The South Caucasus at risk: Why Iran’s stability matters

2026-01-27 - 19:02

The recent protests in Iran, with a still unconfirmed number of casualties, have sparked widespread speculation about the long-term viability of the Islamic Republic. While much international analysis has focused on Tehran, the most acute and dangerous consequences of a deep destabilization would likely be felt in the country’s peripheral regions. For Armenia and Azerbaijan, neighbors of northwest Iran, the fall or violent collapse of the regime would not present a geopolitical opportunity, but could instead open a Pandora’s box of existential challenges, undoing decades of fragile balances. Far from being merely a disruptive actor, a stable and sovereign Iran has, despite occasional tensions, served as a pillar of relative order and an indispensable counterweight in the complex chessboard of the South Caucasus. Iran is not a nation-state in the strict sense, but a civilization-state: a historical tapestry of peoples, languages and cultures woven together over millennia. Its northwest, bordering Armenia and Azerbaijan, is a living testament to this reality. Here, a significant Armenian community — custodians of one of the oldest and culturally richest diasporas — as well as a large Azerbaijani population, one of Iran’s most cohesive minorities, with deep cultural and familial ties on both sides of the Aras River. Together, these communities form an integral part of Iran’s national fabric. The narrative promoted by certain Azerbaijani nationalist circles and external actors hostile to Iran, portraying a “South Azerbaijan” as oppressed and eager for separation, is a dangerous oversimplification detached from Iran’s internal complexity. The loyalties of Iranian Azerbaijanis are multifaceted, encompassing Turkic identity, allegiance to the Iranian state and a predominantly Shiite faith — a powerful source of national cohesion. Azerbaijani President Ilham Aliyev has made veiled references to the rights of this community, but Baku is fully aware of the risks involved in fanning secessionist flames. A violent fragmentation of Iran would not deliver a homogeneous territory to Azerbaijan, but a multiethnic chaos on its southern border, with overlapping claims among Azerbaijanis, Kurds, Talysh, Armenians and Assyrians. For Armenia, the outlook is even grimmer. Iran’s Armenian community, though numerically smaller, has enjoyed protected status and served as a crucial cultural and economic bridge, particularly following the closure of borders with Turkey and Azerbaijan. The loss of this stable enclave in a convulsed Iran would constitute both a humanitarian and strategic blow. As noted by Zareh Sinanyan, Armenia’s High Commissioner for Diaspora Affairs, even the simple disruption of communications during protests generates deep concern in Yerevan. A collapse would mean not only a potential refugee exodus but also the disappearance of a historic partner who, despite its alliance with Russia, has maintained a relatively balanced stance in the Nagorno-Karabakh conflict, opposing forced border changes and the presence of Turkish or jihadist forces near its limits. The economic cost of instability Economic interdependence, often underestimated in official bilateral trade statistics, functions as a lifeline for both South Caucasian countries. Armenia, blockaded by Turkey and locked in a fraught relationship with Azerbaijan, relies on Georgia and Iran to maintain access to the outside world. The north-south corridor through Iran is a vital artery for the movement of goods, energy and people. Official figures showing that Iran accounts for roughly 4% of Armenian imports fail to capture the route’s strategic value as a conduit for third-country goods and as an alternative to Armenia’s omnipresent dependence on Russia. A collapse of order in Iran would immediately sever this artery, strangling the Armenian economy at a moment of extreme vulnerability. For Azerbaijan, direct trade with Iran is also modest, but Tehran’s role as a regional stabilizer and partner in critical infrastructure projects is irreplaceable. The International North-South Transport Corridor (INSTC), a key pillar of Baku’s connectivity strategy, relies on Iran as its central link to the Indian Ocean. Prolonged instability in the neighboring country would turn this ambitious project into a ghost route, undermining Azerbaijan’s aspirations to position itself as a logistical hub between Europe and Asia. In addition, the likely disruptions to energy flows and growing insecurity in the southern Caspian region would pose direct challenges to Azerbaijan’s oil industry. As Mahammad Mammadov of the Topchubashov Center in Baku warned: “The potential contagion effects will hinder the region’s efforts to emerge as a key node between the east-west and north-south corridors.” In other words, the Caucasian dream of becoming a continental crossroads fades if its southern neighbor, the essential connecting piece, descends into chaos. The American factor: A double-edged sword The Trump administration reengaged the United States in the South Caucasus with unusual vigor, mediating the peace process between Armenia and Azerbaijan and promoting the “TRIPP” corridor. In theory, a U.S.-backed regime change in Iran could intensify American interest and investment in the region. In proactive, however, this is a misleading and high-risk prospect. Historically, large-scale U.S. interventions aimed at reshaping states have rarely produced stable neighborhoods, often triggering decades of conflict and mass displacement. An Iran engulfed in violent post-Islamic Revolution reconstruction would not be a partner for Caucasus development, but likely a drain on Washington’s attention and resources — and a magnet for non-state actors and regional powers competing for influence. Russia, deprived of its main ally in the Caspian region, could feel compelled to intervene more directly in the South Caucasus to compensate for the loss and secure its flanks, potentially destabilizing the region further. As Mammadov astutely observed: “If the collapse scenario unfolds through foreign intervention, it will crystallize a new (dis)order where might makes right — a highly undesirable scenario for the small powers of the South Caucasus.” For Armenia and Azerbaijan, countries that have struggled to maintain sovereignty amid giants, a precedent in which borders and state structures are forcibly redesigned would be a strategic nightmare. Their capacity to attract U.S. attention would be outweighed by their vulnerability to the chaos unleashed.