Central Eurasia 2006

CENTRAL EURASIA 2006

Analytical ANNUAL

CA&CC Press® SWEDEN 2007

1 CENTRAL EURASIAFOUNDED 2006 AND PUBLISHED AnalyticalBY Annual INSTITUTE INSTITUTE O OR CENTRAL ASIAN AND STRATEGIC STUDIES O CAUCASIAN STUDIES THE CAUCASUS Registration number: 620720-0459 Registration number: M-770 State Administration for Ministry of Justice of Patents and Registration of Sweden Azerbaijan Republic

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S c i e n t i f i c E d i t o r i a l B o a r d

Eldar ISMAILOV

C h a i r m a n Tel./fax: (994-12) 497 12 22 E-mail: [email protected]

Murad ESENOV

D e p u t y C h a i r m a n Tel./fax: (46) 920 62016 E-mail: [email protected]

Jannatkhan EYVAZOV

E x e c u t i v e S e c r e t a ry Tel./fax: (994-12) 499 11 73 E-mail: [email protected]

Abbas MALEKI

Doctor, Director General, International Institute for Caspian Studies (Iran)

Ainura ELEBAEVA

Doctor of Philosophy, professor, director of the Research Institute of Ethnology, International University of Kyrgyzstan (Kyrgyz Republic)

Ariel COHEN

Doctor, leading analyst, The Heritage Foundation, U.S.A. (U.S.A.)

Vitaly NAUMKIN

Doctor of History, professor, Director, Center for Strategic and International Studies of RF (Russian Federation) 2 Vladimer PAPAVA Doctor of Economics, professor, Senior Fellow, Georgian Foundation for Strategic and International Studies (Georgia), Fulbright Fellow, Central Asia-Caucasus Institute, The Nitze School-SAIS, Johns Hopkins University (U.S.)

S. Neil MACFARLANE Professor, Director, Center for International Studies, The University of Oxford (Great Britain)

Roger N. McDERMOTT Honorary Senior Research Fellow, Department of Politics and International Relations, University of Kent at Canterbury (U.K.)

Lena JONSON Doctor, Senior Fellow, Swedish Institute of International Affairs (Sweden)

Timur SHAIMERGENOV Member of the Secretariat of the Kazakhstan Parliament Majilis (Republic of Kazakhstan)

S. Frederick STARR Professor, Chairman, The Central Asia-Caucasus Institute, The Johns Hopkins University (U.S.A.)

Bülent ARAS Doctor, Chair, Department of International Relations, Fatih University (Turkey)

Xing GUANGCHENG Doctor of Political Sciences, professor, Deputy Director of the Institute for East European, Russian and Central Asian Studies, Chinese Academy of Social Sciences (China)

The views in the Analytical Annual do not necessarily reflect those of the Scientific Editorial Board

Editorial Office: CA&CC Press AB Hubertusstigen 9. 97455 Luleå SWEDEN WEB ADDRESS: http://www.ca-c.org

CENTRAL EURASIA 2006 Analytical Annual

CONTENTS

AFGHANISTAN

Viktor Korgun GENERAL OVERVIEW ...... 9 Viktor Korgun POLITICS ...... 12 Ubaid Okimbekov ECONOMY ...... 20 Iakov Trofimov RELIGION ...... 27 Viktor Korgun INTERNATIONAL AFFAIRS ...... 30

REPUBLIC OF ARMENIA

Agasi Enokian GENERAL OVERVIEW ...... 38 Manvel Sarkisian POLITICS ...... 39 Vaagn Khachatrian ECONOMY ...... 48 Vagram Melikian, Egine Mkrtchian RELIGION ...... 55 Sergey Minasian INTERNATIONAL AFFAIRS ...... 61

AZERBAIJAN REPUBLIC

Nazim Muzaffarli GENERAL OVERVIEW ...... 69 Nazim Muzaffarli POLITICS ...... 72

4 Contents

Rasim Gasanov ECONOMY ...... 79 Elmir Kuliev RELIGION ...... 87 Jannatkhan Eyvazov INTERNATIONAL AFFAIRS ...... 95

GEORGIA

Teimuraz Beridze GENERAL OVERVIEW ...... 105 Giya Zhorzholiani POLITICS ...... 108

Teimuraz Beridze, Nodar Khaduri ECONOMY ...... 116 Zaza Piralishvili RELIGION ...... 125 Archil Gegeshidze INTERNATIONAL AFFAIRS ...... 131

REPUBLIC OF KAZAKHSTAN

Timur Shaimergenov GENERAL OVERVIEW ...... 140 Askar Shomanov, Alisher Tastenov POLITICS ...... 143 Larissa Sidorova ECONOMY ...... 149 Iakov Trofimov RELIGION ...... 161 Timur Shaimergenov INTERNATIONAL AFFAIRS ...... 168

KYRGYZ REPUBLIC

Leonid Bondarets GENERAL OVERVIEW ...... 179 Askar Jakishev, Zaynidin Kurmanov POLITICS ...... 183 Lyudmila Baum ECONOMY ...... 190 Kadyr Malikov, Ikbaljan Mirsayitov RELIGION ...... 202 Muratbek Imanaliev, Erlan Abdyldaev INTERNATIONAL AFFAIRS ...... 210

5 CENTRAL EURASIA 2006 Analytical Annual

REPUBLIC OF TAJIKISTAN

Jamila Majidova GENERAL OVERVIEW ...... 216 Parviz Mullojanov POLITICS ...... 219 Sobir Kurbanov ECONOMY ...... 228 Abdulvokhid Shamolov, Abdunabi Sattorzoda RELIGION ...... 238 Rashid Abdullo INTERNATIONAL AFFAIRS ...... 244

TURKMENISTAN

Azhdar Kurtov GENERAL OVERVIEW ...... 255 Azhdar Kurtov POLITICS ...... 258 Igor Proklov ECONOMY ...... 263 Iakov Trofimov RELIGION ...... 271 Azhdar Kurtov INTERNATIONAL AFFAIRS ...... 275

REPUBLIC OF UZBEKISTAN

Farkhad Tolipov GENERAL OVERVIEW ...... 282 Nikolai Borisov POLITICS ...... 285 Lola Sultanova Albina Gaisina ECONOMY ...... 292 Bakhodyr Ergashev RELIGION ...... 302 Dina Malysheva INTERNATIONAL AFFAIRS ...... 308

CHRONOLOGY OF EVENTS FOR 2005

Politics Afghanistan ...... 316 Republic of Armenia ...... 317

6 Contents

Azerbaijan Republic ...... 319 Georgia ...... 320 Republic of Kazakhstan ...... 321 Kyrgyz Republic ...... 323 Republic of Tajikistan ...... 327 Turkmenistan ...... 330 Republic of Uzbekistan ...... 332

Economy Afghanistan ...... 334

Republic of Armenia ...... 335

Azerbaijan Republic ...... 337

Georgia ...... 338

Republic of Kazakhstan ...... 345

Kyrgyz Republic ...... 348

Republic of Tajikistan ...... 353

Turkmenistan ...... 355

Republic of Uzbekistan ...... 357

Religion Afghanistan ...... 360

Republic of Armenia ...... 361

Azerbaijan Republic ...... 362

Georgia ...... 363

Republic of Kazakhstan ...... 363

Kyrgyz Republic ...... 365

Republic of Tajikistan ...... 368

Turkmenistan ...... 371

Republic of Uzbekistan ...... 372

7 CENTRAL EURASIA 2006 Analytical Annual International Affairs Afghanistan ...... 374 Republic of Armenia ...... 375 Azerbaijan Republic ...... 378 Georgia ...... 381 Republic of Kazakhstan ...... 382 Kyrgyz Republic ...... 385 Republic of Tajikistan ...... 390 Turkmenistan ...... 393 Republic of Uzbekistan ...... 395

LIST OF ACRONYMS ...... 398

8 AFGHANISTAN General Overview

AFGHANISTAN

GENERAL OVERVIEW

Viktor KORGUN D.Sc. (Hist.), head of the Afghanistan Sector, Institute of Oriental Studies, Russian Academy of Sciences (Moscow, Russian Federation)

fghanistan entered the year 2006 with vague expectations of change and a heavy burden of unresolved problems. But early February brought a breakthrough: the London Conference on Af- A ghanistan and the seminal Afghanistan Compact adopted at that conference raised visible hopes of faster national reconstruction. However, the continued worsening of the military-political situation in the country remains a serious obstacle in the way of this process. The Afghanistan Compact is a kind of agreement between Afghanistan and the world community reaffirming the commitments undertaken by foreign donors and providing for an increase in their financial aid to that country by $10.5 billion over a term of five years. The Afghan government, for its part, pledged to strengthen democratic institutions, ensure security, curb the drug trade, promote economic development, uphold the rule of law, meet basic human needs, and protect human rights. Four years after the Bonn Agreement, this document provided a new road map for Afghanistan’s development in the next five years. Shortly before the London Conference, the formation of the Afghan parliament (National As- sembly) elected in September 2005 was completed. As expected, about half of the seats were won by former mojahed warlords (including Islamic radicals), who controlled the situation in the provinces and were in opposition to President Hamid Karzai and his government. Other seats went to representatives of left-wing forces (including the former PDPA), liberal circles and Taliban members who had gone over to the side of the government. Women have 68 seats in the lower house (Wolesi Jirga or House of the People). There was an intense struggle for the position of speaker among such well-known politicians as Abdul Rasul Sayaf, Burhanuddin Rabbani, Yunos Qanuni, Muhammad Mohaqiq and Ramazan Bashardost. As a result of long bargaining and behind-the-scenes negotiations, the position of chairman of the lower house went to Yunos Qanuni, former minister of the Karzai interim government. Eventually, the contours of three informal coalitions emerged in

9 CENTRAL EURASIA 2006 Analytical Annual parliament: the first, led by Yunos Qanuni, is in opposition to the president and his team, seeking broader powers for parliament; the second includes independents supporting the president; and the third mostly consists of left-wingers and liberals taking an intermediate stand. Since the elections were held on a nonpartisan basis, the formation of groups in parliament has proved to be a lengthy process. The only well-defined group that has appeared to date is that of Mustafa Kazemi, mostly representing the interests of the Hazaras. Parliament started its legislative activities by adopting the Rules of Procedure for the lower house and went on to consider major issues relating to various aspects of sociopolitical life in the country: women’s rights, procedure for approving executive bodies, wage rises for government employees, and approval of the annual budget. However, the ideologically mixed composition of parliament caused an intense political struggle at its sittings. At the very first sitting, Malalai Joya from Farah Province demanded that many members of parliament—former warlords guilty of crimes against their people— be brought to justice. She severely criticized them at subsequent sittings as well, evoking anger, irritation and even threats on their part. Such a configuration of forces in parliament also led to difficulties in decision making on many issues, including the discussion and approval of the new Cabinet proposed by the president in March. The heated debate over the approval of new ministers lasted several weeks. Some of the presidential candidates were rejected. Thus, parliament refused to support the candidacy of Supreme Court Judge Fazl Hadi Shinwari, known for his Islamic radicalism. Foreign Minister Abdullah Abdullah was also among the losers. His departure from the government ended the stage of confrontation between the president and the leaders of the Northern Alliance, with former warlords grouped around them. The most odious of these leaders were appointed to government positions as part of the fight against “war- lordism” and acquired the status of public figures. Others were removed from key posts in government agencies and lost their influence in the provinces. With Dr. Abdullah’s departure, the period of political domination by the Northern Alliance came to an end and it virtually ceased to exist. In spring, sociopolitical life became more active outside parliament as well. The country was drawn into the “cartoon controversy” caused by the publication in a Danish newspaper of a cartoon showing Prophet Muhammad. Protest demonstrations rolled across Afghan cities, resulting in clashes with police and loss of human life. After that, public attention focused on the story of a certain Abdul Rahman, who had converted from Islam to Christianity. The conservative circles led by the country’s supreme judicial bodies took a tough and uncompromising stand, demanding the death penalty for the convert. Only the intervention of Western leaders and Hamid Karzai himself saved him from imminent death. This case is fresh evidence of the fierce struggle between Islam and liberalism, between orthodox Muslim clerics and reformers, a struggle which leaves a serious imprint on sociopolitical life in the country. At the end of May, Kabul was shocked by a road accident in the capital, where a U.S. military truck crashed into Afghan passenger cars, causing death and injury. The anti-American demonstrations sparked off by this accident led to riots and to new victims, signaling a general disenchantment with the activities of the Karzai Government and its Western partners. In this uneasy situation, the main threat to the Karzai regime and to national security continued to be posed by the Taliban and its allies, who had stepped up their armed struggle. After the start of the war in Iraq in 2003, they reorganized and regrouped their forces, adopting some of the methods of struggle used by their Iraqi fellow-fighters. Suicide bombings—a phenomenon that had never been characteristic of Afghanistan—became one of their main methods. The first major attack of this kind in 2006 was carried out in January in Spinbuldak, where 21 persons were killed in an explosion. Later on, suicide bombings occurred quite frequently. And although they were mainly targeted against NATO military personnel, most of their victims were civilians. By the end of the year, suicide bombers had carried out over 100 such attacks.

10 AFGHANISTAN General Overview

Apart from that, Taliban militants made increasing use of other methods: mining of roads and vehicles, major attacks against police posts and bases of the international coalition forces, killings of local government members, intimidation of the population, and kidnappings. Toward the end of summer, Taliban attacks reached a threatening scale: Islamists had a dominant influence in four southern and two eastern provinces. In their search for effective ways to deal with the extremists, the international coalition regrouped its forces: in August, they were placed under the command of NATO; Brit- ish, Dutch and Canadian troops were deployed in the south of the country, while most of the Ameri- can forces continued to operate in southeastern and eastern Afghanistan. But even these measures could not turn around the military situation in the country. The Karzai government and its NATO allies kept looking for alternative ways to resolve the problem. One of these was an amnesty for militants who laid down their arms and went over to the government’s side. However, it proved to be ineffective, just as earlier amnesties repeatedly declared since 2004: by the end of 2006, 400 militants had ceased their armed struggle, but this had little effect on the scale of combat operations. Kabul made some adjustments to its antiterrorist strategy: the authorities set up a National Commission for Peace in Afghanistan heafed by Chairman of the Senate (Meshrano Jirga or House of Elders) Sibghatullah Mojaddedi, and Hamid Karzai called for renewed efforts to track down and eliminate the terrorists’ funding and propaganda sources, and also their training bases. The president even appealed to their leaders (Mullah Omar and Gulbuddin Hekmatyar) with a proposal to start a dialog, but this proposal was rejected. It was becoming increasingly clear that the threat to peace in Afghanistan came from the territory of Pakistan, where extremists had found refuge and were receiving support from local tribal leaders, radical religious-political parties, the Inter-Service Intelligence (ISI) of Pakistan, and some of the army generals. Sharp criticism in Afghanistan was increasingly leveled at Pakistan’s president, Gen- eral Pervez Musharraf, the closest ally of the United States in the war on terror. In the Afghan leaders’ opinion, the general is nominally engaged in a fight against terrorism, but in practice he secretly supports the Afghan extremists. At the end of summer, Hamid Karzai and Afghan Foreign Minister Rangin Dadfar Spanta publicly accused President Musharraf of secret support for the terrorists. Relations between the leaders of the two states assumed the character of an open confrontation bordering on hostility. In addition, in September 2006 President Musharraf concluded an agreement with tribal leaders in Pakistan’s Federally Administered Tribal Areas on the cessation of armed clashes with Pakistan army units deployed in this area. In response to their promise, he released from prison 132 extremists and returned their weapons. Subsequent events showed, however, that this agreement merely strengthened the positions of local Taliban members, who increasingly assumed the functions of legislative and executive authority in Pakistan’s North Waziristan District. During a September visit to Wash- ington by President Karzai and General Musharraf, U.S. President George Bush tried to reconcile them. The visit resulted in a new idea: to convene a jirga (council) of Pashtoon tribes on both sides of the border so as to induce the Taliban to look for acceptable compromises. But its implementation can have unpredictable consequences: Kabul fears that Pakistan will try to use the jirga in order to impose its influence on Afghanistan and to make the Karzai regime more pro-Pakistani, while the Taliban will remain an instrument in the hands of Islamabad for putting pressure on Kabul. There is a growing conviction both in Afghanistan and elsewhere that the situation in the country has reached an impasse. What is necessary here is a new strategy, new ideas and new efforts primarily designed to influence the “hearts and minds” of ordinary Afghans, who have lost hope of a better future. The leaders of the NATO countries are beginning to realize that most of the aid should be switched from combat operations to the country’s reconstruction. In their opinion, this will help to raise the people’s living standards to a significant extent, so ensuring a successful solution of crucial problems such as the fight against terrorism, drugs, pervasive corruption and unemployment.

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In the field of foreign policy, the past year was more successful for Afghanistan. The London Conference paved the way for further effective foreign-policy efforts by Kabul. These include visits by Afghan leaders to Britain, the United States, Canada, Turkey, Iran, Pakistan, India, China, Japan, Tajikistan and Azerbaijan, and also visits to Kabul by foreign leaders: George Bush, Pervez Mushar- raf and Canadian Prime Minister Stephen Harper. International conferences in Doha (Qatar), Tokyo and Delhi were devoted to problems of Afghanistan’s reconstruction and security. These matters were also considered at the SCO Summit in Shanghai. On the whole, despite the depressing picture of the country’s development in 2006, there is good reason to hope for a change in the pace of its political and social processes: over the past few years, Afghanistan itself and the world community at large have accumulated a significant potential of efforts and resources required to achieve a decisive turn in the dramatic life of the Afghan people and to bring peace and stability to the country.

POLITICS

Viktor KORGUN D.Sc. (Hist.), head of the Afghanistan Sector, Institute of Oriental Studies, Russian Academy of Sciences (Moscow, Russian Federation)

n the whole, the country greeted 2006 with positive political dynamics at home and crippling military-political and socioeconomic problems. On the one hand, the September 2005 parlia- O mentary elections completed an important stage of national resurrection and development outlined by the Bonn Agreement of 2001. On the other, reconstruction turned out to be a protracted and painful process with no glimpse of hope ahead. The situation on the domestic political scene worsened partly because of increased drug production and trafficking and the intensified armed struggle of the opponents of Hcmid Karzai and his regime, thus undermining the country’s chances of achieving peace and stability. The inefficient government and equally inefficient international efforts are mainly responsible for the negative context. The country’s leaders are obviously unable to cope with the most urgent issues—better living standards and security for all—which creates deep-seated disillusionment among the ordinary people and plays into the hands of those who oppose the regime. The central government is rapidly losing popular support as being weak, incompetent, and unsure of itself; this is amply confirmed by the mounting corruption, violation of law, involvement of local officials in illegal drug trafficking, increase in crime, unemployment, poverty, and the still prominent refugee issue. The parliament formed at the very beginning of 2006 was a political patchwork made up of deputies elected on a personal rather than party basis. Most were elected on the strength of personal influence rather than ideological preferences. Many of them took part in the civil war and were warlords of mojahed units, khans of local tribes, and influential clerics. Fortunately, not all of them are radical Islamists (about 50 out of the total 249 deputies can be described as such); there are about

12 AFGHANISTAN Politics

50 conservatives; others are moderate mojahedin, royalists, Pashtoon nationalists, and nationalists of all other hues. About 50 deputies (some of them former communists) can be described as secular liberals and leftists; there are several former Taliban members who sided with the government; 68 seats (25 percent) belong to women; about 20 deputies have armed units under their command, while about 20 of their colleagues are involved in drug dealing. The ethnic composition of the lower house corresponds, on the whole, to the country’s ethnic structure: the Pashtoons, the largest ethnic group, has 47 percent of the seats. It was obvious from the very beginning that the politically and ethnically patchy parliament was an awkward structure that could not function smoothly. Malalai Joya from Farah Province had the following to say after the parliament’s first session: “Its future looks grim since the parliament is full of warlords, drug barons, and those who fought against the ordinary people. They destroyed our country and cannot be useful to it in future.” By way of parrying the grim forecast, which the woman deputy repeated at several sittings, Abdul Rasul Sayaf, one of those against whom the accusations were made, pointed out that the parliament reflected current reality. Speaker Yunos Qanuni tried to take a reconciliatory approach: “The warlord issue belongs to the country’s past. We should all respect the nation’s choice.” The new Cabinet President Karzai presented late in March caused another bout of serious disagreements among the legislators. The president presented eight new ministers and shifted three ministers of the old Cabinet (partly because he had created a new post, that of senior state minister to supervise the presidential advisors). There was one woman among the 25 ministerial appointments. The political community was stirred up by the fact that the name of Dr. Abdullah Abdullah, who had served as foreign minister since December 2001, was not among the new appointees. There was a lot of talk that the foreign minister and the president did not see eye to eye on ambassadorial appointments. Dr. Abdullah Abdullah is well known in the world as the Northern Alliance spokesman and one of the closest allies of Ahmad Shah Masood, its leader. He has good relations with the leaders of the world’s largest countries and very good relations with India, where his family still lives. His post went to Dr. Rangin Dadfar Spanta, who calls himself a moderate pragmatist; since 2005, when he returned from emigration in Germany, he has been serving as foreign policy presidential advisor. Dr. Abdullah was the last of the Northern Alliance leaders to fill an official post: earlier, in 2004, President Karzai evicted Defense Minister Marshal Mohammed Fahim and Minister of Education Yunos Qanuni from the Cabinet. This ended political domination of the Northern Alliance (Tajiks from the Panjshir Gorge) in the government. The key posts of the ministers of defense, finance, and the interior went to Pashtoons, but the Northern Alliance leaders retained their political weight: Marshal Moham- med Fahim was appointed senator; Yunos Qanuni became speaker of the parliament, while Abdul Rashid Dustom became Chief of Staff to the Commander in Chief of the Afghan Armed Forces. In fact, the Alliance fell apart, while its leaders lost their former influence. In April, the parliament set down to the business of discussing the new Cabinet; each of the potential ministers was discussed individually, so the procedure took several weeks to complete. Each of the proposed ministers from the old Cabinet described his previous activities and outlined his plans. The new candidates also had to present plans and proposals. In an effort to reveal the degree of their competence and professionalism, the deputies subjected the aspiring ministers to harsh in- terrogation. Muhammad Amin Farhang, who served as minister of economics in the old Cabinet, was subjected to scything criticism because the government failed to introduce free market elements into the country’s economy to remedy the unsatisfactory performance of the local NGOs, new jobs were created at a painfully slow pace, while national industry and the national currency remained inadequately protected.

13 CENTRAL EURASIA 2006 Analytical Annual

Frequently tempestuous and emotional, the parliamentary discussions often ended in stalemate. On 22 April, for example, the deputies could not agree on the meaning of the term “majority of votes:” on that day three candidates (Minister of Communications Amirzai Sangin; Minister for Refugees and Repatriation Mohammad Akbar Akbar, and Minister of Urban Development and Housing Moham- mad Yousof Pashtun) failed to get 50 percent of the votes. The issue could have been resolved in several ways, but the next day they were appointed by a show of hands. Twenty deputies left the sitting to register their protest. On 20 April, the parliament endorsed 20 out of 25 candidates. The president’s supporters obviously outnumbered his opponents in the newly elected legislature. The very fact that President Karzai’s supporters acquired the key ministerial posts (ministers of defense, the interior, finance, and foreign affairs) was interpreted as his victory over the disunited opposition headed by speaker Yunos Qanuni. However, the price of victory was high: five candidates were declined; two of them— Surya Sobhrang, Acting Minister for Women’s Affairs (the only woman among the candidates), and Dr. Sayed Makhdum Rahin, Minister of Information and Culture—were the most lamented losses. Surya Sobhrang, well known in the country as a women’s rights activist, and liberally-minded Dr. Rahin came up against opposition from the clerical-conservative majority. Later, in August, Pres- ident Karzai filled the posts that remained vacant throughout the spring and summer. Former minister of economics Muhammad Amin Farhang, who the parliament rejected in the spring, finally received his post in August. The deputies clashed over the new composition of the Supreme Court: the president suggested that Supreme Court Judge Fazl Hadi Shinwari, an ally of the leader of the conservatives Abdul Rasul Sayaf and a Saudi protégé in the past, should be reappointed. Meanwhile, not known as an experienced judge and theologian, he was also accused of bribe-taking and nepotism, violation of human rights and freedom of the press, and was criticized from all sides for the crawling reform of the judicial system and extreme conservatism in relation to women’s rights. It is common knowledge that he freely used the privileges of his office and constitutional provisions to appoint judges who shared his extremist convictions, to ban cable TV, to arrest journalists for blasphemy; he once forced Sima Samar, minister for women’s affairs, into retirement under accusations of blasphemy. The president offered his candidacy for discussion in the hope of ensuring the support of the conservative clergy in counterbalance to the Taliban. To show the West that judicial reform was progressing, President Karzai replaced the old members (eight people in all) with experienced judges. The deputies rejected Fazl Hadi Shinwari twice. In July, after the recess, the parliament approved Prof. Abdul Salam Azimi, educated in the United States, as Chief Justice. The government scored another success when Abdulla Jabar Sabeta was appointed Prosecutor General in July; he immediately launched an uncompromising anti-corruption campaign and was bold enough to challenge the omnipotent warlords, even if he had to admit that he did not have sufficient power. The new government inherited the heavy burden of unresolved problems that range from economics to the counterterrorist struggle, but certain population sections are dissatisfied with the slow pace of the country’s rehabilitation, the inadequate administrative system, and the head of state’s inability to bridle total corruption and drug trafficking. This is partly explained by the earlier euphoric expectations; there is the common opinion that the president is responsible for the failures. Earlier, the nation’s majority and foreign sponsors looked at Hamid Karzai as the person best suited to the post. As the leader of a Pashtoon tribe, he identified divorce with the country’s traditional past; he looked more like a president concerned with the nation’s well-being than a warlord looking after his own interests. He was also regarded, with good reasons, as a pro-American figure able to attract billions of dollars into the country. Today, however, many Afghans, including a large number of Pashtoons, condemn his cautiousness, his tendency to make compromises that encourage corruption, and his fail-

14 AFGHANISTAN Politics ure to act resolutely to put an end to drug trafficking. In a country where the public knows that the police behave like highway robbers, in which high official posts go to the highest bidder, drug barons go fearlessly on with their business, while foreign aid is siphoned off, the president’s job approval level cannot be high. The opposition is varied: there is a legitimate (parliamentary) and illegitimate (non-parliamentary) opposition; some of the opposition groups are loyal, others are not; there is a liberal and radical irreconcilable opposition. The conservative-minded deputies (former mojahed warlords, Taliban members, Islamists, secular conservative radicals, and nationalists) are united into a fairly amorphous group under Yunos Qanuni, who remains the de facto opposition leader. When elected as speaker, he technically abandoned his leadership and announced that from that time on he would side with the president. Today he can be described as a moderate politician. Despite its fairly amorphous structure, the parliamentary opposition includes several compact and independent groups. The group headed by Mustafa Kazemi, minister of trade in Karzai’s intermediate administration, represents the interests of the Hazaras. There are other prominent oppositionists in the lower house, such as Ramazan Bashardost, former minister of planning; Mohammed Mohaqiq, head of the Hezb-e Wahdat-e Islami Afghanistan (the Islamic Unity Party of Afghanistan), who also headed the same ministry; and Ahmad Shah Ahmadzai, who served as prime minister in the Rabbani Cabinet. There are also several prominent opposition figures outside the parliament: former minister of internal affairs Ali Ahmed Jalali, who now lives in the United States, as well as Abdul Hafiz Man- soor, Chief Editor of the Payam-e Mojahed newspaper. In April, the latter, an irreconcilable critic of the president, published compromising information about most of the Cabinet that cast doubt on their qualifications and competence. The list included the key Cabinet members—newly appointed Foreign Minister Dr. Rangin Dadfar Spanta, as well as Defense Minister Rahim Adbul Rahim Wardak, Minister of Internal Affairs Zarar Ahmad Moqbel; Finance Minister Dr. Anwarulhaq Ahady; Minister of Education Haneef Atmar; and Minister of In- formation and Culture Dr. Sayed Makhdum Rahin. All of them denied the accusations, while the president’s advisor for the media A. Khorram described the publication as amoral and politically motivated and accused the publisher of violating journalist ethics. Author and publisher Abdul Hafiz Man- soor was removed from his post as chairman of the Radio and TV Committee of Afghanistan because he banned female singers from TV. He is a member of the Islamic Society of Afghanistan, the largest political party headed by former president Burhanuddin Rabbani. In the post-Taliban period, the party that formed the core of the Northern Alliance and united mainly warlords and former mojahed warlords controlled the key Cabinet posts. Today it is losing its grip. There is the opinion that with the removal of Dr. Abdullah and other changes in the Cabinet, the mojahedin lost their leading positions in the state power structures. Some of the prominent regional figures—the so-called warlords—merely pay lip service to the government. They fill the posts of province governors, heads of smaller administrative units, and heads of the police and security forces. Many of them are omnipotent rulers with military units of their own that are not adverse to engaging in tyranny and violence in relation to the local people. President Karzai has, on the whole, managed to tame (though not without difficulties) the most odious of them: Abdul Rashid Dustom, Marshal Mohammed Fahim, and Gul Agha Sherzai, formerly powerful governor of Kandahar, but he failed to uproot their system of power and influence, which Kabul cannot control and which flourishes on its access to foreign aid, weapons, tax collection, natural resources, and illegal drug trade. The warlords and their clients are a source of corruption. Many of them are involved in drug dealing; some maintain contacts with the Taliban. The warlords are building up their power on the money they receive from the United States, which naturally weakens the government and helps extremists extend their influence. Today, the president’s power is limited to the Kabul Province; he has no choice but to accept the warlords’ omnipotency:

15 CENTRAL EURASIA 2006 Analytical Annual in the absence of a strong and loyal army and a professional police force, they alone can ensure security in their zones of influence. The irreconcilable opposition—the Taliban and its allies—constitutes the greatest threat to security and reconstruction. The allies consist of the Islamic Party of Afghanistan headed by former premier Gulbuddin Hekmatyar and other extremist groups that insist on the Karzai government being liquidated and the foreign forces pulled out of the country. The war on Iraq that began in the spring of 2003 gave the Taliban breathing space. It used it to reorganize and rearm its units. They abandoned their former tactics of lightning blows and swift retreats in favor of suicide bombers (previously unknown in Afghanistan); 85 percent of their victims are civilians. The Taliban also uses remote-oper- ated explosive devices. In 2006, 115 blasts killed 225 civilians and 40 NATO military personnel. It also started forming units of 100 and more to attack government military checkpoints. On the whole, the Taliban members have become more radical and crueller. In 2006, extremists considerably extended the scope of the armed struggle. The Taliban divided the territories of the four southern provinces, the area of the fiercest fighting, into zones of armed struggle, or zones of responsbility of the prominent warlords. In the south, in the Helmand, Kandahar, Uruzgan, and Zabul provinces, the Taliban fights under Mullah Dadul- lah and Saifullah Mansoor; in the southeastern provinces of Host, Paktia, Ghazni, and Paktika, war veteran Jalaluddin Haqqani, who fought against the Soviet troops and maintained friendly relations with bin Laden when the Taliban was in power, is now in command in the area. He is very much respected by the local Pushtu khans. Last spring he received even greater powers from Mullah Omar, the Taliban leader, money, weapons and ammunition and, most important, hundreds of young men who trained as guerrillas in Iraq. His units are also fighting elsewhere in the country. He outranks all the Taliban commanders and oversees training of suicide bombers. Mawlawi Anwar al-Haq Mojahed, son of the late Mawlawi Mohammad Younus Khales, leader of the Islamic Party of Af- ghanistan who died on 19 July, 2006, is fighting in the east, in the Nangarhar Province. Former Premier Gulbuddin Hekmatyar, another ally of the Taliban, is fighting in the eastern border provinces of Kunar and Nuristan. Intensified fighting is leading to increased casualties among the extremists, the Afghan Na- tional Army (ANA), units of the international counterterrorist coalition, and civilians. During three days of fighting, 200 extremists were killed and several hundreds wounded in the Mountain Thrust military operation carried out in May in the mountainous areas in the south. In recent months, Taliban members have been keeping to villages and settlements where they can use civilians as a living shield. American bombings caused losses among the local people; they learn to mistrust or even dislke the United States. In July and August, the number of armed clashes across the country increased by 60 percent—from 85 to 136. In the same period, the number of casualties increased four-fold; the number of deaths among the civilians increased three-fold: in July 93 people died; in August, 104. In July, large Taliban units managed to capture two districts (Garmsir and Nawa Barakzai) in the Helmand Province where 2,300 British servicemen were stationed. In August, after two-week fighting, Taliban units captured the Panjwai District in the Kandahar Province where 2,200 Canadian servicemen were deployed. In September, the southern districts of the Kandahar Province saw fierce fighting between Tal- iban units and NATO troops within Operation Medusa; 260 fighters were killed. Taliban units captured and held two districts (Panjwai and Jari) for several hours. On the whole, in 2006 the Taliban lost 3,000 members (twice as high as the 2005 figure), while the coalition lost over 200. Meanwhile the resistance to the Karzai regime is spreading geographically. In the summer, armed clashes took place in the west (the Farah and Herat provinces), which previously were considered peaceful. Similar clashes took place sporadically in the north.

16 AFGHANISTAN Politics

Recently, the Taliban has increased its propaganda pressure on Kabul, in which it employs the resources that remained banned while it was in power (video cameras, the Internet, and mobile phones). DVD disks with speeches and statements by bin Laden, his deputy al-Zawahiri, and Mullah Omar; punishment meted out on those who cooperate with the Karzai regime; training of Taliban volunteers and suicide bombers, can be freely bought and sold in Pakistan and Afghanistan. The Taliban is actively distributing leaflets with calls for jihad and threats to the “Crusaders” (the Western troops) and Afghan collaborationists. Thirty percent of the Islamists’ sites and radio stations (there are over 4,000 of them in the world) give space and time to the Taliban. The Taliban is swiftly gaining popularity among the disillusioned ordinary people in the south. In some districts, Taliban members have set up parallel power structures, collect taxes, sit in the Shari‘a courts, recruit volunteers, and set up checkpoints on the roads. The Taliban relies on a wide mobilization network that comprises of thousands of madrasahs, in which young men from refugee camps in Afghanistan are transformed into terrorists. Volunteers from Pakistan, Arabs, Chechens, and Uzbeks join the Taliban in the hope of capturing Kandahar, Mullah Omar’s former domain, to extend their control far and wide until they capture Kabul. Today, the Federally Administered Tribal Areas (FATA) of the North-Western Frontier Prov- ince of Pakistan remain the Taliban’s main operation base. Its units cross into Afghanistan where they are supported not only by the local Pashtoon khans and Islamist parties that hold the majority in the local legislature. Some of the Pakistani generals and ISI officers sympathize with the Taliban’s cause and extend it indirect support. They cooperate with the local members of the Taliban who control a large part of the North Waziristan District. On many occasions Kabul has accused Islamabad of conniving with the Taliban members that had found refuge in Pakistan. Kabul demanded that the training camps be closed down and cross-border movement of terrorists stemmed. Every time, however, Islamabad denied everything, including the fact that its political and military circles support Taliban members, and accused Karzai of being unable to cope with his own problems. In fact, pressed by Pakistani military and Islamists, on the one hand, and the United States, on the other, President Musharraf has to support the international counterterrorist struggle. Washington extends considerable financial aid to Pakistan, which it regards as its closest partner in the antiterrorist struggle. In 2005, within the framework of its involvement in the international effort, the central government of Pakistan moved an 80,000 strong army corps into the FATA, to which its jurisdiction did not extend. The armed clashes with terrorists that followed claimed about 600 Pakistani military’s lives. The situation in two districts—North and South Waziristan—did not improve: they have gone too far along the road of “Talibanization.” The local Taliban members control the larger part of this area. In an appeasement effort, General Musharraf took an unprecedented step: in September 2006, he signed a “peace agreement” with the local pro-Taliban khans, under which they pledged to stop armed clashes with the government forces and prevent further infiltration of terrorists across the border. The Pa- kistani president reciprocated by withdrawing his forces from FATA territory, releasing the earlier arrested Taliban members and other extremists, returning their weapons to them, and redressing the damages. Contrary to expectations, the armed struggle in Afghanistan only gained momentum: the agreement merely gave the local Taliban members and those across the border more political weight. The Afghan National Army (ANA), the national police, and the forces of the international counterterrorist opposition stand opposed to the Taliban. The ANA is being set up on a contractual basis on American money and through American efforts. It is expected to become 70,000-strong by 2008 (late in 2006, it was 32,000-strong). It consists of five army corps with 44 motor rifle battalions in each. Unable to fight on its own, it relies on the coalition forces. So far it is still poorly armed with out- dated Soviet-made light small arms, and has no armored vehicles or aviation. The United States recently allocated $2 billion on weapons and military equipment. Unsatisfied with the low wages

17 CENTRAL EURASIA 2006 Analytical Annual

(about $70 per month compared to the $300 the Taliban pays its soldiers), people are deserting en masse. In 2006, the army lost 15 percent of its personnel (the figure for 2005 was 25 percent). It is a multinational army—the trend toward enlisting more Pashtoons is a recent development. The national police being built up by Germany is 54,000 strong. It has to operate in adverse conditions: the numerical strength is inadequate, while drug users are not rare; so far it has no standard police infrastructure. The policemen have no uniforms, armored cars, weapons, or ammunition; and they are poorly trained. This force is expected to fight the cruelest of criminals, the Taliban, and oppose the tribal and faction enmity (blood feud of sorts) still raging between tribes and family clans over resources (water, precious stones, drugs, illegal timber trade, pastures, etc.). The police obviously cannot function in the absence of a strategy designed to create a contemporary system of justice and law-enforcement bodies as domestic security instruments, without which no political and economic progress is possible. Today, both the national police and the judicial system are a sorry sight: the wages of policemen are the country’s lowest ($40), on which loyalty cannot be bought. The police are corrupt through and through and are directly involved in drug dealing. In 2006, the international counterterrorist coalition also reorganized its structure: in August, the U.S. transferred command to NATO, while part of the American troops (8,000 soldiers and officers) under American command remained deployed in the country’s southeast and east where it fights the Taliban in the Nangarhar, Kunar, Paktia, Paktika, and Host provinces. These units are still stationed in the south. U.K., Canadian, and Dutch units are operating in the southern provinces of Helmand, Kandahar, Zabul, and Uruzgan, areas of the fiercest battles with the Taliban. In November 2006, there were 32,000 men under NATO command: 12,000 Americans, 5,200 British; 2,900 Germans; 2,100 Dutch; 2,300 Canadians; 1,800 Italians; 1,000 French; 750, Rumanians; 625 Spaniards; and 475 Turks. There are also units from Norway, Denmark, Belgium, Hungary, Portugal, Bulgaria, Latvia, and other countries (36 in all, including troops from non-NATO members—Sweden, Australia, New Zealand, Croatia, Macedonia, Finland, etc.). So far, the NATO-led military campaign has shown no results. Despite the heavy losses, the extremists are still numerically strong and putting up tough resistance. Afghanistan’s Western allies are coming to the conclusion that the war on terror might be lost. Today, they are at a dead end: the obvious impossibility of solving the problem by force, the mounting anti-Western (anti-Amer- ican in particular) sentiments, as well as the open rejection of the Karzai regime’s policy have forced Kabul and its Western patrons to revise their antiterrorist strategies and seek alternatives. Amnesty for those who lay down their arms is one of the new weapons; America supported this idea. In 2005, a National Commission for Peace in Afghanistan under Sibghatullah Mojaddedi, Speaker of the Afghan Senate, was set up with modest results: by late 2006, only 1,400 fighters moved to the government’s side. Hamid Karzai criticized the Americans and their allies for mass physical extermi- nation of the Taliban members, “the sons of our nation” as he put it. It would be wiser, said the president of Afghanistan, to locate and destroy their material bases and stem money flows. He also formulated the idea of a dialog with the Pashtoon tribal leaders on both sides of the Afghan-Paki- stani border by calling a jirga. The West actively promoted the idea of shifted priorities of the antiterrorist struggle: to gain popular support it was suggested that fighting be replaced with the reconstruction of the country to win the war for the “hearts and minds” of the nation This is a wise decision: since 2001, when the Taliban regime was removed, the United State has spent about $80 billion on its troops stationed in Afghanistan and $7.2 billion on the country’s reconstruction. Today, the coalition forces not only fight—they build schools and hospitals, restore destroyed dwellings, and extend humanitarian aid to the local people. The thriving illegal drug business presents another serious threat to the country’s security and reconstruction. Despite the joint efforts of the world community and Karzai’s government, the prob-

18 AFGHANISTAN Politics lem remains: in 2006, the country produced 49 percent more raw opium than in 2005, or 6,100 tons (92 percent of worldwide production). Drugs bring $2.8 billion in profit, that is, one-third of the country’s national profit. This means that Afghanistan is degenerating into a drug-based state. Drug business breeds corruption and funds the Taliban and other terrorists. The number of drug users in the country is also rising fast: in 2006, it increased from 54,000 to 920,000. Despondency reigns in the country, which has found itself in a desperate or even hopeless situation. According to the public opinion poll conducted by the ABC News and BBC World Service radio stations in October, the foreign military presence in the country was generally accepted; this could not be said about the Taliban. The present Afghan government was likewise supported. At the same time, the new challenges and new even worse problems with which the world community and the Karzai regime have been coping without much success arouse general pessimism. Forty percent of the polled across the country spoke about the rising violence, including murders, bombings, destruction of schools and administrative buildings, armed clashes with the government and coalition forces; in the southern provinces of Helmand and Kandahar, the share was 80 percent; 15 percent help the Taliban with money and foodstuffs—in Helmand and Kandahar the share was 30 percent; 57 percent described the Taliban as the main threat; a year earlier the share was 16 percent. Forty percent of the polled believe that in the absence of other sources of income, people can grow opium (59 percent in the southern provinces); in 2005, 26 percent gave this response; and 75 percent were convinced that the Taliban encouraged drug dealing. The share of those who believed that the country was moving in the right direction dropped by 22 percent (from 77 to 55 percent); the share of those who believed that the country became more secure after the Taliban was deposed decreased by 17 percent; and the share of those who looked with optimism to the following year dropped by 17 percent (from 75 to 58 percent). The parliament lost 18 percent of its supporters; the president, 15 percent. The share of those who believed that the parliament worked for the people dropped from 77 to 59 percent. Fifty-seven percent support the United States (the figure for 2005 was 68 percent); 80 percent welcomed the military presence of the United States and its allies in the country, but 25 percent were convinced that the Americans should leave within the next twelve months (the figure for 2005 was 14 percent). Eighty-eight percent preferred the Karzai regime to the Taliban, which enjoyed the support of 5 percent, mainly in the southeast. Ninety- three percent doubted that the Taliban was capable of bringing security; the share of those who looked at the warlords as the main threat dropped from 22 to 9 percent. The Afghans were more optimistic about the social issues: 74 percent of the polled believed that their living conditions had improved compared with the Taliban period (a drop of 11 percent against 2005); less than 50 percent believed that their access to medical services was adequate, while their economic possibilities good; 80 percent described corruption as an important issue; 79 percent believed that the situation with women’s rights had improved compared with the Taliban period (60 percent approved of forced marriages). The economy bred less optimism: over the year, the share of those who believed that it was in a good shape dropped from 41 to 31 percent. The year 2006 ended with lower political, economic, and social indices, but the nation did not lose the hope of restoration. This cautious optimism rests on the more or less wide support the Karzai regime still enjoys despite its blunders and errors. It is gaining experience and is looking for the best administrative tools to cope with the challenging tasks. The world community is resolved to increase its aid to Afghanistan and achieve peace and stability there. This should be done to preserve not only regional, but also international security.

19 CENTRAL EURASIA 2006 Analytical Annual ECONOMY

Ubaid OKIMBEKOV Ph.D. (Econ.), lecturer, Khorog State University named after M. Nazarshoev (Khorog, Tajikistan)

he Afghan economy in 2006 was generally characterized by trends recorded after the fall of the Taliban regime. Thus, most of the financial aid over the past five years has been going into the T development of the economic infrastructure, but since the degree of destruction of the transport and energy networks was very great, these sectors are still regarded as the main obstacle to economic recovery. Budget revenues (including revenues from own sources) and, accordingly, public expenditures for the development of the economy have been growing every year. The Afghan budget consists of two parts: a core budget (domestic revenues and donor assistance channeled through government accounts) and an external budget (donor assistance outside government accounts). Operating budget expenditure (part of the core budget) for 2006 was projected at 40,346 million afghanis ($831.8 million), with a 17% increase from 2005; and core development budget expenditure, at 66,578.86 million afghanis ($1,372.76 million). Domestic revenues were expected at around 25,220 million afghanis ($520 million). The structure of the 2006 core development budget shows the country’s priorities: almost half of the total (47%) was allocated for the development of the infrastructure and natural resources, 25% for agriculture and rural development, 7% for education, 6% for health, 6% for good governance, rule of law and protection of human rights, and 5% for security. The expenditure structure of the external budget was roughly similar (see Table 1). Table 1 External Budget by Sector

$ million %

Infrastructure and natural resources 633.74 44.5

Agriculture and rural development 288.42 20.2

Health 122.94 8.6

Education 113.31 7.9

Social protection 62.38 4.4

Good governance, rule of law and protection of human rights 61.25 4.3

Security 41.17 2.9

Economic governance and private sector development 31.48 2.2

Other 70.97 5

Total 1,425.66 100

20 AFGHANISTAN Economy

Foreign financial aid constitutes the bulk of total budget revenue. The main donors are the Unit- ed States Agency for International Development (USAID), India, Japan, the European Commission, Saudi Arabia, the United Nations Children’s Fund (UNICEF), Canada, Britain and Germany. The main macroeconomic indicators continued to grow rapidly. In the first 10 months of 2006, GDP grew by 17%, and GDP per capita reached $355. According to the country’s Ministry of Finance, budget revenues from income tax on non-governmental organizations (NGOs) in the first five months of the fiscal year amounted to $4.6 million, almost doubling compared to 2005, when the amount of income tax collected in the first six months after its introduction was only $2.56 million. By Septem- ber, this tax was paid by a total of 800 companies. The most popular theme of the year was the activity of international NGOs performing contract work. The year began with criticism of some of these firms by Afghan officials and analysts. Although Afghans had long expressed their dissatisfaction with the work of NGOs, only now the government took these remarks into account. As we know, the Tokyo Conference on Afghanistan (21-22 January, 2002) decided to distribute all humanitarian and monetary assistance through NGOs in order to ensure timely and more efficient use of financial resources, because the donors feared that Afghan warlords and regional leaders would misuse the funds allocated to Afghanistan. After a time, however, President Hamid Karzai himself declared that the country’s government should have greater control over the distribution of economic and humanitarian aid. Other official spokesmen also expressed dissatisfaction with the activities of the donor countries regarding fulfillment of their commitments in restoring the country’s economy. In particular, Afghanistan’s Consul-General in the Islamic Republic of Iran said at a meeting with the Governor of Iran’s Khorasan Razavi: “Most of the statements on Afghan reconstruction made by the governments of foreign countries have remained on the level of slogans… A significant part of the aid pledged by foreign countries has either not been received or its use depends on the presence of the given country’s military contingent in Afghan territory.”1 Ashraf Ghani Ahmadzai, Chancellor of Kabul University, spoke in the same vein, blaming foreign NGOs for the slowdown in the pace of Afghan reconstruction. In his words, the costs associated with the reconstruction process are several times higher than the estimated cost of facilities not because of the unstable situation but through the fault of the international organizations themselves. In support of his words, he said that Afghanistan “can build a secondary school for $40 thousand, but the international community allocates for this purpose around $250 thousand, most of which goes to pay foreign specialists, whose participation in the construction of a school is not always necessary. The international community plans to build about 500 such schools.” He also believes that about 80% of the budget is spent on the employees of these organizations (wages, housing rent, transport, etc.). And here is what he said about the reconstruction of the Kabul-Kandahar highway: “We could have built it for $35 million, but the nongovernmental organization USAID has built it for us at a cost of $190 million.”2 In view of such facts, the country’s government requested international organizations to review their economic policy on assistance to Afghanistan, and the answer to that request, as it became evident later, was a positive one. As a result, it was announced in February 2006 that over 1,600 foreign NGOs were winding up their activities in Afghanistan: their licenses had not been extended for various reasons. But even after that Kabul continued to express its dissatisfaction with the work of nongovernmental organizations. In April, President Karzai leveled new charges against NGOs operating in the

1 “Iran gotov aktivnee uchastvovat’ v vosstanovlenii Afghanistana,” available at [www.afghanistan.ru/doc/4855.html]. 2 “Ashraf Ghani kritikuet zapadnye nepravitel’stvennye organizatsii,” available at [www.afghanistan.ru]. 21 CENTRAL EURASIA 2006 Analytical Annual country. He accused them, among other things, of misusing aid money and spreading corruption in the country, and said that corrupt, wasteful and unaccountable NGOs had to be stopped. Against that background, the World Bank appealed to the world community in late January for greater assistance to Afghanistan. The Bank issued this appeal because, in the opinion of its analysts, inadequate and delayed assistance can undermine the peace process in the country and lead to a new crisis. In addition, according to World Bank data, over 30% of all assistance to Afghanistan does not reach the intended recipient. From 31 January to 1 February, London hosted another International Conference on Afghani- stan with the participation of 70 countries and international organizations. The Afghan government put before the Conference a document entitled the Afghanistan Compact, containing a plan for the country’s socioeconomic development over the next five years. On the eve of the London Conference, Hamid Karzai told The Financial Times that the country needed an additional $4 billion for the earliest possible reconstruction of its ruined economy. During the subsequent Conference, the Asian Development Bank pledged to allocate $1 billion over a term of five years for reducing poverty in Afghanistan (altogether, donor commitments for the next five years added up to $10.5 billion). In the economic sphere, it is planned, among other things, to achieve the following by the end of 2010: — to modernize the ring road, which is to play the main role in the government’s plans to turn Afghanistan into a bridge linking Central and South Asia; — to bring the Kabul and Herat airports up to international standards and to upgrade the airports in Mazar-i-Sharif, Kandahar and Jalalabad; — to supply electricity to at least 65% of households in urban areas and 25% in rural areas; — to ensure enrollment at primary schools of at least 75% for boys and 60% for girls.3 Another topic hotly debated throughout the year was Afghanistan’s debt to other countries, especially Russia and the United States. During meetings with foreign colleagues from creditor states, Hamid Karzai and members of his government signed agreements on this issue. For the first time this topic was broached at a meeting between President Hamid Karzai and Russian President Vladimir Putin that took place in the capital of Kazakhstan at the beginning of the year. The parties considered the prospects for rescheduling Afghanistan’s debts (around $10 billion). Moscow expressed its readiness to cancel Afghan debts within the Paris Club framework in return for access to the Afghan market for Russian companies, primarily in the production of oil, gas and other minerals, and also access to the rehabilitation of facilities originally built by the Soviet Union. On that score, the Russian Ministry of Finance made the following statement: “The Russian Federation— Afghanistan’s major creditor—intends to reschedule its debt at the multilateral level in the context of the Heavily Indebted Poor Countries (HIPC) Debt Relief Initiative within the Paris Club framework and with due regard for the requirements of domestic legislation. This process can be promoted by measures on the part of the Government of Afghanistan aimed at developing trade and economic relations with the companies of the creditor countries on a nondiscriminatory basis. Given this approach, Afghanistan’s successful implementation of the HIPC Initiative mechanism will most probably lead to 100% cancellation of its debt to the Russian Federation.” Russian President Putin declared once again that “Russia will do its utmost to help reconstruct Afghanistan and normalize life in the country.” The problem of cancellation of Afghan debts to Russia was finally settled during an October visit to Moscow by Afghan Foreign Minister Rangin Dadfar Spanta.

3 See: V. Korgun, “Konferentsia po Afganistanu v Londone,” available at [www.afghanistan.ru]. 22 AFGHANISTAN Economy

An appropriate agreement with the United States, the initiator of Afghan debt rescheduling, was signed in Washington in late September by Afghan Finance Minister Anwar-ul-Haq Ahady and Dep- uty Secretary of the U.S. Treasury Department Robert M. Kimmit. Proposals for the restoration of various facilities and for the exploration and development of mineral deposits continued to come in from neighboring countries, especially Iran. Thus, at a meeting with Afghanistan’s Counter Narcotics Minister Habibullah Qaderi in early January, Governor Gener- al of Iran’s Khorasan Razavi Province Mohammad Javad Mohammadzadeh noted that Iran was prepared to engage in the exploration and production of iron ore in western Afghanistan. In the future, he said, Iran could use this ore to make steel and supply it to Afghanistan. Let us note in this context that Afghanistan is rich in iron ore. However, according to estimates made by Soviet experts back in the days of the U.S.S.R., out of the country’s total reserves of iron ore (2,500 million tons) deposits in Herat Province in western Afghanistan hold only 500 thousand tons.4 At the same time, based on the results of joint geological exploration, the U.S. Geological Survey and the Afghan Ministry of Industry announced in March that oil and gas reserves in Afghanistan were much larger than formerly believed. According to their data, the country’s oil reserves total 3.6 billion barrels, and gas reserves, 36.5 trillion cubic meters. They are mostly located in the north of the country: 1.5 billion barrels of oil and 15.6 trillion cubic meters of gas.5 The first oil fields were discovered in northern Afghanistan back in the mid-1930s, whereupon the country’s authorities concluded a contract with an American company for the development of these fields. But experts came to the conclusion that oil reserves in this area were insignificant, and the contract was cancelled. Later on, oil and gas reserves throughout Afghanistan were estimated at 15.8 million tons and 116.5 billion cubic meters, respectively.6 As regards cooperation with Central Asian countries, during a meeting with Afghan Minister of Energy and Water Mohammad Ismail Khan, President Saparmurat Niyazov of Turkmenistan proposed the following scheme for the supply of electricity: Turkmenistan–Herat–Kandahar–Kabul–Mazar-i- Sharif–Herat. For this purpose, it is necessary to build through Turkmen territory a 500 kV transmission line (350 km), whose construction was undertaken by Ashghabat. In addition, S. Niyazov announced the cancellation of half of Afghanistan’s electricity debts (at that time, they were close to $2.5 million). Apart from Turkmenistan, two other Central Asian countries—Uzbekistan and Tajikistan—supply electricity to Afghanistan. Tajikistan with its huge potential of low-cost hydropower resources is the main hope of neighboring Afghanistan. At a meeting in Dushanbe on 23 February, the bilateral Com- mission on Trade and Economic Cooperation (the Afghan delegation was headed by First Deputy Economy Minister Nazir Ahmad Shahidi) focused on trade in energy resources. Tajikistan, which exports electricity to the Afghan province of Kunduz, asked for return supplies of natural gas. Two major hydropower plants, Sangtuda-1 (670 MW) and Sangtuda-2 (220 MW), are currently under construction in Tajikistan. The former is to be completed in 2009. The Asian Development Bank has extended credits of $21,5 million and $35 million to Dushanbe and Kabul for the construction of a 220 kV transmission line from Tajikistan to Afghanistan, which is to be put into operation in 2009. During a visit to the United Arab Emirates, Hamid Karzai met with the head of Etisalat, the Emir- ates Telecommunications Corporation, and granted it a license for the right to operate in Afghanistan. This company—the third largest mobile telephone operator in Afghanistan ranking behind AWCC (Af- ghan Wireless) and Roshan—declared that by the end of the year it planned to invest $40 million in Afghanistan’s telecommunications sector. According to analysts, total investment in this sector reached $350 million by mid-2006, and Etisalat planned to invest another $300 million. The Afghan Minister of Communications estimates the number of mobile phone users in the country at about 1.5 million.

4 See: G.P. Yezhov, Ekonomicheskaia geografia Afganistana, Moscow State University, Moscow, 1990, p. 35. 5 See: “Afganskaia neftianaia skazka,” Nezavisimaia gazeta, 17 March, 2006. 6 See: G.P. Yezhov, op. cit., p. 31. 23 CENTRAL EURASIA 2006 Analytical Annual

In October, the Ministry of Communications reported that the government had signed a $64.5 million contract with China’s ZTE for the construction of a 3,300 km fiber-optic line to ensure high-quality communications between big cities (in the following order): Kabul–Ghazni–Kandahar– Herat–Mazar-i-Sharif–Pul-e Khumri–Kabul. Eventually, small towns and some other population centers located close to these cities will have an opportunity to tap into the new line, which is to be connected to the communication systems of neighboring countries. In March, the Ministry of Communications announced that call rates would be reduced over the next three years to 0.02-0.03 dollars per minute (from the current rate of 0.1-0.15 dollars). Noticeable changes were also in evidence in the Afghan banking system. On 14 July, Azizi Bank—a new private bank with an initial capital of $7 million—started financial operations in the country. It provides such services as lending to individuals and legal entities, money transfers and opening of deposit accounts (for individuals and legal entities). Its branches are already operating in many cities and regions of the country, which had a total of 16 private commercial banks at the end of 2006. The Afghan market is very sensitive to the situation in the world market. In early September, there was an increase in the domestic prices of flour and melted butter. The reason for this was evidently not a crisis in the domestic market but rising prices in the international market, as confirmed by the increase in the prices of these products in Pakistan, from where they are imported into Afghani- stan. Thus, flour prices jumped about 2.4% in a single week while the prices of other goods remained unchanged. But after a time, with the start of the holy month of Ramadan, there was a significant rise in the prices of other goods as well, especially food products (tea, vegetable oil, etc.). As regards the purchase and sale of gold (there are two kinds of gold in the Afghan market: Arab and Iranian), its prices began to decline. Arab gold fell by more than 5%, and Iranian gold by 8.5% and then by almost 13%.

AFGHANI EXCHANGE RATE IN 2006 50.8

50.6

50.4

50.2

50.0

49.8

49.6

49.4

49.2 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

dollar/afghani

24 AFGHANISTAN Economy

At the beginning of the year, one dollar could buy 50.65 afghanis in the foreign exchange market, and in December the Afghan currency strengthened to 49.91 afghani per dollar. In agriculture, one of the main problems is posed by frequent droughts. The country’s farmers in 2006 lost most of their crop. In Ghazni Province, for example, the fruit harvest was down by 80%, while total fruit production in the country was halved compared to 2005. According to available data, grape production fell from 427,293 tons in 2005 to 213,640 tons in 2006, and apple production, from 327,051 tons to 261,640 tons. In addition, Afghan crop growers faced difficulties in the sale of products supplied to Pakistan, where prices have recently fallen to a very low level. Nevertheless, in the first six months of the fiscal year Afghanistan exported 33 thousand tons of fresh and 13 thousand tons of dried fruits, and also 10 thousand tons of vegetables to the tune of $47 million, including $40 million from the export of dried fruits (raisins, pistachios, almonds, walnuts), $6 million from fresh fruits (grapes, apples, apri- cots, melons and watermelons), and the rest from vegetables. This is far above the figures for 2005. The main importers of Afghan dried fruits are Russia, India, Pakistan, Greece, Germany, Netherlands, Britain, UAE, Turkey, Saudi Arabia, Spain, Australia, and a number of African countries. Under the U.N. Food Program, the country’s largest food storage facility was built in Kabul and was put into service in October. It is intended to store humanitarian aid designated for Afghanistan’s poorest regions, making it possible to provide the necessary food aid in due time, especially in winter. The Afghan government has taken practical measures to upgrade and expand fruit exports. In particular, it has set up an Interagency Commission designed to deal with many problems facing fruit growers, including obstacles to fruit deliveries to the foreign market. The Commission has already achieved some successes. In October, after a meeting with a representative of the World Bank, the Finance Minister announced an increase in the salaries of government employees. Today they range from a minimum of $80 to a maximum of $800. In this way, the government hopes to reduce corruption among employees of government institutions. In September, a plant for the production of non-alcoholic beverages (with a capacity of 360 million bottles per year) destroyed as a result of the civil war in the first half of the 1990s was reopened in Kabul. An Afghan businessman now living in the United Arab Emirates invested $25 million in its reconstruction. The country’s president, among others, took part in the opening ceremony. In mid-October, the U.S. Armed Forces concluded a contract with ABI, an Afghan non-alcoholic beverages company, for the supply of drinking water to the antiterrorist coalition forces deployed in Afghanistan. This deal is advantageous to both parties, because the Afghan company will be getting $600 thousand per month, while the coalition forces will reduce their expenses for water supply from abroad, which amounted to $58 million per year. It should be noted that in order to conclude official contracts with the local population for food supplies, in March 2006 the coalition forces launched a project entitled Afghan First. All transactions in the purchase of food products from local farmers and legal entities are already performed within the framework of this project. After a long break, Russia returned to Afghanistan in order to assist it in restoring the country’s infrastructure. True, since 2001 Moscow has provided assistance to Kabul in the military sphere. Excluding military technical assistance along Defense Ministry lines, Russian aid currently totals $230 million. According to a representative of the Russian Chamber of Commerce and Industry who visited southern Afghanistan, up to now Russia has focused exclusively on the country’s northern region, where Russian companies are interested in implementing technologies in small-scale power generation, construction, transport and the creation of a network of consignment warehouses. In particular, Russian specialists have selected five sites for the construction of mini hydropower plants. In addition, they are to reconstruct the Naglu HPP, originally built by the Soviet Union. The overall passivity of the Russian private sector is explained, according to Russian officials, by uncertainty regarding the political situation and security.

25 CENTRAL EURASIA 2006 Analytical Annual

At the beginning of the year, the government invited tenders for a license to develop the Aynak copper deposit not far from Kabul. This is the largest mining project in Afghanistan, whose copper reserves are estimated at 13 million tons. Experts believe that annual revenue from copper production could reach $200 million. If the project is implemented, up to 4,000 Afghans will be recruited for construction work. Nine large foreign companies were granted the right to participate in the tender: Hunter Dick- inson Inc. (Canada), China Metallurgical Group and Zijin Mining Group Co. Ltd. (China), Hindal- co Industries Ltd. (India), Phelps Dodge Corporation (U.S.), Kazakhmys (Kazakhstan), and TyazhPromExport and SoyuzMetallResurs (Russian state companies). In May, the Ministry of Transport announced that the modernization of seven airports (in the cities of Feyzabad, Maymana, Bamiyan, Chaghcharan, Qaleh-ye Now, Farah and Zaranj) would be completed by the end of the year, and that two airports—in Herat and Mazar-i-Sharif—would acquire international status. Tajik specialists have developed a project for the construction of a Tajikistan-Afghanistan (Lower Panj) railway at an estimated cost of $100 million. Since neither of the two countries can afford such expenses, Dushanbe decided to submit the project to international financial organizations. Let us note that during a visit to China by Afghan Minister for Mines and Industries Ibrahim Adel, Beijing expressed its interest in the construction of a China-Tajikistan-Afghanistan railway. And Tehran, which intends to implement a project for the construction of an Iran-Afghanistan (Herat Province) railway, is prepared, in contrast to Tajikistan, to make significant investments in its construction under a program of free technical assistance to Kabul. More precisely, it is prepared to build a 77 km railway section through Iranian territory and 61 km (out of 114 km) through Afghan territory. In addition, Iran has completed the construction of a 60 km stretch of highway in the Afghan province of Herat. Throughout the year, the interested parties continued their heated debate over an ambitious project for the construction of a 1.5 thousand km Trans-Afghan Gas Pipeline (Turkmenistan-Afghanistan- Pakistan) with a capacity of 30 billion cubic meters per year. The first talks on this issue in 2006 were held in the capital of Pakistan in mid-January with the participation of the Afghan Minister for Mines and Industries Mir Mohammad Sidiq. In the final third of January, the President of Argentina’s Bridas oil company, Carlos Alberto Bulgheroni, visited Afghanistan to discuss the implementation of this project. At a meeting with the Argentine businessman (attended by the ambassadors of Italy and Argentina), President Karzai said that Afghanistan was trying to stand on its own feet and that the implementation of this project would give the people an opportunity to improve their socioeconomic position. The next (ninth) meeting on the Trans-Afghan Gas Pipeline (TAP) project took place in Ash- ghabat on 14 February with the participation of Afghanistan’s Minister for Mines and Industries Mir Mohammad Sidiq, Pakistan’s Minister for Petroleum and Natural Resources Amanullah Khan Jadoon, experts from the Asian Development Bank, representatives of Turkmenistan, and India’s Minister of State for Petroleum and Natural Gas Dinsha Patel. President Niyazov of Turkmenistan made his last statement on this project in October 2006, saying that he was considering a project for the supply of gas to the United Arab Emirates within the TAP framework. But this time he gave priority to the construction of the Turkmenistan-Kazakhstan-China gas pipeline. Since S. Niyazov was one of the main initiators of the TAP project, today (after his sudden death) the future of this project remains unclear. For the time being, Kabul is watching warily the course of events in Turkmenistan, where until recently “all the reins of power were in the hands of a single person, Mr. Niyazov, so that it is logical to assume that his departure will lead to certain changes.”7 Finally, the most profitable and at the same time most painful sector of the Afghan economy is drug production. In 2006, area under drug crops reached a record of 167 thousand hectares (59% more

7 See: “Afganskaia gazeta: smena vlasti v Turkmenii mozhet povliat’ na sud’bu TAG,” available at [www.afghanistan.ru]. 26 AFGHANISTAN Religion than in 2005), and the output of raw opium, according to preliminary estimates by U.N. experts, was 6,100 tons (92% of global production). The international community has for several years urged the Afghan government to step up its fight against drug production and trafficking, but the situation has only worsened from year to year. All the above-mentioned achievements in the economy and its prospects depend on the development of the political situation, whose degree of stability remains low. As President Hamid Kar- zai said at a conference on Afghanistan held in India, the main factor today is that short-lived security can lead to an inadequate physical infrastructure and a contradictory policy detrimental to regional economic cooperation.

RELIGION

Iakov TROFIMOV Ph.D. (Philos.), professor at the Karaganda “Bolashak” Institute of Actual Education (Karaganda, Kazakhstan)

slam is the state religion of the Islamic Republic of Afghanistan (IRA). Its Constitution guarantees freedom of conscience for the followers of all other religions, but it restricts lawmaking to I laws that do not contradict Islam. In fact, the Constitution merely confirms de jure the de facto status of Islam under the Taliban. It is the religion of about 98 percent of the country’s population. There are over 15,000 mosques on its territory (545 in Kabul alone). The absolute majority of Muslims (80 to 85 percent) are Sunnis; over 15-20 percent are Shi‘a. The remaining 2 percent of the population follows other religions (Hin- duism, Sikhism, and Christianity). They have no temples or other devotional buildings: the Shari‘a bans the public performance of other religious rites. Sunni Islam is the religion of the majority of the Pashtoons, Tajiks, Uzbeks, Turkmen, Baluchis, Aymaks, Arabs, etc. The Hazaras, Persians, and some Pashtoons and Tajiks follow Shi‘a Islam. There are also Ismailites: “In Afghanistan there are two large Ismailitic communities: the Hazaras headed by hereditary pir Sayid Shah Naser Nodiri and the Ismailites of Afghan Badakhshan (Darwaz, Shugnan, Ishkashim, Wahan, Munjan) headed by hereditary pirs. The Hazaras mainly live in Hazarajat, in the district of Doshi of the Baghlan Province and in Kabul.”1 Naqshbandiyya and Qadiriyya, two Sufi orders, have their followers among the Afghans; the cult of saints and holy places plays an important role in their religious life. “There are about one and a half thousand mazars (burials) and shrines (ziyyarats), the most popular of them being the Rawze Sharif Mosque in Mazar-i-Sharif, the supposed burial place of Ali, cousin and son-in-law of the Prophet Muhammad, one of the most revered Islamic saints (especially popular among the Shi‘a), as well as the holy building Sakhi Jan in Kabul, where Ali supposedly spent a night. One of the Kandahar mosques

1 S. Shokhumorov, “Ismailism: Traditions and the Present Day,” Central Asia and the Caucasus, No. 2, 2000, p. 136. 27 CENTRAL EURASIA 2006 Analytical Annual exhibits what is described as the dress worn by the prophet himself; the burial of Ahundzade near Jalalabad is another holy place.”2 Typically enough, all the shrines survived the Taliban intact. For several reasons, today neither the Sunnis nor the Shi‘a have authoritative spiritual leaders. First, Islam in Afghanistan is split into ethnic groups. The Hazara Shi‘a stand opposed to the Pashtoon and Qizilbash Shi‘a; the same is true of the Sunnis. Gulbuddin Hekmatyar, one of the leaders of the anti-Western coalition, made an eloquent statement: “I am a Pashtoon first and a Muslim second.” It seems that this sentiment is fairly widespread in the country. Second, both Hekmatyar and Mullah Muhammad Omar are Sunnis, Pashtoons, they fight both against the troops of the counterterrorist coalition and against each other. The same is true of all the official Sunni and Shi‘a alliances. There are over 80 political parties in the country, most of them (over 90 percent) are Islamic- oriented (they are either Sunni or Shi‘a); the names of many make their Islamic affiliation absolutely clear, yet they fought (and continue fighting) among themselves (they include the Islamic Society of Afghanistan, the Party of Islamic Justice of Afghanistan, the Islamic Union for the Liberation of Af- ghanistan, the Party of Islamic Unity of Afghanistan, etc.). The fact that the word “Islamic” is used in the names of many parties demonstrates that Art 35 of the Constitution: “The formation and functioning of a party based on ethnicity, language, Islamic school of thought (madhab i-fiqhi) and region is not permissible,” applies to the non-Islamic religions alone. All sorts of Islamic trends are represented in the new parliament: Sibghatullah Mojaddedi, a sheikh of Naqshbandiyya, is Speaker of the Meshrano Jirga (Senate), Sayyed Ahmad Gailani, a pir of Qadir- iyya, is Vice-Speaker of the Senate, and pir Sayyed Ishaq Gailani, cousin and son-in-law of Sayyed Ahmad Gailani, is deputy of the Wolesi Jirga (lower house). There is a Ministry of Hajj and Religious Affairs in the republic, the influence of which on the religious situation is negligible. In July, the president of Afghanistan agreed with certain religious leaders that the country needed the religious police (earlier disbanded), an intention supported by Acting Chief Justice of Afghanistan Fazl Hadi Shinwari, Minister of Hajj and Religious Affairs Nematullah Shahrani, and a number of National Assembly deputies. According to the published information, “the police would fight moral crimes.”3 In February, the Imam Ali Mosque was reopened after reconstruction in the capital’s eastern district. Today it is called Men’s and Women’s Mosque. The women occupy the second floor, which can hold 150. Ro Afza, spokesman for the Ministry of Hajj and Religious Affairs, described this event as historic: “It was at the women’s request that a female mosque was opened. This is a historic milestone. This is the first mosque of its kind in Afghanistan.”4 The cartoon controversy caused by the Danish newspaper Jyllands-Posten echoed in Afghanistan with mass protest rallies probably provoked by the Taliban. Political analyst A. Ahmad described the riots: “From time to time, there was an exchange of fire with the police, homes and shops were looted. The word ‘death’ in the slogans shouted by the demonstrators was immediately followed by the words ‘Denmark,’ ‘Norway,’ ‘Europe,’ ‘America,’ and, to complete the list, ‘Russia.’ This compelled the European embassies to remove the nameplates from their office doors. The NATO bases and coalition troops across the country were attacked with hand grenades. The disturbances took the lives of 12 demonstrators, while dozens were wounded. The police and foreign military had their share of injuries as well.”5 On 9 February, the Taliban offered a reward of 100 kg of gold for the lives of the cartoon authors, while the lives of servicemen from Denmark, Norway, and Germany (the countries in which the cartoons appeared) were valued at 5 kg of gold each. It was sheer provocation.6

2 Istoria Afghanistana, available at [http://www.afghanistan.ru/print/?id=103], 10 January, 2006. 3 [http//www.afganistan.ru/print/?id=6305], 26 November, 2006. 4 [http://www.centrasia.ru/newsA.php4?st=1139482560], 9 February, 2006. 5 [http://www.centrasia.ru/newsA.php4?st=1140915180], 26 February, 2006. 6 See: [http://www.centrasia.ru/newsA.php4?st=1139548920], 10 February, 2006. 28 AFGHANISTAN Religion

The local Muslims took the speech given by Pope Benedict XVI in Regensburg (Germany) much more calmly; there were no mass riots, although the authorities and the Taliban responded negatively to the quote from Byzantine ruler Manuil II Paleolog: “Show me what innovation brought Muham- mad and you will find malicious and brutal things, such as orders to propagate religion with the sword.” In its special statement, the Afghan parliament demanded apologies from the Pope, the Foreign Min- istry supported the demand by saying, in particular: “These words demonstrate misinterpretation of Islam and serve the basis of our demand that the Muslims, the followers of the religion of peace and reconciliation, be given an apology.” A man who presented himself as the movement’s press secretary informed some of the Pakistani media that on 15 September, the Taliban, in turn, had condemned the Pope and demanded an apology.7 In 2006, the first clash occurred between Sunnis and Shi‘a in the post-Taliban period. A. Ahmad described it in the following way: “On 8 February, the Day of Ashura, when the faithful mourn the Prophet Muhammad’s grandson Imam Hussain, one of the migrant camps on the Iranian border hoisted a banner that said ‘We express our condolences in connection with the death of Umar and Imam Hussain!’ Accord- ing to historical records, 1 Muharram is the day when Caliph Hazrat Omar perished; and 10 Muharram is the day when Imam Hussain was killed. The first date has never been marked as important. According to information that arrived from Herat, the insulted Shi‘a removed the banner; clashes with the Sunni followed. Over 50 were wounded, over 100 reported missing, and about 30 cars, 2 markets, and several houses were burned down.”8 We should bear in mind that Iran has a lot of influence on the Shi‘a of Afghanistan. Today confrontation between Afghanistan and Pakistan, two neighboring countries, has developed into one of the key aspects of their religious life. There is the common opinion among the Af- ghans that their neighbor should be blamed for the wave of terror in their country. This explains why, after the 16 January terrorist acts that claimed 21 lives, over 5,000 gathered on the border to chant “Death to Pakistan!” “Death to al-Qa‘eda!” and “Death to the Taliban!” They marched in columns in some of the border towns on the Afghan side.9 On 23 September, when speaking in Canada, President Hamid Karzai mentioned the rallies and called on the world community to liquidate those Islamic religious schools, the heads of which approve of terrorism (he had in mind the madrasahs of Pakistan). The president voiced his conviction that the madrasahs were planting hatred instead of teaching religion and that they said there were people who should be hated and destroyed. He was obviously convinced that the Afghans and the rest of the world would have to sacrifice a lot “to remove these places that operate in the name of religious schools, which actually preach hatred and the destruction of people, and encourage and mislead young people to go and kill,” meaning they were in fact raising suicide bombers.10 The statement caused mixed feelings in the West and the Muslim world. It is commonly believed that Mullah Muhammad Omar survives somewhere on the border between the two countries. In 1996, he was made Amir al-Muminin (Leader of the Faithful, that is, the Caliph). In the past, he studied at a madrasah in Kandaharia and later at a Hakkani madrasah. Today, he has supporters in both Afghanistan and Pakistan; the Hakkani madrasah is proud of its former student. In Peshawar, numerous legends can be heard about the mullah’s past exploits in the fight for justice against mojahedin violence and his efforts to set up a united Islamic Emirate of Afghanistan. His enemies, however, dismiss him as nothing more than an ISI agent. In 2006, the Taliban relied on suicide bombers more than before: by the end of the year, the number of such terrorist acts topped 100, while Mullah Dadullah Akhund, a Pashtoon Taliban leader and “ruth- less fanatic, has developed an almost mythological status among his compatriots, which is partly why he was dispatched by the Taliban leadership to head the current recruitment campaign for jihad in the

7 See: [http//www.afganistan.ru/print/?id=6752], 26 November, 2006. 8 [http//www.afganistan.ru/print/?id=6821], 26 November, 2006. 9 See: A. Ahmad, “Novye igry na starom pole. Afganskoe pravitel’stvo—tozhe …NPO,” available at [http:// www.centrasia.ru/newsA.php4?st=1140915180], 26 February, 2006. 10 [http://i-r-p.ru/page/stream-event/index-2912.html?NTHOSTSEEID=200fa8603992], 19 January, 2006. 29 CENTRAL EURASIA 2006 Analytical Annual seminaries of northern Pakistan’s Baluchistan Province. Dadullah boasts that he has 200 suicide bombers awaiting his orders, as well as 12,000 combat-ready fighters.”11 In Afghanistan, freedom of conscience is interpreted according to Islam, which means that the faithful cannot convert to other faiths: this is interpreted as high treason and punished with death. This was recently amply confirmed by the case of 41-year-old Abdul Rahman arrested in February when his own family accused him of converting to Christianity. When facing a possible death sentence, Abdul Rahman held firm to his convictions: “They want to sentence me to death and I accept it,” said he. “I am a Christian, not an unfaithful fleeing from justice.”12 The case stirred up negative responses from the United States, Germany, Italy, Australia, Canada, the U.N., and religious and public figures in the West, which forced the Afghan government to reckon with them. On 27 March, he was acquitted of apostasy and released from prison. He emigrated to Italy, even though the parliament continued to insist that he should be kept behind bars for the rest of his life.13 The Afghan authorities look askance at attempts by foreign missionaries to enter the country. On 9 August, the government ordered that the South Korean Christians who arrived to take part in the Peace March in Kabul be deported. Interior Ministry spokesman Yousuf Stanekzai accused the Koreans, who arrived on tourist visas, of violating visa conditions because they had arrived with obviously different plans.14 These are what I believe to be the most important religious events and processes in Afghanistan in 2006. They show that Islam is being exploited both by the pro-government and opposition forces. The Taliban is regaining its former weight, since the five years without it have brought the people neither peace, nor stability, nor affluence. The foreign military presence is another disturbing factor. It seems that nothing much will change in 2007 in Afghanistan’s religious and sociopolitical life, at least under the present leaders; the country needs new leaders and new approaches to the old overdue problems.

11 [http://www.afghanistannewscenter.com/news/2006/july/jul22006.html] 2 July, 2006. 12 V. Korgun, “Afghanistan prokhodit test na demokratiu,” available at [http//www.afganistan.ru/print/?id=5448], 26 November, 2006. 13 See: [http://www.centrasia.ru/newsA.php4?st=1143648480], 29 March, 2006. 14 See: [http://www.centrasia.ru/newsA.php4?st=1155107820], 9 August, 2006.

INTERNATIONAL AFFAIRS

Viktor KORGUN D.Sc. (Hist.), head of the Afghanistan Sector, Institute of Oriental Studies, Russian Academy of Sciences (Moscow, Russian Federation)

n 2006, Afghanistan’s foreign policy was aimed at procuring international support of the country’s development programs and included the following tasks: to promote an increase in econom- I ic aid from the world community, primarily financial, and expand the assistance rendered the country to resolve its most urgent problems—fighting Islamic extremists and terrorists in the form of the

30 AFGHANISTAN International Affairs

Taliban and their allies; combating narcotics; creating an economic infrastructure; and resolving social problems. In so doing, foreign policy was mainly orientated toward the U.S., Afghanistan’s main strategic partner, and toward friendly neighboring states: Iran, Tajikistan, and India. In its relations with its neighbors, the country gave prevalence to opposing common threats to stability and security in the region, as well as to economic cooperation. Due to a number of contradictions, relations with Pakistan took their own particular course of development. The international London Conference on Afghanistan, which was held on 31 January-1 February, 2006 and which was the highlight of Afghanistan’s foreign policy, was devoted to procuring the confidence and continued support of the international community. It was attended by envoys from nearly seventy nations and international organizations. The conference was held in response to the growing instability in Af- ghanistan and the inability of Hamid Karzai’s government to cope with the serious challenges posed by terrorism, corruption, and narcotics on its own. Thus it was an appeal to the international community to bolster its assistance to the country and take a more active part in its political development and state-building. The Afghanistan Compact presented by the Afghan delegation for the conference participants to consider identifies the pillars of activity for the next five years of development in the Islamic Republic of Afghanistan. It addresses the critical areas of rule of law and governance, rural irrigation, combating narcotics, creating a combat-ready army and an Afghan National and Border Police, modernizing roads and airports, and ensuring that the population is supplied with clean drinking water, electricity, and medical services. The main issues addressed at the forum were improving security methods, enhancing the institutions of governance and justice, human rights, rule of law, economic and social development, and combating narcotics. The main components of the Afghanistan Compact were security and development, as well as securing a commitment from the international community to improve the effectiveness and accountability of its assistance. It also analyzed Afghanistan’s achievements and formulated a course aimed at realizing its vision for the future. What is more, it aimed to draw up guidelines for long-term cooperation with the international community and considered Afghanistan’s greater independence in security and development. Only 22% of foreign aid goes through the country’s budget, while 78% is channeled through nongovernmental organizations. The Afghanistan Compact also envisaged specific goals for the next five years. Here are some of the main ones: —bringing the size of the army up to 70,000 by the beginning of 2007; —disbanding all the illegal armed formations by the end of 2007; —reducing the area of mined territories by 70% by 2010; —ensuring access of 90% of the population to medical services by 2010; —ratifying the U.N. Convention against Corruption by the end of 2006 and creating a monitoring mechanism to oversee its implementation by the end of 2008; —completing a population census by 2008; —creating efficiently functioning institutions of governance by the end of 2010 in every province, including prisons with separate facilities for women and adolescents; —modernizing the ring road, which will play a pivotal role in the government’s plans to turn Afghanistan into a bridge linking Central and South Asia; —supplying 65% of households in major urban areas and 25% of rural households with electricity by the end of 2010; —achieving net enrolment in primary school for boys and girls of at least 75% and 60%, respectively, by 2010.

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The country’s National Development Strategy was also presented at the conference, which reflects the government’s priorities in such spheres as economic development, security, combating narcotics, and building up the state administration system. At the London Conference, Afghanistan’s primary donors pledged to provide 10.5 billion U.S. dollars for rebuilding the country over the next five years. Whereby, 80% of this sum comprises new pledges. “This level of commitment underscores the message that Afghanistan will remain a priority for the international community,” said British Foreign Office Minister Kim Howells.” The largest amount, 1.2 billion dollars, was pledged by the World Bank, followed by 1.1 billion dollars from the U.S., 1 billion from the Asian Development Band, 855 million (over three years) from Great Britain, 480 million from Germany, 450 million from Japan, 268 million from the EU, 182 million from Spain, 181 million from India, 179 million from Holland, 153 million from Saudi Arabia, 150 million from Pakistan, 144 million from Norway, 80 million from China, and 55 million from France. Emphasizing the political significance of the Conference, U.N. Secretary General Kofi Annan said: “It is in the interest of the entire international community to provide assistance as the country consolidates its moves toward peace, democracy and, above all, security, which underpins advance- ment on every other front.” He designated the most important threats, not only those influencing the domestic situation in Afghanistan, but also those concerning the world community: “Terrorism, extremist violence, the illicit narcotics industry and the corruption it nurtures, threaten not only continued state building, but also the fruits of the Bonn Process (2001).” Kofi Annan called on the Afghan leaders to exert the maximum effort to carry out the tasks designated at the conference, since the country’s long-term stability and confidence in its government depend on this. Afghan President Hamid Karzai’s statement attracted the general attention of the forum participants. He focused in particular on the achievements reached by the country after 11 September, 2001. He noted approval of the Constitution and election of the country’s president and parliament as the greatest of these achievements. More than six million children, stressed Hamid Karzai, now attend schools, although four years ago, education was in a state of total collapse. The national economy is growing steadily and, over the past four years, we have enjoyed a total real GDP growth of 85 percent. But Afghanistan is still an illiterate country with a huge gap between the very wealthy elite and the millions of poor people. The prospering illegal drug business supplies the world market with 87% of the total amount of heroin produced in the world. “We have a long road ahead,” admitted Hamid Karzai. “On behalf of the Afghan people, I pledge today that we will be a dependable asset to the security of the region and of the world. A stable, peaceful and prosperous Afghanistan is not a blessing for the Afghans alone; it is for all of us.” Security was the main topic of discussion at the conference. “It is not the security and independence of Afghanistan alone that is threatened by terrorism; this menace is the enemy of peace and of humanity, and is responsible for the massacre of innocent people across the world,” the Afghan president assured the delegates. Despite the presence in the country of more than 30,000 foreign servicemen headed by the U.S., terrorists and Islamic extremists are intensifying the armed struggle against the international forces and Karzai’s government. In 2005, 1,600 people were the victims of terrorism. The United States alone lost 90 soldiers and officers, which constitutes the greatest losses for the Americans during eradication of the Tal- iban regime, whereas over the span of four years, they have lost more than 200 people. The drug issue also generated an animated discussion. The Afghanistan Compact contained an appeal to step up the fight against narcotics and create an economic alternative for drug producers, who frequently derive much larger revenues from drug manufacture than from the cultivation of traditional crops. The document also noted that the government would put greater emphasis on the fact that the production and sale of opiates is amoral and contradicts the laws of Islam. Russia was also an active participant in the Conference. Russian Foreign Minister Sergey Lav- rov spelled out the country’s concern for Afghanistan’s fate: “Russia hopes to use its chairmanship in the G-8 to help the Afghan leadership move toward stability and economic prosperity, as well as to mobilize corresponding efforts by the donor community.” In his words, “Moscow again confirms its

32 AFGHANISTAN International Affairs constructive policy aimed at helping the government of the Islamic Republic of Afghanistan headed by President Hamid Karzai to perform the tasks facing the country.” What is more, the Russian delegation came forward with the following initiative: Russia, along with other Afghanistan donors (the U.S. and Germany), intends to review the question of annulling Kabul’s debt, which the Russians estimate at 10.5 billion dollars. The conference acquired full international recognition and approval: on 16 February, the U.N. Security Council approved the Agreement adopted in London on Afghanistan as “the foundation of partnership relations between the Afghan government and international community” in order to promote comprehensive development of this country for the next five years. In a unanimously adopted resolution, the Security Council called on the Afghan government and the entire global community, including international organizations, to fully execute the provisions of this document and the Annexes to it. On the whole, the conference offered broad opportunities to take advantage of international efforts, financial and other material resources to speed up Afghanistan’s rejuvenation. In keeping with one of the tasks designated in London, on 5 July, an International Conference on Consolidation of Peace in Afghan- istan was held in Tokyo, in which IRA President Hamid Karzai took part. After the Taliban regime was overthrown, Japan assumed responsibility for assisting (mainly in the form of financing) the Disarmament, Demobilization, and Reintegration (DDR) Program of illegal armed formations in Afghanistan. But by June 2005, only 63,000 ex-combatants had been disarmed, while there are still as many as 1,500 armed groups, constituting a total of up to 150,000 people, in the country. At this time, a new phase in implementing the general disarmament program began—Disbandment of Illegal Armed Groups (DIAG). But the slow rate with which it was carried out might lead to failure to meet the disarmament deadline planned at the London Conference, which was set for the end of 2007. This aroused the need to convene the conference in Tokyo. Hamid Karzai reiterated his strong commitment to stand firm on DIAG and accomplish it at any cost despite the difficulties and challenges lying ahead. What is more, problems of security, economic development, and continued financial aid to war-devastated Afghanistan were discussed in Tokyo. Japan is one of the leading donors in the IRA’s restoration and has already invested 1 billion dollars in its reconstruction. At the London Conference, it pledged another 450 million dollars, mainly to ensuring security. At the Tokyo Conference, Japan announced that it would allot an additional 60 million dollars to rural development, support of the National Police, and combating narcotics. But even before the beginning of the conference, Japan responded to a warning from a branch of the World Food and Agriculture Organization (FAO) in Kabul that millions of impoverished Afghans were on the brink of starvation and allotted 3 million dollars to purchase 4,400 tons of foodstuffs for 44,000 needy people in the northeast province of Badakhshan. On the whole, according to preliminary estimates, in 2006, the FAO rendered food assistance to 3.5 million Afghans. During his visit to Tokyo, Hamid Karzai met with Japanese Emperor Akihito, Prime Minister Junichiro Koidzumi, and Foreign Minister Taro Aso, who extended him their full support in continuing to assist Afghanistan’s development. What is more, Hamid Karzai met with chairman of the House of Councilors of the Japanese parliament, with some of its deputy groups, with the leadership of the Afghan-Japanese Friendship League and the Japanese International Counter-Terrorism Committee. Japan’s increased interest in Afghanistan reflects its intention to play a key role in Central Asia, by acting as a serious rival of the main actors on the regional arena: the U.S., Russia, and China. In July, Afghanistan became a member of the international organization “Central Asia plus Japan Dialog,” to which Kazakhstan, Uzbekistan, Kyrgyzstan, and Tajikistan belong. The Second Regional Economic Cooperation Conference on Afghanistan held in November in Delhi was also devoted to extending greater assistance to Afghanistan’s economic revival. It fulfilled the plans to gather the main players in the IRA’s postwar restoration on a single platform. These main players consisted of members of the G-8, the U.N., neighboring countries, and other major donors of the Afghan state-building program. The Conference was attended by 20 delegations, including Af- ghanistan’s neighbors, Pakistan among them, representatives of Great Britain, Canada, Russia, the U.S.,

33 CENTRAL EURASIA 2006 Analytical Annual and other states. The Afghanistan delegation was headed by President Hamid Karzai. The main task of the meeting in Delhi was to draw up a formula of effective regional economic cooperation aimed at helping to stabilize the political situation in Afghanistan. In particular, ways were discussed to attract investments into Afghanistan, including the problem of delivering energy resources to the country; difficulties were reviewed related to the development of trade and the power network, to which only 10% of the population have access; and the question of the country’s agricultural development was also raised. On the eve of the conference, the report of the Joint Coordination and Monitoring Board was distributed, which declared “slow progress or lack of such” to be the result of the escalation in combat action and other difficulties. The ongoing armed conflict, the report emphasized, is diverting resources from reconstruction and development. “The anticipated economic growth of 9% this year,” the document states, “is not enough to create the new jobs in a relatively short time necessary for seriously reducing the scale of poverty or putting an end to the growing disillusionment.” The report expressed the hope that the conference in Delhi would “promote further regional economic integration as a means to reduce political tension and ensure security in the region.” Among the problems of regional economic cooperation, goods transit attracted the greatest attention, particularly a project for building a road to link Afghanistan, Tajikistan, and Uzbekistan to the Iranian port of Bander Abbas in the Persian Gulf. The problem of developing an energy sector was also reviewed, in keeping with which Iran, Kazakhstan, Pakistan, and Tajikistan signed an agreement on electric power deliveries to Afghanistan. President Karzai’s stay in India, where he, incidentally, received an education at one time, helped to strengthen and expand traditional friendly ties between the two countries. India is one of Afghan- istan’s main donors and has allotted 652 million dollars to various reconstruction projects. One of the main foreign policy tasks of the Karzai government in 2006 was consolidating ties with international and regional organizations, as well as raising international economic aid to Afghan- istan. Hamid Karzai’s trip to Baku on 5 May to participate in the summit of the Economic Coopera- tion Organization (ECO), to which 10 regional states belong, also helped to fulfill this task. Whereby on the eve, 4 May, a meeting of the ECO Council of Foreign Ministers was held in the Azerbaijan capital, at which the organization’s development prospects were discussed. In particular, during the meeting, the organization’s Secretary General presented a report, a new chairman was elected, and problems of cooperation in transportation and trade, simplification of visa conditions (within this regional structure) were discussed. And at the summit represented by the presidents and prime ministers of the ECO member states, a report was presented on the work of its executive bodies and a plan of action for 2006 was designated. But Hamid Karzai’s meetings with Azerbaijan President Ilham Aliev and Iranian President Mahmoud Ahmadinejad proved to be the most productive. The latter, after giving all due respect to the courage of the Afghan people, assured Hamid Karzai of Tehran’s desire to develop and expand multifaceted aid to its neighbor. In recent years, Iran has indeed become one of Afghanistan’s key donors, after allotting more than 500 million dollars to its reconstruction, and is participating in several important economic and social projects in the IRA, including in transportation, power engineering, irrigation, and public health. But there are still several important problems complicating relations between the two countries. First, the problem of Afghan refugees: despite the fact that more than 1.5 million people have returned home from Iran, there are still approximately 800,000 Afghans on its territory. Tehran has repeatedly tried to speed up their repatriation to the displeasure of official Kabul. The second problem is Afghan drugs, most of which are smuggled to neighboring countries. According to the latest data, in 2006, the flow of these drugs to Iran dramatically increased, amounting to approximately 60% of the entire volume of drugs illegally exported from Afghanistan. Tehran is carrying out a truly titanic fight against this evil and is complaining about the lack of support from Kabul. Iran also regards the presence of U.S. troops in Afghanistan as a threat to its security, although this factor does not directly effect Iranian-Afghan relations.

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President Karzai’s participation in the work of the anniversary, 5th, session of the SCO (15 June, Shanghai) is an important step in strengthening Afghanistan’s position in the Eurasian space. Although Afghanistan still does not have even the status of observer in this organization, it has long participated in its work, in the structure of which the SCO-Afghanistan Contact Group has been created. Kabul’s plans include obtaining the status of a full-fledged member of the SCO. Like at the ECO summit, the Afghan president found it more important to meet with the leaders of the member states than participate in the routine work of the sitting of the SCO leaders. China is one of Afghanistan’s main partners: Beijing’s assistance since 2001 is estimated at 400-500 million dollars. So during the official state visit, which began when the summit ended, Hamid Karzai gave particular significance to his meeting with Chinese leader Hu Jintao. Keeping in mind that Afghani- stan and China are immediate neighbors (they have a common border of 70 km), both leaders expressed the desire to consolidate economic and military ties between the two countries. Within the framework of the visit to Beijing, on 18-21 June, the Sino-Afghan Treaty of Friend- ship, Good-Neighborly Relations, and Cooperation, the Agreement on Economic Trade Cooperation were signed, and a decision was adopted to create a joint economic trade committee. At the signing ceremony, both leaders presented an assessment of their foreign policy positions and the relations between the two countries: they are unanimous in their agreement to jointly combat the three evil forces—separatism, extremism, and terrorism, as well as against international crime. “China respects the social system and development path the Afghan people have chosen for themselves,” Hu Jintao stated in his speech, “and will render support to the efforts of the Afghan government aimed at strengthening national independence, sovereignty, and territorial integrity, maintaining social stability and economic development. China will actively participate in reconstructing (Afghanistan).” The PRC leader highly appraised the relations and coordination of efforts between China and Afghanistan in international and regional affairs, and also expressed the country’s desire to cooperate with it on a multi-vector basis within the framework of such organizations as the SCO and the South Asian Asso- ciation for Regional Cooperation (SAARC), which Afghanistan joined in 2005. What is more, during this visit, Hamid Karzai signed 11 economic trade agreements with China, including on cooperation in developing transportation, telecommunications, the use of water resources, as well as in education, cultural exchange, agriculture, and the military sphere. The Afghanistan President talked before Chinese businessmen, asking them to invest in the Afghan infrastructure: telecommunications, transportation, and construction. Along with consolidating its position in international and regional organizations, Afghanistan has been energetically developing bilateral relations with other states. The priority was focused on its relations with the U.S., which largely define the political situation in the country by having a significant influence on the foreign policy of Hamid Karzai’s regime. It is particularly important that the United States is playing a leading role both in fighting the Taliban and in the socioeconomic revival of the IRA. What is more, in May 2005, Hamid Karzai signed an Agreement on United States-Af- ghanistan Strategic Partnership in Washington. Cooperation with the U.S. in 2006 mainly unfolded in two vectors: official contacts between the leaders of the two countries and trilateral cooperation in the U.S.-Afghanistan-Pakistan format (within the framework of a trilateral commission for combating terrorism). What is more, Kabul and Washing- ton are actively developing ties in many spheres of Afghanistan’s military, socioeconomic, and cultural life: financing and training its army, encouraging interoperability of the U.S. and Afghan Armed Forces in military operations against the Taliban, building and restoring economic and social facilities, combating narcotics, providing humanitarian aid, helping to resolve the refugee problem, and so on. President George Bush’s blitz visit to Kabul on 1 March came as a surprise to the Afghans. It was his first visit to the Afghan capital. It was a blitz visit indeed since the head of the White House was in Afghanistan for only four hours (on his way to Islamabad, and then to India). Bush met with his Afghan colleague and members of his Cabinet. In so doing, the overseas guest could not restrain him-

35 CENTRAL EURASIA 2006 Analytical Annual self from using the rhetoric customary on such occasions: he sweepingly spoke of establishing democracy in Afghanistan and that the U.S. would keep the pledges it has made to the country. Afghan-Pakistani relations hobbled along in 2006. In addition to the traditional contradictions between the two countries, the greatest irritation in Kabul was aroused by the presence of the Afghan Taliban in Pakistan, where its members found refuge in the Federally Administered Tribal Areas (FATA) of the North Western Frontier Province. Kabul’s officials have long been reproaching Islam- abad for turning a blind eye to the terrorist activity of Afghan Islamic extremists, who are becoming entrenched in its territory. What is more, they are receiving latent (and sometimes open) support from the local tribes, religious radical parties, and Inter-Services Intelligence (ISI) of Pakistan. These questions were raised during Hamid Karzai’s official visit to Islamabad in February, the first after winning the presidential election in October 2004. At the meeting, the two heads of state carefully sidestepped the question of the Taliban’s infiltration across the border into Afghan territory, although they also discussed the situation in the border areas of both countries. They placed the main emphasis on jointly combating terrorists. In so doing, Hamid Karzai handed Pervez Musharraf a list of people living in Pakistan and suspected of participating in the Taliban’s terrorist activity. He rejected Islamabad’s plan to build a security wall along the Pakistani-Afghan border and mine it, stating that the border should not divide, but bring the people of the two countries together. On 15 March, the IRA parliament also rejected this project. Islamabad is one of Washington’s main partners in the war on terrorism: as early as 2005, it deployed its army units (80,000 people) in the tribal areas where the Afghan Taliban and al-Qa‘eda militants found refuge. But in the clash with religious extremists, these units underwent significant losses, the activity of the Taliban and their allies from Pakistan not only failed to decrease, it continued to rise. Over the past two years, terrorists have made three assassination attempts on Pervez Musharraf. But official Islamabad denies that the Taliban has settled in Pakistan. Facts show that Pervez Musharraf is pursuing an armed struggle mainly against foreign terrorists—Arabs, Chechens, Uzbeks, and others, who make up the nucleus of al-Qa‘eda. In so doing, he turns a blind eye to the activity of the Taliban. Many experts believe that this is a ploy to screen Islamabad’s intention to use the Taliban movement as a lever of pressure on Kabul. Hamid Karzai and other officials repeatedly talked about “the interference of a neighboring state” in Afghanistan’s affairs, without naming this state, and considered this to be the reason for the increase in terrorism. Criticism became all the more severe and targeted as the Taliban increased the scope of its combat action in Afghanistan. In the summer, the NATO coalition forces were forced to launch large military operations against the Taliban, during which dozens, even hundreds, of extremists lost their lives. The role of certain Pakistani circles in supporting the terrorists became all the more obvious in Afghan- istan. For many, it was already no secret that the headquarters of the Taliban and its leadership was based in Quetta, the administrative center of the Pakistan province of Baluchistan. This is also where the Tal- iban’s main mobilization base in located with its numerous madrasahs, training camps, and arms market. Under the growing pressure, including from the West, President Pervez Musharraf took an unprecedented step by signing an agreement on 5 September with radical religious circles of the Pash- toon tribes of North Waziristan of the North Western Frontier Province of Pakistan on putting an end to the armed clashes between the local Taliban and government troops. In response to the promise of radical representatives to stop supporting the extremists, Pervez Musharraf began withdrawing troops from this territory. On 6 September, he made an official visit to Kabul, where in a meeting with Hamid Karzai he called the accord “a symbol of his commitment to crushing the Taliban.” But even this visit did not bring the positions of the leaders of the two countries closer together. What is more, Pervez Musharraf’s statement on 12 September in Brussels that the Taliban is more dangerous than al-Qa‘eda, since it is supported by the Afghans, gave rise to another hike in tension between the two countries. The Afghanistan Foreign Ministry curtly stated that the Taliban is supported outside Afghanistan. The relations between Hamid Karzai and Pervez Musharraf approached the level of hostility.

36 AFGHANISTAN International Affairs

In this situation, Washington hurriedly took measures to reconcile them: at the end of Septem- ber, both leaders paid an official visit to the U.S. A few days before that, on 20 September, Hamid Karzai spoke at the 61st session of the U.N. General Assembly, calling on the world community to increase its assistance to Afghanistan and stating that terrorism is generated not in Afghanistan, but beyond its borders, in one of the neighboring states. At the meeting of Karzai, Musharraf, and George Bush held in Washington on 27 September, Hamid Karzai assumed a wait-and-see position when the talk turned to a peace pact Pervez Musharraf signed with Taliban radicals in North Waziristan. George Bush managed to get Hamid Karzai and Pervez Musharraf to assume the obligation to join efforts in the war on terrorism, although each of them in his interview did not change his view of his partner, but without making any direct accusations. In the end, the tension between the two presidents was not defused. Nevertheless, the significance of Hamid Karzai’s visit went far beyond the bounds of reconciliation with Pervez Musharraf. The Afghanistan president was able to inform the international community of his position on several key issues and convince it to become more actively involved in the IRA’s rejuvenation and development. Hamid Karzai convincingly showed that terrorism can only be conquered by destroying its base, sources of financing, and other support. It is extremely important that the U.S., Afghanistan’s closest ally, confirmed its support of the country’s president. 2006 was also characterized by a certain stepping up of Russian-Afghan relations. At the end of June, Kabul was visited by a Russian delegation that included representatives of the Russian presidential administration, the Security Council, and other departments. They held several productive meetings at different levels and sounded out the possibilities for further expanding relations between the two countries. In the fall, Moscow received Afghan guests. At the beginning of October, Afghan Foreign Min- ister Dr. Rangin Dadfar Spanta and Minister of Higher Education Dr. Ahzam Dadfar came to the Russian capital. The leaders of the two countries’ foreign ministries exchanged opinions on a wide range of issues, emphasizing Afghanistan’s importance for Russian foreign policy. The growing cooperation aimed at technically equipping Afghanistan’s army and security services and training the Afghan drug police was also noted. During the visit, an agreement was reached on Russia’s participation in restoring the Salang tunnel high in the mountains that links Kabul to the country’s northern provinces, built at one time with the help of Soviet specialists. And in November, an Afghan parliamentary delegation headed by speaker of the lower chamber Yunos Qanuni visited Russia. The deputies met with chairman and members of the State Duma and reached an agreement on establishing permanent contacts between the legislatures of both countries and on exchanging experience. All these contacts can hardly be called a breakthrough in relations or the beginning of a new stage in their development. Most likely they confirm the objective need to expand cooperation and understand that the current level of bilateral relations is inadequate under the rapidly changing conditions of the development of international relations in the region and the increase in threats to the national interests of both countries. So, in 2006, Afghanistan remained an area where the interests of many countries of the world interacted and clashed. The leading states, the main donors and supporters of the Afghanistan restoration programs, are still defining the course of its foreign and largely domestic policy. But the IRA government headed by President Hamid Karzai is gradually increasing its efforts to regain the country’s place as an integral and dignified member of the family of nations, searching for ways and methods to resolve its domestic and foreign political problems. One way or the other, the situation in Af- ghanistan and the policy of its leadership are having an ever-increasing influence on the regional political processes and helping to reinforce the country’s international prestige.

37 CENTRAL EURASIA 2006 Analytical Annual

REPUBLIC OF ARMENIA

GENERAL OVERVIEW

Agasi ENOKIAN Associate professor, Department of International Relations and Diplomacy, Erevan State University (Erevan, Armenia)

he year 2006 can be described as a year of stagnation and increasingly unbalanced presidential power—the trends that came to the fore after the 2003 grossly falsified elections. In 2006, the T nation lost all interest in the political developments in its own country, which became absolute after the referendum on the Constitution, which was imposed on the people late in November 2005 contrary to the commonly shared sentiments and in disregard of the opposition. The Karabakh issue remained as prominent as ever in Armenia’s foreign policy; domestic policy unfolded under the pressure of the 2007 parliamentary elections, while the continued decline of the dollar exchange rate caused a lot of pessimism in the economic sphere. The year 2006, which was free from elections both in Armenia and in Azerbaijan, was expected to be a period of minimum tension at home and with minimum demands for populism, which suggested that progress on the Karabakh issue could be expected. The international mediators, the leaders of the countries involved in the settlement, and the sides in the conflict were optimistic about the prospects. The foreign ministers met several times to discuss the issue, numerous documents were drawn up, and the leaders of the countries involved talked to each other, but no breakthrough followed. The disappointment that naturally followed caused the sides to make belligerent statements, while the international negotiators turned to the public in both countries, rather than their leaders. The “complementariness” adopted by the republic’s leaders as the main policy course was trans- lated into new programs of cooperation with the EU and NATO, the transfer of several other power capacities to Russia, and the beginning of construction of a gas pipeline from Iran—all of this setting the scene for the talks on the Karabakh settlement. At home, the government showed a lot of vigor and inventiveness during the preparations for the 2007 parliamentary elections: the results would determine, to a great extent, the choice of president in 2008. This meant that the government was planning twenty-four months ahead.

38 REPUBLIC OF ARMENIA Politics

This adds special importance to the changes that took place in the ruling coalition, resignation of National Assembly speaker Arthur Bagdasarian, leader of the Orinats Erkir Party, and its withdrawal from the Cabinet. The PR component of this resignation left many questions unanswered; the stated political reasons sounded doubtful. It looked as if the president either wanted to build up a stronger team on the eve of the elections, or he needed a more obedient opposition, or he was merely going to all lengths to shift responsibility for the failed Karabakh effort elsewhere. Several failed attempts at setting up a new pro-presidential party were finally crowned with success. The new party, entitled Prospering Armenia, is headed by well-known oligarch Gagik Tsaru- kian; its members were carefully selected: no criminals, no people with doubtful pasts, no bureaucrats. Having started from scratch, the party gained enough weight to expect a breakthrough at the upcoming parliamentary elections. The opposition, on the other hand, remained timid and passive: it still needed time to recover from the blows it received in the past. Very much as before, the opposition parties spoke a lot about unification; in 2006, this finally took the shape of an Anti-Criminal Movement, the ruling parties were also invited. By the end of 2006, the general disillusionment caused by stagnation, the slack opposition, the party methods, and elections as a way for changing the regime became too obvious to be further ignored. It urged the opposition forces to move forward by setting up several public movements— Alternative, Civil Disobedience, and the Military Fraternity. Continued decline of the exchange rate of the dollar and other foreign currencies largely defined the logic of the country’s economic development. In fact, the decline of about 20 percent, caused by the Central Bank of Armenia in an effort to bridle inflation, crippled the country’s economy and the consumer sector. The government resorted to the following explanation of its economic course: the foreign currency context is burdened by direct remittances from abroad, which in 2006 reached about $1.5 billion. About a third of the local population lives on money sent by relatives; the strengthened dram considerably lowered the people’s standard of living. Local producers also suffered: they exported their products for cheaper dollars and bought raw materials and paid their workers with expensive drams. This is rather eloquent evidence of economic stagnation.

POLITICS

Manvel SARKISIAN Expert at the Caucasus Center (Erevan, Armenia)

he referendum on the Constitution that was disorganized, while the ruling coalition came too held, with numerous violations, in Novem- close to a split. In this context, the political par- T ber 2005 was responsible for society’s ties and the government pinned their hopes on complete alienation from what was going on in the parliamentary elections of 2007 and, to an the country and entirely ruined the opposition’s even greater extent, on the presidential election prestige among the people. The government was of 2008.

39 CENTRAL EURASIA 2006 Analytical Annual A. The Government and the Opposition at the Beginning of 2006

Late in 2005 the idea of a presidential successor appeared on the domestic scene. While the media were engrossed in idle discussions about a possible successor, a potential alliance between Defense Minister Serzh Sarkisian and one of the political parties developed into a problem much discussed by the political community. The minister was gradually moving toward the epicenter of public and political life; his presidential ambitions were growing more and more obvious. It was at that time that the political community started talking about certain contradictions between President Kocharian and Defense Minister Sarkisian, who was considered his favorite, an unprecedented feature of the country’s political life. It was at that time that he was first described as a possible successor. Early in 2006, the government demonstrated its illusory unity for the last time when President Kocharian suggested that the ruling coalition (the Republican Party, the Armenian Revolutionary Federation Dashnaktsutiun, and the Orinats Erkir Party) issue a joint statement about its willingness to continue working together until the parliamentary elections of 2007. Later, however, it became obvious that the centrifugal intentions in the government camp could not be stemmed. Foreign factors worsened the already bad situation still further: on 17 January, U.S. Ambassa- dor to Armenia John Evans met President Kocharian to express his country’s concern over the constitutional referendum of 27 November. In this way, the White House informed the Armenian president that, as America saw it, the country’s governance was ineffective and that Armenia could expect $235 million from the Millennium Challenge Account Program only if and when it achieved efficient and fair governance. The 7 March statement by Deputy Undersecretary of the U.S. State Department Matthew Bryza contained a broad hint at the unsatisfactory way the country was governed. Speaking at a press conference in Erevan, he said that his country believed that democratization in Armenia would triumph, otherwise the country would be excluded from the Millennium Challenge Account Program. He concluded with what sounded like a warning: “Very soon we shall try to build democracy from below, not from above.” On 10-11 February, the Armenian and Azeri presidents met in Rambouillet (France) to discuss the Karabakh issue. The talks failed, which caused a wave of negative responses. Even before the talks, as well as after them, the Armenian political elite was in turmoil, which threatened to destroy the power system. In February, the events that unfolded around Defense Minister Serzh Sarkisian brought the crisis to its peak. The public was stirred up by the rather unexpected election of defense minister as Chairman of the Erevan State University Board on 27 January, a post claimed by Radik Martirosian, former university rector, and rumored to be the president’s choice. According to the media, the Republican Party and defense minister challenged the president and pushed Mr. Sarkisian closer to the presidency. The election of the ombudsman held on 8 February in the parliament can explain much of what was going on in Armenia. The secret ballot revealed that the ruling coalition, which closed ranks behind prominent lawyer Armen Arutiunian, failed to get the necessary number of votes. The candidate, who was backed by the president, and the ruling coalition were puzzled—the defeat came as an unpleasant surprise. While the president talked to his Azeri colleague in Rambouillet, the parliament was going through what could be likened to a mutiny. This mutiny, instigated by several issues, reached its apogee on 21 February after the sensational interview by Arkadiy Gukasian, head of the Armenian community of Nagorno-Karabakh, to Radio Liberty. He suggested that Armenia should abandon the talks in order to

40 REPUBLIC OF ARMENIA Politics push Azerbaijan into direct negotiations with the Karabakh Armenian community. This was a blow to President Kocharian’s prestige. It took the president several days to restore peace and order in the ranks of the ruling coalition. On 2 March, the president, who found himself cornered, was interviewed by two pro-presidential TV channels and the Public NKR TV channel, which carefully edited it, to repair the damage and restore his prestige inside and outside the country. He said, among other things, that those who condemn his course “either are unable to grasp all the subtleties of what I am doing or are pursuing their own private aims in a situation that offers them nothing.” The president made it absolutely clear that he would not follow the initiatives of others. In his interview, the president warned that Armenia might unilaterally revise its position and recognize Nagorno-Karabakh’s independence if Azerbaijan insisted on its unconstructive position. In this way, the president demonstrated his intention to remain in control at home and in the foreign policy sphere. The president’s firm position caught many of the political subjects lulled by the failure of the Karabakh talks and the acute domestic crisis in progress for at least three months unawares. In other words, the period of illusion and doubt suddenly came to an abrupt end. On 3 February, Galust Saakian, leader of the parliamentary faction of the ruling Republican Party, described the president’s interview as a “declaration of war.” The statement by one of the leaders of what was believed to be a pro-presidential party surprised many; it also bared the government’s fairly amorphous nature and set the tone for the anti-presidential statements. Artashes Gegamian, leader of the opposition National Unity Party, was even more vehement. On 10 March, he convened a party conference to accuse the ruling elite of “fanning a war to remain at the helm” and outline a program of mass actions. The opposition did not respond. The TV interviews by the head of state placed the defense minister in a quandary. He publicly insisted on territorial concessions to Azerbaijan and, in the narrow circle of the Armenian military, admitted that his country would be unable to oppose Azerbaijan’s military might. After the interviews, he had to cut back his public activity and limit himself to security issues; the dialog with the president lost its edge, while the public eagerly criticized him. On 16 March, several former military commanders (former defense ministers Vazgen Manukian and Vagarshak Arutiunian and former field commanders) supported by the public association In De- fense of the Liberated Territories organized a round table to inform the public about their plans to replace the defense minister. It was a potentially important political action. They argued that the defense minister actively involved in politics demoralized the army and weakened it. The group called on the opposition parties to close ranks and act together.

B. Mounting Tension in the Ruling Coalition and Its Collapse

Everyone expected that the president, who had restored his position in the power system, would be more active. This did not happen—he seemed to calm down; obviously unwilling to worsen relations with the key figures in his closest circle or with the Republican Party, he moved from the “stick” to “carrot” in his relations with the newly emerging ruling parties. The coalition was puzzled by the president’s intention to set up new ruling parties; this irritated his closest allies—particularly the Republican Party—on which the president relied. No wonder the new, yet undeveloped, parties were the first to detect certain changes. It was rumored even before the constitutional referendum of 27 November, 2005 that highly successful businessman Gagik Tsarukian was forming a new party, Prospering Armenia. His close-

41 CENTRAL EURASIA 2006 Analytical Annual ness to the president and the fact that the new party would be closed to businessmen and bureaucrats stirred up both political camps. At the same time, Artashes Tumanian, another of Robert Kocharian’s comrade-in-arms, announced his intention to set up a party he would call New Country. These moves on the political scene were accompanied by rumors that Prosecutor General Agvan Ovsepian was also planning to create a party called Alliance for Armenia. As could be expected, the president’s old friends, particularly the Republican Party, felt neglected and jealous of the newcomers. Before the 2005 referendum, the president’s intentions were not quite clear, however, the idea of new parties was born at that time; a violent response from the opposition was expected, but never took place. The opposition was bankrupt. After the referendum, however, when the ruling forces realized that they had retained power, the president’s plans were interpreted as an encroachment on the position of his former pillar—the Republican Party and its ally Serzh Sarkisian. In March, the president had to shelve the idea of new parties under the pressure of circumstances; A. Tumanian, head of the presidential administration, who had been actively building up the New Country Party, was among the losers. He was dismissed from his post on 24 February and, three weeks later, was deprived of the right to go on with party-building. The ruling camp was united once more; political status quo looked even more desirable than before. Mr. Tumanian’s fate looked too sad to be emulated. The efforts were duly rewarded: on 27 March in Washington, Armenia and the Millennium Challenge Corporation signed an agreement under which Armenia could expect over $235 million during the next five years. The U.S. was behind the ruling regime—this was absolutely clear to all the political forces. The ruling coalition was thrilled when U.S. State Secretary Condoleezza Rice described the Armenian leaders as an “elected leadership.” The situation remained too vague for some of the political figures who risked making rather inappropriate moves. On 27 March, for example, after the meeting of the Zhog- padgamavor parliamentary faction, it turned out that two of its members—Levon Khachatrian and Va- gram Bagdasarian—intended to set up a party called Alliance for Armenia, while the public refused to believe Prosecutor General A. Ovsepian, who insisted that it was not his intention to go into politics. At a press conference on 4 April, Speaker of the National Assembly Artur Bagdasarian, leader of the Orinats Erkir Party which belonged to the ruling coalition, stole the show from all other political figures by saying in particular that he planned to consolidate the country’s liberal forces. He also stressed the need to fight corruption and offered the opinion that “the time of éminences grises in Armenia had passed” (a broad hint aimed at Defense Minister Sarkisian). His press conference was taken as his personal claim to an independent role. Later events demonstrated that it was his initiatives that most radically changed the nature of the country’s political development. His statements stirred the defense minister, who earlier preferred to keep low profile, into action (with many repercussions). The week between 10 and 16 April proved to be a time of breakthrough for two key political figures: Defense Minister Serzh Sarkisian and Speaker of the National Assembly Arthur Bagdasarian. The roles of two other powers in the Republic of Armenia became clear: the United States spent money on certain political conditions, while Russia extended invaluable help to the Armenian leaders, including the defense minister. Russia countered America’s promises of financial support in exchange for democratization of the country and diversified energy sources with a financial initiative of its own (6 April) and the intention to monopolize energy production: it suggested that the fifth power generating unit of the Hrazdan thermal power plant be transferred to it for $248 million. President Kocharian proved to be very realistic when it came to assessing the meaning of the money received in Washington on 27 March. He was well aware of the pitfalls on the road he had promised to follow—democratization and the anti-corruption struggle (and probably his changed view on the Karabakh issue). The solution suggested itself that Armenia should help Russia to resolve one of the most important problems: the idea of diversified energy resources for Armenia was buried to the defense minister’s advantage.

42 REPUBLIC OF ARMENIA Politics

The hysterics about the transfer of the fifth power generating unit of the Hrazdan thermal power plant to Gazprom came as no surprise. On 11 April the defense minister, amid delighted comments on the transfer of the fifth unit to Russia, stated that the political processes in the country were going on as expected and very much according to his plans. He went on to say that he was not seeking an election alliance with any of the parties and that he would announce whether he intended to run for president after the parliamentary elections of 2007. He said that anti-Russian forces enjoy practically no influence in Armenia—a very significant comment indeed. It was not by chance that a delegation of American congressmen, which included director of the Millennium Challenge Corporation, visited Armenia at precisely that time. Those who expected significant comments from it were not disappointed. On 12 April, at a press conference in Erevan, John Danilovich, Chief Executive Officer of the Millennium Challenge Corporation, pointed out that the Millennium Challenge Account Program might be suspended after the 2007-2008 elections. He reminded the audience about corruption. The United States was obviously displeased—everyone guessed that much. It was clear that the issue of power in Armenia was gaining importance. The fifth unit deal raised another wave of interest in the problem of corruption, this time in the privatization sphere. The tension in parliament came up short of a political crisis. The defense minister and his activities were eclipsed by the political “heyday” of the Orinats Erkir Party and its leader. The regular plenary session of the Armenian parliament was used as a battlefield; public debates became public squabbles inside the ruling group and between it and the opposition. The Republican Party was under fire; for some reason Prime Minister Andranik Margarian chose this time to insist that the parliament should vote and pass the draft Law on Approving the Report on the Fulfillment of the Privatization of Public Property Program in 2001-2003. The factions of two coalition parties—Orinats Erkir and the Republican Party—clashed; the opposition moved to the side of the former. On 12 April, its leader A. Bagdasarian reported on serious violations of the privatization procedure and announced that the relevant facts unearthed by the Auditing Chamber would be transferred to the Public Prosecutor’s office. He added that his faction would vote against the Cabinet’s draft. This dampened the fighting spirit of the Republican faction; the party leaders hastened to say that they did not want to institute investigations because the opponents would find themselves in hot water. In other words, the honor and political future of the Republican Party were at stake. Very much in line with Armenia’s common political practice, the necessary votes were collected under pressure. On 13 April, the Cabinet’s report was approved by 65 votes. The next day, the press informed the nation that only 7 out of the 22 Orinats Erkir deputies obeyed their leader, while Artak Sarkisian, who voted counter to the instructions, was immediately expelled from the party. This started a chain of failures. The ruling coalition was obviously in crisis—the 10-13 April events demonstrated this beyond a doubt. On 14 April, Gurgen Arsenian, leader of the United Labor Party faction, who had also opposed the Cabinet’s report, said that the situation inside the coalition could easily undermine the balance: the coalition had moved too close to a split. On the same day, Arthur Bagdasarian transferred the documents of the Auditing Chamber of the National Assembly, which revealed gross violations during the 2001-2003 privatization campaign, to the Prosecutor General’s office. Once more the Prosecutor General was expected to shoulder the responsibility. The office and the Cabinet grew nervous. The media accused Mr. Bagdasarian of deliberately destroying the fragile balance. Public confrontation between the president and the speaker provoked by the latter’s widely publicized interview in Frankfurter Allgemeine Zeitung brought the tension to its peak. The official media insisted that the statement went against the Armenia’s foreign policy course. The president’s press service revealed that Robert Kocharian was displeased and puzzled. It seems that his displeasure and puzzlement were caused by the fact that the German newspaper presented Arthur

43 CENTRAL EURASIA 2006 Analytical Annual

Bagdasarian as “the next president of Armenia.” The National Assembly speaker insisted that the previous presidential election had been grossly falsified. This was the last straw: the president’s press service quoted the president as saying: “We should wait until Bagdasarian supplies exhaustive explanations.” On 2 May, the speaker specified his position at a plenary meeting of the National Assembly and said that it did not contradict the position of the ruling coalition. If it failed to support him, said Bag- dasarian, his party was prepared to leave the opposition in order “not to embarrass its colleagues.” It turned out that he was quite serious. We could expect the government to act promptly: indeed, between 5 and 11 May, the Orinats Erkir faction lost nine businessman-deputies. The press described this as “rats fleeing a sinking ship:” President Kocharian was obviously resolved to punish the speaker. On 12 May, Arthur Bagdasarian called a press conference, at which he announced that he would leave the coalition and retire from his post as speaker because of acute disagreements with the leaders of the other coalition parties and the president. His party would move to the opposition, he added. After the press conference, the meeting between the coalition parties and President Kocharian registered, according to the press, a “civilized divorce” with Orinats Erkir. It was also announced that the Republican and Dashnaktsutiun parties would remain true to the Coalition Agreement. The presidential press service issued a statement about the speaker’s retirement, which said that the head of state was absolutely convinced that this step would not trigger a political crisis. Inside the Orinats Erkir, the situation could no longer be controlled. The leader demanded that all the bureaucrats who belonged to the party immediately leave their posts, which obviously was against their intentions—none of the three ministers (including Education Minister Sergo Eritsian, whose chances of retaining his post were slim) obeyed. They preferred to leave the party. Some time later, Sergo Eritsian was appointed the president’s advisor.

C. An Alliance between the Defense Minister and the Republican Party. The Ruling Group is Steeped in Contradictions

The leaders tried to present the developments in the ruling coalition as a normal political process, but irreversible changes were in progress. The pro-presidential Prospering Armenia Party was speedily set up. On 14 April, it published its program as an addendum to oppositional dailies. The party designed as a “puppet opposition” had to move to the presidential camp when Orinats Erkir left it. The Republican Party acquired a rival. The opposition, meanwhile, was not overjoyed to see the Orinats Erkir Party in its ranks; Ar- tashes Gegamian, leader of the National Unity Party, and the newcomer did not see eye to eye on certain issues. In fact, Orinats Erkir’s move altered the country’s political landscape and initiated shifts in both camps in search of new niches. By July, the Republican Party came dangerously close to a wave of “rats fleeing a sinking ship.” To stem the possible exodus of its members to the Prospering Armenia Party and in a last frantic effort to remain afloat, the Republicans allied with Serzh Sarkisian. For his part, the defense minister was pushed into an alliance he had not contemplated by a fairly surprising interview given by Foreign Minister Vardan Oskanian. On 14 July, he convened a press conference to announce what can be described as the presidential camp’s idea about Armenia’s political future. It was officially announced for the first time that Robert Kocharian would not run for president in 2008, which meant a rush for successor status. The foreign minister clarified the situation: “We should not be guided by specific forces or individuals. We should think about strategic aims,” and added that this would bring in the second stage of reforms,

44 REPUBLIC OF ARMENIA Politics which might “cripple the elite’s political and economic interests.” The foreign minister assured the journalists that the conditions were ripe. This meant that the president’s team had chartered the country’s political future; it was thought that the foreign minister obviously wanted to succeed the president. Time was short; all those involved in the political games realized that they had to move for fear of being left out in the cold. On 14 July, Defense Minister Sarkisian announced that he had joined the Republican Party, which kept the bureaucrats and businessmen in its ranks. The minister hinted that he had the support of all big businessmen and influential political figures. The Republican Party began preparations for a congress that took place on 22 July and clarified certain issues that had been troubling the political elite for some time. As the newly elected Chairman of the party’s Council, Serzh Sarkisian announced that the party would go on with its policy despite the steps taken by other parties. His speech sounded like a challenge: he promised that his party would bring the country to a qualitatively new level. This and the efforts of the party functionaries to present their activities as a national triumph and a qualitative change in the political climate failed to change reality. Gagik Tsarukian, leader of the Prospering Armenia Party, did not accept an invitation to cooperate. This somewhat dampened the Republicans’ hopes. Immediately after the congress, certain political forces demanded that Serzh Sarkisian be removed from his post as defense minister. The situation worsened. Even before that, on 17 July, this demand came from Vazgen Manukian, leader of the opposition National-Democratic Union; two days later, on 19 July, it was seconded by Albert Bazeian, leader of the National Resurrection Party. The Republican Party, which had placed its stakes on the new member’s administrative resource, could have lost everything. On top of this, the opposition media launched a crusade against consolidation of the bureaucracy and business within the Republican Party. They branded the process “criminal consolidation” aimed at a one-party system. Asmik Navasardian, the wife of Ashot Navasardian, founder of the Republican Party, made an obviously ill-timed statement that the leaders were enlisting “apolitical elements.” This made it clear that a repeat victory of 1997 was out of the party’s reach. In 1997, this small party, which was allied with late Defense Minister Vazgen Sarkisian, developed into a leading political force determining the country’s policy. In several months, the public and political elite developed a negative attitude toward the Republi- can Party and consolidated the opposition. On 24 July, the nation learned that Gagik Tsarukian had gathered a meeting of the Prospering Armenia activists in the large building of the Sundukian Theater. Among other fairly critical statements he said: “Certain people (the Republicans.—M.S.) are going too far. We have been tolerating this so far, but the time will come when we respond on TV and in the press.” He also promised that his party, over 210,000 strong, would win the upcoming parliamentary elections.

D. Anti-Criminal Movement of the Opposition Parties

Once more the Republican Party did not expect the opposition to have an enthusiastic response to Tsarukian’s speech. On 12 August, A. Bagdasarian, leader of Orinats Erkir, announced that the criminal communities were joining forces with the oligarchs and that all honest people should unite to oppose the power of money, crude force, and lies. The party leader preceded this with initiating a new alliance under the slogan “For Legal Elections.” The opposition eagerly responded to the “intercepting leadership” syndrome. United under the banner hoisted by the Orinats Erkir Party, the opposition demonstrated its willingness to initiate an “Anti-Criminal Movement.” Aram Karapetian, leader of the New Times Party, invited all parties, except

45 CENTRAL EURASIA 2006 Analytical Annual the Republican Party, to a meeting in the Mariott Hotel on 11 September. His intention was clear: the opposition and ruling parties intended to form a single front. The Republican Party was once more caught unawares; it spent a lot of time trying to find excus- es for the key political figures; it also sent barrages of criticism at the opposition. The session of the National Assembly that opened on 11 September actively promoted the idea of an “anticrime” movement and just as actively attacked the Republican Party. Its members tried to justify themselves and accuse others of shady dealings. Meanwhile, everyone was asking why the leader of the Prospering Armenia Party never joined the Anti-Criminal Movement, even though rumors ascribed the initiative to Robert Kocharian. This forced the president to caustically criticize the movement to divert suspicions. The wave of deliberate marginalization of the Republican Party caused a lot of dissent in its ranks, a sure sign of even more serious disagreement in the ruling elite. On 13 October, a criminal case was instituted against businessman Akop Akopian, one of the new members of the Republican Party’s Council. This caused an even deeper split among the party leaders. They also disagreed over the unsanctioned attempt to appoint Arman Saakian, another Council member, head of one of the communities of Erevan.

E. The Pro-Western vs. Pro-Russian Orientations. The Opposition Formats Changed

The opposition stepped up its anti-Republican efforts. Though the Anti-Criminal Movement produced no spectacular results, the initiative added vigor to the opposition. New alliances, mainly on the liberal side, were formed one after another. On 10 September, a public-political initiative, Alternative, was formed out of the former members of the Armenian National Movement Party with the stated purpose of removing the ruling regime. Those who remained at the head of the Armenian National Movement preferred to steer clear of this format. On 15 November, Arkadiy Karapetian, a member of the Military Fraternity Organization Coun- cil, called on the nation to start a civil disobedience campaign; on 17 November, Alexander Arzuma- nian, the organizations’ formal leader, informed a press conference that a Civil Disobedience Move- ment had been set up. Three days later the new movement was picketing the president’s residence with the slogan “Kocharian, out!” On 25 November, the Civil Movement met for its Constituent Congress initiated by Vazgen Manukian, leader of the National-Democratic Party, and Raffi Ovannisian, leader of the Heritage Party. The new organizations, which eagerly criticized the government from various viewpoints, and the continued confrontation of the Republicans and Prospering Armenia convinced the public that the president and Serzh Sarkisian were political opponents. The camps were immediately branded as pro-Western and pro-Russian. By the end of 2006, the country had indeed reached the point beyond which its political makeup might have changed beyond recognition in anticipation of a new president in 2008. The uncompromising rivalry between the ruling parties and the opposition’s activity gave rise to the need to control the media as an effective weapon for the upcoming political battles. Defense Minister Sarkisian and leader of Prospering Armenia Tsarukian divided the newspapers and TV channels among themselves. The opposition was pushed aside. It was no longer believed that involvement in large-scale charity actions was enough to guarantee the loyalty of temporary allies. Serzh Sarkisian and his party very soon realized that they could not

46 REPUBLIC OF ARMENIA Politics compete with Gagik Tsarukian and his party in this respect. The president, meanwhile, was keeping very much to himself. Public policy came to the fore: attempts were made to create a positive image of the new national leader as a pro-Western figure. No matter how large the resources of all the political entities were, the key actors sought support abroad. Serzh Sarkisian devoted his time to courting America and Russia; his permanent rival A. Bagdasarian made visits abroad his more or less permanent occupation. Late in November, he visited Moscow, Paris, and Rome. It seemed that the key actors had left their pro-Western and pro-Rus- sia images at home. By the end of the year, the uncertainty in the ruling camp brought the country to the verge of chaos. The government had to tighten control and demonstrate more activity: on 9 December, it urgently convened the 7th Congress of Erkrapa, a union of volunteers which had been the regime’s pillar since 1995. The next day, those who took part on 4 December in the Constituent Assembly of the Alliance of Armenian Volunteers, a new radical opposition structure headed by former volunteer fighter Zhirayr Sefilian, were arrested and their homes searched. Information about an anti-constitutional plot, which the country leaders supplied by way of an explanation, caused a lot of concern over the new alignment of political forces. Had volunteers been allowed to unite under the opposition’s slogans, the Erkrapa Union would have fallen apart; many of the parties would have been willing to join the new center. Some of the social groups felt tempted by the prospect of using revolutionary methods to prevent reproduction of the current regime. Gagik Tsarukian managed to rally the poorest sections around him, but the prospect of his party winning the elections was not generally accepted. Those who support him today are prepared to abandon their position, embrace radical oppositionist ideas, and change their attitude toward the party leader. The president could not accept this: the interests of all those who supported the regime finally coincided. On 15 December, in his interview with the Armenian TV channels, Robert Kocharian was very positive about the growing prestige of the Prospering Armenia Party and pointed out that a revolution was impossible. He also enumerated the parties he would like to see in the future parliament and pointed out that the Republicans, Dashnaktsutiun, Prospering Armenia, and the United Labor Party could have formed a coalition. In other words, the president clearly demonstrated his intention to remain on the political stage. On 16 December, Mr. Tsarukian gathered the activists of his party in a sumptuous setting to confirm his intention to become a leading political force. This was done to support the president, to spite the opposition, and to demonstrate that the government would not retreat. The Prospering Armenia project produced a lot of confusion in the ruling camp, which hoped to remain a “closely knit team.” This suggested certain fairly dramatic moves in the ruling camp. On 20 December, the mounting discontent and very resolute intentions found an outlet in the murder of Roland Mkrtychian, member of Prospering Armenia, who had just recently been elected head of the Nalbandian rural community. The Republican Party found itself a target of attacks once more: the media resumed their deliberations about the rivalry between the two parties, which did the Republicans a lot of harm. The Prospering Armenia leader preferred to remain silent about the murder and the polemics it instigated; it was leader of the Republican Party Prime Minister Margarian who deemed it necessary to respond. At a press conference held on 22 December, the prime minister spoke about the murder and expressed his concern over the growing influence of Prospering Armenia; he was also obviously displeased with the president’s preferences for the future parliament. The prime minister pointed out that the balance of forces in the 2007 parliament would only become clear in the future.

47 CENTRAL EURASIA 2006 Analytical Annual

Late in December, in a vast TV interview, which sounded like polemics with the president, Defense Minister Sarkisian pointed out that he could run for presidency according to the constitution and that he would make use of his right after the 2007 parliamentary elections. No one knows what Robert Kocharian will do in 2007. He does not intend to resign, this much is clear, but his specific plans remain unknown. No one knows who will become his successor. On 19 December, Foreign Minister Oskanian announced that he planned to remain in politics, but did not specify his political and party preferences. The choice belongs to the president, who is obviously engaged in latent political activities. The relations between the key political forces and figures depend on the quality the opposition achieves by the 2007 parliamentary elections; so far, there is talk about boycotting them. Time will show whether this idea proves attractive enough.

ECONOMY

Vaagn KHACHATRIAN Research associate, Center for Political and Economic Studies (Erevan, Armenia)

n line with the trends of the past four years, the tion exceeded the projected 3% and approached country’s economy in 2006 continued to grow 5.5%. The national currency continued to I rapidly: according to the National Statistical strengthen against the world’s major currencies. Service, at an annual rate of 13.4%.1 In abso- As regards the prospects of economic develop- lute terms, annual GDP reached 2,665 billion ment, let us note that, unfortunately, the past drams (AMD), and the GDP deflator increased year failed to become a period of qualitative by 4.8%. But whereas in 2005 growth was ac- growth: of course, the achievements of the past companied by deflation (0.2%), in 2006 infla- few years are obvious, but quantitative GDP growth was not accompanied by qualitative growth, because the share of the “new econo- 1 Here and below, statistical data are taken from: my” based on innovation and high technology Sotsialno-ekonomicheskoie polozhenie Respubliki Armenii v ianvare-dekabre 2006 goda, NSS, Erevan. is insignificant.

Real Sector

According to preliminary estimates, the country’s GDP in 2006 was AMD 2,665 billion ($6,406 million). GDP per capita was $2,002.0 (see Table 1) or $5,100 at purchasing power parity (PPP). As the table shows, the nominal growth rate of GDP per capita differs depending on the currency in which it is calculated. In dollar terms, the figure for 2005 was 36.9%, of which only 13.9% was real

48 REPUBLIC OF ARMENIA Economy

Table 1 Per Capita GDP

2002 2003 2004 2005 2006*

Per capita GDP, 1,000 drams 424.2 505.9 593.6 697.4 832.8

Per capita GDP, U.S. dollars 739.9 874.1 1,112.8 1,523.8 2,002.0

Per capita GDP, real growth, % 13.2 14.1 10.4 13.9 13.4

Per capita GDP in drams, nominal growth, % 15.9 19.3 17.3 17.5 13.9

Per capita GDP in dollars, nominal growth, % 12.2 18.1 27.3 36.9 24.6

* Preliminary data.

S o u r c e: National Statistical Service (NSS). growth. In 2006, the situation was almost the same: per capita GDP in dollars grew by 24.6%, while real growth was 13.4%. The rest was due to the strengthening of the national currency (the dram) and domestic inflation. Considering that the main goal of Armenia’s economic development is to overcome poverty and transform the country into a dynamically developing state, one would like to know how many years it will take the republic, given current GDP growth rates, to reach the EU average? According to some experts, if the average growth rates of the past five years in Armenia and the EU countries (13% and 1.85%, respectively) are maintained, it will take Armenia 19 years to reach the average EU figure for PPP GDP per capita. Economic growth in 2006 was mostly due to construction. Whereas GDP growth in January- December was 13.4% (in absolute terms, AMD 2,665 billion or $6.4 billion), construction grew by 37.1% (to AMD 623 billion or $1.5 billion). Annual growth was also due to an increase in the volume of services provided by 20.3% to AMD 479 billion ($1.2 billion). In fact, construction and the service sector contributed 8.1 and 2.1 percentage points, respectively, to overall economic growth. Household income increased during the year by 19.8%, totaling AMD 1,722.2 billion ($4,139 million) at year-end, while expenditure increased by 18.8% to AMD 1,650 billion ($3,969 million). Industrial production totaled AMD 643.5 billion, falling short of the 2005 figure by 0.9%. In- dustrial production excluding diamonds was AMD 590.9 billion (up 1.9%), and total agricultural production, AMD 555.9 billion (up 0.4%). This means that industry reduced overall economic growth by 2.62 percentage points, while agriculture had an insignificant effect on overall growth, contributing only 0.37 percentage points. The sectoral composition of GDP in 2006 changed as well, and the picture here is as follows: industry 15.1%, agriculture 17.7%, construction 26.7%, services 10.2%, and transport and communications 5.9%. These data are evidence of the need to change the structure of the republic’s national economy in qualitative terms, primarily to focus attention on developing the people’s intellectual abilities and boosting per capita GDP through an increase in labor productivity. 49 CENTRAL EURASIA 2006 Analytical Annual Industry

In 2006, industry could not recover from the blows raining down on it from every quarter: an increase in the value of the national currency on an unpredictable scale, the situation in world dia- mond markets, and problems in the production and sale of electricity, gas, water, etc. Annual production and distribution of electricity, gas and water fell by 2.2% and manufacturing by 1.6%, while production in the mining industry increased by 6.2%. In the sectoral structure of production, the share of manufacturing was 65.1%, and mining, 18.0%. The situation in manufacturing is interesting in itself: food products, including beverages, account for 45.0% of its total output; metallurgy contributes 26.2%, the chemical industry, 3.5%, and the manufacture of machinery and equipment, only 1.7%. The high technology sector is virtually forgotten, i.e., its influence on industry and on the whole economy is equal to zero. In January-December 2006, the level of a year ago (in volume terms) was reached or exceeded for 72 items out of a total of 124 key items, including 41 producer goods (out of 71) and 31 consumer goods (out of 53).

Agriculture

In the past few years, agriculture has developed steadily, with an increase in output from year to year. But 2006 was an unfavorable year for the agricultural sector as well. Production growth compared to 2005 was only 0.4%, mostly due to adverse weather conditions. Thus, the production of grain and leguminous crops fell by 46.4% to 213 thousand tons (compared to 397 thousand tons in 2005). Total output in the livestock sector was AMD 199,683 million, up 10.4% from 2005; in the crop sector, it was AMD 356,239 million, down 4.4% from 2005. The latter is also due to a decline in the total output of fruits and berries by 9.3%, potatoes by 4.4%, and feed crops by 20.8%. Compared to 2005, there was an increase in key livestock products (except eggs). The figure for slaughter cattle and poultry increased by 18.0 thousand tons from 2005 (by 18.2%), and milk production, by 25.4 thousand tons (4.3%).

Construction

As noted above, annual GDP growth was largely due to significant activity in construction, whose volume reached AMD 623 billion. The main sources of finance in this sector were households and organizations: their shares in total capital construction were 65.5% and 23.4%, respectively. This means that external financing is no longer crucial to this sector, one of the key sectors of the economy. At the same time, a comparative analysis of growth in construction, GDP and nominal household income (see Table 2) suggests that in the past four or five years foreign capital has continued to play a certain role in construction. It is generally assumed that if household-financed construction grows significantly faster than GDP and household income, it is financed out of growing domestic savings and/or remittances from abroad. In the case of Armenia, one can say that remittances play a tremendous role. If we look at the structure of GDP, we will find that final consumption expenditure has tended to decline since 2002. Thus, it made up 86.8% of GDP in 2005 and about 88.0% in 2006, whereas in 2001 the figure was 104.8%. This means that a certain part of GDP is consumed in the form of saving or investment. In 2005, gross capital formation made up about 29.7% of GDP, and in 2006, its share was already 33.2%. While noting the positive changes, let us emphasize once again that there are still very few qualitative changes

50 REPUBLIC OF ARMENIA Economy

Table 2 Nominal GDP, Household Income and Household-Financed Construction (% change from previous year)

2002 2003 2004 2005 2006

Household-financed construction, nominal growth 89.8 83.8 23.1 48.0 32.9

GDP, nominal growth 15.9 19.2 16.7 17.5 13.8

Household income, nominal growth 14.2 13.9 16.7 16.8 16.5

S o u r c e: NSS. in the economy. That is why the share of consumption in GDP is so large. The latter indicates that (1) domestic savings are still at a very low level and (2) remittances have a strong effect on final consumption. And very little is being done to convert part of these remittances into real investments. Unless the situation changes, the country’s economy will lose its immunity: it will be unable to compete in the foreign market and will lose its competitiveness altogether. It is probably no accident that in terms of the World Economic Forum’s competitiveness index Armenia ranks 79th among 117 countries.

Employment, Household Income and Expenditure

The average size of the country’s economically active population in 2006 was 1,201 thousand, including 1,112 thousand (92.6%) employed persons and 88.9 thousand (7.4%) jobless persons having unemployed status. During the year, 8.3 thousand people found jobs. Unemployment benefits in De- cember reached AMD 8,631 (up 42.8% from December 2005). The average monthly wage was AMD 62,413 ($169), increasing by 22.7% from the same period of 2005. In the public sector, it rose by 25.5% to AMD 43,957 ($119), and in non-public sector organizations, by 20.2% to AMD 76,007 ($180). As wages rose and unemployment declined, household income increased as well: by 19.8% to AMD 1,722.2 billion ($4,139 million). Household spending increased by 18.8% to AMD 1,650 billion ($3,969 million). Of these, 77.2% (AMD 1,274 million) was used to buy goods and services. The exchange rate of the national currency against the dollar in January-December 2006 was 420.0 drams per dollar. Here we come to the most interesting point. At the exchange rate for November, the average wage was $171, or AMD 62,413, compared to AMD 52,000 in 2005 ($116 at the 2005 exchange rate), i.e., in dollar terms it increased 1.5 times. But prices in dollar terms doubled. It should be noted that the republic’s Central Bank (CBA) did its utmost, especially in the past two years, to prevent prices from rising above the prescribed limit of 3%. In 2005, the CBA managed to do so and inflation was only 0.6% (although it is unclear how inflation was kept so low with economic growth at 14%), but in 2006 the Bank failed to keep inflation within the prescribed limits and asked the National Assembly to change the inflation target from 3% to 4% (plus 1.5%). Throughout this time, the dram continued to strengthen against all other currencies. As it turned out, however, the economy was not ready for the new conditions. First, because in reality it is not free but monopolized; second, it is not competitive; and third, there is actually no level playing field for business.

51 CENTRAL EURASIA 2006 Analytical Annual Money and Finance

According to preliminary CBA data, as of 31 December, 2006, the monetary base was AMD 282,997 million, increasing by AMD 42,228 million (17.5%) compared to the previous month, and the money supply was AMD 485,743 million, increasing by AMD 28,771 million (6.3%). Throughout the year, the Central Bank used monetary instruments designed to drain reserves from the banking system, partly reverse repurchase agreements and issue of its own bonds. In this way, it wanted to resolve the problems of reducing the degree of dollarization of the economy and keeping inflation at the projected level. By addressing these tasks, the Central Bank was able to gradually reduce the degree of dollarization. But this problem remains high on the agenda: 65% of funds in bank deposits are in dollars. Ac- cording to some estimates, about 80% of household savings stashed “under the mattress” are also in dollars. But if the economy is dollarized, the Central Bank’s monetary policy cannot be effective, the shadow economy is bound to grow, and tax revenues to decline. In such cases, crime is often on the rise, which is characteristic of the Armenian economy today. At the same time, figures show that CBA efforts have produced results. In 2006, the monetary base increased by 30.1%, the money supply by 25.5%, currency in circulation by 39.2%, and money deposits by 57.1%. In dram terms, deposits denominated in foreign currency fell by 4.7%, which has led to a dedollarization of the economy by 24%. But this does not mean that all problems have been resolved. The CBA is resolving them cautiously, with small steps. Unfortunately, this has not facilitated a qualitative change in the economy. For example, although money supply and the monetary base have increased significantly, their ratios to GDP remain very small (in 2006, 18.2% and 10.6%, respectively), especially considering that for reasons of national economic security the ratio of money supply to GDP should not be less than 50%. The problem of high interest rates was not resolved in 2006 either. In effect, they remained on the same level: at the beginning of the year, the credit interest rate was 16.5%, and at the end of De- cember, 16.6%; for deposits, the figures were 5.2% and 6.5%, respectively. Naturally, we cannot avoid the question of the rising national currency. Throughout the year, the dram rose against all other currencies, so that by the end of the year it gained 19.6% against the dollar, 13.3% against the euro, and 11.0% against the ruble. As a result of this unprecedented “strengthening” of the dram, Armenian citizens receiving foreign currency transfers from abroad or wages in dollars and those trying to keep their savings in foreign currency continued to suffer serious losses. According to some estimates, they make up 37% of the population. The impact of exchange rate fluc- tuations on national industry, especially its export-oriented part, has also proved to be very dangerous. Throughout the year, domestic producers literally balanced at break-even point with each new drop in the exchange rate of the dollar. In answer to their dissatisfaction, the government and the CBA made it clear that there would be no additional intervention: their main goal was to maintain inflation at 3% (as it turned out, they were unable to do so). The Central Bank’s official explanation was as follows: in 2005 and 2006, there was a sharp increase in private remittances from abroad, mostly from Russia (70%) and the United States (25%), and this puts additional pressure on the market where the exchange rate is formed. In order to establish the dram’s exchange rate, the CBA uses the “floating exchange rate” methodology. Of course, the amount of remittances turned out to be very large: $900 million in 2005 and $1.2 billion to $1.5 billion in 2006, i.e., it exceeded the republic’s budget revenues for the respective years and was commensurate with 30-40% of GDP for those years. The economy was not prepared for such changes, burdened with a whole range of old unresolved problems: competitive environment, monopoly in many sectors, closed borders, business risks, high transportation costs, etc. All of this came to the surface: the prices of almost all basic goods (in drams and in dollars) began to rise steadily; imports surged, while exports fell; by the end of the year, the trade deficit increased to $1,190 million (18.3% of GDP).

52 REPUBLIC OF ARMENIA Economy

To remedy this situation, the authorities must take radical, fundamentally new and sometimes painful steps. For example, if we do not want the dram to continue strengthening, we must increase the money supply. Then the dram/dollar exchange rate will remain the same, domestic producers will not lose anything, and exports will not decline. The Central Bank refuses to take such steps, saying that they will lead to price rises. However, prices are rising anyway.

Budget and Taxes

According to preliminary data, state budget revenues and official transfers amounted to AMD 439,620 million (16.5% of GDP), increasing by 17.9% compared to 2005. Tax revenues totaled AMD 359,715 million (13.5% of GDP), up 18.2%. Budget expenditures increased by 15.1% to AMD 454,977 million (17.1% of GDP). Official transfers amounted to AMD 89,053 million, capital expenditures, to AMD 89,227 million, expenditures for defense made up 2.9% of GDP, for education and science, 2.7%, and for social insurance and social security, 2.1%. The biggest increase (by 40.3%) was in profit tax revenues, which reached AMD 65,329 million; income tax revenues rose by 33.3% (to AMD 35,468 million), and VAT revenues, by 13.0% (to AMD 165,912 million). Since the policy of reliance on indirect taxes has remained virtually unchanged, although direct taxes have also continued to increase rapidly, let us take a closer look at the quality of tax policy. It is a fact that budget revenues have been growing from year to year. But it is also a fact that in the past four or five years income as a share of GDP increased very little, so that in terms of the tax/ GDP ratio Armenia is among the lowest-ranking transition countries. And it is no accident that tax revenues already lag far behind the projected figures written into the Poverty Reduction and Growth Facility (PRGF) program (under this program, tax revenues in 2006 were projected to reach 16.2% of GDP). So social expenditures—for education, health care and social security—have been growing slowly and fall short of the program targets. Significant growth in the tax/GDP ratio will help to find a way out of this situation. This will also mean a reduction in the shadow economy. After all, it this ratio remains as low as it is today, this will amount, in the first place, to maintaining the current level of the shadow economy.

Foreign Economic Activity

Compared to 2005, the foreign trade turnover increased by 15.2% to $3,198 million. Exports rose by 3.1% to $1,004 million, and imports, by 21.8% to $2,194 million. The trade deficit was $1,190 million or, excluding humanitarian aid, $1,137 million. The trade turnover with CIS countries was $910.9 million (28.5% of the total), exceeding the 2005 figure by 28.4%. Trade with Russia was around $426.6 million (13.3% of the total), up 17.9% from 2005. Trade with EU countries was $1,093 million (up 13.9%), and with the United States, $171.7 million (down 1%). Exports to CIS countries amounted to $212.6 million (up 13.2%), including $121.7 million to Russia (up 2.3%). Exports to other countries totaled $791.3 million (up 0.7%), including $472.1 million to EU countries (up 4.2%) and $65 million to the United States (up 4.5%). Imports from the Commonwealth countries came to $573.6 million (up 41.1%), including $365.3 million from Russia (up 36.1%); the figure for EU countries was 592 million (up 11.9%), and for the U.S., $136.7 million (up 17.4%).

53 CENTRAL EURASIA 2006 Analytical Annual

These data suggest that in 2006 many domestic producers lost their foreign markets; in fact, many enterprises were obliged to cancel existing contracts and suffered heavy losses. Armenia mostly exports mineral products, articles of precious and semiprecious stones, nonprecious metals and articles thereof, while importing machinery and equipment, mineral products, articles of precious and semiprecious stones, finished food products, and chemicals. In other words, the so-called “new economy” is virtually absent. And it is only natural that foreign investments are directed only into economic sectors with well-established owners who operate without particular risk, make large profits and reinvest part of these profits (as an obligation) into their own business. For example, the total amount of investment in the Armenian economy in January-September 2006 increased by 31.8% compared to the same period of 2005 and reached $297.4 million. Foreign direct investment (FDI) amounted to $149 million (8% increase). At the same time, 33.6% of total foreign investment and 23.7% of FDI went into the communications sector; another 23.4% of FDI went into mining and 16.4% into air transport. The leader in foreign investment in the Armenian economy was Argentina ($57.9 million), followed by Lebanon ($56.3 million), Greece ($44.9 million) and Germany ($34.6 million). Russia invested $34.4 million, and the United States, $23.7 million.

C o n c l u s i o n s

The past year was marked by continued high rates of economic growth. According to preliminary data, the economy grew by 13.4%, mostly due to growth in construction (by 37.1%). As a result, the share of construction in GDP increased to 26.1%. Industry, on the contrary, not only reduced its share in GDP but was even unable to reach the 2005 level: for the first time in the past seven or eight years, industrial production fell by 0.9%. For agriculture, 2006 was not a good year either: it grew by only 0.4%, while its share in GDP was down to 17.7%. The trend toward a reduction in final consumption expenditure continued. According to preliminary data, it remained close to the 2005 level (86.8% of GDP). But compared to the developed countries this indicator is still very high. The decline in final consumption expenditure was coupled with an increase in saving and capital formation. In 2006, gross capital formation reached 33.2% of GDP. The dram (the national currency) continued to strengthen against all other currencies. As a result, the dollar depreciated by 19.6%, the euro by 13.3%, and the ruble by 11.0%, which was accompanied by an increase in prices in both dollars and drams. Inflation exceeded the projected level of 3%, and the CBA was obliged to ask the government to set a new inflation target: 5% (plus or minus 1.5%). In these conditions, importers made excess profits, but unfortunately this had no effect on the state’s tax revenues. The main reason for the rise in the value of the dram, according to the CBA, was a sharp increase in private remittances from abroad to $1.2-1.3 billion. The leader here was Russia, which accounted for 70% of the total amount of money transfers to Armenia. The United States was in second place with 25% of the total. It turns out that the future of the Armenian economy depends on the state of the Russian and U.S. economies. The problem of dollarization remains high on the agenda. The CBA has done a great deal to reduce the level of dollarization, with the result that the 30.1% increase in the monetary base by the end of the year (compared to the same period of 2005) outran the 25.5% increase in the money supply. During the year, dram-denominated deposits increased by 57.1%, and deposits in foreign currency (in dram terms) fell by 4.7%, so that the degree of dollarization was reduced by 24%. But 65% of funds in bank deposits were still in dollars. In this situation, there was reason to expect a decline in credit interest rates, which had remained high for a long time (from 16% to 20%), with a simultaneous reduction in interest on deposits (which ranged from 4% to 8%), but this did not happen. Although the economy is in need of cheap money for

54 REPUBLIC OF ARMENIA Religion retooling and raising labor productivity, the production sector (especially industry) remains without assistance from the banking sector. According to some forecasts, in the next 5-7 years many enterprises in the country will close down unless they manage to arrange the production of new, more competitive goods and services. The targets for tax collection and for budget revenues and expenditures were achieved (and exceeded) once again. But the qualitative indicator of this work—the tax/GDP ratio—remained unchanged (or almost unchanged). In the past five years, this ratio stayed at 14.0-14.4%, and by 2006 it was projected to reach 16%. Failure to meet this target means that the shadow economy in the republic in recent years has not been reduced and that the implementation of the PRGF program is under threat. In view of this, although economic growth has exceeded all expectations, social spending has not increased accordingly. The share of indirect taxes in budget revenues remains high. As in 2005, the most rapid increase was recorded in profit tax due to changes in the base amount of taxable profit. Still, value added tax collected at the border when goods are imported into the country remains the key tax. As the dram strengthened, export growth rates declined. Of course, they declined not only for this reason, but also due to the competitive environment, transportation problems, low productivity of domestic exporters, etc. Whatever the reason, the trade deficit at the end of the year exceeded $1 billion. And, probably most important of all, there are virtually no high technology products in the export structure; moreover, Armenia acts as an exporter of natural resources to the world market. As regards imports, the share of producer goods is small, while that of food products is high and has been growing from year to year (especially in 2006). On the whole, the past year supports the view that the country’s development is following a negative course: there are very few elements of the new economy, the export structure is very bad, and investments are insignificant despite the great opportunities offered by the diaspora. In other words, the economic development strategy should be changed radically.

RELIGION

Priest Vagram MELIKIAN Director, Information Center of the Mother See of Holy Etchmiadzin (Erevan, Armenia)

Egine MKRTCHIAN Director, Press Center of the Mother See of Holy Etchmiadzin (Erevan, Armenia)

n 2006, six newly registered religious structures and trends in the republic that are organizations increased the total number not in general banned. They represent 10 off- I of religious organizations in Armenia to shoots of the major confessions, mainly Prot- more than 60. There are unregistered religious estant.

55 CENTRAL EURASIA 2006 Analytical Annual

There are no exact figures about the total fall of 2006: national security means, among oth- number of followers of all religious structures or er things, cooperation with the spiritual, moral, about their territorial distribution. What we have and cultural activities of the Armenian Apostolic are bits and pieces about religious organizations Church, prevention of any developments that supplied by individual public institutions indicat- might endanger the Armenian nation’s spiritual ing that between 10 and 15 percent of the repub- and cultural characteristics and its moral values; lic’s population (over 300,000 people) belong to cooperation with other states for the sake of pre- a variety of traditional and non-traditional church- serving the Armenians’ historical, spiritual, and es and religious trends. It is not easy to supply cultural values, as well as the spiritual and cultural exact figures because this figure includes first, values and the national and religious identity of national minorities; second, people forced to join the national minorities living on the Armenian one of the non-traditional confessions because of territory. financial hardship; third, those who live in distant In this way, the AAC, the church of the re- villages where there are neither churches nor public’s absolute majority, was set apart from all priests of the Armenian Apostolic Church (AAC) other religious organizations functioning in Arme- and who are thus forced to join other religious or- nia—a situation justified by historical reality. This ganizations to satisfy their spiritual needs (they should not be taken to mean that other confessions return to the bosom of the Mother-Church as soon were in any way restricted in their activities. as an opportunity presents itself); and fourth, ded- The same article in the RA Constitution icated supporters of sects and non-traditional re- states: “The relations of the Republic of Armenia ligious trends. The absolute majority of the repub- and the Armenian Apostolic Holy Church may be lic’s population belongs to the AAC. regulated by the law.” This religious diversity calls for a concep- Very soon after the referendum, on 29 No- tual approach to religious matters. vember, the National Assembly of Armenia dis- On 27 November, 2005, the country adopt- cussed the draft Law on Relations between the ed amendments to the Constitution of the Repub- Republic of Armenia and the Armenian Apostol- lic of Armenia through a national referendum. It ic Church written by Tigran Torosian, speaker of preserved freedom of thought, conscience, and the Armenian parliament. The final voting was worship; by the same token, it guaranteed freedom postponed until 2007 since the document obvious- of action for all religious organizations. The new ly needed amendments and addenda, although, on version of the Fundamental Law acquired a new the whole, it was accepted both by the governing provision that says: “The Republic of Armenia parties and the opposition. recognizes the exclusive historical mission of the Until the draft is enacted, the AAC and oth- Armenian Apostolic Holy Church as a national er religious organizations will be guided by the church, in the spiritual life, development of the Law on Freedom of Conscience and Religious national culture, and preservation of the national Organizations adopted back in 1991 when the identity of the people of Armenia” (Art 8.1). Soviet republic acquired independence. The sit- This addendum served as the foundation for uation has changed a lot since that time and soci- the following statement in the RA National Secu- ety became aware of the need to amend the law; rity Strategy, the draft of which appeared in the the Cabinet is working on a new draft.

Religious Life and the Legal Reforms

Constitutional reform and the current situation in the republic’s religious sphere call for amendments and addenda to the Law on Freedom of Conscience and Religious Organizations: the law is far 56 REPUBLIC OF ARMENIA Religion from perfect since it does not stipulate punishment for its violations. This means that the law remains impotent. Today, the spiritual security of the nation and definitions of religious organizations call for legally exact descriptions and specifications; all religious organizations should be given equal rights for functioning within the specified spheres. The acting law, however, can be described as favorable: it allows the national minorities to follow their confessions and gives free rein to other religious organizations. A group of 200, for example, has the right to register itself as a religious structure, which means that the state recognizes it as a legal entity: to accomplish this it should base its religious convictions on a historically sanctified holy book, be part of a worldwide system of religious communities, and remain within the bounds of RA laws. It is the job of the department of national minorities and religion under the RA Cabinet to assess the applicants. Some of its assessments do not go down well with the public. In 2004, for example, the Jehovah’s Witnesses were registered as a Christian organization, which contradicts the official position of the entire Christian Orthodox community. Totalitarian sects arouse a lot of concern: the nation should be protected from them—a conclusion with which the parliament agrees. The public sometimes goes to extremes in its demand to deal with the issue. In the spring of 2006, extremist slogans of “Death to Sects and their Members!” signed by “Armenian Aryans” appeared in one of the cities of the republic’s north. The AAC is against extremism in all its forms. According to Alexander Amarian, head of the Public Center for Rehabilitation of the Victims of Destructive Sects, sectarian activities are a source of many troubles. He is absolutely convinced that sects pursue political aims and serve as a tool for certain influential persons. In one of his interviews he said: “One can launder money, cripple national security, and interfere in politics through many of the religious organizations operating in this country.” Some time ago, the Armenian media reported that the Church of Jesus Christ of Latter-Day Saints had been copying parish registers in the State Archives of Armenia. It is commonly believed that totalitarian sects are responsible for the increased number of sui- cides. In fact, what happened in May 2006 in the city of Gumri is obviously connected with the Je- hovah’s Witnesses: 56-year-old Rubik Saakian set fire to himself as an act of protest against the fact that his family had joined the Jehovah’s Witnesses. The sect denied the rumors and argued that it was Saakian’s son who belonged to the organization, while his dead father was known to be psychologi- cally unstable. The regional public prosecutor’s office also denied the connection between the suicide and the religious convictions of the dead man’s son. It was hoped that the Law on Alternative Military Service adopted back in 2004 would be amended to regulate the situation with conscientious objectors. The law was passed to cover members of the Jehovah’s Witnesses, but all those who opted for alternative service in hospitals and old people’s homes found this service humiliating and abandoned it. Criminal cases were instituted against nearly all of them: 18 people are still waiting for court decisions, while 32 are serving their terms in prisons. In 2006, no one opted for alternative service; there is the opinion among bureaucrats that the issue is more political than religious. There is also the opinion that the Jehovah’s Witnesses have found a new way of shirking military service: sentenced to up to 24 months in prison, they are released after several months. If they refuse to serve in the army for the second time, there is no way of forcing them. The law is obviously ineffective. On 4 October, the RA Constitutional Court recognized certain provisions of the Law on Social Security Cards to be illegitimate. A superficial glance reveals that there are only religious reasons for this. In 2003 when the law was enacted, a small group of AAC members set up an organization they called “Against Assigning People Numbers” and rejected the law’s demand that such cards be acquired. By doing this, they deprived themselves of their wages and social benefits for over eighteen months. The group was not dissuaded by the addendum passed in mid-2006 that said: “The social security card

57 CENTRAL EURASIA 2006 Analytical Annual has nothing to do with spiritual matters and cannot be used against the conscience or personal religious convictions.” The AAC explained this to its followers even before the addendum appeared. The Constitutional Court defended citizens’ rights and passed a judgment in favor of two old-age pensioners. This created a precedent: 1,317 pensioners reinstated their right to receive a pension. No one knows how many of them acted out of religious convictions. Three constitutional judges (a member of the AAC Supreme Religious Court among them) expressed their personal opinion that the latest addendum to the law, which stated that the card “cannot be used against the conscience or personal religious convictions,” was hardly correct and created constitutional problems unrelated to the religious sphere. The law passed in December 2006 On the Organization of Burials and the Use of Cemeteries and Crematoria also caused certain problems in the religious sphere. The AAC objected to crematoria “as contradicting the Church tradition and the nation’s ideas.” Burials are a church ritual; the objec- tion was directly related to Christian eschatology, ideas about the world and traditional rituals and ceremonies, which the law ignored. The draft Law on Relations between the Republic of Armenia and the Armenian Apostolic Holy Church extended and specified the sphere of relations between the Church and the state, so far limited to education and spiritual service in the army (today over 30 AAC chaplains serve in army units). In 2000, the AAC and the government signed a Memorandum of Intent; in the same year, the Defense Ministry and Holy Etchmiadzin approved the Charter of Spiritual Service in the RA Armed Forces. In 2003, the premier and the Catholicos of All Armenians signed an agreement under which the subject “History of the Armenian Church” was added to the secondary school curriculum. The project presupposes that the state extends its support to the Church’s cultural institutions; and that the state and the Church will be jointly responsible for the upkeep of church buildings. The memorandum also regulated relations between the clergy and the law-enforcement structures. The state accepted church weddings according to the AAC ritual and church divorces as legally valid. The AAC acquired the right to have its spiritual representatives in hospitals, orphanages, nursing homes, military units, and prisons. It extended its powers in the sphere of education: the Church acquired the right to found or fund kindergartens, primary, secondary, and higher educational establishments, draw up and change the contents of the “History of the Armenian Church” course studied at secondary schools, establish standards for those who teach the subjects, and set up optional courses in public educational establishments. In 2007, it will become clear what will remain in the law and what will be removed from the draft. The relations between the state and Church in Armenia invited favorable comments: in 2006, the International Orthodox Peoples’ Unity Foundation endowed President of Armenia Robert Kocharian with a high award. President of the Foundation. Prof. V. Alekseyev has pointed out that Armenia took the correct approach to relations between the Church and the state in the new political context where the nation is scattered across the world: the U.S. Armenian diaspora is several times larger than the population of the Republic of Armenia.

The Church and Society

We have already written that most of the republic’s population describes itself as AAC followers. On the whole, this manifests itself not only in church going and following religious traditions. Thanks to its exceptionally important role in the nation’s past, the AAC is regarded as a symbol of the nation. This probably explains the fact that the public expects more from the Church than mere attend- ance to its spiritual and religious needs.

58 REPUBLIC OF ARMENIA Religion

Together with the AAC’s loyal followers, the rest of the nation shows a great interest in events related to the Church, which often acquire nationwide political importance. The visit of His Holiness Garegin II, Supreme Patriarch and the Catholicos of All Armenians, to Turkey on 20-27 June, 2006 was one such event. His Holiness and a representative delegation of the AAC arrived in Istanbul on the invitation from Ecumenical Patriarch Bartholomew I and Armenian Patriarch of Constantinople Archbishop Mesrop Mutafian. On 20-21 June, the Catholicos of All Armenians was a guest of the Ecumenical Patriarch. This was a reciprocal visit: Ecumenical Patriarch Bartholomew I visited Armenia in 2001 to celebrate the 1,700th anniversary of Christianity in Armenia as the state religion. After a long talk the two spiritual leaders paid a visit to Heypel Island, where His Holiness opened a seminary of the Ecumenical Patri- archate; he also said that the AAC was prepared to help the sister-churches in case of need. His Holiness spent the rest of his visit in the Armenian community. It should be said that the Armenian Patriarchate, one of the AAC’s hierarchical seats dated back to 1461, is found in Turkey. It brings together all Armenians living in this country. Governor of Istanbul Muammed Güler deemed it necessary to meet the Catholicos of All Armenians, even though the visit was not official. On 4-5 July, the religious leaders of the world met in Moscow within the framework of the program of church and religious contacts. Those who hoped that Catholicos Garegin II would meet Sheikh ul-Islam Allahshukur Pasha-zadeh, the spiritual leader of the Caucasian Muslims, were disappointed. In the past, the meetings were a regular feature through the offices of Alexiy II, Patriarch of Moscow and All Russia. They were expected to create an atmosphere of mutual trust between the Armenians and the Azeris to bring the Karabakh conflict to a peaceful settlement. The official visit to Armenia by the delegation headed by Grand Mufti of the Syrian Arab Re- public Sheikh Ahmad Badr al-Din Hassun, invited by His Holiness, marked an important stage in the relations between AAC and Islam; it promoted a religious dialog between them and furthered cooperation. Late in 2006, the RA Cabinet allocated a plot of land to the AAC to set up a memorial to com- memorate the event and honor friendship between Armenians and Arabs. The year 2006 abounded in contacts with other churches and religions. On 26-30 January, the second meeting of the theological dialog between the Catholic and the Old Oriental Orthodox Churches attended by representatives of the Catholic, Armenian, Coptic, Assyrian, Syro-Malabar Church of India with Cardinal Walter Kasper, head of the Pontifical Council for Promoting Christian Unity and His Grace Amba Bishoi, Bishop of Damiet (Coptic Orthodox Church), took place. On 13-24 February, a delegation of 14 people from Holy Etchmiadzin attended the 9th Assem- bly of the World Council of Churches (WCC) in Pôrto Alegre (Brazil). A member since 1962, the AAC looks at cooperation as highly productive. It was the first time, however, that a representative of Holy Etchmiadzin, Bishop Vigen Aykazian (currently Secretary of the U.S. National Council of Church- es), was elected member of the WCC governing body. Before that, in 1996, the AAC and WCC initiated a round table to promote social, educational, and ecumenical projects. Today this organization operates as the Inter-Church Charity Fund that unites the Armenian Catholic and Evangelical churches as well as the AAC dioceses and public organizations. In the social field, the AAC closely cooperates with an international organization called Habitat for Humanity. Under the agreement signed on 20 April, 2006, the housing construction program for the poorest population groups “Catholicos Garegin II—Armenia Built on Faith” was launched. In the next three years the Church will help to build over 100 such apartment houses; in 2006, the program finished building 37 apartment blocks. On 25-29 May, head of the Finnish Orthodox Church, Archbishop of Karelia and All Finland Leo (Makkonen) visited Armenia, where the delegation and the Catholicos of All Armenians met the president of Armenia and took part in the celebrations of the First Republic of Armenia Day.

59 CENTRAL EURASIA 2006 Analytical Annual

The status of the AAC Georgian diocese and of six Armenian churches, which should be reinstated in the diocese, remains a pending issue: 2006 did not justify the hopes of those who expected to see the problem resolved. On 17 January, the issue was raised again at a meeting between His Holi- ness Garegin II and Foreign Minister of Georgia Gela Bezhuashvili, at which the Georgian side promised to promptly resolve the issue. On 6 February, however, the Synod of the Georgian Orthodox Church on Armenian territory created a new, Tashir-Agarak, diocese under the spiritual administration of the bishop of the Dmanisi diocese in Georgia. The AAC was bewildered by this step, although it in no way objected to an eparchial structure of Georgia or of any other traditional church on its territory. The Supreme Spiritual Council (SSC) met on 7 March in Holy Etchmiadzin to hear a report by Bishop Vazgen Mirzakhanian, head of the Armenian Diocese in Georgia. The Council pointed out, among other things, that the Georgian Orthodox Church should have informed Holy Etchmiadzin about its intention to set up a new diocese in the republic’s north. The Armenian hierarchs were also puzzled by the fact that the Georgian Church deemed it necessary to create a diocese in an area where it had no followers, while in Georgia the rights of hundreds of thousands of religious Armenians are ignored: Armenian churches are not returned to Armenian believers, while the Armenian Diocese is denied a legal status. According to the media and other sources, there are no more than 60 Georgians living in several villages on the territory of the newly formed diocese. Today in Erevan, there is an Orthodox church of the Georgian Patriarchate, which the Catholicos of All Armenians transferred to the Geor- gian Patriarchate to serve the needs of the small Georgian community. Holy Etchmiadzin is going on with its reform of the church structures. In March it discussed the old issue of uniting the Armenian Church structures in France into one diocese. On 10 December, the Patriarchal encyclical announced in Paris united the 25 churches and cultural societies functioning in Paris, Lion, Marseilles, and other places into a single diocese with common rules. The AAC remains true to its spiritual and educational mission, its church building duties, and its obligations in the social sphere, where the wounds of the decades of atheism and theomachy should be healed. In 2006, 36 priests and 5 bishops were ordained; 3 churches were completed and consecrated, the foundations of six new churches were laid; several old monasteries were restored completely or partially; and several youth and social centers were opened.

Other Religious Organizations

The religious organizations registered in Armenia are mostly Protestant; and the six newly registered organizations mentioned above belonged to the same denominations (mainly charismatic churches). The Armenian Evangelist Church registered in 1994 is 160 years old. There is no exact number of its followers, but it is known to have 40 communities, an evangelist theological higher educational establishment which trains clergy, and an education complex for young (from 3 to 6) and older children. In 2006, it bought a large building in the very center of Erevan that previously housed the U.S. embassy for the Armenian Evangelist Community of America. Other religious organizations are much less visible; the public is in two minds about them. There are rumors that the charities are proselyte in nature, something that is banned by the law. This explains why the press connected the visit of American businessman Jon Huntsman of Huntsman Corporation, who intends to donate $50 million for a new cancer hospital in Armenia, with the spread of Mormons in Armenia. In a way, the negative reports were prompted by the wave of all kinds of religious organizations posing as charities that flooded the republic in the last 15 years. There are also enough public organizations, some of them unregistered, illegally engaged in religious activities.

60 REPUBLIC OF ARMENIA International Affairs

The religious life of the RA calls for an even more in-depth investigation; civil servants related to the religious sphere confirm this. The National Academy of Sciences is engaged in studying the religious organizations operating in the country and will come up with information indispensable for those wishing to analyze the religious situation in depth.

INTERNATIONAL AFFAIRS

Sergey MINASIAN Ph.D. (Hist.), Head of the Department of Caucasus Studies, Caucasus Media Institute (Erevan, Armenia)

I n t r o d u c t i o n

he most important events in the country’s for- tinued to be key factors and fundamental priorities eign policy and international affairs in 2006 in Armenia’s foreign policy in 2006. T were the signing of Armenia’s Action Plan Probably the most important domestic po- with the EU within the framework of the European litical event of the year, which is directly related Neighborhood Policy, the launching of the large- to the foreign political activity of the Republic of scale U.S. Millennium Challenge Account Program, Armenia (RA) and could in the future have a sig- the building of the Iran-Armenia gas pipeline, par- nificant influence on its relations with other states ticipation of the peacekeeping contingents of the re- and international organizations, was the work car- public’s armed forces in peacekeeping operations in ried out and public discussions held to prepare for Kosovo and Iraq, the country making its best possi- adoption of the country’s National Security Strat- ble contribution to the international antiterrorist egy. It is believed that this important political doc- campaign, the development of pragmatic political ument will enforce the main orientations and ap- interaction with Russia, the perceptible increase in proaches of the country’s current political lead- foreign investments in the economy, and the inten- ership in security, the principal views regarding sification of Euro-Atlantic integration in security Armenia’s interrelations on the international are- with NATO. At the same time, settlement of the na with its direct neighbors, as well as with the Karabakh conflict and the prospects partially asso- main centers of power and great nations, and the ciated with this of normalizing Armenian-Turkish country’s integration into international and re- relations and opening the border with Turkey con- gional organizations.

Dynamics of the Karabakh Settlement Process

Armenia and Azerbaijan are neighbors in the South Caucasian region and participate in various regional and international organizations, but they have essentially no interstate relations. The non-

61 CENTRAL EURASIA 2006 Analytical Annual settlement of the Karabakh conflict, the arms race, the unwillingness to make compromises, and so on, made it impossible to normalize relations between these states during the past year. The entire format of their relations boiled down to occasional meetings and talks on the Karabakh issue by the presidents and foreign ministers. Nevertheless, by the beginning of the year, some experts, analysts, and even representatives of international and European organizations were expressing the opinion that, due to the unique “window of opportunity” opening up, it was likely that some agreement might be reached on general principles for settling the Karabakh conflict. By this time, the cochairmen of the OSCE Minsk Group had carried out significant preparatory work aimed at bringing the positions of the sides closer together. But even before the Armenian and Azerbaijani presidents met on 10-11 February in Rambouillet (France), it was clear that the divergent ideas about possible compromises between the political elites and public of both sides would make it impossible to achieve any substantial results in a short time. This was also confirmed by the outcome of the meeting between the two presidents in Bucharest on 4-5 June, which also ended in an impasse. Their third meeting on 28 November in Minsk also yielded similar results. The Armenian leadership continues to view the OSCE Minsk Group as the main format for talks on the Karabakh conflict, which permits efficient use of the peacekeeping resources of this authoritative organization, as well as of the mediating efforts of the Minsk Group co-chairing states: Russia, the U.S., and France. According to the opinions expressed by representatives of the Armenian leadership in their speeches during the year, Erevan believes that this problem can only be resolved by means of peace talks and taking fair account of the interests of the sides involved aimed at creating real guarantees of security and democratic development of the people of Nagorno-Karabakh, as well as its involvement and integration into the world community. Along with this, it was repeatedly emphasized that against the background of Azerbaijan’s uncompromising position and based on its military threats, the Armenian leadership is willing to make use of all the forces and means available in the republic to neutralize these threats, including the geographical and geopolitical importance of the territories currently under the jurisdiction of Nagorno-Karabakh.

Relations with Georgia

The many-century historical communion between the Armenian and Georgian peoples forms a solid base for close and good-neighborly relations between Armenia and Georgia at the state level. An important element helping to consolidate relations between the two countries and peoples is the Ar- menians’ immense contribution to the development of Georgian statehood and culture. After the two countries restored their independence, Tbilisi was and continues to be Erevan’s important communication and economic partner, and the dynamics of cooperation in this sphere in 2006 have been steadily growing and intensifying. What is more, the common political approaches of the two countries toward the problems of European and Euro-Atlantic integration became ever clearer as the year progressed. During the visits of Georgian Foreign Minister G. Bezhuashvili to Armenia in January and of the Armenian delegation headed by Prime Minister A. Margarian to Georgia in July, new agreements were reached on building up cooperation, which were to become an even greater stimulus for consolidating strategic partnership and good-neighborly relations between Armenia and Georgia. In particular, the 5th sitting of the Bilateral Intergovernmental Commission was held during the July visit to Georgia of the delegation headed by Armenian Prime Minister A. Margarian. At this sitting, it was decided to exert efforts to further expand and harmonize the contractual-legal base between the two states. Significant progress was noted with respect to defining the Armenian-Georgian state border, and the delimitation commissions of the sides were asked to finish most of the work in this area by the

62 REPUBLIC OF ARMENIA International Affairs end of the year. The foreign ministries were asked to hold interdepartmental consultations on these questions twice a year. As for the current state and prospective area of bilateral trade and economic cooperation, a decision was made to continue observing the principle of free movement of goods and services through both countries. The Georgian Ministry of Economic Development and the Armenian Ministry of Trade and Economic Development were entrusted, together with the state bodies concerned, to continue to hold (no less than once a year) corresponding forums with the participation of the business circles of both states. The commission entrusted working groups of the power engineering ministries of these states to finish working on questions regarding the parallel functioning of Armenia’s and Geor- gia’s energy systems, keeping in mind the parallel functioning of the energy systems of Georgia and the Russian Federation, as well as of Armenia and Iran. Moreover, they were entrusted to monitor the plans for building a third power transmission line of 400 kV between Armenia’s and Georgia’s energy systems, as well as to make a proposal on financing this construction project. During the year, the situation in the Armenian-populated region of Georgia, Samtskhe-Javakheti, continued to have an influence on the relations between the two countries. Erevan tried to get Tbilisi to agree to broader implementation of the economic rehabilitation programs of this region and Arme- nia’s active involvement in this process. Furthermore, both states tried to coordinate their actions to prevent the conflicts and tension in this region from growing, including by using official Erevan’s authority and its influence on the Armenian sociopolitical movements and organizations of Samtskhe- Javakheti. This was particularly manifested by the results of the elections held on 5 October to the Georgian local government bodies, during which Armenia, as agreed upon with the Georgian authorities, tried to prevent further aggravation of the post-election situation and supported the pro-governmental Armenian organizations and political groups of Samtskhe-Javakheti. At the same time, the situation in this Armenian-populated region of Georgia was in the center of attention of several Western, including international research and analytical, organizations, which recommended that the tension be defused by decentralizing the government, creating conditions for the real protection of the rights of the region’s Armenian minority, and further implementing international and European political-legal standards to protect the rights of ethnic minorities in Georgia’s legislative field and political practice.1 Erevan and the U.S. and European Armenian lobbyist organizations also showed their involvement in the political processes around this region by actively opposing the projects to build a Kars- Akhalkalaki railroad branch through this region of Georgia. The recent downturn in Russian-Georgian interrelations also had an impact on the overall interrelations between the two countries. In particular, this was manifested in the difficult situation involving the closing of another communication line between Armenia and Russia that passes through Geor- gia. All the same, at the year’s end it was possible to claim that Armenian-Georgian cooperation in foreign policy and security, communication, and joint economic projects has great potential, which will have a positive effect on the political situation and stability in the Southern Caucasus.

Cooperation with the Islamic Republic of Iran

The year 2006 was characterized by the further development of relations between Armenia and Iran, where particular attention should be paid to the qualitative advances in economic contacts, es-

1 For more detail, see: “Georgia’s Armenian and Azeri Minorities,” International Crisis Group, Europe Report No. 178, 22 November, 2006. 63 CENTRAL EURASIA 2006 Analytical Annual pecially in the energy sphere. The Iran-Armenia gas pipeline was essentially completed at the end of December and was to go into operation in the first half of 2007 after several technical issues are resolved. This will make it possible to raise Armenia’s energy security by ensuring an alternative source of gas supply to the republic and to efficiently implement the Armenian-Iranian-Russian project for producing electric power at the fifth power generating unit of the Hrazdan thermal power plant and its subsequent export to Iran. During the year, Erevan and Tehran carried out significant preparatory work to put a third high- voltage power transmission line into operation, which will link the energy systems of both countries. At the end of the year, the Armenian Cabinet of Ministers approved the draft of an intergovernmental agreement on the joint construction and operation of the Megrin thermal power plant on the Araks border river. The capacity of each of these two plants on opposite banks of the Araks amounts to 140 MW, a feasibility report has been prepared, cartographic and geological work has been completed, and design and building work will begin in 2007. Iran is planning to grant Armenia a loan of 150 million dollars, which will be reimbursed by means of electric power deliveries. What is more, we should note the measures aimed at building a new Iran-Armenia highway, which will reduce the load on the existing motorway and permit the movement of large shipments. Tehran and Erevan drew urgent attention to building a railroad between Armenia and Iran, as well as to the joint implementation of several agricultural programs. Armenia’s joining the Agreement on the Inter- national North-South Transportation Corridor in 2006 made an immense contribution to the development of cooperation in the communication sphere. Political contacts also developed. In particular, on 14 February, Iranian Foreign Minister Manouchehr Mottaki visited Armenia, and on 12 September Iranian Parliament Speaker Gholam Ali Haddad-Adel paid a visit to this country. During the official visits, the highest-ranking Iranian officials had extremely beneficial and productive meetings with their Armenian counterparts. In turn, at the beginning of July, Armenian President Robert Kocharian made a three-day working visit to the Islamic Republic of Iran, where he met with Iranian President Mahmoud Ahmadinejad and discussed issues relating to economic and political cooperation of interest to both sides. In December, Armenian Foreign Minister V. Oskanian also made a visit to Iran, during which vital issues of further developing cooperation between the sides were discussed, including in the economic, energy, and communication spheres. Tehran also expressed its interest in developing the political processes around settlement of the Karabakh conflict, which was manifested in the form of periodical consultations between the diplomats and politicians of both countries.

Relations with Turkey

During the entire year, Armenia and Turkey made attempts to establish bilateral contacts, but this was mainly manifested at the level of representatives of public associations and by visits of expert groups and individual journalists. European structures and U.S. donor organizations also tried to implement certain projects aimed at arranging cultural and public undertakings between Erevan and Ankara, but they were all extremely limited in practical significance. The existing political and historical problems between them are making official contacts extremely difficult, and Turkey continues to keep its borders with Armenia closed, hinging the resolution of this question, among other things, on the Karabakh conflict. An even more serious factor influencing the prospects for establishing bilateral ties is recognition of the events that occurred in the Ottoman Empire in 1915 as genocide. Against the background

64 REPUBLIC OF ARMENIA International Affairs of the statements and declaration of recognition made in 2006 by the parliaments of several countries, particularly after the French parliament approved a draft law envisaging criminal liability for denial of this fact, the semi-official contacts between the representatives of the Armenian and Turkish foreign ministries essentially became frozen again. On the other hand, adoption of this draft law by the French parliament, as well as the European Union’s stringent demands for reforms which Ankara should carry out if it wishes to join the EU, led to the fact that in 2006 Turkey also began actively discussing this problem. Some Turkish experts even noted that, regardless of how the processes around this problem develop, partial opening of the borders with Armenia is possible in the near future, if “some progress is achieved in the Karabakh issue.”

Interaction with the Russian Federation, Cooperation within the CIS and CSTO

The further consolidation of partner relations with Russia was one of the fundamental elements ensuring Armenia’s national security in 2006. Cultural and humanitarian contacts between the countries also developed, and 2006 was declared the Year of the Republic of Armenia in the Russian Fed- eration, the official opening of which took place on 22 January in Moscow with the participation of Armenian President Robert Kocharian and Russian President Vladimir Putin. An important stimulus in the consolidation of bilateral relations was Armenia’s participation in the planned undertakings carried out within the framework of the CSTO. The level of contacts Erevan and Moscow have reached in the security sphere makes it possible to say that they are engaged in bone fide strategic cooperation. As of the present, the military-political cooperation between Armenia and Russia, which has, apart from everything else, a solid historical foundation, is the key factor of regional stability. Relations in this sphere were most actively developed in three areas: 1. Bilateral military-political cooperation, including in the format of a joint Armenian-Rus- sian grouping in Armenia; 2. Multilateral cooperation within the framework of CSTO undertakings; 3. Cooperation within the framework of the CIS air defense system. Economic cooperation was also actively practiced, particularly in the energy and investment spheres. During the year, the Russian companies carried out major investment projects in Armenia. In particular, the fifth power generating unit of the Hrazdan thermal power plant was transferred to Gazprom by way of compensation aimed at setting a discount price for Armenia of 110 dollars per 1,000 cu m for the Russian gas delivered to the republic until the end of 2008. In addition, talks are being held on the final transfer to Gazprom, within the framework of the Armenian-Iranian-Russian project, of the Iran-Armenia pipeline being built for producing electric power at the Hrazdan thermal power plant using Iranian gas and the subsequent export of electric power to Iran. The largest investment project in Armenia was the Russian Vympelkom Company’s purchase (for approximately 380 million dollars) of the Armentel Company from the Greek OTE Company, which is essentially a monopolist of Armenian telecommunications. The stronger position of Russian business in Armenia even provided grounds for some experts to claim that Russia was undergoing economic expansion in Armenia. But most Armenian political scientists believe that in reality the activation of Russia’s economic presence in Armenia in 2006 was of extremely limited political influence against the background of Russia’s overall weaker position in the Southern Caucasus.

65 CENTRAL EURASIA 2006 Analytical Annual

Within the framework of the CIS structures, the republic continued to participate in all the Com- monwealth’s undertakings, although it became increasingly obvious that the competence and political significance of this structure is declining with each passing year, and the CIS is transforming into a kind of “discussion club” of the leaders of post-Soviet countries.

Relations with the United States of America

Armenia believes consolidating cooperation with the U.S. to be one of the most important areas in its foreign policy. Since the moment Armenia reinstated its statehood, the United States has rendered the people of Armenia the greatest and most comprehensive support (compared with other countries) in the economic and humanitarian spheres and helped to consolidate its state institutions, and establish and develop democracy. Within the framework of Erevan’s foreign policy priorities, its relations with Washington continue to actively develop, particularly in the political, trade and economic, and military-political spheres. The active political dialog that unfolded and the agreements reached made a significant contribution to the financial-economic, military, humanitarian, and technical assistance the U.S. offered Armenia, as well as to adopting the law on establishing permanent trade relations with Armenia, and so on. Active cooperation continued within the framework of the international antiterrorist coalition. Moreover, Washington helped Erevan to raise the peacekeeping potential of Armenia’s Armed Forc- es. In this respect, the activity of the limited contingent of its servicemen in Iraq (within the international peacekeeping forces) was of particular significance. During the year, interaction also noticea- bly increased at the operative level between the Armenian Armed Forces contingents and the structures of the U.S. European Command (EUROCOM). In December, the Armenian National Assembly adopted a decision to extend the deployment of the republic’s peacekeeping contingent in Iraq for another year. In July, the House of Representatives of the U.S. Congress adopted a resolution forbid- ding American companies to finance the project to build the Kars-Akhalkalaki railroad bypassing Armenia. It is particularly worth noting the efforts to implement projects related to Armenia’s participation in the U.S. Millennium Challenge Account Program, which envisages granting significant financial resources to the country’s socioeconomic development, implementing infrastructure projects in its rural districts, and lowering the level of poverty in the republic. In 2006, a contract between the Millennium Challenge Corporation and the Armenian government came into force, and in December the first financial advances were allotted (1.4 million dollars). The Armenian diaspora in the United States continued to play an important role in the development of bilateral relations. The comprehensive support of this diaspora, as a component of American society, made the assistance from the U.S. to further consolidate Armenian statehood, develop society’s democratization, and ensure Armenia’s national security all the more significant and perceptible. According to several specialists, it was the influence of this diaspora that was largely responsible for the increasingly noticeable intensification of the American vector in Armenia’s foreign policy in recent years. Based on the above, it can be claimed that 2006 was a noticeable milestone in the development of Armenian-American relations, which are characterized by the long-term coincidence of interests between Erevan and Washington in many aspects of regional security and politics, as well as by their great potential for the development of further cooperation.

66 REPUBLIC OF ARMENIA International Affairs Relations with the European Union

Armenia’s integration into the European structures was and remains one of the priority assign- ments of its foreign policy. This is clearly expressed both in cooperation with the European Union and other European organizations, as well as in Armenia’s bilateral relations with countries belonging to this structure. At the same time, Armenia sees itself as a future full-fledged member of the EU. Nev- ertheless, the republic’s involvement in European integration processes is not an end in itself, but prompted by the Armenian people’s traditional European value references.2 One of the most important events in Armenia’s interrelations with the EU in 2006 was the Ac- tion Plan signed on 14 November within the European Neighborhood Policy Program. In order to carry out the preparatory work for adopting this document, Armenia’s highest officials made numerous official and working visits to Brussels, met with the representatives of European structures at different levels, and discussed the prospects for Armenia’s European integration during talks in the capitals of the European Union member states. In turn, European Commissioner for External Relations and Europe- an Neighborhood Policy Benita Ferrero-Waldner visited Armenia and other countries of the Southern Caucasus in February. On 20 April and 2 October, a EU Troika delegation visited Armenia to become acquainted with the situation in the country and the preparatory work being carried out on the Action Plan within the framework of the European Neighborhood Policy. In the European context of Armenian foreign policy, the state visit by head of the leading EU member state, French President Jacques Chirac, to Armenia on 29 September-1 October was of immense symbolic and practical significance. Along with this, European integration into the activity of various Armenian state bodies and departments gained higher priority. In particular, on 13 July, the first meeting of a specialized Com- mission on Cooperation Coordination with European Structures led by President Robert Kocharian was held. Joint expert groups worked more efficiently in various spheres of cooperation between Armenia and the EU, the format of interaction qualitatively and quantitatively expanded with respect to developing institutions of civil society, implementing and popularizing European standards in Armenia in democratization, human rights, supremacy of the law, and so on. On 25 October, another (the seventh) sitting of the EU-Armenia Cooperation Committee was held. The Committee of Parlia- mentary Cooperation, to which parliamentary deputies from Armenia and the EU belong, was also very active. (Its next sitting was held on 18-19 April in Erevan.) European structures took a noticeable interest in settlement of the Karabakh conflict and in the prospects for post-conflict rehabilitation.3 EU special representative for the South Caucasus Peter Semneby repeatedly talked about the EU’s willingness to assist peaceful settlement of the Nagorno- Karabakh conflict within the framework of the OSCE Minsk Group and participate in post-conflict rehabilitation.

Relations with NATO

Activation of Euro-Atlantic integration and intensification of partnership with the North Atlan- tic Alliance are the essential elements of policy aimed at ensuring the republic’s national security. In 2006, the country entered a new phase of its Euro-Atlantic integration and expansion of relations with

2 For more detail, see: S. Minasian, “Armenia and the EU’s European Neighborhood Policy Program,” Central Asia and the Caucasus, No. 6 (36), 2005. 3 For more detail, see: “Conflict Resolution in the South Caucasus: The EU Role,” International Crisis Group, Eu- rope Report No. 173, 20 March, 2006. 67 CENTRAL EURASIA 2006 Analytical Annual

NATO. Cooperation between Armenia and the Alliance, the country’s gradual involvement in its Partnership for Peace program, and participation in the work of NATO’s Parliamentary Assembly and other joint initiatives made it possible to accelerate and intensify Armenia’s integration. A turning point has essentially come in cooperation with the North Atlantic Alliance, not only taking into account the more frequent contacts between Armenian officials and the public and NATO structures at all levels, but also the new stage in institutionalizing the republic’s relations with this organization, since after Armenia’s IPAP with NATO came into effect at the end of 2005, 2006 became the first year the country actually began implementing this action plan. A declassified text of Armenia’s IPAP was officially published and presented to the country’s public in the summer, which promoted an active discussion in the expert-analytical community and in the republic’s political elite regarding the prospects for the country’s further Euro-Atlantic integration and interaction with NATO. During the year (as the previous year), periodical consultations continued within the IPAP and in other formats on the problems of regional security, Armenia’s drawing up of a National Security Strategy and military doctrine, improvement of defense and budget planning, and ensuring interaction with NATO forces at an operative level. Consultations continued to improve military education, introduce automated control systems into the Armenian armed forces, develop defense science, notify and activate the participation of the broad public in defense issues, raise the efficiency of democratic control mechanisms, interdepartmental correlations in spheres that relate to defense, fighting terrorism, and improving legislation, and resolve other problems. A certain individual approach was noted in relations with NATO, taking into account the complementariness and dynamics of the relations between Erevan and Moscow and Armenia’s membership in the CSTO. In this way, it can be stated that at the end of 2006, Armenia shifted to a qualitatively new level of relations with NATO, accompanied by a much livelier public discussion in the republic about the expediency of its full-fledged integration into this military-political structure.

68 AZERBAIJAN REPUBLIC General Overview

AZERBAIJAN REPUBLIC

GENERAL OVERVIEW

Nazim MUZAFFARLI D.Sc. (Econ.), professor, Editor-in-Chief of The Caucasus & Globalization journal (Baku, Azerbaijan)

he Nagorno-Karabakh conflict was still the key issue determining the developments in all spheres of life: domestic and foreign policy, the economic development, and religion. The T rivalry on the domestic political scene, as well as moral-religious issues, unfolded in the shadow of the settlement process, while the public inevitably remained riveted to the problem. The Armenian armed detachments, which regularly violated the cease-fire conditions, sent the tension up. In 2006 alone, Azerbaijanian settlements and the positions of the Azerbaijanian armed forces were the targets of Armenian shelling 220 times. In the second half of the year, the Arme- nians switched to “scorched land” tactics: the occupied Azeri villages that bordered on Nagorno- Karabakh went up in flames. In September, the U.N. General Assembly passed a resolution On the Situation in the Occupied Territories of Azerbaijan, which expressed concern over the environmental impact of the fires. The hopes pinned on the peace talks fell through. Azerbaijan insisted on a stage-by-stage settlement: first the occupied territories should be evacuated, and then the forced migrants should be returned with their safety guaranteed, and the status of Nagorno-Karabakh determined. It was expected that in February, when the heads of Armenia and Azerbaijan met in Rambouillet (France), the process would be set in motion. This did not happen—the Armenian president unexpectedly up and left the summit before a final decision was reached on the issue. This even came as a surprise to the international mediators, for whom the process was more important than the result. The failed summit added fresh impetus to the somewhat subdued debates over the use of force. The government remained as convinced as ever that the conflict should be resolved by peaceful means, even though it agreed that the country needed stronger military potential. In 2006, the republic doubled its defense spending compared with the previous year; in 2007, it will allocate over $1 billion to defense purposes for the first time in Azerbaijan’s history. The public approved of this, even though

69 CENTRAL EURASIA 2006 Analytical Annual some took it as a sign of political pressure on the Armenians, while others regarded it as a step toward the use of force. There were no elections in 2006, which fed the hopes of those who expected progress to be achieved in the peace settlement process. In May, some constituencies elected ten deputies to fill the vacancies in the Milli Mejlis. The by-elections stirred up debates over the principles of forming election commissions; in fact this had already become a sort of a political tradition. The country’s leaders successfully resisted the pressure applied by certain international organizations to preserve the principles intact, which forced some of the opposition parties to leave the race. The protest negatively affected the quality of the elections and fragmented the opposition still further: Azadlyg, the leading opposition bloc, fell apart. Half of the vacancies went to the ruling New Azerbaijan Party, the loyal opposition acquired two seats. In the fall, the country elected its municipal structures. Some of the leading opposition parties preferred to actively boycott the elections because, as they put it, the country did not have the proper conditions for holding democratic elections. The ruling party acquired 1,137 of the 1,931 seats; while independent deputies took 692. As was expected, the electorate demonstrated a lack of enthusiasm; the opposition tried to explain the fairly low turnout (about one-third of the registered voters) by its withdrawal from the election process, which did not sound convincing. It seems that the institutional weakness of the municipal structures was to blame; the election results could not tip the country’s political balance. No cardinal changes occurred in the foreign policy sphere either: the republic was as resolved as ever to integrate into the European and Euro-Atlantic structures. In the fall, the country signed its Plan of Action within the European Neighborhood Policy, which outlined the main targets and cooperation trends with the EU for the coming five years. It was approximately at that time that Azerbaijan and the EU signed the Memorandum on Strategic Partnership in the Energy Sphere, which described the republic not only as an important supplier of energy resources to the Western markets, but also as an important transit state. Relations with Turkey and Georgia, the republic’s two strategic partners, showed good dynamics and turned toward economic cooperation promoted by the Baku-Tbilisi-Ceyhan oil pipeline commissioned in July. The South Caucasian gas pipeline (Baku-Tbilisi-Erzurum) was commissioned at approximately the same time. The Kars-Akhalkalaki-Tbilisi-Baku railway project was implemented at a good pace. Azerbaijan added vigor to the Eastern dimension of its Eurasian contacts spurred on by Kazakhstan’s interest in the global energy projects in which Azerbaijan is involved as one of the key partners. Relations with Russia can be described as stable and friendly. Political, economic, and cultural contacts between the two countries were promoted by the Year of Russia in Azerbaijan the two presidents opened in Baku in 2006. The project was a follow up to the Year of Azerbaijan in Russia. Late in 2006, however, bilateral relations were somewhat clouded by the decision of the Russian leaders to raise the price for gas exported to Azerbaijan. The political circles inadequately interpreted this as an unfriendly political move rather than an economic action. Relations with Iran, one of the three large neighbors, developed in form rather than content. Bilateral relations remained complicated under the impact of the strained relations between the IRI and the West, particularly with the U.S. The sides, however, spared no effort to preserve superficially good relations, mainly through frequent contacts and political rhetoric. The potential use of force on the part of the U.S. and its allies against Iran encouraged speculations in Azerbaijan of a possible detachment of the Azeri provinces from Iran and their future unification with Azerbaijan. These speculations were further warmed up, in part, by the nationalist rallies of Iranian Azeris, which were cruelly suppressed by the Iranian security forces. In 2006, Iran protested several times against what it called “anti-Iranian statements” coming from Azerbaijan.

70 AZERBAIJAN REPUBLIC General Overview

In 2006, Azerbaijan fortified its position as an important actor in the Central Eurasia energy and communication system. This was the main foreign policy achievement of 2006, which became possible thanks to the country’s dynamic economic development. Just like the previous year, Azerbaijan, with 34.5 percent GDP growth, led the world GDP growth rate ranking. According to CIA—The World Factbook, per capita GDP at purchasing power parity reached $7,300. Industrial production, which increased by 36.6 percent compared with the 2005 increase of 33.5 percent, was the main factor of the country’s economic progress. Fixed capital investment totaled AZN 5,964 million ($6,700 million); about 85% of the total was used for production purposes. Azerbaijan is one of the Central Eurasian leaders in terms of investment per capita. The high growth rates—over two thirds of industrial production—were achieved at the expense of increased oil production, which is still the main economic sector. The government is helping to develop the oil-related branches in an effort to diversify the republic’s economic structure. In 2006, hundreds of processing enterprises and sociocultural facilities were commissioned within a state program; they created about 173,000 jobs. It should be said, however, that the growth rates outside the oil sector (12.1 percent) still lag behind the country’s economic growth rate. Azerbaijan is reducing the poverty level, a highly painful problem in all the post-Soviet states, at a faster pace than other countries. Nominal household income in 2006 rose by 23.4%, real income, by 24.1%, and the average monthly wage increased by 19.8%. The rapidly growing state budget revenues (88.8 percent from 2005) allowed the government to pour more money into social programs. Some of these processes, the oil-generated revenue, which remained huge compared to the country’s economy, and wider social programs, increased inflation; in 2006, the consumer price index was 8.4 percent. Local experts and international financial institutions forecast even higher inflation for 2007. Redenomination of the manat, the national currency, was the main economic event of 2006 (its par value was raised 5,000-fold; by the end of the year $1 was equivalent to 0.89 manats). Economic cooperation with other countries (with the exception of Armenia, with which Azerbai- jan maintains no economic contacts) became wider. Turkey, Russia, Georgia, Kazakhstan, and Iran, as well as Italy, the U.K., Israel, Germany, France, China, Japan, and South Korea, remained the most important foreign trade partners. Azerbaijan’s role as a transit territory for the Europe-Asia-the Cauca- sus transit corridor is gaining weight. In 2006, the details for joining the railway lines of Azerbaijan, Georgia, and Turkey were discussed. The project went ahead despite the refusal of international financial organizations to fund it mainly using the long-term loan of $200 million Azerbaijan extended to Georgia under future transit revenue. This was of huge political, as well as economic, importance. The religious situation developed under the impact of domestic and external political and economic processes. In 2006, the foreign factors were much more prominent than before. The Prophet Muhammad cartoon scandal stirred a storm of emotions inside the country, which found an outlet in mass actions, conferences, and public discussions of the “abuse of freedom of the press” in the West. In the spiritual sphere, religious organizations were more tightly controlled than before; on the other hand, the state paid more attention to the needs of the faithful. In 2006, the heads of the State Committee for Work with Religious Organizations were changed. This can be described as the main event in the religious sphere in 2006. In recent years, the State Committee and the Administration of the Muslims of the Caucasus (a public organization that united the country’s largest and most influential religious community) were at daggers drawn. The newly appointed leaders defused the old tension and considerably improved the situation. Azerbaijan remains a highly tolerant country when it comes to religious and ethnic issues. This is one of its obvious advantages and creates a positive background for its political and economic advance. Religion is excluded from the domestic political struggle. There are no more or less prominent disagreements between the Muslims (who form the absolute majority of the country’s population; 60 percent of them being Shi‘a, the others Sunnis) and the followers of other religions (Orthodox Christian, Protestants, Catholics, Judaists, Krishnaites, etc.).

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On the whole, there were no serious political, economic, or religious complications to slow down the republic’s progress. It seems that economic progress will continue into 2007: economic growth is not expected to slow down. In the latter half of 2007, domestic policy will liven up in light of the presidential election of 2008. The election campaign will probably be affected, first, by the rapid increase in financial resources that are being poured into state social programs and, second, by the fact that the opposition is disunited and split into small groups. Both factors will boost the election position of the country’s leaders.

POLITICS

Nazim MUZAFFARLI D.Sc. (Econ.), professor, Editor-in-Chief of The Caucasus & Globalization journal (Baku, Azerbaijan)

I n t r o d u c t i o n

n 2006, Azerbaijan, like all the other Soviet life was less eventful. The country entered 2006 successor states, marked 15 years of its re- with a newly elected Milli Mejlis (MM), in which I stored statehood: the Constitutional Inde- the parliamentary minority, commonly regarded as pendence Act was passed on 18 October, 1991. a real and effective opposition, proved to be very The year 2006, therefore, can be regarded as the weak. The positive changes of the independence point at which achievements and lost opportuni- period have failed to turn judicial power into a fairly ties were revised and lessons drawn. independent and effective institution. Executive The country conducted a more active for- power, primarily the president, retained the lion’s eign policy in 2006 than in 2005, while domestic share of the power and governing functions.

Power

Structural reforms. Early in 2006 (on 30 January to be more exact), the Ministry of Culture and the Ministry of Youth, Sports, and Tourism were replaced with the Ministry of Culture and Tourism and the Ministry of Youth and Sports, respectively. Former minister of culture Polad Biul-biul oglu was appointed as Ambassador Extraordinary and Plenipotentiary to the Russian Federation. Former Minister of Youth, Sports, and Tourism A. Karaev was appointed as minister of culture and tourism, while A. Ragimov, a widely known businessman, became minister of youth and sports. The State Committee for Women’s Affairs was replaced with the State Committee for Family, Wom- en’s, and Children’s Affairs headed by Kh. Guseynova. The State Committee for Construction and Archi- tecture was reformed into the State Committee for Town Planning and Architecture. In line with the structural

72 AZERBAIJAN REPUBLIC Politics market reforms, the State Agency of Amelioration and Water Economy at the Ministry of Agriculture was transformed into an open joint stock company with the entire block of shares belonging to the state. There was another important event: a Diplomatic Academy was set up under the Foreign Min- istry to train professional diplomats for the Foreign Ministry and other structures and to launch academic studies of international relations. Kh. Pashaev, who for a long time served as ambassador of Azerbaijan to the United States, was appointed as the Academy’s rector and deputy foreign minister. His former post went to Ia. Aliev, who represented Azerbaijan at the U.N. for a number of years. Society showed an interest in the newly established Heraldry Council under the President of the Republic of Azerbaijan staffed with top officials and prominent scientists and cultural figures. It was announced that the Council would “formulate and carry out a single state heraldry policy.” Observers, however, agreed that the new structure was set up to create a new state coat of arms: it is generally believed that the present coat of arms inherited from the Democratic Republic of Azerbaijan of 1918- 1920 should be altered. Personnel reshuffle. K. Geidarov’s move from the post of Chairman of the State Customs Com- mittee and his later (in February) appointment as minister of emergencies can be described as the “personnel reshuffle of the year.” Some analysts saw this as a promotion—after all he was generally regarded as one of the most influential officials—which brought him to the Cabinet and gave him command over a structure with exclusive powers. Others argued that the promotion was of a formal nature: he was removed from the structure that controlled the country’s main material flows. Later several of the presidential decrees under which the new ministry acquired additional functions (not always directly connected to emergencies) confirmed the former opinion. A. Aliev, who had served as deputy under K. Geidarov, was promoted to the post of Chairman of the Customs Committee. In February F. Alekberov, owner of the controlling block of shares of Improteks, one of the country’s most successful private ventures, was appointed as minister of labor and social security. This was more confirmation that the president preferred to see businessmen in key state posts. A. Nagiev, former minister and one of the founding fathers of YAP (the New Azerbaijan Party), was appointed as ambassador to Belarus. In April, two more ministries acquired new heads: Ia. Jamalov was appointed as minister of the defense industry (set up together with the Ministry of Emergencies late in 2005); S. Sharifov (former executive director of the State Oil Fund) was made finance minister. After 14 years as first vice premier, A. Abbasov submitted his resignation. This was the first resignation in the country’s contemporary history; the president accepted it and awarded A. Abbas- ov’s service with the “Istigal” Order, one of the country’s top awards. The ruling party announced that its numbers had reached 380,000, which widened the gap between it and all the other political parties. For the first time in recent history, the leaders of the New Azerbaijan Party openly announced that there was no opposition strong enough to merit a dialog.1 This was taken for a sign of strength—a conviction that looks doubtful to say the least. In the fall of 2006, YAP announced that it had begun preparations for the presidential election of 2008 and that it intended to nominate the incumbent president as its presidential candidate.

The Opposition

Integration and disintegration. The crushing defeat at the 2005 parliamentary elections caused by the Western states’ geopolitical preferences and the domestic political developments, as well as lack of unity inside the opposition, led to further fragmentation of the opposition parties in 2006.

1 See: A. Akhmedov, “V Azerbaidzhane net oppozitsii, sposobnoy vesti dialog s PEA,” Day.az, 21 April, 2006, available at [http://www.day.az/news/politics/47011.html]. 73 CENTRAL EURASIA 2006 Analytical Annual

The Azadlyg bloc, the largest of the opposition alliances, fell apart in February when the Musa- vat Party left it. Other participants accused the breakaway party of betraying the interests of the opposition: Musavat was resolved to work in the parliament and to run for the vacant seats. In fact, only L.-Sh. Gajieva, leader of the Liberal Party and the National Unity bloc, refused to use its deputy mandate. Musavat tried to put up a bold front: it announced its intention to work toward a wider democratic opposition, even though the bloc had fallen apart to the accompaniment of mutual accusations, which made its future reintegration very doubtful indeed. A week later the Azadlyg election bloc was reorganized (with a different membership) into a political bloc, a much weaker structure than before. Later, R. Guliev, leader of the Democratic Party of Azerbaijan, in turn announced that he would create a new political organization—the International Movement for the Democratization of Azerba- ijan—to reintegrate the opposition forces and ensure outside support. By the fall of 2006, the movement did not materialize as promised, which divided the opposition still further. The heads of most of the opposition parties announced that their parties did not intend to join the movement. Prominent public and political figures (especially from among the intelligentsia) left their weakened opposition parties, thus further weakening them. Fragmentation of parties. Some of the parties were more badly hit by the disintegration trends than others. The National Independence Party (NIP) split into two parts, which formalized their existence by conducting two constituent congresses in January. By the fall, the split in the DPA also became inevitable; the opposition Yeni Siyasat (New Politics) election bloc, which planned to become a political organization after the elections, disappeared when first the NIP and then the Social-Dem- ocratic Party left the YeS. Other leaders exchanged harsh statements and hurled accusations at one another. The bloc continued its existence as a purely formal structure. By the end of the year the opposition found itself in a tight corner: some of its top members started talking about suspending opposition activities in order to reveal the undemocratic nature of the country’s political system. As could be expected, this idea remained unclaimed. The opposition and near opposition youth organizations demonstrated more consistency. In mid-May they announced that the youth committees of the Popular Front Party (PFPA), DPA, and the Liberal Party, as well as the YOX (No) and Yeni Fikir (New Thought) youth movements, united into the Platform of Azeri Youth coalition. Together they defended the rights of several arrested leaders of Yeni Fikir who were sentenced back in July to various terms in prison for attempted coups and other crimes.

Nongovernmental Organizations

In 2006, there were approximately 3,400 NGOs in the country, about a third of them (30 percent) unregistered. The sector was developing at a fast pace: in twelve months the country acquired over 400 new NGOs. They employed about 4,000 permanent and over 3,500 temporary office workers. Most of the newly established NGOs operate in the social sphere; a smaller number deals with the issues of peace, democracy, and human rights; the youth NGOs come third in terms of size. All the NGOs are fairly weak structures: about a third of them have no offices, either permanent or temporary. Only a quarter of them are engaged in real activities, while the level of their political involvement is inadmissibly high. In April, about 400 NGOs met for the Sixth Congress of the National Forum of Nongovernmen- tal Organizations, which officially confirmed its determination not to cooperate with those Armenian NGOs that refused to recognize Azerbaijan’s territorial integrity. A. Guliev, an MM deputy, was re- elected president of the Forum.

74 AZERBAIJAN REPUBLIC Politics

The NGOs public image suffered from the scandals and mutual accusations of corruption and betrayal of state interests. This was mainly typical of the human rights structures that ran the lists of political prisoners. Lack of money was the NGOs’ weakest point. Convinced that Azerbaijan had become rich enough to fund its own NGOs itself, the foreign donors cut down their grants. In 2006, it was announced for the first time that the government was studying the possibility of funding NGOs by involving them in projects of regional and social development, environment, education, and human rights. The National Public Committee for European Integration, which brought together many prominent public and cultural figures, academics, and journalists, can be described as the “NGO of the year.”

The Press

Freedom of the press. Financial problems and the fairly complicated licensing of TV companies, as well as excessive political involvement of the media, remained the most prominent features. However, international organizations described physical pressure on journalists as the main threat to the freedom of speech. In May, Editor of Bizim yol (Our Road) was cruelly beaten up by five unidentified people. The Union of Journalists of Azerbaijan, as well as several influential international organizations (the OSCE among them), resolutely condemned the attack. The law-enforcement structures failed to find the culprits, despite the president’s special orders, while the picket that the PFPA intended to organize to protest against the editor’s beating was dispersed by the police. In June, M. Sakit, a journalist of the opposition Azadlyg (Freedom) newspaper, was arrested for alleged drug trafficking. The opposition parties, as well as some local and foreign journalist organizations (Rapporteurs sans Frontieres included), insisted that the arrest was politically motivated. The government flatly denied all the accusations and insisted, in turn, that it was a measure commonly used to cut down criminal activities. Early in October, the journalist was sentenced to three years in prison. This urged M. Kharashti, who represented the OSCE in Azerbaijan, to say that the situation with freedom of speech was worsening. Early in 2006, founder and editor-in-chief of the Beiuk millet (The Great Nation) newspaper S. Adygezalli was arrested and sentenced to twelve months in prison for slandering rector of Baku State University. In August, Sh. Agabeyli, editor-in-chief of the Milli yol (The National Way) newspaper, was sent to a maximum security penal colony for twelve months on a claim by a top functionary of the ruling party. Two weeks later, editor-in-chief of the 24 saat (24 Hours) newspaper F. Faramazoglu was condemned on a claim by the minister of the interior. Instances of the use of force or of threats to use force against journalists invited sharp comments from political and human rights organizations—both oppositional and loyal to the regime. Closure of the ANC was the central event in the latter half of 2006. The company’s broadcasting activities were discontinued on the strength of the audit carried out by the Taxation Ministry of the country’s first private TV and Radio Company. The violations revealed by the ministry were confirmed in court. In October, the National Council for TV and Radio Broadcasting (NC) refused to extend the ANC’s license because the company had violated the law by opening a regional radio station in the city of Sheki. On 24 November, the license was annulled; radio broadcasting suspended, and the company’s bank accounts arrested. Unable to pay their wages, the ANC disbanded the journalist and technical support groups. This echoed across the country and abroad: many well-known international organizations and journalist unions lodged their protests. Some representatives of the public organizations asked the president of the country to assist in resolving the conflict. In mid-December, the NC allowed the ANC to resume broadcasting and apply for another license. Under the compromise, the

75 CENTRAL EURASIA 2006 Analytical Annual

ANC dropped re-translation of Voice of America and Radio Liberty, which in 2007 acquired their own frequencies. Other events. In February, after pointing out that the development of the independent, free, and professional press and protection of freedom of speech, information, and thought were domestic priorities, the president decided to pay the debts of newspapers accumulated prior to the end of 2001 using budget money (earlier he extended the deadlines twice). The quality of the electronic media and press left much to be desired. Throughout 2006, the Journalist Alliance and the Press Council repeatedly declared that many of the newspapers were engaged in mud-slinging rather than journalist activities and that the country obviously needed more analytical publications. The public was stirred up by the eviction, on the strength of a decision by the Economic Court, of the Azadlyg newspaper from the building it acquired in 1992. The same building housed the PFPA, which published the newspaper. The opposition talked about persecution of the media, but the decision was probably aimed against the party rather than the newspaper. The Azadlyg activists responded with a hunger strike that went on, with rotating participants, through the first half of November; they also tried picketing, but were dispersed by the police. The government resettled all the organizations in other buildings—by the end of November the building was vacated.

The Political Agenda

The Nagorno-Karabakh problem remains the central issue of domestic policy. It became even more prominent because of regular violations by the Armenian armed units of the cease-fire regime. Throughout the year, the settlements and positions of the Azeri army were shelled 220 times; this caused 14 deaths among the Azeri military; two were taken prisoner, and scores were wounded. In June, the Armenians launched “scorched land” tactics: first they set fire to houses in the occupied villages of the Agdam District; then they moved to the Terter, Agderi, Fizuli, and Jabrail districts; by mid-July the fire had spread to all occupied territories. In August, the Armenians moved up to the mountains to set forests, fields, and grazing grounds on fire; the fires spread across an area of 65,000 hectares and were plainly seen from the Azeri side of the control line. The Ministry of Natural Resources and the Environment estimated the fire damage at $181.2 million; the region’s infrastructure (airports, social, cultural, religious, and other facilities) was completely destroyed. Some of the losses, cultural monuments among them, were hard to assess in monetary terms. The occupied Khojavend District lost the burial site of Garaj Choban, a historical monument of the 12th century. Azerbaijan addressed the U.N. and several other international organizations with a request to stop the arson in the occupied territory. The OSCE monitoring carried out on 3-5 July along the control line confirmed the facts of arson and drew up appropriate documents. The 33rd Session of the OIC Foreign Ministers declared that it was “appalled by the facts of Armenian vandalism.”2 This and the political discussions that followed revealed two positions: most political and quasi- political organizations insisted on the use of force or even immediate military operations. A smaller number wanted contacts with Armenia and, especially, with the Armenian community of Nagorno- Karabakh. The latter, they argued, were citizens of Azerbaijan, therefore in the reunited country they would have to continue living side by side with their Azeri neighbors. This is easier said than done since most of the public see the efforts to do this as high treason. This is best illustrated by the de-

2 See: Day.az, 22 June, 2006, available at [http://www.day.az/news/politics/51723.html]. 76 AZERBAIJAN REPUBLIC Politics mands of several political youth organizations of Azerbaijan to deprive those Azerbaijanis who took part in the meeting of the Azeri and Armenian youth of Azeri citizenship. The demands were ignored, but the public mood persisted. The September poll of MM deputies conducted by journalists revealed approximately equal numbers of those who favored peaceful settlement and those who wanted to use force. Most of the former, however, did not exclude the use of force if negotiations on reestablishing Azerbaijan sovereignty over the occupied territories failed. The government, on the whole, preferred a dialog, but it did not fail to point out that the country’s increased military potential (the military budget for 2007 will be over $1 billion for the first time in the country’s history) was an important factor of a fair settlement. The opposition, in turn, announced that if fighting resumed it would be prepared to suspend the political confrontation. It never openly called for war, mainly because the West, on whose support it counted, would not hail such slogans. Elections. The ten seats that remained vacant after the 2005 parliamentary elections went to by- election. Just like in 2005, on the election eve, in 2006 the opposition and government failed to see eye to eye on the election laws, to be more exact, the principles according to which the election commissions, including the Central Election Commission, were formed. The opposition insisted that the commissions be formed by parity, in which the government and the opposition were equally represented. In January, the main opposition parties (PFPA, Musavat, and DPA) refused to delegate their representatives to the Central Election Commission, because, they argued, their representation would be of a merely decorative nature, which could do nothing to guarantee democratic elections as long as the commissions were staffed according to the old principles. The Venice Commission of the Council of Europe also insisted that the government and the opposition be equally represented in the CEC. The government responded very much as before: no changes in the election laws until at least after the by- elections. It insisted that the current rules of staffing the election commissions were the only acceptable ones and guaranteed the elections’ democratic nature. The by-elections divided the opposition: the PFPA and DPA decided to stay away and to recall their deputies elected in 2005, while Musavat decided to go on working in the parliament and run for more seats in 2006. It argued that it was getting ready for the 2008 presidential elections. This sealed the fate of the Azadlyg election bloc. The by-elections took place on 13 May; 124 candidates competed for 10 seats; 6,500 observers monitored the elections (5,500 of them local people). Five seats went to the ruling party; three to independent candidates that supported the regime, and two to candidates of the loyal opposition parties, which were never seen as an alternative to the government. The next day, the opposition announced that there had been mass violations of the democratic norms. The PACE observers, in turn, registered their satisfaction with the progress demonstrated by the elections and voiced their regret over the boycott by some of the opposition parties. They pointed out that this deprived the voters of free and wider choice. The CIS observers were satisfied with the elections, which, they insisted, were held in free and absolutely transparent circumstances in conformity with international standards. The OSCE mission stated that despite obvious improvement in some respects, there were alarming developments that called for further reform of the election laws. On 5 June, the Constitutional Court confirmed the results of the MM by-elections. On 6 October, municipal elections were held in 82 constituencies: in some of them, they were by-elections, in others, regular elections were held, while in still others, elections were conducted for the first time. About one-third of the registered voters (slightly over 270,000) came to the polls to elect 1,931 municipal deputies out of 4,524 candidates, the absolute majority of whom were either members of the ruling party or its non-party supporters. The observers were mainly from among the local people: only 32 out of the group of nearly 6,000 observers represented international organizations.

77 CENTRAL EURASIA 2006 Analytical Annual

This time, too, the opposition did not treat the municipal elections seriously: it never believed that the results might change the political situation in the country because of the well-known weakness of the local representative structures. The Azadlyg opposition bloc decided to actively boycott the elections because, as its leaders put it, the country lacked conditions conducive to free democratic elections. The bloc officially refused to nominate candidates and observers and called on its supporters to stay away from the polling stations. After the elections, the opposition forces refused to recognize the results and called on the international organizations to provide their objective assessments. No political results followed. The observer mission of the Council of Europe registered certain improvements compared to the 2004 municipal elections and pointed out, with deep regret, certain serious shortcomings. All the opposition parties, including the loyal parties, acquired about 30 seats; the majority (1,137 seats) went to the ruling New Azerbaijan Party. Independent candidates obtained 692 mandates. The Iranian issue was one of the most discussed. Early in March, the Congress of the Azerbai- janians of the World asked the U.N. Secretary General to grant the status of “divided nation” to the Azerbaijanians.3 Two weeks later, on 16 March, Baku hosted the Second Congress of the Azerbaija- nians of the World,4 at which much was said about the violation of the Iranian Azeris’ political and humanitarian rights. The Iranian embassy responded with a note of protest addressed to the Foreign Ministry of Azerbaijan, in which it resolutely condemned the “anti-Iranian statements” made at the Congress as “contradicting the friendly relations between two fraternal countries.” By way of comment, the For- eign Ministry pointed out that the Congress delegates expressed their personal opinions that should not, and could not, affect the relations between the two countries. This created a background for Azerbaijan’s involvement in a possible American operation against Iran. The country’s leaders were all convinced that the conflict between the world community (the United States in particular) and Iran over the latter’s nuclear program should be settled peacefully by diplomatic means. The authorities pointed out that Azerbaijan was not contemplating involvement in the anti-Iranian campaign (if it took place). Some of the opposition and public alliances, on the other hand, favored their country’s involvement in it. The expert community, in its turn, pointed out that the discussion was premature since a peaceful settlement was still possible. In mid-May, mass rallies and marches “flared up” in Iran to protest against the information that appeared in some Iranian publications and that, as the protesters were convinced, insulted all Azeris. Troops dispersed the rallies; scores of protesters were killed, others were wounded or arrested. On 28 May, the spontaneous meeting of Azeris in the very center of Tehran was cruelly crushed: the press reported on dozens of killed, hundreds of wounded, and thousands of detained. The response in Azerbaijan was stormy; certain politicians described the events in Iran as “another wave of the national-liberation movement in Southern Azerbaijan.” The public responded with picketing in front of the Iranian embassy in Baku; national flags and cartoons of the Iranian president were burnt. The police interference and arrests did not stop the wave—protest actions continued almost until the fall. All prominent political organizations deemed it necessary to issue statements in support of the Iranian Azeris and their struggle for their rights, and condemned the use of force against them. Late in May, a group of well-known public and political figures set up a Committee of Support for the National Movement of Southern Azerbaijan; in the fall, Baku hosted an International Confer-

3 The document said, in particular, that under the Turkmanchai Peace Treaty of 1828 that finished a Russian-Persian War Azerbaijan was divided between Russia and Iran. Today, there are (according to different sources) from 22 to 28 million of Azeris in Iran (they live in compact groups in the country’s north). 4 The Congress was convened under a presidential decree to analyze the situation of the Azeris living abroad, their stronger ties with the Republic of Azerbaijan as well as improved contacts with the diaspora. 78 AZERBAIJAN REPUBLIC Economy ence “National Movement in Southern Azerbaijan,” which called on all the Azeris of the world to support the just struggle of their compatriots in Iran. It seems that the “Iranian issue” will remain on the agenda in the near future.

C o n c l u s i o n

In 2006, Azerbaijan continued building a unipolar political system in the country, in which the leadership was overpowering, while the opposition was unacceptably weak. For this reason political confrontation between the government and the opposition as two more or less politically equal forces never took place. Meanwhile, this alone is the moving force behind progress in any democratic society. So far the NGOs are the weakest link in the democratization process: limited funding and their excessive involvement in politics did not allow them to develop into an influential political actor. The free press, one of the unquestioned gains of the independence period, is having a hard time. Plagued by more or less familiar problems—financial dependence, violation of the rights of journalists, and their so far inadequate professional level—it cannot develop. Nagorno-Karabakh is the key issue on the political agenda. While its peaceful settlement is stalling, the use of force is moving to the fore in domestic political debates.

ECONOMY

Rasim GASANOV D.Sc. (Econ.), professor, Azerbaijan State Economic University (Baku, Azerbaijan)

I n t r o d u c t i o n

he creation of a socially oriented market measures to create a favorable investment envi- economy, chosen by Azerbaijan as a devel- ronment and a proper market infrastructure and to T opment model, is taking place through improve the social protection system. According phased liberalization of economic activity coupled to international financial institutions, the Azerba- with active government support for priority sec- ijan economy today is among the most dynami- tors. Other major components of this process are cally developing economies in the world.

Macroeconomic Stability

Active use of oil and gas resources not only ensures the energy self-sufficiency of the Azerba- ijan economy, but has also been a key factor of its development over the past century and a half. After the restoration of state independence in 1991, energy resources once again became a crucial factor in

79 CENTRAL EURASIA 2006 Analytical Annual radical economic transformations. The turning point here was the conclusion in September 1994 of a production sharing agreement on the joint development of the Azeri-Chirag-Gunashli (ACG) oil fields. Later on, this agreement came to be known as the “Contract of the Century.” Direct and indirect threats— both domestic and external—could not change the country’s policy of putting the country’s oil and gas resources into economic circulation as soon as possible with the aid of foreign investment. In the past 10 years, the republic has concluded over 20 major international contracts for hydrocarbon production. In view of world experience and the warnings of economic theory about the possible negative consequences of attracting large foreign investments into natural resource sectors, and also given the potential destabilizing role of oil revenues, the need to ensure macroeconomic stability came to be regarded as one of the main tasks of economic policy. Later on, efforts to maintain this stability became not only the keynote of development, but also an indispensable condition for transforming the economic system and restoring its integrity. From the very beginning, high and sustained GDP growth rates and low inflation were defined as the main parameters of macroeconomic stability. The difficulty here was that investment (including foreign investment) increased very rapidly against the background of a general denationalization of the economy: in 1996-2006, total investment in the economy exceeded $20 billion.1 In embarking on radical reforms in the economic system, the government formulated their goal: to balance economic development both sectorally and territorially. The subsequent increase in the share of the private sector in GDP (from 30.3% in 1995 to 79.0% in 2006) can be regarded as the most general indicator of the structural changes achieved. Prerequisites created in previous years ensured favorable conditions for maintaining and strengthening macroeconomic stability in 2006. Another feature of the past year was that record- high rates of economic growth created new problems associated with macroeconomic stability: the main task now is an “optimal sterilization” of large oil revenues. The most important institutional reform along these lines was the establishment of the Oil Fund in 1999. In functional terms, the most significant decision was probably the loosening of the “tight fiscal and monetary policy” strictly implemented by the National Bank of Azerbaijan from 1995. True, this loosening began in 2004, but the redenomination of the national currency (manat) in January 2006 led to its further rise against foreign currencies. This was the year’s most notable phenomenon in the fiscal sector. A major specific feature of macroeconomic policy was the use of the state budget as a “sterilizer of financial resources.” For the first time, the budget served as a channel for the flow of revenue into the Oil Fund. The authorities developed and introduced a new model of relations between these financial institutions “sensitive” to the conditions in the world oil market. Consequently, from an institutional standpoint, macroeconomic stability was not only maintained but, in effect, was even strengthened. Whereas in 1996-2000 it was achieved in difficult conditions of economic recovery after a deep crisis and in large part due to credits provided by international financial institutions, and in 2001-2004, in the conditions of a significant increase in public spending for social purposes and public administration reform,2 in 2005-2006 this stability was mostly due to a set of measures designed to sterilize oil revenues coupled with a sharp increase in public expenditure, including public investment. Macroeconomic indicators showed a continuation of the positive trends of recent years. In 2006, GDP growth in Azerbaijan was 34.5% (compared to 26.4% in 2005), the highest growth rate in the

1 The data presented in this article, if there is no other reference, are taken from the publications of the State Statis- tical Committee of the Azerbaijan Republic. 2 In that period, the authorities began implementing various state programs for the development of non-oil sectors; that was also when the first signs of a loosening of fiscal and monetary policy began to appear. 80 AZERBAIJAN REPUBLIC Economy world. GDP per capita increased by 33.0% to $2,373.3 or, at purchasing power parity (PPP), $7,300.3 The main driving force behind this rapid GDP growth was industrial production, which increased by 36.6% (compared to 33.5% in 2005) mainly due to growing oil production. Fixed capital investment totaled 5,964 million new manats (AZN), or $6,700 million; about 85% of the total was used for production purposes. In terms of investment per capita ($785), Azerbai- jan is among the leaders in the CIS and Eastern Europe. Compared to 2005, foreign investment grew somewhat slower: by 14.8% against 16.6%. This is explained, in the first place, by a decline in demand for investment in the oil and gas sector due to the completion of most construction and installation works, whose growth somewhat slackened. For this reason, and also because the country itself is now able to invest significant financial resources in the economy, the share of foreign capital in total investment has fallen to 54.2%. In November, the authorities set up a State Investment Company (SIC) in order to simplify private sector access to financial resources and help to accelerate economic development in non-oil sectors. Large oil export revenues (part of which, despite “sterilization” measures, inevitably went into circulation) caused a slight increase in inflation. Another factor behind inflation was active implementation of social programs, which objectively led to an increase in the total money supply and total domestic demand. In mid-2006, inflation reached about 10% (from 5.5% at the end of 2005). In July, the National Bank raised the refinance rate from 9% to 9.5%, and for the year as a whole the consumer price index (CPI) was 8.4%. Compared to 2005, the prices of locally manufactured goods rose by 17.7%, and those of agricultural products by 8.4%. The biggest price rises were recorded for beef (30.0%), mutton (43.5%) and potatoes (24.6%). It should be emphasized that these rises occurred against the background of a 47% increase in domestic consumer prices for oil products. The prices of many foodstuffs (especially meat) were also affected by the notorious “bird flu:” the threat of an epidemic significantly changed the consumption pattern.

Sectoral Composition of the Economy

The oil sector predominates, accounting for over two-thirds of industrial production. In principle, 2006 can be called a “watershed” year as regards the development of the oil sector and Azerbai- jan’s final emergence as a major actor in the field of global “oil geopolitics.” On 13 July, the official opening ceremony for the Baku-Tbilisi-Ceyhan (BTC) oil pipeline, whose construction was completed back in 2005, was held in Ceyhan (Turkey). In effect, the pipeline became operational in April 2006. The significance of this global energy project has many aspects. For Azerbaijan, the BTC pipeline is an opportunity to gain free access to world oil markets, and this via a route alternative to existing ones; it is an opportunity for sectoral diversification of the economy thanks to a sharp increase in oil export earnings; it is a new prerequisite for enhancing the country’s economic security, an effective tool for its integration into the world economy, a factor helping to increase its transit potential and, on the whole, an additional opportunity to realize the advantages of its geographic location. In the near future, the BTC will undoubtedly have both an accelerating and a multiplier effect. The oil pipeline is a significant economic factor not only for Azerbaijan, but also for neighboring states (Georgia and Turkey) and for Kazakhstan: in June, the presidents of Azerbaijan and Ka- zakhstan signed an agreement on joint oil shipments through the BTC pipeline.

3 See: CIA—The World Factbook, available at [https://www.cia.gov/cia/publications/factbook/index.html]. 81 CENTRAL EURASIA 2006 Analytical Annual

In 2006, under the second global project with Azerbaijan’s participation, the parties completed the construction of the Baku-Tbilisi-Erzurum (Turkey) gas pipeline, which was put into operation in early 2007. Through this pipeline, natural gas from the Shah Deniz field on the Caspian shelf is to be exported to Georgia and Turkey. In June, an oil and gas exhibition and conference was held in Baku with the participation of 350 companies from 32 countries. The main structural problem in the economy remains the large share of oil in industry, in GDP and especially in exports. It also accounts for uneven distribution of business activity across the country. The government is trying to remedy the situation by taking energetic measures to expand and develop non-oil sectors and to even out the level of socioeconomic development in the regions. Under a special state program adopted for this purpose, hundreds of manufacturing enterprises and sociocultural facilities were put into service in 2006 with a total of about 173 thousand new jobs. GDP growth in the non-oil sector was 12.1%. Total income growth in the transport sector was almost 2 percentage points higher: 14.0%. The commissioning of the BTC pipeline served to increase freight traffic in the transport sector. In terms of the increase in freight transportation, Azerbaijan exceeded the average figure for the CIS countries by 6.2 percentage points, and in terms of freight volume, 1.5 times. It should be noted that the BTC’s share in total freight traffic was only 5.5%. The Europe-Caucasus-Asia transport corridor (TRACECA) is gathering momentum. In 2006, freight traffic in its Azerbaijan section alone was about 50 million tons, or roughly a third of total freight traffic in Azerbaijan’s transportation system. A most significant event was the start of a project to connect the railway systems of Azerbaijan, Georgia and Turkey: during the year, virtually all conditions for the construction of the Kars (Tur- key)-Tbilisi section were agreed. It should be emphasized that the states involved were firm in their resolve to implement this project, which met with fairly serious objections. The reasons for Armenian and Russian opposition were mostly political. International financial institutions refused to provide credits for financing the Georgian section. Given the great political and economic importance of the project and motivated by the need to deepen economic integration in the region, the government of Azerbaijan itself allocated the necessary funds to Georgia for the construction of this section in the form of a long-term loan repayable over 25 years out of income from transit. When Russia more than doubled the price of natural gas, Azerbaijan stopped importing Russian gas, mostly used to generate electricity. The republic’s thermal power plants were switched to local fuel oil.

Poverty Reduction and Social Protection

Nominal household income in 2006 rose by 23.4%, and real income, by 24.1%. The average monthly wage increased by 19.8% to $160. The price of a minimum consumption basket, which includes 585 goods and services, was about AZN 52 (roughly $58), and the subsistence level, AZN 42.6 ($47). Allowances to low-income categories of the population were raised twice during the year, in March and August. From October, the minimum monthly wage was raised by 20% to AZN 30 ($33). At the end of October, the president signed an executive order to index the deposits of Azerbaijani citizens with the former U.S.S.R. Sberbank. An Employment Strategy for 2006-2015 was approved, and a Law on Tar- geted State Social Assistance went into effect. On the whole, rapid economic growth naturally helped to reduce poverty to a considerable extent (from 40% to 29%), although its level remains high.

82 AZERBAIJAN REPUBLIC Economy

At the same time, it should be borne in mind that official statistics does not give an adequate picture of poverty, because the share of the informal economy in GDP remains one of the largest in Europe (according to World Bank data, about 62%), which results in a relatively large share of informal income, although it goes without saying that the distribution of the latter cannot be regarded as equitable. The government is developing a new state program to alleviate poverty and ensure sustainable economic growth, aimed at reducing by half the number of poor people in the country by 2015. In order to cushion the impact of the increase in utility charges, the authorities are introducing a system of targeted social assistance to low-income strata of the population. Under this system, already applied as an experiment since July 2006, existing benefits are integrated into a single package of targeted allowances for poor families, with due regard for established distribution criteria.

Business

There was a lively debate during the year on the subject of barriers to effective business, and a number of measures were taken to improve the business environment. A positive step here, for example, was a reduction in the maximum statutory time for state registration of new companies in accordance with a legislative amendment which came into effect in September. In order to give businesses greater access to financial resources, numerous credit fairs were held throughout the country, including the regions. Work continued on the project to create an industrial park near the city of Sumgait (30 km north of Baku) with a total of about 10,000 new jobs. A state Export and Investment Promotion Foundation started work in the country. Its purpose is to raise the level of domestic business and help it to enter international markets. Note should also be taken of measures to popularize leasing and make it more accessible to entrepreneurs. Bilateral business forums with the participation of Italian, French and Kazakh business people took place during the year.

Finance and Credit

A redenomination of the national currency began on 1 January. Its purpose was to improve currency circulation, simplify the accounting and settlement system, and save public funds. For the whole of 2006, the manat’s average exchange rate was 0.89 manats per dollar. It should be emphasized that both independent and opposition experts supported the government’s decision to redenominate the manat, noting that it could have some negative consequences as well (such as a certain degree of technical inflation). According to the Ministry of Finance, state budget revenues reached AZN 3,880.1 million (about $4,360.0 million), up 88.8% from 2005. Budget expenditures totaled AZN 3,779.4 million, with an annual surplus of AZN 90.4 million (instead of the earlier projected deficit of AZN 188.0 million). In May, Milli Mejlis approved amendments and addenda to the State Budget: its revenues and expenditures were increased, respectively, by 12.6% and 12.0%. An important and growing role in the financial system is played by the State Oil Fund, whose resources are already comparable with those of the state budget and are expected to exceed them in the next few years. The government took a decision on a gradual transition to mostly non-cash payments, project- ing measures to promote the use of plastic cards, install POS terminals, and switch customs and tax payments to a card system.

83 CENTRAL EURASIA 2006 Analytical Annual

Some measures were taken to improve the banking system. A Mortgage Fund was set up at the National Bank. The initial experience of mortgage lending revealed a number of shortcomings that complicated this process, which is why certain amendments were made to the relevant legislative acts in order to simplify the provision of mortgage loans. Mortgage lending has two purposes: first, to improve the people’s housing conditions by creating effective construction financing mechanisms; and second, to attract additional local and foreign investors into the area of housing construction. External debt management, as in previous years, was a major focus of government attention. New credit agreements totaling $2.2 billion were concluded on fairly concessional terms. Today the country’s external debt is $1.9 billion, while its international reserves are more than twice as large ($4 billion). In order to promote economic development, steps were taken to improve the fiscal system. In particular, amendments and addenda were made to the laws On the Budget System and On State Duty, and also to the Tax Code; measures were also taken to accelerate the pension reform. A total of AZN 694.0 million of public funds, including AZN 120.0 million from the Oil Fund, went to finance infrastructure projects. To ensure uninterrupted supply of high-quality drinking water, the authorities started the construction of a water pipeline from Gabala to Baku. In February, Milli Mejlis passed a Law on Retirement Pensions. However, not all of the government’s economic decisions proved to be popular. Probably the most negative public response was drawn by the doubling of retail prices for diesel fuel, kerosene and fuel oil used to heat residential buildings (January). The Tariff Board explained this decision by a desire to bring domestic energy prices closer to world prices.

Foreign Economic Relations

Integration into the world economy and into the system of international economic relations is of paramount importance to Azerbaijan. A special effort here is made to strengthen regional economic cooperation, primarily with countries of the Caucasus and Central Asia. In 2006, Azerbaijan’s foreign trade turnover was $11.6 billion, including $6.4 billion of exports and $5.2 billion of imports, with a surplus of $1.1 billion. Azerbaijan’s traditional political allies—Georgia and Turkey—were simultaneously among its key economic partners, and this, for its part, points to a sufficiently high level of political cooperation. Considering the critical situation that arose in Georgia in the field of energy supply, Azerbaijan took a decision on additional supply of natural gas to that country, a move of both economic and great political importance. During an exchange of visits by official delegations, Azerbaijan and Turkey signed a number of intergovernmental agreements in different areas of the economy. Economic ties with other neighboring countries—Russia and Iran—also developed actively. The Russian Federation is among Azerbaijan’s major trading and economic partners: in 2006, it accounted for over 12.0% of the republic’s foreign trade turnover (more than $1 billion). The past year was declared a Year of Russia in Azerbaijan. Cross-border cooperation with Iran mainly included projects in the power industry aimed at expanding the technical possibilities for energy exchange between the two countries. A positive example of economic cooperation with neighboring states was the signing by Azerbaijan, Iran and Russia of an agreement on the construction of the Qazvin-Rasht-Anzali-Astara railway, which will significantly vitalize the North-South Transport Corridor. Substantial changes took place in relations with Kazakhstan, the leading country of Central Asia. Of special importance here was Kazakhstan’s above-mentioned decision to join the Baku-Tbilisi- Ceyhan pipeline project.

84 AZERBAIJAN REPUBLIC Economy

Azerbaijan’s activity within the framework of various regional associations (CIS, GUAM, ECO) and projects (TRACECA and North-South international transport corridors) was highly conducive to international economic cooperation. Economic ties with Islamic states, including Pakistan and some Arab countries, are growing stronger. In July, a branch of the National Bank of Pakistan opened in Baku and a direct air route was established between Baku and Karachi; a joint business forum was held at the Middle East University in Northern Cyprus; and protocols on trade and economic partnership were signed between the Azer- baijani-Turkish Association of Businessmen and various organizations of Northern Cyprus. Matters of integration with Europe came into sharper focus. Trade with EU countries increased, just as the amount of EU investment in the Azerbaijan economy. The EU share in the country’s foreign trade turnover exceeded 44.8%. A special place in this cooperation belongs to technical assistance programs (TACIS). Economic cooperation with the United States is strengthening and developing. It is mostly connected with projects for the use of alternative energy sources, development of promising deposits of oil, gas, gold, silver and copper, and tourism. In 2006, the U.S. accounted for 2.6% of Azerbaijan’s foreign trade turnover. Trade and economic relations with countries of the Asia-Pacific Region—China, Japan and South Korea—have developed dynamically, with a steady increase in trade volumes. Companies from these countries are successfully operating and actively investing in Azerbaijan. In 2006, priority was given to the energy sector: Chinese companies are interested in larger supplies of Caspian oil and seek to increase their investments in this area, and Japanese companies operate at such major facilities as the Sangachal Terminal, the Shimal State District Power Station, etc. Among other cooperation areas one should note the reconstruction of electric power stations, engineering, agriculture, the textile industry, tourism and the development of the infrastructure. Relations with South Korea were on the rise, as manifested in a deepening of cooperation in the energy sector, construction, electronics and information technology in accordance with interstate agreements.

Cooperation with International Financial Institutions

As in previous years, cooperation with the IMF mostly proceeded along the lines of advisory assistance on a wide range of issues: improvement of statistical reporting, fiscal policy, external debt management, assessment of inflation, targeted social assistance to low-income strata of the population, and implementation of the new program for economic reform and development of the non-oil sector. A World Bank mission on development loans to agriculture started work in the republic. Members of the World Bank Group, IFC and IDA, were active in Azerbaijan. In January, a concessional loan to Azerbaijan for the poverty reduction program was approved in the amount of SDR 13.1 million. Potential areas of cooperation in the field of infrastructure projects were discussed as well. The parties signed credit agreements totaling over SDR 75 million (for the development of the postal system, environmental protection in rural areas, health care reform and modernization of the penitentiary service). At the same time, let us note that in 2006 Azerbaijan paid $136.3 million in debt service on IMF and World Bank loans; of this, repayment of principal totaled $97.2 million, including $37.2 million on IMF loans. The EBRD continued to finance four projects (repair of the Hajigabul-Kurdamir road, reconstruction of the Baku-Samur highway, upgrading of the locomotive fleet of Azerbaijan State Railways,

85 CENTRAL EURASIA 2006 Analytical Annual and support of small and medium businesses) at a total cost of about $200 million. In December, the EBRD began implementing a new strategy in Azerbaijan, under which the main targets for EBRD financing are the republic’s non-oil sectors (agribusiness, tourism, telecommunications, industry), the financial sector, infrastructure and natural resources. The Bank allocated $115.0 million for the construction of a thermal power station. It also became a shareholder in a number of local financial organizations. The ADB decided to provide credits to Azerbaijan in the amount of SDR 50 million for modernizing the East-West Road Corridor. The IDB and the government of Azerbaijan discussed the details of a $10.5 million credit agreement for the construction of the Yevlax-Ganja road. The German De- velopment Bank (KfW) provided a EUR 37.3 million grant for technical assistance and improvement of the water supply system in the cities of Ganja and Sheki. The EBRD, BSTDB, IFC, USAID and other organizations are carrying out various microfinance projects, attracting about $100.0 million from foreign sources for their implementation. Overall, international financial institutions in 2006 provided over $500 million to various economic agents in Azerbaijan.

Economic Consequences of Armenian Occupation

In 2006, as in the previous 19 years, a negative influence on every sphere of social life was naturally exerted by the Armenian-Azerbaijani (Nagorno-Karabakh) conflict, whose adverse consequences will continue to impede socioeconomic development in the country and the region for a long time to come. It is known that Armenia seized the Nagorno-Karabakh Region of the Azerbaijan Republic and seven districts adjacent to it, occupying almost 20% of the country’s territory and inflicting huge material damage estimated at $26.2 billion. The number of refugees and displaced persons in Azerbaijan is close to one million, with about 60% of them living below the poverty line. In order to improve their material status and living conditions, the state is obliged to allocate significant budget funds, which puts constant pressure on the economy. Special note should be taken of the environmental damage from Armenian occupation. In the occupied territories, the invaders engage in illegal development of mineral deposits, destroy forests, nature reserves, pastures, flora and fauna, and deliberately pollute transit rivers flowing into the Cas- pian Sea. In view of illegal exploitation by Armenia of natural resources in the occupied territories, and also due to forced cessation of rail and road communications with the Nakhchyvan Autonomous Republic (blockaded for 18 years) and of corresponding transit traffic, Azerbaijan’s budget annually loses colossal amounts.

C o n c l u s i o n

So, 2006 was a period of active implementation of concrete plans and programs designed to ensure sociopolitical and macroeconomic stability, carry out structural reforms, improve the business climate, attract investment, increase the country’s export potential (primarily through oil), accelerate growth in non-oil sectors, and significantly increase real household income. On the whole, all the necessary conditions for continued dynamic development of the economy and a solution of social problems were created in the republic. 86 AZERBAIJAN REPUBLIC Religion

In many respects, Azerbaijan remains an attractive investment destination. The strategy of socially oriented market transformation has created conditions enabling the country—in cooperation with other friendly states and international financial institutions—to accelerate economic development and successfully integrate into the world economy.

RELIGION

Elmir KULIEV Ph.D. (Philos.), Director of the Department of Geoculture at the Institute of Strategic Studies of the Caucasus (Baku, Azerbaijan)

I n t r o d u c t i o n

n 2006, continued negotiations on Nagorno- social and political ideas. The armed conflicts in Karabakh and the socioeconomic reforms un- Afghanistan, Iraq, Palestine, and Lebanon, as I derway in the country eclipsed religious de- well as the threat that they might pose to other velopments. Very much as before, the events on Middle Eastern countries, provoked contradic- the domestic scene and all over the world, which tory and nearly irreversible processes in the added weight to the religious (civilizational) umma, stirred up and consolidated religious component of world politics, largely influenced political forces, and generally affected the nature the country’s religious context and the believers’ of religious convictions.

State Policy in the Religious Sphere

In Azerbaijan, freedom of conscience is guaranteed by Art 48 of the Constitution, according to which every citizen “shall have the right to independently define his/her attitude toward religion, practice religion alone or together with others, or profess no religion at all, and express and spread his/her convictions.” Religious activities in the country are regulated by the Law on the Freedom of Conscience, which limits freedom “only by considerations of state and public security and in cases when rights and freedoms should be protected under the international obligations of the Republic of Azerbaijan” (Art 1). The law bans the propaganda of religious ideas which degrade human dignity, promote religious violence, or fan strife among the people with the purpose of changing their religious lifestyle. In recent years, the state has tightened its control over religious organizations, on the one hand, while demonstrating even more concern over believers, on the other. In 2006, Idaiat Orujev, state councilor for work with national minorities and religious organizations, was appointed as Chairman of the State Com- mittee for Religious Organizations. This was one of the central events in the country’s religious life.

87 CENTRAL EURASIA 2006 Analytical Annual

The Committee’s new leaders met the heads of the religious communities and journalists and started a database on theologians. The newly appointed chairman announced that he intended to pursue state policy in the religious sphere and to establish closer contacts with all religious communities acting under law and not undermining social stability. After putting an end to the dissent between the Committee and the Administration of the Muslims of the Caucasus (AMC), the new chairman resolved the problem of registration of several religious communities (including those at the large Baku mosques, Teze-Pir, Gaji Ajdar-bei, and Juma of the Sabail District). The Committee, though, is not the only state structure responsible for religious policy in the country. Many of the issues related to religious developments are outside its competence and call for the concerted efforts of the departments and ministries. The need to improve and readjust the laws related to religious activities is one such issue. The Law on the Freedom of Conscience adopted in 1992 has become obsolete, despite the amendments of 1996-2002. In the latter half of 2006, the parliamentary Human Rights Commission started working on a new draft law. It has not yet been submitted for public discussion, but the parliamentarians are absolutely open about their readiness to discuss it with heads of the religious communities. Let us hope that the future law will not infringe on the believers’ rights. Meanwhile, there is no agreement about the possible changes: most of the public would like to see tighter registration rules for small non-traditional trends that seek overall political and other control over the followers. On the other hand, the religious minorities and the religious leaders, especially those wishing to go into politics, are openly worried about the potentially stricter state control. Alternative military service for those who cannot carry firearms because of their religious convictions remains in the center of public attention.1 The public also wants to see the Law on Ceremo- nies adopted, yet the nation is showing even greater concern about the possibility of teaching the basics of religion in secondary schools. The state regards promulgating national moral and ethical values to be an absolute priority, while the broad public remains convinced that moral and ethical education of the rising generation is one of the ways to preserve national identity and spirituality in the globalized world. The issue has remained on the agenda for the past five years; the Committee’s previous leadership insisted on teaching the fundamentals of religion, Muslim culture, and the history of Islam in secondary schools. The Ministry of Education argued that the secular nature of the educational system and the shortage of skilled teachers of religion-related subjects ruled this out.2 In 2006, the situation changed. Early in March Baku hosted an International Scientific-Practical Conference called “Islam and the Youth: Education, Science, and Enlightenment” sponsored by the Heydar Aliev Foundation, the Ministry of Education, the International Islamic Relief Organization, and the Ministry of Religious Endowments and Islamic Affairs of Kuwait. It revived the discussion of the role of religious values in education, which went on for the rest of the year. The Russian experience of teaching the Basics of Orthodox Culture in secondary schools was also discussed. Finally, Minister of Education M. Mardanov agreed to include the teaching of religion in the school curriculum.3 If this happens, the shortage of trained teachers for the country’s more than 4,500 secondary schools will remain acute for a long time to come. Trained theologians are few and far between; what is more, the level of their training leaves much to be desired. The teaching programs of Baku Islamic University (BIU) and the Theology Department of Baku State University (BSU) are criticized for not having many of the absolutely indispensable secular subjects. There are no textbooks in the Azerbaijanian language. Today, about 30 graduates of

1 The Law on Alternative Service was adopted as one of the obligations to the Council of Europe. 2 The different points were discussed in detail in the electronic newspaper Azerbaijanskie Izvestia, 30 April, 2007, available at [http://www.azerizv.az/article.php?id=6527&print=1]. 3 See: Bulletin of the Interfax-Azerbaijan Agency, 30 January, 2007, available at [http://www.interfax-religion.ru/ judaism/?act=news&div=16363]. 88 AZERBAIJAN REPUBLIC Religion the BSU Theology Department are studying in Turkey, which breeds the hope of improved teaching of religious disciplines in the future. At the same time, training abroad does not improve the religious situation at home—it even aggravates it. Most of those educated in Iran, Saudi Arabia, Libya, and other countries were not sent there by the Ministry of Education. Some of them come back with non-traditional religious ideas that they proliferate among their compatriots. Those who fell under their spell clash with their environment at home and at work, which causes a lot of dissent among the public and sends up social tension. According to unofficial statistics, about 2,000 young men from Azerbaijan are currently studying religion abroad. No one knows how many trained theologians there are in the country and how many of them can be allowed to teach in school. The government is doing a lot to preserve religious architectural monuments by letting religious organizations use them as cultic buildings. The state program of the regions’ socioeconomic development envisages the restoration of mosques in at least some of the regions. In Balakian, for example, restoration of Minariali mesjid, an architectural monument of the 19th century, is in progress; by December 2006, the Askhabi-kehf complex in Nakhchyvan was completely restored. The Ajdar-bei and Gasym- bei mosques in Baku and the mosque in Bibi-Eybat settlement were restored and renovated. Three new buildings of the AMC and BIU are being built on the territory of the country’s main mosque Teze-Pir. On 1 February, President Ilham Aliev laid the foundation stone of a new mosque in Baku. Religion has influenced the country’s foreign policy to a certain extent. Azerbaijan is a secular state oriented toward integration into the European structures, but it is actively involved in the OIC and maintains close ties with the Islamic Development Bank and the Muslim World League. On 19-21 June, 2006 Baku hosted the 33rd Session of the Islamic Conference of Foreign Ministers; on 11-12 September of the same year, it served as the venue for the 5th Session of the Islamic Conference of Tourism Min- isters. In September, President Aliev took part in the opening of the headquarters of the OIC Youth Forum “For Dialog and Cooperation” in Istanbul. The Forum initiated by the National Council of Youth Organ- izations of Azerbaijan and the Eurasian Association of International Development was set up in Decem- ber 2004 in Baku; the constituent conference elected Elshad Iskanderov as its Secretary General. This means that the political establishment of Azerbaijan is resolved to strengthen contacts with the Muslim countries and extend cooperation in the political, economic, and cultural spheres. There was another important event in the country’s religious life: on 26 February-5 March, Special Rapporteur on Freedom of Religion or Belief of the U.N. Commission on Human Rights Asma Ja- hangir visited Azerbaijan. After meeting with officials, heads of the religious communities, and human rights activists, she said she was satisfied, on the whole, with the degree of freedom of conscience in the country and pointed out that in some cases state control infringed on the rights of religious communities or even bordered on repressions.4 There was a lot of truth in her comments; in fact, the state structures not always coordinate their actions with regard to the religious communities, which sometimes infringes on believers’ rights. It should be added that such conflicts were promptly resolved. Late in November, Ombudsman E. Suleymanova’s interference helped the female students of Sumgayit State University restore their right to wear hijabs inside the university. On the whole, state policy in the religious sphere remained moderately liberal.

Religious Communities and Their Activities

By the end of January 2007, there were 370 registered religious communities in the country; 31 of them belonged to communities other than Islam religions: 13 Protestant, 4 Christian Orthodox (in-

4 See: Zerkalo, 7 March, 2006. 89 CENTRAL EURASIA 2006 Analytical Annual cluding one Albanian-Udin community), 7 Jewish, 3 Bahai, 3 Molokan, and 1 Krishnaitic. There are about 1,300 mosques in the country, 500 of them are registered and financially supported by the state as historical monuments; there are also over 50 churches, prayer houses, and synagogues. The Church of the Immaculate Conception belonging to the small Roman Catholic community (with about 150 parishioners) is being built in Baku. The Administration of the Muslims of the Caucasus is the largest religious center, which under the current laws unites the Muslim communities, regulates their activities, and presents them for state registration at the Committee. Many of the Islamic communities, however, remain formally attached to this nongovernmental organization, while imams of some of the large mosques (such as the Shia- hidliar and Ilahiyiat mosques in Baku; the Juma mosque of the Nariman District, Juma of the Sabail District, and others) prefer to act on their own. The AMC does next to nothing to educate the nation; its leaders limit their efforts to mullahs’ speeches at burial ceremonies and in mosques on Fridays. In fact, marriage and burial rituals are the mullahs’ main duties. Nearly all of them are loyal to power and do not want political changes lest they lose their incomes. For the same reason, they disapprove of the spread of Christianity and reformist and renaissance ideas in Islam. The Qadi Council and the Scientific Religious Council that function at the AMC offer their opinions on religious issues from time to time. The AMC is more active: it interprets sociopolitical processes in a way which, more often than not, is far removed from the political neutrality befitting the clergy. More than that: the contacts between the AMC leaders and the mass of believers are very weak; neither the Administration of the Muslims of the Caucasus, nor its structures run Internet sites. Very much as before the AMC Chairman Sheikh ul-Islam A. Pashazadeh focused a lot of attention on his public functions: he represented the Muslims of Azerbaijan during his visits to Saudi Ara- bia, Iran, Georgia, Russia, and other countries, and met foreign political and religious figures. At a meeting with Catholicos-Patriarch of all Georgia Ilia II in Tbilisi, he raised the issue of returning the Ganja city gates, taken to Georgia as a war trophy in the 12th century, to Azerbaijan. Azerbaijan has tried many times, without success, to settle the issue. In turn, the Patriarch of Georgia repeatedly asked the AMC leaders, equally without success, to help the Georgian Patriarchate return the church in Gakha (a monument of the 18th century) and in the Ambarchai village. The latter stood at the site of an Albanian cathedral ruined in the 18th century. Some members of the expert community objected to the churches being exchanged for the Ganja gates. In August, at a press conference that concluded Sheikh ul-Islam’s meeting with King of Jordan Abdullah II, the former announced that he was prepared “to declare a jihad to liberate the occupied Azerbaijanian territories.”5 The clergy and the public hailed the statement; some of the believers publicly expressed their readiness to join the jihad if it were proclaimed. The Baku Caspian Diocese of the Russian Orthodox Church, restored on 28 December, 1998, is another of the republic’s large religious centers. The diocese has five Orthodox churches: three in Baku, and one in Ganja and Hachmas. The Cathedral of the Holy Wives in Baku is the main church in which the bishop serves. The followings of other religious organizations are small and their influence on the religious situation is negligible. The government believes it extremely important to preserve the tradition of religious tolerance, the result of the coexistence of followers of various confessions in one country. Normally, various religious communities peacefully live side by side and maintain constructive and friendly relations. In recent years, the religious communities have entered a new phase of social involvement, reached even better mutual understanding, and acquired experience of joint charitable activities. This created a

5 See: Zerkalo, 24 August, 2006. 90 AZERBAIJAN REPUBLIC Religion foundation for further development of conceptual principles of the religious dialog. Over 50 religious communities of different confessions joined the religious alliance For Peace and Agreement founded in 2004. Working together with international structures, the Alliance carried out several programs, including one entitled Religious Communities Against AIDS. In January, the Committee chairman discussed with UNDP Resident Coordinator Marco Borsotti the possibility of enlisting religious communities in the countryside to engage in anti-avian flu prophylactics. With the change in AMC leadership, however, the Alliance found it harder to function and almost fell apart.6 Most of the religious communities are poor and organizationally unstable; in the absence of interest from local politicians and businessmen, they have to look at foreign centers and charities for funding. In the absence of laws regulating organizational matters and the functioning of religious funds (waqfs), religious figures cannot achieve financial independence and extend their possibilities. In these conditions, those groups that function on foreign money enjoy certain advantages, which accounts for the spread of non-traditional religious forms in Azerbaijan. The country’s religious communities could have avoided many problems in their relations with the state had they developed social-religious programs of their own to clarify the key points of their beliefs and religious practices and their attitude toward a secular state, state symbols, military service, etc. This would have added transparency to what the communities were doing, made them more man- ageable legally, much clearer for the public, and prevented the spread of religious extremism and totalitarian sects. New laws are needed to achieve this, as well as an improved procedure of state registration of religious communities.

The Public and Religion

State guarantees of freedom of conscience and the public’s more tolerant treatment of non-traditional religions raised the interest in religion and individual beliefs. Recently both the traditional (Shi‘a and Sunni Islam, Orthodox Christianity, Albanian Monophysitism) and non-traditional trends have acquired more followers. The Muslims remain the main vehicles of religious resurrection in Azerbaijan. According to official sources, 96 percent of the country’s population are Muslims, yet the number of practicing Muslims is negligible. At the same time, intellectuals and academic and political elites are being drawn in ever-increasing numbers into religious life. The main religious holidays—Gurban Bayram (Id al-adha) and Ramadan Bayram (Id al-fitr)—are invariably accompanied by charity functions, in which the local executive structures are also involved. In 2006, Gurban Bayram, which crowns the hajj, was celebrated twice—on 10 January and 31 December. In January, about 3,450 Azeri Muslims performed hajj; by the end of the year, their number had increased to about 4,500; leaders of political parties and Milli Mejlis deputies joined the group of pilgrims. The artistic community likewise is involved in the process. Early in 2006, film directors A. Jab- barov and M. Agazade completed their UNESCO-commissioned documentary Celestial Echo about Azerbaijanian religious music. In September, another project was launched: a short film about the traditions of religious tolerance in Azerbaijan was filmed in the village of Kish, where a museum of the Church of St. Elisha, the Caucasus’ earliest Christian monument, was opened in September 2003.

6 The Muslim clergy was not overjoyed when the Alliance was formed; it wants to preserve the AMC as the country’s only Islamic center (see: [http://www.islam.com.az/modules/news/article.php?storyid=156]). 91 CENTRAL EURASIA 2006 Analytical Annual

The religious revival attracted new followers to the mosques; most of them were moderate Muslims who regarded this religion as their personal choice and a source of spiritual perfection. As a rule, they were also involved in economic and public life. Few of the believers studied religion and promoted a religious lifestyle. In most cases they are enthusiastic young men who, in the absence of Islamic educational centers, had to turn to religious agitators preaching pro-Iranian, pro-Arabic, or pro-Turkish religious ideas. The state is working hard to make Islam an inalienable part of the national idea. This has not happened so far—on many occasions religiosity breeds social contradictions or even conflicts. The low religious culture, the absence of a system of spiritual education, the presence of the social and economic problems that still haunt the nation, as well as open propaganda of mass culture and moral vices make the situation even worse. This drives people to radical Islam of all hues. Latent radicalism encouraged by certain religious figures is another reason for radicalization. These people exploit religious solidarity, dedication to the outward manifestations of faith, the spiritual leaders’ charisma, and fanatical rejection of everything that contradicts religious convictions. There were sporadic attempts to turn Islam into a political tool and its followers into a strong potential opposition to the ruling party. In 2006, the public was not ignited, but those who place their stakes on this refused to be discouraged. Some of the opposition media discussed the prospects of a stronger political Islam. On 6 April, Yeni Musavat reprinted an article from the American Weekly Standard about the rising Islamic presence in Azerbaijan. It devoted much space to the unfolding Salafi movement, which, according to the article’s author, had already acquired a 20,000-strong following, and to the Islamic Party of Azerbaijan, which, by the time its official registration was annulled in 1995, had about 50,000 members. The article described Azerbaijan as a country located in the very center of several powerful geopolitical tectonic plates closely watched by the Foreign Intelligence Committee of Iran, which set up an Azeri department in 1995.7 In April-May, a sociological poll (conducted with the support of the U.S. National Endow- ment for Democracy) revealed that about 20 percent of the republic’s population would hail the Shari‘a legal system for the country, while about 50 percent preferred conservative religious and moral values; and 40 percent would side with the Islamic countries in any international disagreement with the non-Muslim states.8 At the same time, the religious figures, who the previous year, on the eve of the parliamentary elections, were actively involved in politics, readjusted their position and started talking about the impossibility of an Islamic revolution in Azerbaijan.9 What was behind the U-turn? On the one hand, previous experience demonstrated that the social base of political Islam was too weak. On the other, the Committee’s new leader removed the contradictions that marred the relations between the Committee and AMC and bred the hope of political dividends. It would be wrong, though, to interpret these statements as the religious leaders’ resolute withdrawal from politics. This is best confirmed by the wave of indignation on the part of both the functionaries of the Islamic Party of Azerbaijan (IPA) and heads of many of the religious communities and NGOs caused by R. Aslanova, Chairperson of the Parliamentary Human Rights Commission, who spoke against the continued existence of pro-Islamic political parties in the country.10

7 P. Church, “The Azeri Edge: With Oil, Questionable Elections, and a Rising Islamic Presence, Azerbaijan May Be at a Crossroads,” The Weekly Standard, 28 March, 2006, available at [http://findarticles.com/p/articles/mi_m0RMQ/ is_2006_March_28/ai_n16346215]. 8 See: Bulletin of the Turan Information Agency, 12 June, 2006, available at [http://gender-az.org/ shablon_ru.shtml?doc/ru/news/12_06_2006_01]. 9 See: A. Rashidoglu, “Islam vsio bol’she ovladevaet umami riadovykh azerbaidzhantsev,” Zerkalo, 15 April, 2006. 10 See: Uch nogte, 12 August, 2006. 92 AZERBAIJAN REPUBLIC Religion International Impact on the Religious Situation at Home

Revival of political Islam in Azerbaijan may be partly caused by the extremely deteriorated relations among confessions elsewhere in the world and the open disdain for Islam in the West. This was amply confirmed by the cartoon scandal which started with the cartoons of the Prophet Muham- mad that appeared in some of the Western newspapers. The response in Azerbaijan was firm yet not excessive. The intelligentsia and the academic community were unanimous in their indignation over the infringement on the Muslims’ religious feelings; the religious political forces, in turn, took advantage of the opportunity to bring crowds into the streets. On 27 February, the IPA organized a round table of some of the leaders of public movements and political parties who resolutely condemned the very fact of the publication of the cartoons and the blowing up of a mosque in Samarra, Iraq. Some people insisted that the blast of the Shi‘a sanctuary was synchronized with the Muslim world’s unity in the face of the insults to and denigration of Islam. It was suggested that the Azeri contingent should be removed from Iraq. The Baku mayor’s office refused to sanction protest rallies and demonstrations, as well as picketing of the offices of international organizations; however, on 7 February, about 300 gathered in front of the Foreign Ministry. Official permission came at the moment when the police invited the gathering to leave the square. The rally read out its address and left without much ado. The same day, there was a meeting in the Nardaran settlement outside Baku. On the whole, the protest rallies of believers were closely supervised; the wait-and-see policy of the law-enforcement bodies allowed the government to assess the radical pro-Islamic forces’ organizational potential. On the other hand, the West got a glimpse of the country’s potential future if the democratic and economic reforms fall through. The official clergy and the Sunnis showed a lot of good judgment and caution. They limited themselves to critical comments and called on their followers not to rise to the provocations. It was against this moderate background that on 11 February the Yeni Heber weekly carried insults against the Prophet Jesus and the Virgin Mary, equally venerated by Christians and Muslims. By way of explanation, the author said that the insults were intended as a response to the humiliating cartoons, but the religious leaders sharply denounced him. Israel’s invasion of Lebanon was another event that caused heated protests in the republic. The position of the Israeli politicians and the military was denounced even though the actual context was far from unambiguous. First, in the past, Hezbollah was responsible for several terrorist acts in Az- erbaijan. On top of this, Hezbollah is supported by the IRI clerical regime, which maintains economic and political contacts with Armenia and is guilty of infringing on the rights of the Iranian Azeris. There is a strong Armenian diaspora in Lebanon; it was in this country that the fighters of the ASALA Ar- menian terrorist organization were trained. In addition, the contacts between Azerbaijan and Israel are developing dynamically. The above notwithstanding, in July and August, the Shi‘a groups carried out an extensive propaganda campaign that involved politicians and public figures; they tried picketing the Israeli and American embassies in Baku. In September, Pope Benedict XVI gave another cause for sharp criticism by quoting a denigrat- ing comment about Islam and the Prophet Muhammad, which was interpreted as another provocation designed to increase tension between the Muslims and the Christians. This raised another wave of protest and unrest in the Muslim world. In its statement, the AMC pointed out: “There is the impression that

93 CENTRAL EURASIA 2006 Analytical Annual these thoughts create another link in the chain of deliberate and malicious anti-Islamic statements coming from the West.”11 On 19 September, Chargé d’Affaires ad interim of the Apostolic Nunciate of Vatican Rolandas Makritskas arrived in Azerbaijan. At a meeting with Sheikh ul-Islam, he expressed his regret over the Muslim world’s negative response to the Pope’s speech, but offered none of the apologies the Muslim clergy very much wanted to hear. The intelligentsia was obviously worried that the period of reconciliation and dialog associated with John Paul II had seemingly come to an end. The Pope’s speech inspired sharp anti-Islamic comments: on 1 November, the little-known Senet newspaper carried an article by a certain R. Tagi who insulted the Prophet Muhammad. A wave of indignation swept the country, while the religious community and the intelligentsia denounced the author. The responding criticism was moderate and constructive. It was mainly said that freedom of the press should not be abused and that religious feelings and convictions should be respected. The situation worsened when two Iranian theologians sentenced R. Tagi to death; on 11 Novem- ber, a rally in Nardaran also demanded that the guilty journalist be punished. On 15 November, the Nasimi District Court of Baku sentenced S. Sadagatoglu, the editor of the Senet newspaper, and the journalist to two months in prison for fanning religious strife and religious intolerance. In response, a small group of journalists and cultural figures abandoned Islam to protest against what they described as encroachment on the freedom of the press. The public remained indifferent. The short-lived scandal around the publication demonstrated once more that neither the state, nor the religious community, nor the intelligentsia would tolerate any attempts at undermining religious peace and harmony in the country.

C o n c l u s i o n

Religious life in the country went on without ups and downs, while the nation displayed a height- ened interest in religious beliefs and religious practices. Foreign religious centers and missionary organizations remained the main source of destabilization together with certain international events and the interests of non-traditional religious groups, which interfered with the interests of most of the nation indifferent to religious activities. The level of religious education remained inadmissibly low; the government was not consistent enough when it came to defending national cultural values. There is no Islamic cultural center in Azerbaijan that might be involved in promoting the moral and ethical values of Islam in the context of secular statehood. There is no legal interpretation of the principle of separation of religion from the state. This is a serious problem, since against the background of active reform of the state institutions, the activities of the religious communities remain non-transparent and, in many respects, are proceeding beyond state and public control. At the same time, the traditions of religious tolerance in Azerbaijan allowed the religious institutions to develop into a spiritual vehicle of civil freedoms and unbiased critics of the social and political changes from the viewpoint of their correspondence to moral principles and fairness in their religious and democratic meaning.

11 See: Information Bulletin of the Regnum Agency, 20 September, 2006, available at [http://www.regnum.ru/news/ 707844.html]. 94 AZERBAIJAN REPUBLIC International Affairs INTERNATIONAL AFFAIRS

Jannatkhan EYVAZOV Deputy Director of the Institute of Strategic Studies of the Caucasus, Executive Secretary of the Central Asia and the Caucasus journal (Baku, Azerbaijan)

I n t r o d u c t i o n

n 2006, Azerbaijan’s foreign policy essential- jan’s political clout, hence more consistent and ly did not change. The country’s main foreign active efforts to resolve the problems facing the I policy priorities and geopolitical references republic. were settlement of the protracted conflict with Ar- Even though there were no elections in menia, development of regional energy and com- 2006, the international community kept its atten- munication projects, and integration into the Eu- tion riveted on Azerbaijan. This, unlike the pre- ropean and Euro-Atlantic structures. vious year, was largely due to several macrofac- The changes that did occur were related to tors related mainly to the U.S.’s relations with Iran the state’s overall consolidation, the stabilization and the EU’s relations with Russia. The world’s of political power after the election turmoil of the major powers have also been showing a greater previous year, and the unprecedented economic interest in the country as they form their foreign growth and corresponding increase in Azerbai- policy regarding the Caucasian-Caspian region.

Armenian-Azerbaijani Relations

Relations with Armenia, the cornerstone of which is the Nagorno-Karabakh conflict, remained an important item on the agenda of Azerbaijan’s foreign policy in 2006 as well. Despite the fact that 2005 was known for the rather intensive contacts between the two republics, both at the foreign minister level and between the heads of state, a solution was not found to this particularly distressing problem in 2006. International mediation structures and observers made very positive assessments of the prospects for conflict settlement in 2006. This was related to several favorable conditions, in particular to the fact that no national elections were scheduled in Armenia or Azerbaijan that year. (Elections, as past experience has shown, can lead to extreme politicization of the problem.) This was precisely why 2006 was characterized as a “window of opportunity” for settling the Nagorno-Karabakh conflict. After an OSCE High-Level Planning Group visited the region in December 2005, there were hopes that a long-awaited breakthrough in the settlement process could be achieved in 2006. This group also came to the republic to evaluate the situation and develop conditions for deploying peacekeeping forces in the event a political decision on the problem was adopted. We will note that as a result of this, the deployment of peacekeeping forces in the conflict zone became the topic of an earnest public discussion in Azerbaijan. According to Azerbaijan Foreign Minister Elmar Mamediarov, “this is one of the components of the discussions being held within the peace process. But our country is not view- ing this issue separately from several other components discussed within the framework of liberating

95 CENTRAL EURASIA 2006 Analytical Annual our occupied territories, returning refugees and forced migrants to their homeland, and promoting the peace process. It is a complex issue.”1 Domestic political discussions in this context were mainly focused on precisely where the peacekeeping forces should be deployed if the corresponding agreements were reached. It goes without saying that the Azerbaijani side placed the emphasis on the need to deploy the main contingent of peacekeepers on the border between the two republics, said Head of the Foreign Relations Department of the Azerbaijan Presidential Administration Novruz Mamedov.2 Novruz Mamedov also said, “…in order to prevent possible conflicts, forces might be deployed between population settlements where Arme- nian and Azeri communities of Nagorno-Karabakh live.”3 As a result of the favorable conditions mentioned, great hopes were placed on the first meeting between the heads of the two countries in 2006 in Paris (10-11 February), but the Paris dialog did not yield any results and dealt a perceptible blow to the negotiation process. Perhaps if such high hopes had not been placed on this meeting, both by the public of the two countries and by international mediators, the “failure at Rambouillet” might not have dealt such a serious blow to the entire negotiation process. There is every reason to believe that this was largely why 2006, which was called a “window of opportunity” for the Nagorno-Karabakh settlement process, fell short of the overall expectations. After these talks, the presidents of both countries found themselves in a very tight spot. Against this background of public expectations of a “breakthrough,” which was also stimulated by various statements and the activity of the international mediation structures, it was very difficult to explain the situation that developed and designate ways out of it, while keeping society consolidated. In this sense, it came as no surprise that after the “failed breakthrough,” there was a greater tendency to po- liticize the problem both in Armenia and in Azerbaijan, something which should not have happened in 2006 according to many observers and mediators, and so this year should have been favorable for settling the conflict. In Armenia, the “Rambouillet effect” prompted a statement by President Robert Kocharian “on the possibility of Armenia taking three steps—recognizing Nagorno-Karabakh, defining the legal responsibility for it, and strengthening the belt of security around Karabakh,”4 while in Azerbaijan it prompted the stepping up of debates on the military settlement of the problem. All of this, of course, did nothing to warm up the relations between the two republics. Nor did the international mediators expect the talks to end this way (they were essentially as disappointed by the failure as the direct participants in the conflict). In 2006, their activity was focused on enhancing the process rather than on achieving results. In other words, what they succeeded in accomplishing in 2006 was maintaining a sufficiently high intensity of contacts between the presidents and foreign ministers of both countries.5 Nevertheless, this entire rather dynamic process (with active participation of the Co-Chairs of the Minsk Group) did not result in any significant advances in the Nagorno-Karabakh settlement process. The impression was created that the international mediators were trying to veil their actual lack of results to a certain extent by keeping up a “high frequency” of meetings between the conflicting sides and making periodical statements about the efforts being exerted to put forward the next “new” proposals for resolving the problem. The comments of Azerbai- jan’s Deputy Foreign Minister Araz Azimov on 24 May, not long before the Bucharest meeting between the presidents of both republics, were very indicative in this respect: “The statements that the

1 Trend Information Agency, Political Review for January, 8 February, 2006, available at [http://news.trendaz.com/ cgi-bin/en/index.pl]. 2 See: Trend Information Agency, January, Political Review for the Second Week, 17 January, 2006, available at [http:// news.trendaz.com/cgi-bin/en/index.pl]. 3 Ibidem. 4 Zhamanak Armenian-American Political Daily, 3 March, 2006, available at [http://ru.zhamanak.com/news/475/], 28 February, 2007. 5 Apart from the talks in Rambouillet, another two meetings were held during the year at the presidential level of both countries—in Bucharest (June) and Minsk (November). Six meetings were held at the foreign minister level. 96 AZERBAIJAN REPUBLIC International Affairs

Co-Chairs of the OSCE Minsk Group are preparing new alternatives for settling the Armenian-Az- erbaijanian, Nagorno-Karabakh conflict are providing no reason for optimism…The Co-Chairs are only using these statements to raise the significance of their activity in the eyes of the public. Of course, they need to justify their actions, so we keep hearing statements about their ever new ideas.”6 Most likely, the failure of the talks at the beginning of promising 2006 was one of the de facto reasons for OSCE Minsk Group Co-Chair Steven R. Mann being replaced by Matthew J. Bryza in June. Following this, reshuffling also took place at the U.S. diplomatic mission in Azerbaijan. Instead of Reno Harnish, who was distinguished for his high level of activity both in the Nagorno-Karabakh settlement process and in the domestic policy of Azerbaijan (in particular on the eve and after the parliamentary elections of 2005), Anne Derse was nominated as the new ambassador extraordinary and plenipotentiary to the republic. In 2006, normalization of Armenian-Azeri relations was complicated by the fires in the occupied territories and the damage they caused to the region’s unique biosphere. Azerbaijan blamed the aggressor country for this, which looked convincing enough in the eyes of the international community, if nothing else because of the essential lack of control over these territories by the Azerbaijani authorities and, consequently, complete de facto control over them by Armenia. This question was raised in Azerbaijan at different international forums and the greatest effect was reached within the U.N. On 7 September, the U.N. General Assembly adopted a resolution on The Situation in the Occu- pied Territories of Azerbaijan by consensus,7 which stated that the General Assembly was “seriously concerned by the fires in the affected territories, which have inflicted widespread environmental damage.” The document confirmed the need for an OSCE mission “to provide all necessary assistance and expertise, including the assessment of the short-term and long-term impact of the environmental degradation of the region,” as a measure to conduct an environmental operation. What is more, the U.N. General Assembly asked the Chairman in Office of the OSCE “to provide a report on this matter to member States of the General Assembly by 30 April, 2007.”8 This topic, just like the problem of relations with Armenia as a whole, was the focus of Azerba- ijan’s high political activity within the framework of the Organization of the Islamic Conference.9 The Baku Declaration adopted by the OIC at the Thirty-Third Session of the Council of Foreign Min- isters (19-21 June) expressed their “deep concern over the recent massive fires in the occupied territories and demand that the occupying forces take urgent measures to prevent an ecological disaster.”10 At this session, resolution No. 9/33-P On the Aggression of the Republic of Armenia against the Republic of Azerbaijan was also approved.11 A discussion of this question at the St. Petersburg summit of the G8 states held on 17 July was supposed to promote settlement of the conflict in 2006. The Chairman’s summary noted: “We reaf- firmed that the G8 supports the mediation efforts by the Co-Chairs of the OSCE Minsk Group (France,

6 Trend Information Agency, Political Review for May, 8 June, 2006, available at [http://news.trendaz.com/cgi-bin/ en/index.pl], 2 January, 2007. 7 On Azerbaijan’s initiative, the General Assembly approved the resolution on extinguishing the fires in the victim- ized territory. U.N. News Service, 8 September, 2006, available at [http://www.un.org/russian/news/fullstorynews. asp?newsID=6155]. 8 See: Text of the U.N. General Assembly Resolution The Situation in the Occupied Territories of Azerbaijan, available at [http://daccessdds.un.org/doc/UNDOC/LTD/N06/489/32/PDF/N0648932.pdf?OpenElement]. 9 In 2005-2006, Azerbaijan’s relations with the OIC were quite dynamic. In particular, 2006 is memorable for the two summits held by this organization in Azerbaijan—the 33rd session of the Council of Foreign Ministers and the 5th sitting of the ministers of tourism of the Organization of the Islamic Conference member states. 10 Baku Declaration Adopted by the Thirty-Third Session of the Islamic Conference of Foreign Ministers, p. 3, available at [http://www.oic-oci.org/baku2006/english/BAKU%20Dec-En.pdf ], 13 March, 2007. 11 See: Resolution No. 9/33-P, On the Aggression of the Republic of Armenia against the Republic of Azerbaijan, The Thirty-Third Session of the Islamic Conference of Foreign Ministers (Session of Harmony of Rights, Freedoms, and Jus- tice), held in Baku, Azerbaijan, from 23-25 JAMADA AL-AWWAL 1427H (19-21 June, 2006), available at [http://www.oic- oci.org/baku2006/english/33-icfm-pol-en.htm#RESOLUTION%20NO.%209/33-P], 13 March, 2007. 97 CENTRAL EURASIA 2006 Analytical Annual

Russia, United States) and stressed the need for an early agreement on basic principles of a peaceful settlement of the conflict to be reached in 2006. We call on Azerbaijan and Armenia to show political will to reach an agreement and prepare their peoples for peace and not for war.”12 But the effect of this was again expressed in intensified interaction between the participants in the settlement process and not, unfortunately, in specific results, the achievement of which was recommended by the “eight high and mighty of this world.”

Relations with Other Neighbors

Georgia and Turkey. 2006 was characterized by further development of Azerbaijan’s real partnership relations with Georgia and Turkey. This was manifested in relatively intense interaction among the official structures and, in contrast to Azerbaijani-Armenian relations, the achievement of specific positive results in forming these countries’ integrated approach to resolving their basic political problems, as well as ensuring safe economic progress. There can be no doubt that the main achievements of cooperation within the Azerbaijan-Geor- gia-Turkey triangle were related in 2006 to the further augmentation of regional transport-energy potential, both in the Western and in the Eastern vectors. In this respect, the year was largely memorable for the launching of the main export Baku-Tbilisi-Ceyhan oil pipeline; the official ceremony to launch the BTC was held on 13 July in Turkey. An extremely significant aspect of this event was that the regional geo-economic function of this pipeline will be extended in the easterly direction. For example, 2005-2006 were characterized by intensive Azerbaijani-Kazakhstani contacts, as a result of which on 16 June, 2006, the presidents of Azerbaijan and Kazakhstan signed a Treaty on Assisting the Transportation of Oil from Kazakhstan via the Caspian Sea and Azerbaijan to International Markets by Means of the BTC System, in compliance with which Kazakhstan officially joined the oil pipeline project. “The treaty envisages organizing tanker shipment of Kazakhstani oil from Aktau to Baku via the Caspian and its further transportation by means of the BTC oil pipeline. At the first stage, Kazakhstan intends to load the BTC with up to 7.5-10 million tons of oil a year.”13 Correspondingly, this meant not only Azerbaijan’s successful transformation into a regional oil exporter but, more important, into a country performing trans- regional energy-communication functions. Another important result of partnership interaction among Azerbaijan, Georgia, and Turkey was the launching of the Baku-Tbilisi-Erzurum South Caucasus Gas Pipeline in 2006, which envisages the delivery of blue fuel from the Azerbaijani Shah Deniz field on the Caspian to Turkey. The Kars- Akhalkalaki-Tbilisi-Baku transportation project continued to be implemented, and the possibility of Kazakhstan joining it was also actively discussed. It is obvious that the energy and transportation-communication spheres continued to function as key links in the cooperative interdependence of the three states, which led to corresponding coordination and mutual assistance. This was manifested in 2006, among other things, in the foreign policy and security policy of the mentioned triad. The situation that developed around Georgian-Russian

12 G8 Summit Saint Petersburg 2006, Chair’s Summary, 17 July, 2006, available at [http://www.mofa.go.jp/policy/ economy/summit/2006/summary.html]. 13 “On 24 January, 2007, the KazMunaiGaz Kazakh National Company signed a memorandum on mutual understanding regarding the project to create a Kazakh Caspian oil transportation system, which will make it possible to export oil from the fields of Kashagan and Tengiz via the Caspian Sea to Europe along the Eskene-Kuryk-Baku-Tbilisi-Ceyhan route. At the initial stage, the system of pipelines should ensure annual transportation of 25 million tons of oil, and subsequently up to 38 million tons. The designing, construction, and launching of this project were supposed to coincide with the onset of production at Kashagan in 2010-2011” (Baku-Tbilisi-Ceyhan oil pipeline, Wikipedia, available at [http://ru.wikipedia.org/ wiki/Íåôòåïðîâîä_Áàêó__Òáèëèñè__Äæåéõàí], 2 March, 2007). 98 AZERBAIJAN REPUBLIC International Affairs relations is quite indicative in this respect, particularly the so-called gas conflict, which continued with various degrees of intensity since the end of 2005. Throughout the year under review, Russia tried to take advantage of the rise in prices for the gas it exported to Georgia as a way to put political pressure on the government of this republic. After the difficult winter of 2005-2006, when Russia halted its gas deliveries to Georgia, the government of the latter found itself in a very difficult situation. It either had to agree to the new price for Russian gas,14 or become embroiled in a serious energy crisis with unpredictable consequences for the country’s socioeconomic sphere and, correspondingly, for political stability in it. In fact it was precisely Geor- gia’s intensive cooperative ties with Azerbaijan and Turkey that helped it to find a sufficiently productive way out of this seemingly deadlock situation. The question was resolved by means of Azerbai- jani gas, which was initially supposed to go to Turkey in compliance with the Baku-Tbilisi-Erzurum project.15 On the whole, the strengthening of cooperation among Azerbaijan, Georgia, and Turkey during the year, as well as the corresponding integration in their political conduct, helped to at least maintain stability in regional security. This was primarily expressed in the real balancing effect of the Azerbai- jan-Georgia-Turkey triangle. The way Georgia’s gas problem was resolved essentially proved to be the first serious and specific countermeasure to intercept stronger Russia’s attempts to restore its former spheres of influence in the south of the post-Soviet expanse. No one took kindly to Anatoli Chubais’ notorious thesis on a Liberal Empire,16 which he claimed was the most acceptable for Russia in terms of its structure. It was not difficult to see traces of its practical implementation in the string of gas conflicts in 2005-2006. However, it was prevented from going any further in the Caucasian vector by the consolidated efforts of Azerbaijan, Georgia, and Turkey. This should probably be evaluated as one of the most noteworthy and important geopolitical achievements of the year, which shows the real presence of regional mechanisms capable of preventing threats to the security of the relevant countries, particularly those related to attempts to reanimate the external control that once existed over the region. Russia and Iran. Although Azerbaijan’s relations with two other neighbors, Russia and Iran, did not undergo any drastic changes in 2006, during the year certain events and trends occurred which, in our view, could lead to such changes in the near future. We will note in particular that perhaps the most important “stability” in the relations in both dyads (Azerbaijan-Russia and Azerbaijan-Iran) was the steady domination of “form” over “content.” Understanding that there are extremely serious problems in their interrelations, the sides tried to preserve ephemeral stability and semblance of the latter by means of intensive contacts and political rhetoric. It was easier for Azerbaijan, in contrast to Geor- gia, to maintain this fragile state by declaring a balanced approach and the multi-vector nature of its foreign policy. Nevertheless, the events of 2006 showed that it was becoming increasingly difficult to externally nurture this positive attitude in the presence of rather significant contradictions of interests. The launching of the Year of Russia in Azerbaijan, the official ceremony of which was held in Baku on 21 February with the participation of the presidents of both states, can perhaps be described as the most noteworthy positive aspect of the year in Russian-Azerbaijani relations.17

14 The Russian gas monopolist Gazprom intended to raise the price of gas exported to Georgia beginning in 2007 from 110 to 235 dollars per 1,000 cu m. 15 Turkey conceded part of its percentage of gas that it was supposed to obtain via the Baku-Tbilisi-Erzerum pipeline in 2007. An agreement on this was reached on 8 December in Tbilisi—during the talks of the Turkish, Georgian, and Azerbaijani energy ministers (see: “Turtsia ustupaet chast svoei doli prirodnogo gaza po proektu Baku-Tbilisi-Erzurum Gruzii i Azerbaijanu,” IA Regnum, 8 December, 2006, available at [http://www.regnum.ru/news/752598.html?forprint]). 16 For more detail on this thesis, see: V. Papava, F. Starr, “In the Caucasus, a ‘Neo-Imperial’ Russian Revival,” The Daily Star, 20 January, 2006. 17 All in all, presidents I. Aliev and V. Putin met three times during the year—in Baku (at the mentioned ceremony), in Almaty (16 June), and in Moscow (9 November). 99 CENTRAL EURASIA 2006 Analytical Annual

By the end of the year, trends toward complications in the aforementioned interrelations became increasingly evident. The fact that this negativity began to appear in those very issues that caused an aggravation in Russian-Georgian relations is not at all surprising, i.e. deliveries of Russian gas and its price. Incidentally, the emergence of similar problems with Azerbaijan confirmed the political significance of these issues. It is difficult not to see the “ominous” political link among the events of the end of 2006—the rise in price of Russian gas delivered to Georgia, the fact that the latter found an “Azer- baijani alternative,” and the increase in price and cutback in deliveries of Russian blue fuel to Azer- baijan. In other words, there was an actual need to put political pressure on Georgia by isolating it from all the alternative sources of importing gas. Russia’s intention to raise the price of blue fuel from 110 to 235 dollars per 1,000 cu m aroused a rather severe public and political reaction in Azerbaijan. In response to Russia’s demands, President Ilham Aliev said that “this price is not in harmony with the spirit and essence of Russian-Azerbaijani relations.”18 It was also announced that Azerbaijani oil would not be pumped along the Baku-Novo- rossiisk route, and at this time it became known that transmission of the two largest Russian television channels—ORT and RTR—may be halted in Azerbaijan.19 Despite the fact that both sides tried to provide relevant economic explanations for their steps, it was obvious that the matter concerned urgent political problems, which are becoming more and more difficult to veil every time. Like 2005, Azerbaijan’s relations with Iran developed under the constant influence of the external “American” factor. Due to the ongoing tension of American-Iranian interrelations and the possibility of using military force against Iran, the striving to achieve at least temporary normalization was clearly felt in the latter’s interaction with its neighbors. It can be said that such activity by the IRI with respect to Azerbaijan was relatively productive in 2005-2006. Nevertheless, the fact that several serious problems of the two countries, such as the situation regarding ethnic Azeris in Iran, the status of the Caspian, cooperation between the IRI and Armenia, as well as the separatist regime in Nagorno- Karabakh, and so on, remain unsolved, there appears to be little chance of evaluating how long the Azerbaijani-Iranian “warming trend” of 2005-2006 will last. At the official level, the sides managed on the whole to retain stability in their interrelations in 2006, although during this period, situations occurred which could have upset the current state of equilibrium in bilateral relations. Examples are the critical statements addressed to Iran at the Second World Azerbaijanis Congress by its president, Javad Derakhti, in Baku in March, which was the reason for the protests of the IRI ambassador to Azerbaijan, as well as the appearance of information about the visit of Iranian representatives to Nagorno-Karabakh in September. In both cases, the official circles of both republics tried not to arouse any public furor over these facts, but rather smooth them over by transferring them to the level of unofficial statements and contacts.

Relations with European and Euro-Atlantic Structures

The European Union. In 2006, interrelations between Azerbaijan and the European Union focused on adopting the European Neighborhood Policy Action Plan. This issue was pertinent for all three Caucasian states (we will remind you that there were plans for them all to join the mentioned EU program together, which subsequently happened).

18 O. Kusov, “Gazprom ottolknul Azerbaijan ot Rossii,” 5 January, 2007, Svobodanews, available at [http:// www.svobodanews.ru/Article/2007/01/05/20070105133930510.html], 4 March, 2007. 19 See: Z. Rasulzadeh, “Azerbaidzhan na pereputie—spasaia Gruziiu i otvorachivaias ot Rossii,” PRAVAIA RU, 12 January, 2007, available at [http://www.pravaya.ru/govern/123/10515], 4 March, 2007. 100 AZERBAIJAN REPUBLIC International Affairs

On 12 December, 2005, the Azerbaijan-EU consultations were officially launched. During the following year, the sides held several rounds of talks, and in October 2006, during a visit by the above- mentioned EU Troika to the region, a decision was made to sign the Action Plan.20 The corresponding official ceremony was held on 14 November in Brussels. The indicated plan is intended for five years and notes in particular: “The EU-Azerbaijan Action Plan is a political document laying out the strategic objectives of the cooperation between Azerbaijan and the EU. …Its implementation will help fulfill the provisions in the Partnership and Cooperation Agreement (PCA) and will encourage and support Azerbaijan’s objective of further integration into European structures.”21 It goes without saying that during the talks about the plan’s details, one of the main elements for Azerbaijan was the obligations thereunder relating to the respect for territorial integrity as a principle of interaction between the two sides within implementation of this policy, which was clearly formulated in the document’s preamble.22 This was noted in the joint statement of Azerbaijan and the European Union made after the Action Plan was adopted under the European Neighborhood Policy. Another and, probably, no less important event which preceded the official beginning of interaction between Azerbaijan and the EU in the Neighborhood Policy was the signing of a Memorandum of Understanding on Strategic Energy Partnership between the Republic of Azerbaijan and the Euro- pean Union on 7 November by Azerbaijani President Ilham Aliev and President of the European Commission José Manuel Barroso. EU High Representative for the Common Foreign and Security Policy Javier Solana described the significance of this document as follows: “The Memorandum of Understanding aimed at establishing a strategic energy partnership, reflects the growing importance of Azerbaijan as a key energy supplier to the EU as well as an important transit country for Caspian basin resources.”23 NATO. In contrast to the previous year, 2006 proved not as noteworthy in terms of activity and efficiency of Azerbaijan-NATO cooperation. Although the sides maintained contact at the highest level, it did not lead to any particular changes in the interrelations designated the previous year. This process was mainly developed in accordance with the Individual Partnership Action Plan adopted in 2005, and the main issues of bilateral consultations were associated during the year with the implementation of this document. In 2006, NATO was most active in Azerbaijan in July. This was due to the NATO Week in Azerbaijan (3-8 July), within the framework of which several events were planned—in particular, organization of the NATO International School in Azerbaijan and the holding of an International Symposium according to the Melange project (destruction in Azerbaijan of missiles left from the former Soviet army) and a Euro-Atlantic Partnership Council Seminar on Combating International Terror- ism.24 A visit by NATO Assistant Secretary General for Public Diplomacy Jean Fournet was scheduled to coincide with this event. Nevertheless, the urgency of energy security issues, in particular the recent problems with Rus- sian energy deliveries to the EU states, as well as the need to form and ensure the functionality of

20 See: “Foreign Relations of the European Union,” EU Bulletin, No. 48, 2006, available at [http://n-europe.eu/content/?p=814], 5 March, 2007. 21 “EU/Azerbaijan Action Plan,” available at [http://ec.europa.eu/world/enp/pdf/action_plans/azerbaijan_enp_ap_ final_en.pdf] 5 March, 2007. 22 Ibidem. 23 Resolution of Frozen Conflicts is Essential for S. Caucasus to Progress, Trend’s Interview with EU High Repre- sentative Javier Solana, 10 November, 2006, available at [http://209.85.129.104/search?q=cache:UJGgtBOed6cJ: www.consilium.europa.eu/ueDocs/cms_Data/docs/pressdata/EN/sghr_int/91755.pdf+Trend+Agency+Solana+Memorandum+ on+Understanding+on+energy+partnership&hl=ru&ct=clnk&cd=1&gl=ru]. 24 See: S. Agaeva, “Okolo 70 predstavitelei stran SEAP primut uchastie v bakinskoi mezhdunarodnoi letnei shkole NATO,” Trend Information Agency, 1 July, 2006, available at [http://news.trendaz.com]. 101 CENTRAL EURASIA 2006 Analytical Annual alternative sources, could not but influence NATO’s relations with countries possessing energy and communication potential. And although 2006 did not lead to any important agreements on this between NATO and Azerbaijan, the increasing attention to these issues was felt all the more in the interaction between the sides, which was also designated during Jean Fournet’s talks in Baku.25

Relations with the U.S.

The tension in American-Iranian relations continued to have a great impact on the relations between the U.S. and Azerbaijan in 2006. This can quite easily be described as a basic foreign factor, although a number of important macrofactors influencing the state of Azerbaijani-American interrelations existed alongside it, for example, the urgency of energy security issues, the rivalry with Rus- sia, which has become stronger since the depression of the 1990s, over influence in Central Eurasia, and so on. In the final analysis, the combination of these realities (in which the Iranian question dominated) had a perceptible influence on the stability and inconstancy of relations between the U.S. and Azerbaijan during this period. As the results of the year showed, domestic factors, such as political processes in Azerbaijan and the activity of the Armenian diaspora in the U.S., played a much more secondary role in forming American policy in 2006 with respect to Azerbaijan than the mentioned macrofactors. Consequently, the agenda of interrelations between the two states remained unchanged (compared with 2005). Primarily, we will mention issues related to Azerbaijan’s participation in the antiterrorist campaign (particularly with the possibility of it being “extended” to Iran), settlement of the Armenian-Azerbaijani conflict, as well as development of energy and communication projects (including questions of ensuring their security). The activity of American envoys in Azerbaijan (including representatives of the military department) also remained at a rather high level. The most noteworthy event of the year was the official visit by Azerbaijani President Ilham Aliev to the U.S. on 25-28 April. During the visit, the Azerbaijani head, in addition to talks with President George Bush, held meetings with Vice President Richard B. Cheney, Secretary of Energy Samuel Bodman, Minister of Defense Donald Rumsfeld, Secretary of Commerce Carlos M. Gutierrez, Dep- uty Secretary of State Robert Zoellick, Under Secretary of State Karen Hughes, Director of National Intelligence John Negroponte, Speaker of the House of Representatives Dennis Hastert, representatives of the U.S. Jewish organizations, and others.26 I will remind you that this was Ilham Aliev’s first official visit to the United States since being elected president of the Republic of Azerbaijan in 2003. Essentially, this event, despite being somewhat tardy, was of quite high significance for both countries. It was a kind of definition- achieving stage in the preparations of the American administration and Azerbaijan to engage in intensified geopolitical cooperation after Ilham Aliev’s advent to power. With the strengthening in the above-mentioned macrofactors, it was highly important for both states (particularly the Bush administration) to achieve this definition, for it gave the U.S. the opportunity to define the limits of interaction to which the current Azerbaijani leadership may go in the Iranian question, and Azerbaijan the opportunity to define the level of U.S. support in resolving the Nagorno-Karabakh conflict.

25 In particular, issues were discussed of ensuring safety of the Baku-Tbilisi-Ceyhan pipeline and NATO’s possible contribution to ensuring the safety of strategic energy pipelines (see: Trend Information Agency, July, Political Review of the First Week, 11 July, 2006, available at [http://news.trendaz.com/cgi-bin/en/index.pl]). 26 See: “SShA i Azerbaidzhan—strategicheskie partnery,” Nash Vek, No. 17 (360), 28 April-4 May, 2006, available at [http://nashvek.media-az.com/360/aktual.html], 8 March, 2007. 102 AZERBAIJAN REPUBLIC International Affairs GUAM

Along with its change in name, 2006 was also a year of consolidation for the current GUAM Organization for Democracy and Economic Development.27 It is worth noting that Uzbekistan’s withdrawal from this structure did not have a negative effect on its functionality. Rather vice versa: GUAM- 2006 was increasingly reminiscent not of an amorphous regional group, but of a viable and functioning organization. Of course, this was promoted by the above-mentioned macrofactors. Correspond- ingly, apart from the structural changes in the organization, the member states focused their activity during 2006 on resolving questions related to the conflicts in their territories and the implementation of energy projects. As for the collisions mentioned, in 2006 this structure made every effort to put this question on the agenda of the U.N. General Assembly. One of the initial purposes for this was the international community’s recognition of the inefficient activity of the Russian peacekeepers in the Transd- niestrian, Abkhazian, and South Ossetian conflicts and the need for their replacement, for which the GUAM member states envisaged creating their own police forces.28 On 25 September, at a meeting of the GUAM foreign ministers in New York, a strategic plan of joint measures was agreed upon for increasing international support in the peaceful settlement of the protracted conflicts in the GUAM area, the main purpose of which was to get the General Assembly to adopt a corresponding resolution.29 Of course, the series of problems relating to the delivery of Russian energy resources to the GUAM states made consolidation of their efforts to resolve the question of an alternative and safe source inevitable. In actual fact, this topic was discussed just as much at the official summits of this organization as the conflicts. For example, Items 7 and 8 of the Kiev Declaration said in particular that “economic pressure and monopolization of the energy market are impermissible,” and emphasized “the need to activate efforts to ensure energy security, including by diversifying the transportation routes of energy resources of the Central Asian and Caspian regions to the European market.” It also mentioned the support of maximum use of “the international transit potential of the GUAM states, including for ensuring stable deliveries of energy resources.”30 The most intensive interaction in this area occurred between Azerbaijan and Ukraine. In 2006, the contacts between the two countries at the official level were very dynamic; during this time Ukrainian President Viktor Iushchenko made his first official visit to Azerbaijan (7-8 September).31 On 7 No- vember, President Ilham Aliev said at the ceremony to sign the Memorandum on Strategic Energy Partnership with the EU that “Azerbaijan confirmed its interest in implementing the Odessa-Brody- Plotsk project, providing it participates in the refining and sale of the petroleum products.”32 It was also noted that this question had been discussed with Ukrainian President Viktor Iushchenko, and that a Ukraine-Azerbaijan working group had been created for analyzing the economic advantages of this project and a possible mechanism of cooperation.33

27 This decision was made in Kiev at the summit of the GUAM heads of state on 23 May, 2006 (see: Kiev Declara- tion on Creating an Organization for Democracy and Economic Development—GUAM, available at [http://www. guam.org.ua/188.565.0.0.1.0.phtml], 8 March, 2007). 28 See: GUAM, Wikipedia, available at [http://ru.wikipedia.org/wiki/%D0%93%D0%A3%D0%90%D0%9C], 8 March, 2007. 29 Ibidem. 30 Kiev Declaration on Creating an Organization for Democracy and Economic Development—GUAM. 31 During the visit, several agreements were signed, including the Agreement on Long-Term Cooperation between the State Oil Company of the Azerbaijan Republic and Naftogaz Ukrainy. 32 Trend Information Agency, November, Political Review of the First Week, 14 November, 2006, available at [http:// news.trendaz.com/cgi-bin/en/index.pl]. 33 Ibidem. 103 CENTRAL EURASIA 2006 Analytical Annual C o n c l u s i o n

It appears that the main result for Azerbaijan in its international affairs in 2006 was the significant consolidation of its position as a vital actor in the Central Eurasian energy and communication systems. Paradoxically, Russia played a definite and important role in this, or, to be more precise, the fact that the Azerbaijan government took advantage of Russia’s dominating position as a deliverer of energy resources to Europe. Russia’s political use of the energy potential in 2005-2006 coincided with completion of the laying and beginning of the operation of the Baku-Tbilisi-Ceyhan oil pipeline and South Caucasus Gas Pipe- line (SCP). This led to Kazakhstan taking more active part in the BTC system and to the possibility of expanding the SCP project for transporting Turkmen gas. It stands to reason that the EU countries interested in diversifying ways to import energy resources focused their attention on the Republic of Azerbaijan, which was not only the initiator and a participant, but also the key geopolitical link in these projects. The Memorandum on Strategic Energy Partnership signed by the EU and Azerbaijan at the end of the year was not at all surprising in this respect. Incidentally, this happened almost at the same time as these sides signed the Action Plan under the European Neighborhood Policy of the European Union. On the whole, the foreign policy situation in the western vector developed in a sufficiently favorable way for Azerbaijan. The EU’s relations (as the West’s as a whole) with Russia, on the one hand, and the U.S. with Iran, on the other, promise quite a number of opportunities for realizing Azerbai- jan’s national interests. In all likelihood, the increase in contradictions in the mentioned interrelations will stimulate the expansion of the noted opportunities for Azerbaijan in the future. All other conditions being equal, this may have a significant effect on accelerating Azerbaijan’s integration into the Euro-Atlantic structures, for instance. At the regional level, the beginning and strengthening of actual geopolitical consolidation in the Azerbaijan-Georgia-Turkey vector were important results of the year. The consolidation of the three countries in Georgia’s gas conflict with Russia demonstrated that positive interdependence in the security of Azerbaijan, Georgia, and Turkey has reached a level at which their cooperation and mutual assistance are acquiring a constant and systemic nature. In other words, we can talk about the real existence of mechanisms based on which a wider and, most important, more efficient system of collective security can be formed, compared with those planned or which currently “exist” in the post- Soviet space. It is likely that these opportunities will grow if we keep in mind the development of energy and communication projects and their enlargement in both the Western and the Eastern vectors. In addition to the mentioned results, 2006 was also a “year of expectations,” expectations related to the resolution of Azerbaijan’s most serious security problem, the Nagorno-Karabakh conflict. Unfortunately, the internal and external conditions conducive to this, which the international mediators systematically talked about, did not help these expectations to become a reality. If we take the relative stability of the set of factors and the correlation of their influence as a basis, in the near future things may become even less favorable for settling this very troublesome problem for the region.

104 GEORGIA General Overview

GEORGIA

GENERAL OVERVIEW

Teimuraz BERIDZE D.Sc. (Econ.), professor, Ivane Javakhishvili Tbilisi State University, International Black Sea University (Tbilisi, Georgia)

he year 2006 was outstanding in Georgia’s recent history for several reasons: first, it marked the halfway point between the Rose Revolution and the next presidential and parliamentary elec- T tions, which makes an in-depth analysis of the developments not only desirable, but also necessary; second, though not free from foreign political (the so-called Russian factor) and domestic political (the confrontation between certain social groups and the existing power) problems, Georgia strengthened its independence; third, Georgia’s economy showed certain positive trends (the GDP was on the rise, financial discipline was tightened, fiscal revenues increased, the banking sector became stronger, and several energy and transport projects were finally launched). This was achieved despite certain negative factors: Russia’s embargo, galloping inflation, the still high unemployment level, the trade deficit, etc. Fourth, on the international scene, Georgia drew closer to the EU and NATO; the country’s leaders did not spare any efforts, particularly diplomatic, to advance toward the settlement of the territorial problem. In 2006, the country experienced political ups and downs: its relations with Russia reached the lowest point mainly because the two countries, for historical reasons, were pursuing different goals. The Russian Federation remains in the clutches of the “great power syndrome” when dealing with the former Soviet republics, while Georgia is back on its natural road leading to integration with European and other international structures and stronger national sovereignty. While paying lip service to Georgia’s sovereignty, Russia is making use of a vast set of tools (from encourage- ment of the separatist regimes to economic embargo, which was hardly popular) to put pressure on the Georgian leaders. The relations between the government and the opposition were another side of Georgia’s domestic policies. While the “Russian factor,” as well as membership in NATO and the European struc-

105 CENTRAL EURASIA 2006 Analytical Annual tures, drew the country’s leaders and the opposition closer together, they disagreed over certain other aspects of political and public life. Under the fire of criticism, the government remained fairly popular with the nation, while the opposition acted at random: it responded to the inadequate measures by the government (the Ministry of the Interior, in particular). In fact, the government needs stronger opponents and a much clearer response to its actions (some of them smacking of authoritarianism). It has been impossible to achieve this so far in Georgia, where the opposition, with no clear platform and no unity in its ranks, is unable to respond to the government’s constructive actions. This was amply confirmed by the local elections, which brought the National Movement, the ruling party, a convincing victory. Some members of the expert community had their doubts about the election’s democratic nature (which they confirmed by criticizing the methods by which the election date was set); it should be admitted that a certain, “the most sensitive,” part of the public showed a certain nihilism toward politics in general and the elections in particular. We all know that able politicians and economists are the key to success in any government. This explains the personnel shifts at the top; too frequent changes, however, upset the government process and its systemic nature; government and public life becomes disorganized, which slows down the positive processes in state development. Science and education demanded reforms—this much was clear. In an effort to complete the urgently needed transfer to the Western model, the reformers lost much of what could and should be rescued from the past; asystemic actions were inevitable, while new elements were few and far apart. The territorial issue remained outstanding, which explains why the authorities put the diplomatic measures to full use to achieve positive political developments (support of the “alternative elections” in South Ossetia was one such step). Time will show whether this positive trend will survive. In the short-term perspective, however, Russia will not readjust its policy regarding the conflict zones and Georgia as a whole: it will continue discrediting the ruling regime in Georgia and the Georgian state. (This has been amply confirmed by the decisions of the Russian Federation State Duma.) The year 2006 made it absolutely clear that the leaders of Georgia had to cope with a dual task: they had to demonstrate to the international community that the country was following the road to further democratization, on the one hand, and that they had to restore territorial integrity and cope with the social problems, on the other. We all know that politics and economics are interrelated. This is especially important for transition states. I can say even more: non-economic factors are keeping the economy under fairly strong pressure. Here I have in mind external (Russia) and domestic (the authorities’ inadequate attitude toward the institution of private property) factors. According to official figures, real GDP growth reached 9.4 percent, while the average annual inflation of 9.2 percent was higher than the planned 5 percent. The share of the unemployed (13 percent) remains alarmingly high. The information basis and an analysis of the sociopolitical trends deserve special mention. In recent years, the country’s official statistical service has been in trouble: its continued functioning at the Ministry of Econom- ic Development is creating a conflict of interests; the district services were liquidated, while the regional statistical administrations were enlarged—the information sources and stored information were lost in the process. Over 70 percent of the employees were made redundant under the slogan of structural reforms; many of the experienced professionals also lost their jobs; meanwhile it takes ten years to train a professional in statistics. Today, for want of better sources we have to accept the official figures. We wonder what was behind the economic growth. My answer is: the structural factor—a more or less adequate combination of economic sectors and sub-sectors creates more or less spectacular economic results. This is typical of all economies; it works well in smaller economies with no extensive sources of progress. In our case, the growth was achieved at the expense of wider services, trade, energy, and financial services (brokerage); foreign trade, financial aid from abroad, and tighter finan-

106 GEORGIA General Overview cial discipline, which brought more money into the state coffers, improved the country’s economic performance. I shall not dwell in detail on the economic effect of the “Russian factor” mentioned above. I can say that Russia’s economy also sustained losses cushioned by the country’s much vaster economy (the economies of scale). Galloping inflation was another prominent feature of 2006: in July, inflation was 14.5 percent higher than in July of the previous year. This cannot be explained only by the energy prices; the production sector and the fairly low investment activity were also responsible for this. The share of the shadow economy dropped to 20-25 percent of the GDP—the government’s undoubted achievement. The foreign trade structure remains a problem: for the past ten years, its balance has left much to be desired. The year 2006, when import was three times higher than export, was no exception. It should be said in all justice that the sector is being actively re-oriented and diversified for the sake of greater economic and political security. The republic still lacks a complete set of market institutions—a securities market and an adequate investment context (we all know that in favorable conditions investments stimulate economic growth). The situation in the religious sphere is more or less straightforward. For centuries the country has been and remains the home of various religions and confessions: Orthodox Christians, Muslims (Sunni and Shi‘a), Monophysites (Armenians), etc. This is a positive factor. In independent Georgia, the Church has gained more weight in public and state life. The Church is involved in the state’s social and educational efforts. Today there are 350-400 more Orthodox churches in the republic than before; the number of clergymen has increased by one thousand. Eighty percent of the believers are Orthodox Christians, while Muslims form small groups of faithful. There is no tension between them, even though Wahhabis appeared in certain regions, but failed to strike root. At the same time, the fact that Protestant and other confessions previously absent in Georgia (the Jehovah’s Witnesses and Pentecostals) have become very active cannot but cause concern. Several waves of Jewish emigration reduced the numerical strength of the Jewish community to 10,000. The Lutheran and Adventist communities are fairly small. I readily agree with Zaza Piralishvili, an expert on the religious situation in Georgia, who says that Orthodoxy is a factor of historico-cultural rather than religious identity, even though increasingly large numbers of people call themselves Orthodox Christians for purely spiritual reasons. In Georgia, the religious factor as a cultural norm, not as an element of personal faith, plays a special role in historical and cultural processes; freedom of conscience is constitutionally registered; tolerance and a dialog between religions form the content of spiritual life. The Church has an important role to play in the republic’s development: its position on several social and educational issues is fairly firm. The current trends in public and political developments suggest that the Church will become ever more involved in the life of the state. Territorial integrity remains an absolute priority for Geor- gia: steps have already been taken to extricate the country from its impasse and reach a settlement. Much was done to stir up the international community to implement a plan of a peaceful settlement (in South Ossetia: demilitarization of the conflict zone, diplomatic moves, a conference of donor states, and a changed format for the Joint Control Commission). Support of the “alternative elections” promoted the settlement process. A superficial observer might think that the situation in both conflict zones is very similar. This is not true: the U.N. plays a more constructive role in Abkhazia (A. Gegeshidze). The Individual Partnership Action Plan (IPAP) designed to help Georgia to join NATO and European structures is gradually being implemented; NATO experts likewise offer their positive assessments of the IPAP’s progress. A Plan of Action of the European Neighborhood Policy has been drawn up and approved.

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The “Russian factor” can be divided into several component parts: (1) the tension caused by the fact that Georgia’s strategic orientation cannot be harmonized with Russia’s interests; (2) Russia’s obvious efforts to freeze, at best, the regional conflicts; (3) the embargo on the import of Georgian agricultural products; (4) the deportation of Georgians; (5) the attempt to make the Kosovo model universal; (6) Russia’s actions in the Kodori Gorge; (7) resolute actions: discontinued transport and postal communication; (8) recalling of the ambassador; (9) discontinuation of visa issuance; (10) use of the energy card. This simple enumeration demonstrates that relations with Russia are very complicated, to say the least. The above suggests that such projects as Baku-Tbilisi-Ceyhan and the gas pipeline from the Shah Deniz gas field should be implemented to strengthen the ties between Europe and Asia, which will raise the country’s economic and energy security. The United States is playing central role in implementing the projects. Georgia is doing a lot to strengthen its diplomatic and economic ties with the Baltic republics, the Scandinavian states, Turkey, Poland, and the GUAM members. In fact regional economic alliances offer the best and shortest road to the world economy. The year 2006 was a year of successes and failures, as well as of negative and positive mutual factors influencing both the economy and politics. This breeds a certain amount of optimism about the country’s future.

POLITICS

Giya ZHORZHOLIANI Ph.D. (Hist.), associate professor, Ivane Javakhishvili Tbilisi State University (Tbilisi, Georgia)

I n t r o d u c t i o n

he sharply deteriorated relations with Rus- In the course of the last year mutual mis- sia were the central event in Georgia’s po- trust between the two countries increased; the T litical life. Georgian ruling circles now believe that Russia 108 GEORGIA Politics will go to all lengths to change the regime in lieves that concessions, like those made by Moldo- Georgia. va, are impossible. The Russian leadership, in turn, is con- The Russia-Georgia disagreement is being vinced that Saakashvili and his government are heated by the rapidly approaching Kosovo settle- determined to join NATO as quickly as possible, ment. It is extremely important for Georgia to but, before doing that, they want to make strides achieve radical improvement before the final settle- toward settling the territorial problem. ment in Kosovo: everybody knows that the situation Mutual mistrust interferes with the sides’ in Kosovo differs from that in the conflict zones in ability to find compromises. Russia has no allies Georgia, but if Kosovo gains its independence, the in Georgia, where, as distinct from Ukraine, there separatist regimes and Russia will exploit it as prec- is no attractive alternative to President Saakash- edent. To avoid this, the Georgian leaders have tried vili’s policy. There is no strong opposition inside and will continue trying to present the conflicts as Georgia to be reckoned with. The president be- sub-elements of the general Russia-Georgia conflict.

The Power System

After coming to the fore in Georgia’s political life, Russian-Georgian relations acquired a central place on the republic’s domestic scene. Russia’s new policy toward Georgia defused some of the tension between the government and the opposition; for some strange reason this weakened rather than strengthened the ruling circles. On the one hand, the much weaker opposition disunited the leading group when some of its members tried to exploit the situation to gain more influence. On the other hand, the confrontation with Russia, which could have brought the leaders together and added to their unity and efficiency, became too stiff. It negatively affected the state and society in the economic and political respects. President Saakashvili did not seek complete personal control—he wanted to achieve a balance among different groups. In the past, the National Movement as an opposition force tended to lay the blame for everything that went wrong on the president and promised a much better life “without Shevardnadze.” Today, Russia has become the main culprit; it is blamed for everything—from territorial conflicts to domestic troubles. The leaders call on the opposition and society as a whole to forget their disagreements and to close ranks in the face of the threat from Russia. After moving the foreign policy issues to the center of the republic’s political agenda, on which the opposition agreed with the government, the Georgian leaders deprived their opponents of freedom of maneuver. In this context, everything done to settle the conflicts and achieve security became even more important.

Operation in the Kodori Gorge

Back in April 2005, the then Defense Minister of Georgia Irakli Okruashvili decided to disband the local self-defense Monadire (Hunter) unit operating in the Kodori Gorge. It took him more than a year to implement the plan: most of the fighters refused to lay down their arms. In the summer of 2006, the power-related structures moved to the gorge to restore their control over it. On 23 July, some of the Monadire fighters and their commander Emzar Kvitsiani, who in the past represented the president in the gorge, declared that they refused to obey the central government. Late in July and early in

109 CENTRAL EURASIA 2006 Analytical Annual

August, control over the gorge was finally restored using force. The area was renamed Upper Ab- khazia and its government was moved there from Tbilisi, where it had been operating in exile.

The Georgian Authorities Against “Russia’s Subversive Activities”

This was how two main anti-Russian actions carried out by the republic’s power-related structures were officially described. 1. Arrest of the Supporters of Former Minister of State Security of Georgia Igor Giorgadze. In the spring of 2006, the supporters of Igor Giorgadze, who for several years remained on the wanted list for an attempt on Eduard Shevardnadze’s life, stepped up their activities. The nation, however, remained indifferent to them and their claim to be the only genuine and irreconcilable opposition. Mainly avoided by other opposition parties and public groups, they are suspected of being on the Federal Security Service’s payroll. On 6 September, a large group of members of Giorgadze’s Justice Party were detained on the accusation of an attempted coup. With no followers inside the country, the party is suspected of being supported by Moscow. 2. Arrest of Officers of the Main Intelligence Administration of Russia. On 27 September, officers of the MIA of Russia were arrested on accusations of espionage to prevent planned large-scale subversive actions. It looks as if Russia’s sharp negative response took the Georgian leaders unawares: several days later the officers were set free through OSCE intervention. Russia, however, did not retreat from its firm position: the transport and economic blockade continues.

Cabinet Shifts

Foreign policy challenges caused radical shifts inside the elite, the most dramatic of them being the removal of Defense Minister Irakli Okruashvili from his post. A longtime comrade-in-arms of the president, he had the highest job approval rating among the Georgian top officials and was believed to be a strong-willed and resolute leader. His harsh political statements and the promise of 2007 New Year celebrations in Tskhinvali caused concern among the separatists, in Russia, and in the Western political community. It was probably for this reason that on 10 November Okruashvili was appointed Minister of Economic Development; this happened when the tension in Russia-Georgia relationships late in September reached its peak. A week later the new minister left his post on his own free will and withdrew from Georgian politics, at least for the time being. Other shifts were less spectacular: former Chief of Financial Police David Kezerashvili became minister of defense, while former head of the presidential administration Georgi Arveladze was appointed minister of economic development. It can be said that when political heavyweight Orkruashvili left politics, Minister of the Interior Vano Merabishvili and the Freedom Institute Group strengthened their position to some extent.1

1 For more detail about the Freedom Institute Group see: Central Eurasia 2005, Analytical Annual, CA&CC Press®, Sweden, 2006, p. 142. 110 GEORGIA Politics

The Government Seeks Greater Legitimacy

The Saakashvili regime depends largely on the Western support; to retain it the president and the ruling group had to agree to certain concessions: in Georgia, the nation tends to associate the government’s legitimacy with the extent to which the West is prepared to support the country’s leaders. In the past, the leaders tried to build domestic legitimacy on outside support (high assessment of the Rose Revolution abroad, the Western idea of Georgia as an outpost of democracy in the region, etc.). Today, they proceed from the opposite: President Saakashvili tries to convince the West that there is no serious political alternative to his regime in the republic and that the absolute majority of the nation is behind him.

The Opposition

In the spring of 2006, it was public sentiments rather than the opposition’s political initiatives that became the decisive factor of power-opposition confrontation. Public groups with no obvious political and party preferences joined forces with political parties in protest actions. This was an absolutely new phenomenon. The death of a young man, Sandro Girgvliani, murdered for personal reasons by officials of the Ministry of the Interior, set the tone for the spring political season. Not satisfied with the arrest of the killers, the opposition, some of the public, and NGOs blamed the authorities for the young man’s murder. They responded with joint meetings to demand the minister of the interior’s resignation. Petty merchants, infuriated by the huge fines imposed on those who failed to use cash registers after 1 March, took to the streets to add to the commotion. Unlike the wrong practices of the past, when criticism was either ignored or refuted by the parliamentary majority, this time the government tried to defuse the situation: the killers were arrested, the law on cash registers was suspended, while a series of operations lavishly covered by the media was carried out to improve the Ministry’s image. It turned out later that the opposition was not prepared to fully carry out the task of transforming public indignation into a consistent political stance. Wider and deeper cooperation between the opposition and certain social groups could have created a representative political alternative to the regime. In April, when the Russian-Georgian relations moved to the very top of the list of political priorities, the opposition relented: its majority had the same attitude toward the Russian issue as those who ruled the country. In May and June, the opposition negotiated unification, while the parliamentary opposition boycotted the sittings of the country’s parliament. It set up a coordinating council, which brought together the New Right, Conservatives, and Republicans on a more or less permanent basis; the Labor Party, Industrialists, and the Freedom Party joined them sporadically. Cooperation failed to produce an election bloc, which predetermined the National Movement’s impressive victory on 5 October at the local elections. Late in the fall, the opposition factions returned to the parliament: on 24 October, they re-appeared at the sittings. By that time, the Russian-Georgian confrontation had moved to the fore on the political agenda, depriving the opposition, which shared the same foreign policy approaches as the government, of its chance to find a political niche. This obviously undermined its appeal.

The Local Elections

The law on local self-government adopted in 2005 radically changed the system of local administration and self-government. The 2006 elections of new local self-government bodies, the first the 111 CENTRAL EURASIA 2006 Analytical Annual

Saakashvili regime conducted in a stable situation, became a test of democracy and an indication of which direction the post-revolutionary country was moving in. Under the amended Election Code, the president could set the election date for no later than 40 days before the election. For this reason, political parties, election commissions, and other organizations involved in the election procedure remained ignorant of the exact date. For a long time, they proceeded from what the head of the presidential administration said and were looking forward to December. The elections, however, were scheduled for 5 October: the authorities tapped the advantage of know- ing the date much earlier than their opponents. Many of the opposition parties could not cope with the situation; the opposition had no time to close its ranks. Experts and observers pointed to numerous formal irregularities before and during the election campaign (although it should be admitted that they hardly affected the results). The ruling party enjoyed a landslide victory in the capital and across the country. The elections demonstrated that (1) the Saakashvili regime has a large part of the nation behind it; (2) there is a large (or even very large) group of people that does not support either the government or the opposition; (3) the ruling party would never permit equal competition if it felt this might cost it its place at the helm or its overwhelming advantage over the opposition; (4) as part of the present system of quasi-parties, which forces the opposition to compete with the state machine rather than the ruling party, the opposition would be unlikely to come to power through elections. The elections of 5 October demonstrated that the majority remained indifferent to the political developments in the country; despite the frantic efforts of analysts and the opposition to prove that the low turnout (in Tbilisi less than 40 percent of the voters came to the polls) testified to people’s negative attitude toward the authorities and their policies, it looks as if the nation does not see the opposition as a vehicle of its interests or an alternative to the present course.

Society and the Media

Science and Higher Education

All sorts of social groups became active on the political scene in the first half of the year: petty merchants, academics and lecturers, students, and some NGOs that had tried but failed to cooperate with the government to protect their interests. Tbilisi State University (TSU) received a new rector Georgi Khubua, which fact meant that the Ministry of Education had moved toward more resolute actions designed to reform the system of higher education in Georgia (particularly the TSU as the country’s main higher educational establishment). The process that began two years ago is proceeding under the slogans of Euro- pean integration and joining the Bologna Process. The ministry has been consistently trying to introduce market principles and what it calls optimization in higher education and science. Late in 2005, despite the energetic protests of the heads of the Georgian Academy of Sciences and its prominent members, the ministry removed all the research institutions from the academy and instituted its control over them as independent legal entities and subjects of public law. Between

112 GEORGIA Politics late 2004 and 2007, the period described as transition, all higher educational establishments were deprived of their autonomy and the principle of electivity of all administrators. Large numbers of professors and lecturers lost their posts—the process is still going on. Former TSU Rector Rusu- dan Lordkipanidze appointed in early 2005 as a consistent supporter of the reforms abandoned this position under pressure from the dissatisfied absolute majority of the professorate. After a while, the recalcitrant rector was removed from her post. After that tension rose: most of the university professors and lecturers were opposed to the newly appointed rector and the ministry, but the latter managed to keep the upper hand.

Rupert Murdoch Comes to the Georgian Media Market

Late in April, a large American media corporation News Corp owned by widely known magnate Rupert Murdock bought shares of the TV Imedi Company belonging to Georgian businessman Badri Patarkatsishvili. This is the most popular and richest of the channels, its popularity earned by high quality programs and balanced politics on the air. In the last two years, the pro-government Rustavi- 2 and Mze TV companies lost much of their former prestige. Unable to compete with independent channels, public television still lingers in the background. Since the Georgian market of commercial adverts is very poor, while TV as a whole is highly unprofitable, Mr. Murdoch was obviously moved by political rather than commercial considerations. So far his impact on the country’s political context is unclear; one thing is clear though: Badri Patarkatsishvili strengthened his position as a political actor and made his TV and his business more or less immune.

Conflicts

Late in May, Russia officially referred to the principle of self-determination for the first time as a possible solution for territorial conflicts applied as a uniform principle in Europe and the post-So- viet expanse. In the West, the decision-makers are aware that Russia has determined its attitude (at least in the short-term perspective) toward the Abkhazian and South Ossetian issues (which contradicts Georgia’s interests) and has moved toward stabilization and exclusion of the most confrontational issues in its relations with Georgia rather than accelerating political decisions. It seems that the West prefers at best to freeze the conflicts in Georgia for an indefinite period.

Elections and Referendum in South Ossetia

In October, a referendum and presidential election were held in South Ossetia, as well as an alternative election obviously organized by the Georgian government, which vehemently denies any connection. The alternative election was intended to demonstrate to the world community that the situation in the region differed from what the separatist Kokoity government was saying: Georgia controls half of the region’s territory; a large number of local people are on Georgia’s side and do not want independence and integration with Russia.

113 CENTRAL EURASIA 2006 Analytical Annual

Alternative elections are potentially dangerous: (1) an alternative government of sorts may become a weighty argument in favor of the continued presence (increased numbers and wider functions) of the peacekeeping (inevitably Russian in the present situation) forces; (2) the separatist government might refuse to deal with the “alternative colleagues” and might even retreat from continued negotiations with the central government: the very fact of an alternative government testifies that the Georgian leaders refuse to recognize the separatist government as a party in the negotiations. This might increase Russia’s role and presence in the conflict zone.

Russia’s Efforts to Boost Its Influence in the Conflict Zones

On 6 December, the State Duma of the Russian Federation adopted a statement on the results of the election and referendum in South Ossetia and on the address by the separatist leaders of Abkhazia. The State Duma believes that, in accordance with international law and Russian laws, Russia should accept the will of those who live in the conflict zones as its political guideline. On 22 December, the Federation Council followed suit. The Georgian parliament reciprocated with a moderate (according to Georgian standards) statement addressed to the international organizations and heads of friendly states complaining that the documents were unfair and legally untenable. At first glance, the moderate response of the government and most of the Georgian political class to this outstanding, not to say unprecedented, decision of Russia was unexplainable. The statements of the Russian parliament clearly indicated that Russia was contemplating a new policy in relation to both regions, which might be de facto absolutely independent of the West’s position. After adopting the documents, Russia may step up its cooperation with the separatist units in all spheres and create a certain “legal” basis of its own (which the international community might reject). It looks as if the Georgian leaders have been cornered: the present format of conflict settlement is radically changing into something that so far looks vague. Georgia does not like this, however, it is unable to influence the process single-handedly. Judging by the past experience and results, the Georgian leaders’ demand to remove the Russian peacekeeping forces from Abkhazia and South Ossetia is logical: Russia is not a neutral country—it is on the separatists’ side. Speaking at an informal Russia-EU summit, President of the Russian Fed- eration Vladimir Putin said that Russia did not encourage the separatists to leave Georgia and added that he could not exclude bloodshed because Georgia was resolved to restore its territorial integrity by force. He called on the international community to prevent this. The Russian side is doing its best to present the problem as a conflict between Georgia and the separatist regimes rather than as Georgia’s strained relations with Russia. In an effort to plant this idea on the international scene, Russia is describing the conflicts as conflicts “between Georgia and Ossetia and Georgia and Abkhazia,” which casts doubt on the country’s territorial integrity. At the same time, President Saakashvili denies that military actions on the part of Georgia are possible; to confirm this he removed Defense Minister Okruashvili, who symbolized the military variant of settlement, from his post.

114 GEORGIA Politics

Today, the opposing sides should either abandon their efforts to arrive at a political solution or drop militant propaganda for the sake of starting reconciliation among the local people. It can be surmised that Saakashvili and his team misinterpreted the situation. Having acquired tremendous support from the West, particularly the United States, and certain post-communist states after the Rose Revolution, they expected support of a different kind that might have led to a settlement. The Georgian leaders believed that the strained relations between the U.S., NATO, and the EU, on the one side, and Russia, on the other, had reached a point at which Georgia might count on whole- hearted, unquestioned and all-round political and financial support of its anti-Russian policy. As could be hoped, these expectations were based on fairly superficial and simplified ideas about the complicated (and contradictory) relations among these influential international actors. It should be said that a large part of the Western political and expert community, which misinterpreted, in turn, the meaning of the Rose Revolution and the political processes it ushered in, is responsible for the Georgians’ inflated expectations.

I n L i e u o f a C o n c l u s i o n

The situation during the latter half of 2006, when the country’s domestic developments were determined by foreign political challenges, will extend into 2007 and will remain dominated by the relations between Georgia and Russia. We can say today that they have entered a new stage: they reached an impasse where the diplomatic efforts of the politicians now in power in both countries are useless. Tension will not be relieved in the future: it is not an episode as happened before, but a systemic and long-term situation of which Georgian and Russian politicians are hostages. Russia will find it hard to abandon the separatist regimes to their own fate, while the Georgian leaders will never exchange territorial integrity for NATO membership. The public will not change its opinion about this: even the most severe critics of the Saakashvili regime approve of its policies and criticize Russia. The presence of a strong outside opponent forces Georgia to limit freedom of speech and strengthen authoritarian trends. The Georgian leaders are at a loss: contrary to what was expected, the West never supported their course toward confrontation with Russia, while the Russian Federation toughened up its position: everything it does (starting with the embargo on Georgian wines and mineral water to gas prices and the Duma decisions on Abkhazia and South Ossetia) speaks of Russia’s intention to weaken not only the ruling regime, but also the Georgian state as a whole. It looks as if the Russian leaders no longer expect to discover alternative political forces in Georgia with whom they might cooperate: they were disappointed with the Giorgadze group, while all the other opposition structures share the ruling elite’s stand on Russian-Georgian politics. Having recognized that the opposition is obviously impotent (this was amply demonstrated, among other things, by the modest support it received from the people at the local elections), the Russians opted for weakening the regime, the state, and its economy.

115 CENTRAL EURASIA 2006 Analytical Annual ECONOMY

Teimuraz BERIDZE D.Sc. (Econ.), professor, Ivane Javakhishvili Tbilisi State University and International Black Sea University (Tbilisi, Georgia)

Nodar KHADURI D.Sc. (Econ.), professor, head of the Macroeconomics Department, Ivane Javakhishvili Tbilisi State University (Tbilisi, Georgia)

he past year may be regarded as a crucial whole, 2006 was marked by economic (and, un- stage in the development of the Georgian fortunately, not only economic) confrontation T economy, because the time remaining un- between Russia and Georgia, the imposition of til the next election roughly equals the time al- the first energy and transport blockade, and a ban ready served by the new administration (two on Russian imports of Georgian agricultural years). Complex processes of structural change products, wine and mineral water, as well as non- in the economy were set in motion not only by economic actions such as the deportation of government action, but also by the general po- Georgian citizens, refusal to grant them entry litical and economic situation in the CIS. On the visas, etc.

Main Macroeconomic Indicators

Under the Georgian government’s Action Program,1 real economic growth in 2006 was projected at 7.5% with an inflation rate of about 5%, and nominal GDP was expected to reach 13 billion lari (GEL). Unemployment was projected at about 13.7%, and the exchange rate, at roughly 1.82 lari per dollar. According to preliminary results, the country’s economy made significant progress: real GDP growth for the year2 is officially estimated at 9.4%. Unfortunately, prices grew faster than expected, and inflation was 9.2% (instead of 5%). So, nominal GDP increased by almost 19% and reached, according to expert estimates, about GEL 13.8 billion, or GEL 3,000 per capita. Special note should be taken of the need for reform in the sphere of statistics. The Statistics Department is currently part of the Ministry of Economic Development; naturally, the degree of its independence is quite low, so that official statistical information is sometimes open to doubt. Regrettably, there are virtually no alternative statistical data in Georgia.

1 Available at the official website of the Georgian government [www.government.gov.ge]. 2 Statistical information is available at the official website of the Statistics Department of Georgia’s Ministry of Eco- nomic Development [www.statistics.ge]. 116 GEORGIA Economy

Figure 1

INFLATION 116.0 114.5 114.0 113.4

112.0 111.4 111.2 110.0 109.8 110.0 110.2 108.8

108.0 107.9 106.0 106.8 106.0 105.8 106.0 105.1 106.4 106.0 105.6 105.2 104.6 104.0 103.3 102.0 101.5 101.2 101.4 100.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

CPI (December 2005 = 100)

CPI (same month of 2005 = 100)

Special attention should also be paid to inflation, which gave cause for concern during the year: it peaked in July reaching 14.5% (compared to July 2005), while from May to October inflation did not fall below 10% (see Fig. 1). During the year, there was an increase in the prices of food products (by an average of 13.4%), electricity and public utility services (22.2%), health services (16%), transportation (2.5%), education (2.2%), and hotel and restaurant services (7.7%), while the prices of alcoholic beverages and tobacco products fell by more than 10%; a marginal decline (by 0.1-0.4%) was recorded in the prices of communication, rest and recreation services. In December, the industrial producer price index was 110.9% compared to December 2005. In the 12 months of 2006, prices rose by 38.8% in mining, 9.4% in manufacturing, and 6.3% in the production and distribution of electricity, gas and water. Naturally, the reason for inflation processes should be sought among energy suppliers, who virtually doubled the price of natural gas. The Georgian government, for its part, kept consumer rates down (through subsidies to the energy complex) until summer, whereupon they were raised, starting a chain reaction. But experts believe that such high inflation could not be due to a single factor, no matter how important, and say that the main reason was lack of concerted action by the authorities. Among other things, inflation processes were probably provoked by the fight against the shadow economy and smuggling. Whereas only a few years ago the shadow sector accounted, according to experts, for about 40% of business activity in the country, and most imported goods (especially oil products and tobacco goods) entered its economic space without proper customs clearance, in recent

117 CENTRAL EURASIA 2006 Analytical Annual years and especially in 2006 there were only a few isolated cases of this kind. Naturally, all of this had an effect on prices and, consequently, on the consumer price index. Since the problem of inflation primarily affected the country’s households, the government was faced with concrete tasks. Let us emphasize that in the short term it took a number of measures designed to resolve this problem (according to official statistics, inflation was kept within certain limits). Today the authorities should focus on methods of counteracting inflationary expectations. As noted above, the increase in some prices was accompanied by a decline in the prices of alcohol and tobacco products. As regards alcohol, the reason here was the same “Russian factor” (the ban on imports of Georgian alcohol products into Russian territory, which increased supply in the domestic market with a resultant drop in prices). In the case of tobacco products, the reason for the decline in prices was a set of amendments to the Tax Code reducing excise taxes on these products. Another factor contributing to price stabilization was the abolition of customs tariffs (import taxes) on many goods and services. New customs tariffs went into effect from September. The number of tariff rates for import products was reduced from 16 to 3. In particular, all tariff rates in the range from 30% to 12% were reduced to 12%, those between 12% and 5% were set at 5%, and those under 5% were equated to zero. In addition, seasonal tariffs were abolished altogether. The new tariffs apply only to imports of agricultural products and building materials. An important role in the fight against inflation was played by the monetary policy of the Nation- al Bank of Georgia (despite its limited possibilities). Although the national budget and the government’s Action Program projected an exchange rate of around 1.82 lari per dollar,3 by the end of the

Figure 2

EXCHANGE RATE DYNAMICS (end-of-period)

2.6

2.4

2.2

2.0

1.8

1.6 2001 2002 2003 2004 2005 I-2006 II-2006 III-2006 IV-2006

lari/dollar lari/euro

3 Monetary statistics are available at the website of the National Bank of Georgia [www.nbg.gov.ge]. 118 GEORGIA Economy year the exchange rate increased to 1.72 lari per dollar, which naturally had an effect on the republic’s balance of payments. Compared to 2005, the lari’s average nominal exchange rate strengthened by 2%. The nominal effective exchange rate declined by 1.7% by the end of the year, while the real effective exchange rate strengthened by only 0.7% (see Fig. 2). Georgia’s gross international reserves reached a new high of over $958 million, doubling from the beginning of 2006. On 4 January, 2006, they totaled $475 million, whereas on 31 January, 2004 the figure was $191.95 thousand. Since 1995, the lowest level of international reserves was recorded in the country on 8 December, 1998: $62 million. International reserves have already exceeded 2.5 months of imports, an “all-time high” for the republic. Growing reserves also help to reduce the risks associated with the large balance of payments deficit. In January-November 2006, the subsistence level in the country was GEL 115.8 for an able- bodied man, GEL 102.6 for the average consumer, and GEL 194.2 for a family of four. In Novem- ber (compared to October), the subsistence level rose by 7.6%. Let us note that Georgia’s Statistics Department changed its technique for calculating the subsistence level from April 2006. The figures for previous years were recalculated accordingly. In January-November 2005, the subsistence level was GEL 94.3 for an able-bodied man, GEL 83.5 for the average consumer, and GEL 158.1 for a family of four. According to data for January-September 2006, the monthly income of the republic’s total population was GEL 297.6 million, and monthly expenditure, GEL 320.9 million. The figures for the same period of 2005 were GEL 270.2 million and GEL 298 million, respectively. The minimum pension was 38 lari.

Energy Security

The beginning of the year was a difficult time for the Georgian economy. Russia decided to use its “energy advantage” and raised the price of natural gas. From 1 January, Georgia began receiving gas at $110 per 1,000 cubic meters (instead of $65). Despite its declaration of political sovereignty, until recently the republic was energy-dependent on the Russian Federation, which was the only supplier of natural gas. In addition, Russia controlled (and continues to control) electricity supplies to Georgia. The doubling of gas prices led to a rise in the prices of electricity and consumer goods. As a “follow-up” to these events, several explosions in Russian territory (not far from the state border) damaged the main and emergency pipelines supplying gas to Armenia and Georgia. High- voltage transmission lines supplying Russian electricity to Georgia were damaged as well. The situation was compounded by cold weather unusual for these latitudes. The energy crisis induced the government to start looking for alternative sources of energy without delay, and its negotiations with Iran and Azerbaijan on gas supplies immediately entered an active phase. In the cold days of January, Georgian society was once again confronted with the vital need to find alternative sources of energy. At that time, the whole of Europe faced a similar challenge, with the only difference that Russia took Europe’s interests into account while regarding Georgia as “easy prey”: during the year it quadrupled the price of natural gas supplied to the republic (from $65 to $110 from 1 January and to $235 from the end of the year), officially explaining this by “market relations.” As it turned out, the problem facing the republic was not intractable, and in January gas was already flowing in from three countries. After the pipeline accident, Georgia began receiving gas from Azerbaijan, and in late January, from Iran (through Azerbaijan); the damaged pipeline was restored and gas supplies from Russia resumed. Consequently, Georgia diversified its natural gas supplies and the energy dependence problem was resolved.

119 CENTRAL EURASIA 2006 Analytical Annual

Despite tensions between Moscow and Tbilisi, the higher echelons of the republic’s authorities did not “lose hope” of a “profitable” privatization of the long-distance gas pipeline connecting Russia with Georgia and Armenia. A buyer appeared in the form of Russia’s Gazprom and, were it not for the fairly tough position of the United States and the warning that this would cause irreparable damage to the republic’s energy security, the gas pipeline would probably have been sold. It should be emphasized that the government’s efforts to resolve the republic’s energy problems are expressed, among other things, in a rehabilitation of energy facilities and that, curiously enough, Russian capital is used very actively in this process. Let us recall that Russia’s RAO UES is the owner of a number of major energy facilities (including JSC Telasi, a monopoly supplier of electricity to Tbilisi) and of several large and medium-sized electric power stations. By an irony of fate, the opening ceremony for a new gas-turbine thermal power station built with the support of Russian capital was held two days after the terrorist act in the Southern Caucasus that left most of Georgia without heat or electricity. Rehabilitation works at the InguriGES HPP, the flagship of the Georgian power industry, were started in the territory controlled by the separatist regime in Abkhazia. Funds for repairing energy facilities throughout the country began to be allocated from the state budget.4 Rehabilitation works were started at KhramiGES HPP, whose transmission lines are to connect two giants of the Georgian power industry: InguriGES HPP, located in the western part of Geor- gia, and TbilGRES (Tbilisi State Regional Power Station). Preparations were started for the continued construction of KhudoniGES HPP, whose completion will fully resolve the republic’s energy problem and turn it into an exporter of electricity. Budget spending on the power industry amounted to GEL 237.9 million, including GEL 112.7 million on measures designed to hold down electricity and gas rates and maintain supplies, GEL 90.6 million on the rehabilitation of power facilities, and GEL 21.3 million on investment projects. The authorities sold (one would like to say “privatized,” but…) the Tbilisi gas distribution company Tbilgazi. Its new owner is Kazakhstan’s KazTransGaz state-owned company. And the Czech company Energo Pro acquired two distributor companies and six hydropower plants (for $312 million). However, at the end of 2006 the privatization agreement between Georgia and Energo Pro was not yet finalized, which raised many questions about the course of this privatization. At about the same time, acceptance tests and filling operations were performed at the Sangachal Terminal (Azerbaijan) of the South Caucasus Gas Pipeline (SCP), which is to become another source of gas supply to Georgia. Georgian gas distributors concluded a contract with Russia’s Gazprom for gas supplies at a “nonpolitical” price of $235 per 1,000 cubic meters.

Financial Sector

The past year was a notable one for Georgia’s financial sector. The most significant successes were achieved in private banking, and some events can safely be called historic ones. Total bank assets increased in 2006 by 82.4% to GEL 4.6 billion ($2.6 billion). It is very important that the banking system is expanding in quantitative terms with a simultaneous reduction in banking risks. The total share capital of commercial banks rose during the year by 90% to GEL 911 million ($520.6 million). One of the factors contributing to this increase was a greater inflow of foreign financial resources. Net profit of the banking system increased by 65% to GEL 102 million ($58.3 million).

4 Information on public finances is available at the website of the Ministry of Finance of Georgia [www.mof.ge]. 120 GEORGIA Economy

Total credit rose by 56% to GEL 2.7 billion; this points to a significant increase in lending to the economy, and also to the population’s growing ability to pay with a resultant rise in demand for credit. The amount of deposits increased by 66% to GEL 1.8 billion, while the proportion of dollar-denominated deposits fell from 71.6% in 2005 to 69% in 2006. The number of ATMs doubled to 298, while the number of plastic cards increased 3.5 times to 900 thousand. Georgia’s banking sector is developing rapidly. The republic has several commercial banks, which cooperate with the leading banks of the world. According to expert studies, TBC-Bank, Sakartvelos Banki (Bank of Georgia), Sakhalkho Banki (People’s Bank) and some other financial organizations have high ratings. In 2006, an interest in Georgian banks was expressed by American, French and Israeli banks and financial corporations, and also by banks from FSU republics (primarily Russia, Kazakhstan, Azerbai- jan and Armenia). The country’s advantageous geopolitical position seems to be conducive to the development not only of the transportation infrastructure, but also of the banking sector. Georgia has every opportunity to become a major center of business activity in the Caucasus. During the year, one of the largest Russian banks, Vneshtorgbank (VTB), became a leading shareholder in the United Georgian Bank, whereupon the latter was renamed VTB Georgia. But there were two events that can be regarded as the highlights of the banking sector’s development in 2006. First, one of the best-known European banks, Société Générale, appeared in the Georgian market (it acquired a 60% stake in a large Georgian bank, Republic Bank). And second, Sakartvelos Banki (Bank of Georgia) floated on the London Stock Exchange (LSE) and raised $160 million. It was the first Georgian bank whose shares were listed for trading on the LSE. These events attracted the attention of world banking capital to the Georgian banking system, which is important for the republic’s economic development, since it is in need of credit resources. Credit in Georgia is “expensive.” The average annual interest rate in December 2006 was 20-22% in local currency and 16-18% in dollars. Naturally, such a high interest rate puts credit beyond the reach of many business entities. Such credit is mostly used for consumer purposes or, at best, only in the most profitable sectors of the economy (most probably in trade). But growing interest in the Georgian banking sector suggests that integration processes in the financial sphere will make it possible to reduce these high interest rates in the next few years. In 2006, money transfers from abroad to Georgian commercial banks (through electronic systems) amounted to $546 million. This was $143 million (35.5%) more than in 2005. Remittances from Russia amounted to $365 million, or 66.8% of total money transfers to Geor- gia. Remittances from the United States totaled $59.5 million (10.9%), and from Greece, $16 million (3%). As regards transfers from Georgia to foreign countries, in 2006 these totaled $132 million, or $44.3 million (50.5%) more than in 2005. Of these, $77 million (58.3%) went to Russia, $8.4 million (6.4%) to Ukraine, and $6.4 million (4.8%) to the United States.

Public Finances

In 2006, successes in the public finance sector continued. Whereas until 2004 the republic could not meet even the most essential expenditures (in particular, public sector wages and pensions were in arrears), after the Rose Revolution this sector changed beyond recognition. The overall amount of revenue and grants transferred to the single account of the Georgian Treasury was GEL 3,772.6 million ($2,219.1 million), or 105% of the projected figure. Out of this total, tax revenues reached GEL 2,633.1 million (104% of the projected figure), non-tax revenues, GEL 482.5 million (101%), capital revenues, GEL 463.6 million (117%), and grants, GEL 193.3 million (102%).

121 CENTRAL EURASIA 2006 Analytical Annual

The amount of payments made by the Treasury during the year was GEL 3,823.1 million (the projected figure for budget expenditures was GEL 3,875.5 million). Expenditures for labor, health care and social protection totaled GEL 766.4 million, including GEL 457.4 million for pension provision, GEL 123.3 million for health care programs, GEL 43.2 million for restoring medical institutions, GEL 8.9 million for assistance to low-income families, GEL 14.8 million for electricity benefits, GEL 26.8 million for the social assistance program, and GEL 92 million for other purposes. Expenditures for the rehabilitation of the road infrastructure totaled GEL 181.2 million, including GEL 97.5 million for the restoration and repair of roads, GEL 46.2 million for the modernization and reconstruction of highways, and GEL 17.6 million for measures to eliminate the consequences of natural disasters. Expenditures for education totaled GEL 358.2 million, outlays on programs in support of science, GEL 17.3 million, and programs in support of higher education institutions, GEL 25.5 million; other expenditures amounted to GEL 29.8 million. The Ministry of Culture, Protection of Monuments and Sports was allocated GEL 53.8 million. Such successes became possible only after a tightening of fiscal administration. During the year, the republic’s financial police detected 5,106 offences, and GEL 262 million was transferred into the budget. The value of seized and confiscated property exceeded GEL 82 million. Compared to 2005, the amount of taxes paid in 2006 increased by 128%, while the amount confiscated for the benefit of the budget increased by 139%.

The Russian Factor in the Georgian Economy

Although the subject of our study is Georgia and not Russia, for a number of reasons we cannot avoid the question of our northern neighbor. Unfortunately, as in the case of energy, the role of the Russian state is not always positive and, most importantly, its not entirely justified or considered actions have caused great damage to the Georgian economy. On 24 February, 2006, Georgian mineral water Borjomi won the “Narodnaya Marka” (Popular Brand) award in Russia. Only a month later Russia banned the import of Georgian agricultural projects. Thousands of tons of fruits and vegetables prepared for delivery to the huge Russian market were left to rot, and Georgian farmers suffered huge losses. At the end of March, Russia banned wine imports from Georgia. In all these cases, the reason was naturally “not political but purely sanitary:” the veto was imposed by decision of Russia’s chief health officer. The Russian State Duma approved this ban as one dictated by “concern for the health” of Russian citizens. Exactly a month after the imposition of the wine ban, Moscow hosted a wine competition entitled “Vinnaya Karta Open 2006,” which confirmed the high quality of Georgian wines. The Grand Prix of the competition, “The Crystal Glass,” was won by Mukuzani 2003 as the best Saperavi wine (Tiflis Wine Cellar L.L.C., Kartuli Vazi brand). Prizes were also awarded to other wines of this company, such as Cahors 2000, which got a gold medal. A bronze medal and the sympathies of the jury went to Mtsvane 2004, and another bronze medal was awarded to Tiflis Superior Chacha (Putevye Zametki brand). Saperavi Special Reserve 2002, a 12-month wine produced by Tbilvino, was awarded a silver medal. The contest was judged by well-known Italian, Russian and French experts. Nevertheless, this victory did not give Georgian wines access to the Russian market; moreover, Russia banned the import and sale of Borjomi mineral water (holder of the “Popular Brand 2006” award), and a week later, of Nabeglavi mineral water as well. Three weeks after the ban on Borjomi, this water won a gold medal at a competition in Mos- cow (within the framework of an international congress entitled “ECWATECH-2006: Water, Ecology

122 GEORGIA Economy and Technology”). Out of a total of 60 mineral and drinking waters, the tasting panel chose the winners using a method known as “blind testing,” and Borjomi scored 24.8 points out of a possible total of 25 points. But Russia did not stop at that. On 8 July, it blocked the road at the only legal checkpoint on the Russian-Georgian border (Verkhni Lars). This amounted to a “road blockade” not only of Georgia, but also of Armenia, whereas only a month earlier passenger rail traffic along the Tbilisi-Moscow- Tbilisi route was resumed after a 13-year break. In early October, Russia stopped all traffic and postal communications with Georgia. So, Rus- sian-Georgian relations reached a dangerous point. Tbilisi withdrew its signature from the protocol on Russian accession to the WTO, and Moscow recalled its ambassador from Georgia and began the deportation of Georgian citizens.

Foreign Economic Relations

According to official statistics, the country’s trade balance in 2006 began to worsen. In the 12 months of the year, imports totaled $3,677.8 million, and exports, $992.5 million. Regrettably, one must admit that imports grew faster than exports. As we said above, imports in January-December 2006 amounted to $3,677.8 million, whereas the figure for the whole of 2005 was $2,490.0 million. Despite tensions between Russia and Georgia, Russia remains, strangely enough, the republic’s main trading partner. In 2006, over 15% of all imports (worth more than $500 million) came from Russia. Apart from Russia, Georgia’s major import partners were Turkey (over 14% of total imports), Germany (about 9.5%), Ukraine (8.8%), Azerbaijan (about 8.6%), Bulgaria (3.3%), U.S. (3.2%), Turkmenistan (3%) and China (2.7%). As regards exports, the largest amount of goods and services (worth about $77 million, or roughly 9% of total exports) was supplied to Azerbaijan; Russia ranked second with 8.4%, and Turkmenistan third with 8.2%. They were followed by Armenia (7.6%), Bulgaria (7.2%), U.S. (6.6%), Ukraine (5.8%) and Germany (3.6%). A comparison of the figures for 2006 and 2005 shows an obvious reorientation of the Georgian economy toward other markets. It should be noted that in 2006 exports increased (in 2005, the figure was $866 million, whereas in the first 11 months of 2006 it already reached $863 million), while the exchange rate of the lari strengthened against the dollar. At the same time, the republic lost its traditional market of wine, agricultural products and mineral water. Due to the ban on Russian import and sale of Georgian alcohol products, exports of Georgian wine in 2006 were down to a third of the 2005 figure. In the first three months of the year (before the imposition of the notorious ban on 27 March), Georgia supplied a fairly large amount of alcohol products to the Russian market. In 2005, it exported 63 million bottles of wine, and 90% of this total went to Russia. Naturally, the rest of 2006 following the ban was a difficult period for the republic’s wine makers. Georgian companies managed to “redirect” part of their products to other markets, but in insignificant amounts. Some companies found alternative markets in Canada, Turkey, the Czech Re- public, Finland, etc. Another fact pointing to reorientation is that in 2005 the largest volume of exports went to Rus- sia (about 18% of total deliveries), while the United States, Germany and Britain got about 3% each. Whereas in 2005 Georgian exports to all its trading partners except Russia totaled $712 million, in the first 11 months of 2006 they already reached $790 million. At the same time, the sharp increase in imports gives cause for concern.

123 CENTRAL EURASIA 2006 Analytical Annual Ratings

According to a joint study of economic freedom (2007) carried out by the Heritage Foundation and The Wall Street Journal, Georgia ranked 35th among 161 countries in terms of the Index of Eco- nomic Freedom with a score of 68.7% and was classified as a “mostly free” country. In 2005, the republic ranked 100th, and in 2006, 68th. In terms of the various components of this index as listed in the 2007 report, Georgia scored 78.9% on business freedom, 61.8 on trade freedom, 94.2% on fiscal freedom, 91.3% on freedom from government, 77.9% on monetary freedom, 60.0% on investment freedom, 70.0% on financial freedom, 30.0% on property rights, 23.0% on freedom from corruption, and 99.9% on labor freedom. The report says that the country’s economy is 68.7% free (according to the 2007 assessment), which makes it the world’s 35th freest country. Its overall score is 3.9 percentage points higher than a year ago, mostly as a result of a liberalization of the labor market. Regionally, Georgia is ranked 20th out of 41 European countries. As emphasized in the report, the republic faces many difficulties which have to be overcome. Trade freedom, property rights and freedom from corruption remain problems, and an inefficient bureaucracy burdens many commercial sectors. In particular, “property rights cannot be guaranteed by the courts because of inefficiency and persistent corruption.” Such ratings are naturally important to investors, but they do not provide full information about actual freedom. According to this report, Georgia outranks even South Korea, which is hard to believe, but the very fact that the country keeps improving its scores every year is most encouraging.

C o n c l u s i o n

So, 2006 can be characterized as a major stage in creating a stable economic system in Georgia. Measures to strengthen financial discipline in the republic went hand in hand with structural reform of government. A process of economic reorientation got underway in the country, which should help Georgian goods to gain entry to the world market, but the most important thing was a diversification of the country’s energy supplies. The negative influence of the “Russian factor” could not prevent a stabilization of the economy. The government was able to keep prices in check, and this should help to improve the investment climate and promote economic growth. New investors (mostly from Kazakhstan) appeared in the country, focusing on tourist business and communication networks. The number of tourists from neighboring states visiting the republic (especially its seaside resorts) increased. These and other important details hold out hope of continued integration into the world economy, a process which will enable the country in the coming years to leave the long period of hardship far behind.

124 GEORGIA Religion RELIGION

Zaza PIRALISHVILI D.Sc. (Philos.), professor, Ivane Javakhishvili Tbilisi State University (Tbilisi, Georgia)

I n t r o d u c t i o n

n the religious sphere 2006 was much calmer policy overshadowed the numerous domestic con- than 2005, but tension could still be felt since tradictions associated with the Orthodox Church I Russian-Georgian relations continued to de- and spiritual life in general. They resurfaced spo- teriorate until they reached their lowest point in radically to remind everyone that much in this the fall. The unwelcome developments in foreign sphere remained unregulated.

Facts and Figures

The republic’s total population is about 4.5 million, the absolute majority of whom (about 80 percent) are Orthodox Christians. The Autocephalous Orthodox Church of Georgia is headed by His Holiness and His Beatitude Patriarch of All Georgia, Archbishop of Mtskheta and Tbilisi Ilia II, who also heads the Holy Synod. The church is divided into 32 dioceses; the Patriarchate resides in Tbilisi, the capital of Georgia. In 1988, the Orthodox Church founded the Higher Spiritual Academy in Tbilisi, which it has been running ever since. There are several secondary religious schools in Georgia: a spiritual seminary and a spiritual secondary school in Kutaisi, a spiritual seminary in Akhaltsikhe and in Batumi, and others (fifteen in all). There are no exact figures about the number of newly built churches and the numerical strength of the clergy. It is commonly believed, however, that during the years of independence the country acquired some 350-400 new churches and over a thousand newly trained clergymen. The Muslim community comprises three ethnic groups: the Azeris, as well as ethnic Georgians— Ajarians and Kistins. According to different sources, their share is about 10 percent, which makes Islam Georgia’s second largest confession. Orthodox believers and Muslims live peacefully side by side, which continues the traditional forms of coexistence between Christians and Muslims that go back into history. Georgia and Azerbai- jan share common political interests, which positively affects the religious peace in Georgia. Contrary to the expectations of certain experts, although Wahhabis have appeared in some of the Muslim regions, the generally good relations between the followers of both religions have survived. Being deprived by Soviet power of the Tbilisi Shi‘a mosque destroyed in 1951, the Shi‘a pray in the Sunni mosque, which is divided into two parts by a curtain. In 1996, when Shi‘a ahund Ali Aliev (who holds the post of plenipotentiary representative of the Spiritual Administration of the Muslims of the Caucasus in Georgia) was appointed imam-hatyb of the mosque, the curtain was removed to allow the two communities to pray together.

125 CENTRAL EURASIA 2006 Analytical Annual

The Muslim Community of Georgia belongs to the Spiritual Administration of the Muslims of the Caucasus headed by Sheikh ul-Islam Allahshukur Pasha-zadeh. There are four large madrasahs in the country’s eastern part. Two of them are Shi‘a funded from Iran; two others are Sunni supported from Turkey. Ajaria has several small madrasahs. The Tbilisi mosque runs a female madrasah; there are madrasahs in Marneuli, Kesalo, and Gardabani. With about 3.9 percent of the believers, the Armenian Apostolic Church is the third largest confession in Georgia. It is headed by Bishop Vazgen Mirzakhanian; its main cathedral is found in Tbi- lisi; there are 21 Armenian churches across the country. The Armenian Apostolic Church runs a spiritual seminary in Shulaveri and several Sunday schools. The 35,000-40,000 Catholics of the republic are mainly ethnic Georgians and Assyrians. In recent years, the Georgian intelligentsia has been inclining, though not strongly, toward Catholi- cism. An expert assessment of 2005 pointed to two extremes—fundamentalism of Orthodoxy and excessive liberalism—that are pushing members of the educated class toward Catholicism, a much more balanced religion, which is better adjusted to the contemporary conditions. There is an opposite trend as well: since the latter half of the 1990s, members of the South Georgian Catholic communities (especially the younger generation), driven by stronger religious nationalism, have been embracing Orthodoxy, which has been and remains one of the key factors behind the nation’s national-cultural identity. The Apostolic Administration of the Transcaucasus of the Roman Rite was set up in December 1993. At first Papal Nuncio Archbishop Jean-Paul Gobel fulfilled the duties of the apostolic administrator. In 1996, the functions were separated; Padre Giuseppe Pasotto was appointed apostolic administrator; in 2000, he was ordained bishop. From its very first days, the Apostolic Administration united the Catholics of the Roman Rite of Georgia, Armenia, and Azerbaijan, and later the Catholics of the Syro-Oriental Chaldean Rite. The Apostolic Administration is governed by the Congregation of Eastern Churches. The year 1999, when Pope John Paul II visited Georgia in November, proved to be a very special year for the Georgian Catholics. There are two Catholic churches in Tbilisi and four in Southern Georgia, where most Georgian Catholics live. New churches are being built in Kutaisi and Batumi. Since 2002, a “Saba” Catholic Institute of Theology, Philosophy, Culture, and History named after Sulhan-Saba Orbeliani has been training Christian theologians. There is a small community of about 18,000 Yezidi Kurds. The community of Orthodox Greeks, once 100,000 strong, lost many of its members due to emigration during the independence years; today there are no more than 10,000 to 12,000 of them. The Evangelical Christian-Baptist Church headed by President-Bishop Malkhaz Songulashvili, though fairly small (some 8,000-9,000 followers), has an important role to play in the republic’s religious life. Its central church is in Tbilisi, while several prayer houses are scattered across the republic. Since 1993, it has been running its own seminary. Protestant and other non-traditional confessions gradually came to the fore in independent Geor- gia: The Jehovah’s Witnesses, for example, claim 15,000 followers, which is probably an inflated figure. There are about 9,000-10,000 Pentecostals; several waves of Jewish emigration reduced the number of Jews to 10,000. In 2006, the Tbilisi Synagogue was 100 years old; it runs its own school. There are synagogues and schools in other parts of the country. The Lutheran community is mostly German; however, there are also people of other nationalities among its members. Despite the fairly long history of the Lutheran Church in Georgia, today it can hardly boast 1,000 followers. The membership of the Seventh Day Adventist community, which in 2005 marked the centenary of its functioning in Georgia, is even smaller (some 360-400).

126 GEORGIA Religion

According to official sources, the number of followers of all other confessions is not more than 35,000. Orthodox believers form the largest majority; this fact determines the nature of religious life and affects other spheres. Christian Orthodoxy in Georgia is a vehicle of historical-cultural rather than spiritual identity for those who follow it (80 to 85 percent according to different sources). In recent years, however, the number of those who embrace religion for purely spiritual reasons has been on the rise. The Business Consulting Group carried out sociological polls in various spheres. Sociologist Emzar Jgerenaia was responsible for the religious studies. The poll revealed that 56.1 percent of those surveyed regarded religion as a very important factor; 32 percent as an important factor; and 8.5 percent as a less important factor in their private lives. According to sociologists, the figures are determined by the unstable economy, high unemployment level, and inadequate security. Only 17.5 percent fully obeyed the religious requirements, while the majority joined in during big religious holidays. According to the 1998 poll carried out by the Philo- sophic Society, the share was 5.67 percent, which proves that the number of people united by the Orthodox community has been growing fairly fast. Today, there is any number of closed groups of believers with an equally closed communication space. This has developed into an important factor of public life. According to all the sociological polls, the Church remains the most trusted of all institutions; even in 2005, after the Rose Revolution, it outstripped the president by several points. Its role cannot be assessed by the number of practicing believers—cultural identity has a fairly important role to play in the historical and political processes.

Formal and Informal Leaders

In February 2006, Cardinal Walter Kasper visited Georgia—a memorable event in the life of the Georgian Catholic community. On 20 June, 2006, representatives of the Muslim population of Georgia met in the Turkish city of Erzurum on the initiative of the National Assembly of the Azeris of the Georgian State. About eighty members of the Muslim communities of Azeris, Georgians, Chechens, Abkhazes, and Ossets met to set up a Muslim Democratic Party of Georgia. The Assembly President Mr. G. Giulmame- dov greeted the delegates over the phone. A working group was set up to prepare a constituent forum. The meeting signed a Declaration on the State Sovereignty and Territorial Integrity of Geor- gia (those who represented the Muslims of separatist Abkhazia refused to sign the document and left the meeting). On 4 October, Orthodox Archpriest Basil Kobakhidze and member of the Evangelical Chris- tian-Baptist Church Beniamin Bakuradze joined the Third Ecumenical Franciscan Order. Bishop of the ECBC Malkhaz Songulashvili joined the order three years earlier (the Order was set up 50 years ago to unite members of the Protestant churches). Basil Kobakhidze was the first Orthodox Christian to join the order. He represents the liberal wing of the Georgian Orthodox Church and enjoys the respect of a large number of clergy and students of the Spiritual Academy. On 7 October, the Right Reverend Stephen George Platten, Bishop of Wakefield, ordained Archpriest of the ECBC of Georgia Malkhaz Songulashvili ecumenical canon in the Cathedral of All Saints.

127 CENTRAL EURASIA 2006 Analytical Annual The Degree of Freedom of Conscience

Under the Constitution of Georgia, the state recognizes the special role of the Orthodox Church in the country’s history; it also recognizes freedom of conscience and the independence of the Church from the state (Art 9). The idea of a special agreement between the state and the Orthodox Church was born in the latter half of the 1990s and realized as a Constitutional Agreement. In March 2001, the Constitution of Georgia received the necessary amendments and addenda. The Constitutional Agreement was signed on 14 October, 2002; the Synod of the Orthodox Church approved it on 17 October, and the parliament of Georgia on 22 October. Under the document, the Church, due to its previous history, is a subject of public law. Under the law, religious alliances have no legal status, which creates problems for those not willing to register as subjects of private law. There are two factors responsible for this: on the one hand, most of the hierarchs of the Ortho- dox Church are dissatisfied with the fact the Church’s past services are given only nodding acknowl- edgment. They believe that the country should be described as the canonical territory of the Orthodox Church with no other confession allowed to evangelize on it. This radical position is countered by the opposite extreme: some people insist that the Constitu- tional Agreement infringed on the rights of other confessions, which should be invited to sign similar agreements. In a country with dozens of religious organizations, some of them fairly small, it will be hard, if not impossible, to put this into practice. Such agreements will hardly carry much weight. These two extremes probably interfere with the attempts to follow the road traversed by many European countries (Austria, Britain, the Baltic republics, etc.) in which religious organizations are ranked according to the country’s cultural traditions, the number of structures, the length of their presence on the country’s religious scene, etc. In these states, religious laws are based on these considerations, while small religious groups and new arrivals, to their displeasure, are left out: this looks like the only reasonable way to regulate the situation in Georgia. The degree to which new religions are included in the country’s cultural life is very important: a culturally relevant religious movement in one country might clash with the cultural context in another country. This happened in Japan, Belgium, the United States, and other countries, where new religious movements led to unexpected and dramatic developments. This obviously calls for caution when dealing with new confessions. The rivalry on Georgia’s “religious market” is still fairly uncivilized: members of the Orthodox Church find it hard to reconcile with other confessions and tend to look at them as a temporary factor. The new confessions, in turn, want to present the Georgian Orthodox Church as an uncivilized and fundamentalist organization. I have already written that ultra-liberal ideologists are partly responsible for this. The time has come for moderate Orthodox clergymen and politicians to move to the fore: so far the Georgian political establishment has been treating the problem as an election issue. In 2006, the squabbles around the Armenian churches, which had first arose in 2005, resumed. In 2005, several members of the Armenian Apostolic Church of Georgia demanded back several buildings that ostensibly belonged to the Armenian Church. The demands were accompanied by immense historical deliberations about 600 Armenian cultic buildings on Georgian territory. The Georgian Orthodox and intellectual communities were enraged because some of the buildings described as Armenian were Georgian symbols of historic and spiritual significance. In 2006, the demands became even more insistent, probably because of the growing Russian-Georgian tension and the shared ge-

128 GEORGIA Religion opolitical interests of the Russian Federation and Armenia. In the fall, the political rights of the Arme- nians in the republic’s southeastern corner also came to the fore. The REGNUM Information Agency disseminated a statement by the Armenian nationalist alliance, Trabzon-Zrdvin-Batum, that contained vague territorial claims best described by the alliance’s name and spoke of vehement anti-Armenian sentiments in the Georgian media. In fact, this brought to mind 2005 when all kinds of Armenian NGOs were spreading information (in Russian and English) about anti-Armenian sentiments in the Georgian media in connection with the cultic buildings issue and the Armenian-populated Georgian areas. In 2006, the same alliance mentioned the Aisi newspaper, which I personally had never heard about. It probably exists, but the information published in this “widely read” newspaper can hardly be described as “anti-Armenian sentiments in the Georgian media.” There are disagreements over several cultic buildings, the future of which should be discussed by a bilateral commission. It has been set up, but has done nothing so far. The Georgian Catholics claim several cultic buildings; last September, Father Gabriele Bra- gantini and the expert Nugzar Papuashvili presented their book On the Truth and Fairness in Re- lation to the St. Ivlita Church in Akhaltsikhe, which enraged the Orthodox radicals, who stirred up a scandal.

Religious Tolerance and Religious Dialog

The year 2006 saw fewer conflicts (especially those provoked by Orthodox radicals) than 2005, however, the dialog among confessions subsided. In May 2005, the Patriarchate set up a Coordination Center of Religious Relations to Promote State Development, and the Office of Ombudsman set up a similar structure. In 2006, however, they were less active than before. Once more the religious dialog shifted to the nongovernmental sector, which means that the preliminaries were unimportant. The International Center for Conflicts and Settlements remained as active as ever. Last October the Orthodox Patriarchate clashed with the Ombudsman and Department of Penal Structures over a treaty between them on meeting the religious needs of inmates who belonged to religious minorities. The document allowed clergymen of religious minorities to visit places of deten- tion. The Patriarchate feared proselytism and referred to the treaty between the Patriarchate and the Ministry of Justice of 30 April, 2001 signed by the Patriach and the then Minister of Justice Mikhail Saakashvili, now President of Georgia, under which the Patriarchate was expected to help meet the spiritual needs of inmates who belonged to religious minorities.

Influence of Foreign Centers and States

The influence of the Patriarchate of the Russian Orthodox Church is the strongest among all other foreign religious centers, which cannot be described in straightforward and unambiguous terms. On the one hand, the Georgian Church is opposing Russian religious expansion in the regions beyond the control of the Georgian authorities (in Abkhazia and Samachablo) as best it can. Certain representatives of the Moscow Patriarchate adopted an obviously unfriendly attitude toward Georgia during the “cold war” between Russia and Georgia. In October, Bishop of Saratov and the Volga Region Vsevo-

129 CENTRAL EURASIA 2006 Analytical Annual lod Longin justified the campaign against Georgian and other labor migrants that led to violations of human rights and several deaths. The Patriarchs of All Russia and All Georgia issued statements in which they insisted on the continued centuries-old brotherhood of both churches, but any casual observer can see that Russian neo-imperialism has developed into Russian Orthodox messianism, which is arousing mistrust of the Russian Orthodox Church. Today, the Orthodox churches have embraced one of two approaches to the current situation. The Constantinople Patriarchate has opted for a relatively liberal approach, it is trying to adapt itself to the new historical conditions and accept all human values. This was best demonstrated during the visit of Pope Benedict XVI to Turkey in November 2006, when Ecumenical Patriarch Bartholomew and the Pope expressed their willingness to draw their churches closer together. The ROC was highly displeased with the meeting and the title of Ecumenical Patriarch the Pope used in relation to Bartholomew. Russian Orthodox ideologists are convinced that by doing this the Pope demonstrated that he did not regard the ROC as the heir to the Byzantine Church. Prior to the Pope’s visit to Turkey, Metropolitan of Smolensk and Kaliningrad Kirill Gundiaev, head of the Department of Foreign Relations of the Moscow Patriarchate, voiced his concern over the intention of the Patriarch of Constantinople to claim a role similar to that of the Pope in the Catholic world. It should be said that a special place belongs in the Russian Orthodox globalist project (which affects the ROC to a great extent) to those Orthodox churches (the Georgian Church among them) that refused to shift from the Julian to the Gregorian calendar. They form a group of churches living in an “alternative history.” The ROC claims the leading role in the group, which explains why Russian publications oppose the priority of the Patriarch of Constantinople and never miss a chance to remind everyone that priority should go to the Jerusalem Church, as the Mother Church, while the ROC and the Russian state should be entrusted with global Orthodox Church tasks.1 There are few supporters of the Russian Orthodox globalist project in the Georgian Orthodox Church, but the wing that thinks in alternative history and alternative (not liberal) eschatology categories is fairly strong—they are all unwilling allies of the Russian strategies. During 2006, the Georgian Church never commented on the active dialog between the Vatican and Moscow.

C o n c l u s i o n s

In 2006, the Orthodox Patriarchate assumed a tougher position in relation to the government; the epistles of Patriarch Ilia II and statements of the Holy Synod bear witness to this. The Church has mastered the skill of adaptation to the rapidly changing circumstances—something that it could not accomplish before. This is amply testified by the Patriarch’s Christmas Message, in which he openly opposed university reform and the statements of the Synod that objected to the removal of religious programs from Georgian Public TV, etc. The year 2006 obviously made a step forward toward new processes.

1 For more detail, see: A. Krasikov, “Globalizatsia i pravoslavie,” available at [http//www.archipelag.ru/geoculture/ religions/Eurasia/orthodoxy]. 130 GEORGIA International Affairs INTERNATIONAL AFFAIRS

Archil GEGESHIDZE Ph.D. (Geography), Senior fellow at the Georgian Foundation for Strategic and International Studies (Tbilisi, Georgia)

n 2006, Georgian foreign policy derived its Russia, to the implementation of regional energy immense dynamism and singleness of pur- and transportation projects, as well as to the in- I pose from the previous year. The country con- crease in GUAM’s functionality. As always, spe- tinued to move closer to the structures of the Euro- cial attention was focused on further advancing Atlantic community while strengthening the po- bilateral interaction with the country’s direct litical and economic ties in the region at the same neighbors, Ukraine, Kazakhstan, and other CIS time. In so doing, the sum total of problems be- states. As for contacts with the U.S., they re- ing resolved remained essentially the same. They mained strategic, largely routine, and were based basically boiled down to achieving two main on a well-oiled mechanism of consultations and goals: a) creating an appropriate foreign policy coordinated decision-making. It should be noted background capable of achieving real results and that since strategic development policy remained rekindling the frozen conflict settlement process essentially unchanged, the tasks for 2006 were in Abkhazia and South Ossetia; and b) raising the largely similar to those of the previous year; nev- level of cooperation with NATO and the EU. In ertheless, the new circumstances that appeared in addition, other tasks were solved—in particular 2006 made it necessary to adjust the problem- those related to the crisis in the relations with solving tactics to a certain extent.

Conflicts in Abkhazia and South Ossetia

During 2006, the main goals of the Georgian government and its foreign policy with respect to settling the conflicts in Abkhazia and South Ossetia were to effect a change in the present status quo and withdraw the settlement process from its impasse. With respect to the conflict in South Ossetia, on the one hand, efforts were made to implement a peace plan for its settlement.1 This was achieved by attempts to further mobilize the international community (mainly the Western) through diplomatic channels, aimed at breaking down the joint resistance of the Russian Federation and the South Ossetian separatists to carrying out the aforementioned plan approved by the world community, including by Russia itself. To do this, Georgia began taking unilateral steps to demilitarize the conflict zone and strengthen security there. At the same time, diplomatic efforts were made in cooperation with the OSCE and other international organizations, as well as with various countries, in order to obtain financial support for the undertakings envisaged by

1 The peace plan was put forward by Georgian President Mikhail Saakashvili on 26 January, 2005 at the Parliamentary Assembly of the Council of Europe (see: [www.president.gov.ge/others/initru.htm]). 131 CENTRAL EURASIA 2006 Analytical Annual the peace plan to restore trust between the sides in the conflict. In particular, the idea of holding a special donors conference was put forward. On the other hand, the Georgian government began actively promoting the need to make changes in the format of the Joint Control Commission (JCC) by including the EU in its membership and consolidating the role of the OSCE. As for the peacekeeping operation in the conflict zone, it was to be replaced with an international civilian police force.2 What is more, Georgia saw to it that the OSCE Ministerial Council adopt decisions to increase the total number of international observers from among the OSCE and monitor the Roki Tunnel. The efforts of the Georgian side were partially crowned with success. The international community, reassured that the Georgian peace initiatives were correct, supported the idea of a donors conference, which was successfully held in Brussels on 14-17 June, 2006 under the auspices of the OSCE. During the event, almost 10 million euros were collected. These funds—should this be in the interests of the conflict participants and overall security—could be extremely conducive to encouraging cooperation in the conflict zone. Nevertheless, unbiased observers are finding it difficult to assess the consequences of the so- called referendum and presidential election held in South Ossetia on 12 November, 2006 from the perspective of stability and security in the region. The thing is that alternative voting for president went on at the same time as the “official” election, during which former prime minister of the South Ossetian government Dimitriy Sanakoev was declared the victor. It is thought that the Georgian authorities did much to encourage the appearance of the “alternative” South Ossetian leader. This fact greatly angered Russia and the “official” government of South Ossetia, which led to more stagnation in the settlement process. What is more, the Russian Federation, in violation of the actions agreed to under the peace plan on demilitarizing the conflict zone, continued unsanctioned deliveries of military hardware, turning a blind eye to the growing cross-border organized crime in the conflict zone. It took great delight in blocking any resolutions on making changes to the JCC format and the peacekeeping operation, as well as the decision to allow international observers to monitor the Roki Tunnel. The conflict in Abkhazia presents an essentially similar picture. After unfreezing the settlement process, Georgia placed the main stakes (for certain reasons) on support of its initiatives by Western countries and their representatives in international organizations. The Georgian side set forth its proposals in a document called “Road Map for a Comprehensive, Peaceful, Political Settlement of the Conflict in Abkhazia,”3 in which an attempt was made to trace the outlines of a strategy for resolving the conflict based on a new vision. It is not surprising that this strategy (as in the conflict in South Ossetia) places particular emphasis on reducing Russia’s role in the settlement process. In particular, it suggests that the Coordination Council be entrusted with the functions of a forum for holding direct talks between the sides in the conflict under the patronage of the U.N. In so doing, the U.N. Secretary General’s Group of Friends of Georgia, as well as the EU and OSCE, should act as guarantors for implementing the agreements reached during the talks. At the same time, the Georgian state still tried to have decisions made on the further internationalization of the CIS peacekeeping contingent or its complete replacement by international police forces.4 It is worth noting that the European Union showed a certain interest in these proposals, although in the short term it has no intention of sending in peacekeepers or police forces, and the U.N. had a more reserved reaction to Georgia’s initiatives, preferring, instead of introducing changes into the

2 Resolution of the Georgian parliament of 18 July, 2006 calls on the country’s government to begin carrying out corresponding work to ensure the placement of international police forces in the conflict zones in Abkhazia and South Ossetia (see: Resolution of the Parliament of Georgia on The Peacekeeping Forces Located on the Territory of Georgia, available at [http://www.parliament.ge/index.php?lang_id=ENG&sec_id=98&info_id=13089]). 3 “Abkhazia: Ways Forward.” Crisis Group Europe Report No. 179, 18 February, 2007, p.10. 4 See: Resolution of the Georgian Parliament… 132 GEORGIA International Affairs format, to concentrate on restoring trust and implementing the agreements reached. What is more, the U.N. is expressing doubts about the expediency of ending the current peacekeeping operation, for the United Nations Observer Mission in Georgia (UNOMIG) is directly related to this.5 As with South Ossetia, 2006 did not bring the Georgian government the token changes it sought in the form and content of the conflict settlement process in Abkhazia. The primary reason, of course, is the obstructionist stance assumed by Russia and the Abkhazian separatists. In particular, Russia’s mood had a negative effect on the motives of the EU, U.N., and other entities when reviewing the initiatives of the Georgian authorities. Moreover, Russia’s attempts to hinge the imminent decision on the status of Kosovo on settlement of the conflicts in the post-Soviet space drove an additional wedge into the relations between the participants in the conflict, thus making the need for direct talks less convincing. Along with this, the Georgian leadership’s lack of a clear understanding of the actual dialog process with the Abkhazian side, as well as the removal of state minister for conflict settlement Gior- gy Khaindrava from his post and transfer of Irakli Alasania to another job, who enjoyed Abkhazia’s trust, aroused doubt in those concerned about Georgia’s ability to effectively hold talks and, consequently, about the expediency of immediate and unconditional support of Georgia’s initiatives. It should be noted that the belligerent (at times) rhetoric, primarily by Defense Minister I. Okruashvili, was also part of the reason for the lack of trust in the Georgian government.

Integration into European and Euro-Atlantic Structures

Immense hopes were placed on greater integration into NATO in 2006. In particular, the country was extremely optimistic about Georgia being invited to join the Membership Action Plan (MAP). Since the beginning of the year, great efforts were thrown into preparing for the visit of NATO experts, scheduled for March, to assess the Individual Partnership Action Plan (IPAP). Documents were drawn up by working groups on the results of economic development; the fight against corruption; border protection; reform of the defense industry; peaceful settlement of the conflicts; and so on. This work was rewarded—the mission of NATO experts positively assessed the progress in the IPAP, which was later confirmed at a special sitting of the North Atlantic Council (NAC). Lat- er, a declaration was adopted6 at a session of the NATO Parliamentary Assembly, which called on the Alliance member states to switch to an Intensive Dialog with Georgia in the near future and render it technical assistance to accelerate its integration into the Euro-Atlantic institutions. On 21 September, 2006, a decision was made at an informal meeting of foreign ministers of the NATO states to begin an Intensive Dialog with Georgia on its membership in the Alliance. This meant the republic’s transfer from the partnership format to the intermediary format of a candidate for NATO membership. This rise in cooperation level with the Alliance was one of the main events of the year. It was followed by the introduction of a draft law in the U.S. Senate on granting Georgia, Croatia, Macedonia, and Albania financial and technical assistance to speed up their membership in the Alliance. The draft law is noteworthy in that Georgia is categorized as a country already implementing MAP, and, just as interesting, 10 million of the 19.8 million dollars allotted for the indicated purpose is intended for Georgia. It became obvious that the United States openly supported Georgia’s membership in NATO, and everyone awaited the official decision of the Alliance summit scheduled for the end of

5 See: “Abkhazia: Ways Forward.” 6 See: NATO Parliamentary Assembly, Declaration on Georgia’s Relationship with NATO, 30 May, 2006, available at [www.nato-pa.int/Default.asp?SHORTCUT=949]. 133 CENTRAL EURASIA 2006 Analytical Annual

November. In particular, it was anticipated (and this was fed by encouraging statements by officials) that the NATO summit would invite Georgia to participate in MAP. But it transpired that the group of European member states in the Alliance was not willing to support this decision. So the sensation of Georgia being accepted did not occur: not everyone believed that Georgia was ready for MAP and, most important, the political situation was not conducive to such a decision. By way of compensation, Georgia was given to understand that if it fulfilled all its obligations under IPAP, NATO would not drag its heels. The year ended with the first round of consultations in the Inten- sive Dialog, which was supposed to be followed by another four rounds, after which the prospects for acquiring a Membership Action Plan would be obvious, but this is already something for the 2007 agenda. In 2006, relations between Georgia and the EU were marked by the drawing up and adoption of the European Neighborhood Policy Action Plan (ENPAP). On Georgia’s part, drawing up the ENPAP was carried out by a special commission under the supervision of the prime minister. The Office of the State Minister for European and Euro-Atlantic Integration was responsible for carrying out internal coordination of the plan. Georgia’s priorities were determined for its subsequent inclu- sion in the ENPAP. Based on this reality, a single vision of the dialog strategy with the European Com- mission was elaborated. In March and May 2006, two rounds of talks were held.7 After each of them, parliamentary hearings were held. On 13 September, 2006, the government approved the ENPAP draft. On 2-3 October, during a visit by the EU Troika to Georgia, a statement was made on collaboration of the final text of the document, and on 14 November, the EU-Georgia Cooperation Council officially adopted the ENPAP in Brussels. Almost all of Georgia’s top priority issues were incorporated into the ENPAP, in particular the EU’s involvement in the conflict settlement process in Abkhazia and South Ossetia; the development of trade relations with the EU, keeping in mind the possibility of their transfer to free trade principles; beginning a dialog to simplify visa conditions on the part of the EU; recognition of Georgia’s Euro- pean strivings; recognition of the priority of cooperation within the Black Sea Region. The ENPAP is a renewable document that can be reconsidered as relations between the EU and Georgia develop, as well the quality and rates of the reforms being conducted by the republic increase. The ENPAP envisages that the sides should carry out the measures set forth it in within five years, but according to Resolution No. 549 of the Georgian government of 22 November, 2006, Georgia should carry out its part of the Plan in three years. At present, the authorities are elaborating a Plan for implementing the ENPAP, which is to be submitted to the EU for its approval. On its basis, financing will begin in 2007 within the framework of the European Neighborhood and Partnership Instrument (ENPI), which will amount to 120.4 million euros for four years.

Relations with Russia

The year 2006 put Russian-Georgian relations to an unprecedented test. The lack of coordination between the “national projects” of the two countries8 predetermined the inevitability of a serious confrontation, which to a great extent was also promoted by the forms and methods of struggle to uphold their interests. Largely inspired by its successful policy regarding Russia the previous year,9

7 The first round of talks was held in November 2005. 8 See: Interview by I. Menagarishvili for the Georgian newspaper 24 chasa, 30 January, 2006, available at [http:// www.georgia.mid.ru/interv/25.html]. 9 In 2005, the main achievement in relations with Russia was the agreement to close down the military bases in Ba- tumi and Akhalkalaki in 2008. 134 GEORGIA International Affairs

Georgia decided to continue moving boldly along in the same direction. The main goals directly affecting the Russian Federation consisted of changing the existing format of the political conflict settlement in Abkhazia and South Ossetia, as well as replacing the peacekeeping operations in the conflict zones with international police forces. At the same time, as mentioned above, Georgia continued moving toward accelerated rapprochement with the EU and particularly with NATO. Inte- gration with the latter was extremely successful: the level of relations between the republic and the Alliance was raised, and the U.S. began taking legislative steps to speed up Georgia’s membership in NATO. Russia regarded this as an extremely undesirable geopolitical shift in the region. What is more, the unfriendly, at times even belligerent, rhetoric of the Georgian authorities seemed to add fuel to the fire. The Russian Federation found certain statements by the highest-ranking Georgian politicians humiliating. In turn, Russia began to take certain steps in response. In particular, the emphasis was placed on seizing the initiative, and instead of pursuing a reactive policy, it decided to shift to a proactive policy. This was initially manifested in the ban on the import of Georgian wine and mineral water into the Russian Federation. At the same time, an attempt was made to launch subversive activity aimed at overthrowing the Saakashvili regime. After it fell through, alternative forms of putting pressure on the government and public opinion began to be elaborated. In particular, Russia began to mull over the idea of possibly universalizing the model for determining Kosovo’s status and using it in other cases, whereby openly hinting at the conflicts in Georgia. Further, in the hope of drawing the republic into a domestic conflict, an uprising was provoked in the Kodori Gorge. The Georgian authorities reacted by carrying out an efficient special operation, after which order was restored in the gorge and, most important, a decision was made to set up the Abkhazian government in exile there. This posed a serious threat to the existing status quo, to which neither Russia, nor even more so the Abkhazian side could reconcile themselves to. The discontent ended in four Russian servicemen being arrested, supposedly for espionage, and later being handed over to a high-ranking OSCE official, who arrived specially for this purpose. The entire undertaking bore clear signs of a PR campaign and was perceived in the Russian Federation as an exclusively aggressive and humiliating act. It was immediately used as an excuse to introduce tough sanctions against Georgia. In particular, transportation routes and postal communication were interrupted; Georgians began to be deported from Rus- sia (often in clear violation of human rights); clamping down on Georgian business began; murders on national grounds became more frequent. The ambassador was recalled, and the embassy was evacuated. Georgian citizens were no longer issued visas. The obvious inappropriate response of the Rus- sian side to the “spy scandal” shows that in actual fact there was a different motive behind these sanctions, which was to arouse the people’s discontent and in so doing, to put it mildly, create problems for the regime, although in the Russian Federation itself whole slew of different reasons were thought up to justify these tough measures, including that the purpose of the sanctions was supposedly to prevent a war in the conflict zones.10 Despite the repeated urges by international organizations and some countries to remove the sanctions, Russia stepped up its pressure on Georgia by achieving the necessary U.N. Security Council resolution and/or Duma recognition of the legitimacy of the referendum and presidential election held in November in South Ossetia. This ended in the price of the natural gas delivered to Georgia being raised from 110 to 235 dollars per 1,000 cu m. It was originally expected that Georgia would continue to meet its blue fuel requirements by means of the newly developed Shah Deniz field. Nevertheless, for technical reasons, these deliveries were delayed and the country was compelled to purchase Russian gas in limited amounts at a “political price.” Azerbaijan agreed to supply the rest at a price of 120 dollars per 1,000 cu m,

10 See: “Politolog: tsel’ sanktsiy Rossii—ostanovit’ spolzanie Gruzii k voine,” RIA Novosti, 4 October, 2006. 135 CENTRAL EURASIA 2006 Analytical Annual whereby showing friendliness and concern at just the right time, which were underpinned by common strategic goals.11 The signing of an agreement on the withdrawal of Russian military bases on 31 March, 2006 was almost the only manifestation of constructive cooperation between Georgia and Russia, but it looks rather insignificant against the background of the losses incurred by the sides as a result of the unprecedented confrontation. The mentioned sanctions caused a lot of grief. Ordinary citizens suffered, primarily those who were rudely deported and deprived of their means of existence. Wine production suffered, which lost most of the market and indirectly placed the entire winegrowing industry in jeopardy.12 Georgian airline companies suffered, which incurred losses running into the millions, since they served 75,000 passengers and transported hundreds of tons of freight annually. Nevertheless, although they dealt a certain blow to the Georgian economy, the sanctions did not have the anticipated macroeconomic effect. The IMF mission, which came specially to Georgia to assess the economic damage, stated that as a result of the sanctions, the external current account deficit would increase to 250-300 million dollars in 2007. In other words, the real GDP growth will decrease from 8-9 to 6-7 percent, which in itself is still not that bad.13 Not only did the Georgian state suffer from the Russian embargo. Closing of the land transportation routes dealt a painful blow to Armenia’s economic and humanitarian interests, which, for well-known reasons, depends in its relations with Russia on transit through Georgia. But even more interesting is the fact that the Russian Federation itself, which did not achieve the anticipated results, also suffered (or to be more precise, its reputation suffered). The sanctions had the opposite effect in the republic—Saakash- vili’s government became even more consolidated, and the image of Russia as an enemy became even more ensconced in the minds of the people. Russia’s pressure, despite the powerful information support of the mass media, had a sobering effect on many members of the CIS; their trust in Big Brother was severely undermined. As for the foreign scene, not a single international formation or state, including those considered traditionally loyal to the Russian Federation, justified its actions. The crisis in Russian-Georgian relations—confirming the saying “every cloud has a silver lin- ing”—had several positive side effects for Georgia. First, the level of energy dependence on Russia dropped; second, the quality of the products exported increased and the export markets became diversified; third, the extent to which the country could count on the support and concern of the world community at a time of crisis became clear. What is more, in 2006, direct Russian investments dramatically decreased: whereas the previous year, they amounted to 38.7 million dollars, in 2006, they dropped to 9.8 million.14 Although this fact cannot really be called a side effect, it is nevertheless thought that many people worried about the increase in Russia’s investments in Georgia’s strategically important industries will be happy with this trend.15

Regional Energy and Transport Projects

The year 2006 was also significant with respect to the increase in the republic’s transit potential. On 13 July, the Baku-Tbilisi-Ceyhan (BTC) oil pipeline officially went into operation, via which one

11 Azerbaijan itself refused to purchase gas from Russia at a “political price,” transferring to the use of more expensive fuel oil. 12 Before the sanctions, 80% of the wine manufactured in Georgia was sold in Russia. According to Georgian wine- growers, the volume of wine production has dropped from the level of almost 50 million bottles in 2005 to 20 million in 2006, and the industry is losing jobs and investments. 13 See: IMF Mission Press Statement at the Conclusion of a Staff Visit to Georgia, 12 December, 2006, available at [www.imf.ge/view2.php?lang=1&view=253]. 14 See: “Who Invests in Georgia?” The Messenger, 27 February, 2007. 15 See: V. Papava, F. Starr, “Russia’s Economic Imperialism,” Project Syndicate, January 2006, available at [www.project-syndicate.org/commentary/papava1]. 136 GEORGIA International Affairs million barrels of Caspian oil will be pumped through Georgia to Turkey. After the decision to build this route was adopted in 1999, Georgia, Azerbaijan, and Turkey were able to overcome certain difficulties related to the Russian Federation and bring the project to fruition. An international consortium consisting of 11 companies owns the oil pipeline; the main shareholders are British Petroleum and the State Petroleum Company of the Azerbaijan Republic. The BTC pipeline, which is one of the largest engineering structures of its kind in the world, was called upon to make a significant contribution to ensuring stability on the international hydrocarbon market, and Georgia, Azerbaijan, and Turkey will receive additional economic, and just as important, political benefits. The BTC project played a decisive role in adopting the decision to lay a gas pipeline from the Shah Deniz field (close to Baku) through Georgia to the Turkish city of Erzerum. The project, which was called the South Caucasus Pipeline (SCP), implied building the route and auxiliary infrastructure with a capacity of 16 billion cu m a year. Work began in 2003, and as early as December 2006, the first test deliveries were made. The main shareholders of the consortium which owns SCP are British Pe- troleum and Statoil. In the future, the possibility is being envisaged of blue fuel transit from Turkmen and Kazakh producers by means of the planned trans-Caspian pipeline. BTC and SCP are radically changing strategic reality in the Caucasus. The energy networks of Azerbaijan, Georgia, and Turkey are becoming increasingly integrated and, in so doing, are raising the significance of the East-West transportation corridor. Today, these countries are ready to engage in another, no less ambitious project to build a railroad connecting the Turkish city of Kars with Geor- gia’s Akhalkalaki. This project will make it possible to ensure uninterrupted rail connection between Europe and Asia. All the Caspian states, as well as China, will acquire additional transport communication with European countries. For Georgia, the new rail branch will be doubly significant: first, Javakheti (one of the most depressed regions of the republic) will acquire a new function, conditions will be created for its economic revival, which is extremely significant in the political and social respect in view of the withdrawal of the Russian military base; second, Georgia’s status as an important transit state will increase even more, with simultaneous strengthening of the strategic relations that have developed with Azerbaijan and Turkey. The only “shortcoming” of the project lies in the fact that it will sharpen Armenia’s feeling of isolation, which due to efficient lobbying has succeeded in convincing U.S. Congress not to give Eximbank permission to allot financial resources to construction of the railway. During the year, talks went on among Georgia, Azerbaijan, and Turkey on the conditions for subsidizing the project. It was decided that Turkey would finance the work on its territory and Azerbaijan would grant Georgia a privileged loan of 200 million dollars. The entire project will cost investors 450 million dollars.

International Activity

In 2006, one of the priority vectors in Georgian diplomacy was promoting the consolidation of regional relations. First, the results achieved in stepping up GUAM’s activity should be noted. In addition to the fact that GUAM became a regional organization,16 the livelier cooperation and increased coordination of its members are just as noteworthy. In particular, adoption of the protocol on the origin of goods was a practical step toward putting free trade conditions into effect within GUAM. Further, the coordinated actions of the foreign ministries were crowned with success, and for the first time the question of the Protracted Conflicts in the GUAM (Georgia, Ukraine, Azerbaijan, the Republic of

16 On 23 May, 2006, at the Kiev summit, GUAM announced the creation of a regional structure—Organization for Democracy and Economic Development—GUAM. The summit adopted a corresponding declaration, available at [www.mfa.gov.ge/print.php?gg=1&sec_id=78&info_id=1427...]. 137 CENTRAL EURASIA 2006 Analytical Annual

Moldova) area and their Implications for International Peace, Security and Development was put on the U.N. General Assembly agenda.17 Special mention should be made of increased partnership with the Baltic countries and Scandi- navia, as well as with Poland. The cooperation begun in 2005 has become extremely dynamic, and we can already talk about a clearly defined Northern Dimension in Georgia’s foreign policy.18 It is difficult to overestimate the moral and political support rendered by the states of this region, and their technical assistance in fulfilling the obligations under the NATO and EU integration programs. Significant diplomatic resources were directed toward ensuring corresponding support from international organizations when making decisions on the issues of interest to Georgia. It should be emphasized that, in most cases, the set goals were reached. For example, a declaration was adopted in the European Union, in which the conflicts in the republic are regarded as territorial, and not domestic.19 And in general, the topic of the conflicts in Georgia became a top priority item on the agenda of the EU’s internal discussions. On 26 October, the European Parliament adopted a resolution regarding Russia that was unusually categorical and condemned the harsh sanctions adopted against the Georgian state.20 At the OSCE Ministerial Council, the Russian Federation was ostracized against the background of overall support for Georgia, which was expressed in the concluding statements of the chairman, EU representatives, and national delegations. Systematic discussion of Georgia’s problems within the trans-Atlantic dialog, as well as on the part of the EU, NATO, and the U.S., is of decisive importance in bilateral consultations with Russia. Consequently, ensuring that Georgia’s problems were included on the agenda of the mentioned undertakings was a priority task in 2006. We will note that in the dialog with the Russian Federation, the U.S. and Euro-Atlantic structures began paying keen attention to the issues relating to Georgia after the Rose Revolution. In 2006, these problems began to be discussed more often, including between the U.S. and EU.21 Bilateral relations with regional neighbors were as usual among the top priority tasks. Geor- gia continued to develop mutually beneficial cooperation with Armenia, Azerbaijan, and Turkey, but the growing level of partnership with the latter two countries should be noted in particular, which was promoted by agreements on questions of energy security and building the Kars-Akhalkalaki railway. The prospects for mutually advantageous cooperation with Kazakhstan should also be mentioned, which was the largest investor in the Georgian economy in 2006.22 Consolidating Georgia’s positive image has always been on the foreign ministry’s agenda. The rostrums of various foreign structures were used to promote this image, and the country took part in international forums with the purpose of promulgating the reforms conducted. What is more, the annual reports of certain organizations that have been keeping an eye on the democratic and economic changes going on had a positive effect on the republic’s image. For example, the Council of Europe regards the reforms as generally encouraging, although it points out the problems that remain;23 in its

17 Text of the corresponding resolution is available at [www.un.org/News/Press/docs/2006/ga10493.doc.htm]. 18 See: Concluding Press Conference for 2006 of Minister of Foreign Affairs of Georgia Gela Bezhuashvili, available at [www.mfa.gov.ge/index.php?lang_id=ENG&sec_id=31&info_id=3130]. 19 See: Declaration by the Presidency on behalf of the European Union on Recent Developments in Georgia—Ab- khazia and South Ossetia, available at [www.mfa.gov.ge/index.php?lang_id=ENG&sec_id=78&info_id=1866]. 20 See: European Parliament Resolution on the Situation in South Ossetia, available at [www.europarl.europa.eu/sides/ getDoc.do?pubRef=-//EP//TEXT+TA+P6-TA-2006-0456+0+DOC+XML+V0//EN&language=EN]. 21 See: U.S.-EU Summit Declaration: Promoting Peace, Human Rights and Democracy Worldwide, available at [www.mfa.gov.ge/print.php?gg=1&sec_id=78&info_id=1632...]. 22 During the first three quarters of 2006, Kazakhstani investors invested 142.5 million dollars in the Georgian economy. In particular, a hotel was purchased in the center of Tbilisi, the capital’s gas supply company and most of the tourist infrastructure in Borjomi and Ajaria (see: “Who Invests in Georgia?” The Messenger, 27 February, 2007). 23 See: Council of Europe Resolution 1477 (2006) in Implementation of Resolution 1415 (2005) on Honoring of Obligations and Commitments by Georgia, available at [http://assembly.coe.int/Mainf.asp?link=/Documents/AdoptedText/ ta06/ERES1477.htm]. 138 GEORGIA International Affairs latest report, Freedom House notes an improvement in the situation regarding civilian freedoms, although the country’s status (“partially free”) has not changed.24 In 2006, Georgia made an impressive step forward (compared with 2005) in terms of the Corruption Perceptions Index calculated by Trans- parency International: after accumulating 2.8 points, it moved from 133rd to 99th place.25 The republic achieved its most significant progress in creating conditions for business development. According to the 2006 results, Georgia reached first place in the world in terms of this index.26 The well-known Economic Freedom Index, calculated by the American Heritage Foundation, also points to the overall success of the Georgian economic reforms. Compared with 2005, the country moved from 68th to 35th place.27 On the whole, as in 2005, an analysis of the above-mentioned information makes it possible to conclude that the state’s international reputation is on the rise.

C o n c l u s i o n

The main result of the events going on around Georgia was the beginning of the formation of a new security environment. The unprecedented political support from international organizations, the U.S., and Western countries, as well as completion of the trans-regional energy projects, greatly consolidated the guarantee of security. Later, as integration into NATO deepens and the strategic knots of cooperation in the region are made tighter, this guarantee will grow even more. The mentioned assistance from the world community was also possible due to the efficient work carried out on international public opinion which was generally successful. In so doing, the fact that most of the republic’s population and political spectrum support the policy chosen by the government is quite important. The only foreign policy issue in which there is some discrepancy between the government and part of the opposition is the expediency of Georgia’s continued membership in the CIS. Clarity of purpose, determination, adherence to principles, stability, predictability, and reliabil- ity have become inherent features of Georgia’s foreign policy, which largely determined its overall effectiveness. At the same time, despite the inevitability of confrontation with Russia, many observers believe the threatening dimensions and acuteness of the crisis in Russian-Georgian relations to be the greatest error of judgment in Georgian policy in 2006. In this respect, normalizing interrelations with the Russian Federation is one of the main tasks of Georgian diplomacy for 2007. The government’s strong political will and the recent incorporation of strategic thinking into the planning and conducting of foreign policy are giving confidence that this task, just like two other equally important problems (unfreezing the conflict settlement process and getting an invitation to join the MAP), will be resolved.28

24 See: Freedom in the World—Georgia (2006), available at [www.freedomhouse.org/template.cfm?page= 22&year=2006&country=6967]. 25 See: Corruption Perceptions Index 2006, Transparency International, available at [www.transparency.org/policy_ research/surveys_indices/global/cpi]. 26 See: Doing Business 2007: Business Becomes Easier Worldwide, World Bank & International Finance Corpora- tion, available at [www.mfa.gov.ge/print.php?gg=1&sec_id=78&info_id=2069...]. 27 See: 2006 Economic Freedom Index, available at [www.heritage.org/index]. 28 In 2006, a conceptual document Foreign Policy Strategy 2006— 2009 was drawn up for the first time [www.mfa. gov.ge/?sec_id=115&lang_id=ENG]. It contains priorities and goals for the mid term, and also serves as the basis for annual foreign policy directives. 139 CENTRAL EURASIA 2006 Analytical Annual

REPUBLIC OF KAZAKHSTAN

GENERAL OVERVIEW

Timur SHAIMERGENOV Member of the Secretariat of the Kazakhstan Parliament Majilis (Astana, Kazakhstan)

key event defining the vector of the political processes in Kazakhstan during the past year, which in general were distinguished by dynamism and a high level of intensity, was President Nur- A sultan Nazarbaev’s Address to the Nation (March), which set forth Kazakhstan’s Strategy for Joining the World’s Fifty Most Competitive Countries. (The problem of competitiveness prompted many economic and political decisions and was widely discussed in society.) This document, which was called Kazakhstan on the Brink of a New Leap Forward in its Devel- opment defined the new approaches to the state’s further progress.1 In particular, it proposed a new innovative policy and implementing “breakthrough” projects in the economy. Of prime importance is the emphasis on promoting a high standard of living, on the need for investments in human capital, and on continuing the reforms in education, health care, and social and cultural spheres. The president clearly formulated the conception of a national idea of Kazakhstan society, the main essence of which was the nation’s competitiveness. A whole set of mutually related tasks will have to be resolved to reach this goal, and this will require consolidation of all of Kazakh society. In December, the country celebrated its 15th anniversary of independence. This anniversary encom- passed the fundamental political and socioeconomic reforms which have dramatically changed the life of the entire state. It will be no exaggeration to say that this date drew a line of sorts between the past and present of Kazakhstan’s development. The moment has come to carry out a critical analysis of the results and search for new approaches to resolving the current problems and to building plans for the future. Approval of the new national anthem and introduction of a new form of national currency sym- bolically accompanied the Republic of Kazakhstan’s transfer to a new level of development. The year was also a time of searching for new approaches to understanding the republic’s role in the world community and thus to its new position as a recognized state leader in Central Asia. Today, Kazakh-

1 See: Kazakhstan President Nursultan Nazarbaev’s Address to the Nation. Kazakhstan’s Strategy for Joining the World’s Fifty Most Competitive Countries. Kazakhstan on the Brink of a New Leap Forward in its Development, 1 March, 2006, available at [www.akorda.kz]. 140 REPUBLIC OF KAZAKHSTAN General Overview stan’s achievements no longer come as a surprise; on the contrary, they are attracting the interest of many of the world’s developing countries, primarily neighboring states. The economy. Today, Kazakhstan is facing new achievements and ambitious tasks. Its economic growth is making it possible to say that the country has reached a systemic stage whereby its development is leading and outstripping that of the other states in the region. On the whole, the year’s end results indicate a 10% increase in the economy. The GDP has reached 77.9 billion dollars and amounted to $3,700 per capita. (In 2007, this index is expected to top $6,000.) The high level of world prices for the country’s basic goods generated a significant increase in export revenue. The foreign trade turnover increased by 36.8% and for January-December it was equal to $56.1 billion, $34.8 billion of which was export and $21.2 billion import, with a growth of 38.2% and 34.6%, respectively. The total volume of foreign investments in the economy topped 60 billion dollars. Along with this, it should be noted that several important documents were adopted, the successful implementation of which can reinforce the country’s economic growth. These include the Strategy for the Development of the Transport Complex for the Period Until 2015, the Territorial Development Strategy, the Concept of Creating a Regional Financial Center in Almaty, the Concept of Kazakhstan’s Transition to Sustainable Development for 2007-2024, the Concept of Establishing Social Business Corporations, and others. The first steps have already been taken in this direction, time will show how successful they are. The social sphere. It is important that state policy is currently placing the main emphasis on people and their interests; the government has begun operating in terms of human resource development categories. The economic policy of the country’s leadership does not only concentrate on macroeconomic indices, but is aimed at resolving social issues: raising employment, lowering poverty, and increasing the size of the middle class. On the whole, positive dynamics are being observed in the social sphere. For example, during the past eight years, the poverty level dropped four-fold from 39% to 9.8%. In recent years, the trend toward a decline in the fertility rate has been overcome, maternal and infant mortality has decreased two-fold, and the volume of health care services has increased 2.4-fold. Issues relating to linguistic development are also coming to the forefront. In particular, at the 12th session of the Assembly of Peoples of Kazakhstan, the head of state raised the question of transferring the Kazakh alphabet to Latin due to the predominance of the latter in the global communication space. What is more, a trilingual conception was offered, according to which the Kazakh language should be actively developed, Russian supported, and English introduced. The problem of developing the Kazakh language is being actively discussed in society. The government’s position on this issue is quite clear—there is no point in expecting any accelerated inculcation of the state language. The state is oriented toward creating an environment which would encourage the broad masses of the population to take an interest in studying the Kazakh language of their own free will. In the near future, more attention will be given to the language in learning institutions, and the functions of the Kazakh language as a means of social communication will be gradually expanded. Noticeable changes are also being seen in public self-conscience: Kazakhstan’s present-day citizens are not only a post-Soviet population, but a new society with a different mentality, way of thinking, and human energy. Today, most Kazakhstanis are people with a market-oriented frame of mind interested in self-improvement and progress. High technology. In 2006, the country continued its course toward joining the club of the world’s spacefaring nations. A pivotal area in implementing the State Program for Developing Space Activity for 2005-2007 is forming a land-based infrastructure for launching and guiding space ships. In particular, in 2006, the first Kazakh satellite “KazSat” was launched, preparatory work is actively underway to create the Bayterek space missile complex, and corresponding departments are drawing up a Development Program for the Country in Space Exploration until 2020. Politics. During the year, the sociopolitical situation in the country remained stable and was distinguished by active discussions about further reform of the political system. On the whole, it can

141 CENTRAL EURASIA 2006 Analytical Annual be said that, based on the economic progress achieved, the government is reorienting its attention from the economy to policy-building. Of prime importance in this area is party structuring of the republic’s political space. This has been promoted by the largest political parties Otan, Asar, the Civil Party of Kazakhstan, and the Agrarian Party of Kazakhstan joining forces to form Nur Otan, a gigantic party with more than one million members. The others are also showing signs of integration, but progress in this direction is still at the negotiation stage. On the whole, the government is showing its inclination to adhere to party principles, which, on the one hand, should increase competitiveness in the political sphere, and, on the other, raise the level of democratization of the political system. It appears that the country needs strong, authoritative political parties with a high electorate potential in order to transfer state power to a party basis. And, in all likelihood, as early as 2007, the appearance of new large and competitive parties can be expected, which will give Kazakhstan’s political life a certain dynamism. Second, a new stage has begun in the liberalization of the country’s political system. The creation of a State Commission for drawing up and specifying a program of democratic reforms shows that a progressive and rather innovative mechanism has appeared for unifying different positions and views on state development issues. This Commission has a very high status and its work is supervised by the president. A key principle in the State Commission’s activity is that all of Kazakhstan’s political forces have access to participation in its work, and that equality of the participants in the dialog is the foundation for the well-balanced and legitimate nature of the upcoming reforms. The Commis- sion’s activity will make it possible to comprehensively and openly discuss every problem, in so doing reaching the necessary level of coordination in management decisions, which is helping to relieve tension in society. The dialog which has begun is ensuring that all interested political forces are being involved in drawing up specific and targeted measures for improving the state system. At the same time, the approaches of the moderates and radicals in the opposition forces toward policy-building are becoming polarized. In particular, leader of the Ak zhol Party A. Baymenov, a representative of the so-called “moderate” opposition, accepted a deputy mandate acquired from the results of the parliamentary elections of 2004, and became a deputy of the Majilis (lower house of parliament), that is, he now directly participates in the political power processes. It should be noted that, during the post- electoral doldrums, it came as no surprise that the radical opposition was unable to underpin its ideas with specific practical work. It is obvious that due to sharp criticism of the current government and refusal to cooperate with it, the radicals are progressively moving toward the periphery of the country’s political arena. Foreign policy sphere. In 2006, a balanced multi-vector foreign policy course was continued, which took into account the interests of the Republic of Kazakhstan, as well as the dynamics of regional and world development. The foreign policy priorities remained unchanged and were focused mainly on the key areas: the Russian Federation, the PRC, the U.S., the European Union, the Central Asian countries, and the Muslim East. For example, the head of state made productive visits to Mos- cow, Beijing, Washington, Brussels, London, Tashkent, and the capitals of several other countries. In Astana, talks were held with the heads of Russia, Japan, the U.S., Egypt, South Korea, Uzbekistan, Kyrgyzstan, Tajikistan, Armenia, and several other states. The most prominent events of the year also include the OSCE conference on tolerance issues (May, Almaty), the CICBMA (Conference on Interaction and Confidence-Building Measures in Asia) summit (June, Almaty), the unofficial congress of leaders of Central Asian states (September, Astana), and the Second Congress of the Leaders of World and Traditional Religions (September, Astana). Unfortunately, although most of the European countries supported Kazakhstan’s candidacy as chairman of the OSCE in 2009, the leadership of this organization began practicing the traditional policy of double standards and postponed adopting a decision on this question until next year. A course was continued toward integration into the international economy by means of Kazakhstan’s participation in such regional and international economic associations as the EurAsEC and the CIS. As chairman of

142 REPUBLIC OF KAZAKHSTAN Politics the CIS, Astana put forward its own program of Commonwealth reform, aimed at raising its potential, and continued its efforts to form a Common Economic Space, as well as to gain Kazakhstan’s membership in the WTO, which is considered an additional tool for modernizing the economy and strengthening the country’s competitiveness on the world markets. Military-political cooperation. Kazakhstan’s policy priorities in security were strengthening and expanding international cooperation in fighting terrorism, organized crime, the illegal circulation of weapons, drug trade, illegal migration, and so on. For example, the draft of a new National Security Strategy for 2006-2010 was reviewed which envisages the country’s integration into the regional and global security systems, using democratic methods and ways for ensuring security, and observing the international obligations assumed by our state. During the year, Kazakhstan continued to strengthen its cooperation with the other Central Asian states in opposing present-day challenges, and it also participated in the“Rubezh-2006” military exercises held under the auspices of the CSTO, in joint antiterrorist initiatives and operations with NATO, in particular, in the “Steppe Eagle-2006” military exercises, as well as in corresponding SCO undertakings. The multi-vector military-political cooperation is making it possible for Astana to resolve questions of national security and achieve a certain balance in relations with the leading geopolitical powers, thus creating an efficient system of checks and balances. On the whole, 2006 was a year in which Kazakhstan consolidated the results already achieved, reconsidered its role, and defined its tasks for the near future. The Republic of Kazakhstan should be a country in which the East and West, Christianity and Islam, and ancient traditions and scientific and technological progress peacefully coexist with each other.

POLITICS

Askar SHOMANOV Ph.D. (Philos.), First Deputy Director of the Institute of World Economics and Politics under the First President of the RK Foundation (Almaty, Kazakhstan)

Alisher TASTENOV Leading research associate at the Institute of Strategic Research of Kazakhstan under the President of the RK (Almaty, Kazakhstan)

n 2006, the post-election sociopolitical lull was short: all the political forces were drawn into the hectic activities around the State Commission on the Development and Specification of the Pro- I gram for Further Democratic Reforms set up under the President of the Republic of Kazakhstan 143 CENTRAL EURASIA 2006 Analytical Annual early in the year. The domestic political process mainly rotated around the commission and the measures needed to promote political modernization and transform the country’s party and political expanse. This was accompanied by more active political moves in both the pro-presidential and the opposition camps. Politics became even more public than before and kept the nation in expectation of another round of political reforms, which could not but affect the nature and specifics of the period under discussion. Two historic events restarted the political process in 2006: on 11 January, Nursultan Nazarbaev was inaugurated as President of the Republic of Kazakhstan; the country also received a new anthem and a new Cabinet. Soon after that, on 1 March, the head of state presented his annual Address to the Nation, in which he formulated Kazakhstan’s Strategy for Joining the World’s Fifty Most Competitive Countries. The Address outlined several new strategic development trends designed to make the country more competitive on a global scale. The president emphasized the socioeconomic factors and identified as priorities Kazakhstan’s integration into the world economy; further economic modernization and diversification; social protection of the most vulnerable groups; development of education; continuous improvement of professional skills, etc. The president also spoke of the need to promote democracy and modernize the republic’s political system: today, competitiveness is directly related to many other, including political, aspects. In other words, the idea of competitiveness is applied to the economic and political sphere: economic considerations lurk behind any political decision of any importance. Economic rivalry, on the other hand, transforms, sooner or later, into political rivalry. The normal competitive economic milieu demands a corresponding competitive political context possible only in a democratic system. The logic is fairly straightforward: only those political systems that strive for democracy can hope to remain afloat and survive any competition. On a wider scale, the Strategy offered a qualitatively new element (specified aims that required specified achievements) and new ideological attributes. These were, in fact, the key political messag- es: if realized, the Strategy could raise the entire nation’s standard of living because the strategic idea of a competitive state means that the Kazakhstanis would develop into a competitive nation with much better abilities for innovative activities. The idea of competitiveness was obviously designed to encourage the nation to work toward a higher standard of living, to demonstrate more civil activeness, social mobility, and spirit of liberalism and freedom, in short, everything realizable in an open democratic society. The president’s program formulated in clear terms more than a strategy—it was the pivotal ideological constant of the country’s future. The above suggests that the Strategy laid the ideological foundation for a more active political process in 2006. The day the State Commission on the Development and Specification of the Program for Further Democratic Reforms began working marked the starting point of this process. The commission gained momentum throughout the year to offer a wide range of relevant measures by the end of 2006. It completed the draft Concept of the Development of a Civil Society (the first version appeared back in the summer of 2005). In May-June, the Commission set up an expert group to finalize the concept draft. On 25 July, the head of state approved the document and the country acquired the Concept of the Development of a Civil Society in the Republic of Kazakhstan for 2006-2011. The document says: “The present Concept is intended to further improve the legislative, socioeconomic, and organizational-methodological basis to promote the all-round development of civil society institutions and their equal partnership with the state and business in accordance with international legal instruments within the framework of international treaties and covenants on human rights and human dimension.” It is very important to help the civil society institutions develop in practice. On the one hand, we should bear in mind that the civil sector of the RK is represented by 12 political parties, 5,820 NGOs, 3,340 public foundations, 1,072 associations of legal persons, 471 national-cultural

144 REPUBLIC OF KAZAKHSTAN Politics associations, 3,340 religious communities, and 6,646 mass media organizations.1 All of them need favorable conditions for their development. On the other hand, we should set up and develop a system for their more efficient cooperation with the bodies of power at all levels and business structures in the interests of the entire nation. The political reforms initiated by the State Commission put the question of correspondence between the current Constitution and new political reality on the agenda. The political and expert communities opened public discussions about the possibilities and the limits of the actual constitutional norms in the context of political transformations and the prospects for constitutional reform. Very soon it became obvious that the answer is not easy to find, while the very idea of constitutional amendments and addenda is fraught with numerous complications. The State Commission deemed it necessary to set up a workgroup to study the potential of the republic’s Constitution and its further realization. In the latter half of 2006, the workgroup met several times to discuss the experience of constitutional reform in other countries and exchange opinions on the possibility of tapping the potential of the Fundamental Law and on the future of constitutional development. The discussions inside and outside the workgroup convinced it that while assessing the potential of the current Constitution, it is necessary to realize to what extent it is adequate as a regulatory instrument for determining the future of the state and society. This clarified the outlines and prospects for constitutional reform. One of the State Commission’s workgroups concentrated on the system of local self-government; the workgroup met several times to discuss the draft law On Local Self-Government, which laid the cornerstone of this important institution of civil society. The workgroup agreed that local self-government bodies (keneses) could be set up on the initiative of those who live in villages, towns, and urban neighborhoods; this fully corresponds to the Constitution of Kazakhstan, the European Charter, and international experience. Most members of the workgroup, however, were convinced that the people were not active enough to set up keneses on their own initiative; it was deemed advisable, therefore, to set up several keneses from above to demonstrate their usefulness and teach people how to make the most of them. Funding of the local self-government bodies proved to be a stumbling block, which generated heated discussions. The workgroup spent a lot of time before coming up with a suggestion that the keneses should be funded from the state budget. It supported those who favored the idea of production units or organizations under the keneses, which would earn money for them. On top of this, the newly established self-government structures were expected to assume scores of diverse functions that so far belonged to the local executive structures (akimats). According to the plan of legislative activities for 2006, the basic draft law On Local Self-Gov- ernment presented to the Ministry of Justice in May had to reach the parliament in June. The process, however, took more time that expected; the experts of the workgroup took their time to study and improve the draft. As a result the parliament did not receive the draft until the fall and sent it back for further improvement. In this way, the Law on Local Self-Government, which had been on the agenda since 2001, was turned down once more. The important link of state administration, which was supposed to decentralize the state governance system in Kazakhstan, was still missing. The decentralization of state power was much more obvious in a different sphere: on 20 Octo- ber, 30 percent (45 districts and 10 regional towns) of the country’s administrative-territorial units elected new akims through indirect secret ballot. Deputies of the local representative structures (mas- likhats) nominated candidates for regional akims (no less than two for the post of district and town akims). District and town akims were elected for a four-year term. This election campaign marked another important stage in the country’s advance toward wider electivity; the country, in fact, acquired elected executive bodies that were expected to boost efficien-

1 Kazakhstan Today Information Agency, 29 July, 2006. 145 CENTRAL EURASIA 2006 Analytical Annual cy of the administrative vertical. People, however, betrayed little interest in indirect voting in which they were not involved. The far from simple situation in the information sphere, which took shape in the last few years because of the complicated relations between the media and the state, affected the political developments as well. In Kazakhstan, where the mechanism of media freedom and their responsibility to the state and society remained unbalanced, most media expressed the interests of various groups—a situation which made monopolization of the information market inevitable. In other words, to create a more balanced mechanism, the country obviously needed a new law, which caused another bout of heated discussions in the public. The RK Ministry of Culture and Information acted promptly: determined to defuse the situation at least for some time, it offered the Law on Amendments and Addenda to Several Legal Acts of the Republic of Kazakhstan Related to the Media enacted on 5 July. Part of the journalist community was obviously displeased with the state’s desire to tighten control over the media (which the law demonstrated beyond doubt). The State Commission likewise failed to demonstrate unanimity over the freedom of speech principle. Finally, the draft law the Cabinet sent to the parliament was approved and the wave of indignation gradually subsided. The State Commission also busied itself with other pivotal issues, such as the parliament’s efficiency and broad party representation in its lower chamber (the Majilis). The Commission’s workgroups drafted relevant suggestions designed to form the foundation of the future National Program of Democratic Reforms. The talk about a greater role for political parties contributed, albeit indirectly, to the radically changed political landscape. The political system was transformed when the four pro-presidential parties—Otan, Asar, the Civil Party of Kazakhstan, and the Agrarian Party of Kazakhstan—joined forces to form the Popular-Democratic Nur Otan Party. Its domination on the country’s political expanse caused an important structural shift. The party in power could not appear out of nothing—the shift was predated by numerous preparatory steps. The idea of the unification of pro-presidential parties was first suggested in June 2006; under the conditions at that time (the fairly amorphous party structure), it was a reasonable move. The party leaders themselves admitted that the political field was dominated by entities of different political weights that used all sorts of political techniques while offering hardly distinguishable ideologies and addressing more or less the same social groups. This was particularly true of the pro-presidential bloc that failed to pool forces to work together in a balanced way for the sake of the country’s development, which accounted for the fairly low quality and efficiency of the party system dominated by the pro-presidential parties. On the whole, the fact that there were several parties operating in the country did not mean that Kazakhstan had acquired an efficient multi-party system. Society remained divided; its political interests vague, and there was no ideology-based party system, which in other countries was inherited from previous generations. These objective factors made it hard to create an effective party system fully adjusted to the local conditions. This should not be taken to mean that nothing was done to remedy the situation. The problem of selecting the best possible party system that would fit the scope and nature of the coming political changes remained on the agenda for some time. Everything that took place in the republic’s political life suggested the same. After the latest parliamentary and presidential elections, the pro-presidential parties remained political rivals. It became clear that the country needed a party in power able to stabilize political administration, prevent domestic conflicts, and consolidate society. In other words, sooner or later the country should acquire such a party. Time has come to select the best alternative of the several known to the world in order to create an absolutely legitimate dominating party (the party in power) and a couple of “secondary level” parties to move toward a future in which political parties will have more weight and enjoy more influence.

146 REPUBLIC OF KAZAKHSTAN Politics

This model was much more realizable than the others, because the pro-presidential parties were geared to almost similar ideologies, therefore a powerful bloc that could be potentially developed into a party was a very real possibility. The very structure of the country’s political sphere suggested the same. Society consisted of two groups that have practically nothing to tie them together—the people (electorate) and the political elite. A party system that would rely on the ruling elite and rivaling elite groups that turn to the voters only during election campaigns was a logical alternative. It should be said that from time to time party leaders did raise the question of a party in power, but under conditions in which they were practically excluded from decision-making the issue could not be developed further; what was more, it was removed from the agenda. In 2006, however, when the camp of pro-presidential parties appeared to be divided by a power struggle, it was logical to tie power to one of the parties and set up a ruling party (party in power). This move was perfectly suited to the current system of power. A party in power will help maintain the efficiency of the vertical of power under conditions when the planned reform decentralizes the system of state administration. In other words, a party in power might serve as a mechanism that would preserve the legal nature of the system of power, which has already demonstrated its usefulness in the course of the market reforms. The country as a whole profited from the changes in the structure of political parties: only the party in power was able to consolidate the politico-economic entities and stem their centrifugal intentions. The republic’s leaders acquired a reliable lobby in the system of representative power; by the same token, the administrative system divided among the politico-economic elites could finally be integrated into a single whole. The key publicly discussed and strategically important decisions could gain more legislative support in a parliament where the party in power was in the majority, while the parliament itself would gain more weight as part of the system of power and contribute to the separation of powers. As an umbrella party, the party in power could bring together a fairly large number of ideologically kindred pro-presidential parties to put an end to vagueness in the pro-presidential party field. Two or three strong parties of the second level, some of them inevitably oppositional, would bind together the party system, give it a clearer structure, and add weight, flexibility, and dynamism. The party system, with one dominating and several smaller parties, looked the most attractive among other institutional models, therefore within a fairly short time (about six months) the largest pro-presidential parties formed a bloc. Certain ambiguous comments notwithstanding, the Popular- Democratic Nur Otan Party gradually acquired the attributes of a party in power; the main aim—balancing the interests of the political elite—was thus achieved. In future, those elite political groups that support the ideology of the party in power and learn to effectively cooperate with the party that is rapidly gaining momentum will find themselves close to the sources and resources of power. The trend toward unification of the pro-presidential parties in 2006 initiated the largest structural shift in the republic’s party expanse, which could radically change the nature of the political process in the country. Naturally enough, this added new vigor to the radical and moderate opposition. The opposition forces, in turn, set up a new organization based on the already functioning opposition bloc. On 19 July, 2006, Zh. Tuyakbai, who ran for president, officially announced that he intended to set up a National Social-Democratic Party (NSDP) independent of the Republican Public Association (RPA) For a Fair Kazakhstan movement. On 7 August, the new party’s regional representatives met in the movement’s office to set up an organizing committee and discuss its main program aims and tasks. On 10 September, over 2,500 delegates gathered for the constituent NDSP congress. It looks as if the movement’s members and supporters needed a political party to directly express their political will, something that could not be done within the framework of a movement. The new opposition party selected the social-democratic platform as the ideologically most attractive: public control of the country’s economy, a fair social system, protection of the interests of the broad masses, etc. Since paternalist expectations were still alive among certain population groups, it looked as if the new party’s program might strike a chord in the hearts of voters. In the medium-term perspective, the

147 CENTRAL EURASIA 2006 Analytical Annual parliament will become larger and will acquire broader powers, which means that the NSDP obviously intends to remain on the scene for a long time. If registered, the party would be able to enter into more constructive cooperation with the government. This will allow the moderate opposition to dom- inate in the opposition camp. The appearance of a new party not only consolidated the left center around Zh. Tuyakbai, but also caused a split in the RPA For a Fair Kazakhstan movement, since the former speaker of the lower chamber became an independent figure in the emerging party and political system. It should be said in all justice that Zh. Tuyakbai could claim the role of an independent and influential opposition leader: at the last presidential election, he was seen as a worthy rival of President Nazarbaev; according to sociological polls, he was the most promising opposition candidate. He has fairly significant state administration experience as the speaker and as a top bureaucrat; the opposition accepted him as its leader. This shows that he is an independent politician able to operate as a public figure, which is confirmed by his recent meeting with the country’s president. In 2006, other leaders of the RPA For a Fair Kazakhstan movement—B. Abilov and O. Zhandosov, chairmen of the True Ak zhol Party—failed to demonstrate their abilities as public figures for various reasons and to specify their plans. A. Baymenov, head of the Ak zhol Party, looked much more active. On 24 September, this opposition party convened a congress that decided to use the mandate the party received during the parliamentary elections of 2004. The party was represented in the State Commission: its leader was actively involved as head of a workgroup and demonstrated his readiness to talk to the government. The government, in turn, demonstrated that it was prepared to talk to the loyal and constructive opposition, such as the Ak zhol Party. It was A. Baymenov and his party who profited more than the rest of the opposition from the political season of 2006. On the whole, in 2006, Ak zhol amply demonstrated that it could claim the status of a systemic opposition, which was justified not only by tactical considerations, but also as a means of political survival amid bitter rivalry. It looks as if A. Baymenov, as a former top state manager, tapped his mainly positive experience as one of the country’s leaders and head of the presidential administration. He joined the opposition as soon as he left his high post; in the last five years he did a lot to become associated with it. His image as a member of the constructive opposition was once tarnished in 2005 when he publicly parted ways with the opposition leaders. For a long time he was blamed for the split, but he not only survived, he also developed into an independent political figure thanks to skilful organizational, information, and ideological efforts designed to cement his own party structure. On 27 October, a new political party, Atameken, joined the country’s party system. Its constituent congress elected E. Dosmukhamedov, member of the Atameken Union of Businessmen, as party chairman. It intends to help develop Kazakhstan into a democratic state ruled by law, to protect the interests of private businesses, to fight corruption and commercialization of the state, as well as to keep it at bay in the economic sphere. The party attracted not only businessmen, but also the representatives of the trade union of miners as well as vulnerable social strata (that normally support the West). The latter were invited to make the party look better in the eyes of potential voters. For some reason, the party describes itself as rightist-central. It should be said that so far the generally accepted division into the right, center, and left has not yet struck root in Kazakhstan: the party programs are too similar, while social stratification is too vague for that. The new party, however, should be seen as a response to the oppositional NSDP and an attempt to bring more ideological clarity to the republic’s party system and politics. Indeed, the party that proclaims protection of the interests of private businesses and campaigns for limited state intervention in the economy as its program aim has every reason to call itself a rightist party. To sum up. The radical changes in the party landscape that took place in 2006 against the background of the discussions about the country’s advance toward a more democratic party system, which

148 REPUBLIC OF KAZAKHSTAN Economy unfolded in the State Commission, changed the balance of forces. This happened because in the last few years there were considerable shifts inside the elites: the liberal reforms created a fairly strong class of owners who had to move into politics to protect their economic interests. Economic security was forged in the sphere of politics in which absolutely transparent decision-making could be ensured. The country is acquiring a multi-polar elite system, through which the new economic class hopes to protect its interests and ensure political security. The resultant political centers of influence are gradually gaining political weight and demonstrate that they need more liberal policies. Under these conditions, the elites should enter into negotiations about the rules to be observed by all players on the political field: this alone will allow the country to avoid destabilization and the “revolutionary rotation of the elites” alternative. The pace with which the country moves to democracy is unimportant. What is important is the fact that if all the interests of all the political forces are taken into account to the greatest degree possible, the country will inevitably arrive at democracy, albeit at a slower pace. The recent events in Georgia, Ukraine, and Kyrgyzstan have amply demonstrated that the color revolutions cannot accelerate democratization in any of the transition societies. They put up obstacles on the road to systemic modernization. Any change or regrouping of the elites calls for a new balance of interests, which takes time to emerge. For this reason, all the political forces of the RK revised their old ideas about democratization. Most of the political actors have realized that further political modernization calls for a pragmatic and balanced course that should replace the “democratic games.” This is the main result of the 2006 political year in Kazakhstan.

ECONOMY

Larissa SIDOROVA Academic Secretary, Kazakhstan Institute for Strategic Studies under the President of the Republic of Kazakhstan (Almaty, Kazakhstan)

I n t r o d u c t i o n

n 2006, the country’s economy continued traditionally recorded in production, investment to develop at a sufficiently rapid pace char- and household income, with rapid development I acteristic of recent years. On the whole, the of construction and the service sector. year’s end results indicate a 10% increase in the On the whole, the past year can be regarded economy. The GDP has reached 77.9 billion as a period of active efforts to ensure macroeco- dollars and amounted to $3,700 per capita. In nomic stability, carry out structural reforms, im- the World Bank classification, the Republic of prove the business environment, and create a fa- Kazakhstan (RK) had a stable place in the group vorable climate for attracting foreign direct invest- of upper middle income countries. Growth was ment to the manufacturing sector. 149 CENTRAL EURASIA 2006 Analytical Annual Key Events

The past year was marked by several significant events in the economy, primarily the formula- tion of new pivotal tasks. President Nursultan Nazarbaev made public Kazakhstan’s Strategy for Join- ing the World’s Fifty Most Competitive Countries. In his Address to the Nation, the head of state listed the priorities of socioeconomic development in the context of enhancing the country’s competitiveness. The most important of these are aimed at achieving the following goals: n successful integration into the world economy as the basis for a qualitative breakthrough in the republic’s economic development; n further modernization and diversification of the economy as the basis for sustainable growth; n a modern social policy meant to protect the most vulnerable groups of the population and to promote economic development; n development of a modern education system, continuous advanced training and retraining of personnel, and efforts to maintain the Kazakhstan people’s flourishing culture. A number of strategic documents adopted last year should help to ensure the country’s advance along the path of sustainable development. These include the Strategy for the Development of the Transport Complex for the Period Until 2015, the Territorial Development Strategy, the Concept of Creating a Regional Financial Center in Almaty, the Concept of Kazakhstan’s Transi- tion to Sustainable Development for 2007-2024, the Concept of Establishing Social Business Cor- porations, and others. There were also changes in the institutional sphere, where two new structures were established in the past year: the Samruk State Holding Company and the Kazyna Fund for Sustainable Develop- ment, which brought together state development institutions. Samruk is designed to improve public sector governance in strategic branches of the economy and to create favorable conditions for the country’s economic growth. The purpose of the Kazyna Fund is to coordinate all development institutions in order to focus their efforts on implementing “breakthrough” projects of international importance. This is to be achieved both by establishing new research centers meeting international standards and by more vigorous activity in the global high technology market so as to raise the scientific and technological level of production. At the present stage, the institutional investment portfolio includes 144 approved projects totaling $3.7 billion. The state took a real step toward a normally functioning stock market in the country. Whereas in 2005 only two Kazakh companies completed their initial public offering (IPO), in 2006 their number doubled: IPOs were launched by two commercial banks and two companies with state participation. Important processes were recorded in taxation. In March, the head of state proposed a number of initiatives for a radical reduction in the tax burden on business. In particular, he proposed a phased reduction during 2007-2009 in the current 15% VAT rate by 3 percentage points. From 2008, social tax—the largest item in the tax payments of enterprises—is to be reduced by an average of 30%, which should encourage employers to raise the wages of their employees. In addition, a fixed rate (10%) of individual income tax was introduced from January 2007. Another major decision affecting broad strata of business people was the introduction of a flat tax of 5% for small businesses. While liberalizing certain norms in tax legislation, the authorities have made some tough amendments directed against fictitious exports and VAT refunds under such transactions. Some of these amendments are expressly designed to clear the economic field of fly-by-night companies, so-called “cashing offices,” and other businesses practicing tax evasion and illegal use of budget funds. In view

150 REPUBLIC OF KAZAKHSTAN Economy of these innovations, tax agencies are now entitled to initiate liquidation proceedings against such businesses. As regards state-funded investment projects in the past year, there were several particularly large projects of this kind in infrastructure and other strategic areas. These include a megaproject for the construction of the Zhezkazgan-Saksaul-Beineu Railway (over 1,000 km at an estimated cost of $1-1.5 billion). Initially, there were plans to build this railway on a concession basis, but then the government suggested public funding. Overall, the development of the rail and road network and the construction of a trans-Eurasian corridor from China to Europe in the period until 2015 will require several billion dollars of investment, and basic decisions to launch these projects were adopted precisely in 2006. Other major deals enabling the state to gain control of some strategic enterprises can also be mentioned in this context. These include, in particular, two major contracts concluded by the national company KazMunaiGaz: in July, it acquired a 50% stake in JV KazGerMunai, and in November, a 50% stake in the Shymkent Refinery (PetroKazakhstan Oil Products). On 1 July, 2006, a new mechanism was introduced for the operation of the National Fund, changing the basic principles of its formation and use. Under the new arrangement, all direct taxes paid by oil sector enterprises go straight into the National Fund, and guaranteed transfers from the National Fund into the budget are used to finance budget programs for implementing strategic development projects. The new National Fund mechanism is expected to ensure budget stability, because budget revenues under this arrangement will not depend on the movement of world oil prices. This means that in the future the state should be able to manage without oil revenues. At the same time, this increases the role and importance of the manufacturing sector, innovative and entrepreneurial activity, because the tax base will not expand without their dynamic development. At year-end, there was a change in Kazakhstan’s sovereign ratings. It should be noted that the republic is one of the few post-Soviet states whose country ratings are upgraded so frequently. Thus, Standard & Poor’s rating agency upgraded the republic’s long-term sovereign foreign currency rating from “BBB-” to “BBB,” its long-term sovereign local currency rating from “BBB” to “BBB+,” and other ratings. At the end of December, Fitch Ratings revised Kazakhstan’s rating outlook from stable to positive and affirmed the existing ratings at current levels. These ratings, according to the experts of the above agencies, reflect Kazakhstan’s balanced budget, prudent fiscal policy, high external liquidity, and good prospects of economic growth. All of this is evidence of Kazakhstan’s growing prestige in the world community as a sound investment destination.

Real Sector

GDP growth in 2006 was due to an increase in production in virtually all sectors of the economy: industry, agriculture, construction, transport and communications (see Fig. 1).

Industry

In January-December, industrial production in current prices totaled 6,432.5 billion tenge (KZT), or 7% more than in 2005 (see Fig. 2). Production increased by 7% in the mining industry, 7.3% in manufacturing, and 3.6% in the production and distribution of electricity, gas and water. Consequent- ly, the natural resource sector—the “mainstay” of the economy—registered steady, but not the most 151 CENTRAL EURASIA 2006 Analytical Annual

Figure 1

MAIN SOCIOECONOMIC INDICATORS FOR 2004-2006 (as % of previous year) 130 127.7

125 122.1 120.4 120

114.4 115 112.4 110.5 110.9 110.6 110.6 109.4 110 107 110.6 109.5 106.7 109.6 104.8 105 105 107 99.9 104.6 100 2004 2005 2006* 95

Gross domestic product Industry Agriculture Fixed capital investment Retail turnover Transport Communications

* January-December

S o u r c e s: RK Ministry of Economy and Budget Planning; RK Statistics Agency. rapid growth in production. The production of coal and lignite rose by 11.3%, oil and associated gas, by 6.1%, and metallic ores, by 8%. However, oil production growth was on the decline for the second year running (in 2005, production rose by 3.8% compared to 15.4% in 2004). According to experts, such a temporary slowdown in oil production growth is quite natural: most of the country’s producing fields have reached their production peak, while the development of new fields requires considerable preparatory work, which is now underway but has not yet been completed. Besides, at the new stage in the development of the oil industry more attention is being paid to qualitative parameters, including matters of rational use of mineral resources and environmental safety. That is why the current slowdown in oil production growth is also due to more stringent rules for the use of natural resources and environmental requirements (primarily regarding the utilization of associated petroleum gas). In manufacturing, the largest increase in January-December 2006 compared to January-Decem- ber 2005 was recorded in the production of rubber and plastic goods (123,2%); other nonmetallic mineral products (117.6%); in engineering (114.2%); in the pulp and paper industry and the publishing business (108.9%); in metallurgy and manufacture of metal products (106.3%); and in the production of food products, including beverages (105.8%). Fairly low growth rates were recorded in the chemical industry, where the volume index was 100.7% (in 2005, 95.3%). Since the development of the petrochemical industry was designated by the

152 REPUBLIC OF KAZAKHSTAN Economy

Figure 2

INDUSTRIAL GROWTH IN 2000-2006 (as % of previous year) 125

120 115.5 113.8 115 110.5 110.4 121 109.1 110 114 107 117.4 104.6 12 1 108.6 108.1 105 110.2 110.3 109.2 105.8 107 115 115.9 103.2 100 107.9 113.4 101.9 102 107.3 106 95 102.2 103.6 90 2000 2001 2002 2003 2004 2005 2006*

Mining Manufacturing Production and distribution of electricity, gas and water Industry as a whole

* January-December

S o u r c e s: RK Ministry of Economy and Budget Planning; RK Statistics Agency. state as an economic policy priority, active work was carried on last year to develop petrochemical production. Thus, the projected special economic zone (SEZ) entitled “National Industrial Petrochemical Technology Park in the Atyrau Region” will make it possible to implement projects for the construction of plants producing both basic petrochemicals and high value added products. Among the projects to be carried out within the SEZ framework is the construction of the first integrated petrochemical complex in the Atyrau Region for the production of basic petrochemicals (polyethylene, polypropylene, styrene and polystyrene, ethylene glycol, benzene, methanol and other products in areas with the necessary factors of production). In 2006, Foster Wheeler Italiana S.p.A. (Milan, Italy) completed the feasibility study for this project. Contracts and memoranda were signed for long-term supply of feed- stock, and two companies were chosen to advise the project: HSBC (London, Britain) as financial advisor, and White & Case as legal advisor. On the whole, the feasibility study showed that the construction of the polyethylene and polypropylene complex would make economic sense. Work is in progress on other projects as well. Wholly state-owned development institutions continue to operate in the republic. As part of their activities, these institutions have financed many projects. In the past year, these included the Biokhim complex for the production of bioethanol; an investment project for the production of woolen and cotton yarn and fabrics with synthetic filament at Nimex Textile Ltd (Ust-Kamenogorsk), and others. The Kazyna Fund signed a framework agreement with Mitsubishi, Haldor Topsoe (Denmark), Aker Kvaerner Chemetics (Italy), KazAzot and the Japan Bank for International Cooperation on the construction of an ammonia-carbamide complex in the grounds of an existing chemical plant. In many regions of the republic there is a generally positive trend in the development of the processing sector. But so far the quality and quantity of projects funded by development institutions

153 CENTRAL EURASIA 2006 Analytical Annual do not fully meet the industrial innovation goals of further economic expansion. It is necessary to enhance the competitiveness of enterprises in industries such as the production of building materials, chemicals, rubber and plastic goods; in engineering, and in the light and food industry. As part of the efforts to resolve these problems, in 2006 Kazakhstan launched the second stage (2006-2010) of its Industrial Innovation Development Strategy for 2003-2015 providing for the creation of an open national innovation system and the development of its four elements: scientific potential, innovation infrastructure, innovative financial institutions (venture funds), and a business environment conducive to innovation. As a result of all these measures, the low growth rate (0.5%) recorded in January was compensated by the end of the year. Let us add that in the first quarter industrial growth was 2.1%, and in the first six months, 5.1%. At the same time, faster growth in manufacturing compared to the mining sector has not yet had any effect on the overall structure of industrial production. The share of mining has remained virtually unchanged and is now 57.9% (in 2005, 58.6%), and the share of manufacturing is 36.7% (in 2005, 35.7%). It is clear that significant structural changes cannot be expected over such a short period, because this is a sufficiently long and complicated process.

Agriculture

In 2006, the government took additional measures to enhance the competitiveness of the country’s agricultural sector. In particular, it launched a Program of Priority Measures for 2006-2008 designed to implement the Concept of Sustainable Development of the Agroindustrial Complex in the Republic of Kazakhstan for 2006-2010. This program provides for appropriate government support, including measures to raise the technical level of agricultural production, to subsidize interest rates on credit to agroindustrial enterprises, to provide them with machinery, equipment, etc. In January-December, total agricultural production amounted to KZT 837.8 billion in current prices and increased by 7% compared to the same period of 2005 (see Fig. 3). This was due, among other things, to the growing share of livestock and crop production in the structure of total agricultural output. All kinds of farms reported a significant increase in livestock and poultry numbers, which already enables specialists to speak of a gradual return to the Soviet-period level lost during the 1990s. The problem area of Kazakhstan’s agroindustrial complex is the processing of agricultural produce. Processing plants are short of capacity and modern technologies, and there are difficulties with raw materials. As a result, the share of imported staple foods in the domestic market remains high. But the situation is gradually improving. In the first 11 months of the year, the country’s enterprises processed 6% more agricultural produce than in 2005. The share of imports fell from 39.5% to 32.4% for vegetable oil, from 32% to 30% for fruit juices, from 56.8% to 49% for canned meat, and from 83% to 62% for dried milk. Many enterprises are being modernized and more new plants are being built. To enhance competitiveness, value added tax has been reduced for enterprises in eight agricultural processing sectors, which will undoubtedly have a positive effect. A fruit and vegetable processing cluster being established in the Almaty Region already includes 355 farms, over 80 of which sell their products in all parts of the republic. Since 2006, agricultural processing and food manufacturing enterprises are entitled to state subsidies meeting 50% of their costs in the development, implementation and certification of quality management systems based on ISO and HACCP international standards. Fifty-two enterprises have already deployed and certified such systems, and another 127 enterprises are now at the implementation stage, which shows that businesses are interested in improving quality management at agricultural processing and food manufacturing plants.

154 REPUBLIC OF KAZAKHSTAN Economy

Figure 3

AGRICULTURAL GROWTH IN 2000-2006 (as % of previous year) 140 117.3 120 106.7 107 103.4 102.1 99.5 95.8 100

% 92 128.5 102.9 99.9 95.1 108.4 109.4 60 100 103.2 104.2 105 105.6 104.5 104.3 40

0 2000 2001 2002 2003 2004 2005 2006* Livestock Crop production Agriculture production

* January—December

S o u r c e s: RK Ministry of Economy and Budget Planning; RK Statistics Agency.

With an expansion of the country’s budget capacity, state support for agriculture in various forms has increased from year to year. For example, the state allocates funds to reduce the cost of diesel fuel and to carry out measures in controlling particularly dangerous contagious animal diseases and plant pests; in order to stimulate broiler production, a new budget program has been launched to subsidize the cost of compound feed, etc. At the same time, the level of efficiency in the agricultural sector is still inadequate. According to experts, petty commodity production and high production costs limit the competitiveness of domestic products compared to imports. This calls for more effective implementation of a number of policy-making documents and use of budget funds allocated to enhance the competitiveness of the agricultural sector and accelerate the deployment of advanced technology in production.

Transport and Communications

In January-December, total freight transportation (including estimated freight shipments by non- transport organizations and businessmen engaged in commercial transportation) was 2,024.0 million tons, up 5.0% from 2005. The volume of services provided by communications enterprises in January-December was 20.4% higher than a year ago, with a 59.5% increase in the volume of cellular communication services. Mobile communications remain among the most successful business projects: despite large in- 155 CENTRAL EURASIA 2006 Analytical Annual vestments in network maintenance and development, in terms of profitability mobile operators are comparable with natural resource companies. At the end of the year, a major stage was completed in the creation of a National Information Superhighway: the Almaty-Karaganda-Astana fiber-optic communications line was put into operation. This is the first line based on the latest DWDM technology, which makes it possible to arrange up to 270 thousand communication channels. Prior to that, the National Information Superhighway could support only 30 thousand channels.

Construction

In January-December, the volume of newly constructed residential housing was 23.9% above the 2005 level. Under the state program for the development of housing construction, the target figure was exceeded by 1 million square meters. Overall, about 6.2 million square meters of floor area was commissioned in the republic in 2006. The interest of banks, private companies and individuals in the construction sector was due to the fact that real estate as such, given the rise in prices over many years, is seen as an almost ideal investment. The return on investment in construction projects (considering the current prices) is also extremely high. Ac- cording to the RK Statistics Agency, the production cost of residential housing for real estate developers in 2006 was KZT 35.4 thousand (about $280) per square meter, whereas the average selling price is at least $800-$900 on average for the country, while prices in Almaty and Astana are much higher.

Business Sector

Since the time when Kazakhstan gained independence, the development of small and medium business has been among the main components of the state’s economic policy. Sociopolitical stabilization in the republic has had a positive effect on the development of small business. On 1 October, 2006, according to the RK Statistics Agency, the number of small enterprises registered in the country was 823,156, or 22.7% more than a year ago. An analysis of projects which attract private capital shows that business (with the support of the banking sector) is oriented toward growing domestic consumption. That is why the highest level of business activity is recorded in trade (341,632 registered enterprises with 533,181 employees), followed by construction (30,130 and 119,141, respectively), real estate operations, lease and consumer services (50,203 and 111,812), and finally industry (27,130 and 100,343). In 2006, steps were taken to upgrade the legislative framework and remove administrative barriers. In particular, the newly adopted Law on Private Enterprise gives an exhaustive list of state control and supervision activities and contains provisions strictly regulating compliance by state agencies with time limits for processing of documents, issue of licenses, etc., and this will make it possible to prevent unlawful government intervention in private business activity. In order to implement the provisions of this law, appropriate amendments and addenda were made to more than 60 laws regulating this activity.

Investment Policy

Regular work is underway to improve investment policy. Thus, amendments have been made to the Law on Investment so as to simplify the procedures for monitoring concluded contracts and to

156 REPUBLIC OF KAZAKHSTAN Economy reduce the frequency of reports to be filed by investors, and also to a number of other investment- related documents. In addition, an Action Plan was drawn up to create an effective system for developing non- primary exports and attracting large-scale investment to the manufacturing industries in 2006- 2007. This plan provides for measures to create conditions for attracting transnationals and large foreign companies to the non-natural-resource sector of the economy, and also to set up a specialized agency to promote exports and develop the network of Kazakhstan’s trade and investment missions abroad. At the same time, while seeking to create a supportive environment for business activities, the authorities are working to improve the process of state regulation. In 2006, the government adopted sufficiently stringent environmental requirements for enterprises in the natural resource sector and introduced new requirements for foreign companies regarding personnel policy.

Fixed Capital Investment

In January-December, fixed capital investment totaled KZT 2,810.3 billion, or 10.6% more than in 2005. The main sources of fixed capital investment were the own funds of business entities (56.6%) and foreign investment (23.2%). Budget funds amounted to 12.1%, and borrowings, to 8.1%. Most of these investments were implemented by private enterprises and organizations (62.5%) and by business entities of other states operating in the territory of Kazakhstan (25.3%). The public sector’s share was 12.2%. However, the trend toward higher growth rates and amounts of investment in the natural resource sector compared to other sectors was not reversed. Investors continue to give priority to oil and gas production (35% of total fixed capital investment), real estate operations (21%), transport and communications (14.5%), and manufacturing (9.6%).

Foreign Direct Investment

A similar situation is characteristic of the inflow of foreign direct investment (FDI). The amount of attracted investment continues to grow, but investments in the natural resource sector are still significantly larger than in manufacturing. In January-October 2006, FDI inflows totaled $7,120.3 million (compared to $6,616.5 million for the whole of 2005). About 20% of the total ($1,363.0 million) went into the mining industry, and about 6.5% ($462.3 million), into the manufacturing industry. Significant amounts of FDI (about 60%, or $4,220.6 million) were channeled into real estate operations, lease and services to enterprises. Nevertheless, there were certain positive changes as well (see Table 1). Statistics show that foreign business circles are increasingly interested in non-natural-resource projects. In the first nine months of the year, the amount of investment in the non-natural-resource sector of the economy was 1.5 times larger than in 2005. At the same time, foreign companies recruit foreign labor on an increasing scale, referring to the lack of necessary personnel or their low qualification. Whereas in 2000 they employed 10,000 foreign specialists for work in Kazakhstan, in the first nine months of 2006 the figure was

157 CENTRAL EURASIA 2006 Analytical Annual

Table 1 Total Inflow of Foreign Direct Investment by Economic Activity (million dollars)

First nine Activity 2000 2001 2002 2003 2004 2005 months of 2006

Agriculture, forestry, hunting and fishing 3.8 5.0 2.4 1.6 –2.0 1.2 35.7

Mining 2,035.5 3,088.9 2,123.4 2,188.3 5,247.8 1,795.2 1,363.0

Manufacturing 246.9 642.7 832.4 1,000.7 520.6 281.1 462.3 Production and distribution of electricity, gas and water 41.3 33.8 19.0 82.4 11.4 119.5 21.1

Construction 12.3 31.0 47.0 50.6 160.3 119.0 305.5

Trade, repair of cars and household goods 46.8 63.6 105.1 163.2 259.1 379.1 356.7

Hotels and restaurants 10.1 25.3 10.9 7.5 13.4 5.8 6.4

Transport and communications 88.4 161.1 95.1 75.2 101.1 110.9 260.6

Financial activity 29.9 44.8 11.8 52.3 71.0 95.1 24.2

Real estate operations, lease and services to enterprises 257.5 454.5 845.9 998.5 1,843.7 3,647.0 4,220.6

Education, health care and social services 5.6 6.0 13.4 4.2 91.0 62.6 64.2

Other activities 3.3

TOTAL 2,781.2 4,556.6 4,106.4 4,624.5 8,317.3 6,616.5 7,120.3 over 30 thousand. In this context, at the 16th meeting of Kazakhstan’s Foreign Investors Council, the head of state urged foreign investors to take an active part in training technical personnel. It should be noted that a modern information technology park has already opened in Almaty, where 11 leading IT companies of the world will not only produce products in the republic, but will also annually train 200 Kazakh specialists. 158 REPUBLIC OF KAZAKHSTAN Economy Foreign Trade

An analysis of Kazakhstan’s foreign trade shows that its growth rate in value terms remains positive. In January-December, the foreign trade turnover increased by 36.8% to $56.1 billion; exports reached $34.8 billion (up 38.2%), and imports, $21.2 billion (up 34.6%). It should be noted, however, that this growth was achieved due to a favorable price situation. As before, mineral products made up the largest share (72.7%) in the commodity composition of exports (see Fig. 4), while the share of non-primary exports remained virtually unchanged.

Figure 4

EXPORT STRUCTURE IMPORT STRUCTURE in January-November 2006 (%) in January-November 2006 (%)

72.7 9.3 7.1 46.4 11

3.3 13.4 15.7 1.7 13.8 4 2.6 Machinery, equipment and Mineral products mechanisms, electrical products Non-precious metals and Mineral products articles thereof Non-precious metals and Food products articles thereof Products of chemical and Products of chemical and related industries related industries Machinery and equipment Food products Other Other

S o u r c e: RK Ministry of Economy and Budget Planning.

Growing imports are an important indicator of the economy’s reserves. In the import structure, equipment, machinery, transport vehicles and instruments make up almost half of the total (46.4%), and chemical products, plastics and other process goods, another 11%. Consequently, a problem which has already become traditional for Kazakhstan is unbalanced exchange of goods with other countries: exports of mineral resources, on the one hand, and imports of investment goods (machinery, equipment, etc.), on the other. A diversification of exports towards manufactured products is a necessary condition for modernization designed to achieve and realize the republic’s competitive advantages. In the context of this problem, the government is preparing measures to make Kazakhstan’s export-oriented enterprises more competitive, in particular, to encourage cooperation between large and small enterprises in producing goods that are potentially competitive in the foreign market, etc. 159 CENTRAL EURASIA 2006 Analytical Annual Inflation

In 2006, as in the previous year, there was growing inflationary pressure in the consumer market. The consumer price index (used as a measure of inflation) in 2006 was 8.4% (compared to 7.6% in 2005). The main contribution to the increase in consumer prices was made by paid services, whose prices rose by 10.3%. The prices of nonfood products rose by 6.8%, and food products, by 8.7% (see Fig. 5). Consumer prices in 2006, just as in 2005, were formed under the impact of the situation in certain commodity markets, mostly in the market of fruit and vegetable products, fuels and lubricants, and some kinds of regulated services. There are several factors which determine price trends and lead to results characteristic of the present stage. The main factor is an increase in household, business and public demand caused by rising income. Although there is no shortage of goods or services in the market, the significant increase in income encourages goods and services producers or sellers to raise prices, and there is potential for their further increase. In addition, there is rising demand for money, both cash and bank credit. In the first nine months of the year, currency in circulation increased by 33.8%. Overall bank credit in the economy expanded by 47.6%, while consumer credit doubled. As a result, the money supply increased by 47.8%. Faster inflation is also caused by an inflow of foreign exchange due to greater borrowing by second-tier banks in the foreign market; rising production costs; and low competition in some goods and services markets. All of these are long-term factors and have a significant effect on consumer prices. The efforts to control inflation were mostly of a monetary nature and were confined to measures to raise the refinance rate, expand the scope of reserve requirements, and tighten prudential regulations so as to limit external borrowing. At the same time, these measures did not change the overall

Figure 5

INFLATION IN 2000-2006 118 116 113.2 114 112 110 116 108.4 108.6 107.6 106.9 108 105.9 106.4 111.5 111.5 106 108.1 108.7 106.8 107 107.7 104 108.5 as % of previous year 105.6 106.8 105 106.8 106.5 106.3 102 104.8 110.3 104.8 105.1 105.6 107.8 100 2000 2001 2002 2003 2004 2005 2006

Food products Nonfood products Paid services Consumer price index

S o u r c e s: RF Ministry of Economy and Budget Planning; RK Statistics Agency.

160 REPUBLIC OF KAZAKHSTAN Religion picture of inflationary pressure, because, among other things, all of them have a delayed effect. A further solution of this problem evidently lies in balanced and concerted action by the government, local executive agencies and the National Bank.

C o n c l u s i o n

On the whole, 2006 in Kazakhstan was a year of certain positive changes and achievements, on the one hand, and difficult challenges, on the other. Apart from undeniable successes in implementing macroeconomic policy, which has helped to achieve rapid economic growth, there were serious problems as well. These include, in the first place, accelerating inflation, growing risks in the banking sector, and the trend toward an increase in external borrowing by second-tier banks. In addition, the narrow base of economic growth and continued dependence on natural resource prices make the country sensitive to external upheavals. The prospects for Kazakhstan’s economic growth and competitiveness will improve as structural reforms accelerate. The country’s coming accession to the WTO in 2007, continued customs administration reforms, development of regional trade and a further improvement of the business climate will be of crucial importance in this respect. The main economic policy priority is to reduce the economy’s dependence on natural resources, ensure a qualitative breakthrough in the key areas of its development, and create new lines of industrial growth.

RELIGION

Iakov TROFIMOV Ph.D. (Philos.), professor at the Karaganda “Bolashak” Institute of Actual Education (Karaganda, Kazakhstan)

s of 1 January, 2006, there were over 5,000 religious communities in Kazakhstan belonging to 62 confessions (3,500 of them were Muslim communities, while about 1,500 followed other A confessions). According to my own calculations, Muslims comprise about 70 percent of the believers, 28 percent are Orthodox Christians; 1 percent are Catholics; about 1 percent are Protes- tants, and less than 0.1 percent belong to other confessions. Most of the communities are multinational, but there is any number of mononational communities of Kazakhs, Jews, Chechens, Uighurs, Dungans, Azeris, Armenians, Ukrainians, Koreans, and other ethnic groups. There is no agreement about the exact number of confessions and denominations and their communities present in the republic: official statistics cite a figure of 46 confessions and denominations united into about 3,800 communities, while experts believe that there are over 6,000 religious communities in Kazakhstan. In the absence of reliable monitoring, I have to rely on my private talks with the clergy and believers, as well as on my personal analysis of the press.

161 CENTRAL EURASIA 2006 Analytical Annual

Islam is the main religion in Kazakhstan, which is a polyethnic and, therefore, poly-religious country. The local Muslims are either Sunnis (of the Hanafi, Shafi‘i and Hanbali madhabs, Hizb ut- Tahrir, and the Tablighi Jamaat) or belong to three Shi‘a and Sufi trends. There are also small occult sects of the Ata Zholy (The Way of Ancestors) type and three Ahmadie communities. The Sunni Hanafi madhab is the main trend in Kazakhstan, the followers of which belong to the Spiritual Administration of the Muslims of Kazakhstan (SAMKaz) headed by Supreme Mufti Absat- tar-Hajji Derbisaliev (who is a Doctor of Philology without a theological education). According to the SAMKaz’s figures, there are about 1,800 mosques in the republic. The actual figure is twice as much, but the Spiritual Administration only takes into account those mosques registered with the Ministry of Justice and SAMKaz itself. There are several scores of Sunni mosques of the Hanafi madhab that refuse to join the SAMKaz. The Gulf Muslim states, Egypt, Turkey, Pakistan, and Iran, are having a great influence on the republic’s Islamic scene. Arab money is being poured into new mosques; it was Egyptian money that built the University of Islamic Culture Nur Mubarak. In March, the University Board of Trustees discussed the possibility of adding new buildings and student hostels to the campus. The SAMKaz educates imams at university at home and sends young men abroad to study in Egypt and Turkey. Imams are offered advanced training closer to home, in Almaty; there are also three madrasahs. Mosques run free courses for studying Arabic and the fundamentals of Islam, taught mainly by lecturers from Turkey. Young men often go to Pakistan, Iran, and other Islamic states to obtain a religious education without informing the SAMKaz; they live there on student allowances paid by the corresponding states. Christianity (in the form of Orthodoxy, Catholicism, and Protestantism of various denominations) has been present in Kazakhstan since the mid-19th century. Today, it is the religion of 30 percent of the total number of believers. I have already written that Orthodoxy is the republic’s second largest confession. As of 1 Janu- ary, the Russian Orthodox Church (ROC) had 237 parishes and 8 monasteries in Kazakhstan. In May 2003, the ROC Holy Synod created a Metropolitan Okrug with its center in Almaty, which included the Astana, Almaty, Uralsk, Guriev, Shymkent, and Akmolinsk eparchies. Metropolitan Methodius (Nikolai Nemtsov) heads the Okrug. The ROC also has a seminary in Almaty, which trains clergymen, and a branch of the St. Tikhon Institute (Russia). Nearly all the churches offer Sunday school classes for children and adults. Today, there are 90 Catholic communities and 160 visiting groups with 2 archbishops (one of them fills the metropolitan post), 2 bishops, and over 60 clergymen (there are Poles, Italians, Ger- mans, Americans, a Korean, and a Swiss among them). Not all of them hold Kazakhstani passports. There are also over 15 monastic congregations. The Roman Catholic Church in the Republic of Ka- zakhstan is headed by Metropolitan Archbishop Tomasz Peta, who is a Kazakhstan citizen. The Cath- olic churches of Germany, France, and Poland are helping to build new churches; in Karaganda, the Mary, Mother of the Church Seminary trains new members of the clergy. There are students from Kazakhstan studying abroad in the seminaries of Russia, Italy, Poland, and Austria. The Ukrainian Greco-Catholic Church has four communities in Kazakhstan: in Astana, Pavlo- dar, Satpaev, and Karaganda. There are also small rural communities around these cities and in the city of Jezkazgan. A Greco-Catholic Monastery of Sisters Servants of the Immaculate Conception of the Blessed Virgin Mary functions in Karaganda. Today there are over 1,000 Protestant communities of every possible denomination in the republic, the most stable of them being the union of Evangelical Christian Baptists with about 300 communities and groups numbering about 12,500 followers. The regular outflow of believers to Germany and Russia somehow does not affect their numbers in the republic. Two Biblical institutes (in Almaty and Shchuchinsk) with three departments—pastors, Sunday school teachers, and missionaries—are busy training new people for the ECB. They employ both local and foreign lecturers and professors.

162 REPUBLIC OF KAZAKHSTAN Religion

The Council of ECB Churches is regaining its position under the new name of International Union of Churches of the Evangelical Christian Baptists: in 2006, it had 22 communities, some of them fairly large. The number of Pentecostal communities has reached 56, mainly by means of new trends of the Sun Bok Ym and the Assembly of God type. The Jehovah’s Witnesses are steadily increasing their numbers: today, they have 131 communities with 24 Kingdom Halls for services—in 1989 they had none. The New Apostolic Church has over 60 communities. Some of the religious associations, however, are losing followers. The number of Lutheran communities dropped from 171 in 1989 to 29 in 2006. The Missouri Synod Mission of the United States was suspended; however, they still run a seminary in Astana. The Mennonites are left with one church and three visiting groups, but they remain active mainly thanks to the Aquilla Charity set up and run together with the Mennonites and Baptists of Germany and Kazakhstan. It has been arranging regular deliveries of parcels from Germany to the Karaganda, Pavlodar, Akmolinsk, Kostanay, and Omsk regions, and to Altai. The charity is also involved in evangelization efforts. Today, Aquilla extends financial aid to about 160 heads of the communities of Kazakhstan and Siberia. The Seventh-Day Adventists are losing followers; today they have 62 communities. They train their clergymen in Almaty at a correspondence department of the Zaokskaia Spiritual Academy (Rus- sia). The loss has been compensated for by new confessions: the Methodists (with 8 small communities; 3 of them functioning in Almaty), Te Singh, and the Sharon Christian Methodist Center. The earlier independent Chong Dong Methodist Church joined the Ata Church. The abundance of Methodist churches in Kazakhstan is due to the missionary activities of the Korean Methodist Church (Chang Sop Song, Tae Hong Yun, and Reverend In Gi Li) and the Russian United Methodist Church (RUMC). They have enticed about 1,000 followers united into communities; the republic’s territory is part of the RUMC Eastern Conference. Presbyterianism is represented by the Grace Church, the Mission Grace, Mission Cosin, Mis- sion Emmanuel, etc. (183 communities in all). They joined their forces to set up several educational religious organizations: the Almaty Presbyterian Spiritual Academy, Kazakhstan Evangelical Chris- tian Seminary, Kazakhstan Spiritual Presbyterian Seminary, the Zharyk Biblical Institution, Kazakhstan Evangelical Christian Seminary, the “Joshua, the Son of Nun” Seminary, the Light Seminary, etc. The Grace-Blagodat evangelical missions that appeared in Kazakhstan in 1990-2005 are the largest among the Presbyterian communities that actively use the teaching of the Seven Gifts of the Holy Spirit. With its center in California, it runs branches all over the world; the largest CIS branches are found in Russia and Ukraine. In the last ten years, the republic acquired over 259 Protestant Charismatic communities with over 30 denominations: the New Life Church with 52 communities as of the beginning of the year and the Agape Mission with 45 communities. The Almaty New Life community is about 2,500-strong and is united into 7 branches: the basic, Russian, Kazakh (with about 300 members), Uighur with about 100 members, 50+, the youth, and the “Trader.” They have a church with a hall that can seat 1,150; and projects to build a new Sunday school and a new church in Almaty are in progress. The church has over 50 departments manned by the faithful. The Biblical New Life Center offers many different services and departments, which are expanding daily and growing even more diverse by opening new sections and offering unlimited types of service. The community set up a Bib- lical college which, between 1992-2005, educated over 3,000 from Kazakhstan, Kyrgyzstan, Uz- bekistan, Tajikistan, Russia, Ukraine, Georgia, and African countries. There is an electronic New Life daily and a religious non-commercial spiritual educational CNL Channel able to broadcast to Israel. It is believed that there is an audience of 37 million in 74 countries; this is the first Christian satellite channel in Russia. Pastor M. Maksimov heads the New Life Center. Buddhism is another world religion present in the republic: there is one Won Buddhism community and three communities of the Tibetan Buddhism Center.

163 CENTRAL EURASIA 2006 Analytical Annual

Judaism is fortifying its position as well: there is the Chabad Lubavitch Center and 25 Jewish communities. In the past seven years, synagogues have appeared in Almaty, Pavlodar, and Astana; more temples will probably appear in other cities. The Church of Jesus Christ of Latter-Day Saints (the Mormons) is developing steadily: today there are six Mormon communities, even though the first of them appeared in Almaty relatively recently—in 2000. The following non-traditional religions are present in Kazakhstan: Bahai (23 communities); the Society for Krishna Consciousness (9 communities); Vaishnava (6); Transcendental Meditation (2); the Unification Church (Reverend Moon) (3), Scientology Church (5). The White Brotherhood, the Church of the Last Testament, the Christian Science Church, and the Church of Satan have one community each. It should be noted that not only mosques and Christian churches, but also synagogues are under construction, and a Buddhist temple has been built in the republic. The country has so far avoided serious ethnic and religious clashes; however, minor problems have become a more or less regular feature of the far from simple life of a country in transformation. Speaking at the opening of OSCE Tolerance Implementation Meeting on Promoting Inter-Cultur- al, Inter-Religious, and Inter-Ethnic Understanding that took place in Almaty on 12-13 June, President Nazarbaev pointed out: “Kazakhstan is the home of over 130 nationalities that belong to 46 confessions. Tolerance is Kazakhstan’s key to sustainable peace, stability, and economic progress, which is amazing the world. Tolerance is not merely a norm of political culture, but also one of the major state principles that we support and consolidate. Tolerance is the norm for the Kazakh nation and its centuries-old culture. It comes naturally to all people, therefore those who are born in Kazakhstan think of it as their Motherland.”1 The country has set up the Assembly of the Peoples of Kazakhstan as a unique institute of ethnic and religious dialog that involves numerous ethnic cultural centers and heads of the largest religious associations. The Assembly and the Smaller Regional Assemblies regularly discuss the republic’s religious context. Since 2004, the Protestants have been actively involved in the Republican Assem- bly, together with Muslims and Orthodox Christians. On 24 October, the 12th session of the Assem- bly of the Peoples of Kazakhstan stressed: “Ethnic and confessional harmony are the key prerequisite for Kazakhstan’s dynamic development and the possibility of joining the most competitive countries of the world.” The session took place in the Palace of Peace and Harmony—a highly symbolic circumstance. On 12-13 September, Astana hosted the Second Congress of the Leaders of World and Tradi- tional Religions, which confirmed once more the confessional and ethnic peace and harmony in the republic. In 2003, the First Congress attracted 17 confessional delegations, in 2006, the Second Con- gress was attended by 29 delegations and prominent political figures: First Vice President of the Eu- ropean Parliament Alejo Vidal-Quadras Roca, Deputy U.N. Secretary General S. Orjonikidze, French Senator Emeri de Montesquieu, UNESCO Director General Koïchiro Matsuura, and former Malay- sian Prime Minister Mahathir Mohammad. Islam was represented by Secretary General of the World Islamic League Sheikh Abdullah Abdul Mohsin Al-Turki and Supreme Imam of the Al-Azhar Uni- versity Muhammad Sayid Tantawy, all of them being highly respected religious leaders. The Moscow and Constantinople patriarchates, as well as the Catholic and Anglican churches and the Lutheran World Federation, represented Christianity; Judaism was represented by Israel’s Ashkenazi Chief Rabbi Yona Metzger and Shlomo Amar, Sephardi Chief Rabbi of Israel. There were numerous Buddhist and Hin- du delegations as well as Tao and Shinto representatives.

1 G. Nurpeisova, “Tolerantnost’ kak faktor mira,” Kazakhstanskaia pravda, 13 June, 2006. 164 REPUBLIC OF KAZAKHSTAN Religion

The Congress concentrated on Religion, Society, and International Security and the issue’s two aspects: 1. “Freedom of Religion and Recognition of Others,” and 2. “Role of Religious Leaders in Enhancing International Security” (President Nazarbaev chaired both congresses). The participants and the media favorably commented on the Congress’ success and its great importance on a republican and world scale. The congress adopted a Declaration which emphasized the religion’s great role in strengthening “the culture of peace.” What is more, the religious leaders declared their “determination together to tackle and ultimately eliminate prejudice, ignorance and misrepresentation of other religions by placing particular focus on what religions hold in common, rather than on what distinguishes them.” The religious leaders resolutely rejected “all false inventions and wrongly created stereotypes about the violent nature of religions and attempts to attribute terrorism to any particular religion.”2 The Congress decided to conduct the Congress of religions on a permanent basis and hold the Third Congress of the Leaders of World and Traditional Religions in 2009. On President Nazarbaev’s initiative, the Congress set up an International Center of Cultures and Religions under its aegis to implement educational, academic, research, and humanitarian projects and to probe deeper into potentially conflict religion-related aspects all over the world. It was generally acknowledged that the Congress made a weighty contribution to stronger mutual understanding among world cultures, religions, and ethnic groups as the basic components of world civilizations. It should be pointed out at the same time that negative developments caused by religious, extremist, and terrorist organizations (Salafiya, Hizb ut-Tahrir, Tablighi Jamaat, Islamic Jihad, the Is- lamic Movement of Uzbekistan, Jamaat of Mujahedin of Central Asia, etc.) have never abated. To cope with the problem, the law-enforcement bodies stepped up their crime-prevention efforts. The country’s leaders continue to pay special attention to extremist and terrorist organizations engaged in subversive activities. In 2006, the Zhambyl regional court sentenced a group of 16 detained a year earlier to various terms in prison. The leader, Zh. Biymurzaev, was sentenced to 25 years in a forced labor camp; the members were given between 7 and 25 years in prison for terrorist activities, premeditated murders, and other crimes set forth in the Criminal Code of the RK. The criminal case was investigated by the law-enforcement bodies of six states: Kazakhstan, Kyrgyzstan, Russia, Uzbekistan, Tajikistan, and Azerbaijan. The RK National Security Committee is engaged in continued efforts to keep the banned religious extremist Hizb ut-Tahrir Party under control. At a press conference on 22 December, the NSC spokesman K. Beknazarov revealed that searches of the party premises came up with computers, over 25,000 leaflets, about 700 copies of religious extremist literature, and state-of-the-art printing equipment. The ruling Otan (Fatherland) Party is likewise concerned about the growing number of Hizb ut- Tahrir’s supporters. The Interfax of Kazakhstan news agency reported: “‘The situation is far from favorable. Several years ago we counted supporters of extremist organizations by the dozen; today, hundreds of them have been imprisoned, while over a thousand remain free under surveillance.’ This statement came from acting Otan chairman at the Tenth Extraordinary Party Congress held on Friday in Astana.”3 In March, the Southern Kazakhstan Specialized Inter-district Economic Court recognized the Public Foundation “Department of a Public Charity ‘Public Social Reforms’” (Jamiiat al-Islakhal- Idjtimai) as a terrorist organization and liquidated it. In November, a court in Astana banned Aum Shinrikyo and the Liberation of Eastern Turkestan Organization on the territory of Kazakhstan as terrorist structures.

2 Declaration of the II Congress of Leaders of World and Traditional Religions, available at [http://www. religionscongress.org/congress/declaration.cfm], 17 September, 2006. 3 Interfax, available at [http://www.interfax-religion.ru/print.php?act=news&id=15761], 22 December, 2006. 165 CENTRAL EURASIA 2006 Analytical Annual

The state places top priority on all measures designed to prevent extremist activities and reveal the religions’ true spiritual values promoting love, harmony, and peace; it is convinced that religious extremism has nothing to do with the genuine nature of religion and is doing a lot to promote this idea. The state is closely cooperating with public, religious, and other organizations and with individual activists. In 2006, however, contradictions between the state and confessions persisted in several spheres. n First, the Administrative Violations Code and the Law on the Freedom of Conscience and Religious Associations, which demand mandatory registration of all religious structures, contradict the Guidelines for Review of Legislation Pertaining to Religion or Belief approved by the OSCE Parliamentary Assembly in Edinburgh on 5-9 July, 2004. Point F-1 of the Guidelines says that “Registration of religious organizations should not be mandatory per se… —Individuals and groups should be free to practice their religion without registration if they so desire.”4 In 2006, members of the International Union of Churches of the Evangelical Chris- tian Baptists were repeatedly fined because their communities functioned without registration. In June, E. Prokopenko and P. Shevel were fined “for taking part in services conducted by an unregistered religious alliance” in the town of Zyrianovsk (the Eastern Ka- zakhstan Region). In October, A. Trifanov and D. Isaev from the city of Uralsk, and in November, P. Zimens from the town of Shchuchinsk (Akmolinsk Region) were fined for identical administrative violations. n Second, the demand the Cabinet introduced in May that spiritual educational establishments should obtain licenses from the Ministry of Education and Science is likewise incorrect. I am convinced that a secular state should have nothing to do with religious education. In- deed, each confession should be free to follow its own educational standards and issue diplomas of its own, unrelated to state diplomas. On the strength of this, I believe that it was wrong to close the Christian Elim Institute in Shymkent, the South-West Spiritual Semi- nary, and the Al-Karim Islamic Spiritual University because they had no state license for educational activities and failed to issue diplomas required by the state. n Third, not infrequently local authorities and religious structures clashed over land. The Portal- Credo.Ru reports: “The akim of the Saryagash District, Southern Kazakhstan Region took the land away from the priest of the St. Nicholas Cathedral to build a house on it. A criminal case against the former akim was instituted under Art 307, Part 2 of the RK Criminal Code; the akim was accused of power abuses; however, there is no hope that the right to the land plot will be restored.”5 The report says that the local authorities are looking for a means to compensate the church by giving it a similar plot of land in the same locality. A much more serious conflict developed in the Karasay District, Almaty Region, over the summer houses of members of the Society for Krishna Consciousness and the land of their agricultural community, which has been functioning since 1999. The agricultural community owned three individual plots of land of a total area of 47.7 hectares (116 acres). Two out of the three plots were tilled, while the third was occupied by the farmer’s house, a cowshed, and other structures. The house serves as the religious society’s legal address and houses its office.

4 Guidelines for Review of Legislation Pertaining to Religion or Belief, OSCE/ODIHR, 2004, p. 17. 5 See: [http://portal-credo.ru/site/print.php?act=news&id=45723], 29 July, 2006. 166 REPUBLIC OF KAZAKHSTAN Religion

In 2006, the local authorities initiated several court cases against the community members who “misused the land allotted for summer houses and did not have the relevant legal documents to prove they owned the land and the buildings on it.” The owners of the summer houses were accused of illegal building activities and of using the house as the religious society’s hostel. The Society for Krishna Con- sciousness did not succeed in winning a single case either in a district or regional court. On 25 April, armed with a court order, the district authorities tried to pull down the summer houses belonging to five members of this religious association, but retreated under the scrutiny of the media and human rights activists. On 21 November, however, 13 summer houses were pulled down on the instructions of the local administration. The U.S. embassy in Kazakhstan made some caustic comments. The state structures insisted that it was a purely economic conflict between the owners of the summer houses and the local authorities, while the houses were pulled down on a court order. The International Helsinki Federation for Human Rights is of a different opinion: “…the issue at dispute has less to do with property rights than with the right of people living in Kazakhstan to exercise their religion freely. This has been demonstrated inter alia by discriminatory statements by local authorities against the community, illegal acts, and the judicial proceedings that have failed to meet international standards for fair trials.”6 This did not stop the local authorities, which are still persecuting the Society members in court. This contradicts the Cabinet’s program of property legalization now in progress in the republic. This was how the religious situation unfolded in Kazakhstan in 2006. It should be added that the nation is actively discussing the amendments and addenda to the Law on Freedom of Conscience and Religious Associations adopted back in 1992. I hope that, if passed, the innovations will make the relations between the state and confessions more democratic. In January, the republic acquired a new structure designed to control relations in the religious sphere—the Committee for Religious Affairs under the Ministry of Justice. It is expected to provide analysis of the rules and other documents of new religious organizations and of religious literature that arrives in the republic, as well as monitor the religious situation. The Committee has regional structures; it is expected to remain in permanent contact with the heads of the republican religious associations. The Council for Contacts with the Religious Alliances under the RK Cabinet survived as an advisory body with its former membership of state officials, scholars, the ROC Metropolitan, and the Supreme Mufti of the SAMKaz. It improved the monitoring of religious life in the country, while similar local councils in the regional, city, and district administrations are helping to promptly deal with problems that might arise among the religious and administrative structures and among members of different confessions. In fact, the state has created a climate conducive to the fullest possible implementation by all confessions of their functions; the state proceeds from the fact of philosophical pluralism and equally protects the interests of believers and atheists. Peace and harmony in any society are very fragile; they need careful protection. For this reason, the state and NGOs are not sparing any effort to sow tolerance and harmony among confessions and ethnic groups; they are doing their best to stem religious extremism. The Kazakhstan-2030 Program talks a lot about the need to breed mutual respect, tolerance, and trust among confessions.

6 Open Letter to All OSCE Delegations on the Judgment against the Krishna’s Consciousness Community in Ka- zakhstan, Vienna, 1 February, 2007, available at [http://www.humanrights.kz/appeal_107-1.php]. 167 CENTRAL EURASIA 2006 Analytical Annual INTERNATIONAL AFFAIRS

Timur SHAIMERGENOV Member of the Secretariat of the Kazakhstan Parliament Majilis (Astana, Kazakhstan)

n 2006, Kazakhstan’s multi-vector orientation The geopolitical priorities focused on de- as an integral feature of its foreign policy not veloping alliance relations with Russia, good I only proved its expediency and viability, but neighborly relations and mutually beneficial co- also demonstrated that this was the only way to operation with China, and strategic partnership survive in contemporary geopolitics. During the with the U.S. What is more, Kazakhstan contin- year, the country continued to follow a balanced ued to develop a policy of good-neighborly re- foreign policy course, taking into account both its lations with the European Union, strengthen own interests and the dynamics of world devel- friendly and cooperative relations with other opment, including regional. Central Asian republics, and expand mutually The following long-term foreign policy goals, advantageous contacts and relations with all the which largely defined Kazakhstan’s actions on the interested states of Asia, Europe, and the Arab international arena, can be designated as follows: first, world. maintaining balanced relations with the geopolitical On the whole, significant progress was not- centers of influence in the region—the Russian Fed- ed in these areas. For example, the head of state eration, the PRC, the U.S., and the EU; second, en- made productive visits to Moscow, Beijing, suring national security by cooperating with the SCO, Washington, Brussels, London, Tashkent, and CSTO, and NATO; third, pursuing an active integra- several other capitals. Talks were held in Astana tion policy and economic interaction in the EurAsEC with the heads of Russia, Japan, the U.S., Egypt, and CIS. The tasks of the republic’s foreign policy in South Korea, Uzbekistan, Kyrgyzstan, Tajikistan, 2006 were as follows: diplomatic implementation of Armenia, and several other states. Strategic part- the Strategy of Kazakhstan Joining the World’s nership with the leading countries and CIS neigh- 50 Most Competitive States declared by Kazakhstan bors reached a new qualitative level.2 President Nursultan Nazarbaev,1 enforcement of the In this way, obvious progress was made in republic’s active role on the international arena, and expanding international relations, maintaining a achievement of important political goals—chairman- confident position in the global energy dialog, and ship in the OSCE in 2009 and continuing the talks on manifesting moderate foreign policy ambitions. In WTO membership. so doing, the economic and military-political priorities, as well as multi-vector nature of foreign 1 See: President Nazarbaev’s State-of-the-Nation Ad- policy were retained. dress. Strategy for Kazakhstan to Join the World’s 50 Most Competitive Countries. Kazakhstan on the Threshold of a New Jump Forward in its Development, 1 March, 2006, avail- 2 See: K.K. Tokaev, “Vektory politiki sosedstva,” able at [www.akorda.kz]. Novoe pokolenie, 29 December, 2006.

Cooperation with the Russian Federation

In recent years, Astana has succeeded in building relations with Moscow in such a way that Kaza- khstan cautiously, without making a big show of it, changed the nature and format of its relations with

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Russia, thus turning them into truly equal cooperation between two allied and close, but nevertheless sovereign, states.3 In 2006, this model of bilateral interaction was significantly reinforced by practice. The year differed greatly from the previous years by the unprecedented number of meetings between the presidents, parliamentary deputies, and foreign ministers of both countries. It should also be added that the dynamics of the meetings between the two heads of state were particularly intensive and regular, which shows that Kazakhstan and Russia are both extremely interested in close cooperation. Nursultan Nazarbaev’s numerous meetings with Vladimir Putin, which were held both in a bilateral format and within the framework of international forums, was a noteworthy element in the relations between the two countries, since they helped to resolve urgent issues of mutually advantageous relations. The main topics at the talks revolved around expanding trade and economic and energy cooperation and further developing contacts in space exploration (launching the KazSat satellite and building the Baiterek space missile complex). Integration within the EurAsEC, CES, and SCO, as well as strengthening regional security, was given a new boost. The specific practical achievements of cooperation should also be noted. For example, many sections of the Russian-Kazakh border are gradually beginning to function as a single economic whole, and the volume of trade turnover at the end of the year topped 12 billion dollars. Interaction is also being stepped up in the humanitarian sphere, in particular, 2006 was declared the Year of Alexander Pushkin in Kazakhstan, and in Moscow a monument to Kazakh enlightener Abay was unveiled.4 The meetings results in the signing of a Protocol on the Exchange of Instruments of Ratification of the Treaty on the Kazakh-Russian State Border, the Agreement on Founding the Eurasian Development Bank, the Agreement between the Agency of the Republic of Kazakhstan for Information Technology and Communications and the Minister of Information Technology and Communication of the Rus- sian Federation on Giving the Kazakhstan KazSat Communications and Broadcasting Satellite an Orbital Slot, the Agreement on Cooperation between the Eurasian Industrial Association and Vneshe- konombank, and others. Improvement of the contractual-legal base indicates Astana and Moscow’s desire to raise alliance relations to a higher level and give them corresponding dynamism. As the results of the period under review showed, the problematic aspects of Kazakh-Russian relations, for example, Kazakhstan’s active cooperation with NATO or Astana’s participation in the Baku-Tbilisi-Ceyhan project, were pushed into the background. Astana’s practical actions made it clear to Moscow that Kazakhstan considers the Russian Federation a strategic ally, so there is no reason for the latter to be jealous of Kazakhstan’s multi-vector foreign policy. Moscow, in turn, emphasized Astana’s importance in its policy by making a very interesting move—it invited the Kazakhstan leader, as CIS chairman, to participate in the G8 summit in St. Petersburg. On the one hand, Nursultan Nazarbaev’s participation in such a prestigious forum confirms Kazakhstan’s growing authority on the international arena, and on the other, it opens a new niche for successfully positioning the republic’s potential in the most attractive spheres, which promises significant political and economic dividends in the future.

Development of Relations with the PRC

In 2006, Kazakhstan continued to implement bilateral agreements with the PRC on economic and political cooperation. In its strategy of relations with Beijing, Astana proceeded from the fact that there is no alternative to mutually advantageous relations with this dynamically developing country. Special emphasis was also placed on cooperation in power engineering and in the financial and sci-

3 See: M. Laumulin, “Triumf mnogovektornosti,” Kontinent, 18 February, 2006. 4 See: “Kazakhstan-Rossia: strategiia druzhby,” Kazakhstanskaia pravda, 4 October, 2006. 169 CENTRAL EURASIA 2006 Analytical Annual entific-technical spheres. As the economies of both states blossomed, trade and economic contacts also developed. Whereas in 2005, the volume of goods turnover amounted to 7 billion dollars, in 2006, it topped 10 billion dollars. In so doing, the border Xinjiang-Uighur Autonomous Region of China accounts for 70% of the total import-export volume. Economic cooperation is also being underpinned by an active political dialog. During the year, the leaders of both countries held several meetings which gave a noticeable boost to interaction in this area. In particular, Kazakhstan President Nazarbaev’s visit to Shanghai on 13 June to participate in the anniversary meeting of the Council of Heads of State of the Shanghai Cooperation Organization should be singled out. The SCO is an important arena for a dialog on resolving the problems in Cen- tral Asia and traditionally plays a significant role in bringing relations between Kazakhstan and the PRC closer together. On 14 June, Kazakhstan President Nazarbaev met with Chinese Chairman Hu Jintao, and on 20 December Nursultan Nazarbaev met again with the PRC leader during a visit to Beijing. During the meetings, the sides discussed the strengthening of strategic partnership and the prospects for developing trade and economic cooperation. It should be noted that meetings between the leaders of the two countries have never been so numerous, that is, a new stage has begun in Kaza- khstan-PRC cooperation—a stage of stronger political trust and rapid expansion of cooperation. On the whole, it can be said without exaggeration that the results of 2006 for Kazakhstani-Chi- nese relations were very productive; in particular, an agreement was reached that the sides will aug- ment cooperation in the economic sphere. China currently has a surplus of financial resources, so the PRC would like to invest them in states distinguished by domestic stability and sophisticated legislation. In this respect, Astana is of great interest to Beijing, so the Memorandum of Intent the two countries signed to create a joint investment fund is very important. Kazakhstan plans to use the Kazyna Fund to fulfill this intent. When talking about the results of diplomatic cooperation, we should particularly note the significance of such documents as the Cooperation Strategy for the 21st Century and the Conception of Development of Economic Cooperation between the PRC and Kazakhstan. Several agreements have also been signed on cross-border rivers: one of them envisaged the regular exchange of hydrological and hydrochemical information; there are plans to create joint control stations that will inform both sides about water management and keep track of how economically and harmoniously water draw-off is being carried out in the two countries. As for the border, Astana and Beijing signed an agreement on border conditions in 2006 which essentially completed its set up.

Kazakhstan and the CIS

Despite the negative trends in CIS development, Kazakhstan is still actively in favor of retaining this organization, whereby it emphasizes the need for it. The Commonwealth’s fate was widely discussed at bilateral and multilateral meetings, and it was also a popular topic of debate during the entire year. Kazakhstan President Nazarbaev, who was elected chairman of the CIS, participated in numerous undertakings within the framework of the Commonwealth. During the period under review, Astana tried to find a new formula for the integration process in the post-Soviet space, which, in particular, was expressed in the initiative to adapt an entire set of EurAsEC documents for use in the CIS and CES. In 2006, Kazakhstan made several attempts to step up the efficiency of this organization, the purpose of which was to find a compromise keeping in mind national interests of the participants, but at the same time not infringing on the position of other states. Kazakhstan, as chairman of the Council of Heads of CIS States, focused its attention on discussing an extensive program for reforming the

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Commonwealth. On 28 November, a long-awaited summit of the CIS states was held in Minsk, which was to provide an answer to the key question of how the Commonwealth should be reformed. The Kazakhstan model of interaction within this structure envisages primarily trade and economic cooperation based on the principle of integration at different levels and different rates, as well as developing relations in the humanitarian sphere. The heads of the CIS states postponed the question of refor- mation until the next summit in Bishkek in the summer of 2007. In its policy in the post-Soviet space, Astana did not limit itself to looking for an efficient model for resolving the problem of the Commonwealth’s further development. The republic’s activity was also manifested in its relations with Armenia, Georgia, Moldova, and Ukraine. Along with questions of bilateral political, trade, and investment cooperation, regional issues were also widely discussed during the meetings. The sides noted the common aspects of views on the urgent topics of regional and international policy and the need to develop interaction. An important vector of Kazakhstan’s foreign policy is its relations with Azerbaijan. In 2006, Astana and Baku signed an agreement on Kazakhstan joining the Baku-Tbilisi-Ceyhan oil pipeline, as a result of which Kazakhstan acquired a third oil transportation route to foreign markets, and Azerbai- jan, in turn, obtained additional resources for filling the pipeline. Special mention should be made of the policy regarding other Central Asian countries: Uz- bekistan, Kyrgyzstan, Tajikistan, and Turkmenistan. Kazakhstan is clearly inclined in this vector toward stepping up efforts to integrate the region in order to promote its economic and political development. In its relations with its Central Asian neighbors, Kazakhstan is proceeding from the fact that it is impossible to build an economically prosperous and politically stable state in the company of poor and unstable countries which will always be a source of threats. The main tasks in Astana’s regional policy were, first, not to permit any conflict situations, and second, to become a stabilizing state in Central Asia. In 2006, Kazakhstan took several steps to strengthen its role as a stabilizing state in the region. First, the republic’s leadership made a decision to turn Almaty into a regional financial center with the relevant infrastructure. This city has long become a tempestuously developing commercial hub, not only of Kazakhstan, but also of the entire region. And it appears that this initiative will stimulate an inflow of investments and an upswing in the economy in the Central Asian countries. Second, Kazakhstan has legalized work migrants who come to the republic illegally from Central Asian states, the total number of whom is close to one million people. What is more, the country’s leadership expressed its willingness to receive up to another million work migrants from these states in the next few years, which is proving economically propitious, since migrants send as much as 300-500 million dollars home every year, thus promoting economic growth in their home republics. In the period under review, special emphasis was placed on relations with Tashkent and Bishkek. Despite all the difficulties in Kazakh-Uzbek relations in 2006, they have warmed up and become more dynamic. For example, on 19-29 March, Kazakhstan President Nazarbaev visited Uzbekistan. It should be noted that both sides had high expectations of this visit: first, resolution of the border problem, and second, significant stepping up of border trade. No one doubts that this trade is advantageous for both Tashkent and Astana. But the customs and excise barriers initiated by Uzbekistan are forcing businessmen to take to the shadow economy.5 And on 4 September, Islam Karimov paid a return visit to Kazakhstan. Words were heard in Astana which many analysts evaluated as a breakthrough in bilateral relations. Islam Karimov, impressed by the warm reception, promised to “resolve any questions in a positive way.” Some of the practical results were the opening of a representative office of the Kazakhstan Development Bank in Tashkent, the renewal of transportation communication, more than 700 million dollars in trade turnover, as well as the signing of a set of strategic documents, among

5 See: A. Asrorov, “Prezidenty Tsentral’noi Azii v 2006 godu,” 22 December, 2006, available at [www.gazeta.kz]. 171 CENTRAL EURASIA 2006 Analytical Annual which we will note the Joint Statement on Further Development of Friendship, Partnership, and Co- operation between Kazakhstan and Uzbekistan, the Provisions on an Interstate Coordination Council under the patronage of the presidents of both countries, and a Program of Economic Cooperation between the Republic of Kazakhstan and Republic of Uzbekistan for 2006-2010. As for Kazakh-Kyrgyz relations, on the whole they have been developing steadily. Putting all the diplomatic rhetoric aside, Bishkek is interested in Kazakhstani business investing more actively in the Kyrgyzstan economy. During the Tulip Revolution, Kazakhstan’s businessmen who invested money in the economy of their neighboring republic suffered great losses. It goes without saying that today Kazakh companies regard Kyrgyz assets as risky and are not anxious to purchase them. It is obvious that Kyrgyz President Kurmanbek Bakiev paid an official visit to Astana with the intent purpose of improving the situation in this area. During the course of this visit, he tried to paint his country in more optimistic colors, and Kazakhstan President Nazarbaev in turn supported this idea. In order to minimize the losses of Kazakhstani businessmen, a Protocol of Intent on the implementation of large investment projects in Kyrgyzstan was signed and, most important, on the regulation of Kazakhstan property rights to resort and recreation facilities located in the Issyk Kul Region of Kyrgyzstan. Relations with Tajikistan strengthened. Several joint documents were signed during an official visit by President Emomali Rakhmonov to Kazakhstan. In 2006, the volume of bilateral trade turnover reached 167.5 million dollars, and Kazakhstani investments in the Tajikistan economy amounted to 81 million dollars. As for Turkmenistan, on the whole, constructive ties continued between the two countries, and at the end of the year, Astana assumed a cautious wait-and-see position regarding the prospects for development of the political situation in Ashghabad. In all likelihood, Central Asian diplomacy reached its peak in the informal meeting of the Cen- tral Asian heads of state on 1 September in Astana attended by Kyrgyzstan President Kurmanbek Bakiev, Tajikistan President Emomali Rakhmonov, and Uzbekistan President Islam Karimov. During the talks, the heads of state discussed the development of multilateral cooperation and the situation in the region. Taking into account the high indices of socioeconomic development, as well as the investment possibilities, Kazakhstan expressed the desire to promote accelerated development of all the countries in the region, actively participate in forming its common market, and maintain all vectors of integration, i.e. create branch consortiums, special border trade zones, joint holdings, and investment structures.6 On the whole, Astana’s activity in regional cooperation and its willingness to take on additional obligations and responsibility show its leading role in Central Asia.

Kazakhstan and the West

In 2006, a significant weakening in the geopolitical position of the U.S. in Central Asia was observed. Against the background of stronger pressure from the SCO and the worsening of Washing- ton’s relations with Tashkent and Bishkek, the White House finally began to understand that despite all its multi-vector nature, Astana is the most suitable strategic partner for the United States in the region. Bilateral cooperation between Astana and Washington was intensive and by the end of the year reached a new level of strategic partnership. It will be no exaggeration to say that Kazakhstan occupies a central place in the U.S.’s Central Asian strategy, which is confirmed both in official statements and in the actions of American representatives. The reasons for this, in our view, are, first, the republic’s obvious political-economic progress compared with the other Central Asian countries; second, Kazakhstan’s steady performance of its

6 See: K.K. Tokaev, “Kazakhstan v sovremennom mire,” Mezhdunarodnaia zhizn, No. 11, 2006. 172 REPUBLIC OF KAZAKHSTAN International Affairs international duties and the absence of zigzags in its foreign policy; and third, the similar goals and priorities in ensuring regional security in Central Asia. It appears that the main event of bilateral relations in 2006 was Kazakhstan President Nazarbaev’s visit to the U.S. Right before this visit, the White House publicized a special statement in which it emphasized the significance of this visit for Washington. For Astana, on the other hand, it is important that a principal agreement has been reached on the development of bilateral relations based on strategic partnership. Within the framework of the visit, apart from the formal meeting with George Bush, Jr., there were official talks and meetings with Secretary of Commerce Carlos M. Gutierrez, U.S. Secretary of Energy, Samuel Bodman, U.S. CIA Director Michael Hayden, U.S. Vice President Rich- ard B. Cheney, and World Bank President Paul Wolfowitz. A symbolic result of the visit was the unveiling of the Kazakhstan Independence Statue in Washington. A positive aspect of cooperation was the fact that the United States essentially recognized Ka- zakhstan’s leadership (in the reforms and economy) in Central Asia and to a certain extent in the CIS. Another fact, more positive than negative, was Kazakhstan’s long-anticipated joining the Baku-Tbi- lisi-Ceyhan pipeline. Washington thinks that Astana should assume the role of leader in the region, which will promote the development of the energy sector infrastructure and create additional transit routes for energy resources. American experts who are directly involved in forming the White House’s policy believe that if the U.S. is interested in stability in Central Asia, its policy should be based on supporting Kazakhstan. In so doing, Washington’s goals should not be restricted exclusively to oil, security, and combating terrorism. The matter essentially concerns the fact that Astana has become a new strategic partner in the long term.7 An extremely eloquent fact confirms the U.S.’s increased interest in Kazakhstan: Kazakhstan was the first CIS republic to be officially recognized by the United States as a country with a market economy. As of the present, the volume of American investments in the republic amount to approximately 12 billion dollars, and as for trade turnover, in 2006 its level reached 2 billion dollars. The concept “strategic partnership” also featured specifically in the signing of the contract between Gen- eral Electric and the Kazakhstan temir zholy Company on production technology of the Evolution locomotive engine series. The cost of the first contract is close to 670 million dollars, while the cost of the entire set of contracts amounts to more than one billion dollars. One of the key areas of Kazakhstan’s foreign policy is cooperation with the European Union which, in turn, is also showing great interest in Kazakh-European interaction. It is no secret that Brussels is trying to diversify deliveries of energy resources to the EU countries, and Kazakhstan occupies an important place in the European energy strategy. Benita Ferrero-Waldner, European Commissioner for External Relations and European Neighborhood Policy, who arrived in Astana on an official visit on 19 October, confirmed these goals, noting that the EU was interested in developing cooperation with Kazakhstan in energy resources, environmental protection, and science and technology. Kazakhstan, in turn, is interested in giving cooperation with the EU greater content in international security (including regional), the economy, and social and cultural development. In particular, Nursultan Nazarbaev’s December visit to Brussels was devoted to these goals, during which he held talks with the EU leadership. During the meeting with José Manuel Barroso, President of the Europe- an Commission, Astana said point blank that “Brussels is interested in Kazakhstan from the viewpoint of acquiring alternative sources of energy resources, but Astana would like to receive something more significant from Brussels in exchange.”8

7 See: M. Laumulin, “Ukroshchenie shtatov,” Liter, 5 October, 2006. 8 K.K. Tokaev, “Vektory politiki sosedstva.” 173 CENTRAL EURASIA 2006 Analytical Annual

Reviewing the content of Kazakh-European relations was dictated by an objective need: at the moment, relations between Kazakhstan and the EU are based on the Standard Agreement on Partner- ship and Cooperation of 1995, which is largely outmoded, and in two years its term will expire. Keep- ing in mind all the changes that have occurred during this time, Astana would like to view relations with the European Union in a somewhat different context. The EU is also raising the question of developing a new strategy in Central Asia, so Kazakhstan believes that new mechanisms are needed for efficient cooperation that take into account the current geopolitical reality, that is, a country-wide approach is required. In 2006, Astana clearly designated the question of building relations with the EU according to the new principle of good neighborly relations and strategic partnership. Perhaps this will also lead to resolution of a negative aspect in Ka- zakhstan-European cooperation—the delay in making a final decision on Kazakhstan’s chairmanship in the OSCE in 2009. For example, against the background of declarative praise of the Kazakhstan initiative, certain European powers are obviously engaging in a policy of double standards and trying to prevent Astana’s chairmanship in the OSCE. The Kazakhstan-European dialog also developed constructively at the bilateral level. In so doing, particular results were achieved in relations with Spain, Great Britain, France, Germany, and the countries of Eastern Europe. Kazakhstan President Nazarbaev visited Croatia (July), Spain (Sep- tember), Great Britain (November), and also held several meetings with representatives of European countries: with First Deputy Prime Minister of Sweden Bosse Ringholm, Minister of Foreign Affairs of the Netherlands Bernard Bot, European Commission Energy Commissar Andris Pibalgs, Secretary General of the Council of the European Union Javier Solana, and others. Intensive contacts with European countries were established both at the interparliamentary level and foreign ministry level. The main areas in the bilateral talks and trade and economic cooperation were as follows: power engineering, survey and extraction of minerals, construction, social infrastructure, public health, transportation and communication, and consulting services. On the whole, 2006 was characterized by a series of frequent meetings between the Kazakhstani leader and European officials of various ranks, which is entirely logical right before Kazakhstan’s application for OSCE chairman was due for consideration. On the other hand, after the Uzbekistan authorities objected to an international investigation of the Andijan events being carried out, the Eu- ropean Union had to find a fulcrum in the region,9 which Astana offered it.

Eastern Vector

Kazakhstan has been actively developing mutually advantageous bilateral relations with most countries of Asia and the Arab East, the main areas of which are trade, economic development, energy cooperation, and relations in the humanitarian sphere. Kazakhstan has been maintaining traditional relations with Turkey. On 18 May, President Nursultan Nazarbaev met in Antalia with Turkish Prime Minister Recep Tayyip Erdoðan. During the talks, ways for further developing bilateral relations were discussed, including strengthening trade and economic ties and urgent problems of regional and international policy. The importance of Kazakhstan’s and Turkey’s participation in such large projects as pumping oil along the Baku-Tbilisi-Ceyhan pipeline, the development of southern rail transit, and the TRACECA transportation corridor aimed at the optimal use of the corresponding potential of both countries was emphasized.

9 See: A. Asrorov, op. cit. 174 REPUBLIC OF KAZAKHSTAN International Affairs

In 2006, Astana and Ankara consolidated their diplomatic duet of sorts in the Turkic-speaking world, within the framework of which they supported each other’s international initiatives. For example, Kazakhstan received Turkey’s support in such important foreign political initiatives as the Con- ference on Interaction and Confidence-Building Measures in Asia (CICBMA), organization of the Second Congress of the Leaders of World and Traditional Religions, and application for chairmanship in the OSCE. In addition, Turkey is the first country with which Kazakhstan has successfully completed talks on Kazakhstan’s membership in the WTO. Astana, in turn, supported Ankara’s foreign policy initiatives by taking part in the 8th Summit of Turkic-Speaking Nations held on 17 No- vember in Turkey. This meeting ended in the adoption of a Declaration in which the leaders of the Turkic-speaking states expressed their confidence that this summit would give a boost to the further development of interaction among the Turkic-speaking countries and strengthen cooperation in the Eurasian expanse. Astana set great store by cooperation with Tehran. For example, on 6 June, a meeting was held between Kazakhstani Foreign Minister Kassymzhomart Tokaev and Iranian President Mahmoud Ahmadinejad. During the meeting, the Iranian leader was presented with President Nazarbaev’s address which set forth Kazakhstan’s vision of the situation involving Iran’s nuclear program and its relation to regional security. And at the SCO summit on 16 June in Shanghai, Nursultan Nazarbaev met with Mahmoud Ahmadinejad. Resolution of the question of the Caspian Sea’s legal status was also given a certain boost: on 17 October, bilateral consultations were held in Tehran, during which problems were reviewed related to the draft of the Convention on the legal status of the Caspian. Kazakhstan has also been taking active part in resolving questions relating to Afghanistan’s development. Afghanistan is certainly a sore spot in the region, and Astana, which is consolidating its leading position in Central Asia, understands that there can be no stability in the region until the Afghan question is settled. Kazakhstan has stepped up its policy with respect to Afghanistan in terms of expanding economic interaction aimed at stabilizing the situation in this country, whereby it took part in the work of the International Conference on Afghanistan held in London at the end of January. At the end of March, Foreign Minister K. Tokaev made a visit to Kabul, which was largely reconnaissance in nature. During this visit, meetings and consultations with Afghani President Hamid Karzai and members of his government were held. And on 16 June at the SCO summit in Shanghai, Nursultan Nazarbaev discussed the prospects for settling the Afghan question with Hamid Karzai. Astana believes that Af- ghanistan should be “drawn closer” to Central Asia, primarily from the viewpoint of regional economic development. In this respect, in 2006, several consultations on Afghanistan were held with the U.S., EU, and within the framework of the SCO and CSTO, where special working groups were created.10 Active cooperation continued with Malaysia. During the year, several meetings took place at the highest level, within the framework of which this country highly appraised and supported Ka- zakhstan’s foreign political initiatives. At the 3rd Malaysia International Halal Showcase (permitted by Islam laws), Mihas 2006, held on 10-14 May, a Kazakhstan delegation received the main prize.11 On 26 June, Kazakhstan President Nursultan Nazarbaev met with Prime Minister Abdullah bin Ah- mad Badawi of Malaysia in Putrajaya. During the talks (in the narrow and extended format), questions were discussed of expanding bilateral trade and economic cooperation, as well as cooperation in innovative technology. The talks ended in the signing of a bilateral Agreement on the Avoidance of Double Taxation and Taxation Evasion of Income Tax. Interaction with Japan also continued, this country being particularly interested in Kazakhstan’s energy resources. On 28 August, Japanese Prime Minister Junichiro Koizumi arrived in Kazakhstan on an official visit. During the talks in an extended format, a wide range of questions on bilateral

10 See: K.K. Tokaev, “Vektory politiki sosedstva.” 11 See: [www.prof.in.kz/?mod=text&archive=126 — 99k]. 175 CENTRAL EURASIA 2006 Analytical Annual cooperation, international problems, including restructuring of the U.N., was discussed. The talks ended in the signing of a Joint Statement on Friendship, Strategic Partnership and Cooperation between Kazakhstan and Japan, and a memorandum on jointly developing atomic energy was adopted. Relations were also perceptibly activated with the Arab countries. A series of summit meetings gave a certain amount of dynamism to Kazakh-Arab cooperation, and the talks mainly focused on the prospects for trade and economic relations, investments, the development of science-intensive technology, and contacts in the humanitarian sphere. For example, on 25 October, Kazakhstan President Nursultan Nazarbaev met in Shymkent with President of the United Arab Emirates Sheikh Khalifa bin Zayed al-Nahayan. The heads of state discussed the prospects for bilateral relations. Their meetings ended in an agreement that the United Arab Emirates would allot funds to build a new maternity hospital and mosque in Shymkent. The dynamic development of relations with Egypt was one of the breakthroughs of the year. On 7 November, President of the Arab Republic of Egypt Hosni Mubarak paid an official visit to Kaza- khstan. This was Hosni Murabak first official visit to a Central Asian state, which also indicates As- tana’s new status in the international system. During the talks (in the narrow and extended format), the leaders of the two countries discussed the possibility of developing bilateral relations in trade and economic and cultural-humanitarian spheres, as well as urgent international questions and the situation in the Middle East and in Central Asia. On 4 December, Kazakhstan President Nazarbaev made a return visit to Egypt, which ended in an agreement being reached on the regular delivery of wheat from Kazakhstan to Egypt, thus greatly raising the volume of bilateral trade.

Cooperation with International Structures

Astana is an active participant in integration organizations. 2006 was also a year of intensive interaction with such international structures as the U.N., SCO, CSTO, NATO, the OSCE, and others. In so doing, Astana focused its attention on many areas, including development of the SCO. For example, the republic participated in a series of meetings within the framework of this structure and expressed a cautious, but unrelenting viewpoint regarding its enlargement. In particular, at the ministerial meeting held on 15 May in Shanghai, Kazakhstan suggested drawing up a clear procedure for accepting new full-fledged members into the SCO. On 15 June, the Kazakhstan president took part in the anniversary meeting of the SCO Council of Heads of State, at the end of which a concluding document was signed. And on 15 November in Astana, a session of the Interdepartmental Working Group on the SCO activity (IWG) was held under the chairmanship of Foreign Minister Tokaev, at which the action plan for 2007 was discussed. A traditionally important place in Kazakhstan’s foreign policy was occupied by cooperation with the CSTO. On 27 March, President Nazarbaev received Secretary General of the Collective Security Treaty Organization Nikolai Bordiuzha. At their meeting they discussed questions of improving the regulatory legal base and prospects for developing this structure. From 23 to 27 August, comprehensive operational and tactical training of Collective Security Treaty member states, “Rubezh 2006,” was held, in which contingents of the Kazakhstani, Russian, Tajik, and Kyrgyz armed forces took part. Operational groups from the military administration bodies of the member states along with the Col- lective Security Treaty joint headquarters and secretariat and Central Asian rapid deployment forces took part in the exercises. On the whole, during the year, Astana continued its active efforts to develop and transform the CSTO into an efficient collective security structure. Astana is continuing as before to actively cooperate with NATO. In January, a Kazakhstan delegation headed by Deputy Defense Minister B. Sembinov visited NATO’s headquarters in Brussels.

176 REPUBLIC OF KAZAKHSTAN International Affairs

During the visit, a meeting of the Military-Political Leading Committee in the NATO-Kazakhstan format was held under the chairmanship of Robert Simmons. The main result of the visit was to review the Individual Partnership Action Plan (IPAP) between NATO and Kazakhstan and prepare it for final approval (it was adopted on 31 January). It should be noted that the IPAP is raising cooperation between Astana and NATO to a qualitatively new level. This document encompasses such priority aspects of Astana’s practical interaction with Brussels, as international stability (including regional), transformation and modernization of Kazakhstan’s armed forces, and raising their interoperability with NATO contingents. As for practical matters, the Stepnoy Orel-2006 (Steppe Eagle) international anti-terror exercise was held from 11 to 22 September, in which the armed forces of Kaza- khstan, the U.S., and Great Britain took part, with the Turkish, Ukrainian, and Kyrgyz defense ministers present as observers. It appears that the geopolitical polarity of the CSTO and NATO will make it possible for Astana to create the necessary system of checks and balances in regional geopolitics, which in general expresses the interests of all the Central Asian countries. On the other hand, the SCO’s active policy, in particular its Chinese component, makes it possible to avoid a bipolar confrontation along CSTO-NATO lines by forcing the players to look for constructive ways to resolve the problems of cooperation in Central Asia. Astana has been manifesting particular activity in its relations with the U.N. In this context, Kazakhstan’s moderate international ambitions are seen the most clearly. In 2006, it took part in numerous meetings and events of the United Nations and its specialized structures. Support of Ka- zakhstan’s candidacy at the election of 18 new members to the U.N. Economic and Social Council held on 2 November in New York at the U.N. General Assembly should be regarded as an achievement of Kazakhstan diplomacy. According to the results of the voting, Kazakhstan received the support of 187 (out of 192) U.N. member states and became the first Central Asian country to be elected as a member of the ECOSOC. For the next three years, Astana will represent the Asian region in this structure. Along with this, talks continued with the OSCE about Kazakhstan’s chairmanship in it in 2009. A heated discussion developed around this question in the international community. On the whole, the attitude toward Kazakhstan’s application was positive and remains such. Keeping in mind the OSCE’s high standards, it is of principal importance that the member states believe Kazakhstan to be a worthy candidate to chair the OSCE. Further talks and discussions on this question were postponed until 2007, since a final decision was not reached in Brussels in December 2006 (postponement of this issue should not be considered a failure of Kazakhstan diplomacy). After all, the price of the question is determined by Astana’s real willingness to assume a high level of responsibility and obligations in the political reforms as the OSCE’s chairman, which demonstrates the progress in the country’s democratic development.

* * *

When summing up the results of the year, it is clear that Kazakhstan played an active part in global politics: the international community began taking realistic account of Astana’s position and opinion. The republic became a key state in Central Asian geopolitics and a strategic link in the global energy security system. The support of its policy by the leading geopolitical powers—the Russian Federation, the PRC, the U.S., and the EU—as well as their recognition of its leading status in Central Asia should be regarded as important achievements in Kazakhstan’s diplomacy. In 2006, Kazakhstan became a center for holding large international events, and the republic’s initiative in security and the intercivilizational dialog found support and approval in most of the world’s states.

177 CENTRAL EURASIA 2006 Analytical Annual

A visual symbol of Kazakhstan’s new status in the international hierarchy is the fact that it has been recognized as a country with a market economy (and has been given an investment rating). Of the total amount of foreign investments in the republics of the region, Kazakhstan accounts for essentially 80%. Recognition of its growing role in the international energy dialog was the Kazakhstan President’s invitation to the G8 summit in St. Petersburg, where one of the main topics of discussion was ensuring global energy security.12 Kazakhstan, which is essentially home to representatives of more than 100 nationalities and several religions, became the center of development of a global intercivilizational dialog and consolidation of inter-confessional consent. This is shown, first, by the OSCE Tolerance Implementation Meeting on Promoting Inter-Cultural, Inter-Religious and Inter-Ethnic Understanding held in June in Almaty; and second, by the Second Session of the Leaders of World and Traditional Religions held in Astana in September, which united the religious leaders of 26 countries of the world.13 Unfortunately, not all the foreign political initiatives and measures undertaken by the republic yielded the desired result. For example, the Second CICBMA Summit was not as effective as the first in 2002. The reason for this was probably the anniversary SCO meeting in Shanghai which took place the day before and literally attracted all the attention of the world mass media, particularly since all the participants of the Shanghai summit were in almost full complement in Almaty. As a result, both summits kind of merged into one.14 The protracted games of the OSCE with respect to making a final decision about Kazakhstan’s chairmanship in this organization in 2009 also disappointed the republic’s expectations somewhat. The story about the scandalous film put out by British comic actor Sacha Baron Cohen aroused a widespread international response. The film is set in Kazakhstan, which is presented in a fictitious negatively comic way that has absolutely no bearing on reality. During the year, the Kazakhstan For- eign Ministry waged an unsuccessful information war with Sacha Cohen and his film, which only aggravated the situation and placed the country’s foreign ministry in a ludicrous position. President Nazarbaev put an end to this scandal during his November visit to Great Britain. In particular, he thanked Mr. Cohen for the PR campaign he instigated and invited the actor to visit Kazakhstan. It is obvious that this story and the great attention the mass media paid it played a more positive than negative role, for thanks to the scandal that developed, the international community’s interest in Kazakhstan rose in leaps and bounds.

12 See: O. Kazantseva, “Bolshoi zadel v ‘Bolshoi vosmerke,’” Kazakhstanskaia pravda, 27 July, 2006. 13 See: “Globalnyi dialog vo imia mira,” Kazakhstanskaia pravda, 12 September, 2006. 14 See: M. Laumulin, “Triumf mnogovektornosti.”

178 KYRGYZ REPUBLIC General Overview

KYRGYZ REPUBLIC

GENERAL OVERVIEW

Leonid BONDARETS Representative of the Central Asia and the Caucasus journal in Kyrgyzstan (Bishkek, Kyrgyzstan)

he processes which began in the republic during the events of March 2005 continued in 2006. The domestic political situation, the main component of these processes, was character- T ized by a standoff between the legislative and executive power branches and the unflagging, although more subdued than last year, revolutionary activity of the population and the opposition, which occasionally overflowed into mass protest acts and disorder. For example, on 25 June, due to clashes among the supporters of the rivaling candidates for deputy, who hurled Molotov cocktails and stones at each other, the election to the Jogorku Kenesh (parliament) in the polling station of Tuzbel in the Kurshab constituency was disrupted. Pickets and demonstrations, as well as threats to close roads, in an attempt to have various demands met, were everyday occurrences. According to the media, two protest acts took place on average in the country every day. One of the scandalous events that aroused an international response was the mass demonstrations in the provinces and capital by the supporters of criminal leader Rysbek Akmatbaev, who was suspended from the election to the Jogorku Kenesh. The Kyrgyz President’s speech to those who rallied at the Government House led to a hurried court case that eventuated in Rysbek Akmatbaev’s complete exculpation. As a result, he was allowed to participate in the election, at which he gathered 79.22% of the votes. And only the murder of this recognized criminal authority prevented his penetration into parliament. The mass meetings organized in April, May, and November by the “For Reforms!” opposition movement, as well as the alternative 8th Nationwide Kurultai (Congress) on 17 September, demanding that the head of state resume the democratic reforms declared during the events of March 2005, had a significant effect on the situation. The opposition leaders and parliamentarians were annoyed about the procrastination of the constitutional reform and the retention of the pyramid power structure endowing the president with significant powers and stymieing the possibilities of the Jogorku Kenesh (presidential-parliamentary form of rule). The displeasure of the president’s former revolutionary advisors with being removed from power and with the formation of a president’s team and personnel policy based on regionalism also played its part. 179 CENTRAL EURASIA 2006 Analytical Annual

But all the same the adoption of the Kyrgyz Republic Constitution was the main domestic political event of the year. The parliament, which took advantage of the November protest meeting initiated by the “For Reforms!” movement, forced the country’s president to sign a “rough” version of the Fundamental Law (essentially declaring a parliamentary-presidential form of rule), which, in particular, envisaged the formation (and not ratification as previously) of a Cabinet of Ministers by the parliamentary party that gathered the majority of votes at the election. Guided by this situation, the government, displeased with the constant criticism of the ministries and the rejection of several draft laws, resigned, which provoked a new power crisis. According to its executive branch and some of the parliamentary deputies, the Jogorku Kenesh, elected according to one-mandate districts, could not form the government. The president demanded the return of some of his lost powers (his right to form the government, appoint judges, etc.) and, threatening to disband the Jogorku Kenesh on 30 December, adopted the latest version of the Constitution. In foreign political activity, after announcing its priorities to be strategic cooperation and partnership with Russia, China, and the U.S., the state’s leadership concentrated its main efforts on strengthening relations with its SCO and CSTO partners. The visits by the country’s president, Kurmanbek Bakiev, to the Russian Federation (24-25 April), China (9-10 June), Kazakhstan (4-5 July), and Uz- bekistan (3-4 October), as well as ongoing telephone consultations with Russian President Vladimir Putin, were largely aimed at alleviating the disagreements that arose as a result of Mr. Bakiev’s de- marche after he signed the SCO Declaration in Astana.1 It is no accident that before his trip to Mos- cow, the Kyrgyz president let the U.S. understand in no uncertain terms that he expected it to step up the talks on a one-hundred-fold increase in rent for the deployment of its military contingent at the Manas air base. And on the eve of the president’s visit to Astana, the parliament finally ratified the alliance treaty of three years ago with Kazakhstan. The visit to Beijing was marked by Bishkek’s official refusal to reconsider the agreement on the Kyrgyz-Chinese border. During the Kyrgyz president’s first visit in the last eight years to Uzbekistan, which was described as a breakthrough in bilateral relations,2 the leaders of these republics came to terms on the rational use of water and energy resources. Keeping in mind the contradictions between these two states, particularly with respect to regulating water flow and energy resource deliveries, this step can fully be regarded as a concession to Tashkent. The contradictions between the financial interests relating to the presence of the American military contingent in Kyrgyzstan, on the one hand, and the discontent with Washington’s activated export of democracy and support of the opposition, on the other, had a significant influence on relations with the United States, the third strategic partner. The goodwill toward nongovernmental and pro- governmental U.S. organizations that have essentially unlimited freedom of action in the Kyrgyz Republic and the indulgence of the American military alternated with instructions from the republic’s minister of justice to carry out an audit of NGOs that enjoyed foreign financing, the Foreign Minis- try’s appeal to U.S. Ambassador to Kyrgyzstan Marie Jovanovich to refrain from public statements and comments bordering on interference in Kyrgyzstan’s internal affairs, and an exchange of “nice- ties,” to be more precise—a reciprocal extradition of diplomats. Nor did the public’s negative reaction to the attempt to lay the blame on Bishkek for the crash between a U.S. air force tanker airplane and a Tu-154 airplane3 and the murder of a Kyrgyz citizen by

1 In this document adopted in 2005, the SCO heads of state demanded that the antiterrorist coalition set the deadlines for foreign military contingents to remain in the Organization’s member states. But after meeting U.S. State Secretary Con- doleezza Rice, which took place behind closed doors, Kurmanbek Bakiev decided to leave the American base in the country for an indeterminate period. 2 For the past four years, relations between the two countries have been essentially frozen. 3 On 26 September, at the Manas airport, departing Tu-154 airliner with 52 passengers on board snagged maneuvering KS-135 U.S. air force tanker airplane with its wing. The Tu-154 crew was able to turn around in the air and land, losing part of the plane’s wing. A U.S. commission put the blame on the Kyrgyz air dispatchers. 180 KYRGYZ REPUBLIC General Overview an American soldier on 6 December do anything to help bilateral relations. With respect to the latter incident, the Kyrgyzstan authorities sent an official memo to the U.S. Ministry of Defense demanding that the American serviceman be deprived of his immunity. The parliament also asked the republic’s government to review the conditions of the agreement on the temporary deployment of the Pentagon’s contingent, as well as on the status and regulations relating to the presence of U.S. military and civilian personnel in the Kyrgyz Republic. In the Western vector, Germany stepped up its activity aimed at expanding bilateral and multilateral cooperation in light of its upcoming chairmanship in the EU. At the same time, the EU, OSCE, and U.S. severely criticized Kyrgyzstan for handing over five Andijan refugees to Uzbekistan. Relations with Turkey continue to develop dynamically, contacts with the Islamic Republic of Iran became more active, mainly in the economic sphere. Significant events were President Kurman- bek Bakiev’s support of Iran’s statement to join the Shanghai Cooperation Organization and official visit to the Kyrgyz Republic by a parliamentary delegation from the IRI headed by Iranian Parliament Speaker Gholam-Ali Haddad-Adel. The state’s economic policy is set forth in the National Development Strategy for 2006- 2010 (NDS), which envisages an increase in the nominal GDP by 65% of the 2005 level (with an average annual increase of 6%), a decrease in the budget deficit to 2.6% of the GDP, and a cutback in the foreign debt by half. Implementation of the NDS required 8.5 billion dollars in investments, with a financial deficit of 4 billion dollars, which was to be compensated for by investments. These questions were resolved during the Kyrgyz president’s visits to China, Kaza- khstan, and Belarus, an exchange of delegations with the Russian regions, economic contacts with foreign businessmen, as well as by initiating the privatization of enterprises. The government was even ready to enter such dubious contracts as building a plant for assembling Iranian cars. But potential investors were put off by the political instability and unfavorable investment climate. High taxes, the unsophisticated system of customs fees, the fiscal conditions, and corruption aroused repeated admonitions from other foreign businessmen too. Russian Ambassador E. Shmagin made a statement about Kyrgyz law-enforcement structures, tax agencies, and financial policy hound- ing Russian business circles. The main problem in the economic sphere was an impossible task in the form of the approaching deadline for paying the foreign debt of 2 billion dollars. In order to alleviate such a heavy burden, the government began reviewing the question of joining the initiatives of the IMF and World Bank regarding cutting back the debt by multi-purpose creditors (HIPC) and writing off the multi-purpose debt (MDRI), which aroused a negative reaction in all strata of society. Numerous acts of protest spread across the country. Even some members of the government, including the deputy prime minister, spoke out against joining the Program. Businessmen created a fund for paying the foreign debt. Neverthe- less, in December, the Kyrgyz government sent their final conditions for the Kyrgyz Republic to enter the HIPC initiative to the IMF and WB offices. The sociopolitical processes going on in the country are reflected as though in a mirror in the religious sphere. The struggle for power in the Spiritual Administration of Muslims of Kyrgyzstan (SAMK), failures in the organization of hajj, demands by the clergy for extortionate financial compensation for the services rendered, and the state’s inattention to the needs of the believers gave rise to mass discontent in their midst. During the year, accusations of corruption among the SAMK leaders were repeatedly heard, as well as demands to replace the supreme mufti and director of the State Agency for Religious Affairs under the Kyrgyz government. To a significant extent, the situation in the country was complicated by an increase in the manifestations of religious extremism and activation of the militants. For example, on 12-13 May, a band of six militants belonging to several religious extremist structures was destroyed in the Batken Re- gion, and in the summer a few more such groups met the same fate.

181 CENTRAL EURASIA 2006 Analytical Annual

A distinguishing feature of the year was aggravation of ethnic confrontation. At the beginning of February, a conflict flared up between the Dungans and Kyrgyz, accompanied by pogroms of Dungan homes, in the settlement of Iskra, the Chu Region. And the victims, in turn, fired on a crowd of Kyr- gyz, which only by pure coincidence did not entail any deaths. In January, the 7th Kurultai of the Uzbek National-Cultural Center of the Jalal-Abad Region adopted an address to Kyrgyz President Kurmanbek Bakiev expressing extreme concern about the manifestations of nationalism. And in May, the leadership of this center demanded that the Uzbek language be given an official status. The unlawful action of the law-enforcement and security force bodies undertaken during a special operation to eliminate the militants had an extremely negative effect on Kyrgyz-Uzbek ethnic relations. This forced even the nationalistically minded Asaba party to state that the special operations in the country’s south “are fomenting anti-governmental moods among the ethnic Uzbeks.” The address of the five-thousand diaspora of Karachays of Kyrgyzstan to the leadership of Ka- rachaevo-Cherkessia asking for help to resettle in their historical homeland was a graphic example of the level of ethnic tension. But the most serious ethnic problem was aggravation of relations between the northern and southern Kyrgyz. The speeches of politicians and media publications repeatedly noted that after Kurman- bek Bakiev’s election as the country’s president, southerners have begun dominating in the government and state structures. In this respect, concern was expressed that the North-South problem would become aggravated.

Brief summary of the year: 1. The Kyrgyz Republic has the strong image of a permanently unstable state and an unreliable partner. 2. The efforts to amend the Constitution ended in the judicial weakening, but actual strengthening of presidential power and a decrease in the opposition’s popularity, which laid the foundation for another turn in political instability. 3. The personnel policy being carried out led to specialists being replaced with nonprofession- als and the former emigrating abroad, on the one hand, and promoted an increase in the discontent of the northern Kyrgyz, on the other. 4. Political problems became the main factor destabilizing the economy. The government was unable to attract the investments necessary for economic growth. Although in 2006 the republic moved away from the negative values of revolutionary 2005, the growth in GDP amounted to only 2.7%. Kyrgyzstan was clearly left out of regional economic projects. 5. The population’s unjustified political and socioeconomic expectations promoted an increase in migration, including for the purpose of finding permanent residence abroad, depopula- tion of the border areas, and an increase in ethnic tension. 6. The socioeconomic problems of most of the population were one of the main reasons for the increase in religiosity, particularly among young people, and affirmation of the ideas and values of radical Islam in the minds of most of the republic’s residents. This situation was caused by: —the population’s loss of trust in the ruling elite and in all three branches of power; —the revolutionary momentum of unlawful upholding of interests; —the weak consolidation of the indigenous residents (possibly due to the absence of a national idea);

182 KYRGYZ REPUBLIC Politics

—the undeveloped party system, which is leading to a clan and regional struggle in the form of political confrontation. One of the serious destructive factors is the predomination in the minds of some of the elite (both the government and the opposition) of selfish personal and clan interests over national. This is making it difficult to reach a political compromise and causing inconsistency in making political and economic decisions, indefiniteness and unpredictability in foreign and domestic policy, and, as a result, no major investments, without which an economic breakthrough is unrealistic. In this respect, it can be presumed that in the near future, the negative processes in Kyrgyzstan’s development will continue, although a smooth withdrawal from the crisis might be possible if the country’s leaders put their mind to it.

POLITICS

Askar JAKISHEV Ph.D. (Hist.), associate professor at the American University in Central Asia (Bishkek, Kyrgyzstan)

Zaynidin KURMANOV D.Sc. (Hist.), professor, independent researcher (Bishkek, Kyrgyzstan)

he final split in the camp of those who won the “revolution” was a major political event in 2006. For the first time in the history of its independence, the country acquired an ideological opposi- T tion to the president in the form of the For Reforms movement. It detached itself from the Peo- ple’s Coalition of Democratic Forces (which included twenty parties and other structures, as well as democratic NGOs). A nationwide democratic opposition was an absolutely new political phenomenon in a country that had so far known only an opposition based on clans and regional groups. The “winner takes all” was the outcome of the March crisis: despite the Bakiev-Kulov tandem, southerners filled all the ministerial posts in the first post-revolutionary Cabinet. The victors were obviously unwilling to share power to save the regional-clan balance. The second president of the Kyrgyz Republic, Kurmanbek Bakiev, was accused of deliberately postponing the already promised constitutional reform expected to destroy the authoritarian system and its legal foundations. This was how the split was explained to the nation. The For Reforms movement organized a series of mass acts of defiance to insist on constitutional reform, which brought thousands into the streets. On three occasions the capital reached the brink of a coup d’etat. This was the second key political event of 2006. The Nesting Doll scandal in Poland, where Omurbek Tekebaev, one of the opposition leaders and former speaker of the Kyrgyz parliament, was caught bringing heroin across the border in a nesting doll, was the third politically significant event. The Poles acted promptly; they sorted things out, acquitted the detained politician, and apologized. Public opinion 183 CENTRAL EURASIA 2006 Analytical Annual blamed the Nesting Doll-Gate on the leaders of Kyrgyzstan. The politician emerged unscathed, while those in power tarnished their image. The government’s image suffered even more when the opposition spread information that the sworn enemy of the Russian president, oligarch Boris Berezovskiy, had visited the country and met its leaders. This, in fact, triggered the November events that shook the country and forced the people at the top to urgently adopt a new Constitution. When it started, 2006 did not promise any political calamities. The new ruling elite insisted very much as before that the country should be ruled from above and that the somewhat undermined vertical of power should be strengthened with people personally devoted to the president or with those who had a rich Soviet or Akaev school of administration behind them. The presidential administration explained the postponed constitutional reform by the need to mend the economy. In the meantime, it made a great show of its alleged concern for the people by distributing Russian cars and Chinese tractors among the members of the lower self-government levels, hospitals, and farmers free of charge. The new rulers boasted of every commissioned industrial enterprise as their personal achievement. Gifts could not improve the situation, but they did improve the president’s image. Information about the gifts confirmed the popular paternalist idea about a strong and kind ruler, especially tenacious in the agricultural areas. The nation consoled itself with the thought that there were still people at the top who think about the common people and that not everything has been stolen from the state coffers. The new government had to resort to certain image-building measures to convince the nation to accept it as legitimate. The practice of free school meals (introduced in the 1950s by Communist leader Iskhak Razzakov and very popular with the people, although discontinued since then) was restored after a long interval. In pursuit of popularity, the people at the top went even further: they formulated a new law on the guarantee of opposition activities, with which the public was duly impressed and which the opposition indignantly rejected. The government, which under the Akaev Constitution served as a lightning rod for popular discontent, was still playing this unenviable role. Its composition, the result of a compromise, spoke of the president’s range of possibilities where intellect and power were concerned. The Cabinet was chiefly staffed with people from the south and with a few northerners personally known to Bakiev and his retinue and personally involved in bringing down Akaev and his regime. Prime Minister Felix Kulov, less affected by clan biases and devoted to the idea of national unity, acted as a peacemaker and a target of criticism both from the presidential and the opposition camp. The Jogorku Kenesh, made up of the deposed president’s loyal supporters, constantly changed sides: during the November crisis the opposition knocked together a parliamentary majority that demanded constitutional reform. There is the opinion in the expert community that it was the weakness and passivity of those in power that forced the conformist deputies to shift between the power centers in search of a safe place to put down anchor. People joined the opposition for different reasons: there were President Bakiev’s former comrades-in-arms in its ranks, as well as the so-called Young Akaev- ites who, obviously, had no future under the new government. After the failed attempt to push through his own version of the Fundamental Law in November 2005, President Bakiev issued a decree that opened the second stage of the constitutional reform to be carried out in stages and completed by the fourth quarter of 2006. After the storm of mass defiance acts involving about 3,000 people that shook the country in spring and fall and accompanied by land seizures and “expropriation of expropriators,” the government achieved at least outward stability. In January 2006, the parliament refused to appoint Roza Otunbaeva, the driving force behind the 2005 March coup, as foreign minister. Later Prosecutor General Azimbek Beknazarov, one of the most active participants in the 24 March revolution, lost his post. Soon after that, Minister of Industry Almaz Atambaev, another “revolutionary” leader, resigned. The squabbles behind the scenes and the intrigues in the “royal court” removed many of the active figures of the Tulip Revolution: Governor of the Osh Region Anvar Artyk- ov, Vice-Premier Ishengul Boljurova, etc. The “revolution” was devouring “each of its children in turn”

184 KYRGYZ REPUBLIC Politics in order to vacate seats for former Soviet and Akaev functionaries. They were lured back because, according to President Bakiev, there was no choice. This convinced the revolutionaries that they, and their cause, had been betrayed. After a while disappointment developed into the slogan “Bakiev, ketsin!” (Go away, Bakiev) tested during the previous crisis that removed President Akaev. Domestic policy looked more like a boxing ring than anything else: as a young man, the incumbent president did a lot of boxing, which probably made him a hard liner who relied on force. Words were the main weapon of the first round, which ended in 2005. In the second round, which began in 2006, the opposition became resolved, based on the weight of the pros and cons of the new leader, to deliver the final blow. Defeat was unexpected yet logical: the opposition was too diverse and too unscrupulous; it could not sacrifice its interests to the interests of the nation—what was more, it did not want to do this. In the parliament, in a bout of political frenzy, its speaker, Tekebaev, who for over 15 years was in opposition to the Akaev regime and who was convinced that the new president was nothing more than Akaev’s political heir, insulted President Bakiev for his earlier criticism of the parliament. The strained relations between them, which dated back to the last period of the Akaev regime, developed into hatred. Omurbek Tekebaev answered the demands of public apology with resignation. The president, in turn, countered the parliament’s refusal to let the speaker go by categorically demanding that the speaker be removed. This added another twist to the spiral of political tension. After swelling with Bakiev’s former supporters, the new opposition promptly moved into the offensive; it haunted the president with never ending discussions of numerous politically important issues. This happened when the parliament discussed the so-called passport scandal, in which corruption deprived 400,000 citizens of the Kyrgyz Republic of the freedom of movement; when deputies busied themselves with fruitless investigations of cases of corruption in which the former president and his family figured as defendants; when the parliament demonstrated its concern over the criminalization of the authorities and the investigation of political assassinations; when the deputies wanted to know why no one had been punished for the Aksy tragedy of 2002, when a peaceful demonstration was fired on. Each of the discussions threatened, and sometimes ended in a demand for impeachment of the government or some of the ministers. The president, who indulged in fruitless yet emotional discussions with the opposition, delivered ill prepared speeches, and chaired meetings that smacked of gatherings of Party activists in Soviet times, only added fuel to the already burning fire. The impression was created that the president was living in the Soviet past and that there was no one who could advise him. The Soviet heritage was especially obvious in the republic’s foreign policies: Kyrgyzstan behaved as a vassal of the Kremlin willing to exchange a global strategy for tactical concessions and minor gains. In April, the For Reforms movement called a mass rally on the capital’s central square to demand constitutional reforms, resignation of the most odious of the bureaucrats, and an end to criminalization of the government and corruption. The event’s peaceful nature notwithstanding, the rally alarmed the powers that be (to the same extent as any unsanctioned public event on the same square), but the president managed to get away unscathed. The demands were ignored; the opposition, on the other hand, demonstrated that it was much more than a handful of discontented deputies, as the authorities described it, but a political force with a multi- thousand following. After getting Bakiev and Kulov to make an appearance, the rally catcalled their im- promptu speeches and promised to come back if their demands were not met. Despite the frantic efforts of the country’s leaders, the opposition gathered another huge rally on the same square. This time Bakiev had to sacrifice the most odious of his team members—administration head Usen Sydykov and State Secretary Dastan Sarygulov—who he was tired of himself, and promised to present a draft Constitution to the parliament next fall. Soon after that, the president initiated the third stage of the constitutional reform under the supervision of opposition deputy A. Beknazarov, the president’s comrade-in-arms during the revolution. The expert community is convinced that this was a purely political appointment prompted by several considerations. First, the president wanted to create the illusion of political activity and blame the opposition

185 CENTRAL EURASIA 2006 Analytical Annual for any possible failure. Azimbek Beknazarov was well known as a radical nationalist without in-depth knowledge of constitutional law, therefore failure was more than possible. The group, which started out with a whole gamut of exotic ideas, concentrated on issues of secondary importance, such as depriving the Russian language of its official status, rejecting the republic’s secular status, and introducing the idea of an “ecological state” into the Constitution’s range of concepts. The democratically minded public, very much concerned about these issues, tended to ignore the key problems. In the fall, experts declared that the three alternatives proposed by this group, i.e. a mixed, a presidential, and a parliamentary form of government, did not correspond to the demands of the time or to the special features of the republic’s current stage in development, were not constructive and, in short, incompetent. After the Venice Commission also gave a negative assessment of this work, the president publicly denounced the activity of Beknazarov’s group. The ruling elite and the expert and civil communities failed to present the most politically developed and active of the Central Asian nations, which had demonstrated its readiness to accept political, economic, and spiritual modernization, with a fundamental draft law worthy of it (in all, there were 14 alternatives). A great scandal fanned by the still fresh memories of the September provocation in Poland loomed on the horizon: the public wanted to know who was responsible for the fruitless eighteen months of constitutional reform. It was defused by a statement issued by the Venice Commission saying that the version submitted by the constitutional conference on 17 June, 2005 was the most preferable. On 2 November, when it became clear that the president had failed to fulfill his promise and after a series of unconstructive talks with him, the opposition, true to its May threat, convened another mass rally on the central square. This was the apogee of the smoldering confrontation between the opposition and the president; the people demanded the resignation of the president and the premier. Several days later, on 6 November, the president hastened to submit the promised version to the parliament, which drove the tension even higher. On that day, the crowd that gathered on the square was even larger (up to 50,000, compared with more than 25,000 on 24 March). Some of the militiamen even moved onto the people’s side. The wave of defiance reached the district and regional centers; the privately owned NTC channel broadcast non-stop from the Ala-Too Square in Bishkek for a week. The country was seeing something reminiscent of the coup in March 2005; people listened to speeches accusing the people at the top of corruption, of having close ties with criminals, of betraying the revolutionary ideals, etc. This went on while the state channel (which the new leaders promised a public status) broadcast music and labor achievements. Once more it was hard to distinguish between the old and the new regime. To hold on to their audience, the official channels had to start covering the developments; on the same day, they broadcast a plenary sitting of the parliament, at which the absolute majority set up a Constituent Assembly to overcome the lack of quorum needed to pass the Con- stitution through the parliament. The newly created structure passed the opposition’s version by roll- call vote. The very next day, the government, which regarded these events as an attempted coup, began gathering its own crowd of employees from official structures and state-financed organizations to demand disbandment of the parliament and recall of the opposition deputies. On 8 November, the militia acted promptly and efficiently to prevent a serious clash between the opposition and the pro-government crowds. The situation reached the point beyond which talks were the only alternative to potentially dangerous developments. The sides initialed the agreed version of the new Constitution. This was the opposition’s moral victory: the initialed version redistrib- uted some of the presidential powers in favor of the government and the parliament. It, or rather the parliamentary parties, acquired the right to form the Cabinet. Under the new Constitution, no less than 50 percent of the parliament should be elected by party lists. This was a great achievement, but it should be said in all justice that President Bakiev suggested this in his first year in power. The new twist in tension and the November consensus gave the country a new Constitution that, as its authors hoped, could stem the authoritarian trends. A preliminary analysis testifies that the new

186 KYRGYZ REPUBLIC Politics

Fundamental Law is a progressive document which is much more liberal than its predecessor. It contains more checks-and-balances, broader human rights and freedoms, and stronger guarantees for the ordinary people. The future course, however, remains an enigma: will the country move toward democracy or will it shift once more toward authoritarianism? Experts believe that the doubts stem from the absence of conditions in which the new norms can be executed and the new mechanisms start working. The Constitution’s faults are explained by the haste with which it was passed amid the November crisis, the need to reach a difficult consensus, and by the fact that jurists’ opinions were ignored when putting the final legal touches to this document of significant importance. The opposition is convinced that President Bakiev showed one and all that he was loyal to the Akaev Constitution and intended to preserve the presidential form of government. This and his other promises, which remained on paper, as well as actions that compromised the government were instrumental in pushing the masses onto the side of the opposition, which, in turn, deliberately or otherwise, acted in keeping with the liberal slogans of human rights and freedoms, thus translating the results of its struggle into the Fundamental Law’s legal norms. To ratify the draft Constitution, which was more progressive than its predecessor, and to build a base for its further actions, the opposition skillfully used the public’s keen interest in issues relating to the official language, the status of the state, citizenship, etc. The rally would have unlikely fought for the official status of the Russian language or for the abolition of capital punishment, but the package of innovations in the human rights sphere justified the opposition’s efforts in the eyes of the nation and international community. Had President Bakiev been more sensitive to civil society’s expectations, he could have tipped the balance in his favor and achieved almost complete stability in the country. Had the opposition deputies limited themselves to coordination and Cabinet formation issues, no matter how important, designed to achieve a balance among the power branches, the country’s leaders would have immediately accused them of pursuing their own selfish aims. This means that the fact the above-mentioned norms were included in the opposition’s agenda played a no less positive role than the steps taken toward a more balanced system of power. Some of the constitutional provisions adopted in haste in the extreme situation were inevitably vague and called for further specification. The interest coordination procedures were new to the Kyrgyz political class. Normally, politicians should not be engaged in law-making (or Constitution writing, for that matter)—they should identify aims, pose tasks, formulate principles, and express their political will when approving an agreement or a treaty, on the strength of which lawyers draw the necessary documents. If the Kyrgyz politicians had adhered to the worldwide practices from the very beginning, the country would not have had to adopt four constitutional drafts within the space of two months. The last days of 2006 brimmed with events that showed the new Constitution had failed to resolve the conflict between the government and the opposition. The people at the top were dissatisfied with the balance of political forces; they planned a revanche with the help of the law- enforcement structures. Aware of this, on 7 December the For Reforms movement announced that it was being persecuted; it demanded that the president stop the “repressions” to prevent it from returning to acts of defiance. On 19 December, the Cabinet suddenly resigned under the official pretext of allowing the new Constitution to take effect. In actual fact, however, the Cabinet was facing an inevitable fiasco in the parliament, where it had to deliver its annual report. The country was hit with the fifth political crisis in the last eighteen months. The president accepted the resignation, but instructed the Cabinet to go on working until a new Cabinet was formed. This very step, however, took the parliament unawares, even though the deputies had been talking for some time about calling for the government’s impeachment. For the first time they were confronted with the very real danger of disbandment: under the new Con- stitution, the Cabinet could be formed by only those political parties that ran for parliament and won (the present parliament was formed according to the majority rather than the party principle). After it recovered, the parliament argued that there were no constitutional reasons for disbandment and invited the president to form a new Cabinet on the strength of the current law. In turn, the president de-

187 CENTRAL EURASIA 2006 Analytical Annual manded that some of his powers (the right to appoint executive and judicial officials), which he had lost to the parliament, be returned. The opposition retaliated by describing President Bakiev’s demands as political revanchism. On 30 December, the president delivered a castigatory speech in the parliament, in which he accused the deputies of inaction and slowing down the reforms. He also said that the KR Security Council would meet later on the same day to decide the parliament’s future. Con- fronted with the imminent threat of disbandment, the parliament (including the opposition) capitulat- ed: it promptly accepted the agreed constitutional amendments, which, according to the deputies, removed all the contradictions from the new Constitution. Only three out of the total 15 opposition deputies voted against this, Omurbek Tekebaev, the opposition leader, being one of the three. On the whole, 2006 turned out to be another year of instability and contradictions, paradoxes and discoveries, profound disappointments and optimistic expectations. The republic is the region’s most open state with a strong civil society and freedom of speech; at the same time, it is the least organized country with weak state institutions and an inefficient bureaucracy. It was a year of the nation’s involvement in politics—a sign of its disappointment in the current developments, and of its health. The people are dissatisfied with the new rulers; they are apprehensive of the country leaders’ ability to fan dangerous conflicts and of their inability to disentangle the country from them. The public expected that the new government would promote democratic reforms—its hopes were not justified. The critical attitude toward Akaev’s legacy did not develop into a systemic struggle against its negative aspects. It turned out that President Bakiev was a devoted follower of the Soviet traditions, which were rapidly sinking into oblivion, and that he was a good psychologist and an expert in clan solidarity values. In 2006, he was insensitive to the political realities based on a consensus among and the concerted efforts of all the power branches under public control. His personal attempts to replenish the dwindling ranks of the leaders of the Soviet era say a lot about his political landmarks and reformist potential. In 2006, Kyrgyz politics remained unpredictable and permitted no reliable forecasts. A couple of politicians could upturn any strategy. The situation changed rapidly because, in an unstable and closed political system, decision-making belonged to bureaucrats guided by their immediate interests rather than long-term programs. In fact, power in the Kyrgyz Republic is not used to improve the situation and move the country forward, but to line pockets and stay in power by selling off the country, distributing lucra- tive posts, and bribing voters. Still, there are signs of a new generation of politicians who think and act rationally and who are prepared to use ideological values to restructure social relations. There was a lot of activity at the very top, where some bureaucrats were shifted from one post to another, while others lost their posts. There was less activity calling for stronger social ties and restructured relations in the social sphere; the new Constitution was the only exception in this respect. Social imbalance became imminent; the leaders were splitting the country into regions; without a clear course and clear idea about the world around them, they were doomed to haphazard actions. Intrigues in the victors’ camp worsened the situation still more; members of the criminal community secured positions in the higher echelons; and the government no longer used the democratic rhetoric that had become part of the nation’s political culture. The country was living amid skyrocketing prices and wage increases in the budget sphere. Its level of freedom was higher, along with a higher level of corruption. More taxes were paid, while the GDP dropped to a historical low. There was a lot of talk about an economic upsurge and investment flow, while the country’s leaders spoke about joining the Heavily Indebted Poor Countries (HIPC) program. Today the public is waiting for the government to recover, get its second wind, outline the clear prospects, destroy the authoritarian system, modernize the formerly pseudo-democratic state, and ensure human rights. No fundamental results are yet to be seen, but personnel shifts are very visible. The leaders outlined such tasks as fighting corruption, uprooting poverty, building more industrial enterprises, etc., but they have not yet indicated the goals around which society could close its ranks. There is the uneasy feeling that no one is at the helm and that the leaders have no more or less specific policy to pursue.

188 KYRGYZ REPUBLIC Politics

The newly adopted Constitution nurtured the hope that the country would finally acquire a new political course and national aims, while the time of empty promises would come to an end. It is very important for the government and the opposition (as part of society) to speed up the establishment of social ties and the restructuring of social relationships. A dialog between them should be encouraged; it should become permanent and productive. So far, it is nothing more than a response to threats and ultimatums. In this context, President Bakiev should finally leave behind the Soviet and clan-regional legacy to become the leader of all the democratic forces. This will clarify the aims and increase public confidence in the country’s leaders. The instability is preventing the government from showing good results: in fact it is not much better than dead weight. The nation, naturally, is reluctant to trust this ill-educated and incompetent dead weight. Everything the authorities have to say is poorly substantiated; they parrot banalities that have nothing to do with what the people want. This breeds contradictory feelings and invites unfavorable comments. The nation does not believe that its leaders know the road to success, hence there is widespread pessimism about the economic strategies, as well as fear of authoritarianism and of the country’s gradual shift toward the camp of the “failed states.” Experts believe that instability in the Kyrgyz Republic is bred, among other things, by the people’s rejection of the new leaders as “their own.” “Their government” should be able to find a common language with civil society. Today the government badly needs the support of those social groups that have so far been rejecting it. Cooperation with democratic forces will add stability to the new government and will help it to breed new ideas and open new horizons. The importance of this can hardly be overestimated. Any other alternative is fraught with more political earthquakes, the state’s deeper degradation, international isolation, and the total failure of the economic initiatives and programs. In fact, other countries are showing mounting concern over the Kyrgyz leaders’ political inconsistency and their unwillingness to take reality into account for the simple reason that the republic is part of an unstable area, a place where cultures and the interests of the world powers meet, and a territory rich in energy resources and water supplies of global importance. Religious fundamentalism, terrorism, and drug trafficking figure prominently in Central Asia. No wonder the U.S., Russia, and the regional countries want Kyrgyzstan to become a responsible member of the world community; we should not expect any concessions because we are inexperienced. Over time, the world community will become more demanding and more insistent. The “December revanche” of the executive power branch and the parliament’s hasty capitulation showed that the country urgently needs a sustainable party system to replace the present system in which the parties have no role to play. It is curbing the democratic reforms and breeding political crises. It turned out that it was not enough for the Kyrgyz Republic to restrict itself to the ideas of democracy—the country needs ideas of liberalism as the shortest route to consensus. On the whole, the efforts crowned by the adoption of the new Constitution can be described as a democratic-liberal breakthrough. Even though the new Constitution is being executed amid difficulties and collisions and even though the parliament retreated and accepted the amendments under pressure, the new constitutional provisions can (and should) serve as a firm foundation for the state’s liberal-democratic development. No matter what the expert and political communities think, the new version of the Fundamental Law and the December amendments, as well as the fact that it was adopted, justified the March coup. This means that all the political forces should work hard to make the new Constitution completely legitimate; they should work together to achieve maximum stability and create conditions for the Constitution’s execution.

189 CENTRAL EURASIA 2006 Analytical Annual ECONOMY

Lyudmila BAUM Leading expert, International Institute for Strategic Studies under the President of the Kyrgyz Republic (Bishkek, Kyrgyzstan)

fter the events of March 2005, the country 2. Negative processes in production and the had to live and work in extremely unsta- social sphere assumed a long-term, persistent A ble conditions. Since the economy is very character. sensitive to drastic changes and immediately re- sponds by a decline in growth rates and worsen- 3. There was further pauperization of the popu- ing budget indicators, in 2006 it developed against lation, loss of skills, and degradation of the the background of negative processes. human potential. 1. The existing socioeconomic differences be- 4. Migration processes intensified, leading to a tween the regions deepened. Regional devel- reduction in the share of the economically opment policy was virtually absent. active population in the republic.

General Macroeconomic Situation

Whereas in 2005 there was an obvious decline in the country’s economic performance, 2006 brought the first signs of a recovery. Some economic indicators improved, but certain major indexes (industrial production, consumer prices) continued to worsen. The gross domestic product at year-end increased by 2.7% compared to the same period of 2005 (the government Program of Concrete Actions had projected an increase of 8%). Considering that this growth started from a negative value (–0.6% in 2005), it cannot be described as sustained.1 The slowdown in GDP growth is related to a decline in production from the Kumtor gold mine (by 36.2%), whose exclusion gives an economic growth figure of 5.1% (compared to 1.9% in 2005 and a target figure of 8.4% under the Program). GDP growth excluding Kumtor was influenced by an increase in production in the service sector (by 8.3%) and in construction (by 8.5%). GDP composition in 2006 changed insignificantly. As before, the major contributors to GDP were agriculture and the service sector, which have low fiscal (revenue-raising) capacity (see Fig. 1).

1 Here and below, statistical data are taken from the following sources: Itogi sotsialno-ekonomicheskogo razvitia KR za 2006 god, Analytical Report of the KR Ministry of Economy and Finance, Bishkek, 2006; Predvaritelnye rezultaty dei- atelnosti sektorov ekonomiki KR za 2006 god, Report by Acting Minister of Industry, Trade and Tourism M. Kerimkulov; Osnovnye pokazateli sotsialno-ekonomicheskogo razvitia Kyrgyzskoi Respubliki v ianvare-dekabre 2006, Ekspress-informat- siya—National Statistical Committee of the Kyrgyz Republic, Bishkek, 2006. 190 KYRGYZ REPUBLIC Economy

Key Economic Indicators for 2000-2006 (% change from previous year)

2000 2001 2002 2003 2004 2005 2006

GDP—real growth 5.4 5.3 0.0 7.0 7.1 –0.6 2.7

Index of industrial production 6.0 5.4 –10.9 17.0 3.7 –12.1 –10.2

Total agricultural production 2.6 7.3 3.1 3.1 4.1 –3.2 1.5

Fixed capital investment 37.3 –14.5 –9.6 –6.6 14.1 5.9 18.2

Inflation 9.8 3.7 2.3 5.6 2.8 4.9 5.1

Unemployment (official) 3.1 3.2 3.1 2.9 2.9 3.3 3.5

Foreign trade turnover (million dollars) 1,058.6 943.3 1,072.2 1,298.7 1,659.8 1,773.3 2,703.7

Primary budget deficit (% of GDP) –1.9 0.4 –1.1 –0.9 –0.5 0.8 1.0*

External debt (% of GDP) 102 94.1 114.5 104.2 95.5 82.0 72.8* Som/dollar exchange rate (annual average) 48.3 47.7 46.9 43.7 42.7 41.0 40.1

* preliminary estimates

S o u r c e s: National Statistical Committee; National Bank; Ministry of Finance.

Figure 1

GDP COMPOSITION IN 2006 Service sector Industry 41.20% 14.90%

Construction Agriculture 2.70% 28.90%

S o u r c e: National Statistical Committee.

191 CENTRAL EURASIA 2006 Analytical Annual Real Sector

Qualitative economic growth is inconceivable without the real sector and its main components: industry and agriculture. Their sustainable development means a reliable source of budget revenue and guarantees the state’s performance of its functions.

n Agriculture, which employs 50% of the country’s economically active population, accounts for about a third of GDP. Production in the agricultural sector totaled 72.2 billion soms (KGS), expanding by 1.5% (–4.2% in 2005) due to an increase in crop production (potatoes 9.9%, vegetables 3.3%) and, to a lesser extent, in livestock production (meat 0.7%, eggs 3.5%, milk 1.2%). Agriculture is excessive, whereas civilized trade is still a thing of the future. Despite much talk about marketing, progress in this area is very slow because of a lack of skilled personnel interested in new methods of work. Analysis shows the absence of any significant improvements in agriculture’s material, technical and financial status. Its share in the republic’s tax portfolio remains modest. Considerable progress has been made in land reform and farm restructuring: a new structure has emerged which gives all farmers access to land, and productivity at numerous small private farms is gradually increasing. We took pride in the introduction of private property in land, but many small farms practice subsistence farming. They lack technical and managerial skills and have limited access to the markets of productive resources and finished products, while the reduction in physical capital (when fixed capital depreciates faster than new investment is made) poses the main threat to agriculture in the long term.

n Industry. The share of industry in GDP is not large. It consists of the following sectors: small-scale engineering, manufacture of cement, sawn timber, refrigerating equipment, furniture, electric motors, footwear, fabrics, sewn products and foodstuffs, production of gold and rare earth metals. In 2006, industrial production fell by 10.2% (compared to 12.1% in 2005) because of significant cuts in production at enterprises operating the Kumtor mine (–36.2%). The decline in gold production is beginning to have an effect on economic development indicators. Based on the preliminary results of 2005, the Asian Development Bank (ADB) projected a decline in GDP growth in the republic to 5% solely due to the expected drop in gold production at the Kumtor mine and rising oil prices. Nevertheless, according to the ADB forecast, these losses could be compensated by the commencement of gold production from the Jer- ooy and Taldy Bulak deposits. But by the end of 2006 these deposits had not yet come on stream. Industrial production totaled KGS 50.9 billion. Growth in industry excluding Kumtor reached 4.2% (–4.6% in 2005) due to an increase in production in the textile and garment industry (by 19.1%), agricultural processing (by 8.2%) and manufacture of other nonmetal products (by 1.8%). Out of 14 industries, growth was recorded in nine: the building materials industry, engineering, metalworking, mining, the textile and garment industry, food production, manufacture of rubber and plastic goods, the pulp and paper industry, and the leather and leather goods industry. In recent years, textile and garment manufacture has posted steadily high rates of growth: 139.9% in 2004, 113.3% in 2005, and 124.8% in January-November 2006. The share of industrial enterprises excluding Kumtor in total industrial production is about 70%, and in 2006 they produced KGS 35.9 billion worth of products. It proved impossible to put into operation such major enterprises as the Kara-Balta Mining Complex, JSC Kristall, JSC Bishkek Engineering Plant, state-owned Bishkek Stamping Plant and JSC Kainda Cable Plant; OJSC Khaidarkan Mercury Complex, JSC Tekstilshchik and other plants operate at less than full capacity. Given their normal operation, the republic’s industry could have additional- ly produced goods in the amount of more than KGS 2.0 billion.

192 KYRGYZ REPUBLIC Economy

Out of 606 industrial enterprises, production growth was recorded at 262 enterprises (at the beginning of the year, the figure was 218). Thirteen new plants were put into operation. Work was started on the construction of large cement plants. Investment utilization totaled KGS 14,330.2 million, an increase of 18.2%. More than 4,000 new jobs were created in the country. The average monthly wage in industry rose by 22% (from 2005). Small and medium businesses made a significant contribution to industrial production. They turned out about 22.1% of total industrial output, while the number of people working at these enterprises increased by 28.8 thousand to 265.1 thousand. These figures point to steady growth in this sector. About 90% of all industrial and agricultural products are now produced in the private sector of the economy. Since 1991, 7,182 economic entities have changed their form of ownership. In its efforts to find new markets, raise product quality and management standards, and invest in human capital, the private sector as represented by micro, small and medium enterprises has become a leading force. An analysis of the situation in industry shows the existence of certain reserves which remain to be tapped. This includes a resumption and stabilization of work at large industrial enterprises and creation of favorable conditions for foreign economic, investment and business activities. The republic’s natural resource endowment—gold, mercury, antimony, tin, zinc, nepheline syenites, oil in limited amounts, etc.—attracts big foreign businesses to the development of mineral deposits. Joint ventures have been established with mining companies from Malaysia, Australia, the United States and Britain. The country’s rich hydropower potential (over 35 thousand lakes and waterways) is its main revenue item and a major driving force behind economic development. It provides drinking water for domestic use and water for irrigated agriculture, the hydroelectric power industry, public utilities, the food industry, manufacturing, the fish industry, and other water-consuming industries. Fifteen hydroelectric power plants (HPPs) enable the republic to export up to 2.5 billion kWh of electricity per year to neighboring countries. The largest of these is the Toktogul HPP (installed capacity—1,200 thousand kW), the Kurpsai HPP (800 thousand kW) and the Tashkumyr HPP (450 thousand kW).

n Investment. Among the factors that contributed to the increase in industrial production was a large inflow of foreign direct investment (FDI). Since 2002, it has increased at an average annual rate of around 20% (see Fig. 2). Figure 2

GROSS FDI INFLOWS (million dollars)

250 210.3 200 175.5 146.9 150 136.3 108.6 115.7 100 89.6 90.1 million dollars 50

0 1998 1999 2000 2001 2002 2003 2004 2005

S o u r c e: National Statistical Committee.

193 CENTRAL EURASIA 2006 Analytical Annual

As regards 2006, according to the latest data provided by the National Statistical Committee, foreign direct investment in the republic was $189.5 million, up 38.9% from the previous year; of this, $34.8 million went into mining, $75.8 million into manufacturing, and $33.6 million into financial activities. But these figures take no account of investment outflows. Most of the growing FDI inflows into the republic’s economy come from CIS countries. The main foreign investor out of a total of 48 countries investing in Kyrgyzstan in 2006 was Kazakhstan, which provided about $200 million. On the whole, statements of intent to cooperate with Kazakhstan add up to $2.5 billion. In the total amount of investment, foreign investments decreased from 24.0% in 2005 to 16.6% in 2006. Domestic investments are expanding, but they are still inadequate to enable the republic to reduce the inflow of foreign investments. During the years of reform, Kyrgyzstan has been unable either to attract the expected amounts of foreign capital or to ensure its proper quality. These failures are largely due to political and macroeconomic conditions (sociopolitical instability), mistakes in implementing market reforms and their incompleteness. In large part they are connected with flaws in the policy designed to attract foreign direct investment. The situation is complicated by excessive bureaucratization of the economy and related corruption problems. According to the results of a study carried out in February 2006 by the International Business Council (IBC), which unites most large foreign investors in Kyrgyzstan, the investment climate in the country is assessed as unfavorable. Besides, foreign investments mostly go into the trade sector, including commodity credit and construction of new shops, restaurants, cafes and elite entertainment centers, i.e., they are not used to meet urgent development needs but are channeled into areas where profit can be made quickly and with the lowest risk or where funds of dubious origin can be laundered without much difficulty. At the same time, potential investors are headed off by high taxes, a deficient system of customs duties, a fiscal regime not conducive to business, and a general situation of uncertainty. It is indicative that since the days of Kumtor no large capital investments have been made in our economy.

n Services. In 2006, the service sector as a whole accounted for about 41.2% of the country’s GDP. Real growth in this sector was 8.3%. It was due both to an increase in domestic consumption of these services and to the development of the republic’s tourist industry. But this industry is crucially dependent on external factors. There was faster growth in retail trade (except trade in cars and fuel): by 15.1% compared to 11.1% in 2005. Sale of goods in organized trade continued to expand. Hotel and restaurant services increased by 19.7% due to rising consumer demand for these services. Growth in postal and electrical communication services was 5.5%. Their development was promoted by the creation of a competitive environment in the communications market (267 operators are now active in this market). Freight transportation by all kinds of transport increased by 2.8% due to a rise in road and rail traffic. Passenger transportation by all kinds of transport rose by 1.8%, mostly due to an increase in rail traffic. At the same time, air transportation of passengers was reduced under the impact of high prices for material and technical resources used by civil aviation and progressive aging of the aircraft fleet, which has fallen behind current requirements.

n Tourism. At state level, tourism is regarded as a priority sector of the economy. A presidential decree On the Creation of Favorable Conditions for the 2005 Tourist Season and Measures to Ensure Further Development of Tourism in the Kyrgyz Republic (No. 307 of 9 August, 2005) has made it possible to conduct activities aimed at presenting Kyrgyzstan’s tourist industry, enhancing its attractiveness, and organizing the work of the appropriate services. In order to develop the tourist sector

194 KYRGYZ REPUBLIC Economy and improve its image, Kyrgyzstan took part in the main international tourism fairs. It held the first Kyrgyz international tourism fair entitled Tourism and Travel BITF 2006 and the eighth international tourism fair Issyk Kul 2006. As a result, exports of tourist services multiplied 2.2 times compared to 2005, including 2.7 times for tourists from CIS countries and by 18.8% for those from other states. The share of tourism in GDP was 3.5%. The total number of foreign tourists was only 809.9 thousand. Today the country has over 300 tourist firms and 4,787 officially registered enterprises engaged in economic activity in the sphere of rest and recreation. The average annual number of people employed in the tourist industry is around 6,500. Exports of tourist services (provided to foreigners visiting the country) were around KGS 5 billion, while the total amount of tax payments is estimated at KGS 210.0 million (166.7% of the 2005 level). In the development of the service sector, the advantages of small and medium business were particularly pronounced. Steady growth in this sector was due to the successful creation of private businesses, whose share came close to 100% (see Fig. 3). Further development of the tourist industry calls for more active use of effective market control instruments. Tourism has not yet occupied a fitting place among the various branches of the national economy, although it could become the main source of foreign exchange earnings and have a positive effect on the country’s balance of payments.

Figure 3

EXPORTS OF TOURIST SERVICES (Income from Services Provided to Foreign Visitors) (million dollars)

150 125

100 75.6 71.6

47.8 35.7 50

0 2002 2003 2004 2005 2006

S o u r c e: National Statistical Committee.

n Inflation. Until recently, low inflation was seen as an achievement of the authorities. But in March 2005 the consumer price index began to rise. In 2006, inflation was 5.1% (5.6% at end of period). It should be noted that the largest price increases were recorded for goods of strategic importance to households, such as food products (a rise of 6.7%) and services (the prices of housing services rose by 11.5%). In addition, there is a hidden form of inflation, which accumulates and after a certain period could lead to a jump in prices. The strengthening of the som against the dollar and the pursuit of a tight budget policy are still the main factors restraining inflation. The som/dollar exchange rate strengthened by 7.7% to 38.12 soms per dollar at year-end, while the average annual exchange rate was 40.16 soms per dollar. The strengthening 195 CENTRAL EURASIA 2006 Analytical Annual of the som was due to an increase in the supply of foreign currency and a weakening of the dollar against the world’s major currencies in foreign markets.

Trade Relations

Foreign trade is a priority for Kyrgyzstan in view of its open economy. An improvement in foreign trade is the main task in the drive to create an effective system of bilateral and multilateral trade and economic relations with countries that are of economic interest to the republic in the matter of maintaining traditional and penetrating new markets and in organizing transport and commodity flows. In 2006, the foreign trade turnover totaled $2.6 billion (up 41% from 2005). Exports of goods amounted to $719.5 million, expanding by 16.0% due to rising exports of fruits and vegetables, raw hides and skins, electricity, cement, oil and oil products. There are serious obstacles to enhancing the republic’s export potential: overconcentration of exports and their dependence on a limited range of goods; involvement of transit countries in the export process; and an overvalu- ation of Kyrgyz agricultural products for customs purposes. Imports of goods rose by 60.2% to $1,685.6 million. Consumer goods, fuel and energy products, machinery and equipment remain the dominant import items. So far we cannot compete with foreign producers even in the domestic market. As a result, this market is in large part filled with imports (with a corresponding underutilization of capacity at Kyrgyz enterprises). Faster growth of imports compared to exports served to increase the trade deficit, primarily in view of growing imports of equipment, raw materials and other investment goods (see Fig. 4). Kyrgyzstan’s bilateral cooperation is active with Russia, Kazakhstan, China, Uzbekistan, the United States, Switzerland, Turkey and other countries. At regional level, trade is increasing with virtually all countries. The development of bilateral ties is promoted, among other things, by meetings of intergovernmental commissions.

Figure 4

EXPORTS AND IMPORTS OF GOODS IN 2000-2006 (million dollars)

2000 1,909.2

1500 1,101.3 941 1000 717 554.1 467.2 586.7 500 504.5 476.1 485.5 581.7 718.8 672 794.5 0 2000 2001 2002 2003 2004 2005 2006

Exports Imports

S o u r c e s: National Statistical Committee; National Bank.

196 KYRGYZ REPUBLIC Economy

Figure 5

SHARE OF CIS AND NON-CIS COUNTRIES IN FOREIGN TRADE 120

100

80 47.7 45.1 45.8 47.1 51.7 55.4 55 60

20 52.8 54.9 54.2 52.9 48.3 44.6 45

0 2000 2001 2002 2003 2004 2005 2006

non-CIS CIS

S o u r c e s: National Statistical Committee; National Bank.

Significant changes in the geographical pattern of exports and imports have been recorded since 1999. In exports, the share of CIS countries has declined with an increase in the share of non-CIS countries, and in imports, on the contrary, the share of CIS countries has increased with a decline in the share of other countries (see Fig. 5). It should be noted that exports in trade with non-CIS countries have a steady tendency to increase. A certain reorientation of the Kyrgyz market toward non-CIS states is explained by the most- favored-nation treatment accorded within the framework of the World Trade Organization. The republic’s trade with WTO countries is not subject to duty; nor can these countries resort to dumping in their relations with Kyrgyzstan, as they do, for example, in their relations with Russia. In 2006, the government successfully submitted its first report to the WTO under the Trade Policy Review Mechanism. Kyrgyzstan is aware of the need to import certain kinds of raw materials and products from abroad. The country is interested in having many suppliers on favorable economic terms. This is necessary to stabilize the balance of payments and attract investors to industries where Kyrgyzstan has comparative advantages in the international market (see Fig. 6). Steps are taken in the country to improve and intensify marketing activities in foreign markets in order to promote domestic goods. The institution of trade missions is being restored. According to a survey carried out by the U.N. Development Program (UNDP) and Kyrgyzstan’s Ministry of Economy and Finance, the shadow economy in the republic reaches 53% of GDP, with serious damage inflicted by contraband. Marketable goods smuggled into the country are sold illegally on a large scale: fuels and lubricants, strong alcoholic drinks, tobacco products, beer and soft drinks, electronic equipment, household appliances, etc.

n External debt. Apart from domestic economic difficulties, the republic’s socioeconomic development is also impeded by its constantly growing external debt. Kyrgyzstan ranks among countries with an acute shortage of domestic financial resources for maintaining current economic activity and is obliged to apply to donors (creditors).

197 CENTRAL EURASIA 2006 Analytical Annual

Figure 6

FOREIGN TRADE IN SERVICES IN 1998-2005 350 305 300 250 231.1 200 180.4 154.3 148.8 151.2 151.3 150 124.97 255.5 100 142 154.7 208.9 million dollars 50 78.86 62.82 64.95 61.82 0 1998 1999 2000 2001 2002 2003 2004 2005

Exports Imports

S o u r c e s: National Statistical Committee; National Bank.

According to the Ministry of Economy and Finance, the country’s external debt in 2006 was $1,923.9 million (four annual budgets), in 2007 Kyrgyzstan is due to repay $75 million; by 2020, this figure is to reach $100 million (see Fig. 7). Out of the republic’s multilateral concessional and non-concessional debt ($1,279.6 million or 66.5% of total external debt), debt owed to the World Bank makes up 28.1%, to the ADB, 23.3%, and to the IMF, 8.9% of the total (see Fig. 8). Out of Kyrgyzstan’s total bilateral debt, 38.9% is owed to the Japan Bank for International Cooperation and 31.2% to Russia. The Export Credit Bank of Turkey is in third place with 7.8%. The country has restructured its debts to bilateral creditors, which make up about 30% of total external debt. The rest is owed to multilateral creditors, which have provided concessional loans with

Figure 7

EXTERNAL DEBT STRUCTURE

0.15% 28.6% guaranteed bilateral

7.1% 64.22% private multilateral non-guaranteed

S o u r c e: National Bank.

198 KYRGYZ REPUBLIC Economy

Figure 8

MULTILATERAL DEBT ON 1 JANUARY, 2006

28.1% WB 23.3% ADB

1.2% EBRD 1.4% IDB

8.9% IMF 0.3% NDF 0.3% OPEC 0.4% IFAD

S o u r c e: National Bank. a 10-year grace period (during which the republic has to pay interest alone, while payment of principal is postponed). In March 2005, the Paris Club and the Kyrgyz government negotiated new terms of bilateral debt restructuring, with a cancellation of 50% of all loans extended on commercial terms (about $124 million) and repayment of the rest over 23 years with a 7-year grace period. Loans provided as official development assistance in the amount of $306 million are to be repaid over 40 years with a 13-year grace period. Nevertheless, even after this restructuring the republic’s external debt will probably remain above the level of heavily indebted countries until 2008. In 2006, the parties considered the possibility of Kyrgyzstan’s joining the HIPC program, which can help to ease its debt burden within the framework of the Multilateral Debt Relief Initiative (MDRI). In case of implementation of the HIPC program and the MDRI initiative, external debt service in 2007 will be reduced by $27 million, and in 2010, by as much as $51 million, which makes up about 30% and 60%, respectively, of total current debt service due for these years. In subsequent periods, debt service reduction is projected at about 40%. The IMF and the World Bank promise that Kyrgyzstan will have an opportunity to write off its external debt to multilateral donors in the amount ranging from $250 million to $395 million, or from $13 million to $21 million per year. In addition, the World Bank and the IMF do not rule out a restructuring of up to 90% of Kyrgyzstan’s external debt to Paris Club members. In case of successful completion of the HIPC program, the republic will be able to obtain debt relief in the amount of $520 million. As a result, total debt cancellation will range from $770 million to $915 million, or an annual average of $20 million to $25 million. Overall, accession to the HIPC and MDRI, according to various estimates, will provide an opportunity for canceling multilateral external debt to the tune of $800 million to $1.3 billion. The Ministry of Econ- omy and Finance plans to implement this program in 15-18 months. At the same time, in order to enjoy debt relief the republic will have to meet sufficiently severe conditions. This includes invitation of international experts to take part in reforming the key sectors of the economy: energy and mining. The question of joining the HIPC initiative met with a mixed response in society, causing many public disputes. Given Kyrgyzstan’s sharply increased dependence on the outside world and foreign economic relations, one of the main threats to the country is its “marginalization” within the system of world economic ties and international relations. 199 CENTRAL EURASIA 2006 Analytical Annual Budget Policy

As in previous years, the state’s fiscal policy was designed to broaden the tax base and ensure priority financing of the social sector. Improvements in tax policy, including the enactment of a new Tax Code and tighter tax administration (against the background of slowing economic growth), made it possible to meet the target figure for budget revenues. From 2007, the country was to have switched to a two-tier budget2 consisting of the national and local budgets, with the exclusion of regional and district budgets. A legal framework for the new arrangement was provided by the Law on the Principles of Budget Law. In the future, the switch to a two-tier budget should do away with the transfer of funds from local budgets to the national budget, so encouraging local government bodies to increase their revenue-raising capacity. Under the new arrangement, the national budget is to get the whole of profit tax (90% of which is provided by Bishkek and the Chu Region), income tax (at a flat rate of 10%) and tax on in-house products. Serious hopes are pinned on VAT and excise taxes. In addition, the Ministry of Economy and Finance expects to get about KGS 700 million from sales tax and over KGS 360 million from land tax and property tax. Small business patents and licenses should bring another KGS 650 million. According to the draft budget: n the economic base for budget revenues is projected to increase in 2007 by 5.5% in real terms, and nominal GDP is to reach KGS 122 billion. Inflation should not exceed 5%; n total budget revenues including grants are to reach KGS 25.7 billion, rising by 12.3% or KGS 2.8 billion compared to the 2006 budget. The revenues of the national budget are to amount to KGS 22.9 billion, increasing by 14.0% or KGS 2.8 billion, while the revenues of local budgets are projected at KGS 2.9 billion; n expenditures are to reach KGS 28 billion (including grants). n the budget deficit is to exceed KGS 4 billion (excluding grants) or 2.8% of GDP. At year- end 2006, Kyrgyzstan’s external debt amounted to about 72.8% of GDP; n tax revenues going into the national budget are projected at KGS 18.4 billion or 15% of GDP, up 21.5% from 2006. As usual, budget expenditures exceed revenues. But investment spending is integrated with current spending. An expansion of the public investment program (PIP) based on external borrowing will lead to an increase in external debt. A system designed to reduce external borrowing has so far failed to take effect. Budget expenditures for external debt service in 2007 are to increase in view of payments due to bilateral creditors that are not members of the Paris Club. The budget expenditure structure is to remain roughly the same: 32% is to go into the social sector and 21% into the real sector. Fiscal policy in 2007 is to be focused on measures designed to reduce the budget deficit to 2.8% of GDP. Steady growth is projected in all sectors of the economy that contribute to GDP. In the service sector, growth is expected at 5.4%, and in agriculture, at 4%. These sectors provide around 70% of GDP. In industry, real growth is projected at 9%, both due to production from the Kumtor gold mine and to production growth in other industries. Growth in agricultural processing is to be about 7%, and in the textile and garment industries, close to 17%. In construction, growth is expected to reach 10% due to more active investment activity and an expansion of housing construction as newly developed mortgage loan mechanisms are put into effect.

2 In view of constant political changes, the decision on this issue was postponed. 200 KYRGYZ REPUBLIC Economy

In 2007, the government will continue to pursue a policy in support of liberal foreign economic activity. Industrial development is a priority area in the republic’s economy. In accordance with the Medium-Term Budget Forecast (a document determining the country’s budget strategy for three years ahead based on forecasts of the economic situation and budget revenues), the priorities for 2007 are listed as follows: n real GDP growth—at least 5.5%; n share of industry in GDP—at least 16.5%; n inflation—no more than 4.5%; n total budget revenues—at least 20.5% of GDP; n current budget expenditures (excluding PIP)—no more than 19.4% of GDP; n PIP expenditures (including capital investment)—no more than 6.2% of GDP. In view of the complicated situation, the development of the necessary reform programs was delayed. True, at the end of 2005 the government adopted a Program of Concrete Actions to Acceler- ate Economic Growth in 2006. The tax reform was continued. From January 2006, the rate of profit tax was reduced by presidential decree by 10%. Supplies of farm produce are to be exempt from VAT. Income tax was switched to a flat rate (10%). In 2006, a draft National Development Strategy was formulated in the republic. It charts the main lines of Kyrgyzstan’s development and activity for 2006-2010. Its general purpose is to raise the level and quality of life in the country by means of sustainable economic growth, a proper employment market, high and stable income, access to a wide range of social services, and high living standards in a healthy environment. Some of the expected results are as follows: in 2010, GDP per capita is to reach $728 (the figure for developed countries is at least $1,000); the average wage is to rise by 60%; and the budget deficit is to be reduced to 2.6% of GDP. Low inflation, which is to be ensured during the projected period by the continued pursuit of a tight monetary policy, will be a condition of macroeconomic stability and production growth.

C o n c l u s i o n

The end of 2006 was marked by sufficiently moderate inflation and a steady exchange rate of the national currency. As regards system indicators, the picture was different. The economic growth recorded in the republic was inadequate for the solution of vital problems. For example, this growth has so far had no effect on the position of most Kyrgyz households. The slowdown in industrial growth, agricultural problems, the energy impasse, low household income, the outflow of able-bodied people to other countries, rising consumer prices, high degree of corruption, and a substantial external debt virtually offset the positive trends in the national economy. The main cause of the problems in the Kyrgyz economy is subjective and is associated with lack of coordination between different branches of power. That is why sustainable economic growth requires a political consolidation of society. A practical solution of the problems arising in the operation of the national economic complex and faster economic growth are of paramount importance.

201 CENTRAL EURASIA 2006 Analytical Annual RELIGION

Kadyr MALIKOV Ph.D. (Philos.), expert at the Institute of Strategic Analysis and Forecasting at the Kyrgyz-Russian (Slavic) University (Bishkek, Kyrgyzstan)

Ikbaljan MIRSAYITOV Ph.D. (Political Science), chief expert at the International Institute of Strategic Research under the President of the Kyrgyz Republic (Osh, Kyrgyzstan)

n 2006, religious life in the Kyrgyz Republic structures carried out several much more vig- changed under the pressure of the following orous operations than before that identified I factors: and cut back destructive activities. 3. The secular authorities and the clergy contin- 1. There were more clandestine religious organ- ued their dialog and extended their coopera- izations than ever before; their impact on eve- tion. The official clergy continued to move ry social group became stronger, while the away from the political processes. Hizb ut-Tahrir Party moved into open con- 4. The power struggle between the young Mus- frontation with the authorities. lim elite, those earlier removed from high 2. The state became even more intolerant of re- posts and the official clergy went on in the ligious extremism. The law-enforcement form of pickets and rallies.

Some Relevant Figures

The sociological studies of the summer of 2006 conducted by the Institute of Strategic Analysis and Forecasting at the Kyrgyz-Russian (Slavic) University (KRSU) in the Osh, Jalal-Abad, Chu, and Issyk Kul regions and in the country’s capital of Bishkek revealed that religious feelings among the local people are rapidly growing: this proved to be one of the typical features of the republic’s religious life. The majority of the respondents (90.7 percent) said that they believed in Allah (87.9 percent of them have higher education). A large share of the polled (35.85 percent) followed all the pre- scriptions of their faith and regularly performed all the Muslim rites; 69.7 percent performed the rites sporadically, while 88.65 percent kept a copy of the Koran at home. According to the Agency for Religious Affairs under the government of the Kyrgyz Republic (hereinafter the State Agency), there are about 1,800 Islamic organizations, 1,648 functioning mosques, 10 Islamic religious foundations, 46 Muslim educational establishments (9 of them higher learning institutions), as well as 9 Christian foundations and societies and 5 Christian higher educational establishments in the country. There are 300 Christian organizations, a Judaic and a Buddhist commu-

202 KYRGYZ REPUBLIC Religion nity, and 46 Christian Orthodox and 30 Christian churches of other denominations, 15 of them Prot- estant. There are also sects and religious movements of Satanists, the White Church, Krishnaites, the Moon Unification Church, Falungun followers, etc. Several clandestine extremist (Hizb ut-Tahrir, Akromiya) and terrorist (the Islamic Movement of Uzbekistan, the Jamaat of the Central Asian Mo- jahedin) organizations are operating in the republic.

Official Islamic Activities

The republic’s official clergy are conservative-minded traditionalists: all of them were educated in Soviet times in the Islamic schools (hujra). Most of them are ill-suited to the type and level of religious thinking and contemporary realities of Muslim society, but since they are at the helm of the Spiritual Administration of the Muslims of Kyrgyzstan (SAMK) and hold high posts in the kaziats, they remain fairly influential. With Azreti Muratali Zhumanov as the Supreme Mufti, the SAMK has been trying to introduce radical changes into the Muslim community’s internal life. It is working toward more consolidated Islam in an effort to prevent a split and to raise the Muslim clergy’s authority in the eyes of their compatriots. To strengthen the vertical and horizontal structures of the SAMK, the supreme mufti is actively using his administrative resource. In 2002-2006, the Council of the Ulema and the SAMK issued over 50 fatwas (decisions) on traditional issues, such as Muslim festivals, the amount of sadaqa-fitir, the extravagancy and waste- fulness at funerals and weddings; the rules for getting permission to build madrasahs and mosques, and the organization of hajj. There were also fatwas dealing with matters of fundamental importance: finding a unified approach to Islamic education based on Ahli sunnat val jamaat; creating a commission supervising Muslim publishing activities; opening a southern branch of the SAMK; condemning political Islam in general and Hizb ut-Tahrir in particular; preventing the politicization of Islam, and discussing the daavat.1 On 31 July, 2006, for example, Supreme Mufti M. Zhumanov discussed with the religious leaders from the country’s south the need to increase the number of preachers in that region. The year 2006 proved to be a trying one for the SAMK; it had to organize hajj twice. The first season (late 2005-early 2006) was far from successful since over 2,000 people failed to reach Mecca. When working on the second hajj season, the SAMK, together with the State Agency, did its best to improve the organizational side. It published a fatwa “On Prohibiting Citizens of Kyrgyzstan from Traveling to Hajj by Bus,” while the State Agency organized a tender among tourist companies for taking the faithful to Mecca. The official religious structures were also plagued by other problems: —Weak control over the way money and other donations were spent; —Shortage of educated clergy; —Low level of the religious educational system (the inadequate intellectual level of many clergy members; society’s refusal to recognize them as a spiritual authority; and the fact that the diplomas of religious educational establishments remained unrecognized); —Inadequate material basis (nagging poverty, low wages of madrasah teachers and imams); —Intrigues among the clergy; —Generation gap in the clergy.

1 See: Tekushchee deloproizvodstvo DUMK za 2002-2006 gody. 203 CENTRAL EURASIA 2006 Analytical Annual

In view of the upcoming election of the SAMK head to be held in 2007, this gap is becoming more and more obvious. It might end in very negative developments; some young Muslims, who have already joined Hizb ut-Tahrir, Dawat, Tablih Jamaati, and similar organizations, may become even more politically active. This suggests that the spiritual administration system, its rules, and its structures should be reformed; the changes are overripe. It is no longer enough to merely replace the republic’s spiritual leader.

Unofficial Clergy and Religious Leaders

In 2006, unofficial clergy and members of religious organizations remained very active. In June, the Muslim jamaat wrenched a construction site for a large mosque and an Islamic cultural center from the Bishkek administration by bringing 10,000 of its followers into the streets. In 2006, women’s religious organizations made their voice heard for the first time. The religious and nongovernmental organizations, on the one hand, and secular authorities, on the other, could not agree on whether religious dress, hijab in particular, should be worn in public places. On 2 October, the Youth Group of Legal Education and Upbringing Foundation from Jalal-Abad protested against the ban of hijab in schools in an address to President K. Bakiev, ombudsman T. Bakir uulu, and Su- preme Mufti M. Zhumanov. Women’s religious NGOs gathered 30,000 signatures of those who wanted to be photographed for their passports in hijabs. A poll conducted by the Hadith Religious Public Association of the Women of Kyrgyzstan revealed that in the last few years the number of mosques in the republic had increased to 2,000. It turned out that they mainly attracted women and girls from poor families: divorcees and widows, single women, mothers with many children, the disabled, old age pensioners, orphans, students, and schoolgirls. The number of girls wishing to study the fundamentals of Islam in women’s religious organizations increased, which means that the number of such organizations should also increase and they should offer better training; over time they might even develop into a political instrument. By 2006, the number of those displeased with the SAMK and the State Agency for Religious Affairs had grown, their ranks swelling not only with private persons, but also with jamaats and public organizations, such as the Congress of the Muslims of Kyrgyzstan and Central Asia Public Asso- ciation, part of the SAMK Ulema Council, and the Initiative Group for the Reform of the Religious Administration. On 14 November, the Muslims of the Batken, Jalal-Abad, and Osh regions demanded that the head of state remove Supreme Mufti M. Zhumanov because of widespread corruption in the higher echelons of spiritual power. On 17 November at a press conference, those who had been earlier removed from their posts in the SAMK for the failure of the first season hajj (A. Zhoroev, A. Masa- liev, Zh. Matiev, and M. Dosbolov) supported the idea of reforming the SAMK. L. Kochkarov, leader of the Initiative Group, and his supporters accused the SAMK heads of lack of transparency when it came to distributing donations and of poor organization of the hajj, which humiliated the republic’s Muslims. The critics insisted that their demands were supported by the faithful of at least seven mosques of Osh: Srazhiddin, Manas-ata, imam-Muslim, imam-Baky, imam- al-Bukhari, Majirim-tal, Ali-al-Bait, and Salamon-Farsi.2 The Kochkarov group accused head of the State Agency for Religious Affairs Zh. Zhorobekov of “monopolizing the hajj to Mecca and making it a business enterprise.” The Hajj-2006 NGO, which united the pilgrims of northern Kyrgyzstan,

2 See: AKIpress, IA “24.kg,” Ferghana.ru. 204 KYRGYZ REPUBLIC Religion accused the State Agency’s head of unequal treatment of the future pilgrims when it came to distributing permissions. They insisted on his removal from his post; and some time later the group announced that it would collect the signatures of those who wanted to see M. Zhumanov and Zh. Zhorobekov removed. Despite loud statements and protests, hajj-2006 was successfully completed while both the mufti and the State Agency head retained their posts.

Illegal Organizations

During 2006, Zhammaty, Hizb ut-Tahrir, Akromiya, Nurchilar, Bayiat, and other illegal religious organizations remained in opposition to the government. In the first six months of 2006, the republic’s Ministry of the Interior identified 73 instances (compared with 22 in 2005) of religious extremism and dissemination of its ideas; it detained 78 people. On 20 occasions the ministry confiscated illegal firearms, explosives, and ammunition. Hizb ut-Tahrir demonstrated frantic activities in all fields ranging from protecting the rights of customers to polemics and an open confrontation with the authorities. In January, its cells organized mass actions in Jalal-Abad, timed to coincide with the Kurban Ayt festival. The authorities managed to prevent similar disturbances in the Osh Region. On 16 January, however, the Muslims of the Papan aiyl okmotu (Papan village administration) of the Kara-Suu District complained to republican ombudsman T. Bakir uulu that on 10 January the authorities had banned Ayt-namaz festive praying and a religious rite on a square in Kara-Suu. On 24 October, during the Orozo Ayt festival, the Jalal-Abad branch of Hizb ut-Tahrir carried out an action that involved the teachers of local school No. 7. Hizb ut-Tahrir tried to join the national discussion of the new version of the Constitution. In September, the official newspapers Slovo Kyrgyzstana and Kyrgyz Tuusu received leaflets and the draft Constitution of an Islamic state that included the following: the definition of a caliphate; the Islamic fundamentals of power; the power structure in an Islamic state; the type of property allowed in a caliphate; the international policy of a caliphate, and its economic system. What the party suggested had nothing in common with the ideas realized under the Righteous Caliphs; what is more, today the Islamic world itself rejects what the party wants to put into practice under the guise of a caliphate.3 The meeting between Head of the Regional Coordination Council for Religious Affairs and Deputy Governor of the Issyk Kul Region K. Zhumaliev and the people of Zhany-Aryk village (Kara- Jal village administration) held on 21 April ended in an argument between him and Hizb ut-Tahrir members. On 1 November, some of those present, who were displeased with the open confrontation, lodged an official complaint in the name of the Muslim community of the Jalal-Abad Region with the governor and the Regional Administration of the National Security Service (NSS) and other law-enforcement bodies against Hizb ut-Tahrir. The party is very active in the north—the Chu, Issyk Kul, and Naryn regions, and Bishkek— where it disseminates its destructive ideas.4 According to information supplied by the Kyrgyz news agencies, the number of confiscated leaflets, religious literature, and audio- and video tapes is much larger than in 2005.

3 See: I. Mirsayitov, “Sub’ekty politicheskogo islama v Ferganskoy doline and mery ideologicheskogo protivodey- stvia im,” Orientir. Analiticheskiy biulleten’ (MISI at the KR president, Bishkek), No. 1 (14), 2007, pp. 110-117. 4 See: AKIpress, IA “24.kg,” Ferghana.ru. 205 CENTRAL EURASIA 2006 Analytical Annual The Religious Sphere and Secular Power

Secular power never let the religious sphere out of its sight. Zh. Zhorobekov, who heads the State Agency for Religious Affairs, favors stricter state control over religious activities. Prime Minister Felix Kulov signed a cabinet decision that set up an Interdepartmental Council for Reli- gious Affairs and specified its composition. Its decisions, related to state policies in the religious sphere, are binding on the ministries, state committees, administrative structures, local administrations, and local self-administrations. At the same time, they are mere recommendations and are not supported by law. In July, the State Agency, with the assistance of USAID, convened a national conference in Bishkek called “The Development of Religions, Civil Initiatives to Improve the Realization of Free- dom of Conscience, the Expression of Convictions, and the Promotion of Conflict-Free Coexist- ence.” In September, Bishkek hosted an international conference called “The Contribution of Cen- tral Asian Muslims to World Civilization” attended by the republic’s State Secretary, A. Madumarov. On 24 November, the administration of the Jalal-Abad Region hosted a round table called “Youth, Religion, and Religious Trends,” at which members of the clergy raised the most burning issues of why young people have joined extremist organizations, why extremist organizations are popular in the region, etc. The dialog between the secular authorities and the SAMK became more consistent than before. Being aware of the complicated religious situation that developed by early summer in the south and of the need to improve relations with the authorities, the imams of 22 Bishkek mosques and the SAMK leaders promised not to interfere in the operations conducted by the law-enforcement structures in the capital’s mosques at a meeting with these structures held on 4 August. At the same time, the state has not yet fully tapped the huge religious potential to address the moral issues and improve the government’s image. This means that the country’s leaders have no long- term strategies in the religious sphere. Certain officials do try to use the religious resources or even create a “vegetarian” ideology based on the national epos Manas or Tengriism, which are absolutely alien to the people and can do nothing but split the nation and undermine the republic’s stability.

Secular Power Against Religious Extremism

In 2006, the country’s leaders intensified their anti-extremist and anti-terrorist efforts. On 31 March, during a special operation of the local administrations of the NSS and the Interior, six suspected members of radical religious organizations were detained in Osh and Uzgen. On 12-13 May, a group of six extremist fighters was destroyed in the Batken Region. A month later, special NSS units destroyed a group of five extremists in Jalal-Abad. Passport conditions in the republic’s south were tightened; streets were patrolled by law-enforcement structures; the movement of cars, people, and freight traffic across the republic’s borders was strictly monitored. This was done to prevent subversive and other illegal actions by organized criminal groups, religious extremists, and terrorist organizations. On 17 July, President Bakiev instructed the NSS and power-related structures to continue their active anti-terrorist and anti-extremist struggle in cooperation with the law-enforcement bodies of the republic’s neighbors. On 24 July, heads of the special services of Kyrgyzstan and Uzbekistan B. Tabald-

206 KYRGYZ REPUBLIC Religion iev and R. Inoiatov discussed the sociopolitical situation in the region in Ferghana (Uzbekistan) and agreed on joint operations and information exchange on religious extremist and terrorist groups. On 6 August, during the course of an operation in Osh, the two services, acting together, killed two IMU fighters, the imam of the Al-Sarahsiy main mosque of Kara-Suu, and respected theologian M. Ka- malov. The death of the latter triggered mass protests; T. Yoldosh, the IMU leader, issued a recorded statement that contained threats against the presidents of Uzbekistan, Kyrgyzstan, and Tajikistan. For ideological purposes the KR Cabinet showed a Kyrgyz documentary called Ihlas (Purifica- tion) about Hizb ut-Tahrir, its ideas and methods to a limited number of people. At the end of 2006, the Jogorku Kenesh (the parliament) passed a bill On the Struggle with Extremism and set up an Antiterrorist Center based on the NSS.

Tolerance and Dialog Among Religions: Between Preaching and Recruitment

During the years of independence, some of the local people embraced Protestantism, which split the titular nation. On 28 July, 2006, for example, 80 unidentified people burst into the house of a Kyrgyz Protestant pastor in the town of Kara-Kul’ja (Osh Region), searched the house, threw out his religious books and burned them in front of the gathered crowd. The last five to seven years have seen numerous conflicts over the burial of Christian Kyrgyz in Muslim cemeteries. The public is very concerned about the missionaries and reactionary sects that are actively operating in the republic, first, because they prey on the youth as the most impressionable part of the nation. The Protestant missionaries, for example, have set themselves the task of evangelizing the entire republic. Some of the missionaries of other confessions also find it hard to keep within the limits of religious tolerance: they tend to emulate the highly competitive secular society, thus turning religion into another social institution hardly distinguishable from a political one, which might lead the republic into the “Lebanese” trap. Certain theologians believe that to avoid potential religious conflicts all newly arrived Western missionaries should pledge to respect the local traditions and culture, as well as Islam and Christian Orthodoxy as the traditional religions. This means that they should accept the code of good behavior of sorts that has been observed for centuries by the two peacefully coexisting confessions.

Influence of Foreign States and Religious Centers

The Protestant churches are rich organizations with headquarters mainly in the United States. The largest of them are the Jehovah’s Witnesses with over 20 communities; the Pentecostals, the Seventh-Day Adventists, the Church of Jesus Christ, the Evangelical Christians in the Apostolic Spir- it, and the Baptists. The Jehovah’s Witnesses are the most odious of them; they act by means of psy- chological pressure, the weakest followers being turned into zombies. In Russia, the sect was banned several years ago. Christian missionaries have chosen the Kyrgyz as their long-term aim: most of them are Mus- lims without any more or less profound knowledge about their religion. This means that the number

207 CENTRAL EURASIA 2006 Analytical Annual of Christian Kyrgyz communities increases daily; local tongues (Kyrgyz, Uzbek, Dungan, etc.) are used in churches, while local priests join the ranks of the Christian clergy. The Protestant missionaries are very active among the national elite: in an effort to channel domestic policies, they push newly converted to the very top of the official ladder. Since 2005, the United States has been figuring prominently in the republic’s religious sphere: the U.S. embassy is involved in a program designed to create a more favorable image of Washington in the region through the local Muslim leaders. For several years now, USAID has been running “tolerance courses” for the religious leaders. There are plans to set up a conflict-prevention course for the local imams and NGO members. USAID uses the American University of Central Asia to distribute grants for Islam- ic studies in Kyrgyzstan. The University’s Center for Social Studies is working on this project with the help of local and Western academics and experts in Central Asia and the Middle East. The Center will be engaged in Islamic studies and offer lecture courses and seminars for the region’s academic and religious communities. The United States has also tapped the religious resources by making active use of the SAMK, the State Agency for Religious Affairs, unofficial NGO leaders, imams, etc. According to the latest information, starting in 2007, USAID will implement a program called “Islamic Studies and Conflict Prevention,” within which the southern districts and regions will get ALERT groups. Washington expects to receive information through mobile research centers of 3 to 5 local people at the mosques to monitor the developments in the Ferghana Valley.

Freedom of Conscience

There are still no laws to protect the state and the nation against all sorts of sects and foreign ideological pressure on the religious sphere. The loopholes in the vaguely worded laws allow the sects and radical religious organizations of the Ahmadiyya or the Moon Church type to function under different names and to carry out their destructive activities. There is the opinion that the Law on Freedom of Conscience should be tightened, but should remain within the international limits; freedom of conscience should be preserved at all costs. How- ever, the leaders of the two largest confessions in Kyrgyzstan, Islam and Christian Orthodoxy, insist that a ban on sects does not infringe on human rights and freedoms—such a ban will merely protect the nation against those who proclaim themselves equal to God. Theologians and clergy believe that, because of its too liberal laws, in the last 15 years Kyrgyzstan has become a hothouse for all sorts of religious sects banned elsewhere. In addition, the Law on Free- dom of Conscience says nothing about the rights of the clergy: after many years of serving God, the clergy, not entitled to pensions, retire into poverty. Religious education is likewise neglected. The available madrasahs and seminaries do not educate theologians. To restore its position, the government should pay special attention to what interferes with its effective work in the religious sphere. The state lacks a clear ideology, without which no strategy or tactics are possible. Officials tend to act outside their spheres of competence, which causes displeasure among the Muslim clergy and rejection of state policies.

C o n c l u s i o n s a n d T r e n d s

There are two obvious processes going on in this highly sensitive sphere, which only meet when the matter concerns the financial and other interests of the forces involved. The first of them is con-

208 KYRGYZ REPUBLIC Religion nected with the spread of Islam, staffing the SAMK, appointment of imams, organization of hajj, etc.; the second is directly related to the state and its structures empowered to deal with religious matters. The state structures have not yet resolved the main task: there is still no conception that would help organize cooperation between the state and religion. Under the Constitution, religion has been separated from the state, which seemingly says enough about the issue. Neither the SAMK nor the State Agency for Religious Affairs has detailed information on how many graduates of famous religious higher educational establishments of Saudi Arabia, Jordan, and Pakistan are now living in the republic; nothing is known about the level of their knowledge, and there are no plans to invite them to work for public benefit. Nothing is known about the graduates of local religious schools either. The SAMK plays a great role in keeping these people on the back burner: today the Administration’s personnel policy pursues personal rather than state interests. Recently new, previously unknown, trends have become obvious: the share of people with higher education among the practicing Muslims has grown; there are more militiamen and military among the faithful. The Friday services in Bishkek attract more teenagers and young men. These qualitative and quantitative changes allowed Tursunbay Bakir uulu not only to run for presidency, but also to get a significant number of votes. For the first time in the recent history of Kyrgyzstan, Hizb ut-Tahrir openly supported (mainly acting outside the mosques) a Muslim who prayed regularly as presidential candidate. Religion is developing into a weighty factor. Today, it is the turn of the country’s leaders to move promptly and act wisely to establish good relations with religion and stick to them. And the more successful they are in these endeavors, the more likely religion will be a factor of stability and social harmony. The alternative is too grim to contemplate: religion may become a political weapon and a destabilizing factor. Significantly, when the United States declared its uncompromising counterterrorist campaign, it turned out that the ideologists of terrorism that converted the ever growing number of people to their faith were much more dangerous than active fighters.5 Terrorism and extremism should be defeated in the Muslim community itself primarily through correct interpretation of the Islamic religious texts. This has not happened yet: the Islamic leaders are too fond of repeating the shop-worn formula that “terrorists have neither nationality nor religion, and that a true Muslim cannot be a terrorist.”6 The time has come to resort to ideological measures in order to oppose the extremist and terrorist ideas. We suggest the following:7 1. A unified curriculum of religious disciplines for all Islamic educational establishments (madrasahs, maqtabs, hujras, institutes, and universities) should be drawn up jointly by the Ministry of Education, Sciences, and Youth Policies, the Agency for Religious Affairs under the KR government, and the SAMK. 2. There should be better quality of training at the theological departments of state higher educational establishments. 3. A council should be created to analyze Ph.D. and doctorate theses on theology to weed out extremist religious ideas at the academic level. 4. An extended expert commission should be set up to analyze the religious literature brought in the country from abroad.

5 See: A. Krymin, “Oranzhevyi jihad. Hizb ut-Tahrir i regimy Tsentral’noy Azii,” available at [www.cainfo.ru], 17 May, 2006. 6 See: Ibidem. 7 See: I. Mirsayitov, op. cit. 209 CENTRAL EURASIA 2006 Analytical Annual

5. Dissent and intrigues inside the Muslim cleric community should be resolutely stemmed. Those analysts and politicians who believe that it is the task of the mosque imams to oppose Hizb ut-Tahrir are wrong. They should remain outside the conflict in conformity with the fatwa of the SAMK, which said that the mosque imams, whose main function is praying, should not be drawn into politics. This is the task of the most respected theologians. We should educate our own spiritual elite in a way that puts them on the same level as the Hizb ut-Tahrir ideologists.

INTERNATIONAL AFFAIRS

Muratbek IMANALIEV President of the Institute of Social Policy, Ambassador Extraordinary and Plenipotentiary (Bishkek, Kyrgyzstan)

Erlan ABDYLDAEV Expert at the Institute of Social Policy, Ambassador Extraordinary and Plenipotentiary (Bishkek, Kyrgyzstan)

fter the well-known events of 24 March, 2005, the Kyrgyzstan leadership headed by Kurman- bek Bakiev enjoyed an extremely high advance credit of trust from the international commu- A nity. Its ever-present resource potential could have brought the country very decent political and other dividends, if it, of course, were used sensibly and with a rigorous and constructive demonstration of the most vital elements of domestic policy. In this context, the constitutional, administrative, and economic reforms conducted by the Kyr- gyzstan leadership, the real drop in the level of corruption, the fight against organized crime (including the strong resistance to attempts by criminal groups to wheedle their way into the government), and the resolute efforts aimed at resolving other critical problems could have added significant “weight” not only to domestic, but also to intensive foreign policy maneuvering. But unfortunately, the republic’s leadership, engrossed in a fight for power against the opposition, could not resolve these problems, or at least designate the main approaches to their resolution. And as a result, in the eyes of its foreign policy partners, Kyrgyzstan is increasingly acquiring the image not only of an unstable, but also of an unpredictable state. The impression is often created that outside forces are not so much forcibly, as insinuatingly having an influence on decision-making. The tough struggle for power, which continued unabated the entire year, objectively pushed the resolution of foreign policy problems into the background to a certain extent, which, in all likelihood, determined the government’s low level of activity, orientation, and efficiency, and was the reason for the Kyrgyzstan leadership’s vague and unstable priorities in this sphere. This circumstance frequently led to foreign policy discourses, which could undoubtedly have a long-term and negative influence on

210 KYRGYZ REPUBLIC International Affairs

Bishkek’s relations with the outside world. What is more, the state’s leaders unfortunately made statements and engaged in campaigns that deviated both in essence and content in their contacts with several foreign policy partners. In the current domestic political situation, with the increasing pressure from Western countries, which are expressing a certain dissatisfaction with the course of the democratic reforms in Kyrgyzstan, its authorities were apparently obliged, and this was in general anticipated, to place the emphasis on strengthening relations with traditional and more understandable partners, primarily with neighboring republics and with other CIS states. In so doing, the Kyrgyz leaders named the CIS, CSTO, EurAsEC, and SCO as the priority international (including regional) organizations. In his address to the people of Kyrgyzstan (28 September), President Kurmanbek Bakiev talked about completing the drawing up of a new foreign policy conception for the Kyrgyz Republic, in which, according to him, corresponding corrections have been introduced, and which he asked the Jogorku Kenesh (parliament) to adopt as a law. But the draft of this foreign policy conception failed to undergo discussion in parliament before the end of the year and so was not publicized. The stalling of the reforms, primarily of the constitutional reform, and undermining of overall democratic values, and to be more precise, the retreat from them, the vagueness and frequent changes in view regarding the deployment of the U.S. military contingent at the Manas airbase, the deportation of U.S. diplomats and the deterioration in relations with Washington as a whole, the problem involving the Uzbek refugees, the periodical criticism by certain politicians of the agreements with China on state border issues, the problems that came to a head at the end of the year over joining the HIPC program, and hydropower and border problems with neighbors are just some of the problems the Kyrgyzstan leadership had to discuss with its foreign policy partners. What is more, it was clear that Bishkek had no consolidated views regarding a number of these problems. But even more depressing is the fact that the mass media and public often got their hands on internal, essentially understandable, disagreements in the upper echelons of power long before principal decisions could be made (to the detriment of the country’s foreign policy image). Kurmanbek Bakiev’s lack of strong domestic policy positions, right down to the potential threat of early retirement as president under pressure from the opposition and augmented by his foreign policy discourses, led to most of Kyrgyzstan’s foreign policy partners preferring to take a primarily wait- and-see stance, either after making a rigid point of where their interests lie, or after freezing relations with Bishkek at the lowest acceptable level. In this respect, it is worth noting that not a single delegation visited Kyrgyzstan at the presidential or prime ministerial level throughout the entire year: the heads of state and government who made tours of the Central Asian countries preferred not to visit Bishkek. Some experts note that the foreign policy precept “Kyrgyzstan returns home to Central Asia” declared by Kurmanbek Bakiev at the beginning of his presidency has begun to take effect, but, unfortunately, not in Bishkek’s favor. Due to the unstable dialog with key partners and the lack of interest in making advances toward each other, the president’s foreign policy field has narrowed down to relations with Russia, its Central Asian neighbors, and several other CIS countries, and in rare cases with Iran and Turkey. However, activity in other areas, American, European, and Asian, can hardly be called positive and effective. Further mechanical implementation of this doctrine could lead to a dis- ruption in the balance of interests of the foreign forces in Kyrgyzstan and to the country becoming dependent on one pole, which might end in a loss of independence on the international arena. Today, as was noted above, a trend is already being seen toward Bishkek’s transfer from a multi- vector policy to domination in foreign policy orientation and in the personal partiality of the top leadership in primarily one vector, the northern. Despite the insistent efforts exerted by the republic’s leadership and personally by President Bakiev himself to move closer to foreign policy partner number one—Russia—Kyrgyz-Russian re-

211 CENTRAL EURASIA 2006 Analytical Annual lations unfortunately did not undergo any obvious development. In all likelihood, the sides, primarily the Kyrgyz leaders, were unable to completely overcome the syndrome of Bishkek’s unfulfilled promises, in particular, Astana’s SCO statement (July 2005) regarding the deployment of U.S. army units at the Manas airbase. On the eve of his first visit to Russia (April 2005), Kurmanbek Bakiev attempted to correct the situation and restore the sympathies of the Russian leadership, again by making harsh demands on Washington. He presented the Americans with an ultimatum: either Kyrgyzstan would make a massive hike in the rent for the airbase, or the U.S. military contingent should leave the country. But Moscow reacted rather coolly to Bakiev’s gesture by immediately responding in the words of Chief-of-Staff of the Russian Defense Ministry Yuri Baluevskiy that Russia does not see a problem with the Pentagon deploying its contingents in Kyrgyzstan. According to the official information of the sides, the main goal of President Bakiev’s official visit to the Russian Federation on 24-25 April was to raise “bilateral relations to a qualitatively new level of mutually advantageous cooperation, primarily in the trade and economic sphere.” It was also reported that during the visit, the implementation (with the participation of major Russian companies) of specific projects in the oil and gas sphere, power engineering, and transportation were discussed, and the topic of cooperation in migration and cultural-humanitarian relations was touched on. But there were no “breakthrough” agreements or contracts signed, the sides limited themselves to protocols of intent. What is more, by the end of 2006, there was no evidence that these protocols were being executed in the Kyrgyzstan economy. The joint document adopted at the end of Bakiev’s visit primarily reflected Russia’s interests and not Kyr- gyzstan’s, particularly regarding Russia’s military presence in Kyrgyzstan, which, in all likelihood, is of primary interest today and one of the backbone elements in the Kremlin’s entire policy toward Bishkek. Moreover, during the year, Russian Defense Minister Sergey Ivanov and Head of the Nuclear Energy Agency Sergey Kirienko (as cochairman of the Russian-Kyrgyz Intergovernmental Commis- sion) paid visits to Kyrgyzstan, and Kyrgyz Prime Minister Felix Kulov visited Moscow. But they did not achieve any obvious progress in trade and economic and other areas of bilateral cooperation. In the middle of 2006, a new irritant unexpectedly appeared in Kyrgyz-Russian relations. Infor- mation appeared in the Kyrgyz mass media that Boris Berezovskiy was due to make a blitz visit to Bishkek and meet with several Kyrgyz officials. Despite Bishkek’s and Kurmanbek Bakiev’s personal denial that Russian President Vladimir Putin’s main rival was due to arrive, the Russian Prosecutor General’s Office nevertheless confirmed the fact, which clearly did nothing to promote mutual trust between the leaders of these two countries. Experts note the development of the situation around the above-mentioned Manas airbase and the topic of Kyrgyz-American relations as a whole as the most prominent influential factors on Kyrgyzstan’s interrelations with other foreign policy partners. In the absence of economic interests in Kyrgyzstan and despite the U.S.’s essentially zero goods circulation and zero investments, Washing- ton’s interests here are mainly concentrated in the military-political sphere and in advancing the democratic reforms. The Manas airbase is a key element for the White House, not so much with respect to American-Kyrgyz relations, as regarding its military-political interests throughout Central Asia. This most probably explains the deliberately cautious stance the U.S. assumed during the repeated changes in the Kyrgyz leadership’s viewpoint on this question, including regarding the ultimatum declared in April for reconsideration of the airbase’s rent agreement. In July, the talks between Kyrgyzstan and the U.S. initiated by Bishkek ended in a decision to use this airbase to support the antiterrorist coalition operating in Afghanistan. When the talks were over, Kyrgyzstan Security Council Secretary M. Niyazov and U.S. Deputy Assistant Secretary of Defense for Eurasian States James McDougall signed a memorandum, according to which the Pentagon intended to allot more than 150 million dollars in the form of general aid and compensation (next year, after approval by U.S. Congress). But this question was not fully resolved and is still the main issue in Kyrgyz-American relations.

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The unexpected announcement (during the second half of 2006) that two U.S. diplomats were persona non grata also contributed to the cooling off of bilateral relations. And the final blow was the murder at the beginning of December of a Kyrgyz citizen at the Ganci airbase, which aroused the justified indignation of the republic’s society. The main event in Kyrgyz-Chinese relations was President Kurmanbek Bakiev’s state visit to the PRC, which reflected all the problems and nuances of the current interrelations of these countries. Beijing’s expectations were connected primarily with the political element of cooperation. During the visit, China’s supreme leadership tried to clarify as much as possible not only Bakiev’s viewpoint on the key issues of bilateral relations and regional and international policy, but also how intact and invariable this viewpoint would be in the long term. On the whole, for Beijing the matter entailed the possibility of reviving the political trust between the leaders of the two countries that began to floun- der after the events of 24 March, 2005, in particular with respect to security, which always defined (and will define) the dynamics of the development of relations in other spheres, primarily in the economy and trade and in the implementation of large economic projects. The main purpose of Kurmanbek Bakiev’s visit was to confirm the succession and strong adherence of the new Kyrgyzstan leadership to previously reached agreements (the main ones being political) and to settlement of the border issue. Beijing evaluated the Kyrgyz president’s official statement on these issues, including with respect to the border (despite the presence of political opponents in Kyrgyzstan itself), as a significant step toward restoring an atmosphere of mutual political trust. The question of America’s military presence in Kyrgyzstan in the immediate proximity of the Chinese border was also an important topic of the talks. The PRC made it clear that it was in favor of defining the time limits of the U.S.’s stay at the Manas airbase and against extending its mandate beyond the framework of the antiterrorist operation in Afghanistan. In all likelihood, Beijing was able to convince Bishkek that its position was substantiated and enlisted its support. In a joint concluding declaration, the sides stated with respect to this issue that “they would not allow third countries to use their territory to the detriment of state sovereignty, security, and territorial integrity of the other side, nor would they allow organizations and associations to act on their territory that posed a threat to the sovereignty, security, and territorial integrity of the other side.” The economic aspect of Bakiev’s visit to China was not the main one on the talks’ agenda and as a result, despite the statements of certain Kyrgyz politicians, no breakthrough decisions were reached in this sphere. The PRC, which does not regard Kyrgyzstan as a promising economic partner in the region, limited itself during the visit to offering a traditional grant to support the Kyrgyz economy (70 million yuan) and a government loan to build a cement factory in the south of Kyrgyzstan, in the town of Kyzyl-Kia. According to Bishkek’s economic projects—building a China-Kyrgyzstan-Uz- bekistan railway and exporting Kyrgyz electric power to the PRC—which have been analyzed and discussed for more than a year now, Beijing, as expected, suggested that they be studied in further depth, which can be taken to mean that it is not interested today in implementing them. On the whole, Kurmanbek Bakiev’s visit to China was primarily political in nature and was aimed at ending the prolonged pause in Kyrgyz-Chinese relations that formed after 24 March, 2005. Despite the absence of breakthrough decisions in the economic sphere, which it is hardly realistic to expect today, it should be acknowledged that the goal of restoring political trust between the leadership of the two countries was essentially reached. And this can be considered the most important outcome of Bakiev’s visit to China. The official visits of the head of state to the Central Asian countries, to Kazakhstan in July and to Uzbekistan in October, were of great significance for Kurmanbek Bakiev in that the political elites of Astana and Tashkent recognized him as the second legitimate leader of a neighboring state. The stated purposes of the visits, to stimulate and resolve problems of bilateral political, trade and economic, and humanitarian relations, were not achieved. The water, energy, border, migration, proper-

213 CENTRAL EURASIA 2006 Analytical Annual ty, and other bilateral problems with Kazakhstan and Uzbekistan could hardly be resolved during one visit. According to experts and the participants in the talks themselves, both visits were primarily aimed at sounding out each other’s viewpoints and searching for possible compromises. What is more, according to the traditions that have already developed, after the “successful” visit to Uzbekistan, Bishkek received notification from Tashkent that gas prices would be raised in 2007 by approximately 50%. Relations with other foreign policy partners—EU states, Japan, Asian and Arab countries— were not active and remained at the previous level. During the year, the sides exchanged rare visits and at levels no higher than the ministerial. The visit by the German foreign minister to Kyrgyzstan at the beginning of 2006 had more of an acquaintance-making nature with the purpose of clarifying Bishkek’s position on partnership with the EU within the framework of the German government’s efforts to prepare the European Union Strategy toward the Central Asian republics. On the whole, Kyrgyzstan’s position within the framework of multifaceted diplomacy also remained the same. The most important issues of cooperation with international organizations (including regional), which are capable of having both a positive and a negative influence on Bishkek’s domestic and foreign policy stances, can be singled out as follows: attitude toward the HIPC program, U.N. reform, and chairmanship in the SCO. The final decision on the first question, which aroused an out- burst of emotion in the country, was postponed until 2007, but, judging from the statements of the head of government and key ministers, the question was decided positively. As for the second issue, China and Japan, whose interests clashed on U.N. reform, tried to put pressure on Bishkek in order to gain its “for” vote. But the voting on U.N. reform was postponed until a later date, although the Kyr- gyzstan leadership must make a difficult decision regarding its choice of the particular alternative of U.N. reform, behind each of which stand the interests of the key world nations. Chairing the SCO and holding its next summit (in 2007) were transferred to Kyrgyzstan according to the Organization’s charter, that is, in accordance with the alphabetic rotation procedure. This gives Bishkek a good opportunity to advance its interests in this structure and show itself to the whole world. In 2006, another problem was clearly designated—management of Kyrgyzstan’s water resources within the framework of the rivalry among Russia, the U.S., and China. The American AES Company had been working for almost a year with Bakiev’s administration and with corresponding ministries on the problem of investment in building hydropower structures in Kyrgyzstan, justify- ing their projects with the need to diversify the export of electric power from the republic to the South Asian states through Afghanistan. It is entirely obvious that the Americans are not only trying to snatch the hydropower initiative from Russia, but are also using this project as an important element in forming what they call a “Greater Central Asia.” During his visit to Bishkek (August), U.S. Assistant State Secretary for South and Central Asian Affairs Richard Boucher also raised this question in a conversation with President Bakiev and promised all kinds of support on the part of the White House. In November, Kyrgyz Prime Minister Felix Kulov signed a protocol of intent on cooperation with the AES. Reacting to the Americans’ increased activity, who until 2006 did not respond to the Kyrgyzstan leadership’s desperate calls to assist in the development of the hydropower installations, the Russian leadership, which so far had not shown any noticeable interest in the Naryn hydropower cascade, also began to initiate its proposals for developing the power industry in Kyrgyzstan. At the EurAsEC summit in August, Russian President Vladimir Putin suggested creating a so- called Eurasian Hydropower Consortium, which could manage water resources and set up an infrastructure for the production, consumption, and export of electric power. The Russian Federation suggested that the hydropower facilities of Kyrgyzstan and Tajikistan join this consortium. It is clear that Moscow is striving not only to neutralize Washington’s activity, but also to take control over management of the region’s corresponding resources—the functioning and meting out of water supplies. This means an increase in the Kremlin’s influence, primarily on Tashkent, Astana, and Ashghabad, which

214 KYRGYZ REPUBLIC International Affairs directly depend on the water resources of Bishkek and Dushanbe. This dependence is due both to the production of agricultural produce and industrial crops, including cotton, and to several other problems, for example, environmental balance, and so on. Literally a week later, the Kazakhstan president issued a surprise invitation for the leaders of four Central Asian countries to meet in Astana. At Nursultan Nazarbaev’s suggestion, they again discussed the question of creating a hydropower consortium for the region. Kazakhstan expressed its water interests in the region, primarily in Kyrgyzstan. Nursultan Nazarbaev stated that Astana is ready to invest up to 2.5 billion dollars in Kyrgyzstan’s economy, in the first place in its hydropower industry. Uzbekistan (since it does not have the necessary material and financial resources) can still not compete with Russia, the U.S., and Kazakhstan in the fight for Kyrgyzstan’s water resources. But the “gas lead” often serves as an important tool of pressure on Bishkek when resolving these problems. And in December, Astana expressed the idea of creating a hydropower consortium within the SCO. To wrap things up, it should be noted that the events that occurred in Kyrgyzstan in 2006 again confirmed the conclusion that the country cannot pursue a strong and expedient foreign policy with a weakened and unstable leadership, stagnating economy, and overall shaky domestic situation. Kur- manbek Bakiev attempted to maneuver in a field that his own policy had made narrower by trying to enlist the support of Russia and China (above all), as well as of his closest neighbors, in order to strengthen his position as the second legitimate president of Kyrgyzstan and resolve the republic’s domestic economic problems. But it should be acknowledged that in the mid term, the stakes he has placed on the preliminary development of relations with Russia can hardly fully compensate for the clearly designated deterioration in relations with the Western countries, primarily the U.S. Based on this, not all the achievements in foreign policy in 2006 can be entered in Kurmanbek Bakiev’s assets.

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REPUBLIC OF TAJIKISTAN

GENERAL OVERVIEW

Jamila MAJIDOVA Represents the journal Central Asia and the Caucasus in the Republic of Tajikistan (Dushanbe, Tajikistan)

he year 2006 was a far from simple one for the republic, which according to the expert community finally acquired its post-Soviet national identity. In 2006, Tajikistan completed the process T of shaping its national statehood based on strong presidential power as one of the cornerstones. The presidential election, which remained the political leitmotif throughout the year, ushered in a new stage in the country’s history. The election held on 6 November attracted 170 international observers from 32 countries, the CIS countries included. Emomali Rakhmonov, who ran for the People’s Democratic Party of the Republic of Tajikistan, received 79.3 percent of the votes; the turnout was equally high—91 percent. The CIS observers described the election as “completely democratic and transparent,” while the OSCE observers were more critical. Their statement contained sharp comments. Only five out of the eight parties registered in the republic took part in the election. Three others (the Social Democratic Party of Tajikistan, the Democratic Party, and the Islamic Revival Party of Tajikistan) were not involved in the election process for various reasons. Long before election day, Rakhmatullo Zoyirov, who headed the Social Democratic Party of Tajikistan, refused to accept the election as legitimate, claiming that “in accordance with the Consti- tution of the Republic of Tajikistan, President Rakhmonov’s term in office ended a long time ago.” He found no supporters among the other party leaders. Split into two parts, the Democratic Party rapidly lost its “opposition impetus.” One of the factions, however, which the Ministry of Justice registered as the “only legal DPT structure,” nominated a candidate, who failing to gather the necessary number of signatures in his support as candidate, left the race. The other part of the divided party preferred to stay away altogether. Early in 2006, the Islamic Revival Party of Tajikistan intended to run for presidency, but in September its congress announced that the party would not participate in the election.

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In November, in the wake of the presidential election, the Cabinet was staffed with new members, the executive structure was reformed, and some prominent officials were transferred to new posts. Structural changes were expected and forecast, while the personal composition of the Cabinet remained something of an enigma. Experts believed that the old nomenklatura would be removed to open the road to a new generation of well-educated people adjusted to the new reality. This did not happen: the country remains dominated by economists of the Soviet school. The year 2006 opened new and enticing geopolitical perspectives: the republic was gradually moving toward much closer cooperation with the outside world, which promised many more foreign investments. So far, Russia remains Tajikistan’s main strategic partner. In recent years, the economy has been demonstrating stable economic growth: in 2006, the nominal GDP was 9,272,200 somoni ($2,811 million); in real terms it increased by 7 percent. The industrial sector grew at the expense of the production of aluminum and building materials; the agrarian sector increased the yield of non-cotton crops (fruit and vegetables by 52 and 40 percent, respectively, with the exception of potatoes and onions). Unprecedentedly high (12.5 percent) inflation was generated, first, by the very limited instruments of monetary policies, which weakened still further and, second, by much higher prices for imported foodstuffs and consumer commodities and a much high consumer demand. In 2006, import increased by 29.5 percent (and reached the figure of $1,723 million); and export rose by 54 percent ($1,399 million). The glaring deficit of the trade balance was patched over with the money Tajik labor migrants sent home from abroad. The somoni-dollar exchange rate dropped by 7.1 percent, from 3.2 to 3.43 somoni for $1, while Amer- ican currency continued its slide in relation to other key currencies and in Tajikistan’s closest neighbors. State budget revenue demonstrated accelerated growth (up to 19.2 percent of the GDP) and up to 17.1 percent of the GDP in the taxation sphere. In 2006, the state budget spent 18.8 percent of the GDP (without state investment programs); this made it possible to gain surplus of 0.4 percent of the GDP (36 million somoni). According to the Finance Ministry, by the end of the year, the state debt was $866 million, or 31 percent of the GDP. The State Committee for Statistics assessed the total volume of direct foreign investments at $385 million and other foreign investments at $120 million. On the whole, this amounted to 18 percent of the GDP. Early in October, a working group on Tajikistan’s WTO membership met in Geneva at the WTO headquarters. The republic was represented by Cabinet members, representatives of the ministries of economics and trade, state revenues and taxes, and other departments. According to the Tajik and WTO experts, the republic stands a good chance of becoming a member in the next couple of years. The government is working hard in this direction. Since the beginning of 2006, the total regulatory capital of Tajik banks increased by 8 percent to reach 268.4 million somoni. The International Finance Corporation (IFC) completed its study of the business climate based on polls of small and medium businesses. In the foreign policy sphere, the republic acted successfully. One of the most important tasks facing Tajikistan in 2006 was ensuring that the outside world had a positive response to the presidential election. The republic also succeeded in realizing several economic and energy projects. The country leaders skillfully maneuvered between American and Russian interests and just as skillfully used their intensified rivalry in Central Asia in the republic’s interests. The Russian vector in Tajikistan’s foreign policy rapidly developed: the two countries established even closer political and economic contacts. Russia, which openly supported Rakhmonov as presidential candidate, organized observers from the CIS and the CIS Interparliamentary Assembly; Tajik citizens could take part in the presidential election in 28 Russian cities.

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The negotiations on building the Sangtuda-1 HPP went smoothly; another construction project, the Rogun HPP, was not free from problems that worsened the bilateral relations between the two countries. Relations with the United States, although not very intense, developed at a good pace: both sides obviously wanted to preserve the already achieved level of mutual understanding and cooperation. The United States initiated several military projects (both bilateral and multilateral within NATO partnership) and extended technical assistance to the power-related structures (the Ministry of the Interior and the Border Guards). Washington’s presence could clearly be felt behind the projects implemented by the IMF, the World Bank, and the Asian Development Bank. It obviously wanted Tajikistan’s greater participation in the American project in Afghanistan. The republic, in turn, exploited American initiatives, but did its best to avoid deeper involvement in the Afghan developments as contradicting Tajikistan’s national interests. Cooperation with China is fruitful. In fact, Dushanbe needs Beijing as a strategic partner because (1) the countries have a common border and (2) China’s interests in Central Asia are developing rapidly. The 2005 Andijan events demonstrated that Beijing could be described as a reliable political ally of the Central Asian countries. In recent years, China has developed its interest in their economic projects; Tajikistan is attracting Chinese investments for its energy and transportation projects. China is a key trade partner; there is a lot of mutual interest in the military sphere. Relations with Iran are mainly limited to the sphere of energy, transport infrastructure, and machine-building. In 2006, Iran commissioned the Anzob tunnel built on Iranian money to connect the Sogd Region of Tajikistan with Dushanbe. Dushanbe and Tehran are prepared to cooperate in other spheres as well. The meeting between President Rakhmonov and President of Iran Ahmadinejad held on 25 July in Dushanbe produced six bilateral documents related to the power industry, the economy, and transport, as well as science and education. The next day, the two presidents discussed a possible power transmission line from Tajikistan to Iran, as well as the prospects for cooperation in developing the transport infrastructure in Afghan- istan and in regional security. Early in 2006, religious life in Tajikistan was shaken by the stormy discussions by the Muslims and the followers of other confessions of the draft Law on Freedom of Conscience and Religious Organizations. The comments were highly critical: believers were convinced that if adopted in its present form the law would infringe on their rights. According to various estimates, 97 percent of the republic is Muslim. Islam is an important part of ethnic self-awareness and ethnic culture, which explains the fairly sharp local response to the “cartoon scandal” and Pope Benedict XVI’s incautious comment on the Prophet Muhammad. Late in the summer, the death of former leader of the Islamic Revival Party of Tajikistan and prominent politician Said Abdullo Nuri reverberated through society. His contribution, as a leader of the United Tajik Opposition, to the dialog and the 1997 Peace Treaty cannot be overestimated. Early in September, at the Sixth Congress, Muhiddin Kabiri was elected new party chairman; the congress deemed it necessary to ask the government to confer the title of Hero of Tajikistan on the late politician in recognition of his services to the republic. Religious extremism and the struggle against terrorist and extremist organizations (Hizb ut-Tahrir and the Islamic Movement of Uzbekistan) remained one of the major headaches throughout 2006. The Ministry of the Interior informed the people that the religious groups, Bayat and Salafiya, had appeared on the republic’s territory. The regional conference “The Role of Religion in Strengthening Peace and Social Partnership” held in Dushanbe in June marked another stage in the republic’s religious life. It was initiated by the Center of Strategic Studies under the President of the Republic of Tajikistan and funded by USAID. The conference attracted experts from all the regional countries, diplomats, international and religious organizations working in the republic, and several top officials.

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In January 2006, the RT Ministry of Education introduced a new subject, the History of Islam, into the curricula of the seven- and eight-year students of secondary schools. In 2006, 4,500 Tajiks performed hajj. One of them, 58-year-old Abdulaziz Rajabov, covered part of the route on foot. He started in Moscow and reached Saudi Arabia nine months later.

POLITICS

Parviz MULLODJANOV Director, the Public Committee for the Promotion of Democratic Processes in the Republic of Tajikistan (Dushanbe, Tajikistan)

he year 2006 will go down in the country’s challenge the government. Second, whereas dur- modern history as a landmark year, symbol- ing the transition period, politics often took prec- T izing Tajikistan’s transition to a new stage edence over economics, today socioeconomic in its development. The previous stage, which problems are taking center stage. Their resolu- started with the signing of the Peace Treaty (June tion is crucial to the preservation of hard won 1997) and lasted almost nine years, can be de- political stability. Third, the distinctly pro-Rus- scribed as a post-conflict period: The republic sian orientation of the country’s foreign policy moved from the chaos of a civil war to political is giving way to a more balanced, multivector stability and relative predictability in its domes- approach and the establishment of contacts with tic and foreign policy. new geopolitical partners. The new stage, which started with last fall’s On the whole, the political situation in the presidential elections, is marked, first, by a country and the geo-political situation around it strong centralized authority and an established is favorable for socioeconomic reform and an in- balance of forces within the country. President flow of foreign investment. Furthermore, this Emomali Rakhmonov and his inner circle com- “greenhouse situation” (according to one Russian pleted the concentration of powers in their hands; political expert) may continue for quite a long the United Tajik Opposition and warlords fell by time, which is largely contingent on the govern- the wayside, while the existing opposition movement’s ability to make an effective use of these ments are now the political fringe, unable to favorable conditions and new opportunities.

Presidential Elections

The 2006 presidential election was the central event in Tajik politics—true, with a predictable outcome.

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The most intriguing question was who the main rivals to the incumbent president would be, amid the general concern that the election campaign might fuel political confrontation in the country, as had been the case in neighboring Kyrgyzstan. The majority of oppositionists, primarily the leadership of the Islamic Revival Party of Tajikistan (IRPT), had not taken a clear-cut stance toward the election until it was time to start registering presidential candidates. Suddenly, they had a problem finding members ready to run in an election whose outcome was a foregone conclusion. Against that backdrop, the Social Democratic Party of Tajikistan (SDPT) was an exception. Long before election day, its chairman, Rakhmatullo Zoyirov, on behalf of his party, refused to recognize the election’s validity. He said: “In accordance with the Constitution of the Republic of Tajikistan, President Rakhmonov’s term in office ended a long time ago. Therefore, he has no legitimate right to run in the election, and its results will in this case be illegitimate.”1 True, the SDPT’s initiative was not supported by other parties, which in some way or other recognized E. Rakhmonov’s right to run for another term. But it was the position adopted by the IRPT and the Democratic Party—the main successors to the United Tajik Opposition (UTO) in the 1990s—that had an especially big response in society. To both parties, 2006 proved to be a turning point: The IRPT had a change of leadership following the death of Said Abdullo Nuri with his deputy, Muhiddin Kabiri, becoming the party’s new leader; the Democratic Party ended up without a leader (its chairman, M. Iskandarov, was sentenced to a long term of imprisonment) and split in two factions, the infighting between which continues to date, requiring more time and effort than the party’s opposition activity. At the start of the year, the IRPT declared its intention to field a presidential candidate. But at a party congress in September, held especially to define its election strategy, the party leadership announced a change of position. It refused to run, saying that it did not want to aggravate the political situation in the country. Thus, the party’s new leader, Muhiddin Kabiri, said: “Many see the Islamic element in the political struggle as a threat to democratic values. Fielding our own candidate would provoke speculation about the revival of confrontation in Tajikistan, as was the case in the parliamentary election. Now we have given the secular democratic parties an opportunity to prove their commitment to the democratic values that they are proclaiming. If they succeed, we will have to congrat- ulate them and adjust our program accordingly. If not, then all talk about an Islamic threat in Tajikistan is a myth that is being used as a cover up for some questionable political game.”2 Among other causes that had affected the party’s decision, M. Kabiri cited the absence of a coherent electoral law, as well as the lack of trust between the main political forces. At the same time, the IRPT left its members with the option to vote in the upcoming election at their own discretion.3 Unlike the IRPT, the Democratic Party at first had no doubts about contesting the election, but as it failed to nominate a single candidate, its subsequent efforts were doomed to fail: A candidate from a newly formed faction, which was recognized by the Ministry of Justice as the party’s sole legal representation, failed to collect enough supporting signatures and was denied official registration, while the party’s unrecognized wing boycotted the election. As a result, not one of the three opposition parties fielded its own candidates, leading the majority of international observers to question whether it was a truly contested election. But formally, it was not uncontested. In addition to incumbent President E. Rakhmonov, nominated by the ruling People’s Democratic Party of Tajikistan (PDPT), there were candidates from the so-called pro-governmental parties, of which only the Communist Party had any real political weight in society.

1 H. Khamdam, “Mururi ruidodhoi siesisi soli 2006 Tojikiston,” BBC, 28 December, 2006 (quoted from: [http://civil- taj.info]). 2 V. Panfilova, “Neuchastie v vyborakh PIVT pytaettsia razveiat’ mif o religioznom ekstremizme,” Nezavisimaia gazeta, 28 November, 2006. 3 See: N. Khamrabaeva, “PIVT budet uchastvovat’ v prezidentskikh vyborakh kak nabliudatel,” IA Asia-Plus, 26 September, 2006, 11:03. 220 REPUBLIC OF TAJIKISTAN Politics

Other presidential contenders came from the Agrarian Party and the Economic Reforms Party of Tajikistan, both created relatively recently, in 2005, according to some political opponents, with direct support from the government. The Agrarian Party’s candidate was its chairman, Academician Amir Karakulov, while the Economic Reforms Party put forward Olimjon Boboev, the rector of the Transport Institute. The Communist Party was represented by MP Ismoil Talbakov. The pro-government wing of the Socialist Party of Tajikistan (SPT)—the party split in two factions in 2004—fielded its leader, Ab- dukhalim Gafarov, while its unrecognized faction joined the boycott declared by the social democrats.4 Thus, of eight registered parties, five contested the election, the remaining three representing the opposition. The poll took place on 6 November. It was the first presidential election monitored by the OSCE. In all, there were about 170 international observers from 32 OSCE member states, as well as from the CIS. As a result, incumbent President Emomali Rakhmonov garnered 79.3 percent of the vote (with a turnout of 91 percent). The election was deemed legitimate and valid by the international community, the overwhelming majority of observers and experts. The most glowing assessment came from CIS observers, who saw the election as completely democratic and transparent. OSCE observers were a bit more restrained, making a number of rather harsh, critical comments. Thus, in their official statement, they said that “the 6 November presidential election in the Republic of Tajikistan did not fully test democratic electoral practices as outlined in the 1990 OSCE Copenhagen Document due to a lack of genuine choice and meaningful pluralism. The election process also revealed substantial shortcomings.”5 Speaking at a press conference in Dushanbe on 6 November, Kimmo Kiljunen, head of the OSCE Parliamentary Assembly Delegation and special coordinator of the OSCE short-term election observation mission, said: “The lack of any serious campaign and credible alternatives undermined this election to a degree that it did not provide an adequate test of Tajikistan’s commitments to democratic elections.” He also said that there was an «invisible campaign» leading up to the poll and widespread self-censorship in the news media.6 According to OSCE observers, the requirement that a candidate collect at least 5 percent of supporting signatures to be registered is a serious impediment to electoral participation. In this connection they doubted that the majority of candidates had really been able to raise the required number of signatures (all six running candidates presented a total of 1.5 million supporting signatures, or 47 percent of the electorate), considering the short time frame and the complex procedure involved. Within the country, the election results aroused much less criticism, excluding the statements by three opposition parties who attributed the president’s easy victory to a lack of credible rivals. At the same time, despite certain shortcomings in the election campaign, its results on the whole reflect the real lineup of forces in the republic. Therefore, even had opposition candidates contested the election, its general outcome would not have changed drastically: Perhaps it would not have been so impressive, but the incumbent president would have won by a very wide margin all the same. There are several objective factors in E. Rakhmonov’s high approval ratings. n First, there is still an ingrained fear of a recurrence of civil war. Against this backdrop, in the eyes of the average voter, who is tired of armed confrontation, political stability is associated with the incumbent president. n Second, political stability was in the past few years backed up with fairly high macroeconomic indicators. Thus, in the past five years, GDP grew by 60 percent—at an average rate

4 See: D. Gufronov, “Schastlivchiki & neudachniki 2006-go,” IA Asia-Plus, 28 December, 2006, 10:07. 5 OSCE Election Observation Mission, Statement of Preliminary Findings and Conclusions, OSCE Center in Dush- anbe, available at [www.osce.org/odihr]. 6 N. Khamrabaeva, “OBSE delaet serioznye zamechaniia,” IA Asia-Plus, 7 November, 2006. 221 CENTRAL EURASIA 2006 Analytical Annual

of 9.4 percent a year. The republic’s foreign debt, at 108 percent of GDP, has now fallen to 31 percent. Whereas in 2001, the national budget was 600 million Tajikistan somoni, in 2005 it was 1.6 billion somoni, and in 2006, according to preliminary data, 2.2 billion.7 True, macroeconomic growth has yet to have an effect on individual incomes and living standards, while many of its indicators are still rather modest. Nevertheless, in the post war years, the situation has been steadily improving (which has not been the case, for example, in Uzbekistan, where the situation has deteriorated). This accounts for the general sense of social optimism, fueling the president’s popularity. n Third, today there are no political figures in the country popular enough to successfully compete with the president. E. Rakhmonov has not only the so-called administrative resource at his disposal but also the largest and most effective political mechanism—i.e., the party of power, as represented by the ruling People’s Democratic Party. At the same time, for a number of objective and subjective reasons, opposition structures in Tajikistan today are unable to provide their candidates sufficient PR support to ensure victory in a presidential election. On the other hand, to the majority of opposition forces (except for the most radical figures), E. Rakhmonov’s candidacy has always been acceptable enough—at any rate, next to a number of politicians from the president’s inner circle who were widely tipped to become his possible successors (e.g., in various Internet publications). During the many years that E. Rakhmonov has been in power, well defined “rules of the game” have been established in relations between the ruling authorities and the opposition, which guarantee a good measure of predictability in the country’s political life. To mainstream parties, primarily the IRPT, such predictability today is far more preferable to the uncertainty that would inevitably be caused by any serious changes in the country’s leadership.

New Cabinet

Changes in the executive structure after the presidential election were actively discussed long before election campaigning began. Whereas there was little doubt about the candidacy of the future president, the composition of a new Cabinet of Ministers remained unknown until the very last moment. Rumor had it that after his victory, the president intended to replace his team completely. Some experts suggested that a new, younger post-Soviet generation of managers and administrators would come to power—more market oriented, more pro-Western. After his victory, E. Rakhmonov did not drag his feet on new appointments. Revamping of the government structure began in late November, and by 1 December its new composition was clear in general outline. The revamping of the executive proceeded along several lines.

1. Reorganization of the Executive Structure

The number of executive power bodies was reduced: Some of the ministries lost their original status, merging with other ministries (of 19 ministries, only 14 remained). The total number of min-

7 See: “Nation Address of the President of the Republic of Tajikistan to Majlisi Oli of the Republic of Tajikistan, 22 April, 2006,” Narodnaia Tribuna (an organ of the People’s Democratic Party of Tajikistan), No. 29 (396), 22 April, 2006, p. 1 (in Tajik). 222 REPUBLIC OF TAJIKISTAN Politics istries, state committees and agencies was downsized from 40 to 29.8 Thus, the Ministry of Commu- nications was disbanded and merged with the Military of Transport; the Ministry of Industry was merged with the Economy Ministry; the State Committee for the Protection of State Borders was abolished as a separate structure and transferred under the control of the former National Security Ministry, reorganized as the State Committee of National Security. The Ministry of Culture took over the functions of the Committee for Religious Affairs, which was abolished,9 while the Energy and Industry Ministry included the functions of the formerly separate ministries of energy and industry, as well as those of the former Agriculture Ministry, relating to the food industry. The functions of the Ministry of Labor and Social Protection relating to labor migration were transferred to the Ministry of the Interior. The following ministries avoided disbandment or merging: the Ministry of Justice, the Ministry of the Interior, the Foreign Ministry, the Education Ministry, the Finance Ministry, the Defense Ministry, the Ministry of Health, and the Ministry of Culture.

2. Personnel Changes

Personnel changes affected virtually all executive power bodies. Pre-election forecasts with respect to Prime Minister A. Akilov and the deputy prime ministers, all of whom retained their posts, were not fulfilled. Also contrary to widespread predictions, M. Alimardonov remained the chairman of the National Bank. Some of the more important personnel changes included the retirement of Inte- rior Minister Kh. Sharipov and Foreign Minister T. Nazarov (who had worked in that position since the mid-1990s). He was replaced by Kh. Zaripov, Tajikistan’s former envoy to the OSCE (Vienna) and then RT ambassador to the United States. In an unexpected move, Justice Minister Kh. Khamidov and Gen. S. Zukhurov, former security minister, until recently chairman of the State Committee for State Border Protection, were both demoted. Emergency Situations Minister M. Zieev, formerly an opposition field commander, and Industry Minister Z. Saidov lost their posts.10 Their departure effectively marked the end of the era of “30 percent officials”—i.e., those who were appointed to high state and government positions under a 30 percent quota provided to the UTO under the 1997 Peace Treaty. One of the substantial innovations has been the creation of the Agency for Fighting Corruption and Economic Crime, answering directly to the RT president (in January 2007 renamed the RT Agen- cy for State Financial Control and the Fight against Corruption). The wave of personnel changes also affected the regional nomenklatura. In a long predicted but nevertheless unexpected move, Sogd Region Governor K. Kasymov was dismissed and appointed chairman of the Sogd branch of the ruling PDPT party. À. Miraliev, the chief administrator of the Khatlon Region, was promoted to chief of the presidential staff. There were considerable personnel changes in the administration of the Gordo-Badakhshan Autonomous Region. Generally, concerning structural and personnel changes in the executive branch of government, two preliminary conclusions can be made. First, the government structure was reformed, if not under pressure, at least under direct influence of international donor organizations—the World Bank and the International Monetary Fund. For many years, almost all of their recommendations and reviews had highlighted the need to streamline the government administrative structure as a key to enhancing the executive and cutting administra-

8 See: N. Pirnazarov, “V Tadzhikistane sformirovana novaia struktura pravitel’stva,” IA Asia-Plus, 1 December, 2006, 08:30. 9 The decision was welcomed by the IRPT: “This move means a unity of religion, in particular Islam, and culture, since religion as such is a unity of cultural values, and society will only benefit from this” // IA Varorud, 2 December, 2006. 10 See: U. Babakhanov, “Vybor Prezidenta,” IA Asia-Plus, 7 December, 2006. 223 CENTRAL EURASIA 2006 Analytical Annual tive costs. The 2006 reform has involved the largest downsizing of the government administrative structure since the country gained independence. At the same time, it is too soon to say how effective it will be: A reduction in the number of power bodies does not necessarily mean a reduction in the number of government officials. Second, forecasts for drastic, across the board personnel changes have not been fulfilled. The president preferred to retain the core of his team for the next seven years. After all is said and done, all of these appointments have added up to a simple “reshuffling” of old cadre—true, on a much larger scale than usual. Ditto for the forecasts that a new generation of pro-market, pro-Western experts would join the presidential team. It seems that the republic is still dominated by Soviet-era economists. Vir- tually all government officials who have been in charge of the country’s economy for the past few years have remained in the presidential team. On the whole, the impression is that many appointments were a byproduct of structural changes. Indeed, when the number of executive power bodies is almost halved, substantial personnel changes are virtually inevitable. The only question is, how these reshuffles will affect the final results.

The Death of Said Abdullo Nuri and the Election of a New IRPT Chairman

Said Abdullo Nuri, the chairman of the Islamic Revival Party of Tajikistan, died on 9 August, shortly before the presidential election. From his first arrest, in 1986, until the last day of his life, he had been one of the most well known and influential Tajik political figures. His death marked the end of the 1990s era with its politics of public rallies, armed confrontation, and the search for compromise. Alongside RT President Emomali Rakhmonov and Afghan leader Ahmad Shah Masoud, Said Abdullo Nuri was one of the driving forces behind the Tajik peace process, which led to the signing of the Peace Treaty, on which he put his signature as the UTO leader. Under his leadership, the IRPT has advanced from underground cells to the party’s first congress to an amorphous semi-political, semi-military association of the early 1990s to a party that now exists within the bounds of the law and the Constitution of the RT. In the late 1990s, recognizing the pressing need for organizational restructuring, Said Abdullo Nuri co-opted into the party leadership a number of young secularly educated managers who within just a few years had created an effective party structure almost from scratch. Today the IRPT is a modern political party with offices in virtually all parts of the country. In the past two years, being already seriously ill and unable to exercise leadership, Said Ab- dullo Nuri transferred the reins of power to Muhiddin Kabiri, his first deputy and the mastermind of the IRPT reform. Therefore, M. Kabiri’s election as chairman formalized the current lineup of forces within the party.

The Democratic Split

The Democratic Party of Tajikistan is yet another symbol of the Tajik opposition of the 1990s. Created a year after the February 1990s riots, it was in effect the first officially registered opposition political organization in the RT. The Democratic Party and its leaders were the architects of almost all main events, activities and public rallies of 1991-1992; in early 1992, they initiated a public “mara- thon” that developed into an armed confrontation between the government and opposition supporters.

224 REPUBLIC OF TAJIKISTAN Politics

Following its military defeat (December 1992), when the opposition’s armed forces redeployed to Afghanistan, the Democratic Party’s influence in the opposition bloc plummeted. Some of its representatives were still playing a substantial role in the UTO, especially in the course of peace negotiations and the signing of the Peace Treaty (1997). But by 1997, the party as a whole had become a divided, amorphous organization without a clear-cut structure or substantial financial resources. Fol- lowing its legalization (in the late 1990s), it failed to overcome organizational shortcomings and pursue an effective party building policy. In 2005, its chairman, M. Iskandarov, was arrested on several charges (including charges of corruption: under the 30 percent quota, he had for several years been president of the TajikGaz state unitary enterprise), but the party said that the arrest was unlawful and politically motivated. In 2006, a new split occurred in the Democratic Party—possibly the most serious one in its entire history. In April, a group of democrats created a faction called Vatan, which harshly attacked the party leadership. The majority of DPT leaders did not recognize the faction, which held an “emergency party congress” in August, proclaiming its leader, Mahmoud Sobirov, the party’s new chairman. But that decision was rejected by DPT members loyal to M. Iskandarov, who was under arrest, and who accused M. Sobirov of falsifying the list of party members who had called for an emergency congress. Soon afterward, Iskandarov followers held their own congress, voting him out of office “for inaction.” Therefore the party was faced with a divided power situation. At first, the RT Ministry of Justice refused to register the new faction, but when Iskandarov followers threatened to boycott presidential elections, it recognized the new faction as the DPT’s only legal faction. True, its candidate was denied registration to run in the presidential race since he had failed to collect the required 160,000 supporting signatures. The split, which has not been overcome to date, effectively paralyzed the party’s activity. But even if its factions do come to terms, it will probably still be unable to restore its position as a leading political party in the republic. The split in the democratic camp reflects the general protracted crisis of the so-called “secular” democratic opposition in the RT, which now that the DPT is so weak is, in effect, only represented by the Social Democratic Party, which also has fallen on hard times: Not so long ago, several leading members and a faction left it.

Geopolitics: New Prospects

In 2006, new, promising geopolitical prospects opened for the country. Tajikistan started actively seeking contacts with new foreign partners (while continuing to strengthen and deepen relations with the RF). That was partly due to subjective reasons, in particular, a good measure of disenchantment in the RT with the less than successful cooperation with Russian big business, primarily the company Rusal (Russian Aluminum). Back in 2004, in a bid to keep Tajikistan within its sphere of influence, the Russian leadership announced the intention to start a number of major joint investment projects in the RT. In October 2004, Russian President V. Putin made an official visit to the republic, in the course of which a series of large-scale economic contracts worth a record of $2 billion were signed. Russia pledged to invest in the construction of two large hydroelectric power plants in Tajikistan— the Rogun HPP (3,600 MW, annual output 13 billion kWh) and the Sangtuda-1 HPP, as well as a new aluminum plant and the modernization of an old plant.11

11 See: “D. Medvedev: Rogun dolzhen byt’ kommercheskim proektom,” IA Asia-Plus, 8 December, 2006, available at [civil-taj/info]. 225 CENTRAL EURASIA 2006 Analytical Annual

Before long, however, it turned out that the RF government did not intend to allocate budgetary resources for the Tajik project,12 while Russian big business was not prepared to sacrifice practical gain to some abstract geopolitical interests. For example, from the outset, the Unified Energy System of Russia (RAO UES) said that it would participate in the project as a contractor, not a principal investor. As for Rusal, the project could only be economically and commercially viable if it minimized construction costs and took control of the greater part of the country’s aluminum production and energy sector, which was acceptable to the RT leadership. As a result, the Rogun HPP construction project was effectively frozen. In the end, the Tajik government said that it intended to tear up the contract with the Rusal. In response, Moscow proposed RAO UES as a contractor in place of Rusal. In this case the RF is ready to invest $1 billion in the project from the state budget, but only in exchange for a 50 percent stake in the Rogun HPP.13 The Tajik opposition has criticized the delay. In particular, M. Kabiri said: “Russia did not want to assume any responsibility, shifting the entire responsibility to private structures, specifically Rus- al… Meanwhile, it is not so important for us exactly who is building Rogun—Russia or some other country… Had Tajikistan allowed others to participate in the project right from the start, it would have been completed a long time ago.”14 From every indication, the Tajik government is also irked by the situation. Thus, in early December, the Tajik president said that his country would complete the Rogun HPP project with its own resources, making no reference to the Russian partners.15 Still, there are also more objective factors in the country’s multivector foreign policy. In the past few years, foreign investors have been showing marked interest in Tajikistan. True, it is mainly driven not so much by economic as geopolitical considerations. Thus, the West has been concerned about the increasingly frequent visits to the RT by high level Russian, Iranian, and Chinese officials and businessmen, as well as the growing state investments that these countries are making in the Tajik economy. Iran’s strengthening and the free access that it is getting to such strategic commodities as Tajik uranium, aluminum and cotton is unacceptable to the West, especially to the United States. Mean- while, in the past few years the relations between Dushanbe and Tehran have shown signs of tangible improvement along several lines. Iran is gradually becoming one of the main foreign investors and consumers of local raw materials. Iranian companies have built the Anzob tunnel and intend to start building the Shakhristan tunnel, a project of strategic importance to the RT, linking the country’s southern and northern parts. Furthermore, Iran is building the Sangtuda-2 HPP with a project cost of $220 million. But a real breakthrough in their relations came in July 2006, when the presidents of Tajikistan and Iran signed six agreements to expand cooperation in tourism, trade, and the economic sphere, including the creation of free economic zones. The sides also announced that the main imped- iments to the implementation of these agreements should be eliminated within the next few months. The RT’s strategic importance to the West also increased substantially amid the sharply aggravating situation in Afghanistan in 2006. According to the U.N., around 60 percent of international humanitarian aid to Afghanistan goes via Tajikistan and is likely to grow in the future. As a result, the international community is increasingly turning its face to Tajikistan (to a certain extent, under the pressure of circumstances), initiating and financing the reform of its economic and political system to Western standards. Thus, in 2006, three high ranking Western officials visited the RT—the U.S. secretary of defense, the French defense minister, and an U.S. assistant secretary of

12 At a meeting with participants in the first national media forum of the CIS and the Baltic States in Moscow on 4 December, 2006, Russian Deputy Prime Minister D. Medvedev said: “I believe that in this case, spending budget funds would not be justified. The hydroelectric power plant project should be implemented on a commercial basis. I think that the Tajik side should also treat Rogun as a commercial project,” IA Asia-Plus, 8 December, 2006. 13 See: “Rossia predlagaet Tadzhikistanu pomeniat’ ‘Rusal’ na RAO ‘EES’,” Finam, 5 December, 2006 [civil-taj.info]. 14 V. Panfilova, op. cit. 15 See: “Rossia predlagaet Tadzhikistanu pomeniat’ ‘Rusal’ na RAO ‘EES’.” 226 REPUBLIC OF TAJIKISTAN Politics state for South and Central Asian affairs, who discussed with the republic’s leadership matters of cooperation, regional security and post conflict reconstruction in Afghanistan. In May, during Tajik President Emomali Rakhmonov’s meeting with top executives of American Energy Corp. (AEC), an agreement was signed on building a power line to transmit electricity from Tajikistan to Afghanistan. Therefore, geopolitical competition is conducive to an investor friendly climate in the RT. The republic’s leadership is using this favorable opportunity more and more effectively. Whereas only a few years ago, its government was unable to find credible investors for its macro projects, now it looks like it will soon be able to choose, giving priority to Tajikistan’s national interests.

An Outlook for the Future

On the whole, 2006 did not bring any particular surprises even though many pre-election forecasts were not fulfilled. The country’s future foreign and domestic policy looks more predictable, which is somewhat unusual in light of the recent large-scale structural changes in the executive branch of government. But since the president’s team and his inner circle have remained virtually unchanged, the following assumptions can be made. In the next few years, the system of so-called managed democracy, characterized by strong centralized authority and managed opposition, media and civil society, will strengthen further. This means that public organizations and nongovernmental structures will have freedom of action (within certain bounds) until they start posing a real threat to the existing regime (and when they do, their activity will be subject to harsh control). In general, Tajikistan can be described as society with a burgeoning macroeconomy and a rather backward microeconomy, small and medium business. The socioeconomic implications of this are, on the one hand, a constantly growing national budget, the country’s integration into the international economic and trading system (often bypassing Russia), and the accelerated application of modern technology and development of infrastructure, but on the other hand, a growing gap between the rich and poor, the slow formation of the middle class, and relatively controlled but rather high inflation. Unfortunately, 2006 saw little success in the fight against corruption, which remains one of the main barriers in the way of an effective economy. The creation of one state agency (or even several agencies) is unlikely to solve the problem, which requires a comprehensive approach—the formation of a free judiciary, an independent and multilateral public control system, transparency in the organization and conduct of tenders, and so on and so forth. With favorable geopolitical conditions the country’s nascent politico-economic system is stable enough: social tensions that may arise will be defused through mass labor migration to Russia and other CIS republics, while political stability in neighboring countries (primarily Uzbekistan and Af- ghanistan) will make it possible to control the spread of such radical parties as the Islamic Movement of Uzbekistan and Hizb ut-Tahrir. In any event, the newly elected president, perhaps for the first time during the entire period of independence, has received a unique opportunity to translate the majority of his plans into reality: He has an obedient parliament at his disposal, a nation tired of war, political stability, and broad powers provided by the Constitution. At the same time, should he fail, he will be unable to invoke “a difficult post-conflict period.”

227 CENTRAL EURASIA 2006 Analytical Annual ECONOMY

Sobir KURBANOV Economist, Panorama Research and Production Association (Dushanbe, Tajikistan)

he economic development trend of the past few years continued in 2006: nominal GDP increased to 9,272.2 thousand somoni (SM), or $2,811 million, and real GDP growth was 7%. T This is slightly above the 2005 level of 6.7%, but below the level of 2002-2004, which suggests that the resources of “recovery” growth based on traditional sources (cotton, aluminum, etc.) are virtually exhausted, while the resources of the private sector remain untapped. Moreover, real sector growth even slowed down: in industry, the growth rate dropped by almost half to 4.9% (from 8.5% in 2005); in agriculture, on the other hand, it rose to 5.4% (from 3.1% in 2005). In the last few months of the year, industrial production in many areas fell in volume terms due to unprecedented power cuts and rising prices for gas and other energy resources, the main component of production costs. Conse- quently, national industry faces the pressing problem of a decline in competitiveness against the background of a transition to world prices. Figure 1

GDP COMPOSITION BY SECTOR (%) 40 35 30 25 20 15 10 5 0 2000 2001 2002 2003 2004 2005 2006

Agriculture Trade Industry Other services Construction

S o u r c e: State Statistical Committee of Tajikistan. Statistical Bulletin for 2000-2006.

In industry, overall growth was in large part achieved due to growth in metallurgy (9%, mostly aluminum), because the Tajik Aluminum Plant (TadAZ) had officially switched to tolling agreements. Having obtained guaranteed supplies of alumina and a guaranteed sales market, the plant and the budget

228 REPUBLIC OF TAJIKISTAN Economy continued to receive a fixed price for processing ($400 per ton), although the world price nearly doubled during the year (from $1,600 to $2,600 per ton). It is possible that in working with new partners TadAZ and the country as a whole will be able to secure a fairer and more transparent profit sharing arrangement. In 2006, the plant produced 413.9 thousand tons of aluminum, and almost all this amount (409 thousand tons) was exported to the Netherlands and Switzerland. Another and no less significant source of growth in industry was the production of building materials, mostly cement, which is due to the general building boom in the private sector and sharply rising demand for building materials required to implement major investment projects in the energy and transport sectors under the Public Investment Program (PIP). These include, for example, the construction of the Anzob tunnel, the Sangtuda hydropower plants, and highways (with the participation of the Asian Development Bank and China). As a result of this rise in demand, the production of building materials and construction volumes as a whole increased by 22.5% (and cement even by 62%), but in 2007 these figures may fall in view of higher prices for gas imported from Uzbekistan. Such an increase in prices for gas (from $55 to $100 per 1,000 cubic meters, i.e., by almost 100%) and electricity (by 25%) may raise costs and reduce the competitiveness of Tajikistan’s key industrial enterprises. The decline in power generation and supply led to a decline in industrial output, especially outside the capital. During the year, power generation fell by 0.3% or, in absolute terms, by 17,152 thousand kWh. The worst-hit sector was the textile industry, where output fell by 4.5%. Consequently, a program to develop the power industry, to achieve energy independence and to promote electricity exports is of key importance to economic growth and a rise in living standards. Figure 2

INDUSTRY BY SECTOR IN JANUARY-DECEMBER 2006

flour, cereals and other fuel and energy feed industry 0.8% 6.6% 7.7% nonferrous food metallurgy 18.8% 45.8%

light 13.9% chemical and industrial building petrochemical materials 1.4% 3.1% engineering and metalworking 1.9%

S o u r c e: State Statistical Committee. Monthly Statistical Bulletin, January-December 2006.

In agriculture, growth was in large part ensured by an increase in the production of non-cotton crops, mostly fruits and vegetables (by 52% and 40%, respectively), except potatoes and onions. Cotton production fell by 2.1% compared to 2005, with a cotton crop of about 420-440 thousand tons (80% of the projected figure). The country’s cotton growing industry is in a deep systemic crisis. Despite the efforts being made, the debts of cotton farms to investors have increased from year to year, exceeding $400 million at the 229 CENTRAL EURASIA 2006 Analytical Annual end of 2006. As a result, the attractiveness of investment in cotton production has declined sharply. The National Bank of Tajikistan (NBT), the Asian Development Bank (ADB) and the World Bank are reviewing the republic’s real debts. It is expected that over half of these debts will be found to consist of interest on the principal amount or (in most cases) interest on late payments, because investors initially used nontransparent credit methods and overpriced supplies. The situation is complicated by lack of clarity in matters of succession to the cotton debts. This is due to the nontransparent and biased privatization of farms and uneven distribution of debts; inadequate mortgage legislation, under which land cannot be mortgaged; rising prices for diesel oil, seed and fertilizer against the background of a decline in cotton prices; and long processing periods at obsolete cotton factories resulting in failure to meet quality standards and in the production of cotton of the lowest grade. This vicious circle is compounded by the fact that the loan cycle in cotton financing is shorter than the cotton production and sale cycle, while farmers have no independent access to foreign markets. Besides, investments in cotton, given their extremely low profitability, were mostly of a political nature, and it is very likely that in the near future the republic will lose its cotton growing industry altogether. As an alternative to cotton, active efforts should be made to develop the production of other crops, and also vegetables, fruits, etc. What is more, the external environment for exports of fruits and vegetables (both fresh and processed) is currently very favorable, as indicated by the growing interest in local environmentally clean fruits and vegetables, especially on the part of Russia and Kazakhstan. In order to increase supplies to its domestic market, Russia even reduced in 2006 the cost of transportation for Tajik fruits and vegetables by 50%. But even in these conditions the Tajik authorities continue to pursue their “monoculture” policy, forcing farmers to grow cotton despite its falling profitability (which is also bad for arable land and makes it unfit for use), while very promising horticulture, viticulture and the production of fruit and vegetable products are not properly developed. In 2006, there was a sharp decline (especially in the south of the country) in the production of such key vegetables as carrots, garlic, onions and potatoes, which led to a rise in their prices and to the need to bring them into the capital from Sogd Region. Farmers should be free to choose the crops they want to grow without any pressure from the local authorities or from investors forcing them to engage in cotton production; farms and food processing (especially fruit and vegetable) plants should be given all-out support in developing production, obtaining low-interest loans and implementing advanced technologies in packaging and marketing their undeniably high-quality products from Tajik fruits and vegetables. It is also highly important to revive selection and gardening, invest in varietal improvement and disseminate agronomic knowledge, especially among local private farmers who have mostly appeared as a result of the privatization and breakup of former collective farms. Apart from the above-listed domestic factors, economic development in 2006 was largely promoted by external causes, primarily by the rapid increase in money transfers (remittances from migrant workers in the first place), which stimulate domestic demand and an increase in household and other consumer expenditures (according to the State Statistical Committee of Tajikistan, they rose by 11.2% in 2006). According to other sources, such as the National Bank’s monetary survey as of the end of November posted on the NBT website, consumer expenditures rose by 20% compared to 2005. But in actual fact the figure may be much higher if one takes into account the shadow economy and major purchases: cars and real estate. A case in point is the year-end consumer boom which broke all records of recent years in terms of price rises and sales, and also the jump (by about 20-30%) in real estate prices in Dushanbe and other Tajik cities. Returning to the above-mentioned key source of growth, remittances (mostly from labor migrants) for January-November 2006, according to National Bank data, exceeded $1 billion, increasing by 67% compared to 2005. The undisputed leader here, as noted in press releases, is Agroinvestbank, which has created the widest nationwide network of branches paying out such remittances, while transfer and re- ceipt procedures have been simplified and have become much less expensive. But there is reason to fear that migrant remittances will eventually cease to be a stable source of economic growth, because a number

230 REPUBLIC OF TAJIKISTAN Economy of political statements and the behavior of the host countries, primarily Russia, point to a tightening of migration rules, which will make it more difficult for our fellow-citizens to live in these countries. As we go over to monetary policy, let us note the record high rate of inflation (12.5% in 2006). This was due, first, to a weakening of the already limited instruments of monetary policy and, second, to a worsening of external factors, i.e., a sharp increase in the prices of imported goods (fueled by rising consumer demand). Another factor contributing to inflation was the rise in the prices of such traditionally large domestic items of household expenditure as potatoes (by 57%; their production reached 103.3% compared to 2005, but there was evidently a sharp increase in exports), meat (30.1%), butter (19%), eggs (22.1%) and rice (16.7%), i.e., so-called basic inflation. According to National Bank data, basic inflation—the rise in the prices of domestic products—accounts for about 7% of total annual inflation (12.5%). The reason for this is rapidly growing domestic demand (against the background of limited domestic production) or large exports and insufficient supplies to the domestic market, which have resulted in the highest level of prices for these products in the country’s public retail markets. This was coupled with a sharp rise in the prices of imports, especially from Russia, which provides up to 80% of all imported consumer goods. The reason is that prices in Russia rose, the ruble continued to strengthen against the dollar (by 10% in 2006), while the somoni weakened against the dollar by 7.1%. Considering that Tajik importers mostly buy goods for dollars, domestic prices for consumer goods continued to rise. Price rises in 2006 were also due to a number of other factors. First, among the goods and services used to calculate the consumer price index (CPI) in Tajikistan are mostly food products: flour, bread, meat, vegetables and fruits. Second, declining production, especially the production of agricultural crops, is accompanied by an increase in domestic demand. Accordingly, the decline in production (especially when it comes to such items as potatoes, carrots and onions) has an immediate effect on domestic inflation, basic inflation in particular. Moreover, Tajikistan produces only about 400 thousand tons of grain (unfortunately, low-grade), while the annual requirements for food grain and flour are close to 1.5 million tons. Consequently, in order to gain real control of inflation, it is not enough to tighten monetary policy: the most important thing is to expand and promote domestic production and to remove the barriers (customs and administrative) to competition and small business, especially in such areas as “shuttle” trade in foodstuffs. In November, a strong influence on inflation dynamics was also exerted by “inflationary expectations” in view of scheduled power outages caused by the damming of the Vakhsh River. As a result of panic, prices almost doubled within a few days because people rushed to buy essential foods, gas, etc. As it usually happens, subsequent price stabilization did not lead to a return to the original position. Going back to prices for domestic products, let us note the very dangerous situation arising in the area of food security: the increase in the prices of basic products. The government is not creating the necessary conditions for developing production, reducing barriers to legal business, providing affordable credit, encouraging people to invest their savings in the development of their own business, etc. In other words, it is not taking any measures that could boost domestic production, saturate the market and lead to a decline in prices. So, accelerating inflation is a real threat. In the near future, it can undermine macroeconomic stability, especially given the near doubling of prices for natural gas imported from Uzbekistan and the projected increase in electricity rates (by 40%), which will inevitably provoke an increase in the GDP deflator and push domestic prices up still further. The main cause of inflation is not so much an excess of money in the economy (with money supply controlled by the NBT) as structural problems associated with limited domestic production against the background of sharply rising demand, as is evident even from basic foodstuffs, and problems facing business (free enterprise) in view of widespread corruption and pressure. Imports in 2006 increased by 29.5% (to $1,723 million), and exports, by 54% (to $1,399 million). Hence a trade deficit, which is likewise mostly financed out of current transfers, i.e., growing remittances from migrant workers, and this leads to high risks in view of the uncertain future of our migrant workers

231 CENTRAL EURASIA 2006 Analytical Annual

Figure 3

PRICE INDEX FOR FOOD PRODUCTS, NONFOOD PRODUCTS AND PAID SERVICES TO THE POPULATION (end-of-month, December 2004 = 100)

131 128 125 122 119 116 113 110 107 104 101 98 95 Jul Jul Oct Oct Jan Apr Jan Apr Feb Mar Jun Feb Mar Jun Sep Dec Sep Dec Dec Nov Nov May May Aug Aug 2004 2005 2006 Food products Nonfood products Services

S o u r c e: State Statistical Committee. Monthly Statistical Bulletin, January-December 2006. abroad. Besides, among those who leave Tajikistan unable to find a decent job at home are the republic’s best specialists, which undermines the prospects for a revival of the national economy. As noted above, growing remittances encourage greater consumption and a further increase in imports, which ultimately leads to a surge in demand for foreign currency, whose inflow is limited because of low exports. This puts strong pressure on the domestic foreign exchange market, pushing down the somoni exchange rate and “spurring” domestic inflation. Hence a vicious circle in which the structural problems of the largely uncompetitive real economy lead to inadequate domestic production and supply; this in turn results in growing imports, which exert pressure on the foreign exchange market and serve to depreciate the national currency, so fueling inflation. In 2006, the somoni fell by 7.1% against the dollar (from 3.2 to 3. 34 somoni per dollar), while the dollar continued its decline against the world’s other major currencies, and also in Tajikistan’s neighboring countries. In the conditions of rising demand for foreign currency, it proved to be impossible to increase the net international reserves of the National Bank; on the contrary, they even somewhat declined. In the area of fiscal policy, state budget revenues grew faster than expenditures and reached 19.2% of GDP; in particular, tax revenues increased to 17.1% of GDP, although implementation of the plan for collecting excise taxes, sales tax on cotton and customs duties was somewhat below the 2005

232 REPUBLIC OF TAJIKISTAN Economy

Figure 4

EXPORTS BY PRODUCT (US$ million) 1600 1400 1200 1000 800 600 400 200 0 2000 2001 2002 2003 2004 2005 2006

Other Cotton Electricity Aluminum

S o u r c e: State Statistical Committee. Monthly Statistical Bulletin, January-December 2006.

Figure 5

IMPORTS BY PRODUCT (US$ million) 2000 1800 1600 1400 1200 1000 800 600 400 200 0 2000 2001 2002 2003 2004 2005 2006

Other Petroleum products

Grain and flour Natural gas

Electricity Alumina

S o u r c e: State Statistical Committee. Monthly Statistical Bulletin, January-December 2006.

233 CENTRAL EURASIA 2006 Analytical Annual

Figure 6

EXCHANGE RATE DYNAMICS IN 2006 (somoni/dollar) 3.45

3.4

3.35

3.3

3.25

3.2 Jul Oct Jan Apr Feb Mar Jun Sep Dec Nov May Aug

Source: State Statistical Committee. Monthly Statistical Bulletin, January-December 2006. level. Annual budget expenditures amounted to 18.8% of GDP (excluding projects under the Public In- vestment Program). Consequently, there was a small surplus of 0.4% of GDP (SM 36 million). On 29 November, President Emomali Rakhmonov signed the 2007 budget passed by the lower house of parliament. Its total amount is SM 3,195 billion (up 47% from the previous year), with real current revenues of SM 1,857 billion (up 22% from the previous year). The main source of budget growth was government credit (SM 778.5 million, or more than double the figure for the previous year). Receipts under the Public Investment Program financed out of loans and grants provided by donor countries and international organizations, which is also included in the budget, are expected to increase by one-third (to SM 490 million). Budget allocations are up 25.2%, including 21% for public administration bodies, 27.6% for the social sphere, 38.5% for health care, 29.6% for education, and 29.7% for pensions. As regards allocations for the economy, the largest increase is in transport and communications (87%) and the power industry (75%), which is due to the need to ensure payment of government contributions to the implementation of major public investment projects. So, whereas 2007 budget expenditures for economic purposes are to rise (compared to preliminary data for 2006) by almost 50% (to 15.21% of GDP), social spending is to increase by only 12%. In other words, the country’s budget is becoming less socially oriented, focusing on projects designed to develop and strengthen the real economy and the transport and energy infrastructure. It is to be hoped that this “sacrifice” is justified and that investments in the power industry and transportation arteries will eventually be repaid with interest and will generate more revenue for the state treasury. Another important point is that the budget and the state monopolies in charge of these projects should have the funds to maintain the technical level of major facilities under construction in the energy and transport sectors. The state’s debt service expenditures, projected at SM 68.5 million (0.54% of GDP), are to increase by 34%; the biggest increase is projected for external debt service (by 54%), mostly for serv- icing large Chinese loans according to repayment schedules.

234 REPUBLIC OF TAJIKISTAN Economy

In view of the newly signed major investment projects in the energy sector and road building, the 2007 budget provides for an increase in the share of capital expenditures, and this limits the government’s opportunities to increase social spending. Hence the myth about the “social orientation” of the 2007 budget, although the government, despite sharply rising prices, has not announced (as of the end of the first quarter) an indexation of the minimum wage, scholarships, pensions or social sector wages. The heaviest burden on the budget is imposed by debt service on large Chinese loans (in the amount of $604 million) used to finance energy and construction projects under agreements signed in mid-2006: projects for the construction of the Dushanbe-Chanak (border with Uzbekistan) highway, a tunnel under the Shakhristan Pass, and a South-North power transmission line which is to connect the energy-surplus south of the country with its northern regions and will make it possible to supply them with electricity, especially in winter. According to Finance Ministry data, Tajikistan’s total external debt at year-end 2006 was $866 million (31% of GDP). And this burden may increase, especially in view of the need to service Chinese loans with a maturity of 20 years (at 2% per annum with a five-year grace period). In order to tighten control over the country’s external debt and to ensure a sustainable (economically acceptable) external debt burden, on 30 November the government approved a State Program of External Borrowings for 2007-2009 drafted by the Ministry of Finance. Its main purpose is to ensure more effective control over borrowings constituting the public external debt. This program covers 71 loans and credits totaling $1,450.0 million, including $603.55 million worth of loans provided by the Export-Import Bank of China (China Exim Bank). Out of this total, $161.55 million was drawn down prior to 1 January, 2006, and the preliminary figure for 2006 is $170.28 million, including $105 million in loans provided by China Exim Bank. Considering the severity of the external debt problem, in recent years the republic’s government has pursued a policy designed to consolidate all budget revenues and strictly limit new borrowing. Thus, it has developed and adopted a debt reduction strategy, made an inventory of external debts, and done a great deal to obtain debt relief from creditors. Only a few years ago, in 2000, the country’s external debt amounted to 110% of GDP. In order to prevent an uncontrolled accumulation of external debt and a repeat of the recent debt situation, there is no need to change the existing system of methods and instruments used to manage external debt and to obtain new loans. It is necessary to continue debt relief negotiations with creditors and the policy of new borrowing only on concessional terms. In addition, questions of providing government guarantees to Tajik business entities seeking to obtain foreign credits should be considered only based on the results of thorough economic and legal reviews. It is equally important to maintain the limits on annual disbursements of foreign loans provided by international financial institutions for implementing projects under the Public Investment Program (as a mechanism of its prioritization). At the same time, given the improvement in the debt situation and the need to ensure the country’s accelerated recovery and development, there are plans to raise the level of concessional government borrowing (from 4% of GDP in 2006 to 12% in 2007, with due regard for disbursements of concessional loans granted by China Exim Bank). In 2008-2009, there is to be a gradual reduction in this figure to 10% and then to 8% of GDP, respectively. It should be noted that for the first time this Program is the result of joint and well-coordinated scrupulous work by all the ministries and departments involved: Ministry of Finance, Aid Coordina- tion Unit and Ministry of Economic Development and Trade (MED). The Program is ambitious and is designed to improve the country’s investment image in the eyes of foreign investors. It includes, as fully integrated components, the country’s medium-term budget for 2007-2009, the Public Investment Program, and the currently discussed matrix for financing Tajikistan’s poverty reduction strategy for 2007-2009. It also imposes a limit on external borrowing which meets the threshold values of international financial institutions for external debt sustainability, i.e., 12% of GDP with due regard for dis-

235 CENTRAL EURASIA 2006 Analytical Annual bursements of Chinese loans. It is a good thing that the government has set a clear borrowing limit and recognizes the importance of maintaining a sustainable debt burden. It is very important to stay within the projected limits and try to avoid new borrowing, especially on a commercial basis. According to the State Statistical Committee, foreign direct investment in 2006 was $385 million, and other foreign investment, $120 million, which adds up to 18% of GDP. According to the MED, investments from 32 countries mostly go into the republic’s energy, mining, chemical and textile industries. Russia remains Tajikistan’s largest investor; in particular, it invested $160.6 million in the republic’s energy sector. Among non-CIS countries, the largest investors are Cyprus ($24 million), the United States ($18.5 million) and Britain ($15.7 million). In the future, the MED expects to see a sharp increase in cash inflows generated by projects in the energy sector, processing of precious and semiprecious stones and metals, and the textile industry due to an improvement, among other things, of the legal environment for investment. In 2006, amendments and addenda to the Tax Code exempt- ed the energy sector from most taxes, and the textile industry (new processing enterprises), from eight taxes. According to MED forecasts, total investment in 2007 is to reach $677.1 million, mostly under projects for the construction of hydropower plants and hotels. In early October, the working party on Tajikistan’s accession to the World Trade Organization held its third meeting at the WTO headquarters in Geneva. The meeting was a success, with the negotiation partners welcoming the country’s achievements in harmonizing its laws with WTO rules and regulations. Tajik government and WTO experts believe that Tajikistan may well join the WTO in the next year or two, for which purpose all the necessary measures are being taken. In the banking system, the total regulatory capital of the country’s banks increased by 8% in 2006, reaching SM 268.4 million, and total deposits (compared to year-end 2005), by SM 245 million (by 45%, including 30% for somoni-denominated deposits and 50% for deposits in foreign currency). In absolute terms, however, foreign currency deposits account for over two-thirds of the total; average interest paid by Tajik banks on such deposits is 13%, which is much higher than interest offered by foreign banks. Credit is available at 24% (in foreign currency) to 30% (in local currency), which is so far prohibitive for business, small and medium business in particular. A narrow deposit base dominated by short-term deposits (under one year) does not allow banks to provide long-term credit to the real sector, especially to agriculture, which is highly important for sustainable economic development. Funds remitted through banks by Tajik migrant workers could become a very promising source of deposits. In January-September, these remittances totaled $743 million, or 63% more than in the same period of 2005. But due to low confidence in the banking system, up to 90% of these funds are withdrawn from accounts and are used for current consumption. Consequently, a key task of the local banking system is to gain the confidence of potential de- positors so that they would choose modern banking services to invest their savings. This produces the largest money multiplier effect, i.e., there is no need to print extra money, while the savings of households and business entities are part of legal banking. The development of a national microfinance system on a massive scale should be seen as a positive trend in the evolution of the republic’s banking system. According to the Banking Supervision Depart- ment of the National Bank, Tajikistan has 27 microloan funds, 17 microcredit organizations, and 5 microcredit deposit organizations. Let us note that world experience in the area of microcredit is highly positive. In 2006, a Nobel Prize in economics was awarded to the owner of the Grameen microcredit network from Bangladesh, who has practiced microcredit for 40 years and has thus managed to raise living standards in this once poorest country in the world, now prospering. The microfinance program of the European Bank for Reconstruction and Development is making particularly rapid progress. Another interesting trend is the active introduction of plastic cards, a service new to Tajikistan. According to the National Bank, the number of plastic card owners increased almost 3.8 times compared to 2005, to 11,769 persons, mostly because the procedure has become simpler and less expen-

236 REPUBLIC OF TAJIKISTAN Economy sive (the leaders here are Agroinvestbank and Tojiksodirotbank), and also because plastic cards are increasingly popular among migrant workers, who no longer have to make money transfers. They can simply open an account and obtain a card in Tajikistan or Russia, and then send it to their relatives. In April-May 2006, the International Finance Corporation (IFC) carried out a survey of the business environment in the republic by polling representatives of small and medium business under its project for the development of small and medium business in Tajikistan. A representative sample of 2,500 respondents included 1,000 individual entrepreneurs, 700 dehkan private farmers and 800 legal entities. The survey showed an insignificant reduction in administrative pressure on small and medium business (SMB), but the environment for the operation of private business remains very difficult and burdensome. From 2003 to 2005, the sector of small and medium-sized enterprises (SMEs) grew by only 3.5%, providing employment for 25% of the working age population, a very low figure by world standards. Administrative procedures remain complicated, especially for legal entities and private farms, with a continued trend toward growing pressure on developing legal business, which explains the faster growth of individual enterprise. Among the positive changes one can note greater access for SMEs and private entrepreneurs to bank financing and a four-fold reduction in unofficial payments in obtaining bank loans. Positive trends in this area reflect both an improvement in banking services and in the operation of the banking system and (for the most part) a sharp increase in access to financing through appropriate micro organizations, especially to microcredit under the highly successful EBRD project. In addition, with the adoption of a law on licensing certain activities in April 2004, the number of activities subject to licensing was reduced from 1,000 to 72. The new Tax Code significantly simplifies taxation procedures, especially for private farmers, but many respondents complain about the actually increased tax burden. This is probably where the list of positive changes comes to an end. In answer to the question of how they preferred to resolve matters with government agencies, 75% of respondents said “unoffi- cially,” which points to the systemic nature of corruption on the part of both bribers and bribe takers. The system of unfair (and uneven) distribution of resources and the readiness to resolve SME regulation problems mostly through unofficial channels reflects the inefficiency of the entire regulation system and lack of confidence in the authorities among business people. The most difficult procedures for private business are those associated with export/import operations, registration, licensing and inspections, while the leaders among barriers (in scope) are matters of taxation, inspections and permits. In the opinion of respondents, the number of inspections has been reduced from 16 to 13 per year, but their duration has increased on average from 17 to 20 days. The leaders here are the tax in- spection authority (91%), fire safety authority (34%) and the sanitary-epidemiological service (30%). A very disturbing trend is the reduction in the number of private businesses involved in export/ import operations (against the background of a sharp increase in the scope of foreign economic activity in general), especially in imports of consumer goods. In 2002-2005, the number of SMEs engaged in exports fell from 5% to 1.6%, and in imports, from 19.6% to 12.3%. This is evidence of monopolization as the regulation of the most attractive segments of economic activity becomes more complicated. On the other hand, this also shows that entrepreneurs (in the main) cannot comply with all the legal formal- ities in export/import operations. Thus, 74% of respondents complained that the procedures for payment of customs duties were too complicated and hard to understand, and 68% noted the need for unofficial payments to customs officers. On average, small and medium business people spend 3.8 months per year to perform various administrative procedures, including 31 days in tax agencies, 25 days in licensing agencies, 14 days on obtaining permits, 8 days on registration, and 4 days on standards. These facts and data presented in the survey speak for themselves, demonstrating the deplorable state of affairs as regards barriers to business. The country’s small business, which is still in its infan- cy, is under great administrative pressure.

237 CENTRAL EURASIA 2006 Analytical Annual

Negative assessments of the business environment in Tajikistan are confirmed by the results of a World Bank survey, “Doing Business 2007,” carried out in 2006. World Bank and IFC experts note that the greatest difficulties are associated with administrative barriers and the complicated bureau- cratic system of governance. Thus, Tajikistan is ranked 166th (out of a total of 175 countries) on the opportunities for “Starting a Business,” and 85th on “Dealing with Licenses.” For example, in order to obtain a license the republic’s construction firms have to go through 18 procedures, which take at least 187 days. Tajikistan is also ranked very low on “Getting Credit” (143rd place), on access to information on a 10 point scale (zero score), on “Paying Taxes” (154th place), and on “Protecting In- vestors” (down to 172nd place). In the overall rankings (“Ease of Doing Business”), the republic is in 133rd place. Among its closest neighbors, only Uzbekistan has a lower ranking (147th place). In conclusion, it should be noted that a significant trend in the country’s economic life in 2006 was a more active fight against corruption. At any rate, the appropriate agencies were strengthened and the country’s top leaders made a number of loud statements. Among the major decisions taken in the process of government reform after the November presidential elections was the establishment of a State Finan- cial Control and Anti-Corruption Agency. The president’s recent statements and decisions are encouraging. At a year-end government meeting, the head of state referred to a fundamental study performed by the Center of Strategic Studies under the President of the Republic of Tajikistan. The conclusion drawn in that study based on wide opinion polls was that corruption was particularly manifest in the public administration system. In view of this, the heads of government bodies, primarily law-enforcement agencies, were given strict instructions to launch a relentless fight against corruption.

RELIGION

Abdulvokhid SHAMOLOV D.Sc. (Philos.), professor, department head, Center of Strategic Studies under the President of the Republic of Tajikistan (Dushanbe, Tajikistan)

Abdunabi SATTORZODA D.Sc. (Philol.), professor, department head, Center of Strategic Studies under the President of the Republic of Tajikistan (Dushanbe, Tajikistan)

here are no official figures on the percentages of followers of various religions in the republic’s total population: the recent population census was not interested in religious affiliations. Ac- T cording to expert assessments, 97 percent of the population is Muslim,1 most of whom are Sunni

1 See: Postroenie doveria mezhdu islamistami i sekuliaristami—tadzhikskiy eksperiment, Devashtich Publishers, Dushanbe, 2004, p. 90. 238 REPUBLIC OF TAJIKISTAN Religion of the Hanafi madhab; however, there are any number of the Shi‘a Twelvers (the school that recognizes 12 imams), Ismailite Shi‘a Seveners (the school that recognizes only seven imams) and Sufi of the Naqshbandiyya order. Orthodox Christians, Catholics, followers of the New Apostolic and Lutheran churches, as well as Seven Day Adventists, Jehovah’s Witnesses, followers of the Korean-led Grace Sonmin (Protestant) Church, Judaists, Hindus, members of the Rama Krishna Mission and the Inter- national Society for Krishna Consciousness, Baptists, and followers of Zardushtism make the republic’s religious picture very diverse indeed. Very much like in other Muslim countries of the East, the Tajik state is not based on a civil society, which means that the official political and the real public structures are separated. The traditional and the contemporary can become closer to a certain extent, if integration between the state and society or, at least, symbiosis of the civil and pre-civil communities reaches a certain level. This was partly achieved under Soviet power and during the years of independence, but the process is extremely uneven. More than that, it is imposed on society and as such is alien to it. For this reason, it is limited to the sociopolitical and consumer spheres, leaving the real social structure intact. Many of the public organizations and the broad masses of the republic’s population are still functioning outside civil society structures and have only just reached their threshold. The developing symbiosis of “modernity” and “traditions” is best illustrated by Islam’s stronger sociopolitical, ideological, and cultural positions. It has become the strongest, as well as the most active and expanding political force among all the other traditional trends that stand opposed to alien, as well as communist and liberal ideas. The local version of Islam is very specific and differs from Islam in Kazakhstan and Kyrgyzstan; it is relatively deeply rooted in the sociopolitical structures, national culture, and way of life; it has become part of ethnic self-awareness and ethnic culture. The year 2006 started with stormy discussions of the Draft Law on Freedom of Conscience and on Religious Associations that the Committee for Religious Affairs under the RT Government submitted to the Cabinet in March. The published document stirred up discussions in the media, the corridors of power, and the public. Islamic clergymen and missionary organizations operating in the republic were among the law’s severest critics. Flooded with numerous complaints, the OSCE Center in Dushanbe carefully studied the proposed law and asked the OSCE/ODIHR Advisory Council on Freedom of Religion or Belief to supply its analysis. The Council, which hires academics from all scholarly fields, responded with Comments on the Draft Law of the Republic of Tajikistan on Freedom of Conscience and on Religious Associ- ations,2 which offered general comments and specific recommendations. The Council summarized its comments in eighteen points, which said in particular: “The draft law … contradicts major international human rights commitments in its detailed provisions, … dis- criminates against religious minorities, restricts religious activities of non-citizens of the Republic of Tajikistan, establishes an over-intensive State control over religions and religious activities, … restricts democratic participation of religions,”3 etc. This encouraged the local critics to dismiss the draft as imperfect and subject it to revision and broad discussion, in which the public and religious organizations should be directly involved.4 According to Murodullo Davlatov, who headed the now dissolved Committee for Reli- gious Affairs under the RT Government, the current Law on Religion and Religious Organiza- tions of 1994 needed conceptual revision where its content and legal regulation structure were con-

2 See: Comments on the Draft Law of the Republic of Tajikistan on Freedom of Conscience and on Religious Asso- ciations prepared by the OSCE/ODIHR Advisory Council on Freedom of Religion or Belief. 3 Ibidem. 4 See: “Religioznye strasti,” Asia-Plus, 11 May, 2006. 239 CENTRAL EURASIA 2006 Analytical Annual cerned.5 The local expert community believes that it is not so important that the current law is not perfect, but that it is imperfectly implemented, even though in the new social and political context created by the peace process, it could have been successfully executed. This did not happen, not only because the official structures deliberately or otherwise violated the law—the religious organizations are also guilty of this. For example, according to the Public Prosecutor’s office of the Khatlon Region, 44 out of 78 mosques in the Panj District have no documents on the land they stand on; and 11 mosques function illegally with no relevant documents. More than that: they run unregistered religious courses for young people. Branches of several main mosques (Hoji Safar, Langar, Boggai, Dehbaland, Kul- chashma, and Gesh) were illegally opened in the Muminabad District.6 Religious minorities objected to the law just as vehemently: the draft infringed on their rights; they’d rather live with the present law that guarantees their equality. There was another issue raised at various levels throughout 2006: the synagogue in Dushanbe. Two years earlier, the Jewish community allowed the administration of the Tajik capital to remove it to obtain space for the planned Palace of Nations. In March 2006, the Embassy of the Republic of Tajikistan in the United States issued a special statement to clarify the point.7 The struggle against religious extremism and extremist and religious organizations (Hizb ut- Tahrir, the Islamic Movement of Uzbekistan, etc.) remained high on the list of priorities. According to the Ministry of the Interior, two more religious groups, Bayat and Salafiya, presumably of an extremist nature, have recently appeared in the republic.8 In 2006, an increasing number of women attracted by religious extremism joined extremist organizations. According to the official figures quoted by former Minister of the Interior Kh. Sharifov at his June meeting with women actively involved in politics, 20 percent of the 400 members of Hizb ut-Tahrir detained in the country in the last five years and 40 IMU members were women.9 Arrests of members of these illegal organizations continue. In March, a search of a house in the settlement of Kistakuza (the Bobojon Gafurov District, Sogd Region) produced 400 books, 700 leaflets, and 300 blanks for publications run by Hizb ut-Tahrir.10 In Isfara, law-enforcement bodies found an underground bunker used as a dwelling and propaganda center of the IMU’s ideas in the region. The bunker belonged to a certain A. Kaiumov, who headed one of the extremist groups. A search brought to light 46 videos and 58 DVDs calling people to join the fight and providing instructions on how to make explosives; there was also a notebook with detailed tactical-technical descriptions of the Kalashnikov machine-gun, Makarov pistol, and RGD-5 hand grenade.11 Two facts—murder of lieutenant of the militia B. Gadoyboev, who headed the investigatory isolation ward of the Kayrak- kum district police department (Sogd Region), and illegal liberation by IMU members of F. Rakhi- mov from Isfara, who served a prison term for illegal possession of firearms—testify that the extremist and terrorist religious groups will not abandon the armed struggle. On 12 May, one of those who attacked the Kayrakkum district police department, initiated an armed attack on the Lakkon border post (Isfara).12 In 2006, the law-enforcement structures somewhat readjusted their punitive anti-extremist and anti-terrorist methods in favor of information and propaganda with the help of the public, experts, academics, respected and trusted religious figures, theologians, etc.

5 See: “Religioznye strasti,” Asia-Plus, 11 May, 2006. 6 See: S. Nazriev, “Mechetey mnogo?” Asia-Plus, 26 June, 2006. 7 See: Nachot, 9 March, 2006. 8 See: Millat, 9 March, 2006. 9 See: Ibidem. 10 See: Tojikiston, 16 March, 2006. 11 See: Asia-Plus, 2 November, 2006. 12 See: Asia-Plus, 15 June, 2006. 240 REPUBLIC OF TAJIKISTAN Religion

The new anti-extremist methods have proven their efficiency, but complete success is still far away. To achieve it, the causes of the undesirable phenomena should be eliminated. The republic’s leaders should formulate clear religious policies while going on with their efforts to improve the socioeconomic climate in the country, cut down unemployment, improve the standard of living, reduce the scope of labor migration by creating more jobs inside the country, narrow the gap between the rich and the poor, and provide young people with a future. The absence of a religious policy, however, does not allow normal relations to be achieved between the state and religion (religious organizations), which is the most frequent source of conflicts in the religious sphere. Extremist and terrorist religious organizations are not the only threat to the country’s security: ideas and views that contradict the traditional religions and religious trends—Hanafi Islam and Chris- tian Orthodoxy—are no less dangerous. This threat is coming to the fore to become another destabilizing factor in the republic’s religious sphere. M. Khimmatzoda, a highly respected Tajik theologian, pointed out that the treatise Salafi’s True Face and the book Unity (tawassul) and Assistance (istigo- sa) in Islam, which promoted a different madhab than that traditionally accepted in Tajikistan, violated the unity of the local Muslim community.13 In May, the book Islam for the Young was removed from bookshops on an initiative of the rector’s office of the Islamic University of Tajikistan and the republic’s Ulema Council as obviously contradicting the Hanafi Islam, the mainstream religious trend. The violent response of the Muslims and Islamic organizations of Tajikistan to the “cartoon scandal” and Pope Benedict XVI’s offensive remarks about the Prophet Muhammad confirmed that extremism, be it Eastern or Western, Islamic or Christian, cannot be tolerated. The Islamic Revival Party of Tajikistan issued a statement to the effect that such acts and such words insult the world Muslim community.14 Sheikh Amonullo Nematzoda, Chairman of the Ulema Council of Tajikistan, described the car- icatures of the Prophet of Islam as blackmail designed to fan hatred between Muslims and Christians.15 In 2006, the Islamic Revival Party of Tajikistan lived under the influence of the presidential election of 6 November. Even before the official election campaign began, the party insisted that it would nominate its own candidate and turned down invitations from other political parties (the Social Democratic, Democratic, and Socialist [M. Narziev’s wing] parties) to unite behind a common candidate. Instead, it invited all other parties to close ranks behind its candidate.16 After a while it became clear that it had been nothing more than a trick designed to get a response from the People’s Demo- cratic Party headed by the president, who was running for re-election. In March, the then IRPT chairman (now dead) Said Abdullo Nuri described a coalition with the ruling party as the only option.17 This unjustified hope forced the IRPT out of the presidential race. The statement came from a special congress at which the party spokesmen and its new chairman M. Kabiri blamed the unfavorable conditions and lack of trust between the IRPT and other forces involved in domestic, regional, and international political processes for this situation.18 After the elections, however, it was admitted that the tactics were wrong.19 The pre-election statements stirred up a lot of interest in the IRPT among the international organizations stationed in the republic and foreign embassies. The party chairman M. Kabiri met V. Sotirov, special representative of the U.N. Secretary General in Tajikistan, M. Schiffer, Director of the Polit- ical Department of the Foreign Ministry of Germany; Hans-Dieter Lucas, an official of the same ministry for the Caucasus and Central Asia, and German Ambassador to Tajikistan Rainer Müller, as well as other EU ambassadors and representatives, O. Van der Wand, who headed the OSCE observer group

13 See: M. Khimmatzoda, “Taassubi mazkhabi-amali nomakbul,” Nachot, 11 January, 2007. 14 See: Nachot, 9 February, 2006. 15 See: Zindagi, 9 February, 2006. 16 See: Millat, 1 June, 2006. 17 See: Millat, 2 March, 2006. 18 See: Nachot, 19 October, 2006. 19 See: Kh. Gaforzoda, “Prishlo vremia dlia Natsional’noy koalitsii,” Fakty i kommentarii, 9 November, 2006. 241 CENTRAL EURASIA 2006 Analytical Annual at the presidential election in Tajikistan, Ia. Milchakov of the same group, etc.20 The meetings and latest publications show that the party was seeking more trust (e’timodsozi) in its relations with the republic’s government, which was expected to approve the party’s course; otherwise the party intended to keep its distance. M. Kabiri, deputy of the parliament and the newly elected party chairman, outlined the party’s policies at a joint sitting of Majlisi milli and Majlisi namoiandagon.21 He repeated his statement in clearer terms in the party’s annual report issued in January 2007. On 9 August, Said Abdullo Nuri died after a long and grave illness at the age of 58. A prominent public and political figure, he founded and headed the Islamic Revival Party of Tajikistan; was the leader of the United Tajik Opposition and co-chairman of the National Reconciliation Committee. The death of man, one of those to whom the country owed peace and national consent, was a great loss for the party and the nation. Rivalry over the post of party leader and the resultant split looked inevitable to certain local and foreign experts, who predicted the party’s undermined position. However, on 2 September, the party, which demonstrated unity, viability, and clarity of purpose, elected a new chairman at the Sixth Congress.22 It remained true to the course set by its founder. The newly elected chairman put the shared feelings in a nutshell: “It was not for me that you voted today—you cast your votes for Ustod (Muallim) S.A. Nuri.”23 In an Address to the Heads of State and Government, the congress asked that the title of the Hero of Tajikistan be conferred on S.A. Nuri in commemoration of his services to the country and the nation.24 In 2006, religious organizations were much more visible on the country’s religious scene than before. They never missed an opportunity to air their views at all kinds of scientific-practical conferences, seminars, and round tables convened to discuss the national idea, peacekeeping in the republic, the dialog of civilizations, a compromise between secular powers and Islam, and other issues. Theo- logical works by prominent scholars of the past and present were published in great numbers.25 Two popular IRPT publications—Safinai umed and Nayson (a popular science journal for women)—marked their fifth anniversary.26 The correlation between the national (tojikiat) and the religious (islomiat) was discussed as actively as before in 2006. Rekindled by K. Sattori’s article “Are the Tajiks Primarily Muslims or Aryans?,” which appeared in Millat on 11 May, the discussion was continued by V. Zayniddinov in “We are Primarily Aryans,” K. Sattori in “We are an Aryan Race, but also Tajik Muslims” (Millat, 10 August), M. Makhshu- lov in “From Zardusht to Muhammad and from Muhammad to Us” (Millat, 24 August), V. Zayniddinov in “I Have Been and Remain an Aryan” (Millat, 31 August), Kh. Sadriddinzoda in “Who are Aryans and Are We Aryans?” (Millat, 6 September), A. Akhrorov in “The Nation Should Come Before Re- ligion” (Tojikiston, 29 November), etc. Like many other discussions before it, this one proved fruitless: the sides were involved in a black-and-white discussion, in which one side flatly denied everything that came from the other. It was revived by Murodullo Davlatov’s review “Pure Islam” of the book The Shari‘a and Socie- ties, which appeared in 2006. Its author Kh.A. Turajonzoda is a prominent state figure, theologian, and deputy of Majlisi milli of the RT. The highly biased review appeared in Tojikiston on 28 September.27

20 See: Nachot, 12 October and 2 November, 2006. 21 See: Nachot, 21 December, 2006. 22 See: “KhNIT dudasta nashud, vale sokhibi du rokhbar shud,” Millat, 6 September, 2006. 23 Ibidem. 24 Ibidem. 25 See: Kh.A. Turajonzoda, Shariat va chomea, Dushanbe, 2006; M. Khimmatzoda, Didgokh va masoil, Dushanbe, 2006, etc. 26 See: Nachot, 4 May, 2006. 27 See: M. Khimmatzoda, “Takhrifkori gunokh ast,” Tojikiston, 12 October, 2006; D. Dust, “Ateizimi nob,” Zinda- gi, 19 October, 2006; I. Aslonov, F. Mukhtorov, N. Siddikov, “Turajonzoda nobgaroi mekunad,” Tojikiston, 23 October, 2006; D. Dust, “Davlatov tarafdori khurofoti astu,” Tojikiston, 23 November, 2006; M. Shakuri, A. Sattorzoda, A. Imomov, “Payvandi dinu khirad,” Tojikiston, 29 November, 2006. 242 REPUBLIC OF TAJIKISTAN Religion

The religious situation in Tajikistan was also discussed abroad. The Diplomatic Academy, For- eign Ministry, and the Institute of Oriental Studies of Austria convened a symposium called “Tajikistan” held in Vienna on 16 August and attended by IRPT Chairman M. Kabiri. On 2-3 May, 2006, Almaty hosted an International Conference “Sufism in Iran and Central Asia,” at which Prof. A. Sattorzoda delivered a report entitled “The Qadiriyya Sufi Order in Tajikistan.” A regional conference “The Role of Religion in Strengthening Peace and Social Partnership” held in Dushanbe on 8-9 June on an initiative of the Center of Strategic Studies under the President of the Republic of Tajikistan with USAID support proved to be an important event in the republic’s religious life. It attracted delegates from Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan, diplomatic representatives, international and religious organizations stationed in the republic, specialists in Islam, and officials. The conference pointed out that it was the first time in the fifteen years of independence of all the Central Asian states that the Islamic ulemas, prominent religious figures, and representatives of the region’s religious organizations discussed the most urgent issues of Muslim societies. The conference participants insisted that such meetings should become a regular feature, because many problems remained unresolved. Former Mufti of Central Asia and Kazakhstan Sheikh Muhammad Sadik Muhammad Yusuf, who represented Uzbekistan, called the conference “a great achievement and a bridge of mutual understanding.” Chairman of the International Center for Islamic Cooperation (the city of Osh) Saryjan Kori Kamolov, a former mufti who represented Kyrgyzstan, pointed out that the positive experience of Tajikistan was known and appreciated within the region and beyond it. The decision of the Ministry of Education of Tajikistan to include the history of Islam in the curriculum of secondary schools (seventh and eighth years) was another positive sign. Minister of Education A. Rakhmonov explained that the new generation should primarily have better knowledge of the history of religion and, especially the history of Islam. The contents of the new course were discussed in detail for a month by the Committee for the Religious Affairs, the Islamic Republican Center, political parties, theologians, and teachers. Tojikiston referred to a source in the Ministry of Education when it wrote that later the university departments of philosophy and history would train specialists in the history of Islam as well.28 Members of the religious organizations of Tajikistan visited other countries and received foreign delegations at home to share positive experience in the religious sphere. Early in April, Ahmed Younis, head of one of the Islamic organizations in the United States and member of the U.S.-Muslim World Advisory Committee, delivered a lecture at the Center of Strategic Studies under the President of the Republic of Tajikistan, met the editors of the Nachot newspaper published by the IRPT, etc. In October, ten religious figures from Tajikistan visited the United States under the USAID “Religion in a Secular Society” program. For twenty days they traveled across the country and met religious and secular groups. On 21-23 May, Dushanbe hosted the Republican Contest of the Koran Readers organized by the Asia Muslims Committee, Kuwait, the International Islamic Charitable Organization, the Internation- al Organization for Training Koran Readers, and the World Islamic League. Tajikistan was obviously expanding its international contacts. The contest attracted over 70 readers between 5 and 25 from all over the country. The winners were expected to represent the republic at the annual international competition of Koran readers. To complete the picture of religious events that took place in the republic in 2006, we should mention certain regrettable developments. The religious organizations are still aware of the latent pressure, about which IRPT Chairman S.A. Nuri informed U.N. Under-Secretary-General Ibrahim Gambari at their personal meeting in June.29 The sudden death of Sadullo Marufov, an IRPT member,

28 See: Tojikiston, 16 February, 2006. 29 See: Millat, 22 June, 2006. 243 CENTRAL EURASIA 2006 Analytical Annual in Isfara on 3 May caused a very negative response in the public. On 2 May, he was detained by the law-enforcement bodies; the next day he was reported to have committed suicide by hurling himself out of a third-floor window of the city militia building. The death of prominent religious figure Esho- ni Said Khodi in the Bokhtar District, Khatlon Region, in the small hours of 11 September sent another negative wave across the republic. The culprits have not been found yet. The public, however, tends to lay the blame on extremist structures, to be more exact, on Hizb ut-Tahrir. The heads of the Committee for Religious Affairs also received their share of criticism; the public was puzzled by why prominent religious figures (Makhsumi Ismoil Pirmuhammadzoda and others) had failed the Committee’s tests.30 The 2006 hajj was a success; it was performed by about 4,500. One of them, 58-year-old A. Raja- bov, a PE teacher, reached Saudi Arabia on foot. He started from Moscow where he spent some time earning money. His feat, which took him nine months, earned him an audience with King Abdullah Bin-Abd-al-Aziz Al Saud.31

30 See: D. Dust, “Kumitai din e taftishi akida?” Millat, 16 November, 2006. 31 See: Zindagi, 31 August, 2006.

INTERNATIONAL AFFAIRS

Rashid ABDULLO Independent political scientist (Dushanbe, Tajikistan)

n 2006, the republic’s leadership, free from in implementing the republic’s strategically im- domestic political emergencies for the first portant economic projects. They accomplished I time in the years of the country’s independ- this task by primarily concentrating their efforts ence, had the opportunity to concentrate on cre- on creating conditions conducive to the imple- ating foreign political conditions conducive to the mentation of major projects, on which agreements country’s advanced economic development. For- had already been reached with foreign investors. mation of the post-Soviet national Tajik state They were (and will remain for the near future) based on the institution of strong presidential projects in the energy and transport-communica- power was completed the same year. The final tion spheres, as well as measures aimed at deal- touch to this 15-year-long process was the prep- ing with the still spontaneously developing mass arations for and holding of another presidential labor migration. The political tasks of ensuring the election. victory of the current head of state and the suc- No one in the republic or beyond it had the cessful implementation of the development slightest doubt that Emomali Rakhmonov would projects became so intertwined that they were be the main contender for this post. But the pres- essentially resolved together. ident and his team tried to promote his image The successful solution of both tasks de- among the electorate as a peacekeeping leader and pended directly on the further enhancement of as a leader capable of achieving the best results relations primarily with Russia, the United States,

244 REPUBLIC OF TAJIKISTAN International Affairs

China, and Iran. In so doing, while striving to Federation and U.S. in Central Asia in the coun- achieve the set goals, the republic’s leadership try’s interests, but also the increasing interest in very rationally and skillfully used not only the the region shown by China, Iran, India, Pakistan, steadily growing rivalry between the Russian Japan, and West European countries.

Tajikistan-Russia

In 2006, the Russian vector of Tajikistan’s foreign policy developed very intensively, particularly in the political and economic spheres. Naturally, the presidential election was directly or indirectly a dominant feature of bilateral political contacts. The Tajikistan leadership counted on Russia’s support of Emomali Rakhmonov’s candidacy, and the Russian Federation declared its support of the current Tajik president as early as the beginning of the year. It was this approach that largely guaranteed the national interests of both countries. Presidents Rakhmonov and Putin discussed the development of bilateral relations before the beginning of the sitting of the EurAsEC Interstate Council held on 25 January in St. Petersburg. And the previous day, on 24 January, Russian Ambassador to Tajikistan R. Abdulatipov held a press conference in Dushanbe, at which he stated that Emomali Rakhmonov did not have any opponents. His statement aroused a sharp response among the opposition: on 6 February, the opposition Democratic, Social-Democratic, and Socialist parties of Tajikistan publicized a joint statement that essentially accused the Russian ambassador of interfering in the republic’s domestic affairs. But these parties’ démarche had essentially no serious consequences for Tajik-Russian relations. On 20 April, President Emomali Rakhmonov presented his annual Address to the parliament, in which he particularly stressed that cooperation with the Russian Federation was viewed as a strategic partnership. At just the right time, Moscow precisely defined its attitude toward the presidential election. On 24 August, Chairman of the Russian Federal Assembly Federation Council Sergey Mironov came to Tajikistan as the head of a large delegation of Russian parliamentary deputies, regional leaders, and Russian businessmen. The Tajik leadership was pleased to hear Sergey Mironov say in a public statement on 25 August that Tajikistan has its own leader, the current head of state, that a multiparty system has formed in the republic, and that Tajikistan’s democratic and political system raises no questions for Russia. These words by one of Russia’s most influential leaders on the eve of the official launching of the election campaign were perceived as nothing more than Russia’s support of Emomali Rakhmonov’s candidacy as president and made an enormous contribution to his victory at this election. On 15 September, Emomali Rakhmonov met with Russian Prime Minister Mikhail Fradkov, who took part in the meeting of the SCO heads of state and discussed a wide range of questions with them. Mikhail Fradkov’s arrival in Dushanbe at the peak of the election campaign was also an expression of political support of the current Tajik president. Later, cooperation between Dushanbe and Moscow with respect to the presidential election in Tajikistan developed in two areas. First, ensuring the participation of observers in the election from the CIS and Interparliamentary Assembly (IPA) of the Commonwealth Member Nations. Second, creating conditions for Tajik citizens living in Russia (and they constitute a large percentage of the electorate) to vote on election day. On 26 September, Vladimir Garkin, Deputy Executive Secretary of the CIS, opened an office of election observers from the Commonwealth in Dushanbe. On 18 October, representatives of the Inter- national Institute of Monitoring Democracy Development, Parliamentarianism and Suffrage Protec- tion for the Citizens of the IPA CIS Member Nations said that no serious violations of the current legislation were recorded during nomination by the political parties of their candidates, gathering sig-

245 CENTRAL EURASIA 2006 Analytical Annual natures in support of them, their registration with the Central Elections and Referendums Commis- sion. On 4 November, CIS Executive Secretary Vladimir Rushailo arrived in Dushanbe and began supervising the work of the CIS observers mission. And on 5 November, Vice-Speaker of the Russian State Duma Vladimir Pekhtin, who was in charge of the CIS IPA observers, arrived in Dushanbe. As we already noted, the Russian authorities helped to set up polling stations for Tajik citizens in 27 cities of the country: Moscow, St. Petersburg, Ekaterinburg, Volgograd, Krasnoiarsk, Novosibirsk, Irkutsk, Perm, Ulianovsk, Samara, Saratov, Togliatti, Tiumen, Astrakhan, Tver, Tula, Kazan, Krasnodar, Kaliningrad, Riazan, Orenburg, Penza, Kemerovo, Novokuznetsk, Kaluga, Cheliabinsk, and Yaroslavl. After the preliminary results of the voting were published (7 November), Vladimir Rushailo declared the election legitimate and free. V. Pekhtin, who also called them democratic, sharply criticized the position of the OSCE: “The observers from the OSCE were more like inspectors, finding fault with every little thing, at the election. The OSCE standards are not acceptable even in many European countries, not to mention the Republic of Tajikistan, which has its own mentality and traditions. Nothing good has ever come from imposing democracy…” These words by V. Pekhtin were not only an expression of Russia’s support of Emomali Rakhmonov, but also an effort to neutralize the critical comments and possible complaints from Western observers. A telephone conversation during which Vladimir Putin congratulated his Tajik colleague on his victory at the election and an official congratulatory telegram from the Russian President to Emomali Rakhmonov were the culmination of Russia’s overall policy in Tajikistan’s presidential election. Tajik-Russian cooperation in the energy sphere developed less smoothly than on the political arena. The need to resolve the problems that arose now and again in this sphere largely defined the nature and content of the political interrelations between Tajikistan and Russia in 2006. Tajikistan and Russia signed agreements on two energy projects: Sangtuda-1 HPP and the Rogun HPP. The former is being successfully carried out: construction officially restarted as early as April 2005. By 2006, the organizations of both countries involved in this project had drawn up a cooperation plan, the infrastructure was restored, and conditions were created for carrying out the main work. On 12 January, it was declared that the Russian Silovye Mashiny Company had won a tender for delivering generators and other equipment for the first three power installations of Sangtuda-1. On 16 January, Emomali Rakhmonov noted that there were no problems with financing the project. On 12 April, he received Head of RAO UES Anatoli Chubais, who said that Russia was carrying out its obligations and has even allotted 200 million dollars to the construction of the hydropower plant in advance. On 29 September, there was a report that Tajik Vice Premier A. Gulomov talked to Anatoli Chu- bais in Moscow about how things were progressing at Sangtuda-1, and they set an approximate date regulating the streamflow for the Vakhsh River. On 15 December, in the presence of President Emomali Rakhmonov and Anatoli Chubais, the river was blocked off and the building of the dam began. The participation of RAO UES as the state-controlled executor, financing from the Russian state budget, and the necessary level of political support on both sides ensured the project’s successful implementation. As for the Rogun HPP project, its implementation has stalled because the sides have different ideas about Tajikistan’s contribution, including with respect to the entire infrastructure and the height of the dam. Dushanbe insisted (and is still insisting) that the cost of the existing infrastructure is close to 900 million dollars, whereas Rusal, the main investor in the project, assesses it at no more than 300 million dollars. Tajikistan wants the hydropower plant to have a rockfill dam 335 m in height. Rusal wants it to be concrete and no higher than 280 m. In so doing, the Russian company maintained that it was proceeding from strictly economic prerequisites, while Tajikistan was certain that the question had acquired political dimensions. According to Tajik experts, in particular Rustam Khaidarov, the original offers made by the Russian side were supposed to be a cover for Moscow’s political calculations regarding Tashkent. In

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October 2004, when the agreements were signed on the Rogun HPP and Uzbekistan was still oriented toward the U.S., Russia had one attitude toward the project. But it changed after the abrupt cooling off in Uzbek-American relations and the prospect that arose in this context of a possible strategic partnership between Russia and Uzbekistan. But there are other problems in implementing the Rogun project. The Tajik side is represented by state structures in this project, while Russia is represented by a private company. What is more, these Tajik structures have been unable to develop efficient cooperation so far with large private companies. Sangtuda-1 is essentially a political-economic project for both sides. This is precisely how the Tajik side approached the Rogun HPP project and the problems associated with it. For Rusal, however, Rogun is primarily a commercial project with only a small political component, which is complicating resolution of the problem. At the meeting between Emomali Rakhmonov and Vladimir Putin held in Sochi on 26 May, the presidents discussed aspects of the development of strategic partnership, the main component of which is the participation of RAO UES, Rusal, and Gazprom in the Tajik projects. But they were still unable to see eye to eye about Rogun. At the press conference held on 6 June in Dushanbe, Russian Ambassador to Tajikistan R. Abdulatipov said that Russia would build the Rogun HPP with or without Rusal. This statement was Moscow’s first public political reaction to the problem of building the Rogun HPP. The Russian Federation confirmed the seriousness of the situation and its desire to keep control over the project, the implementation of which would help to consolidate its strategic influence in the region. The idea of financing the building of the Rogun HPP from the Russian budget arose by way of a solution to the problem. On 20 June, Abdullo Erov, who resumed his duties as the republic’s energy minister, said that during a telephone conversation on 18 June, the Tajik and Russian presidents had come to this agreement, that a government commission had been created for this, and that a new agreement would be signed. At a meeting on 22 July in Moscow between Emomali Rakhmonov and Vladimir Putin, the Russian President confirmed Russia’s intention to participate in the construction of Rogun HPP. But all the same, on 2 August, a representative of Rusal in Tajikistan said that Vladimir Putin’s words should not be understood as a promise to finance the construction of the hydropower plant from the Russian budget. The question of Rogun was discussed again at a meeting between the two presidents in Sochi on 17 August. On 20 September, Ambassador R. Abdulatipov voiced Russian Prime Minister Mikhail Fradkov’s viewpoint, which he set forth during a meeting with Emomali Rakhmonov: Dushanbe and Rusal should nevertheless reach a sensible compromise on Rogun, which should meet both the national interests of Tajikistan and the commercial goals of the Russian company. At the opening of the International Energy Forum on 27 October, Emomali Rakhmonov announced for the first time the possibility of Tajikistan carrying out the Rogun project on its own. In so doing, he emphasized that the doors were always open to all investors. And on 30 October, First Deputy Head of the Barki Tojik Company (Tajikenergo) A. Silantiev clarified the Tajik side’s viewpoint: “Implementation of the Rogun project has been put off for two years now. The conditions of the agreement are not being fulfilled. The goals pursued by Rusal do not meet our interests… If Rusal refuses to build Rogun, Tajikistan will reimburse it the money spent and find new investors. Tajikistan’s doors are open to all investors for implementing this and other hydropower plant projects.” But on 31 October, Deputy Energy Minister P. Mukhiddinov downplayed Dushanbe’s position somewhat by noting that no one had cancelled the agreement with Rusal on building Rogun. Never- theless, he emphasized that if the conditions of this agreement are not observed, the Tajik side may reconsider it. The démarche was underpinned by the meeting held at the mentioned forum between the head of state and Pakistan’s energy minister, who said his country was interested in participating (with investments) in the Rogun project. Throughout the entire post-Soviet period, Pakistan and potential investors from other Muslim countries have been showing an interest in Tajikistan’s energy projects. But the Tajik leadership pre-

247 CENTRAL EURASIA 2006 Analytical Annual ferred to hold such talks exclusively with the Russian Federation. Not until 2004, when it became clear that Russian investment projects are vague, did the republic begin responding positively to the proposals of other potential partners. But in this case, too, Dushanbe is giving its preference to those which do not have political problems with Russia or do not threaten Russia’s interests in Tajikistan. Russia does not always take kindly to Tajikistan’s consistency. Evidence of this is the viewpoint expressed on 4 December by First Vice Premier of the Russian Government Dmitri Medvedev, which essentially supported Rusal’s approach to resolving the problem of the Rogun project.

Tajikistan-U.S.

Throughout the year, relations between Tajikistan and the U.S. were characterized by their mutual interest in preserving and consolidating the previous level of understanding and cooperation reached. This was promoted by the traditional non-conflict ties between the two countries, as well as by the striving to gain each other’s support in accomplishing their own national interests. For the U.S., this means its interests in Central Asia and Afghanistan, and for Tajikistan in strengthening its independence and national sovereignty, as well as in cultivating a favorable attitude on the part of international financial institutions. In 2006, bilateral contacts developed sporadically, that is, they concentrated on limited areas and were not distinguished by particular intensity. As a rule, the initiatives came from the Americans and were essentially aimed at reducing Russia’s influence not only in the republic, but also in Central Asia as a whole, as well as at restraining the development of Tajik-Iranian relations and, possibly, at drawing Dushanbe more closely into Washington’s campaign in Afghanistan. Contacts at the political level, cooperation at the bilateral level and within the partnership with NATO in the military sphere, rendering technical and other assistance to the Ministry of the Interior, to the Tajik border troops, and implementing IMF, WB, and ADB projects, in which the U.S.’s influence is clearly felt, were called upon to resolve these problems. Tajikistan’s tasks consisted of making as efficient use as possible of the potential inherent in the American initiatives for strengthening independence and multi-vector foreign policy, in so doing maintaining a positive balance in its relations with Russia and Iran and not permitting involvement in Afghan affairs that might contradict the republic’s national interests. In addition, Tajikistan wanted to ensure the U.S.’s positive attitude toward the preparations for and holding of the presidential election and its anticipated results. When maintaining political contacts with the White House, on 11 January, President Emomali Rakhmonov discussed not only (and even not so much) the prospects for developing bilateral relations, as questions of ensuring regional security and the situation in Afghanistan with U.S. Secretary of Agriculture Mike Johanns in Astana. In his address to the parliament on 21 April, Emomali Ra- khmonov assessed Tajik-American relations as an important political achievement, emphasizing that Tajikistan is in favor of further expanding cooperation with the U.S. in various branches of the economy, including the hydropower industry. The meeting between Emomali Rakhmonov and U.S. Assistant Secretary of State for South and Central Asian Affairs Richard Boucher held on 8 May in Dushanbe was one of the noteworthy events in bilateral relations. As the latter interpreted the situation, Washington’s priorities in its relations with Dushanbe are assistance in strengthening Tajikistan’s own security, combating drug trafficking, ensuring the possibility of the U.S.’s participation in building the Dashtijum HPP on the Panj River, and helping to develop the potential for energy export from Tajikistan to Afghani- stan, which should promote the economic development of the IRA and decrease the manufacture of drugs in this country.

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When talking about the problem of cooperation between the region’s countries and Iran, Richard Boucher voiced ideas which directly contradicted his statement about the importance of strengthening the sovereignty of the Central Asian republics, when he said: “We recognize the countries in the region and the neighbors of Iran will have relationships with Iran. We all need to make sure these relationships are appropriate and on a commercial basis…” It is obvious that America wants to tell the states of the region, including Tajikistan, with whom and how they should build their relations. For this very reason, it is extremely important for Tajikistan to maintain a level of relations with the U.S. and other major countries at all times which does not allow situations to arise that threaten its sovereignty. On 10 July, Emomali Rakhmonov held talks in Dushanbe with U.S. Secretary of Defense Don- ald Rumsfeld, during which they discussed combating drug trafficking from Afghanistan, protecting the Tajik-Afghan border, restoring the Afghan economy, and dealing with Iran’s nuclear issue. As for the last question, the Tajik position presented by President Rakhmonov boils down to the fact that there is only one rational way out of the real “nuclear” crisis in relations between Washington and Tehran—continuing the dialog and searching for diplomatic solutions, as any attempts to resolve it by force will only lead to an increase in tension. On 6 October, Emomali Rakhmonov met with Richard Boucher again. They discussed bilateral economic cooperation, as well as relations in this sphere between Tajikistan and Afghanistan, particularly in the energy industry. The U.S. expressed its willingness to help Tajikistan attract investments and develop its economy as a whole. But most important was the hope that the upcoming presidential election would be another step toward observing international standards, as well as creating institutions which will promote stability in Tajikistan. This meant that the U.S. does not have any real complaints against Tajikistan, both with respect to the preparations for and the holding of the election, and with respect to its results. This wish, as well as the congratulations the U.S. Ambassador to Tajikistan sent to Emomali Rakhmonov on his re-election as head of state, the cooperation between the two countries in security, the favorable attitude of international financial institutions toward Tajikistan, which was expressed among other things in the IMF’s waiving of a significant (approximately 100 million dollars) part of the country’s debts, and the designated prospects of economic cooperation are the real and positive achievements that it was possible to reach in relations with the U.S. without worsening relations with Russia, the PRC, and Iran.

Tajikistan-China

The year 2006 was also the most productive in Tajikistan’s relations with China. The PRC’s interest in developing relations with Tajikistan and other Central Asian republics rose abruptly after 9/11, when the military presence of the U.S. and its Western allies in the antiterrorist coalition became a reality in the region. The problem of ensuring its military-political security, which became urgent in this respect, prompted Beijing to become more actively involved in resolving the problems of the Central Asian countries, both on a bilateral basis and within the SCO. For Tajikistan, the importance of cooperation with China was determined by two factors. First, the PRC is in a position to counterbalance the influence of the Russian Federation and U.S. in the region and in the republic. After the Andijan events of 2005, China’s behavior also showed that it could be a reliable political ally of the Central Asian countries. Second, after these events, the PRC is ready to offer these countries large amounts of money to implement their economic projects. Since major Western investors have not been paying any serious attention to Dushanbe, Tajikistan decided to attract Chi- nese investments into extremely expensive projects in the energy and transportation industries.

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On 16 February, a delegation of Tajik power engineers left for the PRC to familiarize themselves with the activity of the Chinese state enterprise that manufactures equipment for hydropower plants and hold talks on energy projects. These talks ended in the Chinese side expressing its intention to participate in modernizing the Kairakum HPP in the north of Tajikistan. On 27 March, a representative delegation headed by Tajik Vice Premier A. Gulomov left Dush- anbe for Beijing. It was made up of the ministers of economics, trade, and finance, as well as National Bank managers. The purpose of the visit was to discuss with the directors of China’s Eximbank the conditions for acquiring a privileged loan within the framework of Beijing’s decision adopted as early as the summer of 2005 to allot 900 million dollars to the SCO countries. During the talks, investment projects in power engineering, transportation, and telecommunications were submitted to the Chinese side for their perusal. Two weeks later, on 11 April, it was announced that in keeping with the loan agreement reached, the PRC intends to issue Tajikistan a loan of 269 million dollars (at a 2% interest rate per annum) for rebuilding the Dushanbe-Khujand-Chanak highway (410 km). On 19 April, the Barki Tojik Company (Tajikenergo) and China Teban Electric Apparatus Stock Company (CTEAS) signed two contracts in Dushanbe totaling 340 million dollars for building the South-North power transmission line (LEP-500) in Tajikistan 350 km in length (281 million dollars) and the Lolazor-Obi Mazor power transmission line (LEP-220) 93 km in length (59 million dollars) in the country’s south. On 14-15 June, President Emomali Rakhmonov visited the PRC in order to participate in the Shanghai SCO summit. On 14 June, he met with Chinese leader Hu Jintao and discussed the prospects of bilateral cooperation development. This meeting resulted in the signing of an Agreement on Re- building the Dushanbe-Khujand-Chanak highway, including building the Shakhristan Tunnel. As early as 11 July, President Rakhmonov participated in the ceremony to launch this project. On 22 August, Emomali Rakhmonov also participated in the groundbreaking ceremony for the Shakhristan Tunnel, which is to be 5 km in length. Activity in Tajik-Chinese relations reached its peak in September. On 14 September, Emomali Rakhmonov received the head of the China Development Bank (CDB) Chen Yuan and discussed with him the prospects for joint efforts of the republic’s government and the CDB in developing power engineering, the agrarian sector, and the light industry of Tajikistan. The same day, the National Bank of Tajikistan and the CDB signed an agreement on the Chinese Bank issuing Tajikistan a loan of 10 million dollars for the agrarian sector. At that time, Chairman of the Na- tional Bank of Tajikistan M. Alimardonov and one of the directors of China’s Eximbank Li Gang signed an agreement on investments in Tajikistan’s power engineering, transportation, and telecommunications industries. On 15 September, the 3rd sitting of the Tajik-Chinese Commission on Economic Trade Coop- eration was held in Dushanbe, during which the sides focused particular attention on modernizing the Nurek HPP, rebuilding the Golovnaia HPP and the Dushanbe Thermal Power Plant, and building a cascade of small hydropower plants on the Zeravshan River. At the same time, a forum of businessmen of the two countries was held in Dushanbe, where it was noted in particular that the PRC is among Tajikistan’s five main trade partners. By the end of the year, the trade turnover between the two countries will rise to 45% (compared with the previous year) and will top 200 million dollars. The next day, 16 September, Tajik President Emomali Rakhmonov and PRC Prime Minister Wen Jiabao participated in the official opening ceremony of the building of the South-North LEP-500. On 20 October, Emomali Rakhmonov and Chinese Ambassador to Tajikistan Li Huilai participated in the groundbreaking ceremony that launched construction of the Shar-Shar Tunnel 2.23 km in length (cost—37 million dollars). On 30 October, Tajik Prime Minister A. Akilov discussed the possibility of building a hydropower plant on the Zeravshan River with General Manager of China’s Sinohydro Corporation Fan Jixiang.

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Cooperation in the military sphere was also given a new boost. For example, on 24 April, Tajik Defense Minister Colonel-General Sh. Khairulloev went to the PRC to participate in a sitting of the SCO Council of Defense Ministers held in Beijing on 26 April. Along with ensuring regional security, dealing with Iran’s nuclear program, and combating terrorism and extremism, he also discussed bilateral cooperation with his Chinese colleagues. The discussion focused in particular on conducting Tajik-Chinese exercises in Tajikistan within the framework of the Shanghai Convention on Combat- ing Terrorism, Separatism and Extremism and the Military and Military-Technical Cooperation Plan between the two countries for 2006. On 25 July, S. Saifulloev, first deputy chairman of the State Committee for Protecting the Tajik State Borders, held talks with the deputy commander of the PRC Air Force Administration, who was visiting the republic. They discussed rendering technical assistance to the Tajik border troops and training Tajik border guards in China. On 11 September, Chinese military cargo planes carrying Chinese servicemen began to arrive at the Kulob airport to participate in the first joint exercises in the history of the two countries, Interac- tion 2006, which were held at the Mumirak testing ground in the south of Tajikistan.

Tajikistan-Iran

Dushanbe’s interest in developing relations with Tehran in 2006 was aroused by the former’s desire to ensure an inflow of Iranian investments into the national economy: power engineering, the creation of a transportation infrastructure, machine-building, and so on. On 4 January, Emomali Rakhmonov discussed issues with Iran’s Ambassador to Tajikistan Nasser Sarmadi Parsa relating to his upcoming official visit to Iran. A high-ranking Tajik government delegation consisting of the ministers of economics, transportation, and power engineering, as well as deputy directors of the National Bank and the Ministry of Justice, left for Tehran on 11 January to sign joint documents. On 16 January, Emomali Rakhmonov left on an official visit to Iran as the head of a representative delegation, and on 17 January, talks were held in Tehran between the presidents of the two countries, Emomali Rakhmonov and Mahmoud Ahmadinejad. They discussed the main areas in the development of bilateral cooperation, focusing special attention on implementing projects for building the Sangtuda-2 HPP, the Anzob Tunnel, and restructuring Tajikistan’s debt to Iran. When the talks were over (18 January), eight memorandums on economic relations had been signed. During the visit, the IRI’s Supreme Leader Ayatollah Ali Hamenei received Emomali Rakhmonov and stated his country’s firm intention to assist in Tajikistan’s development. On 20 February, President Rakhmonov, Iranian Parliament Speaker Gholam Ali Haddad-Adel, Iranian Energy Minister Said Parviz Fattah, and Afghani Minister of Water and Energy Mohammad Ismael Khan attended the groundbreaking ceremony for Sangtuda-2 HPP. In his speech, Emomali Rakhmonov emphasized that the next joint energy project might be construction of the largest hydropower plant in the region at Dashtijum on the Panj River. The meeting of the Tajik, Iranian, and Af- ghani energy ministers on 21 February ended in the signing of a trilateral agreement on building a power transmission line from Tajikistan through Afghanistan to Iran and Pakistan. In the summer, the next stage in Tajik-Iranian diplomatic activity began. Within the framework of the SCO summit held in Shanghai on 15 June, Emomali Rakhmonov met with Mahmoud Ahmadine- jad and discussed with him the development of economic cooperation, the implementation of energy and several other projects, as well as the prospects for holding a summit of Persian-speaking countries in Dushanbe. On 25 July, Mahmoud Ahmadinejad arrived in the Tajik capital. That day Tajik-Iranian

251 CENTRAL EURASIA 2006 Analytical Annual talks were held in the narrow and extended format. They resulted in the signing of six bilateral documents in such spheres as power engineering, transportation, land use, science, education, and the joint manufacture of tractors. On 26 July, both presidents attended the ceremony for the official opening of the Anzob Tunnel. Today, Iran is the only country that, starting essentially from scratch, has brought one of Tajikistan’s large and strategically important projects to fruition using its own funds, own engineers, and own construction technology. The Anzob Tunnel will ensure year-round transport communication between the industrially developed northern Sogd Region and the capital, as well as with the central and southern regions of the republic. In this project, Tehran recommended itself as a reliable partner that does not put forward preliminary political requirements and conditions. The same day, on 26 July, a summit of the Tajik, Iranian, and Afghani presidents was held in Dushanbe, during which they discussed the problems of combating drug trafficking, the possibility of building a power transmission line from Tajikistan to Iran, the development of the transport infrastructure in Afghan- istan, as well as regional security issues and several other topics. On 8 September, Emomali Rakhmonov and the then head of the country’s upper house of parliament M. Ubaidullaev held meetings and talks with Iranian Parliament Speaker Gholam Ali Hadd- ad-Adel, who came to Dushanbe to participate in the celebrations of the 15th anniversary of Tajikistan’s independence (this was his second visit to the republic during the year). The same day, there was a meeting of the speakers of the three parliaments: Tajik—S. Khairulloev, Iranian—Gholam Ali Hadd- ad-Adel, and Afghani—Yunus Qanuni. On 8 September, a business forum of Persian-speaking peoples opened in Dushanbe. And on 14 September, Emomali Rakhmonov received Iranian Vice-Presi- dent A. Saidlu and discussed aspects of the further development of cooperation with him. So during the year, the Tajik president met with all the highest-ranking Iranian leaders. If we keep in mind that the speakers of both houses of parliament, heads of the power-related structures, and heads of Tajikistan’s leading ministries productively communicated with their Iranian colleagues, we can say that the Iranian vector was one of the main foreign political and foreign economic priorities of the Tajik leadership throughout the entire year. We should also add that meetings of the heads of state, heads of parliament, and energy ministers of the three Persian-speaking countries, as well as the business forum of Persian-speaking peoples were not only important for Tajikistan because they were the first meetings of this type in the history of these states, whereby they were held specifically in Dushanbe. These meetings were also conducive to Tajikistan’s foreign policy reacting more efficiently to the events and processes going on in the world. For the first time, Tajikistan demonstrated its ability to draw up and put into practice an independent line of conduct, which also had a certain influence on international affairs, at least at the regional and sub-regional level, that is, this was the first time that Tajikistan acquired the staus of an entity.

Cooperation with Other Countries

Of course, in addition to the states of the Big Four, Tajikistan also maintained relations with other countries. For example, on 19 January, Emomali Rakhmonov began his official visit to Turkey, during which he met with its president, Ahmet Necdet Sezer, Prime Minister Recep Tayyip Erdoðan, and Parliament Speaker Bülent Arinç and discussed with them the prospects for economic trade cooperation and attracting Turkish investments into the Tajik economy. A few years ago, Turkey was one of the republic’s extremely important economic partners. But after 2004, due to its insignificant financial possibilities, Ankara began to fade into the background against such giants as Moscow, Bei- jing, and Tehran. Nevertheless, it is still important from the viewpoint of attracting loans from the

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Islamic Development Bank and other international Islamic financial institutions, for they are more willing to allot funds for investment projects only if this country participates in these projects. On 4-5 May, Emomali Rakhmonov paid an official visit to Kazakhstan, a country with a tempestuously developing economy and great financial possibilities, which is attractive to Tajikistan as a source of potential large investments in its economy and receives Tajik labor migrants, as well as a country whose model of economic upswing might suit Tajikistan more than other well-known models. During this visit, Emomali Rakhmonov discussed bilateral relations between their countries with Nursultan Nazarbaev, as well as cooperation in regional and international organizations, urg- ing Kazakh business circles to invest funds in the Tajik economy. Kazkomertsbank, Turan alem bank, Kazinvestmineral, the Kazakhstan Bank of Development, the Kazakhstan Investment Fund, the Kazyna Sustainable Development Fund, and others responded to this appeal. In 2006, they actively analyzed ways to apply their potential in Tajikistan. And the first results have appeared. For example, on 17 July, the Kazinvestmineral Company purchased the Adrasman Mining and Beneficiation Complex at an auction and stated its intention to invest 12-15 million dollars in its modernization. On 19 July, the National Bank of Tajikistan reported that the Kazakhstan Bank of Development would allot Tajikistan 26 million dollars to build a texitle enterprise and 5 million dollars to purchase mineral fertilizers. On 17 October, the Kazakhstan embassy in Dushanbe stated the intention of Kazakh investors to invest approximately 800 million dollars in the Tajik economy, primarily in energy projects. On 7 August, Emomali Rakhmonov paid an official visit to Delhi, where he and Indian Presi- dent Abdul Kalam, Prime Minister Dr. Manmohan Singh, Leader of the Indian National Congress Sonia Gandhi, as well as former prime minister and oppostion leader Atal Behari Vajpayee discussed bilateral relations. Tajikistan focused its attention on expanding bilateral economic cooperation and arousing India’s interest in investment projects in Tajikistan. The visit was important in that it might be a vital step in creating certain prerequisities for In- dia’s greater participation in Tajikistan’s economic development. The problem is that only private Indian companies are capable of acting as investors. But as the above-mentioned experience with Rusal showed, cooperation with private foreign structures pursuing strictly commercial interests is not developing very successfully in the republic. The energy component was the main one in Tajikistan’s activity in the Pakistani vector, too. A Tajik delegation headed by Vice Premier A. Gulomov visited Islamabad on 8-9 May and discussed the problems of financing the export of electric power to Pakistan, including building a power transmission line (LEP-500) from Afghanistan to its territory. On 28 June, Speaker of the Upper Parliamentary House of Tajikistan M. Ubaidullaev said that during the talks with his colleague Muhammad Mian Soomro, the Pakistani side expressed its willingness to invest in building the Rogun HPP. Emomali Rakhmonov and Pakistani Prime Minister Shaukat Aziz discussed this and other questions relating to bilateral relations on 15 September in Dushanbe. Emomali Rakhmonov also discussed Islamabad’s possible participation in building the Rogun HPP and other Tajik energy projects with Pakistan’s Minister for Water and Pow- er Liaquat Ali Jatoi during their meeting in Dushanbe at the end of October. And although the development of relations with the states mentioned in this section were not of immense significance for solving the main tasks facing the country in 2006, they were important from the viewpoint of creating prerequisites for more intensive development of bilateral cooperation in the future. Agreements with Kazakhstan about its possible participation in energy and other projects have a good chance of turning into something real in the near future. The guarantee of this is that there is no unsurmountable mental wall or serious political confrontations between Tajikistan and Kazakhstan. Astana is interested in investing its growing funds in worthy economic projects and is capable of advancing any Kazakh structures to engage in more active and serious work, which corresponds to this country’s national interests in the Tajik vector. The possibility of transforming preliminary agree-

253 CENTRAL EURASIA 2006 Analytical Annual ments with India and Pakistan into specific major projects most probably depends on how the geopolitical situation develops around Tajikistan. As for relations with European countries, in 2006 they were maintained at the previous level rather than advancing, which entirely satisified Dushanbe, since all it had to do was respond adequately to the Europeans’ initiatives. These initiatives concerned, first, the visit by Prince Andrew on 7-8 July, second, by German Foreign Minister Frank-Walter Steinmeier on 3 November, and third, by French Defence Minister Michelle Allio-Mari on 18 December. Prince Andrew’s visit was important in that this was the first visit by a representative of the British royal family to the country in Tajikistan’s history. As for the visit of the German foreign minister, keeping in mind the traditionally important role of the foreign minister of this country and his influence on decision-making, the country’s chairmanship in the EU (2007), as well as its high concern over security problems, we can hope that Germany itself will at least take more active part in economic projects in Tajikistan in the future. Michelle Allio-Mari’s visit was economically more productive. She arrived in Dushanbe with France’s proposal to allot a grant (7 million euros) and privileged loan (17 million euros) for the reconstruction and modernization of the capital’s airport, where a small contingent of French servicemen is deployed which is supporting the international antiterrorist coalition in Afghanistan. Summing up the above, it should be emphasized again that in 2006, the foreign political activity of the country’s leadership was pragmatic. The main tasks were to ensure that the outside world responded positively to the preparations for and holding of the presidential election and its results and to implement the most important energy and transportation-communication projects, which were successfully carried out. This makes it possible to assess the foreign policy activity of the Tajik leadership as quite efficient.

254 TURKMENISTAN General Overview

TURKMENISTAN

GENERAL OVERVIEW

Azhdar KURTOV President, Moscow Public Law Research Center (Moscow, Russia)

he phenomenon of Turkmenistan, which attracts much outside attention, has not yet been adequately explained in most cases. Observers normally tend toward one of two extremes. T The less popular of the two approaches accepts the official propaganda at face value. The totalitarian regime not only suppressed freedom of thought and information—it imposed its propaganda clichés on the media in an effort to justify President Niyazov’s policies and present them as an example to be followed or, at least, envied. On the whole, no propaganda victories were scored. Another, and much more popular, approach assessed the situation in extremely emotional and politicized terms, mainly because it was the European and American media, as well as those of the post-Soviet states, that supplied information about Turkmenistan. The foreign, and much better developed, media dominated on the information field because there was a lot of interest in certain aspects of the republic’s domestic policies. Their approaches, assessments, and conclusions were predetermined, either directly or indirectly, by the interests of corresponding states. European and North American authors condemned Ashghabad for its undemocratic nature and for suppressing elementary human rights; in so doing, they frequently relied on information supplied by Turkmenian opposition groups scattered abroad, which used biased information to fight against the regime. The media of post-Soviet states are not always objective for a different reason: they prefer to distract the attention from failures at home by pointing at negative developments in Turkmenistan. The man-in-the-street feels much better when he knows that, according to the press, life in another country is much worse. The above is explained by the fact that the republic was living behind an information Iron Cur- tain. There is no hope of quick improvement in this sphere: in 2006, Ashghabad tightened up its information control, while suspected dissidents who might start talking too much abroad found it hard to leave the country. The president’s death and the desire to maintain law and order produced the same results.

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This makes an unbiased and scholarly correct investigation next to impossible: the two extreme approaches can hardly create an adequate idea about Turkmenian reality. The republic is not “an impressive example of fantastic progress in all spheres of life,” as official propaganda presents it. Nei- ther is it a “failed state, a hopeless case,” about which nothing can be said apart from its ruler’s obvious blunders. The fact that Turkmenistan does not fit the transformation pattern common to the Soviet successor states cannot annul obvious progress in some spheres of life. The country is a phenomenon to be studied beyond any political biases. Ashghabad’s contradictory nature was confirmed in 2006 when the obvious failure of the country’s agricultural sector went hand in hand with clear achievements in prospecting and producing hydrocarbons (the republic’s main wealth) and commissioning several important industrial and infrastructure facilities. The agricultural sector fell short of the widely publicized tasks the president formulated early in 2006: 3.5 million tons of wheat and 2 million tons of raw cotton, even though the country funded the tasks and allocated money for new agricultural machinery. In mid-July, the republic celebrated a 3,514,631-ton wheat harvest; the president promised a 4-million-ton harvest for 2007. It turned out later that the figure was doctored very much in the Soviet style. Reforms in the agrarian sector are slow; the people are still aware of their social vulnerability; the country’s food safety problem has not yet been resolved, even though the state revenue created by energy resources allows the state to address the problem with greater success. Late in 2006, bread supplies were highly irregular. The year 2006 did not register any achievements in hydrocarbon production either: the country fell short of its plans to export 78-79 bcm of gas, the figure President Niyazov quoted early in the year. The economic failures can be partly explained by the specifics of the Turkmenian political regime: the president is an absolute monarch in all spheres: under the Constitution he heads the cabinet and sets its main trends. The excessive concentration of power in the hands of one person (who is the head of state and of the executive branch) is further supported by the people’s unshakable faith in his grandeur, perspicacity, wisdom, and infallibility. The president’s decisions are never doubted at the preliminary stage—their faults become obvious at the implementation stage, when responsibility is shifted to the government officials. Year after year, the president publicly hurled scything criticism at the bureaucrats, fired them, or even instituted criminal cases against them. (In Turkmenistan, every bureaucrat is aware from the very first day on the job of possible administrative and criminal persecutions.) These measures inevitably failed. In other words, the totalitarian regime negatively affected the country’s economy. Indeed, the totalitarian resource is an inadequate economic tool: the plans and the results never coincide. Totalitarian power uses all devices, including promises of fantastic achievements, to impress the nation. This can be said about many political and religious leaders and movements of the past. The communists were no exception. The republican authorities, which are shamelessly exploiting the myth of the “golden age of the Turkmenian nation,” are pursuing the same aim of extolling the president through impressive ideas. Like all other totalitarian leaders, the leader of all the Turkmen skillfully parried every attempt to verify his achievements by refusing to admit his own failures. Early in 2006, the president solemnly announced that the republic’s fuel-and-energy complex would increase its capacity in the interests of the nation. The republic was expected to produce up to 10.3 million tons of oil and over 80 bcm of natural gas, figures comparable with Soviet times. Very much in line with other oddities of the totalitarian regime, however, the president preferred to ignore the obvious contradictions in the figures. At the same time, he announced that in 2006 the republic would export 78-79 bcm of gas. The country consumes from 11.5 to 13 bcm. This discrepancy was successfully suppressed by the spectacular figure of $5 billion of expected export revenue.

256 TURKMENISTAN General Overview

At the same time, in 2006, the country’s leaders implemented several infrastructure projects that contributed to the republic’s economic growth: the Ashghabad-Dashoguz railway; the Korpeje-Bal- kanabat oil pipeline; the republic’s second large oil refinery in Seyde began operating on oil delivered by railway from the Iolotan oilfields in the Mary Velaiat. This enterprise, commissioned shortly before the Soviet Union fell apart, remained partly idle for a long time: intended for Russian oil from Siberian oilfields, it could not cope with the sporadically delivered and chemically ill-suited oil from Uzbekistan, which caused equipment failures. In 2006, Ashghabad strengthened its relations with Beijing, which can be described as an important political move. Central Asian politics acquired another strong actor that might affect the nature of the foreign policy contacts of all states in the region. Since Turkmenistan does not belong to the Shanghai Cooperation Organization, this move speaks of China’s far-reaching plans. In 2006, the country lived through two pompous election campaigns designed to convince the world of the regime’s democratic nature: on 23 August, the country elected the Gengeshes (local self-government bodies); and on 3 December, members of the etrap and city khalk maslakhaty (local authorities). The technical side of the elections changed for the better: there were several candidates per one mandate; the media coverage improved, while the candidates met their voters. These novelties did nothing to transform the regime, or at least introduce some elements of democracy. There was no political pluralism, while the seats in the bodies of power were reserved for people absolutely loyal to President Niyazov’s ideological and practical moves. In a country where there is only one party—the Democratic Party of Turkmenistan—no rivalry is possible. By the end of 2006, it had 143,247 members organized into 5 velaiat, 13 city, 47 etrap, and 4,830 grass-roots organizations. Neither the party nor other public movements and mass organizations have any important role to play in the country’s social and political life. This was confirmed by the joint sittings of the congresses of the National Galkynysh Movement and the Democratic Party of Turkmenistan that took place on 16-17 December. The forum adopted an address to the nation and to the president extolling his policies. The totalitarian political regime controls not only the political, economic, and social spheres, but also the religious sphere. Only a few of the local Muslims (according to the local clergy, there were 188 of them in 2006) are allowed to perform hajj. In the spring, the president announced that those who read his book Rukhnama three times would become enlightened, develop a deeper understanding of nature, laws, and human values and, most important, acquire the chance of going straight to heaven. The president informed the local Muslims that he had personally asked Allah for this method of identifying the righteous. Classical Islam regards such statements as digressions from the religious canons. The obedient Turkmenian imams, however, were forced to praise the president as a genius and his book Rukhnama as a source of wisdom. In 2006, the muftiat gathered President Niyazov’s instructions under the cover of the National Religious Customs of the Turkmen from Ancient Times to Our Days, a unique publishing effort. In the summer of 2006, the Council for Religious Affairs under the President of Turkmenistan acquired a new head, Charygeldy Seriaev, appointed because he had served in a mosque in the president’s native village. The national anthem contains a line repeated three times about Turkmenistan being “Turkmen- bashi’s great creation.” His death, which occurred late in 2006, gave the country the choice of either following the same road or moving away from it by undertaking liberalization and democratization. The year 2006 failed to give a clear answer to the question about the republic’s future.

257 CENTRAL EURASIA 2006 Analytical Annual POLITICS

Azhdar KURTOV President, Moscow Public Law Research Center (Moscow, Russia)

s distinct from all other states, in Turkmenistan certain products are distributed among the population free of charge. This is a source of pride among the top people, who see it as visual con- A firmation of their concern for the nation. Economics and common sense, however, say the opposite: the primitive practice of free supply of essentials speaks of a weakly developed market. Money, as a general equivalent of value, has been replaced with products in kind not only for the sake of fairness and social-oriented state policies. This logic could partly fit the period of dramatic industrial decline and destroyed economic ties that came as soon as the Soviet Union left the stage. In 2006, however, when, according to the country’s leaders, the per capita GDP reached $8,500, the official motivation behind the free distribution system arouses doubts. The ideology of state paternalism embodied in one person, President Niyazov, is one of the system’s obvious underpinnings; on the other hand, the system is designed to cover up the inefficiency or, rather, conservatism of certain aspects of the country’s economic system. In Turkmenistan, natural gas and electric power for everyday use are distributed free of charge within certain quotas, together with water and table salt (in limited quantities); some time ago flour too was part of the free packet. In fact, the country, which is rich in gas and electric power (partly produced by gas-fueled power stations), can distribute a negligible part of its wealth free of charge without burdening the budget. In 2006, according to preliminary figures, free gas deliveries reached the figure of 3,920 bcm, or 5.5 percent of the planned production. Supply of electric power for everyday purposes was planned at the 2.3 billion kWh level, while the country’s power stations could produce up to 18 billion kWh; and the government intended to distribute about 30,000 tons of iodized table salt. These products could have been sold or even exported, yet political stability would have cost much more: in order to preserve it, the government would have had to increase wages, social allowances, and pensions. However, this is something it wants to avoid in order to keep people tied to the free distribution system, which helps not only to hide the truth about the widespread poverty, but also the shameful squandering of export-created revenues. A money-based system would lay bare certain facts requiring explanations. For example, people would want to know why the gap between the official per capita GDP figure and per family income is so wide. Official statistics busy extolling the president and overstating his achievements insist that in 2006 the average per family income was 48 million manats, or approximately $2,040, according to the commercial exchange rate (which is less than 25 percent of the officially quoted GDP figures). Since statistics normally operate with families rather than individuals (an average Turkmenian family consists of 5 members), people obviously have to accept a mere pittance of what they might have received had the state aimed at fairer social policies. Money that could be spent on raising the standard of living is siphoned into building unnecessary facilities, or goes straight into the personal bank accounts of the head of state and his closest circle. This means that the current economic model is helping to preserve the status quo and well-cushioned life at the top rather than advance the country’s economy. The authorities, still very much devoted to the old Soviet habit of spending time at all sorts of meetings, congregate in great numbers to chew over all sorts of problems. In January 2006, for

258 TURKMENISTAN Politics example, they gathered under Niyazov’s chairmanship at the Ashghabad Agricultural University to discuss agriculture and higher education. The president lauded the cattle breeders and grain producers and spoke about the failures of the cotton growers. He was obviously convinced that the university course in agriculture, extended from four to five years, was the right answer to the problem. (Later, on 30 January at a Cabinet sitting, the president ordered the agrarians to annually increase the cotton yield by 20 percent.) Posing as a caring leader, President Niyazov presented the Agricultural University with a check for $100,000 and replaced Minister of Agriculture B. Atamyra- dov, accused of speculating in flour, with Rector of the Agrarian University E. Orazgeldiev. What is more, some new high-ranking officials were appointed: Minister of Education Sh. Annagylyjo- va, head of the State Customs Services M. Annalyev, and head of the presidential administration Y. Paromov, while Rector of the Pedagogical Institute, khiakim of the Dashoguz Velaiat, Chair- man of the State Committee for Fisheries, khiakims of several etraps, and many other bureaucrats lost their posts. Early in February, the country acquired an amended pension law under which men over 62 and women over 57 were entitled to old-age pensions; the law, however, required an extensive work record with organizations that allocated money to the state pension fund. Not openly discriminatory, the law and its application aroused a furor throughout the country. According to numerous reports from the republic, local administrators refused to accept work records of several categories of pensioners on the grounds that they failed to present the necessary documents. In most cases, however, the older generation who earned their pensions in Soviet times had no means of obtaining such documents in the first place. It was rumored that they would be deprived of their pensions, which caused a rush to the official structures. The Turkmenian opposition spoke about old people dying in long lines in front of the offices, while the officials vehemently denied this. In April, President Niyazov dismissed Prosecutor General Kurbanbibi Atajanova under the pretext of “retirement;” the media, however, picked up leaked information about her closest relatives being involved in drug dealing. Well known across the country for her accusatory speeches against the opposition members involved in an attempt on the president’s life in the fall of 2002, she was long regarded as a reliable supporter of the president’s repressive policies. In April, she became another of the president’s victims. Mukhammedguly Ogshukov, presented for approval to the Mejlis as the next Prosecutor General, was unanimously elected on the same day. Several days later, N. Annaorazov, public prosecutor of the capital’s Akhal Velaiat, lost his post for abusing his official powers. Late in April, at a meeting in the Office of the Prosecutor General, the president subjected K. Atajanova to scything criticism and accused her of encouraging corruption in her office, illegal searches and detentions, and of setting up a racketeer group to harass private businesses. True to his habit, the president cited numerous facts of personal indiscretion and greediness: the former prosecutor general was deprived of a sumptuous house, a fleet of cars, “millions of buried dollars,” etc. Niyazov did not miss the chance of speaking about the drug dealing of her adopted son and brother and accused her son-in-law of smuggling electronic devices into Uzbekistan. According to the president, a large number of other officials of the same system involved in all kinds of criminal activities were also arrested (over $6 million were confiscated in the process). In May, Turkmenbashi signed another decree, in which he deprived former Prosecutor General Atajanova of her rank, privileges, and state awards. Late in June, public prosecutors of the Dashoguz and Mary velaiats were removed from their posts. Wide-scale purges in the prosecutor’s offices, a sign of several important trends, were normal practice in post-Soviet times. Aware of the greed rising together with criminal revenues, the president developed a taste for carrying out purges among officials in charge of economic and trade activities, while bureaucrats, egged on with criminal appetites for business revenue and oblivious of the threat of repression, hastily amassed their fortunes.

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The state machine was obviously malfunctioning: court cases of criminal corruption and other abuses of power rapidly piled up. Totalitarian control proved unable to check the trend: it merely responded post factum to crimes in the power structures. Contrary to official propaganda, the system lacked democratic control. In June, speaking about the situation in the textile industry at an extended sitting in Ashghabad, the president informed those gathered that from that time on directors of enterprises with 1,000 people or more would be appointed by the government. It turned out that the special services were very much interested in misdemeanors in office and financial crimes and paid a lot of attention to personnel policies. In mid-May, the president was forced to convene the Cabinet of Ministers to discuss the deeds of Dortguly Aydogdyev, his deputy as prime minister. On that day, the accusations hurled at him by National Security Minister G. Ashirmukhamme- dov sounded damning. According to the national security minister, D. Aydogdyev, who also filled the post of minister of the textile industry,1 “gathered unworthy people around him, who he moved up the administrative ladder.” The special services were deliberately pushing civilian officials away from financial and other resources that might become useful in the power struggle (if the worst comes to the worst, in case of the president’s death, for example). Yklymberdy Paromov, a trained historian with no experience in economics, but with a work record at the National Security Ministry and appointed as the new minister of the textile industry, was probably not a random choice. The state-of-the-art highways that linked all the regions were one of the strongest sides of domestic policy. For natural and historical reasons, Turkmenistan had no ramified highway and railway network, which negatively affected the republic’s economic and social development. During the years of independence, much has been done to improve the situation. The country acquired the Tejen-Ser- akhs (to be extended abroad to Meshed in Iran) and Turkmenabat-Atamurat railways, as well as the Ashghabad-Karakumy-Dashoguz highway. The plans included several more major highways: Turk- menbashi-Dashoguz, Takhtabazar-Atamurat-Magdanly; the Turkmenbashi-Farab freeway; the Ash- ghabad-Mary and Ashghabad-Dashoguz motorways; a ring road around the capital; and a ring railway around the capital with a large freight junction at Ovadandepe. The political power sphere also showed signs of improvement: in 2006, several laws on the local self-government bodies adopted late in 2005 were enacted: on the Velaiat Khalk Maslakhaty, on Elec- tions to the Velaiat Khalk Maslakhaty, on the Etrap, City Khalk Maslakhaty, on Elections to the Etrap, City Khalk Maslakhaty, on the Gengeshes; and on Elections to the Gengeshes. The leaders described the laws as a step toward a new phase of people’s power. According to official propaganda, this led to stage-by-stage decentralization and redistribution of power in favor of the regions and local structures. The new laws did indeed correct the technical side of the local power institutions, but left intact the totalitarian core that never permitted ideological and political freedom. The new laws brought the number of members of the etrap khalk maslakhaty to 40 people elected by popular vote; the etrap khiakims are elected from among the members. The velaiat khalk maslakhaty has 80 members who represent the velaiat towns and other settlements, also elected by local people. The new laws demanded competitive elections, while in the past one candidate ran for one seat. The khalk maslakhaty are supposed to elect khiakims and their deputies at their first sitting; the election results should be endorsed by a presidential decree to become legally valid. Under the new laws, the term of Gengesh deputies was reduced from five to three years. The number of elected members varied from 5 to 12; the archin (administration head) was elected by a show of hands. Responsible to the Gengesh that elected him, he was accountable directly to the president, Mejlis, the staff of the velaiat and etrap khalk maslakhaty in his day-to-day activity as head of the executive branch.

1 The textile industry of Turkmenistan hires over 300,000 workers. During the years of independence, the republic has acquired more industrial facilities, but it processes a fairly small amount (about 100,000 tons) of the locally grown cotton. 260 TURKMENISTAN Politics

Elections to the Gengeshes were held on 23 July. Today there are 625 Gengeshes: 116 in the Akhal Velaiat; 58 in the Balkan Velaiat; 142 in the Dashoguz Velaiat; 143 in the Lebap Velaiat; and 166 in the Mary Velaiat. There are 5,322 constituencies, 4,550 of them being in the gengeshliks (countryside settlements); 686 in urban-type settlements, and 86 in the etrap towns. There were also 1,152 polling stations. By the time the nomination process was complete, there were 12,208 candidates: 2,072 in the Akhal Velaiat; 1,044 in the Balkan Velaiat; 3,635 in the Dashoguz Velaiat; 2,540 in the Lebap Velaiat, and 2,917 in the Mary Velaiat; 12,200 of them were registered, which meant slightly over two candidates per seat on average throughout the country—hardly stiff competition. According to the Central Election Commission, there were 1,904,981 voters in the republic. The majority (5,320) of the Gengesh members were elected in the first round; in two cases, none of the candidates received more than the 50 percent required by law. The second round took place on 30 August. True to its usual practice, the Central Election Commission published neither detailed figures, nor the composition of the newly elected corps of local self-government bodies. On 3 December, the republic elected etrap and town khalk maslakhaty in 2,640 constituencies: 200 in Ashghabad; 400 in the Akhal Velaiat; 440 in the Balkan Velaiat; 360 in the Dashoguz Velaiat; 750 in the Lebap Velaiat, and 520 in the Mary Velaiat. A total of 6,142 candidates competed for 2,640 seats: 566 in Ashghabad; 1,092 in the Akhal Velaiat; 898 in the Balkan Velaiat; 1,058 in the Dashoguz Velaiat; 1,449 in the Lebap Velaiat, and 1,079 in the Mary Velaiat. According to official information, the turnout was habitually high (96.95 percent). Late in October, the 17th Khalk Maslakhaty of the republic met for a session that coincided with the 15th anniversary of independence marked by a military parade in the capital. The meeting endorsed a significant program for the oil and gas industry until 2030. It presupposed modernizing all enterprises and building new transport complexes designed to deliver gas to consumers, including a marine and river fleet to deliver oil products and liquefied gas. The program was divided into several 5-year stages: until 2010, 2015, 2020, 2025, and 2030. On the whole, the oil and gas industry was expected to bring in half of the budget revenues (the rest was expected to come from the textile, machine-building, and other industrial branches, as well as the agrarian sector). The president and Minister of Oil and Gas Industry and Mineral Resources K. Ataev addressed the session. The president said that between 2007 and 2030, the republic would produce 1.19 billion tons of oil, 648 million tons of which would be exported for the anticipated sum of $259.2 billion. In the same period, the country planned to produce 4.91 tcm of natural gas, 2,884 tcm of which would be exported for $288 billion. The oil refineries would receive 398 million tons of oil with an anticipated profit of $133.2 billion. In the same period, the republic planned to produce 41 million tons of liquefied gas and export 28.5 million for $10 billion. The same session discussed how to further improve elective institutions at all state and self- government levels, but no radical changes were planned. The Khalk Maslakhaty approved a policy for developing the electoral principles of the national statehood to be carried out under the wise leadership of Turkmenbashi. Another decision approved President Niyazov’s domestic and foreign policies. A third document entitled An Address to the Turkmenian People, worded in obsequious terms, ended with: “Let there be eternal peace and let there be our beloved Serdar forever, our President Saparmurat Turkmenbashi the Great, who gave us a sovereign state for all times to come—an independent and neutral Turkmenistan—and ensured its stability for eternity!” Simultaneously there appeared a presidential decree that extended the practice of free deliveries of natural gas, electricity, water, and table salt until 2030. Soon after the session, it turned out that officials had deliberately doctored the information about the state of affairs in agriculture, thus dis- rupting the campaign for sowing winter crops. This triggered another bout of purges that removed, together with other officials, the head of the Bread Association. In 2006, the president, as per usual, was the main newsmaker: in mid-May, he underwent planned medical examination, in which foreign doctors took part and which produced the following statement:

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“Stable and good state of the cardiovascular system, the locomotor apparatus, vision, and all the other vitally important organs of the head of the Turkmenian state.” Very soon, on 23 October, another examination produced a similarly optimistic statement. In three weeks, on 17 November, it became obvious that one more examination could not be avoided, but the result was the same. The frequent medical examinations, however, were a sign of accumulating health-related problems. In the small hours of 21 December, President Niyazov passed away. His sudden death aroused a multitude of rumors about the cause of his death and numerous forecasts about either internal strife or new people (either the opposition, a military junta, or a new regional clan) at the helm. The information that trickled from the closed state developed into all sorts of hypotheses and presumptions in the outside world. None of the guesses proved correct: a medical document issued the next day by a governmental medical commission said that the president had died of heart failure. State power did not collapse either: no military junta was needed to keep the situation under control. Everything undertaken by the authorities looked extremely above board, but there was no avoiding a certain amount of unpleasant- ness. Early in the morning of 21 December, the State Security Council (the structure that so far had been keeping a low profile) met for a joint sitting with the Cabinet of Ministers to discuss measures needed to preserve stability and law and order in the republic. It was decided to convene the Khalk Maslakhaty, the highest legislature, on 26 December. The joint session appointed deputy prime minister Gurbanguly Berdymukhammedov as acting president until an election could be held. He was also entrusted with the burial ceremony. It should be said that under the law this post should have gone to O. Ataev, Chairman of the Mejlis, against whom criminal procedures were immediately instituted to rule out his appointment. In the beginning there were no specific charges. Later, on 22 December, a special session of the parliament was informed that Ataev was accused of fanning tribal hatred. He had allegedly banned a marriage between his adopted son and a girl from the Nokhur tribe (a small community living up in the Kopetdagh mountains close to the Iranian border); the potential daughter-in-law tried to commit suicide. The charges sound hilarious for anyone familiar with the local tradition of arranged marriages, to which children abided without a murmur. There was another telltale detail: the authorities insisted that in September the president had been informed about this. Unhesitatingly, the Mejlis replaced Ataev with Akja Nurberdyeva who, however, was not appointed as acting president. No one knows why Berdymukhammedov, the little-known minister of public health and the medical industry, a former dentist, was selected as Niyazov’s successor. We can hardly accept the rumor that he is the late president’s illegitimate son. More likely than not, the Turkmenian leaders knew that the world would not welcome a military junta under an officer of the power-related structures and that this alternative, if realized, would ignite strife. The selected alternative alleviated tension—like the late president, the acting president belongs to the Teke tribe, the largest in the republic. Power was not usurped—a presidential election was planned. The very fact that Berdymukhammedov was little known and was not directly involved in repressions promised potential political changes. The opposition tried to take advantage of the opportunity to come to power, but failed. To tell the truth, there was no way it could succeed: the Turkmenian opposition is not strong enough to influence the unfolding political process in the country. Today, the opposition consists of several groups, some of which prefer to call themselves parties and movements. In fact, all of them are small dissident circles forced to function outside the republic—certain administrative measures prevent them from coming back. The opposition Vatan Movement and the Republican Party of Turkmenistan nominated a joint presidential candidate, the leader of Vatan, former vice-premier and chairman of the Central Bank, Khudayberdy Orazov, who has been living in Sweden for many years. Former foreign minister Abdy Kuliev, head of the United Democratic Opposition of Turkmenistan, nominated Nurberdy Nurmame- dov, who headed the opposition Agzybirlik movement set up in the early 1990s.

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In these conditions, some of the opposition members tried to enlist the support of other countries, Ukraine in particular. Chairman of the opposition Republican Party Nurmukhammed Khanam- ov, former ambassador of Turkmenistan to Turkey, said as soon as he arrived in Kiev: “We came here to say that if we come to power we shall end the scandalous disruptions of gas supplies of President Niyazov’s era.” The Ukrainian government preferred to ignore the statement. N. Khanamov went as far as saying that Defense Minister Agageldy Mamedgeldiev had been allegedly arrested in Ashghabad. The Turkmenian government passed the test: in the capacity of acting president Berdymukhamme- dov issued several decrees. Niyazov was buried in a mausoleum in his native village of Kipchak. It should be said that the session of the 18th Khalk Maslakhaty amended the Constitution to legalize the transfer of presidential power (that is, in cases when the head of state cannot perform his duties) to one of the prime minister’s deputies and allow Berdymukhammedov to take part in the election. It also passed the Law on the Election of the President of Turkmenistan. The delegates of Khalk Maslakhaty unanimously scheduled the presidential election for 11 Febru- ary, 2007. Nominations followed. The capital (under the Constitution, Ashghabad has no special status that would equate it with other velaiats), the Akhal, Balkan, Dashoguz, and Lebap velaiats nominated two candidates each. The Mary Velaiat preferred to support Berdymukhammedov, who was nominated by the Democratic Party and the Galkynysh movement. The deputies voted for each of the candidates, but the acting president alone was supported by the majority. The Khalk Maslakhaty registered six candidates: acting president G. Berdymukhammedov; O. Garajaev, khiakim of the town of Abadan, the Akhal Velaiat; M. Gurbanov, khiakim of the Karabekaul etrap of the Lebap Velaiat; I. Nuryev, deputy minister of the oil and gas industry and mineral resources; A. Atajykov, first deputy khiakim of the Dashoguz Velaiat; and A. Pomanov, khiakim of the city of Turkmenbashi, the Balkan Velaiat. At first glance, this looks like a positive shift in the country’s political life, but the first weak shoots might perish. Today the situation is under tight control, despite the dramatic developments.

ECONOMY

Igor PROKLOV Researcher, Near and Middle East Department, Institute of Oriental Studies, Russian Academy of Sciences (Moscow, Russian Federation)

n 2006, as in previous years, the Turkmen crease in GDP per capita, high investment activ- authorities continued to implement a program ity, and faster construction of production and I known as the Strategy of Economic, Politi- social facilities. cal and Cultural Development of Turkmenistan However, the end of the year was marked by for the Period Until 2020, adopted in 2003. The a watershed event in Turkmenistan’s develop- main goal of this program is to maintain the ment: President Saparmurat Niyazov, the coun- country’s economic independence and security try’s invariable head of state for over 20 years, through rapid economic growth, a steady in- died on 21 December.

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Today it is too early to say how far the with other countries, primarily in the oil and gas country’s economic vector will change after Ni- sector. yazov’s death, but this event will undoubtedly As regards macroeconomic indicators, from become a major turning point in Turkmenistan’s mid-2006 Turkmenistan stopped publishing offi- modern history and change the geopolitical sit- cial statistics.1 International financial organiza- uation in the region. As many observers had pre- tions have repeatedly noted the almost total lack dicted, a struggle for the position of president got of transparency in this area, and this makes an underway in the country, but one should not independent assessment of economic indicators expect any rapid changes in the economic sphere. very difficult. That is why all official data should Moreover, the presidential contenders kept em- be treated with caution. phasizing the immutability of the economic 1 The latest published statistical data are given only course both within the republic and in relations for the first half of 2006 (see: [www.turkmenistan.gov.tm]).

Industry and the Oil and Gas Complex

Turkmenistan is the largest gas exporter in Central Asia, supplying gas through the pipelines of Russia’s Gazprom mostly to Ukraine and through its own pipeline in insignificant amounts to Iran. According to the data presented at a government meeting by the head of the Central Bank of Turkmenistan, gas production in 2006 exceeded 68 billion cubic meters (the projection for 2007 is over 71 billion cubic meters), and oil production reached 10 million tons, of which 7 million tons was refined in the republic. According to the same data, electricity production in 2006 totaled 13 billion kilowatt hours. It should be noted that the country’s oil and gas complex provides most of the budget revenues (according to the Ministry of Finance and Economy, 82%). Due to its significant energy reserves, Turkmenistan (together with Russia) remains a key play- er in the regional energy market. Against the background of rapidly rising world prices for hydrocarbons, the country’s leadership did its utmost in 2006 to take advantage of the current situation and maximize its dividends, while its main counterparties, primarily Ukraine and Russia, were obliged to partially come to terms with this. The past year, just as 2005, was marked by constant flare-ups between Turkmenistan and its major clients over gas prices. During a visit to Moscow in late January, S. Niyazov made it clear that he was dissatisfied with the role of a gas donor for Russia and Ukraine in effect assigned to Ashghabat during the “gas war” between these two countries. In all probability, he was just as un- happy with the price of gas established at that time for exports to Russia and Ukraine. Let us recall that at the end of 2005 Gazprom reached an agreement with Turkmenistan on the purchase of 15 billion cubic meters (bcm) of gas from the beginning of 2006 at $65 per 1,000 cubic meters (with a price of $95 at the Russian-Ukrainian border), but the status of that agreement is unknown. By the end of the first half of 2006, the parties planned to decide on a price formula for the period from 2007 to 2028. But during a new round of talks in June 2006, Moscow and Ashghabat publicly repu- diated the earlier achieved agreements. In this context, Gazprom officially declared: “The Turkmen side offered its gas for sale at $100 per 1,000 cubic meters. The parties did not come to an agreement, and the talks on this issue were suspended.” As clarified in a report circulated by the Ministry of Foreign Affairs of Turkmenistan, during a three-hour meeting on 29 June President Niyazov and Gazprom CEO Alexei Miller discussed the terms of gas supplies for the second half of 2006 in the 264 TURKMENISTAN Economy amount of 25 bcm and for 2007 in the amount of 50 bcm. No agreement was reached and the talks were suspended. Turkmenistan expressed its readiness to perform the earlier concluded contract in full, whereupon gas deliveries to the Russian company were to have ceased. Ashghabat’s tough stance was in large part provoked by the activities of Gazprom itself. Over a period of six months, Gazprom executives repeatedly declared their intention to increase gas purchases (according to various data, to buy an additional 11-15 bcm). But the acquisition of a total of at least 30 bcm was in contradiction with the 2003 long-term agreement, which said that Gazprom was to buy only 10 bcm in 2006. The rest was to have been acquired by Ukraine’s Naftogaz under direct contracts. At the end of 2005, the latter even contracted to buy 40 bcm (at $50 per 1,000 cubic meters in the first half of the year and at $60 in the second half). However, Gazprom offered to pay $450 million more, which led to a general rise in the price of Central Asian gas, and the Russian monopoly in effect lost control of the situation in the region. From the beginning of 2006, Gazprom was obliged to purchase gas at higher prices not only from local companies, but also, say, from LUKoil (paying $60-65 per 1,000 cubic meters for gas from Uzbekistan and Kazakhstan). And gas meant for processing at the Orenburg Refinery (Russia) is to be bought in Kazakhstan at $140 per 1,000 cubic meters. At the same time, Gazprom has recently been making tough statements about raising gas prices for the CIS countries to the average European level while insisting that the price of gas it buys in Turkmenistan should remain the same. In its open conflict with Gazprom, Ashghabat runs little risk because it can fall back on Ukraine, another major consumer of its gas. However, during talks held in late June, a delegation led by Ukrainian Minister of Fuel and Energy Ivan Plachkov could not reach agreement on gas prices. Ashghabat declared that it regarded the contract for gas supplies at $60 per 1,000 cubic meters signed by Ukraine and Turkmenistan in late 2005 as null and void, and invited Ukraine to sign a new contract for the fourth quarter of 2006 at $100 per 1,000 cubic meters (at the Turkmen-Uzbek border). In addition, Ashghabat recommended Ukraine to urgently obtain a license for the transit through Russian territory of gas to be supplied under this contract. Consequently, with due regard for transit costs the price of Turkmen gas for Kiev added up to about $140 per 1,000 cubic meters. Minsk (equally dissatisfied with the price of Russian gas) also sent a group of Beltransgaz experts to Ashghabat in order to sound out the Turkmen authorities on the terms of delivery. After Gazprom’s switch to market pricing, Turkmenistan was the last hope of poor countries “clinging” to cheap gas. In September, Gazprom was obliged to make concessions. It agreed with Ashghabat on the new price of gas and its delivery volumes for 2007-2009: 50 bcm per year at $100 per 1,000 cubic meters (instead of $65, as in the past) and undertook to transport it for the RosUkrEnergo company, which sells gas to Ukraine. It was also provided that in the fourth quarter Gazprom would purchase 12 bcm of gas (at $100 per 1,000 cubic meters) in addition to the 30 bcm already supplied that year. In November 2005, S. Niyazov declared that a single price ($60 per 1,000 cubic meters) would be established from 2006 for all buyers of Turkmen natural gas. Among others, this applied to Iran, which was then paying $44 per 1,000 cubic meters (at the Turkmen border). From 1 February, 2006, Ashghabat raised the price for Tehran to $65 per 1,000 cubic meters. Under an agreement between President Niyazov and President Mahmoud Ahmadinejad of Iran, from 2007 exports to Iran are to increase to 14 bcm per year (over 2.5 times) and the price of gas is to be reviewed every three years. Apart from active cooperation in matters of supplying gas to Russian and Ukrainian consumers (through the as yet only long-distance gas pipeline running in the northern direction), Turkmenistan continued its intensive search for alternative gas export routes.

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Thus, at a meeting in Beijing on 3 April, President Niyazov and President Hu Jintao of China signed a general agreement on the construction of a gas pipeline from Turkmenistan to China, to be completed in 2009. This document also provides that Turkmenistan is to supply China with 30 bcm of gas per year over a period of 30 years. Under this project, the pipeline is to be routed through Ka- zakhstan and Uzbekistan, although European analysts doubt whether the agreement can be implemented on schedule. But Beijing is determined to go ahead with this project, and it is quite possible that within a few years China will be among the main competitors for Turkmen gas, because its energy requirements have been growing rapidly. Hence its prompt approval of the gas pipeline project in September 2006. The pipeline is to carry gas from eastern Turkmenistan to Guangdong Province on China’s Pacific Coast. Its exact route remains to be determined; possibly, it will bypass Uzbekistan through Ka- zakhstan. In any case, its length will be at least 7,000 kilometers, and its approximate cost will run into tens of billions of dollars. The construction of this pipeline will enable China to diversify energy supplies, and Turkmenistan, to expand its sales markets. The parties also agreed on the joint exploration and development of all fields and areas on the right bank of the Amu Darya (on the terms of production sharing agreements) and arranged to hold talks in order to specify existing agreements, including those on the main principles of the gas pipeline construction project, on the sale and purchase of gas (with a breakdown by years), etc. At the same time, Ashghabat and Beijing declared their readiness to set up a joint working group to prepare feasibility studies on the joint development of gas fields and the construction of a pipeline, to determine its optimal route, and to draft the necessary intergovernmental agreements and treaties. China undertook to hold consultations with the government of transit countries in order to negotiate mutually beneficial terms for the transit of Turkmen gas through their territories. In early December, S. Niyazov ordered the signing of a $140 million contract with the Turkish company Calyk Enerji Sanayi ve Ticaret A.S. to drill for oil in the large gas field of Southern Iolotan.2 Under the executive order, the Turkmenneft oil concern was allowed to conclude a three-year contract for drilling 12 oil wells with a target depth of 3,600 meters in the area of Gunorta Eloten and in other fields (at a total cost of $140.4 million). Gas well drilling in this field was entrusted to the China National Petroleum Corporation (CNPC). In November, S. Niyazov estimated Iolotan’s reserves at an unprecedented 7 trillion cubic meters of gas, a figure doubted by many experts. Mention should also be made of the energy industry. According to the State News Agency (TDH), the country increased its electricity exports in 2006 by almost 27%, supplying 1.646 billion kWh to Afghanistan, Iran and Turkey. Export earnings from electricity were close to $41.6 million, an increase of more than $8 million compared to 2005. The major purchasers of Turkmen electricity are Iran (over 55% of supplies) and Turkey. Afghanistan’s northern provinces are supplied at a reduced price of 2 cents per kWh. In accordance with S. Niyazov’s executive order, the contracts with Kabul were extended to the end of 2007. The Ministry of Energy and Industry plans to increase electricity exports in 2007 by 100 million kWh and to bring its foreign exchange earnings up to $47.4 million. It should be noted that the republic is actively retooling its electric power stations with gas turbine generators supplied by the U.S. General Electric Company. The construction of a large gas turbine plant in the city of Dashoguz is in full swing, and the modernization of generating units (with the participation of Russia’s JSC Power Machines) at the Mary HPP, one of the region’s most powerful hydropower plants, was completed in 2006. Altogether, Turkmenistan has eight electric power stations with a total capacity of 3.3 thousand megawatts.

2 Reuters, 8 December, 2006. 266 TURKMENISTAN Economy Fiscal Sector

The main indicators written into the state budget for 2006 were determined in accordance with the above-mentioned Strategy of Economic, Political and Cultural Development of Turkmenistan for the Period Until 2020. In light of the declared tasks, provision was made for significant investments: about $7 billion. Of these, $5 billion was allocated for production projects, and almost $2 million, for the social sphere. Under the budget act adopted by the Majlis (parliament) in December 2005, the revenues and expenditures of the state budget for 2006 were approved in the amount of 81,300.5 billion manats (TMM), including the revenues and expenditures of the first-level budget in the amount of TMM 19,818.4 billion (at the Central Bank’s official exchange rate, $15.63 billion), which is 20.1% above the 2005 level. Consequently, the country’s budget for 2006 was officially a deficit-free one. According to official data, 2006 revenues significantly exceeded those of previous years due to higher rates of economic growth, a rise in the prices of certain exports, enhanced investment activity and lower production costs. Whereas 2005 was marked by rapid development of the first-level budget (revenues from taxes and other payments going into the budget), the 2006 budget primarily relied on a 23% increase at the second level, i.e., with due regard for public funds and sales revenues of complexes and industries (according to preliminary data, they totaled TMM 61.5 trillion, with a share of 76%). In accordance with the general strategy, the most significant growth was achieved in the key sectors of the economy: the oil-and-gas complex and the energy-and-chemical complex. Fairly good results were recorded in the energy industry, the agroindustrial complex, transport, communications, construction, and the textile and food industries. The law on the state budget provided that revenues would increase, among other things, due to the development of the non-state (non-public) sector, which was given a new impetus by the decision to cut the tax rate to 2% adopted at the 16th session of Khalk Maslakhaty. These measures were designed to provide incentives to non-state enterprises and create favorable conditions for the development of all sectors of the social sphere. For the first time, the state budget provided for a reserve fund (TMM 800 billion) for carrying out presidential and government decisions. In their statements in the official press, the authorities emphasized that the adopted budget was based on rigorous calculation, was underpinned by the country’s resource potential and served the people’s interests, helping to raise living standards and to promote the nation’s spiritual regeneration. The budget allocated TMM 1,585.2 billion to cover the costs of free supply of gas, water, electricity and salt to the population, including TMM 1,333.4 billion from the funds of the respective ministries and departments. As of 1 July, the population of Turkmenistan was 6,836.5 thousand, having increased by 2.93% from the same period of 2005. According to the National Institute of State Statistics and Information (Turkmenmillikhasabat), gross production in the first half of 2006 increased by 20.1% (compared to the same period of 2005), totaling TMM 65.95 trillion. It should be noted in this context that the republic’s authorities have for several years now reported GDP growth rates of around 20%. Similar or comparable figures are presented for all sectors of the economy. Given high investment activity (due to domestic reserves, foreign investment and, last but not least, due to constantly growing prices for the republic’s energy exports), it can be assumed that real GDP growth rates are high indeed. But it is unlikely that they reach the officially declared figure of 20-22%. According to estimates by the Asian Development Bank, GDP growth in Turkmenistan could be around 5-7% (with a rise in the price of exported gas in 2006) and 1-3% (without such a rise).

267 CENTRAL EURASIA 2006 Analytical Annual

By the end of June, the country’s foreign trade turnover increased by 5%, with a surplus of over $1.124 billion.

Statistical Results

Indicators 2006

GDP —

GDP growth (compared to 2005):

official data about 20%

unofficial data 6-7%

GDP per capita —

Population 6,836.5 thousand

2006 budget TMM 81,300.5 billion

Total investment in production and the sociocultural sector TMM 17,289.7 trillion

Total industrial production (first half-year) TMM 25.69 trillion

Gas production 68 bcm

Oil production 10,000 thousand tons

Gas exports 45.2 bcm

Electricity generation 14,000 million kWh

Total agricultural production (first half-year) TMM 9.25 trillion

Cotton 850 thousand tons

Wheat:

official data 3,500 thousand tons

unofficial data —

Potatoes (as of 1 June) 106.9 thousand tons

Cattle population 2,073.65 thousand head

Passenger traffic (Jan-Jun) 603.9 million

Freight traffic (Jan-Jun) 300.4 million tons

Retail trade turnover (Jan-Jun) TMM 20,238.1 billion

Foreign trade turnover (Jan-Jun) $3,713.4 million

Exports (Jan-May) $2,418.8 million

Imports (Jan-Nov) $1,294.6 million

268 TURKMENISTAN Economy

In the sphere of currency regulation, there were no changes. Free conversion of foreign currency was still prohibited, and tight foreign exchange controls inevitably resulted in a shadow foreign exchange market. The value of the dollar in the black market was four times higher than the official exchange rate (5,200 manats per dollar), ranging from 22,000 to 25,000 manats. But at the official exchange rate it was only possible to sell foreign exchange to the state, whereas its purchase at this price was impossible. Most local businessmen were obliged to resort to the services of the black market. Turkish businessmen alone, favored by the Central Bank and enjoying the right to official conversion granted by S. Niyazov, took advantage of this situation and lobbied for many projects designed to promote their own goods and services, which had a negative effect on the development of local business.

Agriculture

According to official statistics for the first half of the year, total agricultural production increased by an average of 20%. In crop production, the increase was 30% (compared to the same period of 2005), and in livestock production, 18%. Thus, the cattle population numbered 2,073.6 thousand head, sheep and goats, 19,954.4 thousand, and poultry, 16,845.5 thousand, which exceeds the level of the same period of 2005 by 3%, 18% and 6%, respectively. In January-June 2006, the production of the main livestock products was as follows: 222.8 thousand tons of meat (live weight), 726.3 thousand tons of milk, and 369.8 million eggs; compared to the same period of 2005, these figures increased by 5%, 8% and 6%, respectively. On 5 July, the president congratulated the country’s farmers on the successful completion of the wheat harvest campaign and a record crop of over 3 million tons. These results, he said, were due not only to weather conditions favorable to winter crops, but also to significant improvements in the equipment and material status of agriculture. As of 9 July, according to Turkmenmillikhasabat data, the country’s grain growers had fulfilled the plan for the first time by harvesting 3.5 million tons of wheat (in 2005, 3.1 million tons), while crop area had increased to 910,000 hectares (from the traditional 850,000 hectares). At a conference on the results of the first six months of the year, S. Niyazov formulated a new task: to harvest 4 million tons of grain in 2007. For this purpose, he promised to acquire a batch of agricultural machines, including 220 Case row-crop tractors and 100 cotton pickers. However, at the end of the year there were numerous reports on disruptions in the supply of flour and bread to the population. According to information from local sources, grain stocks began to run low right after the celebrations to mark the 15th anniversary of the country’s independence, and on 14 November it was announced at a Cabinet meeting that grain crop data were significantly overstated and that Turkmen grain storages would soon be empty. The president fired more than 20 high-ranking ministry, regional and district officials and ordered their arrest. All of them, including the hakims of the Lebap and Dashoguz velaiats, humbly admitted their guilt. Ministry officials, for their part, maintained that executives at different levels were simply obliged to “pad” their reports because at the time of their appointment the president set them unattainable plan targets and they, afraid to object, assumed responsibility for the performance of these obligations (in case of refusal to take office or failure to fulfill the plan, they could face arrest). In view of this, statistical reports on the results of the harvest campaign were totally falsified, while the population was used to severe shortages of grain and bread. As regards the cotton crop, in 2006 (as in 2005) it fell far short of the target figure of 2.2 million tons. The country’s cotton growers were only able to produce about 850 thousand tons of raw cotton (40% of the plan), which gave the president cause to launch another purge among the top executives of the textile industry and local government officials for having “torpedoed” the cotton harvest. At the same time, the head of state was obliged to admit that farmers did not want to work on the existing

269 CENTRAL EURASIA 2006 Analytical Annual unfavorable terms, and declared that the state would raise procurement prices for the harvested crop in order to provide incentives to landholders. This statement was widely reported by the local mass media. In addition, Turkmenbashi ordered the cotton remaining in the fields to be picked under the control of law enforcement agencies, with subsequent payment (in November-December) of wage arrears owed to farmers for 2005 and for the current season. Experts believe that the causes of these annual failures primarily lie in the systemic management crisis in the cotton sector. Unworkable harvest plans are not supported by appropriate financial or material resources: there is a shortage of machinery and fertilizers, inadequate use of advanced farming techniques, etc. The recently launched Tejen Fertilizer Plant should produce about 350 thousand tons of fertilizers per year, but the actual figure is under one-third. According to official statistics, production figures at the Turkmenabat Chem- ical Plant and the MaryAzot production association have been rising, but in actual fact this is not the case. Moreover, in the fall (when cotton growers need fertilizers) local landholders who used to buy fertilizers for cash at neighboring plants in Mary, Dashoguz and Turkmenabat were obliged to stop doing so for lack of money, since the state had not paid them for the 2005 crop. But the main reason is that farmers are not interested in the results of their work, for which they cannot obtain a decent price either in the domestic or in the foreign market. The deplorable situation with the country’s staple crops had an immediate effect on the consumer market, causing a sharp rise in the prices of essential foods. Apart from the bread shortage, problems also arose in the supply of sugar and meat. Only recently, a kilogram of granulated sugar could be bought for TMM 7-7.5 thousand, whereas today it costs TMM 20 thousand. Local experts attribute the sugar shortage and the jump in sugar prices not so much to the fruit preserving season as to the consequences of a mistaken food policy pursued by the Niyazov Government. Sugar prices gradually began to rise when Ukraine and Russia, at Turkmen- istan’s request, began to pay for natural gas supplies in hard currency. In the past, 50% of all payments for gas were made in foreign currency and 50% in goods, including sugar. Georgia, among others, supplied sugar to Turkmenistan as payment for gas received back in the mid-1990s. But these supplies ceased as well. Reportedly, this happened after Turkmenistan’s defense minister had proposed that the republic’s military aircraft be repaired in Georgia in repayment of the latter’s gas debt. S. Niyazov approved this initiative, and war planes and helicopters repaired in Georgia began arriving in the republic in place of sugar. In the opinion of a high-ranking official from the Ministry of Trade and Consumer Cooperation of Turkmenistan, the country needs 105 thousand tons of sugar per year to fully meet the requirements of the population and food processing plants, whereas the capacity of the Mary Sugar Refinery is barely sufficient to produce one-tenth of this amount. Deprived of barter supplies of sugar from Ukraine, Russia and Georgia, the Turkmen authorities did not take the trouble in due time to arrange for additional purchases of this product in order to prevent its imminent shortage.

C o n c l u s i o n

When speaking of the year-end situation in other sectors, many observers and experts point to the existence of a serious structural crisis in the country’s economy despite optimistic official data. The system of governance built by S. Niyazov in large part copies some of the worst methods of the Soviet era. Turkmenistan is undoubtedly a rare exception even to the political practices of the post- Soviet countries of Central Asia. None of the areas of public, political or economic life remained outside the personal control of the head of state. From the very first days of independence, S. Niyazov took full control of the financial and economic system, disregarding the adopted budget and allocating (or not allocating) funds to public sector entities as he saw fit. In the past few years, there was a sharp decline in allocations for social needs.

270 TURKMENISTAN Religion

In order to meet the often fantastic economic development targets set by the country’s president, officials at all levels, well aware of the impossibility of their attainment, were obliged to pad accounts and falsify results on a massive scale. The desire to indulge in wishful thinking cancelled out the positive initiatives designed to reform the Soviet economy in the country. Experts believe that one of the main reasons for the systemic crisis is the low quality of governance caused by too frequent personnel changes. Constant personnel purges for failure to fulfill the plan in both industry and agriculture have resulted in a state of affairs where the targets for cotton and wheat production have never once been met over the past five years. Responsibility for these failures was always placed on farm managers who had been in charge of a particular farm for three to six months. Naturally, no manager could get to know the production process in all its details within such a short period. Besides, he could not work normally because he knew that in a few months he would go to prison. As experts note, the police methods of the ruling regime, which severely punished officials for the slightest offence, have made many people reluctant to take up senior positions, leading to a shortage of professionals in all sectors of the economy. But events in the republic since S. Niyazov’s death have raised hopes that the new leadership will take the path of normalizing economic life, because there is simply no other way out. Despite the negative legacy of S. Niyazov’s rule, Turkmenistan has all the potential to become a stable country.

RELIGION

Iakov TROFIMOV Ph.D. (Philos.), professor at the Karaganda “Bolashak” Institute of Actual Education (Karaganda, Kazakhstan)

n 2006, just as before, the cult of the republic’s President Saparmurat Niyazov-Turkmenbashi (Fa- ther of all Turkmen) dominated Turkmenistan’s religious scene. This cult supplied a graphic ex- I ample of a contemporary secular religion that pervaded all spheres of activities based on two volumes of Rukhnama written in 2001-2004, and on his other smaller creative works and speeches. In March, the already accepted thesis of the book’s holy nature was confirmed by the president’s statement that those who read the book three times would go to heaven. On 19 March, speaking at the Navruz Bayram festival that marked the national spring holiday he said: “When I finished writing the first and second books of Rukhnama, I asked Allah to send to heaven those who read the book three times at home aloud—one hour at dawn and one hour at night.”1 This invited caustic comments in the media the world over, but strangely enough none of them came from Muslim theologians. Rukhnamization of the entire country was the most important element of Turkmenistan’s newly created secular religion and the main determining factor in government policy in relation to the local

1 [http://www.centrasia.ru/newsA.php4?st=1142847240], 20 March, 2006. 271 CENTRAL EURASIA 2006 Analytical Annual religious communities. The new religion aimed at a syncretic marriage of Niyazov’s ideas with Islam, in which Rukhnama was a holy book while the Koran was the word of Allah. The republic’s Orthodox Church was expected to join the process, while all other religions were expected to leave the scene. The government, however, had to take into account the world community’s possible response (from states and human rights organizations), the West would hardly approve harsh treatment of religious minorities. The contradictory fusion of the two elements left its imprint on the state’s religious policy. It strove to use the religious associations to achieve its own ends, that is, propaganda of Rukhnama as a secular religion. Every church, mosque, and prayer house was expected to keep at least two sets of this book; imams and priests had to draw on Rukhnama’s ideas when preaching to the flock. This was done under the close supervision of the special services, which sent their agents to each of these events. The Gengesh (Council) for Religious Affairs under the republic’s president was the main state body entrusted with the task of supervising religious activities. In July, the head of state appointed Charygeldy Tejenovich Seriaev as Council chairman. He began his career as an azancha (muezzin) in the Mosque of Saparmurat Hajji in the village of Kipchak, was promoted to the imam of the country’s main Turkmenbashi Mosque of Spirituality in Kipchak where he served since the day the mosque opened. Since 2005, he served as the chief imam of the Akhal Velaiat. Seriaev replaced former Coun- cil Chairman Iagshymyrat Atamyradov, who was pensioned off in June 2006. Sunni Islam is the main traditional religion in the republic. Today there are about 110 Sunni mosques there. The figure is not exact—it is based on information supplied by international human rights organizations quoted, in particular, in the Human Rights Watch World Report 2006: According to the official figures, by August (2005), a total number of 118 mosques and churches were registered in the country; several-fold fewer than in the mid-1990s.2 Shi‘a Islam is mainly widespread among ethnic Iranians, Azeris, and Kurds, who have no registered mosques. Sunni Islam is considered the only acceptable religion; the religious interests of other ethnic groups are completely ignored. The state closely controls the entire Islamic sphere from the construction and demolition of mosques to the training and appointment of clerics. B. Berdyev, member of the Turkmenian opposition, has written: “Niyazov personally appoints the imams and muftis proceeding from their personal loyalty to him and to the government. Profound religious feelings and knowledge are not encouraged—they are rather regarded as something that might interfere with a cleric’s duties to comply with the demands of Rukhnama’s author... The present mufti, 29-year old Rovshan Allaberdyev, who graduated from the theological department (since closed as superfluous) of the Turkmenian State University perfectly meets the dictator’s requirements: he has difficulty saying even a few words in Arabic; and after switching to Turkmenian, he plunges into lauding the ‘Great Turkmenbashi’ and his policy.”3 According to a decision the president passed in July 2005, unified Muslim rites were introduced across the republic. In January 2006, the Administration of the Mufti of Turkmenistan published a book called The National Religious Traditions of the Turkmen from Ancient Times to Our Days to clarify the point. The elders who represented all the velaiats at a service on Memorial Day of the Defenders of the Motherland (12 January) received the first copies of the newly published book. In his address to the meeting, the president said: “The rules and rituals of all the Turkmenian tribes are gathered under one cover: how to celebrate marriages, how to bury the dead, how to organize a funeral repast.” He called on the meeting to: “Read the book in your mosques and send your comments to the Administration of the Mufti. We shall take them into account if necessary.” The president also pointed out: “Religious rites should not become a source of contradictions. Some peo-

2 [http://www. hrw.org/Russian/reports/2006/world/Turkmen.html], 30 November, 2006. 3 B. Berdyev, “Religia i Niyazov: sviatotatstvo i grekh,” available at [http://www.centrasia.ru/newsA.php4?st= 1142980800], 22 March, 2006. 272 TURKMENISTAN Religion ple mourn on the fortieth day, others on the fiftieth. Some people suggest that religion should be state- controlled. Some people come to our mosques and speak about the Shi‘a, Sunni, and Ismailites. There are all sorts of trends. You should not succumb to this. If you are a Turkman, you are a Sunni. This book will guide you.”4 Religious Islamic education was very limited; in 2005, the department of theology at the Ma- khtumkuli Turkmenian State University in Ashghabad was transformed into a branch of the department of history, while all the lecturers from Turkey employed at the disbanded department were sent back home. It should be said that despite the local efforts to add a Rukhnama flavor to Islam (which would go against the grain of true Islam), the Turkmenian government joined in the chorus of protests against the cartoons published in a Danish paper. On 9 February, the republic’s foreign ministry published a statement on the cartoon scandal, which said in part: “The Turkmenian side believes that any publications, articles, or actions that insult people’s national and religious feelings cannot be accepted. Such acts contradict the commonly accepted moral and ethical norms; they have nothing to do with the interests of the peoples of the world and the dialog of cultures and civilizations. We fully share the pain and indignation of the Islamic world.”5 In 1999, Turkmenistan, though a secular state, adopted a law initiated by the president On An- nual Amnesty and Pardon in Honor of the Holy Gadyr Gijesi Day (the Night of Almightiness). In 2006, 10,056 prisoners (including former Supreme Mufti Nasrullah ibn Ibadullah sentenced to 22 years in prison in early 2004 for his involvement in a failed coup of 2002) were set free. The Russian Orthodox Church of the Moscow Patriarchate (ROC MP) with 12 registered churches is the republic’s second largest confession. It belongs to the ROC MP Tashkent and Central Asian Eparchy. Metropolitan of Tashkent and Central Asia Vladimir cites higher figures. He believes that the Orthodox Church underwent development under Niyazov: “When I was appointed hierarch of Central Asia, there were only four churches in Turkmenia. Today there are fourteen. The president helped us and wanted to restore the cathedral ruined during the years of theomachy.”6 Archpriest Andrey Sapunov heads the ROC MP in the republic; he is Secretary of the Metropol- itan of Tashkent and Central Asia and fills the post of deputy chairman of the Council for Religious Affairs of Turkmenistan. The country is divided into three deaneries. Today there are only five priests that serve in all the republic’s churches: in recent years, the ROC MP found it hard to obtain visas for its new priests. It should be said in all justice that over one third of the parishes cannot support priests. The ROC MP is in a difficult situation: a large part of its traditional flock (Russians, Ukrainians, Belorussians) have left the republic, while there are practically no Orthodox Christians among the local people. There are no Christian Orthodox educational establishments in Turkmenistan; there are no reliable figures on the numerical strength of the local Russian, Ukrainian, and Belorussian diasporas either. In 2006, the Orthodox Christians could not celebrate the Great Saturday that predates Easter because they had to join the day of voluntary labor to plant trees. They informed the ROC leaders about their concern well in advance. A. Bubnov, correspondent of Vremia novostey, writes: “…the religious leaders in Moscow did not ignore the concerns of their flock in Turkmenistan. To observe subordination they sent an inquiry to the chancellery of the Tashkent and Central Asian Eparchy, to which the Dioce- san Administration in Turkmenistan belongs. The reply from Tashkent deserves to be quoted. “…According to information supplied by the Secretary of the Diocesan Administration in Turk- menistan Archpriest Andrey Sapunov, who is also deputy chairman of the Council for Religious Af- fairs of Turkmenistan, voluntary labor days are a regular feature at all enterprises and offices. They

4 [http://www.centrasia.ru/newsA.php4?st=1137396360], 16 January, 2006. 5 [http://www.centrasia.ru/newsA.php4?st=1142980800], 22 March, 2006. 6 [htpp://www.interfax-religion.ru/print.php?act=news&id=15754], 21 December, 2006. 273 CENTRAL EURASIA 2006 Analytical Annual are normally organized on Saturday mornings and never on Sundays. From this it follows that there will be no voluntary labor on Easter Day. We ask you to send us copies of the complaints about this made by believers and human rights organizations.” The above suggested an adequate conclusion: “The last sentence is all-important. In full conformity with the Soviet traditions, Father Andrey, who holds both a church and a high official rank, is demanding information about those who dared to complain about the Turkmenian authorities.”7 In recent years, several religious communities managed to become registered in the republic: the Evangelical Christian Baptists, Seventh Day Adventists, Pentecostals, some of the Christian charismatic communities, the Bahai, the Hare Krishna Movement, and the New Apostolic Church. Regis- tration did nothing to readjust their activities: they still work underground and gather secretly in private houses. Their prayer houses were either destroyed or confiscated by the state. It is next to impossible to rent suitable premises. Editor of the Forum 18 Agency Felix Korli has pointed out: “Today freedom of conscience in Turkmenistan and Uzbekistan is even more suppressed than under Soviet power when militant atheism was the norm. …In Turkmenistan, even those confessions that managed to become registered the year before (2004.—Ia.T.) cannot gather as a community today—they have no right to buy or rent a house or premises in government offices, but there are no other alternatives— they have to gather in small groups. The militia invariably turns up at larger gatherings.”8 Other religious minorities, such as Shi‘a Muslims, Catholics, members of the Armenian Apos- tolic Church, Jews, Molokans, Lutherans, and Jehovah’s Witnesses, either failed to register or ignored the procedure as useless. I am convinced that the amendments to the Law on Freedom of Conscience were purely superficial and designed to reduce the level of Western criticism. No wonder the Statement of the Austrian delegation made on behalf of the European Union at a sitting of the Permanent OSCE Council of 6 April, 2006 said: “The European Union welcomes the fact that several groups of religious minorities in Turkmenistan acquired the right to profess their religion. It insistently calls on Turkmenistan to abrogate the remaining bans on freedom of thought, conscience, and religion for all religious communities, including bans on renting private premises and meetings in private houses.”9 Prosecution of believers never ended. According to the Forum 18 Agency, on 23 January, as soon as her appeal was declined, Cheper Anniazova of the Hare Krishna Movement was transferred from the women’s prison in Ashghabad to a women’s forced labor camp in the city of Dashoguz in northern Turkmenistan. “Born in 1968, Anniazova was one of the first members of the Hare Krishna Movement in the republic. She was accused of two illegal border crossings into Kazakhstan, which she did to visit the Krishna temple in Almaty.” According to the same source, “presented by the Min- istry of State Security of Turkmenistan, the third accusation was never made public. Allegedly she was accused of illegal dissemination of Krishnaism.”10 On 10 June, member of the community of the International Union of Churches of the Evangel- ical Christian Baptists Alexander Frolov, a citizen of Russia, was deported from Turkmenistan, leaving his wife, a citizen of Turkmenistan, and two children (son of three and a five-month-old daughter) behind in Turkmenabat (former Chardzhou). His residence permit was annulled for the following reasons: bringing Christian literature into the republic; no exit-enter visa (he had spent some time in Russia); and organizing religious gatherings in his home. Frolov was informed of the charges verbally. Before that, on 25 May, Shageldy Atakov, member of the same community, could not leave Ashghabad for Russia: he was removed from the flight even though he carried a valid ticket and visa.

7 [http://www.centrasia.ru/newsA.php4?st=1145592720], 21 April, 2006. 8 “Svoboda veroispovedania v byvshikh sovetskikh respublikakh,” Blagovest-Info, 11 May, 2006. 9 [http://www.centrasia.ru/newsA.php4?st=114529040], 9 April, 2006. 10 [http://www.centrasia.ru/newsA.php4?st=1144824000], 12 April, 2006. 274 TURKMENISTAN International Affairs

His absolutely legal demands for explanation were parried with: “We are following our instructions…” His address to the migration service produced no answer either. The list of similar events is fairly long. It should be said that throughout 2006 the republic’s leaders were pursuing a course toward a certain amount of liberalization in the relations between the state and religious organizations and individual believers. The state, however, never loosened its grip on all forms of religious self-expression. In 2006, there was no real freedom of conscience in Turkmenistan. The president’s sudden death on 21 December will probably change the social and political context: democratization might reach the religious sphere and bring freedom of conscience, one of the key freedoms of public life.

INTERNATIONAL AFFAIRS

Azhdar KURTOV President, Moscow Public Law Research Center (Moscow, Russia)

n the eve of 2006, the country’s president, Saparmurat Niyazov, announced that the republic had diplomatic relations with 122 world states and was a member of 39 international organiza- O tions. On the whole, 2006 was a year when several leading world powers showed greater interest in Turkmenistan. Russia still occupies a dominating position in the country’s foreign economic relations, but Ukraine, the country’s second CIS partner, has lost a significant amount of ground. On the other hand, China is gradually becoming more active, while the U.S., EU, and Iran continue their efforts to draw their own benefits from economic contacts with the republic. Kiev stepped up its diplomatic gas activity after Ashghabad signed an agreement on 29 Decem- ber, 2005 with Russia’s Gazprom company on the delivery of 30 bcm of natural gas to Russia in 2006 at $65 per 1,000 cu m. This was when the conflict involving gas deliveries from Russia to Europe through Ukraine became aggravated. Kiev siphoned off large volumes of gas for its own needs without sanctioned permission. The prospects of it acquiring Turkmen gas proved even more illusive, since the last Turkmen-Russian agreement envisaged the delivery of 15 bcm of blue fuel in the first quarter of 2006, which, taking into account the throughput capacity of the main Central Asia-Center pipeline, made any other deliveries of Turkmen gas to Ukraine essentially impossible. As early as 2 January, Head of the Naftogaz Ukrainy National Joint-Stock company A. Ivchenko visited Turkmenistan and tried once more to assure its leadership of the company’s intention to fulfill all the conditions of the signed agreements, including prompt payment of the gas received. But Saparmurat Niyazov, who was consistent in his policy of “making promises to different partners at once,” not only confirmed his intention to deliver gas to the Russian Federation in a telephone conversation with Rus- sian President Vladimir Putin on 5 January, but also promised to visit Moscow on 22-23 January. Gas deliveries from Turkmenistan as a way of influencing the policy in Eurasia was a topic of Saparmurat Niyazov’s talks with Matthew J. Bryza, Deputy Assistant Secretary of State for European

275 CENTRAL EURASIA 2006 Analytical Annual and Eurasian Affairs, and Tracey Ann Jacobson, U.S. Ambassador to Turkmenistan, on 13 January. Judging from the official communiqué, Washington tried to obtain Ashghabad’s consent to organize deliveries of natural gas to the world market via routes alternative to those offered by Russia. This topic became a central one in bilateral relations. During the year, official representatives of the United States discussed it repeatedly with the Turkmenistan leadership. As a rule, these meetings coincided with different stages of entering (or implementing) agreements on the delivery of American equipment (aviation and agricultural) to Turkmenistan, whereby many contracts were extremely impressive. This particularly applies to the one entered in 2006 with the Case-New Holland Corporation envisaging a consignment totaling 55 million dollars. Immediately after this, a delegation of the Chinese National Petroleum Corporation visited Turkmenistan. Its main goal was to come to terms on certain questions relating to Saparmurat Niya- zov’s imminent official visit to Beijing to enter a large-scale agreement on natural gas deliveries. The Chinese factor was a central issue in Turkmenistan’s foreign policy in 2006. By that time, Ashghabad and Beijing had already signed 36 bilateral agreements. Thirty-seven investment projects totaling 382.6 million dollars and 360 million yuan, in which Chinese companies participated, were registered in Turkmenistan. China’s growing economic potential helped to stimulate its foreign policy in the Central Asian vector. Whereby this economic giant also tries to gain ground within the framework of bilateral cooperation and in the SCO format. In many vitally important areas, the PRC’s indices are way ahead of those of other members of the Shanghai Cooperation Organization and Turkmenistan, which does not belong to this association. Beijing is trying to take advantage of this to realize its interests. Nor should we ignore the fact that not one of the Asian countries neighboring on China has been able to gain any reliable access to its markets. The thing is that the PRC is only interested in raw material, financial and banking capital, as well as high-tech production, including the latest types of weapons, gaining access to its markets. In this way, even China’s western neighbors, the Central Asian countries, including Turkmenistan, are not realistically able to make use of China’s tempestuous development with long-term benefit to themselves. In a certain sense, this group of countries even runs the greater risk of slowing down their development in the most competitive spheres of the economy and of reinforcing their role as raw material appendages of the Chinese economy. Partnership with the PRC is undoubtedly stimulating the export of raw material, but, in so doing, it is destimulating the export of industrial goods. This situation is only reinforcing the position of Turk- menistan and the Central Asian countries as the deliverers of primary energy resources and metals. China imports liquorice, cotton, wool, leather, and the products of the textile, light, and petrochemical industry from Turkmenistan. But apart from the raw material industry, there is no indication of a qualitative increase in the competitiveness of the Central Asian economies in relations with China. Even some of the traditional branches are inefficient compared with China’s analogs. For example, cotton manufacture, one of the main branches of Central Asia’s agricultural industry, is losing in the competitive race with China. A case in point: Turkmenistan uses 7.4-fold more water than the PRC to grow one ton of cotton. An analysis of the regional republics’ trade turnover with China, despite its obvious quantitative growth, shows that China is gaining much higher qualitative dividends from it. For example, Turk- menistan is planning to largely import natural gas. The Celestial Kingdom, on the other had, is exporting a wide range of manufactured goods to the Central Asian states: clothing, footwear, and other basic consumer goods, products of the chemical industry, and machine-building products. In some cases, these products, because they are so cheap, are preventing the Central Asian republics from restoring their industries created as early as Soviet times for manufacturing similar goods. We can even say that the PRC is gradually becoming an active trade competitor for other countries, including Russia, wishing to increase their export to the Central Asian countries. Whereby Beijing is not only acquiring goods

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(that is, raw materials) traditionally exported from the region to Russia, but is also competing with Russian enterprises for sales markets. For example, the PRC’s contracts with Turkmenistan include China’s deliveries of railroad carriages, steam engines, and equipment for enterprises of the textile industry and communications sphere, which Ashghabad used to purchase from Russia. (In particular, Turkmenistan and the Chinese Capital-Longji Sci-Tech Co. signed an agreement on the delivery of railroad carriages for a total of 128.6 million dollars.) China is steadily increasing the export of its goods, which are competitive due to their low price, to the markets of the Central Asian states. This is greatly interfering with the development of local production, particularly with respect to the enterprises of the light industry, the foundations of which were laid in the region as early as Soviet times. Turkmenistan’s example may not be as vibrant as that of Kyrgyzstan, Tajikistan, and Kazakhstan in this respect. Of course, China is taking part in projects aimed at boosting the operation of certain enterprises of the light industry in some Central Asian republics, for example, those manufacturing panne in Turkmenistan. But, first, these are isolated cases and do not constitute systemic participation; and second, they are due either to the uniqueness of such production units, or to the fact that these contracts are compulsory concessions Beijing made during its bargaining with the leadership of a specific republic on projects that are much larger-scale and which promise much greater dividends. In Turkmenistan, one of these projects is the assimilation of natural gas fields and the building of a gas pipeline to China. But even in this case, China is pursuing its own interests. The factory in the Turkmen town of Rukhabat will manufacture panne using Chinese technology (Beijing has allotted 40 million yuan as a grant as well as a 50-million-yuan loan to the Turk- menistan government for building this plant). Such a high level of activity on the part of China has a negative effect primarily on Russian and Japanese interests and potentially also on the interests of the U.S., West European countries, and Iran. Traditionally, since Soviet times, Central Asian gas was pumped along major pipelines to Russia. Today, however, Ashghabad has to sell most of the blue fuel it produces to Russia’s Gazprom structures, which engage in its further sale, including on the markets of third countries, thus gaining quite a high profit. For several years, Turkmenistan has been actively getting the Russian Federation to make concessions with respect to the purchasing price of gas. For the past two years, Moscow has had to listen to such demands and dramatically raise the price of the Turkmen gas it acquired. One of the main reasons it did this was because Turkmenistan threatened to reorient gas deliveries from the northern (Russian) to the eastern (Chinese) route. The PRC was interested in encouraging competition among hydrocarbon exporters, thus following the strategy of the EU and U.S., which were also trying to have an influence on the Russian Federation by means of Central Asian gas delivery projects either to Europe, bypassing Russia (the Nabukko Trans-Caspian project), or to South Asia (the Trans-Afghan project). China is already ousting Japanese business from Turkmenistan (in the production of liquefied gas and polypropylene). An important event of the year was the Turkmen president’s visit to the PRC at the beginning of April. In the Joint Declaration adopted during the visit, Turkmenistan, making an advance toward Chinese diplomacy, confirmed its adherence to the policy of “one China,” that is, it recognized Tai- wan as an inalienable part of the PRC, and it also condemned the separatism of the Eastern Turkestan organization. Beijing supported Ashghabad’s neutrality policy. The sides even signed a special Agree- ment on Cooperation in the Fight against Terrorism, Separatism, and Extremism. But the most important document signed during the visit was the general intergovernmental agreement on implementing the Turkmenistan-China gas pipeline project and on selling Turkmeni- stan’s natural gas to the PRC. China committed to buying 30 bcm every year for 30 years from the moment this pipeline goes into operation (scheduled for 2009). According to the conditions of the agreement, the resource base of these deliveries was to be the right-hand bank of the Amu Darya, where Beijing promised to carry out joint exploration and development of the fields with Ashghabad. But

277 CENTRAL EURASIA 2006 Analytical Annual the agreement also included a provision that, if necessary, the Turkmen side would guarantee gas deliveries to China from its other fields too. This provision confirms the conclusion drawn above that several nations are vying for Turkmenistan’s attention. According to the terms of the agreement, the specific volumes of gas to be purchased each year and the accompanying organizational, legal, financial, and other important conditions were to be regulated by separate documents. Article 4 of the agreement couched the basic price issue in very vague terms: “The price of natural gas will be determined reasonably and fairly, based on the comparable price on the international market. Payment shall be made only in U.S. dollars.” The agreement was to be in effect for three years. At the moment, the PRC has offered Turkmenistan a soft loan for 200 million yuan under another agreement signed. Two weeks after his visit to China, Saparmurat Niyazov ordered for a special Directorate on Turkmen-Chinese Cooperation to be created under the Ministry of the Oil and Gas Industry and Mineral Resources. There are no specific data on the project for this gas pipeline. But according to the information FK-News Agency obtained from the PRC Ministry of Energy in the fall of 2006, as early as October 2006, there were plans to begin building a Turkmen-Chinese pipeline, which would compete with Russian gas supplies to the Celestial Kingdom. The construction would supposedly begin from both ends at the same time, and they would meet in north Tajikistan. According to the data of this source, the PRC will be able to ensure up to 25% of its annual requirements for natural gas by means of Turkmen deliveries, and the Chinese will finance almost 60% of the construction. In so doing, there are plans to pay transit countries (Uzbekistan and Tajikistan) for at least 55% of the transit cost in gas, while the export price of Turkmen blue fuel in this direction will be lower than the world export price. This alternative, according to specialists, may create price rivalry over Russian gas in the PRC, which would be sold for 85% of the export price of Russian gas for Europe. This pipeline was supposed to join up with the large gas fields in the Chinese-Tajik border area, as a result of which Chinese gas will also be pumped to other regions of the PRC. It follows from the media reports that Beijing is planning to run a gas pipeline from the eastern part of Turkmenistan to the Pacific coast of China, to the province of Guangdong. Of course, the PRC’s gas expansion in the Central Asian republics still has several limitations which are preventing Beijing from fully developing along the lines of Western and American companies. For example, price policy is one such touchy subject. Domestic Chinese prices for primary energy resources, despite their noticeable increase in recent years, are much lower than the average European level. So any significant increase in gas consumption in China is only possible if its government assumes responsibility for covering the difference between the purchasing price and the price for personal households and industrial enterprises. Incidentally, it is also possible that gas suppliers from Central Asia will agree to set especially low blue fuel prices for the PRC. In this way, such energy cooperation between China and Turkmenistan, as well as the Central Asian republics in general, will acquire additional importance for Beijing, since it can use this as a lever of pressure on Russia. In this respect, it appears quite legitimate that the funds allotted by China under the credit agreement signed in May 2006 in Ashghabad were used in particular to purchase equipment for the largest Turkmen field of Dauletabad, from where gas is traditionally delivered to Russia. But Russia still holds quite a prominent position. In January, Saparmurat Niyazov made a two- day working visit to Moscow, during which he held talks not only with Head of Gazprom Alexei Miller, CIS Executive Secretary V. Rushailo, Head of the LUKoil company V. Alekperov, and Chairman of the Executive Board of the Russian Aluminum and Basic Element companies O. Deripaska, but also with the directors of Naftogaz Ukrainy. LUKoil acquainted Saparmurat Niyazov with several investment projects, and the talks with O. Deripaska touched on the possibility of purchasing Turkmen coke. Of course, the most important part of the visit was Saparmurat Niyazov’s meeting with Russian Pres-

278 TURKMENISTAN International Affairs ident Vladimir Putin. The sides discussed cooperation in the gas sphere and ways to regulate the Cas- pian’s legal status. At the beginning of February, the Iranian delegation headed by Foreign Minister Manouchehr Mottaki visited Ashghabad. As early as the end of 2005, Ashghabad, after coming to terms with Moscow on a new price for exported gas, stated that similar conditions would apply to all of the republic’s foreign partners without exception. The talks were unconstructive, and the Iranians took time out to think it over. A few days later, the head of the Iranian Foreign Ministry told Saparmurat Niyazov that Tehran agreed to Ashghabad’s conditions. A corresponding agreement was signed on 11 April. It envisaged an increase in price for Iran on the Turkmen gas delivered (after 1 February) to 65 dollars per 1,000 cu m, as well as an increase in its delivery in 2007 to 14 bcm. Turkmenistan seems to be a very important foreign policy partner for Iran. The relations between the two nations go back to the distant past. Iran has always supported Turkmenistan in its neutrality policy, since it was this alternative that most reliably guaranteed Tehran a situation where the outer ring of countries—Iran’s neighbors—would not be placed under the U.S.’s control, with which very strained relations had formed. Even the membership of several Central Asian states in military-political blocs not related to NATO and the U.S. (such as the CSTO) did not mean that military bases and other U.S. facilities could be deployed on the territory of these republics, as happened in Kyrgyzstan. So Turkmenistan (and Armenia)—Iran’s neighbors—remained outside the zone of the Pentagon’s influence. The implementation of a project as early as the mid-1990s to join Iran’s main railroads to those of the Central Asian states (the Serakhs-Meshed branch), although it could not significantly reorient the freight flow from the north to the south, nevertheless contributed to the economic cooperation between the two countries. Between 1996 and 2006, more than 14 million tons of transit freight were shipped along this branch line, which brought Ashghabad 218 million dollars. In 2006, this transit amounted to close to 3 million tons. This route has certain prospects, since with the introduction of new mainlines, the rail corridor itself will become shorter. In 2005, the Bafq-Meshed route in Iran was completed, which shortened the route to the Iranian ports in the Persian Gulf by 800 kilometers, and the Ashghabad-Dashoguz railroad completed in 2006 made this corridor shorter still. In July, Iranian President Mahmoud Ahmadinejad visited Turkmenistan, which was his first visit since he was elected to this post (2005). Iran is the second importer after Russia of Turkmen raw materials, mainly natural and liquefied gas, polypropylene, and electric power. Ashghabad assures that reconstruction of the capacities on the main gas pipeline will make it possible to increase the volume of natural gas deliveries to Iran to 14 bcm. In previous years, Turkmenistan and Iran signed more than 150 documents regulating cooperation in various areas. Within the framework of this visit, several more agreements were signed. Ac- cording to Tehran, the volume of reciprocal trade reached 1.02 billion dollars. IRI companies built the main gas pipeline from Turkmenistan to Iran, as well as irrigation facilities, elevators, installations for producing gasoline at the Turkmenbashi oil refinery, and so on. But the possibility of expanding cooperation between Ashghabad and Tehran is limited by the world community’s ambiguous attitude toward the policy of the Iranian leaders, and especially toward its nuclear projects. Tehran’s benign isolation is preventing the implementation of large-scale projects for exporting Turkmen energy resources to the foreign markets through Iran, for example. But Ashghabad gave Tehran its firm promise that it, as one of the sides, would not allow its territory to be used against the other side. Representatives of Western Europe are also showing an increased interest in Turkmen gas. Af- ter the Iranians, Saparmurat Niyazov held talks with Jan Kubish, EU special representative for Cen- tral Asia. He also expressed an interest in delivering Turkmen gas to the European Union states. At essentially the same time, the question of building a trans-Afghan gas pipeline was discussed again in Ashghabad, which resulted in the signing of an additional protocol to the main agreement of

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2002, setting forth the future volume of gas purchases by Pakistan and India. In particular, the Delhi representatives confirmed their previous intention to become an official participant in the project, and stated that the supplies at the Dauletabad field were sufficient for implementing the project (at the moment, the gas from this field constitutes the main volume of deliveries via the Central Asia-Center gas pipeline). As for cooperation with Afghanistan, it also includes supplying this country with liquefied gas and electric power. At the talks held in April with the Kabul delegation, Saparmurat Niyazov suggested increasing the deliveries of electric power to Afghanistan, in particular by building power transmission line-500, 350 kilometers in length, from the Mary thermal power station to the border with Afghanistan (Ashghabad decided to finance this section independently). This project will make it possible to increase the supply of Turkmen electric power to 800 MW. In so doing, the Turkmen president said that 50% of Afghanistan’s debt for the electric power already delivered would be written off. On the eve of the State Flag Celebration (it was also Saparmurat Niyazov’s birthday), the head of Russia’s Gazprom Alexei Miller and a delegation of the Ukrainian heat and energy complex visited Turkmenistan, at the talks with whom Ashghabad again pointed out Kiev’s unfulfilled promises to settle its debt for the natural gas delivered (around 160 million dollars), noting that such inconsistent behavior is aggravating the talks on the cooperation prospects between the two countries. A specific agreement on settling Ukraine’s debt for blue fuel delivered in 2003-2005 was signed later, at the end of March. For a few years now, Ukrainian delegations have essentially been competing with Russia in an attempt to “earn” a little more sympathy from Ashghabad. Their visits usually followed one after another. In so doing, Kiev clearly lost to Moscow. In June, during another visit by a Gazprom delegation to Ashghabad, an agreement was reached on the Russian Federation’s participation in assimilating the oil and gas resources of the Turkmen sector of the Caspian Sea. However, the sides did not come to an agreement on the price of gas for the second half of the year. The Russian delegation came to Ashghabad several times. Initially it succeeded in coming to terms on the delivery volume—25 bcm for the second half of the year and 50 bcm for 2007. But Ashghabad insisted that the price should be raised to 100 dollars per 1,000 cu m, whereby it even threatened to stop export entirely beginning the second half of the year. Saparmurat Niyazov told the Ukrainian delegation that arrived after the Russian one that since Kiev had not managed to receive a license from Moscow for the transit of Turkmen gas through Rus- sian territory, the contract entered between Turkmenistan and Ukraine was no longer valid. If it ob- tains this license, Ashghabad could also deliver gas in the fourth quarter at 100 dollars per 1,000 cu m. At the beginning of September, Saparmurat Niyazov signed another contract with Russia. The sides agreed on the price and conditions of blue fuel deliveries for three years—162 bcm at 100 dollars per 1,000 cu m, and decided to renew the agreed-upon price every three years. Moscow agreed to purchase 100 bcm every year. In this respect, Saparmurat Niyazov noted that when the current agreement, signed in 2003, expired, the Russian Federation could count on entering a new contract (also for 25 years). In this way, only Russia so far is maintaining a high level of cooperation with Turkmenistan in the gas sphere. The agreements between the PRC and Turkmenistan have boosted Japan’s policy, which previously counted on the gas pipeline from Turkmenistan to the Land of the Rising Sun being extended through China. When Tokyo understood that this would not happen, some representatives of the Jap- anese government made critical statements. Ashghabad did not turn a blind eye to them and, during a visit of a delegation of business circles of Japan in mid-June, Saparmurat Niyazov gave them a sharp rebuff: “Essentially behind our backs, without our consent, interaction in the energy sphere is being politicized, which we consider unacceptable… Whereas China is offering us loans at a 2% interest rate, Japan is offering us at an interest rate as high as 8%,” he noted, and stated that he was rejecting Tokyo’s proposals to increase polypropylene manufacturing capacities due to its high expense. Ap-

280 TURKMENISTAN International Affairs parently, the gist of the last disagreements was that the Japanese side insisted on continuing the current practice of disposing in the long term of production put out at enterprises built on Tokyo’s loans, but Ashghabad insisted on different conditions for selling the end products, on their sale at world prices. From this it follows that Turkmenistan (like Kazakhstan) is trying to carry out multi-vector diplomacy, striving to create a balance in the interests of its main foreign policy partners. In so doing, it should not be unequivocally claimed that such a policy yields only positive results. The totalitarian model of power in the republic is nevertheless drawing attention to itself due to the breakdowns in its foreign policy as well. For example, in economic cooperation with other countries, facts are regularly revealed of legislation violations and detriment to its national interests. In the summer of 2006, the results of an audit of the activity of several Turkish companies became known. It turned out that they entered contracts with profile Turkmenistan ministries by deliberately increasing the rates, at times by millions of dollars. Other serious conflicts were also noted. For example, in June, Turkmenistan’s power-related structures arrested Henri Tomassini, a cultural advisor to the French embassy, and OSCE Human Dimension Officer Benjamin Moreau, a French citizen. They were accused of engaging in illegal activities directed against Turkmenistan, including making espionage contacts with some of the antigovernment bodies. Despite some forecasts, Saparmurat Niyazov’ death on 21 December, 2006 did not lead to any significant changes in the republic’s foreign policy. Acting president G. Berdymukhammedov immediately stated his intention to fulfill all of the previously entered agreements. Apart from the opportunity the Turkmen opposition had to come forward with loud statements in the Ukrainian capital, not one of the world’s leading countries tried to openly interfere in Turkmenistan’s internal affairs, preferring to draw preliminary conclusions after its new leadership formed.

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REPUBLIC OF UZBEKISTAN

GENERAL OVERVIEW

Farkhad TOLIPOV Ph.D. (Political Science), representative of the Central Asia and the Caucasus journal in Uzbekistan (Tashkent, Uzbekistan)

he year 2006 turned out to be Year “X” in Uz- the so-called notorious transition period. No decision bekistan, a time of crucial decision about the next was made and no end was in sight. There were no rad- T presidential election and the anticipated end of ical changes for the better in foreign policy either.

Foreign Policy

Since around 2004, the country has been finding itself increasingly bogged down in a geopolitical quagmire. In January 2005, President Karimov pointed out that Central Asia has entered the stage of “strategic vagueness.” This is confirmed not only by the obvious fact of a clash of geopolitical interests between the largest world powers and Uzbekistan’s neighbors, but also by the subjective fact that the state has lost itself in the “geopolitical woods.” This could not but affect the country’s international situation. In 2006, the EU did not lift the sanctions introduced when Uzbekistan refused to permit an international investigation of the May 2005 events, in which several hundred peaceful people lost their lives, while the government cruelly suppressed the Andijan terrorist riot. The U.S. State Department put Uzbekistan on the list of countries in which the rights of believers are violated. In fact, the post- Andijan period can be described as a probation period for the country and its leaders. In 2006, several foreign officials visited Uzbekistan, the most important among them being Richard Boucher, U.S. Assistant Secretary of State for South and Central Asian Affairs, who came in August, and Japanese prime minister Junichiro Koizumi, who came in September.

282 REPUBLIC OF UZBEKISTAN General Overview

At the concluding press conference, the American official confirmed that his country did not want to be involved in any games in the region and would continue taking into account the interests of Russia, China, and other states in the region. At the same time, Mr. Boucher admitted that the two countries did not see eye to eye on many issues of fundamental importance, such as human rights, the functioning of American organizations in Uzbekistan, etc. The central message of everything that Mr. Boucher had to say to the journalists was: the United States wanted to see Uzbekistan a stronger and independent state. This message was of crucial importance. At the same time, the political vagueness caused by lack of trust between Tashkent and Washington did not affect what civil society and the ordinary people thought about each other and their relations. There are no anti-American, anti- Russian, anti-Chinese, or any other negative feelings toward any of the states. Let us hope that the relations between the two countries will return to normal: the nations of the region, rather than the West, are suffering from isolation. The exchange of accusations notwithstanding, it is absolutely clear that only one of the two countries should revise and readjust its domestic and foreign policies. I have in mind Uzbekistan. This explains why there were no radical shifts in Amer- ican policy toward Uzbekistan. The sudden and hardly justified U-turn in Uzbekistan’s foreign policy was probably caused by the changed geopolitical situation in Central Asia. The very fact that the Japanese prime minister appeared in Tashkent immediately after the U.S. Assistant Secretary of State left suggests that Japan, as the U.S.’s strategic ally, might play an intermediary role between the West and Uzbekistan. This can hardly happen if talks about human rights and democratic developments in Uzbekistan are not placed on the agenda. It seems that the Uzbek president and Japanese prime minister exchanged opinions on these issues and that the guest diplomatically hinted that human rights were indispensable for the country’s stability and prosperity and were instrumental in preventing extremism. Journalists and political analysts paid particular attention to what the Japanese prime minister said about the possibility of restoring friendly relations between Uzbekistan and the U.S. and EU, and offered the history of his country as an example: after losing the war, it became more responsive to the world’s opinions and has been maintaining close relations with the United States since that time. In 2006, the country turned to Moscow; Uzbekistan joined the EurAsEC (a CIS within the CIS) and restored its membership in the Collective Security Treaty Organization (CSTO). The media and analytical newspapers in Uzbekistan and in Russia described this as a breakthrough toward a new possibility for reintegration of the Soviet successor states. As usual, there was a lot of talk about a united customs space, united energy system, common currency market, united security system, etc. The question is whether, after failing to realize these aims within the Central Asian Cooperation Or- ganization (CACO), can Uzbekistan and its Central Asian neighbors expect them to be realized in a wider and much more complex organization? Uzbekistan should join over 70 agreements that have already been entered in the EurAsEC and readjust its laws and business climate accordingly. It seems that Tashkent is not ready to do this. There are a lot of problems with integration in the security sphere, not so much in Uzbekistan as in the CSTO, which claims the status of a military-political bloc. Strictly speaking, members of any such structure should share ideas about what threatens security—something that is still absent in the CSTO. Uz- bekistan’s membership in the military-political bloc contradicts the legally binding principle of non- participation in such structures. The strategic turn toward Moscow is felt in everything on an almost daily basis: there are large- scale economic agreements, especially in the gas sphere; Tashkent is busy creating an atmosphere of friendship with Russia, which looks strange against the background of the never-ending friendship among the ordinary people, academics, and cultural figures. It should be said that in 2006 Tashkent missed the regular summit of the Turkic-speaking states, by which it not only demonstrated lack of solidarity with fraternal countries, but also ignored an impor-

283 CENTRAL EURASIA 2006 Analytical Annual tant chance to confirm its independence. The practice began at the very dawn of independence and served, among other aims and purposes, the task of demonstrating the historical and current political unity of these states. In other words, the summits had an international value per se. The above amply testifies that Tashkent is caught between two fires, between the East and the West. The state moved away from the foreign policy principles introduced by the president, according to which “drawing closer to one state should not mean distancing itself from another.” This is especially evident in Uzbekistan’s relations with the United States and Russia. It is extremely important for Uzbekistan to avoid reverse movement, that is, turn its back entirely on one nation to move closer to another; for the United States, not to revise (and not to abandon) its policy of strategic partnership with Uzbekistan; for Russia to abandon its revanchist idea of completely restoring its former domination in the region.

Domestic Policy

In October, the country was living in the anticipation of another presidential election campaign, since the incumbent president was elected in December 1999 and inaugurated on 22 January, 2000. Nothing happened. Even if his term in office expired on 22 January, 2007, rather than in December 2006, the campaign should have been launched three months before the expiry date. Strange as it may seem, there is a latent ban on any discussion of the problem, which naturally created rumors, speculations, and publications abroad about the actual presidential term in Uzbekistan. All of this led to a legal problem for the country’s political system. In the early years of independence, analysts wrote a great deal about the alleged rivalry between Uzbekistan and Kazakhstan for regional leadership. Even though the problem was an imaginary one, in 2006 Uzbekistan accepted Kazakhstan’s leading role in Central Asia. By that time, the Republic of Uzbekistan was trailing behind Kazakhstan in its economy, political reforms, and international image. The Constitutional Law on the Greater Role of the Political Parties in Reviving and Further De- mocratizing the State Administration and Modernizing the Country, initiated by President Karimov, was one of the major milestones on the domestic political scene. Under the draft law, the parliamentary factions, as well as deputies elected from initiative groups of citizens that disagree with the course and program of the newly formed government or with certain parts of it, may declare themselves to be the opposition. A parliamentary faction that does this broadens its powers as a faction with the right to initiate alternative versions of the drafts submitted for parliamentary discussion and approval. Despite its superficially innovative nature, this draft law is unlikely to come into effect not so much because there might be no factions that will call themselves the opposition, as because of the principles on which the party system is based. It should be said that the concept of an opposition appeared in the text of the 1992 Constitution, which means that it was not as innovative as it seemed. Official propaganda is fond of holding forth about civil society; the set of ideological tools even includes the slogan “From a strong state to a strong civil society,” however, the state remains strong, while civil society is as weak as ever. In 2006, the number of offices of Western NGOs in Uzbekistan decreased even more, while the local NGOs are having no (or nearly no) impact on the life of civil society. This means that the country has hit a stretch of political stagnation, while the political reforms have slowed down. The current situation in the Republic of Uzbekistan is the sum total of dramatic subjective and objective factors—the latter are adding weight to the former. Indeed, the policymakers are living and working in a very complex, not to say dramatic, situation both inside and outside the country. The Cen- tral Asian and global political context, in which the state of Uzbekistan and its statehood are developing, directly affects political decision-making. Today, the context is far from favorable. The great powers’

284 REPUBLIC OF UZBEKISTAN Politics geopolitical rivalry, otherwise known as the Big Game, is reaching its apogee. The results are more destructive than constructive because of the initial “balance of forces” or the “zero sum game” principle. In other words, what is going on in Central Asia is echoing in Uzbekistan’s domestic and foreign policies as part of a much larger deep-cutting process of worldwide changes.

POLITICS

Nikolai BORISOV Lecturer in General Political Science and Special Political Disciplines, Department of History, Political Science, and Law, Russian State University of the Humanities (Moscow, Russia)

t was generally expected that in 2006 a mechanism for transferring power to the next president would finally be found, or that extending the incumbent president’s time in office to a third term I would be legally justified. President Karimov’s term expires in January 2007, seven years after his inauguration in January 2000. As 2006 drew to its close, it became increasingly obvious that there would be no presidential election in January 2007. The Constitutional Law of 2002 on the Results of the Referendum and the Key Principles for Organizing State Power created a legal collision that was never publicly discussed inside the country. Under the law, the elections of the President of the Re- public of Uzbekistan, the Legislative Assembly of the Oliy Majlis of the Republic of Uzbekistan, and Zhokargy Kenes of the Republic of Karakalpakstan, as well as of the representative state power structures in the regions, districts, and towns are held the year their constitutional powers expire, that is, on the first Sunday of the third decade in December. In other words, the law that postponed the presidential election from January 2007 to 23 December, 2007 extended Islam Karimov’s presidential term by nearly twelve months. This contradicts the Constitution, under which the president remains in power for seven years. President Karimov’s term expired on 22 January, 2007, after this his presidential powers are no longer effective, at least theoretically. This should not cause serious destabilization inside the country, or make him illegitimate as the president beyond the country’s borders. The very fact that his powers were extended for twelve months (which means that the presidential term is eight years) betrayed a behind-the-scenes search for legal mechanisms to secure in 2007 the post for President Karimov. Here are a few of the most obvious methods of power transfer: first, constitutional amendments that would allow Islam Karimov to run for a third term or would alter the Constitution (a new Consti- tution should not be excluded either), under which the third term could be counted as the first one. Second, the gradual transfer of power to a successor, that is, the prime minister, who will be elected president providing he consents to give social and political guarantees to the outgoing president. Third, Islam Karimov would leave the post de jure to remain in power de facto, which would leave the Con- stitution and the laws unscathed. Under the third possibility, the president would lose some of his powers to the parliament and the prime minister (this post might go to Karimov when he is no longer president). Or he might fill an insignificant post with a lot of influence (a senator or the head of a presiden-

285 CENTRAL EURASIA 2006 Analytical Annual tial structure, etc.).1 The third alternative looks more plausible than the first two. President Karimov probably mistrusts all of his potential successors: frequent shifts in the Cabinet and among the region heads are an indirect confirmation of this. An extended term of his presidential powers is the worst alternative for a country that lives in isolation from the West—after all his powers can be preserved by legal methods. Some of his legislative initiatives aimed at boosting the role of the parties and the government indicate, albeit indirectly, that the third alternative is currently being practiced. I have in mind the recent draft Law on Strengthening the Role of Political Parties in Reviving and Further Democratizing State Governance and in Modernizing the Country, which gives political parties a role to play in forming the Cabinet. The parliamentary elections are expected to create a parliamentary majority of one party or a coalition of factions; all the other factions acquire the official status of the opposition and the right of legislative initiative on issues already discussed by corresponding parliamentary committees; they will be able to voice their particular opinions on all issues under discussion in the verbatim reports of plenary meetings; their members will be invited to all the conciliation commissions on the drafts declined by the Senate of the Oliy Majlis of the Republic of Uzbekistan. Under the draft law, the president, after detailed consultations with each of the factions and the deputies elected from initiative groups, presents the candidate for the prime minister to the parliament. If the parliament (the Legislative Assembly or the Senate) declines the candidate three times, the president appoints an acting prime minister and disbands the parliament or one of its chambers. The draft law grants the factions the right to remove the prime minister; if the president puts this issue to the vote and his proposal is approved by two-thirds of both chambers, the prime minister is removed from his post; in this event, the Cabinet should resign. This also applies to the posts of khokim of the region and the city of Tashkent. After consultations with each of the parties represented in the local kengashes, the president proposes his candidates. He has the right to disband those kengashes that failed to approve the candidate three times. The kengashes cannot remove khokims on their own—they should present the president with a complete description of their unsatisfactory performance. If passed, the law will be enacted on 1 January, 2008.2 The draft has been presented for nationwide discussion, but none of the chambers has discussed it yet. On 8 December, in his speech delivered at a gala sitting to mark the 14th anniversary of the Constitution of Uzbekistan, the president pointed out: “Life itself calls for laws that would make the parties more efficient and help them develop into the moving force behind the changes in our country.” Talking of the draft law, President Karimov said: “It offers the parties wider possibilities where their rights and powers are concerned; it increases their influence in the legislative and administrative structures, and their impact on the country’s domestic and foreign policies… This law will bring more order to the accountability of official structures and their employees in the center and the regions and, if necessary, of the power structures before the public.”3 The draft law broadens the rights of parliamentary factions, on the one hand, and gives the president more powers, on the other: he will be able to disband the Oliy Majlis and the local kengashes and retains the right to appoint and remove the prime minister. The draft law, which is obviously aimed at securing Karimov a new role when he leaves the presidential post in January 2008, is also aimed at giving one or several parties the official status of the opposition. Indeed, the 2005 parliamentary election won by the Liberal-Democratic Party of Uzbekistan created a strange situation: the loser, the National-Democratic Party, which won the previous election, declared itself the opposition, while emphasizing its complete approval of the president’s policy. Under the new law, the term “opposi-

1 This has been tested in China: Deng Xiaoping and, later, Jiang Zemin, while formally chairmen of the Central Military Council, preserved their former influence and wielded power comparable to that of party and state heads. 2 See: [http://www.press-service.uz/ru/gsection.scm?groupId=4392&contentId=25811], 20 December, 2006. 3 See: [http://www.press-service.uz/ru/gsection.scm?groupId=4392&contentId=25811], 23 December, 2006. 286 REPUBLIC OF UZBEKISTAN Politics tion” will mean just that: any opposition party will stand opposed to the Cabinet, the head of which is proposed or approved by the winners. The ruling elite wants to add legitimacy to the opposition: the parties will be divided into ruling and opposition. Indeed, it is hard to distinguish between them in a country where all five registered parties support the president and do not strive for power. The end of 2005 and the early months of 2006 saw several Cabinet resignations and appointments, nearly all of them connected with the Andijan events and their echo—the changed foreign policy landmarks. Foreign Minister S. Safaev and Defense Minister K. Guliamov, two consistent supporters of President Karimov’s pro-American course of the 1990s-early 2000s, lost their posts. Z. Almatov, who remained Minister of the Interior for a long time and a member of the president’s closest circle, had to “retire.” S. Safaev was appointed senator, while K. Guliamov obtained the post of presidential advisor. Very soon, however, he found himself in the center of a criminal case triggered by a letter from U.S. Defense Secretary Donald Rumsfeld written when the American base was removed from Uzbekistan. The American Defense Secretary thanked his Uzbek colleague for his cooperation in the military-technical sphere and highly assessed the minister’s personal contribution to the anti-terrorist struggle and stronger ties between Washington and Tashkent. It was newly appointed Defense Min- ister R. Mirzaev who received the letter and showed it to the president. It is commonly believed that the president suspected strong friendly relations between the two ministers; the letter cost K. Guliam- ov the president’s trust.4 Hearings began in May; charges against the former minister were brought on eight counts connected with the American military base and with the cases of some ministry officials completed in 2003-2005. The president was obviously trying to neutralize all potentially dangerous former ministers who might still be connected with the U.S. administration in one way or another. According to other sources, the Guliamov case was directly related to the Andijan events. The investigation revealed that the army opened random fire on the crowd, while units of the Interior Ministry acted much more rationally. On the other hand, there is information that the president was displeased that his command to suppress the riot as promptly as possible and to storm the building of the local administration (khokimiat) was not immediately fulfilled.5 This probably explains the nearly simultaneous removal of Guliamov and Almatov. The case of the former was intended to show that even the weakest ties between local politicians and Western governments were potentially hazardous. There was a different kind of problem: the former defense minister, member of the president’s closest circle and his loyal supporter, was son of great Uzbek poet Gafur Guliam. It was obviously impossible to pass a harsh sentence, but it was equally impossible to acquit him: this would have meant the investigation structures had been wrong. Chairman of the Military Tribunal T. Mirzaev refused to pass a guilty verdict in the absence of corpus delicti, for which he lost his job. In July, the court, under a new chairman, found Guliamov guilty on all charges and sentenced him to a suspended term of five years in prison. Secretary of the National Security Council R. Mirzaev, who worked in the past for the special services, was appointed as the new defense minister. Now security structures will play a greater role in governing the country. Former Minister of the Interior Z. Almatov avoided the dock—he was merely a witness in the Guliamov case. According to some sources, he left his post because of grave illness. In December 2005, he was awarded the Buiuk khizmatlari uchun (Outstanding Service) Order. In January 2006, his post was filled by B. Matliubov, who headed the State Customs Committee. He used to work in the Min- istry of the Interior, where he rose from a detective inspector to first deputy minister. Like the president, he was born in Samarkand; in 1990-1994, he headed the Samarkand Administration of Internal

4 See: [www.analitika.org/article.php?story=20060525012238938&mode=print], 15 December, 2006. 5 See: [http://www.centrasia.ru/newsA.php4?st=1148439540], 30 December, 2006. 287 CENTRAL EURASIA 2006 Analytical Annual

Affairs; and in 1994-1997, he served as head of the Administration of Internal Affairs of the Bukhara Region.6 V. Norov, who replaced S. Safaev as Foreign Minister, served in the Bukhara Region as Head of the AIA Criminal Investigation Department shortly before B. Matliubov. In 2006, he was given the far from simple task of changing the country’s foreign policy course. There were shifts in the financial and economic block as well: B. Khajaev was made minister of economics; E. Ganiev, minister for foreign economic ties, investments, and trade; E. Shaisma- tov, deputy prime minister responsible for machine-building, non-ferrous and ferrous metallurgy, oil and gas, geology, power, chemical industry, standardization and metrology, as well as state and mobilization resources. He replaced U. Sultanov, who in the past spent many years in the Cabinet as prime minister. In April, he was appointed as the prime minister’s advisor; in November, he was moved to the post of director general of the Valery Chkalov Aviation Industrial Association in Tashkent, a state joint-stock company, one of the linchpins of military-technical cooperation between Uzbekistan and Russia. Two important regional figures lost their posts of khokims: Sh. Nurmatov was replaced by A. Abdullaev as head of the Ferghana Region, while S. Begaliev was replaced with A. Usmanov as head of the Andijan Region. It should be said that S. Begaliev acquired his post immediately after the May 2005 events in Andijan; the new khokim, A. Usmanov, Major-General of the militia, served as deputy minister of the interior and head of the AIA of the Namangan Region. The new appointment was an obvious effort to “strengthen the administration” in the problem regions. The main personnel shifts of 2006 were caused by the republic’s changed foreign policy course, as a result of which the pro-Western ministers had to go, and by the president’s obvious intention to bring more people from the power-related structures to the top posts. The key positions went to people who enjoyed the president’s personal trust (who came from his native city and who had served for many years in the special services and the Ministry of the Interior structures). The names of many of them could be found on the EU lists of persons prohibited from entering the country compiled in 2006. In May, the country elected the aksakals (heads) of the makhallia committees. On the whole, the media reported on the ordinary people’s enthusiasm, while some journalists insisted that in some places the election aroused no response at all. The general conclusion was: agitation and propaganda should be stepped up. In 2006, the parliament passed 27 laws compared with 19 in 2005, the majority of them ratified or denounced international agreements, and introduced amendments and addenda to laws. The laws On the Mass Media and On the Ratification of the Treaty on Alliances between the Republic of Uz- bekistan and the Russian Federation were the key ones passed in 2006. Speaking at the 5th plenary meeting of the Senate of the Oliy Majlis, President Karimov thanked the senators for their productive work and pointed to the “serious shortcomings and failures” in their activities. He enumerated some such shortcomings: —Absence of close ties and cooperation between the Senate and the deputy corps of the local kengashes; —Superficial treatment of the reports submitted by the chairmen of the State Committee for Ecology and the Board of Central Bank, which were never profoundly analyzed and invited no fundamental conclusions; —Lack of initiative when discussing issues of raising the efficiency of the reforms in the socioeconomic sphere;

6 See: [http://centrasia.ru/person2.php4?&st=1013880574], 27 December, 2006. 288 REPUBLIC OF UZBEKISTAN Politics

—Low practical importance of the seminars, conferences, and round tables organized by the Senate; —Inadequate efficiency of the Senate’s controlling function; —The inefficient mechanism of cooperation between the Oliy Majlis chambers and the relations among the committees and structures of both chambers in the law-making process.7 On the one hand, the Senate is inefficient as a political institution; on the other, its limited constitutional powers and the fact that it gathers for sessions four or five times a year do not allow it to develop into an effective legislative structure. Party rivalry, which began unfolding in 2005, continued in 2006 together with the trend toward a clearer status of either “the party in power” or “the opposition party.” In the context of Uzbekistan, the opposition does not mean opposition to official policy. The People’s Democratic Party of Uzbekistan (PDPU), for example, formulated its own ideology of “social democracy,” declared itself the leading opposition force (its opposition was aimed at its rival, the Liberal-Democratic Party), and announced that after the next election it would become “the party in power.” In his report On the Priorities of Developing the NDPU Ideology and Raising the Efficiency of Party Organizations’ Ideological Work delivered on 1 April at the 4th plenary meeting of the NPDU Central Council, its chairman, L. Guliamov, registered the fact that the party had developed into a “parliamentary party.” The plenary meeting identified the key principles of the party’s new ideology as social justice, social solidarity, and social democracy, and pointed out that the road to social leadership lies through ideological rivalry with political opponents. The plenary meeting also pointed out that the deputy groups in the regional, district, and city kengashes should step up their involvement in the party’s ideological efforts. It was also said that the “selfish geopolitical interests of certain West- ern forces are draped in rhetoric about the need to follow ‘the objective globalization trends’ and ‘and general democratic values.’” The plenary meeting supported the official foreign policy course.8 The plenary meetings of the Adolat Party and the Liberal-Democratic Party of Uzbekistan (UzLiDeP) discussed the president’s initiatives designed to boost the role of the parties in the political system. On 4 December, the Political Council of the Social-Democratic Adolat Party met for its 6th plenary meeting. In her report, First Secretary of the Political Council D. Tashmukhamedova pointed out that, if passed, the draft laws on the parties’ greater role would allow all parties to realize their programs and tasks, extend their involvement in the changes underway in the country, and live up to their election promises. The plenary meeting decided in particular to submit a Conception of Strength- ening and Reviving the Social-Democratic Adolat Party of Uzbekistan to the next plenary meeting.9 On 12 December, the UzLiDeP met for its 7th plenary meeting, at which it was pointed out that the legislative initiative of the head of state designed to boost the parties’ status was an “efficient mobilization mechanism to be used for better performance and making faster progress toward a more mature party system” and a “new landmark in the development of parliamentary democracy based on a genuinely multiparty system.”10 Parliamentary hearings at which the political parties disclosed the sources of their funding became a regular feature. On 21-22 February, A. Tursunov, the leader of Fidokorlar; M. Teshabaev of UzLiDeP; D. Tashmukhamedova of Adolat; X. Dosmukhamedov of Milliy tiklanish; and L. Guliam- ov of PDPU disclosed the sources from which their parties were funded in 2005; the deputies passed corresponding decisions.11

7 See: [http://www.press-service.uz/ru/gsection.scm?groupId=4392&contentId=17632], 3 January, 2007. 8 See: [http://www.xdp.uz/index_ru.htm], 30 December, 2006. 9 See: [http://adolat.uz/rus/013_1.htm], 30 December, 2006. 10 See: [http://www.press-uz.info/ru/content.scm?topicId=2803&contentId=33982], 2 January 2007. 11 See: [http://parliament.gov.uz/news/2006/r4_12302.html], 2 January, 2007. 289 CENTRAL EURASIA 2006 Analytical Annual

In 2006, the opposition parties (Erk, Birlik, Ozod dehkonlar partiasi—the Party of Free Land Tillers, the Surkuiesh Uzbekistonim—Sunny Uzbekistan Coalition) continued working very much as before: no signs of possible legalization were in sight. Bringing about a sudden change in the country’s foreign policy course remained their main target. M. Salikh, who led the Erk Party, pointed out: “A year ago Karimov was the most anti-Russian among the Central Asian leaders. He went as far as hurling insults at Russia. …Today, all of a sudden he has become Russia’s best friend.”12 The party leader admitted that the democratic forces had failed to close ranks, even though “there are consultations about a possible unification of his party with Birlik and with the Party of Free Land Tillers.” The regime could be removed by force, he added, if his party got more money and established closer ties with the power-related structures: “When we are sure that the power-related structures are prepared to move to the people’s side,” he stated, “or at least remain neutral, we shall go into the streets.”13 The party leader, however, was obviously convinced that this could be carried out, albeit some time in the more or less distant future. In May, the leaders of the Sunny Uzbekistan Coalition S. Umarov and N. Khidoiatova, arrested in December 2005, received suspended sentences of seven years in prison with three years on probation. The public prosecutor demanded ten years in prison.14 They were accused of stealing state property not for their political activities. In Khidoiatova’s case, the procedure of “punishment liberalization” (normally applied to those who agree to repay the material damage inflicted on the state) was used. It was commonly believed that the opposition party had been set up when the accused (who ran large businesses) sensed that their tax evasion practices had attracted attention. They obviously hoped to be judged and accused as the regime’s political opponents rather than as tax frauds. This might be true, even if it looks suspiciously convenient for the powers that be. It was rumored that Minister of the Interior Z. Almatov and Vice Premier R. Azimov patronized Ms. Khidoiatova. As a result the former was removed from his post while the latter was demoted to a minister. Once in the dock, the opposition leaders immediately become “prisoners of conscience,” no matter how unjustified the image might be, while human rights organizations in the West negatively respond to such cases. Suspended sentences are designed to confirm the “liberalization of criminal laws” promised by the president of Uzbekistan. For obvious reasons it is wiser to pardon economic criminals and tax frauds who promise to repay the material damage into the bargain, rather than give political opponents long terms in prison, who will skillfully exploit the sentence as a symbol of struggle against the regime. It was in much earlier than 2006 that the ruling regime started pushing the foreign NGOs out of the country. The Open Society Institute (the Soros Foundation), Internews, the offices of BBC, Radio Liberty, and the Institute for War and Peace Reporting (IWPR) were closed down. Early in 2006, the offices of Freedom House, a well-known human rights organization, and a branch of the Eurasia Fund were closed by a court decision. In March, the Foreign Ministry of Uzbekistan invited the OHCHR in Geneva to close its Tashkent office within a month, which was set up to sort out the situation with the Afghan refugees, under the pretext that the problem had been resolved. The move was probably prompted by the OHCHR’s involvement in looking after the Uzbeks who fled Andijan during May 2005: they were first sheltered in Kyrgyzstan and later resettled in third countries (Rumania, in particular).15 There are no longer any leading foreign NGOs in Uzbekistan; so far, the humanitarian projects carried out by foreign NGOs have been going on with no bright prospects in sight. The NGOs were

12 See: Kommersant, 12 May, 2006, p. 5. 13 Ibidem. 14 See: [http://www.regnum.ru/news/645731.html], 3 January, 2007. 15 See: [http://www.uzland.info/2006/march/23/04.htm], 29 December, 2006. 290 REPUBLIC OF UZBEKISTAN Politics punished for illegal funding of political parties, particularly opposition parties, and not for violations of financial accounting and legal blunder, as officially stated. The round table organized by the Institute for Civil Society Studies pointed out that the legal NGOs were experiencing certain problems; that their number decreased, the youth showed no interest in them, their material-technical base was weak, the premises were in short supply, while cooperation with the state structures was practically non-existent. The heads of the NGOs of Tashkent, deputies of the Legislative Assembly, and activists of political organizations and self-government bodies believed that a website would help to monitor the NGOs performance and improve it. The new version of the Law on the Mass Media passed by the Legislative Assembly marked another stage in media development. The text has not been published and has not appeared on the Internet, but there is a lot of talk about it being a step toward clearer legal relations in the relevant sphere, as well as to a higher level of awareness under conditions of democratization and liberalization of public life. According to the Novy vek newspaper, the new version specifies the concepts of “publisher,” “media distributor,” “editor-in-chief,” “editorial staff,” and “TV and radio program.” It also specified the legal norms that help to relieve the founders’ pressure on the editorial staff, as well as the corresponding procedures of founding, registering, and distributing media. It is pointed out in the press that in recent years the media have lost much of their former prestige and circulation because of inadequate funding, the low salaries of journalists, and their low professional level. There is the opinion that freedom of the press is far from satisfactory. In its annual report on freedom of the press, Freedom House ranked Uzbekistan 187th among 194 states. The presidential decree of 8 November on reorganization of the TV and Radio Company of Uzbekistan into the National TV and Radio Company was another important decision. It set up four national TV and radio channels: O’zbekiston, Yoshlar, Sport, and Toshkent. Yoshlar is a private company, while the other three are state unitary enterprises. On the whole, the year 2006 continued the trends that became obvious in 2005. Nearly all the more or less important political events were connected, in one way or another, with the country’s changed foreign policy and/or the Andijan events. The president-initiated constitutional reform and the greater role of the political parties were the two central events. First, the president probably meant to achieve a more favorable constitutional context to preserve his political power in the post-presidential future; second, he consistently carried out a policy aimed at replacing the current clan-regional identification of the elite with a party and political identity expected to bring the stability (inside the elite as well as in society) needed when power would be transferred to the new president. The changed foreign policy orientation created, among other things, harsher “ideological measures:” most of the leading foreign NGOs were pushed out of the country, there were personnel shifts in the power-related and regional structures, while the leaders of the “new opposition” became the targets of criminal persecution. We have good reason to expect that this will go on in 2007, since in December the country will acquire a new president. The central events of 2006 testify that the elite did not reject the idea of a general presidential election, but Karimov’s political domination will probably be preserved in one way or another: there is no certainty that a successor will guarantee security for the retired president; what is more, he will never be fully legitimate in the eyes of the elite. This might trigger another round of a potentially destabilizing struggle inside the elite. This means that in 2007, power is unlikely to be transferred to any of the possible successors.

291 CENTRAL EURASIA 2006 Analytical Annual ECONOMY

Lola SULTANOVA Ph.D. (Econ.), lecturer, Tashkent State University of Oriental Studies (Tashkent, Uzbekistan)

Albina GAISINA M.A. (Econ.), independent researcher (Tashkent, Uzbekistan)

ompared to other countries of Central Asia mentality and their propensity toward small busi- and the Caucasus, the economy of Uz- ness and trade; rapidly growing inflows of remit- Cbekistan has a number of specific features, tances from abroad, and other factors. which explain many processes at work in this sphere. Over the past three years, including 2006, Here are some of the factors influencing eco- the republic has demonstrated high rates of growth nomic development: extreme remoteness of export- in the economy and international reserves, a cur- import markets; vast distances to sea routes and rent account surplus, etc. But as in other CIS coun- advanced economies; agrarian-industrial nature of tries, quantitative economic growth is accompa- economic activity; the largest population in the re- nied by a certain worsening of qualitative indica- gion, young and rapidly growing; abundant natu- tors. This includes a significant increase in the ral resources; traditions of the region’s cultural and number of loss-making enterprises; a slowdown infrastructural center, including the location of the in labor productivity growth; degradation of land largest megalopolis in the Asian part of the CIS in agriculture; intensifying migration processes; (Tashkent, the republic’s capital); a significant po- inadequate share of value added in output, includ- tential of business skills and abilities in the people’s ing exports; loss of skills, etc.

General Macroeconomic Situation

In 2006, virtually all macroeconomic indicators continued to grow. Thus, annual GDP grew by 7.3% compared to 2005, which was achieved due to an increase in all its components; industrial production increased by 10.8%, total agricultural production by 6.24%, and the trade surplus rose to almost $2 billion. The state budget was implemented with a surplus (0.5% of GDP). A tight monetary policy kept inflation in check, with the result that the annual consumer price index (CPI) was 6.8%. Although high figures in this sphere have been recorded for several years (see Table 1), the question about the sources of economic growth remains open. Accelerating GDP growth is caused by a number of factors, not least of all by rising raw material prices. But structural changes play an increasing role in economic growth.

292 REPUBLIC OF UZBEKISTAN Economy

Table 1 Key Economic Indicators for 2000-2006 (previous year = 100)

2000 2001 2002 2003 2004 2005 2006

GDP 103.8 104.2 104.0 104.2 107.4 107.0 107.3

Industrial production 105.9 107.6 108.3 106.0 109.4 107.2 110.8

Agricultural production 103.1 104.2 106.0 107.3 108.9 106.2 106.2

Fixed capital investment 100.9 104.0 103.8 104.8 107.3 105.7 111.4 CPI inflation (annual % change) 24.9 27.4 27.6 10.3 1.6 6.4 6.8

Unemployment 0.4 0.4 0.4 0.3 0.4 0.3 0.24 Trade surplus (million dollars) 317.3 33.5 276.4 760.8 1,037 1,317.5 1,988.3 State budget execution (% of GDP) –1.0 –1.0 –0.8 –0.4 –0.4 0.1 0.5 Som/dollar exchange rate (end-of-period) 320.9 685.0 939.1 978.8 1,052.45 1,174.02 1,240.00 S o u r c e: State Statistics Committee of the Republic of Uzbekistan.

GDP Composition in 2006

In the sectoral composition of GDP, services make up a significant share (see Table 2). Trends toward an increase in the shares of industry and the service sector have been recorded over a relatively long period. Thus, the share of industry increased from 14.2% of GDP in 2000 to 22.1% in 2006, and the share of the service sector, from 37.2% to 39.5%; at the same time, the share of agriculture decreased from 30.1% to 24%.

Inflation

Inflation in 2006 was 6.8%. A tight monetary policy (including strict compliance with the projected parameters of the money supply and monitoring of factors that influence price levels) and the adoption of concrete measures made it possible to keep inflation within the projected limits. An analysis of consumer market trends carried out by the Central Bank of Uzbekistan and price monitoring show that changes in state-regulated prices and tariffs, and also seasonal changes in the prices of agricultural products have a significant influence on the inflation rate. Thus, there was an increase in state-regulated prices (tariffs) for goods and services provided by the republic’s natural monopolies, including public transport fares, housing and public utility charges, and prices for gasoline, fuels and lubricants.

293 CENTRAL EURASIA 2006 Analytical Annual

Table 2 GDP Composition by Sector in 1999-2006

1999 2000 2001 2002 2003 2004 2005 2006

GDP, previous year = 100 (at comparable prices) 104.3 103.8 104.2 104.2 104.4 107.7 107.0 107.3

GDP composition by sector, %, including:

Industry 14.3 14.2 14.2 14.5 15.8 17.1 20.7 22.1

Agriculture 29.0 30.1 30.2 30.1 28.6 26.8 25.0 24

Construction 6.7 6.0 5.9 4.9 4.5 4.5 4.9 5.1

Services 36.6 37.2 37.3 38.4 37.2 37.4 38.3 39.5

Net taxes 13.4 12.5 12.4 12.1 13.7 14.0 11.0 8.3

S o u r c e: State Statistics Committee.

Figure 1

UZBEK SOM: NOMINAL EXCHANGE RATE INDEX

118.00

114.00

110.00

106.00

102.00

98.00

94.00 04.01.2005 01.02.2005 01.03.2005 29.03.2005 26.04.2005 24.05.2005 21.06.2005 19.07.2005 16.08.2005 13.09.2005 11.10.2005 08.11.2005 06.12.2005 03.01.2006 31.01.2006 28.02.2006 28.03.2006 25.04.2006 23.05.2006 20.06.2006 11.07.2006 08.08.2006 05.09.2006 03.10.2006 31.10.2006 28.11.2006 26.12.2006

Som/USD Som/JPY

Som/EUR Som/GBP

S o u r c e: Authors’ calculations based on Central Bank data.

294 REPUBLIC OF UZBEKISTAN Economy

Analysis shows that the interdependence between the money supply and short-term changes in the consumer price index tends to decline with a decline in inflation. This is due to the growing influence exerted on inflation processes by factors unrelated to the movement of monetary aggregates. In other words, efforts to curb monetary inflation through a tight monetary policy have little effect on nonmonetary inflation factors, on rising prices or tariffs. Hence, the Central Bank pursued its monetary policy with due regard for the influence of these factors in the medium term. A significant contribution to curbing inflation was also made by the Central Bank’s exchange rate policy designed to maintain the stability and ensure a moderate depreciation of the national currency, the som (UZS). The som’s nominal exchange rate against the dollar declined steadily, going down by only 5.1%. At the same time, its real exchange rate somewhat strengthened. In order to prevent any sharp changes in the som’s exchange rate, the Central Bank covered the gap between supply and demand for currency by building up its international reserves, which increased more than 1.6 times during the year (see Fig. 1).

Banking System

Total bank capital in 2006 exceeded UZS 1 trillion (just over 5% of GDP), multiplying 7.4 times compared to 2000. During this period, bank assets increased 8.2 times, reaching UZS 7,207 billion (35% of GDP). This is a fairly good figure, but delinquent loans make up a significant proportion of these assets. Household deposits multiplied 18.2 times from 2000, to UZS 678.3 billion. Loans in support of small business, private enterprise, dehkan (peasant) and private (commercial) farms increased 8.1 times from 2000, totaling UZS 1,128 billion. Due to efforts to popularize plastic cards, their number reached about 3.2 million. The network of bank branches, mini-banks and savings banks was extended. Their number increased 2.2 times (to 7,627). However, this has created a new problem: some bank branches are unprofitable. At the same time, there are problems in the banking sector that remain to be solved. It is necessary, among other things, to increase the capitalization of commercial banks, restructure the whole commercial banking system and create conditions for intensifying competition in the banking services market, encourage banks to take a more active part in investment processes, continue reducing cash flows outside the banking system, expand the use of plastic cards in retail trade, the services sector, etc.

Denationalization and Privatization Processes

The amount of state-owned assets in the form of shares, equity stakes and facilities sold through public bidding (auctions, competitions and tenders in which the investor assumes additional obligations depending on the specific features of the enterprise and the terms of sale) was 3.8 times above the 2005 figure, while the total amount of such assets increased 1.8 times. In addition, the periods for presale preparation and sale of facilities shortened in the key sectors of the economy. During the year, 673 state-owned enterprises changed hands: they were converted into 19 joint stock companies (2.8% of the total number of converted enterprises) and 55 limited liability companies (8.2%), while 599 enterprises and facilities (89%) were bought out by private owners. An analysis of the privatization process shows that the number of joint stock companies set up on the basis of state enterprises is declining with a simultaneous increase in the size of the new entities, and that most state enterprises are converted into other organizational-legal forms of ownership:

295 CENTRAL EURASIA 2006 Analytical Annual limited liability companies and private enterprises. A total of 492 facilities were sold through stock exchange trading, auctions and competitive bidding. On the whole, the annual target for the sale of state assets was exceeded by 8%. Privatization of the economy is more of an institutional than an organizational process. Formal- ly speaking, it is proceeding apace and most enterprises in the republic are no longer in state ownership. Joint stock companies alone number about 2.5 thousand. But real privatization and creation of joint stock companies are associated with more profound changes in property relations, and this process is still far from complete.

Securities Market

The performance of the securities market points to a steady trend toward an increase in trading volumes (which more than doubled in 2006) due to more active trading in the secondary market (whose share increased from 38% to 66%). At year-end, the total amount of issued share capital reached UZS 3,625.3 billion, a figure comparable with the total assets of commercial banks. But the capitalization of the stock market (the market value of all issued and outstanding shares) is lower by an order of magnitude (see Fig. 2). Exchange turnover in the securities market as a share of GDP more than doubled. There is great potential for growth in this area, especially considering that stock exchange securities make up only about 5% of all issued securities. So far the role of this market in financing the development of the country’s economy remains insignificant. The priority task here is to ensure a substantial increase in the amount of funds channeled into the real sector of the economy through the securities market. In particular, it is necessary to prevent a shift of potential trading activity to other segments of the finan-

Figure 2

TOTAL ISSUED SHARE CAPITAL AND TOTAL COMMERCIAL BANK ASSETS (million soms) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2003 2004 2005 2006

Total Issued Share Capital Total Bank Assets

296 REPUBLIC OF UZBEKISTAN Economy cial market or into the shadow. It is also necessary to enhance the role of domestic retail investors, reduce stock market risk, increase market liquidity, etc.

Fiscal Policy

The state budget recorded a surplus of UZS 93 billion (0.5% of GDP). Corporate income (profit) tax was reduced from 15% to 12%, tax on corporate dividends and interest, from 15% to 10%, and the single social security payment, from 31% to 25%. Due to tax benefits, the republic’s enterprises, companies and farms increased their financial resources by an additional UZS 425 billion. This provided an extra source of investment and an opportunity to increase own current assets and raise employee wages. Despite the reduction in income (profit) tax and dividend tax, the share of direct taxes in total budget receipts increased. This helped to boost budget revenues, because the tax base broadened as the funds released due to tax cuts were channeled into expanded reproduction and led to an increase in the number of taxpayers.

Industry

The share of industry in GDP in 2006 was 22.1%, and industrial production increased by 10.8% (see Table 3). Formally, this is regarded as very high growth, but in large part it is growth in value terms. Table 3 Industrial Growth by Sector (previous year = 100)

1999 2000 2001 2002 2003 2004 2005 2006

Industry, including: 106.1 105.9 107.6 108.3 106.2 109.4 107.3 110.8

Power generation 99.7 101.1 95.8 101.5 101.8 100.3 98.3 106.1

Fuel industry 100.9 99.7 96.4 102.4 100.6 105.8 98.7 105.9

Ferrous metallurgy 101.4 118.7 110.6 104.3 109.1 128.5 108.3 111.0

Nonferrous metallurgy 100.7 102.5 101.8 105.9 99.0 105.0 97.4 99.1

Chemical and petrochemical industry 110.0 115.8 106.8 113.8 105.2 104.5 109.6 119.6

Engineering and metalworking 103.1 89.7 124.8 108.8 130.8 134.5 129.7 125.7

Building materials industry 101.5 104.3 105.9 102.2 104.3 108.2 111.0 112.2

Light industry 106.7 117.0 112.4 109.0 106.2 105.2 112.0 120.0

Food industry 109.4 108.5 109.4 119.2 106.8 104.7 111.2 128.0

S o u r c e: State Statistics Committee.

297 CENTRAL EURASIA 2006 Analytical Annual

The sectoral composition of industrial production includes power generation, the fuel industry, ferrous and nonferrous metallurgy, the chemical and petrochemical industry, engineering and metalworking, the timber, woodworking and pulp-and-paper industries, building materials, light, food and other industries. Light industry, nonferrous metallurgy, engineering and metalworking, power generation and the fuel industry account for over 70% of total industrial output. In 2006, there was dynamic growth in engineering and metalworking (output increased by 25.7%), chemical and petrochemical industry (19.6%), food industry (28%), light industry (20%), woodworking and furniture industry (18%) and building materials industry (12%). Among the facilities put into operation in the republic in 2006 were the Kungrad Soda Plant, the Tupalang HPP, facilities for the production of coiled copper and copper alloy strip at the UzMetKom- binat joint-stock production association, the first stage of a gas recovery project at JV Kokdumalak, a gas fractionation plant at the Ferghana Refinery, the Gazli-Sarymai gas pipeline, and 11 investment projects in the textile industry; large investment projects were launched in a number of key industries. Employment in industry increased by 9%. During the reform period, the number of production personnel has increased in the key industries, including the power industry, the fuel sector and nonferrous metallurgy. The share of small business in GDP was 42.1%, and the number of operating small and private enterprises was around 350 thousand. In these areas, more than 290 thousand new jobs were created during the year (over 50% of all new jobs in the country). In the short period of its existence, the newly established Microcreditbank granted microcredits to small businesses in the amount of over UZS 25 billion. The share of small businesses in exports of goods rose from 5.8% in 2005 to 11% in 2006. The main problems facing industry include the need to increase the share of manufacturing, modernize and retool production, give enterprises access to the resources of the financial market, and ensure the practical application of bankruptcy procedures to loss-making enterprises. Quasi-fiscal operations have a negative effect on efficiency in the real sector. There is much scope for an increase in the competitiveness of industrial enterprises. The share of export-oriented products in total industrial production in 2006 was 52-54%.

Agriculture

The share of agriculture in GDP was 24%, and total agricultural production increased during the year by 6.2%. In the structure of production by category of farm, there was a further reduction in the share of agricultural enterprises, while the share of private farms continued to increase. In 2006, the republic had about 190 thousand private farms with a workforce of 1.4 million; they produced over 86% of raw cotton and 75% of grain crops. Growth was recorded in the production of fruits and berries (by 23.4%) and vegetables (by 21.7%), including potatoes (10.2%), grapes (23.2%) and melons (20.4%); the projected targets for grain production were met (see Table 4). However, output growth in agriculture is to a significant extent connected with extensive land use methods. This leads to a depletion and degradation of land, especially in the conditions of a water shortage. There is a growing need for systematic and effective irrigation and land improvement work. One of the problems is that while accounting for a quarter of the country’s GDP, the agricultural sector gets only 5% of all investments. These funds are clearly inadequate to address the whole set of tasks: to retool production, build mini-plants for complex processing of fruits and vegetables, etc.

298 REPUBLIC OF UZBEKISTAN Economy

Table 4 Production of Main Agricultural Products (previous year = 100)

1999 2000 2001 2002 2003 2004 2005 2006

Raw cotton 112.3 83.4 108.8 95.6 90.4 126.1 105.4 196.6

Grain 104.4 90.7 103.6 142.3 108.1 98.6 108.9 101.5

Potatoes 95.2 111.1 101.8 104.5 106.5 107.0 103.2 110.2

Vegetables 111.5 98.7 105.1 105.7 112.4 100.4 105.4 121.7

Fruits and berries 89.9 161.8 101.3 105.2 90.0 110.5 111.5 123.4

Grapes 102.4 181.5 91.8 90.1 77.7 143.9 108.9 123.2

Melons 112.4 87.1 103.2 102.8 121.7 97.3 107.5 120.4

Meat (live weight) 101.9 102.4 101.4 101.3 108.2 106.4 106.3 107.4

Milk 101.3 102.5 100.9 101.5 108.3 106.2 106.4 106.6

Eggs 106.4 101.1 102.7 107.7 116.2 113.9 105.7 108.2

S o u r c e: State Statistics Committee.

Trade and Services

The share of the service sector in GDP in 2006 was 39.5% (with a growth rate of 19.5%). Growth in this sector was driven by rising domestic demand. The retail trade turnover increased by 14.8%, and paid services, by 19.3%. High growth rates were recorded in transportation, in the sphere of communications and informatization, and in personal and community services. The service sector employs 58% of the country’s total working population. Personal services increased by 15%, education and social services in the care of children and disabled persons, by 30%, and financial services, 2.5 times. There was progress in mobile phone and other telecommunication services, in the establishment of centers providing public access to the Inter- net, in transport and public utility services. Programs for the development of the service sector in 2006-2010 provide for measures to ensure its faster development compared to other sectors (in 2007, its share in GDP is expected to reach 42-43%), to introduce modern services on a large scale, and to enhance the role of this sector in resolving the employment problem, primarily in rural areas.

Investment Policy

Capital investment from all funding sources totaled about $3,140 million (up 11.4% from 2005). There were positive changes in the structure of investment sources as regards the decentralization of fixed capital investment and noncentralized investment processes. Thus, the share of noncentralized investments in their total amount in 2006 was 77.5%. Their prevalence is due to the fact that the largest investment sources are enterprise assets, foreign direct 299 CENTRAL EURASIA 2006 Analytical Annual

Table 5 Composition of Fixed Investment by Funding Source (%)

1999 2000 2001 2002 2003 2004 2005 2006

Total 100 100 100 100 100 100 100 100

State budget 28.3 29.2 21.5 23.9 16.4 14.4 12.7 10.7

Enterprise assets 26.6 27.1 31.1 41.2 42.8 42.9 48.5 48.3

Household assets 13.6 12.0 10.3 11.4 13.5 11.7 11.8 11.7

Government-guaranteed foreign investment 19.0 19.8 23.2 14.8 16.5 14.0 6.0 4.9

Foreign direct investment 3.7 3.4 4.8 5.3 7.7 11.1 13.2 14.1

Centralized credit 6.0 5.2 5.9 — — — — —

Commercial bank credit 1.9 1.7 2.2 2.4 2.2 2.3 2.9 3.4

Extrabudgetary funds 0.7 1.3 0.1 0.2 0.3 1.8 4.7 6.9

Other borrowings 0.2 0.4 0.9 0.8 0.7 0.3 0.2 0.0

S o u r c e: State Statistics Committee. investment and credit, followed by household assets. The share of commercial bank credit in the total investment structure does not exceed 10%. The republic’s banks do not make full use of their potential for participation in investment processes, diverting part of their resources for short-term lending. Due to an improvement in the financial standing of production sectors, the own funds of enterprises accounted for 48.3% of total investment. But this significant share indicates, among other things, that economic agents have little access to alternative financial resources in view of the inadequate development of the financial market. Household assets accounted for 11.7% of capital investments. The share of centralized investment is gradually shrinking, and in 2006 it was down to 22.5% of the total (including state budget funds with a share of 10.7% and government-guaranteed foreign investment and credit with a share of 4.9%). Extrabudgetary funds (National Road Fund, funds for the development of children’s sport and school education, etc.) became more active, so that their share in total capital investment rose to 6.9%. Their resources mostly go into construction and repair of roads, railways and education facilities. The total amount of foreign loans, credits and investments attracted into the country during the independence period is about $20 billion. In 2006, foreign direct investment (FDI) increased by 25.4% due to the implementation of 53 projects with the use of $186 million of FDI, including 11 projects carried out by the Uzbekengilsanoat state joint-stock company, 4 by the Uzbek Communications and Infor- matization Agency, 2 by JSC Uzbekcharmpoiabzali, and 31 projects in the republic’s regions. Out of the total amount of investment, 68.3% went into the production sector, including about 50% for renewal of plant and purchase of new equipment. Investments in non-state enterprises prevail over those in state-owned enterprises. This is due to the former’s significant share in the overall number of registered legal entities and their active efforts to expand the scope of their activities. The country’s investment program for 2007 includes large projects in the key sectors of the real economy and in the social sphere worth a total of $3,950 million. Under this program, it is planned to 300 REPUBLIC OF UZBEKISTAN Economy attract $1 billion of foreign investment, including about $700 million (roughly 68%) of FDI. The number of projects to be implemented jointly with foreign investors in 2007 is close to 80.

Foreign Trade Relations

The foreign trade turnover increased by 13.5% compared to 2005. Exports made up about 60% of the total, and imports, about 40%, so that the trade surplus increased to almost $2 billion. The republic’s major trading partners among non-CIS countries were Britain, Korea, Turkey, Iran, China, Germany and the United States, while Russia, Kazakhstan, Ukraine and Tajikistan were its main partners among the CIS states. Exports of goods in 2006 increased by 31.5%; the share of finished goods and services in total exports exceeded 53%, while the share of cotton fiber fell to 17%. There was a significant increase in exports of food products (2.5 times compared to 2005), ferrous and nonferrous metals (by 64.2%), machinery and equipment (42.6%), energy resources (34.5%), chemical products and plastics (24.8%), services (17.3%), and cotton fiber (5.9%). In the structure of imports, machinery and equipment made up the largest share: 40.3%. In the period under review, their volume remained virtually unchanged compared to 2005. The share of chemical products and plastics in total imports was 15%, ferrous and nonferrous metals, 10.4%, and services, 9.1%.

Key Social Indicators

Nominal money income of households grew faster than consumer prices, with the result that real household income in the republic increased on average by 22% (compared to 2005). This income mostly consists of income from business, including sale of agricultural products, and from property (55.1%). Compared to 2005, nominal household income increased by 29.9%. Income growth was mostly due to a rise in real wages by 36%, and also a rise in pensions, benefits, grants and social transfers. In the structure of expenditures and savings, consumer spending constituted the largest part: 75.2% of total household spending; the share of household deposits, including purchase of foreign currency, was 17.7%; and mandatory payments and contributions amounted to 7.1%. Overall, money incomes in 2006 exceeded expenditures. The working population, according to estimates, numbered 10,467.0 thousand (an increase of 2.7% compared to 2005). In industry, the figure rose by 9%, while in agriculture it fell by 4%. During the year, about 570 thousand new jobs were created in the country, including more than 60 thousand jobs through cooperation between large industrial enterprises and homeworkers.

C o n c l u s i o n

The challenges facing Uzbekistan in its economic reforms are not original. Many countries have followed the same road. These processes have been particularly similar in the CIS republics, which had to deal with the same problems and negative effects associated with the disintegration of the U.S.S.R.’s administrative-command economy and to resolve the same tasks. The ways of addressing these tasks were somewhat different. One can say that the current approach to economic reform in Uzbekistan is mostly a gradualist one. However, intensifying economic and other competition in the region urges the need to give a new impetus to the economy. How can minuses be converted into plus-

301 CENTRAL EURASIA 2006 Analytical Annual es? In the opinion of experts, the agrarian-industrial nature of the economy makes it possible to create modern enterprises and even whole industries “from scratch” instead of engaging in costly modernization and restructuring of old giants, to keep pace with changes in market conditions, to switch from one line of activity to another without large capital expenditures, to take a more flexible approach to employment and, at the same time, to resolve problems relating to the institutional transformation of property. The republic’s young population is a great potential asset which many countries, including our neighbors in the region, do not have, but the important thing is to make skilful use of this asset. Intensifying migration processes mean an increase in remittance inflows, acquisition and improvement of professional skills. The state’s significant role in governing the economy translates into a high level of national consolidation and self-identification, opportunities for implementing major infrastructure projects, and social protection of the population. Sensitivity of exports to world raw material prices provides an opportunity to use their rise for additional investment, etc. Today’s positive growth in quantitative indicators in many sectors of the country’s economy should turn into qualitative growth, primarily structural changes in the economy.

Development Priorities for 2007

The following lines of economic development were designated as priorities for 2007: structural adjustment and modernization, renewal of plant and equipment in the key sectors of the economy; further liberalization of tax policy; creation of favorable conditions for small business and private enterprise, efforts to scale down the presence of the state; more intensive work to attract foreign investment, primarily FDI; extension of banking and financial system reforms, etc. GDP is projected to increase by 7.7%, industrial production by 7.8%, agricultural production by 5.0%, and investments in the economy by 25.5%. A tight monetary policy is to reduce inflation to an annual rate of 5-7%. In addition, it is planned to cut the rate of profit tax from 12% to 10%, the single tax payment for small businesses from 13% to 10%, and the single social security payment to 24%.

RELIGION

Bakhodyr ERGASHEV D.Sc. (Philos.), professor, head of the Social Sciences and Humanities Department, University of World Economy and Diplomacy (Tashkent, Uzbekistan)

he New Year celebrations that demonstrated confessional peace in the republic were among the most important events of the country’s religious life in 2006. The head of state wished the nation T a Happy New Year, declared 2006 to be the Year of Charity and Medics and described it as the year “of stronger peace and stability in the country, family harmony, and continued vigilance

302 REPUBLIC OF UZBEKISTAN Religion in the current far from simple situation in the region and all over the world.”1 By 1 January, 2006, there were 2,186 religious organizations functioning in the country: the Sunni formed the majority in the local Islamic community; Christians mainly belonged to the largest organizations, such as the Russian Orthodox Church (ROC), the Roman Catholic Church, and the Full Gospel Chris- tian Church, etc. On 7 January, over 20,000 attended the Christmas services at 30 churches and three monasteries (convents in Tashkent and Dustabad and the monastery in Chirchik). The central Christmas ceremony led by Metropolitan of Tashkent and Central Asia Vladimir took place in the Holy Dormition Cathe- dral in Tashkent. Children’s Christmas parties were held in the cathedral until 15 January; 27 performances were attended by about 6,000 people, the largest number in the republic’s history. Similar events were organized in the Holy Trinity Convent of St. Nicholas, the Church of Grand Prince St. Vladimir, Equal-to-the-Apostles, and many other smaller churches across the country. The Christ- mas celebration organized by the eparchy went on for nine days and attracted over 50,000 children from Christian families. They had the opportunity to recite poems, sing, perform Christmas carols, and watch performances by professional artists. Every child received a gift. On 10 January, together with the rest of the Muslim world, Uzbekistan celebrated the holy Kurban Hayit festival. (In June 1991, this day was made a national holiday under a presidential decree.) Prayers in mosques went on smoothly without any unpleasant incidents, very much as before. In his message to the faithful, Chairman of the Spiritual Administration of the Muslims of Uzbekistan Abdurashid Bakhramov pointed out: “On the 8th day of the month of Zul Hijja, our pilgrims, like many other faithful elsewhere, marched from Mecca to the Mina Valley dressed in ihram. There they will spend the first, second, and third days of the Kurban Hayit holiday. After that they will perform the ritual encircling of the Kaaba. On the 9th day, after arriving at Mount Arafat to perform the rite of standing on it, the Uzbekistan pilgrims will pray to the Almighty for peace in our independent Uzbekistan and peaceful coexistence of all citizens and the Muslims of our country.” The mufti also added: “After performing the festive namaz, the Muslims will go visiting their parents and senior citizens and will also help orphans, the sick, the poor, and the destitute, as well as perform other charitable acts.”2 The year 1427 of Hegira began on 31 January. Though this date as well as the birthday of the Prophet Muhammad, which fell on 10 April in 2006, is not as widely celebrated as Christmas among the Christians, it symbolizes unity of all the confessions present in Uzbekistan. Navruz, which, though not a purely Muslim feast, is widely celebrated across Uzbekistan. On that day, the national cultural centers organize concerts in all the settlements across the country. In Navoi, the center of the Navoi Region, the Central Mosque, the most modern among the country’s mosques, was ceremoniously opened. Immediately after the Muslim festival, on 25 March to be more exact, 30 Polish builders hired by the Budimex construction company launched a construction project to build the St. Andrew Ro- man Catholic Church in Bukhara, on Tutzor Street. Bishop Jerzy Maculewicz, O.F.M. Conv. Apos- tolic Administrator of Uzbekistan, blessed the cornerstone. It is expected that the project will be completed by 2008. There are about 4,000 Catholics in the country; 6 Catholic parishes with 10 Francis- cans, 3 monks, and 10 nuns. There are about 41,000 Jews living in Tashkent, Ferghana, Andijan, and other cities; eight synagogues and Sunday schools in these areas serve their religious needs. (The synagogue of Bukhara is the oldest among the Central Asian synagogues, while the Bukhara Jewish school is the best in the

1 In Uzbekistan, the New Year festival the president organizes for children from poor families has become a tradition: gift parcels are distributed while the children are treated to concerts given by the country’s most popular artists. 2 Glava dukhovenstva musul’man Uzbekistana pozdravil sootechestvennikov s nastupleniem prazdnika Kurban Bayram, available at [www.regnum.ru/news/569599.html], 9 January, 2006. 303 CENTRAL EURASIA 2006 Analytical Annual country.) On 6-12 April, famous Israeli poet Ronni Somek visited Uzbekistan and caused quite a stir among the Jews and the republic’s cultural community in general. By then, the Grand Hall of the Central Synagogue of over 200 sq m and the women’s hall of 50 sq m had been finally restored. In 2006, the Jewish community was actively involved in the Passover celebrations to mark the exodus of the Jews from Egyptian slavery in 2448, according to the Jewish calendar (about 3,300 years ago); they also celebrated Purim (the miraculous salvation of the Jews in the Persian Kingdom some 2,400 years ago during the reign of King Ahashverosh [Artaxerxes]), and Hanukkah (the candles festival that celebrates the miracle that took place when the Temple was reconsecrated after the victory of Judas Mac- cabeus over King Antiochus in 164 B.C.). On the second day of Easter, the Holy Fire brought from Jerusalem was presented at the evening service in the Tashkent Cathedral led by Metropolitan Vladimir; this happened after the awards had been distributed and everyone present had been congratulated. This is the fourth year running that the Holy Fire has reached Tashkent and the Central Asian Metropolitan See; the metropolitan was the first to light his candle; after that, all those present were given a chance to light their candles and lam- pions from the Holy Fire to carry it home to light their houses and souls. Later the Spiritual Administrative Center of Tashkent hosted Easter festivities: speeches, a con- cert, and an exhibition of Easter eggs, Easter cakes, and art. “Happy is our land beautified at this time of the year by blossoming gardens, bright and still undusted leaves, and warmed by the still not scorching sun. It is doubly joyous to contemplate the spiritual spring in our temples and prayer houses, to see the tables groaning under the Easter gifts, to be aware of your bright faces, and to feel the holy tenderness in the heart,” said Metropolitan Vladimir in his Easter message.3 On 12-15 May, about 300 Catholics from Samarkand, Bukhara, Ferghana, Urgench, Navoi, and Angren gathered in Tashkent for their annual meeting also attended by Jósef Wesoùowski, Ap- ostolic Nuncio to Kazakhstan and other Central Asian nations. This meeting, the sixth of its kind, was dedicated to Pope Benedict XVI’s first encyclical “Deus Caritas Est” (God is Love). The meeting was also timed to coincide with the first anniversary of the chirotony of Bishop Jerzy Macule- wicz that took place in Rome on 14 May, 2005. It was also marked by a photo exhibition in the Church of St. Anthony, which registered the consecration ritual and the meeting between the cleric delegation of Uzbekistan and Pope Benedict XVI. The results of the working trip of the head of state to the Navoi and Bukhara regions on 18-19 May clarified the meaning of the processes in the country’s religious life.4 In Navoi, the president inspected the Central Mosque, while in Bukhara he reminded the nation that the memory of the great ancestors should be preserved; their spiritual heritage should be studied and popularized. He cited as an example the “studies of the rich heritage of Khwaja Bahauddin Naqshbandi, his contribution to the world spiritual heritage that should be tapped to educate the younger generation.” The president also pointed out that each and everyone should visit holy places to purify their souls. At such moments, man inevitably ponders on his past, analyzes the road left behind, and comes to the conclusion that he should dedicate himself to good deeds, that he should be grateful for living on this holy land. (Later, on 28 July, this experience was discussed at a meeting in Bukhara that brought together consultants on religious, spiritual, and moral education of the makhallia communities5 of the city of Tashkent, the Tashkent, Syr Darya, Jizak, and Samarkand regions.) It should be said that Federal Foreign Minister of Germany Frank-Walter Steinmeier showed a lot of interest in the local experience of preserving religious harmony when he visited Bukhara, the

3 Paskhal’noe Poslanie Mitropolita Tashkentskogo i Sredneaziatskogo Vladimira, available at [http://www.pravoslavie. uz/News/2006/news-apr2006-1.htm], 21 April, 2006. 4 It should also be said that the annual celebrations of the Day of Memory and Honors that take place on 9 May added to the religious peace and harmony in the country. 5 This post was instituted at all makhallia, kishlak, and aul communities of Uzbekistan. 304 REPUBLIC OF UZBEKISTAN Religion historical center of Islam in Central Asia. On 2 November, during his visit to Uzbekistan, he arrived in this city, where he met the leaders of all the confessions represented in Bukhara.6 President Karimov’s book The Uzbek Nation will Never Depend on Anyone was presented in two Arab countries—Kuwait and Saudi Arabia—on 25 May and 4 June, respectively. The presentations took place at the Kuwait National University and the King Feysal Center of Islamic Studies in Riyadh. (The book is based on the president’s answers to the press on 25 May, 2005, on the eve of his state visit to the People’s Republic of China, about what caused the Andijan tragedy and what lessons should be drawn from it.) In the summer, Metropolitan Vladimir came forward with the initiative to open a Museum of Christianity in Central Asia. The authorities allocated a landed plot and announced that construction would begin shortly. The museum is to be built on the grounds of the Spiritual-Administrative Center of the Metropolitan See in Tashkent. The ROC Central Asian Diocese, which is 135 years old, unites 106 parishes in Uzbekistan, Turkmenistan, Kyrgyzstan, and Tajikistan. Throughout 2006 the Spiritual-Administrative Center in Tashkent was engaged in educational activities. The second and last Sundays of each month are dedicated to events under the blanket title of “Introduction to Spiritual Heritage” held in the conference hall of the Holy Dormition Cathedral for everyone who wants to attend. The audience was offered papers on relevant subjects presented by the clergy and musical contributions to the classics of literature and art. The first and third Sundays were taken by the “The Gallery of Russian Literature in the Light of Christian Truth” project, which illuminated the Christian nature of the creative heritage of Russian poets and writers who worked in their native land and abroad. The publishing department issued a spiritual-historical almanac Vostok Svyshe, a journal edited by the students of the Tashkent Seminary called Piaty element, and the Dio- cese newspaper Slovo zhizni. In 2006, the system of religious education in the republic included the Tashkent Islamic Insti- tute with 124 students in the 2006/07 academic year, 10 madrasahs with 900 students; the Christian Orthodox Seminary with 49 students, and the Protestant Seminary with 33 students. On 14 June, the Tashkent Seminary held its fourth graduation ceremony: 5 students graduated from the day department and 2 from the non-resident department. Rector of the Seminary Metropol- itan Vladimir addressed the graduates and teachers with parting words. On 9 June, the Senate (the parliament’s upper chamber) passed amendments and addenda to the Criminal, Criminal Procedure, and Administrative Violations codes designed to boost the efficiency of the struggle against extremism, to keep missionary activities under control, and “to increase personal responsibility for the illegal production, possession, importing, and dissemination of religious documents, as well as information promoting national, race, ethnic or religious strife.” The measures drew inadequate comments from abroad. Meanwhile, the amendments and addenda were prompted by the need to keep in check extremist and missionary activities that had become too dangerous and showed no sign of abating. On 12 May, the Islamic Movement of Uzbekistan (IMU), banned in many countries (the United States being no exception), threatened the heads of the Central Asian states through the message IMU leader Tahir Yoldosh sent to the BBC radio station, Radio Liberty, the Voice of America, and the Ferghana.ru information Agency. He spoke about “persecution, repressions, and terror against the Muslims” and went on to say: “The mujahedin haven’t forgotten the Muslims executed in Andijan in 2005. We insist that all regimes in the region put an end to the practice of persecuting Muslims, the practice of harass- ment and terror.”

6 The meeting was attended by Chairman of the Spiritual Administration of the Muslims of Uzbekistan U. Alemov, the rabbi of the Khal-Iiyahudi synagogue Aron Sianov, Catholic priest Wojtek Kordas, archpriest Dmitry Mikhaylov of the Church of St. Michael the Archangel, and Imam of the Shi‘a Hodja Mir Ali mosque Ibrahim Khabibov. 305 CENTRAL EURASIA 2006 Analytical Annual

The media, meanwhile, provided numerous examples of continued anti-constitutional activities of Hizb ut-Tahrir in the country’s border areas. On 17 May, the activities of the branch of the Chris- tian Protestant Miral Church in the Samarkand Region were discontinued because of violations of its own charter. Some time later, the Committee for Religious Affairs banned the book Islam i zhen- shchiny (Islam and Women) published with the financial cooperation of an American NGO Winrock International that distorted the very essence of the Muslim faith.7 In the Ferghana Valley, the Jehovah’s Witnesses were banned for “illegal activities.” In May, Sheikh Abdulaziz Mansur (Mansurov), one of the authors of the book that interpreted the Holy Koran in Uzbek,8 issued a statement in the local and foreign media to the effect that legal responsibility for extremist and missionary activities should be tightened: “The West has not yet arrived at a fuller realization of the extremist threat in Uzbekistan. …Europe still underestimated the threat that was averted last May.” He said, for example, that Aqromiya, accused of the terrorist acts in Andijan in May 2005, “emerged as a product of blended interests of foreign religious-extremist organizations and the local antisocial people.”9 The republic’s delegation took part in the World Summit of Religious Leaders that took place in Moscow. The Spiritual Administration of the Muslims of Uzbekistan summed up its experience as following: “We found it very important to learn what other religious leaders think about the global problems. Our conclusion is: it is our duty to firmly oppose political, national, and religious enmity.”10 (The Uzbek delegation also participated in the meeting of the Presidium of the Interreligious Council of CIS Countries that predated the World Summit.) Early in July, the media reported that the Eastern Sogdian Archaeological Expedition of the Academies of Sciences of Ukraine and Uzbekistan discovered an epigraphic monument (inscriptions in the Sogdian language, one of the Iranian languages close to the Farsi and Tajik, that used the Ara- maic script) during excavations of an early Medieval Christian monastery in the Urgut District, Sa- markand Region. In a cave nearby, the archeologists came across Christian inscriptions in the Syrian tongue. The monastery founded no later than the 9th century continued functioning until approximately the 13th century. It seems that religious tolerance was one of the hallmarks of the Sogdian era. Early in August, Usman Alemov was elected Chairman of the Spiritual Administration of the Muslims of Uzbekistan, the country’s highest Islamic post. The newly elected leader was born in 1950 in the Samarkand Region; in 1987, he graduated from the Tashkent Islamic Institute as an expert in Islam. He is well known in the country as a theologian and author of books on the history and theory of religion. He was elected Mufti after serving as chief imam of the Samarkand Region. (Mufti Ab- durashid Bakhramov was removed from his post for health reasons.) Later, the Presidium of the Spir- itual Administration elected Abdulaziz Mansurov and Rikhsibay Iunusov deputies of the mufti. On the eve of Independence Day, the country’s main holiday, the Ijtimoiy fiqr Public Opinion Center polled the population to find out what the citizens of Uzbekistan thought about 15 years of the republic’s independence, as well as their opinion about the key political, legal, and social institutions. Significantly, the absolute majority pointed to terrorism and religious extremism as the main threats to the country’s independence and security. At the same time, 90 percent is convinced that the current level of the country’s defense capability is enough to preserve its security and territorial integrity.

7 There are other, positive examples: the Kuwait International Islamic Charitable Organization set up in 1989 by Emir Jabr al-Ahmad Jabr-as-Sabah that has been operating in Uzbekistan since December 1995 actively promotes religious education among the Muslims. 8 Currently the book serves the main source of Islamic knowledge. 9 Zapad nedootsenivaet ugrozu ekstremizma v Uzbekistane, schitaet teolog iz Tashkenta, available at [http://www.religio. ru/news/islam/12704_print.html], 15 May, 2006. 10 [http://www.interfax.ru/r/B/sng/14.html?menu=61&id_issue=11549570], 7 July, 2006. 306 REPUBLIC OF UZBEKISTAN Religion

On 9 September, in Tashkent, UNESCO Director General Koïchiro Matsuura awarded Presi- dent Karimov with UNESCO’s Borobudur Gold Medal, which confirmed, according to many experts, that the republic had achieved considerable progress in its religious life. The ceremony was accompanied by a statement that the medal was awarded “to the President of Uzbekistan for his great contribution to strengthening friendship and cooperation among nations, developing a cultural and religious dialog, and supporting cultural diversity.” (The medal was introduced by UNESCO in 1983 and is called so in the name of the famous archeological monument on Java, the Buddhist temple, which dates from the 750s A.D.) In mid-September, the Tashkent Islamic University hosted the final stage of the International Scientific-Practical Conference on “Religion and Young People in Contemporary Muslim Societies,” the plenary sessions of which discussed the following subjects: “How to Protect Young People Against Religious Extremist Influences” and “Religious Education among Young People as the Main Tool for Teaching Religious Tolerance.” The audience heard famous public figures from Russia, Kuwait, and Uzbekistan. Prof. Fahd al-Makrad, Rector of the Arab Open University in Kuwait, in particular pointed out that the fundamentals of Islam should be taught in official higher educational establishments to avoid distortions and misinterpretations. He also pointed out that young people should be taught to accept Islam as a religion promulgating freedom of conscience, the right to security and equality, and the right to life. On 18 September, the Jahon Information Agency issued a commentary in connection with Pope Benedict XVI’s remarks about Islam and the Prophet Muhammad made on 12 September at the Uni- versity of Regensburg: “Unsubstantiated and irresponsible statements of this kind may not only negatively affect East-West understanding, but also create a serious precedence of escalating religious confrontation and extremist acts all over the world.” The Foreign Ministry’s information agency issued a statement in which it expressed its hope that “the Pontiff will do everything in his power to clarify the situation and prevent similar cases in future.” The Muslims of Uzbekistan were devoted and remain devoted to uraza, one of the main Islamic precepts. All mosques invited kori (Koranic readers) to perform the rite of reading the Koran. Accord- ing to the Muftiat, 1,750 Muslims from Uzbekistan, who traveled to the holy land of Saudi Arabia, visited the places associated with the Prophet Muhammad. After the holy month of Ramazan, the Muslims celebrated Ruza Hayit, the feast of the first meal after the fast. About 2 million filled all 1,948 mosques to perform the morning festive prayers. On such days the urban mosques are more crowded than village mosques. In the cities the festive prayers are led by people with higher Islamic education, well-versed in the psychology of the faithful, and knowledgeable enough to find their bearings in the intricate issues of Islam. Early in November, the nation learned that Shavkat Istamov from Samarkand copied 622 pages of the Koran into a book bound in green satin; it is 85 cm high, 63 cm wide, 9 cm thick, and weighs about 40 kg. The text written in black ink covers 311 sheets; the titles and illuminations are done in colored ink and watercolors. Each page contains 15 lines of letters 18 mm high. The exhibition in the State Museum of the History of the Timurid Dynasty called “From the Treasure-Trove of Rare Manuscripts” demonstrated over 40 works of art directly related to the Koran, the hadith, tafsir, fiqh, logic, history, literature, and linguistics. Academics and cultural and religious figures had the opportunity to see with their own eyes a parchment copy of Osman’s Koran done by famous calligrapher Habibulla Salih; the Koran found in the village of Katta Langar of the Kashka- daria Region; and manuscripts of “Hidayah” by Burhanuddin al-Marginani, “Sahihi Muslim” by Imam Muslim; “Mubayyin” by Zahiriddin Muhammad Bobur; “Al-Kashshaf” and “Muqqadimah al-adab” by Mahmud Zamahshari; “Tarihi ajam” by Muhammad ibn Ayyub. The non-Orthodox and some of the Christian communities celebrated Christmas on 25 Decem- ber. On that Holy Day, Christians thank God “for the love and salvation that He gave the world through

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His Beloved Son.” Christmas services were held in all the Catholic parishes—in Tashkent, Samar- kand, Ferghana, Urgench, Angren, and Bukhara. They attracted over 2,500 people, some of them citizens of Uzbekistan, others foreign Catholics. Bishop Jerzy Maculewicz led the festive events. Early on 30 December, the faithful flocked to 1,953 mosques to take part in the festive prayers on the occasion of Kurban Hayit. In 2006, about 5,000 Muslims had the opportunity to perform hajj.11 On the whole, during the years of independence, 53,000 citizens of Uzbekistan performed hajj to the holy places, and about 32 performed Umrah (a small hajj). By the end of the year, 2,222 religious communities of 16 confessions were registered with the state bodies (in 1990, there were 211 religious organizations in Uzbekistan). The majority (2,042, or 92 percent of the total) were Muslim communities, since about 88 percent of the country’s population considers themselves Muslims. There were also 164 Christian organizations, 8 Jewish and 6 Bahai communities, a Society of Krishnaites, and a Buddhist temple. In 2006, the ruling elite did not spare any efforts to promote the ideas of enlightened Islam, to preserve religious peace and harmony, and to prevent outbursts of religious extremism, fanaticism, and fundamentalism. The authorities showed a lot of skill when wandering among the main centers of power in Islam and never agreed to compromises over opposition to international terrorism.

11 In honor of the Year of Charity and Medics the state paid the hard currency part for the hajj of several highly respected aksakals of the makhallia communities.

INTERNATIONAL AFFAIRS

Dina MALYSHEVA D.Sc. (Political Science), chief researcher at the Institute of World Economics and International Relations, Russian Academy of Sciences (Moscow, Russian Federation)

n 2006, two problems defined the country’s international affairs: consolidation of the regional security system and the fight against radical Islamism. In addition, the Andijan events of May I 2005, which drove a wedge in Tashkent’s relations with the West, had an extremely strong impact on the republic’s foreign policy. The republic’s Foreign Ministry underwent some changes. Vladimir Norov (Russian by nationality) replaced pro-American Foreign Minister Elier Ganiev, who was moved to the post of minister of foreign economic relations, investments, and trade. This personnel shift was supposed to under- line the importance of relations between Uzbekistan and Russia. Former first deputy foreign minister Ison Mustafaev was appointed as ambassador to Belgium by a decision of the Uzbekistan Senate on 1 December. The day before, on 30 November, Maruf Usmanov was appointed chairman of the Committee on Defense and Security.

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The measures taken by the United States, in cooperation with the European Union, to economically and diplomatically isolate Uzbekistan President Islam Karimov and his entourage did not yield the anticipated results. In November, the U.N. General Assembly did not review the resolution draft submitted by the U.S. and EU countries on the Situation Regarding Human Rights in Uzbekistan. Instead, at the Third Committee of the U.N. General Assembly, a resolution on Encouraging an Equal and Mutually Respected Dialog on Human Rights proposed by Belarus and Uzbekistan was adopted by a majority vote. This document emphasized in particular “the need to avoid politically motivated and prejudiced resolutions on the situation with human rights in individual countries, confrontational approaches, the use of human rights for political purposes, and the use of double standards in the U.N.’s human rights efforts.” After Andijan, the relations between Washington and Tashkent are still “frozen,” and in 2006, American noncommercial organizations continued to be closed down in Uzbekistan. On 9 August, Richard Boucher, Assistant Secretary of State for South and Central Asian Affairs, arrived in the republic on a working visit. But although they were aimed at looking for ways “to create a new foundation for cooperation” between the U.S. and Uzbekistan, his talks with the Uzbekistan foreign minister and president did not yield the desired results and bilateral relations did not improve. On 30 August, the Uzbek authorities refused to extend accreditation of 14 coworkers of the U.S. nongovernmental organization, Partnership in Academics and Development, registered in Massachu- setts. The Uzbekistan Justice Ministry stated that this NGO systematically violated the republic’s Law on Freedom of Conscience and Religious Organizations where it prohibits attempts to convert representatives of traditional Uzbek confessions (Muslims and Russian Orthodox) to Protestantism. Not long before, by a court decision, the activity of another American nongovernmental organization, Crosslink Development International, was banned in Uzbekistan: it was accused of violating Uzbekistan laws on NGO activity and freedom of conscience under the pretext of implementing humanitarian projects. In response to this, in November, the U.S. State Department put Uzbekistan on the list of countries of particular concern presented to Congress in 2006, which, according to American legislation, could result in the introduction of economic sanctions. U.S. Ambassador-at-Large for International Religious Freedom John Hanford said when speaking in Washington on 13 November that the United States recognizes Uzbekistan faces a legitimate security threat from some groups that have used religion as an excuse for violence, including the Islamic Movement of Uzbekistan, which is listed by the State Department as a terrorist organization. What is more, the Hizb ut-Tahrir Party has been recognized as extremist. The republic’s Foreign Ministry issued an official statement on 24 November in which it accused the U.S. State Department of a unilateral approach and double standards with respect to issues relating to the freedom of religion and belief, noting in particular that “religious tolerance always has been and continues to be the most important component of Uzbekistan’s state policy.” Tashkent evaluated the U.S. State Department’s decision to include the republic on the list of “countries of particular concern with respect to adherence to religious freedoms” as interference in the internal affairs of sovereign Uzbekistan. After the Andijan events, the European Union also unilaterally froze relations with Uzbekistan and introduced sanctions against it due to official Tashkent’s refusal to permit an international investigation of these events. Admittedly, in 2006, the EU softened its stance somewhat, which shows that the Europeans do not want to lag behind the other players in the struggle for influence both in Uz- bekistan and in Central Asia as a whole. However, its attempts to find a compromise with Uzbekistan do not mean that the European Union is willing to lose face and totally forgive Tashkent for Andijan. On 25 July, a delegation of the French Senate headed by Vice Chairman of the French Senate’s finance commission Emeri de Montesquieu discussed the development of bilateral parliamentary relations with Chairman of the Senate of Oliy Majlis of Uzbekistan Ilgizar Sobirov.

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On 28-29 August, a representative EU delegation headed by Antti Turunen, head of the Finnish Foreign Ministry’s Eastern European and Central Asian Department, visited Uzbekistan. According to him, this visit was in response to hints made by one of Uzbekistan’s foreign minister deputies during his visit to Helsinki in June 2006 that a dialog be reinstated at the Uzbekistan Foreign Ministry level regarding all the aspects of Uzbek-European relations, including the events in Andijan. The EU sent Turunen’s mission to Uzbekistan to find out how serious Tashkent was about discussing the reasons for declaring sanctions. Vladimir Norov received the European diplomats on 29 August. In addition, the Europeans met with officials of the Ministry of Justice and the Prosecutor General’s Of- fice, and with representatives of the Senate. A high-ranking delegation headed by EU Special Representative in Central Asia Pier Morel, which arrived in Uzbekistan on 24 October, met with Vladimir Norov. And on 27 October, the European Parliament adopted a resolution on Uzbekistan, in which it dismissed the urges to intensify the sanctions against the republic by extending them for another 12 months and putting Islam Karimov on the list of persons prohibited from entering the European Union countries. On 1 November, President Islam Karimov received German Foreign Minister Frank-Walter Steinmeier at the presidential residence Oqsaroy. The German minister expressed the viewpoint of his country, which not only did not cease active economic relations with Uzbekistan after Andijan, but also retained an airforce base near Termez. Steinmeier stated in particular that pressure should not be put on Uzbekistan, and that the existing threats to peace and stability in Central Asia, the Afghan problem, and issues relating to the region’s security require a coordinated EU policy. After the meeting with Karimov, Steinmeier said that the Uzbekistan government is preparing a new reform conception. On 8 November, the Uzbekistan foreign minister presented this conception to the EU-Uzbekistan Cooperation Council at a sitting of the Council in Brussels. At a press conference that followed, he confirmed that the position of the country’s leadership with respect to the Andijan events had not changed and was still against carrying out any sort of international investigation. Instead, the Europe- an Union was asked to arrange a bilateral meeting of experts on the events in Andijan. On 13 November, the foreign ministers of the European Union extended the sanctions imposed in 2005 on the Uzbekistan government. The embargo on arms delivery will remain in effect for another year, and the ban on issuing European visas to several high-ranking government officials for six months. The EU specified the possibility of reconsidering the sanctions in February 2007. In this way, the European Union decided to renew hearings on Uzbekistan every three months, hoping to retain some lever of moral pressure on President Islam Karimov. From 12 to 14 December, a delegation of representatives of the European Union leadership, employees of the Secretariat of the EU Council, the European Commission, and experts from Germa- ny, France, Great Britain, and Sweden visited Uzbekistan. The delegation held talks with the Uzbek side on the events in Andijan, visited Tashkent and Andijan, and met with prisoners, lawyers, and representatives of the local bodies of power. All of this helped the EU to form some idea of the gist of the events in Andijan and the course of its investigation. Since the relations between Uzbekistan and the West were still tense, the republic continued to reorientate its foreign policy toward Russia and the regional associations patronized by it, which to a certain extent changed the configuration in the security sphere throughout Central Asia. During his working visit to the Russian Federation on 12 May, Uzbekistan President Islam Karimov met in Sochi with Russian President Vladimir Putin, who on the eve of the arrival of his Uzbek colleague signed a law on ratification of the Treaty of Alliance Relations between Russia and Uzbekistan signed in November 2005. And speakers of both houses of the Russian Federal Assembly, first vice premier Dmitri Medvedev and other Russian representatives engaged in the development of bilateral relations, visited Uzbekistan.

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In November, during Commander-in-Chief of the Russian Air Force V. Mikhailov’s visit to Uzbekistan, agreements were reached on the new airfield near the city of Navoi being used for Rus- sian fighters and long-range aircraft. In return for this permission, on 22 December, the Russian Min- istry of Defense promised to outfit the airport with navigation equipment and air defense means. There are plans to establish the regional headquarters of the Central Asian element of the CIS United Air Defense System in Uzbekistan soon. This agreement will allow Russia to use Uzbekistan’s territory to deploy its Rapid Development Force in Central Asia. In 2007, there are plans to open a Russian Federation General Consulate in Samarkand. Ambas- sador Extraordinary and Plenipotentiary of the Russian Federation to the Republic of Uzbekistan Farit Mukhamedshin announced this at a meeting on 11 November with activists of the Regional Branch of the Republican Russian Cultural Center. And on 12 December, at his residence Oqsaroy, Uzbekistan President Islam Karimov discussed the development of bilateral cooperation in the scientific, cultural, and humanitarian spheres with a Russian delegation headed by Russian presidential aide Jakhan Pollyeva. What is more, the Russian delegation took part in the ceremony of the opening of a branch of Lomonosov Moscow State University in Tashkent. Bilateral cooperation also continued to strengthen in the energy sphere. A sitting of the EurAsEC Interstate Council held on 25 January in St. Petersburg was significant in this respect, at which an agreement was signed that greatly increased the Russian Gazprom Company’s control over the transportation and marketing of blue fuel from Uzbekistan, which did not have enough funds to carry out independent survey work. The Uzbekistan government and the Consortium of Investors, which includes Russia’s LUKoil Company, signed a Production Sharing Agreement on 30 August for carrying out geological survey work with subsequent development of the newly discovered hydrocarbon fields in the Uzbek section of the Aral Sea. And on 28 December, they signed an Agreement on Joint Activity and an Agreement on a Single Operator. Islam Karimov also placed stakes on expanding ties with China as a way to counterbalance Russia’s influence. In addition, the Uzbek leader tried to normalize relations with his closest entourage, the other Central Asian states. Uzbekistan intensively developed relations with Kazakhstan at the level of interstate relations, which is not surprising: Tashkent needs to increase the number of its political allies, while Astana is interested in becoming more actively involved in the economy of its southern neighbor. In January, Islam Karimov was present at the inauguration of Nursultan Nazarbaev, who paid a state visit to Uzbekistan on 19-20 March. The Kazakhstan president participated in the Kazakhstan- Uzbekistan: New Possibilities for Business forum, in which the prime ministers, foreign and defense ministers, and heads of other power-related departments, as well as the finance and economics ministers of both countries participated. At that time, Nursultan Nazarbaev indirectly supported his Uzbek colleague’s stance regarding the events in Andijan, stating that the region “was not only keeping law and order for the 26-million population of Uzbekistan, but also for the population of neighboring Kazakhstan, Kyrgyzstan, and Tajikistan.” The extended contacts between the two states resulted in a branch of the Kazakhstan Bank of Development opening in Tashkent, railroad communication being restored along the Almaty-Tashkent-Nukus route, and the number of flights increased between Tashkent and Almaty. President Karimov’s state visit to Kazakhstan was scheduled to coincide with the informal meeting of leaders of the Central Asian countries held on 1 September in Astana, who discussed economic, security, and cultural cooperation issues. Islam Karimov and Nursultan Nazarbaev signed several agreements, including on the creation of an Interstate Coordination Council. On 25 September, representatives of the government structures of Uzbekistan and Kazakhstan discussed demarcation of the joint border in Tashkent, came to preliminary conclusions about this process, and talked about dis-

311 CENTRAL EURASIA 2006 Analytical Annual mantling the border fences set up by Uzbekistan until a complete agreement is reached on all the delimitation issues. At the same time, official representatives of both countries maintain that they do not have disputed territories, and the state demarcation issue is purely technical. Moreover, on 3 November, Islam Karimov and Nursultan Nazarbaev discussed bilateral relations and cooperation at an informal meeting held within the framework of the Interstate Coordination Coun- cil. The Kazakhstan President acquainted the Uzbekistan leader with the results of his visit to the U.S.; opinions were exchanged on the situation in Afghanistan, Iraq, and Iran; the problems of preparing for the Minsk CIS summit were discussed, and approaches to reform of the Commonwealth were reviewed. Uzbekistan greatly complicated relations with another of its neighbors, Kyrgyzstan, after the Andijan rebellion, which Tashkent accused Bishkek of indirectly supporting. But in 2006, many of the contradictions were eliminated. In the summer, the two countries carried out special joint operations, which, according to the information of the Kyrgyz authorities, led to the destruction of Islamic fighters in south Kyrgyzstan. On 24 August, the foreign ministers of these republics met in Tashkent to discuss the further development of bilateral relations. According to the results of the meeting, a Program of Cooperation and a Protocol on Introducing Amendments and Addenda into the Agree- ment between the Governments of Uzbekistan and Kyrgyzstan on State Border Access Points were signed. The sides also initialed the draft of an intergovernmental agreement on citizen exchanges. On 3-4 October, Kyrgyzstan President Kurmanbek Bakiev paid a state visit to Uzbekistan, during which the sides confirmed their adherence to the Friendship Treaty (of 1996) and welcomed each other’s willingness to engage in a joint struggle against radical Islamism in Central Asia. An important result of this visit was also the signing of a bilateral agreement on the cancellation of visa restrictions for the citizens of both countries. What is more, Islam Karimov and Kurmanbek Bakiev agreed to open a new border access point in the Ferghana Valley. For Karimov, who is trying to isolate Uzbekistan in the hopes of preventing the ideology of radical Islamism from penetrating into the country, opening the border to Kyrgyz citizens shows that the Uzbek leader positively assessed Bishkek’s efforts to oust militants from south Kyrgyzstan. On 27 November, a working meeting of the Uzbek-Kyrgyz Intergovernmental Commission was held in Andijan, which is engaged in demarcation of the state border between the two countries. As a result, another 2.5 km of their state line was demarcated. Coordination of the state border line between these two countries has been going on for six years. But a compromise has been reached on only 993 km of the 1,375 km-long border. The delimitation process is slow and painful, since neither side wants to compromise its national and territorial interests. There are plans to build a border access point in the city of Kara-Suu in the Osh Region of Kyrgyzstan, which is located on the border with Uzbekistan. The project is being implemented within the Border Management Pro- gram in Central Asia, which is financed by the European Union and implemented by the UNDP. As for relations with Tajikistan, in 2006 they did not undergo any dramatic changes, that is, they remained rather cool, since Tashkent is convinced that the administration of Tajikistan President Emomali Rakhmonov cannot (or does not want) to take appropriate measures in the struggle against radical Islamism, which since the end of the 1990s has become a threat to the region. Tajikistan’s efforts aimed at developing its own hydropower industry, as well as at increasing aluminum production are also arousing Uzbekistan’s displeasure and, in the fall, led to an acute increase in tension in relations between these two countries. Mutual accusations by their border services of violating the principles of good-neighborly relations are also gaining momentum. At the end of September, an incident occurred with the participation of Tajik and Uzbek border guards not far from the border post in the village of Khavast, which did nothing to improve the already tense bilateral relations. Tashkent accused the Tajik border guards of opening fire on Uzbek forces without warning, supposedly in order to defend a group of Tajik civilians trying to illegally cross the Uzbek border, due to which the Uzbek border guards’ attempt to arrest the offenders provoked the exchange of fire.

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The relations between Uzbekistan and Turkmenistan (while Turkmenbashi was still alive) left much to be desired. Although, after his death on 21 December, the Turkmenistan authorities closed the border with Uzbekistan just in case, on 22 December President Islam Karimov expressed his condolences to Turkmenistan Acting President G. Berdymukhammedov with respect to the death of Sapa- rmurat Niyazov, whom Islam Karimov called “an outstanding leader and devoted son of the Turkmen people, who put all his efforts into serving his country.” Uzbekistan tried to find new foreign economic and foreign policy partners in Eastern countries of the Far Abroad. In April, Islam Karimov visited South Korea, Uzbekistan’s closest partner, where he signed a strategic treaty with President Roh Moo-hyun, envisaging the development of relations in the political, economic, humanitarian, and scientific spheres. During the meeting held on 25 September with Prime Minister of Korea Han Myung-sook, Islam Karimov stated that Uzbekistan will support the candidacy of Korean Minister of Foreign Affairs and Foreign Trade Ban Ki-moon to the post of U.N. Secretary General. On 2-3 May, Karimov made his first official visit to Pakistan, which was aimed at expanding bilateral cooperation in the defense sphere, as well as at developing trade, economic, and political partnership. His talks with Pakistani President Pervez Musharraf ended in the adoption of a joint statement and the signing of a protocol on exchange of ratified notes about the enforcement of the Intergovernmental Cooperation Agreement on the Fight Against International Terrorism. Karimov visited Pakistan soon after he received India’s Prime Minister Dr. Manmohan Singh in Tashkent in April. Japanese Prime Minister Junichiro Koizumi visited Tashkent on 29 August within the framework of his Central Asian tour aimed at increasing Japan’s access to the region’s natural resources. This visit, which took place soon after Richard Boucher’s trip, possibly also pursued the goal of helping the West to build bridges with the Uzbekistan authorities. According to the official statements, the meeting between the Japanese and Uzbek leaders was devoted to investments in the energy sector and the prospects for trade relations. In addition, an agreement was signed on exchanges in education. During the meeting with Karimov, Koizumi touched on issues of the spread of nuclear weapons and the Ira- nian nuclear program, in so doing expressing support of Tashkent’s efforts to create a nuclear free zone in Central Asia and noting the importance of receiving the consent of all the countries interested in creating such a zone, including nuclear states. Uzbekistan hopes that the shared opinions between Japan and the republic on this and many other questions of regional and global policy might be a starting point for renewing cooperation between the U.S. and Uzbekistan. However, in 2007, Uzbekistan intends to begin sending uranium to Japan and is ready to allow companies from other states to help develop its uranium fields. In so doing, Tashkent is trying to undermine Washington’s role as a monopoly importer of Uzbekistan’s raw nuclear material. Uzbekistan is also developing relations with the Islamic Republic of Afghanistan, which is extremely interested in establishing cooperation with the Central Asian countries in power engineering and other spheres. Uzbekistan Deputy Prime Minister E. Shoismatov, Minister of Foreign Economic Relations, Investments, and Trade E. Ganiev, and Foreign Minister Vladimir Norov held talks on 1 December with Afghanistan Foreign Minister Rangin Dadfar Spanta, who paid an official visit to Tashkent. During their meeting, they discussed specific measures for developing bilateral cooperation, including the state of and prospects for strengthening economic trade and cultural-humanitarian ties, regulating the situation in the IRA and its post-conflict restoration, and other urgent international and regional problems. According to the results of the consultations held at the Uzbekistan Foreign Ministry, a memorandum was signed between the foreign ministries of the Republic of Uz- bekistan and the Islamic Republic of Afghanistan. In it the sides confirmed their adherence to the comprehensive and consistent building up and consolidation of good-neighborly relations and designated

313 CENTRAL EURASIA 2006 Analytical Annual the prospects for and ways to build cooperation in various spheres that meet the deep-seated interests of the people of both states. As a sign of respect for the high-ranking guest from Kabul, Tashkent released 12 Afghani citizens imprisoned in Uzbekistan. The Uzbekistan president also defined his attitude toward Iran’s nuclear problem, believing its military resolution to be “absolutely impermissible.” But Tashkent, like Washington, is against Iran’s efforts to create nuclear weapons. In 2006, Iran launched an intensive diplomatic offensive on the republics of Central Asia itself, showing a special interest in Uzbekistan, which has significant supplies of raw uranium. Uzbekistan belongs to such prestigious international organizations as the U.N. and OSCE, as well to influential financial global structures. But whereas Tashkent has only defined its intentions in these areas, its contacts with international political CIS organizations proved more noticeable. Two documents were signed at a special sitting of the heads of the EurAsEC Interstate Coun- cil held on 25 January in St. Petersburg: the Protocol on Uzbekistan Joining the Treaty on Founding the Eurasian Economic Community of 10 October, 2000 and the Protocol on Introducing Corre- sponding Amendments and Addenda into the Treaty, that is, on increasing the number of participants from five to six states. President Islam Karimov explained the reasons for Uzbekistan’s membership in the EurAsEC as the country’s interest in implementing multilateral economic projects and its desire to have a timely response to the “rapidly changing situation in the Central Asian region and the world.” The participants in the 7th plenary session of the Senate of the Uzbekistan parliament held on 26 August unanimously approved the laws on the republic’s membership in the EurAsEC, as well as the laws On Uzbekistan Joining the Treaty on the Customs Union and Single Economic Space (SES), On the Republic Joining the Treaty on Cooperation in Protecting the External Borders of the EurAsEC Member States, and On Uzbekistan Joining the Convention on Privileges and Immunities of the EurAsEC. (The law on joining the Treaty on Cooperation in Protecting the External Borders of the EurAsEC Member States is still being discussed by the Senate deputies.) After the moratorium established by Tashkent in 1998 on active work within the Collective Security Treaty Organization (CSTO) was removed, Uzbekistan declared at the CSTO summit held in Minsk on 24 June that it was joining this organization as a full-fledged member. And on 17 August, the participants in an informal EurAsEC summit in Sochi signed a Protocol on Restoring Uzbekistan’s Membership in the CSTO. This document legally registers Uzbekistan’s return to the CSTO, and this process should be completed by 1 January, 2008. Uzbekistan’s joining the CSTO will bring Tashkent great dividends, primarily financial. For example, it will have the opportunity to purchase the military hardware produced in the organization’s member states, including in Russia, at discount prices and will be able to train its military personnel in corresponding higher learning institutions of the Russian Federation and other CSTO countries on a very favorable basis (even free of charge). At the same time, the Organization’s countries bordering on Uzbekistan (Kazakhstan, Kyrgyzstan, and Tajikistan) also have the opportunity to resolve previously unsolved problems. They concern several frozen border conflicts, interception of the transit channels of Afghan drugs (from Tajikistan through Uzbekistan and Kazakhstan to Russia), and prosecution of “enemies of the regime” seeking refuge in neighboring states. At its 8th plenary session held on 1 December, the Senate approved the Law on Ratification of the Protocol on Restoring Uzbekistan’s Membership in the CIS Collective Security Treaty Organiza- tion. Earlier, on 21 November, the deputies of the lower house of parliament adopted the draft law. On 13 December, Uzbekistan President Islam Karimov signed this law. The headquarters of the Regional Antiterrorist Structure (RATS) created under the Shanghai Cooperation Organization is located in Tashkent and has been functioning since 7 June, 2002. The executive committee of this structure is headed by Uzbekistan representative Viacheslav Kasymov,

314 REPUBLIC OF UZBEKISTAN International Affairs who previously worked in the country’s special services. On 13 December, members of the RATS working group held consultations at the republic’s Prosecutor General’s Office, after which similar meetings were held in its other law-enforcement departments and at the National Security Council. It is obvious that its neighbors in post-Soviet Central Asia will become a priority of Uzbekistan’s foreign policy in the near future, primarily Kazakhstan, the most promising and economically strongest partner. Moscow will also retain its significance as Tashkent’s main economic and political ally. Its striving to increase cooperation with the South Asian and Asia- Pacific Region countries, primarily with China, as well as with the states of the Middle East and Persian Gulf, will become even more noticeable. As for the U.S. and EU, Uzbekistan’s relations with them will directly depend on the observation of human rights in the republic. The presidential election coming up in 2007 could force the government to make certain concessions, particularly since Uzbekistan’s international isolation has no objective advantages for the West, as it is pushing Tashkent into the arms of Mos- cow and Beijing.

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CHRONOLOGY OF EVENTS FOR 2006

POLITICS

Afghanistan

5 February —Mass protest rallies caused by the Muhammad cartoon controversy accompanied by casualties are held in Kabul and other cities. 24 February —350 Taliban members and al-Qa‘eda fighters kept in the Puli-Charhi prison who demand a fair trial rebel and capture the prison building. Four prisoners are killed and 20 wounded in the skirmishes with the police; 5 prison guards are also injured. 25 February —The court sentences Assadullah Sarwari, former prominent NDPA figure who headed the state security structure of the Democratic Republic of Afghanistan, to death for mass murders in the late 1970s. 12 March —Chairman of the Senate Sibghatullah Mojaddedi survives an attempt on his life in Kabul. He accuses the ISI of organizing the attack. 22 March —President Karzai presents a list of the Cabinet and Supreme Court members for the parliament’s approval. 28 March —Abdurrahman, an Afghan, arrested in February for going over from Islam to Christianity, is released from prison. He risked the death penalty according to the Shari‘a; his case echoed far and wide inside and outside the country. Certified as mentally incompetent, he is released and leaves the country for Italy thanks to interference of some Western leaders and President Karzai. 19-20 April —Kabul hosts an international conference called “Reconstruction, Stability and Security of Afghanistan—The Role of Regional Countries” attended by members of the Afghan Cabinet and delegations from 10 countries. 20 April —The parliament endorses the new Cabinet. 28 April —Military parade is held in Kabul on the occasion of the 14th anniversary of the Islamic revolution in Afghanistan. 29 May —Unrest flares up in Kabul caused by the deaths of four Afghans in a traffic accident, for which the American military was blamed. Thirteen people are

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killed and several dozens wounded in clashes with the police. The mass unrest is anti-American and anti-governmental. 19 July —Mawlawi Mohammad Younus Khales, former leader of the Islamic Party of Afghanistan (eponymous with the party of Gulbuddin Hekmatyar), one of the allies of the Taliban, dies. 4 August —NATO assumes command of the forces of the international counterterrorist coalition in Afghanistan. 8 August —The parliament endorses the final composition of the Cabinet and the Supreme Court. 10 August —In the Faryab Province, in the country’s north, units of Chief of Staff to the Commander in Chief of the Afghan Armed Forces General Abdul Rashid Dustom clash with units of his old rival and former deputy Abdul Malik, causing casualties. 7-8 September —An international conference dedicated to the 5th anniversary of the death of the national hero of Afghanistan Ahmad Shah Masood is held in Kabul. It is attended by members of the Cabinet, ambassadors of friendly countries, and delegations from 11 countries. 27 November —It is announced in Kabul that President Karzai intends to set up a political organization of his own—the Democratic Party of Afghanistan. 10 December —On the 59th anniversary of the Universal Declaration of Human Rights, President Hamid Karzai unveils the three-year Action Plan on Peace, Reconstruction, and Justice. He also says that the day will be celebrated in the country as National Remembrance Day of those killed in wars.

Republic of Armenia

17 January —U.S. Ambassador to Armenia John Evan meets President Kocharian to express Washington’s concern about Armenia’s ineffective governance and to point out that an efficient governance is one of the conditions of the country’s involvement in the Millennium Challenge Account Program. 27 January —Defense Minister of Armenia S. Sarkisian is elected Chairman of the Erevan State University Board. 8 February —The ruling coalition fails to get enough votes to elect A. Arutiunian ombudsman. 24 February —A. Tumanian, coordinator of a newly formed New Country Party, is removed from his post as head of the presidential administration. 2 March —President Kocharian is interviewed by two pro-presidential Armenian channels and the Public TV of Nagorno-Karabakh. 10 March —The opposition National Unity Party convenes a special conference. 16 March —The public association In Defense of the Liberated Territories organizes a round table, which demands that Defense Minister Sarkisian be removed from his post.

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27 March —Armenia and the Millennium Challenge Corporation sign an agreement in Washington, under which Armenia will receive over $235 million in five years. 27 March —Deputies of the Zhogpadgamavor parliamentary faction L. Khachatrian and V. Bagdasarian start forming the Alliance for Armenia Party. 4 April —Speaker of the National Assembly A. Bagdasarian convenes a press conference at which he makes public his plan to consolidate the country’s liberal forces. 6 April —Armenia transfers the fifth power generating unit of the Hrazdan thermal power plant to Gazprom for $248 million. 11 April —Defense Minister Sarkisian announces that the political processes in the country are developing normally and fit his plans. 12 April —At a press conference in Erevan, John Danilovich, Chief Executive Officer of the Millennium Challenge Corporation, announces that the results of the 2007-2008 elections might suspend the Millennium Challenge Account Program in Armenia. 12 April —A conflict between Orinats Erkir and the Republican parties about the serious violations during privatization flares up in parliament. 13 April —The parliament passes the Cabinet’s draft Law on Approving the Report on the Fulfillment of the Privatization of Public Property Program in 2001-2003. 14 April —Parliament speaker A. Bagdasarian sends the results of an investigation carried out by the Auditing Chamber of the National Assembly related to violations during the privatization of public property in 2001-2003 to the country’s Prosecutor General’s Office. 14 April —The newly formed pro-presidential Prospering Armenia Party publishes its program in opposition newspapers. 2 May — At a parliamentary session, speaker A. Bagdasarian comments on the vehement response to his interview in the German Frankfurter Allgemeine Zeitung. 5-11 May —Nine businessman-deputies leave the Orinats Erkir parliamentary faction. 12 May —Speaker A. Bagdasarian calls a press conference to announce his intention to leave his post as speaker and say that his party is moving over to the opposition. 12 May —The coalition parties meet President Kocharian to register a “civilized divorce” with Orinats Erkir. 14 July —Foreign Minister V. Oskanian calls a press conference to declare that Armenia is entering the second stage of reforms, which might “cripple the elite’s economic and political interests.” 14 July —Defense Minister S. Sarkisian announces that he joins the Republican Party, the move that convinces the bureaucrats and businessmen remain in its ranks. 22 July —At a congress of the Republican Party Defense Minister Sarkisian is elected Chairman of its Council. 24 July —G. Tsarukian, leader of the Prospering Armenia Party, gathers the party activists.

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12 August —Leader of Orinats Erkir A. Bagdasarian announces that a new party format under the slogan “For Legal Elections” is to be formed. 10 September —A public-political initiative Alternative is formed, which unites some of the former members of the Armenian National Movement. 11 September —On an initiative of A. Karapetian, leader of the New Times Party, the opposition parties unite into an Anti-Criminal Movement. 11 September —The anti-criminal idea is actively promoted at a regular parliamentary sitting, the Republicans being the target of criticism. 13 October —The National Assembly agrees to a criminal case being instituted against businessman A. Akopian, one of the new members of the Republican Party’s Council. 15 November —A. Karapetian, member of the Military Fraternity Organization Council, calls the nation to civil disobedience. 17 November —Former Foreign Minister A. Arzumanian announces that a Civil Disobedience Movement is being set up. 25 November —The Civil Movement meets for its Constituent Congress initiated by leader of the National-Democratic party V. Manukian and leader of the Heritage Party R. Ovannisian. 9 December —The 7th Congress of the union of volunteers Erkrapa is hastily convened. 10 December —Participants in the Constituent Assembly of a new radical opposition structure, the Alliance of Armenian Volunteers, headed by former volunteer fighter Zh. Sefilian held on 4 December are arrested and their homes searched. 15 December —President Kocharian is interviewed by several Armenian TV companies. 16 December —G. Tsarukian gathers the activists of his Prospering Armenia Party. 20 December —R. Mkrtychian, member of the Prospering Armenia Party, who was recently elected head of the Nalbandian rural community, is murdered. 22 December —Prime Minister A. Margarian holds a press conference.

Azerbaijan Republic

20 January —The country marks another anniversary of the January tragedy (in 1990 the Soviet Union moved its troops into Baku; hundreds of citizens were killed or wounded). 7 February —The new composition of the Central Election Commission is approved. 17 February —A new political bloc, Azadlyg, is set up. 1 March —An address with a request to grant the Azerbaijanians the “divided nation” status is sent to the U.N. Secretary General. 16 March —The Second Congress of the Azerbaijanians of the World is held in Baku. 22 March —A National Public Committee for European Integration is set up. 26 April —The Sixth Congress of the National Forum of Nongovernmental Organizations is held.

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13 May —By-elections to the Milli Mejlis in 10 constituents are held. 23 May —Picketing is held in front of the IRI embassy in support of the mass actions of Azeris in Iran in protest against the persecutions. 31 May —A Committee in Support of the National Movement of Southern Azerbaijan is set up. 2 June —Armenians set fire to buildings in the occupied territory. 12 September —The International Conference “National Movement in Southern Azerbaijan” is held. 15 September —The first volume of the journal of social, political, and economic studies The Caucasus & Globalization is presented to the public. 7 October —Municipal elections are conducted in some of the constituents. 21 October —The president signs the decree On Remission of Some Convicted Persons. 24 November —Broadcasting of the ANC TV Channel is discontinued (resumed on 12 December).

Georgia

22 January —Subversive acts on the gas pipelines in North Ossetia suspend gas deliveries from Russia to Georgia until 29 January. 27 March —Russia introduces an embargo on Georgian wines and wine materials. 31 March —The agreement on specific dates for removing the Russian military bases from Georgia is signed. March-April —The opposition and the public carry out rallies that brought together several thousands to protest against the murder of S. Girgvliani by officials of the Ministry of the Interior and against the demand that petty merchants should use cash registers. 23 July —Former plenipotentiary representative of the Georgian president in the Kodori Gorge Emzar Kvitsiani refuses to obey the central government. Early in August, the state structures restore their control over the Kodori Gorge as a result of a police operation. 6 September —Supporters of the former chief of state security of Georgia I. Giorgadze are arrested on the suspicion of planning a coup. 27 September —Four officers of the Main Intelligence Administration of Russia are arrested on the charge of espionage. 28 September —Russia suspends issuing visas to Georgian citizens. 3 October —Russia unilaterally suspends transport communication with Georgia. 5 October —Local elections are held. 10 November —Defense Minister I. Okruashvili is appointed minister of economic development. Several days later he resigns from this post and leaves the Cabinet.

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Republic of Kazakhstan

7 January —President Nazarbaev signs a decree about the new national anthem of Kazakhstan. 11 January —Nursultan Nazarbaev is inaugurated as President of the Republic of Kazakhstan in the Ak orda Palace; after the ceremony, the head of state meets foreign delegates who arrived in Astana to take part in the event. 18 January —President Nazarbaev presents Kazakhstan’s Strategy for Joining the World’s Fifty Most Competitive Countries to the chambers of the RK parliament as the platform for the new Cabinet. 18-19 January —President Nazarbaev issues decrees appointing Danial Akhmetov as premier; Karim Masimov as deputy premier, Kasymjomart Tokaev as foreign minister, Mukhtar Aktynbaev as defense minister, Vladimir Shkolnik as minister of industry and trade, and Akhmetjan Esimov as minister of agriculture. 24 February —President Nazarbaev attends a meeting at which the socioeconomic development of Astana in 2005 is discussed and construction plans for 2006 are formulated. 2 March —President Nazarbaev chairs a sitting of the Security Council, at which the draft Strategy of the National Security of the Republic of Kazakhstan for 2006- 2010 is discussed. 4 March —The Tabigat (Green) Party headed by ecologist M. Eleusizov, who promotes the idea of a democratic state, meets for its constituent congress. 4 March —The Sixth Congress of the Ak zhol Party discusses the issue of using the deputy mandate to promote the reforms. 24 March —President Nazarbaev chairs the first session of the State Commission on the Development and Specification of the Program for Further Democratic Reforms. 14 April —The delegates of the Fourth Congress of the Democratic Party of Kazakhstan ask the state bodies, political parties, and NGOs to support its program Seven Steps toward Uprooting Corruption. 20 April —The Fifth Eurasian media forum opens. 22 April —Delegates of the Extraordinary (Fifth) Congress of the Republican Party Rukhaniat discuss the president’s Address to the Nation and express their support of it. 22 April —The Second Congress of the DPK True Ak zhol meets to discuss organizational and tactical issues. 26 May —Chairman of the For a Fair Kazakhstan movement makes a statement in which he demands that the Alga Party be registered. 30 May —The Presidium of the DPK True Ak zhol issues a statement in which it expresses its “concern over stronger repressive measures against the activists of the democratic forces of Kazakhstan.” 9 June —President Nazarbaev chairs the 15th plenary meeting of the Foreign Investors Council “Kazakhstan’s Progress in Enhancing Transparency and Fighting Corruption” held in Astana.

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12 June —President Nazarbaev takes part in an OSCE meeting on cultural, religious, and ethnic tolerance held in Almaty. 17 June —President Nazarbaev opens the Second Summit of the Conference on Cooperation and Confidence Measures in Asia in Almaty. 4 July —The delegates of the Extraordinary (Ninth) Congress of the Otan Party pass a decision on uniting with Asar. 5 July —President Nazarbaev signs the Law on Amendments and Addenda to Several Legal Acts of the Republic of Kazakhstan Related to the Media. 15 July —The general meeting of the For a Fair Kazakhstan movement passes a decision to approve and support Zh. Tuyakbai’s initiative to set up a social-democratic party. 1 September —The next (Third) session of the parliament of the Republic of Kazakhstan opens. 10 September —The Popular Party Alga meets for its constituent congress and elects A. Kozhakhmetov as its leader. 10 September —The constituent congress of the National Social-Democratic Party elects Zh. Tuyakbai as its leader. 19 September —At a meeting of the RK Security Council, President Nazarbaev removes the akim of the Southern Kazakhstan Region B. Zhylkyshiev and public health minister E. Dosaev from their posts for the critical situation created by the spread of HIV. 24 September —The concluding sitting of the Sixth Congress of the Democratic Ak zhol Party decides to activate the deputy mandate the party received at the 2004 parliamentary elections. 10 October —At a congress of journalists of the RK, D. Nazarbaeva puts forward an initiative to convene a confederation of journalists. 24 October —At the 12th session of the Assembly of the Peoples of Kazakhstan in Astana, President Nazarbaev announces large-scale reforms in connection with introducing the Latin script. 27 October —The Atameken political party gathers for its constituent congress, the program of which contains the key aspects for setting up a democratic law-governed state and elects E. Dosmukhamedov, member of the Atameken Union of Businessmen, as chairman of the party. 10 November —President Nazarbaev takes part in the Seventh Congress of the Civil Party of Kazakhstan, which unanimously votes for unification with the Otan Party. 13 November —President Nazarbaev chairs a regular session of the Security Council of the Republic of Kazakhstan, which discusses housing construction, more secure traffic, and regulation of the gambling business. 17 November —The RK recognizes two more international structures—Aum Shinrikyo and the Organization for Liberation of Eastern Turkestan—as terrorist organizations. 24 November —A joint meeting of both chambers of the parliament passes the Law on Amendments to the Constitutional Law on Elections in the Republic of Kazakhstan, which excludes the norm that bans meetings between election day and the day when the final results are published.

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8 December —President Nazarbaev holds several bilateral meetings within the 16th plenary session of the Foreign Investors Council. 21 December —Investigation of the case of children being infected with HIV ends; criminal cases are instituted against 17 heads of the regional department of public health and medical-prophylactic organizations of the Southern Kazakhstan Region because they infected 82 children with HIV. 25 December —President Nazarbaev signs a decree On Amendments to the Constitutional Law of the Republic of Kazakhstan on Elections in the Republic of Kazakhstan.

Kyrgyz Republic

3 January —A working group to draft the Conception of State and National Ideology of the KR is set up. 5 January —President Bakiev signs a decree On Measures Needed to Prepare a Referendum on the Form of Government in the KR. The referendum is scheduled for the fourth quarter. 6 January —A People’s Coalition of Democratic Forces uniting 18 political parties and public associations is set up in Bishkek. 24 January —Minister of Justice M. Kaipov instructs the registration department to check all foreign-funded NGOs in order to identify those that threaten the country’s national security. 3 February —Speaking at a parliamentary sitting, President Bakiev accuses the speaker and some of the deputies of fanning a confrontation with the executive branch and the head of state. 4-6 February —An ethnic conflict starts in the village of Iskra (the Chu Region) populated by Dungans and Kyrgyz. 7 February —Prime Minister Kulov offers President Bakiev help in improving the performance of the law-enforcement and judicial systems. 8 February —Prime Minister Kulov signs the decision On Adoption of the Statute of the Permanent Representative of the KR Government in the KR JK—Advisor of the KR Premier. 10 February —To preserve stability in the country, speaker Tekebaev resigns after a sensational public conflict with the president. 24 February —Prime Minister Kulov signs a government decision on execution of the presidential decree On Measures Needed to Prepare a Referendum on the Form of Government in the KR of 5 January, 2006. 2 March —Deputy M. Sultanov is elected speaker of the parliament. 4 March —President Bakiev agrees to fill the post of chairman of the Council of the Assembly of the People of Kyrgyzstan. 6 March —President Bakiev signs a decree making 24 March the Day of National Festivities but the parliament refuses to endorse the date. 16 March —The parliament calls on its speaker to initiate a vote of no confidence in the Cabinet because of its failure to supply citizens with new passports issued in 2004.

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17 March —The parliament decides by a majority of votes to instruct the parliamentary committee for constitutional laws and state structure, legality, judicial reform, and human rights to formulate legal foundations for instituting a vote of no confidence in the KR government. 21 March —President Bakiev signs a decree to raise the salaries of employees in the cultural sphere by 35 percent and of those in the social security sphere by 50 percent as of 1 April. 23 March —President Bakiev signs a decree On Further Improvements in Gender Policy designed to ensure that no less that 30 percent of women shall work in state structures and local self-governments bodies. 23 March —President Bakiev signs a decree On Setting Up a Workgroup to Draft Constitutional Projects for Various Forms of Government. 24 March —Speaking on the People’s Revolution Day, President Bakiev calls for electing the next parliament by party lists, strengthening the executive branch, setting up uncorrupt courts, and creating a strong civil society and free mass media. 30 March —The Central Election Commission annuls registration of R. Akmatbaev as a parliamentary candidate. 4 April —Prime Minister Kulov suspends his membership in the Ar-Namys (Dignity) Party for the entire period of his premiership. 10 April —President Bakiev recommends that the ministers suspend their membership in political parties on their own free will before 13 April or resign. 11 April —On the strength of the Law on Civil Service, the Ministry of Industry, Trade, and Tourism announces that the demand to suspend the membership of ministers in political parties is unlawful. 18 April —To achieve concerted functioning and cooperation among the administrative structures when dealing with issues of state importance, President Bakiev signs a decree On the State Council of the KR and endorses its Statute. 19 April —President Bakiev announces that the referendum on the Constitution will be held in the fourth quarter of 2006. 20 April —President Bakiev signs a decree On Setting up a Workgroup to Draft a Conception for Reforming the Judicial System and the Law-Enforcement Structures in the KR. 28 April —The Jogorku Kenesh describes the performance of 80 percent of ministries and government departments as unsatisfactory. 29 April —The opposition For Reforms movement carries out a mass rally and meeting in Bishkek demanding reform of the Constitution and the removal of certain politicians who belong to President Bakiev’s closest circle. To defuse the tension, the president parts with two of the most odious members of his team—Administration Head U. Sydykov and State Secretary D. Sarygulov and promises to submit a draft constitution to the parliament next fall. 2 May —Thirteen ministers, whose work the parliament described as unsatisfactory, resign. Prime Minister Kulov and President Bakiev refuse to accept the resignations. 6 May —President Bakiev issues an order endorsing the Human Rights Commission under the KR president chaired by T. Akun.

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10 May —The president issues a decree relieving State Secretary D. Sarygulov, Presidential Administration Head U. Sydykov, and Chairman of the National Security Service T. Aytbaev from their posts and appoints A. Madumarov as state secretary and B. Tabaldiev as NSS chairman. 27 May —The For Reforms movement gathers a rally in Bishkek to demand that the executive branch carry out 10 easy steps—a demand which underlay the 24 March, 2005 events. 27 May —The Uzbek Society of the Jalal-Abad Region demands that the Uzbek language be given an official status (Jalal-Abad). 5 June —Prime Minister Kulov presents his version of the amendments to the Constitution, which presupposes a strong president and a strong parliament. 7 June —President Bakiev discusses the political and socioeconomic situation in the republic, reforms of the Constitution and the judicial system, and the HIPC program with representatives of all branches of power. The leaders of the oppositional For Reforms movement refuse to take part in the meeting. 16 June —Prime Minister Kulov signs a decision on setting up workgroups for explaining the form of state structure under different forms of government to the people. 23 June —President Bakiev discusses the provisions on which there is no agreement with members of the workgroup for drafting the Constitution of various forms of governance. 8 July —President Bakiev outlines 11 steps toward reform of the judicial system. 27 July —President Bakiev and Prime Minister Kulov receive final drafts of the Constitution with various forms of government. 5 August —The Fifth Kurultai of the Assembly of the People of Kyrgyzstan attended by 759 delegates opens in Bishkek. 19 September —President Bakiev submits three drafts of the Constitution with different forms of government to the parliament to initiate parliamentary hearings. 28 September —President Bakiev addresses the parliament with his message On the National Development Strategy and Immediate Tasks. 4 October —Experts of the Venice Commission of the Council of Europe conclude that none of the drafts presented by the Beknazarov group can be accepted. 9 October —Prime Minister Kulov submits his draft Law on Introducing Amendments and Addenda to the Constitution of the KR. 16 October —The parliament discusses the draft Law on the Legal Guarantees of Opposition Activities in the Kyrgyz Republic. 19 October —President Bakiev agrees not to hold a referendum on the Constitution. 20 October —At a parliamentary sitting, deputy M. Zhuraev suggests that the Kyrgyz Republic should join the Russian Federation. 27 October —President Bakiev attends the National Dialog in Bishkek convened to formulate recommendations for the constitutional reform. The president announces that he will present his own version of the Fundamental Law. 30 October —President Bakiev and Cabinet members discuss the current situation with the deputies. 325 CENTRAL EURASIA 2006 Analytical Annual

31 October —President Bakiev talks with the leaders of the For Reforms movement and promises to submit the draft constitution to the parliament shortly. 1 November —President Bakiev calls on the people to stay away from the meeting scheduled for 2 November. 3 November —Prime Minister Kulov receives a disk on which a meeting of those who organized the rally is recorded, at which it was suggested that administrative buildings in the regions be seized. 4 November —The Office of the Prosecutor General institutes criminal cases against members of the opposition who are accused of an attempted coup. 6 November —The Jogorku Kenesh sets up a Constituent Assembly, which adopts the Constitution with the parliamentary form of government. 9 November —President Bakiev promptly signs the text of the new version of the KR Constitution. 13 November —President Bakiev formulates the task of gradual reorganization of the government’s structure in accordance with the new version of the Constitution. 20 November —In connection with Prime Minister Kulov’s address, Prosecutor General K. Kongantiev declares that the criminal case instituted in connection with the scandalous recording of the opposition’s meeting will not be dropped. 30 November —President Bakiev discusses structural changes in the government with Cabinet members. 4 December —Speaking in the parliament, President Bakiev sums up its performance and outlines future tasks. 4 December —The Karachai diaspora of Kyrgyzstan asks the public of Karachaevo- Cherkessia (RF) to help it move to its historical homeland. 6 December —The new version of the KR Constitution is published in Kyrgyz and Russian. 8 December —The parliament adopts the new structure of the Jogorku Kenesh by 40 votes over 19. 14 December —The government submits a draft structure of the Cabinet to the parliament, which Prime Minister Kulov revokes on the same day. 18 December —Between 8:00 and 10:10 p.m. President Bakiev answers citizens’ questions on the air on the public TV channel. 19 December —A group of deputies asks President Bakiev and Prime Minister Kulov to discontinue the powers of the current Cabinet. 19 December —The government resigns on its free will under the pretext of allowing the new Constitution to take effect. The president accepts this resignation and instructs the Cabinet to continue working until a new Cabinet is formed. 20 December —The parliament meets for an emergency meeting because of the government’s resignation. 21 December —President Bakiev invites the parliament to adopt the new amendments to the Constitution, under which he will regain the right to appoint executive and local judicial personnel and the power-related ministers. 21 December —The parliamentary committees approve of the amendments to the Law on the Political Parties of the KR and the Election Code.

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22 December —President Bakiev discusses the situation created by the Cabinet resignation and the possible ways out of it with Speaker M. Sultanov. 29 December —The parliament tries three times to pass the amendments and addenda to the new version of the country’s Constitution on the president’s conditions. 29 December —President Bakiev unexpectedly announces that early on 30 December he will speak in the parliament. 29 December —The parliament hastily knocks together a coordinating commission that prepares a new version of the amendments and addenda. 30 December —When talking to the parliament, President Bakiev announces that he intends to convene a meeting of the Security Council later that day to finally seal the fate of the Jogorku Kenesh. 30 December —The parliament agrees to President Bakiev’s amendments and passes the amendments and addenda to the Constitution in two readings. Opposition deputies M. Mukashev and A. Beknazarov refuse to vote and leave the conference hall; deputy O. Tekebaev votes against the amendments.

Republic of Tajikistan

3 January —An Afghan immigration mission opens in Tajikistan. 6 February —“Russia’s ambassador to Tajikistan has launched an election campaign for the president of the Republic of Tajikistan, which has not been officially declared yet, and this is incompatible with and outside the scope of duties of an ambassador of a foreign state,” R. Valiev, deputy chairman of the Democratic Party of Tajikistan, says at a press conference on behalf of his own party and expressing the opinion of another two opposition parties—the Social Democratic and the Socialist Party. 20 February —President Rakhmonov attends a ceremony to inaugurate the launch of the Sangtuda-2 HPP project, funded by Iran. 20 March —R. Zoyirov, chairman of the Social Democratic Party, says that there are around 1,000 political prisoners in Tajikistan. 4 April —It is announced at a news conference that the Vatan (Motherland) faction has been formed within the Democratic Party of Tajikistan, comprising 20 members, led by M. Sobirov (Dushanbe). 20 April —In his annual state of the nation address to the Tajik parliament, President Rakhmonov underlines the importance of the fight against corruption at all levels of government. 8 May —Leaders of RT political parties meet with Richard Boucher, U.S. Assistant Secretary of State for South and Central Asian affairs, to discuss problems of the country’s democratization. 24 May —At a meeting between President Rakhmonov and AEC (U.S.) management, the sides sign an agreement to build a power transmission line from Tajikistan to Afghanistan. 2 June —The media publishes a statement by the U.N. Security Council extending the mandate of the U.N. Tajikistan Office of Peace Building. 327 CENTRAL EURASIA 2006 Analytical Annual

14-15 June —Ibrahim Agboola Gambari, U.N. Under-Secretary-General for Political Affairs, Tajik Prime Minister A. Akilov, and IRPT leader S.A. Nurin discuss the country’s sociopolitical problems. I. Gambari notes that the U.N. is ready to provide technical assistance in conducting elections in the republic. 23 June —At a session of the EurAsEC in Minsk, President Rakhmonov criticizes the implementation of Uzbekistan’s EurAsEC obligations, in particular those concerning visa free trips. 23 June —At a CSTO summit (Minsk), President Rakhmonov points out that military cooperation within the framework of the Collective Security Treaty Organization “is especially relevant for Tajikistan, which received virtually nothing from the U.S.S.R.’s military establishment.” 6 July —An earthquake hits Tajikistan with an epicenter in the Rasht Valley (300 km to the northeast of Dushanbe). 27 July —In the course of negotiations between RT President Rakhmonov and Afghanistan President H. Karzai, the sides sign four documents. 7 August —Following Tajik-Indian top level negotiations in Delhi, five cooperation agreements are signed. 11 August —The Supreme Court of Tajikistan sentences G. Mirzoev, former commander of the Presidential Guard and head of the Drugs Control Agency, to life imprisonment. 13 August —The 7,000,000th Tajik citizen is born in Dushanbe (into the Musoev family; the boy is named Faridun). 16 August —A two-day Tajik agricultural exhibition opens in Sochi, which is attended by leaders of the EurAsEC member countries and Armenia, as well as Russian Prime Minister M. Fradkov and Ukrainian Prime Minister V. Yanukovich. 16 August —President Rakhmonov has the title of Honorable Citizen of the Sochi (Russia) conferred on him. 22 August —Participants in a session of the Coordination Council of the CIS Prosecutors General sign an agreement on cooperation and mutual understanding between the Prosecutor General’s Offices of the CIS republics in fighting corruption (Dushanbe). 22 August —Prosecutors general of the SCO member countries sign an agreement on simplified procedure for the provision of legal assistance in criminal cases (Dushanbe). 25 August —Participants in an interparliamentary forum, entitled “Tajikistan—Russia: Prospects for Regional Cooperation,” sign eight agreements. 25 August —A mission of the OSCE Office for Democratic Institutions and Human Rights (ODIHR) arrives in Dushanbe on a six day visit to assess preparations for the upcoming presidential election in Tajikistan. 25 August —Tajik Prime Minister A. Akilov and EurAsEC General Secretary G. Rapota discuss interaction between the member countries (Dushanbe). 30 August —IRPT leader R. Zoyirov says that his illness may have been caused by poisoning. 31 August —The country’s parliament sets 6 November as election day in Tajikistan. 2 September —An IRPT congress in Dushanbe elects M. Kabiri as the party’s new chairman.

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9 September —A military parade and pageant take place in Dushanbe, devoted to the 15th anniversary of the RT’s state independence. 9 September —President Rakhmonov and Afghan Parliament Speaker Yunos Qanuni discuss bilateral cooperation prospects. 10 September —The city of Kulob marks its 2,700th anniversary. 14 September —President Rakhmonov and Chen Yuan, the head of the Chinese State Bank for Development, discuss prospects for Tajik-Chinese cooperation. On the same day, the Chinese State Bank for Development extends a $10 million loan to Tajikistan’s agricultural sector. 15 September —President Rakhmonov and RF Prime Minister M. Fradkov discuss the Rogun HPP project. 15 September —President Rakhmonov and Pakistan’s Prime Minister S. Aziz discuss the status and prospects of bilateral cooperation. 21 September —A Tajik-Iranian tractor making joint venture, TojIron, starts operation (Dushanbe). 25 September —An IRPT congress asks the RT president to bestow the title of Hero of Tajikistan on S.A. Nuri (posthumously). 26 September —A CIS observation mission for presidential elections opens headquarters in Dushanbe. 29 September —An ODIHR/OSCE observation mission opens its headquarters in Dushanbe. 1 October —Natural gas tariffs are increased for all categories of consumers in Tajikistan. 2 October —Electricity supply quotas are introduced in the country. 2 October —The third session of Majlisi namoiandagon of the Majlisi Oli opens in Dushanbe. 20 October —An IMF mission, led by Carlos Piñerúa, arrives in the republic’s capital, Dushanbe. 23 October —The Central Election Commission completes printing 3.2 million ballot papers, in four languages. 27 October —Addressing the Second Conference on the Regional Energy Market, President Rakhmonov says that the final stage of the construction of the Rogun HPP will begin in 2007 (to be funded by the republic’s government). 6 November —The presidential election takes place in Tajikistan. 7 November —R. Zoyirov, the leader of the Social Democratic Party of Tajikistan, says that the presidential election is illegitimate. 7 November —An OSCE observation mission says that the presidential election in Tajikistan did not fully test democratic electoral practices due to a lack of genuine choice and meaningful pluralism. 13 November —All former presidential candidates meet in Dushanbe. 15 November —The Seventh Session of Majlisi namoiandagon of the Majlisi Oli approves the RT Law on the Oath of Allegiance by Military Servicemen to the RT President. 18 November —President Rakhmonov is inaugurated in Dushanbe. 22 November —The RT government tenders its resignation to the newly elected president.

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23 November —The national parliament approves the country’s budget for 2007. 23 November —Due to the damming of the Vakhsh River at the site of the Sangtuda-1 HPP construction project, severe power supply limitations are introduced in the country. 28 November —Amid an ongoing energy crisis, prices for staple foodstuffs and fuel rise sharply. 30 November —President Rakhmonov signs a decree abolishing a number of ministries and government agencies, dismissing the Cabinet en bloc. 1 December —President Rakhmonov signs decrees on the appointment of new ministers and state committee chairmen in the RT. 15 December —President Rakhmonov and RAO UES chief A. Chubais exchange opinions about prospects for energy cooperation. 15 December —Majlisi namoiandagon of the Majlisi Oli elects new chairmen of the Constitutional Court and the Supreme Court of the Republic of Tajikistan. 16 December —Parliament approves the composition of the republic’s new government. 20 December —The World Bank Board of Executive Directors approves a $5 million loan in additional funding for a water supply project in Dushanbe.

Turkmenistan

5 January —The Khalk Maslakhaty endorses the composition of the Central Election Commission. 25 January —Saparmurat Niyazov chairs a meeting on the problems of agriculture and higher education; a series of personnel shifts in the executive structures follows. 1 February —The amended Law on Pensions is published. 8 February —The new railway Ashghabad-Karakumy-Dashoguz goes into operation. 3 March —A.G. Pudakov, Director of Turkmenbashi Oil Refinery, is fired by a presidential decree for large-scale embezzlement and other machinations. 10 April —The president issues a decree that dismisses Prosecutor General K. Atajanova. M. Ogshukov is appointed as the new Prosecutor General. 14 April —Public Prosecutor of the Akhal Velaiat N. Annaorazov is removed from his post for power abuses; purges begin in the public prosecution system. 20 April —The Cabinet of Ministers discusses plans for developing the Turkmenian Caspian shores; President Niyazov quotes a fantastic figure of 45 trillion conventional units as the country’s raw energy reserves. 5 May —The republic carries out the Altyn Asyr-2006 military tactical exercises. 10 May —President Niyazov signs a new decree worded in harsher terms on the dismissal of Prosecutor General K. Atajanova. 15 May —The president undergoes a regular medical examination. 16 May —The Cabinet of Ministers gathers to express non-confidence in the deputy prime minister, Minister of Textile Industry D. Aydogdyev.

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12 June —An extended meeting in Ashghabad discusses the problems of the textile industry. 10 July —The official structures report that the target figure of 3,514 million tons of grain has been achieved. 4 August —A decision on convening the 17th Khalk Maslakhaty is passed; a decision is made to set up the Rukhnama University in Ashghabad in the next few years. August- —The republic widely celebrates the 5th anniversary of S. Niyazov’s book September Rukhnama. 20 October —Ashghabad hosts the 9th Conference of the Turkmen of the world. 23 October —President Niyazov undergoes a regular medical examination. 23 October —The book Family Tree of Great Saparmurat Turkmenbashi is published. 25 October —The 17th Khalk Maslakhaty meets in Ashghabad. 25 October —The head of state publishes a decree that extends free supplies of gas, electricity, water, and salt. 2 November —The president issues a decree to remove Head of State Border Guard Service O. Soltanov from his post. 17 November —President Niyazov undergoes another regular medical examination. 27 November —The government meets to discuss the development of agriculture. 27 and —A series of decrees is issued on removing state officials from their posts for 29 November, inadequate performance. 7 December 7 December —President Niyazov signs a decree on the removal of Minister of Automobile Transport and Roads B. Kelov for breaches of the law. 7 December —The Mejlis endorses the republican budget for 2007. 16-17 December —A joint meeting is held of the National Galkynysh Movement’s 4th congress and the Democratic Party of Turkmenistan’s 4th congress. 19 December —A decree on endorsing khiakims of etraps and towns and their deputies elected at sittings of the newly elected etrap and town khalk maslakhaty is issued. 21 December —President Niyazov unexpectedly passes away; the State Security Council and the Cabinet gather for a joint meeting; they decide to appoint G. Berdymukhammedov as acting president. 22 December —Several important events take place in the country: a joint meeting is held of the State Security Council and the Cabinet; the government medical commission publishes its conclusion on the cause of the president’s death; a special meeting of the Mejlis is held, at which the parliament agrees to institute criminal proceedings against O. Ataev; he is replaced by A. Nurberdyeva as speaker. 23 December —A joint meeting of the State Security Council and the Cabinet dismisses G. Berdymukhammedov as minister of health; B. Sopyev is appointed in his place. 24 December —President Niyazov is given a ceremonious burial.

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26 December —The 18th Khalk Maslakhaty amends the Constitution and the Law on the Election of the President and nominates and registers six presidential candidates. 31 December —The State Security Council and the Cabinet meet for a joint session.

Republic of Uzbekistan

5 January —By his decree the president sends Minister of the Interior Z. Almatov into retirement. The post goes to B. Matliubov, head of the State Customs Committee. 14 January —The country celebrates Motherland Defender Day. 21 January —President Karimov receives Chairman of the Board of the Russian Gazprom Company A. Miller. January-March —The activities of some foreign NGOs (human rights organization Freedom House, the Eurasia Fund, and the OHCHR) are cut short in Uzbekistan. January-May —The court case of the leaders of the Sunny Uzbekistan Coalition S. Umarov and N. Khidoiatova is held in Tashkent. They receive suspended sentences of seven years in prison with three years on probation. 26 February —President Karimov delivers a report to the 5th plenary meeting of the Senate of Oliy Majlis. 6 March —Oliy Majlis ratifies the Treaty on Alliance between the Republic of Uzbekistan and the Russian Federation. 21 March —Navruz is celebrated. 1 April —The 4th plenary meeting of the Central Council of the People’s Democratic Party of Uzbekistan is held in Tashkent. 3 April —President Karimov signs a decision On Additional Measures to Boost the Influence and Effects of Educational and Ideological Work among the Population. 3 April —By his decrees President Karimov removes Deputy Prime Minister U. Sultanov from his post; E. Shaismatov is appointed as deputy prime minister. 11 April —By his decrees President Karimov removes V. Golyshev from the post of deputy prime minister—minister of economics, head of the complex dealing with economics and foreign economic ties. He is appointed presidential advisor for socioeconomic issues. B. Khojaev is appointed minister of economics. 6 May —The country elects aksakals of the makhallia committees. 9 May —The Day of Memory and Honors is celebrated. 18-19 May —President Karimov pays working visits to the Navoi and Bukhara regions. May-July —Court proceedings against former Defense Minister K. Guliamov are held in Tashkent. He is sentenced to a suspended term of five years. 7 July —President Karimov removes A. Azizkhojaev from his post as minister of culture and sport to make him his press secretary. 12 July —By his decree President Karimov appoints V. Norov foreign minister and E. Ganiev minister of foreign economic ties, investments, and trade.

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24 July —President Karimov signs a decree On Privatization of Land on which Buildings and Other Structures of Legal Persons and Citizens Stand. 1 September —The 15th anniversary of independence of the Republic of Uzbekistan is celebrated under the slogan “The Uzbek People Will Never Depend on Anyone” (I. Karimov). 9 September —The media publish draft constitutional laws On Amendments to Individual Articles (Art 89; Art 93.15; Second part of Art 102) of the Constitution of the Republic of Uzbekistan and On Strengthening the Role of Political Parties in Reviving and Further Democratizing State Governance and in Modernizing the Country initiated by the president. 20-21 September —President Karimov goes on a working trip to the Ferghana Region. 13 October —President Karimov signs a decree on removing S. Begaliev from the post of khokim of the Andijan Region. By another decree the president appoints A. Usmanov the region’s khokim on a decision of the regional kengash. 19 October —President Karimov signs a decree that removes Sh. Nurmatov from the post of khokim of the Ferghana Region. By another decree the president appoints A. Abdullaev the region’s khokim on a decision of the regional kengash. 27 October —The president takes part in the celebrations of the 2700th anniversary of the city of Karshi and 670th anniversary of the birth of amir Tamerlane. 8 November —President Karimov signs a decree that reorganizes the TV and Radio Company into the National TV and Radio Company (consisting of four TV and radio channels). 16 November —President Karimov receives the delegation of the Russian Federation headed by G. Pavlovskiy, head of the Effective Policy Fund. 1 December —The Senate of Oliy Majlis approves the Law on the Mass Media. 4 December —The 6th plenary meeting of the Political Council of the Social-Democratic Adolat Party is held in Tashkent. 7 December —President Karimov delivers a speech at a gala sitting on the occasion of the 14th anniversary of the Constitution of the Republic of Uzbekistan and declares 2007 the Year of Social Protection. 7 December —President Karimov receives Chairman of the Board of the Russian Gazprom Company A. Miller. 12 December —The 7th plenary meeting of the Liberal-Democratic Party of Uzbekistan is held in Tashkent. 12 December —President Karimov receives the Russian delegation headed by D. Pollyeva, aide to the president of the Russian Federation. 14 December —President Karimov signs a decision On Organizational Measures Needed to Draw Up and Implement “The Year of Social Protection” State Program.

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ECONOMY

Afghanistan

21 January —The President of Argentina’s Bridas oil company, Carlos Alberto Bulgheroni, arrives in Afghanistan. 31 January —An international conference on Afghanistan opens in London. 14 February —The ninth meeting of the Committee for the Implementation of the Trans- Afghan Gas Pipeline project is held in Turkmenistan. 23 February —A meeting of the Commission on Trade and Economic Cooperation between the Islamic Republic of Afghanistan and the Republic of Tajikistan opens in Dushanbe. 17 March —A press conference on the results of joint Afghan-American aerospace exploration of Afghanistan’s oil and gas potential, whose publication has caused quite a stir in the world press, is held in Kabul. 23 May —President Karzai arrives in the United Arab Emirates for a two-day working visit. 28 May —President Karzai pays a working visit to the Islamic Republic of Iran. 26 July —President Karzai meets with President Emomali Rakhmonov of Tajikistan. 28 October —Afghanistan’s Minister of Energy and Water Mohammad Ismail Khan visits Tajikistan and takes part in the work of the Second Central Asia/South Asia Electricity Trade Conference. 30 October —Kyrgyzstan, Tajikistan, Afghanistan and Pakistan sign a memorandum of cooperation in the energy sector. 9 November —Afghanistan’s Minister of Energy and Water Mohammad Ismail Khan visits Uzbekistan. 11-12 December —Dushanbe hosts an international conference entitled “Afghanistan and Regional Security: Five Years After the Taliban,” organized on the initiative of the Institute of Oriental Studies and Written Heritage of the Tajik Academy of Sciences, the Alexander Knyazev Public Foundation, and the Republican Center for Conflictology and Regional Studies (Dushanbe).

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Republic of Armenia

9 January —It is reported that in terms of the Index of Economic Freedom, compiled by the Heritage Foundation and The Wall Street Journal, Armenia is significantly ahead of other countries in the region and 27th in the world. 12 January —Armenia starts selling quotas under the Kyoto Protocol. 14 January —According to the media, from 1 April the price of Russian gas for Armenia is to increase. 20 January —Media reports say that in the past four years the level of Lake Sevan has risen by 174 cm. 27 January —The World Bank and Armenia sign an agreement on providing a $20 million loan to Armenia. 31 January —Russia’s RAO UES announces that it is to invest $20-25 million in the modernization of the Sevan-Hrazdan hydropower system. 13 February —The European Bank for Reconstruction and Development provides a EUR 40 million loan to Armenia. 15 February —Armenia and Georgia abolish road duty. 24 February —Media reports say that in 2006 Britain is to provide Armenia with a grant of about $2 million. 1 March —According to media reports, 45% of private remittances to Armenia come from Russia and 30% from the United States. 3 March —The German Bank KfW gives Armenia a EUR 8 million credit and a EUR 3.7 million grant. 6 March —Armenia becomes the 36th member country of the European Organization for the Safety of Air Navigation (Eurocontrol). 10 March —From 10 April, according to the media, the price of natural gas is to be raised by 52.5% for households and by 85.2% for enterprises. 11 March —According to media reports, Armenia wins the World Bank’s “Best Practice” award for country programs in 1993-2002. 14 March —Armenia gets EUR 2 million under the TRACECA Program. 29 March —The EBRD announces that in 2006 it is to implement 20 programs in Armenia at a cost of EUR 40 million. 29 March —Armenia gets $8 million for the development of renewable energy. 3 April —Russia’s Gazprom and Armenia’s Cabinet sign an agreement on the acquisition by the company ArmRosGazprom from the republic’s government of a 40 km section of the Iran-Armenia gas pipeline (currently under construction) and the fifth power generating unit of the Hrazdan thermal power plant (Hrazdan-5). 5 April —The government decides to compensate the rise in natural gas prices out of the proceeds from the sale of Hrazdan-5. 2 May —The Armenian-American working group on economic cooperation holds its 12th meeting in Erevan. The parties discuss, among other things, the problem of shutting down the Armenian nuclear power plant.

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5 May —The 15th meeting of the Board of Trustees of the Hayastan All-Armenian Fund is held at the government Guest House. 15 May — The Armenian Minister of Energy and the Export Development Bank of Iran sign a $90 million financial agreement in Tehran. These funds are to be used for the construction of a third power transmission line connecting the two countries. 26 May —A new plant built in Armenia by the Glass World company in the city of Biuregavan starts full-scale production of glass products. 8 June —The government approves the State Program of Medium-Term Expenditures for 2007-2009 and (for the first time) the Single Standard of Real Estate Appraisal in the Republic of Armenia, which is to go into effect from 1 September. 22 June —The government approves a schedule of compensation payments for “frozen” deposits with the U.S.S.R. Sberbank in the amount of AMD 895 million, as provided by the relevant program. 27 June —President Kocharian signs a Law on the Program for Privatization of State Property for 2006-2007. 1 July —As part of the Year of Armenia in Russia, an exhibition entitled “Armenian Economy” opens in the “Armenia” pavilion at the All-Russian Exhibition Center in Moscow. 1 July —Corporate governance principles take effect in the Armenian banking system. 6 July —The government decides to allocate AMD 480.6 million for the rehabilitation of the Yerevan-Goris-Megri-Iranian border highway. 13 July —The European Bank for Reconstruction and Development grants a $20 million loan to Armenia International Airports CJSC for the reconstruction of Zvartnots Airport. 26 July —The U.S. House of Representatives prohibits government financing of the project for the construction of the Kars-Akhalkalaki-Tbilisi-Baku Railway bypassing the territory of Armenia. 1 August —Media reports say that as of the beginning of the second half of the year 18 Armenian banks out of a total of 21 banks were included in the list of 1,000 major taxpayers (they paid AMD 3.84 billion into the state budget). 18 August —The government takes a decision on direct sale of 90% of the shares of state- owned Nairit Plant CJSC (for $40 million) to the British-Irish Rhinoville Property Limited. 19 August —It is reported that 50 small hydropower plants are to be built in the country by 2010 at a total cost of about $100 million. This investment is to be provided by the domestic private sector. 10 September —Armenian products are exhibited for the first time at the Ethnic Food 2006 exhibition in Toronto. 14 September —A new arrivals hall opens at Zvartnots Airport. It can service four flights and up to 1,000 passengers per hour. 21 September —Members of the U.S. Senate Banking Committee vote unanimously for a proposal to prohibit the Export-Import Bank of the United States from providing any loans or guarantees for the construction of the Kars- Akhalkalaki-Tbilisi-Baku Railway.

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27 September —The Armenian nuclear power plant announces a tender for the organization of building works to enlarge the dry spent fuel storage in the territory of the plant. 27 September —The Supervisory Board of the German bank KfW approves a list of participants in its program designed to develop a stable market of home financing. Under this program, in the next three years Armenia is to receive a EUR 12 million credit in two equal tranches. 5 October —For failure to submit property and income statements for the first eight months of 2006, 1,341 officials in Armenia are held administratively liable and are fined a total of about AMD 3 million. 11 October —The government decides to transfer the shares of state-owned Armenian Railway CJSC for concession management. 26 October —The Rusal-Armenal plant is restarted after its complete modernization. 27 October —Under its Armenia Social Investment Fund III project (ASIF III), the World Bank grants a $25 million loan to Armenia. 4 November —The results of a study by Transparency International for 2006 are published in the media. Once again this international organization ranks Armenia among countries with a high level of corruption. 11 November —President Kocharian signs a Law on Food Safety, which says that starting from 2007 food products imported into Armenia should have markings in Armenian. 18 November —According to media reports, from 1 January, 2007, natural gas rates for households are to be cut from the current AMD 90 thousand per 1,000 cubic meters to AMD 84 thousand, with a simultaneous increase for commercial consumers from $146.52 per 1,000 cubic meters to $153.26. 18 November —Given the strengthening of the dram, the Public Services Regulatory Commission decides to cut electricity rates for the republic’s generating and transmitting energy facilities. 1 December —The EBRD and Armenia’s Incobank sign a $5 million credit agreement for financing micro and small business. 10 December —The Asian Development Bank opens a $30 million credit line for Armenia for the reconstruction of rural highways. 24 December —The entire equity stake in HayPost (Armenian Postal Service) CJSC is transferred for trust management to HayPost Trust Management, a Dutch company specially created for this purpose and owned by another Dutch firm, PostFinance Hans Boon. 24 December —Vedanta Resources plc declares its intention to invest $100 million in gold production in Armenia.

Azerbaijan Republic

6 January —Retail prices for some oil products are raised. 19 January —A decree on the institution of a presidential pension for the families of shehids (martyrs) involved in the January 1990 events is signed. 30 January —Georgia starts receiving gas from Iran through Azerbaijan.

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2 February —Georgia begins to repay the principal amount of its debt to Azerbaijan according to a new schedule. 12 February —Azerbaijan becomes a member of the TRACECA international audit group. 20 February —The 10th meeting of the Azerbaijan-Russian Intergovernmental Commission on Economic Cooperation is held in Baku. 14 March —Milli Mejlis starts hearing a Cabinet report on the results of activity for 2005. 10 April —British Petroleum completes the construction of the South Caucasus Gas Pipeline (SCP). 6 May —The 9th summit of the Economic Cooperation Organization (ECO) countries opens in Baku. 5 June —The BTC Company reports that the first tanker carrying Azerbaijan oil has sailed from the port of Ceyhan. 6 June —An international exhibition and conference entitled “Caspian Oil and Gas 2006” opens in Baku. 16 June —The Azerbaijani and Kazakhstani presidents sign the Treaty on Assisting the Transportation of Oil from Kazakhstan via the Caspian Sea and Azerbaijan to International Markets by Means of the BTC System. 3 July —The OECD upgrades Azerbaijan’s credit rating to 4th level. 13 July —Official ceremony to launch the main export Baku-Tbilisi-Ceyhan pipeline is held in the town of Ceyhan (Turkey). 14 July —The State Oil Company of the Azerbaijan Republic (SOCAR) starts cleaning the oil-polluted lands on the Apsheron Peninsula. 18 July —The State Statistical Committee of Azerbaijan declines the IMF offer of technical assistance in improving the method used to calculate inflation. 6 September —Fitch confirms the high risk associated with Azerbaijan’s banking system. 19 September —The BTC pipeline reaches 50% of its design capacity. 21 September —The president issues an executive order to increase the basic retirement pension. 13 October —A budget fund entitled “Motor Roads” is set up by presidential order. 9 November —A State Investment Company (SIC) is set up in the country. 10 November —Azerbaijan produces first gas from the Shah Deniz field. 12 December —Azerbaijan, Turkey and Georgia reach a new production sharing agreement for the Shah Deniz gas field.

Georgia

1 January —New consumer rates for natural gas for Tbilisi and the regions adopted by the National Energy Regulation Commission on 29 December, 2005, come into effect. In the capital, prices are raised from 26.55 to 34.2 tetri (about 19 cents) per cubic meter. Only the import component of the gas rates is changed due to an increase in the prices of Russian gas (from $65 to $110 per 1,000 cubic meters).

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11 January —The National Communications Commission and the Ministry of Economic Development of Georgia assign a new code (44) to the republic of Abkhazia by agreement with Abkhaz communication workers. 12 January —Matthew J. Bryza, Deputy Assistant Secretary of State for European and Eurasian Affairs, advises Georgia not to sell its long-distance gas pipeline to Russia. 12 January —The government adopts a decision to allocate GEL 4.8 million ($2.6 million) for covering the difference between the old and new prices of natural gas supplied from Russia and consumed by the population. 14 January —Cascade Capital Holdings owned by the Cafesjian Family Foundation reports the completion of a transaction by its subsidiary Cascade Bank for the purchase of Georgia’s Emporic Bank. 18 January —A ban on road traffic exceeding the established weight limits for trucks comes into effect. 20 January —KLM Royal Dutch Airlines decides to wind up its business in Georgia because it is unprofitable. 23 January —The opening ceremony for a new 110 MW combined cycle thermal plant is held in Gardabani District (Eastern Georgia), but the plant cannot be put into operation on the opening day because Russia has turned off natural gas supplies to Georgia. 24 January —Natural gas supplies from Azerbaijan to Georgia are reduced from 4 million cubic meters to 2.5 million cubic meters because of an accident at the gas compressor station on the Russian-Azerbaijani border which has resulted in a reduction in gas supplies from Russia to Azerbaijan by 4 million cubic meters. 25 January —Raiffeisen Zentralbank and Sierra Oil demand that Georgia’s Ministry of Energy pay them $50 million; they plan to go to court to recover this amount. 26 January —Presidential Chief of Staff G. Arveladze declares on behalf of the president and the government that businessmen who try to make money on the energy crisis in the country by hiking fuel prices will be severely penalized. 27 January —Tbilisi and Tehran sign an agreement on the supply of Iranian natural gas to Georgia. 28 January —Tbilgazi, the Tbilisi gas distribution company, turns off gas supplies to the Russian embassy in Georgia and to the representative office of Russia’s Gazexport company. 29 January —Repair works on the North Caucasus-Transcaucasia Gas Pipeline are completed at 10:17, Moscow time, and the consequences of the pipeline accident are fully eliminated. 30 January —The North Caucasus-Transcaucasia Pipeline is filled with gas, and gas supplies to Georgia and Armenia are resumed. 30 January —Azerbaijan starts the transit of Iranian gas to Georgia through its territory. 8 February —Georgia stops buying natural gas in Iran, because a steady supply of the required amounts of fuel from Russia has been restored (Iranian gas in the amount of 2 million cubic meters per day was supplied to Georgia from 30 January to 5 February).

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9 February —Bloomfin Limited, a company registered in the Virgin Islands, wins an auction for a mobile phone operator’s license organized by the National Communications Commission. With a starting price of GEL 4,203,927 ($2.3 million), the license sells for GEL 71,887,039 ($39.9 million). 10 February —A simplified visa regime between Georgia and Turkey comes into effect. 15 February —JSC Bank of Georgia announces a buyout of the assets and liabilities of another Georgian commercial bank, JSC Intellectbank. 23 February —Britain’s Stemcor UK Limited pays $33 million for a 72% stake in Selromex Holdings Limited, which owns 96% of JSC Zestafoni Ferroalloy Plant. 24 February —Trade in live poultry is banned in the country because of the discovery near the village of Adlia (Ajaria) of 11 dead swans presumably infected with the H5N1 bird flu virus. 24 February —Georgian mineral water Borjomi wins the “Narodnaya Marka” (Popular Brand) award in Russia (in the “Natural Mineral Water” category). 1 March —Amendments to the Tax Code tightening penalties for violation of the rules for using cash registers come into effect. 21 March —Minimum pensions in the country are raised by 5 lari to 33 lari (about $18). 23 March —At the talks in Geneva on Russia’s accession to the WTO, the Russian and Georgian delegations have a dialog but fail to reach a compromise or to bring their positions closer together. 24 March —The country’s government and parliament coordinate a draft law On Customs Fees reducing the number of tariff rates for import products. 27 March —The head of the Russian Federal Service for Supervision of Consumer Rights and Human Welfare Protection, Russia’s Chief Health Officer G. Onishchenko bans wine imports from Georgia and Moldova. 28 March —The head of the National Bank of Georgia, R. Gotsiridze, makes a proposal to V. Zubkov, Chairman of the Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG), to take measures to end contacts between Russian banks and financial institutions of the self- proclaimed republic of Abkhazia. 31 March —The Turkish company Yuksel Domonik completes a feasibility study for the construction of a Kars-Tbilisi railway. Under the project to create a Kars- Tbilisi-Baku rail corridor, it is planned to build a 98 km section from Kars to Akhalkalaki and to rehabilitate the Akhalkalaki-Tbilisi Railway. 1 April —ITERA International Energy L.L.C. files a lawsuit against the Georgian Ministry of Energy with the International Arbitration Court of the Russian Chamber of Commerce and Industry to recover a debt of over $46 million. It claims, among other things, that the Georgian side does not fulfill the terms of the agreement on a restructuring and gradual repayment of debts owed by Georgian public sector and state organizations for natural gas supplied from 1996 to 2002. 1 April —KLM Royal Dutch Airlines officially ceases operations in Georgia (the decision to leave the Georgian market was taken back in February, but flights were performed until 1 April).

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4 April —The Executive Board of the International Monetary Fund completes the third review under the PRGF arrangement for Georgia and approves the next disbursement (about $20.2 million). 5 April —Russia’s Chief Health Officer G. Onishchenko decides to suspend (as of 5 April) all earlier issued sanitary-epidemiological certificates for brandies, wines (including champagne) and wine materials imported into Russia from Moldova and Georgia and produced in the territory of these republics. 6 April —The National Bank of Georgia signs contracts with leading European mints to produce 1 lari, 2 lari and 50 tetri coins. 12 April —President Saakashvili announces that Defense Minister I. Okruashvili is to be in charge of promoting Georgian wine to new foreign markets. 13 April —A Georgian Oil and Gas Corporation is set up in the republic. Its authorized capital is to include 100% of the shares of the Georgian International Oil Corporation, the Georgian International Gas Corporation and Gruzneft. 13 April —President Saakashvili signs an executive order on the sale of the Borjomi- Likani health resort complex to Kazakhstan’s KazMunaiGaz (for $10 million by direct sale). 14 April —Parliament passes amendments to the Law on the Activities of Commercial Banks providing for further liberalization of the country’s banking sector. 14 April —Fitch Ratings agency assigns the following ratings to the Bank of Georgia: foreign and local currency issuer default ratings (IDR)—“B-” (outlook stable); short-term foreign and local currency ratings—“B;” individual rating—“D;” and support rating—“5.” 19 April —The Russian State Duma passes a decree supporting measures to tighten state sanitary control of food products imported from Georgia and Moldova. 1 May —Georgia receives the first tranche ($3.1 million) under the U.S. government’s Millennium Challenge Account program. 3 May —At the “Vinnaya Karta Open 2006” competition in Moscow, Georgian wine makers once again confirm the high quality of their products. The Grand Prix of the competition—“The Crystal Glass”—is awarded to Mukuzani 2003 as the best Saperavi wine (Tiflis Wine Cellar L.L.C., Kartuli Vazi brand). Prizes (including a gold medal) are also awarded to other wines of this company. Incidentally, the competition is judged by well-known Italian, Russian and French experts. 4 May —Russia’s Chief Health Officer G. Onishchenko bans the import and sale in Russian territory of Georgian mineral water Borjomi. 5 May —The European Bank for Reconstruction and Development sells its 11.8% stake in JSC Bank of Georgia for GEL 18.3 million ($10.2 million). 5 May —Late frosts and unexpected snow in several regions of the republic destroy 80% of vine shoots. 6 May —Russia’s Chief Health Officer D. Onishchenko suspends the sanitary certificates for two Georgian mineral waters, Borjomi (from 7 May) and Nabeglavi (from 10 May). 12 May —Parliament passes amendments to the laws On the National Bank of Georgia and On the Public Debt of Georgia depriving the Finance Ministry of its

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authority to obtain loans from the National Bank of Georgia and other resident credit institutions. 12 May —A group of Kazakh investors pay $90 million for Georgia’s United Telecommunications Company. 12 May —Greenoak, a Norwegian family trust, wins a tender for the right to manage the government’s 100% stake in the Batumi Seaport L.L.C. for a term of 49 years. 18 May —Georgia’s Gold Invest acquires the Tbilisi Jewelry Factory L.L.C. 18 May —The Latvian company Air Baltic makes a presentation on its new Riga-Tbilisi- Riga air service. 19 May —Representatives of the TAV-Urban Georgia consortium, the International Finance Corporation and the EBRD meeting in Istanbul sign an agreement on a $54 million credit for the reconstruction of the Tbilisi and Batumi international airports. 19 May —In view of renewed tensions between Tbilisi and Moscow, a mission of the International Monetary Fund recommends the Georgian government to pursue a more conservative monetary policy. 20 May —The parties concerned sign an agreement on the transfer of the assets of Tbilgazi, the Tbilisi gas distribution company, to Kazakhstan’s KazTransGaz. 24 May —The governments of Georgia and the Czech Republic sign an agreement on double taxation and on measures to prevent nonpayment of taxes (Tbilisi). 25 May —Georgia’s Kartuli Produkti (Georgian Product) is granted a credit in the amount of 5.5 million euro from the president’s reserve fund for resolving problems associated with the export of Georgian wines and for the fall grape harvest (rtveli). 25 May —A Business Information Center opens at the Tbilisi City Hall. It is to provide interested persons and organizations with full information about the investment environment in all sectors of the country’s economy. 27 May —The first Tbilisi-Moscow train after a 13-year break leaves the Tbilisi Central Railway Station at 17:45, local time. 27 May —Tankers in the port of Ceyhan on Turkey’s Mediterranean coast are loaded with the first Caspian oil supplied by the Baku-Tbilisi-Ceyhan pipeline. 31 May —The Swiss company Wissol Petroleum acquires 50% of the shares of CanArgo Standard Oil (the remaining 50% belong to Georgian natural persons). 1 June —At a competition held in Moscow within the framework of an international congress entitled “ECWATECH 2006: Water, Ecology and Technology,” Georgian mineral water Borjomi wins a gold medal. Out of a total of 60 mineral and drinking waters, Borjomi is chosen by the “blind test” method, scoring 24.8 points out of a possible total of 25 points. 1 June —A so-called “block rate” comes into effect in the republic. Its main principle is that the smaller the amount of electricity consumed by a customer, the lower is the price. 3 June —Acceptance tests and filling operations begin at the Sangachal Terminal of the South Caucasus Pipeline (SCP).

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7 June —Coins issued in commemoration of the 25th anniversary of Dinamo Tbilisi Football Club’s victory in the European Cup Winners’ Cup. 17 June —After a 14-year break, the first fast passenger train leaves Erevan for Batumi. This route was restored to enable Armenian tourists to visit Georgian seaside resorts. 20 June —Out of nine Georgian energy facilities offered for sale, eight are acquired by the Czech company Energo Pro for a total of $312,320 thousand. 1 July —Simplified rules for the registration of taxpayers, as provided by amendments to the Tax Code passed by parliament in May, come into effect. 3 July —The Georgian State Agency for Regulation of Oil and Gas Resources names the winners of a tender for the right to carry on oil and gas exploration and production in some regions of the country. Such rights are granted to three companies: Aksai BMC (Kazakhstan), Straigth Oil and Gas (British Virgin Islands), and Global Oil and Energy (British Virgin Islands). 6 July —British Airways increases the number of Tbilisi-London flights to four per week. 8 July —The Ministry of Environmental Protection announces the results of an auction for a 20-year license to develop three deposits of cement materials in Terjoli District (Western Georgia). The license with a starting price of GEL 1.3 million ($722 thousand) goes to Kartuli Tsementi for GEL 47.58 million ($26.4 million). 8 July —On the night of 8 July, Russia closes the Verkhni Lars Checkpoint (the only official checkpoint on the Georgian-Russian border) “in view of repair work.” 12 July —The country’s GPI Holding pension fund joins the Vienna Insurance Group (Wiener Städtische Versicherung AG). 13 July —The official opening ceremony for the Baku-Tbilisi-Ceyhan Oil Pipeline is held in the Turkish port of Ceyhan. The invited guests are greeted by BP Chief Executive Lord Browne; director of BP operations in the Caucasus and the Caspian region; Prime Minister Recep Tayyip Erdoðan of Turkey, President Ilham Aliev of Azerbaijan, and President Mikhail Saakashvili of Georgia. U.S. Deputy Secretary of Energy Clay Sell speaks on behalf of the U.S. government. 14 July —The Georgian government decides to resume talks with Russia on the latter’s accession to the WTO. 26 July —The country’s parliament passes new wordings of the Tax Code and the Law on Customs Fees. 26 July —At the International Wines and Spirits Competition in London, Saperavi Special Reserve 2002 produced by Georgia’s Tbilvino wins a silver medal (Silver Best in Class), and its Tsinandali Special Reserve takes a bronze medal. 4 August —In a television address to the Georgian people, President Saakashvili announces a reform to integrate the country’s customs, tax and financial police structures into a single agency and to create an effective arbitration court meeting international standards for resolving disputes between economic agents. He also says that a state-sponsored professional retraining program is to be launched from 1 September. 11 August —The Georgian Ministry of Agriculture and Food receives a letter from Russia’s Chief Health Officer G. Onishchenko with a proposal to start talks on resuming Georgian wine supplies to the Russian market.

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14 August —Rail traffic between Tbilisi and Akhalkalaki resumes after a long break (trains stopped running in 2003 due to a technical failure). 14 August —The Aldagi insurance company buys out 50% of its shares from Georgia’s Republic Bank. 16 August —The International Monetary Fund recommends the Georgian government to take urgent measures to curb inflation. 17 August —An agreement on restructuring Georgia’s government debt to Azerbaijan is signed by the finance ministers of the two countries. 31 August —At a meeting with Georgian business people in Sagarejo (Eastern Georgia), President Saakashvili declares that grape harvesting and sale are to be controlled by members of the country’s Cabinet of Ministers. 1 September —New customs tariffs come into effect. The number of tariff rates for import products is reduced from 16 to 3. 2 September —An auction for six passenger planes owned by Georgian Airlines is cancelled for lack of bids. 6 September —The grape harvest (rtveli) begins in Kakheti (Eastern Georgia). 8 September —The Austrian Mint fulfills the order of the National Bank of Georgia for minting the first set of Georgian investment coins (six kinds of different size and weight) depicting the Golden Fleece. 9 September —A Commercial Power System Operator formed on the basis of the Georgian wholesale electricity market starts work in the country. 9 September —At an auction in Tbilisi, Georgia’s TRACECA Group Holding pays $18.02 million (with a starting price of $18.0 million) for the Mziuri Georgian Cultural Center building in Arbat Street (Moscow). 18 September —The first auction of certificates of deposit is held at the National Bank of Georgia. 18 September —French bank Société Générale and the EBRD sign a share purchase agreement with the shareholders of the Republic Bank (on the acquisition of 60% and 10% of its shares, respectively). 29 September —The EBRD decides to open a regional center in Tbilisi for implementing investment projects in countries of the Southern Caucasus and in Moldova. 30 September —Armenia, Iran and Georgia sign a memorandum of understanding in the energy sector. 2 October —Russia suspends all traffic and postal communications with Georgia. 2 October —The Board of Directors of JSC Russian Railways recommends the company’s management to abandon its plans to purchase Georgian spare parts for electric locomotives. 2 October —The Executive Board of the International Monetary Fund completes the fourth review under the PRGF arrangement for Georgia and approves the next disbursement (about $20.7 million). 16 October —By government decision, the Georgian International Gas Corporation is granted a budget loan of GEL 18 million (about $10 million) for the rehabilitation of the Saguramo-Krasny Most (border with Armenia) section of the long-distance gas pipeline. 344 CHRONOLOGY OF EVENTS FOR 2006 Economy

16 October —The Georgian-Italian company Badagoni declares its intention to suspend investment in the Georgian economy. 2 November —Referring to Gazprom sources, the Russian media report that in 2007 the price of Russian gas for Georgia may be increased from $110 to $230 per 1,000 cubic meters. 11 November —At an international auction in Tbilisi, Georgian Manganese, a subsidiary of Britain’s Stemcor, acquires the assets of JSC Chiatura Manganese and a 40-year license for the production of manganese ore from the Chiatura deposit in Georgia. The assets are sold for $14.025 million, and the license, for $6.05 million. 14 November —At an international exhibition entitled “World Food Kazakhstan-2006” in Almaty, Georgian mineral water Borjomi wins a gold medal. 16 November —President Saakashvili demands that the Finance Minister suspend the collection of property tax from car owners. 20 November —The National Bank puts into circulation a new modification of 50 tetri coins, and also coins of 1 and 2 lari. 20 November —G. Arveladze, formerly presidential chief of staff, is appointed minister of economic development of Georgia. 29 November —The Bank of Georgia floats on the London Stock Exchange and raises $160 million. It is the first Georgian Bank whose shares are listed for trading on the LSE. President Saakashvili pays a special visit to London in order to take part in the market opening ceremony on the LSE and to watch the trading process. 7 December —Under a program designed to securitize the government debt to the National Bank of Georgia, the first offering of Finance Ministry bonds takes place at the National Bank. The total volume of the bond issue is GEL 10 million. Bonds with a face value of GEL 1,000 will bring their holders a coupon income of 13% (to be paid quarterly). 20 December —The management of Russia’s Gazprom sends a letter to its Georgian colleagues requesting them to specify the amount of gas they want to purchase, which is necessary for the conclusion of an appropriate contract (at $235 per 1,000 cubic meters). 21 December —The BCI insurance company acquires 100% of the shares of Aldagi, leader or the Georgian insurance market. 22 December —Gazprom and Georgian companies sign three contracts for the supply of over 1.1 billion cubic meters of gas at $235 per 1,000 cubic meters. 26 December —The United Georgian Bank, which is part of Russia’s Vneshtorgbank group, is renamed VTB Georgia. 29 December —Parliament approves the state budget for 2007 (150 votes in favor, 9 against).

Republic of Kazakhstan

9 January —President Nazarbaev signs a Law on Amendments and Addenda to Some RK Legislative Acts Regarding Subsidies, Countervailing and Antidumping Measures. The purpose of this document is to bring the country’s legislation

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into conformity with international agreements in view of its coming accession to the World Trade Organization. January —The republic ranks 113th in terms of economic freedom. 31 January —President Nazarbaev signs a Law on Private Enterprise. 1 February —President Nazarbaev signs a decree On Further Measures to Ensure the Interests of the State in Governing the Public Sector of the Economy. 20 February —President Nazarbaev signs a Law on Securitization, which creates a legal framework for the development of securitization as a modern form of financing the real sector of the economy. 1 March —At a joint sitting of the two houses of parliament, President Nazarbaev delivers his Address to the Nation, in which he speaks of the situation in the country, the main lines of domestic and foreign policy, and Kazakhstan’s Strategy for Joining the World’s Fifty Most Competitive Countries. 17 March —President Nazarbaev signs laws ratifying the agreements on the promotion and reciprocal protection of investments signed by the Kazakhstan government with the governments of the Kingdom of Sweden, the Latvian Republic and the Islamic Republic of Pakistan. 23 March —President Nazarbaev signs a Law on State Support for Innovative Activities, which sets the legal and organizational framework for stimulating innovative activities in the country. 30 March —The government adopts a Program for 2006-2008, whose main purpose is to create favorable institutional and economic conditions for enhancing Kazakhstan’s international competitiveness and quality of life in the country. 30 March —The government adopts a National Action Plan to implement Kazakhstan’s Strategy for Joining the World’s Fifty Most Competitive Countries, set forth in the Presidential Address to the Nation on 1 March, 2006. 11 April —President Nazarbaev signs a Law on Amendments and Addenda to the RK Law on the Power Industry. Its purpose is to develop concession relations in this industry. 12 April —President Nazarbaev signs a Law on the Ratification of the Agreement Establishing the Eurasian Development Bank. 23 May —President Nazarbaev signs a Law on the Ratification of the Protocol on Amendments and Addenda to the Free Trade Agreement between the Government of the Republic of Kazakhstan and the Government of the Azerbaijan Republic of 10 June, 1997. 31 May —The Development Bank of Kazakhstan wins the “Best Infrastructure Project” award of the Association of Development Institutions of Asia and Oceania for two projects at once: the construction of the Astana-Almaty fiber-optic line and the construction of a power transmission line to the republic’s southern regions. The bank’s investment in these projects exceeded $43 million. 8 June —The Third Kazakhstan Investment Summit, organized by The International Herald Tribune and the RK government, opens in Almaty. 9 June —The Foreign Investors Council holds its 15th plenary meeting under President Nazarbaev’s chairmanship. The theme of the meeting is Kazakhstan’s progress in enhancing transparency and fighting corruption (Almaty).

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4 July —President Nazarbaev signs laws On the Ratification of the Protocol on the Accession of the Republic of Uzbekistan to the Treaty Establishing the Eurasian Economic Community of 10 October, 2000, On the Amnesty in Connection with the Legalization of Illegal Labor Immigrants, and On the Ratification of the Treaty of Strategic Partnership and Alliance between the Republic of Kazakhstan and the Azerbaijan Republic. 12 July —President Nazarbaev signs laws On Amendments and Addenda to Some RK Legislative Acts Regarding Natural Monopolies, On Competition and Restriction of Monopoly Activity, On Amendments and Addenda to Some RK Legislative Acts Regarding Control and Regulation of the Activities of Natural Monopolies and Market Actors with a Dominant Position in the Respective Commodity Markets, and On Amendments and Addenda to Some RK Legislative Acts Regarding an Improvement of RK Budget Legislation and National Bank Activities. 13 July —President Nazarbaev signs laws On the Ratification of the Protocol on Amendments and Addenda to the Treaty Establishing the Eurasian Economic Community of 10 October, 2000, On Mutual Insurance, and On Amendments and Addenda to Some RK Legislative Acts Regarding Mutual Insurance. 22 September —The national oil and gas company KazMunaiGaz and the Batumi Oil Terminal (Georgia) set up JV Batumi Terminals to ensure stable supplies of Kazakh export oil across the Black Sea. 2 November —Standard & Poor’s upgrades Kazakhstan’s long-term sovereign foreign currency rating from “BBB-“ to “BBB,” its long-term sovereign local currency rating from “BBB” to “BBB+,” and its short-term sovereign local currency rating from “A-3” to “A-2.” The republic’s “A-3” short-term sovereign foreign currency credit rating and “kzAAA” sovereign rating on the national scale were affirmed with a stable outlook. The assessment of transfer and foreign currency translation risk for Kazakhstan’s non-sovereign borrowers was also upgraded from “BBB” to “BBB+.” 14 November —President Nazarbaev signs a decree approving the Concept of Kazakhstan’s Transition to Sustainable Development for 2007-2024. 17 November —President Nazarbaev signs a Law on Amendments and Addenda to Some RK Legislative Acts Regarding the Amnesty in Connection with the Legalization of Property. 20-22 November —President Nazarbaev pays an official visit to Britain, where he takes part in a business conference entitled “Kazakhstan: Way Forward.” The conference participants—members of the republic’s business circles, heads of leading banks and companies—discuss opportunities to expand investment cooperation. 4 December —President Nazarbaev signs laws On the Ratification of the Agreement on Cooperation in Organizing an Integrated Currency Market of the Eurasian Economic Community States, and On the Ratification of the Protocol Amending the Protocol to the Agreement between the Republic of Kazakhstan and the Russian Federation on the Demarcation of the Northern Part of the Caspian Sea Floor for the Purpose of Exercising Sovereign Mineral Rights of 6 July, 1998. 8 December —Kazakhstan’s Foreign Investors Council holds its 16th meeting. 11 December —President Nazarbaev signs laws On Amendments and Addenda to Some RK Legislative Acts Regarding Taxation, On Amendments to the RK Law on

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Microcredit Organizations, and On the Ratification of the International Communications Agreement between the Government of the Republic of Kazakhstan and the Government of the Republic of Tajikistan. 11 December —Fitch Ratings announces the introduction of a national rating scale for Kazakhstan and assigns the “A+(kaz)” national rating with a stable outlook to JSC Astana Finance (AF), and also assigns a local currency issuer default rating of “BB+” (outlook stable). 21 December —Fitch Ratings revises Kazakhstan’s rating outlook from stable to positive. According to its press release, the republic’s current ratings are affirmed at previous levels: foreign currency issuer default rating at “BBB,” local currency issuer default rating at “BBB+,” short-term foreign currency rating at F3, and the sovereign ceiling at “BBB+.”

Kyrgyz Republic

12 January —The government adopts a decree On Income Statements and Payment of Income Tax by Individuals Engaged in Business Activity on a Patent Basis in the Kyrgyz Republic, establishing a regulatory framework for the legalization of the garment industry, at least 80% of which is in the shadow sector. 13 January —President Bakiev declares that a revival of industry and construction will be the main task of the republic’s authorities in 2006. 17 January —The National Bank presents three monetary program scenarios, which are to be implemented depending on the actual rate of economic growth. 18 January —Prime Minister Kulov authorizes the State Intellectual Property Agency (Kyrgyzpatent) to consider the question of creating free economic zones. 23 January —President Bakiev approves a list of public figures to represent civil society in the National Anti-Corruption Council. 30 January —British Prime Minister Tony Blair addresses an official letter to President Bakiev requesting a return of the license withdrawn from the Oxus Gold company for failure to perform its obligations. 1 February —President Bakiev signs a Law on Calculation Index, designed to delink the minimum wage from benefits, compensations and other payments or economic indicators established as a multiple of the minimum wage but not connected with remuneration. 3 February —The main approaches and methods to be used in formulating a National Development Strategy are presented at a government meeting with the participation of NGOs. 3 February —Speaking in Jogorku Kenesh (Kyrgyz parliament), President Bakiev declares the need to grant a concession to operate distribution networks. 8 February —Prime Minister Kulov signs a government decree On the Approval of the Agreement on the Creation of Buffer Stocks and Their Effective Use to Ensure Stable Parallel Operation of the Electric Power Systems of the CIS States. 14 February —President Bakiev presents a strategy for the country’s development providing for market diversification, a new sectoral and structural policy and a

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pragmatic economic policy, and sets forth the main lines of activity in 2006: efforts to ensure socioeconomic stability, a radical change in the attitude to private economic activity, and a change in the economic structure. 17 February —Prime Minister Kulov and National Bank Chairman U. Sarbanov sign a government decree On the Approval of the Medium-Term Microfinance Development Strategy for 2006-2010. 3 March —Prime Minister Kulov signs a government decree On the Approval of a Package of Government Measures in Carrying Out the Action Plan to Implement the State Anti-Corruption Strategy and the State Program for Crime Control in the Kyrgyz Republic for 2006-2007. 9 March — An agreement On Restructuring Kyrgyz Debt to the Republic of Turkey is signed. 14 March —A Russian trade mission opens in Bishkek. 22 March —Kyrgyzstan agrees to take part in the HIPC debt relief program of the World Bank and the International Monetary Fund. 27 March —The Kyrgyz government, Asian Development Bank, Islamic Development Bank, German Development Bank and World Bank sign a memorandum of understanding on a joint review of donor assistance in 2006. 28 March —The authorities make a presentation on the Besh Ashuu (Five Mountain Passes) concept of economic reforms and the Min Bulak (One Thousand Streams) matrix for the development of the financial market for 2006-2010, which provide for a doubling of GDP, a tripling of the country’s budget, and a 2-2.5 times increase in real household money income. 31 March —The World Bank allocates $19 million for an irrigation project in Kyrgyzstan. 3 April —President Bakiev speaks of the need to set up an advisory body for water resources under the president. 3 April —Prime Minister Kulov signs a government decree On the Approval of the Decision of the CIS Economic Council on Addenda to the List of Conditions for Production and Processing Operations Required for Goods to be Qualified as Originating in the Country Where These Operations Occurred. 4-7 April —Minister of Economy and Finance A. Zhaparov takes part in the second session of the Eurasian Economic Community’s Council on Financial and Economic Policy, during which he holds talks with Russian Finance Minister A. Kudrin, Economic Development Minister G. Gref, Deputy Defense Minister V. Isakov, head of the Agency for State Reserves A. Grigoriev, and other representatives of Russian banking and financial circles (Moscow). 7 April —Representatives of the Kyrgyz authorities and the government of Denmark sign a bilateral agreement to restructure Kyrgyzstan’s external debt. 14 April —The second meeting of the SEC chaired by Prime Minister Kulov decides to revive the One Hundred Projects program, under which every district of the republic, ministries, departments and business people are enabled to submit their business projects to the government. 14-15 April —The fifth session of the Kyrgyz-Moscow Joint Intergovernmental Commission for control over the implementation of the Agreement between the governments of Kyrgyzstan and the Russian capital on trade, economic, scientific, technical, humanitarian and cultural cooperation. 349 CENTRAL EURASIA 2006 Analytical Annual

20 April —Prime Minister Kulov and S. Kirienko, head of the Russian Federal Agency for Atomic Energy (Rosatom), sign a protocol on Kyrgyz-Russian cooperation. 24 April —During President Bakiev’s first official visit to Russia, matters of further development of bilateral economic relations are discussed with a wide range of Russian officials. 2 May —The Ministry of Economy and Finance completes the development of a medium-term economic strategy for 2006-2008 designed to strengthen macroeconomic stabilization and ensure sustainable economic growth. 2 May —Representatives of Kyrgyzstan and the PRC hold talks on the construction of an oil refinery in Kara-Balta with a projected capacity of 100 thousand tons of fuels and lubricants per year. 2-5 May —For the first time Kyrgyzstan has its own pavilion at the Intex Festa 2006 trade fair in Osaka (Japan). 10 May —Pakistan decides to import Kyrgyz electricity through Afghanistan. 10 May —President Bakiev transfers the republic’s revenue-raising industries into the charge of the government. 10 May —President Bakiev signs a decree On Some Questions of Improving the Management System for Joint Stock Companies with State Participation and State-Owned Enterprises. The Kyrgyz State Property Committee is authorized to select candidates for election to the management bodies of JSCs with state participation and for appointment as heads of state-owned enterprises. 17 May — Prime Minister Kulov meets with representatives of Kyrgyz-Russian enterprises complaining about officials who obstruct their work in the republic. 23 May —Kyrgyz business people come out against the approval of the new wording of the Tax Code. 7 June —President Bakiev discusses trade and economic cooperation prospects with a delegation of the Republic of Tatarstan (Russia) led by Minister of Trade and Foreign Economic Cooperation Kh. Salikhov. 9 June —During President Bakiev’s official visit to the PRC, representatives of the two parties sign 13 agreements on cooperation in the economic sphere, education, and scientific and technical exchanges. 13 June —Jogorku Kenesh ratifies the Program of Cooperation between Kyrgyzstan and the PRC. 19 June —Parliament makes amendments to the Law on Investment in the Kyrgyz Republic providing that in case of amendments to tax, investment or customs legislation (with the exception of the Constitution and laws relating to matters of national security, health care and environmental protection) investors are entitled to choose the most favorable terms during a period of 10 years. 20 June —Russia’s Gazprom buys over 100 gasoline stations in Kyrgyzstan. 21-22 June —Prime Minister Kulov and Moscow Mayor Iuri Luzhkov sign a protocol to the Agreement on Trade, Economic, Scientific, Technical, Humanitarian and Cultural Cooperation (approved on 26 October, 2000). 30 June —President Bakiev signs a Law on Amendments to the Kyrgyz Law on Excise Tax Rates for Excisable Goods Imported and Produced by Legal Entities and

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Individuals in the Kyrgyz Republic for 2006. Crude oil and crude oil products obtained from bituminous materials are excluded from the list of excisable goods. 4-5 July —During President Bakiev’s official visit to Kazakhstan, the parties sign a Protocol of Intent to Cooperate in Promoting the Implementation of Large Investment Projects in Kyrgyzstan and a Protocol on Cooperation in Fighting Economic Crime and Corruption. 10-12 July —A Kyrgyz delegation led by Prime Minister Kulov pays a working visit to Russia’s Sverdlovsk Region, where he signs an agreement on trade, economic, scientific, technical and humanitarian cooperation between the Sverdlovsk Region and Kyrgyzstan. 17 July —Foreign Minister of Belarus S. Martynov arrives in Bishkek for the purpose of organizing President Bakiev’s visit to Minsk and to discuss matters relating to the development of Kyrgyz-Belarus trade and economic cooperation. 18 July —The participants in the eighth meeting of the EU-Kyrgyz Cooperation Council consider matters of Kyrgyz-European partnership and bilateral trade and economic relations (Brussels, Belgium). 20 July —The SEC examines and approves a project for the development of a technology park in the city of Tokmok as part of the activities of the KyrgyzTechnopark company. 27 July —President Bakiev signs a law requiring tenants to pay land tax. 2 August —ADB Vice President Liqiong Jin, President Bakiev and Prime Minister Kulov discuss the prospects of bilateral cooperation (Bishkek). 4 August —President Bakiev signs a Law on the Ratification of the Program of Cooperation between the Kyrgyz Republic and the PRC for 2004-2014. 7 August —Prime Minister Kulov and National Bank Chairman M. Alapaev approve a Plan of Activities to Control Inflation in the Kyrgyz Republic for 2006. 10 August —Prime Minister Kulov meets with Lee Sang Joon, president of the financial investment company Bridge Horizon Law Group (South Korea), who expressed an intention to build tourist facilities on Issyk Kul and develop aluminum ore deposits in the Naryn Region. 15 August —The participants in the sixth meeting of the Kyrgyz-Tajik Intergovernmental Commission discuss the state and development prospects of bilateral trade and economic cooperation (Dushanbe, Tajikistan). 16 August —An IMF mission led by Paulo Neuhaus, deputy director of the IMF’s Middle East and Central Asia Department, begins its work in Bishkek. Members of the mission and the Kyrgyz government discuss the terms of Kyrgyzstan’s joining the HIPC program. 1-3 September —Prime Minister Kulov and S. Kirienko, cochairman of the Kyrgyz-Russian Intergovernmental Commission and head of Rosatom, meet for consultations (Moscow). 4 September —Prime Minister Kulov signs an order permitting Kyrgyz commodity producers to sell their overstocks of finished products and goods at prices below production cost until 1 January, 2007. 6 September —During President Bakiev’s official visit to Turkey, a meeting of the Kyrgyz- Turkish Business Council is held in Ankara.

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20 September —Prime Minister Kulov signs a government decree on a draft Law on the Ratification of the Agreement between the KR Government and the FRG Government on Financial Cooperation for 2005-2006. 26 September —The government approves a Strategy for the Development of the Banking Sector in the Kyrgyz Republic Until 2008. 3 October —Prime Minister Kulov signs an order approving the draft Treaty between Kyrgyzstan and Uzbekistan on Economic, Scientific, Technical and Humanitarian Cooperation for 2007-2011. 10 October —Prime Minister Kulov signs a government decree on the State Program for Business Development in the Kyrgyz Republic for 2006-2008. 10 October —President Bakiev and Uzbek President Islam Karimov discuss matters relating to the construction of the PRC-Kyrgyzstan-Uzbekistan Railway (China made a decision on this issue in 2001 and approved the northern route through Torugart in 2003). 11 October —The Cabinet supports the Law on Amnesty in Connection with Income and Property Legalization. 11 October —Freight traffic starts along the Islamabad-Kashgar-Bishkek-Almaty road (Karakorum route). 31 October —A Kyrgyz-American business dialog opens at the Ronald Reagan Building and International Trade Center (Washington, U.S.) 3 November —At a sitting of Jogorku Kenesh, Prime Minister Kulov announces the terms of Kyrgyzstan’s accession to the HIPC program. 13 November —Prime Minister Kulov signs an order approving the Kyrgyz part of the group for developing cooperation in coordinating the implementation of the Agreement between the Kyrgyz Government and the Government of the Moscow Region (Russia) on Trade, Economic, Scientific, Technical and Cultural Cooperation (approved in Moscow on 20 January, 2004). 13 November —Prime Minister Kulov signs a government decree approving the composition of the Kyrgyz part of the Kyrgyz-Italian Intergovernmental Working Group on Economic and Industrial Cooperation and Exchange. 20 November —The government approves a draft National Development Strategy for 2006-2010. 22 November —Prime Minister Kulov signs an order approving a draft Agreement between the Kyrgyz Government and the Belgium-Luxemburg Economic Union on the Reciprocal Protection and Promotion of Investments. 25 November —Prime Minister Kulov approves a National Framework Program for Sustainable Land Management. This document provides a basis for Kyrgyzstan’s implementation of the U.N. Convention to Combat Desertification, for attracting donor assistance and carrying out measures to prevent the degradation of land and water resources. 30 November —President Bakiev discusses the terms of Kyrgyzstan’s accession to the HIPC with members of the government. 4-6 December —A delegation of Iranian businessmen pays an official visit to Kyrgyzstan. 6 December —Prime Minister Kulov signs an order on commercial development of the Kutesai-II rare-earth deposit and the Kalesai beryllium deposit.

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7 December —Kyrgyzstan, Russia, Ukraine, Belarus, Uzbekistan, Finland, Estonia, Lithuania and Tajikistan sign a memorandum on the development of strategic partnership in enhancing the effectiveness of the Central Asian transportation system based on railways with a gauge of 1,520 mm. 8 December —President Bakiev signs a Law on Amendments to the Kyrgyz Law on the Management of Agricultural Lands providing for the lease of state-owned agricultural lands by public auction. 11 December —President Bakiev signs a Law on Amendments and Addenda to the Kyrgyz Law on Free Economic Zones in the Kyrgyz Republic, which requires the general management of free economic zones to pay 0.01% of their budget to local government bodies in whose territory these zones are located. 12 December —The draft Concept of Business Development Until 2015 is completed. 13 December —Prime Minister Kulov signs a government decree on the further development of the garment industry. 14 December —Prime Minister Kulov signs a government decree approving the Regulations Governing the Issue, Distribution, Circulation and Redemption of Government Treasury Bills in the Kyrgyz Republic. 14 December —Prime Minister Kulov signs an order approving the draft Framework Agreement between the governments of Kyrgyzstan and Kazakhstan on the establishment of two cross-border cooperation centers, Aukhatty-Ken Bulun and Aisha Bibi-Chon Kapka. 14 December —Parliament ratifies the Agreement on Kyrgyzstan’s Accession to the Customs Convention on Containers (signed in Geneva in 1972). 14 December —Jogorku Kenesh ratifies the Agreement to Restructure Kyrgyz Debt to the Japan Bank for International Cooperation. 15 December —A meeting of the Kyrgyz-Russian Intergovernmental Commission on Trade, Economic, Scientific and Technical Cooperation discusses progress in implementing the decisions of the Commission’s eighth meeting and the state of bilateral cooperation. 15 December —The government dispatches the final terms of Kyrgyzstan’s accession to the HIPC program to the Washington offices of the World Bank and the International Monetary Fund.

Republic of Tajikistan

16 January —President Rakhmonov takes part in a meeting of the International Energy Consortium for the construction of the Rogun and Sangtuda HPPs. Plans for the construction of these facilities and for the sale of Tajik electricity are drawn up with the participation of senior executives of Russia’s Rusal and RAO UES and of investors from Iran, Pakistan and Afghanistan. 30 January —An enlarged government meeting considers the results for 2005, appoints Matlub Davlatov Tajikistan’s State Advisor on Economic Affairs, and approves new appointments in other government bodies. 3 February —Representatives of the countries concerned discuss the opportunities for exporting Tajik electricity to Pakistan (through Afghanistan).

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12-23 February —With the support of the International Finance Corporation, 125 thousand copies of the so-called Inspections Registration Book (for registering inspections of business entities) are published in the republic. 13 February —Tajikistan’s State Financial Control Agency and Britain’s National Audit Office sign a partnership agreement. 21 February —The government of Tajikistan and the Asian Development Bank (ADB) sign an agreement on the construction of a highway from Dushanbe to the border with the Kyrgyz Republic (bypassing Uzbekistan) at a cost of $40 million, of which Tajikistan’s contribution is $10 million. 28 February —The government of Tajikistan and the World Bank sign a grant agreement under a basic primary health care project (for $16.2 million). 3-15 March —A mission of the International Monetary Fund visits Tajikistan. During meetings with Tajik officials, the parties discuss the results for 2005 and the parameters of a new economic program, but this program is not signed due to disagreements over certain aspects of Tajikistan’s external debt policy. 15 March —The authorities adopt a decision to obtain a loan package from China ($604 million) for the construction of the South-North power transmission line and the Dushanbe-Chanak (Uzbek border) Highway, including the Shakhristan tunnel. 30 March —A government meeting considers matters related to the sowing campaign. 3-21 April —As part of the work to draft a National Development Strategy and to determine the priorities in implementing the U.N. Millennium Development Goals (MDGs), sectoral groups on macroeconomics, private sector development, trade and integration into the world economy, education and health care, and transport hold meetings in the republic. 12 April —In view of the government’s disagreement with the findings of Russia’s Rusal on the construction of the Rogun HPP (the question of dam type and height), the World Bank undertakes to make an independent assessment. 28 May —The lower house of parliament passes a Law on Inspections of Business Entities in its first reading. The law limits the range of authorized business inspections, lays down their rules, and prohibits illegal inspections. Relevant amendments to the Tax Code are introduced as a separate article. 16 June —The final version of Tajikistan’s National Development Strategy is approved and signed. It defines the priorities and general lines of state policy designed to achieve sustainable economic growth, to facilitate people’s access to basic social services, and to reduce poverty. 18 June —The governments of Tajikistan and China sign official loan agreements under projects for the construction of the South-North power transmission line and the Dushanbe-Chanak (Uzbek border) Highway, including the Shakhristan tunnel (at a total cost of $604 million). 29 June —The mass media publish the results of a survey of the business environment for small and medium business in Tajikistan carried out by the International Finance Corporation, showing that corruption and frequent inspections are the main barrier to business in Tajikistan and to an improvement of its investment image.

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30 June —Tajikistan’s Minister of Economic Development and Trade H. Soliev chairs a meeting of the CIS Economic Council in Moscow. 21 July —The World Bank approves a $15 million grant for a program to reform public administration in Tajikistan, enhance the efficiency of the public sector and develop private business. 1 August —President Rakhmonov attends a ceremony to mark the start of the construction of the Dushanbe-Chanak (Uzbek border) Highway, which is to connect the north and south of the country and is to operate throughout the year. 13-21 September —Another IMF mission visits Tajikistan to assess the country’s economic policy and make its recommendations. During meetings in the country, the mission expresses concern over the high rate of inflation and the heavy burden of future debt service on Chinese loans. 3 October —A Tajik delegation led by Minister of Economic Development and Trade H. Soliev takes part in the third meeting of the working party on Tajikistan’s accession to the World Trade Organization, held at the WTO headquarters in Geneva. 18 October —Uzbekistan announces an increase (from 2007) in the price of gas imported by Tajikistan from $55 to $100 per 1,000 cubic meters. 20 October —The Swiss government allocates a $1 million grant to Tajikistan for sustainable development and diversification of exports of the republic’s small and medium-sized enterprises. 22 November —The Development Bank of Tajikistan opens in the country. Its purpose is to provide credits at lower interest rates than other Tajik banks. 27 November — The European Commission allocates 9 million Euros to Tajikistan for implementing its Food Security Program in 2006. 29 November —President Rakhmonov approves the country’s budget for 2007. 30 November —The government approves the State Program of External Borrowings for 2007-2009 drafted by the Ministry of Finance. 17 December —The Tajik Aluminum Plant (TadAZ) and Norway’s Hydro Aluminum sign a new agreement On Partnership in the Sale of Aluminum and Supply of Alumina, under which the Norwegian company is to buy 800 thousand tons of primary aluminum per year and supply TadAZ with 150 thousand tons of alumina. 20 December —The authorities of Tajikistan and Uzbekistan agree on electricity supplies in the winter period (until March 2007).

Turkmenistan

17 January —Kiev and Ashghabat agree on the supply to Ukraine in 2006 of 40 bcm of Turkmen gas at $50 per 1,000 cubic meters. 23 January —During President Niyazov’s visit to Moscow, he and Russian President Vladimir Putin hold talks on cooperation in the energy industry, in energy production and transportation. At a meeting between S. Niyazov and senior executives of LUKoil, the parties discuss questions of cooperation in developing the Turkmen part of the Caspian shelf.

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13 February —President Niyazov authorizes the Ministry of Energy to conclude a $120 million contract with the U.S. General Electric Company for equipping a gas turbine plant in the city of Dashoguz. 7 March —President Niyazov and Iranian President Mahmoud Ahmadinejad agree to more than double the supply of Turkmen gas to Iran (to 14 bcm at $65 per 1,000 cubic meters). 16 March —The General Electric Company and Turkey’s Calyk Enerji start the construction of the Dashoguz gas turbine plant (at a cost of $120 million). 3 April —Turkmenistan and China sign a general agreement on the implementation of the gas pipeline project and the sale of Turkmen natural gas to the PRC (Beijing). Under this agreement, China guarantees the purchase of 30 bcm of Turkmen gas per year over a period of 30 years (at the Turkmen-Uzbek border). The projected length of this pipeline (to Shanghai) is 4,000 kilometers, and it is to be routed through Kazakhstan and Uzbekistan. China undertakes to hold talks on this issue and on the terms of transit with the leaders of these two countries. 29 June —The republic’s Ministry of Foreign Affairs announces that Turkmenistan may stop gas supplies to Russia from September, because the parties have been unable to agree on the terms of the contract for the second half of the year and for the whole of 2007. 1 July —During talks in Ashghabat, a Ukrainian delegation led by Minister of Fuel and Energy Ivan Plachkov fails to reach agreement on the price of gas supplies to Ukraine. The Turkmen side declares that it considers the contract for gas supplies at $60 per 1,000 cubic meters signed in late 2005 to be null and void, and proposes the conclusion of a new contract for the fourth quarter of 2006 at $100 per 1,000 cubic meters (at the Turkmen-Uzbek border). 5 July —The republic’s mass media inform the world about the latest victory of Turkmen farmers, who have harvested a record grain crop of 3.5 million tons. 3 August —Ashghabat and the Russian automaker KamAZ conclude a contract in the amount of over $23 million for the supply of 600 dump trucks to Turkmenistan. 16 August —President Niyazov and Michael Edmondson, head of the U.S. Case New Holland company, sign a contract (in the amount of over $55 million) for the supply of 220 tractors, 100 cotton pickers, 220 four-bottom double-moldboard plows, 100 disk harrows and 100 land levelers. 27 September —China approves the project for the construction of a gas pipeline from Turkmenistan. 5 October —President Niyazov authorizes the Turkmen Bank for Foreign Economic Activity to conclude a long-term loan agreement for $300 million with the Export-Import Bank of China. The loan is to be provided for 20 years at an annual interest rate of 3%; most of it is to be used to reconstruct the MaryAzot nitrogen fertilizer plant. The project is to be implemented by China’s Citic Group company. 1 November —The republic marks the 13th anniversary of the introduction of the national currency (manat). 1 December —The cotton crop totals about 850,000 tons, or 40% of the plan.

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8 December —President Niyazov orders the signing of a $140 million contract with Turkey’s Calyk Enerji Sanayi ve Ticaret A.S. for oil drilling in the large gas field of Southern Iolotan. 8 December —The country’s parliament passes the state budget for 2007 with a surplus of TMM 348.6 billion.

Republic of Uzbekistan

9 January —President Karimov’s edict On Measures to Deepen Economic Reforms in Horticulture and Viticulture is published in the press. 20 January —President Karimov’s edict On Further Improvement of the Passenger Transportation System in the City of Tashkent is published in the press. 20 January —Alexei Miller, Chairman of the Board of Directors of Russia’s OAO Gazprom, is received by President Karimov at his Oksaroi Residence. 26 January —At a summit of the Interstate Council of Heads of State of the Eurasian Economic Community (EurAsEC) in St. Petersburg, Uzbekistan becomes an official member of this organization. 15 February —Exchange notes on a grant in the amount of 28.6 million yen ($240 thousand) allocated by the Government of Japan to Uzbekistan for upgrading the audiovisual equipment of Uzbekistan’s State Children’s Library are signed in the republic’s Cabinet of Ministers. 24 February —The Senate approves a Law on Consumer Credit. 7-14 March —A business forum and a fair of Uzbek handicraft products is held in France as part of a visit by an Uzbek business delegation. 14 March —A law is adopted On the Accession of the Republic of Uzbekistan to the Locarno Agreement Establishing an International Classification for Industrial Design, signed in Locarno on 8 October, 1968. 18 March —The sixth session of the Intergovernmental Commission on Trade, Economic, Scientific and Technical Cooperation between the Republic of Uzbekistan and the Republic of India is held in Delhi. 25 March —The Asian Development Bank (ADB) approves a strategy and program of cooperation with Uzbekistan for 2006-2010. ADB loans and credits extended to Uzbekistan since 1995 for implementing 19 projects total $914.7 million. 6 April —Shigeo Katsu, World Bank Regional Vice President for Europe and Central Asia, is received by President Karimov at his Oksaroi Residence. 10 April —A Law on Amendments and Addenda to the Law of the Republic of Uzbekistan on Credit Unions is published in the press. 14 April —A Law on Condominiums is published in the press. 17 April —President Karimov’s decree On Measures to Accelerate the Development of the Service Sector in the Republic of Uzbekistan in 2006-2010 is published in the press. 26 April —President Karimov issues a decree On Measures to Improve the Activities of the State Property Committee of the Republic of Uzbekistan.

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1 May —President Karimov’s decree On Additional Measures to Develop Football in Uzbekistan is published in the press. 2 May —The National Bank for Foreign Economic Activities of Uzbekistan signs memorandums of understanding with Pakistani banks: the National Bank and Habib Bank Limited. 11 May —President Karimov’s edict On the Establishment of a Foundation for the Reconstruction and Development of the Republic of Uzbekistan is published in the press. 23 May —Klaus Mangold, Chairman of the Eastern Committee of the German Economy is received by President Karimov at his Oksaroi Residence. The parties discuss the further development of bilateral trade and economic relations, including the prospects for extending cooperation between small businesses and private enterprises. 31 May —President Karimov issues a decree On Additional Measures to Improve the System for Supplying Textbooks to General Education Schools. 2 June —Grigory Rapota, Secretary General of the Eurasian Economic Community (EurAsEC), is received by President Karimov at his Oksaroi Residence. 13 June —President Karimov’s decree On the Establishment of an Uzbek State Institute for Design in the Power, Hydrocarbon Processing, Chemical and Heavy Industries is published in the press. 14-15 June —Documents for the establishment of an Interbank Association are signed at a meeting of SCO heads of state in Shanghai (China). On behalf of Uzbekistan, these documents are signed by the National Bank. 22 June —Abdulwahab A. Al-Bader, Director-General of the Kuwait Fund for Arab Economic Development, is received by President Karimov at his Oksaroi Residence. 27 June —A Day of the Uzbek Economy is held in Kiel (Schleswig-Holstein, Germany). 28 June —The government of the Russian Federation approves a decision on guarantees of exports to Uzbekistan within the limits of $3 million. 7 July —President Karimov’s executive order On the Establishment of a Working Group to Draft Proposals for Providing Private Farms with Modern Equipment and Mini-Technologies for Processing Fruits and Vegetables is published in the press. 18 July —President Karimov’s decree On Improving the System of Collection, Procurement and Processing of Nonferrous Metal Scrap and Waste is published in the press. 24 July —President Karimov signs an edict On the Privatization of Land Plots Under Buildings and Structures of Legal Entities and Individual Citizens. This document establishes rules according to which from 1 January, 2007, resident legal entities are entitled to privatize land plots under buildings, structures and production infrastructure facilities belonging to them by right of ownership or being privatized, and also adjacent land plots as required for production activity with due regard for the technological processes applied and for building rules and regulations. 31 July —The Asian Development Bank extends two credits (over $60 million) for addressing soil degradation problems in the republic. 21 August —President Karimov signs a decree On Measures to Improve the Organization of the Activities of the Uzbekneftegaz National Holding Company.

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22 August —President Karimov receives the Minister of Agriculture of Morocco. 29 August —A seminar on action against money laundering in the banking system is held in the republic. 30 August —President Karimov and Prime Minister Junichiro Koizumi of Japan discuss bilateral economic relations. 19 September —A Law on Microfinance is published in the press. 27 September —President Karimov’s decree On Measures to Promote the Development of the Securities Market is published in the press. 17-18 October —Tashkent hosts the Second International Cotton Fair. 27 October —The participants in a special session of the EurAsEC Interstate Council sign a Protocol on Uzbekistan’s Accession to the Treaty Establishing the EurAsEC. 2 November —An Uzbek-Japanese business forum with the participation of officials and business people from the two countries starts work in Tashkent. 3 November —An Uzbek-German business forum with the participation of a delegation led by Germany’s Federal Foreign Minister Frank-Walter Steinmeier opens in Bukhara. 22 November —A mission of the Islamic Development Bank (IDB) visiting Uzbekistan meets with senior executives of the National Bank for Foreign Economic Activities. During the talks, the parties discuss the possibility of providing a second IDB financing line through the National Bank to the tune of $20 million for implementing small business projects. 27 November —A regular meeting of the Oliy Majlis Senate Committee on Budget Matters and Economic Reforms discusses the key macroeconomic indicators and parameters of the 2007 State Budget. The discussion ends in the approval of this document. 4 December —The State Property Committee of Uzbekistan offers its stake in the republic’s chemical plants to foreign investors and puts up for sale the state-owned assets of some of these plants. 7 December —Khurshid Anwar, Secretary General of the Economic Cooperation Organization (ECO), pays a visit to Uzbekistan. 12 December —President Karimov issues an executive order on organizational measures to develop and implement a state program entitled “Year of Social Protection.” 13 December —An IMF mission ends its visit to Uzbekistan. During consultations with the Uzbek government (under Article IV of the Fund’s Articles of Agreement), the parties have discussed the development of Uzbekistan’s economy in 2005- 2006, the prospects for 2007 and for the medium term, and the country’s economic reform program. 19 December —President Karimov’s edict On Measures to Encourage an Increase in the Capitalization of Commercial Banks is published in the press.

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RELIGION

Afghanistan

18 January —In the wake of the 16 January terrorist acts that claimed 21 lives a protest rally is held on the Afghan-Pakistani border where over 5,000 chant “Death to Pakistan!,” “Death to al-Qa‘eda!” and “Death to the Taliban!” People march in columns through several border towns. 8 February —Mass clashes between Sunnis and Shi‘a take place in Herat. 8 February —The Imam Ali Mosque is opened in Kabul’s eastern district; from that time on it is known under the official name of Women’s and Men’s Mosque. Women may occupy the second floor. February —The country is swept by mass protest rallies triggered by the controversy over the cartoons of the Prophet Muhammad that appeared in the Danish Jyllands- Posten. 9 February —The Taliban offers a reward of 100 kg of gold for the lives of the authors of the cartoons of the Prophet Muhammad that appeared in the Danish Jyllands- Posten. 27 March —After being acquitted in court of apostasy, Christian Abdul Rahman is released from prison and emigrates to Italy. 18 July —President of Afghanistan agrees with those religious figures who want the religious police restored. 9 August —The Afghan government signs a decision to deport the South Korean Christians who arrived for the Peace March in Kabul. 15 September —The Taliban condemns Pope Benedict XVI’s speech about Islam and insists on an apology. 17 September —The parliament of Afghanistan demands that Pope Benedict XVI apologize to the Muslims for his recent speech about Islam. 23 September —President Karzai calls on the world community to liquidate all Islamic religious schools, the heads of which approve of terrorism.

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Republic of Armenia

6 January —The Patriarchal Divine Christmas and Theophany Liturgy is held. 15 January —His Holiness Garegin II, Catholicos of All Armenians, ordains bishops, heads of the AAC dioceses in Egypt and Damascus in the Cathedral of Holy Etchmiadzin. 26-30 January —The second meeting of the theological dialog between the Catholic and the Old Oriental Orthodox Churches is held in Holy Etchmiadzin. 31 January —Delegations of the Catholicasate of all Armenians and the Great House of Cilicia (Lebanon) discuss the problems of the Armenian Church. 13-24 February —The delegation of Holy Etchmiadzin takes part in the 9th Assembly of the World Council of Churches in Pôrto Alegre, Brazil. 7 March —The Supreme Spiritual Council meets in Holy Etchmiadzin to hear the report of Bishop Vazgen Mirzakhanian, head of the Armenian Diocese in Georgia. 16 April —The Patriarchal Easter Liturgy is held. 20 April —The AAC and the international organization Habitat for Humanity sign an agreement on building apartment blocks for the poorest families in Armenia. 25-29 May —Head of the Finnish Orthodox Church, Archbishop of Karelia and All Finland Leo (Makkonen), visits Holy Etchmiadzin. 20-27 June —His Holiness Garegin II, Catholicos of All Armenians, visits Turkey on the invitation from Ecumenical Patriarch of Constantinople Bartholomew I and Armenian Patriarch of Constantinople Archbishop Mesrop Mutafian. 4-5 July —His Holiness Garegin II, Catholicos of All Armenians, attends the meeting of the world religious leaders in Moscow. 17 July- —Seventy school teachers of the Armenian diaspora from the U.S., Brazil, 14 August Rumania, Russia, Ukraine, Georgia, etc. attend advanced training courses in Holy Etchmiadzin. 16-18 August —The 4th general congress of Holy Etchmiadzin brotherhood is held. 2-7 September —The delegation headed by Sheikh Ahmad Badr al-Din Hassun, Grand Mufti of the Syrian Arab Republic, pays an official visit to Holy Etchmiadzin on the invitation from His Holiness Garegin II. 12-14 September —His Holiness Garegin II attends the Congress of World Religious Leaders. 16 September —Catholicos of the Great House of Cilicia Aram I arrives in Holy Etchmiadzin to take part in the 3rd Congress of Armenia—the Diaspora. 19 September —Catholicos Garegin II is awarded the Friendship Order on behalf of Russian President Vladimir Putin. 21 September —The Patriarchal prayer service dedicated to the 15th anniversary of Armenian independence is held. It is attended by the RA president, speaker of the National Assembly, prime minister, and other officials. September —The Evangelical Church celebrates its 160th anniversary.

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1 October —His Holiness Garegin II meets President of France Jacques Chirac in Holy Etchmiadzin. 23 October —Armenian teachers are awarded patriarchal diplomas. 19 November —Three bishops are ordained in Holy Etchmiadzin. 29 November —The National Assembly deputies adopt the draft Law on Relations between the Republic of Armenia and the Armenian Apostolic Church in first reading. 9-10 December —His Holiness Garegin II pays a patriarchal visit to France and issues a Patriarchal encyclical to set up the Armenian diocese.

Azerbaijan Republic

7 February —The Foreign Ministry of the Republic of Azerbaijan condemns manifestations of disrespect for the freedom of conscience and publication of the cartoons of the Prophet Muhammad in some European newspapers. 16 February —Apostolic Nuncio C. Gugerotti awards the St. George Order to Sheikh ul- Islam A. Pashazadeh. 18 February —Azerbaijanian and Russian translations of the book One Common Faith of the Universal House of Justice appear. 21 February —The AMC awards the Order of Sheikh ul-Islam to Russian President Vladimir Putin. 26 February- —Special Rapporteur on Freedom of Religion or Belief of the U.N. Commission 5 March on Human Rights A. Jahangir visits Azerbaijan. 7 April —A marriage according to the Jewish national traditions takes place in the Baku synagogue of Ashkenazi Jews for the first time in the past 70 years. 11-19 April —A group of 16 citizens of Azerbaijan, Russia, Turkey, and Yemen is brought to court on accusations of involvement in religious-terrorist activities (they are sentenced to 5 to 10 years in prison, while the head Arif Gajiev is sentenced to life imprisonment). 19-21 April —A conference “Azerbaijan: A Dialog between Civilizations Yesterday and Today” organized by the Heydar Aliev Foundation and the Academy of Latin Culture is held. 29-30 April —Baku hosts the 15th National Congress of the Bahais of Azerbaijan. 8 May —Representative of the Senate of Pakistan S.M. Zafar presents RA President I. Aliev with the Best Governed Muslim State Award. 19 May —The AMC asks the minister of culture and tourism to suspend the showing of the film The Da Vinci Code (the showing was suspended and later resumed). 19 May —The restored Albanian church in the village of Nij, the Gabala District (240 km to the north-west of Baku) is consecrated. 27 June —R. Aliev, Chairman of the State Committee for Religious Organizations, is removed from his post. 25 July —I. Orujev is appointed as Chairman of the State Committee for Religious Organizations.

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23 October —An exhibition called “The Treasure-Trove of Light” showing over 300 rare editions of The Holy Koran opens in Baku. 15 November —Editor of the Senet newspaper S. Sadagatoglu and journalist R. Tagi are sent to prison for two months for fanning religious hatred and enmity.

Georgia

February —Cardinal Walter Kasper arrives in Georgia. 20 June —The Turkish city of Erzurum hosts a meeting of representatives of the Muslim population of Georgia to set up the Muslim Democratic Party of Georgia. August —Archbishop of Poti and Khoba Grigol Berbichashvili and Governor of Megrelia and Svanetia Zaza Gorozia are in conflict over the budget money allocated to restore Poti Cathedral. The archbishop claims that the governor demanded that part of the money should be transferred to his personal bank account. September —Priest Gabriele Bragantini and expert Nugzar Papuashvili put out a book about the Church of the Mother of God in Ivlita On the Truth and Fairness in Relation to the St. Ivlita. 4 October —Archpriest of the Georgian Orthodox Church Basil Kobakhidze and member of the Evangelical Christian-Baptist Church Beniamin Bakuradze join the Third Ecumenical Franciscan Order. 7 October —Bishop of Wakefield Stephen George Platten ordains Archbishop of the Evangelical Christian-Baptist Church of Georgia Malkhaz Songulashvili ecumenical canon in the Cathedral of All Saints. October —The problem of the part of the monastery David Gareji complex in Azerbaijan resurfaces when Azeri border guards detained Georgian pilgrims at the border. November —A leaflet called The End of False Religion published by the Jehovah’s Witnesses is delivered by mail along with electricity bills of the Telasi company. The company leaders publicly apologized. 12 November —Local Orthodox believers and followers of the Jehovah’s Witnesses clash in Rustavi. 19 November —Fourth-year student of the Tbilisi Spiritual Academy Gela Zhvania issues a statement about the complex situation in the Academy and the Patriarchate in general.

Republic of Kazakhstan

7 January —Orthodox Christmas becomes an official holiday for the first time. 9 January —Members of the terrorist organization Jamaat of Mujahedin of Central Asia responsible for the blasts in Uzbekistan in 2004 and engaged in preparations for more terrorist acts in this country are sentenced to 8 to 25 years in prison.

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13 January —Kurban Ayt becomes an official holiday for the first time. 16 March —The Southern Kazakhstan Specialized Inter-district Economic Court rules that the Public Foundation “Department of a Public Charity ‘Public Social Reforms’” (Jamiiat al-Islakhal-Idjtimai) is a terrorist organization. On the strength of this, the organization is closed down and its property confiscated. 25 April —The authorities of the Karasay District, Almaty Region, make an attempt to pull down the summer houses belonging to five members of the Society for Krishna Consciousness. 7 June —A conference “With Allah at Heart” organized by the SAMKaz and the activists of Khalyk dabyly (The Voice of the People) is held in Almaty. 12-13 June —Almaty hosts the Tolerance Implementation Meeting on Promoting Inter- Cultural, Inter-Religious, and Inter-Ethnic Understanding. 23-24 June —The Committee for Religious Affairs convenes a conference called “Religion, Science, and the Media: Dialog and Cooperation” in Astana, which attracts representatives of the presidential administration, parliament, government, and academic and journalist community, as well as heads of republican religious centers. 12-13 September —Astana hosts the Second Congress of the Leaders of World and Traditional Religions. 19 September —The Collegium for Civil Cases of the Southern Kazakhstan Region confirms the decision of the Specialized Inter-District Economic Court on closing down the Christian Elim Institute and the South-West Spiritual Seminary funded by the Sun Bok Ym religious alliance (Shymkent). 10 October —Activities of the Al-Karim Islamic Spiritual University are suspended by the court. 24 October —The 12th session of the Assembly of the Peoples of Kazakhstan discusses the issue: Ethnic and Confessional Harmony as the Key Prerequisite for Kazakhstan’s Dynamic Development and the Possibility of Joining the Most Competitive Countries of the World. 16 November —Ten members of a criminal group engaged in preparations for extremist acts are arrested in Stepnogorsk, Akmolinsk Region. 17 November —The Court of Astana rules that Aum Shinrikyo and the Liberation of Eastern Turkestan Organization are terrorist structures and bans their activity in Kazakhstan. 21 November —The authorities of the Karasay District, Almaty Region, pull down the summer houses of 13 members of the Society for Krishna Consciousness. 13 December —Pavlodar hosts a scientific-practical conference called “Kazakhstan Today and Islam.” It is addressed by Supreme Mufti of Kazakhstan Absattar-Hajji Derbisaliev who calls on the youth not to succumb to the temptations of quasi-religious organizations. 31 December —Kurban Ayt is celebrated as an official holiday for the second time.

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Kyrgyz Republic

10 January —An action planned by members of the banned Hizb ut-Tahrir Party timed to coincide with the Kurban Ayt festival is averted in the city of Osh. 16 January —Ombudsman T. Bakir uulu raises the question of disbanding the Agency for Religious Affairs under the KR government, the functions of which should be transferred to the Ministry of Justice; he also favors the establishment of a permanent state structure for the organization of hajj, and wants an extraordinary kurultai of the Muslim to be convened to elect the mufti of the republic. 11 February —The law-enforcement structures of KR tighten security at the FRG embassy and the French consulate because of the Muhammad cartoon controversy. 21 February —Supreme Mufti of the KR SAMK M. Zhumanov and Eric Millet, France’s Charge d’Affaires in Kyrgyzstan, discuss the Muhammad cartoon controversy. 3 March —Prime Minister Kulov signs a Cabinet Regulation on an Interdepartmental Council for Religious Affairs, and in compliance with it approves its composition and rules. The Council’s decisions related to the state’s policies in the religious sphere are binding on the ministries, state committees, central and local administrations, and local self-government bodies. 18 March —Pope Benedict XVI raises the Sui Iuris mission (accountable directly to the Vatican) to the level of an Apostolic Administration and appoints Rector of the Spiritual Academy of the Catholic Eparchy of Transfiguration of Novosibirsk (RF) its first Bishop. 11 April —Director of the Agency for Religious Affairs under the KR government O. Mamaiusupov declares that the ideas promoted by Hizb ut-Tahrir are the country’s main head ache in the religious sphere. 12 May —Expert of the Tashkent Islamic University N. Abulhasan declares that there are over 5,000 Hizb ut-Tahrir members operating in the KR. 19 May —The way the Agency for Religious Affairs under the KR government organized hajj in 2006 is described as unsatisfactory. 24 May —The SAMK suspends the activities of daavatists (Islamic missionaries) for three months in the Batken Region. 20 June —Chairman of the republican NSS B. Tabaldiev points out that previously unknown extremist organizations (Akromiya, Bayiat, the Islamic Jihad Group, etc.) have stepped their activities in the republic. 20 June —On a call from T. Ylaev, who represents the Muslim jamaat, about 10,000 are prepared to attend a rally on 30 June on Ala-Too Square in Bishkek because the local authorities refuse to give them a construction site for a mosque and an Islamic Cultural Center. 12 July —Bishkek hosts a national conference called “The Development of Religions, Civil Initiatives to Improve the Realization of Freedom of Conscience, the Expression of Convictions, and the Promotion of Conflict-Free Coexistence”

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organized by the Agency for Religious Affairs under the KR government and USAID. 12 July —A group of theologians with a good command of Arabic and Kyrgyz translates the Koran into the state tongue. For the first time in the republic’s history, the holy Muslim book will appear in translation from the Arabic into Kyrgyz. 17 July —In expectation of more subversive acts by the IMU and Hizb ut-Tahrir fighters, Minister of the Interior M. Sutalinov gives an oral order to tighten passport conditions in the south even more. 17 July —President Bakiev instructs the NSS to continue its active anti-terrorist and anti-extremist efforts in cooperation with the power-related structures of the KR and the law-enforcement bodies of neighboring states. 19 July —Hizb ut-Tahrir declares a jihad against the employees of the KR law- enforcement bodies. 20 July —Minister of Education, Science, and Youth Politics D. Nur uulu announces that because of terrorist and extremist activities a new subject “Religious Studies” will be possibly added to the school curriculum. 24 July —Heads of the special services of Kyrgyzstan and Uzbekistan B. Tabaldiev and R. Inoiatov meet in Ferghana (Uzbekistan) to discuss the sociopolitical situation in the region and agree on joint operations and exchange of information about religious extremist and terrorist groups. 26 July —UNDP experts, heads of the Jalal-Abad Region, the local law-enforcement bodies, and NGOs discuss how to oppose religious extremist movements. 31 July —The law-enforcement bodies of the Jalal-Abad Region confiscate a large batch of extremist literature and videos from Hizb ut-Tahrir members. 31 July —Supreme Mufti M. Zhumanov discusses the situation created by the growing number of davatchy (missionaries) in the region with the religious leaders of the Jalal-Abad Region. 4 August —At a meeting with law-enforcement bodies, the imams of 22 city mosques and the SAMK leaders promise not to interfere with special operations in the Bishkek mosques. 9 August —The NSS begins the process of investigating the activities of Supreme Mufti M. Zhumanov to find out whether he is cooperating with terrorist organizations. 9 August —The main office of the Agency for Religious Affairs under the KR government is moved to Osh. The office in Bishkek is manned by the deputy director and two employees. 16 August —Ombudsman T. Bakir uulu refuses to attend the conference of the United States Ombudsman Association because of U.S. President George W. Bush’s politically incorrect formula “Islamic fascism.” 16 August —The Agency for Religious Affairs under the KR government studies the registration documents of the Church of Jesus Christ of Latter-Day Saints (the Mormons); in August, 2004, the issue was discussed by an official delegation from the Utah State (U.S.) headed by Governor Olin Walker and the Kyrgyz Republic’s leaders.

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6 September —Governor of the Jalal-Abad Region I. Aydaraliev discusses the religious and social situation in the region with religious figures. 7 September —Bishkek hosts an international conference called “The Contribution of Central Asian Muslims to World Civilization.” 7 September —Head of the Main Anti-Extremism and Anti-Illegal Migration Department of the Ministry of the Interior O. Guronov declares that ombudsman T. Bakir uulu heads the Islamic Movement of Kyrgyzstan. 7 September —Governor of the Jalal-Abad Region I. Aydaraliev declares that the real number of those who support the banned Hizb ut-Tahrir religious party might be over 15,000. 20 September —President Bakiev calls on the law-enforcement bodies to intensify their struggle against religious extremism. 26 September —The editorial offices of the official Slovo Kyrgyzstana and Kyrgyz Tuusu newspapers receive religious leaflets about Hizb ut-Tahrir. 2 October —The Youth Group of the Legal Education and Upbringing Foundation of Jalal- Abad sends letters to President Bakiev, ombudsman T. Bakir uulu, and Supreme Mufti M. Zhumanov to protest against the ban of hijabs in schools. 3 October —Saudi Arabia gives a quota of 4,500 pilgrims from the KR. 11 October —Members of the Congress of Muslims of Kyrgyzstan and Central Asia Public Association demand that Director of the Agency for Religious Affairs Zh. Zhorobekov be removed from his post as the person who failed to organize the hajj. 12 October —Vice-Premier T. Tabyldiev attends a meeting of the republican center for organizing hajj. 12 October —A Protestant organization, Eldos, which worked illegally for three years in Osh, is exposed. 19 October —The draft law on fighting extremism does not gain the necessary number of votes to pass through the KR parliament. 23 October —President Bakiev allocates 2 million soms in material and technical support for the SAMK. 24 October —A festive namaz in honor of the Orozo Ayt holiday is performed in the old square of Bishkek and in all the mosques of the city. 14 November —Muslims of the Batken, Jalal-Abad, and Osh regions ask the head of state to remove Supreme Mufti M. Zhumanov from his post because of the high corruption level in the higher echelons of spiritual power. 14 November —Supreme Mufti M. Zhumanov refutes the rumors that the donations collected during Ramadan were misused. 15 November —A group of 50 gathers outside the SAMK building to demand resignation of Supreme Mufti M. Zhumanov accused of corruption and abuse of power. 17 November —About 2,000 Muslims of Osh express their dissatisfaction with the activities of Supreme Mufti M. Zhumanov and Director of the Agency for Religious Affairs under the KR government Zh. Zhorobekov, who are accused of corruption; the rally insists on their resignation.

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17 November —Members of the Ulema Council of the SAMK send a letter to KR State Secretary A. Madumarov with a request to help them remove Supreme Mufti M. Zhumanov, who also heads the Ulema Council. 21 November —Supporters of Ahmadiyya, an Islamic religious movement, inform A. Kachkynbaev, who represents the department for religious affairs of the Jalal-Abad regional administration, that they intend to disseminate their ideas in the region. 24 November —An initiative group for the reform of the religious administration begins gathering signatures to remove Supreme Mufti M. Zhumanov and Director of the Agency for Religious Affairs under the KR government Zh. Zhorobekov. 24 November —The administration of the Jalal-Abad Region holds a round table called “Young People, Religion, and Religious Trends.” 27 November —The KR government discusses how to organize hajj to Saudi Arabia. 30 November —According to the statement of Pastor Zh. Zhakypov of the New Generation Christian sect (Jalal-Abad), 90 percent of his flock are Kyrgyz. 26 December —A new mosque Rahman is opened at the city hospital on the eve of Kurban Ayt in Kyzyl-Kia. The mosque was built by the ashar method in less than six months, the project being initiated by the hospital head and the patients. 30 December —Bishkek and several other large settlements in the country’s south become scenes of Muslim action in support of celebrating Kurban Ayt on 30 December.

Republic of Tajikistan

5 January —The IRPT makes a statement about Pope Benedict XVI’s insulting comment about the Prophet Muhammad. 3 February —The RT Foreign Ministry issues official comments in connection with the “cartoon scandal,” in which it outlined the position of the president and the government and described the cartoons as an “insulting act and provocation.” 16 February —President Rakhmonov receives Sh. Sachedin, who represents the Aga Khan Development Network, to discuss the present state and future of diverse bilateral cooperation. 24 February —President Rakhmonov receives Prince Amyn Aga Khan, the Representative of His Highness the Aga Khan IV. 24 February —The joint Tajik-Swiss project “Optimizing Implementation of the Law on Religion and Religious Organizations in Tajikistan” completes its “Political Recommendations for More Effective Application of the Current Law” and “Suggestions on the Amendments and Addenda to the Law on Religion and Religious Organizations.” 16 March —The Committee for Religious Affairs completes a Draft Law on Freedom of Conscience and on Religious Associations and presents it to the Cabinet. 16 March —The OSCE/ODIHR Advisory Council completes its document Comments on the Draft Law of the Republic of Tajikistan on the Freedom of Conscience and Religious Associations.

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30 March —The Supreme Court of the RT passes a decision under which al-Qa‘eda, the Islamic Movement of Eastern Turkestan, the Taliban, and Lashkari tayiba are recognized as terrorist and extremist organizations and banned in Tajikistan. 30 March —President Rakhmonov receives Prince Amyn, brother of Aga Khan IV. 30 March —The Embassy of Tajikistan in the U.S. issues a statement about the planned removal of the synagogue in Dushanbe. 30 March —The IRPT opens its Internet site in Tajik [www.hhdtti]. 7 April —A. Younis, head of an Islamic organization in the U.S., member of U.S.- Muslim World Advisory Committee, author of American Muslims: Voir Dire and D.Sc. (Law) arrives in Dushanbe. 13 April —Minister of Education A. Rakhmonov says that seven- and eight-year students of secondary schools will be taught a new subject, the History of Islam. 2-3 May —Almaty (Kazakhstan) hosts an international conference called “Sufism in Iran and Central Asia,” at which Prof. A. Sattorzoda delivers his paper on “The Sufi Qadiriyya Order in Tajikistan.” 11 May —The Millat newspaper opens a discussion on national (tojikiat)-religious (islomiat) correlations. 15 May —Religious confessions and foreign experts join a discussion of the Draft Law on Freedom of Conscience and on Religious Associations (Dushanbe). 15 May —The court of justice of Khujand (Sogd Region) sentences nine women members of the banned Hizb ut-Tahrir Party to various terms in prison. 17 May —Prime minister of the RT A. Akilov and B.O. Fadlalla, Economic Advisor of the Islamic Bank of Development, discuss mutual cooperation. 21-23 May —A Republican Contest of the Koran Readers is organized in Dushanbe by the Asia Muslims Committee, Kuwait, the International Islamic Charitable Organization, the International Organization for Training Koran Readers, and the World Islamic League. 22 May —On an initiative of the rector’s office of the Islamic University of Tajikistan and the RT Islamic Council, the book Islamic Teaching for Young People is removed from bookshops as contradicting the Hanafi Islam. 22 May —As a deputy of the RT Majlisi namoiandagon, an IRPT leader asks Minister of the Interior Kh. Sharifov to protest against the illegal actions of the officials of the Kulob city police department who did not allow the local people to perform Friday prayers. 22 May —Chief Rabbi of Central Asia Abe David Gurevich visits Dushanbe. 22 May —The rector’s office of the Islamic University of Tajikistan informs that it will soon open a Koranic studies department and a female madrasah. 8-9 June —The Center of Strategic Studies under the President of the Republic of Tajikistan supported by USAID convenes a Regional Conference called “The Role of Religion in Strengthening Peace and Social Partnership” in Dushanbe, which, for the first time in the 15-year-long history of independence, attracted Islamic ulema, religious figures, and religious organizations of Central Asian countries.

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25 June —IRPT chairman S.A. Nuri meets Ibrahim Agboola Gambari, U.N. Under- Secretary-General for political affairs. 25 June —V. Sotirov, Special Representative of the U.N. Secretary General in Tajikistan, expresses his concern over Hizb ut-Tahrir activities. 27 June —The celebrations of the Day of National Unity are concentrated in the Rasht District and attract members of the republic’s religious organizations. 3 July —The Nachot newspaper of IRPT publishes a special birthday issue dedicated to M. Khimmatzoda, prominent theologian, public and political figure, and Majlisi namoiandagon deputy. 7 July —IRPT Chairman S.A. Nuri delivers a program speech at the presentation of M. Khimmatzoda’s latest book Position and Problems. 9 August — S.A. Nuri, the founder and first chairman of IRPT, head of the United Tajik Opposition, co-chairman of the National Reconciliation Committee, and prominent public and political figure, dies after a long and grave illness at the age of 58. 19 August —The Moscow Government and the RF Embassy in Dushanbe allocate 100,000 rubles to the Islamic University of Tajikistan for a Russian language cabinet. 23 August —A. Rajabov, 58-year-old pilgrim from Tajikistan, returns home having covered the distance between Moscow and Saudi Arabia on foot in nine months. 2 September —President Rakhmonov receives Mr. Nairi, Chairman of the Imam Khomeini Relief Committee. 2 September —250 couples from poor Tajik families are married with the assistance of the Imam Khomeini Relief Committee. 12 September —The Millat newspaper publishes an article by K. Bekmuhammad “Do the Attacks on Islam Mean the Beginning of the Clash of Civilizations?” in response to Pope Benedict XVI’s comments on the Prophet Muhammad. 28 September —The Tojikiston newspaper publishes a review by Chairman of the Committee for Religious Affairs Murodullo Davlatov, “Chisty Islam,” of the book by prominent political figure and theologian and deputy of RT Majlisi milli Kh.A. Turajonzoda The Shari‘a and Societies, which triggers a chain of similar publications. 28-30 September —IRPT Chairman M. Kabiri takes part in the first round of the Tajik National Dialog in Moscow. 28-30 September —The RT Ministry of the Interior informs the people that during the first nine months of 2006, 47 IMU and 48 Hizb ut-Tahrir members were arrested, including R. Akhunov, leader of the party banned in Tajikistan. 4-24 October —Ten representatives of the RT religious organizations of Dushanbe, Rasht, Khujand, and Isfara go to the United States to be trained under the USAID “Ties between Religion and Society” Program. 15 October —A meeting in memory of S.A. Nuri is held in Kulob. 30 October —The spiritual leader of the Ismailites of the World Prince Aga Khan IV arrives in the RT on a four-day visit. He takes part in the ceremony to lay the first

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stone of the SERENA Hotel and open a bridge in Ishkashim (the Gorno- Badakhshan Autonomous Region). 13 December —The media publish an interview with Aga Khan IV that first appeared in the Schpigel journal entitled “I Believe in Islamic Democracy.” 18 December —Forty pilgrims miss their flight to Saudi Arabia because those responsible failed to warn them that the time of departure had been changed. 18 December —Four-and-a-half thousand citizens of the Republic of Tajikistan perform the hajj. 31 December —IRPT Chairman M. Kabiri congratulates the people on Kurban Ayt and the New Year.

Turkmenistan

12 January —Mosques and churches hold ceremonial services to mark Memorial Day of the Defenders of the Motherland. The main service takes place in the Geoktepe mosque. 12 January —Unified Muslim rites are introduced across the country. The Administration of the Mufti of Turkmenistan publishes the book The National Religious Traditions of the Turkmen from Ancient Times to Our Days. 23 January —Appeal of Cheper Anniazova, member of the Hare Krishna Movement, is dismissed, and she is transferred from the women’s prison of Ashghabad to a women’s forced labor camp in the city of Dashoguz, in the country’s north. 9 February —The Foreign Ministry issues a statement on the cartoon scandal. 7-10 March —Delegates of the churches of Evangelical Christian Baptists from Turkmenistan attend the 51st Congress of the Euro-Asian Federation of the Unions of Evangelical Christian Baptists that took place in Pokrovskoe outside Moscow (Russian Federation). 19 March —The holy nature of Rukhnama is confirmed by the president who says that everyone who reads the book three times will go to heaven. 25 May —Member of the community of the International Union of Churches of the Evangelical Christian Baptists Shageldy Atakov is removed from a flight to Russia even though he carried a valid ticket and visa. 10 June —Member of the ECB community Alexander Frolov, citizen of the Russian Federation, is deported from Turkmenistan. 16 October —Former Supreme Mufti Nasrullah ibn Ibadullah is pardoned. 25 November —The republic marks the fourth anniversary of the terrorist act that, according to officials, was aimed at deposing the country’s leaders. Ritual meals (saadaqa) in the president’s honor are organized in all cities, towns, and villages. 8 December —Clerics bless a unique children’s park called The World of Turkmenbashi’s Fairy Tales and pray for the president and the country’s well-being and prosperity.

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21 December —The authorities announce that the late president was endowed with the gift of prophesy. 24 December —Saparmurat Niyazov is given a Muslim burial in the mausoleum at the Turkmenbashi Mosque of Spirituality.

Republic of Uzbekistan

1 January —All confessions celebrate the New Year, which is announced the Year of Charity and Medics. 7-15 January —Over 20,000 celebrate Christmas in 30 churches and 3 monasteries in Uzbekistan; Christmas celebrations for children take place in the Holy Dormition Cathedral. 10 January —The Muslims gather in mosques to pray and celebrate the holy Muslim holiday Kurban Hayit. 31 January —The year 1427 of Hegira begins. 14 March —The Jewish community of Uzbekistan celebrates Purim. 21 March —The Central Mosque is opened in Navoi. 25 March —Construction of St. Andrew Roman Catholic Church begins in Bukhara on Tutzor St. 6-12 April —Prominent Israeli poet Ronni Somek visits Uzbekistan. 10 April —Birthday of the Prophet Muhammad. 12 April —Reconstruction of the Great Hall of the Central Synagogue of over 200 sq m and the women’s hall of 50 sq m is completed in Tashkent. 13 April —The Jewish community of Uzbekistan celebrates Passover. 23-25 April —Paschal Vespers take place, at which the Holy Fire brought from Jerusalem is distributed; clerics of the diocese are awarded on the occasion of Easter 2006; Metropolitan of Tashkent and Central Asia Vladimir congratulates those present. 12-15 May —Tashkent hosts the 6th meeting of the Catholics of Uzbekistan, which is attended by Archbishop Jósef Wesoùowski, Apostolic Nuncio to Kazakhstan and other Central Asian nations. 19 May —President Karimov visits the memorial complex of Khwaja Bahauddin Naqshbandi in Bukhara. 25 May —Book by President Karimov The Uzbek Nation will Never Depend on Anyone is presented at the Kuwait National University. 4 June —The book by President Karimov The Uzbek Nation will Never Depend on Anyone is presented at King Feysal Center of Islamic Studies of Saudi Arabia (Riyadh). 19 June —Metropolitan Vladimir forwards an idea of a Museum of Christianity in Central Asia in Tashkent. 30 June —The Ulema Council of the Spiritual Administration of the Muslims of Uzbekistan approved of the amendments and addenda to the Criminal,

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Criminal Procedure, and Administrative Violations codes designed to increase personal responsibility for the illegal production, possession, exporting, and dissemination of religious documents, as well as information promoting national, race, ethnic or religious strife. 3-4 July —An Uzbek delegation takes part in the meeting of the Presidium of the Interreligious Council of CIS Countries and the World Summit of Religious Leaders in Moscow. 28 July —Consultants on religious, spiritual, and moral education of the makhallia communities of the city of Tashkent, the Tashkent, Syr Darya, Jizak, and Samarkand regions visit Bukhara to study relevant experience. 8 August —Usman Alemov is elected head of the Spiritual Administration of the Muslims of Uzbekistan. 9 September —President Karimov is awarded with UNESCO’s Borobudur Gold Medal for his great contribution to strengthening friendship and cooperation among nations, developing a cultural and religious dialogue, and supporting cultural diversity. The medal is awarded by UNESCO Director General Koïchiro Matsuura. 15 September —The Tashkent Islamic University hosts the final stage of the International Scientific-Practical Conference called “Religion and Young People in Contemporary Muslim Societies.” 18 October —President Karimov passes the decision “On Ramazan Hayit Celebrations.” 23 October —About 2 million in 1,948 mosques take part in festive prayers on the occasion of Ramazan Hayit. 2 November —Federal Foreign Minister of Germany Frank-Walter Steinmeier meets heads of the religious communities of Uzbekistan in Bukhara. 11-12 November —Professor of the Moscow Spiritual Academy, senior research associate at the department of philosophy of religion and religious studies of the Faculty of Philosophy of Moscow State University Deacon Andrey Kuraev gives lectures in Tashkent. 5 December —An exhibition called “From the Treasure-Trove of Rare Manuscripts” opens in the State Museum of the History of the Timurid Dynasty in Tashkent. 7 December —President Karimov declares 2007 the Year of Social Protection. 16 December —The Jewish community of Uzbekistan celebrates Hanukkah. 22 December —President Karimov signs a decision On the Celebration of Kurban Hayit. 25 December —The non-Orthodox churches and certain Christian communities celebrate Christmas. 30 December —The first day of Kurban Hayit.

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INTERNATIONAL AFFAIRS

Afghanistan

6 January —President Hamid Karzai signs an Agreement on Cooperation with Turkey in Ankara, which will help the Turkish International Cooperation Agency to render aid to Afghanistan in the country’s development and restoration of its infrastructure. 31 January- —The London Conference on Afghanistan is held and attended by envoys of 1 February 70 nations and international organizations. The conference adopted the Afghanistan Compact, a program of cooperation with the world community aimed at enhancing the country’s development over the next five years. 15-17 February —President Hamid Karzai pays an official visit to Pakistan, where he meets with its president, Pervez Musharraf. 16 February —Tom Koenigs, the new Head of the United Nations Assistance Mission in Afghanistan (UNAMA), arrives in Kabul. 20 February —India makes a decision to participate in building the Turkmenistan- Afghanistan-Pakistan gas pipeline. 28 February —At an international conference in Qatar, Afghanistan, Iran, Pakistan, and China sign an agreement on regional security. 1 March —U.S. President George Bush makes a visit to Kabul. 6-8 March —Canadian Prime Minister Stephen Harper visits Afghanistan. 23 March —The U.N. Security Council extends the mandate of the United Nations Assistance Mission in Afghanistan (UNAMA) for another year. 3 April —Belgian Foreign Minister Karel De Gucht visits Kabul. 3 April —An international conference called Cooperation and Trade in Central Asia is held in Kabul. 9 April —President Hamid Karzai makes a three-day visit to Delhi. 11-12 April —An international conference called Afghanistan and Regional Cooperation is held in Kabul.

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4 May —President Hamid Karzai visits Baku to participate in the summit of the Economic Cooperation Organization (ECO). 5-6 May —Afghan Foreign Minister Dr. Rangin Dadfar Spanta visits Japan. 14-16 June —President Hamid Karzai visits Shanghai, where he participates in a SCO summit. 18-21 June —President Hamid Karzai visits Beijing. 24 June —Afghan Foreign Minister Dr. Rangin Dadfar Spanta visits Islamabad. 28 June —Afghan Foreign Minister Dr. Rangin Dadfar Spanta visits Delhi. 5 July —President Hamid Karzai visits Tokyo to participate in the work of the Second Tokyo Conference on Consolidation of Peace in Afghanistan. 25 July —President Hamid Karzai visits Dushanbe. 10 August —Command of the international antiterrorist coalition forces in Afghanistan is transferred from the U.S. to NATO. 6 September —Pakistan President Pervez Musharraf visits Kabul. 7-8 September —An international conference is held in Kabul dedicated to the memory of Afghanistan National Hero Ahmad Shah Masood. 20 September —President Hamid Karzai speaks at the 61st session of the U.N. General Assembly. 21 September —President Hamid Karzai visits Canada. 27 September —President Hamid Karzai visits the U.S., where he participates in a trilateral meeting with the U.S. and Pakistani presidents. 10 November —President Hamid Karzai is awarded the Indira Gandhi prize in Delhi for services in achieving peace, disarmament and development. 18-19 November —President Hamid Karzai participates in the Second Regional Cooperation Conference on Afghanistan held in Delhi. 7 December —Pakistan Foreign Minister Mian Kursheed Mehmood Kasuri visits Kabul. 24 December —President Hamid Karzai participates in the funeral of Turkmenistan President Saparmurat Niyazov in Ashghabad.

Republic of Armenia

16 January —Permanent Representative of the Republic of Armenia at the U.N. Office in Geneva is elected as vice-president of the U.N. Human Rights Commission. 19 January —Chairman of the Armenian National Assembly A. Bagdasarian holds an official meeting with OSCE Secretary General Marc Perrin de Brichambaut. 22 January —Armenian President Robert Kocharian and Russian President Vladimir Putin participate in the opening ceremony of the Year of the Republic of Armenia in the Russian Federation (Moscow). 24 January —Armenian Foreign Minister V. Oskanian meets Azerbaijani Foreign Minister E. Mamediarov (London).

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2 February —President Kocharian receives cochairmen of the OSCE Minsk Group Yu. Merzliakov (Russia), Steven Mann (U.S.), Bernard Facier (France), and Anjey Kasprshik, a personal representative of the current chairman of the OSCE. 8 February —While on a three-day official visit to Sweden, President Kocharian meets with Swedish King Charles XVI Gustavus and holds a meeting with Prime Minister of Sweden Göran Persson. 8 February —President Kocharian meets with special representative of the OSCE Parliamentary Assembly for Nagorno-Karabakh Göran Lenmarker and makes a speech at the Institute of Foreign Policy of Sweden. 10 February —Armenian President Robert Kocharian and Azerbaijani President Ilham Aliev hold separate meetings with French President Jacques Chirac, at which they discuss settlement of the Nagorno-Karabakh conflict (Paris). 10-11 February —Armenian President Robert Kocharian and Azerbaijani President Ilham Aliev hold talks on the Nagorno-Karabakh settlement (Rambouillet, France). 14 February —President Kocharian receives Iranian Foreign Minister Manouchehr Mottaki and the delegation headed by him during a working visit to Erevan. 17 February —European Commissioner for External Relations and European Neighborhood Policy Benita Ferrero-Waldner visits Armenia. 16 March —President Kocharian receives U.S. Undersecretary of State for Europe and Eurasia Daniel Freed and Cochairman of the OSCE Minsk Group Steven Mann accompanying him, who are in Armenia during a regional visit. 31 March —Armenian Foreign Minister V. Oskanian meets with U.N. Secretary General Kofi Annan. 20 April —A EU Troika delegation visits Armenia. 25 April —Armenian Chairman of the National Assembly A. Bagdasarian meets with Chairman of the NATO Parliamentary Assembly Pierre Lelouche (Paris). 25-26 April —Valdas Adamkus, President of the Republic of Lithuania, pays an official visit to Armenia. 12 May —Armenian Chairman of the National Assembly A. Bagdasarian receives State Secretary of the Kingdom of Norway Kjetil Skogrand. 13 May —President Kocharian receives OSCE Secretary General Marc Perrin de Brichambaut. 19 May —Armenian Foreign Minister V. Oskanian meets with cochairmen of the Minsk Group and Azerbaijani Foreign Minister E. Mamediarov. 23 May —President Kocharian receives NATO Secretary General’s Special Representative for Central Asia and the Southern Caucasus Robert Simmons. 25 May —Armenian Prime Minister A. Margarian participates in a meeting of the Council of CIS Heads of Government (Dushanbe). 4-5 June —Another extended meeting of Armenian President Robert Kocharian and Azerbaijani President Ilham Aliev is held with the participation of the foreign ministers of both countries, cochairmen of the OSCE Minsk Group, current chairman of the OCSE in Europe Karel De Gucht, and personal representative of the current chairman of the OSCE Anjey Kasprshik (Bucharest).

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5 June —President Kocharian speaks at the Black Sea Forum for Dialog and Partnership (Bucharest). 10 June —President Kocharian receives members of the Ago Group led by Permanent Representative of Germany in the Council of Europe Ronald Wegener. 12 June —President Kocharian meets with Micheline Calmy-Rey, head of the Swiss Confederation Federal Department of Foreign Affairs (FDFA). 13 June —Armenian Foreign Minister V. Oskanian meets with Azerbaijani Foreign Minister E. Mamediarov. 14 June —Defense Minister S. Sarkisian and Foreign Minister V. Oskanian participate in a joint Northern Alliance-Armenia Council sitting. 17 June —President Kocharian receives IMF Managing Director Rodrigo de Rato and the delegation headed by him, who arrive in Armenia to participate in the representative meeting of the Holland Group at the IMF and the World Bank. 23 June —President Kocharian participates in a regular session of the CSTO (Minsk). 5 July —President Kocharian pays a three-day working visit to the Islamic Republic of Iran, during which he meets with Iranian President Mahmoud Ahmadinejad. 7 July —Prime Minister A. Margarian makes a three-day working visit to Georgia to participate in the 5th sitting of the Bilateral Intergovernmental Commission on Economic Cooperation Issues. 11-12 July —Lebanon Foreign Minister and head of the diaspora Fauzi Salluh visits Armenia. 13 July —President Kocharian holds the first meeting of the Commission on Cooperation Coordination with European Structures. 24 July —President Kocharian receives Peter Semneby, the EU’s special representative to the Southern Caucasus. 29 July —President Kocharian receives U.S. Co-Chair of OSCE Minsk Group Matthew J. Bryza. 15 August —Armenian President Robert Kocharian meets with Russian President Vladimir Putin (Sochi). 21 August —Antonio Guterres, U.N. High Commissioner for Refugees, visits Armenia. 8 September —The U.N. General Assembly approves by consensus the Resolution on the Occupied Territories of Azerbaijan, expressing serious concern about “the fires in the affected territories, which are causing immense environmental damage.” 29 September- —French President Jacques Chirac pays a state visit to Armenia. 1 October 2 October —President Kocharian receives a EU Troika delegation headed by Erkki Tuomioja, foreign minister of Finland, the country chairing in the EU. 3 October —President Kocharian receives the cochairman of the OSCE Minsk Group and the personal representative of the current chairman of the OSCE, who are in Armenia on a regional visit. 4 October —President of Romania Traian Basescu pays a two-day official visit to Armenia. 11 October —Chairman of the National Assembly of Armenia T. Torosian receives a delegation headed by Guy de Vel, Director General of Legal Affairs, Council of Europe.

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12 October —President Kocharian receives NATO Secretary General’s Special Representative for Central Asia and the Southern Caucasus Robert Simmons. 12 October —President Kocharian receives OFID (OPEC Fund for International Development) Director General Suleyman Al-Herbish. 13 October —President Kocharian receives Thomas Hammarberg, Council of Europe Human Rights Commissioner. 16 October —Prime Minister A. Margarian pays a three-day working visit to France to participate in the events devoted to the 15th anniversary of Armenia’s independence and opening of the Year of the Republic of Armenia in the French Republic. 20 October —Chairman of the National Assembly of Armenia T. Torosian receives a delegation headed by Xu Jialu, Vice-Chairman of the Standing Committee of the National People’s Congress, which is in Armenia on an official visit. 23 October —President Kocharian receives Belorussian Prime Minister S. Sidorskiy, who is in Armenia on an official visit. 24 October —Armenian Foreign Minister V. Oskanian meets with Azerbaijani Foreign Minister E. Mamediarov. 30-31-October —Within the framework of a working visit to Moscow, Armenian President Robert Kocharian meets with Russian President Vladimir Putin and Government Chairman Mikhail Fradkov. 6 November —An Armenian delegation headed by President Kocharian pays a two-day official visit to the capital of Kazakhstan, Astana. 14 November —Armenian Foreign Minister V. Oskanian signs a memorandum, according to which the Armenian Action Plan with the EU under the European Neighborhood Policy Program comes into effect. 15 November —President Kocharian pays a three-day working visit to Germany. 21 November —President Kocharian receives cochairmen of the OSCE Minsk Group, Yu. Merzliakov (Russia) and Bernard Facier (France), as well as Anjey Kasprshik, a personal representative of the current chairman of the OSCE. 22-25 November —President Kocharian pays a state visit to the Republic of Cyprus. 28 November —President Kocharian arrives in Minsk to participate in a regular sitting of the Council of CIS Heads of State. Within the framework of this summit, the third meeting in 2006 between President Robert Kocharian and Azerbaijani President Ilham Aliev is held. 17-18 December —Armenian Foreign Minister V. Oskanian visits Iran, where he meets with his Iranian colleague Manouchehr Mottaki, Iranian President Mahmoud Ahmadinejad, Secretary of Iran’s Supreme National Security Council (SNSC) Ali Larijani, and Iranian Parliament Speaker Gholam Ali Haddad-Adel.

Azerbaijan Republic

19 January —President Aliev holds talks with Charles F. Wald, Deputy Commander, U.S. European Command Headquarters.

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23-25 January —Russian Defense Minister, Deputy Chairman of the Russian Government, S. Ivanov, visits the republic. 29 January- —G. Khaindrava, State Minister of Georgia, Chairman of the Commission for 1 February Repatriation of the Population Deported from Georgia in the 1940s visits the republic. 2 February —President Aliev receives a delegation headed by Deputy Speaker of the Georgian Parliament, President of the Georgian Chamber of Commerce and Industry J. Inaishvili. 9-12 February —President Aliev pays a working visit to France. 9-13 February —A delegation of the U.S. Jewish community, the Conference of Presidents of Major American Jewish Organizations, visits the republic. 10 February —Presidents Ilham Aliev and Jacques Chirac meet in Paris. 10-11 February —The Azerbaijani and Armenian presidents hold talks in Rambouillet. 21 February —Ceremonial opening of the Year of Russia in Azerbaijan. 21-22 February —Russian President Vladimir Putin visits Azerbaijan. 23 February —The deputy foreign ministers of the GUAM states meet in Baku to discuss intensifying joint efforts to settle the conflicts. 7-10 March — President Aliev pays an official visit to Japan. 14 March —President Aliev meets with U.S. Deputy Secretary of State for Europe and Eurasia D. Fried. 14 March —President Aliev meets with a delegation headed by Rumanian Minister of Defense T. Atanasiu. 16 March —The Second World Azerbaijanis Congress is held in Baku. 17 March —President Aliev meets with EU Special Representative for the Southern Caucasus P. Semneby. 30 March —President Aliev meets with a delegation headed by Italian Minister of Justice R. Castelli. 4-5 April —Official visit of Turkish President A.N. Sezer to Azerbaijan. 25-28 April —President Aliev pays an official visit to the U.S. 4 May —President Aliev holds talks with Iranian President M. Ahmadinejad in Baku. 10-12 May —President of the Republic of Korea Roh Moo-hyun pays an official visit to Azerbaijan. 23 May —Summit of the heads of GUAM states is held in Kiev. 23 May —Kiev Declaration on Creating an Organization for Democracy and Economic Development—GUAM. 4-5 June —President Aliev pays a working visit to Rumania. 4 June —The Azerbaijani and Armenian presidents hold talks in Bucharest. 8-9 June —Lithuanian President V. Adamkus pays an official visit to Azerbaijan. 16-17 June —President Aliev pays a working visit to Kazakhstan. 16 June —The Azerbaijani and Russian presidents meet in Almaty.

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19-21 June —The Thirty-Third Session of the Islamic Conference of Foreign Ministers is held in Baku. 3-4 July —NATO Assistant Secretary General for Public Diplomacy Jean Fournet visits Azerbaijan. 3-8 July —NATO Week is held in Azerbaijan. 12-13 July —President Aliev pays a working visit to Turkey. 12 July —The Azerbaijan and Georgian presidents, as well as the Turkish Prime Minister, meet in Istanbul. 21-23 July —President Aliev pays a working visit to the Russian Federation. 22 July —The presidents of the CIS member states hold an unofficial meeting in Moscow. 27-29 August —President Aliev pays an official visit to Slovenia. 3-4 September —President Aliev pays a working visit to Turkey. 3 September —President Aliev meets with Turkish Prime Minister R.T. Erdoðan. 7 September —The U.N. General Assembly adopts a resolution on The Situation in the Occupied Territories of Azerbaijan by consensus. 7-8 September —Ukrainian President Viktor Iushchenko pays an official visit to Azerbaijan. 11-12 September —5th sitting of the ministers of tourism of the member states of the Organization of the Islamic Conference is held in Baku. 17-19 September —President Aliev pays a working visit to Turkey. 22-23 September —President Aliev pays a working visit to Germany. 25 September —Sitting of the Council of Foreign Ministers of the GUAM Organization for Democracy and Economic Development is held in New York. 3-5 October —President Aliev pays a state visit to Latvia. 11-12 October —President of Rumania T. Basescu pays an official visit to Baku. 17-18 October —President Aliev pays an official visit to Belarus. 6-8 November —Prime Minister of Jordan M. Suleiman al-Bakhit pays an official visit to Azerbaijan. 6-8 November —President Aliev pays a working visit to Belgium. 7 November —Memorandum of Understanding on Strategic Energy Partnership between the Republic of Azerbaijan and the European Union is signed (Brussels). 8-11 November —President Aliev pays a working visit to the Russian Federation. 14 November —The EU-Azerbaijan Action Plan is signed. 16-20 November —President Aliev pays a working visit to Turkey. 20-21 November —President Aliev pays an official visit to the United Arab Emirates. 24-25 November —National Assembly Chairman of Bulgaria G. Pirinski pays an official visit to Azerbaijan. 27-28 November —President Aliev pays a working visit to Belarus. 28 November —The presidents of Azerbaijan and Armenia hold talks in Minsk. 28 November —President Aliev meets with Georgian President M. Saakashvili in Minsk. 28 November —President Aliev meets with Ukrainian President V. Iushchenko in Minsk.

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December —The first gas deliveries along the Baku-Tbilisi-Erzurum pipeline. 28 December —The Azerbaijani Cabinet of Ministers approves the National Plan for Implementing the Project to Assist Commerce and Transportation of GUAM in 2007-2011. 29 December —The Milli Mejlis (parliament) of the Republic of Azerbaijan ratifies the Charter of the GUAM Organization for Democracy and Economic Development signed on 23 May, 2006 in Kiev.

Georgia

6 March —The United States Mission to the OSCE makes a statement on the situation in South Ossetia. 27 March —Georgian Prime Minister welcomes OSCE involvement in seeking peaceful solutions to the frozen conflicts. 7 April —The United States Mission to the OSCE adopts a declaration on the recent events in Georgia-South Ossetia. 7 April —The United States Mission to the OSCE makes a statement on South Ossetia. 8 April —The OSCE Permanent Council makes Statement No. 604 on Georgia. 23 May —The media publish a joint GUAM-U.S. statement. 23 May —Participants in the GUAM summit adopt a declaration on creating an Organization for Democracy and Economic Development within this regional structure (Kiev). 23 May —The heads of state of the Organization for Democracy and Economic Development—GUAM sign a joint declaration on conflict settlement. 14-17 June —The Donors Conference on South Ossetia pledges almost 10 million Euros for economic development in Georgia-South Ossetia (Brussels). 22 June —Participants in the U.S.-EU summit make a declaration on promoting peace, human rights and democracy worldwide. 30 June —The EU makes a statement on South Ossetia. 6 July —U.S. President George Bush receives Georgian President Mikhail Saakashvili at the White House. 12 July —OSCE Chairman calls for calm and restraint in the zone of the Georgian- Ossetian conflict. 14 July —The Council of Europe makes a statement on Georgia. 19 July —The country’s parliament publicizes a resolution on the activity of the peacekeeping forces in Georgian territory. 21 July —The media publish a declaration on behalf of the Council of Europe on the recent developments in Georgia, Abkhazia, and South Ossetia. 14 August —The U.S. Mission to the OSCE makes a statement on the situation in Georgia. 12 September —The U.S. Mission to the OSCE makes a statement on the current situation in Georgia.

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12 September —OSCE Chairman urges all sides to ensure calm in the Georgian-Ossetian conflict zone and find workable solutions. 13 September —Council of Europe Secretary General calls for talks instead of a “referendum” in the Georgian region of South Ossetia. 29 September —Lithuania urges Russia to constructive cooperation with Georgia. 3 October —EU Chairman welcomes the decision by the Georgian authorities to release four Russian officers. 17 October —The Estonian Parliament makes a statement on the state of Georgian-Russian relations. 20 October —The U.S. Mission to the OSCE makes a statement on Russia’s sanctions against Georgia. 2 November —The Presidium of the Baltic Assembly makes a statement on the pressure by the Russian Federation against Georgia. 12 November —The press publishes a declaration on behalf of the EU on the so-called referendum and so-called presidential elections in South Ossetia. 13 November —Council of Europe Secretary General gives his opinion on the vote in South Ossetia. 14 November —Latvian Foreign Minister does not recognize the “referendum” in South Ossetia. 14 November —OSCE Chairman makes a statement on the referendum in South Ossetia. 17 November —NATO Parliamentary Assembly prepares a resolution on relations between Georgia and the Russian Federation (Quebec). 30 November —Addressing a conference in Riga, Latvian President Dr. Vaira Vike-Freiberga also mentions the Georgian question. 30 November —While participating in a joint press conference with President Ilves of Estonia, U.S. President George Bush mentions the Georgian question, among other things. 30 November —During his inaugural address at the Riga summit, NATO Secretary General mentions the Georgian question, among other things. 30 November —During his visit to Latvia, U.S. President George Bush discusses NATO’s problems and also mentions the Georgian question. 10 December —The European Union makes a statement on the so-called referendum and so- called presidential elections in South Ossetia on 12 November. 18 December —The European Commission makes a statement against racism and intolerance with respect to events affecting persons of Georgian origin in the Russian Federation.

Republic of Kazakhstan

12 January —President Nazarbaev meets with Russian President V. Putin, who was in Astana on an official visit. 19-20 January —A Kazakhstan delegation participates in the Regional Implementation Meeting for Asia and the Pacific for the 14th Session of the U.N. Commission on Sustainable Development (Bangkok).

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25 January —President Nazarbaev meets with Russian President V. Putin within the framework of a special session of the EurAsEC Interstate Council (St. Petersburg). 28 January —Kazakhstan Deputy Foreign Minister R. Zhoshybaev is awarded with a medal of honor of the Republic of Philippines Congress in recognition of Kazakhstan’s contribution to establishing intercivilizational mutual understanding. 21 February —President Nazarbaev receives First Deputy Prime Minister of Sweden Bosse Ringholm. 17 March —The first Kazakhstan Investment Summit ends in London. 19-20 March —President Nazarbaev pays a state visit to the Republic of Uzbekistan. 27 March —President Nazarbaev receives current OSCE chairman, Belgian Foreign Minister Karel De Gucht. 3 April —President Nazarbaev makes a two-day official visit to Moscow. 21 April —UNIFEM highly appraises the document entitled Strategy for Kazakhstan Joining the World’s 50 Most Competitive Countries. 4 May —President Nazarbaev holds meetings with Minister of Foreign Affairs of the Netherlands Bernard Bot and European Commission Energy Commissioner Andris Pibalgs. 5 May —President Nazarbaev meets with U.S. Vice President R. Cheney who came to Kazakhstan on an official visit. 18 May — President Nazarbaev meets with Turkish Prime Minister R.T. Erdoðan (Antalia). 20 May —President Nazarbaev meets with Russian President V. Putin (Sochi). 3-5 June —A Small Kurultai of Kazakhs living in Europe is held with the assistance of the Kazakhstan Embassy in France. A Kazakhstan delegation headed by First Deputy Chairman of the World Association of Kazakhs T. Mamashev takes part in it (Paris). 6 June —On the first day of his official visit to the Islamic Republic of Iran, Foreign Minister K. Tokaev meets with the country’s president, M. Ahmadinejad. 12 June —President Nazarbaev takes part in an OSCE Tolerance Implementation Meeting on Promoting Inter-Cultural, Inter-Religious and Inter-Ethnic Understanding (Almaty). 13 June —President Nazarbaev arrives in Shanghai to participate in the anniversary meeting of the SCO Council of Heads of State devoted to the 10th anniversary of the Shanghai Five and the fifth anniversary of the SCO. 17 June —President Nazarbaev opens the Second Summit of the Conference on Interaction and Confidence-Building Measures in Asia (CICBMA) (Almaty). 26 June —Within the framework of a state visit to Malaysia, President Nazarbaev meets the country’s prime minister, Abdullah bin Ahmad Badawi. 4 July —President Nazarbaev meets with Kyrgyz President K. Bakiev, who arrived in Astana on a two-day official visit. 5 July —President Nazarbaev receives His Royal Highness, Prince Andrew, the Duke of York.

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11 July —President Nazarbaev pays a state visit to the Republic of Croatia. 17 July —President of the Republic of Kazakhstan, Chairman of the Council of CIS Heads Nursultan Nazarbaev, talks before a working session of the G8. 22 July —Kazakhstan President, Chairman of the Council of CIS Heads Nursultan Nazarbaev talks at an informal Commonwealth summit (Moscow). 15 August —President Nazarbaev arrives in Sochi to participate in an informal meeting of the heads of state of the Eurasian Economic Community. 28 August —President Nazarbaev meets with Japanese Prime Minister J. Koizumi, who arrived in Kazakhstan on an official visit. 1 September —An informal meeting of the Central Asian heads of state is held in Astana. 4 September —President Nazarbaev meets with Uzbekistan President I. Karimov. 8 September —A ceremony devoted to signing the Treaty on a Nuclear Free Zone in Central Asia is held in Semipalatinsk. 12 September —The Second Congress of the Leaders of World and Traditional Religions opens at the Palace of Peace and Accord in Astana. 22 September —Foreign Minister K. Tokaev talks at the general debates of the 61st session of the U.N. General Assembly (New York). 22-23 September —At a working meeting in Madrid, President Nazarbaev meets with Spanish King Juan Carlos I. 28 September —During an official visit to the United States, President Nazarbaev holds several meetings with U.S. government officials. 3 October —The forum on border areas of Kazakhstan and Russia ends, during which several Kazakhstan-Russian agreements were signed and a joint press conference of the heads of the two states was held. 4 October —Foreign Minister K. Tokaev meets with NATO Secretary General, Mr. Jaap de Hoop Scheffer (Brussels). 19 October —Foreign Minister K. Tokaev meets with European Commissioner for External Relations and European Neighborhood Policy B. Ferrero-Waldner. 25 October —President Nazarbaev meets with President of the United Arab Emirates Sheikh Khalifa bin Zayed al-Nahayan (Shymkent). 30-31 October —The sixth session of the Kazakh-German Intergovernmental Commission on Ethnic Germans Living in Kazakhstan is held in Berlin. 2 November —Kazakhstan is elected as a member of the U.N. Economic and Social Council. 6 November —President Nazarbaev meets with Armenian President R. Kocharian. 7 November —President Nazarbaev meets President of Egypt Hosni Mubarak, who came to Kazakhstan on his first official visit. 16 November —President Nazarbaev arrives in Antalia to take part in the 8th Summit of Turkic-Speaking Nations. 16 November —Presentations of the Regional Finance Center (Almaty) and Kazakh-German Forum on Cluster Policy of Kazakhstan are held in the largest business centers of Germany, Frankfurt-on-Main and Düsseldorf, respectively.

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20 November —President Nazarbaev arrives on an official visit to the United Kingdom of Great Britain and Northern Ireland. 28 November —President Nazarbaev takes part in a sitting of the Council of CIS Heads of State (Minsk). 29 November —President Nazarbaev pays an official visit to the Hashemite Kingdom of Jordan. 2 December —President Nazarbaev meets with Premier of the PRC State Council Wen Jiabao. 4 December —President Nazarbaev pays a working visit to the Arab Republic of Egypt. 6 December —President Nazarbaev meets with Secretary General of the Council of the European Union Javier Solana (Brussels). 19-22 December —President Nazarbaev pays a state visit to the People’s Republic of China.

Kyrgyz Republic

3 January —The European Commission announces it will allot Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan, and Turkmenistan 66 million euro to assist them in the fight against poverty and to support the institutional, legal, and administrational reforms. 4 January —The World Bank begins the Small Grant Program in Kyrgyzstan for nongovernmental organizations. 11 January —President Bakiev participates in the inauguration of Kazakhstan President Nursultan Nazarbaev (Astana, Kazakhstan). 13 January —European Commissioner for External Relations and European Neighborhood Policy, B. Ferrero-Waldner, informs Kyrgyz Foreign Minister A. Jekshenkulov of the European Commission’s deep concern about the extremely high threat of the repatriation of four Uzbek refugees by the Kyrgyz authorities. 16 January —The Foreign Ministry Information Department divulges comments on the drawing up of a new conception of Kyrgyzstan’s foreign policy, in which the Russian Federation, the PRC, and the U.S. are declared as priority areas of strategic cooperation and partnership. 16 January —The U.S. State Department announces its intent to allot 0.5 million dollars to Kyrgyzstan’s opposition mass media for creating five information centers of democracy in its regions. 24 January —U.S. Ambassador to Kyrgyzstan Marie Jovanovich is presented with a memorandum with new conditions of the agreement on the U.S. military base’s further stay in the country. 24-25 January —President Bakiev participates in the work of a special sitting of the Council of the Eurasian Economic Community (St. Petersburg, Russia). 1 February —Representatives of the U.S. Millennium Challenge Corporation visit Kyrgyzstan. 9 February —Twenty members of the Kyrgyz Constitution Conference are invited to the U.S. for 10-day courses on the constitution and foundations of democracy. 15 February —President Bakiev announces his intention to raise the rent of the Manas airbase for the U.S. from two million to 200 million dollars a year.

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16 February —President Bakiev discusses regional security issues with Secretary General of the Collective Security Treaty Organization N. Bordiuzha (Bishkek). 22 February —Prime Minister Kulov signs an order On the Agreement between the Kyrgyz Government and the Uzbekistan Government on Cooperation in Publishing and Distributing Periodicals and Books. 22 February —The Jogorku Kenesh ratifies an agreement between the governments of Kyrgyzstan and Uzbekistan on border checkpoints, signed on 24 July, 2004 in Bishkek. 2 March —A mission of the International Monetary Fund headed by Deputy Director of the Middle East and Central Asia Department Paulo Neuhaus arrives in Kyrgyzstan. 3 March —During a meeting with the republic’s Foreign Minister A. Jekshenkulov, OSCE Secretary General Marc Perrin de Brichambaut expresses his interest in developing OSCE programs aimed at strengthening human rights, promoting the democratization process, and intensifying work on pertinent projects for fighting corruption and poverty in Kyrgyzstan (Bishkek). 14 March —USAID begins implementing a project to improve economic conditions in the communities of Kyrgyzstan’s southern regions. 27 March —Kyrgyz President Kurmanbek Bakiev and President Vladimir Putin discuss urgent issues of Kyrgyz-Russian interaction in a telephone conversation. 28 March —OSCE Chairman-in-Office, Belgian Foreign Minister Karel De Gucht, pays a working visit to Kyrgyzstan. 4 April —EU special representative for Central Asia Jan Kubish pays a working visit to Kyrgyzstan to hold consultations on future EU policy in Central Asia. 6 April —President Bakiev makes a decision to create a working commission to clarify Kyrgyzstan’s conception on the threshold program of the Millennium Challenge Corporation. 10 April —U.S. Assistant Secretary of State Richard Boucher unexpectedly changes his itinerary and arrives in Bishkek. 11 April —President Bakiev receives U.S. Assistant Secretary of State Richard Boucher. 11 April —U.S. Assistant Secretary of State Richard Boucher meets with the leaders of Kyrgyzstan’s civil society. 18 April —President Bakiev says that Kyrgyzstan will retain the right to terminate the bilateral agreement on deployment of U.S. servicemen at the Manas airbase, if the talks are not completed by 1 June. 24-25 April —Official visit by President Kurmanbek Bakiev to Russia, during which he holds talks with Russian President Vladimir Putin, State Duma Speaker Boris Gryzlov, Government Chairman Mikhail Fradkov, Minister of Economic Development and Trade Gherman Gref, Head of Gazprom Alexei Miller, Head of Russia’s Unified Energy System (RAO UES) Anatoli Chubais, Moscow Mayor Iuri Luzhkov, and Moscow Region Governor Boris Gromov. 28 April —President Bakiev and Prime Minister Kulov receive a delegation of the Russian Security Council headed by its Secretary, I. Ivanov.

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2 May —Representative of the President of Kazakhstan, Vice-Foreign Minister of Kazakhstan R Zhoshybaev pays a working visit to Kyrgyzstan. 16 May — Acting first deputy prime minister D. Usenov discusses the further implementation of conditions for Kyrgyzstan joining the American Millennium Challenge Account program with U.S. Ambassador Marie Jovanovich. 17 May —Kyrgyzstan and Kazakhstan sign a protocol for settling problems involving the channel of the border river Chu. 31 May-1 June —Bishkek and Washington hold the first round of talks on conditions for the state of military and civilian personnel of the U.S. Department of Defense in Kyrgyzstan. 1 June —Toraga (speaker) of the Jogorku Kenesh M. Sultanov and a group of parliamentary deputies discuss with Senator and Elected Chairman of the French delegation for the WEU Assembly Josette Durrieu the political and economic situation in Kyrgyzstan, as well as the parliament’s role in resolving urgent problems. 3 June —EurAsEC Secretary General Grigory Rapota pays a working visit to Kyrgyzstan. 8 June —President Bakiev supports Iran’s membership in the Shanghai Cooperation Organization. 9-10 June —President Bakiev pays a state visit to China, during which the sides sign a Joint Declaration of the heads of state. 15 June —President Bakiev participates in the SCO anniversary summit (Shanghai, China). 16 June —Ex-president of the unrecognized Turkish Republic of Northern Cyprus R. Denktaþ arrives in Kyrgyzstan. 17 June —President Bakiev participates in the work of the Second Summit of the Conference on Interaction and Confidence-Building Measures in Asia (Almaty, Kazakhstan). 23 June —At a session of the CSTO, President Bakiev states that he considers the Organization’s main task to be preventing possible negative consequences for Afghanistan, Iraq, and around Iran (Minsk, Belarus). 23 June —President Bakiev participates in the work of an extended sitting of the Interstate EurAsEC Council (Minsk, Belarus). 30 June —Expert groups of Kyrgyzstan and Uzbekistan come to terms on a stretch of state border of 2.5 km in length. 30 June —The Jogorku Kenesh ratifies the Kyrgyz-Kazakh Alliance Treaty signed on 25 December, 2003 in Astana (Kazakhstan). 4-5 July —President Bakiev pays an official visit to Kazakhstan, during which he and the Kazakhstani president sign a Declaration on the Further Intensification of Bilateral Relations and 11 intergovernmental agreements. 6 July —Prime Minister Kulov signs an order to approve the draft agreement between the Kyrgyz government and Turkish government on gratuitous military aid. 6 July —A delegation of the Venice Commission of the Council of Europe headed by Secretary General Giovanni Buquicchio discusses with Prime Minister Kulov, speaker of the Jogorku Kenesh M. Sultanov, and chairman of the

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Constitutional Court Ch. Baekova three versions of the Kyrgyzstan Constitution and begins preparing its comments on the course of constitutional reform in the republic. 7 July —Russian Ambassador to Kyrgyzstan E. Shmagin discusses with the leaders of several public associations of ethnic Russians of Kyrgyzstan the Russian presidential decree On Measures for Assisting the Voluntary Resettlement to the Russian Federation of Compatriots Living Abroad. 10 July —Employees of the U.S. embassy Kaku Kimara and Pole Polites are expelled from Kyrgyzstan. 10 July —The preliminary marking of the Kyrgyz-Uzbek border in a section 4 km 450 m in length is approved (Tashkent, Uzbekistan). 11-12 July —German State Minister for Foreign Affairs Gernot Erler pays a working visit to Kyrgyzstan with respect to Germany’s development of vectors and tools of cooperation with the Central Asian states during Germany’s chairmanship in the EU (first half of 2007). 12-14 July —The second round of the Kyrgyz-American talks on the conditions for the U.S. military contingent’s stay at the Manas airbase ends. Washington promises to allot Bishkek more than 150 million dollars in 2007 (after approval by U.S. Congress) in the form of general aid and compensation. 21-22 July —President Bakiev participates in an unofficial meeting of CIS heads of state (Moscow, Russia). 23-24 July —Vice-Speaker of the Russian State Duma Vladimir Zhirinovskiy pays a visit to Kyrgyzstan in order to strengthen Kyrgyz-Russian relations. 25 July —Kyrgyz Defense Minister I. Isakov and a delegation of the U.S. Central Army Command headed by General John Abizaid draw conclusions and discuss the prospects of further bilateral cooperation in the military sphere. 28 July —In response to the deportation of two U.S. diplomats from Kyrgyzstan, Washington expels employees of the Kyrgyzstan National Security Service taking a training course in fighting international terrorism, without making any complaints against them. 4 August —President Bakiev approves the Law on the Ratification of the Agreement among the Republic of Kazakhstan, the Kyrgyz Republic, and the Republic of Uzbekistan on the Border Intersection Point among the Three States, signed on 15 July, 2001 in Shanghai. 4 August —President Bakiev approves the Law on the Ratification of the Program of Cooperation between Kyrgyzstan and the PRC for 2004-2014 (signed on 21 September, 2004 in Bishkek). 10-11 August —U.S. Assistant Secretary of State Richard Boucher arrives in Bishkek to discuss the level of, and prospects for, cooperation between Kyrgyzstan and the U.S. 15 August —The Kyrgyz leadership supports Kazakhstan President Nursultan Nazarbaev’s idea to create a Central Asian Union. 15-17 August —President Bakiev participates in an informal meeting of the heads of the EurAsEC states, during which the presidents come to terms on creating a Customs Union (Sochi, Russia).

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15-17 August —Kyrgyz-German talks on military shipments are held at the Kyrgyzstan Ministry of Defense. 24-25 August —Kyrgyz Foreign Minister A. Jekshenkulov pays a working visit to Uzbekistan. 28 August- —Kyrgyzstan and Kazakhstan government delegations discuss the demarcation of the Kyrgyz-Kazakh state border at a joint sitting (Almaty, Kazakhstan). 1 September —President Bakiev participates in an informal meeting of the heads of the 2 September Central Asian states (Astana, Kazakhstan). 1 September —A Kyrgyz embassy opens in Pakistan (at the general consulate). 4-6 September —President Bakiev makes an official visit to Turkey. 8 September —Foreign Minister A. Jekshenkulov signs a Treaty on a Nuclear-Free Weapon Zone in Central Asia. Kyrgyzstan is the depository of the treaty (Semipalatinsk, Kazakhstan). 11 September —President Bakiev participates in the events dedicated to 9/11 in New York at the Manas airbase. 11-14 September —The Fifth Sitting of the Kyrgyz-Russian Commission for Military-Technical Cooperation is held (Cholpon-Ata, Kyrgyzstan). 12 September —Prime Minister Kulov participates in a sitting of the Council of SCO heads of government, where he emphasizes the comprehensive strengthening of trade and economic interaction among the Organization’s member states. 12-14 September —A parliamentary delegation of the Islamic Republic of Iran, headed by Iranian Parliament Speaker Gholam Ali Haddad-Adel, makes an official visit to Kyrgyzstan. 13 September —The Slovakian government equips the Kyrgyzstan Ministry of Emergencies with a system for monitoring the radiation level in the repositories for tailings. 14 September —President Bakiev and Prime Minister Kulov hold talks with the Iranian parliamentary delegation. 17-18 September —A Kyrgyz delegation headed by first deputy prime minister D. Usenov takes part in the Tenth Kurultai of Turkic-speaking states and peoples (Antalia, Turkey). 22 September —At general debates of the 61st session of the U.N. General Assembly, Kyrgyz Foreign Minister A. Jekshenkulov announces that Kyrgyzstan has joined the appeal to increase the number of permanent and non-permanent members of the U.N. Security Council. 22-23 September —An official Kyrgyz delegation headed by Prime Minister Kulov visits the Yaroslavl Region of the Russian Federation. Governor of the Yaroslavl Region and Governor of Issyk Kul Region enter an agreement on cooperation. 2 October —Kyrgyz President Kurmanbek Bakiev and Russian President Vladimir Putin discuss Kyrgyz-Russian cooperation issues in a telephone conversation. 3-4 October —President Bakiev makes an official visit to Uzbekistan, during which the sides sign a joint statement on further development of international cooperation. 3-5 October —Deputy government chairman, Russian defense minister S. Ivanov participates in the active phase of the Iug-2006 antiterrorist part of the joint Kyrgyz- Russian exercises held in Kyrgyzstan.

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7 October —Political Director of the German Ministry of Foreign Affairs Michael Schaefer visits Kyrgyzstan to discuss bilateral and multilateral cooperation between Kyrgyzstan and Germany. 12 October —EU special representative for Central Asia Pierre Morel arrives in Bishkek to discuss the state and prospects for cooperation between Kyrgyzstan and the EU. 16 October —Kyrgyz Foreign Minister A. Jekshenkulov discusses urgent bilateral cooperation issues with Uzbekistan Ambassador to Kyrgyzstan A. Salakhitdinov. 17 October —Deputy Assistant U.S. Secretary of State for South and Central Asian Affairs Evan Feigenbaum arrives in Bishkek. The purpose of his visit is to acquaint himself with the political situation that has developed in Kyrgyzstan. 18 October —Kyrgyz President Kurmanbek Bakiev and Russian President Vladimir Putin discuss urgent bilateral cooperation and interaction within the CIS in a telephone conversation. 26 October —Representatives of the U.S. and Kyrgyz military departments discuss bilateral cooperation issues in the military sphere. 27 October —Prime Minister Kulov takes part in the 17th sitting of the International Council of EurAsEC at the head of government level (Moscow, Russia). 27-30 October —Prince Aga Khan IV visits Kyrgyzstan. 4 November —Within the framework of a working visit to Central Asia, German Federal Minister of Foreign Affairs Frank-Walter Steinmeier arrives in Kyrgyzstan. 17 November —President Bakiev participates in the work of the 8th summit of Turkic- speaking states (Antalia, Turkey). 27 November —President Bakiev makes an official visit to Belarus, during which the heads of the two states sign a Treaty of Friendship and Cooperation. 28 November —President Bakiev participates in a meeting of the Council of Heads of CIS States (Minsk, Belarus). 11 December —Presidents of Kyrgyzstan and Uzbekistan discuss bilateral cooperation issues in a telephone conversation. 14 December —Prime Minister Kulov signs an order on approval of the draft of a framework agreement between the Kyrgyzstan and Kazakhstan governments on creating international centers of border cooperation. 16 December —The government makes a decision to study the Agreement on the Status of U.S. Servicemen at the Manas airbase again. 22 December —President Bakiev sends a telegram expressing condolences to Deputy Chairman of the Turkmenistan Cabinet of Ministers, Acting Head of State G. Berdymukhammedov, regarding the premature death of Saparmurat Niyazov.

Republic of Tajikistan

11 January —President Rakhmonov participates in the inauguration ceremony of Kazakhstan President Nursultan Nazarbaev in Astana and holds bilateral meetings with him and with the presidents of other countries: Russia—

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Vladimir Putin, Uzbekistan—Islam Karimov, Ukraine—Viktor Iushchenko, as well as U.S. Secretary of Agriculture Mike Johanns and Under Secretary for Economic, Energy and Agricultural Affairs Josette Sheeran Shiner. 12 January —The Russian Silovye Mashiny Joint-Stock Company wins a tender and signs a contract for 80 million dollars for delivering the main energy equipment for Sangtuda-1 HPP. 17-18 January —President Rakhmonov pays an official visit to Iran, during which he holds bilateral talks with the Iranian president and meets with the country’s supreme leader Ali Hamenei. 19-21 January —President Rakhmonov pays an official visit to Turkey, during which he holds talks with the country’s president, Ahmet Necdet Sezer, and Prime Minister Recep Tayyip Erdoðan. 24 January —President Rakhmonov makes a working visit to St. Petersburg to participate in the work of the EurAsEC Council. 15 February —The U.N. agencies in Dushanbe make an appeal for 2006, which asks for financial assistance of more than 51.2 million dollars for further support of Tajikistan’s sustainable development. 31 March —The republic’s government approves measures to simplify visa conditions for the citizens of 68 countries. 3-5 April —Tajik-Russian military exercises with combat firing are held at the Lokhur testing ground. 21-22 April —A sitting of the Council of the CIS ministers of the interior is held in Dushanbe, and joint antiterrorist exercises are held in the Ramit Gorge by special units of the Interior Ministries of Armenia, Belarus, Russia, and Tajikistan. 26 April —The Security Council secretaries of Tajikistan, Kyrgyzstan, Kazakhstan, Russia, Uzbekistan and CSTO Secretary General Nikolai Bordiuzha meet behind closed doors in Dushanbe. 4-5 May —President Rakhmonov pays an official visit to Kazakhstan, where he signs several documents on the further development of bilateral cooperation. 19 May —Two hundred and fifty French servicemen arrive at the Dushanbe airport, as a result of which the size of its military contingent grew to 400 people. Three combat Mirage-2000 airplanes were also delivered. 25 May —A sitting of the CIS Council of Heads of Government is held in Dushanbe. 26 May —President Rakhmonov and Russian President Vladimir Putin discuss the execution of Tajik-Russian agreements reached during Vladimir Putin’s visit to Tajikistan in October 2004, as well as the problems of building the Rogun HPP (Sochi). 14-15 June —President Rakhmonov participates in the Shanghai SCO summit and holds bilateral talks with PRC leader Hu Jintao, which result in the signing of an agreement on granting Chinese loans to Tajikistan through the SCO (603.9 million dollars) to implement energy and transportation projects. During the summit, Emomali Rakhmonov also holds bilateral talks with the Iranian and Afghani presidents.

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7 July —Prince Andrew, Duke of York, arrives in Dushanbe on a two-day visit. 10 July —President Rakhmonov and U.S. Secretary of Defense Donald Rumsfeld discuss Afghanistan’s post-conflict reconstruction, security in Central Asia, and defense of the Tajik-Afghan border (Dushanbe). 11 July —The Tajik-Chinese project on rebuilding the Dushanbe-Khujand-Chanak highway begins. 25 July —Iranian President Mahmoud Ahmadinejad pays an official visit to Dushanbe, where the talks end in the signing of six documents. 26 July —President Rakhmonov and Iranian President Mahmoud Ahmadinejad participate in the ceremony to mark the completion of the main work on the Istiklol (Independence) Tunnel under the Anzob Pass and attend the opening of a joint venture to manufacture Khumo tractors. 26 July —Afghani President Hamid Karzai pays an official visit to Dushanbe. 26 July —The first trilateral meeting of presidents Emomali Rakhmonov, Mahmoud Ahmadinejad and Hamid Karzai is held in Dushanbe. 29 July —French Defense Minister Michelle Allio-Mari pays a three-day visit to Dushanbe. 7 August —President Emomali Rakhmonov begins his official visit to India. 15-16 August —President Rakhmonov participates in an informal summit of the Eurasian Economic Community (Sochi). 2 September —President Rakhmonov participates in an informal summit of Central Asian states. 8 September —The 6th forum of Tajiks and Persian-speaking peoples of the world is held in Dushanbe. 14 September —President Rakhmonov and Iranian Vice President A. Saidlu discuss the state of and prospects for bilateral relations. 15 September —President Rakhmonov and Pakistani Prime Minister Shaukat Aziz discuss the state and prospects for bilateral cooperation (Dushanbe). 15 September —A sitting of the heads of state of the SCO countries is held in Dushanbe. 16 September —The opening ceremony for implementing the Tajik-Chinese project for building a South-North power transmission line is held. 21 September —Tajik-Chinese antiterrorist exercises, Interaction 2006, begin. 6 October —President Rakhmonov and U.S. Assistant Secretary of State for South and Central Asian Affairs Richard Boucher discuss the prospects for bilateral cooperation (Dushanbe). 20 October —The Tajik-Chinese project for building a tunnel under the Shar-Shar Pass is launched. 3 November —President Rakhmonov and German Foreign Minister Frank-Walter Steinmeier discuss bilateral cooperation. 17 November —The Nurek optical-electronic installation of the space control system is transferred entirely into Russia’s possession. 27 November —President Rakhmonov leaves for Minsk to participate in a summit of CIS states.

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15 December —In the presence of Emomali Rakhmonov and Anatoli Chubais, the Vakhsh River is blocked off and the building of Sangtuda-1 HPP dam begins. 21 December —The Chinese Development Bank grants a loan of 70 million dollars to develop a mobile phone operator in Tajikistan—the Tajik-Chinese TK-Mobile Joint Venture. 22 December —The Asian Development Bank allots a privileged loan of 21.5 million dollars to Tajikistan and 35 million dollars to Afghanistan for cooperation between the two countries in the energy sphere.

Turkmenistan

2 January —President Niyazov holds talks with head of the Naftogaz Ukrainy company A. Ivchenko. 13 January —President Niyazov meets with Deputy Assistant Secretary of State for European and Eurasian Affairs Matthew J. Bryza and U.S. ambassador to Turkmenistan Tracey Ann Jacobson. 18-21 January —A delegation of the Chinese National Oil and Gas Corporation discussed S. Niyazov’s upcoming visit to Beijing in Ashghabad. 20 January —A government delegation of the Turkish Republic visits Turkmenistan. 22-23 January —President Niyazov pays a working visit to the Russian Federation. 30 January —President Niyazov meets with the U.S. and Turkish ambassadors to Turkmenistan and discusses with them projects for delivering natural gas via the trans-Afghan and trans-Caspian pipelines. 3 February —President Niyazov holds talks with a delegation of the Islamic Republic of Iran. 6 February —A delegation headed by EU special representative for Central Asia J. Kubish arrives in Ashghabad. 13-14 February —President of the United Arab Emirates Sheikh Khalifa bin Zayed al-Nahayan pays an official visit to Turkmenistan. 14 February —The supervisory committee for implementing the project to build the Turkmenistan-Afghanistan-Pakistan gas pipeline holds its ninth sitting. 17 February —President Niyazov holds talks with Gazprom’s Chairman of the Board A. Miller. 17-18 February —President Niyazov holds talks with a delegation of the Ukrainian heat and energy complex. 20 February —Sheikh Hamad bin Khaled al-Thani of the State of Qatar pays a visit to Ashghabad. 6 March —Energy Minister of the United Arab Emirates visits Ashghabad. 6 March —OSCE High Commissioner on National Minorities R. Ekeus visits Turkmenistan. 24-26 March —A delegation of the Naftogaz Ukrainy company holds talks in Ashghabad on the problem of settling its debt on natural gas delivered.

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29 March —OSCE chairman, Belgian Foreign Minister Karel De Gucht visits Ashghabad. 2-7 April —Turkmen President visits China. 11 April —An Iranian delegation signs an agreement in Ashghabad on natural gas deliveries for 2006-2007. 17 April —Ashghabad and OAO Gazprom hold another round of talks about further cooperation in the oil and gas spheres. 20 April —President Niyazov signs an order on creating a special Directorate for Turkmen-Chinese Cooperation under the Ministry of the Oil and Gas Industry and Mineral Resources. 24 April —Talks are held in Ashghabad with a delegation of the Islamic Republic of Afghanistan on economic cooperation issues. 18 May —The Turkmenistan State Bank for Foreign Economic Activity and the Export- Credit Bank of China sign a credit agreement (Ashghabad). The second —A PRC delegation headed by Chairman of the Chinese National Petroleum half of May Corporation Zhang Chenwu holds talks with Turkmen officials. 25 May —Director of UNESCO Tehran Office Abdin Mohamed Ali Salih awards President Niyazov with a certificate stating that the ancient Turkmen town of Kunyaurgench has been placed on the UNESCO World Heritage List. 29 May —A UAE delegation led by Saud bin Sakr Al-Kasimi, crown prince and deputy ruler of Ras Al-Khaima, visits Ashghabad. 1 June —The 7th sitting of the Joint European Union-Turkmenistan Committee is held in Ashghabad. 14 June —Talks with a delegation of Japanese business circles is held in the republic’s capital. 19 June —A report is published about the arrest of Henri Tomassini, a cultural advisor to the French embassy, and OSCE Human Dimension Officer Benjamin Moreau, a French citizen. 19 June —Talks are held with a Gazprom delegation in Ashghabad. 29 June —At talks with the Gazprom delegation, the Turkmenistan leadership announces an upcoming increase in price for gas to 100 dollars for 1,000 cu m (Ashghabad). 29-30 June —At talks with the Ukrainian delegation on natural gas deliveries, the Turkmenistan leadership announces a price hike for blue fuel to 100 dollars per 1,000 cu m and on the need to obtain a license in Russia for its transit (Ashghabad). 24-25 July —President of the Islamic Republic of Iran Mahmoud Ahmadinejad visits Turkmenistan. 25 July —Due to repair works on the major Central Asia-Center gas pipeline, the pumping of Turkmen gas is temporarily halted. 14 August —President Niyazov meets with U.S. Principal Deputy Assistant Secretary of State for South and Central Asian Affairs Steven R. Mann. 15 August —President Niyazov holds talks with a government delegation from the Kingdom of Morocco.

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21-22 August —A Chinese delegation headed by PRC First Deputy Minister of Communications Yu Guangzhou visits Turkmenistan. 31 August —Kazakhstan Foreign Minister K. Tokaev visits Turkmenistan. 4 September —A UAE delegation headed by Presidential Affairs Minister Sheikh Mansur bin Zayed al-Nahayan visits Turkmenistan. 5 September —Another round of talks with Russian Gazprom ends in the signing of a bilateral agreement. 1-3 October —A government delegation headed by State Minister of External Affairs of India Eddappakat Ahamed visits Turkmenistan. 16 October —A delegation of the All-China Assembly of People’s Representatives (parliament) visits Ashghabad. 27 October —President Niyazov meets with a delegation from Russia’s Gazprom. 27 October —President Niyazov meets with a delegation of the Ukrainian Ministry of Fuel and Energy. 2 November —President Niyazov holds talks with German Federal Foreign Minister Frank- Walter Steinmeier. 30 November —President Niyazov meets with Director General (in the rank of deputy minister) of the Russian Foreign Ministry D. Zavgaev. 11 December —President Niyazov meets (separately) with representatives of Russia’s Gazprom and with a delegation of the Ukrainian Ministry of Fuel and Energy. 11 December —President Niyazov welcomes a delegation from the Sverdlovsk Region of Russia headed by its region’s governor, E. Rossel. 18 December —President Niyazov meets with Pierre Morel, newly assigned EU Special Representative for Central Asia. 21 December —Due to the death of S. Niyazov, the Turkmenistan authorities make a statement to reiterate that the republic’s foreign policy course will remain unchanged. 24 December —Numerous foreign delegations participate in the funeral of Turkmenistan President Saparmurat Niyazov.

Republic of Uzbekistan

25 January —Uzbek-Russian gas agreement is signed in St. Petersburg. 19-20 March —Kazakhstan President Nursultan Nazarbaev makes a state visit to Uzbekistan. 2-3 May —President Karimov pays a state visit to Pakistan. 12 May —President Karimov meets with Russian President Vladimir Putin in Sochi during his working visit to the Russian Federation. 24 June —At the CSTO summit, Uzbekistan announces that it has joined this organization as a full-fledged member (Minsk). 25 July —Uzbekistan Senate Chairman Ilgizar Sobirov receives a delegation of the French Senate headed by Vice Chairman of the French Senate’s finance commission Emeri de Montesquieu.

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9 August —Richard Boucher, Assistant Secretary of State for South and Central Asian Affairs, visits Tashkent, where he meets the Uzbekistan foreign minister and president. 17 August —Participants in an informal EurAsEC summit sign a Protocol on Restoring Uzbekistan’s Membership in the CSTO (Sochi). 26 August —The Senate of the Uzbekistan parliament approves laws on the republic’s membership in the EurAsEC. 28-29 August —An EU delegation visits Tashkent. 29 August —Japanese Prime Minister Junichiro Koizumi arrives in Uzbekistan on an official visit. 30 August —The Uzbekistan authorities refuse to extend accreditation of 14 coworkers of the U.S. nongovernmental organization, Partnership in Academics and Development, registered in Massachusetts. 1 September —President Karimov pays a state visit to Kazakhstan. 24-25 September —Prime Minister of Korea Han Myung-sook visits Uzbekistan. 3-4 October —Kyrgyzstan President Kurmanbek Bakiev pays an official visit to Uzbekistan and holds talks with Islam Karimov. 24 October —A delegation headed by EU Special Representative in Central Asia Pier Morel visits Uzbekistan and holds a meeting with the country’s Foreign Minister Vladimir Norov. 27 October —The European Parliament adopts a resolution on Uzbekistan, in which it dismisses urges to intensify the sanctions against Uzbekistan by extending them for another 12 months. 1 November —President Karimov receives German Foreign Minister Frank-Walter Steinmeier at the presidential residence Oqsaroy. 3 November —The presidents of Uzbekistan and Kazakhstan discuss issues of bilateral relations and cooperation within the framework of international organizations at their informal meeting within the framework of the Interstate Coordination Council under the patronage of the leaders of both countries. 8 November —Uzbekistan Foreign Minister Vladimir Norov presents a new conception of the reforms prepared by the republic’s government to the EU-Uzbekistan Cooperation Council at its sitting in Brussels. 11 November —Activists of the Regional Branch of the Republican Russian Cultural Center meet with Ambassador Extraordinary and Plenipotentiary of the Russian Federation to the Republic of Uzbekistan Farit Mukhamedshin. 13 November —The foreign ministers of the European Union countries extend the sanctions on the government of Uzbekistan due to its refusal to permit an international investigation of the May 2005 events in Andijan. 24 November —The Uzbekistan Foreign Ministry issues an official statement, in which it accuses the U.S. State Department of a unilateral approach and double standards with respect to issues relating to the freedom of religion and belief. 30 November —Maruf Usmanov is appointed chairman of the Committee on Defense and Security of Uzbekistan.

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1 December —Deputy Prime Minister E. Shoismatov, Minister of Foreign Economic Relations, Investments, and Trade E. Ganiev, and Foreign Minister V. Norov hold talks with Afghanistan Foreign Minister Rangin Dadfar Spanta, who came to Uzbekistan on an official visit. 7 December —Representatives of Gazprom and Uzbekistan come to terms on the main provisions of an economic feasibility report and production sharing agreement on the fields of the Ustiurt Region and discuss the purchase of Uzbek natural gas by Gazprom in 2007. 12 December —President Karimov discusses the development of bilateral cooperation in the scientific, cultural, and humanitarian spheres with a Russian delegation headed by Russian presidential aide J. Pollyeva. 12-14 December —A delegation of the EU leadership, coworkers of the Secretariat of the EU Council, the European Commission, and experts from Germany, France, Great Britain, and Sweden, which is visiting Uzbekistan, holds talks with the Uzbek side on the events in Andijan. 13 December —President Karimov signs a Law on Ratification of the Protocol on Restoring Uzbekistan’s Membership in the CIS Collective Security Treaty Organization. 21 December —Turkmenistan closes the border with Uzbekistan. 22 December —President Karimov expresses its condolences to Ashghabad with respect to the death of Turkmenistan President Saparmurat Niyazov.

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LIST OF ACRONYMS

ACD Asian Cooperation Dialog ADB Asian Development Bank APEC Asia-Pacific Economic Cooperation APR Asia-Pacific Region ASEAN Association of South East Asian Nations BSECO Black Sea Economic Cooperation Organization BSTDB Black See Trade and Development Bank BTC Baku-Tbilisi-Ceyhan Oil Pipeline BTE Baku-Tbilisi-Erzerum Gas Pipeline CACO Central Asian Cooperation Organization CAEC Central Asian Economic Community CAREC Central Asia Regional Economic Cooperation CE Council of Europe CEA Central Eurasia CEC Central Election Commission CEE Central and East Europe CES Common Economic Space CIA Central Intelligence Agency CICBMA Conference on Interaction and Confidence-Building Measures in Asia CIS Commonwealth of Independent States CMCE Committee of Ministers of Council of Europe CST Collective Security Treaty CSTO Collective Security Treaty Organization EAG Eurasian Group EBRD European Bank for Reconstruction and Development ECO Economic Cooperation Organization 398 List of Acronyms

ENP European Neighborhood Policy EU European Union EurAsEC Eurasian Economic Community FDI Foreign Direct Investment GDP Gross Domestic Product GRFT Group of Russian Forces in the Transcaucasus GUAM Georgia-Ukraine-Azerbaijan-Moldova GUUAM Georgia-Ukraine-Uzbekistan-Azerbaijan-Moldova IAEA International Atomic Energy Agency ICG International Crisis Group IDB Islamic Development Bank IFC International Finance Corporation IFI International Financial Institutions ILO International Labor Organization IMF International Monetary Fund INOGATE Interstate Oil and Gas Transport to Europe IOM International Organization for Migration IPAP Individual Partnership Action Plan IRI Islamic Republic of Iran ISAF International Security Assistance Force KATB Kars-Akhalkalaki-Tbilisi-Baku LAS League of Arab States MERCOSUR South American Common Market NAFTA North American Free Trade Agreement ODIHR OSCE Office for Democratic Institutions and Human Rights of OSCE OIC Organization of the Islamic Conference OSCE Organization for Security and Cooperation in Europe OSCEMG OSCE Minsk Group PACE Parliamentary Assembly of Council of Europe PfP Partnership for Peace PRC People’s Republic of China RATS Regional Antiterrorist Structure RF Russian Federation SCO Shanghai Cooperation Organization SEA South East Asia SFDRF Southern Federal District of the Russian Federation

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SOCAR State Oil Company of Azerbaijan Republic SPECA U.N. Special Program for the Economies of Central Asia TRACECA Transport Corridor Europe-Caucasus-Asia TRNC Turkish Republic of Northern Cyprus U.N. United Nations U.S. United States of America U.S.S.R. Union of Soviet Socialist Republics UAE United Arab Emirates UNCTAD United Nations Conference on Trade and Development UNDAF United Nations Development Assistance Framework UNDP United Nations Development Program UNESCO United Nations Educational, Scientific and Cultural Organization UNFPA United Nations Fund for Population Activities UNHCR Office of the United Nations High Commissioner for Refugees UNICEF United Nations International Children’s Emergency Fund UNIDO United Nations Industrial Development Organization UNTOP United Nations Tajikistan Office of Peace-Building USAID United States Agency for International Development WB World Bank WTO World Trade Organization

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