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The Trans-Caspian Pipeline: Geopolitics Near and Abroad

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Russia’s energy control appears to be soon coming to a halt as Caspian members, Turkmenistan and Kazakhstan, plan on gaining control over vital areas of the Caspian Sea. Ongoing deliberations over assigning specific demarcations to the five outlying regional members of the Caspian threaten to impede on Russia’s years of energy control within the region and across the EU.

Peaceful discussions amongst Caspian members display a warm and sentimental approach towards an issue that can easily impact Russia’s economic and political success. Although Russia has gone on record to demonstrate public support of sea demarcations, behind-the-scenes negotiations with Turkmenistan and Kazakhstan’s leaders appear to be fueling Russia’s agenda in Ukraine, providing a warning to the possibilities of a successful Trans-Caspian Pipeline initiative that does not offer Russia a significant role. The building of Caspian alliances communicates a desire for dynamic partnerships that are dismissive of one dominant player. Russia’s public support of a unilateral decision-making power is being quickly outvoted as plans carry forward toward more innovative models that would elevate the economic and political influences of neighboring countries.

Beginning almost twenty years ago, plans to come to an agreement have been continuously stalled over explicitly defining regional access to the Caspian Sea, mostly due to the abundance of natural oil and gas reserves under its waters. Out of the five neighboring countries Russia’s interests are the least benefited by the Trans-Caspian Pipeline (TCP). “Big countries, especially, have found it easier to make private deals with President Vladimir Putin’s government. And that has done little for Europe’s most vulnerable economies, whose infrastructure is designed only to take in supplies from Siberia.” (Klapper & Lee) Russia continues to strictly maneuver its agendas amongst EU nations, by manipulating energy distributions as a form of reprisal for ill-approved political advancements concerning the Ukrainian crisis. The attitudes toward the TCP proves not only a demonstration against long-term Russian constraints on the EU but also the possibility that such a plan could prove effective to relieving future economic and power crises amongst EU countries.

Locally, Turkmenistan and Kazakhstan have been joined by Azerbaijan, all of whom are openly leading TCP initiatives, as support by the EU grows stronger. EU positions are in favor of the TCP with hopes to break away from Russian-imported gas supplies. “The Kazakh-Turkmen maritime demarcation deal strengthens Turkmenistan’s claim on rights to use its sector for whatever purposes it wishes — building a pipeline, for example — without consulting the other littoral states. Turkmen and Azerbaijani authorities have already said if both countries agree to build such a pipeline there is no need to seek approval from the other three coastal states,”(Ovozi). Such actions have tried to basically oust Russia, pushing its government to oppose progress on the TCP, citing implications of negative environmental effects and even resorting to possible threats against its diplomatic relations with Caspian members.

Russia’s sentiments seem to be shared by Iran in the disadvantages of the TCP in that it also cannot take part in the main spoils. “The current standing of the two countries in the summit indicates that Russia and Iran — at least in this phase — can capitalize on their common concern…According to the Itar-Tass news agency, the countries agreed to increase Russian corporate participation in the development of Iranian oil and gas deposits (such as the South Pars gas field), as well as to cooperate in marketing policy in oil and gas exports and setting up capacity for producing, storing and exporting natural gas in Iran,” (Berti). However the burdens of Iran’s woes are very much different from Russia’s in that Iran may have the ability to change its own fate on the Caspian issue. With relations with the west easing and talks of years of sanctions being lifted, it appears that opportunities for Iran’s recruitment to join the alliances of the TCP are alive and present. “Iran still says that the Caspian and its resources must be subject to joint supervision. Analysts however say that Tehran could moderate this position in exchange for greater involvement in oil and gas export routes. Tehran has been presenting its own pipeline network to the Persian Gulf as the cheapest and shortest export route for Caspian oil,” (MacWilliam). Should Iran decide to change its mindset, the TCP could present an amicable solution to its own economic instability. As a partner in the TCP, Iran would attain the political advancement that could rebuild its geopolitical reputation.

For the U.S., concerns over developing the TCP demonstrate an ulterior motive against its longtime rival, Russia. “Pipelines, ports and power plants are the weapons of what could prove a generation-defining conflict between the U.S. and Russia over how Europe heats and electrifies its homes. Success, U.S. officials say, would mean finally “liberating” former Soviet states and satellites from decades of economic bullying by Moscow.” (Klapper & Lee) Not only would the success of the TCP aid in the demilitarization of Russian economic presence over the EU, it would also push alliances toward EU countries to bid against Russian energy provisions and rely on American counterparts for alternative energy solutions.

Hence, though plans for the TCP continue to remain the excitement of media reports and offstage political meetups in the region, the world’s major power players – Russia and the U.S. – appear to be stacking their chips in a political game of poker. Though initial discussions for the TCP really only involved Russia and its Caspian neighbors, its longtime rival to the far west has found comfort in trying to diminish Russia’s influence. The building of the TCP would mark for the first time a remarkable union between East and West that would see the U.S. try to use it as a “debunker” of Russia’s longtime natural resource coercion within the region and further out amongst EU states. The TCP could even provide some political relief for the crisis being witnessed in Ukraine as it may make Russia more pliable in its negotiations. However, history also demonstrates that Russia tends to not be so eager to lay its concerns to rest and doesn’t stay backed into a corner very long.

 

References

Berti, B. (2007) “Iran Strengthens Its Role in the Caspian Sea and the Central Asian Regions,” The Reut Institute. November 6 http://reut-institute.org/en/Publication.aspx?PublicationId=2652 > accessed 06/21/15.
Klapper, B. & Lee, M. (2015) “U.S., Russia at Odds Over Energy, Cold Ware Style Conflict,” The Washington Times. February 24 <http://www.washingtontimes.com/news/2015/feb/4/us-russia-odds-over-energy-cold-war-style-conflict/?page=allaccessed> accessed 06/20/15.
MacWilliam, I. (1998) “World: Analysis The Caspian’s untapped mineral wealth,” BBC News. July 6 http://news.bbc.co.uk/2/hi/world/analysis/127670.stm> accessed 06/20/15.
Ovozi, Q. (2015) “Kazakhs, Turkmen Divide Caspian Spoils Despite Demarcation Doubts,” Radio Free Europe Radio Liberty. May 27<http://www.rferl.org/content/caspian-demarcation-oil-kazakhstan-turkmeinstan/27039904.html> accessed 06/20/15.

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Transformation of Uzbekistan: How smooth transition in elite class is reshaping the country

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Within the nations of the former USSR, serious transformations are accompanied by distress – active power struggles, revolutions, and outbreaks of separatism. However, today, a country that has been squandering its potential for a quarter of a century is transforming in an uncommon way for the CIS – rapidly yet without political upheaval.

Reboot

The Communist party appointed Islam Karimov to run the Uzbek Soviet Socialist Republic back in 1990. After the Soviet Union collapsed, he retained power and strengthened his authority year after year, a common case for the post-Soviet republics in Central Asia. Karimov abandoned a state-planned economy, but he was otherwise cautious about making reforms and took an isolationist approach, which unquestionably had an adverse effect on the economy in the era of globalization.

After his death in 2016, a small ruling elite privately began to organize, resulting in the emergence of a new leader – former Prime Minister Shavkat Mirziyoyev. The subsequent presidential election, which Mirziyoyev won, only formalized his legitimacy. It seemed like a bad sign for those hoping for change, which was almost all of the 32 million citizens of Uzbekistan. And yet significant change is underway.

Awakening: but for how long?

The new leadership, despite emerging from the “Karimov elite,” seems to be doing everything the former president had opposed for years. A policy of relative openness and careful balance of exposure between the key centers of power, such as Russia, the USA, and China, has replaced isolationism. Mirziyoyev, who succeeded Karimov, did away with exit visas and he became one of the most well-travelled presidents himself. In the last couple of months alone, he has met with the leaders of Kazakhstan, Turkmenistan, China, Russia, and Pakistan, and attended the Arab-Islamic-American Summit as well as the Shanghai Cooperation Organization summit.

Until recently, Uzbekistan saw about zero foreign investment in its economy (0.1 percent of GDP, to be exact), but today it is seriously engaged in attracting foreign capital. A recent landmark example is the privatization of AO Urgench Exkavator, a large previously state-owned factory now owned by the Chinese. This was unthinkable in the previous era of economic isolation. The same goes for Uzbekistan’s agreement with Turkey on a $2 billion investment in agriculture.

Perhaps the biggest economic reform has been the deregulation of the foreign currency exchange market. Though Karimov’s Uzbekistan economy departed from Soviet policy, it maintained state control in one key area – the currency exchange rate. Under Mirziyoyev, the exchange rate of the national currency – the som – was left to be determined by the market. The reform immediately weakened its currency. However, it was still a crucial and beneficial long-term move for engaging in foreign trade and attracting investors.

There have also been reforms in taxation, the judicial system, and law enforcement agencies. Transformation is apparent almost everywhere. But we’ve seen good intentions remain intentions many times in many different countries. Could this end up being the case in Uzbekistan? Of course, it could. However, there are several important signs and trends that give Uzbekistan a chance for real, rather than declarative, transformation.

Tourism as an indicator

Tourism is a telling industry that shows the processes taking place across the country. Uzbekistan is fortunate in this area – it’s an exotic and cheap country with a fascinating culture, nature, and cuisine. Many well-preserved Muslim monuments serve as a great basis for “religious tourism.” Did the country live up to its potential as a tourist destination? Not fully. You could count on one hand the number of hotels that were able to comfortably accommodate foreigners. And paying with a card or exchanging money was a no-go.

The new leadership team has prioritized the development of tourism, and the country is actively filling the gaps in infrastructure (new hotels, bank branches, and means of transportation) and personnel (the new tourism university in Samarkand). Combined with economic reforms, first and foremost the deregulation of the foreign currency market, the first half of 2018 saw the flow of tourism increase by 91.6 percent compared to the same time last year, largely supported by the countries that were granted visa-free status.

Placing a bet on this industry, Uzbekistan is hoping for a multiplying effect and acting very sensibly. Tourism is a driver for other areas of business, such as restaurants, hospitality, and sightseeing, as well as internal logistics. Demand for construction materials, machinery, and utilities will grow to accommodate new construction. And the rise of these industries will create new jobs, stimulating consumption.

The new elite

Surprisingly, a new elite is taking form in parallel to the old one in a peaceful process. The old elite was very small and included only the former president’s family and associates. Today the elite is expanding, primarily as a result of business, the layer of society vitally invested in change.

Instead of struggling for the redistribution of resources, the new elite has taken the long route, searching out new opportunities and creating new niches to occupy without competing with the old elite – the Karimov era politicians and those closely connected to big state business.

The new business elite is gradually finding its way into the administration. In April this year, Dzhakhongir Artykhodzhaev, 42, the founder of the AKFA Group, was appointed as the hokim (mayor) of Tashkent – a business representative, rather than a government official. A German national, Karsten Heinz, was previously employed by the German Ministry of Education and Researchand assumed the role of Deputy Minister of Innovative Development in July. Such appointments, unthinkable in the past, speak volumes about the change in Uzbekistan.

So far the only area that hasn’t shifted significantly is democracy. For the first time ever Freedom House recorded a slight improvement in this area in 2017. But Uzbekistan is a country that needs to develop democratic procedures and independent media. Otherwise, the lack of these characteristics combined with inherited corruption and a lack of skilled professionals will delay its transformation process. Even so, for the first time in 25 years, Uzbekistan stands a good chance of changing. According to HSBC’s forecast (World in 2050 report) within the next 30 years, the country will rank among the 26 fastest growing economies in the world (meaning GDP growth will remain above 5% per year). If this scenario comes to pass, we will witness one of the most impressive transformations of a state and, perhaps, the most inspiring one among former Soviet Union countries.

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Uzbekistan and India Cooperation in the Sphere of Law and Justice

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“Cultivate the moral self, then regulate the family, rule the country rightly and make the world stay in harmony.” – Li Ji (The Book of Rites)

Strong relations between Uzbekistan and India is the result of mutual cooperation and cooperative diplomacy dating back to several decades.  From a historical perspective, there are frequent bibliographical references of Kamboja in Sanskrit and Pali literature, which is referenced to include parts of present-day Uzbekistan.  It is a cited fact that the Shakas participated in Mahabharata on the side of Kauravas. Ancient trade route uttar path, having its reference in Ramayana passed through Uzbekistan.  In later years, Fergana and Samarkand in Uzbekistan emerged as centres of trade on the trade routes linking India with Europe and China. India had close interaction with the Uzbek SSR during the USSR regime.  Indian diplomats and Heads of State often visited Tashkent to strengthen cultural and diplomatic bonds.  Bi-lateral relations between both the countries is also politically sensitive, because former Prime Minister, Shri Lal Bahadur Shastri passed away in Tashkent on 11 January 1966 after signing the Tashkent declaration with Pakistan and in August 1991, as the events leading to the disintegration of the USSR unfolded, President Islam Karimov, in his then capacity as Chairman of Supreme Soviet of Uzbekistan, was visiting India. Uzbekistan was declared independent on 1st September 1991.

A numerically small but vibrant and active Indian community resides in Uzbekistan. The bilateral relationship aims to maintain regular links with the community through its social media accounts, targeted emails, and invitations to Embassy events.  The Indian community actively participates in the celebration of the national days, International Yoga Day, Pravasi Bharatiya Diwas, Hindi Diwas, Holi, Diwali and cultural programmes on various occasions. These frequent interactions over thousands of years since 1947 contributed to close cultural linkages in architecture, dance, music and art. India’s soft power has travelled through borders to Uzbekistan, and it is evident from the fact that Indian movies and cuisine have traditionally been popular in Uzbekistan. Prime Minister Narendra Modi soon after his electoral victory visited Tashkent to discuss bilateral issues in 2015.  He visited Tashkent again in 2016 to attend Summit Meeting of the Shanghai Cooperation Organisation (SCO) during which India inked the Memorandum of Obligations for obtaining a status of the Member State of the SCO, of which Uzbekistan is a founding member. On 09 June 2017, India became a full-time member of the Shanghai Cooperation Organisation. The Regional Anti-Terrorist Structure of the Shanghai Cooperation Organisation (SCO-RATS) is headquartered in Tashkent and on 15 June 2017, the flag of India was raised at the SCO-RATS Headquarters in Tashkent.  India has been an active participant in SCO meetings and SCO-RATS events in Uzbekistan and other SCO countries.  Mr. P.P. Chaudhury, Minister of State for Law & Justice and Corporate Affairs, Government of India led a delegation to the SCO Justice Minister’s Meeting in Tashkent in October 2017.

Government to Government dialogues are managed through a robust mechanism including an Intergovernmental Commission, which oversees trade and economic relations and Foreign Office Consultations. Uzbekistan and India have previously signed Agreements/MOUs/ Protocols/Joint Statements in areas such as trade, investment, education, civil aviation, tourism, science & technology, telecommunications, agriculture and Information Technology.   By the end of 2018, the Union Cabinet chaired by Prime Minister Shri Narendra Modi approved the Memorandum of Understanding (MoU) between India and Uzbekistan on Cooperation in the Sphere of Law & Justice. The MoU is an all-comprehensive diplomatic agreement covering the exchange of experience by legal professionals, Government functionaries and their training and effective legal aid mechanism for resolution. The MoU will accelerate greater cooperation between India and Uzbekistan in providing legal services in both countries in the field of exchange of experience through training and information sharing visits between both countries on enhancing legal capacities of Government functionaries.

The present Government under Prime Minister Narendra Modi is practising a modern form of proactive diplomatic dialogue wherein there is tremendous focus on knowledge sharing areas in the field of law and policy. Strengthening the International law jurisprudence should be main focus of global economies striving for economic and societal progress. The MoU is also important from a diplomatic point for India as the Union Cabinet has also approved an agreement between India and Morocco on Mutual legal assistance in criminal matters. It will also fulfil the desire of both countries to strengthen the bonds of friendship and fruitful cooperation in the Civil and Commercial matters, which is the spirit, essence and language of the agreement. These dual agreements will enhance co-operation in the service of summons, judicial documents, letters of request and the execution of judgments decrees and arbitral awards.

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Tajikistan: Towards the Next Level of Development

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Today, Tajikistan finds itself at a juncture, where—with the right decisions taken—it could step onto a path of rapid socio-economic development, dynamic rates of inclusive growth, and significantly improved economic perspectives for its citizens. Many “foundational” investments, some with World Bank support, have been realized, not least those linked to the modernization of the country’s infrastructure and legal-institutional superstructure, allowing for a more effective delivery of public and social services. However, given the substantial changes that have occurred over the last 25 years, and which have built Tajikistan’s economy, policies that used to be appropriate in the past may no longer be effective in the future. Economic policy challenges have moved from a state-led focus on public infrastructure to the encouragement of private-sector initiative, investment, and innovation.

Throughout its history, Tajikistan has had to respond to a myriad of existential threats, from the civil war to increased politico-economic isolation along borders closed for reasons of politics and/or conflict, the global financial and economic crisis after 2008, or the sharp fall in prices of primary commodities after 2014. It was bequeathed an economic model that had collapsed under the weight of inefficiencies, amplified by a history that—with the demarcation of the Russian-Afghan border in 1895—had placed Tajikistan at the periphery of a larger state entity bereft of its economic base and home markets.

Still, Tajikistan has proven resilient, as reflected in impressive average annual growth rates of 7.3 percent during the post-conflict years. As a result, per capita income during 1998–2017 increased, net of effects from inflation, by more than 160 percent. There has been impressive success in resolving the winter shortages in energy supply, while—in many parts of the country—citizens benefit from tangibly improved water and transport services.

For the last quarter century (that is, for most of Tajikistan’s post-independence history), the World Bank Group has been privileged to support efforts to place the country’s economy on a sound footing and develop the foundation for a socio-economic (professional) perspective for the citizens of Tajikistan. It has done so through all three periods of the country’s development, from the civil war period to reconstruction and the responses to the various economic shocks affecting the country after 2008.

The Silver Anniversary of the collaboration between Tajikistan and the World Bank Group falls on the eve of a new era, with an opportunity for real, sustainable socio-economic transformation, a different set of challenges, and the need to adjust economic and development policies to a new environment. Rather than focusing on a domestic market of 9 million—mostly low-income—clients, which has proven too small a market for competition and sustained private-sector development, Tajikistan-based companies have the opportunity to access hundreds of millions of potential clients in the immediate neighborhood in South, Eastern, and Central Asia. All commodities and services, for which Tajikistan has a comparative advantage, whether it is food products, energy, minerals, cotton, textiles, or IT-based services, have deep markets nearby.

Already, Tajikistan is investing considerable national wealth to improve regional (or, rather, continental) connectivity and establish a stable export base, starting in energy. To be able to reap the full benefits inherent in very ambitious investments in energy generation and transmission, the country needs to pay particular attention to (i) investing in people (and preparing its mostly young citizens for the opportunities ahead); (ii) increasing the efficiency of (public) institutions; and (iii) providing the private sector with an environment that translates the opportunities into entrepreneurs’ confidence that private investments will result in improved productivity, company growth, and increased profits.

The inherent result of Tajikistan’s current remittance-financed, import-reliant economic model is a narrow private sector, with binding constraints to production, logistics, and innovation. If well-understood, the current economic structure might prove a “blessing in disguise” during a period in which there is high “in principle” demand for products and services “made in Tajikistan”. If economic policies are adjusted, with a view to permitting entrepreneurs and investors to develop sufficient trust in institutions and confidence in the future, they would complement public investments with private investments of the scale, scope, and quality to foster innovation, increase productivity of key sectors of Tajikistan’s economy, and increase wages and employment opportunities. By encouraging the private sector to import up-to-date technology, install modern equipment, and implement the highest standards, Tajikistan’s economy would be competitive, export-oriented, and provide profit opportunities for enterprises, irrespective of ownership.

As argued in the World Bank’s (2008) Growth Report, “economic miracles” are a misnomer. Dynamic rates of sustained and inclusive growth can be generated, as other countries have done before, by committed, credible, and capable governments that maintain macro-fiscal stability and allow the private sector to exploit opportunities in the world economy, support high rates of saving and investment, and permit markets to allocate resources. May Tajikistan, by the time of the Golden Anniversary of World Bank Group partnership, have shown the vision, courage, and determination to be included among the élite group of countries that have managed to transform their economies, and invest, innovate, and guarantee growth and prosperity to their people.

World Bank

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