Executive Summary
This report assesses Georgia’s recent agreement to establish joint customs checkpoints with Armenia and Azerbaijan and its broader strategy to position itself as a regional logistics hub.
Tbilisi views the initiative as fundamental to regional integration considering evolving trade routes. The situation arises amidst an ongoing Armenia–Azerbaijan peace process and continued Russian influence, thereby presenting investment and regional security risks.
Key Takeaways
- Georgia is using joint customs projects to institutionalise its role as a transit intermediary between Armenia and Azerbaijan and wider Eurasian markets.
- The initiative supports Tbilisi’s effort to attract foreign capital and balance engagement with China, the European Union, and the United States.
- Fragile Armenia–Azerbaijan relations and Russian leverage create uncertainty for Georgia’s ambition to act as a stabilising logistics corridor.
Background Information
Georgia’s Prime Minister Irakli Kobakhidze informed the country has launched projects to create joint customs checkpoints with Armenia and Azerbaijan with support from the Asian Development Bank.
Kobakhidze further highlighted Georgia’s successful implementation of a novel computerised transit system, which aligns with European Union standards. He stated that a singular declaration and an accompanying guarantee facilitate the unimpeded transfer of goods throughout the EU and among the 39 member nations of this initiative.
The government also emphasises infrastructure initiatives such as the East–West Highway, the Baku–Tbilisi–Kars railway, the Anaklia deep-sea port, dry ports, and railway modernisation, all aimed at enhancing transportation connections between Central Asia, the Black Sea region, and European markets.
Why Does It Matter?
The joint customs initiative positions Georgia as an intermediary between Armenia and Azerbaijan at a time when their peace process remains incomplete. Effective implementation of shared checkpoints may serve to promote cross-border commerce, mitigate transaction expenditures, and position Georgia as an essential transit route for South Caucasus trade. This creates incentives for Armenia and Azerbaijan to maintain cooperative economic links, which may contribute to stabilising effects during an unsettled peace process.
Tbilisi’s strategy also serves geopolitical signalling purposes. Tbilisi enhances its negotiation leverage with international entities and aims to attract investment from China and the West through the incorporation of neighbouring countries into its customs and transit infrastructure. Georgia possesses free trade agreements with China, Turkey, and the EU, and is engaged in a comprehensive economic strategy designed to enhance its connections with China, maintain its partnership with the EU, and preserve its ties with the United States. Beijing’s Belt and Road Initiative has increased interest in South Caucasus transit routes.
Constraints include unresolved Armenia–Azerbaijan tensions that could disrupt corridor projects, Russian leverage over regional security, and Western concerns over governance that could affect funding and political support.
Russia maintains a military presence in Abkhazia and South Ossetia, and its establishment of a naval base in Abkhazia serves to strengthen its regional influence. The Georgian economy faces risks associated with Russian capital inflows, significant unemployment, and corruption. Increased political risk stems from domestic political tensions associated with legislation targeting foreign-funded NGOs and a decline in support for the ruling party.
Indicators to Monitor
- Progress in establishing and operationalising joint Georgia–Armenia and Georgia–Azerbaijan customs checkpoints, including technical and regulatory implementation milestones.
- Developments in the Armenia–Azerbaijan peace process that affect cross-border trade, transit security, and corridor reliability.
- Commitments and disbursements from the Asian Development Bank and other external financiers for Georgian transport and customs infrastructure projects.
- Shifts in EU and US diplomatic and economic engagement with Georgia linked to domestic governance and regulatory policies.
- Changes in Russian military or political activity in Abkhazia and South Ossetia that could alter regional security conditions for transit corridors.
Outlook
Tbilisi will continue joint initiatives in customs integration and infrastructure development to solidify its transit capabilities and encourage foreign investment. The Armenia–Azerbaijan peace process, Russia’s regional actions, and Georgia’s partnerships will shape the continued effectiveness of these initiatives with Western nations. Persistent regional volatility or escalation among external powers could undermine Georgia’s effort to act as a stabilising logistics hub and complicate its multi-vector economic strategy.
