Another theater for US-Iran fallout: the South Caucasus

Armenia, an ally of both countries, shows how tensions between the two could upset the region's diplomatic balancing act.

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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.

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