By Helena Bedwell

March 11 (Bloomberg) -- Georgia is struggling to revive exports of wine, one of the former Soviet republic’s signature products, as a Russian embargo enters its fifth year later this month.

Russia accounted for more than 80 percent of Georgian wine exports before the embargo, imposed on March 25, 2006, when Russia’s public health chief Gennady Onishchenko deemed Georgian wine unfit for consumption. Georgia maintains the ban was politically motivated.

Georgia exported 59.3 bottles of wine in 2005. Exports plummeted 67 percent in the embargo year to 19.5 million bottles and have hovered around 11-12 million bottles a year ever since, according to the Agriculture Ministry.

“We’ve found new markets, but Georgian winemaking is still in trouble,” Giorgi Margvelashvili, head of Tbilisi-based Tbilvino, said by telephone late yesterday. “I’m not optimistic that we’ll get access to the Russian market soon, but I’m sure this can’t go on forever.”

Russia expanded its embargo in October 2006, cutting road, rail, and air and sea links with Georgia, halting postal service and blocking money transfers after Georgia arrested four Russian servicemen, accusing them of espionage. The four were released and expelled on Oct. 2, the day Russia imposed sanctions.

Diversified Exports

Russian President Dmitry Medvedev said in December that he saw “no problems” in renewing imports of Georgian goods.

Georgian Finance Minister Kakha Baindurashvili said the possible resumption of exports to Russia wouldn’t bring “large economic benefits” for Georgia, because it has successfully diversified its wine and food exports to other countries.

Tbilvino exported about 1.3 million bottles last year, the same as before the embargo, when the company shipped half of its wine to Russia.

Significant expansion of the wine industry will be difficult without the Russian market, Margvelashvili said.

Georgian Wine & Spirits, a subsidiary of Pernod Ricard SA’s European holding company, exported as much as 3 million liters of wine a year before the embargo, while 2009 exports were 1.3 million liters, spokeswoman Ani Beriashvili said.

“The ban was political, of course, and Georgia has managed to diversify its food and drinks market somewhat without Russia,” Davit Narmania, executive director of the Caucasian Institute for Economic and Social Research, said by telephone.

“I think it would be more beneficial for Russia to lift the embargo, because they’re cheaper than those from Europe and convenient for shipping given our location,” Narmania said.

Bloomberg