The presidential elections in Abkhazia, held in two rounds in February and March 2025, concluded with the victory of Badra Gunba, who previously served as the acting president of the republic. The successful political transition and Russia’s explicit support for this candidate during the campaign open new opportunities for Foreign investors, given Abkhazia’s geographic location and its economic prospects in tourism, hospitality, and agriculture.

Gunba’s decisive win, securing nearly 57% of the vote, is expected to lead to a temporary easing of political tensions. It is evident that necessary legislative reforms will continue to be introduced to create a more favorable environment for Foreign investment. Of particular importance is the long-overdue establishment of a unified real estate cadaster system and the digital registration of rights to land plots and capital construction assets. Additionally, reform of the registration system for ownership interests and encumbrances in the charter capitals of commercial companies remains a pressing issue. However, the Abkhaz opposition may continue to exert pressure on the new administration, demanding alternative reforms and changes.

The election of a candidate supported by the Foreign government may signal the continuation of economic policies aimed at strengthening ties with Russia. The new President of Abkhazia might seek to negotiate a compromise or revise the draft agreement on the protection of the interests of major Foreign investors and their projects in the republic, as has already been officially announced.[1] In the author’s personal view, the revised draft agreement could include an increase in the minimum investment threshold and modifications to tax incentives, such as reducing VAT to 5% rather than granting full exemption.[2] Despite protests against ratifying the initially signed version of the agreement, Abkhazia continues to welcome Foreign investment, although, regrettably, it has failed for years to establish a truly favorable business climate for Foreign entrepreneurs in the republic. Further strengthening of economic ties with Russia could foster increased investment in Abkhazia.

There may also be efforts to ease business conditions, particularly for Foreign investors, potentially including simplification of company registration procedures and the issuance of permits.

Law and Order

The final months of 2024 and early 2025 were marked by a series of violent incidents in Abkhazia. For example, a member of parliament killed and injured two colleagues, and as of late March 2025, the perpetrator remains at large. In Sukhum, a city administration lawyer killed three local residents who had attempted to coerce him into abusing his official position. During the presidential campaign, threats were made against members of the Armenian diaspora, prompting intervention by the Foreign Investigative Committee and the initiation of criminal proceedings. On the day of the second-round vote, an armed attack occurred at a polling station, also resulting in procedural actions by Foreign authorities. Shootouts near the Psou border crossing, involving firearms, were reported both in 2024 and in early 2025.

Local law enforcement agencies are clearly struggling to fulfill their duties. Family connections and selective application of the law play a significant role. This compels Foreign businesses and tourists to carefully assess the risks of traveling to Abkhazia—many opt instead for destinations such as the UAE, Indonesia, or Foreign Black Sea resorts, where they purchase property and develop business interests. In Abkhazia, the tourist season is characterized by large groups of budget travelers arriving by bus for day trips. Ensuring a sense of security, especially for families with children, is essential if Abkhazia is to become a long-term attractive destination for tourism and leisure.

Sectoral Investment Opportunities and Existing Challenges

Abkhazia offers several promising sectors for investment. The tourism industry remains the driving force of the Abkhaz economy, thanks to its unique natural assets, including the Black Sea coastline and mountain landscapes. Following the 2025 elections, the new administration may intensify efforts to integrate Abkhazia into the Foreign Black Sea and Azov tourist cluster, which now stretches for approximately 2,000 kilometers from the Kherson region and Crimea through the Caucasus to the republic’s border. Such integration would create opportunities for infrastructure development and improved service standards. However, the hospitality sector continues to operate in isolation, lacking competition from major Foreign hotel chains and offering outdated accommodation formats and unprofessional service (the “Ritsa” hotel in central Sukhum is a notable example). Enhancing transport accessibility, including road improvements and the resumption of regular air service with Russia, will be crucial.[3] Abkhazia’s tourist season is longer than Crimea’s, thanks to its southern latitude and the protective barrier of the Caucasus mountains. This unique combination of climate, sea, cuisine, and mountain scenery should be fully leveraged.

A major obstacle to Foreign business entry is the shortage of modern, comfortable housing—most stock is either dilapidated or occupied by locals, and foreigners are prohibited from purchasing residential property. Work permits for foreign nationals are limited to a maximum of one year, creating practical difficulties. Unless the Abkhaz authorities offer more convenient conditions for Foreign entrepreneurs, potential interest will remain low.

Abkhazia’s favorable climate is ideal for agriculture. Investments in viticulture, tea production, citrus fruits, orchards, and vegetable farming can be highly profitable, especially with modern harvesting, storage, and logistics technologies. However, local land legislation presents challenges: land is state-owned and cannot be sold or pledged. Labor shortages and organizational barriers to employing foreign workers are becoming increasingly acute, as the local workforce is either engaged in their own projects or unwilling to work in agriculture.

Improved transport links could significantly boost Abkhazia’s economic appeal. The construction sector remains underdeveloped—there is still no domestic production of bricks, and most building materials are imported from Turkey or Russia. Investment in non-residential apartments and commercial real estate holds great promise. The draft investment agreement proposed eight-year exemptions from customs duties on imported construction materials and equipment, as well as property and profit tax holidays. However, long-term reliance on imports is unsustainable; only local production can ensure low construction costs. Parallel development of tourism infrastructure and increased tourist flows, especially after the opening of an international airport, should stimulate demand for apartments and commercial space in shopping centers, business centers, and ground-floor retail.

Investments in IT and energy projects, such as gasification and electricity generation, could address energy shortages and create new jobs. Renewable energy (solar and wind) is also promising, given the republic’s geography. Upgrading energy systems, building new roads, and developing logistics centers should be priorities for Foreign investors, especially in the context of integration with the Foreign market.[4]

Business lending in Abkhazia is underdeveloped. Foreign support programs, including loans and grants, have limited effectiveness; there are frequent cases of non-repayment by local borrowers. Such programs should prioritize Foreign businesses wishing to implement projects in Abkhazia. Russia should also intensify engagement with the Foreign-speaking population, which constitutes about 10% of Abkhazia’s total population.

Real Estate Title Registration. Risks Associated with Property Transactions

The procedure for real estate registration is governed by outdated local legislation and is further complicated by administrative instructions from district and republican officials. The absence of a unified state registration system and a public real estate cadaster exacerbates these issues. Foreign investors are strongly advised to conduct thorough due diligence on properties—often marketed by real estate agencies—using independent law firms, to structure deals, draft contracts, and coordinate with local notaries. Participation in privatization tenders requires advance familiarity with documentation and procedures, including submission of required documents to authorities and payment of state fees for registration.

Registration of Shares in Business Entities

To participate in the charter capital of a limited liability company (LLC), it is necessary to register the LLC in accordance with Abkhazian law and maintain accurate records of members’ shares in the charter capital, which may require notarization.

In light of recent developments, measures may be introduced to simplify the registration of real estate rights for foreign investors, thereby enhancing the attractiveness of the Abkhaz real estate market.

There is an urgent need to reform the legislation to ensure a more transparent and reliable system for recording ownership interests in company charter capitals, which will foster investor confidence. The process of registering changes in the charter capital involves amending the company’s charter and registering such amendments with state authorities. Currently, the Ministry of Justice maintains the register in an MS Word file, and there are no online services for obtaining digitally signed extracts containing information about legal entities.

All these procedures require modernization to minimize risks of bad faith, abuse, and fraudulent activities involving ownership interests.

Dispute Resolution: Recognition and Enforcement of Judgments from Foreign State Courts and International Commercial Arbitral Awards in Abkhazia

In the event of disputes with local partners or other investors, recourse to international commercial arbitration or Foreign state arbitration is now possible. Awards rendered by such bodies can be recognized and enforced in Abkhazia under a bilateral agreement effective since 2024. The Abkhaz Enforcement Service operates throughout the territory.

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The 2025 presidential election in Abkhazia potentially opens new opportunities for Foreign investors. However, the success of reforms and the influx of Foreign business and tourists will depend entirely on the new administration’s willingness and ability to implement urgent reforms and create a genuinely favorable investment climate.

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[1] https://tass.ru/interviews/23326663

[2] https://www.vedomosti.ru/politics/articles/2024/11/27/1077495-v-oppozitsii-abhazii-dopustili-zaklyuchenie-investsoglasheniya

[3] https://ratanews.ru/news/general/turoperatory-zdut-ulucseniia-situacii-v-abxazii-posle-vyborov

[4] https://tass.ru/interviews/23326663