A new Eurasian economic map is being drawn — and the South Caucasus is again gaining strategic relevance. As trade routes and energy flows reorient away from Russia, Armenia, Azerbaijan, and Georgia are gaining strategic value as a corridor between Asia and Europe. That logistical rise is changing politics: Moscow is losing the role of default arbiter, while Turkey, the EU, the United States, and increasingly China fill the space with capital, mediation, and infrastructure.
For two centuries, Armenia, Azerbaijan, and Georgia sat firmly in Moscow’s geopolitical orbit. From Tsarist conquest through the Soviet era, the South Caucasus was essentially a Russian dominion. Even after 1991, the Kremlin tried to maintain this dominance via military bases, trade leverage, and alliances like the Collective Security Treaty Organization. But today, that once-unquestioned influence is visibly unraveling. In other words, the South Caucasus is drifting out of Russia’s sphere of influence – and a host of geopolitical, economic, and logistical factors are driving the shift.
Trust in Moscow has plummeted across these republics. Russia’s failure to provide security or reliable partnership – starkly illustrated by its inaction during regional conflicts – has led local leaders to seek alternatives. Meanwhile, new powers have stepped in. Turkey has reached a pinnacle of regional clout through its alliance with energy-rich Azerbaijan and growing ties with Georgia and even Armenia. The United States, long relatively hands-off here, is now brokering peace deals and backing new transport corridors that challenge Russia in its historic backyard. Even China has a stake: Beijing’s Belt and Road trade routes traverse the Caucasus, meaning stability and connectivity here directly affect Chinese interests.
All the while, the very map of Eurasian commerce is being redrawn. War in Ukraine and Western sanctions on Moscow have forced trade onto new routes that bypass Russia entirely – often running through the Caucasus. Oil, gas, and cargo that once flowed north or via Russian pipelines increasingly move westwards via the Black Sea or southwards via Turkey and the Caspian. In short, the South Caucasus has re-emerged as a critical logistics corridor between Asia and Europe, one that slips further from Moscow’s control with each new deal and highway.
Russia’s dominance is eroding most palpably in the economic realm. Once the region’s trade hub and investor by default, Moscow is now just one player among many. Russia remains a big market for Caucasus goods (and a source of remittances and imports), but its share is shrinking as Europe, Turkey, and China loom larger.
There are other factors that are changing Moscow’s relationship with its former South Caucasus subjects. Under the pressure of Western sanctions, Russia has been forced to look for new points of economic contact with its immediate neighborhood — including the South Caucasus – as part of the informal infrastructure that helps mitigate restrictions on the Russian economy. Parallel trade, re-export channels, intermediary logistics, and financial workarounds have turned some regional partners into convenient gateways for goods and transactions that became harder to conduct directly with the West.
Yet this adaptation carries a strategic price for the Kremlin. The more Russia depends on these routes and intermediaries, the more bargaining power shifts to the states that provide them. Sanctions-era connectivity does not restore Moscow’s dominance; it commodifies it. South Caucasus partners can monetize Russia’s constraints – earning from transit, brokerage, and market access – while simultaneously reducing their own vulnerability by diversifying the very networks that now make them valuable. In effect, the mechanisms that help Russia circumvent restrictions also strengthen the autonomy of its Caucasus counterparts, allowing them to profit from the northern neighbor’s problems rather than remain captive to its influence.
Armenia: Dependent but Disillusioned
Armenia, with a population of roughly 3 million and a $26 billion economy, has long been Russia’s closest Caucasus ally. It has no direct land border with Russia, yet economic dependence on Moscow is profound – around 40% of Armenia’s foreign trade is with Russia, by far its largest trade partner. This outsized reliance (in energy, imports, and as a labour market for Armenians abroad) gave the Kremlin tremendous leverage in Yerevan. For years, Armenia leaned on Russia as its security guarantor against longtime adversaries like Azerbaijan and Turkey. Russian peacekeepers and military bases on Armenian soil symbolized the alliance.
However, recent events shattered Yerevan’s trust in Moscow’s protection after Moscow failed to support Armenia as Azerbaijan, backed by Turkey, scored military victories in Nagorno-Karabakh while Russian forces mostly stood by.
Disillusioned, Armenia is urgently diversifying its alliances. Pashinyan’s government has embarked on a remarkable political pivot to the West. In 2023, Yerevan began deepening ties with the United States and Europe – signing a strategic partnership charter with Washington and moving toward a peace agreement with Azerbaijan under U.S. mediation. For the first time, an American-brokered deal (the August 2025 White House agreement) supplanted Moscow’s patronage, even granting a U.S. company a role in developing a key transit route through Armenian territory. Armenia has also embraced an EU mission on its soil and taken steps toward future EU accession, a previously unthinkable course.
This westward tilt is happening even as Armenia remains intertwined with Russia economically. Russia’s $12 billion trade with Armenia (2024) dwarfs EU – Armenia trade ($2 billion), underscoring why the Kremlin’s words carry weight. Yet despite these risks, Yerevan appears resolute. It is maintaining cordial ties with Moscow where it must, but fundamentally redefining the relationship.
Azerbaijan: A Balancing Act
In Azerbaijan (10.2 million people, GDP ~$74 billion), Moscow’s waning sway is a story of assertive sovereignty and shrewd balancing. Unlike Armenia, Azerbaijan was never a Russian military client – Baku charted a more independent course after the Soviet collapse. It leveraged vast oil and gas reserves to build both wealth and diplomatic wiggle room.
Today Azerbaijan exemplifies a pragmatic, multi-vector foreign policy: it manages to maintain working ties with Russia while deepening an alliance with Turkey and cultivating Western goodwill. On one hand, Azerbaijan sells natural gas to Europe (via pipelines that deliberately bypass Russia) and hosts Western energy majors; on the other, it has not joined sanctions against Moscow and keeps communication open with the Kremlin. This dual approach has paid off, giving Baku considerable economic leverage and diplomatic flexibility.
After Russia’s full-scale invasion of Ukraine and Azerbaijan’s consolidation of its position vis-à-vis Armenia, Azerbaijan’s confidence and its value to outside powers only grew. The country’s hydrocarbon exports and transit infrastructure make it a pivotal node in the expanding East - West trade corridor that links Asia to Europe. At the same time, Baku is emerging as a hub in a North - South corridor connecting Russia with Iran and South Asia.
Crucially, some of these routes are helping Moscow mitigate Western sanctions. The International North-South Transport Corridor – a 4,500-mile network from Mumbai to Moscow via the Caucasus – is seen as one of Russia’s safest options for evading sanctions. Azerbaijan’s cooperation in such projects (like new railways and highways to Russia and Iran) gives it extra leverage: it can quietly facilitate Russian commerce even as it publicly courts investment from Europe and the Middle East.
This ability to play all sides is what makes Azerbaijan’s approach a model of pragmatic sovereignty. Baku aligns closely with Turkey and positions Azerbaijan as Turkey’s gateway to Central Asia, solidifying a Turkic axis in the Caucasus.
By leveraging energy wealth and geopolitical agility, Azerbaijan is rewriting the old rules and increasingly trying to advance its interests by playing on the contradictions of the power centers surrounding the country.
Georgia: Westward Heart, Eastward Purse
Georgia (population 3.8 million, GDP ~$34 billion) presents a more complex and ambivalent picture. In many ways, Georgia is the most Western-oriented nation in the Caucasus – its public strongly supports EU and NATO integration, and it fought a war with Russia in 2008. Unlike Armenia, Georgia has no Russian troops stationed on territory controlled by Tbilisi, and unlike Azerbaijan, it lacks oil-and-gas leverage. Culturally and politically, Georgia’s post-Soviet identity has been tied to a Western trajectory.
At the same time, this Western trajectory is constrained by unresolved territorial and economic realities. Georgia continues to face the legacy of frozen conflicts in Abkhazia and South Ossetia—regions that Tbilisi considers integral parts of the country, but which remain outside its control. Beyond these territorial enclaves, Georgia also remains closely connected to Russia through economic channels. Trade ties, remittances, tourism, and the presence of a sizeable Georgian diaspora in Russia continue to bind the two economies together, creating structural dependencies that complicate Tbilisi’s strategic choices even as the country seeks deeper integration with the West.
In Georgia, this contradiction is reinforced by the structure of the domestic political economy. A powerful oligarchic layer remains deeply intertwined with Russian markets, capital, and business networks, and this linkage translates into political influence at home. Russia now accounts for about 10% of Georgia’s foreign trade. Key sectors like energy and agriculture depend on the Russian market or supply. For instance, Georgia imports significant oil and wheat from Russia, and before recent bans, Georgian wine exports to Russia were economically important.
Trade turnover between the two countries actually surged after 2022, partly due to Georgia becoming a conduit for goods headed to sanctioned Russia. A wave of Russian citizens and cash also flowed into Georgia after Moscow’s 2022 invasion of Ukraine – an influx that temporarily boosted the Georgian economy and filled hotels and real estate with Russian money. All these factors tether segments of Georgia’s economy to Russia, creating constituencies with a stake in not alienating the Kremlin.
Moscow has taken full advantage of these levers. It employs a multi-layered soft-power network in Georgia: propaganda, disinformation, Orthodox church ties, and political financing – all to shape opinion and policy in its favor. The remarkable part is that this influence is exerted without open military action. In effect, Georgia’s Western aspirations are being undermined from within by those profiting from Russian trade and those who buy into propaganda.
Regional Trends: New Corridors, New Patrons
Stepping back, the South Caucasus is reinventing itself as a crossroads increasingly independent of Russia. New transport and energy architectures — most notably the trans-Caspian “Middle Corridor” linking China and Central Asia to Europe via Azerbaijan and Georgia — are turning the region into a strategic alternative to routes that run through Russia or rely on the Russia–Iran axis. Containers move from Kazakhstan across the Caspian to Baku, then through Georgia and Turkey toward European markets; parallel investments in ports, railways, and road infrastructure have strengthened Baku’s role as a connectivity hub and elevated Georgia as an indispensable land bridge.
This logistical upgrade is reinforced by a broader geopolitical rebalancing: a Turkey - Azerbaijan partnership increasingly shapes regional outcomes, the United States has become a visible diplomatic actor through peace mediation and corridor-backed initiatives, and China quietly benefits from a more open, multi-aligned transit space that reduces exposure to politically risky chokepoints. The result is a region where influence is increasingly contested through corridors, capital, and market access — domains in which Moscow is no longer the default center.
