Georgia’s stance on Western sanctions against Moscow came under scrutiny last year after the Georgian government approved the continuation of direct flights with Russia, though there is no evidence indicating the country’s involvement in sanctions evasion.

“We do not impose sanctions against Russia, but we will do everything so that our territory is not used for circumventing sanctions,” Georgia’s Prime Minister Irakli Kobakhidze stressed in early March.

The European Commission’s enlargement report in November 2023 supported this, assessing Georgia’s alignment with the EU’s Common Foreign and Security Policy (CFSP). Tbilisi also exhibited active engagement in preventing its territory or registered legal entities from being used to evade sanctions, including those in the financial sector.

But since Russia’s invasion of Ukraine, the Georgian government has shown scepticism over the effectiveness of Western sanctions against Russia.

Four days after the start of the war, former Georgian prime minister Irakli Gharibashvili said sanctions are not an effective tool.

In May 2023, Gharibashvili, speaking at the Qatar Economic Forum, also argued that restricting trade between Georgia and Russia would have minimal impact on the Russian economy.

Gharibashvili emphasised the disproportionality between the EU’s trade volume with Russia compared to Georgia’s, stating, “What the EU trades with Russia in four days, we trade with Russia in one year.”

He also highlighted that Georgia’s annual trade turnover with Russia is less than $1 billion, describing it as insignificant in the context of the Russian economy.

While the government’s narrative remained antagonistic, the country’s approach to financial sanctions against Russia was the opposite.

In 2022, the IMF concluded that the National Bank of Georgia (NBG) had instructed financial institutions to adhere to the requirements of the respective financial sanctions imposed by the US, the EU, and the UK.

The NBG maintains an anti-money laundering (AML) department to ensure compliance in the sector, coordinating with banks on sanctions and conducting inspections related to sanctions against Russia.

Businesses in Georgia have increased resources dedicated to sanctions compliance, adopting programs to identify issues.

Contradictory behaviour

Georgia’s behaviour seems contradictory, abstaining from condemning Moscow’s actions in Ukraine despite itself being invaded in 2008 by Russia.

Moscow controls over 20% of Georgia’s territory, with military bases in Abkhazia and South Ossetia.

Cynically, Moscow has taken steps to develop closer travel links, even though political relations have long stalled, including direct flights between the two countries and lifting visa requirements for Georgian nationals, which were imposed in the early 2000s.

This has caused concerns in Brussels and Washington.

While Russian officials commend Georgia’s current approach to the war, in 2022, exports to Russia rose 6.8% to $652 million, while imports surged 79% to $1.8 billion, marking the highest level in sixteen years. Although comparing 2023 to 2022, Georgia’s economic dependence on Russia decreased, primarily due to reduced remittances.

Georgia’s National Bank‘s U-turn

On 14 September 2023, the US imposed sanctions on Otar Partskhaladze, a former Georgian general prosecutor and a Georgian-Russian businessman, for his collaboration with the Russian Federal Security Service (FSB).

Partskhaladze maintains close ties with Georgian government officials and Bidzina Ivanishvili, founder and honorary chairman of the ruling party, Georgian Dream.

Ivanishvili has confirmed strong friendship between Partskhaladze and his son, Bera Ivanishvili, who is also the godfather of Partskhaladze’s grandchild.

A document addressing Russia’s influence in Georgia highlights how the FSB and officer Aleksandr Onishchenko utilised Partskhaladze to influence Georgian society and politics in Russia’s favour.

Onishchenko also sanctioned and assisted Partskhaladze in obtaining Russian citizenship, while restrictions were also imposed on Partskhaladze’s Russian consulting firms.

Following the imposition of sanctions on Ivanishvili’s close associate, Partskhaladze, the National Bank of Georgia initially restricted his access to personal accounts.

This was after the US Department of Treasury OFAC division introduced restrictive measures on individuals listed on their Specially Designated Nationals (SDN) list.

After this decision, leaders of the Georgian Dream asserted unanimously that Partskhaladze had not held any public service position for the past 10-11 years, emphasising his status as a private individual.

But they subsequently began to question the US decision to impose sanctions, prompting criticism from current Georgian Prime Minister Kobakhidze, calling the National Bank’s decision “unconstitutional” and denouncing President Salome Zourabishvili for requesting an investigation.

The NBG has now reversed its decision, reflecting Kobakhidze’s arguments. According to the Constitution of Georgia and the principle of presumption of innocence, Georgian citizens should not face international sanctions unless convicted by a Georgian court.

Subsequently, three of the bank’s vice governors and an advisor to the bank’s president have resigned. This has raised concerns at the International Monetary Fund (IMF), with James John, IMF Georgia’s mission chief, signalling potential implications for NGB.

In Brussels, EU lawmaker Petras Auštrevičius (Renew, Lithuania) remarked that some decisions of the NGB should not be personalised; otherwise, the bank will not be able to maintain its coherence.

One month after reversing the decision, Zourabishvili revoked Partskhaladze’s Georgian citizenship, stating that a sanctioned ex-Georgian official should be tried under Georgian law.

After the NBG stipulated that international sanctions only applied to Georgian citizens once a national court issued a guilty verdict.

Partskhaladze’s Georgian citizenship then came under scrutiny since he held dual citizenship for both Georgia and Russia.,

In September 2023, the Ministry of Justice recommended the president to revoke Partskhaladze’s Georgian citizenship. He later transferred all his property and land in Georgia to his son, Andria Partskhaladze.

Addressing these challenges will be crucial, particularly as Georgia approaches holding free, fair, and democratic parliamentary elections and fulfilling the nine steps to accession outlined by the European Union.

Georgia’s comprehensive progress on the EU Commission’s recommended nine steps will be paramount for initiating accession negotiations with the EU. These steps encompass essential democratic reforms, including those related to the judiciary, anti-corruption, elections, combatting disinformation against the EU values, and aligning with the EU’s CFSP.

In light of Russia’s aggressive actions against Ukraine, Georgia has demonstrated alignment with international and EU efforts in support of Ukraine, including endorsing resolutions passed by the UN General Assembly and the Human Rights Council, as well as the Council of Europe.

However, the European Commission and the EU’s chief diplomat, Josep Borrell, have repeatedly stated Georgia’s lack of support for the condemnatory statements.

Although Georgia’s alignment with EU foreign policy statements and Council decisions under the CFSP has remained relatively stable (44% in 2022, 43% in August 2023), Georgia is expected to significantly increase its alignment rate with EU statements and Council decisions.

This article is part of the FREIHEIT media project on Europe’s Neighbourhood, funded by the European Media and Information Fund (EMIF).

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