Georgia Promotes Major Infrastructure Projects at COP in Baku

The international event was a chance for Georgia to scout for investors for two critical transit projects in need of funding: the Trans-Caucasus Trade Route (Middle Corridor) and Black Sea energy corridor. Political instability at home puts the projects’ future at risk, however.

Georgia presented two flagship infrastructure projects for consideration at the UN’s 29th major Climate Change Conference (COP 29). Topping Georgia’s list was the $20 billion-plus multi-modal land, sea Middle Corridor, and the 1,200 kilometer, $2.3bn “green” Black Sea energy corridor, the submarine cable project which it has initiated (along with Romania) to carry energy generated in the Caucasus to energy-hungry Europe.

The recent political tumult in Tbilisi has arguably created considerable uncertainty for any new large scale projects, as international financial institutions and international investors will have to reconsider their long-term plans. However, at the time of the COP, the plans that were presented seemed to offer considerable opportunity for the green development of the Middle Corridor.

Transportation projects were lobbied hard at the COP, as countries seek financing to convert their trade transport routes and infrastructure to greater sustainability. Key to the multilateral banks’ benign policies on transport is the UN view that, particularly in land-locked developing countries, “efficient, cost-effective, affordable, reliable, and sustainable transport systems and infrastructure—including better roads, more railway links, and transport corridors with unimpeded border-crossings— are keys to further progress toward sustainable development.” The logic is that otherwise trucks will be toiling slowly through towns and villages, degrading landscapes, and creating pollution.

Increasing competition for “hubs”

The COP was an opportunity to talk, formally and informally, to lenders and investors who are less censorious of contentious governments than the EU or US. That seems to be the case for the Asian Development, World Bank, the EBRD, and other multilateral development banks, as well as the world’s risk tolerant hedge funds and private equity investors. Georgia seized the chance to push for its connectivity projects; all of them need urgent progress as competition intensifies to provide logistic “hubs,” processing centers, and container parks for the network of cross Eurasian trade highways.

Almost all the Central Asian countries have plans to improve interlinking between their countries to facilitate trade locally and as an essential step to improving accessibility to the highly profitable markets of Europe. Talks have reached beyond the region into Iran, Iraq, and Afghanistan, as well as India and China. For example, in December, a 486-kilometer China-Kyrgyzstan-Uzbekistan railway was officially launched along with plans for a cold chain system for fruit and vegetable exports. However, competing with it will be the 3,000 miles of new rail routes being built by Kazakhstan, the chief node for East-West trade through the emerging Middle Corridor, which is investing in hundreds of new trains, passenger cars, stations, and containers to enable its growth.

Middle Corridor potential opportunities, obstacles

Good news for Georgia is that many of these new regional corridors and rail routes in process will feed into the Middle Corridor, sending transit-fee-earning container traffic through its rail and highways to Europe and the Americas. However, Georgia needs to heed and respond to the criticism of its current poor transport infrastructure and technology in order to capitalize on these new opportunities.

Currently a number of reports describe widespread discontent among freight forwarders on the pace of modernization of the Middle Corridor. For Georgia, weaknesses listed by the Georgia-based Policy Management Consulting Group range from “continued lack of investment in the development of transport and logistics infrastructure,” lack of ferries and locomotives, and “capacity constraints on equipment.” Other issues include the current absence of adequate port capacity or facilities, including a deep seaport. The new port at Anaklia is a response to the latter, but work has only just started.

While APM Poti Port has said many times that it is “ready to invest at least $200m in a port expansion project subsequent to the Georgian government’s issuance of a decree authorizing its signing,” there has been no news on that yet. International credit rating agency, Fitch has downgraded its view on Georgian Railways on grounds of the political background, making credit more expensive.

Green Energy Corridor

The Caucasian Green Energy Corridor is still in the study stage but it is attracting stakeholders, despite security fears for underwater cables and the Black Sea location. Georgia, Azerbaijan, Hungary, and Romania agreed last summer to establish a joint venture for the cable project and signed a memorandum of understanding with the EU. Recently Bulgaria has said it wants to join, and other countries in the region have indicated interest. While the target deadline is 2030, the technical, security, political, and financial hurdles are not small ones. Next steps are studies to gauge transmission capacity and a more detailed look at the seabed.

The enhanced connectivity resulting from the corridor elevates Georgia’s significance in the broader regional and European energy markets, opening doors to greater economic investment, international partnerships, technological advancements, and security. “For Georgia, the Black Sea Submarine Cable Project is more than an energy corridor—it is a strategic opportunity to redefine its position on the global energy map. By playing a central role in this multilateral initiative, Georgia solidifies its status as a critical energy transit hub between Europe and Asia,” states the Georgian Foundation for Strategic and International Studies, a think tank. “Additionally, the project can catalyze the growth of Georgia’s domestic renewable energy sector, allowing the country to not only meet its own energy needs but also to become a future exporter of green energy to Europe.”

This, as Sebastian Burduja, the Romanian Energy Minister, told Offshore Energy online media, “is not a cheap project.” However, the European Commission has indicated willingness to bankroll it with €2.3 billion. The World Bank has committed $35 million for feasibility studies and other preparatory work.

Azerbaijan will be the predominate energy supplier, holding as it does substantial renewable electricity potential—it has plans for offshore and onshore wind farms along its Caspian Sea coast and for vast solar projects. The country aims to generate 30 percent of its electricity from renewables by 2030, meaning 70 percent would still come from natural gas when the cable is operational. The country is already a vital gas supplier to Europe via the existing pipeline network, a role that increased following Russia’s invasion of Ukraine.

In part due to support from foreign donor and international finance organizations, Georgia has been rapidly developing its renewable energy sector, particularly in wind and solar power. Already known for its hydropower, which accounts for 73 percent of electricity production, Georgia is now focusing on expanding its wind energy generation. The pace of new projects, including plans for a large wind farm in Tskaltubo Municipality, could slow depending on access to funding.

Once the renewable energy from Azerbaijan and Georgia reaches Romania, it would be connected to the European grid, providing clean energy to several EU member states. Romania, which already generates over 11,000 MW of renewable energy primarily from wind and hydropower, plans to use the surplus to increase its renewable energy exports to Europe.