Connecting Iran and the South Caucasus: Competing Visions of the North-South Corridor

Abstract

Due to its geographic location, the South Caucasus could provide alternative trade routes between Iran and Europe as part of a larger vision of an international North-South Transport Corridor. Potential benefits to Iran include having an alternative to its overland route to Europe via Turkey, which has been a source of major problems in recent years, and - in the longer term - becoming a transit country for cargo traffic between South Asia and Europe. Armenia and Azerbaijan, which share a common border with Iran, have been promoting competing rail routes. Azerbaijan's projected rail link to Iran along the Caspian Sea coast has gained momentum since the nuclear deal thanks to the availability of funding and Russia's interest. In contrast, the rival Southern Armenian Railway project, which would connect Iran to Georgia's Black Sea ports via Armenia, was more attractive to Iran during the sanctions era, when it had fewer options at its disposal. This 3.2 billion USD project has failed to secure external funding, making its implementation increasingly unlikely. However, the ongoing large-scale road rehabilitation and construction program in Armenia, financed by international donors, can still improve Armenia's attractiveness as a transit country. While Iran has expressed interest in all these initiatives, it has adopted a cautious approach, as it is also exploring transport corridor options in other regions, including Central Asia.