I.Key Findings

Transparency International Georgia has studied Georgia's economic dependence on Russia, as it poses a threat to the country. In particular, we analyzed the data on Georgia-Russia trade, incoming tourists, and remittances from Russia, as of the end of 2021, as well as Russian companies operating in Georgia and their participation in public procurement. While in 2020 the pandemic reduced Georgia's economic dependence on Russia, in 2021 it grew again, though it has not yet reached the levels of 2019 mainly due to the low numbers of tourists. In 2020, through exports to Russia, Russian visitors, and remittances, Georgia earned about USD 900 million (5.7% of Georgia's nominal GDP), and up to USD 1.3 billion (6.7% of GDP) – in 2021. Other findings of the study include the following:

Trade

• In 2021, exports of Georgian products to Russia increased by 38%, compared to 2020, and reached USD 610 million, which was more than even in 2019. Ferroalloys ranked first in exports to the Russian market with USD 172 million. After China, Russia was second among Georgian exports destinations;
• Wine exports were again highly dependent on the Russian market. The Russian market accounted for 55% of Georgian wine exports;
• In 2021, the value of products imported from Russia to Georgia was also at a record high, amounting to more than USD 1 billion, exceeding the pre-pandemic figure of 2019 by USD 51 million;
• In terms of imports, Georgia was mostly dependent on Russian wheat and wheat flour. Although the price of one tonne of Russian wheat increased from USD 220 to USD 260 in 2021, Russian products accounted for 94% of Georgia's total wheat imports. Last year, Georgia imported 319 thousand tonnes of Russian wheat worth USD 87 million;
• Natural gas imports from Russia have increased significantly in recent years. In 2021, the share of Russian natural gas in Georgia's total natural gas imports was 23.1%, while in 2018 this figure was 2.8%. The purchase of Russian natural gas in 2021 cost Georgia USD 77 million.

Visitors and remittances

• From the summer of 2021, the number of visitors from Russia began to grow, but due to the pandemic, it was still 86% less than in 2019. In 2021, 213 thousand visitors came to Georgia from Russia, which was 11.3% of the total number of visitors to Georgia;
• The share of remittances from Russia in total remittances received by Georgia has been declining, although it remained an important source of income for the Georgian population. In 2021, USD 411 million were transferred from Russia to Georgia, which was 17.5% of the total remittances received by Georgia from abroad. In 2019, this figure was up to 25%.

Russian companies in Georgia

• There are more than 7,000 companies registered in Georgia, all or part of which are owned by companies and/or citizens of the Russian Federation;
• Of these 7,000 companies, 1,230 companies were registered between 1995 and 2012, and up to 5,500 - between 2013 and 2020. A record number of new company registrations - around 1,200 - was recorded in 2018;
• More than half of the Russian citizens who own a company registered in Georgia have a Georgian surname;
• Large Russian companies are represented in all sectors of the Georgian economy, including energy, heavy and light industry, transport infrastructure, financial sector, communications, gambling business, restaurants, and hotels;
• 410 Russian companies participated in the public procurement of Georgia in 2011-2021. In total, these companies received contracts worth up to GEL 590 million, which was about 1.4% of the amount spent through public procurement in Georgia in 2011-2021;
• The following Russian companies received the largest public procurement contracts: Lukoil-Georgia (GEL 200 million), Metrovagonmsheni (GEL 175 million), a Georgian branch of Cheliabinsktranssignal (GEL 46 million), Klasik-Stroi (GEL 15.7 million), and Investstroiregion (GEL 13 million).

II.Introduction

Georgia's economic dependence on Russia is alarming, as Russia has repeatedly used economic leverage against Georgia, Ukraine, Moldova, and other countries since the collapse of the Soviet Union. For example, in 2006 Russia first cut off natural gas and electricity supplies to Georgia, then virtually banned the export of products from Georgia to Russia, and at the end of the same year began deporting Georgian citizens. Russia also decided to "punish" Georgia after the events of June 20, 2019 [1] and banned flights to Georgia.

Therefore, it is important to know the level of dependence of the Georgian economy on Russia and the tendency to strengthen resilience in the face of possible threats. In May [2] 2020 and March [3] 2021, Transparency International Georgia published two studies showing how Georgia was dependent on Russia through trade, tourism, and remittances in 2019-2020. This time, in addition to updating the data of the previous studies and reviewing the trends for the end of 2021, we also additionally studied the major Russian companies^[i] operating in Georgia and their participation in public procurement. Along with key economic ties (trade, tourism, investment, energy, etc.), it is also important to know at what level and in what sectors of the Georgian economy Russian companies are represented and whether they receive benefits from Georgian taxpayers.

III.The main indicators of Georgia’s economic dependence on Russia

Georgia's economic dependence on Russia is mainly determined by three areas: foreign trade, tourism, and remittances from Russia.

According to the Georgian National Statistics Office (Geostat), Georgia exported USD 610 million worth of goods to Russia in 2021 (14.4% of Georgia's total exports), which is 38% more than in the same period of 2020. Among other export destinations of Georgian goods, Russia only lagged behind China by USD 6 million. Due to the pandemic, Georgia's exports to Russia decreased by 11% in 2020, but in 2021 exceeded the pre-pandemic rates.

It is also noteworthy that in 2021 exports to Russia were at a record high. Before that, Georgia had not exported USD 610 million or more worth of goods to Russia in a single year. However, Russia's share in Georgia's total exports in 2017 was higher (14.5%) than in 2021. For reference, before the economic boycott of 2006, Russia's share in Georgia's exports was up to 18%.

Data source: Geostat

In 2021, ferroalloys were top of Georgia’s exports to the Russian market with USD 172 million, which was 36% of the total exports of Georgian ferroalloys.

Traditionally, Georgian wine exports heavily depend on the Russian market. In 2021, Russia imported 55% of the wine exported from Georgia. Last year, Georgian wine exports to Russia amounted to USD 131 million, which was 9.4% more than in 2020.

The high dependence of Georgian wine exports on the Russian market carries political risks. The boycott against Georgian products by Russia in 2006, as well as the discussion of restrictions on the import of Georgian wine in the Russian Duma due to the events of June 20, 2019, clearly showed that the dependence on the Russian market is a serious and real challenge to Georgia's economic and political security.

Data source: Geostat

Georgia has a negative trade balance with Russia, i.e. it imports more products than exports. In 2021, imports of Russian products increased by 16% to USD 1 billion. However, the share of Russian products in Georgia's total imports decreased from 11% to 10.2%. In this respect, Russia only lagged behind Turkey, from which USD 1.8 billion worth of goods entered Georgia in 2021. The nominal value of imports of Russian products in 2021 was at a record high and exceeded the pre-pandemic rate of 2019 by USD 51 million.

The largest share in imports from Russia (13%) was occupied by motor fuel, which amounted to USD 135 million in 2021. In second place were oil gases (gas) with USD 97 million.

Wheat was the third most important food product in imports from Russia. In 2021, 319 thousand tonnes of Russian wheat worth USD 87 million was imported to Georgia, which was 94% of the total imported wheat in Georgia. Compared to 2020, Russian wheat imports by weight (in tonnes) decreased by 31%. However, the total value of imported wheat decreased only by 19% due to the increase in wheat prices. The average price of one tonne of wheat imported from Russia to Georgia in 2020 was USD 220 and in 2021 – USD 260. In parallel with the reduction of wheat imports, the imports of wheat flour from Russia increased 4 times. In 2021, USD 11.5 million worth of wheat flour was imported to Georgia from Russia, which was 96% of the total wheat flour imported to Georgia. The reason for the partial replacement of Russian wheat imports with wheat flour was the increase in the export duty on wheat by Russia last year, which did not apply to wheat flour.

Russian wheat and wheat flour occupy up to 80% of Georgia's wheat consumption, which poses a certain danger. Discontinuation of wheat and flour imports from Russia to Georgia for political or other reasons can lead to a shortage of wheat in Georgia for some time and will increase the price of bread. Russia has halved its wheat exports twice in recent years due to the Covid-19 pandemic and has increased [4] its export duty on one tonne of wheat from USD 60 to USD 98.

Before the Covid-19 pandemic, Georgia was heavily dependent on Russia through tourism in terms of revenue. According to the Georgian National Tourism Administration, in 2019, up to 1.5 million Russian visitors came to Georgia from Russia, as a result of which Georgia received about USD 700 million^[ii].

Due to the pandemic, the number of visitors from Russia decreased by 86% in 2020. The share of Russian visitors in the total visitors of Georgia fell from 15.7% to 11.9%. In 2021, 213 thousand visitors came to Georgia from Russia, which was 2% more than in 2020, although it was still significantly behind (by 85.5%) the 2019 figure. In 2021, the share of Russian visitors in the total number of visitors to Georgia was 11.3%, who were expected to spend about USD 245 million in the country.^[iii]

High dependence on Russian tourists is one of the economic levers that Russia can use against Georgia. For example, due to the events of June 20, 2019, Russia suspended direct flights to Georgia from July 8. The suspension of flights had an impact on the entry of visitors. In July-December 2019, the number of visitors from Russia decreased by 11%. Russia has maintained restrictions on direct flights to Georgia to this day. If Russia closes Georgia's land border to tourists from Russia, the number of Russian visitors will be significantly reduced, which will cost Georgia hundreds of millions of US dollars.

Data source: Georgian National Tourism Administration

Remittances from Russia are also an important source of income for Georgia. In 2021, USD 411 million was transferred from Russia to Georgia, which is 13% more than in 2020. However, Russia's share in total remittances to Georgia decreased from 19.3% to 17.5%.

Data source: National Bank of Georgia

In recent years, the share of Russia in Georgia’s total remittances has been declining. In 2012, Russia's share in total remittances to Georgia was 56%, and in 2021 - 17.5%. This is due to two circumstances: remittances from Russia to Georgia mainly have been decreasing from year to year, while remittances from other countries have been increasing. Remittances from Russia began to decline in 2014 when falling oil prices and sanctions imposed by Western countries triggered an economic crisis in the country. Moreover, in recent years, new flows of Georgian emigrants are moving more to EU countries than to Russia, which has increased the volume of remittances from EU countries. All this led to a decrease in Russia's share. However, the USD 411 million transferred from Russia in 2021 was significant for the Georgian economy (about 2% of GDP) and some households.

In 2019, Georgia earned about USD 1.6 billion from Russian tourists, remittances, and goods exported to Russia, which was 9% of Georgia's GDP. The pandemic reduced revenues from Russia, and as a result, in 2020, Georgia received about USD 900 million in revenues from Russia in the same way, which was 5.7% of Georgia’s GDP. In 2021, despite the continuation of the pandemic, economic constraints were eased and as a result, Georgia earned up to USD 1.3 billion from exports, tourism, and remittances from Russia, which was about 6.7% of Georgia's GDP. Therefore, Georgia's economic dependence on Russia has not returned to the pre-pandemic level of 2019, although it has increased compared to 2020.

High economic dependence on Russia is not only dangerous because it can impose certain restrictions and cause economic damage to Georgia, and demand a political price in exchange for preventing this damage. Due to the aggression on Ukraine, Western countries have imposed severe economic sanctions on Russia, which will naturally reduce Georgia's revenues from Russia and will have a significant negative impact on Georgia's economic growth, the GEL exchange rate, and certain markets such as wine exports and wheat imports.

In recent years, Russian imports have no longer occupied a significant share of electricity consumed in Georgia. In 2021, the share of electricity imported from Russia to Georgia was only 1.8%^[iv] of the total electricity consumption of Georgia, while the share of Russian electricity was 25%^[v] of the total electricity imported to Georgia.

The situation is different in natural gas^[vi] imports. In 2018, natural gas imported from Russia accounted for 2.8% of Georgia's total natural gas imports. In 2019, the share of Russian natural gas increased to 9.5%. In 2020, it reached 12.2% and 23.1% in 2021. Last year, Georgia imported USD 77 million worth of natural gas from Russia, while in 2018, a total of USD 8 million worth of natural gas was imported from Russia. Azerbaijan remains the main supplier of natural gas to Georgia, from which in 2021 USD 256 million worth of natural gas was imported.^[vii] 99.4% of natural gas consumed in Georgia comes from imports, therefore, Russian natural gas accounted for the same share (up to 23%) in domestic consumption as in imports.

Data source: Geostat

As for foreign direct investment, investments from Russia to Georgia in recent years have not been large. In 2016-2020, the share of Russian investments in Georgia's total foreign investment was 3.6%. During this period, a total of USD 249 million was invested in Georgia from Russia. As for 2021, in January-September, USD 53 million was invested by Russia, which was 7.3% of the total foreign investment attracted by Georgia. However, about 38% of foreign investment in Georgia comes from offshore^[viii], and in some cases, it may even be related [5] to the money of Russian origin.

IV.Russian companies in Georgia

Large Russian companies in Georgia operate mainly through subsidiaries registered in the country. Medium and small companies are mostly founded by Russian citizens. More than half of the companies registered by Russian citizens in Georgia are registered by persons with Georgian surnames who currently have only Russian or Georgian-Russian dual citizenship.

After examining the databases of the Georgian Business Register, we have found those companies, all or part of which are owned by Russian legal or natural persons (citizens). We call such companies Russian companies. However, this may not be a complete list, as a company registered in Georgia may belong to a Russian legal entity or individual through a company in another country. There are also frequent cases when the owner of a company registered in Georgia is registered offshore, which makes it difficult to determine the real owners of the company.

Today, more than 7,000 companies are registered in Georgia, which are owned by legal entities and/or citizens of the Russian Federation.

The registration of Russian companies in the Georgian Business Register started in 1995. Of the companies operating even today a total of 222 companies were registered in 1995-2003. In 2004-2009, an average of 64 Russian companies were registered per year ultimately reaching a total of 381 companies. The registration rate of Russian companies in Georgia has grown rapidly since 2010, in particular, in 2010-2012, an average of 210 Russian companies were registered in Georgia per year. Since 2013, the rate of establishment of companies by Russian companies and Russian citizens in Georgia has grown even more, which was probably due to the restoration of trade relations with Russia and the growth of Russian visitors. In 2013-2017, an average of 537 Russian companies were registered in Georgia per year. The number of registration was at a record high in 2018, when 1,201 Russian companies were established. In 2019, compared to the previous year, the registration of Russian companies decreased by 10%, and in 2020 it dropped to 611 due to the pandemic. In 2013-2020, Russian companies and citizens registered a total of 5,600 companies in Georgia.

Data source: Business Register of Georgia

Because there are more than 7,000 companies in Georgia owned by Russian companies and citizens, it is virtually impossible to obtain information about all of them, especially small and medium-sized companies. Due to the scope of activity, size, public interest, and access to information, we focused only on 20 large companies. The main source of information about companies was Business Register and Reporting Portal. ^[ix]

1.Energy sector

JSC^[x] Telasi

Telasi was registered as a joint-stock company in 1995. In 1998, 75% of the company's shares were acquired by the American company AES Silk Road Holdings B.V. In August 2003, RAO Nordic Oy, a Finnish company, purchased 100% of AES Silk Road Holdings B.V. RAO Nordic Oy is owned by a Russian company Inter RAO. To date, 75% of Telasi is owned by Inter RAO, which is controlled by Russian state-owned companies Rosneftgaz Group and Inter RAO Capital Group. In 1998, 25% of JSC Telasi remained in the ownership of the Georgian state. Until August 2020, the mentioned 25% belonged to the Georgian State Investment Fund – JSC Partnership Fund, from which the private company Best Energy Group LLC^[xi] bought the shares for USD 10.5 million. Khvicha Makatsaria owns 100% of Best Energy Group.

JSC Telasi is the only electricity distribution company in Tbilisi. According to the financial report audited by the auditing company Ernst & Young LLC, as of December 31, 2020, the assets of Telasi were GEL 366 million. In 2020, the company had a loss of GEL 73 million, and in 2019 - a profit of GEL 14 million.

JSC Khramhesi I and JSC Khramhesi II

The Hydroelectric Power Plants (HPP) Khramhesi I and Khramhesi II were established in 1996 as joint-stock companies. In 1999, they were acquired by AES Georgia Holdings B.V. As already mentioned, in 2003 AES Georgia Holdings B.V was acquired by the Russian company Inter RAO. Today Khramhesi I and Khramhesi II are owned by Gardabani Holding B.V., a subsidiary of Inter RAO.

In 2020, Khramhesi I and Khramhesi II generated 400 million kWh of electricity, which was 3.6% of the total electricity generated in Georgia.

As of December 31, 2020, the assets of Khramhesi I amounted to GEL 58 million and those of Khramhesi II to GEL 103 million, according to the financial statements audited by the auditing company Ernst & Young LLC. In 2020, Khramhesi I had a profit of GEL 2.4 million, while Khramhesi II had a loss of GEL 3.1 million. In 2019, Khramhesi I had a profit of GEL 5.9 million, and Khramhesi II – GEL 8.6 million.

Energy LLC (Larsi HPP, Shilda HPP)

Energy LLC was registered in 2010. 70% of the company is owned by Mevlud Bliadze, a Russian citizen, and 30% - by Peri LLC. The owners of Peri are Georgian citizens Ioseb Mchedlishvili and Kakhaber Shevardnadze.

The main activity of Energy LLC is the operation of two HPPs - Larsi and Shilda. These HPPs are small in size, in 2020 Larsi HPP generated 74 million kWh of electricity, and Shilda HPP - 15 million kWh.

According to the financial report audited by the auditing company BDO LLC, as of December 31, 2019, the assets of Energy LLC were GEL 88.5 million. In 2019, the company had a profit of GEL 2 million, and in 2018 – GEL 3.4 million.

JSC United Energy System Sakrusenergo

JSC United Energy System Sakrusenergo was registered in 1996. 50% of the company is owned by the Georgian state company JSC Partnership Fund, and 50% - by the Russian state company JSC Federal Network Company of the United Energy System. This company is the operator and manager of the electricity transmission network system of the Russian Federation.

The main activity of United Energy System Sakrusenergo includes the transmission of electricity using its own high voltage power lines in the territory of Georgia and neighboring countries: Russia, Turkey, Azerbaijan, and Armenia. Part of the company's power transmission lines is located in the territory of the Russian Federation. The Director-General of the company is Bachana Suladze, a citizen of Georgia, and the Chairman of the Supervisory Board is Alexei Molski, a citizen of the Russian Federation. Out of 8 members of the Supervisory Board, 4 are citizens of Georgia and 4 are citizens of the Russian Federation.

As of December 31, 2020, the assets of JSC United Energy System Sakrusenergo were GEL 134 million, according to the financial report audited by the auditing company PriceWaterhouseCoopers LLC. In 2020, the company has a profit of GEL 11.3 million, and in 2019 – GEL 14 million.

2.Heavy industry and transport infrastructure

Mining Investments LLC (RMG Gold LLC and RMG Copper LLC)

RMG Gold LLC was registered in 1996. 96.2% of this company is owned by Mining Investments LLC and 3.8% - by RMG Copper LLC. The owner of RMG Copper LLC is also Mining Investments. RMG Copper was registered in 1996 under the name of JSC Madneuli and has been called RMG Copper since June 2012.

The 100% owner of Mining Investments LLC is the Cyprus-registered company Femtilon Holdings Limited, whose supervisory board is chaired by Dimitri Troitsky, a Russian citizen. Kakhaber Mchedlishvili, a Georgian citizen, is a deputy chairman. Kakher Mchedlishvili donated GEL 55,000 to Salome Zurabishvili, the presidential candidate supported by the ruling Georgian Dream party, in 2018, and GEL 120,000 to the Georgian Dream in 2020-2021. The Director-General of the company is Vladimir Petrov, a Russian citizen. According to the financial report of RMG Gold LLC for 2019, the Russian citizens Dmitry Troitsky and Dmitry Korzhev are the final controlling entities of the company.

The main activities of RMG Copper LLC include the extraction and processing of copper and gold ores. In November 2014, this company received a license for exploration, extraction, and processing of mineral resources at the ore field in the territory of Bolnisi Municipality, which is valid until 2041.

The main activity of RMG Gold LLC is the search, extraction, and processing of mineral resources at the Sakdrisi gold deposit. The company holds a license to operate the Sakdrisi field until 2042.

According to the financial report audited by the auditing company KPMG, as of December 31, 2019, the assets of RMG Copper LLC were GEL 304 million. In 2019, this company had a profit of GEL 102 million, and in 2018 - GEL 91 million. In 2019, the assets of RMG Gold LLC were GEL 350 million. In 2019, this company had a profit of GEL 22 million, and in 2018 - GEL 44 million.

JSC Elmavalmshenebeli

JSC Elmavalmshenebeli was registered in 1998. As of December 31, 2019, 87% of its shares were owned by Loco Trans Company LLC, an offshore company registered in Malta, 12.8% were owned by the Georgian state, and 0.2% - by the employees of the company. Igor Tugbaev, a Russian citizen, is the Chairman of the Supervisory Board of Elmavalmshenebeli. 6 out of 7 members of the Board are also Russian citizens, and one is a Georgian citizen. This may indicate that the final beneficiaries of the company registered in Malta are citizens of the Russian Federation.

The main activity of Elmavalmshenebeli is the construction and repair of locomotives and the production of spare parts.

According to the financial report audited by Intellect Audit LLC, as of December 31, 2019, the assets of JSC Elmavalmshenebeli were GEL 71 million. In 2019, this company had a loss of GEL 28 million, and in 2018 – GEL 4 million.

Channel Energy (Poti) Limited - Georgia LLC

Channel Energy (Poti) Limited - Georgia was registered in 2000. 75% of the company is owned by Channel Energy (Era) Limited, registered in Gibraltar, and 25% - by JSC Poti Seaport Corporation. The final beneficiary of Channel Energy (Era) Limited is Petrocas Energy International, a company affiliated with Davit Iakobashvili, a Russian businessman of Georgian descent. According to media reports, at the end of 2014, 49% of Petrocas Energy International was acquired by the Russian company Rosneft.^[xii]

Channel Energy (Poti) Limited - Georgia owns oil terminals in Poti through warehousing, transmission, and logistics facilities.

As of December 31, 2020, the assets of Channel Energy (Poti) Limited - Georgia LLC amounted to GEL 60 million, according to the financial report audited by the auditing company PriceWaterhouseCoopers LLC. In 2020, this company had a profit of GEL 8.7 million, and in 2019 – GEL 7.7 million.

Poti Grain Terminal LLC

Poti Grain Terminal LLC was registered in 2011. 50% of this company is owned by Tower Capital Trading, a company registered offshore in the British Virgin Islands and 50% - by Agricom LLC. Konstantin Osipov is a Russian citizen who owns 100% of Agricom, while the final beneficiaries of Tower Capital Trading are unknown. Marat Shaidaev and Alexei Chemerichko, two members of the Supervisory Board of Poti Grain Terminal, are Russian citizens. Moreover, along with Ketevan Kublashvili, the manager of the company is Abas Mamedov, a Russian citizen.

The main activity of the Poti Grain Terminal is the storage, and loading-unloading of grain, and wholesale trade.

As of December 31, 2020, the assets of Poti Grain Terminal LLC were GEL 49 million, according to the financial report audited by the auditing concern Tsodna LLC. In 2020, the company had a profit of GEL 5.4 million, and in 2019 – GEL 4.2 million.

3.Light industry and service sector

Georgian Branch of IDS Borjomi Beverages Company LLC (IDS Borjomi)

The branch of IDS Borjomi Beverages Company LLC was registered in Georgia in 1997. Until 2009, it was called Georgian Glass and Mineral Water Co. NV. The branch has a license to use the Borjomi Gorge and other water sources in Georgia. IDS Borjomi is a company producing mineral and natural waters "Borjomi", "Likani", and "Bakuriani". IDS Borjomi Beverages Company is registered offshore, Curacao in the Netherlands Antilles. ^[xiii] The director of the company is Vladimir Ashurov, a Russian citizen. The final beneficiaries of the company are unknown. Until June 2021, the director of the Georgian branch was Mikhail Provotorov, a Russian citizen, who was replaced by Ivane Machavariani, the former Minister of Finance of Georgia.^[xiv]

As of December 31, 2020, the assets of the Georgian Branch of IDS Borjomi Beverages Company LLC amounted to USD 87 million, according to the financial report audited by the auditing company Ernst & Young LLC. In 2020, the company had a loss of USD 49 million, while in 2019 it had a profit of USD 17.3 million.

Wimm-Bill-Dann Georgia LLC

Wimm-Bill-Dann Georgia LLC was founded in 2008. 100% of the company is owned by Wimm-Bill-Dann, a joint-stock company registered in Russia. This company was founded in 1992 and Davit Iakobashvili was involved in its registration. Since 2010, the American Pepsico owns Wimm-Bill-Dann.

The main field of activity of Wimm-Bill-Dann Georgia is the production of dairy products and the distribution of imported milk and beverages. The company is known in the Georgian market under the brand of “Soplis Nobati". The company is also an importer of brands such as “Sandora”, “Sadachok”, “Lipton Cold Tea”, “Lays”, and “Doritos”.

According to the financial report audited by the auditing company KPMG, as of December 31, 2019, the assets of Wimm-Bill-Dann Georgia LLC were GEL 33.7 million. In 2019, the company had a loss of GEL 13 million, and in 2018 – GEL 900 thousand.

Tiflisski Vinni Pogreb LLC

Tiflisski Vinni Pogreb was registered in 2003. The 100% owner of this company is DK-Service LLC registered in Russia.

The main activity of Tiflisski Vinni Pogreb is the production and sale of wine and spirits. Most of the company's products are exported.

According to the financial report audited by the auditing company Moore Abc LLC, as of December 31, 2020, the assets of Tiflisski Vinni Pogreb were GEL 36 million. In 2020, this company had a profit of GEL 4.3 million, and in 2019 – GEL 4.6 million.

VEON Georgia LLC (Beeline)

VEON Georgia LLC was founded in 2003. The company is owned by two companies registered offshore in the British Virgin Islands: WaterTrail Industries LLC - 71% and Investico Alliance - 29%.

VEON Georgia is represented by the "Beeline" brand. According to the information^[xv] published on the website of Beeline, VEON Georgia is part of the VEON international group. VEON is registered in the Netherlands, although 47.9% of its shares are owned by Letterone Investment Holdings S.A., ^[xvi] founded and controlled by Russian businessman Mikhail Friedman^[xvii]. An investigation was launched against him in Spain [6] in 2019, and also in 2018, he was included in the list [7] of persons close to Russian President Vladimir Putin created by the US Treasury.

As of December 31, 2020, the assets of VEON Georgia LLC were GEL 120 million, according to the financial report audited by the auditing company PriceWaterhouseCoopers LLC. In 2020, this company had a loss of GEL 92 million, and in 2019 – GEL 40 million.

VTB Bank Georgia

JSC VTB Bank Georgia was registered in 1995 and until 2006 was called United Georgian Bank. VTB Bank Georgia is a subsidiary of the Russian VTB Bank. About 59% of VTB Bank shares are owned by the Government of the Russian Federation.

In terms of assets, VTB Bank Georgia is the 4th largest bank in Georgia after TBC Bank, Bank of Georgia, and Liberty Bank.

On February 25, 2022, the United States and the European Union imposed sanctions [8] on VTB Bank over Russia's invasion of Ukraine.

As of December 31, 2020, the assets of VTB Bank Georgia amounted to GEL 3.1 billion, according to the financial report audited by the auditing company Ernst & Young LLC. In 2020, this company had a profit of GEL 26.7 million, and in 2019 – GEL 29.8 million.

Metra Development LLC

Metra Development LLC was registered in 2013. 50% of the company is owned by Alexei Sonk, a Russian citizen, and the other 50% is owned by another Russian citizen - Alexei Volchkov.

The main activity of Metra Development is the construction and sale of residential buildings.

According to the annual financial report of the company, as of December 31, 2020, the assets of Metra Development LLC were GEL 19 million. In 2020, the company had a loss of GEL 6.3 million, and in 2019 – GEL 13 thousand.

Aliud Unitas Georgia LLC

Aliud Unita Georgia LLC was founded in 2015. A 65%-stake of Aliud Unita Georgia LLC is owned by Peftersona Limited, a company registered in Cyprus, 30% is owned by Ilia Bulichev, a Russian citizen, and 5% - by Levan Korkashvili, a dual citizen of Georgia and Russia. The beneficial owners of the Cyprus-based company Peftersona Limited are unknown.

The gambling business is the main activity of Aliud Unita Georgia. Its additional activities include restaurant services and currency exchange. The company owns the entertainment center ECLIPSE, which is located in Batumi.

According to the financial report audited by the auditing company Prestige-Audit, as of December 31, 2020, the assets of Aliud Unita Georgia LLC were GEL 57.5 million. In 2020, the company had a loss of GEL 36 million, and GEL 18 million - in 2019.

Royal Batoni LLC

Royal Batoni LLC was founded in 2011. 100% of the company is owned by Yuri Korotchenko, a Russian citizen.

Royal Batoni is located in Kvareli municipality. Its main activity is restaurant and hotel services.

According to the financial report of this company, as of December 31, 2020, the assets of Royal Batoni LLC were GEL 1.7 million. In 2020, this company had a loss of GEL 516 thousand, and in 2019 – GEL 323 thousand.

Lukoil-Georgia LLC

Lukoil-Georgia LLC was registered in 2002. The 100% owner of the company is JSC Litasco registered in Switzerland. The beneficial owner of Litasco is the Russian company Lukoil.

The main activity of the company is wholesale and retail sales of oil and petroleum chemicals throughout Georgia.

According to the financial report audited by the auditing company KPMG, as of December 31, 2020, the assets of Lukoil-Georgia LLC were GEL 75 million. In 2020, the company had a profit of GEL 1.2 million, and in 2019 had a loss of GEL 3.2 million.

It should be noted that Lukoil has been under EU sanctions since 2014 due to Russia's invasion of Ukraine. It has also been sanctioned [9] by the United States.

Yandex Taxi

Russian online taxi service company Yandex Taxi entered Georgia in 2016 and in a short time became one of the market leaders. Yandex Taxi is owned by Yandex.Go, a subsidiary of the Russian Internet company Yandex. Yandex Money, a subsidiary of Yandex, was added [10] to the US list of sanctioned companies on February 22, 2022.

Information on the assets and other financial data of Yandex Taxi in Georgia is not available from public sources.

V. Participation of Russian companies in Georgia’s public procurement

410 Russian companies have participated in the public procurement of Georgia in 2011-2021. These 410 companies include companies registered directly in Russia, as well as companies registered in Georgia, all or part of which is owned by Russian companies or citizens. Through electronic tenders and simplified public procurement, these companies have received contracts worth a total of GEL 590 million, which is about 1.4% of the amount spent on public procurement in Georgia in 2011-2021. Out of the mentioned GEL 590 million, GEL 525 million were received through electronic tenders and GEL 65 million - from simplified public procurement contracts.

Below is a brief overview of the 10 Russian companies that have received the most money from Georgian public procurement in the last 10 years. In total, these 10 companies have received GEL 476 million, which is 81% of the total amount received by Russian companies.

Lukoil-Georgia LLC

Lukoil-Georgia LLC, the beneficial owner of which is the Russian company Lukoil, received up to GEL 200 million from Georgian public procurement in 2012-2022. In particular, the company received contracts worth up to GEL 61 million from electronic tenders, GEL 11 million - from simplified procurement, and GEL 129 million - from consolidated public procurement.

JSC Metrovagonmash

At the end of 2021, the media reported that Tbilisi Metro would buy 44 new wagons for 50 million euros (GEL 175 million) from the Russian company Metrovagonmash. The purchase of wagons will start in 2022 and will be completed in 3 years. No information about this tender is sought in the public procurement system, as it was funded by the European Bank for Reconstruction and Development (EBRD), and the purchase was made according to EBRD’s rules. Therefore, Tbilisi Transport Company LLC, a company managing Tbilisi Metro and owned by Tbilisi City Hall, was not involved in the tender and, consequently, in the selection of the winner.

Metrovagonmash [11] is a large Russian company, which is also owned by a Russian company, JSC Transmashholding [12].

Georgian Branch of Construction and Installation Operation Enterprise Cheliabinsktranssignal LLC

Georgian Branch of Construction and Installation Operation Enterprise Cheliabinsktranssignal LLC has won 29 electronic tenders worth GEL 46 million in 2013-2017. With this company the largest GEL 10.1 million contract was signed by the Roads Department of the Ministry of Regional Development and Infrastructure of Georgia in May 2016. According to the contract, Cheliabinsktranssignal was to renovate the Kutaisi-Alpana-Mamisoni pass on the internal state road. The company has not received simplified public procurement contracts.

This company was registered in Georgia in September 2013. Its founder is a Russian company of the same name, and its director is Raindi Kantaria, a person with dual citizenship of Georgia and Russia.

Klasik-Stroi LLC

Klasik-Stroi LLC has won 21 electronic tenders worth GEL 15.7 million in 2015-2021. With this company, the largest contract worth GEL 9.5 million was signed by the LEPL^[xviii] Educational and Scientific Infrastructure Development Agency in August 2019. According to the contract, Klasik-Stroi is building a Didi Dighomi branch of Vladimir Komarov Tbilisi Physics and Mathematics Public School N199 in Tbilisi. Through a simplified public procurement, Klasik-Stroi received only one contract, worth GEL 27 thousand, in 2016 from N(N)LE^[xix] Batumi Blocks.

Klasik-Stroi LLC was registered in Georgia in October 2015. Its founder is a Russian company of the same name, and the director is Kakhaber Mamaladze, a citizen of Georgia.

Investstroiregion LLC

Investstroiregion LLC, registered in Russia, won 2 electronic tenders in 2014 with a total value of GEL 6.3 million. The contracts were signed by the State LLC United Melioration Systems Company of Georgia. In 2014, the branch of Investstroiregion LLC was established in Georgia, which, in 2014-2017, has received 8 contracts with a total value of GEL 6.8 million through electronic tenders. In total, Investstroiregion has signed contracts worth GEL 13 million through public procurement of Georgia. The company has not received any simplified procurement contracts.

Olesia Kvasova, a Russian citizen, is currently the director of the Georgian branch of Investstroiregion.

Grossinvest Capital LLC

Grossinvest Capital LLC has won 10 electronic tenders worth GEL 6.1 million in 2016-2017. With the company, the largest contract worth GEL 3 million was signed by the United Water Supply Company of Georgia in September 2017. According to the contract, Grossinvest Capital was to carry out rehabilitation works of the water supply system in Bakuriani. According to the information posted in the electronic public procurement system, the contract was not completed and Grossinvest Capital received GEL 2.4 million instead of GEL 3 million. The company has not received any simplified public procurement contracts.

Grossinvest Capital LLC was registered in Georgia in November 2016. Its founder is a Russian company of the same name, and the director is Malkhaz Lomsadze, a citizen of Georgia.

Individ-Partner LLC

Individ-Partner LLC has won 5 electronic tenders with a total value of GEL 5.6 million in 2017-2019. With the company, the largest contract worth GEL 2.8 million was signed in December 2019 by the Tbilisi Kindergarten Management Agency. According to this contract, the Individ-Partner was to build a kindergarten in Tbilisi. The company has not received any simplified public procurement contracts.

Individ-Partner LLC was registered in Georgia in December 2016. Its founder is a Russian company of the same name, and the director is Zurab Maghlakelidze, a citizen of Georgia.

Georgian Branch of Nanotechstroi LLC

Georgian Branch of Nanotechstroi LLC has won an electronic tender worth GEL 5.6 million in 2016. The tender was announced by G. Mikeladze State Puppet Theater and the company won it without competition. Under the contract, the company was to build a new puppet theater building. According to the information posted in the electronic public procurement system, the contract was not completed and the Georgian Branch of Nanotechstroi LLC received GEL 5.2 million instead of GEL 5.6 million. The company has not received any simplified public procurement contracts.

Georgian Branch of Nanotechstroi LLC was registered in Georgia in September 2016. Its founder is a Russian company of the same name, and the director is Koba Giorgadze, a citizen of Georgia.

Construction-Installation Division Severo-Zapad LLC

Construction-Installation Division Severo-Zapad LLC has won 10 electronic tenders worth GEL 5.3 million in 2015-2021. With the company, the largest contract worth GEL 1.6 million was signed by Oni Municipality in August 2019. According to the contract, the Construction-Installation Division Severo-Zapad LLC was to carry out road works in the village of Bari-Mravaldzali in Oni Municipality. The company has not received any simplified public procurement contracts.

The Georgian Branch of Construction-Installation Division Severo-Zapad LLC was registered in Georgia in June 2015. Its founder is a Russian company of the same name, and the director is Tengiz Machavariani, a dual citizen of Georgia and Russia.

Litom Representation in Georgia LLC

Litom Representation in Georgia LLC has won 2 electronic tenders worth GEL 3.3 million in 2015-2016. With this company, the contract of GEL 893 thousand was signed by Khulo Municipality, and the GEL 2 million contract was signed by Georgian Airports Union LLC. According to these contracts, Litom Representation in Georgia performed construction works. The simplified public procurement contract of GEL 378 thousand was signed with this company in April 2016.

Litom Representation in Georgia LLC was registered in October 2015. Its founder is a Russian company of the same name, and the director is Gocha Abashidze, a citizen of Georgia.

VI. Conclusion and recommendations

In 2020, the Covid-19 pandemic reduced Georgia's economic dependence on Russia. In 2021, it grew again, though it has not yet reached the levels of 2019. In 2020, through exports to Russia, Russian visitors, and remittances, Georgia earned about USD 900 million (5.7% of Georgia's nominal GDP), and up to USD 1.3 billion (6.7% of GDP) – in 2021. In 2019, these figures stood at USD 1.6 billion and 9% of GDP, respectively.

High economic dependence on Russia is not only dangerous because it can impose certain restrictions and cause economic damage to Georgia, and demand a political price in exchange for preventing this damage. Due to the aggression on Ukraine, Western countries have imposed severe economic sanctions on Russia, which will naturally reduce Georgia's revenues from Russia and will have a significant negative impact on Georgia's economic growth, the GEL exchange rate, and certain markets such as wine exports and wheat imports.

Recommendations

The goal of the Georgian government should be to reduce economic dependence on Russia to a minimum. Therefore:

• In the post-pandemic period, Georgia should work even more actively to diversify its export markets, especially in the field of wine exports;
• Local production of wheat and diversification of wheat imports should be promoted as much as possible;
• Subsidies from the state budget (grants, concessional loans, etc.) should not be given to businesses that increase the economic dependence on Russia;,
• Unlike previous years, Russia should not be the target market for attracting tourists. Resources allocated for marketing activities should be more actively directed to other countries, including countries that bring in high-budget tourists;
• The participation of Russian companies in Georgia’s public procurement should be regulated. For security reasons, buying goods and services from Russian companies should be banned or restricted. Moreover, the participation of Russian companies that fell under the sanctions of Georgia’s partner countries due to the aggression of the Russian Federation on Ukraine should be limited.