The South Caucasus is entering a new phase of geopolitical transformation. Whereas security issues and conflict resolution dominated regional discussions until recently, the focus is now gradually shifting toward competition over transport connectivity and logistics corridors. This shift reflects not only changes in the regional agenda but also a profound restructuring of Eurasia's trade architecture. Sanctions, the war in Ukraine, intensifying U.S.-China rivalry, and the European Union's efforts to diversify supply routes have all elevated the South Caucasus into one of the key links in the emerging Eurasian transportation network.

Yet the competition over transport routes has long ceased to be purely an economic matter. Modern transport corridors have become instruments of political influence, alliance-building, and the redistribution of strategic power. Consequently, nearly every major infrastructure initiative today is accompanied not only by competition among regional states but also by rivalry between external powers. For Washington and Brussels, the objective is to establish alternative transport links between Europe and Central Asia. For Moscow, preserving its traditional influence in the South Caucasus remains a strategic priority. Regional states, meanwhile, see an opportunity to transform their geographical position into a long-term economic advantage.

At the same time, transport infrastructure alone does not guarantee economic development. International experience demonstrates that sustainable benefits emerge only when roads and railways become part of a broader economic model encompassing industrial cooperation, investment, logistics hubs, and the free movement of capital and goods. Otherwise, even the most ambitious infrastructure projects risk remaining mere transit routes without fundamentally reshaping national economies.

For this reason, the principal challenge facing the South Caucasus is not simply the construction of new transport corridors but the ability of regional states to transform them into engines of long-term development. Without lasting political normalization, mutual trust, and clear rules governing economic interaction, the region risks remaining an arena of competition among external powers rather than becoming an independent center of economic growth. Conversely, if transport integration is accompanied by expanded trade, industrial cooperation, and reciprocal investment, the South Caucasus could evolve from a transit region into a fully-fledged economic hub linking Europe and Asia.

To discuss how realistic such a scenario may be, how new transport initiatives could reshape the regional balance of power, influence Armenia's relations with Russia and the European Union, and what economic opportunities could emerge from the normalization of Armenian-Azerbaijani relations, we spoke with Hrant Mikaelian, Armenian political analyst, economist, and research fellow at the Institute of Caucasus in Yerevan.

— Today, transport corridors have become instruments of geopolitics rather than merely channels for trade. In your view, how could the U.S.-backed TRIPP transport initiative across the South Caucasus alter the regional balance of power? Is it primarily an economic project or a geopolitical one?

— Speaking about the so-called TRIPP project, it is important to understand first and foremost that this is not a new initiative that emerged two years ago. Rather, it reflects a longstanding Western concept closely connected with a number of other infrastructure initiatives, including not only transport projects but also pipeline networks. Essentially, it fits within the broader concept of the Middle Corridor through the South Caucasus.

For this reason, it is no longer possible to classify the project as purely economic or purely political. If one had to choose between economics and geopolitics, the answer would lean toward geopolitics. However, if we speak in terms of geoeconomics, the distinction largely disappears, as political and economic objectives become mutually reinforcing.

The project's political dimension is particularly significant. It is designed not only to provide transport connectivity between Nakhchivan and mainland Azerbaijan, as well as between Türkiye and Azerbaijan, but also to integrate Central Asia more closely and strengthen connections with Europe. Moreover, this is not solely about economic infrastructure. The project also has a military-strategic dimension, since transport corridors of this kind could potentially be used for military transit and the transportation of defense-related goods.

— Some experts believe that this U.S.-supported transport route could significantly reshape the existing logistics architecture of the South Caucasus. What long-term consequences could it have for Armenia, Azerbaijan, and the region as a whole?

— For the South Caucasus, it would mean the emergence of a second major transport corridor alongside the existing Georgian route. For Azerbaijan, this would represent a significant regional asset, substantially enhancing its logistical capabilities and geoeconomic importance.

As for Armenia, the situation is considerably more complex. Although the current version of the project is far less controversial than the original concepts, it still does not fully align with Armenia's national interests. Moreover, in many respects, the project is being presented to Armenia as an already established framework, leaving the country primarily with the task of adapting to it. That is precisely why public opinion within Armenia remains deeply divided on the issue.

— In your opinion, how could the implementation of the TRIPP project affect economic relations between Armenia and Russia? Could the emergence of a new transport corridor alter Armenia's traditional trade and logistics ties with the Russian market?

— I do not believe that TRIPP will have a direct impact on Armenian-Russian economic relations. Earlier, various operational models for the route were discussed, including the possible involvement of Russian border guards. However, under current circumstances, there are no grounds to expect any direct effect on bilateral economic relations.

That said, the very existence of an alternative transport corridor could potentially provide the Armenian leadership with an additional instrument in negotiations with Russia, both politically and economically. Nevertheless, under present conditions, such a scenario appears rather unlikely.

A different situation could emerge if Russia increasingly comes to view the project as part of a broader effort to gradually reduce Moscow's influence in the South Caucasus. In that case, changes would likely occur first at the political level rather than in trade itself, although political tensions would inevitably have economic consequences as well.

— Around the world, transport corridors increasingly serve not only as freight routes but also as mechanisms for attracting investment, establishing new industries, and promoting industrial development. Does the South Caucasus have an opportunity to use future transport projects as the foundation for a common economic space? What roles could Armenia and Azerbaijan play within such a framework?

— Such potential certainly exists. However, its realization depends directly on the degree of political normalization among the countries of the region.

At present, transport projects are viewed primarily through the lenses of geopolitics and security. But if interstate relations enter a more stable phase, transport corridors could become the foundation for new production chains, increased investment, and expanded industrial cooperation.

The key prerequisite, however, would be a shift from purely intergovernmental economic interaction toward cooperation among businesses, private companies, and entrepreneurs. Only then would transport infrastructure function not merely as a transit route but as a genuine catalyst for the formation of a shared economic space.

— If Armenia and Azerbaijan eventually achieve full normalization of relations, which sectors of their economies are likely to benefit the most, and which could face new challenges?

— There is considerable potential for economic cooperation between Armenia and Azerbaijan across a wide range of sectors.

At the same time, it should be recognized that, with the exception of the energy sector, the two economies produce many similar goods. Azerbaijan possesses a surplus of energy resources, whereas Armenia faces an energy deficit. However, in most other sectors, the production structures of the two countries are broadly comparable, which objectively limits the scope for bilateral trade.

Nevertheless, meaningful cooperation is entirely possible in agriculture, light industry, and several other sectors. Under favorable conditions, bilateral trade could realistically reach $200–300 million within a few years.

Ultimately, however, the outcome will depend far more on political conditions than on economic ones. Will the border be fully opened? Will citizens of both countries be able to cross it freely? Will all border crossing points become operational? Will trade become a normal commercial activity, or will each individual transaction continue to require intergovernmental approval?

If trade evolves into a normal business relationship comparable to Armenia's trade with Georgia or Azerbaijan's trade with Georgia, then the existing economic potential could indeed be realized. Even so, it would take several years for businesses to identify reliable partners, establish supply chains, and develop sustainable commercial relationships.

— Armenia has been actively expanding economic cooperation with the European Union while remaining a member of the Eurasian Economic Union (EAEU). From an economic standpoint, how sustainable is this balancing strategy, and where do you see its limits?

— Objectively speaking, Armenia's cooperation with the European Union is currently developing primarily in the political sphere.

Its economic results have so far been considerably more modest. In fact, over recent years, the European Union's share of both Armenia's exports and imports has declined, while trade with the Eurasian Economic Union and countries outside any major integration bloc has expanded.

Furthermore, the European market has become increasingly difficult to access for a variety of reasons. As a result, political dialogue with Brussels continues to deepen, whereas tangible economic outcomes remain relatively limited.

There are now efforts underway to reverse this trend. However, another challenge remains: the goods most in demand within the European Union do not necessarily correspond to what Armenia currently produces.

That said, I do not believe that meaningful economic cooperation with the EU is impossible. On the contrary, Armenia is fully capable of expanding economic ties both with Brussels and with individual European countries, which in many cases may prove even more effective. The principal contradictions arise at the political and geopolitical levels, whereas the economic sphere offers considerably greater room for pragmatic cooperation.