War increases the strategic importance of the South Caucasus - Oil and gas could pass through the "Middle Corridor"
In recent years, the South Caucasus region has attracted attention as a key link in the Trans-Caspian International Transport Route. Also known as the Middle Corridor, it serves to connect Europe and China, bypassing Iran and Russia via Central Asia and the South Caucasus.
Now, the war with Iran has put the importance of the Middle Corridor in the spotlight. By closing the Strait of Hormuz, a route that processes approximately 20% of global shipments of oil and liquefied natural gas (LNG), Iran has disrupted global energy flows.
The Middle Corridor, the shortest geographical route between Europe and China, aims to move Chinese goods along with critical minerals and energy products from Central Asia to Europe. Both the EU and China have pledged billions of dollars to improve ports, railways and roads along the route.
Cargo volumes along the corridor have quadrupled since 2022, the year Russia launched its full-scale invasion of Ukraine. Although it still carries only a small portion of Europe-Asia trade, the World Bank estimates that trade volumes could total 11 million tons by 2030.
Even beyond the current conflict, the Middle Corridor could gain more momentum in the coming years. For Georgia, Azerbaijan, and Armenia, this shift would enhance their role as important transit states. For energy-rich Azerbaijan, war with Iran could also bring short-term benefits. Higher oil prices would mean a windfall from exports for the country, which analysts have estimated could bring in an additional $500 million to $600 million a month for the country.
Europe currently receives about 4% of its natural gas from Azerbaijan, equivalent to 12.8 billion cubic meters of gas. This amount is planned to increase to 20 billion cubic meters by 2027.
Georgia, Azerbaijan, and Armenia have all maintained a neutral stance in the conflict. But Iranian officials have long criticized Azerbaijan for its strong economic ties with Israel. In 2025, Israel received 46.4% of its oil from Azerbaijan via the Baku-Tbilisi-Ceyhan (BTC) pipeline. In return, Azerbaijan receives most of its military equipment from Israel.
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