Georgia has a new government headed by Mamuka Bakhtadze. How could this potentially impact Georgian-Russian relations in the light of the recent agreement on economic corridors through Georgia’s breakaway territories and the rising level of trade between the two states? Probably not a lot.

In December 2017, Tbilisi signed a contract with a Swiss company, known by its acronym, SGS, to monitor the Abkhazia and Samachablo (aka South Ossetia) trade corridor, among other things.

In late May 2018 Moscow followed suit. The initiative involves linking Russia and Georgia via a trade corridor through South Ossetia, a faster, wider and, in winter, safer route than the Kazbegi-Upper Lars mountain pass over, which most cargo between the two countries travels today.

The agreement comes on tenth anniversary of the 2008 Russia-Georgia war and almost three-decade long separatist conflicts in the regions of Abkhazia and Samachablo. Despite the geopolitical differences between Russia and Georgia, trade between the breakaway territories and the rest of Georgia has in fact increased. Even the European Union began testing options for opening Abkhaz to the businesses the free trade agreement it has with Georgia.

The agreement on trade corridors should be beneficial for everyone in the region. Samachablo gets better access to the Russian and Georgian markets. Russia also can increase its trade with the small republic. And Armenia is a big winner, as by signing up it improves its access to Russia, as the only country in the Caucasus that doesn't have a boarder with Russia.

Trade has been rising since 2015 at the only crossing for motor vehicles between Samachablo and Georgia proper, connecting Akhalgori to the Mtskheta-Mtianeti region of Georgia. In 2017, trade increased: large numbers of trucks were common. An average of twenty trucks per day were passing through the checkpoint to deliver goods from Tbilisi to the breakaway territory markets. Georgian commodities, despite costing 2-3 times the price in Samachablo, are nevertheless much cheaper than the same products imported from Russia. By the start of this year approximately 1,500 tonnes of cargo reach Akhalgori per month.

According to the Abkhaz authorities, 150 tonnes of commercial cargo cross the conflict divide daily, in both directions. The freight’s annual value ranges from $7mn to $15mn, according to International Alert studies conducted in 2010-2015.

The economic advantages of closer cooperation are obvious, but the politics remain fraught: none of the interested parties are willing to make consessions on the territory’s eventual political status. Moreover, the differences between Tbilisi and Moscow are in fact so wide that more progress in bilateral relations are unlikely to follow.

Georgia-Russia: Bird’s Eye View

Recent statistics showed that in January 2018, Russia became the biggest export partner of Georgia ($28,665mn), and in terms of the overall trade balance Russia is currently second ($94mn) after only Turkey ($112mn) and slightly ahead of Azerbaijan with $91mn.

This is an interesting development: while tensions between the countries are high and the 10th anniversary of the Russo-Georgian military conflict is imminent, Moscow and Tbilisi in fact continue to enjoy pretty intensive economic relationship.

Although the majority in Georgia regard Russia negatively, its geographic proximity to Georgia forces the country into economic relations. Georgia’s location allows Tbilisi to be a regional transit hub, and it cant afford to be oriented towards only one country; if it were then Russia is the obvious candidate to play this role. However, this also does not preclude Georgia and Russia from talking to each other and fostering economic relations. The non-existence of diplomatic relations as well as fundamental differences regarding Abkhazia and Samachablo does not stop the Georgian government from creating closer economic contacts with Russian businesses.

It could be argued that Georgia is pursuing a clever strategy of positioning itself not as an anti-Russian state, but also not abandoning its pro-western course. The ideal scenario for Tbilisi would be when all the neighbouring countries have a stake in the security of Georgia. In addition, large players, such as China with its Belt and Road Initiative, the EU, the US and others would also be involved in the economics of the country. This might create a certain balance in the region.

Countries might be enemies, but geopolitics can at times mean these countries still have to maintain relations. In an era of an increasingly interconnectedness, neighbouring rival countries cannot ignore economic cooperation. Economic interconnectedness through supply chains eventually breaks down large geographic and man-made barriers like those, for instance, created between Samachablo and the rest of Georgia. Russia-Georgia economic cooperation proves that economic progress tramples geopolitics.

What is the future of Georgian-Russian relations? How far could cooperation go? Is Georgia simply being forced by the realities of the geopolitical situation in the Caucasus to become more open to Russia, or it is a continuation of the policy the current Georgian government has pursued throughout the past several years: pro-Western foreign policy and maintaining contacts with Russia? It is too large a question to answer, but it nevertheless shows that Tbilisi and Moscow have much to talk about. Both could cooperate in the security realms as well as deepening economic ties.

At the same time, this potential limited cooperation doesn't guarantee a rosy picture for the future of Russia-Georgia relations. Moscow is very unlikely to give up on its policy towards Samachablo and Abkhazia, while Tbilisi will remain on principle pushing for a return of its territorial integrity. Moreover, Russia has issues with Georgia’s pro-western course, as they endanger Russia’s geopolitical goals in the Caucasus.

These fundamental problems will cap any the improvements in relations, but the two states could work on other points in order to reduce tensions. This brings us back to the Georgian PM’s statement on reaching a breakthrough in relations with Russia. Indeed, a “breakthrough” here does not signify anything dramatic. It emphasizes the fact that there exists the need for engaged Georgia-Russia talks.