Abstract
This paper examines the Trans-Caucasus Transit Corridor (TCTC) as a strategic linchpin in EU connectivity between Europe and Asia. It argues that sustainable peace between Armenia and Azerbaijan is essential for unlocking the corridor’s full potential, particularly amid shifting geopolitical dynamics and rising instability in the Middle East. The study highlights how Russia’s conflict-driven influence and Azerbaijan’s posture hinder integration and development. It outlines the European Union’s strategic leverage and proposes a policy framework that links investment, inclusion, and deterrence to peace. The TCTC is presented as both a test and opportunity for EU geopolitical coherence and ambition.
Introduction
The South Caucasus region stands at the crossroads of Europe and Asia, making it a strategic hub for trade, energy, and digital infrastructure. In recent years, connectivity initiatives – such as the European Union’s Global Gateway and China’s Belt and Road Initiative – have heightened the strategic importance of the Trans-Caucasus Transit Corridor (TCTC), which forms a vital segment of the so-called Middle Corridor. This corridor aims to link Europe and Central Asia through the South Caucasus, bypassing Russian and Iranian territories.
However, the viability of this corridor hinges on a single factor: peace between Armenia and Azerbaijan. While both countries announced on 13 March 2025 that they had agreed to the terms of a long-negotiated peace agreement, Azerbaijan’s subsequent demands and militaristic posture suggest a lack of genuine interest in finalising the deal. Lasting peace is not only a prerequisite for connectivity but also a necessary condition for limiting Russian and Iranian influence, enhancing EU strategic leverage, and ensuring sustainable regional development.
The Trans-Caucasus Transit Corridor and its strategic role
The TCTC, as part of the broader Middle Corridor, provides an east–west route from China through Central Asia, across the Caspian Sea, the South Caucasus, and onward to Europe. The corridor has gained significant traction since Russia’s invasion of Ukraine in 2022, as EU Member States seek to diversify supply chains and reduce dependency on Russian-controlled infrastructure.
Presently, the TCTC bypasses Armenia due to its closed borders with both Turkey and Azerbaijan. Yet, if a peaceful resolution of regional conflicts is achieved, Armenia could join this network, offering shorter and more secure routes through its territory. These routes would not only provide time and cost efficiencies but also align with the EU’s goals of resilient, transparent, and sustainable connectivity.
The strategic importance of the TCTC has been further underscored by the ongoing Iran–Israel confrontation. Heightened instability across the Persian Gulf, the Red Sea, and the wider Middle East highlights the vulnerability of southern transit routes. Against this backdrop, the TCTC emerges as a safer and more geopolitically neutral passageway, which can secure uninterrupted flows of goods, energy, and data between Europe and Asia. In this sense, the EU’s ability to stabilise and develop the TCTC becomes a critical component of its broader strategic autonomy.
Conflict and instability as structural obstacles
The unresolved conflict between Armenia and Azerbaijan remains the greatest barrier to a functional and economically viable TCTC. While peace talks have progressed in principle, Azerbaijan continues to escalate its demands on Armenia – ranging from constitutional changes to the imposition of an extraterritorial corridor to Nakhichevan, and a reduction of Armenia’s military capabilities.
In parallel, Azerbaijan has employed tactics such as disinformation campaigns, ceasefire violations, and territorial provocations. The ‘Western Azerbaijan’ narrative promoted by Azerbaijani officials openly challenges Armenia’s sovereignty. These measures appear to serve the dual purpose of extracting unilateral concessions and maintaining a persistent state of tension that hinders normalisation.
Further complicating the situation is Azerbaijan’s ongoing occupation of over 200 square kilometres of Armenian territory, the detention of Armenian prisoners of war and civilians, and the destruction of Armenian cultural heritage in Nagorno-Karabakh. These actions not only exacerbate mistrust but also serve as deterrents to long-term investment and development in the region – particularly in connectivity infrastructure.
Russia’s crisis management strategy: Conflict as leverage
Russia’s foreign policy in the South Caucasus has historically relied on maintaining low-intensity conflicts that require its mediation. The deployment of Russian peacekeepers to Nagorno-Karabakh after the 2020 war exemplifies this strategy. Although framed as a stabilising gesture, the move primarily served to preserve Moscow’s role as a power broker in the region.
Today, while Russia’s capacities are constrained by its prolonged war in Ukraine, it remains unlikely to relinquish influence in the South Caucasus. Indeed, any EU-led peace or connectivity initiative that threatens to marginalise Moscow is likely to be met with obstruction or subversion. Russia’s primary objective is to prevent any single external actor – especially the EU – from dominating regional projects or negotiations.
Stability in the South Caucasus would undermine the rationale for Russia’s continued military presence and diplomatic mediation. This would, in turn, weaken one of its most effective instruments of leverage. EU policymakers must anticipate and pre-empt efforts by Russia to derail peace or delay the region’s integration into European infrastructure and governance frameworks.
The peace dividend: Unlocking Armenia’s transit potential
A finalised peace agreement between Armenia and Azerbaijan would unlock new possibilities for connectivity, most notably Armenia’s reintegration into regional transit networks. This reintegration is essential to realising the full potential of the TCTC and delivering on the EU’s vision of diversified, sustainable trade corridors.
The inclusion of Armenia would create more direct and efficient links between Central Asia and European markets. For instance, a route connecting Baku to Turkey through southern Armenia would offer a significant logistical advantage over current detours through Georgia. Not only would this save time and costs, but it would also enhance corridor resilience by creating alternative pathways.
The economic incentives of this integration are matched by the political benefits. Open borders and increased interdependence can help normalise relations, foster trust, and encourage long-term peace. For Armenia, such developments would open up new avenues for infrastructure investment, trade diversification, and broader economic renewal – all goals that directly align with the EU’s regional engagement strategies.
EU strategic leverage and imperatives
The EU holds substantial strategic leverage in the South Caucasus. As Azerbaijan’s largest export market for natural gas and home to key investors in regional infrastructure – such as BP – Brussels is well positioned to shape outcomes. However, the EU has often refrained from deploying its full weight in support of peace and sustainable development.
Integrating the South Caucasus into the EU’s Global Gateway and Black Sea Strategy frameworks offers a rare window of opportunity. These strategies are not merely development tools; they are instruments of geopolitical alignment and value-based engagement. Armenia’s inclusion in the TCTC supports the Global Gateway’s aims by promoting democratic governance, transparency, and resilience.
Simultaneously, the Black Sea Strategy – aimed at enhancing connectivity, security, and cooperation – requires a stable South Caucasus to realise its full potential. Armenia, if included, could serve as a pivotal land bridge connecting the Caspian Basin to the Black Sea and onward to Europe. This would enhance not only physical connectivity but also Armenia’s institutional alignment with European norms and partnerships.
International partnerships and ‘materials diplomacy’
The fourth lever centres on international partnerships and materials diplomacy. The US–China dichotomy dominates the conversation (accounting for about 30 per cent of global imports), and the US is shaking up the multilateral trade system led by zero-sum thinking and moving from a rules-based system to a power-based one.
However, there are 190 other countries in the world representing about 60 per cent of global trade. This presents the EU with an opportunity to build a network of strategic partnerships to address CRM needs based on a win–win mindset. This is one way in which Europe can also walk the tightrope between open but fair trade and strategic autonomy.
This is the mindset that should underpin the new Clean Trade and Investment Partnerships the EU plans to build up in the coming years. The recently modernised EU–Chile trade deal, which includes enhanced cooperation on sustainable raw material supply chains, signals a shift towards more geopolitically aware economic diplomacy while defending a continuation of the rules-based, democratic approach to global trade.
Policy recommendations for the EU
To realise the transformative potential of the TCTC, the EU must adopt a proactive and coherent policy framework rooted in conditionality, strategic investment, and conflict resolution.
Firstly, the EU should make a signed peace agreement between Armenia and Azerbaijan a clear precondition for deepened cooperation with Azerbaijan. This includes making explicit its opposition to any extraterritorial corridor that undermines Armenia’s sovereignty and pressing for the immediate release of Armenian prisoners of war and the withdrawal of Azerbaijani forces from occupied territory.
Secondly, the EU must use economic tools to incentivise peace. Infrastructure investments, preferential access to EU markets, and development financing should be made available contingent on measurable progress towards peace. Complementary support for humanitarian needs – such as de-mining, rehabilitation, and trauma recovery – should accompany these measures to support a broader reconciliation process.
Thirdly, the EU should prepare a deterrence mechanism aimed at preventing renewed aggression. This includes readiness to apply targeted sanctions and asset freezes against individuals responsible for escalation. It also requires close coordination with the United States and regional partners to resist destabilising activities by Russia and Iran, whose influence threatens both peace and connectivity.
Fourthly, and most importantly, the EU must work to ensure Armenia’s full inclusion in regional connectivity initiatives. This means supporting its participation in Middle Corridor projects, backing confidence-building measures with Azerbaijan, and facilitating its involvement in EU-aligned platforms such as the Black Sea Strategy. Inclusion, rather than isolation, is the EU’s most effective tool for promoting peace, democracy, and development in the South Caucasus.
Conclusion
The future of the South Caucasus lies at the intersection of peace and connectivity. The Trans-Caucasus Transit Corridor could become a cornerstone of east–west trade and geopolitical cooperation – but only if sustainable peace is achieved. Azerbaijan’s hardline posture, external interference from Russia, and regional instability – exemplified most recently by the Iran–Israel confrontation – highlight the urgency of securing alternative, stable routes for European interests.
The EU must act with clarity and purpose. With the Global Gateway and Black Sea Strategy already in place, the instruments for engagement are available. What is required now is the political will to use them effectively.
Peace is more than a diplomatic objective – it is the linchpin of strategic connectivity and economic security. The credibility of the EU’s foreign policy and its influence across Eurasia will be measured by its ability to ensure that peace enables connectivity – and that connectivity, in turn, secures peace.