The implications of a new opening with Iran have raised expectations around the globe. The European Union, which celebrates the nuclear deal with Iran as a rare success in foreign policy, is positioning itself to exploit new commercial opportunities in the long-closed Iranian market.
Not to be outdone, US firms are equally eager to secure their own deals in Iran, wrote the European Council on Foreign Relations, a pan-European think tank with offices in seven European capitals.
The immediate impact of the Iran deal, and its subsequent reintegration in the global economy, is much more significant for the South Caucasus region. The clear local winner is landlocked Armenia, which has a long record of stable, friendly and cooperative relations with Iran, and as an immediate neighbor, expects direct benefits from an opening up of Iran.
Also benefiting, though to a lesser degree, is Georgia that envisions an opportunity to deepen its own relations with Iran.
Armenia
For Armenia, the possibility of further developing ties with Iran offers much more than trade or economic opportunities. Rather, Iran is an essential alternative for Armenia to overcome its dual dependence, on Russia for energy and on Georgia as a primary transit route. Armenia senses a fresh opportunity, like Iran itself, to emerge from its own profound isolation. And it also presents a rare strategic opening for Armenia to offset its over-reliance on Russia by enhancing its own bargaining power by leveraging its role as a partner of both Moscow and Tehran.
Since independence, Armenia has forged a close and consistent bilateral relationship with its southern neighbor. Rooted in shared geography and converging interests, Armenia stands out as one of Iran’s few reliable and stable partners, while positioning itself less from a historical symbolic partnership and more as a practical “necessary neighbor.”
Clearly, the Armenian strategic approach toward Iran is grounded in graduating from a limited role as a small, symbolic partner to becoming more of a strategic platform. But for this to happen, Yerevan needs to do more.
First, there is an obvious necessity to correct the imbalance in trade. Although the trade volume between the two countries has been steadily growing, from a meager $72 million in 2001 to $300 million in annual turnover last year, Iran remains a marginal import and export partner, despite the low transit costs.
One crucial move would be for Armenia to better leverage its membership in the Russian-led Eurasian Economic Union, which may offer Iran an attractive way to enter the much larger market.
Second, the appeal of using Armenia for trade promotion and projection can be furthered by an added incentive of preferential tax treatment for Iranian commerce to operate and export from Armenia.
Beyond trade and commerce, however, the energy sector is in some ways the least viable opportunity for Yerevan. Although the two countries have an operating natural gas pipeline, it was largely limited by Russian pressure, which imposed serious curbs on gas imports from Iran in order to block any Armenian aspirations of emerging as a regional energy hub, and to maintain Armenian dependence on Russian gas, while also preventing any competition for Russia’s Gazprom as the primary energy player.
From the Iranian perspective, however, the significance of Armenia stems from three considerations. First, seeing Armenia as a strategic pathway to reach out to other markets. Second, looking to a geographic partnership with Armenia as a stable and friendly neighbor. And third, as a geopolitical platform, based on Armenia’s inherent advantages of access to the Eurasian Economic Union and as an outlet through the North-South transport network, thereby engaging the broader South Caucasus region.
But the key for Armenia to seize this new opportunity remains in Moscow, and the real test is to what degree Yerevan has the will or the way to overcome Russian limits on Armenian-Iranian engagement.
Georgia
Georgia definitely should welcome the historical deal with Iran as it implies a weakened Russian position in the region. Moreover, having opened itself up years ago to Iranian tourists and capital, Georgia can now benefit even more as Iran itself opens up to the rest of the world.
After regaining its independence, Georgia enjoyed friendly relations with Iran insofar as this was possible. The then president Shevardnadze—a former foreign minister of the Soviet Union—understood only too well that Georgia could not afford to neglect Iran. Saakashvili, who was initially almost totally focused on the West, came to realize this too.
However, after the 2008 war with Russia, Georgia no longer had the luxury of ignoring anyone, especially a country of Iran’s importance and resources. Tbilisi introduced a visa-free regime for Iranians (later rescinded by the current Georgian authorities, but then partly restored) and embraced Iranian investment.
Georgia in general welcomes any development that will bring peace and stability to the region and therefore promote further economic development.
