The normalization of relations between Azerbaijan and Armenia will foster trade development in the Caucasus region, according to a report by international rating agency Moody's.
"The most significant positive geopolitical event is the ongoing normalization of relations between Armenia and Azerbaijan. A more sustainable settlement will contribute to regional stability, improved transport connectivity, and the creation of new opportunities for the development of trade and transport links in the Caucasus," the report states.
Recall that on October 21, 2025, President of Azerbaijan Ilham Aliyev announced the lifting of all restrictions on cargo transit to Armenia that had been in place since the occupation period.
The first cargo to pass along the new route was grain from Kazakhstan. Since then, various goods have been regularly supplied to Armenia from Kazakhstan and Russia through Azerbaijan's territory, as well as from Azerbaijan itself.
To date, about 17,000 tons of diesel fuel and around 5,000 tons of AI-92 and AI-95 gasoline have been exported from Azerbaijan to Armenia. In addition, about 60,000 tons of grain, more than 9,000 tons of fertilizers, 1,414 tons of propane, 133 tons of aluminum, 1,114 tons of coal, and 608 tons of timber have been delivered from Russia to Armenia through Azerbaijan's territory.
Moody's believes that political and geopolitical risks will remain one of the key factors constraining the creditworthiness of countries in Central Asia and the Caucasus, despite the ongoing improvement in the resilience of regional economies.
"The war in Ukraine remains the dominant geopolitical risk, exerting a direct impact on Ukraine and Belarus and an indirect effect on the broader region through trade, migration, energy, and consumer channels," the rating agency's analysts said.
At the same time, Moody's notes that many states in the region have strengthened their ability to withstand geopolitical shocks.
"The economies of Central Asia continue to expand economic ties with the EU, China, Turkey, and the Gulf countries. Trade diversification, stronger external reserves, and expanded regional cooperation have reduced vulnerability to external shocks and increased the flexibility of economic policy. Ongoing investments in transport, energy, and digital infrastructure are also creating alternative channels for trade and economic growth beyond traditional Russia-oriented routes," the report says.
Furthermore, Moody's notes that the conflict in the Middle East represents a secondary geopolitical risk for the region, with consequences for creditworthiness likely to manifest through energy, food, and transport prices rather than through direct trade or financial channels.
"Net energy importers, particularly Moldova and some Western Balkan states, remain more vulnerable to these factors, while higher energy prices support the fiscal and external balances of exporters such as Kazakhstan and Azerbaijan. Overall, more effective economic policy mechanisms, increased resilience, and ongoing economic diversification will help contain these risks and support the improvement of credit metrics for most countries in the region," the report states.