Kyrgyzstan: Moscow, Riled over Nationalization, Fires Shot Across Bishkek’s Bow

In what could be a new fight over export duties, Russia has stopped transporting petrol fuel to Kyrgyzstan since Feb. 15. Russia initially sent duty free petrol from the beginning of the year until Feb. 15, lowering the price at the pump by almost 25 percent and injecting a rare boost of confidence into the economy. But no fuel has arrived since. (Photo: Dean C.K. Cox)

As the ouster of former president Kurmanbek Bakiyev demonstrated last spring, Russia is not afraid of meddling in Kyrgyzstan when the Kremlin feels its interests are at risk. These days, Moscow appears to be using energy exports as leverage against the Kyrgyz government.

The current source of Russian displeasure is connected with the nationalization of one of Kyrgyzstan’s largest companies, mobile service provider Megacom. The row is shaking Kyrgyzstan’s disjointed coalition and has the potential to seriously damage the country’s fragile economy. Yet, Kyrgyz officials, despite the country’s economic dependence on Russia, aren’t obsequiously acceding to the Kremlin’s wishes.

For Kyrgyzstan, the stakes are high in the nationalization deal. On March 14, government advisor Farid Niyazov confirmed that a deal to lift the tariff on Russian fuel imports was being delayed. From the start of 2011 up until February 15, Russia had been delivering duty-free petrol, a development that had spurred a 25 percent price reduction at gas pumps in Kyrgyzstan, while boosting confidence in the Kyrgyz economy.

But the delivery deal was never finalized, and no fuel has arrived since February 15, MP Akylbek Japarov confirmed to EurasiaNet.org. Drawing parallels to the days before Bakiyev’s ouster in April of last year, Japarov -- a member of the opposition, but pro-Russian, Ar-Namys Party -- said that Moscow’s hesitation to end the tariffs indicated that “Russia no longer holds any trust in this government.”

Prime Minister Almazbek Atambayev is scheduled to travel to Moscow on March 18 to discuss the delay.

On top of rampant inflation, the collapse of the tariff-elimination agreement could deliver a knockout blow to Kyrgyzstan’s weak governing coalition, fostering a sense of uncertainty and social discontent. Speculation about the collapse of Kyrgyzstan’s governing coalition began building after two prominent Russian politicians, while on a visit to Bishkek, lashed out at one of the coalition leaders, along with the government’s handling of the Megacom nationalization.

At a March 9 news conference, Alexey Ostrovsky, chairman of the State Duma’s CIS Committee, complained of a “dirty struggle” over Megacom and accused First Deputy Prime Minister Omurbek Babanov of trying to defraud Russian investors. “We have seen that there is a dirty struggle to misappropriate the property owned by Russian businessmen,” he said. “Difficulties attracting Russian investments to Kyrgyzstan may arise in connection with the situation around Megacom.”

Semyon Bagdasarov, a member of the State Duma’s International Affairs Committee, also warned that the Megacom controversy had seriously damaged Kyrgyz-Russian ties. “The situation that existed in the country prior to the April [2010] events is starting to repeat itself,” he said. “Back then, certain bureaucrats mixed up personal interests with state [interests] and were preoccupied only with deeply self-interested aims. It would seem that, after the revolution, such people should have given things some thought in order not to repeat the mistakes of the former authorities. However, today we see a group of people taking advantage of their privileges. [For example,] take Megacom.”

After the April uprising, Kyrgyzstan’s interim government nationalized the company, which was allegedly owned by interests connected to Maxim Bakiyev, the former president’s son. The Ministry of State Property currently holds 51 percent, which the younger Bakiyev had allegedly obtained from Moscow-based Eventis Telecom in 2006. In early February, two Russian directors of Megacom were charged with abuse of power for failing to declare $10 million in profits and fled Kyrgyzstan. Eventis has been attempting to get its shares back since the post-Bakiyev interim government came to power.

Megacom’s vice president for judicial affairs, Ilim Karypbekov, told EurasiaNet.org that the company, seized from Maxim Bakiyev, should fully belong to the state. “Here we have to defend state interests. Megacom is the second biggest company in Kyrgyzstan … and all 100 percent of the shares must be nationalized. This is only a legal issue, not politics. Intervention by Russian parliamentarians in this case is unacceptable. We are sovereign country and Kyrgyzstan is able to resolve such problems itself.”

Members of the ruling coalition shrug off the episode. Media reports on worsening relations with Moscow are exaggerated, says MP Galina Skripkina, a member of Atambayev’s Social Democratic Party. “I consider the Russian parliamentarians’ statements their own private opinion,” she said. “As for conditions for foreign investors, there is no pressure on Russian businessmen. We have equal conditions for all investors.”

But opposition leaders contend that the Megacom case is spoiling relations with one of Kyrgyzstan’s most important partners, if not its prime patron.

MP Omurbek Tekebayev, leader of the opposition Ata-Meken Party, says the State Duma officials’ visit was designed to demonstrate Russian “anger” with the new government. Russian President Dmitry Medvedev and other top Kremlin officials have long been on record as being opposed to Kyrgyzstan’s move to a parliamentary democratic system in late 2010.

“This is first time when senior Russian officials came to Kyrgyzstan and openly expressed sharp criticism of parliament. The Kyrgyz government has promised a lot of things to Moscow,” Tekebayev told EurasiaNet.org, but too frequently “changes its mind.”

Megacom, however, is not the only irritant in relations between Bishkek and Moscow.

In 2009, Bishkek promised the Kremlin 48 percent of the Dastan naval munitions factory in exchange for $193 million in debt relief and over $2 billion in investments and credit. Moscow transferred $150 million, but never received the shares.

After the April 2010 change in power, Kyrgyzstan’s new leaders confirmed their intentions to transfer the Dastan shares to Russia. But, following a February visit to Bishkek by Turkish Prime Minister Recep Tayyip Erdogan, local reports said Atambayev had discussed selling the shares to Turkey. Calling Russia Kyrgyzstan’s most important partner, Atambayev denied the reports, which were given considerable play in the Russian media.

The governing coalition is also feeling internal strains, as members begin to jockey for position ahead of a presidential election slated for this fall. Ata-Meken’s Tekebayev, who has said he was left out of the coalition because he has poor relations with Moscow, sees the Russian pressure as the price for allowing the Kremlin too much control over how the coalition formed. “This is not surprising. At the beginning [after parliamentary elections last fall], these ruling parties handed their destiny to the Kremlin,” he said. “They have become puppets in [Russian Prime Minister Vladimir] Putin’s hands.”