China's Deepening Footprint In The South Caucasus

Beijing's strategy in the region is multifaceted, with Azerbaijan at its core. Azerbaijan's involvement in the Belt and Road Initiative and its strategic location in Eurasian supply chains make it a pivotal partner for China.

On the one hand, at the geo-economic level, Beijing seeks to establish alternate trade routes, including through Azerbaijan, to reduce its dependence on sea lanes controlled by the US and its allies. This goes along with China's search for new markets and resources.

On the other hand, at the geopolitical level, China's activity in the South Caucasus is part of its broader strategy as a revisionist power to create a Sinocentric network of economic and political relationships, challenging the West's dominant influence in the overall structure of the international system.

China's approach in the South Caucasus exemplifies its strategy of using economic statecraft and infrastructure development as key tools for projecting its influence in Eurasia at large.

As has happened elsewhere in Eurasia, China will sooner or later face more scrutiny from countries in and outside the region. The US, in particular, may seek to re-engage with the region more actively once its domestic political situation stabilizes after the November elections. Some European countries, such as Italy, have already reassessed their approach to Azerbaijan and Georgia.

The Anaklia deep-sea port project in Georgia, strategically located on the eastern edge of the Black Sea, serves as another prime example of China's increasing infrastructural footprint in the region.

The project, which had previously been contracted to a Georgian-American consortium comprising Georgia's TBC Bank and the US-based Conti International, will now potentially fall under Chinese control.

Political controversies and legal issues led to the cancellation of the previous contract in 2020. A new tender was eventually offered, and this year, a Chinese consortium was the sole bidder. It is now set to build the port.

If further necessary infrastructure is completed and cargo transit capacity across the Black Sea is significantly enhanced, the Anaklia port may eventually become a crucial node in the Middle Corridor.

Regardless, its geo-economic implications highlight Georgia's growing ties with China and China's expanding footprint in the South Caucasus. These implications only enhance current questions about Georgia's relations with the West that arise from its anti-democratic domestic political evolution.

For Russia, the dominant power in the South Caucasus for the last two centuries, China's expanding influence there presents both opportunities and challenges. Moscow and Beijing have cultivated closer ties in recent years – indeed for over two decades – but Russia may be suspicious of China's growing presence in Georgia and Azerbaijan, where Russia is accustomed to having a proprietary sphere of influence.

Still, given Russia's current relative international isolation and its related domestic economic challenges, it may have only limited ability to push back against China's increased involvement in Azerbaijan and the broader South Caucasus.

The relative absence of Western engagement in the South Caucasus has created an opportunity for China and other powers, including Russia. Moscow has reinvigorated its relations with Azerbaijan after withdrawing the Russian so-called peace-keeping force from formerly occupied Karabakh.

The recent cosmetic change in Iran's political leadership likewise suggests that Tehran may achieve better relations with all countries in the South Caucasus.

While Azerbaijan's foreign policy overall has been balanced among the various global powers, recent myopic political moves by the US and the EU have contributed to Azerbaijan's pivot towards China.

These included the US Congress' decision to restrict the president's ability to waive Amendment 907 of the Freedom Support Act, which limits aid to Azerbaijan, and a series of resolutions recently adopted by the European Parliament.

The international Armenian diaspora and its lobbies in various capitals championed all these political moves, spurring Azerbaijan's alienation from Western diplomacy and its pivot toward China.

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As a result, the United States and Europe face the prospect of diminished influence in this strategically important region, including any possible liberalizing influence on the evolution of Azerbaijan's domestic political system.

Yet Azerbaijan is strategically the most important country in the region, with a population over one and a half times that of Armenia and Georgia together and twice their combined gross domestic product (GDP).

China's growing presence in Azerbaijan, through infrastructure investments and strategic partnerships, could complicate Western strategic calculations, particularly when it comes to ensuring European energy security.

Specifically, Chinese investments in Azerbaijan's energy sector already offer Baku alternatives to Western financing, potentially reducing its reliance on Europe as an energy market.

Pipelines to be included in the Southern Gas Corridor project. Map: Wikipedia

The increased flexibility that results from such a development would weaken Western bargaining power by allowing Azerbaijan to play its partners off against one another.

At the same time, Chinese-backed projects could shift energy flows toward Asia, affecting the capacity of the Southern Gas Corridor to serve European needs. China has already become the second-largest buyer of Azerbaijan's oil.

A stronger Chinese foothold in Azerbaijan and Georgia may shift the region's balance of power in the medium term, with long-term implications for Russia, the West and the broader region of the Greater Middle East.

Robert M Cutler was for many years a senior researcher at the Institute of European, Russian and Eurasian Studies, Carleton University, and is a past fellow of the Canadian International Council.

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