The snow-capped Caucasus mountains mark the point where Europe and Asia meet – and the Caucasus region, a 1,000-mile stretch of land between the Black Sea and the Caspian Sea – is steeped in millennia of history.
Coming under the control of powers including the Roman, Byzantine, Ottoman and Mongol empires, Arab geographers described the region as ‘Jabal Al-Alsun’ or ‘Mountain of Languages’. More different languages are spoken in the Caucasus than in any comparably-sized area on Earth.
In part, this is due to the strategic location of the Caucasus between Europe and Asia, but countries within the Caucasus also offer opportunities across a range of sectors as they seek to diversify their economies.
The countries of the Caucasus are also becoming increasingly important in terms of infrastructure, thanks to the Middle Corridor - a land and sea freight route from Europe to China, which offers an alternative to the traditional one through Russia. For millennia the Caucasus has been a link in global supply chains – and there’s now renewed interest in this rapidly developing route.
The combination of the key routes through the Caucasus and the diverse and growing economies of its nations offer opportunities for British exporters – with ambitious plans for ports in the region which aim to become important logistics hubs.
In Azerbaijan, there are particular opportunities in the fields of green and renewable energy, thanks to a government strategy to switch from fossil fuels to energy sources such as offshore wind.
Georgia has a modern, Western-style economy, and as the country seeks to diversify its economy there are many opportunities for UK businesses.
While the region is not without challenges, for those wishing to do business here, there are certainly opportunities to be found.
While the region isn’t without challenges these rapidly growing countries house great opportunities for savvy businesses keen to expand, says Rob Waugh
Why now is the perfect time to do business in the Caucasus
Sitting at the crossroads between Europe and Asia, the Caucasus offers huge potential for companies shipping goods between East and West. That potential is set to blossom still further with the planned expansion of the capacity of the ports on Georgia’s Black Sea coast, investments in road and rail links and increased digitalisation at border crossings.
The Georgian vice-prime minister and minister of economy, Levan Davitashvili said this year: “We want to have a modern port infrastructure which would meet the country’s transit potential, which would serve the interests of our country, and, of course, will further increase cargo flows in the Georgian corridor.”
Now is an exciting time for your business to sell to the Caucasus. The Department for Business and Trade (DBT) provides a wide range of free support, wherever you are on your exporting journey.
Find out more about the Caucasus and how DBT can support you at great.gov.uk
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For centuries the wealth of Azerbaijan – and its value to the Soviet Union – came from its vast oil and gas reserves. With its first oil refinery built in 1859, Azerbaijan was one of the birthplaces of the oil industry, with oil having been dug from the ground by hand in the area for the past 10 centuries.
The 19th century turned Baku into one of the world's leading energy centres. But the country is acutely aware of the need to diversify towards renewable energy, with an ambitious plan to secure 30 per cent of its energy needs from renewable sourced by 2030.
A new strategy adopted in 2021 will see a marked move towards exploring the country’s potential in green energy sources including wind, solar, bio-energy and hydropower.
The countries of the Caucasus
Doing business in Azerbaijan
The UK is the largest foreign investor in Azerbaijan, thanks in part to the presence of BP, but more than 450 British companies are already successfully doing business there. These businesses work across sectors as varied as construction, retail and education.
The country’s position leaves it as a 'gateway' between Europe, the Middle East and Asia, and thus businesses operating in the country benefit from high government spending on infrastructure projects.
A government strategy for free trade agreements, economic reform and enhanced infrastructure links is transforming the country into a promising hub for international trade and investment.
Azerbaijan's economy has shown its resilience during the shocks caused by the pandemic, and grew 7.2 per cent in 2021. The government is focused on diversifying the economy, where 49 per cent of the country's £54.62 billion GDP in 2021 came from industry. Because of these strong foundations, the country can now afford to pivot into investing in industries such as IT, cyber security, healthcare and infrastructure. Doing so requires innovative international partners with the skills and technology to make things work: this offers opportunities for British businesses in both goods and service exports. The UK's main exports to Azerbaijan include services, technology and equipment and machinery for the oil and energy sector.
Georgia
Key Industries: Energy and infrastructure, transport and logistic, agriculture, tourism
This mountainous country has effectively modernised its economy with a thriving financial and professional services sector. It is investing significantly in its road and port infrastructure, reflecting Georgia’s importance as a transit route, and in its energy sector.
Armenia
Key Industries: Mining, technology, infrastructure, green energy
Armenia's economy is bouncing back and the IMF projected that GDP would grow by 7 per cent in 2022, and 3.5 per cent in 2023.
Azerbaijan
Key Industries: Industries: Infrastructure, energy, tech
The UK is already the number-one investor in Azerbaijan, and its position makes it an ideal hub for transportation.
Turkey
Iran
Georgia
Azerbaijan
Russia
Armenia
Azerbaijan's Baku International Sea Trade Port also aims to become an important logistics hub for the region, and is building on its existing transit potential through digitalisation and increased international partnerships.
This offers great opportunities for British businesses who have expertise in logistics and construction, who can take a leading role in these ambitious projects, as well as businesses who can utilise these networks to create a hub to export within the region around the Caucasus.
Opportunities in Georgia
In Georgia too, British businesses have been quick to seize on opportunities in the country, and have been amongst the largest foreign direct investment (FDI) investors. BP was a forerunner with the construction of the oil and gas pipelines running through Georgia from Azerbaijan to Turkey and beyond. But others in transport, communications, tourism and real estate have followed. The stock of British direct investment in Georgia is currently valued at £1.4 billion.
It’s extremely easy to register a company in Georgia, with the process taking as little as one day. Some investors are also attracted by the low business tax and contribution rate.
The Caucasus mountains are higher than the Alps
More languages are spoken in the Caucasus than in any similarly-sized area in the world
CAUCASUS facts
Renewable energy
Adult literacy rate in the three South Caucasus countries is 99.8 per cent.
Georgia has been recognised by by UNESCO as the site of the world's first cultivation of grapes for wine 8,000 years ago
Caucasus facts
The country’s offshore wind potential is estimated at 157 gigawatt-hours – and its leadership has turned to experts from the UK to help plan a roadmap for the complex project.
BVG Associates, an energy consultancy company in offshore wind projects, helped to create a roadmap for the project, which when completed will see Azerbaijan realise its ambition of becoming a green energy exporter to its neighbours.
Neil Douglas, director of BVG Associates says: “We are working on behalf of the World Bank in a programme to globalise offshore wind. The World Bank has conversations with governments in countries where there’s technical potential for offshore wind and we work with the energy ministries to deliver offshore wind programmes.”
Douglas says he worked closely with the Department for International Trade (now the Department for Business and Trade) in Azerbaijan, as he has in other regions across the world, relying on the department’s officials for helpful introductions to local contacts.
But Azerbaijan is not the only country with ambitious energy plans in the Caucasus. Georgia is already a regional leader in hydropower, which accounts for 75 per cent of domestic electricity generation but has potential to expand its hydro capacity further. For the UK this offers the additional potential of partnership in Green Hydrogen, in which the UK is an acknowledged world leader. Georgia is also about to embark on a programme of renewable energy developments in solar and onshore wind, presenting some strong opportunities for UK expertise.
Neighbouring countries might also harbour opportunities for UK businesses with expertise in the energy sector. Armenia also has ambitious plans in solar energy and hydropower, with a plan to increase the share of solar energy 17-fold to 15 per cent of generation in the country, with up to 1,000 megawatts of solar photovoltaic capacity to be installed by 2030. Additionally, Armenia has pledged to increase the share of zero-emission source in total energy generation to 54 per cent by 2030. This expansion will require international partnerships, something UK businesses are well placed to provide.
Infrastructure
%
%
702
Total value of UK exports to Azerbaijan in the four quarters to the second quarter of 2022
51.3
Amount of UK exports that were services
450
The number of UK companies already doing business in Azerbaijan
30
Azerbaijan's 2030 target for renewable energy supplies
Azerbaijan's economy in numbers
%
%
156
Total UK exports to Georgia in the year up to the first half of 2022
10.4
Growth of Georgia's economy after the pandemic in 2021
4
Million
Average growth of Georgia's economy 2011-2021
4.8
British market share for services in Georgia
Georgia’s economy in numbers
9.9
Total business tax and contribution rate
%
%
FACT
In terms of exports of goods and services from the UK to Georgia, a bilateral Free Trade Agreement has been in place since January 2021, removing tariffs and standardising customs and other export administration. British exports to Georgia were £156 million in the four quarters to June 2022, a rise of 15.6 per cent on the previous year.
Recognising Georgia’s potential as a trading partner, UK Export Finance (UKEF) has recently increased its ‘cover’ to companies operating from the UK exporting to Georgia, to £4 billion, This is one of the largest export credits UKEF offers in the region, and will provide UK Government support to exporting companies with matters such as financing terms to their buyers, supporting working capital loans and insuring against defaults.
%
£
Million
£
702
Total value of UK exports to Azerbaijan in the four quarters to the second quarter of 2022
Million
£
%
51.3
Amount of UK exports that were services
%
30
Azerbaijan's 2030 target for renewable energy supplies
450
The number of UK companies already doing business in Azerbaijan
156
Total UK exports to Georgia in the year up to the first half of 2022
Million
£
Growth of Georgia's economy after the pandemic in 2021
4.8
%
10.4
%
British market share for services in Georgia
4
%
Average growth of Georgia's economy 2011-2021
%
9.9
Total business tax and contribution rate
Armenia
Kyrgyzstan
Key Industries: Mining, agriculture Kyrgyzstan offers significant potential in terms of expanding its agriculture, electricity production and tourism industry
Uzbekistan
Key Industries: Agriculture, financial services, energy, education
Uzbekistan is riding a wave of market reforms and privatisations which see the country poised to offer major opportunities for foreign investors
Kazakhstan
Key Industries: Oil, gas, minerals, education Kazakhstan is by far the biggest economy in Central Asia and is an oil, gas and mineral powerhouse, with a very international outlook
Iran
Kazakhstan
Tajikistan
Kyrgystan
Russia
Kazakhstan's land border with Russia is 4,667 miles long, the longest in the world
Kazakhstan accounts for around 60% of the total GDP of Central Asia
CAUCASUS facts
702
Total value of UK exports to Azerbaijan in the four quarters to the second quarter of 2022
%
51.5
Amount of UK exports that were services
%
30
Azerbaijan's 2030 target for renewable energy supplies
450
The number of UK companies already doing business in Azerbaijan
Azerbaijan
The Caucasus
