Forging Alliances:

The South Caucasus has pursued ties with the GCC since the former nations gained independence following the collapse of the USSR. In 2022, these two regions celebrated various diplomatic milestones. Saudi Arabia had previously been the first country to recognize Azerbaijan’s independence in 1992. In 1994, Azerbaijan opened an embassy in Riyadh, while a Saudi embassy was established in Baku in June 1999. Azerbaijan has also had diplomatic relations with Oman and Bahrain since 1992 and 1996, respectively. Because of its ties with Azerbaijan, Saudi Arabia has for decades refused to establish diplomatic relations with Armenia due to the conflict in Nagorno-Karabakh.

According to a recent report, former Armenian President Armen Sarkissian’s October 2021 visit to Riyadh marked "a historic turning point in relations between the two countries." Armenia has not established diplomatic relations with either Saudi Arabia or Pakistan. On 16 March 2023, Georgia celebrated thirty years of diplomatic relations with Qatar. What is driving closer ties between these two regions?  What additional mechanisms have facilitated the development of relations? How have geopolitics, with regard to both the Nagorno-Karabakh conflict and the Iran-Israel-South Caucasus triangle, shaped recent relations between these regions?

Mutual Economic Interests

One key dimension of South Caucasus-GCC relations is economic collaboration. Saudi Arabia has been investing in Azerbaijan since the mid-1990s. Economic ties have ramped up further since 2009, especially with regard to trade turnover between Azerbaijan and Saudi Arabia, which amounted to $27 million USD in 2021. Azerbaijani agricultural products have also been successful in Qatari markets. Both sides view the other as important for mutual food security, which has spurred economic collaboration. In recent years, trade between the two regions has increased dramatically. Trade between Azerbaijan and the UAE increased threefold in five years, and in 2022 totalled $8.88 million USD in imports, $95.88 million in exports, and $953 million in re-exports. Trade turnover between Armenia and the UAE also grew to over $1 billion in 2022, more than five times its 2021 level; this now comprises 4.2 percent of Armenia’s total trade turnover.  In 2022, non-oil trade increased by 110 percent to $468 million. The UAE now makes up more than 63 percent of Georgia’s total trade volume with Arab states.

Energy remains a key factor in economic cooperation. Georgia and Saudi Arabia are both interested in maintaining stable global oil markets. Similarly, joint energy projects have helped to boost economic collaboration. In 2012, the Azerbaijani firm SOCAR and Saudi firm Soroof International signed an agreement for oil and gas projects. In 2018, Saudi Aramco also registered a subsidiary company, the Aramco Overseas Company Azerbaijan LLC, in Baku, to further explore oil and gas industries in Azerbaijan and Central Asia. Saudi Arabia and Azerbaijan signed a memorandum of understanding in 2022 for electricity generation in the Caspian Sea. The Saudis also invested $300 million USD in the Absheron-Khizi wind power plant, which aims to add 240 megawatts of wind generation capacity in Azerbaijan. These agreements have helped foster bilateral partnerships in renewable energy.

The UAE is also aiming to diversify its economy with renewable and environmentally-friendly energy. In 2021, Azerbaijan and the UAE signed agreements for renewable energy pilot projects, such as building a 230 MW solar power plant. On 15 March 2022, the Garadagh solar power plant, operated by UAE company Masdar, was officially launched at a groundbreaking ceremony held in Baku’s Gulustan Palace. Qatar’s Nebras Power company is considering building wind power plants in Azerbaijan. Qatar sees Azerbaijan as a future partner in pursuing economic diversification. The Georgia-Saudi Arabia partnership also hopes to diversify into renewable energy, agriculture, manufacturing, tourism, and other sectors. Both sides are interested in collaborating in the fields of renewable energy, innovative use of hydrocarbon resources, electrical interconnection, and energy efficiency. Further diversification has occurred in UAE-Armenia discussions on cybersecurity partnerships to regulate sectoral cooperation between Armenia and the UAE.

Business relations between the GCC and South Caucasus have recently expanded. In 2022, Saudi Arabia and Azerbaijan established a joint business council, following an agreement between the Council of Saudi Chambers and the Azerbaijan’s Small and Medium Business Development Agency. This aligns with the Saudi Vision 2030 initiative to develop business opportunities in Azerbaijan across various economic sectors. In this vein, the fifth meeting of the Azerbaijan-Saudi Arabia Working Group was held in Riyadh on 13 April 2023 to explore potential opportunities for collaboration between relevant professional bodies. At the end of 2022, Azerbaijan also opened the Azerbaijan Trade House in Qatar in order to bolster economic collaboration and expand business relationships.

Gulf investment has flowed steadily into the South Caucasus. In February 2019, Qatar and Azerbaijan established a Joint Working Group on Investment. The UAE and Azerbaijan have also pursued relations in real estate, food security, and the logistics sector. Meanwhile, the UAE’s Abu Dhabi Group rebuilt the former Institute of Marx, Engels and Lenin on Tbilisi’s central Rustaveli Avenue into a five-star hotel tower—now the Biltmore Hotel Tbilisi.

In recent years, tourism has also been a key driver for collaboration. Statistics indicate that tourism between the two regions has increased: In 2017, 33,000 Saudi tourists visited Azerbaijan, a marked increase from only 7,500 in 2016. Similar jumps in visitors can be seen in 2018 data from other GCC states: Emirati tourists to Azerbaijan increased by 300 percent, Kuwaiti and Bahraini tourists by over 200 percent, and Omani tourists by 8 percent. Azerbaijan is an attractive destination for GCC tourists due to the availability of halal foods, the geographical proximity of the country, and the temperate weather. Furthermore, 30-day tourist visas for Saudis and GCC citizens can be obtained in Azerbaijan upon arrival. The Qatari ambassador to Baku, Faisal bin Abdullah Al Hanzab, stated in an interview that "over the past few years, Azerbaijan has become a preferred travel destination for many Qatari nationals due to the available infrastructure capabilities and the short flight distance between the two countries." Georgia has also become another accessible low-cost destination for GCC tourists.

Economic collaboration between the two regions is expected to develop further. In March 2023, after the UAE had already signed deals with India, Israel, Indonesia, and Turkey, the UAE and Georgia entered into a comprehensive economic partnership agreement (CEPA) to bolster economic ties and bilateral trade. Qatar and Georgia also signed two other agreements this year, one focused on "mutual support and protection of investments" and the other on "economic, trade and technical cooperation." 

In addition to direct bilateral relations, relationships are also being built through institutional cooperation. After independence, Azerbaijan sought membership in many international institutions on the basis of shared Muslim identity, including the Organisation of Islamic Cooperation (OIC). This also made Saudi Arabia a crucial partner for institutional-level cooperation. Baku hosted the first GCC-Azeri Business Forum in October 2017. As a result of this forum, GCC states committed to investing about $1.3 billion in Azerbaijan, and Azerbaijan reciprocated by offering $300 million towards the GCC states’ economies. This collaboration is occurring within the context of the OPEC+ agenda.

GCC and Complex Issues

During a ceremony in Baku marking 30 years of diplomatic relations between Saudi Arabia and Azerbaijan, Azerbaijan celebrated Saudi Arabia’s longstanding support. In the mid-1990s, Saudi Arabia was among the first states to offer humanitarian and economic aid to Azerbaijanis affected by the Nagorno-Karabakh conflict. Saudi Arabia supported Azerbaijan at the UN General Assembly and the OIC and backed Azerbaijan’s internationally-recognized authority over Nagorno-Karabakh. Azerbaijan emphasized the religious nature of the conflict, pitting Muslim Azerbaijan against Christian Armenia. Saudi Arabia, "with its regional and global heavyweight value and Islamic-oriented stance, sought to support Azerbaijan’s right on the issue."

Despite speculation in many circles that Qatar might play a more active role as a mediator in the conflict, it has not done so. However, Qatar welcomed the ceasefire agreement signed in November 2020 between Azerbaijan and Armenia in the Nagorno-Karabakh region. Another important issue in this geopolitical context is the Armenian genocide. In a more recent context, Armenia attaches great importance to this issue for building closer relations with many Arab countries. In 2017, several Middle Eastern countries expanded its coalition with Yereven to counter Turkey in the region and beyond, particularly due to divergent stances on the Muslim Brotherhood. Yerevan finds itself in a similar security predicament regarding Turkey as other countries in the region, including Egypt, eastern Libya, Syria, and Greece. These factors have helped strengthen the UAE-Armenia alliance. In 2020, Libya’s interim government has also acknowledged the Armenian genocide.

A Complex Nexus

The deterioration of Azerbaijani relations with Tehran have led to closer ties between Azerbaijan and Israel. At the same time, Armenia has been primarily supported by and is dependent upon Iranian economic and security backing. This has created a complex nexus of alliances in the region. Qatar strongly condemned the recent attacks on Azerbaijan embassy in Tehran, as did Oman, which affirmed that it rejected any action targeting diplomatic missions or destabilizing security and stability.

Following the recent war between Azerbaijan and Armenia over Nagorno-Karabakh, "Tehran looked at the significant change in the balance of power that had occurred, which of course was not in its favor, but tried to proceed [cautiously]. . . in the agreement sponsored by Russia in cooperation with Turkey (Azerbaijan’s main ally)." As Seth Frantzman argued in 2022: "As Israel successfully upgraded its relationship with Azerbaijan and Bahrain, Iran [was] trying to counter Israel’s diplomatic success with threats to its neighbours." Frantzman went on to explain that this state of affairs "reverses the usual role of Iran in the region, expanding its influence and attacking other countries via proxy groups. Now it is Iran who is facing protests at home and is worried that countries closer to it may be a threat."  It might not coincidental that Bahrain-Azerbaijan-Israel relations have grown closer during this time. In March 2023, the US embassies in Israel, Bahrain, and Azerbaijan co-hosted an iftar meal. According to  Azerbaijani ambassador to the US, Khazar Ibrahim, this occasion fostered "peace, friendship, interfaith dialogue, regional bonds and shared values will trump the challenges we face." 

Furthermore, the recent normalization of relations between Iran and Saudi Arabia could prove advantageous for the South Caucasus in the medium term. Suren Sargsyan has argued that while Armenia did not comment on the Chinese-brokered normalization of Saudi-Iranian relations, "it is obvious that Iran is trying to concentrate its attention on the South Caucasus region and to make sure that there are no significant challenges arising from Saudi Arabia at this point. This is a new opportunity for Armenia to regulate its own relations with Saudi Arabia as Armenia never had diplomatic relations with that country."

Conclusion

The expansion of relations between the South Caucasus and GCC states has become increasingly important. From an economic perspective, both regions are key trade partners for each other, as well as partners in the energy sector and in economic diversification. They also share an interest in building tourism and business partnerships between the two regions. These dynamics are occurring at both the bilateral level and through institutional collaborations. At the same time, the growing geopolitical clout of the South Caucasus and the GCC states in their respective regions is also crucial. Despite the GCC states’ previous support of Azerbaijan in Nagorno-Karabakh, the GCC now hopes to pursue ties with both Azerbaijan and Armenia.

Enhancing collaboration and relations with Armenia has become a geopolitical tool for some countries in the region in order to counter Turkish influence in the South Caucasus. These recent developments have brought together the South Caucasus and the Middle East. Azerbaijan’s deteriorating relations with Iran, closer ties with Israel, and the recent Chinese-brokered deal between Saudi Arabia and Iran have also shaped the development of strategic alliances with GCC states. Bahrain has ramped up ties with Azerbaijan, while further Armenian-Saudi dialogue towards future diplomatic relations remains a possibility on the horizon.

Disclaimer: Views expressed in this article solely represent the author and do not reflect the views of InterRegional for Strategic Analysis