By Ellen Hokhikyan, WGSA Associate Expert
The geopolitical landscape of the Middle East has long been marked by volatility, but the recent escalation of hostilities between Israel and Iran has introduced an elevated level of uncertainty, with potential spillover effects that extend far beyond the immediate conflict zone. One such potentially affected state is the Republic of Armenia, a country maintaining a delicate yet strategically significant relationship with the Islamic Republic of Iran. This article explores the possible political and economic ramifications of the Israel-Iran conflict on Armenia, taking into account the current state of bilateral diplomatic relations and the structure of trade between the two countries.
Since the establishment of diplomatic ties in 1992, Armenia and Iran have developed a multifaceted partnership encompassing energy cooperation, infrastructure development, trade, and cultural exchange. Given Armenia’s landlocked geography and closed borders with Turkey and Azerbaijan, Iran serves not only as a critical trade route but also as a rare gateway to southern markets. As such, any disruption in Iran’s economic or political stability reverberates through Armenia’s strategic and economic calculations.
Economic Ramifications
Armenia and Iran’s stable and pragmatic relationship has endured regional shifts, international sanctions, and domestic changes within both states. Today, the partnership is underpinned by more than 190 bilateral agreements spanning energy, transport, trade, education, and culture. With Armenia maintaining an embassy in Tehran and Iran operating a consulate in the strategic southern city of Kapan, both nations have signaled their intent to deepen cooperation. This is especially vital given Armenia’s geographic isolation, with its borders with Turkey and Azerbaijan effectively closed.
Iran’s significance is particularly evident in the energy and infrastructure sectors. The “Gas for Electricity” barter arrangement, in which Iran supplies gas in exchange for electricity, along with the construction of cross-border roads and high-voltage transmission lines, underscores this cooperation. In 2024, bilateral trade reached approximately $737 million -2.4% of Armenia’s total foreign trade, and saw a nearly 10% increase in early 2025.
The trade structure highlights Iran’s role as a key supplier of industrial goods, including metals, building materials, foodstuffs, and chemical products. Armenia’s exports to Iran, while more modest, include raw and processed metals (such as copper and molybdenum), agricultural goods, and mechanical components. These exchanges reflect Armenia’s intent to pursue a multi-vector foreign policy, reducing reliance on any single regional actor.
Energy Diversification and Emerging Challenges
In recent years, Armenia has sought to diversify its energy imports, particularly to reduce dependency on Russian natural gas. There have been exploratory talks about the possibility of importing gas from Turkmenistan via Iranian transit infrastructure. If realized, such a project could secure a non-Russian alternative, leverage Iran’s pipeline network, and enhance Armenia’s energy sovereignty.
However, the escalation of the Israel-Iran conflict has rendered this initiative uncertain. Key risks include:
- Potential Western sanctions on Iranian pipeline usage.
- Internal disruptions in Iran affecting pipeline functionality.
- A shift in Iranian priorities toward domestic and security concerns, sidelining regional transit cooperation.
These developments significantly compromise the near-term feasibility of the Turkmenistan–Iran–Armenia gas corridor and may force Armenia to reconsider or delay its energy diversification plans until regional stability returns.
Tourism and the Diaspora Dimension
Another important, though often overlooked, aspect of Armenia–Iran relations is tourism, closely linked to the Iranian-Armenian diaspora. Approximately 80,000 Armenians reside in Iran, primarily in cities like Tehran, Isfahan, Tabriz, and Urmia. This well-integrated community maintains a strong institutional presence through churches, schools, and cultural centers, and even holds parliamentary representation in Iran.
Diaspora ties support robust tourism flows into Armenia for cultural, religious, and familial reasons, generating income for small businesses in hospitality and retail. However, escalating conflict poses risks to these exchanges. Internal instability in Iran or renewed sanctions could curtail tourism, undermining both economic gains and Armenia’s people-to-people diplomacy.
Defense and Transit: Indian Arms Shipments via Iran
Less publicly discussed but strategically vital is Armenia’s acquisition of defense equipment from India, including long-range artillery and anti-drone systems. Since 2022, India has become an alternative defense partner, with much of the military cargo transiting through Iran via land or multimodal routes involving the Persian Gulf.
Iran’s increasing embroilment in regional conflict raises the possibility of:
- Delays or cancellation of shipments due to logistical bottlenecks.
- Pressure on India to halt arms exports via Iran.
- Tehran reassessing its transit policies in light of internal or external security concerns.
These complications come at a sensitive moment, as Armenia seeks to rebuild deterrence capacity following the 2020 and 2023 conflicts with Azerbaijan. Interruptions in defense deliveries could create a short- to medium-term capability gap, particularly in areas like drone defense.
Political Ramifications and Strategic Scenarios
While economic consequences are already being felt, with Armenian businesses facing logistical disruptions and multiple cargo shipments remaining stalled at Iran’s Bandar Abbas port or a route, significantly affecting both imports and exports that rely on Iranian transit corridors, the political ramifications of the Israel–Iran conflict could prove more transformative. Armenia, positioned at the crossroads of Iran, Russia, Turkey, and the EU, may be profoundly affected by how the conflict evolves. Three scenarios merit consideration:
Scenario 1: Conflict Containment and Diplomatic De-escalation
In this optimistic scenario, diplomacy or third-party mediation (by actors such as Qatar or Turkey) could lead to a ceasefire or non-aggression pact. For Armenia, this would:
- Enable the resumption of suspended cross-border trade and energy initiatives.
- Stabilize the southern Syunik border.
- Enhance Armenia’s value as a neutral logistical corridor.
However, this outcome hinges on Iran restraining its proxies and Israel pausing its military campaign—both of which remain uncertain in the current climate.
Scenario 2: Prolonged Hostilities and Cross-Border Humanitarian Fallout
A more plausible outcome involves a protracted period of asymmetric hostilities, encompassing airstrikes, cyber operations, and indirect military confrontations, without a definitive resolution. This scenario entails serious humanitarian, logistical, and security implications for Armenia.
Refugee Crisis: A Humanitarian and Political Challenge
Should Israeli strikes intensify in Iranian provinces near the Armenian border, particularly in West and East Azerbaijan, Ardabil, or Zanjan, where ethnic minorities and border infrastructure are concentrated, a refugee influx is almost inevitable. In fact, as of today, Armenia is already witnessing the initial stages of such movement: cities like Goris and Meghri, located near the Iranian border, are experiencing a visible influx of Iranian nationals fleeing the conflict. Many have begun relocating from these southern border areas to other parts of Armenia, placing mounting pressure on local infrastructure. Potential refugee flows could include:
- Ethnic Armenians fleeing persecution or instability.
- Iranian civilians escaping military zones.
- Politically targeted individuals seeking sanctuary from state repression.
Given its limited absorption capacity, Armenia would be compelled to respond rapidly by managing:
- Border screening and temporary housing in the Syunik province, which currently lacks substantial humanitarian infrastructure.
- Coordination of public health services and food security logistics.
- National security protocols to mitigate risks of infiltration by militants or intelligence operatives under the guise of asylum-seekers.
While international humanitarian assistance could be mobilized, Armenia’s independent capacity to handle such a scenario remains constrained.
The “Zangezur Corridor” and Geostrategic Opportunism
Concurrently, the long-standing issue of the so-called “Zangezur Corridor”, an extraterritorial route across southern Armenia aimed at linking mainland Azerbaijan with the Nakhichevan exclave, may re-emerge as a focal point of regional power dynamics.
Some analysts suggest that should Iran become preoccupied or weakened by external conflict, Azerbaijan may interpret this as a strategic opening to press its corridor ambitions through unilateral or coercive means, thus infringing upon Armenia’s territorial integrity. Such a move would not only destabilize the region further but would also likely trigger a strong response from Tehran, which considers its land border with Armenia a strategic imperative and has repeatedly defined it as a geopolitical red line.
Indeed, Iran has clearly articulated that any attempt to sever its direct connection with Armenia, effectively encircling it between Turkey and Azerbaijan, the latter maintaining close ties with Israel, is categorically unacceptable.
That said, this scenario currently appears to be of low probability. Armenian officials, including Prime Minister Nikol Pashinyan, have recently dismissed it as both unlikely and deliberately provocative. Nonetheless, the issue’s persistence in regional discourse underscores the need for sustained vigilance and diplomatic engagement.
Scenario 3: Regime Instability or Change in Iran
While less probable in the immediate term, some analysts have raised the possibility of regime instability or even a fundamental change in governance in Iran. This could arise from widespread domestic unrest spurred by wartime dissatisfaction, or from institutional collapse under the cumulative pressures of military conflict, international sanctions, and internal dissent. Notably, even Iran’s former Crown Prince, Reza Pahlavi, recently released a public video asserting that the fall of the Islamic Republic was imminent, calling for national unity across all societal groups.
Although such a transition could yield long-term benefits for regional stability, the short- to medium-term implications for Armenia would be fraught with volatility and risk. A regime collapse or descent into civil strife could bring about:
Short-Term Consequences:
- Disruption and chaos along Iran’s northern border, particularly in provinces adjacent to Armenia, as central state authority weakens.
- Termination or severe disruption of vital trade and energy links, including cross-border electricity and gas flows.
- A potential power vacuum in border regions, possibly filled by unregulated militias or extremist actors.
Given Armenia’s strategic reliance on Iran for both energy diversification and geopolitical depth, the sudden loss of its southern access corridor would significantly amplify its isolation. Armenia would then be forced to pivot more heavily toward Georgia or contemplate an alternative transit route through Turkey, a country with which Armenia maintains no diplomatic relations and whose border has remained closed since 1993 due to Ankara’s alliance with Azerbaijan in the Nagorno-Karabakh conflict and longstanding tensions over the Armenian Genocide.
Long-Term Possibilities: Should Iran eventually re-emerge as a more moderate, secular, and internationally engaged state, this could shift regional dynamics in transformative ways. In such a scenario:
- Armenia could benefit from an economically revitalized and less sanctioned Iranian partner.
- Bilateral transit and trade infrastructure might expand and modernize.
- The broader South Caucasus region could see a de-escalation of rival blocs and more flexible diplomatic alignments.
Nevertheless, the transition toward such a future would almost certainly entail a protracted period of disruption, uncertainty, and heightened security concerns for Armenia, particularly along its southern frontier.
Strategic Dilemma for Armenia
Taken together, these scenarios pose a complex matrix of risks and limited opportunities for Armenia. The country faces an increasingly delicate balancing act:
- Preserving sovereignty without triggering retaliatory pressure from regional powers.
- Maintaining a policy of cautious neutrality while still engaging in meaningful strategic partnerships.
- Preparing for humanitarian contingencies, such as refugee inflows, without undermining internal cohesion.
- Ensuring the functionality of critical infrastructure and military logistics without over-reliance on any single transit corridor.
Despite the narrow margin for maneuver, Armenia is not without agency. Its geographic location, historical experience, and evolving diplomatic engagements position it as a potential stabilizing actor amid regional uncertainty. By pursuing pragmatic, forward-looking policies and deepening cooperation with a range of international partners, Armenia may not only mitigate the fallout from external shocks but also carve out a more autonomous and resilient role in the reshaping regional architecture.
Looking Ahead: Opportunity Amid Uncertainty
While the escalation of the Israel–Iran conflict introduces a multitude of risks for Armenia, ranging from economic disruption and energy insecurity to humanitarian pressures and geopolitical recalibrations, it also underscores the country’s growing strategic relevance in a rapidly shifting regional order. Armenia’s historical resilience, pragmatic diplomacy, and expanding network of bilateral and multilateral partnerships offer a foundation from which to weather this period of uncertainty.
Though challenges abound, particularly in terms of energy diversification, defense procurement, and potential refugee management, Armenia is not merely a passive observer in regional affairs. Its deepening ties with countries like India, its role in north-south connectivity, and its evolving position as a dialogue partner between rival blocs give it leverage and visibility rarely afforded to small states.
Importantly, Armenia’s leadership has so far demonstrated a cautious and measured approach in navigating complex geopolitical tensions. If this strategic posture continues prioritizing sovereignty, diversification, and constructive neutrality, Armenia may emerge not only intact but strengthened, positioned as a flexible and necessary actor in the South Caucasus. The turbulence of today, while challenging, may ultimately create new openings for Armenia to solidify its independence, improve regional integration, and participate more fully in shaping a more stable and cooperative future.