Russia's small, mountainous ex-Soviet neighbor has been subjected to an economic embargo by Moscow, since the two countries became caught up in an intense diplomatic row in September. Russia has cut off mail and transport links with Tbilisi, deported hundreds of Georgians, cracked down on 'illegal' Georgian businesses, and has threatened to halt natural gas supplies from 2007 if Georgia fails to agree to a major price hike.
Minister Aleksi Aleksishvili told Novosti-Georgia agency, "The Georgian side estimates damages [from reduced economic ties with Russia] at $200-250 million, or 2.05% of GDP."
However, he said the overall risk to the Georgian economy is low, as the country is "well-prepared for shocks."
Due to Russia's demand that Tbilisi pay double the current natural gas rate of $110 per 1,000 cubic meters in 2007, Georgia is seeking to diversify its gas imports, looking to energy-rich neighbors Azerbaijan and Iran.
"The raised gas price for Georgia will undoubtedly worsen the balance of payments, but the government is nevertheless aiming for economic growth of 7.5% in 2007," Aleksishvili said.
Relations between Georgia and Russia have been strained ever since the Western-leaning government of President Mikheil Saakashvili came to power in 2003. In March of this year, Russia banned Georgian wines and mineral water, dealing a heavy blow the ex-Soviet republic's fragile economy.
The current standoff was triggered in late September by Georgia's brief detention of four Russian officers on espionage charges, and was later exacerbated by Tblisi's subsequent threat to withdraw its support for Russia's WTO bid.
