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Last Updated: Thursday, 5 October 2006, 23:02 GMT 00:02 UK
Georgia eyes cost of Russian sanctions
By Alexander Koliandre
BBC News

A man waits in Tbilisi airport after transport links are suspended on 3 October 2006
The ban on transport and postal links will hit Georgians hard
Russia shows no sign of lifting sanctions which could cut Georgia's economic growth, Georgia's Minister for Economic Reforms Kakha Bendukidze has warned.

Mr Bendukidze said that Moscow's recently imposed sanctions could cut Georgia's annual growth to 8.5% from the 10% previously forecast.

Early in October, Moscow imposed a ban on transport and postal links between the two nations.

That was in retaliation for the arrest last week of four Russian intelligence officers in Georgia's capital, Tbilisi.

Georgia has accused them of spying, but Russia denies the charges and has called the arrest "blackmail" and "provocation".

'Harsher measures'

Despite the internationally-mediated release of the officers, the Kremlin has ignored US and European Union calls to drop the sanctions.

Not all sanctions have been imposed yet and if provocations continue, other harsher measures could be taken
Russian Speaker Boris Gryzlov

Boris Gryzlov, the speaker of the Russian parliament, said that lifting the sanctions was not an issue.

"The lifting of sanctions is not being discussed," he said.

"Not all sanctions have been imposed yet and if provocations continue, other harsher measures could be taken."

Georgia's economy is heavily dependent on Russia, which accounts for about 15% of the smaller country's trade.

Earlier this year Georgia's pro-Western government was named the most active economic reformer in the world, but the country remains one of the poorest of the former communist nations.

With wages low and unemployment high, many Georgians survive on money they receive from the relatives in Russia.

According to some estimates, almost one million of Georgia's total labour force of 2.1 million people work in Russia.

The closure of transport and postal links between the two countries could hit their families hard and deprive Georgia's economy of hundreds of millions of dollars every month.

If sanctions from Moscow continue, it may cost Georgia more than the minister's estimate of about $225m (120m).

Closed down

Russian police in front of the Georgian embassy in Moscow, 29 September 2006
Russia has tightened restrictions on Georgians in Russia

Russia is also trying to make life economically difficult for Georgians resident there.

In Moscow police have raided Georgian businesses, closing down casinos, restaurants and a hotel ostensibly over tax evasion and sanitation issues.

This is not the first time tensions between the two nations have been played out on the economic field.

Earlier this year, in a move widely seen as politically motivated, Moscow banned the import of Georgian wine and mineral water, products for which Russia was the main market.

While the Georgian economy remains heavily linked to Russia, Moscow has the means to make its displeasure over political differences keenly felt.

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