The South Caucasus is becoming increasingly vital as a strategic corridor between Asia and Europe amid the escalating conflict in Iran. Following the commencement of joint strikes by the United States and Israel on Iran on February 28, air traffic was forced to navigate a narrow air corridor over the South Caucasus, reflecting the geopolitical shifts in the region.
These developments come at a time when interest in the South Caucasus is rising as a key hub in the International Transport Corridor across the Caspian Sea, also known as the Middle Corridor, which aims to connect Europe to China while bypassing Iran and Russia through Central Asia and the South Caucasus.
Details of the Event
The war in Iran has heightened the significance of the Middle Corridor, as the closure of the Strait of Hormuz, which handles about 20% of global oil and liquefied natural gas shipments, has disrupted global energy flows. Richard Giragosian, director of the Regional Studies Center in Yerevan, Armenia, states, "This corridor has become the only available opportunity."
Furthermore, one of the main maritime routes through the Bab el-Mandeb Strait and the Red Sea, which carries 12% of global trade, has repeatedly faced disruptions due to Iranian-backed Houthi militias in Yemen. Giragosian adds, "The Middle Corridor is now the only remaining route."
Background & Context
Over the past few years, the South Caucasus has gained increasing importance as a link between Europe and Asia, especially following Russia's invasion of Ukraine in 2022. Shipping volumes through the Middle Corridor have quadrupled since then, reflecting shifts in global trade.
The World Bank anticipates that trade volumes through this corridor will reach 11 million tons by 2030, underscoring the region's significance for the future. Meanwhile, both the European Union and China are seeking to invest billions of dollars in upgrading ports, railways, and roads along this corridor.
Impact & Consequences
The war in Iran is likely to yield short-term benefits for Azerbaijan, as oil prices are expected to rise, potentially generating additional revenues for the country of up to $500 to $600 million per month. Hikmet Hajiyev, the chief foreign policy advisor to Azerbaijani President Ilham Aliyev, has stated that Azerbaijan is increasing its natural gas shipments to compensate for supplies from the Gulf amid the Iranian conflict.
Currently, Europe receives approximately 4% of its natural gas from Azerbaijan, amounting to 12.8 billion cubic meters of gas, and this figure is expected to rise to 20 billion cubic meters by 2027. However, experts point out that stability in the region is a prerequisite for the success of the Middle Corridor.
Regional Significance
The Arab region is directly affected by the repercussions of the conflict in Iran, as any escalation could lead to increased oil and gas prices, impacting the Arab economy. Additionally, stability in the South Caucasus is crucial for many Arab countries that rely on energy.
In conclusion, the conflict in Iran presents a significant challenge, but it also offers an opportunity for the South Caucasus to enhance its role as a strategic corridor between East and West. Maintaining stability in this region will have far-reaching implications for global trade and energy.