ED – this is part of bne IntelliNews annual series of OUTLOOK 2026 for the upcoming year, where we make a forward-looking assessment for all of the major Global Emerging Markets in Emerging Europe, Asia, Latin America, Africa and the Middle East, drawing on insightful reporting from our bureaus around the world. What is on the agenda? What are the prospects for economic growth and what problems lie in store in the coming year? A detailed report that covers, business, economics, finance, energy, politics and the major sectors of the most important markets. By the end of 2025, the South Caucasus had shifted away from the geopolitical order that dominated the three decades after the Soviet collapse. Russia’s war in Ukraine, the defeat of Armenian forces in Nagorno-Karabakh and the re-opening of regional transport routes have transformed Armenia, Azerbaijan and Georgia from frozen-conflict buffer states into strategically important transit and energy hubs. At the start of 2026, the region has the potential to become more economically connected than at any point since the 1990s. The clearest rupture has been the decline of Russian authority. Moscow remains embedded through energy supply chains, remittances and security elites, but its credibility as a regional guarantor has been badly weakened. In Armenia, anger over Russia’s failure to protect Karabakh Armenians in 2023 has fuelled a historic reorientation, as Yerevan looks to closer links with the European Union. In Azerbaijan, Baku has grown confident enough to challenge Moscow on specific issues while keeping pragmatic ties. Georgia’s government, by contrast, has drifted away from the West and toward a more ambiguous posture that creates space for Russian influence to return. These shifts have coincided with the expansion of new transport and energy corridors linking the Caspian to Europe via the Caucasus and the Black Sea. The so-called Middle Corridor, running through Azerbaijan and Georgia, has become strategically more important as Europe and Asia seek alternatives to routes crossing Russia. This has turned the region into a critical bridge between markets, and a battleground for influence among the EU, the US, China and Russia. Azerbaijan’s recovery of Nagorno-Karabakh in 2023 allowed President Ilham Aliyev to pivot from a conflict-driven agenda to a more ambitious regional strategy. In 2025 this was reflected in a diplomatic breakthrough with Armenia. After months of bilateral and US-mediated talks, Aliyev and Armenian Prime Minister Nikol Pashinyan initialled a peace agreement in Washington in August, committing both sides to recognise each other’s borders and refrain from the use of force. Although a final signature remains dependent on Armenia making politically sensitive amendments to its constitution, the direction of travel is clear. Border commissions are at work, and the prospect of opening transport links, including a route between Azerbaijan and its Nakhchivan exclave, is becoming more realistic. Washington has sought to shape this process through its proposed Trump Route for International Peace and Prosperity (TRIPP) transit corridor, which is already leading to an enhanced US role in the region. Domestically, however, Azerbaijan has become more tightly controlled. Municipal elections in January 2025 confirmed the dominance of the ruling New Azerbaijan Party, while civil society and independent media faced rising pressure. Economically, growth slowed in 2025 as oil and gas output softened, though public investment and the non-oil economy prevented instability. Over the next two years, Baku’s fortunes will hinge on energy prices and its success in turning its new transit role into a broader diversification story. Armenia’s economy remains deeply tied to Russia through trade, energy and labour flows, but Yerevan is actively reducing its political and security dependence on Moscow. Normalisation with Turkey and a peace deal with Azerbaijan are now central pillars of that strategy. 2026 will see Prime Minister Nikol Pashinyan seek re-election in what is already shaping up to be a bitter fight with his opponents, including the Armenian Orthodox Church. The economy remains a relative bright spot. After three years of rapid expansion, growth is slowing but still expected to average around 5% in 2025-26, driven by domestic demand and public investment. However, shifting trade patterns, regional uncertainty and infrastructure bottlenecks will test whether Armenia can sustain this trajectory. Georgia’s economy has boomed, with growth above 7% in 2025 and foreign reserves at record highs, reflecting its role as a financial and transit hub. Yet the political situation in the country remains tense. Since disputed elections in 2024, the Georgian Dream government has consolidated power and clashed with the largely pro-EU population, with protests continuing nightly. Relations with the EU and US are strained, while the government is courting China and has adopted rhetoric that echoes Russian narratives. As 2026 begins, Georgia risks finding itself economically dynamic but diplomatically isolated.