BY DANIEL GAYNOR
From The Truman Project

Most Americans wouldn’t be shocked to learn that the largest American embassy in the world is in Baghdad, Iraq. But the second-largest is in a surprising place: Armenia. It begs the question: why?

The best explanation is a real estate mantra: location, location, location. Armenia, a landlocked country with just three million people, might be in the roughest neighborhood in the world. But in America’s eyes, it might be in the most important position of any US ally to advance President Obama’s foreign policy agenda.

What it lacks in natural resources–it has little oil, gas or jewels–it makes up for in geography. Few countries are in better position to shape US foreign policy than Armenia.

Armenia borders Turkey, Azerbaijan, Georgia and Iran. As a part of the former Soviet Union, it relies on nearby Russia extensively for trade and military backing. The US has a significant stake in all five countries, and Armenia is now coming into view as a potentially potent lever to advance American aims.

That is, if the Armenians can be won over.

As the US tries to woo Armenia to become a stronger ally in the region, the term “geostrategic” has never been more apt. Armenia is literally at the center of a number of countries that Washington considers among its top priorities. As President Obama tries to accomplish key foreign policy objectives–like preventing Iran from attaining nuclear bombs or seeing democracy flourish in Russia–he’s got to encourage Armenia to play along.

To Armenia’s south, one such issue is unfolding in Iran’s nuclear centrifuges. Last  week, a media skirmish between the US and Israel boiled over when Israel’s Prime Minister, Benjamin Netanyahu, stated publicly that America had no “moral right” to say whether or not Israel could bomb Iran to prevent it from developing a nuclear weapon. President Obama reportedly called Netanyahu at 3AM to quell tensions.

America is racing to develop every diplomatic pressure point it can on Iran, lest Israel launch a preemptive attack and embroil America in a third Middle East war in ten years. One of those pressure points goes straight through Armenia.

While the US has cut off formal relations with Iran–Washington talks through Switzerland’s embassy there–it’s no secret that it employs a variety of foreign policy crowbars to influence and destabilize Iran’s ruling regime. Some, like President Obama’s latest round of economic sanctions, are well known. Partnering with Armenia is not, but could have a major impact. Through economic and diplomatic incentives, the US is actively trying to shape Armenia into an ally. As President Obama seeks to economically isolate Iran–his sanctions have cut the value of Iran currency in half–he is trying to regionally isolate the regime, as well. Armenia is key to that strategy.

For Armenia, the game is far less simple. Partnering with the US–with whom it has a good, but not great, relationship–could alienate the few friends Armenia has left in the South Caucasus region. It wants military cooperation with Russia, but economic access to the west.

While it has tried to deepen relations with the European Union and the US, Armenia’s two best friends at the moment are arguably the US’s most challenging adversaries: Russia and Iran. That’s not necessarily because of shared ideologies, or even shared interests; it’s because Armenia doesn’t have many friends to pick from.

Of its four neighbors, two–Turkey and Azerbaijan– have have closed off their borders to Armenia. To go on a road trip, every Armenian must pass through either Tbilisi, Georgia or Tehran, Iran.

Why the frosty reception? Turkey, which the New York Times recently called “the historic nemesis of the Armenians,” is still steaming mad over the negative PR associated with Armenian Genocide. The Turks claim rogue military elements are responsible; Armenians believe the Turkish government is reluctant to take the blame.

In either interpretation, the facts are stark: about 1.5 million Armenians perished in a war with Turkey between 1915 and 1918. The Turks closed off its border in 1993, and with it, a significant chunk of Armenia’s economy disappeared. In the decades since, Armenia has pressed for international recognition of the genocide–and rightfully so–but that has only stoked the fire with the Turks.

But, while one would think that the genocide rift is what led Turkey to close off its border, it’s not. Instead, Turkey is standing in solidarity with another neighbor over a contested territory.

Azerbaijan, another fromer Soviet republic, shut its borders with Armenia after the two battled over an Armenian-populated enclave in Azerbaijan, called Nagorno-Karabakh, in the 1990′s. Today, the territory remains a “semi-autonomous” area; meaning that the Azeris want it back, the Armenians believe they control it, and the Karabakhtis has declared independence (which no country has formally recognized).

Meanwhile, the relationship between Armenia and Azerbaijan is sliding downhill. Last week, Azerbaijan made a deal with Hungary to extradite a convicted Azeri murderer. (The man, eight years ago, nearly decapitated a sleeping Armenian serviceman with an axe at a NATO-sponsored English class.) He was returned under the condition that he would serve at least 25 more years in jail.

Instead, as the New York Times put it, he received “a new apartment, eight years of back pay, a promotion to the rank of major and the status of a national hero.” Uproar in Armenia ensued. Armenia’s President released a statement warning, “The Armenians must not be underestimated. We don’t want a war, but if we have to, we will fight and win.”

Meanwhile, Azerbaijan is enjoying the windfall from oil exports. Israel, in particular, has strengthened relations with the Azeris, purchasing 30 percent of their oil from them, as well as selling them over $1.5 billion in military supplies. The US is also a buyer of Azeri oil. As the New York Times points out, Azerbaijan invested more money in its military than Armenia’s entire state budget last year. Hardly the sign of harmonious relations to come.

So far, Armenia’s walked a diplomatic tightrope with skill. As my Lonely Planet travel book explains, “Despite its limited resources, Armenia has become a master at geopolitics. What other country in the world can say it maintains good relations with the US, Russia and Iran?”

Given the cards they’re dealt, Armenia has been a remarkable success story. If America hopes to engender greater cooperation, it’s got to sweeten the deal–through trade agreements, offering economic reforms and encouraging private sector development in Armenia.

Armenia became independent in 1991. Two decades later, it’s still trying to find its footing in the region. It may not have gold, oil, gas or jewels to give to the US. But, instead, it may have something more useful: a strategic position in the most critical—and potentially most dangerous—region in the world.

Daniel Gaynor is Truman’s Writer and Digital Strategist. He can be followed on Twitter @DannyGaynor