In the shadow of historic empires and modern powers, the South Caucasus – comprising Armenia, Azerbaijan, and Georgia – has long been a geopolitical crossroads. In recent years, the region has attracted growing interest from two Asian giants, China and India, reshaping local dynamics through nuanced, albeit distinct, strategies. While the involvement of both newcomers is broadly welcomed in the region – by the South Caucasus countries and, to some extent, by the region’s traditional powers: Iran, Turkiye, and Russia – a closer inspection of their bilateral relationships reveals a more complex and evolving landscape.
Unlike their overt rivalry in the Indian Ocean and the Indo-Pacific, which is marked by military posturing and strategic competition, China and India’s presence in the South Caucasus has thus far avoided direct confrontation. Their competition in this region is indirect, manifesting through economic initiatives, infrastructure projects, and strategic security and political alignments with local actors.
Why the South Caucasus Now?
Two major developments – one global and one regional – have elevated the South Caucasus region’s importance for China and India, making Armenia, Azerbaijan, and Georgia vital nodes within an emerging logistic network.
First, the Russia-Ukraine war disrupted traditional trade corridors and intensified global competition for alternative routes. Sanctions on Russia forced China to reconsider its reliance on the Northern Corridor – a key Belt and Road Initiative (BRI) route – and shift toward the Middle Corridor, which traverses Central Asia, the Caspian Sea, and the South Caucasus to Europe. Notably, freight volumes along the Middle Corridor surged by 86 percent in 2023 compared to 2022, reaching over 2.8 million tonnes, alongside a 56 percent reduction in China’s exports to Europe via the Northern Corridor.
While China pivoted away from Russia, India attempted to advance the International North-South Transport Corridor (INSTC) to connect with the Russian and European markets via Iran and the South Caucasus. The INSTC allows India to bypass insecure routes through Pakistan and Afghanistan and avoid recent and ongoing disruptions in the Suez Canal. In 2024, trade between India and Russia nearly doubled, reaching a record $66 billion, largely driven by increased use of the INSTC.
The 2020 Nagorno-Karabakh war was another key event that reshaped regional power dynamics. Azerbaijan regained territories and emerged as a stronger regional actor. Baku invited international firms – notably from China – to engage in reconstruction efforts in Karabakh, including smart villages, digital infrastructure, and renewable energy. Concurrently, the proposed Zangezur Corridor through Armenia emerged as a potential trade route, offering China a new avenue to Europe that increases export capacity, and reinforcing Azerbaijan’s strategic importance. Meanwhile, Armenia began diversifying its defense partnerships, reducing reliance on Russia, a security partner for the last 30 years, and aligning more closely with India, which has emerged as Yerevan’s largest defense partner.
As these two events drew two Asian giants to the region, their engagement in the South Caucasus, however, differs. While Beijing maintains its traditional stance of neutrality, New Delhi engages through various alignments, although India tries to act more neutrally on issues of economics and transport.
Trade and Connectivity: China and India’s Parallel Ambitions
When it comes to trade and investment, China and India maintain pragmatic, non-exclusive economic relationships in the South Caucasus. Since the Russia-Ukraine War, China has remained the region’s leading trade partner by volume, particularly through the BRI, while India has expanded its footprint in sectors such as pharmaceuticals, IT, and agriculture under the “Make in India” initiative. Azerbaijan is a key economic partner for both, driven by energy exports and commercial synergies. Georgia enjoys tariff-free trade with China – the only country in the South Caucasus to do so – and India’s trade with Armenia and Georgia are growing rapidly.
China’s infrastructure investments in the Middle Corridor aim to bolster regional connectivity, aiming to create seamless transit to economic zones. Strategic agreements with Azerbaijan and Georgia in 2023–2024 led to large-scale investments in Georgia’s deep-water Anaklia Port, China’s offers to modernize railways, and the expansion of Azerbaijan’s Alat Free Economic Zone. Armenia remains the least connected to the project and China’s BRI investments, mainly due to two closed borders with Azerbaijan and Turkiye, leaving only room for investment in road and tunnel construction within Armenia.
India has similar ambitions in the form of the INSTC, a 7,200 km-long multi-mode network of ship, rail, and road routes for moving freight from India’s port Mumbai to St. Petersburg and Europe via Iran and the South Caucasus. India is willing to work with all three South Caucasus countries – Armenia, Azerbaijan, and Georgia – on this project. This is mainly because India lacks China’s financial leverage and relies on transit countries to invest or find sources of financing to turn this project into reality. Despite the constant declaration of India’s interest to build the Armenia-Iran Corridor, so far the main work has been done in the Azerbaijan-Iran railway connectivity part, due to Baku initially offering to finance the Astara-Rasht-Qazvin railway, which is the last piece of the INSTC to connect Russia-Azerbaijan-Iran to India.
When it comes to trade and investment, the South Caucasus region has avoided economic alignment with either Asian giant, opting instead for a pragmatic, interest-based openness that has so far kept direct competition at bay. Similarly, India and China have collaborated equally with all three South Caucasus republics, though their collaboration naturally reflects the existing reality of the geoeconomic landscape. For instance, China mainly engages with Azerbaijan and Georgia instead of Armenia, as both countries offer existing railway connectivity, whereas Armenia faces limitations due to closed borders. Similarly, Azerbaijan is the region’s largest trading partner for both India and China because it has the largest economy in the South Caucasus, with abundant natural resources.
While the region shows little alignment on economic projects, the security and political front is shifting dramatically, with Asian powers choosing sides – a trend that risks fueling rivalries and igniting fresh tensions.
Between Neutrality and Alignment: Competing Doctrines in the South Caucasus
All five countries under discussion are entangled in territorial disputes – including China’s claim over Taiwan, the Kashmir dispute dividing India and Pakistan, Nagorno-Karabakh between Armenia and Azerbaijan, and Georgia’s disputes over South Ossetia and Abkhazia. Their diplomatic and security cooperation has largely been shaped by their respective positions in these conflicts.
China has emphasized and maintained neutrality ever since establishing its diplomatic relations with the three Caucasus countries in 1992. All three recognize the “One China” policy, and in return China reciprocates with diplomatic balance – abstaining from contentious votes at the U.N. on Nagorno-Karabakh, South Ossetia, and Abkhazia. Beijing often releases statements asking all sides to engage in dialogue and calling for peaceful solutions to conflict and respect for territorial integrity without showing any preferences. This strategy also reflects Beijing’s defense collaboration: limiting military cooperation and focusing only on safeguarding logistical routes without being drawn into geopolitical rivalries. But how long China can maintain its neutrality, especially as India adopts an assertive defense policy in the region, remains to be seen.
After Armenia did not receive the support it sought from Russia during the Second Karabakh War, it invited India to play a larger role in the Armenian defense buildup. India welcomed this new collaboration, which fits into its “extended neighborhood” strategy – covering adjacent regions such as West Asia, Central Asia, and Southeast Asia – where India aims to balance the influence of other powers, prevent encirclement, and project both hard and soft power. Since then, the Armenia-India defense trade has surpassed $600 million, involving the purchase of Pinaka rocket launchers, anti-tank missiles, ammunition, six Advanced Towed Artillery Gun Systems (ATAGS), and additional Swathi radar units.
India views this partnership as a strategic hedge against a rising regional axis of Turkiye, Pakistan, and Azerbaijan – countries that also share close ties with China. In recent years, the military cooperation between these “Three Brothers” has evolved into a trilateral quasi-alliance. Azerbaijan, Pakistan, and Turkiye work together to strengthen defense capabilities, strategic influence, and regional security through joint exercises, defense industry collaboration, and coordinated diplomatic efforts. By enhancing Armenia’s defense capabilities, India aims not only to establish a stronger foothold in the region but also to counter Pakistan’s influence.
Diplomatically, India and Armenia also support each other on core issues at various international platforms, which usually involves pushing back against Azerbaijani and Pakistani collaboration. Armenia backs India on Kashmir, while India supports Armenia’s position on Nagorno-Karabakh. This alignment was evident when India opposed Azerbaijan’s participation at BRICS summits, despite Chinese constant endorsement. New Delhi also boycotted most Azerbaijani initiatives within the Non-Aligned Movement.
Despite India’s deepening alignment with Armenia, its relationship with Azerbaijan remains economically significant and holds untapped potential for positive engagement. Azerbaijan is India’s largest trade partner in the South Caucasus, particularly in the energy and pharmaceutical sectors. Azerbaijan exports to India (mainly crude oil) were worth $955 million in 2023, while India exported $219 million worth of goods to Azerbaijan. According to India’s Embassy in Baku, bilateral trade reached $1.88 billion in 2022 – a 156 percent increase from the previous year.
Beyond commerce and being an energy supplier to India, Azerbaijan plays a crucial logistical role in the realization of the INSTC. In fact, Azerbaijan is the only country that has a railway connection with Russia, and the International Bank of Azerbaijan has initially pledged $500 million loan to finance the missing crucial component of the overall India’s INSTC Network.
Rather than being limited to security considerations, the Azerbaijan-India relationship holds potential to develop into a stabilizing pillar within the region’s connectivity framework. Azerbaijan can emerge as a constructive partner for India in its efforts to access alternative routes to Europe and Russia. If framed through shared economic objectives, their collaboration could support broader regional stability – enhancing the viability of INSTC while offering an example of functional engagement in a fragmented geopolitical landscape.
Strategic Rivalry in Slow Motion?
Since the late 2010s – and even more so after the Russia-Ukraine War and shifts in U.S. foreign policy during and after the first Trump administration – South Caucasus countries have increasingly embraced a multipolar outlook in international relations. Their growing openness to partnerships with China and India reflects a search for pragmatic alternatives to traditional Western and Russian influence. Both Asian powers are attractive not just for their focus on economic cooperation, but also for their hands-off approach to domestic affairs – a combination that appeals to regional governments eager to broaden their foreign ties and boost economic prosperity.
However, as China and India pursue distinct strategies in the South Caucasus – with Beijing viewing the region primarily as a transit corridor to Europe and New Delhi seeing it as both a trade route and a strategic foothold – fresh tensions could surface between the South Caucasus countries and their Asian partners, challenging the delicate balance the region is trying to maintain.
The region walks a geopolitical tightrope. The interactions between China’s economic initiatives and India’s security engagements occasionally intersect in ways that indirectly threaten each other’s strategic interests. India’s intent to stabilize Armenia must be weighed against the risks of militarization. In other words, India’s ongoing military engagement with Armenia could lead to further escalation in the region, given the fragile peace, and this could cause disruption or even destruction of China’s investment and reliance on the Middle Corridor for its exports.
Should regional tensions escalate, China may be forced to abandon its neutral posture and align more explicitly with Azerbaijan to protect its infrastructure projects. As China’s global footprint expands, Beijing is gradually moving beyond its long-held principle of non-interference toward more active security engagement abroad. Driven by the need to protect multi-billion-dollar infrastructure projects and a growing overseas citizen presence, China has built a risk-management toolbox that includes enhanced consular protection, stricter regulation of overseas companies, and large-scale civilian evacuations from conflict zones. In 2018, Defense Minister Wei Fenghe emphasized this shift by declaring China’s readiness to “provide strong security guarantees” for BRI projects. The 2022 launch of the Global Security Initiative (GSI) further institutionalized this trend, promoting security cooperation in BRI regions and signaling China’s increasing willingness to engage militarily to safeguard its strategic investments.
Given the growing defense collaboration between India and Armenia against the backdrop of the Azerbaijan-Pakistan partnership, the South Caucasus is increasingly reflecting the dynamics of the India-Pakistan rivalry imported from South Asia. At the same time, China’s strategic ties with both Pakistan and Azerbaijan introduce an indirect dimension of China-India competition into the region. As a result, the South Caucasus risks evolving from a space of strategic coexistence into one of subtle contestation, mirroring patterns observed in East Africa and Southeast Asia, where economic corridors have become intertwined with geopolitical rivalries.
Ultimately, the stability of the South Caucasus hinges on how external powers, particularly China and India, manage their ambitions within this geopolitically sensitive and historically conflict-prone region. Their ability to balance economic aspirations against strategic realities – without destabilizing local dynamics – will decisively shape the future of this critical Eurasian crossroads. Against this backdrop, pivotal questions emerge: Can India contribute to regional peace while openly aligning militarily with Armenia? To what extent can China continue to prioritize economic connectivity while maintaining a neutral stance and refraining from engaging with broader strategic consequences?
For now, cooperation and competition between China and India coexist in uneasy harmony. But as their footprints expand and local allegiances deepen, the South Caucasus risks quietly evolving into yet another theater in the unfolding story of Asian geopolitics.
Dr. Magsud Mammadov is currently a visiting scholar at the Davis Center for Russian and Eurasian Studies at Harvard University, where his research focuses on non-traditional great power competition and strategic engagement in the South Caucasus. He also serves as a research associate at the Centre for Contemporary Central Asia and the Caucasus (CCCAC) at the University of London and as an AsiaGlobal Fellow at the Asia Global Institute, University of Hong Kong, where he explored China’s Belt and Road Initiative and green diplomacy, with a focus on Central Asia and the South Caucasus.
