Iran’s position in the South Caucasus very much depends on the relations between Armenia and Azerbaijan. The Second Nagorno-Karabakh War drastically changed the fragile geopolitical status quo Iran helped to build in the South Caucasus in the 1990s. With growing Turkish and Russian influence, Iran now has to adjust to the tilted balance of power. Adjustment, however, will be a major challenge for Iranian governments, requiring significant military and economic resources to compete with Ankara and Moscow in the age of great power competition and the changing global order. 

It has long been argued that Iran’s policies towards the three South Caucasus states - Armenia, Azerbaijan, and Georgia - are based more on pure geopolitical interests than ideological principles and the rhetoric that often permeates the Iranian leadership’s stance towards most of the Middle East and the US. Others claim Iran’s policy is a mixture of realpolitik with some elements of ideology, blending historical experiences with the constantly changing balance of power calculations. Overall, despite the religious nature of the Islamic Republic, the “realist” elements of Iranian policy are more dominant in the policies towards the South Caucasus.

Iran’s pragmatic approach to the South Caucasus has not been a unique case. Pragmatism was increasingly evident in Iran’s tense relations with the West too. Similar developments were discernible in Iran’s ties with the newly independent states that emerged following the collapse of the Soviet Union. Tajikistan’s civil war is one example of when Tehran pursued “pragmatic regionalism.” Pragmatism involves elasticity, which perhaps explains why Iran has not yet developed any specific strategy and has not published any official documents on the Islamic Republic’s strategy towards the South Caucasus or Central Asia. Iran has been pragmatic in the Middle East too. During the first Gulf War, Tehran dismissed Iraq’s hopes for creating a common front against the US. Thus, pragmatism has been a fairly common foreign policy approach used by Iran to exert influence in the neighboring territories.

Despite the apparent deficiencies, the foreign policy devoid of religious drivers served as a good basis for Iran’s diplomatic initiatives, the slow but steady growth of trade with the three South Caucasus states, and generally quite nimble foreign policy moves. This pragmatism also allows the Islamic Republic to build long-term, workable partnerships with other regional powers such as Russia and Turkey. Iran’s pragmatism fits into an overall trend that      increasingly permeates bilateral ties among the major Eurasian powers. The notion of traditional alliances is being gradually cast aside and replaced by what I would call the Eurasian model of relations, finding bigger space for interaction and seeing a larger pool of opportunities across the vastness of the supercontinent. This makes their foreign policy more agile in finding a common ground for cooperation across Eurasia and in the South Caucasus in particular. To be sure, Iran, Turkey, and Russia compete too, but a realistic approach to bilateral ties and larger regional problems such as the pressure from the West push the three countries to work constantly towards finding compromises. This requires balancing, and unlike in the West, the balance of power concept is closer to the historical experiences of Iran, Turkey, and Russia.

Iran’s geopolitical vision of the South Caucasus is pretty straightforward. Iran does not pin its hopes on powerful economic and soft power tools to make other countries seek its support. There are limits to its power, and Iran has never pushed beyond its capabilities. Its policies have been always commensurate with the real influence it holds. Nevertheless, Tehran’s policies in the South Caucasus come in  striking contrast with the Islamic Republic’s policiesin the Middle East, where the Islamic Revolution in Iran developed a web of closely linked militant organizations that, through low-cost financial support from Tehran, deliver large geopolitical gains for the Islamic regime. Maintaining this veritable transnational military “empire” is difficult and requires a constant dedication of human and economic resources. This means that in the South Caucasus, Iran’s foreign policy bears little economic cost. But perhaps the underlying reason behind Iran’s relatively inconspicuous position in the region has been the South Caucasus’ generally minor importance in the Iranian worldview. Economically. the region is not very attractive. Rigid terrain makes infrastructure projects way more expensive than elsewhere. And the US and the EU fill in the bits of the geopolitical space where traditional Russian or growing Turkish influence has struggled to penetrate.

This, however, does not mean that the South Caucasus is not regarded as part of the Iranian geopolitical mindset. In fact, the political elites of the Islamic Republic perceive their country as an indispensable regional power, viewing the South Caucasus as a domain where Iran has and will have long-term geopolitical interests.

Iran and the Nagorno-Karabakh Conflict

For Iran, the Nagorno-Karabakh conflict has been important to watch as the conflict zone, where the interests of Russia and Turkey also intersect, is near Iran and could have potentially spilled over into its northern border, the region mostly settled by ethnic Azerbaijanis. 

Contrary to the idea that Iran had a largely unchanged position towards the conflict before and after the 1994 ceasefire, which ended the first Nagorno-Karabakh war, Tehran’s position in fact was often alternating and dictated by its internal political considerations as well as the balance of power. In the 1990s, Tehran opposed an American proposition for the two warring sides to trade corridors: Armenia obtaining a corridor to Nagorno-Karabakh and Azerbaijan the one to Nakhchivan. The initiative could have resulted in a significant extension of the border between Azerbaijan and Iran, while depriving Armenia of direct access to Iran. This would have allowed Turkey to build a veritable corridor from its eastern provinces to the Caspian Sea. It is this fear that still haunts Iran nowadays, especially as the prospects of the Turkish-Azerbaijani corridor following the 2020 war look more promising.

Though unable to be involved as thoroughly as Russia or even Turkey, Iran has nevertheless been attentive to a changing balance of power between Armenia and Azerbaijan in the 1990s and 2000s. Tehran officially remained neutral, but through its actions nevertheless contributed to tacit support for Armenia. For instance, Iran served as the main supply route for Armenia when, in 1992–1993, supply routes from all of Armenia’s neighbors except for Iran were closed or unreliable. In many ways, Armenia continued its war effort against Azerbaijan during the first Nagorno-Karabakh War, mainly with fuel and food supplies imported from Iran.

In the following years, Iranian-Armenian ties expanded notably. All Iranian presidents from Mohammed Khatami (1997–2005) to Hassan Rouhani (2013–2021) visited Yerevan, and in 2018, bilateral trade hit a high mark of $364 million. In a way, it could be argued that Iran preferred Armenian control of the Azerbaijan-Iran border around Nagorno-Karabakh. This provided Iran with a much more porous frontier, which allowed for active trans-border economic and energy cooperation, such as the establishment of a hydroelectric plant that allegedly served Iran’s border regions. Indeed, there should have been tangible economic interactions, as reflected in Iranian state media articles when reports of Azerbaijan regaining control over the border areas following the war in 2020 emerged. 

Warm ties between Armenia and Iran often led to Azerbaijan’s leveling of accusations against Iran. The situation deteriorated due to widespread  misconceptions about Azerbaijani-Iranian relations. Following the first war, Iran made several attempts to resolve the crisis, but was met with indifference by the warring states and lukewarm support from Russia and Turkey too.

Since the  early 2000s, the balance of power has begun  to tilt in Azerbaijan’s favor. Propelled by high oil revenues and the growing ability to convert its financial strength into hard power, Azerbaijan grew more powerful than Armenia. Gradually, the fear of a strong Azerbaijan and a weakened Armenia has begun to shape Iran’s geopolitical imperatives. But instead of relying on Armenia, Tehran sought to fortify ties with Azerbaijan. Another reason for this behavior was Iran’s fear of a potentially disproportionate growth of Turkey’s influence. In Tehran’s understanding, this scenario could have ushered in the Azerbaijan-Turkey alliance, largely constraining Iranian interests. Therefore, Tehran’s goal was to navigate carefully between Armenia and Azerbaijan, in order not to further tilt the latter towards Ankara. 

Similar to the parts of the Middle East where chaos, partially caused by American military presence and the Arab Spring, allowed Iran to move in and fill in the void. Instability in the South Caucasus from the early 1990s allowed Tehran to use its geopolitical position to influence, albeit on a much smaller scale, the processes in the region. The new geopolitical arrangement following the Second Nagorno-Karabakh War, however, upended the foundation of Iran’s foreign policy towards the South Caucasus.

Indeed, since the 1994  ceasefire and until 2020, Iran has been witnessing a changing geopolitical landscape in the South Caucasus as Turkish military and economic involvement with Azerbaijan gradually tipped the balance. Azerbaijan’s economic power, too, propelled by oil and gas revenues, contributed to the unfolding changes. The balance of power between Armenia and Azerbaijan was growing increasingly asymmetrical, which meant that the existing status quo around Nagorno-Karabakh could no longer be sustained. The question for Iran was what could have been done to secure its regional stance. Perhaps this acute perception of unfolding changes in the balance of power served as one of the reasons why Iranian-Azerbaijani relations started to improve, as seen in the discussion above.

The Iranian fears occurred in the  autumn of 2020, when Turkey’s growing military posture and its desire to be present at the negotiating table drove Ankara to increase its support to Baku. Azerbaijani gas may also be a factor in Ankara's decision to strengthen ties with Baku, as the latter has become Turkey's leading gas supplier. From a regional perspective, Iran also fears Turkey’s push to create a land corridor to Azerbaijan proper and further to the Caspian Sea. For Tehran, which has historically viewed the sea as a condominium between Iran and Russia, Turkish involvement and its potential to reach out to its kinsmen in Central Asia is a disruptive development. Iran had little to do with preventing the growth of Turkish influence. In this regard, its position aligned with that of Russia, which, in order to prevent an increasing Turkish influence, repeatedly signaled its unwillingness to give up its role as mediator in the Nagorno-Karabakh conflict.                                    

With approximately 2000 Russian peacekeepers stationed in Nagorno-Karabakh and Azerbaijan returning control over most of the seven regions around the troubled region and over some parts of Nagorno-Karabakh itself, a new transport corridor is still expected to go through the narrowest part of Armenia to link Nakhchivan with the rest of Azerbaijan. This would potentially allow Turkey to reach the wider Caspian region. Indeed, though Iran welcomed the Nagorno-Karabakh deal, fears that Azerbaijan could turn into a jumping-off point for Turkey to project influence into northern Iran and the wider Caspian region have not been unrealistic. In June 2021, the so-called “Shusha Declaration” was signed at a ceremony in Shusha by Azerbaijani President Ilham Aliyev and his Turkish counterpart. The document stated that an attack on either country would be considered an attack on both parties. The declaration also discusses cooperation in the international arena, as well as political, economic, trade, cultural, educational, sports, youth, energy security, and military cooperation. Azerbaijan and Turkey are now officially allies. But if this alliance dynamic was well apparent well before the Shusha Declaration, the document nevertheless represents a major shift in Azerbaijani diplomacy. From now on, Azerbaijan is balancing Turkish and Russian influence, as opposed to the multi-vector foreign policy the country has been famous for. 

It still remains to be seen what Azerbaijan’s victory will mean for Iran’s Azerbaijani minority. Some complications might indeed follow. Yet this narrative should also be counterbalanced by some interesting developments on the ground. The potential threat is often overstated. Pan-Turkic (pan-Azerbaijani) sentiments among the Azerbaijanis of Iran were effectively dealt with by Tehran. Moreover, the majority of Iranian Azerbaijanis are quite loyal to the Iranian statehood; they are widely represented in Iranian political and economic life at different levels. Nevertheless, even a small active minority can cause problems, and the Iranian authorities are watching closely to prevent this. 

In the longer term Iran will have to devote time, resources, and troops to adjust to the new geopolitical reality, namely, a stronger Azerbaijan and a bigger Turkish influence. Fear of potential changes to Armenia’s territorial status were also the driving motives behind Tehran’s massing of troops and military drills near Azerbaijan’s southern border in October 2021 and 2022. Though not explicitly mentioning Turkey, the Islamic Republic’s leadership must have been more worried about Turkey’s growing power than with the alleged Israeli presence. It is thus unclear how Azerbaijan’s success in the war will affect its bilateral relationship with Iran. The competition will be mixed with cooperation.

Iran’s position is complicated by the need to maintain good relations with its historic rival, Turkey. Their ties are complex and often alternate between collaboration and open competition. Economic ties are key, as each side sees the other as an important market for its goods. Good relations with Turkey provide the Islamic republic with a powerful tool to limit its economic and diplomatic isolation imposed by the collective West. Furthermore, the two states also cooperate in combatting the PKK (Kurdistan Workers’ Party) - a potential threat to the territorial integrity of both states.

Iran, however, managed to regain some momentum. The drills and the ensuing rapprochement with Baku were indicative of Iran’s posture. Into the same category should fall an agreement signed in 2022 on transit between Azerbaijan and Iran, effectively reactivating the transit from Azerbaijan proper to Nakhchivan once again through Iran’s northern territory. New infrastructure will be built, bypassing Armenia’s territory. Despite recurrent tensions between Tehran and Baku, the deal is significant, showing that the two are highly pragmatic in bilateral relations.

Beyond Turkey, the Second Nagorno-Karabakh War also showed how dependent Baku was on Israeli technologies. Diplomatic relations were established in the early 1990s. Numerous factors, such as Azerbaijan's loss of political control over Nagorno-Karabakh and the surrounding regions, have contributed to the development of bilateral relations. The desire to correct the disbalance led Baku to become one of the top purchasers of Israeli defense technologies such as military drones. 

The scale of the transactions in the military sphere between the two countries is immense. In 2012, reports emerged about a $1.6 billion purchase by Azerbaijan of weapons manufactured by Israel Aerospace Industries. In 2016, Israeli PM Benjamin Netanyahu said Azerbaijan had bought $5 billion worth of weapons from Israel (unmanned aerial vehicles and satellite systems). In 2017, the Stockholm International Peace Research Institute reported that Baku had purchased $127 million worth of military technology from Jerusalem.

In addition to Israel, Azerbaijan’s relations with the US have been of particular concern to Iran. Washington’s and Baku’s interests have steadily converged over a set of shared concerns. The two countries work together to promote European energy security, expand trade and investment, and combat terrorism and transnational threats.

However, relations between Iran and Azerbaijan gradually improved before 2020 and were perhaps a result of Iran's pragmatic foreign policy, particularly that of the country's then-president Hassan Rouhani. Azerbaijan, too, has been interested in rapidly improving ties with Tehran. Strategically, this would have limited Tehran’s covert support for Armenia, limiting the latter’s geopolitical maneuverability. Azerbaijan’s improving relations with Iran since 2013 have helped neutralize the fears in Baku that, in the event of a major military escalation around Nagorno-Karabakh, Iran’s position would be pro-Armenian, namely, less supportive of Azerbaijan’s territorial integrity.

The outbreak of the Second Nagorno-Karabakh War in September 2020 could not have been a worse moment for the Islamic Republic. Openly supporting Armenia could have positioned Iran against Turkey and, by extension, even Israel - a formidable array of powers Iran would not have been able to confront. A pro-Armenian stance could have also started religiously motivated domestic protests, undermining Iran’s credentials as a champion of the Islamic causes. Iran thus faced a clash between ideological sentiments and a realist foreign policy approach.

Looking Ahead

Iran’s policies in the South Caucasus remain short of being called the playbook the Islamic Republic pursues in many parts of the Middle East. The country does not have pro-Iranian proxies in the South Caucasus to rely on, nor does Tehran possess enough soft power and economic tools to influence the region on a par with Turkey and Russia. Nevertheless, Iran’s vision of the region, despite all the deficiencies, is quite agile and nuanced. Through the interplay of limited use of soft power, economic elements, and geographic proximity, Tehran has managed to maintain the balance between the warring sides and fortify its ability to persuade and entice the neighbors when necessary. A critical element in Iran’s stance towards the region has been to achieve and maintain security by thwarting the Islamic Republic’s archenemies and rivals—the US, Israel, and, to a certain degree, Turkey—from gaining a foothold to the north of the borders. This worked to a certain level.

The resistance against the presence of external powers in the South Caucasus fits into how Iran sees its evolving geopolitical position in the context of the changing global order. The gradual dilution of Western power and the rise of non-Western, mostly Asian powers, their pursuit of near-exclusive geopolitical spheres of influence free of Western involvement in critically important regions allow Iran to partner with other regional powers to compete with the collective West. The latter’s relative absence from the Nagorno-Karabakh conflict-resolution process is an indicator of much wider change, such as the evolving world order. Similar changes trickle down to every global institution and concern all geopolitically important regions. The South Caucasus is one of those regions where the interests of several neighboring regional powers allow them to close off the space geopolitically. Iran is a part of this effort where, along with Russia and, to a limited degree, Turkey, it seeks to lessen Western or any other (for instance, Israeli) influence present in Armenia, Azerbaijan, and Georgia.

Similarly, for Iran, the Middle East and South Caucasus are now two inextricably entwined regions.Regional security and energy resources underpin the growing interconnection. Russia and Turkey, which since the 2010s have been active in increasing their military and economic position in the wider Middle East, now, as the Second Nagorno-Karabakh War demonstrated, consider the South Caucasus as a part of a greater geopolitical game that stretches from the Mediterranean to the Caspian. The trend is clear: for the first time since the early nineteenth century, when the Russian empire began its expansion into the South Caucasus and effectively cut the region off from the Middle East, the two regions are again growing closer. Geography’s inescapable pull underpins the process. Perhaps a major adaptation in the Iranian geopolitical worldview will follow by elevating the South Caucasus’ geopolitical role in the country’s foreign policy. This might not equalize the region in importance to other theaters Tehran is heavily involved in across the Middle East, but a major reconsideration of Iran’s position is now underway.

Emil Avdaliani is a professor of international relations at European University in Tbilisi, Georgia, and a scholar of silk roads.