War in Iran is going beyond Middle East conflict, directly affecting  South Caucasus economic architecture - expert

ArmInfo.The war in Iran is already going far beyond the Middle East conflict itself and is directly affecting the economic architecture of the South Caucasus. This is the opinion of Georgian political scientist Gela Vasadze.

According to him, this is not just about oil prices or risks for  global markets, but a deeper process-the redistribution of flows,  changes in logistics, and the reorganization of regional economic  ties.

"The first and most obvious effect is price. Rising oil prices create  an asymmetric situation within the region. Azerbaijan receives  additional export revenues and strengthens its fiscal stability.  However, this gain is limited: dependence on commodity prices  increases, and market volatility itself complicates strategic  planning," the expert noted.

According to him, the situation is reversed for Georgia and Armenia:  rising energy prices translate into inflationary pressure, higher  logistics costs, and a decline in purchasing power. Thus, a  divergence of economic trajectories within the South Caucasus is  already evident at the first level.

"The second level is the Strait of Hormuz as a key element of the  global energy infrastructure. Any threat to its functioning leads to  higher insurance rates, higher shipping costs, and increased overall  market anxiety.  At the same time, the US signaling a reduced  willingness to assume unilateral responsibility for the Strait's  security effectively shifts the risks to regional and corporate  actors. For the South Caucasus, this means less direct participation  in ensuring security than the need to adapt to a new reality-more  expensive and less predictable global trade," Vasadze asserted.

The Georgian expert believes that the third aspect is related to  logistics and the fate of the North-South Corridor. He noted that  this project, which envisions the integration of Russia, Azerbaijan,  Iran, and India into a single transportation system, effectively  loses its predictability in a war.

"Military risks, sanctions restrictions, and a general decline in  trust in the Iranian route are de facto freezing its development.  This creates a window of opportunity for alternative routes,  primarily the Middle Corridor through the Caspian Sea and the South  Caucasus. However, it should be noted that the infrastructure  readiness of these routes is limited, meaning they are not capable of  completely replacing the Iranian route in the short term," the  political scientist added.

Vasadze identified the transformation of consumer markets as the  fourth level. He recalled that Iran has traditionally served as a  source of relatively inexpensive goods for countries in the region,  especially Armenia and Azerbaijan, and to a lesser extent Georgia.

"The decreased availability of Iranian goods, coupled with rising  logistics costs, is leading to higher prices for final products and a  change in the import structure. Other players, primarily Turkey,  which has a more robust industrial base and export potential, are  beginning to occupy the vacated niches. This is intensifying  competition in domestic markets and simultaneously increasing  dependence on external suppliers," the political scientist continued.  Vashadze considers foreign trade relations with Iran to be a fifth  aspect. He noted that despite relatively modest absolute figures,  Iran's importance as a trading partner varies among countries in the  region.

"For Armenia, it is of strategic importance, including through energy  cooperation. For Azerbaijan, it is an important but not critical  partner. For Georgia, it is more peripheral, but Iran's influence  manifests itself indirectly through pricing and logistics channels.  During a war, these ties either weaken or become less predictable,  which primarily impacts the economies most dependent on them.

Thus, the war in Iran creates a complex and multilayered picture for  the South Caucasus. Short-term benefits associated with rising oil  prices or the expansion of alternative routes are combined with  long-term risks: the disruption of supply chains, increased  inflationary pressure, and increased dependence on external economic  centers. In this context, the key question is not who wins now, but  which economies are able to adapt to the new configuration of  regional and global connections," he concluded.