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The Economic Roots of Georgia’s “Defection” to the West

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An important part of a country’s foreign policy lies in its economic moves. This is particularly true in the case of large states seeking a bigger role in the international arena.

For example, China has been implementing the ‘Belt and Road Initiative’ (BRI), while the US during the Cold War brought in the famous Marshall Plan to help Europe restore its shattered financial strength. Both projects pursue(d) projection of political power through economic means.

Long gone are the times when it still was possible to occupy territories solely through military power. Increasingly, as modernity enabled the rise of self-consciousness and nationalism among small states and ethnic minorities in large countries, it has become difficult to rely on repressive measures. A policy of active economic initiatives targeting one ethnic group inside the country or a separate state has thus gained additional importance.

Looking at the last 30 years of Georgian-Russian relations, there has been almost everything one could imagine: from cordial talks to wars to a full-scale economic embargo. More negative than positive, but well illustrative of the limits of Russia’s foreign policy.

It is true that Georgia has not been economically so important to Moscow as, for example, Ukraine, Kazakhstan or Belarus, but Russia is always interested in influencing Tbilisi. Still, Georgia is a vital transit corridor between west and east as well as north and south. Moreover, without Georgia, it will always be difficult for Russia to effectively control the restive North Caucasus in the long run.

The Russian political establishment failed to see that a major reason in Georgia’s shift to the West in the early 2000s was a shattered post-Soviet economy and no help from Moscow. Russia was not perceived as an enemy when the Rose Revolution was about to happen in 2003: there were simply no concerted efforts from the Russian side to lure Georgia economically.

Russia was also experiencing turbulent times and was self-absorbed with internal problems when Vladimir Putin came to power in 1999. Even when Russia became financially stable in the late 2000s, no viable long-term economic vision was offered to the former Soviet countries. The announcement of the creation of the Eurasian Economic Union (EEU) did not produce the expected results nor did it stop Ukraine drifting from Russia in 2014.

Again, Russian political thought failed to recognize that Kyiv’s choice to move closer to the European Union was based on the latter’s economic attractiveness. As no brotherly relations with Russians could stop Ukrainians’ drift to the western economic space, much less surprising is Georgia’s eagerness to join the European market.

Simply put, Russia has not been attractive enough. Even those countries which are economically close to Russia are so because they have no alternative. Take for example Armenia, the large population of which is not inclined to Russia but is close to the Russian economy because there is no other option. The same goes for the Central Asian states, which still prefer the Russian economy to the Chinese market (however even this trend based on Central Asia’s cultural and historical closeness with Russia has been shifting and the region’s economic relations with China now thrive).

When it comes to choosing between Western and Russian economic spaces even countries culturally closest to Russia still choose the West. The roots of this problem for Russia are its inability to build powerful state institutions and a thriving economic space with opportunities for peaceful development across the former Soviet territories.

What is troubling is Russia’s failure to understand the source of that weakness – the need for a rapid restructuring of the economy to yield higher industrial and technological results. When high-level politicians openly discuss this, it often ends with no specific results.

It can be argued that for the last 30 years, Russia has not pursued a consistent economic policy towards Georgia. Investments were occasional, while other political decisions only further hampered bilateral relations. The case of Georgia’s “defection” to the West well reflects how less attention is paid nowadays in Russia to economic components in the country’s foreign policy. There are even hints that Moscow now prefers military moves to economic ones.

Even from a strategic point, one can say that Russia simply has not had a foreign policy towards Georgia, except for militarily preventing the country from joining NATO and the EU. No long-term approach of economic, cultural and other components was ever formulated. As a result, by 2003 it was already too late to reverse the existing trend in Georgia, while a similar process is now being seen in Ukraine.

Author’s note: first published in Georgia Today

Emil Avdaliani specializes on former Soviet space and wider Eurasia with particular focus on Russia's internal and foreign policy, relations with Iran, China, the EU and the US. He teaches history and international relations at Tbilisi State University and Ilia State University (Georgia).

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Eastern Europe

Can economic cooperation contribute to sustainable peace in Karabakh?

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A major step has taken towards the Karabakh conflict on November 10, 2020. The century-old conflict between Azerbaijan and Armenia has undoubtedly, entered a different phase with the signing of a trilateral statement by Azerbaijan, Armenia, and Russia. Before this, in late September, Azerbaijan has launched a successful counter-offensive to implement the UN Security Council Resolutions (822, 853, 874, 884) through liberating its territories that were under Armenian occupation for almost 30 years. As a result of the military campaign, Azerbaijan was able to get back the majority of the strategic points in Karabakh including the historic city of Shusha. 

While the protests broke out in the Armenian capital Yerevan, when PM Pashinyan publicly declared that he was obliged to sign the agreement to prevent its army from a total collapse, the Azerbaijani side enjoyed the victory by massive celebrations in Baku. The President of Azerbaijan Ilham Aliyev signed the statement on a live broadcast, and right after, addressed the nation and familiarized the Azerbaijani public with the context. As the details revealed by President Aliyev, it became obvious that the agreement was the capitulation of the Armenian side.

Afterward, the consequence of the “44-day war” was described as “a defeat both on the battlefield and in the diplomatic arena” by the Armenian President Armen Sarkissian. Namely, the agreement comprised the unconditional withdrawal of the Armenian troops from the occupied territories within a definite schedule, the return of all refugees, and the deployment of the Russian peacekeepers in the several points of Karabakh. Furthermore, the cardinal element of the statement is that there was not a word about the status of Nagorno-Karabakh. Apparently, the overwhelming military advantage of Azerbaijan induced the Armenian government to come to the negotiation table and finalize its illegal military presence within the boundaries of a neighboring sovereign state.

The agreement further articulates the opening of all communications, restoration of economic and transport links. Due to the stipulated economic notions, the statement possesses a significant role for lasting and sustainable peace. In this context, if Armenia would ensure adherence to the principles of the trilateral statement, the possible economic consequences will encapsulate in two dimensions: regional and global.

The regional dimension or local basis encompasses joint initiatives and shall include Georgia as well. For instance, the “South Caucasus Economic Union” could emerge to build high-quality cross-border infrastructure, to establish intraregional supply chains, and to form stronger financial links. The project rationale derives from the recognition that the development of an integrated South Caucasus, which can guarantee peace and spur growth in all fields, requires multiple, cohesive, and long-term efforts. Thus, the fundamental prerequisite for Armenia is to terminate all the hostilities with neighboring countries.

In the mutually assured peace environment, Azerbaijan and Armenia would strongly benefit from enormous savings on conflict-related fiscal expenditures. Military expenditures could be lessened by 2% of annual GDP in both countries to a reasonable level as in the countries at peace. Besides, Azerbaijan could eventually save expenditures for supporting refugees amounting to 0.4% of annual GDP, thus diminishing total expenditure by 2.4% of GDP yearly. Armenia could save annual expenditures of 0.9% of GDP for supporting the local economy in Nagorno-Karabakh and 0.1% of GDP in interest payments, thus saving 3% of GDP every year. Such massive fiscal savings would enable both countries to avert the budget-related issues and at the same time substantially increase spending in social spheres by eliminating any budgetary pressures.

In the global dimension, South Caucasus is capable of creating opportunities for sustainable growth. The ongoing conflict was generating an elevated extent of risks, which were constituting several constraints for the capital flow to the region. Since an opportunity has emerged to settle the conflict thoroughly regarding the trilateral statement, the effect that it would create in the future on ratings, risk premiums on bonds, loans and equity, investment, and finally, economic growth are likely to be very positive.

The South Caucasus region, acting as a link between the Middle East, China, Russia, and Europe, has immense strategic significance. Previously opened the Baku-Tbilisi-Kars railway, today serves as the shortest way to deliver Chinese goods to Turkey and reduces delivery time to Western Europe. This project was developed within a larger Trans-Caspian International Transit Route, as part of the Belt & Road Initiative.

Within the scope of the agreement, Azerbaijan gained a corridor that links the mainland to the exclave Nakhchivan Autonomous Republic through the Zangazur region of Armenia. The new corridor seems to be a more efficient alternative from distance and timing aspects. Thus, the agreement can be characterized as pivotal since it will not only stimulate the regional development credibly, it will transform the region into a hub of the international supply chain system, as well.

Undoubtedly, the foremost economic issue will be compensation as Armenia officially approved itself as the aggressor state in this conflict with the sign of PM Pashinyan on November 10. According to the United Nations, the overall damage to the Azerbaijani economy has estimated to be around $53.5 billion in 1994. Recently, President Ilham Aliyev stated that foreign experts are going to be invited for the up-to-datecalculations of the total damage as the result of the occupation.

After a longstanding negotiation process, the situation has been exacerbated, and inevitably, processes oriented to the military theatre. This trilateral statement can forestall the risks of resumption of the military operations in this phase. Here, strengthening the capacity to manage the conflict and promote peace through regional economic integration, trade facilitation initiatives, and other policy measures will be on the agenda. There is a plethora of similar practices in the world so that it might lead to a feasible solution.

The Karabakh conflict was making South Caucasus one of the most explosive regions in Eurasia. Nevertheless, from this moment, the focus shall be on the peacemaking process as it yields considerable economic benefits. As mentioned, the flow of investments to the region will tremendously increase, whereby the states in South Caucasus will be able to maximize their economic potentials. For Armenia, it is time to act on facts and realities rather than dreams. So, it should renounce territorial claims and start to rational cooperation with neighbors for a better future.

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Eastern Europe

The new border geopolitics of the Islamic Republic of Iran and Azerbaijan

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Borders are spatial-political phenomena that have a prominent importance and place in the global political sphere because they have divided the world arena into countries and put them together as actors. This importance and prominent position of borders has caused various fields of study such as political science, political geography, international law, etc. to study them from their point of view and continuously to follow and monitor their developments and changes. In the meantime, it seems that after the acceptance of the ceasefire between Azerbaijan and Armenia along the northwestern borders of the Islamic Republic of Iran, some developments have happened that need to examine. So, we examine these developments with a geopolitical perspective. The geopolitical attitude towards the border developments of Iran and Azerbaijan can analyze in the form of the following angles:
Border geopolitics in terms of location is the knowledge, acquisition, exploitation and preservation of geographical sources of power in border areas and related areas in transnational, national, regional and global relations. In other words, designing and reviewing the strategies of actors to achieve benefits and goals based on the geographical resources of power in the border areas called border geopolitics. The developments along the Iran-Azerbaijan border after the ceasefire show these developments cause the geographical sources of Iran's power: alliance with Armenia; severance of Iran's position as Azerbaijan-Nakhchivan communication bridge; reducing Azerbaijan's dependence on Iran for access to the high seas; reducing the possibility of transferring Iranian gas to Europe, etc. that along the borders should significantly reduce. On the other hand, the increase of geographical sources of power: increasing the size of the territory; establishing a connection with the Nakhchivan sector; forming a new opportunity to connect with the high seas through Turkey, etc. has brought about for the country of Azerbaijan. Based on this, it seems that in designing the forthcoming strategies of Iran and Azerbaijan, we will see changes in the geographical sources of power due to these changes.
 
Border geopolitics from a functional point of view is the knowledge, acquisition, exploitation and preservation of geographical sources of power in transnational, national, regional and global relations to achieve protection, control, management, security and other objectives in the length of borders and border areas. In other words, designing and reviewing the strategies of actors to achieve protection, control, management, security and other goals based on the geographical sources of power in the border areas called border geopolitics. If we examine the developments along the Iranian-Azerbaijani border after the ceasefire from this point of view, we will see that the importance and value of Azerbaijan's geographical resources along the border with Iran is increasing compared to Iran's geographical sources of power. It seems to put more effective and successful strategies in front of Azerbaijan to achieve goals such as control, security, etc. along the common borders. On the contrary, it will change the strategies facing Iran to some extent.

Border geopolitics from a player point is the knowledge, acquisition, exploitation and preservation of geographical resources of power in the border areas of the two countries, by Iran and Azerbaijan to achieve their goals and aspirations in transnational, national, regional and global. In other words, the use and exploitation of the geographical sources of power in the common border areas of Iran and Azerbaijan to achieve their goals and aspirations in transnational, national, regional and global relations called geopolitical borders.If we examine the developments along the Iranian-Azerbaijani border after ceasefire from this point of view, we will see that these changes have made Azerbaijan, as a geopolitical player compared to Iran, more powerful than geographical sources. On the other hand, variety of actors such as Turkey, Russia, etc. are present directly along the borders of the two countries.

In general, the changes that have taken place along the borders of Iran and Azerbaijan from a geopolitical point of view of the border seem to have been in favor of Azerbaijan and the geographical sources of power along the border between two countries in favor of this country. It has changed and thus increased the efficiency of the strategies facing Azerbaijan against the strategies of Iran based on the geographical sources of power in the border areas.

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Eastern Europe

The Emerging Nakhchivan Corridor

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As the details of the Karabakh deal are being fleshed out, the stipulation on the new corridor through Armenian territory has caused great debate. Beyond the signatories of the deal, Iran and Georgia are particularly worried as any meaningful change to the connectivity patterns in the South Caucasus could harm their transit capabilities.

The 2020 Karabakh war ended with major Russian diplomatic success on November 9 when a tripartite agreement between Armenia, Azerbaijan and Russia was signed. The surrounding seven regions were to be returned to Baku, while Russian peacekeepers would guarantee the security of the truncated Nagorno-Karabakh. Though the exact role is yet to be confirmed, based on the rhetoric from Ankara and Baku, some sort of direct Turkish military involvement on Azeri soil is likely to materialize. 

More importantly, however, Turkey gained a land corridor to Azerbaijan’s exclave of Nakhchivan. The stipulation in the document reads: “Armenia guarantees the security of transport links … for unimpeded movement of citizens, vehicles, and cargo in both directions” between mainland Azerbaijan and the exclave of Nakhchivan, which are separated by Armenian territory. Moreover, “Transport control is exercised by the Border Service of the Federal Security Service of Russia. By agreement of the parties, the construction of new transport communications connecting the Nakhchivan Autonomous Republic and Azerbaijan’s western regions will be provided.”

The stipulation is a major breakthrough for Turkey as it would allow the country to anchor its influence on the Caspian Sea and perhaps, in the longer term, look even further towards its Central Asia kinsmen. 

This would create a major dilemma for Iran and Russia, as Tehran and Moscow have historically perceived the Caspian Sea as a condominium between themselves (plus the littoral states since the end of the Soviet Union). Potential Turkish involvement could disrupt this equilibrium and especially Iran’s standing. However, this is highly hypothetical. After all, it would need years if not decades for this scenario to be realized and even then Turkish influence could not be as large as Chinese or Russian – two major forces in the region.

What bothers Iran is a potentially major shift in the region’s transportation routes. For decades Azerbaijan has been dependent on Iran for transiting energy and other supplies to Nakhchivan. The new Karabakh deal could change it. Armenia will now guarantee the opening up of a corridor through its territory to allow Azerbaijan to transport goods directly to Nakhichevan. Quite naturally, this limits Tehran’s leverage over Baku.

However, Javad Hedayati, who heads transit operations in the Iranian transportation ministry, announced that Iran is likely to stay a favorable route for trade despite the planned opening of the new corridor. “It is likely that this corridor will merely accommodate local traffic between the Republic of Azerbaijan and Nakhchivan,” said Hedayati.

Ankara has long been working on using the Nakhchivan corridor for geopolitical purposes. This is proved by the quickness with which the Turkish government announced the plans to build a railway to Nakhchivan following the November agreement. This comes on top of an earlier announcement of a gas pipeline construction to the exclave, and underlines the seriousness behind the Turkish intention, at least regarding the section from the Turkish territory to the exclave itself.

Much, however, remains unclear about the new corridor on the Armenia territory itself. First of all, will the road be used by the Turks and Azerbaijanis only? Considering the level of mistrust in Ankara and Baku towards Moscow, whose forces will be controlling this corridor, it is highly unlikely that Azerbaijan and Turkey will be willing to commit large financial resources to rebuild links on the Armenian land. After all, will the corridor be the Armenian territory, or will it fall under the tripartite administrative regime? These are arguably the defining questions which remain unanswered. One could also imagine constant incidents along the corridor as Armenia will remain unhappy with the stipulation. Transit fees could soften Yerevan’s position, but why should Russia be interested in the operation of the corridor? If the corridor is operational, these troublesome questions will have to be managed between the two sides sharing no trust in the other. These dilemmas were well summed up in the words of the Iranian official Hedayati. He stressed that Armenia could prevent Turkey’s access to the corridor for transfer of freight or passengers through Nakhchivan to Azerbaijan and further to countries to the east of the Caspian Sea.

Georgia is worried

One country which is particularly worried with the potential development of the new corridor is Georgia. Various pipelines, roads and a major railway transit the country from Azerbaijan on to Turkey. This has been a backbone of Georgia’s regional importance since the end of the Soviet Union and indeed served as a major attraction for larger players such as Europe and the US.

Quite naturally many in Tbilisi have begun to think whether this enviable position could be challenged. The consensus thought is that in the short and medium term no reshuffling in the region’s connectivity patterns is likely to take place. Even in the longer term, if the above mentioned uncertainties around the new corridor are resolved, many still believe that Baku and Ankara would not trade the already built and functioning railway and pipeline infrastructure, which runs through Georgia, for the Nakhchivan alternative. Perhaps the corridor will serve for ensuring local connections, perhaps limited trade (though highly unlikely).

After all, Georgia has been officially engaged in the trilateral partnership with Turkey and Azerbaijan for nearly a decade. The endurance of the format has been tested by changes of governments and region-wide geopolitical transformations over the last decade. Each country of the three needs the others. Turkey wants a more stable Georgia with deeper economic and energy relations, while Azerbaijan needs Turkey’s backing. Georgia, under pressure from Russia and, given that it is located between its two fellow members of the cooperation, dependent on transit, in turn needs both Turkey and Azerbaijan.

Georgia also sees its position as straddling between two large regions – Europe and Central Asia. The 826-kilometre Baku-Tbilisi-Kars railway unveiled in 2017 enables the delivery of cargo between China and Europe with a haulage duration of approximately two weeks. Up to eight million tons of cargo may be carried via the railway by 2025.

Abandoning this transit corridor would undermine the efficacy of the South Caucasus transportation and energy corridor. This makes the extent of the Nakhchevan corridor quite limited. Perhaps, what the region is likely to see is the growing interconnectedness of the exclave with the Turkish territory. The emergence of a major corridor through the Nakhchivan is likely to happen if, at minimum, a meaningful improvement of Turkey-Armenia relations takes place. 

Author’s note: first published in caucasuswatch.de

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