Putin Backs Away from Georgia Confrontation After Sanctions Call

(Bloomberg) -- Russian President Vladimir Putin stepped away from escalating conflict with neighboring Georgia, rejecting calls from parliament to sharply ratchet up economic sanctions amid anti-Kremlin protests.

“As for various kinds of sanctions against Georgia, I would not do it out of respect for the Georgian people,” Putin told reporters Tuesday in televised comments in Yekaterinburg. “For the sake of restoring full-fledged relations between Russia and Georgia, I would not do anything that would complicate our relations.”

Putin spoke hours after the Russian lower house of parliament approved a motion urging the government to adopt “special economic measures” against Georgia as retaliation for what it called “ongoing anti-Russia provocations.” Those measures may include bans on imports of wine and bottled water as well on as money transfers by Georgians working in Russia, according to Vyacheslav Volodin, speaker of the lower house.

“Of course this is a good decision and we welcome it,” Georgian Prime Minister Mamuka Bakhtadze said on Tuesday, according to local media. “There shouldn’t be barriers between our nations.”

Tensions spiraled after violent protests erupted in Georgia’s capital, Tbilisi, last month when a Russian lawmaker, Sergei Gavrilov, was pictured sitting in the speaker’s chair in the Georgian parliament at a meeting of legislators from Orthodox Christian countries. Relations between Georgia and Russia have been tense since they fought a war in 2008 over the breakaway regions of Abkhazia and South Ossetia, which the Kremlin later recognized as independent. The territories are considered part of Georgia under international law.

The legislator and other members of the Russian delegation had to leave Georgia hurriedly after chaotic scenes outside the parliament. Hundreds were hurt in clashes with police, who fired tear gas and rubber bullets.

Flight Ban

Putin’s decision not to escalate sanctions “can be seen as a way of putting pressure on Georgia by showing that, if necessary, pressure can be increased,” said Alexei Makarkin, an analyst at the Moscow-based Center for Political Technologies.

Russia has repeatedly used economic levers in political disputes with neighboring states in recent years. Following this incident, Putin imposed a ban on direct flights to Georgia that took effect on Monday and may cause losses of as much as $300 million for the Caucasus nation’s tourist industry, according to the Georgian central bank.

The threatened new punitive steps would have been far more damaging. Georgia’s $16 billion economy receives more than $630 million a year in remittances from Georgians living in Russia. Georgia relied on the Russian market for two-thirds of its $203 million in wine exports last year, and almost half of water exports, or $50 million.

The street protests in Tbilisi have continued with many demonstrators accusing the ruling Georgian Dream government of being too willing to accommodate Russia, which they say occupies 20% of the country by keeping forces in Abkhazia and South Ossetia.

Weak Currency

The demonstrations reflect anger at Georgian Dream for inviting the Russian lawmaker into parliament, as well as broader public dissatisfaction with the economy and the lari currency, said Giga Bedineishvili, associate professor at the Free University in Tbilisi. The lari, which has weakened 14% against the dollar in the past year, slid to an all-time low of 2.89 to the greenback on Tuesday.

The dispute flared again when a TV presenter on Georgia’s opposition Rustavi 2 channel insulted Putin using a stream of vulgarities in Russian on Sunday, sparking condemnation in Moscow. The Russian Foreign Ministry called the incident “a glaring example of where brazen Russophobia is leading to.”

There’s no reason to impose sanctions on Georgians “because one of them came out and said something,” Putin said. Rustavi 2 said in a statement on Monday that the presenter, Giorgi Gabunia, had been suspended for two months over the incident.

--With assistance from Helena Bedwell and Natasha Doff.

To contact the reporters on this story: Henry Meyer in Moscow at hmeyer4@bloomberg.net;Andrey Biryukov in Moscow at abiryukov5@bloomberg.net

To contact the editors responsible for this story: Gregory L. White at gwhite64@bloomberg.net, Tony Halpin, Paul Abelsky

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