As Armenia gradually turns away from its traditional strategic ally, Russia, it is tentatively exploring deeper partnerships with the likes of France and the United States.

And then there is Iran. 

Tehran and Yerevan have enjoyed cordial – even warm – relations since the early 1990s. That entente now looks poised to develop yet further, but geopolitics makes this a complicated proposition.

The appeal of this development is most evident in the numbers.

As Armenian Security Council Secretary Armen Grigoryan told Armenian Public Television in an interview aired on November 14, trade between Armenia and Iran is booming. Where the countries traded $350 million worth of goods in 2021, the expectation is that this figure will rise to $1 billion by next year, he said.

Grigoryan sees this as more than a question of generating prosperity.

"Economic relations between the two countries are important from the standpoint of security," he said.

Another interview from a few days earlier, this time given by Iran's newly appointed ambassador to Armenia, Mehdi Sobhani, to independent Yerevan-based news outlet CivilNet, offered more context for that perspective.

Sobhani hinted at the idea of Iran reducing Armenia's energy dependence on Russia. In a mutually advantageous deal, the two countries agreed in August to extend an existing deal whereby Armenia provides Iran with electricity in return for natural gas supplies. This arrangement has been in place since 2009 and was due to end in 2026, but will now be rolled on, in an apparently enhanced form, until at least 2030.

"Thanks to that agreement, we will be able to increase imports of electricity from Armenia to Iran in exchange for gas, triple or even quadruple it," Sobhani said.

 While this idea is promising, Russia can still play the spoiler.

The Iran-Armenia gas pipeline, the very instrument that could be used to wean Armenia off Moscow's gas, has belonged to Russian gas giant Gazprom since 2015. Russia has precedent in constraining the potential of this route.

Even as the pipeline was being designed, Moscow successfully insisted that its diameter be limited to 700 millimeters – less than the originally intended 1,420 millimeters – as a way to ensure no excess volumes of Iranian gas would be sold onward to third countries. This technical fix limited the pipeline's volume to 2.3 billion cubic meters per year. Ultimately, Gazprom bought Armenia's entire gas distribution infrastructure outright.

It is not only energy that is being traded, though.

To expedite other human and commercial exchanges, a vital cross-border highway running through Armenia's southern Syunik region is undergoing a major upgrade. In October, the Armenian government awarded a $215 million contract to two Iranian companies – Abad Rahan Pars Iranian International Group and Tounel Sad Ariana – to do the work. Once finished, the road will enable motorists to drive from Agarak, on the Iranian border, and continue some 32 kilometers northward across mountainous terrain over 17 bridges and through two tunnels.

The politics is where it begins to get complicated.

Although Iran consistently affirmed Azerbaijan's sovereignty over the territory of Nagorno-Karabakh, it has nevertheless often seemed to quietly back Yerevan's interests.

This is playing out at present in wrangling over the so-called Zangezur Corridor. After the Second Karabakh War in 2020, Azerbaijan regained large swathes of territory, including its entire frontier with Iran. Baku began speaking again then of its desire to push ahead with developing a transportation route across the very southern edge of Armenia – the Zangezur Corridor – so as to bridge its mainland territory with its exclave of Nakhchivan.

What Tehran has advanced is an alternative. In early October, Iran broke ground on a bridge that would facilitate faster transit between mainland Azerbaijan and Nakhchivan through its own territory, thereby notionally eliminating any need for an Azerbaijani corridor through Armenia.

Iran is operating in this situation out of a position of strategic self-interest. It is eager to prevent a physical corridor at its northern periphery that would unite the Turkic world and potentially cut off its access to Armenia and points further north.

In this month's interview, Sobhani forcefully reiterated Iran's opposition to the Zangezur Corridor.

"Our position on that matter has been declared at such a level that no one can change it," he said, according to CivilNet's English translation. "This is the position of the Supreme Leader of our revolution, who has stated very clearly that we do not accept and do not tolerate any border or geopolitical changes."

Iranian and Armenian interests diverge, however, when it comes to the presence of extra-regional actors in the South Caucasus, including on the subject of mediation with Azerbaijan.

Iranian Foreign Minister Hossein Amir-Abdollahian was explicit on this point when he recently stated: "The presence of foreigners in the region not only does not solve the problems but complicates the situation."

Armenia increasingly favors U.S. and EU mediation, but Tehran would like to see matters settled exclusively by regional players. Iran has accordingly welcomed a 2021 initiative to establish a 3+3 format for talks that would involve the three South Caucasus nations – Armenia, Azerbaijan, and Georgia – and the three adjacent regional powers – Russia, Turkey, and Iran.

Several meetings have already been held in this format, most recently on October 23 in Tehran. But little seems to have come of them. (The format is in any case misnamed since it is actually 3+2 as Georgia has never agreed to participate in it.)

Elsewhere in his interview, Ambassador Sobhani offered general words of support for the 100,000 or so ethnic Armenians displaced by Azerbaijan's September offensive.  

"We believe the rights of the people of Karabakh should be ensured. The rights of every person from Karabakh should be ensured. They must have the opportunity to exercise their rights. This is a reality that no one, including Azerbaijan, can ignore," he said.

Even though he did not indicate that Iran had any particular policy regarding these people, the very mention of Karabakh drew the ire of the Azerbaijani Foreign Ministry. 

"[W]e consider the position of the Iranian Ambassador against our territorial integrity and sovereignty as a provocation. We expect Iran to prevent such steps, which are inappropriate to the spirit of our relations, as well as to take necessary steps regarding the opinions voiced by the Ambassador," it said.