Azerbaijan’s President Ilham Aliyev and Armenia’s Prime Minister Nikol Pashinyan met for the first time in almost a year on November 26 in Sochi. Russia’s President Vladimir Putin mediated the meeting, the second since the two countries fought a war last year. The discussions included the ongoing border tension, Armenian detainees, and opening borders for transportation links between the two countries. Although neither of the parties signed formal agreements on delimiting and demarcating the borders between Armenia and Azerbaijan or opening up new transportation routes between the two countries, they did sign a document that expressed their intention “to work toward the creation of a bilateral commission on the delimitation of the state border between Armenia and Azerbaijan and its subsequent demarcation, with Russian consultation upon request of the sides.” Greater cooperation between Armenia and Azerbaijan would provide for a de-escalation of the conflict between the two countries and would benefit the region overall. The creation of transportation lines between Armenia and Azerbaijan would greatly improve the economic and shipping capacity in the region.

The Nagorno-Karabakh conflict has caused tensions between the two countries for decades. During 44 days of fighting in Fall 2020, the Azerbaijani military pushed back the Armenian military from the previously occupied territories and from part of Nagorno-Karabakh itself, prompting Russia to broker a peace deal. Russia has since deployed about 2,000 peacekeepers to the region to monitor the peace deal.

The demarcation and full opening of borders between Armenia and Azerbaijan would provide an opportunity to improve their economic relationship. The increase in economic activity could theoretically act as a significant de-escalatory mechanism because the cost of conflict would then increase. The two sides would, thus, not only benefit from the increased economic flows and jobs created to facilitate the trade relationship, but also be more inclined to avoid the high cost of escalating the decades-long conflict. Especially considering that about 23.5% Armenians lived under the national poverty line in 2020, this process could bring drastic improvements to the population’s well-being in the long-term.

The prospect of de-escalation between Armenia and Azerbaijan impacts other countries, like Russia, that has been involved in the conflict resolution process for years, mainly through its participation in the Minsk Group of the Organization for Security and Cooperation in Europe (OSCE). After the announcement of a scheduled meeting between Azerbaijan’s President Aliyev and Armenia’s Prime Minister Pashinyan in December in Brussels, Moscow was quick to announce the meeting in Sochi only four days later. Russia has explicit interests in being involved in the peace process, mainly to cement what Putin has called “Russia’s special sphere of influence” in the former Soviet Socialist Republics. Moscow’s current involvement gives Russia “boots on the ground” in Azerbaijan for the first time.

As Moscow postures on its border with Ukraine and attempts to reverse Western influence in Georgia, Russia exhibits a deep-seated sense of geopolitical insecurity. Armenia and Azerbaijan are where Russia can position itself as a peace-maker, even if it’s a tenuous peace without full resolution of the problem of Nagorno-Karabakh. Furthermore, both Armenia and Azerbaijan have appealed to Russia for support. However, Russia’s amity towards Yerevan has at times been regarded as a betrayal of Baku. While Russia’s closest relationship in the South Caucasus is with Armenia, Azerbaijan remains its largest trading partner in the region with an export value of $2.38 billion and import value of $733 million in 2019. An improved economic partnership would alleviate some of this pressure on Russia, protect Russian assets in the countries, improve Russia’s own trade relations with the states, and promote the status of the Eurasian Economic Union (EAEU). It could also improve its position in Georgia, which hosts large diasporas of both Armenians and Azerbaijanis. Considering all of these factors, a successful Russia-brokered resolution to the conflict would further assert Russia’s authority in the South Caucasus.

Positive developments between Armenia and Azerbaijan could also benefit the West. Azerbaijan’s close ties with Turkey has made the peaceful resolution of the conflict of importance to NATO. In addition to maintaining stability in the region for security concerns, the European Union (EU) has vested trade relations in the region. In March 2021, the European Union-Armenia Comprehensive and Enhanced Partnership Agreement (CEPA) entered into force, providing a collaborative framework across political, economic, trade, and other sectors. The EU is also Azerbaijan’s main trading partner, and has been negotiating a new comprehensive trade agreement with Azerbaijan since February 2017. Improved trade relations between Armenia and Azerbaijan could mean even more streamlined transport connections from the South Caucasus to the EU, benefitting all parties.

Despite the success of the meeting in Sochi, the relationship between Azerbaijan and Armenia remains tense. There is still a long way to go to opening the borders and creating economic links. However, as mentioned earlier, Pashinyan and Aliyev are scheduled to meet again on December 15 in Brussels under the auspices of the EU. Furthermore, without offering any details, Pashinyan said after the meeting in Sochi that the two sides were very close to an agreement on transportation. The meeting in Brussels could be a chance for the two to continue developments to open the border for transportation and trade. At the same time, Putin has also made clear his intentions to work with Aliyev and Pashinyan to create mechanisms for delimitation and demarcation of the border before the end of the year. The final result of negotiations, as well as who sits at the table, could have a large impact on the future of the region.