Issue 4, 2014. August-September

   

REGIONAL IMPLICATIONS OF THE GEORGIAN-EU ASSOCIATION AGREEMENT

Georgia ratified its Association Agreement with the EU on July 18. Investor.ge asked Richard Giragosian, the director of the Regional Studies Center (RSC), an independent think tank in Yerevan, Armenia, to analyze the potential impact of Tbilisi's move toward Europe on the rest of the region.

Richard Giragosian

Georgian PM Irakli Gharibashvili, Parliament Speaker Davit Usupashvili, Energy Minister Kakha Kaladze and Georgian President Giorgi Margvelashvili celebrate the ratification of the EU agreement


The Broader Impact

While the new Association Agreement represented an important success for Georgia, the move will also impact the broader South Caucasus region in several ways. First, the Association Agreement not only brings Georgia closer to the EU, it also creates a new dividing line in the South Caucasus. And in this context, there is a new disparity between Georgia and its neighbors.

At the same time, Georgia's successful concluding of the Association Agreement effectively reaffirms Georgia's position as the "center of gravity" for Western engagement in the South Caucasus. That prominence has waned and weakened in recent years, but with the conclusion of the Association Agreement, which neither Armenia nor Azerbaijan has attained, Georgia has once again emerged as the regional leader.

For Armenia, the Armenian president's surprise September 2013 decision to abandon its own Association Agreement in favor of joining the Russian-led Customs Union not only damaged the country's relationship with the West, but also further deepened Armenia's vulnerable position within the Russian orbit. Moreover, that sudden "U-turn" in policy was more than simply a missed opportunity. Rather, the move effectively undermined the credibility of the Armenian government, weakened the course of reform, and sidelined the political standing of reformers within the government. The decision was also seen as a strategic blunder, representing a misguided decision to "mortgage" the country's future in favor of submitting to Russia.

Over the medium-term, however, Armenia may actually be able to salvage its strategic future and avoid being drawn into the Customs Union. As the repeated delays over its bid to join the emerging Eurasian Economic Union (EEU) have demonstrated, there are now serious doubts over Armenia's possible membership in the Russian-dominated project. Although the three member states of Russia, Belarus and Kazakhstan have agreed to launch the EEU by January 2015, it is now increasingly unlikely that Armenia will overcome resistance from Kazakhstan and Belarus. Nevertheless, Armenia remains hindered by its own over-dependence on Russia, a factor that has only helped to undermine Armenian independence and weaken its sovereignty.

For Azerbaijan, there was never any real desire for an Association Agreement with the EU. Rather, the policy priority for Baku has always been to avoid any closer alignment to Brussels, and instead, limit the relationship to energy cooperation. In this way, the Azeri government was able to further weaken European leverage over the country and mute EU concerns over egregious violations of human rights and serious shortcomings in democratization and reform.

Coming challenges

In light of the new division in the region, marked by the Georgian Association Agreement, there are several significant trends now underway.

First, although there is a sincere recognition on the part of both Yerevan and Tbilisi that the future of Armenian-Georgian relations must deepen further, each country is entering a new period of uncertainty.

This uncertainty over the course of bilateral relations stems from the direct political and economic implications from both Georgia's Association Agreement and from Armenia's possible membership in the Customs Union. For example, under each scenario, the tariff structure of bilateral trade will be modified.

For Georgia, this means that possible Armenian membership in the Russian-led trade bloc would require Armenia to impose significantly higher tariffs and duties on its imports. It may also be forced to adopt additional barriers to Armenian-Georgian trade because of the association agreements. And a likely result may be an increase by Georgia of its transit fees for Armenian exports and imports through Georgian territory, which would directly impact over two-thirds of all Armenian foreign trade.

A second trend may be even more serious. More specifically, the impact of the EU Association Agreement on Russian policy poses a significant challenge to not only Georgia or even the region as a whole, but also to the European Union itself.

For the Georgian government, the challenge stems from the combination of high expectations from the Georgian population, eager for immediate economic gain, and the imperative for real reform through the implementation phase of the EU agreement.

Although Georgia is much less vulnerable to Russian pressure, as Moscow has fewer and more meager instruments of leverage over Tbilisi, there are already signs of concern over a fresh Moscow-inspired campaign to assault and undermine European values. Such a Russian-directed campaign may seek to exploit more conservative elements within Georgia, such as the Georgian Church, in a bid to misrepresent EU ideals as a threat to Georgian "family values." Such a scenario would require greater efforts by the Georgian government and society in defending its own tolerance and freedom.

More broadly, however, the danger here is not coming from a Russia confident and secure in its power and influence in the region. Instead, the bigger threat comes from a weak and unpredictable Russia that no longer pursues rational policies based on any coherent cost-benefit analysis. And in the wake of Russian aggression in Crimea and its continued violation of Ukrainian sovereignty and threats to its statehood, the likelihood of a resurgent Russian attempt to undermine Georgia, pressure Armenia and arm Azerbaijan has now become a greater and more realistic concern. Moreover, in light of Russian complicity in the downing of a civilian aircraft by its own proxy force in eastern Ukraine, Moscow may be even less deferential to deterrence or dissuasion.

And finally, this new post-Association Agreement period will be a serious test for the EU. This test of commitment and resolve will also not be easy, especially judging by the inadequate response by the EU to the Ukrainian crisis to date. Thus, as much as the new Georgian Association Agreement stands as a strategic victory for Tbilisi, the more difficult period of implementation is now only just beginning.

Richard Giragosian is the director of the Regional Studies Center (RSC), an independent think tank in Yerevan, Armenia.

Richard Giragosian

In a largely symbolic move, the Georgian parliament formally ratified its Association Agreement with the European Union (EU) on July 18. The agreement, which was signed on June 27 in Brussels, represented a crowning achievement for Georgia after several years of complex negotiations, and elevated Georgia one step closer to Europe.

Although the endorsement was no surprise, the Georgian government fulfilled a key tenet of the country's strategic bid to solidify its Western orientation. Together with Ukraine and Moldova, the Association Agreement is also an essential move towards strengthening Georgian statehood in the face of looming Russian pressure.

Beyond the strategic significance, the agreement also offers Georgia concrete benefits. It will grant "unfettered access" to the large EU market, while also offering a serious reduction of EU tariffs on Georgian imports. In turn, although Georgia will also be required to slash its own tariffs on EU imports, such a reduction will be imposed on a more gradual basis, allowing Tbilisi to "protect" its own "strategic sectors" from immediate competition.

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