Creating a historic shift in regional dynamics, the peace deal between Armenia and Azerbaijan has created a new era of coexistence. In mid-March, the two countries made a breakthrough by finalizing a draft peace agreement. While the document which was signed in Washington on August 8 marks a significant step forward, it is a framework agreement and not a final peace settlement.  As a result, the impact of this “deal” or “peace agreement” must also be understood within the broader geopolitical and economic shifts across the Eurasian region. 

Earlier, experts believed that benefits of peace between Armenia and Azerbaijan would be modest, given the small size of both economies and limited trade with each other. Predictions showed that trade between the two would make up only about one percent of Armenia’s total trade, and even less for Azerbaijan. But after the war in Ukraine disrupted key trade routes, attention shifted to the Middle Corridor, a new trade route connecting China to Europe through Central Asia and the South Caucasus. This development has opened up new opportunities for countries along the Trans-Caspian route, as freight transport has shifted away from Russia’s Northern Corridor to Central Asia and the southern Caucasus. Now, both Armenia and Azerbaijan could play key roles in global trade, becoming important links on this corridor in a much larger supply chain. 

Until now, Armenia was largely bypassed due to closed borders with Azerbaijan and Türkiye.  However, with the peace agreement in place, transport links between Armenia and Azerbaijan, as well as between Armenia and Türkiye, are expected to reopen. Notably, the “Zangezur Corridor,” now relabeled after White House peace talks as the Trump Route for International Peace and Prosperity (TRIPP), is expected to fill this gap and connect Azerbaijan to its Nakhchivan exclave via southern Armenia and create a rail corridor connecting China to Türkiye. For Armenia, this offers direct overland access to Russia, Iran, Central Asia, and Europe. For the Middle Corridor, this offers a shorter and more diversified route, improving reliability and resilience in global trade.   

Investment Climate and Infrastructure Building

The long-lasting conflict and political tensions between the two Caucasus countries limited the volume of investments coming to the region, making the foreign direct investment (FDI) flows unstable. For example, Armenia and Azerbaijan experienced a 42 to 66 percent decline in foreign direct investments in 2020, respectively. This was largely due to the escalation of the conflict in the region, which led to a sharp increase in geopolitical risks. Under such conditions, some investors chose to leave the market with new investment projects suspended until the situation stabilized.  Although the conflict de-escalated after 2020, the investment climate remained unstable in both Armenia and Azerbaijan. As the World Investment Report indicated, Azerbaijan experienced a sharp decline in FDI inflows from 2020 to 2022, followed by a gradual increase starting in 2023. Armenia, in turn, witnessed a reverse trend.

The peace treaty, in turn, would significantly transform the investment climate in the South Caucasus, making it more attractive for FDI. With the increase in political stability and security in the region, the South Caucasus is likely to regain the trust and confidence of foreign investors. As the ING group highlights, normalization of relations between the two countries “could unlock new investment opportunities” and is projected to attract more “foreign capital inflows.”

The change in investment climate, however, will likely result in different benefits for each country. Already the FDI received in the first quarter of 2025 shows Azerbaijani FDI inflows amounted to $1.5 billion, while the Armenian side received only $113.2 million. These differences mostly come from Azerbaijan’s larger economy and market size, with its GDP being almost three times higher than Armenia’s. Another reason is Baku’s better developed connectivity and access to the Caspian Sea, whereas Armenia continues to experience the legacy of prolonged isolation from main trade and infrastructure routes due to the conflict. 

However, Armenia is not doomed to remain on the sidelines of economic benefits. The signed peace deal is expected to become a turning point for Armenia, taking into account that it agrees to open its territory for the TRIPP. Once it is opened through its territory, Armenia will not only become a part of the Middle Corridor and global trade networks but also will attract foreign investors to build its infrastructure, including highways, motorways, and railroads, as well as collect customs duties and transit fees. 

One of the parties that would likely be interested in facilitating the infrastructure development in Armenia is China. Due to its closed borders, Armenia received the least amount of Chinese investments so far. However, there is potential for increased partnership between the countries after signing the peace agreement. 

One of the major Chinese interests in the South Caucasus is another connection to Europe. Thus, if Armenia opens its territory for the TRIPP as well as promotes its Crossroads of Peace initiative, it is likely to become a more important player for China because it will open new trade routes. Considering Armenia’s close ties to Europe and neighbor Georgia’s currently at-odds-relations with the EU, Armenia might become a preferred alternative for China’s exports to Europe. In turn, this would make Armenia more attractive for Chinese investments, especially in its infrastructure sector. 

The European Union (EU) is another player that would be expected to continue its investments in Armenia. Armenia participates in the EU’s “Global Gateway” strategy, which aims to build global connectivity through investments in various sectors, including digital, transport, and energy infrastructure among others. As a part of this strategy, the EU is expected to invest about $2.5 billion in Armenia, which could include connectivity-enhancing infrastructure investments. The EU leadership expressed its support for Armenian’s Crossroads of Peace initiative, highlighting the importance of establishing regional connectivity. 

Neither should Türkiye be overlooked. Although the countries have a long and hostile history, there has been a warming of relations in recent years between Yerevan and Ankara, and economic benefits that would come from opening the borders could start to outweigh their disagreements. The Turkish side has already expressed its interest in “the implementation of a number of promising projects for the development of the infrastructure of the Trans-Caspian International Transport Route (TITR).” Considering that the TRIPP would facilitate trade between Türkiye, Azerbaijan, and the EU, and potentially “deepen Armenia’s economic dependence and boost Ankara’s regional influence”; there is a chance that Turkish investments could become part of Armenian infrastructure projects in the near future.  Armenian Prime Minister Pashinyan spoke with Turkish President Recep Tayyip Erdogan following the recent White House meeting to discuss regional cooperation and Turkish-Armenian cooperation moving forward.

Other players, such as the Asian Development Bank (ADB), also expressed their support for opening Armenian borders and improving connectivity. ADB particularly expressed support for Prime Minister Pashinyan’s proposal, stating that “Armenia’s Crossroads of Peace initiative is very important and aligns with our concept.” How it would invest in Armenia is an open question. However, it is likely that new infrastructure projects could attract investment from a variety of development finance players such as the ADB, Eurasian Development Bank (EDB), and European Bank for Reconstruction and Development (EBRD), among others. 

Energy and Green Transition

In terms of energy supply, the corridor serves well in addressing Armenia’s energy insufficiency. Since Yerevan has no known internal oil or natural gas resources, the country is dependent on oil sources from Iran, Russia, Georgia, and the EU. Russia’s Gazprom branch in Armenia holds a monopoly in LNG imports and distribution in Armenia, resulting in price and supply shocks that lift the cost of energy. The new TRIPP passageway opens the prospect of new energy routes for Armenia from neighboring Azerbaijan as well as possible supplies from Central Asia through the broader Middle Corridor. 

Energy transportation will remain important for Azerbaijan as well, especially when its Southern Gas Corridor cannot meet Europe’s current increasing demand. Under a 2022 EU memorandum, Azerbaijan’s target is to deliver 20 billion cubic meters of gas to Europe per annum, while in 2023 it delivered 12 billion. Kazakhstan also intends to boost oil shipments through Azerbaijan, with actual volumes already having reached 1.2 million tons between January and October 2024. With European demand for non-Russian gas, involvement of the Armenian side in the Middle Corridor could substantially augment access to Caspian reserves, potentially lowering transport costs for such companies as BP by 10-15%. 

Consequently, Azerbaijan envisions diversifying its economy beyond its fossil fuels exports, because its oil reserves are nearing depletion. Azerbaijan's Energy Minister Parviz Shahbazov mentioned that “We ultimately want to build an energy corridor from the Caspian Sea to Türkiye, including [through] the Zangezur Corridor [TRIPP],” meaning to highlight the development of renewable sector transit capabilities. Wind and solar power will be the primary focus of the energy corridor, although both Azerbaijan and Türkiye also claim to include hydrogen as part of the project. Baku aims to export over 70% of its green energy capacity by 2030 and establish green energy corridors connecting the Caspian, the Black Sea, Azerbaijan, Türkiye, Central Asia, and Europe.

Such prospects make trade and transit diversification through the new TRIPP corridor not only feasible but promising. For investors, TRIPP opens a range of new opportunities. They can participate in expanding the renewable infrastructure, supply chains, and emerging hydrogen markets. As the region becomes a key hub for clean energy transit and production, it is poised to attract significant international investment, making it a strategic focal point for those looking to capitalize on the global energy transition. Additionally, Armenia stands to benefit from the corridor through increased connectivity and access to new energy markets that could stimulate its own renewable sector and economic growth. 

Global Trade Confidence

A peace deal that will finally break Armenian isolation and improve regional connectivity is projected to bring benefits for Eurasian trade as a whole. TRIPP could cut freight shipping time by 30-40%, while increasing the freight volume to 15 million tons.  Upon completion of the new rail line, it could also boost Armenian GDP by 30% in two years and Azerbaijani non-oil GDP by 2%. TRIPP would lower transportation costs, boost trade and connectivity, and transform the Caucasus and Central Asian Trans-Caspian region into a major transit and trade hub. 

This improved connectivity would not only attract infrastructure and energy investments but would also benefit other sectors. The agricultural, IT, and manufacturing sectors would all benefit from having access to diversified markets, which, in turn, would ensure a more competitive business environment. Open borders and improved infrastructure would also boost tourism by accessing sites that were not available before and diversify regional economies.   

The signed peace deal is expected to have a transformative impact on the regional economy and development. As the region gains political stability and Armenia becomes a part of the regional transportation network, the South Caucasus becomes more attractive for foreign investment and global trade. This will inevitably result in a diversification of the economy, which will positively impact various sectors, including infrastructure, energy, manufacturing, and more. Joining the Middle Corridor’s growing importance as a conduit for trade, the Washington peace deal comes at an ideal time for the South Caucasus to resolve its disagreements and unite and prosper.