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The future of Chinese investment in the Caucasus – The case of Abkhazia

China is balancing its investments with large doses of pragmatism in the Caucasus. Internationally recognized partners or not, work on the Belt and Road Initiative must proceed.

September 20, 2018 - Michael Eric Lambert - Articles and Commentary

Sukhumi Photo: Stefan Krasowski (cc) flickr.com

China has used the deterioration of Russia’s relations with the European Union and the Eastern Neighbourhood countries to strengthen its position in the Caucasus as part of its ambitious Belt and Road Initiative. China’s goals are not to compete with Russian influence, but rather to secure its own economic interests in the post-Soviet area, and increase Chinese investments in Central Asia and the Caucasus.

Compared to the EU, China’s approach to the frozen conflicts in this region such as Transnistria, Abkhazia, South Ossetia, and Karabakh is relatively sanguine. The lack of regulations and unexploited potential in partially recognized or de facto states are perceived as an opportunity by Beijing, with high potential to develop the wine industry (Abkhazia), exploit minerals (Karabakh), produce spirits (Transnistria) and even tourism (Abkhazia). All the previously mentioned areas, except Karabakh, are under Russia’s influence. Moscow’s investments are mostly connected to security and defence, in contrast to the business-oriented approach of Beijing.

In fact, Russian support for Chinese initiatives in the de facto states is openly admitted. In exchange, China supports Russia by abstaining from open criticism on its recognition of Abkhazia and South Ossetia as breakaway provinces of Georgia, its annexation of Crimea, and by importing Russian oil and gas. The partnership brings benefits to China, which is perceived as a more neutral player in Caucasus by both the EU and Russia. China’s influence in the whole Caucasus is not considered to be a potential threat to anyone, except maybe by the citizens themselves. While Tbilisi supports foreign investments, the breakaway Republic of Abkhazia in Georgia remains more sceptical when it comes to China’s 

Beijing-Sukhumi

Abkhazia is a partially recognized land of 8,660 square kilometres and 240,000 inhabitants, under Russian influence due to geographic proximity with the Federation. After the conflict in 1992, infrastructure has been destroyed, including tourist facilities and the railway connecting Abkhazia to the rest of Caucasus. Abkhazia’s economy is still slowly recovering. It faces further difficulties when it comes to modernising industries, re-building hotels in Sukhumi, and gaining international recognition beyond Russia. In that specific context, China might be the key to solving economic and political issues.

Economically, the conflict between Russia and Georgia allows Abkhazia to strengthen its presence in the Black Sea area. It is difficult to open the Sukhumi airport without the consent of the Russian army. And visa requirements to travel by boat from Turkey to Georgia, then from Abkhazia to Russia, and then from Russia to Ukraine, are complicated for obvious legal and geopolitical reasons. China makes use of Russia’s need to generate capital in Abkhazia by investing and providing a measure of economic stability. Chinese investors are interested in wine exports, but also tomatoes, oranges, and tobacco products in the area.

China has expressed interest in buying land in Abkhazia, and in settling 3,000 workers to renew infrastructures which would link with the new Silk Road Economic Belt. But such initiatives were blocked by Abkhaz authorities afraid of Chinese influence. Even if China’s investment is considered an opportunity, the authorities decided to wait for a better offer from China. China also finds cooperation with the Russian Federation in Abkhazia important in the context of security and stability in the South Caucasus. The danger of renewed conflict between Russia and countries in the Caucasus is tempered by Russia’s capacity to preserve the current status quo in that part of the world, providing security for China to invest there.

As Moscow increasingly expresses support for the Belt and Road initiative, Abkhazia may soon have to accept more investment from Chinese companies. This may change the whole landscape and could even be an opportunity for Chinese tourists seeking a more affordable place to spend vacations than Europe.

Looking at the rising influence of China in the South Caucasus, does Beijing’s non-recognition of Abkhazia constitute an obstacle to future investments?

In theory, the need to recognize Abkhazia isn’t a serious roadblock. China still needs to invest in Georgia with its Tbilisi Sea Plaza project and doesn’t need Abkhazia as a platform to export goods from Caucasus to Russia at the moment. Abkhazia’s economy is recovering, and China may use a step by step policy to rent lands and renew infrastructure in major cities. The Sukhumi airport is still under Russian military command and facilities are not ready to welcome a high number of tourists from China.

More than an investment 

We can expect China to remain silent regarding the recognition of Abkhazia for now. But it may take a political position in the next decade. For the moment, China’s ambitions are purely about business, but Abkhazia’s location could be an opportunity to create a Chinese outpost on the Black Sea, and to secure China’s investment in other countries like Ukraine, Turkey, and Moldova. China’s military presence remains speculative – but it could be one of the next steps in securing investments for the Belt and Road Initiative. It’s not impossible that China may try to replicate the situation in Djibouti, where China recently opened a military base to secure its interests in east 

China could also negotiate with Russia to send some peacekeepers to Abkhazia. In theory, that option wouldn’t be perceived as a direct threat to security by Russia, the EU or Georgia. Georgia may eventually even consider embracing Chinese influence as a way to counter Russian influence in the Black Sea region, although that possibility is for the moment rather distant.

In the short term, we should not expect a rapid change in China’s relations with either Abkhazia or Russia. As long as China can rely on Russia to counterbalance the EU’s influence in the Black Sea, the policy of cooperation and investment without geopolitical rivalry will continue. China takes advantage of the disagreement between Russia and the West and has neither the military capabilities nor motivation to change the status quo between Russia and Georgia in Abkhazia.

Both sides benefit from the current situation. China is investing in the whole Caucasus, and Russia is able to keep an eye on Chinese investments when it comes to military issues. China’s interests in Abkhazia are compatible with Russia’s geopolitical interests and do not weaken Moscow’s regional influence. Moreover, Abkhazian authorities can choose if they want more or less investments from Chinese companies. China may not recognize Abkhazia as an independent state, but will keep investing in certain key sectors, and may even reconsider its political position at some point in the not too distant future.

However, given the important of the new Silk Road Economic Belt, China does not seem to be ready to take position as long as it can benefit from the tensions between the West and Russia regarding the future of Abkhazia and the South Caucasus in general.

Michael Eric Lambert has a PhD in International Relations from Sorbonne University and is the director of the Black Sea Institute.

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