By Tomáš Baranec and Giorgi Khishtovani

Long-term rapid GDP growth is one of the pillars on which the Georgian government builds its legitimacy amid social and political instability following the October 2024 parliamentary elections. The numbers seemingly confirm the government’s argument. Georgia's GDP growth was 7.8 percent in 2023 and 9.7 percent in 2024. In 2025, overall growth is expected at 7.5 percent and International financial institutionsexpect GDP growth at 5-5.5 percent for 2026. The growth of recent years, however, was driven by several temporary and random factors rather than structural reforms. Numerous indicators suggest that growth in 2025 was artificially inflated and that the Georgian economy is in fact entering a turbulent phase.

BACKGROUND:

Georgia’s high GDP growth after 2020 was driven by three primary and two secondary factors. The first, most short-term, primary factor was natural growth after a sharp decline during the first year of the COVID-19 pandemic. After a contraction caused by the pandemic in 2020, when GDP fell by 6.3 percent, GDP grew by 10.6 percent the following year. The economy grew rapidly, primarily due to the fading of the initial shock from the pandemic and adaptation of the labour market and supply chains to the new pandemic reality.

While the effect of adaptation to the pandemic gradually faded, two other strong primary factors of GDP growth emerged, both associated with the Russian invasion of Ukraine in the spring of 2022. These were the mass arrival of Russian citizens and the opening of a transport corridor for sanctioned goods to Russia via Georgia. Following 2022, more than 80,000 Russian citizens settled in Georgia, mostly IT professionals, small businesspeople, and other members of higher-income groups. Their arrival stimulated overall demand, particularly growth in housing prices and development of the construction and IT sectors. In addition, Russian capital in the form of deposits from Russian citizens began flowing into Georgian banks in large quantities in 2022.

After 2022, Georgia became one of several transport corridors for the (re)export of sanctioned goods to Russia. Official statistics indicate Georgia’s role as an export corridor for passenger cars. In 2025, Kyrgyzstan (export from Georgia US$ 1.49 billion) and Kazakhstan (export from Georgia US$ 909 million) became Georgia’s main trading partners, and the main official export destinations for passenger cars from Georgia. The export value of this commodity reached US$ 2.81 billion. Passenger cars were also the largest import item to Georgia with a total value of US$ 3.87 billion. It should be noted that the “Georgian corridor” is partly absent from Kyrgyz and Kazakh statistics. While there is an immense increase of Georgian exports to Asia, the corresponding imports from Georgia are missing in the statistics of these countries. For instance, Kyrgyzstan’s official imports from Georgia are at least ten times lower than exports from Georgia to Kyrgyzstan.

The war in Ukraine also became the impetus for the emergence of two secondary factors of GDP growth in Georgia: foreign students and Russian tourists. Before the war, universities in eastern Ukraine were the main competitors of Georgian universities for international students, especially from India. After the war broke out, large numbers of students instead came to Georgia, increasing by an average of 20 percent year-on-year. In the 2024-2025 academic year, 37,100 international students studied in Georgia, more than double the 17,500 foreign students in Georgian universities in 2021-2022. This factor is an often overlooked yet significant secondary driver of Georgia’s GDP growth over the past few years.

Moreover, unlike many Western countries, Georgia has not banned flights to Russia, thereby stimulating growth in tourism. Russians represented 23.32 percent of total visits to the country in 2025.

Increased state revenues are an additional element that have contributed to strong growth figures and increased government spending in the years 2021-2025. Central government tax revenues rose from US$ 3.5 billion in 2021 to US$ 8.0 billion in 2025, reflecting a 128 percent increase, while state budget appropriations increased from US$ 6.19 billion to 10.3 billion, a 66.3 percent rise.  

IMPLICATIONS:

Several trends indicate that the main drivers of Georgia’s growth have already peaked and are beginning to fade. The economic growth in 2025 was likely inflated mainly by the International Company Status Act adopted in 2020. The Act grants certain types of companies in the IT and maritime sectors the opportunity to qualify for significant tax breaks. The changes adopted in 2020 allow foreign IT companies to register in Georgia, having to pay only a 5 percent corporate tax and 5 percent on employee wages. The ultimate catalyst for growth under the legislation was the arrival of Russian and Belarusian IT experts in 2022. In parallel with this law, the government also introduced simplified permanent residence for employees in the Information and Communication Technology (ICT) sector in 2025.

In the third quarter of 2025, the ICT sector grew by 21.1 percent; in the second quarter of 2025, by 37.1 percent; and in the first quarter of 2025, by 28.6 percent. In the third quarter of 2025, the sector reached 7.4 percent of the country’s GDP, from only 3 percent in 2020. While the state’s revenues from this scheme are rather insignificant, it does contribute to inflating growth statistics.

At the same time, almost all sectors relevant to the real economy and the state budget recorded a decrease in growth or a decline in the third quarter of 2025: energy (-3.3 percent), agriculture (-5.4 percent), construction (0.2 percent), trade (+3 percent) and manufacturing (+2,5 percent).

Other trends also contribute to the slowdown of the real Georgian economy. The number of people employed in the Georgian economy has decreased (most probably due to emigration) in the third quarter of 2025. Meanwhile, growth rates of imports are decreasing as compared to 2024. 

While state budget revenues increased by approximately 25 percent in 2024, they increased by only 10 percent in 2025, with 4 percent offset by current inflation. These trends contradict the estimated 2025 GDP growth rate.

The Georgian economy’s growth was not only an important PR tool for the Georgian government but also a practical means for maintaining its public support in the critical years of 2024 and 2025.

During its time in power, Georgian Dream has created a self-dependent layer of civil servants and citizens receiving various social benefits. Over the past two years, the ruling party has further strengthened their loyalty by increasing salaries and benefits. This was permitted by strong economic figures in 2022-2024. After 2025, Georgian Dream is starting to run short of resources to continue buying the support of these groups.

Most probably, the Georgian government is aware of the real slowdown in economic growth and the threats it poses to its legitimacy. It is currently taking several steps to address this threat. In the summer of 2025, the National Bank of Georgia managed to restore its dollar reserves to the same level as in 2024, before it started to sharply sell US$. 

Keeping a stable currency is one of Georgian Dream’s main priorities. The government has also become more careful in spending budgetary funds in comparison to previous years, and is actively building a financial reserve to limit the impact of slowing economic growth.

Georgian Dream’s ability to prepare for a period of economic turbulence will depend on several factors. These factors cannot currently be estimated accurately, however, the duration of Western sanctions against Russia stands out among the most relevant. Maintaining Georgia’s relevance as a transport corridor to Russia would significantly help Tbilisi weather the upcoming economic turbulence. On the other hand, a quick resolution of the conflict in Ukraine and the restoration of trade relations between Moscow and the West could, indirectly but significantly, weaken Georgian Dream’s position.

CONCLUSIONS:

The slowdown in the Georgian economy’s real growth will likely be the next big challenge for the ruling Georgian Dream party in the coming years, following the protest year of 2025. Unlike the mass protests, a significant deterioration in the population’s socio-economic situation could undermine support for the ruling party, even among its core electorate. Several current government actions indicate that Georgia’s de facto leader, Bidzina Ivanishvili, is aware of this threat and is taking steps to maintain the government’s capacity to support the existing social system. However, several key factors in this direction are shaped by other actors and trends and depend only marginally on the actions of the Georgian government. Of these, an end to the war in Ukraine could have the most severe negative impact. Moreover, the data accounted for here precedes the recent outbreak of war in Iran. The fallout from the conflict adds uncertainty to an already precarious economic situation in Georgia.

AUTHOR’S BIO: 

Tomáš Baranec is a Research Fellow and Head of the Caucasus Program of the Slovak think tank Strategic Analysis. He currently works as a field researcher on the Georgian-Ossetian ABL. Tomas studied Balkan, Central European and Eurasian Studies at Charles University in Prague. Giorgi Khishtovani is a Full Professor and Head of the Department of Finance at Ilia State University (Georgia). He holds a PhD in Economics from the University of Bremen (Germany), an MSc in Business Administration, and an LLM in Law from the University of Trier (Germany). His research focuses on political economy, governance, economic and fiscal policy.

By Ebru Akgün

Armenia is currently navigating its most significant geopolitical shift since its independence in 1991. The collapse of the traditional security architecture, which was built on the pillar of the Russian-led Collective Security Treaty Organization (CSTO), has forced Yerevan to embark on a perilous journey of "sovereign recalibration." By embracing Western civilian security instruments—most notably the European Union Monitoring Mission in Armenia (EUMA)—while simultaneously hosting legacy Russian military infrastructure, Prime Minister Nikol Pashinyan’s administration has adopted a high-stakes "dual-track" strategy. However, this hedging mechanism is reaching its structural exhaustion. As regional geopolitics shift toward binary alignments and the South Caucasus becomes a primary theater for broader EU-Russia competition, Armenia's tactical flexibility is increasingly challenged by the reality of asymmetric pressures.

BACKGROUND:

​The central challenge for Armenia’s transition is the "security guarantee deficit." While Yerevan has successfully frozen its participation in the CSTO, citing the alliance’s failure to respond to incursions into Armenian sovereign territory in 2021 and 2022, it has not yet secured a formal military alternative. The Western response, though diplomatically robust, remains focused on "soft power" and monitoring rather than "hard power" defense obligations.

​The EUMA's mandate has been extended until 2028, providing a layer of "visibility-based deterrence." However, from a military perspective, a civilian mission cannot function as a permanent shield. Unlike the formal mutual defense obligations found in Article 4 of the CSTO treaty—which Armenia now views as a "failed promise"—the EU mission carries no legal mandate to intervene in the event of an armed conflict. The presence of European monitors on the border with Azerbaijan may increase the political cost of escalation, but it does not provide the physical protection necessary to stop an offensive.

​For Western policymakers, Armenia serves as a critical case study of the limits of small-state hedging under asymmetric pressure. The lack of a "hard" security partner leaves Yerevan in a state of strategic ambiguity. While France and the United States have increased their security assistance, these relationships are characterized by bilateral cooperation agreements rather than mutual defense pacts. This gap between monitoring and defense creates a period of strategic vulnerability that regional actors could exploit, especially if the diplomatic cost of military escalation is perceived as manageable by Baku or Moscow.

​A critical but often under-analyzed component of Armenia’s new security architecture is its integration into Western-backed transit networks, specifically the Trump Route for International Peace and Prosperity (TRIPP) corridor. Launched as a flagship initiative to decouple the South Caucasus from Russian and Iranian monopolies, the TRIPP implementation framework signed in early 2026 aims to integrate Armenia into a Western-secured transit network.

​The TRIPP initiative seeks to link Azerbaijan with its Nakhchivan exclave through Armenian territory (specifically the Syunik province) under Armenian sovereign and customs control. By promoting this "Crossroads of Peace" vision, the United States is attempting to create a vested economic interest in Armenia’s territorial integrity. If major Western corporations and U.S.-backed contractors become primary stakeholders in Armenia’s infrastructure, the logic follows that Washington will have a more explicit incentive to ensure the region's stability.

​However, the TRIPP corridor brings its own set of risks. While it offers an economic lifeline and a potential implicit security shield, it places Armenia at the heart of a "corridor war" between the West, Russia, and Iran. Tehran remains deeply wary of any increased Western presence in Syunik, which it views as its "red line" for northern connectivity. Meanwhile, Moscow views any corridor not controlled by its own FSB border guards as a violation of the November 2020 ceasefire arrangements. Therefore, the TRIPP corridor is as much a security challenge as it is an opportunity, requiring Armenia to balance American ambitions against the immediate geographical realities of its neighbors.

​Armenia’s military modernization efforts represent another pillar of its diversification strategy. Recent contracts for French GM200 radar systems and Mistral anti-air missiles, alongside the procurement of Indian Akash-1S missile systems and Pinaka rockets, mark a decisive break from the decades-long monopoly of the Russian defense industry.

​However, "buying Western" does not automatically translate into "Western security." Armenia faces an immense technical challenge known as the "interoperability trap." The nation’s current command-and-control (C2) architecture is built on Soviet-legacy systems that are historically transparent to Russian military intelligence. Integrating NATO-standard French radars or high-tech Indian artillery into this legacy environment is not just a logistical hurdle; it is a profound security risk.

​Without an entirely independent and secure C2 network—a project that would require billions of dollars and years of specialized training—Armenia’s new hardware remains vulnerable to electronic jamming or data interception by legacy Russian systems. Furthermore, the logistical chain for these Western systems is fragile. Unlike Russian equipment, which is supported by established rail links, Western hardware must be transported through Georgia’s ports or via complex Iranian routes, making the supply chain vulnerable to external political pressures. This technical sovereignty is the missing link in Armenia's military transition.

​The strategic direction of Armenia will face its ultimate domestic test in the upcoming June 7, 2026 parliamentary elections. These polls will function as a definitive referendum on the "Western pivot" and the "Fourth Republic" vision proposed by the Pashinyan administration. Public opinion in Armenia is currently characterized by "ambiguity fatigue." While trust in Western institutions has surged, a significant portion of the population remains skeptical that monitoring missions and "economic corridors" like TRIPP can replace the hard security guarantees once expected from Russia.

​The 2026 elections will be fought on two fronts: economic prosperity and national survival. If the government cannot demonstrate that its pivot has brought tangible security improvements or significant economic relief through projects like TRIPP before the elections, the opposition—likely backed by Russian narratives of "restoring traditional ties for safety"—may gain significant traction. The outcome of the 2026 polls will determine whether Armenia continues its pursuit of sovereignty through Western integration or is forced into a strategic reversal. The memory of the 2020 and 2023 conflicts looms large, and the electorate's patience for "strategic patience" is wearing thin.

IMPLICATIONS:

​Despite the rhetoric of "de-coupling," the physical and economic reality of Russian influence in Armenia remains a formidable obstacle. Russia still owns a majority of Armenia’s natural gas infrastructure through Gazprom Armenia and plays a critical role in the operation of the Metsamor nuclear power plant. To counter this, the European Union has pledged $500 million to enhance Armenia’s energy security and diversification, but the transition will take years.

​This economic asymmetry gives Moscow a "soft-kill" capability. The Kremlin does not need to launch a military intervention to destabilize Armenia; it can achieve similar results through "technical" border closures at the Lars crossing, energy price hikes, or logistical sabotage. The withdrawal of Russian FSB border guards from Zvartnots Airport was a symbolic victory, but Russian units still maintain a presence along the borders with Turkey and Iran. Any move that Moscow perceives as an "over-pivot" could trigger a devastating economic retaliation that the Armenian state is currently ill-equipped to handle.

​In this complex chess game, the role of Iran cannot be ignored. Tehran views the Syunik province as its essential gateway to the north. Any implementation of corridors—whether TRIPP or the Russian-backed Zangezur version—that changes the border status or introduces NATO-linked security actors is considered a "red line" by Iran. Armenia must navigate its pivot toward the West without alienating its southern neighbor, which remains its only other physical gateway to the world. This necessitates a delicate balance: engaging with the U.S. on TRIPP while reassuring Tehran that Armenia’s sovereign control over the route remains absolute and non-negotiable.

CONCLUSIONS:

Armenia is currently in a race against time. The dual-track strategy has provided essential short-term breathing room, allowing the state to begin the slow process of military modernization and diplomatic diversification. However, as the 2026 elections approach and the regional environment becomes more binary, the luxury of ambiguity is disappearing.

​For Armenia to survive as a sovereign actor, it must bridge the gap between "monitoring" and "defense." This requires moving beyond symbolic gestures toward a robust institutional framework that accounts for the state’s structural vulnerabilities. The TRIPP corridor and Western arms contracts are steps in the right direction, but they are not panaceas. Ultimately, Armenia’s ability to sustain its independence will depend on whether its Western partners are willing to provide actionable security pathways that go beyond binoculars and political statements. In a region where hard power still dictates the terms of sovereignty, Armenia’s "dual-track" must eventually find a single, solid, and defensible destination.

AUTHOR’S BIO: 

Ebru Akgün is an independent researcher specializing in the South Caucasus, regional security architecture, and transportation corridors. Her work focuses on the intersection of infrastructure development, military modernization, and geopolitical risk analysis in Eurasia. She actively monitors the evolving dynamics between Armenia, its neighbors, and global power enters. You can follow her latest research and professional updates via http://linkedin.com/in/ebruakgun

By Davit Gasparyan

Escalating tensions between the Armenian government and senior figures within the Armenian Apostolic Church are more than a domestic institutional dispute. The ongoing confrontation demonstrates Armenia’s broader geopolitical recalibration and growing concerns within Yerevan that Russian influence continues to operate through religious and cultural networks. While the Armenian Apostolic Church remains one of the country’s most trusted and historically significant institutions, the political behavior of certain ecclesiastical elites has intensified debates over sovereignty, national security, and foreign interference. The dispute is an example of how religious institutions across Russia’s neighboring countries can become entangled in geopolitical competition, particularly amid Armenia’s evolving foreign policy orientation and Russia’s continued reliance on soft power mechanisms.

BACKGROUND:

Relations between the Armenian government and the Armenian Apostolic Church have deteriorated significantly in recent years and particularly recent months, with public disagreements increasingly centered on Armenian Prime Minister Nikol Pashinyan’s allegations of corruption, political interference, and questions surrounding the Church’s institutional accountability. While these tensions have often been portrayed as domestic disputes over governance and reform, Armenian political leadership has also framed the issue in broader geopolitical terms.

Prime Minister Nikol Pashinyan has explicitly linked his government’s concerns regarding church leadership to national security considerations. During a parliamentary question-and-answer session, Pashinyan stated that he “does not need a Catholicos who will obey him,” but rather one who “will not obey a senior lieutenant of a foreign special service” or report to foreign intelligence actors. Such remarks suggest that the Armenian government views elements within church leadership as potential conduits for external political influence rather than solely domestic institutional actors.

The Armenian Apostolic Church occupies a uniquely influential position in Armenian society. For centuries, it has served as a pillar of national identity, preserving Armenian cultural, linguistic, and spiritual continuity through periods of foreign domination, including Ottoman and Soviet rule. Public trust in the Church remains consistently high, making it one of the country’s most respected institutions according to the Caucasus Barometer, outperforming political parties and figures. This legitimacy, however, also renders the Church a powerful societal actor vulnerable to political instrumentalization.

Historically, segments of the Church’s senior leadership have maintained close institutional and symbolic ties with the Russian Orthodox Church and the Russian state. These connections reflect broader historical patterns in which former Armenian political elites aligned closely with Moscow during Armenia’s post-Soviet transition and subsequent security dependence on Russia. Such relationships have periodically reinforced Russia’s ideological narratives across the region.

These ties became particularly visible following Russia’s full-scale invasion of Ukraine in 2022. That year, Catholicos of All Armenians Garegin II received a Russian state honor from President Vladimir Putin, clearly signaling the continuing closeness between Armenian and Russian religious leadership. More controversially, Archbishop Ezras (Nersisyan), head of the Russian Diocese of the Armenian Apostolic Church and brother of Garegin II, publicly blessed the Arbat Battalion in 2023, a military unit that includes ethnic Armenians associated with Russia’s war effort in Ukraine. The act carried strong symbolic significance, depicting how certain church elites have engaged in activities aligning with and supporting Russia’s wartime mobilization narratives against Ukraine. Pashinyan later alleged in 2025 that Archbishop Ezras was recruited by the KGB.

Russian religious and political actors have also reacted sharply to Armenian government criticism of church leadership. Representatives of the Russian Orthodox Church have condemned perceived state interference in ecclesiastical affairs, portraying Armenian government actions as part of broader efforts to undermine traditional spiritual institutions. Russian political commentators and politicians, including Sergei Lavrov, have similarly framed Armenian reform efforts as destabilizing and influenced by Western political agendas.

The dispute has extended beyond Armenia’s borders into Russian streets. Russian authorities have permitted Armenian diaspora communities to mobilize publicly around disputes between the Armenian government and church leadership and to publicly criticize Pashinyan’s actions. These developments show how the Russian regime has allowed and implicitly endorsed such attacks on Pashinyan as such demonstrations would require extensive scrutiny and approval by Russian authorities.

IMPLICATIONS:

The confrontation between the Armenian government and segments of church leadership reflects a broader geopolitical struggle over Russia’s influence within Armenian society. Religious institutions have historically served as important channels of Russian soft power across the post-Soviet region, enabling Moscow to shape political narratives, reinforce cultural alignment, and maintain influence even where formal political leverage declines.

Russia’s use of religious networks as instruments of influence has been particularly evident in Ukraine. Following Russia’s annexation of Crimea in 2014 and the subsequent full-scale invasion in 2022, tensions between Ukrainian authorities and Moscow-affiliated religious structures intensified. Kyiv’s eventual support for the establishment of an independent Orthodox Church reflected concerns that religious institutions could function as vehicles for Russian political influence and intelligence activity. Similar dynamics have been observed in Moldova, where Moscow-aligned religious organizations have maintained strong societal influence and occasionally reinforced pro-Russian political narratives. In Georgia, Russian-linked religious messaging has also been used to amplify conservative social discourse and skepticism toward Western integration.

Armenia’s current church-state tensions appear to follow comparable patterns. Pashinyan’s government has increasingly pursued foreign policy diversification, strengthening relations with the EU, the U.S., and regional partners while reducing reliance on Russian security and economic guarantees. These shifts have heightened the Armenian leadership’s sensitivity to domestic institutions perceived as linked to Moscow’s influence infrastructure.

Pashinyan has suggested that segments of church leadership have been used in forms of “hybrid warfare” targeting Armenian sovereignty. While such claims remain politically and legally contested and strongly rejected by church representatives, they highlight the degree to which religious institutions have become intertwined with national security discourse in Armenia. The framing reflects broader concerns within Armenian political circles that Russian influence persists through societal and cultural networks even as formal bilateral relations undergo strain.

The dispute also carries significant domestic political implications. Armenia’s 2026 parliamentary elections are expected to take place amid heightened geopolitical competition. Russia has historically demonstrated interest in influencing Armenian electoral processes and public discourse and there are reports that it already has commenced influence operations. Given the Armenian Apostolic Church’s deep societal legitimacy, internal church disputes could become politically mobilized, shaping electoral narratives and public perceptions of government legitimacy.

At the same time, aggressive state action against church leadership risks generating backlash among segments of Armenian society that view the Church as inseparable from national identity. Balancing institutional reform with respect for religious tradition will remain a very delicate political challenge for Armenian authorities. Certain Western human rights and religious organizations have already criticized the Pashinyan regime for its targeted crackdown on Armenian church members.

More broadly, Armenia’s experience demonstrates how religious institutions across Eurasia continue to operate at the intersection of identity, politics, and geopolitical competition. As Russia’s conventional political leverage in parts of the post-Soviet space declines, Moscow has increasingly relied on cultural and religious networks to preserve influence. Armenia’s internal church-state confrontation demonstrates how such networks can become focal points of broader geopolitical realignment.

CONCLUSIONS:

The escalating conflict between the Armenian government and senior figures within the Armenian Apostolic Church should be understood as both a domestic institutional dispute and a manifestation of broader geopolitical transformation. While the Church remains a foundational pillar of Armenian identity and social cohesion, the political, pro-Russian alignment of certain ecclesiastical elites has contributed to growing concerns regarding foreign influence.

Pashinyan’s confrontation with church leadership reflects Armenia’s efforts to redefine its geopolitical orientation and reduce Russian soft power penetration within Armenian society. The outcome of this struggle will likely influence not only Armenia’s internal political stability but also its future strategic alignment. As Armenia navigates a changing regional security environment on the eve of its 2026 Parliamentary elections, the interaction between religious authority, national identity, and external geopolitical competition will remain a critical factor shaping the country’s trajectory.

AUTHOR’S BIO: 

Davit Gasparyan researches security dynamics in the South Caucasus and Russia’s regional strategy. He conducts research with the Belfer Center for Science and International Affairs at Harvard Kennedy School and previously served as a Russia researcher at the Institute for the Study of War, and has worked with the Carnegie Endowment and Caucasus Watch.

By Stephen Blank

While Central Asian cohesion and regional cooperation grow; the South Caucasus is fragmenting. This process increasingly affects the nature and scope of regional interactions with key international actors. Russian influence has declined precipitously in Armenia, which is turning to the West, and Azerbaijan, which is expanding its circle of partners. However, in Georgia the state increasingly resembles Russia in its autocratic and legal structure and thus its state practices.

BACKGROUND:

Writing in 2024, the Azeri scholar Gulshan Pashayeva observed that a defining feature of the Caucasus was its fragmentation. This fragmentation is deepening and in effect, relationships between the South Caucasus and key external actors have quickly grown and assumed new shapes in 2025. Georgia’s dependence on Russia has grown, whereas Russian influence in Armenia and Azerbaijan has visibly declined as these states are turning to Washington and Europe. 

Georgia is paying the supreme price of colonial status as it over time loses territory to Russia as both South Ossetia and Abkhazia virtually included in the Russian Federation. The Russian-driven borderization whereby Russian or pro-Russian forces either overtly or surreptitiously move border posts demarcating Russian-controlled from Georgian territories to expand Russia’s holdings occurs with impunity.

The mounting discord between the Georgian government and the EU also exemplifies Georgia’s regression. Georgia’s government, possibly at Moscow’s behest, is trampling upon processes necessary for Georgian admission into the EU and frustrating both Brussels’ conditions and the continuing support for EU membership among a majority of the Georgian population. 

Armenia’s government is implementing a program of democratic reform and ultimate membership in the EU while striving to make a conclusive peace with Azerbaijan and normalize ties to Turkey despite staunch resistance by domestic, diasporic elements, the Church and Russian influencers. None of these groups supports peace and many of them, including Russia, fear democratization as signaling a decisive political defeat at home as well as a threat to Russia. It is no surprise that the Church with Russian backing emerged as the leader of an attempted coup in 2025 to replicate Russia’s success in Georgia and reverse Yerevan’s turn to the West.

Azerbaijan’s case is even more striking. Beyond its military-diplomatic success in forging an alliance with Turkey and partnership with Israel to strengthen its military capability, it neutralized Russian support for Armenia while improving ties with key European states and the U.S. The Trump Administration has now built a permanent monument to its military-economic presence in the Caucasus, namely the Trump International Road for Peace and Prosperity (TRIPP). This project brings Washington into the Caucasus as a permanent player and checks Iranian threats to Azerbaijan and links to Armenia, while giving Yerevan a tangible reward for its pro-Western and anti-Russian policies. Meanwhile, Russia’s downing of an Azerbaijani airplane in 2024 and attacks on Azerbaijani residents in Russia have generated enormous resentment in Azerbaijan. 

IMPLICATIONS:

The Caucasus has become a battleground where the great powers and their favored local governments are not only on opposite sides, but where these powers’ rivalry also spills over into trade routes. The TRIPP has duly triggered Georgian apprehension since that project’s inauguration may well push aside Georgia as a preferred partner in the Middle Corridor project that ties together China, Central Asia, and ultimately Europe. But the significance of TRIPP far transcends its potential impact upon Georgia.

This project is only the latest manifestation of the declining Russian influence in the Caucasus and the parallel ensuing fragmentation of the region. While Moscow still holds many levers of influence and has no scruples about using them; they are fewer, less potent than before, and Russia faces a greater and more sustained foreign presence in the Caucasus than at any time since the disintegration of the USSR. Neither is this foreign influence strictly economic as in China’s case and as seen in its sponsorship of the Middle Corridor trade and transportation route through Azerbaijan that bypasses Russia. Türkiye’s alliance with Azerbaijan is of an explicitly military nature that provides an enduring supply of weapons, training, and presumably logistical and intelligence support for Azerbaijan. Türkiye also buttresses this support by providing the primary terminus for Azerbaijan’s increasing energy exports to Europe. Beyond these increasingly deep-rooted connections to Azerbaijan, through the Organization of Turkic States Türkiye now also has an institutional base for enduring outreach to Central Asia and the provision of all manner of military and economic ties to that region. 

Azerbaijan is also increasingly tied to the Middle East through its long-running defense and economic ties to Israel, their mutual collaboration against Iran and its membership in both the Abraham Accords and President Trump’s Board of Peace. Likewise, the EU and Azerbaijan have embarked upon a mutually rewarding series of ties independent of Russian influence and also primarily based on Azerbaijani energy exports in return for EU investment and political support.

Moreover, the advent of the TRIPP has launched what looks like a sustained U.S. presence in the Caucasus. This project is taking physical shape and Vice-President Vance’s visit to Armenia and Azerbaijan demonstrates that sustained interest. Under this project, “American companies could develop railways, roads, and pipelines linking Azerbaijan proper to its Nakhchivan exclave via a corridor through the south of Armenia’s Syunik Province.” Since Azerbaijan is now providing Armenia with energy, a formal peace treaty terminating the state of war over Nagorno-Karabakh under U.S. auspices seems likely. Beyond those signs of U.S. influence, President Trump has just stated that Vance’s tour will, “strengthen our strategic partnership with Azerbaijan, a beautiful Agreement for Peaceful Nuclear Cooperation with Armenia, Deals for our Great Semiconductor Makers, and the sale of Made in the U.S.A. Defense Equipment, such as body armor and boats, and more, to Azerbaijan.” If this lasting multi-domain U.S. presence materializes, it will represent a major blow to Russian ambitions but also codify the fragmentation of the Caucasus and exclude Georgia from the growing and long-term international competition in the region for a long time to come.

CONCLUSIONS:

Russia certainly still has cards to play. It has a long-term military base at Gyumri, Armenia, and well-established connections among the Armenian opposition that is both unreconciled to the loss of Nagorno-Karabakh and to the Pashinyan government’s democratizing reforms and efforts to join the EU. Russia also has substantial economic connections to Georgia and what looks like a secure base of influence in Georgia’s government. 

Nevertheless, it is a declining power economically if not militarily and cannot stop the rising foreign presence in the Caucasus. Indeed, it depends on trade coming from Armenia and Central Assia to circumvent Western sanctions and access vital Western goods. Iran, whose back is to the wall due to combined U.S., Israeli, and European military-economic pressure, cannot bail it out. Nor will China, the primary sponsor of the Middle Corridor, rescue it in the Caucasus. Despite the Russo-Chinese “no-limits” partnership, Beijing has never lifted a finger to allow Russia to become a viable economic competitor across Eurasia or regarding inter-continental trade, transport, and connectivity issues.

Therefore, the fragmentation of the South Caucasus and the heightened presence of competing major international actors is likely to continue. Central Asian states, in contrast, forge ahead with mounting cohesion and collaboration. Indeed, those states, recognizing Azerbaijan’s critical geographic position and rising heft, have now included it in what used to be the 5+1 relationship with Washington, transforming it into a 6+1 formation. This development will also contribute to regional fragmentation. Azerbaijan is increasingly a power whose perspectives must embrace Washington, Europe, the Middle East, and Central Asia, not just the Caucasus.

The ethnopolitical rivalries that made the Caucasus a zone of conflict for a generation after 1991 may, however, be coming to an end as the new ties between Baku and Yerevan and greater foreign connections show. To the extent that Georgia can be helped to resolve its ethnic and other domestic cleavages that Russia continues to exploit, it may become possible for the South Caucasus to emulate the discernible regional cooperation now appearing in Central Asia.

That outcome would be to the benefit of the entire Caucasus as well as to its neighbors and interlocutors. While disappointing to Moscow, its regional clients and those “dead-enders” who wish to rekindle the fires of ethnic conflict, that way has been tried and founds wanting in the balance.

AUTHOR’S BIO: 

Stephen Blank is a Senior Fellow with the Foreign Policy Research Institute (www.fpri.org.)

By Sergey Sukhankin

In late 2025, during his visit to Kyrgyzstan, Russia’s President Vladimir Putin declared Russia’s readiness to build a small modular nuclear power reactor (SMR) in Kyrgyzstan, thereby signaling Moscow’s intention to move beyond traditional trade relations toward projects in long-term strategic infrastructure. Russia’s proposal may be justified by the need to address Kyrgyzstan’s persistent problem of frequent energy shortages, caused by rising consumption, aging energy infrastructure, and overreliance on hydropower as the primary source of electricity generation. At a deeper level, however, the initiative reflects Moscow’s post-2022 strategy, premised on exporting high-technology solutions to politically friendly states and anchoring influence through capital-intensive projects with multi-decade life cycles, such as SMRs. Undoubtedly, if successfully constructed, an SMR could strengthen Kyrgyzstan’s energy security. Yet, it would also exacerbate the country’s strategic dependence on Russia by locking it into long-term technological, financial, and regulatory reliance, rendering the project arguably more geopolitical in nature than economic.

BACKGROUND:

Kyrgyzstan’s energy system has long suffered from structural fragility stemming from the country’s overarching dependence on hydropower: more than 90 percent of electricity generation derives from this source, largely produced by the Toktogul cascade. Exposed to multiple risks and weaknesses, such as droughts, aging Soviet-era infrastructure, and rapidly growing domestic demand, the system has shifted from experiencing occasional electricity deficits to facing a structural crisis. In 2023, the government introduced a state of emergency in the energy sector, explicitly acknowledging the inability of existing generation capacity and demand-management tools to ensure uninterrupted supply. Experts note that persistent electricity shortages could further undermine Kyrgyzstan’s socio-economic stability and, in the longer term, generate political repercussions posing serious challenges to the country’s leadership. Nevertheless, Kyrgyzstan appears unable to address this challenge independently. Beyond economic constraints, particularly the high fixed costs associated with hydropower generation, recent water shortages have further exacerbated the problem. In this context, Kyrgyz authorities have expressed interest in developing nuclear energy projects, with external financial support, as a potential solution to the country’s long-term electricity supply challenges.

This interest emerged in parallel with Russia’s broader strategic effort to diversify its export portfolio beyond raw materials. In this context, Moscow has actively promoted the deployment of an SMR in Kyrgyzstan as part of a wider push to export high-value energy technologies. The origins of this initiative can be traced to early 2022, when Rosatom, Russia’s state-owned nuclear corporation, and the Kyrgyz Ministry of Energy signed a non-binding memorandum on cooperation in the peaceful use of nuclear energy. Beyond signaling technical cooperation, the memorandum laid the groundwork for potential SMR construction and the gradual development of a national regulatory framework, indicating a long-term and structurally embedded approach rather than a short-term energy solution. Following the outbreak of war between Russia and Ukraine in February 2022 and Russia’s exposure to an expanding array of international (Western) sanctions, the idea gained renewed momentum.

Given Kyrgyzstan’s highly specific socio-political environment, distinct from that of other Central Asian states, public opinion on nuclear energy is an issue the ruling elite cannot afford to ignore. Available evidence suggests that societal attitudes toward nuclear power remain ambivalent. According to public opinion surveys conducted in 2024, 58 percent of respondents expressed support for the development of nuclear energy, while 38 percent voiced categorical opposition. Support is largely driven by expectations that nuclear power could help meet the country’s growing electricity demand and create new employment opportunities. At the same time, significant concerns persist regarding nuclear safety, environmental risks, seismic vulnerability, and the state’s institutional capacity to regulate complex and high-risk technologies. As a result, nuclear energy remains a politically sensitive and potentially contentious issue within Kyrgyzstan’s domestic political landscape.

IMPLICATIONS:

Should the Kyrgyz political leadership respond positively to Russia’s proposal, the country would face a combination of potential benefits and risks, which can be broadly categorized as follows.

First, meeting energy needs and ensuring system stability. From an energy-security perspective, the emergence of an SMR could positively affect Kyrgyzstan’s electricity balance. Unlike hydropower, nuclear generation provides continuous baseload output independent of seasonal water availability. Russian officials have indicated that Kyrgyzstan could be offered a plant based on the RITM-200N reactor design, with total capacity ranging from approximately 110 to 440 MW, depending on configuration. This output could supply electricity to between 66,000 and 352,000 households simultaneously. Even at the lower end of this range, such capacity could reduce imports and ease pressure on hydropower assets during dry periods. That said, to fully realize these benefits, Kyrgyzstan would need to meet several conditions: the establishment of a comprehensive regulatory framework, an independent nuclear safety authority, trained operators, emergency-response systems, and long-term arrangements for fuel supply and waste management. For Kyrgyzstan, this would entail either creating much of this infrastructure from scratch or delegating these functions to Russia, a choice that would inevitably deepen institutional dependence on Russia.

Second, the issue of economic costs and long-term dependence. Although SMRs are often presented as cheaper and more flexible than conventional large nuclear plants, they remain capital-intensive projects with long payback periods. In practice, this would require Kyrgyzstan to assume long-term financial obligations while ceding significant control over critical components of its energy system to a foreign state with a documented record of using energy as a geopolitical instrument of pressure. Moreover, dependence would extend well beyond construction, encompassing fuel supply, maintenance, software, spare parts, and periodic upgrades. For Kyrgyzstan, this would narrow future strategic options and increase the cost of diversifying away from Russian technology for decades to come.

Third, implications for domestic politics. Nuclear projects frequently face public resistance even in countries with strong institutions. In Kyrgyzstan, where trust in state decision-making is limited and political competition is intense, an SMR could become a focal point for opposition mobilization, particularly in the event of an incident or if Russia were perceived as leveraging Kyrgyzstan’s dependence. Without transparent consultations, credible safety assurances, and clearly articulated local benefits, the project risks appearing as an externally imposed geopolitical arrangement rather than a sovereign national development choice.

Fourth, intra-regional geopolitical effects. The Central Asian “water–energy–food” nexus is inherently conflict-prone due to divergent seasonal priorities: upstream states, particularly Kyrgyzstan and Tajikistan, seek to maximize winter electricity generation, while downstream countries depend on summer water flows for irrigation. From a policy perspective, the deployment of an SMR could offer a structural advantage by providing reliable winter baseload generation, thereby reducing reliance on hydropower and creating space for more predictable and cooperative water–energy arrangements with Kazakhstan and Uzbekistan. However, this opportunity entails significant trade-offs. An SMR would deepen long-term technological and financial commitments to an external partner and could become entangled in regional and extra-regional geopolitical bargaining. If politicized, the project risks undermining trust, constraining policy flexibility, and further securitizing energy governance in Central Asia rather than contributing to its stabilization.

CONCLUSIONS:

Russia’s proposal to build an SMR in Kyrgyzstan represents a pivotal choice that extends well beyond energy policy. While the project could substantially enhance electricity security and reduce vulnerability to hydrological shocks, it would also bind Kyrgyzstan to long-term technological, financial, and regulatory dependence on Russia. In a politically pluralistic and socially sensitive environment, such dependence entails significant domestic and regional risks. Ultimately, the project’s impact will depend on whether Kyrgyz authorities can balance short-term energy gains against strategic autonomy, address public concerns transparently, and prevent the SMR from becoming an instrument of geopolitical leverage rather than a catalyst for sustainable development.

AUTHOR’S BIO: Dr. Sergey Sukhankin is a Senior Fellow at the Jamestown Foundation and the Saratoga Foundation (both Washington DC) and a Fellow at the North American and Arctic Defence and Security Network (Canada). He teaches international business at MacEwan School of Business (Edmonton, Canada). Currently he is a postdoctoral fellow at the Canadian Maritime Security Network (CMSN).