Georgia is clearly the closest US ally in the South Caucasus, moving in lockstep with American interests on just about every foreign policy issue – except one: Iran. Not wanting to become embroiled in a potential regional conflict, officials in Tbilisi are trying to finesse relations with Tehran, while staying in Washington’s good graces.
All the saber-rattling surrounding Iran’s secretive nuclear program has Georgians on edge. If the United States, European Union and/or Israel try for a forceful solution of the problem, geography suggests that Tbilisi could easily get dragged into a conflict.
“They [Georgian leaders] want to avoid conflict if possible, but they don’t feel in control of the situation,” said Thomas de Waal, a longtime Caucasus observer and senior associate at the Carnegie Endowment for International Peace in Washington, DC.
A series of arrests this year related to alleged Iranian plans for terrorist attacks in neighboring Azerbaijan against US and Israeli targets, and a recent bomb incident near the Israeli embassy in Tbilisi, have heightened the Georgian government’s sensitivities. And not without cause, noted de Waal. “Georgia and Azerbaijan are … the closest thing that Israel has to allies in the area around Iran, so that makes them vulnerable to the covert war between Iran and Israel,” he said.
To limit the chances of blowback in the event of an attack on Iranian nuclear facilities, Tbilisi has assiduously courted Iran’s favor, even as it tries to snuggle in the United States’ embrace.
Many heads turned last year when Georgia lifted visa requirements for Iranian citizens and talked trade and tourism expansion with Tehran. In the first three months of ۲۰۱۲, almost ۱۳,۶۰۰ Iranians visited Georgia; a ۹۱-percent uptick compared to the same period during the previous year, according to Geostat, Georgia’s national statistics service. During the Nowruz celebrations in March, neighboring Armenia even complained that it was losing Iranian tourists to Georgia.
Some Iranians interviewed by EurasiaNet.org in Tbilisi say Georgia attracts them for its relaxed culture and the ease with which business can be done. “This is Europe,” said one Iranian man, who came to Tbilisi on a business trip. “Things are easy to do, and it feels very open.”
Open to a degree. Conscious of American diplomatic and economic support, Tbilisi can only allow so much official friendship with Iran. US Ambassador to Georgia John Bass commented to EurasiaNet.org that Washington is in “an ongoing conversation with the Georgian government on Iran” and has “encouraged them to adopt the sanctions specified by Section ۱۲۴۵ of the National Defense Authorization Act for ۲۰۱۲.”
Among other measures, Section ۱۲۴۵ authorizes the US president to shut off or restrict access to the US financial system for foreign banks found to have transactions with Iran’s Central Bank or certain Iranian financial institutions.
Ambassador Bass did not specify if Washington is happy with Tbilisi’s stance on the sanctions, or how it views economic ties between Tbilisi and Tehran. Georgian Foreign Ministry officials responsible for Iranian policy could not be reached for comment.
While Tbilisi may not have made official declarations in support of sanctions against Iran, de-facto restrictions on banking activities by Iranian citizens in Georgia appear to exist. One Iranian citizen employed in Tbilisi told EurasiaNet.org that TBC Bank, one of Georgia’s largest private banks, had turned him down for a checking account, indicating that the background check for his under-$۵۰,۰۰۰ deposit was not worth its while. Others, including one Iranian-born US citizen, had similar tales. All Iranians who spoke with EurasiaNet.org declined to be identified by name.
In response to an inquiry from EurasiaNet.org, a spokesperson for TBC Bank said that the bank’s policy toward non-resident customers is “based on a risks assessment and … international regulations and recommendations, which sometimes means restrictions.”
Another private Georgian bank official, who asked not to be named, said that they only provide such basic services as currency conversion and payment of Georgian state taxes to Iranians. Beyond this, the bank shuns any operations with Iranian passport holders to avoid possible problems with the US Treasury Department, the official said.

The National Bank of Georgia did not respond to questions.

Arguably, such restrictions could explain why trade and investment ties between the two countries remain relatively modest. Iranian foreign direct investment peaked in ۲۰۱۰ at $۱.۱ million – five times its amount in ۲۰۰۹, but still some ۲۹ times less than American investment. Imports increased by $۱۰ million in ۲۰۱۱, the year the visa requirement for travelers between Iran and Georgia was dropped, to reach $۶۵ million, but exports only stand at $۱۶.۲ million.

Trying to stay on friendly terms with both Iran and the US simultaneously can create some delicate situations for Tbilisi. In March, the Georgian government invited an Iranian defense attaché to attend joint US-Georgian military exercises for Afghanistan, where Iran is believed to be backing insurgents that are battling NATO forces. At the time, Ambassador Bass declined to comment about the US reaction on the Iranian observer.

Lincoln Mitchell, an associate research scholar specializing in the Caucasus at Columbia University’s Harriman Institute, believes that Georgia’s ties with Iran do not have too “much salience” in Washington for now, but notes that that “may change, if push comes to shove on Iran.”

If it does, Tbilisi may look to its past for some balancing lessons. In the late ۱۸th century, Georgia turned to Russia for protection against Persia; the result was its ۱۸۰۱ annexation by the Russian Empire, a fact bitterly resented today.

Veteran Georgian foreign policy expert Alexander Rondeli, president of the Tbilisi-based Foundation for Strategic and International Studies, believes that Georgia can hold its own. “Tbilisi will have to maintain neutrality and a careful diplomatic policy, but that’s what the government is for,” Rondeli said.

Editor's note: Giorgi Lomsadze is a freelance journalist based in Tbilisi. He is a frequent contributor to Eurasianet's Tamada Tales blog.