How South Caucasus countries' economic relations with Russia have changed: A review from Baku

South Caucasus-Russia economic relations

Amid the geopolitical developments in the South Caucasus, one of the key issues is the changing dynamics of economic relations between the region’s countries and Russia.

In recent years, trade relations between Georgia and Azerbaijan with Russia have remained largely unchanged. Interestingly, despite Armenia’s claims of Western integration, its economic ties with Russia suggest otherwise. Following the onset of the war between Russia and Ukraine, trade turnover between Armenia and Russia has significantly increased.

• Azerbaijan is preparing to raise the minimum wage following the recent increases in pensions and benefits
• Up to 5,000 employees of the online casino “Evolution Georgia” have gone on strike
• Russian investment agreement in Abkhazia: no benefit, only harm. Opinion

We present an overview from analysts at the Azerbaijani Center for South Caucasus Studies (CSSC), based on data from regional statistical agencies and Transparency International.

Azerbaijan-Russia trade relations

“Foreign trade turnover between Azerbaijan and Russia increased by 1.45 times from 2021 to 2023, reaching $4.36 billion.

During this period, Azerbaijan’s exports to Russia grew by 1.3 times, amounting to $1.12 billion. Imports from Russia to Azerbaijan increased by 1.52 times, reaching $3.16 billion.

In the first half of 2024, the trade turnover between the two countries amounted to $2.17 billion, including $557 million in exports (a 10% decrease) and $1.6 billion in imports (a 4.4% increase).

From 2021 to 2023, Russia’s share in Azerbaijan’s exports decreased from 4.15% to 3.53%, while its share in imports increased from 17.7% to 18.3%.

In the first six months of this year, Russia’s share in Azerbaijani exports was 4.31%, and in imports, it was 18.17%.

As can be seen, Azerbaijan’s foreign trade volume with Russia has been on the rise over the past three years, but this growth has not been significant. Russia’s share in Azerbaijan’s foreign trade has not undergone substantial changes.”

"Azerbaijan must build relations with Russia while constantly considering changes in the geopolitical landscape." Opinion from Baku

“Currently, Moscow acts as a friendly neighbor to the South Caucasus, but this may change with shifts in global power,” – analysts from “Şərqə baxış”

Georgia-Russia trade relations

“Significant growth in Georgia’s foreign trade with Russia was observed in 2022, with trade turnover between the two countries increasing by 1.53 times, reaching $2.45 billion. However, in 2023, this figure decreased by 2.9%, amounting to $2.4 billion.

In the first five months of 2024, Georgia’s exports to Russia declined by 2.8% compared to the same period last year, while imports decreased by 6.1%.

Thus, despite the growth in trade relations between Georgia and Russia in 2022, this trend has since reversed. The decline in trade ties has continued into this year.”

Transcaucasian highway: South Ossetia is unhappy that "Russia and Georgia are discussing this behind their backs"

This, along with the very idea of opening the road, has sparked discontent among South Ossetian opposition and a significant portion of society.

Armenia-Russia trade relations

“In the South Caucasus region, the most significant changes in trade relations with Russia in recent years have occurred with Armenia. From 2021 to 2023, the volume of foreign trade between Armenia and Russia increased by 2.6 times, reaching $7.4 billion. During this period, imports from Russia doubled, while exports quadrupled.

This rapid growth continued into early 2024. In the first five months of this year, the trade volume between the two countries has already exceeded the total for 2023. Unlike in 2022 and 2023, imports from Russia to Armenia have surged dramatically in 2024.

As seen, despite the worsening political relations between Armenia and Russia, their trade relations have grown at an unprecedented pace. The trade turnover in 2024 is witnessing the most significant growth in recent years.”

"Bold actions can lead to serious problems," says Armenian economist

Armenian experts argue that efforts to reduce the country’s dependence on Russia remain “unnoticed and insufficient”

Summary

“Over the past three years, the trade relations between the South Caucasus countries and Russia have shown different dynamics. During this period, Armenia had the largest trade volume with Russia among the region’s countries. The data from the first five months of 2024 confirm that economic ties between these two countries are growing at an extraordinary pace.

Georgia’s trade relations with Russia have been more variable. Despite some growth in imports from Russia, the level of exports has remained unchanged.

Azerbaijan’s trade relations with Russia are showing growth, but it is gradual rather than rapid. Considering that this growth is occurring alongside the overall increase in Azerbaijan’s foreign economic relations, the share of trade with Russia has not seen significant changes.”

South Caucasus-Russia economic relations