Abstract: The establishment of irrevocable democracy, the rule of law, free market economic relations, and the protection of fundamental human rights have not yet assumed key significance in the South Caucasus countries. Consequently, all pressing problems of the region continue to intensify, keeping the region politically and economically unstable. Given contending geopolitical and geoeconomic interests, the region may develop into a center of clashes jeopardizing the currently manageable political instability. The focus of this article is to highlight the main threats to regional security and stability. Key words: Nagorno-Karabakh, NATO, South Caucasus Opposing Foreign Policy Vectors Division lines separating Armenia from the region became particularly pronounced in 1999, when the other Caucasus republics, Azerbaijan, and Georgia, walked out of the Russian-led Collective Security Treaty (CST), declaring their intentions to instead integrate with Euro-Atlantic security structures. In 2003, the CST was reorganized into the Collective Security Treaty Organization (CSTO), formed as a counter to the North Atlantic Treaty Organization (NATO) and the eastward expansion of European influence. Armenia is the only country in the South Caucasus whose foreign policy serves the goals of the CSTO, and Armenian authorities see it as the only international framework ensuring the country's national security. On the other hand, Georgia and Azerbaijan are striving to minimize threats to their security by seeking the development of relations with NATO. Armenia's only relations with NATO, through its Individual Partnership Action Plan (IPAP), have been a part of Moscow's attempt to initiate cooperation between NATO and the CSTO. Armenian authorities state that the country's defense system stems from the assumption of NATO-CSTO dialogue. It is obvious that Armenia also hopes for the implementation of a June 18, 2004, decision of the CSTO's Collective Security Council, the core of which is a structural transformation of a one-level individual partnership, effective under the frameworks of the Euro-Atlantic Partnership Council (EAPC) and the Partnership for Peace program (PfP) into the format of a two-level individual-collective partnership with NATO. This is because every CSTO member country is also a member of the Euro-Atlantic Partnership Council (CEAP), whereas Armenia is the only CSTO member developing an IPAP with NATO. There is little doubt that regional stability will be possible in the South Caucasus when the three states of the region belong to the same international security system. The harmonization, synchronization, and coordination of the foreign policy priorities of the three states can prevent the South Caucasus from developing into a hotbed of geopolitical clashes. This means that Armenia should revise its foreign policy. Armenia's IPAR however, is not sufficient, and the country should declare its intention to join NATO. While doing this, Armenia should continue to develop its place in and relationships with international and regional organizations, which in the future may take on key security functions. Under these conditions, Armenia's membership in GUAM (Georgia, Ukraine, Azerbaijan, and Moldova) would indicate Yerevan's desire to take up a realistic foreign policy. If Armenia continues to remain isolated from the regional integration processes, the divergences in the interests of the three states will continue to deepen, and the line that separates confronting geopolitical blocs and security systems will run along Armenia's borders. Unfortunately, the authoritarian regime presently in power in Armenia has reduced its foreign policy to tighten its grip. As a result, Armenia has become the main conduit of Russian policy in the region, thus restricting its foreign policy to the bounds of the Kremlin's interests. The recent redeployment of Russian military forces and hardware from Georgia to Armenia reflects Armenia's continuing economic and political isolation, and is evidence of the growing polarization in the region. …