The South Caucasus has entered one of the most consequential periods in its modern history. After decades of armed confrontation, Armenia and Azerbaijan are engaged in an unprecedented normalization process that has raised realistic expectations for a formal peace treaty. At the same time, however, the region finds itself surrounded by escalating geopolitical turbulence - from instability involving Iran to broader disruptions across the Middle East and Eurasian transport routes. These developments place the South Caucasus at the intersection of peacebuilding, strategic trade competition, and regional security risks. While new opportunities are emerging, so too are vulnerabilities that could influence the implementation of Armenian-Azerbaijani peace and the future of the Middle Corridor.
From Diplomatic Breakthrough to Practical Peace Between Armenia and Azerbaijan
On August 8, 2025, The Washington Summit was held at the White House between the leaders of United States, Azerbaijan, and Armenia. That summit is considered historic, as it gave impulse to the peace process between Azerbaijan and Armenia, resulting in signing of the Joint Declaration between President of the U.S. Donald Trump, Azerbaijani President Ilham Aliyev, and Armenian Prime Minister Nikol Pashinyan, to end the decades long conflict. Today, peace between Azerbaijan and Armenia exists not only on that adopted paper. Peace is already being felt in practice:
Firstly, it should be emphasized that there are no longer any exchanges of fire on the border between Azerbaijan and Armenia, there are no casualties or losses. Azerbaijan and Armenia have only been at peace for roughly 8 months, but the countries are already experiencing the positive outcomes.
Secondly, Azerbaijan has lifted all restrictions on the transit of goods from other countries to Armenia through Azerbaijan. Moreover, Azerbaijan has begun trading with Armenia and exporting it essential petroleum products.
Additionally, today, the representatives of civil society involving NGO’s, media and experts of both Azerbaijan and Armenia are directly engaging with an aim to prepare their populations for a long-term peace.
And this once again demonstrates Azerbaijan’s strong political will, since peace was achieved not only on paper – the document was initialed by the two countries – but also on the ground. This is also important because sometimes, as it is widely known, documents remain on paper for a long time with no implementation. In the case of Azerbaijan and Armenia, it has been less than two years since the last bloody military clash in September 2023 until the establishment of peace in August 2025. This is the best indicator that nations and people can reconcile if both sides demonstrate political will and a commitment to peace. Azerbaijan knows what it is like to live in a state of war or to be in a state of war. That's why such countries value peace perhaps more than any other.
Why Instability Near Iran Could Complicate the Peace Process?
Touching the question of risks related to the peace process due to the ongoing instability on the southern borders of Azerbaijan and Armenia, meaning the situation over Iran, here one of the most sensitive parts of the peace agreement concerns southern Armenia, along the Iran border - particularly plans for transport routes within the TRIPP project, also called Zangezur Corridor, linking mainland Azerbaijan to its exclave Nakhchivan. This area is strategically critical for all three countries (Armenia, Azerbaijan, and Iran), thus, any instability or military activity involving Iran near that border directly affects the core infrastructure and territorial questions of the peace deal. If Iran feels threatened or sidelined (for example by new transit routes bypassing it), it may push back politically, or more forcefully, complicating implementation of the process. It should be noted that the territory we are talking about is Iran’s only direct land connection to Armenia (and indirectly to Georgia and Europe).
However, there is a way to design the project so it not perceived as a threat by Iran and the first thing that has to be considered is keeping the full Armenian sovereignty over the route. This would mean no extraterritorial status of this land link and no foreign security forces. Additionally, both countries are maintaining communication with Iran over the project every step of the way to minimize concerns. Even recently, after major tensions related to drone incidents, Azerbaijan has sent humanitarian aid shipments and maintained diplomatic communication to signal that it doesn’t seek confrontation with Iran.
The Middle Corridor’s Rising Importance
The escalation in the Middle East, particularly involving Iran, the Gulf states, and disruptions around the Persian Gulf, has had both immediate and structural effects on the transit of goods and people through the South Caucasus and the broader Middle Corridor (Trans-Caspian route). The whole paradox of this is that in the short term, they increase the corridor’s importance and usage, but they also intensify vulnerabilities and risks that could disrupt it.
We have seen how the closure of airspace across much of the Middle East (Iran, Iraq, Israel, Gulf states) has forced airlines to reroute via the South Caucasus. As a result, air traffic particularly over Azerbaijan has skyrocketed, making the region a key East–West aviation bridge. The similar situation could be seen also for the transportation of goods. Today, shipping and logistics firms are avoiding the Persian Gulf and the Strait of Hormuz, redirecting flows toward the Middle Corridor. The demand for this corridor has really surged, for example, the container demand rose on roughly 450–500% just in a week, creating let’s say, a lot of work to process, for ports like Baku and Aktau. The situation has also obviously brought higher transit revenues for Azerbaijan and Georgia.
Another point worth mentioning is, that the significance of the South Caucasus passage has already proved itself against the backdrop of earlier disruptions, such as the Russia-Ukraine war that limited the Northern Corridor. This geopolitical configuration made the South Caucasus one of the few actually viable Eurasian land routes. This having said, the South Caucasus has become a critical bypass route for both cargo and passenger transit between Asia and Europe.
The Middle East region is going through a lot nowadays, and this creates certain turbulence for South Caucasus as well, considering its neighboring location. What absolutely cannot be allowed to happen, is the spillover of the conflict towards the South Caucasus. Any widening of the conflict could threaten Azerbaijani critical infrastructure such as ports, pipelines, railways and have disruptive effects not only on a local scale, but globally, for the reasons listed above.
In order to minimize the risks, because obviously they cannot be totally erased, it is necessary to enhance coordination between whole 3 South Caucasus states, meaning Azerbaijan, Georgia and finally with Armenia. Strengthening protection of the critical infrastructure is of utmost importance and all countries sooner or later should elevate this as well. And finally, more coordination, more diplomacy and more trust building between whole countries of the region, including Iran.
TURAL AKHUNDOV oversees the public relations strategy for ''CRESCENT'' Research Center. He holds a Master’s degree in Political Science from European Humanities University (Lithuania) and a Bachelor's degree in International Relations from Baku State University. He also holds a multi-level certification on Irregular Warfare provided by the Defense Security Cooperation University (USA). Equipped with a nuanced understanding of the international system, relations, and law, he has undertaken extensive research on NATO-related topics, such as collective defense, energy, and cyber security.