U.S. Inches Closer to Causing Major Caucasus Crisis With Offer to Administer Transport Corridor Between Turkey and Azerbaijan
Naked CapitalismIt’s all connected, as they say. And the battles in Ukraine and Middle East between Washington and its adversaries are now spilling over into the Caucasus in earnest. US Ambassador to Türkiye Tom Barrack confirmed reports that we noted back on July 7 that the US is weaseling its way into the South Caucasus with its proposal to administer the 32-kilometer Zangezur Corridor. This route, long coveted by Ankara and Baku, would cut through southern Armenia along its border with Iran and connect mainland Azerbaijan with its Nakhchivan exclave (and Turkiye). Washington is talking about acting as a neutral guarantor by taking out a 100-year lease on the corridor and having a private American logistics operator run it. Here’s Barrack:
Barrack’s comments were the first official acknowledgment of the US interest in direct engagement in the corridor. And here’s Trump, for whatever it’s worth, promising that a deal between Baku and Yerevan is close:
It’s presented as some benign intervention by Washington to unlock peace between the two sides, but if you’ve been following this story the past few years, it’s clear this geopolitical power play was the plan all along in order to damage both Russia and Iran. We can go at least as far back as then-U.S. assistant secretary of state for European and Eurasian Affair, James O’Brien’s Nov. 15, 2023 comments during “The Future of Nagorno-Karabakh” House committee hearing for insight on the US intentions regarding these corridors. Here’s what O’Brien said then:
“A future that is built around the access of Russia and Iran as the main participants in the security of the region, the South Caucasus, is unstable and undesirable, including for both the governments of Azerbaijan and Armenia. They have the opportunity to make a different decision now.”
It looks like that decision is imminent. If this happens, it means Armenia and Azerbaijan are reneging on the ceasefire agreement brokered by Moscow to conclude the 2020 war between the two countries. Point 9 of the trilateral statement signed by Azerbaijan, Russia, and Armenia at that time reads:
All economic and transport links in the region shall be unblocked. The Republic of Armenia shall guarantee the safety of transport communication between the western regions of the Republic of Azerbaijan and the Nakhichevan Autonomous Republic with a view to organize the unimpeded movement of citizens, vehicles and cargo in both directions. Control over transport communication shall be exercised by the Border Guard Service bodies of the FSS of Russia.
Of course the US would go for this, but what about the other players? Why are they burning bridges with Russia and Iran at a time when both appear to be strengthening while the US and the rest of the West are in a downward spiral? And what are the short- and long-term repercussions?
The current Armenia has essentially been taken over by the West. The US has one of its largest embassies in the world in Armenia and even a representative of the US armed forces embedded in the Armenian Defense Ministry. While the opposition warns that this is inviting disaster (Ishkhan Saghatelian, a leader of the opposition Armenian Revolutionary Federation, says, “This is the beginning of a new storm, not only for Armenia but also the entire region,” and predicts a “new cycle of violence and instability with unpredictable consequences.”), the Armenian government is cracking down hard on dissent as an announcement is likely approaching.
Armenian Prime Minister Nikol Pashinyan likes to talk about how this is all a grand rebalancing act, but if so, it has been horribly executed and is akin to getting in deep with the sharks. Or here’s another take:
What about Türkiye and its famous balancing act?
Ankara is concerned about Russia and Iran gaining too much influence in the Caucasus and elsewhere, including over Türkiye itself. Fear over what comes after a Russian victory in Ukraine is likely in part driving the Erdogan clique’s decision making. Türkiye is also getting loads of deals from the EU and Washington. For months, the EU has been increasing Türkiye’s role in the bloc’s defense industries and it was recently capped off by news a few weeks back that the two sides will hold defense talks after a three-year pause. Ankara is looking for access to the EU’s new $170 billion defense fund. And the US is reportedly on the verge of easing up on the 2017 Countering America’s Adversaries Through Sanctions Act (CAATSA).
How about Azerbaijan? While Baku and Moscow have either been hit with a series of escalating unfortunate events or a calculated campaign to turn Russia away from the corridor project (we covered the spiraling ties here) It too has been lavished with deals from the West for its oil and gas. In 2022, Baku and Brussels signed a memorandum on the growth of supplies from 10 to 20 billion cubic meters (bcm) per year. Gas supplies have already increased by more than 40 percent from 2021 to 2024, but Brussels is already asking for an additional 14 bcm as it tries to get completely off Russian gas.
Azerbaijan has had trouble keeping up with the demand. In 2024, the country produced 50.3 billion cubic meters of natural gas, and has even been importing more Russian gas itself in order to meet domestic demand and its obligations to Europe. There are plans to expand the Southern Gas Corridor which connects Azerbaijan to Europe, but for now it is already at full capacity.
Despite the current struggle to meet demand, it’s obvious why Baku would be interested in opening a corridor through Armenia. It could theoretically cut out Iran and Russia from grand designs to become a towering gas hub. There are visions of Azerbaijan upping its own output while sending gas west from Turkmenistan and elsewhere in Central Asia to Israel, Syria, and all over Europe.
Currently, it has to pay a transit fee to Iran just to keep the lights on in its Nakhchivan exclave—an arrangement it bristles at.
Türkiye, too, has long dreamt of this corridor that would cement it as a major energy and transit hub between Central Asia and Europe. But of course their gain would be Iran’s loss. Tehran would lose money, influence, and security. As a reminder of what the opening of the Zangezur Corridor would mean, it is the missing link in what would be the shortest land transport route between the Pacific and Atlantic oceans in a Eurasian trade and transport communications worth more than $1 trillion. And key to many involved parties is not only the shorter distance but the fact that it’s one of the few routes that entirely bypasses Russia and it would weaken Iran by opening an interlocked Turkic front across its northern borders. This so-called “Turan Corridor” is a major concern of Tehran for economic and defense reasons. From Security & Defence Quarterly:
Azerbaijan used to pay 15 percent of the 350 million cubic metres of gas sent to Nakhchivan through Iran as a transit fee. With the opening of the new corridor, Iran may lose this profit.
An agreement on sale of gas was signed between Türkiye and Iran in 1996. Based on that agreement, Türkiye has been buying gas from Iran for years. While Türkiye pays Iran US$490 for a thousand cubic metres of gas, it can buy the same amount from Azerbaijan for US$335.
If a gas pipeline is built from Azerbaijan to Türkiye through this corridor, Iran’s loss of gas revenue may be huge.
The planned gas pipeline project from Turkmenistan through Iran to Türkiye then to Europe was frozen in 2017 because of financial disagreements. Turkmenistan can now deliver this gas to Europe via Azerbaijan.
The importance of Iran’s pipeline to Armenia has also decreased.
The Strategic Council of Foreign Relations in Tehran, whose director is Iran’s former minister of foreign affairs Kamal Kharazi, condemned the construction of the Zangezur corridor, indicating that the corridor has been introduced as NATO’s “Turan corridor,” a project ostensibly supported by Israel and NATO, which aims to foment ethnic unrest in the areas of Iran inhabited by Turks. As per the aforementioned Council, NATO’s Turan corridor is supposed to directly bring NATO onto the northern border of Iran, the southern border of Russia, and western China and lay the groundwork for their disintegration.
I’ve seen a few reports that Tehran is supportive of Armenia unblocking regional transport routes and that things are fine between Baku and Tehran. That would be quite the shock. Tehran has in the past called the Zangezur Corridor a red line, and they might be backing off that stance a bit because aside from occupying southern Armenia to prevent it, there’s not much to be done. But it’s pretty clear they view having the US on their northern border as the glue to a Turan corridor as a major problem. In a Thursday call between senior Iranian and Armenian security officials, the Secretary of Iran’s Supreme National Security Council Ali Akbar Ahmadian, reiterated Iran’s consistent opposition to any shifts in the geopolitical landscape of the region. In May, Ahmadian warned that ““extra-regional” forces in the South Caucasus are “not interested in lasting peace in the region.” That’s quite the understatement.
With Azerbaijan already being used as an Israeli outpost to destabilize Iran and launch drone attacks, the idea of a strengthened and connected Türkiye and Azerbaijan across its northern border with the involvement of Washington is an absolute nightmare.
Moscow was previously on board despite the opposition from Tehran, but that was when Russia was to be included in the corridor and would benefit from it.
Now with so much money flying around, Azerbaijan and Türkiye both seem to have made the decision that their economic interests are better served by the West. Armenia looks to be committing national suicide by entering into deals with Azerbaijan and Türkiye with its security guaranteed by …Washington? France? Good luck with that.
Both Ankara and Baku potentially believed that they wouldn’t face much consequences from Russia. They appear to have miscalculated.
Moscow is hitting back. Hard.
With regards to Armenia, the price of liquified petroleum gas (LPG), which is widely used in cars there, has surged by 40 percent after Georgia blocked the transit of gas from Russia. Moscow hasn’t come out and said it, but it’s believed in Armenia that Georgia is acting on behalf of the Kremlin, and it is intended to send a message. Georgia also recently blocked the export of Armenian brandy to Russia, and there are plenty of other levers Moscow can pull. As Fitch Ratings notes, Armenia’s economy relies significantly on Russia for both trade and energy. For example, Armenia also currently pays Russia $165 per thousand cubic meters of gas, well below the market price in Europe, and Russia is Armenia’s number one trading partner.
But is this another instance in the New Cold War where Russia technically wins (it can inflict more damage on Azerbaijan, for example) but loses long term. Short of another military intervention, how does Moscow stop the Zangezur Corridor from opening without its involvement? Both Armenian media (for the past two years) and Azerbaijani media (for the past seven months) have been hard at work stoking anti-Russian flames and blaming Moscow for incidents large and small.
And should the relationship between Moscow and the two South Caucasus countries (and Ankara) continue to deteriorate, how much will that hurt Russia’s position in the South Caucasus—a region Moscow has major plans for with regards to trade corridors and countering Western isolation efforts?
Russia, to varying degrees, plays major roles in the energy economies of Azerbaijan, Armenia, and Turkiye. Due to Russian companies’ large investments in the Azerbaijani oil and gas sector, it is one of the bigger beneficiaries of Brussels’ efforts to increase energy imports from Azerbaijan in order to replace Russian supplies. Türkiye gets nearly half of its natural gas and a quarter of its oil from Russia on good deals and profits from sending Turkstream gas on to Southeastern Europe.
But Russia also relies on both to counter Western isolation efforts. There aren’t many good options for Russia aside from applying more economic pressure, but that also has the potential to turn public opinion more against it. Yes, it could rely on its superior force but at what cost? Or it allows a Turkic/NATO corridor that allows Ankara to expand across the Caucasus and into Central Asia creating a whole host of new headaches for Moscow?
The US, meanwhile, sits back and nods in approval. Either it gets a 100-year lease foothold in the South Caucasus from which more trouble will no doubt spring and/or it makes more progress on the infamous RAND plan to “overextend and unbalance” Russia.
