Iran and the South Caucasus: Understanding relations with Armenia and Azerbaijan

Emma Martirosyan
American University of Armenia
10/12/2023
 Introduction
Iran’s involvement in Transcaucasia has become a focal point for global attention,
starting from the challenging period of the Republics of Armenia and Azerbaijan gaining
independence. The ongoing relations between those countries continue to determine the
region's political climate, and Iran’s interactions with the countries play an integral role in
understanding geopolitical and economic dynamics in the territory. This study provides a
comparative examination of Iran’s bilateral relations with poat-independence Armenia and
Azerbaijan, aiming to evaluate Iran’s involvement in the South Caucasus region and answer
the questions of what its broader political implications are. Addressing the mentioned
questions is crucial for understanding Iran’s standing amid the geopolitical turmoil and
unraveling the untapped potential of cooperation between Iran and these countries.
Specifically, this paper will briefly discuss historical ties and dive into Iran's bilateral
relations with Armenia and Azerbaijan in an economic and foreign relations framework.

Literature Review
Ehteshami (2022) discusses the periods of Iranian foreign policy, highlighting the
Consolidation period in 1979-1981, marked by rejection by the West and communist bloc,
setting the stage for the Islamic Revolution; the Rejectionist period - coinciding with the war
with Iraq, opposition to Israel and Iran's isolation due to conflicts with neighboring states.
From 1988 to 1990, the course of Iran shifted apart from its hardline stance by accepting the
UN Security Council Resolution 598 and somewhat normalizing relations with Gulf Arab
neighbors. Finally, Iran entered the stage of Pragmatism at the beginning of the 1990s and put
effort into improving relations with Arab neighbors, the Soviet Union, and non-Arab allies.
Finally, the author states that the post-1997 era is the Drive for a Moderation period in Iran,
marked by moderation, more open diplomacy, and détente in Iran's international relations.
In his article “Iran and Its Two Neighbours Armenia and Azerbaijan: Resuming
Relationships under America’s Suspicious Eyes”, Zarifian (2009) mainly discusses how
Iran's foreign relations with Armenia and Azerbaijan evolved after the dissolution of the
Soviet Union and the role of the USA in this regard. Iran's stance on the Armenian-
Azerbaijani conflict was neutral, which received an adverse reaction from the Azerbaijani
side driven by religious factors; however, the situation changed when the Aliyev clan came to
power and adopted a more pragmatic approach, which helped improve the relations between
the states. Meanwhile, according to the author, Armenia has always hoped for political and
economic support from Iran, which has been fulfilled (Zarifian, 2009). Zarifian argues that
even though Iran and these states are not considered to be in the same region for geographical
and political reasons, the Iranian view is that Transcaucasia is their natural sphere of
influence. Iran has tried to maintain strong ties with those countries since the 1990s, which
happened to be the period when Iran was also trying to export its ideology to Central Asia,
providing Azerbaijan with a whole new purpose. However, Zarifian (2009) mentions that the
standpoint of Azerbaijan's second president, Abulfaz Elchibey, served as an obstacle to this,
posing a threat to Iran's territorial integrity. This, in turn, prompted relations between Iran and
Armenia, which have remained robust since then. The geopolitical significance of this
relationship is underscored by economic cooperation, with Armenia benefiting from Iranian
support during the harsh conditions in the early 1990s and remaining one of the few non-
hostile countries toward Iran.
In contrast, Iranian-Azerbaijani relations faced difficulties, especially during President
Elchibey's term, due to strategic differences, which attenuated from 1993 onwards, with
lingering disagreements regarding strategic alliances and the Caspian Sea's jurisdictional
status. When it comes to the United States, the country's involvement in the region cannot be
considered very active, yet it has certain expectations from both sides as a member of the
OSCE Minsk Group. The USA has criticized Armenia's ties with Iran and expressed
concerns about Armenia's role in facilitating the transit of non-controlled products, including
Russian ones, to Iran, as well as maintained hope of using Azerbaijani territory for
monitoring Iran ever since investing in Azerbaijani energy production (Zarifian, 2009).
Koolaee and Hafezian (2010) provide a more comprehensive insight into Iran's bilateral
relations with South-Caucasian countries, highlighting the resolution of Armenia’s
significance in providing Iran access to European countries. However, the authors note that
Armenia's rejection of Iran's mediation offer in the Nagorno-Karabakh conflict has strained
political ties. Koolaee and Hafezian (2010) add that the only significant aspect of Iran-
Georgia relations is in the scope of the Iran-Armenia-Georgia trilateral collaboration,
focusing on power plants and energy supplies. When it comes to Azerbaijan, the authors
share a similar view with other scholars cited in this paper: alliances with Turkey and the
U.S. Disagreements over the Caspian legal regime, territorial integrity, and Iran's exclusion
from the Azerbaijan Republic Oil Consortium contribute to diplomatic tensions. U.S. military
aid to Azerbaijan and concerns about potential military actions against Iran further
complicate relations, emphasizing the geopolitical complexities of the region
 Elaborating further on Iran-Azerbaijan relations, contrary to Zarifian’s (2009)
abovementioned claim about Azerbaijan serving as a threat to Iran’s territorial integrity,
Michael Rubin (2014) argues that Azerbaijan faces an issue of independence due to sectarian,
economic, and geopolitical fault lines related to Iran, its soft power over the country and
Hezbollah. He claims that even though Iranian authorities have sought to undermine and
destabilize Azerbaijan, the Azerbaijani government has been able to counteract effectively.
Furthermore, Lindenstrauss and Celniker (2012) mention that the tension between Iran and
Azerbaijan escalated over border closures, attempted terrorist attacks, recalls of ambassadors,
and increased Iranian naval presence in the Caspian Sea. Reports of military cooperation
between Israel and Azerbaijan, especially regarding the potential Israeli use of Azerbaijani
airfields for an attack on Iran, have further strained relations. Azerbaijan's efforts to ease
tensions, such as declarations against allowing an attack on Iran from its territory, are viewed
skeptically by Tehran. Military deals and collaborations between Israel and Azerbaijan raise
concerns for Iran, not only in the context of Caspian Sea resource disputes but also due to the
involvement of foreign advisors and private security firms in Azerbaijan's military training.
Lindenstrauss and Celniker (2012) also single out the interesting case that turned out
to be controversial for Iran - Azerbaijan's alignment with the West, hosting of the Eurovision
Song Contest, and its perceived role as a route for NATO forces. The authors (Lindenstrauss
& Celniker, 2012) state that Azerbaijan-Israel relations have grown due to shared concerns
about Iran; nonetheless, Azerbaijan remains cautious not to jeopardize its ties with Iran due to
factors like Azerbaijan's dependence on Iran for strategic routes, its economic reliance on
energy exports, and its lack of power to initiate a frontal conflict with Iran.
Finally, the bilateral relations of Armenia and Iran have been primarily stable
throughout the decades. Armenian scholar of Iranian studies Gohar Iskandaryan (2015) writes
that even though Iran’s Turkish-speaking community considered Iran pro-Armenian
throughout the Nagorno-Karabakh War in the 1990s, Iran actually maintained a perfect
balance. Iskandaryan (2015) claims that the Armenian government perfectly understood
Iran’s strategic and economic importance to Armenia but considers the situation more of a
win-win, as Iran would also gain from a more stable and robust Armenia for reasons like
showcasing the Armenian community to the global audience whenever accused of oppressing
minorities and human rights, having a reliable ally against Turkish influence and mobilizing
Iranian-Armenian lobbying.
 Methodology
This paper is based on both primary and secondary findings.
The secondary findings used contain reports from professional and state sources,
including the analysis “A Renewed Nagorno-Karabakh Conflict: Reading Between the Front
Lines” by the Center for Strategic and International Studies, “Choosing transits. Why Iran
reoriented from Armenia to Azerbaijan” from Carnegie Endowment for International Peace,
“Armenia-Azerbaijan: Iran’s Rising Mediation Role in the South Caucasus” by Special
Eurasia and news articles from Radio Free Europe/Radio Liberty.
This research also employed a qualitative approach to gain in-depth insights into
Iran’s bilateral relations with Armenia and Azerbaijan. The interview participants were
purposively selected based on their availability and expertise in the field. Four individual
interviews were conducted, one of which was an online interview. Each participant was
invited to participate in the study, considering their availability and willingness to contribute.
The interviews were semi-structured; the complete list of questions can be found in the
Appendix below.

Findings
Section 1: Secondary Findings
Special Eurasia (2023) points out that Iran’s role as a mediator in the Nagorno-
Karabakh Conflict resolution is increasing, specifically evident in the 3+3 format. The source
mentions that Iran establishing a consulate in Syunik Province of Armenia signaled its
readiness to intervene if Azerbaijan attacks Armenia. Iran's positive relationship with Russia
and efforts to improve ties with Azerbaijan set it apart as a mediator. The recent Tehran
meeting demonstrated Iran's ability to secure foundational agreements for ongoing peace
processes.
In this context, Radio Free Europe/Radio Liberty (2023) writes that Irant has pledged
to expedite the construction of a new road connecting Azerbaijan to Nakhichevan, bypassing
Armenia. Despite Alyev’s demands for an extraterritorial corridor for Nakhichevan and
Erdogan’s being vocal about it, Iran has firmly opposed the so-called Zangezur corridor.
Iranian President Raisi expressed determination to complete the Aghband Route, connecting
Azerbaijan to Nakhichevan. CSIS (2023) makes an interesting contribution to understanding
Iran’s involvement in the region and, more precisely, the Nagorno-Karabakh issue. The
source mentions that apart from mediation efforts that Iran makes and maintaining careful
and balanced relations with both countries, Iran’s actions reveal their geopolitical stance: the
opening of the Syunik consulate indicates its interest in maintaining influence in the region
while coinciding with France's increased involvement in the region.
Moreover, CSIS discusses Iran’s resentment toward the “Zangezur corridor,” which
can be explained by its concern of being excluded from Eurasia. Finally, Iran proposes
economic initiatives to foster regional cooperation, such as road and rail transport networks
and energy sector collaboration. These initiatives align with Iran's broader economic and
geopolitical interests, promoting stability and connectivity.
Finally, to understand the dynamics of these relations, two sources will be further
outlined and complement one another.
Armenia’s former ambassador to Iran, G. Arakelyan, writes that Iran accepted
Russia’s terms of engaging in the region and never sought to implement large-scale
cooperation with Armenia independently. The relationship between Russia and Iran has been
positive, with Iran even accepting the Russian military forces in Armenia. Considering these
factors, Iran came up with the initiative of Iran-Armenia-Russia cooperation, which would
also limit American and Turkish involvement in the region.
Nikita Smagin from the Carnegie Endowment for International Peace (2023)
discusses why Iran recently reoriented to Azerbaijan from Armenia. The author agrees that
Iran allied with Armenia against Azerbaijan’s growing alliance with Turkey, which gradually
came closer to the region and worsened Iran-Azerbaijan relations. Iran’s standpoint was
firmly against Azerbaijan changing the borders by force: Iran started conducting military
training on the border with Azerbaijan, yet the latter responded by threatening to support the
separatism of ethnic Azerbaijanis in Iran. However, he explains that the swift Karabakh
operation by Azerbaijan on 19-20 September led to a surprisingly restrained response from
Iran, which started to exhibit a more flexible stance about the corridor as well, which did not
go unnoticed by Erdogan, who publicly noted this. The reasons that Smagin brings in his
article are twofold - new priorities and economic order. The tone of the Iranian-Azerbaijani
dialogue shifted positively with the opening of representative offices and commitments to
infrastructure projects, including a road bridge. By September, Azerbaijan received "positive
signals" from Iran, and the resolution of the Nagorno-Karabakh issue further eased tensions.
Iran, recognizing the changing regional order, opted for pragmatic engagement, considering
economic opportunities and avoiding alignment with Armenia, which faced challenges from
both Azerbaijan and the West. The conflict in Nagorno-Karabakh and Russia's war with
Ukraine have prompted Iran to reassess its foreign economic strategy. Moscow's focus on
alternative cooperation, particularly with Iran, is evident as seen in the intensified efforts on
the North-South transport corridor. This corridor, considered by Iran as the "new oil," has
become a focal point for economic cooperation. Notably, Russia's investment in the Rasht-
Astara railway underscores the strategic importance of this project.

Section 2: Primary Findings - Interviews

The first part of each interview was regarding Iran's ambitions and priorities in the
South Caucasus region. A professor from the American University of Armenia (hereinafter
Interviewee 1) pointed out that Iran desires to have stability in the region and maintain the
map the way it is, without drastic changes. A professor from Yerevan State University
(hereinafter Interviewee 2) claimed that the South Caucasus is a priority zone of engagement
for Iran, considering various factors, including the threat of Pan-Turkism, the strengthening
of Israel, and the involvement of the West in this region. At the same time, Interviewees 3
and 4 (a professor from the American University of Armenia and a diplomat from the
Ministry of Foreign Affairs of RA, respectively) stated that Transcaucasia pales in
significance compared to the Middle East.
For a more detailed overview, the content gained from this interview is classified into
several themes, which are highlighted below.
1. Russia’s Role for Iran
Interviewee 1 mentions that since the end of the 20th century, Iran has always taken
into account Russia’s interests, specifically driven by interests in trilateral cooperation where
Armenia is in the middle of Iran-Russia relations; however, the speaker mentions that within
the same framework, Iran-Azerbaijan-Russia cooperation is more developed in terms of
content and is in more serious stages of implementation. Interviewee 2 claims that, at least
from the Iranian point of view, Russia is a potential partner. Interview 3 says that Iran and
Russia’s relationship has been defined through mutual rivalry with the West since the Soviet
times. He claims that the biggest question to explore now is Russia's decline in military and
soft power and its effects on the Karabakh issue. The interviewee claims that Russia is
leaving a vacuum, and there is a question of how it will be filled. Lastly, Interviewee 4
mentions that Iran acknowledged that Transcaucasia was primarily a zone for Russian
influence. He mentions that Iran’s perspective is that regional issues should be solved on a
regional level with no external involvement. However, Iran accepts Russian engagement to
refrain from the West filling in the vacuum that leaving out Russia would create.
2. The USA, Iran, South Caucasus
 In this context, Interviewee 1 mentions that at this point, the attempts of the Armenian
government are not taken very seriously by Tehran, as there is no precise cooperation plan
with the USA, and the USA does not prioritize relations with Armenia or any other South
Caucasian state. He claims that, similar to Georgia, the US involvement has more of an anti-
Russian nature, leaving room to imply that Tehran would understand that phenomenon.
Interviewee 3 mentions that the American interest is so aligned with Israel's that
anything that moves toward Iran is a red flag; hence, promoting relations with Iran can
undermine the bigger and more critical question of how Armenia is going to disengage from
the Russian sphere of influence. He suggests that Armenia goes in the direction of finding
Western alternatives for economic and security purposes.

3. The Nagorno-Karabakh Issue

All the participants of the study claimed that Iran has always been in favor of
Azerbaijan’s territorial integrity when it came to the Nagorno-Karabakh conflict. Interviewee
4 considers 2020 a turning point in Armenia-Iran relations. Iran’s interest was prompted by
territorial changes directly concerning its borders. The Interviewee also mentions that even
though the Turkish side came up with the 3+3 format, it ignited such a big interest in Iran that
the format became known as the “Iranian format”. Another important aspect for Iran was
Israel supplying weapons to Azerbaijan, furthering Iran’s interest in the issue. Immediately
after the war, Iran tried to engage in Nagorno Karabakh’s occupied territories, specifically
through infrastructural and investment plans. One of the interpretations of Iran’s behavior is
that it is an exciting transit opportunity for them; secondly - it contradicts Israel by filling the
vacuum. Finally, in this context, Iran mentioned that the Iran-Armenia border is a top priority
that shall not undergo any changes.
Interviewee 1 mentions that throughout the 9-month blockade of Nagorno-Karabakh
and forced displacement of people, Iran has not been very active; he notes that Iran
potentially is a good partner and Armenia should realize the potential for cooperation.

4. Turkey
Interviewee 1 mentions that Turkey has always been a competitor for Iran, and even
though Erdogan started using nationalist-Islamic rhetoric for domestic purposes, that still is
something contradicting Iran’s interests as the Islamic Republic, as having Erdogan as the
leader of the Islamic world is something Iran would never accept. Another issue arises with
having a NATO member country as a nation, which practically means bordering NATO and a
pressing risk for Iran. Interviewee 2 claims that even though the relationship between Turkey
and Iran is complex, it is more typical of their issues in the Middle East rather than the
Caucasus, where their relations mostly revolve around the corridor. Finally, Interviewee 2
adds that irrespective of diplomatic rhetorics, Iran and Turkey are sacred enemies and that the
remaining of their relationship would benefit Armenia.

5. Religion and Demographics

As mentioned in the literature review, the participants of the interview series claimed
Iran to be very pragmatic in its foreign policy. Interviewee 2 says, “When building foreign
relations, Iran does not form relations with other states based on highly dogmatic, ideological
reasons but state interest”. He brought Armenia as an example of how first Shiite and
Christian countries have unbothered relations while two Shiite states (Iran and Azerbaijan)
have problematic relations.
Interviewee 3 talks about identity politics, mentioning that the Azerbaijani
community living in the North of Iran serves as an Israeli leverage point and a serious
problem for Iran, which benefits the Armenian side. Nonetheless, Interviewee 2 claims that
there is no Azeri minority in Iran but a Turkish-speaking community, which is gradually
growing closer to Azerbaijan due to propaganda. When it comes to the Armenian minority,
the Interviewee singles out the importance of acknowledging the importance of the Armenian
community for Iran throughout history and understanding the resources it provides.
Interviewee 1 adds that while religion is important to Iran as a theocracy, national interest
prevails. Moreover, due to the authoritarian regime in Iran, the presence of any minorities
does not translate into their foreign policy.

Conclusion
In conclusion, the paper explores Iran's historical involvement in the South Caucasus,
emphasizing its strategic interests in connection to the Western market and preventing the
rise of rival influences. While historically maintaining a balanced approach between Armenia
and Azerbaijan, recent shifts indicate an improving relationship with Azerbaijan, marked by
challenges posed by Turkish influence, separatism, and ties with Israel. In contrast, Iran's
relations with Armenia have been robust, as Armenia was serving as a key player in its
connections with Russia and the West. Despite potential complications arising from
Armenia's pursuit of Western support, the study suggests that enhancing Armenian-Iranian
relations is currently feasible, considering reduced tension over territorial disputes. However,
acknowledging limitations in sourcing information on Iran-Azerbaijan relations, the study
refrains from providing a definitive conclusion on the implications of Iranian involvement but
underscores a discernible increase in Iran's influence over time.

Acknowledgments
I would like to express my sincere gratitude to the individuals who generously
participated in the interviews for this study. Their valuable insights and expertise have
significantly contributed to the depth and quality of this research. However, to maintain
confidentiality and in accordance with ethical guidelines, the names of the participants will
not be disclosed in this document.
Appendix
What is your evaluation of Iran’s involvement in the South Caucasus region?
What are Iran’s priorities in the region?
What are Iran’s main goals connected to the South Caucasus?
How does religion reflect on the South Caucasian political decisions of Iran?
What role does Russia play in this context?
What is the role of the US in Armenia-Iran relations?
How does Turkey reflect on the political views of Iran in the Southern Caucasus?
What role do Armenian and Azerbaijani communities in Iran play in Iran’s foreign policy?
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