STEM presents an interview with Georgian economist, founder and CEO of Business Insider Georgia and Economic Forum (Georgia), former head of the presidential administration Giorgi Abashishvili

- How would you assess the dynamics and quality of economic cooperation between Azerbaijan and Georgia over the past five years in terms of diversification and added value? What institutional and regulatory barriers still limit deeper integration of the two countries’ economies?

- Over the past five years, economic cooperation between Azerbaijan and Georgia has shown positive momentum, particularly in the areas of energy transit, transport infrastructure, and trade facilitation. However, while the volume of economic interaction has grown, its structure remains relatively concentrated in traditional sectors such as oil, gas, and transit logistics. Diversification and the creation of added value—especially through joint industrial zones, tech innovation, and agro-processing—remain underdeveloped. Institutional barriers such as differences in regulatory environments, tax regimes, and customs procedures still limit the seamless movement of goods and capital. Harmonization of standards, digital customs systems, and bilateral trade facilitation frameworks are necessary to deepen integration. Moreover, limited access to coordinated SME financing and lack of cross-border R&D partnerships prevent both economies from unlocking the full potential of their cooperation.

 

- How effectively are transport and logistics infrastructures (e.g. BTK and the Southern Gas Corridor) used to create synergies in the regional economy?

- Infrastructure projects like the Baku–Tbilisi–Kars (BTK) railway and the Southern Gas Corridor have significantly boosted regional connectivity and placed the South Caucasus on the global transit map. However, while their strategic value is clear, their economic multiplier effect is not yet fully realized. The utilization rates of the BTK, for example, have not reached projected capacity due to underinvestment in supporting infrastructure such as terminals, warehousing, and customs modernization.

Similarly, while the Southern Gas Corridor enhances Europe’s energy security, its potential for regional gas market development and downstream industrial synergies remains underutilized. To truly create economic synergy, both countries must invest in logistics ecosystems, promote digital infrastructure along corridors, and enhance cross-border coordination between transport and energy regulators.

 

- How does the interaction of the two countries in the energy sector affect their long-term sustainable development strategy?

- Azerbaijan and Georgia’s close collaboration in the energy sector—especially through oil and gas transit routes—has significantly contributed to national revenues and energy security. However, the long-term sustainability of this cooperation will depend on diversification within the energy mix and the shift toward renewable sources. Georgia’s growing hydropower and green energy potential could complement Azerbaijan’s investments in solar and wind, allowing for regional energy balancing and green exports. Moreover, joint efforts to modernize grid infrastructure and develop cross-border energy markets could anchor a more resilient and sustainable energy future. Both countries need to align their national strategies with global decarbonization trends.

 

- What strategic areas and projects in bilateral cooperation have the potential for a multiplier effect on the regional economy?

- Beyond traditional energy and transit, several areas of bilateral cooperation hold high multiplier potential. The development of a joint free industrial zone or logistics hub at the border, coordinated tourism routes, and integrated digital platforms for trade and customs could all generate wide regional benefits. Education and human capital projects—such as cross-border vocational training centers in logistics, energy management, and IT—could also enhance workforce readiness and boost SME productivity. Furthermore, agricultural cooperation through value-added processing and export partnerships can tap into niche markets like organic or halal-certified goods. These initiatives not only stimulate growth in adjacent sectors but also reinforce economic resilience and inclusive development in the broader South Caucasus.

 

- What role do private investments and intergovernmental initiatives play in shaping the new economic landscape of the South Caucasus?

- Private capital and intergovernmental partnerships are both essential pillars of the South Caucasus' evolving economic landscape. Intergovernmental initiatives such as the Middle Corridor or the Black Sea submarine electricity cable provide foundational infrastructure and geopolitical alignment. However, it is private investment—especially in logistics, manufacturing, and services—that drives innovation, efficiency, and employment. Public-private partnerships (PPPs), regulatory stability, and investment protection treaties are critical to attracting sustained FDI. Azerbaijan’s energy firms and Georgia’s logistics entrepreneurs, when linked through cross-border projects, can serve as catalysts for deeper regional integration. A balanced framework where the state provides enabling infrastructure and policy while private investors drive sectoral growth is key to long-term transformation.

 

- What is the degree of integration of the economic policies of Azerbaijan and Georgia, taking into account their national priorities and external geopolitical factors? What risks and opportunities does increasing competition in regional markets create for the business environment of both countries?

- While Azerbaijan and Georgia maintain strong bilateral ties, the degree of actual policy integration remains limited. National development strategies are shaped by differing geopolitical alignments—Azerbaijan's closer coordination with Turkey and energy-centric priorities contrast with Georgia’s EU aspirations and broader liberal trade agenda. Nonetheless, both countries recognize the strategic value of economic complementarity, particularly in logistics and energy transit. Growing competition—especially from Central Asia and Iran—creates pressure to optimize logistics chains, reduce bureaucracy, and improve investment climates. This competition poses short-term risks such as pricing pressures and market diversion, but it also encourages reforms and innovation. Regional competitiveness can be a catalyst if both governments embrace coordinated policy reforms and institutional integration.

 

- In the context of growing competition for transit flows between the East and the West, what role can the South Caucasus play in the new transport architecture of Eurasia? Is there enough political will and institutional coordination between the countries of the region to realize this potential?

- The South Caucasus is in a key position—right between Europe and Asia. As global routes change, our region can become a major transit hub, especially through the Middle Corridor. But to play this role fully, countries in the region need to work together more closely. That means harmonizing customs, speeding up border checks, and aligning policies. We’re not there yet, but with more political commitment and stronger coordination mechanisms, we can turn this geographic advantage into a real economic engine.

 

- How do you assess the impact of global changes in logistics chains and sanctions policies on the prospects of the South Caucasus as an alternative route for international trade? Is the region capable of becoming a sustainable part of the global "Belt and Road"?

- The realignment of global logistics due to geopolitical tensions and sanctions has opened new windows of opportunity for the South Caucasus. However, sustainability requires more than transit—it demands value capture. Without the development of inland logistics hubs, bonded zones, digital customs, and local value-added services, the region risks being merely a “bridge” rather than a destination. Both Azerbaijan and Georgia must leverage their position to establish industrial clusters, regional e-commerce hubs, and services around transport corridors. Participation in the Belt and Road Initiative should be strategic—focused not only on connectivity, but on embedding the region into global production and distribution systems.