TOPIC OF THE WEEK: Georgia is not on my mind
I feel compelled to write this note on Georgia given that it has again hit the headlines, with the European Commission's annual enlargement report concluding that the country is a "candidate in name only", as well as the government's lawsuit before the Constitutional Court seeking to ban three key opposition parties. The aura surrounding these events is certainly not good, and investor skepticism seems justified.
Yet, I would argue against such premature conclusions. First, Georgia is too deeply integrated with the West to implement any kind of foreign policy reversal. Second, the political opposition is taking a radical position in rejecting Russian influence and demanding alignment with the West immediately. In contrast, the ruling party is of moderate hue, prioritizing Western integration but conflict-averse towards Russia; last year’s parliamentary elections and this year's local vote showed that ordinary Georgians are largely comfortable with this approach. Third, the Georgian authorities want to join the European Union by 2030, despite Brussels’ current attitude toward Tbilisi.
The West’s current dissatisfaction is not due to any pro-Russian stance by the Georgian authorities (there is none), but because Western capitals failed to turn Georgia into a “second front” against Russia by exploiting its territorial issues with Moscow. Georgian Dream is not, even remotely, a pro-Russian party. However, amid the broader confrontation between Russia and the West, even this moderate stance appears pro-Russian.
Market participants would thus be well advised to look past the politically motivated statements and, rather, focus on the strong fundamentals of the Georgian economy and the professionalism of its policy-makers. The end result would always be that the West wins in Georgia regardless, be it in the form of a government overthrow in another “Rose Revolution” or by coercing the political elite to deepen collaboration on various fronts. One should rest assured that political instability will be relatively modest all the way through the 2028 elections. The more relevant medium-term risk to Georgia pertains to its potentially diminishing role as a transport corridor between Europe and Asia in the case of the TRIPP materializing.
Ultimately, the battle for the South Caucasus is now being fought not in Tbilisi, but in Yerevan as I argued in my last week's report.
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