The South Caucasus, a crucial geopolitical nexus connecting Europe, Russia, Central Asia, and the Middle East, possesses significant strategic importance regarding security, energy, and transit. Comprising the Republic of Azerbaijan, Armenia, and Georgia, this region serves as a battleground for competition among regional and global powers, including Russia, Turkey, Israel, and the United States, while simultaneously offering a unique platform for the development of multilateral cooperation models – particularly between Iran and the European Union.
In an era marked by geopolitical conflicts and security challenges that threaten the stability of the Caucasus, both Iran and the European Union confront shared threats, including chronic instability, ethnic tensions, transnational trafficking, extremism, and energy insecurity. However, there exist opportunities for economic collaboration, clean energy initiatives, transit expansion, and the establishment of political dialogue platforms, which could transform the Caucasus into a hub of overlapping interests between Tehran and Brussels.
Given the South Caucasus’ status as one of the most geopolitically sensitive regions linking Europe, Russia, the Middle East, and Central Asia, any form of cooperation or competition in this area directly influences the regional balance of power, Europe’s energy security, and Iran’s strategic objectives. This report examines the common political and economic interests of Iran and the European Union, assessing the capacities, challenges, and opportunities for collaboration in the Caucasus. It illustrates how the region could transition from a theater of rivalry into a space for strategic partnership between Iran and Europe, informed by geopolitical realities, the power dynamics of regional and global actors, economic potential, and the mutual interests of both parties.
Shared Political Interests
- Consolidating Regional Stability as a Common Priority
The South Caucasus has historically been a theater of rivalry among both regional and extra-regional powers, including Russia, Turkey, Iran, the European Union, the United States, and, more recently, Israel. In this context, any form of instability – such as the Nagorno-Karabakh conflict or internal unrest in Georgia or Armenia – can have multifaceted repercussions on the security of Iran’s northwestern borders, Europe’s energy security, and critical commercial and transit routes.
Both Iran and the European Union prioritize regional stability in the Caucasus, as instability (e.g., the Second Nagorno-Karabakh War or ongoing border tensions between Azerbaijan and Armenia) can lead to the proliferation of extremism, arms trafficking, and illegal migration. Iran is particularly concerned about the increasing influence of Israel and Turkey in the South Caucasus, while the EU is alarmed by Russia’s expanding influence and the potential disruption of the regional geopolitical balance. Despite their differing perspectives, both actors aim to mitigate the role of destabilizing third-party interventions. They recognize that an escalation of hostilities (such as a potential “Third Karabakh War”) could severely disrupt energy routes, trade flows, and transit communications.
Shared Interests:
- Iran, with its substantial Azerbaijani and Armenian populations, is highly sensitive to ethnic and ethno-religious tensions and conflicts in the Caucasus.
- Europe, which relies heavily on pipelines traversing the region – such as the Baku–Tbilisi–Ceyhan and Baku–Tbilisi–Erzurum pipelines – strongly advocates for sustained stability (Eurasiatique, 2023, https://eurasiatique.ca/2022/04/03/european-energy-security-and-pipelines-in-the-south-caucasus-carriers-of-energy-and-conflict/?amp=1).
- Both parties share common interests in crisis management, multilateral mediation, and reducing the influence of external actors such as Israel, Turkey, and transnational extremists.
- Countering External Interventions and Strengthening the Sovereignty of South Caucasus States
In the recent agreement between Yerevan and Baku – brokered and facilitated by the United States – one key component grants external actors a role and authority in the development and monitoring of a transit route known as the Zangezur Corridor. This aspect effectively enhances the U.S. presence and influence in a geopolitically sensitive area adjacent to Iran (Reuters, 2025, https://www.reuters.com/world/us-secures-strategic-transit-corridor-armenia-azerbaijan-peace-deal-2025-08-07/). Tehran perceives this development as a direct threat to the security of its northwestern borders, with senior Iranian officials cautioning that, in addition to diplomatic measures, they may resort to “other tools” to prevent the establishment of a corridor under exclusive foreign control (PressTV, 2025, https://www.presstv.ir/Detail/2025/08/09/752786/Iran-opposition-corridor-Armenia-Leader-advisor-Velayati).
From a structural perspective, if the corridor is implemented under a military-administrative framework or unilateral foreign control, it could undermine Armenia’s de facto sovereignty while intensifying great power rivalries in the region, impacting the interests of both Iran and the European Union.
Iran’s Perspective:
- Iran is apprehensive about the increasing Israeli influence in the Republic of Azerbaijan, particularly regarding the use of Azerbaijani territory by Israel for intelligence and military operations that threaten Iranian interests.
- Iran opposes the establishment of any military or destabilizing corridor, such as the “Zangezur Corridor,” which could disrupt the region’s geopolitical balance to the detriment of existing power dynamics.
- Iran emphasizes the importance of preserving international borders and existing transit routes to facilitate regional connectivity without infringing upon state sovereignty.
European Union’s Perspective:
- The EU expresses concern over the expanding influence of Russia in Armenia and Georgia, particularly through the deployment of military forces or control over critical infrastructure.
- The EU opposes Russia’s geopolitical maneuvering in regional conflicts to gain control of energy corridors and exert political-economic pressure on the European Union.
- The EU advocates for the maintenance of open energy and trade transit routes, free from unilateral dependency on Moscow or other external powers (ECIPE, 2025, https://ecipe.org/publications/eu-strategic-positioning-in-the-south-caucasus-central-asia/).
The shared interests of Iran and Europe are as follows:
- Both parties aim to enhance the independence and national sovereignty of the South Caucasus countries, thereby preventing their alignment with external powers – namely, Russia, Turkey, Israel, or the United States.
- There is a mutual commitment to mitigating security risks associated with the presence of foreign interventionist actors and to preventing the establishment of corridors that may serve military or destabilizing purposes.
- Both parties support the development of multilateral and balanced transit routes that protect Europe’s commercial and energy interests while ensuring the national security and territorial integrity of Iran and regional countries.
- There is a concerted effort to promote regional dialogue and cooperation mechanisms, such as the 3+3 format, which facilitate inclusive participation from all key stakeholders as an alternative to externally imposed solutions by global powers.
- Mediation and Preservation of Territorial Integrity and International Borders
The European Union has consistently underscored the necessity of respecting the international borders of the republics in the South Caucasus, asserting that any forcible alteration of these borders is unacceptable. This stance is pertinent to issues such as the Zangezur Corridor and the establishment of self-proclaimed “republics” with foreign support, even though the EU has not adopted an explicitly firm position in these matters. Likewise, Iran, invoking principles of international law, opposes any modifications to the region’s political geography.
The European Union has made efforts to mediate in the Nagorno-Karabakh crisis
(Azatutyun, 2023, https://www.azatutyun.am/a/32265773.html). Iran has similarly reiterated the importance of peacefully resolving disputes and maintaining the integrity of borders. Both Iran and the EU are united in their opposition to the proliferation of war and separatism, particularly concerning the security ramifications of the Karabakh conflict for ethnic communities and minorities, including those residing in Iran’s border regions with the Republic of Azerbaijan.
These shared perspectives create a basis for collaboration between Iran and the European Union within international forums such as the United Nations, the OSCE, and the UN Security Council, aimed at averting territorial fragmentation and regional destabilization.
- Combating Terrorism, Extremism, and Transnational Trafficking
The northern Caucasus border regions – adjacent to Chechnya, Dagestan, and Ingushetia – have a documented history of activities by Takfiri groups (Persee, 2004, https://www.persee.fr/doc/cemot_0764-9878_2004_num_38_1_1742). Salafi and extremist factions, along with arms and human traffickers, have infiltrated these areas, extending their reach into both Iran and Europe. Consequently, the rise of religious extremism in the North Caucasus – particularly from Takfiri groups or foreign mercenaries – represents a shared threat to the interests of both Europe and Iran.
Iran possesses extensive experience in identifying and neutralizing terrorist networks, while Europe is increasingly concerned about the return of foreign terrorist fighters. This scenario presents a potential opportunity for intelligence and security cooperation. The European Union, equipped with advanced intelligence capabilities and surveillance technologies, could engage in targeted security partnerships with Iran to address this mutual threat.
Such collaboration could occur through informal diplomatic channels (Track II diplomacy) or within the framework of initiatives like Horizon Europe, particularly in the domains of border security, cyber defense, and risk analysis.
Shared Economic Interests
- Diversifying Energy Routes and Reducing Europe’s Dependence on Russia
In the aftermath of the Ukraine crisis, the European Union has actively pursued the diversification of energy supply sources and transmission routes (Council of the EU and the European Council, 2024, https://www.consilium.europa.eu/en/policies/eu-response-russia-military-aggression-against-ukraine-archive/impact-of-russia-s-invasion-of-ukraine-on-the-markets-eu-response). The oil and gas resources of Azerbaijan and Turkmenistan can be directed toward Europe; however, for westward transmission, Iran presents a more reliable, cost-effective, and stable alternative compared to routes passing through the Black Sea or Turkey.
Iran, the European Union, and the South Caucasus all prioritize energy security and the establishment of multiple export routes. To effectively reduce reliance on Russian gas, the EU must seek diverse sources and delivery pathways, such as the proposed Caspian–Europe pipeline. Iran can act as a complementary partner through initiatives such as connecting to the South Caucasus gas corridor or facilitating energy exchanges with Armenia, Georgia, and Turkey. The South Caucasus could serve as an energy bridge between Iran and Europe, while Iran could provide a viable route for Caucasus energy to reach Europe via electricity or gas transit from Georgia or Azerbaijan.
The mutual benefits for all parties include:
- Iran could transport Turkmen or Azerbaijani gas southward, delivering it to Europe via the Persian Gulf, Iraq, Syria, or LNG export routes.
- Involvement in initiatives such as gas swap agreements or the expansion of Iran’s regional gas distribution networks could significantly enhance Europe’s energy security.
By collaborating with Iran, Europe could reduce its reliance on Turkey or high-risk corridors and gain a geostrategic alternative that circumvents Russia.
- Developing Shared Transit Corridors (North–South and East–West)
The North–South Transport Corridor (INSTC) traverses Russia, the Caucasus, and Iran, extending to India and South Asia. The European Union can leverage this corridor to reduce transportation costs, challenge Russian monopolies, and facilitate trade with South Asia (Eurasian Development Bank, 2021, https://eabr.org/en/analytics/special-reports/the-international-north-south-transport-corridor-promoting-eurasia-s-intra-and-transcontinental-conn). The INSTC connects Iran to Russia and Europe, making it an appealing option for the EU as it circumvents both Russia and the Black Sea.
Both Europe and Iran are committed to developing multimodal transport systems – rail, road, and sea – that would position the South Caucasus as a crucial connectivity hub. EU involvement in the development of Iran and the Caucasus’s transportation infrastructure – such as the Rasht–Astara railway or Caspian Sea ports – could yield significant geo-economic advantages for both parties. With its central location along the corridor, Iran could evolve into a regional transit hub. The development of the Rasht–Astara railway and the Chabahar Port presents Iran with the opportunity to become a pivotal node in Eurasian logistics.
The European Union could support Iran’s infrastructure through financial mechanisms under the Global Gateway Initiative. A trilateral cooperation between Iran, Europe, and the South Caucasus on transit matters would provide the EU with a strategic trade advantage while ensuring sustainable transit revenue for Iran.
- Investment in Renewable Energy, Water, Environment, and Technology
The Caucasus region presents substantial potential for renewable energy development, including hydropower, wind, and solar resources. The European Union, as part of the European Green Deal, aims to collaborate with neighboring countries to facilitate the transfer of clean technologies (European Commission, 2024, https://climate.ec.europa.eu/eu-action/international-action-climate-change/eu-engagement-climate-action-non-eu-countries/eu-climate-cooperation-neighbouring-countries_en). Iran is also pursuing investments in renewable energy and could act as a pivotal regional partner for Europe in environmental and clean energy initiatives.
The establishment of a joint clean energy development fund among Iran, Europe, and the South Caucasus states could contribute to reducing carbon emissions, addressing water scarcity and global warming, and generating employment, particularly in rural and border areas.
- Complementary Trade and Regional Markets
Iran and the South Caucasus possess strong potential for cooperation in sectors such as agriculture, food products, light industries, technical and engineering services, and medical tourism. The European Union, through a trilateral cooperation framework (Iran–Caucasus–Europe), could facilitate the expansion of non-oil exports and imports across the region.
The Free Trade Agreement between Iran and the Eurasian Economic Union (EAEU), which includes Armenia, provides a new platform for trilateral economic engagement with Europe (Iran Daily, 2025, https://newspaper.irandaily.ir/7800/3/14608). If sanctions are eased or alternative financial mechanisms such as Special Purpose Vehicles (SPVs) or local currency arrangements are activated, Europe could leverage the market capacities of both Iran and the Caucasus through strategic trilateral partnerships.
Within this framework, opportunities include:
- Exporting food products, construction materials, industrial components, and medical services from Iran to the Caucasus, and subsequently to Europe;
- Engaging in re-export cooperation via Iran’s free trade zones (such as Aras and Anzali), capitalizing on the EU’s trade regimes.
These interconnected commercial initiatives could foster a resilient regional market while strengthening Europe’s economic presence and enhancing Iran’s regional outreach.
Conclusion
A comprehensive analysis of developments in the South Caucasus indicates that, despite significant divergences in their broader foreign policy objectives, Iran and the European Union possess complementary and overlapping interests in this region – interests that have the potential to evolve into strategic, multi-layered, and multi-level cooperation.
In the political and security domains, both parties aspire to achieve lasting stability, contain extremism, mitigate destabilizing external influences, and uphold the territorial integrity of regional states. Economically and in terms of energy, the EU’s need to diversify its transit and energy supply routes, coupled with Iran’s effort to enhance its role in international transit and exports, has created substantial opportunities for convergence.
Furthermore, shared threats such as organized smuggling, border insecurity, illegal migration, and terrorist infiltration have made intelligence and security cooperation, along with joint regional initiatives, a potential priority for both parties.
Despite challenges such as sanctions, political distrust, and pressure from third-party actors, there remains a realistic potential for establishing trilateral cooperation mechanisms among Iran, the EU, and the Caucasus countries in areas such as environmental diplomacy, transit, border security, renewable energy, and scientific and cultural exchanges.
Iran and the European Union share significant strategic, economic, and geopolitical interests in the South Caucasus. Despite their differences in other areas, this region can serve as a constructive platform for cooperation and active multilateralism. The alignment of interests between Iran and the EU in the Caucasus is not only pragmatic and actionable, but – with political will and active diplomacy – can also facilitate tension reduction, regional balance, and sustainable development.
Recommended actions to achieve these objectives include:
- Establishing a trilateral strategic working group involving Iran, the European Union, and South Caucasus countries for sustained dialogue on regional security and economic developments;
- Engaging in joint infrastructure projects, including railways, ports, free trade zones, energy corridors, and solar energy stations;
- Launching regional clean energy programs such as technology transfer initiatives in solar, hydro, and wind energy, and convening environmental and renewable energy summits with participation from Iran and European countries;
- Developing informal intelligence cooperation on counter-extremism, counterterrorism, anti-trafficking, and border and cyber security;
- Promoting Track II diplomacy through academic, research, civil society, and expert-level exchanges to build trust between Iran and Europe;
- Expanding Iran’s diplomatic engagement with key European actors on Caucasus-related issues, particularly France, Germany, and the Baltic states;
- Facilitating joint investment in transit and energy infrastructure, with support from the European Investment Bank and Iran’s National Development Fund;
- Leveraging Iranian and European legal and diplomatic capacities to mitigate the influence of destabilizing actors in the South Caucasus.
Ultimately, the South Caucasus represents not only a testbed for a balanced regional role for Iran and Europe but also a strategic opportunity to transform latent tensions into synergetic potential and to develop a new model of Eurasian cooperation grounded in shared interests and regional responsibility.
Resources
- Eurasiatique (2023), European Energy Security and Pipelines in the South Caucasus: Carriers of Energy and Conflict, Accessible at: https://eurasiatique.ca/2022/04/03/european-energy-security-and-pipelines-in-the-south-caucasus-carriers-of-energy-and-conflict/?amp=1
- Reuters (2025), S. secures strategic transit corridor in Armenia-Azerbaijan peace deal, Accessible at: https://www.reuters.com/world/us-secures-strategic-transit-corridor-armenia-azerbaijan-peace-deal-2025-08-07/
- PressTV (2025), With or without Russia, Iran will block American corridor in Caucasus, Accessible at: https://www.presstv.ir/Detail/2025/08/09/752786/Iran-opposition-corridor-Armenia-Leader-advisor-Velayati
- ECIPE (2025), Navigating Geopolitical Realities: The EU’s Strategic Positioning in the South Caucasus and Central Asia, Accessible at: https://ecipe.org/publications/eu-strategic-positioning-in-the-south-caucasus-central-asia/
- Azatutyun (2023), S., France ‘Combining Efforts’ Against Karabakh Blockade, Accessible at: https://www.azatutyun.am/a/32265773.html
- Persee (2004), Sufism and Fundamentalism in Dagestan and Chechnya, Accessible at: https://www.persee.fr/doc/cemot_0764-9878_2004_num_38_1_1742
- Council of the EU and the European Council (2024), Impact of Russia’s invasion of Ukraine on the markets: EU response, Accessible at: https://www.consilium.europa.eu/en/policies/eu-response-russia-military-aggression-against-ukraine-archive/impact-of-russia-s-invasion-of-ukraine-on-the-markets-eu-response
- Eurasian Development Bank (2021), The International North–South Transport Corridor: Promoting Eurasia’s Intra- and Transcontinental Connectivity, Accessible at: https://eabr.org/en/analytics/special-reports/the-international-north-south-transport-corridor-promoting-eurasia-s-intra-and-transcontinental-conn
- European Commission (2024), EU climate cooperation with neighbouring countries, Accessible at: https://climate.ec.europa.eu/eu-action/international-action-climate-change/eu-engagement-climate-action-non-eu-countries/eu-climate-cooperation-neighbouring-countries_en
- Iran Daily (2025), Iran-Eurasia free trade to take effect in mid-May, Accessible at: https://newspaper.irandaily.ir/7800/3/14608