When Russia launched its all-out invasion of Ukraine in February, it faced a barrage of Western sanctions. Almost immediately, it began skillfully to adjust to the new reality.
With old trade routes shut down and some goods and services completely banned, Russia began to seek alternatives. It looked south to routes through Georgia, Azerbaijan, and Kazakhstan. The situation also provided opportunities to these border states, who observed the Kremlin’s isolation growing and its prestige diminishing. Suddenly, their nemesis was deeply dependent on smaller neighbors more used to being on the receiving end of Russia’s highhandedness.
Trade began to balloon, notwithstanding Georgia’s role as a refuge for large numbers of young Russian men avoiding the draft, and its historic hostility to its larger neighbor. Cargo volumes are thought to have grown by 32% overall. Huge tailbacks of trucks wind through the mountains on both sides of the border.
Maintaining the sanctions is an extremely difficult task. And loopholes multiply as Moscow learns how to avoid Western restrictions, especially through cooperation with another veteran in the sanctions-dodging business – Iran. Recently it has been reported that Georgia may be serving as a key conduit for Russia to access the products it covets most. The country has close ties with Turkey, the only NATO partner it borders, and since Russia-Turkish relations remain strong, Georgia is geographically the shortest route for the Eurasian states. Cargo volumes between Russia and Turkey passing through Georgia tripled in the first half of 2022.
The story is not that simple, however. Misconceptions abound. Suspicions are based on the sudden huge increase in traffic but it is unclear how much of this cargo is sanctions avoidance. That picture is further muddied by Turkey’s refusal to join Western sanctions; cargo traffic banned elsewhere is perfectly legal in trade between the two.
The Georgian government insists that goods in transit through its territory are not subject to international sanctions. The opposition however accuses the ruling Georgian Dream party of secretly colluding with the Kremlin. This causes indignation among many Georgians but allows businesses to flourish. Yet there are potential long-term political costs as even benign dependence on Russia could swiftly turn toxic once Russia decides (as it has done so multiple times) to use it as a geopolitical tool.
There is also plenty of misinformation too. It has been reported several times that Georgia has been used for overflights by Iranian planes transporting drones to Russia. Geographical ignorance may play a role — why would Iran use Georgian, Armenian, or Azeri airspace when it can easily ship the drones to Russia via the Caspian Sea, by air, or by ship?
More worrying for many ordinary Georgians is the number of Russian residents and newly registered Russian businesses in Georgia. According to a new report prepared by a Georgian NGO, some 17,000 Russian companies have been registered since the invasion began. Wealthy Russians are buying up real estate and renting it to their fellow countrymen. As a result, prices have skyrocketed, while wages remain significantly lower, driving many hardworking people from a now-overpriced Tbilisi. These developments offer a short-term economic sugar rush, but in fact, mark Georgia’s failure to diversify economically from Russia.
The wider geopolitical picture helps explain Georgia’s caution. Russia invaded Georgia in 2008 and since then has occupied 20% of its territory. Russian troops not only remain on Georgian soil, but are just 60km (37 miles) away from the capital.
It may also be that the Georgian government sees Russia’s current troubles as an emerging opportunity. Indeed, Moscow has recently offered to re-establish direct flights and even restore diplomatic ties. The government responded positively to the first suggestion, causing a cascade of negative comments from the opposition and even the president.
In private, members of the government and the opposition recognize that the core problem is the West’s indecisiveness when it comes to Georgia. Undefended, Georgia wants to avoid a repeat of the events of 2008. That’s not to say that the country has dropped its ambitions to join NATO and the European Union (EU), just that both seem very remote at the moment.
Georgia is also vulnerable economically. Large numbers of Georgians live and work in Russia. The National Bank of Georgia announced that nearly $2bn of the $4.4bn in remittances from abroad came from Russia. Trade is active between the two countries and Russia’s share in numerous areas of the Georgian economy is very significant. For instance, fruit, nuts, and vegetable imports from Russia in 2022 reached a record high.
Often described as a bridge between east and west, Georgia in fact also serves as a critical link between Russia and the Middle East. This is both beneficial and highly dangerous. The country’s balancing act requires perseverance and careful messaging.
How long this can last is difficult to say. As the stakes in the war in Ukraine rise, offsetting economic and political pressure from Russia against demands for solidarity from the West could become unsustainable for a small country.
Emil Avdaliani (@emilavdaliani) is a non-resident fellow at the Georgian think tank, Geocase, and teaches history and international relations at Tbilisi State University and European University.
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.