Georgian Prime Minister Giorgi Kvirikashvili is on a two-day visit to Iran, meant to re-ignite bilateral relations following the easing of international sanctions against the Caspian state in 2016, and improve regional economic and trade ties.
"Negotiations with Iran are highly important to us and we are ready for the development of cooperation in all fields," Kvirikashvili said Tuesday in a meeting with Iran’s Foreign Minister Mohammad Javad Zarif.
Kvirikashvili is on a two-day visit to Tehran, from April 22-23, after Kvirikashvili met with Zarif in Georgia’s capital Tbilisi on April 18.
Georgia implemented a bilateral visa-free policy with Iran in 2011, which led to a fourfold increase in Iranian visits to Georgia. However, in July 2013 Georgia unilaterally canceled the visa-free arrangement with Iran and started strict compliance with sanctions placed on Iran, by freezing 150 Iranian bank accounts. Iranian visits to Georgia dropped significantly, by 72 percent in 2015 compared to 2012.
Marion Kipiani, an independent consultant and researcher based in Austria, identifies Georgia as an important piece to Iran’s foreign policy and economic strategy, as it seeks to maintain regional stability in the Black Sea, Caucasus, and Caspian regions while boosting its political and economic standing, as well as increasing its access to European markets.
“Due to Georgia‘s strong political and security alignment with the European Union and the United States – which have been the main drivers of the sanctions regime imposed against Tehran – bilateral ties have often been delicate, albeit generally positive, in terms of tourism and trade,” Kipiani told Caspian News. “Tbilisi’s decision to unilaterally abolish a visa-free region with Iran in 2013 was largely seen as a result of Western pressure to rein in economic relations in the banking sector, which had raised suspicions of being used by Iran to circumvent international sanctions,” Kipiani explained.
The recent upswing in diplomacy between Georgia and Iran is likely a sign of Iran’s renewed interest in Georgia as an economic partner and comes nearly two years after Tehran reached an agreement with Western powers to curb its nuclear program.
The agreement called the Joint Comprehensive Plan of Action and reached in July 2015 between Iran, the five permanent members of the United Nations Security Council (China, France, Russia, the UK, the US) plus Germany, and the European Union provided relief to Iran from crippling economic sanctions. By January 2016, the sanctions started to be lifted and money flowed back into the Iranian economy.
But international sanctions relief has not been the only variable in Georgian-Iranian relations.
“Iran’s image as a regional player in the Caucasus has improved in Georgia after the August 2008 war with Russia, as Iran officially supported the sovereignty and territorial integrity of Georgia and emphasized the importance of respecting international norms and agreements," Kipiani said.
The 2008 Russo-Georgian war saw Russian and Georgian forces pitted against one another over South Ossetia and another self-proclaimed breakaway region, Abkhazia, when Georgia’s military operation to restore control over South Ossetia encountered an armed intervention by Russia. The war, considered to be the first European war in the 21st century, came to an end with a ceasefire agreement negotiated by France in August of the same year.
Georgia’s business-friendly regulatory environment, investment opportunities in tourism and the agricultural sector, and Georgian demand for petrochemical products – a sector Iran is trying hard to develop – all represent the opportunity. At the Georgian-Iranian Business Forum, which brought together over 100 companies from both countries and was held in Tbilisi on April 18, Georgia’s Economy Minister Giorgi Gakharia said that bilateral trade between Georgia and Iran has already increased by 50 percent in 2017.
Arguably the most attractive asset that Georgia has to offer Iran is its economic proximity to the European Union, which has culminated in the establishment of a Deep and Comprehensive Free Trade Agreement (DCFTA). Tbilisi pursues a strategy of actively promoting itself as an “economic gateway to Europe,” whereby third-country investors can access Europe’s market by establishing businesses in Georgia.
Ibrahim Dogus, Director of the Center for Turkey Studies in London, which issues analytical reports also about Iran, said that since 2015 Tehran has viewed Georgia as a door to Europe.
“In 2015, the Iranian authorities conceived a sixth five-year development plan, aimed at the establishment of a resistant economy, and promotion of cultural excellence and progress in science and technology. In these regards, Georgia can support Iran and become for the country the gateway to Europe, one of the world’s biggest concentrated hubs of innovation,” Dogus told Caspian News.
“Georgia is also a main conduit for transport and energy corridors linking Europe to Central Asia and farther to the attractive markets of East Asia,” Marion Kipiani Austria based independent researcher explained Caspian News. “The country participates both in Western projects, such as the Southern Gas Corridor which has options to link up European markets to hydrocarbon resources in the Caspian and farther afield; as well as China’s ‘One Belt, One Road’ New Silk Road investment and trade initiative. For Iran, this presents opportunities to diversify its export routes by creating a Persian Gulf-Black Sea transport corridor for energy and trade that links up these macro-regional initiatives,” Kipiani said.
Iran currently benefits from a trade imbalance with Georgia, and trade turnover between the two countries surpassed $131 million in 2016, according to the National Statistics Office of Georgia reported. Exports from Georgia to Iran were slightly over $46.5 million, while imports from the second largest economy in the Middle East region into Georgia stood roughly at $84.5 million. Bars and rods, iron, ferroalloys, motor cars and other vehicles, and livestock account for the largest share of Georgian goods transported to Iran. Petroleum coke, float glass, grapes, sacks, and bags are Georgia’s main imports from Iran.
Iranian foreign direct investment in Georgia between the years 2006 – 2015 stood at $9.2 million, according to a 2016 report by the Georgia-based think tank the Economic Policy Research Center. During the last two years, Iran mostly invested in Georgia’s processing industry ($2.039 million), real estate ($1.9 million), and agriculture and fishing sectors ($3.104 million). According to the Georgia-Iran Chamber of Commerce and Industry Iran has one business center and a hotel being constructed in Georgia.
While the potential for economic growth is real, Kipiani believes rapprochement between the two countries will not bring considerable changes to the region’s socio-political dynamic.
“Georgia-Iran cooperation is still modest and remains dependent on the vagaries of geopolitics,” she said. “Georgia’s primary foreign policy vector is Euro-Atlantic integration, and it will engage with third actors only in so far as these ties do not jeopardize its good relations with the United States and Europe. Therefore, in the short to medium-term, a strengthening of bilateral relations between Georgia and Iran will most likely proceed incrementally and not lead to radical shifts in Caspian sociopolitical life.”
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