A Fragile Thaw in the Caucasus

The early 1920s saw a tentative reopening of cross-border exchanges in the Caucasus region, masking deeper ideological and political tensions that simmered beneath the surface. Soviet diplomats increasingly advocated cooperation with Reza Shah’s new Pahlavi regime after its December 1925 overthrow of the Qajar dynasty. However, many veteran Bolsheviks in the Caucasus viewed this conservative, military-backed government with undisguised contempt.

This ideological friction erupted publicly during an April 1926 banquet in Baku celebrating the new Shah’s coronation. Several Azerbaijani guests, ignoring Moscow’s explicit instructions, openly insulted their Iranian hosts. While Tehran protested, this incident represented merely a symptom of broader border tensions brewing since the implementation of the New Economic Policy (NEP).

The Perfect Storm: Economic and Identity Crises Converge

By 1925, the NEP’s vulnerabilities became glaringly apparent. Plummeting grain exports drained Soviet foreign currency reserves, forcing the Politburo to consider drastic trade reforms. In October-November 1925, Moscow abruptly slashed consumer goods imports – the lifeblood of Near Eastern trade. Dried fruits, a Caucasus culinary staple, became symbolic of the new import restrictions as the USSR redirected resources toward industrialization.

Simultaneously, a migration crisis unfolded. Soviet security agencies grew alarmed by increasing numbers of non-citizens in Transcaucasia, particularly Iranians and Turks. Many Armenians allegedly claimed Persian citizenship to avoid Soviet military service or property taxes. Several high-profile cases, like that of Mir Taghiyev – an Azerbaijani cotton magnate who avoided execution by suddenly producing Persian citizenship papers – heightened Soviet suspicions about borderland identities.

Moscow vs. the Periphery: Diverging Priorities

As these twin crises developed, a fundamental disconnect emerged between central Soviet authorities and regional Caucasian leaders. While Moscow focused on trade imbalances, Transcaucasian officials prioritized migration control. In December 1925, regional Cheka forces began mass expulsions of undocumented Iranians and convicted criminals without central approval. By January 1926, these actions prompted formal protests from both Turkish and Iranian ambassadors.

Soviet Foreign Commissar Georgy Chicherin, fearing a diplomatic disaster, convinced Caucasian authorities to moderate their approach. Meanwhile, on January 31, 1926, the Soviet government announced near-total import bans along the Persian border except for cotton and wool – a devastating blow to northern Iran’s economy.

Economic Warfare and Popular Mobilization

The trade restrictions created immediate hardship in Iran’s northern provinces, where local economies depended entirely on commerce with Soviet Transcaucasia. As export markets collapsed and food prices soared due to poor 1925 harvests, anti-Soviet sentiment intensified. By February 1926, wheat prices had doubled and rice tripled, creating desperate conditions.

In January 1927, merchants in the Caspian city of Rasht formed the Economic Revival Association, launching a trade boycott against Soviet goods. This movement quickly gained momentum, echoing the 1891-92 Tobacco Protest that had successfully resisted British economic imperialism. The Association’s delegates met with Prime Minister Mostowfi ol-Mamalek in Tehran, while mass rallies spread to the capital.

Propaganda Wars and Cultural Confrontation

The crisis spilled into the cultural sphere as Soviet media portrayed the merchant protests as British imperialist manipulation. Transcaucasian newspapers intensified criticism of Reza Shah’s regime, rehashing debates about Iran’s aborted republican transition. Two films stoked the propaganda fires: Bek-Nazarov’s The Silk Hauler in the Fur Coat (depicting the 1891-92 protests as anti-imperialist struggle) and The Girl from Gilan (glorifying the 1920-21 Jangali revolt).

Toward a New Border Regime

Resolution came gradually through multiple agreements reconstructing cross-border relations. The October 1927 Soviet-Iranian trade accord established import-export quotas to balance trade, favoring large enterprises over small merchants. The vibrant Baku Trade Fair, deemed incompatible with the new economic model, was discontinued in 1928.

Simultaneously, both nations worked to clarify borderland identities. A 1926-27 foreigner re-registration campaign in Transcaucasia targeted Persians, Turks, and Greeks, though widespread noncompliance limited its effectiveness. The May 1927 Soviet-Turkish and May 1928 Soviet-Iranian agreements established stricter border crossing regulations and currency controls, particularly targeting migrant workers’ remittances.

Legacy of the Crisis

The 1926-27 border crisis revealed the fragility of early Soviet-Iranian relations and the tensions between Moscow’s centralized policies and Transcaucasian regional interests. While Iranian merchants demonstrated remarkable organizational capacity, their ultimate gains proved limited against Soviet economic restructuring. The crisis marked the end of the relatively open border policies of the early 1920s, ushering in an era of stricter controls that would culminate in the complete closure of the Caucasus frontier during subsequent crises. These events underscored how economic policies, migration patterns, and competing national identities could transform border regions into flashpoints of international tension.