DYNAMICS AND STRUCTURE OF GEORGIA‘S TRADE WITH THE RUSSIAN FEDERATION Before and After the full-scale Russian Invasion in Ukraine MERAB KAKULIA NODAR KAPANADZE Tbilisi 2023

DYNAMICS AND STRUCTURE OF GEORGIA’S TRADE WITH THE RUSSIAN FEDERATION BEFORE AND AFTER THE FULL-SCALE RUSSIAN INVASION IN UKRAINE Merab Kakulia Nodar Kapanadze ᲔᲙᲝᲜᲘᲛᲘᲙᲐ ᲓᲐ ᲤᲘᲜᲐᲜᲡᲔᲑᲘ Cover Photo: Trucks waiting to get through the Georgia/Russia border crossing ©(CC BY-SA 2.0), Panegyrics of Granovetter(Sarah C. Murray) © Friedrich-Ebert-Stiftung © Georgian Foundation for Strategic and International Studies Friedrich-Ebert-Stiftung| Tbilisi Office Ramishvilis Dead End 1, Bldg. 1| 0179 Tbilisi| Georgia Tel.:+995 32 225 07 28 http://southcaucasus.fes.de/ To order publications: georgia@fes.de The views expressed in this publication are not necessarily those of the Friedrich-Ebert-Stiftung and the Georgian Foundation for Strategic and International Studies . Commercial use of all media published by the Friedrich-Ebert-Stiftung(FES) is not permitted without the written consent of the FES

Table of Contents 1. INTRODUCTION 2 2. SOURCES OF INFORMATION 3 3. DESCRIPTION OF THE WORK CONDUCTED AND RESEARCH METHOD 4 4. EXPORT STRUCTURE 5 5. IMPORT STRUCTURE 8 6. GOODS UNDER SANCTION 13 7. EXPORT OF GOODS UNDER SANCTION 14 8. IMPORT OF GOODS UNDER SANCTION 16 9. RE-EXPORT AND RE-IMPORT 20 10. CONCLUSIONS 23 ANNEX#1 24 ANNEX#2 27 ANNEX#3 28 ANNEX#4 30 SOURCES 34 1

DYNAMICS AND STRUCTURE OF GEORGIA‘S TRADE WITH THE RUSSIAN FEDERATION BEFORE AND AFTER THE FULL-SCALE RUSSIAN INVASION IN UKRAINE 1 INTRODUCTION On February 24, 2022, the military forces of the Russian Federation violently entered the territory of Ukraine. The war precipitated a strong reaction from the USA, the Eu ropean Union, Great Britain, Japan, and other countries, seeing strict economic sanctions imposed on the Russian Federation as an aggressor country and resulting a sharp restriction of trade relations with that country. Despite the moral, humanitarian, and political support for Ukraine at the international level, Georgia chose not to introduce individual sanctions against the Russian Feder ation. According to the Georgian government, imposition of such sanctions, taking into account the expected re taliatory measures, would have dealt a great blow to the Georgian economy, which was already weakened by the pandemic. Georgian society received its government’s choice with ambivalence. Sociological research showed that a large part of the population supported this decision, but a cer tain part perceived it as capitulatory(GORBI, 2022). 1 The issue became even more acute after some representatives of Ukraine, without providing proper evidence, accused Georgia of facilitating circumvention of the international sanctions(Unian, 2022). 2 Although the aforementioned accusation did not go beyond the scope of rhetoric, it at tracted the attention of international media and political circles, raising certain reputational risks for Georgia. It is vitally important to offer an evidence-based response to this allegation. The goal of the current study is to draw on the available statistical data to reveal whether Georgia’s trade with Russian Federation is indeed being utilized as a channel to avoid the international sanctions. The research is based on an analysis of the Georgian exports and re-exports to the Russian Federation, as well as the imports and re-im ports from this country before and after Russia’s largescale invasion of Ukraine. 1 https://www.interpressnews.ge/ka/article/715057-gorbi-s-kvlevistanaxmad-respondentta-698-etanxmeba-mtavrobis-pozicias-arsheerteboda-rusetis-cinaagmdeg-mimartul-ekonomikur-sankciebsxolo-ar-etanxmeba-271 2 https://www.unian.net/war/vlasti-gruzii-razreshili-kontrabandupodsankcionnyh-tovarov-v-rossiyu-gur-novosti-vtorzheniya-rossii-naukrainu-11772412.html?fbclid=IwAR0WFIHghgn2-xNPPxCqgS4brd2K0B 9hOlTeF1n0RScvNKA8O-w_tO5axWU 2

SOURCES OF INFORMATION 2 SOURCES OF INFORMATION The study used the data on the foreign trade of Georgia available on the website of the Ministry of Finance of Georgia. 3 Such information is also published by the Na tional Statistics Office of Georgia(Geostat), 4 however, the data of the latter is provided separately according to the countries and goods(at the level of 4- and 6-digit codes of the HS classifier) and not published simultaneously in both contexts, while the data of the Ministry of Finance allows such analysis. It should be noted here that the data of the Ministry of Finance and that of Geostat usually differ, as illustrated clearly in the diagram below. For the purpose of this study, a 12-month period from March 2022 to February 2023 was taken and compared with the previous 12-month period(March 2021 to February 2022). In terms of the temporality, it is exactly one year before and after the start of the war. At the same time, through various sources(see links) we searched for the official list of goods that were restricted by the European Union and the USA within the framework of the sanctions imposed on the Russian Federation(see links). 5 We approached both the National Statistics Office and the Ministry of Finance for clarifications on the matter. As the National Statistics Office informed us,"the data posted on the website of the Ministry of Finance do not fully cover the customs regimes of export and import(for example, re-export, processing) that we include in trade, therefore, its scarcity is quite logical." Diagram 1 Annual dynamics of the total trade turnover according to the data of the Ministry of Finance and Geostat($ million) 25,000 20,000 15,000 10,000 5,000 18% 10,433 26% 10,933 21% 11,463 8,859 8,683 9,487 13% 9,508 8,438 10,597 9,459 10,803 7% 10,142 28% 12,741 9,948 32% 13,318 10,126 31% 11,398 8,698 31% 14,342 10,981 38% 19,181 13,926 -11% 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Difference in percent Total turnover according to the Ministry of Finance Total Turnover according to Geostat 50% 40% 30% 20% 10% 0% -10% -20% Source: Ministry of Finance of Georgia, National Statistics Office of Georgia. 3 https://www.mof.ge/export_importis_informacia 4 https://www.geostat.ge/ka/modules/categories/35/sagareo-vachroba 5 https://www.consilium.europa.eu/en/policies/sanctions/restrictivemeasures-against-russia-over-ukraine/sanctions-against-russiaexplained/ 3

DYNAMICS AND STRUCTURE OF GEORGIA‘S TRADE WITH THE RUSSIAN FEDERATION BEFORE AND AFTER THE FULL-SCALE RUSSIAN INVASION IN UKRAINE 3 DESCRIPTION OF THE WORK CONDUCTED AND RESEARCH METHOD At the first stage, the data posted on the website of the Ministry of Finance were consolidated into a single database which contains information on Georgian import-ex port at the level of 11-digit codes of the HS classifier. Next, we separated the trade(export and import) data with the Russian Federation for the indicated periods and grouped them at the level of 4-digit codes of the HS classifier. As a result of the comparison, we acquired a complete list, which contains the full category of sanctioned goods at the level of 11-digit codes of the HS classifier. Finally, we analyzed the structure of foreign trade of Georgia and Russia in the context of the list of sanctioned goods. After that, we calculated the correlation coefficient be tween comparable periods at the level of 4-digit codes: we compared the structure of exports from March 2022 to February 2023 with similar data for the period from March 2021 to February 2022. Analogously, we compared the import structures in the same vein. This allowed us to assess the degree of structural change of imports and exports with the Russian Federation within a year of the start of hostilities, as compared to the exact same period before the start of the war. Afterwards, we identified the main commodity groups that showed a significant change in import or export. The next step was to reduce the list of goods subject to sanctions to the level of 11-digit codes of the HS classifier, and compare this with a similar list from the Revenue Service of the Ministry of Finance of Georgia. We found that the list available at the Revenue Service is identical to the official list of restricted goods we found on the web. https://sanctionscanner.com/ https://ofac.treasury.gov/sanctions-programs-and-country-information https://www.sanctionsmap.eu/#/main https://www.trade.gov/russia-sanctions-and-export-controls https://www.gov.uk/government/publications/russia-sanctionsguidance/russia-sanctions-guidance https://finance.ec.europa.eu/eu-and-world/sanctions-restrictivemeasures/sanctions-adopted-following-russias-military-aggression against-ukraine_en 4

EXPORT STRUCTURE 4 EXPORT STRUCTURE According to the data of the Ministry of Finance, in the period from March 2022 to February 2023, compared to the previous corresponding period, export from Georgia to the Russian Federation decreased from$583 million to $582 million, that is by 0.1 percent. It is safe to say that the export volume is almost unchanged. At the same time, the correlation coefficient between the structures at the level of 4-digit codes of the exports HS classifier in the comparable periods is 0.949, which indicates almost complete similarity in the export structure before and after the war began. As the provided data shows, 16 products from the list of top twenty exported goods remained unchanged in the comparable periods. The other four products: in the corresponding period of 2022-2023 were replaced by the following four products: 1. Fruits and other parts of plants, canned or prepared in other ways; 2. Food products, not specified elsewhere; 3. Mixtures used in the production of beverages; 4. Light vehicles. It should be noted that the list of goods presented below covers 95 percent of Georgia's exports to the Russian Federation. 1. Potatoes, fresh or frozen; 2. Tomatoes, fresh or frozen; 3. Coffee, tea or mate extracts, essences and concentrates, and 4. Copper waste and scrap Table 1 Top twenty products exported from Georgia to the Russian Federation according to the 4-digit codes of the HS classifier N From March 2021 to February 2022 1 Ferroalloys 2 Natural grape wines 3 Mineral and fresh waters 4 Ethyl alcohol nondenatured, with an alcohol concentration of 80 vol. less than %, alcoholic beverages 5 Waters, including mineral and carbonated waters, containing sugar additives 6 Apricots, cherries and berries, peaches, plums and bullace plum, fresh 7 Potatoes, fresh or frozen 8 Fresh or dried citrus fruits Mln$ 183.62 136.57 62.06 41.20 27.25 26.67 15.55 14.36 From March 2022 to February 2023 Natural grape wines Ferroalloys Ethyl alcohol nondenatured, with an alcohol concentration of 80 vol. less than%, alcoholic beverages Mineral and fresh waters Waters, including mineral and carbonated waters, containing sugar additives Apricots, cherries and berries, peaches, plums and bullace plum, fresh Fruits other, fresh Electric water heaters Mln$ 164.68 121.30 64.78 52.05 41.68 34.42 13.56 11.11 5

DYNAMICS AND STRUCTURE OF GEORGIA‘S TRADE WITH THE RUSSIAN FEDERATION BEFORE AND AFTER THE FULL-SCALE RUSSIAN INVASION IN UKRAINE N From March 2021 to February 2022 9 Fruits other, fresh 10 Electric water heaters 11 Apple, pear and quince, fresh 12 Walnuts other, fresh or dried 13 Manganese oxides 14 Copper waste and scrap 15 Ginger, saffron, thyme, bay leaf, curry, and other spices 16 Fruit and vegetable juices 17 Tomatoes, fresh or frozen 18 Other vegetables, fresh or frozen 19 Coffee, tea or mate extracts, essences and concentrates 20 Instruments and devices for medical or veterinary use Top twenty, total Export to Russia, total Share of top twenty in the total exports Mln$ 9.15 7.53 7.11 4.74 4.15 4.08 3.90 2.64 2.62 2.25 2.05 From March 2022 to February 2023 Apple, pear and quince, fresh Manganese oxides Fresh or dried citrus fruits Ginger, saffron, thyme, bay leaf, curry, and other spices Fruit and vegetable juices Walnuts other, fresh or dried Food products, not specified elsewhere Mixtures used in the production of beverages Fruits and other parts of plants, canned or prepared in other ways Instruments and devices for medical or veterinary use Light vehicles 1.94 559.44 582.72 96% Other vegetables, fresh or frozen Top twenty, total Export to Russia, total Share of top twenty in the total exports Mln$ 7.86 7.25 7.18 5.52 4.24 4.12 2.51 2.40 2.19 2.17 1.91 1.82 552.74 581.95 95% Source: Ministry of Finance of Georgia, authors‘ calculations. It is important to analyze the nature of change in the volume of main export products in the comparable periods. None of the listed products, the exports of which have increased, belong to military or dual-use goods. The most notable was a 34 percent decline in the ferroalloy exports, with a weighted reduction effect of 7.1 percent. The negative effect of the decrease in mineral water exports was also significant- 16 percent. The exports of other goods in the top twenty list also decreased, but due to their small volume, the negative impact was low. Among the listed goods, ferroalloys are the only ones that can be used for military purposes, however, the export of these products to the Russian Federation decreased by 34 percent during the analyzed period. In the compared periods, most significant was the 57 percent increase in alcohol exports. The increase in wine exports by 21 percent was in the same league of significance. Of particular note is the 53 percent increase in exports of sweet and carbonated beverages, with the weighted effect of 3.8 percent. All these products are of local production and belong to traditional export categories to Russia. 6

EXPORT STRUCTURE Diagram 2 Changes in the volume of the top twenty export products before and after the war Ethyl alcohol nondenatured, with an alcohol concentration of 80 vol. less than%, alcoholic beverages Natural grape wines Waters, including mineral and carbonated waters, containing sugar additives Apricots, cherries and berries, peaches, plums and bullace plum, fresh Fruits other, fresh Manganese oxides Electric water heaters Mixtures used in the production of beverages Fruit and vegetable juices Food products, not specified elsewhere Ginger, saffron, thyme, bay leaf, curry, and other spices Fruits and other parts of plants, canned or prepared in other ways Apple, pear and quince, fresh Instruments and devices for medical or veterinary use Light vehicles Coffee, tea or mate extracts, essences and concentrates Other vegetables, fresh or frozen Walnuts other, fresh or dried Tomatoes, fresh or frozen Copper waste and scrap Potatoes, fresh or frozen Fresh or dried citrus fruits Mineral and fresh waters Ferroalloys -400%-300% 0.0% -13.7% -0.1% -19.0% -0.1% -13.1% -0.1% -60.3% -0.1% -73.9% -0.3% -89.0% -0.6% -50.0% -1.4% -16.1% -7.1% -33.9% 6.4% 57.2% 5.8% 20.6% 3.8% 52.9% 1.7% 29.1% 1.1% 48.1% 0.9% 74.8% 0.9% 47.6% 0.8% 0.4% 60.7% 0.4% 96.8% 0.4% 41.4% 0.2% 53.1% 0.1% 10.5% 0.0% 12.0% 0.0% 0.0% 187.1% -200%-100% 0% 100% 200% 300% Export change, weighted according to the 2022 structure Change in export volume Source: Ministry of Finance of Georgia, authors‘ calculations. 7

DYNAMICS AND STRUCTURE OF GEORGIA‘S TRADE WITH THE RUSSIAN FEDERATION BEFORE AND AFTER THE FULL-SCALE RUSSIAN INVASION IN UKRAINE 5 IMPORT STRUCTURE According to the data of the Ministry of Finance, in the period from March 2022 to February 2023, compared to the previous corresponding period, imports from the Russian Federation to Georgia increased from$1,035 million to$1,879 million, or by 82 percent. The correlation coeffi cient between the structures at the level of the 4-digit HS imports classifier codes in the comparing periods is 0.824, which indicates a great similarity in the structure of imports in the periods of interest. in the corresponding period of 2022-2023 were replaced by the following five products: 1. Rods of carbon steel, without further processing; 2. Coal, types of solid fuel derived from coal; 3. Carbon steel semi-finished products; 4. Electricity; 5. Plywood glued, plywood panels and similar materials from mixed wood. As the data presented below shows, in the compared periods(before the war and after), 15 products from the top twenty commodity groups of imported goods remained unchanged. Five products, namely: 1. Telephone devices, including telephones for cellular networks and other wireless networks; 2. Corn; 3. TV receiving equipment; 4. Haircare products, and 5. Surface-active organic material; Washing and cleaning products. Table 2 Top twenty products imported from the Russian Federation to Georgia according to the 4-digit codes of the HS classifier N From March 2021 to February 2022 1 Oil and petroleum products 2 Wheat and meslin Mln$ 140.07 81.23 3 Petroleum gases and other gaseous hydrocarbons 76.02 4 Sunflower, safflower, and cottonseed oils 39.04 and their fractions 5 Telephone devices, including telephones for cellular networks and other wireless 37.93 networks 6 Coke and semi-coke from coal, lignite, or peat, retort charcoal 28.20 7 Chocolate and other prepared food products containing cocoa 26.23 From March 2022 to February 2023 Oil and petroleum products Petroleum gases and other gaseous hydrocarbons Wheat or wheat-rye flour Wheat and meslin Coke and semi-coke from coal, lignite, or peat, retort charcoal Demijohn bottle, bottles, and other glass containers Sunflower, safflower, and cottonseed oils and their fractions Mln$ 704.52 79.52 67.18 65.27 58.00 44.79 43.42 8

IMPORT STRUCTURE N From March 2021 to February 2022 8 Margarine 9 Bread, flour confectionery, cookies, cake and other pastries 10 Demijohn bottle, bottles, and other glass containers 11 Wheat or wheat-rye flour 12 Corn 13 TV receiving equipment 14 Products for preparation of sauces and ready-made sauces, mustard 15 Medicinal products, packaged 16 Coffee, tea, and mate extracts, essences and concentrates 17 Processed legumes 18 Pigs alive 19 Means for the hair care 20 Surface-active organic material; Washing and cleaning products Top twenty, total Imports from Russia, total Share of top twenty in the total imports Source: Ministry of Finance of Georgia, authors‘ calculations. Mln$ 23.70 19.85 19.35 18.55 16.20 13.76 13.63 13.15 11.95 11.88 9.87 9.25 9.16 619.04 1,034.99 60% From March 2022 to February 2023 Rods of carbon steel, without further processing A grain of processed legumes Chocolate and other prepared food products containing cocoa Margarine Bread, flour confectionery, cookies, cake and other pastries Coal, types of solid fuels derived from coal Pigs alive Carbon steel semi-finished products Medicinal products, packaged Electricity Products for preparation of sauces and ready-made sauces, mustard Coffee, tea, and mate extracts, essences and concentrates Plywood glued, plywood panels and similar materials from mixed wood Top twenty, total Imports from Russia, total Share of top twenty in the total imports Mln$ 43.37 37.29 31.11 28.94 26.68 26.42 21.88 21.75 21.68 20.96 19.64 18.25 13.58 1,394.26 1,878.70 74% It is important to observe the change in the volume of the main import products in the comparable periods. The largest weight in the increase of imports, at 403 percent, was in petroleum products, while the highest rate of growth was observed in the import of steel rods(1493 percent), which is due to its low base value. The weighted effect of this increase is much smaller than that of petroleum products. The imports of primary grain processing goods increased significantly(flour and processed grains, 262 and 309 percent respectively). The import of telephone equipment(by 94.5 percent) and TV equipment(by 80.6 percent) decreased sharply. 9

DYNAMICS AND STRUCTURE OF GEORGIA‘S TRADE WITH THE RUSSIAN FEDERATION BEFORE AND AFTER THE FULL-SCALE RUSSIAN INVASION IN UKRAINE Diagram 3 Changes in the volume of Top twenty import products before and after the war Oil and petrolium products Rods of carbon steel, without further processing Wheat or wheat-rye flour Coal, types of solid fuels derived from coal Cereal grains otherwise worked; germ of cereals Carbon steel semi-finished products Coke and semi-coke from coal, lignite, or peat, retort charcoal Demijohn bottle, bottles, and other glass containers Electricity Live swine Medicinal products packaged Plywood glued, plywood panels and similar materials from mixed wood Extracts, essences and concentrates, of coffee, tea or mat Bread, flour confectionery, cookies, cake and other pastries Products for preparation of sauces and ready-made sauces, mustard Margarine Chocolate and other prepared food products containing cocoa Sunflower, safflower, and cottonseed oils and their fractions Petroleum gases and other gaseous hydrocarbons Preparations for use on the hair Surface-active organic material; Washing and cleaning products Telephone devices, including telephones for cellular networks and other wireless networks Television receivers Corn wheat and meslin 151.1% 403.0% 34.5% -0.1% -19.2% -0.1% -22.6% -0.1% -94.5% -0.1% -80.6% -0.2% -35.5% -0.7% -19.7% 9.4% 262.2% 4.3% 308.7% 4.2% 213.8% 3.4% 292.9% 3.3% 105.7% 3.1% 131.5% 1.8% 158.7% 1.4% 121.6% 0.7% 64.8% 0.6% 80.2% 0.5% 52.8% 0.5% 34.4% 0.5% 44.1% 0.3% 22.1% 0.3% 18.6% 0.3% 11.2% 0.2% 4.6% 1492.4% -400%-200% 0% 200% 400% 600% 800% 1000% 1200% 1400% 1600% Change in imports, weighted according the 2022 structure Change in import volume Source: Ministry of Finance of Georgia, authors‘ calculations. 10

IMPORT STRUCTURE The significant increase in the import of ferrous metallur gy products is completely natural, as the largest supplier of these products before the war was Ukraine. This supply was stopped due to the war, and the alternative source for the aforementioned goods is the Russian Federation, which has replaced Ukrainian-made ferrous metallurgy products in the Georgian construction sector. The main reason for the sharp increase in the import of primary wheat processing products from Russia can be found in the 19 percent decrease in the import of unprocessed wheat from the same country. The Russian Federation was and remains the main source of wheat import to Georgia. Diagram 4 Dynamics of wheat and flour import structure in Georgia by partner countries 100% 90% 80% 70% 60% 50% 40% 1% 3% 2% 4% 1% 2% 2% 3% 1% 1% 4% 7% 1% 8% 5% 4% 915 1% 1% 5% 7% 20% 5% 24% 26% 16% 4% 2% 19% 9% 1% 22% 2% 758 776 757 5% 1% 697 16% 28% 20% 615 535 603 538 645 40% 596 595 606 542 504 540 509 55% 43% 414 419 1,000 900 800 700 600 500 400 43% 43% 30% 253 57% 300 217 61% 30% 72% 20% 20% 71% 37% 82% 200 52% 10% 20% 85% 30% 14% 29% 82% 10% 70% 15% 100 9% 52% 13% 5% 9% 11% 12% 8% 10% 94% 94% 96% 11% 91% 94% 98% 1% 0% 3% 1% 3% 5% 3% 2% 3% 2% 21%% 4% 2% 2% 2% 1% 2% 3% 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Azerbaijan Kazakhstan Russia Turkey Ukraine Rest Total Import(Thousand Ton) Source: Ministry of Finance of Georgia, authors‘ calculations. As mentioned above, the import of petroleum products increased sharply. The increased demand for cheaper petroleum products as a result of the sanctions has led to a decrease in fuel prices in Georgia, a fact confirmed by the Geostat data. 11

DYNAMICS AND STRUCTURE OF GEORGIA‘S TRADE WITH THE RUSSIAN FEDERATION BEFORE AND AFTER THE FULL-SCALE RUSSIAN INVASION IN UKRAINE Diagram 5 Change in gasoline prices compared to the corresponding month of the previous year 80% 60% 59% 57% 52% 43% 44% 43% 45% 40% 46% 41% 40% 37% 33% 26% 29% 27% 28% 20% 6% 18% 15% 8% 0% -20% -2% -10% 0% -6% -8% -15% -40% -32% 01 02 03 04 05 06 07 08 09 10 11 12 01 02 03 04 05 06 07 08 09 10 11 12 01 02 03 Source: National Statistics Office of Georgia. 2021 2022 2023 The decrease in fuel prices is an important factor in slowing down the rate of inflation, and this was also reflected in a reduction in the growth rate of the prices of goods and ser vices 6 of the relevant group. The data presented below show that Georgia is not in such a bad situation in terms of price increases for the goods of the aforementioned group. Diagram 6 Housing, water, electricity, gas, and other types of heating: annual price increase as of February 2023 Moldova Turkey Latvia Lithuania Estonia Hungary Poland Italy Bulgaria Georgia Great Britain France USA Germany Greece -4.9% -10.0% 0.0% 18.0% 12.4% 11.8% 8.7% 8.6% 8.3% 37.8% 32.4% 30.4% 27.2% 24.5% 10.0% 20.0% 30.0% 40.0% Source: International Monetary Fund: https://data.imf.org/regular.aspx?key=61015894 46.6% 50.0% 55.9% 60.0% 68.9% 70.0% 80.0% 6 Source: COICOP Group: Housing, water, electricity, gas, and other types of heating. https://data.imf.org/regular.aspx?key=61015894 12

GOODS UNDER SANCTION 6 GOODS UNDER SANCTION According to the retrieved data, as a result of the sanctions imposed on the Russian Federation at different times, the European Union banned or restricted the ex port of 3,866 products out of 10,057 types of goods at the level of 11-digit codes of the HS classifier. The Unit ed States of America introduced sanctions on the export of 2,089 products. The export of 4,356 products in total from the USA and the European Union to the Russian Fed eration are under sanction. Of the 10,057 types of products at the level of 11-digit codes of the HS classifier, the European Union has re stricted or prohibited the import of 3,274 from the Russian Federation. The USA announced the same type of sanctions on 901 goods. Overall, 3,965 types of goods have been sanctioned for import from the Russian Feder ation into the US and EU. Diagram 7 EU and US restrictions on trade relations with Russia out of 10,057 types of products at the level of 11-digit codes of the HS classifier Import from Russia to EU or USA 3,965 6,092 Export to Russia from the EU or USA 4,356 5,701 Dual-use goods 665 9,392 Import from Russia to USA 901 9,156 Import from Russia to the European Union 3,274 6,783 Export from USA to Russia 2,089 7,968 Export from EU to Russia 3,866 6,191 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Under sanctions Not under sanctions Source: Indicated links, authors‘ calculations. 13

DYNAMICS AND STRUCTURE OF GEORGIA‘S TRADE WITH THE RUSSIAN FEDERATION BEFORE AND AFTER THE FULL-SCALE RUSSIAN INVASION IN UKRAINE 7 EXPORT OF GOODS UNDER SANCTION According to the data of the Ministry of Finance, in the period from March 2022 to February 2023,$582 million worth of goods were exported from Georgia to the Rus sian Federation, of which$334 million, i.e. 57 percent of the total exports, constitute those products that are not subject to the sanctions imposed on Russia by either the European Union or the United States.$248 million worth of exports, or 43 percent of the total volume, is made up of goods that are sanctioned by either the European Un ion or the United States. Of that identified$248 million,$11 million(2% of the total exports) was accumulated from goods sanctioned only by the EU, while$163 million(28% of the total exports) from those sanctioned by the US, and$74 million(13% of the total exports) from goods sanctioned by both the EU and the US. Table 3 The distribution of$582 million worth of products exported from Georgia to Russia, according to the sanctions introduced against Russia, from March 2022 to February 2023. Exported, Total Among them: Not under sanction Under sanction, total Among them: Sanctioned only by the EU Sanctioned only by the USA Sanctioned by the EU and USA Source: Ministry of Finance of Georgia, authors‘ calculations. Mln$ 582.0 333.5 248.4 10.9 163.5 74.1 Percent 100% 57% 43% 2% 28% 13% The structure of exports of sanctioned goods from Geor gia to the Russian Federation by category is noteworthy. As the data shows, 66 percent($165 million) of the ex ports of sanctioned products comes from wine. 26 per cent($65 million) is alcohol, and 3 percent($7 million) is manganese oxides. These are the traditional categories of goods whose export is very important for Georgia. According to the available data, the Russian Federation absorbed almost 70 percent of Georgian wine exports in 2022. This was among the reasons the Georgian government refused to join the sanctions imposed on the Rus sian Federation as an aggressor country. The above three products alone account for 95 percent of all sanctioned exports. The share of the same three prod ucts in the 12-month period from March 2021 to February 2022 was also 95 percent. The remaining 5 percent by the 4-digit HS classifier codes is distributed among 105 goods, and the share of each is 0.04 percent on average. 14

EXPORT OF GOODS UNDER SANCTION Table 4 The distribution of goods exported from Georgia to Russia, sanctioned either by the EU or the USA, according to the 4-digit codes of the HS classifier, from March 2022 to February 2023 Exported, Total Among them: Natural grape wines Ethyl alcohol non-denatured, alcohol concentration less than 80% by volume, alcoholic beverages Manganese oxides Other Source: Ministry of Finance of Georgia, authors‘ calculations. Mln$ 248.4 164.7 64.8 7.3 11.7 Percent 100% 66% 26% 3% 5% Of these 105 products, there are only three products whose export exceeds$1 million. These are: – Food products not specified elsewhere, the export of which was also recorded in previous years; – Light vehicles, which were not recorded in previous years, the emergence of this position being only the re sult of the rearrangement of logistical connections. The volume is insignificant; – Mixtures used in the production of beverages, the ex port of which was also recorded in previous years. See Appendix#1 for a detailed list. Incidentally, only 0.2 percent of the total exports is of goods that have been given the code of dual-use products in the sanctions packages developed by the USA and the EU. That 0.2 percent is distributed among 17 commodities by the 4-digit codes of the HS classifier. Of these, the com modity group of artificial and primed waxes stands out with the largest volume, its share comprising 0.1 percent of the total export. The average volume of the remaining 16 goods is$17 thousand, and the average share 0.003 percent. It should also be noted that the export of this type of product decreased by 23.6 percent in the compared periods. See Appendix#2 for a detailed list. Thus, the accusation that Georgia has become a hub for the export of military or dual-use goods to Russia is com pletely unfounded. 15

DYNAMICS AND STRUCTURE OF GEORGIA‘S TRADE WITH THE RUSSIAN FEDERATION BEFORE AND AFTER THE FULL-SCALE RUSSIAN INVASION IN UKRAINE 8 IMPORT OF GOODS UNDER SANCTION According to the data of the Ministry of Finance, in the period from March 2022 to February 2023,$1,879 million worth of goods were imported from the Russian Federation to Georgia, of which$629 million, or 33 percent, of the total imports constituted products that are sanctioned neither by the European Union nor the USA. The products that are on either the European Union or the United States’ list of sanctions make up$1,250 million, or 67 percent of the total imports. The products sanctioned only by the EU make up$334 million(18% of the total imports) of that$1,250 million, while$112 million(6% of the total imports) is the share of goods sanctioned by the US alone. Those sanctioned by both the EU and the US constitute$805 million(43% of total exports). Table 5 The distribution of$1,879 million worth of products imported from Russia to Georgia according to the sanctions imposed on Russia, from March 2022 to February 2023 Imported, total Among them: Not under sanction Under sanction, total Among them: Sanctioned only by the EU Sanctioned only by the USA Sanctioned by the EU and USA Source: Ministry of Finance of Georgia, authors‘ calculations. Mln$ 1,878.7 628.5 1,250.2 333.8 111.7 804.7 Percent 100% 33% 67% 18% 6% 43% Petroleum products made up 56.4 percent($ 705 million) of the imports of sanctioned goods. Natural gas constituted 6.4 percent. The share of all other products is less than 5 percent. In this case, more important than the volume of main goods is the list of products. As can be seen from the table below, almost all the sanctioned commodity positions of imports from Russia to Georgia are traditional import categories. There is no particular addition to this list. It is also worth noting that the volume of imported products according to each commodity position is of such a size that it cannot possibly serve as a reason to circumvent the sanctions: the volume is so small that it can only be intended for the domestic market. 16

IMPORT OF GOODS UNDER SANCTION Table 6 The volume and structure of the top twenty sanctioned products imported from the Russian Federation to Georgia according to the 4-digit codes of the HS classifier in the period from March 2022 to February 2023 Total Oil and petroleum products Petroleum gases and other gaseous hydrocarbons Coke and semi-coke from coal, lignite, or peat, retort charcoal Demijohn bottle, bottles, and other glass containers Carbon steel rods, without further processing Coal, types of solid fuels derived from coal Carbon steel semi-finished products Electricity Plywood glued, plywood panels and similar materials from mixed wood Petroleum coke, petroleum bitumen and other petroleum refining residues Pipes, tubes and hollow profiles, other, of ferrous metals Means for the hair care Products made of asphalt or similar materials Surface-active organic material; Washing and cleaning products Thermally polished glass and glass with a matt or polished surface Wooden construction goods Flat-rolled carbon steel of a width of 600 mm or more, hot rolled steel Fertilizers with mineral or chemical nitrogen, containing phosphorus and potassium Angles, shapes and special profiles made of carbon steel Products of ferrous metals used for railway and tram tracks Cosmetics or make-up and skin care products Sawn timber Food products, not specified elsewhere Slabs made of sapwood fiber or other lignified materials Coiled hot-rolled carbon steel, loosely coiled Soap Products made of stone or other mineral substances Slabs of wood chipboard Paper and paperboard, uncoated, for writing, printing or other graphic purposes Other uncoated paper and paperboard, in rolls or sheets Metal constructions and their parts from ferrous metals Plates, sheets, tapes, foil, and strips of polymeric materials Plastic pipes, tubes, and hoses and their fittings Means for oral and dental hygiene Other Mln$ 1,250.2 704.5 79.5 58.0 44.8 43.4 26.4 21.7 21.0 13.6 9.2 7.7 7.5 7.2 7.1 6.9 6.9 6.8 6.6 6.2 6.2 6.1 5.8 5.8 5.6 5.0 4.8 4.8 4.6 4.5 4.5 4.2 4.0 3.9 3.7 91.7 Percent 100% 56.4% 6.4% 4.6% 3.6% 3.5% 2.1% 1.7% 1.7% 1.1% 0.7% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.3% 0.3% 0.3% 0.3% 7.3% Source: Ministry of Finance of Georgia, authors‘ calculations. 17

DYNAMICS AND STRUCTURE OF GEORGIA‘S TRADE WITH THE RUSSIAN FEDERATION BEFORE AND AFTER THE FULL-SCALE RUSSIAN INVASION IN UKRAINE The only commodity position that could possibly be suspected of being exported through Georgia, bypass ing sanctions, are petroleum products. Their import in creased 5 times during the reporting period and amount ed to$704.5 million. One might think that much of this oil was imported for export to other countries. Thus, the export of petroleum products from Georgia slightly increased in 2022, 7 but its scale does not correspond in any way to the growth rate of import of petroleum products from Russia. Consequently, we can conclude that the petroleum products imported from Russia are almost entirely intended for local consumption. As the following data shows, from March 2022 to February 2023, petroleum products worth$23 million were exported from Georgia, which is$14 million more than in the previous corresponding period. Yet, in the same period, the growth rate and volume of imports are correspondingly higher: from March 2022 to February 2023, the import of petroleum products increased by$403 million. Diagram 8 Dynamics of import and export of petroleum products in 12-month periods from March to February($ million) 1,400 1,200 1,292 1,000 800 932 934 962 600 718 400 200 1 1 1 4 0 2010 2011 2012 2013 Source: Ministry of Finance of Georgia, authors‘ calculations. 871 609 7 3 2014 2015 Export 716 619 5 49 2016 2017 Import 843 26 2018 796 10 2019 889 468 5 9 2020 2021 23 2022 Most likely, the increase in the import of petroleum products from Russia was caused by their lower price. This is also verified by the structure of petroleum product im ports by country, which clearly shows a sharp increase in Russia's weight in 2022, at the expense of a decrease in oil imports from other countries. 7 იგულისხმება მარტიდან თებერვლის ჩათვლით 12 თვიანი პერი ოდი. 18

IMPORT OF GOODS UNDER SANCTION Diagram 9 Annual dynamics of the structure of import of petroleum products by country($ million) 100% 62 70 69 59 90% 45 30 48 59 36 27 42 65 80% 40 64 115 70% 26 932 934 962 128 162 60% 718 242 290 50% 94 40% 208 184 126 30% 20% 307 347 316 282 10% 0% 2010 2011 2012 2013 Azerbaijan Greece Source: Ministry of Finance of Georgia, authors‘ calculations. 59 30 75 57 45 95 47 69 871 56 54 50 75 100 146 33 47 65 100 148 843 183 250 716 187 609 619 166 178 114 190 97 82 77 93 231 129 107 112 112 2014 2015 2016 Bulgaria Turkmenistan 2017 2018 Romania Other 87 60 116 62 42 19 796 120 218 468 189 86 46 57 88 75 2019 2020 Russia Import, total 85 203 889 25 140 159 135 143 2021 76 131 47 1,292 705 226 82 25 2022 1,400 1,200 1,000 800 600 400 200 0 All in all, it can be said that the import of sanctioned prod ucts from Russia to Georgia is a natural continuation of the trend of previous years, while the nomenclature of imported goods is unchanged. The following two essential factors that fit into that logic, considering the current processes, are worth noting: 1. The increase in the import of ferrous metallurgy products. These were traditionally supplied by Ukraine, but as it is no longer possible to import from that country, the next most realistic alternative source is the Russian Federation. This should explain the de cision of the Georgian government not to close this source of import, it would have caused great damage to the construction sector, which is an important component of Georgia's GDP; 2. The five-fold increase in the import of petroleum products intended for domestic market consump tion, as demonstrated by the structure of the import of these goods by country. Given the current global situation, it is hard to imagine how much this source of import could have been diversified. Here, we note that the share of products that have been assigned a dual use product code in the sanctions pack ages developed by the US and the EU make up only 1 percent of the total imports. The import of only three of these commodities exceeds$1 million. These are:: – Pipes, tubes, and hollow profiles, other, made of fer rous metals. The imported volume of this commodity position was the same in the previous corresponding period; – Products made of stone or other mineral substances, also imported in the same volume as in the previous corresponding period; – Telephone equipment for cellular or other wireless net works, including phones. The imports of this commodity position decreased by 95 percent compared to the corresponding period. The remaining volume of these imports is divided among 64 commodity positions according to the 4-digit codes of the HS classifier, and amounts to an average of$850 thousand, while its average share in the total imports is 0.007 percent. The total imports according to this list have decreased by 65.5 percent compared to the corresponding period. See Appendix#1 for a detailed list. 19

DYNAMICS AND STRUCTURE OF GEORGIA‘S TRADE WITH THE RUSSIAN FEDERATION BEFORE AND AFTER THE FULL-SCALE RUSSIAN INVASION IN UKRAINE 9 RE-EXPORT AND RE-IMPORT According to the explanations received from the National Statistics Office and the Ministry of Finance, the statistics data presented on the website of the Ministry of Finance do not reflect temporary, diplomatic, transit, or other similar types of cargo. Thus, we can assume with some certainty that the difference between the data of Geostat and the Ministry of Finance is precisely due to these cargo. In the period from March 2022 to February 2023, the difference between the data of Geostat and the Ministry of Finance was$105 million, which can be considered to represent the volume of re-exports and transit to the Russian Federation, although this does not by any means indicate that those goods are subject to sanctions. In addition, the representatives of the customs department explained to us that they check the compliance of the cargo with the sanctions policy even during the transit process. The re-exports of light cars constitute 72 percent of that $102.8 million, from March to December 2022. The re-ex port of light cars has increased five times compared to the same period in 2021. According to the Revenue Service of the Ministry of Finance of Georgia, the sanctions imposed by the EU and the USA include expensive cars, the value of which exceeds 50,000 Euros and 50,000 US Dollars, re spectively. According to the agency, products of this cate gory are subject to strict customs control. 9 Therefore, we can consider that the increased re-export of light vehicles through Georgia comes as a result of the rearrangement of logistics connections. 11 percent of re-exports in the same period is water heat ing equipment. The re-export of these products has in creased by 1.9 times compared to the same period in 2021. This flow, in our opinion, is also the result of logisti cal changes. We should not lose sight of the fact that after the"clos ing" of the Ukrainian channel, a certain part of the cargo entering Russia(primarily not sanctioned) was quite pos sible diverted towards Georgia. To verify this hypothesis, we took re-export data from the international trade portal of the United Nations, 8 where data on Georgia covers the period up to and including December 2022. Afterwards, we compared the aforemen tioned data with the corresponding data of the Russian Federation from March to December 2022. This period does not cover an entire year, but covers a full ten-month period before and after the start of the war. These two positions alone account for 83 percent of re-exports from March to December 2022. The remaining 17 percent is allocated to 118 commodities at the level of 4-digit code of the HS classifier. The volume of re-exports per position is$0.15 million on average, and the average share in total re-exports is 0.15 percent. The detailed structure at the level of 4-digit codes of the re-export HS classifier according to commodity spectrum is given in An nex#4. In the period from March to December 2022, the re-ex port of tobacco and medicinal goods significantly reduced compared to the previous year. From March to December 2022,$102.8 million worth of re-exports were carried out from Georgia to the Russian Federation, which is 2.1 times higher than the figure of the same period of 2021($48.9 million). These figures are very close to the difference shown in the diagram above, which confirms that re-exports are indeed what takes up the largest chunk of the difference between the data of Geostat and the Ministry of Finance. 8 https://comtradeplus.un.org/TradeFlow 9 https://www.radiotavisupleba.ge/a/32370998.html?fbclid=IwAR0Ha2_ Y8IeCO1C0MT9LXe1ZE4hYEkJE0KG04BAZ4Bwp8EJ2W_ea2-HQ9iA 20

RE-EXPORT AND RE-IMPORT Diagram 10 Annual dynamics of exports to the Russian Federation according to the data of the Ministry of Finance and Geostat($ million) 800 120 687 700 634 100 600 500 456 477 449 583 582 80 226 401 400 183 428 438 422 60 300 247 243 373 40 200 30 33 223 170 228 34 20 100 36 38 52 164 2 8 20 42 24 6 15 28 28 39 27 52 105 0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Difference Export to Russia- According to the Geostat data Export to Russia- According to the Ministry of Finance data Source: Geostat, Ministry of Finance of Georgia, authors‘ calculations. The comparative analysis of import data shows a similar picture. In the period from March 2022 to February 2023, the difference between the data of Geostat and the Min istry of Finance was$114 million, which can be considered as the volume of re-imports and transit from Russia. Diagram 11 Annual dynamics of imports from the Russian Federation according to the data of the Ministry of Finance and Geostat($ million) 2,500 140 2,000 114 120 1,992 100 80 1,879 1,500 70 60 38 52 49 30 40 2 26 18 9 13 1,056 1,073 20 920 886 1,000 822 689 989 1,035 0 472 -6 588 586 631 809 872 857 -20 500 311 562 568 400 621 619 -40 406 470 -67 -60 258 0 -80 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Difference Import from Russia- According to the Geostat data Import from Russia- According to the Ministry of Finance data Source: Geostat, Ministry of Finance of Georgia, authors‘ calculations. 21

DYNAMICS AND STRUCTURE OF GEORGIA‘S TRADE WITH THE RUSSIAN FEDERATION BEFORE AND AFTER THE FULL-SCALE RUSSIAN INVASION IN UKRAINE According to the United Nations international trade por tal, only$0.6 million worth of goods were re-imported from Russia to Georgia from March to December 2022. Thus, the difference shown in the diagram above is most likely due to the transit expenditure of goods.  22

CONCLUSIONS 10 CONCLUSIONS The results of the study allow us to arrive at the following conclusions: 1. Since the Russian aggression in Ukraine began in 2022, the total volume of exports from Georgia to the Russian Federation has hardly changed; 2. The structure of Georgian exports to Russia before and after the war is practically identical; 3. The export of ferroalloys plummeted, causing significant damage to the Georgian economy; 4. The outflow of traditional export goods- alcoholic and non-alcoholic beverages- has increased sharply; 5. The share of dual-use goods is only 0.2 percent of the total export, and its volume decreased by 23.6 percent as opposed to the compared period; 6. Imports from the Russian Federation rocketed after the start of the war, and its absolute majority is intended for the domestic market; 7. The import of ferrous metallurgy products from Russia increased dramatically, replacing the import of these products from Ukraine; 8. The import of petroleum products rose sharply; 9. The volume of re-export has increased, which can be considered as part of the rearrangement of logistics connections; 10. We have not detected any flow of exports from Georgia to the Russian Federation, or vice versa, aimed at circumventing the sanctions. 23

DYNAMICS AND STRUCTURE OF GEORGIA‘S TRADE WITH THE RUSSIAN FEDERATION BEFORE AND AFTER THE FULL-SCALE RUSSIAN INVASION IN UKRAINE ANNEX#1 The distribution of goods exported from Georgia to Russia, sanctioned either by the EU or the USA, according to the 4-digit codes of the HS classifier, from March 2022 to February 2023 HS Code 2204 2208 2820 2106 8703 3302 2939 8516 2203 2103 8309 6309 8607 3304 3004 8421 2909 2710 2402 8450 6116 2821 3203 2206 4811 3305 2930 8903 3911 7304 4907 8479 8462 9026 Description Wine of fresh grapes Undenatured ethyl alcohol, spirits, liqueurs and other spirituous beverages Manganese oxides Other food preparations Motor cars Mixtures of odoriferous substances, of a kind used as raw materials in industry Vegetable alkaloids, natural or reproduced by synthesis, and their derivatives Electric instantaneous or storage water heaters, space and soil heating apparatus Beer made from malt Sauces and preparations therefor; mixed condiments and mixed seasonings Stoppers, caps and lids and other packing accessories, of base metal Worn clothing Parts of railway or tramway locomotives or rolling-stock Beauty or make-up preparations and preparations for the care of the skin Medicaments put up in measured doses Centrifuges; filtering or purifying machinery, for liquids or gases Ethers, ether-alcohols and their halogenated Petroleum and petroleum oils Cigars, cheroots, cigarillos and cigarettes Household or laundry-type washing machines Gloves Iron oxides and hydroxides; earth colours Colouring matter of vegetable or animal origin Other fermented beverages Paper, paperboard, wadding and webs of cellulose fibres, in rolls or sheets Preparations for use on the hair Compounds with other nitrogen function Yachts and other vessels for pleasure or sports Petroleum resins, polyterpenes and other products, in primary forms Tubes, pipes and hollow profiles, seamless, of iron or steel Maps and hydrographic or similar charts of all kinds, printed Machines and mechanical appliances having individual functions Machine-tools for working metal by forging, hammering or die-stamping Instruments for measuring or checking characteristics of liquids or gases Million$ 164.68 64.78 7.25 2.51 1.91 1.74 0.64 0.61 0.57 0.55 0.41 0.36 0.31 0.19 0.17 0.15 0.13 0.13 0.13 0.11 0.10 0.08 0.06 0.06 0.06 0.05 0.05 0.05 0.04 0.04 0.04 0.04 0.04 0.03 Percent 66.282% 26.075% 2.919% 1.009% 0.770% 0.700% 0.256% 0.245% 0.230% 0.223% 0.167% 0.146% 0.124% 0.076% 0.070% 0.060% 0.051% 0.051% 0.050% 0.044% 0.042% 0.032% 0.025% 0.025% 0.023% 0.022% 0.021% 0.018% 0.018% 0.017% 0.016% 0.015% 0.014% 0.012% 24

ANNEXES HS Code 9619 8501 4819 8482 2515 3201 8528 7311 2905 6909 0604 8503 2915 2001 8431 9025 3403 6204 8409 4016 6904 6202 3307 7326 4707 8504 8307 9405 8708 3809 6913 3926 8484 8537 6102 6110 6912 Description Sanitary towels(pads) and tampons, napkins and napkin liners for babies, and similar articles, of any material Electric motors and generators Cartons and other packing containers, of paper, paperboard or cellulose Ball or roller bearings Marble, tufa, ecaussine and other calcareous monumental or building, alabaster Tanning extracts of vegetable origin; tannins and their salts and other derivatives Television receivers Containers for gases, of iron or steel Acyclic alcohols and their derivatives Ceramic wares for laboratory, chemical or other technical uses Foliage, branches and other parts of plants, for ornamental purposes Parts suitable for use solely or principally with the electric motors Saturated acyclic monocarboxylic acids and their anhydrides; their derivatives Vegetables and other edible parts of plants, prepared or preserved Parts suitable for use solely or principally with the hoisting machinery Hydrometers and similar floating instruments and any combination of them Lubricating preparations Women's or girls' suits, ensembles, jackets, trousers and similar clothes Parts suitable for use principally with the internal combustion piston engines Other articles of vulcanised rubber Ceramic building bricks, flooring blocks, support or filler tiles and the like Women's or girls' overcoats, car-coats and similar articles perfumery, cosmetic or toilet preparations Other articles of iron or steel Waste and scrap of paper or paperboard Electrical transformers, static converters and inductors Flexible tubing of base metal Lamps and lighting fittings Parts and accessories of the motor vehicles Finishing agents, used in the textile, paper, leather or like industries Statuettes and other ornamental ceramic articles Other articles of plastics and articles of other materials Gaskets and similar joints of metal sheeting Boards, panels and other bases for electrical apparatus Women's or girls' overcoats, car-coats, capes and similar articles Jerseys, pullovers, cardigans and similar articles, knitted or crocheted Tableware, other household articles and toilet articles, of ceramic Million$ 0.03 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Percent 0.011% 0.010% 0.009% 0.008% 0.007% 0.007% 0.007% 0.006% 0.006% 0.006% 0.005% 0.005% 0.005% 0.005% 0.005% 0.004% 0.004% 0.004% 0.003% 0.003% 0.003% 0.003% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 25

DYNAMICS AND STRUCTURE OF GEORGIA‘S TRADE WITH THE RUSSIAN FEDERATION BEFORE AND AFTER THE FULL-SCALE RUSSIAN INVASION IN UKRAINE HS Code 8466 8481 8477 4203 9105 5702 7308 4202 7009 6206 6104 7320 8536 6405 7020 6905 6208 3906 7610 6106 9701 8471 3822 8519 6217 9601 8508 9506 8527 7010 3824 8215 8443 3214 8512 9504 9307 Description Parts and accessories suitable for use with the different machine-tools Taps, cocks, valves and similar appliances for pipes Machinery for working rubber or plastics Articles of apparel and clothing accessories, of leather or of composition leather Other clocks Carpets and other textile floor coverings, including hand-woven rugs Structures and parts of structures of iron or steel All kind of begs including camera, musical instrument and other cases Glass mirrors Women's or girls' blouses, shirts and shirt-blouses Women's or girls' suits, jackets, shorts and other clothes, knitted or crocheted Springs and leaves for springs, of iron or steel Electrical apparatus for switching electrical circuits for a voltage not exceeding 1000 Other footwear Other articles of glass Ceramic building bricks, flooring blocks, support or filler tiles and the like Women's or girls' singlets and other vests, slips and similar articles Acrylic polymers in primary forms Aluminium structures and parts of structures Women's or girls' blouses, knitted or crocheted Paintings, drawings and pastels, executed entirely by hand Automatic data processing machines and units thereof Composite diagnostic or laboratory reagents Turntables, record- and cassette-players and other sound reproducing apparatus Other made-up clothing accessories; parts of garments or of clothing accessories Worked ivory, bone, horn and other animal carving material, and articles thereof Vacuum cleaners Articles and equipment for gymnastics, other sports or outdoor games Reception apparatus for radio-telephony, radio-telegraphy Carboys, bottles, flasks and other closures, of glass. Prepared binders for foundry moulds or cores; chemical products and preparations Spoons, forks, ladles, skimmers, cake-servers and similar kitchen or tableware Printing machinery Non-refractory surfacing preparations for walls, floors, ceilings or the like Electrical lighting or signalling equipment, used for cycles or motor vehicles Articles for funfair, table or parlour games(billiards, bowling) Swords, cutlasses and similar arms and parts, scabbards and sheaths therefor Million$ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Percent 0.001% 0.001% 0.001% 0.001% 0.001% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 26

ANNEXES ANNEX#2 The distribution of dual-use goods exported from Georgia to Russia, sanctioned either by the EU or the USA, according to the 4-digit codes of the HS classifier, from March 2022 to February 2023 HS Code 3404 3910 8903 7304 8462 8479 8482 7311 3403 8421 8504 3926 8537 8466 8481 7306 8471 Description Artificial waxes Silicones in primary forms Yachts and other vessels for pleasure or sports Tubes, pipes and hollow profiles, seamless, of iron or steel Machine-tools for working metal by forging, hammering or die-stamping Machines and mechanical appliances having individual functions Ball or roller bearings Containers for gases, of iron or steel Lubricating preparations Centrifuges; filtering or purifying machinery, for liquids or gases Electrical transformers, static converters and inductors Other articles of plastics and articles of other materials Boards, panels and other bases for electrical apparatus Parts and accessories suitable for use with the different machine-tools Taps, cocks, valves and similar appliances for pipes Other tubes, pipes and hollow profiles, of iron or steel Automatic data processing machines and units thereof Million$ 0.75 0.06 0.05 0.04 0.04 0.03 0.02 0.02 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Percent 0.129% 0.010% 0.008% 0.007% 0.006% 0.005% 0.003% 0.003% 0.002% 0.001% 0.001% 0.001% 0.000% 0.000% 0.000% 0.000% 0.000% 27

DYNAMICS AND STRUCTURE OF GEORGIA‘S TRADE WITH THE RUSSIAN FEDERATION BEFORE AND AFTER THE FULL-SCALE RUSSIAN INVASION IN UKRAINE ANNEX#3 The distribution of goods imported from Russia to Georgia, sanctioned either by the EU or the USA, according to the 4-digit codes of the HS classifier, from March 2022 to February 2023 HS Code 7306 6815 8517 3926 7305 8481 8413 9405 8537 8430 8479 7304 8414 3921 3819 7019 7307 8419 8429 8903 7310 2930 9031 8428 9030 7219 8482 8504 8515 7311 8421 8456 5407 8543 8471 8514 8461 Description Other tubes, pipes and hollow profiles, of iron or steel Articles of stone or of other mineral substances Telephone sets, including telephones for cellular networks or for other wireless networks Other articles of plastics and articles of other materials Other tubes and pipes, having circular cross-sections, of iron or steel Taps, cocks, valves and similar appliances for pipes Pumps for liquids, liquid elevators Lamps and lighting fittings Boards, panels and other bases for electrical apparatus Other moving, grading, extracting or boring machinery, for earth, minerals or ores Machines and mechanical appliances having individual functions Tubes, pipes and hollow profiles, seamless, of iron or steel Air or vacuum pumps, air or other gas compressors and fans Other plates, film, foil and strip, of plastics Hydraulic brake fluids and other prepared liquids, obtained from bituminous minerals Glass fibres and articles thereof Tube or pipe fittings, of iron or steel Machinery, plant or laboratory equipment, whether or not electrically heated Self-propelled bulldozers, graders, levellers, scrapers, tamping machines Yachts and other vessels for pleasure or sports Tanks, and similar containers, for any material, of iron or steel Organo-sulphur compounds Measuring or checking instruments, profile projectors Other lifting, handling, loading or unloading machinery Oscilloscopes, and other measuring or checking electrical quantities Flat-rolled products of stainless steel, of a width of 600 mm or more Ball or roller bearings Electrical transformers, static converters and inductors Electric, laser or other light or photon beam machines Containers for gases, of iron or steel Centrifuges; filtering or purifying machinery, for liquids or gases Machine-tools for working any material by removal of material Woven fabrics of synthetic filament yarn Electrical machines and apparatus, having individual functions Automatic data processing machines and units thereof Industrial or laboratory electric furnaces and ovens Machine-tools for planing, shaping, slotting and similar Million$ 7.71 3.45 2.08 0.85 0.78 0.77 0.61 0.57 0.57 0.49 0.46 0.34 0.24 0.22 0.20 0.18 0.17 0.13 0.12 0.11 0.11 0.10 0.07 0.07 0.06 0.05 0.05 0.05 0.04 0.04 0.04 0.04 0.03 0.03 0.03 0.03 0.03 Percent 0.410% 0.184% 0.111% 0.045% 0.042% 0.041% 0.032% 0.030% 0.030% 0.026% 0.025% 0.018% 0.013% 0.011% 0.011% 0.010% 0.009% 0.007% 0.006% 0.006% 0.006% 0.005% 0.004% 0.004% 0.003% 0.003% 0.003% 0.003% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 28

ANNEXES HS Code 3911 9027 8466 8207 8464 3404 9506 3910 3403 5903 9022 8463 8542 8525 5607 8802 8505 8536 7309 8460 8502 9013 8541 8507 5509 8462 9020 9014 8506 7303 Description Petroleum resins, polyterpenes and other products, in primary forms Instruments and apparatus for physical or chemical analysis Parts and accessories suitable for use with the different machine-tools Interchangeable tools for hand tools, whether or not power-operated Machine-tools for working stone, ceramics, concrete, or like mineral materials Artificial waxes Articles and equipment for gymnastics, other sports or outdoor games Silicones in primary forms Lubricating preparations Textile fabrics impregnated, coated, covered or laminated with plastics Apparatus based on the use of radiations Other machine-tools for working metal, sintered metal carbides or cermets Electronic integrated circuits and microassemblies Transmission apparatus for radio-telephony, radio-telegraphy Twine, cordage, ropes and cables Other aircraft; spacecraft and spacecraft launch vehicles Electro-magnets, clamps and similar holding devices Electrical apparatus for switching electrical circuits for a voltage not exceeding 1000 Reservoirs, tanks, vats and similar containers for any material, of iron or steel Machine-tools for deburring, sharpening, grinding Electric generating sets and rotary converters Liquid crystal devices, lasers, other optical appliances and instruments Diodes, transistors and similar semiconductor devices Electric accumulators, including separators therefor, whether or not rectangular Yarn of synthetic staple fibres, not put up for retail sale Machine-tools for working metal by forging, hammering or die-stamping Other breathing appliances and gas masks Compasses; other navigational instruments and appliances Primary cells and primary batteries. Tubes, pipes and hollow profiles, of cast iron Million$ 0.03 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Percent 0.001% 0.001% 0.001% 0.001% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 29

DYNAMICS AND STRUCTURE OF GEORGIA‘S TRADE WITH THE RUSSIAN FEDERATION BEFORE AND AFTER THE FULL-SCALE RUSSIAN INVASION IN UKRAINE ANNEX#4 The distribution of goods re-exported from Georgia to Russia, according to the 4-digit codes of the HS classifier, from March 2022 to December 2022 HS Code 8703 8516 3302 0805 2402 8704 7202 8701 0801 0901 0808 9018 8302 0803 1202 2829 3701 9619 9021 2309 0303 3305 6802 3917 9022 2710 0802 2202 8422 6805 3702 2208 2403 8711 Description Motor cars Electric instantaneous or storage water heaters, space and soil heating apparatus Mixtures of odoriferous substances, of a kind used as raw materials in industry Citrus fruit, fresh or dried Cigars, cheroots, cigarillos and cigarettes Motor vehicles for the transport of goods Ferro-alloys Tractors Coconuts, Brazil nuts and cashew nuts, fresh or dried Coffee; coffee husks and skins; coffee substitutes Apples, pears and quinces, fresh Instruments and appliances used in medicine Base metal mountings, fittings and similar articles Bananas Ground-nuts, not roasted or otherwise cooked Chlorates and perchlorates; bromates and perbromates; iodates and periodates Photographic plates and film in the flat, unexposed Sanitary towels(pads) and tampons, napkins and napkin liners for babies, and similar articles, of any material Orthopaedic appliances and artificial parts of the body Preparations of a kind used in animal feeding Fish, frozen Preparations for use on the hair Worked stone and articles thereof, mosaic cubes and the like, of natural stone Tubes, pipes and hoses, and fittings therefor, of plastics Apparatus based on the use of radiations Petroleum and petroleum oils Hazelnuts and other nuts Waters, mineral and aerated waters, containing added sugar Dish washing machines; and similar machinery Natural or artificial abrasive powder or grain Photographic film in rolls, sensitised, unexposed, of any material Undenatured ethyl alcohol, spirits, liqueurs and other spirituous beverages Other manufactured tobacco and tobacco substitutes; tobacco extracts and essences Motorcycles and cycles fitted with an auxiliary motor; side-cars Million$ 73.89 11.22 1.73 1.69 1.18 1.14 1.01 0.89 0.84 0.79 0.66 0.58 0.50 0.43 0.42 0.41 0.38 0.37 0.33 0.30 0.24 0.23 0.17 0.16 0.16 0.15 0.14 0.14 0.14 0.13 0.12 0.12 0.12 0.12 Percent 71.890% 10.922% 1.685% 1.643% 1.144% 1.112% 0.984% 0.870% 0.821% 0.768% 0.643% 0.565% 0.483% 0.423% 0.406% 0.398% 0.370% 0.361% 0.316% 0.293% 0.232% 0.222% 0.163% 0.159% 0.152% 0.144% 0.140% 0.135% 0.135% 0.127% 0.119% 0.119% 0.118% 0.114% 30

ANNEXES HS Code 9504 4402 8418 4014 8518 2201 1509 8438 3707 8450 7312 3506 8509 2915 2204 0709 0710 2203 3919 2009 8483 8203 0702 8414 3004 8508 8462 8522 7323 8460 9015 0810 8456 8702 9026 3303 0704 8716 Description Articles for funfair, table or parlour games(billiards, bowling) Wood charcoal Refrigerators, freezers and other refrigerating or freezing equipment Hygienic or pharmaceutical articles, of vulcanised rubber Microphones and stands therefor Waters, natural or artificial mineral and aerated waters, not containing added sugar Olive oil and its fractions, whether or not refined Machinery for the industrial preparation or manufacture of food or drink Chemical preparations for photographic uses Household or laundry-type washing machines Stranded wire, ropes, cables, plaited bands, and the like, of iron or steel Prepared glues and other prepared adhesives Electro-mechanical domestic appliances Saturated acyclic monocarboxylic acids and their anhydrides; their derivatives Wine of fresh grapes Other vegetables, Vegetables, frozen Beer made from malt Self-adhesive plates, sheets, film, foil, tape, and other flat shapes, of plastics Fruit and vegetable juices Transmission shafts and cranks Files, rasps, pliers, shears and similar hand tools Tomatoes, fresh or chilled. Air or vacuum pumps, air or other gas compressors and fans Medicaments put up in measured doses Vacuum cleaners Machine-tools for working metal by forging, hammering or die-stamping Parts and accessories of audio or video apparatus Table, kitchen or other household articles and parts thereof, of iron or steel Machine-tools for deburring, sharpening, grinding Surveying, hydrographic, meteorological, geophysical and the like instruments Other fruit, fresh Machine-tools for working any material by removal of material Motor vehicles for the transport of ten or more persons Instruments for measuring or checking characteristics of liquids or gases Perfumes and toilet waters Cabbages, cauliflowers, kohlrabi, kale and similar edible brassicas Trailers; other vehicles, not mechanically propelled; parts thereof Million$ 0.11 0.11 0.10 0.10 0.09 0.08 0.07 0.07 0.07 0.06 0.06 0.06 0.06 0.05 0.05 0.05 0.04 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 Percent 0.108% 0.104% 0.099% 0.094% 0.086% 0.078% 0.072% 0.071% 0.069% 0.061% 0.061% 0.061% 0.057% 0.052% 0.047% 0.044% 0.035% 0.032% 0.030% 0.030% 0.028% 0.027% 0.027% 0.027% 0.026% 0.024% 0.023% 0.023% 0.022% 0.020% 0.019% 0.019% 0.018% 0.018% 0.017% 0.016% 0.016% 0.015% 31

DYNAMICS AND STRUCTURE OF GEORGIA‘S TRADE WITH THE RUSSIAN FEDERATION BEFORE AND AFTER THE FULL-SCALE RUSSIAN INVASION IN UKRAINE HS Code 2401 9607 1302 6912 9025 5515 7326 9027 8528 8306 8208 6204 3926 8542 9017 8543 4202 8517 9029 8708 8471 8504 8525 8510 6302 4203 6211 7020 8537 6506 8481 5703 8409 4016 8544 6304 6109 Description Unmanufactured tobacco; tobacco refuse Slide fasteners and parts thereof Vegetable saps and extracts Tableware, other household articles and toilet articles, of ceramic Hydrometers and similar floating instruments and any combination of them Other woven fabrics of synthetic staple fibres Other articles of iron or steel Instruments and apparatus for physical or chemical analysis Television receivers Bells and the like, non-electric, statuettes and other ornaments, mirrors of base metal Knives, for machines or for mechanical appliances Women's or girls' suits, ensembles, jackets, trousers and similar clothes Other articles of plastics and articles of other materials Electronic integrated circuits and microassemblies Drawing, marking-out or mathematical calculating instruments Electrical machines and apparatus, having individual functions All kind of begs including camera, musical instrument and other cases Telephone sets, including telephones for cellular networks or for other wireless networks Revolution counters, production counters, taximeters and the like Parts and accessories of the motor vehicles Automatic data processing machines and units thereof Electrical transformers, static converters and inductors Transmission apparatus for radio-telephony, radio-telegraphy Shavers and hair clippers, with self-contained electric motor Linen for Bed, table, toilet and kitchen Articles of apparel and clothing accessories, of leather or of composition leather Track suits, ski suits and swimwear Other articles of glass Boards, panels and other bases for electrical apparatus Other headgear Taps, cocks, valves and similar appliances for pipes Carpets and other textile floor coverings, tufted Parts suitable for use principally with the internal combustion piston engines Other articles of vulcanised rubber Insulated wire, cable and other insulated electric conductors Other furnishing articles T-shirts and other vests, knitted or crocheted Million$ 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Percent 0.013% 0.013% 0.013% 0.012% 0.011% 0.011% 0.010% 0.009% 0.008% 0.006% 0.006% 0.005% 0.003% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 32

ANNEXES HS Code 8484 4415 9032 8512 8467 3924 8309 6203 6812 8507 8539 Description Gaskets and similar joints of metal sheeting Packing cases, boxes, drums and similar packings, cable-drums, pallets of wood Automatic regulating or controlling instruments and apparatus Electrical lighting or signalling equipment, used for cycles or motor vehicles Tools for working in the hand, pneumatic or with self-contained motor Tableware, kitchenware, other household and toilet articles of plastics Stoppers, caps and lids and other packing accessories, of base metal Men's or boys' suits, ensembles, trousers, and shorts Asbestos fibres; mixtures with a basis of it or magnesium carbonate; there articles Electric accumulators, including separators therefor, whether or not rectangular Electric filament or discharge lamps, arc-lamps Million$ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Percent 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 33

DYNAMICS AND STRUCTURE OF GEORGIA‘S TRADE WITH THE RUSSIAN FEDERATION BEFORE AND AFTER THE FULL-SCALE RUSSIAN INVASION IN UKRAINE SOURCES 1 https://www.mof.ge/export_importis_informacia 2 https://www.geostat.ge/ka/modules/categories/35/sagareo-vachroba 3 https://www.consilium.europa.eu/en/policies/sanctions/restrictive-measures-against-russia-over-ukraine/ sanctions-against-russia-explained/ 4 https://sanctionscanner.com/ 5 https://ofac.treasury.gov/sanctions-programs-and-country-information 6 https://www.sanctionsmap.eu/#/main 7 https://www.trade.gov/russia-sanctions-and-export-controls 8 https://www.gov.uk/government/publications/russia-sanctions-guidance/russia-sanctions-guidance 9 https://finance.ec.europa.eu/eu-and-world/sanctions-restrictive-measures/sanctions-adopted-followingrussias-military-aggression-against-ukraine_en 10 https://comtradeplus.un.org/TradeFlow 34

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DYNAMICS AND STRUCTURE OF GEORGIA’S TRADE WITH THE RUSSIAN FEDERATION BEFORE AND AFTER THE FULL-SCALE RUSSIAN INVASION IN UKRAINE https://southcaucasus.fes.de/ https://gfsis.org.ge/