Azerbaijan and Georgia - More Gas and Geopolitics in the Caucasus

Georgia continues to position itself to be at the center of a new economic zone connecting Europe to Iran and Central Asia. Recent agreements with Azerbaijan -though largely under reported by Western media - serve to foreshadow more extensive arrangements with other regional players.  


Background

Leksika recently reported several developments in the Republic of Georgia which are poised to affect the country’s long-term political and economic future. Among these are investment in a new deep-sea port project, the establishment of a visa-free travel regime with Iran, and the re-negotiation of terms with Russian energy giant Gazprom. Georgia is actively seeking to position itself at the center of a new trans-Eurasian energy corridor, connecting emerging economies in the East with Europe.

The Georgian political class has likewise been very active. In the face of upcoming elections however, neither of Georgia’s major political coalitions – the Western-leaning United National Movement (UNM) or the ruling Georgian Dream (GD) – seek to make controversial moves. This is likely the primary reason behind Tbilisi’s recent decision to import larger quantities of gas from Azerbaijan, at the expense of potential deals with Russia and Iran.

Azerbaijan: The Safest Option for the Short Term

Cooperation with Azerbaijan comes without the potential political fallout of making new deals with Russia’s Gazprom or Iranian companies. The move acts as a reassurance to Western officials that they are not ‘losing’ Georgia to Russia.  It also comes amid vocal opposition to any talks with Gazprom or Russia from Mikheil Saakashvili’s UNM.  Therefore, striking a deal with Baku enhances the domestic position of the ruling Georgian Dream ahead of the crucial Georgian parliamentary elections in October.

Azerbaijan has served as a major source of energy for Georgia since the completion of the Baku-Tbilisi-Ceyhan oil pipeline and the Baku-Tbiisi-Erzurum gas pipeline in 2005 and 2006 respectively.  However, the impact of the recent slide in global energy prices has adversely impacted Azerbaijan.  The uncertainty over Baku’s supply of energy to Georgia was a key motivating factor in Energy Minister Kakha Kaladze’s recent energy talks with Moscow and Tehran.  Consequently, the recent deal with Tbilisi bodes well for Baku at a time of increased economic uncertainty.

Additionally, Azerbaijan, like neighboring Georgia and Armenia, has long had to act in a pragmatic manner, being located between larger powers with regional and even global ambitions. Baku has managed to balance its relations with Russia, Iran, Turkey, most Arab states, Israel, the European Union, and the United States – all simultaneously. Despite criticism of the Aliyev government’s authoritarian tendencies and the unresolved dispute over Nagorno-Karabakh, global and regional actors find in Baku a reliable economic partner in the developing Caspian Sea basin.  It therefore serves as a natural partner for Georgia, even though the relationship between these two Caucasian brothers is not entirely free of problems (e.g., the border dispute over the Davit Gareja monastery complex).

Nevertheless, while in office, former Georgian Prime Minister Irakli Garibashvili described Azerbaijan as a strategic partner for Georgia and called the strengthening of such a partnership  a “priority for the Georgian government.” His successor and friend, Prime Minister Giorgi Kvirikashvili, has upheld this policy. On March 6-7, Georgian Foreign Minister Mikheil Janelidze made a state visit Azerbaijan. Energy Minister Kaladze followed the Foreign Ministry’s lead, announcing to the public that Georgia will experience no shortages in gas supply despite the lack of deals with Moscow or Tehran. 

Iran: A Long-Term Strategy

Georgia and Iran share a historical relationship that goes back centuries.  There is a significant community of Georgians in Iran, centered on the city of Fereydunshahr, which dates back to the 17th century.  Tehran is a natural partner for Tbilisi in the Greater Caucasus region.  However, deepening economic cooperation with Iran will be a long-term project for Tbilisi, a phenomenon which is likely to accelerate as Tehran re-integrates with the global economy.

At the moment however, the most pragmatic decision for Tbilisi is to deepen existing relationships with Azerbaijan, as both countries’ fates will be intertwined as transit points along the new Silk Road.  Acting as the land bridge between the Caspian and Black Seas, existing trade routes and new infrastructure projects will continue to be a focus of investment. 

It is in this environment which Iran fits. Having a large, mostly untapped consumer market, copious energy resources, and sea access to the Gulf and therefore the Indian Ocean, Iran has much to offer its northern neighbors. More than a few analysts are already pondering Iran as the next regional ‘superpower’ in light of these factors.

According to Iranian press sources, Tehran and Baku are currently examining potential ‘strategic ties’ between the two countries. On February 23, Iran and Azerbaijan signed “11 agreements and memoranda of understanding to improve and speed up cooperation in different fields.” Iranian President Rouhani reportedly “expressed hope that the agreements would also prepare the ground for joint cooperation of Iran, Azerbaijan and Russia, particularly in the fields of transit, energy and trade.” The ground-work for long-term cooperation is therefore being put into place by Iran as well as Georgia.

After Note:

At the time this article was being written, officials from Armenia, Georgia, Iran, and Russia met to discuss deepening energy ties. Leksika will continue to report as this situation develops.

 

Special thanks to Pietro Shakarian for assistance in this report.

Photo Courtesy of Wikimedia Commons