hranoush dermoyan turkish investments in gerogia
                                            Illustration by Armine Shahbazyan.


The South Caucasus is not a constructive region when it comes to regional cooperation among its three countries, Armenia, Georgia and Azerbaijan. As Armenia has been excluded from regional projects, Georgia, Turkey and Azerbaijan have worked together on energy projects such as the Baku-Tbilisi-Ceyhan oil pipeline and the Baku-Tbilisi-Erzurum natural gas pipeline. With economic integration and expansion of commercial links as the underlying objective, Armenia has to articulate different methods of re-inserting itself into regional projects, and the possible opening of communication routes may serve such objectives. This, however, assumes the normalization of relations with neighbors with whom Armenia has either been at war or has had minimal diplomatic relations.

The dilemma of normalizing relations with Turkey is not new for Armenia; Armenia has been facing that challenge since its independence. In 1991, Turkey was one of the first countries to recognize Armenia’s independence, and Armenia’s first President Levon Ter-Petrosyan tried to keep active communication with Turkey while the First Nagorno-Karabakh War was still ongoing between ethnic Armenian forces and Azerbaijan. Despite the efforts to establish relations with Turkey, the latter shut its border with Armenia in 1993, when Armenian armed forces took over Kelbajar in Karabakh. Since then, Turkey has conditioned the normalization of relations on Armenia acquiescing to Azerbaijan's demands in the Nagorno-Karabakh conflict.

In 2008, another attempt was made to normalize relations between Armenia and Turkey. Armenia’s third President Serzh Sargsyan initiated a process that came to be known as “football diplomacy”. The thaw between Armenia and Turkey was not well received in Baku. In 2009, Armenia and Turkey signed the Zurich protocols; the entire process was closely followed by the Obama Administration and then-Secretary of State Hillary Clinton. The protocols were supposed to kickstart the reconciliation process between the two countries; however, neither of the parliaments ratified the protocols. In 2018, Serzh Sargsyan finally rejected the protocols, especially as Turkey had reasserted preconditions that were not part of the original deal. Today, Russia is playing an active role in mediating relations between Armenia and Turkey.

The consequences of the 2020 Artsakh War have altered the regional dynamics, and new proposals are being suggested, especially by Russia, to normalize relations between Armenia and Turkey. The opening of communication routes and developing an integrated regional economy is actively discussed by regional players.

Normalization of relations, however, are hampered by concerns in Armenia regarding the ongoing security dilemma Turkey poses, as well as fears that the size of Turkey's economy may overwhelm and disproportionately dominate that of Armenia's. Armenia’s northern neighbor Georgia, however, has continued developing close economic ties with Turkey, as well as Azerbaijan. Looking into Georgian-Turkish economic relations may serve as an indicator of what to expect for Armenia.


Georgian-Turkish Relations: The Beginning

Turkey was also one of the first countries to recognize Georgia’s independence; the two countries established diplomatic relations in 1992.

In the early 1990s, Georgia joined regional cooperation projects like the Commonwealth of Independent States (CIS)[1] and the Collective Security Treaty Organization (CSTO).[2] In 1995, Russia and Georgia signed an agreement according to which Russia would rent military bases in Vasiani, Akhalkalaki and Batumi for 25 years. However, after the Rose Revolution in 2003, Russian military bases were gradually removed from Georgia; the process was completed by 2007. Georgia left the CIS following the 2008 Georgian-Russian War; it had left the CSTO even earlier in 1999.

While Georgia gradually left the Russian-led regional cooperation formats, it needed new economic partners and security guarantors. It looked to the West to find new allies. Georgia viewed Turkey as a window to the EU and potentially to NATO.

Georgia’s shift from Russia to the West accelerated after the Rose Revolution, when young and Western-educated Mikheil Saakashvili came to power. It was precisely after the Rose Revolution that Russia's economic influence in Georgia was stemmed and gradually replaced by Turkey.

Turkey and Georgia both had set interests when they started to deepen cooperation. For Turkey, it was important to increase its presence in the South Caucasus and have a transit road to Azerbaijan for energy projects. For Georgia, it was an opportunity to cement its role as a transit country and hub for cooperation in the region, as well as to establish a conduit for its aspirations to join the EU and NATO.


Saakashvili’s Policy Toward Turkey

Saakashvili was an advocate for a more active Turkey in the South Caucasus region. In 2013, he told the Turkish Policy Quarterly that Georgia’s geographic location enables it to become a gateway for European influence toward Asia and an important part of an East-West corridor that is pivotal for Europe in terms of energy transit. Saakashvili’s vision was to turn the South Caucasus, and Georgia in particular, into a corridor linking West to East, and he saw a strategic partner in Turkey to achieve his goals. His ambitious plans coincided with the era of Ahmet Davutoglu, who was the architect of the Turkish foreign policy known as the “strategic depth” doctrine, which was defined by the concept of “zero problems with neighbors.”

The strategic depth doctrine entailed that Turkey was entitled to play a bigger role in the region, given its Ottoman past and geographic location linking Europe to the Middle East. The “zero problems with neighbors” policy was part of the strategic depth doctrine and proposed that Turkey improve its relations with its immediate neighbors, as well as regional players, based on soft power and economic cooperation. Within the framework of this foreign policy format, Turkey continued to strive toward EU integration and strengthened its position within NATO.

It was also in this period that Georgian-Russian relations started to worsen, as Russia closed its market to Georgian products in 2006. In line with Saakashvili's visions, Tbilisi started offering favorable investment opportunities for Turkish businesses. As a result, economic ties between Turkey and Georgia intensified and strengthened. Turkish companies have invested in large construction and hydropower projects in Georgia, and hold the management rights for the Tbilisi and Batumi airports. In terms of foreign investment, Turkey is second only to Azerbaijan in Georgia.


Turkish-Georgian Economic Cooperation

One of the main fields of cooperation for Georgia and Turkey are regional energy projects. Two of the region's most important pipelines carry Azerbaijan’s oil and gas to Europe through Georgia and Turkey. There is also the Baku-Tbilisi-Kars (BTK) railway, which not only creates a rail connection between Azerbaijan, Georgia and Turkey, but also serves as a potential land connection between China and Europe. Although the construction of the railway was commissioned before China announced its plans to revitalize the Silk Road through the Belt and Road Initiative (BRI) in 2013, the BTK railway can now serve as the middle corridor of the modern Silk Road. Through these projects, Georgia gains transit fees as well as influence in the region as a transit country for energy resources.

Besides cooperation in regional energy projects, Turkey and Georgia also have strong economic ties at the bilateral level. In this regard, it is important to take into account that the Turkish economy is much bigger than that of Georgia. As of 2021, the GDP of Georgia is $15.8 billion; Turkey’s is $720 billion. The population of Georgia is 3.7 million, and the country comprises an area of 69,700 square kilometers, while the population of its economic partner Turkey is over 83 million people and its area is 783,356 square kilometers.

In 2002, one year before the Rose Revolution, Georgia’s main import and export partner was Russia. Georgia’s overall imports from Russia accounted for 15.3 percent of total Georgian imports. Exports to Russia accounted for 17.6 percent of Georgia’s total exports. Turkey held second place for imports as well as exports with 11.2 and 15.5 percent, respectively. In 2008, five years after Saakashvili came to power, Turkey had already replaced Russia as Georgia’s main economic partner. Exports to Turkey accounted for 17.5 percent of Georgia’s overall exports, and imports from Turkey accounted for 15 percent of overall Georgian exports. In 2013, when Saakashvili was ousted from power, Georgia’s main export partner was Azerbaijan (24.3 percent of overall Georgian exports), while Turkey remained Georgia’s main import partner with a share of 17.5 percent of overall Georgian imports. As of 2019, Georgia’s main import partner was still Turkey with a share of 17 percent, and Georgia’s main export partner was still Azerbaijan, though with a lower share of 13 percent.

In 2021, Turkey’s share in Georgia’s overall imports was 17.7 percent, which is the largest number for a single country. Turkey’s share in Georgia’s overall exports amounted to only 8.6 percent in 2021. Georgia exported more to China, Russia and Azerbaijan than to Turkey. In 1995, 20 percent of Georgia’s exports were sent to Turkey; that number dropped to 8.6 percent in 2021. As Turkey’s share grew among Georgia's imports, the latter’s exports to Turkey decreased.

The trade volume between Turkey and Georgia was $1.85 billion in 2019, and Turkish contractors have completed 285 projects in Georgia worth $4.8 billion. In the second quarter of 2021, Turkish foreign direct investment (FDI) in Georgia amounted to $21 billion. Turkey ranks 5th in Georgia’s overall FDI list, preceded by the UK, the Netherlands, Czechia and Japan.

According to Aleksandre Kvakhadze, Research Fellow at the Georgian Foundation for Strategic and International Studies, there is a significant imbalance between Georgia’s imports from Turkey and its exports to Turkey. As the country with smaller economic capacity, Georgia is vulnerable to the Turkish economy. Agricultural products and textiles, for example, are imported more cheaply than they are produced in Georgia, which has a negative impact on producers in Georgia.

With the deepening of Turkish-Georgian relations after 2004 and Turkey’s growing presence in the Georgian economy, the Georgian labor force also started to explore job opportunities in Turkey. After the visa regime between Turkey and Georgia was lifted in 2006, Turkey became one of the major destinations for Georgian migrant workers. Although, according to Alexandre Kvakhadze, Turkey is not a primary market for Georgian migrant workers anymore, Georgia continues to receive a significant amount of remittances from Turkey. In 2021, Georgia received $69 million worth of remittances from Turkey, while in 2017 that number was $23 million.

Turkish companies also invest in hydro and wind power plants in Georgia. Some of the electricity they produce is then exported back to Turkey. In 2018, exports of electricity from Georgia to Turkey increased by 61.4 percent compared to 2016; in 2019, Georgia exported 2.78 million kWh of electricity to Turkey.

Despite strong economic ties between Turkey and Georgia, Turkey has not been able to project as much soft power in Georgia as it would have liked. Approximately 10 percent of Georgia’s population is Muslim, including an Azerbaijani-speaking population in Georgia’s south and Ajars in Ajara bordering Turkey. The main target of Turkish soft power has been Georgia’s Muslim population. Since the 1990s, Turkey has financed the construction and renovation of around 300 Shia and Sunni mosques, in Ajara and other regions. In Batumi, there are 10 schools teaching Islam, and they are all financed by Islamic organizations from Turkey. There are also two mosques in the capital of Georgia. However, Georgia does not have the same level of influence in Turkey; in the last 20 years, it has never demanded that Turkey reconstruct old Georgian churches in Turkey.



Today’s Turkey is very different from the Turkey of the early 2000s. Not only was Turkey not able to maintain “zero problems” with its immediate neighbors, it is now militarily involved in Syria, Iraq and Libya, and engaged directly in the 2020 Artsakh War. Although Turkey is trying to establish itself as a regional power, it is facing economic challenges as the lira is plummeting and there is growing unrest domestically.

Turkish-Georgian relations continue to develop on the foundations that were laid in the early 2000s. However, today’s Turkey is not driven by the “strategic depth” and “zero problems with neighbors” principles anymore. Turkey will consider other trajectories when and if it establishes diplomatic and economic ties with Armenia.

Turkey has significant influence in certain sectors of the Georgian economy. As its main import partner, Georgia is dependent on Turkey for machinery, iron and steel articles, plastics, electrical/electronic equipment and more. Turkey is also investing in Georgia’s energy sector.

The Armenian economy is also heavily dependent on imports. If Armenian-Turkish relations are normalized, Turkey might rise to become one of Armenia’s main import partners and assert dominance over certain sectors of the Armenian economy. However, in recent years, Armenia is trying to transition to a services and high-tech sector economy. While Turkey can provide Armenia with cheap textiles, agricultural products, plastics, electronic appliances and so forth, it is yet to be seen if Turkey will find a foothold in Armenia’s service and high-tech sectors.


[1] The CIS was created after the fall of the Soviet Union to maintain economic cooperation among the Former Soviet States.
[2] The CSTO was established as a security cooperation platform among former Soviet countries.


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Manuel Ferez

Dear friends, congratulations for your articles, I enjoy to read it. I want to contact Hranoush Dermoyan to make her an interview for Oriente Medio News an independent website in Spanish for latinamerica audience.

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