Topic of the week: Election carousel
The world may be justifiably focused on the elections in the US and Russia next year, but 2024 is now shaping up to be a hot election year for the South Caucasus, as well. While the parliamentary elections in Georgia were in any case scheduled to take place in the fall, President Aliyev has decided to spring a surprise by announcing early presidential elections in Azerbaijan in Feb. We think that there are also good chances for Nikol Pashinyan to follow suit and declare early parliamentary elections in Armenia, thus closing the circle of election repositioning in the region.
As we argued in our 2024 Outlook, we anticipate a relatively easy win for the ruling Georgian Dream in Georgia given public preferences for economic welfare, which has been greatly facilitated by Georgian Dream’s chosen modus operandi to pursue a neutral approach to Russia in its foreign and economic policy. While there are many far-fetched theories regarding Aliyev’s surprise announcement, we are of the view that the most obvious one of trying to reap the benefits of victory in the 3rd Karabakh war makes reasonable sense. Aliyev will thus be acting from a position of strength, but Pashinyan may decide on early elections from a position of weakness. In our view, his main objective would be to catch the political field off guard and prevent the possibility of a new opposition force's being created in the country. Ultimately, such elections must be analyzed within the framework of our expectations that 2024 will mark the year when a peace treaty between Armenia and Azerbaijan will be formally signed. Therefore, seeking popular support for concluding such a momentous peace deal seems a natural way to proceed at this juncture.
Still, internal considerations, as important as they may be, possibly pale in comparison to the critical geopolitical underpinnings to these early elections in a region that has become the center of an intense rivalry between the West (USA, Europe, Turkish-Azerbaijani tandem) and the East (Russia, Iran and China). Aliev’s announcement took place only a day after the visit of US Assistant Secretary of State for European and Eurasian Affairs James O'Brien to Baku, and it would be the height of naïveté to assume away any relationship between the two. In our view, it has been the explicit objective of the US to prod Armenia and Azerbaijan into signing a peace deal within the current window of Russia’s pre-occupation with Ukraine, which has been characterized by weakened Russian involvement in the South Caucasus. Accomplishing such a feat under the auspices of the West with newly elected Armenian and Azerbaijan leadership would add gravity to the deal while further limiting Moscow’s clout in the region. Most importantly, if reports of a stalled Ukraine counteroffensive amid increasing Russian strength are true, then further Russian successes on the battlefield may prompt the Kremlin to re-direct resources to the South Caucasus and forestall Washington’s plans. Hence, the seemingly sudden (Western) pressure on Armenia and Azerbaijan to hold fresh elections and conclude a peace deal sooner rather than later.
Electoral cycles, especially when transpiring outside the limits of regular schedules, may always present unpleasant surprises to market participants. There is no particular reason not to heed this risk in the South Caucasus. However, we prefer to interpret these looming events within the scope of our expressed view on the politics of the region whereby we see less risk due to our expectation that no further military escalation will take place between Yerevan and Baku, and that the elections in Georgia in Oct will deliver a win for the ruling party without any major political economy excesses.
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