Vali Kaleji

Senior Research Fellow, The Institute for Iran-Eurasia Studies (IRAS), Tehran, Iran

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Zhanna Vardanyan,

Researcher, “Orbeli” Analytical Research Center, Yerevan, Armenia 

I n recent years, trade turnover between Armenia and Iran has experienced steady growth. In 2021, bilateral trade exceeded $500 million for the first time, followed by an increase to $700 million in 2022. The volume remained strong at $690 million in 2023 and reached $737 million in 2024. At this pace, the two countries are steadily approaching their joint trade target of $1 billion. However, this is not considered a final goal. Officials from both sides have expressed a shared commitment to further increase trade volumes, with a longer-term goal of $3 billion.

   While energy - mainly natural gas and electricity - continues to account for a large share of bilateral trade, the share of other goods has been growing, indicating a gradual diversification of traded commodities. In addition, the "Free Trade Agreement" between Iran and the Eurasian Economic Union will come into effect on May 15, 2025, and from this date, imports and exports of 87 percent of goods included in trade between Iran and the Eurasian Economic Union member states will reach zero. Undoubtedly, the "Free Trade Agreement" could significantly increase the volume of trade and transit between Iran and Armenia. 

   This shift highlights the growing importance of modern and efficient infrastructure in facilitating trade. Although Armenia is connected to Georgia via a Soviet-era railway route, it lacks a direct rail connection to Iran. Therefore, the only means of communication and transit between Armenia and Iran is the road from Yerevan to Meghri on the Iranian border. This 400-kilometer route which passes mountainous areas is very narrow, making it difficult and slow for trucks to pass, especially during the winter with snow and ice.  Therefore, the construction and development of modern, safe and high-quality transit routes became an inevitable necessity for Armenia. 

  At the center of these infrastructure efforts is Armenia's North-South Highway, a major transport corridor currently under development which will connect Bavra (near the Georgian border) with Meghri (near the Iranian border). This project is the largest investment transport project in the history of independent Armenia. It began construction in 2009 with the aim of connecting the south of the country with the north. The completion date for the construction is planned for 2030, with an additional 2 years for defect correction. The project was divided into five sections. While the northern sections being completed around Yerevan and Gyumri, significant sections of the highway are under construction in the south. The mountainous regions of southern Armenia have made the process of building highways and tunnels costly and lengthy. The map below depicts the route of Armenia’s North-South Highway, which runs from Shirak province in the North to Syunik province in the South of Armenia.  

The route of the “North-South Highway” of Armenia, from Shirak province in the North (Georgia) to Syunik province in the South (Iran). (Source: Tunleing World)

T his strategic corridor aims to reduce the transportation distance between the Iranian and Georgian borders from 560 km to approximately 460 km. Once completed, the highway is expected to significantly shorten transport times and reduce logistics costs.  According to estimates published in the Armenian media, the transit time of Iranian goods through Armenia will be reduced from 9 hours to about 5 hours. At the same time, the cost of transporting one ton of cargo per kilometer is expected to decrease by $1.5 to $2.

  The impact of the highway will be particularly significant in the Armenian province of Syunik. Following the Second Karabakh War and problems encountered by Iranian trucks on the Goris-Kapan highway in Syunik province in September 2021, the alternative road of Tatev-Aghavni lacked the necessary quality and standard, particularly during the winter season. In addition, according to Armenia’s former Minister of Territorial Administration and Infrastructure, in Syunik Province, on the current road from Sisian to Kajaran, the average driving speed is about 50 km/h. On the new highway, this could reach 100 km/h, reducing travel time across this segment by approximately two hours. In this regard, the construction of the Kajaran Tunnel as part of the North-South Project will also eliminate the need to use the Meghri Mountain Pass, ensuring safer and more reliable transportation, especially during the winter months. 

   The section of the Sisian-Kajaran highway includes the construction of a new 60-kilometer section of road. The highway will feature three-lane roads with asphalt concrete pavement, five tunnels (including one in the Bargushat area), 11 bridges, 68 fences, and 43 retaining walls. The estimated cost of constructing the southern section of the Sisian-Kajaran highway, part of the North-South transport corridor, is €452 million.

    In this regard, on January 9, 2025, the Armenian government approved a major financial agreement with the European Investment Bank (EIB) to construct a strategically important section of the Sisian-Kajaran highway. Financing will be provided by several international financial institutions: in addition to the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD) and the Asian Development Bank (ADB) will each contribute €236 million. 

   In addition, on October 23, 2023, Armenia and Iran signed an agreement on the construction of the southern section of the North-South highway, as well as the abolition of road tolls. Based on this contract, the Iranian side will construct the 32-kilometer section of the Agarak (from the Iranian border) - Vardanidzor - Kajaran tunnel, which will include the construction of 5 new intersections, 6 overpasses, 2 tunnels, and 17 bridges. In this regard, Iranian engineering companies are carrying out the major reconstruction of the Agarak-Vardanizor road (about 21 km) and the construction of the Vardanidzor road up to the tunnel exit (about 11 km) within the framework of the fourth section of the North-South Highway Investment Program of Armenia. 

    The importance of the North-South Highway goes beyond bilateral trade. This project can play an important role in “Persian Gulf-Black Sea Corridor” which is a multimodal and combined network of ships, rails, and road freight routes connecting Iran, Armenia, Georgia, Bulgaria, and Greece. In this context for Armenia, it provides critical access to Iranian territory and, through it, to Persian Gulf ports and markets in India. It can also improve Iran's access to the Black Sea, facilitating trade with European countries and beyond. With the free trade agreement signed between Iran and the Eurasian Economic Union (EAEU), the highway is positioned to become a key conduit for trade between Iran and EAEU member states.  In a broader regional sense, the highway helps improve the reliability of trade routes and makes it easier for markets across the region to stay connected. 

   On the other hand, the effectiveness of Armenia's North-South Highway requires the development of transit routes in Iran and Georgia. In this regard, given the limited capacity of the existing border bridge between Iran and Armenia on the Aras (Araks) River between Norduz-Meghri, the two governments are considering the construction of a second bridge to increase cross-border capacity. Indeed, Since the Tabriz-Varzaghan transit highway project in East Azerbaijan Province had already been implemented, the completion of the continuation of the route from Varzaghan to Norduz on the border with Armenia is under construction. According to the latest reports, the project is more than 90% complete and will be completed by the end of the current Iranian year 1404/March 2026. In fact, the Varzaghan-Norduz highway is also a section connecting the border to Tabriz and Tehran, which, by connecting to the North-South Highway of Armenia, can increase the volume and speed of transit and trade between the two countries.

    Indeed, in the north, Armenia’s North-South Highway should connect to The East-West international highway in Georgia. Connecting the Tabriz-Varzaghan-Norduz highway in Iran to the North-South highway in Armenia and the East-West highway in Georgia could play an important role in the Persian Gulf-Black Sea Corridor. It can connect Iranian ports in the Persian Gulf and the Sea of Oman to the Georgian ports of Poti and Batumi on the Black Sea, allowing trucks and containers to be transported by Roll-on/roll-off ships from the Black Sea to Bulgarian ports including Burgas and Varna. 

      In conclusion, Armenia's North-South Highway is more than a national infrastructure project-it is a strategic platform for advancing economic relations between Armenia and Iran which can play an important role in the Eurasian Economic Union as well as the Persian Gulf-Black Sea, North-South Corridors. Therefore, by improving logistics, fostering cross-border cooperation, and enabling regional connectivity, the highway can support both immediate economic goals and long-term strategic cooperation perspectives. As trade continues to grow and diversify, this corridor will remain central to strengthening the economic partnership between the two countries.