Russia's Gift of Recognition Hurts Abkhaz Traders

Exports nosedive as an unintended consequence of Moscow’s diplomatic gesture of friendship.

Russia's Gift of Recognition Hurts Abkhaz Traders

Exports nosedive as an unintended consequence of Moscow’s diplomatic gesture of friendship.

Friday, 1 May, 2009

In rural districts of Abkhazia, many country folk say they have stopped going to the Psou checkpoint on the border with Russia.

This is because they know the Russian customs officers there won’t let them carry their farm produce across the border, as they used to.

“Three days ago I went to the border,” said Alena Zotova from the village of Gandiadi, in Abkhazia’s Gagra district.

“I wanted to cross over to Sochi to sell some stuff from my garden there. But they didn’t allow me to.”

Flowers are the only items that Abkhaz farmers can sell freely on the other side of the border.

Abkhazia’s frustrated farmers and market gardeners are victims of a muddle over whether Abkhaz citizens can take produce into Russia without documents they did not formerly need – and without paying customs duties.

Ironically, this difficulty has sprung up as a consequence of Russia’s decision to help Abkhazia by recognising it as an independent state.

Although moves are being taken to sort out the situation, Abkhaz exports to Russia have all but ground to a halt in the meantime because of the new rules, introduced by the latter in mid-March.

Before Russian recognition, Abkhazia enjoyed all the trading privileges allotted to members of the Commonwealth of Independent States, CIS, as it was de jure part of Georgia.

But since it was recognised by Moscow, it has lost all those perks, as it is neither a CIS member in its own right and, in Moscow’s eyes, is no longer part of Gerogia.

Russia applies a zero customs rate to goods coming from CIS partners.

It used to be enough for Abkhaz exporters to show a form known as a CT-1, issued by the Abkhaz chamber of commerce and industry, to be allowed into the Russian market.

Now exporters find they need new documentation, which most small farmers don’t possess.

In particular, they must provide border officials with an international certificate of origin, a so-called form A, to take goods into Russia. Without this, importers are liable to pay hefty customs duties.

In theory, the muddle has already been sorted out. On March 13, Russia’s federal customs service issued a decree granting Abkhazia most-favoured-nation status.

This ought to have meant Russia offering preferential tariff treatment to any goods coming from Abkhazia.

But Abkhaz officials say in practice they have yet to see any benefits from this new status.

“Most-favoured-nation treatment sounds beautiful,” said Msoust Shamba, deputy chairman of the Abkhaz customs committee.

“And non-specialists may think this regime accords privileges, including exemption from customs duties, but in reality this just isn’t the case.”

In another bid to rectify the situation, Russia’s federal customs service suspended customs duties on Abkhazia until further notice on April 20.

But in the Abkhaz capital of Sukhum, this measure is viewed as a temporary device that will not making things easier for Abkhaz exporters in the long term.

“Customs duties have not been abolished – they’ve only been temporarily suspended, which means the problem has not been solved,” complained Beslan Kvarchia, director of Sukhum-Babayevskyi, an import-export company.

Kvarchia said that in the year before last summer’s recognition, his firm had shipped 325 tonnes of nuts to its Russian partners.

But this year he had not been able to sell anything to Russia and the company was now facing closure.

He said the new customs rules had forced his company to raise the prices for its produce, which had driven away his former clients in Russia.

It would take him years, he said, to get sales back on track, even if the problem over customs was cleared up for good.

“We’ve been ousted from the market already, as our rivals – Georgia, Azerbaijan and Turkey – have been enjoying better conditions,” he said.

Sukhum has applied to officials in Russia to negotiate a lasting deal for its exporters.

But Batala Avidzba, chief of the Abkhaz customs control department, said the only solution would be an agreement that permanently exempted Abkhaz goods from dues.

“Abkhazia could be included on a list of developing countries participating in a scheme of preferences,” he suggested.

Beslan Baratelia, an Abkhaz economist, said the confusion over exports highlighted the fact that last year “Abkhazia was not ready to be recognised [as an independent state].

“We are lucky it’s not the [harvest] season and that we have no great quantities of agricultural produce to sell right now.

“But Abkhaz exporters have suffered a blow, as they have had difficulties shipping their goods.”

However, this expert said the situation won’t necessarily wreak havoc with the republic’s budget, since Russia supports Abkhazia financially in a host of other ways.

“I am sure Russia will be cooperative toward us,” he said, predicting a final agreement on the question of exports.

Anaid Gogorian is an IWPR contributor.

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