EurasiaNet Eurasia Insight - Central Asia Summary: Recent Developmments in Kazakhstan, Kyrgyzstan and Turkmenistan

EURASIA INSIGHT

CENTRAL ASIA SUMMARY: RECENT DEVELOPMMENTS IN KAZAKHSTAN, KYRGYZSTAN AND TURKMENISTAN

Ahmed Rashid 1/18/01

This article is the second of a two-part series that reviews key development during the past year in Central Asia. This article focuses on Kazakhstan, Kyrgyzstan and Turkmenistan. Click here for part one.

Kazakhstan faced continuing problems with the refusal of major international oil companies to build the necessary oil and gas pipelines to expand Kazakhstan’s export of energy. As a result, President Nursultan Nazarbayev guided the country closer to Russia. He continued to rule with an authoritarian stamp, leading to increased political opposition to his regime, and public charges of large scale corruption by his family. During the summer, parliament was �persuaded’ to make him an honored citizen for life -- unaccountable to any future court or authority - which was only one step away from having himself appointed President for life.

Nazarbayev faced major political problems in the north, where the majority population of ethnic Slavs asked the government to hold a referendum as to whether Kazakhstan should join the union of Russia and Belarus. In January, 22 Russian ultra-nationalists went on trial in Ust-Kamenogorsk for conspiracy against the state and trying to declare a pro-Russian Republic in the north.

Kazakhstan also felt threatened by the wave of Islamic radicalism sweeping across the region from Afghanistan. In January, Nazarbayev said his country was the next target, and that events in Afghanistan, Tajikistan and Chechnya were closely connected. Russia charged Kazakhstan with allowing Chechen rebels to enter Central Asia through Kazakhstan and the government clamped down on the issuing of transit visas. Several senior US officials visited Kazakhstan in the summer to discuss security issues, including Secretary of State Madeleine Albright in April, and later, the CIA and FBI chiefs. The meeting of the Shanghai Five defense ministers in the new capital Astana on March 30, strengthened joint counter terrorism cooperation among the five states.

Oil and gas exports remained the major influence on the country’s economic and foreign policy. Kazakhstan continued to face problems in persuading foreign oil companies to build new export oil and gas pipelines. In February the government said it was frustrated with China for not honoring its commitment to build a new oil pipeline to Beijing, and said it may be forced to depend more on Russian pipelines, if Chinese and US companies did not fulfill their pledges. Officials said that of the 30 million tons of oil to be produced in 2000, 12 million would be exported through Russian pipelines compared to 7 million tons last year.

In May, the government sold US oil company Chevron 5 percent of its stake in the Tenghiz oil field for US $450 million, leaving Kazakhstan with only a 20 percent share in the Tenghiz project. Chevron also paid a US $210 million bonus payment to the government. Chevron is building a new oil pipeline from Tenghiz to the Black Sea. After public accusations that officials would only pocket the funds from Chevron, the government announced it would set up a fund to invest in US blue chip stocks. The fund would facilitate ongoing economic development.

A major problem for foreign investors was corruption scandals within the government, and demands for huge kickbacks from by Nazarbayev’s entourage. On April 14, the Belgian company Tractabel said it would withdraw from operating Kazakhstan’s internal gas market because of irreconcilable differences with the government and that it would demand US $100 million as compensation. A few weeks later the government seized the property of Tractabel and froze six of the company’s bank accounts. Bribery accusations reached a crescendo in July when the US announced it was investigating James Giffen, a key American economic consultant to Nazarbayev, for corruption and handing over enormous bribes to the President and his family members. Three US oil companies which Giffen dealt with were asked to cooperate in the US investigation.

Kazakhstan’s best news of the year was the announcement on May 11 that huge oil reserves had been discovered at the East Kashagan field near the Caspian Sea, by a Western oil consortium called the Kazakhstan International Operating Company. There were now greater hopes that Astana would agree to take part in the US-sponsored oil pipeline from Azerbaijan to Turkey, although Nazarbayev refused to provide a commitment. In July the country faced huge energy shortages as its separate power grids were not linked and the country remained dependent on Russian power from Siberia.

On January 1 2000, the beginning of the new economic year for Kazakhstan, Nazarbayev said his government would tackle several major tasks during the year, dealing with widespread unemployment, a new tax code, incentives for agriculture and the regular payment of wages and pensions. The economy grew by 1 percent in 1999, compared to contracting by 2.5 percent in 1998. Foreign exchange reserves stood at US $2 billion on January 1, compared to US $1.2 billion the previous year. The government ceded 50 percent of its stake in the Ekibastuz power plant to Russia on January 19, in lieu of its outstanding US $239 million debt for energy supplies from Moscow.

In May, the government said the results of the first quarter of fiscal 2000 showed GDP growth at 7 percent, with industrial production up by 15 percent. Gas production was up by 32 percent, oil production up by 16 percent, iron ore production by 182 percent and exports stood at US $1.25 billion. Kazakhstan also announced that it would pay back US $400 million it owed to the IMF before the amount was due. In May, the country received a US $400 million loan from the Asian Development Bank.

Social problems increased with drugs trafficking and addiction becoming a major problem. Police seized 20 tons of heroin in 1999, mainly emanating from Afghanistan but this was only 1 percent of the total flowing through Kazakhstan. In June officials said the war against drugs was being lost, as addiction had grown 20 times compared to 1991 and drug related crimes had quadrupled. A national census revealed that due to mass out-migration of ethnic Russians and Germans, the country’s population had shrunk by 8 percent, from 16.2 million people in 1989 to 14.9 million in 2000. Out of 1 million ethnic Germans in Kazakhstan in 1989, only 170,000 remained at the end of 2000.

In April, there was public outrage after a Russian rocket being tested from a Kazakh rocket range went astray and crashed near Primorye in western Kazakhstan. Under pressure the government asked Russia to suspend all missile tests. After lengthy discussions, Russia agreed at the end of June to continue using four military test sites and pay Kazakhstan US $27.5 million dollars for their use, out of which only US $2.3 million dollars would be in cash - the rest would meet the cost of training 900 Kazakh officers in Moscow.

KYRGYZSTAN

Kyrgyzstan, once the most democratic and liberal of the five Central Asian Republics, faced the growing authoritarianism of President Askar Akayev as he emulated his neighbors in crushing political dissent, curbing the media and rigging elections in order to keep his administration in office. Kyrgyzstan also faced growing security threats from Islamic radicals based in Tajikistan and Afghanistan.

In January, opposition parties formed a coalition in preparation for the February parliamentary elections. The OSCE criticized the government for hindering the ability of opposition parties to participate in the vote. Akayev eventually ordered officials to stop their harassment of opposition politicians and allow parties to register for the elections.

However, the elections on February 20 were highly controversial after a victory by Akayev’s block in parliament. In particular, authorities prevented the leading opposition figure, Feliks Kulov, from winning a parliament seat. Out of 27 parties only nine parties were allowed to put up candidates. Among opposition parties, the communists gained 27 percent of the vote - due to the worsening economic crisis. On March 3, leaders of several opposition parties set up a coordinating committee to combat the government. There were demonstrations and hunger strikes in several towns demanding a recount of the polls, which the government refused to carry out. The US and the OSCE condemned the elections for being undemocratic.

Kulov was subsequently arrested on corruption charges and his trial, which started on June 27, became a major focus for opposition activity and the media. In a statement Kulov said he was innocent of all criminal charges and would support Akayev in December’s Presidential elections if Akayev reverted back to being the democrat he was. As international pressure mounted, Kulov was set free in August.

The government’s domestic crackdown was explained as necessary due to the increasing security threat posed by Islamic extremism across the region. On January 20 four Islamic radicals from the southern city of Osh went on trial for terrorist activities, as the army set up 23 new posts to guard the border and prevent incursions by Islamists from Tajikistan.

The government also faced Chinese pressure to curb separatist-minded Uighurs living in Kyrgyzstan. On May 8, a court in Osh sentenced five Uighurs for wanting to create a separate Uighur homeland in China. International human rights groups protested Kyrgyzstan’s threat to send the Uighurs back to China where they would almost certainly be hanged.

On June 21, one of those sentenced, an ethnic Uighur named Jelil Turdi, was deported back to China. In retaliation, a leading Chinese businessman was kidnapped in Osh by Uighur extremists and a ransom of US $150,000 demanded for his release. On July 10, in the biggest crackdown of the year, police arrested 10 people belonging to the Uighur Liberation Front for allegedly killing an anti-seperatist Uighur in Osh and other crimes. Among those detained were Uzbeks, Uighurs, Chinese, Turks and Kyrgyz. Officials said they had allegedly fought in Chechnya and trained in Pakistan and Afghanistan. Kyrgyz National Guard commander Lt.General Abdygul Chotbaev said 300 Kyrgyz citizens were training in Afghanistan.

There were major disputes with Uzbekistan over their common border as Uzbek border guards made incursions into Kyrgyzstan to unilaterally demarcate the border at several points. In February Uzbekistan stopped rail and road traffic and gas supplies to Osh from the Uzbek part of the Ferghana valley. These tensions momentarily subsided at the end of March, when Uzbekistan and Tajikistan joined Kyrgyzstan to hold a week long joint military exercise called �’Southern Shield,’’ in the Shartuz district of northern Tajikistan. Akayev said he feared an invasion by 5,000 Uzbek Islamists based in Afghanistan and Tajikistan.

Kyrgyzstan received increased international support to bolster its security. On March 30, the Defense Ministers of the Shanghai Five group of countries met in Kazakhstan and vowed to intensify military cooperation against Islamic extremism. Four days later US Secretary of State Madeleine Albright visited Bishkek and gave US $3 million for helping rearm Kyrgyz border guards.

However Albright urged Akayev to stop persecuting his political opponents and allow greater democracy. The US Federal Bureau of Investigation opened an office in Bishkek. Other US visitors included General Anthony Zinni, head of US CENTCOM, who arrived in Bishkek on May 11; George Tenet, the head of the US Central Intelligence Agency; and US military officers who arrived to help train Kyrgyz troops. In June, NATO Secretary General George Robertson arrived to discuss security and terrorism.

Other states also expressed their concern about the security of Kyrgyzstan. Visiting officials from China, Turkey and Russia promised military help to Kyrgyzstan. Turkey said it would arm 3000 new soldiers while military equipment worth US $360,000 arrived from the US and Germany.

In early August, hundreds of heavily armed Uzbek militants invaded the Batken region of southern Kyrgyzstan in an attempt to penetrate the Ferghana Valley in Uzbkekistan. The outbreak of fighting prompted Akayev to call an emergency meeting August 21 of leaders from Central Asian nations and Russia. Akayev said 1,500 rebels had crossed from Afghanistan and Tajikistan and some 200 rebels remained in Batken. Uzbek and Kyrgyz security forces co-ordinated military counter-terrorist measures. By mid September, 32 Kyrgyz soldiers had been killed and 40 wounded while 70 rebels were killed.

As a result of the threat of terrorism, Akayev cemented closer relations with Russia. On April 13, in a meeting in Moscow, Presidents Vladimir Putin and Akayev agreed to cooperate �’to prevent another Afghanistan emerging in Central Asia.’’ At the end of July Akayev met again with Putin in Moscow, signing a new 10-year economic cooperation agreement. Akayev said his country could not survive without Russian support.

On May 21, Akayev called upon parliament to recognize Russian as a second national language. This move was designed to stem the tide of Russian emigrants. About 5,000 Russians were leaving the country every month compared to 5,000 in all of 1999. There were 615,000 Russians in the country, as compared to 915,000 in 1989. On June 10, after a heated debate in parliament, Akayev signed the law giving official status to the Russian language.

The economic crisis worsened due to the cost of servicing the US $1.27 billion foreign debt. This debt accounts for 40 percent of the total budget. In 1999, Kyrgyzstan defaulted on repayments to Turkey, Pakistan and Russia. The GDP for 1999 was estimated at US $978 million. GDP grew by 3.6 percent in 1999 compared to 10 percent in 1997, but with inflation at around 40 percent, and a dramatic fall in industrial production, joblessness and hunger became widespread. The national census in May showed a total population of 4.8 million, a 13 percent increase since 1989. The largest increase of 23 percent was in the southern city of Osh which now has a population of 1.1 million.

TURKMENISTAN

President Saparmurat Niyazov -- or �Turkmenbashi,’ the chief of the Turkmens - developed his personality cult as he furthur isolated the country and its people from the international community. Niyazov’s unpredictable personality and policies had an adverse effect in allowing Turkmenistan to choose between various oil and gas pipelines to export its energy resources. Even though Turkmenistan was being courted by a variety of interests, Niyazov’s constant demand for a better deal left him with little by the end of the year.

In January, one of the few political dissidents who had not fled the country, Nurbedi Nurmamedov, founder and leader of the opposition Agzybirlik, was arrested. He was put on trial for attempted murder in February. A crackdown began on several religious organizations such the Hare Krishna cult, the Seventh Day Adventists and Baptists.

On April 19, the European Bank for Reconstruction and Development suspended US $209 million in public sector loans to Turkmenistan to protest the government’s anti-democratic policies. Niyazov refused to meet a visiting EBRD delegation. The IMF also withheld loans due to a lack of economic reforms. There were severe shortages of foreign exchange in the country as the government’s fixed exchange rate of 5,200 manats (local currency) to the US dollar, increased to four times that on the black market.

In early July, the government said it would monitor all visiting foreigners and close down foreign bank accounts held by Turkmens to prevent capital flight. Decrees were issued to monitor foreign mail and telephone calls, while internet providers were stripped of their licenses. In late July, Niyazov said English and other foreign languages were to be banned from being taught in schools and patriotism was the key for those students wanting a higher education. Turkmens due to study in the US under USAID scholarships were prevented from leaving from the country.

Niyazov was equally unpredictable in handling his own cabinet. In early January, Niyazov fired Deputy Prime Minister Khudailberdy and later in the month fired Energy Minister Saparmurat Nuryev, accusing them of abusing their positions for personal gain. On July 28, Niyazov sacked Foreign Minister Boris Sheikhmuradov, who had held the position since 1993, and appointed his deputy Batyr Berdiyev in his place. Most analysts said this would further isolate the country from the international community, as Sheikmuradov was the best known Turkmen abroad.

In August, however, Niayzov appointed Sheikhmuradov as his Special Envoy and sent him to Afghanistan to try and broker peace between warring Afghan factions. Niyazov refused to join other Central Asian states in condemnation of the Taliban. Instead he strengthened ties with the Taliban, providing electricity, fuel and gas to Taliban controlled western Afghanistan. In April, Niyazov publicly snubbed his neighbors by refusing to attend a summit conference which dealt with the growing crisis in Afghanistan, and he refused to attend the Shanghai Five summit meeting in Bishkek later in the year.

Niyazov’s unpredictability had an adverse effect on foreign investors aiming to build energy pipelines from Central Asia to the West. After ignoring Turkmenistan’s demands for a better price for the sale of its gas to Russia for several years, Moscow returned in January to court Ashgabat with a plan to buy 50 billion cubic metres (bcm) of gas a year over 30 years. The Russian offer was a clear bid to try and thwart Turkmenistan pledging gas sales to PSG - a consortium of US companies trying to build oil and gas Trans-Caspian pipelines from Azerbaijan to Turkey - and other plans to sell Turkmen gas to Turkey through Iran.

Niyazov played along with Russia, publicly criticizing US officials in late January for attempting to �’blackmail Turkmenistan’’ to join the US backed project. As the United States continued to send senior officials to try and woo Niyazov, he remained adamant on wanting a better deal before he committed himself to the Trans-Caspian line.

In March, Turkmenistan pursued other options by offering to raise its sale of gas to Iran along the 193 kilometers Korpedzhe-Kurt-Kui line from 2 bcm this year to 13 bcm a year in the future. In April, Iran agreed to increase purchases and upgrade the pipeline to deliver 8 bcm a year. Iran was also pursuing Niayzov to help build a proposed 1,000-mile (1,500-kilometer) oil pipeline costing US $1.2 billion. That project would draw oil from Kazakhstan and Turkmenistan into a pipeline that would traverse Iran to the Gulf - a clear Iranian attempt to undermine US objectives.

But in May, Turkmenistan developed major differences with Iran over pricing the gas it was already selling to Iran. Turkmenistan was already receiving US $40 per 1000 cubic metres (cm) of gas sold to Iran, while Russia was only offering US $36 per 1000 cm. Cash starved and land locked, Turkmenistan not only haggled over prices, but appeared to be committing gas supplies to all comers, when it did not have the capacity to fulfill such pledges.

In late May, Russia said it had successfully negotiated the supply of 50 bcm of gas from Turkmenistan every year for the next 30 years at US $36 per 1000 cm, to be paid 40 percent in cash and 60 percent in goods. But when Russian President Vladimir Putin arrived in Ashgabat on May 19 to finalize the deal, it fell apart as Niyazov reneged on the agreement and again demanded a higher price for Turkmen gas.

Meanwhile, with no agreement with PSG on gas sales for the Trans-Caspian line due to Niyazov’s insistence of an up front bonus payment and a demand for US $45 per 1000 cm, PSG cut its spending, staff and offices in the region as the US Trans-Caspian effort withered. By holding out to the PSG offer, Niyazov was trying to force Russia to raise its piece for gas. Ultimately, Russia agreed to buy 20 bcm of gas from Turkmenistan at the rate of US $36 per 1000 cm, and on September 1, Russia agreed to buy an additional 10 bcm of gas at the rate of US $38 per 1000 cm.

Turkmenistan continued to pursue other highly unrealistic projects. On July 6 Chinese President Jiang Zemin arrived in Turkmenistan to discuss a long term project to build oil gas pipelines to China. This idea has been around since the early 1990s, but little progress has been made because of the vast distances and high costs involved. Niyazov also continued to pursue the idea of the construction of a gas pipeline to Pakistan and India across Taliban controlled Afghanistan.

With per capita income at only US $33 dollars a month peoples living standards continued to decline and foreign investors remained wary of doing business in the country due to Niyazov’s unpredictability. Turkmenistan remained isolated on the international stage.

Editor�s Note: Ahmed Rashid is a journalist and author of the book "Taliban: Militant Islam and Fundamentalism in Central Asia."

The Central Eurasia Project aims, through its website, meetings, papers, and grants, to foster a more informed debate about the social, political and economic developments of the Caucasus and Central Asia. It is a program of the Open Society Institute-New York. The Open Society Institute-New York is a private operating and grantmaking foundation that promotes the development of open societies around the world by supporting educational, social, and legal reform, and by encouraging alternative approaches to complex and controversial issues.

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