$1b of Israeli investment at risk in Georgia

There is concern that Israeli arms sales to Georgia may upset the Russians.

The war between Russia and Georgia that erupted over the weekend when Georgian forces launched an offensive to retake the breakaway South Ossetia region, is leaving its mark on the economies of the countries involved. Thousands of people are reported killed in the fighting. The Russian Stock Exchange (RTS) fell 6.5% on Friday to a low point last seen on May 30, 2007. Trading on the RTS was suspended an hour before the regular closing, because of the plunge. The ruble fell over 1% to 24.203/$.

After the Georgian Army occupied parts of South Ossetia, moving towards the capital, Tskhinvali, and bombing targets in the area, Russia launched an air and ground counter-offensive, sending troops and armor into the region and bombing targets within Georgia.

The former Georgian ambassador to Israel estimates that Israeli real estate, defense, and other investment in Georgia exceeds $1 billion, and that the Russia-Georgia war is putting these investments at risk.

The Ministry of Foreign Affairs reports that Israeli companies in Georgia have begun evacuating their personnel from the country, and that Israeli tourists are returning home. The ministry advises restricting or freezing arms sales to Georgia to prevent Russia perceiving them as a hostile act against it.

Shmuel Flatto Sharon, who has invested in Georgia, says that the fighting has not affected his investments.

Georgia is building an oil and gas pipeline for the carrying of Caspian oil to its Black Sea ports, where it is then transported to the West. The pipeline is intended to bypass Russian territory, adding flames to the fire.

Published by Globes [online], Israel business news - www.globes-online.com - on August 10, 2008

© Copyright of Globes Publisher Itonut (1983) Ltd. 2008

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