Azerbaijan – Iran normalization process may foster regional partnership Carrot and stick diplomacy is underway

After a long-term confrontation and a war of words, Azerbaijan and Iran recently decided to return to the negotiating table and start the reconciliation process. As for Iran, the turbulent relations with neighbouring Azerbaijan did not boost its influence. Instead, it further diminished its regional influence and halted several essential infrastructure projects.

The relations between Baku and Tehran dramatically strained in the post-Karabakh war in 2020, when Azerbaijan declared military victory over Armenia and de-occupied large swathes of its territories. However, Iran became one of the few countries that expressed its concerns with the results of the war as Azerbaijan fully restored its borderline with Iran after three decades. Moreover, in the post-war period, Azerbaijan and Türkiye proposed a new transit route via Nakhchivan and Armenia’s Syunik province to be linking Baku and Ankara directly.

Despite the proposed route's economic nature, Tehran fiercely opposed the idea, referring to "possible threats of redrawing borders in the region". Iran's concerns stemmed from losing land connection with partnering Armenia in case the Nakhchivan corridor starts functioning. In order to refute such allegations, Azerbaijan signed an additional agreement with Iran in March 2021, thus inaugurating a new trade route going through northern Iran to Türkiye dubbed the Aras Corridor.

Even so, reconciliation between Baku and Tehran continued until the middle of 2023. Considering its declining influence in the region, Iran made a first positive step toward Azerbaijan by sending Foreign Minister Amir-Abdollahian on July 5 to Baku to attend a ministerial meeting of the Non-Aligned Movement.

In a sign of a thaw in bilateral ties, the Iranian chief diplomat notably met Azerbaijani President Ilham Aliyev on the summit's sidelines. The meeting marked a surprise breakthrough between the two previously antagonistic states.

The chief diplomat also reiterated Tehran’s desire for cooperation with Baku on regional projects. Of particular interest is a potential “Aras Corridor” linking Azerbaijan to its Nakhchivan exclave through Iranian territory.

As such, after two years of halt, Iran and Azerbaijan re-engaged in talks to revive the Aras Corridor. Moreover, according to Turkish President Recep Tayyip Erdogan, Iran has agreed to set up a corridor via Armenia after Ankara-Tehran talks.

Hence, on September 26, President Erdogan, in his interview, mentioned that Iran is now warming up to a joint Turkish-Azeri plan to set up a transport corridor connecting Turkey to Azerbaijan via Armenia. Indeed, establishing this corridor is very important for Turkey and Azerbaijan. This is a strategic issue and must be completed.

In this regard, President Erdogan recently inked a new agreement to start constructing the Nakhchivan-Kars railway connection. This fact motivated Iran to restore trade links with Azerbaijan amid its ongoing economic crisis and political unrest.

Since the diplomatic thaw unfolded, Iran and Azerbaijan agreed to construct a bridge on the Astarachay River running along the joint border as part of their plans to increase road transit between the two countries.

Moreover, the bridge's construction will be an essential part of the International North–South Transport Corridor, a multi-mode network of ship, rail, and road routes for moving freight across India, Iran, Azerbaijan and Russia.

The bridge will be about 100 meters long with a width of 31 meters and connects the Iranian city of Astara near the Caspian Sea to Azerbaijan's capital, Baku. The agreement was inked while Iran's Road Minister Rostam Ghasemi visited Azerbaijan to follow up on the implementation of several joint infrastructure projects.

The Azerbaijani-Iranian de-escalation also has economic dimensions. Baku and Tehran have maintained solid trade relations in spite of the previous political tensions. Bilateral trade grew from $608 million to $688 million in the period March 2022-March 2023. Stronger political relations should help foster stronger economic ties.

Undoubtedly, Iran is looking for viable roots to be connected to Russia – its main strategic ally, and ease its long-term isolation from the rest of the world. In May 2023, the presidents of Russia and Iran, Vladimir Putin and Ibrahim Raisi, signed an agreement to build a 170-kilometre section of the railroad in northern Iran, from Astara on the Azerbaijani border to the city of Rasht.

With the mending ties between Baku and Tehran, the region may witness renewed regional interconnectivity projects with the strong involvement of Türkiye as a reliable and strategic partner of Azerbaijan.