On the Soviet side, the Stavka wanted to follow up its success at Stalingrad by trapping Heeresgruppe A in the Caucasus. The Soviet South and Southwest Fronts were about to begin an offensive against Heeresgruppe Don with the objective of taking Rostov, which would sever von Kleist’s line of communications. The Northern Group’s mission was to push back von Kleist’s PzAOK 1 and herd them toward destruction around Rostov. Meanwhile, the Black Sea Group, which had only a single tank brigade and a few OTBs, would mount supporting attacks against the 17.Armee around Tuapse and Novorossiysk, with the end goal of clearing the Kuban. The Stavka anticipated a ‘second Stalingrad’ in the Caucasus, with the bulk of Heeresgruppe A becoming isolated and eventually destroyed. However, in this case the Germans were aware of the danger and less inclined to be caught like fish in a barrel.
In order to carry out his part of the Stavka’s grand design, Maslennikov prepared an even larger offensive to strike the left flank of the XXXX Panzerkorps. Khomenko’s 9th Army was reinforced with the 4th and 5th Guards Cavalry Corps and additional tanks. Up to this point, Maslennikov had used his armour in company-size detachments and the North Caucasus Front had no tank corps. Yet it was clear that in order to penetrate the German defensive line and achieve a decisive breakthrough, the Soviets would have to mass their available armour at one point. In order to provide the 44th Army with an armoured shock force, General-major Georgy P. Lobanov formed a composite tank group from five separate tank units. Altogether, Tank Group Lobanov had 106 tanks (of which 46 were T-34s, 18 Valentines, 6 M3 Lees and 36 T-60/70) and 24 BA64 armoured cars, but no attached infantry or artillery. Maslennikov’s intent was to attack north of the 3.Panzer-Division’s stützpunkt at Aga-batyr, held by Kampfgruppe Hoffman (II./Panzergrenadier-Bataillon 3) and overwhelm the Kosaken-Regiment von Jungschultz (a German-led unit consisting of Caucasian volunteers); the 9th Rifle Corps would attack first and then Lobanov’s tanks would pour through the gap.
Dawn on New Year’s Day 1943 was cloaked in heavy fog, but the 44th Army began its artillery preparation on schedule. There was a light snowfall on the hardened ground and temperatures were just above freezing. Although the indirect fire was inaccurate in the fog, it was heavy enough to disrupt the defence and at 0900 hours Lobanov’s tankers rolled forward behind the infantrymen of the 9th Rifle Corps. The Cossack cavalrymen gave way, exposing the flank of the German 3.Panzer-Division to envelopment. During the afternoon, Major Stockmann led 20 tanks from his battalion northward to try and block Lobanov’s tanks, engaging in several skirmishes. The German tankers popped in and out of the fog, sniping at the flanks of the Soviet breakthrough corridor. Lobanov’s group suffered a total loss of 17 tanks on the first day of the offensive but still made good progress. Westhoven realized that his flank was being turned and decided on his own to move up the time to begin the withdrawal by 24 hours. Stockmann’s panzers were ordered to conduct a delaying action – despite the severe shortage of fuel – while the rest of the division began retreating westward to the Kuma River. For the next three days, Stockmann managed to delay Lobanov’s armour and the 5th Guards Cavalry Corps while the bulk of 3.Panzer-Division slipped away. Numerous immobilized vehicles that could not be withdrawn were destroyed. On 3 January, Stockmann was forced to fight a large-scale tank battle near Piev, where Lobanov brought his T-34s into action. On the same day, the Soviet 9th and 37th Armies also began attacking the front of PzAOK 1 and the German retreat accelerated. However, Khomenko’s 44th Army botched the pursuit operation and its tanks and cavalry had lost contact with the retreating XXXX Panzerkorps, allowing it to retreat to the Kuma River unhindered.
In order to re-energize the Soviet pursuit, Maslennikov formed a second tank group under Podpolkovnik Vladimir I. Filippov. Tank Group Filippov consisted of 123 tanks (including 31 T-34s) from seven different tank units that belonged to either the 9th Army or the front. Once the 9th Army was firmly across the Terek River, Filippov’s armour was sent directly up the Prokhladnyy-Georgiyevsk road on 7 January to seize Mineralnye Vody. In this sector, the German 50.Infanterie-Division was retreating in very strung-out columns and made the mistake of assuming that it was fairly safe after crossing the Kura River, oblivious to the fact that the frozen river was not a serious obstacle to enemy tanks. Filippov’s lead brigade came out of the early morning fog on 8 January and struck the I. and II./Grenadier-Regiment 122 near the village of Kommayak, 20km east of Georgiyevsk. In a four-hour action, the Soviet tankers destroyed two companies of German infantry and killed the battalion commander of I./GR 122, creating a hole in the centre of the new German defensive line. The next morning, Filippov tried to expand this breakthrough, but had almost no infantry or artillery support. Von Mackensen dispatched Kampfgruppe Hake from the 13.Panzer-Division and panzerjägers to deal with Filippov’s incursion and a lively tank battle occurred on the morning of 9 January; the 140th Tank Brigade was defeated and lost 12 M3 Lees and two Valentines.
Nevertheless, by 10 January Maslennikov’s 9th and 44th Armies were beginning to get across the frozen Kuma River in force, because the German frontline was merely a string of strongpoints with gaps in between. Both Lobanov’s and Filippov’s tank groups were across the river, along with cavalry and a few infantry brigades, which threatened to collapse the thin German main line of resistance (HKL). The 13.Panzer-Division, which was in even worse shape than the 3.Panzer-Division, made a brief stand in front of Mineralnye Vody to delay the Soviet tanks, then fell back toward Armavir. Westhoven’s 3.Panzer-Division continued to fend off Lobanov’s tanks, fighting another action on 11 January, before also retiring westward. Von Kleist was now aware that the Soviet Southern Front was aiming to close his retreat route through Rostov and opted to fall back toward Armavir, but this was only a waypoint along the path of evacuating the entire Caucasus. Hitler only grudgingly gave approval of tactical withdrawals as long as von Kleist promised to move PzAOK 1 toward the Kuban to hold a bridgehead in Caucasus, but he still refused to accede to von Manstein’s and von Kleist’s requests to transfer any part of PzAOK 1 to assist Heeresgruppe Don in the defence of Rostov.