*CPC NOTE:  With individual articles for each of the eight countries of the Caspian Region, the Caspian Policy Center is reporting the effects of Russia’s war in Ukraine on the countries of the region

Sharing a northeastern border with Russia, Georgia has remained hesitant to participate in Western sanctions against Russia since Russia’s invasion of Ukraine. At the same time, Tbilisi has voted to condemn Russia’s invasion of Ukraine, joining 140 other countries in the vote during the United Nations General Assembly resolution on March 2. Given Georgia’s conflict with Russia over territory in 2008, and the continued Russian military occupation of about one-fifth of Georgian territory, Georgian officials have to tread carefully with their policies towards Russia. Georgian Prime Minister Irakli Garibashvili warned that participating in sanctions “would only damage our country and populace more.”  

Just a month after the invasion, Georgia, along with Ukraine and Moldova, sought protection by applying for European Union (EU) membership on March 3,  citing that it was an “emergency matter.” Georgia has maintained good relations with the West and sought to strengthen its relationship with the EU prior to the invasion, although current events have catalyzed its desire to seek economic and political security as an official EU member. The European Commission released a memo on June 17 stating that they have evaluated the application and have seen promising “foundations” from Georgia meeting the political and economic criteria to join. They concluded that Georgia should be given a “perspective” candidate status, recommending some more areas of structural and political reform to meet the membership criteria. 

Russia’s invasion of Ukraine has had a ripple effect on many neighboring economies—Georgia has been no exception. Georgian trade, tourism, and remittances are all sectors that have faced negative consequences as previous influx from Russia and Ukraine have come to intermittent halts. As a result, Georgia’s economic growth, previously forecasted to be 5.5 percent in 2022, is now expected to drop to 2.5 percent. While the World Bank Regional Director for the South Caucasus, Sebastian Molineus, says that the 2022 growth slowdown is inevitable, recovery starting from 2023 is expected. “Georgia is well placed to manage the economic fallout of the war due to reasonable fiscal and external buffers and a credible macro-financial framework. The banking sector is entering the crisis in relatively strong shape, government deposits are sizeable, and debt is likely to remain sustainable,” said Molineus.  

Ultimately, Georgia has focused on economic stability by managing it internally. Molineus proposed, “What is needed now is to continue with prudent economic management, provide support to affected businesses and households while reinvigorating the structural reforms to improve productivity, improve human capital, and address consequences of climate change.” 

At the same time, Western sanctions against Russian energy have created opportunities for Georgia to step in as a key transport country. The EU and Azerbaijan signed a deal to double gas supplies to Europe through the Trans-Anatolian Natural and Trans-Adriatic gas pipelines. However, access to Azerbaijani’s natural resources would be limited without Georgia. Consequently, Georgia, Türkiye, and Azerbaijan signed a preliminary agreement on August 18 to simplify transit processes and customs procedures. Georgia also hosted a meeting between Georgian Minister of the Economy Levan Davitashvili and the transport ministers of Türkiye and Azerbaijan to discuss their future relationship in this sector and the Trans-Caspian International Transport Route’s (TITR) potential. This transition is expected to take time, but Georgia is working with neighboring states to build on current infrastructure and relationships to set the stage for the country to be a reliable means of transport for resources to the West amidst a global effort to move away from Russian resources. 

Georgia is also facing potential challenges involving the absorption of over 260,000 Russians who have fled into the country since the start of the invasion. After Putin’s draft announcement on September 21, an even larger number of military-aged Russian men are seeking sanctuary within Georgia’s borders. Currently, Russian citizens have the right to remain in Georgia without a visa for 365 days, which beats even Armenia’s 180-day policy and Azerbaijan’s 90-day limit. At the same time, the country is careful not to provoke renewed Russian aggression by imposing stricter visa policies. One potential factor Tbilisi considers is that the increase of Russians entering the country provides additional economic stability in the short term. The Georgian economy relies heavily on tourism—Russians bringing in business and spending money within their borders, regardless of their reason for being there, adds value to the national currency.