Georgia - Next Stop on the New Silk Road


Recent developments in the Republic of Georgia have largely gone unreported in the Western press. The significant economic, political, and security implications however warrant close attention, as Georgia is positioning itself to be at the center of a new economic order connecting Europe to Iran and Central Asia.  


Introduction

The Republic of Georgia has recently made important steps to invest in its economic future. Development projects along the Black Sea coast highlight the growing potential for the country as a whole, in light of both the dropping of Iran sanctions and growing economic inter-connectivity across Central Asia. Tbilisi is positioning itself well to benefit from these new developments, laying the foundation for long-term prospects economically, politically, and militarily.

New Deep-Sea Port

The Georgian government has recently selected the Anaklia Development Consortium (ADC) to develop the Anaklia Deep Sea Port and the Anaklia Free Industrial Zone, with the explicit purpose to “breathe new life into the ancient Asia-Europe trade route.” According to statements from the Consortium’s website, the “ADC embraces the Silk Road vision to accelerate Georgia’s GDP growth and create jobs for its people. The Anaklia Port will be a lasting economic driver for Georgia, both as a national asset representing Georgia’s historic significance and its vital role in the evolving global economy.”

The Consortium brings together primarily Georgian and American companies, including TBC Holding, Conti International, Moffatt & Nichol, Maritime & Transport Business Solutions, and BLC Law Offices. This combination of construction, finance, and legal expertise is well suited for large-scale investment and development efforts in Georgia and helps highlight a larger development trend throughout the former Soviet space and beyond.

The Big Picture

Georgia’s geographic position puts it in the perfect place to benefit from such projects, a fact Tbilisi is well aware of. The Georgian government is actively seeking to capitalize on its position at the geographic and diplomatic center of an emerging trade corridor. On 15 February Energy Minister Kakha Kaladze traveled to Iran to “discuss potential gas imports and cooperation in other areas of energy sector.” According to a brief press statement, “The Georgian and Iranian sides are at this stage studying possibilities of import of Iranian gas to Georgia. Possibilities for implementation of various other investment projects in the energy sector will also be discussed.”

It is likely that, at least in part, Georgia’s desire for closer cooperation with Iran is due to recent controversies between Tbilisi and Russian energy giant Gazprom. For years, Georgia has allowed free transit of Gazprom gas to Armenia in exchange for a 10% siphon to Georgia, a relationship Gazprom now seeks to monetize. While this is not problematic in and of itself, Gazprom CEO Alexey Miller is now seeking to add political requirements to the deal, such as the re-opening of the controversial Georgia-Abkhaz railway. Some argue that this would require Tbilisi (unofficially) recognizing the breakaway government’s legitimacy, something that large portions of the Georgian public and political class are against.  

Tbilisi also recently approved a visa-free travel agreement with Iran, allowing citizens of the Islamic Republic to more easily travel to the country. Georgia is already a popular tourist destination among many wealthier Iranians, and the new visa-free regime will no doubt dramatically increase the number of visitors Georgia will receive. This is consistent with Georgia’s newly developed long-term strategy for its tourism industry, which “targets to achieve 11 million international arrivals by 2025 and to increase tourism receipts from the current level of USD 1.8 billion to USD 5.5 billion.”

On 19 February the Georgian Foreign Minister, together with his Turkish and Azerbaijani counterparts, met to visit a planned regional rail link. In a joint statement adopted after the meeting in Tbilisi on February 19, the Azerbaijani, Georgian and Turkish foreign ministers stressed “the key role of the Baku-Tbilisi-Kars (BTK) railway in facilitating competitive transportation between Asia and Europe.”

On 23 February, officials from the Georgian Economic Ministry and Chinese Ministry of Commerce met in Tbilisi for the “first round of talks on free trade agreement between the two countries.” Georgia’s Economic Minister Dimitri Kumsishvili said that the Georgian side would “especially focus on gaining preferential regime for exporting of the Georgian wine and agriculture products to China,” during his signing of the memorandum.

Security Dimensions of Economic Growth

The emerging high-value trade area between Iran, the Caucasus, and the Black Sea basin is also one with significant political turmoil. Georgia alone is host to two unresolved ‘frozen’ conflicts; South Ossetia and Abkhazia, both of which have repeatedly proven their potential to disrupt Georgian economic and political projects.

In July 2015, South Ossetian forces expanded their territory by moving border fences southward, seizing control of a portion of a BP-operated pipeline spanning Azerbaijan and Georgia. South Ossetia’s heavy dependence on (and treaty-obligations with) Russian military forces leaves Moscow in a position to be able to completely disrupt the project if it so chooses, either directly or through Ossetian proxies. This action may be the Kremlin’s response to increasingly close military cooperation on the part of Georgia with Turkey and Azerbaijan.

Georgia has hosted and participated in a number of joint drills with these countries over the past several years. In May and June of 2015, drills dubbed the “Caucasian Eagle” (Kafkas Kartalı) were hosted on Azerbaijani territory. Reportedly, Georgian special forces played a prominent role over the course of the exercises, which were primarily tactical in nature.

Georgian special operations forces have historically operated against Jihadist groups in the predominantly-Chechen Pankisi Gorge (an area which has since largely been stabilized) and have experience fighting with coalition forces in Afghanistan, where Georgia is the largest non-NATO force contributor. Moscow has also accused Georgian troops of preparing sabotage operations against the separatist governments in South Ossetia and Abkhazia. The strengthening of Georgian special operations abilities, in combination with strengthened cooperation in conventional military affairs with major regional partners, will likely serve to increase national security in areas of high economic interest, if one leaves the disputed territories out of the picture.

Not to be out-done, Russia responded by conducting joint drills with Armenia, their primary regional ally. Armenia, while close historically, culturally, and religiously with Georgia, is nevertheless stuck between a rock and a hard place when it comes to geopolitics. Located directly between Turkey, from whom they suffered genocide in the early 20th century, and Azerbaijan, with whom they fought a brutal war for Nagorno-Karabakh in the 1990s, the Armenians are left with no choice but to look for Moscow in matters of security.

Yet, relations remain warm with Georgia generally speaking, leaving Tbilisi in the position to act as a mediator or middle man in dealings with Baku or Ankara. Armenia in turn would act as a land-bridge between Georgia and Iran, allowing easy access for an increasing number of goods traveling back and forth between Tbilisi and the Islamic Republic.

Looking Forward

Georgia and the Caucasus will play a central role in the decades ahead, as Central Asia, Iran, China, and Europe become more economically interconnected. Its strategic position on the Black Sea, situated directly between Europe and the emerging economies in Iran and Central Asia, presents it with unique opportunities, both economically and politically.

Very real security issues remain, but Tbilisi seems to be using all means available to mitigate them. These efforts have apparently satisfied serious Western investors, likely encouraging more to come. The success of the Anaklia Development Consortium will be an important litmus test for Georgia. If successful, the South Caucasian country will prove a crucial player in the emergent new Silk Road, and an economic center to last well into the 21st century. 

Photo Courtesy of Wikimedia Commons