DEAR READER,

This week, NATO leaders are heading to The Hague, where they will be pushing to set a new benchmark for defense spending, 5% of GDP. Not everyone’s on board (shocker), but we will be watching closely, especially since Volodymyr Zelenskyy is invited to attend again, but it is rumoured that Ukraine will only get a passing mention. We will unpack what it all means for our region in next week’s edition.

For now, though, we are zooming in on the South Caucasus. Specifically, how countries there are responding to the latest escalations between Israel and Iran. We asked Rusif Huseynov, Director of the Topchubashov Center in Baku, to walk us through the regional developments.

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Enjoy reading this week’s “brief”!

— Giorgi Beroshvili, Editor

The ongoing Iran-Israel conflict is raising alarm across the South Caucasus, where the three regional countries – Armenia, Azerbaijan, and Georgia – have generally maintained a policy of neutrality while voicing concern over the potential for escalation.

Georgia, despite not sharing borders with either side, remains particularly cautious. While the country views rising tensions in the region with apprehension, it has opted for a carefully balanced and neutral stance.

Armenia and Azerbaijan, which do share borders with Iran, are also monitoring the situation closely. In Armenia's case, the concern is understandable: although the government and much of the society lean towards the West, Iran is viewed as a crucial security partner, particularly in offsetting the influence of Azerbaijan.

For Azerbaijan – the largest country in the South Caucasus – the situation is even more complex. Its strategic partnership with Israel is well-established and no secret. Over the past two decades, Baku has steadily deepened its military and technological cooperation with the Jewish state, notably acquiring advanced Israeli weaponry that played a pivotal role in the 2020 war over Nagorno-Karabakh. More recently, Azerbaijan has expanded this cooperation by finalizing additional deliveries of Barak-8 air defence systems, increasing joint drone production with local value-added components, and securing new energy agreements in Israeli waters.

However, relations between Azerbaijan and Iran remain strained, despite the same religious –Shiite – background. Tehran views Baku with suspicion, echoing a broader imperial mind-set akin to how Russia perceives Ukraine – seeing Azerbaijan as part of a former imperial domain. Ideological differences, particularly between Iran’s theocratic regime and Azerbaijan’s secular governance model, further fuel mistrust.

Complicating matters is the presence of a large ethnic Azerbaijani population within Iran –estimated between 15 to 30 million – which fosters cultural and emotional ties across the border but also stokes Iranian fears of potential Azerbaijani irredentist sentiments.

The current crisis could further challenge Iran’s perception of Azerbaijan’s neutrality. The latter’s close alliance with Israel has long led some elements within Iran’s leadership to suspect Baku of possible involvement in hypothetical Israeli military actions. During one of the earlier Iran-Israeli escalations, some hardliners within the Iranian political establishment offered to hit Baku in retaliation, either the Israeli diplomatic mission or just as an easier target.

This time, too, some fringe online sources circulated rumours of Azerbaijani complicity in Israeli actions against Iran. However, Azerbaijani authorities swiftly and firmly denied any involvement. Presidential foreign policy advisor Hikmat Hajiyev dismissed these claims – especially allegations that ethnic Azerbaijanis inside Iran were recruited to aid Israeli efforts – as unfounded and part of a deliberate disinformation campaign.

Despite its official neutrality, Azerbaijan faces several real risks from any further escalation. A humanitarian crisis, particularly a mass exodus from Iran, is a distinct possibility, and Baku appears to be quietly factoring this into contingency planning. A sudden influx of both ethnic Azerbaijanis and non-Azerbaijanis could carry significant political, social, and economic consequences.

Another concern is the potential for environmental fallout. Due to Israeli and US strikes on Iran’s nuclear facilities – particularly Fordow or Natanz – there is fear of radioactive contamination affecting neighbouring countries. To date, Azerbaijan’s mobile radiation-survey units deployed along the southern border have not detected any such threat. Armenian teams in the Syunik province have reached similar conclusions.

Faced with these challenges, Baku has adopted a calibrated two-track strategy: engaging Iran as a cautious and often difficult neighbour while maintaining a robust security partnership with Israel. Although strict neutrality remains Azerbaijan’s most prudent course, it must also prepare for a range of possible scenarios inside Iran – including mass out-migration, internal unrest, regime change, or even territorial fragmentation.

— Rusif Huseynov, Director at Topchubashov Center