At a geographic intersection between East and West, the South Caucasus has long sought to work with, or contend with, external powers on either side of the compass. The countries in the former Soviet region – Armenia, Azerbaijan and Georgia – count countries as geopolitically apart as the EU bloc, the US, Türkiye, China, Kazakhstan, the Gulf states and Iran among their allies and partners. They have learned to deftly leverage the political clout of their larger neighbours to their advantage as a matter of survival and profit. As a result of this pragmatic and non-aligned approach, the region has become a haven for those seeking to exploit the system and the region’s transnational connections, leading to a flourishing illicit economy. Criminal activities have arguably become one of the region’s most influential exports.

After emerging during the latter days of the Soviet Union, criminal networks sought new opportunities, with ethnic groups of the former Soviet empire specializing in certain regions and illicit markets. Armenian criminal groups established a firm footing in the US, France and Lebanon, where, today, their activities include loan sharking, money laundering and human trafficking. Azerbaijani networks have strong ties to Türkiye, Russia and other neighbouring countries, and are involved in drug and human trafficking and the illicit trade in caviar, among other markets. Georgian groups maintain a prominent presence in European cities, where they top the leader board in organized burglary and theft.

Although the domestic space for these activities had shrunk in recent decades following the suppression of criminal networks in Azerbaijan through state control, and anti-corruption reforms instigated by the Rose and Velvet Revolutions in Georgia and Armenia, criminality and illicit economic activity are on the rise again in the region. The war in Ukraine and mounting sanctions against Russia have re-created opportunities for regional economic actors, helping the South Caucasus to emerge as a hub for sanctions evasion. Much illicit trade is driven by oligarchs and their networks, who accumulated their wealth in Russia and maintain close ties with political actors and businesspeople in the region, using these relationships to manage large-scale sanctions evasion activities.

Wheeler-dealers of the isthmus

These dynamics have led to Georgia – for instance – becoming a multi-billion-dollar hub in the automobile trade, importing largely used vehicles from the US, the EU and Japan before re-exporting them to Russia and Kyrgyzstan. Armenia, for its part, has developed into a trans-shipment point for Russian gold heading to the UAE, Türkiye and elsewhere, with smuggled gold bars often melted down and re-exported in a different form to disguise their origin.

While Georgia’s free trade agreements with the EU, and Armenia’s membership in the Eurasian Economic Union and close economic integration with Russia have made these two countries transit hubs for incoming Western-produced goods, Azerbaijan plays a more prominent role along the north–south transit route connecting Russia and Iran, with the port of Alat serving as a major transit and logistics point for commodities between the two countries.

The South Caucasus has also become a hub for IT and cryptocurrency, with Georgia and Armenia emerging as leaders in the sectors – both regionally and globally – over the past decade due to an abundance of hydroelectric power (needed for computing and energy-heavy crypto mining) and a favourable regulatory environment. Journalists and NGOs on the ground revealed that these technological factors have attracted scam call-centre operations in both countries, where criminal groups target Western citizens in Canada, the US and EU member states with fraudulent investment schemes and other profit-making activities – adapting techniques seen elsewhere in eastern Europe and in South East Asia.

According to interviews conducted in the region in January 2025 with investigative journalists, civil society and the international community, cyber-scam networks reportedly maintain links with government officials, who provide protection. At its heyday several years ago, individuals employed in call centres in Georgia could make upwards of US$40 000 per month – a hefty amount compared to other local employment opportunities.

In addition, sources in Tbilisi and Yerevan said that cryptocurrency exchange platforms in the region allow Russians denied access to Western financial systems – including criminals and state-associated oligarchs – to funnel their assets out of Russia and get their hands on hard currency, mirroring similar patterns seen in other jurisdictions. Not only are these crypto exchanges helping many circumvent sanctions, but these funds are often used in cash-based transactions, which are notorious for fuelling corruption and encouraging opaque business practices.

Looking ahead, domestic, and often conflictual, political developments in the South Caucasus are likely to have an impact on how criminality develops in the region. In December 2024, Georgia held contested elections that inaugurated president Mikheil Kavelashvili, a former football player, and in March 2025 the country’s courts handed a former president, Mikheil Saakashvili, an extended prison term for an embezzlement case related to his time in office.

Meanwhile, Armenia signed a strategic partnership charter with the US in January 2025 as it continues to build closer ties with the West after its traditional ally, Russia, did not step in to prevent Azerbaijan’s seizure of the disputed region of Nagorno-Karabakh in 2023, displacing the enclave’s ethnic Armenian population. The signing of the charter came after Azerbaijan’s president called Armenia a ‘threat to the region’, stoking fears of a renewed conflict between the two states. However, the two countries have since agreed to the terms of a peace treaty, although at the time of writing the signing of the document by either party remains uncertain.

External geopolitical developments will also have an impact on the region, such as the cessation of hostilities in the Russia–Ukraine conflict or the end of the war through a peace agreement. As past evidence has shown, criminal actors are often the first to respond to new opportunities and partnerships, wherever they may be. The South Caucasus has since the end of the Soviet era been an amenable environment for criminal actors. In a volatile geopolitical climate, it warrants close attention once again as a potential hub for emerging criminal dynamics in this shifting landscape.