Significant corruption and the ongoing capture of the state keep having a debilitating effect on the South Caucasus region

Significant corruption and the ongoing capture of the state keep having a debilitating effect on the South Caucasus region

A new study says Armenia, Georgia, and Azerbaijan remain vulnerable to high-level corruption and illicit economies despite decades of political and economic change.

A new report by the Global Initiative Against Transnational Organized Crime (GI-TOC) says entrenched informal governance continues to fuel corruption, state capture and illicit economies in Armenia, Georgia and Azerbaijan.

The study, the second in a two-part series, examines how political elites across the South Caucasus use formal institutions for private gain. It finds that despite major economic and geopolitical shifts over the past 35 years, the basic structures enabling corruption remain largely unchanged.

GI-TOC identifies three levels of corruption: petty corruption, high-level corruption and state capture. Petty corruption refers to small-scale bribery at service delivery points, high-level corruption involves manipulation of laws and policies by elites, and state capture represents the systematic subordination of state institutions to informal networks.

According to the report, Azerbaijan offers the clearest example of consolidated state capture, with political and economic power concentrated among a small elite. Investigations have documented the use of offshore companies, control of the banking sector and manipulation of public procurement to enrich ruling networks.

Georgia, once praised for reforms, has backslided since 2012. The report says high-level corruption is again widespread, with ruling elites exerting influence over key institutions and economic sectors. Manipulated procurement processes and misuse of state resources illustrate this trend.

Armenia has reduced petty corruption since the 2018 Velvet Revolution—sparked by public anger over widespread corruption and kleptocratic rule—but high-level corruption remains entrenched. Questionable investigations involving politically connected figures have eroded public trust in reform efforts, the study says.

Across the region, informal governance blurs the line between state, business and illicit activity. Conflicts, sanctions evasion and closer ties with authoritarian states have created fertile ground for smuggling, shadow economies and elite-controlled networks linking the region to the global economy.

The report warns that high-level corruption and state capture continue to distort markets, limit development and weaken trust in institutions. While progress is possible, long-standing systems of governance remain resistant to meaningful change, according to the report.