Executive Summary
This assessment analyses how renewed United States tariffs on countries trading with Tehran, combined with internal instability in Iran, affect Armenia’s economic resilience and strategic posture.
It evaluates the implications for Yerevan within the broader context of fragile regional balances involving Azerbaijan and Turkey and the US/Israel – Iran confrontation.
Key Points Newly imposed US tariffs on trade with Iran risk placing Armenia under secondary economic pressure due to its structural dependence on Iran for energy and connectivity. Iran’s internal unrest and economic fragility increase the likelihood of disruption to Armenia’s southern lifeline at a time of heightened regional insecurity. These developments exacerbate Armenia’s strategic exposure to Azerbaijan and Turkey, while the prospect of military action involving the United States and Israel further constrains Yerevan’s operational and diplomatic flexibility. Background Information
President Donald Trump has publicly announced the introduction of a 25% tariff on countries trading with Iran. The statement, made via X, did not specify exemptions or carve-outs, creating immediate uncertainty for states maintaining economic relations with Tehran. In the absence of clarifying guidance, the measure is assessed to apply indiscriminately, thereby potentially affecting Armenia.
Armenia and Iran maintain a relationship characterised by deep structural interdependence rather than volume-driven trade. The Islamic Republic represents Armenia’s only reliable southern access route. This connectivity underpins not only trade flows but also Armenia’s strategic autonomy.
Energy cooperation is central to this relationship. Yerevan relies on a gas-for-electricity swap arrangement with Tehran that contributes to domestic energy security and price stability. Beyond energy, Iran functions as a critical transit corridor linking Armenia to the Persian Gulf and Asian markets. These ties are particularly significant given Armenia’s limited alternatives and ongoing efforts to diversify away from overdependence on Russia.
Iranian companies have been actively engaged in upgrading sections of the Agarak–Vardanidzor–Kajaran road, a key component of Armenia’s North–South connectivity project, encompassing bridges and associated infrastructure critical for linking southern Armenia with Iranian territory.
The two countries have also jointly modernised the Meghri border crossing and reached an agreement to construct a second bridge over the Araks River to enhance cross-border traffic and facilitate deeper integration of transport networks. High-level discussions have been conducted to expand rail transport cooperation, including freight operations and potential integration into broader corridors such as the International North–South Transport Corridor (INSTC).
Both sides have additionally emphasised the development of major transit routes, notably the Persian Gulf–Black Sea corridor, designed to connect Iranian ports with Armenian and Georgian infrastructure, thereby strengthening Eurasian trade flows.
In 2024, Iran inaugurated its largest-ever foreign trade centre in Yerevan, featuring over 100 booths for the display of Iranian goods, including oil products, chemicals, and technology, as well as offering business support services. The facility functions as a strategic gateway for Iranian enterprises into Eurasian Economic Union (EAEU) markets, leveraging Armenia’s location to promote bilateral trade.
The Iran Chamber of Commerce, together with the Armenian Embassy in Tehran, has launched a joint digital B2B platform to connect Iranian and Armenian businesses, harmonise customs procedures, and enhance trade and investment linkages. Leaders of both countries have set a bilateral trade target of $3 billion and agreed on mechanisms to facilitate commerce. Furthermore, a set of ten memoranda of understanding was signed, encompassing trade, infrastructure, tourism, industry, and cultural cooperation, alongside frameworks for joint forums and the implementation of investment projects.
Analysis
The imposition of US tariffs fundamentally alters Yerevan’s strategic calculus. While Armenia is not a major commercial partner of Iran in absolute terms, its exposure lies in the structural nature of the relationship. Secondary economic pressure from the United States risks deterring investment, complicating financial transactions, and constraining Armenia’s ability to maintain essential economic exchanges with Tehran without incurring external costs.
Simultaneously, Iran’s internal situation is alarming although the outcome of the protest is unknown and can still evolve in favour of the government. Persistent protests, economic mismanagement, and international isolation increase the probability of internal destabilisation. For Yerevan, this raises the risk of supply disruptions, border instability, or reduced Iranian capacity to act as a dependable partner. A severe degradation of Iranian state capacity—or, in an extreme scenario, partial collapse—would remove Armenia’s only viable southern outlet, intensifying its isolation.
These dynamics unfold against the backdrop of volatile relations between Armenia, Azerbaijan, and Turkey. Following recent conflicts and ongoing negotiations, Yerevan’s security environment remains fragile. Any weakening of Armenia’s economic resilience or logistical flexibility directly benefits its regional adversaries by narrowing Yerevan’s strategic options. Reduced access to Iran would increase Armenia’s exposure to pressure along its eastern and western axes, where Azerbaijan and Turkey possess superior leverage.
Efforts to deepen cooperation with Western partners and develop alternative corridors may mitigate long-term risk, but they are unlikely to fully offset the immediate strategic value of Iran in the short to medium term.
The opening of the Iranian Trading House in Yerevan was regarded by some Western actors as part of Tehran’s broader effort to circumvent sanctions and expand its economic presence in the region. This development must be situated within Tehran’s wider strategic environment, in which the country perceives itself increasingly constrained to the south by a concentration of United States military assets, allied security partnerships, and NATO-aligned states across the Middle East and the Persian Gulf.
While not all neighbouring countries host permanent NATO installations, the overall configuration of Western military power has reinforced Iranian assessments of strategic pressure along its southern approaches. The United States and allied forces maintain a network of military hubs and access agreements across the Middle East, including in Turkey, Iraq, Qatar, Kuwait, Bahrain, the United Arab Emirates, Jordan and, to a lesser extent, Syria, that project Western power in proximity to Iran’s borders and maritime approaches to the Persian Gulf and Strait of Hormuz.
After decades of economic constriction resulting from successive sanctions regimes, Iran has sought to regain strategic and economic space by turning northwards. The South Caucasus, accessed primarily through Armenia, has become a key component of this effort, alongside Iran’s engagement across the Caspian basin and into Central Asia. This orientation reflects a calculated attempt to diversify trade routes, secure alternative markets, and reduce exposure to maritime chokepoints and hostile regional theatres.
For Armenia, whose borders with both Azerbaijan and Turkey have remained closed for years, the Islamic Republic has constituted a critical outlet and a source of strategic depth. This is particularly true for the southern province of Syunik, whose importance has grown as Azerbaijani political rhetoric has increasingly referred to the area as “Western Azerbaijan”, sustaining concerns in Yerevan over the possibility of renewed military pressure. In this context, Tehran has served not only as an economic partner but also as a stabilising factor, anchoring Armenia’s southern flank and advocating for its territorial sovereignty.
Armenia’s role is further amplified by its status as the only country bordering Iran that is a member of the Eurasian Economic Union. Through Armenia, Iran gains access—via a free trade framework—to a large integrated market of millions of consumers. This has elevated Armenia’s strategic value for Tehran at a time when alternative avenues for economic engagement remain constrained.
The tightening of United States pressure on Iran’s partners, broadly aligned with Israeli strategic priorities and illustrated by parallel measures against Iranian allies such as Venezuela, places Armenia in an increasingly difficult position. As Yerevan deepens its political and economic engagement with Washington and Brussels, and advances along a European integration trajectory, relations with Moscow have declined. This deterioration has reduced Armenia’s strategic margin for manoeuvre, leaving Iran as the only dependable outlet should access along both the Turkic and Russian vectors be simultaneously curtailed.
Within this framework, the proposed development of the TRIPP corridor along Armenia’s border with the Iran has been received in Tehran with open hostility. Iranian authorities have framed the project as an intrusion by external powers into the regional balance, as well as a potential platform for hostile intelligence activity directed against the Islamic Republic. Whether intentionally or not, Yerevan risks becoming entangled in the wider and still unresolved confrontation between the Washington–Tel Aviv axis and Tehran.
Much will depend on the volatility of political decision-making within the Trump administration, which has in recent days alternated between de-escalatory signals and public speculation regarding possible military action against Iran. Regardless of the immediate trajectory of this confrontation, Armenia’s strategic equilibrium with its neighbours remains fragile. Even Georgia, itself economically bound to Azerbaijan and Turkey through energy and transit dependencies, may once again prove unwilling or unable to offer Armenia a reliable alternative corridor in a crisis scenario.
Conclusion
The confirmed introduction of US tariffs on countries trading with Iran constitutes a significant external shock for Armenia, given its reliance on Iran for energy security and strategic connectivity.
Coupled with Iran’s internal instability and Armenia’s precarious regional environment, these developments heighten the risk of economic strain and strategic isolation.
Absent viable and rapidly deployable alternatives, Armenia might face a narrowing margin for strategic autonomy at a critical juncture in its regional security landscape.
SpecialEurasia Co-Founder & Managing Director. She is an International affairs specialist, business consultant and political analyst who has supported private and public institutions in decision-making by providing reports, risk assessments, and consultancy. Due to her work and reporting activities, she has travelled in Europe, the Middle East, South-East Asia and the post-Soviet space assessing the domestic dynamic and situations and creating a network of local contacts. She is also the Director of the Energy & Engineering Department of CeSEM – Centro Studi Eurasia Mediterraneo and the Project Manager of Persian Files. Previously, she worked as an Associate Director at ASRIE Analytica. She speaks Italian, English, German, Russian and Arabic. She co-authored the book Conflitto in Ucraina: rischio geopolitico, propaganda jihadista e minaccia per l’Europa (Enigma Edizioni 2022).