Armenia’s geopolitical pivot from Russia toward the West has been one of the most significant South Caucasus developments of the last decade.  Following a long history of orientation towards Moscow, Armenia is now charting a new course, as indicated by its courting of weapons and funding from the West, and the launch of visa liberalization talks with the European Union (EU).  Officials in Yerevan are even discussing the possibility of an eventual EU membership application.  Yet, while Armenia’s economic and political ties to Russia are often noted as a matter to be settled on the way to deeper EU relations, less referenced is Iran’s role in Armenia’s foreign policy.  Given U.S. sanctions against the Islamic Republic, Yerevan’s economic and political relationships with Tehran may come under more scrutiny as Armenia seeks to affiliate itself with the trans-Atlantic block. 

While nowhere near as central to Armenian foreign policy and trade as Russia, Iran has been an important regional player for Yerevan since independence.  Iran is Armenia’s third largest source of foreign goods and trade between the two countries is now reportedly booming, with an Armenian official stating in late 2023 that Iran and Armenia’s trade turnover had gone from $350 million in 2021 to an expected $1 billion in 2024. Confronted with extensive sanctions, Armenia has been a critical door to the outside world for Iran, especially for foreign goods and money laundering purposes.  The neighbors also signed a new natural gas deal in 2022, made all the more important for Armenia given its near total reliance on Russian energy.  

Politically, the two countries have positive relations.  Iran publicly backs Armenia in the ongoing dispute over Azerbaijan’s desire to have a trade corridor through Armenia.  In Iran's July presidential elections, Iranian citizens in Armenia were able to vote at three separate locations.

Ties with Iran have been in part a product of necessity for Armenia.  With closed borders with Türkiye to the east and Azerbaijan to the west since 1993, Armenia has faced limited options for trade and military shipments.  Further complicating matters is the fact that Georgia closed its airspace to Russian arms shipments in 2008.  Moscow has been Yerevan’s primary military supplier.  This left Iran's border with Armenia as a lifeline for the South Caucasus country, and it has been the main point through which Russian weapons have circuitously entered Armenia.  Even now, with Armenia increasingly purchasing military gear from India, Iran will remain a crucial thoroughfare for Yerevan.  

Pragmatism provides the Islamic Republic with reason enough to foster good relations with Armenia.  Azerbaijan’s closest ally is Türkiye, who Iran sees as a rival.  Tehran’s opposition to an Azerbaijani transit corridor through Armenia was likely in part informed by a desire to keep Turkish influence at bay.  Baku also has productive relations with Israel, Tehran’s regional foe.  Israel provides Azerbaijan with weaponry while Azerbaijan is the source for 40% of the Jewish state’s energy.  Israeli military and intelligence personnel have long been rumored to spy on Iran from Azerbaijan, something regularly alluded to by U.S. intelligence officials.  Analysts believe that in a war between Iran and Israel, Azerbaijan would be a base of operations for Israeli forces.  Tehran’s relations directly with Baku have been rocky but have been recuperating in the last year.  For Tehran, Armenia has therefore been a useful counterbalance to Turkish, Azerbaijani, and Israeli influence. In January 2023, Iran’s ambassador to Armenia declared, “Armenia’s security is Iran’s security.”  

But things are changing in the South Caucasus.  Armenia’s pivot toward Europe and the West seems to beg the looming question of Yerevan’s relationship with Tehran.  Iranian-Azerbaijani relations are now warming, perhaps giving Iran less incentive to back Armenia.  Historically, one could argue that Armenia’s ties to Iran have been a product of necessity and not choice.  Yet if Armenia turns away from using Russian military goods and opens its eastern and western borders in the coming years, this argument will hold less water.  European and American allies, likely hoping to reward Armenia’s political split from Moscow, have so far not commented harshly on the country’s relationship with Iran.  This may not be the case indefinitely. The United States has deployed secondary sanctions against Armenian firms before for trading with Iran and may do so again.  

Ties with Iran also present Yerevan with new opportunities.  Armenia, still a member of the Russia-backed Eurasian Economic Union (EEU), stands to gain from the new free trade agreement between the EEU and Iran.  The only EEU member who borders the Islamic Republic, Armenia could become the center for Iranian goods looking to enter the shared EEU market of 183 million people.  If Armenia looks to wean or diversify itself away from Russian energy resources, Iran may also be a valuable source of gas and oil.  Additionally, Armenia’s interest in connecting to South Asian and Middle Eastern markets require logistical routes running through Iran.  Iran appears open to further cooperation, with Iran’s supreme leader Ayatollah Khamenei remarking “We are deeply committed to enhancing our relations with Armenia, and the collaboration between our two nations,” during a July 30 meeting with Armenian Prime Minister Nikol Pashinyan.

On the other hand, if Yerevan is able to normalize relations and open borders with Azerbaijan and Türkiye, it could open up diverse local commercial opportunities for Yerevan, who will likely desire more than simply replacing a Russian trade reliance with a reliance on Iranian imports.

Iran’s market size and proximity to Armenia are going to continue to make a working relationship necessary and advantageous.  Pashinyan, alongside other South Caucasus and Central Asian leaders, attended Iran’s recent presidential swearing in and such meetings will likely continue.  But the degree to which Armenia expands ties or distances itself from the Islamic Republic in the coming years may be a useful bellwether for the extent to which Armenia wants or is able to pursue Western affiliation.  Yerevan may seek a balance, expanding relations with both Tehran and Europe.  Such an equilibrium might be possible, given that analysts now view Brussels and Washington as primarily interested in rewarding Yerevan’s turn away from Moscow.  But maintaining or expanding relations with Iran could also pose significant limits on integration with Europe or relations with the United States.  It will be up to Yerevan to weigh the costs and benefits of its approach.