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The Saudi-Iranian Rapprochement Shapes Azerbaijan’s Balancing Act

Numerous geopolitical, economic, and security factors have influenced Azerbaijan’s foreign policy decisions throughout the country’s modern history. Like other nations, Azerbaijan aspires to uphold its independence, promote its economic growth, and foster international harmony through good relations with regional and global powers. To that end, it must simultaneously cooperate with significant regional players like Iran and Saudi Arabia, whose end goals have frequently been at odds. Therefore, Azerbaijan’s relations with Riyadh and Tehran will be impacted by the current warming of relations between Saudi Arabia and Iran and the resulting change in the regional balance of power. To advance its national interests and stay out of any potential disputes between Riyadh and Tehran, Baku must carefully consider its actions as the Saudi-Iran detente progresses.

An Effective Partnership

Since they established diplomatic relations in 1992, Saudi Arabia and Azerbaijan have developed a solid bilateral relationship, with growing collaboration in fields including energy, trade, and defense. After signing various agreements to strengthen their economic cooperation, notably on energy projects, this connection has grown stronger in recent years. The two nations have strong cultural ties as well, with many Azerbaijanis undertaking the yearly hajj pilgrimage to Mecca. In spite of their effective partnership, however, Saudi-Azerbaijani relations have been overshadowed by Iran’s dominance in the region and its revanchist territorial aspirations in Azerbaijan.

In order to understand Saudi-Azerbaijani relations, it is also useful to consider Baku’s broader relationship with the GCC. Azerbaijan has pursued cooperation with the wealthy Gulf states in a wide range of areas, including energy, trade, tourism, and cultural exchange. For its part, Azerbaijan is a desirable partner for the Gulf states as they seek to diversify their economic and political ties to hedge against risk. The opportunity therefore exists for Azerbaijan and Saudi Arabia to significantly increase their collaboration in several fields of mutual interest, such as security, cybersecurity, and counterterrorism. The two nations can gain much from closer cooperation, helping to stabilize one another as the Middle East experiences tectonic political and economic shifts.

The next decade will see a significant increase in Azerbaijan’s collaboration with Saudi Arabia as a result of the region’s ongoing energy transition. Saudi Arabia is considering exporting green electricity to Europe through Azerbaijan to expand its renewable energy capabilities and diversify its economy. ACWA Power, a Saudi Arabian power and water developer, has signed agreements with Azerbaijan’s Ministry of Energy and state energy company Azerenerji to develop renewable energy projects in Azerbaijan, including solar and wind power plants. Azerbaijan’s location at the intersection of Europe and Asia makes it an ideal partner for Saudi Arabia’s green energy export plans. Through two significant agreements in renewable energy, ACWA has increased its footprint in Azerbaijan. In the first agreement, ACWA agreed to construct a 240 MW wind power project in the Absheron and Khizi districts to help Azerbaijan reach its renewable energy goals, while simultaneously reducing its reliance on fossil fuels. The second agreement entails the construction of a 200 MW floating solar project on Boyukshor Lake, which will supply the capital with clean energy and help it to lower greenhouse gas emissions.

Enter Iran

The normalization of relations between Saudi Arabia and Iran could have significant implications for the region, particularly regarding Iran’s ties to Azerbaijan. While improved relations between Riyadh and Tehran would likely reduce tensions and promote a more secure environment for the region, there are also concerns that such reconciliation could lead to a shift in the regional power structure. This could also result in Saudi Arabia and Iran joining forces to balance out other regional players, including Azerbaijan. Iran’s relationship with Azerbaijan is complex and has included both collaboration and rivalry. Recognizing the importance of avoiding antagonism with its large neighbors, Azerbaijan has long sought to maintain a balance in its relations with Saudi Arabia and Iran. At the same time, Iran’s connections with Armenia, Azerbaijan’s principal regional rival, have also contributed to tensions between the two countries.

Since the onset of the COVID-19 pandemic, these tensions have come to a dramatic inflection point. Due to ongoing territorial disputes, bellicose diplomatic rhetoric, and concerns about regional security, relations between Azerbaijan and Iran are at their lowest point in decades. Azerbaijan will certainly continue to seek out economic and security links with Saudi Arabia, but Baku will likely seek to strike a balance between these interests and further deterioration of relations with Iran. Russia has also played a problematic role, urging Armenia to forgo signing a peace accord and delineating its boundary with Azerbaijan. In the disputed Nagorno-Karabakh region and throughout Azerbaijan proper, this tension raises the specter of a new military conflict between Yerevan and Baku, as well as a potential increase in terrorist acts. Given the tremendous waves of anti-government activity that have endangered the stability of the ruling regime in Iran since September 2022, the risks for Tehran may even be higher.

The Islamic Republic’s animosity toward Azerbaijan could further incense huge populations of ethnic Azerbaijanis residing in the Iranian regions close to the Azerbaijani border. Indeed, ethnic Azerbaijanis have already joined the protest movement in droves, and repressive policies by the Islamic Republic will likely increase these numbers. To prevent further deterioration in their relationship, both Iran and Azerbaijan must prioritize their mutual interests and engage in communication. While normalization of relations between Saudi Arabia and Iran could be beneficial for regional stability, it is important to consider its potential impact on Iran-Azerbaijan relations.

Iran is applying pressure on Azerbaijan through a variety of means, including threatening to seal the border and accusing Azerbaijan of backing anti-Iranian organizations. Iran wants to restrict Azerbaijan’s engagement with Israel and the United States. The pressure Iran puts on Azerbaijan might backfire and drive the country further away from Iran. Due to its location and oil resources, Azerbaijan is crucial as a strategic ally for Israel and the United States in the region. If Azerbaijan is drawn away from Iran by Tehran’s behavior, it may be drawn toward Israel and the United States.

Ultimately, in spite of hostile rhetoric between Baku and Tehran, Azerbaijan is anticipated to maintain a neutral stance in its relations with Saudi Arabia and Iran. Azerbaijan values its historical and cultural links to Iran. It also sees tremendous potential in its commercial and energy ties with Saudi Arabia. Azerbaijan is likely to keep pursuing its strategic goals and gaining an advantage from the regional dynamics. Baku is expected to remain neutral in its dealings with both Tehran and Riyadh. The future of Azerbaijan’s relationship with Saudi Arabia similarly depends on how Iran and Saudi Arabia approach their relationship and engage with their neighbors in the region.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of Gulf International Forum.

Issue: Geopolitics
Country: Iran, KSA

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Dr. Umud Shokri is a Washington-based foreign policy and energy geopolitics expert, author of US Energy Diplomacy in the Caspian Sea Basin: Changing Trends. He serves as a Visiting Research Scholar in the Center for Energy Science and Policy (CESP) and the Schar, School of Policy and Government at George Mason University and Analyst at Gulf State Analytics (GSA). Umud holds a Ph.D. in International Relations. His primary research interest lies in energy diplomacy, energy transition, U.S. energy policy, the geopolitics of energy, Iran-Turkey relations, Iran-Russia relations, Caspian Sea region, Central Asia, and the GCC. He has fifteen years of extensive professional experience in global energy market studies, energy security and geopolitical risk. He has published articles in various academic journals including Energy and Environment, Energy Intelligence, Middle East Policy, National Interest, Oil and Gas Journal, Springer, Palgrave Macmillan Publishing and appeared on the various media outlets, including Aljazeera, Asharq,TRT World, Deutsche Welle, Anews, BBC, and several others. Follow him on Twitter at @ushukrik.


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