The Economic Side of the Conflict in Tskhinvali Region

The conflict of Tskhinvali region is significant for Georgia from the viewpoint of the political situation and the scientific study. Consequently, there are numerous articles presenting historical, political and military analyses related to the above-mentioned issue.

However, the existing articles related to the conflict of Tskhinvali region are chronologically restricted to the events which have occurred since the 90s of the 20th century. The reason is that one of the last phases of the conflict began in that period.

Nevertheless, the conflict began in the first half of the 20th century, during the Transcaucasian Democratic Federative Republic and the period of the Democratic Republic of Georgia (1918-1921). That is why it would be appropriate to carry out the conflict analysis based on the study of the initial events of the conflict, because the period between the origin of the conflict and the present-day situation is only one century, which is not a long period for history.

The aim of the given article is to compare developmental stages of the conflict not just from the 90s of the 20th century, but from its beginning. Another point is that the discussions of the conflict are largely linked to the analysis of political and military events. Economic issues are less discussed, though very often the economic reasons play a great role in the conflict. That is why we should implement a chronological analysis of the economic side of Tskhinvali conflict.

The first features of the conflict in Tskhinvali region appeared after the 1917 Revolution. In this period the Public Congress of South Ossetia and National Council were created. They gradually tried to take control of the so-called "South Ossetian" territory.

On 4 January 1918, the delegates of the Ossetian Public Congress sent the official appeal to the Georgian National Council, according to which all the issues concerning the Ossetian nation had to be addressed to the South Ossetian Council. This fact was followed by further events.

From March 16, 1918, after the first conflict events, both the economic and political demands were quite obvious. On March 16 the Ossetian delegation presented the following claims in Tskhinvali:

1. They demanded the splitting of lands;

2. They demanded that some persons working for the revolutionary organization be banished from Gori Province;

3. They demanded banishment of all the nobility from Gori Province;

4. They demanded freedom of speech and assembly [Bluashvili,2005: 11].

The local government was given some hours to fulfill these demands. In this case I do not intend to follow factual developments of this conflict, but it is very interesting to note that the cause of this conflict was not only political. Certain economic factors concerning land issues and rights of nobles could be traced as well.

After the  events of 1918, there were two military oppositions in the period of the Democratic Republic of Georgia in 1919 and 1920.

Unlike the claims of the conflict in 1918, economic factors were no longer in consideration in 1919 and 1920. However, we can find some interesting issues here as well. For instance, On 26 February  1919, during the conflict, the meeting of Ossetian workers was held in Tbilisi, which distanced itself from the claims of the ethnic Ossetian population [Toidze, 1991: 30].

It is worth mentioning that during the military confrontation (1920) which was the biggest of all previous conflicts, ethnic Ossetians were not involved in any military conflict or any forms of protest.[1]

According to statistics, the number of ethnic Ossetians living in Tskhinvali region in late 19th and early 20th was not great. Tskhinvali region was largely inhabited by Jews and to a lesser extent, Georgians and Armenians. According to the census of 1886, there were 1953 Jews, 1135 Georgians, 744 Armenians but no Ossetians whatsoever. What is more, according to the census of 1922, when the Ossetian autonomy was being created, the number of Ossetian population was relatively small in  Tskhinvali region. By that time there were 1651 Jews, 1436 Georgians, 765 Armenians and 613 Ossetians in Tskhinvali [Guntsadze, 2013/2014: 45]. In spite of this, in 1918-1921 Ossetian Bolsheviks claimed to make Tskhinvali their center. One of the main reasons for this was Tskhinvali’s location. By that time Tskhinvali was the trade center on the crossroads from South Caucasus to its Northern part. Tskhinvali has never lost its significance of being a strategically important part of the Caucasus. Thus, Ossetians had economic interests with regard to Tskhinvali region. In this case, they did not pay any attention to the ethnic majority of the population, because they were interested in the economic factor more than the demographic one.

During the Soviet Period, the situation changed and the economic importance of the region increased. This was caused by the construction of Roki tunnel connecting Georgia and Russia. The construction of the 3700-meter tunnel ended in 1984 and it started functioning in two years.  The tunnel provided additional benefits to Tskhinvali Region. It became possible to reach any place in spite of meteorological conditions. Later the tunnel was used for military purposes, but this topic is not the main issue for my discussion.

After the restoration of Georgia’s independence, the most large-scale economic relation with the so-called “South Ossetia” was Ergneti market, which was opened in 1996 and functioned for 8 years. The Ergneti Market, with its advantages and disadvantages, was linked to Roki tunnel from where goods were imported without excise (became easily accessible for Tskhinvali region).

From the period of its opening, Ergneti market was the subject of discussion, not only within the framework of Tskhinvali conflict, but also because it involved a large scale of economy and influenced the entire Georgian economic system.

The special committee conclusion regarding Ergneti market was published in 2004. From the economic perspective, about 150 cars passed through the uncontrolled territory to Ergneti and other Georgian territories per day. Transport importers did not pay any customs duty and bribed  local checkpoints, paying about 20 GEL per car. Furthermore, additional services were introduced to support the bribery system. In order to accompany freight traffic from Ergneti to Mtskheta and provide its safety, 800 GEL was paid for the service. Depending on the seasonal activity, the losses of the state varied from 200 million GEL to one billion [Kukhianidze ... 2004: 19] [August ... 2009: 23].

The economic black hole caused the severe damage to the economy of the country, it encouraged the groups that were involved in the conflict only for economic interests. This phenomenon is called “the economics of war”. However, Ergneti Market had some positive features. The population living in the conflict zone largely depended on Georgian economy and trade area. It was possible to sell there not only smuggled goods but agricultural products as well. This made the conflict zone population directly dependent on the Georgian economy in spite of a political separation.

In 2004 Georgian authorities decided to close Ergneti market and took decisive measures in this regard. This may be explained by two reasons. One of the obvious reasons was the “black hole” that was harmful for Georgian economy. The second explanation of the Georgian-Ossetian conflict is given on the Georgian Parliament website [Information 2006: 15]. According to this information, Georgian government took this decision because of the Ossetian leader - Eduard Kokoity, who intended to strengthen his economic power through  Ergneti market. The Georgian side tried to weaken Kokoity’s position by closing the market. They hoped to gain loyalty of Ergneti population. This fact could have weakened Kokoity’s position. Yet, how could the loyalty of the population be achieved? They had been involved in Ergneti trade zone and got economic benefits from it.

 After the closure of  Ergneti market, economic relations with ethnic Ossetians have weakened on the occupied territories. The only economic relationship was transportation of agricultural products to different Georgian regions. This was easier than transportation of goods to North Ossetia, which was quite far.

After the war of  2008, all economic relationships were suspended because both – Russian and Georgian sides - blocked trade relations. This led to an absolute separation and ceasing of all trade relationships. Consequently, people living in the conflict zone stopped being dependent on the Georgian economy.

Finally, I want to underline one more fact. On 11 October 2010, according to the decision of the President of Georgia, it became possible to use 90 days visa-free regime for Chechnya, Ingushetia, Northern Ossetia, Dagestan, Kabardino-Balkaria, Circassian and Adygea Republics. This would encourage and restart the economic relations among the Caucasian people [Statement №815, 2010].

The above-mentioned fact is the good example showing how to establish and restore favorable relations, albeit at a small scale. Ergneti market had an immense negative impact on the Georgian economy. However, it should be mentioned that the population currently residing in the conflict region does not find the Georgian side economically attractive. Therefore, some compromise should be found to restore the economic relations on the agricultural level at least, because a complete economic stagnation and separation will not help to solve the conflict. Instead, the situation will be further aggravated.


[1] For more information on the given issue see: M. Guntsadze: Ossetian Uprising of 1920 in Shida Kartli According to the Georgian Press Materials, Georgian Source-Studies XV-XVI, 2013/2014 p. 40-58.


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