1. Introduction

The era of globalization brought substantial changes in the relations of different countries. Old indicators of state behavior are no longer existent, they are simply unsustainable. Currently, soft power gains advantage in most of the regions of the world. Countries try to overcome their problems through dialog and negotiations, rather than by using force. Absolute gains are favored over relative gains. Less than twenty years ago only a few would have imagined that almost half of the world’s population would now have access to the Internet. This is an example of old standards vanishing and being replaced by new ones. Iran (officially called Islamic Republic of Iran or IRI) has become one of the crucial actors in the South Caucasus recently, largely due to its geographical location and political–economic capabilities. The country plays a major role in the economic interactions of the South Caucasus. The relations between Iran and the South Caucasian countries are developing constantly, largely due to the changes discussed above. Iran, being a religious state cooperates with its secular neighbors. Moreover, for a long period of time it has favored Christian Armenia over Muslim Azerbaijan in its foreign affairs. It should also be stated that the country maintains good relations both with Azerbaijan, with whom it had territorial disputes (the problem of Iranian Azerbaijan) and conflicts on the oil market and with Georgia, which is an ally of the United States, Iran’s major rival in the world arena. It should also be stated that the trade of energy sources is the most crucial part of bilateral relations between Iran and the countries inhabiting the South Caucasus. The aim of this paper is to discuss Iran’s foreign relation with the South Caucasian states regarding energy issues, paying serious attention to Iran’s bilateral relations with these states and avoiding external factors (the role of the US, Russia, Turkey etc.).

That main argument of this article is that Iran’s relations with the South Caucasian countries can best be discussed from the perspective of neoliberal IR theory of International Relations. The main contribution to the field would be a change of discourse considering the foreign relations of Iran, from describing the country as a player which uses hardball tactics to one that is more open towards finding common solutions with its partners. This change of discourse would better equip researchers as well as policy practitioners when dealing with situations that are similar to one discussed below. This paper will begin with discussing the theory itself as opposed to other major schools IR theory and will proceed with stating why this theory best explains Iran’s bilateral relations with the South Caucasian states that are going to be presented in more detail below.

2. Neoliberal Theory in International Relations

Neoliberalism, which is often referred to as ‘neoliberal institutionalism,’ is one of the major theories of IR. Like Neorealism, it encompasses features of both Liberalism and Realism, which makes these two theories more flexible than the formers. As mentioned by Robert Keohane and Lisa Martin, two of the main proponents of the theory, the common ground between Realism and Neoliberalism is the assumption that there is absence of a sovereign authority which is capable of creating and enforcing agreements. It suggests that states advance their own interests, while also making it difficult for them to cooperate with others v. It will be shown below that Iran’s relations with all three South Caucasian states are a perfect example of Complex Interdependence on a regional level.

3. Iran’s relations with Armenia

The bilateral relations of Islamic Iran and Christian Armenia are a great example of Neoliberalism. An old indicator of state behavior, i.e. Islamic ideology, can no longer be applied. The main factor defining Iranian policy is the possibility of achieving economic gains on both sides. This cooperation is mutually beneficial, as it allows Armenia to get out of the economic embargo and blockade imposed by Turkey and Azerbaijan due to the war over Nagorno–Karabakh Republic, while Iran is seeking its way out of isolation through partnership with Armenia xiv.

4. Iran’s relations with Azerbaijan

Though these two countries share cultural and religious affinities, their relations are not as friendly as the Iranian–Armenian relations. This is, due to large extent to the fact that Iran and Azerbaijan are competitors on oil and natural gas markets. This is another example of unsustainability of aforementioned old indicators. Another fact should also be given serious attention. Though the two countries have grievances towards each other on what percentage of the Caspian Sea they would get, there has never been an ambition to use hard power on any side. This means that Iran and Azerbaijan favor achieving absolute gains, i.e. economic stability in the region and trade of the goods they possess, over relative gains. Building up on what was discussed above it should be restated that the bilateral relations between Iran and Azerbaijan should also be analyzed from the perspective of Neoliberalism. Iran uses soft power against Azerbaijan, which means that the country fulfills its goals through cooperation rather than coercion xix.

5. Iran’s relations with Georgia

Unlike Armenia and Azerbaijan, Georgia does not have common borders with Iran, which limits the bilateral relations between the two countries. It should also be noticed that Georgia is an ally of the United States, the relations of which with Iran are rather tense. However, Iran and Georgia reached several agreements regarding trade of energy sources, primarily of natural gas. This is also an important indicator of Neoliberal concepts implemented in practice. It should be added that Neoliberals believe that “there are many mutually beneficial arrangements that states forgo because of the fear that others will cheat or take advantage of them, they see important gains to be made through the more artful arrangement of policies” xxvi.

6. Conclusion

Iran’s energy policy in the Caucasus should be understood by material state considerations and not by ideology. However, there is room for expanding the cooperation between Iran and the South Caucasian republics. Taking into consideration how important South Caucasus is for Iran’s national interests after the collapse of the Soviet Union, Iran, being a regional power, has not pursued as active a foreign policy towards its northern neighbors as it could. However, over the past twenty years Iran has been active in expanding its presence in the region and gaining influence by reaching agreements on economic cooperation and extending economic ties with South Caucasian republics. One of Iran’s primary goals is to become one of the most influential actors in the South Caucasian economy. If Iran manages to fulfill the goal, it will recover its geographical–economic status as the north–south and east–west corridors for connecting various regions to one another, such as Europe, the Middle East, and West and East Asia. It was demonstrated above that Iran tries to maintain good relations with all three South Caucasian states, though the degree of bilateral cooperation has not reached desirable levels. The focus of Iranian energy policy towards all three states is the trade of natural gas. The country has reached high–level cooperation in the sphere of electricity, as well. From a theoretical perspective, as was noted several times above, these relations, largely based on mutually beneficial trade, could be best understood from the perspective of Neoliberalism. Neoliberalism, unlike other major schools of International Relations theory, has enough capacity to describe all the nuances of these relations in a grasp manner, without losing any key points.


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viii Zarifian, Julien. "Iran and Its Two Neighbours Armenia and Azerbaijan: Resuming Relationships under America’s Suspicious Eyes." Iran and the Caucasus 13 , 2009: 388
ix Ibid, 397
x Ibid, 397
xi Sadegh-Zadeh, Kaweh: "Iran's Strategy in the South Caucasus." Caucasian Review of International Affairs, Vol. 2 (1), Winter, 2008: 37-38
xii Varun Vira and Fitzgerald, Erin: "The United States and Iran: Competition Involving Turkey and the South Caucasus." Washington, DC: Center for Strategic and International Studies, 2011: 24
xiii Moniquet, Claude, and William Racimora. The Armenia-Iran Relationship: Strategic implication for security in the South Caucasus Region. European Strategic Intelligence & Security Center, 2013: 14-15
xiv Jervis, Robert. "Realism, Neoliberalism and Cooperation: Understanding the Debate." International Security 24:1, 1999: 52
xv Keohane, Robert O. and Nye, Joseph S. Jr.: "Power and Interdependence in the Information Age." Foreign Affairs, Vol. 77, No. 5 , 1998: 86
xvi Hafezian, E. K. and Mohammad H., 402
xvii Ibid, 403
xviii Balla, Evanthia. Turkish and Iranian interests and policies in the South Caucasus. Policy Brief, Norwegian Peacebuilding resource Center, 2013: 2
xix Jervis, 51
xx Ibid, 48
xxi Hafezian, E. K. and Mohammad H., 406
xxii Ibid, 406
xxiii Sadegh-Zadeh, K., 40
xxiv Hafezian, E. K. and Mohammad H., 407
xxv Ibid, 407
xxvi Ibid, 407