Peace talks heat up, growth cools down: Washington can’t coast while Brussels and Ankara move in

Breakthrough diplomacy is edging the South Caucasus toward something once unthinkable: a real peace treaty between Armenia and Azerbaijan, and a thaw with Turkey that could finally pry open one of the world’s most stubborn borders. Yet just as the politics brighten, the economics are wobbling. That mismatch matters — and it’s the gap the United States needs to fill before the European Union or Turkey claims the prize of shaping the post-conflict order.

The headline moment came on 8 August, when Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev met at the White House with President Donald Trump. Since then, both the optics and the plumbing of diplomacy have moved in tandem. In mid-September, Ankara’s and Yerevan’s special envoys — Serdar Kiliç and Ruben Rubinyan — met in Yerevan for the first time in this negotiating track. For a relationship frozen since 1993, that locale was a statement in itself. Turkish Foreign Minister Hakan Fidan has now put a rough date on what comes next, saying an Armenia-Azerbaijan treaty, finalized in March and initialed in August, could be signed in the first half of 2026, with full Armenia-Turkey normalization and border opening “immediately” after. Yerevan plainly wants the gates up sooner to capture an early trade dividend, but the choreography remains tied to Baku.

For decades that linkage has been the rule. Turkey closed the border in 1993 after Armenian forces took Kelbajar and six other districts around Karabakh. Even the flashes of goodwill since then have been carefully bounded. Ankara allowed quake aid through in 2023 and humanitarian supplies to Syria earlier this year; in the early 1990s it let wheat transit during Armenia’s grain crisis. Now the communiqués are meatier, with both sides talking up the long-mothballed Kars–Gyumri railway, more direct flights, opening crossings to third-country citizens and diplomats, and deeper educational exchanges. Flights between Yerevan and Istanbul have existed since the mid-1990s, but a working railway and a functioning land border would transform the map.

The images have been calibrated to match the text. Pashinyan and Aliyev chatting on the sidelines of the Shanghai Cooperation Organisation summit — and their spouses pictured alongside Turkey’s First Lady — would have been unthinkable not long ago. The symbolism continues at home, where Pashinyan’s government moved to remove Mount Ararat (Ağrı Dağı in Turkey) from Armenian border stamps, a nod at defusing iconography Ankara reads as a territorial claim. The pushback from the opposition was instant and fierce, a reminder that peace is never cost-free domestically. With parliamentary elections due in June 2026 and approval ratings at a low ebb, Pashinyan is gambling that he can deliver enough tangible integration—secure borders, trade, connectivity — to drown out the charge of capitulation. It’s a familiar paradox: the very steps required to make peace durable can shave political capital in the short run.

Here’s the twist. While the politics flicker into the realm of the possible, the economic data no longer looks breathless. Armenia’s headline activity still prints solidly positive — up 7.5% year-on-year in August, after 9% in July — but the engine room is cooling where it counts. Construction growth decelerated from an eye-popping 26.1% to 21.1%. Services slowed sharply, from 11.4% to 6.7%. Trade eased as well. Industrial output is the bright spot, accelerating to 5.8%, and month-on-month activity nudged up 5.4% versus 5% in July. On a January-to-August basis, the economy is 7.1% ahead of last year — hardly a slump. But for a country that has just ridden a migration- and investment-fueled boom, these are the first hints that the low-hanging fruit is gone and the next leg up needs hard infrastructure, new markets, and investor certainty. In other words, exactly what a peace-plus-connectivity package is meant to unlock.

Investors read signals as much as they read numbers. They can see the “first half of 2026” timeline, and they can see Baku still pressing Yerevan for constitutional edits before a signing ceremony. They can also see that Turkey continues to tie any full normalization to the treaty’s ink drying. That combination tends to create a wait-and-see posture in boardrooms: good-faith interest, but with term sheets held back until the border opens, the railway runs, and the legal text is ratified. The risk is obvious. If money and projects don’t materialize ahead of the treaty, the politics that enable it become harder to sustain, particularly for a government already paying a domestic price for de-escalation.

This is where the United States should be irresistible and, so far, isn’t. Washington had the marquee moment — the August meeting — and Secretary of State Marco Rubio has been eager to frame it as a presidential achievement, folding it into a broader Transatlantic push alongside NATO and EU partners. But hard power in a post-conflict transition is often spelled the same way as soft power: railways, roads, customs scanners, cross-border industrial parks, SME finance. The European Union is already on the field, not just with statements but with bodies and budgets. The EU Mission in Armenia is embedded on the ground. Brussels is greasing justice cooperation with a Eurojust liaison in The Hague and has the bureaucratic muscle to turn communiqués into procurement. Canada is quietly backing the EU monitoring mission. Turkey, meanwhile, is both an interested neighbor and a future corridor, with the leverage of a reopened border and the Kars–Gyumri line. If Washington limits itself to photo-ops and congratulatory press releases, it will discover that influence accrues to those pouring concrete and underwriting credit.

The geopolitical incentives align with the economics. For Aliyev and Erdoğan, sealing peace broadens their regional reach and opens fresh trade routes that run through Turkish logistics hubs and beyond. For Pashinyan, a functioning border with Turkey and normalized ties with Azerbaijan would knit Armenia into supply chains that don’t require detouring around closed frontiers. For Iran, which has publicly blessed the process, stability on its northern rim removes a set of wildcards. For the EU, this is a rare stage where it can visibly convene, fund, and supervise a positive-sum outcome. The United States can either lead that orchestra or applaud from the balcony.

Serious engagement is not mysterious. It means arriving with bankable offers and early wins that make normalization feel real long before a treaty-signing ceremony. Rehabilitation of the Kars–Gyumri railway doesn’t just need intergovernmental green lights; it needs feasibility studies, financing, and tendering that can start now. Border facilities and customs modernization are the kind of unglamorous projects the US has financed elsewhere with outsized security and trade payoffs. SME credit lines tied to export readiness can be deployed while borders are still closed, so firms are poised to move the day they open. Scholarships and vocational programs aligned with logistics, rail maintenance, and customs brokerage — to say nothing of tech and light manufacturing — signal that integration is about jobs, not just geopolitics. None of that requires Washington to outspend Brussels; it requires Washington to pick a few catalytic levers and move them quickly.

There’s also a narrative battle that shouldn’t be ceded. Images of leaders smiling in Beijing or Istanbul matter in societies that have lived with enmity. So do small, human-scale changes at the border: a limited opening for third-country travelers, more flights, pilot crossings for diplomats. Those are already on the Armenia-Turkey docket, and they are precisely the kind of steps that can be bundled into a US-EU-Turkey coordination framework without tripping over the core sequencing — peace treaty first, full border opening after. Done right, they create just enough momentum for businesses to stop waiting and start planning, which in turn creates constituencies for the larger deal.

The window is real but not infinite. By early 2026, the region could be broadcasting ribbon-cuttings and rail schedules — or it could still be collecting well-phrased communiqués while voters in Yerevan punish a peace they can’t feel in their wallets. Armenia’s growth is still robust, but the deceleration in services and construction is a warning shot that sentiment alone won’t carry the economy into a new equilibrium. The EU is already edging from monitoring to enabling, Turkey has the switches on the frontier, and even distant partners like Canada are plugging into the effort. If the United States wants credit for midwifing peace, it has to midwife prosperity too.

The paradox of this moment is that the politics have arguably never been better aligned. Ankara is openly tying normalization to a treaty it believes is within reach. Baku has every incentive to cash in on a settlement with a large connectivity upside. Yerevan is staking its political future on a peace agenda. The missing ingredient is not diplomatic choreography; it’s the tangible, near-term economic proof that peace will pay. That’s where Washington can still matter — if it chooses to show up with more than a handshake before Brussels and Ankara steal the show.