Iran Crisis Poses Major Risks to South Caucasus

Never in its post-Soviet history has the South Caucasus attracted so much attention from the world's top powers as it is now. The Iranian nuclear crisis poses a major threat to stability in Armenia, Georgia and Azerbaijan. If the standoff worsens, we could see war, crime, instability and poverty increase all across the region.

In recent years, Iranian interest in Georgia has increased dramatically, aided by the abolition of visa requirements for tourists from the two countries.

Tehran's role in Armenia is both political and economic, and is heightened by Yerevan's isolation – its borders with both Azerbaijan and Turkey are closed, so it cannot be too picky about its friends.

But the most important prize is Azerbaijan, located on Iran's northern border and rich in energy resources supplies. That is where Tehran has focused its efforts. Iran, which is home to millions of ethnic Azeris, has been active in Azerbaijan ever since 1991, and has spread its religious values among a population that largely shares its Shia Muslim faith.

Ever since it became independent, Azerbaijan has attempted to maintain a balance in its foreign policy, as it faces threats and opportunities from every direction. But that has allowed both Iran and Russia to increase their influence over its politics. Tehran, in particular, is able to use religious groups to put pressure on the Azerbaijani government.

Iran views Azerbaijan's secular system as an existential threat. Many Iranian citizens would rather live under the kind of government that Azerbaijan has – despite all the corruption, lawlessness and poverty – than under their own.

Perversely, however, Azerbaijan's crushing of civil and political rights has opened up space for pro-Iranian groups to grow, since the authorities have destroyed home-grown forms of opposition that might threaten their monopoly on power. Most experts agree that Iran has succeeded in creating an extensive spy network in Azerbaijan.

Azerbaijan is a major centre for western oil companies, it provides a stopping-off point for supplies for NATO in Afghanistan, and it has forged close political and economic ties with Israel.

Iran's increasingly aggressive stance on Azerbaijan is an attempt to halt these burgeoning relationships with the West. At a minimum, it wants to ensure that Baku is neutral in the event of Washington waging a war on Iran.

The tough rhetoric employed by Iranian politicians, including the recent allegation that Azerbaijan allows Mossad agents to use its territory, is intended to make Baku extremely cautious about assisting outside powers. It is certain that if a war did break out, then Azerbaijan would be seriously affected, as would all countries in the region.

An economic blockade would increase Iranian emigration to all three South Caucasus states, and a conflict could turn this exodus into a humanitarian catastrophe. Azerbaijan – which already has a large number of people displaced from Karabakh – could find itself with hundreds of thousands of refugees from Iran.

Armenia would be hardest hit by an economic blockade of Iran, because its economy and trade are so tied into that country, but all three countries would be affected by the boom in smuggling – including of heroin – that would inevitably follow. Iranian involvement in the region's organised crime groups would increase.

Islamic militants would certainly become more active and might launch attacks against targets in the region.

Nor can one rule out the risk of military engagement. Armenia, Georgia and Azerbaijan are militarily weak, unlike Iran's principal foes, Israel and the United States, and this might make them look like easy targets for a short, winnable war designed to shore up popular support within Iran.

It is possible that the populations of these countries might take advantage of instability to demand greater civil liberties, but that would likely plunge these states into deeper turmoil.

It is therefore not surprising that governments in the South Caucasus states are taking their time before deciding how they should react to the spiralling international crisis around Iran. Their very futures are at stake.