Tamaz Datunashvili: “Some 85% of fuel and 100% of wheat comes from Russia. If import is halted, there will be a deficit in three to seven days.”

Verdict: FactCheck concludes that Tamaz Datunashvili’s statement is HALF TRUE.

Resume: Fuel import from Russia increased sharply since 2022. As of the first quarter of 2023, Russia’s share in terms of money is 67% and in terms of volume it is 74%. Import dependency on Russia is even higher in terms of wheat and flour and is around 96-97%.

Despite this very high dependency, deficits in three to seven days are not expected if Russia decides to ban export to Georgia, neither for car fuel nor for bread. This is because apart from having stocks, it is easier to replace suppliers of the aforementioned goods as compared to suppliers of some other goods (for instance, natural gas). Therefore, banning export may lead to price hikes (switching from cheaper to more expensive export), although the disappearance of goods from markets is an unrealistic expectation even in the short-term.

Tamaz Datunashvili’s figures about dependency are also exaggerated to a certain extent. At the same time, concerns about potential consequences arising as a result of a potential export ban are exaggerated and untrue. Therefore, FactCheck concludes that Tamaz Datunashvili’s statement is HALF TRUE.

Analysis:

On 17 May 2023, on air on TV Pirveli’s talk show, Pirveli Khazi, a member of the Lelo political party, Tamaz Datunashvili, stated the following in terms of Georgia’s growing economic dependence on Russia (from 59:40): “If Putin decides tomorrow to stop exporting fuel to this country (Georgia), cars will be ground to a halt in three days because 85% our imported fuel comes from Russia. We are 100% dependent on Russia in terms of wheat and if it stops the export of wheat to Georgia, there will be no bread in Georgia in one week.”

Georgia is 100% dependent on fuel import. Local production is negligible which means full export because there is no oil processing facility in Georgia. The foreign trade portal of the National Statistics Office of Georgia provides detailed information about goods that Georgia trades with foreign countries and data are available from 2009. In 2009, Georgia purchased 961,000 tonnes of fuel at a total value of USD 555 million. Of this amount, Russia’s share was only 3.1% which is 30,000 tonnes of petroleum products valued at USD 17 million.

In 2012, Russia’s share increased to 7%, in 2015 to 10.5% and further to 23% in 2018. In 2021, this figure decreased to 16.4%. In this whole period (2009-2021), Russia’s share in import measured both in monetary terms and in volumes was identical and Russia was only one of the supply channels.

In 2022 after Russia’s invasion of Ukraine, the West started to distance itself from Russia and gradually close its markets to Russian fuel. As a result, Russia had to sell its oil/fuel at lower prices. It was from that period when Georgian importers started to increase fuel import from Russia. In 2022, Georgia purchased 1.331 million tonnes of petroleum products valued at USD 1.337 billion. Of this amount, import from Russia was 657,000 tonnes with a value of USD 623 million. Russia’s share in imports reached 46.6% monetarily and 49.4% in volumes.

The trend continued in 2023 as well. Of the 315,500 tonnes of fuel purchased in the first quarter for USD 251 million, 235,000 tonnes were imported from Russia with a value of USD 169 million. Russia’s share in imports surged to 67.3% in terms of value and it became even more in terms of volumes – 74.6%.

Graph 1: Russia’s Share in Import of Petroleum Products

Source: National Statistics Office of Georgia

Georgia is also dependent on imports for wheat but unlike oil, 15%-30% of the demand is satisfied by local production. Russia's share in wheat imports almost always exceeded 80% with the exception of 2010-2012 when its share fell below 50%, although it did reach 100% in 2016-2017. The import dependence figure was 95% in 2022 and 96% in the first quarter of 2023.

Since 2021, there has been a tendency of decreasing wheat imports, although not so much at the expense of the growth of local production but a result of replacing wheat imports with flour imports. If in 2020 the import of wheat amounted to 491 thousand tonnes, it decreased to 367 thousand tonnes in 2021 and dropped further to 184 thousand tonnes in 2022. The decrease in two years amounted to 307 thousand tonnes whilst local production increased by only 55 thousand tonnes from 102 thousand to 157 thousand tonnes. The difference was offset by the import of wheat flour whose volume increased from 11 thousand tonnes to 182 thousand tonnes in the same period. The reason for the structural change was Russia’s decision to increase the export tax on wheat.

Russia’s share in flour import was 97% in 2021, 99% in 2022 and 97% in the first quarter of 2012.

Replacement of wheat with flour resulted in suspending the work of some mills. Local farmers also started to talk about problems. According to the decision of the Government of Georgia, additional duty will be imposed on imported flour from 10 June 2023 for the duration of five months in order to protect local production.

Graph 2: Russia’s Share in Import of Wheat and Flour

Source: National Statistics Office of Georgia

Similar to fuel, the statistical figures provided by Tamaz Datunashvili are also true in the case of wheat. Georgia is almost 100% dependent on Russia in terms of wheat and flour imports.

The second part of the statement, which was about the possible development of events in the case of Russia banning exports to Georgia, is false. The available stocks are enough for a period longer than one week.

The first mention of depletion of wheat stocks was circulated in May 2022 when the Executive Director of the Wheat and Flour Production Association, Levan Silagava, told Business Formula that there were only ten days of wheat stocks left in the country and that the mills would soon be closed. After three days on May 16, Malkhaz Dolidze, Chairman of the Georgian Bread Manufacturers Union, announced that unlike wheat, there was a two-month supply stock of flour. In his interview with Georgia’s Public Broadcaster in January 2023, Levan Silagava confirmed the existence of joint stocks of wheat and flour which would be sufficient for two months.

When the price of oil dropped on the world market, larger fuel importers tried to justify their delayed response to reducing petroleum prices by claiming that they still had fuel stocks which had been purchased at higher prices. It is very difficult to find an alternative supplier for some products such as natural gas. If there is no other pipeline, it takes years to construct one. The same applies to the weapons, which are not traded under standard market rules, and their export depends on political will. Unlike natural gas, it is much easier to switch to an alternative supplier of fuel or to another supplier of wheat or flour.

If Russia indeed bans the export of wheat and fuel to Georgia, importers will have to find new suppliers and retail prices will most likely increase. The government may temporarily subsidise the price difference but it will be budget money; that is, the taxpayers’ money. In both cases, expenses vis-à-vis citizens will increase directly or indirectly. However, a price increase on a product is one thing and a deficit of a product is different. As of today, the country does not face the danger of a domestic lack of car fuel or bread.

Finally, the first part of Tamaz Datunashvili’s statement where he speaks about size of Georgia’s dependence on Russian imports is mostly true whilst the second part which forecasts likely consequences of Russia’s possible ban on export to Georgia does not correspond to the reality. Therefore, FactCheck concludes that Tamaz Datunashvili’s statement is HALF TRUE.