Economic and geopolitical partnership in the Caucasus: the Azerbaijani-Georgian-Turkish approach

Jim van Moorsel
Intern at Caucasian House


New and modernising approaches are tackling the Soviet past in the Southern Caucasus. This has gradually led to a remodelling of the geopolitical and economic situation in the region. After experiencing a difficult and war-torn past in the first years of independence, the republics seek a modernising and more self-determinant perspective for the future. The Azerbaijani-Georgian-Turkish cooperation exemplifies this. With the completion of the Baku-Tbilisi-Ceyhan (BTC) pipeline in 2006, the first product of this cooperation became reality. Is the geopolitical and economic Caucasian space being shaken up? Traditional regional powers Russia and Iran have been left out, and Armenia has been by-passed. Could this be seen as a result of the region’s troubled past that still continues to haunt the present? What are the roots of this cooperation, its implications, and its outcomes? This article will first provide some background on the roots of the economic alliance, and then will delve deeper into the geopolitics that are involved in the region, before moving on to the importance and the results of the Azerbaijani-Georgian-Turkish partnership.

Pan-Turkic tendencies and the Azerbaijani quest to reach Europe
The Azerbaijani-Georgian-Turkish cooperation has its roots in the collapse of the Soviet Union and the independence of Azerbaijan and Georgia in 1991. Ismailzade (2006) describes the Turkish establishment as very keen to gain power in its direct neighbourhood, as well as to invest in a pan-Turkic agenda, which entailed intensive cooperation and cultural identification with Azerbaijan. The Second President of Azerbaijan, Abulfaz Elchibey, shared this idea of Turkic identification, and attempted to diminish the Russian and Iranian influences on the country. His successor Heydar Aliyev, however, opted for a pragmatic approach. The idea of exploring new routes to export Caspian oil to Europe fit perfectly within this discourse. As previously all pipelines had to go through Russia, Azerbaijan lacked direct connections to Europe. In turn, new routes had to be explored. A route through Armenia was not a viable option, and therefore Georgia and Turkey remained as cooperation partners. Russia and Iran objected to the new pipeline, calling it ‘politically conspired’, and commercially not viable. The Armenian diaspora heavily lobbied to block BTC, but with eventual US support and Azerbaijani perseverance, the process of implementation began. At the same time, Turkey had strengthened its relationship with Georgia. While Georgia has not always been on the agenda of Turkish foreign politics, it has become clear that political and economic aspirations have made Turkey more aware (Aydin, 2002; Cornell, 2015; Oskanian, 2011). Cornell (2001) argues that Turkey, also through Azerbaijani aspirations of developing an alternative to the Russian gas supply in Europe, has started to see Georgia as the key transit link to Azerbaijan and Central Asia.

Caucasian particularities in geopolitics: the formation of triangles
The collapse of the Soviet Union and the consequent demise of a bipolar world order suddenly created new possibilities in the Caucasus and new geopolitical strategies were being carried out. Instead of forming just a part of the Soviet hemisphere, the Southern Caucasus was now a strategically important juncture between Europe, Russia and the Middle East. The pan-Turkic alliance between Azerbaijan and Turkey was the first product of new geopolitics of the early nineties. Turkey profited from a weak Russia and began to spread its influence over the region. As stated previously, Georgia formed the closing part of the chain and also became part of this ‘Western alliance’, backed by NATO, US and Israel. Russia and Iran were forming their own alliance. Armenia, as being the only Caucasian ‘left-out’, was a natural ally for Russia and Iran and assured their influence over the region. (Nichol, 2009; Melman, 2016).
This image leaves us with the Azerbaijani-Georgian-Turkish triangle on the one hand, and the Iranian-Armenian-Russian one on the other. As one could notice on a geographical map, this new division of Caucasian space does not seem of equal benefit for both. Georgia, the Caucasian key link, seems to have turned into a battlefield between the two camps, both wanting to impose their sphere of influence. While Azerbaijan and Turkey managed to develop a chain that links the Caspian Sea to the Black Sea and the Mediterranean, Iran and Armenia are not geographically linked to Russia, making Georgia the ambiguous factor within this scenario (Cornell, 2013). This has become even more so clear in the breakaway regions Abkhazia and South Ossetia, eventually culminating into the Russo-Georgian War in 2008, which has led to a large Russian presence in both regions and their de facto independence from Georgia. Apart from the political aspect, the war also raised concerns about the country being safe enough for oil transports as being part of BTC. Azerbaijan heavily relies on Georgia’s safety as it forms part of its created gateway to export gas to neighbouring countries and to Europe (Petersen & Ziyadov, 2007)

The importance of Georgia’s strategic position has also become clear from the perspective of its neighbour Armenia, which depends on Georgia as a transit country. Armenia, due to closed borders with Turkey and Azerbaijan, heavily relies on its connections with Georgia, as it does not share a direct border with its biggest ally, Russia. Georgia, as Bondyrev, Davitashvili and Singh (2015) argue, finds itself at a juncture of geopolitical, cultural and economic vectors. It is the intersection of several different axes (North-South, West-East, Europe-Asia, and Eurasia-Middle East), which all display a variety on geopolitical alliances, particularly the two triangles that have been mentioned already. Could Georgia, which holds such a strategic geographic and geopolitical place, therefore be loyal to a single geopolitical and economic alliance without losing the benefits of this alliance, as well as avoiding hostile reactions from others?

Implications of the Azerbaijani-Georgian-Turkish cooperation
Georgian PM Giorgi Kvirikashvili became the first foreign head of state to visit Turkey after the failed coup attempt by parts of the Turkish military in the evening of Friday, July 15. […] Although the event focused on bilateral trade and economic issues, both parties emphasized that the official visit demonstrated Georgia’s continued support for Turkey’s democratically elected authorities. (Ajeganov, 2016)

At first sight, the cooperation between the three countries seems to go much further than only an economic partnership. When the Turkish coup took place last year, Georgia showed support for Erdoğan’s government, while NATO and the EU took a more critical stance. Ajeganov (2016) argues that ‘‘regardless of what direction Turkey’s politics take, Georgia does not have much of a choice but to toe its neighbour’s line, come rain or shine’’. While this might be a bit of a stretch, he points out Georgia has continued to rely heavily on its Turkic neighbours economy-wise. While the Caucasus has not continued to impress economically in the last years, with Armenia even being unilaterally dubbed as ‘the second worst economy in the world’ by Forbes (Fisher, 2011), Georgia has enjoyed continuous investment by Turkey and Azerbaijan. Turkey, its main trade partner, has invested over USD 1 billion in the country during the past 14 years (Baghaturia & Dumbadze, 2013). This seems to indicate a partnership that primarily bases itself on geographical and economic concerns. For the geopolitical aspect, as Ajeganov (2016) states, one should mention that during the past years Turkey has been drifting away from the EU, while Georgia has been doing the opposite. Although Georgia occupied a more neutral position vis-à-vis the EU’s critical stance after the failed Turkish coup, it has continued its aspirations of Euro-Atlantic integration. Yet, as antagonising Turkey would mean a more precarious position in the region and more vulnerability towards Russia, Tbilisi has not many other options besides accepting Ankara’s pivotal demands, which include loyalty from its neighbours.

Although Armenia does not participate in any cooperation with Azerbaijan or Turkey, Georgia has always fostered a bilateral trade relationship with its neighbour. Yerevan’s reliance on its northern neighbour as transit country has given Georgia huge political leverage. Although Armenia is developing closer ties with Iran, it first and fore mostly depends on Russian gas, which must be transited through Georgia. This vulnerable position was exposed during the 2008 war, when Armenia became deprived of Russian gas for several days. However, even after Russo-Georgian relations severed, Tbilisi has continued to negotiate with Gazprom on behalf of securing gas supply to Armenia. Recently, Georgia’s benefit for this deal has been monetised; before it was receiving a percentage of the supply as part of a barter system (Dvali & Gachechiladze, 2017). Does this undermine the cooperation with Turkey and Azerbaijan, or is it a logical consequence of economic and geopolitical pragmatism? During the last years, while negotiating new deals with Gazprom, Georgia has repeatedly stated its aim to diversify energy supplies. Azerbaijan, on the other hand, has kept on assuring it has enough gas to fully meet Georgia’s needs ‘for 100 years to come’. Through providing extra supplies, SOCAR seems to have successfully removed energy diversification from the Georgian political agenda for now (Lomsadze, 2015; Tsereteli, 2016).

It seems Georgia has become increasingly aware of its key position as a gateway to both Europe and the Caucasus. Former Georgian President Saakashvili would sometimes release bold statements as ‘‘whoever opposes Azerbaijan, is Georgia’s enemy’’ (, 2011), giving more importance and strength to the partnership and showing where Georgia’s loyalties were to be found. Nowadays, Georgia plays a subtler role when it comes to geopolitics. This can be seen in its willingness to negotiate with Gazprom, but also in its exploratory talks with Iran on energy supplies, although Kakachia (2011) argues that the improvement of Georgian-Iranian relations should also be seen in the light of Georgia’s quest for allies that can provide a counterweight to the Russian power and influence, and also as a pragmatic recalculation of ‘geostrategies’. While Armenia already showed signs of interest in becoming a transit country for such deliveries, Georgia still sees a gas deal with Iran as a future prospect, for now only remaining ‘a talk between experts’. As Gurbanov (2016, October 17) states, such a deal and the opening of an Iran-Armenia-Georgia route would present serious political challenges for Georgia. It would possibly undermine its negotiation talks with Gazprom, and it would also strengthen Yerevan’s geopolitical position at the expense of Tbilisi’s.

Outcome of the Azerbaijani-Georgian-Turkish cooperation
BTC was a first tangible result of the triangle cooperation in the Caucasus. Besides that, there was another project in the ‘political pipeline’ for years that would strengthen regional cooperation. The so-called Kars-Akhalkalaki-Tbilisi-Baku (or ‘BTK’) railway project has often been dubbed as the shortest route for commercial transport between Europe and Asia, competing with the Russian Trans-Siberian Railway. As Ismayilov (2007, February 7) argues, this is yet another example of self-reliance of the Southern Caucasus. However, the railroad project has been delayed for much longer and cannot gain support from the US and the EU, as long as ‘its intention is excluding Armenia’ (Lussac, 2008). Another reason for the delay, however, has been Georgia’s position. For years, it feared such a railroad would mean the decay of its Black Sea ports Batumi and Poti, as the competition would be too fierce. After relations with Russia severed, culminating into a transportation blockade in 2006 and the 2008 Russo-Georgian War, Georgia reconsidered the project.

Contrary to the Azerbaijani leadership in the BTC project, it was Turkey that proposed the railway project, back in 1993. Ankara considered the future railway as a method of shortening the transportation times from the Caspian Sea terminals to Europe. Turkey would be an important link on this route, and thus would be able to widen its influence and trade connections. In addition, it would provide direct railroad access between Turkey and Azerbaijan for the first time. After the US and the EU refused to contribute, the State Oil Fund of Azerbaijan (SOFAZ) has set up a loan fund for Georgia, which allows Georgia to build and renovate existing sections for its part of the project. While not all Georgians have welcomed this dependence on Azerbaijan, it could also be viewed as a Caucasian form of self-reluctance, while relying on neighbours. Ketevan Salukvadze (head of the Georgian Department of Transport) has stated in 2015 that BTK should be considered as the project of the century for Georgia, as it will bring economic stability and would open Azerbaijan and Georgia to the European market (Israelyan, 2015).

Considering the endless delay and its possible completion in 2017, has this project been worth all the hassle? Lussac (2008) argues it potentially makes the political and economic cooperation between the three countries even bigger. This can already be shown with the results of BTC, as the trade figures between Azerbaijan, Georgia and Turkey have constantly been increasing in the last decade (see Figure 1). The opening of BTC in 2006 shows a sharp increase of the Turkey-Azerbaijan figure, and permitted more modest Azerbaijan-Georgia and Georgia-Turkey increases, albeit the politically unstable situation in Georgia in 2008. Although Figure 1 shows constant growth during the last decade, Figure 2 reveals a more mixed image. The Georgia-Russia and Azerbaijan-Iran trade figures stand out the most, reflecting the geopolitical situation and bilateral relations. When comparing both figures, one could reasonably conclude that Georgia and Azerbaijan have the most to win out of the BTC and BTK projects, as well as other forms of cooperation between the three countries. Turkey seems to take a more independent approach, as demonstrated by the increases in trade figures with Russia and Iran. We can also compare dependence on the partnership by comparing export figures. While the export to Georgia and Azerbaijan in 2014 only accounted for 2,49% in Turkey’s case, this was 4,08% for Azerbaijan and a whopping 21,68% for Georgia (OEC, 2016). In other words, Turkey and Azerbaijan combined form more than 1/5 of Georgia’s export market.

Figure 1. Bilateral trade figures between Azerbaijan, Georgia and Turkey




Total trade figures (import and export) in USD (millions). Source: The Observatory for Economic Complexity (OEC) (2016).

Figure 2. Bilateral trade figures of Azerbaijan, Georgia and Turkey with third countries



Total trade figures (import and export) in USD (millions). Source: The Observatory for Economic Complexity (OEC) (2016).

The three countries all have their own stakes within the aforementioned partnership. While Azerbaijan mainly seeks to enter the European market to export its gas, and Turkey searches to increase its influence in the region, Georgia’s stake seems to be the most multi-faceted. Azerbaijan and Turkey form reliable economic partners, providing investments in the country, and permitting Georgia to be a transit country. In addition, the geopolitical Caucasian space has always driven Georgia towards the two Turkic nations. Because it cannot count on stable relations with Russia, Georgia would be expected to have a big stake in the development of a military alliance between the three nations. As tensions between Turkey and Russia unexpectedly rose last year, Turkey has been fuelling the performance of military exercises as of lately. This would mean the Azerbaijani-Georgian-Turkish ‘triumvirate’, as Ismayilov (2007) dubbed it, is entering a new stage of cooperation. Still, it remains uncertain to which level such partnership could be taken without provoking Russia and Iran (Kucera, 2016). For now, such cooperation seems first and fore mostly intended to secure the economic branch of the partnership, namely the gas pipelines. The Turkish and Georgian sections were already targets of sabotage in 2008, while securing the Azerbaijani branch has become increasingly important with the escalation of events in Nagorno-Karabakh last year (Eissler, 2011).

Azerbaijani-Georgian-Turkish cooperation within the Caucasus region has steadily been increasing since the independence of the Caucasus states in 1991. Sharing a Turkic language and culture, Azerbaijan and Turkey seemed destined to be allies. However, geopolitical challenges, as well as geography, have led to the inclusion of Georgia within their triangle of Caucasian cooperation. The partnership has a multi-faceted character of self-determination, and has taken the role of both a trading a political cooperation. Georgia and Azerbaijan regard their relative independence from Russia and Iran within this cooperative framework as positive.

Two big economic projects stand out within the aforementioned cooperation. The BTC pipeline provides Azerbaijan with a direct energy connection to Europe via Georgia and Turkey, making it less dependent on Russia. Georgia profits as a transit country, which entails investments and trade, and has become independent from Russian gas. Turkey, on its own, profits from becoming a greater economic (and political) leader in the Caucasus. A geopolitical factor which raises is the bypassing of Armenia, which has led to the formation of the Azerbaijani-Georgian-Turkish cooperation on the one hand, and the Iranian-Armenian-Russian triangle on the other. This division may still seem one-sided, but the first triangle has managed to carry out some major partnership projects with BTC, and the soon-to-be-completed BTK. Especially for Georgia, these projects and additional cooperation have led to an ever-increasing growth in trade figures. Exports to Azerbaijan and Turkey now account for more than 20% of the total Georgian export figure (OEC, 2016). Economic cooperation has also grown into partnerships on other levels. Joint military exercises have increased in the last years as a consequence of protection of the gas pipeline. Cooperation and joint operations should above all be sought in the economic realm, as this is where the main interests for all parties can be found. Therefore, while the economic outcome of Azerbaijani-Georgian-Turkish cooperation might be major, its geopolitical importance seems to be somewhat mitigated and it still will have to prove itself in the future.

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