Executive Summary

The 17^th Eurasian Cooperation Organisation (ECO) Summit held on 3–4 July 2025 in Stepanakert (Khankendi) stressed Azerbaijan’s domestic and regional strategy and Iran’s attempt to normalise relations with Baku and maintain its local authority.

This event symbolises Baku’s commitment to integrating the Nagorno-Karabakh region, both symbolically and economically, into the nation, while also promoting the area to other regional powers. Although Azerbaijan faces international criticism over its reconstruction policies and accusations of cultural erasure, Baku used the summit to portray an image of progress and reconciliation.

Iran’s presence at the ECO summit highlights the intricate blend of practical diplomacy and strategic uncertainty in the South Caucasus. The event might normalise Baku-Tehran’s relations after the recent Israeli-Iranian conflict.

ECO Summit might have also reinforced Azerbaijan’s bid for regional connectivity and served as a stepping stone toward broader strategic objectives, particularly the Zangezur Corridor.

Key Takeaways

1. Azerbaijan is using multilateral platforms such as the ECO to assert de facto and symbolic control over contested territories in Nagorno-Karabakh.
2. Tehran’s participation reflects its strategic imperative to manage tensions with Baku, despite deep suspicions over alleged Israeli activity in Azerbaijani airspace.
3. The summit highlights Baku’s aim to integrate post-conflict Karabakh into a thriving regional economy, furthering its transit and geopolitical objectives.

Background Information

The 17^th Eurasian Cooperation Organisation (ECO) Summit in Stepanakert (Khankendi) marks a watershed moment in Azerbaijan’s post-conflict governance of Nagorno-Karabakh. Following Azerbaijan’s military campaign and the subsequent displacement of Armenians in late 2023, this was a major international event in the territory after Azerbaijan retook control of the self-declared Republic of Nagorno-Karabakh/Artsakh.

President Aliyev’s speech at the summit stressed the symbolic significance of the location, emphasising the region’s importance to Azerbaijan and showcasing previous summits in Shushi (Shusha), Lachin, and Stepanakert(Khankendi) as part of a wider normalisation and reintegration strategy.

The summit drew leaders and representatives from ECO member states: Turkey, Pakistan, the Central Asian republics, and notably Iran, even though Iran maintains traditional alignment with Armenia and has recently had tense relations with Azerbaijan. Iranian President Masoud Pezeshkian’s attendance seemed intended to promote regional discussion, despite Tehran’s call for Baku to probe potential Israeli use of Azerbaijani airspace in June 2025 attacks on Iranian nuclear and military facilities.

Geopolitical Scenario

By hosting the ECO Summit in Stepanakert, Azerbaijan is making a calculated geopolitical move to confirm internationally and regionally its sovereignty over Nagorno-Karabakh and highlight its administrative and infrastructural control in the post-conflict region. This furthers Baku’s strategic goals: strengthening its regime, restoring its territories, and becoming a key regional player in Eurasia and the Turkic world.

The summit improves Azerbaijan’s standing with Turkic and Muslim-majority nations, strengthening ties with Turkey and Pakistan, and aiming for practical cooperation in Central Asia.

Even with ongoing tensions, Pezeshkian’s attendance shows Tehran’s strategy to maintain relations with Baku, preserve influence in the South Caucasus and guarantee the success of the International North–South Transport Corridor (INTSC).

While boosting Azerbaijan’s political standing, the ECO Summit also brings increased examination of Azerbaijani rebuilding efforts and cultural policies in Nagorno-Karabakh. Reports of church destruction and vandalism in Baku could further alienate it from Western human rights standards, despite muted criticism from European nations prioritising energy security and diplomatic relations. A lack of strong Western criticism gives Baku more freedom to merge its control without harming its important relationships.

The summit’s regional impact reflects a wider competition for better connectivity. Baku aims to exploit Tehran’s currently difficult situation, because of the consequences of its conflict with Israel, to quickly establish the Zangezur Corridor through southern Armenia. This corridor would create a new east-west trade route under Azerbaijani control, connecting mainland Azerbaijan to Nakhchivan and Turkey. Such a development would significantly alter transport routes in the South Caucasus, possibly provoking responses from Iran, Armenia, and Russia.

Baku’s ambitions are not without constraint. Rebuilding and resettling the area sustainably remain major domestic challenges, especially given its history of ethnic and political divisions. Internationally, any perceived alignment with Israeli military actions could trigger diplomatic retaliation from Iran or provoke broader regional escalations.

Reputational risks for Azerbaijan stemming from the humanitarian and legal fallout of its Nagorno-Karabakh actions could hinder future international financial support and development partnerships.

Forecast and Scenarios

• Baseline Scenario. To strengthen its control over Nagorno-Karabakh, Baku might soon host additional major events in the region while continuing to build infrastructure and increase the population. To counter further Azerbaijani aggression, Iran might increase its military presence in Armenia and its southern border regions while maintaining a cautious diplomatic approach. Armenia is likely to protest symbolically but remain constrained militarily and diplomatically. The Zangezur Corridor will remain contested, but may see incremental progress through soft coercion and regional diplomacy.
• Adverse Scenario. More evidence of Baku’s complicity with Tel Aviv might trigger a military or proxy response from Iran, targeting infrastructure or partners in Azerbaijan. If diplomatic communication fails, border clashes or sanctions could destabilise the South Caucasus corridor projects.
• Optimistic Scenario. Through logistical incentives offered by Azerbaijan via the North-South and East-West corridors, Baku and Tehran might reach an understanding on recent allegations, normalise and also improve their relations. Through international investment, the Nagorno-Karabakh might rapidly develop into a key transportation and industrial centre, fuelled by reconstruction efforts. Armenia enters mediated dialogue on corridor cooperation under regional or EU auspices.

Overall Assessment

Azerbaijan’s hosting of the ECO Summit in Stepanakert reflects a calculated move to merge control over Nagorno-Karabakh while testing the limits of its diplomatic engagement with Iran. Iran’s participation, despite serious concerns about Israel’s purported use of Azerbaijani airspace, reflects a pragmatic attempt to keep regional influence and de-escalate tensions. The event underscores the fragile and business-like nature of Azerbaijani-Iranian relations, a dynamic shaped by overlapping security interests and ambitions in transit. Although Baku’s symbolic and strategic importance grows, its strained relationship with Tehran continues to threaten stability in the South Caucasus.