Home

Russia’s war with Georgia has triggered a diplomatic upheaval across the region, but also in the international relations of the Caucasus. Not only has Russia laid down a forceful marker claiming its right to an exclusive sphere of influence there and across the CIS, it has moved to follow it up by placing pressure on Azerbaijan’s foreign, defense, energy, and economic policies. Turkey also has jumped into the fray with the revival of an older plan for a region-wide mechanism to address the Caucasus’ frozen conflicts.  As a result of this war and the diplomatic currents it has unleashed, Iran too has had to assert its presence by vigorous diplomacy. Iran’s assertion in the Caucasus reflects the complex connections between the regional powers and the larger arena of world politics and cries out for explanation.

Russian military reform plans have been adjusted as a result of the Georgia war. However, these early ‘lessons learned’ may only result in some minor modifications to overall reform plans. That approach is in itself mixed, as some Russian generals believe the war provided an opportunity to assess the inefficiencies and shortcomings of the Russian military ranging from equipment issues to tactical command and control, while others take comfort in the demonstration of a rapid conventional military victory over a United States and NATO trained army. These issues must also be examined carefully by Western military planners in order to make necessary calculations regarding how best to tailor their assistance in rebuilding the Georgian armed forces in the years ahead.

In the coming years the countries of the Syr Darya basin (including upstream Kyrgyzstan and Tajikistan and downstream Uzbekistan and Kazakhstan) face the task of finding a common water regime in order to tackle growing energy and water demands as well as avert future crises of poor inter-state coordination of water resources. Any effort to facilitate cooperation and better management of water in the region by the international community, however, are stalled by the Central Asian governments’ unwillingness to compromise, inability to plan in the long-term, or their mere lack of knowledge of international law.

In summer 2007, the American subprime crisis had an impact on the Kazakhstani real estate market, and then, in 2008, on its entire banking sector, which after Russia’s is the most developed in the CIS. This sector is facing major difficulties owing to its massive lending sprees in international financial markets and its overexposure to the real estate sector. For the first time since the Russian crash in summer 1998, Kazakhstani authorities are faced with managing a major shock, compelling them to test, in real time, not only the solidity of the country’s most dynamic economic sectors, but also the effectiveness of the state intervention mechanisms. Astana ultimately seems to have demonstrated its overall financial solidity, but the long-term social and regional costs remain unclear.