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The economy of Abkhazia is heavily integrated with the economy of Russia and uses the Russian ruble as its currency.
Abkhazia has experienced a modest economic upswing since the 2008 South Ossetia war and Russia''s subsequent recognition of Abkhazia''s independence. In 2011, about half of Abkhazia''s state budget was financed with aid money from Russia.[1]In 2021 43.6% of Abkhazia''s state budget was financed by aid money from Russia, while 56.4% of the budget came from local income.
Tourism is a key industry and, according to Abkhazian authorities, almost a million tourists (mainly from Russia) came to Abkhazia in 2007.[2] Since Abkhazia and Russia have signed a visa-free travel agreement, Russian passport-holders do not require a visa to enter Abkhazia. Holders of European Union passports require an Entry Permit Letter issued by the Ministry of Foreign Affairs in Sukhumi, against which a visa will be issued upon presentation of the Letter to the Ministry.[3]
Abkhazian railway is a rail operator in Abkhazia. Under a monopoly agreement, it is fully managed and partially owned by Russian Railways for a ten year contract from 2009-2019. In 2016, 307,748 people traveled between Abkhazia and Russia by rail.[4] There is also the New Athos Cave Railway, an underground electric railroad serving the New Athos Cave in the town of New Athos.
Sukhumi Babushara Airport is the main airport of Abkhazia, located some 20 kilometres (12 mi) from Sukhumi.
Abkhazia''s fertile land and abundance of agricultural products, including tea, tobacco, wine and fruits (especially tangerines), have secured a relative stability in the sector.
Electricity is largely supplied by the Inguri hydroelectric power station located on the Inguri River between Abkhazia and Georgia proper and operated jointly by Abkhaz and Georgians.
The exports and imports in 2006 were 627.2 and 3,270.2 million rubles respectively (appx. 22 and 117 million. US dollars) according to the Abkhazian authorities.[5]
In July 2012, the State Customs Committee for the first time published trade statistics. It reported that in the first half of 2012, imports had been worth 6.748 and exports 1.48 billion ruble, resulting in a 4.6518 billion ruble trade deficit. At the same time, while imports had stayed virtually the same (decreasing by 0.2%), exports had risen by 25.8%. Abkhazia''s main trading partners were Russia (64%), Turkey (18%), the Baltic states (5%), Moldova (2%), Germany (2%), Ukraine (1%) and China (1%).[6]
The CIS economic sanctions imposed on Abkhazia in 1996 formally remain in force, although Russia announced on 6 March 2008 that it would no longer participate in them, declaring them "outdated, impeding the socio-economic development of the region, and causing unjustified hardship for the people of Abkhazia". Russia also called on other CIS members to undertake similar steps,[10] but met with protests from Tbilisi and with lack of support from the other CIS countries.[11]
The European Union has allocated more than €20 million to Abkhazia since 1997 for various humanitarian projects, including the support of civil society, economic rehabilitation, help to the most vulnerable households and confidence-building measures. The EU''s single largest project involves the repair and reconstruction of the Inguri power station.[12]
In April 2011, the government of Georgia summoned the Israeli ambassador for clarifications over an Israeli visit to Abkhazia and AP reported that the Israeli ambassador officially denied that Israel would provide arms to Abkhazia.[13]
According to a 2007 report by US-based organisation Freedom House, the region continues to suffer considerable economic problems owing to widespread corruption, the control by criminal organisations of large segments of the economy, and the continuing effects of the war.[14]
Abkhazia has introduced daily six-hour power cuts following significant damage to a section of the Enguri (Ingur) hydroelectric power plant and insufficient Russian-provided electricity.
The Enguri hydroelectric power plant (HPP) is located along the boundary between Abkhazia and Georgia, with Sukhumi (Sukhum) and Tbilisi sharing the power plant''s output.
The authorities in Abkhazia increased the number of hours of daily blackouts from four to six hours on Sunday, after they suspended the Enguri HPP''s operation until 15 April after a section of its diversion tunnel was damaged, causing concrete debris to fall into its turbine compartment.
Abkhazia will now experience three two-hour blackouts throughout the day.
The Enguri HPP is Abkhazia''s only source of domestically produced electricity, as the region heavily relies on imports of Russian electricity.
Water levels at the hydropower plant are a critical factor in determining the stability of Abkhazia''s electricity supply.
A high demand for electricity in the period of low river flow between October and April means that the reservoir is unable to adequately supply the region with energy. Since 2016, Abkhazia has negotiated the purchase of electricity from Russia to cover this period, but the annual purchases rarely cover the region''s energy demand.
In 2023, Abkhazia''s state energy company Chernomorenergo purchased ₽40 million ($400,000) worth of energy from Russia, but since November has received ''social flows'' and purchased electricity commercially from Russia.
However, Chernomorenergo stated that after repair work on the diversion tunnel is complete, the blackouts might be cancelled entirely depending on the water level in the reservoir.
On 8 April, chair of the Enguri HPP''s board of directors Levan Mebonia told Apsnypress that a private Georgian company was supplying electricity to Abkhazia. Georgia''s Economy Minister, Levan Davitashvili, later told RFE/RL that he was not aware of which company Mebonia was referring to.
As well as seasonal variations in water levels, electricity shortages have been attributed to high demand stemming from cryptocurrency mining.
Abkhazia''s headquarters for combating illegal cryptocurrency mining publish regular reports on the number of cryptocurrency mining devices that have been seized, with approximately 3,500 cryptocurrency mining devices confiscated since the beginning of 2023.
Electricity payments have also decreased since energy prices rose at the beginning of 2024, to ₽1.40 ($0.02) per kilowatt hour.
''In winter, I paid ₽1,500 ($16) per month, with my Russian pension of ₽10,000 ($110)'', said an 80-year-old resident of Sukhumi (Sukhum). ''I''m now thinking of stopping paying entirely.''
''I have always paid for electricity, even in the most difficult times. But today, looking at how some people make money from mining and do not pay millions, I think that I''ve done enough giving away my pennies, I''ll do as they do and use it for free.''
Chernomorenergo reportedly installed a total of 22,500 energy metres in 2023, in part a measure to combat low rates of payment, and plan to install a similar number in 2024.
Abkhazia''s President Aslan Bzhania suggested prior to 2023 that differential stations of the Enguri hydroelectric power station should be privatised, claiming that ''the state is a bad owner''.
But the issue is controversial, and unpopular with many who suggest that this will lead to further price hikes, as well as potentially opening the critical infrastructure to use in international political negotiations.
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