Since 2014 Georgia has been actively promoting its economic and investment interests with the Gulf Cooperation Council (GCC) states - Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain and Oman. Though the GCC states seem hesitant to invest billions, there are wider geopolitical motives which indicate their long-term interests in Georgia’s and generally South Caucasus’ nascent energy and transport corridor.

There have been steps to invigorate Georgia's relations with the regional actors, while separate Embassies were opened in Qatar and Saudi Arabia, and the decision to establish our diplomatic missions in Saudi Arabia and the UAE has been announced.

Georgia is becoming increasingly attractive for citizens and expats of the GCC countries who come as tourists, private visitors and entrepreneurs to diversify their leisure and seek new possibilities for investments. A crucial step was the liberalisation of the visa regime between Georgia and the GCC states which resulted in the increase of visitors. 30,000 tourists from Saudi Arabia visited Georgia in 2016, a 116% increase over the previous year. Overall, more than 60,000 tourists visited Georgia from the GCC countries overall in 2016, which is a 65% increase compared to 2015.

According to the 2017-2018 statistics, the numbers continue to grow, albeit with not the same increase in numbers as in 2016.

There have also been multiple high-level visits by the heads of state and government since 2014-2015, which allows to enhance relations and gives impetus to investment growth.

Moreover, the Georgian government has followed suite. Successive visits of Georgian high officials over the last decade to the GCC countries served the purpose of reaffirming Georgia’s desire to enhance cooperation with these countries and provide a favourable environment for bolstering economic and business relations and increase investments in the Georgian economy.

For example, over the past several years Georgian politicians held meetings with the Crown Prince of Abu Dhabi Sheikh Mohammed Bin Zayed Al-Nahyan, Prime Minister of UAE and the Ruler of Dubai Sheikh Mohammed Bin Rashid Al-Maktum, Ruler of Ras al-Khaima Sheikh Saud Bin Saqr Al-Kasimi as well as with Sheikh Nahyan Bin Mubarak Al-Nahyan, Minister of Culture, Youth and Community Development and Chairman of the "Dhabi Group". The latter has had substantial business interests and investments in Georgia.

There were also meetings and discussions with the executives of the Abu Dhabi Chamber of Commerce and Abu-Dhabi Investment Authority, who expressed their readiness to promote investments and business projects in Georgia.

For an outside observer those meetings might not mean much, but considering that Georgia is small economy, a medium-sized GCC investment could bring tangible results.

The Minister of International Cooperation and Development of the UAE Sheikha Lubna Khalid al Qasimi, Sultan bin Saeed Al Mansouri, UAE Minister of Economy made visits to Georgia. This resulted into the construction of the luxury Millennium Hotel in Tbilisi, which is a Dhabi Group project.

Moreover, in addition to existing free trade agreements with China, Turkey, and Central Asian countries, Georgia has proposed the idea to have similar deals with the UAE and Saudi Arabia. With a GDP growth of over 4 percent a year (forecast for 2020), Georgia is one of the top 10 countries in the World Bank’s Doing Business rankings, which will serve as a further attraction.

Geopolitical Context

There are geopolitical reasons behind this sudden flourishing of Georgia-GCC states relations. Surely, the basis has been the GCC countries' decades-long support for Georgian sovereignty and territorial integrity. This is particularly important for Tbilisi, especially as the GCC states have always maintained close relations with Russia.

But there are also global trends which drive GCC states' interests in the South Caucasus. The GCC states are among the most oil- and natural gas-dependent economies in the world. Since a sharp downfall of oil prices in 2014, a renewed urgency appeared among GCC states to increase their efforts on diversification of their economy through the development of other production spheres as well as investments into vital infrastructure overseas. The urgency is also driven by the fact that that oil prices are likely to remain low for the next decade and international competition from LNG sector will be growing.

The GCC states look at the South Caucasus as a continuation of the Central Asian corridor. Together these two regions make up a critical road and rail link between larger world markets such as Europe and China. Quite naturally the GCC states want to tap into many economic opportunities stemming from the nascent South Caucasus corridor. Indeed, numerous pipelines, railways and roads built in the past 20 years, have gradually been transforming the region into a potentially global transportation corridor.

Therefore, the GCC countries are particularly interested in Georgia's transit role. If we look at transcripts of meetings held between Georgian and GCC officials, the prospects of investing in the development of the transit corridor are always discussed. Road, railway and Black Sea port infrastructure are of primary interest for the GCC countries and they hope that further progress will be made by Georgia in the development of its transit potential. The reason is simple the GCC countries see the country as yet another road to the European markets.

Consider the following the example, even before 2014, the UAE bought the port of Poti in 2008. The company was the Ras al Khaima investment authority (RAKIA). The port was then sold in 2011, but RAKIA’s actions were a reflection of the GCC countries interests.

Forecast

There is a large potential for deeper economic cooperation between Georgia and the GCC countries, but trade relations still lag considerably behind what could be achieved. For example, non-oil trade between UAE and Georgia by 2019 reached only a couple of hundreds of million US dollars. The same goes for Saudi Arabia. Since the Georgian Embassy was opened in Saudi Arabia in 2015, economic relations have dramatically increased by a staggering 360%, but overall the numbers are low. Throughout decades, foreign direct investments from the Kingdom barely exceeded $100 million. 

These statistics shows that there is some hesitancy among the GCC countries to increase investments in Georgia. Perhaps unstable security situation in the South Caucasus and most notably Russian actions in Georgia serves as a distraction. 

However, as argued above, there are important geopolitical motives which make GCC states’ potential investments in Georgia quite likely in the linger run.

Emil Avdaliani specializes on former Soviet space and wider Eurasia with particular focus on South Caucasus and Russia's internal and foreign policy, relations with China, the EU and the US. He can be reached at emilavdaliani@yahoo.com.