Aligning itself with Western sanctions, Georgia has implemented a ban on the transit and re-export of vehicles imported from the United States and the European Union, headed for Russia and Belarus. Amid Russia’s expansive incursion into Ukraine, Georgia’s thriving re-export industry faces mounting scrutiny.
Though the intent behind this maneuver is to fortify the enforcement of sanctions, it remains uncertain whether it can effectively obstruct these vehicles from reaching Russia through indirect channels. As of August 1, cars imported from the U.S. and bound for the two sanctioned nations fall under this regulation, with a similar prohibition on European vehicles commencing September 26.
Following initial confirmation of these restrictions in response to media inquiries, the Georgian authorities publicly declared the news on August 3. To stay compliant with recent waves of Western sanctions, these steps, according to officials, are requisite. Georgia, while not imposing sanctions against Russia, has committed to preventing its territory from being used for evasion of sanctions.
Leveraging a swiftly growing sector of importing and subsequently re-exporting vehicles, primarily used and refurbished ones, Georgia has etched itself as a regional powerhouse. With patronage largely stemming from erstwhile Soviet countries and Eastern Europe, motorcars account for nearly a third of Georgia’s total exports and have emerged as the leading export product in the first half of 2023.
Sandro Bitsadze, a representative of Caucasus Auto Import, believes the impact of the new regulations on the marketplace will be minimal. “Currently, the share of cars that go from Georgia to Russia is just under 5.5 percent,” stated Bitsadze, suggesting that while the fresh restrictions may cause a slight dip in car prices in Georgia, they will barely dent the market.
These sanctions now cover vehicles with engine capacities exceeding 1.9 liters, along with electric and hybrid vehicles, supplementing the pre-existing restrictions on Western vehicles priced above $50,000.
Nonetheless, the significant uptick in the export of cars to Kazakhstan, Kyrgyzstan, and Armenia, all constituents of the Eurasian Economic Union, has raised eyebrows among analysts. Given the abrupt surge, suspicions that these cars might ultimately be transported to Russia are high. But, the possibility of any consequential backlash for Georgia from the West remains ambiguous in the event of such re-exportation.
Reacting to these concerns, the Revenue Service of the Georgian Finance Ministry asserted, “Due to the high public interest, we further clarify that the restrictions do not apply to the export/re-export of vehicles imported from the US and the EU to countries that are not listed in the sanctions issued by the US and the EU.”
By introducing these restrictions, Georgia has implied that its neighbors, like Armenia, will face a blockade on channeling Western-imported cars to Russia through Georgian terrain.
Ever since Russia initiated its widespread invasion of Ukraine, Georgia has been viewed as a potential route for Russia to evade Western sanctions. Georgian officials have consistently maintained their commitment to collaborating with Western partners to ensure the necessary oversight of exports is conducted. Despite Georgia not aligning with Western sanctions, Western diplomats and EU officials have commended Georgia’s efforts to uphold its commitment not to allow its territory to be used for sanction evasion.
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