Another theater for US-Iran fallout: the South Caucasus

In late March, as the United Nations Security Council debated whether to increase sanctions against Iran over that country's refusal to halt its nuclear program, Iranian President Mahmoud Ahmadinejad and his Armenian counterpart met near the border of the two countries to inaugurate a new pipeline bringing Iranian natural gas to fuel Armenian cities.

Lighting a symbolic flame, Armenian President Robert Kocharian called the ceremony "evidence of our friendship." But it's a relationship some of Armenia's other friends – particularly the US – wish weren't quite so cozy.

As tensions between Iran and the West approach a boiling point, Armenia is finding it increasingly difficult to negotiate the often conflicting alliances in its complicated neighborhood. Its precarious position illustrates the potentially destabilizing consequences of a Western standoff with Iran on not only the Middle East, but the South Caucasus as well.

More than 15 years after the breakup of the Soviet Union, the fragile region remains politically volatile. A number of unresolved conflicts – over the breakaway regions of Nagorno-Karabakh, Abkhazia, and South Ossetia – still poison relations between neighbors.

Those local tensions have been amplified by new global focus on the region that has placed the countries at a nexus of competing interests. Russia, the US, the European Union, Turkey, and Iran all claim important economic or political stakes in the region.

Armenia faces a choice: Iran or the US?

Keeping good relations with Iran is vital for Armenia, a small, landlocked country. Its main borders – with Turkey and Azerbaijan – are closed, and the country is still in a state of cold war with neighboring Azerbaijan over Nagorno-Karabakh, an unrecognized ethnically Armenian state that is still legally part of Muslim Azerbaijan.

But the US is Armenia's main donor and the only one which currently funds humanitarian assistance in Karabakh. Over the next five years, Armenia is also slated to receive $235 million in aid through President Bush's flagship international development program, the new Millennium Challenge Account.

Armenia's outgoing foreign minister, Vartan Oskanian, says Armenia's allies understand its difficult position. But he also acknowledges that, as tensions rise, there is increasing pressure to choose a side.

"In the case of Iran and the United States, I think we're reaching that point," says Mr. Oskanian, who is Syrian-born and earned a masters degree at Tufts University in Medford, Mass.

Analysts say military conflict with Iran would be devastating for the region and many here fear that its effects could spill over into Iran's neighbors in the South Caucasus, Armenia, and Azerbaijan.

"God forbid, if there is military action against Iran, Armenia may get involved. And Azerbaijan as well," says Stiopa Safarian, director of research at the Armenian Center for National and International Studies, a think tank connected to the opposition Heritage Party.

In the worst-case scenario, Mr. Safarian says, it could reignite conflict between the two countries, which still stare each other down across disputed and heavily militarized cease-fire line near Iran.

Armenia spends $250 to $300 million a year on its military, largely because of the unsolved Karabakh conflict. Azerbaijan spends more than three times that.

But politicians also worry that even if the current conflict stops short of military intervention, heightened tension between Iran and the West could shatter the delicate diplomatic balancing act in the region.

Armenia and Azerbaijan both have close ties to the United States and Iran, although Christian Armenia's ties have been steadier with Iran.

Despite Iran's sometimes tense relations with Azerbaijan, many analysts say the country plays a key balancing role in the region. Iran steadies relations between Armenia and Azerbaijan and counterbalances the influence of Russia, a key regional power.

So far, a balance

So far, Armenia has been able to steer a middle course between the US and Iran. It has stayed largely silent on Iran's nuclear policy, but kept its economic ties with the country transparent and – along with Azerbaijan – quietly enforced international nonproliferation agreements.

But the US is concerned about the growing economic ties between Armenia and its neighbor, particularly the new pipeline, which Armenians see as strategically vital.

Armenia has no energy resources of its own and suffered severe energy shortages in the early 1990s as a result of the civil war in neighboring Georgia.

"Armenia was dependent on pipelines that passed through several countries," says Serzh Sarkisian, who recently became Armenia's prime minister. "We remember what the situation was in Armenia when that pipe was out of order. Imagine sitting in Yerevan in January and you have no heat, no water, and it was minus 30 degrees Celsius."

Given Iran's economic importance to Armenia, though, few here believe that Armenia can do anything other than continue to claim neutrality for as long as possible. But beneath Armenia's steady relationship with Iran, there is also wariness in the country about its neighbor's behavior.

"It's very simple. I don't think that anyone in Armenia would be happy if next to their borders they would have weapons of mass destruction," says Mr. Sarkisian.