This report summarizes the online discussion on “The South Caucasus Amid Geopolitical Shift: Mitigating Crisis, Leveraging Opportunities,” convened by the Democratic Security Institute, with expert contributions from Medea Turashvili (Georgia), Tigran Grigoryan (Armenia), and Rauf Mammadov (Azerbaijan).
Executive Summary
2025 was a significant year for the South Caucasus with the August 8th Washington Summit acting as a turning point in Armenian-Azerbaijani relations. At US President Donald Trump’s invitation, Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev signed a number of agreements regarding trade and communications [1]. The most visible and practical outcome is a de-escalation in the risk of armed conflict. The so-called “Trump Route” proposes linking Azerbaijan to its exclave of Nakhichevan through Armenian territory, providing an alternative trade route which avoids both Russia and Iran. With a fragmenting and seemingly more transactional global order, where “spheres of influence” seem to be making a comeback, leaving the South Caucasus in a precarious position of crisis but also of opportunity. It is entering a period of fragile stabilization driven by elite-level diplomacy, connectivity economics and pragmatism, but it lacks potential durability.
From Escalation to Managed De-escalation
Before the Washington summit, a Russian-brokered ceasefire from 2020 resulted in a tense and asymmetrical relationship between Armenia and Azerbaijan, which reached new heights following the 2023 territorial surrender of the Nagorno-Karabakh region. With a litany of unresolved crises, the risk of renewed conflict was ever-present. Yet, following August 8th, the two formalized a political agreement to peace and normalization, which reframed regional connectivity through the trade routes as a peace-building agenda and signaled a shift in mediation leadership toward the US. Since Armenia and Azerbaijan have started to cooperate on bilateral border commissions, trade contracts and an exchange of experts, not seen before. However, the agreements still require a period of negotiation before full ratification and implementation, rendering newfound stability fragile. The summit has reduced the likelihood of immediate conflict, but the durability of this newfound peace is contingent on a variety of factors, including geopolitical struggles amongst great powers, domestic political crises, and the diversification of security strategies.
Great Power Recalibration
With a route named after him in reverence or self-entitlement, the Trump Route has allowed Donald Trump to continue to propagate himself as a global peacemaker. His role and those of his special envoys have introduced a model of diplomacy that operates a highly personalized and resource-light system. Ignoring multilateral institutions that have sought peace in the South Caucasus for decades, Trump has relied on presidential diplomacy and targeted intervention to push Armenia and Azerbaijan toward a formalized agreement of peace. Despite much of the legwork being done by the previous Biden administration, Trump’s self-styled role as peacemaker serves US foreign policy and domestic political purposes. It reinforces the American role in global conflict resolution without committing boots on the ground. August 8th reflects this approach. Elite-driven political negotiation, with the optics of hosting in Washington, has reinvigorated the peace process in the region.
Whilst the strengths of presidential diplomacy lie in its ability to build momentum, it comes with an inherent weakness of durability. By tying progress closely to the Trump brand, the process is contingent on the continued interest of Washington. Presently, the White House is evidently interested in the strategic and economic benefit of a de-escalation in the region, with Vice President JD Vance’s visit to Armenia – a country no sitting US President or Vice President has visited before – and Azerbaijan proving US commitment to normalization [2]. However, Trump’s foreign policy record suggests a pattern of rapid reprioritization and a preference for symbolic wins over institutional consolidation. For a region experiencing fragile peace, the unpredictability of the White House carries real risks. The existence of competing crises in the Middle East, Ukraine, and Venezuela may divert the President’s attention to the long-term implementation period required for Armenian-Azerbaijani peace. Furthermore, whilst Aliyev looks set to continue as Azerbaijan’s leader, both Armenia and the United States are constitutionally bound to electoral cycles, which creates uncertainty for regional actors. In the event of an administrative change, questions will inevitably arise over commitments to peace and sustained support of the project.
With a fragmenting global order, the European Union is struggling to find a role in peace negotiations. The EU has traditionally held normative influence in peace negotiations. Yet as normative values come under strain, the EU has struggled to retain relevance. Since Georgian Dream’s controversial electoral win in 2024, the country has shifted away from its agenda of European integration, moved towards appeasing Moscow, and experienced dramatic democratic backsliding. Georgia sits in a structurally precarious position: by turning away from the EU, it has diluted its once monopolistic status as the EU’s principal partner in the region. Some fears emerging connectivity routes might bypass Georgian territory, undermining its dominance as a central trading hub of the South Caucasus. Whilst the EU remains an important energy partner for Baku, political relations are more transactional than transformational. Azerbaijan privileges bilateral negotiations with European states, which avoids the normative agenda of the EU.
However, it is widely believed that there are opportunities for the EU in the region if they choose to further engage. Armenia is struggling with a structural complication in their railway network, operated by the Russians since a 2008 concession agreement. However, Russia’s 2022 invasion of Ukraine and the impact of international sanctions have diminished its ability to rehabilitate Armenia’s infrastructure. Armenia must diversify its security network and secure alternative financial means for infrastructural development. They have not been shy to suggest they would turn to the EU for financial and technical support. Supporting the development of Armenian infrastructure would further mitigate Russian structural power, providing the EU with direct leverage over how connectivity in the South Caucasus operates.
Analysts note the differences between the European and American operating procedures. Under the new US National Security Strategy, democracy is a preference and not a requirement for deepening relations with the US. Reliant on personal rapport and leverage, the US has challenged the international rules-based system, which underpins the logic of the EU integration process. The EU has traditionally adopted a gradualistic approach. Integration is dependent on reform and state-building. This slower strategy has led to the EU struggling to remain relevant in moments of geopolitical acceleration, compounded by Georgia’s steering towards Russia. However, the EU’s comparative advantage lies in its capacity for sustained partnership in economic redevelopment. Its financial instruments, regulatory expertise, and institution-building render it a credible long-term partner for the development of sustainable peace.
The Economics of Connectivity as a Strategy Seen from the Region
The prospect of transit routes through the South Caucasus has renewed importance because it offers an alternative trading route that bypasses both Russia and Iran. Following the 2022 invasion of Ukraine and subsequent sanctions regime, Russia has decimated its potential as a reliable trading partner. Similarly, Iran’s geopolitical isolation and crumbling economy also reduce the security of trade. Bypassing both provides Europe and Asia access to larger markets and strengthens supply-chain resilience. For the South Caucasus, lying at the intersection of east and west, north and south, the Middle Corridor and the “Trump Route” convert precarious geography into geographic leverage and economic relevance in an increasingly fragile world. Medea Turashvili, DSI non-resident fellow, suggests multiple trading routes through the South Caucasus would raise the strategic value of the region and grow the overall economic pie. With no one state capable of servicing such a volume of cargo, Armenian Prime Minister Nikol Pashinyan stated in Parliament, “I think now is a very good time for Armenia, Georgia and Azerbaijan to view this opportunity as a common one.” [3] Developing broader connectivity would have sustained benefits for all countries, including Georgia, so long as it integrates into the development process.
From the Armenian perspective, Tigran Grigoryan, Director of the Regional Center for Democracy and Security, argues that the project demonstrates a ‘de facto lack of reciprocity’ with regard to transit implementation. According to Grigoryan, the border and customs control regime will be simplified on the Armenian side by the involvement of third-party personnel and a front office–back office model. However, he believes it is unlikely that Azerbaijan will accept similar regulations on its soil, highlighting that bigger issues will emerge when conversations on how to operationalise peace begin. This scenario would embed a degree of structural asymmetry into the transit process. However, compared with alternatives such as renewed escalations initiated by Azerbaijan or possible Russian control, this scenario is ‘not the most unacceptable proposal’. However, with large levels of domestic mistrust remaining a major obstacle, this proposal would require significant efforts to build public support. Thus, negotiations are operating in two languages: one for domestic politics and one for practical implementation. The challenge will be in aligning them.
For Azerbaijan, the transit and energy routes will allow Aliyev to project the state as a strengthened regional power, but Rauf Mammadov, non-resident scholar at the Jamestown Foundation, argues he’s “overstretching” due to increasing domestic socio-economic pressures. Scholars have long labelled Azerbaijan a petrostate, dependent on oil revenues to maintain a social contract that inhibits civil society participation in exchange for low or no taxation. However, declining oil revenue and modest GDP growth of 0.8% have constrained Aliyev’s ability to maintain this social contract. Fiscal pressures have driven the state to offset the losses from oil and gas by taxation and heavy penalties. However, Rauf Mammadov explains, “Azerbaijanis always act with their pockets, never from their political concentrations,” so it will be interesting to see how the domestic population responds to Aliyev’s taxation experiment. Domestic pressures have obliged the state to look into the connectivity and potentially leverage them as an alternative means of revenue generation. Mammadov adds the corridors are “equally important from a geostrategic perspective,” whereby Azerbaijan can present the region as stabilizing and foreign companies can trust these routes.
Azerbaijan is also hedging its bets with middle powers. They’re creating very strong ties with the Gulf countries, particularly the UAE. There’s increasing economic and political relations with the UAE serving some purposes. UAE and Saudi companies are the only companies investing heavily in Azerbaijan’s renewable energy sector, providing Azerbaijan with the ability to project itself as an exporter of renewable energy. It is also in keeping with Azerbaijan’s long-standing multi-vector foreign policy, allowing them to diversify their bets and remove dependence on one major ally [4]. Economically, it is a challenging time for Azerbaijan and geopolitically, the region is consistently in turmoil. It is up to Azerbaijan to decide how it will react and whether to reap the economic opportunities of a fragile peace.
Conclusion
The South Caucasus is experiencing its most fluid geopolitical moment since 2020 with a reinvigorated peace process. They must respond to an increasingly anarchical world order in which dependence on a great power ally has not paid off. The United States’s role as a reliable ally has been called into question, the EU is under strain, and Russia is crumbling under its war in Ukraine. Trump has utilized presidential diplomacy to provide momentum for the peace process and the development of transit routes through the region has mitigated the risk of conflict in the immediate. However, with rising domestic crises and as the global order reshapes, the resilience of peace seems dependent on two factors. Firstly, geostrategic diversification. Georgia must rethink its alliance with Russia and, rather, reorient itself toward Europe to retain relevance and benefit from newfound interest in the region. Increased connectivity through trading routes comes with opportunities for further economic integration in the region, stability and an increase in regional value. Georgia, Armenia and Azerbaijan must cooperate in a meaningful manner to present a narrative to the world that the South Caucasus is open to stability and trade. Remaining open to multilateralism, European integration and democratic values is a crucial way to improve their geopolitical positioning and the domestic stability of the governments.
Secondly, the resilience of the peace process is contingent on its popular legitimacy. At present, the foundations for reconciliation are weak. In Azerbaijan, thirty years of state narratives have perpetuated feelings of humiliation and trauma, entrenching an intergenerational public mistrust of Armenians. The monopolization of the political space by one man has severely constrained genuine peacebuilding initiatives. Pro-democratic and peacebuilding actors have largely been jailed, exiled, or silenced, creating a profound dilemma for Armenian society, where engagement with government officials is viewed with skepticism. Historical violence and more recent traumas of war compound social trauma for Armenians and peacebuilding remains largely absent. Without domestic buy-in, both Rauf Mammadov and Tigran Grigoryan are not optimistic about the resilience of this peace process. Without space for genuine dialogue and healing, peace remains fragile. Whilst limited, there are some examples of grassroots initiatives like Bright Garden Voices, which “provide a platform where Armenians and Azerbaijanis practice active coexistence by working together to process trauma” [5]. In the long term, sustainable peace will require an expansion beyond top-down, elite-driven negotiations and must include initiatives striving for societal reconciliation.
Author: Grace Shipp
[1] Armenia and Azerbaijan tout possible peace deal – POLITICO
[2] Vance is in Armenia, the 1st sitting US vice president to visit | AP News