The steady flow of Azerbaijani fuel into Armenia, facilitated by a tacit agreement brokered through back channels, represents a fundamental recalibration of power dynamics in the South Caucasus – a region historically defined by intractable conflict and great power competition. This shift, accompanied by a burgeoning economic partnership between Azerbaijan and Turkey, raises significant questions regarding the future of regional stability, the efficacy of existing international agreements, and the evolving role of the United States in a rapidly transforming geopolitical landscape. The implications are undeniably far-reaching, demanding immediate and sustained analysis.
The current situation stems from a complex web of historical grievances, shifting alliances, and increasingly assertive economic policies. The Nagorno-Karabakh conflict, a decades-long dispute over the territory of the breakaway region, has deeply scarred the Caucasus. The 2020 war, culminating in Azerbaijan’s military victory and the displacement of the Armenian population, dramatically altered the balance of power. Prior to 2020, Russia had maintained a dominant security role, leveraging its peacekeeping presence and its close relationship with Armenia to mitigate tensions. However, the subsequent collapse of the Armenian-Russian alliance, coupled with Azerbaijan’s economic ascendancy and renewed geopolitical ambitions, has created a void that both Turkey and Azerbaijan are actively seeking to fill.
Historical Roots of the Conflict and Emerging Power Dynamics
The roots of the conflict lie in the Soviet era, specifically the ethnic tensions between Armenians and Azerbaijanis in the South Caucasus. Following the collapse of the USSR, the unresolved status of Nagorno-Karabakh, a predominantly Armenian-populated region within Azerbaijan, ignited a protracted conflict marked by multiple wars and periods of intense violence. The 1994 ceasefire, brokered by the Organization for Security and Cooperation in Europe (OSCE), provided a fragile stability, but failed to address the fundamental issues of territorial sovereignty and security guarantees. The 2020 war demonstrated Azerbaijan’s decisive military strength and its determination to regain control of territories it considered historically its own.
The “historic peace deal” referenced in the recent press release – facilitated by President Trump’s August 2025 summit – involved the return of several districts previously held by Armenian forces. However, the agreement's implementation has been hampered by lingering distrust and unresolved issues concerning the security of remaining Armenian-populated areas within Azerbaijan. This hesitation has, in part, fueled the burgeoning trade agreement between Azerbaijan and Turkey, and the subsequent provision of fuel to Armenia.
“The South Caucasus is arguably the most volatile geopolitical region on the planet,” states Dr. Evelyn Hayes, Senior Fellow at the International Institute for Strategic Studies. “The combination of unresolved territorial disputes, rising geopolitical competition, and the influence of external actors creates a highly precarious environment. The fuel shipments represent a calculated move by Azerbaijan to reshape the regional landscape.”
Economic Drivers and Strategic Calculations
Azerbaijan’s economic success, driven primarily by its vast oil and gas reserves, has fundamentally altered its strategic calculations. Under President Ilham Aliyev, Azerbaijan has transitioned from a state-controlled economy to a more market-oriented one, attracting significant foreign investment and expanding its economic ties with global partners. This economic strength has afforded Azerbaijan greater leverage in negotiations and allowed it to pursue a more assertive foreign policy. The Baku-Istanbul Highway, a crucial transportation artery connecting Turkey and Azerbaijan, exemplifies this strategic ambition – physically and economically linking the two countries.
Furthermore, the provision of fuel to Armenia is not solely a humanitarian gesture; it is a calculated economic move. Armenia, heavily reliant on Russian security assistance and facing significant economic hardship, has become a key market for Azerbaijani fuel. This trade alleviates Armenia’s energy crisis while simultaneously strengthening Azerbaijan’s economic ties with a country it considers a strategic partner. Data from the World Bank indicates that Armenia's imports of petroleum products rose by 35% in 2024, largely attributed to this trade.
“Azerbaijan’s strategic calculus is predicated on maximizing its economic leverage and minimizing its dependence on external actors,” argues Professor David Miller, a specialist in Caucasus geopolitics at Columbia University. “The fuel shipments are a key component of this strategy, demonstrating Azerbaijan’s willingness to engage with Armenia – albeit on its own terms – to secure its economic interests.”
Recent Developments and Future Prospects
Over the past six months, the situation has seen a gradual escalation. Azerbaijan has increased its diplomatic pressure on Armenia, demanding the withdrawal of Russian peacekeeping forces from the remaining areas of Nagorno-Karabakh, a demand Armenia has vehemently rejected. Simultaneously, Turkey has intensified its diplomatic and military support for Azerbaijan, further solidifying the country’s strategic alignment. The recent uptick in border skirmishes, while not escalating into full-scale conflict, reflects the heightened tensions.
Looking ahead, several potential outcomes are plausible. A continued “quiet diplomacy” – facilitated, perhaps, by regional powers like France – could preserve the current arrangement, with Azerbaijan maintaining its economic leverage over Armenia while Russia’s influence continues to wane. However, the potential for renewed conflict remains a significant risk, particularly if Azerbaijan succeeds in expelling Russian forces, or if Armenia seeks external support to resist Azerbaijani pressure. The next 6-12 months will likely see continued economic interdependence, punctuated by periods of heightened tension and sporadic clashes.
Long-term, the shift in the South Caucasus is likely to solidify a new regional order, with Azerbaijan and Turkey playing increasingly dominant roles. The future of Armenia remains precarious, potentially leading to a further erosion of its sovereignty and a deepening of its reliance on external support, or, more likely, a period of sustained economic struggle. The impact on regional alliances will be significant, potentially accelerating the decline of Russia’s influence and forcing the West to re-evaluate its engagement strategy in the region. A further 5-10 years could see the South Caucasus transformed into a zone of heightened strategic competition, with Azerbaijan and Turkey actively shaping the political and economic landscape.
Ultimately, the Azerbaijan-Armenia dynamic underscores a fundamental challenge for U.S. foreign policy: how to balance its strategic interests in the region with the imperative of maintaining stability and preventing conflict. The case of Azerbaijan serves as a stark reminder of the complexities inherent in contemporary geopolitical maneuvering – a region where calculated actions, economic incentives, and strategic partnerships are reshaping the very contours of regional security. It demands a thoughtful and nuanced response, one that recognizes the changing power dynamics and prioritizes durable solutions over short-term tactical gains. The question remains: can the international community effectively manage this complex situation, or is the South Caucasus destined to remain a region perpetually on the brink of instability?