ISET Economist Blog

The Positive Sides of Georgia’s NATO Partnership (Not Membership)
Monday, 06 July, 2015

Since the Rose Revolution, pro-Western Georgian politicians strive to lead their country into the apparent safe haven of the NATO defense collective. So far membership seems far off, causing disappointment among many Georgians and affirming those who preferred less integration in the Western geopolitical bloc. The continuing debate as to whether or not Georgia should assume full membership in the alliance may be obfuscating the reality that the present relationship with the alliance is the most ideal for Georgia. It allows for a nearly unrestricted flow of investment, without Georgia assuming the complicated bureaucracy that is the NATO Alliance.


The generally accepted narrative is that NATO wants to avoid being dragged into an inter-state conflict by a small Caucasian country – and Georgia could easily do this. In practice, NATO avoids inter-state conflict at all costs, preferring asymmetrical interventions into already ongoing conflicts.  

This narrative, however, is not convincing. Once assuming NATO membership, the danger of a renewal of the armed conflicts with Russia would almost disappear. Putin is cautious when dealing with NATO member states, and he is certainly not interested in a global escalation of petty border issues in Abkhazia and South Ossetia. 

Secondly, and more importantly, Article 5 of the NATO treaty does not force the member states to declare war on Russia if Georgia would be attacked. It reads: “The Parties agree that an armed attack against one or more of them in Europe or North America shall be considered an attack against them all and consequently they agree that […] each of them […] will assist the Party or Parties so attacked by taking forthwith, individually and in concert with the other Parties, such action as it deems necessary, including the use of armed force, to restore and maintain the security of the North Atlantic area.” 

There are two loopholes here. Firstly, Georgia is not a member of the North Atlantic area and hence does not fall under this purview, NATO member or not. Secondly, one may guess what a country like Germany, often ridiculed for its aversion to anything that has to do with the shooting, would “deem necessary” to assist Georgia. Certainly, one would hear some sharp condemnations of Russia from Berlin, and probably even a new round of sanctions would be proposed. Yet one can be sure that the German army would stay at home. Those countries that are usually named as those which are blocking Georgia’s NATO membership due to their fear of armed conflicts do actually have convenient loopholes to get out of their obligations to assist, if necessary.

However, another reason for NATO’s rejection of Georgia is completely underestimated. The argument is pointed out in a 1991 article by Shlomo Weber and Hans Wiesmeth (“Economic Models of NATO”, Journal of Public Economics 46), the first author being a former academic director of ISET and the second author teaching at ISET for many years. Weber and Wiesmeth show that in a game-theoretic equilibrium small countries contribute to the common defense less than proportionally, and big ones contribute relatively more. 

The intuition for this result can be derived from the fact that the members of NATO are in a situation similar to what is known as a public good game. In this game, each player (i.e. country) can decide how to use their budget: it can be used for individual consumption or for funding a public project. Whatever is invested in the public project will be multiplied by some factor greater than one, say, three, and then distributed equally among all countries. What is consumed privately, on the other hand, leads to the direct utility for the country. While the socially optimal outcome of this game would be a situation where all players invest the entire budgets in the public project, with more than three players the only Nash equilibrium is reached when everybody consumes their whole budgets privately. If one now modifies this game so that there is a high marginal utility from the public good when little of it is available, and this marginal utility is increasing in a country’s size, it is quite intuitive that in an equilibrium, larger countries will contribute over-proportionally and smaller countries under-proportionally to the joint project. 

By upgrading its army and proactively contributing to Western military endeavors, Georgia has tried to refute the suspicion that it will be a free-rider on other countries’ defense efforts. According to the CIA’s World Factbook, Georgia spends about 3% of its GDP on its military. To put this in perspective, at the Wales summit in 2014, NATO members signed the Defense Investment Pledge, under which they would attempt fiscal and domestic political wrangling to bring their defense budgets up to 2% of GDP. Presently, few alliance members meet this goal, yet Georgia exceeds it and does so unilaterally, with no obligations to a supranational entity. 

Likewise, Georgia contributes more troops to NATO’s Resolute Support Mission in Afghanistan than any other alliance member, save for the United States. In recent history, this force posturing is nothing new. Georgia also was, at times, the second largest contributor to the United States’ Iraq coalition in the 2000s. The quantity and price of this material and human support are quite astounding, considering the size of Georgia’s population and military.

By acting in this way, Georgia says: “Look, we will be an asset for the joint defense, not a liability!” This is, however, what game theorists call “cheap talk”. Once Georgia will be in NATO, it can immediately draw down all these activities to the levels of smaller member states.

Thus, the reason for keeping Georgia out of NATO is, to a considerable extent, based on rational cost-benefit analysis. Through NATO membership, Georgia’s security would increase big time, while the security of the existing member countries would not be tangibly affected.

This, however, is good news for Georgia’s NATO aspirations. In the end, also other small countries were allowed to join NATO. If, on the other hand, the resistance against NATO membership would primarily be rooted in a fear of a confrontation with Russia, for decades to come the chances of being admitted would be dim.


The United States all but wrecked its fiscal portfolio paying the trillions of dollars necessary to perpetuate two-decade-long quagmires in Iraq and Afghanistan. However, for Georgia to contribute a proportionately similar portfolio of its soldiers to these conflicts has had the opposite effect. By contributing hundreds of soldiers and closely wedding its defense policy to NATO’s Georgia sees strong returns to its military-industrial complex and even its labor market. The present position lets Georgia reap the economic benefits of a close partnership, without the bloated bureaucratic requirements of the NATO apparatus. 

Perhaps, Russia is to blame, or the foreign policy of the Post-Rose Revolution era, but regardless of causality, the West is giving Georgia a wealth of weaponry and technology for free, or bargain prices. This is why the real-term defense spending number should be upwardly adjusted beyond the already high 3%. 

Furthermore, thanks to the geopolitical musings of Vladimir Putin’s Russia, this number will be maintained or even inflate in the coming years. One year ago, Barack Obama announced the European Reassurance Initiative – a billion-dollar presidential discretionary fund purposed solely for material reassurance of U.S. allies in the face of the new Russian threat. There is a surprising level of detail of this program that is open to public eyes, most likely in an effort to lay the project brazenly on Vladimir Putin’s doorstep as a concrete response to his military misadventures in Ukraine. In this one program alone, Georgia will conduct a $5 million exercise on the Black Sea with the United States, Romania, Bulgaria, and Ukraine and a portion of $63 million dollars to be split between Georgia, Moldova, and Ukraine tasked for “capacity building” and “filling critical operational gaps,” as well as increased information sharing with Black Sea partners. The list goes on. Georgia was gifted refurbished ships for coastal defense, recently conducted large-scale exercises with the NATO Reaction Force in the aptly named Operation Noble Partner, and just last week sealed a purchasing deal with France for sophisticated air defense systems. 

Looking at the Independence Day parade on Freedom Square, Georgian troops marching in a kit that looked like mirror images of their American counterparts – a far cry from the days after the Rose Revolution when some units looked distinctly Soviet. However, this increase in capabilities has a greater return to the Georgian economy than most realize, and the benefit lies not only in the money that is injected into the Georgian economy but also in the buildup of human capital by the soldiers themselves, who can then enter the Georgian labor market. NATO-trained former Georgian officers would be a lucrative hire for Georgian businesses for their critical thinking and project management.


Meanwhile, Georgia’s rhetoric remains firmly oriented towards alliance membership. Georgian Defense Minister, Tina Khidasheli, while visiting NATO Headquarters ahead of the June ministerial was quoted in saying that her office is “not going to tone down demands.” This is curiously blunt language considering NATO’s level of investment in Georgia. Minister Khidasheli does not have to worry that her demands would be accommodated, as NATO membership is highly unlikely for Georgia in the near future, and certainly off of the table for the upcoming 2016 Warsaw summit. 

In the public debate, the benefits returned to Georgia from the military partnership with the West are often obfuscated by the knowledge that the United States and NATO will not put boots on the ground to protect Georgia’s territorial integrity – as was the case when Russia flagrantly marched into Georgia proper in August 2008. Yet considering current political realities, Georgia’s present position in relation to NATO is its most ideal. It reaps the benefits of material and personal investment as if it were a member, without having to contribute to the complicated and expensive NATO missions that it is simply not prepared to do, and without buying into the clumsy bureaucratic processes that characterize NATO decision making.

And while NATO members get served whatever dish the United States cooks, Georgia, alternatively, has a seat at the NATO buffet where it can pick and choose the most politically delicious serving.  If Georgia had a seat on the North Atlantic Council, it is highly unlikely that they would prevent the more dovish members of the alliance, such as Germany, not vetoing their proposals – which would likely relate to Russia, South Ossetia, and Abkhazia. The title of “Alliance member” certainly would be a political gold mine in Tbilisi, but unduly restrictive and complicated when it comes to the day-to-day realities of what undoubtedly is a political complicated alliance.

The views and analysis in this article belong solely to the author(s) and do not necessarily reflect the views of the international School of Economics at TSU (ISET) or ISET Policty Institute.