PSCRP-BESA Reports No 122 (March 31, 2025)
by Alexander Shpunt
Just two years ago, the future political orientation of Armenia and Georgia toward closer ties with Western countries—primarily the European Union—appeared to have no alternative.
Immediately after Georgia gained independence in 1991, its leadership set state policy priorities aimed at establishing close relations with Western countries, chiefly the United States and the European Union. As early as 1996, Georgia signed a Partnership and Cooperation Agreement with the EU, and in 1999, it became a member of the Council of Europe. Five years later, in 2004, a committee on European integration was established in the Georgian parliament, and the position of State Minister for European and Euro-Atlantic Integration was created. Two years after that, in 2006, Georgia abolished visa requirements for EU citizens making short-term visits to the country. Another two years later, the EU reciprocated by launching the Eastern Partnership initiative to deepen ties with post-Soviet states, including Georgia. The effort culminated in the signing of an EU-Georgia Association Agreement in 2014, followed by a visa-free regime three years later.
Georgia applied for EU membership alongside Moldova on March 3, 2022. In June of the same year, the European Commission recommended granting candidate status to both republics, but the decision on Tbilisi’s application was postponed. Georgia ultimately received candidate status in December 2023.
Yet, on November 28, 2024, the Georgian authorities announced their decision to suspend EU accession negotiations from the national agenda until 2028. What happened?
Formally, Georgia’s partnership with Western countries began deteriorating after the adoption of the Law on Transparency of Foreign Influence and the Law on Protection of Family Values and Minors, which prohibits LGBTQ+ propaganda.
The EU froze relations with Georgia, canceled high-level meetings, halted financial assistance, and paused the country’s integration into the bloc, citing unmet preconditions for starting accession talks. Simultaneously, the U.S. suspended strategic partnership agreements and partial funding, imposing financial sanctions on Bidzina Ivanishvili, honorary chairman of the ruling party Georgian Dream. Five EU member states, alongside the UK, U.S., and Ukraine, introduced visa sanctions against over 300 Georgian officials.
The West accuses Georgia’s current leadership of democratic backsliding and anti-Western rhetoric. Georgian authorities attribute the rift to Western dissatisfaction with the country’s neutral stance on the Ukraine conflict and its insistence on preserving sovereignty.
However, the public rhetoric of both sides fails scrutiny: these are consequences—not root causes—of the seemingly abrupt reorientation of Georgia’s strategic vector.
Georgia, like Armenia (to be discussed later), is undeniably a country with democratic procedures for forming governments. Yet the political influence of business elites far exceeds traditional Western electoral models of sponsorship or support. The dirigisme of large businesses over Georgian and Armenian national politics is beyond the scope of this analysis, though it is well-documented in academic consensus by colleagues’ research.
Prior to February 2022, Russian authorities themselves anticipated a gradual thaw with the West and thus did not force Georgian elites into a binary geopolitical choice. The collapse of Russia-Europe normalization prospects made reintegrating Georgia and Armenia into Moscow’s political orbit a cornerstone of Russia’s new geopolitical strategy in the South Caucasus. In this context, Russia found its most convenient leverage within these states: national business elites, heavily dependent on maintaining commercial ties with Moscow and thus vulnerable to pressure.
In the late 1980s, during the twilight of the USSR, Bidzina Ivanishvili—dubbed “Georgia’s owner” and honorary chairman of Georgian Dream–Democratic Georgia—began his entrepreneurial career in Russia alongside Vitaly Malkin. By 1990, the partners had become leading electronics distributors. Ivanishvili owned Rossiyskiy Kredit (one of Russia’s largest banks), the agricultural conglomerate Stoilenskaya Niva, the pharmacy chain Doctor Stoletov, Moscow’s Minsk and Tsentralnaya hotels, and numerous industrial assets across Russia.
In October 2011, Ivanishvili announced the sale of all his Russian businesses, claiming he sought to create an opposition party in Georgia to challenge President Mikheil Saakashvili. However, most economic analysts in Russia and Georgia remain deeply skeptical that Ivanishvili’s Russian empire—which earned him nearly $7.5 billion and placed him 373rd in Forbes’ global rankings—was liquidated at peak profitability.
Regardless, official data suffices to confirm Georgian business elites’ extreme dependence on Moscow. According to Georgia’s National Statistics Office (Sakstat), Georgia-Russia trade turnover grew by 5.4% in 2024 compared to 2023, reaching $2.5 billion, making Russia Georgia’s second-largest trade partner after Turkey.
But this is hardly the crux.
First, consider Russian investments and ownership in Georgia. In strategically critical sectors like energy, Russian entities dominate: JSC Telasi, JSC Khrami HPP-1, JSC Khrami HPP-2, Mtkvari Energy TPP, Larsi HPP, Shilda HPP, and the unified energy system SakRusEnergo—all are Russian-owned and financed.
In mining, JSC RMG Copper and LLC RMG Gold belong to the Russian holding Mining Investment, ultimately owned by businessman Dmitry Troitsky. These firms specialize in copper and gold ore extraction and processing. Even Georgia’s iconic mineral water brand, Borjomi, is owned by IDS Borjomi of Russian billionaire Mikhail Fridman.
The brevity of this article precludes a full exposition of Russian capital’s penetration into Georgia’s major industries. Suffice it to note that, should the Kremlin order Russian businesses to “pressure” Tbilisi, it possesses more than sufficient leverage.
The second factor is Georgian business in Russia.
Alexandre Djaparidze is the only Georgian besides Ivanishvili on Forbes’ global rich list, ranking 61st among Moscow’s 200 wealthiest individuals. David Yakobashvili, founder of Russia’s largest dairy and juice company, Wimm-Bill-Dann (later sold to PepsiCo), remains Georgia’s most influential Jewish businessman in Russia, owning several key—albeit less visible—enterprises. A third example is Konstantin Mirilashvili, owner of Russian agro-holding Evroservice, a leader in Russia’s sugar and meat markets. Georgian entrepreneurs also dominate Russia’s restaurant sector, highly sensitive to regulatory shifts.
All these figures wield political clout in Tbilisi and serve as convenient tools for Moscow, given their reliance on Russian authorities’ goodwill toward their businesses.
The third factor emerged recently, directly tied to the Ukraine war and the mass exodus of Russian businesses—primarily to Georgia.
From February 2022 to February 2023 alone, over 16,000 individual enterprises (IEs) were registered in Georgia under Russian citizens’ names. By comparison, in the previous 27 years (January 1995–February 2022), Russians founded just 7,788 companies in Georgia. Russians have not merely relocated—they have intricately linked Georgia’s small and medium businesses to their remaining operations in Russia, creating tens of thousands of high-paying jobs. Official statistics obscure exact numbers, but Georgian authorities cautiously estimate 63,000 Russian relocants, while experts double this figure. Even the lower official number represents 5–7% of Georgia’s economically active population. Crucially, the average age of these relocants is 27–30—peak productivity years.
Their purchasing power is evident in Tbilisi’s 94% and Batumi’s 76% annual spikes in new property transactions, with premium housing demand in Adjara surging by 339%.
Given business’s decisive influence on electoral processes and government behavior in Georgia, the above facts make it unlikely that the pro-European aspirations of the population will translate into official policy.
In Part II, we will analyze why Armenia not only remains in Moscow’s orbit but shows signs of selective alignment. While many reasons mirror those discussed here, significant distinctions exist.
Alexander Shpunt is Israeli and Russian researcher and expert in theory and practice of information and analytical work in the field of politics, resides in Haifa. Since 2016 he served as a professor at the National Research University “Moscow Higher School of Economics. In 1999 – 2011 he also served as the Executive director of the “Effective Policy Foundation”, the largest think-tank in the RF at that time, and in 2011founded and headed the Institute of Political Analysis Tools, specializing in systems for monitoring political behavior.