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Doing Business in the Post-Conflict Part III

Updated: Mar 12, 2021

Georgia: Between Western ‘darling’ and Russian strategic outpost


By: Alessia Cappelletti & Bob Rehorst

The third and last piece of Dyami’s trilogy ‘Doing business in the post-conflict’ explores the perils of doing business in countries on the brink of the re-escalation of an old conflict. For this article, we focus on the Caucasian country of Georgia, which is often overlooked, especially now that its Armenian and Azeri neighbours are in conflict.

Having gone from a traveller’s hidden gem to the number one business ‘darling’ of the West in the region, Georgia is becoming increasingly attractive for foreign investments. The World Bank ranked the country as the most business-friendly of the Caucasus region, which reflects Georgia’s continued efforts to improve and innovate its economy.

At the same time, Georgia is commonly remembered for its strikingly successful ‘Rose Revolution’ in 2003 which started after disputed parliamentary elections of Soviet leadership. Now, Georgia is again facing mass protests in response to the 2020 parliamentary elections, won by the Georgian Dream Party (GD) which was founded by Oligarch Bizidina Ivanishvili.

This might have consequences for businesses operating in the country, or foreign investors worried about thesis assets. Why, then, is Georgia subject to public outrage, alleged parliamentary election fraud, and Russian influence? And what does this mean for businesses with interests or assets in the country? To understand this, let us first take a closer look at the 2003 Rose Revolution that successfully ousted President Eduard Shevardnadze.

The revolution derives its name from the historical moment when protesters, led by Mikheil Saakashvili (who later became the 3rd president of Georgia), stormed the parliament with red roses in hand. Saakashvili and a network of pro-democratic NGOs were aided by the Open Society Institute (OSI), which also paid for numerous Georgian student activists to go to Serbia and learn from the Serbians who had ousted Slobodan Miloševic in 2000.

This event marked the end of the pro-Soviet leadership in the country and made Georgia pursue a pro-Western democratic policy. Georgia became a ‘darling of the West’ after Saakashvili came to power and instituted reforms to boost democratic institutions and battle corruption. However, Saakashvili was later blamed and indicted for mistakes made during the 2008 invasion and was forced to self-exile in Ukraine.

The current protests mark the third time that Georgia’s population turns against the sitting parliament in two decades. The first was the Rose Revolution in 2003. The second, in 2012, saw the population rising up after Russia commandeered the regions of Abkhazia and Ossetia. The Georgian Dream Party, founded by Georgia’s richest man Ivanishvili, came to power. Now that the third wave of protests is happening, What is the reason this time?

The direct reason behind the protests is the allegations of rigged elections, in the aftermath of the 31 October parliamentary election. Georgians do not trust the GD being re-elected yet again, for what would be their third consecutive term. The GD party has close ties with Russia too, as the rich party leader, Ivanishvili, has lived and made his fortune in Russia only to come back to Georgia later and enter politics.

The heightened outrage has roots in the history of Russia’s ambitions in the region and the consequential fear of losing independence among the Georgian population. For a while now, Russia has increasingly used the, now commonly known, strategies of hybrid warfare. Hybrid warfare entails the implementation of multi-dimensional tactics ranging from political, informational, economic, and classic warfare tactics.

What is commonly overlooked, is the transnational dimension of Russia's ambitions in the Black Sea region, on which Georgia has the critical port city of Batumi. According to the Middle East Institute, it is wrong and dangerous to compartmentalise geography and treat Russia’s infringements as individual incidents. Indeed, Russia's deployed strategies appear part of a broader ambition for increased geopolitical control, which could undermine the progress made so far in the Georgia-EU bilateral Agreement signed in 2014.

For example, Russia's interference in the 2014 crisis of Ukraine has led many to believe that Moscow engaged in hybrid warfare. Instead of simply invading Crimea, Russia incited Pro-Moscow protests, sent anonymous militias to occupy government buildings, and generally disrupted Ukrainian national unity. Such strategies give the Kremlin 'plausible deniability' if accused of involvement in Ukrainian internal conflict. While Moscow continues to deny its direct involvement, it has sustained and increased its ambitions in the Black Sea region and the South Caucasus - like its initial support for Armenia during the Armenian-Azeri clashes of 2020.

Russian hybrid warfare strategies are also emerging in Georgia. First of all, its control over Abkhazia and South Ossetia allow Moscow to have a tighter grip on Georgia and pursue a 'creeping occupation'. Second, with the current protests, Georgia appears to fall prey to the Kremlin’s subversive tactics of cyber-warfare and systemic release of disinformation as a sort of psychological warfare against its population.

Russia has always had Georgia on their mind, and their interest in the South Caucasus is unlikely to decrease. The current election demonstrations appear to be a symptom of a larger geopolitical powerplay that is hidden from the distant observer. Georgia's European ambitions are a thorn in Russia's side, and Moscow will continue to undermine Georgia's diplomatic and logistical developments towards EU-standards.

This means that western investors and businesses alike might need to keep an eye open on the ongoing protests. If the Georgian Dream party continues to rule the country, dissatisfaction and worry are likely to grow among the pro-EU population and clashes may not stop soon. It is essential, therefore, to pay attention to Russia's moves and popular Georgian reactions to them.

This article is part three of a series highlighting the potential risks of doing business in post-conflict countries.

For source references, please download the PDF version.

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About the authors:

Alessia Cappelletti is a Global Security Analyst and Program Manager of DEWIS. She has field experience in South America, Colombia especially, which makes her largely acquainted with the security challenges of the Latin American context. Her expertise includes conflict analysis and investigation, human rights protection, and criminality.

Bob Rehorst is a Global Security Analyst at Dyami. He has extensive field experience in the Levant-Middle East region, North Africa and Sub-Saharan Africa. He holds a Graduate Degree in Conflict Studies and Human Rights, and an Undergraduate Degree in Cultural Anthropology, both from Utrecht University. Bob specializes in geopolitics, conflict development and global crises.

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