Gulf and South Caucasus: Relations and Stakes




In the Soviet era, the relations between the USSR and the Gulf countries were limited due to the different political considerations. Moscow was backing pro-Soviet Arab regimes, including Egypt, Syria, Iraq, Yemen, Ethiopia, and Afghanistan, while the Gulf countries were enjoying a close alliance with the United States, that was detrimental to Soviet objectives in the region. However, the collapse of the Soviet Union affected the geopolitical and geostrategic balances in the world in general, and the Gulf in particular.

In recent years, there has been growing interest in the member-states of the Gulf Cooperation Council (GCC) to consolidate and expand their relations with ex-Soviet republics in the South Caucasus region, namely Azerbaijan, Georgia, and Armenia. For the GCC, which consists of Saudi Arabia, Kuwait, Qatar, Bahrain, Oman, and the United Arab Emirates (UAE), the South Caucasus is a continuation of their relations with the Central Asian corridor. Therefore, any development or tension in this region is of great importance to Gulf interests.

In late September, the conflict broke out between the two former Soviet republics over the Nagorno-Karabakh region. Considering the two countries had never resolved the territorial dispute over Nagorno-Karabakh –  which is part of Azerbaijan but was occupied by Armenia – the GCC had justifiably expressed “great concern” over the war between Azerbaijan and Armenia on the Nagorno-Karabakh region. In a statement, GCC Secretary-General, Nayef Al Hajraf, had said the Council “urges Azerbaijan and Armenia to a cease-fire and enter into comprehensive negotiations to reach an inclusive political solution in line with the UN Security Council resolutions and the international law.”

None of the GCC member states had taken sides in the conflict between the two warring neighbors. This was very much related to the policies carried out by the Gulf states in their relations with the South Caucasus region’s states – Azerbaijan, Georgia, and Armenia. Although GCC member states, neither share historical/cultural links nor territorial closeness with the three South Caucasus states, they have expanded their ties with the region, particularly through tourism and economic investments. The connections between the Gulf and the South Caucasus are diverse and wide-ranging based on individual policies of each GCC member country with each of the South Caucasus states and are shaped by broader regional and international politics.

The Gulf countries are aware that the South Caucasus is a region that is caught up in a fierce competition between Russia and the West, as the two sides often pursue clashing interests in the region. However, the Gulf countries, which enjoy relations with both the West and Russia, have in recent years been actively courting the South Caucasus states to the point that both the Gulf and the South Caucasus have increasingly become intertwined, both politically and economically.

Tourism is a major driver of closer ties with the Gulf, especially for Azerbaijan and Georgia. The GCC states have invested less in the South Caucasus than in Central Asia, but a surge tourists from the Gulf has been pumping money into Azerbaijan and Georgia. Azerbaijan had eased visa rules for Gulf states and introduced a visa-on-arrival for Gulf nationals; a move that contributed to the increase in tourist numbers from the Gulf. Baku is also aiming to attract investments to its real estate, manufacturing, and hospitality industries by promoting business tourism. Armenia and Georgia, which already had visa-free regimes with most of the world, have also sought to participate in the growing Gulf tourism activity, also lifting visa requirements for Gulf states. Qatar Airways became one of the handfuls of major international airlines to launch almost daily direct flights to all three South Caucasus capitals; UAE-based low-cost carriers, Air Arabia and flydubai do the same.

Since 2014, Georgia has been actively promoting its economic and investment interests with GCC member states. For example, Georgia has received about $1 billion from trade with the UAE and Saudi Arabia. In addition to existing free-trade agreements with China, Turkey, and Central Asian countries, Georgia had similar deals with the UAE and Saudi Arabia to further increase trade. Several high-level visits between UAE and Georgian officials took place during 2017-2019. The UAE has been the clear leader when it comes to investing in the South Caucasus region. The UAE had already emerged as a top foreign investor in Georgia, with a 2008 deal to buy the port of Poti by the Ras al Khaimah investment authority (RAKIA), which was estimated to put over $155 million into the project. Yet another UAE investor poured $140 million into a Tbilisi hotel. UAE-based companies have also been among the biggest sources of foreign investment in Azerbaijan and Armenia.

Mr. Mikayil Jabbarov

The UAE’s relations with Azerbaijan began to develop after the opening of its embassy in Baku in 2011. In 2019, Azerbaijani Economy Minister, Mikayil Jabbarov, said that the UAE has invested $2.2 billion in the Azerbaijani economy and his country, in turn, has invested $347 million in the UAE’s economy. One of the main points of cooperation between the UAE and Azerbaijan is the opening of the Dubai Chamber of Commerce and Industry in Baku. Azerbaijan has also opened a Trade House in Dubai.

In recent years, Armenia and UAE have come closer. The Abu Dhabi-based Ocean Holding LLC had pledged to invest $100 million into solar energy in Armenia. UAE had hosted Armenian President, Armen Sarkissian, for an investment conference, and Sarkissian followed that with a similar trip to Qatar. UAE is considered as an influential country by Armenia and Sarkissian discussed the ceasefire with Azerbaijan during his short visit to UAE last November. The Armenian president met with Abu Dhabi Crown Prince, Mohammed bin Zayed, who said his country welcomes the November 10 peace agreement between Azerbaijan and Armenia and hopes it will foster lasting peace and security.

Among all the members of the GCC, Saudi Arabia is the only Gulf country that does not yet have any level of official ties with Armenia. This is because the Saudis have tended to side with Azerbaijan, especially on this particular issue. The relationship between Baku and Riyadh goes back as early as the first year of Azerbaijan’s independence. Nevertheless, the official relationship was not established until the visit by the former president of Azerbaijan, Heydar Aliyev, to Riyadh in 1994. In that year, Azerbaijan established its embassy in Riyadh, and was also accredited to Bahrain and Oman, and subsequently, formal political and diplomatic relations began to draw the two countries closer, in order to improve cooperation and reciprocal representation on many levels. In 2017, three visits took place from the Saudi side to Baku.

Last September, the Saudi Tourism Minister met with Georgian Prime Minister, Giorgi Gakharia. In the meeting, bilateral relations and regional cooperation areas were discussed while the issue of free trade was also touched upon. It was noted that the establishment of a free trade regime between Georgia and the GCC will be mutually beneficial in the future.

All three Caucasus countries have built ties both with Qatar and the other Gulf states and kept a low profile during the current Gulf crisis. Armenia said that it will continue to pursue close ties with Qatar, in spite of the sanctions its other Gulf partners have imposed. Azerbaijan also has professed its desire to keep a balanced approach. Georgians have also appeared to remain silent. Official reciprocal visits by President Aliyev to Qatar in 2004 and 2017 and Qatari Amir to Azerbaijan in 2007 and 2016, opened broad prospects to enhance mutual cooperation. The agreements signed during these visits have created a favorable legal framework for the deepening of bilateral relations. Doha also enjoys good relations with Armenia. The mutual visits by Armenian presidents in 2002, 2009, and 2017 augmented the mutually beneficial ties between the two countries. In the course of their rising cooperation, both countries have signed several agreements on several areas of cooperation.

Also, the Gulf countries’ antagonism towards Iran, which sits at the crossroads between the Gulf and the South Caucasus, is another factor driving the Gulf approach to the South Caucasus. Iran’s foreign policy towards the South Caucasus seeks to basically diminish the Western influence in the region. Tehran’s policy is based on pragmatism, seeking ways to build ties with the South Caucasus countries. Among the three countries, Armenia is the closest to Iran, while Azerbaijan and Georgia are cautious but also not against Iran.

Thus, in summary, there are diverse motivating factors that push closer relations between the Gulf and South Caucasus states, ranging from tourism to energy, from similar regional concerns to common interests. These factors have led GCC member states to remain neutral at the recent Azerbaijani-Armenian conflict, while in the same vein, the South Caucasus states have remained balanced in the Gulf crisis, in which Qatar and other three GCC states had confronted.