Central Eurasia 2008

CENTRAL EURASIA 2008

Analytical ANNUAL

Published since 2005

CA&CC Press® SWEDEN 2009

1 CENTRAL EURASIAFOUNDED 2008 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 2008 Analytical Annual

CONTENTS

AFGHANISTAN

Viktor Korgun GENERAL OVERVIEW ...... 10 Viktor Korgun POLITICS ...... 13 Ubaid Okimbekov ECONOMY ...... 18 Taj Muhammad RELIGION ...... 23 Makhmud Shinvari INTERNATIONAL AFFAIRS ...... 29

REPUBLIC OF ARMENIA

Sergey Minasian GENERAL OVERVIEW ...... 36 Manvel Sarkisian POLITICS ...... 38 Haroutiun Khachatrian ECONOMY ...... 48 Granush Kharatian RELIGION ...... 55 Sergey Minasian INTERNATIONAL AFFAIRS ...... 63

AZERBAIJAN REPUBLIC

Nazim Muzaffarli GENERAL OVERVIEW ...... 72 Kenan Allahverdiev POLITICS ...... 76

4 Contents

Rasim Gasanov ECONOMY ...... 83

Elmir Guliev RELIGION ...... 92 Jannatkhan Eyvazov INTERNATIONAL AFFAIRS ...... 100

REPUBLIC OF BELARUS

Sergey Nikoliuk GENERAL OVERVIEW ...... 108

Sergey Nikoliuk POLITICS ...... 111

Alexander Sosnov ECONOMY ...... 118

Vladimir Matskevich RELIGION ...... 125

Viacheslav Pozdniak INTERNATIONAL AFFAIRS ...... 130

GEORGIA

Teymuraz Beridze GENERAL OVERVIEW ...... 141

Gia Jorjoliani POLITICS ...... 144

Nodar Khaduri ECONOMY ...... 151

Zaza Piralishvili RELIGION ...... 158

Thornike Gordadze INTERNATIONAL AFFAIRS ...... 164

REPUBLIC OF KAZAKHSTAN

Timur Shaymergenov GENERAL OVERVIEW ...... 173

Sergey Konovalov POLITICS ...... 176

Sergey Reviakin ECONOMY ...... 182

Marian Abisheva RELIGION ...... 203 Timur Shaymergenov INTERNATIONAL AFFAIRS ...... 208 5 CENTRAL EURASIA 2008 Analytical Annual

KYRGYZ REPUBLIC

Noor Omarov GENERAL OVERVIEW ...... 217 Noor Omarov POLITICS ...... 219 Lyudmila Baum ECONOMY ...... 224 Ikbalzhan Mirsaiitov RELIGION ...... 236 Muratbek Imanaliev, Erlan Abdyldaev, Radislav Safin INTERNATIONAL AFFAIRS ...... 246

REPUBLIC OF MOLDOVA

Svetlana Pynzar GENERAL OVERVIEW ...... 254 Marius Tãrîþã POLITICS ...... 256 Lyudmila Golovataya ECONOMY ...... 263 Marius Tãrîþã RELIGION ...... 277 Svetlana Pynzar INTERNATIONAL AFFAIRS ...... 280

REPUBLIC OF TAJIKISTAN

Jamila Majidova GENERAL OVERVIEW ...... 290 Parviz Mullojanov POLITICS ...... 292 Habib Gaibullaev ECONOMY ...... 298 Lola Khalikjanova RELIGION ...... 306 Rashid Abdullo INTERNATIONAL AFFAIRS ...... 312

TURKMENISTAN

Azhdar Kurtov GENERAL OVERVIEW ...... 324 Igor Proklov POLITICS ...... 327 6 Contents

Igor Proklov ECONOMY ...... 332 Islam Palvanov RELIGION ...... 338 Azhdar Kurtov INTERNATIONAL AFFAIRS ...... 344

UKRAINE

Rustem Zhanguzhin GENERAL OVERVIEW ...... 351 Sergey Tolstov POLITICS ...... 354 Tamara Panfilova ECONOMY ...... 362 Viktor Budkin RELIGION ...... 374 Sergey Tolstov INTERNATIONAL AFFAIRS ...... 382

REPUBLIC OF UZBEKISTAN

Farkhad Tolipov GENERAL OVERVIEW ...... 393 Nikolai Borisov POLITICS ...... 395 Lola Sultanova, Albina Gaisina ECONOMY ...... 400 Kamoliddin Rabbimov RELIGION ...... 412 Evgeni Abdullaev INTERNATIONAL AFFAIRS ...... 417

CHRONOLOGY OF EVENTS FOR 2008

Politics Afghanistan ...... 422 Republic of Armenia ...... 423 Azerbaijan Republic ...... 426 Republic of Belarus ...... 427 Georgia ...... 429

7 CENTRAL EURASIA 2008 Analytical Annual

Republic of Kazakhstan ...... 430 Kyrgyz Republic ...... 432 Republic of Moldova ...... 434 Republic of Tajikistan ...... 435 Turkmenistan ...... 438 Ukraine ...... 439 Republic of Uzbekistan ...... 439

Economy Afghanistan ...... 442

Republic of Armenia ...... 442 Azerbaijan Republic ...... 443 Republic of Belarus ...... 444 Georgia ...... 447 Republic of Kazakhstan ...... 449 Kyrgyz Republic ...... 452 Republic of Moldova ...... 454 Republic of Tajikistan ...... 456 Turkmenistan ...... 458 Ukraine ...... 460 Republic of Uzbekistan ...... 460

Religion Afghanistan ...... 465

Republic of Armenia ...... 466 Azerbaijan Republic ...... 467 Republic of Belarus ...... 468 Georgia ...... 471 Republic of Kazakhstan ...... 472 Kyrgyz Republic ...... 474

8 Contents

Republic of Moldova ...... 477 Republic of Tajikistan ...... 478 Turkmenistan ...... 479 Ukraine ...... 479 Republic of Uzbekistan ...... 480

International Affairs Afghanistan ...... 483 Republic of Armenia ...... 485 Azerbaijan Republic ...... 486 Republic of Belarus ...... 487 Georgia ...... 489 Republic of Kazakhstan ...... 493 Kyrgyz Republic ...... 495 Republic of Moldova ...... 497 Republic of Tajikistan ...... 499 Turkmenistan ...... 501 Ukraine ...... 504 Republic of Uzbekistan ...... 506

LIST OF ACRONYMS ...... 510

9 CENTRAL EURASIA 2008 Analytical Annual

AFGHANISTAN

GENERAL OVERVIEW

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

n 2008, the country plunged even deeper into the general crisis that had already spread to all spheres of social, political, economic, and military life. The international counter-terrorist co- I alition led by the United States was partly responsible for this. In the absence of a well-substantiated and comprehensive strategy and clearly formulated tasks, it acted chaotically and not always adequately. It found itself cornered and tried to disentangle itself without losing face. The failures of the Afghan government add to the highly unproductive performance of the ill-balanced international mechanism. The parliament was mainly concerned about the Cabinet, which lost several important figures. Throughout the year, several top-ranking officials were removed from their posts. This happened to Mayor of Kabul R. Aman, who was replaced by A.A. Sahibi, the fifth mayor in the last seven years, and A. Wafa, governor of Helmand (former governor of Kunar, who insisted on the deportation of two European diplomats he suspected of secret negotiations with the Taliban). The British command of the troops stationed in Helmand tried to defend the diplomats, which cooled the relations between Kabul and London. As for the former governor, he was awarded with a medal and appointed as head of the Department of Complaints in the Presidential Administration. In the spring of 2008, leader of the Afghan Uzbeks General A.R. Dostum, presidential adviser for military matters, caused quite stir by kidnapping Akbar Bay, his rival and chairman of the Nation- al Islamic Movement of Afghanistan the general set up in 1992. Akbar Bay and his people were detained and beaten up and had to be hospitalized after their release. The attorney general removed Dostum from his post but the general declared his decision illegal and avoided punishment. The president did not succeed in exiling the refractory general to Turkey until late in 2008.

10 AFGHANISTAN General Overview

In July, Attorney General A.J. Sabet lost his post, allegedly for joining the presidential race while remaining attorney; corruption was the real reason. In October 2008, President Karzai yielded to American pressure and removed Minister of the Interior Z.A. Moqbel, who was suspected of corruption. His post went to former Minister of Educa- tion M.H. Atmar, an officer of the security service under Najibullah. In December, President Karzai removed several more ministers and governors. His childhood friend T. Wesa, who returned from Canada, was appointed as governor of Kandahar, the president’s home province. Its former governor, A. Khalid, lost the post in April on suspicion of corruption and on the insistence of the commanders of the locally deployed Canadian troops. In October, the former governor was appointed as state minister for contacts with the parliament. By the end of the year he headed the Ministry of Border and Tribal Affairs. Another high official, Minister of Commerce M.A. Farhang, was removed because he failed to control gasoline prices, which only decreased by 10 percent on the domestic market while oil prices worldwide plummeted three-fold. The parliament had other interests besides firing and appointing top officials. In October, the lower chamber discussed the draft law on water resources submitted by the Ministry of Energy and Water suggested by Iran’s violation of the agreement on joint use of the trans-border River Helmand. The parliament did not avoid hot political issues either. In September, the Senate resolutely condemned the NATO military operations that led to loss of life among civilians. The senators were especially outraged by the American bombing of the village of Azizabad in Herat that killed about 90. In recent years this NATO routine has caused the nation’s mounting discontent. Under pressure from the Afghan authorities and the public, the U.S. had to revise its military tactics, cut down on mass bombings, and coordinate them with the authorities. The parliament’s international contacts remained as diverse as ever. In 2008, its delegations visited Iran and Azerbaijan and took part in the sittings of the CIS Interparliamentary Assembly. Preparations for the presidential election scheduled for 20 August, 2009 began amid continued political instability, the outcome being all important for the country’s future. It was not the question of a new leader but possibly of different political and economic priorities. The presidential race, so far latent but still acute, began in the spring of 2008. By the end of the year over fifteen people of various ranks and calibers were more or less willing to run but not all of them had made their intentions clear. Hamid Karzai was the natural favorite even if his position was far from unassailable. He was rapidly losing public support because of his inability to resolve the nation’s most burning problems—political extremism as represented by the Taliban, drugs, corruption, unemployment, refugees, and organized crime. Moreover, in recent years, he has become fairly critical of the United States, the aviation of which has caused numerous deaths among the civilian population. The Americans in Afghanistan are not in control but they are strong enough to affect the election results. This was confirmed late in 2008 when four presidential candidates (whom Washington obviously preferred to the others without abandoning Karzai altogether) were invited to the United States. There are three former ministers among them (Finance Minister A.S. Ahmadzai, Minister of the Inte- rior A.A. Jalali, and Foreign Minister Dr. Abdullah) and Governor of the eastern province of Nan- garhar G.A. Sherzai. None of them was promised firm support. The other candidates’ competition with Karzai can be described as a token of protest; Finance Minister A.H. Ahadi, the president’s friend, was the only exception. This is a patchy crowd as far as their ideas, background, political positions, public and personal contacts, and social context are concerned. There is deputy R. Bashardust, a former minister and the most scything critic of Karzai and his Cabinet, among them. He shocked the capital by publicly rejecting an apartment and expensive car and settling in a tent just opposite the parliament. The list of candidates also included General A. Dostum, the odious leader of the Afghan Uzbeks, his supporter poet A.L. Pedram, who, as a member of the new

11 CENTRAL EURASIA 2008 Analytical Annual generation of politicians, cuts a popular figure with the women and youth; former minister M. Moha- qiq, and two monarchists—deputy S.I. Gailani and former vice premier H.A. Arsala. Late in 2008, Sh.N. Tanai, former defense minister in the Najibullah Cabinet and a politician of checkered reputation, joined the race. In March 1990 he rebelled against the president and, being defeated, fled to Pakistan to seek the protection of head of the Islamic Party of Afghanistan G. Hekmatyar. There was information that former ambassador of the United States to Afghanistan, who filled the post of U.S permanent representative in the U.N., American of Afghan descent Z. Khalilzad, might join the race. The United States showed a certain interest in rapidly progressing Minister of the Interior M. H. Atmar. Some of them had already tested themselves in the 2004 presidential race and even gathered a large share of votes (M. Mohaqiq received 10.8 percent while A. Dostum gained 10 percent). The long list of present candidates killed their chances. It remains to be seen who will receive America’s support: to a certain extent Washington is responsible for the political climate in the country. Americans partly fund the race and ensure security. In October 2008, voter registration began; from the very start the Independent Election Com- mittee had to cope with numerous violations: multiple registrations; elders managed to procure more registration cards than needed; some of the registration offices were not completely safe and functioned in ill-suited places; in violation of the law some of the registered were under age. The unsafe provinces, however, were the greatest headache. In December, the tribal chiefs and elders of the Zabol Province warned that they would boycott the election if NATO continued the bombing that caused a tremendous loss of life among civilians. President Karzai also repeatedly spoke out against this practice. A total of 2 thousand civilians died in 2008 as a result of the hostilities. The process of slow fragmentation of power was inexorable. According to Director of National Intelligence in Afghanistan Vice-Admiral McConnell, the Karzai government controlled less than one third of the country; the Taliban had 10 percent under its more or less permanent control while the rest of the country belonged to the warlords. In 2008, America remained the main foreign policy partner; in May, the two countries signed the Declaration on Strategic Partnership. Washington is still the largest donor: according to U.S. State Secretary Assistant R. Boucher, between 2001 and 2008 the Congress allocated over $26 billion of aid to Afghanistan (70 percent of which was spent). In May 2008, President George W. Bush asked the Congress for $3.7 billion more to build up the Afghan armed forces and $1.1 billion “for democratic development, effective administration, agriculture, anti-drug efforts, and humanitarian operations.” America has 29 thousand people in Afghanistan, more than any other country. In April 2008, it sent 3,200 marines there. American military spending in Afghanistan increased from $171 billion in 2007 to $193 billion in 2008, or by 13 percent. Much was expected of the change of presidents in Pakistan, relations with which have always been strained but nothing changed much when A.A. Zardari replaced P. Musharraf as president in September. To a great extent this can be explained by the rising instability in Pakistan and the fact that the new regime is unable to cope with the Taliban fighters inside the country. They are de facto in control of the larger part of the country’s North-West Frontier Province this was done to take a firmer grip on the ISI, which secretly supports the Taliban. The new American strategy elaborated by the Obama Administration regards Pakistan as a natural ally of Afghanistan in the anti-terrorist struggle. This means that in the future Kabul and Islamabad might find new cooperation possibilities.

12 AFGHANISTAN Politics POLITICS

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

was a less eventful year than the previous ones: there were no momentous changes that could have stabilized the currently unstable country. Very much as before Af- 2008 ghanistan was pestered by numerous threats and challenges—terror, insecurity, mounting drug trafficking, all-out corruption, political and everyday banditry, mass unemployment, the still unresolved refugee issue, and famine. The drought of 2008 crippled the national economy beyond repair; large tracts of arable land remained barren; and cattle were underfed. In a predominantly agricultural country this can be described as a calamity. According to the Ministry of Agriculture and Irrigation, water shortages destroyed vegetation on 80 percent of the farmland and delivered a heavy blow to 19 of the country’s 34 provinces, where arable land comprises mere 12 percent and peasants and nomads account for three- quarters of the total population. In 2008, the water resources of land springs lost up to 70 percent of their previous volume. According to preliminary data, the grain yield will be two-fold lower than the previous year: it is expected that 2.5 million tons will be gathered. Fifty-three percent of the rural population became destitute because of the drought and the never-ending war.1 According to the report of the Afghanistan Independent Human Rights Commission published in Kabul, “in most of the isolated regions the population has no food. The coming winter may gen- erate a humanitarian catastrophe.” Over 37 percent of the Afghanis live on less that $2 per day; over 40 percent have to be satisfied with $1, says the report.2 By late 2008, about 6 million urgently needed food. Russia was among the donor countries that supplied Afghanistan with foodstuffs. It, in particular, pledged to deliver 17.8 thousand tons of flour by the end of January 2009.3 This cannot be described as a favorable context for the presidential election scheduled for Au- gust 2009. In November 2008, the registration of voters began. It should be said that the chances of the incumbent president (who nominated himself again) being elected for another term are falling under the burden of the appalling situation. His press secretary, Humayun Hamizada, described the president’s main achievement as: he gave the country a “new democratic order” within the “Muslim world’s most progressive constitution.”4 He is convinced that the president’s achievements are not limited to the political sphere: in 2007 the country demonstrated sustainable economic growth of 13 percent, Asia’s highest against the negative figures of 2001. Today, said the press secretary, over 85 percent of

1 See: J. Palmer, “7 Dry Years Add to Misery in Afghanistan,” Chronicle Foreign Service, Friday, 12 December, 2008. 2 “Bol’shinstvo afghantsev nakhodiatsia v tiazheleishem polozhenii,” Cairo, 26 December, 2008 (ITAR-TASS cor- respondent). 3 See: “Afghanskiy MID: Rossia postavit Afghanistanu svyshe 17 tysiach tonn muki,” available at [www. Afghanistan.ru], 29 December, 2008. 4 A. Siddique, “Dogged by Security Failings, Karzai Seeks Reelection,” RFE/RL’s Radio Free Afghanistan, 29 No- vember, 2008. 13 CENTRAL EURASIA 2008 Analytical Annual the population enjoy medical services, and millions of boys and girls attend school. The president is known all over the world as a herald of peace, development, security, and reconstruction of his country. His own people and his international partners trust him.5 The analytical community is less optimistic: it is convinced that Karzai will face serious challenges. His popularity has been waning while his opponents are not trusted either. The country still lacks security, poverty is spreading, and the rule of law is fiction. The political process has not yet created new leaders whom the nation can trust and follow. Meanwhile the number of presidential hopefuls grew by the day. Many of them, besides Presi- dent Karzai, ran for presidency in 2004. By late 2008, the media spoke of the following candidates: former ministers with the highest ratings: Finance Minister Ashraf Ghani Ahmadzai and Minister of the Interior Ali Ahmad Jalali, as well as the present Finance Minister Anwar ul-Haq Ahadi. They belong to the thin yet highly influential layer of Western-educated repatriate technocrats. Former Minister of the Interior Dr. Abdullah represents the circles connected with the Northern Alliance. Governor of the eastern province of Nangarhar Gul Agha Sherzai, a powerful and highly influential figure from the past with a slightly dubious reputation, belongs to the same group. He remained a political heavy- weight in Kandahar and the southern region as a whole under various regimes and several times filled and lost the post of the province’s governor. In 2003-2005, he filled the post of minister of urban development. Until recently, he had the U.S. and Pakistan on his side. Parliamentary deputy Ramazan Bashardust, who in the past filled the post of minister of planning and became one of the most irreconcilable critics of the government and the president, is steering clear of the other former ministers. Leader of the National Congress of Afghanistan Party Ab- dul Latif Pedram, who returned from Paris when the Taliban regime was routed and ran for presidency in 2004, represents the new generation on the list of candidates. There are several other fa- vorites of the 2005 race: leader of the Hazarean Mohammad Mohaqiq and leader of the Uzbeks Abdul Rashid Dostum. There are also two monarchists—Sayed Ishaq Gailani and former vice premier Hedayat Amin Arsala. They are all fairly well known in the country while little is known about Mutasim Billah Maz- habi, who recently returned after ten years in the United States and intends to run in August 2009. It is rumored that Zalmay Khalilzad, an America-born Afghani, former U.S. ambassador to Kabul and recent permanent representative of the U.S. in the U.N., will join the others. So far, he has consistently denied this. The great-great grandson of the legendary Iron Emir Abdurrahman who ruled the country in 1880-1901 is also determined to run for the highest post in the country. So far, none of them have offered any programs. They are all a politically motley crew, with the rare exception (A. Ahadi, a recent friend of the president), rallied together by opposition sentiments. Their chances likewise vary. The political community is favorably disposed toward former ministers Ashraf Ghani Ahmadzai and Ali Ahmad Jalali, neither of whom had announced his intention to run for president by the beginning of 2009. The former is known for his Pashto nationalism while the latter is notorious as a strict administrator. A.G. Ahmadzai was supported by 32 political parties and 342 popular councils (shuras). The chances of Finance Minister Anwar ul-Haq Ahadi, who heads the Social-Democratic Party of Afghanistan, are not bad either. Late in 2008, he resigned from his post to run for presidency. Former Foreign Minister Dr. Abdullah is better known outside the country than on home turf. He remains visible on the political scene although his contacts with the leaders of the now mainly mythical Northern Alliance can hardly make him popular with the Pashtuns. R. Bashardust’s uncompromising anti-corruption struggle is unlikely to help him climb up to the highest post in the country. Intellectual Latif Pedram’s fame is limited to the north; his association with the controver-

5 A. Siddique, op. cit. 14 AFGHANISTAN Politics sial, to say the least, figure of General Dostum will hardly add points. The general compromised himself with a series of scandalous illegal actions and, on 2 December 2008, was exiled, not for the first time, to Turkey along with his family. One of the leaders of Shi‘a Khazareans Mohammed Mohaqiq remains, very much as before, among the prominent second-ranked politicians; his support is probably limited to the Khazarean territory. At the same time, Governor of Nangarhar Gul Agha Sherzai, a Pashtu with strong clan ties and great financial potential, can hardly count on the national minorities of the north. S.A. Gailani is not popular with the influential cohort of new technocrats that form the core of Afghanistan’s political elite. H.A. Arsala, who used to fill important posts in the past, has not acquired enough political weight; he is probably approaching the end of his political career. Former U.S. Ambassador to Kabul Z. Khalilzad can count on Washington’s strong support despite the fact that he belonged to the previous administration. It is not clear so far whether he will run. Former Attorney General Abdul Jabar Sabet is another political figure with a checkered reputation. In the fall of 2008 he made public his intention to run for presidency, which enraged the incumbent president. The presidential press service pointed out that his political ambitions clash with his position as the attorney general; he was accused of abuse of power. Educated in the United States, he lived in Canada for a long time before he returned to Afghanistan in 2002. When appointed attorney general he announced a “jihad” against corruption. In June 2007, he instigated criminal cases again several of the Northern Alliance leaders yet failed to institute criminal proceedings against the former field commanders. In July 2008, he lost his post, which triggered mass rallies in several cities that accused the former attorney general of corruption and demanded that he be arrested. He hastily left the country contrary to the order to stay put in the capital. After a while he resurfaced in the United States where the Embassy of Afghanistan and officials of the U.S. Department of Justice took him under their wing. He soon returned to Kabul and asked the president to pardon him in exchange for quitting the race. It should be said that the chances of all the candidates depend on the U.S. administration, which is still on the side of Karzai’s government. Washington meanwhile decided to take a closer look at four other potential candidates: A.A. Jalali, H.G. Ahmadzai, Dr. Abdullah, and G.A. Sherzai. In July 2008, Barack Obama, still a candidate, first met Sherzai and later Karzai. Washington is also keeping the rapidly rising and influential Minister of the Interior Hanif Atmar in sight. Recently President Karzai lost much of his former political reputation among the U.S. political circles. No wonder since he was one of the harshest critics of the American air strike tactics that are the cause of rising civilian casualties. He said he was willing to share power with the Taliban if it abandoned its armed struggle against the regime; and he is obviously unable to bridle corruption, which is best described as an epidemic. Corruption in Afghanistan has infected all the state administrative structures. The country ranks 172nd among the 180 countries Transparency International studied to reveal the level of corruption. Parliamentary deputy R. Bashardust insists that Afghanistan is the only country in the world with legalized corruption. Corruption pushes the destitute and despairing, jobless young men in particular, toward Islamic extremists who, against the background of the corrupt bureaucracy, look like honest people. Under the Taliban the laws were strict but they were used; no one took bribes and most of the country lived under the rule of law. Today, corruption is part of life at all levels of state administration—from the policeman who earns $100 and takes bribes to feed his family and pay the rent to senior officials such as the defense minister and attorney general. So far, though, none of eminent bribe-takers caught red-handed have been brought to court. In July 2008, the Anti-Corruption Bureau was closed. The recently set up Anti-Corruption Commis- sion staffed with members of the security structures probably has wider powers. In November, the presidential administration announced that the president would personally chair the commission’s

15 CENTRAL EURASIA 2008 Analytical Annual monthly meetings. This can hardly remedy the situation in a country where a bribe is called “shirini” (sweetmeat) and where most contacts with the administrative structures must be sweetened. A driv- er’s license costs between $100 and $160, and bribes must be given even to pay water and electricity bills.6 In 2007, Integrity Watch Afghanistan discovered that every family in the country spends about $100 a year in bribes even though 70 percent of them live on approximately $1 per day. President Karzai cannot but be concerned with the rising corruption. In March, Hanif Atmar, one of the most influential ministers who is very close to the president, announced that the country was prepared, with international support, to launch a campaign designed to condemn (“named and shamed”) certain top-ranking bribe-takers connected with the drug business. Hanif Atmar specifically pointed out that the president was prepared to punish his closest associates if their guilt was proven beyond doubt.7 Similar declarations are not breaking news in Afghanistan; the powers that be have already tried to uproot corruption but to no avail since it is engendered in the upper echelons of power. This explains why none of those bogged down in corruption are punished. In the past few years none of the prominent corrupt bureaucrats suffered—they were reshuffled. This happened to Governor of Kandahar Asadullah Khalid, whom the commander of the Canadian military contingent in Afghani- stan accused of human rights violations and corruption—he was merely moved to the post of state minister for contacts with the parliament. Early in December 2008, Minister of Transport Hamidullah Qaderi, who demanded $250 from everyone who went to Mecca for hajj, was arrested on charges of corruption. The military-political situation in the country cannot be described as balanced. The movement of the supporters of “true Islam” has gained momentum; according to the American command, in 2008 the scope of hostilities in the county’s east grew by 40 percent compared to the previous year, a figure recently confirmed by the U.N. Special Representative for Afghanistan Kai Eide. American losses increased: in June 2008, they were larger for the first time than similar indices in Iran during the same period. The Taliban extended the zone of its control and influence: according to the ICOS, in 2007 the Taliban military force was present in 54 percent of the country’s territory; a year later it covered 72 percent.8 In 2007-2008, they captured and retained several southern districts. In 2008, extremists organized a series of large-scale subversive and terrorist acts in Kabul, including an assassination attempt on President Karzai during a military parade on 27 April and a blast at the Indian embassy in July. The scared authorities and international organizations transformed the capital’s center into a maze of defensive concrete constructions, barbed wire, and barricades. Recently, Taliban fighters have moved close to Kabul, are operating in the neighboring Wardak and Logar provinces, and are in control of the larger part of Ghazni, not far from Kabul. Islamic extremists have three out of the four highways that connect the capital with the rest of the country and Pakistan under their control. The unfolding warfare claims lives on both sides: in 2006, 4,000 were killed; in 2008—6,340. Since 2001, over 1,000 members of the international coalition have been killed. Taliban fighters use a wide range of methods: they attack the outposts of governmental troops and NATO bases, they ambush and kill, they scare people, take hostages for ransom, destroy schools, mine roads, and resort to suicide bombers. They succeed for many reasons, the main one being the rising popular support. Most people do not want the extremists back yet many, especially in the combat zone (in the south or southeast), help

6 See: K. Barker, “Pervasive Corruption Fuels Deep Anger in Afghanistan,” Chicago Tribune, 25 November, 2008. 7 See: P. Taylor, “Afghan Urges ‘Name and Shame’ War on Graft, Drugs,” BRUSSELS (Reuters), 16 March, 2008. 8 See: J. Hemming, “Taliban in 72 Percent of Afghanistan, Think-Tank Says,” KABUL (Reuters), 8 December, 2008. 16 AFGHANISTAN Politics them as best they can. The estimated share of support in these areas is between 20 and 30 percent. They are much less liked in the north, which is populated by national minorities. There is no fighting there, which means that the fighters merely come and go. The local people have a very different idea about the Taliban than Kabul’s Western allies. Yes, they are cruel and conservative-minded but they are fighting against the infidels, arbitrariness, and corruption. Chairman of the National Commission for Peace, Speaker of the Senate S. Al-Mojaddedi, who fought against the Soviet troops, says with implied pride: “Taliban fighters are our brothers and part of our nation.” Meanwhile, the struggle of the counter-terrorist coalition against the Taliban is losing its efficiency: Kabul as well as the European capitals and Washington are moving closer to admitting that the situation has reached a dead end. The rising number of American military failures deprives the allies of any remnants of sympathy among the local people; the nation is concerned about the nature and the results of Western strategies. Massive bombing of the settlements where, according to intelligence, Taliban fighters have found refuge produce civilian deaths. The losses are comparable to those incurred by the Taliban’s military actions. During the first 8 months of 2007, 1,040 civilians lost their lives because of the sides’ military actions; during the first 8 months of 2008 the figure increased to 1,445 (800 of the dead, or 55 percent, were killed by the Taliban and 645, or 45 percent, died in NATO air raids). In August 2008 alone, 330 civilians were killed.9 The military failures are forcing Washington to revise its anti-terrorist strategy. Barack Obama campaigned with the promise to make Afghanistan the new administration’s foreign policy priority; to increase the American military contingent by 30 thousand by means of troops removed from Iraq, and to augment the volume of economic aid. In September, the first units of U.S. Marines (2,500 in all) arrived in Afghanistan and were stationed in Helmand province in the south to support the Brits. The process of Taliban-ization crossed the border into Pakistan, which gives the United States the right to say that the neighboring country has become sort of an asylum for the fighters where they set up their headquarters, mobilization bases, training camps, and money sources. Washington repeatedly insists that the Pakistani authorities should liquidate the bases and camps and throw the extremist leaders out of the country. Until recently, however, Islamabad denied that there were Afghan extremists in the country and never tired of reproaching Kabul for its inability to control the situation. In fact, Pakistan is involved in a far from simple game: as a close U.S ally in the antiterrorist struggle it still hopes to put a pro-Pakistani government in Kabul. The Taliban is Islamabad’s important lever of pressure, which explains why it objects to American air raids on the Taliban bases in its territory. In September 2008, the initiative of Defense Minister of Afghanistan Abdurrahim Wardak, who suggested that a joint operational-tactical Afghan-Pakistani group with NATO participation be set to fight on both sides of the border, stirred up a lot of interest. Shortly before that he discussed this at a meeting of the tripartite American-Afghan-Pakistani Antiterrorist Commission. Islamabad, probably unwilling to let Americans inside the country even under this pretext, promised to think it over. There is another road to peace—negotiations with the Taliban. The Karzai government has been working on the issue for a long time. Several times Kabul amnestied those fighters who were prepared to lay down their arms and engage in peaceful activities. According to unverified information, about five thousand Taliban fighters have moved over to the government’s side in the last four years. Some of them were appointed to prominent administrative posts. In 2006, President Karzai even invited the fighters to take part in the parliamentary elections; two of them acquired parliamentary seats. Recent- ly the president invited them to join the presidential election race.

9 See: P. Bergen, “A Man, A Plan, Afghanistan,” The New Republic, 24 September, 2008. 17 CENTRAL EURASIA 2008 Analytical Annual

For many years, the Karzai Cabinet has tried to talk to the liberal, or moderate, wing of the Taliban. In September 2006, the president openly invited the leaders to the negotiation table and announced that he was prepared to meet the heads and even Mullah Omar, the leader of the Taliban. Cabinet posts were promised in case of success. The Taliban accepted the invitation but the negotiations fell through: each of the sides insisted on mutually unacceptable conditions. President Karzai invited the Taliban to lay down arms and accept the 2004 Constitution and the ruling regime. The Taliban came forward with demands to move the foreign troops out of the country and to create its own Constitution; they refused to recognize the regime. There is information that certain Western countries, members of the counterterrorist coalition, also secretly contacted the Taliban through their representatives. In September 2008, The Observer of Britain carried information that the government of Afghan- istan was talking to the Taliban. Foreign Minister of Afghanistan R.D. Spanta and the Taliban flatly refuted the information but it became known that in the summer President Karzai had invited the Taliban to engage in peace talks and asked the Saudi king for mediation. There was information that in Sep- tember a highly placed representative of Kabul (probably Foreign Minister in the Taliban Cabinet W.A. Mutawaqqil) was engaged in shuttle diplomacy between Pakistan, Saudi Arabia, and Western capitals trying to explore the ground of future negotiations. Early in October, former ambassador of the Taliban to Pakistan A.S. Zaif, who spent four years at the American Guantanamo base and moved over to Karzai, supplied additional information about the supper in Mecca on the last day of Ramazan. Invited by Saudi King Abdullah, he found himself in the company of F.H. Shinwari, former attorney general of Afghanistan known for his Taliban bias, Chief of Staff of the Afghan Armed Forces General Bismillah Khan, the president’s brother Qayum Karzai, representatives of the Taliban and its ally, the leader of the Islamic Party G. Hekmatyar. A.S. Zaif disproved the rumors about possible negotiations. This means that the sides met to find out the prospects for a future dialog. On 21 October, Foreign Minister of Saudi Arabia Prince Saud al- Faisal confirmed that the talks had been held in Mecca. The contacts were assisted by London and supported by Washington. Today, the sides continue seeking possible roads to peace talks. They realized that peace should be restored in the country through mutually acceptable compromises. The world community will certainly help them.

ECONOMY

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

he year 2008 was relatively difficult for the Afghan economy. Although the economy was developing in different directions, the long cold spell, forced deportation of Afghani refugees from T neighboring countries (particularly from Iran), destabilization of the situation, and other objec- 18 AFGHANISTAN Economy tive and subjective factors created additional problems for the Afghan government. First of all, it should be mentioned that various methods of financing the Afghan economy by donors have been actively discussed by Afghani officials and international research centers and organizations. In fact, all of them have shown their growing discontent with how the appropriated funds are being used by nongovernmental organizations (NGOs). That was actually the reason why at a press conference in Kabul at the end of January 2008 on behalf of the Afghan government, Mr. Rangin Dadfar Spanta, minister of foreign affairs of the Islamic Republic of Afghanistan (IRA), called upon the sponsors to commit to channeling their aid resources through Afghanistan’s national budget. Meanwhile, the Oxfam International charity organization issued an official report saying that Afghanistan never received approximately $10 billion of the amount promised by the world community. The report also argues that the funds received by the NGOs were spent rather inef- ficiently. According to some estimates, only 20% of the funds committed tend to reach those who are in need. Some international financial institutions appropriating money for Afghanistan’s restoration are not satisfied with the progress of the work being carried out under specific programs and projects. For instance, in the middle of the year the World Bank expressed its discontent with the way the committed funds were spent. In particular, the Bank is not satisfied with the performance of the Poverty Elim- ination Program; it also called upon the Afghan government to fight corruption more actively and improve the tax system. Therefore, the head of the World Bank mission in Afghanistan insisted that the Afghan government be given the right to supervise over financial aid management. In fact, only a small amount of the funds from external and internal financing sources tends to reach the final destination point via government channels, namely—through the state budget. Receipts from internal sources—despite the fact that they are growing from year to year—are still too insignificant. For illustration purposes, below you can see the structure of the IRA national budget for 2007- 2008, which is divided into three sections: the operating budget, the development budget, and the external budget.

Table

Afghanistan Budget by Sector ($ million)

Operating Development External Budget Budget Budget

2007 2008 2007 2008 2007 2008

Agriculture 20.6 22.69 495.6 391.123 572.4 370.66

Infrastructure 38.2 33.38 786.9 564.8 985.9 894.59

Security 488.71 578.87 47.6 13.5 60.8 2 546

Education 194.5 224.79 171.5 100.2 146.2 179.99

Public health service 30.7 27.7 103.5 57.312 167.5 216.4

Others 323.7 419.88 191.8 261.171 512.6 650.64

Total 1,096.41 1,307.31 1,796.9 1,388.106 2,445.4 4,858.28

19 CENTRAL EURASIA 2008 Analytical Annual

The operating budget includes state expenditures, such as wages, purchase of goods and services. The development budget consists of investments in the construction of roads, schools, hospitals, and power stations. They are financed through government channels. The external budget is secured by donor assistance outside government accounts. In 2005, 56% of the operating budget was financed through internal sources, the revenues from which came to $452 million. By 2008, these parameters were registered at 68% and $888 million, respectively. The world community continues to provide Afghanistan with financial and technical assistance to ensure the development of its economy. For instance, the U.S. has signed an agreement with the IRA, in accordance with which the Americans, over the next five years, are to appropriate $218 million to the development of Afghanistan’s public health service. China has announced its intention to allocate $2.5 million to the restoration of the Jumkhuriat hospital in Kabul. The Asian Development Bank has appropriated $1.6 million to Afghanistan and Tajikistan to control floods and soil erosion in the Panj river basin. The government of Canada has promised to allocate another $550 million until 2011 to various economic and social development programs. India has announced its intention to provide $450 million worth aid to the IRA. Businessmen of the United Arab Emirates declared their commitment to invest about $4 billion in the Afghan economy, while the Government of China, at the end of the year, offered its financial assistance of about $10 million. Over the seven-year post-conflict period, Afghanistan has been provided with a certain amount of financial and technical aid. However, its economy is still in ruins, which expressly indicates that real assistance should proceed. On the eve of the International Conference in support of Afghanistan (Paris, 12 June, 2008), the Afghani authorities declared their intention to appeal to the world community for additional financial aid in the amount of $20 billion. Following the results of the Conference, the world community pledged to provide this amount. Criminality and acts of terrorism are other factors that are having a negative impact on the Af- ghan economy. In fact, the growth in crime and deterioration in security are believed to be the main factors contributing to the reduced investments in the national economy in 2008. In mid-May, Taliban militants attacked the truck convoy of the United Nations World Food Program (U.N. WFP) and set two trucks carrying humanitarian cargo on fire. In the same province they hijacked a truck convoy carrying 46 tons of humanitarian cargo. Therefore, U.N. WFP decided to deliver food cargoes through Iran for safety reasons. In addition to the above, the winter of 2008 created many misfortunes and new problems for the Afghans. Indeed, the cold weather inflicted much harm—mainly to the northern, western, and central provinces. Not only the inhabitants of these provinces, but also their domestic cattle became victims of the cold weather and avalanches. In the Balkh Province alone, for example, nomads lost over 8,000 head of cattle, while in the Herat Province this number reached 41,000 head of cattle. Despite the fact that by midwinter several hundreds of people in Afghanistan had died from cold and many Afghan residents had become the hostages of snowslides and avalanches, neighboring Iran proceeded with the mass deportation of Afghani refugees to their home country. For instance, by early January the number of those deported reached 360,000. The Afghani authorities urged Iran to stop deportation. However, Tehran, after declaring a temporary suspension of the process, began deport- ing more than 100 people again a day later. In the given circumstances Afghanistan was unprepared to accept them. In this connection, Shamsuddin Khamid, head of the Refugee Affairs Department of the western Herat province, declared that the deportation of Afghanistan’s citizens to their home country in such hard times aggravates the crisis situation since “all efforts are being spent to help those who have suffered from the cold.” At the end of February, the Ministry of Foreign Affairs of the IRA once again officially appealed to the Iranian authorities, urging them to slow down the deportation process. Not until early March did Deputy Minister of Foreign Affairs of Iran promise at a press conference in

20 AFGHANISTAN Economy

Kabul that henceforth the Afghans would be deported exclusively with the consent of the Afghani authorities. However, by the end of the year, i.e. just when the cold weather was approaching, Iran renewed the process and deported 30,000 people within several days. Later the Afghani authorities reached an agreement with Tehran and declared that Iran would not deport Afghani refugees again during the cold weather. As for the refugees themselves, they are in no hurry to return home. Most of them are concerned about their safety in their native country. In these circumstances, some countries tried to help the local authorities improve the situation. For example, the German government allocated •500,000 to purchase the necessary goods for the people suffering from the cold, and Turkmenistan sent 500 tons of diesel fuel and 1,000 tons of food products to the republic. All in all, more than 250,000 refugees have returned to Afghanistan during the year. However, most repatriates tend to settle around big cities, such as Kabul, Mazar-i-Sharif, and Kunduz, which creates additional problems, such as shortage of drinking water. So far about 70% of the IRA’s inhabitants have no access to drinking water. In this connection, the World Bank is planning to build 200 water purification facilities in Afghanistan. As a part of these initiatives, a water-purifying station near Kabul was opened at the end of March. In addition to the long cold spell, the IRA was also challenged with an internal food crisis. The problem is that the agricultural sector of Afghanistan is still incapable of providing the country with grain. Moreover, the situation in the republic was seriously affected by the world food crisis, which triggered a two-fold hike in grain prices. This forced the Afghan government to appeal to the international community for food aid. India was the first country to respond to Afghanistan’s request for assistance. According to Afghanistan’s Agriculture and Cattle Breeding Minister, the republic lacked about 250,000 tons of grain. In turn, the Afghan authorities were also doing their best to solve this problem. In particular, they announced the granting of a concessional loan to businessmen engaged in grain deliveries to Afghanistan and cancelled import duties on certain types of food products. Later in the year, U.N. WFP representatives declared that about one million Afghani peasants required emergency food aid. In fact, they were referring to the part of the Afghan population that had ever been able to make ends meet. By the middle of April, the World Food Program officials announced that WFP had received about $100 million from various donors as a part of the Afghan humanitarian aid food package. That was the money the WFP was planning to use to procure 88,000 tons of food products. On top of that, in early May China declared its intention to deliver 4,400 tons of grain to Afghanistan in humanitarian aid. By the end of the year the food situation deteriorated even more and, as British researchers from the Institute for Defense Analyses emphasized, it could become a catastrophic. Moreover, at the end of November, IRA Vice President warned that about 6 million of the country’s residents were threatened by famine. It should be mentioned here that small business development micro-crediting programs could be a rather effective tool in raising the quality of life of the population, especially of the poor. Some- times handicraftsmen and representatives of other similar trades need only a few more dollars to promote their business. In this connection, the World Bank has allocated $30 million in gratuitous aid to encourage governmental lending programs intended to support the needy population of Afghanistan. Speaking about the lending system, we should emphasize that in the year under examination, official statements were made for the first time in Afghanistan’s history about a possible transition to the Islamic banking system. In February, Chairman of Afghanistan’s Central Bank Abdul Qadir Fe- trat said that “as Afghanistan is an Islamic republic, it must make a transition to the Islamic banking system.” Later this opinion was indirectly echoed by Abdul Rasul Sayaf—Afghanistan’s Parliament

21 CENTRAL EURASIA 2008 Analytical Annual

Deputy and a well-known field commander. The latter objected to various commercials promoting dividends from bank transactions. As he put it, “this contradicts the fundamental law of the country, which states that Afghanistan is an Islamic Republic.” Afterwards, no more statements on the given issue were made. Today, the Central Bank continues its routine performance. In one of its latest moves, it banned foreign currency transactions in the internal market. At the beginning of the year, Afghanistan’s international reserves totaled $2.9 billion. As was mentioned above, the cold weather inflicted serious damage on Afghanistan’s northern and northeast provinces. In this connection, the Aga Khan Fund for Economic Development has been actively engaged in supplying the high-mountain areas of the country with electric power. As a part of this effort, the Pamir Energy Company built a 0.4 kV power transmission line totaling $225,000 to supply electric power from Tajikistan’s Gorno-Badakhshan Autonomous Region to the Shugnan District in Afghanistan’s Badakhshan. Curiously enough, $150,000 of this amount was provided by the Raushan mobile company—an affiliated branch of the Aga Khan Fund for Eco- nomic Development. Besides, two Indian companies, which had won a $19 million tender, are engaged in the construction of a power transmission line from the Tajik Sangtuda-1 Hydropower Plant to the Afghan border. Russia was another player that returned to the Afghan power market. In particular, Russia’s Technoexport Company won the tender and started work to modernize the Naglu Hydropower Plant. This contract is estimated at $32.5 million. The main portion of the modernization work has already been completed. In midsummer, major oil exporters to Afghanistan—Russia, Kazakhstan and Uzbekistan—suspended their fuel deliveries to the republic causing a rise in gasoline prices. Speaking about Afghanistan’s trade and economic relations with Russia, we should emphasize that their foreign trade turnover in Q1 2008 amounted to $39.4 million, while for the first 6 months of the year it reached $92.1 million, and in the same period of 2007 this index was registered at $41.37 million. In particular, Afghanistan was exporting fruit, carpets, and carpet products, while Russian imports included timber, technical equipment, and spare parts. Over the first nine months of 2008, goods turnover came to $137.76 million, and by the end of the year it had almost tripled (compared to 2007) and totaled $190 million. As for Afghanistan’s neighboring states, in 2008 they were also focused on transportation system development, in particular—on the construction of the trans-Afghan railway route. At this point, Uzbekistan is considering a project to connect its railway transportation network with the Iranian section on the Termez–Mazari-i-Sharif–Herat route. It is worth mentioning that Iran, in turn, is currently completing the construction of a railroad to the Herat province. More than 70% of the construction work on this railroad branch has already been completed. During his visit to Tajikistan, Mr. Rangin Dadfar Spanta, the Afghan minister of foreign affairs, said that China was going to build a railroad to Afghanistan and even further—to Pakistan. The Af- ghani side proposed that the railroad pass through the territory of Tajikistan. This project is estimated at $8 billion. Road reconstruction financing is also underway. The government of Japan has allocated $33.74 million to restore the Kurgan-Tiube–Dusti–Nizhniy Panj highway. India has completed the construction of the 218-km-long Dilaram-Saranzh motorway section which connects Afghanistan’s transportation system with Iran. In another development, the Tajik and Afghan transport ministers agreed to open road transport communication between the two countries. According to the agreement signed by the two ministers, passengers will be taken by bus from the Afghan town of Kunduz to the Tajik capital. Since Kabul-

22 AFGHANISTAN Religion

Moscow flights were canceled because of their inefficiency, this route will allow Afghani citizens to take advantage of Tajik air service. Within the next five years, 12 new airports will be built in Afghanistan with the World Bank’s financial support. In addition to that, the U.S. is currently financing the construction of an airport in the southern province of Hilmand. The project costs $45 million. In the industrial sphere we should mention the restoration and launching of the Kabul house- building factory, which employs 500 workers. This factory was built as late as 1965 with the assistance of the U.S.S.R., and at that time it employed about 5,000 people. A French company also helped the Afghans to modernize the Spinzar textile factory in the northeast province of Kunduz. Interesting- ly enough, this factory is one of the oldest industrial enterprises in Afghanistan. Iran is also planning to open an automobile and tractor assembly plant in Afghanistan. At this point, the Afghan companies themselves are more actively involved in economic restoration and development of their native country. For example, the tender for gold mining and processing work at Nurab minefield (Takhar province) was won by an Afghan company. After winning a corresponding tender, China’s MSS Company signed a contract with the Af- ghan Mining and Industry Ministry for Ainak copper extraction. In the past several years, the Mining and Industry Ministry of the IRA has provided various data with respect to Afghan hydrocarbon reserves. According to the newly released data, Afghanistan’s oil and gas reserves exceed the previously forecast figures 12-15-fold and 5-6-fold, respectively. And finally, a few words about the manufacture of narcotics. In 2008, there were some positive changes in this area. The United Nations Drug and Criminality Control Department reported that Afghanistan’s opium output dropped by 6% in 2008. According to the U.N. annual report, the area under opium poppy cultivation decreased by 19% compared to 2007. At this point, opium poppy fields can be found in 16 of Afghanistan’s 34 provinces, whereas last year poppy was grown in 21 provinces. However, in overall figures, Afghanistan’s opium output declined from 8,200 to 7,700 tons. On the other hand, it should be kept in mind that this index (7,700 tons)—although it is only 6% less than in 2007—is 26% higher than the 2006 parameter. In this connection, the World Bank believes that to reduce drug production volumes, the international community must invest in Afghani- stan’s agriculture. According to the World Bank’s estimates, at this point the Afghan agricultural sector requires $2 billion in investments.

RELIGION

Dr. Taj MUKHAMMAD Independent researcher (Kabul, Afghanistan)

he overthrow of the theocratic regime of the Taliban in 2001 meant that the new government would abolish the numerous bans and limitations in the nation’s public and private lives imposed T on the people by the Islamic extremists. This raised the question of the role and place of Islam 23 CENTRAL EURASIA 2008 Analytical Annual in the new and democratically oriented society—the previous interpretation of Islam did not match the nature of the new state. The 2004 Constitution reserved an important yet limited space for Islam in the new system of values and principles. On the one hand, it appeared in the country’s new name—the Islamic Republic of Afghanistan—the biggest concession to the orthodox clergy and the conservative-minded population groups. Under Art 2 of the Fundamental Law, Islam became the state religion; under Art 3, no law contradicting Islamic foundations could be passed and enacted in the country. On the whole, the 2004 Constitution can be described as the document of a secular state which confirmed the extremely important provision about power belonging to the people rather than to God as is stated in the constitu- tions of several other Muslim countries. Formally, Islam and the clergy are separated from politics: the religious structures and the clergy do not belong to the system of state administration. The functions of the Ministry of Hajj and Religious Affairs are limited to purely technical issues: hajj to the holy places and Mecca. The Ulema Council is a public structure with the function of correlating Islam and drafting laws and government decisions; its rulings are nothing more than recommendations. The 2003 Law on Political Parties bans political organizations with religious underpinnings. The orthodox Muslim clergy, however, can influence public sentiments in many ways; throughout the entire post-Taliban period the clergy invariably claimed the role of the public’s spiritual leaders. Until recently, the Supreme Court and the small cohort of the old generation of Muslim theologians remained the vanguard of aggressive clericalism with a vast social basis of millions of the faithful still loyal to the Taliban ideology. The liberalization launched by the United States and other Western partners of the government affected very limited numbers in the capital and some other large cities. The rest, mainly the rural population, are guided by the old ideas deeply rooted in Islam. The population of the provinces where the Taliban dominate (Farah, Helmand, Kandahar, Uruzgan, Zabol, Ghaz- ni, Host, Kunar, and others) has to obey the laws re-introduced by the extremists. Recently, as the dimensions of the Taliban’s armed struggle against the government and the international coalition grew along with the Islamic extremists’ increased influence, the Muslim clergy has become much more insistent in its efforts to turn religion into a political weapon. Early in January 2008, the Ulema Council demanded that the president revive certain judicial practices of the Taliban, such as public executions, which, the Council argued, might stem the rising crime wave. They also objected to foreign films shown in the country as “contradicting the Islamic norms.” On 4 January, at a private meeting with the president, the clergy insisted that “the practice of encouraging Christian missionary groups” should be terminated. “The Council is concerned about the activities of some of the missionary and atheist groups and believes that their activities contradict the Shari‘a, the Consti- tution, and political stability in the country,” says the Council’s statement.1 It also wanted some of the private TV channels to be closed for promulgating an “amoral and anti-Islamic culture.” A witch hunt is in full swing in the country—progressive-minded journalists are persecuted on a wide scale while the clergy exploits the Muslims’ religious feelings and, by skillfully fanning religious zeal, rallies the public. The vociferous campaign against journalist Ghaws Zalmai, assistant to the Attorney General, condemned for his translation of the Koran into Dari had barely subsided when the mullahs incited a wave of demonstrations demanding the death sentence for the translator. The academic community found itself in the midst of the scandal: in December 2007, Kabul hosted a conference with the highly provocative title of “Scientific Investigation of What Causes the Plots to Abuse the Koran.”2

1 “Afghanskie ulemy trebuiut vozvrata k publichnym kazniam,” available at [www.afghanistan.ru], 7 January, 2008. 2 H. Gardesh, “Afghan Koran Translation Provokes Controversy,” Institute for War & Peace (ARR No. 276, 6 De- cember, 2007). 24 AFGHANISTAN Religion

In fact Ghaws Zalmai was not the translator; the Koran had been translated into Dari 30 years earlier and published in the United States without the parallel Arab text. In 1992, when the mojahed- din came to power in his country Ghaws Zalmai was stationed at the Afghan Embassy in Tajikistan as a cultural attaché and deemed it wise to emigrate to the Netherlands. The post-Taliban government invited him back; he became head of the Association of the Afghan Journalists and was appointed press secretary of Attorney General Abdul Jabar Sabet, who was very open about his pro-Taliban views. It was he who played the decisive role in the journalist’s arrest. Ghaws Zalmai was accused of disseminating the Dari translation of the Koran that abounded in “errors” and “misinterpretations” and was sentenced to 20 years in prison. Early in 2008, another religion-related case reached the court. Sayed Parvez Kambaksh, a journalist student at Balkh University and reporter for the Jahaan Naw (The New World) daily, was arrested back on 27 October, 2007 for publishing the article of an Iranian journalist found on the Inter- net which criticized Islamic fundamentalists whose interpretations of the Koran justified women’s oppression. He himself was deprived of any means of legal defense. Shams ur-Rahman, chairman of the Shari‘a court, declared that the reporter was brought to court for blasphemy and for insulting Is- lam and the Prophet Muhammad. On 22 January, the closed sitting of the court sentenced him to death— a punishment reserved for blasphemy. About 100 religious and tribal chiefs of the Eastern part of the tribal zone asked the president not to use his right of pardon. The conservatively-minded students of Balkh University published a “black list” of those whom they suspected of apostasy. Yahya Najafizada, a friend of the condemned student and one of the “apos- tates,” had to leave the country after being threatened twice by a mob of fanatical Muslims who as- sailed his home; he was also pestered by telephone calls that accused him of “spying for the infidels.” He had to flee for his life, first to Pakistan and then to Sweden. Under the Constitution, the condemned reporter could appeal to the Supreme Court but everyone knows that it prefers not to interfere even if the sentence was passed by the Shari‘a court. The Senate left the sentence in force despite the protests of the U.N., human rights organizations, and Western diplomats. The local journalists were warned against interfering to avoid a similar fate. The president alone could revise the sentence; U.S. Secretary of State Condoleezza Rice and U.K. Foreign Secretary David Miliband asked him to use his right. NATO Secretary-General J. Scheffer said that he expected his “Afghan friends” to demonstrate understanding. President Karzai limited himself to “justice will triumph.” Meanwhile the wave of protest swept the world. The Independent of Britain organized a campaign in support of the journalist and called on readers to ask the Foreign Office to speak sternly to the Afghan government and insist that the journalist be released. By the end of April, over 100 thousand signed the petition in defense of Kambaksh. Under worldwide pressure the government moved him to Kabul for a new, this time open, trial. The attorney general had to make a public statement to this effect. The trial was a long one; in October 2008, the death sentence was replaced with 20 years in prison. The world community believed that this was a symbolic case which brought to light the dispar- ities between the constitutional provisions of freedom of speech and the Islamic laws that accepted the death penalty for apostasy. Had the journalist been executed, the conservative clergy, which fears that traditional Afghan morals might be diluted by Western values, would have become even more determined. The Kambaksh case cornered the president: on the one hand, he wanted to demonstrate to the West that he was the main vehicle of democracy and human rights; on the other, he had to demonstrate to the nation that he sided with the religious leaders. In March, the local clergy acquired another opportunity to get into the limelight of public attention. They studiously fanned a wave of mass protests against the cartoons mocking the Prophet Muham-

25 CENTRAL EURASIA 2008 Analytical Annual mad in several Danish and Dutch newspapers, as well as the intention of a Dutch deputy to make a film that the clergy described as anti-Islamic. The cartoon scandal spread far and wide, which forced the U.N. to call the world community to a dialog with the enraged faithful. A wave of protest rallies engulfed the country. On 5 March, about 300 gathered in Puli Alam, the center of the Logar Province, to condemn those who had mocked the Prophet and to demand that the Dutch and Danish troops be removed from the country. The crowd set Dutch and Danish flags on fire and called on the president to condemn the anti-Islamic publications in the Western press and break off diplomatic relations with the two countries. A portrait of Pope Benedict XVI was torn to pieces. People from nearby villages and the local elders joined the action. Seventeen members of the local administration of the Nangarhar province voiced their protest at the head of a large demonstration.3 A day earlier Mazar-i-Sharif witnessed a similar rally. The Ministry of Religious Affairs described the cartoons an “attack on Islam.” On 4 March, the Afghan parliament issued a special statement to condemn the fact that the Western press published the cartoons. It was followed by a statement by Foreign Minister Rangin Dadfar Spanta, who said that the repeated publication of the offending cartoons in Denmark “cannot be justified by freedom of speech.” Later protest rallies swept Samangan and Herat. Finally, on 20 March, a huge rally of about 5 thousand gathered in Kabul. Twenty deputies of the parliament present at the rally chanted “death to the enemies of Islam.” There, too, the mob set Danish and Dutch flags on fire. Early in April, 70 women, nearly all of them in hijabs, went into the streets to protest against the cartoons. They also wanted the troops of the two countries out of the country and demanded that the Danish and Dutch embassies be closed. The Taliban responded painfully both to the cartoons and the upcoming showing of the Fitna movie. On 5 March, they issued a statement in which they classified what had happened as an insult to the Prophet and called on their supporters to settle scores with Geert Wilders, the movie maker, and launch a terrorist campaign in the Netherlands to prevent the film showing. The cartoon scandal and the film added vigor to the Islamist agitators who exploit the nation’s religious feelings. The Taliban, in turn, warned that the Western troops in the country were fighting Islam and therefore should be countered with jihad. Extremists announced that they had increased their attacks on the Dutch and Danish military contingents (1,650- and 630-strong, respectively). In anticipation of possible trouble that might follow the showing of the Danish video critical of the Koran, the very concerned NATO commanders turned to the Afghan government for support. General John Craddock, Supreme Allied Commander in Europe, expected that the popular wrath caused by the film might be turned against the Dutch military contingents stationed in the Uruzgan Province. “They could use the video to whip up anger against NATO troops in Afghanistan, they want to use this as a rallying point to their advantage; we have appealed to the (Afghan) leadership: Don’t hold the soldiers accountable, it’s not fair... I think the leaders have understood that,”4 said the general at a briefing at NATO Headquarters in Kabul. In April, Denmark and the Netherlands deemed it necessary to evacuate their diplomats from Algeria and Afghanistan to keep them out of danger; the embassies, however, continued functioning. In January, when suicide terrorist acts were becoming more frequent, drug trafficking more active, and the population more inclined to support the Taliban to an even greater extent than before, the conservative clergy and the Ulema Council, together with Minister of Information and Culture Abdul Karim Khorram, launched a campaign against Indian soap operas, which, according to the conservatives, “are disseminating amorality and an anti-Islamic culture.” In January, when a group of theolo-

3 See: “Afghans Protest Blasphemous Cartoons,” The Times, 6 March, 2008. 4 D. Brunnstrom, “NATO Seeks Afghan Support on Anti-Koran Film,” KABUL (Reuters), 18 March, 2008. 26 AFGHANISTAN Religion gians met the president to demand that these and similar programs be banned, the minister denounced the “alien culture.” Five Indian soap operas were removed from the TV screens.5 The clerics heartily approved of the minister and his decision. One of the members of the Ulema Council, Said Inayatullah Baleg, spoke for his colleagues in the Pul-e-Heshti, the largest of the Kabul mosques. “The Ulemas are satisfied with the ministry’s decision,” said he, “yet we all know that this is not enough. The Ulema Council will use all its rights to block the road to violations of morals at any cost. We shall prevent all manifestations of vice; we shall not be afraid of doing this even if they tag us as the Taliban or al-Qa‘eda. We shall protect everyone who defends Islam. Afghanistan is a Mus- lim country and should live by Islamic laws.”6 In the last three years, 17 private TV stations (11 of them in the capital) have appeared in the country to offer their audiences a blend of “hot” news and entertainment programs which enraged the most devoted of the clergy. They have become much more active: they want the Afghan rappers and pop stars banned from the TV screens; they would have punished those who watch television instead of praying in mosques. From time to time their indignation goes too far: on 27 March, the “defenders of Islam” set the Zafar (Triumph) radio station in Pagman (a suburb of Kabul) on fire. Its director explained that they had been selected as an “amoral” and “anti-Islamic” station. Early in April the government warned all TV stations that Indian soap operas should disappear as of 15 April. Finally, President Karzai came forward to say, under clerical pressure: “Like all people the world over we want our TV to correspond to our culture. TV programs that contradict the Afghans’ way of life and that people reject should be banned.”7 To prevent anything like that happening to their best programs the directors of the most popular Tolo channel decided to give more time to Islamic programs. They introduced literacy lessons to help people read the Koran and decided to organize a competition of Koranic readers under the catching title of “The Star of the Koran” to educate people through good reading. The minister of culture approved this as a model series. Former Foreign Minister Dr. Abdullah condemned the attempt to introduce what in fact amounted to censorship on TV as a revival of the country’s Taliban-ization. The president of the Union of Jour- nalists of Afghanistan Abdul Hamid Mobarez, who in the past filled the post of deputy minister of information and culture, condemned the ministry’s position. He believed that the ban, which was not adopted by the parliament, was illegal. The Tolo directors seized the opportunity to go with the Indian soap operas. It should be said that people love them; in the remote province of Helmand people do not be- grudge the costly and hard-to-get fuel in their generators to watch another Indian “soap.” This explains the high rating of the commercial Tolo TV channel, which offers Indian films on prime time; their audience is huge—10 to 11 million. The human rights community is naturally concerned about the persecutions of contemporary TV programs. Jean MacKenzie, country director for the U.K. Institute of War and Peace, believes that the pressure which the Ulema Council puts on the Karzai Cabinet largely undermines its not-very-high rating.8 The efforts to introduce censorship on radio and television are fraught with a return to the time when the Taliban banned all entertainment and people risked their freedom when watching smuggled videos at home. Recently the Taliban confirmed this by banning television in the Logar Province

5 A.W. Wafa, C. Gall, “Afghan Ministry Bans the Broadcast of 5 Foreign Soap Operas,” The New York Times, 22 April, 2008. 6 W. Rahmani, “Taliban Exploit Local Religious Sentiment to Target Dutch and Danish Troops,” Kabul Center for Strategic Studies (KCSS), 14 March, 2008. 7 “Afghan Defiance Over Indian Soaps,” BBC News, Tuesday, 15 April, 2008. 8 See: N. Meo, “Afghan Council Wants Soap Operas Off TV,” The San Francisco Chronicle Foreign Service, 3 March, 2008. 27 CENTRAL EURASIA 2008 Analytical Annual

(to the south of Kabul) because of its anti-Islamic nature. This was one of the many bans the Taliban introduced on the territory under its control. According to Najib Manelai, a senior official of the Ministry of Culture, dozens of masked armed people burst into mosques in the Logar Province and warned the residents against watching television. Soap operas were banned on the strength of several complaints. Saad Mohseni, who owns Tolo TV, believes that the “soaps” had little to do with the bans: they were introduced to stop investigation programs done by courageous reporters who saw it their duty to let everyone know about pedophiles in the police, ministers connected with drug trafficking, governors involved in kidnappings and extortions, and people close to the president who grew rich on shady deals. There may also be other reasons for the scandals involving TV. In the last few years many of the political organizations have acquired their own media. On the eve of the presidential election scheduled for 20 August, 2009, when the struggle for votes is gradually reaching its peak, the role of the media cannot be overestimated. Some observers think that the arguments of those who want TV programs banned because part of the audience wants this do not hold water: people are free to seek other programs. The TV audience, however, is divided: some people believe that the programs do undermine Afghan traditions and even the faith; others say that the Ulema Council, the parliament, and the government are turning a blind eye to thousands of murders, robberies, and other anti-Islamic actions because they are partly involved in them while trying to evict from the TV screens several Indian soap operas that speak of love, friendship, and straightforward human relations. In April, the religious conservatives never eased their pressure on the authorities. Their allies in the parliament—members of the Committee for Asocial Behavior—drafted a law that brought to mind the times of the Taliban once more. The draft outlaws cosmetics in public places and prescribed the hijab (that covers the body leaving the face and hands open) outside one’s home. Bracelets, chains, and bandana should be prohibited for men as purely female ornaments; dog and cock fights and pi- geon breeding were likewise outlawed as well as joint dances of young men and girls. Men and women should be separated at wedding ceremonies, no loud music should be allowed under the risk of a fine of 500 to 5,000 afghani (between $10 and $100).9 While the situation in the country was going from bad to worse because of the widening fighting zone and mounting support for the Taliban, orthodox Muslims deemed it possible to interfere in the government’s prerogatives. Early in August, the Alliance of the Ulemas of Afghan Refugees asked the American commanders to accept their failure, pull out of the country, and compensate for the material and human losses incurred by the American air raids. The statement that appeared in the press pointed out that jihad was the duty of each and every Muslim and that it alone can liberate the nation from the “horrors and cruelty of the American occupants and their allies.”10 In the future, the role and importance of Islam and its preachers will depend on the correlation of forces—the Taliban and the Karzai regime supported by the West—and on the struggle at the very top between the technocratic reformers and the pro-Islamic conservatives. It is still too early to speak about the chances for Western-type democracy in the traditional Afghan society.

9 See: “Afghan Parliament Committee Drafts Taliban-Style Moral Law,” KABUL (AFP), Wednesday, 16 April, 2008. 10 “Ulema Ask U.S. to Accept Failure in Afghanistan,” Daily Times (Pakistan), 2 August, 2008. 28 AFGHANISTAN International Affairs INTERNATIONAL AFFAIRS

Dr. Makhmud SHINVARI Independent researcher (Kabul, Afghanistan)

n 2008, Afghanistan’s relations with the U.S. and NATO, which have been increasingly defining the nature of the political processes in the country, occupied the most important place in its for- I eign policy. The gist of the matter was the growing threat to Afghanistan’s security caused by the increase in terrorist and extremist activity, the all-out corruption of state administration, security structure, and judicial system officials, organized crime, drug production and trafficking, the ineffective U.S. and NATO military campaign, the drop in the population’s standard of living, and the declining popularity of Hamid Karzai’s government. The U.S. remained Kabul’s main strategic partner. The worsening domestic political situation in Afghanistan not only aroused the establishment’s anxiety and concern, but also was the reason for clear signs of pessimism among American politicians. Sentiments such as “the U.S. is winning the battle but losing the war in Afghanistan” took the upper hand. All the same, Washington’s Af- ghan policy was still dominated by the desire to convince official Kabul that it was fulfilling all the promises it had made. This was confirmed in particular during U.S. Vice President Dick Cheney’s visit to Kabul in March 2008 on the eve of the NATO summit in Bucharest. “The U.S.’s commitment (with respect to Afghanistan.—M.Sh.) is firm and unwavering,” said Cheney at a meeting with Hamid Karzai. The American vice president’s assurances were soon reinforced by an important document: on 13 May, 2008, State Secretary Condoleezza Rice and Afghan Foreign Minister Dr. Rangin Dad- far Spanta signed a joint statement in Washington confirming the resolve of the sides to strengthen Afghanistan’s “long-term security, democracy, and economic prosperity.” The declaration demonstrated both countries’ adherence to the Agreement on Strategic Partnership they signed back in May 2005. Against the background of the growing pessimism in the U.S. about the military achievements in Afghanistan, Washington began re-examining its strategy. On 30 January, 2008, three reports by leading politicians were presented to Congress confessing the hopelessness of the situation in Afghan- istan and proposing specific steps to re-examine the U.S.’s strategy. In particular, the Afghanistan Study Group Report of Presidential Aide on Security James Jones and former U.S. ambassador to Moscow Thomas Pickering from the Center for the Study of the Presidency entitled “Afghanistan has been neglected and is now in danger of collapse” emphasizes that “the progress achieved after six years of international engagement is under serious threat from resurgent violence, weakening international resolve, mounting regional challenges and a growing lack of confidence on the part of the Afghan people about the future direction of their country. The United States and international community,” the authors of the report are convinced, “have tried to win the struggle in Afghanistan with too few military forces and insufficient economic aid, and without a clear and consistent comprehensive strategy to fill the power vacuum outside Kabul and to counter the combined challenges of reconstituted Taliban and al-Qa‘eda in Afghanistan and Pakistan.” The authors of the document suggest drawing up a universal strategy that will include military and civilian aspects, involving all the interested countries and organizations—the U.S., U.N., NATO, the EU, and the Afghan government—in its implementation, replacing the “light footprint” in Afghan-

29 CENTRAL EURASIA 2008 Analytical Annual istan (as Operation Enduring Freedom was evaluated by Bush administration in 2001) with a “right footprint,” and treating the Iraq and Afghanistan wars as two separate missions. The report of the Atlantic Council, which was also presented to Congress, confesses that a dead end situation has developed in Afghanistan and that the failure of the world community’s efforts will be a disaster for Europe, North America, and the Central Asia Region. The Atlantic Council study concludes that the U.S. must adopt a comprehensive plan to «save Afghanistan,» bringing in regional powers and overcoming a «security stalemate.» “Unless those parties interested in saving Afghani- stan understand that a regional approach is essential,” assure the authors, “the stalemate will continue. Bringing in interested parties and neighbors could be done through a meeting or conference that could include the Shanghai Cooperation Organization; India; Iran; and of course Pakistan.”1 Meanwhile, the development of Afghani-American relations was strongly affected by the presidential election campaign going on in the U.S., during which the contenders for the country’s highest post gave a significant amount of attention to the Afghan problem in their debates. In particular, the evaluations and proposals in the above-mentioned reports to Congress found their practical embodiment in the iniative of one of the presidential candidates, Senator Barack Obama, who entered the presidential race as early as 2007. On 19 March, 2008, he delivered a speech in Fayetteville (North Carolina) in which he set forth his vision of the situation in Iraq and suggested a plan for withdrawing from the crisis in Afghanistan. He said that the goal of his new strategy would be to take the central front in the war on terror to Afghanistan and Pakistan. He pledged to send at least two additional combat brigades (7,000 servicemen) to Afghanistan, and use this commitment to seek greater contributions from NATO allies. Focus would be placed on training Afghan security forces, including more joint NATO operations with the Afghan Army. He proposed an additional non-military assistance, bringing the total up to $3 billion each year, to prevent Afghanistan from slipping into chaos. Whereby he specified that these funds would go to financing restoration work, training exercises for the army and police force, and local projects aimed at providing alternative livelihoods to poppy-growing for Af- ghan farmers. The assistance would also go to providing efficient functioning of the Afghan government, ensuring meaningful safeguards to prevent corruption, and supporting an Afghan judiciary. Barack Obama also singled out Pakistan as a country that, on a par with Afghanistan, presents a real threat to regional and international security and proposed closer cooperation with the U.S., NATO, and Afghanistan in opposing this threat. “Make no mistake: we can’t succeed in Afghanistan or secure our homeland unless we change our Pakistan policy. We must expect more of the Pakistani government, but we must offer more than a blank check to a General (Musharraf—M.Sh.) who has lost the confidence of his people. It’s time to strengthen stability by standing up for the aspirations of the Pakistani people. That’s why I’m cosponsoring a bill with Joe Biden and Richard Lugar to triple non- military aid to the Pakistani people and to sustain it for a decade, while ensuring that the military assistance we do provide is used to take the fight to the Taliban and al Qa’eda.”2 Senator Obama’s new strategy also envisaged a wide range of practical global steps in U.S. foreign policy. In particular, he proposed creating a fund of 5 billion dollars to fight global terrorism in order to coordinate the activity of the American and foreign special services and law-enforcement structures, dramatically improve the U.S.’s image in the Arab world within the framework of “people’s diplomacy” by opening an “American Home” in different countries, create a Global Education Fund of $2 billion as an alternative to the radical madrasahs, and take action to prevent nuclear terrorism, and so on.3

1 “Three Independent Reports Conclude Efforts in Afghanistan are Failing and Call for Urgent Action,” National Security Network, Washington, 31 January, 2008. 2 “Obama’s Remarks on Iraq and Afghanistan,” The New York Times, 15 July, 2008. 3 See: B. Obama, The World beyond Iraq, Speech in Fayetteville, NC, 19 March, 2008. 30 AFGHANISTAN International Affairs

In July 2008, Barack Obama paid a visit to Afghanistan during his international tour that included Kuwait, Israel, Palestine, Jordan, Pakistan, Germany, France, and England. Although he criticized Hamid Karzai’s policy, the Afghans liked the senator, whom they preferred to his more experienced opponent, John McCain, since Obama gave priority to Afghanistan’s problems. Barack Obama believes that the fight against terrorism in Afghanistan is more important for the U.S. than the campaign in Iraq. Incidentally, he spoke out against the military operation in Iraq as early as 2002. During his meeting with President Hamid Karzai, Obama assured him that if he won the presidential election his policy would remain the same. In turn, his rival from the Democratic camp, Hillary Clinton, presented her Afghanistan program at a press conference in Washington on 6 March, 2008. She criticized George Bush’s Afghan policy and said that if she won the election she would definitely increase the number of U.S. forces in Af- ghanistan and persuade the NATO allies to do likewise. She also promised to double the efforts in the fight against drug trafficking in Afghanistan and assist the country’s rehabilitation by increasing foreign investments in education, the infrastructure, and other areas.4 While the U.S. presidential candidates where drawing up their new strategy for extracting Af- ghanistan from the crisis, the George Bush administration, recognizing the difficulty of the situation in Afghanistan, the increase in the dimensions of the Taliban’s military activity, the inability of the international coalition forces to defeat it, as well as the fact that the problem could not be resolved exclusively by force, nevertheless continued to place the emphasis on expanding the militiary presence in the country. Washington clearly demonstrated this at the NATO summit at the beginning of April 2008 in Bucharest, asking its allies to send additional troops to Afghanistan. In turn, George Bush made a decision at the end of January 2008 to send 3,200 marines to Afghanistan, 2,200 of them to the southern regions of the country, to assist the British and Canadian contingents. The NATO summit in Rumania was noteworthy for the fact that President Vladimir Putin attended it as a guest. There he signed an agreement with NATO permitting the Alliance to transport its non-military cargoes to Af- ghanistan through Russian territory. Nevertheless, the NATO member states did not see eye to eye in Bucharest about expanding the Alliance’s presence in Afghanistan. Despite the pressure from the U.S., several countries, including Germany, refused to increase the size of their military contingents or use their troops in military operations in the country’s south. The Canadians came to the rescue, warning that if the NATO countries did not send additional forces to the south of Afghanistan, they would begin withdrawing their forces (2,500 people), although not long prior to this the Canadian parliament had approved a decision to extend the stay of the Canadian troops in Afghanistan until 2011. Barack Obama also supported the demand to expand NATO’s military presence. On the eve of the Bucharest summit, France agreed to increase its military contingent by 1,000 people. President Nicolas Sarkozy informed British Prime Minister Gordon Brown of this during his visit to London. Taking the president’s idea even further, French Prime Minister François Fillon demanded that the NATO member states increase their state assistance programs to Kabul and draw up a schedule for gradually replacing the international forces with contingents of the Afghan army, along with “synchronous” promises from other countries with respect to reinforcements. “France is willing to make additional efforts on three conditions,” stressed the prime minister in an interview to the French press, “that international assistance grows, ‘Afghanization’ is accelerated, and the allies assume simultaneous obligations to send additional forces.” Hungary supported France at the summit by agree- ing to send an additional 100 people to Afghanistan, while Britain consented to send 450, bringing the total number of its troops up to 8,200 servicemen. A total of 20 NATO member states expressed their

4 See: K. Jensen, “Clinton Says She Would Commit More U.S. Troops to Afghanistan,” Bloomberg, 6 March, 2008. 31 CENTRAL EURASIA 2008 Analytical Annual willingness to send additional forces to Afghanistan, but they clearly offered fewer numbers than the U.S. president wanted. In August 2008, when developing the U.S.’s new approach to Pakistan, President George Bush gave unofficial instructions to American servicemen in Afghanistan to launch strikes at the Taliban and al-Qa‘eda bases on Pakistan territory. He motivated this by the fact that terrorists do not recognize national borders, so the U.S. had the right to attack them on any territory. The first action of this kind was taken long before the president’s decision. Strikes were made using drones (unmanned aircraft) or missiles launched from Afghan territory. They caused significant casualties among civilians and aroused a fierce reaction in Islamabad. President Musharraf repeatedly spoke out in protest and said that Pakistan would not permit violations of its national sovereignty. President Hamid Karzai supported the U.S. actions. Consequently, due to the growing pessimism of the American military in Afghanistan and their understanding that it was impossible to deal with the conflict by military means alone, the idea began to gain currency in American military circles of making contact with the Taliban and its allies and holding talks with them in order to achieve national consent. This idea was supported by U.S. CENTCOM chief, General David Petraeus, and Commander of U.S. and NATO Forces in Afghanistan David McKiern- an. Of course, emphasized the latter, the talks should be held by the Afghan government as a sovereign structure, with the foreign military backing it up. Barack Obama’s victory at the U.S. presidential election inspired great hopes both in Afghani politicians and in the ordinary people. “I applaud the American people ... and hope this election and President Obama’s coming into office will bring peace to Afghanistan,” said Hamid Karzai when congratulating the new American president. “The request of Afghanistan is a repeat of our requests that we have had for a long time,” Karzai said. “Our request is a change of strategy in the campaign against terrorism; meaning the campaign against terrorism is not in the villages of Afghanistan, the campaign against terrorism is not in our country.”5 Hamid Karzai was no doubt trying to gain new points in the election campaign going on in Afghanistan or maybe he just happened to touch on the Afghanis’ sore spots: “My first demand from the US president, when he takes office, would be to end civilian casualties in Afghanistan and take the war to places where there are terrorist nests and training centres.”6 The Taliban’s reaction to the new U.S. president also came as no surprise: “The new American president should end a long era of wars and begin an era of peace… If he brings changes to Bush’s policies in real terms, then he will be the winner and if he doesn’t then there will be more crises.”7 The hopes placed on the new U.S. president did not stop Hamid Karzai from highly appraising the merits of George Bush, who arrived in Kabul on 15 December, 2008 on a farewell visit, in fighting terrorism and helping the Afghan people. He even presented him with the highest government award— the medal of Gazi Amanullah Khan. Against the background of the difficult but relatively stable relations with the U.S. and NATO countries, Afghanistan tried to develop multilateral relations with its neighbors. And whereas Kabul did not have any problems with the Central Asian countries, China, and India, and there were certain achievements, as well as several complications, in its ties with Iran, its relations with Pakistan frequently came close to the brink of open hostility. The existence of a safe refuge for the Afghan Tali- ban and al-Qa‘eda in Pakistan’s Northwest Frontier Province (PNFP), including the terrorist training camps, seriously hindered the struggle of the international coalition and Afghanistan government against the extremists. In the past two years, under the influence of the Afghan Taliban that has gathered here and the actions of the Pakistani forces fighting against the extremists in the Federally Administered

5 S. Salahuddin, “Afghanistan Welcomes Obama Win, Wants New Strategy,” KABUL (Reuters), 5 November, 2008. 6 “Afghanistan Demands Obama’s Govt Ends Civilian Casualties,” KABUL (AFP), 5 November, 2008. 7 S. Salahuddin, op. cit. 32 AFGHANISTAN International Affairs

Tribal Areas (FATA), as well as under the influence of religious extremist parties, the local population has become greatly radicalized and the Taliban-ization process has spread beyond Afghanistan to the PNFP. As a result, in December 2007, a local Taliban movement appeared there—Tehrik-i-Tali- ban Pakistan (Students’ Movement of Pakistan)—led by Baitullah Mehsud. It proved to have close ties with the Taliban and al-Qa‘eda. Afghani-Pakistani relations have been very tense lately. The Afghan Taliban that found refuge in the PNFP took advantage of the unofficial support of some of Pakistan’s army generals, the ISI (Pakistan’s Inter-Services Intelligence Agency), and the Pakistani radical Islamic parties. In these conditions, military contingents of the Taliban were able to cross unhindered over an essentially transparent border into the territory of Afghanistan and carry out attacks on the international coalition forces and contingents of the Afghan army. The Afghan government repeatedly demanded that Islamabad close the Taliban bases and camps on Pakistani territory and intercept the infiltra- tion of extremists across the border. But Pakistani President Musharraf categorically denied the accusations against him and, in turn, criticized the Afghan leadership for its incompetence to deal with the extremist opposition in its own country. But the Taliban’s presence on Pakistani territory soon became so obvious that no one could deny that the Taliban leadership and its headquarters were based in Quetta, the administrative center of the Pakistani Province of Baluchistan, and from there were coordinating the actions of militant contingents in Afghanistan’s southern provinces of Farah, Kandahar, Hilmand, and Uruzgan. Islamabad was essentially double dealing with respect to Afghanistan. As a close U.S. ally in the war on terrorism, Pakistan was indeed persecuting terrorists from other countries who joined the ranks of al-Qa‘eda, but turned a blind eye to the actions of the Taliban, seeing them as a lever of pressure on Kabul. After the Americans leave Afghanistan, and this is bound to happen, Pakistan hopes to bring a friendly, pro-Pakistani government to power in Kabul, thus realizing the dream of President Ayub Khan who put forward the idea in 1956 of creating a Pakistani-Afghan federation in which Pakistan would dominate. When the new coalition government led by Yousuf Raza Gilani came to power in Pakistan after the parliamentary elections of 18 February, 2008, there was hope that Islamabad would re-examine its policy regarding Kabul and Pakistan would cooperate more closely with its neighbor in the fight against terrorism and extremism, particularly since the National People’s Party of Pakistan, which is strongly opposed to the Taliban’s extremism, acquired a dominating position in the legislative assembly of the PNFP. During the visits to Islamabad by Afghan Foreign Minister R.D. Spanta (April) and his Paki- stani colleague Shah Mehmood Qureshi to Kabul (June), both sides agreed to “put an end to the contradictory and conflict period in bilateral relations” and try to begin again “from scratch.” But this hope began to fade during the subsequent steps taken by the Gilani government. The new Pakistani authorities called for cutting back on the armed struggle against extremists and preferred to engage in talks. In this context, on 21 May, 2008, Islamabad entered an agreement with the Taliban in the Swat Agency, in accordance with which it pledged to withdraw its troops from this territory. In exchange, the Taliban promised to close its militant training centers, including those for suicide bombers, and refrain from attacking the security structures. But it acquired the right to introduce Shari‘a law in the region as local legislation. Kabul was enraged by this act. “We believe any exclusive deal with the Taliban would result in worsening of the situation,” said Afghan Foreign Ministry press secretary S.A. Baheen. “We believe any sort of agreement with the terrorists would harm both countries.”8 The Afghan president also expressed his concern about this. Meanwhile, President Musharraf’s real power was rapidly waning, turning into a decorative function. The weak government torn apart by internal squabbles proved incapable of controlling the

8 “Pakistan Signs Peace Deal with Pro-Taliban Militants,” PESHAWAR, Pakistan (AFP), 21 May, 2008. 33 CENTRAL EURASIA 2008 Analytical Annual situation in the region. In these hard times, the ISI and the army were the only real forces in the country, who also initiated talks with the extremists without taking the trouble to consult with the government. The Afghan leadership’s disillusion in Islamabad’s activity was so great that in June 2008 Hamid Karzai threatened to send troops to the border regions of Pakistan to liquidate the leaders of the Paki- stani Taliban. The president demanded decisive action from the Islamabad authorities against elements “undermining security in Pakistan and Afghanistan.” At the beginning of July, Hamid Karzai announced that the Pakistani special services were involved in the terrorist act at the Indian embassy in Afghan- istan on 7 July which entailed a large number of casualties. Islamabad denied its involvement in the tragic event and, in turn, demanded that Kabul stop playing its “accusation game.” On 14 July, the Afghan Cabinet of Minister decided to halt all talks with Pakistan. Despite the growing tension in the relations between the two countries, their leaders continued to look for ways to normalize bilateral ties. On 3 August, 2008, Hamid Karzai and Pakistani Prime Minister Gilani met in Colombo at the summit of the South Asian Association for Regional Cooper- ation (SAARC). They agreed that the two countries needed a united strategy for combating terrorism and extremism and scheduled another meeting. A serious turn in Afghani-Pakistani relations came when Pervez Musharraf resigned as president on 27 August. This event caused a positive response in Kabul and the hope that “Musharraf’s departure would strengthen democracy” in both countries. The Taliban in the PNFP immediately took advantage of the power vacuum left in Pakistan to attack the fort in the Bajaur Agency and stage an explosion using suicide bombers at a meeting of Shi‘ites. Essentially the entire territory of the province, apart from the Peshawar valley, was under the control of the extremists. Observers believe that these acts were a response to the session of the trilateral NATO-Afghanistan-Pakistan commission, at which a coordinated plan was adopted to prevent the militants from crossing the border. The political vacuum in Pakistan did not last long: on 8 September, leader of the People’s Party of Pakistan Asif Ali Zardari took his oath as new president. He said that he would work actively with neighbors, primarily with Afghanistan. Hamid Karzai was the only foreign head of state invited to the inauguration of the new Pakistani president. Both leaders pledged to jointly fight terrorism and extremism in order to ensure peace in the region. President Zardari assured Karzai that from that day on his government would act in keeping with the region’s interests. The Afghan president, in turn, said that Afghan- istan and Pakistan were Siamese twins. “This is why both countries suffer from the same problems,” he noted, emphasizing the need for a joint struggle. And he added that Afghanistan would continue to take action to eradicate terrorism in the region and would support Pakistan’s efforts in this direction. But the old problems in bilateral relations remained unresolved. They included the extremist bases in FATA which were the targets of missile strikes by American drones. This proved to be an immense bone of contention in Afghani-Pakistani relations, since Pakistan regarded these acts as a violation of its national sovereignty. In an attempt to defuse the tension in this issue, in September 2008, Afghan Defense Minister General Rahim Wardak suggested creating a joint tactical force in cooperation with the U.S. (NATO), Afghanistan, and Pakistan, which by virtue of its status could track down militants on both sides of the Afghani-Pakistani border. Justifying his idea, General Wardak said: “Everyone must realize that we have common threats, a common enemy, and common goals.” But Islamabad did not support the Afghan minister’s proposal. Nevertheless, the leaders of both countries continued declaring their intentions to cooperate: on 27-28 October, 2008, an Afghani-Pakistani jirga was held in Islamabad attended by 25 delegates from each side. It was planned as early as August 2007 at the first joint jirga in Kabul. The possibility was discussed at the Islamabad jirga about engaging in talks with the Taliban, and a group of delegates from both sides was formed for holding these talks. At the beginning of December 2008, the presidents of both countries met in Istanbul during a trilateral summit also attended by Turkish President Abdullah Gül. This was the second meeting of

34 AFGHANISTAN International Affairs the leaders of both countries sponsored by Turkey. The first—between Hamid Karzai and Pervez Musharraf—was held in Ankara in April 2007. In Istanbul, the presidents of the three countries confirmed that fighting terrorism was their top priority. They discussed political and economic problems, as well as regional security issues. The presidents of Afghanistan and Pakistan entrusted the foreign ministers of their countries with drawing up a common strategy for opposing al-Qa‘eda and other extremist forces. Everyone agreed that the meeting of the three presidents helped to ease the tension in Afghani-Pakistani relations. And, finally, the Pakistani president accepted Hamid Karzai’s invitation to pay an official visit to Kabul. The visit took place on 6 January, 2009. A certain shift was also designated in the relations between Afghanistan and Russia, which had died to a mere glimmer over the past few years. The pessimism of Chairman of the State Duma Inter- national Affairs Committee K. Kosachev expressed at the end of March 2008 about the prematurity of Russia joining the NATO efforts in Afghanistan changed in April to an agreement, mentioned above, on transit of the Alliance’s non-military cargoes through Russian territory entered by President Vladimir Putin at the Alliance’s summit in Bucharest. On 28 May, Russian Foreign Minister Sergey Lavrov said that “Russia will continue to be involved to such an extent as meets our interests and principles of equal cooperation.”9 And in June at a session of the Russian-American workgroup on fighting terrorism, the sides came to a principal agreement on deliveries of Russian weapons to the National Army of Afghanistan. The August events of 2008 in the Caucasus, which took the form of an armed conflict between Russia and Georgia, and Russia’s subsequent recognition of South Ossetia’s and Abkhazia’s independence led to an aggravation in Russia’s relations with the West, primarily with NATO. Relations with the latter were essentially frozen. But Moscow made it understood that this did not apply to the agreements on transporting NATO’s non-military cargoes to Afghanistan through Russian territory. Incidentally, the cooling off in relations with the West did not affect Russia’s policy in Afghanistan, which was shown by the meeting between President Dmitri Medvedev and Hamid Karzai at the end of August 2008 at the SCO summit in Dushanbe. Soon relations between Moscow and NATO were restored, which indicated their renewed cooperation with respect to Afghanistan. So the weakness and incompetence of its government, as well as its domestic policy failures, primarily in the fight against drug trafficking, extremism, corruption, unemployment, and organized crime prevented Afghanistan from bolstering its international position and it continued to be politically and economically dependent on international donors.

9 M.K. Bhadrakumar, “Russia Joins the War in Afghanistan,” Asia Times Online, 25 June, 2008.

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REPUBLIC OF ARMENIA

GENERAL OVERVIEW

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

he year 2008 was rich in events on the domestic stage; foreign policy and relations with its closest neighbors also offered food for thought: the country went to the polls to elect a new presi- T dent; rivaling political forces clashed in the streets; there were regional wars, new initiatives applied to the old ethnopolitical conflicts, and efforts to normalize relations with neighbors. On 19 February the country elected its next president, an event that can be described as unprecedented for many reasons. First, this was the first time in the history of the newly independent Cauca- sian states that a president (Robert Kocharian), after serving two constitutionally permitted terms, left his post and did not run in the election. Second, the 2008 election involved real rivals, one of them being the first president of independent Armenia Levon Ter-Petrosian. This is highly unusual for the Soviet successor states: in most of them former presidents not only have no chance of making a comeback to “big politics,” they are either disgraced or even physically removed. In Armenia the former president had an equal chance along with then Prime Minister Serzh Sargsian to be elected president. This made the 2008 election highly competitive; the rivalry was stiff to the extent that it divided the nation. According to the official data, on 19 February, 2008 Ter-Petrosian received about 21 percent of the votes while Sargsian, his main rival, received about 52 percent, which made him the next president of Armenia. The post-election developments sent political tension up. The protest rallies of Ter-Petrosian’s supporters on Freedom Square in Erevan forced the ruling political forces and one of the presidential candidates (Artur Bagdasarian, leader of the Orinats Erkir (The Rule of Law) Party, who lost with 17 percent of the votes) to join forces on 29 February in a coalition made up of the Republican, Flour- ishing Armenia, Dashnaktsutiun, and Orinats Erkir parties.

36 REPUBLIC OF ARMENIA General Overview

The members shared the ministerial portfolios and posts of the commission heads and vice speakers in the National Assembly among themselves. Artur Bagdasarian was given the post of Secretary of the National Security Council of Armenia. The document that made the coalition a political fact was signed on 21 March. On 1 March the police and other law enforcers dispersed the opposition meeting on Freedom Square; in the commotion and clashes that followed 10 were killed and many wounded. Dozens of people were detained, including several opposition members of the parliament, under charges of organizing disturbances and “usurping power.” Under a decree issued by President Kocharian a state of emergency was introduced in Erevan for 20 days because of the tension in the country’s capital. The tragic events of 1-2 March caused a profound political crisis that negatively affected the country’s development and its international image. The events, however, and the public’s response made authorities realize that radical changes were overdue: corruption should be fought more resolutely and freedom of speech should be restored along with further democratization. On 9 April, at special sitting of the National Assembly, third president of Armenia Serzh Sarg- sian assumed office. The ceremony required special security measures because of the continued tension in the capital (which had still not recovered from the March events and the state of emergency). Very soon the country received a new cabinet headed by Tigran Sarkisian, head of the Central Bank, well-known economist and political figure, and composed of representatives of all the parties that formed the coalition (the Republican, Flourishing Armenia, Dashnaktsutiun, and Orinats Erkir parties). The latter half of the year was much calmer: the opposition played down its activities and was no longer strongly opposed to the government. This was partly caused by the fact that regional politics had come to the fore (very much to the advantage of central power and the president’s personal rating). On the other hand, the nation was growing tired of political activities and became indifferent to the election results as the February elections receded into the past. Later in the year domestic policy and the opposition revived when PACE published the results of the monitoring of the fulfillment of resolutions Nos. 1609 and 1620 passed in the wake of the March events. The January 2009 PACE session was expected to deprive Armenia of the right to vote if it failed to implement the resolutions. The most important foreign policy events took place in the latter half of 2008 dominated by the Five-Day War between Russia and Georgia and the unfolding world economic and financial crisis. The war largely affected the political context in the region and Armenia’s foreign policy, particularly its relations with Azerbaijan and the Nagorno-Karabakh conflict. It seemed that in the post-war conditions, Baku would have to readjust its position on the Karabakh conflict in view of Georgia’s defeat, the potential threat to the oil routes, and the revived “Russian threat.” Armenia, in turn, should seek and find a new place in the new context as well as dividends in the regional political processes. The political elites and supporters of the conflicting sides revised their ideas about the future of the Karabakh conflict. The threat that Azerbaijan might start a war in Nagorno-Karabakh diminished. The Moscow Declaration of the Three Presidents signed on 2 November by Medvedev, Sarg- sian, and Aliev related to the prospect of a political settlement in Nagorno-Karabakh was another significant event of 2008. One can say that throughout the year the Karabakh issue remained on Arme- nia’s foreign policy agenda and will not lose its urgency later. Turkish President Abdullah Gül’s visit to Erevan can be described as another result of the Five- Day War. Even before the August war in South Ossetia the relations between the two countries had been warming up. (In June 2008 President Sargsian invited his Turkish colleague to visit Erevan, thus adding vigor to bilateral political relations.) After the Russo-Georgian war, the supply line risks of Georgia made Ankara even more interested in Armenia as an alternative transportation or even energy corridor for Turkey.

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Throughout the year Armenia actively developed its cooperation with its main foreign policy partners. Russian President Dmitry Medvedev visited Erevan within the framework of the permanent Armenian-Russian political dialog. The sides discussed bilateral cooperation within the CSTO format among other things (from September 2008 Armenia chaired this military-political structure). Through- out 2008 Erevan discussed the future of its energy and supply line cooperation with Iran; it agreed with Tbilisi on a second transportation corridor from Armenia to Georgia’s Black Sea coast. Much was done to develop cooperation in the political and regional security spheres with the United States, NATO, the main European countries, China, and India. The Armenian peacekeepers successfully concluded their peace mission in Iraq. In December the republic was included in the new Eastern Partnership program of the European Union in the context of the country’s long-term political priorities and its cooperation with the EU. In the latter half of the year the country’s economy was inevitably affected by the world financial and economic crisis. While early in the year (despite the March events in the country’s capital) it was expected that the economy would continue to flourish and business activity would become even more vigorous, in the latter half the situation drastically changed. Together with most of the Soviet successor states Armenia, hardly integrated into world economy, suffered less at the crisis’ first stage. According to the National Statistical Service in January-December 2008, the GDP increased by about 6.8 percent against 2007 (instead of the expected 10 percent). Despite the fact that the republic was not severely affected by the first blows of the crisis, some industrial branches suffered more than others (the mining industry, capital construction, and the processing of precious stones). The private remittances from abroad (Russia and the United States in particular) showed a tendency to subside.

POLITICS

Manvel SARKISIAN Senior expert at the Armenian Center for Strategic and National Studies (Erevan, Armenia)

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

y the end of 2008 Armenia left political and presidential election’s tragic finale. The aftermath economic stagnation behind with a heavy of the August war between Russia and Georgia was B foreign policy burden. Six months after the another important event that affected the region’s se- post-election bloodshed of 1 March, 2008 in Erevan curity. The country’s economy, badly hit by the Armenian politics remained under the pressure of the world financial crisis, added to the 2008 torpor.

38 REPUBLIC OF ARMENIA Politics

The numerous dangers made active politics Serzh Sargsian as the new president could not impossible; the external threat intensified by the boast of a high legitimacy level inside the country, Russian-Georgian war paralyzed not only the which created foreign policy troubles for him and country’s leaders but also their opponents; the op- the country. New and much harsher conditions position between the government and the radical were formulated for the Nagorno-Karabakh settle- opposition and contradictions inside the ruling ment; PACE threatened to deprive Armenia of its camp reached their highest point. voting right, while the American Millennium Chal- The country’s political system acquired two lenge Program refused to extend financial aid to the political camps unable to agree on the results of republic. The West’s rigid position was directly the presidential election. The government and associated with the pending political prisoners’ property, which merged together, created a pole issue and the uninvestigated causes of the 1 March of power with a monopoly on the republic’s eco- developments in the Armenian capital. nomic activities as well as on the absolute major- Fully aware of its weakness, the government ity of the electronic media. Executive power had placed its stakes on propaganda: after the election the law-enforcement structures and the parliament brainwashing in an effort to “emphasize the unity under its total control. of the people and the government” never stopped. The radical political parties and a large This was partly suggested by the tension inside the part of the protest electorate concentrated on the government camp which had completely merged opposite pole supported by a considerable with business, a situation that bred corruption and number of the media. Most of the formerly op- squabbles. This did not force the country’s leaders position parties, which steered clear of the op- to try to talk to the opposition even though the lat- position pole, moved onto the government’s ter suggested that political prisoners should be freed side. This also happened to some of the public and a dialog to find a solution to the quandary and organizations. The resultant situation left no the external threats should be started. The newly room for a “third pole.” The balance between elected president showed no desire to do this when the two poles was maintained by repressions the opposition stopped mass actions to avoid ex- and the ruling camp’s domination in the sphere ternal pressure on the republic. The year 2008 be- of information. gan and ended with confrontation.

The Presidential Election and Its Tragic Finale

Rigid confrontation between the government and the radical opposition began long before the election; during the election campaign it developed into antagonism. The Central Election Commis- sion set 19 February, 2008 as the election day. Long before that, on 10 November, 2007, the Council of the Republican Party of Armenia (RPA) nominated its leader Serzh Sargsian as presidential candidate. The next day, speaking at the 11th RPA congress, Sargsian severely criticized the actions and statements of first president of Armenia Levon Ter-Petrosian. He pointed out that revenge was impossible and that “all actions designed to undermine the state system will be resolutely opposed.” This forced the opposition parties to close ranks; they toyed with the idea of a single opposition candidate. Ter-Petrosian was supported by the leader of the People’s Party of Armenia (Stepan Demirchian), Raffi Hovannisian from the Heritage Party, and the Liberal-Progressive Party (Ovannes Hovannisian), as well as the Conservative Party, Social-Democratic Party Gnchakian, the Mother- land and Honor Party, the Armenian Motherland and Freedom parties (16 parties in all), and several dozen public organizations.

39 CENTRAL EURASIA 2008 Analytical Annual

Many of the opposition leaders, however, preferred wait-and-see tactics: former prime minister of Armenia Vazgen Manukian, leader of the National-Democratic Alliance, declared that the first president was no different from the country’s acting leaders and refused to cooperate with him. The opposition Orinats Erkir (The Rule of Law) remained determined to nominate its own leader, Artur Bagdasarian, as presidential candidate; Dashnaktsutiun, an opposition party at that time, came up with its own candidate. As a result the Central Elections Commission registered 9 candidates: RPA leader Serzh Sarg- sian, former prime minister and leader of the National-Democratic Alliance Vazgen Manukian, first president of Armenia Levon Ter-Petrosian, head of the National Unity Party Artashes Gegamian, Chairman of Orinats Erkir Artur Bagdasarian, Vice Speaker Vaan Hovannisian nominated by Dashnakt- sutiun, leader of the People’s Party Tigran Karapetian, former advisor of the president of Nagorno- Karabakh Armen Melikian, and leader of the National Agreement Party Aram Arutiunian. The “single candidate” idea was obviously rejected. The official part of the race was over; the country moved toward the typically Armenian political practice. The programs of the two main candidates (Serzh Sargsian and Levon Ter-Petrosian) betrayed their determination. The former spoke of the need to liquidate the anti-constitutional pyramid of power and restore constitutional law and order very much in line with the opposition’s intentions. The people in power, on the other hand, wanted to preserve the regime in its totality—the “Forward, Ar- menia!” slogan and the thesis about the value of “unity” as opposed to “freedom” (the centerpiece of Serzh Sargsian’s program) spoke of the intention to preserve the regime intact. From the very beginning Ter-Petrosian placed his stakes on isolating the state structures from the ruling crust by inspiring them to boycott their rulers. He identified President Robert Kocharian and presidential candidate Serzh Sargsian as the enemies of the constitutional order. All the others (businessmen and civil servants included) were seen as supporters of change. Ter-Petrosian promised that property would not be redistributed and denounced illegal methods of struggle (such as occupation of buildings, etc.) from the very beginning. Many were impressed; the effect was multiplied by the government, which launched a vehement struggle against all the opposition candidates. At some point this forced Ter-Petrosian and Artur Bag- dasarian to meet for consultations; there were talks about their possible alliance. Bagdasarian spoke at one of the meetings of Ter-Petrosian’s supporters; he announced that he had been threatened and warned that if anything happened to him the authorities should be blamed. The Orinats Erkir leader, however, was determined to run on his own; on 14 February, several days before the election, he announced that he “would discuss a united opposition after the first round of the election.” Ter-Petrosian subjected this to scything criticism and described his decision as “be- trayal” and “abetting the authorities.” Dashnaktsutiun received its share of criticism. In any case, no alliance among the candidates was possible. This was the psychological climate on the eve of the election; the CEC expected 2,328,320 to come to the polls; it had registered 6 international observer missions, the largest of them (316 members) being sent by OSCE/ODIHR; the CIS dispatched 166 observers, the OSCE Parliamentary As- sembly 53, the CIS Parliamentary Assembly 39; PACE 40; the European Parliament 6. Early on election day the candidates’ election headquarters started complaining about violations of the election procedure and beating up of their supporters. There was information about bribes and open agitation banned on election day. As soon as the vote count started Serzh Sargsian’s victory in the first round was predicated as certain; the opposition made public its intention to gather a rally in Erevan the next day. The CEC quoted a figure of 52.86 percent of votes cast for Serzh Sargsian; 21.50 percent for Levon Ter-Petrosian; 16.66 percent for Artur Bagdasarian, and 6.2 percent for Vaan Hovannisian. This opened the post-election process that climaxed on 1 March in Erevan. It was these events and the ensuing

40 REPUBLIC OF ARMENIA Politics decision of the Constitutional Court of 8 March, 2008 that speeded up the radical political changes in the republic. On 20 February, the opposition gathered the promised rally; its leaders called on the opposition political forces to join the movement headed by the first president. It was stated that the results of the presidential election had been falsified. The election headquarters of the first president refused to accept the results and insisted on a new election. After the meeting the rally marched along the capital’s main streets. Meanwhile, the international observer mission accepted the election as corresponding to the obligations the country had shouldered. This did nothing to convince the opposition, which merely ignored the Europeans. Impressed by the rallies, the state structures wavered. At the meeting on 21 February Ter-Petrosian announced that two deputies of the defense minister (Manvel Grigorian and Gagik Melkonian) were prepared to support the opposition. No denials from the very top could stop the absolutely new political current on the domestic scene. The fear that the leaders might lose control over state structures determined the course of events. The leaders of the protest meeting organized a tent camp on Freedom Square opposite the Opera House to convince the protesters to remain on the square around the clock. They judged correctly: the discontent among the civil servants became even more obvious. On 22 February, Gagik Jangirian, deputy of the republic’s Prosecutor General, joined the opposition; emboldened, several deputies of the National Assembly did the same. The situation in the government camp was rapidly sliding into a crisis; time was slipping away— decisions became overdue. On 21 February, President Kocharian went to Moscow; after that the government became much more resolute. On 23 February, President Kocharian met the top military and warned them that he “would not permit anyone to undermine the republic’s stability.” The same day he met the top officials of the National Security Service to inform them of the same. He described the developments as a coup d’état and warned that retaliation would be resolute and cruel. Later, he met the top police officers. The security structures were mobilized; it was the Russia factor that probably fed the president’s newly found resolution. The same day, fully aware of possible retaliation, Ter-Petrosian announced that the opposition would remain within legal bounds; on 23 February, the determination that the opposition was demonstrating throughout the crisis convinced several Armenian diplomats (including Deputy Foreign Minister Armen Baiburtian and several ambassadors) to side with it. They called on the law enforcers to refrain from the use of force against the people. The government was not caught napping either: on 23 February practically all the deputies who had vowed support of the opposition the day before signed a joint statement issued by the government coalition about their support of Serzh Sargsian. Those state officials who"had moved away from the official camp were repressed. On 23 February, the police detained Gagik Jangirian, who had been removed from his post as deputy of the republic’s Prosecutor General; the wayward diplomats lost their posts while several opposition leaders were likewise detained. In this context, on 24 February, the CEC published the final results of the presidential election: Prime Minister Serzh Sargsian was declared the new president. The CEC members, who represented the Heritage and Orinats Erkir parties, boycotted the sitting while the Dashnaktsutiun representative offered his own opinion, after which he voted with the majority. Immediately after that Ter-Petrosian announced that even if the West recognized the presidential election as legitimate the opposition would not lay down its arms: nothing changed for the opposition, he argued, when Serzh Sargsian was declared president. The first president described this victory as pyrrhic. The opposition declared that it would go to the Constitutional Court with a demand to recognize the election as illegitimate. Civil servants continued leaving the government camp: on 25 February, several officials of the Ministry of Trade and Economic Development made public their intention to side with the opposi-

41 CENTRAL EURASIA 2008 Analytical Annual tion. The country’s leaders, in turn, began consolidating their supporters to bring them out for rallies. On 25 February, their meetings were held in several regions; on 26 February, a huge rally was organized on the Republic Square in Erevan. This was a big mistake. Forced to attend the meeting many of the participants moved to Free- dom Square to join Ter-Petrosian’s supporters, leaving behind banners of the Republican Party. This was the apogee: people were marching in thousands in the streets. In the evening President Kocharian addressed the nation on TV and explained that the attempts to destroy the state machine were aimed against Armenian statehood. “This cannot be justified and those guilty of this should be punished.” The government was obviously bracing itself for harsh measures; it mobilized the structures and brought more law enforcers into the capital. Two parliamentary parties (Heritage and Orinats Erkir) refused to accept the election results, which left the ruling camp with very limited political resources—in fact the administrative resource was all that was left. Meanwhile events were unfolding; the government was obviously haggling with the political forces. Serzh Sargsian called on the political forces to join ranks in a coalition. Ter-Pet- rosian, in turn, was negotiating with the largest parties. It turned out later that their leaders had been talking to both conflicting sides in an effort to find their bearings in the storm. What they did in public confirmed this. The government, meanwhile, started talking about the unlawful possession of firearms. Later it became obvious that it had not stopped at that. On 24 February, the National Security Administration opened a criminal case on usurpation of power. By that time, the government had already armed itself with legal reasons to move against the opposition. At the same time the police called on the rally to discontinue the illegal actions. In anticipation of a possible unfavorable decision by the Constitution- al Court, the government scratched up political support. The tide turned when, on 29 February, Artur Bagdasarian, head of the Orinats Erkir Party, all of sudden accepted the invitation of the country’s leaders. He was offered the post of secretary of the Security Council under the President of Armenia. What happened next showed that the government, thus emboldened, had finally resolved to move against the rally. On 1 March at about 07:00 a.m. law enforcers dispersed the meeting on Freedom Square; the police used truncheons and other special means to carry out an operation described as confiscating illegal firearms. It took the law enforcers from 10 to 15 minutes. Levon Ter-Petrosian was forced to return to his mansion. The dispersed crowds gathered outside the French Embassy at the monument to Alexander Miasnikian. By noon there were tens of thousands waiting for Ter-Petrosian to reappear. The same day the world community offered its first comment: Secretary General of the Council of Europe Terry Davis expressed his concern over the Armenian developments and condemned the use of force against the rally. It was obvious that the situation had to be resolved one way or another. The protesters were determined to resist to the end; they had already built barricades out of buses, trolleybuses, cars, refuse bins, etc. In the evening pressure increased: about 09:00 p.m. the police moved against the crowd from Grigor Lusavorich (St. Gregory the Enlightener) Street; they used tracer bullets and shot into the air. The crowd stayed put. What happened elsewhere, in the streets of Amirian, Proshian, and Leo, was obviously much more dangerous: burnt cars and rumors about several plundered shops confirmed this. The police concentrated its forces at the crossing of the Mashtots and Lusavorich streets where later dead bodies of civilians and policemen were found. The instigators of the arsons, plunders, and shootings remained unknown yet it was obvious that the government would tighten the regime in the capital. About 11:00 p.m. President Kocharian called a press conference to inform that he was forced to introduce a state of emergency for twenty days. The National Assembly gathered at an emergency meeting to take the decree into consideration. Seeing

42 REPUBLIC OF ARMENIA Politics that the government had moved troops and heavy artillery into the city, Ter-Petrosian called on the rally to disperse. The same night 15 supporters of the first president were detained. The Prosecutor General’s Office issued a statement saying they had been detained in connection with the criminal case instituted on the fact of mass disorders and on the suspicion of being involved in actions described by Part 2 Art 225 (mass disorders) and Part 2 Art 316 (using violence against representatives of power) of the republic’s Criminal Code. In the morning the same structure came up with a statement that eight people (one policeman among them) had been killed and 123 wounded. Contrary to the rules of the state of emergency, the government launched an information campaign while suppressing all alternative information sources despite repeated protests from the editors of the suspended electronic and printed media. It should be said that throughout the election campaign all TV channels had been on the side of Serzh Sargsian; the opposition was left with several newspapers and a regional TV company in the city of Gumri; it had to rely on DVDs to let people know where it stood. Arrests among the opposition continued; according to the Prosecutor General’s Office by 3 March 30 people had been detained. The next day the parliament met for a special sitting to deprive, at the request of the Prosecutor General’s Office, four of its members of immunity so that they could be arrested to be brought to court as accused. On 2 March, the Prosecutor General’s Office accused the opposition of previously committed crimes even before it could charge it of grave crimes. In these conditions the Constitutional Court met for hearings; on the evening of 8 March it declined the claims of presidential candidates Tigran Karapetian and Levon Ter-Petrosian to recognize the election results as invalid. The Constitutional Court confirmed the CEC’s decision about the election results and handed over the materials about violations of the election procedure supplied by the claimants to the Prosecutor General’s Office. On 17 March, at another of its special meetings, the parliament decided that the Law on Meet- ings, Rallies, Marches, and Demonstrations needed addenda and amendments to tighten the regime of mass actions and, in fact, make them impossible. Meanwhile, arrests continued: by 18 March 106 people had been arrested and 3 detained; 879 were brought to police stations (754 of them were later freed). The state of emergency was lifted on 20 March. However in the wake of the events of 1 March repressions were not enough; on 21 March, soon after the state of emergency was lifted, the government deemed it necessary to knock together a new political coalition of the RPA, Orinats Erkir, Flourishing Armenia, and Dashnaktsutiun. On 9 April, Serzh Sargsian’s inauguration ceremony was held at the Opera House; the capital’s center was sealed up. In the evening a festive event was organized on Republic Square. While the festive crowds watched balloons the opposition was laying wreaths at the Miasnikian monument. The government preferred to ignore the action.

The Government and the Opposition after 1 March: Searching for New Resources

On 17 April, 2008 a regular PACE session passed resolution No. 1609 On Functioning of Dem- ocratic Institutions in Armenia, which ushered in international pressure on the Armenian government. The document pointed out that the events of 1 March should be investigated by an independent structure, that those imprisoned on obviously false political charges should be set free immediately, that

43 CENTRAL EURASIA 2008 Analytical Annual the addenda and amendments to the Law on Meetings, Rallies, Marches, and Demonstrations should be recognized as invalid under the threat of the suspended right to vote. This put the president (whose power was doubted anyway) under considerable international pressure which limited his freedom of maneuver on the domestic scene. The opposition recognized its chance: on 2 May the Second Congress of the National Movement (consisting of the parties and other organizations that stood with Levon Ter-Petrosian on 19 February) opened in the grand hall of the House of Government in Erevan. Speaking in front of his supporters, the republic’s first president said that 1 March had not been a random clash between the crowd and the police but a well-planned mas- sacre, the responsibility for which rested on Robert Kocharian. As for the present head of state, continued Ter-Petrosian, “he can prove his innocence by instituting independent investigations of what happened on 1 and 2 March.” Ombudsman Armen Arutiunian amazed many when he supported these accusations by publishing, on 4 May, a special report dealing with the election and post-election developments. Much of what it said confirmed what Levon Ter-Petrosian had said at the congress—it is not surprising that criticism from the official camp was harsh. By early May the Armenian leaders found themselves criticized from two sides. After appointing the Cabinet (Prime Minister Tigran Sarkisian took his post on 9 April), Serzh Sargsian had to imitate public support: on 25 April he set up a workgroup at the presidential administration to offer suggestions on how Resolution No. 1609 should be fulfilled. It was announced that a Public Chamber under the president would be set up; the corresponding decree followed on 13 June. The government declared that the country was ready for “second-generation reforms” and that a “dialog with society was on the agenda.” Simultaneously, both the people in power and the opposition turned a deaf ear to the demands of their dialog. On 16 June, the parliament passed a law draft On Setting up a Temporary Parliamentary Com- mission for Investigation of the Events of 1-2 March in Erevan and Their Causes. The radical opposition and the opposition Heritage faction preferred to steer clear of the coalition-dominated structure. The opposition, which wanted a parity commission and did not get it, set up a public commission and revived the rally wave. Unwilling to side with the opposition and unable to disobey PACE the National Assembly moderated, to a certain extent, the law on rallies and manifestations. PACE planned to discuss how Armenia complied with Resolution 1609 on 23 June, which gave the opposition a chance to call another meeting. This time the opposition was able to test its new tactics: it was announced that the rally would take place even if unsanctioned. The law-enforcement structures and loyal media responded with an active campaign to prevent it. On 20 June, the unsanctioned meeting took place and safely ended without much trouble. The police invited the gathering to disperse; its invitation unheeded, it opened access to the territory. This was followed by two other meetings (on 4 July and 1 August); the fact that during several months after the tragic events the Prosecutor General’s Office had cleared the opposition of the charges encouraged even greater numbers to attend the opposition rallies. None of over 100 arrested were charged with the grave crimes that served as the foundation of the criminal cases against them. The Prosecutor General’s Office failed to prove that the demonstrators used firearms against the police. On 25 June, PACE passed Resolution 1620 under which Armenia was to comply with the demands until the end of 2008 under the threat of a suspended mandate. The political prisoners issue should be resolved until September. The political situation remained vague. On 4 July at another of the unsanctioned rallies in Erevan the opposition announced that it had started a sit-in strike that would go on until all the opposition members were freed; it also started collecting signatures under a claim to the International Court in The Hague to open criminal proceedings against former president Robert Kocharian.

44 REPUBLIC OF ARMENIA Politics

Although its members were released one by one from custody the opposition would not be pac- ified and began instigating protest actions in the courts thus completely paralyzing the judicial system. On 1 August, at another rally, the opposition directly pointed to President Sargsian as the main culprit; its leader Levon Ter-Petrosian announced that from that time on the opposition would insist on his resignation and a pre-term election. A new opposition structure—the Armenian National Con- gress—would be set up as the only governing body.

The Tide Turns: Domestic Situation under External Pressure

President Sargsian had to respond; it seems that late in June he decided to seek external support: he spent 23 and 24 June in Moscow where he invited President Medvedev to visit Armenia. His next step was even more impressive: he invited President of Turkey Abdullah Gül to a football match that took place in Erevan on 6 September. This was a wise and timely decision with considerable repercussions on the domestic scene, even though few thought so on 6 September. A week later everything changed: on 8 August Russia invaded Georgia and later recognized the independence of Abkhazia and South Ossetia, two Georgian provinces. Armenia found its transport communications blocked. Very soon the external developments were translated into domestic issues: the opposition aimed scything criticism at President Sargsian, who stayed behind in Beijing to watch the Olympics. The new opposition onslaught was somewhat alleviated by the burning subject of Armenia’s relations with Turkey. It was Ankara that started that ball rolling by inviting, on 14 August, Russia and the three Caucasian states to sign the Caucasus Stability and Cooperation Platform, which supplied the expected visit of the Turkish president to Erevan with even more obvious political overtones. It should be said that the visit divided the coalition: Dashnaktsutiun warned that it planned protest actions. The opposition, which had always favored better relations with Turkey, annulled the rally scheduled for 5 September so as not to interfere with the process. The political atmosphere inside the country changed dramatically: President Gül’s visit and the talks about possibly opening the frontier between the two countries somewhat stabilized the situation. The public concentrated on President Sargsian’s foreign policy; the Nagorno-Karabakh settlement, which had returned to the foreign policy agenda, forced the opposition to tone down its criticism. On 15 September, Levon Ter-Petrosian, speaking at a rally, called on the government to cooperate with the opposition on issues of vital importance for the country; nothing was said about the president’s resignation. On 17 October, at another rally, he announced that mass actions would be temporarily discontinued because of the complex international situation and the threat to Nagorno- Karabakh. This allowed the government to snatch the political initiative. On 16 September, Tigran Torosian, speaker of the National Assembly and member of the ruling RPA, announced that he would resign and leave the party, a sure sign of serious reshuffling at the very top. Three days later he resigned. On 29 September, Ovik Abramian, former head of the presidential administration and member of the ruling party, was elected speaker. According to RPA leader Serzh Sargsian, this was done to add political weight to the parliament. In fact the president was merely strengthening his position, with Russia obviously on his side: on the morning of 21 October the presidents of both countries opened Russia Square in the center

45 CENTRAL EURASIA 2008 Analytical Annual of the Armenian capital, at the crossing of Grigor Lusavorich and Argishti streets, near the central municipal office and the House of Moscow (at the very site of the tragic events of 1 March). This added political implications to the ceremony. Official Moscow backed Serzh Sargsian for reasons of its own. On 2 November in Moscow, the presidents of Armenia, Azerbaijan and Russia signed a declaration on Nagorno-Karabakh interpreted throughout the world as Russia’s firmer grip on the region. Armenia was not happy and responded with another wave of criticism: the president was accused of retreating from the country’s position on the Nagorno-Karabakh settlement. This probably forced the president to invite, on 20 November, the leaders of 50 political parties to a closed meeting to create the impression of considerable political backing. From that time on criticism of his foreign policy mounted. By late 2008 the government found itself in an even more difficult situation: its clumsy attempts to alleviate the impact of the world financial crisis stirred up all sorts of political forces. The heaviest blow came on 17 December when PACE moved forward with a threat to deprive Armenia of the right to vote. Its commission produced a negative report on the way the republic was fulfilling the demands of resolutions Nos. 1609 and 1620 and expressed its displeasure with the upcoming trial of seven opposition members. The report came on the eve of the trial, which started on 19 December in Erevan and which was expected to be a successful conclusion to the “1 March file.” Success hinged on several conditions, none of which proved viable. On 22 October, the parliament extended the powers of the temporary parliamentary commission—this meant that the authorities found themselves cornered. The next day, in an effort to bring the trial to a successful end, the president set up a fact-finding group of experts to which opposition members were also invited. The PACE initiative caught the people at the top unawares: this was the second blow (the first came when the Millennium Challenge Corporation excluded Armenia from its program). The opposition was heartened. On 21 December, Levon Ter-Petrosian said at a conference of the Armenian National Congress that the government was settling scores with the political opponents “by shifting the blame for its crimes—usurpation of power by falsifying the election results and shooting at peaceful marchers—onto the opposition.” He further stated that the strategy would remain the same (no mass events would be staged) and warned that the world financial crisis might trigger irreparable social and economic losses from which Azerbaijan would profit. The Armenian government found itself in deep water: it made several haphazard efforts to borrow money in Asia, while its loyal media hurled invectives at the West. As could be expected there were rumors about Robert Kocharian’s return to big politics: he was very critical about his successor and stated that the president of Turkey would never have been received in Armenia had he remained in power. The former president obviously disagreed with the incumbent. He clearly indicated that he planned a comeback and regarded Levon Ter-Petrosian as his principal opponent. Rumors intensified when oligarch Gagik Tsarukian, leader of Flourishing Armenia and believed to be a close friend of the former president, moved to the fore with far from clear initiatives. On 23 December, he called on Armenian businessmen to stay away the sales of the property and the brand of the Bzhni Mineral Water Company; this amounted to an attempt to help Khachatur Suki- asian, an oligarch from the opposition camp and the company owner, to retain his property. The Flourishing Armenia parliamentary faction objected to the draft law that legalized the privatization deals of 2006-2007. This looked strange: no one in Armenia would move against the official plans without good reason. Another event clarified the situation: on 26 December at a presentation of the report on “Armenia-

46 REPUBLIC OF ARMENIA Politics

2008: Crisis and Possibilities,” Vardan Oskanian, Council Chairman of the Civilitas Fund, former foreign minister and Kocharian’s friend, was fairly critical about several important domestic and foreign policy issues. He criticized Dashnaktsutiun for joining Serzh Sargsian’s coalition; doubted the official version of the causes of the crisis in the republic; and pointed out that at least half of them were brought about by the ruling regime. He blamed the authorities for the threats coming from PACE and did not hesitate to use the terms “political prisoners” and “encroachments on the freedom of speech.” This was easy to understand: suspension of Armenia’s PACE rights was moving closer while America had successfully isolated the republic from the funding sources. This was the best time to start looking for scapegoats. The government camp wavered: this much was obvious from the loyal media. It turned out that the Republican Party of Armenia preserved its optimism and continued looking for solutions. All others, including the leaders who had left the stage in 2008, were less optimistic, however they had already discovered chances inside and outside the country to tip the balance in their favor.

C o n c l u s i o n

The social collapse caused by the presidential election and the disagreements at the top destroyed the ruling machine. In the months that followed the new president tried to keep the country in a semblance of order; toward the end of the year, however, the ruling camp started gradually falling apart. The president was not quick on the uptake; over time he too had to admit that force, big business, and external support had helped retain power yet they were useless when it came to its stabilization. He decided to concentrate power in the center, rely on the build-up of repressions during the election campaign, and establish strict control over financial and economic assets. The budget should be increased at any cost to lure the poorest sections to the side of the government. Big business had to readjust its policy and find itself a new role. Repressions became much more inventive while the rich discovered, to their amazement, that they were as defenseless before the government as their poorest compatriots; tension in the ruling camp continued to grow. This and the two-pole political system can be described as two major results of 2008; this will largely determine politics in 2009. In fact, far from pacifying society Serzh Sargsian merely heated up the crisis among those who ruled the country. He failed to rally, even to the minimum extent, the nation under the national unity banner: the nation refused to accept as “national leader” a president who had retreated on the Nagorno-Karabakh and Turkish issues. The events staged to intensify patriotic feelings soon lost their impact; repressions against the opposition added vigor to what the opposition was doing. The president allowed the opportunity to shift the blame onto it slip between fingers; the far from effective attempts to play down the impact of the world crisis made Serzh Sargsian the only target of harsh criticism. In 2008 external impact on domestic policy increased, which means that in 2009 much will depend on the influential international organizations. The threat of losing the right to vote in PACE and unfavorable developments in the Nagorno-Karabakh issue might worsen the situation at home.

47 CENTRAL EURASIA 2008 Analytical Annual ECONOMY

Haroutiun KHACHATRIAN Analyst and editor of the Noyan Tapan News Agency (Erevan, Armenia)

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

or the first time in seven years, economic less expensive Georgian route), but also indirect growth in 2008 was less than 10%. The key losses in the form of lost profits. Although the F role here was played by external factors: the armed conflict itself, which started on 8 August, August “five day war” between Russia and Geor- lasted only five days, the problems for Armenia gia and the world economic crisis that erupted in ended only in the last third of the month, when the second half of the year. In these conditions, the normal rail traffic was restored. vulnerabilities of the Armenian economy, such as Another specific feature of Armenia’s eco- its communication dependence on Georgia and its nomic development in 2008 was that the new gov- strong dependence on foreign markets, came to the ernment formed last year was headed, for the first fore. It is no accident that many parameters men- time since 1996, not by a politician but by a pro- tioned in this article are given not only for the year fessional economist, Tigran Sarkisian, who had as a whole, but also for the first 9-10 months, i.e., been head of the Central Bank of Armenia during before they sharply deteriorated in view of these the previous 10 years. The new government pro- two almost concurrent external shocks. claimed several ambitious goals, such as maximum According to official government data, the involvement of the resources of the Armenian di- August conflict between Russia and Georgia aspora in national economic development and con- caused damage to Armenia worth a total of $700 mil- sistent efforts to reduce the shadow economy. lion. This includes not only direct losses (the cost These efforts can produce results only months lat- of evacuating people from Black Sea resorts, traf- er, whereas the onset of the economic crisis at the fic disruptions, the need to divert part of the car- end of the year confronted the Sarkisian Govern- go to the Iranian route instead of the shorter and ment with new and challenging problems.

Key Macroeconomic Indicators

According to official statistics, real GDP growth in 2008 compared to the previous year was 6.8%.1 Annual GDP was 3.65 trillion drams (AMD), or $11.93 billion at the average annual exchange rate. GDP per capita was 112,858 drams (3,689 dollars or 2,507 euros). Growth from the previous year was 15%, 28.6% and 26.7%, respectively. The higher growth rates in dollar and euro terms are due to the fact that the exchange rate of these currencies against the Armenian dram in 2008 was much lower than a year ago.

1 Unless otherwise indicated, the data presented in this article are taken from the National Statistical Service of Ar- menia [www.armstat.am]. 48 REPUBLIC OF ARMENIA Economy

Along with a slowdown in economic growth, the past year also brought some structural changes. The construction sector, which had for several years been the main engine of economic growth in Armenia, lost its leading position to the service sector. In 2008, the latter accounted for 2.9 percentage points out of the 6.8% GDP growth, while construction contributed 1.8 pp, followed by industry with 0.4 pp and agriculture with 0.2 pp. Figure 1 GDP Growth and Inflation in 2008

% 6

0 Jan Jan-Jul Jan-Oct Jan-Apr Jan-Feb Jan-Mar Jan-Jun Jan-Dec Jan-Nov Jan-May Jan-Aug Jan-Sep Year-to-date

GDP Inflation

The consumer price index (CPI) in January-December was 9.0% compared to the previous year. Throughout 2008, the Central Bank of Armenia (CBA) maintained a high refinancing rate (5.75%-7.75%) because of concern about a possible loss of control over inflation. As a result, bank lending rates in the country did not fall below 15% during the year, which naturally did not stimulate business activity. Figure 1 shows the changes in GDP growth rates and inflation in 2008 compared to the same periods of the previous year. An obvious decline in economic growth in the last three months of the year immediately catches the eye. Until August, this indicator remained above 10%. Then came a sharp drop, which was primarily due to a slowdown in the construction sector caused by the Russian-Geor- gian war. As for inflation, its noticeable surge in May-June was obviously due to the increase in prices for natural gas caused by the abolition of state subsidies. Let us recall that these subsidies were introduced in April 2006, enabling small gas consumers to pay 42% less for gas (AMD 59 instead of AMD 84 per cubic meter), and large consumers, 51% less ($101 instead of $153 per 1,000 cubic meters). From 1 May, 2008, these subsidies were abolished, but the government managed to keep inflation within acceptable limits and even to reduce it.

49 CENTRAL EURASIA 2008 Analytical Annual

The past year was more or less unique in terms of the stability of the national currency in Arme- nia. During the year, the exchange rate of the U.S. currency fluctuated in the narrow range between 300 and 309 drams per dollar. The exchange rates of the euro and the Russian ruble (these currencies together make up about 10% of the money circulating in the country’s foreign exchange market) varied depending on their value against the dollar in foreign markets. The euro ranged between AMD 486 and AMD 386, and the ruble between AMD 13.09 and 10.46. As the value of the Armenian currency increased, it gradually strengthened its position in the domestic market. In particular, the degree of dol- larization of the Armenian economy steadily declined in recent years, including 2008. For example, the share of bank deposits denominated in foreign currency at the end of 2008 was just over a third of their total amount, whereas only three years earlier foreign currency deposits made up 60% of the total. True, the negative phenomena that appeared at the end of the year (in the first place, the sharp decline in the country’s foreign exchange earnings due to a threefold reduction in world prices for copper and molyb- denum, Armenia’s main export items) induced the CBA to go over from dollar purchases to dollar sales in order to maintain a stable dram exchange rate. As a result, the balance in dollar trading on the currency exchange was negative for the first time since 2005 (in 2008, CBA dollar sales on the currency exchange exceeded purchases by $360 million). In other words, starting around October the CBA used currency interventions to maintain an overvalued exchange rate of the dram against the dollar. In response to accusations that such actions were harmful to the national economy, CBA officials argued that the Bank preferred to maintain the stability of the financial system and to avoid fueling inflation. Armenia’s public debt at the end of 2008 remained low: 14% of GDP.

Sectoral and Regional Structure of the Economy

Last year the structure of the Armenian economy did not undergo any fundamental changes (see Fig. 2). As in previous years, the service sector was the largest one (33% of GDP), followed by con-

Figure 2 GDP—Composition by Sector

Taxes Agriculture 11% 16%

Industry 13%

Services Construction 33% 27%

50 REPUBLIC OF ARMENIA Economy struction (27%). A year earlier, the figures were 32.5% and 25.6%, respectively. Thus, in 2008 the share of industry and agriculture in the country’s economy continued to shrink.

Industry

During the year there was a further increase in the share of manufacturing in the total structure of Armenian industry: it rose to 67.8% of total industrial production (from 66.4% a year ago). The share of energy and related industries (production of electricity, gas and water) increased as well: to 18.2%, up 0.8% from 2007, while the share of mining—the main export-oriented sector of industry and of the whole economy—was only 14% of total industrial production. At the same time, output in this sector increased during the year by 1.5%. The overall index of industrial production in Armenia in 2008 compared to the previous year was 102.0%. In contrast to construction, industrial production did not feel the impact of the economic crisis that erupted at the end of the year. For example, industrial production growth in January-Sep- tember compared to the same period of the previous year was not much faster than growth for the year as a whole: only 3% (i.e., an index of 103%). Moreover, if the energy industries (production of electricity, gas and hot water, which add up to 14% of total industrial output and grew by 8% in 2008) are subtracted from total industrial output, it will turn out that the rest of industry grew by only 0.8%. This is due to the influence of a number of factors. Whereas key industries such as mining and food production grew marginally, the jewelry industry continued to decline (production here dropped by another 16.3%), while the previous year’s growth in the metallurgical and chemical industries was not sustained. Compared to 2007, production in these industries fell by 9.6% and 14.8%, respectively. At the same time, metallurgy remained in second place among the manufacturing industries in terms of output. The production of rolled aluminum in 2008 increased 5.8 times compared to the previous year, although output (188.2 tons) is still incomparable with the output of aluminum foil (over 11 thousand tons). There was also an increase in wine production: 2.2 times to 8,238 thousand liters. The figure for brandy was even higher: 15,961 thousand liters, up 13% from the previous year. This, too, is one of Armenia’s growing industries (in 2007, the production of brandy increased by 55.4%). To complete the picture, let us cite the following data: out of a total industrial production volume of AMD 751 billion ($2.46 billion at the 2008 exchange rate), realization of goods amounted to AMD 741.8 billion, or 98.7% of total output. Of this, 10% went to CIS countries, and 19.9% to other countries. In other words, about 70% of industrial products in Armenia are sold in the domestic market. The past year was marked by positive trends in the energy industry. The construction of the Iran-Armenia Gas Pipeline was finally completed, giving Armenia an alternative route of natural gas supply in addition to supplies from Russia. Furthermore, the construction of a new generating unit was started at the Erevan thermal Power Plant (TPP), and work to complete the construction of the fifth unit of the Hrazdan TPP (a “never-ending” project inherited from the Soviet period) was in progress. All of this helped to strengthen the country’s position as a potential electricity supplier to neighboring countries, because the total capacity of its electric power plants already significantly exceeds its own requirements. In recent years, Armenia has supplied electricity to Georgia and Iran, and in September 2008 it was announced that electricity could also be supplied to Turkey (for this purpose, it is necessary to restore some sections of high-voltage transmission lines that were in use over 20 years ago).

51 CENTRAL EURASIA 2008 Analytical Annual

Armenia’s position as a regional electricity exporter is strengthened by the fact that it continues to use relatively cheap natural gas. This is due not only to close political relations between Russia and Armenia, but also to the fact that Gazprom owns over 75% of ArmRosGazprom’s shares. Neverthe- less, as can be seen from the above, Armenia is not always able to take advantage of this favorable pricing environment for the development of national industry.

Agriculture

Agricultural production in 2008 increased by 1.3%, which is not much compared to 2007, when the figure was 9.6%. Whereas the production of fruits and berries jumped 22.1% and that of potatoes 11.1%, grape production fell by 15.1% from 2007, and grain and pulse production by 8.2%. The yields of some other crops dropped as well, so that the annual increase in plant products was only 0.2%. Obviously, Armenia is an area of risk farming. At the same time, livestock production rose by 3.5%, with an increase in all key types of products. The largest increase was in eggs: by 9.4%.

Construction

Construction volume in Armenia in 2008 was 1.7% higher than a year ago (at comparable prices). Although this growth was positive, a comparison with the previous year’s figure (19.5%) will show that it was something of a failure. As noted above, such a decline in construction growth rates was due in large part to the Russian-Georgian war in August. Whereas in January-September construction volume at comparable prices stood at 112% of the volume for the same period of 2007, in the fourth quarter it dropped to 72.7% of the figure for the same period of the previous year. An analysis of official data shows that the decline in construction was due to a drop in investment by private institutional investors (officially “institutions”). Construction work funded by “institutions” amounted to only 71.1% of the previous year’s volume, while their share of total investment in construction fell to 18.1% (from 25.8% a year ago). Another adverse feature of the construction sector—concentration in the Armenian capital— persisted in 2008 as well. Erevan accounted for 87.4% of total construction volume, including 84% of total newly constructed housing. There was a slight shift toward the 1988 earthquake zone and surrounding areas (Shirak and Lori marzes): these two marzes (provinces) accounted for 5% of total newly constructed housing, compared to 3.6% a year ago. In real terms, the increase was even greater: 25 thousand square meters of housing was commissioned in these two marzes compared to 16 thousand square meters in 2007.

Services

The service industry grew by 13.8%. Its largest sector was communications, with 23.1% of total services. During the year, the amount of communication services rose by 14.9%, mostly due to an increase in cell phone services by 32.8%. Internet access services grew by 52.3%, but their amount is still small and Armenia remains a country with low Internet penetration.

52 REPUBLIC OF ARMENIA Economy

The transport sector, the second largest service sector (22.3% of the total), showed growth of 8.9%. Significant growth was also recorded in financial services, the third largest service sector (with 20% of total services in 2008). According to CBA data, at the end of 2008 Armenia had 22 operating banks with a total capital of AMD 235.7 billion, or 37.4% above the level of December 2007. Total bank assets at year-end stood at AMD 1,024 billion (28% of GDP), and total loans, at AMD 731.4 billion (20% of GDP). In December 2007, these figures were 24.3% and 15.3% of annual GDP, respectively. Despite such impressive growth, the amounts of bank assets and loans in Armenia still fall far short of what the country needs. At the end of December 2008, Armenian banks owed $555 million to foreign creditors, which amounted to only 16.5% of their assets. Debts on loans provided by international financial institutions (i.e., relatively low-interest loans) made up 25.5% of the total, while the capitalization ratio for Arme- nian banks was fairly high: around 27%. All of this explains why the international financial crisis that broke out in September 2008 did little harm to the Armenian financial system

Government Actions

As soon as former CBA chairman Tigran Sarkisian became prime minister, he declared his intention to carry out fundamental economic reforms in the country. His statements such as “those who have knowledge and not those who have the impudence should be successful in Armenia” were generally perceived as a bid to dismantle the system based on the privileges of “oligarchs.” At the same time, the former cabinet headed by Serzh Sargsian remained virtually intact: the only appointee of the new premier was Finance Minister Tigran Davtian. True, Economy Minister Nerses Yer- itsian, a member of the former cabinet, is “Tigran Sarkisian’s man” as well, because he took up a government post after serving at the Central Bank. The premier has evidently managed to turn the four-party coalition government into a close-knit team, and this team has the support of the country’s president. The government has implemented a whole set of structural and legislative innovations in customs and tax agencies. These measures were designed to reduce contacts between businessmen and government officials (fraught with corruption), to simplify procedures and make the work of fiscal agencies more transparent. In this process, the government holds regular consultations with the business community and tries to take its remarks into account. The government’s basic strategy in fighting the shadow economy is as follows. The government imposes more stringent requirements on small and medium-sized businesses and on all retailers as regards accounting records and cost justification. It is assumed that these businessmen, for their part, will urge big businessmen (their partners) to provide them with the necessary cost justification documents, so forcing them to gradually “come out of the shadow.” In return, the government takes measures to facilitate document management for small and medium-sized businesses, giving them an opportunity, among other things, to simplify accounting procedures. At all events, in the first period of tax administration reforms (launched in May 2008) the tax authorities focused precisely on small and medium-sized businesses, which created certain difficulties for them and caused growing dissatisfaction. In response to appeals to start fighting the shadow economy from big instead of small business, the government in effect admits that it is unable to control big business directly. It was planned to enact the basic package of legislative changes in this area on 1 January, 2009, and the results of its implementation will be evident many months later. The current crisis creates additional difficulties in the efforts to follow the chosen path.

53 CENTRAL EURASIA 2008 Analytical Annual Foreign Economic Relations

In 2008, foreign trade continued to grow: the trade turnover increased by 24%. At the same time, this growth was obviously biased against Armenia: whereas imports rose by 35%, exports fell by 7.2%. As a result, the import/export ratio rose from 2.8 to 4.1, and the trade deficit, from $2.1 billion to $3.3 billion. A deficit in excess of 27% of GDP (compared to 23% a year ago) is clearly a cause for concern. The key foreign trade indicators changed only marginally in quantitative terms, whereas the qualitative picture was the same as a year ago. The European Union is Armenia’s largest trading partner, although its share of total trade shrank from 38.4% to 35.3%. Russia, too, has retained its position of a major trading partner, although its share of the total trade turnover fell from 20.9% to 19.5%. Instead, there was an increase in the share of trade with non-EU and non-CIS countries: from 29.1% to 34.7%. This applies, first and foremost, to Turkey (twofold growth). It should be noted that this growth in turnover was due exclusively to an increase in Armenian imports from Turkey from $130 million in 2007 to $267 million in 2008. There was also an increase in Armenian trade with such major partners as Germany (12%), Austria (29.6%), Bulgaria (33.8%) and Italy (28.5%). At the same time, Armenian exports to some countries with a small share of total trade turnover increased very significantly. Thus, exports to Canada jumped 2.7 times to $15.9 million; to Britain, 14.6 times to $40.8 million; and to the United Arab Emirates, by 52.8% to $10.3 million.

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

At first glance, the past year did not abound in dramatic events in the Armenian economy, especially since the significance of many of them has to be reviewed in the light of the global economic crisis. The vector of the year was set by the presidential elections of 19 February, whereupon the new president, Serzh Sargsian, appointed the technocrat Tigran Sarkisian as head of government in the hope that he would be able to carry out the structural reforms that are necessary to dismantle the oligarchic system of the Armenian economy based on privileges for big businessmen. But the success of these reforms is far from granted, because the current authorities in Armenia rely in large part precisely on this oligarchic system, while this system naturally resists the attempts to implement reforms. The world economic crisis has posed an additional and possibly very serious challenge to the Armenian economy. The crisis is dangerous for Armenia from two perspectives. First, it will reduce the country’s export earnings in view of the drop in world prices for Armenian export products, a process which already got underway in the last two months of 2008. And second, it will reduce the inflow of private remittances from abroad if the economic situation in the host countries (primarily Russia) worsens. In November, the government presented the key provisions of its strategy for resisting the world crisis. Like most documents of this kind adopted in other countries, the strategy was based on three elements: infrastructure building, promotion of local production by improving the business environment, and government support to producers even to the point of government participation in the capital of private enterprises.

54 REPUBLIC OF ARMENIA Religion RELIGION

Granush KHARATIAN Ph.D. (Hist.), chairperson of the Armenian Center for Ethnologic Studies (Erevan, Armenia)

Relevant Statistics (sizes of the confessions, religious communities, holy places, religious educational establishments, etc.)

ccording to the last official population census of 1991, there are 3.2 million people living in Armenia (2.2 percent of whom are national minorities). No questions about religious beliefs A were asked so the census returns fail to provide an idea of the population’s confessional preferences. Since nearly all the citizens belong to the Armenian Apostolic Church (which became mono- ethnic as early as the 7th century) religion is commonly identified with ethnic affiliation. This means that the size of a particular ethnic group is taken as the size of the corresponding confession. Accord- ing to expert assessments, the main national minorities nominally belong to their corresponding ethnic confession; this means that the size of a particular ethnic confession at least corresponds to that of the corresponding ethnic group. Table 1 presents the republic’s ethnic composition. Table 1 The Republic’s Ethnic Composition Based on the 2001 Census

Total Armenians Assyrians Yezidis Greeks Russians Ukrainians Kurds Others

3,213,011 3,145,354 3,409 40,620 1,176 14,660 1,633 1,519 4,640

In real life the two figures do not necessarily coincide: the number of followers of any given confession and the ethnic-related religious picture are somewhat different. Ethnic Russians are the best example. Some of them are Orthodox Christians; there are also Old Believers, so-called Molokans (known among the Russians as sectarians). Not all Molokans in Armenia are Russians: there is a certain number of Mordovians among them. (They are commonly believed to be Russians because of their affiliation with the Molokans commonly associated with Russians.) One of the polls revealed that over 80 percent of the Molokan respondents described themselves as a Russian and a Christian, Molokan, Prygun, Postoiannyi, or Maximist; 31 percent of the Old Believers described their religious affiliation as Christianity.1

1 “School education among the national minorities of Armenia (Yezidis, Kurds, Russians (Molokans), Assyrians).” Investigation was carried out by the public organization Armenian Center of Ethnological Studies in 2004; collected materials were analyzed by Lusine Kharatian and Shushan Saratikian. 55 CENTRAL EURASIA 2008 Analytical Annual

Russians are not the only Orthodox Christians in Armenia; there are Orthodox Christians among the Assyrians, Armenians, Ukrainians, and Belarusians. One of the Russian Orthodox churches is found in the village of Dmitrovo (the Ararat Marza) populated by Assyrians and Armenians. This means that the number of ethnic Russians differs from the number of Orthodox Christians. It should be said that the Russian Orthodox Church in Armenia has been registered by four religious organizations while the Old Believers are not registered at all because of their religious traditions, which does not interfere with their religious practices. The difference between the ethnic and religious affinity of another ethnic minority reveals an identical picture. Most of those who use Kurmanjî, one of the Iranian languages, refer to themselves as Yezidis; a smaller number of Kurmanjî speakers believe themselves to be Kurds. Both groups profess Yezidism.2 There is a small number of Muslims among the ethnic Kurds; in fact 40,620 Yezidis and 1,519 Kurds could have been described as Yezidis had not followers of non-traditional religions appeared among them in the last twenty years. Despite the fact that Yezidism is a highly “ethnicized” religion protected by strong ethnic religious rules (or, rather, by cultural tradition), in the last ten years both groups have felt the pressure of all sorts of religious affiliations. The new “believers,” as they are known in Armenia, are not always sure of their new confessions. They sometimes say simply that they “worship God,” “worship the cross,” or that they are “Christians” or “people of Jesus” while in fact they are Pentecostals or Jehovah’s Witnesses. There are no followers of the Armenian Apostolic Church (AAC) among the Yezidis and Kurds for the simple reason that it is not engaged in missionary activities among other ethnic groups and limits its religious practices to the Armenians. Out of 302 Yezidis and Kurds polled only 221 belonged to the traditional religion (they described themselves as Sun worshippers, shams, Yezidis); 61 described themselves as Pentecostals (22 people); 9 as “Christians;” 7 as “People of Jesus,” 23 belonged to several other trends, while 22 were undecided. This means that at least 20 percent of the polled followed a religious teaching alien to their ethnic milieu. This causes tension in Yezidi and Kurdish families in which the women, rather than the men, change their religious affiliation in an effort to cut short traditional religious practices in their families, to which their husbands are vehemently opposed.3 The Yezidi spiritual elite (the sheikhs and pirs), intellectuals, and public figures are very much concerned about the fact that non-traditional religious ideas are gradually trickling into Yezidi society: religion among the Yezidis is a strong component of ethnic identity found high on the scale of ethnic indicators. This means that the numerical strength of the Yezidis and Kurds do not coincide with the number of followers of their traditional religion. Yezidism in Armenia is represented by two registered religious organizations. The Assyrian ethnic community is far from homogenous in the religious sense. There is no idea about religious entity among the Assyrians of the four villages with compact Assyrian pop- ulations. There is a Russian Orthodox church in the Assyrian village of Dmitrovo inherited from Soviet times. This tradition dates to the time when in the absence of an Assyrian priest for the Russian-speaking Assyrians a priest from the Russian Orthodox Church was appointed; in this

2 The Yezidis prefer to describe their religion as Sun-worshippers as well as Yezidism, Sharfadin or Shams (sun). They believe in the single God (whom they call Huade) which reveals itself in three hypostases—Melek Tawus, Sheik Adî and Sultan Ezi. In many of the Yezidi myths God bears the name of Melek Tawus even if sometimes he is described as assistant to God (see: T. Dalalian, “Manifestations of Kurdish and Yezidi Identity among the Kurmanjî Speakers of the Republic of Armenia,” application for the Stipend Program of the Caucasian Bureau of the German H. Böll Foun- dation in 2007). 3 Yezidic religious practices can be described as active and concentrated in the families. Sacrifices accompany every event and all important events (marriage and death in the first place) involve spiritual teachers. In fact, the newly converted women (normally, meek wives) object to the ideas about death and future life as well as sacrifices. The traditional Yezidi society finds it hard to accept this. 56 REPUBLIC OF ARMENIA Religion way the local Assyrians became members of the ROC. The local Assyrians are fairly indifferent to Orthodox specifics and describe themselves as Christians. They celebrate all secular and religious holydays (some of them having nothing in common with Christian Orthodoxy) in the church’s yard. Many of the local Assyrians are prepared to accept any of the Christian confessions and believe that they can receive ecclesiastical guidance from any of them (AAC, Protestant, Catho- lic, or any other church). In the last ten years the Holy Apostolic Assyrian Church of the East, which shouldered the mission to ethnicize the religion of the Armenian Assyrians, has been working in the village of Dvin. The Assyrians of the villages of Arzni and Nor Artagers have no idea about Orthodoxy and Nestorianism; they consider themselves Christians and are prepared to embrace any of the Christian trends that permit preserving certain cultural ethnic traditions. Non-traditional religious organizations (the Seventh Day Adventists, Pentecostals, and the Jehovah’s Witnesses) have already reached the four villages. The local “Christians” keep away from them but treat them loyally. They are regarded as harmless “believers” who do not threaten their ethnicity. The locals are baffled by their non-traditional religiosity and the active and strange forms of their religious practices. A limited poll revealed that 78 percent of the Assyrians polled described themselves as “Christians”; a mere 5 percent specified their religion as “Orthodoxy.”4 When the Holy Apostolic Assyrian Church of the East opened a church in the village of Dvin some of the Assyrians began to describe their religion as Assyrian-Christian. There is only one registered Assyrian religious organization—the Assyrian Religious Organization of Ar- menia “The Holy Apostolic Assyrian Church of the East.” The republic’s other national minorities are believed to be followers of their “ethnic” religions (Ukrainians and Belarusians are Orthodox Christians; Greeks, Greek Orthodox Christians; Georgians, Georgian Orthodox Christians; Poles are Catholics; Germans, Lutherans; Jews, Judaists). There is only one registered religious organization—the Religious Community of the Jews of Armenia; the Polish Catholics are served by a Catholic. The Catholics in Armenia are mainly ethnic Armenians who belong to one of the three Catholic religious organizations. The Armenian Apostolic Church as a practicing religious organization is represented by one registered organization; its flock is ethnically homogenous and consists of Armenians. There is a fairly large number of registered Protestant organizations: 13 Evangelical; 21 Pen- tecostal; and 1 Seventh Day Adventists. There are also Slovo Zhizni, known as Charismatics, and several organizations close to it: God’s Church, the Lord’s Anointed, and the Armenian Communi- ty of the New Apostolic Church. The Church of Jesus Christ of Latter-Day Saints, the Baha’i, Je- hovah’s Witnesses, and Arordineri ukht (Armenian pagans) all have one registered organization. There are seven, mainly Protestant, organizations registered as religious structures largely involved in charities. In the last year their membership did not change much. The republic’s absolute majority (the share coming close to over 80 percent) belongs to the AAC even though not all of them are active believers. The majority probably identifies itself with the AAC for ethnic reasons and knows next to nothing about religious specifics and teaching; this is true of confirmed atheists. In recent years the AAC has managed to plant religious awareness to a certain extent among young people. The number of followers of the Charismatics and Jehovah’s Witnesses engaged in active proselytizing changes to a much greater extent. There are unregistered religious groups in Armenia. On the whole the religious communities can be classified as 1. Groups registered as religious organizations.

4 “School education among the national minorities of Armenia (Yezidis, Kurds, Russians (Molokans), Assyrians).” 57 CENTRAL EURASIA 2008 Analytical Annual

2. Groups registered as public organizations but acting as religious units. Such are, for example, Transcendental Meditation, otherwise known as the Vedic Maharishi Center; the Roerich Armenian Society, probably the Moonies, etc. The degree and forms of their religious practices, the number of followers and interested are still to be determined. 3. Unregistered religious groups (Russian Old Believers, probably the Krishnaites, meditation groups, Scientologists, etc.) can serve as an example. Their number is unknown (the Molokans are the only exception), however experts assess it as small. No one knows why some groups avoid registration, which is a very simple process. It takes no more than one month and normally creates no problems. Registration changes nothing in the religious respect, however the resultant legal status allows the groups to be involved in all sorts of legal operations. The Russian Old Believers do not register on principle and keep away from all sorts of administrative structures. The size of other unregistered groups is probably below the limit (200 members), which makes them ineligible for registration. It is much more important to understand why religious groups prefer to register as public organizations since under the law only religious organizations are allowed to engage in religious practices. It seems that in this case too the number of followers (below 200) is a stumbling block: public organizations have no such limits. Finally, the individual activities of conjurors, sorcerers, etc. engaged in religious practices have so far escaped administrative control and public attention. Art 7 of the Law on Freedom of Conscience and Religious Organizations allows religious organizations to engage in religious education, which may be pursued in different forms. Some of them run all sorts of educational projects: schools, Sunday schools, seminaries, universities, educational groups for children and young people; summer educational camps, etc.

Official Religious Leaders

The official religious leaders are working toward closer contacts and a dialog among themselves and with the AAC in particular. Some of the Protestant leaders joined forces to compile a draft Law on Freedom of Conscience and Religious Organizations. Some of the Evangelical organizations give lessons in Christian and public morality and teach English and computer skills to schoolchildren. The As- syrian and Yezidi leaders spare no effort to inform the authorities about the missionary activities of non- traditional confessions in their ethnic milieu and insist on an adequate response. The Charity of the Church of Jesus Christ of Latter-Day Saints and the Catholic Caritas are engaged in large-scale social projects. The religious organizations, on the whole, are fairly isolated: their public activities are limited to charities. The AAC alone is involved on a wide scale in all sorts of social and ecological programs (anti-HIV/ AIDS, trafficking, conflict settlement, environmental protection, demographic projects, development, etc.). Since 1977 it has been an active member of the Conference of European Churches and is represented by one member in its central committee and by three permanent representatives on commissions. Its active involvement in the ecumenical movement and a friendly dialog with the traditional religions contrasts with its obvious desire to avoid active cooperation with the other religious organizations inside the country.

Unofficial Religious Leaders

It is hard to define which of the religious leaders can be described as unofficial. This term can probably be applied to leaders of the national minorities’ public organizations that sporadically inter-

58 REPUBLIC OF ARMENIA Religion fere in the life of the corresponding religious communities. For example, the leader of an Assyrian public organization, a confirmed Orthodox Christian, tried to limit the activities of a priest of the Holy Apostolic Assyrian Church of the East. Laymen have acquired the habit of interfering in the religious life of the Yezidis.5 One of them managed to acquire a plot of land for a sanctuary, which divided the Yezidi community: they believe that God settled in Lalish (in northern Iraq, outside Sinjar) where the main sanctuary and the residence of the chief spiritual leader are found. There is no place in the Yezidi tradition for another sanctuary; many of the Yezidi clergymen in Armenia disapprove of the interference of a mrid public figure in the community’s religious life as potentially dangerous for the existing relations among the castes.

Freedom of Conscience

The Republic of Armenia has joined all the basic international conventions on freedom of conscience, thus making them part and parcel of its national legal system. I have in mind the Universal Declaration of Human Rights; the International Pact on Civil and Political Rights, including General Comment 22 (Art 18); the Declaration on the Elimination of All Forms of Intolerance and of Discrim- ination Based on Religion or Belief; the European Convention on Human Rights and Fundamental Freedoms, the Framework Convention for the Protection of National Minorities, etc. The laws based on the Declaration on the Elimination of All Forms of Intolerance and of Dis- crimination Based on Religion or Belief protect freedom of conscience and exclude religious discrimination in full conformity with Arts 1 and 2.2 of the Declaration. Since 1991 freedom of conscience is guaranteed by the Law on Freedom of Conscience and Religious Organizations that registers the rights of religious communities to practice their cults, provide religious education, be involved in charities, acquire the necessary religious objects and literature, establish and maintain contacts with individuals and communities for religious reasons at the national and international levels, apply for financial assistance, collect donations, etc. The law guarantees that the state will not interfere in the internal life of religious organizations. Art 17 of the same law says that the state “has no right to force its citizens to profess any religion,” to interfere in the internal life and legal activities of the church and religious organizations; prohibits state structures or their representative from being involved in religious organizations; the Church cannot be involved in state administration while the state should not transfer any of its functions to the Church or religious organizations.” Many of the international standards have become part and parcel of Armenia’s national legislation. The Criminal Code protects freedom of conscience in at least twelve articles (Arts 112, 113, 119, 143, 160, 162, 185, 226, 165, 392, 393, and 397). Similar norms are present in many of the national laws, including the laws On Citizenship, On the Rights of the Child, On the Protection and Use of Immovable Monuments of History and Culture and the Historical Milieu, On the Fundamentals of Culture-Related Law, On Alternative Service, On Public Organizations, On Advertising, On Parties, On the Bar, On Employment, Faoily Laws, etc. International law and domestic legislation related to religious freedom and non-discrimination are still undergoing development; they seek the best possible definition of individual and collective rights, resolution of the discrepancies between some of the forms designed to protect the individual, etc. International law insists on the right of parents or legal guardians to choose religious education for their children: “The child’s parents, or legal guardians, as the case may be, have the right to organ-

5 The Yezidi society is based on the caste system; there are three castes: sheikhs and pirs (the clergy) and mrids (the laity.) 59 CENTRAL EURASIA 2008 Analytical Annual ize life within the family in accordance with their religion or belief and bearing in mind the moral education in which they believe the child should be brought up.”6 Armenia’s national legislation confirms this right in the Law on the Rights of the Child, which bans the involvement of children under 16 in religious organizations without the parents’ consent. Today, when non-traditional religious trends have stepped up their activities in Armenia, parents sometimes join different religious groups, which causes a conflict over the choice of religion for their children: either one of the two groups or no religious education at all. The law provides no answer to the problem. It is equally powerless to answer the question of how one of the divorced parents can realize his/her right to provide a religious education for a child who lives with the other parent. The conflict between the right to ethnic specifics and the right to choose one’s religion is fairly acute. Art 8 of the Law on the Foundations of Culture-Related Legislation says: “The Republic of Armenia promotes the preservation and development of the cultural specifics of the national minorities on its territory and helps to create conditions for the preservation, dissemination, and development of their religions, traditions, language, cultural heritage, and culture through state programs.” Not infrequently the individual’s right to choose his/her religion clashes with the continuity of cultural traditions, which is especially obvious in smaller groups. The Yezidis, for example, one of Arme- nia’s unique national minorities, require state interference to check the spread of non-traditional confessions in their communities as dangerous for their religion-based social relations, which is one of the small ethnic community’s basic ethnic distinctions. The problem is not new and is not limited to Armenia: experts of the Council of Europe had to respond to it using PACE Recommendation No. 1556 of 2002 called “Religion and Changes in Central and Eastern Europe.” It says “the Assem- bly has also persistently expressed its awareness of the need to ensure or restore harmonious relations between religious institutions and states. This is an essential part of securing such basic human rights as freedom of conscience and religion, religious tolerance and the protection of individuals and communities against all forms of religious persecution.” This means that no one knows how to balance out democratic principles and human rights to freedom of conscience and religion, on the one hand, and national, cultural, ethnic and religious identity, on the other. Migration and new challenges to identity have already somewhat shattered the hitherto staunch public values in Western Europe. This forced PACE to move forward, albeit cautiously, to protect the European culture. The resolution says, in part: “to include information on Europe’s main religious cultures and practices in school curricula; to promote exchange programs to give students, research workers and artists a full picture of the ethical, moral and cultural values of Europe’s religions, to promote scientific research aimed at uncovering the shared roots of Europe’s various cultures and fostering a better understanding of the ways in which they interrelate and complement one another.” In the former socialist camp and across the post-Soviet expanse the problem has certain specifics beyond the scope of the above-mentioned resolution and PACE’s attention in general. The Soviet policy of setting up a common sociopolitical and cultural identity forced the national units to seek new forms of their local ethnic and cultural identities. The crisis of these policies contributed to the Soviet Union’s disintegration. The Soviet social and cultural identity hinged, among other things, on a non-religious and/or conscious atheist culture. Soviet citizens, far removed from religion, remained firmly dedicated to their affiliation with religion as a manifestation of their local ethnic and cultural identity, which amounted to a latent political protest, a form of disagreement with the official course. Today, a new religious diversity in the Soviet successor states is coming into being through the missionary activities of alien religions and local missionaries of new religious trends rather than through migration. The formerly latent vehicles of “ethnic religions” per-

6 “Declaration on the Elimination of All Forms of Intolerance and of Discrimination Based on Religion or Belief,” Art 6.1. 60 REPUBLIC OF ARMENIA Religion ceive the present religious diversity that replaced the open and/or superficial lack of religiosity as unfair rivalry between active, energetic, and well-trained faiths and the formerly semi-legal historical religions. The latter claim the role of ethnic indicators which under Soviet political pressure lost their practical religious skills. Public consciousness, at least in Armenia, looks at the rivalry as a threat to one of the most important components of the local ethnic identity rather than as a chance for the individual to freely choose his/her religion. This makes religion an element of ethnic and cultural identity rather than a faith or a teaching, which shifts the discussion from freedom of conscience to the rights of a group to preserve its ethnic culture. Art 5 of the Framework Convention for the Protection of National Minorities describes “religion, language, traditions and cultural heritage” as “essential elements of their identity.” It pledges to contribute to the conditions in which these elements can survive. The rivalry between new (non-traditional) and traditional religions may greatly affect these specifics, at least where religions are concerned. Since in some cases large parts of the “traditions and cultural heritage” are conditioned by corresponding religions, new (non-traditional) religions might damage these sectors as well. This is best illustrated by the Assyrians and Yezidis of Armenia. The same document says that the “creation of a climate of tolerance and dialog is necessary to enable cultural diversity to be a source and a factor, not of division, but of enrichment for each society.” The above suggests that we should look for better forms of ensuring the right of people to disseminate their religious convictions so as not to interfere with the rights of any group to its ethnic culture and its desire to preserve it. The above suggests that the level at which freedom of consciousness is ensured in Armenia corresponds to the international legal standards. It rests on laws that fully conform to the Declaration on the Elimination of All Forms of Intolerance and of Discrimination Based on Religion or Belief; it is realized to the extent groups and individuals are able to accomplish this. At the public level the issue is still potentially debatable.

Tolerance and Dialog between Religions

Society remains “moderately tolerant” with respect to all sorts of religious groups and seeks measures to protect its ethnicity. People accept and even approve of the “ethnic religions,” which explains why the religious organizations of national minorities are respected. All nationalities, the Armenians being no exception in this respect, are concerned with active proselytizing, which accounts for the somewhat negative idea about certain religious organizations. The nation is still actively discussing the Jehovah’s Witnesses and is indignant about the fact that school teachers have also been tempted. Parents are concerned with the possibility of uncontrolled religious propaganda in school and refuse to deal with teachers whose religious views differ from their own. In 2008 several members of the Jehovah’s Witnesses complained to the law-enforcement bodies about being ac- costed in the streets while they were distributing religious literature and/or otherwise engaged in religious agitation. The media, likewise, remain interested in the religious issues: some of the papers describe the non-traditional trends as “sects” while their members are described as betrayers of the main national values. Several TV channels discussed the religious situation in the republic to reveal that the nation was worried by the religious diversity in the Armenian ethnic milieu. In February, during the election campaign when the confrontation between the opposition and government mounted one of the TV channels discussed the “Jewish question” for several days running, which did nothing for the traditional good relations between the Armenians and Jews.

61 CENTRAL EURASIA 2008 Analytical Annual

In 2008 the authorities did not limit religious practices; throughout the year the Administra- tion for National Minorities and Religions under the Government of the Republic of Armenia discussed with all the leaders of the religious organizations the results of the round table “Religious Organizations in the RA, Legal and Practical Issues and Public Sentiments” held on 30 November 2007 and attended by all the religious organizations, human right structures, representatives of the president and ombudsman (the Jehovah’s Witnesses being the only exception—they normally steer clear of public discussions). All those present received a packet of the relevant international and national laws. On 31 October, 2008 the Cooperation for Democracy public organization initiated, together with the OSCE office in Erevan, a seminar called “Religion in Law-Governed Society Today: Freedom of Conscience and Religion in Armenia.” The discussion was lively. The same organization publishes a periodical called Religion and Society that gives space to all confessions (the AAC, Evangelists, Sev- enth Day Adventists, etc.), analysts, and experts. The latest issue carried an article that analyzed the national legislation related to conscience and religious beliefs.7 Many of the Armenian religious leaders were satisfied with the speech the president of Armenia delivered on 24 September to the New York Armenian community. He confirmed, among other things, that the nation should not feel apprehensive of the diversity in Armenia; it should be regarded as the nation’s strong point because it rested on tolerance. “The cultural, linguistic and religious diversity among the Armenians,” said the president, “is not a vice to be suppressed but an advantage that opens up specific possibilities.” Very much as in previous years the authorities extended their aid to the religious and ethnic communities that needed it. Every year ethnic communities receive budget grants to be used for religious needs (this is done by the Jews, Yezidis, and Poles); they pay for religious holydays or buy religious objects. In 2008 the budget paid for the restoration of the Jewish cemetery of the 14th-17th centuries in the Vaik District on the banks of the Ekhegis River; this was done when a monument to the Holocaust was erected in the center of the Armenian capital. In 2008 the Yezidi community received a large plot of land for a sanctuary. Religious monuments (churches in particular) nationalized under Soviet power are being returned to their former owners; the Assyrian community, in particular, got back its church.

Influence of Foreign Religious Centers and Foreign States

The public is still convinced that the non-traditional religious organizations are governed from abroad, in particular from the United States. This is confirmed by the newly built expensive, by Arme- nian standards, religious and administrative buildings of some of the Protestant structures and the Church of Jesus Christ of Latter-Day Saints. In 2008 there was no more or less serious discussion of the impact of foreign religious centers and foreign states on the country’s religious life. The AAC continued its dialog with the traditional religions; it was involved in the Conference of European Churches and received foreign ambassadors, leaders, and representatives of all sorts of confessions, as well as secular leaders who visited Armenia.

7 See: G. Kharatian, “The RA Legislation Related to the Freedom of Religion and Religious Activities,” Religion and Society, No. 5, 2008 (in Armenian). 62 REPUBLIC OF ARMENIA International Affairs M a i n C o n c l u s i o n s a n d T r e n d s

The republic’s legislation on freedom of conscience corresponds to the international legal standards but is being constantly improved with the aim of achieving the best possible balance between the right to freely choose one’s religion and the right of the group to protect its ethnic specifics. Freedom of religion is realized as best as groups and individuals can manage while there is a moderate conflict at the public level. The political storms of 2008 did not affect the religious sphere. The absolute understanding and even encouragement of “ethnic religions” are responsible for the acceptance of and respect for the national minorities’ religious organizations; this brings the followers of the traditional religions closer together and is responsible for the public’s restraint regarding the religious activities of all sorts of groups. This treatment can be described as “moderately tolerant,” which calls for additional ethnic-protective mechanisms. On the whole, society is displaying a growing interest in Christian values and a desire to know its own religion better.

INTERNATIONAL AFFAIRS

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

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

he year 2008 was a very politically intense talks on the Nagorno-Karabakh problem continue year for Armenia. And although the main within the framework of the OSCE Minsk Group and T events of the year occurred on the domestic that political settlement of the conflict be reached on political stage and were associated with the pres- the basis of the Madrid proposals. idential election on 19 February and the post-elec- Armenia’s strategic and diverse relations tion processes, international affairs and the over- with Russia continued to intensify. Efforts were all regional situation also provided much for the made to develop and strengthen friendly cooper- country to go on during the year. ation with the U.S. and leading European coun- The Nagorno-Karabakh problem and ways to tries. In September 2008, Armenia took the chair reach its fair political settlement remained on the in the Collective Security Treaty Organization frontline of Armenia’s foreign policy. The meeting (CSTO). At the same time, Armenia’s partnership among the presidents of Armenia, Azerbaijan, and with NATO underwent development, the first Russia and the Moscow Declaration they signed on two-year stage of cooperation within the Individ- 2 November were important milestones in the ne- ual Partnership Action Plan (IPAP) was given a gotiation process. This declaration stipulated that the positive evaluation. In October 2008, Armenia as-

63 CENTRAL EURASIA 2008 Analytical Annual sumed chairmanship in the Black Sea Economic events of 1 March in Erevan and the need to main- Cooperation Organization (BSECO). tain stability and fulfill the country’s obligations 2008 was a turning point in the normaliza- to the international community, the authorities tion of Armenian-Turkish relations. On 6 Septem- were asked to execute the provisions regarding ber, the Armenian president invited President of Armenia in two PACE resolutions (Nos. 1609 and the Turkish Republic Abdullah Gül to visit Er- 1620). The August crisis and hostilities involving evan, and contacts continued at the level of the South Ossetia posed a serious threat to the secu- foreign ministers and civil society representatives rity and transportation stability of the entire re- of both countries. Relations also developed with gion, including in Armenia. other neighbors—Georgia and Iran. In October However the consequences of the global fi- 2008, the last section of the Iran-Armenia gas nancial and economic crisis that emerged during pipeline went into operation. the second half of 2008 continue to pose a grow- Armenia also encountered serious foreign ing problem and challenge to Armenia’s future political problems during the year. Due to the economic development.

The Nagorno-Karabakh Conflict and Relations with Azerbaijan

2008 was very intense in terms of the Nagorno-Karabakh conflict, but no new opportunities emerged during the year for making any real progress in the peaceful settlement and harmoniza- tion of the relations between Armenia and Azerbaijan. Along with the rather routine but also very important activity of the OSCE Minsk Group aimed at preserving the fragile peace in Nagorno- Karabakh, the most significant events for Armenia were the consequences of the Five-Day War between Russia and Georgia, as well as the signing of a Declaration on Nagorno-Karabakh Settle- ment in Maindorf outside Moscow on 2 November by the presidents of Armenia, Azerbaijan, and Russia. Initiated primarily by Russian President Dmitry Medvedev, the signing of this Declaration was aimed at repudiating the negative political-psychological consequences of the August war with Geor- gia in the West and Moscow’s recognition of the independence of South Ossetia and Abkhazia. In the context of the Nagorno-Karabakh conflict, the Moscow Declaration was also important in that it simply registered the new political reality in the region after the Five-Day War. This was particularly manifested in the significantly lesser likelihood of the hostilities flaring up again in Nagorno-Karabakh. The geopolitical context in the region changed after the August Five- Day War, while the Declaration of the Three Presidents on Nagorno-Karabakh signed in Maindorf on 2 November simply registered this latest status quo. We should also keep in mind other repercussions of the war: the Russian threat came alive again in the minds of the Azeri people, the results of Geor- gia’s failed military operation to return South Ossetia were projected onto Baku, and oil prices abruptly fell. The latter in particular is a very significant factor for Azerbaijan, more than 70% of the spending of which is directly or indirectly financed by the sale of energy resources. It should also be kept in mind that the Five-Day War showed the vulnerability of the transportation routes of Azeri hydrocarbons through Georgian territory. The Moscow Declaration had several positive aspects for Armenia, including, first, the fact that the OSCE Minsk Group retained its co-chairmanship, whereby all attempts to create any alternative or parallel negotiation format failed, and second, registering an albeit declarative, but public, refusal by the parties to use force to resolve the conflict. However it stands to reason that the

64 REPUBLIC OF ARMENIA International Affairs

Declaration should not be considered a document that can provide a final solution to the problem. Settlement of the Nagorno-Karabakh problem is still impossible—the sides cannot reach mutually acceptable compromises and the co-chairmen and leading nations are unable to apply joint consolidated pressure. At the end of 2008, the provisions of the Moscow Declaration were confirmed and supplemented during the 16th session of the OSCE Council of Foreign Ministers held in Helsinki on 4-5 Decem- ber, at which the foreign ministers of the OSCE countries called for continuing the talks within the Minsk Group and on the basis of the so-called Madrid proposals.

Relations with the Turkish Republic

In February 2008, another presidential election was held in Armenia, at which the country’s leadership changed hands. Turkish President Abdullah Gül and Prime Minister R.T. Erdoðan were the first to congratulate the newly elected president, Serzh Sargsian. The change in leadership in Ar- menia and the statements from Turkish experts about the political inexpediency of blockading Arme- nia tilled the ground for beginning a new round of efforts to normalize bilateral relations. Naturally, Erevan and Ankara were unable to begin again from scratch. The specter of the past and difficulty of the problem for both sides, as well as the momentum of unilateral actions and the deep mutual mistrust, took their toll. In June 2008, at a meeting with representatives of the Armenian diaspora of Russia in Moscow, President Serzh Sargsian publicly invited President Abdullah Gül to visit Erevan to watch the football match between Armenia and Turkey together. According to many experts, it was no accident that the invitation for the Turkish president to visit Erevan was extended in Moscow—this symbolized a change, or at least an adjustment, in Russia’s policy regarding the smoothing out of Armenian-Turkish relations. Evidently the Armenian leadership was able to convince the Kremlin that the prospect of har- monizing relations between Erevan and Ankara had nothing to do with Armenian-Russian military- political cooperation. For the first time, Russia not only did not try to hinder the Armenian-Turkish dialog, it even did its best to promote it. The mass media let it be known that during Russian Foreign Minister Sergei Lavrov’s visit to Turkey in June 2008 (after Serzh Sargsian’s invitation to Abdullah Gül in Moscow), the Russian minister actively discussed the restoration of Armenian-Turkish relations, among other things, with the Turkish leadership. The Five-Day War that began during the night of 8 August, 2008 between Russia and Georgia changed the entire regional context and created a new political reality, a new status quo in the Cauca- sus. Turkey also tried to play its own game during the crisis and claim its new place in the Caucasian regional policy. This was manifested in particular in the form of an initial prohibition imposed by Ankara on the passage of American ships through the Black Sea straits to the Georgian coast. Turkey’s changed political priorities were also manifested in the form of the new political initiative it put forward (with Moscow’s consent)—the Platform of Stability and Cooperation in the Caucasus. The results of the August crisis and the new status quo also had an effect on the general atmosphere in Armenian-Turkish relations; they accelerated their overall dynamics and created new prerequisites for normalization which politicians and experts did not take previously before. For example, Georgia’s transportation risks as a result of this war primarily aroused Ankara’s interest in the possibility of opening the border with Armenia and using its territory as an alternative and even energy corridor for Turkey. In the wake of the Five-Day War and temporary halt in all the transportation and

65 CENTRAL EURASIA 2008 Analytical Annual energy projects going through Georgia, several Turkish experts and politicians, even at the level of Turkish Foreign Minister Ali Babacan, began to express the opinion that “Armenia could also become an alternative route for the gas pipeline going to the West from the Caspian Sea through Georgia, which has become unreliable after Russia’s intervention.”1 On the whole, it can be said that the Five-Day War in South Ossetia significantly animated or, to be more precise, reanimated Turkey’s Caucasian policy. Many experts believe that it was largely under its influence that Ankara ultimately decided on Turkish President Abdullah Gül’s unprecedented visit to Erevan on 6 September, 2008. During the events of August-September 2008 it was confirmed again that the Nagorno-Karabakh problem is only of instrumental significance in the general format of Armenian-Turkish relations and is less important among Ankara’s political priorities than Ankara’s recognition of the 1915 events in the Ottoman Empire as genocide of the Armenians and the smoothing out of relations with Armenia in the context of Turkey’s striving to become a member of the European Union.

Relations with Georgia

Armenian-Georgian relations developed steadily in 2008, although the regional context and particularly the August crisis in South Ossetia created serious problems in the second half of the year for both Georgia and Armenia. The Russian-Georgian war that flared up in August 2008 had the most direct and negative impact on the general development of the situation throughout the region. These events had a serious effect on Georgia’s transportation possibilities. All the countries of the region are experiencing difficulties related to this. After almost all the transportation routes going through Geor- gia were closed at the beginning of August and a railway bridge on Georgian territory was blown up, Armenia also felt the negative consequences of the hostilities. Most of the freight shipments to Arme- nia through Georgia were temporarily halted. At the same time, throughout 2008 cooperation between Armenia and Georgia was aimed at strengthening and developing relations between the two friendly countries, implementing new joint programs, improving the socioeconomic situation of the Armenian diaspora in Georgia, and resolving its urgent problems, particularly in Samtskhe-Javakheti, a region densely populated by Armenians. In 2008, an entire series of summit meetings was held attended by officials from both countries. From 30 September to 1 October, the Armenian president paid an official visit to Georgia, during which an agreement was reached on building a new alternative road to link Armenia with Batumi and Geor- gia’s Black Sea coast through the Armenian-populated region of Samtskhe-Javakheti. This road, the building of which became extremely urgent for Georgia itself after the August events, could become a significant milestone in the cooperation between the two countries. The presidents also talked about activating cross-border cooperation, simplifying the visa regime for Armenian and Georgian citizens, and other things. On 9 December, Armenian Prime Minister Tigran Sarkisian paid an official visit to Tbilisi. During the visit, the 7th session of the Armenian-Georgian intergovernmental commission was held. Tigran Sarkisian also met with representatives of Tbilisi’s Armenian community and visited the Armenian church of Norashen, regarding the ownership of which there are still arguments between representatives of the Georgian Orthodox Church and the local diocese of the Armenian Apostolic Church. During the meetings with the highest Georgian political leadership, the Armenian prime minister reached an

1 “Armeniia v turetskoi skheme – alternativnyi Gruzii marshrut prokachki azerbaidzhanskoi nefti: Ali Babacan,” available at [www.regnum.ru], 8 September, 2008. 66 REPUBLIC OF ARMENIA International Affairs agreement on continuing the dialog on the further fate of Armenia’s historical-religious heritage in this country and finding a resolution to other controversial issues.

Relations with the Islamic Republic of Iran

Armenia’s relations with Iran during 2008 remained stable and developed according to the customary scenario in such areas as energy, transportation, and foreign economic affairs. On 1 December, 2008, a ceremony was held to launch the final section of the Iran-Armenia gas pipeline on the Kajaran-Ararat line. Armenian President Serzh Sargsian, ex-president Robert Kocharian, and Head of Gazprom Alexei Miller participated in the ceremony. Launching of the second and final section of the Iran-Armenia gas pipeline was of both purely economic and political significance. By laying this line, Armenia acquired a second and alternative source of gas supply (in addition to the Georgian route that is subjected to various geopolitical risks, via which gas is pumped to Arme- nia from Russia). The raised level of Armenia’s energy security provided a serious guarantee of the country’s future stable economic development and also lowered the risks in the event that unfavorable geopolitical processes develop in the Caucasus. In September 2008, on an invitation from Iranian Foreign Minister Manouchehr Mottaki, an Armenian delegation headed by the Armenian foreign minister visited Iran. During the visit meetings were held with the highest political leadership of the Islamic Republic of Iran. On 22-24 November, on an invitation from his Iranian colleague, Secretary of the Armenian Security Council Artur Bag- dasarian visited Teheran with his delegation. He met with the Iranian president, parliament chairman, and other high-ranking Iranian officials. On 15 December, the 8th joint meeting of the Armenian-Iranian intergovernmental commission was held in Teheran at which the participants discussed, among other things, construction of a hydropower plant on the River Araks, of the third section of the Iran-Armenia power transmission line, of a refinery and oil reservoir in Armenia, and of an Armenia-Iran railroad.

Relations with the Russian Federation and Cooperation within the CSTO

On 20-21 October, Russian President Dmitry Medvedev paid a two-day official visit to Arme- nia. Although this visit was mainly for the record, it nevertheless enforced the level of military-political cooperation and partnership reached by the sides on the most diverse issues in the economic and humanitarian spheres. Practical issues with respect to intensifying relations between the Republic of Armenia and the Russian Federation were also discussed. Dmitry Medvedev’s visit to Armenia was preceded by several meetings between the presidents of the two countries, the last of which was held in Sochi at the beginning of September during which Serzh Sargsian and Dmitry Medvedev discussed pertinent problems of regional policy in the light of the August events of 2008. On the whole, it should be noted in particular that the August crisis involving Georgia and the active Armenian-Russian consultations (keeping in mind Armenia’s chairman-

67 CENTRAL EURASIA 2008 Analytical Annual ship in the CSTO) were conducive to the overall development of bilateral relations and security at the regional level. In Erevan, the presidents of the two countries also discussed the prospect of Nagorno-Karabakh settlement, which was soon reflected in Russia’s initiative to sign a tripartite document on this problem with participation of the conflicting parties. This led to the signing of the Moscow Declaration on 2 November by the presidents of Armenia, Azerbaijan, and Russia on political settlement of the Nagorno-Karabakh conflict. During the year contacts continued between the highest officials of both countries at the most diverse levels, including parliament speakers, heads of government, Security Council secretaries, foreign ministers, defense ministers, and so on. Military and military-technical cooperation between the two countries developed efficiently both at the bilateral level and within the CSTO structures. In April the 5th session of the CSTO Interstate Commission on Military-Technical Cooperation was held in Erevan. In June-August 2008, joint command-staff exercises of the organization’s member states, Rubezh-2008, were held in Armenia. The exercises made it possible to check out the level of readiness of the member states and develop measures to be used in the event of a threat of aggression against Armenia. Cooperation actively developed in the economic and financial-investment sphere. On 20 Octo- ber, the 10th session of the Intergovernmental Commission on Economic Cooperation was held in Erevan. Russian investments in the Armenian economy topped 1 billion 300 million dollars. In 2008, the Russian Railroads Company won the tender for management of Armenia’s rail network with mandatory modernization and investment.

Relations with Leading European Countries and Organizations (the European Union and Council of Europe)

During 2008, cooperation between Armenia and the leading European countries actively developed, including with the most important European organizations—the European Union and the Council of Europe. In particular, during the year Armenian President Serzh Sargsian made visits to France, Belgium, and Bulgaria. During his visit to France on 3-4 November, Serzh Sargsian met with Presi- dent Nicolas Sarkozy, Prime Minister François Fillon, and President of the Senate Gérard Larcher. During the visit to Brussels on 5-6 November, the Armenian president met with Belgium’s Prime Minister Yves Leterme and heads of the parliamentary houses Armand De Decker and Herman Van Rompuy. Meetings were also held in Brussels between the Armenian president and EU and NATO heads. During the Armenian president’s official December visit to Bulgaria, he met with Bulgarian President Georgi Parvanov, Bulgarian Prime Minister Sergey Stanishev, and National Assembly Chairman Georgi Pirinski. During the year, Armenia’s cooperation intensified with the EU within the framework of the European Neighborhood Policy (ENP). In 2008, Armenia achieved significant progress in all areas stipulated in the Action Plan, particularly in tax and customs reform, improvement of the investment climate, and so on. Serzh Sargsian’s November visits to France, which was chairing in the EU, as well as to Brussels and the EU structures were of the greatest significance with respect to the development

68 REPUBLIC OF ARMENIA International Affairs of the political dialog between Armenia and the European Union. The visits activated Armenia’s cooperation with the European Union countries. During the visits an agreement was signed on creating an Armenia-EU consultation group to assist the reforms being carried out in Armenia. Cooperation was given an immense boost by the exchange of visits between Armenian Foreign Minister Edvard Nalbandian and Director-General of the Enlargement Directorate-General of the European Commission Eneko Landaburu. In July, Armenia was invited for the first time to participate in the political consultations at the Troika level of the EU Political and Security Committee. In order to encourage the European Union to make investments, Armenia signed an agreement with the Euro- pean Investment Bank. During the talks throughout the year several agreements were signed on strengthening cooperation with the EU countries regarding migration and so on. On 3 December, 2008, the European Commission announced a new program in Brussels called the Eastern Partnership (EaP) which involves six post-Soviet countries, including the Republic of Armenia. This step can be regarded as a new stage in the cooperation between United Europe and its neighbors from among the former Soviet Republics. In addition to creating a free trade zone between the EU and each of the partner states, simplifying the visa regime with them, and enlarging the volume of financial and economic assistance provided by Brussels, the Eastern Partnership program will also imply the signing of a new agreement on associated membership. But this program does not guarantee future membership for any of the partner states. The level of further cooperation between the partner states and the EU will be decided on an individual basis. Participation in and implementation of the Eastern Partnership program will mean a new stage for Armenia in its European integration—it will form the foundation of the country’s entire foreign policy and economic development in the foreseeable future. The European Union’s new role and place in the region in the wake of the August crisis are of immense importance both for the Republic of Armenia and for the development of regional political processes as a whole. During the August events, Brussels tried to occupy a special niche in regional policy and create new formats for institutionalizing its presence in the region. Placing European observers in the buffer zones along the borders of South Ossetia and Abkhazia was essentially the Euro- pean Union’s first serious independent initiative to project its political and partly military potential onto peacekeeping operations beyond its own borders and without the direct support of the NATO structures or the U.S. Armenia’s cooperation in 2008 with another leading European structure—the Council of Eu- rope—mainly developed in the context of the post-election events in Armenia and the country’s fulfillment of its obligations to the international community regarding the development of democracy and observation of political rights. In addition, cooperation between Armenia and the Council of Europe continued in other spheres: drawing up priorities in the Armenia-CE cooperation program, participation of Armenian specialists in intergovernmental and ministerial committees, and fulfillment of the obligations it has assumed. In 2008, Armenia continued cooperating with various structures of the Council of Europe, particularly the Ago Group of the Committee of Ministers of the Council of Eu- rope, which is keeping tabs on Armenia’s fulfillment of its obligations, as well as with Council of Europe’s Commissioner for Human Rights Thomas Hammarberg. On 7 May, Armenian Foreign Minister Edvard Nalbandian took part in the 118th session of the Committee of Ministers of the Council of Europe in Strasbourg and held meetings with the secretary general of the Council of Europe, chairman of the Parliamentary Assembly of the Council of Europe, members of the Ago Group, commissioner for human rights, and head of the European Court for Human Rights. On 25 February, Slovak Foreign Minister Jan Kubis, the chairman of the Council of Europe’s Committee of Ministers, paid an official visit to Erevan. In 2008, Armenia continued to take active part in the work of the Parliamentary Assembly of the Council of Europe (PACE). With respect to the March events of 2008, PACE adopted two resolutions

69 CENTRAL EURASIA 2008 Analytical Annual on Armenia—Nos. 1609 and 1620, and on 22-25 July, 2008 President of the Parliamentary Assembly of the Council of Europe (PACE) Luis Maria de Puig visited Armenia.

Relations with the U.S.

2008 was a very important year in terms of the development of Armenia’s relations with the United States. Bilateral efforts were continued to intensify partner relations in many spheres, beginning with military-political cooperation and ending with humanitarian and cultural contacts. As in the previous years since Armenia gained its independence, the large Armenian diaspora in the U.S. and its influence on American sociopolitical life continued to play a special role in the relations between Erevan and Washington. In 2008, for the first time in several years, the U.S. Congress appointed a new American ambassador to Armenia. Let us recall that prior to this all attempts to appoint a U.S. ambassador failed due to the opposition of American congressmen who demanded that the candidate to this post be unequivocal in his recognition of the 1915 events in the Ottoman Empire as genocide of the Armenians. Marie L. Yovanovitch was appointed as the new U.S. ambassador to Armenia. In July 2008, Armenian Foreign Minister Edvard Nalbandian visited Washington. During his visit to the U.S., he met with State Secretary Condoleezza Rice, Assistant to the President Ambassa- dor James F. Jeffrey, Assistant Secretary of State Daniel Freed, Assistant Secretary of State David Kramer, Chief Executive Officer of the Millennium Challenge Corporation John J. Danilovich, and congressmen. In September 2008, while in New York to participate in a session of the U.N. General Assem- bly, Armenian President Serzh Sargsian met with U.S. State Secretary Condoleezza Rice. During the meeting they discussed the prospects for the further development of bilateral relations. In October 2008, in Washington, Armenian Prime Minister Tigran Sarkisian, who participated in the annual meeting of the World Bank and International Monetary Fund, met with U.S. Vice President Dick Cheney and State Secretary Condoleezza Rice. In November 2008, a regular sitting of the Armenian-American work group on economic issues for coordinating economic tradg relations between the two countries was held in Washington. An Armenian delegation headed by Minister of Economics Nerses Eritsian participated in the sitting and discussed a wide range of issues regarding bilateral cooperation.

Cooperation with NATO

In 2008, efforts continued to develop partnership between Armenia and NATO within the framework of the Individual Partnership Action Plan. Armenia’s cooperation with NATO remained the most important component in ensuring the country’s national security and an indication of the efficiency of its multilateral complimentary foreign and defense policy. In particular, cooperation with the Alli- ance was actively developed in terms of crisis management and emergencies, reform in the defense sphere, border security, fighting terrorism, and public diplomacy. During the year, the first two-year stage within the Individual Partnership Action Plan was positively evaluated. In 2008, the largest military exercises in the entire history of cooperation were held in Armenia with the participation of servicemen from the NATO member and partner states. On 3 April, 2008, the newly elected Armenian president, current Prime Minister Serzh Sargsian paid a working visit to Bucharest, where he participated in a meeting of the heads of state of NATO’s

70 REPUBLIC OF ARMENIA International Affairs

Council of Euro-Atlantic Partnership. On 5 November, during his visit to Brussels, President Serzh Sargsian also meet with NATO Secretary General Jaap de Hoop Scheffer. On 28 May, 2008, a regular session of the Armenia-NATO Council was held at which Armenia was represented by Foreign Minister Edvard Nalbandian and Defense Minister Seiran Oganian. This session ended the first two-year stage of the Individual Partnership Program. In June 2008, Armenia doubled the size of its peacekeeping contingent in Kosovo, bringing its numbers up to the size of a squadron. The possibility is being considered of sending an Armenian peacekeeping contingent to Afghanistan. In June 2008, within the framework of the Individual Partnership Program, another NATO Week was held in Erevan, during which several high-ranking representatives of the Alliance visited Arme- nia. During the year, Armenia’s bilateral military cooperation also developed with the NATO member states, particularly with the U.S., Greece, France, Germany, Great Britain, and others.

71 CENTRAL EURASIA 2008 Analytical Annual

AZERBAIJAN REPUBLIC

GENERAL OVERVIEW

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

s in the previous year the Nagorno-Karabakh conflict remained the burning issue on the political agenda. The situation was regularly aggravated by Armenian violations of the cease-fire A regime. Azerbaijan has stepped up its diplomatic efforts, resulting in the March resolution of the U.N. General Assembly which recognized the fact of Armenian occupation of Azeri territories. The public was stirred up by the Moscow Declaration signed in November by the presidents of Azerbai- jan, Armenia, and Russia that confirmed the sides’ resolution to settle the conflict through political means even though it never suggested any specific measures. It was for this reason that the republic’s political community assessed the Declaration as the result of Russia’s desire, first, to demonstrate its leading role in the post-Soviet expanse and, second, to confirm its image of a politically neutral intermediary in the Caucasus after the war with Georgia. This image was later very much tarnished by information that Russia had transferred weapons and ammunition totaling over $800 million to Arme- nia free of charge. In 2008, the political leaders (both from the government and opposition camps) spoke much less about military topics even though the country was building up, very much as before, its military force. This was amply confirmed by the June military parade that marked the 90th anniversary of the Armed Forces. The presidential election held in October can be confidently described as the central political event. President Ilham Aliev crossed the finish line well ahead of his six rivals, something that had been predicted long in advance. His victory came as a surprise neither to the political observers nor to the public at large. Indeed, the government was successfully pursuing a balanced foreign policy; in recent years it has made significant accomplishments in the construction of infrastructure and social programs, which boosted the government’s popularity. On the other hand, the opposition was disunit-

72 AZERBAIJAN REPUBLIC General Overview ed; it was greatly enfeebled by pressure from the official structures and its own tactical and strategic blunders to the extent that it proved unable to compete with the government. It seems that being fully aware of their own impotence in the face of the government’s election (including administrative) resources, some of the most prominent opposition leaders preferred not to enter the race. The boycott did nothing to quench the voters’ enthusiasm and never cast any doubts on the legitimacy of the election results. Most of the international observer missions (including those that represented PACE, the EU, and the United States) were quite positive about the election. Immediately after the election the government initiated a constitutional referendum to find out what the nation thought about the suggested amendments and addenda to the Constitution, the political importance of which could hardly be overestimated. One of the amendments, however, that of lifting the limitation on one person’s presidency to two terms, caused fierce debates. Certain political forces and some international organizations were dead set against it as contradicting the principles of democracy. Those who agreed with the amendment argued that it corrected the infringements on the electoral rights of the candidates and the electorate. The Constitutional amendments and addenda were approved by the overwhelming majority in the course of the March 2009 referendum, an analysis of which goes beyond the time limits of the present edition. In 2008, the Cabinet structure remained practically the same while personnel changes were limited to the appointment of former deputy minister of taxes Sh. Mustafaev to the post of minister of economic development, where he replaced G. Babaev immediately after the election. It can be said that the NGO sector lived through serious structural changes: the NGOs engaged in politically neutral projects fortified their positions while the NGOs well known for their opposition bias moved into the shadows. It seems that the trend will survive or even deepen in 2009. In 2008, all TV channels switched to the Azeri language, which can be described as a very important event. The journalist community and the TV audience showed sympathetic understanding of the decision even though its practical realization was far from simple and even painful for the TV and radio companies. Late in the year it was decided to deprive foreign radio companies of the country’s FM frequencies, which raised a wave of protests from the political opposition and several Western states. Formally, the step was absolutely justified: TV and radio should be working in full accordance with the national laws which, before their enactment, were approved by respected international structures. The press failed to achieve financial self-sufficiency, which naturally limited its independence. The Conception of State Support for the Media endorsed in July contained several measures designed to alleviate the problem but most of problems created by judicial pressure remained. On the whole, the political expanse remained unipolar even to a much greater extent than before. The government was consolidated while the opposition was fragmented and, therefore, weak with practically no chance of influencing the political agenda. The Milli Mejlis (parliament) cannot be described as a field of political battles between the ruling elite and the opposition; many of the deputies prefer to remain in the shadows. The expert community explained the situation by the country’s rich natural resources, which decrease the level of public demand for democratic reforms, and predicted that the trend will survive for several more years. Foreign policy priorities did not change much; the Nagorno-Karabakh settlement in conformity with the state’s territorial integrity remained the central point on the foreign policy agenda. Two factors, however, added an edge to the situation. n First, the war between Georgia and Russia, which ended in the latter’s easily predictable victory, after which Russia recognized the state independence of South Ossetia and Abk- hazia. It became clear that any attempt to use force to resolve the Nagorno-Karabakh prob-

73 CENTRAL EURASIA 2008 Analytical Annual

lem without preliminary agreements with large states (neighbors in particular) was fraught with serious consequences. In the wake of the Russian-Georgian war Azerbaijan demonstrated extreme diplomatic caution. n Second, Turkey stepped up its activities in the Central Caucasus; it concentrated on settling its relations with Armenia and on Armenian-Azeri relations. This can be described as the first stages of a policy that will certainly survive in the next few years. Under certain circumstances, especially if the leading centers of world politics exert their pressure, this trend may come to the fore in Turkey’s foreign policy activities. Azeri society, on the whole, was positive about Turkey’s more active involvement in the region but both the government and the opposition voiced their doubts about its intensive political dialog with Armenia. Relations with Turkmenistan were normalized, which can be described as a positive result of 2008 and an important contribution to stability in the Caspian. After a long interval, Turkmenistan appointed an ambassador to Azerbaijan (it had recalled its ambassador in 2001 after a conflict over offshore oil fields in the Caspian). This created a much better political atmosphere in which the countries could cooperate in the energy sphere and in joint projects to export Central Asian natural resources to the European markets in particular. In 2008, European and Euro-Atlantic integration figures prominently in the republic’s foreign policy. The renovated plan of action within the Individual Partnership Action Plan (IPAP) can be described as a practical result of cooperation with the North Atlantic Alliance; energy cooperation was in the center of the country’s dialog with the European structures. The European Commission invited Azerbaijan and five more Soviet successor states to join the Eastern Partnership Program, which envisaged bilateral agreements on free trade areas, closer integration with the EU, further cooperation in the common European security sphere, etc. Azerbaijan is playing an ever increasing role in setting up a new system of European energy security. The 4th energy summit held in Baku can be described as an important event of the year 2008. It was attended by over 20 countries, including five presidents (of Azerbaijan, Georgia, Lithuania, Poland, and Ukraine), the vice president of Bulgaria, the prime ministers of Hungary and Estonia, the U.S. Energy Secretary, and the EU Commissioner for Energy. NATO, the United States, the European Union, and most of the important international actors showed their interest in the Organization for Democracy and Economic Development—GUAM and its further progress. Azerbaijan’s chairmanship in GUAM in 2008 was marked by a quest for new forms of strategic alliance among its members. The international conference on GUAM Strategy organized by the Foreign Ministry of the Azerbaijan Republic in May attracted a lot of interest. In 2008, Azerbaijan saw no breakthrough in resolving its foreign policy problems, however amid the foreign policy storms it managed to preserve balanced relations with the key states seeking wider spheres of influence in the Caucasus. In the last few years, Azerbaijan was one of the world’s leaders as far as economic growth rates were concerned. In 2003-2008, its GDP increased 2.7-fold; in 2008 alone it grew by 10.8 percent. In 2008, the non-oil branches developed faster than the oil sector: the GDP of the former increased by 15.7 percent while of the latter by 7.0 percent. In 2003-2008, industrial production increased more than 2.7-fold while the state budget burgeoned more than 10-fold (in 2008 it topped $15 billion). In recent years international reserves increased to reach a figure of over $18 billion. During this period the Azeri economy received investments totaling over $46 billion; in the last two years the share of domestic investments increased considerably, which can be described as the dominating trend. In 2008, the government pursued an active investment policy, especially in the non- oil sphere, which received 81.3 percent of the total state investments. The government regards this as an important condition of economic diversification.

74 AZERBAIJAN REPUBLIC General Overview

The nominal per capita GDP increased 5-fold compared to 2003 to reach 4,440 AZN ($5,366). According to the CIA—The World Factbook, the per capita GDP calculated by the purchasing power parity was about $9,000 ($4,700 in Georgia and $6,400 in Armenia). For obvious reasons intensive economic growth improved the standard of living: per capita monetary incomes increased by 36.2 percent (2,343 manats, or $2,857); and average monthly wages grew by 24.2 percent (268 AZN, or $327). These figures, as well as most of all the other macroeconomic indicators, have made Azerbaijan an unrivaled leader in the Central Caucasus. In 2008, Azerbaijan reached new heights in improving its business climate; it climbed 64 rungs up (from 97th to 33rd) on the WB Doing Business ladder to be described as the world’s most dynamically reforming economy. Fast development of the private enterprise sector (its GDP share reached 84.5 percent) is one of the results of the better business climate. The government never let public enterprises out of its sight: in 2008, the State Oil Fund of Azerbaijan received the U.N. special transparency award. The State Five-Year Program of Regional Development was completed in 2008, which created a considerable number of jobs outside the capital. It not only helped to spread economic activities more evenly across the country but greatly improved its branch structure. In 2008, the communications sphere grew by 28.2 percent; transport by 13.5 percent; construction by 36.0 percent; and trade by 17.5 percent. Retail turnover grew by 16.1 percent and paid services by 29.7 percent. In the next few years the country will still have to fight unacceptably high inflation; in 2008, the inflation risk, which remained high, was caused, on the one hand, by the country’s high oil income and, on the other, by its active investment in social programs and economic (particularly infrastructure) projects. This inevitably increased the money supply and aggregate domestic demand. Annual inflation reached 20.8 percent while foodstuff prices increased by 28.6 percent. The last figure could have been even higher but for the global economic crisis, which caused a price drop by the end of the year (in imported goods in particular). By the end of the year it became clear that Azerbaijan was one of the countries least affected by the external risk factors; this was confirmed by practically all the international financial organizations (WB, IMF, EBRD, etc.). The government announced, however, that it would go on with the anti-crisis measures. The republic’s economic progress in 2008 and earlier might have been even more stunning but for the Armenian occupation of Nagorno-Karabakh and seven adjacent regions. It caused huge ecological damage, short-received incomes (from about 20 percent of the territory removed from economic circulation), and a huge number of refugees and forced migrants that are supported by Azerbai- jan. The last tent camp was liquidated in 2008; all forced migrants were moved to settlements with modern amenities, standard houses, and personal plots. Ethnic and religious tolerance can be described as the country’s special feature. 2008 was another year of mutual understanding and respect among all the traditional religions represented in the country (Islam, Orthodox Christianity, and Judaism). The Muslims dominate the religious scene, 65 to 70 percent of them are Shi‘as and the rest are Sunnis. The Catholic Church of Immaculate Conception of the Blessed Virgin Mary opened in March in Baku was more confirmation of religious tolerance and mutual respect. The official ceremony was attended by President Aliev, State Secretary of the Vatican Cardinal Tarcisio Bertone, and heads of the republic’s religious communities. In February, the Lutheran church built in 1854 in the town of Khanlar was opened after thorough restoration. Restoration of two large mosques in Baku (Teze-Pir and Ajdarbey) continued with state support. There are 1,750 mosques in the country, 804 of them functioning; five synagogues; five churches of the Russian Orthodox Church; one church of the Geor- gian Orthodox Church; one church of the Evangelical Lutheran Church; and one of the Roman Catho-

75 CENTRAL EURASIA 2008 Analytical Annual lic Church; there are also 26 prayer houses run by the Molokan, Protestant, Krishna, and Bahai communities. The terrorist act in the Juma (Abu Bakr) mosque in Baku that took place in August can be described as the biggest tragedy of the year. It killed 2 and wounded 18. The authorities laid the blame on the Forest Brothers radical terrorist group, many of whom were either killed while being detained or sentenced to long prison terms. The terrorist act warned that sharp contradictions could tear the Muslim community apart and that the use of force was not always the best answer. The authorities, however, often relied on force to put pressure on the faithful to contain religious extremism, which some domestic and foreign observers described as violations of freedom of religion. The independent expert community believes that a higher educational level among the Muslim clergy, absolute transparency of the religious communities, and wide-scale proliferation of religious knowledge are the correct answers to religious radicalism. Today, the government, together with the religious centers, is working hard to settle the problem, and hopefully, their concerted efforts will bear fruit in the near future. On the whole, the year was free from political, economic, or religious upheavals that could have affected the country’s socioeconomic development. Nothing extraordinary in domestic policy is expected in 2009. The country will live under the guidance of the incumbent president, who is in full control of the political, economic, social, and cultural processes. The economy will remain in the center of social development in view of the world financial and economic crisis and the Nagorno-Karabakh settlement is high on the list of political priorities.

POLITICS

Kenan ALLAHVERDIEV Ph.D. (Philos.), associate professor at the Department of Political Science and Political Administration, Academy of State Administration under the President of the Azerbaijan Republic (Baku, Azerbaijan)

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

he republic’s political agenda has not litical changes occurred within this agenda. The changed much since 2007; it still contains all presidential election can be described as the cen- T the traditional elements: the government, so- tral event together with the stronger etatist trends cial problems, the media, and the Nagorno-Kara- inside the country and certain shifts in the settle- bakh settlement. All the more or less significant po- ment of the “frozen” Nagorno-Karabakh conflict.

76 AZERBAIJAN REPUBLIC Politics The Government

The year began with election forecasts supplied by Azeri and Western analysts. The easily predictable outcome was summed up by The Financial Times: “Few doubt that Ilham Aliev, the current president of Azerbaijan, will win a second term in office at a general election this Octo- ber… The Moscow-educated, English-speaking leader is said by his associates to be committed to westernizing reforms.”1 The same newspaper wrote that the weak opposition was not expected to raise barriers on his road to presidency. The opposition that has no support among the Azeris found itself in isolation.2 The expected results of the year’s main political event deprived the first half of the year of political collisions. It was then that Azeri diplomacy scored a foreign policy victory in the form of the U.N. General Assembly Resolution “The Situation in the Occupied Territories of Azerbaijan,” which the country’s leaders could use as propaganda at home. The large-scale military parade held on 26 June in Baku (for the first time since 1992) produced a huge political and propaganda effect. Dedicated to the 90th anniversary of the Armed Forc- es of Azerbaijan, it combined the domestic political effect with a foreign policy message to Arme- nia and the world. The country was obviously strong enough to liberate the occupied territories on its own. Defense Minister Safar Abiev moved forward on his own initiative to promise Ilham Aliev the army’s support at the coming election; this was a sure sign of the military’s newly found confidence. The statement, an obvious breach of the Constitution of Azerbaijan, which does not allow the army to interfere in politics, invited another statement, this time from Head of the Presidential Administration Ramiz Mekhtiev, who said that “interference of the army in political processes and the election process in particular is wrong.”3 On 17 August, a terrorist act in the Juma (Abu Bakr) Mosque in Baku killed 2 and wounded 18 people. The investigation revealed that it had been organized by a group known as the Forest Brothers headed by terrorist Ilgar Mollachiev. Its members were detained by officers of the Minis- try of National Security of Azerbaijan; the leader was liquidated in Russia by the Russian special services. The country’s leaders and experts interpreted the events described as religious extremism and fanaticism as a possibility that the opposition might: (a) assume radical and illegal armed forms of political struggle; (b) move into the religious-political sphere. The latter was especially dangerous for Azerbaijan as a Muslim country since Wahhabism, especially popular in the north, was fraught with the replacement of the political opposition (loyal, on the whole, to the government) by a radical religious opposition that might present a serious threat to social and political stability and the state’s secular nature. The presidential election held on 15 October was unquestionably the year’s central political event. Incumbent President Ilham Aliev won by a vast majority of over 88 percent of the votes. Six other candidates also ran: Igbal Agazade, Chairman of the Umid Party; Gudrat Hasanguliev, Chairman of the United Popular Front Party; Fazil Hasanfaroglu, Chairman of the Great Creative Effort Party;

1 [http://www.today.az/news/politics/42645.html]. 2 See: [www.day.az/news/politics/105547.html], 26 January, 2008. 3 “Ramiz Mekhtiev: Armia dolzhna byt vne politiki,” available at [http://www.day.az/news/politics/117212.html], 7 May, 2008. 77 CENTRAL EURASIA 2008 Analytical Annual

Gulamhuseyn Alibeyli, an independent candidate; Fuad Aliev, Chairman of the Liberal-Democratic Party; and Khafiz Hajiev, Chairman of the Muasir Musavat Party. Experts and foreign observers agreed, on the whole, that the presidential election can be described as successful by two criteria. n First, it was positively assessed by international organizations and particularly by the three pillars of contemporary democracy—PACE, the European Union, and the United States. On 19 November, the Monitoring Committee of the PACE discussed the situation in Azerbai- jan and the results of the presidential election of 15 October. Andres Herkel and Eugenia Zhivkova, the reporters for Azerbaijan, pointed out that “the election marked considerable progress toward meeting OSCE and Council of Europe commitments and other international standards.”4 The delegation of the European Parliament agreed with their PACE colleagues that on election day the delegation had observed considerable progress toward international standards and the country’s election obligations despite “significant procedural shortcomings in vote counting in many cases” and control over the media.5 This time the U.S. De- partment of State, which never beats about the bush, limited itself to general and neutral- positive comments. n Second, after the election which caused no serious doubts and which the world community and the nation accepted as legitimate for the first time in many years, society became much more consolidated. This became obvious during the election campaign (the boycott of the election the opposition declared with great pomp passed unnoticed) and after the election when the opposition, contrary to its previous practice, did not go to court or organize violent demonstrations to contest the results. On 31 October, President Ilham Aliev endorsed the new Cabinet of the Azerbaijan Republic, which lost one of its members, Minister of Economic Development Heydar Babaev. Some state committees and agencies received a higher status. In November, the ruling Eni Azerbaijan Party initiated a referendum on the amendments and addenda to the Constitution. The media and the politically active part of the nation were especially concerned about the amendment that lifted the limitation on the number of presidential terms for any citizen of Azerbaijan. Those who favored the change offered the following three arguments: —Democracy will receive another boost since the people will be able to elect those political leaders they trust without limitations; —The political elites will be able to drop all sorts of political combinations to ensure the continuity of power (this happens in nearly all Soviet successor states), which will bring the nation closer together; —Two presidential terms are obviously not enough to carry out successful domestic and foreign policy especially when the state is burdened with a smoldering ethno-political conflict and the world financial crisis. Those who were against the amendment offered the usual liberal democratic arguments: the rule of law rather than of an individual; regular renovation of power is needed to meet the challenges of a constantly renovating society, etc. After receiving the Constitutional Court of the Azerbaijan Republic’s positive decision on the legality of the draft Act on Referendum regarding the amendments and addenda to the fundamental

4 [http://fas.org/sgp/crs/row/RS22977.pdf]. 5 [www.regnum.ru/news/1071290.html], 17 October, 2008. 78 AZERBAIJAN REPUBLIC Politics law, the parliament met on 26 December to schedule 18 March, 2009 as the date of the referendum with 100 votes for; 7 against, 1 abstained, and 2 not voting. The draft amendments proposed lifting the constitutional restriction of two presidential terms for one person; presidential and parliamentary elections could be postponed in the event of war; 40 thousand voters would receive the right of legislative initiative; video, photo, and audio recording against a person’s will should be prohibited; the executive presidential structure would receive the new name of Presidential Administration; the National Bank would change its name to Central Bank; the municipalities would become accountable to the parliament; former presidents would receive material support from the state, etc.—41 amendments to 29 articles. The public and international organizations concentrated on two of the comparatively large number of planned amendments: lifting the limitation on the number presidential terms for one person and limitation on the methods the media use to obtain information. Experts found it hard to agree on which of the amendments proved to be most important for the country’s future. According to Miklos Haraszti, OSCE Representative on Freedom of the Media, “prohibition of video, audio and photo recording against person’s will is among the most important changes.”6 His colleague Andres Herkel, reporter for Azerbaijan of the PACE Monitoring Committee, was convinced that the other issue should be regarded as the key one. He went on to say that normally the presidency was limited to two terms so that no one could remain in power too long. This was a tradition which could be changed through a referendum with due account of the country’s preceding election experience. Those who did not quite understand the democratic constructs used in the West would not grasp the meaning of this manipulation. This should be described as an artificial method of extending democratic institutions, concluded Herkel.7 Peter Semneby, EU Special Representative for the South Caucasus, remained neutral: the people knew better whether they should or should not amend their Constitution. He pointed out that the European Union could offer no recommendations or its own opinion on the subject and pointed out that the discussions of the issue should be profound and comprehensive.8

Society

The tension created by the mounting financial and economic crisis that was gradually envelop- ing the world proved to be a serious test for social stability in Azerbaijan. The world crisis, in fact, put certain limits on the ambitious social programs of President Ilham Aliev’s election platform. Although the country’s leaders repeatedly stated that the people would not feel the crisis, it was clear that this would only be the case if the situation proved exceedingly good. According to the Gallup poll conducted in May, 37 percent of the population could be described as living on the brink of food insecurity.9 In its report called The State of Food Insecurity in the World, 2008, the U.N. Food and Agriculture Organization (FAO) used the new U.N. minimum energy requirements for humans updated in 2006 and its own studies of the figures for 1990-2005 to reveal positive dynamics. The number of undernourished in the country dropped over two-fold: from 27 percent in 1990-1992 to 12 percent in 2003-2005. The figures for Armenia are 46 and 21 percent, respectively;

6 [http://training.journal/istnetwork.eu/forum/topics/anar-khanbeyli-291208-baku-1]. 7 See: “Andres Herkel: Lyudi ne poymut eti manipuliatsii s konstitutsionnym referendumom,” available at [http:// contact.com.az/index.php?type=news&lang=ru&news_id=9123], 24 December, 2008. 8 See: “U Pitera Semneby net slov po povodu izmeneniy v Konstitutsii,” available at [http://www.contact.com.az/ preview.php?type=news&lang=ru&news_id=9138]. 9 See: [http://www.day.az/news/economy/140061.html]. 79 CENTRAL EURASIA 2008 Analytical Annual while for Georgia they are 47 and 13 percent.10 It should be said that amid the world crisis the people in power remain optimistic: “In the last five years the number of people living below the poverty level dropped from 49 to 16 percent; I am sure that in 2008 the figure will be even lower. Some of our citizens are still living in poverty, which means that the state should do everything it can to help them. For this reason the program of social support will go on. I am absolutely sure that poverty, one of the social evils, will be liquidated in our country,” said the president of Azerbaijan in his New Year address to the nation.11 Corruption, another social evil, found its reflection in the annual Corruption Perceptions Index issued by Transparency International in the summer, in which Azerbaijan ranks 158th among the countries with great corruption-related problems.12 The government is doing everything to eliminate it but, judging from social expectations, this is not enough—the problem obviously calls for systemic decisions. In 2008, the republic hosted several international summits in the humanitarian sphere that can be described in all justice as outstanding political and cultural events. On the initiative of First Lady Me- khriban Alieva, Baku hosted the forum “Wider Roles for Women in the Dialog between Cultures” on 10-11 June, which attracted 400 women from 60 countries, including the first ladies of many countries. Supported by UNESCO and the Islamic Educational, Scientific and Cultural Organization (ISESCO), it attracted a lot of attention in the republic and outside it; it is now to become a biennial event. The 4th Islamic Conference of Ministers of Higher Education and Scientific Research on “Bring- ing Change through Scientific Youth Force” was held in Baku on 6-8 October. It was the best confirmation of the republic’s successful cooperation with the ISESCO and OIC. This and the preceding meetings of OIC foreign ministers and ministers of tourism marked another stage in the republic’s closer ties with the Islamic countries, which was further confirmed by making Baku the 2009 capital of Islamic culture. In December, the parliament passed the Law on Education in the second reading, a document of great social importance. It took three convocations of the Milli Mejlis and nearly 16 years to draft the law and harmonize departmental and lobbying interests to bring the draft to its present stage. It stands a good chance of being enacted in 2009. Under the new law secondary education will comprise of three stages: for 3 to 5- year olds—preschool education; from 5 years to 9th grade—compulsory secondary education; while 10th and 11th grades at secondary schools and schools of professional training will be reserved for those who want a full secondary education. Those who win Olympiads on school subjects will be admitted to higher educational establishments without entrance tests. Higher education will consist of three cycles: Bachelor- ship, Magistracy, and Doctorate (divided into two stages—D.Sc. and Professor). On 2 December, Baku was the venue of another significant event: the International Conference of Ministers Responsible for Culture “Intercultural Dialog as a Basis for Peace and Sustainable Develop- ment in Europe and its Neighboring Regions” held in cooperation with the Council of Europe and the Government of Azerbaijan. It attracted 10 international organizations and 16 states; as distinct from the previous international humanitarian forums, all the regions and leading confessions were represented.

The Press

The ban on the use of foreign languages by the republic’s TV channels and radio was enacted on the first day of the new year, 2008. The decision of the National Council for TV and Radio to bring

10 See: [http://www.fao.org/docrep/011/i0291e/i0291e00.htm]. 11 See: [www.rbc.ru/rbcfreenews/20090101073342.shtml]. 12 See: [http://www.transparency.org/news_room/in_focus/2008/cpi2008#translations]. 80 AZERBAIJAN REPUBLIC Politics television into conformity with national interests, which, in general, had invited no serious objections, ran into two serious practical problems. n First, it required a huge amount of dubbing of foreign films in Azeri, which proved to be an organizational and technological challenge. As a result, foreign films disappeared from the TV screens. n Second, the void left by Russian-language films and other programs in Russian was filled with Turkish films shown without translation, which forced people to wonder about the ban’s political underpinnings. By the fall of 2008 the situation was remedied: all films were either dubbed or subtitled. By the end of the year the president had to cool the zeal of those who attacked the Russian language: “Rus- sians have become an inalienable part of the multinational Azeri society. Thousands of Russians have linked their lives with Azerbaijan, which they regard as their Motherland. For many decades Russians have been living and live in Azerbaijan in an atmosphere of friendship, brotherhood, and calm. They have preserved their national and religious customs and traditions, their ethnic specifics, and language, which is not persecuted in this country and culture.”13 In the fall, the “nationalization” policy of the republic’s media expanse received a logical continuation in the form of limiting foreign (Western) radio broadcasts, which caused a lot of grumbling abroad and practically no response at home. The official and unofficial concerns of foreign states and international organizations remained ignored: the National Council for TV and Radio removed, as of 1 January, 2009, the BBC, Radio Liberty, Voice of America, and Europe + from the republic’s national frequencies. The press found itself in a far from simple situation: according to the Council for the Press, most media were short of money, which made their independence very doubtful. In 2007, the Council moved forward with the idea of a Media Fund to somehow improve the situation. On 31 July, 2008, the president of Azerbaijan signed the Conception of State Support of the Media. A. Hasanov, who heads one of the departments of the presidential administration, said: “The Conception is totally unrelated to those publications that camouflaged themselves as the press to go on with their illegal activities. The state will extend its support to those publications that supply information, ensure political pluralism, and present varied opinions. I am not talking about giving money away to certain publications. Money will go to those that help the press develop.”14 According to A. Amashev, who heads the Council for the Press, the press is in a very bad situation. Genuinely independent publications are few and far between. Many of those that call themselves independent are politically biased and either go along with the government or with the opposition. He is convinced that the Fund should create an economic system in which the media might become financially and therefore politically independent.15 By the end of the year the Council for the Press, which had undertaken the task of “weeding” the media’s field, accused 36 newspapers of racketeering. It was said that “this decision was based on facts of violations of professional journalist ethics; these publications acted contrary to these rules and the rules of common human decency.”16 These fairly controversial actions gave the Freedom House human rights organization grounds to include Azerbaijan among the countries where there is no freedom of press. According to the Free- dom in the World report, Azerbaijan ranks 168th, with no improvements in 2008.17

13 [http://www.rusinaze.ucoz.ru/], 21 November, 2008. 14 [http://www.echo-az.com/obshestvo11.shtml], 17 January, 2009. 15 Ibidem. 16 [http://www.day.az/news/society/143850.html]. 17 See: [http://www.freedomhouse.org/uploads/fop08/MOPFfinal.pdf]. 81 CENTRAL EURASIA 2008 Analytical Annual The Nagorno-Karabakh Conflict

The very first months of 2008 refuted the forecasts made in Azerbaijan and abroad that no serious breakthroughs in conflict settlement should be expected in the year of a presidential election. In fact, the Foreign Ministry, the military-industrial complex and the Armed Forces, the lobby inside and outside the country, formal and informal contacts of top bureaucrats, in short, “all the president’s men” worked hard to achieve significant results in the election year. The fruits of these political and diplomatic efforts were soon to ripen. On 14 March, the U.N. General Assembly passed a resolution suggested by Azerbaijan on “The Situation in the Occupied Territories of Azerbaijan” by 39 votes “for;” 7 against (Russia, the U.S., France, Armenia, India, Angola, and Vanuatu), and 100 abstentions. Strange as it may seem the cochairmen countries of the Minsk Group (the U.S., France, and Russia) voted against the resolution, which confirmed support of international mediation, including the efforts of the cochairmen of the OSCE Minsk Group. The fact that resolution on the situation in the occupied territories passed despite active opposition by the cochairmen of the Minsk Group can be described as a triumph of Azerbaijan’s diplomacy. On the other hand, it bared the problem of real, rather than declarative, international support. The media and the public could not but wonder whether this format was needed at all. The agreement signed on 2 November in Moscow by the presidents of Russia, Azerbaijan, and Armenia was a logical continuation of the above. This was the first document to bear the signatures of the leaders of Azerbaijan and Armenia since 1994. It turned out, however, that the elite and the ordinary people expected too much from it. n First, in the next two months the negotiation process gradually stalled while the vacuum was filled with all sorts of interpretations of the Declaration. Officials, experts, and the public on both sides of the conflict interpreted the references to international standards and principles found in the Declaration as they saw fit (Azeri and Armenian political scientists plunged into detailed explanations to each other of the principles of international legislation, the so- called Madrid Principles, etc.). n Second, the people, little acquainted with international legal principles, relied instead on their common sense to guess that the West would not remain a passive observer of Russia’s successful mediation. Indeed, the response was not long in coming. Late in December, an “armaments scandal” fed by unverified rumors of the transfer, free of charge, of Russian weapons to Armenia totaling $800 million caused serious friction between Rus- sia and Azerbaijan. Soon, however, it turned out that NATO had been aware of the free transfers of Russian weapons to Armenia in 2008 long before the Georgian press organized the leakage.18 It is thought that the “deal” looked suspicious, that it was either misinformation or skillfully planted information (Vafa Guluzade),19 but the public became convinced that Russia was an unreliable intermediary. By the end of the year the optimism caused by this or any other document had evaporated. It became clear that the great powers present in the region were not merely useless when it came to

18 See: Sotrudnik NATO: “V Azerbaidzhane deystvitelno uzhe sozdana armia, kotoraia sposobna vesti boevye dey- stvia nastupatelnogo kharaktera,” available at [http://www.day.az/news/politics/146284.html]. 19 See: [http://www.1news.az/interview/20090203120715902.html]. 82 AZERBAIJAN REPUBLIC Economy conflict settlement. Russian political scientist Sergey Markov put the resultant skepticism in a nut- shell: “The Nagorno-Karabakh conflict will never be settled. Any settlement will be nothing more but a stopgag.”20

C o n c l u s i o n

In 2008, the republic’s political expanse changed but little:21 it became more unipolar, the vertical of power became much more structuralized while the country remained politically, socially, and economically stable amid the global economic and financial storms. The problems that caused a lot of concern—poverty, unemployment, corruption, and the Nagorno-Karabakh conflict—remained among the political priorities. The larger part of the nation (and the electorate for that matter) pinned their hopes on stronger state institutions rather than on the panacea offered by the world economic centers or on the mechanisms of the self-regulatory market economy. In this context the victory at the 2008 presidential election gave the ruling elite a carte blanche for political changes. The local political scientists are convinced that the critics of the new constitutional architecture are left with the feeble hope that the West will side with them. We shall have to wait and see.

20 Sergey Markov: “Postavki oruzhia v Armeniiu sozdayut balans,” available at [http://www.echo-az.com/ politica01.shtml]. 21 See: Central Eurasia 2007, Analytical Annual, CA&CC Press, Sweden, 2008, pp. 86-87.

ECONOMY

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

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

n terms of its nature and results, 2008 was a rity may be increasingly caused by factors exter- momentous year in the history of the world nal to their own political and economic system. I economy. The dynamics of economic devel- Second, changes are taking place in the tradition- opment (viewed from a global, regional and na- al hierarchy of economic resources, which mate- tional perspective) show that, first, deepening glo- rially alters the economic environment, the inter- balization tends to increase and change the nature national competitive environment above all. of external threats to the economic security of In these conditions, state economic policy small states. The threats to their economic secu- turns into the most accessible instrument for reg-

83 CENTRAL EURASIA 2008 Analytical Annual ulating relations both between countries and be- tation of the State Program for Regional Social tween national and supranational economic actors. and Economic Development was completed. Pov- Given the processes noted above, and also the erty was significantly reduced: to 13.2% at year- 2008 national elections in Azerbaijan, which re- end (from 49% in 2003). sulted in the re-election of the incumbent presi- In recent years, Azerbaijan has invariably dent for a new term of office, it sometimes makes been a world leader in economic growth rates. In sense to assess the country’s economic perform- 2003-2008, its GDP increased 2.7-fold, industri- ance based on five-year trends.1 al production, 2.7-fold, and the state budget, over Despite year-end difficulties, which are con- 10-fold: from $1.2 billion in 2003 to more than sidered below, the Azerbaijan economy developed $15 billion in 2008. During these five years, insufficiently intensively during the year, with tens vestment in the economy reached 38 billion man- of new enterprises put into operation and with ats (AZN), or more than $46 billion at the aver- huge (by national standards) infrastructure age annual official exchange rate. This amounts projects carried out in the country. The implemen- to 77% of investment in the country’s economy since independence in 1991. Azerbaijan remains sufficiently attractive to foreign investors. Domes- 1 For this purpose, we used the Report on Social and Economic Development issued by the State Statistics Com- tic investment in recent years has markedly in- mittee of Azerbaijan on 15 January, 2009. creased as well.

Macroeconomy

The progressive economic development trends of recent years continued in 2008. Real GDP was AZN 38 billion ($46.3 billion), increasing during the year by 10.8% (7% in the oil sector and 15.7% in the non-oil sector). Nominal GDP per capita increased 5-fold from 2003, to AZN 4,440 ($5,366). The private sector’s share of GDP reached 84.5%. These figures reflect the high growth rate of the economy and confirm the numerous forecasts made in previous years both by Azerbaijan officials and by local and foreign experts. It is clear that the oil and gas factor—purposeful policy in the field of efficient use of the country’s hydrocarbon resources—has been and remains the key component of such intensive growth. It should be noted, however, that other, non-oil sectors of the Azerbaijan economy have also developed rapidly in recent years, having gained impetus from massive oil and gas revenues flowing into the country. Further efforts were made to improve the business environment, the sectoral composition of the economy, and the state economic management system. The systemic economic reforms carried out in Azerbaijan and the new opportunities for economic development opened up by these reforms were positively assessed, among others, by influential international economic organizations. Azerbaijan was recognized as the world’s top reformer for 2008, ranking first among 181 countries in the World Bank’s Doing Business 2009 report. The World Bank noted in a special press release that Azerbaijan was the first country in the entire history of its Doing Business reports to move up 64 places in the rankings on the ease of doing business: from rank 97 a year ago to rank 33. In terms of this indicator, Azerbaijan has outranked not only all other CIS countries, but also some developed European states. Such a significant improvement in business environment indicators was achieved due to reforms in the key components of the business climate and innovations in business and labor legislation. Another major success of the year was that the State Oil Fund of Azerbaijan (SOFAZ) won a special U.N. award for transparency. This is a very important achievement, especially considering that lack of transparency in the use of oil and gas revenue characteristic of most exporting countries is a serious obstacle to their effective socioeconomic and political development.

84 AZERBAIJAN REPUBLIC Economy

A major role in the development of non-oil sectors, primarily agriculture, was played by the implementation over the past five years of the State Program for Regional Social and Economic Develop- ment. During this period, public investment under this program totaled AZN 6 billion ($7.3 billion), including AZN 2 billion ($2.4 billion) in 2008. Due to the implementation of this and other state programs, employment levels in the country rose significantly, especially in the regions. In the last five years, 26.6 thousand new enterprises and more than 766 thousand new jobs were created in the country, including 548 thousand permanent jobs. In 2008, growth from the previous year was 28.2% in the communications sector, 13.5% in the transport sector, 36.0% in construction, and 17.5% in trade. Retail sales rose by 16.1%, and paid services to the population, by 29.7%. Such positive dynamics of economic growth are naturally reflected in indicators measuring the people’s well-being. During the year, per capita money income rose by 36.2% to AZN 2,343 ($2,857), and average monthly wages increased by 24.2% to AZN 268 ($327). Fixed capital investment from all sources was AZN 9,073.6 million, or $10,065.4 million. In terms of investment per capita ($1,183), Azerbaijan is among the top performers in the CIS and East- ern Europe. One of the positive results for the year was a sharp increase in the investment growth rate to 34.4%, although the previous year’s figure was quite high as well (17.8%). The increase in domestic investment was accompanied by a corresponding reduction in the share of foreign investment, which made up 24.5% of total investment, or 15.9 percentage points less than in 2007. There was a sharp increase in the volume of construction and installation work: to AZN 5,620.4 million ($6,854.1 million), or 56.7% more than in 2007. Out of the total investment amount, AZN 6,519.2 million ($7,950.2 million), or 71.9%, went into the construction of production facilities; AZN 4,355.4 million (48.0%) into industry and agriculture; and AZN 2,042.1 (22.5%) into transport and communications. The government continued its active investment policy: public funds invested in the economy reached AZN 5,677.4 million ($6,923.7 million), including AZN 3,569.1 million ($4,352.6 million) of investment financed from the state budget. Investment in non-oil sectors providing the key to future sectoral diversification of the economy increased faster than investment in other areas, making up 81.3% of total investment. In 2008, inflation declined slightly. At the beginning of the year, many international organizations and local experts projected inflation at 25-27%. But due to global factors and partly to domestic policy measures, by the end of the year inflation fell substantially. As a result, the actual annual inflation rate (consumer price index) was below the projected level: 20.8%, including 28.6% for food products and 11.4% for non-food products. As expected, 2008 was another milestone in the growth of the country’s strategic foreign exchange reserves. Compared to 2003, they increased 11-fold to an all-time high of $18 billion. Today Azerbaijan’s international reserves are 6.7 times in excess of its total (internal and external) public debt, which can be regarded as one of the most significant achievements of recent years. This circumstance is one of the main reasons why Azerbaijan has suffered less from the global financial and economic crisis than many other countries of comparable size and economic development level. At year- end, the country’s total internal and external public debt stood at AZN 2,686 million (7.1% of GDP); total public debt per capita was $380, and external debt, $330.

Sectoral Composition of the Economy

Industry remains the key sector of the economy. Industrial production in 2008 was AZN 28 billion (over $34 billion), increasing by 7% in the past year and 2.5-fold in the past five years. The

85 CENTRAL EURASIA 2008 Analytical Annual share of industry in GDP was 57.4%. Since the oil and gas sector was the main factor of economic growth, the structure of industrial production itself was dominated by the extractive industry (76.6%). In 2008, Azerbaijan reached an all-time high in the production of oil (44.5 million tons, including condensate) and gas (16.3 billion cubic meters). This is 4.6% and 50.4% more, respectively, than in 2007. As emphasized in earlier issues of this publication, in recent years the government of Azerbaijan has continued its drive to diversify the economy, although the intensively developing oil-and-gas and energy sectors are still the main source of the country’s economic wealth. Consistent diversification measures have already produced tangible results: in 2008, real GDP growth in the non-oil sectors was 15.7% instead of the projected 12%. For example, due to a number of measures, primarily subsidies and tax breaks granted to farmers, in 2003-2008 agricultural production (nominal value) increased 2.4-fold, and real value added in the agricultural sector was 25.1%. In 2008, agricultural production increased by 6.1%, including crop production by 7.2% and livestock production by 4.1%. In recent years, the strategy for priority development of the non-oil economy has resulted in intensive development of the information and communication technology (ICT) sector. Faster development of this sector has been officially declared by the government a top priority of its economic policy. In 2003-2008, average annual ICT growth did not fall below 30%. In its annual report for 2008, the World Economic Forum (WEF) put Azerbaijan in first place among the CIS countries in terms of ICT development, and in 67th place among all countries of the world. According to the Global Infor- mation Technology Report 2007-2008, prepared by the WEF together with the international business school INSEAD, in terms of the development of information technologies Azerbaijan is ahead of virtually all post-Soviet countries. In 2008, the production of goods and services in its ICT sector increased by 28.4%. Transport is another priority sector. Azerbaijan seeks to develop this sector taking advantage of its geographical position at the intersection of East-West and North-South transport routes. In 2008, freight traffic increased by 9.2%, and freight transit by 13.6%. The republic’s transport system carried 183 million tons of cargo. The private sector accounted for 69.4% of total freight. Traffic through the Transport Corridor Europe-Caucasus-Asia (TRACECA) continued to increase. In 2008, freight transported by its Azerbaijan section was more than 50 million tons.

Poverty Reduction and Social Protection

Social programs were a major focus of government attention. Total public spending on the social infrastructure in 2008 amounted to AZN 2,312 million ($2,819.5 million), or 38.4% more than in 2007. Public spending on social protection and social insurance, which is part of total public social expenditure, rose by 42.2%. Spending increased by 34.6% for health care, 35.5% for education, and 47.1% for culture, art, information and physical culture. In 2008, the authorities continued to implement targeted social assistance programs. With the development of the country’s economic potential, the amount of government assistance has increased and additional opportunities have been created for citizens in need of support. As a result of purposeful government efforts to reduce poverty, at the end of the year the number of people living below the poverty line was only 13.2%, a much smaller figure than in many other post-Soviet countries.

86 AZERBAIJAN REPUBLIC Economy Business

One of the main lines of economic policy in Azerbaijan is the development of free enterprise, with focus on the creation of a strong middle class. In the past five years, the National Business Sup- port Fund provided soft loans to private enterprises worth a total of AZN 335.6 million (over $400 million). Out of the 7,350 investment projects supported by the Fund, 82.3% have been (or continue to be) implemented outside the capital. Due to measures aimed at boosting exports and facilitating foreign market entry, last year Azer- baijan was included in the GSP programs of the United States and Norway and the GSP+ program of the European Union. These programs enable Azerbaijan businessmen to export goods and services to the markets of developed European countries and the United States duty free or with very low tariffs. During the year, Azerbaijan continued its work to join the World Trade Organization (WTO). Bilateral negotiations were held with 11 states, and bilateral protocols were signed with two states. The Azerbaijan Investment Company began active operations. It has already invested AZN 55 million ($67 million) in non-oil sectors of the economy and continues to attract additional investments. Today the company is working on an investment package of AZN 761 million ($928 million).

Finance and Credit

Last year was also a successful one in terms of an increase in financial flows. This is clearly evident from budget performance data for the state and consolidated budgets. State budget revenues totaled AZN 10,763 million ($13,126 million) instead of the projected AZN 10,484 million. In other words, state budget revenue exceeded the target by 2.7%. Compared to 2007, the state budget increased by AZN 4,756 million (by 79.2%). It should be taken into account that in mid-2008 state budget indicators were revised upward for both revenue and expenditure, although toward the end of the year oil prices began to decline. Despite this decline, money transfers from the State Oil Fund of Azerbaijan to the state budget were maintained within the limits provided by the budget law: AZN 3,800 million ($4,634 million). As for state budget expenditure items, they recorded a deficit (i.e., actual performance reached 96.6% of the target figure), but this did not prevent the government from sharply increasing the absolute amount of public expenditures, which rose to AZN 10,680 million ($13,025 million), or 75.5% more than in 2007. One of the best economic results for the year was further development of the banking sector. According to E. Rustamov, Chairman of the Board of the National Bank of Azerbaijan, during the past five years the republic’s banking market has ceased to be a “demand market” and has turned into a “supply market.” All banking indicators in this period have increased 10-fold on average. As a result, the financial sector’s share of the non-oil sector of the economy has increased from 18% to 60%. At the same time, the country’s banking community as a whole and the Central Bank authorities are well aware that banking reforms should be continued in order to ensure the sector’s further development.

87 CENTRAL EURASIA 2008 Analytical Annual

At year-end, the total amount of loans provided by the country’s banks was AZN 7,163.2 million ($8,736 million), or 53% more than at year-end 2007. The trend toward an increase in average loan maturity continued in 2008 as well: 67.9% of all loans were long-term. State banks accounted for 42.3% of all loans, and private banks for 55.3%. Banks with foreign capital provided loans totaling AZN 2,404.8 million, or $2,933 million (about 34% of total loans). Just over half of all loans (50.9%) were provided in the national currency. An expected result of economic development was a further strengthening of the position of the State Oil Fund in the financial system. Today the bulk of SOFAZ own resources is managed by the Fund itself, and only less than 5% has been transferred into the hands of foreign managers. Govern- ment experts believe that since most of the Fund’s assets are invested in fixed-income securities, there is currently no point in attracting foreign management companies. At the same time, in the near future—as the percentage of shares in the total amount of SOFAZ assets increases—the professional experience and knowledge of foreign managers will probably be in higher demand.

Foreign Economic Relations

Azerbaijan has increased its role in the system of international economic relations, regional relations above all. In the first 11 months of 2008, its foreign trade turnover was $53,469 million, including exports of $46,973 and imports of $6,496 million. The countries of the European Union accounted for 53.3% of the total foreign trade turnover (28.0% of imports and 56.8% of exports), while the CIS countries’ share of foreign trade fell to 6.9%. The first place in Azerbaijan’s exports still belongs to Italy (40.3%, $18,951.7 million), and in imports, to Russia (19.0%, $1,236.6 million). The republic’s political partnership with Georgia extended to the economy as well: bilateral relations developed steadily in virtually all areas of the economy. Apart from active foreign trade, mutual investments are of great importance to both countries. Relatively recently, the State Oil Company of Azerbaijan (SOCAR) acquired a controlling stake in the Poti Terminal on the Black Sea coast, and in 2008 it invested in a filling station network and in the Georgian gas distribution system, assuming management of the latter. Today Azerbaijani companies are among the leaders in the Georgian investment market. Azerbaijan’s economic relations with Turkey are of particular importance. Along with joint implementation of a number of major regional energy and transport projects, these two friendly states have successfully maintained conventional trade and economic relations. At the same time, many independent experts believe that the level of these relations is inadequate to the potential of the two countries and does not quite match their long-term intentions. In 2008, for example, Turkey accounted for only 1.3% of Azerbaijan’s exports and 11.2% of its imports. In accordance with a recently established tradition, in 2008 the governments and private businesses of the two countries signed a number of agreements in various areas of the economy. Among commercial initiatives, an event of particular importance was that the State Oil Company of Azerbaijan won a tender held by the Turkish government and became the majority shareholder in the well-known Turkish petrochemical company PETKIM; it is to invest $2.1 billion in this project. In November, the 4th Energy Summit was held in Baku with the participation of representatives of more than 20 countries, including five heads of state (Azerbaijan, Georgia, Lithuania, Poland and

88 AZERBAIJAN REPUBLIC Economy

Ukraine), the vice president of Bulgaria, the prime ministers of Hungary and Estonia, the U.S. secretary of energy and the EU energy commissioner. The main item on the agenda was a diversification of energy supplies from the Caspian region to Europe. Many summit participants assessed it as a historic event opening a new page in oil and gas transportation to European markets. Azerbaijan President Ilham Aliev said that Azerbaijan has an opportunity to increase oil production, but for this purpose it is necessary to build new oil transportation facilities. U.S. Energy Secretary Samuel Bodman compared the Baku Summit—in terms of its importance—to the 1994 “Contract of the Century” for the development of Caspian oil reserves. The Baku Declaration adopted as a result of the Summit reflected the participating countries’ resolve to engage in close cooperation in implementing the projects discussed. The transport factor has an important place in Azerbaijan’s foreign economic policy: as noted above, the republic seeks to make the most effective use of its favorable geographical position. Invest- ments in the development of transportation infrastructure under the Central Asia Regional Economic Cooperation (CAREC) program have now exceeded $5 billion. At the opening of CAREC’s 7th Minis- terial Meeting in Baku in November 2008, Asian Development Bank (ADB) President Haruhiko Kuroda said that by 2020 another $14 billion was to be allocated for this purpose. A project no less important to Azerbaijan is the rehabilitation of the so-called Great Silk Road linking Frankfurt (Germany) with Shanghai (China). Azerbaijan remains one of the most active participants in this project. In terms of economic sense and opportunities for rapid implementation, the opening of the Baku- Tbilisi-Kars Railway is a regional transport priority, especially for freight transportation. The project’s economic efficiency is due to the fact that its implementation will significantly accelerate freight shipments to Turkey and Mediterranean ports from Asia and back. At the first stage of the railway’s operation (starting in 2011), it is expected to carry about 1 million passengers and 6.5 million tons of cargo a year. Later on these figures are to increase significantly, reaching about 3 million passengers and 18 million tons of cargo by 2034. The project is estimated at $422 million or, including infrastructure, at $600 million. In 2008, a working group set up by Azerbaijan, Iran and Russia under the project for the construction of a railway as part of the North-South international transport corridor held several meetings. In order to link the Azerbaijan railway with the rail network in Iran, it is planned to build a railway from Astara (Azerbaijan) to Astara (Iran). At the initial stage, freight transportation along this route will amount to about 5-7 million tons with a subsequent increase to 15-20 million tons. Accord- ing to forecasts, Azerbaijan’s income from freight shipments through the Russia-Azerbaijan-Iran rail corridor will be close to AZN 30-40 million a year. The creation of the North-South international transport corridor will facilitate freight transit from the Asia-Pacific Region and the Persian Gulf. This railway will reduce freight costs by 10-15% and shorten delivery periods by 20 days compared to the Suez Canal.

Cooperation with International Financial Institutions (IFIs)

The nature of cooperation with global and regional financial institutions did not change compared to the previous year. The thrust of government policy is that although there is no impera-

89 CENTRAL EURASIA 2008 Analytical Annual tive need for IFI funds, Azerbaijan should not scale down but, on the contrary, should seek to extend cooperation with these institutions. This cooperation mainly takes the form of advisory assistance provided by international and regional financial institutions to the republic on a wide range of problems. In other words, although loans from the World Bank, the IMF and other international financial institutions are still important to Azerbaijan, today they are no longer rigidly “tied” to any recommendations for managing the economy. In the first three quarters of 2008, Azerbaijan repaid earlier IFI loans in the amount of $286.3 million, including $214 million of principal. Cooperation with the European Bank for Reconstruction and Development (EBRD) is of great importance. Mainly operating in the financial sector, the EBRD seeks to develop non-oil sectors of the economy with focus on regional financing. It supports the development of domestic banks by providing long-term credit lines and acquiring an equity interest in these banks. Overall, the EBRD has financed 77 projects in Azerbaijan. In 2008, it approved 10 projects worth a total of EUR 25 million in the financial sector, communications, tourism and other areas. Today it is considering the possibility of financing another 18 projects in 2009 at a total cost of EUR 140- 180 million. The ADB and the Azerbaijan government have reached agreement in principle to co-finance the State Railway Development Program for 2008-2012. This program is estimated at AZN 1.2 billion (about $1.5 billion). For this purpose, the ADB is to provide a loan to the government in the amount of up to $550 million. The EBRD together with the European Investment Bank (EIB) are prepared to take part in financing these works by contributing $500 million. The railway section of the West-East corridor is funded by the World Bank ($450 million) and, as expected, by the Japan Bank for Interna- tional Cooperation ($260 million). The German Development Bank KfW is to finance the renewal of rolling stock.

The Economic Consequences of Armenian Occupation

Unfortunately, the Nagorno-Karabakh conflict forced upon Azerbaijan by Armenia was not resolved in 2008. Just as in the previous 20 years, it had an extremely negative effect on all areas of public life, including the country’s socioeconomic development. Special mention should be made of the environmental damage caused by the Armenian occupation. This includes illegal development of natural resources in the occupied territories, destruction of forests, nature reserves and pastures, extermination of flora and fauna, deliberate pollution of transit rivers flowing into the Caspian Sea. There are 90 officially registered and estimated deposits in the conflict zone. A significant part of Azerbaijani territory (about 20%) has been excluded from economic circulation. But the consequences of the conflict are not confined to lost economic benefits. Azerbaijan is obliged to bear a huge burden of government spending on refugees and displaced persons. The past year was a major stage in improving their living conditions: the last refugee tent camp was eliminated. During the year, AZN 145 million ($179 million) was spent on their resettlement to new homes with the necessary social infrastructure.

90 AZERBAIJAN REPUBLIC Economy The Impact of the World Crisis

Azerbaijan is one of the few countries whose economy is more or less immune to the crisis. The government has used the republic’s oil revenues to form a so-called “safety cushion,” which is large enough to ensure budget and exchange rate stability in the medium term. Azerbaijan’s strategic foreign exchange reserves are sufficient to finance imports of goods and services over a period of 27 months. Even in the most critical global conditions the country can meet its financial needs for several years without interruption. In late 2008 and early 2009, virtually all IFIs issued statements to the effect that the Azerbaijan economy did not feel the destructive effects of the world financial and economic crisis. Some of them (including the EBRD) have declared that they do not plan to review the strategy of their operations or to limit funding amounts, and that they are prepared to support projects in all sectors of the Azerbaijan economy. At the same time, it is quite natural that at the end of the year the banking sector and then the real sector of the economy experienced serious difficulties. Azerbaijan banks were faced with a sudden credit crunch in world financial markets. A factor that significantly cushioned the impact of the global crisis on domestic banks was the relatively low share of foreign borrowings: 25% of all liabilities (about $2.5 billion). By the end of 2008, Azerbaijan banks repaid part of their external debt (about $1 billion). Another major “cushioning factor” was the anti-crisis policy of the government and the Central Bank. For example, interest rates on centralized credit resources were reduced several times during the year; reserve requirements were lowered; and additional liquid funds totaling about $500 million were provided to banks. All of this played a certain role in stabilizing the situation in the financial market. Today liquidity in the banking sector is at the level of its external debt. Nevertheless, special anti-crisis measures, including support for innovative private enterprises, must and will be continued in 2009.

C o n c l u s i o n

The past year, marked by presidential elections in Azerbaijan and great financial and economic upheavals in the world, was also a period of active implementation of concrete programs designed to ensure sustainable and balanced economic development in the country. The year will be remembered by its structural reforms, an improvement in the business climate, an inflow of non-oil investment, an increase in the country’s export potential, and further growth in the non-oil sectors. All of this contributed to a significant increase in real household income. The fact that socioeconomic stability in the republic was maintained against the background of a deepening world crisis and the resulting drop in world energy prices testifies to the structural stability of its economic system. The economic results for the year show that on the whole Azerba- ijan has all the necessary prerequisites for faster economic growth in the medium and long-term perspective.

91 CENTRAL EURASIA 2008 Analytical Annual RELIGION

Elmir GULIEV Ph.D. (Philos.), director of the Geoculture Department, Institute of Strategic Studies of the Caucasus (Baku, Azerbaijan)

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

n 2008, the republic’s religious community unprecedented terrorist act in a mosque. At the attracted much more attention from politi- same time, relations between the state and the I cians and the public than before. The press, religious communities remained practically the round tables, TV talk shows, and Internet forums same; the public did not change much of its atti- were busy discussing representative internation- tude toward religion. Despite scattered informa- al conferences and forums, consecration ceremo- tion about infringements on freedom of religion, nies of new and restored mosques and churches, the various religious communities were satisfied resounding trials of extremists, and, finally, the with the status quo.

The State and Religion: Drawing Closer to be Able to Move Apart

In recent years, the government tightened its grip on the processes occurring in the religious sphere; measures were taken to limit or event cut short radical religious activities. In 2008, bans were combined with active educational measures: officials attended seminars and conferences and appeared on TV screens to discuss social-religious subjects. The level of religious knowledge in the country is still rather low but the efforts have not been wasted: it has been noticed that fewer young men are showing an interest in non-traditional, especially destructive, religious cults. The State Committee for Work with Religious Associations (hereinafter the State Committee) did a lot to maintain stability in the religious sphere. By closely cooperating with the heads of religious centers and communities, the State Committee worked consistently to ensure freedom of conscience and preserve confessional harmony in the republic. Throughout 2008 the Commissions for Religious Affairs set up a year earlier at the executive power structures of the republic’s cities and regions remained highly active, helped to resolve religion-related problems, and served as a link between the believers and executive power. The State Committee concentrated on coordinating the state structures designed to control the religious situation, preventing administrative problems that might pester religious communities, and helping to resolve those that had already arisen; it never stopped looking for the best possible mechanisms for ensuring freedom of conscience and religion. In 2008, the State Committee met members of the local executive and law-enforcement structures of the Ismailli, Agdash, and other districts. In order to clarify state religious policy, the State Committee also organized four seminars on The Army,

92 AZERBAIJAN REPUBLIC Religion

Society, and Religion in military units and colleges, as well as a cycle of training seminars for school- teachers in Baku, Ganja, and Sumgait and in the Agjabadi, Imishli, and other districts. The State Committee successfully completed a cycle of training seminars in penitentiary institutions launched in 2007 on the basis of an agreement with the Ministry of Justice. Throughout the year the State Committee was engaged in upgrading the level of religious knowledge through seminars and meetings with civil servants, members of religious communities, leading theologians, experts in religion, and journalists. On 30 January, the State Committee’s central office gathered journalists writing for the press to explain their unique role in preserving religious harmony and preventing outbursts of religious violence. On 4 March, the State Committee organized a seminar dedicated to the coming presidential election called “The Presidential Election-2008: The Faithful Voters,” which stressed the need to involve the believers in public and political life on a greater scale and make them aware of their responsibilities. Much attention was paid to the need to remove the discrepancies between democratic and Islamic values and ensure the religious communities’ turnout at the presidential election in October 2008. On 17 March, the heads of the State Committee met the directors and editors of the main Baku publishing houses to explain the threats represented by totalitarian and extremist religious groups and warn them against clandestine publishing of banned literature. Under Art 22 of the Law on Freedom of Conscience, the import of religious literature and its dissemination in the republic are controlled by the State Committee.1 In some cases expert conclusions take a long time but the heads of the religious communities are prepared to accept this.2 In 2008, the State Committee experts, after checking 1,507 titles of religious publications, banned 59 of them that preached religious intolerance. Ac- cording to official figures, in the last two years there were fewer cases of importing and disseminating extremist and destructive writings. On the whole, the government is increasingly concerned about the non-traditional religions operating in the republic that have already caused social splits and everyday conflicts. Islam is becoming more politicized, which is regarded as an alternative to the weakened and discredited opposition. What causes concern is the rising amount of religious-related violence and crimes, the activity of foreign missionaries who act through the local neophytes, and the great interest in the local religious situation on the part of foreign embassies and international structures. To lighten external pressure on the domestic religious situation and strengthen the state’s secular nature, the authorities are trying to control the process of theological education for Azeri young men abroad and find them jobs when they come back. During his visits to Turkey on 2-7 June and Iran on 6-12 August, State Committee Chairman H. Orujev met Azeri students studying theology in these countries. He familiarized them with the religious situation in Azerbaijan and the main political trends in the religious sphere. It was also agreed that Turkish imams would leave Azerbaijan as soon as their contracts expired (they work under an agreement between the Ministry for Religious Affairs of the Turkish Republic and the government of Azerbaijan). According to information supplied by the State Committee, Turkish imams have already vacated their posts in four mosques in favor of their Azeri colleagues. In 2008, several mosques and churches were either renovated or restored to offer believers better conditions for exercising their constitutional right. A mosque in the village of Rustov, the Guba District, was restored on the instructions of the Ministry of Culture and Tourism; the Juma mosque dated to the 18th-19th centuries is being restored in Nakhchyvan; and construction is going on in two large Baku mosques (Teze-Pir and Ajdarbey).

1 For the text of the law, see [http://dqdk.gov.az/rus/zakon_svoboda_r.html]. 2 Recent positive changes in the procedure have been noticed by international organizations (see, for example: In- ternational Religious Freedom Report 2008, available at [http://2001-2009.state.gov/g/drl/rls/irf/2008/108435.htm]). 93 CENTRAL EURASIA 2008 Analytical Annual

On 5 February, the Lutheran church in the city of Khanlar (built in 1854 on donations from the local Germans) was reopened after many years of neglect and restoration partly supported by the German Society of Technical Cooperation. On 7 March, the Catholic Church of the Immaculate Conception of the Blessed Virgin Mary was opened in the presence of President Ilham Aliev, State Secretary of the Vatican Cardinal Tarcisio Bertone, and heads of the republic’s religious communities. During his visit to Azerbaijan, Pope John Paul II blessed the future church to be built on the plot that then President of Azerbaijan Heydar Aliev had transferred to the Catholic community free of charge. Early in 2008, the church received the bells President of Poland Lech Kaczyñski presented to the Catholic community during his official visit to Azerbaijan in March 2007. The decision of the Yasamal District court of 3 December to remove a mosque in the process of construction comes as a surprise against the above background. According to Rector of the State Economic University of Azerbaijan Sh. Hajiev, the mosque was being built on grounds that belonged to the university.3 Construction work was suspended while the future of the project remains vague. On the whole, according to the latest data, there are 1,750 mosques in Azerbaijan (804 of them are functioning). There are five synagogues, five churches of the Russian Orthodox Church, one church of the Georgian Orthodox Church; one church of the Evangelical-Lutheran Church; one of the Roman Catholic Church; and there are 26 prayer houses used by the Molokan, Protestant, Krishnaite, and Bahai communities. There are over 500 places of worship associated with folk beliefs scattered across the republic. By 1 January, 2009 the State Committee had registered 529 religious communities (102 of them were registered in 2008—101 were Muslim communities and one a Jewish Kubar community in the city of Sumgait).

Religious Extremism— A “Virus” in the Minds of Young People

On 17 August, the Juma Mosque, also known as the Abu Bakr Mosque, in the Narimanov Dis- trict of Baku was the scene of a terrorist act that killed 2 and left 18 others with wounds of varying gravity; G. Suleymanov, imam of the mosque and leader of the local Muslim community, who was the main target, was among the wounded. It was suspected that the act was organized by a radical religious group headed by I. Mollachiev, known as Abdelmajid, from the Zakataly District, who named himself the Amir of the Daghestani people. According to the press service of the Ministry of National Security, he and his brother-in-law, S. Mekhdiev, planned to revive the Forest Brothers armed group, the members of which, together with their leader, citizen of Saudi Arabia Naif Abdelkarim al-Badavi also known as Abu Jafar, were arrested in November 2007 and sentenced to different prison terms in June 2008.4 The Forest Brothers, former members of the orthodox Salafi community which congregates around the Abu Bakr Mosque, are known to follow the extreme forms of Khajiritism.5 G. Suleymanov, who

3 See: Day.az Agency, 3 December, 2008, available at [http://www.day.az/news/society/139049.html]. 4 See press releases of the AR Ministry of National Security of 2 September, available at [http://www.mns.gov.az/ news/02.09.2008.12.54_ru.html] and 8 September, 2008, available at [http://www.mns.gov.az/news/ 08.09.2008.12.32_ru.html]. 5 The religious-political school in Islam that unites several different trends; the Kharijites accuse all Muslims who refuse to share their views of apostasy. They call for the use of force to remove a regime that does not abide by the Shari‘a. Across the post-Soviet expanse they are known as Wahhabis, even though some experts in Islam believe this to be wrong 94 AZERBAIJAN REPUBLIC Religion heads the Salafi movement, is known for his loyalty to the government.6 During the past few years, he has been engaged in active propaganda against the radical groups that called for an “armed jihad against the infidels.”7 Despite his efforts the Khajirite ideas are mostly popular among his former followers, the supporters of “puritanical” Islam who have despaired of achieving the aims of the Shari‘a through peaceful preaching.8 It was in the latter half of the 1990s that moderate Muslims in Azerbaijan first exhibited a trend toward radicalism.9 In the last two years, however, extremist activities have been attracting more attention from the public and law enforcers. Some international observers tend to explain this by overwhelming control of peaceful religious activities and limited personal religious freedoms;10 in particular, in some mosques in the capital and regions no public address systems can be used to read azan.11 From time to time the independent and opposition press report cases of police arbitration in Baku and Sumgait, as well as in the country’s north and northwest. The public is very much disturbed by the news that Muslim women in headscarves are fired at or that their rights are infringed upon in any other manner, even though the conflicts are normally resolved in favor of the believers.12 In February 2008, N. Melnikova, a primary school teacher at school No. 20 in Baku, was fired “for gross breaches of labor discipline.” The Russian teacher, an active member of the Baku Muslim community, insisted that she had been fired for mercantile considerations while her religious convictions and the headscarf were used as a pretext. Late in April, the teacher, actively supported by human rights activists, lost her case in the Yasamal district court, which ruled that the school administration had acted strictly within the laws. It should be said that school administrations are not always guided by disagreements over their subordinates’ religious ideas, however the response of the religious community is always highly emotional; such cases are invariably mentioned by human rights organizations in their reports. Not all of the faithful were prepared to follow the rules imposed by the authorities to protect the mosques. On the eve of the Holy Month of Ramadan, twelve days after the blast in the Abu Bakr Mosque, mass prayers outside mosques were banned.13 This decision is still applied and creates lots of trouble for the faithful who have to travel outside Baku for Friday services. The decision of the Police Administration of the Narimanov District to suspend prayers in the Abu Bakr Mosque because of the threat of another terrorist act was not hailed either.14 On 27 October, the Narimanov district court satisfied the claim of the local religious community, but after the defendant lodged a complaint the case was revised. On 23 December, the claim of the religious community was declined on the grounds of an incomplete investigation. On 9 January, 2009, the religious community appealed against this decision.

(see: A. Yarlykapov, “Narodny islam i islamskaia molodezh: formy bytovania islama na Tsentralnom i Severo-Zapadnom Kavkaze,” available at [http://www.islamica.ru/?pageID=219]. 6 See, for example: Bizim yol newspaper, 3 November, 2007, available at [http://www.bizimyol.az/ index.php?mod=news&act=view&nid=5263]. 7 A. Rashidoglu, “Jihad protiv vlasti?!” Zerkalo, 28 October, 2008. 8 I investigated in detail why religious extremism finds new supporters in my article “Islamic Extremism in the Cau- casus: Real Threat and How to Avert It,” The Caucasus & Globalization, No. 1 (1), 2006, available at [http://www.ca-c.org/ c-g/2006/journal_rus/c-g-1/15.ekuliev.shtml]. 9 See: A. Yunusov, Islam in Azerbaidzhan, Zaman Publishers, Baku, 2004, p. 262). 10 See: International Crisis Group Report “Azerbaijan: Independent Islam and the State,” 25 March, 2008, available at [http://www.crisisgroup.org/home/index.cfm?id=5351&l=1]. 11 See: Olaylar Information Agency, 17 September, 2008, available at [http://olaylar.az/index.php?newsid= 1221654956]. 12 For example, in September teachers at schools Nos. 162 and 167 in Baku were kept away from school (see: Day.az Agency, 15 September, available at [http://www.day.az/news/society/130528.html]). 13 See: ANS Press Agency of 1 September, 2008, available at [http://anspress.com/nid86339.html]. 14 [http://www.day.az/news/society/135424.html]. 95 CENTRAL EURASIA 2008 Analytical Annual

The Abu Bakr tragedy revealed acute contradictions inside the Muslim community of Azerba- ijan and demonstrated that the tactics the authorities employed against religious extremism cannot be called completely effective. There is any number of experts who believe that no positive results can be obtained until the state establishes a multi-stage system of religious enlightenment, with the clergy and intelligentsia playing the key role in it.15 On the other hand, the resolute and unanimous condemnation of the Abu Bakr terrorist act by political and public figures suggests that religious extremism has few supporters and that it is regarded as hostile to Islam.

Official Islam: Conformism in Action

The Caucasus Muslims’ Board (CMB) is the supreme structure for the traditional Muslim clergy of Azerbaijan. Spiritual leader of the republic’s Muslims Sheikh-ul-Islam Allahshukur A. Pashaz- adeh is an influential person with numerous supporters, especially in the south of the country. Under Art 12 of the Law on Freedom of Conscience, official registration is limited only to the Islamic communities with written CMB recommendations. The CMB is also responsible for setting up Islamic religious institutions; it supervises the Baku Islamic University and its four regional branches (in Zakataly, Lenkoran, Sumgait, and Mingechaur). The theological department of Baku State University is a secular structure headed by prominent Oriental scholar, chairman of CMB Scientific-Religious Council Academician V. Mammadaliev. The mullahs, most of whom have no theological education to speak of, limit their services to rituals; they keep away from educational activities, which invites criticism of the revivalist clergy and the intelligentsia. This forced the CMB to step up its ideological involvement by hiring young people for this purpose educated in Iran, Turkey, Egypt, and other Muslim countries. According to the Inter- national Crisis Group, the new and well-educated generation of clergymen, particularly in the Sunni regions, is doing a lot to attract the youth.16 The Muslim clergy took another step toward the public by opening an electronic Kelam journal [www.kelaminfo.az] established and edited by M. Seidzade, who heads the CMB Science and Education Department. Throughout the year the head of the Muslim community of the Caucasus remained very active: he met journalists and offered his comments on religious events inside and outside the country. In his interviews, Sheikh-ul-Islam Allahshukur A. Pashazadeh never shuns difficult questions about the higher prices for the hajj to Mecca and the money received from foreign sponsors.17 In July, he proposed the establishment of Islamic Charity Fund to accumulate money to pay for the restoration of mosques and other cultic objects, pay wages, and finance all sorts of charitable projects.18 This idea has been put forward time and again by Muslim intellectuals concerned with high ritual tariffs. Nothing has been done so far. Under public pressure, the CMB had to speak out against wasteful burial ceremonies19 ; according to media reports some regions received unofficial instructions related to burial and wedding cere-

15 See, for example, interview of human rights activist I. Ibragimoglu to the News Azerbaijan Agency on 9 Septem- ber, 2008, available at [http://www.newsazerbaijan.ru/exclusive/20080909/42476974.html]. 16 See: International Crisis Group Report “Azerbaijan: Independent Islam and the State.” 17 See: Day.az Agency, 17 November, 2008, available at [http://www.day.az/news/society/137013.html]. 18 Trend Information Agency, 1 July, 2008, available at [http://news-ru.trend.az/society/religion/1235982.html]. 19 Deputy CBM Chairman S. Musaev, in particular, talked about this in his interview to the ANS TV Channel on 21 October, 2008, available at [http://anspress.com/index.php?nid=92696]. 96 AZERBAIJAN REPUBLIC Religion monies. The tradition of funeral repasts on Thursdays was abolished in the Udjar District while in the Nakhchyvan Autonomous Republic burial-related ceremonies were cut down to two and a half days with refreshments limited to tea and sugar. In late March, the polemics about the legality of similar limitations in a democratic society reached the press and electronic media.20 The religious public and the human rights community cannot agree on the issue; some of the Majlis deputies are behind the idea of the Law on Ceremonies.21 Very much as before the CMB paid a lot of attention to the traditions of religious tolerance and an inter-religious dialog. In January, Sheikh-ul-Islam Allahshukur A. Pashazadeh spoke once more against identifying praying Muslims with fundamentalists and their religion with terrorism.22 This was his response to those political scientists who warned about the danger of Islamic fundamentalism in Azerbaijan.23 In August, he defended Islam when commenting on the Abu Bakr terrorist act.24 On 1 May, the CMB leaders condemned the “all-Armenia” pilgrimage “Forward, Armenia, to God” from Etchmiadzin to Shusha. This was seen as violating an agreement to promote settlement of the Nagorno-Karabakh conflict and refrain from provoking religious confrontation achieved at the Moscow World Summit of the Religious Leaders of 2006. In July, the head of the Caucasian Muslims visited the United States to attend the conference on Loving God and Neighbor in Word and Deed: Implications for Christians and Muslims organized by Yale University (the U.S.) and the Royal Aal al-Bayt Institute for Islamic Thought (Jordan); he also met leaders of the local religious communities with whom he shared his experience of preserving religious harmony. In December, Sheikh-ul-Islam Allahshukur A. Pashazadeh objected against the provisions related to artificial insemination and surrogate motherhood in the draft Law on Protection of Reproduc- tive Health and Family Planning and called on the State Committee Chairman H. Orujev to inform the parliament about it.25 It should be said that in view of the state’s secular nature the Muslim clergy, on the whole, prefer to keep their ideas about the laws to themselves. In 2008, the CMB chairman remained active on the international arena. Late in February, he visited Turkey where he presented Prime Minister Erdoðan with the Sheikh-ul-Islam Order for his contribution to brotherhood and friendly relations between Turkey and Azerbaijan. In April, he headed a religious delegation that came to Moscow to meet President Medvedev, Patriarch of Moscow and All Russia Alexiy II, and U.N. Secretary-General Ban Ki-Moon to discuss the possibility of an Interreligious Consultative Council at the U.N. to tap the religions’ peacekeeping potential in conflict settlement. This idea was raised once more during a July visit to the United States when Sheikh-ul-Islam Allahshukur A. Pashazadeh met Secretary-General Special Adviser Ibrahim Gambari. On the whole, in 2008 the CMB accomplished a lot and did much to strengthen positive trends in the country’s religious life. On many occasions, the public agreed with the CMB, whose position was close to the ideas of the country’s majority and complemented the official position on several domestic and foreign issues.

20 See: Bizim yol, 28 March, 2008. 21 See: Azdrbaycan, 6 March, 2008. 22 See: Trend Information Agency, 10 January, 2008, available at [http://news.trend.az/index.shtml?show=news& newsid=1108772&lang=AZ]. 23 His comments were suggested by information about an article by Prof. Maraks in the December issue of the Dutch journal Armex which discusses the geopolitical reality and the threat of Islamic fundamentalism in Azerbaijan (see: Azdr- baycan, 26 December, 2007). 24 See: Day.az Agency, 18 August, 2008, available at [http://www.day.az/news/society/127877.html]. 25 See: ARA Agency, 23 December, 2008, available at [http://ru.apa.az/news.php?id=122693]. 97 CENTRAL EURASIA 2008 Analytical Annual Society and Religion: Maintaining Traditional Tolerance

Azerbaijan is a country of religious tolerance, which is regarded as one of the fundamental cultural traditions praised by foreign political and religious figures. This accounts for the fact that civil society organizations concentrated on the need to preserve the atmosphere of religious tolerance, oppose totalitarian and extremist ideologies, and bring the values of Islam and democracy closer together. It is not surprising that in February-May the BBC Azeri Service, together with the Inam Center for Plu- ralism with financial support of the U.K. Embassy in Azerbaijan, created a cycle of radio programs on Religion and Democracy. On 5-8 November, the Ministry of Youth and Sport of Azerbaijan, in cooperation with the Council of Europe’s Directorate of Youth and Sport and ISESCO, organized a highly representative conference called Beyond Religious Differences: Islamophobia and Other Forms of Discrimination based on Religion or Belief: Consequences for Young People and Youth Work Responses. On 10 November the Consultative Council at the State Committee chairman organized a seminar attended by heads of the religious communities of Azerbaijan. The event was timed to 16 Novem- ber, the International Day of Tolerance. The Heydar Aliev Fund headed by First Lady, Deputy of the Milli Mejlis and Goodwill Ambas- sador of UNESCO and ISESCO Mekhriban Alieva is doing a lot to strengthen national spiritual values and develop the religious dialog. On 26 September, the Fund signed an agreement on cooperation with the country’s Catholic community designed to enhance contacts in the sphere of education, culture, and health protection and preserve the traditions of religious tolerance. This is not the first project of this kind. Earlier the Fund actively contributed to the restoration of an Orthodox church in Baku and construction of a Jewish children’s educational center.26 These efforts did not pass unnoticed; they were highly assessed by Dr. Adel Abdullah Al Falah, Under-Secretary of the Ministry of Awqaf and Islamic Affairs of Kuwait and Chairman of the Asia Muslim Committee, author of the book Heydar Aliev and National-Spiritual Values, translated from the Arabic into Azeri, Russian, and English and presented on 29 April at the Gulistan Palace in Baku. An international conference on Coexistence of Numerous Religions in Azerbaijan: Religious Tolerance and Social Development held in Berlin on 3 June was more confirmation of the great interest in the West in Azerbaijan’s experience of preserving religious tolerance. The State Committee Chairman H. Orujev delivered the main report called The Legal Foundations of Activities and the Present State of Religious Communities in Azerbaijan: The Role of Religion at the National and Re- gional Levels. An exhibition of paintings on Biblical themes by A. Heybatov, Merited Artist of Azerbaijan and member of the International Federation of Artists (UNESCO), opened in the Apostolic Palace of the Vatican on 22 May. It can be safely described as an important event related to the high level of religious and cultural dialog in Azerbaijan. Another important event took place three days later, on 25 May, when Director of the Azerbaijan National Academy of Sciences Human Rights Institute R. Mustafaev was awarded a diploma of the Gelati Academy of Sciences functioning under the aegis of the Georgian Orthodox Church to become the first foreign member of this spiritual academy, one of the oldest in the Caucasus.

26 See: Trend Information Agency, 26 September, 2008, available at [http://news.trend.az/ index.shtml?show=news&newsid=1305306&lang=RU]. 98 AZERBAIJAN REPUBLIC Religion Islamic Finances: First Steps in the Central Caucasus

Despite the growing interest of the Azeri business community in Islamic investment and insurance, Islamic banks have not carved out an important niche for themselves in the country. In fact, the Kövsdrbank so far remains the first and only financial institutuion that takes the Shari‘a rules into account. Back in 2002, it acquired a license on all sorts of banking operations but for legal reasons it cannot engage in the full range of Shari‘a financial services. Islamic banking cannot develop in the absence of an adequate legal basis, although the international Islamic financial institutions are intrested in the Azeri market for their large-scale Shari‘a financial projects. In 2007, the Islamic Development Bank and the Azeri Investment Company set up a joint Caspian International Investment Company to attract foreign investments to Azerbaijan. In 2008, the Islamic Corporation for the Development of the Private Sector entered agreements on credit lines for several commercial banks, including the Rabitdbank, Turanbank, and Azdrddmiryolbank. The Unileasing leasing company [www.unileasing.az] also started its first project based on Islamic principles. For several years now the Azeri financial community has been discussing the future of Islamic financial institutions in the republic. On 27-28 February, an international seminar organized by the Marketing Society of Azerbaijan and the Islamic Development Bank gathered to discuss Islamic Fi- nances and their Potential in Azerbaijan. The future of Islamic finacial institutions in Azerbaijan was also discussed at a summer school called Islam in Contemprary International Relations held in Baku and the Guba District on 11-20 July. The seminars organized by the Diplomatic Academy of Azerba- ijan were attended by participants from 15 countries of Europe, Africa, the Middle East, and the United States.27 One of them, R. Bekkin from Russia, believed that the future of Islamic banking in Azerba- ijan depended not so much on political decisions and legislation as on wide access to information about the advantages of Shari‘a-based funancial products and services.28

C o n c l u s i o n

The last year can be described as far from simple for the country’s religious community. The traditional religions had to defend their positions in stiff rivalry with the non-traditional and revivalist ideologies that were winning the hearts of and enjoyed popularity among young people. Despite the high level of religious tolerance, radical sentiments heated from abroad and by the socioeconomic problems at home remained a highly destabilizng factor. Today, society on the whole does not regard Islam as an alternative to the secular state while the social basis of political Islam is very narrow. It is difficult to say how the world economic crisis might affect the religious situation since its pressure did not become more or less noticeable in Azerbaijan until early in 2009.

27 [http://ada.edu.az/news/20081205030130318.html]. 28 See: R. Bekkin, “Azerbaijan: Emerging Market,” New Horizon. Global Perspective on Islamic Banking & Insur- ance, No. 169, October-December 2008, p. 29. 99 CENTRAL EURASIA 2008 Analytical Annual INTERNATIONAL AFFAIRS

Jannatkhan EYVAZOV Ph.D. (Political Science), Deputy Director of the Institute of Strategic Studies of the Caucasus, Executive Secretary of Central Asia and the Caucasus, Journal of Social and Political Studies (Baku, Azerbaijan)

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

he year of 2008 was characterized by over- ed with positive results. Compared to the previ- all stability of Azerbaijan’s foreign policy ous year, 2008, particular its second half, was T activity. Settlement of the conflict with Ar- characterized by the influence of macro factors menia, development of trans-regional energy and that far from inspired the country’s active foreign transportation projects, and integration into the policy course. Rather to the contrary, caution, European and Euro-Atlantic structures were still moderation, and a wait-and-see attitude were the the top priority issues. However, certain changes order of the day. This was mainly due to the Rus- occurred in the overall foreign policy context that sian-Georgian war that flared up in August, as set the stage for bringing the designated goals to well as to the world financial crisis that led to fruition. plummeting oil prices. The presidential election It cannot be said that the conditions that scheduled for October also kept Azerbaijan’s for- developed in the period under review were bless- eign policy activity in check to a certain extent.

Closest Neighbors

Settlement of the conflict with Armenia continued to be the main vector in Azerbaijan’s foreign policy in 2008. Although international activity in resolving the Nagorno-Karabakh problem boasted no major breakthroughs, the year cannot be called unproductive. However, this productivity was not directly associated with the activity of the official mediating structure—the OSCE Minsk Group, the work of which continued, just as in the previous year, to be mainly perfunctory. The activity of the cochairmen essentially boiled down to discussing and coordinating with official Baku and Erevan the proposals they put forward in Madrid in November 2007 without achieving any particular progress in bringing the positions of the conflicting sides closer together. In March, the U.N. General Assembly adopted a resolution on The Situation in the Occupied Territories of Azerbaijan, initiated by an Azeri delegation within the framework of an item of the same name on the agenda of the 62nd session, which called upon the organization’s member states to respect and maintain the sovereignty and territorial integrity of Azerbaijan within its internationally recognized borders. The document contained a statement that “…no State shall recognize as lawful

100 AZERBAIJAN REPUBLIC International Affairs the situation resulting from the occupation of the territories of the Republic of Azerbaijan, nor render aid or assistance in maintaining this situation,” and also emphasized the need for “the immediate, complete and unconditional withdrawal of all Armenian forces from all the occupied territories of the Republic of Azerbaijan.”1 The fact that countries co-chairing in the OSCE Minsk Group—Russia, the U.S., and France— voted against this resolution generated quite a serious sociopolitical response in Azerbaijan. Explain- ing the negative vote in the General Assembly, U.S. Deputy Permanent Representative Alejandro Wolff said that three countries did not support the resolution because it did not reflect all the approaches to the conflict settlement offered by the Minsk Group as a “balanced package of principles.”2 This prompted Azerbaijan to ask for the co-chairs to be recalled or replaced. One of the first official reactions was a letter sent to the OSCE secretariat asking for more precise specification of the corresponding mechanisms and procedures. This was something Deputy Foreign Minister A. Azimov mentioned in particular at the end of March.3 Another more noteworthy result of the year’s activity to settle the Armenian-Azerbaijani conflict was the Moscow declaration signed on 2 November by Russian President Dmitry Medvedev, Azerbaijani President Ilham Aliev, and Armenian President Serzh Sargsian. The text itself did not declare anything new, it contained the most general provisions on which the negotiation process was already based—promoting the establishment of stability and security in the region by means of political settlement of the conflict based on the principles and standards of international law; carrying out confidence-building measures; further maintaining bilateral contacts at the top level, and so on.4 However, in form the declaration designated several important aspects. The most positive element for the Azeri side was confirmation of the fact that the sides in the conflict are Azerbaijan and Armenia, and not the Armenian community of Nagorno-Karabakh. In addition, it was the first document in the Nagorno-Karabakh settlement since the 1994 cease-fire agreement which the leaders of both sides in the conflict signed. On the whole, the Russian-Georgian war prompted the foreign powers to step up their efforts a bit more in the Armenian-Azerbaijani settlement process, although this largely occurred independently of the Minsk Group. Turkey, in addition to Russia, showed the most activity in this respect. In the wake of official Ankara’s initiative to form a Platform of Stability and Cooperation, intensive activity began aimed at normalizing the situation in the region after the Russian-Georgian war. Special emphasis was placed on regulating Armenian-Turkish and Armenian-Azeri relations. The meeting between the Turkish and Armenian presidents in Erevan, the talks between the leaders of Turkey and Azerbaijan in Baku and Ankara, and the meeting of the foreign ministers of Azerbaijan, Armenia, and Turkey in New York serve as good cases in point. However, the external interest in resolving the frozen conflicts in the region, which grew after the beginning of the hostilities in South Ossetia, was short-lived. The unfolding world economic crisis reoriented the countries concerned toward their internal problems. In addition, de-actualization of the region in the political considerations of the powers that be also resulted from the significant drop in oil prices. This was perhaps the most outstanding macro factor having a negative effect on the

1 Azerbaijan: Draft Resolution. The Situation in the Occupied Territories of Azerbaijan, available at [http://daccessdds. un.org/doc/UNDOC/LTD/N08/245/92/PDF/N0824592.pdf?OpenElement]). 2 See: U.N. General Assembly Resolution Seeks to Fill Gaps in the Karabakh “Peace Process,” Eurasia Daily Mon- itor, Vol. 5, Issue 51, 18 March, 2008, available at [http://www.jamestown.org/single/?no_cache=1&tx_ttnews%5Btt_news% 5D=33468]. 3 See: “Azerbaidzhan napravil pis’mo v sekretariat OBSE s tsel’iu izucheniia protsedury otzyva obratno ili zameny licho sopredsedateley Minskoy gruppy OBSE,” Day.az, 26 March, 2008, available at [http://www.day.az/news/politics/ 112433.html ]. 4 See: “Deklaratsiia Azerbaidzhanskoy Respubliki, Respubliki Armenii i Rossiyskoy Federatsii,” available at [http:// www.president.az/print.php?item_id=20081103103359248&sec_id=140]. 101 CENTRAL EURASIA 2008 Analytical Annual

Armenian-Azerbaijani settlement process. While the presidential elections in Armenia and Azerbai- jan can be singled out among the internal factors. As early as the beginning of the year, a new president was elected and new foreign minister appointed in Armenia, while Azerbaijan was to go to the polls at the end of the year. On the one hand, now time was needed to establish new contacts, while on the other, the domination of electorate priorities limited the possibilities of compromise. 2008 did not bring about any significant changes in Azerbaijan’s relations with its other land- based neighbors. However, the aggravation of the situation in the region caused by the Russian-Geor- gian war led to a certain amount of indefiniteness in the regional geopolitical vectors. Azerbaijan, like Armenia, as a country not directly involved in the conflict, preferred to use the wait-and-see tactic and retain a balanced position. But even so it was obvious who Azerbaijan backed in this situation. As soon as Georgia began its military operation in South Ossetia, press secretary of the Azerbaijani For- eign Ministry said at an emergency briefing convened on this occasion that “Georgia has every right to restore its territorial integrity… So the steps taken by Tbilisi do not go beyond the framework of international regulations.”5 Despite the temporary geopolitical indefiniteness mentioned above, Azerbaijan continued to place priority on developing its strategic partnership relations with Turkey and Georgia in 2008. The countries intensified their cooperation in the energy and transport communication spheres. The most noteworthy event in this respect was the ceremony held in July in Kars to mark the laying of the foundation of the Turkish section of the Baku-Tbilisi-Kars railroad, in which the presidents of the three countries participated. Cooperation with two other regional neighbors—the Russian Federation and Islamic Republic of Iran—also retained its priority. Azerbaijan’s real problems with these countries continued to test the fragile stability of their relations for strength. And official Baku mainly succeeded in maintaining this stability in 2008. Energy and communication issues remained the main items on the agenda of Azeri-Russian relations. The Russian side wanted Azerbaijan to refrain from participating in the Nabucco gas pipeline project and was interested in purchasing natural gas from the Azeri fields in the Caspian, which were topics of lengthy talks between the two sides. Russia did not manage to resolve the question in its favor.6 The year was also characterized by an intensification of the Central Asian vector in Azerbaijan’s foreign policy, which indicated not only official Baku’s interest in pumping gas from Central Asia through its territory, but its specific activity aimed at creating the political conditions for successful implementation of this project. Since the beginning of the year, Azerbaijan has been noticeably intensifying its contacts with Turkmenistan, with which very difficult relations developed during President Niyazov’s era. Rela- tions between the countries were complicated by several problems, the most urgent of which were the controversial fields in the Caspian.7 We will remind you that Azerbaijan, Russia, and Kazakhstan have already entered agreements on delimiting the bed of the Caspian Sea based on the modified median

5 Hazar Ibragim, “Azerbaidzhan odnoznachno podderzhivaet territorial’nuiu tselostnost Gruzii,” The 1 News Azerbai- jan, 8 August, 2008, available at [http://www.1news.az/articles.php?item_id=20080808055813010&sec_id=2]. 6 In September, Azerbaijan’s Minister of Industry and Energy N. Aliev said that Azerbaijan is not rejecting the Nabuc- co project and thinks that it has prospects. According to the minister, there are no technical problems in implementing the project, but political tension is being artificially created that is interfering with its implementation at present. It is an expensive project and it cannot justify itself using Azeri gas alone. Other sources of gas are needed to make it remunerable, which means Central Asia (see: Azeri press digest—10.09.08, Novosti- Azerbaidzhan, 10 September, 2008, available at [http://www. newsazerbaijan.ru/obsh/20080910/42478950.html]). 7 The matter concerns the Azeri and Chirag fields (according to the Turkmen version “Hazar” and “Osman,” respectively) (see: N.Z. Ter-Oganov, “Iran, problema statusa Kaspiyskogo moria i energoresursy,” Institut Blizhnego Vostoka, 21 Febru- ary, 2008, available at [www.iimes.ru/rus/stat/2008/21-02-08.html]). 102 AZERBAIJAN REPUBLIC International Affairs line while retaining joint use of the sea’s water layer and surface.8 This issue has not yet been resolved with Iran and Turkmenistan. In addition, Azerbaijan’s debt for Turkmen gas at that time had not been settled. Normalization of relations between Azerbaijan and Turkmenistan and in particular resolution of the controversial Caspian fields were among the main items in official Baku’s foreign policy. In-depth talks to clarify the basic elements of the coordinates along the median line were held at sessions of the intergovernmental commission and expert groups of the two countries in Ashghabad and Baku. Bilat- eral energy and transport cooperation issues were discussed during visits by Turkmen Foreign Min- ister R. Meredov (March) and Turkmen President Gurbanguly Berdymukhammedov (May) to Baku, as well as by Azerbaijani President Ilham Aliev to Ashghabad (November) and his talks with the Turkmen and Turkish presidents. On the whole it can be said that it was quite a successful year for Azerbaijan both in terms of normalizing its relations with Turkmenistan and in forming favorable political conditions for cooperation between the two countries in the energy and transport communication spheres. The problem of Azerbaijan’s debt for Turkmen gas was settled and progress was made in a constructive dialog on delimitation of the Caspian, as well as on transportation of Turkmen gas and laying a Trans-Caspian gas pipeline. In March, A. Mammedov was appointed as Turkmen ambassador to Azerbaijan. We will remind you that as early as 2001 official Ashghabad recalled its ambassador due to the aggravated relations between the two countries over the Caspian fields. Relations with Iran were characterized by much less obvious achievements both in the positive and negative sense. The countries’ interaction intensified to a certain extent during the first half of the year due to the detention in Azerbaijan of Russian freight being sent to build the Iranian atomic energy plant in Bushehr.9 As for the rest, 2008 can easily be called a year of stability and passivity in Azeri-Iranian relations. The set of problems existing between the countries not only failed to undergo any positive changes, there were no perceptible attempts, initiatives, or activity to bring about these changes either. To some extent this relative passivity can be related to the already mentioned Russian-Georgian crisis and the caution and wait-and-see attitude chosen by both countries in this situation. Azerbaijan was worried about any ventures Russia may undertake regarding the Nagorno-Karabakh problem and Iran was afraid of giving the U.S. and its allies reason for more criticism of official Tehran’s regional policy.

Euro-Atlantic and European Structures

Azerbaijan’s political contacts with NATO and the EU remained quite intensive. And the year was also characterized by the good results from this cooperation, which made it possible to say that the European and Euro-Atlantic vector of Azerbaijan’s foreign policy was indeed developing. Although it led to certain tactical changes in the activity of the regional countries, the Russian-Georgian conflict did nothing to change their strategic priorities. Azerbaijan’s course toward intensifying relations with NATO and the EU remained a priority.

8 See: V.V. Arsenov, “Energeticheskaia strategiia Irana v Kaspiyskom regione,” Institut Blizhnego Vostoka, 9 No- vember, 2005, available at [http://www.iimes.ru/rus/stat/2005/09-11-05a.html]. 9 For more detail, see: “MID Irana potreboval ot Azerbaidzhana propustit rossiyskiy gruz dlia AES v Bushere,” Day. Az., 27 April, 2008, available at [http://www.day.az/news/politics/116097.html]. 103 CENTRAL EURASIA 2008 Analytical Annual

Cooperation with the North Atlantic Alliance within the Individual Partnership Action Plan (IPAP) continued in 2008. In March, the sides approved a renewed individual action plan that determined the program of the political dialog between Azerbaijan and NATO and was aimed at intensifying practical cooperation in a wide range of areas—reform of the defense and security sectors, creation of democratic institutions, information support of society and civil emergency planning, and so on.10 Developing cooperation in the energy sphere was Azerbaijan’s main focus in the European vector. Deliveries of Azeri gas to the EU countries, the use of Azerbaijan’s transit possibilities for transporting the Caspian region energy resources to the European markets, and its participation in the Nabucco, TGI (Turkey-Greece-Italy), the Trans-Caspian gas pipeline and Odessa-Brody-Gdansk oil pipeline projects largely remained in the epicenter of official Baku’s interaction with the EU countries. As during the previous year, the main activity in this sphere took place between Azerbaijan and the new members of the European Union—Poland, Latvia, Lithuania, and Estonia—in tandem with its GUAM partners, Georgia and Ukraine. In May and November, two energy summits were held in Kiev and Baku, respectively, with the participation of the presidents of these countries, representatives of the European Commission, the U.S., and others. They resulted in the signing of several documents—the Kiev Declaration on Principles of Global Energy Security, the Joint State- ment on the Caspian-Black Sea-Baltic Energy Transit Expanse, the Joint Statement of the Presi- dents of the Azerbaijan Republic, Georgia, the Lithuanian Republic, the Republic of Poland, and Ukraine on the Eurasian Oil Transportation Corridor Project,11 the Declaration of the Baku Energy Summit, and others.12 Of course, the world financial crisis and the significant drop in energy resource prices that resulted from it promoted a certain decrease in the developed countries’ striving to find additional sources of this energy. However, due to the increased tension in the EU’s relations with Russia and its continued oil and gas dependence on it, the instability of world prices for this commodity did not lead to any truly significant decline in its striving to diversify its energy imports, including by means of forming transportation routes in Central Eurasia circumventing Russia. The European Union was still interested in this, as it was in strengthening relations with neighboring countries through which these routes could be laid. In this respect, launching of the Eastern Partnership program, which the European Commission invited Azerbaijan and five more of the former Soviet countries—Armenia, Georgia, Moldova, Ukraine, and Belarus13 —to join in December was a noteworthy event of 2008. There are plans to enter bilateral agreements on association, create free trade areas, intensify integration of these post-Soviet states into the EU, develop cooperation in resolving European security issues, including energy, introduce a non-visa regime, and so on within the framework of this project.14

10 See: “NATO i Azerbaydzhan obnovliaiut Individual’nyy plan deystviy partnerstva,” NATO News, 17 March, 2008, available at [http://www.nato.int/docu/other/ru/updates/2008/03-march/r0307a.html]. 11 See: “Itogi Energeticheskogo sammita v Kieve,” Korrespondent, 22 May, 2008, available at [http://korrespondent. net/ukraine/politics/470993]. 12 In addition to the Declaration of the Baku Energy Summit, agreements were reached on deliveries of Azeri gas to Georgia, as well as the delivery of Kazakh oil to Azerbaijan with its further re-export via the Baku-Tbilisi-Ceyhan oil pipeline (see: T. Ataev, “Vosmozhny li real’nye podvizhki vokrug ‘Nabucco’?” Iuzhnyy Kavkaz, Tsentral’naia Aziia i SNG v pechati, 18 November, 2008, available at [http://atc.az/index.php?newsid=422]; R. Ibragimov, “Itogi IV energeticheskogo sammita v Baku,” Evraziyskiy dom, Informatsionno-analiticheskiy portal, 17 November, 2008, available at [http:// www.eurasianhome.org/xml/t/expert.xml?lang=ru&nic=expert&pid=1810]; P. Goble, “Baku Energy Summit Highlights Azerbaijan’s Role,” Azerbaijan in the World, ADA Biweekly Newsletter, Vol. 1, No. 22, 15 December, 2008, pp. 3-5. 13 Due to the difficult relations between the EU and the Belarusian authorities, the country’s participation in the program was examined at the technical level. 14 See: “Vostochnoe partnerstvo”—novyy vitok v razvitii otnosheniy ES s ego vostochnymi sosediami,” Mosty, Is- sue 11, December 2008, International Center for Trade and Sustainable Development, available at [http://ictsd.net/i/news/ bridgesrussian/36116/]. 104 AZERBAIJAN REPUBLIC International Affairs The U.S.

As in 2007, the general context of American policy toward Azerbaijan continued to be defined by the U.S. interaction with Russia and Iran. Nevertheless, 2008 was characterized by a rather notable shift from the Iranian to the Russian question in official Washington’s focus. This was prompted by the Russian-Georgian war, in which the U.S. clearly took the side of its Central Caucasian ally. Russia’s military intervention in Georgia convinced the U.S. even more of the need to form alternative sources of energy supplies for its European allies, which called for fortifying the post-Soviet states most conducive to this. This issue, primarily implementation of the Nabucco project, was the main topic at the talks with high-ranking U.S. officials in Baku, particularly with Senator Richard Lugar in August and Vice President Dick Cheney in September. The situation in Georgia helped to create a favorable external background for developing Amer- ican-Azeri cooperation due to the U.S.’s growing motivation in the region, on the one hand. While it was obvious that official Baku preferred to keep a low profile in its interaction with the high-ranking representatives of official Washington, on the other. This is quite understandable. First it was difficult to predict Moscow’s reaction to the breakthroughs in American-Azeri cooperation at the peak of aggravation in the relations between Russia and the West. In addition, no one was sure about the latter’s ability to effectively defend Azerbaijan, since, first, the Euro-Atlantic community had been unable to prevent the Russian invasion of a neighboring country regarded as essentially America’s main ally in Central Eurasia. And second, the experience of official Baku’s interrelations with the U.S. and United Europe showed that the West held a rather inexplicit position regarding de facto support of Azerbai- jan in the difficult periods of its post-Soviet independence.15 Although the Iranian question remained on the agenda of American-Azeri relations in the period under review, it was essentially moved to the back burner by the above-mentioned events in the region. As during 2007, the main item on this agenda was the possibility of American-Azeri cooperation in missile defense or, to be more precise, in the use of the Qabala radar station currently rented to Russia. The proposal to share the Qabala radar station with the U.S.16 essentially lost all meaning for Russia after the United States reached an agreement in August about deploying missile defense facilities in Poland. All the same, the possibility of third countries using the radar station after Russia’s rent contract expires in 2012 was also a topic examined in 2008. In February, Azeri Deputy Foreign Minister A. Azimov said that “if Azerbaijan and Russia do not extend their agreement in 2012 on rental of the station, other alternatives may be examined. For example, the radar station could be used in a trilateral format. The third country could be either the U.S. or Turkey. Perhaps there could even be a fourth…”17 And in July, U.S. Ambassador to Azerbaijan Anne Derse noted: “…we intend to create the architecture of missile defense and plan to continue our actions in these frames. We may view the Qabala radar station in this context.”18

15 It is enough to remember amendment 907 to the Freedom Support Act introduced by the U.S. Congress with respect to Azerbaijan and which is still in effect. 16 As early as June 2007, the Russian president put forward a proposal on joint use of the Qabala radar station with the U.S. in exchange for Washington backing off with its plans to deploy missile defense facilities in the Czech Republic and Poland for defending the European countries against a possible missile attack by Iran and North Korea (see: “Putin predlozhil SShA sovmestnoe ispol’zovanie azerbaidzhanskoy RLS,” Lenta ru, available at [http://lenta.ru/news/2007/06/07/ rls/]; “SShA otvergli predlozhenie Putina po Gabalinskoy RLS i po-prezhnemu namereny razvernut PRO v Chekhii i Pol’she,” Newsland, 18 June, 2007, available at [http://www.newsland.ru/News/Detail/id/58064/], 28 February, 2008). 17 See: “V Baku rassmatrivaiut vozmozhnost’ peredachi Gabalinskoy RSL v ekspluatatsiiu SShA i Turtsii,” Day.az, 19 February, 2008, available at [URL: http://www.day.az/news/politics/108655.html]. 18 See: U.S. Ambassador to Azerbaijan: “Issue of Qabala Radar Station Has Not Been Removed from the Agenda,” Day.az, 10 July, 2008, available at [URL: http://www.today.az/news/politics/46319.html]. 105 CENTRAL EURASIA 2008 Analytical Annual GUAM

Developing interstate consolidation within GUAM in 2008 was among Azerbaijan’s foreign policy prerogatives. The basic agenda of interaction among the countries of this organization remained unchanged—it included settling the frozen conflicts and subsequently combating such threats to security as separatism, terrorism, and arms and drug trafficking; strengthening branch cooperation among the member states; and developing their transit and energy potential in the Europe- Caucasus-Asia vector. Several undertakings were devoted to working on these issues, including the Batumi summit of heads of state in July, which resulted in the adoption of the Batumi Declaration on “GUAM—Inte- grating Europe’s East,”19 the international conferences held in April-May in Baku on “Fundamental Principles of Settling the Conflicts on the Territory of the GUAM States,” “GUAM—Transit,” and “GUAM’s Development Strategy,” during which a decision was reached to create a Coordination Council of Bank Associations of the Organization’s countries. The instability on the Eurasian energy arena and deterioration in relations between the West and Russia, which continued in the period under review, largely served as a favorable background for GUAM’s development. Against this background, the striving of the member states to move closer to the EU and NATO became all the more evident. However, it cannot be said that all four participants in the Organization have the same interest in GUAM and 2008 showed this. Ukraine, Georgia, and to some extent Moldova see the Organization largely as a way to integrate into United Europe and NATO. For Azerbaijan, which is experiencing perhaps the most difficult geopolitical circumstances, maximum diversification of the export routes of its energy resources is most important, the political effect of which is diversification of external influence and the possibility of balancing the interests of the corresponding powers. This is partly the reason for the difference in Ukraine’s and Azerbaijan’s reaction to the Russian-Georgian war, for example. The Russian-Georgian war also posed a challenge to GUAM, primarily to the Organization’s unity. In addition to everything else, these demonstrated the need for more coordination among the member states, and not only in the form of one state supporting the actions of another, but in whether it is expedient to take steps that could be of detriment to the Organization’s consolidation or to those strategic goals in which all its participants are interested.

C o n c l u s i o n

Compared to the previous year, 2008 will go down in Azerbaijan’s history for its inconspicuous foreign policy achievements. The Russian-Georgian war, the international economic crisis, and the plummeting oil prices formed macro conditions in which it was difficult to expect the country to engage in active behavior or achieving breakthroughs in resolving the most pressing foreign political problems during the year. The fact that official Baku succeeded in retaining stability in its relations with the key nations interested in the region in the face of the immense aggravation in regional geopolitical rivalry can be considered the most outstanding overall achievement. Of course, this in itself could not pave the way for any foreign political breakthroughs, but at least it was possible to hold onto what had already been achieved in previous more active and productive years.

19 See: Batumi Declaration “GUAM—Integrating Europe’s East,” available at [http://guam-organization.org/en/node/ 379]. 106 AZERBAIJAN REPUBLIC International Affairs

It was difficult to expect any positive results from the efforts exerted to settle the Armenian- Azerbaijani conflict. The set of unfavorable external factors was supplemented by internal elements, such as presidential elections in both countries. And the activity of the official intermediary—the OSCE Minsk Group—continued to be largely perfunctory. On the whole, the main orientations in Azerbaijan’s relations both with its regional neighbors and with non-regional powers did not undergo any dramatic changes. Energy and transport issues formed the basis of development in the Azerbaijan-Georgia-Turkey and GUAM cooperation vectors. This sphere also retained its priority in official Baku’s interaction with the West and the Russian Federa- tion. Relations with Iran during the year were less dynamic. The general trend toward “movement to the West” continued, while the changes in Azerbaijan’s foreign policy activity rather affected its tactical side, which under the influence of the mentioned external factors was characterized by caution, a wait-and-see attitude, and quite a lot of balancing.

107 CENTRAL EURASIA 2008 Analytical Annual

REPUBLIC OF BELARUS

GENERAL OVERVIEW

Sergey NIKOLIUK Independent expert (Minsk, Belarus)

he republic entered 2008 with the firm intention of joining the group of thirty countries with the most favorable business climate and came out of it in the midst of a full-scale economic crisis. T The inefficiency of the “Belarusian economic model” became obvious to each and every one, its authors in particular. Liberalization remained the only, if enforced, remedy. Russia’s financial aid (which in 2006 topped 20 percent of Belarus’ GDP) had been the lifebelt keeping the Belarusian economy (which remained Soviet in many respects) afloat. Over time it became obvious that it was not enough to maintain a standard of living inside the republic comparable to that of its closest neighbors in the West and even in the East. The relatively open frontiers kept labor migration at a level of one-fifth of the able-bodied population (from 0.6 to 1 million according to different sources). Sociological studies by independent researchers revealed that the legitimacy of the government in the republic and of President Lukashenko personally hinged mainly on the ever growing wellbeing of the local people. This means that economic growth became an instrument of political stability. Having exhausted the potential of Russia’s aid the Belarusian leaders had to move away from empty declarations to multi-vector policies. In the absence of any hope of Western financial aid, the new foreign policy born in 2008 relied on continued financial aid from the East and Western investments. The new course demanded that the republic improve its image in the West as “the last dictatorship of Europe.” In March President Lukashenko talked with Lord Timothy Bell, founder of the Bell Pottinger Group and a public relations executive. It seems that the sides arrived at an agreement: at least in late April President Lukashenko said in his annual Address to the National Assembly that the political aim of the year was recognition by the West of the results of the September parliamentary elections.

108 REPUBLIC OF BELARUS General Overview

It should be said that Lord Bell coped with the task: his success can be measured not only by President Lukashenko’s numerous interviews to the world’s leading information agencies and the press but also by the noticeably warmer relations with united Europe. The West, however, refused to accept the results of the September elections as valid yet, contrary to what the analytical community expected, did not exacerbate the confrontation. In fact, the West, which concluded that isolation bore no fruit, reduced the list of unwelcome Belarusian bureaucrats and gave them six months to “correct their errors.” The republican leaders reaped the first dividends of the warmer political climate: late in Decem- ber the IMF announced that it was prepared to extend a loan of $2.5 billion to the republic. This resumed the contacts cut short in 1995 when President Lukashenko dismissed the IMF representatives as “IMF swindlers.” However, the Belarusian political regime paid for the tangible material successes in the Western vector with a loss of independence in domestic policies. Here is the most graphic example: on 1 De- cember, 2008 the first-category tariff rate (on which the salaries of those employed in the civil sector and at state enterprises as well as pensions depend) was reduced and the Belarusian ruble (BYR) devalued on the recommendation of the IMF (whereby the tariff rate was lowered just one month after its latest increase). The West was even able to influence the political climate in the republic to a certain extent. This is best illustrated by the fact that all the political prisoners were released in two waves: early in 2008, even before the new course was announced (which means that the leaders were following a plan rather than acting impulsively), and on the eve of the elections. The post-election warming was probably one of the results. The foreign policy changes inevitably caused personnel changes at the very top. In the small hours of 4 July, when the country was celebrating Independence Day, the center of the republic’s capital was shaken by a blast that injured 50. So far the culprits have not been found or even identified yet the president seized the opportunity to reshuffle the higher echelons: he fired Victor Sheiman, the permanent curator of the security ministries, and appointed Vladimir Makei, member of the “youth group,” as administration head. Throughout 2008 the Cabinet’s economic bloc steadily gained administrative weight until in June its confidence level among the public and expert community became equal to that of the president for the first time in the republic’s history. The hectic economic and foreign policy activities failed to provide the opposition with a new course. It concentrated on election strategy until, on the very eve of polling day, having interpreted the warming between the West and the Belarusian leaders as its chance to get into parliament, the opposition split into those who called for boycotting the elections and those resolved to “go to the end.” This split threw those who followed the opposition into confusion. The visit of Vatican Secretary of State Cardinal Tarcisio Bertone was the main event of 2008 in the religious sphere. President Lukashenko used this opportunity to invite Pope Benedict XVI to visit Belarus at any time he found convenient. On the whole, the blending of the state and Christian Orthodoxy continued very much as before; this was indirectly confirmed by the government’s refusal to return to the collective protests against the 2002 Law on the Freedom of Conscience that gathered 50 thousand signatures. “Last year growth of the key macroeconomic indices continued. The forecasts were largely achieved even though the growth rates of many indices slowed down during the last months of 2008.”1 This was how the head of the Department for Statistics summed up the last year. The GDP increased

1 [www.government.by/ru/rus_dayevents20080624.html - 38k]. 109 CENTRAL EURASIA 2008 Analytical Annual by 10 percent in comparable prices compared to 2007; industrial production by 10.8 percent (compared to the planned 8-9 percent), production of consumer goods by 12.1 percent (9-10 percent); agricultural production by 8.9 percent (7-8 percent); and investments in fixed capital by 23.1 percent (15-17 percent). Once more trade demonstrated good results: retail turnover increased by 20.5 percent (10-11 percent) and outstripped the increase in personal incomes, which rose by a mere 12 percent (9-10 percent).2 At the same time the consumer price index increased by 13.3 percent (contrary to the planned 6-8 percent); the negative visible balance of trade in commodities reached a figure of $5.4 billion in 11 months (–$3.7 billion compared to the same period in 2007) despite the official forecast of $1.42 billion. The last three months, however, looked much worse than the year’s positive outlook. In Decem- ber 2008 industrial output dropped by 22 percent compared to August and by 7.2 percent compared to November. The industry of construction materials lost 17 percent compared to November; the light industry 10 percent; and machine-building and metal working 8 percent. The country produced fewer metal-cutting machine tools (by 34 percent); buses and tractors (by 20 percent), TV sets and electric cookers (by 18 percent), and trucks (by 15 percent). This is fully explained by the figures related to export. In October the republic’s export dropped by 11.3 percent compared to September; while in November the drop was even greater—27.6 percent. In November Belarus exported 43.3 percent less potassium fertilizers, the second most important export item after petroleum products. In 2008 the negative balance of foreign trade was no longer a purely economic issue—it developed into a social problem: it proved impossible to maintain the national currency exchange rate and the growth rate of real incomes without borrowing. The government fell into a trap of its own making: the volume of consumer goods production, which increased by 12.1 percent, and retail turnover, which rose by 20.5 percent, created a powerful pump that sucked huge amounts of imported consumer goods into the republic. On the other hand, the Belarusian ruble, strengthened by the National Bank (a process that continued unabated throughout 2008), undermined export. By 1 January, 2009 the country’s gold-value reserves, which amounted to $4.2 billion on 1 Jan- uary, 2008, dropped to $3.7 billion. Most of the expert community is convinced that the huge sums used to preserve the exchange rate of the national currency (mainly toward the end of 2008) were wasted: on 2 January, 2009 the Belarusian ruble was devalued by 20.5 percent. Economic liberalization is seen as the answer to the growing negative foreign trade balance and stability of the national currency. The top bureaucrats started talking about liberalization in Novem- ber, however the first steps in this direction designed to attract foreign investors were taken in the fall of 2007—hence the aim of joining the group of thirty countries with the most favorable business climate. Several steps in this direction were taken in the first half of 2008, including Decree No. 113 “On the Procedure and Conditions for Selling Enterprises to Legal Entities as Property Complexes of Unprofitable State Organizations” and Decree No. 114, which annulled the “golden share” institution that gave the state the right to participate in the management of economic structures. The tax on income earned by operations with shares was lowered from 40 to 24 percent; Decree No. 3 of 20 March, 1998 On De-etatization and Privatization of State Property in the Republic of Belarus was amended (the limitations on the circulation of shares of public corporations set up during the de-etatization and privatization of state enterprises will be gradually lifted); and the Council of Ministers issued Deci- sion No. 1021 that envisaged the auctioning of 519 public enterprises in the next three years.

2 Information on income growth relates to January-November. 110 REPUBLIC OF BELARUS Politics

The drop in the republic’s export and the ensuing industrial production slump amid the unfurl- ing world financial and economic crisis forced the government to turn to local business. In December the president signed Decree No. 689 On Certain Measures to Improve Control and Supervisory Activ- ities in the Republic of Belarus, which de facto introduced a moratorium on control of legal entities and personal businesses. The government announced that it was working on a program to liberalize business activities in the republic.

POLITICS

Sergey NIKOLIUK Independent expert (Minsk, Belarus)

n 2008 the five-year-long period of sustaina- financial crisis in the republic (34.2 percent) were ble economic growth maintained by the high the main concerns of the country’s citizens, I demand for Belarusian commodities, the whereby the September parliamentary elections prize place among which belonged to the petro- ranked a mere fifth among the year’s most impor- leum products the republic produced from duty- tant events (22.0 percent).1 free Russian oil and potassium fertilizers, ended. So it comes as no surprise that the sociological poll 1 Information supplied by the Independent Institute of conducted in December 2008 registered that in- Socioeconomic and Political Studies (IISEPS), available at flation (47.2 percent) and the signs of the world [www.iisepts.org].

The Government

Those wishing to better grasp the meaning of the cardinal changes in the presidential vertical of power and in its domestic and foreign policies in 2008 should know that the vertical views the republic’s national interests and its own survival as indivisible. The highly personalized nature of the authoritarian regime in the republic makes the vertical’s further existence primarily dependent on Pres- ident’s Lukashenko’s ability to remain the nation’s only political choice. The republic’s open economy (export accounts for 50 percent of the GDP) and the fairly porous borders with the European Union call for continued concentration of internal and external resources to ensure the steady growth of the electorate’s wellbeing. This explains why the Eastern vector has been dominating the republic’s foreign policy since the very first days of its independence. The country and its rulers have always regarded the close political and military alliance with Russia as a source of material boon. In 2007, however, the advantages became a threat to President Lukashenko’s regime of personal power: the “union state game” that followed the pattern: “cheap oil and gas in exchange for

111 CENTRAL EURASIA 2008 Analytical Annual promises of strategic partnership” could not continue indefinitely. In 2006 Russia demanded that the president finally clarify his position—he clarified it by rejecting the Russian integration alternative; in December 2007 the price of gas doubled while the easy terms of oil supplies were revised. In 2007 this ended in what the president described as “the most difficult period in the history of our young state.”2 In response the republic not only invigorated the Western foreign policy vector but also cardi- nally revised the “Belarusian development model,” formerly the pride and joy of the vertical of power. Revision of foreign policy priorities began in the fall of 2007 and developed smoothly for the rest of the year and the larger part of 2008 until the world financial crisis slowed it down. The Belarusian leaders knew better than to expect financial aid from the West, yet the local investment climate was ill-suited to massive Western investments. Hence the ambitious aim of joining the group of thirty countries with the best investment climate. It was not enough, however, to annul the most odious anti-market measures (the “golden share” rule is one of the best examples). Belarus had to get rid of its image of the “last dictatorship in Europe,” which meant political changes. In the first two months of 2008 leaders of the youth democratic movement Dmitri Dashkevich and Artur Finkevich, businessman Iuri Liavonov, journalist Alexander Sdvizhkov, and politician Andrei Klimov (whom the West regarded as political prisoners) were suddenly released from prison. Alexan- der Kozulin, the most famous political prisoner and ex-presidential candidate, was released later, in August, a month before the parliamentary elections. He remained in prison longer than the others because he refused to accept emigration as the condition for his liberation. This became known while the head of state refused, in turn, to make further concessions. The Belarusian leaders, however, remained true to themselves: having taken a step toward the West in February and March they used force to disperse a protest rally of self-employed businessmen and detained many of those who tried to organize a celebration of Freedom Day. Activist of the youth movement Andrei Kim and businessman Sergey Parsiukevich arrested at the protest meeting were sentenced to 1.5 and 2.5 years in prison. Both were set free in August. In March a diplomatic scandal burst out: the Belarusian Foreign Ministry recalled the ambassador from Washington and reduced the embassy staff to five in response to the economic sanctions that the U.S. Treasury had introduced against the Belneftekhim. This was not all. The Belarusian Foreign Ministry forced the Americans to respond in kind: on 12 March U.S. Ambassador Karen Stewart left Minsk followed by the embassy’s “extra staff.” Independent analysts on the whole agree that the ups and downs of the republic’s foreign and domestic policies are explained by the struggle inside the president’s vertical. They are probably right. The struggle is going on behind the scenes and burst onto the stage under the pressure of extraordinary circumstances. One of them took place in the small hours of 4 July during the gala concert “Minsk— the Hero City” dedicated to Independence Day. No one was killed in the explosion, but about fifty injured sought medical assistance; even more people received minor injuries. Criminal proceedings were instituted under Part 3 of Art 339 of the Criminal Code (malicious hooliganism). According to unofficial information, 50 to 70 people were detained, including former members of the opposition (who were freed without charges). There was no shortage of guesses as to who were the culprits: (1) a malicious hooligan with a score to settle with the world—the original official version; (2) the government wishing to rally society around the leader; (3) the opposition wishing to destabilize the situation;

2 [naviny.by/rubrics/politic/2008/01/01/ic_news_112_283185/ — 49k -]. 112 REPUBLIC OF BELARUS Politics

(4) the special services at daggers drawn among themselves or clans fighting for property; (5) Russian business out to settle scores with the authorities that kept it away from privatization of the Belarusian enterprises and send a warning about future developments; (6) the West out of malice and to prevent the country’s drift toward Russia. I have never posed myself as an expert in “behind the scenes” policy, therefore I shall limit myself to a general observation that the political situation in the republic in the summer of 2008 had nothing in common with the Russian context in which President Yeltsin transferred powgr to his successor. The Belarusian president needs social stability more than anything else, which makes version 2 highly doubtful. This is confirmed by the fact that the authorities left the opposition alone. The real culprits notwithstanding, President Lukashenko seized the opportunity to dismiss Sec- retary of the Security Council Victor Sheiman and Administration Head Gennadi Nevyglas from their posts “because of new appointments.” The dismissal of the latter, a shy man who feared the president and had no weight in the corridors of power, does not call for comment. The figure of the former was too important to be ignored. In 1994, during the first presidential election, Victor Sheiman was part of Lukashenko’s team. Since that time he has remained close to the president moving among the closed circle of high state posts: administration head, prosecutor-general, and Security Council secretary. Each of his appointments added weight to the corresponding structure partly thanks to his team of analysts from the security ministries (rumored to be 300-strong) that followed him from one structure to another. This means that he invariably remained the curator of the security ministries until January 2007 when, at the height of the “oil and gas war” with the Russian Federation, the president incorporated his elder son Victor into the Security Council: he clearly trusted his life to no one else amid the crisis. A tighter grip on the security ministries took time; judging by the July reshuffle the president’s elder son coped with the task. We should always bear in mind that the name of the former secretary of the Security Council was linked to numerous scandals of weapons deliveries to hot points and the physical removal of prominent members of the opposition. Dismissal of the most odious of the president’s cronies was one of the secret Western demands. On 15 July, Chairman of the KGB Yuri Zhadobin was appointed secretary of the Security Coun- cil, while the post of the administration head went to Vladimir Makei, who was known as the key figure in the “youth group” knocked together by the elder son (the new appointee’s good command of German and English made him a noticeable figure in the Belarusian corridors of power). The “youth group” Victor Lukashenko is allegedly setting up is a pet subject of Belarusian analysts. The change of generations at the very top has begun; this could only be expected in view of the time Lukashenko Sr. has served as president—yet optimism is premature. There is no unity in the groups close to the Olympus of Belarusian power, although this does not mean that there are several competing projects of “new Belarus”—everything is limited to the competing mercantile projects. The economic novelties we have been witnessing since last fall were enforced; they would have continued, even if there had been no economic crisis, merely under the pressure of globalization. In this context the “young” with their command of foreign languages will certainly be in a better position. The parliamentary elections of 28 September were geared to the emerging Western foreign policy vector. Back in April President Lukashenko said in his annual Address to the National Assembly: “These elections should be organized in such a way that no one will question the legitimacy of the elected deputies. We need this more than the observers.”3 By the vague “no one” he meant “no one in

3 [www.afn.by/news/i/98799 — 31k -]. 113 CENTRAL EURASIA 2008 Analytical Annual the West:” the OSCE was responsible for the fact that since 1996 the West had not recognized the results of the parliamentary and presidential elections. The legitimacy of the elections meant equal chances for all the candidates; between late April and late September the president expatiated on this every time he appeared in public. Here is one of his statements: “All candidates should enjoy equal access to the media so that no one can reproach us that some of them are in a better position than others. The so-called opposition wants nothing other than persecution—it stands no chance and yet will have to justify the failure to its sponsors. People will reject it, yet the conditions should be equal for all.”4 It should be said in all justice that the government undertook measures to convince the outside observers that the elections were genuinely democratic. Formal “arithmetic” became much fairer: political parties acquired 10.6 percent of the seats in the constituency election committees, although closer scrutiny reveals the old tricks. The Belarusian Social-Sport Party and the Belarusian Popular Front Party obtained 5 seats each; the same tendency was betrayed when “weeding out” candidates of public organizations: the pro-government Belarusian Republican Youth Union and Belaia Rus received 96 and 82 seats, respectively, while the opposition Belarusian Popular Front “Adradzhenne” was left with 4. Everything became clear when the election committees at the polling stations (where vote counting takes place) were formed. The opposition parties and structures received less than 40 seats (out of the total of about 70 thousand); those who filled them depended on the government in one way or another. The outcome was predetermined: none of the opposition candidates were elected; the elections in all 110 constituencies were completed in one round. The OSCE mission refused to accept the elections as democratic; the U.S. Department of State resolutely condemned them. The way the president responded to the mission’s criticism can be described as the most important result of the election campaign. When talking to the mission’s head Anne-Marie Lizin he suddenly promised “to correct the mistakes.” The approaching world financial crisis left him no choice.

The Opposition

For a long time the opposition and the political parties that form its core have been limiting their political involvement to election campaigns. Everyone knows that vote counting stopped in 1995, which does not prevent the opposition from rekindling the traditional “boycott or participation” discussion. The September 2008 elections to the lower chamber of the National Assembly were no exception. This time the bloc of those who insisted on the boycott consisted of Charter-97, the European Coalition made up of the organizing committee of the Belarusian Social-Democratic Party (Narod- naia Gramada), the Party of Freedom and Progress, and the Molodoi Front Organization registered in the Czech Republic. The parties and organizations that together formed the United Democratic Forces organization (UNF) were resolutely in favor of taking part in the elections (the Belarusian National Front, the United Civil Party, the Belarusian Social-Democratic Party—Gramada, the Belarusian Party of Communists). The analytical community knows only too well why the above parties divided into two uncompromising camps. The boycott supporters are mainly virtual parties that specialize in individual ac-

4 [naviny.by/rubrics/politic/2008/07/10/ic_news_112_293472/ — 48k -]. 114 REPUBLIC OF BELARUS Politics tions on the conditions of Western financial support. The parties with real structures choose to participate even though the number of their local structures is steadily declining. This has already created an exotic coalition—the UDF—consisting of the liberals (United Civil Party), Communists (Belarusian Party of Communists), and nationalists (the Belarusian Popular Front). The UDF agreed on its election strategy in February: it was decided to present a single list of candidates. From February until 18 August (the last day of nomination) the bloc worked on the list with good results: the parties agreed on a single candidate for each of the 110 constituencies. The Central Election Commission registered 78 of them—more than in 2004 when only 47 opposition candidates reached the election stage. The policy of drawing closer to the West created a problem for the UDF. Since 1996, when President Lukashenko dissolved the Supreme Soviet to set up the loyal Chamber of Representatives, the opposition has been actively supporting the West, which refused to recognize the parliament. The new course forced the UDF to revise its position. After a lot of talking the UDF decided that its candidates would take part in the elections if they proved to be transparent and democratic. It turned out that it was easier to decide than to stick to the decision. The leaks skillfully organized by the secret services and the statements made by the president convinced the public that there had been an agreement with the ambassadors of several European countries that the opposition would acquire several seats in the lower chamber. This split the UDF and divided some of the opposition parties. The candidates who worked actively in their constituencies and were sure of victory, wanted to go on to the end; they refused to obey the fairly contradictory and far from consistent decisions of the party leaders. According to the official information supplied by the Central Election Commission, none of the opposition candidates received more that 15 percent of the votes. Was this the correct figure? For many years the independent sociological services have been registering a stable share of those who support the opposition (or rather stood opposed to the government) at about 30 percent. This should not be taken to mean that these votes would be cast for the opposition: its potential supporters are much less enthusiastic voters than those who side with the government. The opposition has much less media resources, although in the large cities it stands a real chance of victory hence the official structures’ close attention to the election commissions and wide-scale agitation for voting ahead of the election date (in September 2008 one out of five voters did that). The elections did not cut short the dialog between the Belarusian government and the West, which dampened the opposition’s chances of continued European support. Late in 2008, the UDF began a broad discussion that can be described as “looking for another Lord Bell” to improve its image. The official dialog allowed the opposition to present its own agenda to the West in the form of political demands that included liberalization of the regime as one of the priorities. The West eagerly shouldered the task.

The Press

In its annual freedom of speech rating, the Reporters Without Borders ranked Belarus 154th (out of 173 countries) between Somalia and Yemen; in 2007 the republic was three positions higher. A formal assessment of the state of the press and electronic media can be “grave but stable.” By 1 January, 2009 there were 1,307 registered periodicals (673 newspapers, 586 journals, 42 bulletins, and 6 catalogues); 409 (221 newspapers) of them belonged to the state. Privately produced publications are either glossy magazines or advertising material, which is why they outnumber the state-run

115 CENTRAL EURASIA 2008 Analytical Annual press. According to the Belarusian Association of Journalists, there are fewer than 30 social-political non-state publications in the country; over half of them cannot be obtained through the state distribution structures. The situation in the electronic media market has remained practically the same throughout the years. By 1 January, 2009 there were 158 registered radio and 69 TV programs; the majority of them (137 radio and 28 TV) belonged to the state. Information policy of both sectors is controlled by the state. Early in 2008 Alexander Sdvizhkov, deputy editor-in-chief of Zgoda newspaper (an independent publication), was sent to prison for three years. The Ministry of Information sued the newspaper for reprinting some of the “Danish Muhammad cartoons” and it was closed in 2006. The end of 2008 was more optimistic: the newspapers Narodnaia Volia and Nasha Niva were returned to the state distribution system. The former resumed printing in Belarus (for many years it failed to sign an agreement with any of the local print shops). The positive developments became possible thanks to much warmer relations between Belarus and the West; this is confirmed in particular by a letter Minsk addressed to the European structures to inform them about its decision to renew state distribution of two opposition newspapers. The Law on the Mass Media can be described as the central event of 2008; the public was struck by the speed with which the draft (presented by the Cabinet to the parliament on 10 June) became a law. Signed by the president on 4 August, it came into force in February 2009. The law defined which of the Internet media resources would come under its jurisdiction and specified the registration rules, envisaged re-registering of the media, simplified the process of closing down publications, and in general dented the journalists’ legal protection. It should be said that together with traditional treatment of the non-state media, the government had to rely more than before on state publications. It was not seeking more active propaganda but more effective control over the bureaucracy. The reason was obvious: in 2002 Belarus ranked 36th in the Corruption Perceptions Index; in 2008 it dropped to 151st place, probably because the vertical was enthusiastically using Russian financial aid. The rapidly depleting resources made bureaucratic enthusiasm too dangerous for the president’s personal power hence his call on the state media “to expose shady dealings” and the promise to keep in check those wishing to abuse power to put pressure on the press.5

The Nongovernmental Sector

According to the Ministry of Justice, 69 new public associations were registered in the republic (4 of them were international, 12 republican, and 53 local); 9 new funds (3 international and 6 local); and 2 new unions of public alliances. The ministry also registered 27 new organizational structures of political parties; 754 organizational trade union structures; and 7,628 organizational structures of public associations. These impressive statistics should be treated with skepticism since most NGOs rely on outside funding (from the state or from abroad) to function. The pro-presidential Republican Public Associ- ation Belaia Rus is one of the best examples. Instituted in October after several false starts, it was

5 [www.afn.by/docs/i/110478 — 110k]. 116 REPUBLIC OF BELARUS Politics believed to be a party of power. This is hardly true: President Lukashenko is a typical charismatic leader who needs no intermediaries. On the whole, the state treated the NGOs that tried to be organizationally and financially independent very much as usual: all attempts at registering were mercilessly cut short. The For Free- dom Movement set up by Alexander Milinkevich, who ran for presidency, is the only exception: it was registered after three failed attempts. This was a direct concession to the West’s demand and can be likened to the return of the Narodnaia Volia and Nasha Niva newspapers to the state distribution system. The public organizations of Belarusian business are the only exception: n first, they do not need state funding and the government accepts this; n second, their weight and negotiation value come in handy during times of economic crisis. In 2008 it was only public business organizations that could maintain a dialog with the top Cab- inet members with good results. The annulment by the Ministry of Economy of Decision No. 179 that limited the trading margin on imported goods is a good case in point. In 2008 the people closed ranks to defend their rights and won. This was probably the first attempt of this sort in the republic’s history. In January the Minsk authorities decided to transform one of the central streets into a mall with a ramified amusements network, which meant that families from 80 apartments would have to be resettled. The city authorities retreated under the pressure of determined and well-organized resistance. It should be said that the victory was won mainly because the people merely went to the very top (instead of making a political issue out of their quandary) very much in line with the Soviet tradition. The city authorities saved face while the president confirmed his image of “the people’s protector.”

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

In 2008 Belarus entered a period of instability; the world crisis accelerated degradation of the “Belarusian economic model,” which exacerbated the social crisis. The government could no longer mobilize the nearly exhausted domestic resources while funding from abroad was, first, fairly limited and, second, could not solve the problem: the Belarusian economic model was merely concentrating and distributing resources—it could not produce them. The republican leaders had no choice but to launch liberal reforms and seek normal relations with the West. The country is seeing a repeat of the situation of 1985 when plummeting oil prices forced Mikhail Gorbachev to start perestroika with quite unexpected results. This is only natural: the economy based on concentration of resources and their distribution demanded repressive measures against resource squanderers. For this reason any attempt at liberalization will only bring disintegration closer. The future of the Belarusian economic model based on centralized distribution and the speed of its disintegration in 2009 will depend on the generosity of Western and Eastern sponsors. One thing is more or less clear: the economic and social crisis will acquire a political dimension.

117 CENTRAL EURASIA 2008 Analytical Annual ECONOMY

Alexander SOSNOV Ph.D. (Econ.), independent expert (Minsk, Belarus)

here is good reason to believe that 2008 can Such optimism was based on statistical data: be described as a year of drastic changes in during 1996-2008, annual GDP growth in Bela- T the Belarusian economy. It started with the rus averaged 7%. However, the year ended with president’s declaration of a grandiose plan, who an abrupt decline in industrial output and a said that “we should do our utmost to ensure that record foreign trade deficit. In spite of such an Belarus leaves the group of countries that are obvious reversal of the longstanding trend, ac- catching up and joins the group of leaders.”1 cording to the official version, “there is no crisis in the country,” there is only “a struggle to overcome the consequences of the global finan- 1 [president.gov.by/press57288.html — 22k]. cial crisis.”

Macroeconomic Parameters

According to the 2008 year-end results, 17 of the 19 major targets in the socioeconomic development forecast were successfully met (forecast parameters are subject to compulsory implementation in Belarus). At the same time, however, the government was unable to keep the consumer price index within the forecast boundaries, and it also failed to meet its foreign economic activity objectives. In 2008, the GDP grew by 10% (it reached 128.8 trillion Belarusian rubles (BYR 128.8 trillion), or $58.9 billion), with the annual forecast being 9%. As in recent years, GDP growth was primarily driven by the favorable external environment. Industrial output amounted to BYR 127.5 trillion. This sector of economic activity comprises 26.5% of the labor force. Naturally enough, the country’s wellbeing largely depends on the health of its industry. In 2008, industrial output gained 10.8%, but a number of negative trends became apparent in the fourth quarter. For example, in December industrial output dropped by 22% compared to the August figures. As of 1 January, 2009, the consumer price index (CPI) amounted to 113.3% in contrast with the projected 108%. According to the official version, such CPI growth over the target parameters was primarily driven by external factors—the increase in prices for foodstuffs and energy resources. In particular, the cost of Russian gas in 2008 rose from $100 to $128 per 1,000 cubic meters. Interestingly enough, foodstuffs accounted for 60% of the CPI growth, non-foodstuffs for 15%, and services for 25%. The year 2008 also saw considerable growth in fixed capital investments (123.1% or BYR 35.9 trillion), including in building and assembly works—122.2% (BYR 15.5 trillion). In addition, an unprecedented (for Belarus) amount of residential space—5,140,600 sq. m (a 10.2% increment compared to 2007)—went into operation using all available sources of financing.

118 REPUBLIC OF BELARUS Economy

In 2008, $6.5 billion was invested by foreign investors in the real sector of the Belarusian national economy (apart from banks), which exceeded the 2007 figures by 20.4%. The largest portions of foreign investments went to such branches of the economy as industry (42.9% of all the investments received), market support activities (29.8%), and trade and public catering (8.5%). Foreign direct investments (FDI) accounted for 34.9% of the aggregate foreign investments received by Belarus. FDI increased 1.7-fold compared to 2007. The main forms of attraction were credits and loans from direct investors (67% of the total direct investments). One of the forms of foreign financing is portfolio investment, which amounted to only $1.7 million in 2008, thus representing a 24.1% decline compared to the 2007 figures. They accounted for as little as 0.03% of the aggregate foreign investments received by Belarus. The attraction of foreign direct investments has been one of the priority directions in the activities of the Belarusian authorities. As early as the fall of 2007, they set up a special commission headed by National Bank Chairman P. Prokopovich and Vice Premier A. Kobiakov. The commission was assigned with the task of developing the necessary measures and arrangements for enabling Belarus to become one of the “top 30 countries of the world with the most favorable investment climate.” Among the major decisions designed to improve the investment climate in Belarus, we should mention in particular Decree No. 144, which abolished the state’s special privilege (the “golden share privilege”) to participate in managing economic entities; Decree No. 1, which provided for a preferential operating principle for commercial organizations created in settlements with a population of no more than 50,000 people; Decree No. 7, which gradually lifts restrictions for the circulation of shares of Belarusian open joint-stock companies created during denationalization and privatization; and the decision of March 2008 to lower the tax rate on incomes from transactions with stocks, shares, and bonds, including legal entities’ bonds, from 40% to 24%. The result was not long in coming. After the survey conducted by the World Bank’s Research Group, Belarus was included in the worldwide list of top ten reformers in the “Beginning of Business” and “Protection of Investors” categories. And in accordance with the data obtained from the Doing Business-2008 study, Belarus was ranked 110th among 178 countries. Therefore, Belarus improved its rating by moving up 19 positions compared to the previous year. As a part of the effort to attract foreign investors, the Belarusian authorities organized the Bela- rus Investment Forum. It was held in London on 18 November and was attended by about 400 Bela- rusian officials and businessmen. It goes without saying that such big events require long-term preparation, and when its dates were under discussion, there were no signs of the imminent global financial crisis. Therefore, it seems quite natural that this first challenging and ambitious international presentation of Belarus’ investment appeal (which, in addition, was held in one of the major business centers of the West) failed to bring any tangible results. Closing the investment-related topic, we shall refer to the report of the European Bank for Re- construction and Development drafted in the fall of 2008. The EBRD experts argued in particular that, in spite of the number measures taken, Belarusian enterprises are still being challenged by several serious problems, such as overregulation and excessive government intervention in the economy, limited channels of access to government agencies and forced dissemination of various assignments to enterprises regarding such issues as production, export, and pay rises.2 In 2008, double-digit growth in household income continued. In fact, it grew by 12.7% compared to the projected 9-10%. And real earnings increased by 9.9% compared to the 2007 figures (the forecast was 8.5%). Due to a sweeping pay rise in Russia with which Belarus has signed a number of intergovernmental agreements (within the framework of the Russia-Belarus Union State) making it

2 [naviny.by/ruÁÐics/economic/2009/02/05/ic_news_113_305854/ — 49k]. 119 CENTRAL EURASIA 2008 Analytical Annual easy for Belarusians to obtain jobs in the Russian Federation, the republic was drawn into a wasteful pay rise race. In spite of the fact that in 2007 the government pledged to increase the average monthly salary of the population in Belarus to $500 by the end of the five-year-plan (2011), as early as April 2008 President A. Lukashenko in his Annual Message to the Belarusian People and the National Assembly was forced to raise the bar: “By the end of the five-year-plan we should raise salaries—I am even somewhat afraid to say—to $700. Indeed, there is no way out: $500 will not be enough. We will have to make $700 the average salary throughout the country. Then we can maintain stability in our society.”3 However in June, the Federal Statistic Service of Russia (Rosstat) declared that the average salary in the Russian Federation was $760. After that the Belarusian government was forced to reconsider its plans once more and declare that in 2011 the average salary in Belarus should be $1,000. According to various estimations, from 0.6 to 1.0 million people were employed beyond Bela- rusian borders (basically in Russia) by the middle of 2008. Given the fact that as of 1 January, 2009, 4.5 million people were engaged in the national economy system, the president’s concern about preserving stability in Belarusian society is quite understandable. The high level of labor emigration is also implicitly confirmed by the fact that retail turnover in the past few years has been growing at a faster rate than household income which, in turn, has been outstrip- ping salaries and pensions. In fact, in 2008, retail turnover increased by 20.5% with the plan being 10-11%. There would seem to be a visible mismatch between the high level of labor emigration and the extremely low number of unemployed (0.8% of the economically active population). Such inconsist- ency has a very simple explanation. The thing is that the number of unemployed in Belarus is determined by the number of citizens registered at labor bodies, employment service agencies, and social security authorities. Given the highly bureaucratic registration procedures and meager unemployment benefits (about $20 a month with an obligation to work off at least 10 days doing socially useful labor) there is nothing surprising in these low figures. According to ILO estimates, unemployment in Bela- rus is at least 4-5%. However, independent social surveys show that unemployment has always been one of the first three serious economic problems in the country. The banking system of Belarus has also played a key role in retail turnover growth. The aggregate volume of bank loans issued in 2008 increased more than 1.5-fold, with the highest growth rate (1.6-fold) reported in the investment and consumer loan sectors. Such growth became possible due to the increase of the resource base of Belarusian banks, which grew by 42% compared to the previous year. Moreover, in 2008 there was an unprecedented rise in the authorized funds of Belarusian banks, which increased by 91.9%, or by BYR 4,157 billion, and as of 1 January, 2009 amounted to BYR 8,678.6 billion. According to the data provided by the National Bank, at the end of 2008, the ratio of total banking assets to the GDP amounted to 4.03% year on year. As for household deposits, their growth rates turned out to be lower than those of consumer crediting. Interestingly enough, a slowdown has been observed in the growth rate of household deposits for three successive years: 46.9% in 2006, 32.3% in 2007, and 31.7% in 2008. These figures show that the consumer boom is increasing in Belarus. As of 1 January, 2009, the balance of household deposits in banks amounted to BYR 13.3 trillion ($6.1 billion). Population prosperity growth in 2008 also affected the structure of retail turnover. The share of non-foodstuffs increased from 49% to 51%, while the share of food products declined, respectively, from 51% to 49% compared to 2007. As of 1 January, 2009, the banking sector of Belarus comprised of 31 banks with 323 branches; 25 of them are banks with foreign capital, including eight banks with a 100% share of foreign investors. However, government participation in the banking sector of Belarus is still about 80%.

3 [president.gov.by/press57288.html — 22k]. 120 REPUBLIC OF BELARUS Economy

In 2008, the international reserve assets of Belarus dropped in the national terms by $1,330.5 million (or by 26.6%) to $3,662.2 million. This happened irrespective of the fact that the first $1 billion tranche from Russia was made available to Belarus in November, and Belarus received a $500 million loan from Venezuela in December. Interestingly enough, the international reserve assets of Belarus grew by approximately $442 million (10.6%) according to the results at the end of the second quarter of 2008, while in 2007 they increased threefold. This considerable growth was actually driven by the $1.5 billion state loan issued by Russia in December 2007. The essential reduction of the country’s international reserves did not prevent the Finance Min- istry of Belarus from closing the year with a budget surplus. In 2008, the surplus of the Belarusian consolidated budget (including the special-purpose budget fund and the social security fund) totaled about BYR 1.8 trillion: its revenues reached almost BYR 66 trillion (105.6% of the annual plan), while expenditures amounted to about BYR 64 trillion (96.4%). It is worth noting that in 2008, the consolidated budget revenues in relation to the GDP set up a new record after exceeded the symbolic boundary of 50% for the first time. The government’s annual assurances to lower this fiscal revenue parameter have always resulted in its consequent growth. There- fore, concentration of resources in the hands of the state, which started as early as 1994, continued in 2008 irrespective of government’s assurances that it intends to pursue an economic liberalization policy. The global financial crisis, the influence of which was especially keenly felt in the fourth quarter, only spurred on this process as an increasing number of enterprises started to feel the need for state support. In 2008, budget expenditures for the national economy branches totaled BYR 14.4 trillion, or 96.1% of the annual plan. And on top of that, 1,085 enterprises received direct state support from the budget in the amount of BYR 2.2 trillion. The National Bank managed to hold back the ruble exchange rate in relation to the dollar. Moreover, during the first six months of the year it became stronger, but the increasing trade deficit forced the National Bank to change its policy by the end of the year and begin ruble devaluation (2.3% year on year). Belarus’ external national debt grew by $1,382.2 million (59.2%) and amounted to $3,718.9 million as of 1 January, 2009. Even more so, the loans borrowed by the government (in the external national debt structure) increased by 77.2% to reach $3,588.8 million (compared to $2,025.7 million as of 1 January, 2008). External borrowings have become an increasingly important factor allowing the Belarusian authorities to maintain sociopolitical stability in the republic. In November, an agreement on Russia issuing another $2 billion loan to Belarus was signed in Moscow. In the fall, for the first time since 1996, Belarus started its active negotiations with the International Monetary Fund to attract new loans. On 31 December, the IMF gave its preliminary consent to issue Belarus a loan worth $2.5 billion. However, in return the IMF demanded that a number of tough economic measures be taken by the Belarusian authorities. In particular, they were told to limit salary hikes and give the go-ahead to ruble devaluation. Finding itself in a deadlock, Belarus was forced to accept those requirements: on Decem- ber 1, the first-category tariff rate was reduced by 15.4%, which automatically led to a wage reduction for state enterprise workers and so-called “public sector employees.” And on 2 January, 2009, the ruble was devaluated by 20.5%.

Sectoral and Regional Structure of the Economy

The share of industrial value added to the Belarusian GDP amounted to 28.1% compared to 26.0% in 2007, of services to 22.7% (23.1%), agriculture to 8.4% (7.4%), construction to 9.4% (8.5%), trans-

121 CENTRAL EURASIA 2008 Analytical Annual port and telecommunications to 8.0% (8.6%), trade and public catering to 10.6% (10.2%), and taxes to 15.9% (15.5%). The value added in the basic branches of the Belarusian economy in 2008 showed the following growth indexes compared to 2007: industry—14.4%, agriculture—9.5%, construction—23.5%, transport and telecommunications—5.5%, and trade and public catering—18.2% (all the figures are given in comparable prices). In recent years, the pricing environment has been extremely favorable for most Belarus industry sectors. The fuel and energy complex, machine-building and automobile production, the manufacture of metals and fabricated metal products, fertilizers, chemical goods and building materials—these are the sectors of the economy which not only contributed to growth of the country’s industry but also of the Belarusian economy in general. Nor should we forget the cheap Russian energy resources, which have also contributed to industrial production growth, especially in the power-consuming branches. The last four years were quite successful for the manufacturers of ferrous metals and fabricated metal products from the point of view of physical production growth. In 2008, the physical volume of steel increased by 28.1%, of rolled ferrous metals by 34.3%, and of steel pipes by 33.0% compared to the 2005 figures. Manufacture continued to increase at the Minsk Tractor Works (physical production grew by 56.9% over the last four years) and at the Minsk Automobile Plant (an 18.5% increase in trucks and 90.4% in buses). In addition, combine harvester manufacture grew by 61.7%. The construction boom had a positive impact on the manufacture of building materials. In 2005- 2008, the physical volume of cement grew by 34.8%, walling materials by 48.2%, and ceramic wall tile by 31.3%. The manufacture of ceramic products for baths and kitchens increased by 60%. There was also a real breakthrough in paint and varnish production: during these four years their output increased 2.7-fold from 43,000 to 115,000 tons. The government adopted an investment program involving the creation of one hundred new manufacturing enterprises for consumer goods production in 2008. However, its feasibility was initially questioned by the expert community, since the consumer goods enterprises existing in Belarus since Soviet times are now experiencing more and more problems due to the increasing competition both inside the country and in the foreign markets. The manufacture of television sets serves as a typical example here: in fact, their physical production dropped by 45.2% between 2005 and 2008. Over the past few years, the Minsk Motorcycle and Bicycle Plant (“MOTOVELO”) has constantly been on the verge of closing down. Its purchase by an Austrian investor in 2007 has not improved the situation. Its production volume is still declining. Between 2005 and 2008, bicycle production declined by 45.2%. As for motorcycles, their output in 2008 fell by 42.3% compared to 2007. The Minsk Refrigerator Plant Atlant is also experiencing great difficulties selling its products. Despite the fact that the plant raised its refrigerator production by 11.2% in 2005, Russian competitors are increasing their efforts to oust it even from the domestic market: in 2008, the share of domestic re- frigerators sold through Belarus’ retail trade system dropped from 77.1% to 75.0% compared to 2007. The attempt to develop large-scale production of automatic washing machines along with re- frigerators led to a situation where more than 200,000 washing machines were stockpiled in the warehouses as of 1 January, 2009. And the share of domestic washing machines sold through the retail trade system in 2008 amounted to only 37.2%. The year 2008 appeared to be quite successful for agricultural producers: agricultural output grew by 8.9% year on year. Belarus not only met its internal requirements for foodstuffs by 85.9%, but its food exports gained $1.6 billion (a 29% increase compared to 2007). Along with value indicator growth, shipments in natural terms have also increased: pork 2.2-fold, sausage products and potatoes 1.6-fold, flour, butter, and cheeses 1.2-fold, and canned meat, beef, vegetables, and eggs 1.1-fold. As for dairy products, they turned out to be the most tradable Belarusian articles abroad: their share in bulk deliveries amounted to 63.1%.

122 REPUBLIC OF BELARUS Economy The Beginning of the Financial and Economic Crisis

Taking into account the open character of the Belarusian economy and weak diversification of its export markets, the global crisis consequences are likely to be the most adverse for Belarus’ national economy sector. They started to clearly manifest themselves in the second half of 2008. For instance, with the overall increase in proceeds from the sale of goods, products, works, and services of industrial enterprises by 32.7% in 2008 and with the rise in industrial manufacturers’ prices during this time by 14.7%, the country’s December revenues decreased by 19.4% compared to July. In August 2008, profit on the sale of goods, products, works, and services began to drop. In particular, in December, the share of profit on the sale of goods, products, works, and services by industrial enterprises accounted for 19.8% of the trading profit received in July. As a result, the sales margin with respect to industrial products, works, and services decreased from 19.9% in July to 4.5% in December. There has been a considerable increase in overdue accounts payable. Whereas in 2008 overdue accounts payable grew by 35.5% year on year against a 16.4% rise in industrial producers’ prices, in October-December they went up by 29.1%. As of 1 January, 2009, 68.4% of industrial enterprises had overdue accounts payable and 88% of them had more than three months of debts. Overdue accounts receivable increased by 38.6% in 2008; in October-November they grew by 25.6%, and in December there was a 1.9% decline. As of 1 January, 2009, more than 80% of industrial enterprises had overdue accounts receivable, and 90.9% of them had more than three months of debts. As already mentioned above, industrial output in 2008 grew by 10.8%. However, in Decem- ber there was a 22% decline compared to August. In particular, the manufacture of metal-cutting machines dropped by 34%, buses and tractors by 20%, television sets and electric stoves by 18%, and trucks by 15%. While reducing their industrial production volumes, enterprises started to stockpile their products at warehouses. Whereas in September the ratio of finished goods inventories to the average monthly output was 49.3%, in December this figure amounted to 61.1%. This means that products worth $2.3 billion were stockpiled at warehouses. The list of industrial leaders—in this respect— looks as follows: the light industry (150% as of 1 January, 2009), machinery and metal-working production (105.6%); forestry, wood processing, and pulp and paper industries (82.5%); the food industry (83.7%); building material production (83.7%); and the chemical and petrochemical industry (37.2%). In December, forced part-time employment in industry grew considerably compared to Novem- ber. For example, the number of industrial workers transferred to a part-time working day or part-time working week at the employer’s initiative averaged 30,900 people and increased 2.1-fold compared to November. And the number of workers sent on mandatory leave of absence at the employer’s initiative grew 3.6-fold and amounted to 48,400 people.

Foreign Economic Relations

Over the period under review the foreign trade in goods and services (according to the payments balance methodology) accounted for $79 billion, including exports—$37.3 billion and imports— $41.7 billion. Compared to the 2007 figures, foreign trade in goods and services in actual prices to-

123 CENTRAL EURASIA 2008 Analytical Annual taled 136.1% (with the 2008 forecast being 114.5-115.5%), exports—135.1% (forecast—116-117%), and imports—137% (forecast—112.5-113.5%). This growth is primarily explained by the increase in the average prices for exported and imported goods. In contrast to 2007, average export prices jumped by 33.3% and average import prices by 20.1%. The physical volume of exports grew by only 1.7%, while that of imports by 14.6%. The increase in average prices provided for a 95.3% increment of merchandise exports in value terms and 61.2% of merchandise imports, while commodity mass growth yielded 4.7% and 38.8%, respectively. In 2008, Belarus traded with 183 countries. The country exported to 139 states and imported from 168. Belarus’ major trading partners were Russia (47.2% of the total trade volume), the Nether- lands (8.2%), Ukraine (6.8%), Germany (5,0%), Poland (4.1%), Latvia (3.2%), China (2.8%), Great Britain (2.4%), Brazil (1.7%), and Italy (1.6%). Belarusian exports to the Russian Federation went up 19.2% compared to 2007 and amounted to $10.6 billion, while imports from Russia totaled $23.6 billion, representing a 37.2% increase year on year. Exports to the Netherlands increased by 30% to $5.6 billion (16.9% of the total amount). At the same time, however, imports from the Netherlands accounted for 0.9% of the total amount of imports of $0.4 billion (a 45.4% increase). There is nothing surprising in such disproportion: the Netherlands is the main storage terminal for the petrochemicals produced at two Belarusian oil processing plants from the cheap Russian oil. According to the payments balance methodology, the balance of foreign trade in goods and services in 2008 was negative and amounted to $4.4 billion. The negative foreign trade balance in goods was $6.1 billion. However, Belarus’ balance of foreign trade in services was positive and reached $1.7 billion. According to the official forecast, the negative foreign trade balance in 2008 should have been $1.40-1.42 billion. According to the trade balance methodology received on the basis of customs statistics, the negative balance of foreign trade in goods amounted to $6.6 billion in 2008 (in 2007 this parameter was minus $4.4 billion). It should be emphasized that export-import transactions with intermediate materials (energy resources, raw materials, supplies and component parts) were the main source of Belarus’ negative balance of foreign trade in goods. In 2008, $28.9 billion-worth of intermediate materials were imported into the country, which is 39.4% more than in 2007. Intermediate product exports amounted to $24 billion, exceeding the 2007 level by 43.4%. In recent months, there was an essential decline in foreign trade transactions in value terms due to the emerging world crisis. This situation was caused both by a reduction in average prices for exported and imported goods and by a curtailment of physical volumes. In December, average export prices dropped by 30.1% and average import prices by 20.7% compared to the September figures. Finally, merchandise exports decreased by 17.7%, while imports showed insignificant growth (of 1.1%).

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

It appears that the stage of continuous economic growth in Belarus has come to an end. This growth was only of a quantitative nature and has never been supported by any structural transformations or diversified investment, foreign trade, and production policies. On top of that, it has never been backed by human capital assets and deep-cutting institutional reforms. And the world crisis only exposed and revealed the problems that have been accruing in the Belarusian economy for years. The

124 REPUBLIC OF BELARUS Religion transformations that began in the fall of 2007 made Belarus one of the leaders among the CIS countries as far as the pace of economic reforms is concerned; however, judging by the overall level of transformations since the beginning of the 1990s, the republic is lagging behind all the CIS states, apart from Turkmenistan. The country’s economy is still based on large state enterprises while the private sector’s share in the GDP does not exceed 30%. In these conditions, the anti-recessionary policy currently pursued by the government is largely based on the perception that the problems that emerged in Belarus during the last few months of 2008 were caused by external factors alone. Therefore, the Belarusian authorities hope to wait out the crisis and focus on augmenting their financial support to enterprises, which appears to be the primary method of coping with the crisis phenomena. However, December has shown that the main challenge for enterprises is not only and not so much crediting problems but primarily the rapid slowdown in actual demand, both external and internal. This policy contributes to non-market behavior of enterprises with financial support criteria being the number of people employed and the output volume produced rather than cost efficiency and sales. The accelerated growth in the balance of payments deficit during the recession months is leading to rapid growth of the external debt. To stabilize the situation with foreign borrowings Belarus will have to continue attracting investments, thus improving the business climate in the country. All this will make the liberalization policy irreversible. However, in conditions of a centralized economy (which is based on the concentration and redistribution of resources), such a policy is likely to be counterproductive. The problem is that we are all very well aware of its consequences from the time of Gorbachev’s perestroika.

RELIGION

Vladimir MATSKEVICH Head of the Humanitarian Technologies Agency— Center of Social Innovations (Minsk, Belarus)

Statistics (Sizes of Confessions, Religious Communities, Places of Worship, Religious Educational Establishments, etc.)

t the beginning of 2008 there were 25 dif- and organizations, including monasteries, broth- ferent confessions and trends in Belarus; erhoods, missions, and religious educational es- A 3,156 registered religious communities tablishments. Most of the religious communities 125 CENTRAL EURASIA 2008 Analytical Annual and organizations belong to religious associa- clergymen (190 of them are foreigners, tions: mainly citizens of the Polish Republic). The Grodno and Pinsk seminaries train 1. The Belarusian Orthodox Church: the Catholic clergymen. Belarusian exarchate of the Moscow Pa- triarchate of the Russian Orthodox There are also: Church, which includes 11 eparchies: (1) Evangelical Christian Baptists (267 Minsk, Brest, Bobruisk, Grodno, Gomel, communities) Vitebsk, Mohilov, Novogrudok, Pinsk, Polotsk and Turov. The Belarusian Ortho- (2) Pentecostals (492 communities) dox Church has 1,399 parishes, 5 religious (3) Seventh Day Adventists (74 communi- educational establishments, 28 monaster- ties) ies, 13 brotherhoods, and 9 sisterhoods. (4) Full Gospel Christian Union (alliance of There are 1,175 religious buildings in the four charismatic churches, 54 commu- eparchies, about 85 percent of the re- nities) quired number; 172 buildings are in the process of construction. Between 1998 (5) Old Believers (33 communities) and 2006 the BOC received about 840 fa- (6) New Apostolic Church (21 communi- cilities from the state to be used for reli- ties) gious purposes. The Church employs (7) Jehovah’s Witnesses (26 communities) 1,438 clergymen and runs five educational establishments: the Minsk Spiritual (8) Lutherans: three associations with their Academy, the Minsk Spiritual Seminary centers in Minsk, Vitebsk, and Grodno. in Zhirovichi (Slonim District, Grodno The associations of Lutherans are organized Region), the spiritual college of the by trends rather than by territories like all the other Vitebsk Eparchy, the Minsk spiritual churches. One of them associates itself with the college of the Minsk Eparchy, and the Missouri Synod of the Evangelical Lutheran Slonim spiritual college of the Novogru- Church; another is more liberal and is closely dok Eparchy. The current number of cler- connected with the German Evangelical Luther- gymen covers 96 percent of the parish- an Church and the associations of the CIS Lu- es’ needs. therans. Since the Lutheran communities with a 2. The Roman Catholic Church has 4 region- large number of ethnic Germans among their al eparchies (Grodno, Pinsk, Vitebsk, and members use German for religious ceremonies, the Minsk-Mohilov Archdiocese). The the third Lutheran association includes the com- duties of the metropolitan of Belarus be- munities that use Belarusian. There are 27 Lu- long to the Minsk-Mohilov archbishop; theran communities in the republic, 6 of them are there is also the Conference of the Catho- completely autonomous and function outside the lic Bishops of Belarus. The Church runs associations. 440 parishes (communities); 2 spiritual The non-Christian religions are represent- educational establishments; 8 monasteries; ed by 9 religious missions; and 435 Polish Roman Catholic churches (45 more are being (1) Judaists, organized into two associa- built). Between 1988 and 2006 the RCC tions of traditional Judaism (29 commu- received 295 facilities from the state to be nities) and one association of progres- used for religious purposes; the number of sive Judaism (17 communities); there is religious buildings covers 89 percent of the one Yeshiva in the republic. RCC needs (the highest share in the repub- (2) Islam, organized into two associations lic). There are 381 Roman Catholic (24 communities).

126 REPUBLIC OF BELARUS Religion

(3) Bahaism, organized into 5 communi- to restore their confessions. Today the Judaist ties. communities are still small with no hope of a larg- There are also autonomous communities; er membership. The Muslim communities are the largest of them are the Uniates with 13 com- swelling with migrants: out of the nearly 400 of those who attend the Slonim mosque 88 are local munities; the Krishnaites with six communities; people (descendants of the Belarusian Tartars). while 10 other confessions have from one to nine Others are Azeris, Afghans, and members of oth- communities. er diasporas. Reliable statistics are limited to the small By the end of the Soviet period many con- confessions; the figures related to the three fessions had already lost all their religious build- Christian confessions are highly doubtful and ob- ings, which had been either ruined or used for viously distorted. Indeed, according to some of other purposes. Those that could be described as the sociological polls the number of believers in architectural monuments were transferred to the the country is larger than its entire population. Orthodox Church. (This happened to the Calvin- Handbooks assert that 80 percent of the popula- ist Church of the 16th century in Zaslavl and some tion (not the believers!) are Orthodox Christians. other Protestant and Catholic buildings.) Recent- At the same time sociological polls limit the ly some of the still standing religious buildings— share of Protestants to 2 percent. These figures the synagogue and the only surviving Lutheran cannot be trusted. Indirect data, likewise, are Church in Grodno—were returned to the corre- unreliable: the Baptist and Adventist communi- sponding confessions. ties are small while the charismatic communities There is any number of places of worship have a thousand or even more members. Some and pilgrimage attended by Orthodox believers, of the Orthodox parishes register all villagers as Catholics, and Judaists. Similar Muslim places are their members while church attendance is non- found outside the country while Protestantism existent. In the village of Olshany (Brest Region) does not practice the worshiping of holy places the Pentecostal community is about 4 thousand- and pilgrimage. strong. The huge church is always overcrowded The numerous Orthodox objects of worship while two Orthodox churches in the same village found in Belarus include the Zhirovitsy Icon of are neglected. the Mother of God, the tradition of worshipping The republic’s large confessions (including of which goes back to 1410. It is kept in the Ca- Orthodoxy and Catholicism, which never retreat- thedral of the Dormition of Our Most Holy Mother ed too far in Western Belarus) were caught in the of God of the Zhirovitsy monastery in Slonim (the wave of the religious revival of the 1990s. In the Grodno eparchy). Catholics and Uniates also last 20 years the number of Orthodox and Catho- worshipped the icon. Pilgrims and worshippers lic communities has increased four-fold; Baptists are especially attracted by the holy relics pre- nearly two-fold; Pentecostals over ten-fold; and served in several Orthodox cathedrals in the re- Adventists seven-fold. Some of the Protestant public’s territory: the Sophia and Theophany ca- trends were practically unknown or had to be re- thedrals and the Church of Our Savior in Polotsk, vived from scratch. The old Pentecostal move- which preserves the restored reliquary-cross of ment gave rise to a charismatic movement (some- Venerable Efrosinia of Polotsk, the Holy Spirit times called Neo-Pentecostal). The Lutherans and and Holy Apostles Peter and Paul cathedrals in the Reformers restored their churches and gath- Minsk, etc. The Ostra Brama Icon of the Mother ered their scattered followers or their descendants. of God, another traditional object of worship of Catholic communities moved into Eastern Bela- the Orthodox believers of Belarus is found in rus where the descendants of Catholic families Vilnius. joined forces to invite a ksi¹dz (priest). Late in the The Icon of the Mother of God of Budslav 1980s the Muslims and Judaists had one registered dating back to the 17th century (kept in the Ber- community each, which means that they too had nardin church in Budslav) is one of the main Cath-

127 CENTRAL EURASIA 2008 Analytical Annual olic objects of worship in Belarus. Regular pil- 19th centuries). Their ruins still attract believers grimages bring together Catholics from Belarus, and rabbis from all over the world. Russia, Lithuania, Latvia, and other countries. The Kitabs—medieval religious manu- Judaists all over the world venerated sever- scripts in the Old Belarusian language written in al places in Belarus, the better known of them Arabic script—can be described as Muslim holy being the Volozhin and Mir yeshivas (the largest objects. Some of them are kept in museums, sev- Judaic religious schools of Europe in the 18th- eral belong to Muslim communities.

Prominent Religious Figures

Traditionally Belarusian society has always respected the prominent figures of all confessions. Patriarchal Exarch of the BOC Filaret, who has been head of the BOC for over 30 years, now is regularly described in sociological polls as one of the country’s most politically influential persons. At the elections that followed the death of Alexiy II he was one of the probable patriarchal candidates. Cardinal Kasimir Swentek, apostolic administrator of the Pinsk Eparchy, is one of the most influential Catholic clergymen. Late in 2007 Archbishop Tadeusz Kondrusiewicz, who spent some time in Rus- sia as head of the Roman Catholic Church there, returned to Belarus. It took him only twelve months to establish his authority and fortify the position of the Catholic Church in the republic. Viacheslav Goncharenko, pastor of the New Life Church who in 2008 was elected Bishop of the Full Gospel Christian Union, can be described as another outstanding figure. The Protestant leaders find it hard to communicate with the authorities; Sergey Shidlovskiy and Sunday Adelaja left Belarus for Ukraine, and late in 2008 Ukrainian citizen Veniamin Brukh, the spiritual leader of the Full Gospel Christian Union, was prevented from entering the country. Leaders of the Muslim and Judaic communities are actively involved in everything that is going on in their communities in the political and ethnic contexts. The nation is fairly well acquainted with the names of Ibragim Kanopatskiy and Ismail Voronov- ich, two Muslim leaders, and Rabbi Iakov Basin.

The Level of Freedom of Conscience

The confessional situation in the republic cannot be described as simple despite the religious upsurge of the 1990s and the relative freedom the religious communities enjoy. In fact, the confessions are not equal; some of them are discriminated against and even repressed. The new Law on the Freedom of Conscience and Religious Organizations of 2002 divides the confessions into traditional and non-traditional according to their historical contribution to the country’s culture and development (which can be described at best as an arbitrary criterion). The law says nothing about separation of the church from the state, a source of numerous conflicts in a multi-confessional society. The close ties between the Orthodox Church and the state are a fact: in January 2008 President Lukashenko spoke of the Orthodox Church as the country’s main ideologist. The BOC maintains special relations with the state legalized by the agreement of 2003 under which the Church gained access to schools, hospitals, the army, and prisons, which means that it can organize social, missionary, and other activities closed to all other confessions. The law introduced obligatory registration for all religious organizations and banned religious activities in those that are not registered. Registration is open to structures with no less than 20 appli-

128 REPUBLIC OF BELARUS Religion cants and a registered address; the procedure is torturous: it abounds in bureaucratic traps and might take several months to complete. Obtaining a registered address could be very costly; since most of the buildings and other property belong to the state a registered address can only be obtained with official permission. This means that small communities (with several dozen members) cannot obtain a registered address while large communities run across another obstacle. They cannot acquire land plots for their religious objects because all land belongs to the state. Bought or newly built buildings cannot be transferred to the category of religious ones without official permission, which means that it is illegal to perform religious functions in them. This was behind most of the conflicts between the state and religious organizations. In 2008 several clergymen and their flocks were persecuted for holding religious functions “in places not intended for them.” Court proceedings related to the building of the New Generation Church in Baranovichi and New Life Church in Minsk were going on. While the former reached a consensus with the city authorities, the latter lost the case in the Supreme Economic Court. Protestant churches were involved in conflicts of this type; the number of unregistered Baptist communities is comparable to the number of registered ones. Many of the Pentecostal communities could not obtain registration. In fact the number of unregistered communities remains unknown: their existence becomes known only when they are repressed or persecuted. The Catholic Church has different problems: its priests, most of whom are foreign citizens, mainly from Poland, have to live under the threat of deportation. In 2008 four of them were deported; three more priests from the Grodno Region and one from Borisov were warned. This dampens the religious fervor of both the clergymen and their flocks. Sometimes deportation practices are used against the Protestant priests: as was noted above, in October 2008 citizen of Ukraine Veniamin Brukh, who had been living in Minsk since the early 1990s and was known as one of the most influential bishops of the Jesus Christ Full Gospel Christian Church, was detained and deported. The Muslim and Judaic communities suffer from vandalism: from time to time mosques, burial sites, and monuments are desecrated. In 2008 the obviously anti-Semitic Christian Initiative that distributed literature fanning national and religious intolerance was banned. Earlier the Orthodox Church condemned its activities. At that time the organization was known as the Orthodox Initiative. Followers of several confessions united into a movement for making amendments to the 2002 Law on the Freedom of Conscience. The over 50 thousand signatures collected failed to produce any response from the authorities.

Tolerance and the Inter-Religious Dialog

On the whole, Belarus is regarded as a tolerant country that accepts all confessions. However this does not rule out tension between them. The Orthodox Church accuses the Roman Catholic Church of proselytism on what it describes as its canonical territory. This explains the strained relations between Moscow and the Vatican. In Belarus, however, these two largest confessions have to coexist; it would be much better if they could talk directly to each other without Moscow’s interference. An inter-church round table has been active in Belarus for many years now; it brings together Orthodox Christians, Catholics, Baptists, and Lutherans. There are other local structures and personal contacts between the clergymen and believers of various confessions. The Civil Initiative “For the Freedom of Conscience” that rallied followers of many confessions and was headed by a rabbi of progressive Judaism can be described as a response to the 2002 Law. At the national level the relations between confessions are barely developed.

129 CENTRAL EURASIA 2008 Analytical Annual The Impact of Foreign Centers and Foreign States

The central structures of practically all the confessions present in the republic are found outside it. The Belarusian Orthodox Church is part of the Russian Orthodox Church of the Moscow Patriar- chate. The Catholics all over the world have one center; the large Protestant churches have their own world centers; the same can be said of the Muslims and Judaists. The impact of foreign structures cannot be described as decisive. Perhaps with one exception. Foreign centers have been involved in setting up two of three Lutheran associations now present in the republic. On the other hand, scattered communities and small confessions (e.g. Mormons and Krishnaites) depend on their foreign centers not only for guidance but also for their continued functioning.

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

The confessional situation in the republic cannot be described as normal; it is the traditions of a multi-confessional country rather than the state that are responsible for the absence of grave conflicts and tension. Fundamental human rights are not ensured, this is true of freedom of conscience, assembly, and organizations. There is no equality among the confessions: one of them is privileged while the rights of others are infringed upon, which leads to conflicts between religious organizations and the authorities. There are no conflicts among the confessions; all unpleasantness is limited to vandalism aimed at certain confessional and ethnic groups. The forms and methods of conflict settlement cannot be described as legal or civilized. The Law on the Freedom of Conscience does not protect the rights of the believers and their organizations. This is typical of all other spheres of public life, which means that the religious problems cannot be resolved without radical changes in the country’s political system and democratic reforms designed to create a state ruled by law.

INTERNATIONAL AFFAIRS

Viacheslav POZDNIAK Ph.D. (Philos.), associate professor at the European Humanitarian University (Vilnius), director of the Internet portal “Wider Europe” (Minsk, Belarus)

he year 2008 was an exceptionally active the Western vector. For the first time since the and very contradictory one for Belarus, country gained its independence, the Western vec- T whereby it was potentially groundbreaking in tor essentially became a priority in Minsk’s foreign 130 REPUBLIC OF BELARUS International Affairs policy in terms of its intensity and number of ed from the past and their ongoing influence and events, while it drew almost level with the Eastern with respect to its main precepts and primary vector in terms of significance, although it contin- emphasis on developing relations with the Rus- ued to lag behind the latter with respect to results. sian Federation as well as with other leading part- At the same time, Belarus retained the fun- ners—China, Vietnam, Iran, Cuba, Venezuela, the damental and essential continuity of its foreign Middle Eastern countries, SAR, and several oth- policy both with respect to the problems inherit- er states.

Belarus and Its Key International Issues

Belarus put forward initiatives in the U.N. and within the framework of the leading international forums designed to better coordinate efforts in combating human trafficking and prohibiting the development and production of new types of weapons of mass destruction and new systems of these weapons, as well as to ensure the access of all states to technology for raising energy efficiency and using alternative and renewable sources of energy. The Belarusian leadership believes that the existing architecture of European security is inadequate and incapable of preventing new conflicts. Further erosion of the fundamental principles of international law, destruction of the most important arms control regimes in Europe, and revival of bloc confrontation logic are also evident. In this context, Belarus welcomes and supports the initiative of the Russian Federation to draw up a Treaty on European Security.1 Belarus kept a low profile regarding the Caucasian conflict and did not recognize the independence of South Ossetia and Abkhazia, nor of Kosovo.

Belarus-The U.S. and the European Union

Human rights violations and the country’s failure to adhere to democratic principles are creating the main obstacles for the U.S. and the European Union in their attempt to establish full-fledged relations with Belarus. The United States and the EU declared that the 2006 presidential elections in Belarus failed to meet democratic standards. This caused Minsk’s relations with Washington and Brussels to deteriorate. Many opposition leaders and activists have been subjected to repression. Presidential candidate A. Kozulin and several other well-known Belarusian politicians received severe, politically motivated court sentences, which evoked a wide public response. In November 2006, in a special address to the Belarusian authorities and people, the European Union put forward twelve prerequisites for establishing cooperation with Belarus: release of all political prisoners, free elections, freedom of the press, and other democratic reforms, to name a few. Despite the constant criticism and pressure from the U.S. and EU in the form of visa and economic sanctions, the Belarusian leadership was loath to budge and did not release the last of the best-known political prisoners, A. Kozulin, until August 2008.

1 [http://www.mfa.gov.by/ru/press/official-releases/d85c1d8c0a01b7d9.html]. 131 CENTRAL EURASIA 2008 Analytical Annual

In order to achieve this, the U.S. had to introduce additional economic sanctions against Minsk at the beginning of 2008, which evoked an acute political and diplomatic conflict with Washington. As a result, bilateral relations fell to an all-time low and hints that they might return to normal did not appear until the fall when the Belarusian side showed the first signs of being willing to compromise (it released political prisoners, kept a low profile in the Caucasian conflict,2 and refused to recognize the independence of South Ossetia and Abkhazia). A rather long normalization process lies ahead that entails returning ambassadors, restoring the optimal number of embassy employees, and so on. Belarus also has to face the reality that the West as it previously knew it no longer exists. By 2008, the many years of political confrontation between official Minsk and the European structures, primarily the European Union and the Council of Europe, showed that neither side would gain anything further from it. The previous alternatives of European policy designed to democratize Belarus did not prove effective enough. In turn, the economic cost of Belarus’ international isolation, particularly due to the aggravated problems of energy security and energy transit and the need for foreign investments, technological re- equipping of the production base, and the opening of European sales markets for Belarusian commodities, began to be increasingly superimposed on the immense political and moral cost. The need to diversify sources of energy, introduce energy-saving technology, and obtain corresponding assistance from the EU also played their part. It became obvious that Belarus’ further sustainable development would be impossible without normalizing and advancing relations with the European Union, which, after Poland, Lithuania, and Latvia joined it in 2004, became a direct neighbor with powerful influence on the entire region. Par- adoxically, however, it was doubtful that the current Belarusian regime could retain power without the EU, the primary critic of the Belarusian regime, without its potential, and without establishing productive cooperation with it. The risks associated with Minsk’s hypertrophic comprehensive dependence on Russia and the special features of the latter’s foreign policy also played a certain role in the country’s drift toward the West.

Belarus- The European Union

The initiative to pursue the European Union Eastern Partnership policy put forward by Poland and Sweden in the spring of 2008 opened up a “window of opportunity” for both the EU and the Belarusian authorities to extricate themselves from the impasse that had formed in their relations. The Belarusian side intently followed the formation of this new partnership program from the very beginning. According to Belarusian Minister of Foreign Affairs Sergey Martynov, Belarus has a positive attitude toward the Eastern Partnership policy, while its proposals are taken into account by the Euro- pean Commission.3 Such unprecedented enthusiasm on the part of Minsk is due among other things to the fact that the EU’s previous policy is undergoing significant modification. What the Belarusian side has been striving for—de-politicization of the European Neighborhood Policy—is happening to a certain extent. At present, the main emphasis is on meeting five of the twelve prerequisites: having no political

2 [http://www.mfa.gov.by/ru/press/news/a6550553028f4124.html]. 3 [www.svaboda.org], 27 November, 2008. 132 REPUBLIC OF BELARUS International Affairs prisoners in the country, taking certain steps regarding the mass media, reforming the election legislation, improving working conditions for nongovernmental organizations, and ensuring freedom of assembly and expression.4 The end of the summer and fall of 2008 scored a multiyear record in the number of bilateral contacts, right up to the highest level. On 28-30 August, 2008, Hugues Mingarelli, deputy head of the European Commission’s Direc- torate-General for External Relations, paid a working visit to Minsk. He held meetings at the Presi- dential Administration and Foreign Ministry of the Republic of Belarus. The sides discussed the prospects for intensifying the dialog between Belarus and the European Commission. On 24 September, Alexander Lukashenko had a telephone conversation with Javier Solana, the EU’s High Representative for the Common Foreign and Security Policy. During the conversation, they discussed the development of the domestic political situation in Belarus, as well as the entire spec- trum of the country’s cooperation with the European Union.5 Minsk could only initiate positive changes on the Western front if it acquired political legitimization and changed the West’s attitude toward the Belarusian power structures, which heretofore considered them procreations of an authoritative system. So the preparations for and holding of the next elections to the Belarusian National Assembly (Belarusian parliament) in September 2008 were a new test of the seriousness of Belarus’ intentions. On 9 July, 2008, the Belarusian Foreign Ministry sent an official invitation to the CIS Executive Committee, the OSCE Office for Democratic Institu- tions and Human Rights, the Interparliamentary Assembly of CIS Member States, and the OSCE Parliamentary Assembly asking them to provide international observers. Despite the fact that the international observers from the OSCE/ODIHR noted numerous violations during the election campaign, Brussels, although with stipulations, continued its dialog with Minsk. On 13 October, 2008, keeping in mind certain improvements compared with the past in the organization and holding of the parliamentary elections on 28 September, the Council of the Euro- pean Union nevertheless stated that they did not meet the OSCE’s criteria. But in the interests of developing a dialog with the Belarusian side and in order to promote further democratization, it decided to partially remove the visa restrictions for Belarusian officials for a six-month trial period, upon or before the expiration of which, the decision will be reconsidered if positive changes have taken place. The Council also spoke in favor of intensifying technical cooperation with Belarus in areas of mutual interest.6 Following a meeting on 13 October in Luxembourg between Belarusian Foreign Minister Sergey Martynov and EU High Representative for the Common Foreign and Security Policy Javier Solana, along with the EU Troika, a delegation of the European Commission headed by Deputy Director-General of the Directorate-General for External Relations Hugues Mingarelli visited Minsk at the beginning of November 2008. The delegation offered specific proposals on the development of bilateral relations.7 The sides reached an agreement on expanding cooperation between the state management structures of Belarus and the European Commission in spheres of mutual interest, including in energy security, transit, customs, and others. Ways to activate economic trade cooperation between the Republic of Belarus and the EU were looked at separately. The possibility was discussed of Belarus making more active use of TAYEKS, which included offering the European

4 [www.ej.by], 4 December, 2008. 5 See: “Solana pozvonil Lukashenko,” 25 September, 2008, available at [http://www.dw3.de/dw/article/ 0,,3671076,00.html]. 6 See: Press Release C/08/288. 14137/08 (Presse 288). Council of the European Union. General Affairs and Exter- nal Relations. Luxembourg, 13 October, 2008, available at [http://europa.eu/rapid/pressReleasesAction.do?reference=PRES/ 08/288&format=HTML&aged=0&language=EN&guiLanguage=en]. 7 [interfax.by], 5 November, 2008. 133 CENTRAL EURASIA 2008 Analytical Annual

Union’s technical and expert assistance in bringing national legislation into closer harmony with EU law.8 The Belarusian leadership appreciated the EU’s temporary cancellation of the visa restrictions and, expressing its willingness to normalize political relations and develop cooperation, announced that it was ready to take three steps: discuss with the OSCE ways to improve the election code, permit two opposition newspapers (out of the approximately 20 in existence) to be printed in Belarus, and organize a round table between the Ministry of Information and the OSCE on legal regulation of the Internet in order to later take account of the results of the discussion with “further improvement of the legislation.” As of today, Belarus and the EU do not have a contractual-legal framework that regulates the entire range of bilateral relations. In order to set up a full-fledged diplomatic representative office of the European Union in Minsk, Deputy Foreign Minister Valery Voronetskiy and European Commis- sioner for External Relations and European Neighbourhood Policy Benita Ferrero-Waldner signed an Agreement between the Republic of Belarus and the Commission of the European Communities on establishing, privileges, and immunities of a Representative Office of the Commission of the Europe- an Communities in Belarus on 7 March, 2008 in Brussels. The fate of this document proved to be as complicated as the relations between Belarus and the European Union themselves. The upper house of the Belarusian parliament rejected the draft of a corresponding law, motivating this step by “the need to further study the question of the expediency and timeliness” of opening a representative office. The agreement was not ratified by the parliament until the second attempt. On 18 December, Head of the EC Delegation in Ukraine and Belarus Mr. Jose Manuel Pinto Teixeira and Belarusian Vice Premier Andrei Kobiakov signed a framework agreement between the European Commission and Belarus regarding technical assistance under the European Neighborhood and Partnership Instrument (ENPI) that replaced the TACIS program. At the same time, several technical agreements were signed that serve as the basis for carrying out measures in cooperation with the EU in nuclear security, transborder cooperation, and the energy sphere. The dialog between Belarus and the EU is already encompassing customs, energy, transport, environmental, and agricultural issues.9 On 19 December, at a press conference in Minsk, head of the consul department of the Belarusian Foreign Ministry Andrei Giro said that Minsk wanted to enter a framework agreement with the European Union on simplifying visa formalities and lowering the cost of visas, although so far talks are only underway with individual EU member states.10

The Post-Soviet Expanse

Belarus-Russian Federation

The stagnation in relations between the Republic of Belarus and the Russian Federation contrasts sharply with Belarus’ active foreign policy in the Western vector. The Union State project has lost its momentum and both countries are following autonomous foreign policy courses along with the format of coordinated foreign and partially integrated domestic policy and economy, which are becoming increasingly distinguished from one another. The steps taken by Belarus to move closer to the EU, which contrast with Russia’s refusal to do this, are a good case in point.

8 For more on the visit of the European Commission delegation to Minsk, see: [http://www.mfa.gov.by/ru/press/news/ f97a676fa4f2eb51.html]. 9 [http://www.mfa.gov.by/ru/press/news/f0fe13ed879a6431.html]. 10 [http://naviny.by]. 134 REPUBLIC OF BELARUS International Affairs

In 2008, the main unresolved issues in bilateral relations regarding which numerous primary agreements were adopted were the following: adoption of the Constitutional Act of the Union State, introduction of a single currency, and signing of an agreement on a unified air defense system. Sittings of the Supreme State Council of the Union State were repeatedly postponed, which shows the ongoing disagreements regarding this and several other major issues. The rate at which Rus- sian gas would be delivered to Belarus the following year was not agreed upon before the end of December. Final confirmation of the set of documents drawn up was postponed until the beginning of 2009.11 “Russia was and still is Belarus’ main strategic partner, while alliance-building is an objective process that meets the interests and expectations of the two nations,” said the Belarusian president.12 According to the results of the talks, on 22 June, 2008, presidents Dmitry Medvedev and Alexander Lukashenko adopted a joint declaration in which they expressed their satisfaction with the advanced development of relations between the two countries and confirmed their adherence to the Treaty on the Creation of a Union State signed on 8 December, 1999. Consistent expansion and intensification of universal Russian-Belarusian integration cooperation, the strengthening of the collective security system, building up of cooperation in the humanitarian sphere, and raising of the prosperity of Bela- rusian and Russian citizens are the priorities in this vector. Along with economic cooperation, military-political and military-technical cooperation between the two states is the most advanced today.

Belarus-CSTO

In his Address to the Belarusian people and National Assembly, Belarusian President Alexan- der Lukashenko emphasized that Belarus is continuing its efforts to strengthen the Collective Security Treaty Organization and expand bilateral military-technical cooperation with Russia.13 “Belarus and Russia are essentially the nucleus of the Organization,” noted Alexander Lukashenko. “So we must jointly resolve all the problems arising in the CSTO zone.”14 Minsk is carrying out all its obligations within the CSTO and actively supporting Moscow’s efforts to strengthen it and turn it into a full-fledged military organization and international multifunctional structure designed to promote national and international security. “I would like the CSTO to be a bone fide organization, like NATO. Its member states have a clear agreement: if any of the NATO countries is subjected to aggression, everyone fights. Not all our participants have ratified that provision. But this is something we need to strive for,” said the head of the Belarusian state.15 Belarus was the first of the four signatory states to ratify the Agreement on the Peacekeeping Activity of the CSTO (14 July, 2008). Corresponding procedures are also being carried out with respect to other documents. Along with the Organization’s other member states, it supported Russia’s initiative to enter a new agreement on European security. The statements by the Belarusian leadership on the need to strengthen the country’s military potential, and that of the Belarusian-Russian regional group in particular, by deploying Iskander mis-

11 See: “Belarus i Rossiia iavliaiutsia strategicheskimi i kliuchevymi drug dlia druga partnerami,” 22 December, 2008, available at [www.president.gov.by]. 12 “Rossiia byla i ostaiotsia osnovnym strategicheskim partnerom Belarusi,” 24 April, 2008, available at [www. president.gov.by]. 13 See: “Belarus is Continuing its Efforts to Strengthen the CSTO and Expand Military-Technical Cooperation with Russia,” 29 April, 2008 [BELTA]. 14 [http://www.dkb.gov.ru/start/index.htm]. 15 [http://www.belta.by/ru/news/archive?date=08_09_2008&page=1&id=267211]. 135 CENTRAL EURASIA 2008 Analytical Annual sile complexes in Belarusian territory fully correlate with the plans announced by CSTO Secretary General Nikolai Bordiuzha.16

Belarus-CIS-EurAsEC

According to the Belarusian leadership, the Commonwealth of Independent States should become one of the world’s powerful economic growth zones. Interaction among the countries hinges mainly on economic trade cooperation, whereby a long unresolved issue—completing the formation of a full-scale CIS free trade area—is the focus of its main efforts. Unified approaches should be found in such spheres as transport, energy, a common labor market, and food safety, and joint work should be stepped up in the transportation and transit spheres.17 Belarus believes that the activity of the Eurasian Economic Community (EurAsEC) should be boosted as much as possible. “The rates at which the Eurasian Economic Community is growing at present are not sufficient to keep up with the tasks we are posing,” said President Alexander Lukash- enko.18 The Belarusian side thinks that a Customs Union should be created at a steady and dynamic pace, but this is not currently happening. Creating a common energy market within the EurAsEC should be another priority. Belarus is also in favor of focusing attention on developing international transportation transit and removing the obstacles that hinder the free movement of transportation means within the Community.19

Relations with Its Closest Neighbors

In 2008, Belarus held active inter-foreign ministry and consular consultations with Poland and the Baltic states, during which the countries discussed drawing up agreements on simplification of the visa regime, border cooperation, interaction within the framework of the European Neighborhood and Eastern Partnership programs, development of the official dialog between Minsk and Brussels, as well as possible vectors of cooperation between Belarus and the EU. On 31 January, 2008, an Agreement between the Governments of Belarus and Latvia on Cit- izen Exchanges was signed. Work on agreements with Latvia, Lithuania, and Poland on travel regulations for the residents of border areas is drawing to an end. Lithuania and Poland proposed two projects on the cost of national visas and the procedure for issuing them.20 The Lithuanian government suggested that the Belarusian government introduce a non-visa regime for citizens living in the border areas.21 On 29 December, Foreign Minister of the Lithuanian Republic Vygaudas Usackas visited Minsk. During their meeting, Head of the Belarusian Presidential Administration V. Makei and V. Usackas stressed the need to strengthen bilateral interaction in trade and the economy, carry out

16 [http://www.newsru.com/russia/28jul2008/pro.html]. 17 See: “Sodruzhestvo Nezavisimykh Gosudarstv dolzhno stat odnoi iz mirovykh zon moshchnogo ekonomicheskogo rosta,” 23 May, 2008, available at [www.president.gov.by]. 18 “Razvitie EurAsEC dolzhno byt maksimalno aktivizirovano,” 26 February, 2008, available at [www. president.gov.by]. 19 See: “Aleksandr Lukashenko izbran predsedatelem Mezhgosudarstvennogo soveta Evraziiskogo ekonomicheskogo soobshchestva,” 10 October, 2008, available at [www.president.gov.by]. 20 [http://www.mfa.gov.by/ru/press/news/bcc214b357bbe6c9.html]. 21 [http://naviny.by/rubrics/tourism/2008/11/14/ic_news_126_301527/]. 136 REPUBLIC OF BELARUS International Affairs large joint projects in energy, transit, and transport logistics, as well as to combat cross-border crime and illegal migration. Special attention was focused on prospective vectors of cooperation in atomic energy.22 In 2008, an intensive political dialog between Belarus and Ukraine supplemented the successful development of their economic trade relations, and preparations were made for a meeting between the presidents of the two countries.23 The problems discussed included the entry into force of the Treaty on the Border, development of the state borders, cooperation in eliminating the consequences of the accident at the Chernobyl Atomic Power Plant, and simplification of the border-crossing regulations and stay of nationals of the other state in the host country. On 9 October, 2008, a Belarusian-Ukrainian inter-foreign ministry consultation meeting was held in Minsk to discuss relations with the European Union.24 Ukraine is interested in Belarus joining such international organizations as the WTO and the Council of Europe, coordinating policy in energy transit, and creating additional transportation routes for hydrocarbons from east to west and south to north with Belarus’ participation.25

Development of Relations between the Republic of Belarus and Other Countries

In 2008, Belarusian President Alexander Lukashenko visited the Socialist Republic of Vietnam, the People’s Republic of China, and Kyrgyzstan. Belarusian Foreign Minister Sergey Martynov visited the Turkish Republic, and a high-level Belarusian delegation went to the Syrian Arab Republic. President of the Bolivarian Republic of Venezuela Hugo Chavez, head of the Great Libyan Revolution Muammar Qaddafi, foreign ministers of the Islamic Republic of Iran, the Republic of Nicaragua, the Republic of Armenia, the Syrian Arab Republic, the South African Republic, State Secretary of the Holy See, official delegations of the Republic of Korea, United Mexican States, and others visited Belarus for talks with the country’s leaders.

Relations with International Organizations and Movements

Belarus-OSCE

In 2008, Belarus continued to support reform of the OSCE. According to the Belarusian leadership, this organization is experiencing a crisis and since it refuses to undergo reform it is incapable of ensuring effective resolution of the key security issues in practice.26

22 [http://www.belta.by/ru/news/politics?id=316949]. 23 [http://www.mfa.gov.by/ru/press/news/fda2ea1e6197156c.html]. 24 [http://www.mfa.gov.by/ru/press/news/f2247216f3db6ca4.html]. 25 Ambassador of Ukraine to Belarus Igor Likhovoi: “We are anxiously watching the information war against Ukraine” [Online conference of Ambassador Extraordinary and Plenipotentiary to Belarus Igor Likhovoi], 3 December, 2008 [TUT.BY]. 26 [http://www.mfa.gov.by/ru/press/official-releases/d85c1d8c0a01b7d9.html]. 137 CENTRAL EURASIA 2008 Analytical Annual

With respect to the introduction by the U.S. of additional sanctions against the Belneftekhim Concern in March 2008, the Belarusian Ministry of Foreign Affairs made a special statement in which it demanded that the OSCE “take immediate action to effectively ensure that this member state fulfilled the fundamental principles of the Organization and its international obligations,” and, if measures were not taken, warned that it may reexamine its relations with it.27 At the same time, relations with the ODIHR have become imbibed with the spirit of cooperation, which was eloquently manifested during the preparation and holding of the September elections to the Belarusian parliament and the subsequent period. In 2008 the OSCE mission in Minsk began playing a perceptible role in Minsk’s dialog with the West and in establishing cooperation regarding specific agenda items.

Belarus-NATO

Belarus’ relations with NATO in 2008 can largely be described as undergoing gradual, step-by- step development within the former framework set by the Belarusian leadership. There is still a negative attitude toward the Alliance’s enlargement, which is perceived as a threat that calls for strengthening the state’s defense capacity.28 A quantitative augmentation in cooperation is being seen. The Belarusian side refused on principle to participate in the Bucharest summit of the Euro- Atlantic Partnership Council (EAPC) at the level of heads of state and government on 3 April, 2008 because NATO “adopted a decision to limit the level of participation of the Belarusian side in the upcoming meeting.”29 In order to discuss regional security issues, a sitting of the NATO Political Military Steering Committee was held on 4 November, 2008 at NATO headquarters in Brussels regarding the planning and evaluation of forces of the Partnership for Peace program in the 26+Belarus format. In December, for the first time in many years, NATO Deputy Assistant Secretary General for Security Cooperation and Partnership Robert Simmons visited Belarus. According to Mr. Simmons, NATO is willing to expand the political aspect of the dialog with the Belarusian authorities, and his meetings at the ministries of defense and foreign affairs showed that this desire is mutual.30

Belarus and the Non-Aligned Movement

On 29-30 July, 2008, Belarusian Foreign Minister Sergey Martynov visited Iran in order to participate in the 15th Ministerial Conference of the Non-Aligned Movement (NAM) held in Te- heran. Mr. Martynov made a plenary speech in which he called on the NAM states to unite—not in words, but in deed—in order to uphold the interests of the Movement and its member states. The Belarusian Foreign Minister emphasized the need to consolidate the efforts of the NAM states in combating human trafficking and ensuring universal and equal access to technology for using alternative and renewable sources of energy.31

27 [http://www.mfa.gov.by/ru/press/official-releases/b8714d2d9719964b.html]. 28 [www.rian.ru], 3 April, 2008. 29 [http://www.mfa.gov.by/ru/press/official-releases/ccb53e8430241d5f.html]. 30 See: “NATO gotova rasshiriat politicheskiy dialog s Belarusiu,” 11 December, 2008, available at [naviny.by]. 31 [http://www.mfa.gov.by/ru/press/news/cb952125dbde02e2.html]. 138 REPUBLIC OF BELARUS International Affairs

The Conference adopted a Final Document that included proposals by the Belarusian side on the need to draw up a global plan of action to combat human trafficking and to create an international mechanism to ensure universal and equal access to technology for using alternative and renewable sources of energy.

Relations with the Council of Europe

In February 2008, President of the Parliamentary Assembly of the Council of Europe (PACE) Lluís Maria de Puig emphasized the need to hold free and democratic elections in Belarus and also expressed concern about Belarus’ other problems: the failure to carry out independent investigation of the scandalous disappearances in 1999-2000, the existence of political prisoners, the numerous obstacles hindering the activity of the opposition and independent media, as well as the absence of real division of power among all the branches of state power.32 “The Belarus parliament is not interested in restoring its status as a special member of the Par- liamentary Assembly of the Council of Europe but wants full-fledged membership,” said chairman of the House of Representatives of the National Assembly V. Andreichenko. He noted that Belarus might reexamine the question of abolishing the death sentence in the future.33 But there were no significant shifts in the relations between Belarus and the Council of Europe in 2008.

Belarus-International Labor Organization

Belarus has been included five times in a special paragraph of the report of the International Labor Organization (ILO) as a country that violates the rights of trade unions. The ILO drew up 12 recommendations for the Belarusian government, which, if fulfilled, will remove the country from the special paragraph. The Committee for the fulfillment of ILO norms and standards stated on 13 June, 2008 that “the main recommendations of the international experts have not yet been carried out.”34

C o n c l u s i o n

So in 2008 international affairs in Belarus remained contradictory and consisted of the following: n the establishment of an intensive dialog with the European Union and the uncertain prospect of normalizing relations based on the real steps Minsk has taken so far toward democratization; n the creation by Minsk of an acute political-diplomatic conflict with the U.S. and its transfer in an unregulated state to 2009;

32 [http://naviny.by/rubrics/politic/2008/02/13/ic_news_112_285629/]. 33 “Andreichenko: Belarus dolzhna byt polnopravnym chlenom PASE,” 17 December, 2008, available at [interfax.by]. 34 [http://naviny.by/rubrics/politic/2008/06/13/ic_news_112_292143/]. 139 CENTRAL EURASIA 2008 Analytical Annual

n the retention of economic preferences by the Russian Federation (energy resource deliveries at discount prices, granting loans, and so on) along with the continued unresolved status of the main Belarusian bargaining items that Russia is interested in: signing an agreement on a unified air defense system, adopting the Constitutional Act of the Union State, and diplomatic recognition of South Ossetia and Abkhazia; n the multi-vector transformation in Belarus’ foreign policy.

140 GEORGIA General Overview

GEORGIA

GENERAL OVERVIEW

Teymuraz BERIDZE D.Sc. (Econ.), professor at the International Black Sea University, advisor to the Director General of the International Bank of Azerbaijan-Georgia Joint Stock Company (Tbilisi, Georgia)

he year 2008 was far from simple in Georgia; it can be even described as a year of special importance. In January the country went to the polls to elect a president at a pre-term election; in May T it elected a new parliament; and in August there was a war with the Russian Federation. It was political developments rather than economic affairs that determined the country’s political future and affected the regional and world contexts. Anyone wishing to understand what made these two intertwined events possible should provide answers to two far from simple questions. The answer to the first is obvious—the political crisis that brought the people into the streets in 2007. The protest rallies that demanded more democracy for the country were dispersed. They were, in fact, an outcrop of the discontent with the undemocratic state governance and administration at all levels (analyzed in detail by Gia Jorjoliani in the Politics section) that had accumulated over the past two years, on the one hand, and the nation’s far from simple social and economic situation, on the other. The elections revealed that Georgia was still far removed from a real multiparty system and that it still lacked the mechanisms that would allow its citizens to be involved in decision-making. So far, the political organizations are showing no intention of merging into larger and more influential structures; parties and movements are born on the eve of election day to die once the elections are over. Those who stand behind them are seeking power rather than a better life for the country and the nation. Some of the parties and movements doubted the election results even though they were accepted by the leading powers and international observers.

141 CENTRAL EURASIA 2008 Analytical Annual

The answer to the second question is suggested by Russia’s inadequate, to say the least, Geor- gian policy and its stand in relation to the breakaway regions, which culminated in an armed conflict. The war brought Russia to the forefront of world politics as a power wishing to tighten its grip on the territories it describes as areas of its special interests, at least within the post-Soviet expanse. This was a far from adequate response (let us call it aggression) not so much to Georgian as to Amer- ican policy and the already obvious East European “political architecture.” The results can be classified as follows: n Political—Georgia lost two of its territories to Russia (which was seeking wider spheres of influence in the Caucasus). n Economic—Georgia lost some opportunities for dynamic economic growth, on the one hand, while it acquired the possibility of foreign economic aid, on the other. n Social (humanitarian)—lives were lost on both sides while Georgia continued to cope with the swelling numbers of refugees (a problem it has been facing for the past twenty years). What can and should be done? The answer supplied by Gia Jorjoliani is correct: radical reform of the power system; revised ideological approaches to political issues and more attention to the regions. This invites the following question: does the government have enough political and economic resources to accomplish this without being deprived of its popular support? We will have to wait and see. There is another question: what brought the country to the economic abyss and what must be done to retreat from its brink? I totally agree with Nodar Khaduri who blames the state and its inconsistent economic policies. Very much as before, in 2008 the government relied on foreign investments to the detriment of domestic investment potential. This can be described as a serious blunder which is responsible for the far from advantageous GDP structure and the far from favorable social context. The August events scarred the Georgian economy and its prospects: indeed, any military conflict is fraught with positive and negative effects. The victor has the chance to boost its economy by drawing on the newly acquired natural, financial, and human assets. At the same time this overheats the economy and makes it hard to allocate resources and optimize the economic structure in the short and medium term. The loser can make use of loans to promptly get back on its feet, lay the foundation for economic growth, and put its economy on a qualitatively new basis (this happened in Germany and some other West European countries after World War II). Defeat has a less optimistic side to it: territorial integrity is lost; infrastructure is destroyed, while the country’s society, deprived of part of its human capital, is badly disoriented, etc. The above applies to a greater or lesser degree to both sides in the conflict. After recognizing Abkhazia and South Ossetia as two independent states Russia drew them into the sphere of its economic interests, which brought it certain political and economic dividends. At the same time, its newly acquired satellites will have to cope with the problems that have been pestering Russia for some time. Georgia, on the other hand, having lost part of its territory, can count on certain economic gains and assistance in building up its armed forces. It should be borne in mind that the short clash did not ruin Georgia’s economy; it merely created problems for the banking sphere (within a very short period depositors withdrew about $160 million) that can be overcome with foreign help. In the short term the war left no indelible imprint on the Georgian economy. The long-term results in the form of smaller foreign investments might be more painful (a lower GDP, less jobs, greater financial instability, etc.) with the world financial crisis adding fuel to the flames. (The latter has already affected Georgian economy.)

142 GEORGIA General Overview

The economic problems remained the same: an ineffective economic structure, two-digital inflation, practically unprotected property rights, a balance of payments deficit, a trade deficit, a huge external debt, high unemployment, etc. Today, the socioeconomic situation (unemployment and inadequate education and health services) is the biggest challenge. The government should work hard to minimize the impact of the crisis-prone factors on the Georgian economy (structural and privatization policies and inadequate foreign economic policy). The very content of the state’s economic policies should be changed: it should concentrate on improving the economic structure, producing import-substituting products, and ensuring import-substitution growth in this sector. Georgia should not emulate the liberal (or neo-liberal) economic model in the strict sense of the word; its policy should follow the latest trends exhibited by other national economic systems. Eco- nomic growth should rest on the latest technological structures rather than on virtual financial flows. At all times the spiritual factor remained prominent in Georgia. The recently increased role of the Georgian Church in the country’s social and political life can be explained by the problems created by the government and the armed conflict with Russia, which is described in detail in Zaza Piral- ishvili’s article. The address of Patriarch of All Georgia Ilia II to the leaders of the Russian Federation with a request to decline the decision of the State Duma recognizing the independence of the two breakaway regions, his meeting with the president of Russia, as well as the Russian Orthodox Church’s refusal to take the Sukhumi-Abkhazian and the South Ossetian Orthodox eparchies under its jurisdiction can be described as the most important factors. The Russian aggression created the problem of protecting Georgia’s religious and cultural monuments on the separatist-controlled territories. This is not merely a short-term problem but an issue of vital importance for the national awareness of future generations. Thornike Gordadze deals with international affairs and international relations. For obvious reasons he concentrates on the conflict with Russia, analyzes what was done to join the Membership Action Plan (MAP), and describes the relations with Georgia’s closest neighbors: Turkey, Azerbaijan, and Armenia. He stresses that the relations with Russia made the conflict inevitable. Georgia could not accept Russia’s policy toward the two Georgian regions and Georgia’s natural desire to join the European and Euro-Atlantic structures. In 2008 the country concentrated on integrating with NATO, which was not an easy task in view of the domestic and foreign problems. The country’s socioeconomic development level and the pending territorial integrity issues were the stumbling blocks at home. Russia, which consistently undermined Georgia’s integration efforts, was a stumbling block on the international scene. Georgia must work hard to weaken the Russian factor. At all times the Turkish factor has been prominent in Georgia’s history. In 2008 the Turkish president betrayed his skepticism about the U.S.’s ability to unilaterally control the developments in several corners of the world; he had in mind the August events in the Caucasus and the Kars Treaty of 1921. The Karabakh conflict between Azerbaijan and Armenia, on the one hand, Azerbaijan’s balanced relations with the West and Russia and Armenia’s obvious pro-Russian bias, on the other, might affect Georgia’s relations with both countries. Tbilisi should keep this in mind when dealing with Baku and Erevan. The August conflict can be described as the year’s central event, which forced Tbilisi to face the fact of Russia’s recognition of the so-called independence of the Georgian territories (which have remained under Russia’s protectorate since the early 1990s). This problem should remain high on the country’s list of priorities and must be resolved sooner or later.

143 CENTRAL EURASIA 2008 Analytical Annual

Today Georgia must cope with a dual problem: it must create a democratic civil society and an effective market economy to give the country an attractive image conducive to peaceful settlement of the territorial issue.

POLITICS

Gia JORJOLIANI Associated professor at the Ivane Javakhishvili Tbilisi State University (Tbilisi, Georgia)

he Russian-Georgian war was the central Seen in the wider geopolitical context, the event of 2008; it drew a line under the post- war demonstrated that the current geopolitical T Soviet history of Georgia. The events that order was fragile and that the security stereotypes predated it, the hostilities, and the aftermath spoke and peaceful settlement of local and, even more volumes about the country’s political system and obviously, regional and global confrontations, regime, about their possibilities and main features. were ineffective. Finally, it became obvious that In fact, the August events revealed that domestic virtual may become real, discussions may end in and foreign policies were inseparable. action, while rhetoric may lead to bloodshed.

The Presidential Election

It was a very different New Year: after stormy protests the divided people froze in anticipation of 5 January, election day. A presidential election was scheduled for 5 January after the violent political crisis that began in September 2007 to reach its peak on 7 November when the government used force to disperse a peaceful rally, occupied the building of the Imedi TV Company, the opposition’s main information outlet, and introduced a state of emergency on a national scale. The use of force triggered negative responses at home and abroad. In fact, it was influential international structures that interfered on time to halt a political confrontation that was only a step away from violence. President Saakashvili had no choice: he resigned and fixed the date of a pre-term presidential election (5 January, 2008), thus trapping the opposition, which, for the lack of a strong presidential candidate, insisted on parliamentary elections. Its victory would have given it a chance to transform Georgia from a presidential into a parliamentary republic—a step seen as the shortest road to democracy. The National Council, the largest of the opposition structures, set up in November 2007 nominated Levan Gachechiladze as its presidential candidate. Shalva Natelashvili ran for the Labor Party and David Gamkrelidze for the New Right. Badri Patarkatsishvili, the regime’s richest opponent and owner of the Imedi TV Company, joined the race. This might have split the protest electorate and

144 GEORGIA Politics undermined the chances of each of the opposition candidates. On the other hand, this might have mobilized the protest electorate and made a second round possible. The election campaign, full of mudslinging, subsided by election day. The preliminary results, the exit polls (mistrusted by the opposition and many of the ordinary people) and parallel vote counting demonstrated that the president was balancing at the 50 percent level; he lost in Tbilisi and failed to carry the day in nearly all the large cities. The largest figures came from the constituencies well known for doctored figures and other irregularities. The Central Election Committee offered the final figures of 53.47 percent for Saakashvili and 25.69 percent for Levan Gachechiladze, his closest rival. Seventy-seven percent of the republic’s population favored NATO membership for the country; 80 percent wanted parliamentary elections in the spring. The opposition refused to accept the final figures of the presidential election; on 13 January it called a massive rally to demand a second round. However, the influential international actors, the U.S. administration in particular, were firm in their support of the president elect. This somewhat cooled the opposition: in front of a crowd of several thousand the opposition leaders refused to accept Saa- kashvili as a legitimate president but had to reconcile themselves with reality by making public their intention to take part in the parliamentary elections described as the “second round of the presidential election.” The presidential election of 5 January can be described as a novel phenomenon in the republic’s post-Soviet history. It was the first time the regime and the president failed to gain the nation’s overwhelming support. According to official information, nearly half of the votes were cast against the government: the nation obviously rejected the president.1 As distinct from mature democracies in which this level is sufficient to legitimize the winner and is accepted by those who voted against, in Georgia legitimacy needs much wider support. Based on a strict majority, personified and centralized presidential power in Georgia does not presuppose either vertical or horizontal distribution of power, which means that the minority has no chance of affecting decision-making. If the minority reaches the point where it comes too close to the majority, the legitimacy of power, its decisions, and their implementation become a big problem. In the wake of the Rose Revolution President Saakashvili enjoyed the unquestioned support of influential political forces in the West, which added legitimacy to his power. The November events undermined it, particularly in Europe: it lacked its former enthusiasm and took the developments with a grain of salt. Indeed, Europe needed stability in Georgia and the Caucasus rather than solidarity with the people currently in power in Tbilisi. The elections revealed that the situation was far from simple. To boost his legitimacy the president had to demonstrate that he still enjoyed the support of his external partners (in the form of the MAP) and of his own nation. The coming parliamentary elections were expected to confirm this.

The Parliamentary Elections

On 29 January the opposition published its Memorandum announcing that it was prepared to cooperate with the government for the sake of a fair, genuinely competitive, and transparent campaign and corresponding conditions on election day.

1 The very fact that support was only slightly higher than 50 percent was interpreted as confirmation that this time, as before, the government was relying on the administrative resource by adding at least several points to the real figures. The majority remains convinced that the real figures were below the needed 50 percent. 145 CENTRAL EURASIA 2008 Analytical Annual

At first the government agreed to discuss certain mutually acceptable conditions with the opposition. The talks, however, were cut short when it declined the opposition’s main demands, which radicalized the opposition’s approaches.

The Opposition on the Eve of the Elections

Badri Patarkatsishvili died on 12 February. His fairly complicated relations with the rest of the opposition before the elections notwithstanding, he remained an important strategic and tactical factor in the opposition struggle mainly due to his wealth. His death deprived the opposition of the chance to raise any substantial means for the election campaign, which, together with certain other considerations, enabled the government to nominate prominent businessmen in single-member constituencies, thus pushing aside the poorer opposition candidates. On 9 March, having lost the last vestiges of hope of reaching an agreement with the government, the opposition began a hunger strike in front of the parliament to rally the masses and force the Memorandum on the country’s leaders. This too proved futile: the situation and public sentiments had changed since the previous elections while the presidential election was expected to bring a regime change; no talk about a “second round” could convince the public that the parliamentary elections could do the same. The very fact that the parliamentary elections would take place with the incumbent in power convinced the nation that the legitimacy crisis had been overcome. Protest feelings survived while the momentum was spent. Fully aware of the opposition’s quandary, the emboldened government buried the already agreed Memorandum provisions. By refusing to replace the majority system in the single-member constituencies with proportionate representation in the multi-member constituencies, the government dealt the opposition the heaviest blow. It even went further by increasing the number of such mandates from 50 to 75 (half of the total number of available seats); the other half of the 150-strong parliament was elected by party lists. The opposition had a slim chance of winning in the majority constituencies where several of its candidates ran against one another. The initial plan of running on a single opposition list fell through early on; there were 3 election blocs and 9 political organizations running mainly against each other. The United Opposition—Na- tional Council—the New bloc, formed from all the 8 political forces of the united opposition, looked like the most formidable opponent of the ruling United National Movement. Two political parties with decent results at the presidential election—the Labor and the Republicans—ran on their own. There were several other blocs—the Right Alliance and the Traditionalists-Our Country-Women’s Party. The newly established Christian-Democratic Movement led by a head of the Imedi TV Company Giorgi Targamadze joined the race.

The Government on the Eve of the Elections

With the inauguration procedure behind them the people at the top busied themselves with gathering all the resources they could to strengthen the regime and boost its legitimacy. The greatly impaired image of the “beacon of democracy” forced the government to mobilize the most effective means for restoring its former authority with the West and find the shortest roads leading to this

146 GEORGIA Politics aim. On 14 February, President Saakashvili officially asked NATO Secretary-General Jaap de Hoop Scheffer to extend the Membership Action Plan (MAP) to Georgia. Russia was obviously concerned, which forced many of the NATO key members to take its mounting opposition into account. On 6 March, Russia moved toward lifting the blockade on the conflict regions. The United States, which remained Georgia’s staunchest NATO lobbyist, proved unable to turn the tide at the Bucharest Summit on 2-4 April. Back at home the Georgian leaders made the most of the summit’s resolution that promised the country NATO membership in the future. The opposition predictably ascribed the failure to the West’s highly critical attitude toward the president and his political course. The summit’s results sent up the tension over foreign policy issues. The government tried to boost its legitimacy with the world community by stressing the country’s precarious position at the side of a strong and large neighbor rather than by praising the regime as democratic; it was also expected that the external threat would bring the government and society closer together. Since the presidential election the country’s leaders had been trying to shift the political priorities from democracy and human rights (which figured prominently in the opposition’s post-No- vember propaganda campaign) to fairly mundane ones: “Georgia without Poverty” and “Deeds instead of Talk” in an effort to convince the people that the authorities had their social and economic concerns close at heart. Nothing was spared to demonstrate that unlike the opposition mainly concerned with political aims shared by a very limited circle the party in power was determined to address the needs of the people. Certain specific decisions demonstrated that it meant business. Indeed, the government had moved to a much better position leaving the opposition that lacked similar mechanisms out in the cold. The “carrot” came together with the “stick:” the entire administrative and financial potential of the central and local administrations, the security structures, businessmen connected with the government, and the media (TV in particular) had to pour their efforts into a common cause.

Election Results

The opposition was shocked by the absolute majority of the party in power: the United National Movement gained 48 seats on the party list; the United Opposition: the National Council-the Right came second with 15 seats; the Labor Party obtained 6 seats; and the Christian-Democratic Movement 6 seats. In the one-candidate constituencies the ruling party won with 71 seats; the united opposition and the Republican Party ended the race with 2 seats each. The international observers came with preliminary assessments: this time the elections were better organized than in January but were not free from serious problems.2 The opposition insisted that, as on 5 January, the results were falsified; it initiated a new protest wave in the streets. It all started with a large protest rally in front of the parliament at which some of the leaders of the united opposition announced that they would not work in an illegitimate parliament. The government scored a political victory of sorts: the fairly serious criticism offered by the international and local observers notwithstanding3 and despite the fact that the opposition continued

2 See: International Election Observation Mission. Georgia—Parliamentary Elections, 21 May, 2008. Statement of Preliminary Findings and Conclusions, available at [http://www.osce.org/documents/odihr/2008/05/31268_en.pdf]. 3 See: Georgia, Parliamentary Elections, 2 November, 2003, OSCE/ODIHR Election Observation Mission Report, available at [http://www.osce.org/documents/odihr/2004/01/1992_en.pdf]. 147 CENTRAL EURASIA 2008 Analytical Annual insisting on the illegitimacy of the elections and the parliament they created, it was obvious that this time the nation was less negative about the government than it had been in January.

The War

Nothing spoke of the coming storm: having acquired considerable support at the presidential election, the president improved his position. The opposition, which refused to recognize the parliament and work in it, was left without a clear strategy and tactics. Even though a large part of society did not support the president and his policy, it was clear that the public had become disillusioned with the opposition parties and the protest actions. It looked as if the government had reached the point where it could safely ignore the opposition. The country’s leaders, however, realized that the political crisis had merely been swept under the carpet. Deprived of an absolute mandate, they could no longer rely on the old methods: important decisions would surely be challenged both at home and abroad. An absolute mandate should have been restored at all costs together with the somewhat diluted support of the influential Western political actors. This seemed to be a priority.

Legitimization through Confrontation

Strange as it may seem Georgia and Russia responded in a more or less similar way to Kosovo’s independence proclaimed on 17 February, 2008: they did not recognize it but they were obviously determined to exploit the new factor. While paying lip-service to Georgia’s territorial integrity, Rus- sia gradually moved its support of the separatist regime to the official level. While insisting that Ko- sovo was no precedent, Georgia was obviously apprehensive that it would be used in this capacity if the worst came to the worst. The Russian and Georgian leaders alike were looking for the shortest roads to their different aims (far from unidimensional and expected to produce varied results); it was clear, however, that mounting confrontation was inevitable (amply confirmed in Kosovo). Georgia expected that Russia’s aggressive and confrontational behavior would be seen in the West as a threat to regional stability and that the West would move to Georgia’s side. Russia probably expected that the world community would interpret Georgia’s confrontational zeal as a sign of its aggressive plans and its resolution to use force. This would have justified Russia’s presence in a region where the civilian population needed protection. The developments were spurred on by the approaching presidential election in the United States.4

4 Analysts disagree about the role the U.S. played to escalate the conflict; Russia accused the radical wing of the Republican Party of inciting Georgia against Russia. The Americans resolutely denied this; U.S. officials said many times that they recommended that Georgia avoid armed conflicts. For an interesting analysis of America’s role see: A. Cooley, L.A. Mitchell, “No Way to Treat Our Friends: Recasting Recent U.S.-Georgian Relations,” The Washington Quarterly, Vol. 32, No. 1, January 2009, pp. 27-41. 148 GEORGIA Politics

It should be said that the confrontation strategy limited Tbilisi’s maneuverability when talking to Sukhumi and Tskhinvali.

The Chronicle of the Armed Conflict

The armed conflict between Russia and Georgia lasted from 8 to 12 August. According to the Georgian parliamentary commission, 413 Georgian citizens were killed (220 of them civilians) and 2,234 wounded; the conflict produced 131,169 refugees. Georgia lost its control over part of Tskhin- vali region and the Kodori Gorge in Abkhazia. The Georgian side shifted the responsibility for the conflict onto Russia saying that the aggression had been planned long before August 2008. The Geor- gian president announced that being informed that Russian troops and military vehicles had crossed the Roki Tunnel into South Ossetia he had to use force. The Russian side insisted that it was Geor- gia that started the hostilities, thus forcing Russia to launch a peace enforcement operation, which was completed by 12 August. The PACE resolution of 2 October, 2008 laid the responsibility on both sides.5 On 15 August, the presidents of Russia and Georgia signed an agreement of 6 points brokered by President Sarkozy on ceasefire and further steps to ensure security. On 12 August, President Saakashvili announced that Georgia would leave the CIS.

The Results of the War

On 26 August, President Medvedev issued a decree that recognized the independence of Ab- khazia and South Ossetia; on 9 September, Russia established diplomatic relations with both. By recognizing the separatist regimes Russia was probably seeking a stronger position in the region and a more prominent global geopolitical role. The strategic repercussions of this, however, look doubtful. The relations between the two countries have been spoiled beyond repair: none of the democratically elected Georgian government would accept the Russian decision or permit Russia to increase its influence in Georgia unless forced to do this (which naturally excludes democratic procedures based on the sovereign will of the nation and the state). Russia demonstrated that it would not use so-called “soft power” to achieve its aims; that it was prepared to act on its own while ignoring the international community and the influential political actors as well as its present and potential allies. What was done would hardly cement the very fragile Commonwealth of Independent States. No wonder none of its members sided with Russia when it came to supporting its decision to recognize the independence of the two self-proclaimed republics. Russia is a much weaker state than the Soviet Union was after World War II, therefore it cannot force either the countries which it tries to influence or the influential actors of world politics to accept its decision. It has neither the military-political, nor the economic, nor the ideological prerequisites. Anti-Ameri-

5 See: Resolution 1633 (2008). The Consequences of the War between Georgia and Russia. Parliamentary Assem- bly, available at [http://assembly.coe.int/Main.asp?link=/Documents/AdoptedText/ta08/ERES1633.htm]. 149 CENTRAL EURASIA 2008 Analytical Annual canism and “sovereign democracy” can hardly serve the foundation for Russia’s foreign policy aims. They can hardly rally the Near Abroad around Russia; they are unlikely to help it find serious and long-term partners when dealing with ambitious foreign policy tasks. By relying on force to achieve its aims Russia has limited itself to the same method in the future and deprived itself of a wider choice of foreign policy means. The war spelled a catastrophe in Georgia: civilians and the military lost their lives; it lost control of the Tskhinvali region and the formerly controlled part of Abkhazia; refugees arrived in great numbers while it became absolutely clear that the state could not guarantee the security of its citizens. The Georgian leaders lost practically all their chances to defend the country’s foreign policy interests. Today, Georgia can count on the still very fragile hope that the international community and the European Union in particular will come to its rescue. The government did not achieve its aims; the president lost part of his former legitimacy. The enthusiasm of the first days of the war rapidly petered out. The government was losing the efficiency and even internal legitimacy it had earned at the parliamentary elections. The shifts at the top (the prime minister and the defense minister resigned) spoke of the intention to alleviate the general negative attitude toward the government rather than of efforts to seek new approaches. Nevertheless, the critical point, the result of Georgia’s nearly twenty years of independent development, could be used to make a fresh start: the past should be critically examined and reappraised while the country should receive new political landmarks. This is primarily true of the way territorial-ethnic conflicts should be addressed in future: the government should learn that in a democratic country force and disdain for the minorities’ fundamental interests (this is true of all population groups, not necessarily ethnic minorities) are unacceptable. Today, society should move toward peaceful and collective methods of conflict settlement.

C o n c l u s i o n

The events of 2007-2008 demonstrated that cardinal changes in the system of power were long overdue: the present system can neither confirm its legitimacy nor pursue an effective and responsible policy in the name of all the social groups. The country’s security demands that unidimensional, confrontational, and ideological approaches should be replaced with moderate, pragmatic, multi-vector, and pluralist ones. The current trend, which is moving away from globalization to regionalization, suggests that attention should be paid to regional mechanisms of peace and sustainable development with Europe’s active involvement as the key regional actor. This cannot be done without radical transformation of the institutional elements of the Georgian government. The road toward security lies through political reforms designed to create more democracy, strengthen domestic legitimacy through wider representation, achieve decentralization, cooperation, and stricter accountability of power to the nation, and make the government more responsible. This, in the final analysis, will boost the political system’s efficiency and encourage cooperation between the government and society.

150 GEORGIA Economy ECONOMY

Nodar KHADURI D.Sc. (Econ.), professor, Ivane Javakhishvili Tbilisi State University (Tbilisi, Georgia)

he year 2008 was the most dramatic one in global financial crisis (a crisis predicted for sev- the recent history of independent Georgia. eral years by the world’s most prominent econo- T In fact, the country has not seen events of mists) as of the inconsistent economic policy this kind since the mid-1990s, after it managed to pursued by the Georgian government, often un- recover from protracted military conflicts in sep- professional and politicized. Let us recall, for aratist regions (Abkhazia and South Ossetia) and example, that the past year was punctuated by to achieve macroeconomic stability and high rates elections (early presidential elections on 5 Janu- of economic growth (around 11-12% a year). And ary and parliamentary elections on 21 May), it is not so much a question of the August mili- which left a negative imprint on the country’s eco- tary operations in the country’s territory or the nomic development.

Key Macroeconomic Indicators

The year began with patently unrealistic forecasts. The results for the previous year indicated that these forecasts were far too optimistic and were not based on actual macroeconomic performance. Under a government program called United Georgia Without Poverty, economic growth in 2008 was projected at 7.5%, with inflation of no more than 8% and nominal GDP of 20 billion lari (GEL), or $3,000 per capita at purchasing power parity. Given the trends of previous years, these forecasts could be regarded as over-optimistic from the very beginning. Let us add that experts attending the World Economic Forum in Davos in early Jan- uary already predicted that in 2008 the world would be exposed to the highest political and economic risks of the past few decades. The authorities drafted a bill outlining plans to turn Georgia into a world financial center. It was assumed that free economic zones would stimulate the inflow of foreign capital and thereby lead to an economic boom in the country. But the global financial crisis that erupted in the second half of the year could not promote the implementation of the plans mentioned in the document. This was coupled with serious miscalculations in government activity. Georgia completed the year with 2% economic growth and inflation of 5.5%. The results for the year are discouraging. Nominal GDP, which was expected to increase from GEL 17 billion in 2007 to GEL 20 billion in 2008, reached only GEL 18 billion. Let us note that the composition of GDP was not optimal either: 17% public administration, 16% trade, 12.1% transport and communications, 11% agriculture, 9.5% manufacturing, 8.3% education and health care, 5.8% construction, 2.6% financial activity, and 17.7% all other types of activity.

151 CENTRAL EURASIA 2008 Analytical Annual

As we see, the production part of GDP is very small and, most importantly, that the largest seg- ment of the Georgian economy is the state apparatus. This is one of the obstacles to the development of business and a factor hindering economic growth. An analysis of inflation rates for various groups of goods and services in the consumer basket will show that the prices of food products and non-alcoholic beverages rose by 5.5%, electricity, natural gas and other fuels by 3.9%, medical services by 21.5%, and communication services by 4.4%, while the prices of clothes and footwear fell by 2.6%, tobacco and alcoholic beverages by 0.5%, and education services by 0.4%. Average annual inflation compared to the previous year increased by 10%, including 12.2% for food products and non-alcoholic beverages, 15.4% for transport services and 14.9% for health services. Inflation and unemployment in 2008 remained at a steadily high level. It is known that economic growth and economic stability depend in large part on world oil prices. Let us note on this score that the past year brought serious fluctuations in oil prices. Whereas at the beginning of the year the price of oil in world markets was around $100 per barrel, by mid-year this price reached $145, and by the end of the year it dropped to only $40. Such fluctuations naturally influenced the prices of other goods as well. In November, the National Bank of Georgia (NBG) raised the exchange rate of the U.S. currency from 1.4 lari to 1.67 lari per dollar. In view of the macroeconomic trends of the second half of the year, this sharp appreciation of the dollar resulted in price increases for imported goods and services. Overall, the past year was quite unsuccessful in terms of the stability of the Georgian currency. Whereas at the beginning of the year a dollar bought 1.60 lari, in March its exchange rate fell below 1.50 lari, and at the end of July, below 1.40 lari. Naturally, such an exchange rate could not encourage exports. Moreover, it placed local producers at a disadvantage compared to foreign competitors. The government and the National Bank were obliged to manipulate the exchange rate in order to prevent the Georgian economy from going into hyperinflation.

Figure 1 Monetary Policy Rate

0 23.01.2008 23.02.2008 23.03.2008 23.04.2008 23.05.2008 23.06.2008 23.07.2008 23.08.2008 23.09.2008 23.10.2008 23.11.2008 23.12.2008 23.01.2009

152 GEORGIA Economy

This goal was achieved. As noted above, annual inflation was 5.5%, whereas from January to October it ranged from 10% to 12%, and in August, when Russian troops occupied a number of Geor- gian cities, including Poti and Gori, inflation reached almost 13%. At the end of July 2008, literally a week before the start of large-scale military operations, the exchange rate of the national currency began to fall and the dollar began to rise. This process naturally accelerated during the hostilities and especially after their cessation. But the National Bank was able to prevent the lari from falling sharply by means of a currency intervention, since Geor- gia’s foreign exchange reserves enabled it to do so. Nevertheless, on 7 November the National Bank switched to a new “equilibrium” of 1.67 lari per dollar. This exchange rate was maintained until the end of the year.

Figure 2 Official Exchange Rate (Period Average)

2.50

2.00 Official exchange rate 1.50 (period average) USD 1.00 Official exchange rate 0.50 (period average) EUR 0.00 Jul Oct Jan Apr Feb Mar Jun Sep Dec Nov May Aug

The National Bank’s attempts to prevent a decline in the lari exchange rate led to a reduction in Georgia’s foreign exchange reserves: from August to December they shrank by almost $750 million. The subsistence level (cost of living) in the country rose in line with inflation. Whereas at the beginning of the year the subsistence level for an adult male was GEL 123, by the end of the year it rose by about 6% and exceeded GEL 130. The level for the average consumer rose from GEL 109 to GEL 116, and for the average family, from GEL 207 to GEL 220. The structure of household income did not undergo any radical changes during the year. Aver- age monthly household income was around GEL 380; of this, wages accounted for about 45%, and income from the sale of agricultural products, for about 7%. Pensions, grants and government transfers made up about 20%, and income from capital, 1%. Remittances from abroad constituted about 5%, and money received as a gift from friends or relatives, about 10%. These data on household income give a clear picture of the situation in the country. The amount of capital is so small that income from it makes up only 1% of total household income. This highlights the importance of direct investment, which should enhance the economy’s foreign exchange capabilities and, accordingly, increase income from capital. An economy cannot be seen as healthy if wages

153 CENTRAL EURASIA 2008 Analytical Annual make up half of the population’s income, especially when unemployment is so high: according to official data, around 13% (this applies only to city dwellers, whereas rural inhabitants are counted as employed because they have plots of land). Naturally, problems have also appeared in the budget sector. Although the state budget was implemented, there is reason to believe that this was done using administrative resources on a large scale, because otherwise it remains unclear how, considering the failure to fulfill the main forecast (on the potential size of nominal GDP), the tax authorities managed to meet the target for collection of taxes, which are directly dependent on GDP. It should be noted that problems in public finance arose even before the start of hostilities. In January, tax revenues were already slightly below the figure for the same period of the previous year. True, in subsequent months they increased, which enabled the authorities to talk about the absence of financial problems in the country. In May 2008, Georgia issued Eurobonds worth a total of $500 million. Of this, $250 million was earmarked for two new extrabudgetary funds: the Future Generations Fund ($150 million) and the Sustainable Development Fund ($100 million). One of the purposes of the Future Generations Fund was to finance projects after the restoration of Georgia’s territorial integrity. This included projects for the complete rehabilitation of the territory of the Abkhazian Autonomous Re- public and the former South Ossetian Autonomous Region and their earliest possible reintegration into the Georgian economic space. After the August hostilities there were no financial problems, and tax revenues were virtually at the 2007 level, but in December the gap already exceeded $50 million. Annual budget revenue totaled GEL 4.5 billion, while expenditure exceeded GEL 5.5 billion.

International Economic Relations

Despite the problems noted above, Georgia’s foreign trade turnover rose by 17.2% from 2007 and reached $7.6 billion; exports rose by 21.5% to $1.5 billion, and imports exceeded $6 billion, with a deficit of over $4.5 billion. Georgia had a trade deficit with 107 countries and a trade surplus with only 21 countries. A point to note is that a surplus of more than GEL 1 million was recorded only with Canada, Armenia, Mex- ico, Iraq, Tajikistan and Albania. Since it has proved impossible to restore trade and economic relations with Russia (Georgia’s major economic partner in recent years), the Georgian authorities and businessmen are obliged to look for new markets, including in the European Union and the United States. In 2008, Georgian exports to EU countries totaled $335 million, and imports, about $1.6 billion. Despite problems with Russia, trade turnover with CIS countries increased. Compared to 2007, it rose by 10% to $2.6 billion, including exports of $545 million and imports of $2 billion. It is interesting to note that Georgian trade is relatively concentrated, as indicated by the fact that the country’s ten major trading partners account for about 68% of its total trade turnover. Georgia’s largest economic partner in 2008 was Turkey, with a trade turnover of $1.2 billion, or 33.7% more than a year ago. Turkey’s share in Georgian trade turnover rose from 14% to 16%. Azerbaijan is in second place with a turnover of $813.2 million, or 56.2% more than a year ago. Georgia’s ten major trading partners also include Ukraine (with a turnover of $791 million), Ger- many ($467 million), Russia ($454 million, including imports of $426 million), U.S. ($344 million), China ($307 million) and the United Arab Emirates ($284 million).

154 GEORGIA Economy

Among Georgia’s top ten export items, the first place belongs to ferroalloys (about 18% of total exports). They are produced at a single plant, which means that the Zestafoni Ferroalloy Plant accounts for a fifth of the country’s export potential. It uses Chiatura manganese ores, as well as ores imported from Ukraine. Nonferrous scrap makes up almost 9% of total Georgian exports. The top ten export items also include passenger cars, nitrogen fertilizers, raw or semi-processed gold, cement, alcohol, grape wine and nuts. As indicated by the above, goods produced at industrial enterprises (except mining and processing industries) are virtually absent from Georgian exports. The only exception is passenger cars, and the point is not only that Georgia produces cars which are in high demand, but also that Georgian legislation treats the transit of cars through its territory as exports. So, dealers in used cars from Eu- rope, America or Japan clear them through customs as imports into Georgia, and subsequently they are registered as Georgian exports to Armenia or Azerbaijan. The top ten items imported by Georgia include oil and oil products, passenger cars, natural gas, pharmaceuticals, communication and television equipment, iron and steel bars, wheat, computers and their components, wheat flour, manganese ore and concentrates. Let us note that the import structure is not too encouraging, if only because the largest import items do not include modern technology that would make it possible to start producing import-substituting and export products. Thus, the difference between imports and exports is $4.6 billion, which exceeds 75% of imports, so that exports cover only 25% of imports. This is a very unsatisfactory indicator. Naturally, such a large gap should be covered by capital inflows, including remittances from other countries. During 2008, remittances to Georgia exceeded $1 billion, about 64% of which ($634 million) came from Russia, 7% from Ukraine, 6.5% from the U.S., 5% from Greece, 4% from Italy, and 2% each from Turkey and Spain. In the same period, remittances from Georgia amounted to $84 million, 43% of which went to Russia and 16% to Ukraine.

The Impact of Hostilities and the World Financial Crisis on the Georgian Economy

In 2008, the Georgian economy felt the negative impact of several external factors, the most important of which were the Russian-Georgian war in August and the global financial crisis that erupted in the second half of the year. Let us not that even before this war the Georgian economy was not doing very well. At the beginning of the year it already became clear that the rate of economic growth could not be sustained. For example, economic growth in the first quarter of 2008 was 9.3%, whereas the figure for the same period of the previous year was 11.4%. After the hostilities, the inflow of foreign investment into Georgia decreased and an outflow of capital got underway. The hostilities lasted only five days. The Georgian economy stood the test despite gloomy pre- dictions by both local experts and representatives of international business circles, especially in Eu- rope. In view of the hostilities, 12 August was declared a one-day holiday for Georgian banks. In addition, the National Bank recommended that commercial banks close their online banking services and refrain from making loans. During the week that the conflict lasted, the Georgian banking system lost about 12% of deposits, and the country’s foreign exchange reserves shrank by about $350 million.

155 CENTRAL EURASIA 2008 Analytical Annual

Despite the blockade of the Poti Sea Port, the Georgian railway and central highways by the Russian armed forces, the republic managed to prevent a shortage of essential goods. It is difficult to distinguish the consequences of the military conflict from those of the global market meltdown in August-September: the war caused serious damage to the Georgian economy as the first rumblings of the global crisis reached the country. Since the Georgian stock market was not particularly developed, neither the war nor, even more so, the financial crisis had much effect on it. According to preliminary estimates, direct losses from the war-ravaged infrastructure amounted to $1 billion (about 8% of GDP). The Georgian army estimates the damage to its infrastructure at $200 million. In connection with the war, the Georgian tourism industry suffered significant losses. All the more so since Russian tanks were deployed in Poti, less than 20 km away from Ajarian health resorts, while forest fires raged in the well-known Borjomi Gorge. More than 100 thousand people hastily left the country or cancelled their visits. A serious blow was dealt to the country’s investment attractiveness. Kazakhstan abandoned its plans to build a grain terminal in Poti, although it had planned to direct part of its grain exports to the West through the Baku-Poti transport corridor. Earlier on, the Kazakh company KazMunaiGaz (which owns the gas distribution network in Tbilisi) decided not to invest in the construction of an oil refinery in Batumi. The Georgian Ministry of Economic Development revised its forecasts from 12% to 5-6% of GDP. But even this forecast, as mentioned above, turned out to be too high. In reality, according to the most optimistic estimates, GDP growth was only 2%. In order to support the Georgian economy, it was important to obtain foreign infusions. Due to the financial crisis and military action, the inflow of private direct investment into the country was in jeopardy. A significant event in this respect was the October conference of donor countries in Brus- sels, which decided to provide $4.4 billion worth of aid to Georgia. The IMF allocated $750 million in support of the country’s financial sector. Active negotiations began with Washington on the issue of granting preferential treatment to Georgia in trade with the United States. The European Union also agreed in principle to conclude an agreement on free trade with Georgia. Thus, the Georgian economy has stood the test of the August hostilities and the onset of the world financial crisis, remaining functional despite the problems that arose in this connection.

The Paradoxes of Russian-Georgian Relations: Georgia in the “Liberal Russian Empire”

Even Anatoly Chubais, the ideologue of “Russian liberal imperialism,” could hardly imagine that Georgia, despite such complicated relations with Russia after the August war, would itself “ask for admission” to the “Liberal Russian Empire.” On 25 September, 2003, the St. Petersburg State Engineering Economic University awarded an honorary doctorate to Anatoly Chubais, chairman of RAO Unified Energy Systems (RAO UES) of Russia. At that ceremony, he first came up with the idea of creating a “liberal empire.” He said: “Liberal imperialism for me does not mean that we can abandon the principle of the inviolability of borders in real earnest. Of course, it does not mean that we will violate generally recognized rules

156 GEORGIA Economy of international law. It means that the state has the duty to promote in every possible way the development of Russian culture and the culture of other peoples in neighboring countries. Liberal imperialism for me means that the Russian state should promote in every possible way a Russian business expansion beyond the country’s borders, toward our neighbors. For me it means that the Rus- sian state should do its utmost—directly and by legal means—to support the fundamental values of freedom and democracy not only in Russia, but also in all neighboring states.”1 When these “legal” means of Russian expansion were supplemented with tanks and aircraft, many analysts began to think that Georgia would not only keep out of the “Liberal Russian Empire,” but would also get down to nationalizing the property that had passed into the hands of Russian (mainly state) capital after privatization. Even before the Rose Revolution, RAO UES of Russia acquired 75% of the shares of the Tbilisi electricity distribution company Telasi, 100% of Mtkvari Ltd. (2 units of TbilGRES power plant), 50% of the electricity distribution company TransEnergy Ltd (which has quotas for electricity supply to Turkey), and also the right to manage JSC Khrami Hydro Power Plant until 2024. All these companies were bought from the American AES back in the summer of 2003. After that, Russian capital appeared in the Tbilisi water distribution system and in the mining industry. A preliminary agreement was also reached between Gazprom and the Georgian authorities on the acquisition of Georgia’s main gas pipeline. This agreement was cancelled after a visit to Tbilisi by U.S. President George W. Bush. And after the cessation of hostilities, in a situation where there are no diplomatic relations, no transport or postal service between the two countries, where the Russian market is closed to Geor- gian products (except electricity) and Russia has occupied Georgian territories, recognized the independence of its two autonomies and is building military bases in Georgian territory, we find that Enguri HPP, Georgia’s largest hydroelectric power plant, has been handed over to Russia as a result of behind-the-scenes negotiations. This fact casts doubt on the credibility of Georgian economic policy.

C o n c l u s i o n

The year 2008, one of the most dramatic and tragic ones in the history of independent Geor- gia, is over. It is too early to summarize its exact results. A convincing fact, however, is that even before the hostilities the country encountered serious problems in the banking sector and public finance, while its economic growth slowed down. This shows that Georgian economic policy needs serious rethinking. The continued Russian military presence in Georgian regions is a threat to Georgia’s ability to perform its transit function. Moreover, it can become an obstacle to large-scale investment in the country and to the development of its tourism industry. On the other hand, the assistance provided by the world community gives hope that in the years ahead the country will be able to overcome the crisis and return to normal life.

1 [http://www.archipelag.ru/geopolitics/nasledie/empire/russia/]. 157 CENTRAL EURASIA 2008 Analytical Annual RELIGION

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

I n t r o d u c t i o n he clash between Georgian and Russian tity and was disoriented by the new historical and armed units in separatist South Ossetia in Au- cultural reality, in August 2008 the GOC was the T gust was unquestionably the central political only social structure the nation trusted and respect- event of 2008, which indirectly boosted the social ed. Its members were the first to arrive on the bat- and political role of the Georgian Orthodox Church tlefield and help the people; its role of an interna- (GOC). While in the past it gained authority among tional actor was equally important. a nation scared by social and economic difficulties, The August events pushed everything else, which faced the prospect of losing its cultural iden- no matter how important, aside.

Facts and Figures1

According to different sources, Orthodox Christians comprise the largest (from 81.5 to 83.9 percent) share of the republic’s population. The number of church-goers is rising steadily. While in 1998, according to a poll conducted by the Philosophical Society of Georgia, the share of church-goers among the Orthodox Christians was 5.67 percent, in 2006 (according to the Business Consulting poll) the share increased to 17.5 percent. Catholicos-Patriarch of All Georgia Archbishop of Mtskheta-Tbilisi Ilia II heads the GOC and the Holy Synod. The Church is divided into 33 eparchies; the Patriarch’s residence is in Tbilisi. The GOC has a Higher Spiritual Academy founded in 1988 in Tbilisi with 15 spiritual colleges scattered across the country (Kutaisi, Akhaltsikhe, Batumi, and elsewhere). On 21 December, 2006, the Andrew the First Called University was set up under a decree of the Patriarch and a decision of the Holy Synod. It has already acquired a building while its curricula are still being discussed. Since 2006 the Patriarchate has been running its own TV channel (which was suspended for several weeks because of internal problems in 2008). It also broadcasts through its Radio Iveria. There is no reliable information about the number of new churches or size of the clergy. Accord- ing to expert assessments, 350-400 new Orthodox churches have appeared during the years of independence; in addition to that 1,000 people have joined the clergy. In the late 1970s there were only 50 functioning churches in the republic. The Muslim community includes three ethnic groups: Azeris, Muslim ethnic Georgians (Ajar- ians), and Kistins.2 The Muslims comprise about 9.9 to 11.2 percent of the total population.

1 Information is borrowed mainly from Religions in Georgia published in 2008 by the center of tolerance under the people’s ombudsman of Georgia. 2 They are descendants of the Chechens and Ingushes who settled in the Pankissi Gorge, in the northeastern corner of Georgia, on the upper reaches of the Alazani River in the 1830s and 1870s. In 2002 there were 7,100 of them. 158 GEORGIA Religion

Their community operates under the Administration of the Caucasian Muslims headed by Sheikh- ul-Islam Allahshuqur A. Pashazadeh. Gazi Akhundi Ali Aliev is the Administration’s plenipotentiary representative in Georgia. In the republic’s east there are four large madrasahs operating at the mosque: two of them are Shi’a and funded from Iran; the other two are Sunni and function on Turkish money. There are several small madrasahs in Ajaria, Marneuli, Kesalo, and Gardabani. The Tbilisi mosque runs a female madrasah. The followers of the Armenian Apostolic Church (AAC), about 3.9-4 percent of the total population, comprise the third largest religious group headed by Bishop Vazgen Mirzakhanian. Their main cathedral is in Tbilisi; the community has 21 churches, a spiritual seminary in Shulaveri, and several Sunday schools. About 0.68 to 1 percent (mainly Georgians and Assyrians) of the republic’s population are Cath- olics. During the last few years the Georgian intelligentsia has been demonstrating a weak yet noticeable bias toward Catholicism. On the other hand, the Catholic population of Western Georgia (especially the youth) has been tending toward Christian Orthodoxy, which is connected with the strengthening of religious nationalism. Christian Orthodoxy has been, and remains, one of the key factors of national-cultural identity in Georgia. The Apostolic Administration (Latin Rite) of the Caucasus was set up in December 1993 under Nuncio Jean-Paul Gobel. In 1996 the functions were divided and the post of Apostolic Administrator went to Padre Giuseppe Pasotto, who was consecrated bishop in 2000. From its first day the Apostolic Administration has been uniting the Catholics of the Latin Rite of Georgia, Armenia, and Azerbaijan; later the Catholics of the Syrian-Chaldean Rite joined them. The Apostolic Administration is part of the Congregation for the Oriental Churches. Pope John Paul II’s visit to Georgia in November 1999 made this year a special one for the Georgian Catholics. There are two Catholic churches in Tbilisi and four in Southern Georgia, a predominantly Cath- olic area. New churches are being built in Kutaisi and Batumi. The Sulkhan-Saba Orbeliani Catholic Institute of Theology, Philosophy, Culture, and History set up to educate Christian theologians has been functioning in Tbilisi since 2002. In 2001 the Yezidis comprised 0.7 percent of the republic’s total population. There were over 100 thousand Orthodox ethnic Greeks in the republic before emigration cut down their numbers to 12-15 thousand. President-Bishop Malkhaz Songuashvili heads the Evangelical Baptist Church which, according to the 2001 figures, had a following of no more that 5,000 members; together with those interested there are about 17 thousand Evangelical Baptists in the republic with the main church in Tbilisi and several chapels scattered across the republic. The Baptists claim at least 60 centers in Georgia; since 1993 they have been running a seminary. Encouraged by independence the Protestant and other churches have been demonstrating much more vigor than before: by 2001 there were 15 thousand Jehovah’s Witnesses and about 9-10 thousand Pentecostals in Georgia. Several emigration waves cut down the size of the Judaic community to 10 thousand (0.2 percent of the total population). The community runs synagogues and Sunday schools in Tbilisi and elsewhere in Georgia. The Lutherans (under 1 thousand) are mainly found among the members of the German community. The Seventh Day Adventists are a relatively small group of 400. The other religious groups taken together account for 34 to 35 thousand members. The republic is dominated by Christian Orthodoxy: all the public opinion polls testify to the fact that the GOC is the most trusted institution (80 to 83 percent), which easily explains the interest of foreign experts in its political role.

159 CENTRAL EURASIA 2008 Analytical Annual Official Religious Leaders

In 2008 the GOC took up an even more prominent position on the domestic and foreign issues. Early in 2008 it played an important role in the republic’s relations with Russia. On 18 Feb- ruary, Catholicos-Patriarch of Georgia published his statement in which he called on Moscow to change the tone it used when talking about independence for Abkhazia and South Ossetia in the light of Kosovo’s independence. The head of the GOC pointed out that even though Georgian society found it hard to agree on many points, “the opposition, government, Church, and nation are united in their conviction that Georgia was and should remain an undivided country.” And further, as quoted by Interfax: “I have many times warned representatives of the Russian authorities that separatism is a catching disease: we should all be aware of this.” He also pointed out that “Russian culture, history, science, and philosophy are respected in Georgia, yet we should point out that no sovereign state would accept the tone Russia uses when talking to Georgia.” Late in April the Pa- triarch pointed out that both countries were not always consistent when it came to building good- neighborly relations. According to the Interfax-Religion portal, Ilia II handed his statement to Ambassador of Russia to Georgia Vyacheslav Kovalenko at the St. Trinity Cathedral in Tbilisi with words of regret over the far from simple relations between the two countries: “We are fully aware that both sides are guilty of blunders committed at different times, but the Georgian Orthodox Church is convinced that separatism should not be supported anywhere in the world and believes that such support breeds violence and aggression.” Similar statements were published on 4 and 8 May. On 9 June, according to ITAR-TASS, Patri- arch of Moscow and All Russia Alexiy II sent a letter to Catholicos-Patriarch of All Georgia Ilia II in which he described his vision of the relations between the two countries and said that he shared the concerns of the GOC leader. Armed clashes between Russia and Georgia began on 8 August. The Catholicos-Patriarch of All Georgia and the Patriarch of Moscow and All Russia responded with statements designed to call the sides back to the negotiation table. They both expressed their hope that no one could ignite enmity between the two Orthodox peoples. According to Associated Press, on 11 September Pope Benedict XVI called for a cease-fire and talks between Russia and Georgia. He urged the sides to refrain from further confrontation and actions that might worsen the already bad situation. On 12 August, Head of the Russian Agency for the Protection of Cultural Monuments A. Ki- bovskiy stated that he was amazed by the lack of international response to the destruction by Geor- gian troops of Ossetian cultural monuments. This was a purely political statement: the ruined monuments (the ancient St. George Kavta Church of the 8th-9th centuries, the Sabatsminda Fortress of the 15th-18th centuries, the Khvtismshobeli Church, and some of the cathedrals of the 19th century) the Russian official described as Byzantine monuments were registered as Georgian cultic objects. They belonged to the Nikozia and Tskhinvali eparchies (which include the city of Tskhinvali, the Tskhinvali, Akhalgori, Java, and Znauri districts) with a mixed Ossetian and Georgian population; as such they were under the jurisdiction of the Georgian Patriarchate. They were never registered as Byzantine or Ossetian cultic objects (there is no information about Ossetian Christian structures in the Central Caucasus). Their names are purely Georgian and have nothing in common with the Ossetian language. The services in these churches, as elsewhere in Georgia, have always been in Georgian and never in Ossetian. In view of the ethnic purges in the Tskhinvali Region carried out by Russian and Ossetian military (tens of thousands of civilians were unceremoniously evicted from their homes) it

160 GEORGIA Religion seems that the cultural monuments suffered at the hands of those guilty of the ethnic purges. This means that the accusations the Russian official hurled at Georgia were groundless and should be dismissed as part of information warfare. The statement of the Georgian Foreign Ministry of 8 August already mentioned the cultural monuments ruined by Russian air strikes and separatist forces and described this as an attempt to destroy Georgia’s cultural heritage in South Ossetia. In the 1990s the so-called Alanian Orthodox Church was set up in South Ossetia; recognized in 1993 by the Russian Orthodox Church Abroad (ROCA) and later by the Greek Old Calendarist Or- thodox Church. It has eight parishes and an office in Moscow. The ROCA contributed in its own way to the ethnic conflicts in Georgia. Here is what happened to the Abkhazian Church: since 1993 the Tskhum-Abkhazian Eparchy of the GOC remained separated from Abkhazia, which urged the ROCA to extend its jurisdiction to the Abkhazian Church (the act was never canonically registered). The Act on Canonical Communion of October 2007, which made the ROCA part of the ROC, transformed the situation into an act of invasion of the Moscow Patriarchate into the Georgian Church’s canonical territory. The ROC refused to take the South Ossetian and Sukhum-Abkhazian Orthodox eparchies under its jurisdiction despite their repeated requests. The Moscow Patriarchate issued a statement that said in particular: “Political decisions cannot affect church jurisdiction and the spheres of pastoral responsibilities.” This means that while the ROC is present in Abkhazia and South Ossetia the Moscow Patriarchate formally supported the indivisibility of the GOC. This means that the ROCA’s independent policies in the regions can be described as latent expansion. On 26 August, Catholicos-Patriarch of All Georgia Ilia II asked the president and prime minister of Russia to refrain from signing the State Duma’s decision recognizing the independence of Ab- khazia and South Ossetia. In his address published by the Georgian Patriarchate he pointed out that the end of the hostilities had not discharged the tension between the two countries, which would rise to even more dangerous proportions if Abkhazia and South Ossetia were recognized as independent states. The Russian Orthodox leaders, likewise, repeatedly stated that the two Orthodox churches might become the guarantors of peace between the two nations. In November a GOC delegation came to Moscow to meet its Russian colleagues and one of Russia’s deputy foreign ministers. On 11 December, the Georgian Patriarch, who had arrived for the burial of Patriarch of Moscow and All Russia Alexiy II, met President Medvedev. They spoke for 45 minutes. This was the second time the Orthodox Church had tried to promote a dialog between the two hostile states. Later, when describing his meeting with the Russian president to members of the Georgian diaspora in Moscow, Ilia II deemed it necessary to refer to Russians and Geor- gians as “two fraternal peoples” and expressed his hope that the conflict would be resolved by peaceful means. President Medvedev, in turn, said that Georgia needed a strong Russia while Russia needed a strong and united Georgia. “We shall achieve this with God’s help,” he said.

Freedom of Conscience, Tolerance, and Inter-Religious Dialog

In 2008 old contradictions (inherited from 2005) between the GOC and the AAC over several cultic objects flared up again. The AAC published several statements demanding the return of several churches that allegedly belonged to the Armenian Church. The accompanying historical essays spoke

161 CENTRAL EURASIA 2008 Analytical Annual about 600 controversial buildings, an obvious overstatement that made the talks next to impossible. At some point the Armenians claimed objects of historical and religious importance for Georgia. In the context of the problems related to the cultic objects and Armenian-populated regions of Georgia all sorts of Armenian NGOs were indulging in spreading information in Russian and English about anti-Armenian hysterics in the Georgian media. This was not true even though obscure marginal publications did afford anti-Armenian statements.3 Late in May the Georgian Eparchy of the AAC protested against the iron railings with typically Georgian symbols the GOC built around the controversial church (Armenians call it the St. No- rashen Church) on Leselidze Street in Tbilisi. At about the same time the prime ministers of Geor- gia and Armenia met at a CIS summit in Minsk and discussed this problem, among others. The Armenian prime minister asked his Georgian colleague to sort out the legal problems relating to the building. After a while, on 23 October, the Georgian AAC Eparchy demanded, in the name of the 400 thousand-strong Armenian diaspora in Georgia, a halt to the “encroachments on the Armenian cultic objects.”4 On 16 November, a group of Orthodox believers came to the disputed church to tidy up the yard. The fact that several Armenian burial monuments had been displaced in the process added fuel to the fire. According to Orthodox priest Tariel Sikinchilashvili, this was done to put the stones in their original places. The Armenian side preferred to call this “desecration” of Armenian burial sites. On 19 November, the Armenian Foreign Ministry demanded an explanation from the Georgian ambassador. On 27 November, the Research for Armenian Architecture (RAA) suggested that the Armenian public should go to the international structures involved in the protection of cultural heritage and call on them to put an end to “Georgia-nization” of the Armenian churches. On the same day a crowd of protesters gathered in front of the Georgian embassy in Erevan. On 28 November, it became known that representatives of the two Churches had met at the office of the Georgian Patriarchate. It was agreed to set up a commission of clergymen and academics to decide which of the sides had the right to the disputed building. This did not discourage students of Erevan’s educational establishments from protesting against the encroachments on the Armenian churches in Georgia in front of the U.N. office in Erevan. They demanded that the Georgian clergy discontinue their illegal actions against the Armenian churches in Georgia. There were rumors that similar actions were also being planned in other countries. The Armenian diaspora in Georgia is much more reasonable. Its members do regard the disput- able church as AAC property but, with the exception of several hotheads, they prefer a constructive dialog and reject the radical demands formulated by several Armenian organizations and private persons. Van Bayburt, co-chairman of the Union of Georgian Armenians and advisor to the president of Georgia, has publicly warned against possible highly unwelcome repercussions of the mounting tension orchestrated by all sorts of forces. On 8 December, the Georgian Patriarchate published a statement to confirm its respect for the Armenians and the Armenian Church and express its amazement that the Armenian and international press were building up tension after it had been decided to set up a joint commission. At the same time

3 Trabzon-Ardvin-Batum, an Armenian nationalist association, issued a statement in which it hinted at certain territorial claims and spoke about anti-Armenian hysterics in the Georgian media. It mentioned the Aisi newspaper, of which I personally have never heard. It might exist but anything it wrote cannot be described as anti-Armenian hysterics because of the newspaper’s humble status. 4 The statement grossly overestimated the size of the Armenian diaspora. According to the latest (2002) population census, there are about 250 thousand Armenians in Georgia. The figure is large enough and cannot be dismissed lightly. 162 GEORGIA Religion the Georgian press demanded the return of ten Georgian churches in Armenia that the AAC had appropriated under Soviet power. On 9 December, it became known that Prime Minister of Armenia Tigran Sarkisian, together with Georgian Minister of the Environment Georgi Khachidze and Minister of the Georgian Diaspora Yulon Gagoshidze, visited the disputed church (the doors of which had been sealed). Soon after that the doors were broken. The culprits remain unknown but believers tend to lay the blame on Georgian officials. Previously it was the Georgian side that was held responsible for interfering in the functioning of the joint commissions; in 2008 it became obvious that it was the Armenian side that prevented their smooth functioning. On 22 December, Bishop Vazgen Mirzakhanian announced that the Armenian side was dead set against any joint commission; he argued that there was no need to go into details since it had always been an Armenian church (panARMENIAN.Net). “The Armenian side,” said he, “objects to a commission to study who should own the churches, including the St. Norashen Church, the status of which are disputed by the GOC. Even if it finds their status debatable, the Armenian Apostolic Holy Church will still regard them as its historical property.” In August it became abundantly clear that the churches, particularly just one of them, were not the crux of the matter. The tension was rising because of the August armed conflict between Russia and Georgia. If escalated, the religious conflict would have created a favorable background for Russia’s invasion of Georgia under the pretext of protecting the ethnic minorities. On 10 December, President Saakashvili personally assured Prime Minister of Armenia Sarki- sian that he would study the problem in detail. The Georgian side responded to the accusations by accusing the Armenian side of deliberate distortion of historical facts. It has been never forgotten that in the 16th-18th centuries the Armenian clergy used the Iranian persecutions of the GOC to appropriate any number of Georgian churches. The fact that the Armenian Church has been at daggers drawn with the Jerusalem Orthodox Eparchy over the Church of the Holy Sepulcher is interpreted as evidence of the Armenian Church’s expan- sionist nature. It should be said that, very much as before, in 2008 the problem of the churches and the sociopolitical situation in Samtskhe-Javakhetia coincided with another bout of Russian-Georgian tension, the coincidence probably explained by the Russian-Armenian strategic union. The recent military clash demonstrated that ethnic conflicts have been and remain an important element of Russia’s policies used to tame its “recalcitrant” neighbors. The Georgian-Armenian confrontation is partly fed by the inflexible position of certain Geor- gian clergymen: they refuse to revise their position, insist on drawing theological arguments into a purely legal problem, and reject all compromises. It seems that an academic approach to the issue and talks based on academic findings would have defused the tension. On 9-10 October the International Center of Christian Studies at the GOC and the Gelati Acad- emy of Sciences organized the 3rd International Symposium “A Dialog of Civilizations—Education and Upbringing as an Instrument of Cooperation” attended by academics and religious leaders from many countries.

163 CENTRAL EURASIA 2008 Analytical Annual INTERNATIONAL AFFAIRS

Thornike GORDADZE Head of the Caucasian Laboratory at the French Institute of Anatolian Studies (Istanbul-Baku)

t the beginning of the 19th century Carl a) Events that promoted or caused the war von Clausewitz wrote that war is a contin- and A uation of political activity by other means. b) events that occurred as a consequence. The Russian-Georgian war of 2008 fully corrobo- rates this hypothesis. The hostilities, which lasted For instance, recognition by most of the for only a few days, were just one episode in the West of Kosovo’s independence, cancellation of Russian-Georgian confrontation that began long the Russian Federation’s sanctions against Geor- before August 2008 and still has a long way to go. gia’s separatist regions and their militarization, Nevertheless, this short war can be considered the and NATO’s refusal to offer Georgia the MAP at most important occurrence of the year in Georgia. the Bucharest summit promoted the Russian- All the more or less significant events in Georgian war. Whereas the American-Georgian Georgian foreign policy in 2008 are associated in charter and approval of a 4.5-billion-dollar aid some way with the war. They can be divided into plan for Georgia at a conference of sponsors in two categories: Brussels are consequences of the war.

Georgia and Russia: On the Warpath

At the beginning of 2008, during the anticipated presidential election campaign, Russian-Geor- gian relations were as hot as they could get. The Georgian leadership suspected some of the opposition forces that demanded retirement of the government and president the previous November of being in cahoots with Russia. After he was re-elected, Mikhail Saakashvili said that his main aim was to normalize relations with Russia and promised to invite President Vladimir Putin to his inauguration. But soon declaration of Kosovo’s independence and its recognition by the U.S. and several EU countries put Russian-Geor- gian relations to a serious test. Russia’s reaction can be called extreme. Many countries, even EU member states (Spain, Rumania, and Cyprus), were against this recognition, but only Russia called so blatantly for re-examination of the generally accepted state borders. Not even Serbia took such an open stance. It is unlikely that Russia was prompted by feelings of “Slavic fraternity” alone in the Kosovo question. It was sooner the beginning of its aggressive policy on the international arena. Claiming protection of territorial integrity, Russia was actually threatening to begin fragmentation of the post- Soviet states, Georgia being the first to find itself on the Russian president’s chopping board. On 21 February, Vladimir Putin and Mikhail Saakashvili met for the last time as presidents. It was not an easy encounter, although both leaders tried to present it in a positive light. They announced that air communication would soon be restored. Mikhail Saakashvili was in a hurry to say that some

164 GEORGIA International Affairs progress had been made in establishing joint control over the Roki Tunnel and the checkpoint on the Psou River (the Abkhazian part of the Georgian-Russian border). Later the Georgian leadership admitted that Putin did mention the Russian Federation’s intention to withdraw from the CIS agreement of 1996 that envisaged economic sanctions against Abkhazia (in reality Moscow has long failed to observe this agreement). And it did withdraw on 6 March after the Russian Foreign Ministry sent a corresponding note to the CIS Executive Committee. Since 6 March, the Kremlin actively engaged in measures that brought the countries closer to an armed conflict. This was recognized as the most likely outcome of its strategy. After moving to un- freeze the Abkhazian and South Ossetian conflicts, Moscow hoped to break Tbilisi’s resistance and gain major concessions in the form of Georgia accepting a neutral status and abandoning its Euro- Atlantic orientation. If Georgia continued to resist, the Kremlin intended to play a tougher “foul game”1 and continue moving toward integrating Abkhazia and South Ossetia into its orbit, which Georgia justifiably called “creeping annexation.” Election of the new president in the Russian Federation did not change the course toward tough- ening up the grip on Georgia. At the end of March, the State Duma held a special session on Abkhazia and South Ossetia at which there were calls to recognize the sovereignty of Georgia’s breakaway regions and protect the Russian citizens living there, even if it meant using force. The aim was to put pressure on Georgia since the resolution adopted only “recommended” that the executive branch “re- examine the expediency of protecting the security of the Russian citizens living in Abkhazia and South Ossetia.” In response to this, Mikhail Saakashvili offered the Abkhazian side new peaceful initiatives, but they failed to reach their objective since they were sent to the Abkhazian leadership, which had the least room for maneuver at that time due to its increasing dependence on Moscow. The period between April and June (Mikhail Saakashvili’s first meeting with new Russian Pres- ident Dmitry Medvedev) was characterized by growing tension. It became increasingly obvious that NATO would not be offering Georgia the MAP. The countries of the Alliance that voted against this hoped this move would defuse the tension on the Russian-Georgian front, but this proved to be a serious mistake. Immediately after the NATO Bucharest summit, Vladimir Putin sent a public letter to the heads of Abkhazia and South Ossetia and a few days later (16 April) signed a decree according to which the government and other state structures of the Russian Federation were to establish official relations with the corresponding structures of these separatist regions. This began legalization of Russia’s already long established relations with Abkhazia and South Ossetia. Other steps were also taken to increase the tension. In particular, Georgian drones were struck down over Abkhazian territory, which demonstrated the sides’ tactics: Tbilisi was trying to attract the attention of the international community by intentionally sacrificing its drones. Despite the assurances of the Russian and Abkhazian military that the drones were struck down by Abkhazian air defense systems, few doubted that Russian aviation was to blame. The United Nations Observer Mission in Georgia (UNOMIG), which is always cautious in its assessments, came to the same conclusion (26 May, 2008). Georgia wanted to show Russia’s latent aggression. And the latter wanted to see just how loyal the international community was to its principles and test the strength of the Georgian leadership’s nerves. For the moment the West was happy to limit itself to calls for caution, the Kremlin believed that any real problems were still a long way off and that it could continue putting pressure on Georgia. At the end of April-beginning of May, the countries showed some of the first signs in a while of coming close to open warfare. Russia unilateral increased its peacekeeper contingent by adding par- atroopers (its peacekeepers should not include offensive forces) in Abkhazia, which could have pro-

1 I borrowed this “sports analogy” from Sergey Markedonov, who used it for the first time in an article in Russia’s Vesti of 13 April, 2005. 165 CENTRAL EURASIA 2008 Analytical Annual voked Georgia to respond with force. But the Georgian authorities once more preferred to appeal to the international community, which, this time, produced a more perceptible result. The EU, NATO, and the U.S. asked Russia to re-examine its decisions to establish direct relations with the separatist authorities and to bring in additional forces in April. On 15 May, after several months of no-go, the U.N. General Assembly adopted the resolution prepared by Georgia calling for recognition of the right of refugees, forced migrants, and their descendants to return to Abkhazia regardless of their ethnic origin. The international community became convinced that passivity regarding the frozen conflicts in Georgia could lead to a major international crisis and war. High-ranking European (Javier Solana and Frank-Walter Steinmeier) and American (Matthew Bryza) diplomats, as well as ambassadors of the EU countries and the U.S., began actively visiting Sukhumi, Tbilisi, and Moscow in an attempt to prevent a military confrontation. Tbilisi succeeded in raising the settlement process to an international level and getting the international community to recognize Russia as a discriminat- ing mediator. In response, Russia built up its military might in both of the rebel regions, hoping that the Geor- gian leadership would make a mistake. At the end of May, with the objective of renovating the railroad, the Russian Federation brought rail forces into Abkhazia and accelerated the building of an unofficial military base in the Java District of South Ossetia. Despite the active efforts of the international community, its actions were far too indecisive and slow to force Russia to curtail its policy. After Dmitry Medvedev was elected president, some members of the Georgian leadership hoped the heads of Russia’s bicephalous executive power branch would not see eye to eye and the president would take the upper hand over the prime minister and his team of hawks. Mikhail Saakashvili’s first meeting with Dmitry Medvedev at the summit of CIS heads of state kept these hopes alive and work even began on various documents, one of which called for the possible division of Abkhazia into Georgian and Russian “zones of responsibility,” which Kommer- sant newspaper supposedly got its hands on. But the lull in the escalation of the conflict was short- lived and the tension began to build again in July. This coincided with Condoleezza Rice’s visit to Georgia when it was no longer denied that Russian war planes were violating Georgian airspace. At the same time, the most extensive exercises of the Russian Armed Forces in the Northern Caucasus in recent years began near Georgia’s borders. As for the war itself, there are numerous scenarios of how events developed, but most of them place the emphasis on who opened fire first. This is not the right way to look at the question. The situation on 7 August resulted from the accumulation of very different events and factors. It is possible that the Georgian army was the first to move on Tskhinvali in order to gain time since the adversary had already concentrated additional forces in South Ossetia and widespread hostilities were inevitable. It is possible that provocation had its role to play. The Russian leadership had been showing signs of frustration with Eduard Kokoity’s escapades. The tension was to his advantage since it helped him to obtain financial and other resources from Moscow. But the frustration Moscow was showing could have been purposefully overplayed. Be that as it may, there can still be no denying that the development of events from at least March 2008 was leading directly to the military scenario. The intrusion of Russian forces into Georgian territory, Moscow’s recognition of Abkhazia and South Ossetia, Georgia’s withdrawal from the CIS, and the curtailment of diplomatic relations between the countries as a result of the war led to a breakdown in direct contact between Georgia and Russia: all contacts were carried out through mediators, primarily the EU. French President Nicolas Sarkozy managed to achieve a cease-fire but could not force Russia to fulfill all the points of the Medvedev-Sarkozy agreement. After achieving a certain amount of success in extending its territorial control, Moscow lost its status of peacekeeper and openly became a side in the conflict. The country’s image was dealt a heavy blow. Russia’s main victory can probably be seen in the fact that it put a temporary halt to NATO’s extension by preventing Georgia and Ukraine from joining this organiza-

166 GEORGIA International Affairs tion. But the Kremlin was unable to either overthrow Mikhail Saakashvili or achieve Georgia’s de- sovereignization. After calling the Georgian president a “political corpse” and refusing to hold talks with him, the Kremlin began espousing the fact that it “was talking to the Georgian people but not to its government.” Only the Kremlin knows what it means by the Georgian “people” or “peoples” in this context. Abkhazia and South Ossetia had been good bait for manipulating the Georgian authorities. But after the war most of the Georgian establishment understood that the Kremlin could not voluntarily give back these regions, which noticeably decreased Russia’s influence on Georgia. But Moscow would try to exert its influence by other means. Russia has several levers for this. First, the relations between the Orthodox churches of the two countries and, second, the Georgian diaspora in Russia. The Russian Orthodox Church (ROC) continues to officially regard the Churches of South Ossetia and Abkhazia as part of the Georgian church. The Russian political leadership well understands the significance of the church keeping in mind the great influence of the church on society in Georgia and the frequently difficult relations between the Georgian leadership and the religious institution. The Kremlin is pursuing the goal of driving a wedge between the government and religion in Georgia. The incidents in the village of Perevi on 12-13 December can also be regarded in this context, when the Georgian Patriarchy was credited with the four-hour de-occupation of the village and the return of the Russian military was presented as a “response to the president’s thought- less statement.”2 The Georgian diaspora in Russia poses several difficulties for the Kremlin. Despite the numerous statements by Russian politicians about the millions of Georgians in Russia, there is barely more than half a million of them. Attempts to use this resource against the Georgian leadership cannot be very successful while nationalism and xenophobia about Caucasian nationals prevail in Russia. Most Russian Georgians do not feel much sympathy for the Russian authorities since they constantly have to deal with the arbitrary behavior of the criminal community and law-enforcement structures, which stand above the law. The events of the fall of 2006 are still fresh in people’s minds when a real Geor- gian head hunt raged in Russia. Hundreds of Georgians were arrested in the streets of Russian cities and deported on cargo planes.

The West and Georgia: Blow to the Integration Process

2008 was a year of risks and tests in Georgia’s relations with the West (the U.S. and EU). The latter did not have enough resources and political will to compete with Russia, which had concentrated all its efforts on Georgia and was ready to resort to aggravation in order to achieve its own goals. The West’s position was primarily undermined by the lack of unity between the U.S. and some of the European countries, in particular with respect to NATO’s enlargement. The second problem was the lack of a clear and united position in the EU. United Europe, despite the enormous funds invested in Georgia, is still unable to have any perceptible influence on the political processes in the region. Of

2 In reality credit for the temporary withdrawal of Russian troops from Perevi should have gone to European diplomats who repeatedly asked the Russian authorities to liberate the village, which was outside the borders of the former South Ossetian Autonomous Area. The Georgian Patriarchy had “a very distant and indirect relation” to this, to put it mildly. But the Russian authorities tried to tie this fact to Ilia II’s visit to Moscow and win the gratitude of the Georgian Orthodox Church (GOC) and Europe at the same time. And the return of the Russian armed forces to the village was presented as a “response to Saakashvili’s short-sighted statements.” 167 CENTRAL EURASIA 2008 Analytical Annual course, Nicolas Sarkozy’s mediation at the peak of the crisis and the decision to send a mission to Georgia to monitor the cease-fire agreement should be given their due, but these steps were merely a reaction to the crisis and not the launching of a wide-scale political process in the region. The Georgian leadership welcomed the West’s increased activity after Russia’s April-May “offensive” in Abkhazia. Visits by high-ranking U.S. and EU diplomats to Tbilisi and Sukhumi became more frequent, several rather caustic resolutions condemning Moscow’s actions were adopted, and different plans for resolving the conflict were presented. One of them was the plan of German Foreign Minister Frank-Walter Steinmeier. Germany, which lobbied several joint energy projects with the Russian Federation in the EU, was extremely interested in improving relations between Europe and Russia. It also put up the greatest objections to Georgia joining the MAP, while the French side was less resolute and waited for Berlin’s final decision. Steinmeier’s plan was not initially coordinated with the EU partners, but they essentially supported it, although showed some surprise regarding it. The plan consisted of three sections: security, refugees, and status. But each of the conflicting sides (the Georgian, Russian, and Abkhazian) had their objections about the priority of this section or the other. In the end the plan was rejected by the Abkhazian side. It is worth noting that Moscow often used this tactic to block other agreements. The Steinmeier plan was subsequently modified by the Americans (the so-called Rice Plan), but it was also rejected by the Abkhazian side in June. All in all the Kremlin regarded the Russian-Georgian war as an episode in its opposition to the West. Constant citing of the Kosovo, Iraqi, and even Cyprian examples was meant to emphasize the fact that intervention in Georgia was only Russia’s response to the West’s constant humiliation of it and disregard of its interests. By warring with Georgia, Russia was primarily opposing the West, its plans to extend NATO and the energy projects undermining Russia’s monopoly on gas and oil deliveries from the territory of the former Soviet Union. And the anti-Georgian rhetoric that has been going on for the past few years in the Russian mass media was merely part of the general anti-Western rhetoric. The beginning of the war found many Western leaders on holiday or at the Olympic Games in Beijing. The EU’s reaction, largely due to the French president who held the chair at the time, was unusually rapid. Rapid achievement of a cease-fire (5 days after the hostilities began) can be considered a European diplomatic success. U.S. President George Bush’s statement on rendering humanitarian aid by means of warships also played a significant role and probably helped Nicolas Sarkozy to achieve the green light from Dmitry Medvedev regarding the cease-fire. Another significant achievement was the prompt decision to create and send a EU monitoring mission, which has been observing fulfillment of the Sarkozy-Medvedev plan since 1 October. All the same, the Kremlin continued to test how loyal European diplomacy was to its principles: the orthographic-semantic battles over translation of the text of the agreement (“stability and security of Abkhazia and South Ossetia” versus “stability in Abkhazia and South Ossetia” or “pull-out” versus “withdrawal”) will long be remembered by the diplomats participating in the talks. What is more, Russia made every attempt to put its own interpretation on the time-limits and the perimeter of the territory for withdrawal of its forces. Before the end of 2008, it had only partially fulfilled the Sarkozy-Medvedev plan: it did not draw back its forces to the position they held on 7 August, it unilaterally recognized Abkhazia’s and South Ossetia’s independence, and it set up Russian bases there. The Kremlin made it perfectly clear that it had no intention of allowing the EU monitoring mission to enter the territory under its control and began actively blocking all the multilateral peace initiatives. It also initiated a policy to exclude the OSCE and U.N. from the peacekeeping process. As for the OSCE, the Russian Federation blocked extension of the mandate of the Organization’s mission in Georgia in proud solitude, the only one among the 55 member states to uphold this opinion. This precedent might be repeated in the U.N. where Russia is demanding a change in the name of the mission and removal from

168 GEORGIA International Affairs it of any mention of Georgia. This is making the EU mission especially significant for Georgia: the EU is the only collective organization in which Russia does not have the right of veto. The EU mission played a stabilizing role in the conflict. Georgia signed several agreements with it in which Tbilisi pledged not to deploy forces larger than a battalion in the direct proximity of the conflict zones. Against the background of Russia’s total disregard of the EU mission, the stakes the Georgian authorities placed on constructive cooperation with it strengthened Georgia’s position in the eyes of the international community. However, the European Union ended up not imposing any sanctions against Russia. The summit of EU states on 1 September in Brussels adopted a resolution supporting Georgia, promising economic assistance, and beginning talks on gradual alleviation of the visa regime. The toughest measure it took against the Russian Federation was putting a temporary halt to the talks on the partnership treaty, which would only be resumed after the Russian troops pulled back to the position they occupied on 7 August. But at the beginning of November the talks with Russia were resumed and this prerequisite was forgotten since Nicolas Sarkozy himself stated that “Russia had fulfilled the main obligations of the Medvedev-Sarkozy plan.” This caused many people in Tbilisi to think that Europe had given up on Georgia. As for the EU itself, the Russian-Georgian war has done serious and evidently extensive damage to Russia’s image there. Far fewer European politicians are justifying Rus- sian foreign policy and in favor of establishing alliance relations with it. As for Georgian-American relations after the war, they developed in the knowledge that George Bush’s team would soon be leaving the scene. A month before the presidential election it was clear that Barack Obama would win and this meant several months of indefinite foreign policy. During the years it was in power, the Georgian leadership had established close ties with the Republican administration and would have preferred John McCain to win. But the close relations between the Republi- cans and Mikhail Saakashvili’s administration were often interpreted, mainly in the Russian press, as subordination and complete control of the former over the latter. In reality the situation was different. Mikhail Saakashvili was far from an “American project,” as Sergey Lavrov once described him, rather he was one of the Republican administration’s few successful examples of U.S.-sponsored democratization. Against the background of the serious blunders in Latin America and the Middle East, as well as in light of the rise in anti-Americanism in the world, Georgia, like Kosovo, was an exception that Washington could not turn its back on. The arrival of the Democrats in the White House caused some alarm, but when Joe Biden and Hillary Clinton were appointed to key posts in the American administration the pessimism abated somewhat. Joe Biden was among the initiators of the Senate’s resolution of 14 February that supported offering Georgia and Ukraine the MAP. He was also the first high-ranking U.S. official to come to Georgia in August and support the Georgian leadership.

Relations with Turkey

When the Justice and Development Party came to power in Turkey, the war on Iraq, in which the Kurds were the Americans’ main allies, began, and the EU became insistent in its attempts to block Turkey’s membership in it, Ankara began pursuing an increasingly independent foreign policy course. Its strategy in the Caucasus began to diverge more and more from that of the Americans and Europe- ans. For example, in an interview to The Guardian, Turkish President Abdullah Gül stated a few days after the Russian-Georgian war began that the conflict in Georgia showed that the U.S. could no long-

169 CENTRAL EURASIA 2008 Analytical Annual er dictate global policy and that it should begin sharing power with other countries. This statement was in the spirit of the multipolar world principle supported by Russia. Turkey did not prevent the American warships from passing through the Bosporus into the Black Sea, an act that had a dampening effect on Russia’s ambitions in the conflict. It made every attempt to scrupulously defend the provisions of the Montreux Treaty of 1936, thus also putting pressure on the Americans. After Russia recognized Abkhazia’s and South Ossetia’s independence, the Turkish For- eign Ministry made a statement on 27 August in which it recognized Georgia’s territorial integrity, but in contrast to similar statements by the U.S., NATO, and the EU countries, it did not condemn Moscow’s actions. However, it would also be naïve to call Turkey’s position “pro-Russian.” Despite the noticeable warming in bilateral relations, the countries are rivals in several important issues. As the conductors of a more pragmatic course, the Recep Erdoðan-Abdullah Gül cabinet is trying to establish relations of cooperation with Russia, which has already become Turkey’s third trade partner after the EU and the U.S. At the same time, while supporting the project to build the Blue Stream gas pipeline (from Russia to the Turkish Black Sea port of Samsun), Turkey is also actively lobbying the Nabucco project in spite of the opposition from Russia. Ankara’s ambitions to become the main gas link between the Caspian countries (and possibly Iran in the future) and Europe are hindering Russia’s plan to monop- olize hydrocarbon deliveries to Europe. In this respect, stability in Georgia is very important for Tur- key and although Ankara may welcome a weakening in Washington’s role in the region, it does not want Russia’s position to strengthen either. This is the aspect that should be emphasized when talking about Turkey’s Platform of Stability and Cooperation in the Caucasus project. Whereas this idea appeared long before the war, it acquired real significance after the beginning of the conflict. Turkey perceived a weakening in the West’s, particularly the U.S.’s, regional influence in this situation and was ready to rapidly step in and fill the existing vacuum. On 14 August, Turkish Premier Recep Erdoðan visited Moscow and Tbilisi and presented the Platform to the leaders of the conflicting sides. The main idea of the Turkish project, reducing the role of non-regional states in the Caucasus (primarily the U.S. and EU), was approved in Moscow. However, in Tbilisi and even in Baku it was received with caution. The fact that the Plat- form could lead in the future to the creation of a Russian-Turkish condominium in the region could not help but arouse concern in Georgia. The fears were intensified by the frequent mention of the Kars Treaty of 1921 and Turkey’s specific role as a guarantor of Ajaria’s autonomy. Georgia was also rather ambivalent about the tempestuous development of events to normalize Armenian-Turkish relations in 2008. After the football diplomacy of Abdullah Gül and Serzh Sarg- sian and the secret diplomacy of Ali Babacan-Sergey Lavrov, the prospect of opening the border and establishing diplomatic relations between Turkey and Armenia will become a reality in the near future. Some think that Georgia may also suffer from this and not so much because of the reduced amount of transit revenue (this is very insignificant and the settlement of Turkish-Armenian relations will hardly torpedo Baku-Tbilisi-Ceyhan or Baku-Akhalkalaki-Kars projects) as from loss of its exclusive geopolitical role. Being less dependent on Georgia, Armenia may be more willing to aggravate relations with it and take a more active stance on Moscow’s side in the Russian-Georgian conflict. But on the other hand, if the normalization of Turkish-Armenian relations results in Armenia’s more prowestern orientation, Georgia’s geopolitical situation could be considerably eased. At this juncture, something else could also be mentioned. In 2008, a scandalous affair developed in Turkey involving the Ergenekon group, which was accused of preparing a state coup. Among its members were former military, nationalistic, and leftist politicians, as well as representatives of academic circles associated with Russia. Even if they did not have direct access to the Kremlin, many Russian politicians and brain centers ideologically close to the Russian leadership and often consulting it were its partners.

170 GEORGIA International Affairs Relations with Armenia and Azerbaijan

Despite the antagonism between Azerbaijan’s and Armenia’s geopolitical positions, Georgia is an important partner for them. Both Baku and Erevan are keeping a watchful eye on Georgia’s attempts to join NATO. Azerbaijan has periodically declared its intention to draw closer to the Alli- ance, although this was part of its strategy to create a “balance” between the West and Russia. The latter began worrying that if Georgia joined NATO, Azerbaijan, and then Armenia, would follow suit. Baku, and to some extent Erevan, looked at Georgia as a touchstone. The August war had a strong impact on Georgia’s neighbors. Both countries suffered greatly from the paralysis of Georgia’s transportation arteries (on 14 August the rail bridge in the village of Metekhi in the Kaspi District was blown up, which entirely halted the movement of freight to Arme- nia and Azerbaijan after the country’s main highway was closed). After the beginning of the Russian attack in Western Georgia and the seizure of Poti, Azerbaijan was forced to temporarily halt operation of the Baku-Supsa pipeline. Although Erevan and Baku uphold diametrically different geopolitical positions, they were extremely concerned by Russia’s invasion of a neighboring country. This act was interpreted as a warning signal from Moscow and the leaders of both countries were extremely cautious in their reaction. Armenia, as was to be expected, basically condoned Russia’s actions but also tried to preserve its relations with Georgia: Erevan did not follow in Moscow’s footsteps and recognize the independence of Abkhazia and South Ossetia, motivating this by the fact that Armenia has still not officially recognized Nagorno-Karabakh. Azerbaijan, Georgia’s closest ally in the region, also encountered a problem. It felt the heavy hand of Moscow: Russian forces seized the territory of the Kulevi oil terminal, the owner of which is the State Oil Company of the Azerbaijan Republic; several missiles exploded in the direct proximity of the Baku-Tbilisi-Ceyhan (BTC) oil pipeline; and unplanned military exercises began in the Cas- pian Sea. Baku did not make any sensational statements about supporting Georgia. Nevertheless, Azerbaijan, despite the caution in its public rhetoric, provided Georgia with significant material assistance. It was thanks to Azerbaijan that Tbilisi did not suffer from a shortage of fuel and food during the hostilities after the closedown of all the main Georgian routes. The extended occupation or destabilization of Georgia could have had very dire consequences for Azerbaijan. After the August shock subsided and most of Georgia was de-occupied by the beginning of October, Azerbaijan felt more confident and began showing more active support of the Nabucco project. This was demonstrated by the energy summit held in Baku in November with the participation of the leaders of the Central and Eastern European countries, Turkey, Georgia, and Central Asia, where, among other things, five-year gas agreements were signed between Azerbaijan and Georgia. These agreements are helping Georgia to gain its gas independence from Russia by obtaining blue fuel from Azerbaijan at reasonable prices. Other issues can also be singled out in the bilateral relations of the Caucasian states in 2008. For example, the fate of several Armenian churches in Georgia, which the GOC lists as being among its possessions, continued to be a thorn in the side of Armenian-Georgian relations. Some Armenian political parties and diaspora organizations began actively raising this issue and lobbying its examination not only by the authorities of both states, but also by international organizations.

C o n c l u s i o n

2008 was the hardest year after bloody 1992-1993. Georgia lost control over some of its territories and the number of forced migrants, which was large anyway, swelled by another 25 thousand. 171 CENTRAL EURASIA 2008 Analytical Annual

The West’s weak and irresolute stance contributed to escalation of the conflict with Russia, making it inevitable. Moscow perceived its confrontation with Georgia as part of its opposition with the West and saw the summer of 2008 as the ideal time to take decisive action. Could the Georgian leadership have been more cautious in its policy toward the Russian Federation? Even if the answer were “yes,” the consequences for Tbilisi would have been no better. Russia had gone too far in integrating Geor- gia’s rebel regions and could not turn its back on them without losing face even if Georgia abandoned its plans to join NATO. Tbilisi repeatedly stated that territorial integrity is extremely important, more important than membership in the North Atlantic Alliance. It is quite possible that even if Georgia had decided not to join NATO, the Kremlin would have continued to put pressure on it to gain greater concessions since the Russian authorities usually do not deem it necessary to talk about mutual concessions with those countries it can talk to in the language of force. Only the West could draw a definite dividing line by actively interfering in the conflict. But its internal disagreements and insufficient motivation made it impossible for Georgia to realize its key interests: joining NATO and restoring territorial integrity.

172 REPUBLIC OF KAZAKHSTAN General Overview

REPUBLIC OF KAZAKHSTAN

GENERAL OVERVIEW

Timur SHAYMERGENOV Official at the Secretariat of the Majilis (Parliament) of the Republic of Kazakhstan (Astana, Kazakhstan)

n 2008, the republic mainly stood firm in the midst of the international financial and economic storm that spared no one. Its financial and economic figures looked good while society remained I undisturbed and the situation stable. This proved possible thanks to the financial potential accumulated in the years of the republic’s dynamic growth and the government’s anti-crisis measures, which proved highly adequate. As could be expected, throughout the year Kazakhstan was seeking effective and specific answers to the challenges of the world economic crisis and measures designed to neutralize its negative impact on the state’s socioeconomic development. As soon as economic growth showed the first signs of slowing down Kazakhstan began actively mobilizing its resources in the hope of coping with the worst possible scenario and strengthening the country’s potential. This context inevitably revealed several trends that determined the republic’s agenda: n first, systemic financial and institutional support of the national economy; n second, maintenance of social stability and reduction of social tension; and n third, state support of the nation. All the decisions were centered around the social vector: the state poured more money into the quality of life, education, health protection, competitiveness, and welfare. The measures were not only designed to cushion the impact of the world financial crisis but also to create a platform from which the country could move into the post-crisis world to achieve economic growth. Economy. In 2008, the republic moved along without any abrupt ups and downs. The country’s leaders promptly responded to the negative economic trends: the banking system and jobs in

173 CENTRAL EURASIA 2008 Analytical Annual the real sector survived, while mass redundancies and social discontent were avoided. The per capita GPD was $8,450; the GDP reached a figure of about $135 billion, which meant an increase of over 3 percent. The volume of industrial production grew by 3 percent; in the mining industry the figure was even higher (5.2 percent). By the end of 2008, hydrocarbon production amounted to 70 million tons and foreign trade turnover to $94 billion. Exports were twice as high as imports. The state’s international reserves (including the money accumulated by the National Fund) reached $47 billion. In 2008, new tax and budget codes, laws on competition, financial stability, and other legislation were enacted to open new vistas for business and production. The country’s economy received another impetus in the form of three-year planning. The government, the National Bank, and the Agency for the Regulation and Control of the Financial Market pooled forces to draw up a plan of anti-crisis measures designed to stabilize the economy and the financial sphere to avoid the worst possible impact of the world crisis on the country’s economy. There are plans to pour $10 billion into the anti-crisis program to achieve five specific tasks: stabilize the financial sector; shore up the realty market; support small and medium businesses; develop the agro-industrial complex; and implement breakthrough innovative, industrial, and infrastructure projects. In 2008, the state allocated $4 billion to support the financial system and the banks. In 2008, the earlier policies of the state’s presence in the strategic economic branches were further confirmed by systemic measures such as promoting national interests at the legislative level. This was best confirmed by the new Tax Code that did away with the idea of “stability” of the taxation regime and contracts in the field of mineral mining and hydrocarbon production and introduced a new tax on mineral mining. In December, speaking at the council of foreign investors, President Nazarbaev stressed the need to increase his country’s share in the activities of all foreign companies working in Kazakhstan. From that time on they should give priority to the local workforce, buy local products and services if possible, etc. Space Research and Related Technologies. In 2008, the republic went on with its space research program. The world crisis and certain local problems notwithstanding caused, among other things, by the failure of the first KazSat satellite, the country remained resolved to build a space research program of its own. In 2008, the National Space Research Agency Kazcosmos improved the parameters of the KazSat-2 and KazSat-3 satellites. It insisted that ineffective Russian equipment should be replaced with tested European equipment. Kazakhstan is actively preparing to set up a national system of remote sensing and monitoring of the Earth from space and a satellite navigation system. In 2008, the Agency met representatives of Brazilian, Korean, Israeli, Taiwan, Tai, Russian, and French companies and held talks to identify the best partner. This branch is expected to become the springboard of the national economy’s innovative development. Politics. The far from simple economic situation pushed political issues to the back burner. To a certain extent the rumors about the imminent disbandment of the Majilis (the lower chamber of the republic’s Parliament) stirred up the public. Formed on the basis of the 2007 parliamentary elections, it was a one-party (Nur Otan) chamber. The rumors were born by the opposition’s harsh criticism of the one-party chamber and by the speech President Nazarbaev delivered at the 17th annual session of the OSCE Parliamentary Assembly in Astana. He pointed out that the country needed a mechanism that would ensure at least a two-party chamber. In September, speaking at the second parliamentary session, the president disproved the rumors. They were revived shortly afterwards when a packet of amendments to the law on elections, political parties, etc. reached the parliament. They widened the corridor of possibilities for all political parties to be represented in the parliament and guaranteed at least a two-party legislature.

174 REPUBLIC OF KAZAKHSTAN General Overview

Although this was not a breakthrough, it should not be underestimated either: the amendments were important for the country’s further political evolution and improved its image as OSCE chairman in 2010. In 2008, the country’s leaders continued steering a course toward greater transparency of the state system and stauncher law and order in it: a wide anti-corruption campaign was launched across the country. Several highly placed officials lost their posts; and several of them were brought to court on criminal charges. In October, Astana hosted a republican anti-corruption forum attended by the head of state that identified new approaches to the old evil. International Affairs. In 2008, the republic remained loyal to its multi-vector and balanced policies; its geopolitical aims were set at fruitful cooperation with its key partners: Russia, China, the United States, the European Union, and the Asian and Arab countries. At any given moment Astana was able to turn its attention to the most urgent foreign policy issues. In 2008, in view of its OSCE chairmanship coming up in 2010, it concentrated on Europe; the dialog was further supported by the state program Road to Europe for 2009-2011, which can be regarded as a roadmap of sorts showing the way to systemically deeper relations with the European Union and the European countries in general. The year 2008 abounded in important foreign policy events, the following of which deserve special mention: the visit of Russian President Medvedev to Kazakhstan, the 17th annual session of the OSCE Parliamentary Assembly, the celebrations of the 10th anniversary of Astana, and the international forum “A Common World: Progress through Diversity” attended by the foreign ministers of 60 states and members of important international structures and forums. In November, the president took part in an extended meeting of the Foreign Ministry’s collegium which decided that the country needed a new foreign policy conception and a much more active foreign policy stemming from a clearer understanding of the positions, aims, and means. In view of the country’s approaching chairmanship in several international structures (the ACD, OSCE, OIC, SCO, EurAsEC, and TURCSOY), its diplomatic corps should double its efforts. Military-Political Cooperation. Kazakhstan continued its multi-vector military cooperation with the CSTO, SCO, and NATO. In 2008, the country limited its involvement in the annual Rubezh-2008 military exercises held in Armenia to a delegation of the Defense Ministry because of the specific tasks fulfilled and the active role of the Russian and Armenian military. Kazakhstan took part in several large tactical exercises. Early in September it was involved, along with the Russian military, in large- scale operational-strategic exercises, Tsentr-2008, in the Southern Urals. In mid-September, Kazakh- stan, along with Great Britain and the United States, took part in traditional field tactical peacekeeping exercises, Steppe Eagle-2008, not far from Almaty designed to improve compatibility between the Kazbrig peacekeeping contingent and NATO. On the whole, 2008 cannot be described as a bad year; the country was inevitably affected by the world crisis. In 2008, the country’s strongest and weakest points became absolutely clear. The financial-economic cushion that took many years to form allowed the country to remain afloat amid the crisis and to bring to fruition many of its earlier plans. The measures already taken proved adequate and timely, which breeds cautious optimism about the future.

175 CENTRAL EURASIA 2008 Analytical Annual POLITICS

Sergey KONOVALOV Project head, Sociological Association of Kazakhstan, Ph.D. (Sociology), assistant professor at the Lev Gumilev Eurasian National University (Astana, Kazakhstan)

he year 2008 brimmed with political events, but external factors (the world financial crisis) moved economic issues to the fore on the state agenda. In view of the negative developments of the T economic situation throughout the world, the president paid much more attention to the country’s socioeconomic development. This could not but affect the nature and general tone of domestic policy—the government concentrated on social and political consolidation in the face of the external economic challenges. Throughout the year the president visited all the regions, where he met the leaders, the public, and the work collectives; he saw over 100 enterprises and social infrastructure facilities and took part in launching new production units. Fully aware of the fact that the nation’s unity and domestic stability were two absolute priorities, the country’s leaders paid more attention to anti-crisis measures and upgrading economic sustainability. Several major events determined the year’s ideological and political context, the most important of them being President Nazarbaev’s Address to the Nation delivered on 6 February.1 The president pointed out that the state would concentrate on the human dimension and stronger social support of the people, which caused a positive response and improved the government’s image. Despite the document’s obviously social bias the president confirmed that the political reforms would not stop at the constitutional changes of the previous year and that political modernization remained on the agenda. The president described the following as political priorities: (1) further development of Kazakhstan’s know-how as represented by the Assembly of Nation of Kazakhstan (ANK) and mechanisms of ethnic harmony. (2) further modernization of the political system; the present model with one dominant party (known also as the “one-and-a-half-party system”) was described as the best possible alternative, although competition among the parties should be encouraged. (3) fighting crime and corruption as well as further improvements in the law-enforcement structures to transform them from a punitive into a crime prevention structure; (4) state administration should become more effective; it should become result-oriented, which called for administrative reforms; (5) budget planning should be improved as well as cooperation with the business community as an important mechanism for building an independent civil society. The president put the gist of what he wanted to say into the following words: “The nation and all the social groups and strata should feel that their social health is improving—this has been and remains the state’s main concern.”2

1 “Rost blagosostoianiia grazhdan Kazakhstana—glavnaia tsel gosudartsvennoi politiki,” Address to the Nation of the President of the Republic of Kazakhstan N. Nazarbaev, February 2008, available at [www.akorda.kz/www/www_akorda_kz.nsf/ sections?OpenForm&id_doc=0793D9432423DDE5062573EC0048005B&lang=ru&L1=L2&L2=L2-22]. 2 Ibidem. 176 REPUBLIC OF KAZAKHSTAN Politics

The Address and active cooperation with the ruling party revealed one of the key political courses of 2008: society, deeply immersed in market relations, was ideologically prepared to mobilize its social and psychological resources. In fact, it was the echoes of the first wave of the world economic crisis, which reached Kazakhstan in the fall of 2007, that readied the nation for what was in store. During the seventeen years of independence, Kazakhstan society has become sufficiently integrated into the world economic process while the people have learned how to use its advantages to achieve the standard of living other nations already enjoy. However, this was the first time the country had to cope with a market economy crisis. The crisis of the middle and late 1990s was caused by the gradually dismantling of the Soviet economic system. The country’s new life did not begin until early in the new millennium. The government had to invent new political and ideological methods. The year abounded in important events that resounded across the country and created a certain amount of psychological and social tension. This was particularly true of Rakhatgate and the arrests of high-ranking officials on charges of abuse of power. The crimes resounded across the country invariably caused unfavorable comments. There was the tragedy of the explosions at coal mines owned by ArcelorMittalTemirtau; in the spring nearly fifty settlements were flooded in the country’s south. The public was divided over stricter traffic rules. The government responded to all the minor and major crises by acting consistently and demonstrating a lot of ingenuity. Late in June, the president invited the ideological community to his town residence of Akorda to call on it to move away from empty phrases toward clear and simple forms of communication with people. He deemed it necessary to stress that ideological efforts should not necessarily deal with politics and offered four new ideological formulas: the so far dominating idea of domestic political sustainability was reshaped into “sustainable development,” which gave the formula much more vigor: indeed sustainability was no longer an aim in itself but a stimulating element. A “stronger statehood” was another novelty: the president stressed that inculcation of patriotic feelings should proceed through motivations found in science, education, sports, etc. rather than through the avalanche of words that bureaucrats of all hues loved so much. “Unity of the nation” was the third of the president’s formulas: in fact the republic, which relied on fundamental methods of social engineering, had transformed its poly-ethnic nature from a dilem- ma into a potentiality. Ethnic harmony is the country’s key brand which leads to the nation’s consolidation tested for tenacity by the market: the nation runs the risk of being divided into groups with different incomes, prestigious and less prestigious occupations, etc. In 2008, the idea of national unity was given a fresh boost; it became extremely important to specify the aims of social development; invigorate the Assembly of Nation of Kazakhstan and its local branches and organize its regular financing through a special fund. This was what the president said in October at the 14th ANK session.3 Nursultan Nazarbaev, who is also ANK chairman, pointed out once more that it was vitally important to preserve national and confessional peace and harmony in the republic and strengthen the unity of the nation. The session was presented with a packet of measures designed to strengthen the ANK and further improve its performance. In 2008, the Law on the Assembly of Nation of Kazakhstan was finally adopted thanks to earlier constitutional amendments. The Assembly as a public institution of ethnic harmony finally acquired an official and legally registered status. This allowed it to be more active. The number of vice-chairmen was increased with the consent of its chairman (the posts went to members of the non-titular nations).

3 “Vystuplenie Prezidenta RK N.A. Nazarbaeva na XIV sessii Assamblei narodov Kazakhstana,” available at [www.akorda.kz/www/www_akorda_kz.nsf/sections?OpenForm&id_doc=F29C728DC227F2F2062574EC0000C5C1?=ru& L1=L2&L2=L2-15]. 177 CENTRAL EURASIA 2008 Analytical Annual

“Social optimism” was another pillar of President Nazarbaev’s new ideological doctrine. Those present at the meeting of the president with the leading ideologists revised the old ideas of this phenomenon. It was decided that the old content should be replaced with an active behavior mode since the reforms had made the Kazakhstan society more adaptable. This meant that time had come to move away from adaptation to diffusion: people should contribute to the reconstruction of the realities to make them better suited to life. This explains the fact that in 2008 the government paid much more attention to the youth and gave youth policies a fresh impetus. President Nazarbaev met the graduates and scholarship holders of the international Bolashak Program that allowed talented young people (up to 3 thousand a year) to receive higher education paid for by the state in the best educational establishments of the developed countries. The final aim of the effort is a large group of well-educated specialists and managers who mastered new thinking and the latest skills. President Nazarbaev paid much attention to the young activists consolidated around the youth wing of the ruling Nur Otan Party. The first congress of Zhas Otan set up a Council for Youth Affairs under the president designed to enliven the republic’s youth policies and decided that young people should be represented in the country’s civil servants reserve. Early in September the presidential team launched a new stage of mobilization and concentration of forces, resources and willpower to oppose the economic crisis. Politics and new ideological formulas were needed to clarify the economic measures for the nation. In view of the anticipated economic problems no one would have been surprised if the political reforms underway were slowed down or discontinued. The president’s statements made at the opening ceremony of the second session of the parliament of the fourth convocation in September 2008 to the effect that there would be no pre-term elections to the Majilis and that they would be held as scheduled in 2012 sounded to many like a confirmation of their doubts.4 This, however, should be interpreted as more confirmation that the Kazakhstani model of political reforms permitted no deviations and followed the original schedule. The elections to the Senate (the upper chamber of the parliament) held on 4 October were another important event on the domestic political scene. In full accordance with the law, the election commissions announced the preliminary results on election day. This was not a hard task: by 01:00 p.m. 97 percent of the electors had already voted: 97.6 percent of the 3,310 voters sent by the maslikhats turned up. In 2008, 16 senators were elected, all of them members of the National- Democratic Nur Otan Party. On the whole, 49 international observers represented the CIS and SCO, Azerbaijan, Armenia, Belarus, China, Kyrgyzstan, Poland, Russia, Tajikistan, Turkey, and Uz- bekistan. The elections did not stir up the public mainly because senators are not elected by universal vote and therefore are not involved in uncompromising election campaigns. They are appointed by the local administrations, the maslikhats. The year 2008 will go down in history as the year when the party vertical was strengthened; together with the noticeably more influential parliament this cemented the party-parliament foundation of power. This long process progressed along with the democratic trend. The party system developed and strengthened alongside the organizational structure of power. The president’s Address to the Nation was preceded by active and serious work with the ruling Nur Otan Party, which had moved into a dominant position in the country’s political system and assumed an exclusive position in the parliament after the 2007 parliamentary elections. On 17 January, 2008, the party gathered for its extended Political Council, which concentrated on the Ten Blows to Corruption Program. The Council formulated seven clear tasks related to various aspects of state policy.

4 “Vystuplenie Prezidenta RK na otkrytii II sessii Parlamenta RK,” available at [www.akorda.kz/www/ www_akorda_kz.nsf/sections?OpenForm&id_doc=98F2D256CA617479062574B8007238F0&lang=ru&L1=L2]. 178 REPUBLIC OF KAZAKHSTAN Politics

This was the first time in the country’s recent history that this political structure was charged with strategic tasks of state development and acquired the right to set up the political mechanisms needed to cope with them.5 It was these decisions that made Nur Otan the ruling party. A week later the Bureau of its Political Council met the president; at the meeting it was announced that A. Djaksybe- kov, who had served as head of the presidential administration and later as ambassador extraordinary and plenipotentiary to Russia, was appointed the party’s first vice-chairman. This means that the president, as the party’s chairman, intended to add more vigor to the party’s activities inside the country. In fact, the party does not need supervision; it is a highly competitive force that no longer needs the president’s ratings to survive—it can extend political support to the head of the state itself. The changes made in the fall of 2008 are highly illustrative in this respect. Doctor of Political Science D. Kaletaev, a young and active political analyst and graduate of the National Higher School of Civil Service, was appointed first vice-chairman. New young members joined the party in great numbers while the party itself was restructured to add stability to its vertical. It stepped up its cooperation with the Cabinet: on 21 November, its core met Premier K. Masimov at the party’s office to discuss the anti-crisis program. Late in the year the party set up a Committee for Party Control to audit the use of anti-crisis resources. The party stepped up its anti-corruption efforts. On 6 November, it convened an Anti-Corrup- tion Forum attended by the president, who announced that a National Anti-Corruption Action Plan had been adopted and warned that national legislation should be revised to acquire a stronger anti- corruption bias and law on lobbying. The president was obviously geared toward an anti-corruption struggle.6 Throughout the year the issue was discussed at a conference on the anti-corruption struggle, a Security Council meeting, an extended sitting of the collegium of the Public Prosecutor’s Of- fice, the Agency for Fighting Economic Crimes and Corruption, the Auditing Committee, the Minis- try of the Interior, the Ministry of Justice, and the Customs Control Committee. The ruling party cemented its position but the country’s leaders did a lot to strengthen the party system as a whole and provide all the parties with adequate competitive opportunities. Speaking at the 17th annual session of the OSCE Parliamentary Assembly held on 29 June in Astana, the president touched upon the problem of the political parties. His considerations formed the core of his political suggestion designed to move the country closer to the OSCE standards. He spoke about the mechanisms needed to ensure at least a two-party parliament and simpler state registration rules. On 2 Sep- tember, he confirmed what had been said at the session in the parliament. He was very clear about the fact that the exclusive position of the Nur Otan Party was the result of the will of the nation. It should be respected, said the president, while the laws should be strictly obeyed. He invited the parliament to think about a mechanism that would ensure the presence of at least two parties in the republic’s legislature; the president further said that state registration of parties should be made friendlier; the same applied to the conditions on which the parties ran for parliament. The amendments to “political” legislation can be described as another asymmetric answer to the current challenges. During the first round of amendments that coincided roughly with the summer and winter of 2007 the parliament largely coordinated legislation with the amended Constitution. The laws On Elections, On the Parties, and On the Media were left out because of their highly sensitive nature. Typically for Kazakhstan, where important constitutional or political decisions are predated by broad public discussions, they came to the fore during the new round of amendments.

5 “Partiinost vlasti i kredit doveriia,” Kazakhstanskaia pravda, 31 January, 2008. 6 “Vystuplenie Prezidenta RK N.A. Nazarbaeva na Antikorruptsionnom forume NDP ‘Nur Otan,’” available at [www.akorda.kz/www/www_akorda_kz.nsf/sections?OpenForm&id_doc=018B974BE38C134B062574F900740061&lang= ru&L1=L2&L2=L2-15]. 179 CENTRAL EURASIA 2008 Analytical Annual

The amendments to the legislation on parties are expected to revive party life: its state is one of the most important indicators of the democratic process. In 2007, the competitive model of party relations failed while the political parties collapsed under pressure of the election campaign where they ran against the ruling party; this inevitably crippled the party system and the parliament. It became obvious that certain “rescue” mechanisms were needed; such was the regime that guaranteed the party that came second (even if it failed to negotiate the 7 percent barrier) parliamentary seats. Art 97 Point 1 of the Law on Elections was supplemented with Point 1-1 under which the seats are distributed between the party that came first and the party that came second (even if it gained less than the required 7 percent). For example, at the 2007 parliamentary elections Nur Otan, which received 88.05 percent of the votes, and the opposition United Social-Democratic Party (USDP), which came second with 4.62 percent, could have divided the parliament according to the following calculations: 4.62 percent corresponded to 5,445.5 thousand votes, which means that one seat in the Majilis was worth 55 thousand votes; in this way Nur Otan would have received 94 seats and the USDP five.7 Some of the parties promptly responded to the changes. The Adilet Party, which had enticed a prominent public figure, S. Abdrakhmanov, into its ranks was known to about 18 percent of the respondents according to sociological polls. It comes fifth among the parties but outstrips the USDP with its 14 percent, formally the “second party” according to the results of the parliamentary campaign. According to other sociological polls related to electoral preferences, the second place should belong to Ak Zhol with 5 percent of the potential voters which is known to over 50 percent of the polled. The Auyl Party is known to over 28 percent, which means that it outstrips both the USDP and Adilet. The opposition deemed it necessary to change the name of the Nagyz Akzhol party to Azat; it dropped the brand that attracted a large share of the protest voters but also, according to experts, borrowed the name that belonged to another party with different aims and tasks that have nothing in common with the image and methods of those who “stole” the brand. The national-radical community demonstrated a certain amount of activity when it criticized the government for its inadequate attention to the Kazakh language as the state tongue. The amendments lowered the barriers that separated parties from registration; the information field and the experts were spellbound by the figure 50,000 (the number of signatures needed for official registration). In fact, this figure, which appeared in the corresponding legislation in 2002, did not affect the party structure. The number of parties decreased from 16 to 10 but the number of party members grew from 0.25 million (3 percent of the total number of voters) to 1.3 million (15 percent). According to public opinion polls the people demonstrated their usual conservatism and demonstrated no enthusiasm: nearly 68 percent of experts and 77 percent of the population were negative about the possibility of lowering the figure. Only 28 percent of the experts and 8.5 percent of the population accepted this possibility. The Law on Political Parties received over 25 amendments related to six most important spheres in which the parties normally operate. 1. The registration procedure became simpler; the number of required signatures dropped by 10 percent; the minimum number of members in the regions required was cut by 15 percent to 40,600. 2. The law contains much clearer propositions about possible refusal to register a party because of certain irregularities in the lists of members. Earlier, registration could be denied because of the smallest errors. Under the amended law, if the lists of signatures contains at least 40 thousand correct signatures the party will be registered.

7 Information supplied by the Central Election Commission of the RK, available at [www.election.kz]. 180 REPUBLIC OF KAZAKHSTAN Politics

3. The new law contains much clearer provisions about how parties can be formed, which sim- plifies the process and excludes different interpretations. A large number of addenda regulates the activities of organizing committees. These structures are expected to play the main role in contacts with the state registration agencies. The law provides a detailed description of the duty of the registering body to register the party (or refuse to do so) if the conditions leading to liquidation of the party’s state registration have been removed. 4. The new law is much stricter about the protection of the parties’ names and symbols; the parties can no longer use the symbols of state structures or of active and liquidated parties and public associations. 5. The process of party changes has become much more regimented; the law contains clear norms relating to the reorganization, unification, and division of parties, in short, the reorganization of parties. 6. The law introduced more effective norms relating to public and national security. It clearly stipulates that the parties should not receive donations from physical persons or organizations that receive grants or other types of funding from international or foreign NGOs. There are examples when certain foreign centers exert an active influence on the political processes in other, including some of the CIS, countries. The election laws were amended in the parts related to the interests of all those involved in the election campaigns. Art 27.7 of the new version of the Law on Elections obligated the media to carry information about events dedicated to candidate and party list nominations and their registration by the election committees in equal space in the printed media and equal time in the electronic media. The procedure for forming election teams and election staffs became much simpler. Under Art 12.8 of the amended law, registration of the election agents of presidential candidates was transferred to the territorial election commissions. The candidates are relieved of the complicated procedure of making their contributions and getting them back through the Central Election Commis- sion. Under Art 104.1 this can be done through the local executive structures. Under the amended law, the Central Election Commission is duty bound to explain the election laws and set up seminars for party representatives and other participants in the election process on how the elections should be organized. This was a logical amendment registered in a special point of Art 12. The election laws changed a great deal but minds are still geared to the old election “picture,” which slows down the introduction of new laws and downplays the positive image of the new system. The Central Election Commission was charged with the practical function of tightening control over absentee ballots: people travel a great deal, which makes this task a fairly hard one. Reconstruction of the party and political system is going ahead; the government is very consistent about this and will never permit a retreat while being unwilling to suspend the reforms. Every- thing is going as it should: the elements of a two-party system are being put in place together with continued liberalization of the political system, a simpler registration procedure being part of it. The country has not merely preserved but also extended the foundations of a multi-party system. Proceeding from the results of the 2007 parliamentary elections, the government took certain steps to protect the parties of the second echelon; their parliamentary seats are guaranteed if they come in second at the elections. The election infrastructure is being improved; members of the election commissions and all the participants in the election process acquired new rights; the election laws supported the two- party system which means that the election system should become more efficient and much more legitimate. Liberated from some of its functions, the Central Election Commission should concentrate on its main tasks.

181 CENTRAL EURASIA 2008 Analytical Annual

The Law on the Media was amended with the following aims in view: protection of the professional independence of editorial boards and journalists by cutting down their duties; streamlining the administrative procedures by abolishing registration of those media that require licenses for their functioning (TV and radio); a simpler procedure for re-registering the media; and improvement of the anti- corruption norms by abolishing the legal linguistic procedures with a huge corruption potential. Na- tional legislation related to the media should correspond to the socioeconomic and sociopolitical development level and as well as to the higher level of the nation’s legal culture. On the whole the amendments freed the political sphere while the state retained enough instruments to prevent the emergence of destabilizing parties. In other words, party legislation became much more balanced: it took into account the political security issues and the obvious need for further liberalization of party and political relations in the republic.

* * *

These were the most important results of 2008; the country remained calm while the sociopolitical situation unfolded as predicted. Even though politics was removed from the limelight for several reasons, political modernization continued, which was amply confirmed by the events described above. To a great extent certain hopes for further political changes are associated with the country’s OSCE chairmanship in 2010. Some experts predict that OSCE chairmanship will become a factor in the much faster and irreversible movement toward a higher level of democratic development.

ECONOMY

Sergey REVIAKIN Advisor to the President of the Institute of Economic Research of the Ministry of Economy and Budget Planning of the Republic of Kazakhstan (Astana, Kazakhstan)

he main item on the government’s agen- sultan Nazarbaev in his speech at an enlarged gov- da for 2009-2010 is to overcome the ef- ernment meeting in October 2008.1 Hence, the “T fects of the world crisis on Kaza- year under review was marked by a number of khstan… There is a good opportunity to emerge major events in Kazakhstan’s economic life. They from this situation with a more mature and strong- can be divided into two main groups. First, events er economy. We must learn to derive benefit even somehow connected with the response to the con- from crisis periods. This implies an improvement sequences of the world financial crisis. And sec- in the quality of economic development…” Such an objective was set by Kazakhstan President Nur- 1 Kazakhstanskaia pravda, 28, November, 2008. 182 REPUBLIC OF KAZAKHSTAN Economy ond, events associated with the solution of other (on 1 January, 2008, the National Fund had about tasks set before the country. $26.9 billion on its account; during the year, its As we know, last year Kazakhstan, like revenue growth rate fell to 1.17%, the lowest fig- many other countries, was exposed to the influ- ure for the past 6 years7). ence of the world financial crisis.2 Due to a drop There was also an increase in budget expen- in world raw material prices, the country’s expect- ditures connected with the allocation of signifi- ed revenue declined, and on 1 January, 2009, the cant amounts for implementing anti-crisis meas- state budget deficit reached 333.24 billion tenge ures (the anti-crisis plan for 2009-2010 is to be im- (KZT)3 (about $2.7 billion4 or 2% of GDP). plemented at a cost of not less than KZT 2.2 tril- In response to crisis trends in the world, an lion or about $18 billion, which amounts to 13.4% anti-crisis plan for joint action by the govern- of GDP). Obviously, GDP growth has slowed ment, the National Bank and the Agency of the down: from 10.6% in 20068 to 8.5% in 20079 and Republic of Kazakhstan on Regulation and Su- to 3.1% in 200810 ). One of the anti-crisis meas- pervision of Financial Market and Financial ures was a partial “nationalization” of second-tier Organizations (Financial Supervision Agency), banks (with the state acquiring a 25% stake in developed by order of the president and meant four banks); not a single commercial bank was to stabilize the economy and the financial sec- closed. A Distressed Assets Fund11 and a Sover- tor, was brought into play. During the year, the eign Wealth Fund (Samruk-Kazyna)12 were set state allocated $4 billion for these purposes. To- up for the same purpose. The National Bank of day these funds are working for the Kazakhstan Kazakhstan lowered reserve requirements for economy, helping to achieve certain results. second-tier banks on two occasions (first from In January-September 2008, for the first 6% for domestic liabilities and 8% for other lia- time since 2004, the current account showed a bilities to 5% and 7%, and then to 2% and 3%, surplus with an increase in the revenue deficit (in respectively).13 the first nine months of 2008, the deficit increased Along with processes directly connected by 61.5% to over $12 billion); the financial ac- with the impact of the crisis, last year brought a count recorded a deficit for the first time since number of other important events. New listing 2000 (by September 2008, it reached $3.4 billion); rules were introduced for the stock market. The overall, the 2008 balance of payments could main novelty is the imposition of requirements on record a deficit, but according to the National the number of free-float shares. This ensures a Bank of Kazakhstan this deficit will not exceed sufficient amount of shares freely floating in the 2% of GDP (about $2.7 billion) even in the market and helps to enhance the liquidity of Ka- worst-case scenario. There was a reduction in the zakhstan’s stock market. In addition, the new list- revenue of the National Fund of the Republic of 5 Kazakhstan and in the inflow of capital from 7 6 Calculated based on data from [http://www.minfin. abroad as a result of the global liquidity crisis kz/index.php?uin=1120634759&lang=rus]. 8 [http://www.rian.ru/economy/20070209/6043 7128.html]. 2 [http://www.izvestia.kz/news.php?date=23-01- 9 [http://www.gazeta.kz/art.asp?aid=104873]. 09&number=14]. 10 [http://www.zakon.kz/our/news/news.asp?id=3037 3 [http://www.minfin.kz/index.php?lang=rus&uin= 3680]. 1120634698&act=budjet&vb=3®ion=&year=2008& 11 The Fund was established in November to buy out month=12]. illiquid assets from commercial banks on condition of their 4 Here and below, at the exchange rate of KZT 121.3 repurchase in the future. These mainly include mortgage per U.S. dollar. loans in the doubtful (second and third) category. 5 The Fund was established in 2000 to perform a 12 The Fund was established in October as the core of saving and stabilization function (see [http://www.regnum. the government’s anti-crisis program by merging the Kazy- ru/news/765255.html]). It accumulates the difference be- na Sustainable Development Fund and the Samruk State tween actual revenues from certain taxes paid by raw ma- Asset Management Company in order to pool state-owned terial producers and those projected in the republican and assets in conditions of instability for the purpose of further local budgets. economic development. 6 [http://www.vlasti.net/news/26528]. 13 [http://ru.government.kz/site/news/2008]. 183 CENTRAL EURASIA 2008 Analytical Annual ing structure provides for a separation of shares toward the achievement of certain results, start- and debt securities, creates liberal conditions for ing from the planning stage to the stage of finan- issuers seeking to enter the stock market, promotes cial monitoring and control. The new Budget the use of new financial instruments, and helps to Code provides a legal basis for reorganizing the attract new mid-cap issuers. Thus, the share sec- budget process at every stage in order to increase tor is divided into three categories by type of com- the independence and responsibility of all levels pany: blue chips (the largest and most liquid com- of state administration and to enhance the effec- panies), medium-sized businesses, and young, tiveness and transparency of public financial promising and fast-growing companies. And the management.15 debt securities market is divided into two catego- Considering that the consequences of the ries: rated and unrated. Investment funds are set world financial crisis were the main threat to the apart as a separate sector.14 Kazakhstan economy in 2008, the government The past year in Kazakhstan was marked by focused attention on the strength of its impact on the adoption of a new Tax Code, which differs from the country’s economy and the measures that had the old one by its philosophy: there is a change in to be taken by the state in this connection. In fair- the government’s tax policy. Since 1 January, ness to the government, one must say that in its 2009, the tax burden on the primary sector has efforts to maintain the size of the economy and increased, while the burden on the non-primary reduce the consequences of the crisis, it took all sector has decreased. Steps are also being taken the necessary regulatory measures to support the to introduce mechanisms designed to increase financial system, ensure macroeconomic stabili- Kazakhstan’s share in key natural resource ty, and stimulate economic activity in the coun- projects implemented with its participation. try. As a result, the year ended relatively success- The new Budget Code adopted in 2008 pro- fully against the background of world market fluc- vides for the introduction of new results-oriented tuations, and Kazakhstan was able to accomplish budgeting methods and a transition to three-year a number of planned tasks. Since the impact of the budgets, and is designed to harmonize economic world financial crisis on the country can be as- and budget planning and to improve intergovern- sessed, in the first place, by the dynamics of its mental fiscal relations. Its main purpose is to re- socioeconomic indicators, let us take a closer look orient the activities of government institutions at them.

14 [http://www.rfca.gov.kz/485]. 15 See: Kazakhstanskaia pravda, 9 January, 2009.

Real Sector of the Economy

In 2008, the global crisis led to instability in world financial and commodity markets, and this significantly slowed down economic growth in Kazakhstan as well. According to preliminary estimates, last year its economy grew by 3.1%. Under the medium-term plan for socioeconomic development in the country for 2008-2010, growth was expected at 9.6%,16 while Standard & Poor’s rating agency projected a figure of no more than 4%.17 GDP in 2008 is estimated at $135 billion, and GDP per capita, at $8.45 thousand.18 A decline in growth was recorded in virtually all sectors of the economy (see Fig. 1).

16 [http://www.apk-inform.com/showart.php?id=49250]. 17 [http://www.zakon.kz/our/news/news.asp?id=30177730]. 18 [http://www.gazeta.kz/art.asp?aid=124611]. 184 REPUBLIC OF KAZAKHSTAN Economy

Figure 1 Key Socioeconomic Indicators in 2005-2008 (previous year = 100)

140 120.4 109.4 110.7 133 110.4 120 103.1 105.5 100 108.7 110 106.7 104.6 106.2 107.2 108.2 102.1 80 94.4 112.4 122.1 115 111.1 108.4 104.5 104.6 60 103.6 105 104.9 40 127.7 104.8 20 0 2005 2006 2007 2008

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

N o t e

Industry Total industrial production (goods, services), KZT billion Agriculture Total agricultural production, KZT billion Transport Freight traffic for all modes of transport, million ton-kilometers Communications Communication services, KZT billion Retail sales Retail sales through all sales channels, KZT billion Fixed capital investment Fixed capital investment, KZT billion

S o u r c e: Constructed by the author based on data from the Statistics Agency of Kazakhstan.

The slowdown in all sectors of the economy is probably associated with a decline in the inflow of foreign loans during the world crisis, an increase in crisis and inflation expectations in the country, and a drop in aggregate demand.

Industry

Industrial production in January-December 2008 was KZT 10,188.4 billion at current prices ($84 billion), or 2.1% more than in January-December 2007. In mining, production increased by 5.3% compared to the same period of 2007 (see Fig. 2). In the first half of the year, this was probably connected with the continued positive dynamics of global demand for raw materials and a significant amount of investment (41% of all foreign investments), and in the second, with the desire of mining 185 CENTRAL EURASIA 2008 Analytical Annual companies to boost production in order to stabilize their income and get a return on investment in the conditions of falling global demand. Figure 2 Industrial Growth in 2001-2008 (previous year = 100)

120 113.8 115 113.4 115.9 109.1 110.3 114 107.3 107,3 110 106 105.3 115 110.5 110.4 106.7 105 101.9 110.2 102 107 108.6 106.4 100 108.2 109.2 104.6 102.2 107 104.5 102.1 107.9 95 103.2 103.6 102.6 97.4 90 85 2001 2002 2003 2004 2005 2006 2007 2008

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

S o u r c e: Constructed by the author based on data from the Statistics Agency of Kazakhstan.

In the production and distribution of electricity, gas and water, output increased by 6.4%, which is probably due to an increase in domestic demand for these capacities, on the one hand, and to external economic conditions, on the other (see Fig. 2). For example, Kazakhstan currently remains an energy donor for a number of other economies.19 In manufacturing, output fell by 2.6% (see Fig. 2), probably because of a decline in the inflow of foreign loans, an increase in inflation expectations, and a drop in aggregate demand.

Agriculture

Total agricultural production in January-December 2008 was KZT 1,316.4 billion at current prices ($10.85 billion), down 5.6% from January-December 2007 (see Fig. 3). Given sustained growth in livestock production, the overall slowdown in agricultural growth can be due to a decline in grain production. In 2008, Kazakhstan produced about 17.5 million tons of food grain (bunker weight), or almost 3 million tons less than in 2007, although the Ministry of Ag- riculture reports that area under grain crops increased during the year by 5.1% with high quality grain output.20 Among the factors influencing grain production in Kazakhstan, let us mention drought. According to a press release under the U.N. Development Program (UNDP) in Kazakhstan, drought will become a constant feature of life in Kazakhstan in the future and will affect not only grain production, but also livestock production, forestry, land use and rivers. The intensive development of the agro-industrial complex as a basis for diversification of exports and job growth has now become one of the government’s main priorities. In 2008, state support

19 [http://www.elektrodelo.ru/news/18986]. 20 [http://www.apk-inform.com/showart.php?id=69333]. 186 REPUBLIC OF KAZAKHSTAN Economy

Figure 3 Agricultural Growth in 2001-2008 (previous year = 100)

140

120 112.7 104.2 105.6 107.7 104.0 117.3 99.5 100 103.4 106.7 106.2 108.4 128.5 102.1 105 104.5 104 95.1 108.4 104.5 80 103.2 102.9 99.9 94.4 60 86.8

0 2001 2002 2003 2004 2005 2006 2007 2008

Agriculture as a whole Crop production Livestock production

S o u r c e: Constructed by the author based on data from the Statistics Agency of Kazakhstan. for the agricultural sector in Kazakhstan was 1.7 times in excess of the 2007 level, with subsidies almost doubling and loans increasing 2.2 times. Among the measures taken to ensure food security, the state also gives priority to infrastructure projects. An increase in the capacity of the Aktau Port tops the list. The implementation of this project will make it possible to increase grain exports from Kazakhstan to Iran and countries of the Caucasus by 1 million tons and will ensure full utilization of our terminals in Amirabad and Baku, which will otherwise operate at less than full capacity. There are plans to build a grain terminal on the border with China. Marketing research is currently underway in order to determine the prospects for Ka- zakhstan grain exports in this direction. All the more so since western China has developed actively in recent years, and its demand for grain has increased accordingly. Apart from that, a major instrument in the efforts to stabilize the country’s grain market is government procurement. At present, JSC Food Contract Corporation has already purchased more than 1 million tons of new grain. It paid $200-250 per ton of wheat, which was simultaneously a measure of support for agricultural producers. By the beginning of autumn, the price of grain on the Chicago and Paris grain exchanges was $260-280 per tons, and the Corporation decided to pay domestic producers $250 per ton based on this price level. According to the Corporation’s board chairman, wheat purchased at this price will be sold to processing companies at a price not above $300 per ton (with due regard for transportation, storage and other costs).

Transport

Overall, the trend in freight and passenger traffic in 2008 was positive. This is probably due to low price elasticity of demand for these services in Kazakhstan. Total freight traffic (including 187 CENTRAL EURASIA 2008 Analytical Annual estimated freight transportation by non-transport organizations and entrepreneurs engaged in commercial transportation) in January-December 2008 was 369.8 billion ton-kilometers (tkm), up 5.5% from the same period of 2007. Freight figures will probably respond to the decline in demand for goods with a lag in 2009. Rail freight traffic in January-December 2008 was 215.1 billion tkm, increasing by 7.1% from January-December 2007 due to an increase in domestic long-distance traffic. As for road transportation, freight traffic in January-December 2008 (including estimated freight transportation by non-transport organizations and entrepreneurs engaged in commercial transportation) was 63.5 billion tkm, or 2.9% more than in the same period of 2007. From the beginning of the 2008 shipping season, river freight traffic reached 55.3 million tkm, increasing by 6.9% from the same period of the previous year. Different trends were demonstrated in 2008 by air freight traffic: in January-December, it totaled 69.5 million tkm, down 19% from January-December of the previous year. This trend can probably be explained by the fact that air freight is the most expensive kind of transportation, and with the slowdown in economic activity in the country its volumes were redistributed to other modes of transport (e.g., rail transport) or were terminated because they were unprofitable. An increase in freight traffic was recorded for trunk pipelines: in January-December 2008, it totaled 90.3 billion tkm, or 3.1% more than in January-December 2007. Out of the total figure for trunk pipelines, oil transportation amounted to 44.2 billion tkm (a 4.6% increase compared to Janu- ary-December 2006 is connected with an increase in supplies to China and through the Caspian Pipe- line Consortium system), and gas transportation amounted to 46.08 billion tkm (up 1.8%). The increase in delivery volumes will help to stabilize revenue from the sale of raw materials as their prices fall. Passenger traffic in January-December 2008 rose by 2.1% compared to the same period of the previous year and reached 126.98 billion passenger-kilometers (up 2.2% for buses, 4.2% for taxis,

Figure 4 Passenger Traffic Structure

Rail transport Urban electric 11.1% transport 0.3%

Air transport 4.4%

Taxis Buses 26.0% 58.2%

S o u r c e: Statistics Agency of Kazakhstan.

188 REPUBLIC OF KAZAKHSTAN Economy and 3.9% for air transport). At the same time, there was a decline in rail passenger traffic by 3.1%; the figure for trolleybuses fell by 28.1%, and for trams by 13.6% (see Fig. 4). The increase in passenger traffic is probably due to the fact that with rising expectations of negative crisis consequences during the financial crisis, part of the population most sensitive to economic turmoil has stopped using individual transport vehicles and has switched to buses and taxis. Probably for the same reasons, many people have also cancelled their planned journeys by train. As regards the increase in travel by air, it can be explained by the fact that people using this mode of transport—a group of the population more immune to economic fluctuations—feel the effects of the crisis less keenly and/or with a time lag. That is why today’s growth in travel by air is evidently due to the implementation of earlier plans. Next year, in all probability, one should expect a stabilization or even a decline in growth rates in this transportation sector as well.

Trade and Other Services

Retail sales (excluding public catering) in 2008 totaled KZT 2.508.5 billion ($20.68 billion), increasing by 3.6% from January-December 2007 (see Fig. 1). This is probably associated with rising inflation expectations and a trend toward an increase in consumer stocks. There may also be a lag in this area: retail sales will visibly respond to the financial crisis in the country only in 2009. In December 2008, sales of goods amounted to KZT 253.2 billion ($2.09 billion), or 6.2% more (at constant prices) than in December of the previous year. Compared to November 2008, the increase was 3.2%. In the reporting period, merchandise sales by trading companies and individual entrepreneurs operating in permanent trading networks were the largest contributors to retail sales. In January- December 2008, their share was 82.3%. At the same time, there was a continued trend toward a reduction in the share of sales at public retail markets (from 22.4% in January-December 2007 to 17.7% in the same period of 2008). Consequently, retail sales, which are not directly involved in contractual relations with international markets, on the one hand, and due to the low price elasticity of these goods, on the other, have not declined in response to the liquidity crisis, as opposed to wholesale sales. Wholesale sales in Kazakhstan in January-December 2008 totaled KZT 6,538.4 billion ($53.9 billion). This is virtually at the level of 2007 at comparable prices (99.9%). Just as in retail trade, the non-state sector accounts for a significant share of wholesale sales. Non-food products and producer goods continue to make up a large share of these sales. As for public catering services, in January- December 2008 these amounted to KZT 107 billion ($882 million) or 99.9% of the figure for 2007. Individual entrepreneurs (sole proprietors) provided 16.7% of the total volume of public catering services. This picture can evidently be explained by the reduction in the use of public catering services by the most crisis-sensitive strata of the population. Last year the amount of services in the maintenance and repair of cars, motorcycles, home appliances and personal effects totaled KZT 20.7 billion ($171 million). Most of these services (58.3%) were provided in the small business sector (by small enterprises and individual entrepreneurs). As for small businesses in general, the amount of goods and services produced by them in January-December fell by 9.7% compared to the same period of the previous year (at constant prices) to KZT 2,182.2 billion ($17.99 billion). This decline may be caused by the liquidity crisis and the appearance of a psychological reluctance to invest. Data for 1 January, 2009, show a decline in the number of small businesses actively operating in the market. Compared to the same period of the previous year, it fell by 3.1% to about 621.2 thou-

189 CENTRAL EURASIA 2008 Analytical Annual sand entities, including about 58.5 thousand legal entities, 392.9 thousand individual entrepreneurs, and 169.7 thousand peasant (private) farms. Some experts21 also estimate that about 70% of small and medium businesses have scaled down production under the negative impact of the financial crisis. This is naturally accompanied by a reduction in the number of people employed in small business (by 4.7% to 1,726.2 thousand). Since small and medium businesses are particularly vulnerable during the financial crisis (limited access to credit resources, a decline in demand for their products), the government has allocated $1 billion for their support as part of the adopted anti-crisis program. This will probably help to stabilize domestic demand for their products and to maintain employment (small businesses alone currently employ about 23% of the country’s working population).

Construction

In January-December 2008, the volume of construction works (services) in Kazakhstan totaled KZT 1,783.4 billion ($14.7 billion), or 1.8% more than in 2007, with the growth pattern strongly affected

Figure 5 Construction Index

130 125.5 125 119 120 115.5 117.3 114 115 116.3 111.2 111 110 106.4 104.7 105 106.7 104.1 105.6 101.7 100 102.8 97.8 98.6 98.7 100.2 96.9 95 95.5 90 87.1 90.1 85 83.3 80 I II III IV V VI VII VIII IX X XI XII I II III IV V VI VII VIII IX X XI XII 2007 2008

same month of the previous year = 100

S o u r c e: Statistics Agency of Kazakhstan.

21 [http://www.neonomad.kz/neonomadika/politika/index.php?ELEMENT_ID=4604&phrase_id=106047]. 190 REPUBLIC OF KAZAKHSTAN Economy by the financial crisis. Construction works performed by private building organizations made up the largest part of the total: 74.6%. Foreign contractors performed 24.7% of total construction works, and government contractors, 0.7% (see Fig. 5). In the structure of work performed, construction of buildings and civil engineering made up the largest share: 55.5% of the total (compared to 32.1% in 2007). In January-December 2008, about 34 thousand buildings, including about 30 thousand residential and 4 thousand nonresidential buildings, were constructed in the country. Among newly constructed non-residential buildings, shopping facilities made up the largest number: 1,664 buildings. In education and health care, 193 facilities were completed during the year, including 67 general education schools, 20 preschool institutions, 96 polyclinics and 10 hospitals (under a presidential program known as 100 Schools, 100 Hospitals). In January-December 2008, investment in housing construction totaled KZT 442.3 billion, or 16.1% less than in 2007, which was due to a limitation of external sources of credit. In the total volume of fixed capital investment, the share of funds utilized in housing construction was 11.5%. Enter- prises and organizations of all forms of ownership and households put into service about 7 thousand square meters of total residential floor area, or 2.3% more than in 2007 (see Table 1). Table 1 Housing Construction in 2003-2008

Indicators 2003 2004 2005 2006 2007 2008

Investment in housing construction, billion tenge 59.5 124.4 241 368.4 489.6 442.3

Total floor area of new housing, volume index (previous year = 100) 136 122.7 182.4 125.1 129.8 101.6

Total floor area of new housing, 1,000 square meters 2,111 2,591 4,992 6,245 6,679 6,832

S o u r c e: Statistics Agency of Kazakhstan.

Most of the residential housing continues to be built by private enterprises, organizations and households (84.8% of total newly constructed housing). Individual builders accounted for 51.6%. Government organizations put into service 12.5% of new housing, and foreign enterprises, 2.7%.

Fixed Capital Investment

Fixed capital investment in 2008 was KZT 3,836.1 billion ($31.6 billion), up 4.6% from 2007 (see Table 2). The investment slowdown is evidently associated with more limited access to foreign loans. Private businesses were the most active investors (see Fig. 6).

191 CENTRAL EURASIA 2008 Analytical Annual

Table 2 Fixed Capital Investment in 2003-2008

Indicators 2003 2004 2005 2006 2007 2008

Fixed capital investment, billion tenge 1,327.9 1,703.7 2,421 2,824.5 3,234.2 3,836.14

Fixed capital investment, volume index (previous year = 100) 116.6 123.1 134.1 111.1 108.2 104.6

S o u r c e: Statistics Agency of Kazakhstan.

Figure 6 Fixed Capital Investment by Source (% of total)

2007 Jan-Dec 2008

17.0 15.8 14.4 19.9

18.4

23.0

48.8 42.7

budget funds own funds foreign investment borrowings

S o u r c e: Statistics Agency of Kazakhstan.

In terms of investment utilization, the share of enterprises and organizations of other countries operating in the territory of Kazakhstan was 26.1%, while the state sector accounted for 20.6%. Among the various sectors of industry, the production of crude oil and natural gas remains the priority investment destination, accounting for 21% of total fixed capital investment (see Fig. 7).

192 REPUBLIC OF KAZAKHSTAN Economy

Figure 7 Fixed Capital Investment by Destination (%)

100 1.9 1.7 Agriculture, hunting and 90 forestry

Industry 80 41.0 Construction 70 47.2 Trade, repair of cars, 60 1.5 home appliances and 2.5 personal 50 1.6 effects 2.5 17.4 40 Transport and 15.5 communications

30 Real estate 23.6 21.5 transactions, 20 lease and consumer services 10 12.1 10.0 Other sectors 0 Jan-Dec 2007 2008

S o u r c e: Statistics Agency of Kazakhstan.

Compared to 2007, there was a significant increase in investment in education (1.9 times) and health care and in the provision of social services (1.6 times). A certain contribution to these figures was made by the implementation of the 100 Schools, 100 Hospitals presidential program. Investors’ own funds mainly went into mining (34.7% of investment from this source), while most budget funds (60.6%) went into such sectors as transport and communications, the production and distribution of electricity, gas and water, and education. Investments in transport and communications are associated, in the first place, with government policy designed to utilize the country’s transit potential. Important objectives here include water supply to the population and more efficient use of energy resources, an area where a number of problems remain unresolved.22 About half of foreign investments (41.1%) went into the mining industry. In the first half of the year, this was largely due to high purchase prices in raw material markets. Total outflow of investment by economic activity is shown in Table 3.

22 [http://www.ng.ru/courier/2008-03-31/19_kazahstan.html, http://www.rg.ru/2008/09/10/kazenergy.html]. 193 CENTRAL EURASIA 2008 Analytical Annual

Table 3 Total Direct Investment from Kazakhstan: Outflows by Investors’ Economic Activity (for the period, $ million)23

First nine Activity 2004 2005 2006 2007 months of 2008

Agriculture, hunting, forestry and fishing 1.4 1.0 12.2 –0.3

Mining 2.9 –3.4 30.8 225.0 6.6

Manufacturing 178.7 117.1 164.6 107.5 48.1

Construction 6.9 13.0 49.9 91.2 10.7

Trade, auto and home appliance repair 175.4 53.1 149.9 804.0 233.9

Hotels and restaurants 6.0 5.3 1.6 21.2 0.1

Transport and communications 7.0 22.9 34.4 86.4 340.5

Financial activity 38.3 50.0 136.5 980.5 612.4

Real estate transactions, lease and services to enterprises 10.1 47.8 689.3 137.0 1,776.3

Education, health care and social services 0.3 4.1 0.3

Other activities 0.1 0.1 33.3 263.9 214.7

TOTAL 425.4 307.4 1,291.6 2,733.0 3,243.3

N o t e. Total outflow of direct investment from Kazakhstan to other countries includes: — acquisition of part of foreign share capital (not less than 10% of shares or stake in authorized capital) by residents from non-residents, excluding sale of part of foreign share capital by residents to non-residents; — reinvested earnings (Kazakhstan direct investors’ share in retained earnings or losses of foreign enterprises); — disbursement of funds under loans and credits provided by Kazakhstan direct investors, in both cash and other forms (in the form of goods, works, services, intangible assets, etc.), excluding amortization.

S o u r c e: National Bank of Kazakhstan.

23 At the time this article was written, data in this category were available on the official website of the National Bank of Kazakhstan only for the first nine months of 2008 [http://www.nationalbank.kz/?uid=7F897FDA-802C-E8F0- E508F9C9598AD453&docid=680]. 194 REPUBLIC OF KAZAKHSTAN Economy

The figures for total inflow of direct investment by economic activity are given in Table 4.

Table 4 Total Foreign Direct Investment in Kazakhstan: Inflows by Economic Activity (for the period, $ million)24

First nine Activity 2004 2005 2006 2007 months of 2008

Agriculture, hunting, forestry and fishing –2.0 1.2 37.3 –24.9 16.8

Mining 5,247.8 1,796.6 2,396.1 4,656.9 3,177.7

Manufacturing 520.6 303.6 642.4 893.5 578.5

Production and distribution of electricity, gas and water 11.4 119.5 26.7 36.6 133.2

Construction 160.3 94.0 367.8 483.2 354.8

Trade, auto and home appliance repair 259.1 381.4 739.3 1,238.3 595.3

Hotels and restaurants 13.4 5.8 10.2 49.2 26.8

Transport and communications 101.1 98.1 300.6 181.8 174.7

Financial activity 71.0 107.9 452.7 2,938.3 2,037.7

Real estate transactions, lease and services to enterprises 1,843.7 3,647.8 5,551.0 6,963.8 5,650.0

Education, health care and social services 91.0 62.6 99.5 98.1 96.8

TOTAL 8,317.3 6,618.6 10,623.6 17,514.9 12,842.4

N o t e. Total inflow of direct investment (FDI) into Kazakhstan includes: — acquisition of part of Kazakhstan share capital (not less than 10% of shares or stake in authorized capital) by non-residents from residents, excluding sale of part of Kazakhstan share capital by non-residents to residents; — reinvested earnings (foreign direct investors’ share in retained earnings or losses of Kazakh- stan enterprises with FDI); — receipt of funds under loans and credits provided by foreign direct investors, in both cash and other forms (in the form of goods, works, services, intangible assets, etc.), excluding amortization.

S o u r c e: National Bank of Kazakhstan.

24 At the time this article was written, data in this category on the official website of the National Bank of Kazakhstan were available only for the first nine months of 2008 [http://www.nationalbank.kz/?uid=7F897FDA-802C-E8F0- E508F9C9598AD453&docid=680 195 CENTRAL EURASIA 2008 Analytical Annual

Thus, in the first nine months of 2008 Kazakhstan had a positive balance of foreign direct investment (net FDI inflow).

Foreign trade

According to the Finance Ministry’s Customs Control Committee, Kazakhstan’s foreign trade turnover (excluding informal trade) in January-December 200825 was $109 billion, increasing by 35% compared to January-December 2007; exports rose by 49% to $71.2 billion, and imports by 16% to $37.9 billion. In the export structure, primary commodities made up the largest share (over 60%).26 The increase in exports may be connected with growth of investment in this sector and an improvement in external market conditions, particularly the July rise in world oil prices to a record high of $147 per barrel.27 The main buyers of Kazakhstan products are Italy (17.0%), Switzerland (16.1%), China (10.5%), Russia (8.9%), France (7.7%), Netherlands (6.4%), Israel (3.2%), Iran (2.9%), Ukraine (2.8%) and Turkey (2.7%). The CIS countries’ share of total exports in the period under review was 15.5% (compared to 16.8% in January-November 2007). The increase in imports (at a slower rate than exports) probably reflects the steady growth in domestic demand with an improvement in living standards in the country. In the total volume of imports, investment goods in January-November 2008 amounted to $16.2 billion or 47.4% (compared to $13.6 billion or 45.6% in January-November 2007). In January-November 2008, 46.7% of total imports came from CIS countries (compared to 44.6% in January-November 2007). Kazakh- stan’s major import partners are Russia (37.1% of total imports), China (11.4%), Germany (6.9%), Ukraine (5.2%), U.S. (5.0%), Italy (3.4%), Japan (2.6%), Turkey (2.4%), France (2.2%) and Nor- way (2.0%).

Prices

Inflation (December 2008 over December 2007) was 9.5%,28 which is less than the figure for 2007 (18.8%29) (see Fig. 8.1). Thus, the task set by the president of Kazakhstan to prevent inflation from exceeding 10% was accomplished.30 Average annual inflation (January-December 2008 over January-December 2007) was 17.0%31 (see Fig. 8.2). Food prices rose by 10.8%, making the largest contribution to the overall price increase: 4.4%. The prices of paid services rose by 11.4%, and those of non-food products, by 5.7%, contributing 3.1% and 1.9% to inflation, respectively. Industrial producer prices in December 2008 were 18.6% lower than in December 2007, which is due to the drop in prices in world commodity markets. A decisive influence on the movement of non-food prices was exerted by changes in fuel and lubricant prices: during the year, they fell by 10.3% due to a fall in gasoline prices by 12.9%. Prices for diesel fuel rose by 8.8% in 2008 (compared to 20.3% in 2007), and for solid fuel, by 20.1% (25.1%). The actual average cost of construction of a square meter of residential floor area in January-December 2008 was KZT 57.9 thousand ($477). The

25 [http://www.customs.kz/exec/statist/stat?id=1]. 26 [http://www.nomad.su/?a=4-200902041128]. 27 [http://www.fmbiz.ru/news/2219.html]. 28 [http://www.nomad.su/?a=4-200901060113]. 29 [http://www.icquadro.ru/index.php?option=com_content&task=view&id=3276&Itemid=106]. 30 [http://www.regnum.ru/news/1079050.html]. 31 [http://www.nomad.su/?a=4-200901060113]. 196 REPUBLIC OF KAZAKHSTAN Economy

Figure 8.1 Inflation in 2001-2008

20.0 18.8 18.0 16.0 14.0 12.0 9.5 10.0 8.4 7.5 8.0 6.4 6.6 6.8 6.7 6.0 4.0 2.0 0.0 2001 2002 2003 2004 2005 2006 2007 2008 end-of-period, % change from December of previous year

All goods and services

S o u r c e: Constructed by the author based on data from the Statistics Agency of Kazakhstan.

Figure 8.2 Inflation in 2001-2008

18.0 17.0 16.0 14.0 12.0 10.8 10.0 8.4 8.6 7.6 8.0 6.4 6.9 5.9 6.0 4.0 2.0 0.0 2001 2002 2003 2004 2005 2006 2007 2008 % change from previous year

All goods and services

S o u r c e: Constructed by the author based on data from the Statistics Agency of Kazakhstan. cost of construction of a square meter in apartment houses was KZT 81 thousand ($668), and in individual houses, KZT 36.3 thousand ($299). At the same time, the national average sale price of a square

197 CENTRAL EURASIA 2008 Analytical Annual meter of new residential housing was KZT 147.5 thousand ($1,216), down 0.7% from the previous month, and the resale price of a square meter of comfortable housing, KZT 108.3 thousand ($893), down 2.3%. Core inflation (calculated excluding fruits, vegetables, gasoline and coal) was 0.3% in December 2008 compared to 0.7% in November (see Table 5).

Table 5

December 2008 over Jan-Dec November December December 2008 over 2008 2005 2007 Jan-Dec 2007

Inflation 0.2 40.9 9.5 17.0

Core inflation 0.3 39.9 9.9 16.9

Change of tariffs for lowest-income population groups 0.1 48.9 11.1 21.1

Change of tariffs for highest-income population groups 0.4 37.8 9.2 15.5

S o u r c e: Statistics Agency of Kazakhstan.

The subsistence level (cost of living) calculated based on minimum nutrition standards in De- cember 2008 was 13.1% higher than in December 2007 and 0.2% lower than in November 2008, amounting to about KZT 12.2 thousand or $101 (food products KZT 7.3 thousand or $61, non-food products and paid services KZT 4.9 thousand or $40). In its structure, expenditures on meat and fish in December 2008 made up 19.3%, fat-and-oil products and eggs 16.9%, fruits and vegetables 11.8%, bakery products 9.9%, and sugar, tea and spices 2.1%.

Unemployment and Household Income

In 2008, unemployment in Kazakhstan was recorded at 6.7% of the economically active population (compared to 7% in 2007). At the end of December, the number of people registered with the employment service as unemployed was 48.4 thousand, or 0.6% of the economically active population. But experts assess the number of unemployed in December 2008 at 562.4 thousand. In Novem- ber 2008, according to estimates, nominal money income per capita was KZT 30.6 thousand ($253), increasing by 13.2% from November 2007, while real money income rose by 1.7%. Average monthly nominal gross wages in November 2008 stood at KZT 59.6 thousand ($491), up 10.5% from Novem- ber 2007. Real wages fell by 0.7%.

Financial Sector

Given the high vulnerability of the financial sector in Kazakhstan, the main task of current government policy is to avert panic and prevent the bankruptcy of even a single systemically important 198 REPUBLIC OF KAZAKHSTAN Economy bank. In 2008, public confidence in the banking system was on the whole maintained, with timely government intervention designed to offset existing problems. An overview of the financial sector in 2008 is given in Table 6.

Table 6 Financial Sector ($ million, end-of-period)32

12.07 12.08*

Net foreign assets 15,674 32,466

Claims on non-residents, convertible foreign currency 38,559 42,561

Liabilities to non-residents, convertible foreign currency 42,749 36,846

National Fund assets 20,833 27,219

Other net foreign assets –969 –468

Domestic assets 19,876 15,626

Net claims on Central Government 740 1,865

Claims 1,703 3,002

Liabilities 962 1,137

Claims on regional and local governments 23 3

National Fund resources 22,554 27,219

Claims on public non-financial institutions 489 581

Claims on private non-financial institutions 41,457 47,206

Claims on non-profit organizations providing services to households 14 13

Claims on households 22,927 21,281

Other net domestic assets –23,221 –28,104

Liabilities 35,550 48,092

Liabilities included in broad money 34,750 47,319

Cash in circulation 6,092 7,058

Transferable and other deposits 28,658 40,261

32 Including accounts of the National Bank of Kazakhstan, second-tier banks, mortgage companies and the Develop- ment Bank of Kazakhstan. 199 CENTRAL EURASIA 2008 Analytical Annual

Table 6 (continued)

12.07 12.08*

Other liabilities (not included in broad money) 800 773

Transferable and other deposits 41 8

Securities 473 460

Loans 15 75

Financial derivatives 18 6

Other accounts payable 252 224

* Excluding closing balances.

S o u r c e: Recalculated by the author based on data from the National Bank of Kazakhstan.

The key indicators of the financial market in Kazakhstan as of 1 January, 2009, are given in Table 7 ($ billion). Table 7

Banking Retirement Insurance Non-bank Indicator sector savings funds sector institutions

Total assets 98.1 0.5 2.2 1.8

Total liabilities 86.1 0.1 0.8 1.3

Equity 12.0 0.4 1.4 0.4 S o u r c e: Recalculated by the author based on data from the Financial Supervision Agency of Kazakhstan.

Banking Sector

On 1 January, 2009, Kazakhstan’s banking sector was represented by 37 second-tier banks. Five second-tier banks were in the process of compulsory liquidation by a court decision. The dynamics of banking sector indicators are presented in Fig. 9. As the figure shows, the assets of banking sector players exceed their liabilities, including due to a reduced refinancing rate and government support. In the structure of the bank loan portfolio, the share of standard loans on 1 January, 2009, was 43.3% (compared to 39.7% on 1 January, 2008), doubtful loans made up 52.3% (58.8%), and bad loans, 4.4% (1.5%). Loans in the fifth doubtful loan category plus bad loans (including provisions for similar-type loans)33 totaled KZT 744.2 bil-

33 For similar-type loan portfolios (with similar credit risks), nonperforming loans are recorded as the sum of actually created provisions. 200 REPUBLIC OF KAZAKHSTAN Economy

Figure 9

14,000

12,000

10,000

8,000

6,000 billion tenge 4,000

2,000

0 1.01.2004 1.01.2005 1.01.2006 1.01.2007 1.01.2008 1.04.2008 1.07.2008 1.10.2008 1.01.2009

Assets Liabilities Equity

S o u r c e: Financial Supervision Agency of Kazakhstan. lion ($6 billion) or 8.1% of the total loan portfolio (compared to KZT 283.1 billion/$2 billion or 3.2% on 1 January, 2008). On 1 January, 2009, delinquent loans more than 90 days in arrears totaled KZT 477.9 billion ($4 billion) or 5.2% of the bank loan portfolio (compared to KZT 476.0 billion/$4 billion or 5.2% on 1 December, 2008). Loan loss provisions on 1 January, 2009, totaled KZT 1,020.5 billion ($8 billion) or 11.0% of the loan portfolio, increasing by 95.6% from the beginning of the year. In 2008, the shares of Ka- zakh banks repeatedly fell in price on both the Kazakhstan Stock Exchange (KASE) and the Lon- don Stock Exchange. In mid-October, for example, Alliance Bank shares, which cost $14 in June 2007, sold at $1.15 per share. According to experts, another Kazakh bank—Kazkommertsbank— has lost much of its value as well. Whereas in 2007 its assets were close to $5.5 billion, today they are less than $2 billion. In 2008, the government bought 25% of the shares of four second-tier banks in order to get an opportunity for operational control of the financial sector of the economy during the financial crisis. That is why the government does not plan to remain a shareholder in these banks for long, but will withdraw from them depending on the situation in world financial markets. In the corporate securities market, the number of joint stock companies on 1 January, 2009, was about 2,000. Other companies currently operating in the market include 104 broker-dealers, 15 regis- trars, 11 custodian banks, 13 pension fund management companies, 66 investment portfolio managers, and 4 transfer agents. In 2008, 45 mutual funds were registered in the country, and 30 funds were redeemed. At present, 6 joint stock companies listed on the stock exchange have defaulted on their bonds. During the year, 511 share issues, 82 bond issues with a total nominal value of KZT 731.2 billion ($6 billion), and 13 bond programs totaling KZT 538 billion ($4.4 billion) were registered in the country.

201 CENTRAL EURASIA 2008 Analytical Annual * * *

Thus, the world financial crisis, which manifested itself in full measure in the second half of 2008, changed the earlier positive trends in the world economy and in the economy of Kazakhstan. Starting from October 2008, marked by the bankruptcy of major US mortgage companies and investment banks, the crisis began to tell on Kazakhstan’s financial sector, with corresponding negative changes in its real sector. That is why last year the Kazakhstan authorities took an important decision: with a reduction in revenue and a slowdown in economic growth during the world financial crisis, it was decided to maintain the size of the economy through the use (for the first time) of the resources of the National Fund of the Republic of Kazakhstan. Under the anti-crisis plan, a unified fund pooling all state-owned assets became the main instrument of its implementation. It was decided that while reducing the impact of the financial crisis on the country and increasing the state’s role in the economy, Kazakhstan should use world market conditions to diversify the economy and create new competitive advantages so as to accelerate economic development in the post-crisis period. The October escalation of the crisis and the global liquidity crunch limited the country’s external financing sources, which is why it was decided to mobilize domestic sources. For this purpose, the bank refinancing rate was reduced, four second-tier banks were partially nationalized, and it is planned to continue increasing government spending. And so, despite downgraded ratings, Kazakhstan has managed to avoid a sharp drop in fixed capital investment. Of course, a slight decline has occurred in mining and manufacturing. In the near future investment may decrease due to a decline in credit in the economy, but the anti-crisis measures may help to bring about qualitative changes: investment will be channeled in accordance with the needs of economic diversification and will produce the desired results. Under the anti-crisis plan, financial flows were directed into agriculture, small and medium business, the real estate market and the financial sector. In addition to the state asset management fund, the authorities set up a fund to manage the distressed assets of commercial banks, simplified government procurement procedures in order to accelerate the flow of capital into the real sector of the economy, and significantly lowered administrative barriers for businesses. New listing rules were introduced to improve the climate in Kazakhstan’s stock market. Consequently, the anti-crisis policy implemented in Kazakhstan enabled it to avoid economic and social upheavals in 2008. There were no massive job cuts, the level of household incomes and their regularity were maintained, inflation stabilized at a relatively low level, the parity of the population’s purchasing power and prices was ensured, deposits were guaranteed, and the stability of the banking system was maintained through liquidity support. Along with the anti-crisis measures, a number of systemic steps were taken to promote the country’s national interests, especially in priority natural resource projects: at the legislative level, the matter was resolved by the adoption of a new Tax Code, and in the real sector, by establishing government control over all three oil refineries (which makes it possible during the crisis to develop a single marketing policy with due regard for social tasks) and by increasing oil pipeline capacity and Kazakhstan’s share in a number of major natural resource projects. That is why the increase in national influence on one of the country’s major sources of income should produce a positive socioeconomic effect, raising the living standards of every Kazakhstan citizen.

202 REPUBLIC OF KAZAKHSTAN Religion RELIGION

Marian ABISHEVA Deputy Director for Academic Work, Kazakhstan Institute of Strategic Studies under the President of the Republic of Kazakhstan (Almaty, Kazakhstan)

The religious situation in Kazakhstan is shaped to a great extent by its ethnic and demographic specifics as well as by the political, economic, moral and sociocultural situation inside and outside the republic. The confessional, group and individual, official and sectarian traditional and modernized, political and everyday religiosity types, forms and varieties create a highly intricate patchwork in the republic. It can be said with good reason that the republican model of interaction between the state and confessions based on respect for human rights and freedoms, partnership, and the desire to achieve mutual understanding is an outcome of the state’s purposeful activities. The religious associations of Kazakhstan are regarded as an inalienable part of its social structure, while their followers are viewed as citizens with a full range of rights. The state shifted the accent from one-sided control functions in which power belonged to the state toward cooperation and mutual assistance. The government regards religious associations as its social partners, as a collective form of meeting people’s religious demands, and not as highly suspicious structures that need to be closely controlled and watched. The state gave freedom of action to all the religious groups—the Muslims, Orthodox Christians, Protestants, Judaists, Buddhists, etc. In its political practice it is guided by the rule that a secular democratic poly-confessional and poly-ethnic state should not give preference to one particular religion but it should never forget the traditional confessions either. In short, achieving an inter-confessional balance is the final aim of state politics. Today, the country is enjoy- ing a spiritual renaissance and inter-confessional consent that favorably affect the republic’s social and political development. During the years of independence Kazakhstan has acquired a legal basis that ensures equality of rights and freedom of religion for all citizens irrespective of their religious convictions. Today, religion and politics are kept apart, which can be described as one of the greatest pillars of domestic stability. The state pursues three major principles with respect to freedom of conscience: neutrality, tolerance, and parity. Ideological neutrality is the key principle, which means that the state does not interfere in the internal affairs of religious communities and alliances. The republic’s religious legislation says that religious alliances are separate from the state, which cannot give preference to any one of them if others may rightfully claim theirs. Tolerance is more than mere toleration—it means respect of the religious convictions of others. The principle of parity demands that all people, irrespective of their convictions, be treated equally especially when it comes to their civil rights. The country’s leaders act in the conviction that it is the state’s duty to create equal and favorable conditions for all confessions. In Kazakhstan all religions and all religious associations are equal before the law; Kurban ait, a Muslim holiday, and Christmas, celebrated by the Orthodox Christians, are days off. Half of the polled citizens (52 percent) described confessional relations as stable and respectful; 34.9 percent believed that they were friendly. The general level of religiosity is not very high (there is a more or less equal number of “very devoted,” “loyal to religion,” and atheists or people with no definite ideas about religion); the level of tolerance, on the other hand, is high (90 percent of the na-

203 CENTRAL EURASIA 2008 Analytical Annual tion described its attitude to followers of other religions as friendly, neutral, or tolerant; 2.5 percent spoke about their bad or even conflict-prone attitude). During the last 18 years the number of religious institutions increased while their quality became much higher. In 2008, over 43 confessions and denominations were present in Kazakhstan united into 4,173 communities. In 1990, there were 670 religious communities. According to state statistics about 70 percent of the citizens are Muslims but this does not interfere with the functioning of other confessions. Figure 1 Dynamics of the Numerical Strength of Religious Organizations

4,500 4,173 3,992 4,000

3,500 3,259 3,016 3,000

2,500 2,299 2,100 2,000 1,642 1,500 1,180 977 1,000 671 500 0 1990 1993 1995 1996 1997 2001 2003 2005 2007 2008

S o u r c e: Based on information supplied by the Committee for Religious Affairs at the Ministry of Justice of the RK for 2008.

Between 1990 and 2008 the number of Islamic associations increased from 46 to 2,441; the Russian Orthodox Church now has four times more parishes than before (293 against 62 in 1990); there are twice as many Roman Catholic communities (86 against 42). The Evangelical Christian Baptists increased the number of their communities from 168 to 362; Seventh Day Adventists from 36 to 66; and Protestant communities from 521 to 1,189. There are 27 Judaic communities in the republic; the Buddhists are united into 4 communities. The religious organizations own 3,129 religious structures, 2,229 of which are mosques; 258 Orthodox churches; 93 Catholic churches; 6 synagogues; and 548 Protestant prayer houses and churches. Many of the religious organizations run educational and training centers such as madrasahs, Sunday and parish schools, seminaries, universities, and advanced training institutes; there are monasteries and convents and monastic orders. The state supports and encourages efforts designed to maintain the confessions’ peaceful coexistence. A program for enhancing the Kazakhstan model of ethnic and confessional consent for 2006- 2008 is being implemented. It envisages a set of measures designed to create more harmony in ethnic and confessional relations and introduce tolerance and cooperation between the state structures and national-cultural, religious, and non-governmental organizations for the sake of promoting spiritual

204 REPUBLIC OF KAZAKHSTAN Religion

Figure 2 The Number of Religious Organizations in Kazakhstan

Non-traditional and others 137 Judaism 27 (3%) (1%) Protestantism 1,189 (28%)

Catholicism 86 (2%)

Orthodoxy 293 Islam 2,441 (7%) (59%)

S o u r c e: Based on information supplied by the Committee for Religious Affairs at the Ministry of Justice of the RK for 2008. values. According to the Ministry of Culture and Information, religious organizations issue 44 religious periodicals. The republic has already acquired a complete set of tools for establishing communication between the government and religious organizations at the republican level, which includes the As- sembly of Nation of Kazakhstan, the Committee for Religious Affairs at the Ministry of Justice, and the Council for Contacts with Religious Associations under the Government of the Republic of Kazakhstan. There are divisions for contacts with public and religious associations in the departments for domestic policies at the akimats (executive structures of local power) of the regions, Astana, and Almaty. These structures are supposed to organize constructive dialogs between the state and religions, as well as among religions; wide-scale propaganda among the people, which also involves the leaders of confessions and the media; improvement of the national legislation on freedom of religion; monitoring of the religious situation in the country; ensuring an active response to all illegal actions of leaders of religious organizations and foreign missionaries; prevention of religious extremism, etc. Religious life in Kazakhstan is developing at several levels: development of the religions, relations among the religions, and relations between the religions and the state. In 2008, all the religions present in the republic demonstrated dynamism: they opened new churches and religious schools, and organized seminars and meetings. The public gradually changed its attitude toward religion. Relations among the religions can be described as constructive and friendly: the leaders congratulate one another on holidays; people, irrespective of their religious affiliation, celebrate all the religious holidays. There is not what can be called “rivalry over minds” or squabbles over confessional expanse: each of the religions is developing in harmonic cooperation with the others. The content of state/religions cooperation is changing gradually; it has received new accents while the sides are united in pursuing common aims. The state and religions are working hard to address the most urgent issues and defuse social tension. The following events can be described as the key ones in public life.

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Islam has been dynamically developing; in March, the Muslim community celebrated Mawlid an Nabi (Birth of the Prophet); in September, the Holy Month of Ramazan and Oraza-Bairam were celebrated; the year ended with Kurban ait in December. Society and the state worked together to organize the hajj. In March, the Ministry for Tourism and Sport of the RK met to discuss organizational matters and assess the experience of 2007. According to the ministry, the country was given a quota of 5,000 places for the hajj to Saudi Arabia. Several new mosques were opened in Aktoba, Atyrau, Karaganda, Pavlodar, Semei, Taldykorgan, and Uralsk, as well as in several regions, which shows that more and more people wanted to satisfy their religious needs. In 2008, several airports opened prayer rooms. The presidents of Russia and Kazakhstan play an important role in the dialog between Islam and Christian Orthodoxy. In September, they visited a new mosque and new church in Aktoba. Christian Orthodoxy, the republic’s second largest confession, has been developing and further unfolding its public activities. In January, it celebrated Christmas and received warm greetings from President Nazarbaev and Chairman of the Spiritual Administration of the Muslims of Kazakhstan A. Derbisali. Across the country the holiday was marked by an all-night vigil and Christmas liturgy. On 27 April, the Christians celebrated Easter, one of the Twelve Major Festivals. The Holy Fire was delivered to the Resurrection Cathedral in Almaty from Jerusalem. New churches and chapels were opened in Aktobe, Almaty, Pavlodar, and Taldykorgan. The Catholics, they comprise 1 percent of the total population in the republic, celebrated Christ- mas; in 2008, Vatican representatives were received in Kazakhstan: in February, Chairman of the Senate K. Tokaev received Apostolic Nuncio, Ambassador of the Vatican to Kazakhstan and Central Asia Archbishop Weselowski. According to official information, in 2008 the Catholics of Kazakhstan had over 73 churches in the republic, including one Greco-Catholic parish supervised by four Apostolic administrations; there are over 93 Catholic communities and 162 Catholic visiting groups and about 15 monastic congregations. In 2008, the Judaists attracted much attention by several religious ceremonies. In April, a fair, Pesah-5768, was organized in the Central Synagogue in Almaty, in June, the Judaists celebrated Shavuot, the Torah holiday, in September, they marked Rosh Hashana, New Year according to the Jewish calendar. In 2008, the republic’s first kosher restaurant was opened in Almaty, an event hailed by the Jewish community. On the whole, there were no great structural or qualitative changes in the religious sphere, which steadily developed in accordance with the conditions formulated by the state. In recent years, the public has been actively engaged in a dialog about the future of religion and inter-religious communications. In 2008, the state paid even more attention to the religious sphere and actively involved the religious leaders in the dialog. In January and July, the Council under the Government of the RK discussed religious associations and their activities. To ensure national security and protect the republic’s religious milieu, the state undertook several systemic measures. It paid attention to the unregistered religious organizations and missionary groups that violated the laws and promoted dangerous, pseudo-religious, and extremist ideas. The law-enforcement bodies detained several dozen missionaries associated with unregistered or banned organizations, such as Tabligi jamaat, Hizb ut-Tahrir, and others. The state spared no efforts to prevent the proliferation of destructive activities of all sorts of movements that used religion to camouflage their true intentions. The parliament, which in 2008 paid more attention to religious extremism, discussed the situation at its sittings. The secular and religious public displayed a great deal of interest in the draft law On the Amendments and Addenda to the Legislation of the Republic of Kazakhstan related to Free- dom of Conscience and Religious Associations intended to protect human rights in the religious sphere and ensure security and order. Throughout the year the legislature and several regions and cities (As- tana, Almaty, Kostanai, Pavlodar, and Shymkent) hosted a series of round tables and forums devoted

206 REPUBLIC OF KAZAKHSTAN Religion to the changes in religious legislation, development of the religious sphere, and struggle against religious extremism. The state pays particular attention to young people as the age group especially susceptible to religious propaganda. Several scientific-practical conferences, seminars, lectures, and forums related to the youth problem were held in Astana where the Eurasian National University organized a lecture called The Universal Principles of Hinduism; in May, the Center of Islamic Economics and Law of the Kazakh Humanitarian-Legal University organized an international scientific-practical conference on Islam: Trends and Prospects for the 21st Century, at which the book by Russian academic Yu. Mikhailov Pora ponimat Koran (The Time has Come to Understand the Koran Bet- ter) was presented. A round table on Islam in the 21st Century and the Problem of Religious Ex- tremism was held in Almaty, and a scientific-practical conference on how to oppose religious extremism among young people was held in the same city. The Kazakh University of Economics, Finances and International Trade in Almaty organized a round table on the Mental Foundations of Tolerance in a Poly-Ethnic and Poly-Confessional Society; in Kzyl-Orda a seminar on the functioning of mosques in the region was held in the Palace of Students at Kzyl-Orda State University. Pavlodar hosted a regional scientific-practical conference on The Role of Religion in Promoting Spirituality in Kazakhstan Society Today. The state is very much concerned about protecting the religious sphere against outside negative influence. In May, the research and analytical center for religious problems of the Ministry of Justice and the National-Democratic Nur Otan Party organized a conference which discussed modified forms of religious associations. The participants concentrated on the use of religion for political and commercial aims. It was established that certain confessions were open to negative influence from abroad. There are still foreign missionaries who regard the nation as “missionary virgin soil”; their active proselytism endangers the country’s cultural specifics and national security. Religious harmony, dialog, and mutual understanding are extremely important for civil peace and political stability. The country’s political leaders are fully aware of the need to mobilize religious resources in the interests of peace, dialog, and harmony; they are also needed to neutralize intolerance and avoid potential religious conflicts. This means that the people should be taught to separate true values from false ones so that they are better able to understand reality, the value of each and every day, and the importance of promoting the welfare of all. Kazakhstan initiated and organized congresses of leaders of world and traditional religions held in 2003 and 2006. It has become clear that the world religions may serve a link in the dialog of civilizations and protect society from the negative influence of extremist forces resolved to undermine world order. In 2008, Kazakhstan was obviously trying, in a consistent way, to place the ideas of tolerance and religious dialog in an international context. In June, the members of the Conference on Cooperation and Confidence-Building Measures in Asia gathered in Almaty for a conference on Tol- erance as the Main Value of Central Asia. An International Center of Cultures and Religions was opened in the Palace of Peace and Harmony in Astana in December. Throughout 2008 the republic actively prepared for the 3rd Congress of the Leaders of World and Traditional Religions scheduled for 2009. Late in October, representatives of all the world and traditional religions and experts of international organizations came to Kazakhstan for the 7th sitting of the Congress’s Secretariat. Early in April 2008, Astana received the Group of High Representatives, which included academic, cultural, and political figures from the states that showed an interest in a conference called A Common World: Progress through Diversity, suggested by Kazakhstan. They came from Austria, Afghanistan, Bahrain, Great Britain, Spain, Qatar, Kuwait, Pakistan, Poland, Russia, Slovakia, Saudi Arabia, the U.S., Turkey, France, Sweden, and other countries. In October the forum discussed the basic issues related to Kazakhstan’s initiative to establish a dialog between the West and the Muslim world.

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On the whole, the world community has accepted the Kazakhstan model of confessional cooperation and harmony as unique. This was confirmed by the fact that in 2010 the republic will chair the OSCE; and in 2011 it will head the OIC. This means that the republic’s important contribution to the global dialog between cultures and religions has been recognized. During the years of independence the republic, which is home to over 130 ethnoses and 43 confessions, has accumulated experience in promoting religious tolerance which has become part of society’s political culture and an inalienable part of state politics. During its 2010 chairmanship, Ka- zakhstan plans to place religious cooperation and the continued efforts of the member countries to fight all forms of discrimination on the agenda as two of the key points.

INTERNATIONAL AFFAIRS

Timur SHAYMERGENOV Official at the Secretariat of the Majilis (Parliament) of the Republic of Kazakhstan (Astana, Kazakhstan)

n 2008, Kazakhstan continued to pursue quite ing the celebrations of the 10th anniversary of the an active international policy. Astana has tra- Kazakh capital in July and at the resort zone of I ditionally been adhering to a multi-vector Burabai in December, as well as the following conception of relations with Russia, China, the international forums: the third meeting of the U.S., the European Union, and countries of the Ministers of Foreign Affairs of the Member States Muslim East. As in the past, the strategic vector of the Conference on Interaction and Confidence- of Kazakhstan’s diplomacy aimed to create and Building Measures in Asia (CICA), the Seventh maintain favorable conditions for the country’s Ministerial Meeting of the Asia Cooperation Di- sustainable development based on political and alog, the “Common World: Progress through Di- economic reforms. The foreign policy agenda for versity” forum, and others. 2008 was very full and comprehensive. The head In 2008, 12 heads of state visited Kazakh- of state participated in a total of 112 international stan—from Georgia, Qatar, Kyrgyzstan, Latvia, meetings and functions, including six trips to for- the UAE, Russia, Tajikistan, Turkmenistan, Tur- eign countries within the framework of bilateral key, Ukraine, Uzbekistan, and Germany. During relations, eleven multilateral summits, and eight the year, the Kazakh leader received the prime international forums. During the year, Nursultan ministers of nine states during their working vis- Nazarbaev paid visits to Spain, China, Kyr- its to the republic, in particular—Italy, China, gyzstan, Mongolia, Oman, France, and Japan and Luxembourg, Lithuania, Mongolia, Russia, participated in several international summits: the Tajikistan, France, and South Korea. Ambassa- CIS, EurAsEC, CSTO, SCO, World Economic dors from 20 countries of the world presented their Forum, 17th annual session of the OSCE Parlia- credentials, and at the end of the year President mentary Assembly, meeting of Central Asian Nazarbaev met as usual with the representatives leaders, informal meetings of heads of state dur- of the foreign diplomatic corps.

208 REPUBLIC OF KAZAKHSTAN International Affairs

There were also numerous meetings with EBRD President Thomas Mirow, and World Bank representatives of international structures and Group President Robert B. Zoellick.1 foreign political and business circles who visited In the past year there was a perceptible in- the country, in particular with Asia Society Chair- crease in the number of working meetings and man Richard Holbrooke, U.S. Secretary of State talks with state leaders and representatives of in- Condoleezza Rice, General Secretary of the ICO ternational organizations and business circles of the Ekmeleddin Ihsanoglu, CSTO Secretary General CIS countries (29 meetings in 2008 and 27 in 2007) Nikolai Bordiuzha, OSCE Chairman-in-Office and Europe (28 and 26 meetings, respectively). Alexander Stubb, Secretary General of the There was also an increase in the number of for- EurAsEC Tair Mansurov, Turkish Parliament eign policy cooperation measures with the PRC (6 Speaker Köksal Toptan, Crown Prince of Abu and 1), the countries of the Islamic world (18 and Dhabi Sheikh Mohamed Bin Zayed Al-Nahyan, 12), and East and South Asia (7 and 2, respective- Director-General of the World Health Organiza- ly). In 2008, eleven meetings (6 in 2007) were held tion Dr. Margaret Chan, and others. Attention was with U.S. officials, politicians, public figures, and focused on investment cooperation and imple- businessmen. The designated statistics clearly menting innovative projects at the meetings with show an increase in the intensity and balance of 2 a delegation from the U.S. Congress, the repre- Kazakhstan’s foreign policy activity. sentatives of contract companies in the North Caspian project—Shell, Total, ENI, Exxon Mo- 1 See: M. Kasymbekov, “Rabochiy grafik Presidenta: bil, Conoco Philips, and Inpex, President of Gen- osnovnye itogi 2008 goda,” Kazakhstanskaia pravda, 13 Jan- eral Electric Ferdinando Beccalli, Kingdom Hold- uary, 2009. 2 See: M. Iliasov, “Kontseptualno novaia rol,” Kaza- ing Company Chairman Abdul Aziz Al Saud, khstanskaia pravda, 17 January, 2009.

Russia and the CIS Countries

One of the key vectors in Kazakhstan’s foreign policy is further intensification of cooperation with the Russian Federation, with which more than ten top-level meetings were held in 2008, including Dmitry Medvedev’s first official foreign visit as head of state to Astana in May. During the meetings, the sides discussed joint oil and gas field development and oil and gas transportation projects, as well as the creation of joint petrochemical enterprises. Attention was focused on use of the Baikonur space center and joint space exploration. During the past year, on the initiative of the Russian side, a working group was created to step up bilateral cooperation in innovative development, within the framework of which the main vectors of its activity were determined. Joint high- tech projects in the chemical industry were also launched, as well as projects to develop and introduce agro-technology. In order to intensify cooperation, a whole set of new agreements was signed, including on cooperation in the use and development of the GLONASS system; on cooperation between the National Innovation Fund Joint-Stock Company and Russian State Nanotechnology Corporation; and on the intention to grant a long-term loan between the Kazakhstan Bank of Devel- opment Joint-Stock Company and the RF Development and Foreign Economic Activity Bank State Corporation. Several important documents were also signed during the second visit of the leaders of both countries held during the 5th Kazakh-Russian Forum of Border Area Leaders at the end of September in Aktoba. In 2008, this forum acquired a new significance for bilateral relations, since not only the border areas took part in it, but also regions of Kazakhstan and Russia located at a great distance from each other. On the whole, at the end of 2008 an increase in reciprocal trade volume in relations with Russia was noted, which amounted to almost 20 billion dollars. The intensive nature of the meetings between

209 CENTRAL EURASIA 2008 Analytical Annual the leaders of the two countries and the diversity of the projects launched indicate that bilateral cooperation is extremely important for both countries. The signing of a Joint Kazakhstan-Russia Action Plan for 2009-2010 was an important result of cooperation. New prospects were also designated in the development of relations with other countries of the post-Soviet expanse. During the EurAsEC and CSTO summits held in Bishkek, the leader of Kazakh- stan met Moldovan President Vladimir Voronin and discussed with him several bilateral cooperation issues and the prospects for expanding Kazakh-Moldovan economic cooperation. Last year there were signs of relations between Kazakhstan and Ukraine moving to a higher level. In March, the heads of Kazakhstan and Ukraine, Nursultan Nazarbaev and Viktor Yushchenko, solemnly opened the Year of Ukraine in Kazakhstan, which was aimed at strengthening political, economic, and humanitarian cooperation between the two countries. The Year of Kazakhstan in Ukraine in 2007 and the Year of Ukraine in Kazakhstan in 2008 gave a powerful boost to the development of bilateral relations: more than 350 bilateral undertakings were carried out over the two years. At the talks in Astana in March, the heads of the two countries agreed to continue cooperation in implementing several joint projects already launched in the energy sphere, space exploration, oil transit, oil and gas field development, and joint production of oil and gas equipment, as well as in developing transport communication relations and increasing freight shipments between Europe and Asia. Intensive cooperation also continued with Kazakhstan’s closest neighbors in Central Asia. For example, in April, Kyrgyz President Kurmanbek Bakiev paid an official visit to Kazakhstan. Dur- ing the talks the sides agreed in particular to hold an international forum in Kazakhstan in 2009 devoted to the initiative to create a Union of Central Asian States, noted the need to stimulate contacts in the hydropower industry and in transport and communications. In order to efficiently resolve bilateral relation issues, a High Intergovernmental Council was formed, the sittings of which will be held annually under the chairmanship of the prime ministers of the two countries. And in August, President Nazarbaev paid a working visit to Kyrgyzstan, during which he held talks with President Kurmanbek Bakiev on several issues of regional and bilateral cooperation. President of Tajikistan Emomali Rakhmon paid an official visit to Astana, which resulted in a decision to create a Kazakh-Tajik Investment Fund with authorized capital of 100 million dollars for financing future projects in Tajikistan. During the meetings, a Program of Economic Cooperation between the governments of Kazakhstan and Tajikistan, a Memorandum on the Creation of an Interstate Coordination Council and Council of Foreign Ministers of the two countries, as well as other agreements were signed. President of Uzbekistan Islam Karimov also paid a two-day official visit to Kazakhstan. The talks touched on intensifying bilateral economic trade cooperation. They resulted in agreements to open business centers and trade representative offices in the Kazakh and Uzbek capitals, as well as to create a hydropower consortium of the Central Asian states. Kazakhstan’s Central Asian diplomacy efforts succeeded in gaining the Tajik and Kyrgyz presidents’ support of regional integration. They expressed their approval of gradually implementing this institutional cooperation. Ashghabad and Bishkek supported Astana’s initiative to hold a forum on this issue next year. During the year, the sides actively discussed measures designed to jointly resolve the current regional problems in water management, the energy industry, and the food industry, as well as the activity of the International Aral Rescue Fund.

The European Vector

Kazakhstan traditionally pays much attention to cooperation with the European countries and European regional structures. Last year, its relations actively developed with Italy, Spain, Latvia, Luxembourg, Slovakia, France, Germany, and Estonia. In 2008, the Kazakh president signed the “Road

210 REPUBLIC OF KAZAKHSTAN International Affairs to Europe” state program,3 which was aimed at reaching a level of strategic partnership with the Eu- ropean countries in the development of economic cooperation, attracting management technology and experience, improving domestic legislation, and drawing up the main vectors of Kazakhstan’s chairmanship in the OSCE. During the first half of June, the Kazakh president paid an official visit to France where he met with President Nicolas Sarkozy, Prime Minister François Fillon, Speaker of the French Senate Christian Poncelet, Speaker of the French National Assembly Bernard Accoyer, and former French President Jacques Chirac. Important items on the itinerary were the visit to the Thales Alenia Space Company in Cannes and the meeting with representatives of France’s business circles. During the visit, a set of documents consisting of ten agreements and treaties was signed aimed at increasing Kazakh-French cooperation in different areas, including the Treaty on Strategic Partnership between Kazakhstan and France, intergovernmental agreements on cooperation in tourism and the creation of a Kazakh-French Business Council, and a memorandum on cooperation in transport, high technology, and space exploration. Nursultan Nazarbaev was presented with France’s highest state award—the Grand Cross of the Legion of Honor—for his achievements in developing Kazakh-French cooperation. Active cooperation continued with Spain, which was promoted by meetings with King Juan Carlos I and representatives of the Spanish government during the Kazakh president’s July working visit. While in Spain, Nursultan Nazarbaev also held talks with leaders of Spanish companies, Telefonika (telecommunications), Iberdrol (energy), Indra (information technology), Dragados (construction and infrastructure), and Talgo (rail transportation) regarding the implementation of large projects in Ka- zakhstan in alternative energy, highway and rapid transit railroad building, and tourism. The Kazakh leader officially opened the National Day of the Republic of Kazakhstan within the framework of the Expo-2008 World Exhibition in Saragossa. In September, Federal President of Germany Horst Köhler paid a state visit to Astana. Dur- ing the talks, agreements were reached on holding various functions in 2009-2010 and on the Ka- zakh president’s future visit to Germany. The leaders of the two countries also focused on investment cooperation issues. The meetings ended in the Kazakh side proposing that a Year of Kaza- khstan be held in Germany in 2009 and a Year of Germany in Kazakhstan in 2010. During the visit, a Joint Statement on Future Partnership was also adopted between Kazakhstan and Germany, and agreements were signed on forming innovative-investment partnership until 2011. The launching of Kazakh-German poly-functional partnership programs was extremely important, as well as the implementation of the New Partnership Strategy between the EU and Central Asian countries that Germany initiated in 2007. In October 2008, Prime Minister of Italy Silvio Berlusconi paid a short working visit to Kaza- khstan. The sides discussed the further development of bilateral relations. Italy is one of Kazakhstan’s largest foreign trade partners and Italy’s political circles are very interested in strengthening the Ka- zakh-Italian dialog and economic trade cooperation.4 Latvia’s President Valdis Zatlers paid his first official visit to Kazakhstan. The talks and business forum attended by representatives of the business circles of both states made a point of emphasizing that Latvia wants to be the “open gates” for Kazakhstan as it takes the road to Europe. During the talks, the discussion turned to strengthening mutual cooperation by augmenting economic cooperation and bilateral trade. Kazakhstan is particularly interested in using Latvia’s transportation potential as a transit corridor with a well-developed port, rail, and road infrastructure. The sides agreed

3 See: “Gosudarstvennaia programma ‘Put v Evropu’ na 2009-2011 gody,” available at [http://ru.government.kz/docs/ u080653_20080829~1.htm]. 4 See: E. Rudenko, “Berlusconi: Astana dostoina voskhishcheniia,” Kazakhstanskaia pravda, 29 October, 2008. 211 CENTRAL EURASIA 2008 Analytical Annual to continue efforts to organize rail container shipments via the China-Kazakhstan-Russia-the Baltic states transport corridor.5

Cooperation with the U.S.

Relations with the United States were a top priority in Kazakhstan’s foreign policy. In 2008, bilateral relation issues, as well as the most important world and regional problems, were discussed by the Kazakh leader during meetings with State Secretary Condoleezza Rice and her Assistant Secre- tary of State for South and Central Asian Affairs Richard Boucher. The meetings focused on enhancing political and economic cooperation and the participants exchanged opinions on urgent issues of international policy. The sides expressed their mutual desire to do everything they could to strengthen Kazakh-American strategic partnership. On 18 November, Nursultan Nazarbaev spoke on the phone with U.S. president elect Barack Obama, congratulating him on his election victory and wishing him success in his future activity.6 Parliamentary diplomacy also became more active, in particular Nur- sultan Nazarbaev met with an official U.S. Congress delegation led by House Natural Resources Committee Chairman Nick J. Rahall, who is head of the informal Friends of Kazakhstan group. In addition to Rahall, the delegation also consisted of authoritative members of the House of Represent- atives, Darrell Issa, Charlie Melancon, Ray LaHood, John Linder, and Jack Kingston, while the very fact that this group exists confirms the significant interest in Kazakhstan abroad as a key partner in Central Asia. At the end of the year, American companies accounted for a third of the total volume of foreign direct investments in Kazakhstan (mainly in the oil and gas sector) and the governments of both countries showed their interest in diversifying them. In January 2008, the sides signed a second Five-Year Military Cooperation Plan aimed at raising the efficiency of Kazakhstan’s armed forces, strengthening its potential in maintaining peace, and developing the military infrastructure in the Caspian Sea. Last year, recognizing the primary role of the private sector in ensuring sustainable economic growth, Astana and Washington launched the Kazakh-American Initiative on State-Private Economic Part- nership designed to encourage investments in Kazakhstan’s private and state sectors. Partnership also has an important regional aspect, in particular it is promoting economic integration of the Central Asian countries, including Afghanistan. On the whole, as the intensity of the visits by representatives of the political and business elites to Kazakhstan in 2008 shows, Washington is taking its creation of a new and broader cooperation format with Astana seriously and it looks as though Kazakh-American relations will continue to intensify next year too.

The Eastern Vector of Diplomacy

The Eastern vector is very important in Kazakhstan’s policy with respect to developing relations with the states of the Arab East and Asia. One of the most significant results of Eastern diplomacy was not only strengthening cooperation, but also enhancing Kazakhstan’s image and building its recognition in the vast expanses of the East. Kazakhstan, as we know, is actively developing its relations with the countries of the Arab world. In so doing, beneficial contacts with them are based on mutual interest in joint economic projects

5 See: V. Kuriatov, “Vorota na puti v Evropu,” Kazakhstanskaia pravda, 4 October, 2008. 6 See: M. Iliasov, op. cit. 212 REPUBLIC OF KAZAKHSTAN International Affairs and common origins of historical and spiritual-cultural heritage. In March, President Nazarbaev paid an official visit to the Sultanate of Oman. He discussed organizing reciprocal freight shipments to the Persian Gulf and back and increasing Oman’s investment presence in strategically important industries of Kazakhstan. The talks focused in particular on building contacts in the political sphere. They primarily concerned Oman’s participation in the activity of the Conference of Interaction and Confidence-Building Measures in Asia and the congress of leaders of the world and traditional religions, as well as in promoting Kazakhstan’s other international initiatives.7 At the beginning of March, the Emir of Qatar Sheikh Hamad bin Khalifa Al-Thani paid an official visit to Astana. During the talks, the leaders of the two countries discussed a wide range of bilateral relation issues in the political, economic, and cultural-humanitarian spheres and talked about the prospects for cooperation within the framework of the Conference on Interaction and Confidence- Building Measures in Asia (CICA). In addition, in order to step up economic relations, the sides spoke in favor of rapidly creating a Kazakh-Qatar Business Council and developing cooperation in the investment sphere. Incidentally, two documents were signed in Astana on this topic. Relations are expected to strengthen with Kuwait. In April, President Nazarbaev received Head of the Emir of Kuwait’s Administration Sheikh Nasser Sabah Al-Ahmad Al-Jaber Al-Sabah. The sides discussed the possibility of opening embassies of their respective countries in Astana and Al Kuwait. Plans also unfolded to create a Business Council of the entrepreneurs of the two states. The Kuwaiti side is looking at the possibility of investing in energy facilities, agriculture, and projects relating to the oil and gas industry and metallurgy. On 18 May, Nursultan Nazarbaev participated in the World Economic Forum (Davos) on the Middle East held at Sharm el Sheikh in Egypt. During the World Economic Forum on the Mid- dle East, the Kazakh leader held several meetings with Egyptian President Hosni Mubarak and King Abdullah II of Jordan, at which they discussed the possibility of expanding cooperation, stimulating partner relations between the private sectors, and organizing bilateral business forums on a permanent basis. New ideas for developing relations with the UAE were designated. In mid-May, the Kazakh President met with Crown Prince of Abu Dhabi Sheikh Mohamed Bin Zayed Al-Nahyan. During the meetings, they talked about creating a Kazakh-Emirates Direct Investment Fund, building a petrochemical complex, and implementing the Aktau-City and Abu-Dabi-Plaza projects. These same topics were also raised a little later, in mid-July, when Sheikh Mohamed Bin Zayed Al-Nahyan arrived in Astana as president of the UAE. In addition to everything else, the decision of the Emirate side to finance the construction of a cathedral mosque and maternity home in the South Kazakhstan Region was highly evaluated at the talks.8 Last year, Kazakhstan significantly stepped up its cooperation with the Asian countries. Kazakh- Turkish relations were characterized by a high intensity of contacts. Turkey recognizes Kazakhstan’s leading role in Central Asia and regards it as its most important partner in the region. During the meetings with Turkish President Abdullah Gül, the bilateral cooperation agenda was drawn up. Turkish Grand National Assembly Speaker Köksal Toptan, who visited Kazakhstan, noted in a conversation with Nursultan Nazarbaev that Ankara fully supports the Kazakh leader’s initiative to create a Parliamen- tary Assembly of Turkic-Speaking Countries (TurkPA).9 India is seen as an important country for developing strategic partnership relations. In April, Nursultan Nazarbaev met with Vice President of India and ex officio Chairman, Rajya Sabha (upper house of the parliament), Shri Mohammad Hamid Ansari. The Indian guest confirmed New Delhi’s

7 See: “Dorogoi innovatsiy i progressa,” Kazakhstanskaia pravda, 18 March, 2008. 8 See: M. Kasymbekov, “Rabochiy grafik Presidenta: osnovnye itogi 2008 goda,” Kazakhstanskaia pravda, 13 Jan- uary, 2009. 9 See: “Obshchnost kornei kak faktor istorii,” Kazakhstanskaia pravda, 25 November, 2008. 213 CENTRAL EURASIA 2008 Analytical Annual interest in participating in bilateral interaction to ensure regional and global security and develop cooperation in nuclear energy, information technology, tourism, science, and culture.10 In June, Nursultan Nazarbaev paid an official visit to Japan, which determined the new con- tours for Kazakh-Japanese cooperation and opened the next stage in the development of bilateral relations. During the trip, meetings were held with Emperor Akihito, Japanese House of Representa- tives Speaker Yohei Kono, Head of the House of Councillors (the upper house of Japan’s parliament) Satsuki Eda, Prime Minister Yasuo Fukuda, and Economy, Trade and Industry Minister Akira Amari. Keeping in mind Japanese businessmen’s great interest in Kazakhstan, Nursultan Nazarbaev met with the leadership of world famous companies—Sumitomo Corporation, Marubeni Corporation, Toshiba, Kansai Electric Power, Tokyo Electric Power, Mitsui, Itochu, Mitsubishi, and Inpex, and discussed their participation in projects to develop Kazakhstan’s refining complex, machine-building, energy, transport, and communication infrastructure, construction, and pharmaceutical industry. The president also held a reception for the Japanese business elite interested in developing cooperation with Kazakhstan. Emperor Akihito presented the Kazakh president with Japan’s highest state award—the Supreme Order of the Chrysanthemum—for his contribution to nuclear disarmament and initiatives to strengthen peace and security.11 Relations with Mongolia also reached a new level. At the beginning of August, the leader of Kazakhstan paid a state visit to Ulan-Bator. During the meetings with Mongolian President Nam- baryn Enkhbayar, Chairman of Parliament Danzan Lundeejantsan, and Prime Minister Sanj Bayar, the sides confirmed their resolve to continue strengthening and enhancing economic, cultural, and humanitarian relations. The sides also discussed issues relating to long-term economic cooperation in creating joint enterprises, establishing reciprocal deliveries of industrial and agricultural production, and developing joint transit-transportation potential. They also examined issues relating in particular to creating a joint direct investment fund that will open up new possibilities for financing the most important projects. Nursultan Nazarbaev was presented with the highest state award of this country, the Erdene-Ochir Order, for his significant contribution to strengthening Kazakh- Mongolian relations. One of the most important vectors in Kazakhstan’s foreign policy is strengthening mutually advantageous cooperation with China. The meetings between Nursultan Nazarbaev and PRC Chair- man Hu Jintao within the framework of the Olympic Games in Beijing and the SCO summit in Dush- anbe were an important step in developing bilateral relations. During his October visit to Astana, Premier of the PRC State Council Wen Jiabao discussed the development of bilateral cooperation and specific agreements were reached on the production and transportation of hydrocarbons. The traditionally warm and constructive relations with the Republic of Korea were complemented by Nursultan Nazarbaev’s meeting in May 2008 with Korean Prime Minister Han Seung Soo, at which a broad range of bilateral economic trade cooperation issues was discussed. During his time in Beijing, the president also met with President of South Korea Lee Myung-bak, who particularly emphasized during the talks that Kazakhstan is one of their priority partners in Central Asia.12 Kazakhstan is acquiring the enhanced image of a state that is actively holding a dialog in the name of peace on the planet and acting as a bridge between the Western and Eastern civilizations. In keeping with the priority of advancing tolerance within the framework of its chairmanship in the OSCE and in developing the idea of the Alliance of Civilizations, Kazakhstan initiated the convocation of an international forum entitled “Common World: Progress through Diversity” at the foreign ministerial level of the Muslim world and Western countries in October.

10 See: M. Iliasov, op. cit. 11 See: “Kursom voskhodiashchego partnerstva,” Kazakhstanskaia pravda, 20 June, 2008. 12 See: N. Sergeev, “Diplomatiia vyschego urovnia,” Kazakhstanskaia pravda, 31 December, 2008. 214 REPUBLIC OF KAZAKHSTAN International Affairs

Kazakhstan continued to assist in rehabilitating Afghanistan. Two years ago, the Kazakh government adopted a special Action Plan in Afghanistan for 2007-2008, which envisaged allotting 3 million dollars to assist this country. In 2008, efforts were exerted to compile a plan of intensified assistance for 2009-2011, as well as organize the Kazakh prime minister’s first scheduled visit to Kabul.

International Organizations and Integration Policy

In order to meet the new challenges and threats to security and promote economic and humanitarian integration, Kazakhstan stepped up its cooperation within the framework of many international and regional structures. In so doing, cooperation in interstate associations of the Commonwealth of Independent States was the most intense. For example, during the year, Kazakhstan took part in three CIS summits: two informal summit meetings in February in Moscow and in June in St. Petersburg and the summit in October in Bishkek. In December, Nursultan Nazarbaev hosted an informal summit of the heads of Kazakhstan, Armenia, Kyrgyzstan, Russia, and Tajikistan at the resort zone of Burabai in Kazakhstan. This meeting ended in agreements on forming a group of rapid deployment force within the CSTO, instituting a joint assistance fund to overcome the consequences of the world economic crisis, and creating a high-tech center for the joint development and introduction of innovative projects. In August, at a regular sitting of the Council of Heads of State of the Shanghai Cooperation Organization, Nursultan Nazarbaev focused attention on the need to expand economic trade cooperation, create a single energy space, develop transport communications, ensure food safety, and provide mechanisms for preventing natural disasters and eliminating their consequences on the territory of the SCO member states. In August, the third meeting of the foreign ministers of the CICA member states was held, which ended in the adoption of constructive decisions on the most important problems of contemporary international policy. In particular, the ministers adopted a declaration called Progress of the CICA in Implementing Confidence-Building Measures. Implementation of President Nazarbaev’s initiative on convening the Conference in the new geopolitical conditions is gaining increasing world support, which is indicated by Jordan and the UAE joining the CICA in 2008 as full-fledged members and Qatar as an observer. The fact that new members from the Arab countries have joined the Conference confirmed both the urgency of the CICA’s tasks to create a multilateral mechanism of stability in the Asian region and the increase in Kazakhstan’s international prestige.13 As for the Seventh Ministerial Meeting of the Asia Cooperation Dialog held in Astana in October, Kazakhstan, in compliance with the decision adopted in June 2007 in Seoul, began performing its duties as chairman of the ACD for 2008-2009 and during this time intends to exert every effort to ensure sustainable development of the Asian sub-continent, expand economic cooperation among the states of the region, and strengthen feelings of common affiliation with the so-called Asian identity. Last year, preparations for Kazakhstan’s chairmanship in the OSCE in 2010 were an important component in the country’s foreign policy activity. In 2008, the president signed a decree on opening Kazakhstan’s permanent representative office at the OSCE in Vienna, and a special department for cooperation with the European organization was created at the country’s Foreign Ministry. In his speech

13 See: “SVMDA: v rusle prakticheskikh resheniy,” Kazakhstanskaia pravda, 26 August, 2008. 215 CENTRAL EURASIA 2008 Analytical Annual at the Seventh Eurasian Media Forum in Almaty in April 2008, Nursultan Nazarbaev put forward several ideas to be placed on the agenda of Kazakhstan’s chairmanship in the OSCE. The head of state’s participation in the 17th session of the OSCE Parliamentary Assembly held in Astana at the end of June was of great significance. Speaking before its participants, the Kazakh leader said that a key issue on the OSCE’s current agenda was its adaptation to the new international reality. During the session, the Kazakh president held bilateral meetings with President of the OSCE Parliamentary Assem- bly Göran Lennmarker, OSCE High Commissioner on National Minorities Knut Vollebaek, and a U.S. Congress delegation led by Chairman of the Commission on Security and Cooperation in Europe Alcee Hastings. It is worth noting that at the last session attended by delegates from 56 countries, Joao Soares was elected as the new OSCE PA president and Senate Speaker of the Kazakh Parliament K. Tokaev was appointed as one of the OSCE PA vice chairmen.14 Keeping in mind that Kazakhstan has reached a qualitatively new level of international activity, the president named several prospective tasks at the extended sitting of the Kazakh Foreign Ministry collegium in November with respect to the country’s chairmanship in the next three years in several international associations—the OSCE, OIC, SCO, EurAsEC, and TURKSOY. In particular, the head of state charged his government with drawing up a new concept of Kazakhstan’s foreign policy, ensuring full-fledged implementation of the Road to Europe state program, and making preparations for hosting the Third Congress of Leaders of World and Traditional Religions and a global conference under the auspices of the Davos Economic Forum in Astana in 2009, as well as the next CICA summit in 2010.

* * *

According to the available data, the Kazakh president spent 59 days on the road during the year, 20 days of which he was in foreign countries and 39 days in Kazakhstan’s regions. During the period under review, the head of state’s significantly reduced his visiting time. The difficult conditions created by the world financial crisis forced him to concentrate on supporting and strengthening the national economy and hold the fort at home. Nevertheless, the country’s kept up its dynamic foreign policy activity by inviting foreign partners to visit Kazakhstan and organizing meetings and talks inside the country. This made it possible to keep up the pace of international cooperation, give the necessary attention to domestic issues, and show foreign guests, in their capacity as potential economic partners, Kazakhstan’s current achievements, possibilities, and potential in the most advantageous light possible. On the whole, Kazakhstan’s international activity was aimed at developing and intensifying economic cooperation, particularly in trade, investments, and innovative-technological cooperation. The emphasis on participation in multilateral summits and international forums was primarily associated with the desire to jointly resolve the current set of financial and economic problems. In this way, despite the difficult global situation, Kazakhstan essentially performed the foreign political tasks designated for 2008.

14 See: “V sisteme mirovykh koordinat,” Kazakhstanskaia pravda, 1 July, 2008. 216 KYRGYZ REPUBLIC General Overview

KYRGYZ REPUBLIC

GENERAL OVERVIEW

Noor OMAROV D.Sc. (Hist.), professor at the Kyrgyz-Russian Slavic University (Bishkek, Kyrgyzstan)

t is an open secret that in 2008 the country, together with nearly all the other countries of the world, was drawn into an economic and social crisis with no end in sight. Social and economic issues I moved to the fore; the need to survive replaced the political ardor of recent years so the overview of 2008 should begin with a review of the social and economic situation. The republic remained unscathed during the first phase of the world economic crisis for several objective and subjective reasons: its banking system and the security market were undeveloped (which prompted optimistic statements by certain officials that the republic would gain a lot from the worldwide negative developments). Their optimism was misplaced. In 2008 the republic was still coping with the usual ailments that had been pestering it during the past few years caused by large-scale redistribution of property and the incomprehensible economic policy of several successive cabinets. In 2007 extensive development brought the country (in which economic growth was fed by the steadily rising customs dues and taxes) to the brink of a humanitarian catastrophe. This detracted attention from the real economic sector: the social sphere survived by means of fiscal dues. In 2008 it became clear that this road was leading to a dead end; it became equally clear that the government proved unable to cope with the problem. In 2008 the people were badly hit by the energy crisis caused, first and foremost, by the in- competent Ministry of Industry and Energy. Throughout the year the population of this power-producing country was daily deprived of electricity from 8 to 12 hours. The leaders of the country rich in considerable hydropower resources blamed “shallow waters” and “irresponsible users who wasted electricity.” In mid-2007 independent experts warned that there would be a crisis if the state persisted in its irresponsible energy policy. Here is an example: in 2005 the Toktogul water-storage reservoir at the Toktogul Hydropower Plant (which produced up to 60 percent of the locally consumed power) con-

217 CENTRAL EURASIA 2008 Analytical Annual tained 19 billion c m of water; by the fall of 2008 the level had dropped to a mere 6.5 billion (slightly over the critically low level of 5.5 billion at which the turbines grind to a halt). By late 2008 there was about 8.5 billion c m of stored water while twelve months earlier this amount was 11.5-12 billion. The former head of the Ministry of Industry and Energy declared in no uncertain terms that in 2009 the country might be left with no electricity at all. Independent experts, however, disagreed with the official explanation; they argued that the crisis was caused by ineffective management, corruption, lack of transparency, and illegal trade in electricity and water at the height of the irrigation season. The new heads of the energy branch brushed aside expert opinion and ignored the popular discontent: instead of looking for a way out of the dead end the new minister (appointed late in Novem- ber 2008) merely suggested that the electricity supply should be limited to 4 hours a day. As a result, the flow of investments turned to a trickle: the republic received between 65 and 70 percent of the expected capital investments. In December 2008 the leaders were more or less encouraged by Prime Minister Putin’s promise of $1.7 billion to pay for the Kambar-Ata 1 project; the money was first promised in 2004; later, in August 2007, President Putin promised $2 billion for the project on the condition there would be complete transparency. Nothing was done to fight corruption, which means that the country is unlikely to acquire large Russian investments. The world economic context and the worsening conditions in Russia are creating reasonable doubts about future Russian investments. In these conditions the government of Kyrgyzstan resorted to its old tactics: it took money from the people by raising the tariffs on electricity and heating. On 1 June, 2008 public transportation fares doubled; on 1 July the price of electricity rose by 13 percent; cold water and heating became more expensive. Despite the government’s “heroic” efforts it failed to achieve the planned 7.5-8 percent of GDP growth. According to foreign experts, the GDP will probably increase by 5 percent while inflation will remain at the present level of 20 percent. So 2008 can be described as a year of social and economic problems and public discontent. In 2008 political issues lost their urgency for most of the republic’s population. It turned out that the country could survive without the president or be ruled by phone from Germany. In March, the president’s first medical trip to Germany was accompanied, in the absence of clear statements from his press service, by all sorts of rumors and speculations. However, later, in October and November, the country continued to live and work quite peaceably, paying practically no attention to President Bakiev’s absence from the country. On the domestic scene the government and the opposition were steering parallel courses. The opposition resorted to all sorts of demarches, such as the Public Parliament (set up in February 2008), two people’s kurultais in the spring and fall, and all sorts of protest actions. Throughout the fall and early winter of 2008 the opposition tried to close ranks; on 24 December it finally knocked together a new opposition bloc; by that time the formerly loyal southerners, U. Sadykov, I. Isakov, and M. Kaiypov, had already left the presidential team. The government, which throughout 2008 pretended not to notice the opposition, began showing an interest toward the end of the political season. In December it instituted criminal cases against A. Jekshenkulov, former foreign minister who headed the “For Justice” Movement, and I. Isakov, former defense minister. Very much as usual they were accused of crimes rather than of political activities. The public, mainly its politically engaged part, is very skeptical about all this. In fact, the nation is losing its confidence in the authorities: the republic is obviously being transformed into a police state. The president no longer conceals the fact that he relies on the security structures; in 2008 he appointed his closest cronies to the posts of defense minister and head of the Nation- al Security Service (the latter went to his brother Zh. Bakiev).

218 KYRGYZ REPUBLIC Politics

The triple summit (the CIS, EurAsEC, and the Central Asian countries) held on 10 October in Bishkek can be described as the central event of the republic’s foreign policy in 2008. The CIS summit was convened in the country’s capital because the republic was chairing the CIS in 2008. The CIS summit was predated by President Medvedev’s first official visit to Kyrgyzstan; the heads of state discussed the most urgent issues of bilateral cooperation and concentrated, for obvious reasons, on the economy. The summit produced 20 agreements; its members discussed in detail the Economic Develop- ment Strategy for the CIS until 2020. It was to be signed in Bishkek but then it was decided it needed further work. The document was signed in Kishinev in November 2008. Very much as usual the CIS summit was followed by the EurAsEC summit; a spontaneous meeting of the heads of the Central Asian states was held the following day. Its members agreed they would work together to deal with the hydropower and fuel resource issues as well as water accumulation in the Toktogul and Nurek water reservoirs, a well-timed decision in the face of the mounting energy crisis. The Bishkek CIS summit cannot be described as an “integration breakthrough” in the post-So- viet expanse: it merely confirmed that its members wanted to preserve it and build up its potential. The republic failed to fully tap the potential of its CIS chairmanship: there were no serious initiatives and it made a timid response to the August crisis in South Ossetia—this was precisely how the public perceived it. The year 2008 can be described as a year of lost opportunities. In 2008 the republic lost several outstanding cultural figures and scientists of whom the nation was duly proud: writer Ch. Aitmatov, D. Sadyrbaev, and Academician Mirrakhimov; their names were well known abroad. Every year the republic loses more than it acquires: the year 2008 was no exception: it bred no hopes and no optimism.

POLITICS

Noor OMAROV D.Sc. (Hist.), professor at the Kyrgyz-Russian Slavic University (Bishkek, Kyrgyzstan)

n 2008 two opposite trends clashed on the republic’s domestic scene. On the one hand, domestic policy obviously depended on economic factors to the extent that the nation lost some of its po- I litical enthusiasm. On the other, the rapidly approaching socioeconomic catastrophes could not conceal the rapidly mounting contradictions between the government and the opposition about the country’s political future. This largely determined the course and dynamics of domestic policy that would extend into the following year. The government tried to present the situation as stable and predictable despite the minor crises in the power camp. The political opponents agreed that the country was stagnating, which negatively affected domestic policy. The government, the opposition, and civil society took this into account when formulating their positions and taking certain measures

219 CENTRAL EURASIA 2008 Analytical Annual

Domestic policy was greatly affected by the pre-term parliamentary elections of 16 December, 2007. On 10 January, 2008, after winning a large parliamentary majority represented by the presidential Ak-Zhol Party, Kurmanbek Bakiev outlined his social, economic, and political priorities in an address to the newly elected parliament. He said that wide-scale privatization would invigorate the economy and that the country needed a better administration system and higher standards of living. The president stressed that the state should abandon the strategic branches to private investors, which stirred up heated debates. Those who sided with the president argued that he was driven by his concern for the national economy. The opposition offered detailed criticism, which it later specified in its programs. Practically none of the presidential suggestions were realized. Throughout the year the government acted under the pressure of several factors: late in 2007 and early 2008 the struggle for access to the president among several quasi-elite groups reached its highest point. The groups can be conventionally tagged as (a) the president’s family; (b) the southerners, who brought Bakiev to power; and (c) Akaev’s civil servants still hoping to preserve their posts. The “family” was not united either: the older and younger generations relied on the other two groups in the clash over influence on the president. The conflict continued to develop: in mid-2008, A. Madumarov, the speaker of the parliament, fell victim to it when he decided to order expensive renovation of the parliament. In fact, it was his unlimited ambitions that caused his fall. Later, observers interpreted this as a victory of the group supported by the younger Bakievs. In September the conflict at the top reached a new phase. At first it consisted of mudslinging. In August-early September 2008 the media that used the Kyrgyz language was full of it. The battle reached its peak late in September when K. Kabilova, head of the Central Election Committee, came forward with scandalous videoed accusations: she insisted that the government had falsified the results of the 2007 parliamentary elections. Maxim Bakiev, the younger of the president’s sons, was accused of allegedly threatening Kabilova and putting pressure on her because of her stand on the I. Kadyrbekov issue: detained on charges of abuse of power he intended to run for a post in the local administration structures. The head of the Central Election Committee allowed him to run and was allegedly subjected to threats from the president’s son. Finally, she fled abroad with her family. For some time the nation expected specific videoed accusations, which never came. This probably explains why the General Prosecutor’s Office never responded to her first statement and her flight from the country. Early in October 2008 another scandal burst out in the circles closest to the president. On 7 Octo- ber, I. Isakov, secretary of the Security Council, former Minister of Justice M. Kaiypov, and state advisor to the president U. Sydykov issued a statement in which they criticized the president and the results of the local elections held on 5 October and warned that if the results were not revised and the policy of filling the top posts was not changed they would move to oppose the president and organize mass protest actions. The three men belonged to the pro-presidential Zhany Kyrgyzstan (New Kyrgyzstan) Party and were members of its presidium, which drew a lot of attention to their demarche. Only superficial observers were amazed by the maneuvers of those who had been Kurmanbek Bakiev’s loyal supporters for many years. The reshuffling at the very top indicated that the so-called southerners were pushed aside to be deprived of power and access to money in the republic’s highly corrupt administrative system. In the final analysis the rioting southern quasi-elite gained nothing. The president accepted I. Isa- kov’s resignation as soon as his statement was made public; in December the same happened to U. Sy- dykov. On the whole, society interpreted this as defeat of the southerners in the clash with the seem-

220 KYRGYZ REPUBLIC Politics ingly invincible head of the presidential administration, M. Sadyrkulov, who had the president himself behind him. Later A. Madumarov acquired the post earlier filled by I. Isakov. The formally high post with no real powers meant that the president wanted to keep the southern opposition disunited. By moving his potential rival closer the president greatly weakened his opponents who demanded radical changes on top. The way the government responded to what the opposition was doing created another political factor: while formally remaining within the law, the government tried to scare the opposition and build a police state in Kyrgyzstan. This became especially evident in the latter half of 2008. Criminal proceedings were initiated against the son of A. Jekshenkulov, leader of the “For Justice” Movement; later he was also affected. In December the General Prosecutor’s Office opened a criminal case against him for alleged abuses of power when he held the post of foreign minister. Late in December two criminal cases on similar charges were instituted against former defense minister I. Isakov. Earlier in 2008, I. Kadyrbekov, former head of the State Commission for Construction and Architecture, was arrested for similar crimes. Part of the political community, however, asserted that the president’s closest circle had never forgiven him for the first post-March days when he was acting head of state for one night. This was not all: the government did not limit itself to persecutions of its individual opponents: it was also engaged in a not too active struggle against the opposition. On the whole, the numerous events staged by the opposition were taken calmly, yet from time to time the government resorted to force or even violence. In the latter half of April 2008, for example, government supporters attacked the leaders of the opposition in the Issyk-Kul Region. Later, on 18 November, something similar happened in Talas where the opposition tried to organize a kurultai. At the same time, pursuing a democratic image of sorts, the government imitated foreign examples: in the latter half of 2008 the president set up a Public Chamber as an alternative to the Public Parliament; the new structure claims to be an intermediary between the president and the nation. The head of state’s health was the third political factor. In March and November Kurmanbek Bakiev went to Germany to undergo medical treatment. In March he was absent from the country for 28 days instead of the planned 10 to12 days. Lack of information and the clumsy work of the press services bred all sorts of rumors about the possible reasons for his absence and the possible consequences. This stirred up the country and brought it to a state of hysterics. His return late in March calmed the people down. Later he needed more medical treatment in Germany. He was absent from 19 October to 21 November, however this time the public remained indifferent. This factor is politically important because the president cuts a dominant figure in the republic. His long absences from the country stirred up the people at the top, the opposition, and the elite. In 2008 the government acted in cycles that were largely determined by the state of the president’s health. The shifts at the top were not intended to improve state administration: they were caused by the clashes of the rivaling groups that had taken shape in 2005-2007. The first cycle covered January and February when the president outlined the strategic aims for 2008. Later, when he returned from Germany, he subjected the government to scything criticism for its failure to reach the targets. The second cycle lasted from late March to October when the government concentrated on neutralizing the conflict in its own ranks and limiting the opposition’s authority with the public. The third cycle began after 20 November and lasted to the end of December. Much was done to suppress the opposition and the groups close to it. As distinct from the government, the opposition remained extraordinarily active throughout 2008. It pushed aside contradictions for the sake of consolidation and a common position on domestic issues. On 24 December it set up a new public and political structure called the United Popular Move- ment of Kyrgyzstan, which brought together the main opposition forces.

221 CENTRAL EURASIA 2008 Analytical Annual

In the first half of 2008 the opposition was heated up by the desire to question the returns of the 2007 pre-term parliamentary elections. The generally recognized large-scale falsifications deprived the opposition of parliamentary seats, which was expected to deprive it of a rostrum. This speeded up the process; in January the “For Justice” Movement that united the leading opposition forces was finally organized. A. Jekshenkulov, who was elected the movement’s leader, shouldered the task of creating a constructive opposition. On 14 January, the public “For Justice” Movement called a forum attended by 12 parties, 21 NGOs, and prominent public figures. The results of the parliamentary elections, the political system that had taken shape in the country, and the public parliament and coordination council were the central points of its agenda of seven issues. The forum adopted an Address to the People of Kyrgyzstan. It was said at the forum that the legal methods had been mainly exhausted; mass rallies produced no or little effect on the country’s leaders; and strict control of the media deprived the opposition of information outlets. It was decided to confront the illegitimate parliament with an alternative Public Parliament set up to discuss the burning issues. It would be staffed with the leading opposition forces, public figures, and the civil sector. The first sitting was scheduled for no later than 15 February. The “For Justice” Movement announced that it planned an all-republican kurultai for March- April. On 5 February, the Coordinating Council of the Public Parliament adopted the new structure’s regulations and rules; it stated its aims as defending democracy; improving the political system; shaping public opinion and informing the central and local power structures about it; and promoting civil initiatives designed to realize the constitutional rights and legal interests of all the people and public organizations. The first sitting was held on 20 February; it discussed the results of the parliamentary elections and organizational issues: the number of members, parliament leaders, and frequency of its sittings. On 19 March it met for its second sitting to discuss the country’s energy industry, which was obviously nearing a crisis. Its speaker, A. Erkebaev, announced that he had received a letter from the General Prosecutor’s Office warning him that the Public Parliament was an illegitimate structure. The members agreed that it should be treated as another attempt to put pressure on the public in view of the Kurultai of the People of Kyrgyzstan scheduled for 29 March. Because of the president’s absence from the country and the expected shifts at the top, the opposition postponed the kurultai until mid-April. It was held on 12 April; its over 1500 delegates adopted a resolution of nine points which contained, very much as expected, severe criticism of the government and described the socioeconomic and political situation as dramatic. The results of the parliamentary elections were once more doubted; it was declared that privatization of the energy industry, natural resources, schools, and higher educational establishments was unacceptable. The kurultai defended the media and human rights; the resolution ended with a warning that if its demands were ignored the opposition would respond with mass protest rallies. None of the top officials attended the sitting while the government as a whole demonstrated its complete indiffer- ence: it never intended fulfilling the demands, which means that the opposition never lived up to its promises. On 21 May, the Public Parliament met for the third time. It was decided that it would create a new strategy for the country. It set up a workgroup of thirteen members to submit a draft strategy to the Public Parliament before September. The Parliament also made public its position on the country’s foodstuff security and condemned the flagrant violation of human rights in April 2008 during the march of the opposition in the village of Tiup (the Issyk Kul Region). The Public Parliament also raised the question of state borders. Its speaker, A. Erkebaev, pointed out that transfer of lands to Kazakhstan would create even more problems when it came to border delimitation with Tajikistan and Uzbekistan (the disputed stretches being 900 and 1300 km, respectively).

222 KYRGYZ REPUBLIC Politics

The Public Parliament met again on 15 September; it set up an independent public commission to analyze the causes of the energy crisis and to inform the public of the real state of affairs in the country’s energy sector. It was decided that the commission’s results and suggestions would be referred to the people’s kurultai scheduled for early November. The Public Parliament adopted a new development conception that would be likewise referred to the kurultai. In view of the local elections scheduled for 5 October, which the opposition hoped to carry off, the Public Parliament set up a monitoring commission to prevent massive falsifications and supply verified information about the results. The Public Parliament discussed the possibility of setting up a United Civil Movement of Kyrgyzstan in the format of a wide coalition of all the progressive forces. It was the government that called the tune at the local elections; the local administrations effectively kept the opposition away while the commission failed: the government refused to pay the slightest attention to its findings. On 22 October, the opposition leaders came back from Moscow where they met Russian politicians, experts, well-known public figures, and labor migrants from Kyrgyzstan. The meetings confirmed their resolution to unfold a wide-scale campaign to unite all the anti-presidential forces. The sitting the “For Justice” Movement held on 27 October fixed the date and place for the next kurultai: 25 November in Bishkek. The opposition predated it with a memorandum on a wide coalition of all the political parties, movements, and the civil sector—in short, all the forces that share its convictions—to be followed by a draft of a new constitution and a conception of the country’s development. On 3 November, at a regular sitting of the Public Parliament, the Memorandum was signed by 20 deputies and former deputies of the Zhogorku Kenesh, 23 public figures, representatives of six newspapers, 46 people from all spheres of public life, and 18 NGOs. The same sitting offered its assessment of the local elections. At more or less the same time, in mid-October, the Revolutionary Committee set up to remove the president and headed by A. Beknazarov and several other opposition leaders became even more active. This is a radical structure that demands resignation of the president and purges in the state structures. The Revolutionary Committee (later transformed into the People’s Revolutionary Movement of Kyrgyzstan), which disagrees with the Public Parliament on many issues, convened an alternative kurultai in Talas on 18 November. Despite the wide-scale promotion campaign, attendance was meager; active repressions against the participants scared many people away. The people’s kurultai held on 29 November was the second in 2008; it discussed only two issues—the systemic crisis at the top and the conception of a new political system for the republic. The participants managed to discuss, more or less constructively, the conception laid on the table jointly by the Public Parliament and the “For Justice” Movement. It suggested that Kyrgyzstan should be transformed from a “super-presidential” country into a “parliamentary republic” in which the parliament would be elected by party lists providing that the winner gained no more than 50 of the 90 seats. The conception allowed the parliamentary minority to address the president, the powers of whom would by curtailed. The kurultai called on the president to implement the conception before March 2009; otherwise the opposition promised mass protest actions to demand the president’s resignation. On 24 December, the consolidation process that had taken nearly a year to complete was crowned with a Unified Popular Movement. The opposition leaders signed a Treaty on Unification and the Rules of the New Opposition Movement. The new structure attracted the movements “For Justice,” the Public Parliament, United Kyrgyzstan, the People’s Revolutionary Movement for Resignation of President K. Bakiev, the political parties Ata-Meken, Ak-Shumkar, the Green Party, Asaba, Zhany Kyrgyzstan, Ulutuu Birimdik, and the Social-Democratic Party of Kyrgyzstan. After signing the agreement, these structures were expected to suspend their independent activities for a while to start working together toward the main aims: pre-term resignation of the president, a coalition government, and a new constitution that would establish a parliamentary form of government.

223 CENTRAL EURASIA 2008 Analytical Annual

Some observers thought that the demand to suspend individual activities would cause conflicts in the new opposition structure: the parties and movements strongly depended on their leaders, nearly all of whom nurtured presidential ambitions. The NGO sector was developing very much as usual; it consolidated with the opposition, joined its events, was engrossed in human rights activities, and went to court to defend the ordinary people and opposition members. The NGOs took part in the discussions of socially important development issues in the sphere of power production, education, and gender equality. The Interbilim Center, the Women’s Political Discussion Club, and several others distinguished themselves. The relations between the government and the media remained strained; the country’s leaders went on with their earlier attempts to suppress the opposition publications by taking them to court on criminal charges. This happened to the Alibi and De Facto Kyrgyz-language newspapers; the latter was closed while the editor-in-chief emigrated. The obedient parliament made its contribution to the efforts to place the media under complete control: in the fall of 2008 it discussed the possibility of treating Internet publications as printed matter to be able to fight the opposition on the Internet—so far the only outlet for those who think differently. In 2008, the discussions were still going on; the results will probably make part of the new Law on the Media. The fact that in 2008 the republic dropped one place lower (from 110 to 111) in the world freedom of speech index speaks volumes. The trend was obvious: the government wanted the tightest possible grip on the country’s media. The results and trends in the country’s domestic policy can be described as contradictory and highly ambiguous. On the one hand, the political system was obviously stagnating: the government wanted to perpetuate the family-clan regime of the first president. On the other, the opposition and the civil sector were working hard to change the situation. The resultant contradictions about the republic’s future inevitably added to the tension.

ECONOMY

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

General Macroeconomic Situation

t first glance, 2008 was a relatively quiet year in Kyrgyzstan. Macroeconomic stability in the republic was generally preserved and the state’s social obligations were timely and adequately met. A However, in the second half of the year, the Kyrgyz economy began showing growth slowdown in contrast to the same period of 2007. This process was influenced by the following trends:

224 KYRGYZ REPUBLIC Economy

—Negative dynamics of the world economy; —Drastic change (high volatility) in prices for raw commodities; —Macroeconomic performance in Russia and Kazakhstan, which remain the largest post-Sovi- et economies: any significant changes in these economies are subsequently transmitted to Kyrgyzstan with prevailing negative manifestations; —Financial flows affecting Kyrgyzstan indirectly through Kazakhstan. The consequences of the world economic crisis for Kyrgyzstan are expressed in an upsurge in prices for imported products, raw materials, and energy resources, as well as in dollar inflation (gradual devaluation of the dollar in the world markets, which stimulates growth of the world prices for oil and raw materials) and reduced foreign capital inflows. n The global advance in prices for food products and energy resources in combination with the drought season had a negative impact on Kyrgyzstan’s agriculture and energy sectors. The rapid rise in prices for petroleum, oil, and lubricants resulted in the higher cost of practically all goods and services. The increased electricity tariffs and boosted utility rates have led to a situation where the inflationary process started to have a negative influence on Kyrgyz business activity. n Rapid private consumption growth in 20071 and the economic advance in internal sectors such as trade and construction were mainly influenced by the events occurring in neighboring Kazakhstan. For instance, the latest failure in Kazakhstan’s economy as a result of the international mortgage crisis had an immediate negative impact on the above sectors, which entailed delayed crediting and real estate price curtailment. The above factors led to capital outflow, which, in turn, gave rise to foreign currency deficiency in the market. Idling of the automobile business had a negative impact on many medium businessmen who were experiencing hardships with credit and loan repayment. Dordoi Bazaar—the largest wholesale market in Central Asia (about 250,000 workplaces)—is really going through hard times at the moment.

Table 1 Key Economic Parameters of the Kyrgyz Republic in 2004-20082 (% of the previous year)

2005 2006 2007 2008

GDP, real growth (%) –0.2 3.1 8.2 7.6

Physical index of industrial production –12.1 –10.2 7.3 14.9

1 Private consumption in 2007 was the main driving force behind economic growth promoted by increased real household income, in particular—by migrant remittances and the shadow economy, which is estimated at about 50-60% of the country’s official GDP. 2 Here and elsewhere the statistical data are given in compliance with the following documents: “Socioeconomic Situation in the Kyrgyz Republic, January-December,” KR National Statistics Committee, Bishkek, 2009; “Socioeconom- ic Situation in the Kyrgyz Republic, January,” KR National Statistical Committee, Bishkek, 2009; Report of Minister of Economic Development and Trade A. Zhaparov at a session of the National Advisory Counsel on Strategic Development of Kyrgyzstan, 25 February, 2009, and on the basis of the data issued by the Ministry of Finance and the Ministry of Eco- nomics of the Kyrgyz Republic. 225 CENTRAL EURASIA 2008 Analytical Annual

Table 1 (continued)

2005 2006 2007 2008

Gross agricultural output –3.2 1.5 1.5 0.7

Capital investment 5.9 54.6 3.7 –5.4

Inflation (%) 4.9 5.1 20.1 20.2 (as% of (as% of December December 2006) 2007)

GDP deflator (% of the previous period) 7.1 9.4 13.5 21.2

Unemployment (official figures) 8.1 8.3 8.2 7.7

Current account (% of GDP) –8.3 –10.1 –6.1 –9.2

Broad money growth (%) 17.6 54.9 33.7 24.0

Foreign trade turnover ($ million) 1,773.3 2,703.7 3,469.9* 5,178.6*

Primary budget deficit (% of GDP) 4.2 –3.0 –1.8 –2.0

External debt (% of GDP) 77.0 66.3 52.8 50.8

Som/dollar rate (on the average for the period under examination) 41.0 40.1 37.3 36.57

* January-November.

S o u r c e: Kyrgyz Republic National Statistics Committee; Kyrgyz Republic National Bank; International Monetary Fund; World Bank.

The gross domestic product (GDP) of Kyrgyzstan has grown two-fold since 2005: as of 1 January, 2005, it equaled 94,400 million soms (KGS), and at the end of 2008 it amounted to KGS 185 billion. Similarly, four years ago GDP per capita was $436, and at the end of 2008 it reached $959. During this period of time, the average monthly salary was also growing: from KGS 2,240 in 2005 it rose to KGS 5,217 as of 31 December, 2008. As for average pensions, they increased by 60%— from KGS 668 in 2005 to KGS 1,047 by the end of 2008. According to the National Statistics Committee (NSC), the shadow economy of Kyrgyzstan grew almost 20-fold from 1995 to 2007. Whereas in 1995 the shadow economy output was KGS 1.4 billion, in 2007 it was as high as KGS 26 billion. NSC experts insist that the annual increase in the shadow economy output was mainly driven by private household domination, though in 2008 the private household share in the Kyrgyz GDP was 12%, while the shadow economy (including agriculture)

226 KYRGYZ REPUBLIC Economy accounted for 30% of the GDP. According to NSC data, the shadow economy is mainly concentrated in trade and services, such as repairs and maintenance of household goods, motor vehicles, and personal items. Its annual output is estimated at KGS 60 billion.

Positive Trends

In 2008, the Kyrgyz GDP increased by 7.6% compared to the same period of 2007 and reached KGS 185,013.6 million. Gold production recovery and the rapid growth in communication services made an appreciable contribution to the real GDP increment, which allowed the Kyrgyz government to partly make up for the growth slowdown in other sectors of the economy. Without taking into account the enterprises developing the Kumtor gold field, the real Kyrgyz GDP grew by 5.4%, compared to 9.0% the previous year. GDP per capita rose from $741 in 2007 to $959 in 2008, resulting in an increase of 6.8%. In 2008, the GDP deflator amounted to 21.2%. As for the inflation rate, it showed a 20% growth year-on-year, which is mainly explained by the higher prices for food products and paid services. Other key factors that also influenced the inflation rate were the augmented cost of imported oil products, energy resources, and grain, as well as the inflow of currency remitted by labor migrants working abroad. According to the 2008 year-end results, labor productivity in Kyrgyzstan grew by 1%—from 5.4% in 2007 to 6.4% in 2008. The Kyrgyz securities market managed to avoid a stock quotation “meltdown” due to the fact that it was not deeply dependent on foreign investors and the world stock market. The same can be said about the banking system of Kyrgyzstan, which still remains quite isolated from the international financial market. However, it is much more dependent on the banking systems of adjacent states, such as Kazakhstan. Despite certain problems (which do exist in the republic’s banking system), they have never led to dramatic negative consequences for the Kyrgyz market. All the banks created with Kaza- khstan’s partnership continue their routine performance. It is only their rapid development that has slowed down. According to the National Bank of Kyrgyzstan, the country’s banking system is stable and only subject to the “indirect influence of the world crisis.” Generally speaking, this really is the case, although in December 2008, the republic’s loan portfolio declined by KGS 350 million, or by 10%. In the bank deposit structure, there was an approximately KGS 250 million shift (by almost 10%) from som deposits to foreign currency deposits, which shows a market response to the crisis.

GDP Composition

Over the years of Kyrgyzstan’s independence, its GDP structure has changed considerably (see Fig. 1). It has turned from an agriculture-industrial country into a service-marketing state. Today, this sector accounts for 44% of the Kyrgyz GDP. In fact, Kyrgyzstan trades more than it produces. There- fore, according to the 2008 year-end results, in the nominal GDP structure agriculture accounted for 25.8%, industry for 14%, construction for 3.1%, transport and communications for 8.4%, trade and repairs for 18.6%, and the services of hotels and restaurants for 8.4%. Trade sector growth contributed to a service share increase of 1%. Kyrgyzstan’s economic growth in 2008 was basically driven by the reviving gold production and by inertial growth in some service-related sectors. Exclusive of gold, the increase in the Kyrgyz GDP was appreciably lower compared to the level achieved in 2007.

227 CENTRAL EURASIA 2008 Analytical Annual

Figure 1 GDP Composition (in current market prices)

Product manufacturing Net taxes 42.90% 13.20%

Services 44%

In 2008, the number of economic agents operating in Kyrgyzstan increased by 20,000 units (or by 10.5%) and totaled 436,000. As it was the case in previous years, they are dominated by peasant (farm) holdings—63.7%. Individual businessmen (natural persons) accounted for 30.0%, while the share of enterprises, agencies, and organizations (legal persons) was 6.2%. The contribution made by private companies to the national economy exceeded 75% of the GDP. It is worth noting that private institutions employ more than 80% of Kyrgyzstan’s working population. According to provisional data, the 2008 consolidated budget revenues rose by 28.1% (more than KGS 9.9 billion), compared to 2007. Their main portion came from fiscal revenues. The nominal growth of all tax proceeds was 35.3% (KGS 9.4 billion) in contrast to the 2007 figures. According to the Central Exchequer Chamber of the Ministry of Finance of Kyrgyzstan, in 2008, the state budget surplus amounted to KGS 1,564.7 million. State budget revenues grew by 29.5%, compared to 2007, while its expenditure section increased by 25.6%. The deposit base of the Kyrgyz banking system totaled approximately KGS 30 billion: corporate deposits accounted for 64.9% of total deposits, and household deposits for 35.1%.

Economic Problems

The year-on-year slowdown in the Kyrgyz economy was mainly promoted by the crisis phenomena in the region and by certain problems in the energy sector, which led to a considerable reduction in energy generation and electricity supply failures. The said problems also resulted in reduced output on the part of some processing industries, overcooling in such sectors as trade and tourism, and a decrease in value added increment in construction, transportation, and communication. Besides, the problems in the Kyrgyz mining industry have not yet been resolved. —Electricity production and distribution indicators dropped below the 2007 figures (92.5%) owing to the water shortage period and the low water level in the Toktogul Reservoir.

228 KYRGYZ REPUBLIC Economy

—In spite of the measures designed to increase the output of certain agricultural goods, allocate agricultural machinery, and supply farmers with seeds, agricultural output parameters remained at the former level. —Growth slowdown in the service sector—the growth index was fixed at 8.8%. —A decline in capital investment from all sources of financing was registered in 2008. In overall figures this parameter decreased by 5.4%, compared to 2007. In 2007—in contrast to 2006—capital investment inflows grew by 5%, according to the data provided by the Na- tional Statistics Committee. In 2008, capital investment totaled KGS 29,208 million (about $500 million). Fixed capital investment decreased due to fact that domestic enterprises had fewer opportunities to invest their own funds (in nominal figures, they fell by 23% as of 1 October, 2008). On the contrary, foreign direct investment and borrowings proved to be even more important financing sources. In fact, they accounted for about 33% of the total capital investment (compared to 17% in the first 9 months of 2007). There was considerable growth in assimilated investment in the construction of the Kambarat HPP (5.3-fold) and Tash-Kumyr HPP (1.7-fold). Contract works accounted for the main investments. For instance, KGS 462.8 million of capital investments were used in 2008 to rebuild a motorway that was part of the South Kyrgyz Transport Corridor. The industrial sector performed rather unstably during the year (see Fig. 2). First of all, its growth rates were lower than planned. Based on the 2008 year-end results, the physical index of industrial production amounted to 14.9%, compared to the same period of 2007. However, this figure does not include the enterprises involved in the Kumtor gold-mining project (97.9%). According to the Kyr- gyz Government Action Plan for 2008, industrial production growth was forecast at a level of 19%, which was expected to be primarily obtained from the enterprises developing Kumtor. Indeed, Kyr- gyzstan’s industrial production still strongly depends on the enterprises involved in the Kumtor project, which account for about 35% of the republic’s gross industrial output. The main volume of Kyrgyz industrial output (up to 88%) is produced by the five key economic branches, namely: metallurgical (42%); food processing (13%); textile and sewing (7%); building material manufacturing (10%), and the electric power sector (16%). Industry entities provide for more than 35% of the tax revenues to the republican budget and up to 85% of export deliveries. Industrial performance slowdown—net of Kumtor production—was driven by commonly known factors, such as the high degree of capital consumption, lack of personnel, shortage of line experts, and floating capital deficiency. However, there are some other reasons as to why the said parameters slipped into a decline in the year under review. In particular, they include: the negative influence of the financial crisis; the energy (electricity and gas) shortage; the decrease in product competitiveness; the constantly esca- lating prices for imported primary goods, materials, and energy resources; and the decreased demand for products. The mining industry of Kyrgyzstan saw positive dynamics in 2008 with an increase of 6.4% (KGS 1,916.5 million). A significant advance was also registered in the processing industry, which enjoyed a 23.6% rise, or (in monetary terms) KGS 70,221.2 million. From this amount, food products—including drinks and tobacco products—accounted for 15.9%, metallurgical production and manufacture of ready-made metal goods for 51.8%, and textile and sewing manufacture for 8.5%. In the overall industrial output, the processing industry accounted for 81.8%, electricity, gas and water for16%, and the mining industry for 2.2%. In 2008, the index of the physical volume of foodstuff production was 1.5%, including drinks— 1.1%. A decline in the food processing sector resulted in a downturn in packing products manufac-

229 CENTRAL EURASIA 2008 Analytical Annual

Figure 2 Dynamics of the Physical Index of Industrial Production by Economic Activity (% of the previous year)

180

156

132

108

60 I II III IV V VI VII VIII IX X XI XII I 2008 2009 Mining industry Processing industry Electricity, gas and water production and distribution

S o u r c e: “Socioeconomic Situation in the Kyrgyz Republic,” January 2009, KR National Statistics Committee. ture, mainly due to a drop in demand—including export demand—for plastic molds which are used for RAT bottle manufacturing. The index of the physical volume of textile and sewing output amounted to 10.9%, including the manufacture of textile products, clothes, and the embossing and dyeing of fur—15.7%. The production of fabrics, knitted goods, and garments increased, while the manufacture of cotton fiber, cotton yarn, and wool yarn decreased. It is worth noting that furniture manufacture saw a 14% rise, while jewelry production grew by 21%. The latter has rather good export potential, and its production dynamics during the year were mainly positive. Negative production dynamics were registered in the second half of 2008. During the year, 6% of the total number of Kyrgyz industrial enterprises stood idle. In 2008, foreign direct investments were quite actively saturating not only the financial sector, but also the processing industry, the construction branch, and operations with real estate (see Table 2). The mining sector registered a perceptible decline in investments in contrast with the previous two years, whereas manufacturing sectors and—especially—tourism managed to boost investments following a successful 2007 tourist season (see Fig. 3). The year 2008 saw certain negative trends that developed in the production and distribution of electricity, gas, and water. All in all, this sector slipped by 7.5% as a result of problems in the energy industry which, in turn, entailed a decline in electricity production and distribution. For in- 230 KYRGYZ REPUBLIC Economy

Table 2 Foreign Investment Composition ($ thousand)

Jan-Sept 2008 Jan-Sept Inflows minus as % to Jan-Sept 2008 outflows 2007

Total 2,626,759.7 146.1 431,910.2

Foreign direct investment 481,012.8 148.3 193,421.3

Portfolio investment 8,016.9 6.2-fold 6,231.6

Other investment 2,090,543.1 145.7 185,070.4

Grants, technical aid 47,186.9 127.4 47,186.9

Figure 3 Dynamics of Foreign Direct Investment Earning

600 580

500 437

400 336

300 210 $ million 176 200 153 136 147 109 116 96 86 90 90 100

0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 stance, in 2008, Kyrgyzstan lost more than 30% of its electric power. However, by the end of the year, the government managed to reduce the losses by a symbolic 4.6%. In fact, the end users paid only 90% of the electricity consumed. Stability of the energy sector and the state of the electricity network have developed into the most acute internal problem for Kyrgyzstan. The ambitious reforms being carried out today in the power sector (changes in the infrastructure and modification of the electricity market principles, electric power

231 CENTRAL EURASIA 2008 Analytical Annual industry liberalization, and introduction of competitive markets intended to provide electricity services to residential customers) have entailed new risks—market risks. The year 2008 will be remembered by the outbreak of the severe energy crisis in the country when rolling—and afterwards targeted—electricity blackouts were broadly practiced across the entire state and had an extremely negative impact on small and medium enterprises. Both the accounts receivable and the annual increase in natural gas prices still make it problematic for the Kyrgyz government to properly supply the republic’s economy branches and its population with power. In 2008, Uzbekistan delivered 736.5 million cubic meters of natural gas to Kyrgyzstan totaling $107 million. The construction sector was actually the first to feel the consequences of the global financial crisis. In fact, the slowdown of growth in construction in 2008 was mainly driven by the mortgage crisis that developed in the U.S. and Kazakhstan and by the curtailed production of building materials in Kyrgyzstan. According to the 2008 year-end results, construction productivity in Kyrgyzstan declined by 10.8%, compared to a 20% increase in 2007. In contrast with the previous year, the capital investment assimilation index moved down by 5.4%. And contract works accounted for the lion’s share of capital investments. The most dramatic decline was registered in residential construction, especially in Bishkek, which is primarily explained by the weak market and cautious investment solutions. This notwithstanding, residential construction still holds the core share in overall capital investments. The said decline also took place in agricultural construction where the capital investment assimilation index fell by 34% from a year earlier, as well as due to processing industry construction where the index in question dropped by 8.1%. As for the building materials market, it was mostly affected by a drop in demand in Kazakhstan where construction was actually discontinued. In addition, a downturn in residential construction in Kyrgyzstan itself also promoted a reduction in demand for building materials. All this led to production being suspended at the Kant concrete combine and at the Tokmak-based Interglass Plant which manufactures sheet glass. Agriculture. According to the Kyrgyz Government Action Plan for 2008, agricultural output growth was to exceed 4% year-on-year. During the year, KGS 1.3 billion was invested in Kyrgyzstan’s agriculture, while investment returns stood at five%. In real terms, gross output in agriculture, hunting, and forestry in 2008 grew by a mere 0.7% compared to the previous year, including animal production—by 2.1%. Growth in the livestock sector was also rather modest. At the same time, there is another problem dealing with insufficient forage reserves for the forthcoming winter period, which could also affect rural community production capability and income. Crop output in Kyrgyzstan had reached 99.6% of 2007, whereas in 2008 the cultivated area grew by 2.8%. In overall figures, Kyrgyzstan’s grain harvest (weight after processing) rose by 1.3%, including wheat—by 5.3%, compared to the previous year. In combination with the drop in world prices, this might help to curb food commodity inflation rates. Consumer market. The situation in the consumer market in 2008 was notable for the 8.8% growth in the total volume of trade turnover and of maintenance and repair of motor vehicles, household goods, and personal items. The volume of services provided by hotels and restaurants also showed continuous growth. This index exceeded the 2007 level by 13%. The overall volume of services, accounting for more than 44% of GDP, continued to increase throughout the year, despite some slowdown in trade turnover growth. Sustained high growth in the volume of services was driven by a rapid advance in transportation and communication services (31%), largely due to cellular communication service enhancement.

232 KYRGYZ REPUBLIC Economy

In 2008, the volume of cargoes transported by all types of vehicles totaled 31.7 million tons, representing a 5.6% growth compared to 2007. Motor transport, which accounts for more than 92% of the total amount of cargo traffic volume, carried 7.9% more cargoes compared to 2007. The freight- traffic volumes (including mail) transported by air service increased 1.5-fold, while cargo traffic con- veyed by railway dropped by 20%. As for the consumer market itself, it is just beginning to perceive the influence of the world financial crisis. For instance, it is quite clear that consumer demand is declining—even in the food products market. Kyrgyzstan is currently exporting more than 45% of dairy products. However, a marked reduction in dairy produce output was registered in 2008. Processed milk production sank by 11.8%, milk powder output by 20.7%, and the production of hard and other cheeses by 1.8%, compared to 2007. According to customs statistics, in January-November 2008, Kyrgyzstan’s foreign trade turnover, including natural persons’ export-import operations, grew by 50% compared to 2007, hitting a volume of $5,178.6 million. Export deliveries grew by 50% to $1,498.4 million, while import supplies increased by 50% to $3,680.2 million. Not including gold, overall exports increased by 32.6%. A steady upward trend in imports resulted in a trade balance deficit. The negative trade balance grew by 50% compared to January-November of 2007 and came to $2,181.8 million. This state of affairs was mainly caused by the higher prices for almost all import articles, energy products in particular. Naturally enough, this is primarily related to the price factor; however, non- food consumer imports are not showing any appreciable signs of slowdown. Potentially, this can be explained by the following two reasons. 1. The extent of re-export of previously imported goods was much larger than previously assumed. 2. The inflow of migrants’ remittances was as high as in the previous year. This allows the government to maintain a higher household consumption level. It should be mentioned that Kyrgyzstan’s main trading partner is China (with trade turnover amounting to about $5 billion). Russia accounts for about $1.5 billion, while Kazakhstan for $0.5 billion. In 2008, Kyrgyzstan traded with 115 countries all over the world. Its goods were exported to 67 countries (see Table 3). The main consumers of Kyrgyz products were Switzerland, Russia, Ka- zakhstan, Turkey, and the UAE. During the year under examination, exports to these countries increased. As for Kyrgyz imports, they mainly came from Russia, China, Kazakhstan, Germany, and Japan.

Table 3 Kyrgyzstan’s Foreign Trade Turnover Structure

Total 100

CIS Countries 53.5

EurAsEC States 49.8

Countries outside CIS 48.0

In December 2008, the consumer price index, which is normally used to measure the inflation rate in the state, amounted to 20%, compared with the same period of the previous year. According to 233 CENTRAL EURASIA 2008 Analytical Annual

KR National Bank’s estimates, the inflationary processes in the republic were generated by monetary factors (their share came to 78.4%), by non-monetary factors—9.8%, and by inflationary expectations—11.8%. According to the National Bank of Kyrgyzstan, the weighted average official exchange rate of the U.S. dollar to the Kyrgyz som in 2008 was KGS 36.57/1USD—down 2% compared to 2007. This decline is mainly explained by the higher inflation rate in Kyrgyzstan than in the countries that are its major trading partners. In Kyrgyzstan, the price of three major commodities—bread, petroleum, oil & lubricants and electric power—has always had a direct impact on the cost of living. An increase in price for any of them entails a price increase for the other two, and together they can act as a detonator of popular frustration growth.

Figure 4 Inflation Rate in 2008 (% of December 2007)

20.0 20 18.4 16.6 15.6 15.2 15.1 14.8 15

10.5 10 7.2 6.1 5 3.7 2.0

0 January March May July September November

As early as 2007, a sharp turnaround in food prices (bread, flour, vegetable oil, meat, and milk) was the main reason for inflation. The booming price increase had a direct impact on the entire technological chain—from grain to bread. The food price increase forced people with average and low incomes to spend more money on food and cut down on non-food expenses. The increase in food prices in 2008 was lower than in the previous year (20.9% and 31.5%, respectively). However, the highest price growth was registered in alcohol and tobacco (13% versus 9.1% in 2007), non-food consumer goods (16% versus 9.8%), and services (34% versus 10.6%). In the non-food category, gas prices showed a record-breaking increment as a result of ex-factory price growth in Uzbekistan. Up went the prices for petroleum, oil, lubricants, and diesel fuel (12.7%). Prices for paid services grew by 6.4% due to an increase in prices for transportation services, public health services, and education. The producer price index (PPI) for industrial production in January-December 2008 amounted to 26.4%, compared to 11.9% in 2007, while agricultural production PPI rose by 22.8% year-on-year (see Table 4). For discussion purposes, we can pinpoint two periods in Kyrgyzstan’s 2008 inflation dynamics. In the first six months of 2008, an acceleration in inflation was registered in Kyrgyzstan following the

234 KYRGYZ REPUBLIC Economy

Table 4 Producer Price Index in January-December 2008 Relative to the Same Period of 2007

2007 2008

Total 111.9 126.4

Mining industry 119.4 133.5

Manufacturing industry 112.8 128.4

Production and distribution of electric power, gas and water 107.7 116.0 recent upsurge in food and energy prices, which contributed to higher internal prices for food and petrochemicals and promoted increased tariff rates for gas, electricity, other fuels, and transportation services. The advance in prices for major material resources had an immediate effect on the cost of derivative goods, thus forming a high inflationary background in the Kyrgyz economy. During the first six months of 2008, the inflation rate amounted to 15.2%. In the second half-year period, the world prices for major food products and petrochemicals stabilized and started to fall. At that time, the energy problems became an additional factor behind inflationary pressure, which had an indirect impact on the PPI and promoted increased tariff rates for services. Until May there was a certain gap between nominal and real inflation. After that, the Kyrgyz economy slipped into the second phase of consumer price growth, which forced the KR National Bank to raise the official discount rate in order to redeem commercial banks’ excess liquidity. This goal was achieved as late as October. Interestingly enough, the National Bank started to raise the discount rate in May 2008—from 8.28%, and it reached its peak value (15.9%) on 22 October. Internal prices for individual goods were directly governed by their world production and consumption levels. This primarily relates to grain, sugar, and petrochemical pricing policies. For instance, according to the world forecasts, the 2008-2009 grain harvest, in particular wheat and rice, is expected to exceed the previous year’s indices, which will lead to higher balances carried forward and, accordingly, to price fixation at the current level or, probably, to reduced prices in the coming year. Despite internal crop output growth, Kyrgyzstan will be obliged to import a large amount of grains to cover their deficiency. Prices for paid services grew by 34.4% (December-December) in connection with the rise in utility rates and due to the increase in prices for transportation services and education tariffs. Problems in the power sector added inflationary pressure. This resulted in business activity slowdown which, in combination with the price increase, hindered the republic’s economic development. Population Living Standards

In 2008, the monthly minimum consumer budget per capita averaged KGS 3,570.95, having increased by 27.7% compared to 2007. In the minimal consumer budget structure, food products accounted for the largest share (64%).

235 CENTRAL EURASIA 2008 Analytical Annual

Wages and labor market. Despite the high inflation rates, actual wages have increased. The average monthly nominal wages per worker in January-December 2008 (not counting small enterprises) totaled KGS 5,422.0 ($148.3)—up 36% compared to the previous year, while their real growth, calculated on the basis of the consumer price index, came to 9.2%. A wage increase was registered in all areas of economic activities; however, the most significant growth was observed in state management, in operations with real estate, in the services sector, and in health care. In the private sector, the largest increase in wages was registered in trade, agriculture, and construction. The labor market of Kyrgyzstan is still being challenged by a number of problems, such as limited employment opportunities, low wages, social vulnerability of workers, and brain-drain migration. Employment of the population, especially youth employment, has become one of the top priorities of the Kyrgyz government. According to experts, about 500,000 migrants from Kyrgyzstan are working abroad at the moment. The level of migratory intentions can be classified as critical, especially given that the highest level of migratory sentiments is normally seen in young people under the age of 30. In other words, we are referring to a social group that it is traditionally considered to be the bearer of the nation’s labor and mental potential. According to the State Committee of the Kyrgyz Republic on Migration and Employment, the number of registered unemployed as of January 1, 2009 decreased by a mere 2.2% compared to the same date in 2008, while the number of unemployed decreased by 5.7%. On the other hand, international migratory activity of the population has continued its steady growth. Migrants from Kyrgyzstan employed in Russia remitted more than $870 million through money transfer systems. Following the 2008 year-end results (according to the estimates provided by the Ministry for Economic Development and the State Committee on Migration and Employment), labor migrants’ remittances to Kyrgyzstan are expected to reach $1.2 billion, and remittances to the GDP are likely to exceed 30%.

RELIGION

Ikbalzhan MIRSAIITOV Ph.D. (Political Science), independent expert (Bishkek, Kyrgyzstan)

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

he year 2008 was a stormy one in the coun- up passions which did not begin subsiding until try’s religious sphere. The draft of a new late December when the new law was sent to the T Law on Freedom of Conscience and Reli- president to be signed. The Spiritual Administra- gious Organizations initiated by the Zhogorku Ke- tion of the Muslims of Kyrgyzstan (SAMK) be- nesh (parliament) of the Kyrgyz Republic stirred came much more active; for the first time the lo-

236 KYRGYZ REPUBLIC Religion cal clergy launched a systematic ideological cam- nomenon in the country’s religious sphere. One paign against extremist organizations. of them, the Alliance of the Muslims of Kyr- On 1 April, the Hizb ut-Tahrir supporters gyzstan with T. Bakir uluu, former ombudsman, clashed for the first time with the government, and N. Motuev as its heads can be described as which ordered the law enforcers to brace them- a single center of the future religious opposi- selves for harsher measures, even going as far as tion. the use of force and firearms. The government, in turn, strongly support- In 2008 new organizations moved forward ed by the OIC, tried to plant Islamic financial prin- in the country’s politics, a totally novel phe- ciples in the country’s economy.

Statistics

In 2008 there were 2,168 religious organizations in Kyrgyzstan; 1,791 of them were Islamic structures. The SAMK has 9 kazyiats, 1,674 mosques (76.14 percent of them found in the country’s south), 8 institutes of higher learning, 50 madrasahs (four of them, in the Osh Region, were closed in October 2008), 49 Islamic funds, centers, and alliances, and 3 foreign missions. In the republic’s south the Islamic educational establishments comprise 56.14 percent of the secular educational structures; in the north the share is lower (43.86 percent). There are 2,866 students in the religious educational system (1,516 of them study in the south, 1,350 in the north). There are 362 Christian facilities functioning in the country (16.69 percent of the total number of religious facilities in the republic). There are 45 churches and parishes among them as well as a convent of the Russian Orthodox Church; 2 churches of Old Believers; and 4 Catholic communities. There are also 311 Protestant facilities (49 of them are run by Baptists; 21 by Lutherans; 53 by Pen- tecostals; 31 by the Seventh Day Adventists; 43 by Charismatic faiths; 41 by the Jehovah’s Witness- es; 26 belong to unknown religious denominations and 24 to foreign Christian confessions). There are 12 Baha’i communities; while the Judaists and Buddhists have one community each. On the whole, the Christian religious organizations function in economically developed areas. In 2008 there were 78 missionaries working in Kyrgyzstan; since 1996 1,544 of them have been registered. Thirty-two foreign missionaries are Muslim of various trends; others are Christians of all hues. According to the State Agency for the Religious Affairs under the Government of the Kyrgyz Repub- lic, in the last 12 years 1,097 Christian missionaries visited and worked in the country. Several religious organizations are unregistered and are operating illegally: Falunggun; the Sun Moon Church; the Maharishi Management School (transcendental medicine); the International Soci- ety for Krishna Consciousness (Vaishnava); the Church of Jesus Christ of Latter-Day Saints (the Mormons); the White Brotherhood; Satanists; and Dolnara Khanon (some of them banned in other countries).

Official Religious Leaders

The year 2008 marked a watershed for the SAMK: the muftiiat and the clergy became more active. On 28 May, the SAMK published its Fatwa on the Hajj; its leaders had convinced the people at the top that only the SAMK should be charged with the hajj. In June it signed an agreement with the Ministry of Hajj of Saudi Arabia on organizational matters and a quota of 4,500 people for 2008. 237 CENTRAL EURASIA 2008 Analytical Annual

It set up republican headquarters, 6 regional structures for the Osh, Jalal-Abad, Batken, and Chu regions and in the city of Osh; the Talas, Issyk-Kul, and Naryn regions and Bishkek had one common structure. The muftiiat refused to use tourist firms selected through a tender; it shouldered the burden on its own. In the past the official clergy remained indifferent to the extremist organizations but in 2008 the imam-hatibs of the central mosques in the country’s south became much more active in their criticism of Hizb ut-Tahrir. In one of his sermons in the Imam-Ata Friday mosque Mahmujan-kori pointed out: “Igno- rance of the very foundations of our religion or their misinterpretation by Hizb ut-Tahrir cause an inadequate response among the ordinary Muslims. The majority of them are baffled. For several years now the official clergy and unofficial organizations have been engaged in a dispute about the date when fasting begins and when Ramazan Aiit should be celebrated. This has become a tradition.” I noticed that in 2008 the official clergy launched a full-scale ideological campaign against extremist ideas. Some of the official clergy tried their hand in politics: imam-hatib of the Imam Sarakhsi Friday mosque Rashod Kamalov registered as a candidate at the local elections in Kara-suu scheduled for 5 October, 2008. It took the local government some time to convince him to withdraw from the race. Late in 2008, when Israel launched a military operation in the Gaza Strip Head of the International Islamic Cooperation Center, Sadykzhan-kori Kamalov, speaking on the local OshTV channel, sharply criticized the Jewish state. The Mutakallim public women’s organization headed by Frontbek kyzy Zhamal asked the president of Kyrgyzstan to help acquire permission for schoolgirls and students to wear headscarves at schools and higher educational establishments: the Mutakallim members were frequently chastised by teachers who humiliated them by their demands to remove their headscarves. The official Muslim circles condemned the mass riots that took place on 1 October in the Nookat District and blamed Hizb ut-Tahrir for the tragic events. The official clergy, local administrations, and law enforcers had to join forces to explain to the local population in the republic’s south the dangers of extremism. There is information that the SAMK intended to introduce uniforms for the official Muslim clergy starting in 2009. The SAMK and the Orthodox Church were united in their support of official domestic policies and the Law on Freedom of Conscience and Religious Organizations in the Kyrgyz Republic. Nearly all Protestant organizations, on the other hand, the Evangelical-Lutheran Church, the Union of the Churches of Evangelical Christian Baptists, the local Church of Jesus Christ, the Kudai zhamaaty Religious Association, the Southern Conference of the Christian Seventh Day Adventists, the Union of the Churches of the Christians of Evangelical Faith, the Alliance of the Kyrgyz Evangelical Churches, and the Union of Evangelical Churches suggested that the draft be amended. In their open letter to the president, the parliament, and the government dated 14 October, 2009 they invited the government, the deputies, and the State Agency for Religious Affairs to engage in an open dialog. They suggested that members of all confessions be involved in the discussion, that the parliament initiate open hearings of the draft, that the law contain mechanisms of cooperation between the state and religious organizations, and that it correspond to the international pacts and agreements ratified by the Kyrgyz Republic. This shows that 2008 was a dynamic year. On the one hand, the official religious organizations sided with the state when moving against religious extremism and terrorism, while on the other, the very format of the relations between the state and religion changed. The government tightened

238 KYRGYZ REPUBLIC Religion its grip on religion: it was no longer a regulator of the religious sphere but an instrument of control and punishment. It remains to be seen what format the religious organizations will prefer in the new conditions.

Unofficial Religious Leaders

Confrontation between the official authorities and religious-political organizations in Kyrgyzstan has become a permanent feature; today they not merely oppose the secular government but also challenge the official clergy. Hizb ut-Tahrir, an illegal religious-political organization, moved away from ideological propaganda among the local people to action. An analysis and monitoring of what it was doing in 2008 revealed several trends: n First, polemics and debates with the government became much more urgent and developed into imposing its ideology on the opponents. In 2008 it issued several types of audio and video materials and published leaflets and books specially intended for civil servants and statesmen at the mid and higher levels. This was not all: some Zhogorku Kenesh deputies received provocative letters designed to compromise the most popular politicians and officials in the eyes of the government. The law-enforcement structures treated those who received the letters with suspicion. n Second, the Hizb ut-Tahrir adepts stepped up their activities in the capital: in 2008 Bishkek and environs attracted the largest number of its members; Hizb ut-Tahrir obviously concentrated on brainwashing the population of the country’s capital. n Third, Hizb ut-Tahrir does not limit itself to Central Asia; it condemns what America, Isra- el, and some other Western countries are doing in Iraq and Afghanistan. The May 2008 report of the U.S. Department of State pointed out that radical extremists, Hizb ut-Tahrir among them, fanned anti-Semitism and anti-Western ideology, which might indirectly promote terrorism… The United States cannot prove, however, that the extremist Hizb ut-Tahrir movement is engaged in international terrorism but its radical anti-American and anti-Se- mitic ideology inspires violence against the U.S. and its allies. Its supporters openly call on Muslims to go to Iraq and Afghanistan to fight the coalition.1 n Fourth, Hizb ut-Tahrir tested its ability to mobilize the people for political purposes; for some years now they have been turning the Muslim holidays Orozo Aiit and Kurban Aiit into political events. It tried to plant alternative ideas among the people, taint the image of the authorities, and teach Muslims to distrust and reject the official clergy and the state. In mid-September 2008, Muslims in the republic’s south received invitations that said: “It is not for the Mufti of the Muslims or for the head of state to determine when the month starts and when it ends. It is nature that indicates the beginning. Since the Mufti and the country’s leader do not take the beginning of the month into account and do not obey the Shari”a canons they should not be trusted or obeyed. In this case every Muslim should force the Mufti and the head of the country to obey the Shari’a canons. If they do not obey them they should be replaced by those who do obey. Those Muslims who

1 D. Karimov, “‘Hizb ut-Tahrir,’ raspolagaiushchaia posledovateliami v Kyrgyzstane, podderzhivaet akty nasiliia protiv Soedinennykh Shtatov i ikh soiuznikov,” available at [http://www.24.kg/politic/2008/05/07/83981.html]. 239 CENTRAL EURASIA 2008 Analytical Annual believe that each person should answer to the Almighty for his sins are wrong. Those who agree with the Mufti and the head of state are sinners. The head of the state and the Mufti should lead the reading of the Orozo Aiit namaz. If they refuse others should do this.” These “invitations” stirred up the October riots in the town of Nookat (the Osh Region) when the local administration declined the request to use the central square for the Orozo Aiit celebrations and offered the local stadium instead. The Hizb ut-Tahrir activists did not like it and skillfully managed the “crowd syndrome” by exploiting the people’s religious feelings: popular discontent was channeled against the authorities. Hizb ut-Tahrir was planning mass celebrations, lotteries, and food hand-outs in the towns of Uzgen, Osh, Jalal-Abad, and Karasu. Acting resolutely the local authorities prevented a wide-scale campaign planned by Hizb ut-Tahrir. The events in Nookat demonstrated that religious feeling could mobilize huge Muslim crowds and that the government was not yet ready to talk to prevent possible religious riots. The use of force, on the other hand, the only instrument available to the authorities, fanned confrontation with the religious radicals and even moderate Muslims. To prevent similar unwelcome developments in the future 32 rioters were brought to court on criminal charges and severely punished with prison terms of 9 to 20 years. Early in 2008 the authorities deemed it necessary to use even more force against religious extremists. In January the cabinet endorsed an Interdepartmental Plan of Preventive Measures until 2010 designed to stem propaganda of religious extremism, fundamentalism, and the activities of Hizb ut- Tahrir as a party of religious extremists and prevent religious conflicts. The law enforcers and the special services created their own plan of struggle against religious extremists; the results were summarized in their report for 2008. In 2008 they confiscated 196 copies of printed matter (compared with 54 copies in 2007); 152 compact discs (17 in 2007); 3 computers (none in 2007); 290 leaflets (none in 2007); 8 audio and video cassettes (24 in 2007); 26 books and 8 extremist religious journals. They registered 662 people as potential radicals (18 of them were women earlier involved in Hizb ut-Tahrir activities); 155 were brought to court on charges under Art 299 of the republic’s Crim- inal Code; 306 people were within the 18 to 30 age bracket; 303 between the ages of 31 and 45; and 57 were over 45 years old. In 2008 the unofficial religious organizations demonstrated much more activity than before. Several new organizations sprang up, the Alliance of the Muslims of Kyrgyzstan with Tursunbai Bakir uluu and Nurlan Motuev, two political mavericks at the head being one of them. They appealed to the Muslim values probably to conceal that they were simply trying to recover their former political capital and the people’s confidence. Jamaati Tablig is one of the unofficial religious organizations that strengthened its position in 2008 and spread across the country. It used very simple and very attractive measures when dealing with the ordinary Muslims: n First, stories (baian) about the Prophet Muhammad (S.A.S.)2 and his companion “sahabah” accompanied by eulogies to the Muslim saints to show the people an example to be followed in the hope that at least some of them would dedicate what was left of their lives to Allah. n Second, so-called “home leaving”: mobile groups engaged in daawat (active propaganda) traveled from one place to another all over the country. In 2007 they even went abroad, to India and Pakistan; in 2008 their scope was limited. In the summer of 2008 Tablig leaders

2 Sheikh Muhammad Yusuf Kandehlavi, Izbrannye khadisy, Tsentr innovatsionnykh tekhnologiy, Kazan, 2003. 240 KYRGYZ REPUBLIC Religion

from India and Pakistan visited Kyrgyzstan to inspect the results of the local efforts. Dissat- isfied with the low level of religious feelings the high commission recommended concentrating on the domestic scene. Southern groups were sent up north while the northern groups were moved to the south where they had to remain active for one to four months. They had to stop by every house to call on people to embrace Islam, pray, and go to the mosque. As a rule the groups lived in the local mosques. As distinct from Hizb ut-Tahrir, Jamaati Tablig has no political aims in view; it has neither a political program nor rules; it does not distinguish between high-ranking and petty officials, rich and influential businessmen and poor people, a popular politician and the man-in-the-street. Their ideology suggests that they are all equal in the eyes of the Almighty, which accounts for the uniform daawat methods. Jamaati Tablig has been working in Kyrgyzstan since the mid-1990s but it is still not registered with the corresponding state structures, which accounts for the fact that it is sometimes classed among the extremist trends. It seems that theologians should pay more attention to this phenomenon and study it in detail. Today, confrontation between the official and unofficial religious organizations and their struggle for the hearts and minds of the people remains a burning issue. While the official religious organizations have common aims their unofficial rivals use different methods and pursue different aims when working among the people.

Freedom of Conscience

Throughout 2008 the new Law on Freedom of Conscience and Religion remained the most burning issue. The draft initiated by several Zhogorku Kenesh deputies consisted of 30 articles, a glossary of terms, and several provisions. Under the new law state registration was limited to religious organizations created on the initiative of no less than 200 adult citizens of the republic and its permanent residents (10 members under the old law). An alliance required no less than 10 regional branches (a condition that was absent in the old law); children should be kept away from religious agitation, and proselytism was banned; the draft specified the way local religious organizations, foreign missions, and religious educational establishments should be registered, liquidated, or banned. No religious books or other printed, audio, or video materials should be distributed in public places (streets and boulevards) or apartments, kindergartens, schools, and institutions of higher learning visited for propaganda purposes. Two leading religious organizations—the SAMK and the Russian Orthodox Church—which represent the two leading confessions (Islam and Christian Orthodoxy) supported the draft and recommended that the president sign it. They pointed out that democratic principles could not justify the humiliation of religious feelings; the traditional religions reject unisex marriages allowed by some of the foreign churches.3 Experts in Kyrgyzstan and abroad could not agree on the draft. K. Malikov, for example, believed that the expert community should amend the law to make the state an arbiter in religious affairs. He believed that the law should point to the “special historical role of the traditional confessions— Islam and Orthodoxy—based on mutual respect and tolerance.” He suggested that the law should speak of spiritual security meaning “security against the destructive ideological and religious impact on

3 [http://www.24.kg/community/2008/10/21/95803.html]. 241 CENTRAL EURASIA 2008 Analytical Annual society’s national specifics.”4 Prof. L. Khoperskaia, in turn, pointed out that the draft law established control over the financial activities of the religious organizations, especially those funded from abroad or engaged in economic activities. She referred to the foreign practice of extending state support to religions and wrote that the “traditionalists” insisted that religion should be used to deal with spiritual and moral problems, help prevent religious extremism, and “make the nation immune to alien ideologies by grafting the correct understanding of Islam.”5 Most of the state structures—the Ministry of the Interior, the State National Security Commit- tee, and the State Agency for Religious Affairs under the Government of the KR being the most insistent—approved the document. The parliament was the center of the debates fed by the report “On the Religious Situation in the Kyrgyz Republic” submitted by a parliamentary commission headed by deputy R. Tagaev. In his oral presentation at a sitting of the Zhogorku Kenesh commission on constitutional legislation, state order, laws, and human rights, he said: “The time has come to improve the laws to protect the nation against religious groups of all sorts.” The parliamentary commission concluded that the country lacked a strict registration procedure for religious organizations, which encouraged their proliferation. Some of the deputies agreed with the draft, others criticized some of its provisions. Vice-speaker of the parliament Ch. Baekova pointed out: “The norm of 10 people introduced in 1991 was intended to identify the nation’s religious preferences. Smaller groups will go underground if the norm of 200 people stands while we want to introduce more order in the religious sphere.”6 A. Sabirov, who chairs the ethics and regulations committee, criticized some of the points: “I would like to warn those who favor stricter punishments for spreading religious extremism that in a week’s time everyone in the detention centers will be praying; in a month’s time this will spread to all the prisons. Then we will confront an explosive mixture—religious extremism blended with the criminal world… I agree with those deputies who say that extremist trends should be stopped but we should use the same, ideological, methods.”7 As a result, the majority agreed with Z. Kurmanov, who drafted the law, that “the old law of 1991 has fulfilled its mission as a legal basis for religious organizations… New structures have appeared, new relations in the religious sphere have developed—it is for the state to regulate them.”8 After taking the comments into account, the deputies endorsed the draft in the first and second readings and passed it on to the president for signing. The republic’s civil sector and NGOs (Interbilim and “For International Tolerance” among them) harshly criticized the draft. Dustin Bickel, an advisor on economic and political affairs at the U.S. Embassy in Kyrgyzstan, remarked that by banning unregistered religious organizations the law added to the disagreements between the state and religious organizations.9 The European Union likewise voiced its concern with the law.10 The leaders of the U.S. Com- mission on Security and Cooperation in Europe called on the president of the Kyrgyz Republic to return the draft to the parliament for revision: “We strongly urge you not to sign this law which would mark a serious regression in your country’s observance of OSCE norms” and would “damage your coun-

4 [http://www.24.kg/community/2008/10/20/95715.html]. 5 L. Khoperskaia, “Religioznaia situatsiia: ugroza ‘dukhovnoi bezopasnosti,’” Opyt etnopoliticheskogo monitoringa situatsii v Kirgizstane (2006-2008), Institute of Ethnology and Anthropology of the Russian Academy of Sciences, Mos- cow, available at [http://www.24.kg/glance/2008/10/27/96345.html]. 6 [http://www.24.kg/parliament/2008/10/08/94705.html]. 7 [http://www.24.kg/parliament/2008/10/08/94691.html]. 8 [http://www.24.kg/parliament/2008/10/08/94677.html]. 9 D. Bickel, “Pravitelstvo SShA privetstvuet shagi v dele prodvizheniia religioznoi terpimosti,” available at [http:// bpc.kg/news/4616-31-10-08 31/10/2008]. 10 [http://bpc.kg/news/4616-31-10-08 31/10/2008]. 242 KYRGYZ REPUBLIC Religion try’s reputation” in the eyes of the OSCE that unites 56 countries, all of them promoting human rights and security.11 The president was also showered with letters from the people, heads of small religious groups, and Kyrgyz Christians urging him to return the draft to the parliament. Some provisions of this document, they believed, encroached upon their right to freedom of religion. Heads and activists of the Evangelists, the Seventh Day Adventists, the Union of Christian Churches, and others were very much concerned. In their letters they argued: “A mere 5 percent of the republic’s religious organizations have enough members to meet the requirements of Art 9 of the draft, under which registration is limited to groups of 200 adults permanently residing in the republic… The others have no choice but to go underground. The clergy whose duty it is to spread religion find this more important than anything else. It is the government that is pushing them to this decision: the state, which hoped to fight extremism and religious fanaticism with the help of the new law, has infringed on the rights of law-abiding religious organizations. Life has shown that extremist organizations do not need state registration.”12 President Bakiev instructed the government and other relevant structures to set up a commission with a wide representation of the local confessions to specify the debatable issues mentioned in numerous letters. It was expected that it would discuss them and “find solutions according to the established procedure.”13 The president, however, signed the draft without amendments early in 2009. The new law divided the nation into liberals and traditionalists. The group of ardent supporters of the draft included two traditional confessions (Islam and Orthodoxy) but also the power branches. The liberal camp united the civil sector, international organizations, and small religious organizations. None of the extremist groups betrayed its position on the issue. Hizb ut-Tahrir does not need state registration since it rejects all the secular laws, including the law on freedom of conscience. The new law gave more freedom of action to the law enforcers and special services with respect to the ordinary believers.

Tolerance and Dialog among Religions

The year 2008 put the relations among the local religions to severe tests. The traditionalists went on with their criticism of the sectarianism and proselytism of those members of the titular nation who abandoned their confessions. Tursunbai Bakir uluu dismissed the new religious sects as pseudo-religions and a greater threat to society than the opposition or squabbles at the very top. He was very critical of proselytism as “the most dangerous phenomenon of our day. When the people of one nationality who belong to different faiths are set against one another, this may cause social conflicts or even cost us our statehood.”14 Head of the public alliance “Akyl, es, rukh zhana yiman” D. Abdyldaev was another enemy of Western values: “Numerous foreign sects have recently turned up in the republic. They actively draw people into their ranks… Some of them profess atheism and deny God, others say that man descended from the apes or worship idols.”15

11 [http://kyrgyzstan.neweurasia.net/2009/01/20/not-free-religion/]. 12 A. Shumilin, “Priniatie novogo zakona ‘O svobode sovesti i religioznykh organizatsiiakh v Kyrgyzstane’ prive- det k tomu, chto mnogie konfessii uidut v podpolie,” available at [http://www.24.kg/community/2008/10/16/95503.html]. 13 [http://www.24.kg/community/2009/01/12/102857.html]. 14 [http://www.24.kg/community/2008/12/24/101907.html]. 15 [http://www.24.kg/community/2008/10/21/95803.html]. 243 CENTRAL EURASIA 2008 Analytical Annual

According to another expert O. Moldaliev, “aggressive parasitic organizations that lead the faithful away from religion have appeared in Kyrgyzstan… They change their names or mimic NGOs.”16 The stormy discussions served the background for a training seminar on Encouraging Legal Competence and Religious Dialog held on 12 June, 2008 by the State Agency for Religious Affairs and the Local OSCE Bureau. It discussed international norms applied to freedom of conscience and religion and national religion-related laws and offered practical knowledge of how the laws should be applied. The seminar taught how to approach religious conflicts caused by extremist organizations, proselytism, wearing religious attributes in state educational establishments, and missionary activities. It should be said that in 2008 the nation failed to learn religious tolerance and start talking to the religious opponents. The new registration rules and norms will help identify and liquidate pseudo- religious organizations and sects (many of which are banned in the West). Proselytism in Kyrgyzstan is not a novel phenomenon; its neighbors (Tajikistan and Uzbekistan) banned it to prevent religious conflicts. Those who wrote the draft were probably driven by the same arguments.

Economic Activities of Religious Organizations

The religious organizations’ economic activities remained outside the scope of the world financial crisis for the simple reason that they were involved in local and independent operations. In 2008 some of them operated on budgets of over $1 million compared to $100 thousand fifteen years before.17 The social sphere remains the main concern of religion and, therefore, of religious organizations that channel the bigger part of their profits into social programs. There are several economic models in the republic. Trade associations are the most popular: active members set up stationary and movable small shops in market places; each of them contributes part of their earnings to the organization’s budget since all of them share the ideas and programs and accept the rules of their organization. Some of the religious structures set up small private enterprises, eateries, cafes, or hostels with fixed wages for all employees from the director down to the manual worker. The proceedings are sent to charities to be used for members and other programs such as orphanages, shelters, and boarding houses. In 2008 Muslim organizations started the halal-industry with outlets in markets and shops trading under the already familiar Halal Food signs. Very soon demand outstripped supply and the need for a licensing commission became obvious. It was set up by the SAMK. Network marketing among members of religious organizations produces no profit for the members involved; they are expected to recruit new members to pour more money into the organization’s budget. This type of activity is mainly limited to unregistered structures. Business empires of religious organizations are normally formed by members of one organization. Such associations are engaged on their own in education or even big business as companies or corporations. Some of them run banks, larger educational establishments, universities, and trade houses in the republic.

16 [http://www.24.kg/community/2008/10/20/95723.html]. 17 L. Khoperskaia, op. cit. 244 KYRGYZ REPUBLIC Religion

This explains why deputies insisted that the law on freedom of conscience should make control of the religious organizations’ financial activities a law. Deputy A. Arabaev, for example, suggested that their bank accounts should remain under strict control.18 On the one hand, the economic activities of religious organizations create jobs and regulate social problems; while on the other, the majority of them prefer to remain in the shadow. Their economic activities cannot be discontinued for the simple reason that the basic economic structures will survive anyway while the leaders will soon find other forms of activity. The state’s resolute and aggressive moves against religious organizations might embitter their members.

Influence of Foreign Religious Centers and Foreign States

In 2008 the state concentrated on the task of introducing Islamic financial principles in the country’s economy. President Bakiev said in one of his interviews that “introduction of Islamic financial principles, which will complement the already functioning ones, will boost the efficiency of the country’s labor and financial resources, add stability to the financial sector and its progress, and help reduce the poverty level in a systemic way.”19 Mustafa bin Hamat of the Islamic Development Bank arrived in the republic to help with the project; on 24 June, 2008 the resultant favorable conditions allowed the OIC to revive the old resolution on economic aid to Kyrgyzstan which calls on all Muslim and Islamic financial structures to extend financial support to the republic. The events of 1 October in Nookat forced the State Agency for Religious Affairs to revive the educational program for imams of the mosques; the Turkish Charity Dianet Waqfy, along with the Theology Department of Osh State University, endorsed the curricular for the imams of the republic’s south. The same charity intends to fund the program in 2009.

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

In 2008 the religious sphere was in turmoil; the republic’s liberal laws encouraged all sorts of confessions, including those banned in other countries, to engage in hectic activities. The new Law on Freedom of Conscience and Religious Organizations came too late: many non-traditional and destructive confessions (unknown in the Soviet period) had already stuck root in the minds of at least some of the republic’s population. They had acquired followers, raised a young generation from among the members of the titular nation, and built up an adequate material and technical base. The new law has obviously confronted the non-traditional and destructive confessions with a choice: retreat, go underground, or set up new religious structures compatible with the new law. It raised a wave of discontent among the believers, the most implacable part of the opposition. The authors argued that their law was intended to oppose religious extremism and add efficiency to law enforcement. The law marks a new beginning. The second stage calls for complex measures designed to boost ideological, educational, and legal measures. An effective national conception in

18 [http://www.24.kg/parliament/2008/10/08/94709.html]. 19 K. Bakiev, “Na finansovom rynke poiavitsia realnaia konkurentsiia,” Delovoi Kyrgyzstan, No. 3, 2008. 245 CENTRAL EURASIA 2008 Analytical Annual this sphere will make the struggle even more efficient. If nothing is done events might spread far and wide to eclipse what happened in Nookat on 1 October. Most of the religious organizations have independent economic structures that not only support the communities but also pay taxes to the state budget. The law enforcers have to cope with the difficult task of distinguishing between moderate religious activists with whom a dialog is possible and advisable and radical fanatics infected with the “infantile disorder of Caliphate-ism.”

INTERNATIONAL AFFAIRS

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

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

Radislav SAFIN Media program coordinator, Institute of Public Policy (Bishkek, Kyrgyzstan)

he local and foreign expert community maintained that, in general, Kyrgyzstan retained positive trends in its foreign policy activity in 2008. T In contrast to previous years, Kyrgyzstan placed top priority on relations with its neighbors. The presidents of Kyrgyzstan and Tajikistan supported the idea of their Kazakh colleague, Nursultan Nazarbaev, to create a Central Asian Union. However, the head of Uzbekistan opposed it, which clearly showed the problems in their relations with respect to regional water resource sharing, particularly when the low water period begins. We will note that aggravation of contradictions over water is contextually broader than just water discharge from the Toktogul and Nurek reservoirs. The hydropower plant being built on the Naryn and Vakhsh rivers is also a bone of contention. The talks and statements by the heads of state over the past six months have shown that the water problem in Central Asia is becoming internationalized—an increasingly larger number of countries and international organizations are being drawn into this process.

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In addition, such issues as cooperation with the world centers and attempts to restore the balance in interrelations with them found their way onto the agenda. The most heated discussions in Kyrgyz society were aroused by relations with Kazakhstan. The main issues related to interaction and cooperation in sharing water and energy resources, the border, and the participation of Kazakh capital in mineral production and in the finance and banking, construction, and telecommunication sectors of Kyrgyzstan’s economy. Interstate cooperation with respect to four Kazakh sanatoriums on Lake Issyk-Kul, the status of Kyrgyz labor migrants in Kazakhstan, and access of Kyrgyz goods to the Kazakh market and their transit to Russia were also topics of lively discussion. Despite the numerous meetings at different levels and the signing of a large number of bilateral agreements and treaties in the above-mentioned areas, many questions still remain open and periodically lead to certain complications in bilateral relations. There was hope that Kyrgyz President Kurmanbek Bakiev’s official visit to Kazakhstan on 17 April would help to resolve some of these issues. When commenting on the upcoming meeting between the leaders of the two states, E. Poletaev, a well-known Kazakh expert, noted that, in his opinion, “Kurmanbek Bakiev is going to Kazakhstan with a prepared set of proposals and a similar set is already waiting in Astana… We cannot expect any new ideas, particularly since the relations between Kazakhstan and Kyrgyzstan have not produced anything new in the past year, nor have there been any prerequisites for this. Most of the problems are long-term, which also applies to the issues that have been harped on for many years now regarding the border and the situation with the sanatoriums. I just want to say that there are no new challenges, particularly since there have been no foreign policy events that might merit some reaction from Kaza- khstan or Kyrgyzstan. It will be a purely internal Turkic dialog between fraternal nations and their leaders without any surprises.” In turn, Kyrgyz expert N. Omarov noted the following: “I can say that Kazakhstan in particular is interested in building relations with us. It was the president of Kazakhstan who put forward the initiative last spring to revive the integration processes, in particular, to create a network of interstate councils, which I call network integration… It is not simply one head of state visiting another, but the beginning of the work of the Kazakhstan-Kyrgyzstan Interstate Council, which is extremely important for both states. In particular, this is pumping fresh blood into the integration processes which ground to a halt in the region in 2005.” An Agreement on the Border and Agreement on Four Issyk-Kul Sanatoriums to be transferred to Kazakhstan, discussed as early as 2003, which were signed on the eve of the meeting between the two leaders, added particular interest to this event. But in contrast to their Kazakh colleagues, who ratified these agreements within a year, the Kyrgyz parliamentary deputies of two convocations were loath to take this step. Nevertheless, despite the active protests and sharp criticism of both agreements by the opposition, the new Kyrgyzstan parliament, mainly thanks to the domination in it of the pro- presidential party “Ak Zhol,” managed to get them ratified. The idea of the Kazakh president to create a Union of Central Asian States was discussed in particular at the talks in Astana. Nursultan Nazarbaev noted that Kyrgyzstan and Kazakhstan are both in favor of creating this kind of union. “Kazakhstan invests the most capital in the development of the Kyrgyz economy. New joint enterprises are being created, as well as new jobs. Mutual economic trade and investment relations are being successfully enhanced,” emphasized the Kazakh president. In turn, the Kyrgyz president confirmed that his country is still in favor of and fully supports this idea since such a union will help to promote integration among the countries of the region. Summing up the results of his visit to Kazakhstan, President Kurmanbek Bakiev noted that it saw the successful culmination of several specific issues. For example, the previous agreement on the delivery of 50,000 tons of grain to Kyrgyzstan remained in effect despite the prohibition Kazakhstan

247 CENTRAL EURASIA 2008 Analytical Annual placed on exporting grain from the country due to the increase in world prices. Moreover, during 2008, an additional 300,000 tons of cereal grain from the neighboring republic will be delivered to Kyrgyzstan. In order to ease travel conditions, Kazakhstan supported the idea of extending the time Kazakh and Kyrgyz citizens may visit the other country without registration to 90 days. An agreement was also reached on loading the refinery in Jalal-Abad with crude oil from Kazakhstan. Spe- cial emphasis was placed on developing investment and economic cooperation. The question was discussed of rapidly launching a Kyrgyz-Kazakh investment fund and further implementation of joint strategic projects, particularly with respect to the Kyrgyz side joining the Turkmenistan-Chi- na gas pipeline project and the Kazakh side participating in financing and building the second line of the main gas pipeline of the Bukhara gas-bearing region-Tashkent-Bishkek-Almaty, which passes through Kyrgyzstan. The expert community evaluated the results of Kurmanbek Bakiev’s official visit to Kazakhstan as positive. The sides made a certain amount of progress in resolving several specific issues. Never- theless, there are still significant differences in the sides’ positions regarding key issues of bilateral relations—the fuel and energy complex, the water problem, and transportation. Nor have the border and four Issyk-Kul sanatorium issues been entirely removed from the agenda and they will most likely continue to come up from time to time. In the first half of 2008 problems became aggravated in the relations between Kyrgyzstan and Tajikistan. Conflicts among the residents of the border areas of both countries became more frequent and escalated due to squabbles over the use of land and water resources. The most significant and noteworthy was the incident that occurred on 26 March when more than 150 Tajik citizens led by the khakim of the Isfara Region and representatives of the security structures illegally crossed the Kyrgyz border to destroy a dam that did not allow them to irrigate their fields. The day was saved by both sides being willing to make an effort and come to a compromise. Nevertheless, it is causing concern that problems in bilateral relations are not being resolved at the negotiation table, but by using forceful methods involving violation of the state border and the direct participation in the conflicts of representatives of the government and security structures. In order to defuse the tension in bilateral relations and prevent similar incidents in the future, on 16 May Kurmanbek Bakiev paid a working visit to the border city of Khujand on the invitation of Tajik President Emomali Rakhmon. When commenting on the upcoming meeting between the Kyrgyz and Tajik leaders, President of the Institute of Public Policy M. Imanaliev noted: “I doubt that the presidents will talk seriously about economic cooperation since, frankly speaking, apart from the opportunities offered by their common border I do not see any other serious channels for this type of cooperation between the two countries. And of course they will also talk about how Kyrgyzstan and Tajikistan are to survive the winter.” This prognosis was confirmed and the talks resulted in the heads of the two countries entrust- ing the corresponding departments with accelerating legal registration of the state border line between Kyrgyzstan and Tajikistan. Whereby they both said they were interested in stepping up the negotiation process. Moreover, in order to prevent conflicts on economic issues in the border areas, the presidents entrusted the governments of their states with drawing up and signing an intergovernmental agreement on prohibiting economic activity along the state border line until completion of its delimitation and demarcation, as well as an agreement on leasing pastureland on Kyrgyz territory. In order to find a rapid solution to the problems that are arising the sides also agreed to form joint border area administrative groups. The presidents of Kyrgyzstan and Tajikistan noted the importance of constant coordination and conducting of a coordinated water and energy policy between the two states. The corresponding departments were entrusted with carrying out reciprocal deliveries of electricity as necessary and as

248 KYRGYZ REPUBLIC International Affairs seasonal needs demanded and to study the project for building a power transmission line in Kyrgyzstan and Tajikistan for delivering electricity to third countries. A concerted effort was to be made to sign a four-way Intergovernmental Protocol on the Use of the Hydropower Resources of the Naryn-Syrd- arya Cascade for 2008-2010. Kyrgyzstan’s relations with Russia developed smoothly and steadily during the first six months of 2008, as many experts noted. However, at the beginning of the year, a pall was cast on bilateral cooperation by skinheads attacking and murdering Kyrgyz citizens living and working in Russia and by Kyrgyz militiamen arresting Russian servicemen at the airbase in Kant. The sides exerted every effort to settle this kind of conflict, but it is still too early to talk about complete resolution of the problems, particularly with respect to the stay of Kyrgyz citizens in Russia. After a new president was elected in Russia on 2 March, many Kyrgyz experts expressed the opinion that Dmitry Medvedev’s arrival at the helm was unlikely to dramatically change the current relations between the two states, although there would definitely be new nuances and tones in them. The fact that both countries are trying to gain mutual benefit from bilateral cooperation was discussed as early as the first talks between the presidents of Kyrgyzstan and Russia on 6 June during the informal CIS summit in St. Petersburg. During the talks, the Russian president noted that he highly valued the relations between the two countries and said: “I am glad to meet you and have this opportunity to discuss the current state of cooperation. We have many interesting joint projects, some of which are already being implemented and some which are at the discussion stage. Economic trade cooperation is dynamically developing, there is real growth in trade turnover, it has risen by 50 percent recently, which is having a positive effect on the development of mutually beneficial bilateral relations between Russia and Kyrgyzstan.” In his reply, Kurmanbek Bakiev emphasized: “Russia occupies a special place in Kyrgyzstan’s foreign policy and the relations between our countries are a top priority. Mutual economic cooperation has resulted in a real increase in goods turnover between Kyrgyzstan and Russia. Whereas in the past we only began talking about certain joint projects, in recent years they are coming to fruition.” The heads of the two states also discussed economic trade cooperation issues, further expansion of the participation of Russian companies in investment projects in Kyrgyzstan, and several aspects of cooperation in the humanitarian sphere. When forecasting the further development of Kyrgyz-Russian relations, deputy of the Zhogorku Kenesh and member of the Social-Democratic Party of Kyrgyzstan B. Beshimov said the following: “Prospering Russia is interested in Kyrgyzstan as one of the SCO countries, one of a whole slew of states in the post-Soviet expanse. I do not think that relations will change in any dramatic or positive way. They will merely continue to take their course. Particularly since, if we look at the agreements reached during intergovernmental sittings, we can see that many decisions have not been executed. Incidentally, Russian officials have repeatedly emphasized this… Building positive relations depends not so much on Russia itself as on Kyrgyzstan’s political leadership. At this juncture, it is Kyrgyzstan’s turn to act. Russia has already set the pace and designated its policy in the post-Soviet expanse and in Central Asia. Now the ball is in the court of the Kyrgyz political leadership.” Former Kyrgyz secretary of state I. Abdurazakov, in turn, gave his vision of the further development of relations between the two countries by saying the following: “Relations must be developed on the basis of equality. This sounds all well and good from the legal standpoint, but true equality is extremely hard to achieve in practice. No matter what, however, mutual interests must be kept in mind… Every country pursues its own interests and even though many consider Kyrgyzstan helpless, we should not be regarded as entirely dependent. Our country must continue developing relations with Russia with the understanding that it is to our advantage and we should in no way miss the opportunity to gain all kinds of dividends.” In general, 2008 was not a breakthrough year in the development of Kyrgyz-Russian relations.

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Kyrgyzstan’s relations with the U.S. in the period under review also developed smoothly and steadily, but perhaps less actively than with the Central Asian countries and Russia. If we do not count the routine replacement of the U.S. ambassador to Kyrgyzstan, there were no significant events in bilateral relations. The agenda of Kyrgyz-American relations remained the same. It is still dominated by the same issue—the U.S. airbase at the Manas aerodrome. Deputy Assistant Secretary of State George Krol’s visit to Kyrgyzstan on 19-21 June was devoted to this issue in particular. Several days before his arrival certain Kyrgyz publications began spreading the word that during the talks the American side supposedly intended to ask the Kyrgyz leadership for an additional 300 hectares of land to build new facilities at the airbase. But during the meeting with Kyrgyz Prime Minister I. Chudinov, George Krol said that the U.S. would not raise the question of expanding the airbase but wanted to ask about the possibility of moving the ramps for the antiterrorist coalition’s war planes to a different site in order to ensure the safety of civilian flights into Manas airport. Mr. Chudinov also confirmed the fact that the American side had not asked for an additional 300 hectares of land. And he noted that the country’s government was placing great significance on President Bakiev’s visit to the U.S. scheduled for the fall. He also expressed the hope that the U.S. government would make a positive decision on Kyrgyzstan’s proposal to open its consulate in New York. In response to this, George Krol said that the U.S. was willing to render Kyrgyzstan comprehensive economic assistance to ensure the country’s food safety and fight inflation. We will remind you that not long before George Krol’s visit, Kyrgyz Foreign Minister E. Kara- baev made an important statement about the American airbase at the Manas aerodrome. “The antiterrorist coalition base at the Manas airport meets Kyrgyzstan’s national interests and those of the Cen- tral Asian region as a whole,” he said on 15 May during a visit to the OSCE academy in Bishkek in answer to students’ questions. E. Karabaev also noted that Kyrgyzstan’s foreign policy remains multi-vector and balanced, which is shown by the country’s cooperation both with the OSCE and NATO within the framework of Af- ghanistan’s rehabilitation, and with the CSTO. He said that the presence of two military bases representing two opposing organizations in Kyrgyzstan shows that the country has “its own independent” foreign policy and its priority is to resolve the country’s national interests. When commenting on the development of the situation involving the American airbase, Securi- ty Council ex-secretary M. Niyazov said: “I think that we need to put away our ambitions at the moment and place regional security above all else in the foreign airbase issue… Nor should we forget that participation of the coalition forces in establishing order in Afghanistan is of interest and benefit to all the countries of the region. Maintaining stability and security is equally important for all of us.” Kyrgyz military expert L. Bondarets, in turn, expressed the following viewpoint: “I do not think that this airbase ensures Kyrgyzstan’s security, even if our former and present officials say that it is helping to fight terrorism. There are opinions that the Americans are using their military presence in our country for purposes other than fighting terrorism. The main objective of the U.S. presence in Kyr- gyzstan is to remove our country from China’s and Russia’s sphere of influence.” Against the background of these contradictory expert assessments about certain aspects of Kyr- gyzstan’s cooperation with the U.S. bilateral relations are gradually shifting toward a relatively constructive dialog. Some experts say it is still too early to talk about their full recovery. Much will depend on how firm the Kyrgyz leadership’s stance on the American airbase issue is during the Dush- anbe SCO summit and on President Bakiev’s planned visit to the U.S. There were several events in Kyrgyz-Chinese relations in the first half of 2008 that attracted experts’ attention. On 20 May, President Bakiev received a Chinese parliamentary delegation led by Vice Chairman of China’s National People’s Congress Standing Committee Han Qide. During the meeting, Kurmanbek Bakiev noted that Kyrgyzstan is giving strategic importance to bilateral

250 KYRGYZ REPUBLIC International Affairs cooperation with China. Touching on the development of cooperation in transport communications, Han Qide pointed out the need to develop the China-Kyrgyzstan-Uzbekistan roads and carry out a feasibility study for building the China-Kyrgyzstan-Uzbekistan railroad. The sides discussed issues relating to the development of economic trade cooperation between the two countries, ensuring regional security and stability, the preparations for the Beijing Olympics, and intergovernmental cooperation. During the first half of the year major progress was achieved in implementing the building project of the Chinese-Kyrgyz-Uzbek main railroad. A second sitting of the Kyrgyz-Chinese expert group was held on 25-29 June in Bishkek, the work of which has been stalled for many years. The talks ended in adopting a decision to sign an intergovernmental agreement On the Construc- tion of the Chinese-Kyrgyz-Uzbek Main Railroad and open a representative agency of the PRC Rail Ministry in Bishkek and a representative agency of the Kyrgyz Temir Zholu National Company in Beijing. On the whole, Kyrgyz-Chinese relations in 2008 retained sufficiently high positive dynamics. Several important issues of bilateral relations were pegged for discussion during the Dushanbe SCO summit. The dynamics of relations with European countries did not undergo any significant changes. During the meetings and talks in 2008, Kyrgyzstan mainly raised the question of the European countries stepping up their participation in various projects in the country. A meeting was held on 26 April between Kurmanbek Bakiev and OSCE Secretary General Mark Perren de Brishambo. The Kyrgyz president noted that his country is engaging in broad cooperation with this organization. “Cooperation is developing very successfully in ensuring security, freedom of speech, and economic development. Kyrgyzstan is steadfastly following the principles of democratic development. A sufficiently active and strong civil society has formed in the country. At present, particular attention is being paid to creating as favorable conditions as possible for the development of small and medium business and entrepreneurship in general. Kyrgyzstan is ready to engage in efficient interaction with the OSCE in all areas of cooperation. The OSCE secretary general emphasized in turn that since his last meeting with President Bakiev Kyrgyzstan has achieved immense progress in its development. “The question of constitutional reform has been resolved, parliamentary elections have been successfully held, and conditions have been created for further progress under your leadership. The OSCE is willing to make its contribution to this progress and counts on Kyrgyzstan’s support and assistance in developing the OSCE as a member of the Organization.” On 14 May, Lithuanian Prime Minister Gediminas Kirkilas arrived in Bishkek and held talks with President Bakiev and Prime Minister Chudinov. The main result of the talks was the signing of an agreement on the creation of an intergovernmental commission (IGC) called upon to function permanently to resolve problems in the economic trade sphere, as well as the opening of the Honorable Consulate of the Lithuanian Republic in Kyrgyzstan. We will note that this visit was the first by such a high-ranking official in the history of Kyrgyz- Lithuanian relations. During the talks, Kurmanbek Bakiev emphasized that “the relations between our countries became more dynamic after the Lithuanian foreign minister visited Kyrgyzstan last year. I hope that your official visit today will help to boost the development of bilateral relations and that the agreements that are reached during the talks between the governments of the Kyrgyz Republic and Lithuanian Republic will strengthen the economic, cultural, and educational ties between our countries.” The president also noted that the volume of goods turnover between Kyrgyzstan and Lithuania does not correspond to the current potential. “The most favorable conditions have been created in Kyrgyzstan for conducting business. According to the World Bank, our country has the most attractive investment climate. We are particularly interested in cooperation with the European Union coun-

251 CENTRAL EURASIA 2008 Analytical Annual tries. And we are hoping the Lithuanian side will support us in creating a Hydropower Academy in Bishkek and in holding a high-level international forum on this issue.” The Lithuanian prime minister, in turn, noted the following: “The European Union is paying particular attention to relations with the Central Asian countries. Lithuania is interested in increasing cooperation with Kyrgyzstan in all areas of relations, including in full-fledged realization of the economic trade potential of both countries. I think the Kyrgyz-Lithuanian business forum will provide a good opportunity for a comprehensive exchange of opinions in this area. Gediminas Kirkilas also noted in his speech that the intergovernmental treaty on strengthening and expanding mutually advantageous cooperation between Kyrgyzstan and Lithuania will help to develop mutually advantageous cooperation between the two countries. On 20-22 May, the Kyrgyz prime minister paid a working visit to Latvia and Poland. The talks between I. Chudinov and Latvian Prime Minister I. Godmanis ended in the sides signing an intergovernmental agreement on stimulating and protecting investments between Kyrgyzstan and Latvia. During the first half of 2008, several important personnel changes occurred in Kyrgyzstan’s foreign ministry. Among them experts particularly single out the appointment of a new Kyrgyz ambassador to Russia, R. Attakurov. A corresponding decree was signed by the president on 18 January. Attakurov’s appointment gave rise to a discussion in the Zhogorku Kenesh about his dual citizenship— he also holds a Russian passport. On 16 June, President Bakiev appointed T. Abdraimov as Kyrgyzstan’s ambassador extraordinary and plenipotentiary to Korea. Abdraimov used to hold the post of chairman of the Kyrgyz Cen- tral Election Committee and later he was minister of public health. New ambassadors were also appointed to Turkmenistan (B. Ashirov), Belgium (Zh. Azylov), and Egypt (Zh. Sharipov). In addition, the parliamentary committee for international affairs and interparliamentary cooperation approved the nomination of M. Jamanbaev to the post of ambassador to Japan and S. Zakirov as consul general to Dubai (the United Arab Emirates). Major changes also occurred in the foreign diplomatic corps accredited in Kyrgyzstan. U.S. ambassador Mary Jovanovich, who had been head of the U.S. diplomatic mission in Kyrgyzstan since 2005, was replaced by Tatiana Gfoeller-Volkoff. The ambassadors of Germany, Kazakhstan, Tajikistan, and Ukraine also ended their diplomatic missions in Kyrgyzstan. Foreign political events in the second half of 2008 essentially began with a “Caucasian rupture.” The Russian-Georgian war became a watershed that put all the CIS states, including Kyr- gyzstan, to the test. For the first time, the Central Asian states had to make an independent choice. This was particularly difficult for Bishkek since at that time it was “the operator on duty in the CIS.” The pro-Russian opposition and mass media literally demanded that President Bakiev publicly support Russia. While other opposition members began openly scaring the authorities and society about Moscow’s growing aggression. But Bishkek parried the blows by saying that consultations should be held with partners in different international organizations, including the CIS, CSTO, and SCO. During the Olympic Games in Beijing, the beginning of which coincided with the events in the Caucasus, the Kyrgyz president, who attended the opening ceremony, did not react at all to the beginning of the hostilities in Georgia. This problem was discussed more or less seriously by the presidents of Kyrgyzstan and Kazakhstan during their informal meeting on the shores of Lake Issyk-Kul on 13 August. Two elements of their position were publicly voiced. 1. Condemnation of Georgia’s actions in South Ossetia; 2. The need to observe international law. This gave rise to a third element—justification of Russia’s actions. On 27-28 August, a summit of the SCO member states was held in Dushanbe at which, as expected, the sides were unanimous in their response to the situation in the Caucasus, but not particularly in Russia’s favor. This especially applies to China’s position. The summit’s final declaration did support Moscow but its partners in the organization refused to recognize Abkhazia and South Ossetia.

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Nor did this happen at the sitting of the CSTO Security Council, in which a Kyrgyz delegation led by President Bakiev participated. The most important events in Kyrgyzstan’s political life were the CIS and EurAsEC summits held on 10 October, which were preceded and followed by official visits of the Russian president and Belarusian president on 9 and 11 October, respectively. Bishkek coped quite successfully with these events, without any negative consequences, although there were no positive breakthroughs either. On 17 October, Assistant U.S. Secretary of State for South and Central Asian Affairs Richard A. Boucher visited Bishkek. The Manas airbase was the focus of attention. It was obvious that there was no other serious objective of this last visit of the high-ranking American diplomat before the U.S. presidential election. On 19-21 December, an informal CSTO summit was held in Kokshetau (Kazakhstan), which was noteworthy in particular due to the absence of the president of Uzbekistan. The summit added questions relating to the reformation of several of the Organization’s areas of activity to its agenda.

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REPUBLIC OF MOLDOVA

GENERAL OVERVIEW

Svetlana PYNZAR Master of political science, senior lecturer at the State Institute of International Relations (Chisinau, Republic of Moldova)

n 2008 the Republic of Moldova summarized its European integration accomplishments, analyzed its political, economic, and cultural blunders and foreign policy miscalculations, and learned some I lessons. In 2008 President of Moldova Vladimir Voronin met with president of the unrecognized Transnistrian Republic Igor Smirnov for the first time in seven years. This can be regarded as a breakthrough and a step toward settling the Transnistrian issue. This was the first time after a two- year hiatus that the consultations on this problem within the 5 + 2 format had been resumed. The fact that the republic will go to the polls in 2009 to elect the parliament added special importance to 2008. In March 2008 Prime Minister Vasile Tarlev and his Cabinet resigned. The new Cabinet was headed by Zinaida Greceanîi, the first woman to serve as prime minister in the republic’s history. There are five more women in the Cabinet: Minister of Social Protection, Family and Child Galina Balmoº; Minister of Ecology and Natural Resources Violeta Ivanov; Finance Minister Mariana Durleºteanu, Minister of Education and the Youth Larisa ªavga, and Minister of Health Larisa Catrinici. Throughout 2008 assessments of the results of the republic’s performance within the EU/Moldova Action Plan and its future as well as discussions of the Transnistrian settlement within the 5 + 2 format and the social and economic projects dominated the domestic policy scene. The republic’s leaders agreed that in 2008 European integration, the country’s modernization, preparations for the 2009 parliamentary elections, and reintegration of Moldova should remain high on the list of priorities. The European vector figured prominently in the domestic and foreign policies. Early in 2008 much was done to assess the extent to which the Action Plan, the main promotion instrument of continued democratic reforms, had been fulfilled.

254 REPUBLIC OF MOLDOVA General Overview

Early in April the European Commission submitted its Report on the Action Plan with a positive assessment of the 2007 results; the authors specifically pointed out that the local elections in 2007 went smoothly; it commented positively on the enactment as of 1 January, 2008 of the Agreement on Simplification of the Visa Regime and Readmission and the opening of a Single Visa Center at the Hungarian Embassy in Chisinau. The European Commission also pointed out that Moldova successfully cooperated with the EU and the EUBAM on the Transnistrian settlement issue. The republic preserved its impressive economic growth while its progress in improving the institutional framework was rewarded with Individual Trade Preferences enacted in March 2008. The report, however, pointed out that, the obvious progress notwithstanding, “reforms still remain a challenge,”1 mainly with respect to judicial reform, the anti-corruption struggle, freedom of the press, and a better investment climate. Having completed the first stage of the EU/Moldova Action Plan the country entered a new stage of the highly ambitious European integration plan to be crowned with the Treaty on Associated Mem- bership in the European Union. In March the people of Gagauzia elected their People’s Assembly; the local executive structures chose to interfere to impose a new chairman elected in violation of the legal procedures. This was described as usurpation of the Gagauzia parliament’s power by Mihail Formuzal, the Baºkan of Gagauz- ia. President Voronin described the events as “clashes of personal and clan interests” that should not “affect all the people.”2 Independent deputies and deputies of the Communist Party used the central media to ask the international organizations accredited in Moldova to help resolve the conflict. Members of international organizations visited Comrat on 8 July. Early in August the conflict between the executive and legislative power branches in Gagauz Yeri was resolved. The economic situation was and remains stable. In 2008 the world financial crisis did not reach the republic. According to Minister of Trade and Economics Igor Dodon, “the crisis situation remained under control for two reasons. First, from the very beginning of the world crisis the government and the National Bank of Moldova acted together. Second, there is no risk capital in the republic that might have triggered the crisis.”3 President of the National Bank of Moldova Leonid Tãlmaci has promised: “Moldova will only be slightly affected by the world financial crisis” because the Bank implemented several anti-crisis measures: it increased the required reserves, kept the budget deficit at the zero level, and lowered inflation.4 In 2008 inflation in Moldova remained at the 7.3% level (one of the lowest in Europe); foodstuff prices increased by 6.5%; consumer goods prices by 2%; and communal services grew by 17.5% (the cost of centralized heating increased by 75.9%; water supply by 57.1%; and natural gas by 28.2%).5 Restored winemaking and the resumed wine trade with Russia can be described as positive developments. On 25 July a railway branch between Cahul and Giurgiuleºti that is to connect the country’s south with the sea—an economically important project costing 930 million leis—was commissioned. The year 2008 abounded in social initiatives: wages in all the economic branches, child allowances for poor families and orphans, pensions, and other social benefits were gradually raised.

1 “Est ‘ambitsioznost i osobye sposobnosti,’” Nezavisimaia Moldova, 9 April, 2008. 2 See: “Glava gosudarstva v efire telekanala NIT otvetil na voprosy, kotorye volnuiut vsekh,” Nezavisimaia Moldo- va, 1 July, 2008. 3 A. Ianchev, “Dlia krizisa predposylok net,” Nezavisimaia Moldova, 5 December, 2008. 4 See: Leonid Talmach: “Finansovaia situatsia pod kontrolem,” Nezavisimaia Moldova, 23 October, 2008. 5 See: “Rekordno nizkiy uroven infliatsii (po materialam press-reliza ministerstva ekonomiki i torgovli,” Ekonom- icheskoe obozrenie “Logos-Press,” 16 January, 2009. 255 CENTRAL EURASIA 2008 Analytical Annual

On 29 November the Moldovan lei, the republic’s national currency, turned 15. It passed the test of the time to become one of the attributes of Moldova’s statehood. Later in July the flood on the Dniester and Prut, together with heavy rains, caused inundation of the republic. The catastrophe cost Moldova $120 million; it damaged over 3.3 thousand hectares of agricultural land and 1.5 thousand privately owned hectares despite the non-stop frantic efforts of the republic’s emergency services.6 The authorities of all levels acting together with civil society and foreign partners finally coped with the tragedy. The flood tested the new government, which proved itself equal to the crisis. On the very first day of the flood it set up two national commissions to assess the losses, liquidate the damages, and distribute humanitarian aid. They were empowered to mobilize human resources and equipment. Most analysts and experts are more or less optimistic about the future. European integration will continue (there are plans to negotiate a new agreement on associated membership); the Tran- snistrian conflict will be settled; confidence-building measures with the unrecognized republic will be reinforced; and relations with foreign partners, including international organizations, will be developed. Macroeconomic indices testify that next year economic growth will be 3.6%. According to Director of the EBRD office in Chisinau Libor Krkoska, Moldova will preserve the high level of investments either at the 2008 level7 or even higher. Foreign partners are showing no intentions of folding up their projects.8 Late in 2008 documents on allocating resources to maintain the production level in the republic and stabilize its financial sector, as well as to renovate the Chisinau airport, were signed.

6 See: T. Soroceanu, “Itogi goda: ispytanie prirodoi,” Nezavisimaia Moldova, 26 December, 2008. 7 In 2008 investments amounted to $650 million. 8 See: D. Kalak, “Forum Tsentralno-Evropeiskoi initsiativy: izderzhki formata,” Ekonomicheskoe obozrenie “Log- os- Press,” 19 December, 2008.

POLITICS

Marius TÃRÎÞÃ Junior fellow at the contemporary history sector, Institute of History, State, and Law of the Academy of Sciences of Moldova (Chisinau, Republic of Moldova)

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

hroughout 2008 the parliamentary elections stitutional amendments of July 2000 made the scheduled for 2009 remained the major po- country a parliamentary republic in which the T litical event on the domestic scene: the con- president is elected by the parliament. 256 REPUBLIC OF MOLDOVA Politics

The resignation of Prime Minister Vasile capital Dorin Chirtoacã (chairman of the Liberal Tarlev, who had held this post since April 2001, Party and nephew of its leader Mihai Ghimpu) and was the central political event. Between March members of the Municipal Council. 2008 when he resigned and September he had The opposition was much more critical than not done anything remarkable; late in 2008 he before of the ruling Communist Party of the Re- was elected chairman of the Centrist Union of public of Moldova (CPRM) yet the party went on Moldova. with its program. In March 2008 Zinaida Greceanîi, vice pre- The talks between Moldova and the Tran- mier and finance minister since 26 February snistria were boosted to a certain extent by two 2002, was recommended as a candidate for prime meetings between President of the Republic of minister. The parliament approved both the new Moldova Voronin and President of the unrecog- Cabinet and its program, which the new prime nized Transnistrian Republic Igor Smirnov (April minister presented to it within the time stipulat- and December), as well as the revived consulta- ed by law. tions within the 5 + 2 format and the creation of a In 2008 the republican and Chisinau media new 2 + 1 format (involving the Russian Federa- paid much attention to Mayor of the republic’s tion).

The Government

On 16 January, 2008 Victor Stepaniuc, head of the parliamentary committee for culture, science, education, the youth, and the media, was appointed vice premier. This was the first change in the Cabinet’s personal composition. Prime Minister Tarlev’s resignation stirred up a lot of interest in the fate of the recently appointed vice premier. According to expert assessments, his position in the CPRM party was much shakier than before. He, however, remained in the new Cabinet as its active member responsible for social programs. On 21 March President Voronin recommended Zinaida Greceanîi for the post of prime minister. She had 15 days at her disposal to form a new cabinet able to collect the 52 votes necessary for approval.1 On 27 March the country acquired a new government; on 31 March the parliament approved its personal composition with 55 votes out of the total 101. The new ministers took their oath. The following people preserved their posts in the new Cabinet: Minister of Economy and Trade Igor Dodon, Victor Stepaniuc and Foreign Minister Andrei Stratan, both deputies of the prime minister; Minister of Agriculture and Food Industry Anatolie Gorodenco, Minister of Transport and Roads Vasile Ursu; Minister of Social Protection, Family and Child Galina Balmoº; Minister of Justice Vi- talie Pîrlog; Defense Minister Vitalie Vrabie; Minister of Reintegration Vasile ªova; Minister of Lo- cal Public Administration Valentin Guznac; Minister of Culture and Tourism Artur Cosma, and recently appointed Minister of Ecology and Natural Resources Violeta Ivanov. Mariana Durleºteanu became the newly appointed finance minister; the other new conscripts were: Larisa ªavga (Minister of Education and the Youth); Larisa Catrinici (Health Minister), Valentin Mejinschi (Minister of the Interior), Pavel Buceaþchi (Minister of Information Development), and Vladimir Baldovici, who was entrusted with the newly created Ministry of Construction and Territorial Development. Two other members of the new Cabinet are Baºkan of Gagauzia Mihail Formuzal and head of the Republic’s Academy of Science Gheorghe Duca.

1 See: “Zinaida Greceanîi was Recommended to the Parliament as New Prime Minister,” Moldova Suveranã, 25 March, 2008 (in Moldovan). 257 CENTRAL EURASIA 2008 Analytical Annual

Newly appointed Zinaida Greceanîi announced that she intended to closely cooperate with the press, non-governmental organizations, economic agencies, and other partners. At the first sitting held on 2 April Prime Minister Greceanîi informed her colleagues that the programs of the individual ministries should correspond to the approved Progress and Integration program, a follow-up to the Na- tional Development Plan. She pointed out that the country needed social and economic programs that would embrace the people living on the left bank of the Dniester. On 1 December Minister of Culture and Tourism Artur Cosma was removed from his post—this proved to be the last change in the Cabinet. Significantly, no press conference was convened to offer an official explanation of this move. On the other hand, the opposition regularly accused him of the republic’s passive cultural life. Late in July 2008 the new Cabinet was confronted with a test in the form of a flood that inundat- ed dozens of villages along the Prut and Dniester rivers. The regions of Briceni (in the republic’s northwest), where 185 houses were completely destroyed, and ªtefan-Vodã (in the southeast), which lost 34 houses, suffered more than the rest. On the whole, 1,183 houses were flooded and 7,852 people were evacuated.2 The national army was mobilized; centers were opened across the republic to gather donations. By mid-September the government extended various forms of aid totaling $1 million to the flood victims. By that time a special bank account held about 1 million.3 The government acted promptly, however the opposition criticized the Cabinet for the fairly slow progress and published the names of those who had not received aid. (By late October 2008 new houses had not been commissioned as promised.) The economic crisis and preventive measures were two other concerns of the Cabinet. A team of professionals, including Prime Minister Greceanîi and Minister of Economics and Trade Dodon, carried out successful financial and economic policies: until the late 2008 the world crisis did not affect the domestic financial processes. The congress of the ruling party held on 15 March in the National Palace in Chisinau was an important event: the party adopted a new program which made public its priorities: a social-oriented state with a high level of social standards; a new open innovational economy; efficient multi-level democracy; the state’s higher competitiveness; stable neutrality; territorial integrity; and integration openness.4 In the spring of 2008 Gagauzia elected its People’s Assembly; the CPRM carried the elections but did not obtain enough seats to elect a speaker. After six months of haggling the conflict was finally settled and the CPRM retreated. In 2008 the parliament passed a law relating to the 2009 parliamentary elections. On 10 April, after fairly passive discussions, the deputies passed the law with 63 against 11 votes, which raised the minimum threshold (from 4 to 6 percent) for political parties running for the parliament.5 The law also banned election blocs and alliances among the political parties. Dumitru Diacov, head of the Democratic Party of Moldova, was the only political leader who disagreed with the new law.6 One cannot help but wonder why the factions of the other opposition parties—the Christian-Democratic People’s Party (CDPP) and the Liberal-Democratic Party (LDP)—supported the law: according to public opinion polls they could not hope to receive more than 5 percent.

2 See: “Solidarity Wins,” Moldova Suveranã, 7 August, 2008. 3 See: “The Government will Allocate 14 Million Lei,” Moldova Suveranã, 19 September, 2008. 4 See: “Na nizkom starte,” Puls, 26 December, 2006, p. 4. 5 See: “Election Threshold was Raised from 4 to 6 Percent,” Moldova Suveranã, 11 April, 2008. 6 See: N. Federiuc, “The Parliament Raised the Election Threshold to 6 Percent,” Flux politic, 14 April, 2008 (in Moldovan). 258 REPUBLIC OF MOLDOVA Politics

The parliament paid a lot of attention to the National Security Conception. The previous one adopted in 1995 was no longer adequate. Work on the new conception began as early as 2005, but it remained a draft until May 2008, even though the parliament had discussed it several times. This time Minister for Foreign Affairs and European Integration Andrei Stratan presented the conception. He pointed out that the previous one had lost its legal force while the Individual Partner- ship Action Plan between Moldova and NATO envisaged a new conception for the country. The new document associates the country’s security with European integration and good relations at the bilateral, regional, and multilateral levels; it stresses that the republic should retain its neutrality, a point that invited serious criticism from the opposition. The chapter dealing with the national security threats describes the Transnistrian conflict as the most urgent: the illegal armed formations in the republic help it to preserve its self-proclaimed independence. The country’s energy dependence is another risk. The republic’s gradual demilitarization is to be one of the aims of the National Security Strategy based on the conception. The conception was approved in the first reading by the CPRM, CDPP, DPM, and SDP factions.7 Early in the year the talks between Moldova and Transnistria were stalling; on 7 April, however, quite unexpectedly the presidents talked over the phone; four days later, on 11 April, they met in Tighina (Bendery). They agreed that meetings should become regular and expressed their intention to set up workgroups to build up mutual confidence. President of Transnistria Smirnov for- warded two, seemingly incompatible, suggestions. He invited Moldova to sign a peace treaty between Moldova and Transnistria as two independent subjects and to remove all economic and transportation barriers.8 The next meeting was postponed, mainly by the Transnistrian administration for various reasons; the sides met on 24 December in Tiraspol. During the meeting, which did not last more than two hours, they discussed the possibility of resuming the talks in the 5 + 2 format and agreed that the workgroups engaged in confidence- and security-building measures should demonstrate more vigor. They also discussed the measures needed to open free movement of people and commodities between the two banks of the Dniester. President Voronin pointed out that the problems should be addressed as a single packet.9 It was decided to meet again in March 2009 and continue consultations in the 2 + 1 format, which includes Moldova, Transnistria, and Russia, set up in 2008. Speaking at the last sitting of the Cabinet in 2008 President Voronin pointed out that the government’s Progress and Integration program was being implemented and had created “positive social- economic dynamics.” He called on the Cabinet to continue working on the strategic development programs including gasification, deliveries of fresh water, and modernization of the road infrastructure. He stated his conviction that “European modernization of the Republic of Moldova” should remain an absolute priority.10 In his New Year address to the nation the president dwelt on the government’s future, pointed to the obvious progress toward a social oriented state, spoke about raising pensions and wages, the program for reconstructing old and building new cultural objects, and gasification of the countryside, and expressed his hope that the Transnistrian problem would be resolved in 2009.11

7 See: “The National Security Conception was Adopted in the First Reading,” Moldova Suveranã, 9 May, 2008. 8 See: “Voronin and Smirnov Ordered to Resume Talks,” Flux economic, 14 April, 2008 (in Moldovan). 9 See: “Minister of Reintegration Supplied Detailed Information about the Meeting between Vladimir Voronin and Igor Smirnov,” Moldova Suveranã, 26 December, 2008. 10 See: “European Modernization of the Country Should Remain the Government’s Main Aim,” Moldova Suveranã, 6 January, 2009. 11 See: “New Year Address of the President of the Republic of Moldova Voronin,” Moldova Suveranã, 6 January 2009. 259 CENTRAL EURASIA 2008 Analytical Annual The Opposition

The following parties form the opposition: the Christian-Democratic People’s Party (CDPP, leader I. Roºca), Our Moldova Alliance (OMA, leader S. Urecian); the Liberal-Democratic Party (LDP, leader V. Filat), the Democratic Party of Moldova (DPM, leader D. Diacov), the Social-Liberal Party (SLP, leader O. Serebrian), and the Liberal Party (LP, leader M. Ghimpu). The opposition believes that as an official opposition party, the CDPP is too active in its cooperation with the ruling Communist Party. The CDPP itself believes that it behaves entirely in accordance with the European principles applied to the constructive opposition. Despite the fairly sizable parliamentary opposition, the Communist Party, together with independent deputies, passed most of the laws. In 2008 the Our Moldova Alliance and the Liberal-Dem- ocratic Party were highly critical of most of the draft laws submitted to parliament. Their voices are clearly heard in society but not in parliament for two reasons: first, they occupy the second and third lines in the sociological polls and second, they run newspapers with considerable circulations in which they can offer their opinions. The opposition criticized each of the government’s steps, ranging from Prime Minister Tarlev’s failure to come to parliament to announce his resignation to violations of freedom of the press, the malfunctioning judicial system, the vague prospects for the republic’s European integration, and the stalling relations with Rumania. The opposition voiced its displeasure about the law that banned multiple citizenship. A. Tãnase and D. Chirtoacã went to the European Human Rights Court, which on 18 November, 2008 ruled on the case Tãnase and Chirtoacã versus Moldova that the government of Moldova should, within three months, revise the law that prohibited people with multiple citizenship from occupying official posts.12 The parliament adopted, without long discussions, the law that established a threshold of 6 percent for the parties running for parliament. D. Diacov, head of the Democratic Party of Moldova, was the only one dead set against the law and argued that it would be unfair to transfer the votes cast for the parties that remained below the required threshold to the larger parties that negotiated it. He described this legal norm as unfair but his plea fell on deaf ears. The draft of the National Security Conception invited critical fire from the opposition. The Our Moldova Alliance and its leader Serafim Urecian, together with several independent deputies, demanded that the republic annul its permanent neutrality status and join NATO. He also insisted that the presence of armed formations in Transnistria be described in the Conception as “the Transnistrian region occupied by Russian troops.”13 In 2008 the opposition parties rarely agreed among themselves on any issue. On 4 April, 2008 President Voronin entered the fourth year of his second term as the republic’s head. Three years earlier he was supported by the DPM, SLP, and CDPP. The vote destroyed the coalition of the former two with the Our Moldova Alliance; LDP leader V. Filat (the party had detached itself from the DPM) announced that “the democratic principles have been forgotten” with the help of the CDPP and that “today the parliament is a voting machine while the government acts according to the president’s command.”14 D. Diacov and O. Serebrian likewise stated that they regretted the historic voting of 4 April, 2005. The DPM and the SLP were negotiating a merger but the details never reached the public. Oleg Serebrian was appointed DPM Vice Chairman. On 18 December D. Diacov organized a press confer-

12 See: “Torg neumesten,” Puls, 19 December, 2009, p. 7. 13 “The National Security Conception was Adopted in the First Reading,” Moldova Suveranã, 9 May, 2008. 14 “On 4 April, 2005 the minds were greatly impressed with the West,” Flux, 11 April, 2008, p. 9 (in Moldovan). 260 REPUBLIC OF MOLDOVA Politics ence at which he presented a DPM shadow cabinet.15 Valeriu Bulgari, who in the 1990s filled the post of minister of agriculture, was given the post of shadow prime minister; O. Serebrian was appointed shadow foreign minister. On 29 September the republic saw Vasile Tarlev return to big politics as chairman of the Cen- trist Union of Moldova; this unexpected move triggered a barrage of criticism in the press (the pro- government newspapers were especially active). The Ministry of Justice of the Republic of Moldova made use of a technical error to refuse to accept the appointment as valid. On 13 December the Cen- trist Union of Moldova gathered for its fifth special congress to elect Tarlev with a large majority; the deputies also adopted a social-oriented election program. The opposition was highly negative about the 2 + 1 format; the CDPP was very skeptical of it in general. The LDP, OMA, and DPM likewise criticized the format and argued that without intermediaries Russia would impose crippling conditions on Moldova such as the continued stationing of Rus- sian troops in the region, the confederative status for the self-proclaimed republic, and some other factors that would slow down the country’s progress toward European integration.

The Non-Governmental Sector and the Press

The non-governmental sector is fairly large and diverse. According to official data supplied by the Ministry of Justice there are over 3,500 registered NGOs in the republic. The expert community believes that at least half of them are idling and exist only on paper. Most NGOs are based in the capital and large cities. Many of them are engaged in research and political comments. The Institute for the Develop- ment and Social Initiatives Viitovul (IDSI Viitovul) and the Institute for Public Policy known far beyond the republic are the two most active structures, supplying almost every politically, socially, and economically important event with their comments. IDSI Viitovul expert Veaceslav Ioniþã did not expect considerable Cabinet reshuffling under the new prime minister and hoped that it would consist of competent technocrats. Executive Director of the Institute for Public Policy Arcadie Barbãroºie was very skeptical about the new government and the legacy it inherited from its predecessor. He also pointed out that the one year remaining until the parliamentary elections was not enough to bring radical improvements and predicted that it would be hard to cope with the shortcomings in the judicial sphere and anti-corruption struggle.16 Experts are very critical about domestic policy because objective progress is impossible without real changes for the better in the judicial sphere and freedom of the press. It should be said that the expert community offers much more specific, constructive, and well-substantiated criticism than the opposition. They are convinced that European integration depends on the changes expected from the parliament and the government. Late in 2008 some organizations began maintaining that the republic should join NATO in order to achieve internal modernization and embark on the road of European development. Those who promoted the idea pointed to the Baltic republics that had joined NATO before being admitted into the European Union. These people seemed to forget that not all EU members belong to NATO (Sweden, Finland, and Austria being pertinent examples).

15 See: “Kakoe budushchee Moldovy,” Puls, 19 December, 2009, p. 8. 16 See: A. Luca, “Skepticism in Relation to the New Government,” Flux economic, 31 March, 2008, p. 2. 261 CENTRAL EURASIA 2008 Analytical Annual

On the whole the NGOs are less critical of the central government than the opposition: not involved in the political struggle they can be more objective. Their criticism is invariably accompanied by specific recommendations. The press can be divided into three groups. The first consists of the publications that remain on the side of the government, the most important of them being Moldova Suveranã (4 issues a week), Nezavisimaia Moldova (4 issues a week), the Kommunist and Puls weeklies, and Kishinevskie novosti (twice a week). They all carry a lot of information and polemize with the opposition. The second group consists of newspapers that are critical of the ruling party and the government, the most popular among them being: Timpul de dimineaþã (5 issues a week), Jurnal de Chiºinãu (3 times a week), and Moldavskie vedomosti (twice a week). They never inform their readers about the achievements of the ruling Comminist Party, which can be described as their great shortcoming. The Literatura ºi Arta weekly of the Union of Writers of Moldova, which is very critical of the CPRM’s and CDPP’s cultural policies and favors drawing closer to Rumania, also belongs to the second group. It carries a lot of material about Rumanian history and language. The third group consists of newspapers with no clear political position: they have set themselves the task of being objective. Such is the Sãptãmîna weekly, which gives space to those who side with the government and those who criticize it. The Vremia newspaper can be described as pro-Russian; Kishinevskiy obozrevatel concentrates on the country’s socioeconomic life; Ekonomicheskoe obozrenie “Logos-press,” which offers socially and economically important information, is generally considered a serious and objective newspaper. The silent march of over 100 journalists (Moldavskie vedomosti counted about 200) from the press and electronic media held on 8 May in Chisinau was one of the most prominent events. The journalists marched in silence from the House of the Press on Pushkin Street to the parliament in the Stefan cel Mare Street carrying slogans of “Transparency” and “Freedom.” In this way the journalist community protested against the economic conditions that do not allow the press to freely develop and against the absence of a law on the press.17

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

In 2008 the new Cabinet and central government remained resolved to go along the previously chartered road. This was possible for several reasons. n First, the CPRM parliamentary majority allowed it to pass decisions without cooperating with other factions; n second, the opposition parties were more inclined to confrontation than to cooperation. The government is determined to follow the modernization and Europeanization course in the future. The Cabinet pursued correct financial policies and the parliament adopted several important laws, including the National Security Conception, the Education Code, etc. The floods that hit the country late in July 2008 tested the Cabinet, which it passed with flying colors. No tangible results were achieved in the talks between Chisinau and Tiraspol; the two meetings between President Voronin and President Smirnov of the unrecognized Transnistrian Republic will bear fruit in 2009.

17 See: L. Gorokhov, “V Kishineve proshel marsh solidarnosti shurnalistov,” Moldavskie vedomosti, 9 May, 2008. 262 REPUBLIC OF MOLDOVA Economy

The NGOs that occupy pro-European positions did their best to remain objective, however their comments passed unnoticed in society; they produced no impact on the ruling party. The press remained disunited, passive, and for a variety of reasons unobjective. Those newspapers that sided with the government carried enough facts while the opposition press was too critical; it also favored NATO membership for the republic and carried numerous articles that criticized the constitutional proposi- tion regarding the country’s permanent neutrality.

ECONOMY

Lyudmila GOLOVATAYA D.Sc. (Econ.), associate professor at the Moldovan State Institute of International Relations (Chisinau, Moldova)

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

n 2008, both the international and domestic inflation rate in Eastern Europe of 7.3%. All the developments were by no means easy for state’s internal and external debt obligations were I Moldova. It is enough to recall the conse- met, and the funds currently available on accounts quences of the 2007 catastrophic drought, the im- allowed the government to maintain budget stabil- ported food price inflation, skyrocketing prices for ity and meet its financial commitments. Russian energy, the summer floods and, finally, the The past year was also a year of further world financial crisis. However, Moldova managed strengthening of ties and cooperation between the to meet all the challenges. According to the 2008 Republic of Moldova and the European Union. year-end results, its economy grew by 7.5% com- Introduction of the Autonomous Trade Preferenc- pared to the previous year. The primary sources of es opened the way to more Moldovan exports. growth were agriculture, retail trade, and net taxes Moldova has become EU’s partner in the pilot on goods, including merchandise imports. In addi- project of Mobility Partnership. tion, for the second successive year both consum- All the past year’s economic indicators and er and investment demand have been growing impressive achievements represent a solid back- along with foreign direct investment volumes. On ground enabling Moldova to push its way forward top of that, in 2008 Moldova registered the lowest to a flexible and competitive economy.

Major Macroeconomic Parameters of 2008

Being an integral part of Europe, the Republic of Moldova has a rich and remarkable history. The country is located in the contact zone of various cultural and historical trends and over time it has

263 CENTRAL EURASIA 2008 Analytical Annual developed its own specific and unparalleled features. Located between the Prut and Dniester rivers, Moldova occupies a relatively small (less than 34,000 sq. km) but well-developed territory. With its average population of 3.57 million people (urban—1.47 million and rural—2.09 million, excluding the residents of Transnistria and the Bender municipality), Moldova has the highest population density (105 people per 1 sq. km) among all the republics of the former U.S.S.R., which makes human and agricultural resources the basis of the state’s economic potential. Moldova relates to those post-Soviet countries where systemic reforms were focused from the very beginning on the liberal model and the “shock therapy” scenario. At the active stages of its reforms the Moldovan government was guided by the directives of its major sponsors – the IMF and the World Bank. In the 1990s, Moldova (as well as Ukraine, Azerbaijan, Georgia, and Tajikistan) went through the greatest economic recession, which cut its GDP by 60%. The country’s economic growth began as late as 2000. As a result, in 2008, Moldova’s overall GDP in current prices amounted to only $6.5 billion and its GDP per capita to about $1,694 making Moldova one of the poorest countries in Europe. The previous year’s macroeconomic parameters look as follows: the gross value added in merchandise production advanced by 14.7% against the 2007 figures, contributing to a 3.6% increase in the GDP. This growth was driven by a considerable (35.2% year-on-year) increment in the gross value added in agricultural production; however, in industry this parameter rose quite insignificantly, by only 0.3% compared to 2007. The gross value added in services also went up (3.8%), which contributed to 2.3% GDP growth. Revenues from domestically produced goods and merchandise imports exceeded last year’s figures by 9.2%, accounting for 18.8% of the GDP. Gross investment in long-term assets went up 1.8% compared to the previous year, holding a substantial share of the GDP (34.1%), which increased by 0.6%. The evolution of the gross domestic product in terms of expenditure was mainly driven by augmented final consumption (4.6%) compared to last year’s parameters. It contributed to 5.2% GDP growth.

Figure 1 Gross State Budget Revenue Evolution (in million Moldovan lei)

14,000 12,344 13,996 12,000

9,568 10,000 7,764 8,000

5,534 6,000 4,573 3,302 4,000 2,775

2,000

0 2001 2002 2003 2004 2005 2006 2007 2008

264 REPUBLIC OF MOLDOVA Economy

Curiously enough, in recent years final consumption has exceeded the actual GDP due to a foreign trade imbalance toward imports. The said imbalance was accompanied by decreasing gross savings—both relative and absolute. This situation was also made possible due to permanent net cash inflows from the outside. These cash inflows would primarily include external borrowings and remittances made by Moldovan citizens employed abroad. According to the 2008 year-end results, the republic’s gross state budget revenues grew by 13.4% to 13,996 million Moldovan lei (MDL), representing a 1.9% rise compared to the originally adopted target plan. The rectified annual target plan was over-fulfilled by MDL 259 million. The overall 2008 state budget revenues exceeded last year’s parameters by MDL 1,652 million. According to Moldova’s Finance Ministry, the gross state budget revenues increased fivefold over the last seven years. In 2001, they were estimated at MDL 2,775 million. In 2008, the revenues controlled by tax inspections grew by 11.1% compared to 2007, while those controlled by the Customs Service—by 17.3%. The daily amount of funds transferred to the state budget in 2008 averaged MDL 54.5 million compared to MDL 49.0 million in 2007. The year 2008 witnessed positive dynamics of the savings registered by the National Social Insur- ance Office and the National Medical Insurance Company. For instance, social expenditures of the Na- tional Public Budget in 2000-2008 increased 5.6-fold—from MDL 2,893 million to MDL 16,292 million. The most substantial growth was registered in public health service expenditures—7-fold; education expenditures—7-fold; expenditures on culture, art, sports, and youth actions—approximately 6-fold; and expenditures on insurance, household social assistance, and support—4.7-fold, from MDL 1.6 billion to MDL 7.5 billion. Figure 2 2008 Gross State Budget Revenue Growth compared to 2007 (in million Moldovan lei, recorded on an accrual basis)

1,800 1,652 1,534 1,600

1,400 1,307 1,337

1,200 1,254 987 1,000 1,083

800

600 401 400 514 145 200 77 –52 0 Q1 –200 Q3 May July 2008 April period August January October February year-end November 1st half-year

265 CENTRAL EURASIA 2008 Analytical Annual

Another positive development in 2008 was the preservation of stability in Moldova’s banking sector. During the previous year, due to the increase in the assets and the loan portfolio the capitalization of banking institutions in Moldova substantially increased (by 26.8%) compared to the 2007 figures. In 2008, average rates on loans and deposits to customers were raised, and liquidity remained at a rather high level, in particular during the last 4 months of the year. As of 31 December, the current liquidity of Moldovan banks composed 30.6%, exceeding the caution requirements by at least 20%. In the past year, current liquidity increased by 1.5 percentage points, while shareholders’ equity grew by 26.8%. The official reserve assets increased by $338.72 million, or by 25.4%— from $1,333.69 million as of 31 December, 2007 to $1,672.41 million as of 31 December, 2008.

Sectoral and Regional Structure of the Moldovan Economy (Annual Trends) Agriculture

According to preliminary estimates, the agriculture gross output in all categories of Moldova’s farms grew by 31.9% against the 2007 figures in comparable prices and totaled MDL 16.4 billion in Figure 3 Agriculture Output Indices in 2001-2008 (%)

135 131.9 130 125 120.8 120 116.0 116.3 114.7 115 110.1 110 106.4 115.0 105

% 106.4 95.2 98.9 100 103.4 100.8 88.2 95 90 85 86.4 80

75 76.9 70 2001 2002 2003 2004 2005 2006 2007 2008

Agriculture Output Index (2000 = 100) Agriculture Output Index (previous year = 100)

266 REPUBLIC OF MOLDOVA Economy current prices. This growth resulted from a considerable increase in crop production, which rose by 69.0%, while livestock products decreased by 19.6% compared to 2007.

Table 1 Manufacture of Main Agricultural Products at Farms of All Categories

Production impact Agriculture Production, on growth (+), output in 2008,* thou. tons reduction (–) of in % of: agriculture gross output in 2008 2006 2007 2008** 2006 2007 compared to 2007,* %

Agriculture gross output: — — — 101.4 131.9 31.9

Crop production — — — 112.2 169.0 40.1

Crops and legumes—total*** 2,290 902 3,160 137.6 in 3.5-fold 23.4

of which: Wheat*** 692 406 1,286 185.9 in 3.2-fold 9.8

Grain corn 1,322 363 1,471 114.4 in 4.1-fold 9.9

Sunflower*** 380 156 371 97.2 in 2.4-fold 5.3

Sugar beet*** 1,177 612 919 78.1 150.2 1.1

Tobacco 5 4 4 77.9 104.0 0.0

Soya beans 80 40 57 71.7 143.8 0.4

Potatoes 377 199 270 71.7 135.5 1.6

Vegetables—total 475 222 376 80.2 166.0 3.3

Fruit, nuts, berries—total 329 277 367 110.8 138.1 1.5

Grapes 466 598 635 136.5 106.5 1.3

Livestock farming — — — 79.3 80.4 –8.2

Cattle and poultry (live weight) 139 141 108 77.0 75.1 –5.5

Milk 628 604 542 87.4 90.5 –1.3

Eggs (one million pieces) 765 704 541 71.3 –1.3

* Based on agriculture gross output calculations in comparable prices of 2005. ** According to preliminary estimates. *** Weight after updating.

267 CENTRAL EURASIA 2008 Analytical Annual

When analyzing the extent of the influence of the manufacture of various agricultural goods on the gross output in 2008 (compared to 2007) we came to the conclusion that the most essential positive impact was rendered by the increase in the production of crops and legumes (3.5-fold), sunflower (2.4-fold) and vegetables (by 66.0%) which contributed to an increase in agricultural output by 23.4%, 5.3% and 3.3%, respectively. According to the 2008 year-end results, the share of crop production in gross agriculture output amounted to 74.4% (in 2007—58.1%), with crops and legumes making up 25.0% (9.5%), technical crops—12.3% (8.1%), potatoes, vegetables, watermelons, melons, and gourds—12.4% (10.7%), and fruit and grapes—20.4% (24.3%). Livestock farming accounted for 25.6% (in 2007—41.9%), with cattle and poultry making up 12.6% (22.1%), milk— 9.1% (13.3%), and eggs—3.1% (5.3%). The decline in livestock farming and its share in the total agricultural output (compared to the previous year) was stipulated by the significant decrease in the cattle population in Q3 and Q4 of 2007 and in the first six months of 2008 as a result of Moldova’s severe 2007 drought.

Industry

According to the National Bureau of Statistics, the enterprises and organizations of all types of ownership in January-December 2008 manufactured products totaling MDL 29,654.62 thousand in

Table 2 Basic Parameters of Moldova’s Industrial Production* % production index, % January-December 2007 in comparable prices, in comparable prices**, % Indices of industrial prices in comparable prices***, % in January-December 2008 to January-December 2007 in current prices, million lei Influence of production cost Share in the total production Cost of industrial production to the relevant period of 2006 cost from the beginning of 2008 growth/reduction on the general

Industry—Total 29,654.6 100.7 100.0 +0.7 97.3

Mining industry 479.2 98.1 1.7 –0.0 103.6

Processing industry 19,286.9 100.9 87.7 +0.8 96.7

Production and use of electric and thermal energy 2,816.2 99.4 10.5 –0.1 101.9

* The data do not include Transnistria and Bendery municipality figures. ** At 2007 average prices. *** At 2006 average prices.

268 REPUBLIC OF MOLDOVA Economy current prices. The index of the industrial production volume compared to January-December 2007 constituted 100.7% (in comparable prices). The industrial output increase was caused by a 10.4% growth in the production volume of food and beverages. They accounted for 43.1% of the total industrial output, which resulted in a 4.1% growth. The overall industrial output was primarily influenced by the growth in the following industrial branches: wine production—by 26.0% (its 9.6% share in the total industrial output contributed to a 2.0% industrial increase); sugar production—by 80% (its 4.4% share in the total industrial output contributed to a 2.0% industrial increase); manufacture of dairy products—by 6.0% (share—4.6%, growth—0.3%); manufacture of bread and bakery products—by 7.1% (share— 3.5%, growth—0.2%); chemical sector—by 15.4% (share—1.3%, growth—0.2%); manufacture, processing, and conservation of meat and meat products—by 6.2% (share—2.5%, growth—0.1%); production of strong alcoholic beverages—by 6.2% (share—2.5%, growth—0.1%); production of cocoa, chocolate, caramels—by 7.9% (share—1.9%, growth—0.1%); manufacture of furniture—by 8.0% (share—1.5%, growth—0.1%); processing of leather—by 33.0% (share—0.2%, growth—0.1%); metallurgical branch—by 30.5% (share—0.5%, growth—0.1%), etc. An increase in industrial output was also observed in the following areas: flour-milling production—24.7% growth; manufacture of paint and varnish materials (12.2%); stone working (16%); processing of wood and wood product manufacturing (13.4%); manufacture of medicines and pharmaceutical products (9.5%), etc. At the same time, the year 2008 survived a reduction in production volumes in the following industrial branches: manufacture of clothes (14.9%); paper and cardboard (29.3%); production of beer (18.7%); manufacture of products from concrete, plaster, and cement (12.5%); processing and conservation of fruit and vegetables (3.2%); tobacco products (15.8%); textile products (8.8%); vegetable oil and fats (1.6%); manufacture of glass and glass products (2.6%); agricultural machinery (13.2%); power sector (0.6%), etc.

Transport and Transportation Services

In 2008, all types of Moldovan transportation agencies carried 16,163.700 tons of cargoes, which resulted in a 4.8% decline compared to the 2007 figures. The reduction in cargo transportation in 2008 comprises the following parameters: transportation by railway (–7.2%), air (–17.0%), and motor transport (–0.1%), while cargo deliveries by water transport increased by 21.3%. As for overall freight turnover, it decreased by 1.1% compared to 2007. Railway transportation turnover declined by 7.8% and air transportation by 7.5%. At the same time, freight turnover in motor and water transport increased by 10.7% and 24.1%, respectively. Motor transport enterprises carried 4,963.200 tons of goods, which is only 0.1% less than the previous year. Railway transportation companies carried 10,997.700 tons of cargoes, which resulted in a 7.2% decline compared to last year’s figures. The main groups of products carried by this type of transport included: cement and other building materials (48.7%), hardware and scrap metals (20.8%), grain and flour-grinding products (10.5%). In contrast to 2007, the year 2008 showed an increase in passenger transportation by buses and minibuses (+6.4%) and by air transport (+14.1%), while in water transport there was an 11.9% drop.

Construction

In the past year, building organizations of various types of ownership accomplished civil and erection works totaling MDL 5,963.6 million (in current prices), which accounted for 91.1% (in compa-

269 CENTRAL EURASIA 2008 Analytical Annual rable prices) of the 2007 level. The larger part of the works included the construction of new buildings and facilities and reconstruction and expansion of existing enterprises. Their cost was MDL 4,364.1 million, and they accounted for 73.2% of the total accomplished works. The share of overhaul and rebuilding works was 26.8% of the total volume of works. The main portion of works was accomplished by private companies (MDL 4,800.9 million or 81%). Interestingly enough, 75% of all the civil and erection works were carried out in the Moldovan capital.

Foreign Economic Relations

The Republic of Moldova performs its foreign trade activities in full conformity with the goals and objectives of its national economic policy. In doing so, the republic has been applying various foreign trade policy instruments. In particular, they include tax, budgetary, banking, and currency regulations intended to promote (or restrict, if required) foreign trade operations and protect the national economy. Moldova’s foreign trade activities are governed by the following laws: the 1990 Law on Regu- lating the Import and Export of Goods and Services and the 1992 Law on the Main Principles of For- eign Trade Activities in the Republic of Moldova. As a result of that, Moldova’s foreign economic relations have started to recover, which provides for intensive movement of merchandise exports, imports, services, and capital. In fact, external relations (in particular business links) are extremely important for the Moldovan economy. The export quota (ratio of exports to GDP) is about 26.4%, and the import quota—81%. Figure 4 Foreign Trade Development Trends

5,500 4,898.9

4,500 3,689.5

3,500 2,693.2

2,500 1,341.7 1,597.3 1,051.6 776.4 1,500 471.5 $ million 500 –304.9 –1,500 –1,641.6 –2,347.8 –2,500 –3,301.6 –3,500 2000 2006 2007 2008

Exports Imports Trade balance

270 REPUBLIC OF MOLDOVA Economy

According to the 2008 year-end results, Moldova’s foreign trade activities could be described as follows: in the past year, Moldovan exports increased by 19%—up to $1,597.3 million, while imports grew by 32.8%—up to $4,898.9 million. The volume of goods imported into Moldova from the EU states grew by 25.2% and amounted to $2,105.4 million, accounting for 43.0% of the overall imports (45.6% in 2007). Products imported from the CIS countries amounted to $1,737.2 million, which is 30.3% up compared to the 2007 figures, accounting for 35.5% of the overall imports (36.1% in 2007). According to the data available, the republic’s trade balance deficit reached $3,301.6 million, which is $953.8 million (40.6%) higher than the figures registered in 2007. In trade with the EU countries, the trade balance deficit amounted to $1,285.3 million (in 2007—$1,001.7 million), and with the CIS countries to $1,109.3 million (in 2007—$783.5 million). Over the period under examination, Moldova’s imports overshadowed its exports by 32.6% (in 2007— by 36.4%).

Table 3 Moldova’s Merchandise Trade Balance

The extent of country groups’ Structure, impact on growth 2008 % (+), reduction (–) in exports and imports, %

$ Million % of 2007 2007 2008 2007 2008

EXPORTS—total 1,597.3 119.0 100.0 100.0 27.6 19.0

of which: EU countries 820.1 120.7 50.6 51.4 13.5 10.5

CIS countries 627.9 114.1 41.0 39.3 12.0 5.8

Other countries 149.3 133.0 8.4 9.3 2.1 2.7

IMPORTS—total 4,898.9 132.8 100.0 100.0 37.0 32.8

of which: EU countries 2,105.4 125.2 45.6 43.0 17.2 11.5

CIS countries 1,737.2 130.3 36.1 35.5 11.6 10.9

Other countries 1,056.3 156.5 18.3 21.5 8.2 10.4

TRADE BALANCE—total –3,301.6 140.6 100.0 100.0 — —

of which: EU countries –1,285.3 128.3 42.7 38.9 — —

CIS countries –1,109.3 141.6 33.4 33.6 — —

Other countries –907.0 161.2 23.9 27.5 — —

271 CENTRAL EURASIA 2008 Analytical Annual

Figure 5 Moldova’s Trade Deficit— Monthly Evolution

I II III IV V VI VII VIII IX X XI XII 0

–20.9 –16.3 –16.7 –22.6 –22.6 –20.2 –50 –30.2 –25.8 –27.5 –26.0 –29.3 –46.8 –92.9 –73.7 –100 –119.8 –132.7 –133.0 –123.4 –134.8 –141.4 –150.2 –147.2 –150 –140.7 –172.8 –163.4 $ million –194.0 –168.1 –200 –181.0 –180.2 –185.2 –181.1 –193.3 –229.0 –206.0 –207.1 –226.1 –250 –269.3 –247.0 –283.5 –286.5 –290.1 –279.1 –268.3 –300 –278.1 –285.1 –299.9 –313.1 –313.9 –350

2000 2006 2007 2008

The Republic of Moldova has been a full WTO member since 2001. WTO membership has allowed the republic to expand its foreign trade activities and apply international standards in its domestic manufacturing process. As a WTO member, Moldova has to comply with WTO requirements in various fields, including trade and tax policy, and to adhere to the provisions and regulations issued by the customs authorities. Moldova’s successful participation in multilateral negotiations within the WTO, the agreement with the EU on the preferential trade regime encouraging the creation and participation of the country in the regional free trade exchange area with participating states to the Sta- bility Pact for South Eastern Europe had a positive impact on national export promotion. The Repub- lic of Moldova has a liberal trade regime. So far Moldova has signed Free Trade Agreements with CIS member states and with some countries of Eastern Europe, such as Rumania, Croatia, Serbia, Mace- donia, Bosnia-Herzegovina, Albania, and Bulgaria. In addition to that, Moldova has been granted access to the EU’s Generalized System of Preferences (GSP+), and it has taken advantage of the trade preferences provided by such countries as the U.S. and Japan. However, Moldova still appears unable to solve its problems with its external trade imbalance. In 2008, Moldova’s external trade accounted for about 24.5% of the republic’s exports and 75.5% of its imports. However, Moldova’s foreign trade geography is quite diverse: its exports, as well as imports, have been diversified among many countries. In Moldova’s export pattern the biggest share (about 40%) is occupied by agri-business goods. They are followed by light industry products (about 20%) and products of other branches of Moldovan

272 REPUBLIC OF MOLDOVA Economy economy (their delivery volumes are rather insignificant though). Moldova’s imports are dominated by the goods which maintain normal functioning of the entire economy (raw materials, energy resources), as well as by consumer products. Speaking of Moldova’s economic partners, we should mention Rumania and Russia as its main business counterparts. In the previous year Rumania accounted for 21% of Moldova’s exports and 12% of its imports. The second largest foreign partner was Russia with 20% of Moldova’s exports and 13.6% of its imports, though from the 1990s until the present time Russia’s role has been continuous- ly declining as Moldova refocuses its trade and other links toward Western countries and its nearest neighbors—Rumania and Ukraine. On the other hand, Moldovan products, such as wine, fruit, canned food, not to mention more complex items, have been steadily ousted from the Russian market, being unable to defy competition with similar goods produced by other countries.

Investment Activities

At this point, one of the primary goals of the Moldovan government is to attract investments and create a favorable business climate for all investors—both foreign and local. In this connection, the Moldovan authorities are taking all the necessary measures to stimulate entrepreneurial activities and improve the investment environment by emphasizing the positive factors, such as the country’s favorable geographical location, qualified labor, fertile soil, and Moldova’s participation in the free trade area of the CIS countries and the countries of Southeast Europe, as well as a number of other aspects. As of today, the volume of investments attracted into the free economic areas has exceeded $76 million. In addition to that, the Giurgiuleºti International Free Port, which is currently under construction, is also quite attractive for investments. The current national tax laws provide for a number of investment privileges for the payment of personal income tax, value added tax (VAT), and excises and customs duties. In 2008, about MDL 17,710 million were invested in equity by Moldovan enterprises and organizations from various finance sources. This is 0.4% more than in 2007 (in comparable prices). According to the National Bureau of Statistics, 25.7% of fixed capital investments were made by public enterprises, while 74.3% of fixed capital investments accounted for non-state economic

Table 4 Main Indicators of Investment Activity and Their Dynamics

2008

Invested, in % of: million lei 2007 Total

Fixed capital investments—total 17,710.3 100.4 100.0

of which: For construction and assembly works 10,148.0 100.4 57.3

For housing construction 3,382.7 105.0 19.1

273 CENTRAL EURASIA 2008 Analytical Annual

Table 5 Fixed Capital Investments by Form of Ownership

2008

Invested, in % of: million lei 2007 Total

Fixed capital investments—total 17,710.3 100.4 100.0 of which by form of ownership: Public 4,551.5 102.2 25.7

Private 7,190.4 97.8 40.6

Mixed (public and private) 265.7 75.5 1.5

Foreign 2,337.8 106.4 13.2

Joint Ventures 3,364.9 102.5 19.0 entities. About 70% of the investments made by non-state economic entities accounted for construction and assembly works and 82% for housing construction. During the period under examination, enterprises’ own funds and household funds (51.3%) and foreign investments (18.4%) were the main sources for investment activities. The state budget accounted for 14.6% of the total amount of fixed capital investments.

Table 6 Fixed Capital Investments by Sources of Financing

2008

Invested, in % of: million lei 2007 Total

Fixed capital investments—total 17,710.3 100.4 100.0

of which financed from: State budget 2,019.0 109.2 11.4

Administrative and territorial unit budgets 566.7 119.2 3.2

Own funds of enterprises 9,085.4 102.4 51.3

Foreign investor funds 3,258.7 91.6 18.4

Other sources 2,780.5 96.2 15.7

274 REPUBLIC OF MOLDOVA Economy

Table 7 Fixed Capital Investments by Separate Industrial Activities

Invested, In % of the total 2007 in % of million lei amount the total amount

Fixed capital investments—total 17,710.3 100.0 100.0

of which: Residential houses 3,382.7 19.1 18.3

Non-residential buildings and structures 5,614.2 31.7 30.6

Machinery and equipment 5,260.0 29.7 29.2

Transportation vehicles 1,275.1 7.2 8.7

Others 2,178.3 12.3 13.2

The data reflected in the tables show that the biggest portion of funds invested in the national economy (50.8%) was appropriated for the construction of buildings and structures. From this amount, 19.1% was assigned to residential construction, which exceeded the previous year’s parameters by 1.9 percentage points (the share of investments in the construction of residential buildings grew by 0.8 percentage points). At the same time, the investments designed for the acquisition of machinery and equipment accounted for 36.9% of all the investments made, which is by one percentage point less compared to the 2007 figure.

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

Now it can be said for sure that our country is on the right track. This is evidenced not only by the minimal inflation rate, but also by the fact that the Moldovan authorities have managed to adequately respond to the challenges of the world financial crisis. First of all, the year 2008 was a year of socially targeted initiatives: in particular, it was decided to gradually increase salaries in all the economy sectors and raise social payments both for the children from needy families and for young children deprived of parental care. Secondly, the previous year became the Year of the Youth. Its “final chord” was the opening of the Republican Center for Children and Youth. Thirdly, the Code on Education was adopted in Moldova. By adopting this Code, our state has successfully accomplished the first stage of the European Union-Moldova Action Plan, which simultaneously became the starting point of a new plan—its ultimate goal is the signing of the European Union-Moldova Associated Membership Agreement. The troubles our country had to deal with in 2008 are also worth mentioning. The severe summer floods appeared to be a real challenge for Moldova’s national economy. However, by combining

275 CENTRAL EURASIA 2008 Analytical Annual all its efforts, the republic proved its ability to overcome the difficulties with dignity, as was the case after the 2007 drought. Subsequently, quite a rich harvest was gathered in Moldova in 2008. Despite certain difficulties with market outlets and the global financial and economic crisis notwithstanding, which affected most countries all over the world, practically all the economic parameters of the republic showed strong preconditions for growth. The year 2008 also saw a sweeping advance of investments in the Moldovan economy (in 2000, their level was hardly higher than 200 million lei). Importantly enough, at this point the state has no arrears on salaries, pensions, and other social benefits. In 2008, the most significant events from the point of view of Moldovan economic development were the following: —The government decided to apply a zero share tax on legal entities’ reinvested income. In the past, the disadvantageous income taxation policy resulted in a situation when economic entities looked for different schemes designed to evade taxes. Moreover, transactions with assets were registered at understated prices or were executed with the participation of offshore companies and so-called “phantom” firms. This is why it was very important to carry out reformist measures to encourage income legalization. Today, as a result of the reform, legal entities can reinvest profit in business development. In addition, the economic entities’ incomes, including the income tax amounts which have not been transferred to the budget, could be reinvested in the purchase of goods and services subject to VAT taxation. And finally, the reform stimulates the abandonment of various tax payment evasion schemes when importing goods and services. —A regulatory regime ensuring sustainable development of the economy was established in Moldova. Another worthy development was the adoption of the government’s resolution designed to arrange monitoring of trade import operations. According to the government, these measures could promote bona fide competition in the national economy. For the customs authorities the important thing is that from now on they can acquire the necessary and ex- haustive data specifying the level of prices registered in the domestic market. —Provision of Autonomous Trade Preferences to Moldova by the European Union. It should be emphasized here that the Moldovan customs authorities actively participated in the preliminary consultations with the European Commission experts. The consultations were organized by the Directorate General for Taxation and Customs Union of the European Com- mission. We are also pleased to mention that the positive results of the consultations (which served as a precondition for granting the Autonomous Trade Preferences to Moldova) were achieved mainly due to the fact that the Customs Service had introduced the brand new Prod- uct Quality and Country Origin Compliance Certification System. The System is based on statutory acts and advanced European practice. The advantage is that from this time on, exporters can receive Product Origin Certificates which comply with the ones currently applied by the customs authorities of the EU member states. —Exemption from profit tax. Owing to this decision, in the conditions of the evolving crisis, many enterprises, especially those focused on exports, have managed to redirect their uncom- mitted funds for incidental expenditure repayment or for development. —Intensive road repair works. Poor infrastructure is one of the most serious problems in our country, which is typical not only of the regions, but of big cities as well. Some roads in the capital are even worse than long-distance highways. —Introduction of the World Bank’s Program designed to finance market participants’ transition to the business management system in compliance with the international standards (ISO).

276 REPUBLIC OF MOLDOVA Religion

It is a well-known fact that today no more than 5% of Moldovan economic entities are involved in this process; however, a good start has been made. The state is also participating in this process. It compensates the expenses incurred by enterprises and, in this way, stimulates their technical, technological, and organizational renovation. —The Moldovan authorities have expressed their intention to create a Consumer Protection Agency. This is believed to be an essential step forward in the perception of the long-standing tasks, goals, and functions of this sort of structure. Obviously enough, the next step will be an understanding of the fact that protection is required not only for consumers, but also for manufacturers.

RELIGION

Marius TÃRÎÞÃ Junior fellow at the contemporary history sector, Institute of History, State, and Law of the Academy of Sciences of Moldova (Chisinau, Republic of Moldova)

rt 31 of the Constitution of the Republic of Moldova adopted on 29 July, 1994 says: “Freedom of conscience is guaranteed; …freedom of religious worship is guaranteed and religious bod- A ies are free to organize themselves according to their own statutes under the rule of law.” According to different sources 93 to 96 percent of the republic’s population are Orthodox Christians; Catholicism, Judaism, Baptism, and certain other confessions are also present. Recently two main churches—the Moldovan Metropolitanate and Bessarabian Metropolitanate— have come to the fore. The former is the Orthodox Christian Church of Moldova functioning under the jurisdiction of the Moscow Patriarchate and headed by Metropolitan of Chisinau and All Moldova His Eminence Vladimir (Kantarian). The Metropolitanate includes 6 eparchies: Chisinau, Edineþ- Briceni, Bãlþi-ãleºti, and Chisinau-Moldova (which includes Ungheni and Nisporeni), Cahul-Com- rat, and Tiraspol-Dubãsari.1 Several eparchies have no bishops. The Edineþ-Briceni eparchy lost its head, His Eminence Dorimedont, on 31 December, 2006. The ordinary people cannot help but wonder why their eparchy has been functioning without its head for two years now. The Chisinau-Moldovan eparchy, likewise, has no head: the powers of His Eminence Petru (Bishop of Hîncu) are temporarily limited to the Monastery of Hîncu. Since the summer of 2007 the local community of churchgoers has been waiting for a commission from Russia expected to investigate the bishop’s activities in the eparchy.

1 See: official site of the Metropolitanate of Moldova [http://www.mitropolia.md]. 277 CENTRAL EURASIA 2008 Analytical Annual

The Bessarabian Metropolitanate is the Autocephalous Local Orthodox Church of the Rumani- an Orthodox Church headed by His Eminence Petru (Pãduraru); according to certain sources it unites a quarter of the republic’s Christian Orthodox community. In 2008 the two metropolitanates successfully avoided bitter conflicts similar to those of 2007 when the two structures could not agree on religious and material inheritance. In 2008 certain unofficial steps were taken to bring the followers of both Churches closer together: on 11 May they, along with Baptists, Jehovah’s Witnesses, and public associations (over 200 people), prevented a bus carrying members of sexual minorities and the GenderDoc-M organization of Chisinau from going to a parade of the gay community in the very center of the Moldovan capital. On 16 May members of over 5 Christian youth structures took part in a follow-up conference that discussed many issues and agreed that gays should not be allowed to stage their events in public places. On 11 May, for the first time in the republic’s history, Christians of all confessions gathered together to demonstrate their support of Israel and the Jewish people. The Sons of the New Testament Community organized a Christian conference in Chisinau to celebrate the 60th anniversary of the State of Israel. This initiative was supported by both Orthodox metropolitanates, the Roman Catholic Church in Moldova and the unions of Baptist and Pentecostal churches. The conference was convened to assure the Jews and the State of Israel that the Christians of Moldova were their true friends who pray for peace, benediction, and prosperity of this country and its people as well as to repent, in the name of the Christians of Moldova, for the Holocaust that took place in Moldova. Rabbi Israel Lifshits, who spoke at the conference, expressed his hope that the city of Chisinau (Kishinev) would go down in history not only as the place of the 1903 pogrom but also as a place where people of all nationalities and confessions live in peace and harmony.2 In the first half of 2008 Christian students organized a series of conferences (mainly at universities) with the participation of prominent monks, theologians, and writers of the Republic of Moldo- va and Rumania. On 14 July an annual Drumul Crucii ceremony (first organized in 1990)3 was held in Chisinau; the day-long ceremony accompanied by religious singing brought together over 100 people. Restoration of the Kurki Monastery can be described as the central religious event of the year. In Soviet times the buildings were occupied by a mental hospital and a narcological dispensary. It remained abandoned and ruined throughout the 1990s. It was restored thanks to the efforts and money of ordinary citizens and opened on 8 November, 2008. President of Moldova Vladimir Voronin, Pre- mier Zinaida Greceanîi, and Speaker of the Moldovan Parliament Marian Lupu attended the ceremony together with over 400 believers and foreign guests, including His Eminence Theophylactus, head of the Orthodox Church of Lebanon. The restoration cost $8.50 million. In November an Orthodox church in the village of Corjova (Transnistria), the birthplace of President Voronin, was completed but the militia of Transnistria stopped him at the region’s borders when he arrived to attend the opening ceremony. His Eminence Vladimir likewise refused to attend the event. Early in 2008, on 21 January, President Voronin was awarded the Prize “For Outstanding Serv- ices in Strengthening the Unity of Orthodox Peoples”; it was presented to him by Patriarch of Mos- cow and All Russia Alexiy II and Chairman of the Unity of Orthodox Peoples Fund Valeriy Alexeev. The head of the Moldovan state accepted the award with the words: “It is a great honor to be among

2 See: “V Moldove proshla mezhkonfessionalnaia konferentsiia,” available at [http://news.invictory.org/ issue17928.html]. 3 The ceremony, which resembles an icon-bearing procession, symbolized the restored rights to profess religion lost under Soviet power and restored in 1990 as well as the joy and faith of the people in their victory. 278 REPUBLIC OF MOLDOVA Religion you today. I know that I came here not in my personal capacity, I represent my Motherland, Moldova, and the Moldovan people who have performed a great feat in the last seven years for the sake of the Orthodox culture and its renaissance. This high award means that this spiritual feat and its values at the altar of our common heritage were appreciated.”4 The president decided to spend the money part of the award on restoring one of the old churches in Moldova. This award confirms that the president plays an important role in restoring the old monasteries of the republic, including the Cãpriana (founded in 1429) and Kurki monasteries. Throughout the year His Eminence Vladimir visited several countries and traveled to Mos- cow and Constantinople (Istanbul). On 25 June he spoke about the religious situation in the Repub- lic of Moldova at the Assembly of Hierarchs of the Russian Orthodox Church. He said in particular: “Today there are 1,277 parishes in the Chisinau-Moldovan Metropolitanate, 42 monasteries, 8 sketes, and 8 religious schools… The Orthodox Church in Moldova is administered by four ruling bishops; there is also one suffragan bishop, the Edineþ eparchy is widowed.”5 He also spoke about the special status of the Orthodox Church in Moldova and mentioned the fact that central TV broadcasts religious programs three times a week, while central radio broadcasts similar programs twice a week. He pointed out that the Orthodox Church had agreements with the ministries of culture, defense, and the interior, under which the Church organized prayer rooms in the army and penitentiary organizations attended to by the priests of the Chisinau Metropolitanate. He spent several days (6-9 October) in Moscow to attend the conference of the Hierarchs of the Russian Orthodox Church and took part in the ceremony dedicated to St. Sergius of Radonezh. On 11- 16 October His Eminence Vladimir participated in the conference of the main heads of the Orthodox Church in honor of St. Apostle Paul held in Constantinople. The conference adopted a document that confirmed the Church’s support of the institution of family and marriage and opposed secularism. On 5 December His Holiness Patriarch of Moscow and All Russia Alexiy II passed away. Moldova was represented at the memorial services in Moscow by His Eminence Vladimir and President of Moldova Voronin. He was one of the three heads of Orthodox states who deemed it necessary to come to Moscow, the other two being Alexander Lukashenko and Boris Tadiæ. On 10 December His Eminence Vladimir participated in the meeting of the ROC Council that fixed the date of the election of the new patriarch for 27-29 January, 2009. On 1 December the Orthodox Church of Moldova organized a Day of Struggle against AIDS; 7 December was National Prayer Day intended to reunite the Christians of Moldova in prayer for the Moldovan guest workers in Greece, Italy, and Portugal. The Bessarabian Metropolitanate opened information bureaus on migration issues in Chisinau, Cantemir, Leova, ªtefan-Vodã, and Orhei. The National Prayer Day was organized with support of the International Organization for Migration and its office in Moldova. The Catholic Church with cathedrals in Chisinau, Bãlþi, and other places plays an important role in public life; it is mainly engaged in social programs for children, the elderly, and the disabled. In November the Jewish community received material support ($10 thousand) from the Europe- an Jewish Fund to be spent on Jewish education under the Development of Jewish Education in Moldova project designed to make teaching in Jewish educational establishments more effective. Teachers will be given an opportunity to learn more about Jewish history, traditions, literature, and ethics, meet Judaic theologians, and visit Israel.6

4 See: “Pravoslavie—nashe obshchee serdtse, nasha obshchaia dusha,” Nezavisimaia Moldova, 22 January, 2008. 5 “Doklad mitropolita Kishinevskogo i vseia Moldavii Vladimira na Arkhiereiskom Sobore Russkoi Pravoslavnoi Tserkvi,” available at [http://www.patriarchia.ru/db/print/428321.html]. 6 See: “V Moldove budut razvivat evreiskoe obrazovanie,” available at [www.izrus.co.il/obshina/news/2008-11-12/ 7008.html]. 279 CENTRAL EURASIA 2008 Analytical Annual

On the whole, the religious situation in the republic was stable and free from conflicts, while cooperation among the confessions moved ahead. The Moldovan and Bessarabian metropolitanates remained the main religious structures; the Roman Catholic Church, the Jewish community, and some other confessions became more active. This trend will obviously survive.

INTERNATIONAL AFFAIRS

Svetlana PYNZAR Master of political science, senior lecturer at the State Institute of International Relations (Chisinau, Republic of Moldova)

ccording to most analysts and specialists, At the beginning of the year, the country’s 2008 occupies a special place in contem- leaders announced that Moldova’s European in- A porary Moldovan diplomacy. tegration efforts would remain a priority. For example, Moldovan Prime Minister Vasile Tar- n First, the European Union adopted a politi- lev noted that in the international context the gov- cal decision in 2008 to begin talks with the ernment is planning to meet the strategic goal of Republic of Moldova on signing a new European integration by carrying out specific agreement. measures in 2008, that is, it plans to sign a new n Second, Moldova chaired five regional East- agreement with the EU that will raise the relations ern European organizations in 2008. between the Republic of Moldova and the EU to n Third, relations with Russia, including a higher level. within the framework of the CIS, developed Steps were also to be taken to provide the dynamically and were very productive in Republic of Moldova’s chairmanship in several 2008. of the European regional structures, thus making it possible to improve its image at the international n Fourth, settlement of the Transnistria conflict level. Special attention was to be paid to intensi- (meetings were held between the presidents of fying and expanding diplomatic relations with the Republic of Moldova and Transnistria, countries of the European Union and creating there was an increase in confidence measures suitable conditions for the activity of the Repub- between the sides, and consultations were re- lic of Moldova’s diplomatic missions in keeping newed within the framework of the 5 + 2 for- with the program for acquiring facilities for these mat) got off the ground in 2008. missions. The prime minister also stressed that n Fifth, throughout the whole of 2008, the Eu- special efforts should be made to promote domes- ropean Union member states supported tic products in the foreign market.1 Moldova in its European integration efforts, which was also expressed in intensive bilat- 1 See: “Pravitelstvo: prioritetnye zadachi na 2008 eral contacts in various vectors. god,” Nezavisimaia Moldova, 18 January, 2008. 280 REPUBLIC OF MOLDOVA International Affairs

The country’s authorities were also supposed tion once and for all,”2 noted Moldovan President to concentrate their efforts on unifying the country. Vladimir Voronin at a meeting with ambassadors “All our strategies and plans will not be completely accredited in the republic on 25 January, 2008. fulfilled while we are still living separately, until we are united into a single whole. It is not political 2 ambitions or pipe dreams, but the pragmatics of “Vladimir Voronin: ‘Glavnoi zadachei 2008 goda iavliaetsia ob’edinenie strany,’” Nezavisimaia Moldova, development itself that demand we settle this ques- 29 January, 2008.

European Integration

The year 2008 was also marked by another important step in the Republic of Moldova’s relations with the European Union. The political dialog between the Republic of Moldova and the EU underwent continuous development and the issues placed on the agenda became increasingly ambitious. During the second half of the year, the Moldovan leadership gained a clear idea of what items should feature in the Association Agreement with the EU. As Moldovan Minister of Foreign Af- fairs and European Integration Andrei Stratan noted, “the association agreement should envisage consistent integration of the Republic of Moldova into the EU, a gradual transfer to a free trade regime, and recognition of the need to introduce non-visa travel for Moldovan citizens in the near future.”3 According to the country’s president, “European integration primarily implies the country’s internal modernization.” On the initiative of Vladimir Voronin, a National Commission for European Integration was created to ensure coordinated fulfillment of the obligations set forth in the documents and agreements between Moldova and the European structures. On 1 January, 2008 the Agreement on Simplification of the Visa Regime and Readmission signed by the Republic of Moldova and the EU came into force, while the United Center for the Issue of Visas at the Hungarian embassy4 was not only a pilot, but also one of the EU’s successful projects in this sphere, which is also to be implemented in the Balkans. In 2008, this institution issued Schengen visas for the first time. When evaluating the Center’s work, Hungarian Ambassador to the Republic of Moldova Mihály Bayer noted that the center had become “an important policy tool for the European community in assisting Moldova to simplify its visa regime.”5 Other joint projects are being successfully carried out in border security (the EU Border Assist- ance Mission—EUBAM) and in humanitarian security. According to the Moldovan Ministry of For- eign Affairs and European Integration (MFAEI), more than 20 million dollars have been spent to implement these projects. We will note in particular that Moldova’s relations with the EU will also develop within the framework of the Eastern Partnership program which was officially presented on 3 December as a new instrument of EU cooperation with six post-Soviet states—Armenia, Azerbaijan, Belarus, Geor-

3 “Vneshnepoliticheskaia strategiia Respubliki Moldova: plany i dostizheniia,” interview with Minister of Foreign Af- fairs and European Integration, Vice Premier of the Republic of Moldova Andrei Stratan, Nezavisimaia Moldova, 23 Decem- ber, 2008. 4 The center was created and opened on 25 April, 2007. Information about its work can be found at the following Internet site: [www.cac.md] (in Moldovan and Russian). 5 “Edinyi tsentr vydachi viz: rasshirenie granits,” Nezavisimaia Moldova, 28 March, 2008. 281 CENTRAL EURASIA 2008 Analytical Annual gia, Moldova, and Ukraine. Benita Ferrero-Waldner, the European Commissioner for External Rela- tions and European Neighborhood Policy, said that the project participants would receive 350 million euros in the next three years by way of financial aid to implement agreements on free trade, energy cooperation, and fortification of borders and social institutions.6

Relations with Neighbors

2008 did not yield any specific results for Moldova in terms of its bilateral relations with its neighbors Rumania and Ukraine. On the one hand, there was greater economic trade and cultural cooperation between the Republic of Moldova and its neighbors; while, on the other, relations were tarnished by conflict situations and disagreements. On 13-14 April, Ukrainian Foreign Minister Vladimir Ogryzko visited Moldova. Several meetings were held with the Moldovan leadership, a press conference was held at the MFAEI, and two important documents were signed: an agreement between the Republic of Moldova and Ukraine on cooperation in ensuring the rights of national minorities and a joint letter addressed to Secretary General of the EU Council Javier Solana and European Commissioner for External Relations and European Neighborhood Policy Benita Ferrero-Waldner. The letter contained a request for financial and technical assistance for Moldova and Ukraine in border demarcation (460 km in the central section of the border, including the Transnistria region). The first stage of this project will cost 4 million euros. The dispute over building the Dniester State District Power Station continued throughout the spring. This dispute was partially resolved. For example, Moldova was able to come to terms on the delivery of electric energy from this station until 2010 at a price lower than the market price (4.4 cents per kW). However terms could not be reached on joint use of the Dniester State District Power Station despite the fact that part of this station is on Moldovan territory. One of the many projects of successful trilateral cooperation among the Republic of Moldova— the EU—Ukraine is the mission to monitor the Moldovan-Ukrainian state border—EUBAM, which largely ensures greater security for the Republic of Moldova and its eastern borders. The main problems in Moldovan-Ukrainian relations included putting the Giurgiuleºti energy and transport complex into operation, the section of highway close to the village of Palanca, and demarcation of the Moldovan-Ukrainian border. As for relations with Rumania, Moldova is interested in the best relations with this state and in establishing sound diplomatic, economic, and trade relations. Vladimir Voronin noted: “We have absolutely nothing against the Rumanian people or against the state of Rumania. It is our neighbor and this neighbor is a member of the EU. So it would be stupid to pursue anything but a friendly policy with a neighboring state and EU member.” Voronin also stressed that normal relations could be developed with Rumania providing that “Moldova is our country, our Homeland. It is not subject to either division, or unification, or any other transformations. It is only subject to modernization in keeping with those European measures and standards we ourselves wish to develop.”7

6 See: D. Kalak, “Individualnyi podkhod k ‘Vostochnomu partnerstvu,’” Ekonomicheskoe obozrenie “Logos-Press,” 5 December, 2008. 7 “Glava gosudarstva v efire telekanala NIT otvetil na voprosy, kotorye volnuiut vsekh,” Nezavisimaia Moldova, 1 July, 2008. 282 REPUBLIC OF MOLDOVA International Affairs

In 2008, relations with Rumania were not that straightforward. Several times Rumanian diplomats accredited in Chisinau were summoned to the MFAEI to clarify various conflict situations. Moldova repeatedly asked Rumania not to support the provocations regarding the territorial integrity and statehood of the Republic of Moldova (such meetings were held in April and November, for example). Several visits by the leaders of both countries took place in 2008. For example, on 28 May, Vice Minister of Foreign Affairs and European Integration of the Republic of Moldova Valeriu Ostalep paid a working visit to Bucharest, during which Rumania again confirmed its support of Moldova’s European integration efforts. On 7 July, Vladimir Voronin received Rumanian Foreign Minister Lazãr Comãnescu, and on 20 August a meeting was held between the presidents of the two countries. At these meetings, bilateral relations, Moldova’s accelerated European integration, and settlement of the Transnistria conflict were discussed. On 22-23 October, the first sitting was held of the Moldovan-Rumanian Commission for Eco- nomic Trade Cooperation, which was arranged during Moldovan Prime Minister Zinaida Greceanîi’s visit to Rumania. The Moldovan side described Moldovan-Rumanian relations as “far from bright in the political sphere and very favorable in the economy.”8 At the end of the year, the Moldovan minister of foreign affairs and European integration expressed the hope that “the new Rumanian government to be approved after the parliamentary elections will return to the question of signing two important documents between our states—the Basic Political Treaty and the Treaty on the Border.”9 In the middle of the year, the Moldovan president informed his EU colleagues of the problems associated with signing the Basic Treaty and the Treaty on the Border with Rumania. The president set forth the development of Moldovan-Rumanian relations throughout the years of the Republic of Moldova’s independence in a special letter. One of the main problems in the talks with Rumania was determining the language in which they should be signed. In this respect, the president clarified that a formula had been found that was acceptable to both sides—the documents would be signed in the official languages of the signatory states.10 According to Director of the European Institute of Political Studies in Moldova Viorel Cibotaru, Chisinau believes the main prerequisite for normalizing relations with Bucharest to be signing the Treaty on the Border, as well as the Basic Treaty on Friendship and Cooperation, but Rumania is not willing to do this. According to the expert, this is a question of principle for Chisinau, since the signing of these documents will put an end to the debates on the identity of the Moldovan state and open up the prospect for Moldova’s European integration.

Relations with the Centers of Power

The Republic of Moldova is also focusing great attention on bilateral relations with states that are centers of power.

8 “ES sblizil Moldovu s Rumyniei,” Ekonomicheskoe obozrenie “Logos-Press,” 24 October, 2008. 9 “Vneshnepoliticheskaia strategiia Respubliki Moldova: plany i dostizheniia…” 10 See: “Moldova na mezhdunarodnoi arene,” Nezavisimaia Moldova, 3 June, 2008. 283 CENTRAL EURASIA 2008 Analytical Annual

The United States is Moldova’s reliable partner and supports its policy aimed at preserving the state’s sovereignty, territorial integrity, modernization, and democratization and at European integration. Andrei Stratan described the Moldovan-American dialog in 2008 as “constant, open, and constructive.” He noted that Moldovan-American cooperation was based on a search for new ways to settle the Transnistria problem, Moldova’s participation in the Millennium Challenge Account, and the development of relations in other spheres, including the fight against corruption and reform of the Republic of Moldova’s security and defense system.11 The U.S. is rendering assistance to the Repub- lic of Moldova on a permanent basis in the social and humanitarian sphere and constantly supports Moldova in various areas. On 12 February, a meeting was held between the Moldovan president and U.S. Ambassador to Moldova Michael Kirby, during which important issues of bilateral cooperation were discussed, such as how to settle the Transnistria conflict and implement social projects in Moldova with the participation of American experts and financing from the American administration. Particular attention was paid to the project for modernizing Moldova’s medical-sanitary institutions, including on the left bank of the Dniester.12 Cooperation with the Russian Federation, which is still Moldova’s strategic partner, including in economic trade relations, is playing a key role in reviving the talks on settlement of the Transnistria question. In 2008, several meetings were held between the leaders of both states, at which a variety of bilateral and multilateral issues were examined, such as investment cooperation, interaction in the gas sphere and the energy industry, food safety problems, and social-humanitarian and cultural cooperation. An important topic of the Moldovan-Russian discussions in 2008 was the settlement of the Tran- snistria question. For example, the meeting between the presidents of Moldova and Russia that was held on 21 Jan- uary during the Moldovan president’s working visit to Moscow was called the most important political event of January 2008 in Moldova. According to the expert assessments of most analysts, it showed there is an interest in unfreezing the Transnistria talks. On 13-14 November, Russian Prime Minister Vladimir Putin paid an official visit to Chisinau, which was a sign of warming in Moldovan-Russian relations. The meetings and conversations between the Moldovan and Russian leaders made it possible to avoid complicated and difficult relations in 2008 burdened by the prohibitions on meat and vegetable products and the wine wars and lay a good basis for developing further cooperation between the two states. A Moldovan-Russian Program of Economic Cooperation for 2009-2020, a Program of Coop- eration between the Ministries of Culture for 2009-2011, and an agreement on implementing a project to provide energy blocks of the MoldGRES for radial work with the Rumanian energy system were signed. Moldova is ready to have strong mutually advantageous relations with Russia. There are no critical issues between Russia and Moldova at present, and the political dialog has been fully restored. According to official data, at the end of 2008, Russian investments in Moldova amounted to approximately 260 million dollars. (Moldova ranks second among the CIS countries in terms of this index.) There are 435 enterprises registered in Moldova with Russian capital, and today approximately 40 Moldovan enterprises are operating in Russia, according to Putin. The Moldovan side also called for developing regional economic relations, including by developing joint projects with the Russian regions.

11 See: “Vneshnepoliticheskaia strategiia Respubliki Moldova: plany i dostizheniia…” 12 See: “Za pomoshch—priznatelny,” Nezavisimaia Moldova, 13 February, 2008. 284 REPUBLIC OF MOLDOVA International Affairs Relations with Other States

The Republic of Moldova is just as active in its relations with other states. Special note should be made of the development of political and economic relations with the European Union member states. Moldova’s relations with these states are sufficiently dynamic and diverse. This is shown by both the quantitative and qualitative characteristics of the official visits. This year government officials from such countries as Latvia, Austria, Bulgaria, France, Poland, the Czech Republic, Slo- vakia, Slovenia, Sweden, Norway, and Germany paid working and official visits to Moldova. These states are developing a political dialog with Moldova and constantly confirm their support of the Republic of Moldova in its striving for European integration. They also state their desire to establish economic contacts, sign economic trade agreements, and engage in social and humanitarian cooperation. In 2008, Moldova also developed its relations with other states, such as Japan, China, Israel, and Montenegro. Some states rendered the Republic of Moldova significant development assistance, primarily in specialized spheres (for example, Japan in agriculture), others only established their first political contacts (for example, Montenegro), while still others developed relations in the social and humanitarian sphere (for example, Israel). Moldovan diplomacy was also distinguished by the fact that bilateral contacts are being pursued within the framework of multi-vector diplomacy and at various forums, conferences, and sittings of the structures of international organizations.

Relations with International Organizations

In 2008, Moldova actively cooperated with international organizations. In addition to relations with the European Union, Moldova focused great attention on developing relations with universal and regional organizations (the U.N. and organizations of the U.N. system, the Council of Europe, the OSCE, NATO, the CIS, the CEI, and others). According to Minister of Foreign Affairs and European Inte- gration Andrei Stratan, since the beginning of 2008, Moldovan delegations have participated in more than 50 international forums, particularly within the framework of those structures in which Moldova is a full-fledged member.13 In this respect, our productive cooperation with the U.N. structures cannot be ignored. The Republic of Moldova is a member of the U.N. Economic and Social Council for 2008-2010 and in 2008 it participated in this structure’s sessions. This three-year mandate, according to MFAEI specialists, “is an effective way to advance the state’s economic and social interests not only within ECOSOC but also in specialized agencies and financing programs, and this could ultimately be productive both with respect to expanding the programs and projects introduced in our country and to attracting additional technical and financial assistance in the Republic of Moldova’s priority spheres.”14 In addition, Moldova’s membership in ECOSOC is an excellent opportunity for Moldovan experts to exchange information and borrow the experience of the U.N. and its member states in draw-

13 See: “Vneshnepoliticheskaia strategiia Respubliki Moldova: plany i dostizheniia…” 14 “ECOSOC: i vygodno i otvetstvenno,” Nezavisimaia Moldova, 16 November, 2007. 285 CENTRAL EURASIA 2008 Analytical Annual ing up policy and strategy, as well as in resolving the country’s economic, social, cultural, and humanitarian problems. The Moldovan delegation headed by Vice Premier and Minister of Foreign Affairs and Euro- pean Integration Andrei Stratan participated in the annual session of the U.N. Economic and Social Council in New York, at which urgent problems were discussed. Vice Premier Andrei Stratan participated in the working ministerial meeting on “Science, Technology and Innovation Policy: the Basis for Sustainable Development” and in the sitting of the ECOSOC member state delegation heads on the topic “Migration, Environment and Climate Change: the Gender Perspective (UNFPA, IMO).” On 2 July, Moldova’s delegation head took part in an ECOSOC session at which Belgium, Chili, Great Britain, and Tanzania presented reports on introducing the Millennium Development Goals at the national level. It is worth noting that the government of the Republic of Moldova expressed its willingness to present such a report at the national level at the next ministerial meeting of ECOSOC. With the support of many organizations of the U.N. system (UNDP, UNFPA, UNICEF), our country was rendered technical assistance and aid totaling 10 million dollars to overcome the consequences of last year’s drought, and two million dollars were allotted to overcoming the consequences of the July flooding. On 25 February, the Moldovan president sent a message to the heads of state and government of the U.N. member states asking them to step up their efforts within the U.N. to combat international terrorism. Another project was launched under the auspices of the U.N. The matter concerns the creation of a Control Center for monitoring the environmental purity of products in the Republic of Moldova. According to experts, participation in this project could also be an effective step toward Moldovan producers gaining access to European sales markets. Relations with the Council of Europe remained within last year’s parameters. The year 2008 marked the thirteenth anniversary of the Republic of Moldova’s membership in this prestigious organization. A meeting was held in May between the chairman of the Moldovan legislative structure and Secretary General of the Council of Europe Terry Davis, who welcomed Moldova’s efforts to carry out democratic reforms and strengthen the judicial system and activity of the state institutions, after noting that Moldova deserves to be integrated into Europe. At the same time, the official European representative noted that our country must ensure continuation of the reforms in such areas as justice, the mass media, and the business climate.15 In this respect, special attention was paid at this time to two joint programs of the Council of Europe and the European Commission on ensuring the independence and transparency of the legal system and fight against corruption. Five more programs were also launched designed to support free elections, ensure freedom of expression and the mass media, support a civil society, create independent structures in the protection of human rights, and promote the protection of the human rights of the Roma. With respect to the upcoming parliamentary elections in the Republic of Moldova, a Council of Europe Action Plan for their support was approved as early as June 2008. Moldova engaged in successful regional cooperation this year. Throughout 2008, the Republic of Moldova chaired five regional structures, including the Eastern Partnership Program, the CEI, the Central European Free Trade Agreement, the Center for Security Cooperation, as well as the South- eastern Europe Health Network. At the end of January, Secretary General of the Central European Initiative (CEI) Pietro Ercole Ago visited Moldova. He informed society that the Republic of Moldova is ready to carry out its chairing

15 See: “Moldova dostoina evropeiskoi perspektivy,” Nezavisimaia Moldova, 27 May, 2008. 286 REPUBLIC OF MOLDOVA International Affairs obligations and expressed the hope that chairmanship in the organization he headed and advancing the planned projects will make it possible for Moldova not only to enhance its image on the international arena, but also resolve several of its own domestic problems. He noted that some of the projects planned for 2008 included a summit of CEI member state heads, a conference of power engineers and academics, a youth forum, and an economic summit. Two million euros were allotted to these projects under the auspices of the CEI. On 21 May, Vladimir Voronin participated in a summit of the heads of state and government of the Southeast European Cooperation Process, and Moldova adopted the mandate of the current chairman of this regional organization. The Moldovan chairmanship program in this organization included 15 different large-scale political and sectoral undertakings. In his welcome speech, the Moldovan president noted that “regional cooperation for the Republic of Moldova means an important and inalienable additional framework for it to draw closer to European values, standards, and principles, as well as to the European Union as such.”16 On 16 June, Moldovan President Vladimir Voronin met with Appointed Secretary General of the Regional Cooperation Council Hido Bišèeviæ, who congratulated the president on Moldova’s consent to be chair and emphasized the importance of drawing the attention of the world nations and primarily the EU to the situation in Southeastern Europe. He also noted that the priorities of the Eu- ropean Commission on the development of Southeastern Europe coincided with the priorities set by Moldova as chairman of the Southeast European Cooperation Process. On 8-9 October the 11th Central European Initiative Summit Economic Forum was held in Chisinau, at which important issues of economic cooperation in the region were discussed. The fifth annual investment forum of Moldova was held at the same time in Chisinau. These two events drew more than 700 representatives of business circles and state and international institutions from eleven countries of the region to Chisinau. At this time, sittings in 12 main sectors of the economy and numerous bilateral meetings of Moldovan and foreign business representatives were held. According to Moldovan Minister of Economics and Trade I. Dodon, “such an important forum was an excellent platform for advancing Moldova’s image and acquainting foreign guests with our country’s potential in investments and commodity production and export.” 17 At the end of October, a meeting was held in Chisinau of the ministers of justice and home affairs of the Southeast European Cooperation Process (SEECP) participating states on “Protecting Individuals from New Technological Challenges.” The participants in this forum approved the Mem- orandum on Legal and Judicial Guarantees against Unlawful Processing of Personal Data and the Joint Declaration on Strengthening International Cooperation among the Southeast European Cooperation Process Participating States in Combating Cross-Border Cyber Crimes. On 27-28 November, a summit was held in the Moldovan capital of the heads of government of the CEI states. It officially ended the republic’s chairmanship in this organization. When evaluating the results of Moldova’s chairmanship, Minister of Foreign Affairs and European Integration Andrei Stratan noted that 150 projects were carried out during this time, 20 of which were proposed by the Moldovan side. These projects related to agriculture, energy, transport, and the state’s youth policy.18 Moldova’s cooperation in GUAM also continued in 2008. On the whole it was carried out at the level of events planned within the organization’s framework (for example, sittings of the Coun-

16 “Regionalnoe sotrudnichestvo priblizhaet nas k Evrosoiuzu,” speech by Moldovan President Vladimir Voronin at the summit of heads of state and government of the Southeast European Cooperation Process on 21 May, 2008 in Pomorie (Bulgaria). Nezavisimaia Moldova, 22 May, 2008. 17 D. Kalak, “Forum Tsentralno-Evropeiskoi initsiativy: izderzhki formata,” Ekonomicheskoe obozrenie “Logos- Press,” 10 October, 2008. 18 See: “Moldova sdaet polnomochiia predsedatelia,” Nezavisimaia Moldova, 28 November, 2008. 287 CENTRAL EURASIA 2008 Analytical Annual cil of National Coordinators, sittings of working groups in various spheres, and so on). Particular attention was paid to the development of projects under the auspices of the GUAM+ format. For example, on 21 February a meeting of GUAM national coordinators and Polish representatives was held. The meeting took place in Warsaw where it was also attended by American and Japanese representatives and ended in the drawing up of a GUAM-Poland Action Plan for 2008 and the signing of a joint communiqué. Moldova was represented by Deputy Minister of Foreign Affairs Valeriu Ostalep, who talked at this meeting about Moldova’s priorities in GUAM and spoke in favor of relations with Poland. He noted that Poland’s experience in regional cooperation (particularly the cooperation experience of the Vyshegrad Group) and in justice and internal affairs would be interesting for the GUAM countries and also spoke in favor of intensifying economic trade relations between the partners. One of the sittings of the Council of National Coordinators was held in Chisinau on 13 May. In addition to summation and cooperation development issues, the agenda included an item regarding the GUAM+ format. The Moldovan side spoke in favor of intensifying relations within the framework of partnership between the GUAM states and the U.S., the EU, the Council of Europe, and other potential international partners. Several documents were discussed relating to cooperation issues in the fight against terrorism, the fight against illicit drug circulation, and the protection of intellectual property rights.19 We will also note the international conference held on the Republic of Moldova’s initiative on the occasion of its chairmanship in five regional organizations, which was called “Regional Cooper- ation—Opportunities, Challenges and Synergy.” Minister of Foreign Affairs and European Integra- tion Andrei Stratan spoke at the conference, noting that regional cooperation is a priority of Moldo- va’s foreign policy. Representative of the Azerbaijani chair Anar Jakhangirli informed the conference participants about his country’s program and chairing priorities. GUAM Secretary General Valeriy Chechelashvili spoke at the conference, presenting information on sectoral cooperation among the organization’s member states. Moldova is efficiently using multilateral cooperation mechanisms within the framework of the Commonwealth of Independent States. The Republic of Moldova took very active part in drawing up the economic strategy for the CIS states until 2020, which was adopted at the summit of the Common- wealth’s heads of government in Chisinau in November. Next year, Moldova will chair in the Com- monwealth’s structures and has already declared that relations with its CIS partners will focus primarily on economic issues. Strengthening energy security, expanding interaction in transport, developing cooperation in ensuring food safety, and, of course, creating an inviting investment climate for economic agents in the CIS expanse are equally important. Permanent consultations are being held at present among the Commonwealth member states on ways to overcome the consequences of the financial and economic crisis.

* * *

This year was characterized by important progressive changes in cooperation with the European Union. They were expressed in the very encouraging conclusions of the European Union Council on relations with the Republic of Moldova, the entry into force of the Agreement on Simplification of the

19 See: “Sitting of the GUAM Council of National Coordinators (Reuniunea Consiliului Coordonatorilor Naþionali GUAM),” available at the official website of the Moldovan Ministry of Foreign Affairs and European Integration: [http:// www.mfa.gov.md/noutati/2663/]. 288 REPUBLIC OF MOLDOVA International Affairs

Visa Regime, the introduction of individual trade preferences, the launching of the Mobility Partner- ship and, last but not least, the advance of preparations for the talks on a new ambitious agreement with the EU. During the entire year, the main attention was focused on creating a free trade zone in keeping with the WTO’s requirements; increasing export to the CIS markets; and removing tax and customs barriers hindering a freer trade regime with these states. Implementing joint projects with many European countries and organizing the most diverse international symposiums, specialized conferences, and meetings of ministers of transport, tourism, economics, and agriculture allowed the Republic of Moldova to more efficiently integrate into the European and world system of political and economic relations.

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REPUBLIC OF TAJIKISTAN

GENERAL OVERVIEW

Jamila MAJIDOVA National representative of the Central Asia and the Caucasus Journal in the RT (Dushanbe, Tajikistan)

he year 2008 turned out to be a year of crises and efforts to set things right. The energy crisis that set in early in January can be described as a national calamity, a social and psychological shock T for the people. The Nurek Hydropower Plant cut back on energy production, causing problems for enterprises and offices, which had to stop functioning. Public services and other related structures proved unable to cope with the unprecedentedly severe winter when temperatures dropped to –25oC. The government had to ask the international community for help. The timely arrival of humanitarian aid from many countries and the resumed energy production helped the country to survive the crisis. After barely recovering from the energy shock, the country was slowly but surely drawn into the world economic crisis. Its main export items—aluminum and cotton—were no longer bought in the same quantities for the same prices. Inflation was an inevitable result. These two factors combined caused the loss of over 3.5 billion somoni mainly in the industrial and agricultural spheres. The industrial production volume dropped compared to 2007 by 4.3 percent. Energy and gas supplies were dwindling, raw materials were in short supply, and the world aluminum prices were dropping while many of the republic’s industrial enterprises stood idle. A production slump was the logical result. Despite the negative trends, however, the GDP grew by 7.9 percent compared to 2007. The republic’s economy revived as soon as energy production was normalized. Labor migrants contributed to the growing macroeconomic indices by sending more money home. During the first 11 months of 2008 they transferred $2.5 billion; the budget surplus was 1.9 percent of the GDP. In 2008 inflation reached 11.8 percent, which means that it dropped by 7.9 percent compared to 2007. At the same time, consumer prices for services increased by 20.6 percent. Foreign trade turnover amounted to $4,549.6 million, $1,378.4 million of which was provided by export and $3,171.2 million by import.

290 REPUBLIC OF TAJIKISTAN General Overview

On 1 January, 2009 the republic’s foreign debt reached $1,371.4 million or 26.7 percent of the GDP. In 2008 it was social issues that set the country’s political pace. Social tension created by the winter energy crisis and later the world crisis, which sent up consumer prices, added tension to domestic policy. The scandal between the IMF and the republic’s government, which damaged the republic’s image, reached the public. The IMF accused the heads of the republic’s National Bank of misinformation and demanded that the republic return $47.4 million. The conflict was widely discussed by the local and foreign media. The above increased social tension and lowered the nation’s trust in the government. The opposition ranks swelled while the criticism the opposition hurled at the people at the top was more readily accepted by the people. A series of “unpredicted incidents” that occurred around the republic inevitably caused concern among the people. By the end of 2008 the government managed “to greatly alleviate tension in its relations with the regions and retain control.” In 2008 the republic’s foreign policy was fairly active: the energy crisis forced the leaders to play down the effects of the harsh weather and dwindling energy supplies by reaching a higher foreign policy level. The head of state frequently spoke on the phone and personally met with representatives of international organizations and the diplomats accredited in the republic to reach a positive solution to the problem. His efforts were awarded with humanitarian aid in the form of diesel generators, fuel, foodstuffs, etc. The U.S., Iran, Russia, Germany, Saudi Arabia, the Netherlands, Turkey, Great Brit- ain, Japan, China, France, the European Union, the Aga Khan Foundation, the WFP, and the FAO were the first to extend their assistance. Within the space of two months 25 states delivered 3,700 tons of humanitarian aid totaling $9.1 million to the republic (64.7 percent arrived from the United States and 15.7 percent from Russia). The spring and the end of the energy crisis returned foreign political activities to normal. In March President Rakhmon took part in the 11th OIC summit in Dakar, the central event of the year under review. The foreign ministers of Tajikistan, Iran, and Afghanistan met in March 2008 in Dushanbe where they agreed to set up a tripartite investment company. The official visits of the heads of state of China and Russia, the summit of the Farsi-speaking countries, and the SCO summit (held in August 2008) were the most important foreign policy events of the summer of 2008 and, probably, of the entire year. In June the Tajik-Chinese intergovernmental commission for trade and economic cooperation met in Beijing to discuss technical-economic cooperation in energy and road building, two issues of strategic importance for Tajikistan. In September 2008 the head of state attended the regular U.N. General Assembly in New York, which he used with good results to stir up America’s interest in his country and its economic development. This was one of the central foreign policy events of 2008. In October 2008 Dushanbe hosted a conference on Administration of the Borders and Drug Control in Central Asia at the ministerial level, which attracted the EU members, Russia, the U.S., the Central Asian countries, Afghanistan, Iran, China, and Japan. This too was seen as a key event of the last year. At the bilateral level mention should be made of the Tajik-German, Tajik-French, and Tajik- British contacts. At the end of the year, in December, President Rakhmon attended the CIS summit, at which it was decided to set up an anti-crisis fund of $10 billion. Everything was more or less calm in the religious sphere. As distinct from the past, the local government did not confront the Islamic resurgence in an open and active way. The Muslims, in turn, moderated their ambitions.

291 CENTRAL EURASIA 2008 Analytical Annual

Throughout the year the Ministry of Education continued its previous policies: hijabs remained banned from educational establishments as “propaganda of religious ideas in a secular society.” The traditional Hanafi madhab stood opposed to Salafi trends previously unknown in the republic. In the latter half of 2008 their confrontation reached the media, which readily took sides. The media and the public were stirred up by another significant event in the country’s religious life: the Ismaili Imam, Prince Aga Khan IV visited Tajikistan. The non-Islamic religious communities lost much of their former influence. The synagogue was removed while the Jehovah’s Witnesses, who complained that their activities had been illegally banned, went to court and lost.

POLITICS

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

Politics 2008: Forecasts and Blunders

hose analysts who predicted higher social tension in Tajikistan in 2008 were right. The same can be said about those who predicted that the energy crisis in the republic would reach new heights T and that the contradictions in the agricultural sphere would become exacerbated.1 However, the political forecasts were not as unequivocal, nor were they all to the point. None of the experts doubted that a further increase in social tension would stir up domestic political activity. At the same time it remained to be seen how the socioeconomic problems would affect the dynamics of domestic policy. There are two objective reasons for the somewhat unexpected political developments and their specifics: First, the dynamics of social tension proved to be higher than expected the previous year. The winter of 2008 proved to be much colder than in 2007: for two and a half months the average temperature remained at the –20o-25oC level. Public services and the state governance system were caught unawares. Early in February the government declared a state of emergency and asked the international community for help.2 For several months people had to manage without heating and elec-

1 See: D.L. Stern, “In Tajikistan, Debt-Ridden Farmers Say They are Pawns,” available at [http://www.iht.com/articles/2008/10/15/asia/15tajik.php]. 2 See: V. Panfilova, “V Tajikistane ostanovleny predpriiatia. Vlasti gotovy vvesti v strane chrezvychainoe poloz- henie,” Nezavisimaia gazeta, 24 January, 2008, available at [http://www.centrasia.ru/newsA.php?st=1201130760]. 292 REPUBLIC OF TAJIKISTAN Politics tricity; the residents of cities and settlements built during the Soviet period suffered more than others because they had to rely on central heating to heat their homes. This made the effects much worse than expected. The 2008 energy crisis can be described as a calamity and a social and psychological shock for the population. The world financial and food crisis, ignored by those who compiled the forecasts for 2008, was another factor of major importance. In the spring it took its toll on Tajikistan and was manifested in the form of galloping inflation. Like the previous year, early in the spring prices for essential foodstuffs (flour, oil, rice, vegetables, etc., in short, the consumption basket of the poorest groups) unexpectedly skyrocketed. They reached heights unknown even during the hardest periods of the civil war. Both factors directly affected domestic policy; the energy and foodstuffs crisis deprived the government of a great share of popular support. This time each and everyone, irrespective of their social status and place of residence, was hit by the negative developments. While the top bureaucrats spared no effort to explain that the crisis was of an objective nature (that is, outside the Tajik government’s sphere of influence), people bent an ear to the unsubstantiated rumors about corruption at the very top, energy smuggling to Afghanistan, illegal trade in water with Uzbekistan, etc. The situation was further aggravated by the scandal that started as soon as the cold weather subsided. It dealt a heavy blow to the government’s image both inside the country and abroad. The IMF accused the heads of the National Bank of the Republic of Tajikistan of misinformation and demanded the return of $47.4 million in previous loans. This reached the media and was widely discussed abroad, as well as by the local press (something that was not possible earlier). Social tension went up; the government’s tainted image expanded the opposition’s social basis to a much greater extent than expected.3 The swelling ranks of the opposition parties was not important: in 2008 they did not increase their membership in any noticeable way. The fact that the criticism the opposition hurled at the government found a response among the people was much more important. The past actions and statements of certain radically-minded opposition leaders were received with skepticism (the memory of the civil war was still fresh in society’s mind); the impact of the crises gradually changed this. However, in early 2008 the opposition was still disunited and passive; few people believed that the political parties would shoulder the burden of coordinating and mobilizing the protest actions. Most of the observers did not exclude sporadic protest actions in various parts of the country if the energy crisis were to suddenly worsen and power shortages become too acute.

The Unpredicted Factor

One more factor remained too long outside the scope of attention. In 2008 former field commanders who, it was believed, had long lost their power, all of a sudden came into the limelight. And this is in spite of the fact that the last few years no one doubted that the government had managed within the several years after the peace treaty to put an end to this political phenomenon.

3 The claims were described in a most general way; at the official level it was announced that when asking the IMF for a loan the republic supplied the wrong information about the financial reserves of the government, the National Bank, and its crediting practices. Russian and Western experts supplied more detailed commentaries: the government and the National Bank had concealed information about the true amount of the international reserves and assets of the National Bank transferred to the industrial, mainly cotton, sectors. The futures on the cotton market were funded under the National Bank’s guarantees. 293 CENTRAL EURASIA 2008 Analytical Annual

As a rule, the former field commanders were appointed to other posts at which they lost their former independence and became just some of the many other army officers or law enforcers. In this way, during the several years that followed the peace treaty most field commanders were squeezed out of the state structures and lost their units and former influence in domestic policy. It was generally believed that the greater part of them had become adjusted to their new lives; while those unable or unwilling to do this were either imprisoned or left the country. This explains why former field commanders and fighters found it hard to accept their new lives and why many of them remained dissatisfied and restless—something, which came as an unpleasant surprise to the government. The 2008 events confirmed that many of the field commanders had retained enough influence around the country and, under certain conditions, could ride social discontent.

Surprises on the Domestic Political Stage

No wonder the developments of the early half of 2008—their central figures, their form and content—shocked many. The first of them took place in Gharm, the administrative center of the Rasht District 220 km to the east of Dushanbe. On 2 February a mobile unit of the Interior Ministry’s special forces arrived in Gharm to arrest Mirzokhuja Akhmadov, a former field commander, who headed the local militia department. The attempted arrest developed into an armed clash in which commander of the special unit Oleg Zakharchenko was killed and several people wounded; the others were disarmed and sent back. Several days later the Ministry of the Interior issued a statement in which it blamed Akhmadov and his supporters for the death of Zakharchenko: it was alleged that the special unit had been sent to attend a regular meeting and was ambushed. Akhmadov insisted that he and his people had been attacked and had to resist. The incident nearly destabilized the mountainous region, an outpost of the opposition during the civil war and a seat of staunch resistance to the government. According to unofficial information, the next day a crowd of several hundred former fighters assembled in Gharm. They threatened to fight side by side with their comrades against the government if it dared to retaliate. The incident provoked a barrage of statements. Akhmadov, a field commander like many others, suddenly became a national celebrity; for several months he expressed the interests of a part of the former fighters and members of the United Tajik Opposition (UTO) highly displeased with the way the government had treated them. In numerous interviews and statements Mirzokhuja Akhmadov not only laid the blame on the law enforcers and special services, he also made public the demands of his supporters. In his letter to the president he said: “Despite the fact that the former fighters of the opposition have been serving in the government armed forces for many years now, they are still suspected. Today, most of them have been dismissed and removed from the army.” His supporters were more outspoken: they insisted that because of continued pressure from the security structures many of the former fighters had either moved high up into the mountains or had emigrated. According to official statements, the incident was not a political one—it was caused by the crime situation in the region. Barely two weeks after the Gharm clash the republic learned about another incident, this time in Khorugh, the administrative center of the Gorno-Badakhshan Autonomous Region (GBAR). On 23 February, 2008 a group of seven headed by Mamadbokir Mamadbokirov, a former field commander who had spent several post-war years working as a border guard, shelled the building of

294 REPUBLIC OF TAJIKISTAN Politics the Khorugh Regional Interior Department, penetrated it, and beat up the assistant militiaman on duty. According to official information, this was “sheer hooliganism.”4 The official statement said in part: “On the eve of the incident Mamadbokirov’s group drove to the Pamir-1 Hydropower Station to rude- ly express their dissatisfaction with the lack of electricity in their homes. The militiamen asked them to calm down.”5 The republic’s Ministry of the Interior came up with a statement that the group had been involved in clashes with the government and law enforcers. Two years previously, on 17 Au- gust, 2006, in the Verkhniy Khorugh quarter, Mamadbokirov’s people had exchanged fire with militiamen of Khorugh who arrived to arrest him; he was suspected of several crimes. This time the government was more determined: on 26 February the Interior Administration of the Autonomous Region issued an ultimatum in which it demanded that by the evening of 27 February the remaining armed units should lay down their firearms. The same day a mainly female crowd of about 200 gathered for a sanctioned meeting to demand that the illegal armed units stop threatening the peace. Under pressure from the authorities and the leaders of the local communities Mamadbokirov agreed to obey: it seemed that firearms were exchanged for his personal safety: no further attempts to arrest him were made. This was not the end: on 14 March two officials of the public prosecutor’s office were beaten up in the Roshtkala District of Gorno-Badakhshan Autonomous Region who, according to the local opposition, “were guilty of extortions.” Three days later, on 17 March, a rally gathered in Khorugh to protest against the law-enforcement structures “that practice extortions among the local people.”6 The leaders were invited to the building of the local administration to talk to the region’s head, public prosecutor, and head of the National Security Committee and Interior Administration. The rally also demanded that six villages transferred from the Autonomous Region on 7 March by a decision of the upper chamber of the republic’s parliament to the Tavildarin District of the republic be returned to the Autonomous Region’s jurisdiction. The protesters were convinced that the parliament had violated the Constitution, according to which the administrative borders of Gorno-Bada- khshan could not be changed without the agreement of the Autonomous Region’s Majlis of the peoples’ deputies. Early in May another incident took place in Kulob (the Khatlon Region) in the republic’s south. It was triggered by the arrest of former pro-government field commander Sukhrob Langariev, brother of Langari Langariev, one of former leaders of the Popular Front of Tajikistan. The republic’s Minis- try of the Interior insisted that it had acquired information that Sukhrob Langariev kept large supplies (over 100 kilograms) of heroin at home. To verify the information, the militia came to search the house but Sukhrob Langariev refused to open the door. It was decided to storm the building, which was encircled; armored vehicles were also used. The special units dispatched from the capital took the house defended by Sukhrob Langariev and several supporters by storm. Five were killed, including an officer of the security services and several passers-by. In June 2008, the central government was put to an even more severe test in Khorugh. It all started on 14 June when several officials of the regional public prosecutor’s office clashed at the office’s entrance with people of former field commander Imomnazar Imomnazarov. Public prosecutor of the Autonomous Region Rashid Gulmadshoev was severely beaten up.7 According to sources in the gov-

4 N. Khamrabaeva, “23 fevralia v Tajikistane. Byvshiy nachal’nik pogranzastavy Mamadbokirov organizoval vooruzhennoe napadenie na OVD Khorugha,” Asia Plus, 25 February, 2008. 5 Ibidem. 6 A. Shonavruz, “Aktsii protesta v Khorughe: pamirtsy vozmushcheny militseyskim bespredelom,” IA Azia-plus, available at [http://www.centrasia.ru/newsA.php?st=1205761200]. 7 See: R. Gulmadshoev (prosecutor in GBAR): “Nam pripisyvaiut vymogatel’stva, chtoby diskreditorovat’!” Asia Plus, available at [http://www.centrasia.ru/newsA.php?st=1214477280]. 295 CENTRAL EURASIA 2008 Analytical Annual ernment, the unrest was triggered by the fact that the former field commanders refused to obey the law. The latter, on the other hand, insisted that they were expressing the will of the people dissatisfied with the arbitrariness of the highly corrupt law enforcers. Several days later Khorugh was agitated by sudden rumors that more armed units had been moved into the Autonomous Region for a wide-scale special operation against the local criminal leaders (formerly field commanders of the opposition and the local self-defense forces). The city and local community were worried about possible fighting in the streets. On 18 June the local activists of the Social- Democratic Party of Tajikistan rallied outside the local administration to demand withdrawal of the troops from the region. Officials did not deny that special troops had been moved in; at first they explained this by the need to protect the president during his visit to Gorno-Badakhshan Autonomous Region scheduled for late June. Later, however, they argued that the troops had been brought in “to establish order which the local law-enforcement structures were unable to protect.” The rallies responded with: “If the president does not trust his own law enforcers, he should introduce direct presidential rule.” Whether an “anti-crime” special operation had been planned or not, it was impossible to carry out since everyone knew about it and the central square remained occupied by a protest meeting. Force could not be used lest destabilization spread. Finally, after a series of talks the meeting was curtailed on the condition that it would be renewed if the troops remained in the autonomous region.

Political Parties

In 2008 the political parties remained moderate and balanced: the domestic political events of the first half of 2008 hardly affected their activities with the exception of the Social-Democratic Par- ty, the Badakhshan branch of which organized a series of protest meetings in March and June in Khorugh. The Gorno-Badakhshan branch of the Islamic Resurrection Party of Tajikistan is second in terms of size only to the local branch of the ruling People’s Democratic Party. The IRPT members preferred to stay away from the protest rallies because, as they privately explained, they did not want to rock the boat. Indeed, no one knows what might have happened had the rallies been organized by influential and large parties (the IRPT or the Communist party of Tajikistan) rather than by the SDPT, which had lately lost much of its support. On the other hand, the opposition leaders (of the IRPT in particular) tread cautiously because the memory of the civil war was still fresh while a new alliance between the Islamists and the Democrats would have looked unpleasantly familiar and would have brought to mind the 1992 events. On the whole, the second half of 2008 was much calmer and free from political upheavals. In August the Democrats marked the 18th anniversary of the Constituent Congress of the Democratic Party of Tajikistan, the heyday of which coincided with the first period of the civil war. It should be said that the party reached its 18th anniversary divided into three irreconcilable factions, each of them claiming the right to represent the entire party. In 2008 the party finally split; there was no hope of going back, which worsened the party’s position and lowered its already low rating. In the latter half of 2008 the government managed to bring the incidents in the country’s regions (in Gharm and Badakhshan) to an end. This can be described as an impressive political success. Dur- ing his visits to both regions the president found a compromise with the local leaders: in Gharm he officially amnestied Colonel Mirzokhuja Akhmadov accused of killing the commander of the govern-

296 REPUBLIC OF TAJIKISTAN Politics ment’s special unit. The former field commander and his six supporters handed in their firearms and were transferred under the control of the Ministry of the Interior, which was to be responsible for their future employment. As a result, by the end of the year the government defused much of the tension in its relations with the regions and preserved its control over the situation there.

C o n c l u s i o n

The events of the first half of 2008 posed several questions: first, how could these incidents have happened: were they random developments or caused by the still latent social trends? Was there any connection between the events in Gharm, Kulob, and Badakhshan? Were they planned and by whom? The most important question was: What do they mean for the country’s future, should they be taken into account when forecasting further developments? Today, the answers to these questions are hard to find, however an analysis of the events described above offers several preliminary conclusions. First, during last year social issues moved to the forefront with a force unprecedented in the post- conflict period to determine the course and nature of domestic policy. This presupposed a higher level of political activities at the grass-roots level. The June rallies in Khorugh involved the local communities (which had previously stayed away from politics). In the past the population had been mostly alarmed by protest actions staged by the former armed opposition—in 2008 people were more concerned with what the government was doing and what it planned to do. All the incidents were rooted one way or another in the economy. In Gharm, for example, the conflict was probably triggered by the rivalry between the regional and central elites for control over the local coal deposits. In Khorugh and Kulob the local criminal leaders and central elites clashed over the property earmarked for privatization. This might have triggered public discontent. Second, the forces involved were the most prominent feature of the three incidents. The authorities clashed with the former middle-ranking field commanders who were believed to be loyal to the government, fully adjusted to peaceful activities, and even integrated into the official structures. This shows that the process of integration of the former civil war fighters into peaceful life was not totally successful while many related issues remain pending. On the whole, the field commanders preferred to steer clear of politics—they moved into business and other non-political activities. Even in 2008 they were unwilling to take up politics and preferred to reach an agreement with the authorities. They willingly retreated and limited their demands to personal safety. It seems that the flare-up of their activities was caused by their concern about their future: after losing much of their political weight they had lost much of their former confidence. In recent years the central government has become stronger, to the extent that it has stopped taking the opposition (which has lost much of its former influence) and all sorts of regional groups and elites (the so-called centers of power) into account. It frequently dismissed public opinion as unimportant when making decisions. Decision-making became concentrated in the very narrow and still narrow- ing circle of the top crust, which is out of society’s reach. The inner balance between the government and the local elites, the regional and political groups, which had been achieved with much effort and time in the course of peace process, is endangered. In the regions this is explained by the frequently aggressive actions of central business and the political elites that refuse to take into account the objective conditions and interests of some of the regional groups.

297 CENTRAL EURASIA 2008 Analytical Annual

The year 2008 demonstrated that the government’s self-assurance is hardly justified; this is especially true in the context of the mounting financial and energy crisis. In fact, further developments will force the regime to widen its social basis by involving the political parties and regional and business elites in the decision-making. This was what 2008 taught us.

ECONOMY

Habib GAIBULLAEV Ph.D. (Econ.), Social Policy and Labor Market Research Department Director, Center for Strategic Studies under the President of the Republic of Tajikistan (Dushanbe, Tajikistan)

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

he year 2008 in Tajikistan started with a The said reduction in electric power out- severe energy crisis caused by unprecedent- put by the Nurek HPP resulted in many indus- T ed cold temperatures: there were days when trial enterprises being shut down in January- the air temperature dropped to minus 30 degrees February, and some social institutions even had Celsius. The water level in the Nurek reservoir fell to cease operating, which had a negative impact to as little as 9 meters, with 10 meters being the on all the macroeconomic parameters over this critical point. To retain this water level the Tajik period of time. The country’s economic indica- government had to reduce electricity output by 30- tors started to increase in March when uninter- 40%. It is worth noting that more than 90% of the rupted electric power supplies to all major indus- electricity produced in Tajikistan comes from the trial enterprises and social infrastructure facili- Nurek Hydropower Plant. ties were resumed.

Macroeconomic Indicators

The extreme and long cold winter and the consequences of the severe summer drought and global economic crisis notwithstanding, the macroeconomic situation in the republic at the end of 2008 developed quite positively, with economic growth rates being higher than the 2007 figures. The damage from the above factors (primarily in the industrial and agricultural sectors) exceeded 3.5 billion Tajikistan somoni (TJS). Moreover, the world economic crisis triggered a cut in prices for major Tajik exports, such as aluminum and raw cotton. The high growth in macroeconomic indicators was mainly achieved due to increased remittances to Tajikistan from labor migrants working abroad. Their inflows totaled $2.6 billion, which allowed 298 REPUBLIC OF TAJIKISTAN Economy the National Bank of Tajikistan to increase its net bank reserves. The consolidated budget surplus amounted to 1.9% of the country’s GDP.1 Despite the industrial output decline, the country’s GDP grew by 7.9% compared to 2007. Figure 1 GDP Dynamics in 2001-2008

112 110.8 111 111 110.3 110 109.6

109 107.8 107.9

% 108 107 107 106.7

106

105

104 2001 2002 2003 2004 2005 2006 2007 2008

In 2008, the nominal value of the GDP amounted to TJS 17,609.3 million, which exceeded the expected GDP index (TJS 16,380 million) by 7.5%. If we look at the current real GDP growth rate compared to the 2001 index, we can see that it has increased by 71.1%. However, the actual GDP accounted for only 79.5% of the 1991 level. The country’s GDP per capita amounted to TJS 2,345.7, which represents a 32.2% increase compared to 2007. Summarizing the 2008 year-end results, we can conclude that the growth rates of major components of the Tajik GDP are characterized by the following figures: Table 1 Annual Growth Rates of Major GDP Components

Growth Rates 2007 2008 GDP 107.8 107.9 Industry 109.9 95.7 Agriculture 106.5 107.9 Construction 2-fold 160.0 Services 113.2 123.4

1 Here and hereafter the statistical data are given in accordance with the Socioeconomic Situation of Tajikistan in 2008 drafted by the State Committee on Statistics of the Republic of Tajikistan. 299 CENTRAL EURASIA 2008 Analytical Annual

Tajik GDP structure in 2008 has actually remained the same compared to 2007. For example, merchandise production accounted for 44.4%, including industrial products—12.9%; agricultural goods—21.9%; and construction articles—9.6%. The share of the service-producing industry was 43.5%. This figure included market services—36.7% and non-market services—6.8%. The share of taxes increased insignificantly—from 11.5% in 2007 to 12.1% in 2008. By analyzing the structure of Tajik GDP in 2000-2008, we can conclude that material production in the entire GDP capacity is on the downward trend, while the share of services (transportation, communication, trade and catering, public, personal), human knowledge, finance, and taxes is growing. The increase in services and taxes in GDP is primarily associated with the fact that tariffs for services and taxes normally grow faster than commodity prices. And the economic growth in the republic was inspired by positive trends in its main economic branches. Indeed, the growth rates of most macroeconomic indicators in 2008 were higher than in the previous years. GDP growth rates also affected its application structure. The investments in fixed capital from all funding sources reached TJS 4,033.6 million, which represents a 60% increase compared to 2007. The share of fixed capital investments as a proportion of the GDP amounted to 23%, which actually corresponds to the average level in 2007. The power engineering sector still remains a priority in fixed capital investments: it accounts for 50.1% of all the major investments made.

Inflation

The consumer price index dynamics show that the inflation rate decreased in contrast to the 2007 parameters. For example, in the consumer sector it dropped to 11.8%, which is 7.9% less than the previous year.2 The major driving force spurring on inflation in 2008 is believed to be the 20.6% increase in prices for public services, which, in turn, is explained by the increase in the cost of imported natural gas and electric power by an average of 21.2%. This resulted in electricity fees almost doubling, hot water fees increasing by 58%, tariffs for water supply services growing by 41.2%, gas supply services by 39%, air carriage services by 22%; and passenger transportation services by 17%. During the time period under examination, the consumer price index for food products increased by 25.9%, while for nonfoods it rose by only 7.7%. The price index in the energy sector totaled 180.1%, in the fuel industry—146.1%, in the chemical industry—144.3%, in the building materials industry—151.7%, and in the food industry—129.6% year-on-year. The price index in all the industries in 2008 averaged 116.3% compared to 2007.

Industry

In spite of the GDP growth, the Tajik economy is still experiencing an industrial production slump, which continues to negatively affect both the republic’s economic development and the gross national product parameters in general. The industrial production index dropped by 4.3% compared to 2007. This is explained by the fact that many industrial enterprises in Tajikistan were shut down during this time period. In 2008, 262 industrial enterprises stood idle—this is more than 33% of the total number of industrial enterprises operating in the republic. The continued cutback in electricity and gas sup-

2 In 2007, inflation in the consumer market was 19.7%. 300 REPUBLIC OF TAJIKISTAN Economy plies, shortage of raw materials, and decrease in aluminum prices in the world market have resulted in an overall industrial production decline. However, in the fuel sector the production rates reached 119.7%, in machine-building and metal-working manufacturing—119.7%, in the timber and woodworking industries—115.7%, and in printing and publishing industry—109.5%. The production plan was successfully fulfilled by the food, chemical, and petrochemical industries, as well as by the flour-and-cereals and feed mill industries. Therefore, the industrial production performance in 2000-2008 shows that thanks to the government’s constant care and the qualitative work of Tajik experts and technicians, the republic achieved positive results in most industrial output parameters. For instance, electric power output reached 16,127 million kWh (in 2000 it amounted to 14,300 million kWh), while coal production increased tenfold, syn- thetic ammonia production grew by 50%, cement output increased 3.5-fold, the production of walling materials grew almost twofold, and the output of cotton cloth, carpets, and hosieries threefold. In January-November, Tajik industrial enterprises shipped ready-made products worth TJS 3,222.5 million (80.5% of the total output). Articles manufactured by the iron and steel industry account for the largest amount of non-shipped ready-made products (47%). This primarily concerns aluminum, which is largely explained by the drop in aluminum prices in the world markets. The industrial output structure is dominated by the nonferrous metals industry (42.4%), the food industry (19.4%), the light industry (10.9%), and the fuel and energy sector (10.7%). An industrial output decline was mainly observed in the electric power sector (13.8%), in the nonferrous metals industry (3.9%), in building materials (12.2%), and in the food-processing industry (13.6%).

Agriculture

Despite the original forecasts that the agrarian sector might fail to meet its target parameters due to the abnormally cold winter and severe summer drought, the overall 2008 results proved to be rather positive. In all categories of farms, gross agricultural output, in contrast to 2007, rose by 7.9%, including in crop production by 7.7% and in livestock products by 8.6%. Production of grains increased by 0.5%, of potatoes by 3.9%, of vegetables by 9.3%, of fruit by 65.7%, and of grapes by 10.7%. However, the production of raw cotton—a major agricultural crop which accounts for 30% of all the republic’s planted areas—dropped by 20.7% compared to 2007. On the other hand, appreciable progress was observed in livestock farming. For instance, in contrast to the 2007 figures, meat production grew by 8.9%, milk by 6.9%, and eggs by 32.7%. The sheep and goat population increased by 324,300 heads (8.5%) and poultry by 371,600 heads. Private household farms account for 91.3% of cattle stock and 82.0% of sheep and goats in the total amount of livestock. By and large, the market economy requires that agricultural workers regularly increase land efficiency, especially by means of irrigation, and introduce advanced equipment and technology.

Foreign Trade Turnover

Tajikistan’s foreign trade turnover in 2008 totaled $4,549.6 million, which is 13.3% ($626 million) higher than the 2007 parameters. Nevertheless, foreign trade turnover in December (in contrast 301 CENTRAL EURASIA 2008 Analytical Annual to November) decreased by 34% ($125 million), which was caused by a reduction in both exports and imports. Tajik exports totaled $1,378.4 million, representing a 6.1% drop ($89.7 million) compared to 2007. In particular, export of basic metals declined by 3.1% ($31.9 million), of electric power by 2% ($11 million), of ready-made foodstuffs by 10.6% ($0.6 million), and of textile products by 14.7% ($21.8 million), including ginned cotton by 15.2% ($17.4 million). And in contrast to November, December exports decreased even more—by 44% ($37.3 million). By and large, this slowdown was caused by a cut in prices for many goods (including aluminum) in the world market. Tajikistan’s imports amounted to $3,171.2 million, which is 29% ($715.7 million) higher than similar parameters for 2007. And the cost of the products delivered to the republic in December (in contrast to November) decreased by 30.4% ($87.6 million), which had a negative impact on revenue receipts. The domination of imports over exports has kept up the existing negative trade balance trends. For this reason, the trade balance deficit rose by 83% ($805.6 million) compared to the same period in 2007. In fact, it amounted to $1,793 million, which is estimated at 34.8 percent of the GDP. The increase in consumer and investment demand continues to play a key role in accelerated import growth.

Labor Migration

At this point, Tajikistan is attributed to the group of states with a high level of labor migration. Its incidence—in terms of percentage level and socioeconomic impact—is quite significant. In 2008, Tajik citizens working abroad accounted for one third of the economically active population. The existing migration scheme reflects the inability of the local labor market to provide Tajikistan’s growing and very young population with work and a worthy salary. At the same time, there are plenty of attractive opportunities in the international labor market, first of all in the Rus- sian Federation, where more than 90% of Tajik labor migrants tend to go on average. However, the so-called export of labor migrants from Tajikistan is usually organized through unofficial channels. It is worth noting that while abroad, Tajik labor migrants are mainly engaged in seasonal work. In this connection, many people tend to leave for other countries in the early spring and summer, and 75-80% of them normally return to Tajikistan during the fall-winter period. To arrange the official export of Tajik labor migrants to foreign countries, the Ministry of Labor and Social Protection of the Population of Tajikistan, in compliance with the Law on Licensing of Certain Types of Activity, started to issue licenses to private employment agencies enabling them to employ Tajik citizens abroad. In 2008, such licenses were issued to 10 economic entities operating in Tajikistan. It should be emphasized here that after adoption of the RF Law on the Legal Status of Foreign Citizens in the Russian Federation, which came into force on 1 November, 2002, Russia has tough- ened up its policy toward labor migrants from abroad. As a result, only a few Russian employers are interested in officially hiring manpower from other countries. This state of affairs encourages most labor migrants to stay on in Russia illegally. The statistics issued by the Ministry of Labor and Social Protection of the Population of Tajikistan show that on average only 0.5-1% of Tajik labor migrants leave the republic and acquire jobs through state-owned and private employment agencies. According to a 2007 survey, the overwhelming majority of Tajik migrants work in the construction sphere (74.1%); the wholesale and 302 REPUBLIC OF TAJIKISTAN Economy retail trade sector accounts for 10.8% of migrants, industry for 4,8%, agriculture for 5.4%, and other sectors for 4.8%. As far as the gender aspect is concerned, over 90% of labor migrants are males; however, the number of female migrants has started to increase in recent years. In 2008, Tajik labor migrants’ remittances exceeded $2.5 billion.

External Debt

As of 31 December, 2009, Tajikistan’s external debt amounted to $1,371.4 million (26.7% of the GDP). The debt grew in nominal figures by $254.5 million (as of 1 January, 2008 it was $1,119.9 million), but percentagewise it decreased by 3.5% (30.2% as of 1 January, 2008). This external debt increase was basically driven by the disbursement of concessional loans granted to the Tajik government by international financial institutions and the Export-Import Bank of China. The funds spent on the servicing and repayment of the external debt, including IMF loans and debts guaranteed by the state, totaled $89.4 million. This figure includes $72.3 million in principal redemp- tion and $17.1 million in interest payment. Servicing and repayment of the direct state-guaranteed internal debt accounted for $56.5 million: $46.5 million at the expense of budgetary funds and $10.0 million at the expense of Tajikistan Railways as amortization payment of Tajikistan’s debt to Uzbekistan by transiting Uzbek railway cargoes.

State Budget

By and large, the main target parameters of the 2008 state budget have been met. In particular, the Tajik government managed to achieve advanced growth in the revenue side of the national budget in contrast to its expenditure side. High rates of tax collection mainly driven by the increase in imports compared to the planned parameters and preservation of government expenditures at the forecasted level created a solid background for the budget surplus, which amounted to 1.9% of the GDP, the equivalent of TJS 333.4 million, with the target deficit value being 0.5% of the GDP. These figures do not include the contingency funds and the funds of the Public Investment Program (PIP), which is financed from external sources. The formation of the revenue side of the national budget was characterized by appreciable growth in fiscal revenue collection. As far as cash execution of the budget is concerned, its total fiscal revenues (inclusive of PIP, the contingency funds, and China’s loan) amounted to TJS 5,291.3 million (30% of the GDP). Excluding the contingency funds and external financing of the Public Investment Program, state budget revenues equaled TJS 3,419.7 million, or 109.6% of the adjusted index. On top of that, the over-fulfillment amount totaled TJS 300.3 million. In 2008, state budget revenues increased by 39.2%, or by TJS 962.3 million, compared to 2007. Public revenues in percentage of the GDP also increased, but this growth was rather insignificant— 0.2% of the GDP (from 19.2% in 2007 to 19.4% in 2008). Nevertheless, despite continuous growth of the revenue side of the national budget, its performance parameters could have been better. However, these expectations did not come true owing to the foreign trade turnover curtailment in Q4 (following a cut in prices in the foreign market). Tax revenues in the 2008 state budget accounted for 95.3% of the target plan—an equivalent of TJS 3,427.5 million (and for 116.2% of the approved tax budget revenues of TJS 2,809.6 million).

303 CENTRAL EURASIA 2008 Analytical Annual

Implicit tax revenues still remain the major income source of the state budget; an increase in VAT accounts for their main portion. Its share in the total amount of public revenues and grants amounted to 44.5%. Earnings from such taxes have also shown an insignificant increase of 0.3% of the GDP (from 8.3% in 2007 to 8.6% in 2008). By and large, such parameters have essentially been influenced by the increase in imports. In 2008, imports grew by 29% ($715.7 million) compared to 2007, which, in turn, has affected the amount of revenues from all types of external taxes, including VAT. The tax revenue structure analysis shows that 46.6% of overall tax revenues come from VAT; social taxes account for 10.4%, income tax for 7.4%, sales tax for 3.5%, excise tax for 4.3%, customs payments for 6.2%, and company income tax for 3.3%. The remaining 10 types of taxes, duties, and other payments comprise only 18.3% of the total tax revenues. Despite ultimate over fulfillment of the targeted fiscal revenues, the government’s tax return plan for 2008 was underfulfilled in relation to the following taxes: —Corporate profits tax—by 1.6% (TJS 1.7 million); —Agricultural producers’ single tax—by 10% (TJS 6.2 million); —Ginned cotton sales tax—by 35.3% (TJS 24.2 million), —Domestic production value-added tax—by 3.6% (TJS 12.5 million); —Processed production tax—by 15.6% (TJS 5.6 million). Poor parameters were also observed in non-tax revenues where underfulfillment reached 12% (TJS 21.2 million).

Government Capital Expenditures

A considerable increase in the revenue side of the national budget has allowed the Tajik government to essentially increase the amount of government expenditure financing. In fact, their total volume (inclusive of PIP, China’s loan, and the contingency funds) amounted to TJS 4,985.2 million, which is equivalent to 28.3% of the GDP. And expenditure financing through budgetary funds grew by 34% (TJS 787 million) year-on-year and amounted to TJS 3,086.3 million. In percentage of the GDP, national budget expenditures (exclusive of PIP, the contingency funds, and China’s loan) were retained at the level of 2007, i.e. at 17.5% of the GDP. The Public Investment Program (it accounts for 7.4% of total government expenditures during the period under examination) was executed quite actively in 2008. The biggest share in the cumulative structure of the Public Investment Program is held by agricultural reform, fuel and energy sector restructuring, transport infrastructure development, and reforms in public health services and education. The biggest portion of state budgetary appropriations (net of PIP) was used to finance education (20%), social insurance, and social protection of the population (15%), public authority and management (13%), fuel and energy complex (9.3%), housing and communal utilities, environment and forestry (7.1%). At the end of the year, the funds advanced against concessional loans under the Public Invest- ment Program were spent faster than expected, however they were provided in compliance with the loan agreements in effect, therefore they cannot be attributed to additional loans. In this context, on 28

304 REPUBLIC OF TAJIKISTAN Religion

October, the government adopted a three-year debt management strategy which establishes the maximum debt limit at 40% of the GDP.

Unemployment Rate

As of November 2008, the number of economically active people in the country (both employed and officially registered unemployed) was 2,100,600. This figure included 2,054,900 (97.8%) people employed in various branches of the economy and 45,700 residents with the official status of unemployed, which accounted for 2.2% of the economically active population. Given the fact that most of the unemployed prefer not to register, the real unemployment rate in Tajikistan could be as high as 30%, according to the estimates issued by the Ministry of Labor and Social Protection of Tajikistan and the World Bank. And with the reduction in seasonal work, this level could reach 33%, which in combination with low standard of living is one of the main reasons for the high rates of labor migration. Unfortunately, the high economic growth recorded in Tajikistan over the past few years has not affected the unemployment rate. The number of people employed in various branches of the Tajik economy in 2008 totaled 1,041,900, including in industry 87,300, in agriculture 525,400, and in material production 87,300. In 2003, these parameters were 1,071,200, 109,800, 543,900, and 739,200, respectively. These data show that the government’s efforts intended to organize and create new jobs and expand production operations (which is extremely vital in the current situation) have been insufficient. And this is quite regrettable, since these efforts could have lowered the level of poverty and unemployment rate in the country. Curiously enough, in 2008, the number of people employed in various managerial structures increased by 43.4%, those working in crediting, insurance, and retirement provision agencies by 65.3%, in culture and art by 12.3%, and in the material production sectors by only 4.3%. Therefore, job creation in industry, agriculture, the service and trade sphere is still lagging behind the target requirements. And the current financial crisis, which has actually affected all the countries of the world (including Tajikistan), is even worsening the situation for the unemployed, since their numbers are increasing as migrants return from Russia.

Standard of Living

The updated assessment of the standard of living carried out by the State Statistics Committee of Tajikistan with the World Bank’s financial support showed that over 55% of the Tajik population is now living below the poverty line. According to provisional data, household income in January-November totaled TJS 8,513.2 million. This means that during the period under examination it grew (in actual prices) by 37% year-on- year, while real household income in January-November measured by the consumer price index (less obligatory payments) increased by 1.8% compared to the 2007 parameters. Per capita income now equals TJS 97.6 a month, whereas the consumer goods basket, given the rational nutritional standards, equals TJS 174.5 a month. The average monthly nominal accrued wages of hired workers in January-November amounted to TJS 226.3, which is 1.4-fold higher than the same period in 2007. Actual wages in November (with consumer price index adjustment) increased by 13.4% compared to 2007. 305 CENTRAL EURASIA 2008 Analytical Annual

Wage arrears as of November 2008 (taking into account the previous years) amounted to TJS 20.2 million, which is almost TJS 6.0 million less than in January 2007.

C o n c l u s i o n

An analysis of Tajikistan’s macroeconomic indices in 2008 shows that despite the winter difficulties and water and energy shortages, the republic managed to achieve certain progress in its economy due to effective and timely measures taken by the government.

RELIGION

Lola KHALIKJANOVA IWPR Editor in Tajikistan (Dushanbe, Tajikistan)

n 2008 the republican authorities seemed to mosques; several mosques closed under the pre- have retreated from their previous practices text that their documents did not correspond to the I of opposing, openly and actively, the process, laws were reopened. All attempts to keep under- which moderate people describe as the Islamic age boys (schoolchildren in particular) away from revival or Islamic renaissance. The radically the mosques have been essentially discontinued minded prefer to use the terms Islamization and as ineffective. The “anti-hijab” campaign lost its undermining of the secular foundations of the impact as politically damaging to the authorities. Tajik state. Both sides are right to a certain extent: Indeed, the official ban that kept girls in hijabs out in Tajikistan, as in the other post-Soviet states, Is- of schools and other educational establishments lam has occupied a niche which is its by right: supplied the critics of the regime with more ar- Tajikistan is a Muslim state.1 guments. The fact that an increasingly larger The process that is going on unannounced number of girls are not allowed to obtain an edu- betrays itself in different forms: the government cation is much more important. The number of is more lenient when it comes to closing down young women seeking an education is steadily decreasing, contrary to the president’s desire to see a much greater number of women with secu- 1 The Administration for Religious Affairs at the Ministry of Culture of the RT informs that 97 percent of the lar education. republic’s population are Muslims (in 2007 its population These are recent developments showing that was 7.3 million strong). The Shi‘a comprise 1 percent (the the authorities are looking for the best possible majority of them are either Ismailites or Imamis). The larger part of the Ismailites live in the Gorno-Badakhshan Auton- way to adapt the country to the weakening of sec- omous Region in the republic’s east, as well as in several ular principles, a process common to the entire districts of the Khatlon Region (in the south) and in the cit- Muslim world. ies of Dushanbe, Khujand, Chkalovsk, and certain others. There are also Naqshbandi and Qadiriyya Sufi brother- In Tajikistan, as well as in the other Mus- hoods. lim Soviet successor states, this process is 306 REPUBLIC OF TAJIKISTAN Religion caused by the fact that the secular model was by political, ideological, material, and moral not the result of the society’s inner develop- instruments. They disappeared together with the ment. It was imposed from above in the form Soviet Union, thus dooming the model to ex- of Soviet modernization and was kept in place tinction.

The “Great Split”

In 2008 the republic’s religious life was strongly affected by an open struggle between traditional Hanafism and Salafism, the latter being a recent arrival. The discussion focused on the question: which of the two is more correct and better suited to the local Muslims? At first, the discussion was limited to mosques, however in the latter half of 2008 it went further to involve the public. The fierce disputes involved the ordinary people, imams, academics, theologians, and spiritual leaders as well as public figures, officials, the media, and political parties. It was mainly the media that moved the discussion to the national level. Those Salafis who were engaged in the dispute kept strictly within the laws but in the summer of 2008 several public prosecutors publicly denounced their activities. Public Prosecutor of the Sogd Region Khairullo Saidov in particular used a press conference to announce that the Salafis had been placed under strict control and said that it would be advisable to limit their access to the mosques. Later, at another press conference Prosecutor General of Tajikistan Bobojon Bobokhonov lumped together the Salafis and Hizb ut-Tahrir and Wahhabism, two extremist religious organizations. He pointed out, however, that none of the Salafis had been caught violating the Constitution.2 Some analysts believe that the government is dead set against the new movement not so much because of its extremism but because the traditional clergy fears, with good reason, losing its followers. The new movement is much more active, not to say aggressive, in its preaching. In some regions young imams educated abroad (in Saudi Arabia, Pakistan, and Iran) are gaining popularity among the local people, especially the youth. There is an opinion that the new teaching is easy to grasp and is more radical than the traditional madhab, the preachers of which lack the necessary ardor. The Salafis lavishly quote from the Holy Koran and other books to support each of their postulates. They pour more conviction than others into condemning luxury and religious bigotry; they are determined to improve the standard of living for the poorest sections: this cannot but meet with general approval in a country where, prior to the world financial crisis, 54 percent of the population was officially declared as poor. Just like the traditional Hanafis, the Salafis condemn moral depravity but their preaching carries much more conviction. A government official, however, offered an opinion that the concerns about the group’s intentions might justify the attempts to limit the movement’s scope. Leading expert of the Administration for Religious Affairs at the Ministry of Culture Khojiakbar Fayzullaev wonders: “Can we trust them and pay no attention to what they are doing, will not they turn up tomorrow with arms and demand that we become as fanatical as they are?” The then head of the National Strategy Department of the Center for Strategic Studies under the President Abdulvohid Shamolov has said that “the Islamic communities with a low level of religious knowledge turned out to be more receptive” of extremist views. Tajikistan is one such country. Former head of the Supreme Koziet of Tajikistan, member of the parliament’s upper chamber, and highly respected religious and political figure Hoji Akbar Turajonzoda was one of the first to lead

2 See: Azia Plus, 23 July, 2008. 307 CENTRAL EURASIA 2008 Analytical Annual the traditional clergy in the fight against the new movement. He voiced his apprehensions in the press: young people educated in Muslim educational establishments of Saudi Arabia, Pakistan, and Yemen, he argued, led the new movement. He accused them of extremism and enmity toward other religions and confessions, both Islamic (Shi‘a, Ismailites, among others), and Christian. He warned society against being loyal to the Salafi members and argued that young men (in the majority in the movement) are easy to manipulate; they might be on the payroll of the Western special services and they might be very dangerous (like al-Qa‘eda) because most of them are still very young (under 30). “Semi-literate, young, and talented people able to ignite others are lured by good money ($300-$400 per month); in the past the Bolsheviks used similar tactics. They publish scores of books, translate works by the Salafi leaders and theologians into Tajik, and give them away free… We should always bear in mind that young people are capable of extreme measures…They might organize terrorist acts or assassinations.”3 According to the senator, the number of those who support Salafia is not that big; there are merely several thousands of them. There is the opinion in the expert community, however, that their numerical strength is much larger. Abdulvokhid Shamolov has also pointed out that in recent years Salafism has been gaining popularity much faster than Hanafism, even though the latter has more followers. The Salafis enjoy the support of no more than 10 percent of the total population (an unverified figure). The Ulema council, which represents the official clergy of Tajikistan (mainly the Hanafi Mus- lims), believes that the Salafi ideas can be described as a vehicle of alien interference and a force that fans religious enmity. The Salafi supporters are accused of having obtained an education abroad and acting on foreign funding (arriving mainly from Arab countries and Pakistan), which violates the country’s national Islamic traditions. The Salafis, in turn, reject all accusations of extremism; they insist that they support the official course on the strength that a God-given government cannot be doubted. They are unanimous in stating that they seek personal salvation and a return to Islam’s spiritual sources.4 It is commonly believed that the Salafis are hostile to Shi‘a Islam, to which the Ismailites belong, yet they vehemently disagree with the Sunni (they themselves belong to Sunni Islam) over religious issues. The Salafis are convinced that they are victims of misunderstanding and slander of the local clergymen who are losing their followers because there is no place for clergy in “pure” Islam. They accused the republic’s clergy of emasculating Islam by their far from convincing sermons and of overpricing marriage and burial rituals. The Salafis also accuse the local mullahs of incompetence, violation of the Islamic canons and superficial treatment of sermons. Both sides addressed the government either directly or indirectly in an effort to find highly placed patrons. The followers of the new movement never failed to stress their loyalty to the president’s course and the legal measures designed to bring order to the rites and rituals. They agreed with the president that the money the mosques received should be used to open schools and help orphans and the poor. The traditional clergy have gradually arrived at the idea that the Hanafi trend in Sunni needs legal protection. Finally, Hoji Akbar Turajonzoda raised this issue in the republican newspaper Nigokh. Under the Constitution no ideology can be accepted as dominant, therefore the idea has no constitutional foundation. Despite this, the squabble within religion and the never-ending discussions forced the republican leaders to interfere.

3 “Sekret salafitov,” Asia Plus, 23 July, 2008. 4 See: “Salafity—eto pravednye musul’mane,” Asia Plus, 10 September, 2008. 308 REPUBLIC OF TAJIKISTAN Religion

In September 2008, President Rakhmon, speaking at a gala event dedicated to the 17th anniversary of national independence, announced that 2009 would be dedicated to Imom Azam, the founder of Hanafi.5 The president praised the services of Imom Azam (the 1310th anniversary of his birth is to be marked in 2009) and pointed out that this religious leader had done a lot to develop and unite Islam. He also stressed the fact that 97 percent of the country’s population is Hanafis. The analytical community agrees that the presidential initiative means that the state supports the traditional madhab and, therefore, the traditional clergy. In a country where, according to sociologists, most of the people are becoming active Muslims despite the government’s frantic efforts to preserve the state’s secular nature, the president acted as a pragmatist. Of the two roads—either active confrontation to the process or active support of Islam— the president opted for the latter by declaring 2009 the year of the founder of the Hanafi madhab. Political analyst Rashid Abdullo finds this most acceptable: “Everywhere where the ruling forces try to rationally adapt themselves to reality and lead the discussions they acquire new legitimacy, fortify their position in society and, with the nation’s support, move the country forward. This happened in Malaysia under Mahathir bin Mohamad; and this is going on in Turkey under Recep Tayyip Erdoðan and Abdullah Gül.”6

Other Events in the Republic’s Islamic Religious Life

In 2008, five thousand citizens of Tajikistan performed hajj to the Islamic holy places in Mecca according to the quota of the Ministry of Hajj of Saudi Arabia. The Ministry of Education insisted, very much by inertia, on its ban on hijabs in all educational establishments despite the numerous requests of the Islamic Resurrection Party and protests of public and political figures. Minister of Education Abdujabor Rakhimov described hijabs as a way to “promote religious ideas in a secular society.” The ministry’s officials explained that the hijab was banned because numerous radical groups are ready to exploit Islam in order to undermine the state’s foundations. This explains in particular why Hizb ut-Tahrir was banned in the republic: in the past it used the services of young women to distribute its leaflets. According to the State Statistics Board, in the last 2 years about 150 women were brought to court on criminal charges. Mayram Davlatova, editor of the Ravzana ba chakhon journal and director of the Center for Gender Policy, believes that girls in hijabs are manipulated by members of extremist religious trends. The anti-hijab zeal did more harm than good: girls were merely kept away from schools. In the Sogd Region in particular, the parents of the girls banned from school because of hijab were openly displeased when talking to Mukhiddin Kabiri, IRPT leader and member of the parliament. His party tried many times to protect, without much success, the young hijab-wearers.7 The law-enforcement structures never relented in their persecution of the members of the banned Hizb ut-Tahrir: according to former Minister of the Interior Makhmadnazar Salikhov, 11 supporters were arrested in 2008.

5 Information Agency Azia Plus, 8 September, 2008. 6 Azia Plus, 18 December, 2008. 7 See: “Zapret na noshenie platkov ostaetsia aktualnym voprosom, RCA, 14 November, 2008. 309 CENTRAL EURASIA 2008 Analytical Annual

In 2008 head of the Ismaili Imam, Prince Aga Khan IV visited the republic as part of his golden anniversary (of being in power) voyage. His visit was widely discussed while his local followers (mainly ethnic Pamirians of Gorno-Badakhshan Autonomous Region, where there are slightly more than 200 thousand of them) were especially inspired.

The Non-Islamic Religious Trends and Their Problems

The non-Islamic religious organizations had no prominent role to play even though the government and the orthodox Muslim leaders were deeply concerned about them and the possibility that they might lure some of the Tajik Muslims onto their side. The government gradually suppressed their influence by banning their activities under different pretexts. According to the Administration for Religious Affairs, during the independence period the total number of Christians in the country reached three thousand.8 Early in 2008 two important events took place: the republic’s only synagogue was removed while the Jehovah’s Witnesses went to court to contest the illegal, as they argued, ban on their activities. Despite the protests of the small Jewish community and several publications in the local and foreign press, in April 2008 the synagogue was removed: it did not fit the planned reconstruction of the city’s center and a project for building a new presidential palace. Today, there are no more than one thousand Jews in the republic; 300 of them, who live in the capital, were deprived of a place of worship. The Jewish community insisted that the government fully recompense the lost building to enable it to build another one elsewhere. The city administration turned a deaf ear to the demands. So far, the community has been congregating in the rabbi’s home. President of the Federation of the CIS Jewish Com- munities Levi Levaev said recently: “The Dushanbe authorities have already allotted us another plot of land; very soon the project will be funded by the Federation of the CIS Jewish Communities, the World Congress of the Bukhara Jews, and private donations. There will be no problems with funding.” In January 2008 the Jehovah’s Witnesses, banned in 2007 by a decision of the state security structures, went to the military court of Dushanbe to complain that early in 2008 officers of the security structures illegally confiscated over 500 thousand copies of religious publications; they were determined to contest the ban on their activities. The court dismissed the case and confirmed the ban. The elders went to higher instances. The sect, which arrived in Tajikistan in 1997, has been steadily increasing its membership; there are many Tajiks among the newly converted who have abandoned their Muslim faith. Earlier, its activity was suspended for several months. In July 2007 the Ministry of Culture (of which the Administration for Religious Affairs is part) added its publications to the list of banned literature because the Muslim majority was highly displeased with the arrival of numerous Protestant missionaries.

8 Eighty-five non-Muslim groups are registered with the Administration for Religious Affairs. There are about 150 thousand Christians in the country (mainly ethnic Russians and other groups that stayed behind when the Soviet Union fell apart). The Russian Orthodox group is the largest among the Christian groups. Other registered organizations are: Baptists (five groups); Roman Catholics (two); Seventh Day Adventists (one), Jehovah’s Witnesses (one), Lutherans (no information), and the Korean Protestant Church together with the Sun Min (two). There are many non-registered religious structures and trends, which are not banned on the whole. There is a certain number of confessional branches but there is no exact information about their followers and popularity. Public institutions supply figures according to which there are between 50 and 70 thousand followers of all sorts of traditional and non-traditional churches and non-Islamic religious trends. There are Bahaists (four registered organizations); Zoroastrians (no information), and one Jewish organization. All of them are fairly small and concentrated in Dushanbe and other big cities. According to other sources, 0.01 percent of the total population are atheists or do not belong to any of the religious trends. 310 REPUBLIC OF TAJIKISTAN Religion

The Constitutional Law of the Republic of Tajikistan on Religion and Religious Organizations confirms an individual’s right to freely choose, pursue, and change his/her religious convictions and defend them. In practice the law is used to establish state control while the judiciary frequently does not demonstrate enough zeal to insist on abidance by it. In 2008 the discussion of a power-initiated draft law on religion and religious organizations continued. Back in 2006 religious organizations, civil society, and international organizations were concerned about the numerous limitations the new law envisaged. The draft was not discussed openly, yet civil society groups doubted many of the provisions related to registration and the legal status of the religious groups and associations as potentially limiting religious education, publishing activities, and other aspects of religious self-expression. Early in 2008 leader of the IRPT Mukhiddin Kabiri, one of the few members of the parliamentary opposition, presented an alternative draft law to the parliament’s lower chamber. The chamber never discussed it, which can be described as a violation of parliamentary procedure. So far the authorities have failed to present an amended draft. Religious activities are supposed to be regulated by the 1994 law, however in practice they are regulated by other legal acts. Human rights organizations criticized the way freedom of conscience in observed in the republic. In its International Religious Freedom Report the U.S. Department of State pointed out: “The Government expanded its efforts to control virtually all aspects of religious life, and government officials actively monitored religious groups, institutions, and figures. Government policies reflected a concern about Islamic extremism, and government officials use these concerns to justify imposing restrictions and engaging in surveillance. The Government closed many unregistered mosques and prayer rooms but subsequently allowed most of them to reopen. The Government demolished three unregistered mosques in Dushanbe as well as the only synagogue in the country. The Government sought to influence Islamic practice by controlling the operation of mosques through the registration process and indirectly controlling the selection of imams.”9 Experts believe that this control in relation to the non-Islamic (mainly Protestant Christian) structures was caused by the accusations the orthodox Muslims hurled at the government, which allows and does not prevent the conversion of Tajiks to other faiths while banning the religious practices of Salafi and other Muslim preachers.

C o n c l u s i o n s

An active anti-Salafi position moved Hoji Akbar Turajonzoda, a prominent religious and political figure, into the limelight (just as earlier, on the eve of the republic’s independence) as the leader of the traditional clergy. At the same time, the neutral attitude of the IRPT to the Salafi issue and its moderate involvement with the media cost it several rating points. On the whole the year 2008 confirmed religion’s growing role in the nation’s social and public activities. Amid the economic and moral crisis God remains the only indisputable authority. The government, which fears extremism and radicalism more than anything else, is tightening its grip on religious activities by adapting itself to reality rather than opposing it.

9 [http://www.state.gov/g/drl/rls/irf/2008/108507.htm]. 311 CENTRAL EURASIA 2008 Analytical Annual INTERNATIONAL AFFAIRS

Rashid ABDULLO Independent political scientist (Dushanbe, Tajikistan)

n 2008, the republic became deeply aware that companied this in the spring, the August war in the current model of state economic manage- the Caucasus, and the global financial crisis, I ment was incompatible with the tasks facing which began having a direct effect on Tajikistan the country at this stage in its development. This in the fall. problem was exacerbated by certain outstanding All of these problems and circumstances circumstances, the worst of them being the un- could not help but have a direct or indirect effect precedented and enduring bitterly cold weather on Dushanbe’s foreign policy activity. In terms of during the winter which seriously aggravated the content, this activity focused primarily on the permanent energy crisis at this time of year, mod- main task of attracting foreign investments. But ification of the government model in Russia and it was not as streamlined as the previous year, the shifts in the Russian power structures that ac- 2007, and was to a certain extent seasonal.

Winter

Until the end of February 2008, the country remained in the grips of the coldest and longest spell of cold weather in the past twenty-five years. Unable to cope with the higher loads, the extremely dilapidated energy network and transformers began to break down. In addition to these accidents, the overall situation was later exacerbated by power outages aimed at saving electricity. Even in the capital entire districts were left without electricity. The president was engaged in intensifying contacts with the outside world in order to alleviate the crisis by ensuring additional regular and emergency deliveries of electricity, gas, oil, and petroleum products to the republic. Tajikistan’s regional neighbors, Uzbekistan, Turkmenistan, Kazakhstan, and Kyrgyzstan, were the closest source of the energy resources the republic needed and the countries it could count on most for real assistance. This was particularly true since, for the first time in many years, it was in the winter of 2008 that contacts and relations with them stepped into the limelight and became vitally important for the republic. Cooperation with Turkmenistan proved to be the most propitious in this respect. On 28 Janu- ary, during a telephone conversation with his Turkmen colleague, Emomali Rakhmon raised the question of increasing energy deliveries to the republic and, at the beginning of February, daily deliveries of Turkmen electric power rose from 3.5 to 6.6 million kWh. Due to the difficulties experienced by Turkmenistan itself, on 8 February, these deliveries fell again to the previous level. But as early as 14 February, Turkmenistan once more increased its daily deliveries of electric energy to Tajikistan to 5.9 million kWh. This was achieved on 13 February after Tajik Energy Minister Gul Sherali met with President Gurbanguly Berdymukhammedov. The Tajik-Iranian agreements reached during Emomali Rakhmon’s earlier visit to Iran also promoted the positive solution to this problem. Under one of them, the Iranian side pledged to concede its quota of Turkmen electric energy to Tajikistan. Until the end of February, Turkmenistan supplied the republic with up to 10.7 million kWh every day.

312 REPUBLIC OF TAJIKISTAN International Affairs

The traditional non-conflict nature of Tajik-Turkmen relations, as well as the good personal relations between the two heads of state, largely predetermined Ashghabad’s rapid response to Dush- anbe’s requests. Turkmenistan highly appreciated the fact that during the difficult period the country experienced after Saparmurat Niyazov’s death, President Emomali Rakhmon remained by its new leader’s side. Relations with Kyrgyzstan also developed in a business-like manner. On 24 January, Tajik Prime Minister Akil Akilov, who came to Moscow to participate in a session of the EurAsEC, met with Kyrgyz Premier Igor Chudinov in the Russian capital. At the request of Tajikistan’s president, Akil Akilov asked his colleague to increase daily energy deliveries to the republic by at least 50 MW. On 29 Jan- uary, Kyrgyzstan began delivering electric power to Tajikistan. On 6 February, Tajikistan’s power engineers said that Kyrgyzstan was delivering 500,000 kWh a day to the northern region of Tajikistan and that the total volume of deliveries would reach 11 million kWh. As usual, relations with Uzbekistan were bumpy. On the one hand, Uzbekistan remained the largest exporter to Tajikistan not only of natural gas, but also of electricity. For example, in January, Uzbekistan delivered 68.7 mcm of gas to the republic totaling 10 million dollars and 210.7 million kWh of electric energy totaling 3.2 million dollars. On the other hand, electricity deliveries were frequently reduced and sometimes stopped altogether. On 24 January, the Tajik mass media reported that Uzbekistan had reduced natural gas deliveries to the republic by one third due to Tajikgaz’s debts. Prompt and timely payment of gas consumption goes without saying. But gas deliveries were reduced at the very time Tajikistan was experiencing its coldest weather. So it is not surprising that the republic’s population believed the actions of the Uzbek side to be politically rather than strictly economically motivated. This response in itself shows how difficult the relations are between the neighbors, who in many ways are the closest regional countries to each other. Against the background of the active position of Turkmenistan and Kyrgyzstan and the uneven but nevertheless significant support of Uzbekistan, Kazakhstan’s actions to help Tajikistan overcome the difficulties caused by the cold weather and energy crisis in no way correlated either to the level and state of relations between the two countries or to Kazakhstan’s potential. On 28 January, after the above-mentioned conversation with the Turkmen president, Emomali Rakhmon discussed the present state of and prospects for further cooperation between Tajikistan and Kazakhstan with Nursultan Nazarbaev on the phone. Nursultan Nazarbaev invited Emomali Rakhmon to pay an official visit to Kazakhstan. It stands to reason that the Tajik side was bound to ask for help in overcoming the difficulties the country was experiencing at that time. However the official report said nothing about this, which leads us to conclude that no satisfactory arrangements were reached on that score. The head of state also attempted to resolve the issues, problems, and difficulties that arose in connection with the cold weather and energy crisis by activating contacts with external states and international organizations. On 31 January, Emomali Rakhmon received Michael Patrick Jones, U.N. program coordinator in Tajikistan, and discussed with him the present state of and prospects for developing cooperation between Tajikistan and the U.N. Particular attention was paid to issues relating to the current energy crisis and the U.N.’s possible contribution to overcoming the difficulties. Michael Jones noted that the U.N. structures in Tajikistan were studying the country’s needs for electricity and emergency energy assistance and resolving the problems of providing public health institutions and other socially important facilities with electricity generators. According to him, the U.N. was also focusing its attention on bilateral and multilateral work with sponsors in order to find ways to finance the construction of small hydropower stations that could reduce the load on large hydropower plants.

313 CENTRAL EURASIA 2008 Analytical Annual

Subsequently, the UNDP played an immense role in ensuring that emergency humanitarian aid reached Tajikistan from different countries. Some of the first aid of this kind came from the government of Japan. At the Tajik Public Health Ministry’s request, it provided the republic with 2,200 blan- kets totaling 93,900 dollars. On 18 February, the U.N. asked the world community on behalf of the government of Tajikistan to render the republic no less than 25 million dollars in emergency humanitarian aid. Even prior to the U.N.’s appeal, some international organizations and countries had already begun sending various kinds of humanitarian aid to Tajikistan. For example, on 13 February, CSTO Secretary Gener- al Nikolai Bordiuzha said that members of the organization—Russia, Kazakhstan, and Kyrgyzstan— had already begun providing the republic with humanitarian aid. On 14 February, the UNICEF office in Tajikistan noted in its press release that the energy crisis was threatening the lives of 3.5 million children. The office organized immediate emergency aid to children and mothers totaling 200,000 dollars. On 15 February, the U.S. Embassy stated in its press release that the U.S., through USAID and its partners, Save the Children, CARE, and Mercy Corps, was delivering emergency humanitarian aid—fuel, heaters, and clothing totaling 830,000 dollars, as well as 259,000 box lunches totaling 1.6 million dollars. The U.N.’s emergency appeal on behalf of the Tajikistan government created the necessary formal basis for various countries to send humanitarian aid to the republic. This aid, which included diesel generators, fuel, food, and so on, was sent by the U.S., Russia, Iran, Germany, Saudi Arabia, the Netherlands, Turkey, Great Britain, Japan, the PRC, France, the EU, the Aga Khan Foundation, the World Food Program, and the Food and Agricultural Organization. In January-February, 25 countries sent the republic 3,700 tons of humanitarian aid totaling 9.1 million dollars. According to the official statistics, most of the aid (64.7%) came from the U.S. Russia’s share in the assistance amounted to 15.7%. Tajikistan’s foreign policy activity aimed at softening the combined blow dealt by the natural disaster and permanent winter energy crisis comprised the main thrust of the republic’s international affairs in the winter of 2008.

Spring

With the onset of the warmer spring weather, Tajikistan’s relations with its regional neighbors gradually returned to normal. In March, however, the local water conflict between two border Tajik and Kyrgyz regions—Isfar and Batken, respectively—flared up again. The conflict was settled after the leaders of these regions met to discuss the issue. Meanwhile, the Kyrgyz mass media reported that on 31 March the Kyrgyz parliament adopted a resolution on the incident in which the government was asked to take appropriate measures to ensure territorial integrity, right down to the use of arms in such a situation. On 2 April, the Tajik Foreign Ministry said that the foreign ministers of both countries would discuss the issues relating to this incident in Ashghabad on 9 April, where they would be participating in a meeting between the foreign ministers of the Central Asian countries and EU representatives. On 29 April, a working meeting was held in Isfara between Secretary of the Tajik Security Council Amirkul Azimov and his Kyrgyz colleague Tokon Mamytov. During the talks, the ministers discussed cooperation in defending the Kyrgyz-Tajik state border and drawing up joint measures to settle conflict situations on the state border. The meeting ended in the adoption of a decision to create a number of headquarters for preventing, localizing, and resolving conflict situations at the level of the heads of provinces and regions of the two countries and to prohibit economic activi-

314 REPUBLIC OF TAJIKISTAN International Affairs ty in controversial sections of border territories until work on delimitation and demarcation of the state border was complete. On 16 May, a meeting was held between presidents Emomali Rakhmon and Kurmanbek Bakiev in Khujand, the administrative center of the Sogd region of Tajikistan. The talks ended in the signing of a joint statement, which noted in particular that legal registration of the Kyrgyz-Tajik state border meets the vital interests of the two countries. The presidents entrusted the governments of their countries to prepare an intergovernmental agreement on the prohibition of economic activity along the state border line until its delimitation and demarcation were complete, as well as an intergovernmental agreement on renting pasture land in the Kyrgyz Republic. In the spring, along with the customary stoppages and renewals of gas and energy deliveries by the Uzbek side, Tajik-Uzbek relations continued in pretty much the same way with a few new nuances. On 12 March, the Tajik mass media reported on another incident of a Tajik resident stepping on a mine set by the Uzbek side on the border between the two countries. Also in the spring, a scandal arose for the first time in all the years of cooperation between Tajikistan and international financial institutions. On 5 March, the IMF issued a press release, which said that Tajikistan had submitted an inaccurate report, on the basis of which the republic had been allotted almost 50 million dollars for implementing programs in 2004-2006 and that the IMF demanded that the money be returned. At the same time, the IMF said that it understood the difficult situation Tajikistan was in last winter. So instead of demanding that the money be returned within 30 days after adoption of the corresponding resolution, as per customary practice, it consented to the sum being repaid in installments. The IMF also suggested that an independent audit of the National Bank of Tajikistan be carried out. On 7 March, the Tajik side hurried to agree with the IMF’s position. On 28 April, President Emomali Rakhmon received Thomas Moser, Executive Director to the International Monetary Fund. The sides discussed cooperation issues. Thomas Moser said that several tricky issues were discussed during the conversation with the president and that the sides would soon arrive at a solution. On 30 April, head of the IMF delegation mission in Tajikistan Carlos Pinerua said that …the unpleasant episode involving submission of the inaccurate report was over. As for big Tajik politics, during the spring months the most significant events were President Emomali Rakhmon’s official visit to Algeria, participation in the OIC summit as well as in bilateral and multilateral meetings of the Tajik president and his Muslim colleagues with the leaders of several international Islamic organizations in Dakar, the capital of Senegal, and the meeting of the foreign ministers of the Farsi-speaking countries—Tajikistan, Iran, and Afghanistan—in Dushanbe. On 11 March, President Rakhmon met with President of Algeria Abdelaziz Bouteflika and Tajik- Algerian talks were held, during which the present and future of extensive bilateral cooperation were discussed, particularly in such an important sphere for Tajikistan as hydropower. The Tajik president put forward, and his Algerian colleague accepted, a proposal to hold a forum of the two countries’ businessmen. The talks ended in the signing of documents aimed in particular at developing cooperation in the energy industry. On 12 March, Emomali Rakhmon flew from Algeria to Dakar to participate in the 11th summit of the Organization of the Islamic Conference. When he arrived in Dakar, Emomali Rakhmon met with the organization’s Secretary General Ekmeleddin Ihsanoglu. The sides discussed reform of the OIC and the summit’s agenda. The same day, Emomali Rakhmon held a meeting with President of the Islamic Development Bank (IsDB) Ahmed Mohammed Ali. During the meeting the head of the IsDB said that his bank was planning to allot Tajikistan 65 million Islamic or gold dinars in addition to the 122 million dollars in loans and grants that are currently being used for development of the Tajik economy. The sides emphasized the need to create an investment holding of the IsDB in Tajikistan and increase the amount

315 CENTRAL EURASIA 2008 Analytical Annual of loans and grants offered, as well as to reach an agreement on financing deliveries of fertilizers to Tajikistan and expanding cooperation in education and public health. On 24-25 March a tripartite meeting of the foreign ministers of Tajikistan, Iran, and Afghani- stan was held in Dushanbe. According to the IRNA, an agreement was reached at the meeting on creating a tripartite investment company that was to function in compliance with international standards and attract its own and foreign financial resources to carry out joint projects. It also stressed the need for trilateral cooperation within the U.N., OIC, SCO, and other international and regional organizations. The sides agreed to create commissions at the level of the deputy foreign ministers for monitoring implementation of the agreements reached. Other notable events were the two-day (7-8 March) official visit to Tajikistan by Ukrainian President Viktor Yushchenko, Emomali Rakhmon’s visit to Kazakhstan (12-13 May), and the meeting between the Tajik and Russian foreign ministers on 27 March in Moscow. Viktor Yushchenko’s statement in Dushanbe about Ukraine’s desire to act as a participant in the international consortium for the Rogun Hydropower Plant was inconclusive since it remained unclear just how this desire would be implemented in practice. In the current circumstances Ukraine is unlikely to find the financial resources needed for investment in this or any other large project in Tajikistan. It is more interested in using at least some of the funds invested by others in the Rogun and other large infrastructure projects to buy the necessary equipment manufactured by Ukrainian enterprises. Contacts with Kazakhstan could be of great practical significance. But experience shows that the potential of Tajik-Kazakh relations is being far from fully tapped. It appears that extensive and real cooperation with the regional countries is not a top priority for Kazakhstan, despite the statements by its politicians to the contrary.

Summer

In August, the Tajik leadership again found itself faced with a difficult task—determining its position regarding the events in the Caucasus. As a post-Soviet state, ensuring its territorial integrity is an extremely urgent problem for Tajikistan. And it is not surprising that the republic has always been very understandable about Mikhail Saakashvili and his team’s desire to restore the country’s territorial integrity, but not about his intention to solve this task by means of confrontation with Rus- sia and reliance on the West. Such a choice is obviously ineffective. For the same reason, Tajikistan found it impossible to join Russia in its recognition of South Ossetia and Abkhazia as independent states. At the same time, the country’s leadership distanced itself in every way from the West’s tough, emotional, and non-pragmatic stance regarding this issue. On 6-7 June, President Emomali Rakhmon took part in an informal summit of the CIS heads of state in St. Petersburg. In his speech at the summit, he criticized the Commonwealth states’ economic and particularly energy cooperation. He even placed special emphasis on the fact that he did not feel the CIS countries had sufficiently supported the republic as it grappled with its difficulties during the cold winter. CIS summits are a good opportunity for the heads of states to hold bilateral meetings even if they do not always provide the necessary ground for discussing common problems. In St. Petersburg the Tajik president met with Russian President Dmitry Medvedev, Belarusian President Alexander Lukashenko, Turkmen President Gurbanguly Berdymukhammedov, and Kyrgyz President Kurman- bek Bakiev. Emomali Rakhmon’s first meeting with a new Russian President Dmitry Medvedev was of particular importance. At this meeting the presidents discussed scientific-technical cooperation and training

316 REPUBLIC OF TAJIKISTAN International Affairs military specialists at specialized Russian learning institutions. Dmitry Medvedev noted that the Rus- sian side is interested in active participation in building energy facilities in Tajikistan and expressed his certainty that Gazprom’s efforts in the survey and production of gas at two fields in the center and south of Tajikistan would yield good results. The sides expressed their satisfaction with the cooperation between the security structures and law-enforcement agencies of both countries. Emomali Rakh- mon invited his colleague to come to Tajikistan on an official visit. On 24-25 June a meeting was held in Beijing of the Tajik-Chinese intergovernmental commission on economic trade cooperation. The sides discussed technical and economic cooperation in the power industry and road building, privileged taxation, and food and energy security, issues that were all important for Tajikistan. The Tajik side suggested stepping up cooperation in the production in renewable energy sources and in the geological survey and production of minerals, in particular of uranium and precious metals. On 29 July, a three-day Chinese National Exhibit called “Chinese-Tajik Trade and Investment” opened in Dushanbe. More than 70 major companies that manufacture heavy construction and telecommunication equipment and technology and other commodities participated in it. The exhibit produced contracts totaling 189 million dollars. The same day, the Chinese suggested looking at the question of building a Kulma-Karasu-Kyr- gyzstan road in which Chinese banks could invest. On 7-8 August, President Emomali Rakhmon was in Beijing and participated in the opening ceremony of the summer Olympic Games. During his stay in the Chinese capital he received Z X Choi Invest President Gorden Yanro, who stated his intention to cooperate with Tajikistan in the production and study of the republic’s uranium supplies. Emomali Rakhmon also met with the heads of other large Chinese companies—Huawei, TBEA, Lijun, and Sinohait —and discussed investment in the country’s economy with them. On 14 August, it became known that the Chinese Sinohydro Company was examining the draft of an agreement on building the Nurabad GES-2 of 200 MW. On 26 August, after a meeting with Emomali Rakhmon, President of China’s Exim Bank Li Ruogu said that they not only discussed implementation of the Lolazor-Hatlon power transmission line (which has already gone into operation), the South-North power transmission line, and reconstruction of the Dushanbe-Khujand-Buston- Chanak—projects that are being financed by the bank for a total of 603.5 million dollars—but also the possibility of implementing new energy projects with China’s participation. Hu Jintao’s visit to Tajikistan on 27 August struck the final chord in Tajik-Chinese contacts for 2008. As usual, the Tajik-Chinese summit was productive. On 27 August, the republic’s Ministry of the Power Industry signed an agreement with Sinohydro, and on 28 August another agreement was signed with the Yunnan Phosphate Chemical Group. In the first instance, the Chinese company has pledged to design and build the Nurabad GES-2, including a double circuit 220 kV power transmission line on turnkey conditions. In the second instance, the sides will create a joint venture for manufacturing ammonium nitrate. The Tajik-Russian summit meeting held on 29 August was marked by essentially complete mutual understanding regarding the functioning of the Russian Federation Ministry of Defense 201st military base on Tajik territory, the joint use of the Gisar military aerodrome, the further strengthening of cooperation in the military and military-technical spheres, the increase in rates of economic-trade and scientific-technical cooperation between Tajikistan and Russia, and the implementation of mutually advantageous projects in the fuel and energy branch, including the carrying out of geological survey work and the development and operation of natural gas fields in Tajikistan in cooperation with Gazprom. The sides agreed to augment constructive foreign political cooperation on a bilateral basis within the framework of regional integration associations—the CIS, EurAsEC, CSTO, and SCO—and international organizations such as the U.N. and OSCE.

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The summit also showed that the disagreement between the sides regarding joint completion of the Rogun GES has still not been satisfactorily resolved during Dmitry Medvedev’s presidency either. The joint statement signed at the end of the summit by the presidents of the two countries contains only a vague mention of this project to the effect that the sides have confirmed their interest “…including in building the Rogun GES.” In June, preparations for the summit of heads of state of the Farsi-speaking countries intensified. In order to prepare for Iranian President Mahmoud Ahmadinejad’s visit to Tajikistan to participate in this summit and the SCO summit, a delegation of the Iranian Foreign Ministry headed by Deputy Foreign Minister Dr. Manoucher Muhammadi arrived in Dushanbe on 21 June. On 22 August, Tajik Foreign Minister Hamrokhon Zarifi and U.S. Ambassador to Tajikistan Tracey Ann Jacobson signed an agreement in compliance with which the U.S. will render Tajikistan aid amounting to 13.4 million dollars to strengthen security and establish law and order in the country. This money is to be spent on implementing projects to reconstruct border facilities, build border posts, develop the long-term potential of this service, in particular, train personnel and render technical assistance, support the Ministry of the Interior structures and the Drug Control Agency, support the rule of law by training judges and lawyers, and further improve the Criminal Procedural Code of the Republic of Tajikistan. Ambassador Tracey Jacobson noted that in 2007 18.8 million dollars were allotted by the U.S. government to strengthen security in Tajikistan. She said that her country intended to continue cooperating with Tajikistan in security because it appreciates the contribution Tajikistan is making to the fight against terrorism, drugs, and other current threats. On 29 July, Tajik Foreign Minister Hamrokhon Zarifi left for Tehran to participate in the regular meeting of the foreign ministers of the Farsi-speaking countries. In the Iranian capital he and his colleagues, the heads of the Iranian and Afghanistan foreign ministries, Manouchehr Mottaki and Rangin Dadfar Spanta, discussed the preparations for the summit meeting and issues relating to the proposed building of roads and railroads from Tajikistan to Iran through Afghanistan, the creation of a united Persian-language television channel, and cooperation in culture. On 28 August, a trilateral meeting of the heads of Tajikistan, Iran, and Afghanistan was held in Dushanbe. During the meeting it was stressed that implementation of joint projects in building roads, tunnels, bridges, and railroads linking the three countries, as well as high-voltage power transmission lines from Tajikistan to Iran and Pakistan through Afghanistan meet the interests of the three countries. The heads of state supported the idea of creating a single center for attracting investments into the economies of their countries. At the end of the trilateral summit presidents Emomali Rakhmon, Mahmoud Ahmadinejad, and Hamid Karzai signed a joint statement, a memorandum of trilateral cooperation in energy production, and a memorandum on completing construction of the Istiklol road tunnel between Tajikistan and Iran. This same day, a meeting of the Council of Heads of the SCO Member States was held in Dush- anbe and attended by representatives of the observer countries. At the summit, the Dushanbe Decla- ration, an Agreement on the Fight Against Illegal Circulation of Weapons, Ammunition, and Explo- sives, a Memorandum on the Foundations of Partnership Relations between the SCO Interbank Asso- ciation and the Eurasian Bank of Development, a Decision on Confirmation of the Resolution on the Status of Partnership in the SCO Dialog, a Decision on Approval of the Report of SCO Secretary General on the organization’s activity last year, a Decision on Approval of the Report on the Activity of the Regional Antiterrorist Structure in 2007, and a Joint Communiqué were adopted. Other events relating to the development of Tajik-Western contacts that deserve mention are the arrival of EU Special Representative for Central Asia Pierre Morel in Dushanbe on 14 July on a two- day visit. He discussed with President Emomali Rakhmon the upcoming European Union-Central Asia forum on security and the conference to strengthen borders and fight drug trafficking to be held in Dushanbe in September and October.

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An important and even breakthrough event in the development of Tajik-European cooperation was the signing of four agreements at once between Tajikistan and Germany on 25 July totaling 53.5 million euros. There are plans to allot 5.5 million euros of this amount on a gratuitous basis to implement projects in assisting small and medium businesses, supporting microfinancing in rural areas, and implementing programs for assisting reform of the professional and primary education system. Twen- ty-five million euros will be used to implement the Rehabilitation of the 220 kV Switchboard at the Nurek GES project, whereby 18 million will be in the form of a loan for 40 years at a 0.75% annual interest rate and with a grace period of 10 years, and 7 million in the form of a grant. This project is to be implemented within four years, by 31 December, 2012. The money will be used to replace the worn-out electric equipment of open switchboards with new energy-saving installations. This loan is the first really serious participation of Western countries in the post-Soviet history of Tajikistan in the modernization of one of the country’s major, strategic, and backbone energy facilities.

Fall

Emomali Rakhmon’s big August politics continued during his September visit to New York to participate in a regular session of the U.N. General Assembly. He tried to take advantage of his stay in New York to interest the U.S. in his country’s economic development. On 25 September, in his speech to the General Assembly, Emomali Rakhmon stressed in particular that more than 55% of all of Central Asia’s water supply form in Tajikistan, that only about 5% of the country’s annual hydropower potential of 527 billion kWh is being tapped, that without implementation of hydropower projects the republic will not be able to ensure its sustainable growth and the demand of the region’s other countries for water, and that his country is counting on the support of the Bretton Wood institutions and U.N. partners in the private sector for carrying out its plans. The same day, President Rakhmon met with U.S. Department of State Under Secretary for Po- litical Affairs William Burns. The sides emphasized their willingness to step up interstate consultations regarding development of the power industry, transportation, and communications in Tajikistan, as well as regarding the creation of an energy market on the territory of the Central Asian countries and the establishment of strong ties with international financial organizations. The main vectors in Tajik-American cooperation were also discussed at the meeting between Emomali Rakhmon and representatives of U.S. business circles held on 26 September. This time it was not so much the Tajik as the American side that prompted its business circles to take greater part in the Tajik vector. Speaking before them, Deputy Assistant Secretary for South and Central Asian Affairs George A. Krol emphasized that the U.S. was and continues to be Tajikistan’s friend and partner, that it will assist its development, and that Tajikistan is always in the focus of its attention. This clearly stated position was supported by David Robson, head of Tethys Petroleum Limited, who in- sistently called on American businessmen to work in the Tajik vector and said that plane tickets to Dushanbe were not so easy to buy these days and if the Americans did not hurry, tomorrow it would be too late, others would beat them to it . In November, after Barack Obama’s victory at the presidential election, Emomali Rakhmon’s New York contacts continued in Dushanbe. On 11 November, cooperation issues between Tajikistan and the U.S. were discussed during a meeting between President Rakhmon and Deputy Assistant Secretary for South and Central Asian Affairs George A. Krol. The same day he also met with several officials, representatives of the business sector and NGOs, presented a report at the international conference on Central Asia and Afghanistan: Challenges, Opportunities and Prospects, and gave a press conference.

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Nor were the West Europeans slow on the uptake. It appears that they were just as affected as the Americans by the new image Russia presented to the world after Georgia’s shocking defeat in the open warfare with this country and the anti-Russian phobias clearly stirred up in the aftermath. Tajikistan was in favor of the West Europeans’ desire to move towards a more pragmatic and practical policy in their relations with the Central Asians. On 20 October, the president’s state advisor on economic policy Matlubkhon Davlatov, Minis- ter of Economic Development and Trade Gulomjon Bobozoda, Minister of Labor and Social Security Shukurjon Zukhurov, Minister of Public Health Nusratullo Salimov, and Chairman of the State Com- mittee on Investments and State Property Management F. Khamraliev met with Dirk Megank, head of the mission for expanding cooperation between the European Commission and Tajikistan within the EU’s Central Asia strategy adopted in 2007. During the meeting the sides defined the bilateral cooperation programs for 2009-2010 totaling 43 million euros. They said that Tajikistan would receive the largest share of bilateral assistance of 66 million euros between 2007 and 2010. The European Com- mission has already allotted 23 million euros for 2007-2008 for implementing social programs. On 21 October, a two-day ministerial conference on Border Management and Drug Control in Central Asia began in Dushanbe. It was attended by delegations from the European Union countries, Russia, the U.S., as well as Central Asia, Afghanistan, Iran, China, and Japan. It is expected that as a result of the conference Tajikistan will be rendered comprehensive support in strengthening its borders, ranging from deliveries of uniforms to repair and modernization of checkpoints and border outposts. This assistance is in the interests of the international community itself. According to President Rakhmon, Tajikistan is one of the main obstacles to the transit of drugs to the CIS, Europe, and the U.S. Tajik Foreign Minister Hamrokhon Zarifi emphasized that the financial and material resources allotted by the international community do not always correlate to the growing level of drug aggression. On 24 November a meeting was held between the Tajik president and Norbert Justin, the new head of the European Union office in Tajikistan. After the meeting Norbert Justin told journalists that many EU projects and programs are currently being implemented in Tajikistan and a dialog is being held at the governmental and other levels…. The European Union supports the investment climate and the republic’s trade relations with the EU countries…. The European Union is playing a leading role in drawing up a strategy for developing the country’s social sphere and exerting efforts to maintain stability in Tajikistan itself and in the region as a whole. Norbert Justin emphasized in particular that during the meeting the question was discussed of rendering assistance in strengthening the borders and that Brussels is expecting a visit from President Rakhmon. On 5 December, a representative of the European Commission delegation in Tajikistan said that the EC and the republic’s government had signed a Second Financial Agreement for 14 million euros to support the government’s reforms in social security. It supplements the first agreement signed by the sides in January of this year for 9 million euros. In compliance with the agreement, Tajikistan will be granted 17.5 million euros over two years in the form of budget support and 5.5 million euros in technical assistance. Tajik-German, Tajik-French, and Tajik-British contacts were the most noteworthy elements of bilateral relations during the fall. On 7-8 October, a two-day meeting was held in Dushanbe of the Tajik-German intergovernmental commission on cooperation. It was stated that within the framework of technical and financial cooperation the German government would render Tajikistan additional assistance over the next two years totaling 36 million euros—29 million euros of which was to be used to implement financial cooperation projects and 7 million euros to implement technical cooperation projects. On 17 October, a German Center was opened at the Technological University of Tajikistan. Head of the DAAD Information Center Kai Franke said that specialists with a good command of German were needed in the technical sphere for developing economic relations between Germany and Tajikistan.

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On 20 October, Tajik Foreign Minister Hamrokhon Zarifi received Head of the Federal Foreign Office Directorate-General for the United Nations and Global Issues Peter Wittig. During the conversation they discussed bilateral cooperation and German investments for implementing hydropower projects in Tajikistan. On 26-27 October, Prince Andrew, Duke of York, visited Tajikistan. On 27 October, he was received by President Emomali Rakhmon. During the hour-long conversation, they discussed political and economic issues of mutual interest. At the end of the meeting, Prince Andrew told journalists that the relevant British ministries and business structures would be asked to study the potential of the Tajik market. He also said that Great Britain was ready to render help in financing the EU’s programs to strengthen the Tajik-Afghan border. On 27 November, a loan agreement for 17 million euros was signed in Dushanbe between the country’s Minister of Finance and the French bank, Natixis, for the construction of an air terminal at Dushanbe’s international airport. In compliance with it, a long-term loan will be granted for 35 years at a 0.15% interest rate with a grace period of 20 years. On 31 October, Prince Aga Khan IV, head of the Ismailites, arrived in Dushanbe on a six-day visit. The same day, he was received by Emomali Rakhmon. The sides discussed strengthening cooperation in implementing projects in agricultural product processing, developing the tourism infrastructure, implementing projects in energy, communications, and construction, and reconstructing roads. On 1 November, Aga Khan IV met with chairman of the upper chamber of the Tajik parliament Ma- khmadsaiyyd Ubaydulloev. On 1 December, Makhmadsaiyyd Ubaydulloev began his six-day visit to the PRC. On 3 Decem- ber, he met with Chairman of the Standing Committee of the National People’s Congress Wu Bang- guo. The latter expressed his gratitude for Tajikistan’s resolute support of the PRC in the Taiwanese and Tibetan issues and in the fight against the forces that want to set up Eastern Turkestan. Wu Bang- guo confirmed the Chinese side’s desire to execute the previously reached agreements and signed contracts and strengthen business cooperation in the mining industry and agriculture. In addition to Beijing, Mr. Ubaydulloev also visited Shanghai and Urumqi. The Tajik parliamentary chairman’s visit saw that Tajik-Chinese relations in 2008 ended on a high note. The growing competition from the U.S., EU, and PRC had a positive effect on Tajik-Russian cooperation in implementing investment projects. On 2 September, representatives of the Barki Tojik energy holding said that by way of executing the agreements reached at the Rakhmon-Medvedev summit, Russia’s Inter RAO UES was being offered projects for building the Urfat, Obburdon, and Yavroz GES (the capacity of the largest of which will amount to around 250 MW) and that a bilateral working group was being created to determine which project will be implemented first. On 17 September, bilateral cooperation between Tajikistan and Russia was discussed at a meeting between Emomali Rakhmon and head of the Russian presidential administration Sergey Naryshkin. The sides focused particular attention on cooperation between the two countries in hydropower and in the production of gas, oil, and other minerals. Sergey Naryshkin expressed the willingness of the Russian side to participate in building the Rogun GES. On 24 October, Tajik Foreign Minister Hamrokhon Zarifi said that Tajikistan was continuing talks on creating an international consortium to finish building the Rogun GES with all countries that wish to participate in this project, including the Russian side. “We want Russia to participate within the framework of an international consortium,” said Hamrokhon Zarifi. On 24-25 October, the Third Interparliamentary Forum “Russia-Tajikistan: Potential of Interre- gional Cooperation” was held in Dushanbe. The Russian delegation was headed by Chairman of the Federation Council of the RF Sergey Mironov. On 5 November, the third unit of Sangtuda GES-1 was officially put into operation. President Emomali Rakhmon noted that from 20 January, when the first unit of the GES went into operation, to

321 CENTRAL EURASIA 2008 Analytical Annual the present day, 840 million kWh of electricity have been generated at the power plant, which made it possible to ease the electricity shortage in the country to a certain extent. On 14 November, a report appeared that the previously mentioned bilateral work group had already held two meetings and visited the construction sites of the future Urfat, Obburdon, and Yav- roz GES. A third meeting was to be held before the end of the year and the Russian specialists were to visit the future construction sites again. The Russian side is to present the feasibility reports for the projects to Dushanbe in the first quarter of 2009. On 26 November, Tajik President Emomali Rakhmon and Head of the Presidential Administra- tion Sergey Naryshkin met and discussed the progress reached in the agreements concluded during President Dmitry Medvedev’s official visit to Tajikistan in August. The main attention was focused on the development of cooperation in the economy and commerce. The sides discussed how the Sang- tuda GES-1 project was going. Work groups were looking into the Rogun GES question. During this meeting President Rakhmon and Sergey Naryshkin also discussed military-political cooperation, including within the framework of the CSTO, as well as the conditions for the functioning of the 201st Russian military base in Tajikistan. The end of the fall and the first days of December were marked by Emomali Rakhmon’s visits to Iran (27-28 November), Qatar (28-30 November), Yemen (30 November-1 December), and Ukraine (3-5 December). Emomali Rakhmon’s second visit to Tehran in 2008, just as the first in February of the same year, was largely predetermined by the coming winter, as well as by the unfolding world financial crisis. It was important for Tajikistan to talk over possible energy deliveries with the Iranians before the cold weather set in. It was also important to receive Iran’s guarantee that it would implement energy and other projects in Tajikistan. A drop in oil prices also meant a reduction in the Iranian side’s financial possibilities. Emomali Rakhmon expressed his concern about this circumstance by mentioning the insufficiently high construction rates of Sangtuda-2 GES and emphasizing the need to speed up work to finish the Istiklol tunnel that joins the country’s center with the north and accelerating the work to design the Shurab GES. The sides also decided to create a joint venture in Tajikistan for railway car repair, metal smelting, and the manufacture of energy-saving lamps. In Qatar, Emomali Rakhmon discussed the development of bilateral cooperation with Emir Hamad Bin Khalifa Al-Thani. The priority vectors of this cooperation were opening direct air communication between the two countries, building a large mosque and contemporary school and residential buildings using Qatar investments, creating joint ventures for processing honey, fruit, vegetables, meat, and milk aimed at the subsequent export of these joint ventures’ products, and practical implementation of the cooperation agreements. The prospects for this cooperation were also discussed during Emomali Rakhmon’s meetings with Qatari Prime Minister and Foreign Minister Sheikh Hamad bin Jassem bin Jabor Al-Thani and Minister of Finance, Economy, and Commerce Yousuf Hussain Kamal. On 30 November, Emomali Rakhmon arrived in the Yemen capital of Sana’a. On 1 December, he discussed the prospects for developing Tajik-Yemen relations with Yemeni President Ali Abdul- lah Saleh. The talks between the delegations of the two countries ended in the signing of four documents: on economic trade cooperation, on scientific-technical cooperation, on cooperation in education, and on political consultations. This laid the foundation for the contractual-legal base of bilateral relations. The heads of the two states also agreed to open a consulate of the Republic of Tajikistan in Sana’a. A relatively large diaspora of Tajik citizens has currently formed in Yemen. It comprises more than 700 people, at least 80% of whom are medical workers. This circumstance has made the Tajik state’s protection of their interests more pertinent. The decision to open a consulate was the first practical step in this direction. On 3 December, President Emomali Rakhmon left on a three-day state visit to Ukraine. The visit began in Lvov where his elder brother, who was killed during service in those parts, is buried.

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On 4 December, Tajik-Ukrainian talks began in Kiev, which ended with the signing of several documents. From the viewpoint of Tajikistan’s main interests, the most that can objectively be expected of Ukraine in implementing Tajik strategic infrastructure projects is the selling of energy and other equipment by Ukrainian enterprises. It is obvious, however, that they are experiencing certain difficulties with their sale. These difficulties have also been aggravated by the current financial and already economic crisis. Given the circumstances, it would serve Tajikistan well to take advantage of the current situation and diversify its sources for obtaining state-of-the-art equipment, as well as take advantage of the growing competition among the producers of this equipment and obtain what the republic needs on the best conditions for it.

* * *

On 19-20 December, President Emomali Rakhmon participated in an informal summit of the CIS heads of state in Kazakhstan. It was a strange summit. Almost half of the CIS heads of state refused to participate in it for one reason or another. With respect to Tajik interests, the most significant thing about the summit was the discussion of ways to jointly combat the world financial crisis and increase regional integration, as well as the decision to create an anti-crisis fund for 10 billion dollars. Emomali Rakhmon’s participation in the December CIS summit put the final touch to Tajikistan’s big diplomacy for 2008. On the whole, its results can be described as very satisfactory but not as impressive in terms of real investments into the country’s economy as 2007 and particularly 2006.

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TURKMENISTAN

GENERAL OVERVIEW

Azhdar KURTOV Research associate, Russian Institute of Strategic Studies (Moscow, Russian Federation)

he year 2008 proved to be another year of severe tests for the Central Asian Region, mainly caused by outside factors. The unexpectedly cold winter caught practically all the newly independent T states unprepared. Turkmenistan had its share of tests: transportation and deliveries were not the only victims of the cold weather. The leaders realized that neither the fuel and energy complex nor the large stocks of natural gas could guarantee the smooth functioning of the social system. The winter crisis forced Turkmenistan to suspend power and gas deliveries to some of its neighbors: the domestic market demanded much more fuel and energy than normal. Compared to its neighbors, Turkmenistan survived the winter without the unpleasant excesses that largely discredited the authorities of Tajikistan and Kyrgyzstan. The world financial crisis, which has been marching across the planet since the late summer of 2008, proved to be another test. Once more the republic managed to remain beyond the crowd of outsiders and losers mainly thanks to several factors unrelated to the wise politics of the country’s leaders or the well-substantiated government programs. First, in the post-Soviet period Turkmenistan, which has chosen totalitarian modernization, did not allow real market relations and free enterprise as its immanent feature to develop to any great extent. State paternalism in the financial and economic sphere under which the projects and construction budgets for each apartment block were endorsed by the head of state made it impossible for Turkmen businesses to become fully involved in the worldwide financial exchange. The Turkmen leaders frowned on receiving loans from foreign banks, buy- ing shares from foreign funds and companies, promoting the republic’s blue chips on stock exchanges, and engaging free monetary operations, including inevitable speculations. Thanks to the archaic and highly conservative policies, the gusts of the world financial tempest did not shake the republic’s economic pillars.

324 TURKMENISTAN General Overview

The fact that the country’s economic model was based on natural gas as the republic’s main export item was the second favorable factor. Turkmenistan has no role to play as an exporter in the world market of metals, oil, grain, or cars, in short in markets where prices plummeted in the fall of 2008. Therefore it sustained no losses when others were badly hit by the changed situation in the world markets. Demand for Turkmen natural gas increased and developed into fierce rivalry. Throughout 2008 natural gas prices climbed up. Ashghabad raised the selling prices for Russia and Iran and acquired China’s vague agreement to pay more for Turkmen gas in the future. Natural gas prices dropped at a much slower rate than crude oil prices in the European markets, which allowed Turkmenistan to enjoy a sustainable flow of money throughout 2008. More than that: acting together with Kazakhstan and Uzbekistan, Turkmenistan used the fact that Russia had raised the gas prices for the CIS countries (Ukraine in particular) to switch in 2009 to a new formula for pricing Cen- tral Asian natural gas. Gas prices skyrocketed: at the beginning of 2008 Gazprom paid $130 per 1,000 cu m of Turkmen gas. By the end of the same year the republic registered a much higher foreign trade balance of $17.6 billion. The above should not be taken to mean that the republic is insured against economic troubles; it seems that the people at the top know this. In 2008 they initiated changes in the economic and other spheres. Compared with the previous period (of Turkmenistan’s first President Niyazov) the country opened up to the world markets and acquired new foreign partners. The country has moved closer to its final aim: channeling foreign investment activities to the so-called Turkmen sector of the Caspian.1 In view of potential investors’ insistent demands that Turkmenistan’s hydrocarbon reserves be subjected to international auditing, Ashghabad agreed to international auditing, something it had pains- takingly avoided in the past. From his very first days in power the new president became aware that the problem created by the absence of international auditing data was interfering with the economic development plans. The partners were growing more and more impatient: they wanted to know how much fuel the republic had after all. Here too the Turkmen leaders remained true to their Oriental nature. The president issued a decree, which entrusted Gaffney, Cline & Associates of the U.K. to audit the gas resources of the South Yoloten-Osman and Yashlar fields in the Amu Darya basin (Eastern Turk- menistan). There are two points worth mentioning: n first, Gaffney, Cline & Associates is a well-known consulting firm with practically no auditing experience, which means that the choice leaves many questions about the British firm’s professionalism and unbiased approach unanswered. n Second, only some of the republic’s gas fields (probably those that could support Ashghabad’s claims about the republic’s vast hydrocarbon riches) were offered for auditing. In any case, in mid-October 2008 the British experts published the results arranged into three versions. For the South Yoloten-Osman fields the lowest assessment was 4 trillion cu m; the optimal was 6 trillion; and the highest 14 trillion. The optimal assessment was several times higher than at Dauletabad, the largest Turkmen gas field. The Turkmen leaders tend to count the South Yoloten-Osman field among the world’s five or even four largest fields. Yashlar turned out to be a fairly large field, too: the British company’s lowest assessment was 0.25 trillion cu m; the optimal was 0.675 trillion; and the highest 1.5 trillion cu m of gas. The presence of considerable natural resources is gradually helping to normalize the economic situation; the economic irregularities typical of the crisis period when the country was moving away

1 The Turkmenian sector is a conventional term since in 2008 the Caspian remained undivided, in the international- legal sense, among Turkmenistan, Iran, Azerbaijan and Kazakhstan, which interfered with legal and wide-scale economic activities in the sea. 325 CENTRAL EURASIA 2008 Analytical Annual from the socialist planned economy are gradually being remedied. On 1 May, 2008 the country acquired a single exchange rate for its national currency (the manat). Another economic novelty took place in April 2008 when the government decided to denom- inate the national currency on 1 January, 2009; this is the best illustration of the changes underway in Turkmenistan not limited to the economic sphere. The new banknotes lost the portrait of first President Niyazov, which used to appear everywhere: this happened after the numerous monuments and posters were taken down, his portrait removed from magazines and journals, and his name no longer mentioned in the official oath of allegiance.2 The new president, however, is in no rush to introduce novelties into social life; he is obviously apprehensive of pulling down the load-bearing structures and destroying the mechanism of power (something he shows no inclination to do) in a hurry. This explains why the 500-manat banknote (the largest denomination) still bears Niyazov’s portrait. The legal sphere was approached in very much the same way. In mid-January 2008, several holidays introduced by the former president were annulled but National Flag Day, which coincides with Niyazov’s birthday, survived in the Labor Code. In September 2008, the Constitution was re- formed after a fairly formal and mostly demonstrative national discussion. The new version, however, did nothing to change the autocratic nature of presidential power. The elections to the Mejlis of Turk- menistan, which from that time on had more seats than before (an increase planned by Niyazov), were held in the presence of international observers (another novelty); the result, however, was totally predictable: a one-chamber legislature obedient to the president and fully manageable. This should be clarified. The international community, including the U.N., is prepared to ignore the nature of Turkmenistan’s political regime and even demonstrate its respect of it and is striving toward wider cooperation (the U.N. opened a preventive diplomacy center in Ashghabad). The number of visits to Turkmenistan of foreign delegations of all levels is steadily rising; the intervals between the Turkmenian leader’s visits abroad are becoming shorter. The world today is ruled by cynical pragmatism rather than by the high ideals of democracy and human rights. All key entities of international policy involved in Turkmen affairs are fully aware of this. It seems that not only the authorities in Ashghabad but also a much wider circle of entities are demonstrating Oriental cynical hypocrisy. So far the Turkmen leaders have an opportunity to preserve the totalitarian regime in the highly favorable context of the high hydrogen resource prices. Had they wanted they could have alleviated the previous methods of primitive violence or replaced them with more inventive but in no way more civilized methods of authoritarian supervision. Today, nothing is forcing the country’s leaders to carry out real and important reforms; there is no pressure from civil society or the political opposition since there are no such structures in Turk- menistan. President Berdymukhammedov’s contacts with foreign politicians and bureaucrats have taught him that he can remain within the present limits of the authoritarian regime—the outside world is prepared to accept it. There is the threat, though not an obvious one, that the Turkmen president might shift to much harsher forms of governance. In September 2008 a serious armed incident took place in Ashghabad. According to official information special units of the republic’s security services liquidated a well- armed group of bandits dealing in drug trafficking. The city was shaken by machinegun fire and vol- leys of rocket launchers. The government could use these events (especially if they are repeated) to tighten up its repressive policies. The present barely noticeable and far from consistent retreat from totalitarian monopolism might peter out.

2 The fact that in May 2008 the parliament of Turkmenistan abandoned the obviously unviable Niyazov’s initiative to restore the generally accepted names of the months belongs to the same set of measures. 326 TURKMENISTAN Politics

It should be said, however, that there were many positive developments in 2008 in a number of areas, including the humanitarian sphere. New research institutes and higher educational establishments were opened; the number of computers at schools reached 9 thousand. For the first time, 1.5 thousand young people were sent abroad to receive an education. Turkmenistan is following its own course yet it is moving forward, not back.

POLITICS

Igor PROKLOV Research fellow at the CIS Department, Institute of Oriental Studies (Moscow, Russia)

he year 2008 can be described as a year of frenzied foreign political activity; however, equally important events took place on the domestic scene, about which experts and observers have not T yet agreed. There is the opinion that liberalization is slow and inconsistent: indeed, contrary to the expectations of the republic’s citizens inside and outside the country, the new president has done nothing that can be described as revolutionary. Those who think differently insist that there is a certain logic in everything President Berdymukhammedov does. After taking power he concentrated on cementing his position and removing the most dangerous rivals. In 2008 he tried to adapt what he had inherited to the new reality, discard the attributes of the previous epoch, and make his regime look civilized. Those who think that the domestic context is forcing the new president to tread with caution and prudence are quite right. Instead of posing as a revolutionary and bold reformer, President Berdy- mukhammedov preferred to pose as Niyazov’s successor who cares about stability and the inviolability of load-bearing political structures. The constitutional changes of 2008 (liquidation of the Khalk Maslakhaty and making the parliament professional) cannot be described as deep-cutting—they were intended to modernize the old regime. The novelties and changes of 2008 can be described as legal norms already tested elsewhere across the post-Soviet expanse and do not interfere with the already established regime of personal power. It should be borne in mind that the previous and present regimes rested on the appropriation of a large share of money obtained from the export of energy resources and other natural riches. To a certain extent the country’s leaders are forced to demonstrate reformist intentions because Western Europe and the United States want their share in the production, transportation, and sale of the country’s gas and oil (thus balancing out Turkmenistan’s relations with Russia and China, which has just started receiving Turkmen gas). This means that reforms in the social, cultural, and even economic sphere will continue while domestic policy will hardly change. As could be expected, 2008 was not marked by any more or less radical attempts to put an end to the Niyazov cult. All official foreign delegates are brought to the burial place of the first president; and Rukhnama and its ideas about the role of the Turkmen in world history are still part of the curriculum of all educational establishments, even though in a less prominent form. The Turkmenbashi personality cult will hardly be erased al-

327 CENTRAL EURASIA 2008 Analytical Annual together; this cannot be expected in the near future: the authority of the country’s present rulers might suffer too much. In the absence of a more or less coherent ideology the first president and his deeds will probably be mythologized: the leaders have repeatedly insisted that an Islamic state was not their goal. This means that many of Turkmenbashi’s ideas will survive, to be used by the new rulers: praise of the Turkmen nation as one of the oldest in the world that has made one of the greatest contributions to civilization. They will serve as the construction material for the new national institutions. As the founder of the independent state Niyazov remains the only ideological authority for the people; no one will profit from revising the foundations of new Turkmen independence. The new leaders are merely discarding the most odious and least popular attributes of the past. In May, Speaker of the Mejlis A. Nurberdyeva, acting, according to her statement, on the strength of numerous requests, asked the Cabinet of Ministers to restore the old names of the months (according to the Gregorian calendar) and the Eastern names of the weekdays. The names of the months and weekdays changed in 2003 were restored on 1 July, 2008.1 Earlier President Berdymukhammedov restored International Women’s Day (8 March) and Victory Day (9 May) and made the days of Niya- zov’s birth (19 February) and death (21 December), which were previously celebrated as holidays, normal workdays. Slowly but surely the portraits of the old president were removed from the streets and state offices to be replaced by portraits of the new president. It was promised that the gold statue of President Niyazov that moved together with the sun would be transferred from the capital’s central square to a less conspicuous location. The old parliament replaced all mention of Turkmenbashi in the national anthem with the word “people.” Early in 2008 a book with the tale-telling title of New Renaissance: Chronicle of 2007 reached the bookstores. Compiled by the Turkmenistan State Information Service, it lists the new president’s foreign visits and the summits in which he took part and offers detailed information about the new projects and reforms. The country’s ideologists have armed themselves with the term “new renaissance,” which is continuing the Golden Age of President Niyazov. True to the old habits, the new government continued marking important events with pompous architectural constructions. According to the official Internet portal Turkmenistan.ru, on 12 May the new president was shown the project of the Constitution Monument that would be erected in the center of Ashghabad. The 185-meter high construction, which symbolizes the date when the Fundamental Law was adopted (18th day of the 5th month), stands on an octagon (a symbol of the legendary Oguz Khan star). This perfectly fits the policy of the country’s rulers of planting in the people’s minds an image of their country and statehood as great and eternal. The rather unexpected decision of the World Karate Federation to grant Berdymukhammedov the highest, 6th, Dan2 “for his outstanding contribution to the development of national sports in contemporary Turkmenistan,”3 as the letter of the Fed- eration’s President Antonio Espinós says, deserves special mention. Traditional amnesties were announced in 2008, the largest of them being timed to coincide with one of the nights of the holy Muslim month Oraza. On that night 1,670 prisoners were released under a presidential decree. The lists, limited mainly to petty criminals, appeared in the press; none of those convicted of the “attempt on Niyazov’s life” in 2002 were pardoned. The officials are keeping quiet about the fate of former foreign minister and later main opponent of President Niyazov Boris Shikhmu- radov.

1 [www.turkmenistan.ru], 1 July, 2008. 2 It should be said that the right to a black belt (the 1st Dan) requires several years of persistent and intensive training. 3 “Prezident Turkmenii Gurbanguly Berdymukhammedov poluchil odno iz vysshikh zvaniy v karate,” Ekho Moskvy, 7 October, 2008. 328 TURKMENISTAN Politics

Those who remain skeptical about President Berdymukhammedov’s liberal reforms find arguments in the state of the republic’s mass media and access to information. During the election campaign the future president promised that the foreign press would finally reach the country. This was interpreted as wide access to information. So far, however, the Turkmen authorities have not opened access to foreign publications; subscription is limited to a very small number of state offices. There are four state TV channels in Turkmenistan and a national radio station; the republic publishes 24 national and local newspapers and 16 journals. It was announced that on 1 January, 2009 a national music TV Channel “Turkmen ovazy” would operate round the clock. Many in the republic, however, say that little has changed: the newspapers filled with official information all look the same; this also applies to TV and radio. As before, the time is filled with official information and greetings to the president. The president’s meeting with members of the Turkmen intelligentsia that took place early in 2008 changed nothing; the president criticized the Turkmen press, which, he argued, “inadequately reflects the stability obvious in all spheres of state and public life, including the bodies of state power and administration.”4 According to foreign information agencies, the president pointed out that journalists were not professional enough and that out of “the 80 thousand Turkmen words found in the dic- tionaries,” radio and TV were using “the same 200.” President Niyazov closed the country to the outside world and limited the media to covering expensive projects designed to support the prestige and laud- ing of the regime and its leaders. Old habits die hard: journalists are still adjusting themselves to the new rules and are slowly moving away from the old fears, “lest something goes wrong.” The new president insists on fresh approaches but self-censorship of the journalist community is winning: no one wants to be the first to introduce novelties. Journalists prefer to tread cautiously: they cherish their jobs and do not want to be arrested for anti-state activities. In a country where all achievements are ascribed to one person, where the head of state has publicly assumed responsibility for everything going on in the country, the smallest hint at criticism can be interpreted as an encroachment on the foundations of state order. Turkmen journalists have forgotten about “reflecting reality.” Over time, genuine liberalization of the media will clash with the president’s personal power. Until the government releases its grip on the media and starts protecting journalists against administrative pressure and the special services, journalists will keep on using their favorite 200 words. It seems that the government is prepared to offer the journalist community a “new reality” combined with larger funding and the latest TV and radio equipment. The situation, however, remained the same, at least in 2008. On 10 November, President Berdymukhammedov repeated his criticism of the media at a Cabinet sitting: he pointed to the “very low quality of the periodicals with a large circulation and ‘far from profound’ publications in many, including specialized, editions.”5 Two weeks later, on 22 October, the president signed a decision under which a state commission to assess the artistic level of literary works, theater productions, and film scripts was set up at the Cabinet of Ministers.6 This started talks about tightened censorship. A new version of the Constitution and the parliamentary elections were the central events in 2008. On 18 April, 2008 President Berdymukhammedov announced that a new commission for drafting a new version of the republic’s Constitution would be set up. On 23 April the president chaired an extended Cabinet sitting at which he pointed out that the state power and governance system should be radically changed. Constitutional changes were discussed as the most urgent issue. “The laws should be geared at reform and should move us forward. We cannot sit around and wait for the next meeting

4 Vremia novostey, 22 January, 2008. 5 “Prezident Turkmenii kritikuet periodicheskie izdania strany,” available at [www.turkmenistan.ru], 11 November, 2008. 6 See: “Pri turkmenskom pravitel’stve obrazovana kommissia po otsenke literaturnukh proizvedeniy,” available at [www.turkmenistan.ru], 22 October, 2008. 329 CENTRAL EURASIA 2008 Analytical Annual of the Khalk Maslakhaty to adopt a new law,” said the president.7 This launched the process of constitutional changes; the draft was published for a nation-wide discussion in July 2008 and was unanimously adopted on 26 September at a special session of the Khalk Maslakhaty. Radical changes throughout the state power and governance system starting with the Khalk Maslakhaty and Mejlis and going on down to the local self-administration structures were needed for several reasons. First, the Khalk Maslakhaty, Niyazov’s “brainchild,” ill fitted the division of powers. Its founder devised it as a body of popular power and an embodiment of the idea of the genuinely national traditions of the Turkmen people. This form of national consultation with the most respected representatives of the nation worked well in the first years of independence: it helped achieve national consent. Seemingly a “popular” democracy structure, it added legitimacy to Niyazov’s personal decisions. It was a cumbersome structure convened more than once a year only for adopting special decisions. The new rulers who wanted more flexible decision-making preferred the presidential republic (successfully tested in many CIS countries). Under the new version of the Constitution adopted in September 2008 the functions of the Khalk Maslakhaty were distributed among the president, the Mejlis, and the Cabinet of Ministers. The Mejlis was entrusted with adopting the Constitution, introducing amendments and addenda, discussing and adopting programs relating to the country’s political, economic, and social development, passing decisions on national referendums and on presidential, parliamentary, and local elections, ratifying and rejecting international treaties, changing state borders, and discussing war and peace issues. Elected bodies of power in the largest administrative centers and self-administrative structures in small towns and settlements received more power than before. The new Constitution changed much in the way the highest legislative branch functioned; the number of seats in the Mejlis increased from 50 to 125; and deputies were to be elected for five years from the constituencies with an approximately equal number of voters. In the past most of the deputies were professionally engaged elsewhere while the new parliament is devised as a professional structure with much wider powers. This put an end to the duality of power and mixed competences among several branches of power caused by the presence of the Khalk Maslakhaty in the state power system. Today, the republic’s government has acquired a more familiar form with a division of powers in which the legislative, executive, and judiciary branches function separately and mutually balance each another out. The new parliament will open its first session early in 2009; there are plans to renovate much of the political, economic, social, and cultural legislation: the laws on land, water, labor, and the criminal-procedural and civil codes in particular. The head of state placed the priority on preparing the legislative base for a gradual transfer to market relations and improving legislation concerning the private economic sector. However, the expert community generally agreed that the new Constitution did not change the principles of state governance; power is still completely personified while human rights and freedoms are still limited. The small shifts in the economic sphere are mostly decorative and are aimed at forming the country’s positive image in the West rather than at raising the standard of living. The Turkmen authorities have not abandoned the idea of consultations with respected representatives of the nation to discuss urgent domestic and foreign issues. On 5 December the president established a Council of Elders and outlined its legal powers. It will meet once a year and its sittings will be attended by the president, Cabinet members, and Mejlis deputies. The first meeting is scheduled for March 2009. The new rulers need it to demonstrate that the people’s representatives approve the novelties.

7 See: “Turkmenistan provediot masshtabnuiu Konstitutsionnuiu reformu,” available at [www.turkmenistan.ru], 24 April, 2008. 330 TURKMENISTAN Politics

On 14 December the country elected a new parliament under the close scrutiny of international observers. This was the first time the Elections Commission of Turkmenistan accredited about 60 experts and observers from the U.N., OSCE/ODIHR, and the CIS. The latter dispatched the largest mission headed by CIS Executive Secretary Sergey Lebedev, which highly assessed the way the elections were prepared and carried out. In fact, the results were easily predictable: all the candidates either belonged to the ruling (and the only registered) Democratic Party or were independent (loyal) candidates. Most of the voters remained indifferent to the results and suspicious of the government.8 The OSCE refused to send a full- scale delegation because, it stated, the elections were potentially a far cry from international standards. Western journalists were few and far between: many of the willing failed to receive permission to cover the elections. Experts agreed that foreign observers were merely present in the country: it was not their task to carry out full-scale monitoring of the elections and they were not required to supply the OSCE with their public reports. This practice, already tested in several Central Asian countries, allows the international institutions to save face without criticizing the regime, which is allowed to imitate a democratic process. This was the first time that citizens of Turkmenistan living outside the republic were able to participate in election of the parliament. There were 27 polling stations in Asia, the Middle East, Europe, and America where thousands of Turkmen citizens cast their votes. The smooth election campaign was disrupted by an extraordinary event. According to information from Ashghabad, between 10 and 13 September there was firing in the streets, which developed into a full-scale engagement and the use of armored vehicles. According to official information the local police detained a group of drug dealers involved in illegal drug trafficking.9 The Memorial and other human rights organizations offered their own version, according to which supporters of former political prisoner Hudayberdy Amandurdyev were taking their revenge on the law enforcers who had roughly treated his wife.10 The government had to admit that the ministries of the interior and national security sustained numerous losses and that, according to certain sources, they had to seek the support of the Russian special services. This cast doubt on the ability of the security structures to stand opposed, if needed, to terrorism, extremism, and criminal circles and to ensure the country’s national security. In this connection the restored practice of filling high posts that existed during Niyazov’s time cannot but cause concern. President Berdymukhammedov is following in the footsteps of his predecessor to select ministers and khiakims from among his closest circle. He gives them a trial period of six months after which they are severely criticized and removed from their posts. It should be said that the dismissed ministers were not quick on the uptake and were ignorant of the latest administrative methods. This is not surprising since their professional level is low: they were appointed either by their patrons or bought their posts. The present generation of Turkmen managers is locally educated; in the last 20 years the higher educational establishments have not revised their curricula; corruption in them is high while most students seek diplomas as their main aim. This obviously called for urgent measures. An Academy of Civil Service under the President will be set up on the basis of a presidential decree.11 The dismissed ministers and other bureaucrats will most likely be sent to the Academy rather than to prison. In April 2008 Turkmenistan revived post-graduate education.12 On the whole, the changes that took place in 2008 can be described as positive although there are indications that the government is unlikely to allow greater liberalization. The people at the top

8 [www.iwpr.net/?p=btm&s=b&o=348557&apc_state=hrubbtmdate20081215]. 9 [www.turkmenistan.ru], 14 September, 2008. 10 [www.ferghana.ru/article.php?id=5943]. 11 [www.turkmenistan.ru], 13 September, 2008. 12 [www.turkmenistan.ru], 1 April, 2008. 331 CENTRAL EURASIA 2008 Analytical Annual will probably limit themselves to modernizing the economic and social sphere and regulating it. In the absence of real alternatives and real counterweights to the president’s personal power, the regime might rapidly degenerate from fragile liberalization into harsh authoritarianism.

ECONOMY

Igor PROKLOV Research fellow at the CIS Department, Institute of Oriental Studies (Moscow, Russia)

he socioeconomic life of Turkmenistan in 2008 was notable for certain positive changes mainly driven by the “dosed” liberalization policy initiated by President Gurbanguly Berdymukhamme- T dov. Turkmenistan’s national economy analysis indicates that the new leadership of the republic has turned to a consistent course of rejecting the most odious aspects of Saparmurad Niyazov’s regime and some of the former approaches to national economy management. As a result of these moves, the Khalk Maslakhaty has been abolished, the structure of the republic’s executive and legislative power branches has become much more efficient, and many former executives of all the levels who were convicted under S. Niyazov have been released from prison. On top of that, the new authorities are even promising to resume unobstructed access to the Internet and the foreign press. Although all the above measures are far from being of a pronounced reformatory nature, they have made a positive impact not only on Turkmenistan’s image abroad, but also on the internal socioeconomic situation in the republic in general. Nevertheless, we cannot help but agree with many observers who argue that despite certain positive changes and quite a number of reformatory statements made public by the new Turkmen leadership, the economic policy pursued by the new authorities is generally based on former principles, namely, on almost total governmental control over all the economic agents operating in the republic. Moreover, it should be kept in mind that in addition to numerous monuments and portraits which are now being hastily replaced by the new authorities, the new Turkmen President G. Berdymukhamme- dov has received a highly undesirable heritage: the national economy of Turkmenistan is currently facing a most severe crisis, which may eventually threaten the political stability of the regime. It is also a reminder that the policy toward steady economic development undertaken by the authorities at the beginning of the 1990s resulted—by the time S. Niyazov passed away—in country-wide corruption, economic mismanagement, and significant deterioration of the internal social situation. The excessive dependence of Turkmenistan’s economy on hydrocarbon exports, the sluggish and inconsistent economic reforms, and the system-wide crisis in industry management have made Turkmeni- stan extremely vulnerable to the external environment, for it is absolutely clear that the republic is likely to face new challenges if it deteriorates. The most alarming thing is that during the last two years the situation with the submission of statistical data on the country’s economic development (to the CIS Statistical Committee in particu-

332 TURKMENISTAN Economy lar) has not changed. If we refer to the statistical reviews published both by the statistical agencies of the CIS and other world organizations and institutions (the U.N. Economic Commission, IMF, EBRD), we will quite frequently see dashes in the “Turkmenistan” column, as was always the case in previous years. And where separate figures are available, it is emphasized in the notes that Turkmenistan-related figures should be used with care, since these data are far from credible. As a matter of fact, Turk- menistan still remains the only country in the world that tends to conceal its real “achievements.” Based on the above, we should be highly critical of the last years’ socioeconomic development parameters made public by the Turkmen authorities.1 According to the official data unveiled by the Turkmenistan Statistical Agency, at the end of 2008 Turkmenistan‘s gross domestic product (GDP) reached 43.68 billion redenominated manats (TMM 43.68 billion), and the GDP grew by 10.5% compared to 2007. The share of industry increased by 15.1%, which was mainly promoted by a significant rise in investments in production—more than 70% of all the investments made. In 2008, production amounted to TMM 46.24 billion, which is up 23.9% compared to 2007. According to Turkmenistan‘s official statistical figures, the highest growth rates were achieved in industry (37.8%), construction (32.5%), trade (25.1%), transport and communications (20.8%). Ac- cording to the authorities, such good results were achieved owing to political stability, favorable trends in Turkmenistan’s economy, its efficient resource potential, the construction of new production facilities equipped with modern technological equipment, and a well-balanced financial policy. Introduc- ing a unified exchange rate, carrying out monetary reform, and reducing tariffs allowed the authorities to keep the inflation rate at a level of 8.9%. By the end of the year, the average wages in Turkmenistan grew by 13.3 % to TMM 2,802,600 (about $140).2 The unified exchange rate introduced by the republic’s Central Bank (from 1 May, 2008, one dollar was equal to TMM 14.250) proved to be quite a positive point in Turkmenistan’s financial system. The new unified rate was more than double the former official rate and was a little lower than the non- official rate. From the above-mentioned date the authorities began selling currency to individuals and corporate entities at the same rate. It is assumed that the exchange rate will be floating; however, it will probably be regulated administratively as before. Nevertheless, this step is expected to harmonize the republic’s monetary system, which, in the opinion of international and local economists, will enable Turkmenistan’s authorities to more extensively attract additional external loans and investments into the national economy. Foreign trade turnover amounted to $17.6 billion, which is 32% more than in 2007. Exports totaled $11.9 billion, or 33.7% up compared to the same period of the previous year. As for imports, they reached $5.7 billion. Therefore, exports exceeded imports 2.1-fold, with the surplus being $6.2 billion. According to experts from international economic organizations, such dynamics will make it possible to ease the influence of the financial crisis on the national economy. Foreign trade turnover growth (mainly due to the increase in prices for the energy resources exported by Turkmenistan) helped to strengthen the real sector of the republic’s economy and encouraged capital investment in infrastructure and social projects. It is worth noting though that the world economic financial crisis that broke out in 2008 has not directly affected the Turkmen economy so far. However, further aggravation of the crisis and a drop in world prices for energy resources could have significant negative impact on foreign currency inflows. One of the preventive measures to counteract such consequences was the creation of the Stabi- lization Fund of Turkmenistan in order to “avoid the negative impact of the world economic and fi-

1 [www.turkmenistan.gov.tm], 15 January, 2009. 2 [www.turkmenistan.gov.tm], 15 April, 2009. 333 CENTRAL EURASIA 2008 Analytical Annual nancial crisis on the national economy.”3 According to the idea of the Stabilization Fund creators, its financial basis will be formed from the remaining surplus of the state budget, and in the future it is supposed to accumulate the financial assets of the state. According to the President, this Stabilization Fund is expected to minimize the national economy’s dependence on the oil and gas sector and reduce the negative impact of external factors. Some of the Stabilization Fund assets will be placed with minimal risk in high-yielding, long-term financial covenants, which will contribute to the creation of Turk- menistan’s insurance fund for future generations. However, in the conditions of full non-transparency of the Turkmen financial system, most economists are still in the dark about the specific sources of the fund, its size, and where exactly the accumulated assets will be invested. According to the official data, foreign investments in the Turkmen economy increased 4.8-fold, however no specific figures have been given. It should be noted that the National Investment Program for Transforming the Social Conditions of the Population of Villages, Settlements, Towns, Etraps, and Etrap Centers was launched in the republic in 2008. During 2008-2012, there are plans to appropriate $4 billion for implementing the first stage of this Program from the state budget of Turkmenistan. In 2008, settlements refurbished with modern infrastructure were commissioned in a number of Turkmen regions under the auspices of this Program. However, according to the War & Peace Institute, not all of the ministries and agencies have succeeded in utilizing the funds allotted: “most of the funds appropriated in 2008 for motorway construction, urban redevelopment, and infrastructure building have remained unutilized, and 75% of the planned construction targets have never been met.”4 According to the experts, this situation could be explained by the lack of experience on the part of the local contracting organizations and the shortage of highly skilled managerial personnel. State budget revenues in 2008 amounted to TMM 10.1 billion (117.2%) and its expenditures totaled TMM 5.4 billion (62.5%), which exceeds the 2007 parameters by 2.2- and 1.5-fold, respectively. According to the Turkmen mass media, salaries, pensions, scholarships, and welfare payments were paid in a full and timely fashion in 2008, and all the debts to farms for crops delivered in 2007 were covered. Certain changes have also taken place in agriculture. The government’s measures to promote agricultural reform produced positive results; in particular, a considerable increase was observed in the production of grain, raw cotton, and various kinds of foodstuffs. On 3 November, while address- ing an extended session of the Cabinet of Ministers of Turkmenistan, G. Berdymukhammedov voiced his support of a more efficient approach to use of the resource potential of the republic’s agrarian branch taking into consideration the real capabilities of each region. In particular, G. Berdymukhammedov emphasized the need to take a package approach backed by the opinion of scientists and practical experts: “It is no secret that in the past our country’s agricultural branch focused exclusively on cotton growing. Throughout the entire territory of the country, from the north to the south, cotton was sown on all agricultural land despite the local climatic conditions. Even in the most northern etraps of the Dashoguz Velaiat we have been sowing cotton from year to year, although the weather conditions of this region with the relatively small number of dry and warm days are not good enough for cultivating this crop. The reason is very simple: the cotton has no time to ripen. Taking this into account, it appears more appropriate to cultivate grain here.”5 The president’s decision to increase the state’s procurement prices for wheat and raw cotton was a positive step in this direction. In particular, the state appropriated TMM 2 million ($140) for the purchase of one ton of wheat, which is expected to raise farmers’ net income by more than 50%.6 Earlier, in April 2007, the president signed a similar decree

3 State News Agency of Turkmenistan (TDH), 21 October, 2008. 4 [www.gundogar.com], 24 February, 2009. 5 Asiabusinessconsult.com., 4 November, 2008. 6 See: State News Agency of Turkmenistan, 20 August, 2008. 334 TURKMENISTAN Economy with respect to cotton procurement prices: for one ton of medium-fibered cotton the state was committed to pay TMM 5,200,000 and for one ton of fine-fibered cotton—TMM 7,500,000. As for the state’s procurement prices for seed cotton, they were also raised. Besides, from this time on, payments for the cotton purchased were made both in manats and in hard currency. According to the official data, in 2008 Turkmenistan harvested a little more than 1 million tons of raw cotton and the same amount of wheat,7 with the average crop yield being only 11.5 centners per hectare, and the average cotton yield 14.1 centners per hectare. At the same time, however, many observers are arguing that despite the optimistic reports on the part of the Turkmen authorities, the standard of living of most of the republic’s population remains at a rather low level. Even if we refer to the official statistic figures, we see that in Turkmenistan there is a big gap between the official macroeconomic parameters, on the one hand, and the indicators describing the actual standard of living, on the other. Based on the fact that most of the republic’s production facilities (including those of the fuel and energy complex) are owned by the state and the authorities are declaring a socially focused economic policy, it becomes apparent that the growth rates and dynamics of the population’s living standards are if not interdependent, at least intercomparable. Employment is still rather problematic: according to the estimates of foreign experts, the current rate of unemployment exceeds 50%. The Turkmenistan authorities have also emphasized their commitment to pursue a new energy policy. In line with their fuel and energy complex development strategy, a number of large projects are being implemented in the republic at the moment, the Turkmenistan-China and Caspian Gas Pipe- line construction projects being a priority. Turkmen leaders are still searching for alternative routes that could bring Turkmen energy resources to the world market. The newly established procedure for selling gasoline to vehicle owners (it was introduced in Turkmenistan in 2008) deserves special attention. Previously, one liter of gasoline at Turkmen gas stations cost 400 manats ($0.02), which means that 50 liters of gasoline could be bought for only $1. Such a low price was the main reason for the increased illicit sales of significant volumes of fuel to neighboring Uzbekistan where gasoline prices are much higher. This led to frequent fuel supply disruptions (especially in border areas) which, in turn, resulted in the formation of a fuel black market in Turkmenistan itself. All this created good grounds for corruption. However, starting in 2008, in accordance with a presidential decree, car owners will be provided with 120 liters of free gasoline; truck, bus, and tractor owners with 200 liters, and motorcycle and motor scooter owners with 40 liters. The sale of gasoline in excess of the set limit will be carried out at market prices approved by the government of Turkmenistan. To realize their right to free fuel, Turkmenistan’s car owners will be given special limit coupons for free refueling at state-owned gasoline stations. Simultaneously, a number of new gasoline stations will be built in Turkmenistan in 2008-2009, and a modernized system of payments using special cards will be introduced. Naturally enough, the local mass media are widely publicizing this decision as one of the major achievements of the social policy pursued by the authorities. In mid-March 2008, the British company Gaffney, Cline & Associates Ltd. started its audit of the gas reserves of the South Yoloten deposit located in the southeast of Turkmenistan, 50 km from the regional center of Mary, and as early as 4 October, the company’s representatives published the results of the audit of two gas deposits (South Yoloten-Osman and Yashlar).8 According to the official press release, the British company gave the following estimates for the South Yoloten-Osman deposit: low estimate—4 trillion, optimal—6 trillion, and high estimate—14 trillion cubic meters of gas. As for the gas-bearing fields of the second surveyed deposit, Yashlar, the British specialists provided the following forecast: low estimate—0.25 trillion, optimal—0.675 trillion, and high—1.5 tril-

7 [www.terkmenistan.ru], 16 December, 2008. 8 [http://www.terkmeninform.com/2008/10/29/0000267.htm] 335 CENTRAL EURASIA 2008 Analytical Annual lion cubic meters of gas. Therefore, the estimations of gas reserves available in Turkmenistan passed from the “prospective” category to the category of “officially confirmed reserves” and grew by almost 7 trillion cubic meters of crude hydrocarbons. Such estimates indicate that the South Yoloten-Os- man gas field now ranks among the world’s four or five largest gas deposits in the world. Its reserves are almost double those of the Gazprom-operated Shtokman field (which are estimated at 3.7 trillion cubic meters of proven gas reserves). The above figures indicate that Turkmenistan has actually become one of the key gas players in Eurasia, which may encourage many people to reas- sess their attitude both toward Turkmenistan in particular, and toward the geopolitical landscape in the region in general. In the context of the gas audit data released, all the remaining gas transportation projects (in addition to the Turkmenistan-China and Caspian Gas Pipeline projects) have a good chance of being implemented in the course of time. These plans include, first of all, the construction of the TransCas- pian Pipeline, which in the long-term perspective could be connected with the Nabucco Pipeline running to Europe through Turkey. This actually explains why the EU envoys in general and representatives of certain EU member states in particular visited Turkmenistan so actively in 2008. Whereas observers used to consider all the EU’s efforts to be purely tactical maneuvers aimed at easing Russia’s position regarding direct gas transits from Central Asia to Europe, confirmation of the fact that Turkmenistan does possess sufficient raw material resources makes people believe that the existing hypothetical plans for construction of the Nabucco pipeline could well be put into a practical framework and even go as far as setting up a construction consortium with a well-defined financial base. In 2008, Turkmen authorities were actively working to start natural gas deliveries to China. According to the most recent data, gas supplies will be launched in 2009 since the construction of all major infrastructure facilities has already been completed in Turkmenistan, Uzbekistan, Kazakhstan, and China. Moreover, in compliance with the latest agreements, Turkmenistan guarantees an increase in its deliveries from previously planned 30 billion cubic meters of gas per year to 40 billion cubic meters.9 Once launched, the gas pipeline to China will become a transportation project unequalled anywhere in the world since Soviet times. Therefore, Russia’s monopoly on Turkmen gas transportation will essentially be liquidated. However, in his speeches Turkmen President G. Berdymukhammedov was obliged to admit that there are serious problems in the performance of the fuel and energy complex. Essential drawbacks in the oil and gas branch are closely interrelated with the problems inherent in the entire Turkmen economy, namely, low efficiency amid significant financial inflows, inefficient management, low labor productivity, insufficient personnel motivation, poor occupational training, and particularly the training of young professionals. Many managers of structural divisions, both in the oil and gas sector and in other branches, have lost their jobs for violating fiscal discipline. Integrated industrial programs are being implemented too slowly, and there are plenty of violations in operating expensive production equipment. In this connection, many analysts doubt that the oil and gas industries will be able to independently provide for stable growth of gas production and gas deliveries to their foreign partners despite the fact that a few new gas deposits have been discovered. The problem is that the construction and development of new gas deposits will require significant investments and resources which are unavailable in the Turkmen economy at the moment. According to experts, the production cost of extraction in deep-seated high-sulfur deposits (the South Yoloten-Osman gas field has similar characteristics) will be rather high. In view of these difficulties and given that Turkmen experts have insufficient experience, Turkmenistan may choose to ask Gazprom for help.

9 See: Deutsche Welle, 4 September, 2008. 336 TURKMENISTAN Economy

In turn, Gazprom is interested in reliable and uninterrupted deliveries of Central Asian gas. On 3 June, Gazprom and Turkmenistan signed an agreement on Gazprom’s participation in gas investment projects in Turkmenistan. The deal was signed during a visit by Gazprom’s delegation led by Alexei Miller, Chairman of Gazprom’s Management Committee, to Ashghabad. The two parties agreed that Gazprom will be financing and building the new main gas pipelines from the east of the country, developing gas fields, and boosting the capacity of the Turkmen sector of the Caspian Gas Pipeline to 30 billion cubic meters. Being well aware of the fact that in the near future it could lose its monopoly on the purchase of Turkmen gas, Gazprom signed an agreement with Turkmenistan on Turkmen natural gas price formation principles. The agreement contains specific arrangements on market pricing principles within the framework of the long-term contract for Turkmen gas to be purchased by Gazprom.10 It is worth noting that Russian-Turkmen economic relations appreciably intensified in 2008. The official visit of Russian President D. Medvedev to Ashghabad at the beginning of July was an important event in this connection. Before that, in February, the two presidents met at an informal summit of CIS leaders in Moscow, and later, on 6 June, D. Medvedev and G. Berdymukhammedov held a meeting in St. Petersburg within the framework of the St. Petersburg International Economic Forum. According to Russian Federation Presidential Aide Sergey Prikhodko, “new opportunities are being created for Russian companies that are truly ready to work not only in the fuel-energy sphere, but also in other fields: machine-building, chemistry, construction, and telecommunications. Wider prospects are opening up for increasing trade between the two countries and further strengthening and expanding mutually profitable economic relations. A number of large projects with the participation of Rus- sian companies are currently at various development and implementation stages.”11 During the visit, the two parties confirmed their former arrangements regarding Caspian Gas Pipeline construction and further gas deliveries and agreed to organize direct railroad and ferry transportation services and increase the number of Turkmen students studying in Russian high schools. On 30 August, the Russian-Turkmen Intergovernmental Commission on Economic Cooperation met in Ashghabad. During the session, First Vice Premier of the Russian Federation V. Zubkov and Turkmen Deputy Prime Minister Rashid Meredov signed the Trade and Economic Cooperation Agree- ment aimed at closer cooperation between the two countries, first of all, in such sectors as fuel and energy, machine-building, the agrarian and industrial complex, construction, transport, telecommunications, etc. The two parties also agreed to develop long-term mutually advantageous cooperation in exploration work, in developing oil, gas, and other deposits, in building oil and gas pipelines and transmission lines, and in reconstructing power facilities with the attraction of investors from Russia. At the same time, Ashghabad also hosted the first Russian national exhibition “Economic Growth and Mutually Advantageous Partnership,” which was organized with the joint efforts of the Ministry for Industry and Trade of the Russian Federation and the Chamber of Commerce and Industry of Turk- menistan. Diversified equipment was presented at the exhibition ranging from aircraft construction to household electronics manufacture. However, the primary accent was placed on agricultural equipment and farm machinery. Along with the exhibition, a branch of the Gubkin Russian State University of Oil and Gas was opened in Ashghabad. According to Head of the Russian Presidential Administra- tion Sergey Naryshkin, significant growth in the volume of reciprocal trade had been observed over the last 18 months: it amounted to about $4 billion.12 On 5 March, 2008, the governments of Azerbaijan and Turkmenistan signed the Debt and Fi- nancial Claim Satisfaction Agreement.13 The parties managed to come to terms and resolve the long

10 See: Finmarket Information Agency, 25 July, 2008. 11 PRIME-TASS, 4 July, 2008. 12 Ibidem. 13 See: Regnum, 5 March, 2008. 337 CENTRAL EURASIA 2008 Analytical Annual gas delivery debt dispute, which could be considered a sign of normalization of the relations between these two Caspian states. Just six months later, on 28 November, an Azerbaijani-Turkmen summit was held in Ashghabad. Following the summit talks, the parties signed a package of documents fixing their commitment to cooperate in the fuel and energy sector, as well as in transport, communications, agriculture, and the textile industry. After that the format of the meeting was expanded and the parties moved to the city of Turkmenbashi where a tripartite meeting of the presidents of Azerbaijan, Turkmenistan and Turkey was held. This summit meeting primarily focused on gas issues.14 It should be emphasized that the Turkmen leaders kept a rather high profile in their foreign economic activities in 2008. Among other things, quite a few large-scale contracts were signed with companies from Germany, France, Turkey, and Hungary both on infrastructure development projects and on projects providing for the delivery of high-tech equipment.

C o n c l u s i o n

Despite certain positive socioeconomic changes, the Turkmen economy still appears to be highly vulnerable to crisis phenomena resulting from both internal and external factors. The most disturb- ing thing is that the heads of all industrial branches are again being dismissed after a rather short period of time in office for violations committed and non-performance. All of this indicates that the former management methods and approaches have been preserved in Turkmenistan and that the situation with human resources appears to be highly critical. On the other hand, a sharp slump in oil prices will inevitably entail a reduction in the price of gas, the export of which forms the basis of the Turkmen economy. This could lead to a sharp curtailment of investments in commenced projects and create insuperable conditions for attracting foreign investors to help modernize the republic’s fuel and energy complex.

14 See: Regnum, 28 November, 2008.

RELIGION

Islam PALVANOV Independent expert (Ashghabad, Turkmenistan)

he absolute majority of Turkmenistan’s population comprises Sunni Muslims. Apart from the Turkmen, there are also several Muslim ethnic groups in the republic: Uzbeks and Kazakhs form T the two largest, as well as smaller groups of Shi‘a Muslims (about 120 thousand) who are main- 338 TURKMENISTAN Religion ly Azeris and ethnic Persians. Turkmenistan belongs to the Turkic Muslim area, which can be described as unorthodox and fairly tolerant when it comes to observing religious dogmas; the secular and religious spheres are separated and religion does not interfere in politics. The collapse of the Soviet Union and the communist ideology forced Saparmurat Niyazov, the first president of Turkmenistan, to look elsewhere for an alternative. He found it in the Kemalist version of state order that preserved the secular nature of the newly independent state. Art 12 of the new Constitution adopted in 2008 confirmed the principle of separation of religious organizations from the state and guaranteed equality of all confessions. Since most the republic’s population identifies itself with the Muslim tradition, Islam is primarily regarded as an important element of the national and cultural identity. Its attributes are present in the state symbols and everyday life while the main Muslim holidays are celebrated as official days off. It should be said that states with a predominantly Muslim population that have preserved their secular nature (Turkey, Azerbaijan, and the post-Soviet Central Asian republics) are few and far between in the Muslim world. In the rest of the Muslim states Islam is officially proclaimed as an official or state religion; this is registered in the legislation and its relations with the other confessions. On the other hand, in Turkmenistan the principles on which the state arranges its relations with religious associations are of a very special nature. Since 1994 the Gengesh (Council) for Religious Affairs under the president has been keeping an eye on the religious activities in the republic. The Council is headed by the Mufti (head of the republic’s Muslims), deputies, the dean of Christian Or- thodoxy, and a civil servant. In the regions (velaiats) there are velaiat councils for religious affairs at the local administrations, the councils being headed by the regions’ chief imams. All of them draw salaries from the state and can therefore be described as civil servants. In this way Islam and the Or- thodox Church are incorporated into the state. This violates Art 12 of the Constitution, which pro- claims the principle of “freedom of religion and confession and their equality before the law” and contradicts another Constitutional provision according to which “religious organizations are separated from the state and cannot perform state functions.” This means that in Turkmenistan the highest religious figures of the two traditional confessions have a monopoly on shaping and carrying out state policies in relation to the other confessions. This is an unprecedented situation in a secular state. Today, the Council for Religious Affairs is headed by Charygeldy Seriaev, who began his career in the Mosque of Saparmurat hajji in Geok-tepe. Rovshan Allaberdyev is the republic’s Supreme Mufti; he began as a mullah in the same mosque. They are in fact civil servants who do not owe their posts to their spiritual authority and piety but were promoted to their high rank by President Niyazov for their loyalty and willingness to promulgate the new ideological postulates and fundamental ideas of Rukhnama among the faithful. The cult of the late president still survives in the country albeit on a lesser scale. All official delegations as a rule visit the Mosque of Spirituality in Kipchak (President Niyazov’s birthplace), which stands close to the family mausoleum of the first president. All visitors pass through the gates that bear an inscription in Turkmen: “Rukhnama is a sacred book, the Koran is the book of Allah.” On one side of the gates visitors can see the text of the oath of allegiance to the president carved in stone; on the other, there is the text of the national anthem. In 2008, certain liberalization notwithstanding, the authorities did not relieve their pressure on the religious communities or relinquish control over the sermons delivered in the mosques and churches. In 2008 the number of pilgrims to Mecca remained limited to 188 under a decree signed by President Berdymukhammedov.1 The figure itself was not selected at random: the aircraft of the

1 [www.turkmenistan.ru], 24 November, 2008. 339 CENTRAL EURASIA 2008 Analytical Annual national Turkmenskie Avialinii airline that carries out a chartered flight to Saudi Arabia can seat 188. There has never been any official information about the Saudi quota for Turkmenistan, which should be no less than 3 thousand. The figure 188 is too small for a predominantly Islamic country of 6 million. In 2008 the other Central Asian countries sent several thousand pilgrims to Mecca. Nat- urally enough, in Turkmenistan there are many more potential pilgrims, most of whom are prepared to pay. The Turkmen authorities still prohibit those not included on the official lists from going. Under the practice inherited from the Niyazov regime, the government selects the most loyal Sunni Muslims who practice moderate Islam. Those who deviate from the norm (or practice Shi‘a, or are too zealous) are controlled by the secret services and are not allowed out of the country. In many countries the budget pays for some of the pilgrims, others pay for themselves; the state cannot prevent Muslims from performing their sacred duty. The situation in Turkestan is different but the faithful have already mastered alternative ways: some of them go to Turkey as if on business and from there they travel on to Saudi Arabia. The Turkmen authorities fear that the hajj will boost the authority of the Muslims, especially the most zealous of them or those who were educated in Turkey, Syria, and Pakistan, which will create seats of discontent or even opposition to the ideology and political regime. Experts and political analysts tend to agree that, as distinct from its neighbors, Turkmenistan has successfully avoided Wahhabism and its agents partly because of the secret services and the government’s tight control over society and partly because religious fundamentalism is alien to Turkmen believers and the nation’s mentality. Fundamentalist Islam will not find fertile soil in the republic. All the efforts of Hizb ut-Tahrir’s emissaries to stir up discontent failed: people remained indifferent to their ideas and the literature they smuggled into the country. It should be said that attendance at the new huge and sumptuous mosques in Ashghabad and other cities is meager or even non-existent. There are several reasons for this: first, Islam is sort of the state religion in Turkmenistan; religious life is unfolding under the strict control of state functionaries and the special services while many of the believers are repulsed by the ideology of Rukhnama, the new holy book imposed on the people as a new religion. Second, the Turkmen, many of whom were nomads, never practiced the ritual religiosity typical of the Uzbeks, Tajiks, and other settled peoples. Any Turkmen understands himself to be a bearer of individual religiosity; many prefer to pray at home, alone, and in their native tongue. Their nomadic ancestors addressed Allah amid the desert sands. In the same way, present-day Turkmen find solitude conducive to their communication with God. A mullah is invited to attend special family occasions like marriages, circumcisions, funeral repasts, or festive meals. The mullah is placed at the head of the table and reads surahs. Normally people prefer older mullahs and pay particular attention to their performance. At the end of the event the mullah is given a small amount of money wrapped in a handkerchief. For many elderly people this is the main bulk of money they can get. In 2008 the tradition to pompously celebrate the main Muslim holidays (Oraza Bairam and Kurban Bairam) continued. President Berdymukhammedov congratulated the nation on the occasion of the Oraza Bairam holiday in the following tale-telling way: “In free Turkmenistan where moral purity, enthusiasm, religiosity, patriotism, and freedom of conscience reign supreme this holiday has acquired a new content and a new meaning. In the age of a new Renaissance the Oraza Bairam holiday occupies a fitting place in the life of our society as a national holiday that fortifies our unity, inspires our never-dying love of the independent Motherland, and instills the principles of charity and humanism.”2

2 [www.portal-credo.ru/site/?act=news&id=65662&cf=]. 340 TURKMENISTAN Religion

The Russian Orthodox Church of the Moscow Patriarchate is the republic’s second largest religious organization. According to certain sources, its followers constitute up to 9 percent of the total population; it has 12 registered parishes united into three deaneries. Prior to 2007 they were part of the Tashkent and Central Asian Eparchy of the ROC. On 12 October, 2007 the Holy Synod of the ROC separated the Turkmen Deanery from the Tashkent and Central Asian Eparchy and placed it under the Moscow Patriarch. Back in May 2005 President Niyazov addressed His Holiness Patri- arch of Moscow and All Russia Alexiy II with a rather unexpected request to transfer the Orthodox parishes in the republic’s territory directly to the Patriarch’s jurisdiction. It is thought that Turk- menbashi did not want to remain subordinated to Tashkent in any, even if indirect, way. Patriarch Alexiy II, unwilling to comply and equally reluctant to complicate the already far from simple relations with Turkmenistan, responded in a diplomatic and delicate way: “In accordance with the administration charter of the ROC, decisions of this type belong to the competence of either the Local Coun- cil or the Assembly of the Hierarchs. We treat your request with understanding and will study it when the time for the assembly comes.”3 Later, probably under pressure of the Turkmenian authorities or in an effort to prevent a schism that might have pushed the Turkmenian Church toward the Constantinople Patriarchate, the Holy Synod of the ROC moved the parishes away from the Tashkent and Central Asian Eparchy and formed the Turkmen Deanery under the Patriarch of Moscow and All Russia. This fact added importance to two- day visit to Ashghabad by Metropolitan of Smolensk and Kaliningrad Kirill, who filled the post of Chairman of the Department for External Relations at the Moscow Patriarchate, late in May 2008. The official commentary of the Moscow Patriarchate described the visit as a follow-up to the decision of the Holy Synod of the Russian Orthodox Church of 12 October, 2007 to remove the parishes in the territory of the Republic of Turkmenistan from the Tashkent and Central Asian Eparchy and set up the Turkmen Deanery under His Holiness Patriarch of Moscow and All Russia. The visit was organized to inform the top Turkmen leaders of the opinion of the Supreme Authority of the Moscow Patriar- chate on the position of the ROC in Turkmenistan.4 Metropolitan Kirill had the following to say in this connection: “The President of Turkmenistan is interested in setting up an independent Eparchy of the ROC in the territory of the independent and neutral state.”5 When in Turkmenistan Metropolitan Kirill met all the clergymen serving in the republic to discuss the urgent problems of the local churches surviving on donations: supplies of candles, religious literature, and holy vessels. Metropolitan Kirill concluded his visit with a joint service in the Resurrection Cathedral in Ashghabad performed by all priests and attended by a large number of parishioners; he addressed the audience and delivered the benediction of Holy Patriarch. This was the first ever visit of a top figure of the Moscow Patriarchate to Turkmenia. Before that Metropolitan of Tashkent and Central Asia was the highest church figure to visit Ashghabad. The position of the Orthodox believers remains difficult despite the official statements to the contrary: much is being said about the benevolent treatment of the Orthodox community by the leaders of the state and administrative structures of various levels. Material support of the churches, especially of those that need restoration, remains inadequate. Despite the fact that all Orthodox churches enjoy free gas, electricity, and communal services and the government allocates money to the churches, this is obviously not enough. Many of the churches are falling apart and need restoration and maintenance far beyond the Russian diaspora’s financial capacity. The local parishioners assert that

3 “Prezident Turkmenii mozhet sprovotsirovat’ raskol Russkoy pravoslavnoy tserkvi,” Vremia novostey, No. 126, 15 July, 2005. 4 See: “Mitropolit Smolenskiy Kirill vstretilsai s prezidentom Respubliki Turkmenistan,”.Patriarkhia.ru, 28 May, 2008. 5 [http://www.chrono-tm.org/?025004413800000000000001100000]. 341 CENTRAL EURASIA 2008 Analytical Annual most parishes are too poor to pay their priests. Religious educational establishments are located too far away, and entry and exit visas are too hard to obtain. This interferes with the smooth functioning of the local clergy on a day-to-day basis. The demand for religious literature is another important problem. The official policy keeps the country isolated from the world, which means that the parishes need libraries of their own; they could develop into centers of Russian spiritual culture, which are badly needed by the Russian diaspora and members of other ethnic groups educated in the Russian cultural traditions. Recently, an ever growing number of Turkmen has been displaying interest in Christianity and Christian Orthodoxy. The process was started by the insistent “Rukhnamization” of Islam and the inadequate educational level of the local Muslim clergymen—two circumstances, which created a spiritual vacuum. The local people prefer to seek advice from Christian priests, which means that at least some of the religious texts should be translated into Turkmen. It should be said that ethnic Turk- men who adopted Orthodox Christianity risk public insults and official accusations of betraying their nation. Relations between the local ROC heads and the Turkmen authorities are best described by the fact that the highest local Orthodox priest is a member of the Council for Religious Affairs; in this capacity he represents the government and should be guided by the “wise and far-sighted” policies of the country’s president. Inadequate information about the life of the Orthodox Church in the republic and isolation of the country from the rest of the world cannot conceal the fact that the Orthodox Church in Turkmenia has become an instrument of the Turkmen authorities. It tacitly agrees to ignore the fact that the Turkmen authorities refuse to register Christian religious associations in violation of Art 12 of the Constitution, which guarantees “freedom of religion and confession and their equality before the law.” In 2008 the flow of information about violations of the rights of non-traditional religious groups and their members continued. According to Western observers, the officials never relented: groups and individual members were persecuted, arrested, and put away in mental hospitals. In 2008 Turk- menistan was 13th on the annual list of countries that persecuted Christians compiled by the Open Door charity society.6 I think that everything said about the official treatment of these groups should take into account the situation in the country. For historical reasons the majority in the republic is Muslim; Islam is accepted as one of pillars of Turkmen national self-identification, which means that it is encouraged by the authorities, sometimes in a very special way. The so-called non-traditional confessions (mainly Protestant, Baptists, Pentecostals, Adventists, Jehovah’s Witnesses, Krishnaites, and Ba- hais) are treated by the locals (who are mainly guided by patriarchal ideas) as “exotic” and therefore hostile. This is an objective factor: Muslim societies in all countries are highly intolerant of the missionaries operating in their territories. The country’s new leaders are suspicious of any informal, including religious, activities that go beyond the limits of the official course aimed at creating a monolith Turkmen society. According to the Forum 18 observers, in 2008 the religious policies in the republic did not change: the followers of non-traditional religions were not allowed to build or open prayer houses, they could neither publish or import religious books nor travel abroad. Communities that the authorities found especially offending were never registered. In 2008, according to Forum 18, Head of ODIHR Christian Strohal visited Turkmenistan and offered the Turkmen government assistance on the issues of elections, the rule of law, and human rights through legislative support and other forms of bilateral cooperation. It was also reported that the visit

6 [http://www.opendoors-de.org/index.php?supp_page=weltverfolgungsindex_2007_kurz&supp_lang=de]. 342 TURKMENISTAN Religion coincided with an attack on local Protestants carried out jointly by the special services, local administration, and the local mullah. People were invited to special rallies at which the names of the Prot- estants’ parents were made public; they were threatened with having their electricity, gas, and water supply cut off, their children expelled from schools, and their land confiscated. They were accused of “criminal and political activities against the government.”7 According to the believers, under President Berdymukhammedov pressure on the faithful has increased: there are threats, police raids, fines, bans on the travel of religious activists, refusal to en- dorse their official status, and censorship of religious literature. Under the new president the state remains in control of the nation’s religious life. Forum 18 quoted one of the believers who referring to the presence of an official at each service in every community said: “The communities do not complain. They have to live with it. This is the way it was in the Soviet Union all the time.”8 There are still limits on the import and publication of religious literature, which leaves the believers wondering whether the law on religion or way the authorities act should be changed. The police and the special services do not hesitate to cooperate with the imams to intimidate Jehovah’s Witnesses and Protestants. Forum 18 failed to find at least one official willing to explain why Jehovah’s Witnesses and followers of other religions were persecuted. There is information that the Jehovah’s Witnesses tried to obtain registration not because they expected to succeed—they merely wanted to give the government a chance to obey the law. They applied for official registration in the summer of 2008; by early December they had received no relevant information. According to portal-credo.ru, many of the republic’s religious communities do not think it is worth having official registration: it merely attracted the attention of the state and invited greater pressure by the authorities, which are trying to force religious organizations to inform the secret services about their members. In fact, registration does not help to find a place for holding prayer services: de facto the use of land or a prayer house received free of charge is banned. Very much as before the Turkmen authorities have been continuing with the practice of deport- ing the most active members of religious communities with no Turkmen passports even if they lived in the republic for a long time. At the same time, the very complicated procedure of entering the republic does not allow religious communities to invite their coreligionists from other countries, thus keeping them isolated from the rest of the world. On the whole, in 2008 the state continued its violations of the Constitution, which declared freedom of consciousness. When President Berdymukhammedov assumed his office, he promised to observe human rights, but the state still infringes on freedom of thought, conscience, and religion. The authorities strive to control even the very limited sphere of permitted religious activities. Human rights organizations receive enough evidence to conclude that taking responsibility for the violations of freedom of conscience, one of the fundamental human rights, is the least of the Turkmen authorities’ concerns. However, the unfolding energy-related dialog with the West and possible cooperation in the gas transportation sphere might convince the Turkmen leaders to relieve their grip on society; this will inevitably improve the country’s human rights record. 9-11 December—Turkmenistan celebrates the Muslim Sacrifice Feast (Kurban Bairam).

7 [http://www.forum18.org/Archive.php?article_id=1088]. 8 Ibidem. 343 CENTRAL EURASIA 2008 Analytical Annual INTERNATIONAL AFFAIRS

Azhdar KURTOV Researcher at the Russian Institute of Strategic Studies (Moscow, Russian Federation)

ertain changes in Turkmenistan’s foreign policy, which became evident as early as 2007, continued to emerge in 2008. However this can in no way be described as a revolution or dramatic C 180-degree turn in Ashghabad’s basic foreign policy vector. Only researchers far removed from Central Asian reality could expect anything like that from President Berdymukhammedov. Those well versed in the intricacies of Eastern policy do not nurture such illusions. The matrices successfully used in Europe proved to be largely unproductive for comprehending the processes going on in Turkmenistan. I will risk voicing a rather unpopular idea. Despite its whimsicality, the Turkmen model that emerged during Niyazov’s era and was modified after Berdymukhammedov came to power proved not to be exclusively the product of the despotic mind of the nation’s autocratic leader. If it were true, abrupt changes could indeed have been expected of the Ashghabad authorities in their foreign policy pursuits. But the thing is that both the power model as a whole and its foreign policy component in particular have their own intrinsic common sense, are subordinated to specific aims, and are in no way built on a hunch or some personal whim. The model of totalitarian modernization chosen by the Turkmen leadership has its own logic. And, on the whole, this logic is no less rational than the logic behind the actions of the authorities in Europe’s parliamentary republics. Do not think, however, that by saying this the author is trying to defend the Turkmen regime. This is not true, although in all fairness, I must say that the foreign policy of the current Turkmen leadership is very prudent, circumspect, and in this sense rational within the framework of the totalitarian model that has become firmly established in this republic. At his meeting with the country’s diplomatic corps on 20 March, 2008, the president said that the main vectors of the country’s foreign policy strategy for 2008-2012 have been drawn up in Turk- menistan.1 In its foreign policy, Ashghabad is gradually building a system of relations with other players on the international arena that is beneficial to itself based on the ideas currently predomi- nating in Turkmenistan. So we should separate our analysis of the dynamics of Turkmenistan’s foreign policy from assessments of the far from universally attractive model of Turkmen totalitarianism. By recognizing the positive dynamics and success of the Turkmen government’s undertakings the author is in no way confirming his complete agreement with everything going on in Turkmenistan. In 2008, several significant aspects of Turkmenistan’s foreign policy can be singled out. n First, as in 2007, there was a steady rise in the number of the Turkmenistan leadership’s diplomatic contacts. According to the official information of the Turkmen Foreign Min- istry, 422 foreign delegations visited the republic in 2008,2 which works out at more than one every day. This fact in itself is very significant since it shows that the world commu-

1 The same day, the Turkmenistan presidential decree appeared on creating an institute of international affairs of the republic’s foreign ministry—an educational institution for the high-quality training of diplomats. 2 It should be noted that this index is lower than the one for 2007, when around 600 foreign delegations visited Turk- menistan. 344 TURKMENISTAN International Affairs

nity is not isolating Turkmenistan in response to either the evident human rights violations in this country or to the country’s authoritarian political practice, as the opposition Turkmen groups in emigration hoped. In addition, Ashghabad was frequently visited by representatives of those countries that traditionally belong to the democratic camp. Never before, for example, has the Turkmen capital seen such a large number of representatives of the European Union states. Whereby it must be noted that the qualitative composition of the foreign delegations visiting Turkmenistan has changed to a certain extent. Whereas during the years of Sapar- murat Niyazov’s rule, the state-controlled mass media imposed the opinion upon the people that the world community was interested in Turkmenistan by providing detailed coverage of visits to Ashghabad by officials of far from the highest rank, or even merely business representatives, under Berdymukhammedov delegations headed by the presidents and prime ministers of foreign states have in fact begun to visit Turkmenistan more frequently. How- ever, to be fair we must note that the former propagandist wiles of the Turkmen mass media are still being practiced. In 2008, 14 delegations headed by the highest and high-ranking officials visited Turkmenistan. They represented entirely different regions of the planet: the United Arab Emirates, the Russian Federation, the Republic of Croatia, the Hashemite King- dom of Jordan, the People’s Republic of China, the Latvian Republic, the Azerbaijan Re- public, the Turkish Republic, the Republic of Bulgaria, the Hungarian Republic, the Repub- lic of Korea, the Republic of Lithuania, and Malaysia. Turkmenistan was also visited by a delegation headed by the vice president of India, 28 delegations from various foreign countries headed by vice premiers and ministers, as well as 10 foreign ministerial delegations. n Second, both the head of the Turkmen state and the country’s leadership as a whole became much more mobile in terms of diplomatic visits. It appears that President Berdymukhamme- dov has ultimately departed from the tradition characteristic of his predecessor, President Niyazov, who preferred to receive foreign guests at home and not make visits to other countries, in so doing placing the emphasis on his own importance (and even, probably, in his understanding—grandeur) and independence from everyone else. Turkmenistan’s new president has begun making more visits himself, whereby not only official, an example being his visit to the Olympic Games in Beijing. The year of 2008 was extremely noteworthy for its increase in the number of visits by Turkmen delegations of different levels to the outside world, including to events not directly related to Turkmen foreign policy. n Third, Ashghabad’s foreign political activity has begun to gradually acquire the stability traditional for this sphere of relations, as well as a unique positive conservatism. By the latter the author means that it is following the rules of foreign policy etiquette that have developed in world diplomatic practice. For example, a doubtless priority for any normal country is strengthening its relations with its close neighbors—with those it shares a common border. In 2008 Turkmenistan was able to make significant advances in improving its relations with each of its neighbors. The enhanced relations between Turkmenistan and Azerbaijan is a good case in point. In 2008 a Turkmen embassy was opened in Baku. Ashghabad opened another new embassy in Saudi Arabia. New Turkmen ambassadors were appointed in Lithuania, Egypt, Switzerland, Israel, Italy, and Cuba. During this time, the ambassadors of 17 foreign states appointed to Turkmenistan presented their letters of credit in Ashghabad.3

3 As was noted at a meeting between President Berdymukhammedov and the country’s diplomatic corps on 20 March, 2008, Turkmenistan maintains diplomatic relations with a total of 125 states and is a member of more than 40 internation-

345 CENTRAL EURASIA 2008 Analytical Annual

Turkmenistan’s growing efforts to establish cooperation with the leading international organizations should also be evaluated in the same vein. Ashghabad is trying to make a name for itself on the world arena by putting forward various diplomatic initiatives. For example, it initiated the adoption of a resolution on Reliable and Stable Transit of Energy and its Role in Ensuring Sustainable Develop- ment and International Cooperation on 19 December, 2008, which was voted for by delegates of the U.N. General Assembly. Turkmenistan simultaneously continued its contacts with the U.N. Regional Center for Preventive Diplomacy in Central Asia opened in Ashghabad in December 2007. In 2008, contacts were strengthened between Ashghabad and UNICEF. In so doing, Turkmenistan joined almost one hundred international conventions, whereby it joined six of them in 2008. President Berdy- mukhammedov began looking much more favorably to the participation of his republic in the CIS, visited the summits of this organization, and even said that he sees “…the CIS as efficient mechanism of international cooperation.” Special mention should be made of the fact that the mass media of Turkmenistan has begun covering news on events in foreign countries, which was not the case in the past. In June 2008 a new foreign language study center opened in Ashghabad. The same month new biometric passports were introduced in Turkmenistan for citizens to travel abroad. Special memorial dates instituted by international organizations have begun to be celebrated. In the cross-cultural respect, the Turkmen leadership continued developing its contacts with its main foreign policy partners in particular. Contrary to the popular public opinion in the world, Turk- menistan, a neutral state, in fact regards none other than Russia as its main partner in the outside world, although the Turkmen leadership avoids registering this fact in any significant documents. This has given rise to a somewhat distorted perception of the situation in both the expert and journalist community and among politicians and diplomats and encouraged them to hope that major changes are possible in Ashghabad’s foreign policy. Immediately after the death of Turkmenistan’s former president, Saparmurat Niyazov, many thought that under the new Turkmen leadership, the Western countries and China would push Russia, as Turkmenistan’s main historical partner, into the shadows, or even further out of sight. Indeed, Moscow’s geopolitical competitors greatly increased their visits to Ashghabad. Nevertheless, the new Turkmen leadership has in no way discarded its previous policy in its relations with Moscow. Relations with Russia are still among the priorities that de facto guide Turk- menistan President Gurbanguly Berdymukhammedov. Moreover, the dialog between Moscow and Ashghabad has become more productive in many ways and there can be no doubt about its mutual benefit. We will note primarily that not only has it become more intensive—meetings between the heads of states, heads of government, and heads of the foreign ministries have become much more frequent than during Niyazov’s time—more important, several strategic agreements have been adopted recently. For example, Russia, Turkmenistan, and Kazakhstan signed an agreement on building a new Caspian gas pipeline and these countries, along with Uzbekistan, also signed an agreement on reconstruction of the existing Central Asia-Center gas transportation system which envisages the creation of new capacities for transporting Central Asian blue fuel to Russia. Throughout 2008 dozens of delegations from the European Union countries tried invariably during their meetings and talks with the Turkmen leaders to persuade the latter to reorient Turkmenistan’s gas flows from the northern (Russian) route to the western, which presumes laying pipelines to Eu- rope without passing through Russia. These projects have turned from purely economic into political undertakings, which has only intensified the desperate diplomatic struggle. The Nabucco project, which is designed to deliver Azeri and Central Asian gas to Europe through Turkey and the Balkan coun- al organizations. At that time, 15 diplomatic and consular representative offices operated in foreign states, and 28 foreign diplomatic missions and 18 representative offices of international organizations and unions functioned in Ashghabad. 346 TURKMENISTAN International Affairs tries, has literally become a fetish. By means of propaganda, it has acquired features of a messianic salvation enterprise that is in no way commensurable to the role it could play in Europe’s energy supply. And since one of the main questions was and remains that of finding the necessary resource base for filling this pipeline with gas, Turkmenistan has obtained a unique opportunity to benefit here from the greatly intensified struggle over Turkmenistan’s blue fuel resources. The supporters of laying the Nabucco pipeline have exerted titanic efforts to draw Turkmenistan into this project. Ashghabad’s authorities demonstrated considerable Oriental cunningness in this respect: they did not resolutely rebuff the offers to deliver Turkmen gas through this pipeline. In addition, from time to time President Berdymukhammedov even gave vague promises of providing 10 bcm of Turkmen gas some time in the future to be delivered to Europe along the Western route. It was obvious that Ashghabad was watching the aggravated competitive struggle among the contenders for Turkmen- istan’s gas resources in the hope of receiving increasingly advantageous offers from the parties in this struggle. The year of 2008 showed that Russia’s competitors were nevertheless unable to tip the scales regarding this problem in their favor. Even though a little tardy, it was precisely the northern delivery route of Turkmen gas to Russia that was not only confirmed as strategic, as stipulated in the agreement of April 2003, but also underwent further development both in terms of the capacity of the pipeline arteries and in terms of their routes. In addition to southeast Turkmenistan, which is the traditional resource base of gas deliveries to Russia, west Turkmenistan—the Caspian Region— began to take shape as the second such base, with the offshore sections of the Caspian Sea also to be potentially added. This seems to be of great significance. Whereas Russia and China are continuing to fight over the resource base of southeast Turkmenistan, with the other players—Iran, Af- ghanistan, Pakistan, and India—falling hopelessly behind, Russia, Iran, Azerbaijan, and the West- ern states (the EU and U.S.) are continuing to fight over west Turkmenistan’s resource base. But Russia still has the advantage in this competitive struggle over west Turkmenistan. It was precisely this country that managed to convince the Turkmen authorities of the great advantage of developing relations between Ashghabad and Moscow. It is no accident that the Turkmen president discussed precisely these issues during his meetings with the Russian leaders during the informal CIS summit in Moscow in February 2008. As a result, execution of the long-term agreement on deliveries of Turkmen natural gas to Rus- sia entered on 10 April, 2003 for 25 years has been going on for five years now without the serious interruptions so characteristic of the 1990s. Despite all the efforts of the parties concerned, Gazprom was and remains Turkmenistan’s main strategic partner in the gas sphere. No one can argue with the obvious fact that not one of the new Turkmen gas transportation projects being discussed can compare in parameters with the volumes of gas that are already being regularly delivered to Russia. We will present several facts testifying to this conclusion. Turkmenistan, in contrast to several of Russia’s other CIS partners, has no intention of terminating previous bilateral agreements. On the contrary, the Treaty on Friendship and Cooperation between Russia and Turkmenistan of 23 April, 2002 is being replenished with specific content. After the Russian-Turkmen economic forum attended by the representatives of business circles and chambers of commerce and industry from 17 regions of the Russian Federation was held in Ashghabad in December 2007, there occurred what we can rightly describe as natural diversification of economic contacts at the bilateral Turkmen-Russian level. Fifty-nine federal constituencies have established contacts with Turkmenistan. In February 2008, the Russian-Turkmen business council was formed in Moscow from the business circles of the two countries. We will note that not only did Russia’s active foreign policy toward Turkmeni- stan make this possible, but also the implementation of the economic reforms initiated by President Berdymukhammedov, reforms that attempt to transform the traditional and develop new spheres of the republic’s national economy. It is obvious that Moscow will become one of Turkmenistan’s partners in this field.

347 CENTRAL EURASIA 2008 Analytical Annual

Russia is also intensively building up other vectors of cooperation with Turkmenistan. Rus- sia’s S-7 (Siberia) airlines have begun making regular flights from Moscow to Ashghabad. More than half a million Turkmen citizens use the services of the Russia’s MTS mobile communication company. The directors of this company are planning to spend additionally more than 150 million dollars to develop the mobile communication network in Turkmenistan. Russian energy workers from St. Petersburg are rebuilding the Mary station and providing it with new equipment. In 2008 alone, multi-million contracts were entered between the Russian companies OAO Trubnaia metal- lurgicheskaia kompaniia, OAO Stroineftegaz, OOO Itera, the Astrakhan ship-building plant, and the Turkmen side. In mid-2008 there were 113 enterprises with Russian capital functioning in Turk- menistan and 116 projects and contacts with the participation of Russian companies were implemented. Russia is still Turkmenistan’s main trade partner. The trade turnover between our countries in 2008 topped 5 billion dollars for the first time since the collapse of the U.S.S.R., that is, it was even much higher than Moscow’s trade turnover with many of the EurAsEC states, where special trade and customs preferences are in effect. And since the growth rates of this trade turnover are extremely high (an increase of approximately one third in both 2007 and 2008), it can be expected to keep on growing. After all, productive contacts are emerging today not only at the federal but also at the regional level. In 2008 delegations from the Astrakhan Region and Republic of Tatarstan visited Ashghabad. On 4-5 July, 2008, an authoritative Russian delegation headed by Russian President Medvedev visited Turkmenistan. In turn, the Turkmen president visited Kazan. The issues discussed not only related to fuel and energy cooperation. Ashghabad showed great interest in establishing productive cooperation in a wide range of spheres. President Berdymukhammedov made special mention of the cooperation possibilities in transportation, particularly under the so-called North-South transportation corridor project. This meeting ended in the signing of an agreement on the delivery of an enormous consignment of KAMAZ large goods vehicles. This can be evaluated as a major breakthrough since for long years prior to this Turkmenistan mainly bought construction equipment in Japan for its various building projects. The KAMAZ vehicle plant built a training service center in Turkmenistan costing seven million dollars for servicing its products, which President Medvedev visited during his trip. We will note in particular that machine-building production comprises up to half of Russia’s exports to Turkmenistan. To a certain extent, all of this shows that under the new Turkmen president Russian- Turkmen economic relations have acquired a new quality. Contacts are also expanding in the humanitarian vector. Construction of a new building for the Russian-Turkmen Pushkin secondary school for 800 students is going on in Ashghabad with Russia’s help (Gazprom allotted 20.79 million dollars for this). Since 1 September, 2008 a branch of the Gub- kin Russian State University of Oil and Gas has been operating in the country. According to mutual agreement, the quotas have been increased for graduates from Turkmen schools to study in Russian higher educational institutions. In spite of the regular reports in the mass media about the Ashghabad authorities’ desire to make advances toward NATO and offer the country’s territory for deployment of the North Atlantic Alli- ance’s bases, President Berdymukhammedov continues to emphasize that his country’s main foreign policy is permanent positive neutrality. This position is not only understood but also supported by the Russian leaders. Another very significant element of Ashghabad’s foreign policy in 2008 was normalizing relations with its close neighbor, Azerbaijan. A compromise solution was found in 2008 for settling Azerbaijan’s debt for Turkmen gas deliveries, a problem which has hindered cooperation between the two countries for thirteen years. Az- erbaijan admitted that this debt exists and agreed to pay a little more than 48 million dollars. Ash- ghabad did not insist on imposing a fine.

348 TURKMENISTAN International Affairs

Settlement of the debt was supposed to have been a necessary prerequisite for resolving much broader problems. It is obvious that Baku was bent on getting Ashghabad’s consent to hook it up to the so-called Trans-Caspian main gas pipeline, which, in turn, was to become part of the Nabucco project being advanced by the EU. But no significant progress could be achieved here mainly because of the ongoing problem of the controversial deposits in the Caspian. One way or another Ilham Aliev and Gurbanguly Berdymukhammedov were able to avoid blindly going down the same old path of the past. On 20 May, the Turkmen president paid a visit to the capital of Azerbaijan. There the Turkmen leader was invited to visit the Baku State University where a ceremony was held to award him with the title of honorable doctor of the Baku State Uni- versity “for an outstanding contribution to strengthening Turkmen-Azerbaijani relations and developing science and education.” The Turkmen president was presented with a corresponding diploma and gown. All the same, no really important agreements on major issues were signed during the visit to Baku. Only a few secondary bilateral documents were signed, including intergovernmental agreements on international combined freight shipments, cooperation in youth policy and sport, international transportation services, and cooperation in standardization, metrology, certification, and accreditation. The Azerbaijani president’s official visit to Ashghabad in November 2008 did not lead to any significant breakthroughs with respect to the Trans-Caspian pipeline either. All the same, the relations between the two neighboring countries were freed from some of their former phobias and now we can expect them to develop further. This was shown by the bilateral undertakings, particularly the Turkmen-Azerbaijani economic forum in Ashghabad in June 2008 and the Turkmen-Azerbaijani conference in Baku in September 2008. Azerbaijan ranked sixth on the list of Turkmenistan’s main trade partners. Positive dynamics were also seen in the relations with another of Turkmenistan’s neighbors— Uzbekistan. At the beginning of the year, meetings of the Turkmen-Uzbek commission on economic trade, scientific technical, and cultural cooperation and a National Exhibition of the Republic of Uz- bekistan were held in Ashghabad. The Turkmen president paid a state visit to Uzbekistan in March. After a cooling-off period in the relations between the neighbors caused by the events surrounding the assassination attempt on President Niyazov in 2002, Ashghabad and Tashkent gradually strengthened their trade ties, which increased by 50% a year. However, the density of economic contacts remained low since only 10 enterprises with Uzbek capital are registered in Turkmenistan. Relations between Turkmenistan and Tajikistan have also begun to take shape. A bilateral intergovernmental commission has been working since the beginning of the year. Admittedly, Ashghabad was unable to fully carry out the deliveries of electric energy and natural gas it promised to send to Tajikistan, partly because of the position of Uzbekistan itself, which is in sharp confrontation with Dushanbe on a wide range of issues. Nevertheless, during the hard winter months, deliveries of diesel fuel were carried out. Contacts continued with Afghanistan, with which Turkmenistan signed twenty bilateral agreements. In April, President Berdymukhammedov paid a visit to this neighboring country. Nor did Ashghabad forget its other traditional and new important partners on the international scene. In March, President Berdymukhammedov visited Turkey, with which Turkmenistan has signed hundreds of bilateral agreements. Turkey occupies fourth place in Turkmen export and first place in import (the trade turnover volume amounts to 1.3 billion dollars). About five hundred companies with Turkish capital operate in Turkmenistan, a third of the total number of such business structures. Tur- key is one of the largest investors in Turkmenistan’s economy, as well as one of its main partners in the humanitarian sphere. There are 14 Turkish-Turkmen schools alone. The Chinese vector of Ashghabad’s foreign policy was given an additional boost during the Turkmen president’s visit to Beijing in August 2008 on the occasion of the 29th Olympic Games and

349 CENTRAL EURASIA 2008 Analytical Annual during the PCR Chairman Hu Jintao’s official visit to Ashghabad the same month. Nevertheless, China still only ranks fifth on the list of Turkmenistan’s main trade partners. But this situation could significantly change in the very near future. In Beijing, President Berdymukhammedov stated that the through- put capacity of the gas pipeline being built to China had increased. And at the end of August this decision was enforced in a framework agreement. It envisages an increase in the pipeline’s capacity from 30 to 40 bcm of gas a year. But the price at which Turkmen gas will be delivered to China has still not been settled. Evidently Ashghabad wants to have the final word here too, hoping to take advantage in the future of the contradictions among Turkmenistan’s trade partners striving to obtain its gas. Nor is it completely clear whether Ashghabad will be able to provide the entire declared amount of natural gas to be delivered to China. Finally, 2008 was noteworthy for such events as the Turkmen president’s participation in the NATO forum, meetings at the foreign ministerial level of the EU and Central Asian countries in the Turkmen capital, and the participation of foreign observer missions in the parliamentary elections held at the end of the year, which can also be evaluated as a sign of the new changes in Ashghabad’s foreign policy.

350 UKRAINE General Overview

UKRAINE

GENERAL OVERVIEW

Rustem ZHANGUZHIN D.Sc. (Philos.), leading fellow at the Institute of World Economy and International Relations, National Academy of Sciences of Ukraine (Kiev, Ukraine)

he year 2008 should probably go down in Ukrainian history as a year of lost opportunities. The Ukrainian political community and the public wasted their efforts to capture or extend the coun- T try’s privileged position on the political and economic stage rather than work, with much better results, toward systemic modernization of the political, social, and economic infrastructure and build up confidence among various social groups. Part of the Ukrainian expert community indulged itself in conspiratorial ideas, however claiming that the continued collisions were caused by the subjective likes and dislikes on the political Ol- ympus seems rather farfetched. The perpetual political crisis in Ukraine is due to the close ties between the government and capital: financial-industrial groups are locked in stiff rivalry, the real cause of all the political squabbles. This is best illustrated by the economically unsubstantiated skyrocketing inflation in December 2008; the transfer of the WB credit tranche to several randomly selected banks rather than to the real economic sector; and the dramatic conflict between Naftogaz Ukrainy and Gazprom of Russia mainly caused by the Ukrainian-Russian political confrontation during removal of RosUkrEnergo from the scheme of natural gas deliveries to the Ukrainian and EU markets. These events resounded across the country and the continent; others, less prominent, remained beyond the scope of our surveys. In the latter half of 2008 the macroeconomic situation gradually began to deteriorate, a sure sign of an imminent systemic national economic crisis. The Fitch Ratings international agency forecasted that in 2008 the Ukrainian GDP would be 4.5 percent ($168.5 billion): this meant a 3.5 percent decline (the nominal GDP was $148.7 billion);1 an annual average inflation of 25 percent; an

1 [http://vinogradsat.ru/rssnews/08-11-27-11-54/page/7]. 351 CENTRAL EURASIA 2008 Analytical Annual average exchange rate of the national currency to the U.S. dollar of 5.5 hryvnias per $1; a state debt of 13.1 percent of the GDP; a budget deficit of 1 percent; and a current account of the balance of payments of 7 percent of the GDP. In 2008 the country’s international reserves were, as predicted, $38.4 billion. In July 2008 the WB raised its forecast for Ukraine for 2008 from 5.5 to 6 percent and worsened the inflation forecast from 17.2 to 21.5 percent. The EBRD expected average inflation in Ukraine at a level of 11.7 percent; GDP growth at 5.5 percent; while the IMF improved the GDP forecasts for 2008 from 5.4 to 5.6 percent and worsened the inflation forecasts from 10.6 to 17.1 percent.2 The Ukrainian authorities tried to minimize the effects of the world financial crisis. On 23 De- cember, in particular, the Supreme Rada passed a decision On Amendments and Addenda to the Laws of Ukraine in an effort to protect the agro-industrial complex from the negative impact of the world financial crisis. Another important event took place at the turn of 2009: RosUkrEnergo, an intermediary company working in the Ukrainian gas market, was finally removed from the import scheme, which did a lot of good for natural gas import from Russia and Central Asia and its transit. It should be said that not all the amendments and addenda to the regulatory and legal acts were in correlation with the international legal regulations or the laws of the free market. The expert community is convinced, for example, that the higher import levies on meat will replace legal meat imports with smuggling and unmarketable products. This will clash with the country’s WTO obligations and might even produce punitive measures. The above is the obvious (and smaller) part of the problems that should be promptly addressed and successfully resolved: procrastination will undermine the regime’s stability and the predictability of the situation at home and on the international arena. The three political heavyweights—the Bloc of Yulia Timoshenko, the president’s Our Ukraine- People’s Self-Defense, and Viktor Yanukovich’s Party of the Regions—spent the year in active battles in the parliament; Prime Minister Timoshenko and head of the presidential secretariat Viktor Baloga found it hard to agree on anything. In the fall, the Timoshenko Bloc and the Party of the Regions acted together to limit the president’s powers; this forced the president’s OU-PS to leave the coalition in mid-September. Early in October the president announced once more that the parliament would be disbanded, but later had to withdraw his decision under the pressure of the mounting world crisis. The Ukrainian president’s attempt to change the regime for the Russian Black Sea Navy stationed in Sevastopol; the situation with the Russian-speaking citizens of Ukraine; the Great Famine (Golodomor) described as deliberate extermination of Ukrainians; and Ukraine’s part in the Rus- sian-Georgian conflict, among other things, weighed heavily on Russian-Ukrainian relations throughout 2008. The unprecedented flood in Western Ukraine was one of the most prominent events: about 523 settlements with 9 thousand homes and over 24 thousand hectares were flooded; 360 roads and 560 pedestrian bridges were destroyed; 36 people perished. The damage was assessed at several bil- lions of hryvnias. In the sphere of foreign policy in 2008 the country concentrated on being included in the Membership Action Plan (MAP), the first stage of NATO membership. Early in the year President Yushchenko, Prime Minister Timoshenko, and Speaker of the Supreme Rada Yatseniuk informed NATO Secretary General Jaap de Hoop Scheffer of the country’s desire to join NATO. America and the East European members supported Ukraine but Germany and France, two members on which the future of Ukraine’s MAP depended, blocked the process: quarrels with Russia

2 [http://vinogradsat.ru/rssnews/08-11-27-11-54/page/7]. 352 UKRAINE General Overview were obviously not on their agenda. On 3 April the Bucharest NATO summit declined Ukraine’s request but promised NATO membership in the foreseeable future. The discussion was postponed until December when the Alliance merely offered Ukraine a new format of a so-called one-year national program. The Visit of the Year. On 1 April, on the eve of the NATO Bucharest summit Kiev received U.S. President George W. Bush, who came to discuss the prospect of NATO membership for Ukraine and how it would affect Russian-Ukrainian relations. Friends of the Year. In August, on the very first day of the Russian-Georgian conflict, the Ukrainian Foreign Ministry called on Russia to remove its troops from Georgian territory and be more moderate in what it was doing. President Yushchenko first sent Deputy Foreign Minister K. Eliseyev to Tbilisi as his personal representative and later Foreign Minister V. Ogryzko. The Ukrainian president was involved in active consultations with the world leaders and heads of the European Union about the settlement in South Ossetia. On 12 August he made a personal visit to Tbilisi where he spoke in support of Georgia’s territorial integrity. This supplied the Foreign Ministry of Russia with a chance to accuse Ukraine of illegal weapon deliveries to Georgia. Kiev responded with documents that testified that arms trade had proceeded strictly within international law. After the war about 300 Georgian children were received for rehabilitation at the best Ukrainian spas in Feodosia, Irpen, and Lutsk. The Holiday of the Year. President Yushchenko invited Ecumenical Patriach Bartholomew I to Ukraine to celebrate the 1020th anniversary of the Baptism of Kievan Rus. Patriarch of Moscow and All Russia Alexiy II was likewise invited but the Russian Orthodox Church declared that Kiev deliberately played down his visit. The Ukrainian authorities planned a grandiose event intended to stress the fact that Ukraine was the heir of Kievan Rus. The president expected the Ecumenical Patriarch to support him in his efforts to set up a united Ukrainian Church independent of the Moscow Patriar- chate; Bartholomew I, however, apprehensive of inevitable and negative political repercussions, refused to go along with the president. Both patriarchs jointly officiated at the Liturgy in the open air at the monument to St. Vladimir on the high bank of the Dnieper. Ukraine marked the event with a silver commemorative coin of 50 hryvnias depicting Patriarch Bartholomew I and Viktor Yushchenko on the reverse. Under the pressure of the geopolitical challenges emanating from the dynamically changing world, Ukraine must extend its foreign policy activities to the regions and countries with which trade and economic relations should be treated as a priority. This is particularly true of the Central Caucasian and Central Asian countries that have considerable raw material resources, potentially promising yet so far undeveloped transport and communication East-West lines, as well as capacious labor and consumer markets. Today the country is seeking integration into the Euro-Atlantic structures, which means that its greater involvement in the Central Caucasus and Central Asia does not clash with the European trend. In fact, the two trends are mutually complementary: Ukraine stands a good chance of serving as the link between Europe and Central Asia and the APR. This will improve the country’s political image in the eyes of the world community.

353 CENTRAL EURASIA 2008 Analytical Annual POLITICS

Sergey TOLSTOV Ph.D. (Hist.), leading fellow at the Institute of World Economy and International Relations, National Academy of Sciences of Ukraine (Kiev, Ukraine)

1. The System of Power

ccording to the Constitution, the government (the Cabinet of Ministers) is the core of the republic’s executive power, which remained greatly enfeebled throughout 2008 by the never-- A ending political squabbles between the president and the prime minister. The Cabinet was formed in December 2007 out of two parliamentary factions: the Bloc of Yulia Timoshenko (BYT) and the pro-presidential Our Ukraine—People’s Self-Defense (OU-PS). The president retained his grip on the executive vertical made up of the regional and district administrations. Throughout 2008 the Timoshenko Cabinet failed to come up with a more or less comprehensi- ble program; it was mainly engrossed in raising social benefits, which immediately fell victim to the high and growing inflation of over 22 percent. The government missed the time when preventive measures could have alleviated the impact of the world financial and economic crisis; the government’s inefficiency and the sharp contradictions at the very top even added to the harm done. Production began to decline during the latter half of Sep- tember 2008, and a month later it dropped by 2.1 percent against October 2007; in November the production decline was 14.4 percent. The Cabinet failed to privatize large enterprises: the disagreements with the Public Property Fund of Ukraine proved too great. Until 26 December, 2008 it was headed by V. Semeniuk, member of the Socialist Party of Ukraine, appointed back in 2006 by the coalition Cabinet of Viktor Yanukovich and supported by the presidential administration. Ukrainian politics were dominated by the perpetual conflict between the three main political forces and their leaders. So far, the power system remains relatively balanced with none of the sides being stronger than the other two; this can be described as an obvious power crisis. The president and the prime minister were locked in a power struggle at the personal level. The conflict has another side to it: conflicting interests of different financial and economic groups and different ideas about macroeconomic and foreign policies. In September 2008 Prime Minister Timoshenko and her parliamentary faction created a political crisis triggered by their entering into secret talks with the opposition Party of the Regions (PR). Early in September, acting together, they pushed several laws through the parliament that undermined the president’s functions and powers as the first step toward a parliamentary-presidential republic with wide powers of the parliament and the Cabinet. In August Prime Minister Timoshenko and her party refused to side with the president in the Russian-Georgian conflict. The latter did not hesitate to support Georgia and insisted that Russia should be accused of aggression and annexation of part of Georgian territory.

354 UKRAINE Politics

The prime minister, in turn, refused to openly support President of Georgia Saakashvili, favored her country’s asymmetric neutrality in the conflict, and sided with the European Union. On 3 September the leaders of the OU-PS parliamentary faction retaliated by withdrawing from the parliamentary majority. Some of the ministers who had acquired their posts under the OU-PS quota or on the president’s recommendation missed several Cabinet sittings. They did not, however, resign; the party, on the other hand, found itself divided into the prime minister and presidential factions. The withdrawal of the OU-PS faction from the parliamentary majority coalition allowed the president, strictly within the framework of the Constitution, to disband the parliament. President Yushchenko scheduled 7 December, 2008 as the day of the next parliamentary elections. The BYT and PR, meanwhile, had stopped their negotiations; under the threat of resignation Yulia Timoshenko agreed to annul the laws that limited the president’s powers and invited OU-PS back into the majority coalition. On 4 October the president announced that he would give the political forces three days (until 7 October) to form a new majority coalition. He argued that he had “the right to disband the parliament today.” Later, on 8 October, he addressed the nation on TV to inform everyone that the parliamentary crisis would be resolved through pre-term elections; on 9 October a corresponding decree appeared on the president’s web site.1 The prime minister refused to revise the state budget for 2008 to allocate the necessary sums for the elections and went to court against the decree. This forced the president to annul his decree; in the absence of legal funding no new date could be set. The BYT and the breakaway groups of the OU-PS faction vowed to block funding of the pre-term parliamentary elections. The latent confrontation between the president and the prime minister extended into November when the BYT and the PR, as well as the PR and the presidential secretariat, were engaged in negotiations; Vladimir Litvin with his small faction of 20 deputies came into the limelight: his votes would have tipped the balance. The statement by Russian President Medvedev issued on 20 November 2008, in which he demanded immediate Ukrainian payments for the gas already used under the threat of postponing the 2009 agreement between Gazprom and NaftaGaz of Ukraine, jolted the Ukrainian political community into frenzied conflict settlement. The PR and the BYT came very close to forming a coalition government with the parliamentary majority behind them. President Yushchenko and his secretariat interpreted the Russian president’s statement and the talks between the BYT and PR as a direct threat to his power. He declared that he would never allow Timoshenko and Yanukovich to usurp power: the possible duumvirat was described as a direct threat to political order. The talks were disrupted but the president’s gain was not impressive: he was not able either to carry out the planned shuffles in the executive structures or form a coalition among the PR, OU-PS, and the Litvin Bloc. On 9 December the relations among the main political subjects arrived at a new turn: after several rounds of talks the BYT, part of the formally presidential OU-PS, and the Litvin Bloc agreed on a new coalition. Vladimir Litvin hinged his open support of the BYT and OU-PS on the post of speaker for himself. Elected as Rada speaker, Vladimir Litvin immediately announced that the parliament had acquired a new majority and promised its complete support of Yulia Timoshenko. Together the three factions had 248 votes with the BYT contributing 156 votes, OU-PS 72 votes, and the Litvin Bloc 20 votes.

1 See: Decree No. 911/2008 of the President of Ukraine “On Pre-term Discontinuation of the Powers of the Supreme Rada of Ukraine of the 6th Convocation and Ordering Pre-term Elections,” 9 October, 2008, available at [http://www. president.gov.ua/documents/8411.html] (in Ukrainian). 355 CENTRAL EURASIA 2008 Analytical Annual

The coalition could not be described as stable; it could count at best on 220 votes while it needed 226 votes to be in the majority. Most of the laws passed by the parliament were supported by the formally opposition Communist Party of Ukraine. Prime Minister Timoshenko had slightly half of the OU-PS faction (72 votes in all) on her side. The president and his secretariat were still in control of about 20 votes of those who had excluded themselves from the majority coalition. From the procedural point of view the majority remained half-baked, which could be used as a pretext to question the Cabinet’s powers. For some time, however, the new coalition defused tension and added legitimacy to the government. Its stability was not guaranteed despite the fact that the government passed several laws and approved the 2009 budget. This did not alleviate the tension among the main political forces either.

2. Relations among the Main Political Entities

Early in December 2008, during the talks among the parliamentary factions, the prime minister outwitted the president: she drew Litvin to her side and received the promise of ad hoc support from the Communists. The presidential secretariat lost control over part of the OU-PS parliamentary faction and had to take fairly risky steps to prevent a BYT-PR coalition: President Yushchenko looked at it as the principal threat to his influence and political future. At the same time, the new parliamentary majority was hardly effective because the president and his secretariat continued to control the minority of the OU-PS faction. In the case of some disagreements over any of the issues or if the Commu- nists or some of the PR deputies withdrew their support the new parliamentary majority would be unable to achieve anything at all in the parliament. The OU-PS faction changed its leaders: a protocol on a coalition with the BYT and the Litvin Bloc was signed by the faction’s deputy chairman B. Tarasiuk (leader of the People’s Rukh of Ukraine Party);2 N. Martynenko was elected the faction’s new leader. President Yushchenko meanwhile tried to expand his control over the members of his Our Ukraine Party who belonged to the OU-PS faction. There were plans to unite the Our Ukraine and United Center (the party controlled by head of the presidential secretariat V. Baloga) and join them with other groups loyal to the president. Prime Minister Timoshenko, resolved to keep her post until the presidential election expected no later than January 2010, was engaged in uncompromising polemics with the president whom she accused of interfering with the efforts to set up an efficient parliamentary majority, unjustified devaluation of the national currency, and wide-scale currency speculation of certain banks. On 10 De- cember she promised in her TV address that she would “protect the parliament and the new coalition” and would never permit “maltreatment of the Supreme Rada and the country… No presidential election is worth the abyss of confrontation and chaos into which political adventurers will push the country.”3 Once more the BYT demanded that its members be made heads of the State Property Fund and the Anti-Monopoly Committee of Ukraine; its head regularly demanded that Mayor of Kiev Leonid

2 See: “Bol’shinstvo delegatov fraktsii ‘NUNS’ podderzhali sozdanie koalitsii s BYUT i Blokom Litvina,” Zerkalo nedeli, 13 December, 2008, available at [http://www.zn.com.ua/1000/1550/64938/]. 3 Timoshenko: lichno budu berech’ etot parlament, 10 December, 2008, available at [http://www.unian.net/rus/news/ news-289360.html]. 356 UKRAINE Politics

Chernovetsky be removed from his post and that the head of the National Bank of Ukraine responsible for the crisis situation in the banking sphere be replaced. Timoshenko who sought greater powers for the Cabinet found an important and efficient ally in Litvin, who wished to widen his own influence: they both want to stall the president’s attempts to disband the Supreme Rada. Members of the Litvin Bloc could count on several posts in the government; the ministers of the economic block would be replaced while the ministers appointed by the OU-PS quota reshuffled. On 9 December Vladimir Litvin announced that there were no legal reasons to replace the prime minister and most of her Cabinet and added that he hoped that the idea of pre-term parliamentary elections would be buried and that the parliament would go on working until the end of its term in 2012. He suggested that a one-year moratorium on constitutional amendments be announced and argued that such amendments would be needed only after the presidential election. According to the Rada speaker, the election system badly needed revision, which should, nevertheless, be postponed. The alliance between Timoshenko and Litvin speeded up an informal truce between Yushchenko and Yanukovich. Their further steps are hard to predict; the prime minister’s opponents count on the obviously unprofessional ministers of the economic block. Cooperation with the president will hardly damage Yanukovich’s chances much: the rating gap between them is too wide. The leaders of the Party of the Regions, on the other hand, would have liked to keep Yulia Timoshenko out of the second round of presidential race.

Political Groups Loyal to the President and Their Projects

President Yushchenko mainly relies on the People’s Union Our Ukraine (PUOU); on 29 No- vember its closed congress violated the Constitution, which prohibits the president from filling posts in public associations by electing the president its leader (previously President Yushchenko held the post of the party’s honorary chairman). In the present parliament the PUOU is part of the OU-PS faction, which also includes the United Center Party group (leader V. Baloga), People’s Self-Defense group (leader Iu. Lutsenko), the Peo- ple’s Rukh of Ukraine group (headed by B. Tarasiuk), and several smaller units. The presidential secretariat and the PUOU leaders initiated the disintegration of the coalition in September 2008. The OU-PS faction is split both ideologically and politically. If a presidential election is held, neither Iu. Lutsenko (People’s Self-Defense) nor B. Tarasiuk People’s Rukh of Ukraine) will be able to join the president’s political projects because of their acute contradictions with the secretariat. Over half of the OU-PS faction is prepared to side with the prime minister. Lutsenko and Tarasiuk have already negotiated their membership in the BYT and its election lists if pre-term parliamentary elections are held. President Yushchenko is inclined to preserve the PUOU as the core of his political support; there are several other alternative political projects: the United Center (V. Baloga and I. Kril), as well as the so far virtual project of former speaker A. Yatseniuk (the Democratic Front or the Front of Changes) designed as a pseudo-left political group. While it was expected that the pre-term parliamentary elections would be held on 7 December the “presidential” group (Our Ukraine and its satellites, the United Center and the Yatseniuk Bloc) intended to run separately. In so doing, only the virtual project of Yatseniuk could rely on minimum electoral support; if set up, it will try to draw supporters of the leftist and moderate reformist parties that remained outside the parliament to its side.

357 CENTRAL EURASIA 2008 Analytical Annual

The United Center planned to form a bloc with the Mayor of Kiev and regional elite groups. The hypothetical Yushchenko Bloc was expected to rely, among other forces, on the radically nationalist Freedom Alliance (O. Tyagnibok) at the brink of overcoming the barrier of 3 percent at the expense of active support in Western Ukraine. It might prefer to run separately.

The Bloc of Yulia Timoshenko

Formally it consists of three political parties—Batkivshchina (the Fatherland) led by Timosh- enko, the Reforms and Order, headed by V. Pinzenyk, and the Ukrainian Social-Democratic Party with Chairman of the Supreme Court V. Onopenko as its factual leader. Potentially the bloc could comprise the People’s Rukh of Ukraine Party (B. Tarasiuk), and Iu. Lutsenko’s followers (the Forward, Ukraine! Party and the People’s Self-Defense movement). The bloc is a closed and highly bureaucratic organization based on the Fatherland Party, a strictly controlled and vertically arranged administrative-technological structure. By accusing Timoshenko of plotting with Putin and betraying the national interests of Ukraine the presidential secretariat deprived her of some of her supporters in Western Ukraine who moved their votes to Yatseniuk and the radical nationalist All-Ukrainian Svoboda Association. Prime Min- ister Timoshenko retained her support in Central Ukraine while in the south it somewhat increased in 2008. The BYT criticized the president and insisted that he was personally responsible for the crum- bled orange coalition. The BYT, in turn, had to preserve its electorate and even somewhat expand it, especially in Western Ukraine, by confronting those who sided with the PUOU; in the south-east the BYT expected stiff rivalry with the PR. Had the elections taken place in the fall of 2008, Timoshenko, a past master of populist demagoguery, would have tried to attract the protest voters. Later, when Ukraine entered the hardest stage of economic slump, it would be much harder for the prime minister to quench the discontent and ride the protest wave. The protest niche, formerly occupied by the BYT, would be occupied by the Communists, Svoboda, and to certain extent by the leftist marginal structure of Natalia Vitrenko.

The Litvin Bloc

In the present parliament this Bloc is found between the BYT and Our Ukraine, on the one hand, and the PR, on the other. It was prepared to accept various configurations of the majority and was never openly opposed to the president. On 4 October Golos Ukrainy4 (The Voice of Ukraine) carried a statement of the Litvin Bloc about the highly dangerous developments caused by the enmity between the president and the prime minister. The statement described the rising tension in society and the undisguised war in government as a direct threat to the country’s finances, economy, and state sovereignty. It hurled invectives at the dirty political games and at those who were pushing the country toward pre-term elections while ignoring what the absolute majority of the country’s population was thinking. The statement warned that the presidential secretariat was moving toward direct presidential rule and dictatorship. Vladimir Litvin was dead set against a possible alliance between the BYT and the PR, which, he argued, would amount to a political coup.

4 See: “Statement of the Litvin Bloc in the Supreme Rada of Ukraine,” Golos Ukrainiy, 4 October, 2008, available at [http://www.golos.com.ua/rus/article/1223042881.html]. 358 UKRAINE Politics

Amid the political and economic crisis the Bloc called to political and state responsibility, needed to adequately respond to the social and economic situation in the country. At the same time, as part of the pro-government coalition Litvin and his bloc should share responsibility for the Cabinet, which will inevitably affect his rating if the situation worsens.

3. The Opposition

Parliamentary opposition consists of the Party of the Regions and the Communist Party of Ukraine. The 2007 elections allowed the PR to remain the largest parliamentary faction. It does not belong to the ruling coalition because of the deep-cutting political segregation, the fruit of the Orange Revolution. It was hard to achieve any agreement with the BYT; some of the OU-PS deputies flatly refused to cooperate with the PR. In the fall of 2008 the PR leaders believed that they would profit from pre-term parliamentary elections: the BYT had lost part of its former support while the split in the OU-NS had cost it several rating points. The PR includes several interest groups: the Yanukovich group, the groups of R. Akhmetov, A. Klyuev, and S. Levochkin (connected with Dmitry Firtash, co-owner of RosUkrEnergo), and several smaller units. Levochkin and Firtash are most ardent supporters of cooperation with the president and his secretariat. The PR leaders tried twice, without much effect, to set up a temporary tactical alliance with the BYT. On 2 October the PR press service described the BYT retreat from the decisions it had passed, together with the PR in early September, as irresponsible and unprincipled. The PR stated that the fact that the BYT agreed to annul the laws passed through joint voting on 2-5 September5 demonstrated that it was guided by its own narrow interests rather than by political convictions. It was further said the “the BYT wants nothing more than to preserve the post of prime minister for its leader” to retain, along with it, the financial and administrative resources for the future presidential election to manipulate, “very much as usual,”6 the electorate. The PR shadow Cabinet laid a set of measures on the table designed to extend state support to the main industrial sectors, setting up a stabilization fund and extending budget support to the real economic sector through state orders. The PR has no ministers, which allows its deputies to ignore voting on the government’s draft laws; they lay the blame for the negative effects of the economic crisis on the Timoshenko Cabinet and the parliamentary majority. The PR members, N. Azarov in particular, declared that if his party came to power, the government would insist on better IMF crediting conditions. In December 2008 one of its members, V. Khara, became head of the Federation of Trade Unions of Ukraine. In near future the party will be able to ride the protest wave. The Communist Party of Ukraine is better described as quasi-opposition. Its ideology does not allow it to join the parliamentary majority, which sides with the Cabinet. The Communist Party and the OU-PS are politically incompatible; at the same time the Communists reached certain agreements with the prime minister. Several of its members serve as deputy ministers and heads of state agencies. In the fall the Communists favored an “anti-presidential coalition” in the Rada. The party enjoys stable electorate support, which is gradually increasing along with the crisis. In the fall the party

5 See: BYT soglasilsia otmenit’ zakony, priniatye vmeste s PR 2 oktiabria 2008 goda, available at [http://podrobnosti. ua/power/2008/10/02/558402.html]; BYT I NU-NS nachali sovmestnye golosovania. “Anti-prezidentskie” zakony otmeneny, 2 October, 2008, available at [http://podrobnosti.ua/power/parliament/2008/10/02/558497.html]. 6 PR obvinila BYT v otstupnichestve, 2 October, 2008, available at [http://podrobnosti.ua/power/parliament/2008/10/ 02/558588.html]. 359 CENTRAL EURASIA 2008 Analytical Annual was ready to run for parliament on its own even though A. Moroz of the Socialist Party of Ukraine and V. Volga of the Union of Leftist Forces invited it to join a Leftist Bloc.

4. Sociological Data and Assessments

The returns of the sociological polls offer a picture of the fairly controversial dynamics of the popularity of the main political leaders and their parties and blocs. According to the public opinion polls of the latter half of the 2008, the dynamics of popular support (in relation to the total number of voters, including undecided and those unwilling to vote) is described in Table 1: Throughout 2008 the ratings of PR and BYT remained within 23-24 percent; in October-Novem- ber they dropped a bit: they lost the support of the disappointed (those determined to vote “against all” or were still undecided); the PR restored its former support in the regions and among ethnocultural groups. Table 1 The Level of Popular Support (%)

Party/Bloc October* November** December***

BYT 21.2 18.3 17.3

PR 19.8 16.4 31.5

V. Yushchenko Bloc 2.7 1.9 3.8

The People’s Union Our Ukraine 0.9

The V. Litvin Bloc 2.8 3.3 4.4

CPU 4.5 5.9 7.2

People’s Self-Defense 2 0.2

The Yatseniuk Bloc 1.8 3 5.1

Against all 9.4 16.9 7.9

Undecided 15 11.9 14.8

Not going to vote 16.8 16.1

* The poll was conducted by the Public Opinion Fund-Ukraine on 12-23 October.7 ** The poll was conducted by the Public Opinion Fund-Ukraine on 12-24 November.8 *** The poll was conducted by the Democratic Initiative Fund jointly with the Ukrainian Sociology Service on 17-28 December, 2008.9

7 See: Opros: V Verkhovnuiu Radu prokhodiat tri politsily, 27 October, 2008, available at [http://korrespondent.net/ ukraine/politics/628130]. 8 See: Opros: Blok Yushchenko ne prokhodit v parlament, 26 November, 2008, available at [http://korrespondent.net/ ukraine/politics/659471]; L. Dolgopolova, “Protiv vsekh gotovy golosovat’ 16.9 % ukraintsev,” Kommersant-Ukraina, 27 November, 2008. 9 See: The End of the Political Season-2008: the Ukrainian population thinks about the elections, 12 January, 2009, press release, available at [http://dif.org.ua/ua/press/4] (in Ukrainian). 360 UKRAINE Politics

The five parliamentary parties and blocs stood the best chances at pre-term elections. The possible but still virtual A. Yatseniuk Bloc could count on considerable support. By December the So- cialist Party had gained several points (according to the December results obtained by the Ukrainian Sociology Service, it was 2.5 percent). The radical nationalist Svoboda had certain chances as well. The potential Leonid Chernovetsky Bloc lost some of its support. Some of the political projects— the Natalia Vitrenko Bloc and Vitali Klichko Bloc—enjoy support ranging from 0.6 to 1 percent. The share of the undecided and those who intended to vote against all went up. Those who wanted none of the parties and blocs present on the Ukrainian political scene have not yet found an adequate alternative political force. On the whole, the total share of those who would not go to the polls or were undecided was the highest in November at about 45 percent. The presidential ratings of the main political leaders according to public opinion polls are shown in Table 2. Table 2 The Level of Support of the Potential Presidential Candidates (%)

Candidate August-October* November** November*** December****

Yu. Timoshenko 20-24 19.8 29.1 13.9

V. Yanukovich 20-24 17.4 28.8 22.3

A. Yatseniuk 3.3 6.6 7.9

P. Simonenko 4.3 5.7 7.6 3.6

V. Litvin 3.5 3.9 7.3 4.1

V. Yushchenko 4.3 3.1-3.3 9.6 2.4

V. Klichko 0.9 0.9

A. Moroz 0.8-1 0.8 2.5 1.5

Yu. Lutsenko 0.9-1 0.6

Against all 11 13.7 20

Undecided 10 16.1 22.6 20

Not going to vote 8 10.3 * Averaged returns obtained by different sociological services. ** The poll was conducted by Public Opinion Fund-Ukraine on 12-14 November, 2008.10 *** The poll was conducted by the Institute of Social and Political Psychology on 24-30 November, 2008.11 **** The poll was conducted by the Fund of Democratic Initiative and Ukrainian Sociology Service on 17-18 December, 2008.12

10 See: L. Dolgopolova, op. cit. 11 See: A. Meyta, Shansy Timoshenko i Yanukovicha stat’ prezidentom Ukrainy primerno ravny, 10 December, 2008, available at [http://www.rian.ru/politics/20081210/156937617.html]. 12 See: The End of the Political Season-2008: the Ukrainian population thinks about the elections, 12 January, 2009, press release. 361 CENTRAL EURASIA 2008 Analytical Annual

The incumbent lost many rating points and is unlikely to recover them soon. Table 2 shows that the protest electorate was increasing faster (about 30 percent) than popular support of the political parties (29 percent). Together with those who in the fall of 2008 did not intend to vote (they can be described as the passive protest electorate) the share of protest voters was even higher (40 percent).

C o n c l u s i o n

Under the pressure of the economic crisis in Ukraine the political sphere was equally unstable. The decreasing GDP reflects a deep and probably long recession. In 2008 construction, metallurgy, the chemical industry, coke production, petrochemistry, the food industry, and some of the services experienced a long decline (for two or more quarters in a row). Recession bred unemployment, lower personal incomes (caused by lower wages, wage arrears, and frozen social benefits) and pension arrears. Politicians and parties associated with the government were losing public supporters. In 2008 Yulia Timoshenko and her Cabinet were regarded as one of the main factors of the mounting economic crisis. The government proved unable to act in the new conditions and make responsible decisions— this undermined its position and exacerbated the crisis of power. The economic decline is accompanied by rising utility fees and city transport fares. The public is gripped by social apathy that experts describe as “stress” and “social depression.” Spontaneous protest actions in various towns and cities are mostly provoked by the closing of enterprises that directly or indirectly employed nearly all who lived there and the wage arrears. According to sociologists, nationwide protest campaigns in 2008 were next to impossible: only 9 percent were ready to take part in them irrespective of their aims and the intentions of those who organized them. In 2004 the Orange Revolution stirred up 15-16 percent of the country’s population, 6 to 7 percent of whom were actively involved.13 Over 40 percent of the population was prepared to take part in protest actions “depending on their aims.” This means that there is enough protest potential.

13 See: “There Will Be No Mass Protests Caused by the Declining standard of Living,” 23 January, 2009, Expert commentary, available at [http://dif.org.ua/ua/publications/comentar/fhrsh] (in Ukrainian).

ECONOMY

Tamara PANFILOVA Senior research associate, Institute of World Economy and International Relations, National Academy of Sciences of Ukraine (Kiev, Ukraine)

n the second half of 2008, Ukraine, like most tional economy. By and large, this was promoted by other countries of the world, fully felt the “hot the excessive dependence of the production and con- I breath” of the global financial crisis that after- sumption of goods and services on the situation in the wards developed into a crisis of the real sector of na- foreign markets—both for exporters and importers.

362 UKRAINE Economy General Macroeconomic Situation and Ratings

According to preliminary estimations, the country’s key macroeconomic average annual indicators can be described as “acceptable,” given their positive value (see Table 1). Table 1 Basic Macroeconomic Indicators of the Ukrainian Republic in 2004-2008 (growth rates in % of the same period of the previous year)

2004 2005 2006 2007 2008

GDP, real growth 112.1 102.7 107.3 107.9 102.1

Industrial production 112.5 103.1 106.2 110.2 96.9

Agricultural production 119.7 100.1 102.5 93.5 117.5

Capital investment 128.0 101.9 119.0 129.8 102.0

Foreign direct investment 170.3 348.2 60.1 167.1 107.5

Inflation* 12.3 10.3 11.6 16.6 22.3

Merchandise exports 140.8 104.8 111.2 128.0 135.9

Merchandise imports 123.7 121.8 122.1 136.8 138.4

Current account balance of payments (as percentage of GDP) 10.6 2.9 –1.5 –3.7 –6.7

Hryvnias/dollar rate (on the average for a year) 5.32 5.12 5.05 5.05 5.27

Retail turnover (legal entities) 121.9 123.4 126.4 129.5 117.9

Unemployed population (according to ILO Methodology) to economically active population by age group (15-70 years of age) 8.6 7.2 6.8 6.4 7.0

* December to December.

S o u r c e s: State Statistics Committee (Goskomstat) and the National Bank of Ukraine.

According to the State Statistics Committee, notwithstanding the rather high economic growth rates in recent years, as of January 1, 2009 the country’s GDP was only 74.1% of the 1990 level, while industrial output amounted to107.7%, agricultural production to about 70%, and capital investment to about 90%.

363 CENTRAL EURASIA 2008 Analytical Annual

The Ukrainian Goskomstat’s GDP-related quarterly data with an emphasis on separate ultimate use categories testifies to the thesis that the Ukrainian national economy is excessively dependent on foreign markets. For instance, the share of exports of goods and services in the country’s GDP in the first quarter amounted to 47.4%, in the second quarter to 50.4%, in the third quarter to 47.7%, and for the whole year, according to our forecasts, to 47-48%. In other words, almost half of the goods and services produced went to export. However, import dependence is characterized by even higher values: the share of imports of goods and services in Ukraine’s GDP in the first quarter equaled 58.4%, in the second quarter it amounted to 58.0%, in the third quarter to 51.3%, and for the whole year, according to our forecasts, to 53-55%. Cumulatively, the share of exports and imports of goods and services in the country’s GDP exceeded 100% at the end of the year, although in the third quarter, due to a drop in exports and imports, this parameter equaled 99%. However, there are some basic factors that are believed to be the most problematic both for Ukraine’s efficient economic development and its “survival” in the context of increasingly aggravated global crisis phenomena. They primarily include inefficiency of the main government institutions, macroeconomic instability, low efficiency of the goods and services markets, an unfavorable business environment, etc. This is evidenced by the competitiveness assessment results contained in the latest report compiled by the experts of the World Economic Forum (WEF).1 Ukraine was included for the first time in the group of the “efficiently developing” countries owing to the fact that it had reached a real GDP per capita of about $3,000. However, the rapid devaluation of the hryvnia, which began at the end of 2008, and the anticipated negative GDP dynamics in the near future could throw Ukraine back into the category of states that are only “transferring to efficient development.” According to the Global Competitiveness Report 2008-2009, Ukraine is ranked 72nd in terms of the Global Competitiveness Index (GCI) with an overall value of 4.1. In the “Basic Requirements” sub-index it ranks only 85th, which represents an average figure calculated on the basis of the following criteria: “Quality of Institutions”—115, “Infrastructure”—79, and “Macroeconomic Stabil- ity”—91. This means that Ukraine’s position in the ratings evaluated by the above criteria turned out to be considerably lower than its global rating. However, in the “Efficient Development” sub- index Ukraine ranks 58th, which is 14 points higher than its global rating (72). This was due to its rather high positions according to the following criteria: “Higher Education and Vocational Train- ing”—43, “Labor Market Efficiency”—54, and “Market Size”—31. At the same time however, Ukraine ranks only 103rd in terms of the “Goods and Services Market Efficiency” criterion, 85th according to the “Financial Market Sophistication” criterion, and 65th in terms of the “Technolog- ical Readiness” criterion. The above ratings correlate with Ukraine’s position in the global economic environment in accordance with the World Bank classification in effect until July 2009, which is based on GDP per capita data for 2007. In particular, with a parameter of $2,550, Ukraine was classified among the countries located in the European and Central Asian (ECA) Region with lower than average incomes. The rating assessments of the Index of Economic Freedom published in January 20082 are believed to be quite significant for evaluating Ukraine’s position in the global sales and investment environment. The overall assessment rating consists of 10 components: Business Freedom, Trade Freedom, Labor Freedom; Fiscal, Monetary, Investment, Financial Policies; Freedom from Corrup- tion, Property Rights, and Government Size. In 2008, Ukraine ranked 133rd in this assessment among 157 countries of the world and 39th among 41 countries of Europe, and it was classified as a predominantly economically non-free state. In terms of most of the parameters its position is much worse than

1 See: The Global Competitiveness Report 2008-2009, WEF, available at [http://www.weforum.org]. 2 See: “2008 Index of Economic Freedom,” available at [http://www.heritage.org/index]. 364 UKRAINE Economy the average ratings for the countries of the world and Europe. The experts argue that in Ukraine, under conditions of relatively normal development in trade and taxation, there are certain problems in such spheres as freedom of business, state machinery size, freedom of monetary relations, freedom of investments, protection of property rights, and freedom from corruption. For example, as far as the financial freedom level is concerned, Ukraine ranks 50th, whereas the average level in Europe is 66.3, and the average level worldwide is 51.1; as for freedom from corruption, the figures are 28, 57, and 40, for property rights—30, 62, and 45; labor freedom—54.3, 63.4, and 61.5; monetary freedom— 69.9, 78.6, and 74.2; business freedom—44.3, 75.9, and 62.3; and investment freedom—30, 65.4, and 49.7, respectively. In 2008, Ukraine’s position in the global business simplicity rating did not improve in spite of a number of reforms that have been accomplished. This conclusion is contained in the Doing Business 2009 Guide3 where Ukraine occupies 145th position among the 181 countries analyzed in the report. When evaluating the rating, the following criteria are particularly taken into account: the time and money spent to meet government requirements when creating new businesses (128), receiving construction permits (179), obtaining property registration (140), paying taxes (180), trading across borders (131), closing a business (143), and protecting investors (142). For comparison: three countries of the CIS—Azerbaijan, Belarus, and Kyrgyzstan—are among the world’s ten top reformer countries as far as the “ease of doing business” criterion is concerned.

GDP Dynamics and Structure

When describing the changes in Ukraine’s GDP in 2008, we should pay special attention to the fact that since the beginning of the year there have been positive GDP dynamics of about 104.9% in January and 106.5% in March-July. The “peak” of this growth was reached in August (which means a gain of 107.1% compared to the first 8 months of the previous year). Afterwards, gradual reduction in the growth rates led to a situation where the GDP increment was as little as 102.1% at the end of the year. Curiously enough, in August, the main contribution to the country’s GDP growth was made by such economic sectors as agriculture and forestry, wholesale and retail trade, transport and the processing industry, while at the end of 2008 predominantly by agriculture and forestry, as well as by transport. In this connection it should be emphasized that during the year under review there were certain changes in the structure of product and service output as per different economic activities4 in actual prices. For instance, the processing industry had the biggest share in Ukraine’s GDP. But whereas in the first quarter its index value was 41.3% and in the second quarter it increased to 41.8%, by the third quarter it experienced a dramatic drop to 35.8%. According to our estimations, this parameter averaged 38-39% in 2008. The sphere of trade and consumer services (including automobile repairs) had the second biggest share in the country’s GDP with quarterly indices of 11.3% and 10.5%, respectively, and at the end of the year it averaged 11.0%. In spite of a decline in construction output, its share in Ukraine’s GDP increased: first quarter—5.0%, second and third quarters—5.4%, however, at the end of the year it averaged about 5%. Special attention should be paid to the dynamics of the share of

3 See: Doing Business 2009, available at [http: //www.doingbusiness.org]. 4 Calculated by the author on the basis of quarterly data presented by Goskomstat of Ukraine. Express editions No. 159 of 11 July, 2008, No. 246 of 16 October, 2008 and No. 308 of 31 December, 2008, available at [http://www. ukrstat.gov.ua]. 365 CENTRAL EURASIA 2008 Analytical Annual agriculture in Ukraine’s GDP (including hunting and forestry): first quarter—2.9%, second quarter— 4.3%, and third quarter—as much as 14.1%, however at the end of the year it totaled 8%. In other words, the GDP structure change “in favor of agriculture” will allow the Ukrainian government to ensure food security for the population of Ukraine, in a situation where the crisis phenomena in the real and financial sectors of the economic activity are intensifying, due to the fact that a significant percentage of food resources is produced by private households (this will be discussed in greater detail below).

Industrial Production

The state of affairs in Ukraine’s production industries during 2008 can be characterized as follows. In contrast to the GDP dynamics, the biggest growth rates in industrial production, compared to the same period of the previous year, were achieved in February—108.8%. The increment rates were then maintained at a level of 7.3%-8.0% until July, and in August they started to slump. Therefore, the drop in manufacturing output was 3.1% at the end of the year. According to Ukraine’s Goskomstat,5 the decline in this key sector of the national economy in the fourth quarter of 2008 came to 24.9% compared to the fourth quarter of 2007. Furthermore, at mining and smelting enterprises the drop amounted to 39-45%, at chemical industry enterprises to 32.5%, and at engineering industry enterprises to 29.2%. In fact, these figures are quite telling: after all, the production items manufactured by the above branches of the economy form the basis of Ukraine’s commodity exports. Generally speaking, according to the end results of 2008, some industries maintained positive dynamics: the average gain in the machine-building branches amounted to 108.6%, in particular, in the manufacture of vehicles and equipment to 111.1%, in electric, electronic, and optical equipment to108.3%; in the woodworking industry and lumber production (apart from the manufacture of furniture) to109.6%; and in pulp-and-paper manufacture and publishing to 107.3%. Production also dropped in the iron and steel industry, in the chemical and petrochemical industry, and in the manufacture of coke and oil processing products by 10.6%, 6.2%, and 15%, respectively. Serious problems have been observed in the food-processing industry as well. Although overall production in the industry in value terms declined by only 1.4%, its output quantities decreased as follows: frozen veal and beef by 36.3%, fresh or chilled veal and beef by 20.4%, frozen pork by 41.8%, fresh or chilled pork by 18.5%, frozen poultry meat and poultry by-products by 17.9%, sunflower oil by 16.5%, butter by 15.4%, granulated sugar from sugar beet by 15.8%, juices and nectars by 9%, and processed liquid milk by 5.8%. However, it would be incorrect to insist that the said problems with the processing and manufacture of basic food items are related to import expansion. According to Goskomstat data,6 the share of sales of domestic food items in the home market through the country’s retail trade system, judging by the results of the first 9 months of 2008, has not changed compared to the same period of the previous year and amounted to 88.5%, and with respect to the above groups of goods, it even exceeded 96%.

5 See: Pro sotsialne-ekonomichne stanovishche Ukraini za 2008 rik, Derzhkomstat Ukraini, Kiev, 2009, 82 pp., available at [http://www.ukrstat.gov.ua] (in Ukrainian). 6 See: “Prodazh spozhivchikh tovariv, iaki vibroleni na teritorii Ukraini, u torgoviy merezhi za 9 misiatsiv 2008 roku, Derzhkomstat Ukraini,” Ekspres-vipusk, 2008, No. 297, 17 December, available at [http://www.ukrstat.gov.ua] (in Uk- rainian). 366 UKRAINE Economy Agriculture

When analyzing the country’s food problems, we should also mention some positive changes in agriculture. According to preliminary data, compared to 2007, the gross volume of agricultural production in 2008 increased by 17.5%. This average figure includes an increase of 35.2% at agricultural enterprises and 5.8% in private households. The gross output of crop production in 2008 increased by 30.5% and of livestock by 1.0%. The highest grain harvest (including corn; weight after processing) obtained over the entire 17-year period of Ukraine’s independence appears to be quite an important development from the point of view of the state’s food security with a parameter of 53.3 million tons, which is 1.8-fold higher than the 2007 indices (mostly due to the 60% increase in grain crop productivity and the 14% expansion of the harvesting area). As before, the share of private households remains rather high in agricultural output: agricultural enterprises produced 42.1 million tons of grain (79% of the gross yield) and private households—11.2 million tons (21%). In addition, private households grew 98% of the gross potato yield, 86% of vegetables, 85% of fruits and berries, 14% of sugar beet, and 19% of sunflower. As for grain crops, the gross wheat yield (25.9 million tons) rose 1.9-fold compared to 2007, barley increased by12.6 million tons (a 2.1-fold increase), grain maize by 11.4 million tons (a 1.5-fold increase), rye by 1.1 million tons (a 1.9-fold increase), and sunflower by 6.5 million tons (a 56% increase). However, the gross harvest of industrial sugar beet amounted to 13.7 million tons, making a 19% decline (exclusively because of an approximately 30% reduction in the harvest area, with an increase in productivity of 21%). The gross output of vegetables (8.0 million tons) grew by 16.5%, including potatoes (19.5 million tons) and fruit and berry products (1.5 million tons)—by 2%. The situation in cattle breeding was characterized by negative dynamics, as was the case in previous years. For instance, according to preliminary data, the pattern of cattle and poultry sales for slaughter by farms of all categories amounted to 2.7 million tons (live weight bias), which is 1.5% less compared to 2007. Moreover, farms produced 11.8 million tons of milk (a 4.1% decline) and 14.9 billion eggs (a 6.2% increase). At agricultural enterprises, cattle and poultry sales for slaughter grew by 4.5% and egg production increased by 11.1%, while milk output diminished by 4.0%. At private households, meat production dropped by 6.6% and milk output by 4.1%, while egg production increased by 0.4%. The share of private households in the overall production of these livestock products was 51%, 82%, and 43%, respectively. As of 1 January, 2009, farms of all categories dealing with cattle breeding owned 5.2 million heads of cattle stock (which is 6.1% less than as of 1 January, 2008), including 2.9 million cows (a 5.7% decline), pigs—6.4 million heads (a 8.3% drop), sheep and goats—1.7 million heads (a 1.1% increase), poultry of all kinds—176.6 million heads (a 4.3% increase). Curiously enough, at agricultural enterprises the population of cattle diminished by 10.7%, including cows—by 8.0%; pigs—by 4.7%; and sheep and goats—by 0.7%, while the poultry population grew by 9.3%. At private households, the cattle population dropped by 3.6%, including cows—by 5.1% and pigs—by 10.7%, while the sheep and goat population increased by 1.5% and poultry of all kinds (99.9%) essentially remained at the previous year’s level. By the beginning of January 2009, private households owned two thirds (66.6%) of the overall cattle stock (64.9% compared to January, 2008), including cows—78.6% (78.1%); pigs—57.5% (59.1%); sheep and goats—82.4% (82.1%); and poultry of all kinds—50.4% (52.7%). Summarizing the above data that describes the agricultural situation in Ukraine, we must admit that small-scale industries do prevail in the country, since a significant part of its output is produced by private households. But even in the absence of large-scale industries, the current situation shows

367 CENTRAL EURASIA 2008 Analytical Annual that this sector has big potential for turning into a significant “player” in the world markets provided that the government invests the necessary material and financial resources into creating cattle-breeding complexes and vertically integrated structures focused on livestock production.

Construction and Transport

The construction sector was actually the first to encounter the effects of the global financial crisis. Indeed, in February and March alone the increment rates of construction output exceeded similar parameters for the previous year (100.4% and 101.7%, respectively). In April, zero growth was registered, and in May construction productivity began to drop, whereby this decline even accelerated in the fourth quarter. In total figures, the annual reduction amounted to 16%. In fact, a construction slowdown was observed in all the basic construction areas. In particular, construction site preparation works decreased by 10.3%, construction of buildings and facilities by 16.3%, and technical equipment installation works by 14.3%. Among the construction companies that experienced a drop in their productivity the most dramatic figures were shown by those involved in the construction of highways, roads, airfields, and sports facilities (by 36.4%), long-distance and local pipe lines (by 13.9% and 19.9%, respectively), and communication and power supply lines. Most transport industries managed to resist the crisis phenomena in the global and national economy. By and large, transportation companies carried 891.8 million tons of freight, which is only 1.3% less compared to the previous year, and freight turnover decreased by as little as 0.2%. Even more so, during the first seven months of the year, freight turnover topped 105-106% (in February and March this figure was even 109.6% and 110.1%, respectively). The situation with automobile transportation appears to be the most successful. Motor transport enterprises (including shipments by individual businessmen) carried 186.6 million tons of cargo, which exceeded the previous year’s figures by 10.3%, while their shipment turnover amounted to 37.4 billion ton/km, which increased by 27.3% on account of long-distance and international shipments. The shipment of freight by railway decreased by 3.0% compared to 2007, including freight forward by 3.9%. In addition, the transportation of oil and petrochemicals dropped by 23.3%, ferrous scrap by 15.6%, ferrous metals by 13.5%, timber cargo by 10.7%, building materials by 9.9%, chemical and mineral fertilizers by 9.6%, and iron and manganese ore by 5.5%. Main pipelines transported 186.8 million tons of cargo, which is 4.7% less than in 2007. At the same time, the pumping of gas increase by 0.5% and ammonia by 1.8%; however, oil transportation decreased by 19.5%. The transit of gas grew by 3.8%, but the transit of oil and ammonia was curtailed by 17.4% and 1.8%, respectively. The domestic sea and river commercial fleet decreased cargo transportation by 19.6% compared to the 2007 indices, including shipment by river transportation by 25.5% and by sea transportation by 9.8%. Foreign freight shipment by river transportation decreased by 21.7% and by sea transportation by 7.3%. Cargo processing at commercial and fishing ports, as well as in industrial berths (sea and river wharfs) increased by 4.4%. The processing of export shipment increased by 17.9% and of import shipments by 12.2%, while the processing of domestic shipments dropped by 17.6% and that of transit shipments by 4.1%. Air transportation carried 101.4 thousand tons of freight in 2008, which represents a 2.6% drop compared to 2007. Cargo turnover by air transportation amounted to 378.4 million ton/km, which is a 2.6% decrease compared to the 2007 indices.

368 UKRAINE Economy

Passenger transportation was notable for its positive dynamics: approximately 8.3 billion passengers used passenger transportation services in 2008. These services performed a total of 147.3 billion passenger/km, thus exceeding the 2007 figures by 1.4% and 4.5%, respectively. Rail- way transport in 2008 carried 445.6 million passengers, which is 0.3% less compared to 2007. About 4.4 billion passengers used automobile transportation services, which exceeds the 2007 indices by 4.7%. Individual businessmen provided services for 9.4% more passengers by means of ground transportation. Sea passenger movement dropped in 2008 by 4.3% compared to the figures for 2007 and the foreign sea transportation of passengers decreased by 4.1%. At the same time, river passenger movement diminished by 15.7%, and foreign river movement showed a 38.5% drop. Air passenger movement amounted to 6.2 million passengers, resulting in a 25.1% increase compared to 2007.

External Sector of the Economy

The global financial crisis has also had a considerable impact on the external sector of the Ukrain- ian economy. In particular, after many years of continuous growth (see Table 1), in the second half of 2008, the country was challenged not only with a dramatic decline in foreign trade of goods and services, but also with an investment cutback and drop in the exchange rate of the national currency. However, the monthly merchandise deficit curtailment to $1.4 billion (according to financial results for the first 11 months of 2008) appears to be quite a positive factor, since this has reduced the current account balance deficit to $1.6 billion.7 And in December the trade balance deficit was reduced by as much as $0.4 billion compared to the previous months.8 In 2008, Ukraine maintained international merchandise trade transactions with partners from 216 countries worldwide, with the Russian Federation still being Ukraine’s biggest trading partner (Rus- sia accounts for more than 23% of export and import deliveries). In 2008, as in previous years, the commodity pattern of Ukrainian exports rested on base metals and products from them, as well as on mineral products, mechanical and electric equipment, transport vehicles and road facilities, and products manufactured by the chemical industry and other related branches. It should also be mentioned that in 2008, the share of energy materials, oil and oil distilla- tion products, land transport vehicles (apart from railway carriers), ferrous metals, ores, slag, and ashes increased in the overall merchandise imports, while the share of mechanical and electrical machines, polymeric materials, and plastic decreases. According to the preliminary estimations of experts from the National Bank of Ukraine,9 in the conditions of a sharp reduction in external demand for Ukrainian exports, the curtailment of the merchandise trade deficit was caused by a decline in the hryvnia (over the last two months along the official hryvnia-dollar exchange rate dropped by almost 40%). The drop in the Ukrainian Hryvnia (UAH) exchange rate was one of the most powerful reasons for the curtailment of imports: in November 2008, Ukrainian imports showed a $2.2 billion decline compared to October indices. According to the preliminary end results for 2008, the current account balance deficit amounted to $11.9 billion (–6.7% of the GDP), while the trade balance deficit increased to $16 billion

7 See: Otsinka stanu platizhnogo balansu Ukraini v sichni-listopad 2008 roku. Analitichniy ogliad (za poperednimi danimi), Natsionalniy bank Ukraini, available at [http://www.nbu.gov.ua] (in Ukrainian). 8 See: Otsinka stanu platizhnogo balansu Ukraini v 2008 rotsi. Analitichniy ogliad (za poperednimi danimi), Natsion- alniy bank Ukraini, available at [http://www.nbu.gov.ua] (in Ukrainian). 9 Ibidem. 369 CENTRAL EURASIA 2008 Analytical Annual

(for reference: –$5.3 billion and –3.7% of the GDP in 2007), and the income balance deficit reached $2 billion. In value terms, merchandise exports in 2008 increased by 35.9% compared to the previous year and reached $67.7 billion, while imports grew by 48.4% and totaled almost $83.6 billion. Such high growth rates are explained, first of all, by the mid-year pricing environment and favorable market situation for Ukrainian exports and by the high domestic demand for imported consumer products and investment goods. In July 2008, when the foreign trade volume reached its peak, the overall increase in exports was 47% and in imports—60% compared to January-July of the previous year. In merchandise exports throughout the year, the following trends should be highlighted. In January-July, their monthly volumes gradually increased from $3.7 billion to $7.7 billion, while later they started to drop. As early as November, merchandise exports dropped to $3.8 billion, representing a 34% decline compared to October and a 16% cutback in contrast to November 2007. The decline in metallurgical production (by 49.4%), chemical industry production (by 34.1%), machine-building production (by 28.1%), and agrarian and industrial complex output (by 18.9%) had the biggest impact on the overall curtailment of exports in November 2008 compared to Octo- ber 2008. However, in December the government managed to raise the monetary value of merchandise exports, compared to November 2008, by 9.2% and bring it up to $4.1 billion, mainly due to increased deliveries of machine-building and metallurgical products. These rather high export growth rates resulted from value increments in metallurgical output (33.4% growth), agrarian and industrial complex output (70%), and machine-building production (29%). As for the geographical structure of export transactions, the share of the CIS countries gradually fell during the year: as of 1 January, 2009 this parameter amounted to 35.5% compared to 37.9% in 2007. However, according to the December 2008 results, this index—in monthly figures— amounted to 38.7%. Merchandise import dynamics also showed a gradual increase in January-July 2008—from $4.6 to $8.8 billion—with a further decline to $5.3 billion in November and to $4.7 billion in Decem- ber. In December, import volumes in value terms shrank by 9.1% compared to November. The increase in merchandise imports was caused both by consumer and investment demand growth and by higher prices in the world markets, first of all—on energy carriers. And import curtailment in the second half of 2008 was primarily explained by consumer demand cooling off under the influence of the financial and economic crisis and hryvnia devaluation. For instance, a reduction in imports in Novem- ber compared to October was observed in the following groups of goods: mechanical engineering products by 39.5% (primarily owing to cars, power-operated machinery and equipment); mineral products by 20.2% (due to a drop in oil product deliveries); chemical industry products by 32% (plastic and polymer products, pharmaceutical products); and metallurgical products by 46.1% (ferrous metals and products from them). In the geographical structure of import transactions, the share of countries outside the CIS increased to 61.0% compared to 58.9% in 2007. According to preliminary estimations,10 service surplus in 2008 amounted to $2.1 billion: non- residents were provided with services worth $18.0 billion, while the amount of services received—in value terms—was about $15.8 billion. Here it should be mentioned that the increment rates of service imports considerably exceeded the corresponding export parameter—34.8% against 26.9% (in 2007, the increment rates were 28.1% and 25.4%, respectively). Such acceleration in service imports incre-

10 See: Otsinka stanu platizhnogo balansu Ukraini v 2008 rotsi. Analitichniy ogliad (za poperednimi danimi). 370 UKRAINE Economy ment rates is explained by the 60% increase in transportation services, which is associated with the high growth rates in foreign trade activities. The global financial crisis has also affected the volumes of foreign direct investments received. For example, the foreign direct investment increment in November 2008 is estimated at only $298 million (for reference—$1.1 billion on the average in January-September and $375 million in October). In the fourth quarter of 2008, the net inflow of foreign direct investments into Ukraine totaled as little as $1.2 billion, which is 2.7-fold less than the three previous quarters on the average. However, the overall net inflow of foreign direct investments into Ukraine in 2008 is estimated at $9.9 billion, which exceeds last year’s index ($9.2 billion) by 7.5%. In 2008, the comparative appeal for foreign investors of the banking sector continued to grow: this sector’s share is estimated at 42.7% of the total receipts (37.9% in 2007), and investments themselves increased by 44.9% compared to 2007. In today’s crisis conditions, the banking sector has also remained the main recipient of foreign direct investment assets, mainly due to recapitalization of banks with foreign capital: in the fourth quarter, the share of investments is estimated at 56.6%. The financial account balance in 2008 was positive, and it amounted to $8.8 billion, which is 40.1% less than the 2007 figures ($14.7 billion). Such a reduction was the result of a short-term outflow in the fourth quarter ($5.7 billion), which was observed in Ukraine for the first time in the last 30 months, and it was directly caused by the impact of the financial crisis on the Ukrainian economy. External revenue reduction at high repayments on previously borrowed funds has had a beneficial effect on the situation with the private external debt. For instance, in October-December 2008, the private external debt decreased by $1.5 billion (or by 1.6%), and as of 1 January, 2009 it was estimated at $89.7 billion. From this amount the banking system debt was reduced by $2.3 billion (5.5%) and reached $39.8 billion. The banking system indebtedness structure has also improved: the floating debt share decreased by 7.2% to $9.3 billion.

Interior Trade and Inflation

In 2008, the turnover of wholesale trading companies amounted to 1,000.1 billion hryvnias, and the actual wholesale turnover had decreased by 6% compared to the previous year. The retail trade turnover (including the turnover of retail sale enterprises and merchandise sales by individual businessmen) in 2008 amounted to UAH 449.3 billion, which represents an 18.6% increase compared to 2007. In the retail trade turnover structure the share of organized and informal markets amounted to 30%. In organized market turnover, agricultural products accounted for 14.1%, and the turnover of the enterprises engaged in retail trade and catering business was UAH 243.9 billion, which exceeded the 2007 indices by 17.9% in comparable prices. The consumer price index (index of inflation) amounted to 122.3% (compared to 116.6% in 2007). For example, the price of foodstuffs and soft drinks went up by 24.5%, including pork by 48.1%, beef by 43.8%, and poultry by 21.7%. Housing, water, electric power, gas, and other fuel payments increased by 28.2%, including for natural gas by 54.1%, sewage by 45.1%, water supply by 40.6%, apartment rent by 35.7%, and hot water supply and heating by 30.7%. In 2008, public health service charges went up by 21.9%, with the biggest increase in prices being for sanatorium-and-spa treatment services and out-patient services (26.1% and 23.0%, respectively).

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The price increase for transportation services amounted to 22.5%, which resulted, first of all, from the increase in the cost of shipments by road (53.0%) and railway (25.3%) transport. The cost of services provided by educational institutions, restaurants, and hotels, as well as by recreation and culture institutions went up significantly. According to the 2008 annual figures, the price index of industrial output manufacturers in Ukraine amounted to 123.0% (compared to 123.3% in 2007).

Household Incomes and the Labor Market

Nominal household incomes grew by more than 40% in 2008 compared to 2007. The income available to the population for the purchase of goods and services increased by more than 39%, while real available income, taking into account the price factor, rose by 11%. Household expenses in 2008 increased by almost 37% compared to the same period of the previous year, while the increase in savings amounted to more than UAH 59 billion. According to random surveys of the population (households), the monthly number of economically active population between the ages of 15 and 70 averaged 22.6 million people. This figure includes about 21 million people involved in economic activities and almost 1.6 million unemployed. The occupation level of the population was as follows: between the ages of 15 and 70—60.1%, and of active working age—68.1%. In late 2008, the situation on the labor market increasingly deteriorated: at most enterprises, managers were even forced to introduce mandatory leaves and reduce working hours. As of 1 January, 2009, the number of people searching for work through the State Employment Agency amounted to 876,200 (a year ago this figure was 660,300). Throughout the country in general, as of 1 January, 2009, the level of registered unemployment was 3.0% of the working-age population.

Financial Sector

In the conditions of the complicated macroeconomic situation and influence of the global financial crisis, the country’s monetary policy in 2008 was characterized by the following data. From the beginning of the year, the National Bank of Ukraine, as a part of its anti-inflation effort, continued to conduct an interest rate policy intended to increase the value of its national currency, and it took specific measures to encourage positive trends in the structure of banks’ debit and credit transactions. As of the beginning of October, the banking system was fully liquid: in fact, the banks’ liquid deposits were twice as high as their current performance requirements. However, at the beginning October (as the world financial crisis developed), the Ukrainian financial market started to show financial strain attributes owing to a negative information background and artificially provoked mistrust on the part of bank depositors who, in mass numbers, rushed to withdraw money from their bank accounts. Under the increase of the strain in the Ukrainian financial market in October-November, the National Bank of Ukraine primarily focused its efforts on ensuring timely bank exchanges, cash outflow reduction, and currency situation balancing.

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In this context the National Bank of Ukraine extended the banks’ ability to maintain their liquidity via refinancing mechanisms, alleviated its mandatory reserve requirements, limited certain active bank transactions in foreign currencies, and improved the regulations for such transactions. At the end of November the National Bank of Ukraine started to implement the second phase of its stabilization arrangements, with the main objectives being to decrease speculative demand for foreign exchange and maintain the positive trends in the banking system stabilization efforts. This phase of stabilization arrangements, in particular, is aimed at the following: —limiting banks’ liquidity support; —adjusting mandatory reserve requirements intended to increase the appeal of credit-debit transactions in the national currency; —undertaking measures to increase the value of the national currency with the purpose of establishing additional incentives to return deposits to the banking system. In particular, starting on 19 December, overnight loan rates were increased to 22% (against security) and 25% (blank), and the weighted average interest rate on mobilization transactions in De- cember was increased to 16.8% per annum (in November—6.0% per annum). To maintain the banking system liquidity, in December the National Bank of Ukraine granted refinancing credits totaling UAH 30.7 billion (including UAH 6.1 billion in overnight credits), compared to UAH 45.5 billion in November (UAH 24.3 billion of which were in overnight credits). Since the beginning of the year, the National Bank granted refinancing credits totaling UAH 169.5 billion (UAH 91.8 billion of which were in overnight credits). In addition, to improve the redistribution of provisionally spare money between the banks, the National Bank of Ukraine continued its transactions aimed at mobilizing the banks’ funds. In Decem- ber, mobilization transactions amounted to UAH 3.4 billion (since the beginning of the year they equaled UAH 57.2 billion). To extend its capabilities in maintaining the banks’ liquidity, the National Bank of Ukraine did not decrease the interest rates on its transactions, following its anti-inflation policy. In 2008, the weighted average interest rate on liquidity maintaining transactions amounted to 15.3%, compared to 10.1% in 2007. Individual deposits increased in December by 4.3% to UAH 215.6 billion (since the beginning of the year they grew by 31.1%). Corporate deposits increased by 7.6% to UAH 142.3 billion (since the beginning of the year they grew by 23%). Overall deposits in December grew by 5.6% (since the beginning of the year—by 27.7%) to UAH 357.8 billion. Overall credit deposits increased in December by 9.3% (since the beginning of the year they grew by 71.9%) to UAH 733.9 billion. Credits granted to legal entities increased in December by 10.2% (since the beginning of the year—by 69.7%) to UAH 460.5 billion. Credits granted to individuals increased by 7.7% in December and by 75.9% since the beginning of the year to reach UAH 273.4 billion. Such credit and deposit-related dynamics were basically influenced by the exchange rate revalu- ation of previously granted credits. The value of deposits continued to grow in December. For example, the weighted average rate on deposits in national currency increased in December from 12% to 13%, while in foreign currency it slightly decreased from 8.3% to 8.2%. At the same time, in December the weighted average rate on credits in national currency decreased from 22.6% to 21.6%, while in foreign currency it went up from 11.5% to 12.6%. As of 31 December, 2008, the official hryvnia/dollar rate was UAH 770.00 for $100; hryvnia/ euro rate—UAH 1,085,546 for 100 euros; and the hryvnia/ruble rate was UAH 2.6208 for 10 Russian rubles.

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When assessing the economic situation in Ukraine in 2008, it should be emphasized that the country’s economy cannot be characterized as “catastrophic” in spite of the fact that the national statistics do show that it has been seriously affected by the global financial and economic crisis in the last quarter of the year. In our opinion, the real sector of the Ukrainian economy has always had a huge “survival” potential, which is explained by the high level of adaptability of the country’s businessmen to conditions in a stable institutional and political environment. The frequent change of governments over the last four years and continuous inactivity of the supreme legislative power branch have only aggravated the problems caused by the incomplete structural reforms in Ukraine. In 2008 Ukraine became a full-fledged member of the World Trade Organization. However, as analysts have argued, in the current situation the country’s executive and legislative authorities have demonstrated that they are entirely unprepared to apply the GATT/WTO norms and regulations due to the lack of relevant experts. In this respect, the crisis phenomena that emerged at the end of the year have not been adequately addressed by the power structures and, accordingly, the measures taken by the authorities were “overdue,” unsystematic, and nonconforming. In other words, the depth of the crisis currently emerging in Ukraine in the financial and economic environment fully depends on the quality, timeliness, and adequacy of the anti-recessionary methods and instruments developed and applied by the authorities.

RELIGION

Viktor BUDKIN D.Sc. (Econ.), professor, merited scientist and technologist of Ukraine, senior fellow at the Institute of World Economy and International Relations, National Academy of Sciences of Ukraine (Kiev, Ukraine)

The Current Religious Context

he situation in the religious sphere in Ukraine differs greatly from that in the other CIS countries where one religion dominates over all the others (Kazakhstan, in which Islam and Orthodoxy T are more or less balanced, being the only exception). In Ukraine several Christian churches with 374 UKRAINE Religion more or less equal weight form several centers, which means that the political leaders and parties have to take all of them into account. Neither of them, however, can boast of being the dominant force. Confrontation between the more or less equally important confessions is one of the causes of the latent instability that crops up during presidential and parliamentary elections. The country’s eastern and southern regions with their Russian-speaking population which sides with the Ukrainian Orthodox Church of the Moscow Patriarchate (UOC-MP) and favors friendly relations with Russia, on the one hand, stand opposed to the central and western regions in which other Christian confessions predominate (the Ukrainian Orthodox Church of the Kievan Patriar- chate—UOC-KP and the uniate Ukrainian Greek Catholic Church—UGCC), the population of which is either restrained (UOC-KP) when it comes to relations with Russia or is negative (UGCC), on the other. The latter actively supports President Yushchenko, who insists on Ukrainization of education and the media, NATO membership, etc. These Christian confessions are the main religious communities; their parishes are scattered across the country, however the UOC-MP dominates in the east and the south; the UOC-KP in the center and partly in the west; and the UGCC in the west. The Ukrainian Autocephalous Orthodox Church (UAOC) is less influential; the Roman Catholic Church, Islam, Judaism, Baptists, Lutherans, and other smaller confessions are also present. This has been inherited from the past and stems from the history of relations between the state and religion both in the Russian Empire and the Soviet Union. It should be said that the differences between these confessions remain strictly in the ideological sphere without developing into an open confrontation. Today it is only the Moscow Patriarchate with its daughter structure the Ukrainian Orthodox Church that stands opposed to the other Christian confessions present in the country. It looks at the UOC-KP as a breakaway church, the head of which, Mikhail Denisenko, defrocked by the ROC Holy Synod has no right to the name Filaret he now bears as a monk. The UGCC is accused of the 400-year-long split and the intention of transferring Ukraine to the Vatican. Typically enough, when the Greco-Catholics moved their residence from Lvov to Kiev in 2005, the UOC-KP did not object; by contrast, the Moscow Patriarchate resolutely objected to the move, which was interpreted as a claim to spreading its jurisdiction to the rest of the country. The UOC-MP, which is fighting against the UOC-KP and UGCC (which in the early 1990s deprived the Moscow Patriarchate of a large number of churches and followers), is not ready to fight Catholicism. It has much fewer followers than the other two structures mentioned above (there are practically no Ukrainians or Russian-speakers among them). The late Patriarch of Moscow and All Russia Alexiy II was extremely negative about the relations with the Vatican, which explains the current position of the UOC-MP in relation to Catholicism. The position of the Moscow Patriarchate in Ukraine is far from simple. There is no official confrontation with the state but, unlike President Kuchma, incumbent President Yushchenko is actively involved in church affairs on the side of the UOC-KP. The Moscow Patriarchate was forced to accept the so-called self-governing churches—the formally independent structures within the common Mother- Church. It was within this structure that the Ukrainian Orthodox Church emerged and became known among other confessions as the Ukrainian Orthodox Church of the Moscow Patriarchate. The fact that Metropolitan of Kiev and All Ukraine Vladimir decided not to run for Metropoli- tan of Moscow and All Russia when Alexiy II died because of the fairly complicated confessional situation in Ukraine is an indirect indication that the position of the UOC-MP in the country is far from easy. The position of the Moscow Patriarchate was undermined to a great extent when the self-proclaimed Kievan Patriarchate came into being. According to official data, by 1 January, 2008 the UOC-MP had 11 thousand parishes and the UOC-KP had 4.5 thousand. At the same time, according to sociological polls, the UOC-KP has 14 million followers, while the UOC-MP has only 9 to

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9.5 million.1 However the Ukrainian Orthodox Church of the Moscow Patriarchate is in a much better position because the main question, that of the canonical status of the Kievan Patriarchate and its territory (Ukraine), remains pending. In 2008 the position of the other confessions remained the same. The UGCC, which moved the residence of its head Cardinal Lubomyr Husar to Kiev, did not gain a stronger position in the east. Judaism is represented by several trends; not a large ethnic group (the Jews comprise 0.2 percent of the country’s total population),2 the Judaists are actively involved in public life: some of their public organizations are headed by big businessmen and political leaders or have them among their members (Vadim Rabinovich, a big businessman, or former governor of the Zaporozhye Region and top ranking official Evgeny Chervonenko are two of the many). The much larger Muslim community (about 2 million, or 4 percent of the country’s population)3 is much more passive socially: it is engrossed in confessional problems; they do not live in compact groups anywhere in the country except the Cri- mea. Deported at the end of World War II on Stalin’s orders, the Crimean Tartars have now returned to the peninsula. Today there are about 250 thousand of them; the conflicts with the rest of the Crime- an population is caused not so much by confessional disagreements as by the fact that the Tartars have not yet been returned their former land. The three Ukrainian presidents (Leonid Kravchuk, Leonid Kuchma, and Viktor Yushchenko who currently fills the post) and all the political forces have been treating all the religious confessions equally since the very first days of the republic’s independence to keep all potential voters happy. Represent- atives of all the churches (UOC-MP, UOC-KP, UGCC, etc.) regularly received state awards; driven by political expediency rather than religious tolerance the top officials never miss the religious holidays of any of the Christian confessions and the Judaic communities. It should be said though that recently many of the top political figures have become more open about their religious affiliation. According to Father Superior of the Kiev-Pecherskaya Lavra Archbishop Paul, in 2008 President Yushchenko stopped attending the UOC-MP churches4 while the head of the largest parliamentary faction and the Party of Regions Victor Yanukovich never takes part in the events organized by the UOC-KP. They are driven by political considerations: President Yushchenko regards the UOC-MP as the main religious instrument of Russian influence in Ukraine while Yanukovich, along with the largest part of the voters living in the south and the east, sides with UOC-MP because of its predominant influence there.

Hopes and Disappointments of Ukrainian Orthodoxy

The 1020th anniversary of the baptism of Kievan Rus was the central event in the country’s religious life. The date, which could not be regarded as a suitable pretext for large-scale celebrations, was selected because in 1988 the 1000th anniversary was celebrated in Moscow, not in Kiev where the event took place. Moscow was selected for purely political reasons; there were fears of stronger separatist sentiments in Ukraine during perestroika. In 2008 Kiev, likewise, was politically motivated: the celebrations were intended to emphasize Kiev’s religious priority in its rivalry with Moscow and to clarify the position of the Kievan Patriarchate by delivering it of the stigma of

1 See: Pravoslavny vistnik, No. 7-8, 2008, pp. 56-57 (in Ukrainian). 2 See: A. Wolfe, “Natsionalnosti Ukrainy,” 2000 Newspaper, 6 July, 2007. 3 Ibidem. 4 See: “Interview with Archbishop Paul: ‘Idols are coming back’,” Kievskiy vestnik, 27 December, 2008. 376 UKRAINE Religion a breakaway and therefore illegal structure. This would have pushed the Moscow Patriarchate from the republic and would have replaced the three Orthodox churches (including the UAOC) with a single Orthodox structure. The Kievan and the Moscow patriarchates never tire of talking about their purely religious contradictions yet the Russian Orthodox Church (operating at home in symbiosis with the state) remains a political factor as well through which Russia realizes its influence in the east and the south. On the eve of the Kievan festivities Patriarch of Moscow Alexiy II was in two minds about attending the jubilee; he went at the direct request of Prime Minister Putin, who could not afford losing grip on Ukraine. The Ukrainian authorities shouldered the main burden of foreign policy support for the event. President Yushchenko negotiated with the head of Orthodoxy Ecumenical Patriarch Bartholomew I of Constantinople, on whom the future of the UOC-KP as the only local church in Ukraine depended. In a letter to President Yushchenko, the Local UOC-KP Council (convened as part of the jubilee) wrote: “We highly appreciate and welcome your efforts designed to overcome the division of the Ukrainian Church through inviting, among other things, the heads of the Local Orthodox Churches to participate in the solution to the problem, including Ecumenical Patriarch Bartholomew, Head of the Constanti- nople Mother-Church, in particular.”5 The president awarded orders to 41 representatives of the UOC-KP to upgrade its status in the country; Patriarch of Kiev and All Ukraine Filaret was the first cavalier of all five degrees of the highest state order—the Order of Yaroslav the Wise. On the initiative of the three Orthodox churches (UOC-MP, UOC-KP, and UAOC), the National Council on Cultural and Spiritual Affairs and the Ukrain- ian Culture Fund, the president instituted a new holiday—the Day of the Baptism of Kievan Rus—to be marked on 28 July, the memorial day of Grand Prince St. Vladimir, Equal-to-the-Apostles. The holiday started on 11 July with a sitting of the Local UOC-KP Council dedicated to the baptism of Kievan Rus and the 900th anniversary of the St. Michael Golden-Domed Monastery, which comes second only to the Kiev-Pecherskaya Lavra. Destroyed in the 1930s by the Soviets, it was completely restored by independent Ukraine in the late 1990s. The Council adopted several documents, the most important of them being the Address to the Heads of the Local Orthodox Churches that justified separation of the UOC-KP from the Moscow Patriarchate in 1992 as an absolutely legal step. The document accused the Moscow Patriarchate of the still indefinite status of the UOC-KP as a canonical and local church “because of its artificial isolation by the Russian Church.” In view of the considerable disagreements between the Constantinople and Moscow patriarchates, the document suggested that the autocephalous status of the Ukrainian Patriarchate would “considerably limit the Moscow Patriarchate’s claims to priority in Ecumenical Orthodoxy and related provocations.” The Local Council also pointed out in the same document that “historically and canonically” Ukrainian Orthodoxy should obey the Ecumenical Patriarch of Constantinople rather than Moscow. The Local Council called on the heads of the other local Orthodox Churches “to look at the situation in the Ukrainian Church not through the mirror distorted in Moscow but through their own eyes.”6 In line with the tradition of extolling the historical personalities who fought for independent Rus—Ukraine, the Local Council canonized the founder of the Kievan feudal state Yaroslav the Wise who lived in the 11th century and the last Ataman of the Zaporozhye Sech Petr Kalnishevskiy (exiled on the orders of Russian Empress Catherine the Great to the north when the Sech were liquidated, he died in the Solovki Monastery, which served as a prison, early in the 19th centu-

5 See: “Letter of the Local Council to President of Ukraine Yushchenko V.A,” Pravoslaniy visnik, No. 7-8, 2008. 6 See: “An Address of the Local Council of the Ukrainian Orthodox Church of the Kievan Patriarchate to the Heads of the Local Orthodox Churches,” Pravoslanvniy visnik, No. 7-8, 2008, pp. 15-18. 377 CENTRAL EURASIA 2008 Analytical Annual ry).7 To raise its authority among those dissatisfied with its ambiguous position in relation to the strengthening position of other religious communities (the uniate UGCC in particular), the Council canonized Prince Konstantin Ostrozhskiy and Metropolitan of Kiev, Galich, and All Russia Job Boretski, two most active fighters for Orthodoxy and against Catholicism and the uniate movement in the 16th-17th centuries. The main events took place on 25-27 July when Ecumenical Patriarch Bartholomew I and the heads or representatives of other local churches arrived in Kiev, Patriarch of Moscow and All Russia Alexiy II among them. The Moscow Patriarch warned the other Orthodox churches that he would stay away from events attended by the hierarchs of the UOC-KP, which the ROC accused of schism and which it could not therefore accept as a legal structure. This kept the jubilee initiator, the Kievan Patriarchate, away from the festive events in its official capacity even though lower-ranking clergymen and the laity attended all the mass events. The Kievan Patriarchate issued a press release that said in part: “To avoid a very complicated situation for the state it was decided that the hierarchs would not attend the official events.”8 This transformed the celebration of the 1020th anniversary of the Baptism of Kievan Rus, planned as a purely religious state-supported event, into a purely state event. The UOC-KP organized several independent events, including a liturgy in front of the St. Michael Monastery, which attracted a thousand of priests and 15 thousand laymen and a religious procession to the monument to Prince Vladimir. President Yushchenko showed Ecumenical Patriarch Bartholomew I special attention, he met him personally at the airport and attended two services with him. The event was commemo- rated with a coin that bore the images of the president and the patriarch of Constantinople. The city brimmed with portraits of the patriarch of Constantinople while there was practically no information about the arrival of Alexiy II. The president demonstratively left the joint service of the Ecumenical and Moscow patriarchs at the monument to Prince Vladimir and ignored the services conducted by the head of the ROC in the Kiev-Pecherskaya Lavra, the first monastery of Kievan Rus. From the very beginning the Moscow Patriarch was cold-shouldered: at the airport he was greeted by speaker of the Supreme Rada Arseniy Yatseniuk, the third man in the state, and a handful of civil servants. The labors of the president and the Kievan Patriarchate were lost: despite the courteous attention he was shown, Ecumenical Patriarch Bartholomew I demonstrated no mean diplomatic skills in what he said and with whom he met while in the Ukrainian capital. On the one hand, he refused to lift the anathema from the head of the Kievan Patriarchate Patriarch Filaret imposed on him in 1997 by the ROC for declaring the Ukrainian Orthodoxy autocephalous and capturing churches. He carefully avoided contact with members of the Kievan Patriarchate. On the other, some of his pronouncements were interpreted as supporting President Yushchenko’s efforts to ensure Church unity in the country, which was only possible under the Kievan Patriarchate. Much attention was paid to the statement issued by the ecumenical patriarch that the Church of Constantinople was the Mother-Church of Ukrainian Orthodoxy (a title claimed by the Moscow Patriarchate). The UOC-KP explained the ambiguous position of Patriarch Bartholomew by the pressure put on him by the Moscow Patriarchate. It was rumored that Moscow even threatened to split the world Orthodox community by moving the closest national churches under its patronage, as the strongest

7 Zaporozhskaia Sech (fortified territory in the lower reaches of the Dnieper) was military democratic republic set up by Ukrainian Cossacks (free or escaped soldiers) that existed in the 16th to the 18th century which elected its own atamans. 8 See: “Celebrations of the 1020th Anniversary of Baptism of Rus. Press Center of the Kievan Patriarchate,” Pravo- slanvniy visnik, No. 7-8, 2008, p. 52. 378 UKRAINE Religion

Orthodox center. The official journal of the Kievan Patriarchate carried a brief exposition of an article that appeared in Cumhuriet (Turkey) which informed readers that on the eve of the jubilee Prime Minister Putin spoke to Turkish Prime Minister Erdoðan while the Foreign Ministry of Russia warned the Turkish Foreign Ministry of possible negative repercussions for bilateral relations created by the visit of the Ecumenical Patriarch. The article hinted that the patriarch, who is a Turkish citizen with the status of a civil servant, was also warned.9 The celebrations proved to be disappointing for their main initiators and participants. The Kievan Patriarchate did not receive the desired status of a legal community of the canonical and local Orthodox churches. The “voluntary” absence of the heads of the Kievan Patriarchate from the official events deceived no one while delivering a heavy blow at the authority of the Kievan Patri- archate in the eyes of world Orthodoxy. President Yushchenko gained nothing either: the aims remained unattained while the supporters of the Moscow Patriarchate interpreted the event as the intention to squeeze their church out of Ukraine, which cost the president several rating points with the UOC-MP voters. At the same time the UOC-KP supporters became disillusioned with the president’s ability to resolve the most important problem—they still belong to an “illegal” church. The Moscow Patriar- chate did not gain much: it became clear that without Russian state support its position in Ukraine was shaky. The strain of the jubilee and everything that predated it probably undermined the health of the Patriarch of Moscow, who died six months later, in December 2008. The authority of the Ecumenical Patriarch also suffered: it turned out that his power as the head of the Orthodox world could be limited from the outside—by the Moscow Patriarchate and the Russian and Turkish authorities.

Other Religious Communities

In 2008 the life of the other religious communities was less hectic. The Ukrainian Autocephal- ous Orthodox Church stayed away from the celebrations: it could not be officially represented at the jubilee. Its absence was less conspicuous, which means that its authority remained intact. It avoided active contacts with the UOC-KP on possible unification, an issue actively discussed a couple of years before. In 2008 the UAOC concentrated on establishing its rights to St. Andrew’s Cathedral, its main church, which it has been using for services since the early 1990s. After several years of haggling over several central cultic objects in Kiev the other confessions finally sorted things out. The UOC-KP received St. Vladimir’s Cathedral; the Catholics St. Alexander’s Cathedral; the Jews the Brodsky Synagogue, etc. On 22 May, 2008 the secretariat of the president decided to transfer St. Andrew’s Church, currently belonging to the St. Sophia of Kiev museum, to the UAOC. The Ukrainian Greek Catholic Church, which regards itself as a representative of the two main Christian confessions—Orthodoxy and Catholicism—marked the 1020th anniversary of the Baptism of Kievan Rus by Greek priests in full conformity with its name and was thanked by the president. In September 2008, at a meeting with its head, Cardinal Lubomyr Husar, President Yushchenko pointed out that the Christian communities should have celebrated the jubilee together, which was very important for the unification of the Ukrainian churches and the believers. They also discussed how the

9 See: “The Turkish Leaders Hinted to the Patriarch of Constantinople that his Possible Interference in the Ukraini- an Affairs Constradicted the Turkish Interests,” Pravoslanvniy visnik, No. 7-8, 2008, p. 54. 379 CENTRAL EURASIA 2008 Analytical Annual

UGCC could extend spiritual patronage to Ukrainians abroad, including millions of Ukrainian guest workers.10 In July Cardinal Leonardo Sandri, prefect of the Congregation for Eastern Churches, visited Ukraine; deputies of the Lvov, Ivano-Frankovsk, and Ternopol Regional Councils (regional legisla- tures) conferred with the UGCC leaders. They used the visit to ask the Pope to give the UGCC a patriarchate status and extend beatification to Metropolitan Andrey Sheptitsiki and Patriarch Iosif Sle- poy, who headed the UGCC during the time of the worst trials in the mid-20th century. According to the media, Cardinal Leonardo Sandri’s ambiguous reply was due to the Pope’s unwillingness of worsen relations with the Moscow Patriarchate even more.11 In recent years the question of personal contacts between the Pope and the Ukrainian president has been actively discussed; in the past few years (since June 2001 when Pope John Paul II visited Ukraine) the issue has remained on the back burner. On 25 May, 2008, when talking to Vatican State Secretary Cardinal Tarcisio Bertone, President Yushchenko invited Pope Benedict XVI to visit Ukraine. Cardinal Bertone, in turn, invited Victor Yushchenko, on behalf of the Pope, to visit the Vatican. The invitation was confirmed in December 2008 when the president met with UGCC Metropolitan of Lvov Archbishop Mechislav Mokshitskiy. He was also thanked for the Catholics’ participation in the events commemorating the 75th anniversary of the Great Famine (Golodomor), the result of Soviet policy regarding the peasantry in 1932- 1933 that caused numerous deaths among the Ukrainians. Pope Benedict XVI was thanked for his prayer for the famine victims. The president highly appreciated the efforts of the Catholic Church to organize volunteers to help the disabled, elderly people, and orphaned children; to organize points of free food distribution, etc.12 The September Hasidic pilgrimage to the burial place of Reb Nachman, the saddik of this orthodox trend in Judaism, in the city of Uman (the Cherkassy Region) was one of the central religious events for the local Jews. In the 1990s the foreign Hasidic community paid for the largest synagogue (of up to 5 thousand people) in Eastern Europe to be built next to his burial site. Other cultic places were also built. As a rule Hasidic pilgrims from Israel, the U.S., West Europe, and other regions are protected by the Ukrainian militia. In 2008 the Israeli special services pooled efforts with the local militia to protect the Hasidic pilgrims against possible terrorist acts which Hezbollah threatened to organize on Ukrainian territory.13 As in most other Soviet successor states there are certain distinctions in the everyday activities of the official Islamic organizations and all sorts of sects. According to Mufti of Ukraine Akhmed Tamim, in 2008 the Muslim community concentrated on building its main cultic structure, the Charity Mosque, started in 1992. In Ukraine the Islamic organizations regarded as anti-state in many countries of the world are not banned. In the Crimea there are unregistered but not prosecuted communities of those international sects which are banned in Central Asia, the RF Muslim republics, and elsewhere in the CIS and the world. On 2 August, 2008 the Autonomous Republic of the Crimea hosted a conference in Simferopol, its capital, on Radicalism, Extremism and Islamism. Myths and Realities of the War on Terror convened by the Muslim DAVET community to discuss the problems of Islam in the contemporary world. It concentrated on the struggle between two ideologies—capitalism and Islam—which the West in-

10 See: Mutual Understanding between the Churches. The Dialogue is Going on,” Uriadoviy kurier, 13 September 2008 (in Ukrainian), 11 See: “Deputaty za patriarkaht i beatifikatsiu,” Zerkalo nedeli, 19 July, 2008. 12 See: “Zhdem v gosti Papu Rimskogo,” Moskovskiy Komsolomolets v Ukraine, 28 May 2008; “Standing Guard over Society’s Spiritual Resurrection,” Uriadoviy kurier, 17 December, 2008. 13 See: L. Titarenko, “The Hassid in Uman will be Protected by the Israeli Special Services,” Golos Ukraini, 25 Sep- tember, 2008 (in Ukrainian). 380 UKRAINE Religion terprets as a war on terror. One of the few events of its kind and since it addressed a very pertinent issue, the conference was attended by state and public organizations, including the Research Founda- tion in Support of the Autochthonous Peoples of the Crimea, the Crimean Center of Humanitarian Research, the Crimean Center of Practical Monitoring, the Crimean branch of the People’s Rukh of Ukraine Movement, the Republican Committee for Religious Affairs, the Main Administration of the Ministry of the Interior for the Crimea, etc.

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

As distinct from many of the CIS countries in which political confrontation peaked in the early half of the 1990s, Ukraine is still living amid a grave political crisis. Despite their statements of non- interference in the country’s politics, the confessions could not remain outside the process. Without moving too obviously to the side of the main political figures—President Yushchenko, Prime Minis- ter Timoshenko, or head of the largest parliamentary faction Yanukovich—the country’s main religious communities do affect the political biases of their followers. The UOC-MP followers form the bulk of Victor Yanukovich’s voters while affiliation with the UOC-KP or UGCC determines support of either the president or the prime minister. The structures and organizations close to one of the churches involved in politics under religious slogans present a problem. In July 2008 the All-Ukrainian Orthodox Choice Alliance organized an icon-bearing procession in Kiev to protest the visit of NATO Secretary-General Jaap de Hoop Scheffer. Members of so-called political Orthodoxy actively protest against visits of NATO men- of-war to Sevastopol and joint training exercises of Ukrainian and NATO military contingents on Ukrainian territory. Earlier denounced by the UOC-MP Assembly of Hierarchs, the Union of Or- thodox Citizens and the Union of Orthodox Communities remained convinced that believers should be actively involved in the events devoted to the burning political issues within the political Or- thodoxy movement. In 2008 they organized several purely political actions against the Ukrainian president during the preparations for and celebration of the 1020th anniversary of the Baptism of Kievan Rus. All sorts of organizations which side with the UGCC are active in the west; they favor Euro- Atlantic affiliation for the country and stiff opposition to the Russian leaders. The republic’s political life concentrated on the events connected with the Great Famine of 1932- 1933; the UOC-KP and UGCC, which together with President Yushchenko regard Golodomor as genocide of the Ukrainians, displayed a lot of activity. In his address to the compatriots Patriarch Filaret pointed out: “In Ukraine collectivization was coupled with ‘resolution of the national question.’ It created Golodomor—genocide of the Ukrainian people.”14 The leaders of Ukraine and Russia clashed over this interpretation. Moscow did not agree that the Soviet leaders had deliberately exterminated Ukrainians since people died in great numbers elsewhere in the Soviet Union. The UOC-MP, in turn, organized several memorial events but sided with Russia, thus moving against excessive politicization of a problem that is potentially detrimental to the relations between the two countries. The Address of the Leaders of the Christian Churches of Ukraine to the Ukrainian People, which called on all politicians and statesmen to cooperate for the sake of the country, was another eloquent confirmation that the religions were actively engaged in politics. The document was signed by the

14 See: “Address of the Leaders of the Christian Churches of Ukraine on the Occasion of Glorifying the Victims of Golodomor of 1932-1933,” Pravoslanvniy visnik 2, No. 11-12, 2008, p. 50. 381 CENTRAL EURASIA 2008 Analytical Annual

UOC-KP, UOC-MP, UGCC, the Catholic Church, the Baptists, the Pentecosts, and the Lutherans, which set aside their contradictions for a while. In December 2008-January 2009 the Ukrainian Judaists vigorously responded to the Israeli- Palestinian conflict, a sure sign of their greater involvement in politics. Vadim Rabinovich, head of one of the Judaic communities, even accused the media of misinterpreting the events. In 2009 the upcoming presidential election and mounting economic crisis in Ukraine and elsewhere will urge the leading religious communities toward even greater political involvement.

INTERNATIONAL AFFAIRS

Sergey TOLSTOV Ph.D. (Hist.), leading fellow at the Institute of World Economy and International Relations, National Academy of Sciences of Ukraine (Kiev, Ukraine)

t a press conference on 25 December, 2008 —Ukrainian-Russian contradictions in the hu- devoted to the year-end results, Foreign manitarian sphere. Minister Vladimir Ogryzko listed Ukraine’s A The country places top priority on drawing main unresolved foreign political problems.1 The up an Annual Ukraine-NATO National Program. following can be singled out in particular: The Ukrainian Foreign Ministry hopes to prepare —Russia’s procrastination in demarcation of the a new annual cooperation program in record time land border (it has taken eighteen months for based on the Ukraine-NATO Special Plan ap- the Russian side to come up with an official proved by the Cabinet of Ministers at the end of reply to Ukraine’s proposal to begin demarca- 2008. tion). According to the minister, if a decision Ukraine is still determined to take a tough- cannot be made on the basis of mutual agree- er stance in its relations with Russia, which it ments, the Ukrainian side will begin unilateral hopes to build on the principles of equality and demarcation of its border with Russia; pragmatism with complete adherence to the reg- —Lack of progress in border delimitation in the ulations of international law. Kerch Straight and territorial demarcation in With respect to international security, the the Azov Sea; Ukrainian Foreign Ministry insists on each state being free to choose its own security model. Spe- — Slow progress in settling the problems related to the stationing of Russia’s Black Sea Fleet; cial attention must be paid to executing the Unit- ed State-Ukraine Charter on Strategic.2

1 See: “Itogi goda: lichnyy vzgliad. MID Ukrainy v etom rogy dostig sushchestvennykh rezul’tatov vo vneshnei 2 See: “Priority Tasks of the Ukrainian Foreign Min- politike—Vladimir Ogryzko,” 25 December, 2008, availa- istry for 2009,” available at [http://www.mfa.gov.ua/mfa/ua/ ble at [http://www.ukrinform.ua/rus/order/?id=767521]. publication/content/22678.htm] (in Ukrainian). 382 UKRAINE International Affairs Relations with NATO

President Viktor Yushchenko identifies Ukraine’s political sovereignty with its membership in NATO. The NATO Bucharest summit held on 2-4 April, 2008 officially recognized the prospect of Ukraine and Georgia joining NATO without specifying the actual time this might happen. The foreign ministers of the Alliance countries were to examine the possibility of inviting Ukraine and Geor- gia to join the Membership Action Plan (MAP) in December 2008. The serious deterioration in relations between the West and Russia in the aftermath of the Au- gust crisis in the Caucasus changed the situation. At a session of the North Atlantic Alliance’s foreign ministers held on 2-3 December, 2008, Great Britain and the U.S. motioned for the question of Ukraine and Georgia joining the MAP to be removed from the agenda. Instead, NATO suggested that Ukraine and Georgia draw up Annual National Programs to be elaborated and approved. These programs are to be financed from the budgets of specific Ukrainian ministries and the Alliance’s budget. Germany asked that this new format of Ukraine’s and Georgia’s relations with NATO not be viewed as an alternative to MAP, which is still considered a necessary stage preceding any country’s membership in the Alliance. At a sitting of the defense ministers of the Ukraine-NATO Commission in Brussels on 13 June, 2008, a decision was adopted on Ukraine’s participation in the NATO Rapid Response Force. A Memorandum on Ukraine Joining the NATO Air Situation Data Exchange Program was signed. Main accents: The NATO member states rejected the possibility of Ukraine and Georgia joining NATO by some alternative route that circumvented the MAP. Germany, France, It- aly, and several other West European countries insisted on retaining the MAP format for joining NATO. The consultation mechanism within the NATO-Ukraine Commission is being strengthened, which is to work on the main points set forth in the official MAP. In contrast to the MAP, the approved joint action plans coordinated with NATO will not call for a set schedule or time-limit for gaining membership in the Alliance. At the same time, the programs should envisage more intensive interaction in military issues and specific assistance from NATO in modernizing the army.

Relations with the EU

The Ukrainian side initiated discussion of cooperation with the European Union within the framework of energy projects. During the visit of the EU Troika foreign ministers to Ukraine on 13-14 February, 2008, European Commissioner for External Relations and European Neighborhood Policy Benita Ferrero-Waldner emphasized the European Commission’s interest in reconstructing Ukraine’s gas transportation system. During the 12th Ukraine-EU summit held in Paris on 9 September, 2008, decisions on most issues on the agenda, including Ukraine’s European prospects and beginning a dialog on a non-visa regime, were postponed. The signing of a new agreement between Ukraine and the EU was put off until the second half of 2009.

383 CENTRAL EURASIA 2008 Analytical Annual

On 22 July, 2008, the EU Council of Foreign Ministers adopted a decision to call the new agreement between it and Ukraine an agreement On Association. The Ukrainian side was hoping that a political declaration would be made at the Ukraine-EU summit on Ukraine’s potential membership in this organization. A provision was to be included in the introductory part of the agreement draft on association, according to which, based on common values and the Ukraine’s European choice the EU’s doors will be open to it. But on the pretext of the governmental crisis in Ukraine, this question was removed from the agenda. The European Union insisted that the new agreement between the sides did not envisage Ukraine’s future membership in the EU. The Netherlands made the most categorical objections to the prospect of Ukrainian membership. Nicolas Sarkozy noted that the draft agreement On Association does not guarantee Ukraine’s membership in the EU, although neither does it deny it. The joint statement on the results of the summit expressed united Europe’s willingness to support Ukraine’s sovereignty and territorial integrity. Talks were held on Ukraine’s participation in the EU Rapid Response Force created within the framework of the European Corps. There are plans to develop a political consultation mechanism between Ukraine and the EU to be implemented should a threat arise to Ukraine’s sovereignty, territorial integrity, and inviolability of its borders. Main accents: The contents of the new agreement on association between the EU and Ukraine and the prospect of its signing are still unclear. Viktor Yushchenko presumed that the new agreement would be signed in 2008, but the drawing up and signing of the agreement have been postponed until the second half of 2009. If the situation (with respect to the formulations on the prospect of membership) does not change by mid-2009, the Ukrainian side will most likely try to get the document signed at a later date. The European Commission tends to hedge any discussion of Ukraine’s nomination for membership in the EU and the prospect of its membership. The Eastern Partnership initiative ensures that the countries of the East European semi-periph- ery are organizationally associated with the EU. In addition to having a dominating influence on the economy and political processes, it should also provide an institutional framework that restrains any increase in Russia’s influence.

Relations with the U.S.

Relations between Ukraine and the U.S. were more intense and closer than was publicly demonstrated. During his state visit to Ukraine on 31 March-1 April, 2008, U.S. President George Bush focused his attention on the need for Ukraine and Georgia to join the MAP despite Russia’s very negative attitude and the objections of several West European countries. During the visit, the Amer- ican delegation suggested looking at the question of creating a free trade zone between Ukraine and the U.S. On 4-5 September, 2008, U.S. Vice President Richard Cheney paid a working visit to Ukraine. During the visit, Richard Cheney held closed meetings with President Viktor Yushchenko and Prime Minister Yulia Timoshenko. They discussed coordinating the actions of the U.S. and the GUAM member states with respect to the Russian-Georgian conflict. Richard Cheney’s main task was to consolidate the GUAM organization in order to use it in the power game in the Black Sea as a coun- terbalance to Russia. At the same time, during the talks with Azerbaijani President Ilham Aliev, Rich-

384 UKRAINE International Affairs ard Cheney was unable to get this country’s leadership to curtail its relations with Russia and fully reorient Azeri energy export toward the Georgian transit route. In September 2008, Viktor Yushchenko made two working visits to the U.S. During his one-day visit on 29 September, Viktor Yushchenko met with President George Bush and discussed the Rus- sian-Georgian conflict and the domestic political situation in Ukraine (the situation in the Crimea, the aggravated relations with Russia regarding the movements of the Black Sea Fleet, and the possibility of holding pre-term parliamentary elections). The Ukrainian delegation consisted of Foreign Min- ister Vladimir Ogryzko, Defense Minister Yu. Ekhanurov, acting Chairman of the Security Service V. Nalivaichenko, Secretary of the Ukrainian National and Defense Council (UNSDC) R. Bogatyre- va, and Prosecutor General A. Medvedko. On 19 December, 2008, U.S. State Secretary Condoleezza Rice and Ukrainian Foreign Minister Vladimir Ogryzko signed the United States-Ukraine Charter on Strategic Partnership. The document is a political statement and does not have direct legal force. Condoleezza Rice confirmed that the U.S. would help Ukraine to reach NATO standards in keeping with the Alliance’s Bucharest declaration of 2008. The U.S. State Department interprets the charter as a signal to the Russian leadership that the U.S. intends to oppose Moscow’s attempts to create a sphere of influence along the perimeter of Rus- sia’s borders. The charter contains assurances that the U.S. will help Ukraine to integrate into the Euro- Atlantic structures and support it as a candidate for membership in NATO, as well as strengthen cooperation in defense and security issues. The U.S. has also promised to help Ukraine modernize its gas transportation system. It is presumed that the U.S. and Ukrainian governments will form a bilateral workgroup on energy security. The charter does not obligate the sides to render each other military assistance, but envisages the possibility of holding consultations. The document serves as a political basis for delivering arms and military materiel to Ukraine, including U.S. naval frigates, something that was discussed by defense ministers Yu. Ekhanurov and R. Gates. Ambassador William Taylor confirmed the possibility of sending 1-3 U.S. naval frigates to Ukraine,3 something which did not feature in the talks held in October- November when the discussion was about sending Ukraine 15-20 out-of-commission American combat ships. It is worth noting that the Charter changed the motivation for cooperation. According to the Budapest memorandum of 1994, the U.S. assured Ukraine of security as a non-bloc state that rejected possession of nuclear weapons. Now the U.S. has shifted the accent to strengthening Ukraine’s Euro- Atlantic integration and enforcing the prospect of Ukraine’s membership in NATO. It now guarantees Ukraine security as “a state intending to become a member of NATO.” Main accents: From the viewpoint of the George Bush administration, signing the Charter on Stra- tegic Partnership with Ukraine was called upon to compensate for NATO’s refusal to offer Ukraine the MAP and recognize it as an official candidate for NATO membership. The U.S. has confirmed its political assurances of Ukraine’s security set forth in the multilateral guarantee documents of 1994 (the Statement of the Presidents of Ukraine, the U.S., and Russia and the Budapest Memorandum on the Guarantee of Security for Ukraine). Before it retired, George Bush’s administration tried to enforce Ukraine’s and Georgia’s Euro-Atlantic prospects, which essentially did not contradict the political declarations Barack Obama’s team made during the election campaign. These actions were designed to reduce the Obama administration’s maneuverability in American-Russian relations.

3 See: “Amerikanskaia podpiska,” Zerkalo nedeli, 20 December, 2008, No. 48 (727), available at [http://www.zn.ua/ 1000/1550/65031/]. 385 CENTRAL EURASIA 2008 Analytical Annual Relations with Russia

During 2008 bilateral relations became extremely aggravated, for which there were several reasons: —Viktor Yushchenko’s course toward Ukraine’s membership in NATO without taking Rus- sia’s position into account and his refusal to try and find points of contact and reach acceptable compromise agreements with Moscow. —Attempts to establish control over the movement of ships and contingents of the Russian Black Sea Fleet across the Ukrainian state border and limit their movement on Ukrainian territory. —Refusal to take into account the position of Russia and other CIS countries with respect to recognizing the 1932-1933 famine as a deliberate act of genocide against the Ukrain- ian people. — Attempts by Yulia Timoshenko’s government to re-examine the gas delivery regime to Ukraine, whereby not taking into account the interests of Viktor Yushchenko and his entourage. At the beginning of 2008, an attempt was made to revive the bilateral dialog at the top level within the framework of the Ukrainian-Russian Interstate Commission. Its second sitting on 12-13 February in Moscow ended in the signing of a bilateral Action Plan for 2008. The document declared the sides’ desire to develop “strategic partnership relations.” The plan envisaged several mutual political obligations, including beginning demarcation of the Ukrainian-Russian state border, drawing up the final version of agreements for demarcating the Azov and Black seas, and drawing up agreements on cooperation in navigation, fishing, protection of the marine environment, and environmental security in the Azov and Black seas and in the Kerch Strait. It was hoped that acceptable solutions could be found to questions regarding the functioning of the Black Sea Fleet, navigational support in the Black and Azov seas, and the carrying out of an inventory survey of the land plots and real estate facilities used by the fleet. Among other things, military and technical cooperation between Rosoboroneksport and Ukrs- petseksport in the markets of third countries was to be stepped up and the possibility of Ukraine obtaining a share in the International Uranium Enrichment Center in Angarsk examined. The search for acceptable ways for Viktor Yushchenko and the Russian leadership to establish their relations proved short-lived. In the spring of 2008, confrontation rose at the interstate level. Execution of the provisions of the bilateral action plan was curtailed. In April, the Ukrainian Foreign Ministry sent a memorandum to the Russian Foreign Ministry proposing that a schedule be coordinated for gradual withdrawal of the Russian Black Sea Fleet before 28 May, 2017. In response, the Rus- sian side refused to look at the question of signing the already prepared Agreement on Demarcation of the Ukrainian-Russian State Border. Relations are aggravated by the Russian-Georgian conflict: When the Russian-Georgian war began, President Viktor Yushchenko openly supported Tbilisi and accused Russia of committing an act of aggression against Georgia’s independence and territorial integrity. On 10 August, the Ukrain- ian Foreign Ministry stated that it would prevent the Russian side from engaging the Russian Feder- ation’s Black Sea Fleet ships in the conflict in the Caucasus. It was noted that the Ukrainian side assumed the right to prohibit ships and other vessels that would participate in the military operation from returning to Ukraine (before settlement of the conflict). The Russian Foreign Ministry said that any restrictive measures imposed by Ukraine against the Black Sea Fleet were a sign of hostility toward the Russian Federation.

386 UKRAINE International Affairs

On 13 August, the Ukrainian presidential administration further aggravated the situation. Pres- ident Viktor Yushchenko signed two decrees approving the decisions of the Ukrainian National Se- curity and Defense Council (UNSDC) on issues regarding the movement of RF Black Sea contingents on Ukrainian territory4 and “crossing of Ukraine’s state border by servicemen, war ships (supply vessels), and aircraft of the Russian Federation Black Sea Fleet which is on Ukrainian territory.”5 The decisions of the UNSDC envisaged the impossibility of “actually uncontrolled” crossing of the Ukrainian borders by the RF Black Sea Fleet and recommended introducing a “system of authori- zation” for ships, airplanes, and servicemen of the Russian Federation to cross the Ukrainian state border. The texts of Viktor Yushchenko’s decrees and the decisions of the UNSDC were publicized on the Ukrainian president’s official site on 13 August. The decrees came into force as soon as they were published. The presidential secretariat and the Ukrainian Armed Forces General Headquarters expressed their willingness to ensure execution of the president’s decrees on the Russian Federation Black Fleet, of which Ukrainian Armed Forces Chief of Staff General S. Kirichenko informed the military attachés of foreign states accredited in Ukraine on 14 August. According to Decree No. 706/2008 of 13 August, the Russian Federation Black Sea Fleet forces may cross the Ukrainian border only after notifying the Ukrainian Armed Forces General Headquar- ters at least 72 hours before the intended crossing of the border. The list of mandatory information to be presented to the Ukrainian side included items on permitting a war ship or aircraft to cross the state border, the type of war ship or aircraft, and the number of crew members and other persons on board. If “the demands are not met, the services of the Ukrainian state control structures shall immediately inform the Ukrainian Ministry of Foreign Affairs of this and in compliance with Arts 2 and 3 of the U.N. Convention on the Law of the Sea of 1982 can demand on the behalf of Ukraine that the war ship (supply vessel) or aircraft of the Black Sea Fleet immediately leave the internal waters and territorial sea of Ukraine or its air space.”6 On 14 August, Deputy Chief of Staff of the Russian Armed Forces A. Nogovitsyn said that the Russian Navy did not recognize the legality of Viktor Yushchenko’s decree obligating the RF Black Sea Fleet to notify the Ukrainian Armed Forces General Headquarters of its movements. All the same, the Russian side tried to avoid further aggravation of the conflict. On 19 August, the RF Black Sea command reported to the Ukrainian Defense Ministry on the return of four ships to Sevastopol, which were previously headed for the coast of Abkhazia. The Ukrainian Defense Ministry admitted that the Russian side had met the requirements for reporting on the entry of ships into Sevastopol in compliance with the Ukrainian president’s decrees. However, the Russian Foreign Ministry did not officially recognize the legality of the demands in Viktor Yushchenko’s decrees. Russian official representatives insisted that Russia had the right to use its fleet in any situations without notifying the Ukrainian side. At the same time, the Black Sea command was forced in practice to partially accept and execute the border-crossing procedure instituted by the Ukrainian president. The increased presence of the U.S. Navy in the Black Sea (the entry into the Black Sea of Mount Whitney, the flagship of the U.S. Navy’s Sixth Fleet, and several other ships), along with the possible

4 See: Ukaz No. 705/2008 “O reshenii Soveta natsional’noy bezopasnosti i oborony Ukrainy ot 13 avgusta 2008 goda “O situatsii vokrug peredvizheniy, sviazannykh s deiatel’nost’iu voennykh formirovaniy Chernomorskogo flota Rossiyskoy Federatsii vne mest ikh dislokatsii na territorii Ukrainy”, available at [http://www.president.gov.ua/documents/8207.html] (in Ukrainian). 5 Ukaz No. 706/2008 “O reshenii Soveta natsional’noy bezopasnosti i oborony Ukrainy ot 13 avgusta 2008 goda “Voprosy peresecheniia gosudarstvennoy granitsy Ukrainy voennosluzhashchimi, voennymi korabliami (sudami obespeche- niia) i letatel’nymi apparatami Chernomorskogo flota Rossiyskoy Federatsii, kotoryy nakhoditsia na territorii Ukrainy” available at [http://www.president.gov.ua/documents/8208.html] (in Ukrainian). 6 “Poluostrov razdora,” AMI “Novosti-Ukraina,” 14 August, 2008, available at [http://www.newsukraine.com.ua/ news/120460/]. 387 CENTRAL EURASIA 2008 Analytical Annual attempts by the Ukrainian side to block the movement of Russian Black Sea Fleet ships reflected a greater threat of direct confrontation between the U.S. and Russia. The actions of the Ukrainian presidential secretariat and the threat of a spread in the conflict aroused concern in the Russian embassy in Ukraine and were accompanied by an extremely nervous reaction in the capitals of several Black Sea states. The official prohibition of the Ukrainian side on the entry of RF Black Sea Fleet ships into the bays of Sevastopol could have created potential ground for a direct conflict between Ukraine and Russia. Such a conflict could presumably have been viewed by the Ukrainian presidential secretariat as a reason to change the domestic political situation or possible internationalization of the problem of the stationing of the RF Black Sea Fleet, for example by creating an international commission with U.S. participation. Due to the greater military threat in the Black Sea basin, the actions of Yushchenko’s secretariat objectively raised the risk of escalation and internationalization of the conflict. On the whole, it can be noted that the question of increasing control over the activity and movements of the RF Black Sea Fleet across the Ukrainian border and on its territory is very rational. But this question cannot be resolved outside bilateral talks. Since Russia and Ukraine are intricately interdependent on each other, it serves little purpose for Ukraine to use forceful measures of pressure against Russia. By the end of the year, the sides had undertaken certain measures to lower the level of tension in Sevastopol. In an interview to Den’ newspaper (8 December, 2008), Commander of the Ukrain- ian Navy I. Teniukh stated that after the events in the Caucasus the Ukrainian Navy was controlling the actions of the Russian Black Sea Fleet ships and airplanes and the Russian fleet was essentially fulfilling the requirements by informing the Ukrainian Navy Headquarters whenever ships went out to sea. In September 2008, the Russian Foreign Ministry stated that it did not intend to take steps to terminate the Treaty on Friendship, Cooperation, and Partnership (1997), which will automatically be extended on 1 April, 2009 for another ten years. Since the Russian side is satisfied with the contents of the treaty, Moscow prefers to insist on the Ukrainian side fulfilling the obligations set forth in its articles. In order to help defuse the tension in relations with Russia, on 2 December, Viktor Yushchenko signed decrees on the creation of an Interdepartmental Strategic Group on Ukrainian-Russian Rela- tions and appointed Ambassador to Russia K. Grishchenko as the Ukraine’s special representative for developing relations with the Russian Federation.7 According to the presidential decree, in addition to the functions of ambassador, K. Grishchenko was endowed with the powers of Ukraine’s special representative in Russia with the right to hold talks on behalf of the country’s president. It is expected that K. Grishchenko will try to establish working contacts with Medvedev’s administration in coun- terbalance to the contacts between Yulia Timoshenko and Vladimir Putin. The decisions of Viktor Yushchenko’s secretariat were positively evaluated by the Russian Foreign Ministry at the official level. On 3 December, A. Nesterenko, official representative of the Russian Foreign Ministry, noted that this department “is proceeding from the fact that any realistic steps and measures aimed at the positive development and enhancement of Russian-Ukrainian relations should be welcomed.” According to A. Nesterenko, “…Moscow is resolutely in favor of constructive, pragmatic, and responsible cooperation with Ukraine in all bilateral and international is-

7 See: “Yushchenko sozdal strategicheskuiu gruppu po otnosheniiam s Rossiey,” 2 December, 2008, available at [http:// korrespondent.net/ukraine/politics/665671]; E. Rodionov, “Sozdanie kvaziMIDa. Ukrainskiy president pytaetsia dostuchat’sia do Kremlia,” Lenta.ru, 3 December, 2008, available at [http://www.lenta.ru/articles/2008/12/03/ukr/]. 388 UKRAINE International Affairs sues,” including by means of “the Russian-Ukrainian interstate commission as well as within the framework of an intergovernmental dialog.”8 It is worth noting that these initiatives were limited and did not ease the dispute over controversial issues, including the broadcasting of Russian television channels, revision of history, in- fringement on the Russian language, glorification of people who cooperated with Nazism, and so on. Ukraine’s delivery of arms to Georgia is still one of Russia’s major complaints against this country. On 25 December, 2008, Chief of Russia’s Land Forces Tactical Air Defense System Major General Mikhail Krush officially stated for the first time that the Russian Defense Ministry has “irrefutable proof” of the participation of Ukrainian military specialists in the hostilities in South Ossetia with respect to the air defense means (Buk-M1 and Osa complexes) Ukraine delivered to Georgia.9 Problems associated with gas deliveries and transit. After Yulia Timoshenko was appointed prime minister on 18 December, 2007, the Ukrainian government demanded that the Ukrainian state structures restore control over the internal gas market. The government strived to oust the UkrGazEn- ergo Company created on parity principles by the Naftogaz Ukrainy state holding and RosUkrEner- go, the company that acted as operator of the gas deliveries to Ukraine from the Central Asian countries in 2006-2008. On 26 February, 2008, Gazprom gave the Ukrainian government an ultimatum stating that if the disputes were not settled (including debt repayment) and the necessary documents were not signed before 3 March, gas deliveries to Ukraine would be cut by 25%. Gazprom insisted on creating two joint enterprises, one of which was to deliver gas for Ukraine and the other to obtain a quota in its internal market. The open phase of the conflict began after Gazprom announced a cutback in gas deliveries for Ukraine, at first by 25% (on 3 March) and then by 50% (on 4 March). The gas conflict of 3-5 March, 2008 was settled by means of partial settlement of Gazprom’s debt contentions for 2007 gas deliveries. Gazprom said it was possible to transfer to long-term gas delivery contracts for Ukraine. On 12 March, 2008, Gazprom’s President Alexey Miller and Naftogaz’s President O. Dubina signed an Agreement on the Development of Relations in the Gas Sphere. The agreement enforced the conditions for delivering gas for Ukraine in 2008 (in the amount of 55 bcm at the previously agreed price of $179.5 per tcm). RosUkrEnergo was still the gas supplier and Naftogaz Ukrainy purchased the gas at the Ukrainian border. During Yulia Timoshenko’s working visit to Moscow on 2 October, 2008, an Intergovern- mental Memorandum on Cooperation in the Gas Sphere was coordinated that was to become the foundation of the interrelations between Gazprom and Naftogaz Ukrainy. According to the memorandum, from 1 January, 2009, direct, long-term relations on gas deliveries in amounts that ensure Ukraine’s gas consumption balance were to be established between Gazprom and Naftogaz. The Ukrainian side guaranteed “continuous transit of Russian gas through Ukraine.” There was to be a gradual transfer to market prices for gas deliveries over the span of three years and to transit tariffs through Ukrainian territory. It was presumed that Gazprom and Naftogaz Ukrainy would sign a new agreement that tied the price of gas deliveries for Ukraine to the price of Russian gas exported to the EU countries, keeping in mind the lower coefficient. On 23 October, 2008, Gazprom and Naftogaz

8 “MID RF: Moskva nastroena na konstruktivnoe vzaimodeystvie s Ukrainoy po vsemu kompleksu problem. RBK-Ukraina,” 3 December, 2008, available at [http://www.rbc.ua/rus/newsline/2008/12/03/473548.shtml]; “Rossiia nastroena na konsruktivnoe vzaimodeystvie s Ukrainoy. MID RF,” 3 December, 2008. 9 See: “Ukrainskie grazhdane vkhodili v sostav raschetov sredstv PVO, postavlennykh Ukrainoy Gruzii, oni sbivali rossiyskie samolety—Minoborony RF,” PRIME-TASS, 25 December, 2008, available at [http://www.prime-tass.ru/news/ show.asp?id=851289&ct=news]. 389 CENTRAL EURASIA 2008 Analytical Annual

Ukrainy signed a framework agreement On the Principles of Long-Term Cooperation in the Gas Sphere. According to this agreement, a long-term direct contract was to be signed for the delivery of Russian gas to Ukraine in 2009 at the same transit rate as in 2008 ($1.7). The main unresolved problem was settlement of Naftogaz Ukrainy’s debt to RosUkrEnergo, the operator, of around 2 billion dollars.

Relations with the EU Countries and NATO

In 2008, Ukraine most actively developed its diplomatic contacts with Great Britain, Poland, and Lithuania. President Viktor Yushchenko visited Great Britain, Canada, France, Italy, Portugal, Slovenia, Poland, Rumania, and Lithuania. Political and ideological factors associated with supporting Ukraine’s prospects in its relations with the EU and NATO dominated in the relations with the West and South European countries. On 15 May, a joint statement was adopted between the Ukrainian president and British Prime Minister Gordon Brown. The British prime minister recognized Ukraine’s right “to become a full- fledged member of the EU” after meeting the relevant criteria, and he also said it would be wise to set forth principles of political association and economic integration in a new agreement between the EU and Ukraine. The sides also reached mutual understanding in their evaluation of the conflict in the Caucasus. The relations between Great Britain and Ukraine were defined as a “strategic partnership.”10 Ukraine announced that it was joining the British-French helicopter initiative within the framework of development of the EU armed forces. Viktor Yushchenko held several meetings with President of Poland Lech Kaczyñski and made two working visits to Poland. On 14 April, a joint declaration was signed between the presidents of Ukraine and Poland on intensifying cooperation in the preparations for the final round of the Euro- 2012 European football championship. A Ukrainian-Polish intergovernmental committee was created for preparing and holding Euro-2012. During Viktor Yushchenko’s visits to Lithuania meetings of the Council of Presidents of Ukraine and Lithuania were held. On 12 May, a joint declaration of the presidents of the two countries on strategic partnership was signed. The technical possibilities for exporting Ukrainian electric energy to Lithuania were coordinated. And the Council announced the creation of a Ukrainian-Lithuanian working group on energy issues. If the Odessa-Brody oil pipeline is extended to Gdansk, it may be possible to lay a branch of this oil pipeline to Lithuania. Political tension continued in relations with Rumania due to the dispute over division of the lit- toral continental shelf in the Black Sea, Rumania’s objections to using the navigation channel in the Ukrainian part of the Dunai delta, and different approaches to evaluating the Moldova problem. The Rumanian government asked the European Commission and EU member countries to make Ukraine stop reconstructing the Dunai-Black Sea canal in the Ukrainian section of the river delta under the pretext of failure to observe the procedures established by the U.N. Convention on Environmental Impact Assessment in a Transboundary Context.

10 Joint Statement for the press between Ukrainian President Viktor Yushchenko and British Prime Minister Gordon Brown, 6 October, 2008, available at [http://www.president.gov.ua/ru/news/11560.html]. 390 UKRAINE International Affairs Relations with the CIS Countries

When discussing the concept of CIS development, the Ukrainian side suggested measures designed to increase the effectiveness of economic cooperation and full execution of the free trade agreement. Viktor Yushchenko’s appeal to the leaders of the CIS countries to support Ukraine in recognizing the famine in Ukraine as genocide of the Ukrainian people and adopting a joint CIS document on this issue was not supported since it failed to include the famine victims in other republics of the former Soviet Union. On 14 August, 2008, deputy head of the Ukrainian presidential secretariat A. Goncharuk commented on Ukraine’s official position toward the CIS. The presidential secretariat proceeds from the fact that Ukraine was never a member of the CIS and did not recognize it as an entity of international law, but cooperated and continues to cooperate with it within the framework of corresponding economic projects. Ukraine has signed most international agreements within the framework of the CIS stipulating that it be excluded from those provisions that envisage this organization as an entity of international law.11 In 1991, Ukraine, understanding the need to maintain economic and interpersonal relations in the post-Soviet expanse, was one of the founders of the CIS. The CIS economic court made a special distinction between the member states and founder states of this organization. This provision is also enforced in Art. 7 of the CIS Charter, which Ukraine did not sign. According to this distinction, Ukraine has the status of a founder state. At the CIS summit on 10 October in Bishkek, the Ukrainian delegation was headed by Secretary of the Ukrainian National Security and Defense Council R. Bogatyreva. Relations with the post-Soviet states are slackening off. The Ukrainian leadership showed an interest in drawing Kazakhstan into various energy projects. The Kazakhstan leadership has formally expressed its interest in building an oil refinery in Ukraine, the production of which could be exported to the EU countries. But no specific decisions on this issue were adopted. Kazakhstan continues to show a certain interest in developing cooperation with the GUAM countries in the energy sphere. This interest is partly associated with the discussion about creating alternative transit routes for oil and gas (including possibly building a Trans-Caspian oil pipeline), the implementation of which could lead to cancellation of the restrictions on Russia’s transit of Kazakh oil. Astana’s interest in the Odessa-Brody project is still low. Relations between Ukraine and Turkmenistan were characterized by a curtailment of economic relations and loss of former contacts (due to the changes in the government and in the leadership of Turkmenistan’s state corporations). In 2008, everyone was waiting for Turkmen President Berdymuk- hammedov to visit Ukraine, but this trip was cancelled for no justified reason. Economic relations between Ukraine and Tajikistan livened up a little. The government of the latter is interested in deliveries of Ukrainian equipment for building and designing hydropower plants.

C o n c l u s i o n

The formation of Ukraine’s foreign policy is complicated and contradictory. The presidential structures are clearly bent on using the Russian factor as a stimulus for consolidating the power elite

11 See: “Ukraine was never a member of the CIS and never recognized it as an entity of international law, but cooperated with it within the framework of economic projects – A. Goncharuk,” Press service of the Ukrainian president, 14.08.2008, available at [http://www.president.gov.ua/news/10945.html] (in Ukrainian). 391 CENTRAL EURASIA 2008 Analytical Annual around several basic theses, including the pro-Western orientation and reformatting of the multieth- nic society on the basis of a narrower set of ethnic and cultural-linguistic stereotypes, goals, and principles. At the same time, the Ukrainian political system is still divided into three basic trends oriented toward the electorate of the western regions (Galichina), central Ukraine, and the southern and eastern regions. The government’s outward positioning is helping to strengthen these three main trends in politics and the provisions of the ideological models associated with them that are represented by the main parties (political blocs) and their leaders.12 Sociologists believe that despite activation of the external factors (the course toward accelerated membership in NATO and aggravated relations with Russia), there is unlikely to be a rapid change in the basic social sentiments or a civilizational reorientation of Ukrainian society.13 If the course imposed by the government is not underpinned by perceptible economic achievements, its domestic political impact could lead to serious destructive consequences. The identity crisis will be accompanied by an aggravation in the domestic political contradictions and an imbalance in the government institutions. Segregation of the political elites, a decline in the political status of the primarily Rus- sian-speaking population in the eastern and southern regions, possible attempts to divvy up property, and so on are also seen as significant threats. Association with the U.S.’s geopolitical game in Eurasia has not resulted in Ukraine receiving the significant technical and material support that was rendered new EU members, including Latvia, Lithuania, Estonia, Bulgaria, and Rumania. The domestic political crisis caused a breakdown in the reform model causing social tension and a drop in the standard of living. The foreign political references offered by the government have been devaluated. In the context of the economic crisis, the consequences of bringing gas prices up to the European level and the significant economic slump will be viewed as Ukraine’s domestic problems. With the loss of the sales market, the reduction in ties with the CIS countries, and aggravation of relations with Russia, Ukraine’s foreign policy is losing its room for maneuver. Ukraine is moving further away from the prospect of European integration with respect to reaching a GDP level that meets European standards and observing consensus democracy. Keeping in mind the relatively low public support of Ukraine’s NATO membership, the political circles are presuming that informal subordination of Ukrainian policy to NATO’s strategic doctrine can be carried out without offering it official membership in the Alliance.14 NATO is taking the same approach as the EU. Ukraine is being asked to make an effort to “move gradually closer.” This status of “one-vector orientation” is characterized by the extended unilateral obligations and high outlays that are being imposed on the Ukrainian side and not accompanied by adequate security guarantees. In turn, NATO is not assuming any responsibility but it may use levers of influence and control with respect to re-examining Ukraine’s non-bloc status.

12 The first political-ideological trend (“pro-Western nationalism,” which is referring with increasing frequency to the rhetoric and concepts of integral nationalism) is identified with Viktor Yushchenko’s policy and has basic support in Western Ukraine. The second trend (which is oriented toward charismatic power and populism and a search for simple solutions to difficult social and political problems of society) is represented by the leadership of the BYT. The third trend (a combination of the importance of relations with Europe and Russia, retaining relations among the Eastern Slavic nationalities, and protecting the Russian language and cultural equality) is represented by the Party of the Regions. 13 See: E. Golovakha, “Vybor posle vyborov,” Grani+, 3 February, 2006; I. Kapsamun, “Evgeniy Golovakha: Ob- shchestvu ne nuzhna revoliutsionnaia stabilizatsiia, kak i ne nuzhna revoliutsionnaia destabilizatsiia,” Den’, 26 September, No. 173, 2008. 14 See: D. Blair, “NATO has ‘No Will’ to Admit Georgia or Ukraine. According to Poland’s Foreign Minister Radek Sikorski,” The Daily Telegraph, 25 January, 2009. 392 REPUBLIC OF UZBEKISTAN General Overview

REPUBLIC OF UZBEKISTAN

GENERAL OVERVIEW

Farkhad TOLIPOV Ph.D. (Political Science), associate professor at the Political Science Department, National University of Uzbekistan (Tashkent, Uzbekistan)

n 2008, the republic accomplished a relative breakthrough on the international scene even though the progress can be described as contradictory. The country was gradually emerging from inter- I national isolation: by October most of the sanctions imposed by the European Union in 2005 in the wake of the Andijan events had been lifted. This added vigor to the republic’s bilateral and multilateral contacts in Europe and America. Early in 2008, top American and EU officials resumed their regular visits to Uzbekistan, and the talks about the American military presence in Khanabad were revived. NATO officials started talking about the Termez military base in the south as a potential deployment point for the organization’s troops involved in the peacekeeping operation in Afghanistan. In April 2008, President Karimov attended the NATO summit, which can be described without exaggeration as the year’s central foreign policy event for the republic. The president of Uzbekistan laid several initiatives on the table related to the problem of Afghanistan and outlined his country’s position on the issue. In particular, he proposed resuming the peace and stability talks within the U.N.-supported 6 + 2 contact group of plenipotentiary representatives of Afghanistan’s neighbors plus the U.S. and Russia, which demonstrated its efficiency in 1997-2001. The contact group agreed on general principles and common approaches (accepted by all its members) to Afghan settlement under the U.N. aegis. It organized a meeting of the conflicting sides in Tashkent in July 1999, which adopted the Declaration on the Fundamental Principles for Peaceful Settlement of the Conflict in Afghanistan that served as the basis for a corresponding decision by the U.N. Security Council, which described the results of the Tashkent Meeting as an important step toward final political settlement of the problem.

393 CENTRAL EURASIA 2008 Analytical Annual

In view of the latest developments, the contact group can be revived in the 6 + 3 format, which would give NATO a chance to have its say. The West has not yet responded to Uzbekistan’s serious and extremely specific initiatives. The August war between Russia and Georgia affected the republic’s foreign policy moves: together with the other CIS members it found itself facing the difficult task of forming its position on the Russian-Georgian conflict and on Russia’s recognition of the independence of Abkhazia and South Ossetia. Uzbekistan joined the neutral statements made at the SCO summit on 28 August and at the CSTO summit on 5 September. The republic, as well as the other CIS members, is acutely aware of the unhealthy atmosphere created by the conflict and Georgia’s withdrawal from the Com- monwealth. By leaving the EurAsEC “all of a sudden” in November 2008, Uzbekistan added tension to the already dramatic situation. This move reflected the highly contradictory nature of its foreign policy meandering. During the seventeen years of independence the geopolitical processes in Central Asia created what President Karimov once described as strategic ambiguity, which is probably responsible for the country’s highly ambiguous foreign policy. Tashkent’s latest foreign policy move cannot be explained by its new, pro-Western course; its arguments revealed, to a certain extent, the state of affairs within the EurAsEC. It is, in fact, a mini-CIS with a micro-CIS inside (the customs union of three countries). The European principle of integration at different speeds turned out to be ill-suited to the post-Soviet expanse, which discredited, among other things, the idea of integration among the former Soviet republics. This is a general problem while Uzbekistan had reasons of its own. It disagreed with the principle on which it could join the customs union, was dissatisfied with the way its initiatives were treated, and did not like the way the problems in its relations with Tajikistan were addressed. Uzbekistan merely suspended its membership; it did the same thing with its membership in the CST only to return in 2006. It might do the same this time too. Meanwhile the finales of the “foreign policy dramas” of 2008 proved to be satisfactory. Uzbekistan received several foreign business and financial delegations to demonstrate its improved investment climate and wide investment possibilities. Domestic policy was probably invigorated by the recent presidential election of December 2007 when President Karimov was re-elected to a new term. Throughout 2008 he demonstrated much more interest in the human rights issue and democratic reforms, which obviously dominated domestic policy throughout the year. In October 2008, for example, the Supreme Court of the Repub- lic of Uzbekistan organized a conference to discuss the best way to implement the Presidential Decree of 1 May On the Program of Events Dedicated to the 60th Anniversary of the Universal Human Rights Declaration intended to stir the human rights structures of Uzbekistan into action. The ombudsman of the Republic of Uzbekistan, the National Human Rights Center, the Institute of Mon- itoring of Current Legislation at the President of the Republic of Uzbekistan, as well as human rights departments at the Ministry of Justice, the General Prosecutor’s Office, and the Ministry of the Interior were all involved. The republic responded to the lifting of sanctions with certain practical steps designed to improve its image: human rights activists were released from prison; capital punishment was abolished; the right of arrest was transferred to the courts; and the republic ratified the Convention on the Worst Forms of Child Labor. In 2008, American NGOs—the Eurasia Foundation and the Institute for New Democracies— suspended because of the tension between the two countries in 2004-2005 which reached its peak after the Andijan events returned to Uzbekistan; several new American structures appeared.

394 REPUBLIC OF UZBEKISTAN Politics

Finally, another significant event took place in the republic: the Environmental Movement of Uzbekistan arrived on the domestic political scene with a quota of 15 seats in the Oliy Majlis under the Law on Elections to the Oliy Majlis. Since that time the environment in all its forms (propaganda and education) has gained prominence in domestic policy and public life. It should be said that the environment is acquiring political dimensions; later it might develop into a movement and then into a party that will stand out with its political program, very much different, for objective reasons, from the programs of the other political parties. The latter have failed to create a pluralistic and competitive milieu and, therefore, are hardly distinguishable. The year 2009 will probably add an environmental dimension to the domestic political process in view of the coming parliamentary elections. On the whole, 2008 brimmed with domestic and foreign political events. Logic suggests that the country has reached an important crossroads beyond which dramatic political changes can be expected that might give the nation new prospects. Russian President Dmitry Medvedev’s state visit early in 2009 can probably be described as one of the signs of the coming changes.

POLITICS

Nikolai BORISOV Ph.D. (Political Science), senior lecturer at the Russian State Humanitarian University (Moscow, Russia)

he republic’s domestic policy, with its habitual ups and downs, did not change much in 2008. Indeed, Uzbekistan suspended its EurAsEC membership and transferred three gas fields earlier T promised to Gazprom to a Malaysian company; this hardly fit the budding strategic partnership of 2005-2007 between Russia and Uzbekistan. President Karimov explained his decision to suspend his country’s EurAsEC involvement by the fact that it duplicated much of what was done by two other international organizations (the CIS and CSTO) of which the republic was a member.1 Disappointed in Russia, which had failed to stand by the republic in its disagreements with other EurAsEC members, President Karimov looked elsewhere for support. This is confirmed by the fact that in 2008 the European Union lifted its sanctions. The inauguration ceremony of 16 January, held on a moderate scale, opened 2008; the president elect assumed office in front of the two Oliy Majlis (parliament) chambers, the Cabinet members, the Central Election Committee, and the Constitutional Court; the circle of guests was limited to the ambassadors accredited in the country. Only two presidents, Nazarbaev and Berdymukhammedov, of those invited, were present. This was President Karimov’s third term, extended by the December 2007 election until 2015. On 30 January, President Karimov turned 70.

1 [http://www.ferghana.ru/news.php?id=10628&mode=snews], 20 December, 2008. 395 CENTRAL EURASIA 2008 Analytical Annual

Several shifts at the very top can be described as extremely important: Defense Minister R. Mirza- ev was replaced (allegedly because of a new appointment) by K. Berdiev. The man who became the new defense minister on 17 September had filled a long string of posts: he was deputy head of the Main Staff of the Armed Forces of Uzbekistan; member of an Interdepartmental Coordination Com- mission for the improvement of information activity and data transfer; commandeer of the Tashkent Higher General Command College; minister of emergencies; and deputy defense minister-commander of the Southwestern Special Military District. In 2005, he commanded a special brigade sent to Andijan to restore law and order. It seems that his close cooperation with the president goes back a long way and that he was earmarked for a high post. R. Mirzaev, on the other hand, probably lost his position because of a huge fire on the territory of a helicopter unit stationed in Kagan accompanied by a series of explosions at the artillery depots. The July disaster killed three and wounded 21.2 The rescue operation demanded joint efforts by the ministries of defense and emergencies; at first, a terrorist act was suspected. On 2 June, F. Akbarova was appointed deputy prime minister—chairperson of the Women’s Committee of Uzbekistan. Some of the regions acquired new heads as usual. On 15 February, at a special session of the Khorezm Regional Council, I. Babajanov was replaced as khokim by O. Ollabergenov, who was previously khokim of one the region’s districts. On 6 March, A. Abdullaev lost his post as khokim of the Ferghana Region to M. Gafurov, previously chairman of the Republican Association of Oil and Food Industry. On 25 March, T. Juraev replaced A. Eshmuratov as khokim of the Surhandarya Region. On 15 April, U. Barnoev was appointed to the post of khokim of the Samarkand Region. Finally, in De- cember, the Tashkent and Navoi regions acquired new heads: R. Kholmatov and E. Turdimov, respectively. This means that in 2008 six regions received new leaders. The case of I. Babajanov, khokim of the Khorezm Region, deserves closer scrutiny. He had filled the post for eight years and was one of the two khokims awarded the title of Uzbekiston Kakhramoni (Hero of Uzbekistan) and one of the two regional political old-timers (S. Khusenov remained in the post of Bukhara khokim for twelve years). It was under Babajanov that the region acquired two hotels associated with the businesses of Gulnara Karimova, the president’s daughter. President Karimov accompanied his decision to replace I. Babajanov with: “Some people who are born and grew up in the native land where they reach high posts lose their heads after four or five years and stop distinguishing between black and white.” Babajanov’s replacement was predated by numerous criminal cases against heads of enterprises and organizations accused of large-scale embezzlement, abuse of power, falsifications, and other economic crimes. According to unverified information, the former khokim was also arrested in April.3 On 1 January, the Law on Strengthening the Role of Political Parties in the Renovation and Further Democratization of State Governance and the Country’s Modernization was enacted. It marked an important stage in the country’s political life. Two other laws were enacted on the same day: On Amendments and Addenda to Some Legal Acts of the Republic of Uzbekistan in Connection with Abolition of Capital Punishment and On Amendments and Addenda to Some Legal Acts in Connec- tion with the Transfer of the Right to Sanction Arrests to Courts of Justice. Capital punishment was replaced by life imprisonment limited to two crimes (first degree murder and terrorism) and excludes criminals of both sexes over 60 and minors. From that time on the right to sanction arrests became the exclusive prerogative of the courts of justice. On 7 January, the European Union welcomed the abolition of capital punishment in Uzbekistan. In its statement, the Government of Slovenia, speaking on behalf of the EU in the capacity of its chair-

2 See: Nezavisimaia gazeta, 11 July, 2008. 3 [http://www.centrasia.ru/person.php], 25 December, 2008. 396 REPUBLIC OF UZBEKISTAN Politics man, promised its complete support in executing this decision and in carrying out further reforms of the judicial system. It also expressed its hope that the other Central Asian countries would follow suit.4 Abolition of capital punishment produced the desired effect abroad; it was partly responsible for the European Union’s decision to lift the sanctions. On 20 November, the president issued a decree On Measures Designed to Improve the Condi- tions in which the Conscripted Citizens Serve in the Armed Forces of the Republic of Uzbekistan. The decree pointed out that since, in accordance with the Law on Universal Military Service, citizens are conscripted for twelve months, starting in 2009, conscription will take place once a year, in February- March, while army discharge will take place in March-April. The decree also pointed out that “the salaries of the military will be doubled while retirement allowances for those moved to the reserves will be equal to sixteen minimal wages.”5 In 2008, the formal election rights of the country’s citizens were further limited. The Law on Amendments and Addenda to Some Legal Acts of the Republic of Uzbekistan in Connection with Improvements in Election Legislation No. ZRU-194 signed by the president on 25 December increased the number of seats in the Legislative Chamber from 120 to 150 (135 of them will be elected by constituencies on the multi-party basis, while 15 seats will go uncontested to the newly formed Environ- mental Movement of Uzbekistan. Under the new law, groups of citizens can no longer nominate their candidates.6 This means that the old scheme of legislation amendments and addenda was used once more: they were intended to create the semblance of wider election rights while limiting them still further. Very much as before, obviously undemocratic amendments were lumped together with liberal ones (in this case, the 15 uncontested seats for the Environmental Movement). This time even the vague possibility of nominating unwelcome candidates was ruled out: from that time on nomination was limited to registered political parties, none of them oppositional. The same procedure used to apply to nominating presidential candidates. On 6 December, when speaking at the traditional gala meeting on Constitution Day, President Karimov summed up the year 2008 and outlined the tasks for the next year. He dwelt in detail on the financial crisis and its repercussions in the republic and suggested that 2009 be the Year of Devel- opment and Improvement of the Countryside. He promised that under the State Program for the Year of Development and Improvement of the Countryside to be drawn up the villagers would receive a ramified infrastructure, higher standard of living, developed industrial production and construction, compact processing enterprises using the latest machinery and technology, and better services. He also pointed out that the government was aware that soil fertility and health services needed improvement.7 It is common knowledge that schoolchildren and students are still recruited to pick cotton during the academic year, which is officially strictly forbidden. In August, in their address to the president of Uzbekistan four American and British companies engaged in import and the sale of clothing publicly objected to the use of child labor in Uzbekistan’s cotton industry as an unacceptable practice.8 Very much as before, the Oliy Majlis met sporadically: in 2008 the Legislative Chamber met for short (1 or 2 days) sessions 24 times; the Senate met 4 times. On 23 January, the Legislative Chamber received a new speaker, which can be described as an important political event. E. Kha-

4 [http://www.press-service.uz/ru/news/show/press/eu_welcomes_abolition_of_death_penalty_i/] 20 January, 2008. 5 [http://press-service.uz/ru/news/show/zakonyi/o_vnesenii_dopolneniya_i_izmeneniye_v_za/# ru/news/show/ ukazyi_prezidenta/o_merah_po_sovershenstvovaniyu_usloviye_/], 25 November, 2008. 6 See: Narodnoe slovo, 26 December, 2008. 7 [http://press-service.uz/#ru/news/show/dokladi/obespechit_postupatelnoe_i_ustoyechivoe_/], 30 December, 2008. 8 [http://www.ferghana.ru/article.php?id=5822], 30 December, 2008. 397 CENTRAL EURASIA 2008 Analytical Annual lilov, an old-timer in the post (he filled it for 15 years as acting chairman of the Supreme Soviet in 1993-1995; chairman of the one-chamber Majlis in 1995-2005; and chairman of the Legislative Chamber since 2005), was removed “for health reasons at his own request.” D. Tashmukhamedova was elected as the new speaker; she previously filled the post of deputy speaker and headed the Adolat Social-Democratic faction in the parliament.9 She was the first woman in Central Asia to go that high in politics. In December 2007, she ran for presidency, which probably accounts for her new appointment. D. Tashmukhamedova was born in the Tashkent Region, graduated from the Tashkent State Medical Institute, and rapidly moved up the career ladder: in eight years she covered the road from an Oliy Majlis deputy to first secretary of the Political Council of the Adolat Social-Demo- cratic Party, head of its parliamentary faction, deputy speaker of the Legislative Chamber, and presidential candidate. This put an end to the monopoly of the Samarkand-Djizak clan at the very top: earlier the president, the prime minister, and the speaker of the Legislative Assembly (Karimov, Mirzieev, and Kha- lilov) all belonged to the Samarkand clan. Throughout 2008 the opposition continued insisting that anti-presidential political forces were closing ranks in the republic and abroad. Early in December, leader of the Erk Party, Mukhammad Salikh, who lived as a political émigré abroad, announced that the Uzbek opposition had begun pooling its forces. In his interview to Radio Liberty he said that the democratic, economic, and religious oppositions were moving closer together to “consolidate all anti-Karimov forces.”10 He further said that all the political emigrants should join forces with the informal alliances and religious jamaats inside the country11 because, said he, the hope that the president would voluntarily transfer power, at least to his daughter, and that the Andijan events would radically change the regime had failed. M. Salikh favors a “bloodless revolution” in the form of mass actions (patterned on Kyrgyzstan and Ukraine) and hopes that at least some of the law enforcers (the militia and special services in particular) will side with the opposition. At the same time he looks at the West for support and hopes that there will be a change in power in the next eighteen months. He emphasized that it would be a long and peaceful process yet failed to describe S. Umarov, one of the leaders of the Sunny Coalition, as a serious political opposition figure. On 17-18 September, Tashkent witnessed another important event: a conference of the young people of Uzbekistan convened to discuss the results of the International Economic Consultative Council set up in 2005 by the Serkuesh Uzbekistonim (Sunny Uzbekistan) coalition. The conference was attended by members of the youth wing of the unregistered Ozod Dekhkonlar (Free Dekhkans) Party, human rights activists of the International Human Rights in Uzbekistan Society, Independent Human Rights Organization of Uzbekistan, the Human Rights Society of Uzbekistan, members of the Prison- ers of Conscience Committee, the Human Rights Alliance of Uzbekistan, the Uygun Uzbekistan movement, and the Sunny Coalition. The conference voted for the economic Roadmap toward Uz- bekistan’s Prosperity program which stressed that the country had so far failed to develop a market; it contained recommendations of how to overcome the negative economic developments and favored freedom of speech and meetings and fair elections. The conference was held with the consent of the country’s political leaders, a fact that spoke volumes. Nigora Khidoyatova, chairwoman of the Ozod Dekhkonlar Party, offered the following comment: “The government tolerates our existence, but we would really like it to listen to us.”12

9 [http://www.parliament.gov.uz/ru/events/chamber/183], 25 January, 2008. 10 [http://www.svobodanews.ru/Transcript/2008/12/02/20081202193021793.html], 25 December, 2008. 11 [http://www.ferghana.ru/article.php?id=5997], 1 October, 2008. 12 [http://www.ferghana.ru/news.php?id=10220], 27 December, 2008. 398 REPUBLIC OF UZBEKISTAN Politics

On the whole, the opposition structures inside the country remained as disunited as before and were still operating clandestinely. Journalists and human right activists still found it hard to work; at least 18 of them remained in prison. Here are several typical examples. In 2008, journalists Agzam Turgunov and Salijon Abdura- khmanov, who criticized the president, were charged with possessing drugs and sentenced to ten years in prison.13 Two years ago, Alisher Karamatov, a human rights activist who headed the branch of the Hu- man Rights Society of Uzbekistan in the Mirzaabad District of the Syrdarya Region, was sent to prison for nine years where he is dying of tuberculosis and general emaciation.14 Journalist and human rights activist Jamshil Karimov, the president’s nephew, has been kept in a mental hospital in Samarkand for over three years now. No one knows anything about him. On 6 December, human rights activists organized the Human Rights Parade, an important event timed to coincide with Constitution Day and designed to mark the 60th anniversary of the Universal Declaration of Human Rights. It brought together human rights activists of Ezgulik, the Committee of the Prisoners of Conscience, and the Human Rights Alliance of Uzbekistan. The rally demanded the release of all political prisoners and Muslims imprisoned for their religious convictions. The picket- ing ended with the arrest of ten of its participants. They were sentenced to fines of about $200 and set free.15 Human rights actions are still cut short but fewer people are sent to prisons; most of them are just fined. The government likewise tested its skills in the human rights game. On 3 July, a joint sitting of the Kengashes of the Legislative Chamber and the Senate decided to set up, at the Oliy Majlis, a Pub- lic Fund to extend support to nongovernmental non-commercial organizations and other civil society structures and a Parliamentary Commission to look after the Fund’s money. On 10 July, the two Ken- gashes endorsed the rules of the Fund and the Parliamentary Commission, as well as its personal composition.16 According to its Rules, the Fund was expected to give money directly to civil society institutions in the form of grants, subsidies, and social orders in full accordance with their applications and with the Commission’s decisions. The Fund was expected to accumulate the funds it received from the state budget and other legal sources and ensure that they were used to stimulate NGOs and other civil society institutions and that these structures were actively involved in dealing with the most urgent social, economic, and humanitarian problems.17 The Fund was obviously another ploy to fit the presidential strategy “From a Strong State to a Strong Civil Society.” The state did not intend to pay its critics (the human rights organizations cannot avoid this while restoring the rights violated by bureaucrats). It looks as if money was offered in exchange for loyalty, which means that it will enrich the pro-governmental structures and pay for state- controlled human rights organizations. This and other measures are intended to impress the nation and the world. The year 2008 did not differ much from its predecessors: the same people (minus several personalities) headed by President Karimov were still ruling the country while the regime remained as authoritarian as ever. The lifted sanctions and acceptance of President Karimov’s third term in power mean that the key European and American partners are ready to cooperate with the ruling elite on a mutually advantageous basis and turn a blind eye to the regime’s political makeup. This is the best guarantee of the regime’s stability. On the other hand, in the absence of political forces

13 [http://www.ferghana.ru/news.php?id=10892&mode=snews], 25 December, 2008. 14 [http://www.ferghana.ru/news.php?id=10674&mode=snews], 1 December, 2008. 15 [http://www.ferghana.ru/news.php?id=10814&mode=snews], 30 December, 2008. 16 [http://www.parliament.gov.uz/ru/events/chamber/30], 1 September, 2008. 17 [http://senat.uz/ru/news/2008/04-07.html], 1 September, 2008. 399 CENTRAL EURASIA 2008 Analytical Annual able to displace the top crust (legally or otherwise) and change the regime there is no threat of a revolution. At the same time, the president has failed to create an administrative party able to serve as an institutional pillar for his unlimited power. This means that the president will either have to create a structure able to reproduce the regime when its present protagonists leave the stage or extend his powers indefinitely (which cannot be done for natural reasons) and appoint a successor. The latter looks more plausible, however the regime might not survive. Whatever the case, Uzbekistan has to create a mechanism (still absent in Central Asia) of power transfer when a new leader receives power from the old leaders through elections, inheritance, or by some other means.

ECONOMY

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

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

General Macroeconomic Situation

n 2008, the economy of Uzbekistan continued to show steady growth and macroeconomic stability. I Real growth of the gross domestic product (GDP) was 9.0% due to an increase in all its components. Owing to effective public expenditure management, the state budget was implemented with a surplus of 1.5% of GDP. A contributing factor here was that budget revenue exceeded the forecast by 2.3%. The Central Bank’s monetary policy ensured the stability of the national currency and kept inflation within the target range. As a result, the devaluation of the national currency against the dollar did not exceed the target, and inflation was 7.8%. Industrial production increased by 12.7%, and total agricultural production by 4.5%. The foreign trade turnover rose by 21.4% compared to January-December 2007. Exports increased by 28.7%, with a trade surplus of $4,068.8 million (see Table 1).

400 REPUBLIC OF UZBEKISTAN Economy

Table 1 Key Economic Indicators for 2000-2008 (previous year = 100, unless otherwise specified)

2000 2001 2002 2003 2004 2005 2006 2007 2008

GDP 103.8 104.2 104.0 104.2 107.4 107.0 107.3 109.5 109.0

Industrial production 105.9 107.6 108.3 106.0 109.4 107.2 110.8 112.1 112.7

Agricultural production 103.1 104.2 106.0 107.3 108.9 106.2 106.2 106.1 104.5

Fixed capital investment 100.9 104.0 103.8 104.8 107.3 105.7 111.4 122.9 128.0

Inflation (CPI) 24.9 27.4 27.6 10.3 3.7 7.8 6.8 6.8 7.8

Trade surplus ($ million) 317.3 33.5 276.4 760.8 1,037 1,317.5 1,988.3 3,500.0 4,068.8

State budget execution (% of GDP) –1.0 –1.0 –0.8 –0.4 –0.4 0.1 0.5 1.1 1.5

Som/dollar exchange rate (end-of-period) 320.9 685.0 939.1 978.8 1,052.45 1,174.02 1,240.0 1,290.0 1,393.0

S o u r c e: State Statistics Committee of Uzbekistan.

Inflation

Inflation measured by the consumer price index (CPI) in 2008 was 7.8%. A significant role in the inflation process is currently played by structural pricing factors. But the Central Bank of Uzbekistan seeks to achieve the target rate of inflation by using monetary instruments to control its core component. Movements in the som exchange rate helped to reduce inflationary pressure in the economy while maintaining the pricing environment for the competitiveness of domestic goods in international markets. Considering the exchange rate dynamics of world currencies, the general purpose of exchange rate policy in 2008 was to keep the exchange rate of the national currency within the target range and gradually slow down its devaluation. The dollar’s nominal value increased from 1,290 soms at the beginning of 2008 to 1,393 soms at year-end. An additional factor in ensuring price stability in the domestic market and preventing a negative influence of external economic factors on the domestic market is the Uzbekistan Reconstruction and Development Fund, set up to finance priority sectors of the economy.

401 CENTRAL EURASIA 2008 Analytical Annual Sectoral Composition of GDP

The non-state sector of the economy accounted for most of the gross value added in 2008: 79.4%. The share of small businesses in GDP production rose from 45.5% in 2007 to 48.2% in 2008. In the sectoral composition of GDP, production of goods and production of services had roughly equal shares: 45.4% and 45.3%, respectively; net taxes on products and export-import operations accounted for 9.3% (see Fig. 1). In the service sector, the most dynamic development was recorded in communication, information, financial, banking and transport services, auto repair and home appliance repair services.

Figure 1 Sectoral Composition of GDP

45.4 45.3 9.3

Jan-Dec 2008

48.0 42.5 9.5

Jan-Dec 2007

0% 20% 40% 60% 80% 100%

Production of goods Production of services Net taxes on products and export-import operations

S o u r c e: State Statistics Committee of Uzbekistan.

The biggest increase in the real gross regional product was achieved in Tashkent: 18.6%. High growth rates were also recorded in Andijan Region (14.0%), Namangan Region (12.3%) and Kashka- darya Region (11.7%). The sectoral composition of industry in Uzbekistan is as follows: electric power industry, fuel industry, ferrous metallurgy, nonferrous metallurgy, chemical and petrochemical industry, engineering and metalworking, forest, woodworking and pulp-and-paper industry, building materials, light, food and other industries. There was rapid growth in such sectors as the food industry (where output increased by 28.2%), fuel industry (23.9%), engineering and metalworking (23.5%), forest, woodworking and pulp-and-

402 REPUBLIC OF UZBEKISTAN Economy paper industry (19.8%), building materials (9.8%), chemical and petrochemical industry (8.2%), light industry (6.6%) and ferrous metallurgy (5.7%). The increase in the production of consumer goods was 17.7%, including 19.3% in food products and 16.6% in non-food products (see Table 2).

Table 2 Industrial Production by Industry (previous year = 100)

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Industry, of which: 106.1 105.9 107.6 108.3 106.2 109.4 107.3 110.8 112.1 112.7

Fuel industry 100.9 99.7 96.4 102.4 100.6 105.8 98.7 105.9 110.1 123.9

Ferrous metallurgy 101.4 118.7 110.6 104.3 109.1 128.5 108.3 111.0 112.7 105.7

Chemical and petrochemical industry 110.0 115.8 106.8 113.8 105.2 104.5 109.6 119.6 118.4 108.2

Engineering and metalworking 103.1 89.7 124.8 108.8 130.8 134.5 129.7 125.7 129.0 123.5

Building materials industry 101.5 104.3 105.9 102.2 104.3 108.2 111.0 112.2 114.5 109.8

Light industry 106.7 117.0 112.4 109.0 106.2 105.2 112.0 120.0 108.6 106.6

Food industry 109.4 108.5 109.4 119.2 106.8 104.7 111.2 128.0 114.7 128.2

S o u r c e: State Statistics Committee of Uzbekistan.

Agriculture

The reforms carried out in agriculture, including a restructuring of low-margin and unpromising shirkats (agricultural cooperatives), establishment of private farms on their basis, introduction of new market mechanisms for providing credit to these farms, and improvement of contractual relations have significantly accelerated the development of agriculture. The share of plant products in total agricultural production was 53.5%, and of livestock products, 46.5%. There was growth in the production of potatoes (17.7%), melons (16.8%), vegetables (11.7%), fruits and berries (10.5%), eggs (9.7%), meat (6.6%) and milk (6.5%). As a result, total agricultural production increased by 4.5% in real terms compared to 2007 (see Table 3). Non-state-owned enterprises produced 99.9% of total agricultural output. In the structure of agricultural production by category of farm there was a further reduction in the share of agricultural enterprises by 0.4 pp. The share of private (commercial) farms in total agricultural output was 32.5%, including 99.1% in the production of raw cotton and 79.8% in grain production.

403 CENTRAL EURASIA 2008 Analytical Annual

Table 3 Production of Main Agricultural Products (previous year = 100)

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Raw cotton 112.3 83.4 108.8 95.6 90.4 126.1 105.4 96.6 103.2 92.3

Grain 104.4 90.7 103.6 142.3 108.1 98.6 108.9 101.5 101.2 100.2

Potatoes 95.2 111.1 101.8 104.5 106.5 107.0 103.2 110.2 116.4 117.7

Vegetables 111.5 98.7 105.1 105.7 112.4 100.4 105.4 121.7 108.8 111.7

Fruits and berries 89.9 161.8 101.3 105.2 90.0 110.5 111.5 123.4 107.3 110.5

Grapes 102.4 181.5 91.8 90.1 77.7 143.9 108.9 123.2 109.6 89.9

Melons 112.4 87.1 103.2 102.8 121.7 97.3 107.5 120.4 112.9 116.8

Meat (live weight) 101.9 102.4 101.4 101.3 108.2 106.4 106.3 107.4 106.1 106.6

Milk 101.3 102.5 100.9 101.5 108.3 106.2 106.4 106.6 105 106.5

Eggs 106.4 101.1 102.7 107.7 116.2 113.97 105.7 108.2 104.1 109.7

S o u r c e: State Statistics Committee of Uzbekistan.

Under a program for the development of livestock farming, 20.3 thousand head of cattle were sold at auction in the past year, and soft loans totaling 48.2 billion soms (UZS) were granted for the purchase of cattle. From 2006 to 2008, over 102 thousand head of cattle were made available to low-income families free of charge. As a result, the total number of citizens registered as engaged in cattle raising on personal subsidiary and dehkan (peasant) farms, as of 1 January, 2009, exceeded 1.1 million.

Antimonopoly Policy

In 2008, out of the 338 enterprises in bankruptcy proceedings, 232 insolvent, loss-making, idle earlier privatized enterprises were liquidated and sold to new owners. Creditors received about UZS 250 billion in settlement of debts, including UZS 13 billion owned to the budget and extrabudgetary funds. This is double the figures for 2007. At 404 enterprises (72% of their total number) there was an improvement in production and financial performance indicators, and 171 enterprises were restored to financial health and no longer showed signs of bankruptcy. Compared to 2007, average monthly production and sales at 314 enterprises increased by more than 20%, and at 132 of these, more than doubled. In addition, 92 new enterprises were created on the basis of liquidated ones.

404 REPUBLIC OF UZBEKISTAN Economy

Overall, the implemented measures helped to reduce the number of loss-making enterprises by 22 entities (compared to 2007) to a total of 58 entities. The number of insolvent enterprises with state participation fell by 63 entities (from the beginning of the year) to 97 entities. During the global financial and economic crisis, the State Committee on Demonopolization, Support of Competition and Entrepreneurship of Uzbekistan focused its attention on strict monitoring of monopoly prices, especially for such staple foods as vegetable oil, flour, sugar, etc. Further modernization and retooling of enterprises, incentives to produce finished and localized products, and measures to restructure and improve the financial health of large industrial enterprises were the main factors behind the rapid growth of industrial production, which increased by 12.7%. The output of consumer goods rose by 17.7% to UZS 7,436.5 billion (food products—UZS 3,020.5 billion, non-food products—UZS 4,416.0 billion).

Investment

Measures to deepen market reforms, liberalize the economy and enhance the protection of private property continue to have a positive effect on the investment climate in the country and on the attraction of foreign capital. Compared to 2007, fixed capital investment from all funding sources increased by 28.3% to UZS 8,483.7 billion. About 50% of total utilized investment went into the technological renewal of the economy and purchase of modern equipment. Investment in non-state enterprises (74.6% of total investment) prevailed over investment in state-owned enterprises. Decentralized investment predominates in the structure of investment sources, because the largest sources are the own funds of enterprises and households (53.9% of total investment), foreign investments (25.8%), bank loans and other borrowings (5.0%), extrabudgetary funds (6.0%), and a republican budget (9.0%) (see Fig. 2). In the total amount of investment, the share of production investment was 75.4%, including 30.1% in industry and 26.3% in transport and communications. In the non-production sphere (24.6% of total investment), the largest part of investment went into housing construction (9.9%) and education (8.8%). During the year, 423 production facilities were put into operation under the Investment Program: 145 facilities in the food industry, 118 in building materials, 65 in the light and textile industry, 58 in agriculture and forestry, 13 in the chemical and petrochemical industry, and 8 in the pharmaceutical industry. The total fixed assets of these facilities were around UZS 250 billion. Other projects carried out in 2008 under the Investment Program include the completion of a 165 km high-voltage transmission line from the Novo-Angren Thermal Power Plant (TPP) to Uzbekistanskaya Substation and the continued construction of two other high-voltage lines (Syr- darya TPP—Sogdiana Substation and Guzar-Surkhan) and power supply facilities in Tashkent. Over 2.6 thousand km of water pipelines and over 825 km of gas networks were put into operation. Last year the country’s builders constructed or renovated 169 vocational colleges and 23 academic lyceums, built 69 schools and renovated 582 schools, 184 children’s sports facilities, 26 rural medical stations, 7,240 thousand sq m of housing, etc. The amount of foreign investments and loans utilized in the country in 2008 was $1.7 billion, and 74% of this was foreign direct investment (FDI). The total amount of foreign investment attracted by Uzbekistan in 2008 was $2.8 billion, including about $2 billion of foreign direct investment, or roughly 60% more than in 2007. FDI

405 CENTRAL EURASIA 2008 Analytical Annual

Figure 2 Composition of Investment by Source in 2008 (%)

Extrabudgetary funds Bank loans and (6.0%) other borrowings (5.0%) Republican budget (9.0%)

Foreign Enterprise and investments and household loans assets (25.8%) (53.9%)

S o u r c e: State Statistics Committee of Uzbekistan. amounts to about 70% of the total, and loans (including government-guaranteed loans) make up about 25%.

Foreign Trade

Positive macroeconomic trends have made it possible to increase foreign trade. In 2008, Uz- bekistan’s foreign trade turnover was $19,077.0 million (121.4% of the 2007 figure), including exports of $11,572.9 million and imports of $7,504.1 million, with a trade surplus of $4,068.8 million. The increase in foreign trade was mainly due to growing trade with non-CIS countries by 47.5% (see Fig. 3). The republic’s major trading partners among non-CIS countries in 2008 were China (6.8% of the total foreign trade turnover), Switzerland (5.7%), Republic of Korea (5.5%), Turkey (4.1%) and Iran (3.0%). The major trading partners among CIS countries were Russia (20.2% of the total foreign trade turnover), Ukraine (8.4%) and Kazakhstan (4.8%). In the period under review, there was a significant increase in the share of non-primary products in total exports to over 71%, while the share of services was 10.4%, machinery and equipment 7.5%, and ferrous and nonferrous metals 7.0%. In the import structure, machinery and equipment have the largest share: 53.3% of total imports. In 2008, their volume increased by 19.8%. They were followed by chemicals and plastics (13.0%), ferrous and nonferrous metallurgy (6.8%) and services (5.7%).

406 REPUBLIC OF UZBEKISTAN Economy

Figure 3 Structure of Foreign Trade ($ million)

8,000 7,562 7,000 6,000 4,719 5,000 4,300 4,273 4,011 4,000 3,204 3,000 2,722 2,514 2,000 1,000 0 Exports Exports Imports Imports to CIS to other from other from CIS countries countries countries countries

2007 2008

S o u r c e: State Statistics Committee of Uzbekistan.

Key Social Indicators

In 2008, nominal household income rose by 34.1% compared to 2007. In the structure of household income, the main part was income from business, including income from the sale of agricultural products and other sources (49.9%). Compared to 2007, such income rose by 28.5% in nominal terms. This growth was largely due to an increase in wages and other earnings by 39.1%, and also an increase in income from social transfers (pensions, benefits, grants and other social security payments) by 42.4%. Consumer spending in 2008 rose by 36.1%. The use of household income had the following structure: consumer spending made up 74.7% of total household spending, savings in deposits and securities (including purchase of foreign currency), 17.1%, and mandatory payments and fees, 6.5%. Nominal household income grew faster than consumer prices, with the result that real household income increased by 25.1% (see Fig. 4). The average monthly nominal wage in dollar terms was over $300; the average wage in public sector organizations increased more than 1.5 times, and in the economy as a whole, 1.4 times. As of 1 January, 2009, the population of Uzbekistan was 27,555.3 thousand. The republic’s working population in 2008 was 11,035 thousand, up 2.8% from 2007. This growth was due to an increase in the number of jobs in both the non-production sphere (by 3.2%) and in production (by 2.6%). The number of job seekers applying to the employment service was 623.3 thousand. Out of the total number of citizens registered as job seekers, people aged 16 to 18 made up 1.3%, 18 to 30, 53.5%, and 30 to 50, 43.9%. 407 CENTRAL EURASIA 2008 Analytical Annual

Figure 4 Growth in Household Money Income and the Consumer Price Index in 2008 (same period of 2007 = 100)

160 140 120 100 80 60 40 20 0 Q1 Q2 Q3 Q4

Income growth CPI

S o u r c e: State Statistics Committee of Uzbekistan.

Banking System

Last year Uzbekistan’s banking system remained a steadily developing sector of the financial market. As a result of implemented measures, the total capital of commercial banks increased by 40% compared to 2007, to over UZS 2,104 billion.

Figure 5 Growth in Total Capital of Commercial Banks (UZS billion)

2,500 2,000 1,500 1,000 500 0 1 Jan 2006 1 Jan 2007 1 Jan 2008 1 Jan 2009

S o u r c e: Central Bank of Uzbekistan.

408 REPUBLIC OF UZBEKISTAN Economy

Bank assets increased by 30.1% compared to 2007, reaching UZS 12,065 billion. As a result of active investment in bank shares, the number of bank shareholders exceeded 220 thousand, with individuals making up 71% of all shareholders. Figure 6 Growth in Total Assets of Commercial Banks (UZS billion)

14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1 Jan 2006 1 Jan 2007 1 Jan 2008 1 Jan 2009 S o u r c e: Central Bank of Uzbekistan.

Due to more active bank financing of economic growth, by 1 January, 2009, bank loans reached UZS 6,372 billion or $4,532 million (compared to UZS 4,757 billion in 2007). The amount of loans in support of small business and private enterprise rose by 68.2% from 2007, to UZS 1,251 billion. In accordance with a presidential decree On Additional Measures of Material and Moral Sup- port for Young Families, the country’s commercial banks provided mortgage, consumer and low-interest microloans totaling UZS 135.7 billion or $96.5 million. As a result of a wide range of deposit services offered by credit institutions (over 400 kinds of deposits), timely payment of cash from deposit accounts, and government guarantees for household (retail) deposits, deposits at commercial banks increased by 68.6% from 2007 and reached UZS 1,724 bil-

Figure 7 Growth in Retail Deposits with Credit Institutions (UZS billion)

2,000

1,500

1,000

500

0 1 Jan 2006 1 Jan 2007 1 Jan 2008 1 Jan 2009

S o u r c e: Central Bank of Uzbekistan.

409 CENTRAL EURASIA 2008 Analytical Annual lion or $1,260 million (compared to UZS 1,023 billion in 2007), which is a sign of growing public confidence in banks. With an expansion of bank financing of economic growth, credit to the real sector of the economy has increased from year to year. In 2008, banks provided about UZS 1,534 billion or $1,091 million for the modernization and retooling of enterprises and for projects designed to organize the production of competitive goods for the domestic and foreign markets.

Budget Policy

Measures carried out by the state tax service in 2008 helped to ensure economic stability. In particular, budget revenue targets were exceeded by 2.3%. Further measures were taken to reduce the tax burden on business entities, to lower the single tax rate for micro firms and small enterprises from 10% to 8%, and to reduce individual income tax with a simultaneous improvement of the tax schedule. As a result, the number of small businesses operating in the country increased 1.9 times in the last six years, reaching almost 400 thousand.

Securities Market

During the year, the government of Uzbekistan took a number of measures to increase the capitalization of joint stock companies in the republic. For example, a presidential decree On Measures to Enhance the Financial Stability of Enterprises in the Real Sector of the Economy (No. UP-4053 of 18 November, 2008) established the minimum capital requirement for joint stock companies at the equivalent of $400 thousand (in soms at the exchange rate of the Central Bank of Uzbekistan). In July 2008, a new Law on the Securities Market was adopted in the republic. The results for 2008 showed a trend toward an increase in capitalization levels in all sectors of the economy. Whereas at the beginning of the year the authorized capitals of all joint stock companies added up to UZS 3.3 trillion, by the end of the year the figure reached UZS 4.5 trillion, with an increase of almost UZS 1.3 trillion. Total market turnover rose by more than UZS 300 billion (1.7 times) compared to 2007. The primary market made up 68.5% of share trading volume. Sale of shares in the primary over-the-counter market more than doubled from 2007, which points to more active issue of shares by the republic’s joint-stock companies. Compared to 2007, total turnover in the secondary stock market increased by 65.5% or by UZS 88.1 billion. The growing capitalization of joint stock companies prompted a decision to raise minimum capital requirements for professional market participants so as to enhance their stability and reduce risk in securities transactions.

Insurance Market

At the end of 2008, there were 30 insurance companies providing services in Uzbekistan’s insurance market. Of these, 29 companies provide general insurance services, and 1 company operates in life insurance. There is also one successfully operating reinsurance company.

410 REPUBLIC OF UZBEKISTAN Economy

The republic’s insurers collected a total premium of UZS 87.1 billion, or 18.3% more than in 2007. This includes premiums on direct insurance policies (excluding inward reinsurance premiums) totaling UZS 82.1 billion, or 24.9% more than a year ago. In the structure of insurance premiums in 2008, as in previous years, voluntary insurance had the largest share. Direct premiums in voluntary insurance constituted 91.7% of the total, down 3.2 pp from 2007. Last year the republic’s insurers paid out UZS 14.2 billion of insurance benefits, with a 62.9% increase from the previous year, and the rate of growth in insurance benefit payments more than tripled. It should be noted that 45.6% of total payments were made in the 4th quarter of 2008. Benefit payments in voluntary personal insurance grew faster than other payments, more than doubling from the previous year to over UZS 2.0 billion. As a result, the share of voluntary personal insurance payments increased from 11.8% to 14.3%. As in previous years, most benefit payments were made in voluntary property insurance (75.2% of total payments); in absolute terms, these payments increased 1.8 times. Since insurance benefit payments in 2008 grew faster than insurance premiums, the ratio of payments to premiums (loss ratio) for the insurance market increased 1.5 times to 16.3%. This is the highest ratio for 2004-2008. For voluntary insurance, the loss ratio increased 1.5 times to 16.0%, whereas for mandatory insurance it fell 1.5 times to 20.1%. Among voluntary types of insurance, the highest loss ratio is traditionally found in personal insurance: 21.2% in 2008 (compared to 14.0% in 2007), and the lowest, in voluntary liability insurance: 1.13% (compared to 1.1% in 2006). The ratio for voluntary property insurance rose last year from 10.8% to 17.8%.

Development of the ICT Sector

In the past year, telecommunications and ICT enterprises produced goods and services worth a total of UZS 1,493.13 billion reaching 156.8% compared to 2007. The number of mobile phone users more than doubled to 12.5 million. Telecommunications and ICT exports reached 140.2% of the target figure. FDI inflows into the country amounted to $243.87 million (UZS 339.95 billion), which made it possible to exceed the Investment Program targets by 35%. In the development of information and communication technologies, the republic has achieved some positive results. In particular, the number of Internet users in 2008 reached 2.4 million. The speed of access to international information networks increased 2.3 times, the number of websites in the national domain .UZ by 134%, the number of digital signature users 2.8 times, and the amount of interactive government services provided through ministerial and departmental websites 2.8 times.

C o n c l u s i o n

Despite the problems and difficulties, in 2008 the republic managed to achieve not only stable operation of the economy, but also steadily high rates of economic growth. A phased and pragmatic line of stable economic development is an indication of Uzbekistan’s interest in developing domes-

411 CENTRAL EURASIA 2008 Analytical Annual tic industry and laying the foundation for the republic’s export strategy. A significant increase in exports and an improvement of the entire foreign trade structure is of particular importance in this respect. The results of the systemic market reforms that continued in 2008 and structural adjustment in the economy, including production modernization and renewal, create favorable conditions for attracting investment to Uzbekistan. In the near future, the global economic recession will have an effect on Uzbekistan through a drop in the prices of exchange goods that are the republic’s main export items, through a decline in demand for Uzbekistan’s exports caused by slower economic growth in its major trading partners, and a reduction in remittances. The Uzbek economy is not integrated with the financial markets of developed countries and for this reason is unlikely to suffer considerable damage from credit restrictions or a sharp reduction in capital flows. The task is to cushion the impact of the world crisis on economic growth by means of a timely and well-targeted policy coupled with efforts to ensure financial stability and curb inflation. The authorities have provided for a wide range of economic policy measures designed to stimulate domestic demand, including an expansionary fiscal policy and a prudent monetary policy. In 2009, Uzbekistan’s economic development prospects are expected to remain generally favorable.

RELIGION

Kamoliddin RABBIMOV Independent expert (Tashkent, Uzbekistan)

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

nyone wishing to draw a true picture of the quently passed for “social consent,” yet the con- religious situation in Uzbekistan should flict of religious ideas has caused quite a storm in A keep in mind several dimensions: the nation’s consciousness. The government is only too well aware that (1) the multilayered official religious policy; the public interest in Islam is of a fundamental (2) the behavior of official and unofficial (includ- nature and that Islam in the republic is a perpet- ing oppositional) religious actors; and ual factor. This explains the republic’s bi-vector policy: strict control designed to lower (but (3) what the public thinks about religion and re- not eliminate) the general level of religiosity, on ligious feelings and the corresponding trends. the one hand, and molding some of the official An analysis of the above will inevitably religious institutions and figures into pliable demonstrate that religion in Uzbekistan has devel- actors, on the other. oped into an uncompromising clash of values and The year 2008 was, on the whole, a rela- opinions. This is not always obvious; it is fre- tively calm one even though in some regions the

412 REPUBLIC OF UZBEKISTAN Religion official course aimed at lowering the level of re- The quota of one place per 1,000 members ligiosity among the people took primitive and of the country’s Muslim population is the official- even brutal forms. The media went on with its ly established rule for hajj. This means that with relatively recent, post-Andijan information pol- its 27 million-strong population (about 90 percent icy, which removed the terms “extremism” and of which are Muslims) Uzbekistan can send about “terrorism” from everyday vocabulary. In this 25 thousand every year to Saudi Arabia. Howev- way the state realized its “patronage” over the er, the authorities cut back the number to a mere “right” Islam. 5 thousand even though hajj is considered by the Relevant figures. The number of registered Islamic doctrine as practically the only way for the religious organizations remained practically the faithful to improve their situation on Doomsday. same as in the previous years: by the end of 2008 In Uzbekistan, where this conviction is gaining there were over 2,250 religious organizations popularity, people have to wait for their turn to that belonged to 16 confessions. Ninety-two perform hajj; in some regions places are booked percent (or 2,042) of them were Muslim struc- until 2011. tures, 2,000 being mosques. There are 165 offi- Nearly all Uzbek pilgrims should be senior cial Christian organizations, 8 Jewish, and 1 Ba- citizens, this is what the government is convinced hai community, as well as one Buddhist temple of; there is any number of confirmations that the and one Krishnaite society. The system of reli- official age limit is 45 + even though the rule was gious education includes the Tashkent Islamic never been made a law. Institute (Oliy makhad), ten madrasahs scattered The hajj is organized at a fairly high level: across the country, as well as one Orthodox Chris- from the moment people board the aircraft in tian and one Protestant seminary. The Tashkent Tashkent to the time they return everything goes Islamic University set up in 1999 under a presi- smoothly and without a hitch. This makes control dential decree in the wake of the series of terror- of the pilgrims and Muslims in general very effi- ist acts in the country’s capital functions at the cient. The Uzbek authorities are convinced that Cabinet of Ministers as a secular institution that during the hajj the states involved spare no effort uses the latest methodologies to teach religious to demonstrate their organizational skills. So it is and secular subjects. not surprising that Tashkent wants to look better Every year over 150 members of other reli- than its Central Asian neighbors. gious communities perform pilgrimages to Israel Official religious leaders. Former Mufti and Russia.1 Sheikh Sodik Muhammad Yusuf, who figures Hajj. The number of pilgrims and the qual- prominently on the republic’s religious scene, built his information activities related the Wasa- ity of pilgrimages to the Islamic centers can be tia (Moderation) doctrine based on the religion’s described as indicators of the level of religiosi- philosophy that enjoins the faithful to remain ty and of certain aspects of the state’s treatment moderate in everything: God worshipping, poli- of Islam and its followers. From the very first tics, and dealing with life’s complexities.2 days of independence, the state deemed it nec- The official site of the Administration (Muf- essary to assume control over hajj. In the last few tiate) of the Muslims of Uzbekistan [http:// years the number of Muslim pilgrims remains at muslim.uz] contains much more information and the 5-thousand level. During the 17 years of in- is much more frequently updated than the site of the dependence, 65 thousand Uzbek citizens per- Committee for Religious Affairs at the Cabinet of formed hajj (about 3,820 every year); the number Ministers of the Republic of Uzbekistan [/www. of those who performed umrah is almost half this religions.uz/]. amount.

2 Today his site can be described as the most in- 1 See: Uzbekistan Today, 20 December, 2008. [http:// formative of the Islamic sites in Uzbek on which Wasatia www.ut.uz/rus/obshestvo/molodej_tolerantnost_i_ ideas are widely presented [see: [http://islom.uz/content/ naionalnie_ennosti.mgr]. view/793/136/]]. 413 CENTRAL EURASIA 2008 Analytical Annual

Religious literature inside the country. Pentecostals, the Jehovah’s Witnesses), some- Muslim literature never suffered much from the thing that the conservatively-minded Muslims and strict official control over everything religious. the Orthodox Church, the self-appointed defend- Between 1998 and 2003, the local Muslims lived er of the traditional (Orthodox) Christianity in Uz- through a crisis before they adjusted themselves bekistan, readily welcomed. to reality. Islamic literature is growing more and Non-official religious leaders. The state’s more commercial because of the stable demand policy in relation to Islam and the Muslims drove successfully exploited by publishing houses, many of the active and independently-minded bookstores, and CD sellers: Tashkent is already Muslims out of the country. Obidkhon kori well stocked while the demand in the regions is Nazarov, an imam of one of the Tashkent mosques still higher than the supply. whose fame peaked in the 1990s, now lives in an In 2008, scores of Islamic Internet sites of EU country. In 2008, he launched a site called varied content opened. They offer books, videos, Islom ovosi3 (The Voice of Islam), which consists articles, fatwas, the Koran on audio tape, and a lot of several sections and is updated almost every of other interesting and useful information. The day. As one of the most popular Islamic sites in sites are in Uzbek and Russian. Recently CDs Uzbek, it gives the faithful a chance to ask the have been gaining popularity at the expense of imam a question and receive an audio answer other vehicles of information; most of the CDs (MP3, Realmedia). Questions come from Uz- sold and bought are produced in private studios bekistan and other countries; this means that de- or at home. spite the fact that this site is blocked in Uzbekistan, On Fridays the mosques across the republic people have learned how to gain access to it. In are flanked with people selling films, books, and the mosques, maruza (preaching) is limited to the Koran in electronic and book form. This can Fridays while on the Internet preaching goes on be described as a second boom of Islamic litera- day after day. ture in the republic—this time it is traditional, avoids alternative positions and interpretations, 3 The internet address of the site is [http:// and is strictly controlled. islomovozi.com/]. On 16 May, 2004, the imam’s elder son Throughout the year, state structures repeat- was kidnapped (relatives are convinced that the Uzbek special services were involved). Nothing has been heard about edly confiscated banned Protestant literature (of him since.

Freedom of Conscience

Uzbekistan has formed its own idea about “freedom of conscience and religion.” The government interprets it as “secular freedom” and/or controlled religiosity. Genuine religious freedom in Uzbekistan is impossible for several reasons. First, there is no understanding that freedom of conscience and religion is not something that exists outside the social context: it is a process finely tuned to the society’s religious requirements. The second and main reason: to survive, authoritarian regimes never permit the slightest freedom lest it invite a greater and more hazardous one. The government is fully aware of the fact that in the context of a profound social crisis Islam stands a good chance of becoming the “ideology of social justice,” something that happened many times in the past. This means that the authorities cannot imagine the “freedom of religion” idea. The regime has posed itself the task of keeping the religiosity level relatively low: individuals are allowed to identify themselves with Islam but they are expected to demonstrate moderation in their religious way of life and behavior. The year 2008 was very much like any of the previous years in

414 REPUBLIC OF UZBEKISTAN Religion this respect. Those accused of “extremism,” “fanaticism,” and “anti-constitutional behavior” were arrested very much as before. In 2008, however, the number of women among the arrested was much higher. The legislation relating freedom of conscience and religion abounds in lacunae and contradictions exploited by the authorities to interfere with the affairs of religious communities and persecute the least acceptable. The Law on Freedom of Conscience and Religious Associations, for example, uses the terms “fanaticism” and “extremism,” which are never clarified in the country’s legislation. The same law contains provisions that interfere with freedom of conscience and religion: “Actions aimed at enticing believers into a different confession (proselytism) are banned as well as all other missionary activities. Persons guilty of them are liable as envisaged by the law” (Art 5) “Citizens of Uzbekistan, with the exception of clergymen, should not appear in cultic garb in public places” (Art 14). This obviously prevents citizens from satisfying their religious needs.

Tolerance and Interreligious Dialog

It is commonly believed in Uzbekistan that harmonious relations among religions, tolerance, peace among the local peoples, and general stability are the highest achievements of the government. On the whole this is true: there are no public conflicts among the confessions and religious figures, there is practically no criticism; if any, critical comments are offered at the direct or indirect command of the people in power. The absence of public conflicts among the confessions and tolerance have been established but the question of the price paid for tolerance and religious harmony, as well as whether they are lasting, reveals much of what normally remains behind the scene. There are two general models of state regulation in the religious sphere: (1) the state offers all the confessions equal conditions; defends their rights and freedoms by law, and does not extend its support to any of them; (2) the state supports one religion and segregates others. Uzbekistan is caught between the two variants; during the years of independence it acquired a rule under which all confessions were allowed their spheres of influence and degree of involvement in public life. Violators and opponents4 will be punished. The religious harmony that has taken shape in Uzbekistan is better described as “passive tolerance:” the absence of conflicts goes along with the absence of religious freedom. In this respect 2008 looked very much like its predecessors. The religious harmony born by the nature of the political regime will change along with the inevitable transformation of the regime that created it. It is too early to guess how religious relations will change under the pressure of the expected transformations but one thing is abundantly clear: the role of all religions, Islam in particular, will be revised. Today the “sacrificial syndrome” created by the government’s uncompromising struggle against “religious extremists” has become part and parcel of what society thinks of Islam and the Muslims.

4 Proselytism is legally banned in the republic which means that the much needed revision of religions’ boundaries is also banned. 415 CENTRAL EURASIA 2008 Analytical Annual M a i n C o n c l u s i o n s a n d T r e n d s

When the Soviet Union, the outpost of the worldwide atheist movement, left the stage, Islam became the de facto main element of public consciousness in Uzbekistan for explaining the meaning of life and man’s predestination. Previous sociological polls confirmed that 98-99 percent of the population are confirmed believers; at the same time 80 to 85 percent of the respondents revealed that despite their firm religious convictions their lifestyle can be described as secular. This is the main result of the state’s religious policy. Depending on the context, the state regards Islam as an opposing force or as an unreliable ally. It is an opposing force because it tends to play the habitual role of social moderator tuned to public discontent and willing to address the most painful of the urgent problems. In other words, Islam as a religion that strives for universalism becomes an “ideology of social justice:” as soon as it runs against the government, this side betrays itself in opposing injustice, tyranny, and violence. This forces the government to transform the traditional religions, Islam in particular, into its ally. n The year 2008 was relatively calm without any serious clashes between the state and the faithful. Several imams were arrested in Karakalpakia; several groups of women were detained in the capital and the Tashkent Region; and there was a struggle against proselytism represented by several Protestant groups in the regions. On the whole, the country was completely freed from religious extremists and fundamentalists. n In its struggle against religious extremism the state has morally exhausted itself; it lost public support and a lot of its former self-assurance, which came to the fore in the wake of the 2005 Andijan events. At the same time, the government remains resolved to fight all sorts of unacceptable, including religious, ideas and still has enough resources to do this. It is adjusting its policy to the degree of uncontrolled activities. n The republic’s leaders have made the struggle against religious extremism and the resultant terrorism an aim in itself. The pressure against them is not accompanied by greater liberalization and democratization; the opposite is true: the struggle potentially undermines the democratic potential. n An analysis of mosque attendance and the popularity of religious literature shows that the level of religiosity is not subsiding, however, as distinct from the past, it has become more self-contained. n Islam in Uzbekistan is becoming increasingly Internet-oriented; websites in Uzbek started by those who operate under official control and by independent operators are mushrooming. n The officially established degree of freedom of conscience and religion limits religious rituals to officially designated places. Religions should keep away from burning social, economic, and political issues. In other words, the local religions are discouraged from reproducing tension (read: criticism). In fact, many of the purely religious requirements are outlawed. n Society is highly appreciative of the religious tolerance the confessions are demonstrating; imposed from above, tolerance and peace, however, are shaky and can hardly be regarded as sustainable. The religious tolerance created by the current regime might disappear along with the government itself.

416 REPUBLIC OF UZBEKISTAN International Affairs INTERNATIONAL AFFAIRS

Evgeni ABDULLAEV Ph.D. (Philos.), head of the International Cooperation Department, National Center for Human Rights (Tashkent, Uzbekistan)

General Overview

n 2008, Uzbekistan set its foreign policy sights on improving relations with the West without detrimentally affecting its relations with Russia. It partially succeeded, which was mainly due to I the relative passivity of the main foreign policy players. The U.S. was focusing its domestic political resources on electing a new president, while its foreign political resources went to Iraq, Af- ghanistan, and Pakistan (but not to post-Soviet Central Asia). Russia also lived through a change in power and focused on resolving the burning issues in the Caucasus; Uzbekistan was only a target of the Kremlin’s attention with respect to the oil and gas interests lobbied by Gazprom, LUKoil, and several other Russian companies. Both countries were also engaged in resolving problems generated by the world financial crisis, which pushed their foreign political activity to the back burner. On the other hand, the relatively closed nature of its economy made it possible for Uzbekistan to avoid the first direct blows from the international financial crisis and manifest a little more flexibility in its dialog with foreign policy partners. After Islam Karimov was re-elected as president at the end of 2007, the domestic political context did not undergo any drastic changes in 2008. The situation inside the country remained quite stable economically while social problems, although they made their presence known, were not serious enough to provoke any particular changes in foreign policy. There was no single significant foreign policy event during the year to ruffle the relatively smooth surface of the domestic and foreign political situation. On the whole, Uzbekistan was able to take advantage of the time-out enforced by the major players and partially win back several foreign policy positions lost after the Andijan events of May 2005. The country’s overall foreign policy orientation was directed as before toward the main centers of power—Russia, the U.S., and partially China; relations with the European and East Asian countries remained at the previous level while contacts with the Arab countries strengthened somewhat. Foreign policy strategy also remained unchanged, it focused on taking as much advantage as possible of the competition (albeit much lower) among the main powers in the region by making use of its geographically central location in it. Relations with the U.S. did not undergo any significant changes. Apart from the traditional visits of Washington officials to the region—Commander of the United States Central Command Wil- liam Fallon and Assistant Secretary of State for South and Central Asian Affairs Richard Boucher— there were no other top-level visits; Uzbekistan was not on the itinerary of U.S. Secretary of State Condoleezza Rice’s October trip to the region. Nevertheless, the Uzbek leadership took several steps toward rapprochement with the United States—it withdrew from the EurAsEC, a symbolic gesture to show it was distancing itself from Russia; it improved its democratic image; and it softened its attitude toward the activity of several Western organizations in this sphere, including American, which

417 CENTRAL EURASIA 2008 Analytical Annual will be discussed below in the corresponding sections. In response, the U.S. toned down its foreign policy rhetoric toward Uzbekistan somewhat and a certain amount of progress was achieved in observing human rights. It is difficult to say whether the United States knew of Bishkek’s plans to close the base at the Manas airport, but it is possible that specific talks on alternative ways to ship American cargoes to Afghanistan were held with Uzbekistan at the end of 2008. All the same, American assistance to Uzbekistan in 2008 was the lowest ever during the past decade and this trend will continue in 2009. Although the attitude of the new Washington administration toward Uzbekistan remained rather vague, Uzbekistan was able to draw at least two conclusions from Hilary Clinton’s appointment as secretary of state—on the one hand, the ex-president’s wife was in Uzbekistan at the end of the 1990s and spoke positively of the country at that time; while on the other, there is concern that she may place the emphasis on observing human rights, introducing an independent court, and establishing democratic procedures and institutions in the U.S.’s relations with Uzbekistan. Relations with Russia developed more intensely, although there were no significant breakthroughs there either. Apart from frequent contacts at the bilateral level (during the Uzbek president’s visits to Moscow and St. Petersburg, as well as Vladimir Putin’s visit to Tashkent), there were also contacts within the framework of the SCO and CSTO. In addition, it was agreed that the Russian president would visit Uzbekistan in January 2009. The gas theme prevailed in the talks with Russia: discussing the prices for the gas exported by Uzbekistan and feeling out the country’s attitude toward the West’s plans to build the Nabucco gas pipeline (circumventing Russia). Uzbekistan’s suspension of its membership in the EurAsEC came as quite a surprise for observers. All the same, this was fully in keeping with Tashkent’s well-known idiosyncrasy toward membership in regional and trans-regional associations, which it usually criticizes as ineffectual (such as the CIS, EurAsEC, and GUUAM) or, on the contrary, as aggressively politicized (such as the OSCE). It should be said that it is more convenient and effective for the Uzbek leadership to resolve issues in the bilateral or collective format, where Uzbekistan can assume a more advantageous hierarchic position. On the other hand, its withdrawal from the EurAsEC was designed to demonstrate Uzbekistan’s independence from Russia and, in so doing, raise the country’s status in the dialog with the West. It should also be noted that Tashkent has a rather negative attitude toward Russia’s participation in water projects with Tajikistan and Kyrgyzstan, viewing this as a possible lever of pressure on Uzbekistan in the future. Uzbekistan also refrained from taking a specific position regarding the Russian-Georgian conflict (limiting itself to sending humanitarian aid to South Ossetia). Apart from the already rather cold relations with Ukraine and Georgia, in the aftermath of their color revolutions, and with the Baltic states, after they voted in favor of the European Union’s well- known sanctions, Uzbekistan’s relations with the CIS states remained stable. Foreign political and foreign economic relations with China developed relatively steadily both in the bilateral (in June construction of the Uzbekistan-China gas pipeline began) and in the SCO format (its Council of Heads of State was held on 28 August in Dushanbe). The Uzbek Foreign Ministry also made a special statement in which Uzbekistan confirmed that it “believes the Tibetan Autonomous District to be an inalienable part of Chinese territory” and supported the “steps taken to restore law and order and ensure stability in this region, which is China’s internal affair.” Relations with another Far Eastern partner—the Republic of Korea—also focused primarily on raw hydrocarbons. For example, an agreement was signed with Daewoo International on carrying out geological survey work at the Koskudyk and Ashibulak investment blocks in the Ustiurt Region and with another Korean company—the Korea National Oil Corporation (KNOC)—on geological survey work at the Chust- Pap and Namangan-Tergachin investment blocks in the Ferghana oil and gas region. Relations with regional neighbors—Kazakhstan, Kyrgyzstan, Tajikistan, and Turkmeni- stan—did not undergo any significant changes (apart perhaps from a slight warming trend in Uzbek-

418 REPUBLIC OF UZBEKISTAN International Affairs

Turkmen relations). Apart from meetings in the SCO format, Islam Karimov also met with the Kaza- kh and Kyrgyz presidents within the framework of bilateral visits. As in the case of the EurAsEC, Uzbekistan assumed a particular (rather negative) position with respect to the Kazakh president’s initiative to create a Union of Central Asian States. Other burning issues, such as the export of Uzbek gas to Tajikistan and Kyrgyzstan; use of water resources; the visa regime and transport routes between Uzbekistan and Tajikistan; regulation of migration flows between Uzbekistan and Kazakhstan, and so on, also largely remained unresolved. Regional security issues focused on Afghanistan. The Afghan theme was also raised by Presi- dent Karimov at the Euro-Atlantic Partnership Council (EAPC) summit on 3 April, 2008 in Bucha- rest, where he suggested reviving the negotiation process regarding Afghan settlement in the “6+2” format (the U.S., Russia, China, Iran, Pakistan, Tajikistan, Turkmenistan, and Uzbekistan) and transferring it to the “6+3” format by adding NATO. He repeated this suggestion on 28 August at a session of the Council of Heads of SCO Member States. Several delegations of ministers from Afghanistan visited Uzbekistan. Apart from showing the country’s natural concern about the uncontrolled way the situation in Afghanistan is developing, focusing on the Afghan question also indicates the Uzbek leadership’s desire to move closer to the U.S. (at the beginning of the 2000s this position was vital for American-Uzbek rapprochement). Contacts with Arab countries, particularly with the United Arab Emirates, whose high-ranking representatives made several visits to Uzbekistan after Islam Karimov trip to this country at the beginning of the year, developed quite dynamically compared to other vectors. Evidently the decrease in the activity of religious fundamentalist and extremist groups over the past three years has reduced Tashkent’s caution toward the Middle Eastern oil monarchies as the possible sponsors of such movements; Uzbekistan’s contacts with these countries are becoming increasingly active. As for the West European countries, there were no changes in Uzbekistan’s relations with them. They continued to vary from quite warm with respect to Germany to cold with respect to Great Britain. Traditionally positive relations continued with Japan, Malaysia, Latvia, Bulgaria, and Azerba- ijan (see, chronology of main events).

Relations with International Organizations

On the whole, relations with international organizations developed rather favorably for Uz- bekistan. In October, the EU sanctions against Uzbekistan were lifted (apart from the embargo on arms deliveries). Removing Uzbekistan from the list according to the U.N. 1503 Procedure in February 2007 was an important step toward bringing the country out of isolation. Uzbekistan, in turn, softened its attitude toward the activity of international and foreign organizations engaged in democratization issues. In July, the American Institute for New Democracies (IND) was accredited in the republic. In Decem- ber, Regional Representative of the U.N. Human Rights High Commissioner for Central Asia Dimiter Shalev visited Tashkent (this was the first visit since May 2005 by a representative of this organization to Uzbekistan). The decision to celebrate the 60th anniversary of the Universal Declaration of Human Rights at the national level was quite significant. In May, a corresponding decree was adopted and action plan approved; one of the items called for allotting $100,000 to the fund of the Office of the U.N. High Commissioner for Refugees (UNHCR). Several significant international documents were ratified, primarily the Second Optional Protocol to the International Covenant on Civil and Political

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Rights, aiming at the abolition of the death penalty, the United Nations Convention against Corrup- tion, the Protocol to Prevent, Suppress and Punish Trafficking in Persons, Especially Women and Children, supplementing the United Nations Convention against Transnational Organized Crime (we will remind you that the topic of trafficking in persons used to be “closed”), and the United Nations Convention against Transnational Organized Crime. In December, a large delegation from Uzbekistan presented a Universal Periodical Review in Geneva on the situation with human rights. The country engaged in active cooperation with specialized programs and U.N. agencies—the UNDP, UNODC, UNICEF, and UNESCO. Relations with international credit organizations remained the same. Relations with the Asian Development Bank continued to develop most favorably—it granted Uzbekistan a loan of 100 million dollars to improve water resource management and land reclamation in the Andijan, Navoi, Na- mangan, Samarkand, and Ferghana regions. Relations with the International Monetary Fund (IMF) warmed up somewhat, as can be seen from the rather complimentary statement about Uzbekistan made by the IMF Mission that visited the country between 8 and 19 December (see [www.imf.org/external/ russian/np/sec/pr/2008/pr08347r.pdf]). Relations with the OSCE largely remained at the previous level—this organization is still represented in the country by the Program Coordinator and his office. Apart from the traditional visit of this organization’s Chairman-in-Office, other high-ranking representatives did not visit Uzbekistan, which is in full keeping with the ongoing cooling trend in relations between Uzbekistan and the OSCE (if we compare them with the intense cooperation in 1996-2003). Some insignificant changes occurred in Uzbekistan’s foreign policy establishment. In Febru- ary, the president’s daughter, Gulnara Karimova, was appointed as deputy foreign minister for cultural affairs, and in September as permanent representative of Uzbekistan to the U.N. and other international organizations in Geneva. In November, Khamidulla Karamatov, who was previously rector of the University of World Economics and Diplomacy at the Foreign Ministry, ambassador of Uzbekistan to France, and even earlier deputy prime minister, was appointed as deputy foreign minister (for cooperation with the CIS countries). Several staff appointments were made in the embassy corps in December: a young diplomat, Farrukh Tursunov, was appointed as Uzbekistan’s ambassador extraordinary and plenipotentiary to the Republic of Kazakhstan, Ilkhamjan Nematov to the Russian Feder- ation, Alisher Kadyrov to the Kingdom of Saudi Arabia, Salikh Inogamov to the Republic of India, and Aybek Eshonov to the State of Israel. But apart from these staff shuffles, there were no other significant changes in the foreign ministry during 2008.

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

On the whole, 2008 was not marked by any intense foreign policy activity or significant changes in the foreign policy situation. All the same, some improvement in relations with the West—while retaining the previous level in the dialog with Russia—can be regarded as one of the year’s positive results, although the stagnation in relations at the regional (Central Asian) level was fraught with an accumulation of unresolved problems, many of which could later become quite serious. The following trends can be singled out: n possible rapprochement with the United States in resolving regional security issues (primarily Afghanistan); n further strengthening of the economic component (primarily associated with gas transit) in relations with Russia while keeping the military component to the minimum;

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n an attempt to restore confidence in relations with Western Europe (with Germany’s possible role as mediator); n activation in resolving water resource distribution problems (and possible intensification in this respect of contacts with Tajikistan and Kyrgyzstan); However, Uzbekistan will continue to pursue a rather closed foreign policy and strive to avoid any steps that may upset the political status quo.

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CHRONOLOGY OF EVENTS FOR 2008

POLITICS

Afghanistan

19 February —The Attorney General’s office decides to temporarily remove General Abdul Rashid Dostum from the post of presidential advisor. 25 February —The Taliban announces that it is ready for a peaceful dialog with the new government of Pakistan. 2 March —Afghan deputies approve two new ministers proposed by the president. 2 March —Iran opens the IT-institute it built in Kabul to train specialists in information technology. 15 March —A mass protest rally is held in Kabul against reproductions of the cartoons of the Prophet Muhammad in the Western press. 4 April —The opposition National Front of Afghanistan Party begins negotiations with the Taliban. 27 April —Terrorists attack President Karzai during a military parade in Kabul. 7 May —A National Anti-Corruption Agency is set up in Afghanistan by a presidential decree. 8 May —Mustafa Zahir, grandson of the deposed king of Afghanistan, suggests that some time later an interim government together with the Taliban should be created. 30 May —Taliban fighters seize a district in the central province of Ghazni. 14 June —In the southern province of Kandahar Taliban fighters attack the central prison of Kandahar and liberate about one thousand of its inmates. 30 June —There is an assassination attempt on Mohammad Osman Osmani, governor of Ghazni, one of the central provinces. 422 CHRONOLOGY OF EVENTS FOR 2008 Politics

13 July —The upper chamber of the parliament of Afghanistan demands that the status of the foreign troops stationed in the country be specified and the time of their withdrawal fixed. 19 August —Afghanistan marks the 89th anniversary of independence. 25 August —The Afghan authorities are inclined to limit the powers of the foreign armed forces and insist on revision of the conditions under which they are stationed in the country. 13 September — Abdullah Wardak, the governor of Logar, a central Afghan province, is killed in a blast in the Pagman district in the west of Kabul. 20 September —President Karzai addresses all the sides in the armed conflict to agree on a cease-fire. 30 September —President Karzai refutes information about secret talks with the Taliban. 4 October —President Karzai offers a seat in the Cabinet to Mullah Omar, spiritual leader of the Taliban. 10 November —President Karzai removes Minister of Transport Hamidullah Qaderi from his post. 18 November —The Taliban declines an invitation from President Karzai to start talking until the foreign troops are removed from the country. 19 November —An international conference on Afghan refugees living in neighboring countries opens in Kabul. 25 November —President Karzai demands that a stage-by-stage schedule be drawn up for the withdrawal of foreign troops from the country with exact dates. 4 December —Leader of the Afghan Uzbeks General Dostum is exiled to Turkey with his family. 5 December —The opposition Council of Afghanistan’s National Union calls for an international peace conference on settlement in Afghanistan. 18 December —The lower chamber of the parliament passes a majority no-confidence vote against Minister of Commerce and Industry Muhammad Amin Farhang. 23 December —Spiritual leader of the Taliban Mullah Omar denies the rumors about talks with Kabul.

Republic of Armenia

18 January —The Central Elections Commission registers nine political figures who presented all the necessary documents as presidential candidates. 19 January —The Heritage Party invites the opposition presidential candidates to join forces. 8 February —Presidential candidate Levon Ter-Petrosian demands that the election be postponed for two weeks.

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14 February —Presidential candidate Artur Bagdasarian announces that he is resolved to run for president on his own. 19 February —The Central Elections Commission publishes the preliminary results of the presidential election which Serzh Sargsian wins with 52.86 percent of the votes. 20 February —The international observer mission recognizes that the election largely corresponded to Armenia’s obligations. 21 February —Levon Ter-Petrosian announces at a rally that Manvel Grigorian and Gagik Melkonian, two deputies of the defense minister, are inclined to support the opposition. 21 February —The organizers of the rally set up a tent camp on Freedom Square at the Opera House. 22 February —Gagik Jangirian, deputy Prosecutor General of Armenia, joins the opposition. 23 February —President Kocharian confers with the top military, heads of the national Security Service, and the police. 23 February —A group of Armenian diplomats and ambassadors joins the opposition. 23 February —Practically all the deputies of the National Assembly who stated the day before that they supported the opposition sign a joint statement of the ruling coalition in support of Serzh Sargsian. 24 February —The Central Elections Commission publishes the final results of the 19 February presidential election and declares presidential candidate Serzh Sargsian the country’s president. 24 February —The opposition declares that it intends to go to the Constitutional Court to demand that the election results be annulled. 26 February —Supporters of Serzh Sargsian gather on Republic Square in Erevan for a meeting. 26 February —President Kocharian addresses the nation on TV. 29 February —Leader of Orinats Erkir Artur Bagdasarian accepts the government’s invitation to cooperate. 1 March —Law-enforcement forces disperse an opposition rally on Freedom Square in Erevan. 1 March, — President Kocharian announces at a press conference that he is forced evening to introduce a state of emergency in the capital. 2 March —A state of emergency is introduced for twenty days. 4 March —Acting on the request of the Prosecutor General the parliament lifts immunity from four deputies and permits them to be arrested as the accused. 8 March —The Constitutional Court declines the claims of presidential candidates Tigran Karapetian and Levon Ter-Petrosian to recognize the election results as invalid.

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17 March —The parliament adopts amendments and addenda to the Law on Meetings, Rallies, Marches, and Demonstrations at a special sitting. 20 March —The state of emergency in Erevan ends. 21 March —A new political coalition of the Republican Party of Armenia, Orinats Erkir, Flourishing Armenia, and Dashnaktsutiun is formed. 4 April —Artur Bagdasarian is appointed secretary of the Security Council of Armenia. 9 April —The president issues a decree to appoint former head of the Central Bank of Armenia Tigran Sarkisian prime minister. 25 April —A workgroup at the presidential administration is set up to draft decisions on the fulfillment of PACE Resolution No. 1609 On Functioning of Democratic Institutions in Armenia. 5 June —The National Assembly holds hearings on the special report of Ombudsman of Armenia Armen Arutiunian on the presidential election and post-election developments. 13 June —The president issues a decree that sets up a Public Chamber under the president. 16 June —The parliament adopts the law draft On Setting up a Temporary Parliamentary Commission for Investigation of the Events of 1-2 March in Erevan and Their Causes. 26 June —The Law on Amendments and Addenda to the Law on Meetings, Rallies, Marches, and Manifestations adopted by the parliament comes into force. 4 July —An opposition rally and march are held in Erevan. 16 September —Speaker of the National Assembly Tigran Torosian resigns. 29 September —Former head of the presidential administration and member of the parliamentary faction of the ruling Republican Party Ovik Abramian is elected speaker of the National Assembly. 17 October —Levon Ter-Petrosian announces at a meeting in Erevan that mass actions will be suspended. 22 October —The president extends the powers of the temporary parliamentary commission set up to investigate the events of 1-2 March in Erevan until 25 February. 23 October —President Sargsian sets up a fact-finding group of experts to investigate the events of 1-2 March. 20 November —President Sargsian initiates discussions of the Nagorno-Karabakh conflict with the political forces of Armenia. 3 December —The parliament passes the law on the amendments and addenda to the Law on Referendum in the first reading. 17 December —The PACE Monitoring Commission publishes its report, which presupposes suspension of Armenia’s right to vote. 425 CENTRAL EURASIA 2008 Analytical Annual

19 December —The trial of seven supporters of Levon Ter-Petrosian begins in Erevan. 21 December —The opposition Armenian National Congress meets for its conference in Erevan.

Azerbaijan Republic

1 January —A ban is enacted on the use of foreign languages by Azeri TV channels and radio. 10-11 June —Baku hosts the forum “Wider Roles for Women in the Dialog between Cultures,” organized together with UNESCO and ISESCO, that attracted 400 women from 60 countries, including the first ladies of many countries. 26 June —The full-scale military parade dedicated to the 90th anniversary of the Armed Forces of Azerbaijan takes place. 31 July —President Aliev endorses the Conception of State Support to the Media. 17 August —A terrorist act is committed in the Abu Bakr Mosque in Baku. 6-8 October — The 4th Islamic Conference of Ministers of Higher Education and Scientific Research “Bringing Change through Scientific Youth Force” is held in Baku in cooperation with ISESCO and OIC. 15 October —A presidential election is held at which incumbent Ilham Aliev wins with a wide margin. 31 October —President Aliev appoints the new Cabinet. 10 November —The ruling Eni Azerbaijan Party initiates a referendum on Constitutional amendments and addenda. 2 December —Baku hosts the International Conference of Ministers Responsible for Culture “Intercultural Dialog as a Basis for Peace and Sustainable Development in Europe and its Neighboring Regions” in cooperation with the Council of Europe and the Government of Azerbaijan. It attracts 10 international organizations and 16 states. 24 December —The Constitutional Court positively assesses the draft Act on the Referendum “On Amendments and Addenda to the Constitution of the Azerbaijan Republic.” 26 December —The Milli Mejlis (parliament) schedules a referendum for 18 March, 2009 by an absolute majority of votes (100 for; 7 against, 1 abstained, and 2 not voting). 30 December —The Milli Mejlis of the Azerbaijan Republic passes the Law on Education in the second reading. 30 December —The National Council for TV and Radio discontinues broadcasting of BBC, Radio Liberty, Voice of America, and Europe + on the republic’s national frequencies. 426 CHRONOLOGY OF EVENTS FOR 2008 Politics

Republic of Belarus

1-15 January —More than half of the self-employed businessmen decide to take part in a protest action in the form of “forced leave with non-payment of taxes.” 4 January —The Ministry of Justice goes to the Supreme Court with a demand to liquidate the Belarusian Party of Communists. 9 January —The presidential administration officially informs the political council of the United Democratic Front that it refuses to take part in a dialog about the parliamentary elections. 12 January —The Ministry of Justice goes to the Supreme Court with a claim to liquidate the republican public organization Perspektiva, the claim is recalled on 18 January. 18 January —The Minsk City Court sentences journalist A. Sdvizhkov to three years in prison for publishing in the Zgoda newspaper Muhammad cartoons that earlier appeared in Jyllands-Posten (Denmark). 23 January —One of the leaders of the youth democratic movement D. Dashkevich is released from prison before his term expired. 31 January —Iu. Liavonov, former director of Nika-trans, is released from the Bobruisk medium-security penal colony before his term expired. 3 February —The 5th Plenum of the C.C. Belarusian Party of Communists is held in connection with the end of the six-month suspension period. 5 February —A leader of the non-registered Molodoi Front A. Finkevich is released from prison. 8 February —Decree No. 70 changes the rules of enrollment in higher and secondary educational establishments to introduce preliminary professional- psychological interviews for those wishing to enroll in courses for professions “with special requirements.” 10 February —The United Democratic Forces draw up their election strategy. 15 February —A. Klimov, a well-known politician, is released from the Mozyr correctional colony. 18 February —The militia prevents a protest meeting of self-employed businessmen on October Square in Minsk. 22 February —Due to a decision by the Supreme Court Collegium to reduce his t hree-year sentence to three months, journalist A. Sdvizhkov is set free. 7 March —Ambassador of Belarus to the United States A. Khvostov is recalled for consultation in connection with additional sanctions introduced by the U.S. against Belneftekhim. 12 March —U.S. Ambassador Karen Stewart leaves Belarus. 25 March —Celebration of Freedom Day ends in dispersal of the rally and mass detentions.

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27 March —The U.S. embassy in Minsk informs the BelaPAN that 17 American diplomats are leaving the country. 27 March —Large-scale searches are conducted in Minsk, Brest, Vitebsk, Gomel, Grodno, and other Belarusian cities in apartments owned or rented by journalists working with Radio Ratsiia and the Polish Belsat TV Channel; electronic appliances and information carriers are confiscated. 22 April —A. Kim, an active member of youth movement, is sentenced to eighteen months in a standard regime penal colony under Art 364 of the Criminal Code (violence or threat of violence against a militiaman). 22 April —S. Parsiukevich, one of the business community leaders, is sentenced to two and a half years in a standard regime penal colony. 24 April —The Central Election Commission of Belarus adopts a document regulating the activities of foreign observers. 3 May —The annual report of Freedom House on the freedom of the press ranks Belarus 188th among 195 countries. 16 May —The United Democratic Front Presidium approves the message of its candidates at the elections to the Chamber of Representatives of the National Assembly. 16 May —Belarusian businessmen register their public association For the Free Development of Entrepreneurship in Kiev. 10 June —The Council of Ministers submits a draft Law on the Mass Media to parliament. 18 June —The Ministry of Justice refuses, for the second time, to register the social public organization Belarusian Christian Democracy (BCD). 19 June —The Ministry of Justice refuses, for the third time, to register the For Freedom public movement. 26 June —President Lukashenko signs Decree No. 14 that extends the powers of the Constitutional Court. 4 July —About 50 people are wounded by an explosion at the Minsk— the Hero City Stella during the celebration of Independence Day in Minsk. 8 July —A. Lukashenko signs a decree that removed V. Sheiman from the post of the Security Council secretary and G. Nevyglas from the post of the head of presidential administration because of other appointments. 15 July —President Lukashenko appoints V. Makei as head of the presidential administration, Yu. Zhadob in as secretary of the Security Council, and V. Zaitsev as head of the KGB. 4 August —President Lukashenko signs the Law on the Mass Media. 15 August —Election commissions are formed at the polling stations. 16 August —A. Kozulin is liberated from the Vitba-3 colony. 428 CHRONOLOGY OF EVENTS FOR 2008 Politics

20 August —A. Kim, an activist of the youth movement, is released from the Bobruisk colony; self-employed businessman S. Parsiukevich is set free from a correction colony in Minsk. 29 August —The Central Election Commission of Belarus publishes the results of candidate registration (276 in all). 25 September —A meeting is held of the Belarusian importers and representatives of the Ministry of Economy organized by the Minsk Union of Businessmen and Employers. 28 September —Elections to the Chamber of Representatives of the National Assembly are held in Belarus. 25 October —The Republican Public Association Belaia Rus gathers for its congress in Minsk. 18 November —Bailiffs take inventory of the property in the apartment rented by an activist of the For Freedom Movement in Minsk. 19 November —The European structures receive a document from the Belarusian authorities in which they promise to return the independent publications Narodnaia Volia and Nasha Niva to the Belarusian publishing system and the state distribution system. 25 November —The Narodnaia Volia newspaper signs agreements with Belsoiuzpechat and Belpochta on distribution through newsstands and by subscription; on 27 November the newspaper reached the newsstands. 17 December —Activists of the For Freedom Movement receive registration certificate No. 2020 at the Ministry of Justice.

Georgia

5 January —A pre-term presidential election is held in Georgia; Mikhail Saakashvili wins. 5 January —Georgians support NATO membership for their country and parliamentary elections in the spring of 2008 at a national referendum. 13 January —At a protest rally the opposition dismisses the election results as falsified and demands a second round. 12 February —Former presidential candidate Badri Patarkatsishvili dies of heart failure in his London home. 9 March —The opposition launches a hunger strike in front of the parliament to demand a new presidential election, fair parliamentary elections, and release of all political prisoners. 21 March —The Georgian parliament endorses a set of constitutional amendments that changes its structure; from that time on half of the seats (75 out of the total 150) will go to deputies elected in single-member constituencies, the other half will go to deputies elected by party lists. 429 CENTRAL EURASIA 2008 Analytical Annual

25 March —After meeting with Patriarch of All Georgia Ilia II the opposition leaders discontinue the hunger strike. 23 April —France gives political asylum to former defense minister of Georgia Irakly Okruashvili. 5 May —Eka Tkeshelashvili is appointed foreign minister of Georgia. 21 May —Parliamentary elections are held in Georgia. 23 May —The United Opposition announces that it will boycott the newly elected parliament, will not work in it, and demands pre-term parliamentary elections. 7 June —The newly elected parliament starts functioning; apart from the United Opposition, it is also boycotted by the Labor Party. 7-12 August —An armed conflict between Georgia and Russia. 12 August —President of France Nicolas Sarkozy and President of Russia Dmitry Medvedev sign a cease-fire agreement. 12 August —A meeting in support of Georgia’s territorial integrity is held in front of the parliament. It is attended by the presidents of Poland, Ukraine, Lithuania, and Estonia and the prime minister of Latvia who have arrived to demonstrate their support. President Saakashvili announces that his country is leaving the CIS. 26 August —President of Russia Medvedev signs a decision that recognizes the independence of Abkhazia and South Ossetia. 1 November —The parliament votes in support of a new cabinet with Grigol Mgaloblishvili as prime minister and of the government program. 3 November —Elections to the Supreme Soviet of the Ajarian Autonomy are held. 4 December —Irakly Alasania, who represented Georgia in the U.N., resigns. 5 December —Shifts take place in the Cabinet: Minister of Defense David Kezerashvili is replaced with David Sikharulidze, who was Georgia’s ambassador to the United States. Eka Tkeshelashvili is appointed secretary of the National Security Council while her former post of foreign minister is filled by Grigol Vashadze; deputy Nikolz Rurua is appointed minister of culture while another deputy, Lasha Zhvania, becomes minister of economic development. 8 December —The Republican Party and the New Right form an official alliance.

Republic of Kazakhstan

17 January —The extended meeting of the Nur Otan Political Council chaired by President Nazarbaev is held. 24 January —President Nazarbaev arrives in Zhezkazgan with a working mission to take part in a republican forum on the social responsibility of businesses.

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30 January —President Nazarbaev attends a Forum of Scholarship Holders of the Bolashak Program in Astana. 6 February —President Nazarbaev delivers his Address to the Nation at a joint sitting of both chambers of the Parliament. 14 February —President Nazarbaev presides over an extended sitting of the Government of Kazakhstan. 21 February —State Secretary K. Saudabaev presides in Akorda over the Anti-Corruption Commission under the President of the RK. 29 February —President Nazarbaev receives Chairman of the Senate K. Tokaev. 26 March —The akim office of Astana holds a meeting on celebration of the capital’s 10th anniversary. 27 March —President Nazarbaev chairs a regular meeting of the Security Council of Kazakhstan in Akorda. 10 April —President Nazarbaev receives a group of Majilis deputies. 11 April —President Nazarbaev holds a conference in Akorda on the problems of administrative reform of the law-enforcement system attended by top officials of the Presidential Administration and Government, as well as heads of the law-enforcement, special and other state structures. 6 May —President Nazarbaev signs the Law on the Ratification of the U.N. Anti-Corruption Convention. 12 May —President Nazarbaev finishes his business trip to the Kzyl-Orda Region. 10 June —State Secretary K. Saudabaev presides over a sitting of the Council of the Assembly of Nation of Kazakhstan attended by the heads of the national-cultural centers held in House of Friendship in Almaty. 16 June —The Academy of State Governance under the President of the Republic of Kazakhstan hosts an international scientific-practical conference called “The Role of Civil Service in Upgrading the Country’s Competitiveness.” 17 June —President Nazarbaev signs the Constitutional Law on Amendments and Addenda to the Law of the Republic of Kazakhstan on the Constitutional Council of the Republic of Kazakhstan. 25 June —President Nazarbaev signs the Law on the Ratification of the Optional Protocol to the Convention against Torture and Other Cruel, Inhuman or Degrading Treatment and Punishment. 27 June —President Nazarbaev signs a decision on prizes and grants in the mass media. 30 June —President Nazarbaev opens celebrations dedicated to the 10th anniversary of Astana. 3 July —A conference on the future development of Astana takes place in the akimat office of Astana. 431 CENTRAL EURASIA 2008 Analytical Annual

5 July —A gala meeting on the occasion of the 10th anniversary of the Kazakhstani capital takes place in the Palace of Peace and Harmony. 9 October —President Nazarbaev finishes his business trip to the Zhambyl Region. 16 October —President Nazarbaev gives an interview to the country’s leading TV channels. 23 October —the 14th session of the Assembly of the People of Kazakhstan takes place in the Palace of Peace and Harmony. 5 November —President Nazarbaev chairs a regular meeting of the Security Council of the Republic of Kazakhstan that discusses the performance of the law-enforcement bodies fighting crime and corruption. 6 November —Astana hosts an Anti-Corruption Forum. 17 November —President Nazarbaev signs the Law on the Supreme Judicial Council of the Republic of Kazakhstan designed to strengthen the status and organizational side of the Supreme Judicial Council as a structure set up under the head of state to ensure his constitutional rights when staffing the courts, ensuring independence of the judges and their immunity. 25 November —President Nazarbaev chairs a meeting convened in Akorda to discuss the course of judicial reform and its prospects. 27 November —State Secretary K. Saudabaev chairs a meeting of the Anti-Corruption Committee under the President of the RK in Akorda. 2 December —State Secretary K. Saudabaev presides over a regular meeting of the Republican Commission for State Symbols in Akorda.

Kyrgyz Republic

10 January —President Bakiev addresses the nation in the parliament. 14 January —The forum of the opposition “For Justice” Movement held in Bishkek decides to set up a Public Parliament. 15 January —B. Nogoibaev is replaced by M. Kongantiev as Minister of the Interior. 5 February —The Coordination Council of the Public Parliament meets. 20 February —The Public Parliament holds its first sitting, at which it adopts an address to the nation and the country’s leaders. 29 February —President Bakiev leaves for medical treatment in Germany. 19 March —The Public Parliament meets for its second sitting to discuss the energy issue and preparations for a people’s kurultai. 24 March —Kyrgyzstan marks the 3rd anniversary of the 2005 “revolution.” 27 March —President Bakiev returns. 12 April —The opposition holds a people’s kurultai in Bishkek. 26 April —Opposition leaders take part in a march along the shores of Lake Issyk-Kul; the government disperses the peaceful demonstration.

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15 May —I. Isakov is removed from the post of defense minister to be appointed secretary of the republic’s Security Council. He is replaced as defense minister by former head of the State Security Service Bakytbek Kalyev; from that time on the State Security Service is headed by president’s brother Zh. Bakiev. 21 May —The Public Parliament meets for its third session to pass a decision on drafting a new conception of the country’s development. 29 May —Speaker A. Madumarov, who plans costly renovation of the parliament building, is replaced by A. Tagaev from the Ak-Zhol pro-presidential faction. 15 September —The Public Parliament meets for the fourth time to start preparations for another kurultai. 18 September —M. Kaiypov is removed from his post as minister of justice. 24 September —B. Amirazhanov, son of Zh. Zheenbekov, member of the Social-Democratic faction in the parliament, disappears. 26 September —A videoed address by head of the Central Election Committee K. Kabilova in which she accuses the government of falsifying the results of the pre-term parliamentary elections and one of the president’s sons of allegedly putting pressure on her is made public. 30 September —Member of the Social-Democratic faction R. Shabotoev disappears. 5 October —Local elections are held. 7 October —M. Kaiypov, I. Isakov, and U. Sydykov publicly announce that violations did occur during the elections, that the country’s leaders “personnel policy” was wrong, and warn about mass rallies. 10 October —I. Isakov is replaced by A. Madumarov as secretary of the Security Council. 15 October —The Revolutionary Committee headed by A. Beknazarov announces at a press conference that the committee members are being persecuted and that the president should be removed from his post in full accordance with the Constitution. 17 October —President Bakiev addresses the nation on TV. 19 October —President Bakiev leaves for Germany for medical treatment. 19-22 October —The leaders of the “For Justice” Movement go to Moscow to meet Russian experts and politicians. 27 October —The “For Justice” Movement meets to discuss the preparations for the people’s kurultai scheduled for 25 November. 3 November —A Memorandum of the opposition is signed at a meeting of the Public Parliament. 18 November —The Popular Movement for Resignation of K. Bakiev (earlier called the Revolutionary Committee) holds a kurultai in Talas. 21 November —President Bakiev returns from Germany. 433 CENTRAL EURASIA 2008 Analytical Annual

29 November —A people’s kurultai in Bishkek adopts the Conception of the Country’s Development. 7-21 December —The opposition leaders go to the United States to present their Conception of the Country’s Development. 16 December —Criminal proceedings are instituted against A. Jekshenkulov, one of the opposition leaders. 24 December —The United Popular Movement of Kyrgyzstan is set up. 29 December —Two criminal cases are instituted against I. Isakov, one of the opposition leaders. 31 December —President Bakiev addresses the nation with New Year greetings.

Republic of Moldova

16 January —Chairman of the Parliamentary Committee for Culture, Science, Education, the Youth, and the Media Victor Stepaniuc is appointed vice premier of the republic’s government. 15 March —The CRRM gathers for its congress in the National Palace to adopt a new program that speaks of a socially oriented state as one of the priorities. 19 March —Prime Minister V. Tarlev resigns. 21 March —President Voronin nominates Minister of Finance Z. Greceanîi as a candidate for the post of prime minister. 31 March —The parliament approves the new government with 55 votes (out of the total 101). 2 April —The new government meets for the first time. 7 April — V. Voronin and I. Smirnov speak over the phone, a fact which comes as a surprise for the press. 10 April —The parliament approves of the new election threshold (6 percent) for parties running for parliament in 2009 with 63 votes for and 11 against. 11 April —V. Voronin and I. Smirnov meet in Tighina (Bendery). 8 May —The parliament adopts a new National Security Conception. 8 May —A silent march of over 100 journalists carrying “Transparency” and “Freedom” slogans takes place in Chisinau. 29 September —V. Tarlev is elected chairman of the Centrist Union of Moldova. 24 November —Members of the diplomatic missions of the EU members in Chisinau express their desire in an address to the central government of the Republic of Moldova that the elections scheduled for the spring of 2009 be democratic. 1 December —Minister of Culture and Tourism Artur Cosma is dismissed from his post by a presidential decree.

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13 December —V. Tarlev is elected chairman of the Centrist Union of Moldova for the second time because the Ministry of Justice of Moldova refused to recognize the September voting as legal. 18 December —D. Diacov organizes a press conference at which he presented the shadow government of the Democratic Party of Moldova. 19 December —After prolonged and far from simple debates and numerous amendments the parliament passes the Education Code with 54 votes. 24 December —Voronin and Smirnov meet in Tiraspol and decide, among other things, to add vigor to the workgroups on confidence building and security measures. 27 December —The Republican Center for Children and Young People ARTICO is opened in Chisinau; the ceremony is attended by the president and prime minister.

Republic of Tajikistan

8 January —Re-registration of Tajik NGOs is summed up. It began in the latter half of 2007 when a new law was adopted. As a result, the number of NGOs decreased three-fold from 3,200 to 1,040. 9 January —Power restrictions are introduced because of the electricity shortage; most regions only have power for 2 to 3 hours a day. 12 January —The American AES Corporation suspends its functioning in the republic. 24 January —All industrial enterprises are closed down; the authorities are prepared to introduce a state of emergency because of the power crisis. There is the danger that by early February the country will be left without heating and electricity. 25-26 January —For two days an extended sitting of the Cabinet chaired by President Emomali Rakhmon discusses the results of Tajikistan’s socioeconomic development in 2007 and the goals for 2008. 28 January —At a Cabinet meeting President Rakhmon dismisses over 20 officials because of the difficult economic situation and the energy crisis. 2 February —Some Internet providers block access to TopTJ.com probably because of the users’ severe criticism of the government triggered by the energy crisis. 2 February —An armed clash takes place in Gharm (220 km from Dushanbe) between the local law enforcers headed by former field commander Akhmadov and a special unit of the republican Ministry of the Interior, the commander of which, Colonel Oleg Zakharchenko, is killed. 6 February —The government of Tajikistan asks the international community for urgent aid to help overcome the damage caused by the extremely cold weather and acute energy crisis. 8 February —The Moroz-2008 anti-crisis headquarters set up at the Health Ministry of Tajikistan reports that 232 infants and 12 mothers died in unheated maternity hospitals in the last month.

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23 February —The Ministry of the Interior announces that a group of seven headed by former commander of a border guard outpost in the Murghab Region of GBAR Mamadbokir Mamadbokirov shelled the Interior Department of Khorugh. 26 February —In Khorugh about 200 attend a sanctioned rally to demand that the illegal armed groups lay down their arms and stop threatening stability and peace. 1 March —Three opposition parties of Tajikistan—the Democratic Party (the Iskandarov Bloc), the Social-Democratic, and the Socialist (the Nazriev Bloc) parties— issue a joint statement to demand a national referendum to amend the Constitution. 3 March —The last remaining monument to Lenin in the Central Part of Culture is removed. 6 March —The IMF demands that Tajikistan return several credit tranches extended in the early 2000s totaling $47.4 million. 15 March —About 40 people (mostly women and children) gather early in the morning at the Presidential Palace in Dushanbe to demand that the authorities pay more attention to their problems. 17 March —A rally takes place in Khorugh to protest against the arbitrary rule of the law enforcers. A crowd of about 300 gathers outside the regional administration to protest against extortions and other violations of the law by the law-enforcement structures. 1 May —A district court in Dushanbe suspends the activities of ORA International Charity of Germany since its members are engaged in missionary activities contrary to the company’s rules. 7 May —According to Gazeta.Ru, which refers to the UCAN Information Agency, the Ministry of Culture prevents the local Baptists from bringing 100 thousand copies of the Bible into the country. 27 May —An armed clash takes place in Kulob where government special forces stormed the house of Sukhrob Langariev, the brother of Langari Langariev, one of the prominent leaders of the People’s Front of Tajikistan of the civil war period. 15 June —An unsanctioned meeting begins in Khorugh, the administrative center of the Gorno-Badakhshan Autonomous Region, to protest against the additional troops brought in into the region. 18 June —An anti-president meeting in Khorugh that began on 15 June folds up; about 500 protesters are resolved to resume the meeting if the troops are not removed within three days. 23 June —The Supreme Court passes a guilty verdict for three members of the Islamic Movement of Uzbekistan extremist-terrorist organization. 10 July —The collegium of the court of Dushanbe passes a verdict for Komiljon Ishonkulov accused of being involved in the explosion that took place the previous June on the Supreme Court’s territory.

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23 July —President Rakhmon speaks in favor of replacing the Cyrillic alphabet for the Tajik language with the Arab script. 30 July —The Ministry of the Interior issues a statement to the effect that the public should stand opposed to the Salafi movement which has recently become much more active. 10 August —The Democratic Party of Tajikistan, one of the best known in the republic, has turned 18. 28 August —A SCO summit opens in Dushanbe. It is attended by 12 heads of state, who arrived the day before. Six of them are SCO members (Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan); four have an observer status (Iran, India, Mongolia, and Pakistan); the heads of Turkmenistan and Afghanistan attend as guests. 5 September —Food prices in the markets skyrocket on the eve of the Holy Month of Ramazan. 8 September —In his speech on the 17th anniversary of state independence of Tajikistan President Rakhmon says that in three years the republic will achieve energy independence; until this time people are storing coal. 12 September —Strict limits on energy consumption (nine hours a day) are introduced. 16 October —The parliament passes the Law on State Social Order under which the state will fund civil society organizations. 23 October —President Rakhmon officially pardons former fighter of the United Tajik Opposition who until recently headed the Regional Department of Struggle against Organized Crime of the Rasht group of districts Mirzokhuja Akhmadov accused of killing Colonel Oleg Zakharchenko during firing on 2 February, 2008. 13 November —Well-known field commander of the former People’s Front of Tajikistan Khuja Karimov accused of grave crimes committed during the civil war is placed on Interpol’s “Wanted” list. 15 November —It is announced that Gaffor Mirzoev’s brother, who is currently imprisoned and in the past was Emomali Rakhmon’s main rival, will soon be extradited from the United Arab Emirates. 29 November —The State National Security Committee opens criminal proceedings against Nuriddin Turajonzoda, the most influential among the spiritual leaders and preachers of the Tajik Muslims, better known as Ashoni Nuriddin. 1 December —Tajik guest workers organize the first large-scale strike during the financial crisis in the center of Ekaterinburg (Russia) to demand their wages. 3 December —Officers of the Ministry of the Interior confiscate the year’s largest amount of drugs (557.9 kg). 9 December —President Rakhmon asks Russia to increase the migration quota for Tajik labor migrants in 2009. 437 CENTRAL EURASIA 2008 Analytical Annual

24 December —Tajikistan is included on the list of authoritarian regimes (together with Uzbekistan and Turkmenistan) compiled by The Economist Intelligence Unit (EIU) of Britain that specializes in ratings of all sorts.

Turkmenistan

18 January —A State Anti-Drug Service is set up. 19 January —President Berdymukhammedov meets the creative intelligentsia. 21 January —A new list of holidays and commemorative dates is endorsed. 1 April —Post-graduate education is revived. 18 April —President Berdymukhammedov approves the document on the Constitutional Commission for improving the Constitution and the plan of the Commission’s work. 23 April —President Berdymukhammedov chairs an extended meeting of the Cabinet of Ministers that discussed wide-scale constitutional reform. 6 May —A competition for state grants among scientific projects is announced. 6 May —923 people are amnestied on the eve of Victory Day. 12 May —A project of the Constitution Monument 185 meters high to be erected in the center of Ashghabad is presented to the president. 18 May —The country celebrates Constitution Day and the Day of Renaissance, Unity, and Poetry of Makhtumkuli Fragi. 1 July —The generally accepted names of the months and weekdays are restored. 25 July —An automobile rally, Friendship of Nations-2008, finishes in Ashghabad. 10-13 September —An exchange of fire takes place in Ashghabad; official sources report that the ministries of the interior and national security are involved in an operation against a well-armed group of criminals. 12 September —An Academy of Civil Service under the President of Turkmenistan is set up. 26 September —The Khalk Maslakhaty adopts the new Constitution at its last sitting. 8 October —President Berdymukhammedov is awarded the 6th Dan in karate. 22 October —President Berdymukhammedov signs a decision under which a state commission for assessing the artistic level of literary works, theater productions, and film scripts is set up. 27 October —Turkmenistan marks the 17th anniversary of state independence. 29 October —The book Akhaltekinets—nasha gordost’ i slava (Akhal Teke Horse— Our Pride and Glory) by President Berdymukhammedov is presented in Ashghabad. 438 CHRONOLOGY OF EVENTS FOR 2008 Politics

5 December —The Statute of the Council of the Elders of Tajikistan is adopted. 14 December —Elections of the parliament (Mejlis) are held. 22 December —A New Year Tree is set up on the main square of Ashghabad.

Ukraine

3 September —The leaders of the OU-PS faction announce that they are leaving the parliamentary majority in the Supreme Rada. 4 October —The Golos Ukrainy newspaper carries a statement by the Litvin Bloc parliamentary faction which warns that continued confrontation at the top threatens the country’s finances and economy and its state sovereignty. 29 November —Victor Yushchenko is elected leader of the People’s Union Our Ukraine at its closed congress. 9 December —The Bloc of Yulia Timoshenko, part of the Our Ukraine-People’s Self-Defense faction, and the Litvin Bloc agree on a new coalition. 13 December —Speaker of the Supreme Rada V. Litvin suggests that a moratorium be introduced on constitutional amendments for at least one year. 26 December —The Supreme Rada endorses the 2009 budget.

Republic of Uzbekistan

1 January —The Constitutional Law of the Republic of Uzbekistan on Strengthening the Role of Political Parties in the Renovation and Further Democratization of State Governance and the Country’s Modernization; the laws On Amendments and Addenda to Some Legal Acts of the Republic of Uzbekistan in Connection with the Abolition of Capital Punishment and On Amendments and Addenda to Some Legal Acts in Connection with the Transfer of the Right to Sanction Arrests to Courts of Justice are enacted. 14 January —The Day of the Defender of the Motherland. 23 January —Speaker of the Legislative Chamber of Oliy Majlis E. Khalilov is removed from his post “for health reasons;” his post goes to D. Tashmukhamedova, head of the Adolat Social-Democratic faction and deputy speaker. 15 February —I. Babajanov is removed from his post as khokim of the Khorezm Region by a presidential decree; O. Ollabergenov is appointed to this post by another decree. 6 March —A. Abdullaev is removed from his post as khokim of the Ferghana Region by a presidential decree; M. Gafurov is appointed to this post by another decree. 439 CENTRAL EURASIA 2008 Analytical Annual

25 March —A. Eshmuratov is removed from his post as acting khokim of the Surkhandarya Region by a presidential decree; T. Juraev is appointed to this post by another decree. 15 April —I. Barnoev is appointed khokim of the Samarkand Region by a presidential decree. 3 July —A joint sitting of the Kengashes of the Legislative Chamber and the Senate of Oliy Majlis set up a Public Fund at the Oliy Majlis to extend support to NGOs and other civil society structures, as well as a Parliamentary Commission designed to look after the Fund’s money. 31 August- —The 17th anniversary of independence of the Republic of Uzbekistan is 1 September celebrated. 17 September —Defense Minister R. Mirzaev is removed from his post by a presidential decree because of “another appointment;” K. Berdiev is appointed to the post by another decree. 17-18 September —Tashkent hosts a conference of the youth of Uzbekistan convened to discuss the results of the International Economic Consultative Council set up in 2005 by the Serkuesh Uzbekistonim (Sunny Uzbekistan) coalition. It adopts an economic Roadmap toward Uzbekistan’s Prosperity program. 20 November —The president issued a decree On Measures Designed to Improve the Conditions in which Conscripted Citizens Serve in the Armed Forces of the Republic of Uzbekistan; starting in 2009, conscription will take place once a year. 2 December —M. Salikh, one of the leaders of the opposition in emigration, says in an interview to Radio Liberty that the democratic, economic, and religious oppositions are moving closer together to “consolidate all anti-Karimov forces” in order to change power and political regime by peaceful means. 5 December —The Senate of the Oliy Majlis of the Republic of Uzbekistan appoints new ambassadors extraordinary and plenipotentiary of the Republic of Uzbekistan to Russia (I. Nematov), Israel (O. Eshonov), Kazakhstan (F. Tursunov), India (S. Inagamov), and Saudi Arabia (A. Kadyrov). 6 December —The president delivers a speech in the Turkiston Palace at a gala meeting dedicated to the 16th anniversary of the Constitution and announces that 2009 will be the Year of Development and Improvement of the Countryside. 6 December —Human rights activists organize the Human Rights Parade in Tashkent timed to coincide with Constitution Day and dedicated to the 60th anniversary of the Universal Declaration of Human Rights. The Public Prosecutor’s Office arrests most of the participants and fines them. 13 December —B. Ruziev is removed from his post as khokim of the Navoi Region by a presidential decree; E. Turdimov is appointed to this post by another decree.

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16 December —Z. Niyazov is removed from his post as khokim of the Tashkent Region by a presidential decree; A. Kholmatov is appointed to this post by another decree. 25 December —The president signs the Law on Amendments and Addenda to Some Legal Acts of the Republic of Uzbekistan in Connection with Improvements in the Election Legislation under which the number of seats in the Legislative Chamber is increased from 120 to 150; initiative groups of citizens lose the right to nominate candidates.

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ECONOMY

Afghanistan

21 April —A European Union delegation led by Javier Solana arrives in Kabul. The main purpose of the visit is to prepare for an international conference in support of Afghanistan to be held in Paris in June. 21 April —An Afghani delegation led by Minister of Energy and Water Resources of the Islamic Republic of Afghanistan Muhammad Ismail-Khan visits Uzbekistan. 28 April —A delegation of Tajikistan’s Chamber of Commerce and Industry led by its Chairman Mr. Sharif Said pays a working visit to Afghanistan. 20 May —Tajikistan’s capital Dushanbe hosts a meeting of Afghan-Tajik business community representatives. 13 October —An UAE delegation consisting of officials, businessmen, and experts arrives in the Afghan capital. 19 November —Kabul hosts an international conference on problems of Afghani refugees living in the neighboring countries—Iran and Pakistan. 21 November —Afghanistan and Uzbekistan, with the mediation of the Asian Development Bank, sign a memorandum of understanding on the expansion of their trade and economic relations through railway infrastructure development. 22 December —An international exhibition devoted to the economic revival of Afghanistan opens in Tehran.

Republic of Armenia

5 February —ProCredit Bank, Armenia’s 22nd bank, opens in the country. 7 February —Armenia issues its first 20-year government bonds. 13 February —An agreement is signed to transfer the Armenian Railway to JSC Russian Railways for concession management. The agreement is to go into effect on 1 June. 442 CHRONOLOGY OF EVENTS FOR 2008 Economy

9 April —Serzh Sargsian takes office as president of Armenia. That same day he appoints Tigran Sarkisian as prime minister. 29 April —The new government’s program is put before the National Assembly. 30 April —The National Assembly passes the first of a number of amendments to the Tax Code, so initiating reforms in this area. The amendment lays down clear rules for determining the customs value of goods. 1 May —Government subsidies for natural gas are abolished. 3 July —Fitch Ratings upgrades Armenia’s rating from BB- to BB. 30 July —The construction of a new generating unit starts at the Erevan TPP with a loan from the Japanese government. 20 August —A State Revenue Committee is created by merging the Customs Committee and the Tax Service. 21 August —A package of legislative changes to tax and customs laws is adopted in the country. 9 September —An Armenian-Russian mining company is set up to explore and develop uranium deposits in Armenia. 24 September —A feasibility study is presented for the construction of a new nuclear power plant is Armenia (at a possible cost of $5.2-7.2 billion). 6 October —A tender for the role of Armenia’s third mobile operator is won by the French company Orange. 12 November —Prime Minister Sarkisian puts before parliament the key provisions of his strategy for fighting the global financial crisis. 1 December —An official ceremony to mark the completion of the Iran-Armenia Gas Pipeline is held in the republic. 9 December —Armenia, among 16 other countries, is granted GPS+ trade status for exports to EU countries. The Generalized System of Preferences (GPS) provides for a significant reduction or elimination of tariffs on more than 6,400 goods.

Azerbaijan Republic

10 January —A new state registration system for commercial and other legal entities based on the “single window” (one stop shop) principle is presented to the public. 6 February —The government decides to index the insurance part of retirement pensions. 13 March —AutoShow 2008, the fifth show of its kind, opens in Baku. 15 March —A new Law on Insurance Activity goes into effect. 22 April —Oil production begins in the deepwater part of the Gunashli Field in the Caspian Sea. 25 April —The State Oil Company of Azerbaijan opens its gasoline station network in the Georgian city of Rustavi under the brand name of SOCAR.

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1 May —The International Bank of Azerbaijan, the largest banking and financial institution of the Central Caucasus, begins issuing American Express charge cards for the first time in the country. 3 June —The 15th International Exhibition Caspian Oil & Gas opens in Baku. 7 July —It is announced that the privatization of JSC Kapital Bank has been completed. 25 August —The State Program for Ensuring a Steady Supply of Food to the Population for 2008-2015 is approved. 15 September —The State Program for Poverty Reduction and Sustainable Development in Azerbaijan for 2008-2015 is approved. 11 November —President Ilham Aliev issues a decree on the use of the “single window” principle in checking goods and motor vehicles at checkpoints on the state border. 21 November —The 7th Conference of the Central Asia Economic Cooperation (CAREC) countries is held in Baku. 1 December —A TRACECA transport ministers’ meeting opens in Baku. 10 December —The State Program for the Development of the Pension Insurance System for 2009-2015 is approved.

Republic of Belarus

4 January —The Ministry of Economics makes a decision to raise Russian oil transit tariffs by an average of 16.2% beginning on 1 February. 15 January —At a session of the Security Council a decision is finally made to build a nuclear power station in Belarus. 21 January —The Government and the National Bank of Belarus approve the Corporate Securities Market Development Program. 22 January —The Council of Ministers of the Republic of Belarus approves its plan of measures for 2008 designed to implement the National Export Development Program for 2006-2010. 25 January —Belarus, Russia, and Kazakhstan sign a package of agreements on the formation of a Customs Union. 31 January —President Lukashenko signs Resolution of the National Security Council on Development of the Nuclear Energy Industry in the Republic of Belarus. 28 February —A decree On the Procedure and Terms for Selling Companies as Property Complexes of Unprofitable State-Owned Organizations to Legal Entities is published. 28 February —President Lukashenko holds a meeting that focuses on ways to improve the performance of the country’s construction industry.

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4 March — President Lukashenko signs a decree which abolishes the state’s special privilege (the “golden share privilege”) to participate in the management of economic entities. 6 March —The official website of the U.S. Department of Treasury publishes a review and explanations regarding the economic sanctions imposed on Belarus. 21 March —Deputy Head of the Ministry for Economic Development and Trade of the Russian Federation A. Belousov declares in Minsk that the price of Russian gas for Belarus in the second quarter will be $128 for 1,000 cubic meters. 27 March —Minsk hosts the International Conference “Development of Investment Processes in Belarus.” 1 April —The tax rate on income from transactions with shares and bonds, including bonds of legal entities, is reduced from 40% to 24%. 1 April —A decree, which provides for a preferential operating principle for commercial organizations created in settlements with the population not exceeding 50,000 people, comes into force. 1 April —New rules of payment for realtor services are put into force in Belarus. 14 April —President Lukashenko signs a decree to change and amend Decree No. 3 of 20 March, 1998 On Denationalization and Privatization of State Property in the Republic of Belarus. Pursuant to these changes and amendments, the restrictions on the circulation of shares of Belarusian open joint-stock companies created during denationalization and privatization will be gradually lifted in Belarus. 14 May —Russian Prime Minister Vladimir Putin announces the adoption of a final decision regarding the construction of BTS-2 (the Baltic Pipeline System) through which Russian oil will be transported to the West bypassing Belarus. 23 May —The State Duma of the Russian Federation ratifies the Intergovernmental Agreement with Belarus on measures to regulate trade and economic cooperation in the export of oil and petroleum products establishing import and export customs rates, which was signed on 12 January, 2007 in Moscow. 30 May —The fifth plenary session of the Advisory Council for Foreign Investments (ACFI) is held in Minsk. 1 June —Household electricity tariffs increase by 25% in Belarus. 11 June —Russian President Dmitry Medvedev signs the Federal Law on Ratification of the Intergovernmental Agreement with Belarus on Measures to Regulate Trade and Economic Cooperation in the Export of Oil and Petroleum Products. 11 July —President Lukashenko signs a decree On the Establishment of the Nuclear Power Department at the Energy Ministry of Belarus.

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14 July —The Council of Ministers approves a resolution pursuant to which 519 national enterprises are to be incorporated as joint-stock companies within the next three years. 24 July —According to the statement made by OJSC Beltransgaz press secretary Vladimir Chekov, the company is now repaying its debts to Gazprom. 13 August —The National Bank of Belarus raises the refinancing rate by 0.25 percentage points up to 10.5% per annum. 20 August —The Ministry of Economics raises tariffs for intra-republican transportation of cargoes by rail by 25%. 26 August —President Lukashenko signs a decree, according to which the Ministry of Statistics and Analysis is to be transformed into the National Statistical Committee (Belstat) which will report directly to the president, not to the Council of Ministers. 29 August —A presidential decree approves the key parameters of the Social and Economic Development Forecast for the Year 2009. 1 September —With its decision, the National Bank increases quotas for the presence of foreign capital in the Belarusian banking system from 25% to 50%. 1 September —For the third time this year, electric energy and heat tariffs for industrial consumers are raised in Belarus. 10 September —The Ministry of Economics cancels its resolution limiting the price markup on imported commodities to 30%. Instead it adopts a resolution which softens conditions for enterprises and organizations engaged in import operations. 15 October —The National Bank of Belarus raises the refinancing rate by 0.25 percentage points up to 10.75% per annum. 3 November —The International Rating Agency “Standard & Poor’s” (S&P) lowers the forecast of sovereign credit ratings for Belarus from “stable” to “negative.” 4 November —President Lukashenko signs a decree On Safety Guarantees for Households’ Deposits, and an ordinance On Some Issues Regarding the Financial Activity of Banks. 10 November —President Lukashenko signs a decree On Some Issues of Privatization of Republican Unitary Enterprises. 12 November —The National Bank of Belarus raises the refinancing rate by 0.25 percentage points up to 11.0% per annum “for the purpose of increasing the profitableness of household savings in national currency and further strengthening financial stability.” 13 November — Belarus Finance Minister Andrei Kharkovets and Russian Vice Premier and Finance Minister Alexei Kudrin sign an agreement in Moscow to grant Belarus a loan facility of $2 billion. 16 November —A resolution of the National Bank of Belarus restricting the possibility of economic entities purchasing foreign currency to make advance payments on import contracts comes into force. 446 CHRONOLOGY OF EVENTS FOR 2008 Economy

18 November —The Belarus Investment Forum is held in London. 1 December —The Belneftekhim Concern lowers wholesale and retail prices on oil products by approximately 10%. 1 December —The first-category tariff rate used to calculate labor payment in budgetary organizations is reduced by 15.4% to BYR 77,000. 10 December —The National Bank of Belarus decides to raise the refinancing rate to 12% beginning on 17 December. 12 December —Following the foreign currency tender on the Belarus currency stock exchange, the dollar exchange rate increases by 2 rubles and reaches the upper boundary of the currency target range established by the National Bank for 2008 (BYR 2,200). 15 December —The Government approves the list of joint-stock companies that are not covered by cancellation of the share movement moratorium. 19 December —President Lukashenko signs a decree On Some Measures to Improve Control and Supervision Activities in the Republic of Belarus. This decree actually imposes a moratorium on the checkout and inspection procedures for legal persons and private businessmen. 25 December —President Lukashenko signs a decree which changes and amends some decrees relating to entrepreneurial business regulation. 31 December —The International Monetary Fund publishes a press release with information on granting a $2.5 billion stabilization loan to Belarus.

Georgia

9 January —A bill On Global Competitiveness of the Financial Sector is presented to the Georgian cabinet by Prime Minister Lado Gurgenidze. 10 January —The Georgian Wine Producers Union addresses a letter to Gennady Onishchenko, head of the Russian Federal Service for Supervision of Consumer Rights and Human Welfare Protection (Rospotrebnadzor) expressing a readiness to collaborate with the Russian side in resolving problems related to Georgian wine exports to Russia. 24 January —The composition of the new cabinet is announced. 25 January —Five companies submit bids for the privatization of the state-owned stake in Georgian Railways Ltd. 28 January —Kakha Kaladze, a Georgian football defender playing for Italy’s AC Milan, establishes Progress Bank. 30 January —The National Bank of Georgia grants a banking license to KOR Bank, founded by the Abu Dhabi Group, an investment group based in the United Arab Emirates. 12 February —The Batumi Oil Terminal and the Batumi Port are transferred for management to the Romanian company Rompetrol.

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12 February —Efes Breweries International (EBI) signs an agreement to acquire 100% of the shares of Georgia’s largest brewing company Lomisi Ltd. 16 February —Georgia’s TBC Bank completes the purchase of 75% of the shares of the Azerbaijan credit institution SOA Credit. 15 March —The company SOCAR Energy Georgia obtains a permit to operate the Kulevi Oil Terminal from the Ministry of Economic Development of Georgia. 28 March —The company RAK Investment Authority (UAE) acquires 51% of the shares of JSC Poti Sea Port with over 3 million square meters of land adjacent to it. 11 April —Georgia places five-year Eurobonds in foreign markets worth a total of $500 million. The coupon rate is 7.5%. 18 April —Russian President Vladimir Putin authorizes the government to start consultations with Tbilisi on access to the Russian market for Georgian goods and to lift the remaining visa restrictions for Georgian citizens. 21 April —Pochta Rossii (Russian Post) resumes postal communications with Georgia, interrupted in October 2006. 28 April —Georgia suspends bilateral negotiations with official Moscow on Russia’s accession to the WTO. 1 May —Georgian Finance Minister Nika Gilauri tells journalists that out of a total of $500 million obtained from the Eurobond issue, $250 million is to go into two new extrabudgetary funds. 7 May — The Georgian government begins work to transfer some government institutions and organizations to the city of Kutaisi. 16 May —A new terminal opens in Kulevi (Western Georgia). 19 May —The European Commission has included Georgia among the three major third-country sources of counterfeit goods supplied to the European Union, says EU Commissioner for Taxation and Customs Union Laszlo Kovacs. 20 June —First British Bank starts operating in the Georgian banking market. 24 June —HSBC Bank Georgia begins serving customers in Georgia. 9 August —Azerbaijan oil exports through Georgian ports are suspended because of hostilities in Georgia. 12 August —A holiday is announced for Georgian banks in order to prevent panic over military operations. 16 August —The Batumi-Erevan train route is suspended because of damage caused to a bridge near Gori. 19 August —Restrictions on lending by Georgian commercial banks are lifted and they continue to operate as usual. 21 August —The Monetary Policy Committee of the National Bank of Georgia cuts its key policy rate (interest rate on one-week certificates of deposit) by 1 percentage point to 11% per annum. 448 CHRONOLOGY OF EVENTS FOR 2008 Economy

26 August —The Baku-Tbilisi-Ceyhan Oil Pipeline resumes operation after a three-week break. 1 September —The government of Kazakhstan abandons its plans for transit of oil products through Georgian territory. 3 September —Kazakhstan will not build a grain terminal in Poti. 30 September —The Turkish parliament ratifies the Agreement on Free Trade with Georgia. 1 October —The U.S. and Georgia begin talks on a free trade regime. 17 October —The Monetary Policy Committee of the National Bank of Georgia cuts its key policy rate to 10%. 29 October —Grigol Mgaloblishvili, former ambassador to Turkey, is appointed Georgia’s new prime minister in place of Lado Gurgenidze. 4 November —Khalik Bank Georgia starts operating in the country. 14 November —An agreement on the supply of Azerbaijan natural gas to Georgia is signed for a term of five years. 27 November —The Monetary Policy Committee of the National Bank of Georgia cuts its key policy rate to 9%. 29 November —A working group is set up to reform the Georgian statistical system. 3 December —RAK Investment Authority (UAE) acquires 49% of the shares of Poti Sea Port (for $65 million), thereby increasing its stake to 100%. 8 December —Cargolux, the Luxembourg-based cargo airline, starts flights to Georgia. 10 December —A Moscow-Tbilisi telebridge on the influence of the financial crisis on Russia and Georgia is held at the Tbilisi office of RIA Novosti news agency. 23 December —The lease agreement for Ortachal HPP is cancelled, and it is transferred to ENERGO PRO-GEORGIA for $25.2 million. 25 December —The Georgian parliament approves amendments to the 2008 State Budget. 25 December —The Monetary Policy Committee of the National Bank of Georgia cuts it key policy rate to 8%. 25 December —The Georgian government and Azerbaijan’s SOCAR Georgia Gas sign an agreement on the transfer to the latter of 30 regional gas distribution companies. 30 December —The Georgian parliament approves the State Budget for 2009.

Republic of Kazakhstan

14 January —The participants in the Kashagan project reach an agreement to increase the stake of JSC National Company KazMunaiGaz (NC KMG) to 16.81%. 15 January —An early warning center is established in Kazakhstan to detect impending economic and financial turmoil. 449 CENTRAL EURASIA 2008 Analytical Annual

6 February —NC KMG acquires the Batumi Oil Terminal and the Batumi Sea Port from Greenoak Holdings. 7 February —Under the action plan to implement the State Anti-Corruption Program for 2006-2010, a Financial Violations Research Center is set up at the Audit Committee. 20 February —For the first time in history, the closing price of oil on world exchanges rises above $100 per barrel. 12 March —The Ministry of Finance of Kazakhstan establishes a depository for the financial reports of all public companies in the country. 8 April —A government meeting decides to impose export duty on crude oil in the amount of $109.91 per ton. The decision is to go into effect 30 days later. (From 11 October, export duty on oil is raised to $203.8 per ton, and from January 2009 it is lowered to $139.79 per ton.) 22 April —Kazakhstan and Uzbekistan agree to establish a free trade area. 8 May —As a result of talks on 6-7 May, Kazakhstan Minister of Energy and Mineral Resources Sauat Mynbayev and Russian Minister of Industry and Energy Viktor Khristenko reach a common position on the issue of expanding the Caspian Pipeline Consortium (CPC) from 32 million to 67 million tons of oil per year. 14 May —Latvian commercial bank Baltikums opens a representative office in Kazakhstan, in the city of Almaty, as the first office in a projected international network of the bank’s representative offices. 19 May —Kazakhstan bans the export of oil products. 29 May —President Nazarbaev signs a law on support and promotion of oil transportation from Kazakhstan via the Caspian Sea. 1 June —New listing rules are established for the stock market. 11 July —World oil prices reach an all-time high of more than $147 per barrel. 21 July —Kazakhstan Prime Minister Karim Masimov announces plans to set up a Distressed Assets Fund. 29 July —The National Bank of Kazakhstan lowers reserve requirements: from 6% to 5% for domestic liabilities and from 8% to 7% for other liabilities. 5 August —Alnair Capital Holding JSC is granted the status of a major shareholder in some subsidiaries of Kazkommertsbank JSC; today the company in effect owns 25.15% of Kazkommertsbank’s ordinary shares. 6 August —Subsidiary Joint Stock Bank ABN AMRO Bank Kazakhstan JSC is renamed Subsidiary Bank RBS (Kazakhstan) JSC. 27 August —South Korea’s Kookmin Bank completes the purchase of a 23% stake in the capital of Bank CenterCredit JSC (BCC) for $500 million. 18 September —According to Minister of Energy and Mineral Resources Sauat Mynbaev, by 1 October, 2013, oil production from the Kashagan field should reach a commercial level: 450 thousand barrels per day. 450 CHRONOLOGY OF EVENTS FOR 2008 Economy

1 October —Bank Caspian JSC is to be rebranded as Kaspi Bank. 13 October —President Nazarbaev tells an enlarged government meeting that he has signed a decree on merging the Kazyna Sustainable Development Fund and the Samruk State Asset Management Company. They are to be united into a Sovereign Wealth Fund, whose board of directors is to be headed by the prime minister. 31 October —New agreements improving the economic conditions for Kazakhstan in the development of the Kashagan fields are signed in Astana. These include a second additional agreement (Sector B) to the North Caspian Production Sharing Agreement and a purchase and sale agreement increasing NC KazMunaiGaz’s stake in the Kashagan project. 1 November —The government passes a resolution to establish a Distressed Assets Fund (DAF). 3 November —JV TengizChevrOil (TCO) starts exporting oil from the Tengiz field through the Baku-Tbilisi-Ceyhan (BTC) oil pipeline. 7 November —The Russian Federal Property Management Agency (Rosimushchestvo) buys out Oman’s 7% share in the Caspian Pipeline Consortium (CPC). Earlier, on 30 October, President Nazarbaev made a proposal to the Russian side to buy out Oman’s share in CPC on a parity basis. 12 November —JSC International Bank Alma-Ata changes its name to JSC Home Credit Bank. 14 November —JSC NC KazMunaiGaz and Azerbaijan’s State Oil Company (SOCAR) sign an agreement on the basic principles of implementation of a trans-Caspian project known as Kazakhstan Caspian Transportation System (KCTS). 25 November —The government adopts an action plan to stabilize the economy and the financial sector for 2009-2010, which is to be implemented at a cost of at least KZT 2.2 trillion. 26 November —The parliament of Kazakhstan passes a new Tax Code, under which mineral tax on crude oil, including gas condensate, is to be levied at rates of 5% to 18%. 2 December —Chairman of the National Space Agency of Kazakhstan Talgat Musabaev reports that the space satellite KazSat-1 has become inoperative. 4 December —President Nazarbaev signs the new Budget Code of the Republic of Kazakhstan. 10 December —President Nazarbaev signs the Code of the Republic of Kazakhstan on Taxes and Other Mandatory Budget Payments (Tax Code), which regulates intergovernmental relations in the imposition, computation and payment of taxes and other mandatory budget payments, and also relations between the state and taxpayers (fiscal agents) relating to the performance of tax obligations. 11 December —The South Korean holding company Kookmin Bank increases its stake in Bank CenterCredit JSC from 23% to 30.5%; additional investments

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by this major foreign shareholder in the Kazakh bank total about $140 million. 22 December —The government of Kazakhstan together with the Financial Supervision Agency have developed an action plan to stabilize the economy and the financial system for 2008-2010, providing for a solution of problems in the real estate market. 26 December —The Kazakhstan Senate (upper house of parliament) summarizes the results of its work. During the year, it has adopted 105 laws, including 2 codes and 7 independent laws, 42 laws amending and supplementing effective laws. The senate has also ratified 54 international treaties and agreements.

Kyrgyz Republic

8 January —Prime Minister I. Chudinov signs a decree on developing the Kara-Keche brown coalfield base reserves. 8 January —Great Britain and Northern Ireland allocate a $15 million loan to Kyrgyzstan to restore social infrastructure in rural areas. 9 January —President Bakiev makes public the guidelines of Kyrgyzstan’s new economic policy. 14 January —The republic’s parliament approves a bill on Kyrgyzstan’s transition from a two-level to a three-level budgeting system. 18 January —The Government of Kyrgyzstan approves the Action Plan and the Draft Budget for 2008. 25 January —Japanese businessmen arrive in Kyrgyzstan to negotiate the launching of polycrystalline silicon manufacture. 31 January —A National Trade and Transport Facilitation Council of the Kyrgyz Republic is established in Kyrgyzstan. 1 February —A group of experts from China completes work on the Kyrgyzstan railway electrification project. 8 February —The Kyrgyz Republic Parliament approves a bill establishing the minimum wage at KGS 1,500 in the first reading. Employers will deduct taxes from this amount. 13 February —The Government approves the National Energy Program for 2008-2010 and the Fuel & Energy Complex Development Strategy until 2025. 14 February —The prime minister of Kyrgyzstan asks international sponsors to provide technical aid to improve the business and investment environment. 20 February —Two licenses for exploration work in the south of Kyrgyzstan are solemnly transferred to Alexei Miller—Gazprom JSC Chairman of the Board. 7 March —The Government develops a package of measures for 2008 to curb inflation in the republic. 14 March —The World Bank and the Government of Kyrgyzstan discuss issues dealing with electric power delivery to South Asia. 452 CHRONOLOGY OF EVENTS FOR 2008 Economy

9 April —Minister of Economic Development and Trade A. Zhaparov proposes a new program on the struggle against the shadow economy providing for: entrepreneur registration in a single state power body, transition to an hourly wage system in labor relations, a new fiscal policy, and capital legalization. 15 April —Minister of Industry, Energy and Fuel Resources S. Balkibekov presents the National Energy Program for 2008-2010 and the Fuel & Energy Complex Development Strategy until 2025 to the parliament deputies. 15 April —The U.S.-based Sentry Petroleum Ltd. oil and gas exploration company enters into a conditional joint venture agreement with Monitor Energy Limited on joint development of oil and gas fields in Kyrgyzstan. 18 April —The U.S. Chamber of Commerce (AmCham) initiates a discussion in Kyrgyzstan on the prospects and possibilities in the development of trade, transportation, and transit. 23 April —President Bakiev orders reform of the State Committee for Taxes and Levies to start. 26 April —The relatives of a well-known British billionaire of Indian origin, L. Mittal, laid the first symbolic stone in the construction of a ferroalloy factory in Kyrgyzstan. 6 May —The Directorate for the Small and Medium-Scale Power Generation Sector headed by ex-Prime Minister Felix Kulov is created in Kyrgyzstan. 21 May —The Government of Kyrgyzstan asks Poland to participate in the development of small hydropower stations on Tien Shan. 22 May —China and the National Bank of Kyrgyzstan discuss the possibility of making the yuan a convertible currency in Kyrgyzstan. 22 May —Kyrgyzstan and Latvia sign an agreement designed to support mutual investments. 29 May —Negotiations between Kyrgyzstan and Uzbekistan on the construction of a China-Kyrgyzstan-Uzbekistan railway approach the completion stage. 30 May —The Government approves a preliminary draft of the new Tax Code. 20 June —President Bakiev declares at a session of the Investment Council that there is still internal resistance in the state bodies to the reforms intended to improve the business environment in the republic. 23 June —Self-repayment principles are introduced in the energy sector. 24 June —One-year results of the Kyrgyzstan Development Strategy are summed up. Improvement of the socioeconomic situation in the republic and preservation of control over macroeconomic parameters are its major achievements. 20 August —Kyrgyzstan is willing to join the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC). This issue is going through the reconciliation procedures in Kyrgyz government. 453 CENTRAL EURASIA 2008 Analytical Annual

25 August —Scheduled rolling electricity blackouts begin in Kyrgyzstan. 3 September —The Islamic Development Bank lends $750,000 to Kyrgyzstan to ensure food security. 10 September —The World Bank’s Doing Business research program reveals that for the first time in its history Kyrgyzstan has entered the top ten and ranks third on list of the most active reformer states. 13 October —The World Bank allocates $5 million to Kyrgyzstan in emergency energy aid. 14 October —President Bakiev approves a Program for the Development of the Small and Medium-Scale Power Generation Sector until 2012. 20 October —The New Tax Code comes into effect in Kyrgyzstan. 29 October —The government of Kyrgyzstan approves privatization of Bishkekteploset JSC, Severelektro JSC, and Bishkek CHP as a unified package. 31 October —The government of Kyrgyzstan urgently introduces amendments to the 2009 national budget. 4 November —President Bakiev signs a decree on creating workgroups responsible for drawing up a long-term development strategy until 2020. 17 November —USAID allocates $300 thousand to Kyrgyzstan to ensure food security. 27 November —The government of Kyrgyzstan adopts the State Ownership Privatization Program for 2008-2012. 27 November —The World Bank’s Board of Directors approves an $11 million loan as a part of the Energy Emergency Assistance Project in the Kyrgyz Republic. 27 November —The Ministry of Economic Development and Trade works out a plan to counteract the influence of the world financial crisis on the Kyrgyz economy. 2 December —The Finance Ministry starts developing the Budget Code. 15 December —President Bakiev defines six tasks to be implemented by the republic’s banking sector: banking system liquidity maintenance, preservation of people’s trust in banks, attraction of foreign investments into the banking sphere, additional mobilization of internal resources, domestic manufacturer support, and enhancement of the bank capitalization level. 17 December —The Government defines five directions intended to preserve economic stability in the republic: banks, macroeconomic parameters, domestic demand, targeted social protection of the population, and energy and food security.

Republic of Moldova

1 January —A ban on some kinds of activity on the basis of entrepreneurial patents comes into force in Moldova.

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21 January —The Council of Ministers of the EU adopts Regulations on the Provision of Autonomous Trade Preferences to Moldova. 29 January —The Convention on Double Taxation Avoidance is signed between Moldova and Cyprus. 4 February —The first Moldovan passport with biometric data is issued to President Vladimir Voronin. 5-10 February —The multi-industry “Made in Moldova” exhibition is held in Chisinau under the patronage of the Government of Moldova and under the motto “Moldavian Mark—European Quality.” 6 February —The Moldovan and Russian Chambers of Commerce and Industry sign a new Economic Cooperation Agreement. 6 February —The Customs Service of Moldova launches the “E-channel”—a new electronic service designed for news distribution among economic agents and the public. 14 February —The Moldovan Parliament ratifies the Moldovan-British Convention on Double Taxation Avoidance and the Prevention of Fiscal Evasion with respect to taxes on income and capital. 20-21 February —Chisinau hosts the Viennese Economic Forum attended by 18 states. 29 February- —The wines of three Moldovan manufacturers receive awards at one of 4 March the most prestigious wine contests “Les Vinalies Internationales 2008.” They are included in the list of “1000 Best Wines of the World” (“1000 Vins du Monde”). 17 April —Moldova and Germany sign a •2.3 million-worth financial cooperation agreement. 26-27 June —Chisinau hosts the Moldovan-Ukrainian economic forum. 21 August —The Moldovan government issues its assessment of the damage inflicted on the republic by the 2008 summer floods. The damage is estimated at $120 million. 25 September —The capital of Greece Athens hosts an economic mission intended to promote Moldova’s mission and economic potential under the motto “Moldova Presents.” 2 October —President Voronin holds a session on reorganization of the National College for Winegrowing and Winemaking in Chisinau and its preparation for the winter. 10-11 October —“Moldova-Belarus” Business Cooperation Days are held in Chisinau and Orgeev. 18-19 October —The city of Ungen (Moldova) hosts the International Economic Forum under the motto “Regional Cooperation and New Business Opportunities.” 14 November —Moldova takes over the presidency of the Council of the CIS Heads of State. 14 November —The Russian Trade Mission in Moldova opens in Chisinau. 455 CENTRAL EURASIA 2008 Analytical Annual

15 November —The Shopping MallDova Entertainment and Commercial Center is officially opened in Chisinau. 17-20 November —The Moldovan-German economic forum under the motto “Moldova Presents” is held in Frankfurt-on-Main (Germany). 18 December —President Voronin holds a meeting devoted to the financial and economic situation in the republic. Prime Minister of Moldova Zinaida Greceanîi, President of the National Bank of Moldova, and other officials are present at the meeting. 24 December —President Voronin signs a decree on promulgation of the Law on the Accounts Chamber. 25 December —President Voronin participates in the annual meeting of the Accounts Chamber employees. 30 December —President Voronin signs a decree on appointing Sergey Pushcuce to the position of financial adviser to the president of the Republic of Moldova.

Republic of Tajikistan

1 January —New electricity tariffs are introduced in Tajikistan: the 250 kWh quota at a reduced tariff for residential customers is canceled and a uniform tariff— 3.2 dirams per 1 kWh—is established. At the same time, fixed communication prices are reduced from 16.5 to 4 dirams. 5 January —President Rakhmon submits laws On State Registration of Real Estate Rights and Transactions and On Mortgage, along with amendments to the Tax Code, to the parliament for “fine tuning.” 15 January —A special government meeting discusses the energy situation in the republic. 20 January —Power Unit No. 1 is put into operation at Sangtuda Hydropower Plant-1. 22 January —President Rakhmon and World Bank Regional Director Annette Dixon discuss in Dushanbe issues regarding the creation of a consortium on Rogun HPP completion and debt repayment to Dehkan farms involved in cotton growing. 22 January —The government decides to cut off electric power supplies to Tajik industrial enterprises, apart from those of vital significance for the republic’s economy. 28 January —The presidents of Tajikistan and Turkmenistan make a decision to boost Turkmen electric power deliveries to Tajikistan. 29 January —500,000 kW of electric power a day is now delivered to Tajikistan from Kyrgyzstan. 5 February —President Rakhmon makes custom staff reshuffles. 7 February —The supply of daily electricity to residential customers in Dushanbe is reduced (all residential buildings are de-energized from 10 p.m. until 5 a.m.). 10 February —During President Rakhmon’s official visit to Iran the parties agree to reduce the construction period of Sangtuda Hydropower Plant-2 and build a new 456 CHRONOLOGY OF EVENTS FOR 2008 Economy

1,000 MW hydropower plant, two new plants, a power transmission line, a railway, and a motorway from Tajikistan through Afghanistan to Iran. The two presidents also discuss black oil delivery issues. 19 February —The first of two planes from the Russian Emergencies Ministry arrives in Dushanbe with humanitarian cargo. 19 February —President of Kazakhstan Nursultan Nazarbaev informs President of Tajikistan Emomali Rakhmon about his decision to send 1,000 tons of black oil to Tajikistan, as well as diesel fuel, foodstuffs, and basic necessities worth about $3 million. 20 February —The European Commission decides to provide a 750.000 humanitarian aid package to Tajikistan. 20 February —The Government of Turkey sends a batch of foodstuffs to Tajikistan. 24 February —Uzbekistan once again cuts off its electric power supplies to Tajikistan. 27 March —President Rakhmon and World Bank Vice-President Shiego Katsu discuss issues dealing with Tajik cotton growers’ debts and preparation of the feasibility report regarding construction of the Rogun HPP. 15 April —The government approves the charter and the management structure of Rogun HPP Open Joint-Stock Company. 21 April —President of Tajikistan Emomali Rakhmon discusses cooperation issues with a delegation of the EBRD Board of Directors. 23 April —The meeting of a special task force for regional cooperation in the sphere of electrical energy of the Central and South Asian countries opens in Dushanbe. 28 April —President Rakhmon and IMF Executive Director T. Moser discuss bilateral cooperation issues. 29 April —At the regular session of the government, two free economic areas are established. 30 April —President Rakhmon and Head of the International Monetary Fund Mission Carlos Pinerua discuss prospects of bilateral cooperation between IMF and the National Bank of Tajikistan. 1 May — President Rakhmon attends the launching of two units of the 120 MW Heat and Power Plant and the introduction into operation of the reconstructed Tajikkhimprom electrolysis workshop (Yavansky area). 1 May — Electricity tariffs are raised in the republic. 10 June —OAO Gazprom of Russia and Minenergoprom of Tajikistan sign an Agreement on the General Principles of Geological Survey at Oil and Gas Fields in the Republic of Tajikistan. 17 June —President Rakhmon signs a decree on increasing salaries and pensions. 20 June —Power Unit No. 2 is officially put into operation at Sangtuda Hydropower Plant-1. 1 July — A session of the Advisory Council under the Tajik President for Improvement of the Investment Climate is held in Dushanbe. 457 CENTRAL EURASIA 2008 Analytical Annual

25 July — President Rakhmon meets with IMF representatives. 25 July —President Rakhmon declares a moratorium on all kinds of checks and inspections of small and medium businesses. 12 September —The Tajik leadership toughens up restrictions on electric power supplies. 17 October —The government appropriates $30,480,000 for the second phase of the Dangara Valley Irrigation Project. 17 October —Dushanbe hosts Tajik-German negotiations on social and economic cooperation. 29 October —The parliament of Tajikistan approves the Regulations on the Sogd and Panj free economic areas. 1 November —Interchange flows of Turkmen electric power to Tajikistan begin. 4 November —President Rakhmon and Head of IMF Mission for Tajikistan A. Shimmelpfennig discuss bilateral cooperation issues. 5 November —Power Unit No. 3 of Sangtuda Hydropower Plant-1 is put into operation. 5 November —The 2009 state budget is approved in Tajikistan. 20 November —Construction works at the Istiklol tunnel are completed. 1 December — Sangtuda Hydropower Plant-1 generates its first billion kWh of electric power. 11 December — Tajikistan becomes a new member of the Eurasian Development Bank. 23 December —The term of the RT Law on Amnesty of Citizens and Legal Entities of the Republic of Tajikistan in Connection with Legalization of Property is extended for another six months.

Turkmenistan

11 February —Prices for gasoline are raised; however, now Turkmen car owners can receive free gasoline in amounts established by the government. 26 February —Turkmen-German Economic and Energy Forums are held in Ashghabad. 5 March —The Debt and Financial Claim Satisfaction Agreement is signed between the governments of Azerbaijan and Turkmenistan. 10 March —President Berdymukhammedov begins his visit to Uzbekistan. 11 March —Executives of national oil and gas concerns of Uzbekistan, Turkmenistan, and Kazakhstan announce their decision to sell gas at European prices. 27 March —An international exhibition called “Searching, Prospecting, and Developing Gas Fields and Mineral Resources in Turkmenistan” opens in Ashghabad. 7 April —A new licorice root extract procurement plant is put into operation in Turkmenabat. 17 April —An international conference called “Oil and Gas of Turkmenistan-2008” opens in London. 458 CHRONOLOGY OF EVENTS FOR 2008 Economy

1 May —The Central Bank establishes an official unified exchange rate. 27 May —Turkmenistan and the EU sign a Memorandum of Cooperation on energy. 1 June —Turkmenistan approves regulations for inter-bank foreign currency exchange and exchange trade rules. 3 June —Negotiations between Alexei Miller, Chairman of Gazprom’s Management Committee, and heads of Turkmen oil and gas sector are held in Ashghabad. The negotiations focus on Turkmen natural gas price formation principles. 18 June —The Tripartite Committee for Caspian Gas Pipeline Construction meets in Ashghabad. 23-24 June —A forum entitled “Perspective Areas of Turkmen-Russian Cooperation” is held in Ashghabad. 28 June —Turkmenistan and Tatarstan sign an intergovernmental agreement on trade and economic, scientific and technical, and cultural cooperation. 4 July —Negotiations between Russian and Turkmen Presidents D. Medvedev and G. Berdymukhammedov are held in Ashghabad. 5 July —A training-service center of the Russian company KAMAZ opens in Ashghabad. 20 July —The Galla Bairami Holiday (Harvest Festival) is celebrated in Turkmenistan. 23 July —The first Turkmen-Croatian business forum is held in Ashghabad. 7 August —An international exhibition entitled “Turkmenagro-2008” opens in Ashghabad. 20 August —The new Law on Hydrocarbon Resources comes into force. 27 August —The President of Turkmenistan replaces executives of oil and gas agencies. 29-31 August —A Russian national exhibition entitled “Economic Growth and Mutually Advantageous Partnership” is held in Ashghabad. 31 August —A branch of the Russian Gubkin State Oil and Gas University opens in Ashghabad. 9 September —An oil and gas exhibition of Turkmenistan and Azerbaijan opens in Baku. 8 October —President Berdymukhammedov meets Head of the Russian Presidential Administration Sergey Naryshkin. 9-10 October —A session of the Turkmen-Korean Cooperation Commission is held in Seoul. 14 October —The British Company Gaffney, Cline & Associates Ltd. confirms gas reserves in eastern Turkmenistan. 24 October —A bill On the State Budget of Turkmenistan for 2009 was unanimously approved by the Turkmen Parliament. 7 November —President Berdymukhammedov meets with South Korean business representatives; following the meeting a package of bilateral documents is signed.

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16 November —President Berdymukhammedov visits the Siemens Forum in Munich. 19 November —An international exhibition called “Oil and Gas of Turkmenistan-2008” opens in Ashghabad. 26 November —The Cabinet of Ministers of Turkmenistan holds its meeting focused on protecting the national economy against the consequences of the world financial crisis. 29 November —A tripartite meeting of presidents of Azerbaijan, Turkmenistan, and Turkey is held in Turkmenbashi. The meeting is devoted to interaction in the gas sphere. 15 December —Turkmen cotton growers report to the government that they have yielded more than 1 million tons of raw cotton to the state. 25 December — Gazprom and Turkmenistan agree on basic conditions for the construction of the Turkmen sector of the Caspian Gas Pipeline.

Ukraine

25 January —Geneva hosts the final session of the working group on Ukraine’s accession to the World Trade Organization. The updated Draft Report of the Working Group on Ukraine’s accession to the WTO, as well as other documents, is approved at the session. 5 February —The Protocol on Ukraine’s accession to the World Trade Organization is signed at the WTO General Council Session. 10 April —The Verkhovna Rada of Ukraine adopts the Law on Ratification of the Protocol on Accession of Ukraine to the WTO. 16 April —The Ministry of Foreign Affairs of Ukraine notifies the WTO’s director general about the completion of the domestic procedures relating to Ukraine’s accession to this organization. 16 May —Ukraine receives official WTO membership. Hence, the long period of transformation of the external economic policy of the country comes to an end. September —A foreign exchange deficit emerges in the forex market. It has been caused by reduced revenues from residents’ export activities, difficult access to the world financial markets, and curtailed foreign loans. 31 October —The Memorandum of Economic and Financial Policies is adopted. According to this Memorandum, the National Bank of Ukraine announces its strong commitment to the IMF to establish a flexible foreign exchange rate.

Republic of Uzbekistan

2 January —The new Tax Code of Uzbekistan comes into force. 2 January —Gazprom and Uzbekistan agree a price for gas to be purchased by Russia in 2008. 460 CHRONOLOGY OF EVENTS FOR 2008 Economy

8 January —The Asian Development Bank (ADB) grants a $75.3 million loan to Uzbekistan for developing its key highway, which is part of the Central Asian Regional Transport Corridor. 24 January —A list of 17 investment projects worth a total of about $1 billion to be funded by members of the Arab Coordination Group (ACG) is approved by presidential order. 7 February —Russia’s Promsvyazbank extends a $86 million line of credit for a term of one year to UzDaewooAuto-Saratov, the largest distributor of the company Uz- Daewoo. 7 February —Russia and Uzbekistan conclude an agreement on integrating the Chkalov Tashkent Aircraft Production Company into the Russian United Aircraft Corporation (UAC). 21 February —A presidential decree On Additional Measures to Liberalize the Terms and Provide Guarantees for Retail Deposits at Commercial Banks is published in the media. 22 February —Uzbekistan determines the priorities in new oil and gas projects for 2008. 22 February —Foreign investors may obtain new oil and gas contracts in Uzbekistan totaling over $600 million. 3 March —A presidential decree On Raising Wages, Pensions, Grants and Social Security Benefits is published in the media. 4 March —In order to improve the mechanism giving businessmen access to raw material resources, the Cabinet of Ministers passes a resolution On Improving the Mechanism for Exchange Sale of Monopoly Products with Due Regard for Seasonal Demand. 29 March —An Uzbek-Vietnamese business forum is held in Tashkent. 16 April —Uzbekistan launches a State Program for the Reclamation of Irrigated Lands for 2008-2012. 21 April —Uzbekistan laws On the Protection of Consumers and On Advertising are amended and supplemented. 25 April —SJSC Uzbekenergo and the Ministry of Energy and Water of Afghanistan sign a memorandum of understanding. Uzbekistan is to triple electricity supply to Afghanistan. 10 May —Uzbek President Islam Karimov receives Korean Air Chairman Yang-Ho Cho at his Oksaroi Residence. 12 May —A meeting between Uzbek Prime Minister Shavkat Mirzieev and South Korean Prime Minister Han Seung-soo is held in Uzbekistan. During a visit by a South Korean government delegation led by Prime Minister Han Seung- soo, a $90 million interbank agreement is signed between Asaka Bank and the Export-Import Bank of Korea. 16 May —A mission of the International Monetary Fund in Uzbekistan holds discussions with Uzbek officials as part of 2008 consultations under Art IV of the IMF’s Articles of Agreement. The IMF mission notes the positive trends in the monetary sector. 461 CENTRAL EURASIA 2008 Analytical Annual

21 May —The president of Uzbekistan signs a resolution On Additional Measures for Further Reform and Development of the Insurance Market. From 2010, new minimum capital requirements are to be established for insurance companies. 29 May —Businessmen from Uzbekistan and the United Arab Emirates hold a business forum in Tashkent. 30 May —The World Bank has developed a new strategy of assistance to Uzbekistan and is to provide a $68 million loan for the development of agriculture in the republic. 18 June —USAID launches a project of assistance to agriculture in Uzbekistan (AgLinks). 27 June —The government of Uzbekistan concludes a $45 million contract with China National Chemical Engineering Group Corp (PRC) for the construction of a new interregional water supply system in the Ferghana and Andijan regions. 1 July —The construction of a gas pipeline to China begins in Uzbekistan. The project, whose total cost is over $2 billion, provides for the construction of two 500 km lines. 2 July —President Karimov issues an order authorizing the Korea National Oil Corporation (KNOC) to conduct geological exploration work in 2008-2012 at investment blocks worth a total of $62.5 million. 10 July —Tashkent hosts a business seminar on the attraction of foreign investment to the Uzbek market and the role of portfolio investors, organized by the National Association of Investment Institutions (NAII) jointly with the companies Ansher Capital and Ansher Fund Management. 15 July —President Karimov signs a resolution On Additional Measures to Stimulate the Implementation of Innovative Projects and Technologies in Production. 20 July —One of the world’s major rating agencies Fitch Ratings assigns the following ratings to State Joint Stock Bank Asaka: long-term issuer default rating (IDR) “B” with a stable outlook; short-term IDR “B”; support rating “4”; and support rating floor “B.” 24 July —President Karimov signs a resolution On Measures to Improve the Process of Attraction and Utilization of Foreign Investments and Loans. 30 July —An Uzbek-Iranian business forum is held in Tashkent. 15 August —Agreements between Japan and Uzbekistan on the liberalization, promotion and protection of investments are signed at the Uzbek Foreign Ministry. 18 August —Negotiations between the National Bank for Foreign Economic Activity of Uzbekistan and Exim Bank of India result in the signing of an agreement on a $10 million line of credit. 22 August —Uzbekistan and Vietnam agree on the development of bilateral cooperation in oil and gas exploration with the aim of signing an agreement on oil and gas exploration in Uzbekistan and transfer of coal-to-liquid technologies. 2 September —Russia and Uzbekistan agree a pricing formula for Uzbek gas acquired by Russia. The two countries reach an agreement on the construction with 462 CHRONOLOGY OF EVENTS FOR 2008 Economy

Russian participation of a new gas pipeline in the territory of Uzbekistan for the export of Turkmen and Uzbek gas. 17 September —Tajikistan and Uzbekistan agree on the transit of Turkmen electricity through Uzbekistan’s energy system. 19 September —Fixed retail prices for flour, vegetable oil and bread are established in Uzbekistan. 22 September —The specialized association Uzsuvenergo of the Ministry of Agriculture and Water of Uzbekistan completes the delivery of equipment from China for the needs of HPP-2 on the Andijan Reservoir and a small hydro plant on the Akhangaran Reservoir. 2 October —President Karimov signs a resolution On the Investment Program of the Republic of Uzbekistan for 2009. According to this program, it is planned to utilize foreign investment in 86 investment projects totaling about $1.8 billion. 8 October —The government of Uzbekistan and the World Bank sign an agreement on a $67.96 billion credit for the second phase of the Uzbekistan Rural Enterprise Support Project (RESP II). 14 October —An Uzbek-German business forum and cooperation exchange are held at the International Business Center in Tashkent. 16 October —The national holding company Uzbekneftegaz and China National Petroleum Corporation (CNPC) sign the Memorandum and Articles of Association of the joint venture company Mingbulakneft set up for the supplementary exploration and development of the Mingbulak field in Namangan Region. 21 October —A presidential decree On Measures to Optimize Crop Area and Increase the Production of Food Crops is published in the media. 22 October —The president of Uzbekistan signs the decree On Raising Wages, Pensions, Grants and Social Security Benefits. 4 November —The Asian Development Bank grants a $30 million loan to Uzbekistan for improving the supply of drinking water and utility services to Surkhandarya Region in southern Uzbekistan. 6 November —Uzbek and Bulgarian businessmen meet in Tashkent within the framework of a state visit to Uzbekistan by Bulgarian President Georgi Parvanov. 17 November —A representative business delegation from the Islamic Republic of Iran arrives in Uzbekistan. It includes representatives of large Iranian companies operating in the chemical, metallurgical, agricultural, textile and food industries and other sectors of the economy. 21 November —Uzbekistan, Afghanistan and the Asian Development Bank sign a memorandum of understanding on expanding trade and economic opportunities through the development of railway infrastructure. 3 December —A presidential decree On Creating a Free Industrial Economic Zone in Navoi Region is published in the media. 4 December —The upper house of the Uzbek parliament approves the state budget for 2009 with a deficit of UZS 491.6 billion or 1% of projected GDP. 463 CENTRAL EURASIA 2008 Analytical Annual

15 December —A meeting of the EurAsEC Interstate Council at the level of heads of government grants Uzbekistan’s request for suspension of its membership in the organization. 20 December —A new joint venture with General Motors in engine manufacturing is set up in Uzbekistan. The construction of a new plant, General Motors Powertrain Uzbekistan, begins in the republic. 22 December —An Uzbek-Turkish business forum is held in Tashkent within the framework of a visit to Uzbekistan by a representative business delegation from the Republic of Turkey led by Foreign Trade Deputy Undersecretary Ulker Guzel.

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RELIGION

Afghanistan

4 January —At a meeting with President Karzai the clergy demands that the practice of “encouraging Christian missionary groups” be discontinued because, they assert, they are engaged in converting Muslims to Christianity; the clergy also favors the restored practice of public executions. 22 January —The court of Mazar-i-Sharif sentences journalist Sayed Parvez Kambaksh to death by hanging on accusations of blasphemy in the form of an Internet article he published. 2 February —The Senate annuls this death sentence. 7 February —At a joint press conference with U.S. Secretary of States C. Rice and UK Foreign Secretary D. Miliband in Kabul, President Karzai, referring to the Kambaksh case, promises that justice will triumph. 2 March —A mass rally against the cartoons mocking the Prophet Muhammad that appeared in Danish newspapers is held in Mazar-i-Sharif. The crowd sets Danish and Dutch flags on fire and demands that the contingents of both countries be pulled out of the country. 3 March —During his visit to Denmark Foreign Minister of Afghanistan Rangin Dadfar Spanta condemns the cartoons and says that freedom of speech should not “humiliate a billion Muslims.” 5 March —A huge rally takes place in Kabul; over 200 parliamentary deputies come to protest against the cartoons under the slogan “Death to the Enemies of Islam!” 9 March —Thousands of Afghan students block the Kabul-Jalalabad highway and threaten to attack foreign troops in protest against the cartoons. 18 March —Concerned about the potentially negative response to the showing in Denmark of a video about the Prophet Muhammad, NATO commanders turn to President Karzai for support. 465 CENTRAL EURASIA 2008 Analytical Annual

29 March —The lower chamber of the parliament passes a resolution that bans TV entertainment programs that can be described as “non-Islamic.” 1 April —The Taliban announces that it is launching military operations against the Danish soldiers in response to the showing of an “anti-Islamic” film by a Danish politician. 22 April —The Ministry of Information and Culture orders private TV channels to remove “anti-Islamic” programs, including Indian soap operas. 22 April —President Karzai announces that he supports the government’s ban of Indian soap operas as contradicting the national culture. 23 April —The National Union of Journalists of Afghanistan issues a statement that condemns the ban. 23 April —The government of Denmark evacuates its diplomats from Afghanistan and Algeria because of the threat to their security. 2 August —The Council of the Ulema of Afghan Refugees calls on the United States to recognize its defeat in Afghanistan and pull the NATO forces out of the country. 21 October —The Court of Appeal of Afghanistan sentences journalist Parvez Kambaksh to 20 years in prison, thus annulling his previous death sentence, for publishing an article found on the Internet saying that the Prophet Muhammad ignored the rights of women.

Republic of Armenia

13 February —Catholicos of All Armenians Garegin II receives the newly appointed Ambassador Extraordinary and Plenipotentiary of the Islamic Republic of Iran to the Republic of Armenia. 5 March —Catholicos of All Armenians Garegin II and Catholicos of the Great House of Cilicia in Holy Echmiadzin meet Vatican State Secretary Cardinal Tarcisio Bertone to discuss continued cooperation between the Armenian Apostolic and the Catholic churches. 8 March —Catholicos of All Armenians Garegin II receives members of the French l’Association Réalités et Relations Internacionales headed by Chairman Jean Michel Fauve. 10-13 April —An AAC representative attends the annual meeting of the Church and Society Commission of the Conference of European Churches in Prague. 14-17 May —An AAC representative attends a sitting of the European Ecumenical Round Table held in the city of Ohrid (Macedonia) to sum up what has been done to fight HIV/AIDS, trafficking, as well as the problems of peacekeeping, social and diaconal questions and projects. The next sitting will take place in Armenia in 2009.

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6 July —Catholicos of All Armenians Garegin II receives Metropolitan of Bia³ystok Archbishop Edward Ozorowski from Poland. 8-10 July —The Round Table of Armenia Foundation of the World Council of Churches organizes an educational program within the Priests against Trafficking project in Tsakhkadzor (Armenia). 16-18 July —An AAC representative attends an international meeting dedicated to the inter-religious dialog organized by the Muslim World League (Madrid). 26-28 July —An AAC representative attends an international meeting on the safety of holy places in conflict zones held in Trondheim (Norway). 13 September —Catholicos of All Armenians Garegin II receives Speaker of the Senate of the Czech Republic Pøemysl Sobotka. 24-28 September —The AAC takes part in the 7th Congress of the European Christian Environmental Network on the main challenges of the climate changes in Milan. 7-9 October —The Round Table of Armenia of the World Council of Churches together with the AMCOR international organization and Democracy Today NGO carry out an educational program “Let’s Oppose Trafficking Together” within the Priests against Trafficking program in Tsakhkadzor. 15 October —Environmental protection is discussed in Holy Echmiadzin. 20-21 October —Demographic issues and development of religious organizations are discussed in Istanbul. 22 October —Catholicos of All Armenians Garegin II receives a delegation of the Martin Luther University (Germany). 22 October —Catholicos of All Armenians Garegin II receives a delegation headed by Deputy U.N. Secretary General S. Diara. 30 October- —The AAC takes part in the 40th Conference of European Churches— 2 November the 4th Meeting of the Community of Protestant Churches in Europe in Vienna. 31 October —The Cooperation for Democracy public organization initiates, together with the OSCE office in Erevan, a seminar on Religion in a Law-Governed Society Today: Freedom of Conscience and Religion in Armenia.

Azerbaijan Republic

30 January —The State Committee organizes a seminar for journalists writing for the press. 5 February —A Lutheran church is opened in Khanlar. 11 February —The Internews Azerbaijan public association and Yeni Ndsil journalist association organize a seminar on Covering Religious Subjects in the Three Media.

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23 February —Protests against the Prophet Muhammad Cartoons take place in the Nardaran settlement. 27-28 February —An international seminar on Islamic Finances and their Potential in Azerbaijan is held. 4 March —A seminar on The Presidential Election 2008: the Faithful Voters is held. 6-9 March —State Secretary of the Vatican Cardinal Tarcisio Bertone visits Azerbaijan. 7 March —A ceremony to officially open the Church of the Immaculate Conception of the Blessed Virgin Mary is held in Baku. 25 March —The International Crisis Group publishes its report on Azerbaijan: Independent Islam and the State. 8 April —Deputy Chairman of the Administration of the Muslims of the Caucasus S. Musaev is awarded the Shokhret Order. 29 April —The book Heydar Aliev and the National-Spiritual Values is presented in the Gulistan Palace in Baku. 3 July —CBM Chairman A. Pashazadeh, head of the Baku-Caspian Eparchy of the Russian Orthodox Church Father Alexander, and Head of the Community of the Mountain Jews S. Ikhiilov meet President Medvedev in Moscow. 11-20 July —The Diplomatic Academy of Azerbaijan organizes a summer school called Islam in Contemporary International Relations. 28-31 July —The CBM chairman takes part in the international conference on Loving God and Neighbor in Word and Deed: Implications for Christians and Muslims organized by Yale University (the U.S.). 17 August —A terrorist act is committed in the Juma mosque (the Narimanov District of Baku). 19 September —The U.S. Department of State publishes its Freedom of Religion 2008 report. 5-8 November —An international symposium called Beyond Religious Differences: Islamophobia and Other Forms of Discrimination based on Religion or Belief: Consequences for Young People and Youth Work Responses is held. 20-23 November —U.S. Special Envoy to the OIC Sada Cumber arrives in Azerbaijan to study the local religious situation. 9 December —The CBM chairman A. Pashazadeh takes part in the burial ceremony of Patriarch of Moscow and All Russia Alexiy II.

Republic of Belarus

9 January —A court sitting in Baranovichi examines the case against the New Generation Church accused of misuse of the land on which the church stands.

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25 January —Patriarchal Exarch of Belarus Metropolitan of Minsk and Slutsk Filaret initiates a public morality council during his meeting with President Lukashenko. 4 February —Hegumen Josaphat (Morza), inspector of the Minsk Spiritual Academy and Seminary and lecturer of patrology and liturgy, is appointed rector of the Minsk spiritual schools. 6 February —The Lelchitsy District court examines the case of Baptist Victor Evtukhov who is accused of “other believers … coming to his house to pray.” The local authorities demand that he remove the sign from his house that identified it as a prayer house. 20-21 February —Minsk hosts an international theological-practical seminar “Modern Missionary-Catechizing Methods of the Orthodox Church.” 26 February —Funding of restoration of the Minsk mosque resumes. In 1949 it was closed down and turned into a club of sailors of the Voluntary Alliance of Cooperating with the Fleet. In 1962 the building was liquidated. Rebuilding began in 2004 and was halted because the Muslim World League discontinued funding for political reasons. 26 February —The state structures of the Republic of Belarus receive a Collective Address of the Citizens about violations of freedom of conscience with over 50 thousand signatures on 3,442 pages. 1 March —A prayer TV bridge between Minsk and the Apostolic Capital is organized in the Archcathedral church of the Name of the Blessed Virgin Mary in Minsk for the first time in the history of the Catholic Church in Belarus in connection with the 6th European Day of University Students. 4 March —The Constitutional Court of the Republic of Belarus refuses to consider the Collective Address of the Citizens about violations of freedom of conscience. 24 March —On the second day of Easter according to the Catholic calendar President Lukashenko visits the Archcathedral church of the Name of the Blessed Virgin Mary in Minsk and meets Archbishop Metropolitan Tadeusz Kondrusiewicz. 25 March —An on-line conference with well-known Greek-Catholic priest and spiritual leader of Belarusian emigration Alexander Nadson is held. 26 March —The Chamber of Representatives of the National Assembly of the Republic of Belarus gives a negative response to the Collective Address of the Citizens about violations of freedom of conscience and refuses to discuss amendments to the Law on the Freedom of Conscience and Religious Organizations. 8 April —President Lukashenko refuses to react to the Collective Address of the Citizens or send suggestions to the Constitutional Court regarding amendments to the Law on the Freedom of Conscience and Religious Organizations. 6 May —The Institute of Theology of the Belarusian State University hosts a theological conference within the project “Reconciliation in Europe” attended

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by Patriarchal Exarch of Belarus Metropolitan of Minsk and Slutsk Filaret, Metropolitan of Minsk-Mohilov Tadeusz Kondrusiewicz, Archbishop of Wrocùaw and Szczecin Jeremiah, Bishop of the Evangelical Church of Germany Claus Wollenweber, and representatives of the Orthodox, Catholic, and Greek-Catholic churches of Belarus and Ukraine. 21 May —At a meeting with journalists Leonid Guliako, Plenipotentiary for Religious and Ethnic Affairs of the Republic of Belarus, confirms information that the republic is going to sign a concordat with the Vatican. 17 June —The 3rd International Festival of Christian films and TV programs Magnificate-2008, presenting 35 films from 9 countries, opens in the town of Glubokoe (Vitebsk Region). 18-22 June —Vatican Secretary of State Cardinal Tarcisio Bertone visits the Republic of Belarus. 20 June —President Lukashenko invites His Holiness Pope Benedict XVI to visit Belarus at any convenient time. 30 June —The Greek-Catholic St. Joseph Center opens in Minsk. 5 July —The authorities of the Grodno Region interfere with the intention of three Protestant communities to carry out the ceremony of baptism in the open. 7-8 July —The Belarusian media inform that Benedict XVI accepted the invitation to visit Belarus but Archbishop Tadeusz Kondrusiewicz refutes this information. 21 July —A decision on opening an Orthodox grammar school in Vitebsk is passed. 31 August —An Orthodox grammar school is opened in Bobruisk. 4 September —Twenty-seven parishioners of St. Joseph Catholic parish begin unlimited abstinence in Minsk to return the Bernardin covenant and Roman Catholic church, as well as monuments of the Baroque architecture of the 17th century, to the believers. 20 September —The 1st Assembly of the Christian Social Service Mission completes its work at the Kinonia house of inter-church communication. 24 September —President Lukashenko announces that he would like Patriarch of Moscow and All Russia Alexiy II and Pope Benedict XVI to meet in his country. 2 October —The International Public Association SS Methodius and Cyril Christian Educational Center, the Belarusian Exarchate of the Russian Orthodox Church, and the National Academy of Belarus hold a conference called “The Prospects of a Dialog between Science and Religion in the Republic of Belarus.” 8 October —The U.S. Institute of Religion and Public Policy recommends that President George W. Bush include Belarus on the list of countries in which violations of freedom of conscience cause “special concern.”

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16 October —Border guards detain Bishop of Full Gospel Christian Union Veniamin Brukh at Minsk-2 airport and isolate him as deported; he is not informed about the reasons for his detention and deportation. 23-25 October —Primate of the Russian Orthodox Church His Holiness Patriarch of Moscow and All Russia Alexiy II visits Belarus. 10 November —At a press conference gathered on the occasion of his first year as Metropolitan of Minsk-Mohilov, Archbishop Tadeusz Kondrusiewicz expresses his concern about the authorities’ interference in the life of the Belarusian Catholic Church. 11 November —The St. Efrosinia regular pedagogical readings open in Minsk to discuss the Traditions of Orthodox Spirituality in Moral Education and Prevention of Family Troubles. 19 November —The Supreme Economic Court resumes examination of the case related to the building of the Minsk Protestant Church New Life. 21 November —Alexander Nadson, Apostolic visitator for the Belarusian Catholics abroad, visits Belarus in connection with the 50th anniversary of his clerical activities. 17 December —Three Polish Roman Catholic priests of the Grodno Diocese are not permitted to continue their religious activities in Belarus in 2009. 24 December —Priest of the Church of the Nativity of the Blessed Virgin Mary in Borisov Zbigniew Grygorcewicz leaves the parish because his residence permit is not extended.

Georgia

18 February —The statement of Catholicos-Patriarch of Georgia Ilia II in which he calls on Russia to abandon the tone it is using when talking about possible independence for Abkhazia and South Ossetia is made public. Late May —The Georgian Eparchy of the AAC protests against the iron railings being built around the disputed church on Leselidze Street in Tbilisi. 23 May —The prime ministers of Georgia and Armenia discuss the problem of the disputed church at the CIS summit in Minsk. 9 July —Patriarch of Moscow and All Russia Alexiy II sends a letter to Catholicos- Patriarch of All Georgia Ilia II in which he regrets the tension between the two countries. 8 August —In connection with the first armed clashes between Russia and Georgia, Patriarch of Moscow and All Russia and the Catholicos-Patriarch of All Georgia publish their statements in which they call on the sides to start peace talks. 11 August —Pope Benedict XVI calls for an immediate cease-fire and Russian-Georgian talks. 471 CENTRAL EURASIA 2008 Analytical Annual

26 August —Catholicos-Patriarch of All Georgia Ilia II asks the president and the prime minister of Russia not to sign the State Duma’s decision on independence for Abkhazia and South Ossetia. 9-10 October —The International Center of Christian Studies at the GOC and the Gelati Academy of Sciences organized the 3rd International Symposium “A Dialog of Civilizations—Education and Upbringing as an Instrument of Cooperation.” 23 October —The Georgian Eparchy of the AAC demands that the “encroachments on Armenian cultic objects” be discontinued. 16 November —Tension rises around the disputed church on Leselidze Street in Tbilisi as a group of Orthodox believers arrives to tidy up the courtyard. 19 November —The Armenian Foreign Ministry demands an explanation from the Georgian ambassador about the situation involving the disputed church. 8 December —The Georgian Patriarchy publishes its statement in which it expresses its amazement at the growing tension in the Armenian and international press after the sides had agreed to set up a joint commission. 10 December —At a personal meeting with Prime Minister of Armenia Sarkisian President Saakashvili confirms his intention to go into details about the disagreements over the disputed church. 11 December — Catholicos-Patriarch of All Georgia Ilia II meets in Moscow President Medvedev; they discuss the far from simple relations between the two countries. 22 December —Head of the Georgian Eparchy of the AAC Bishop Vazgen Mirzakhanian declares that the Armenian side was dead set against the commission expected to establish the real owner of the Surb Norashen Church because, he argues, it has been Armenian from the very beginning.

Republic of Kazakhstan

5 January —On the eve of Christmas the head of state congratulates the country’s Orthodox community. 7 January —An all-night vigil and Christmas Liturgy are performed in Almaty. 10 January —Kazakhstan pilgrims return from Mecca. 19 January —The Orthodox community celebrates Epiphany. 22 January —A special council under the Government of the RK discusses the activities of religious associations. 20 February —The head of state receives Chairman of the Spiritual Administration of the Muslims of Kazakhstan. 15 March —The Ministry of the Interior and the clergy of Kazakhstan sign an Agreement on Cooperation and Moral Education of the People.

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19 March —The first kosher restaurant is opened in Almaty. 20 March —The Muslims celebrate Mawlid an Nabi, Birth of the Prophet. 1 April —A dialog on The Muslim World—the West is held in anticipation of the meeting of the Group of High Representatives. 2 April —Kazakhstan supports a draft statement of the U.N. Secretary General High Representative for the Alliance of Civilizations Jorge Sampaio “A Call for Respect and Calm” in which he condemns “an insulting film on the Holy Qur’an”. 8 April —Experts support the initiative of the parliamentarians relating to the religious sphere. 14 April —The Lev Gumilev Eurasian National University organizes a lecture called “The Universal Principles of Hinduism.” 27 April —The Orthodox Christian world celebrates Easter, one of the Twelve Major Festivals. 27 April —The head of state attends the Easter service. 1 May —The day of national unity of Kazakhstan. 8 May —A conference called The Youth Against Religious Extremism is held in Almaty. 13 May —A chapel is opened in the Orthodox church of Taldykorgan. 13 May —A scientific-practical conference Islam: Trends and Prospects for the 21st Century opens in Astana. 30 May —Construction of a unique mosque begins in Semei. 9 June —The Jews celebrate Shavuot, the day of receiving the Torah. 11 June —The Orthodox Church of Taldykorgan starts a charity action called Give Children Joy. 14 June —Almaty hosts a conference on Tolerance as the Main Value of Central Asia attended by the member states of the Conference on Cooperation and Confidence-Building Measures in Asia. 30 July —The Council for Contacts with Religious Organizations under the Government of the Republic of Kazakhstan meets for its regular sitting in Astana. 19 August —A mosque named after Abu Bakir hajji is built in Pavlodar. 22 August —A new mosque is opened in Almaty. 1 September —The Holy Month of Ramazan begins. 9 September —A round table on Islam in the 21st Century and the Problem of Religious Extremism is held in Astana. 12 September —The problems of luring the youth into religious sects are discussed in Almaty. 22 September —The presidents of Kazakhstan and Russia visit a new mosque and a new church in Aktobe.

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26 September —The Muslim Holyday Lailat al Kadr (The Night of Fate) is celebrated. 27 September —The Jewish holiday Rosh Hashana (the New Year) begins. 29 September —The republic receives a quota of 5,000 for the hajj. 30 September —Supreme Mufti of Kazakhstan Absattar hajji Derbisali congratulates the republic’s Muslims on Oraza ait. 7 October —A draft law on freedom of conscience and religious associations is discussed in Almaty. 9 October —The Eurasian National University holds a scientific-practical conference on how to oppose religious extremism among young people. 28 October —Members of religious organizations discuss the agenda of the 3rd Congress of the leaders of world and traditional religions in Almaty. 5 November —The Kazakh University of Economics, Finances and International Trade hosts a round table on Mental Foundations of Tolerance in a Poly-Ethnic and Poly-Confessional Society organized by an International Center of Cultures and Religions. 14 November —K. Tokaev meets the religious and political figures of several countries in New York. 2 December —An International Center of Cultures and Religions opens in Astana. 6 December —The Kurban ait holiday. 8 December —The head of state congratulates the faithful on the Kurban ait holiday. 16 December —The Chief Rabbi of Kazakhstan congratulated the citizens of the republic on Independence Day.

Kyrgyz Republic

8 January —Two young female supporters (a 29- and a 26-year-old) of Hizb ut-Tahrir are detained in the village of Kerben (the Aksy District) with 19 books and 24 journals of the banned organization. 28 January —The government endorses an Interdepartmental Plan of Preventive Measures until 2010 designed to stem propaganda of religious extremism, fundamentalism, and the activities of Hizb ut-Tahrir as a party of religious extremists and prevent religious conflicts. 31 January —A load of books of extremist religious nature is confiscated from a dweller of the Ala-Buka District (the Jalal-Abad Region) who came to Bishkek. 6 February —According to the Ministry of the Interior, videos of the banned Hizb ut-Tahrir Party are being distributed among schoolchildren at a computer club in the city of Uzgen (the Osh Region). 26 February —A Hizb ut-Tahrir supporter who stored extremist files on his computer is detained in Jalal-Abad.

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6 March —Five members of the Islamic Movement of Uzbekistan (two of them are citizens of Uzbekistan) are put on trial in Jalal-Abad. 2 May —A Hizb ut-Tahrir supporter with leaflets of this extremist organization is detained in the village of Ivanovka not far from the country’s capital. 5 May —A special issue of the Delovoi Kyrgyzstan newspaper dedicated to Islamic financial principles and their application in Kyrgyzstan is published in Bishkek. 7 May —The U.S. Department of State publishes a report on terrorism in the world which says that Hizb ut-Tahrir (with a following in Kyrgyzstan) encourages violence against the United States and its allies. 15 May —Deputy of Zhogorku Kenesh Zulkhabira Bekenova criticizes the law- enforcement structures and points out that the younger generation is infected by extremist ideas. 20 May —Members of Hizb ut-Tahrir Nurmukhamed Mullazhanov and Abdumalik Alybaev are charged with murdering A. Bazarov, member of the Ak-Zhol Party. 10 June —The Zhogorku Kenesh committee for constitutional legislation, state order, the rule of law, and human rights endorses in the first reading the amended draft law On Freedom of Conscience and Religious Organizations in Kyrgyzstan. 10 June —The City Court of Osh gathers for its first sitting to discuss the case of Ravshan Gapirov, director of the Human Rights “Justice-The Truth” Center, accused of a crime envisaged by Art 299 Part 2 of the Criminal Code of the KR (fanning national, racial, religious, or regional hatred). 12 June —The State Agency for Religious Affairs together with the Local OSCE Bureau in the city of Osh organizes a training seminar on Encouraging Legal Competence and Religious Dialog in Jalal-Abad. 19 June —An intellectual discussion club is planned in the Law Department of the Kyrgyz-Slavic University to strengthen cooperation among law students, NGOs operating in the legal sphere, religious organizations, and institutions of higher learning. 24 June —The OIC resumes the previous version of the resolution on economic aid to Kyrgyzstan. 27 June —An extended meeting of the Chu Regional State Administration also attended by Secretary of the Security Council I. Isakov is held in Bishkek to discuss the religious situation in the Chu Region. 30 June —At a press conference at the AKIpress Agency the inhabitants of the Uchkun Quarter in Bishkek accuse founder of the International Islamic Fund Iliaz uulu Urmatbek of misappropriating 76 apartments. 1 July —The SAMK announces that early in June 2008 it signed an agreement with the Ministry of Hajj of Saudi Arabia on a hajj quota of 4,500 for the republic.

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1 July —A general meeting of the Jalal-Abad regional committee of the Party of Communists of Kyrgyzstan expresses its concern about the rising religious tension in the region in its address to the president, the government, and the Zhogorku Kenesh. 2 July —President Bakiev signs the Law on Ratification of the Treaty of the Member States of the Commonwealth of Independent State on Opposing the Legalization (Laundering) of Criminal Money and the Funding of Terrorism. 29 August —Leader of the Erkin Kyrgyzstan Party Tursunbai Bakir uluu asks the premier to stop the regular electricity blackouts for the month of Ramadan. 17 September —Secretary of the Security Council Ismail Isakov chairs a meeting with the heads of the SAMK and the State Agency for Religious Affairs under the KR Government. 22 September —The U.S. State Department publishes its annual report on freedom of conscience in which the amendments to the law on freedom of conscience are severely criticized. 1 October —Mass riots take place in the city of Nookat, the Osh Region. The government accuses Hizb ut-Tahrir. 2 October —Two inhabitants of the city of Uzgen (earlier brought to court on charges of fanning national, racial, religious, and regional enmity) are detained at the city market by officers of the Uzgen District Department of the Interior who confiscate 255 leaflets of a radical extremist organization. 8 October —Zhogorku Kenesh deputy A. Arabaev suggests that the bank accounts of religious organizations should be strictly controlled. 11 October —Zhogorku Kenesh deputy R. Tagaev reports on the findings of the parliamentary commission set up to study the religious situation in the republic. The main conclusion is “the religious situation in the republic remains complicated and contradictory.” 13 October —An investigative team of the State Committee of National Security detains 32 people from Nookat on the suspicion of organizing the riots near the city’s regional administration building on 1 October and identifies 67 students of secondary schools who took part in the disorder. 15 October —The Mutakallim Public Association of Women headed by Frontbek kyzy Zhamal asks President Bakiev to help obtain permission for schoolgirls and students to wear headscarves in schools and institutions of higher learning. 20 October —A list of religious organizations that might threaten the country’s security is made public in Bishkek; it includes Hizb ut-Tahrir, the Islamic Movement of Uzbekistan, Akramiya, the White Brotherhood, the Sun Moon Church, and Satanists of all hues. 476 CHRONOLOGY OF EVENTS FOR 2008 Religion

3 November —The General Prosecutor’s Office completes its investigation of the criminal case instituted on the fact of mass disturbances in the Nookat District (the Osh Region) organized by Hizb ut-Tahrir supporters; 32 people are charged, including one minor and two women. 1 December —The European Union expresses its concern about the Law on Freedom of Conscience and Religious Organizations in Kyrgyzstan. 2 December —Akim of the October District Administration of Bishkek S. Saliev meets imams of the district’s mosques and members of the State Agency for Religious Affairs to discuss how to warn the faithful against the illegal actions of individual members of religious trends on 8 December, the holiday of Kurman ait. 2 December —The Osh Regional Administration and the State Agency for Religious Affairs initiate an inspection of madrasahs: 4 madrasahs out of 14 are closed and 3 are suspended as a result of the inspection. 15 December —The leader of the Union of Muslims of Kyrgyzstan Tursunbai Bakir uluu and head of the Zhoormart Movement Nurlan Motuev announce that the government and official clergy put pressure on them. 16 December —Kyrgyz Protestants ask President Bakiev not to sign the draft law On Freedom of Conscience and Religious Organizations, Spiritual Security of the Citizens of the KR. 16 December —The SAMK intends to introduce uniforms for the Muslim clergy. 24 December —Co-chairman of the Union of Muslims of Kyrgyzstan Tursunbai Bakir uluu subjects the Protestant religious organizations to severe criticism and supports the traditional religions. 24 December —The Constitutional Court of Kyrgyzstan postpones the examination of the application of former ombudsman Tursunbai Bakir uluu, head of the Erk Party, and co-chairman of the Union of the Muslims of Kyrgyzstan in which he demands that the amendments and addenda to the Law on the Right of Citizens of the KR to Gather Peacefully and without Arms, Meetings and Marches should be recognized as illegal.

Republic of Moldova

21 January —President Voronin receives the Prize “For Outstanding Services in Strengthening the Unity of Orthodox Peoples” and decides to spend the money on restoring one of the old churches in Moldova. 11 May —A joint march of Orthodox believers, Baptists, and public associations takes place in Chisinau to protest against the parade of sexual minorities in the city’s center. 11 May —A unique inter-confessional conference is convened to demonstrate support of Israel and the Jews. 477 CENTRAL EURASIA 2008 Analytical Annual

16 May —A youth Orthodox conference is organized to discuss in particular prohibiting parades and rallies of sexual minorities in public places. 25 June —Metropolitan of Chisinau and All Moldova Vladimir delivers a report at the Assembly of Hierarchs of the Russian Orthodox Church. 14 July —The Drumul Crucii march (an icon-bearing procession of sorts) that attracted 100 Christians takes place in Chisinau. 8 November —An opening ceremony of the reconstructed Kurki Monastery attended by the top officials of the RM and Orthodox Christians takes place. 1 December —The Orthodox Church of Moldova organizes a Day of Struggle against AIDS. 7 December —A National Prayer Day that united nearly all confessions present in the republic is organized with the support of the International Organization for Migration and its office in Moldova. 10 December —Metropolitan of Chisinau and All Moldova Vladimir attends the meeting of the Council of the Russian Orthodox Church that fixes the date of the election of the new patriarch.

Republic of Tajikistan

22 February —A round table on religious education attended by political scientists from the Center for Strategic Studies under the President of the RT, members of the clergy, representatives of the Ministry of Education, and international experts is held in Dushanbe. 18 April —The mayor’s office in Dushanbe makes a final decision on removing the synagogue in the city’s center. 22 May —The First Regional Basic Training Seminar on HIV/AIDS for training Muslim community leaders is held in Dushanbe; 30 Muslim leaders from Kazakhstan, Kyrgyzstan, and Tajikistan undergo training. 22 June —On the authorities’ instructions the only synagogue in Tajikistan is removed; the wooden one-storey 19th-century building is replaced with a park adjacent to the presidential palace in the center of Dushanbe. 2 July —Kulob hosts a seminar on “The Salafis Acquire New Members in Kulob” attended by the imam-khatibs of the city and district mosques as well as cultural figures and educators. 8 September —President Rakhmon announces at a gala meeting dedicated to the 17th anniversary of National Independence Day that the year 2009 will be dedicated to the founder of Hanafia Imom Azam. 23 September —The Party of Islamic Resurrection holds a press conference in the building of its regional organization attended by the media and the OSCE at which the parents of 15 schoolgirls kept way from schools because they wear hijabs

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announce that they intend to complain to the public prosecutor’s office to protect their children’s rights. 24 October —Retraining courses for madrasah teachers open in Dushanbe.

Turkmenistan

21-22 March —The republic celebrates the national spring holiday Novruz Bairami. 27 May —President Berdymukhammedov meets Chairman of the Department for External Relations at the Moscow Patriarchate Metropolitan of Smolensk and Kaliningrad Kirill. 4 September —President Berdymukhammedov meets U.N. special rapporteur on the issue of freedom of belief and religion Ms. Asma Jahangir. 26-27 September —Mass amnesty timed to coincide with the Night of Omnipotence (Gadyr gijesi) is announced. 2 October —The holy month of Ramazan (Oraza Bairam) ends. 6 October —Memorial services and ritual funeral repasts are held in all the mosques and churches to mark the 60th anniversary of the tragic 1948 earthquake. 10 November —An international scientific conference dedicated to the philosophical and creative heritage of prominent religious figure Imam Reza is held in the city of Mary. 24 November —188 Turkmenian pilgrims depart to Saudi Arabia for hajj. 8 December —President Berdymukhammedov sends his condolences to President of the Russian Federation Medvedev in connection with the death of Patriarch of Moscow and All Russia Alexiy II.

Ukraine

26 May —President Yushchenko invites Pope Benedict XVI to visit Ukraine. 11 July —The UOC-KP Local Council meets. 17 July —Cardinal Leonardo Sandri, prefect of the Congregation for Eastern Churches, visits Ukraine. 25-27 July —Kiev celebrates the 1020th Anniversary of the Baptism of Kievan Rus. 2 August —Simferopol, the capital of the Autonomous Republic of the Crimea, hosts a conference convened by the DAVET Muslim community Realities and Myths of the War on Terror. 23 November —Benedict XVI addresses the Ukrainian pilgrims and members of the Ukrainian community of Italy on the occasion of the 75th anniversary of the Great Famine (Golodomor) of 1932-1933 479 CENTRAL EURASIA 2008 Analytical Annual

from the window of the Vatican Palace on St. Peter Square in the Vatican after reading Angelus Domini (a weekly event that takes place on Sundays at noon). 20-22 December —Five Muslim organizations meet in Kiev and sign a cooperation agreement.

Republic of Uzbekistan

13 January —Services are held in all Orthodox churches to mark Christmas. 8 February —Two TV journalists, Eldor Mustafaev, who edited the Sport TV Channel, and Ikrom Ulugboev, anchor of a popular TV program, are fired for attending a mosque on Friday. 11 February —The Embassy of Uzbekistan in Belgium organizes a briefing on Uzbekistan’s Experience in Religious Harmony devoted to the religious situation in the republic and the state’s policy. 10-18 March —Many of the independent media carry information about a campaign underway in the Andijan Region to keep tabs on secondary school students who attend mosques. It was reported that on Fridays makhalla activists, militiamen, and school teachers install themselves at mosques to register school students. The lists are reported to be transferred to the law-enforcement structures. A member of the Department for Religious Affairs of the Andijan Region resolutely refutes this information and insists that school administrations will never prevent their students from going to mosques in their free time. 19 March —Information appears that a new religious group, which the public calls “Kora sallalilar” (Black Turbans), has been set up in the republic. When asked for information Deputy Mufti Abdul Aziz Mansour confirms that a new religious trend has appeared in some regions: its supporters have been noticed in the Samarkand, Kashkadarya, Syrdarya, and Surkhandarya regions; they ignore the official imams and officially registered mosques. 21-23 March —The nation celebrates Navruz (the pre-Islamic New Year holiday), which attracts all ethnic groups and all confessions. 1 April —The republic discusses “Fitna,” a film by Dutch parliamentarian Geert Wilders. A press release from the Zhakhon Information Agency at the republic’s Foreign Ministry says that “the public of Uzbekistan is enraged.” 11 April —The imams of two Namangan mosques—Kamolkhon Sulaymonov of the Imam Bukhari mosque and T. Sattarov of the Makhdumi Eshon mosque—are brought to court and fired for unsanctioned teaching of the fundamentals of Islam to children. Their superior, Abdulkhay 480 CHRONOLOGY OF EVENTS FOR 2008 Religion

Tursunov, who represents the Muftiat in the region, is fired for “negligence.” 26 May —The national TV channels show a film called Zhakholat changalida (In the Clutches of Ignorance) produced by the State Uzbekkino Agency that criticizes missionaries of the Jehovah’s Witnesses, the Full Gospel Church, and Prosperity. 8 June —The Halal FOOD restaurant is closed in Tashkent even though this and similar small places are popular because of their low prices and halal food. The public, which has learned to treat everything the government does with suspicion, interprets this as mistrust of Islam and the Muslims. 10 June —The Committee for Religious Affairs, the Customs Service, and the legislative structures working together intercept an attempt by the Biblical Society of Uzbekistan to bring a large consignment (about 7,000 copies) of illegal religious literature into the country. 17 June —In mid-June a delegation of the Republic of Singapore headed by President of the country’s Islamic Religious Council Haji Mohd Alami Musa arrives in Tashkent to establish closer relations with the Muslims of Uzbekistan. 19 September —The U.S. Department of State publishes its annual report on freedom of conscience in the world in 2008 which acknowledges that there has been some improvement in Uzbekistan, which is still classed among the countries causing serious concerns. 19 September —Twelve members of the Jehovah’s Witnesses are brought to court in the Kashkadarya Region for illegal religious missionary activities and fined. At the same time, 7 members of the Jehovah’s Witnesses are brought to court in the Kagan District, Bukhara Region, and sentenced to fines of three minimum wages. 26-30 September —Several imams of mosques are arrested in Karakalpakstan: Ilham hajji of the Nasimjon bobo mosque of the Ellikkalin District; Abdurrakhman esahn of the Sultan Uvaysi of the Beruni District; and imam of one of the mosques of the Amudarya District, Kuchkar Bekimbetov. According to Forum 18, the former two were charged with economic violations; while the latter was found in possession of 20 grams of heroin and sent to prison for 14 years. The organization’s press release says that over 50 people were arrested in the Turtkul District on charges of religious extremism. 16-17 November —During the visit of Prime Minister of Malaysia to Uzbekistan, President Karimov demonstrates an interest in the Malaysian model of Islam; the media close to the official circles initiate the term “the holy Islam.” 17 November —Twenty-seven women accused of membership in an unofficial religious group are arrested in the Shaykhantakhur, Sabir Rakhim and Yunus-Abad districts of Tashkent. It has been noticed that this measure is normally applied 481 CENTRAL EURASIA 2008 Analytical Annual

to girls/women whose relatives were previously brought to court on similar charges. 21-29 November —Five thousand Uzbek citizens go to Mecca and Medina, the holy Islamic places. 24 November —A cross and memorial plaque are placed in the foundation of an Orthodox church during a ceremony in Urgench, the Khorezm Region. The media point out that the new church will be built according to a unique project based on the traditions of Russian Orthodox church architecture. The church, in the shape of a cross, will appear close to the railway station.

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INTERNATIONAL AFFAIRS

Afghanistan

21 January —NATO’s Secretary General and the Pakistani president discuss the situation in Afghanistan in Brussels. 5-6 February —An international conference on the rehabilitation of Afghanistan is held in Tokyo. 17 February —Afghan President Hamid Karzai arrives in the capital of Qatar to participate in a conference called “The U.S. and the Islamic World.” 18 February —Afghanistan officially declares its recognition of Kosovo’s independence. 12 March —A session of the U.N. Security Council on Afghanistan is held in New York. 14 March —The presidents of Afghanistan, Tajikistan, and Iran plan to hold a tripartite meeting in Dushanbe this year. 21 March —Canadian Prime Minister Stephen Harper announces that his country will pull its military contingent out of Afghanistan in 2011. 27 March —A new special envoy of U.N. Secretary General Kai Eide arrives in Kabul. 3 April —A NATO summit is held in Bucharest at which Afghanistan-related issues are examined. 13 May —Afghanistan and the U.S. sign a Declaration on Strategic Cooperation in Washington. 25 May —The Afghan Ministry of Mines signs a contract on the development of the Miss Ainak Copper Mine Project with the Chinese Minnesota Control Company (MCC) in Kabul. 26 May —Afghan Foreign Minister Rangin Dadfar Spanta pays an official visit to Moscow. 9 June —Afghan President Hamid Karzai arrives in Holland on an official two-day visit. 483 CENTRAL EURASIA 2008 Analytical Annual

12 June —An international conference on Afghanistan opens in Paris attended by delegations from 67 countries and the representatives of 17 organizations. 21 June —Russia announces its intention to deliver 15,000 tons of grain to Afghanistan in humanitarian aid for stabilizing wheat prices. 27 June —In his message to Hamid Karzai, Russian President Dmitri Medvedev promises to render Afghanistan gratuitous aid. 17 July —The U.S. embassy in Kabul and the Afghan Ministry of Public Health sign an agreement on allotting 218 million dollars to develop Afghan health care. 19 July —American senator Barack Obama arrives in Kabul on a visit. 25 July —German Foreign Minister Frank-Walter Steinmeier arrives in Kabul on a visit. 2-3 August —Afghan President Hamid Karzai participates in the summit of the South Asian Association of Regional Cooperation (SAARC). 4 August —President Hamid Karzai pays an official visit to Delhi. 8 August —Afghan President Hamid Karzai arrives in Beijing for the opening of the Olympic Games. 28 August —The Afghan and Russian presidents meet during the summit of heads of the SCO members states in Dushanbe. 23 September —The U.N. Security Council extends the powers of the International Security Assistance Force (ISAF) for one year. 31 October —Talks are held in Istanbul between the Afghan president and Pakistani prime minister. 17 November —Russian Foreign Minister Sergey Lavrov speaks out against talks with Taliban leader Mullah Omar. 18 November —NATO official representative in Kabul James Appathurai announces the Alliance’s support of talks between the Afghan government and the Taliban. 22 November —A delegation of the U.N. Security Council arrives in Kabul. 30 November —An Afghan parliamentary delegation led by Speaker of the Lower House Yunus Qanuni arrives in Baku on an official visit. 4 December —A session of the U.N. Security Council on Afghanistan is held in New York. 5 December —A tripartite meeting of the presidents of Afghanistan, Pakistan, and Turkey—Hamid Karzai, Asif Ali Zardari, and Abudullah Gül—is held in Istanbul. 15 December —President George Bush arrives in Kabul on a farewell visit. 23 December —Representatives of Afghanistan’s Central Independent Election Committee with the mediation of tribe elders talk at the negotiations with the Taliban.

484 CHRONOLOGY OF EVENTS FOR 2008 International Affairs

Republic of Armenia

25 February —Slovak Foreign Minister Jan Kubis, the chairman of the Council of Europe’s Committee of Ministers, visits Armenia. 25-26 February —OSCE Chairman-in-Office, Finnish Foreign Minister Ilka Kanerva visits Armenia. 3 April —Newly elected Armenian president, current Prime Minister Serzh Sargsian pays a working visit to Bucharest where he participates in a meeting of the heads of state of the NATO Council of Euro-Atlantic Partnership. 17 April —PACE adopts Resolution No. 1609 On the Functioning of Democratic Institutions in Armenia. 7 May —Armenian Foreign Minister Edvard Nalbandian takes part in the 118th session of the Council of Europe’s Committee of Ministers in Strasbourg. 28 May —A sitting of the Armenia-NATO Council is held at which Armenia is represented by Foreign Minister Edvard Nalbandian and Defense Minister Seiran Oganian. 6 June —President Sargsian meets for the first time since his election with Azerbaijani President Ilham Aliev during the Nagorno-Karabakh settlement process in St. Petersburg. 25 June —PACE adopts Resolution No. 1620 On Implementation by Armenia of Assembly Resolution 1609 (2008). 1-3 July —Armenian Foreign Minister Edvard Nalbandian pays an official visit to Finland. 13-15 July —Council of Europe’s Commissioner for Human Rights Thomas Hammarberg visits Armenia. 14 July —Armenian Foreign Minister Edvard Nalbandian visits Washington. 22-25 July —President of the Parliamentary Assembly of the Council of Europe (PACE) Luis Maria de Puig visits Armenia. 6 September —Turkish President Abdullah Gül visits Erevan. 12-13 September —Armenian Foreign Minister Edvard Nalbandian pays an official visit to Georgia. 15-17 September —Armenian Foreign Minister Edvard Nalbandian pays a visit to Iran. 23-26 September —President Sargsian visits New York, speaks at the U.N. General Assembly, and meets with the U.N. Secretary General and the heads of state and high- ranking officials of several countries. 30 September- 1 October —President Sargsian pays an official visit to Georgia. 20 October —The 10th sitting of the Armenian-Russian intergovernmental commission on economic cooperation is held in Erevan.

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20-21 October —Russian President Dmitry Medvedev pays an official two-day visit to Armenia. 2 November —The presidents of Armenia, Azerbaijan, and the Russian Federation sign the Declaration on Nagorno-Karabakh Settlement in Maindorf outside Moscow. 3-4 November —President Sargsian visits France. 5-6 November —President Sargsian visits Brussels and meets with the Belgium, EU, and NATO leaders. 12 November —House of Representatives Speaker of the Republic of Cyprus Marios Garoyian pays an official visit to Armenia. 22-24 November —Armenian Secretary of the National Security Council Artur Bagdasarian visits Iran. 1 December —A ceremony is held to launch the last section of the Iran-Armenia gas pipeline. 3 December —The European Commission announces the new Eastern Partnership program in Brussels, which is to include the Republic of Armenia. 4-5 December —A sitting of the OSCE Council of Foreign Ministers is held in Helsinki at which a statement is adopted on peaceful settlement of the Nagorno-Karabakh conflict within the framework of the Moscow Declaration and Madrid principles. 9-10 December —Armenian Prime Minister Tigran Sarkisian pays an official visit to Georgia and participates in the 7th joint sitting of the Armenian-Georgian intergovernmental commission. 14-17 December —A delegation headed by OSCE Secretary General Marc Perrin de Brichambaut visits Armenia. 15 December —The 8th joint sitting of the Armenian-Iranian intergovernmental commission is held in Teheran.

Azerbaijan Republic

7 March —NATO and Azerbaijan approve the renewed Individual Action Plan. 14 March —The U.N. General Assembly adopts a resolution on “The Situation in the Occupied Territories of Azerbaijan.” 15-16 April —An international conference on “The Fundamental Principles of Settling the Conflicts on the Territory of the GUAM States” is held in Baku. 29-30 April —An international conference called “GUAM—Transit” is held in Baku. 22-23 May —An energy summit is held in Kiev. 29-30 May —An international conference called “GUAM’s Development Strategy” is held in Baku. 1 July —The Batumi Summit of GUAM is held. 486 CHRONOLOGY OF EVENTS FOR 2008 International Affairs

3 July —The presidents of Azerbaijan and Russia hold talks in Baku. 24 July —A ceremony is held in Kars to mark the laying of the foundation of the Turkish section of the Baku-Tbilisi-Kars railroad attended by the presidents of Turkey, Azerbaijan, and Georgia. 25 September —Talks are held among the foreign ministers of Azerbaijan, Armenia, and Turkey in New York. 2 November —The presidents of Russia, Azerbaijan, and Armenia sign the Moscow Declaration. 14-15 November —An energy summit is held in Baku. 29 November —Talks are held among the presidents of Turkmenistan, Azerbaijan, and Turkey in Ashghabad. 3 December —The European Commission proposes that Azerbaijan participate in the Eastern Partnership program.

Republic of Belarus

21-25 January —The Belarusian Question is discussed at the winter session of the Parliamentary Assembly of the Council of Europe (PACE) in Strasbourg. 4 February —New OSCE Minsk Office Head Hans-Jochen Schmidt arrives in Minsk. 6 February —A survey and explanation of the sanctions introduced against Belarus is published on the official site of the U.S. Treasury. 7 March —An Agreement between the Republic of Belarus and the Commission of the European Communities on establishing, privileges and immunities of a Representative Office of the Commission of the European Communities in Belarus is signed in Brussels. 23 March —Belarusian television reports that the law-enforcement structures found an “FBI affiliate” in a rented apartment near the U.S. embassy. 7 April —The Council of Ministers of the European Union extends the sanctions against several high-ranking Belarusian officials for another year. 15 April —A report on abuse in the Belarusian criminal justice system is presented at the spring session of the Parliamentary Assembly of the Council of Europe in Strasbourg. 22 April —Belarusian Ambassador to Lithuania V. Drazhin apologizes on behalf of Belarus for the incident that occurred in Minsk on 25 March during which without justification and with the use of physical force journalists of the news service of Lithuanian radio and television accredited by the Belarusian Ministry of Foreign Affairs were arrested. 4 May —Head of the KGB Center of Information and Public Relations V. Nadtochaev gives details of the story involving exposure of the U.S. espionage network in Minsk in March of the same year.

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10 May —Spanish newspaper El Pais publishes information on the delivery of Belarusian weapons to Columbian insurgents. 15 May —The U.S. Treasury publishes new clarification of the economic sanctions against the Belneftekhim Concern. 29 May —The first national TV channel broadcasts a program in which the U.S. embassy is accused of financing the Belarusian opposition. 6 June —The White House press service states that President George Bush’s sanctions against several high-ranking Belarusian officials will be extended. 10 June —The U.S. and European Union present a joint statement criticizing the measures taken by official Minsk with respect to the diplomatic missions in Belarus. 13 June —A session of the International Labor Organization at which the Belarusian government is given the opportunity to carry out the ILO’s recommendations within six months closes in Geneva. 24 July —A report appears in the Belarusian press with a reference to the newspaper Sudan Tribune about Belarus’ possible involvement in delivering 12 MiG-29 fighter jets to the Sudan in circumvention of U.N. resolution 1591. 11 August —Head of the OSCE/ODIHR’s long-term observation mission Ambassador Geert-Hinrich Ahrens arrives in Minsk. 21-22 August —Deputy Assistant Secretary for European and Eurasian Affairs at the U.S. Department of State David Merkel holds meetings in Minsk with the Belarusian authorities and members of the opposition. 4 September —The U.S. Treasury alleviates the economic sanctions against two Belarusian enterprises, Lakokraska and Polotsk-Steklovolokno, for six months. 18-21 September —A Belarusian parliamentary delegation takes part in the fall session of the OSCE PA. 24 September —President Alexander Lukashenko holds a telephone conversation with the EU’s High Representative for the Common Foreign and Security Policy Javier Solana. 8 October —President Lukashenko holds talks with Chairman-in-office of the OSCE, Foreign Minister of Finland Alexander Stubb. 9 October —The European Parliament adopts a resolution which contains an appeal to the European Union to reexamine the sanctions against Belarus. 13 October —The foreign ministers of 27 European Union countries adopt a decision in Luxembourg on shortening the list of Belarusian officials restricted to travel abroad from 41 to 5 people. 13 October —A meeting is held in Luxembourg between European Commissioner for External Relations and European Neighbourhood Policy Benita Ferrero-Waldner and Belarusian Foreign Minister Sergey Martynov. 488 CHRONOLOGY OF EVENTS FOR 2008 International Affairs

3-5 November —A delegation of the European Commission pays a working visit to Minsk. 20 November —President Lukashenko signs Decrees No. 633 and No. 634 aimed at “establishing a constructive and comprehensive dialog with the European Union.” 21 November —The ILO Administrative Council approves the report on the freedom of associations, which notes that the situation with trade unions in Belarus is far from meeting the principles of the freedom of associations, due to which the trade benefits guaranteed by the Generalized System of Preferences cannot yet be restituted. 27 November —A decision is adopted at the sitting of the OSCE Permanent Council in Vienna on extending the mandate of the OSCE Minsk Office until 31 December, 2009. 29 November —The OSCE/ODIHR publishes its final report on assessment of the parliamentary elections in Belarus, in which the parliamentary elections held, despite “certain improvements,” were described as failing to meet OSCE standards. 1 December —A sitting of the Supreme State Council of the Union State is postponed until further notice. 11 December —A conference is held in Minsk called Contemporary Challenges to International Security attended by NATO Deputy Assistant Secretary General for Security Cooperation and Partnership Robert Simmons. 12 December —Deputies of the House of Representatives ratify the agreement on establishing, privileges, and immunities of the Representative Office of the Commission of European Communities in Belarus. 18 December —Head of the EC Delegation in Ukraine and Belarus Mr. Jose Manuel Pinto Teixeira and Belarusian Vice Premier Andrei Kobiakov sign a framework agreement between the European Commission and Belarus in Minsk.

Georgia

7 January —The European Union calls on all the political forces in Georgia to respect the election results. NATO welcomes the presidential election held in Georgia on 5 January as “an important step in Georgia’s democratic development” and promises to enhance its “intensive dialog” with Georgia. 15 February —President Saakashvili sends an official letter to NATO expressing Georgia’s desire to join the MAP and asking the organization to make a corresponding decision. 19 February —Georgia announces that it does not recognize Kosovo’s independence. 21 February —President Saakashvili meets with his Russian colleague Vladimir Putin in Moscow.

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4 March —Georgia withdraws from the Joint Control Commission for Conflict Settlement (CCC) in South Ossetia. 6 March —The Russian Foreign Ministry states that Russia is unilaterally withdrawing from the CIS agreement of 1996 which envisages economic sanctions against Abkhazia. 28 March —President Saakashvili puts forward new peace initiatives regarding Abkhazia. He proposes opening a free economic area in Gali and Ochamchira; providing the participation of Abkhazians in Georgia’s central executive branches, including a new constitutional post of vice president who will have the right of veto on issues relating to Abkhazia, and a single customs and border space. 3 April —A decision is adopted at the NATO summit in Bucharest not to offer Georgia and Ukraine the MAP. 20 April —Georgian drones are struck down in Abkhazia. 26 April —The Georgian Foreign Ministry says that Russia has begun information support of long-planned military aggression against Georgia. 29 April —Russia unilaterally increases the number of peacekeepers in Abkhazia. 30 April —The leaders of Abkhazia and South Ossetia, Sergey Bagapsh and Eduard Kokoity, reject the Georgian president’s offer to form a single state. 15 May —The U.N. General Assembly adopts the resolution prepared by Georgia recognizing the right of refugees, forced migrants, and their descendants to return to Abkhazia regardless of their ethnic origin. 31 May —The Russian Defense Ministry says that rail forces are being sent to Abkhazia to renovate the railroad and highway infrastructure. 5 June —In its resolution, the European Parliament says that the Russian peacekeeping mission being carried out in Abkhazia should be changed and called on the EU to send its border mission there. 6 June —Presidents of Georgia and Russia, Mikhail Saakashvili and Dmitry Medvedev, hold a bilateral meeting in St. Petersburg. 15-17 June —Representatives of the Georgian government and Abkhazian leadership meet in Sweden. 26-27 June —The Georgian question is discussed at the Russia-EU summit in Khanty-Mansiysk. 2 July —A GUAM summit is held in Batumi. 5 July —Dmitry Medvedev and Mikhail Saakashvili meet in Astana. 8 July —Sukhumi rejects the American plan on joint police forces in the south of Abkhazia. 9 July —U.S. State Secretary Condoleezza Rice visits Tbilisi. 11 July —Georgia recalls its ambassador to Russia. 490 CHRONOLOGY OF EVENTS FOR 2008 International Affairs

17-18 July —German Foreign Minister Frank-Walter Steinmeier pays a working visit to Tbilisi and Sukhumi. The Abkhazian side deems the plan he presented unacceptable. 19 July —The South Ossetian authorities reject the European Union’s offer to hold talks in Brussels, in which the Georgian, South Ossetian, and Russian sides are to participate. The reason for this refusal is that representatives of the Republic of North Ossetia-Alania have not been invited to Brussels. 24 July —A ceremony to launch construction of the Turkish section of the Baku-Tbilisi-Kars railroad is held in Kars. 25 July —The South Ossetian authorities reject the offer of the current OSCE chairman to organize a Georgian-Ossetian meeting in Helsinki, saying that they are only true to the Joint Control Commission format. 3-5 August —Most of the people of Tskhinvali are evacuated to Java and Vladikavkaz. Numerous volunteers arrive from the Russian Federation. 7 August —A meeting between Reintegration Minister Temuri Iakobashvili and a representative of the South Ossetian authorities in the presence of Iu. Popov (Russian Foreign Ministry) fails to take place. Military action begins. 10 August —The heads of the French and Finnish foreign ministries arrive in Georgia. 12 August —French President Nicolas Sarkozy achieves a cease-fire after talks in Moscow and Tbilisi. 14 August —Turkish Prime Minister Recep Erdoðan and U.S. State Secretary Condoleezza Rice arrive in Tbilisi. 14 August —The Georgian parliament votes for the country’s withdrawal from the CIS. 17 August —German Chancellor Angela Merkel arrives in Tbilisi. 22 August —Head of South Ossetia Eduard Kokoity announces that “there are no more Georgian enclaves.” 22-23 August —Russian troops leave the towns of Gori, Senaki, and Zugdudi. They remain in Poti and the so-called buffer zones in Samegrelo and Shida Kartli. 25 August —The State Duma and Federation Council of Russia vote for recognizing Abkhazia’s and South Ossetia’s independence. 26 August —The Russian president signs a decree on recognizing the independence of South Ossetia and Abkhazia. 28 August —The Georgian parliament declares Abkhazia and South Ossetia occupied territories. 29 August —Georgia breaks diplomatic relations with Russia. 2 September —De facto leader of Abkhazia Sergey Bagapsh says that new Russian military bases will not be created in Abkhazia. Several days later he is forced to change this decision. 491 CENTRAL EURASIA 2008 Analytical Annual

3 September —Russia closes its embassy and consulate in Tbilisi. 4 September —U.S. Vice President Dick Cheney arrives in Tbilisi. 5-6 September —An informal meeting of the foreign ministers of the EU countries is held in Avignon (France). A decision is made to send an EU observation mission to the conflict zone. 6 September —Nicaragua announces that it recognizes South Ossetia and Abkhazia. 9 September —Russian Defense Minister A. Serdiukov announces the deployment of 7,600 Russian servicemen in South Ossetia and Abkhazia. 11 September — De facto leader of South Ossetia Eduard Kokoity says that the republic will soon become part of the Russian Federation and that independence is not expedient. Kokoity is soon forced to withdraw this statement. 15 September —The ambassadors of 26 NATO member countries and Secretary General Jaap de Hoop Scheffer hold a sitting of the North Atlantic Council in Tbilisi. A document is signed on creation a NATO-Georgia Commission. 24 September —The Abkhazian parliament ratifies the Treaty on Friendship, Cooperation, and Mutual Assistance with Russia. 25 September —Russian Prime Minister Vladimir Putin says that Russia should ensure South Ossetia’s close economic integration and remove the barriers of border administration with it. 9 October —The Russian Armed Forces leave most of the checkpoints in the territories adjoining Abkhazia and South Ossetia. But Russian checkpoints remain in Kodori, the Akhalgori Region District, and the village of Perevi, the Sachkher District. 15 October —Official representatives of Georgia, Russia, and the U.S. begin talks in Geneva organized by the European Union, U.N., and OSCE. The Georgian and Russian sides accuse each other of disrupting the plenary session. 21 October —Abkhazian Foreign Minister S. Shamba says that Russia will deploy its forces at two military bases in Abkhazia—in Gudauta and Ochamchira. He says that posts of Russian forces will also be set up in the upper part of the Kodori Gorge. 22 October —At the end of the conference of donors for Georgia in Brussels, a statement is made about allotting 4.55 billion dollars over the next three years to assist Georgia’s post-war rehabilitation. 10 November —A EU summit is held in Brussels. The EU renews talks with the Russian Federation. Lithuania is the only member state that votes against. 14 November —French President Nicolas Sarkozy says that “Russia has fulfilled the main obligations of the Medvedev-Sarkozy plan.” 18 November —A second round of talks is held in Geneva. 29 November —Georgia ceases its diplomatic relations with Nicaragua due to this country’s recognition of Abkhazia’s and South Ossetia’s independence. 492 CHRONOLOGY OF EVENTS FOR 2008 International Affairs

3-4 December —The OSCE Ministerial in Helsinki rejects Russia’s plan for building a new security architecture in Europe. Russia blocks extension of the OSCE mission’s mandate in Georgia. 17-18 December —A third round of talks is held in Geneva.

Republic of Kazakhstan

7 January —During a short trip to China, Kazakh President Nazarbaev receives special envoy of PRC Chairman Hu Jintao, member of the PRC State Council Tang Jiaxuan. 10 January —Kazakh Foreign Minister Marat Tazhin holds a meeting with U.S. Senator Richard Lugar in Astana. 22 January —An interdepartmental assembly on implementation of the U.N. Framework Program is held in Astana. 26 January —Kazakh Foreign Minister Marat Tazhin receives U.S. State Department Coordinator Steven Mann in Astana. 29 January —Kazakh Foreign Minister Marat Tazhin receives special envoy of the Senegal president in Astana. 8 February —President Nazarbaev meets with French Prime Minister François Fillon. 11 February —President Nazarbaev meets with Assistant U.S. State Secretary Richard Boucher. 15 February —Kazakh-Russian consultations on the legal status of the Caspian Sea and a sitting of the Workgroup on Enhancing the Investment Image are held in Astana. 22 February —President Nazarbaev arrives in Moscow to participate in an informal summit of heads of CIS countries. 4 March —Emir of Qatar Sheikh Hamad bin Khalifa Al-Thani pays an official visit to Kazakhstan on Nursultan Nazarbaev’s invitation. 5 March —The Year of Ukraine begins in Kazakhstan. 8 April —President Nazarbaev meets with Vice President of India and ex officio Chairman, Rajya Sabha (the Upper House of the Indian Parliament), Shri Mohammad Hamid Ansari. 17 April —President Nazarbaev meets with Kyrgyz President Kurmanbek Bakiev, who has arrived in Astana on an official visit. 22 April —President Nazarbaev meets with Uzbek President Islam Karimov, who has arrived in Astana on a two-day official visit. 12 May —Tajik President Emomali Rakhmon arrives in Astana on a two-day official visit. 14 May —President Nazarbaev meets with Crown Prince of Abu Dhabi Sheikh Mohamed Bin Zayed Al-Nahyan.

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17 May — President Nazarbaev arrives in Egypt’s Sharm el Sheikh to participate in the World Economic Forum (Davos) on the Middle East. 22 May —Russian President Dmitry Medvedev arrives in Astana on a state visit on Nursultan Nazarbaev’s invitation. 26 May —President Nazarbaev receives an official U.S. Congress delegation led by House Resources Committee Chairman Nick J. Rahall. 6 June —An informal summit of the heads of the CIS member states is held in St. Petersburg attended by the Kazakh president. 10 June —President Nazarbaev begins his official visit to France. 19 June —Nursultan Nazarbaev meets with the leaders of the Japanese parliament houses in Tokyo. 30 June —President Nazarbaev participates in the opening of the 17th annual session of the OSCE Parliamentary Assembly. 7 July —President Nazarbaev holds a bilateral meeting with Georgian President Mikhail Saakashvili. 8 July —President Nazarbaev holds bilateral meetings with Russian President Dmitry Medvedev, Turkmen President Gurbanguly Berdymukhammedov, and Turkish President Abdullah Gül. 29 July —President Nazarbaev arrives in Palma de Mallorca on the invitation of King of Spain Juan Carlos I, where an official meeting is held between the head of state and the Spanish monarch. 7 August —President Nazarbaev meets in Beijing with PRC Chairman Hu Jintao. 8 August —Nursultan Nazarbaev participates in the official opening ceremony of the 29th Olympic Games in Beijing. 9 August —The Kazakh president holds a working meeting in Beijing with President of South Korea Lee Myung-bak. 12 August —Nursultan Nazarbaev meets his Kyrgyz colleague, Kurmanbek Bakiev, on the shores of Lake Issyk-Kul. 27 August —President Nazarbaev arrives in Dushanbe to participate in a sitting of the Council of Heads of State of the Shanghai Cooperation Organization. 28 August —A meeting is held in Dushanbe between Nursultan Nazarbaev and Russian President Dmitry Medvedev at which bilateral cooperation is discussed. 2 September —President Nazarbaev receives Assistant U.S. State Secretary Richard Boucher. 3 September —Federal President of Germany Horst Köhler arrives in Astana on a state visit. 5 September —President Nazarbaev participates in a session of the CSTO Collective Security Council held in Moscow. 5 September —Latvia’s President Valdis Zatlers pays his first official visit to Kazakhstan on the invitation of President Nazarbaev. 10 October —President Nazarbaev receives U.S. State Secretary Condoleezza Rice, who has arrived in Kazakhstan on a short working visit.

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11 October —A bilateral meeting between Nursultan Nazarbaev and Moldovan President Vladimir Voronin is held in Bishkek. 17 October —President Nazarbaev participates in the Ministerial Conference “Common World: Progress through Diversity” held at the Palace of Peace and Consent. 21 October —President Nazarbaev receives Turkish Grand National Assembly Speaker Köksal Toptan. 26 October —Prime Minister of Italy Silvio Berlusconi pays a short working visit to Astana. 27 November —An interdepartmental assembly on the Caspian problem chaired by Kazakh Foreign Minister Marat Tazhin is held in Astana. 10 December —Nursultan Nazarbaev’s traditional annual meeting with heads of the diplomatic corps accredited in Kazakhstan is held at the Akorda Presidential Palace. 19 December —An informal summit of the presidents of Kazakhstan, Armenia, Kyrgyzstan, Russia, and Tajikistan begins in the resort zone of Burabai.

Kyrgyz Republic

21-22 February —An unofficial CIS summit is held in Moscow. 17-18 April —President Kurmanbek Bakiev pays an official visit to Kazakhstan where the Second Session of the High Interstate Council of the Kyrgyz Republic and the Republic of Kazakhstan is held. 26 April —President Kurmanbek Bakiev meets with OSCE Secretary General Mark Perren de Brishambo. 14-15 May —Lithuanian Prime Minister Gediminas Kirkilas pays an official visit to Kyrgyzstan. An intergovernmental agreement is signed on strengthening and expanding mutually advantageous cooperation between the two countries. 16 May —President Kurmanbek Bakiev pays an official visit to Khujand, Tajikistan, where a Joint Statement of the Presidents of Kyrgyzstan and Tajikistan on Further Strengthening of Friendly Relations between the two countries is signed. 20 May —President Kurmanbek Bakiev meets with a PRC parliamentary delegation led by Vice Chairman of China’s National People’s Congress Standing Committee Han Qide. 20-22 May —Prime Minister I. Chudinov makes a working visit to Poland and Latvia. An intergovernmental agreement is signed on stimulating and protecting investments between Kyrgyzstan and Latvia. 22 May —President Kurmanbek Bakiev meets with delegation heads at the 24th session of the Council of CIS Security and Special Service Heads. 23 May —Prime Minister Chudinov participates in a sitting of the CIS heads of government in Minsk (Belarus).

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6-7 June —President Kurmanbek Bakiev participates in St. Petersburg (Russia) in an informal CIS summit and the 12th St. Petersburg International Economic Forum. 10 June —President Kurmanbek Bakiev meets with U.N. Deputy High Commissioner for Human Rights Kyung-wha Kang. An Agreement on the Opening of a Regional Branch of the Office of the United Nations High Commissioner for Human Rights (ONCHR) for the Central Asian countries is signed in Bishkek. 19-21 June —Deputy Assistant U.S. Secretary of State George Krol visits Kyrgyzstan. 24-25 June —The Fifth Assembly of Ministers of Culture of the Shanghai Cooperation Organization Member States is held in Bishkek. 2 July —President Kurmanbek Bakiev meets with participants of a session of the CIS Member States Council of Defense Ministers. 5-6 July —The Kyrgyz President participates in the celebrations dedicated to the 10th anniversary of the capital of Kazakhstan—the city of Astana. 16 July —President Kurmanbek Bakiev pays a working visit to the Russian Federation and holds talks with President Dmitry Medvedev. 5 August —President Kurmanbek Bakiev receives a delegation of U.S. senators led by Top U.S. Senate Democrat Harry Reid. The meeting was also attended by Senators Jeff Bingamen, Bill Nelson, Johnny Isakson, and Robert Menendez. 7-9 August —An official Kyrgyz delegation led by the president participates in the opening ceremony of the 29th Olympic Games in China. 13 August —An informal meeting between the presidents of Kyrgyzstan and Kazakhstan is held at the state residence, Cholpon-Ata, on the shores of Lake Issyk-Kul. 27-28 August —President Kurmanbek Bakiev participates in the 8th session of the SCO Council of Heads of State (Dushanbe, Tajikistan). 5 September —An official Kyrgyz delegation led by the president participates in a regular session of the CSTO Security Committee Council. 5 September —President Kurmanbek Bakiev holds bilateral talks with the Russian president. 9 October —Russian President Dmitry Medvedev makes an official visit to Kyrgyzstan. 10 October —Bishkek hosts a summit of the CIS heads of state and a session of the EurAsEC, as well as an informal meeting among the heads of five Central Asian states. 11 October —Belarusian President Alexander Lukashenko pays an official visit to Kyrgyzstan on the invitation of President Kurmanbek Bakiev. 17 October —President Kurmanbek Bakiev receives Assistant U.S. Secretary of State Richard A. Boucher. 19-21 December —President Kurmanbek Bakiev participates in an informal summit of the CIS heads of state in Kokshetau (Republic of Kazakhstan). 496 CHRONOLOGY OF EVENTS FOR 2008 International Affairs

Republic of Moldova

1 January —The Agreement on Simplification of the Visa Regime between the Republic of Moldova and the EU comes into force. 22 January —A press conference is held in Chisinau with Secretary General of the Central European Initiative (CEI) Pietro Ercole Ago, at which it is reported that 2 million euros will be allotted to supporting Moldova’s chairmanship and implementing joint projects. 8-10 February — President Voronin participates in the 44th Munich conference on security policy called “The World in Disarray – Shifting Powers – Lack of Strategies” at which the Moldovan side presents its vision of European security. 14-15 February —European Commissioner for External Relations and European Neighborhood Policy Benita Ferrero-Waldner visits Moldova. 28 February —President Voronin meets with Swedish Foreign Minister Carl Bildt. 4 March — President Voronin meets with President of the French Senate Christian Poncelet in France. 5 March —An agreement is signed between Moldova and Japan on issuing a grant for 300 million yen (2.8 million dollars) to support the development of small and medium businesses in Moldova, as well as an agreement on increasing the 2KR project to 200 million yen (1.95 million dollars). 7-10 March —A sitting of the Moldovan-Chinese Joint Commission on Economic Trade Cooperation is held in Chisinau. 3 April —President Voronin participates in the NATO summit in Bucharest, where he talks about security measures and Moldova’s place and role in European security. 7 April —President Voronin meets with Slovakia’s Foreign Minister Ján Kubiš in Chisinau, where the latter has come on an official visit; an intergovernmental agreement is signed on advancing and protecting investments. 13-14 April —Ukrainian Foreign Minister Vladimir Ogryzko visits Moldova and meets with the country’s leadership. 16 April —A Czech delegation headed by Vice Chairman of the Chamber of Deputies of the Parliament of the Czech Republic Vojtìch Filip visits Chisinau. 23-24 April —A Moldovan delegation visits Baku, where three agreements are signed—on cooperation in the fuel and energy complex, on cooperation and information exchange in the fight against violations of economic and tax legislation, and on cooperation in protecting intellectual property—and the Day of Moldovan Culture in Azerbaijan is officially opened. 21 May —A summit is held of the heads of state and government of the Southeast European Cooperation Process in Bulgaria and Moldova accepts the mandate of current chairman of this regional organization. 23 May —Moldovan Parliament Chairman Marian Lupu meets in Strasbourg with Secretary General of the Council of Europe Terry Davis.

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27 May —The tenth sitting of the Republic of Moldova-EU Cooperation Council is held in Brussels; the Moldovan delegation is headed by President Voronin. 28 May —Moldovan Vice Minister of Foreign Affairs and European Integration Valeriu Ostalep pays a working visit to Bucharest and holds meetings at the Rumanian Ministry of Foreign Affairs. 6 June —An informal CIS summit is held, at which Vladimir Voronin meets with the presidents of Russia and Ukraine, Dmitry Medvedev and Viktor Yushchenko. 9-11 June —A summit of the parliament chairmen of the BSECO is held; Moldova takes over the chair in the BSECO PA for six months from Greece. 16 June —A meeting is held between President Voronin and Secretary General of the Regional Cooperation Council Hido Bišèeviæ, during which the president talks about Moldova’s task of chairmanship in this organization—advancing the region’s states along the path of European integration. 20 June —A meeting is held between the prime ministers of Moldova and Russia, Zinaida Greceanîi and Vladimir Putin, in Moscow. 25-27 June —A sitting is held of the Republic of Moldova-EU cooperation subcommittee “Energy, Transport and Telecommunications, Science and Technology and Education.” 26 June —A meeting is held between the president of Moldova and Montenegrin Foreign Minister Milan Roæen, who paid his first visit to the country in the history of Moldovan-Montenegrin contacts. 27 June —Minister of Foreign Affairs and European Integration Andrei Stratan reports to the parliament on the results of introducing the Republic of Moldova-EU Action Plan. 6-9 July —PACE President Lluis Maria de Puig visits Moldova. 7 July —President Voronin receives Rumanian Foreign Minister Lazãr Comãnescu, who is paying an official visit to Moldova. 8 July —A meeting is held between Moldovan Prime Minister Zinaida Greceanîi and Max-Peter Ratzel of the European Law Enforcement Organization Europol; talks are held between the Moldovan and Rumanian delegations in Chisinau. 14 July —Polish Foreign Minister Radoslaw Sikorski visits Moldova, where he announces the EU Eastern Europe Initiative (as proposed by Poland and Sweden), the Republic of Moldova and the Republic of Poland sign a Declaration on Creating a Moldovan-Polish European Integration Forum. 20 August —A meeting is held between the presidents of Moldova and Rumania in Chisinau. 25 August —A meeting is held between the presidents of Moldova and Russia in Sochi. 2-3 September —A Moldovan delegation headed by Prime Minister Zinaida Greceanîi pays a visit to the Czech Republic where a Moldovan-Czech economic forum is held; a protocol is signed to the agreement on mutual protection of investments; and a new residence of the Moldovan embassy in the Czech Republic is opened. 498 CHRONOLOGY OF EVENTS FOR 2008 International Affairs

9 September —A meeting is held between Minister of Foreign Affairs and European Integration Andrei Stratan and Chairperson of the Monitoring Committee of the Council of Europe’s Parliamentary Assembly Josette Durrieu. 10-13 September —A Moldovan delegation participates in an economic forum in Krynica, Poland, in order to attract foreign investments. 3 October —A sitting is held in Brussels of the Republic of Moldova-EU Cooperation Council and informal talks are held on a new document regulating relations between the parties. 6 October —A French delegation visits Moldova and a meeting is held between the president of Moldova and Minister of State Responsible for European Affairs Jean-Pierre Jouyet. 8-9 October —The 11th Economic Summit of the CEI Member States is held in Chisinau. 22-23 October —Moldovan Prime Minister Zinaida Greceanîi visits Rumania and a sitting of the Moldovan-Rumanian intergovernmental commission on economic trade cooperation is held for the first time. 27-28 October —A meeting is held between the presidents of Moldova and Montenegro within the framework of an official visit by Montenegrin President Filip Vujanoviæ; an intergovernmental agreement is signed on mutual support in the customs sphere. 30 October —A meeting is held between the president of Moldova and NATO Secretary General Jaap de Hoop Scheffer. 3-5 November —The 32nd plenary session of the BSECO PA is held in Chisinau. 13-14 November —Head of the RF Government Vladimir Putin pays an official visit to Moldova. 14 November —A summit is held of the heads of CIS states in Chisinau; Zinaida Greceanîi takes the baton from her Belarusian colleague and becomes chairman of the Council of Heads of CIS Governments. 18 November —President Voronin meets with the secretary of the Secretariat of the Central Committee of the Communist Party of China who is paying a working visit to Moldova. 24 November —The foreign minister of Italy pays a working visit to Moldova and the question of opening an Italian embassy in Chisinau, which has repeatedly featured on the agenda of Moldovan-Italian relations, is discussed. 27-28 November —A summit of the heads of state and a sitting of the foreign ministers of the CEI member states are held in Chisinau. 3 December —The European Commission receives a mandate for beginning talks on drawing up a new agreement with the Republic of Moldova.

Republic of Tajikistan

28 January —The presidents of Tajikistan and Turkmenistan agree to increase deliveries of Turkmen electric energy to Tajikistan.

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9-10 February —President Emomali Rakhmon pays an official visit to Iran. 19 February —The international community begins delivering emergency humanitarian aid to Tajikistan. 21 February —Presidents Emomali Rakhmon and Vladimir Putin meet in Moscow. 25 February —A working meeting of the OSCE is held in Dushanbe to discuss border management. 7-8 March —Ukrainian President Viktor Yushchenko pays an official visit to Tajikistan. 12-13 March —Emomali Rakhmon participates in the 11th OIC summit in Dakar and in bilateral meetings with the presidents of Qatar, Iran, Turkey, and Bahrain and the head of the Islamic Development Bank. 24-25 March —A trilateral meeting is held among the foreign ministers of Tajikistan, Iran, and Afghanistan. 27 March —President Emomali Rakhmon and the vice president of the World Bank discuss settlement of the cotton growers’ debts and drawing up of a feasibility report for Rogun GES. 8 April —President Emomali Rakhmon discusses cooperation with the European Union with European Commissioner for External Relations and European Neighborhood Policy Benita Ferrero-Waldner. 11 April —French Foreign Minister Bernard Kouchner visits Tajikistan. 11 April —A regional conference of French ambassadors to the CIS countries is held in Dushanbe led by French Foreign Minister Bernard Kouchner. 14 April —German Minister of State Gernot Erler visits Tajikistan. 28 April —President Emomali Rakhmon discusses cooperation between Tajikistan and the IMF with Executive Director to the International Monetary Fund Thomas Moser. 12-13 May —President Emomali Rakhmon pays an official visit to Kazakhstan. 15 May —The defense ministers of the SCO member countries sign an Agreement on Cooperation in the Military Sphere in Dushanbe. 16 May —Tajik President Emomali Rakhmon meets with Kyrgyz President Kurmanbek Bakiev in Khujand to discuss border and hydropower issues. 3 June —Current OSCE Chairman and Finnish Foreign Minister Alexander Stubb visits Dushanbe. 6-7 June —Emomali Rakhmon participates in an informal summit of the CIS heads of state in St. Petersburg. In the city on the Neva he meets the new Russian president, Dmitry Medvedev, for the first time. 5-6 July —Emomali Rakhmon participates in an informal meeting of the heads of several states in Astana on the occasion of the 10th anniversary of the new capital of the Republic of Kazakhstan. In the Kazakh capital he held bilateral meetings with Russian President Dmitry Medvedev, Turkmen President Gurbanguly Berdymukhammedov, Kazakh President Nursultan Nazarbaev, and Turkish President Abdullah Gül. 500 CHRONOLOGY OF EVENTS FOR 2008 International Affairs

26 July —President Emomali Rakhmon and Chinese Foreign Minister Yang Jiechi discuss bilateral cooperation. 4 August —Iranian President Mahmoud Ahmadinejad and Tajik Foreign Minister Hamrokhon Zarifi discuss bilateral cooperation between Tajikistan and Iran in Tehran. 7-8 August —Emomali Rakhmon visits Beijing to participate in the opening ceremony of the Summer Olympics. In Beijing he meets with the heads of China’s largest companies Z X Choi Invest, Huawei, TBEA, Lijun, and Sinohait and discusses investments into his country’s economy with them. 28 August —A summit of the heads of SCO states is held in Dushanbe. 29 August —Russian President Dmitry Medvedev pays his first official visit to Tajikistan. 23-26 September —President Emomali Rakhmon participates in a regular session of the U.N. General Assembly in New York. 9-10 October —President Emomali Rakhmon participates in a regular session of the Council of Heads of CIS State and Interstate Council of EurAsEC. Emomali Rakhmon and Islam Karimov come to terms on the transit of Turkmen electric energy via the energy network of Uzbekistan. 16 October —President Emomali Rakhmon signs a decree on the opening of a Tajik embassy in Ukraine. 24-25 October —The 3rd Interparliamentary Forum “Russia-Tajikistan: Potential of Interregional Cooperation” is held in the republic. 9 November —Days of Azerbaijani Culture begin in Tajikistan. 26 November —President Emomali Rakhmon discusses bilateral cooperation with Head of the Russian Presidential Administration Sergey Naryshkin. 29 November —President Emomali Rakhmon participates in the Conference on Development Financing in the capital of Qatar, Doha. 3-5 December —Emomali Rakhmon pays a state visit to Ukraine. 19-20 December —Emomali Rakhmon participates in an informal summit of the heads of CIS states in Borovoe (Kazakhstan) and holds talks with Nursultan Nazarbaev.

Turkmenistan

9 January —Executive Director of the United Nations Office on Drugs and Crime (UNODC) Antonio Maria Costa visits Ashghabad. 11-12 January —An American delegation headed by Senator Richard Lugar visits Turkmenistan. 13-14 January —A government delegation from the Republic of Tatarstan (Russian Federation) headed by Tatarstan Prime Minister Rustam Minnikhanov visits Turkmenistan. 501 CENTRAL EURASIA 2008 Analytical Annual

16 January —An EU delegation headed by representative of the Slovenian Foreign Ministry Darja Bavdaz Kuret visits Turkmenistan. 17 January —A government delegation from Azerbaijan headed by Deputy Prime Minister Iagub Eiubov visits Ashghabad. 19 January —Speaker of the Turkmenistan Mejlis visits Georgia to participate in the inauguration of President Mikhail Saakashvili. 22-24 January —A delegation from the Republic of Korea headed by Vice Minister of Foreign Affairs and Trade Cho Jung-Pyo visits Turkmenistan; an embassy of the Republic of Korea opens in Ashghabad. 25 January —A U.S. delegation headed by Commander of the U.S. Central Command Admiral William Joseph Fallon visits Turkmenistan. 29 January —Deputy Assistant Secretary of State for South and Central Asia Steven Mann visits Ashghabad. 29-31 January —The 28th sitting of the interdepartmental commission on marine biological resources of the Caspian Sea of five Caspian states is held in Ashghabad. 31 January —A delegation from Uzbekistan consisting of Minister of Economic Batir Zhodzhaev and Minister of Foreign Economic Relations, Investments, and Trade Eler Ganiev visits Ashghabad. 7 February —A delegation from the Arab Republic of Egypt headed by Egyptian Assistant Foreign Minister Tamer Abdel-Aziz Abdalla Khalil visits Turkmenistan. 12 February —A delegation from Rumania headed by State Secretary Viorel Palasku visits Turkmenistan. 12-13 February —First sitting of the intergovernmental Turkmen-Tajik commission on cooperation is held in Ashghabad. 14-17 February —A government delegation headed by Deputy Chairman of the Turkmen Cabinet of Ministers T. Tagyev visits Belgium. 18 February —A delegation from Senegal headed by Minister Serigne Diop visits Turkmenistan. 19-24 February —A Turkmen delegation headed by Minister of Transportation G. Khangulyev visits the Republic of Korea. 20-23 February —Turkmen Minister of Environmental Protection Akmyradov visits Monaco to participate in the U.N. conference on environmental protection problems. 22 February —The Turkmen president participates in an informal CIS summit in Moscow. 24 February —A German business delegation headed by Minister of Economy and Technologies Michael Gloss visits Turkmenistan. 27-28 February —Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE, pays an official visit to Turkmenistan. 28 February —U.S. Coordinator for Eurasian Energy Diplomacy Ambassador Steven Mann visits Ashghabad. 502 CHRONOLOGY OF EVENTS FOR 2008 International Affairs

5-6 March —OSCE Secretary General Marc Perrin de Brichambaut visits Turkmenistan. 10-11 March —President Berdymukhammedov pays a state visit to Uzbekistan. 20 March —President Berdymukhammedov meets with the country’s diplomatic corps; a decree is issued on creating an institute of international affairs. 24-25 March —President Berdymukhammedov visits Turkey. 2-4 April —President Berdymukhammedov visits the NATO summit in Rumania; meetings are held with the U.S., Croatian, and Afghan presidents. 4 April —Vice President of India Hamid Ansari visits Turkmenistan. 9-10 April —A foreign ministerial session of the EU Troika and the Central Asian countries is held in Ashghabad. 22 April —Prime Minister of Lithuania Gediminas Kirkilas visits Turkmenistan. 23 April —A delegation from the European Bank for Reconstruction and Development visits Turkmenistan. 24 April —Deputy Oil Minister of Iran Reza Kasaeizadeh visits Turkmenistan. 28 April —President Berdymukhammedov visits Afghanistan. 29-30 April —A delegation from Azerbaijan visits Ashghabad. 11 May —NATO’s Special Representative for the Caucasus and Central Asia Robert Simmons visits Turkmenistan. 15 May —A delegation from the Republic of Korea headed by Prime Minister Han Seung-soo visits Turkmenistan. 19-20 May —The Turkmen president pays an official visit to Azerbaijan. 21 May —OSCE High Commissioner on National Minorities Knut Vollebaek visits Turkmenistan. 26 May —An EU delegation visits Turkmenistan; a memorandum is signed on cooperation in the energy sphere. 28 May —U.S. Assistant Secretary for South and Central Asian Affairs Richard Boucher visits Turkmenistan; ECO Secretary General Khurshid Anvar visits Turkmenistan. 4-5 June —An OSCE delegation headed by Chairman-in-Office Alexander Stubb visits Turkmenistan. 5-6 June —President Berdymukhammedov visits the CIS summit in St. Petersburg; talks are held with the presidents of Russia and Ukraine. 11-16 June —Secretary General’s Special Representative and Head of the U.N. Regional Center for Preventive Diplomacy in Central Asia (UNRCCA) Miroslav Jenèa visits Turkmenistan. 12 June —A Turkmen delegation visits Paris to participate in an international conference on Afghanistan. 16 June —A Turkmen-Azerbaijani economic forum is held in Ashghabad.

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17 June —A delegation from Hungary visits Turkmenistan; gas talks with Russia’s Gazprom are held in Ashghabad. 7 August —President Berdymukhammedov visits the Olympic Games in Beijing; meetings are held with president of the Republic of Korea and chairman of the PRC. 24 August —King of Jordan Abdullah II pays an official visit to Turkmenistan. 28-29 August —PRC Chairman Hu Jintao pays an official visit to Turkmenistan. 30 August —A Russian delegation headed by Vice Premier Viktor Zubkov visits Turkmenistan. 1 September —Minister of Energy and Natural Resources of Turkey Hilmi Güler visits Turkmenistan. 2 September —U.S. Deputy Assistant Secretary for South and Central Asian Affairs Ambassador George A. Krol visits Turkmenistan. 7 September —Special Envoy for U.S. Eurasian Energy Clayland Boyden Gray visits Turkmenistan. 11 September —A Latvian delegation headed by Minister of Economics Kaspars Gerhards visits Turkmenistan. 3 October —Turkish Prime Minister Recep Tayyip Erdoðan visits Turkmenistan. 7-8 October —Latvian President Valdis Zatlers pays an official visit to Turkmenistan. 8 October —Head of the Russian presidential administration Sergey Naryshkin visits Turkmenistan. 10 October —President Berdymukhammedov visits the CIS summit in Kyrgyzstan. 5-7 November —President Berdymukhammedov pays a state visit to the Republic of Korea. 13-15 November —President Berdymukhammedov pays an official visit to Germany. 16-18 November —President Berdymukhammedov pays an official visit to Austria. 28-29 November —President of Azerbaijan Ilham Aliev and Turkish President Abdullah Gül visit Turkmenistan. 18-19 December —Bulgarian President Georgy Pyrvanov pays an official visit to Turkmenistan. 19 December —The 63rd session of the U.N. General Assembly adopts a resolution on Reliable and Stable Transit of Energy and Its Role in Ensuring Sustainable Development and International Cooperation initiated by Turkmenistan.

Ukraine

13-14 February —The EU Troika foreign ministers visit Ukraine; European Commissioner for External Relations and European Neighborhood Policy Benita Ferrero-Waldner confirms the European Commission’s interest in reconstructing the Ukrainian gas transportation system.

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31 March-1 April — During a state visit to Ukraine, U.S. President George Bush focuses attention on the need for Ukraine and Georgia to join the MAP. 15 May —The Ukrainian president and British Prime Minister Gordon Brown adopt a joint statement. The British prime minister recognizes Ukraine’s right to “become a full-fledged EU member” after meeting the relevant criteria and notes the wisdom of setting forth the principles of political association and economic integration in a new agreement between the EU and Ukraine. 22-23 May —The 3rd Energy Summit is held in Kiev with the participation of the presidents of Ukraine, Azerbaijan, Georgia, Estonia, Latvia, Lithuania, Poland, EU Energy Commissioner, and representatives of Bulgaria, Kazakhstan, Slovakia, and the U.S. 6 June —President Viktor Yushchenko meets with Turkmen President Berdymukhammedov during the CIS summit in St. Petersburg. 30 June-1 July —President Viktor Yushchenko participates in the GUAM summit (Batumi, Georgia). 13 August —President Viktor Yushchenko signs two decrees approving the decisions of the Ukrainian National Security and Defense Council (UNSDC) on movement of Russian Black Sea Fleet contingents on Ukrainian territory and “crossing of the Ukrainian state border by servicemen, war ships (supply vessels), and aircraft of the Russian Federation Black Sea Fleet which is on Ukrainian territory.” 14 August —Deputy Head of the Ukrainian Presidential Secretariat A. Goncharuk comments on the country’s official position regarding the CIS. The presidential secretariat proceeds from the fact that Ukraine was never a member of the CIS and did not recognize it as an entity of international law, but cooperated and continues to cooperate with it under corresponding economic projects. 2 October —During Yulia Timoshenko’s working visit to Moscow an Intergovernmental Memorandum on Cooperation in the Gas Sphere was coordinated that should become the foundation of relations between Gazprom and Naftogaz Ukrainy. 13-14 November —The 4th Energy Summit is held in Baku attended by the presidents of Azerbaijan, Ukraine, Georgia, Lithuania, Turkey, and Poland. 2 December —In order to defuse tension in relations with Russia, President Viktor Yushchenko signs decrees on creating an Interdepartmental Strategic Group on Ukrainian-Russian Relations and appoints Ambassador to Russia K. Grishchenko as Ukraine’s special representative for developing relations with the Russian Federation. According to the presidential decree, in addition to the functions of ambassador, K. Grishchenko has been given the powers of Ukraine’s special representative in Russia with the right to hold talks on behalf of the country’s president. 2-3 December —At a session of the North Atlantic Council’s foreign ministers, Great Britain and the U.S. motion to remove the question of offering Ukraine and Georgia the NATO Membership Action Plan from the agenda. Instead NATO suggests

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that Ukraine and Georgia draw up one-year national programs to be elaborated and approved every year. 25 December —Chief of Russia’s Land Forces Tactical Air Defense System Major General Mikhail Krush officially states for the first time that the Russian Defense Ministry has “irrefutable proof” of the participation of Ukrainian military specialists in the hostilities in South Ossetia with respect to the air defense means (Buk-M1 and Osa complexes) Ukraine delivered to Georgia.

Republic of Uzbekistan

24 January —President Karimov receives Commander of the United States Central Command William Fallon. 5-6 February —Islam Karimov pays an official visit to the Russian Federation. 24-26 February —Islam Karimov pays a visit to the Republic of Korea. 10 March —Turkmen President Gurbanguly Berdymukhammedov pays a state visit to Uzbekistan. 11-12 March —An international conference on “Problems of the Aral Sea: Their Impact on the Gene Pool, Flora and Fauna, and International Cooperation for Mitigating Consequences.” 17 March —President Karimov pays an official visit to the United Arab Emirates. 20 March —President Karimov receives Prince Al-Walleed bin Talal bin Abdul Aziz Al Saud. 3 April —President Karimov participates in the NATO/Euro-Atlantic Partnership Council summit in Bucharest. 22-23 April —President Karimov pays an official visit to the Republic of Kazakhstan. 24 April —A visiting session of the Board of Directors of OAO LUKoil (Russia) is held in Tashkent attended by the heads of several Uzbek ministries and departments and the Uzbekneftegaz National Petrochemical Company. 29-30 April —An international conference is held in Tashkent on problems of ensuring security and sustainable development in Central Asia: “Peace and Stability in Afghanistan: Ways and Methods to Achieve Them.” 12 May —President Karimov receives Prime Minister of the Republic of Korea Han Seung-Soo. 13 May —President Karimov receives Foreign Minister of the Republic of Indonesia Hassan Wirayuda. 2 June —President Karimov receives Assistant Secretary of State for South and Central Asian Affairs Richard Boucher. 4 June —President Karimov receives acting chairman of the OSCE, Foreign Minister of Finland Alexander Stubb.

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9 June —President Karimov receives a minister of the United Arab Emirates Cabinet of Ministers, Chairman of Dubai Holding Mohammad Al Gergawi. 14 July —A sitting is held of the Council of Executive Directors of the IMF to discuss the report of IMF personnel on the results of consultations with the Republic of Uzbekistan in keeping with Article 4 of the IMF Charter. 18 July —President Karimov receives Japanese Finance Minister Fukushiro Nukaga. 21 July —Emir of the State of Kuwait Sheikh Sabah Al-Ahmed Al-Jaber Al-Sabah arrives in Uzbekistan on an official visit. 22 July —President Karimov receives U.S. Ambassador Extraordinary and Plenipotentiary Richard Norland. 17 August —President Karimov instructs the republic’s government to allot 250,000 USD for rendering humanitarian aid to the civilians that suffered during the military conflict in South Ossetia. 21-23 August —A delegation of the Sultanate of Oman led by Minister of Higher Education Dr. Rawiyah bint Saud Al Busaidiyah arrives in Uzbekistan on a working visit. 28 August —Uzbekistan participates in a sitting of the Council of Heads of the SCO States in Dushanbe. 28 August —Members of a delegation led by Acting Commander of the U.S. Central Command Lieutenant General Martin E. Dempsey meet with Defense Minister of the Republic of Uzbekistan Ruslan Mirzaev. 1-2 September —Russian Prime Minister Vladimir Putin pays a working visit to Uzbekistan. The bilateral talks end in the signing of an action plan for an economic cooperation program between Russia and Uzbekistan for 2008-2012. 2 September —A delegation of the Federative Republic of Germany led by Federal Defense Minister Dr. Franz Josef Jung arrives in Uzbekistan. 5 September —President Karimov participates in a summit of the CSTO held in the Russian Federation capital, Moscow. 11 September —President Karimov pays an official visit to the Azerbaijan Republic. 16 September —An Uzbek delegation led by Foreign Minister V. Norov takes part in the 8th session of the Uzbekistan-EU Cooperation Council. 19 September —Bilateral political consultations are held in Tashkent between the Republic of Uzbekistan and the Republic of Korea at the deputy foreign ministerial level. Deputy Minister of Foreign Affairs and Trade Lee Yong-Joon heads the South Korean delegation. 22 September —The 8th sitting of the Uzbek-Indian Intergovernmental Commission (IGC) is held in Delhi. 23-25 September —A delegation of Republic of Korea business circles visits Uzbekistan. 2 October —A delegation of the Federative Republic of Brazil led by Under Secretary for Political Affairs of the Brazilian Ministry of Foreign Affairs Roberto Jaguaribe Gomes de Mattos visits Uzbekistan.

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5 October —Latvia’s President Valdis Zatlers pays a state visit to Uzbekistan. 9-10 October —The Uzbek president visits Bishkek where he participates in sittings of the Council of Heads of CIS States and the Interstate Council of the Eurasian Economic Cooperation (EurAsEC), as well as in a meeting of the heads of Central Asian states. 13 October —The European Union lifts most of the sanctions against Uzbekistan (only the embargo on delivering arms to this country remains in force). The foreign ministers of the EU member states adopt a decision to lift the sanctions during a regular meeting in Luxembourg. 22 October —President Karimov receives a minister of the United Arab Emirates Cabinet of Ministers, Executive Chairman of Dubai Holding Mohammad Al Gergawi. 5 November —Bulgarian President Georgi Parvanov pays a state visit to Uzbekistan. 16 November —Prime Minister of Malaysia Abdullah bin Haji Ahmad Badawi pays an official visit to Uzbekistan. 18 November —Rumanian Foreign Minister Lazar Comanescu visits Uzbekistan. 19-21 November —Hungarian Foreign Minister Kinga Göncz visits Uzbekistan. 25 November —President Karimov receives Russian Ambassador Extraordinary and Plenipotentiary to Uzbekistan Farit Mukhametshin in connection with expiration of his term in office. 27 November —A delegation of the Algerian People’s Democratic Republic led by deputy of the National People’s Assembly Abdul Qader Bunekraf visits Uzbekistan. 28 November —A sitting of the Uzbek-Polish Intergovernmental Commission on Economic Cooperation is held in Warsaw. 2 December —A meeting with Special Representative of the U.N. Secretary General for Afghanistan Kai Eide is held at the Uzbekistan Ministry of Foreign Affairs. 3 December —An Uzbek delegation participates in a high-level EU-CA conference called “Platform for Cooperation in the Area of Environment Protection and Water Resources.” 8-19 December —An International Monetary Fund (IMF) mission headed by Ms. Sena Eken, Assistant Director, Middle East and Central Asia Department, International Monetary Fund, visits Tashkent. 10 December —Uzbekistan joins the Second Optional Protocol to the International Covenant on Civil and Political Rights, aiming at the abolition of the death penalty (New York, 15 December, 1989). 12 December —Uzbekistan officially joins the Joint Convention on the Safety of Spent Fuel Management and on the Safety of Radioactive Waste (Vienna, 5 September, 1997) and the Optional Protocol to the Convention on the Rights of the Child on the Sale of Children, Child Prostitution and Child Pornography (New York, 25 May, 2000).

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13 December —Uzbekistan ratifies the Protocol to the Partnership and Cooperation Agreement establishing a Partnership between the European Communities and their Member States, of the one part, and the Republic of Uzbekistan, of the other part, to take account of the accession of the Republic of Bulgaria and Rumania (Brussels, 20 May, 2008). 25 December —A delegation of the People’s Republic of China led by Chinese Assistant Foreign Minister Li Hui arrives in Uzbekistan. 31 December —A delegation of the Republic of Uzbekistan visits the Sultanate of Oman. The delegation consists of representatives of the Ministry of Foreign Economic Relations and Trade, the Foreign Ministry, the State Property Committee, Uzbekneftegaz, the National Bank of Foreign Economic Affairs, and other ministries and departments.

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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 510 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 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 SOCAR State Oil Company of Azerbaijan Republic

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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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