‘Lifting sanctions is the last thing they want’ Western sanctions on Russia have upended cross-border trade. In Georgia’s case, that just might be a good thing.
Georgia has quietly built economic momentum by capitalizing on the ripple effects of Western sanctions against Russia — particularly through a booming car re-export trade. But with Donald Trump’s unpredictable approach to foreign policy, the future of this shadow economy is far from certain. For Novaya Gazeta Europe, Iya Barateli investigated how sanctions on Russia have been a boon for Georgia’s economy — and what could follow if they’re lifted or eased. Meduza shares key points from her reporting, translated into English.
Georgia’s top export for years now has been something it doesn’t produce: cars. Thanks to its strategic location, access to ports, low tariffs, and streamlined customs procedures, the country has become a key hub for the re-export of vehicles from Europe and the United States.
The business is thriving — perhaps not in spite of the war and sanctions, but because of them. In 2024, Georgia exported a record $2.43 billion worth of passenger cars. And in just the first two months of 2025, vehicle exports totaled $285 million. Much of that trade, experts believe, ultimately reaches Russia via third countries. The numbers back that up: since sanctions were imposed, Kyrgyzstan and Kazakhstan have become the top buyers of Western cars from Georgia. Since January alone, Georgia has exported $100.7 million worth of cars to Kyrgyzstan and $166.6 million to Kazakhstan.
In a Telegram post, Autostat analyst Sergey Tselikov shared broader figures showing how the re-export system works. Between March 2022 and February 2025, nearly 100,000 new passenger cars entered Russia via Kazakhstan. That route, he noted, began gaining traction three years ago. Kyrgyzstan became a second major transit corridor shortly thereafter. “Over the past three years, nearly 130,000 new cars have been imported through these channels,” Tselikov wrote.
Many economists believe the financial stability enjoyed by the ruling Georgian Dream party — which has openly rejected aid from the E.U. and the U.S. — is largely underpinned by this “gray” re-export trade to Russia.
Before the full-scale war in Ukraine, the pandemic had pushed Georgia into a deep economic crisis. Even with preferential loans and direct budget support from the West, the country struggled to keep its currency afloat. Today, the networks built over the past three years to reroute sanctioned goods to Russia largely fill the gap left by the absence of financial assistance from the E.U., U.S., and IMF.
But this arrangement may not last. If U.S. President Donald Trump decides to ease or lift sanctions, Georgia’s profitable re-export scheme could quickly lose its value. For now, Georgian Dream benefits from the West’s sanctions on Russia.
‘Doing what brings in money’
Economist Vakhtang Partsvania, a professor at Caucasus University in Tbilisi, described the situation to Novaya Gazeta Europe as paradoxical: for several countries in the region — Georgia included — sanctions on Russia have turned into a lucrative opportunity.
“Under Georgian law, re-exporting goods to third countries — excluding Russia — is perfectly legal and does not violate Western sanctions. So the government’s view is: as long as Georgia isn’t selling directly to Russia, it bears no responsibility for what happens after the car leaves Georgia’s borders,” he explained. “But the E.U. might view this as a ‘gray channel’ — because in the end, those cars are still making it to Russia, bypassing sanctions.”
In theory, that could be prosecuted. But in practice, it’s difficult for European authorities to trace and penalize those involved. The business is driven largely by small traders and intermediaries, not large corporations. Re-export routes often involve a network of participants from Eurasian Economic Union (EAEU) countries — including Kazakhstan, Kyrgyzstan, and Armenia — between which customs borders don’t exist.
Partsvania noted that after Georgia formally imposed restrictions on re-exports to Russia in 2023, in line with the E.U.’s 11th sanctions package, border dynamics shifted significantly. “Before the restrictions, you might have seen 100 cars re-exported from the E.U. to Russia via Georgia. Now it’s 10,” he said. “The other 90 get routed through different countries — but in the end, Russia still gets its 100 cars.”
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Western sanctions are also expanding. The U.S. and E.U. continue to introduce new restrictions and tighten existing ones, adding more categories of goods to the list. Secondary sanctions have already hit companies in countries like China, South Korea, Kazakhstan, Turkey, the UAE, and Taiwan.
Thanks to tighter enforcement, large-scale shipments — like turbines or heavy machinery — are increasingly difficult to move through these routes, Partsvania noted. “But microchips or car parts are much easier to slip through unnoticed,” he added.
Investigations by journalists in Georgia have revealed that the re-export of sanctioned goods is a lucrative business involving a wide network of individuals who’ve established connections with government agencies along the supply chain. In theory, customs enforcement could clamp down on these shipments — if there were political will. But that hasn’t happened. Instead, the main profits flow not into the state budget, but into the pockets of those running the schemes.
“It’s not exactly accurate to say Georgian Dream is fundamentally pursuing a pro-Russian policy,” said Partsvania. “They’re simply doing what brings in money — however short-term or shadowy it may be. If it stops being profitable, or becomes too risky under sanctions, they’ll start talking about European integration again.”
Other countries in the region have taken a similar approach. According to Partsvania, when Europe shut down Russia’s trade routes, the region saw an opening. “Armenia, Azerbaijan, Kazakhstan — they all started playing their own game,” he said. “Lifting sanctions is the last thing they want. In fact, if Russia were allowed to fully return to global trade, Moscow’s attitude toward these countries might shift dramatically — and not for the better.”
Tariff troubles
Whether or not sanctions are eased, there’s still a real chance that Georgia could lose its billion-dollar foothold in the car re-export business. And once again, the reason has to do with Donald Trump — this time, because of his tariffs.
Georgia primarily imports and resells used cars. The most popular models are European and Japanese vehicles assembled in the United States, followed by American brands themselves. Russian buyers tend to favor the same types of cars. It’s no surprise, then, that in 2023, Georgia’s imports of passenger vehicles from the U.S. rose by 84 percent. But if prices for these cars go up in the U.S., reselling them to Russia — via Georgia, then through Kyrgyzstan or Kazakhstan — will no longer be profitable.
Trump is planning to raise import duties on cars, tacking on a 25 percent tariff starting April 2, and has already imposed a 25 percent tariff on steel and aluminum imports — key materials in car manufacturing. As a result, the global auto market is bracing for increased demand and higher prices for used vehicles.
Aleksi Noniadze, head of Georgia’s Auto Importers Association, told the Georgian outlet Commersant.ge that the U.S. tariff hikes will likely reduce car imports to Georgia. “Of course, Trump’s decision will have a negative impact on car imports, although not immediately. We expect it will take at least five to six months,” he said. “If American cars become even more expensive, they’ll likely be pushed out of the Russian market entirely — replaced by Chinese models.”
And China won’t need Georgia to do that. The country could lose its role as a re-export hub just as Chinese automakers gain ground — not only in Russia, but also in Kazakhstan and Kyrgyzstan.
According to official statistics, Chinese cars made up 37.9 percent of all auto sales in Kazakhstan in 2024, up from 26 percent the year before. Korean cars accounted for 32.9 percent, while American vehicles dropped to 15.2 percent.
The trend is even more dramatic in Kyrgyzstan. Between January and July 2022, just 574 Chinese cars were imported. In the same period in 2024, that number jumped to 14,910 — an increase of nearly 26-fold.
