the de facto republic receives its first income.
The meeting also discussed the reconstruction of the Kvemo Zaramagi-Roka crossing checkpoint. The point provides road transport between Russia and the region. Reconstruction of the Kvemo Zaramagi CCP began on June 20, 2023. Volvach noted that the issue of reconstruction of the CCP is important and priority for the Russian Ministry of Transport.
Meeting Between Dmitry Volvach and Alan Gagloyev
Fuel Crisis
On September 11, the de facto parliament discussed the issue of fuel price increase in the region. As the so-called Minister of Economic Development, Dzambolat Tadtaev, explained, this is due to the increase of the export price of fuel on the oil exchange by 261.8% from January to August. According to Tadtaev, if it were not for the free trade agreement with Russia, the price of fuel in the occupied region would be much higher. The de facto Minister also noted that the region will not be affected by the Russian government's decision to limit fuel exports and, as in the case of Abkhazia, the occupied region will continue to receive fuel from Russia. In 2023, the region will receive 8 tons of AI-92 fuel and 1.1 tons of diesel.
First Private Investment in Construction Business
A residential building with 72 apartments will be built for the first time in the occupied Tskhinvali region with private investment. Reportedly, the private investor has implemented successful projects both in Russia and in the Republic of North Ossetia - Alanya.
It should be noted that there is an acute shortage of well-accommodated residential houses in the region. Before this investment, all residential houses in the region were built within the framework of the “state program” and only for those “citizens” who needed to renovate/receive a residential house, for which people wait for their turn for years. According to media reports, attracting a private investor is a direct result of Gagloyev's involvement. It is planned to put the building into operation by the end of 2025.