The article provides a comprehensive analysis of the historical fate of Caucasian Albania and its Church during the pivotal 7th and 8th centuries, a period marked by the collapse of the Sasanian Empire and the establishment of Umayyad hegemony in the Near East and adjacent territories. This study reconstructs the process of the systemic dismantling of Albanian state and religious institutions—a subject that frequently remains on the periphery of modern Caucasian studies. The research addresses the rapid decline of Sasanian Iran, attributed to ethno-religious particularism and the centrifugal aspirations of regional elites. Special attention is devoted to the fiscal policy of the Umayyads: it is argued that the Arab administration implemented a pragmatic reception of Sasanian taxation models, transforming them into instruments for the rigorous exploitation of the Christian population. Central to the study is the tragedy of the Caucasian Albanian Church. Through an analysis of the activities of Patriarchs Viro, Nerses Bakur, and Michael, the mechanisms behind the loss of ecclesiastical autocephaly are identified. The circumstances of the Council of Barda (704–705 AD) are examined in detail, characterizing it as an act of institutional absorption of the Albanian See by the See of Dvin, facilitated by the direct political support of the Caliphate. The scholarly novelty of the research lies in substantiating the thesis that the liquidation of Albanian ecclesiastical independence and the subsequent loss of the national script resulted from a purposeful alliance of interests between the Arab administration, which sought centralized control, and the Armenian Church, which pursued canonical unification. In conclusion, it is argued that the replacement of the Albanian liturgical language with Old Armenian (Grabar) in the early 8th century served as a “point of no return,” predetermining the cultural assimilation of the Albanian ethnic group and the final disappearance of a distinct Albanian literary tradition within an Islamic environment.