Key Takeaways

• Georgia’s ruling party, Georgian Dream (GD), has recently turned to history in order to position itself as a defender of a peaceful, enduring state amid dangerous neighbours.

• GD continues to conduct a multivector foreign policy but must carefully balance relationships with Eurasian powers alongside a “European” identity favoured by its citizens.

• As long as it spurns Euro-Atlantic integration, Georgia’s security relies on its utility as a hub to evade sanctions and conduct international trade.

A Turn to Georgia’s Pre-Imperial Past

Georgia’s Prime Minister, Irakli Kobakhidze, detoured centuries into the country’s history during a briefing on international relations on August 18. Before the press, he praised the 1783 Treaty of Georgievsk, when Erekle II of the Georgian kingdom of Kartli-Kakheti accepted Russian “protection” in exchange for guarantees of sovereignty.

Kobakhidze’s unprompted defence of a treaty that foreshadowed Imperial Russia’s annexation of Georgia sparked a firestorm at home and abroad. Did this move herald a new stage – or at least a new public stage – in Russia-Georgia relations? Russian media nodded approvingly. What might this mean for Georgia’s multivector foreign policy, which has been leaning heavily towards China, Iran and Eurasia in the past years? What did it augur for tentative efforts at transatlantic détente with North America and the European Union (EU), which have been critical of Georgia’s democratic backsliding?

Any effort to attribute long-term strategy to the actions of the governing Georgian Dream (GD) party is risky, but Kobakhidze appealed to domestic and international audiences alike as he spoke about Georgia’s place in the world through its history. The diversion reveals above all the delicacy of Georgia’s security surrounded by countries currently at war (Russia, Ukraine, Iran) as well as those considering a path to peace (Armenia, Azerbaijan, Türkiye). It also accounts for the Georgian population’s ambivalent views towards Europe, Russia and Eurasian powers.

Kobakhidze presented Erekle II’s decision as a “” for Georgia. He cited Christianity and “traditional European culture” in a treaty that ostensibly allowed Georgia to avoid assimilation into Turkic or Persian worlds. He also argued Georgians that Russia – which later violated the agreement, absorbing the region in 1801 – would act in its own interests, in a briefing that presented a of international relations.

Russia’s state-run news agency, RIA Novosti, highlighted Kobakhidze’s speech with the headline: “.” Georgian opposition figures alongside Mikheil Saakashvili, the now-jailed former Prime Minister, that this “history lesson” foreshadowed a future agreement between Georgia and Russia. One that the Georgian public, still negatively inclined towards its northern neighbour (), would need to swallow for its own future survival and “civilization.”

Europe (Which Europe) or Eurasia?

Motivations behind Kobakhidze’s statements, however, appear more complicated. GD has little to gain through formalizing a relationship with Russia. Opening a discussion on the Russian-backed territories of Abkhazia and South Ossetia – which together compose about 20% of Georgia’s territory – would open a large wound with unpredictable consequences. Given Russia’s unpopularity in Georgia, GD has always operated in a zone of plausible (and public) deniability of links between Moscow and Tbilisi. Sanctions-busting, however, . Georgia has followed domestic security playbooks used in Russia and Belarus, among others, from to the .

Keeping these relationships quiet also allows Georgia to continue feigning allegiance with the West even as it builds an increasingly authoritarian state, condemning “,” and . The loss, however, of their closest ally in Europe – Hungary’s Viktor Orbán and his Fidesz party – complicated GD’s narrative that they would join, in essence, an Orbánified-Europe. Georgia has extended olive branches to and a high-level parliamentary delegation visited in June. As Kobakhidze’s defence of Erekle II highlights, Georgia continues to view itself as “civilizationally” European. GD leaders hold , alongside citizenship for their families. Formal agreements with Russia would threaten GD members with further sanctions () and disturb their quiet – though commonly-known within Georgia – relationship with the European powers whose liberal values they condemn in terms .

Kobakhidze’s highlighting of Erekle II’s Christian choice also serves to counterbalance its increasing Eurasian links, even as the population overwhelmingly considers itself European. Thus far in 2026, Kobakhidze has visited the Central Asian countries of Kazakhstan, Kyrgyzstan and Tajikistan; Uzbek President Shavkat Mirzoyiyev met Kobakhidze in Tbilisi in July. Georgian President Mikheil Kavelashvili also attended the funeral of Iranian leader Ayatollah Khamenei in July 2026, while on June 9 Georgia and China “upgraded” their relationship to a “.”

The Middle Corridor: Georgia’s Future?

Georgia is staking its security and prosperity on acting as a critical transport hub through the Middle Corridor (also known as the ), linking China to Europe through Central Asia and the Caucasus. Traffic through the Middle Corridor has experienced since Russia’s 2022 invasion of Ukraine. Central Asia’s promise to increase the corridor’s importance in the coming years. Georgia’s free trade agreements with Türkiye, the EU, and US also serve to make the country extremely attractive for Chinese enterprises. Chinese companies have already played a major role in upgrading Georgian road and rail infrastructure, while Xinjiang’s facilitates commercial exchange between Georgia and other Xinjiang-based Chinese companies.

Georgia’s ties with Iran have also deepened, though the effect of the ongoing regional war is unclear. As with Russia, Georgia has become a for Iranian companies. Russian strategic airlifters have been to Iran, even though the country has pledged to . And while relations with the US remain rocky, . Washington has noted the importance of Middle Corridor trade and in the long-stalled plan to develop the deep-sea Anaklia port on the Black Sea after a Chinese company withdrew from the project.

GD also realizes it needs to move quickly to consolidate trade as the prospective Trump Route for International Peace and Prosperity (TRIPP) could soon become a rival transitway across the Middle Corridor. With plans to take Chinese and Central Asian goods to Europe through Armenia and Azerbaijan, the TRIPP represents a threat to Georgia’s role in facilitating regional trade. However, to Georgia’s benefit, and faces staunch Iranian opposition.

How does Erekle II fit this picture? Kobakhidze wants Georgians to consider the historic King as making hard but necessary geopolitical decisions in a world of great powers. Kobakhidze, like Erekle in a way, wants to be seen as the trusted actor to deal with dangerous entities in the interests of maintaining a , which has been GD’s basic platform since 2022. GD wants to show a “civilized” European face even as it deepens dealings with Eurasian powers. This discourse also serves as a signal to Russia that Georgia is a friendly country even as it privileges maintenance of its sovereignty. GD will, in the meantime, happily use a historical debate to that has condemned this comparison through its control of an increasingly authoritarian regime. Georgians who oppose GD point to growing internal party divisions,, as evidence of a party lacking the funds to grease enough palms to tighten its rule. Such calls, however, remain based on hope more than evidence.

Policy Recommendations

• GD’s decision to support US civil aviation sanctions on Iran shows it is sensitive to Western pressure. Intensified efforts, by Europe and the US simultaneously, to identify and punish sanctions-busting by the Georgian government could loosen GD’s anti-democratic grip.

• Possible carrots for Georgia can involve support for trans-shipment through Anaklia or an expanded Poti port, with strings that would allow Georgian civil society groups to function. It is unclear, however, whether GD would make such a concession. One stick would involve efforts to shift trade to TRIPP, effectively icing Georgia out of the economic benefits of regional integration.

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After a contentious summit – one that saw European Union (EU) members divided on the future of funding to Ukraine as the war nears its fourth year – the EU has created a plan to secure an . This plan depends on using cash from secured capital markets, deviating from the to use frozen Russian assets. The summit comes at a time where and . While the EU’s major goal of securing a funding package was achieved, internal fractures are increasingly felt and spreading, with the discussion inflaming verbal attacks and disagreements between Hungary, Slovakia, and other EU members.

Risky or revolutionary?

The EU’s final iteration of its funding package comes as a much safer development from the Commission’s initial Reparations Loan. That initial package would have secured funding from since the start of the full-scale invasion. Days before the summit, the EU agreed to , which primarily belong to the Russian Central Bank, held through Euroclear. The Commission maintained there was no breach of ethics on account of the agreement not affecting the Russian Central Bank’s intellectual property and Euroclear would be bound to repay it. Despite this, the plan elicited heated controversy among EU members.

Strong opposition largely stems from Euroclear and Belgium – where the financial company is based. Euroclear’s concerns pertain to the international trust in the euro and the company itself; it also expressed concern that it may be undermined by what they deemed a “.” Belgium fears Russian retaliation through international courts. The and promised if the plan were to go ahead. Retaliation from Russia could also include various hybrid strategies such as cyberattacks, sabotage of critical infrastructure, or even drone incursions. Hungary and Slovakia have also opposed the plan. The two countries have become increasingly critical of EU sanctions against Russia due to their own political and energy connections and dependencies on the country. Both nations to indefinitely freeze Russian assets, eliminating their veto power. Prime Ministers and slammed the plan on social media, implying it betrays important normative and legal architecture of the European Union.

Ultimately, the Reparations Loan in its original form was not passed, with members saying it was “too complex” and politically risky to go through with now. The primary concern was that Belgium needed . This brought mixed reactions and the guarantees could not be met. The EU’s main strategic goal to avoid escalation with Russia also made this move too risky, with the threat of financial and legal repercussions too costly.

What’s next for Ukraine?

The loan will be based on , requiring Ukraine to pay it back once they begin receiving reparations after the war has ended. The current plan eases the burden for some struggling with financing Ukraine directly, while also not affecting the obligations of countries like . This guarantee also paved the way for these countries to support the loan, making the decision smoother. The loan will be used to support Ukraine’s financial needs, particularly for investing in Ukrainian defence technology and industry. The country has identified a need for additional funding beyond its current IMF program, calling for up to .

What does this say about the EU?

One thing that has become abundantly clear during the summit is the increasing fractures between members of the European Union regarding the war in Ukraine. Russia’s full-scale invasion of Ukraine and its continued influence throughout Eastern Europe is beginning to sow real discord within the EU, proving to be an increasingly complex issue as the war rolls on. Currently, the EU has made several moves that mitigate the ability for countries that sympathize with Russia to disrupt aid to Ukraine; however, the new plan also gives a noteworthy “out” to these countries by allowing them not to contribute. Disagreements over the war are also combined with strong anti-bureaucratic and anti-EU rhetoric from leaders, who operate from a populist and, at times, illiberal base of governance. The EU will need to be vigilant and cautious about the influence and relationship to Russia that current member states have. The destabilization and weakening of the EU will be strategically advantageous to Russia, divisions that have already begun to exploit.

What will be interesting to see is how funding will evolve as time goes on. The EU . Will later developments prompt this risky move? Additionally, what will the reaction of Moscow be in these current conditions? It will be important to follow developments as they relate to renewed funding, as this could (re)invigorate either party and change future strategies and funding scenarios. Whether this will result in strategic pressures with positive outcomes or a further destabilization of the European continent, has yet to be seen.

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Amid the ongoing war in Ukraine, Latvia is increasingly confronting the issue of companies using third countries to evade international sanctions. Many companies, particularly in the information and communication technology (ICT) sector, use transit jurisdictions, undermining international efforts and national security. Traditional sanctions alone are insufficient, as . This memo explores the potential of corporate self-regulation through corporate social responsibility (CSR) as a proactive alternative.  

CSR allows companies to voluntarily exclude themselves from unethical practices, ensuring that each employee takes responsibility for compliance with established norms. Participation in such ethical business practices could enhance . This issue is particularly pressing as the to finance Russia’s war against Ukraine, making it a matter of national security. While the circumvention of sanctions occurs across various industries, this paper focuses on the self-regulation mechanisms implemented by Latvian ICT companies. An assessment of Latvia’s five largest ICT companies shows considerable variation in their compliance with self-regulatory standards. Only a few meet most criteria, likely because prior reputational issues have prompted greater efforts. Key gaps include: weak public advocacy, limited third-party transparency, and insufficient training on sanctions compliance.   

This memo concludes that self-regulation practices concerning sanctions compliance among Latvian ICT companies are insufficient, especially in light of the war in Ukraine. Recommendations include encouraging CSR-based compliance frameworks, improving transparency, and considering a legal model similar to the United Kingdom (UK) Bribery Act 2010 to promote ethical business conduct and accountability. As sanctions circumvention directly impacts Latvia’s economic security and geopolitical independence from Russia and Belarus, promoting stronger self-regulatory and legal mechanisms are essential. This approach could also be applied to other high-risk sectors such as construction and extractive industries.

The Problem

The issue of sanctions circumvention, particularly through third countries, has become acute since Russia’s full-scale invasion of Ukraine in 2022. indicates that many Latvian companies use states in Caucasus and Central Asia as intermediaries to get around international sanctions. For example, in 2024 the Deputy Director of the Customs Administration – without disclosing the names of specific companies – noted a sharp increase in the number of sanctions violations committed by Lativan companies. The export of goods was prohibited in more than related specifically to Central Asian countries. This report highlighted that the goods being intercepted are mostly various mechanical devices, vehicles, and electrical equipment. Similar increases have been observed in Germany, as reported in a by Robin Brooks. There is about the need for against companies that facilitate such activities. However, it is evident that this approach is not , as it often fails to address the , namely, that the same individuals can establish new legal entities, continue their operations under a different owner, or employ alternative schemes to .  

The Context

In the case of CSR, compliance with economic sanctions is not a well-documented subject. According to relevant literature on the topic, sanctions compliance could be indirectly linked with topics, such as ; corruption risks associated with ; as well as s. CSR is also generally accompanied by an that aids in internalizing and implementing its provisions, as well as adhering to its own established standards and norms. Furthermore, the literature emphasizes the necessity of a proactive and innovative approach in developing supplementary mechanisms that beyond mere regulatory compliance. 

There are related but not directly addressed topics about sanctions compliance within CSR. In 2025, the United Nations Working Group on Business and Human Rights released a implying that businesses should comply with all relevant legal frameworks, which could include sanctions. Maayan Menashe that international standards can become embedded as social norms within corporations, influencing their behaviour even when legal enforcement is weak or absent. Similarly, sanctions compliance can be reinforced by market and societal expectations, making circumvention more reputationally and financially costly. According to Hortense Jongen, the private sector is facing pressure to , particularly in areas like anti-bribery and corporate responsibility, because of scrutiny from . Just as firms voluntarily align their CSR policies with international standards to maintain credibility, according to Bryan R. Early and Timothy M. Peterson, they may also adopt stricter compliance policies regarding sanctions to avoid being . A strong example of corporate response to geopolitical events is the reaction to Russia’s invasion of Ukraine, with over 1,000 companies publicly announcing the beyond the minimum legal requirements imposed by international sanctions. 

 A recent study by Keith A. Preble and Bryan R. Early claims that a critical aspect of compliance with economic sanctions is , with enforcement agencies leveraging “naming and shaming” tactics to deter violations. Firms fearing reputational damage are less likely to engage in risky transactions with sanctioned entities, and the heightened scrutiny on large corporations creates industry-wide compliance pressures. However, the authors also , with American institutions imposing significantly higher fines on foreign entities to ensure global compliance. Similar conclusions come from a study which , particularly those imposed on Russia after its 2022 invasion of Ukraine, through a survey of 610 medium-sized companies in Germany, Poland, and the United States (US). This analysis finds that, while external pressure generally encourages compliance and even overcompliance, it can also push some firms toward sanctions circumvention. Compliance is often accompanied by proactive business strategies aimed at finding legal loopholes to continue operations. The results of this study underscore the – US firms, for instance, face stronger legal enforcement mechanisms, whereas firms located in the European Union (EU) , particularly in Germany and Poland, exhibit a wider spectrum of compliance behaviors. These findings suggest the need for stronger enforcement mechanisms, standardized regulatory guidance, and targeted measures to curb both undercompliance and sanctions circumvention. 

To gain insight into how such regulatory measures are implemented by Latvian ICT companies and what the most popular approaches are, this memo examines the largest ICT enterprise, including a review of corporate statutes, annual reports, as well as open and publicly available data. The evaluation is conducted based on criteria aligned with  international standards. However, the criteria used in this memo are modified to reflect the existing narrative on sanctions circumvention, specifically addressing political involvement, corruption risks associated with third-party involvement, and public anti-corruption stance. The assessment is conducted based on a scoring system, where “Yes” is assigned 1 point, “Partially” is assigned 0.5 points, and “No” is assigned 0 points, depending on the extent to which the information found in the company’s documentation aligns with the methodological criteria.  

The methodology to review the most popular approaches is based on ISO 37001 (), ISO 26001 standards (), (training programs), (third-party involvement and whistle-blowing) and (sanctions compliance and restricted parties). State-owned companies or companies that have previously been state-owned are excluded from the study. Primarily, publicly available information about companies is included, and letters requesting answers to specific questions were sent out to relevant companies as a secondary source.  

Table No.1 Criteria to review most popular self-regulatory approaches 

Table No.2 Evaluation of the largest Latvian ICT companies 

Overall, self-regulatory approaches and their implementation among the five largest Latvian ICT companies can be characterized as insufficient according to the utilized methodologies. There are significant disparities in the extent to which companies comply with the requirements, with some demonstrating full or near-full compliance, while others fail to comply with any of them.  

The lowest performance was observed in areas such as advocacy for sanctions compliance, transparency regarding meetings with public authorities, and disclosure of industry association memberships. In addition, most companies disclose only their own offices and a limited number of partners, failing to provide comprehensive disclosure of partners across different jurisdictions. Furthermore, there is insufficient recognition of anti-corruption and anti-bribery compliance programmes, and whistleblowing mechanisms for employees are largely absent. Additionally, based on the analysis of social media and website content, as well as information obtained through formal correspondence, existing training programmes appear to inadequately cover all key topics. Typically, employees across all levels receive uniform training content on anti-corruption and compliance, with no specific reference to sanctions compliance. 

Conclusion and Recommendations

Given the inconsistent approaches among businesses in implementing sanctions compliance policies, it may be beneficial to consider a legal framework similar to the . This legislation has motivated both domestic and foreign companies operating in the UK to establish , as failure to do so may result in legal liability. A comparable framework could be developed for sanctions compliance in Latvia – clearly defining what constitutes a sanctions violation and establishing enforcement mechanisms. Such a framework should also include provisions for holding companies accountable for failing to prevent sanctions circumvention or violations. 

At the same time, such measures may be considered controversial, as critics might claim that these regulations internationally, potentially undermining short-term competitiveness. Criticism of this regulatory framework often comes from and various private sector actors – particularly those where law enforcement institutions are less advanced. In such contexts, companies based in developed economies can exploit institutional weaknesses to serve their own interests. This issue underscores the broader phenomenon whereby business actors from developed countries ‘export corruption’ and take advantage of their cooperation partners in developing countries. To mitigate such practices, only a few jurisdictions have introduced specific regulations, for instance, foreign bribery committed by U.S. nationals or persons located in the country is addressed under the . 

Analysis of ICT companies in Latvia reveals differing approaches to sanctions compliance. It is important to acknowledge that , , long term, often involving tax avoidance, tax evasion, tax fraud, and money laundering. Given Latvia’s current , there is a strong case that implementing such a regulatory framework could positively influence corporate decision-making, especially in selecting international partners. The evaluation shows that only Tietoevry Latvia has largely met most criteria, likely as a result of efforts to involving Belarus. In other cases, the extent of compliance remains incomplete.  

In sum, based on the analysis conducted, the following recommendations are proposed for Latvian policymakers and other relevant stakeholders: 

1. Develop a comprehensive legal framework for sanctions compliance. It is recommended that policymakers establish a legal framework for sanctions compliance and prevention of foreign bribery, modelled on the UK’s Bribery Act 2010; 

2. Promote enhanced corporate due diligence in partner selection. Companies should be encouraged to strengthen their due diligence practices, particularly when selecting international business partners, especially in high-risk geopolitical contexts; 

3. Expand compliance evaluation to other high-risk sectors. It is advisable to apply the compliance evaluation methodology currently used in the ICT sector to other high-risk industries, including construction and extractive sectors. 

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