New Trilateral Cooperation for Iran, Armenia and India in the South Caucasus: From ‘Soft Balancing’ to Regional Transit Balance

In April 2023, the first trilateral political consultation between the deputy foreign ministers of Iran, India and Armenia was held in Yerevan (Shargh Daily, April 21). The three countries focused primarily on “economic issues and regional communication channels,” and “the sides agreed to continue consultations in the trilateral format” (Mfa.am, April 20). The formation of this tripartite format has a number of key strategic implications that could disrupt the geopolitical balance in the South Caucasus.

First, growing cooperation between Iran, Armenia and India can be seen as part of Tehran’s effort to restore the balance of power in the South Caucasus after the Second Karabakh War. This grouping stands in contrast to the trilateral cooperation between Pakistan, Turkey and Azerbaijan, with the “Three Brothers” military exercises in September 2021 being one of its more significant manifestations (Aa.com.tr, September 9, 2021). However, it is unlikely that, in the near future, the scope of Iranian-Armenian-Indian cooperation will extend from economic, commercial and transit interests to the military arena, including joint exercises. It seems that the nature of this particular tripartite cooperation will, instead of “hard balancing” (military-security), focus efforts on “soft balancing” (economic-transit) against the tripartite ties of Azerbaijan, Turkey and Pakistan in the South Caucasus.

Second, though Azerbaijan and Armenia are involved in both the International North-South Transport Corridor (INSTC) and the Persian Gulf–Black Sea International Transport and Transit Corridor projects, due to tensions between Baku and Yerevan, in practice, Azerbaijan is more active in the INSTC, while Armenia plays an essential role in the Persian Gulf–Black Sea Corridor. Nevertheless, due to changes in the balance of power in the South Caucasus following the Second Karabakh War and Russia’s war against Ukraine, Armenia (Mfa.am, January 12) and India (Economic Times, March 10) are planning to be more active in both corridors.

In such circumstances, Iran is trying to emphasize the common needs and approaches of Armenia and India regarding the Persian Gulf–Black Sea Corridor, in parallel to the development of transit and trade along the INSTC (Valdaiclub.com, March 30). Tehran was chosen as the “trustee of the agreement,” responsible for coordinating demands and finalizing documents for the national parliaments of the other five countries involved in the Persian Gulf–Black Sea Corridor (Armenia, Azerbaijan, Georgia, Bulgaria and Greece). Iran has played a central role in establishing transit routes to the Black Sea region since 2016. As a result, Iran hopes to establish a “transit balance” in the South Caucasus as part of its “balanced foreign policy approach,” specifically using the INSTC and the Persian Gulf–Black Sea Corridor to further cement its influence in the region.

Third, the Port of Chabahar, in the Sistan and Baluchistan province of southeastern Iran, represents the transit and commercial bridge between Iran, India and Armenia. This facility is of great importance as it is the only Iranian port with direct access to the Indian Ocean. Furthermore, within the framework of the tripartite agreement signed by Iran, India and Afghanistan on May 24, 2016, “the successful efforts of the Indian lobby have exempted the Chabahar transit project from unilateral US sanctions” (Valdaiclub.com, May 19). For its part, Uzbekistan also recently joined this agreement.

Parallel to the participation of Russia and China in the Chabahar Port project, including investments in both the Shahid Beheshti and Shahid Kalantari parts of the Chabahar Free Trade–Industrial Zone (FTZ), which have grown since the war in Ukraine began, Armenia has also shown more attention to this Iranian port project in further developing transit and trade with India. In this regard, Armenian Prime Minister Nikol Pashinyan set up “an inter-agency task force to launch a new international cargo transportation route and become an operator at Iran’s Chabahar Port” (Tasnim News Agency, May 8).

Fourth, impeding the simultaneous development of a transit corridor through Armenia can also be considered as part of Tehran’s targeted effort to strengthen the Iranian presence in the Syunik province of southern Armenia, which shares a border with Iran. The passage in question is the Zangezur Corridor as promoted by Azerbaijan, which, if established, could hamper Iranian involvement in regional transit (see EDM, October 14, 2022). In this regard, in parallel with holding two large military exercises—“Fatehan (Conquerors) of Kheibar” in October 2021 and the “Eghtedar (Power)” in October 2022—Iran opened a consulate in Kapan, the capital of Syunik province (Armenpress, October 21, 2022).

Additionally, on May 25, Iran announced the establishment of the joint free trade zone of Aras (Iran) and Meghri (in Syunik province) (Fars News Agency, May 25). Therefore, deepening trade and commerce ties between India, Iran and Armenia, as opposed to the Zangezur Corridor, will focus on developing the INSTC and the Persian Gulf–Black Sea Corridor, as both will ostensibly pass through Syunik province. In the meantime, though Moscow does not share Tehran’s concerns about the Zangezur Corridor, Russia is still not in favor of further weakening Armenia and disrupting the balance of power in favor of Azerbaijan and Turkey. Moscow’s recent decision to open a consulate in Kapan could signal a step toward Russia’s reengagement with the South Caucasus (Panarmenian.net, May 29).

Fifth, despite efforts to improve development, the Iranian-Azerbaijani-Russian land routes within the INSTC have high-quality infrastructure in comparison with the Armenian routes. Yerevan’s inadequate transit infrastructure and the still incomplete “North-South highway” are the main problems in this regard. The 400-kilometer road from Yerevan to Meghri on the Iranian border passes through mountainous areas and is very narrow, making it difficult and slow to pass through for trucks, especially during the winter. Furthermore, the lack of a rail connection between Iran and Armenia has reduced the volume and speed of goods transferred along this portion of the corridor. Therefore, for the foreseeable future, the passage running through Iran, Azerbaijan and Russia (Astara-Baku-Dagestan) will remain the INSTC’s primary route. At the moment, on average, a truck crosses the shared border of Iran and Azerbaijan every seven minutes. However, moving forward, Iran will likely try to transfer at least part of this traffic to the Armenian-Georgian land route and the Iranian-Russian sea route in the Caspian (Valdaiclub.com, February 17).

Sixth and final, while India’s increased participation in the INSTC has helped increase the country’s role in three main routes of this corridor—the western route (Russia-Azerbaijan-Iran-India), Trans-Caspian route (Russia-Iran-India) and eastern route (Russia–Central Asia–Iran–India), New Delhi’s increased use of the INSTC’s other route (Iran-Armenia) and the Persian Gulf–Black Sea Corridor will elevate its transit and commercial role in the South Caucasus and Black Sea region—two regions where India’s competitors, namely China and Pakistan, have taken important steps in recent years to strengthen their position.