Georgia does not know yet the extent of new barriers to its trade with neighboring Armenia that are expected to emerge after Yerevan joins Russia’s Customs Union with Belarus and Kazakhstan, a senior Georgian diplomat said on Wednesday.
“We don’t know what the Customs Union will be requiring from Armenia with regard to us,” Tengiz Sharmanashvili, the Georgian ambassador in Yerevan, told RFE/RL’s Armenian service (Azatutyun.am) in an interview.
“A free-trade regime between us is still functioning,” Sharmanashvili said. “We will try to ensure that this does not change. In essence, we don’t plan to change that regime. As for what changes the Customs Union will demand, we don’t know that yet.”
Membership in the Russian-led trade bloc, currently transformed into the Eurasian Economic Union (EEU), would require Armenia to adopt its significantly higher duties collected from imported goods. The Armenian government wants to continue applying, at least temporarily, its existing low tariffs to more than 800 items manufactured outside the EEU. Government officials say that the EEU’s member states are ready in principle to grant such trade preferences.
Yerevan could be forced to put in place additional barriers to Armenian-Georgian trade because of the recent signing of association agreements between the European Union and Georgia as well as Ukraine and Moldova. Russia has denounced those agreements, threatening to complicate imports from the three ex-Soviet states at odds with Moscow. Russian officials seemingly hope that such protectionist measures would be taken by the Customs Union.
“Whatever happens, we will find the most acceptable ways for our contacts,” Sharmanashvili said, referring to the Georgian and Armenian governments. He said Tbilisi has no plans yet to respond to Armenia’s entry into the EEU with import duties for Armenian goods.
Analysts believe that hurdles to bilateral trade will become inevitable if Armenia completes its ongoing accession to the EEU. “If we join that union and adopt its trade rules it’s hard to imagine what the consequences for the Armenian economy will be,” said Babken Tunian, a Yerevan-based economist.
Tunian suggested that Tbilisi could retaliate by also raising its transit fees for Armenian exporters and importers using Georgian territory. At least two-thirds of Armenia’s foreign trade is carried out through Georgia.
The Armenian government could not be reached for comment on the matter on Wednesday.
Visiting Tbilisi last month, President Serzh Sarkisian claimed that Georgia’s free-trade accord with the EU and Armenia’s membership in the Russian-led alliance could actually strengthen economic ties between the two neighboring states. Sarkisian said that Georgian and Armenian businesspeople will be able to invest in each other’s country for gaining tariff-free access to markets in Russia and the EU respectively. But he did not comment on the likely impact on Georgian-Armenian commerce.
According to Armenian government data, the total volume of bilateral trade rose by 27 percent to $152 million last year. Even so, Georgia, accounted for only 2.6 percent of Armenian foreign trade.