Diplomacy
Armenia and Azerbaijan Expand Bilateral Trade as Peace Dividend Takes Hold
April 9, 2026
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Armenia and Azerbaijan are quietly constructing the economic architecture of a bilateral relationship that was unthinkable just two years ago. With Georgia playing a critical facilitation role, the two South Caucasus nations have begun formalising trade flows, with Azerbaijani energy exports arriving in Yerevan and Armenian officials compiling an export list of industrial and agricultural goods destined for Baku. The shift marks the first substantive bilateral commercial exchange between the two countries in over three decades.
Armenian Prime Minister Nikol Pashinyan noted in a recent press briefing in Tbilisi that Georgia's geographic position and longstanding commercial ties with both countries make it a natural clearinghouse for the emerging trade relationship. Georgian Prime Minister Irakli Kobakhidze welcomed the characterisation, stating that "cooperation among the South Caucasus countries opens new horizons for the entire region."
The trade normalisation follows the January 2026 framework agreement in which Yerevan secured recognition that all infrastructure on Armenian territory — including any future transport links between Azerbaijan and its Nakhchivan exclave — would remain under Armenian sovereignty and jurisdiction. This assurance removed one of Yerevan's central concerns about the TRIPP connectivity corridor, which had previously generated significant domestic political controversy.
On the energy side, Azerbaijan has begun exporting electricity to Yerevan under a bilateral arrangement that supplements Armenia's nuclear and hydroelectric supply. Azerbaijani officials have also offered to serve as a transit route for wheat shipments from Kazakhstan and Russia into Armenian markets, a practical arrangement that illustrates how commercial logic is beginning to outpace historical grievances. Radio Free Europe reported that both governments are under pressure from their respective business communities to move quickly on formalising the trade relationship before political headwinds can reassert themselves.
Economists monitoring the region have estimated that full normalisation of Armenian-Azerbaijani trade — including re-establishment of the historic direct road and rail links that were severed in the early 1990s — could add between 0.5% and 1.2% annually to both countries' GDP growth rates. The IMF, in its recent assessment of the region, specifically noted that a durable peace agreement could "boost regional investment significantly" by reducing geopolitical risk premiums across the South Caucasus.
The business communities on both sides are cautiously optimistic. Armenian exporters in the food processing, textiles, and light manufacturing sectors have identified Azerbaijan as a natural market with complementary demand characteristics. Azerbaijani companies, meanwhile, see opportunity in Armenia's growing ICT services sector. APA Finance noted that the IMF has explicitly cited the peace dividend as a key upside scenario for regional growth projections.
Trade infrastructure remains an early-stage constraint. Direct banking payment channels between Armenian and Azerbaijani institutions are still being established, and logistics networks capable of supporting commercial flows do not yet exist at scale. Both governments have tasked working groups with developing a bilateral trade agreement framework with target completion by end-2026.
For Georgia, the development reinforces its role as the indispensable economic hub of the South Caucasus — a positioning that Tbilisi has been investing in through port expansion, logistics modernisation, and free zone development for the past several years.
