The Caspian Region Did Not Wait for Opportunity in 2023 What Lies Ahead for 2024?
Author: Dr. Eric Rudenshiold
Dec 22, 2023
Perhaps the greatest indicator of change in 2023 was the accelerating speed of evolution in the Caucasus and Central Asia regions. This review and forecast is intended as an overview of the high points of 2023 in the Caucasus and Central Asia—referred to here as the Caspian region. For decades locked into a post-Soviet stasis of stable, if not moribund, leaderships and lackluster development, the Caucasus and Central Asian countries have seemingly shrugged off their lethargic ways in 2023, emerging as a new Caspian region undergoing structural change, recalibration, and diversification. Led by surprisingly active Presidents, the Caspian region has taken off in surprising directions.
At the end of 2022, it was widely forecast that the tumult of January protests in Kazakhstan, Karakalpakstan protests in Uzbekistan, Gorno-Badakhshan protests in Tajikistan, and even cross-border conflicts between Kyrgyzstan and Tajikistan, and civil unrest in Georgia would pose challenges to the governments in the region. However, this proved not to be the case. Those demonstrations of civic turbulence were largely calmed in 2023. While some tensions remained, leaders and governments in the region were generally forced to confront popular concerns and anti-government sentiments, as well as socio-economic pressures. In general, economic issues were prioritized instead.
Fueled in no small measure by Russia’s continued invasion of Ukraine, the republics of Central Asia and the Caucasus appear particularly influenced by Moscow’s continued inability to satiate its ambitions against a western-supported Kyiv. The Central Asians notably doubled down on their continued refusal to recognize Moscow’s annexation of Donetsk and Luhansk in 2023, with public pushbacks by the region’s presidents and United Nations votes that did not always support Russia. Despite their close and sometimes uncomfortable proximity to that contentious neighbor, Central Asian and Caucasus governments accepted Russia’s war migrants but largely did not let Moscow control or sidetrack their development agendas, especially in the realm of economic outreach.
For Caspian onlookers, the spectacle of Ukraine’s continued ability to withstand Russia’s much-feared armed forces, combined with the disappointing performance of its military hardware, appears to have raised questions on the true veracity of Russian security and defense relationships. The year saw the Central Asians and Caucasians further enhance and diversify their defensive capabilities through drone and other security-related exercises and purchases from Turkey, Iran, and other new suppliers, embracing a novel freedom afforded by Russia’s backlogged capabilities.
The Prigozhin revolt, followed by his swift death early in the year, served both as a cautionary reminder of Moscow’s perfidy, and also as a singular indication to Caspian leaders of at least a temporary brittleness in Putin’s leadership. Russia’s President for once appeared reactive in 2023, not always able to control events or exercise the limitless leadership that he is known and feared for. As a consequence, Caspian capitals continued and accelerated their outreach for non- traditional partnerships and to forge new alliances to the east, west, and south, not just for maintaining multi-vectoral counterbalances, but also to establish alternatives to Russia’s heretofore hegemonic efforts to dominate and control the broader region’s relationships.
Increasing summitry among themselves by the leaders of Central Asia and a deepening of relations with a widened array of partners was a major feature of 2023: China pledged approximately $4 billion for investment in the region, while the United States held its first-ever summit with Central Asia at the presidential level. The leaders of the EU, Germany, France, Turkey, Iran, Pakistan, India, the Gulf States, and others met with Central Asia’s presidents, offering and signing deals worth billions of dollars in investments. This rise of engagements and recognition of Central Asia at the highest levels demonstrated a renewed regional interest in 2023 by global partners, which Russia had neither the financial nor innovative wherewithal to counter.
These new and deeper alliances were augured as missing pieces contributing to modernization of the region’s economies, while also serving to offset the impact of the war in Ukraine and the declining international image for trade with Russia. Moscow’s central bank warnings across the year were harbingers of interest rate hikes and presaged ill health in the Russian economy. Both were unwelcome in the war-impacted economies of the Caspian region and triggered internal belt tightening.
The Caucasus and Central Asian countries by and large stiffened their monetary policies and proved more resilient than expected in 2023, benefiting from diversification. The exodus of businesses from Russia and Moscow’s continued need for migrant labor also bolstered the region’s fiscal hardiness. Declining trade and supply-chain disruptions with Russia, the impact of sanctions and war migrants on domestic economies, and increasing anti-Russian sentiment were very evident in polling surveys across the Caspian region, escalating the trends of 2021 and 2022, even among countries dependent upon Russia for labor migrancy.
Caspian relations at the state-to-state level have traditionally been difficult to manage in the past. While not providing a complete apostasy of relations with Moscow, the past year saw a significantly growing cooperation within the Central Asia region, as well as developing outreach and collaboration with the Caucasus countries. Caspian capitals were compelled by their geography and traditional economic needs to maintain engagement with their northern neighbor, but increasing regional cooperation fostered significant breaks with the past.
Countries in the region were also driven to act upon a long-standing desire to build more diverse economic relations and partnerships that would enable them to connect more globally. Perhaps the most important element of 2023, was the recognition and desire of Caspian leaders to get their own houses in order by working more with each other. The five Central Asian leaders continued a comparatively new tradition of meeting with each other to discuss a growing, collective agenda. For the first time, the group added Azerbaijani President Aliyev to the mix, in a demonstrative symbol of continuing and increasingly resolute trans-Caspian collaboration. The greater partnership and investment by Central Asia in Azerbaijan and Georgia during 2023, was another key symbol of regional integration and further evidence of this evolutionary trend.
The resulting intensification of bilateral and multilateral relations within the Caucasus and Central Asian regions, as well as between them, heightened organic efforts in 2023 to strengthen nascent Caspian partnership networks and capitalized on Moscow’s preoccupation in Ukraine. This East-West explosion of economic engagement was met with some counter-efforts by Moscow to create a new North-South corridor for trade and energy. While it may have been intended by Moscow to reinsert stronger Russian influence in the region, instead it further solidified the expanding geopolitical importance of the region, and Azerbaijan in particular, as a new economic hub. Central Asian leaders adopted new mechanisms to facilitate cross-border cooperation and trade, as well as new economic trade zones. For the Central Asian countries, facilitating and stabilizing collaboration across the Caspian became a critical component to the year’s foreign and economic policy agendas. Absent such new connectivity, the region would remain blocked, save for existing routes primarily through Russia and China.
The resulting rise of attention paid to development of the trans-Caspian’s Middle Corridor in 2023, from a notional and low-margin idea in 2022 to a viable, cost-effective, and faster trade route, demonstrates a significant proof of concept that countries in the broader region can cooperate effectively absent Russian leadership. These developments also presage growing economic schisms between Russia and its near abroad, evident by declining dependence on Moscow for trade routing. This appears to be a dynamic and overt adaptation in Central Asian thinking this past year, aimed at increasing economic sovereignty and competitiveness over the long term. Further evidence is apparent as regional leaders scramble to develop new infrastructure projects that would also connect the region southward.
The year saw on-again, off-again discussions between Baku and Yerevan continue with the goal of achieving a peace treaty. The United States, Russia, and the European Union each sought to assist and facilitate the process. However, a rapid Azerbaijani offensive in September saw Baku retake the remaining Armenian-occupied Nagorno-Karabakh territory and skip over more prolonged negotiations. Faced with rule by Azerbaijan, a large majority of the region’s remaining approximately 100,000 ethnic Armenian residents chose to decamp for Armenia. Baku announced plans to “reintegrate” the region not just for the departed Karabakh Armenians, but also for the over 600,000 internally displaced Azerbaijani former residents of the region.
Armenian Prime Minister Pashinyan in October announced a “Crossroads of Peace” project to normalize relations with his country’s neighbors; reopen borders between Armenia, Azerbaijan, and Turkey; as well as to reestablish road and rail connectivity. Both Baku and Yerevan have announced their intention to sign a peace treaty by the end of 2023. The prospect of reopened borders and unlocking another branch of the Middle Corridor for rail traffic coming from Central Asia, appears to have attracted interest by Central Asian leaders with increased visits and engagements among the trans-Caspian countries. More than doubling the freight capacity currently transiting Georgia along a newly opened Zangezur corridor would create a “peace dividend” for Armenia, a larger role for Turkey spanning the Caspian region, and also enable significantly greater volumes and throughput for trans-Central Asian cargo.
Against the backdrop of a threatened global recession and renewed Russian bullying in 2024, this year’s growing cooperation within Central Asia and between it and the countries of the Caucasus marks a significant and further divergence away from the region’s heretofore autonomic fealty to Moscow. This trend portends much for the coming year. Taking note of 2023’s transformations and, admittedly, an optimistic read on the region’s trajectory, the following areas of development seem worth watching:
- - Middle Corridor Realization: Continued investment and building out of feeder lines to and through the Middle Corridor (i.e. China-Kyrgyzstan-Uzbekistan rail, Azerbaijan-Armenia-Turkey-rail), along with increased trans-Caspian shipping capacity, will likely be key factors in the corridor’s confirmation and growth. Greater cooperation on customs and trans-shipment facilitation between Caspian countries are also critical and probable.
- - C5 Momentum Continues: The increased engagement and activity of the five Central Asian presidents seems likely to continue in 2024, and to escalate on progressively substantive issues. The inclusion of Azerbaijan in this configuration in 2023 points to a broader trans-Caspian trade/transit agenda for all of the region’s countries and is likely to continue.
- - Trans-Caspian Gas Options: European demand for natural gas energy continues to be a significant pull factor for Central Asian resources that need to transit the Caspian. The increase in gas swaps from Central Asia through Iran are largely maxing out pipeline capacities and aren’t sufficient to meet Europe’s needs. Relations between Baku and Ashgabat have grown significantly in 2023. The time appears ripe again for a deal to construct the trans-Caspian connector pipeline, particularly as the UAE and other Middle Eastern countries are investing in Caspian energy.
- - Georgia’s EU Dream: Signaling to Tbilisi that a lengthy EU membership process is a reality will likely prove a pull factor in Georgian politics, particularly as ties to Russia continue to lose their luster. Increased Middle Corridor activity could also prove to be a strong lure and financial boon to Tbilisi’s state budget, driving needed developments.
- - Rapprochement Dividend: If it happens, a new peace treaty between Yerevan and Baku will take significant time and investment to realize and implement in 2024, but a process of joint investments and confidence-building measures will be critical to its execution. U.S. engagement can play a major role, particularly in closing the deal and providing assistance for resettling Karabakh. External spoilers will likely challenge peace prospects, but there is significant momentum at the year’s start for an agreement to be realized.
- - Environmental Meltdown: The continued impact of climate change on the broader Caspian region, glacial decrease, increasing water scarcity and droughts, the need for energy stability, and anomalous weather issues will continue to motivate countries in Central Asia and the Caucasus to cooperate more fully to address existential threats. Baku hosting COP 29 will likely prove helpful.
- - Insecurity Concerns: Afghanistan and the threat of terrorism will remain a concern to leaders in the Caspian region, prompting greater interest in security cooperation, particularly in the vacuum created by Russia’s continued military invasion of Ukraine. New opportunities for regional security cooperation with the United States and Turkey seem likely.
- - Geopolitical Counterbalancing: Efforts by Caucasus and Central Asian countries to offset the interests of Russia, China, Iran, Turkey, Middle Eastern, and Western powers will continue to drive Caspian economic, security, and political decision-making. As Caucasus and Central Asian leaders learn to work more closely together, and their economies become more intertwined and interdependent, balancing Great Power and other interests could become easier for Caspian capitals.
The coming year promises continued importance for the Caspian region, as trends from 2022 and 2023 prompt prospects for greater collaboration among the countries of the Caucasus and Central Asia in the coming year and while Russia’s attention remains focused elsewhere. Though such opportunities for cooperation among Caspian countries have been dashed before, there does appear to be a greater recognition in the region that this is a unique time in history. It remains to be seen if regional capitals can actually seize the moment.