CENTRAL ASIA AND THE Volume 16 Issue 3-4 2015 AND THE CAUCASUS Journal of Social and Political Studies

Published since 2000

Volume 16 Issue 3-4 2015

CA&CC Press® SWEDEN

1 Volume 16 FOUNDEDIssue 3-4 2015 AND PUBLISHEDCENTRAL ASIA AND THEBY CAUCASUS INSTITUTE INSTITUTE OF FOR CENTRAL ASIAN AND STRATEGIC STUDIES OF CAUCASIAN STUDIES THE CAUCASUS Registration number: 620720-0459 Registration number: M-770 State Administration for Ministry of Justice of Patents and Registration of Sweden Republic PUBLISHING HOUSE CA&CC Press®. SWEDEN Registration number: 556699-5964

Journal registration number: 23 614 State Administration for Patents and Registration of Sweden

E d i t o r i a l C o u n c i l

Eldar Chairman of the Editorial Council ISMAILOV Tel./fax: (994 - 12) 497 12 22; E-mail: [email protected]. Murad ESENOV Editor-in-Chief Tel./fax: (46) 70 232 16 55; E-mail: [email protected] Vladimer PAPAVA Deputy Editor-in-Chief Tel./fax: (995 - 32) 24 35 55; E-mail: [email protected] Jannatkhan Deputy Editor-in-Chief EYVAZOV Tel./fax: (994 - 12) 596 11 73; E-mail: [email protected] Kalamkas represents the journal in Kazakhstan (Astana) YESSIMOVA Tel./fax: (7 - 701) 7408600; E-mail: [email protected] Ainura represents the journal in Kyrgyzstan (Bishkek) ELEBAEVA Tel./fax: (996 - 312) 61 30 36; E-mail: [email protected] Saodat OLIMOVA represents the journal in Tajikistan (Dushanbe) Tel.: (992 372) 21 89 95; E-mail: [email protected] Farkhad represents the journal in Uzbekistan (Tashkent) TOLIPOV Tel.: (9987 - 1) 225 43 22; E-mail: [email protected] Ziya KENGERLI represents the journal in Azerbaijan (Baku) Tel.: (+994 - 50) 3006694; E-mail: [email protected] David represents the journal in (Erevan) PETROSYAN Tel.: (374 - 10) 56 88 10; E-mail: [email protected] Kakhaber ERADZE represents the journal in () Tel.: (+995 - 95) 45 82 88; E-mail: [email protected] Sun ZHUANGZHI represents the journal in China (Beijing) Tel.: (86) 10-64039088; E-mail: [email protected] Konrad SCHÄFFLER represents the journal in Germany (Munich) Tel.: (49 - 89) 3003132; E-mail: [email protected] Vladimir MESAMED represents the journal in the Middle East (Jerusalem) Tel.: (972 - 2) 5882332; E-mail: [email protected] Irina EGOROVA represents the journal in the Russian Federation () Tel.: (7 - 495) 3163146; E-mail: [email protected] Robert represents the journal in the U.S. (Buffalo, NY) GUANG TIAN Tel: (716) 880-2104; E-mail: [email protected] Rustem represents the journal in Ukraine (Kiev) ZHANGUZHIN Tel.: (380 - 44) 524-79-13; E-mail: [email protected] 2 CENTRAL ASIA AND THEE CAUCASUSD I T O R I A L B O A R DVolume 16 Issue 3-4 2015

Akif ABDULLAEV Ph.D. (Economy), Senior Research Fellow, Institute of Strategic Studies of the Caucasus (Azerbaijan) Bülent ARAS Doctor, Chair, Department of International Relations, Fatih University (Turkey) Mariam ARUNOVA Ph.D. (History), leading research associate, Institute of Oriental Studies, Russian Academy of Sciences (Russia) Garnik ASATRIAN D.Sc. (Philology), Professor, Head of the Department of Iranian Studies, Erevan State University (Armenia) Mustafa AYDIN Rector of Kadir Has University (Turkey) Svante E. CORNELL Professor, Research Director, Central Asia-Caucasus Institute, Silk Road Studies Program, Johns Hopkins University-SAIS (U.S.A.) William FIERMAN D.Sc. (Political Science), Professor of Indiana University (U.S.A.) Paul GOBLE Senior Advisor, Voice of America (U.S.A.) Sergey GRETSKY Doctor, Chair of Central Asian Studies, Foreign Service Institute, U.S. Department of State (U.S.A.) Xing GUANGCHENG D.Sc. (Political Science), Professor, Deputy Director of the Institute for East European, Russian and Central Asian Studies, Chinese Academy of Social Sciences (China) Alexander IGNATENKO President, Institute of Religion and Politics, Doctor of Philosophy, specialist in Islamic studies, leading expert of the Institute of Social Systems, Moscow State University, member of the Council for Cooperation with Religious Associations under the Russian Federation President (Russia) Ashurboi IMOMOV Ph.D. (Law), Assistant Professor, Head of the Department of Constitutional Law, Tajik National University (Tajikistan) Stephen F. JONES Professor, Russian and Eurasian Studies, Mount Holyoke College (U.S.A.) Lena JONSON Doctor, senior researcher, Swedish Institute of International Affairs (Sweden) Klara KHAFIZOVA D.Sc. (History), Director, Center for Strategic and International Studies, Professor at the International Relations and Foreign Policy Department, Kainar University (Kazakhstan) Zaynidin KURMANOV D.Sc. (History), Professor, Head of the Chair of International Relations, the Kyrgyz-Russian University (Kyrgyzstan) Jacob M. LANDAU Professor of Political Science, The Hebrew University of Jerusalem (Israel) S. Neil MACFARLANE Professor, Director, Center for International Studies, The University of Oxford (Great Britain) Alexei MALASHENKO D.Sc. (History), Professor, Scholar-in-Residence, Ethnicity and Nation-Building Program Co-Chair, The Carnegie Moscow Center (Russia) Abbas MALEKI Doctor, Director General, International Institute for Caspian Studies () Akira MATSUNAGA Doctor, History of Central Asia and the Caucasus, Program Officer, The Sasakawa Peace Foundation (Japan) Roger N. McDERMOTT Affiliated Senior Analyst, Danish Institute for International Studies, Copenhagen (Denmark) Roin METREVELI D.Sc. (History), Professor, Academician of the Georgian National Academy of Sciences, President of the National Committee of Georgian Historians (Georgia) Nazim MUZAFFARLI D.Sc. (Economy), Professor, Director, Institute of Economy, Azerbaijan National Academy of Sciences (Azerbaijan) Vitaly NAUMKIN D.Sc. (History), Professor, Director, Center for Strategic and International Studies of RF (Russia) Yerengaip OMAROV Professor, Rector of Kainar University, President of the Academy of Natural Sciences, Republic of Kazakhstan (Kazakhstan) Avtandil SILAGADZE D.Sc. (Economy), Professor, Tbilisi University of International Relations, Full Member of the Georgian National Academy of Sciences (Georgia) S. Frederick STARR Professor, Chairman, Central Asia-Caucasus Institute, The Johns Hopkins University (U.S.A.) James V. WERTSCH Professor, Director of the International and Regional Studies Program, Washington University in St. Louis (U.S.A.) Alla YAZKOVA D.Sc. (History), Professor, head of the Mediterranean-Black Sea Center, Institute of Europe, Russian Academy of Sciences (Russia) Stanislav ZHUKOV D.Sc. (Economy), Senior Researcher, Institute of World Economy and International Relations, Russian Academy of Sciences (Russia)

The materials that appear in the journal do not necessarily reflect the Editorial Board and the Editors’ opinion

Editorial Office: CA&CC Press AB, Hubertusstigen 9. 97455 Luleå, SWEDEN WEB ADDRESS: http://www.ca-c.org © Central Asia and the Caucasus, 2015 © CA&CC Press®, 2015 3 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

CENTRAL ASIA AND THE CAUCASUS Journal of Social and Political Studies

Volume 16 Issue 3-4 2015

IN THIS ISSUE:

NATION-BUILDING

Nikolay POTENTIALS AND LIMITS OF POLITICAL COMPETITION: Borisov. INSTITUTIONAL TRANSFORMATIONS IN GEORGIA AND ARMENIA IN THE 2000S...... 7

Ali POLITICAL ELITES IN THE CONTEXT OF Salgiriev. THE ETHNOPOLITICAL PROCESSES IN THE NORTHERN CAUCASUS...... 25

Kenan THE NATIONAL IDEA AND NATIONAL IDEOLOGY Allahverdiev. IN THE SUSTAINABILITY OF ETHNOCULTURAL IDENTITY...... 32 Beka THE GEORGIAN POLITICAL ELITE: Chedia. MAIN TRENDS OF ITS CIRCULATION...... 42 Asyl POLITICAL CLANS OF KYRGYZSTAN: Bolponova. PAST AND PRESENT...... 50

ENERGY POLICY AND ENERGY PROJECTS

Sergey THE GREAT OIL AND GAS ROAD: Zhiltsov. FIRST RESULTS AND PROSPECTS...... 63 Valeria “THE GAS PIPELINE WAR”: Gandzhumian. ON SEVERAL GEOPOLITICAL CONSEQUENCES OF THE TANAP AND TURKISH STREAM PROJECTS...... 73

4 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

REGIONAL INTEGRATION

Chinara Esengul, Sheradil Baktygulov, Asel Doolotkeldieva, PROSPECTS FOR REGIONAL COOPERATION Bermet Imanalieva. IN CENTRAL ASIA AS SEEN TODAY...... 82 Rashid TAJIKISTAN-CHINA: Abdullo. TWENTY-FIVE YEARS OF DIRECT RELATIONS...... 93

GEOPOLITICS AND REGIONAL SECURITY

Parviz THE “RUSSIAN IDEA” VS. THE “AMERICAN DREAM”: Mullojanov. “SOFT ARM WRESTLING” IN THE CIS...... 108 Rouben THE DIPLOMACY OF QUALIFYING INDUSTRIAL ZONES. Shougarian. An Alternative Scenario of American Brokerage between Armenia and Turkey...... 116 Fareed THE EVER-CHANGING DYNAMIC OF CONFLICTS Shafee. IN GEORGIA: THE INTERPLAY BETWEEN INTERNAL AND EXTERNAL FACTORS...... 127

REGIONAL ECONOMIES

Ilkin GOVERNMENT BUDGET REVENUES IN AZERBAIJAN: Aslanov. THE TAX BURDEN AND THE ROLE OF THE OIL FACTOR...... 137 Vakhtang GEORGIA: PROBLEMS OF Burduli. INCREASING NATIONAL ECONOMIC SELF-SUFFICIENCY (Sectoral-Structure Aspect)...... 155 Vladimir Paramonov, CHINA IN THE OIL AND Alexei Strokov. GAS BRANCH OF ...... 176

RELIGION IN SOCIETY

Nurgul KYRGYZSTAN’S ISLAMIC REFERENCE POINTS: Esenamanova. THE ROLE OF FOREIGN RELIGIOUS TRENDS...... 186

Contents of the Central Asia and the Caucasus Issues Volume 16, 2015 ...... 200

5 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

FOR YOUR INFORMATION

The Special Feature section in the next three issues will discuss:

 Central Eurasia: Politics Today  Central Eurasia: Religion in the Sociopolitical Context  Central Eurasia: Integration Processes

Contributors please use the following guidelines: — begin articles with a brief abstract of 300-500 words and keywords; — articles should be no less than 3,000 and no more than 6,000 words, including footnotes; — footnotes should be placed at the bottom of each page; if there are references to Internet resources, please give the author’s name, the name of the document, the website address, and the date it was made available, for example, available 2007-04-19; — quotations, names of authors and other information from English-language sources should be duplicated in brackets in the original language, that is, in English; — the article should be divided into sections, including an introduction and conclusion; — the author should include the following personal information: first name, last name, academic degree, place of work, position, city, country.

All articles accepted are published in Russian and English, in the Russian-language and English-language versions of the journal, respectively. The editorial board takes responsibility for translation of the articles.

6 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

NATION-BUILDING

POTENTIALS AND LIMITS OF POLITICAL COMPETITION: INSTITUTIONAL TRANSFORMATIONS IN GEORGIA AND ARMENIA IN THE 2000S

Nikolay BORISOV Ph.D. (Political Science), Assistant Professor, Head of the Department of Theoretical and Applied Political Science, Faculty of History, Political Science, and Law, Russian State Humanitarian University (Moscow, Russian Federation)

ABSTRACT

he author approaches the course and The parliamentary-presidential form of results of the institutional transforma- government deprived the presidency of a T tions in the forms of government and large share of its former significance. This electoral and party systems in Georgia and means that the political regime in Georgia Armenia from the position of neo-constitu- will further consolidate its position not on the tionalism. He relies on methods of compara- basis of “dominant power,” but through insti- tive index analysis to identify the main mod- tutionalized competition and rotation of the els and trends of the political developments political elites according to certain rules, if in these countries in the last fifteen years the ruling coalition passes the test of func- and analyzes in detail the constitutional tioning in the “divided governance” context, changes and the way the new party and which cannot be excluded. electoral systems took shape as the political For the past fifteen years, Armenia has regimes consolidated their positions. been living amid vehement political competi-

7 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS tion. The opposition is strong enough to re- has closed ranks after years of disunity. The main a political entity: it reaps a consider- next parliamentary or presidential election able share of the votes at presidential elec- might be used for a violent regime change. tions and seats in the parliament at parlia- In the 2000s, the political develop- mentary elections, but never enough to win. ments in Georgia and Armenia proceeded A substantial number of people consistently within two different models: vote for the opposition, irrespective of who (1) the institutionalized competitive model represents it. So far, none of the incumbents with a dominant party (Georgia in 2000- has lost a presidential election, while every 2003 and 2003-2012) is extremely un- time the opponents refuse to accept the stable and is prone to coups: it is the il- election results and mobilize their electorate lusion of a consolidated regime, in which for protest action. The inevitable talk about political involvement is carried out falsified results and “stolen victory” sounds through informal institutions; convincing since the gap between the win- ner and the runner up is insignificant, espe- (2) the institutionalized competitive model cially in the regions. The regime in Armenia without a dominant party (Armenia) is must avoid suppression of the opposition relatively stable since mounting political and never try to curb competition to avoid rivalry is kept within certain limits through being challenged by the opposition, which a high degree of institutionalization.

KEYWORDS: political rivalry, Georgia, Armenia, the institution of presidency, electoral system, party system.

Introduction

The numerous transformations in the political regimes across the post-Soviet space have cre- ated the problem of forecasting political stability and manageability, which is much more interesting from the academic and much more relevant from the practical viewpoint than the problem of “democ- ratization” of the post-Soviet political regimes. The “disintegration” of the post-Soviet space, which has become obvious in the last fifteen years, and further divergence of the post-Soviet political re- gimes (even of close neighbors), as well as a series of regime changes, mean that the political vectors of the “post-Soviet” world should be urgently analyzed and explained. The post-Soviet transformations should not be analyzed as different types of “democratization”: this is unproductive and misleading. The growing awareness that the post-Soviet transformations are of a “non-lineal” nature suggests a “regime cycles” concept.1 It is equally correct to say that rivalry in the post-Soviet polities has nothing to do with the development level of civil society and demo- cratic institutions. It is an indicator of the extent to which the incumbents can control elections and the media, as well as use power when dealing with the opposition. This means that we should study the post-Soviet developments and classify them not as democ- ratization/authoritization, but as institutionalization/a-institutionalization, competitiveness/non-com- petitiveness, and stabilization/destabilization. We should investigate the ways the main political in-

1 H. Hale, “Regime Cycles: Democracy, Autocracy, and Revolution in Post-Soviet Eurasia,” World Politics, No. 58, 2005, pp. 133-165.

8 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 stitutions are formed and the ways their constellations affect the course and results of the political processes across the post-Soviet space. Today, we should concentrate on the possibilities and the range of limitations of political rivalry in different political conditions, as well as the causes of these efforts and their results. It has been correctly said that, in many cases, systems of government operate in the political- structural contexts created by institutional frameworks (the electoral system, synchronized election cycles, and the law on parties),2 while “how institutions affect the structure of incentives for people to act is one of the key considerations in the study of any system of governance.”3 An analysis of the forms (systems) of government, electoral systems, and party systems of the last fifteen years is needed to identify the comprehensive models (clusters) of the political develop- ment of the post-Soviet states. Some of them left the period of transformation and transition in the 2000s, while others began transforming within their new regimes during this time. This was a period of consolidation that finally created states in which no actor could change the regime contrary to the will of all the other important actors.4 Throughout the 2000s, the political processes in Georgia and Armenia unfolded under the pres- sure of frequent changes in the formal framework of rivalry, which brought very different political results. Political institutionalization means the rationalization of political institutions—sustainable, meaningful, and reproducible behavior. To put it another way, institutionalization expresses the de- gree to which a political institution is independent of a certain social group (family, clan, or class) or individual.5 Some analysts offer the under- and over-institutionalization concepts as two ideal defini- tions of party systems.6 This method of study can be described as a comparative analysis of the institution of presi- dency, as well as the electoral and party systems, according to certain criteria. By form (system) of government we mean the way the highest power structures (the head of state, government, and the parliament) are formed and the way their powers correlate. The index of form of government (IFG) calculated according to A. Krouwel’s methods7 and specified by O. Za- znaev8 is a 10-point system in which plusses mean that the system is presidential, minuses that the system is parliamentary, and zeros indicate a balanced system. Here I will rely on my own scale to identify the degree of institutionalization of the institution of presidency (IIP).9 The index of competitiveness of the institution of presidency (ICP) is an aggregate index calcu- lated as an average value of the following indicators: the time during which the same person fills the post, the average number of “also ran,” the defeat of the incumbents (in %), the average share of votes

2 See: B. Thibault, “Prezidentskie, parlamentskie ili gibridnye sistemy pravlenia? Instituty i razvitie demokratii v Tretiem mire i v stranakh Vostochnoy Evropy,” in: Povoroty istorii: postsotsialisticheskie transformatsii glazami nemetskikh issledovateley, in 2 vols., Vol. 2, St. Petersburg, p. 46. 3 V. Ostrom, The Meaning of American Federalism: Constituting a Self-Governing Society, Institute for Contemporary Studies Press, San Francisco, 1991. 4 See: V. Gelman, “Transformatsii i rezhimy: neopredelennost i ee posledstvia,” in: Rossia regionov: transformatsia politicheskikh rezhimov, ed. by V. Gelman, S. Ryzhenkov, Bri. M., Ves Mir, Moscow, 2000, p. 34. 5 See: S. Huntington, Political Order in Changing Societies, Yale University Press, 1968. 6 See: A. Schedler, “Under- and Overinstitutionalization: Some Ideal Typical Propositions Concerning New and Old Party Systems,” Kellogg Working Paper, No. 213, 1995, pp. 18-19, available at [http://kellogg.nd.edu/publications/ workingpapers/WPS/213.pdf]. 7 See: A. Krouwel, Measuring Presidentialism of Central and East European Countries, Amsterdam, 2003. 8 See: O.I. Zaznaev, Poluprezidentskaia systema: teoreticheskie i prikladnye aspekty, Kazan, 2006. 9 See: N.A. Borisov, “Institutsionalizatsia instituta prezidenstva i perspektivy konsolidatsii politicheskikh rezhimov na postsovetskom prostranstve,” Politea, No. 4, 2011, pp. 93-103.

9 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS cast for the president elect, and the mean difference between the share of votes cast for the candidates who came first and second. The effective number of parliamentary political parties can be calculated using the formula of Taagepera and Laakso10 (one divided by the sum of squares of the shares of seats that parties or blocs of parties acquired in the parliament). The index of disproportionality is calculated by the formula proposed by Douglas Rae11: the sum-total of absolute (module) values of discrepancies between the share of votes and the share of seats each party acquired in the parliament divided by the number of parliamentary parties. Here I will identify the basic models and trends of the political developments in Georgia and Armenia through consistent analysis, from the position of neo-constitutionalism based on the index analysis described above, of the course and results of the institutional transformations in the forms of government and the electoral and party systems in these countries.

Georgia: The “Overturning” Effect of Institutional Reforms

In Georgia, political projecting has been invariably connected with serious transformations in the political system and the fairly active opposition. The form of government. The first version of the Constitution of Georgia (1995) was based on the American model of a presidential republic with a clear separation of powers and system of checks and balances. The president was the head of state and the executive power branch, but could not dis- solve the parliament. The parliament had no right to pass a vote of no confidence against the govern- ment, while it needed three-fifths of the votes to override the president’s veto (IFG = +6).12 The regime change of 2003 was accompanied by constitutional amendments.13 Executive power was entrusted to the government, while the president became the head of state. The presiden- tial administration was separated from the government, while a chapter on the government’s powers was added. The amendments spoke of transferring to a presidential-parliamentary republic (typical of most of the CIS members) with the president as the head of state and the prime minister as the head of government fully accountable to the president and, partially, to the parliament. On the other hand, strange as it may seem, these amendments pushed the country closer to a presidential form of government—the president can dissolve the parliament after three refusals to declare con- fidence in the newly formed government (Art. 80), or if the parliament passes a vote of no confi- dence against the government (Art. 81). According to Art 73, the president has the right to appoint ministers without the consent of the parliament, but only as advised by the prime minister. The IFG rose from +6 to +7. In October-November 2007, the political situation in Georgia was shaped by massive opposition rallies. Ten opposition parties united to form a bloc that formulated the following demands: parlia-

10 See: M. Laakso, R. Taagepera, “‘Effective’ Number of Parties: A Measure with Application to West Europe,” Comparative Political Studies, Vol. 12, No. 1, 1979. 11 See: D. Rae, The Political Consequences of Electoral Laws, New Haven, 1971. 12 See: Constitution of the Republic of Georgia (Adopted on 24 August, 1995), available at [http://www.venice.coe.int/ webforms/documents/?pdf=CDL(2004)041-e]. 13 [http://csb.gov.ge/uploads/2081806.pdf].

10 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 mentary elections should be held in the summer of 2008 (according to the Constitution) instead of the fall of 2007 (as the ruling elite wanted); monitoring should be entrusted to the election commission on a parity basis; in the majority constituencies, mandates should be distributed on the basis of the votes cast for each of the candidates; and political prisoners should be released from prison.14 A compromise was reached when Mikhail Saakashvili agreed to hold a pre-term presidential election in January 2008 and organize referendums to determine the date of the parliamentary elections and NATO membership for Georgia.15 Saakashvili was reelected; 79.74 % favored the summer of 2008 as the date for the parliamentary elections, as the opposition had insisted;16 and 77% wanted to see their country in NATO,17 a drop against the 2007 results.18 As a result, Saakashvili remained president (even if he shortened his term by six months) since the opposition had no time to launch a full-scale election campaign. In the highly competitive election, Saakashvili received 53.47% of the votes, while his closest rival, Levan Gachechiladze, gained 25.69%.19 This meant that the country found a legal way to extricate itself from the crisis. In 2010, the constitutional order and form of government changed; the country became a par- liamentary-presidential republic. For objective reasons, the opposition needed constitutional amendments and a move toward a parliamentary republic: it never missed the chance to criticize the president for his insistent desire to preserve his wide powers and point to the glaring imbalance between the powers of the president and the parliament. The president’s party, in turn, did not miss the opportunity to consolidate its position with the help of the constitutional amendments that Saakashvili initiated in September 200820 under the pretext of the “modernization” and “democratization” of Georgia: “We are switching to a more complicated system; this will be a new system that relies on several power centers… Adopted im- mediately after the , that model would have led to a catastrophe.”21 At the same time, the Georgian president pointed out that the recommendations of the Venice Commission for Democ- racy through Law to continue limiting the president’s powers were unacceptable.22 In October 2010, the parliamentary majority, the faction of the United National Movement headed by Saakashvili, passed, without much trouble, his version of the constitutional amendments.23 The amendments and addenda considerably limited the powers of the president and extended those of the government and the parliament. Under the amended Constitution, the president was no longer head of the executive branch of power; Art 80.2 said that within seven days after the govern- ment is dissolved, the President of Georgia shall nominate a candidate for prime minister proposed

14 See: “No Signs of Compromise as Opposition Vows to Keep Protesting,” Civil Georgia, 2 November, 2007, available at [http://www.civil.ge/eng/article.php?id=16172&search=]. 15 See: B. Chedia, “Dilemma of the Georgian Elections: Political Transformations or a Slide toward Non-Liberal Democracy,” Central Asia and the Caucasus, No. 1 (55), 2009, pp. 104-105. 16 See: Protocol of the Results of the Referendum, ცენტრალური საარჩევნო კომისიის (Central Election Commission), available at [http://www.cesko.ge/uploads/other/6/6774.pdf] (in Georgian). 17 See: Ibidem. 18 See: B. Chedia, op. cit., p. 106. 19 See: Protocol of the Results of the Elections of the President of Georgia of 5 January, 2008, ცენტრალური საარჩევნო კომისიის (Central Election Commission), available at [http://www.cesko.ge/uploads/other/6/6773.pdf] (in Georgian). 20 See: “Saakashvili reshil podelitsia polnomochiami s parlamentom,” Lenta.Ru, 26 December, 2008, available at [http://lenta.ru/news/2008/12/26/president]. 21 “Saakashvili on New Constitution,” Civil Georgia, 30 September, 2010, available at [http://www.civil.ge/eng/article. php?id=22713&search=]. 22 See: Ibidem. 23 See: The Constitutional Law of Georgia on Amendments and Additions to the Constitution of Georgia of 15 October, 2010, No. 3710-IIc. საქართველოს პარლამენტის (The official site of the ), available at [http:// parliament.ge/ge/law/7437/19994] (in Georgian).

11 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS by the political party with the best results in the parliamentary elections; while Art 79.5 envisaged that the prime minister shall appoint and dismiss other members of the government. Under Art 78, “the Government of Georgia is the supreme body of the executive branch, which exercises domestic and foreign policy of the State.” According to Art 81, 811, the parliament has the exclusive right to form the government and declare a constructive vote of no confidence in the govern- ment. If the parliament cannot endorse the government twice in succession, the president shall present the legislative branch with a candidate for prime minister recommended by two-fifths of the deputies, dissolve the parliament and schedule extraordinary parliamentary elections only after a third attempt to declare confidence in the government fails. According to amended Art 68.4, the president’s veto on a draft law may be overridden by a simple majority of deputy votes (instead of three-fifths as be- fore). The president’s right to appoint governors goes to the government (Art 813); legal acts of the President of Georgia shall be countersigned by the prime minister (Art 731); and under Art 67, the President of Georgia loses the right of legislative initiative. According to Art 69, the President of Georgia is the supreme commander-in-chief of the armed forces of Georgia, head of the National Security Council (Art 72), and has the right to appoint three members of the constitutional court (Art 88). The president remains an arbiter if the parliament cannot select a candidate for prime minister, or if no candidates are offered, or if the parliament fails to de- clare a vote of no confidence in the government within the time established by law. The president shall be elected as before by direct voting (Art 70). On the whole, the constitutional reform moved Georgia toward a parliamentary-presidential form of government with the prime minister as the head of state. The IFG dropped to –1 (transfer to parliamentary semi-presidential form of government). The transitional constitutional provisions on the constitutional amendments (Art 3) registered that the amendments and addenda would come into force on 1 December, 2013. Since the presidential election was scheduled for October 2013, the amendments applied to the president who came to power after Saakashvili. According to the Constitution, Saakashvili could not be elected to a third term. Therefore, by passing on the constitutional powers to the prime minister, he could, in the event that his party won the parliamentary elections, guarantee himself the post of prime minster and es- sentially remain the head of state. In 2010, few of the Georgian analysts and opposition leaders missed the point. The Democratic Georgia— opposition bloc won the 2012 parliamentary elec- tions; its leader Bidzina Ivanishvili formed a new government; this upset Saakashvili’s plans to re- main in power. In 2013, Giorgi Margvelashvili of Georgian Dream won the first round of the presi- dential election with 62.12%; David Bakradze, who ran for the United National Movement, came second with 21.72%. This was a total defeat.24 This was the first time since 1990 that Georgia acquired a new president through elections, not a coup. The institutional reforms of 2010 produced an “overturning” effect that helped the opposition to win. The reforms initiated by Saakashvili made the elections more competitive and increased the degree of institutionalization of the presidency in Georgia, while reducing the status of the president and his influence to the minimum. The electoral system. Throughout the period of independence, it remained loose and mixed, however the correlation between the proportional and majority vote has changed considerably. Part of the parliament was elected by party lists in the national constituency, the rest of the candidates were elected in multi-mandate constituencies, the number of which was never the same. The number of

24 See: “Summary Protocol of the Results of Presidential Elections of 27 October, 2013 of Georgia,” Election Administration of Georgia, available at [http://www.cesko.ge/uploads/other/26/26885.pdf].

12 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 voters in the majority constituencies varied from very large (140,000 voters) to very small (6,000 voters),25 which violated the principle of equal representation.

Table 1

Competition at the Presidential Elections in Georgia in 2000-2013

Criteria 2000 2004 2008 2013 Average Year

Number of candidates 6 5 7 23 10.25

Number of parties with nominees 4 2 6 10 5.5

Share of party candidates (%) 66.7 28.6 85.7 43.5 56.1

Share of votes cast for the winner (%) 80.4 96.27 53.47 62.12 70.61

Difference between the winner 63.74 94.42 27.78 40.4 56.59 and the runner up

Number of defeated incumbents 2 0 1 0 1 (50%)

Number of pre-term elections 2 0 0 1 1 (50%)

Number of elections in the second round 0 0 0 0 0

IC average 52.17%

In 2003, after Shevardnadze’s retirement, the results of the 2003 parliamentary elections that triggered the regime change were annulled in the proportional constituencies and in several (but not all) majority constituencies. In 2004, the parliamentary elections were held to fill the vacancies in the party lists. In 2004, when Mikhail Saakashvili came to power, the number of seats in the Georgian parlia- ment was cut from 235 to 150; 100 of them were filled by proportional vote, the rest by majority vote. The 2008 amendments and addenda to the Constitution increased the number of seats in the parlia- ments: from that time on an equal number of deputies (75) was elected by proportional and majority vote (which means that the share of those elected by proportional vote was slashed by 50%); the election barrier for candidates elected by proportional vote was lowered to 5%; to be elected by the majority system, candidates needed over 30% of votes. In December 2011, Georgia acquired a new Election Code, under which the number of seats in the parliament remained the same and the correla- tion between the deputies elected by the proportional and majority systems was practically identi- cal—77 to 73.26 In 2004, immediately after the regime change and Saakashvili’s victory at the presidential election, the ruling elite slashed the number of deputies elected by majority vote; four years later, when the popularity of the ruling United National Movement and Saakashvili, its leader, dropped, the number of deputies elected by proportional vote was lowered, the difference was filled by

25 See: B. Chedia, op. cit., p. 126. 26 See: Organic Law of Georgia. Election Code of Georgia, available at [http://www.transparency.ge/sites/default/files/ August%202012,%20Election_Code_of_Georgia_EN_-_codified.pdf].

13 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS those elected by majority vote; in 2011, Saakashvili refused to increase the number of deputies elected by proportional vote. The Georgian elite followed the logic of most of the post-Soviet elites, which used the electoral formula as a tool of electoral engineering: as long as the ruling party remained popular, the number of deputies elected by proportional vote increased, while a decrease in popularity increased the number of deputies elected by majority vote. This was done to compensate, if possible, for the lower share of votes cast for the ruling party in the propor- tional constituencies. The following figures confirm the above: in 2008, the United National Movement received 59.9% of the votes and 49 mandates out of the total 75 mandates to be won by proportional vote and 71 out of 75 by majority vote. The ruling party won 79.3% of the mandates.27 In 2012, this formula allowed the United National Movement, which was losing popularity, to compensate for the outflow of votes cast in the proportional constituencies. The party preserved its 32 mandates out of 73 in the majority constituencies; it gained 40.43% of the votes, 33 mandates by proportional, and 32 mandates by majority voting; the Georgian Dream received 54.85%, 44 and 41 mandates, respectively.28 The number of seats the parties acquired through the parliamentary elections corresponded, on the whole, to the election results. The disproportionality index, which increased in 2008, dropped after the 2012 elections. The case of Georgia confirms the fact that the people in power can rely on the administrative resource to control majority voting, so it comes as no surprise that the ruling party prefers it. After it moves to the opposition, it starts insisting on proportional voting. In 2012, for example, the United National Movement, as an opposition party, insisted that majority voting should be eliminated. In 2015, it, together with the opposition non-parliamentary parties, signed a Memorandum on Election Reform.29 In June 2015, the coalition meeting of the Georgian Dream decided that the mixed system would be used at the 2016 parliamentary elections; all majority constituencies would receive the same num- ber of voters; the election barrier would be raised from 30 to 50% of the votes cast for the candidate (on which the opposition insisted). At the same time, the elections following the 2016 election [that is, held in 2020!] would use proportional voting.30 The ruling party deemed it wise to make conces- sions to the opposition, but preserved the mixed system for the next electoral cycle. This means that in the absence of an obviously dominant party, it is the opposition that profits from proportional voting. As soon as the opposition comes to power, it pushes the electoral reform issue onto the back burner. The party system. The law on political parties was passed in 1997.31 According to Art 12, a party is established when a group of at least 300 citizens holds a party constituent congress (confer- ence, assembly, or other) without preliminary permit; Art 22 established the number of members as no fewer than 1,000; Art 27 limited funding by physical and legal persons; while under Art 30, the parties that overcame the election barrier of 5% at the national elections (according to the propor- tional system) could count on funding from the state. The calculations were done in keeping with the

27 See: Summarizing Protocol of Parliamentary Elections, 21 May, 2008, Election Administration of Georgia, available at [http://www.cesko.ge/uploads/other/8/8722.pdf]. 28 See: Report on the Elections of the Parliament of Georgia 2012, Election Administration of Georgia, available at [http://www.cesko.ge/uploads/other/13/13973.pdf]. 29 See: “David Usupashvili prisoedinilsia k memorandumu po izbiratelnoy reforme,” 18 March, 2015, The Georgian Union in Russia: The Independent Information and Analysis Portal, available at [http://www.georgians.ru/news. asp?idnews=166556]. 30 See: “Posolstvo SShA sledit za protsessom reform izbiratelnoy sistemy v Gruzii,” BlackSeaNews: Information and Analysis Portal, available at [http://www.blackseanews.net/ read/100626]. 31 See: Organic Law of Georgia on Political Unions of Citizens, available at [http://aceproject.org/ero-en/regions/ europe/GE/organic-law-of-georgia-on-political-union-of/view].

14 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 basic funding that was doubled if the party acquired 8% in the last parliamentary elections or 6% in the last local elections. The formula included the number of seats in the parliament and the number of votes cast for the party. In December 2011, total amount of spending by a political party/electoral entity did not exceed 0.2% of Georgia’s GDP of the previous year,32 and in 2013, the figure was lowered to 0.1% of the country’s GDP.33 The same law banned funding of political parties by legal persons. These measures were spearheaded against Ivanishvili’s Georgian Dream, the main rival of Saakashvili’s party at the upcoming parliamentary elections. In 2013, the new parliamentary majority restored funding of up to 120,000 laris; the barrier for the parties which received funding was lowered from 5 to 3%; funding was doubled for parties that won 6% of the votes.34 Today, fourteen political parties are funded from the budget. The above shows that the laws on parties, which remained unchanged from 1997 to 2005, have been frequently changed since that date to consolidate the party system and extend support to a limited circle of big parties; this did not, however, slow down the process of party-building in the country. In the 2000s, the number of political parties increased from 175 to 219, the majority of them being groups of clients of political leaders (important and not very important); treated as political tools, they appeared on the eve of elections and disappeared after them. Big parties were set up by administrative methods: The Round Table (1990-1991), The Union of Citizens of Georgia (1995- 2001), and The Georgian Renaissance Party (1992-2004). In the late 1990s and early 2000s, two political parties were set up (and later disintegrated) with the aim to create a party system with one dominant party—The Union of Citizens of Georgia and the United National Movement. The former was set up on the initiative of President Shevardnadze as a typically administrative party to ensure domination in the parliament and the regional power struc- tures and serve as a source of civil servants. With no ideology and no vision of the future, the party was a melee of interests and values of the Georgian elite united by their shared loyalty to President Shevardnadze. The above is further confirmed by the fact that opposition to Shevardnadze was taking shape inside the elite that belonged to the ruling party (M. Saakashvili, N. Burjanadze, Z. Zhvania, and others). The coup of 2003 and the abolition of the results of the parliamentary elections brought the National Movement—Democrats Party (later the United National Movement) headed by Saakash- vili to power. At the parliamentary elections of 2004 and 2008, it reaped even more votes than the Union of Citizens of Georgia before it and 80% of seats in the parliament. The 2003 election (the results abolished because of falsifications) demonstrated that together two administrative parties could not count on even half of the votes: 40.16% of the votes and 40.85% of the seats in the parlia- ment (together with the seats won in the majority constituencies). Six parties were elected by party lists, the effective number being 5.49, while the disproportionality index 0.94 was the lowest in the history of Georgian elections. This means that the elections of 2004 and especially 2008 were less competitive than the falsified elections of 2003 and further removed from the will of the voters. The party system remained the same: the dominant administrative party headed by the president that controlled the executive and the legislative power branches.

32 See: Organic Law of Georgia on Introducing Amendments into the Organic Law of Georgia on Political Associations of Citizens of 28 December, 2011 No. 5661-vs, available at [http://www.parliament.ge/ge/law/7572/14493] (in Georgian). 33 See: Organic Law of Georgia on Introducing Amendments into the Organic Law of Georgia on Political Associations of Citizens of 29 July, 2013 No. 900-vs, available at [http://www.parliament.ge/ge/law/27/9857] (in Georgian). 34 See: Organic Law of Georgia on Introducing Amendments into the Organic Law of Georgia on Political Associations of Citizens of 7 August, 2013 No. 923-vs, available at [http://www.parliament.ge/ge/law/16/9919] (in Georgian).

15 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Mikhail Saakashvili demonstrated disrespect of all the opposition parties and insisted on his party’s exceptional and exclusive role. In 2010, he said the following: The National Movement is the only force capable of ruling the country. Other responsible parties can join the process, but no one should be under the illusion that we will repudiate our right of decision-making… We do not want development and progress to discontinue in Georgia. Our political party is the only force that can ensure progress.35

Table 2

General Descriptions of the Electoral and Party Systems of Georgia

Criteria 20031 2004 2008 2012 Year

Total number of seats in the parliament 235 235 150 150

Mixed Mixed Mixed Mixed Type of electoral system parallel parallel parallel parallel (150+85)2 (150+85) (75+75) (77+73)

Total number of political parties 175 181 205 219

Number of political parties and blocs that ran 21 16 12 30 for the parliament

Number of political parties with factions 6 2 4 2 in the parliament

Share of votes of the winner 40.163 67.02 59.18 54.97

Share of seats of the winner 32.7 64.2 79.3 56.7

Share of votes cast for the losing parties 13.58 22.33 6.67 4.69

Competitiveness in multi-member constituencies (average number of candidates n/a — 38.4 per mandate)

Share of party candidates in multi-member 75.3 — constituencies (%)

Election threshold (%) 7 7 5 5

Effective number of parliamentary 5.49 2.97 1.96 1.55 political parties

Rae’s disproportionality index 0.94 4.31 8.66 2.36

1 The results of the 2003 parliamentary elections were registered, but the seats in parliament were distributed according to the partial election held in March 2004. 2 The first figure is the number of mandates distributed according to the proportional system, the second by the majority system. 3 This is the sum of the votes gained by the two presidential parties—For New Georgia of Shevardnadze (21.32%) and The Union of Democratic Revival (18.84%).

35 See: “Saakashvili on Ruling Party’s Vision,” Civil Georgia, 15 June, 2010, available at [http://www.civil.ge/eng/ article.php?id=22422&search=].

16 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

The elections of 2012 destroyed the old party system in Georgia and reopened the window of opportunity for a competitive party system. This was especially important when the country was moving toward a parliament-centered form of government, in which the party with the majority in the parliament determined the country’s political course.

Armenia: Institutional Limits of Political Competition

In the 2000s, the competitive political system of Armenia, which had been coping with several problems and lived through a series of tragedies in the late 1990s, was subjected to new trials. The ruling elite declared and realized new political projects that partially stabilized the situation, but did not eliminate political rivalry. The form of government. Unlike in the other post-Soviet states, the Constitution of Armenia adopted in 1995 was amended once, according to the results of the 2005 referendum. Armenia was set up as presidential-parliamentary republic, in which the right to form the government belonged to the president, who, according to Art 117, “may, after consultations with the Chairman of the Na- tional Assembly and the Prime Minister, dissolve the National Assembly and call for a special election”36 (IFG = +6). The amendments initiated by the president and enacted in 2006 specified the status of the president, limited the number of reasons for which the parliament could be dissolved, as well as the powers of the president related to forming the government.37 Art 49 says: “The President of the Republic of Armenia shall be the head of the state;” Art 75 limits the right of legislative initiative: “The right to legislative initiative in the National Assembly shall belong to the Deputies and the Government;” at the same time, Art 74.1 says that the President of the Republic shall dissolve the National Assembly if the National Assembly does endorse the program of the Government two times in succession within two months. In some cases, the president can, but is not obliged to dissolve the parliament: The President of Republic may also dissolve the National Assembly upon the recommendation of the Chairman of the National Assembly or the Prime Minister in the following cases: (a) If the National Assembly fails within three months to adopt draft law deemed urgent by a decision of the Government or; (b) If in the course of a regular session no sittings of the National Assembly are convened for more than three months, or (c) If in the course of a regular session the National Assembly fails for more than three months to adopt a resolution on the issues under debate (Art 74.1). The president is limited in his nomination of prime minister: The president shall, on the basis of the distribution of seats in the National Assembly and consultations held with the parliamentary factions, appoint as Prime Minister the person enjoying confidence of the majority of the Deputies (Art 55); the same article says: The President of the Republic shall accept the resignation of the Government on the day of the first sitting of the newly elected National As- sembly, of the assumption of office by the President of the Republic. Another new regulation was introduced by Art 88.1: Regional governors shall be appointed to and dismissed from office by a decision of the Government. The constitutional amendments that limited the power of the president shifted the form of government in Armenia toward parliamentarism; consequently the IFG dropped from +3 to 0 (an absolutely balanced form of government).

36 Constitution of the Republic of Armenia, available at [http://www.concourt.am/hr/armenia/const/armeni-e.htm]. 37 See: Constitution of the Republic of Armenia (with amendments), available at [http://www.parliament.am/parliament. php?id=constitution&lang=eng#3].

17 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

It seems that this was done because Robert Kocharian’s second presidential term ended in 2008. He hoped to remain in power as prime minister under President Serzh Sargsian. There is no direct evidence of this; however, the amendments helped the ruling Republican Party of Armenia (RPA) to remain in power even if the opposition candidate won the 2008 presidential election. The Republican Party and its government accountable to the parliament retained their dominant positions. This adds special importance to the fact that in 2007 Prime Minister Serzh Sargsian became leader of the Re- publican Party of Armenia, which won the 2008 parliamentary elections. This means that the Consti- tution was amended in the interests of the ruling elite and was not agreed upon by the ruling elite and the opposition. More likely than not, the amendments were discussed and accepted by the elite. In 2003, incumbent Robert Kocharian won the presidential election, albeit in the second round; Karen Demirchian, his main opponent, came second with 32.55%.38 There is an opinion that presidential power in Armenia was transferred in 2008 from President Kocharian to his “successor” Sargsian. Kocharian did support Sargsian during the election campaign, the latter, however, could rely on an important resource—the Republican Party of Armenia in the majority in the National Assembly.39 Serzh Sargsian came to power amid large-scale and violent unrest in (during which people were killed and injured) organized by supporters of Levon Ter-Petrosian, one of the candidates. The elections were competitive; Kocharian decided not to extend his presidential term and not to remain in power as prime minister. This means that Sargsian was not Kocharian’s “successor.” The 2013 parliamentary elections confirmed that the opposition parties should not be treated lightly: while in 2012, the Heritage Party acquired a meager five seats in parliament, a year later at the presidential election, its candidate, Raffi Hovannisian, came second with 36.8% of the votes; in some cities he was not very far behind Sargsian.40 In September 2013, Armenia entered another period of constitutional reforms: a commission was set up under a presidential decree; the preliminary draft was published in April 2014; the final and complete draft was offered to the public for discussion in July 2015.41 According to the draft, the president would be deprived of his main political powers, which would be transferred to the government and prime minister. Art 125 of the draft Constitution sets forth the procedure of presidential elections: the President shall be elected by an assembly consisting of an equal number of deputies of the National Assembly and representatives of local government bodies, appointed by municipalities. Art 145 said that domestic and foreign policy shall be entrusted to the government rather than the president; according to Art 154, the Prime Minister shall be the supreme commander-in-chief of the Armenian armed forces during military operations. The government shall be formed by the political party or a bloc that won the elections, while the president shall confirm the candidate nominated by the political force that won the parliamentary elections as prime minister (Art 145). If the parliament refuses to endorse the program suggested by the government or fails to nomi- nate a prime minister, it shall be dissolved on the strength of the law (Arts 148, 151); there is a newly introduced regulation regarding a constructive vote of no confidence (Art 115). The implemented amendments would turn Armenia into a typically parliamentary republic with IFG = –7; in the presence of a dominant party, this means that the ruling elite will spare no effort to remain in power. The Republican Party of Armenia would form the next government and nominate

38 See: “Election for President, Republic of Armenia, 5 March, 2003,” Election Guide: Democracy Assistant and Election News [http://www.electionguide.org/elections/id/1893]. 39 For more details, see: P.V. Panov, K.A. Sulimov, “Smena lidera i predely personalistskogo prezendentsializma: perspektivy varianta ‘preemnik’ v stranakh Zakavkazia i Tsentralnoy Azii,” Politicheskaia nauka, No. 1, 2014, pp. 134-158. 40 See: “Presidential Elections, 18 February, 2013,” Republic of Armenia Central Electoral Commission, available at [http://www.elections.am/presidential]. 41 See: The Project of the Constitution of Armenia of 15 July, 2015, The Ministry of Justice of the Republic of Armenia, available at [http://moj.am/storage/uploads/NAKHAGITS_3.doc] (in Armenian).

18 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 the prime minister, the de facto head of state. The draft undermines the institution of presidency to an even greater extent than happened in Georgia in 2013. To avoid the Georgian scenario and to remain in power, the ruling elite needs an overwhelming victory of the ruling party at the parliamentary elections in 2017; it should be able to minimize the scope of protest caused by possible and habitual accusations of falsifications. So far, these favorable conditions cannot be guaranteed. The new Constitution will be adopted only in the absence of veto players in the parliament; the extra-parliamentary opposition forces will be too weak to prevent the adoption or annul the results of the next parliamentary elections. It remains to be seen whether the opposition forces will close ranks; so far they remain disunited and therefore unable to play an im- portant role in blocking the decision-making process. Under Sargsian, the IIP increased from 62.5 to 81.25%. This is confirmed by the fact that the post was transferred from one president to another at the appointed time, that the “successor” or “regime- change” scenarios were not realized, that the parliament was not dissolved, and that the Constitution was not amended to extend the term of presidency. The president became a member and the leader of the political party that dominated in the parliament, government, and local structures of power. The conflicts were resolved within the current laws. On the other hand, the incumbent invariably won the presidential election, therefore there was no transfer of power to the opposition (see Table 3); the opposition always disagreed with the election results, but the conflicts between it and the ruling elite were largely resolved within the framework of the formal institutions; the losers were not pushed out of the republic’s political life and retained their chance of winning (L. Ter-Petrosian, R. Kocharian, and R. Hovannisian).

Table 3

Competition at the Presidential Elections in Armenia in 2003-2013

Criteria 2003 2008 2013 Average Year

Number of candidates 9 9 7 8.33

Number of parties with nominees 7 8 4 6.33

Share of party candidates (%) 77.78 88.89 57.14 74.60

Share of votes cast for the winner 49.48 / 52.82 58.64 57.10 (1st round/2nd round) (%) 67.45

Difference between the winner and 21.26 / 31.32 21.89 27.34 the runner up (1st round/2nd round) 34.9

Number of defeated incumbents 0 0 0 0

Number of pre-term elections 0 0 0 0

1 Number of elections in the second round 1 0 0 (33.33%)

IC average 69.57%

The electoral system. The Armenian electoral system was based on the Election Code, the first version of which was adopted in 199942 (it remained in force with numerous amendments until 2011)

42 See: Izbiratelny kodeks Respubliki Armenia on 17 fevralia 1999 goda No. ZP-284, Official Site of the National Assembly of the Republic of Armenia [http://parliament.am/legislation.php?sel=show&ID=2020&lang=rus].

19 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS and replaced with a new version in 2011.43 The electoral system remained mixed parallel with differ- ent proportional/majority correlation; the number of deputies of the National Assembly of Armenia remained the same (131). The threshold for the proportional system was 5%; in 2007, the threshold for blocs of parties was raised to 7%, the threshold for parties remaining the same. Until 2011, the right to nominate candidates by majority constituencies was limited to political parties and groups of citizens (50 and more); in 2011, self-nomination became possible. In 1999, 56 deputies were elected by proportional and 75 by plurality systems; in 2003, the figures changed places; in 2007 and 2012, 90 deputies were elected by proportional and 41 by plural- ity systems. On the whole, the majority part was cut down from 150 to 41 deputies, while the propor- tional increased from 40 to 90 deputies. This trend became obvious when Armenia started moving toward a system with a proto-dominant party. In 2003, the Republican Party of Armenia won 23.66% of the votes in proportional constituencies44; in 2007, 32.8%; and in 2012, 44.02%.45 At the last elec- tions, the candidates of the dominant party won in 29 out of 41 constituencies46; this means that the dominant party profits more than all the others from the plurality system. This gave the Republican Party (together with the Rule of Law Party, its coalition partner) 56.49% of the seats in the National Assembly. For the first time in its history, the Republican Party did not need an alliance with another political force. The Prosperous Armenia Party (PAP), its coalition partner in the previous parliament, left the ruling coalition. The disproportionality index at the parliamentary elections was relatively low (it increased slightly in 2007 and dropped again in 2012); however, it was the Republican Party that consistently received a larger share of seats compared with the share of votes cast for it. The draft Constitution published in 2015 envisages a transfer to the proportional system while the number of seats in the National Assembly will be cut from 131 to 101. The draft says that the electoral system should guarantee a consistent parliamentary majority in the National Assembly (Art 89).47Art 89 contains the rare provision that if no stable parliamentary majority is achieved, a second round of elections between the two parties or two blocs that gathered the largest number of votes in the first round shall be held. This guarantees consistent domination of the ruling party and keeps the veto players outside the parliament. In this way, throughout the 2000s, consistent transformations of Armenia’s electoral system brought the country to a party system with a proto-dominant party; later this domination was con- solidated. The trend toward consistently increasing the number of votes cast for the ruling party stimulated the share of the proportional component in the electoral formula; finally, given the con- solidation of the new constitutional norms, the proportional system would become the only electoral system. After the dominant party and the party system consolidated their positions, the ruling elite no longer needed the plurality component; to minimize the costs and remain in power, the elite opted for the purely proportional principle. In the absence of veto players, the elite stands a good chance of implementing this at the 2017 parliamentary elections. The party system. The party system began to take shape in Armenia in the early 2000s. The 2002 Law on Parties, which for the first time identified parties in legal terms and formulated the basic -de

43 See: Izbiratelny kodeks Respubliki Armenia ot 14 iiunia 2011 goda No. ZP-164, Official Site of the National Assembly of the Republic of Armenia [http://parliament.am/legislation.php?sel=show&ID=4216&lang=rus]. 44 See: Election for National Assembly, Republic of Armenia, 25 May ,2003, Election Guide: Democracy Assistant and Election News, available at [http://www.electionguide.org/elections/id/1370]. 45 See: Saturday, 12 May, 2007, Parliamentary Elections, Republic of Armenia Central Electoral Commission: Official Website [http://www.elections.am/proportional/election-82]. 46 See: Sunday, 6 May, 2012, Parliamentary elections (majoritarian), Republic of Armenia Central Electoral Commission: Official Website [http://www.elections.am/majoritarian/election-24103] 47 See: The Project of the Constitution of Armenia of 15 July, 2105.

20 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 mands, drew a certain line.48 Art 5 “The Number of Party Members, Territorial Structural Subdivi- sions and Territory of Activity” of the new law says: “The party shall have no less than 200 members. The party shall have separated divisions in at least one-third of the regions (Marzes) of the Republic of Armenia.” Art 21 “Exclusive Rights of Parties” specified that the party is the sole public union entitled to nominate candidates for the election of deputies to the National Assembly, as well as the election of the President of the Republic and heads and council members of local self-governing bod- ies. Art 27 deals with the state funding of the parties and says that state budget means are allocated to such party (party alliances), whose voting list during the last elections to the National Assembly has received at least 3 percent of the sum of the total number of votes in favor of voting lists of all parties that have participated in the elections. According to this article, the amount of resources al- located from the state budget to each party shall be no less than 0.03-fold of the minimum salary established by the law and the total number of votes in favor of the voting list of the given party dur- ing the last election to the National Assembly.49 Art 31 “Liquidation of the Party” says in Para 2 that the party is subject to liquidation if it has not participated in the past two elections to the National Assembly, or in any of the recent two elec- tions to the National Assembly. This means that the liquidation of small and practically non-existent parties was one of the aims of the law. It was geared toward financial and other support of the parlia- mentary parties, particularly the ruling Republican Party, which received the right to budget funding. This played an important role in extension of the proportional part of the electoral formula and the possible transfer to proportional elections in 2018. The Prosperous Armenia Party is the second largest administrative party set up on the eve of the 2007 election as a clientele of President Kocharian; this is confirmed by the telltale fact that its leader Gagik Tsarukian is Kocharian’s biggest business partner. The Republican Party of Armenia, headed by Prime Minister Serzh Sargsian, won, while the Prosperous Armenia Party had to be satis- fied with the role of a “junior partner” in the coalition.50 The 2008 parliamentary elections brought victory to all the parties united into the ruling coali- tion: the RPA, PAP, Dashnaktsutiun, and Orinats Erkir (The Rule of Law). In February 2012, the RPA and PAP were actively discussing the coalition memorandum and their joint participation in the approaching parliamentary elections. PAP declined the memorandum and ran for the parliament on its own.51 Since then, PAP has remained independent on many issues; it relies on the administrative and financial resources of part of the ruling elite. The parliamentary elections of 2012 in Armenia can be described as unique: they were a competition between two political parties of the ruling coalition (the RPA and PAP) rather than between the opposition and the government. This has given way to a competitive milieu with two administrative parties as the main rivals. On the whole, the institutional reforms created clear signs of consolidation of the party system (see Table 4): parties became the only entities of the election process; the number of parties involved dropped from 23 to 9; in 2012, the number of votes cast for parties left outside the parliament reached its absolute minimum of 1.12%, while the disproportionality index dropped to 2.82. The efficient number of parties dropped from 7.1 in 2003 to 2.73 in 2012. This means that Armenia is moving toward a party system with a proto-dominant party and another large faction in the parliament that cannot become a veto player since absolute majority belongs to the RPA.

48 See: The Law of the Republic of Armenia on Parties of 7 August, 2002, No. ZP-410, available at [http://www. parliament.am/legislation.php?sel=show&ID=1326&lang=eng]. 49 In 2013, the minimum wage in Armenia was established at a level of 45,000 Armenian drams ($110). 50 It seems that the defeat of Prosperous Armenia in 2007 forced Kocharian to abandon the idea of extending his presidential term (if he had planned to do this). 51 See: “Novy koalitsionny memorandum ne podpisan: RPA i PPA budut uchastvovat na vyborakh otdelnymi spiskami,” 7or.am, 13 February, 2012, available at [http://www.7or.am/ru/news/view/30624].

21 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Table 4

General Descriptions of the Electoral and Party Systems of Armenia (2003-2012)

Criteria 2003 2007 2012 Year

Total number of seats in the parliament 131 131 131

Mixed Mixed parallel Mixed parallel Type of electoral system parallel (90+41) (90+41) (75+56)1

Total number of political parties 70

Number of political parties that ran for the parliament 21 23 9

Number of political parties with factions in the 6 5 6 parliament

Share of votes of the winner 23.66 32.8 44.02

Share of seats of the winner 30.53 48.85 52.6

Share of votes cast for the losing parties 24 27.2 1.12

Competitiveness in single-member constituencies 3.24 3.34 (average number of candidates per seat)

Share of candidates in single-member constituencies 80.2 64.2 nominated by political parties (%)

5% for parties, 5% for parties, Election threshold (%) 5 7% for blocs 7% for blocs

Effective number of parliamentary political parties 7.1 3.39 2.73

Rae’s disproportionality index 3.29 4.14 2.82

1 The first number refers to the number of mandates distributed according to the proportional system; the second, according to the majority system.

The party system with a proto-dominant party forced the opposition to close ranks; this means that the rivalry between the ruling and the opposition parties will become even fiercer, especially if the RPA seeks monopoly on the electoral and parliamentary fields. Very much as before, political confrontation concentrated on the status of Nagorno-Karabakh and the economic strategy.

Conclusion

The institutional reforms and political projects in Georgia and Armenia were the outcrops of an intensive power struggle among different elite groups. The reforms (I have in mind the constitu- tional amendments, as well as the laws on parties and on elections) became more frequent as the in- tensity of struggle increased and the political elite disintegrated into an ever larger number of groups. All institutional models should be introduced depending on their purpose and the expected re- sults. Every time this depends on the correlation between the resources of the ruling elite and the opposition and the presence of veto players.

22 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

Georgia and Armenia entered the 2000s amid serious political upheavals: the 2003 coup in Georgia and the 1998 political crisis in Armenia. The transformations in Georgia’s political context of the early 2000s and 2010s largely changed the main formal institutions and, ultimately, the entire political system. On the whole, Saakashvili acted in the “patronage presidency” paradigm typical of , his predecessor: he wanted to strengthen the administrative party and ensure its continued domination in the parliament, he frequently changed the rules of the game to remain in power, he slighted the opposition and fought its leaders (Ivanishvili, in particular) using formal and informal institutions. His party, the United National Movement, was set up by the counter-elite, not the ruling elite. Saakashvili shifted the key powers to the parliament, probably in the hope of remaining in power; this added vehemence to po- litical rivalry and brought a different elite group to power. The political system with one dominant party that Shevardnadze set up and Saakashvili developed was overturned by the opposition that won the 2012 elections. Throughout the process, the ruling elite manipulated the rules to remain in power.52 The regime, however, was not consolidated: monocentrism was impossible in a country where the political elite was divided into numerous, including regional, groups. This is indirectly confirmed by the fact that the merger after the coup of 2003 of two political unions—Saakashvili’s National Movement and Burjanadze’s United Democrats—was a far from simple or even a painful process, even though their programs and values were fairly close. Saakashvili, however, institutionalized the institution of presidency and consolidated the party system to a great extent. This is confirmed by the smaller effective number of parliamentary parties, the disproportion and the much smaller shares of votes cast for the parties that remained outside the parliament. Institutionalization and the high index of competitiveness of Georgia’s political system did not allow the elite to arrive at a system with a dominant party in control at the very top. The acutest problems were addressed through a dialog with the opposition. This means that “hyper-institutionalization” failed, while the strategy of “incomplete institutionalization” was not discussed, making gradual institutionalization the only version of a competitive party system. The transfer to the parliamentary-presidential system dramatically decreased the value of the presidency, which means that the political regime in Georgia will be consolidated on the basis of institutionalized rivalry and rotation of the political elite according to the rules. This will happen if the elite now in power passes the test of “divided governance.” For fifteen years, Armenia has been demonstrating a high level of political rivalry; the opposition has a sufficiently large resource to become a subject of the political process by reaping a considerable share of votes at the presidential election and winning seats in the parliament, even though it has never won. In fact, there is a fairly large number of those who consistently vote for the opposition, irrespective of personalities. On the other hand, so far the incumbents have never lost an election, while their opponents invariably mobilize the protest electorate to challenge the results.53 The very narrow gap (especially in the regions) between the shares of votes made accusations of falsifications and the slogan of a “stolen victory” very convincing. In 2008 and 2013, the announced results of the presiden- tial elections placed the system on the brink of disaster; continued pressure and continued efforts to limit political rivalry are hazardous. Armenia’s political regime could be destabilized if the formerly disunited opposition closes ranks and the PAP, the second administrative party, is pushed into the op- position. This means that the next parliamentary or presidential election might trigger a regime change. Both Georgia and Armenia are moving toward parliamentarism, which means redistribution of powers among the president, parliament, and government in the interests of the two latter actors. In Armenia, the IFG dropped from +4 to 0, and in Georgia from +6 to –1.

52 Georgia is the leader among the post-Soviet states in terms of the number of constitutional amendments and changes in the election laws. 53 It was only once, in 1991, that the lost side recognized the results of the presidential election in Armenia.

23 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Both countries are moving toward the proportional electoral system, which means that the cor- relation between the proportional and majority parts will be revised in favor of the former in the mixed parallel electoral system. The reform of the electoral system actively discussed in Armenia and possible institutional transformations in Georgia presupposed that both countries would be using the proportional system in the next election cycle. To reap the maximum number of votes in the absence of an administrative party or its limited legitimacy and limited electoral support, the ruling elite invariably opts for the majority (pluralist) component of the electoral system; in an undeveloped party system this brings victory to the ruling elite. Elections by single-member constituencies invariably cause disproportions, very much in the interests of the administrative party, when the votes are converted into seats. At the same time, while the administrative party takes shape and consolidates its position to become the dominant party, the ruling elite gradually extends the proportional component of the mixed system, or even switches to it. This took place in Armenia, which has acquired an administra- tive party headed by the president or the prime minister. In the absence of an administrative party, all the players expect that the seats will be fairly dis- tributed and that the proportional system will be introduced as a result of cooperation between the elite and the opposition, not on the strength of the decisions of the ruling elite. This system could be implemented in Georgia. An analysis of the evolution of the efficient number of parliamentary parties and the number of votes cast for the non-parliamentary parties confirms what has been said above about the consolida- tion trends in the party systems in Armenia and Georgia. Political projecting in the 2000s in Georgia and Armenia was carried out within two basic models: (1) the institutionalized competitive model with a dominant party (hyper-institutionalization): a regime with high ICP, high IIP, and a dominant or proto-dominant party (Georgia in 2000- 2003, 2004-2012). This highly unstable model ends in a regime change: a dominant party in a highly competitive political system creates an illusion of consolidation; this channels political activities into informal institutions. (2) the institutionalized competitive model without a dominant party: a regime with high ICP and IIP and without a dominant party (Armenia and Georgia after 2012). This is a rela- tively stable model since high institutionalization keeps the gradually mounting political competitiveness within formal limits. This means that the political processes in these states will be further developed. In Georgia, stabilization is possible if there is no dominant party, if the opposition is institutionalized (including at the local level), and if it has a legal way to come to power. Destabilization cannot be ruled out in the conditions of “divided governance” and the old constitutional formula. In Armenia, stabilization will be possible if the proto-dominant party does not monopolize the political field, otherwise Armenia will be pushed into the first cluster where a regime change will become probable rather than possible.54 In both countries, rotation of the elite notwithstanding, the same models of patronage presi- dency are consistently reproduced; there is limited competitiveness, consistent efforts to prevent consolidation of the opposition, manipulations with the rules of the game, reliance on informal insti- tutions, patron/client relations, and willingness to annul the rules in case of a conflict. This model can be changed only if competitiveness reaches the point where the ruling elite is forced to draw up the rules together with other actors. If this does not happen, or if there is no rivalry, there are two possible

54 This cannot be excluded: the opposition will be able to mobilize a very large number of people. This happened in 1998, 2003, 2008 and 2015.

24 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 scenarios: either the rules are imposed from above and are constantly changed, to be adjusted ad hoc, or the rules disappear under the pressure of the counter-elite, which relies on the masses. The latter option should not be taken to mean that the new elite will refrain from the old strategy; the Armenian and Georgian experience confirms this. In the mid-2000s, Georgia went the second route, entailing destruction of the previous institutional system. This could be reproduced in Armenia if attempts to monopolize the political space continue at the national or local level. The rivals of the present elites enjoy considerable support and have a vast mobilization resource; this means that elections can be used as a pretext for a regime change. Political stability can be ensured if the inclusion/manageability and participation/ institutional- ization contradictions are resolved; the states’ political future also depends on this.

POLITICAL ELITES IN THE CONTEXT OF THE ETHNOPOLITICAL PROCESSES IN THE NORTHERN CAUCASUS

Ali SALGIRIEV Ph.D. (Political Science), Chief Researcher, Sector of Philosophy and Sociology, Institute of Humanitarian Studies, Academy of Sciences of the Chechen Republic (Grozny, Russian Federation)

ABSTRACT

he author discusses the North Cau- mal patron-client relationships. The elite’s casian political elites as a subject of closeness and durability are significantly T the political processes unfolding slowing down the democratic processes in within the regional ethnopolitical proces- the region and interfering with the develop- ses. ment of civil institutions. The main role in these processes be- The ethnic elites never hesitate to use longs to the local ethnopolitical elite (region- their mobilization resource to haggle with al heads and their closest circles, business the federal administrative elite over budgets. elites, clergy, etc.), who also rely on tradi- Not infrequently budget conflicts move to the tional ethnic institutions, national culture and next, extremist phase. time-honored practices, another source of The author traces and systematizes influence on the masses. The federal Center the specifics of the ethnopolitical tension has to take into account the interests of the and contradictions in the region down to ethnopolitical elites rooted in clan, family, their historical, culturological, psychological, and teip solidarity and realized through infor- social, and economic roots. 25 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

KEYWORDS: the Northern Caucasus, Russia, regions, elites, political elites, ethnopolitical elites, conflicts, national relations, nationalities policy, political process, clans.

Introduction

Ethnic relations are very sensitive to social changes: according to the available data, at the turn of the 1980s, about half of the countries of the world were involved in ethnic political conflicts; in the mid-1980s, 98 out of 120 armed conflicts (82%) were ethnic conflicts. The number of ethnopolitical conflicts is steadily climbing up under the pressure of globalization, marginalization, modernization, migrations, mounting global and regional instability, ethnization, ill-devised and poorly realized na- tionalities policy, etc. The economic situation in the was extremely negative. Production decline, the nagging shortage of consumer goods, shrinking real incomes, steadily climbing unemployment and corruption, customary wage arrears in the budget sphere, and the huge federal budget deficit fanned ethnic and political tension in the Northern Caucasus and moved it into the streets in the form of mass protest rallies, etc. The highly unstable social and political situation in Russia on the eve of and after the Soviet Union’s disintegration, the economic problems and political miscalculations of the country’s political leaders, and the absence of a national doctrine geared toward the new economic and political reality were exploited by the ethnic elites to fan ethnic contradictions and separatism. The Soviet Union fell apart, while the “parade of sovereignties” and economic problems that followed fanned ethnic tension in the region. The newly independent states became openly ethnonationalist, which provoked several ethnic conflicts between the Ossets and Ingush, and , Russia and Chechnia, etc. Today, the conflict potential of the ethnopolitical situation in the Northern Caucasus is high.1 Many of conflicts are unresolved; such is the frozen conflict between the Ossets and Ingush; the Georgian-Abkhazian conflict is kept within certain limits by the Russian peacekeepers, etc. The democratic processes in the Northern Caucasus were slowed down by an upsurge of ethnic- ity, xenophobia, intensive ethnocultural and ethnopolitical mobilization, and the high degree of eth- nicization of governments in the region.2 Applied political science concentrates on the guiding role of the subjects of the political pro- cesses, particularly the top subjects with the greatest impact on political strategies. The political elite, with the biggest resources of power and legitimacy, determine the aims of the political processes and

1 See: V.A. Avksentyev, G.D. Gritsenko, A.V. Dmitriev, Regionalnaia konfliktologia: kontsepty i rossiiskaia praktika, Moscow, 2008; V.A. Avksentyev, Etnicheskaia konfliktologia: v poiskakh paradigmy, Stavropol, 2001; V.V. Chernous, “Sovremennye geopoliticheskie faktory konfliktogennosti na Yuge Rossii,” in: Faktory konfliktogennosti na Severnom Kavkaze, Rostov on Don, 2005. 2 See: G.S. Denisova, Etnicheskiy faktor v politicheskoy zhizni Rossii 90-kh godov, Rostov on Don, 1996; L.L. Kho- perskaya, Sovremennye etnopoliticheskie protsessy na Severnom Kavkaze: kontseptsia ethnicheskoy sub’ektnosti, Rostov on Don, 1997; V.A. Avksentyev, Stabilnost i konflikt v rossiyskom prigranichye: etnopoliticheskie protsessy v Sibiri i na Kavkaze, Moscow, 2005; A.N. Smirnov, Etnopoliticheskie protsessy na Severnom Kavkaze: osobennosti i osnovnye tendentsii, Moscow, 2001; A.K. Aliev, Severny Kavkaz: sovremennye problemy etnopoliticheskogo razvitiia, Makhachkala, 2003.

26 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 the administrative methods to be used; they play the greatest role in the political activities unfolding in the region. I have posed myself the task of assessing the degree to which the local political elite influences the ethnopolitical processes in the Northern Caucasus.

The Emergence and Development of Ethnopolitical Elites in the Region

In the 1990s, the federal Center and regional authorities largely neglected the internal contradic- tions in the North Caucasian republics. Meanwhile, the influential clans and teips that acquired pow- er from the Center and were prepared to go to all lengths, up to and including social and political destabilization, to remain in power, might have been dangerous as a source of corruption, crime abetting, and extremism.3 Political extremism can be described as one of the causes of the ethnopolitical clashes in the Northern Caucasus. For example, a group of Ingush (which operated on the political margins), deter- mined to return the Prigorodny District of North Ossetia-Alania (before deportation it belonged to the Ingush), ran against the firm resistance of Osset nationalists and the federal Center, which supported one of the sides. This was the beginning of a multi-layered ethnic conflict. In September 1991, the legal power structures of the Chechen-Ingush A.S.S.R. collapsed under the pressure of the political extremism led by General Dudaev with tragic repercussions for the Chechens; two wars in Chechnia followed.4 Throughout its history, the Northern Caucasus attracted and continues to attract the attention of different states and different economic structures seeking social, political, and economic destabiliza- tion there. They rely on local separatist and extremist forces, fund them, and look after their interests at the international level. The terrorist acts in Ingushetia, Daghestan, and Kabardino-Balkaria testify to the fact that the Northern Caucasus remains a zone of ethnopolitical tension.5 So far the threat of extremism, ethnonationalism, and religious radicalism in the Northern Cau- casus remains prominent, therefore the academic community should concentrate on the study and prevention of extremism and ethnonationalism of the ethnopolitical elites.6 The ethnic elites in the North Caucasian republics have a lot of political power: they might play a positive role in conflict settlement or might prove to be a destructive force. In fact, their determina- tion to come to power in 1990-1992 on the wave of the Soviet Union’s disintegration when all the autonomous republics of the Russian Federation sought and acquired sovereignty added to the re- gional political tension. The degree of their influence cannot be ignored: they are developing into political subjects at the federal level. In May 2015, according to the monthly expert polls conducted by the Agency for Political and Economic Communications, Head of Chechnia Ramzan Kadyrov was second out of 83;

3 See: Yu.V. Vasiliev, Etnopoliticheskie protsessy na Yuge Rossii na rubezhe XX-XXI vekov: ot konflikta k stabilizatsii, Rostov on Don, 2004. 4 See: V.Kh. Akaev, “Chechnia: put ot konflikta k stabilizatsii obshchestvenno-politicheskoy situatsii,” in: Faktory stabilizatsii situatsii na Severnom Kavkaze, Rostov on Don, 2006, pp. 131-146. 5 See: M.V. Savva, Etnicheskiy status (Konfliktologicheskiy analiz sotsialnogo fenomena), Krasnodar, 1997. 6 See: V.M. Yurchenko, Politika kak faktor regionalnoy konfliktnosti, Kransodar, 1997, pp. 237-247.

27 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Head of Ingushetia Yu.-B.B. Evkurov occupied 27th place, President of Daghestan R.G Abdulatipov, 26th place; Head of North Ossetia-Alania T.D. Mamsurov, 40th place; President of Kabardino- Balkaria Yu.A. Kokov, 42nd place; Head of Karachaevo-Cherkessia R.B. Temrezov, 45th place; and Head of Adygey A.K. Tkhakushinov, 79th place.7 It should be said that Yevkurov, Tkhakushinov, and Temrezov had fortified their positions compared to April 2015: their ratings have been improving for several years now.8 The elites of the Chechen Republic and North Ossetia demonstrate the greatest cohesion, while the elites of Daghestan, Karachaevo-Cherkessia, Kabardino-Balkaria, and Adygey are divided into ethnic and clan groups. This means that the strategy “winner takes all” is combined with the “com- munity of the elites” principle. The relative clout of the regional ethnopolitical elites depends on many factors, since they are a fairly complicated element of the political processes as relatively independent and influential sub- jects with interests and resources of their own. The national and regional ethnopolitical elites should work together to achieve the normal functioning of social institutions. The regional ethnopolitical elites delegate their members to the national elite and can play a positive role in social processes, and vice versa.9 Classified by informal features, the political elites form clans of all sorts, cliques, strategic groups and groups of pressure, inner parties, and other groups. On the whole, the sum-total of in- formal ties inside this system can be described as client relations based on personal dependence that has nothing in common with the rational distribution of resources and power. The ties between the patron and his numerous clients add another dimension to the hierarchical structure of the po- litical elite found outside its formal organization. These mini-pyramids of power rest on personal protection. Not infrequently they follow the patron to his new office. In Soviet times, the situation was very much the same. The principle of selection (the so-called nomenklatura principle) inherited from So- viet times persists and remains far from transparent: personal loyalty, obedience, and personal or kindred relations are preferred to professional qualities. In 1989-1993, the nomenklatura principle (which had been used for many years) was destroyed to be replaced with elections, which, in the course of time, developed into one of the main mecha- nisms for forming elites in the upper echelons of power in particular. Civil society was shaping its own independent segment of the elite, many of its members coming from the democratic movement. In practice, the quota-clan principle of elite-forming did not disappear: it survived and became stron- ger. This causes dissatisfaction among the local people irritated by the lack of visible progress in this respect.10 Even though the federal Center tried to keep the elite under control, in 1994-1999, these elites were actively involved in institution-building. Today, many positions in the Russian elite are monopolized, both vertically and horizontally, by a group that closed ranks around an influential leader. Such groups, often described as political clans, are organized as “puff-pastry” or an iceberg, the upper (visible) part of which is represented by a well-known politician, while the lower (invisible) parts are formed by a political support

7 [http://www.apecom.ru/projects/item.php?SECTION_ID=101&ELEMENT_ID=1896], 1 June, 2015. 8 See: Nezavisimaia gazeta, 10 October, 2012. 9 See: A.R. Salgiriev, “Politicheskie elity kak faktor politicheskikh protsessov,” XXI vek: itogi proshlogo i problemy nastoiashchego plius (Penza), Vol. 1, No. 11 (15), 2013, pp. 193-197; idem, “Elity v politicheskom prostranstve Yuga Rossii,” Nauka i bizness: puti razvitia, No. 9 (27), 2013, pp. 156-159. 10 See: I. Babich, “The Clan Structure and Its Impact on Political Situation (case-study of Northwestern and Central Caucasus),” Central Asia and the Caucasus, No. 1 (19), 2003, pp. 32-39.

28 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 group, an economic (financial) support group, a media group, and a group of special services and security.11 The status, administrative functions, and wider possibilities of mobilizing resources make the regional political elites the most prominent political actors in the RF constituencies. They largely shape relations with the federal Center, determine social and economic dynamics, and ensure stabil- ity. Throughout the period of reforms this became an involved and, therefore, contradictory process. In the first half of the 1990s, this segment was dominated by former Soviet and party officials. Many of them had become adjusted to the new reality, they abandoned ideological preferences and became pragmatics under the pressure of everyday problems (unemployment, economic crisis, pensions and wage arrears, etc.). By the late 1990s, liberally-minded elite, businessmen, military and law enforcers came to power in many regions.

Regional Elites: Structure and Functioning

Today, interaction between the most influential business and administrative elites and close interconnections between business and power can be described as the main feature of the regional political elites.12 The ruling regional elites were strengthened by newcomers from the law-enforcement struc- tures and federal power structures to fortify the vertical of power and settle contradictions be- tween the Center and the regions. These changes enhanced the status of those regional officials who supported the president and enjoyed his support. Personnel policy became less democratic. In the past, the governor corps was formed amid sharp conflicts and mud-throwing; legal and moral norms were pushed aside, while huge amounts of money were poured into the process. On the one hand, it was a defect of unconsolidated democracy, while on the other, it was an outcrop of the servile political culture of the elite and a conflict between various groups and corporate economic, financial, and political interests. Closer scrutiny of the ruling elite reveals the still very low level of consolidation and fairly pronounced economic and political biases. At the same time, the regional political elites are gradually growing more loyal to the Center. In fact, stronger rela- tions between the federal and regional elites based on the delimitation of powers and responsi- bilities can be described as a positive trend that helps realize the thesis “strong Center-strong re- gions-strong Russia.” Here are the most typical features of the clan-organized elite: — decision-making is concealed from the public and is independent of it. Those responsible for decision-making are guided not by national interests, but by the interests of their groups (clans or “families”), the main interest of which is to remain in power; — monopolization of power through control over the most influential financial and industrial groups and the media;

11 See: D.A. Zhuravlev, “Politicheskie klany kak sotsialnyy institute,” Obrazovanie. Nauka. Nauchnye kadry, No. 5, 2012, pp. 196-199. 12 See: I.R. Akhmadullin, “Osobennosty funktsionirovaniia biznes-elity v sovremennoy Rossii,” Vestnik Kazanskogo tekhnologicheskogo universiteta, Vol. 16, No. 3, 2013, pp. 257-258.

29 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

— laws are reduced to instruments of political domination; — high posts are divided among those who are ready to obey the rules of the game, profes- sional people are obviously not needed. The Russian regional elites are staffed according to these principles, even if the processes might be different and geared toward regional specifics.13 Aware of the above, each of the elites knows that its rights and interests (legal and illegal) are guaranteed by its continued involvement in state power. There is another and better option: a couple of administrative regions (municipal units) should be detached from two- or multi-titular republics, their federalization should be achieved, and their ethnic statehood should be created or restored. The Abazin and Nogai ethnic regions of Karachaevo-Cherkessia can serve as an example of the above. On the other hand, nothing came of the attempts to divide the Karabudakhkent District of Daghestan into two ethnically different parts.14 Despite the consistent efforts to enlarge the districts in Daghestan, they are divided into smaller units to be further divided into even smaller districts. Today, an area of 50.3 thousand sq km with a population of 2.6 million is divided into 41 districts, while the Rostov Region, the territory of which is twice as small and has a population of 4.4 million, has 42 districts.15 Irrespective of the number of titular nations in any of the polyethnic North Caucasian republics, the state and municipal power structures are formed according to democratic principles that take into account ethnic composition; this is typical, to different degrees, of any state16 and explains why the republics’ political elites invariably seek compromises when forming structures of power. Formally, the election system does not prevent the biggest ethnicities from forming a relatively homogenous parliament, but this never happens: all ethnic groups are represented to a certain extent in the legisla- tures and the executive bodies of power; the legal sides of these processes are of secondary impor- tance. In the Northern Caucasus, the traditional practices of power of the elites are highly sustainable. The republics of the Southern Federal and North Caucasian Federal districts (Chechnia, Ingushetia, Daghestan, Kabardino-Balkaria, Karachaevo-Cherkessia, Adygey, and partly North Ossetia) orga- nized cooperation on the basis of adats (common unwritten laws) and forms of self-organization (teips and tukhums); the institution of traditional courts has been revived.17 These are positive factors that consolidate society; at times of transformation, they might be- come stumbling blocks abused by political leaders in their interests. Late in the 1990s, some leaders of the North Caucasian republics wanted to include certain local specifics, up to and including blood feuds, in the federal laws. Revival of the Shari‘a has stirred up contradictions; not infrequently, local elites use religious slogans to fan enmity and xenophobia. Today, the political elite play, to a certain extent, a consolidating role and form the region’s cultural space. This is confirmed by the high level of interaction among the national-cultural autono-

13 See: A.V. Ponedelkov, S.A. Vorontsov, I.V. Gnidenko, “Rossiyskie elity v federalnom i regionalnom aspektakh,” Izvestia Altayskogo gosudartsvennogo universiteta, No. 4-1 (84), 2014, pp. 290-294. 14 See: K.I. Kazenin, Elementy Kavkaza: zemlia, vlast i ideologia v severokavkazskikh respublikakh, Moscow, 2012, pp. 104-126. 15 See: L.V. Batiev, O.A. Belousova, I.V. Pashchenko, “Etnicheskiy printsip v formirovanii organov gosudartsvennoy vlasti respublik Severnogo Kavkaza,” in: Vzaimodeystvie narodov i kultur na Yuge Rossii: istoria i sovremennost, Collection of scholarly papers, Rostov on Don, 2008, pp. 201-202. 16 See: Atlas sotsialno-politicheskikh problem, ugroz i riskov Yuga Rossii, ed. by G.G. Matishov, Rostov on Don, Vol. 1, 2006; Vol. 2, 2007. 17 See: Etnoetatism i etnokratia na Yuge Rossii, ed. by V.V. Chernous, Rostov on Don, 2006, pp. 57-70, 110-124.

30 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 mies, diasporas, and other social-cultural organizations that represent the interests of individual ethnic groups. The threats and security challenges in the Northern Caucasus came to the fore during the deep- cutting ethnic and social transformation and crumbling social order. The media, especially the national media, which offer biased coverage of the conflict situa- tion in the region and breed confrontational feelings in the population of Russia, are negatively perceived by the North Caucasian population. More than that: the readers and TV audiences are deliberately deprived of reliable information by certain journalists who take orders from third parties18

Conclusion

The specific of studies of the emergence, exacerbation, and unfolding of ethnopolitical conflicts in the South of Russia have moved several system-forming features, i.e. economic, political, and ethnic, to the fore. Restoration of Russia’s single legal space, which began in 2000, consolidation of the federal structure, and overcoming of the economic crisis have allowed us to address the task of building a national model of the ethnocultural space designed, among other things, to protect human rights and the rights of the peoples, ensure equal cooperation of cultures and religions, and consolidate regional security in the Northern Caucasus. It is fundamentally important to take into account the basic principles that ensure Russia’s ter- ritorial integrity, protect its interests and national security in the Northern Caucasus, offer a set of measures designed to achieve peace and security, establish a balance between national interests and the interests of the North Caucasian peoples, and preserve and foster economic and cultural historical heritage. The Northern Caucasus remains a conflict-prone region; the state power structures, cultural figures, public organizations, and academic community are working together to change the situation for the better. Ethnopolitical tension can be reduced by territorial-administrative reform. So far, the ethnopo- litical elites are deliberately slowing down the process of modernization, while the region’s persisting social and economic problems (unemployment, stratification, etc.) are waiting for attention.19 The dialog between the federal and regional government should be continued; migration policy should become more rational, migration flows controlled, and ethnic crime, reliance on clans and corruption liquidated; the region needs a network of ethnoregional monitoring. The state power structures should work toward building a civil society in the region, an indispensable condition of stabilized national relations.

18 See: M.-E. Shamsuev, “Russia’s Information Security in the Northern Caucasus: Problems and How to Settle Them,” Central Asia and the Caucasus, Vol. 13, Issue 4, 2012, pp. 94-105. 19 See: D. Khalidov, “The Northern Caucasus: An Alternative Approach. Systems Analysis and the Paradoxes of Sta- tistics,” Central Asia and the Caucasus, Vol. 11, Issue 2, 2010, pp. 114-138.

31 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS THE NATIONAL IDEA AND NATIONAL IDEOLOGY IN THE SUSTAINABILITY OF ETHNOCULTURAL IDENTITY

Kenan ALLAHVERDIEV Ph.D. (Philos.), Associate Professor, Department of International Relations, Azerbaijan Tourism and Management University (Baku, Azerbaijan)

ABSTRACT

he author investigates the correlative impact on the ethnocultural identity of peo- ties between the categories “national ples in the context of the contradictory pro- T idea” and “national ideology” and their cesses at the current stage of globalization.

KEYWORDS: national idea, national ideology, ethnocultural identity, globalization.

Introduction

This analysis focuses on revealing the correlative ties in the national idea-national ideology- ethnocultural identity triad and how they interact with each other. My interest was stirred by the events that have been unfolding and are still unfolding in Ukraine. Some people interpret them as the inevitable revival of what is called the “Russian World” (essen- tially the idea of the ethnocivilizational “mission” of the Slavic-Russian proto-ethnicity, or future super-ethnicity, the choice depending on the political bias), others defend the idea of “Ukrainianism” (that is, national-civil ideology), while others still advocate the notorious “European choice” (as a unique cross-ethnocultural identity). Even this simple and extremely condensed enumeration of the components of the political, cultural, and ethnic aspects of the Ukrainian tragedy points to the possibility that other and highly varied configurations might appear today or in the near future. No reasonable or self-respecting expert today is ready to forecast which of the possible alterna- tives will be realized in the form of Hegel’s “reasonable reality,” “traded” in the course of the Great Game on the Grand Chessboard, or sacrificed and forgotten. One thing is clear, however, in the globalized and contradictory world these three aspects of ethnopolitical and cultural life are intertwined to the extent that, metaphorically speaking, they can only be articulated as a choir, and not as individual arias. My approach to the national idea-ideology-identity triad can be replenished with the following three simple, yet coherent questions: Are the concepts “national idea” and “national ideology” tools

32 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 or stages of nation-building? Is ethnocultural identity the choice of history or of politicians? and What will become the “sacral offering” to globalization: the national idea, ideology, or identity?

Are the Concepts “National Idea” and “National Ideology” Tools or Stages of Nation-Building?

At one time, Russian scholar and academician Nikita Moiseev wrote about the role of the na- tional idea in social life: “No nation is likely to survive, let alone preserve its culture, without a clear understanding of its national idea or a certain vision of its prospects. This makes society and the people vulnerable.”1 This is very true, however the range of definitions of the national idea is ex- tremely wide, and becomes even wider keeping in mind that most ethnicities (nations) rigidly cor- relate the concept and philosophy of the national idea with the past and present political and eco- nomic format, geopolitical context, etc. To clarify my point I will rely on a specific example of the national idea in one country—the idea of “Azerbaijan-ism.” It is based on three dominants:  The national development strategy. According to the official viewpoint, the national idea as the basic element for modernizing Azerbaijani society will serve as an important compo- nent of the new political culture that is taking shape in Azerbaijan.  The geopolitical development strategy. Few people involved in the internal discussion of the idea of so-called Greater Azerbaijan associate it with the idea of Azerbaijan-ism. It seems that concentrating on this and other virtual ideas (phobias) adds vehemence to ethnic and state relations in the region and pushes the possible development vectors of the na- tional idea into the Procrustean bed of radical nationalism.  The national security strategy. Some members of the political-expert community offer a different interpretation and look at the essence of the national idea through the prism of national security and the need to preserve it. Political scientist Rizvan Guseynov has put the alternative ideas into a nutshell: “We still lack the main thing. I have in mind a national idea that would arm the state and be realized across the country as a clear-cut program. I think that the struggle for the occupied Azeri lands should become the strongest unifying stimu- lus for our people.”2 I think that such a wide range of interpretations of the national idea is very acceptable for a country that has just moved away from the ethnization of politics to statist ethnicity. I can say more: what is frequently said about the national idea as a phenomenon limited to the post-Soviet developing countries poorly correlates with historical reality, even though those who say this argue that in devel- oped democratic states, no one is losing sleep over whether they have a national idea or not. This is hard to accept, since essentially all nations have well-known and popular clichés that express their national idea in a few words. Take for instance, America’s recognition of Divine Prov-

1 N.N. Moiseev, “Rossia na pereputie,” Sotsialno-gumanitarnye znaniia, No. 4, 1999, pp. 173-174. 2 R. Guseynov, “Azerbaidzhanu neobkhodima obshchenatsionalnaia idea,” available at [http://www.nedelya.az/articlen. php?catno=0100014#1], 17 October, 2008.

33 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS idence expressed in “God bless America” and the contemporary idée fixe of American supremacy; Russia’s notion that it is the last bulwark of the Orthodox world (“Moscow is the Third Rome and there will never be a Fourth”) and its striving to the neo-imperialist “Eurasian Projects;” the Jews’ claim that they are “God’s chosen people” and Israel’s absorption policy; and China’s ideas ranging from the Middle Celestial Kingdom to “concentration on itself” as the strategic aim of the twenty-first century. The recent history of the European peoples and the European Union as their main achievement tells us how they, having discarded the obsolete idea of the “white man’s burden,” started talking about multiculturalism, a new idée fixe, and a magic wand expected to resolve the problems that are still piling up. This means that the national idea is a concise form of what people think about their past, their cultural mission in the world, etc. The question of national ideology, its meaning, and its correlation with the national idea looks even more complicated when discussed in the media and quasi-scholarly publications. There can be no national ideology where there is no national idea and, therefore, there will be no concept of national policy. Hence ethnic, confessional, and other clashes between the titular nation and national minorities in polyethnic states and an impaired nationalities policy.3 Those who write about this also warn their readers against confusing the concepts of national idea and national ideol- ogy, saying that they are not one and the same thing. The national idea can be described as a strategy, while ideology is a tactical tool used to implement the strategy. Ideology is the methods and means used to popularize the national idea; it is a vehicle of the national idea.4 Historian Eldar Ismailov was of more or less the same opinion: “National ideology is a wider aspect of the problem that not only covers purely ideological issues, but also economics, politics, ethics, and aesthetics, in short, the hu- man environment. The national idea, on the other hand, concentrates on one problem, i.e. recognition of the Azeris as a separate and very individual phenomenon, very special people that occupy their own niche in an ethnically highly diverse world.”5 So far, however, the expert community has not arrived at a consolidated opinion. Philosopher Amrali Ismailov, for example, has concluded that there is no national ideology, and cannot be one. He calls it nonsense, an absurdity and self-deception, and says that there can only be a national idea.6 Other authors are even more radical; they insist that formulating a national idea and national ideol- ogy terminologically, building a special policy on this, and imposing it on society smack of totali- tarianism.7 The above suggests at least two theoretical constructs. According to the “realistic” construct, spiritual-political components—national idea and national ideology—are two logical results of the course of history, socioeconomic history in particular. Since I have already written about this in detail above, I will only point here to two possible interpretations. Either the components of national exis- tence appear stage-by-stage in keeping with a certain order—first the national idea (and national unity) and then national ideology (and stronger unity)—or they emerge concurrently as two halves of a single whole—strategy and tactics—to use political parlance.

3 R. Guseynzade, “Azerbaidzhanstvo—odna iz form patriotizma,” available at [http://ethnoglobus.az/index.php/vse- novosti/item/478], 8 January, 2015. 4 R. Mekhtiev, “Sovremenny Azerbaidzhan kak voploshchenie natsionalnoy ideii,” available at [http://1news.az/ analytics/20110519053419632.html], 19 May, 2011. 5 Bakinski rabochi, 18 June, 2011. 6 A. Ismailov, “Ne natsionalnaia ideologia, a natsionalnaia ideia,” available at [www.1news.az], 30 September, 2009. 7 Z. Guliev, “Opasnye igry v natsionalnuiu ideiu,” available at [http://minval.az/author/219/#sthash.dJGtO4wf.dpuf], 29 April, 2013.

34 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

According to another theoretical construct very popular in Western classical ethnopolitical writ- ings based on instrumentalist and constructivist paradigms, national ideas are a prior to the nation. Ernest Gellner’s famous “nationalism produced nations, not the other way around”8 offers a succinct description of the above, and further “nations are the artifacts of man’s convictions and loyalties and solidarities.”9 Different authors identify different dominants in the formation of nationalism and na- tions, such as the undisguised voluntarism of Urs Alternatt10; the vague political program of Eric Hobsbawm11; the intellectual elites of Miroslav Hroch,12 etc. The very principle of the primacy of the national idea as a form-shaping feature of a certain “imagined entity” over all the other components that build the nation has been and still is criti- cized. According to prominent British scholar Anthony Smith, nations do not appear out of no- where; “some historians,” he goes on to say, “have perhaps given ideology too much attention and explanatory weight; they overlook or bypass the importance of processes of nation-formation, which are independent of the activities of nationalist ideologists”.13 It is not surprising that Karl Deutsch, a prominent German political scientist, arrived, if not at Marxist, at least at materialist conclusions (through his study of communication systems) that nations resulted from the indus- trial revolution.14 I feel much closer to Anthony Smith, who writes about the “ethnic roots of nationalism,” by which he means that ethnicity is fertile soil for nationalist ideology and that, however, nationalism develops under the pressure of other factors.15 By way of summing up, I can say that there are two main approaches—ethnic and ethnocul- tural—to the factors that determine the emergence of a national “idea-ideology.” They are not mutu- ally contradictory, rather they are mutually complimentary. To emerge, a national idea needs the prototype of a nation, an ethnic community that gradually shapes a national idea out of its ethnocul- tural identity, common language and culture in particular. I believe that national ideology as a synthesis of national-ethnic ideas helps the nation (ethnic- ity) to understand its social and ethnic commonness as a single organism and its entire set of rational- axiological and emotional characteristics. National ideology as a result of systematization and gener- alization of national interests by the political elite serves as the foundation for the nation’s self-deter- mination in the social, political, and spiritual spheres. Despite the fact that national ideology contains and preserves its genetic basis, genetically hued basic ideas, postulates, and values, there are several possible vectors of transformation: — the ethnic component is treated as an absolute in national ideology, either in the form of nationalism, or so-called macro-nationalism, the positive and negative aspects of which are covered in classical works by Louis Leo Snyder Global Mini-Nationalisms: Autonomy or

8 E. Gellner, Nations and Nationalism, Cornell University Press, Ithaca, New York, 2006, p. xxi. 9 Ibid., p. 7. 10 U. Altermatt, Das Fanal von Sarajevo. Ethnonationalismus in Europa, Verlag Neue Züricher Zeitung, Zürich, 1996. 11 “Nationalism is a political programme, and in historic terms, a fairly recent one. It holds that groups defined as ‘nations’ have the right to, and therefore ought to, form territorial states of the kind that have become standard since the French Revolution” (E.J. Hobsbawm, “Ethnicity and Nationalism in Europe Today,” in: Mapping the Nation, ed. by Gopal Balakrishnan, Verso Books, 2012, pp. 256). 12 M. Hroch, “From National Movement to the Fully-formed Nation: The Nation-building Process in Europe,” in: Mapping the Nation, pp. 78-97. 13 See: A. Smith, “Nationalism and the Historians,” in: Mapping the Nation, p. 175. 14 K.W. Deutsch, Nationalism and Social Communication: An Inquiry into the Foundations of Nationality, Cambridge, Mass., 1953. 15 A. Smith, Theories of Nationalism, London, 1971; idem., Nationalism in the Twentieth Century, Oxford, 1979; idem., The Ethnic Revival in the Modern World, Cambridge, 1981; idem., The Ethnic Origin of Nation, Oxford, 1986; idem., National Identity, London, 1991.

35 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Independence16 and Macro-Nationalisms: A History of the Pan-Movements.17 The latter dis- cusses the Turkic dilemma: Pan-Ottomanism, Pan-Turkism, and Pan-.18 — the sociopolitical component prevails in national ideology when individual national-ethnic ideas are integrated to form the political ideology of a single state, that is, when national ideology becomes state ideology and a tool of sorts used by a polyethnic nation to realize its interests. In any configuration, the national idea and national ideology are bound by ethnicity, no matter how it is interpreted—either as man’s inborn qualities, behavioral stereotypes, and common environ- ment of symbols, or using other definitions. What is important is its ability to regulate individual social behavior and promote psychological stability, definition, and socialization of the values inher- ent in the given ethnic environment. Recognized as the cornerstone of the “national idea-national ideology” tandem, ethnicity re- veals the mobilizing mechanism used to achieve certain aims. This creates a string of determinants of ethnonational qualities that develop along a spiral and are present in any given nation: “ethnicity- ethnocultural identity-ethnosocial requirements and interests-national idea-national ideology-the nation-state as a developed ethnosocial organism.” This reveals another extremely important aspect—the dependence of temporal descriptions of the emerging national idea and national ideology on a specific matrix of their substantive basis. These two components belong to different periods and stages of the nation’s development as a entity of the historical process. More likely than not, the national idea is a “slogan-dream” of sorts rooted in the people’s (ethnicity’s) ethnocultural identity. Its outlines are vague, but the trend is clear: the ethnic- ity is developing into a nation. National ideology, on the other hand, is the mobilizing vector of the nation (which has taken or is taking shape) moving toward a fully-fledged ethnosocial mechanism, which means that the nation is blending with the state. The content of these phenomena will be dif- ferentiated by different history states prevailing at different stages of nation-building.

Is Ethnocultural Identity the Choice of History or of Politicians?

Ethnicity as a set of certain objective descriptions of the interaction of a social group with the environment demonstrates a certain degree of definiteness (a definite territory and ethnonym, two tangible realities), while the national idea and national ideology represent two different stages of the development of this quality. It is much harder to reveal the nature of a nation’s ethnocultural identity in order to establish whether it is primordial or chosen by the ethnic group under the pressure of a very specific combination of internal and external factors; this means that the choice is historically determined. In the most general form, ethnocultural identification can be defined as individual correlation with a sociocultural group (in our case ethnicity/nation) through imitation or enforced or free and deliberate choice.

16 L.L. Snyder, Global Mini-Nationalisms: Autonomy or Independence (Contributions in Political Science), Westport, Connecticut; Greenwood Press, London, England, First Edition, 1982. 17 L. Snyder, Macro-Nationalisms. A History of the Pan-Movements, Westport, Connecticut; Greenwood Press, London, England, 1984. 18 Ibid., pp. 114-128.

36 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

This fairly generalized description of the phenomenon of ethnocultural identification contains a deep-seated contradiction among its components: while the processes of ethnoformation and, hence, ethnic identity are evolutionary (that is, a change in any of its components does not change ethnic self-awareness), the processes of cultural self-determination can be relegated to the ethnotransforma- tional type. Here the changes are more dynamic and may replace, relatively quickly, the primary cultural archetype. This explains why many authors describe the problem of identity as a major chal- lenge of our time on a par with globalization.19 This is primarily caused by the realization that globalization, while bringing down interstate and international walls, invigorates self-defense mechanisms among the globalized nations and the search for a refuge of sorts. Anthony Giddens offered an impressive description: “As the influence of tradi- tion and custom shrink on a world-wide level, the very basis of our self-identity—our sense of self— changes. In more traditional situations, a sense of self is sustained largely through the stability of the social positions of individuals in the community. Where tradition lapses, and lifestyle choice prevails, the self isn’t exempt. Self-identity has to be created and re-created on a more active basis than before.”20 The range of perceptions of ethnocultural identity is fairly wide, therefore I will keep here to the most frequently used: (1) normal—when a nation’s image is perceived as positive and the need for identity is deter- mined by personality types and situations; (2) ethnocentric—an uncritical perception of one’s own ethnicity as advantageous accompa- nied by certain elements of ethno-isolationism; (3) ethnodominant—when belonging to a certain ethnicity is perceived as the highest value; (4) ethnic fanaticism—an extreme form of ethnic identity coming close to self-sacrifice; (5) ethnic indifference—when ethnic identity does not matter; (6) ethnonihilism—a form of cosmopolitanism; (7) ambivalent ethnicity—normally observed in mixed ethnic environments.21 It is not my task to dwell on historical examples of types of ethnocultural identity; however, I will point out that it stems from the “we-them” opposition and the desire of all peoples to find an answer to the question “who are we?” Discussions—scholarly, quasi-scholarly, public, and political—began on the very first day of Azerbaijan’s independence in an attempt to arrive at an answer to this question. The wide range of responses can be summed up as follows: (1) we are designated as a Turkic people and “the national idea of Azerbaijan cannot be formu- lated unless we restore the time-tested self-name ‘Turks’ of the titular nation.”22 (2) we are and “in the conditions of global transformation, it is highly important to preserve our national image, traditions, language, history, and the sociocultural back- ground of the Azerbaijani people.”

19 E.H. Erikson, Identity: Youth and Crisis, W.W. Norton, 1994; S. Huntington, Who Are We?: The Challenges to America’s National Identity, Free Press, 2005; M.A. Mikhailova, “Etnokulturnaia identichnost v usloviakh kulturnoy globalizatsii,” available at [http://cyberleninka.ru/article/n/etnokulturnaya-identichnost-v-usloviyah-kulturnoy-globalizatsii]. 20 A. Giddens, Runaway World: How Globalisation is Reshaping Our Lives, Free Press, 2005, p. 42. 21 A.P. Sadokhin, Etnologia, Gardariki, Moscow, 2002, pp. 134-135. 22 F. Alekperli, “Natsionalnaia ideologia Azerbaidzhana,” Zerkalo, 8 August, 2009.

37 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Some authors try to oppose these two theses, while others attempt to lump them together into one. Nizami Jafarov, for example, proceeds from the thesis that Turkism rests on the ideology of Azerbaijan-ism.23 These discussions are useless from the academic and all other points of view. Indeed, in the final analysis, both the most widespread models of ethnosociocultural identity—ethnocentric (un- critical preference for one ethnicity and self-identification with it) and ethnodominant (one ethnicity among many others is preferred) offer no advantages when it comes to the modernization and renova- tion of society. It is much more important to concentrate on the quest for innovational content of national de- velopment that would allow us to avoid social and cultural degradation and even marginalization of the country’s population, as well as help it to find its place in the global world. “Azerbaijan-ism is an outcrop of national state-building, rather than ethnonational, awareness. It unites ethnic Azeris, Lezghians, Talyshes, Kurds, Russians, Avars, Jews, , etc. This is confirmed by the fact that national self-awareness—Azerbaijan-ism, statism, and a global approach to state problems prevail in the regions where national minorities live in compact groups.”24 Ethnocultural and religious tolerance is one of the main components of this vector of the self- identity of any nation. There is any number of international documents related to tolerance as a factor of security and stability in the world,25 the main and the most inclusive among them being the Dec- laration of the Principles of Tolerance adopted by UNESCO in 1995 that says: “Tolerance is respect, acceptance and appreciation of the rich diversity of our world’s cultures, our forms of expression and ways of being human.”26 Much has been written about tolerance, but until recently the issue was never taken beyond its religious or religious-political aspects. Russian academic Musi Gajimirzaev has pointed out the following in this respect: “Ethnoconfes- sional tolerance as a factor that ensures peace and security reflects the nature of the relations and socio- political activity of the political entities, including social, ethnic and confessional groups and individuals as tolerant and based on mutual understanding and harmony, which strongly affects the degree to which the individual, society, the state, and its regions are protected against external and internal threats.”27 Here is an even more important question: What place does ethnoconfessionality hold in the ethnopolitical processes in the states of the Caucasus? The above paradigm points to four most im- portant points: (1) Ethnonational development in most of the titular and small ethnicities living in the Cauca- sus is still going on, while ethnoconfessionality, by its very nature, pushes aside ethnotrib- alism and sub-ethnic clans and accelerates ethnic consolidation. (2) Because of their polyethnicity, all Caucasian states (monoethnic Armenia being the only exception) have been confronted with the task of moving the “coexistence” of the earlier relatively independent smaller ethnicities into a new format of ethnosocial unity, viz. a

23 N. Jafarov, “Na osnove ideologii Azerbaidzhanstva stoit tiurkizm,” available at [http://ethnoglobus.com/index. php?l=ru&m=news&id=222]. 24 G. Inanj, “Azerbaidzhanstvo ne etnicheskoe, a natsionalnoe soznanie,” available at [http://www.1news.az/ authors/84/20091002032217102.html], 27 September, 2009. 25 Declaration on the Elimination of All Forms of Intolerance and of Discrimination Based on Religion or Belief, 25 No- vember, 1981, available at [http://www.un.org/documents/ga/res/36/a36r055.htm]; Declaration on the Rights of Persons Be- longing to National or Ethnic, Religious and Linguistic Minorities, 18 December, 1992, available at [http://www.un.org/docu- ments/ga/res/47/a47r135.htm]. 26 [http://www.unesco.org/webworld/peace_library/UNESCO/HRIGHTS/124-129.HTM]. 27 M.M. Gajimirzaev, Etnokonfessionlnaia tolerantnost kak faktor obespechenia mira i bezopasnosti na Severnom Kavkaze, Author’s synopsis of the Ph.D. thesis, Stavropol, 2003, p. 9.

38 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

united people within each particular state with their ethnocultural diversity intact. This far from simple process (ethnic fusion in the parlance of ethnologists) largely depends on the degree to which the forms of ethnoconfessionality are developed. (3) Late in the twentieth century, when the Soviet Union was falling apart, it was ethnoconfes- sionality that provided the moral-political and social-psychological justifications of the national states. (4) Most of the polyethnic transition states, including those in the Caucasus, accepted ethno- confessionality as a pragmatic ideological and political foundation of all types of constructs of the national idea, national ideology, and national ideal (the idea of Russia-ism or Azer- baijan-ism). The following question is of fundamental importance: if the development of ethnicities (nations) boils down to movement toward a certain ideal (aim or program ideol- ogy) to what extent is this social ideal “national,” or to what extent is the national ideal “social?” Ethnoconfessionality as a universal accumulator of the historically developing ethnic, social and spiritual experience of people can serve as the measuring rod. This explains why the development of independent Azeri statehood was closely related to the traditions of tolerance. Rabbi Abraham Cooper, associate dean of the Simon Wiesenthal Center, put this in a nutshell: “…many countries hold forth about their tolerance; this is an excellent political gimmick, yet genuine tolerance remains outside the reach of many. Your country is an exception: little is said about tolerance, yet it is a national feature of your people… Tolerance in Azerbaijan is an inexhaustible category.”28 I have deliberately concentrated on tolerance as one of the components of ethnocultural iden- tity: its presence, absence, or low level predetermines in many respects the predominance of one of the types of identities enumerated above. It should be said that they, or even wider versions of the important aspects of ethnocultural identity, do not answer the question: is ethnocultural identity the choice of history or of politicians? I have the following to say in this respect: (1) During ethnogenesis, practically all peoples relied and rely today on ethnic (national) self- awareness of a local group fixed at the ethnopsychological level as “we-them” to acquire ethnocultural identity. It is at this stage (despite possible and very different interpretations of this process) that a certain cultural-linguistic entity of the given local group emerges, the group itself tends to isolation within certain territorial limits. (2) The ethnicity’s specific geohistorical environment and the geopolitical balance of power in the world and the region play a certain role in the process.

What Will Become the “Sacral Offering” to Globalization: The National Idea, Ideology, or Identity?

Here are two very pessimistic forecasts of the future of the ethnocultural world on our planet. The influential American newspaper The Wall Street Journal wrote that, according to schol- ars, “by 2115, it’s possible that only about 600 languages will be left on the planet as opposed to

28 “Baku—odin iz nemnogikh gorodov, gde ia svobodno mogu khodit v kipe,” Nedelia, 22 August, 2008.

39 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS today’s 6,000.” This will happen for objective reasons: in the globalized world bigger groups affect smaller groups, who in time will start using their languages and borrowing their cultures.29 And the second forecast: in fifty years, the U.N. might consist of 400 to 500 states (twice as many as today). This means that the process of nation- and national state-building is still going on and that we have not yet reached the highest point, let alone the final stage. Those who wrote about the end of national states in the post-Soviet era were wrong.30 These scientifically substantiated assertions are causing a lot of concern among ordinary people, members of specific nations (ethnicities), and citizens of specific states. They cannot but ask them- selves: What will happen to us? What will happen to the identity of my grandchildren and great grandchildren in 100 years? In what state will we live? What should we sacrifice today for the vague boons of some global civilization? At first glance, the two trends are logically incompatible or even contradictory. Indeed, on the one hand, there is mounting ethnocultural unification, while on the other, there is dynamic fragmenta- tion of the present political and economic map of the world. In fact, this is a dialectical contradiction rather than logical incompatibility and it is rooted in the nature of the current stage of globalization. It should be said that globalization, as movement toward closer worldwide interconnection on the basis of communicative closeness, blending of national economies into the world economy, and the emergence of new international forms of infrastructure, makes mutually exclusive development trends unavoidable. The 18th World Congress of the International Political Science Association held in Quebec (Canada) in August 2000 discussed the correlation between globalization and Westerniza- tion and modernization, the contradictory correlation between globalization and national sovereignty and national interests, the contradictions between identity and globalization and between the mount- ing national self-awareness of smaller ethnicities in the absence of adequate representative (national- state) organizations in the countries where they live and in the world, the contradictions between national-ethnic relations and consciousness in the age of globalism and between globalization and migration, and the mounting threat of nationalism and separatism amid global development.31 In the time that has elapsed since the 18th World Congress, the following contradictions have come to the fore:  The threats and challenges (international terror and crime, drug trafficking, slave trade, etc.) created by globalization have become more prominent in scope and repercussions and in- compatible with its advantages;  The relations between the national and quasi-states and between ethnicities and supra-na- tional integration structures remain fairly vague.  Globalization is widening the gap between the rich and the poor regions of the world: the rich countries are growing richer, while the poor countries are becoming poorer. This speaks volumes about the elite nature of globalization. It also adds veracity to the warnings: instead of a “new world order,” humanity might find itself amid “new world disorder.”32 Ernest Gellner, in turn, wrote: “Nationalism is not a zero-sum game, it is a minus-sum game, because the majority of cultures-participants is bound to lose: there are simply too many cultures, as it were potential state-definers, for the amount of space available on this earth

29 J.H. McWhorter, “What the World Will Speak in 2115,” 2 January, 2015, The Wall Street Journal, available at [http:// www.wsj.com/articles/what-the-world-will-speak-in-2115-1420234648?tesla=y&mod=e2fb]. 30 See: R.G. Abdulatipov, Etnopolitologia, St. Petersburg, 2004, p. 245. 31 Iu.V. Irkhin, “XVIII Vsemirny kongress Mezhdunarodnoy assotsiatsii politicheskoy nauki o problemakh globalizatsii,” Vestnik Rossiiskogo universiteta druzhby narodov, Politologia Series, No. 3, 2001, pp. 36-44. 32 H. Veltmeyer, New Perspectives on Globalization and Antiglobalization (The International Political Economy of New Regionalisms Series), Hants, Aldershot, UK; Ashgate, Burlington, VT, 2008

40 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 for viable states. So most of the cultures are bound to go to the wall and fail to attain their fulfillment, that is, the marriage of the culturally defined nation with its own state, which is what nationalist theory anticipates and ardently desires.”33 This means that globalization is a geohistorical process that spreads far and wide to cover all aspects of social life and all regions albeit with different intensity, its impulses and development vec- tors depending on the regions’ “qualitative” state. This suggests that the twenty-first century will unfold amid two opposing, yet gradually strengthening global trends: Disunity, which has been widely developed during ethnic consolidation and ethnopolitical mo- bilization, on the one hand, and the unificatory trend in the form of ethnic integration and the quest for new forms of global community, on the other. These trends perfectly fit the seemingly contradictory opinions about future trends, which sup- press ethnic and linguistic diversity, on the one hand, and increase the number of states on the planet, on the other. These two trends may be brought together in the following way. As the first step in the desired direction, the “interested” external players “wake up” local ethnic groups and the parade of their “national ideas” stirs up the centrifugal intentions of individual ethnicities and territories. Under certain conditions, this stage may lead to political, territorial, administrative, etc. delimitation with the state to which they belong. The imperatives of globalization, however, make the next stage in- evitable: the territories that have just detached themselves from their former states to become quasi- states will seek integration with big regional or even macro-regional associations. It goes without saying that these structures, which look supra-national and rely on specific ethnocultural dominants, will gradually weaken the sovereignties and change the values, traditions, language, and mentalities, in short the spiritual sphere, of their “new members.” This is a universal, but not a uni-lineal process: it depends, to a great extent, on the ethnodemo- graphic indices of each specific ethnicity: its numerical strength, the level of ethnic distances, sustain- ability of the ethnocultural code, etc. Some of the large nations might profit from the globalization trends described above and might consolidate their position in the integrating historical space: China in the APR, Germany in Central Europe, etc.

Conclusion

The above demonstrates that the three interrelated factors—the national idea, national ideology, and the identity problem—are especially important. It seems that the ethnonational ideas and ethnonational ideologies based on the archaic matrix of ethnicity and fulfilling its instrumental (mobilizing) and motivational functions in the post-Soviet states have already exhausted themselves. Today, national-state ideology is a tool for realizing the national ideal and achieving economic and political aims, as well as a criterion of their correspon- dence to real and long-term national (ethnosocial) interests. I am talking about efficient states with clearly formulated long-term interests; all others are best described by Seneca’s famous saying: “If one does not know to which port one is sailing, no wind is favorable.”

33 E. Gellner, op. cit., p. 127.

41 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS THE GEORGIAN POLITICAL ELITE: MAIN TRENDS OF ITS CIRCULATION

Beka CHEDIA Ph.D. (Political Science), Head of Publishing Projects of the Tbilisi School of Political Studies (Tbilisi, Georgia)

ABSTRACT

he author relies on the structure, na- tional and professional levels, methods, and ture, and values of the Georgian po- traditions of elite replenishment, as well as T litical elite to identify the ways and the conditions in which political careers de- means through which it is replenished. He velop serve as the starting point for assess- arranges the members according to their po- ing Georgia’s political context as lacking in litical clout, compares the central and re- political rivalry and stifled by prominent nep- gional elites, and examines the changing otism. The political elite and its interaction figures of the gender balance. The educa- with the public elite are also discussed.

KEYWORDS: elite, politics, gender, elections, rule, party, charisma, Georgia.

Introduction

In Georgia, the political elite is closely intertwined with the business elite, public elite (the intel- ligentsia), NGOs, and the media. The dividing lines are too vague to arrive at a clear idea about the contours of the political elite. Indeed, what is a political elite? Is it limited to politicians, or does it include all of the actors who are actively involved in the political process and have a direct or indirect effect on political decisions? As a nation, Georgians are very interested in politics, which means that the circle of people involved in the political process is fairly wide. The public sphere is steeped in politics, which means that all of the actors—journalists and observers who write about politics and experts—de facto be- long to the political elite. This makes the structure of the political elite complicated, yet the range of decision-makers (people in power), or those who can have a noticeable impact on decision-making and the political processes (the opposition, the media, NGOs, the Church, etc.) is comparatively narrow. However, in Georgia, the elite is not limited to the ruling elite; likewise, political decision- making does not belong solely to the ruling elite. Journalists, experts, and members of the ruling elite or the opposition can become political entities if and when they find their own niches and their own arguments to help them move into the public-political sphere and acquire direct or indirect means of shaping the political processes.

42 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 The Political Elite: Structure and Nature

In the Soviet Union, legislators were recruited according to quotas: it was decided in advance how many representatives of non-political professions (actors, athletes, and people of creative profes- sions) should be elected to the Supreme Soviets of the Union republics. Independent Georgia inher- ited the tradition and developed it further. Starting in the 1990s, the parliaments of different convoca- tions invariably included a certain number of people from creative professions and athletes, most of them seen as outstanding personalities and the pride of the nation. At the first stages of independence, this was hailed and accepted: in Soviet times and in the 1980s and 1990s, people of creative professions and athletes were involved en masse in the national- liberation movement. This means that the new political elite and the replenishment methods are rooted in the past and that the tradition which appeared at that time survived as part of the country’s political system. At that time, the political elite looked like the politically aware part of the public elite: actors, producers, academics, and athletes. Little by little, the public grew irritated with their too active in- terference in Georgian politics. However, today, some of the non-political figures remain prominent in this sphere and are even elected to parliament. The deputies of the Georgian parliament (members of the ruling party and the opposition alike) form one of the topmost levels of the Georgian political elite. This is confirmed by their legitimacy (they never miss a chance to remind everyone that they have been elected by the people), their privi- leges (deputy immunity), and their absolute confidence that throughout their parliamentary term they will remain in the elite. Their responsibilities, however, are less exacting than those of the executive power branch, the members of which might be unceremoniously pushed out. The Constitutional amendments of 2010, which extended the parliament’s powers in Georgia’s power system, added more consequence to the deputy mandates. The 2012 parliament consists of 150 deputies: among them are 32 lawyers, 25 engineers, 14 eco- nomists, 14 doctors, 7 historians, 7 athletes, 5 agronomists, 5 actors, 5 philologists, 4 journalists, 4 teachers, 3 chemists, 3 mathematicians, 3 producers, 2 singers, 2 philosophers, and 2 physicists. There is also one political scientist, one sociologist, and one psychologist in the parliament; artists, architects, hydrologists, biologists, commodity experts, theosophists, aircraft mechanics, and fire- men are also represented by one deputy from each profession.1 About eleven deputies have law degrees as proof of their second higher education acquired at educational establishments of dubious reputations: they are athletes, engineers, teachers, or doctors. In most cases, their knowledge of the law is superficial. This means that only one-third of the deputies is professionally competent to en- gage in parliamentary activities. The chairman of the parliamentary committee for legal questions is a physicist, while the chairman of the defense and security committee is an expert in German philology. The previous parliaments also demonstrated an acute shortage of deputies with legal or economic educations. Soon after the 2012 parliamentary elections, on the eve of the off-year election to the sud- denly vacated majority seat in one of the constituencies, Speaker David Usupashvili bitterly com- plained to the founder of the Georgian Dream ruling coalition Bidzina Ivanishvili, the then prime minister, about the lack of adequately educated deputies. The prime minister later told the media: “Every day the speaker of the parliament reminds me that I should not add the name of another fa-

1 [http://www.parliament.ge/ge/parlamentarebi/deputatebis-sia] (in Georgian).

43 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS mous actor or someone similar to the list… In the past, we put the names of our favorites on the election lists and won, but the parliament is formed to pass laws. This means that the deputies should know how to do this.”2 Moreover, the law prohibits deputies from engaging in business activities, but many of them have businesses registered in the names of family members. There are 17 official millionaires in the 2012 parliament. The executive power branch, likewise, badly needs professionals, yet this part of the Georgian elite is normally staffed according to two opposite principles: some of its members are not politicians and do not belong to any of the parties, while others are politicians pure and simple. According to their official biographies, none of the 19 ministers has previous political experi- ence: three were diplomats, five worked in Ivanishvili’s company, while several others have had some brief experience in party work. Three or four of the ministers have extensive political and party ex- perience. There are two football players in the government, one producer, one former prosecutor, one accountant, one professional bodyguard, etc., while two of the ministers were inherited from Shevard- nadze. This means that the government, which, according to the Constitution, “shall be the supreme body of executive power to implement the internal and foreign policy of the country” (Art 78), is staffed with figures far removed from politics.

The Political Elite: Recruitment

One often wonders how people become politicians and join the political elite? Indeed, there are no privileged population groups or aristocracy in Georgia to delegate its members to the elite based on wealth or nobility. In Georgia, those who want to join the political community need no previous political experi- ence, despite the fact that the country with its 3.7 million-strong population3 has about 217 registered political organizations.4 The laws do not limit citizens’ political temperament, but the road to the country’s political elite does not lie through inner-party competition. No matter how hard they have tried, none of the Georgian political parties has managed so far to create conditions conducive to full- fledged party democracy. For example, after its ignominious defeat at the 2012 parliamentary elec- tions, the United National Movement repeatedly declared that it would institute reforms and conscript a younger generation of top managers. The old leaders, however, managed to keep the unwelcome new people out. On the other hand, someone might suddenly find themselves at the very top. Until 2012, Irakli Garibashvili, currently the prime minister of Georgia, served in the private bank of Bidzina Ivanish- vili, a billionaire and founder of the Georgian Dream political coalition. Some ministers with no previous political record were catapulted to the top layers of the ruling elite. Kakhi Kaladze, Minister of Energy and vice premier, came to power from the football national team of Georgia and the Italian Milan football team. After the 2012 elections, he found himself a member of the ruling elite with no previous managerial or political experience. Today, however, he doubles the posts of vice premier and secretary general of the ruling party.

2 [http://www.netgazeti.ge/GE/105/News/17711/], 14 March, 2013 (in Georgian). 3 [http://www.geostat.ge/index.php?action=0&lang=eng]. 4 [http://napr.gov.ge/p/477] (in Georgian).

44 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

The Georgian elite consists of two different types of people: some have come to stay, whereas others join by chance and leave after a short while. After spending three years (from 2012 to 2015) in his post, the minister of natural resources retired, left the ranks of the elite, and joined his family, who lived in Germany and whom he sorely missed. The above is partly explained by the fact that Georgia has not acquired a political culture based on the study of and permanent attention to the biographies of politicians. They come unexpectedly into the limelight, then just as unexpectedly leave the stage. In 2008, during the off-year presidential election, Levan Gachechiladze, who ran as a member of the united opposition, scored an unprece- dented 25.69% of votes earned in stiff competition. Mikhail Saakashvili had to work hard to acquire an unimpressive 53.47%. Despite his hefty 25.69% of the votes, Gachechiladze stayed away from the 2012 elections and withdrew from politics after the victory of the Georgian Dream to go into a big business project. Nearly all the big parties in Georgia have youth organizations, yet neither their form, nor struc- ture, nor nature correspond to the task of educating new politicians and the country’s political elite. They look more like a surrogate of the Komsomol (Young Communist League) than anything else. On the one hand, society is very skeptical about them, while on the other, these youth wings of the Georgian parties are better described as a youth supplement used for election propaganda (distribu- tion of leaflets, campaign organization, etc.). There are no institutions in Georgia able to make politi- cians out of young people. Under the Constitution, “Any citizen who is twenty-one years old and has the right to vote may be elected as an MP” (Art 49). This means that not infrequently, people elected to the parliament have no previous adequate records. After the 2012 elections, Georgian society became even more keenly aware than before of nepotism as a form of recruiting new people into politics. In 2013, Ivanishvili, the founder of the rul- ing party, who filled the post of prime minister at that time said: “There is nothing wrong in the practice of appointing close people to certain posts. It has its positive sides, and this is done in devel- oped societies, France being a good case in point.”5 It comes as no surprise that in Georgia, with its small population, many people have a large number of acquaintances and relatives, which has made nepotism an inevitable feature of Georgian politics. Between the Rose Revolution and 2012, this problem disappeared as a political trend (individual cases do not count). After 2012, relatives of the prime minister and other ministers flocked into the executive structures, businesses, and the ruling party. In 2015, NGOs tried to make nepotism a criminal offence; they initiated draft laws which the parliament refused to support. The open type of conscription to the elites is typical of democratic pluralist political systems. An open elite is a typical feature of an open society. In Georgia, where personal trust prevails, this process is closed to outsiders. The bureaucracy, based on personal trust and closely connected with the political elite, is involved in politics. This is unacceptable and explains why new regimes prefer to create their own bureaucracies. On the one hand, the phenomenon of protectionism and client relations is rooted in the Soviet system. In the 1990s, foreign analysts pointed to it as the most efficient of the informal institutions in the Caucasus. It continued living in independent Georgia; the new Georgian government failed to set up a state bureaucracy based on professional qualities, rather than personal relationships. Normally political elites are not exported from one country to another. We, however, could watch this when the Soviet Union fell apart and the Soviet elites became the national elites of the former Soviet republics. In 2015, however, a precedent of elite export was created. Former Georgian president Saakashvili and several of his former ministers acquired high state posts in Ukraine. The

5 [https://www.youtube.com/watch?v=dGkl99ytcb8] (in Georgian).

45 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS former president became governor of Odessa on 30 May, 2015; some of his comrades-in-arm, still members of the Georgian parliament elected in 2012, were appointed to high posts in Ukraine. This post-Soviet Georgian-Ukrainian precedent changed the traditional ways of recruitment, circulation, and replenishment of the political elite.

To What Extent is the Elite Ready to be the Elite?

The low level of Georgia’s political elite is one of the biggest problems of the country’s politi- cal system, even though different segments of the elite think differently about professionalism and competence. High professionals (financiers, lawyers, political scientists, etc.) prefer to keep away from politics (and careers in political parties in particular), either because they do not want to be drawn into it, or because the high barriers keep skilled and knowledgeable professionals away. In Georgia, the educational level of the elite is lower than the country’s average. In 2012, with the advent to power of the Georgian Dream coalition, it became clear that its average professional level was much lower than that of its predecessors. Local experts (even those who were very critical of Saakashvili and his team) have admitted that the Georgian Dream falls far behind the professional level of the political elite brought to power by the Rose Revolution, which was much more progressive into the bargain. Bidzina Ivanishvili, the founder of the Georgian Dream, who filled the post of the prime minister for some time after the 2012 parliamentary elections, knew that his parliamentary majority was much weaker professionally than the minority knocked together out of former top bureaucrats of the Saakashvili regime.6 It should be said that the Georgian electorate has become much more exacting when it comes to the country’s political elite, thanks to the people who, while in power from 2003 to 2012, raised the minimally required educational and professional level. Today, Western diplomas have become an important career driver, a ticket to the corridors of power, a trend among the political elite, and a trigger of inferiority complex among those top officials who have been unable to produce them. They used their posts to acquire allowances on easy terms (or budget funding) to study at Western universities. Not infrequently, having climbed high up the career ladder, members of the Georgian political elite combine civil service with so-called educational holidays to spend a year abroad at master courses and short-term refresher courses, or take advantage of online educational pro- grams. In Georgia, a deputy or a minister who studies at a higher educational establishment is nothing out of the ordinary. They prefer the United States, Great Britain, and some other European countries to withstand the competition in society, where the number of graduates from the best universities is too high to allow the political elite to feel comfortable. Intellectually, the NGOs leave the political elite far behind in terms of professional and educational level. This explains why those members of the political elite who used to belong to the third sector stand apart as progressive-minded politicians. After the Rose Revolution, there was a much larger number of former NGO people in the ruling elite; their number shrank considerably after the 2012 elections. This means that a place in the political elite offers not only levers of power and involvement in decision-making, but also forces people to raise their educational level. About half of the deputies of the 2012 parliament are graduates from Tbilisi State University, the flagman of the country’s educational system.

6 [http://www.netgazeti.ge/GE/105/News/17711/], 14 March, 2013.

46 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

It is impossible so far to modernize the country’s political field and establish a new model of political culture—the professional level of the deputies is too low for that. This explains why the center of gravity has shifted to the third sector. Under Saakashvili, the ruling elite was the main mod- ernizer; the president himself looked like a reformer to the rest of the world (despite the harsh politi- cal regime he established in the country). After the 2012 elections, which brought the Georgian Dream coalition to power, the ruling elite was no longer able to carry out the reforms. The parliament’s low professional level is especially obvious when it comes to forming the budget, the duty and prerogative of the parliament in many other countries. In Georgia, the budget drawn up by the cabinet is approved by the parliament. Its members call themselves politicians, who do not and cannot know everything, while members of the political elite refuse to consider themselves politicians.

The Local Elites

There is no local political elite in Georgia to speak of: the country’s political elite prefers to congregate in the capital. The local elites, on the other hand, consist of deputies elected by majority vote, heads of district administrations, and governors. The leaders of the local party cells are nothing more than pawns (including those who belong to the ruling party). Heads of the district police, who have much more clout than heads of district administrations (a tradition inherited from Soviet times), also belong to the district elite (in most districts). The deputies elected by majority vote are the worst headache of Georgia’s political system. Before the 2012 elections, the Georgian Dream promised to replace the majority system with voting by regional-proportionate lists. This has not been done. Today, 73 out of 150 deputies are elected by majority vote; 77 are elected by party lists. Since the 1990s, many international organizations have been recommending changes, since under the ma- jority system a district with 5,000 voters and a city of 100,000 are represented by one deputy each. Some people say that the majority system interferes with the development of parliamentarism and political parties in Georgia. On top of this, the majority deputies are useless as legislators. On 12 June, 2015, the speaker made public the names of those deputies who had missed more plenary sittings than others: majority deputies were among the ten persistent truants: one of them missed 101 sittings7 between 2012 and 2015. On many occasions, they want to have their fingers in all the pies: political, economic, and in- frastructural. They interfere, contrary to the law, in what the administration is doing in order to look like “the father of their constituency” in the eyes of the electorate. Today, the post of a governor (head of a region consisting of several districts) is the most prestigious and consequential; it was the starting point of the development of local political elites under President Shevardnadze. For many years, the posts of plenipotentiary representatives of the president (governors) were distributed among former MPs and other active politicians. In 2012, everything radically changed for two reasons: first, under the Constitutional amendments, the right to appoint governors was transferred from the president to the prime minister; second, civil servants with experience in the law-enforcement structures are pre- ferred to political figures. Today, four out of nine governors served in the police and state security structures (some of them were educated in Soviet schools of the militia, KGB, or FBI courses in the United States). Three governors came from the tax police or from the Customs Service (one of them was a famous singer); two governors are unrelated to the law and order system: one of them served

7 [http://www.liberali.ge/ge/liberali/news/126106/].

47 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS in Ivanishivili’s bank, while the other is a professional producer employed by the TV channels that belonged to Ivanishivili’s company.8 Security and defense officials in the local ruling elites are a novelty for Georgia, even though heads of the local police or secret service (at the ministry of internal affairs level) did rule districts instead of the local administrators. Security and defense officials as governors are a surrogate of the post-Soviet models, especially of the model now used in Russia. The part of the local political elite elected at the local elections cannot become a real local po- litical elite. There are 71 local elected bodies (Sakrebulo) with 2,083 representatives; there are mayors in twelve cities and 59 municipalities headed by gamgebeli. The Tbilisi Sakrebulo stands apart from the other 70 as the most important. The capital is home to a third of the country’s population, which explains why its sakrebulo is called a mini-parliament. The way its 50 seats are filled is very specific, however it cannot be free in what it is doing: it is supposed to keep an eye on the Tbilisi government, while in fact the mayor’s office imposes its rules on it. In the absence of a clear political course, the deputies of the Tbilisi Sakrebulo, the country’s political center, belong to the local political elite. Traditionally, political parties consider the Tbilisi Sakrebulo to be a step toward running for the parliament. The political elite (political parties) use the local elections as a dress rehearsal for the parliamentary elections. The mayor of Tbilisi, elected by direct popular vote, is much higher up the political ladder than certain ministers. Several years ago, the mayor was appointed by the government, although his political clout was comparable to that of the prime minister or ministers.

The Gender Question in the Context of the Male-Dominated Elite

The need to draw more women into politics is strongly felt in Georgia. After 2012, there were suggestions to introduce quotas for women in order to open the doors to the country’s political elite. Those who opposed this argued that quotas would infringe on the rights of women: they would be drawn into politics because of their gender not their records, skills, and professionalism. It was further said that quotas might draw accidental people into the political elite. Some of the female deputies of the 2012 parliament were likewise critical: the quotas might put an end to their so-called gender mo- nopoly in the balance of power in the political elite. Today, there are 17 women (11.3%) in the parlia- ment. Georgia ranks 106th9 in the world in this respect, one step higher than Armenia. In the previous parliaments, the gender correlation was as follows: 1995—16 women out of the total 235 deputies (6.8%); 1999—17 out of 235 (7.2%); 2004—22 out of 235 (9.4%); 2008—9 out of 150 (6.0%).10 In 2011, the corresponding law was amended to provide financial incentives to those political parties that voluntarily include candidates of different sexes in their party lists. Initially, the law pro- vided 10% additional funding if the party list was composed of at least 20% women distributed among every ten candidates. In 2014, one more amendment was introduced into this law for local self-gov- ernment elections: a 30% increase in the supplement from the state budget if the party list includes at least 30% women distributed among every ten candidates.11

8 [http://gov.ge/index.php?lang_id=GEO&sec_id=37] (in Georgian). 9 [http://www.ipu.org/wmn-e/classif.htm]. 10 The data has been compiled by the Inter-Parliamentary Union on the basis of information provided by National Parliaments by 1 June, 2015, available at (see: [http://www.ipu.org/wmn-e/classif.htm]). 11 See: The Organic Law of Georgia on Political Union of Citizens (Art 30.7[1]), available in Russian at [https://matsne. gov.ge/ru/document/download/28324/15/ru/pdf].

48 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

The involvement of women in politics is encouraged at the legislative level, while local activists are still displeased with the small number of women at the local level: there are only eleven women among the 50 members of the Tbilisi Sakrebulo.12 In Georgia, 4 out of 19 ministers are women. This figure looks unimpressive, although the ministerial posts they occupy cannot but impress: a woman defense minister in a Caucasian country with a traditional male-dominated political system looks like a breakthrough; the posts of the foreign minister, the minister of justice, and the minister of education also belong to women. Two more high posts—Chairperson of the Supreme Court and Secretary of the Security Council—are occupied by women. This means that women are involved in Georgia’s political life and that reproaches about its male-dominated elite no longer hold water.

Conclusion

The Georgian political elite is a fairly complicated phenomenon in terms of structure and ideol- ogy. In fact, it has no ideology, a feature inherited from the Soviet past when a party card opened all doors to the top. Not all of those who strove to climb high and those who have climbed high were committed communists. Perestroika and the upsurge in the national-liberation movement in Georgia allowed the elite to discard the remnants of ideology. After the 1990s, the Communists left the Geor- gian political class and moved into business to become part of the business elite. After coming to power in independent Georgia, Eduard Shevardnadze, former First Secretary of the C.C. Communist Party of the Georgian S.S.R., brought back part of the Communist nomenklatura. Today, in the absence of political ideology, it is hard to pigeonhole the Georgian political elite. In Georgia, people have not and do not close ranks around an ideology; elites have been and remain the product of a historical stage. In the 1990s, dissidents with no nomenklatura past to mar their im- ages formed the political elite; under Shevardnadze, former Communists who had wisely left their ideology and political values behind moved to the fore to form the ruling elite without an ideology. Under Saakashvili, the ruling elite demonstrated the greatest ideological bias: it assumed a neoliberal ideology and was determined to modernize the country. The post-2012 ruling elite is amor- phous and has no clear ideology, even though small groups in the ruling class and the opposition demonstrate ideological preferences. NGOs, the media, and the expert community, which belong to the political elite on the strength of their political decision-making potential thanks to their roles in shaping public opinion, demonstrate the highest degree of ideologization. In Georgia, people have no confidence in the political elite. The Soviet formula “politics is a dirty business” is still very popular. Repeated sociological polls organized by all sorts of structures and centers reveal a low and diminishing trust in the political institutions. In 2015, the polls revealed that 91% trust the Georgian Orthodox Church and 82% trust the media, while political parties and other political institutes are mistrusted and are gradually losing their supporters. Fifty-one percent has confidence in the office of the president; 49% trust the parliament; 48% have confidence in the Cabi- net of Ministers; 45% in the office of the prime minister; and 25% in the parties.13

12 [http://tbsakrebulo.gov.ge/index.php?m=338&faction_id=184&fraction=%E1%83%A1%E1%83%90%E1%83%9] (in Georgian). 13 [www.iri.org/resource/iri-georgia-poll-georgians-are-less-optimistic-continue-desire-deeper-ties-west-wary].

49 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS POLITICAL CLANS OF KYRGYZSTAN: PAST AND PRESENT

Asyl BOLPONOVA Ph.D. (Hist.), Assistant Professor, Department of Baccalaureate, Academy of State Administration under the President of the Kyrgyz Republic (Bishkek, Kyrgyzstan)

ABSTRACT

he author traces the history of the clan gyzstan. She relies on facts to demonstrate system and its evolution as part of the that the clan system of our days is a product T political processes unfolding in Kyr- of classical unification of tribes into clans.

KEYWORDS: clan, kin, tribe, tribalism, nomads, nomenklatura clans, political-family clan, ethnoregionalism, Kyrgyzstan.

Introduction

The clan system and tribalism, which figure prominently on the political scene of Kyrgyzstan, can be described as the country’s greatest problem. It adds vehemence to the power struggle be- tween clans, breeds corruption, ignites clash of interests, encourages nepotism and political patron- age, etc. Normally, scholarly studies of the role of the state in democratization concentrate on classes and political parties and ignore the negative role of informal ties and relations that weaken the regime and destabilize it. Meanwhile, it was social groups tied together by informal rules and regulations that moved to the fore in independent Kyrgyzstan; this means that the phenomenon of tribal cohesion and the resultant regulatory tools deserve the close attention of our academic community. Clans and their role in the political processes unfolding in Kyrgyzstan constitute a relatively recent trend of social studies in the republic that calls for a comprehensive approach. Much of what is said about these phenomena in the academic and analytical communities shows inadequate knowl- edge of the subject; the social response to the results of academic and analytical deliberations could develop into a behavioral model. This makes my contribution objectively important and well-timed: we need theoretical foundations to identify the trends in future studies of these problems.

The Clan as a Target of Study

The academic literature brims with identifications of clans, while the methodologies of studies of the clan as a phenomenon is burdened by the use of different, yet semantically close, terms: “clan community,” “lineage,” “tribalism.” “nepotism,” “the Asiatic mode of production,” and “nomenkla-

50 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 tura” of the Soviet period are used in historical contexts; “elite” and “patronage networks,” in politi- cal contexts; “identity,” “mentality” in philosophical contexts; “social stratification” in sociological contexts, etc. Terminologically, the Gallic “clann” literary means “seed”; in the broader sense, the word means children, offspring, descendants.1 At first, the term “clan” as “kin” (rarely, tribe) was wide- spread among the Celts (the Irish, Scots, and Welsh people). During the disintegration of clans, the term was applied to groups of close relatives with the same ancestor; the Scots put Mac (son) in front of the family name to point to common roots; the Irish use O’ (grandson) for the same purpose. Anthropology of the nineteenth and the first half of the twentieth century applied the term “clan” to tribal entities typical of the Asian and African margins and the Pacific islands, common relatives and common territory being the basic descriptions. The twentieth-century ethnology brought more order to the ideas about clans: a group of blood relatives originating from a common ancestor, either male or female (unilineality). The interpretation of the clan offered by American ethnographer Lewis Morgan, who described the clan as a unit of descendants from the same male ancestor (patrilineal group), should be taken into account. Frederick Engels relied on Morgan’s ideas in his The Origins of the Family, Private Property and the State, one of the fundamental works of Marxism.2 A clan unites several lineages, groups of relatives who can trace their roots to common ances- tors. Clans and lineages are regarded as corporate groups bound by a feeling of unity and, frequently, common property. Prominent British ethnologist Edward Evans-Pritchard who studied the political order of British-Egyptian Sudan described lineage as genealogical kinship and clan segmenting.3 He treated the system of lineages, in societies where there was no supreme power, as a functional meth- od of control and brokering of social conflicts. “Tribe,” the most frequently used term, is applied to a certain aspect of a clan: a small group of people united by common kinship or common territorial origins. There are several types of tribalism: political, social, and historical-cultural, political tribalism being the most prominent type today. Western and Russian academics prefer the term “identity” when writing about tribalism and clan. Lucien Febvre, Marc Bloch, Erik Erikson, Heinrich Lubbe, and Samuel Huntington offered their own concepts of identity. Lubbe speaks of identity and “historical individuality”4; in his Who Are We? Huntington wrote about identity as uniformity that keeps individuals together: common culture, com- mon territory or common political, economic and social interests.5 Anthony Giddens, Zhan Toshchenko, and linguist Sergey Ozhegov did not include a “group tied by blood kinship and common ancestors” into the definition of clan.6 They wrote about the clans as we know them: people tied together by common traditional, cultural, and religious identities and also mutual interests and obligations. It should be said that the problem has been well studied7; there is a more or less common opin- ion that clan ties are the most prominent feature of power structures. In fact, globalization and integra-

1 See: “Spravochnik iuridicheskikh terminov,” available at [http://www.assured. ru/dictionary/index.php?l =18&id=206]; Ch.K. Lamazhaa, “‘Klan’: poniatie v sotsialnykh naukakh,” Znanie. Ponimanie. Umenie, No. 2, 2008, pp. 121-131. 2 See: F. Engels, The Origins of the Family, Private Property and the State, Penguin Books, 1972. 3 See: E. Evans-Pritchard, The Nuer: A Description of the Modes of Livelihood and Political Institutions of a Nilotic People, Clarendon Press, Oxford. 4 H. Lubbe, “Istoricheskaia identichnost,” Voprosy filosofii, No. 4, 1994, pp. 108-113. 5 See: S. Huntington, Who Are We? The Challenges to America’s National Identity, Simon&Schuster, 2004. 6 A. Giddens, Sociology, Polity Press, 2011; Z.T. Toshchenko, “Elita? Klany? Kasty? Kliki? Kak nazvat tekh, kto pravit nami,” Sotsiologicheskie issledovania, No. 11, 1999, p. 131; S. Ozhegov, Tolkovy slovar, available at [http://dic.academic.ru/ dic.nsf/ogegova/83466], 15 May, 2013. 7 See: M.B. Olcott, Central Asia’s New States: Independence, Foreign Policy and Regional Security, Washington, 1996, pp. 9-10; K. Collins, “The Logic of Clan Politics: Evidence from the Central Asian Trajectories,” World Politics, Vol. 56,

51 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS tion of contemporary societies has given rise to and popularized the term “political clan” consisting of political, regional, economic, and financial elites. Today, any political clan relies on friendship, kinship, ethnic ties and the ties based on territorial kinship, common business and professional inter- ests, and administrative relations. According to American academic Slavomír Horák, the newly independent states produced po- litical-family clans as a new type of elite group: a relatively narrow group of people (the national or regional political elite proper) and its retinue.8 They are kept together by a system of direct personal (friendly, ethnic, and common territory) or business (professional, property, administrative, etc.) rela- tions, each of them differently affecting the clan structure. In all cases, however, family-clan and tribal relations are of fundamental importance. The family does not limit its presence to the top state positions: it is actively involved in all sorts of financial, economic, and public foundations, projects, and communities. Family control of the media helps its members to move into important official posts (the government, parliament, etc.). This means that in the post-Soviet period, the classical definition of clan no longer corresponds to what students of nomadic societies wrote in their time. According to Chimiza Lamazhaa from Rus- sia, today clans are based on direct or indirect personal relations tied by common economic interests. The clan system of our day consists of clearly outlined social groups that share informal regulations and obey informal rules. The revolutionary events of 2005 and 2010 in Kyrgyzstan were a tragic example of the danger of allowing clans to control state power.

Nomadic Society and the Clan and Tribal System among the Kyrgyz

The clan structure among the Kyrgyz stemmed from the specifics of information and property transfer among the nomads; it is much older than the state and its institutions. An analysis of the objective course of history, socioeconomic development, and the genesis of society suggests that clan identity was created by the ecological niche and its natural and climatic specifics. Nomadic cattle- breeding proved to be the most adequate form of material production; settled agriculture was kept strictly outside by never-slacking efforts to preserve the wellbeing, specifics, homogeneity, and inde- pendence of ethnic communities. Indispensable information was transferred from generation to gen- eration along patrilineal channels, which explains the predominance of the genealogical system of kinship and the genealogical organization of the system of social aggregation of nomadic communi- ties. This type of state structure functioned among the nomads from the beginning of nomadism to the middle of the 2nd millennium A.D. Here I would like to mention the works of Russian and Ukrai- nian academics who studied Central Asian nomadism.9 By the late twentieth century, the CIS gave

No. 2, January 2004, pp. 224-261; N. Masanov, “Kazakhskaia politicheskaia intellektualnaia elita: klanovaia prinadlezhnost i vnutrietnicheskoe sopernichestvo,” in: Evrazia: Lyudi i mify (collection of articles Vestnik Evrazii), Compiled and edited by S.A. Panarin, Natalis, Moscow, 2003, pp. 235-241; Ch.K. Lamazhaa, Arkhaizatsia obshchestva v period sotsialnykh transformatsiy (sotsialmo-filosofskiy analiz tuvinskogo fenomena); Doctoral thesis, Moscow, 2011, 41 pp.; Sh. Kadyrov, “Institut prezidenstva v klanovom postkolonialnom obshchestve,” in: Eurazia: Lyudi i mify, pp. 337-364. 8 See: S. Horák, “Transformatsia identichnosti sredneaziatskikh elit: traditsia i sovremennost,” available at [http:// slavomirhorak.euweb.cz/bibliography-ru.htm]. 9 See: S.I. Vainstein, Mir kochevnikov tsentra Azii, Nauka Publishers, Moscow, 1991; N.N. Kradin, Politicheskaia antropologia, Textbook, Ladomir, Moscow, 2011; A.M. Khazanov, Kochevniki i vneshniy mir, Almaty, 2002; N. Kradin, “Kochevniki, mir-imperii i sotsialnaia evoliutsia,” Almanakh Vostok, No. 11/12 (35/36), November-December 2005, pp. 314-335.

52 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 rise to national ethnological schools; the Kazakhstan school demonstrated the best results in the study of nomadism.10 The process of natural integration of nomadic societies led to the emergence of territorial con- federations: wings (tribal unions) were an important step toward a new social organization. By the fifteenth century, the Kyrgyz acquired a dual ethnopolitical organization—on kanat and sol kanat— which strongly affected the future of their social and political development.11 According to Omurkul Karaev, the dual ethnopolitical system appeared in the latter half of the fifteenth century, at the con- cluding stage of the emergence of the in Tien Shan. Anvarbek Mokeev writes that the Kyrgyz inherited the dual ethnopolitical organization from the Turks in the sixteenth century. He relies on Chinese (Xi Yu Zhi—A Record of the Barbarian Countries in the Western Region) and Ara- bic sources compiled by the 1770s.12 The genealogy of the Kyrgyz and the origins of ethnopolitical organization among the Kyrgyz were registered in the source Majmu at-tavorix written by Saif ad’din Ahsikendi in the early sixteenth century.13 The earliest information about the Kyrgyz clans belongs to the sixteenth century. There is any number of versions of the history of the Kyrgyz tribes and clans, each deserving attention and analysis. Here I have relied on the materials of the archeological-ethnographic expedi- tion gathered in 1953-1956 by S. Abramzon and Ya. Vinnikov.14 The right wing consisted of three large branches—Tagay, Adigine, and Mungush—which, in turn, included Sarybagysh, Bugu, Solto, Tynymseiit, Sayak, Cherik, Ckekir Sayak, Zhediger, Azyk, Kara-Bagysh, Monoldor, and Chon- bagysh. The tribes of the left wing were Saruu, Kushchu, Mundus, Kytay, Basyz, Tebey, Nayman, Chon Bagysh, and Zhetigen. The third group Ichkilik consisted of the tribes Kypchak, Nayman, Teit, Zhoo-Kesek, Kangdy, Boston, Noygut, Dөөlөs (Tөөles), Avagat (Avat), Kydyrsha, and Ilik.15 The dual system proved to be perfectly suited to the nomadic organization of territories and populations. The names of clans and tribes should be interpreted as a purely geopolitical factor. Each zone has its own cultural-historical specifics. It should be said that until the fifteenth century nomads set up state structures for expansion. Later, in the Modern Times, the nomads set up state structures to regulate relations between the no- madic and settled agricultural worlds at the sites of their direct contact. In peacetime, these structures played a minimal role or no role at all in social life; this explains their predominantly amorphous nature. Indeed, forced to fight, the Kyrgyz had to close ranks, while their nomadic lifestyle required segmentation. Two prominent historians from Kyrgyzstan (D. Dzhunushaliev and V. Ploskikh) dis- covered new positions from which the tribal-clan identity of Kyrgyz society can be discussed and reappraised.16

10 See: Zh.B. Abylkhozhin, Traditisonnaia kultura Kazakhstana. Sotsialno-ekonomicheskie aspekty funktsionirovania i transformatsii (1920-1930-e gg.), Alma-Ata, 1991; K.I. Nurov, Pravovaia i ekonomicheskaia modernizatsia traditsionnoy struktury Kazakhstana (XIX-XX vv.), Gylym, Alamaty, 1995; N.E. Masanov, Kochevaia tsivilizatsia kazakhov: osnovy zhiznedeiatelnosty nomadnogo obshchestva, Almaty, 1995; idem, Sotsialno-ekonomichseskie otnoshenia v kazakhskom kochevom obshchestve, Almaty, 1997; Z. Muzalin, “Korporativnost kak politicheskaia traditsia v Kazakhstane,” Mysl, No. 8, 1998, pp. 24-25; N. Amrekulov, “Zhuzes and Kazakhstan’s Social and Political Development,” Central Asia and the Caucasus, No. 3, 2000, pp. 100-115. 11 See: Kyrgyzy: istochniki, istoria, etnografia, Compiled by O. Karaev, K. Zhusupov, Bishkek, 1996, 524 pp. 12 See: A. Mokeev, “Etapy etnicheskoy istorii i sotsialnoy organizatsii kyrgyzov na Tian-Shane v XVI-XVIII vv.,” Izvestia AN Respubliki Kyrgyzstan. Obshchestvennye nauki, No. 4, 1991, pp. 43-54. 13 See: Saif al-din ibn da-mullo Shakh Abbas; Majmu atut-Tavorix, Akyl, Bishkek, 1996, 128 pp. 14 See: Trudy Kirgizskoy arkheologo-etnograficheskoy ekspeditsii, Vol. 3, Moscow, 1956-1959. 15 The names of tribes are cited from Trudy Kirgizskoy arkheologo-etnograficheskoy ekspeditsii, Vol. 1, p. 137; Vol. 3, pp. 36-37. 16 See: D. Dzhunushaliev, V. Ploskikh, “Tribalism and Nation Building in Kyrgyzstan,” Central Asia and the Caucasus, No. 3, 2000, pp. 115-123.

53 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS Traditional Kyrgyz Society Reformed in the 19th-20th Centuries

The Russians replaced the traditional social system with a territory-state administrative system. Under the decree of the Russian emperor of 2 July, 1867, the General-Governorship of five regions appeared: Syr Darya, Ferghana, Samarkand, Semirechie, and Trans-Caspian.17 In this way, the region acquired a unified system of state-territorial domination of Russian autocracy. As part of the Turkestan General-Governorship, Kyrgyzstan was divided between several regions: the north of Kyrgyzstan became part of the Semirechie (Issyk Kul and Tokmak districts); the Talass Valley joined the Syr Darya Region as the Aulie-Atin District; and the south was divided between the Ferghana and Samarkand regions (the Andijan, Osh, Namangan, and Khujand districts and the Pamir area). The Russian authorities found the social, economic, clan, and legal statuses that divided the local people highly advantageous: they raised the traditional social institutions to the supra-group level to create institutions of power that relied on the elite and aristocracy. As a result, the traditional nomadic and the Russian (colonial) systems of governance became an integral whole. The traditional clan and tribal organization helped Russian czarism to adapt its novelties to the local conditions. Nikolay Grodekov wrote in his time that the Central Asian lands received an indirect system of governance that left the local social structures intact.18 The local peoples individually associated themselves with clans or tribes. Colonialism did not change the traditional Kyrgyz nomadic community; it used and exploited it as an integral whole. The czarist government failed to change the traditional governance system of Kyrgyz society no matter how hard it tried. Soviet power, the totalitarian system, and its dominant ideology, likewise, tried to push clan and tribal loyalty to the backburner. The tells us that no matter how hard Soviet officials tried in the 1920s-1930s to impose a Soviet identity on the people and each of its members, the clan and tribal identity prevailed. In the 1930s, the traditional ideas of power survived in the course of enforced settlement of the nomads; collectivization abolished private property in cattle and communal property in land. The clan and tribal system was anathematized; the means and tools of production became state property, while collective and state farms were set up everywhere, albeit with little success: the traditional clan and tribal system absorbed all the novelties. In the 1920s-1930s, “the nomadic mentality” triumphed over the Soviet reforms of state structures, which demonstrated little or no viability. In fact, the clan and tribal system received a new lease of life within the totalitarian regime to become the most important attribute of state governance in Kyrgyz- stan, where society preserved its traditional culture and demonstrated the highest degree of surviv- ability. Throughout the Soviet period, a totalitarian-traditional symbiosis at the top level of power ap- peared: the top official posts were privately distributed among members of clan and tribal elites.19 The system of dual standards concentrated power within a fairly narrow circle of national elites that gradually developed into a new nomenklatura clan known as euronationals, a term coined by Russian ethnologist Leokadia Drobizheva.20 The nomenklatura elites needed wider rights as an indispensable external and internal condition of successful careers.

17 See: Kyrgyzstan-Rossia: Istoria vzaimootnosheniy v sostave imperii i SSSR (vtoraia polovina XIX v.-1991 g.), Collection of documents and materials in two books, Book 1, Bishkek, 2000, pp. 22-23. 18 See: N.I. Grodekov, Kyrgyzy i kara-kyrgyzy Syrdarinskoy oblasti: iuridichesky byt, in 2 vols., Vol. 1, Tashkent, 1889, p. 12. 19 See: S. Toktogonov, Iz istorii proshlogo Kyrgyzstana, Osh, 1995, pp. 25-26. 20 See: L.M. Drobizheva, “Intelligentsia i natsionalism: opyt postsovetskogo prostranstva,” in: Etnichnost i vlast v polietnichnykh gosudarstvakh, Materials of International Conference 1993, Nauka Publishers, Moscow, 1994, pp. 71-84.

54 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 Emergence of Political-Family Clans in Sovereign Kyrgyzstan

During the years of independence, the archaic institutions of the Middle Ages were revived against the background of social modernization. It has become absolutely clear that society remained as loyal to the traditions rooted in Kyrgyz culture as ever and that the deliberate strategies and sub- conscious trends of their preservation survived amid the nostalgia and idealization of the past. This awakened the Kyrgyz to the need to find their own identity and “their own path,” as well as rehabili- tate and legalize the culture of tribal mutual assistance. It was then that regional and clan elites ap- peared. In the course of time, clan and tribal institutions became tools of political self-identification, nepotism in the corridors of power, patronage networks, and corruption being the most prominent negative results. The regional and clan elites have not only preserved their basic traits and traditions: they preserved the patronage networks and, through them, their ability to openly affect state-building. It was a model of modernized Kyrgyz society based on archaic consciousness set up to improve the mechanisms of administration. National self-identification and an interest in the past are two objective phenomena typical of all new states. The Asian and African post-colonial states experienced this in the 1960s. Early in the 1990s, Francis Fukuyama wrote about “the currently ‘reawakening nations’ in Soviet Central Asia” eager “to ‘rediscover’ historical languages and cultures.”21 He saw this phenomenon as a natural cy- clical phase in the emergence and development of national identity. Rauf Garagozov has explained the reviving subcultures and ethnonational myths by the response of the developing countries to globalization challenges.22 To my mind, however, archaic elements in power are a negative phenom- enon. On the one hand, they create a rigidly centralized system of governance and ensure political and economic stability, while on the other, the clan system spreads at all levels of power. Democracy is pushed aside by bureaucrats who are members of one and the same clan and who, therefore, are always ready to sweep misdeeds or even crimes of their cronies under the carpet. The following factors are partly responsible for the stronger position of clans and tribalism in the corridors of power: 1. The rapidly developing market economy created economic problems for the people, who had no choice but to close ranks on the basis of blood kinship. Society, which has no confidence in future, turned to the much clearer past; the strug- gle for survival, one of the basic instincts, pushed natural mechanisms to the fore. Corporate consciousness and cohesion, as well as the social mobilization (clans and tribes) typical of the Kyrgyz society at all times were the first steps toward the clan system and patronage networks in state power. The nomadic heritage—the instinct of self-preservation, the clan and tribal structure of nomadic society, and collective thinking at the subconscious level— had an important role to play. Indeed, in crises and periods of transition, collectives, rather than individuals, stand a better chance of living and surviving. The nomads, vehicles of nomadic civilization, acted according to this pattern. This explains why, after gaining their independence, the Kyrgyz united into corporate entities based on kinship and mutual sup- port to cope with the social, economic, and political challenges. The same principle was applied at the very top where patronage-client relations became the main tool of political

21 F. Fukuyama, The End of History and the Last Man, Avon Books, 1993, p. 269. 22 See: R. Garagozov, “Collective Memory and National Identity in the Globalization Era (Empirical Studies of the Azeri Youth),” The Caucasus & Globalization, Vol. 3, Issue 3, 2009, pp. 104-114.

55 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

mobilization and efficient ties between the elites and the masses and played an important role in obtaining and distributing public resources. The clan principle applied everywhere, from the center to the remote regions, made clans part of the country’s political context. Status is all-important: the higher the post of one of the clan members, the wider the foun- dation of the clan pyramid. 2. Kyrgyz society responded with clan cohesion to Western influence and globalization, which irrevocably damaged the moral principles of the Kyrgyz, the centuries-old traditions of collectivism, clan democracy, and mutual support and infringed on the authority of the older generation. Looking back at Askar Akaev’s time, we can say that Kyrgyzstan was ready to accept Western-style democracy. According to Kyrgyz academic Sergey Kozhemiakin, it was the wrong model of democracy: it presupposed Westernization under the pressure of Western civilization and Western values, which pushed the country dangerously close to a social, economic, political and cultural crisis. In its political development, Kyrgyzstan tried differ- ent types of modernization,23 but, from the very beginning, all the Western models of state governance were ill-suited to Akaev’s regime. Their failure left a vacuum, which became rapidly filled by centuries-old traditions and maximum unity based on common culture, traditions, and norms; collectivist thinking prevailed over individual, while solidarity and tribal and clan identities reached the highest point. This led to clan cohesion in the corridors of power, as well as nepotism and stronger patronage ties. President Akaev gradually de- veloped into a despotic ruler. 3. National identity, cultural heritage, and historical roots became the pivotal points. Many of the post-Soviet states, the Central Asian countries in particular, lived through a period of myth creation. It seems that Kyrgyzstan, very much like its neighbors, was seeking a revival of national spirit. Huntington, who made the question “Who Are We?” the title of one his works,24 proved beyond doubt that the question of identity was actualized when the post-Soviet states were acquiring their independence, Kyrgyzstan being no exception. The official course toward revival of the past and consolidation of traditions was indispensable for state-building in all the Central Asian countries. They moved back to their cultural heritage: forgotten traditions (sanjyra), kurultais, and gene- alogy. In one way or another, this strengthened the government. Revival of cultural heri- tage was expected to contribute to the unity of the people, their national identity, and continuity of the generations, as well as promote traditional education based on the ge- netic memory of the people. In short, cultural heritage was seen as a substitution for Soviet ideology and a new filling of the ideological vacuum of the early independence period. Indeed, revival of the traditions of patriarchal-feudal society looked like the best option and justification of the titular nations’ historical mission. The Central Asian lead- ers are searching the past for the present self-identities of the autochthonous population and justification of their claims to leadership. Actualization of traditions revived negative features: nepotism, patronage, and corruption. This eventually led to the creation of po- litical-family clans at the top and the strong authoritarian regimes of Akaev and Bakiev. They ignited rioting sentiments among the masses and led to the revolutions of 2005 and 2010.

23 See: S.V. Kozhemiakin, Osobennosti modernizatsii traditsionnykh obshchestv v uslovoiakh globalizatsii, Author’s abstract of Ph.D. thesis: 23.00.04, Bishkek, 2009, pp. 10-15. 24 See: S. Huntington, op. cit.

56 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

Polish researcher Piotr Załęski has rightly pointed out that the clan system (tribalism) or the “political culture of ties” is a typical feature of the Central Asian mentality. The “political culture of ties” is responsible for the personality cults of the leaders and the domination of family clans and “leading families.” In short, the leaders exploited traditionalism in their interests.25 Late in the twentieth century, the political-family clans had reached a nearly absolute political and economic monopoly in their ethnic regions; regional governors were, as a rule, the closets clients of the heads of informal groups. The amendments and additions to the Constitution of the Kyrgyz Republic of 5 May, 1993 (additions of 10 February, 1996 and 17 October, 1998) increased their influ- ence. Bigger constituencies gave the ruling family more levers of control over the local political and bureaucratic circles. V. Khanin has pointed out that the clan leaders gradually appropriated all types of power resources—from an informal mechanism of mobilization of ethno-tribal loyalty to control of elections and local administrations.26 Piotr Załęski described concentration of power in the hands of the president and his clients as “degradation of the regime.”27 Local elections revealed the monopoly of political clans in the regions. The clan of the close relatives of former President Akaev (who were part of the political elite of Kyrgyzstan) was a symbiosis of the political elites and big financial business. Petr Svoik from Kazakhstan described this phenomenon as “the economies of nephews.” This fully applies to Bermet Akaeva (the daughter of President Akaev): from 2003 to 2006, she was official curator of the Aga Khan Development Network in Kyrgyzstan; in 2005 she was elected to the Zhogorku Kenesh. Her husband, Adil Toygonbaev, controlled the most important economic branches (aviation, energy, net- work communications, alcoholic beverage industry, private TV and the Vecherny Bishkek newspaper) from 1997 to 2005. In 1999-2001, Aydar Akaev, the former president’s son, was director of the Kyrgyz office of Kazkommertsbank; in 2001, he was appointed advisor to the finance minister; in 2004, he became chairman of the Olympic Committee; and in 2005, he was elected to the Zhogorku Kenesh. Toychubek Kasymov, former governor of the Issyk Kul Region and head of the presidential administration, was born in the same village as First Lady Mayran Akaeva. Under Akaev, the northern tribes (Sarybagysh, Kushchu, Solto, Tynay, Sayak, Bugu, Saruu) gained a lot of political weight; Akaev and his closest circle enjoyed even more influence than other members of the same clans. The Chuya clan, represented in the corridors of power by M. Ashirkulov, I. Bekbolo- tov, Ch. Abyshkaev, K. Kozhonaliev, and F. Kulov, had the public prosecutor’s office, the defense and security structures, and the Security Council under its control. Former governor of the Issyk Kul Region T. Kasymov, famous writer Ch. Aitmatov, and Foreign Minister A. Aitmatov can be described as the most successful members of the Talass clan. The closest circle of the First Lady controlled the media, banking, and law-enforcement structures. Turdakun Usubaliev, former First Secretary of the C.C. Com- munist Party of Kyrgyzstan, was one of the most powerful members of the Naryn clan (the Sarybagysh and Sayak tribes) that looked after regional governorship and the middle-ranked political elite; the Issyk Kul clan (the Bugu tribe) controlled the governors, the foreign ministry, science, culture, and art. There are two groups (they call themselves Ichkilik and Otuz Uul) in Southern Kyrgyzstan, a densely populated part of the country with a predominantly Uzbek and Tajik population. , who constitute over 30% of the local electorate, can be described as the key ethnic group of voters.28 The influence of Russian culture in the south is much weaker than in the north.

25 See: P. Załęski, Kultura polityczne więzi w Azji Centralnej, Warsaw, 2011, pp. 365-370. 26 See: V. Khanin, “Kyrgyzstan: Ethnic Pluralism and Political Conflicts,”Central Asia and the Caucasus, No. 3, 2000, pp. 126-127. 27 P. Załęski, op. cit., p. 253. 28 See: A.R. Zhooshbekova, “Etnicheskie aspekty migratsii naselenia iuga Kyrgyzstana,” in: Problemy polietnicheskogo obshchestva v Tsentralnoy Azii: vyzovy i vozmozhnye reshenia, Materials of an International Scientific Conference, Bishkek, 2013, pp. 113-117.

57 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Under Soviet power, the knowledge of Russian among the Kyrgyz brought them closer to Eu- ropean civilization and was an important career factor. Usubaliev, who remained First Secretary of the C.C. Communist Party of Kirghizia for twenty years (1960-1980), did nothing to incorporate southerners into the republic’s political hierarchy. Under Akaev, likewise, the south was poorly rep- resented in the higher echelons of power. The Ichkilik clan had slightly more members in the political elite than Otuz Uul. In fact, the legislative assembly was an organ of regional, rather than national power. On the other hand, members of the Talass and other northern clans, as well as the clan and tribal elite of Sarybagysh and its “liberal-democratic” cronies closed ranks around the presidential administration and the government. This explains the regularly rekindled conflicts between the “progressive” presi- dent and the “conservative” parliament. The biggest of these conflicts flared up in the fall of 1994 over the commission of a corruption investigation in the legislative and executive structures. The Zhogorku Kenesh was disbanded; the referendum that followed empowered Askar Akaev to carry out constitutional reform. The lower segments of the clan structures play an important role in their regions. Today, they consist of clan and former nomenklatura elites and the so-called new plutocracy, by whom I mean private entrepreneurs who, very much like their colleagues in the CIS countries, had to operate in market economies still dominated by the bureaucracy and seek patrons from among officials and politicians of different ranks to gain access to state contracts and other resources in exchange for money and other services. Civil service and its broad possibilities are the best option for those busi- nessmen who seek personal and political safety. The majority rightly believe that the political crisis of 2005 was rooted in the Kyrgyz specifics of state policy.29 The crisis was coming to a head in the shadow part of social life; the state proved unable to guarantee the rights of the regions and the influential clans or resolve the contradictions; the state and the elite failed to find a common language. This led to the March 2005 coup, which brought Kurmanbek Bakiev, a member of the southern clan and former prime minister, to power. Five years later, in April 2010, another coup removed him from the republic’s political scene. Brought to power by the 2005 revolution, Bakiev preferred to ignore one of the key demands of the Kyrgyz opposition: the need to uproot the clan system in the echelons of power. During his five years in power, tribalism, albeit camouflaged, developed into the central principle of state gover- nance. The March 2005 revolution consolidated the position of the southern clans; the presidential election that followed on 23 July, 2009 (expected to ensure a second presidential term for Bakiev until 2014) made the split between the North and South very real and consolidated the position of the ruling class. Kurmanbek Bakiev filled all the key and politically important posts in the state power structures, including the Supreme Court, national security structures, army, foreign ministry, and economically efficient companies with his close relatives and most loyal supporters, mainly from the south and, more specifically, from the Jalal-Abad Region. Even before Bakiev became president, his closest relatives had already captured certain posts in the local and central power structures. Kanybek, Zhusup, Marat, and Zhanysh Bakiev worked in the state structures; Akhmat and Adyl Bakiev were businessmen; later Zhusup Bakiev moved to the post of chairman of the Jalal-Abad City Council of Deputies and became president of the State Fund at the Ministry of Emergencies. Kanybek Bakiev headed a village council in the Suzak District; Zha- nysh Bakiev served as Deputy Chairman of the National Security Service between March and Sep- tember 2006, where he headed counterintelligence and represented Kyrgyzstan in the SCO; in June

29 See: S. Luzianin, “Color Revolutions in the Central Asian Context: Kyrgyzstan-Uzbekistan-Kazakhstan,” Central Asia and the Caucasus, No. 5 (35), 2005, p. 18; B. Baimatov, “Indigenous Dimensions of ‘Civil Society’ in Kyrgyzstan— Perspectives from the Margins,” Central Asia and the Caucasus, No. 4 (40), 2006, pp. 16-22.

58 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

2008, he was appointed head of the Presidential State Security Service; in 2005, Marat Bakiev was sent to the FRG as the republic’s ambassador.30 Marat Bakiev, Kurmanbek Bakiev’s eldest son, was appointed Deputy Chairman of the National Security Service in April 2010. In the fall of 2009, President Bakiev set up the Central Agency for Development, Innovation and Investment under his youngest son Maxim Bakiev, which placed him in control of the executive financial and industrial sphere of the state budget. He supervised the most profitable economic proj- ects, was engaged in funding the building of the Kambarata Hydropower Plant, privatized the Bitel Mobile Communications Company and the Kyrgyz Public Educational Radio and Television Com- pany, and organized sales of state property. Members of the Bakiev family climbed very high and filled many important posts at the two top levels. The third level was represented by relatives who filled the top posts in economic, military, and law-enforcement structures. They were distributed in the following way.31 Adakhan Madumarov was torag of the Zhogorku Kenesh in 2007-2008, secretary of the Security Council in 2008-2009, and vice premier in 2005-2006. Marat Sultanov filled the posts of chairman of the National Bank between July 1994 and December 1998 and finance minister between January 1999 and July 1999, as well as from January 2009 to April 2010. From November 2009 to April 2010, Elmyrza Saty- baldiev was the president’s national security advisor; in April 2010, he was Public Prosecutor Gen- eral; and between October 2006 and May 2008, he headed the State Security Service. Bakytbek Kalyev was defense minister between May 2008 and April 2010; in November 2005, the Zhogorku Kenesh appointed Kambaraly Kongantiev as public prosecutor general (he remained in this post until March 2007). His younger brother Moldomusa was minister of internal affairs between January 2008 and April 2010. In 1999-2005, under President Akaev, Marat Kayypov was a judge at the Constitutional Court, and from September 2005 to 2008, he was minister of justice. Between July 2006 and September 2008, the post of military prosecutor and deputy of the republic’s Prosecutor General was filled by Nurlan Tursunkulov, who was later (in September 2008) appointed as minister of justice; he remained in this post until November 2009. Kamchybek Tashiev was minister of emer- gencies in 2007-2009; and Akhmatbek Keldibekov headed the state tax service under the govern- ment of Kyrgyzstan from October 2008 to November 2009. In fact, practically all posts in the presidential administration were filled with people from the south who worked hand in glove with the president and his family. The northern elite was pushed aside: in April-June 2010, many of them lost the high posts to which they had been appointed in October/December 2009: Prime minister D. Usenov; Z. Kurmanov, Speaker of the Zhogorku Kenesh; A. Musaev, Minister of Education and Science since February 2009; M. Mambetov, Minister of Health Protection since December 2007; I. Aydaraliev, Minister of Agriculture; T. Turdumambetov, Minister of Public Property; and A. Ryskulova, Minister of Labor, Employment and Migration. The southern clan established its absolute hegemony in the corridors of power. In 2009-2010, the southern elite strengthened its position; after the 2009 presidential election, its members climbed even higher up the pyramid of power. By that time, the clan principle of distribution of power and property had exhausted its con- solidating and stabilizing potential. Personal property, organizational skills, personal ties, kinship, and friends were gradually coming to the fore to eclipse ethnic origins and regional affinity. How- ever, although the clan factor should not be overestimated, its importance should not be underesti- mated either. A. Dzhusupbekov pointed out that it was under President Bakiev that the so-called

30 See: A. Pobedimov, “Bolshaia semeyka,” available at [http://www.kommersant.ru/doc/589685]. 31 See: “Kto est kto: statistika,” available at [http://www.centrasia.ru/person.php].

59 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS identity shift (belonging to the southern clans as a sign of high prestige) came to the fore32: many in the political elite suddenly discovered the southern roots of their family trees. In April 2005, members of the northern and southern elites, Felix Kulov, Kurmanbek Bakiev, and Dzhenishbek Nazaraliev, began their presidential campaigns.33 The sides reached a compromise: Bakiev from the south became president, while Kulov from the north received the post of prime minister. Political and economic crises bared separatist sentiments and regional disintegration. In 2006- 2007, for example, the northern opposition exacerbated the regional problems.34 The clash between the elites made it absolutely clear that certain political circles were pursuing their interests at the expense of national interests; the northern opposition did not spare words when criticizing the south- ern president. During its years of sovereignty and independence, Kyrgyzstan restored its culture, legalized traditionalism, and national identity, political and family clans in the republic being a byproduct. As a result, in the late twentieth and early twenty-first centuries, the clans moved to the center of domestic policy. Political-family clans set up to ensure political power and material wealth were allowed, with certain limitations, to rule the country. At the grass-roots level, clan leaders personified the whole range of ethnosocial values and interests. Under the Akaev and Bakiev families, the clans blended with state governance to become political-family clans; they relied on personal loyalty and dedication to oligarchic interests far removed from the interests of the ordinary people. The top po- litical nomenklatura and big business guaranteed the stability of the presidential families, while pa- tronage ties, nepotism, and corruption added stability to political clans. Ethnic, regional, and clan identities drawn into the game by those who sought and gained power gradually degenerated into ethno-regionalism and tribalism.  While the clans of Akaev and Bakiev were cementing their inner solidarity, the influential families inside the clans squabbled over property and spheres of influence; the clans gradu- ally disintegrated, which did nothing for the state of affairs in the country.  In the post-Soviet period, likewise, the informal political institutions—political clans as a product of symbiosis of traditional feudal relations and the Soviet party-nomenklatura sys- tem—proved to be flexible enough in post-Soviet times.  The clan system was growing stronger in a weakening state; this means that mutual assis- tance inside the clan became all-important; the interests of one ethnoregional identity or one of its groups, rather than the nation, were promoted and protected.  Patronage networks and nepotism served as the foundation of the political-family clans; tribalism and the clan system revealed that corruption, nepotism, and kinship outweighed objective merits, making democratic development impossible.  Reliance on clans endangered the state’s stability and integrity; separatism and regionalism were on the rise. Under the first two presidents, the North-South disagreements became full blown and turned into a potential threat to the country’s national and territorial unity.

32 See: A.K. Dzhusupbekov, Etnicheskaia identichnost nomadov, Ilim, Bishkek, 2009, p. 201. 33 See: K. Bakiev, “My s Kulovym ne ssorilis… Vozmozhno soiuz eshche slozhitsia” (Verbatim report of press conference of Acting President of Kyrgyzstan K. Bakiev in Moscow), available at [http://www.centrasia.org/newsA. php4?st=1115699520]; Dzh. Nazaraliev, “O samovydvizhenii,” available at [http://www.svoboda.org/programs/tw/2005/ tw.042705.asp]. 34 See: M. Omarov, “Tribalism kak zerkalo kyrgyzskoy politiki, ili Fenomen tribalizma u kyrgyzov,” available at [http:// www.easttime.ru/analitic/1/4/202.html].

60 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

 The family clans of both presidents gained enough political weight to stir regional op- position, the core of which was formed by prominent members of regional elites, into action.  The political, social, and economic crisis caused marginalization of big population groups, intensified migration, and increased poverty. In fact, the country has come close to margin- alization of its entire population; part of the nation came too close to the state of a crowd, a “monster of power,” a term used by sociologists to describe the behavior of depersonal- ized masses that destroy their present and future deliberately and recklessly. There are several important points that make the events of 2005 and 2010 in Kyrgyzstan very different. In 2005, the opposition, which needed stability and therefore controlled the masses, avoid- ed at least the worst outbursts of violence. In 2010, it was the masses that poured into the streets; the opposition leaders joined the process at the last stage. The street violence is explained by the fact that Bakiev’s clan reached the apex of power within a very short time and was much more consolidated than that of his predecessor’s. Personal devotion and the patronage system explain the fierce resis- tance put up by Bakiev’s clan. The events of 2005 and 2010 were the product of the country’s internal problems: the eco- nomic crisis, the system of power based on family and clan ties, as well as the president’s personal power, which excluded true power of the people, and inefficient executive structures infected with excessive bureaucratization (interests of the bureaucracy rather than the interests the people) and cor- ruption. This revived traditionalism and caused regional North-East identities to clash, which threat- ened the country’s continued existence as a unified state. Western influence in both crises was not that important. Rotation of the political elites, a natural and indispensable tool of state governance, ac- quired specific features in Kyrgyzstan and presupposed the use of force; the latest political technolo- gies tested elsewhere in the post-Soviet space were used in Kyrgyzstan during the street riots. The April revolution of 2010 was a continuation of the March revolution of 2005, which had not resolved the problems that caused it in the first place and resurfaced in 2010. Under Akaev and Bakiev, the clan system was set up and consolidated as one of the key tools of state governance.

Conclusion

Throughout the history of the Kyrgyz people, the clan system developed as an integral social organism. All attempts to reform it at different stages of its development failed; all reforms designed to liquidate the clan and tribal identity of the Kyrgyz incorporated it into state governance. In the nineteenth century, the clan system played a positive consolidating role. In the twentieth and early twenty-first centuries, when the country entered the period of industrialization and gained its sovereignty, the clan system became a negative phenomenon. It affected state governance: the post-Soviet political and family clans created wide and ramified patronage networks; they encour- aged protectionism, nepotism, and corruption at the very top of the pyramid of power. The distur- bances of 2005 and 2010 were stirred up by the rule of clans and patronage networks: at the turn of the twenty-first century, the traditional, classical clan degenerated into a clan system in the corridors of power.  Clan and tribal relations, therefore, should be discussed as part of the historical memory of the Kyrgyz and kept apart from the system of state governance of contemporary Kyrgyz- stan. The idea that clan and tribal relations are acceptable in the system of state governance

61 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

should be disavowed; the nation needs an industrial society and a state ruled by the law and national policy based on a commonly accepted system of political and civil values, that is, political ideology.  It is necessary to study the history of the Kyrgyz in order to avoid falsifications and distor- tions of their cultural heritage.  Our historical experience has demonstrated that in sovereign Kyrgyzstan political-family clans created patronage systems, nepotism, and corruption, therefore, the regulatory-legal base of the state should be amended and extended, up to and including the laws of the Kyr- gyz Republic on civil service, the status of judges, the Public Prosecutor office, and the investigatory committee to create an effective barrier to nepotism and rule out its negative effects.

62 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

ENERGY POLICY AND ENERGY PROJECTS

THE GREAT OIL AND GAS ROAD: FIRST RESULTS AND PROSPECTS

Sergey ZHILTSOV D.Sc. (Political Science), Head of the Department of Political Science and Political Philosophy of the Diplomatic Academy, Russian Federation Ministry of Foreign Affairs (Moscow, Russian Federation)

ABSTRACT

he geopolitical changes associated implementation of this policy ultimately made with the collapse of the Soviet Union it possible for Beijing to build a new pipeline T and the emergence of the newly inde- infrastructure in Central Asia oriented toward pendent states in its territory have led to the meeting China’s hydrocarbon resource re- appearance of a large number of new pipe- quirements. So it is legitimate to say that a line projects. Some of the new projects con- Great Oil and Gas Road is being formed that cerned the delivery of oil and gas in the Eu- relies on the historical heritage of the Great ropean (westerly) direction, while others Silk Road and articulates the political and were aimed at creating infrastructure for ex- economic changes occurring in China’s poli- porting hydrocarbon resources in the east- cy toward the Central Asian countries. erly direction—from the Central Asian coun- It stands to reason that we need to tread tries to China. carefully when drawing such historical paral- In the 1990s, China began implement- lels. Relations among the countries differ, ing a new energy policy. It was oriented to- new forms of transport have been created, ward gaining direct access to the hydrocar- and fundamentally new technological achieve- bon resources of the Central Asian countries ments have been reached. Appealing to the and creating reliable routes for exporting oil historical heritage of the Great Silk Road has and gas to China. Diligent and persevering activated interstate contacts and the need to

63 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS expand economic trade cooperation. And through several stages, each of which de- whereas “silk road” was commonly used as a veloped under the influence of different fac- general term for describing the large number tors. These are primarily the unstable geo- of caravan trade routes with a few major political situation, the constantly changing branches that linked China with Asia and Eu- data about hydrocarbon reserves, the de- rope, the current pipeline architecture serves mand for hydrocarbon resources, and the as a new set of regional relations. In contrast price of oil and gas in the world markets, as to the Great Silk Road, which covered an well as the technological possibilities allow- enormous territory, the Oil and Gas Road has ing to develop new hard-to-access depos- geographic boundaries confined by the east its.1 Nevertheless, in contrast to the large- coast of the Caspian Sea. scale European pipeline projects, many of It is very interesting to trace the stages which have not emerged from the discus- China has passed through in its effort to es- sion stage, the Great Oil and Gas Road has tablish a Great Oil and Gas Road, as well as been translated into action. Moreover, China study the approaches to its formation. Despite is continuing to pursue a policy aimed at in- political and financial difficulties and the active creasing its presence in the energy sector of policy of non-regional states in Central Asia, the regional countries and at initiating new China has succeeded in forming new energy large-scale pipeline projects. flows by incorporating the regional countries into the orbit of its geopolitical influence. 1 See: S. Zhiltsov, “Energy Flows in Central Asia and China’s creation of new export routes, The Caspian Region: New Opportunities and New to which the concept “Great Oil and Gas Challenges,” Central Asia and the Caucasus, Vol. 15, Issue Road” can be suitably applied today, went 4, 2014, pp. 69-79.

KEYWORDS: China, Great Oil and Gas Road, Great Silk Road, Central Asia, hydrocarbon resources, pipelines.

Introduction

The concept of the Great Silk Road appeared relatively recently. It was coined by geographer Ferdinand von Richthofen in 1877 in the book called China. The collective name Great Silk Road included a large number of caravan routes going from China to Europe, which passed through vast territories. This route existed from the second century BC until the 15th century AD. The Great Silk Road was an enormous, temporally mobile historical and cultural space used in Antiquity and the Middle Ages to facilitate international land communication from the distant bound- aries of Asia to the countries of the West.2 The numerous caravans delivered a variety of goods, among which were silk, weapons, and jewelry. At the same time, several researchers point out that trade was only carried out in some of the sections of the Silk Road and on a small scale. This casts doubt on the conclusions about extensive trade flows that spread out over vast areas.3 Nevertheless,

2 See: A. Petrov, Veliky shelkovy put (o samom prostom, no malo izvestnom), Vostochnaia literatura RAN, Moscow, 1995, p. 46. 3 See: V. Khansen, Veliky shelkovy put. Portovye marshruty cherez Sredniuiu Aziiu. Kitai-Sogdiana-Persiia-, Tsentrpoligraf, Moscow, 2014, p. 386. (Valerie Hansen, The Silk Road. A New History, Oxford University Press, New York, 2012.)

64 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 the Great Silk Road is recognized as a global project that promoted the development of trade relations between countries and peoples. The longest stretch passes through territory currently occupied by the CA countries. Interest in the Great Silk Road project has passed through several stages. At the first stage, it was a matter of preserving the cultural heritage. For example, study of the Great Silk Road began in the second half of the 20th century. At the end of the 1980s, an international project was organized under the auspices of UNESCO called “Integral Study of the Silk Roads: Roads of Dialogue.” The project envisaged carrying out three large expeditions along steppe, desert, and maritime routes. The expedition program included examining, evaluating the state of, and comparing architectural monu- ments of the silk roads, as well as geographical research and learning about the conditions in which people lived.4 Later, the concept of the Great Silk Road was used to develop numerous projects aimed at expanding economic trade and energy cooperation. Introducing the concepts “Great Silk Road” and “New Great Silk Road” into circulation played an enormous role in the development of political, trade, and cultural contacts among different countries. The idea of creating a new version of the Great Silk Road formed the basis of the political and economic initiatives of Western countries looking for ways to expand their presence in the newly independent states that formed in the territory of the former Soviet Union at the beginning of the 1990s. The initiatives they put forward were intended to promote economic integration and expand transportation cooperation among the states of Western Europe, the Caucasus, and Central Asia. For instance, in 1998, a Europe-Caucasus-Asia international transport corridor program was offered that envisaged forming a transport corridor from China to Europe. Then, at the end of the 1990s, a New Silk Road project was proposed in the U.S. that was never developed. In 2011, the Barack Obama administration publicized a New Silk Road concept that proposed creating transport infrastructure for linking Central and Southern Asia through and liberalizing regional trade.5 The ideas proposed to create trade and transport routes were largely political. They did not propose establishing supranational formations and did not clarify where the money would come from; they mainly acted as additional tools for expanding political contacts. What is more, the authors of the new version of the Silk Road did not point to any precise geographic boundaries, or departure and destination points.6 Nevertheless, despite the very modest success in realizing these initiatives, interest in the his- torical heritage of the Great Silk Road did not abate. China, with which the Great Silk Road is es- sentially associated, was one of the initiators of reconstructing or building a new version of this his- torical route.

China’s Advance into Central Asia

China’s cooperation with the CA countries, and during Soviet times with the republics of Central Asia, began developing at the end of the 1980s. At that time, China entered agreements with the former Soviet republics on the development of economic, scientific-technical, and cultural co- operation. The collapse of the Soviet Union led to the formation of newly independent states—Kazakh- stan, Uzbekistan, Kyrgyzstan, Turkmenistan, and Tajikistan—as well as to drastic changes in China’s

4 See: V. Radkevich, Veliky shelkovy put, Agropromizdat, Moscow, 1990, p. 8. 5 See: T. Cheklina, “Perspektivy sotrudnichestva stran Shankhaiskoi organizatsii sotrudnichestva v ramkakh proekta “Ekonomicheskiy poias na Velikom shelkovom puti,” Rossiisky vneshneekonomicheskiy vestnik, No. 2, 2015, p. 31. 6 See: Yu. Tavrovskiy, Xi Jinping: po stupeniam kitaiskoi mechty, Eksmo, Moscow, 2015, pp. 170-171.

65 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS policy in the region. In the first half of the 1990s, China focused its economic trade expansion efforts on the economically and politically weak CA countries. The unregulated development of trade rela- tions, along with the weak political regimes and augmenting economic problems of the regional countries, provided Beijing with ample opportunity to build its trade and economic presence in CA, while placing increased focus on the oil and gas of the Central Asian states. China primarily set its sights on Kazakhstan and Turkmenistan, which had the largest reserves of hydrocarbon resources and were interested in fortifying their economies and political position by building new pipelines in the easterly direction. New pipeline projects appeared at that time, which can be seen as the first steps toward reviving a contemporary version of the Great Silk Road. China’s increased interest in the Great Silk Road project was a response to the geopolitical changes that occurred after the disintegration of the Soviet Union. The newly independent states situated in the expanses of Central Asia abruptly cut back their political and economic ties with Rus- sia and were looking for new foreign political and economic partners. In turn, the rapid development of China’s economy increased its need for the region’s hydrocarbon resources. As a result, Beijing began viewing the Central Asian countries as an additional source of the oil and gas it needed for its further development.

The Beginning of the Great Oil and Gas Road

Emergence of the Great Oil and Gas Road is inseparably related to the numerous pipeline proj- ects that were actively discussed at the beginning of the 1990s. They launched the formation of the Great Oil and Gas Road and redirected the oil and gas flows from north-south to east-west. In 1992, the Turkmenistan-China-Japan gas pipeline with an annual capacity of 30 bcm a year and 8,000 km in length was developed. The China Petroleum Engineering and Construction Corpora- tion took part in its planning. The matter concerned transporting gas from Turkmenistan to Southeast Asia. The pipeline was to become part of an extensive gas pipeline network linking Turkmenistan, Uzbekistan, and Kazakhstan with consumers in China, South Korea, and Japan. In 1993, Asian Pipeline Research Society of Japan presented conclusions and proposals for a Trans-Asian gas pipeline project. The Northeast Asia and North Pacific Ocean gas pipeline was examined among the many versions of international pipeline routes set forth in the document. The international Turkmenistan-West China-Japan gas pipeline was part of this route. The idea was to pump gas from Turkmenistan to Shanghai and other coastal territories of China by building a pipeline through the gas-bearing territories of the Tarim Basin in West China. In so doing, some of the natural gas could be exported to Japan via an underwater pipeline. The Chinese government showed an inter- est in this project at the time. In the second half of the 1990s, China’s policy toward the Central Asian countries underwent changes. Beijing concentrated its efforts on the further development not only of economic relations, but also in the energy sphere. These changes in Beijing’s policy were caused by the greater competi- tion over the hydrocarbon resources of the Caspian region and Central Asia and for control over their delivery routes to the external markets. This explains China’s greater interest in Turkmen and Kazakh hydrocarbon resources, as well as in their delivery routes to China. The discussion about organizing deliveries of Turkmen gas and Kazakh oil to China began in 1996. At that time, Turkmenistan and China specified their positions and outlined the contours of the future pipeline arteries. The same year, a tender was announced in Kazakhstan for the sale of the government’s shares in AO Uzenmunaigaz in the amount of 60% of the authorized fund. Amoco (the

66 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

U.S.), Petronas Charigali (Malaysia) along with Unocal (the U.S.), and the China National Petroleum Corporation (CNPC) participated in the tender. In August of 1997, the China National Oil & Gas Exploration and Development Corporation, which is a subsidiary of CNPC, was announced the win- ner of the second tender; the company received 55% of Uzenmunaigaz’s shares. Some time earlier the CNPC won the tender to purchase another company, Aktobemunaigas. Over a span of 20 years, China was supposed to allot $4 billion to the development and operation of the fields owned by the bought-out companies. In the end, the Chinese side acquired the control sets of shares of two enter- prises responsible for the production and transportation of oil—Aktobemunaigaz and Uzenmunaigaz. The pipeline was supposed to stretch for 2,600 km, but in order for it to bring oil to its end consumers in the Chinese interior, the length of the pipeline had to be increased to 8,000 km. The Chinese planned to build this route by 2004, when Kazakhstan, according to different estimates, might need additional oil export routes, including and keeping in mind the Caspian Pipeline Consortium (CPC) oil pipeline through Novorossiisk that went into operation in 2000. A separate paragraph in the agree- ment envisaged the Uzen-Turkmenistan-Iran pipeline. It stretched for 250 km through Kazakhstan. There were plans to pump 8.2 million tonnes of oil from the Uzen field alone by 2002. A specific discussion of oil deliveries to China took place during Prime Minster of the PRC State Council Li Peng’s official visit to Kazakhstan in September 1997. At that time, two intergov- ernmental agreements were signed On Cooperation in Oil and Gas and On Laying Two Oil Pipelines from Western Kazakhstan to Western China and Iran. The Chinese side pledged to carry out develop- ment and building of the Western Kazakhstan-Western China oil pipeline of 3,000 km in length and invest $3 billion. The matter concerned transporting oil from two of the largest fields—Uzen and Aktobe. In so doing, Kazakhstan took the first step toward implementing a policy aimed at extending the geographical boundaries of its export oil delivery routes. The signed contract envisaged that China’s investments in Kazakhstan’s oil and gas industry would comprise a total of $11 billion and would go to developing oil fields and building oil pipelines to Western China and Iran. The Chinese company was given priority for either economic—the total expenditures of the CNPC at the two tenders amounted to almost $500 million—or political rea- sons—the promise of a strategic partner underpinned by oil pipeline building projects.7 According to the feasibility report of the oil pipeline project from Kazakhstan to China, it was to pump no less than 20 million tonnes of oil a year. Several circumstances interfered with execution of the signed documents on oil and gas coop- eration and building the oil pipeline from Kazakhstan to China. The complicated internal political situation in Kazakhstan and the drop in oil prices led to China’s diminishing interest in building an oil pipeline that was not economically lucrative at the time. China took a greater interest in Turkmen hydrocarbon resources. Turkmen President Saparmu- rad Niyazov discussed this project during his visit to China in August 1998, the cost of which at that time was estimated at between $8 and $12 billion. At the end of October of the same year, the feasi- bility report for this project was finished. One of the priorities of the joint trade and economic com- mission created during the visit was to accelerate implementation of a gas pipeline project. If success- fully laid, the pipeline would be a backbone of the ancient Great Silk Road being revived in its con- temporary version. Ashghabad was well-disposed toward China’s interest in acquiring Turkmen gas. Its positive attitude was influenced by the difficult relations with Russia during the first half of the 1990s, which convinced Ashghabad that it needed to have alternative routes for delivering its hydrocarbon re- sources. There were several directions for this: the southern, southeastern, and eastern. The first

7 See: K. Syroezhkin, Kazakhstan-Kitai; ot prigranichoi torgovli k strategicheskomu partnerstvu, Vol. 1, Almaty, 2010, p. 160.

67 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS proposed laying a gas pipeline through Afghanistan to Pakistan, while the second envisaged a route to Turkey through Iran, Azerbaijan, Armenia, Georgia—depending on the particular configuration— and on to Europe. However, the difficult situation in Afghanistan and the U.S. sanctions against Iran made it impossible for Turkmenistan to count on rapidly building pipeline infrastructure in the direc- tion of these countries. There was another, eastern, direction for delivering gas to China. Moreover, Chinese companies were willing to invest in the construction of new pipelines that were to bring Turkmen hydrocarbon resources to China. At that time, the Turkmenistan-Western China-Japan project, like other large-scale projects, was considered unprofitable due to the low world gas prices at the time, as well as the high cost of the project—around $9 billion. In the end, work was halted. However, a few years later, after world gas prices rose, the project was in demand again. Activation of Beijing’s energy policy toward the CA countries at the beginning of the 2000s was related to the growing needs of the Chinese economy. The numerous consultations and negotiations between Kazakhstan and China regarding the building of an oil pipeline ended in July 2000. Inciden- tally, even this agreement was unable to get the project going, showing the futility of the political talks that had been going on for several years between the two countries regarding the oil pipeline. This was explained by the absence of the necessary resources for the future oil pipeline, since the Chinese com- pany operating in Kazakhstan was producing around 5 million tonnes of oil a year. For the pipeline to be profitable, at least 20 million tonnes had to be pumped through it. Moreover, in 2001, the CPC went into operation, and the Atyrau-Samara pipeline reconstruction project, which envisaged increasing the volume of oil pumped through it, was at the practical implementation stage. This meant that there would be no free volumes of oil for delivery to China via the pipeline in Kazakhstan. The only hope was development of the Caspian shelf, but there were certain difficulties there too: the super long distances, absence of infrastructure, mountainous terrain, seismic zones, abrupt climatic fluctuations, the low quality of Kazakh oil and the need to heat it, and so on. All of this made construction more expensive. Nevertheless, during his visit to Beijing in December 2002, Kazakhstan President Nursul- tan Nazarbaev again stated that energy, oil, and gas, as well as building an oil pipeline and a gas pipe- line from Kazakhstan to Western China, were the main targets of cooperation between Kazakhstan and China. The Treaty on Good Neighborly Relations, Friendship, and Cooperation between China and Kazakhstan signed during the visit bolstered this cooperation in the energy sphere. Despite the various difficulties, at the beginning of the 2000s, Kazakhstan succeeded in activat- ing the projects for building a pipeline to China. In October 2003, China and Kazakhstan returned to the idea of building a global Western Kazakhstan-Western China oil pipeline. A decision was made to begin building it in mid-2004 in order to ensure the delivery of 20 million tonnes of oil to China, with the prospect of increasing this amount to 50 million tonnes. However, China accelerated imple- mentation of the pipeline project, partly to increase its influence in CA faster, and primarily to prevent an increase in the role of Western oil and gas companies in the region’s oil and gas sector. As a result, in the spring of 2003, the Kenkiiak-Atyrau pipeline with a throughput capacity of the first thread of 6 million tonnes a year with the possibility of increasing it to 12 million tonnes went into operation in the west of Kazakhstan, becoming the first joint Kazakh-Chinese project in oil pipe- line construction. It was 448 km long and 610 mm in diameter. The oil pipeline was intended for transporting the oil produced at the Kenkiiak, Zhanazhol, Alibekmola, Kozhasai, and other fields of the Aktobe region to Atyrau for further export to the world markets via the CPC and the Atyrau-Sa- mara oil pipelines. When operated in reverse, the oil pipeline was to be the first part of the global Western Kazakhstan-Western China oil pipeline, the memorandum on the construction of which was signed in 1997. In May 2004, an agreement was signed on building the Atasu (Karaganda Region)-Alashank- ou (China) oil pipeline, and a joint Kazakhstan-China Pipeline company was created, the founders

68 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 of which were AO Kaztransoil and the China National Oil & Gas Exploration and Development Corporation with a share of 50% each. The framework agreement on the development of comprehen- sive cooperation in oil and gas signed by the two countries enforced further cooperation in hydrocar- bon resource exploration, production, refining, and transportation projects. In November 2005, construction of the Atasu-Alashankou oil pipeline was finished. It was 988 km long with a pipe diameter of 810 mm and a capacity of 10 million tonnes a year. It was linked to the Kumkol group of oil fields. The route passed from the Atasu oil-pumping station in the Kara- ganda Region (the center of Kazakhstan) to the Alashankou railway station (China), which is China’s largest oil terminal. This was the first Kazakh oil pipeline that did not pass through Russian territory. The oil pipeline went into operation in July 2006. The Atasu-Alashankou oil pipeline was the second part of the Kazakhstan-China interstate oil transportation project, the idea for which was discussed as early as 1997. In 2003-2005, Chinese companies carried out surveys on the right-hand Turkmen bank of the Amu Darya, which confirmed the high prospects of this territory.8 An increase in gas production was to be achieved by raising the efficiency of the existing wells (using different intensification methods), as well as by developing new fields in Central and Zaunguz Karakum, in the Amu Darya oil-and-gas basin. China’s relations with Turkmenistan reached a new level after the Turkmen president visited Beijing in April 2006. The talks ended in the signing of a contract for $1.5 billion to develop natural gas in Turkmenistan. In keeping with the agreement on delivery of Turkmen gas to China, there were plans to build a main Turkmenistan-China gas pipeline with a capacity of 30 bcm of gas a year. The total length of the gas pipeline amounted to 7,000 km (there were plans to lay 188 km through Turk- menistan, 530 km through Uzbekistan, 1,300 through Kazakhstan, and more than 4,500 km through China). The fields on the right-hand bank of the Amu Darya river were to provide the gas for the pipeline under a production sharing agreement. The countries agreed to jointly engage in their explo- ration and development. China created the new energy system against the background of rapid development of trade and economic relations with the region’s countries. The first half of the 2000s was distinguished by an increase in China’s trade volume with the CA countries. The inclusion and domination of Chinese capital in joint ventures was seen. The economic niche it carved out for itself in the regional countries, primarily in Kazakhstan and Kyrgyzstan, made it possible for Beijing to expand its presence in this region all the more confidently. In the second half of the 2000s, China’s growing interest in CA was determined by the increas- ing significance of hydrocarbons for the Chinese economy. China did not want the region’s countries to fall under the influence or control of states that might be unfriendly toward it. Preventing the forma- tion of any political, never mind military unions or organizations in CA opposed to China became one of the priority tasks of Chinese policy, including in the energy sphere. Keeping in mind the growing importance of hydrocarbon resources for the Chinese economy, Beijing was faced with the task of ensuring guaranteed access to them. This was where China’s in- terests diverged from the policy of Russia and the Western countries interested in using Central Asia’s hydrocarbons to implement their own pipeline projects. In July 2007, the president of Turkmenistan visited Beijing again. The visit ended with the sign- ing of a production sharing agreement at the Bagtyiarlyk gas field on the right-hand bank of the Amu Darya. Here there were plans to produce 13 bcm of gas every year. Another 17 bcm of gas was to be produced at other fields. According to the forecasts, gas reserves at that field amounted to around

8 See: K. Syroezhkin, Kazakhstan-Kitai; ot prigranichoi torgovli k strategicheskomu partnerstvu, Vol. 2, Almaty, 2010, p. 117.

69 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

1.3 tcm. It was expected that, beginning on 1 January, 2009, China would export 30 bcm of Turkmen gas every year for thirty years. In December of the same year, construction of the third, last, part of the Kazakhstan-China project began. The Kenkiiak-Kumkol oil pipeline was to bring West Kazakh oil to the Chinese bor- der. The throughput capacity at the initial stage was to be 10 million tonnes with a subsequent in- crease to 20 million tonnes of oil a year. The project was estimated at $1 billion. EU pressure on Turkmenistan, which was insistently asked to join the European Nabucco pipe- line project, as well attempts to turn Kazakhstan’s oil flows toward Europe forced Beijing to acceler- ate export pipeline construction work. In August 2008, talks were held in Beijing with the Turkmen president at which a decision was made to build the pipeline by the end of 2009 with a capacity not of 30 bcm, as earlier planned, but of 40 bcm. In turn, the Turkmen president asked China to consider buying another 10 bcm of gas in addition to the 30 bcm envisaged by the interstate agreement. As a result, in 2009, China essentially completed formation of the pipeline infrastructure that linked its territory with the oil and gas fields in the CA countries. In July, construction of the 793-km- long Kenkiiak-Kumkol oil pipeline was completed, and in December the official launching of the Turkmenistan-China gas pipeline with a projected capacity of 40 bcm of gas took place. The export gas pipeline from Turkmenistan and Kazakhstan to China that went into operation at the end of 2009 was not only supposed to meet the growing needs of the Chinese economy for raw hydrocarbons, but also prevent reorientation of the energy policy of Turkmenistan and Kazakhstan toward the interests of the Western countries. In turn, Ashghabad and Astana were able to make sig- nificant progress in diversifying the export routes of resources. China’s policy led to the CA countries being included in the orbit of its energy interests. Beijing turned the flows of oil and gas in the easterly direction, thus ensuring guaranteed deliveries at moder- ate prices. Notably, China is the largest importer of Turkmen gas. In 2014, Turkmenistan produced 76 bcm and exported 25.9 bcm to China. In May 2010, Turkmenistan began building the East-West gas pipeline, which was to link its main fields in Dovletabad and South Yolotan with the Caspian coast. The project was estimated at $2 billion and was to be implemented in five years. The capacity of the pipeline was to amount to 30 bcm a year. At the initial stage, there were plans to pump around 6 bcm of gas through it, with an increase to 30 bcm of gas a year between 2015 and 2030. The East-West gas pipeline of more than 800 km in length and a throughput capacity of 30 bcm a year, being built in Turkmenistan, will join the large gas fields and create conditions for exporting fuel to the world markets in any direction. This Chinese megaproject might in the future link the Celestial Kingdom with the European countries. It proposes creating up to several hundred infrastructure projects: railroads, highways, energy projects, and industrial parks. Beijing is counting using this project to reinforce political contacts, create a transportation network from the Pacific Ocean to the Baltic Sea, and reduce barriers for trade and investments. In the mid-2000s, China began showing increased interest in Kazakh gas. Relations with this state were bolstered by several bilateral documents, in which Kazakh-Chinese relations were declared a priority vector in the foreign policy of the two states. Against the emergence of a contractual basis that promulgates the mutually advantageous nature of cooperation between the two countries, China fortified its position in the economy of Kazakhstan. Chinese policy focused its attention on transport projects. Trade and economic cooperation received a new boost. Along with it, China focused on increasing its presence in the Kazakh oil-and-gas sphere. In 2005-2010, China carried out expansion in Kazakhstan’s oil-and-gas industry by greatly increasing its share in oil companies. In March 2006, KazMunaiGaz and the China National Petroleum Company entered an agree- ment on the construction of a gas pipeline from Kazakhstan to China. The pipeline passes from the

70 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

Kazakh-Uzbek border through Shymket to Khorgos. In March 2008, the sides established the Asian Gas Pipeline joint venture for building the Kazakh-Chinese gas pipeline. The volume of investments in its construction was estimated at $6 billion. In July 2009, a ceremony was held to mark the completion of the first thread of the Kazakhstan- China gas pipeline. Its cost had risen to $7.5 billion. The Kazakh part of the gas pipeline with a throughput capacity of 4.5 bcm of gas a year was put into operation in December 2009. In so doing, Kazakhstan paved the way to building new pipeline infrastructure, which made it possible for it to deliver not only oil, but also natural gas to the external market. In recent years, China has been actively cooperating with the CA countries in the produc- tion and export of hydrocarbon resources. China receives oil from Kazakhstan, gas from Turk- menistan, Kazakhstan, and Uzbekistan, and uranium from Kazakhstan, processes gold in Kyrgyzstan and Tajikistan, and produces rare metals in Tajikistan. Most of the infrastructure projects financed by China—highways, railroads, and pipelines—lead back to China. In turn, Chinese policy regarding the formation of stable oil-and-gas routes from the region is favored by the Central Asian states, since Beijing is viewed as a source for financing infrastructure projects that have a positive impact on the development of the regional economies. These projects are advantageous for the Central Asian countries, particularly keeping in mind that without Chinese investments they would have no chance of being implemented.9 For China, the New Silk Road is an opportunity to increase its influence in CA and main- tain control over its hydrocarbon potential. Beijing believes the states of the region to be serious potential suppliers of energy resources and also takes account of the importance of the region’s tran- sit opportunities. The region’s boarder transportation infrastructure is being modernized for this, which is envisaged by China’s strategy to revive the Great Silk Road.10

Beijing’s New Initiatives

In September 2013, during his visit to Kazakhstan, PRC Chairman Xi Jinping suggested build- ing a Great Silk Road Economic Belt and drawing the economic relations among the Eurasian coun- tries closer.11 The main topic discussed during the visit was how to further expand energy cooperation. Beijing is examining this project through the prism of its current economic development and realiza- tion of long-term interests. At that time, the heads of Turkmenistan and China signed an agreement on the construction of the fourth thread of a gas pipeline with a capacity of 25 bcm of gas a year. This thread was to pass along the Turkmenistan-Uzbekistan-Tajikistan-Kyrgyzstan-China route. The pipe- line was to be finished in 2007 with an ultimate throughput capacity of Turkmenistan’s pipeline system in the easterly direction of up to 80 bcm. In compliance with the agreement signed between the China National Petroleum Corporation and the Turkmengaz State Concern, by the end of 2021, Turkmenistan would supply China with 65 bcm of gas every year.12 Total investments were to amount to around $6.7 billion.13

9 See: Yu. Sigov, “Kitai bankuet po-krupnomu,” Delovaia nedelia (Kazakhstan), 10 July, 2015. 10 See: I. Frolova, “Tsentralnaia Azia v energeticheskoi strategii KNR,” in: Tsentralnaia Azia: problemy i perspektivy (vzgliad iz Rossii i Kitaia): Collected Articles, ed. by K. Kokarev, D. Alexandrov, and I. Frolova, RISI, Moscow, 2013, pp. 129-140. 11 See: Yu. Tavrovskiy, Kitai, Rossia i sosedi. Novoe tysiacheletie, Vostochnaia kniga, Moscow, 2015, p. 21. 12 See: A. Badalova, Kitaiu nuzhen turkmenskiy i rossyisskiy gaz, available at [http://www.trend.az/business/energy/ 2393707.html], 12 May, 2015. 13 See: N. Yuldasheva, “Slishkom bolno ne budet…,” Delovaia nedelia (Kazakhstan), 17 October, 2014.

71 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Then in October of the same year, PRC Chairman Xi Jinping put forward an initiative in Indo- nesia regarding the establishment of a 21st Century Maritime Silk Road. As a result, one New Silk Road route will pass overland from China to Europe and the Middle East, while the second will pass over the sea. Both roads are supposed to complement each other and will be subordinate to China’s long-term interests aimed at gaining access to new sales markets. China’s projects to create the Silk Road Economic Belt and the Maritime Silk Road are global in nature and show the manifold increase in the financial potential of the Chinese economy. These projects are affecting dozens of countries and are aimed at increasing China’s trade and economic presence in a vast area—from China’s northern and western borders to Europe. As additions to the Great Oil and Gas Road, they should ultimately create further opportunities for preserving and, in the future, increasing China’s geopolitical influence. The boundaries of the Great Silk Road have not yet been precisely designated and are more like initiatives that still require clear project outlines. The Oil and Gas Road has distinct limits in area and is extremely subordinate to the needs of the Chinese economy. It is confined by the east coast of the Caspian and designed to take deliveries of resources in one direction determined by China’s interests. In less than two decades, China has been able to drastically change the pipeline architecture in CA by ensuring itself direct and reliable access to the oil and gas reserves available in these countries and creating conditions for their transportation. Just like the Silk Road Economic Belt, the new pipe- line infrastructure is aimed at fortifying geopolitical positions and forming reliable sources of raw hydrocarbons. For example, in November 2014, China established a Great Silk Road Development Fund of $40 billion. These resources were to be used to finance infrastructure and develop natural resources in the countries of Central and South Asia. On the whole, during implementation of the New Silk Road project, China intends to launch 900 projects totaling over $890 billion in 60 countries. The matter primarily concerns building trans- port infrastructure that will help to rapidly link Asia with Europe.14

Conclusion

Successful implementation of China’s initiatives to establish the Oil and Gas Road is promoted by its geographical proximity to the CA countries and their interest in expanding international con- tacts and implementing large infrastructure, primarily pipeline, projects. It is also promoted by this project’s vast historical heritage, which is a powerful tool for advancing Beijing’s interests. The foreign policy course of the Central Asian countries is making it easier for China to carry out this task. These countries see China’s initiatives as a way to reduce their dependence on Russia. The countries of the region are also interested in the further development of transportation infrastructure, which is strengthening their position.15 In the last decade, China has been consistently augmenting its share in the energy sector of the CA countries. This is the result of China’s geopolitical strivings and the ongoing need of its economy for additional raw hydrocarbons. China is expanding its sphere of influence in the CA states and the Caspian countries by pursuing not only commercial, but also geopolitical goals and trying to prevent Astana and Ashghabad from focusing their foreign policy on the West, as well as limit the influence of Western oil companies. Beijing is keeping tabs on the regional countries’ dialog with the West, which intends to use the pipeline projects not only to draw the Central Asian and Caspian countries

14 See: I. Lis, “Draiver vzaimnogo rosta,” Delovoi Kazakhstan, 5 June, 2015, p. 1, 2. 15 See: N. Abzhekenova, “Stary novy put,” Megapolis (Kazakhstan), 17 November, 2014.

72 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 out of Russia’s sphere of influence, but also to limit the Chinese factor. In turn, the Chinese vector remains a priority for Turkmenistan and Kazakhstan with respect to hydrocarbon deliveries.16 China’s long-term policy is aimed at intensifying Kazakh-Chinese and Turkmen-Chinese rela- tions in the development of raw hydrocarbons. For this reason, despite its relatively strong position in the region, China is continuing to build close relations with CA.17 A distinguishing feature of China’s policy toward all the CA countries is issuing loans used to finance Chinese import. This means that China is funding the increase in its own economic presence in CA. This way of conquering the regional markets improves China’s image, since it is acting as a financial sponsor. On the other hand, it makes them more dependent on China. China is trying to take advantage of the historical heritage of the Great Silk Road in its policy. The initiatives China is advancing to create an Economic Belt, a Maritime Silk Road, and form new pipeline architecture in CA are all in its global and regional interests. The PRC is consistently build- ing up its economic potential and increasing its geopolitical influence.

16 See: S. Zhiltsov, I. Zonn, Kaspyskaia truboprovodnaia geopolitika: sostoianie i realizatsiia, Vostok-Zapad, Moscow, 2011, 320 pp. 17 See: A. Muminov, “Kitai stanet Shelkovym dlia Evrazii,” Kursiv (Kazakhstan), 14 May, 2015, p. 1.

“THE GAS PIPELINE WAR”: ON SEVERAL GEOPOLITICAL CONSEQUENCES OF THE TANAP AND TURKISH STREAM PROJECTS

Valeria GANDZHUMIAN Ph.D. Candidate at the Department of World Politics and International Relations, Russian-Armenian (Slavic) University (Erevan, Armenia)

ABSTRACT

he current stage in international rela- ing the creation of new geopolitical and geo- tions is characterized by rapid intensi- economic advantages for the transit coun- T fication of competition in the energy tries. Moreover, uninterrupted production sphere. The Russian-Ukrainian gas crisis of and safe transportation of oil and natural gas 2008-2009, as well as the conflict around are becoming important for guaranteeing Ukraine at the current stage are pushing en- the stability of the largest economies. ergy supply security, one of the most impor- This article looks at the ways to diver- tant concepts in scientific literature, into the sify gas deliveries to Europe, the geopolitical foreground. The primary importance of this consequences of and Europe’s reaction to concept in the increasingly unstable and implementation of the Turkish Stream gas rapidly changing global economy is promot- pipeline, and Turkey becoming the largest 73 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS transit country and most important gas hub above topics will be beneficial for drawing up for Europe. Identifying and studying the a pragmatic policy that meets current reality.

KEYWORDS: Turkish Stream, TANAP, EU Energy Union, Southern Gas Corridor, route diversification, energy security, Turkey, Russia, the EU.

Introduction

It is no easy task to assess the effectiveness of a particular event, especially keeping in mind the lack of advantages from a retrospective view. Nevertheless, using the arsenal of theoretical analysis, we will try to examine the latest events relating to cancellation of the South Stream gas pipeline project and its replacement with the new Turkish Stream gas pipeline project, as well as Europe’s hurried steps to advance the Southern Gas Corridor project in response. During his visit to Turkey on 1 December, 2014, Russian President Vladimir Putin announced out of the blue that the South Stream project would be cancelled and replaced with a new project called the Turkish Stream. This gas pipeline is to establish a new gas delivery route from Russia to Europe through Turkey. The principles of this tactical change in Russia’s decision are well known: failure of the South Stream gas pipeline project due to the EU adopting the Third Energy Package that prohibits the same company from having both production and distribution assets. Although the EU stated that the Third Energy Package serves one of its most important goals, meaning liberalization of the energy sphere, which makes it possible for third parties to gain access to the market, the po- litical rationale motivating the EU to adopt this package is clearly seen, i.e. preventing too much energy dependence on Russia. This prompted Russia to declare that the EU’s unconstructive policy made it impossible for it to continue the South Stream project. It must be noted that it is not enough for Europe to merely declare its adherence to market lib- eralization and diversification of energy suppliers in order to eliminate Gazprom’s monopoly in the energy market. To achieve these goals, it needs new actors in the energy market who can actively compete with Russia. In this context, the Southern Gas Corridor project has acquired prime impor- tance. It is a system of existing and nascent gas pipelines geared to linking the EU with the Caspian region in circumvention of Russia. The Trans-Anatolia gas pipeline (TANAP), which passes through Azerbaijan, Turkey, and Georgia, and the Trans-Adriatic gas pipeline (TAP), which passes through Greece to Italy, are constitutive elements of the system. Azerbaijan’s Shah Deniz-2 field is considered the main gas source for this gas pipeline system. Building and hooking up the Trans-Caspian gas pipeline to the Southern Gas Corridor makes it possible to transport Turkmen gas to Europe. The Southern Gas Corridor is essentially playing the important role of serving not only European interests, but also those of several countries of the Middle East and the Caucasus.

The Turkish Stream and TANAP Projects: Economic and Geopolitical Aspects

Let us first take a look at the economic efficiency of the Turkish Stream project. The project’s throughput capacity amounts to 63 bcm a year, 13 billion of which are for internal use and 50 billion

74 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 of which will be sent to the Turkish-Greek border for sale in the European market. For comparison, according to preliminary estimates, 16 bcm of natural gas will be sent through TANAP to Europe, 6 billion of which are for Turkey’s internal consumption and 10 billion of which are intended for the European market. It is obvious that there is not enough Azeri gas to meet the growing volumes of gas needed by the EU, which means other sources of gas must be found for maintaining gas in the TANAP pipeline—Turkmen gas or gas from Northern , for example. The existing political crises between Russia and Ukraine are creating a very unpredictable po- litical environment, which could easily have an impact on the effectiveness of business and agree- ments between the two countries. In this case, more serious problems could arise relating to natural gas deliveries. In this context, the Turkish Stream will lower Russia’s dependence on Ukraine and, in so doing, will prevent potential crises related to the delivery of natural gas, as was the case in 2006 and 2009. What is more, one of the advantages of the Turkish route for the Russian Federation is that Russia does not have to adhere to the requirements of the Third Energy Package: Turkey, which is not an EU member, does not fall under the provisions of EU energy legislation. Along with the posi- tive consequences of implementing the Turkish Stream in the form of a direct gas delivery route circumventing Ukraine, in executing this project, Moscow is nevertheless giving Ankara a carte- blanche. By concentrating an extremely large number of energy routes in Turkey, it is making the whole of Russia’s European energy business dependent on the Turkish leadership, which will un- doubtedly place top priority on its own interests. From the Turkish viewpoint, implementation of this project is extremely beneficial: it will give Turkey the opportunity to become an energy center, gas hub, and stronger regional player. Turkey, along with TANAP and the Turkish Stream, could become one of the most important transit countries delivering natural gas to Europe. This will give Turkey additional leeway in talks with Europe. Moreover, the Turkish Stream and TANAP will play a decisive role for Turkey in meeting its growing internal energy needs at lower prices. And transit payments will benefit the economy. So it is unlikely that the Turkish Stream will lower the significance of TANAP, as some analysts are saying. Becoming a powerful gas transit state will give Turkey the opportunity to dictate its conditions to the European Union. It should be noted that Turkey has been trying to join the European Union for a long time. The negotiation process is continuing, but there are reasons preventing it from reaching its ultimate resolution. Implementing the Turkish Stream project could become an additional trump card for Ankara in its relations with the EU. Nevertheless, several foreign policy risks, which implementation of the Turkish Stream poten- tially have for Turkey, should be kept in mind.  First of all, the EU sees Turkey, which has such projects as TANAP, the Trans-Caspian gas pipeline, and the gas pipeline project for delivering gas from Northern Iraq, as a very im- portant alternative to Russia. If it implements the Turkish Stream project, Turkey will most likely lose its appeal for the EU as a political alternative to Russia.  Second, the Turkish Stream project can be viewed as a strategic alliance between Turkey and Russia.  Third, a larger volume of natural gas imports from Russia might have a negative effect for Turkey in the form of asymmetrical gas dependence on the Russian Federation.  Fourth, keeping in mind the fact that cooperation in the energy sphere and mutual invest- ments form the basis of the strategic partnership between Azerbaijan and Turkey, close interaction with Russia could be seen as an inconsistent foreign political choice.

75 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Due to the difference between the foreign policy strategies of Turkey and Russia, several for- eign policy risks can also be identified for Moscow. For example, a cursory analysis of the countries’ foreign policy courses shows that Ankara and Moscow frequently have mutually exclusive interests, which can be seen using the example of and Crimea. In this context, it is not known whether cooperation in the energy sphere and economic and geostrategic preferences for overcoming political differences are sufficient. Differences in foreign policy course are also seen in the attitude toward the Islamic State of Iraq and Syria (ISIS). The activity of the Turkish leadership is aiding the formation and development of radical in the form of ISIS, which is a direct threat to the interests and national security of the Russian Federation. It is also worth noting that Turkey’s stronger geopolitical role might have an impact on Azer- baijan’s geopolitical clout and, keeping in mind the latter’s involvement in the conflict around Nago- rno-Karabakh, will be a potential threat to the status quo of the entire region. In the event of a new armed conflict, Russia might not stand aside, since the heart of its strategic interests will be affected. It must also be kept in mind that Turkey’s stronger geopolitical position will definitely mean weakening of the main Ankara-Iran counterbalance in the region. What is more, significant dividends in the country’s economy could be a stimulus for Turkey becoming a leader, not only of the region, but also of the whole Islamic world. At least, this is the trend that can be seen in the country’s foreign political course. Keeping in mind the ambitions and manifestations of neo-Ottomanism of the Turkish leadership, this circumstance will upset the balance of power in the region, which could have serious consequences for both the regional, and non-regional powers. Another important fact is that Turkey is one of the leading members of the North Atlantic Alli- ance, which is a strategic rival of Russia and Iran. In other words, Turkey will be involved in one way or another in the orbit of the West’s U.S.-led anti-Russian policy.

Europe’s Reaction to Implementation of the Turkish Stream: From Theory to Practice

Russian President Vladimir Putin’s visit to Turkey and the statements made there about the rerouting of flows of Russian gas to Europe were like a bolt out of the blue for Europe. This explains a rather infantile response the Europeans give sometimes with respect to closing the South Stream project. For example, realizing the lost advantage for his country, Bulgarian Prime Minister Boyko Borisov demanded that the European Commission return it the South Stream.1 He also continues to talk about the South Stream in the present tense, as though it is still a plausible alternative. It is obvi- ous that Borisov is taking European Commission Chairman Jean-Claude Juncker’s example, who also blindly believes that the project could still be implemented. Nevertheless, facta infecta fieri nequent (what is done cannot be undone), as they say. Russian Energy Minister Alexander Novak announced that the decision to close the South Stream project is final,2 and his words were confirmed by Gazprom Head Alexei Miller.3

1 See: “Bulgaria, EU Still Want South Stream Pipeline,” available at [www.euronews.com/2014/12/04/bulgaria-eu-still- want-south-stream-pipeline/]. 2 See: “Novak Says the EU’s Position was the Reason for Cancelling the South Stream,” available in Russian at [www. forbes.ru/news/274721-novak-nazval-prichinoi-ostanovki-yuzhnogo-potoka-pozitsiyu-es]. 3 See: “Miller: The South Stream Project is Closed, There Will Be No Return,” available in Russian at [www.ria.ru/ economy/20141201/1036049502.html].

76 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

Incidentally, the EU is still trying to convince Turkey. Europe’s concern can be seen in its sud- den big interest in Turkey: Putin’s statement about the Turkish Stream was followed by a “rampage” of European officials on Ankara. First British Prime Minister David Cameron arrived, then head of European diplomacy Frederica Mogherini came to Ankara. Italian Prime Minister Matteo Renzi also visited Turkey. The thing is that although it is a member of NATO, Turkey has been making such independent foreign policy decisions that the Old World has begun bargaining in an attempt to restore its influ- ence, even reviving the idea that Turkey might join the EU. It should be noted that Turkey’s unbe- gotten dream of joining the European Union will soon be fifty years old: Europe has been insisting for many years that its doors are open to Turkey, whereby demanding a whole series of important concessions and putting forward more and more demands without offering anything in exchange. Ankara’s sights on Russia and the planned building of a gas hub are forcing Europe to be more ac- commodating: Turkey is being offered 70 million Euros to help it take care of refugees and render it support in the fight against the Islamic State, and, what is most important, the opportunity to dis- cuss its accession to the EU.4 It is obvious that Ankara is not being offered such dividends for noth- ing. Europe is trying to talk Turkey out of implementing the gas project with Russia, as well as convince it to join the anti-Russian sanctions and refrain from strengthening trade and economic ties with the Kremlin. As a result, Europe took some specific steps. In particular, the European Commission approved the strategy for creating an EU Energy Union that, in the words of its architect, Vice President Maroš Šefčovič, is “the most ambition project” aimed at loosening “Russia’s gas grip.”5 Integrating 28 en- ergy markets into one energy union has been designated as one of the strategy’s far-reaching plans, which should lead to Brussels stronger influence on the national energy regulators. Major restructuring of Europe’s energy system implies moving away from fragmentariness in energy policy and diversifying routes and sources of gas deliveries. In particular, according to Brus- sels, Kremlin’s main political weapon and blackmail continue to be the energy supplies of its mo- nopolist Gazprom. Moreover, it is the gas component that Russia is using as a lever of pressure in its relations with Ukraine. Proof of this fact is yet another increase in tension over payments and gas deliveries. In this respect, Europe is trying to rid itself of its Russian gas dependency by creating a new South Corridor that will reorient the European energy industry toward Caspian gas from Turk- menistan, Azerbaijan, Iran, and Iraq. According to the Europeans, implementing this scenario with its far-reaching consequences will not only bring the EU economic advantages, but, from the political viewpoint, will also mean approaching Russia’s borders from the other side. Moreover, the EU is planning to sign a memorandum on mutual understanding with Azerbai- jan and Turkmenistan as early as 2015, which is seen as a way to stabilize gas deliveries.6 This will update the Trans-Caspian gas pipeline project, which will allow Turkmen gas to be pumped along the bottom of the Caspian Sea to Azerbaijan and then delivered to the European market within the framework of the Southern Gas Corridor. From the European viewpoint, gas cooperation with Azer- baijan and Turkmenistan will be beneficial to all: Europe will receive alternative gas suppliers, Azerbaijan will be able to activate its transit potential, and Turkmenistan will gain access to a new sales market.

4 See: “Mogherini: The EU will Give Turkey 70 Million Euros for Helping Refugees from Syria,” available in Russian at [www.ria.ru/world/20141208/1037214544.html]. 5 “Šefčovič Says the Gas Transit Route from Russia to Ukraine is a Key One for the EU,” available in Russian at [www.1prime.ru/energy/20150324/805673116.html]. 6 See: R.M. Cutler, “Turkmenistan Pipeline from East to West to be Completed This Year,” available at [www. eurasiansecurity.com/energy-geopolitics/turkmenistan-pipeline-completing-east-west/].

77 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

It is worth noting that the EU earlier planned to draw up this package before 2016. What made the European Union accelerate its plans? There are several ways to explain the change in deadline. First, the answer should be sought precisely in Washington’s position. The main geostrategic goal of the U.S. is to reduce Gazprom’s share in the East European market by 20% by 2020, which is why Washington is putting pressure on the EU to squeeze out Russia. Keeping in mind the fact that Gaz- prom announced an increase in gas delivery volumes of up to 650 bcm7 to Europe at the beginning of February, we get the impression that it is Brussels’ mission to retain the transit of Russian gas through Ukraine no matter what. In so doing, attempts are being made to make Moscow relinquish the Turk- ish Stream. But why? After all, the Turkish Stream is advantageous to the Europeans from the eco- nomic viewpoint: all they need to do to receive Russian gas under contract is build the necessary infrastructure in the direction of the Turkish borders. However, if this scenario is played out, Ukraine’s geopolitical role as an energy hub will be reduced to naught and the EU will lose its political lever of pressure on Moscow via the “Ukrainian factor.” So it can be concluded that the EU has decided to implement a new energy strategy that presumes “more geopolitics than economics.” It is worth recalling the Nabucco project circumventing Russia previously presented, which, despite its clear economic inexpediency, was long promoted by the EU. This project enjoyed Wash- ington’s extensive political support, although there was not enough Azeri gas to pump through and fill the pipeline, Turkmenistan’s participation in this project remained under a big question mark due to the undetermined status of the Caspian, while Iran’s accession to the project meant its withdrawal from the sanction regime. Russia’s rejection of the South Stream forced Brussels to remember the Trans-Caspian gas pipeline project, which would join Turkmenistan’s gas system to Azerbaijan’s infrastructure. How- ever, it should be kept in mind that even if this project was implemented, the role of Russian gas for Europe would not change geopolitically after the Turkish Stream project went into operation. Never- theless, the Europeans also envisage an alternative development scenario, which presumes building an energy security system in the long term. For instance, some experts from Brussels are offering a scheme for a new strategic alliance with Turkey in the energy sphere that presumes a shift in Turkey’s orientation in favor of TANAP by raising Ankara’s geopolitical role in the Middle East. This sce- nario will lead to a cut in the share of Russian gas deliveries to Europe by increasing gas deliveries from Azerbaijan and Iran. What can Ankara expect in return? The combination is simple: in exchange for participating in the energy system, Brussels will give Ankara the opportunity to integrate with the EU within a specific time. Although Iran is presently not striving to participate in the anti-Russian intrigues, it can nevertheless be presumed that making Tehran the tempting offer of cancelling the sanctions could prompt Iran to change its mind. Papers by several European experts, hinting at the possibility of political upheavals in Azerbai- jan and Turkmenistan, keeping in mind the fact that the regimes in these countries are qualified as “autocratic,” show Europe’s serious intentions.8 Europe is also looking at the possibility of creating a common gas transportation infrastructure incorporating Russia, Azerbaijan, Turkmenistan, and Iran for coordinating potential volumes and directions of gas, thus removing the building of “politicized” circumventing gas pipelines from the agenda. This scenario will lead to Turkey’s withdrawal from the game, since instead of a gas hub on the Turkish-Greek border, it will create a gas crossroads in the Southern Caucasus. It can be presumed that it is this eventual scenario that will force the EU to step up signing memorandums on mutual

7 See: “Gazprom States its Intention to Raise Gas Exports to Europe,” available in Russian at [www.top.rbc.ru/busines s/03/02/2015/54d071579a7947b16ec39c8c]. 8 See: St. von Schultz, “Aserbaidschan und Turkmenistan: Europa setzt auf Gas von Autokraten,” available at [www. spiegel.de/wirtschaft/soziales/gas-aus-aserbaidschan-und-turkmenistan-eu-setzt-auf-autokraten-a-1019882.html].

78 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 understanding with Baku and Ashghabad in the effort to build a strategic partnership with these coun- tries in the energy sphere.

The Gas Game Continues

Another stage in the gas pipeline game was the Eastern Partnership Summit held from 21-22 May in Riga that made a name for itself with the adoption of a final declaration in which the summit participants expressed their support of the Southern Gas Corridor project. Despite the fact that many experts and politicians say that the Turkish Stream and TANAP are not rivals, it is obvious that the decision to orient the EU toward building the Southern Gas Corridor was made when the difficulties and unclear prospects of the Turkish Stream arose. Essentially Rus- sia’s stepping up implementation of the Turkish Stream failed. While it was referred to earlier that the intergovernmental agreement on the Turkish Stream between Russia and Turkey would be signed before the end of July 2015 and that Gazprom had scheduled launching of the first thread of the pipe- line for December 2016,9 at present it is no secret that there is no official resolution from Ankara about building the Turkish Stream. Moreover, Alexei Miller’s statement about beginning work on the off- shore section of the Turkish Stream aroused the bewilderment of many experts and politicians. In particular, Turkish Ambassador to the Russian Federation Ümit Yardım said there were several unre- solved issues in this project, which, if not resolved, would make it impossible to begin any kind of work. In his opinion, the end consumer of Russian gas must be determined, the impact of the Turkish Stream on the environment studied and, finally, permission received for laying the pipeline along the bed of the Black Sea.10 Since there is no intergovernmental agreement in which all the legal aspects will be taken into consideration, it does not look very likely that the Turkish Stream will become a reality any time soon. What is more, in April, signing of the memorandum on building the Greek section of the Turkish Stream gas pipeline between the directors of OAO Gazprom and the govern- ment of Greece was not crowned with success, while the leadership of Macedonia and Serbia an- nounced their willingness to coordinate their decisions on transporting and buying gas with the EU. The last circumstance gave Azerbaijani Head Ilham Aliev reason to confirm “the timely or even early extension of the South Caucasian pipeline and building of TANAP.”11 However, things are not that simple. Serious political difficulties have emerged in the multi- move combination of the gas game in the form of fundamental problems in implementing the TAP project. The thing is that after the socialists came to power, Greece demanded an increase in the transit fee for Azeri gas, as a result of which the Shah-Deniz consortium announced that TAP would not go into operation until the end of 2020. At the same time, an environmental campaign against the TAP gas pipeline is underway in Italy: despite the fact that the Italian authorities have announced that construction has begun, the municipal authorities of Apulia, the region where the gas pipeline emerg- es from the Adriatic onto the Italian coast, plan to lodge a complaint about this decision in court.12 So, judging from everything, the plan of the Azerbaijani authorities, which presupposes rejecting open

9 See: “The Turkish Stream Will Be in Operation in December 2016,” available in Russian at [www.gazeta.ru/business/ news/2015/05/07/n_7174629.shtml]. 10 See: “Turkish Ambassador: Ankara Expects Launching of the Turkish Stream after 2017,” available in Russian at [http://www.interfax.ru/443245]. 11 “Ilham Aliev: Azerbaijan has Enough Gas for Another 100 Years,” available in Russian at [www.ekhokavkaza.com/ archive/news/20150528/3235/2759.html?id=27041078]. 12 See: “Ilham Aliev Makes an Unexpected Admission, ‘Someone is Standing in Our Way!’” available in Russian at [http://haqqin.az/news/46072].

79 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS confrontation with Moscow and engaging in a gas game against it using the U.S. and EU, which are bent on ousting Russia from the EU energy market, might fall through. In the current breakdown of forces, it can be seen that each participant in the gas game is trying to maneuver to gain bigger economic and political dividends. While taking advantage of the political vacuum in the relations between the EU and Iran, Baku is actively trying to find a niche for itself in the European gas market by means of implementation of the Southern Gas Corridor with the prospect of receiving political dividends in the Karabakh settlement. Turkey is continuing to live with the dream of becoming the largest energy hub in the Middle East and is unlikely in the near future to reject either implementation of TANAP or the Turkish Stream. Greece is also playing the Azeri card, striving to reach a compromise with European creditors: at the moment, difficult talks are going on with the EU and IMF regarding unfreezing of the assistance and debt reconstruction program (the debt amounting to more than 240 billion Euros). At the same time, the Greek government is placing the stakes on maneuvering between Moscow, on the one hand, and Brussels, on the other. For ex- ample, Greek Prime Minister Alexis Tsipras stated his consent regarding examination of the invita- tion to become the sixth member of the BRICS bank and expressed his willingness to discuss with Gazprom ways for the latter to participate in creating gas transportation infrastructure in Greece for transporting Russian gas. The gas game continues. The EU must resolve several important questions in a few different areas in order to make the Southern Gas Corridor a reality and retain the status quo with respect to Ukrainian transit. First of all, the policy of Kiev’s current authorities must be changed to be- come acceptable to Russia, the geopolitical consequences of turning Turkey into a major energy hub in the Middle East must be assessed, gas transportation infrastructure in Azerbaijan, Georgia, and Turkey must be created, the possible risks relating to the unsettled conflicts in the Southern Caucasus must be neutralized, and destabilization should not be permitted to spread from the adjacent region of the Middle East. Problems with Greece, which, if not resolved, will make it impossible to talk about building TAP as part of the Southern Gas Corridor, can be added to the list of difficulties. In practice, however, the EU is acting precisely the opposite in all these issues or sitting and looking on with its arms folded. Meanwhile, the radical Islamic State group is gaining momentum in the direct proximity of the South Caucasian borders (350-500 km), while it is likely the destabiliza- tion will spread to Turkey, which is an important state in implementing the Turkish Stream and TANAP. Moreover, neither Washington, nor Brussels wants to carry out a land-based operation against the Islamic State even to protect the regional pipeline infrastructure. In this respect, it can be said that the EU’s actions in this area are highly illogical: Brussels is trying by all means to free itself from gas dependence on Russia without keeping in mind the current reality.

Conclusion

In accordance with the data of Interfax Global Energy analysts, total gas consumption in Europe and Turkey in November-December 2014 amounted to 495.4 bcm.13 At present, the EU’s main sources of blue fuel can be divided into three parts: its own fields (Norway is a large gas exporter); the Russian Federation (Gazprom, which accounted for 29.67% in 2014); and other sources of gas (the African and Middle East countries and the U.S.). The EU has 2.2% of the world gas reserves, while its consumption reaches approximately 18% of total world consumption. If this trend con-

13 See: “Europe Consumes Less Gas but Gazprom Saves its Stake in 2014,” available at [www.rusmininfo.com/ news/23-01-2015/europe-consumes-less-gas-gazprom-saves-its-stake-2014].

80 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 tinues, the share of imports in European gas consumption will amount to 80% by 2030, while Rus- sian gas could occupy 2/3 of the European gas market.14 From this viewpoint, Europe’s idée-fixe, which is bent on looking for non-Russian sources of gas supplies, is entirely legitimate. This means that Europe must make good on approximately 70 billion cm of gas before 2020. Since Europe does not want to agree to increase Russia’s share in its gas mar- ket, it will have to look for alternative suppliers. This is why Europe has been so actively lobbying the Southern Gas Corridor project, in which Azerbaijan is the main supplier. Turkmenistan and Iran (de- spite the economic sanctions) are being viewed as possible suppliers. Of course it is not a matter of squeezing Gazprom out of Europe, rather of not allowing an in- crease in Russia’s share in the European gas market. In this way, by 2020, Europe will need approxi- mately 217 bcm, which is difficult to compensate for at present by means of potential suppliers, judg- ing by the fact that if TANAP is fully loaded to 16 bcm, 6 billion will remain in Turkey and 10 will go to Europe. However, this is not enough to fully meet the European demand. So, from a realistic viewpoint, Europe cannot give up on Russian gas entirely. Correspondingly, in the context of ensur- ing energy security, implementation of the Turkish Stream is acquiring primary importance for Eu- rope, although precedence is given precisely to the Southern Gas Corridor.

14 See: “BP Energy Outlook 2035,” January 2014, available at [www.bp.com/content/dam/bp/pdf/Energy-economics/ Energy-Outlook/Energy_Outlook_2035_booklet.pdf].

81 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

REGIONAL INTEGRATION

PROSPECTS FOR REGIONAL COOPERATION IN CENTRAL ASIA AS SEEN TODAY

Chinara ESENGUL Ph.D. (Political Science), Deputy Director, National Institute of Strategic Studies of the Kyrgyz Republic (Bishkek, Kyrgyzstan)

Sheradil BAKTYGULOV Expert, National Institute of Strategic Studies of the Kyrgyz Republic (Bishkek, Kyrgyzstan)

Asel DOOLOTKELDIEVA Ph.D. Candidate, Faculty of Political Studies and International Relations, University of Exeter (Devon, U.K.)

Bermet IMANALIEVA Research Associate, National Institute of Strategic Studies of the Kyrgyz Republic (Bishkek, Kyrgyzstan)

ABSTRACT

he authors sum up the results of stu- and negative factors. They assess, in par- dies of regional cooperation in Central ticular, the political, economic, and cultural- T Asia and identify its main positive humanitarian aspects of the present state 82 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 of regional cooperation in Central Asia, role the Kyrgyz Republic plays in regional analyze the problems related to border and cooperation, and point to its most promis- water-energy issues, concentrate on the ing trends.

KEYWORDS: regional cooperation, Central Asia, prospects, economic cooperation, political cooperation, cultural-humanitarian cooperation, factors of cooperation.

Introduction

Is Central Asia an integral region? What factors promote/interfere with regional coopera- tion? These are highly topical questions calling for profound investigation. This article is based on the report titled Regional Cooperation as a Factor of Peace and Security in Central Asia: Achievements, Challenges and Prospects prepared by the National Institute of Strategic Studies of the Kyrgyz Republic for the U.N. Regional Center for Preventive Diplomacy for Central Asia (UNRCCA). The answers to the questions formulated above require a trip into the early post-Soviet period when, in 1993, Kazakhstan, Kyrgyzstan, and Uzbekistan signed a treaty on setting up an economic union, the first step toward the Central Asian Economic Community—CAEC; until July 1998 it had been functioning as the Central Asian Union. Tajikistan joined it in March 1998; this was when the interstate council outlined the economic priorities of regional cooperation—agroindustrial and hydropower complexes and transportation. It was decided that the region needs (a) a free trade area as the first stage of a common economic space; (b) coordinated policies in the agrarian and environmental sectors; and (c) concerted environmental-related efforts in the Aral Sea basin. By the mid-2000s, it became clear that cooperation among the Central Asian states had no prospects because of the region’s increasing dependence on external regional and global political and economic trends and policies, its inadequate resource potential and inadequate political experience to independently achieve regional security and development, as well as compromises among the states, claiming regional leadership, etc. In December 2001, CAEC received a new name—the Organization of Central Asian Coopera- tion (OCAC); in 2004, Russia joined it; and in 2005, OCAC merged with EurAsEC. The Central Asian states shifted to bilateral relations,1 a format that left many regional problems outside its scope. In April 2007, President of Kazakhstan Nursultan Nazarbaev tried to revive the Central Asian Union2 only to discover that all his Central Asian neighbors, except Kyrgyzstan, were very skeptical about his idea.

1 This fact has been confirmed by the joint studies of the OSCE Academy and the Norwegian Institute of International Affairs (see Central Asia Regional Data Review, No. 7, February 2013). 2 See: “Kirghizia obretaet starshego brata v litse sosednego Kazakhstana. Rossia vne igry?” available at [http://www. fergananews.com/articles/5091].

83 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS What Affects Regional Cooperation in Central Asia

Regional cooperation in Central Asia depended and still depends on external and internal fac- tors. The following internal factors interfere with successful regional cooperation:  The states consider potential threats to their sovereignty to be a very disturbing trend. Stron- ger statehoods and stronger regional security are believed to be incompatible. Strong state- hoods create strong states that rely on special services, laws enforcers, and the army; neigh- bors are seen as a potential security threat, while regional security is strengthened with joint military training exercises and joint operations of law enforcers and military structures of the Central Asian countries.  Centralized systems of governance as opposed to democracy and regionalism (two interde- pendent factors: wider democracy leads to stronger regionalism). Centralized systems tend toward nationalism and limit their cooperation to projects that serve the regime’s interests presented as national interests. The nationalism vs. regionalism discourse dominates in the minds of decision-makers, as well as in the academic and expert communities, despite the obvious fact that regionalism, as applied to the key regional issues, could have consoli- dated the position of the nation-states.  The ideas of regional identity and regionalism lost much of what made them two different concepts. Today regionalism is interpreted as the presence of supra-national structures with powers delegated to them by national states. This breeds the fear of lost sovereignty; re- gional integration brings to mind the experience of being part of the Soviet Union and, therefore, stirs up active opposition to the prospect of losing even some national powers to supranational structures.  The very different resource potential and unequal distribution of natural riches among the Central Asian countries explain their mostly unequal post-Soviet economic and political development. Kazakhstan, Uzbekistan, and Turkmenistan own most of the region’s energy reserves; Kyrgyzstan and Tajikistan, on the other hand, have 90% of the region’s hydro- power resources at their disposal. While the former group of countries was able to remain afloat during the transition period using their hydrocarbon resources as a safety belt, the latter had to cope with a deficit of energy and the vague rules of transboundary use of their hydropower and water resources.  There are no similar political cultures, economic development or geopolitical integration strategies in the region. Kyrgyzstan, for example, opted for “fast” political and economic changes, while Kazakhstan, Tajikistan, Turkmenistan, and Uzbekistan placed the stakes on economic reforms within the old political regimes, their economic strategies, however, be- ing very different. The same fully applies to the future courses of their political develop- ment. The aims are very different and cannot be harmonized. They are (a) achieving economic and political integration under the aegis of one country; (b) establishing a dialog platform; and (c) attracting investments.  Leadership rivalry has been and remains extremely prominent partly because of the very different ideas of the presidents of Kazakhstan and Uzbekistan about the development mod-

84 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

els of their states, while the strategies and projects they have offered to the region—the Turanism of Islam Karimov and Eurasianism of Nursultan Nazarbaev—make political dia- log of any kind in the region next to impossible.  The Corruption Perceptions Index in the region is one of the highest; it slows down re- gional cooperation by narrowing the competitive leeway in each of the countries and rely- ing on non-transparent interstate transactions.3 The pressure of external factors is no less, and perhaps even more important: these factors in- terfere with regional cooperation, on the one hand, while promoting it, on the other. Water, hydro- power, and border issues interfere with cooperation in Central Asia: most experts describe the present state of interaction in these fields as an imposed status quo.4 Despite the 150 agreements and contracts of all sorts, the stalemate persists.5 The roots of the disagreements should be looked for at more gen- eral, political, and historical levels. All the countries capitalize on border issues as pressure levers when it comes to settling hydro- power disagreements. The agreement currently being implemented between Kyrgyzstan and Kazakhstan on the joint use of the facilities on the Chu and Talas rivers signed on 21 January, 2000 is the exception rather than the rule6; the same can be said about the border delimitation they have achieved. The countries situated on the lower reaches of the local rivers prefer the status quo: it ensures the irrigation regime inherited from the Soviet past; the countries on the upper reaches would have preferred to move to a new energy regime less damaging to their interests. We should also bear in mind that the large hydropower plants currently being built in Tajikistan and Kyrgyzstan will change the situation, which is fraught, as President of Uzbekistan Karimov warned, with “water wars.” The present situation faithfully reflects what is going on with respect to managing the region’s hydropower resources. The border disputes offer more nuances: recently, the Kyrgyz-Tajik and Kyr- gyz-Uzbek talks on the disputed border stretches resumed, along with the so-called economy-related issues relating to the disputed stretches or those close to them. Today, only 54% of the border between Kyrgyzstan and Tajikistan has been qualified7; while Kyrgyzstan and Uzbekistan have still to reach an agreement on 73% of their common border.8 The revived talks on economic issues bred hopes that cooperation on border delimitation could be revived. On 10 July, 2014, the exchange of fire between Kyrgyz and Tajik border guards on the day construction of a transboundary highway was resumed buried the hopes of another round of talks.

3 See Appendix. 4 For more details, see: Report by the National Institute of Strategic Studies (NISI) Regionalnoe sotrudnichestvo kak factor mira i bezopasnosti v Tsentralnoy Azii: dostizhenia, vyzovy i perspektivy, Bishkek, 2014. 5 See: “Vodnoe partnerstvo v Tsentralnoy Azii. Pozitsia Rossii po Rogunskoy i Kambar-Atinskoy GES,” available at [http://www.centrasia.ru/news.php?st=1403887740], 27 June, 2014. 6 See: Monitoring pozitsiy stran Tsentralnoy Azii po voprosu ispolzovania transgranichnykh vodnykh resursov, NISI KR Report, Bishkek, 2013. 7 See: “Abdyrakhman Mamataliev, vitse-premier ministr: “Rayony Zherge-Tal i Murgab prinadlezhali nam…” available at [http://www.gezitter.org/interviews/31567_abdyirahman_mamataliev_vitse-premer-ministr_rayonyi_jerge-tal_i_murgab_ prinadlejali_nam/], 15 July, 2014. 8 According to the latest information, the Uzbek side has moved away from the earlier agreement to sign a document related to 1,007 km of the borderline and proposes revising the earlier agreement related to 300 km of border with economically profitable facilities: the oil rich Burgondu Valley and the Orto-Toko water reservoir. The total stretch of the Kyrgyz-Uzbek border is 1,378 km (see: Interview with Kurbanaby Iskandarov, Special Representative of the Government on Border Delimitation Issues, Bishkek, June 2014).

85 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Conflicts on the Tajik-Kyrgyz border and adjacent areas have become more frequent: since 2014 the State Border Guard Service of Kyrgyzstan has registered 31 instances of fire exchange. Some think that that the government is using the banal disagreements between the local people living on either side of the state border as levers of blackmail and pressure. This means that cooperation on eco- nomic and border issues remains at the lowest level. There are people in the corridors of power and expert community of Kyrgyzstan who think that the recent incidents on the border with Tajikistan speak of disintegration trends. It should be said that there was no integration. The region survives on the mechanisms of interaction inherited from the Soviet Union; this means that no disintegration can happen where there was no integration in the first place. We can say that the situation is changing; the attempted joint border and hydropower projects might be frozen and the countries could switch to autonomous regimes of energy, water, and border security. The following external factors push the countries toward regional cooperation:  Common traditional and non-traditional challenges and threats to the region’s countries’ sustainable development;  Similar systems of education, culture (Turkic, Islamic, etc.) and administration;  Common interests in using the hydropower infrastructure;  Migrations inside the region and the gradually worsening demographic situation, espe- cially acute in the Ferghana Valley. Trade and economic cooperation is the key to stronger regional peace and security. The local people have been involved in active trade from time immemorial; the region was crossed by the northern and southern stretches of the Silk Road. These traditions are still alive, even if economic and trade cooperation is limited to bilateral or multilateral agreements and to those who live along the borders. Trade and economic cooperation depends, to a great extent, on multisided structures such as EurAsEC (Belarus, Kazakhstan Kyrgyzstan, Russia, and Tajikistan), the Customs Union (Belarus, Kazakhstan, and Russia) and, since 2015, the Eurasian Economic Union (EEU). The agroindustrial and hydropower complexes, transport, and free trade areas that are being formed, coordinated agrarian policy, environmental protection, and joint efforts to improve the ecol- ogy of the Aral Sea basin are seen as the cooperation priorities. Cooperation in these fields should be preserved, its prospects resting on at least three common features: (1) Shared strategic identity as a crossroads in the heart of Eurasia or the “point of balance” between the main global powers—China, the U.S., and Russia. (2) Common problems related to the use of water, hydropower projects, transport corridors, and opposition to transboundary religious extremism. (3) The countries are landlocked, so if one of them wants to gain access to the sea, this presup- poses land and air transit agreements with the others. Transport cooperation is another important sphere of regional cooperation; today it is coop- eration in automobile, air, and railway transport. On the whole, the Central Asian countries use or are even expanding the airports, highways, and railways built in the 1970s-1980s, as well as extending the geographical range of transport corridors.

86 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

Highways. The Central Asian countries are still using the highways inherited from the Soviet Union and expanding their network. Kyrgyzstan as a transit country is involved in the Highways of Central Asia project that will tie together Russia, Kazakhstan, and Tajikistan.9 The project will cost about $850 million, the money to be spent on building new and maintain- ing old roads; an alternative North-South highway, which will connect the north and the south of Kyrgyzstan and reach the Chinese border, is part of a bigger project. Air transport. New air routes and new directions are being developed by local and foreign firms. Kyrgyzstan is developing two projects—the International Transcontinental Air Hub and the Central Asian Regional Air Hub. The location of the Manas airport has determined its strategic role as a hub in the worldwide air transportation system. Its advantages have been tested by the ISAF, which over the past 12 years has moved 5,300 thou. U.S. and NATO military across it to Afghanistan and back, 98% of the total num- ber of the ISAF contingent in Afghanistan. The international airport in Osh is one of the largest in the Ferghana Valley; it is used by people from the south of Kyrgyzstan and also from Tajikistan and Uzbekistan. The Russia-Kazakhstan-Kyrgyzstan-Tajikistan railway was described as an initiative of the President of Kyrgyzstan, who chaired the CSTO Collective Security Council in 2013. It was sup- ported by the presidents of the three other potential partners. Today, the heads of the railways of Russia, Kazakhstan, Kyrgyzstan, and Tajikistan are working on the problems of the project’s eco- nomic and financial expediency. Uzbekistan is the only country connected to Afghanistan by the Mazar-i Sharif (Afghanistan)- Khairaton (Uzbekistan) railway. As the monopolist, Uzbekistan changes tariffs in its territory at will. A railway from Russia to Tajikistan, which should leave Uzbekistan out of the project, will make it possible to move cargoes at predictable tariffs and in greater quantities than those permitted by the other transportation means. The planned railway can be connected to the planned Tajikistan-Afghan- istan-Turkmenistan-Iran railway. The Uzbekistan-Kyrgyzstan-China railway appeared on the agenda in 1995 in two versions: either Kashgar–Irkeshtam–Osh–Andijan, or Kashgar–Torugart–Balykchy–Kara-Keche–Jalal-Abad– Andijan; its total length is expected to be 268 km. For over ten years now, the Kyrgyz side has been lobbying the latter route expected to cross a large chunk of its territory and connect the big coal and iron ore mining projects. The Kyrgyz leaders wanted to tie together the south and the north of their country by means of this single-track railway. Its cost is assessed at $2 to $4 billion, the figures raising a lot of doubt; its annual profit is -ex pected at the $250 million level. On the other hand, a double-track railway between China and Ka- zakhstan cost much less and is earning $250 million every year. One cannot but wonder how a single- track railway could bring as much income as a double-track railway (part of the fully loaded route from China to Europe and back). It should be said that with the lower tariffs of the Kazakh railway, the Uzbekistan-Kyrgyzstan-China railway will start losing money. Cooperation in education is another factor that promotes regional cooperation. It is rooted in the common history, common traditions, religion, culture and similar languages used by the four Turkic-speaking states and is, therefore, still alive and so far remains one of the most promising co- operation trends. Kazakhstan, which is rich in mineral resources, can pour more money into education than its Central Asian neighbors. It has 130 higher educational establishments, 59 run by private companies.10

9 [http://www.gov.kg/?p=24327], 28 July, 2014. 10 [http://www.edu.gov.kz/ru/news/parlamentskie-slushaniya-o-kachestve-i-perspektivah-podgotovki-kadrov-v- sisteme-tehnicheskogo-i].

87 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

According to the Statistics Board, there are 10.4 thou. foreign students in Kazakhstan, mainly from Uzbekistan, China, Russia, and Mongolia. Uzbekistan, with 75 higher educational establishments, six of them branches of foreign univer- sities, comes second.11 In Soviet times, the republic was a major educational center that trained spe- cialists for other Soviet republics (Kazakhstan, Kirghizia, Tajikistan, and Turkmenia); today, the highly specific features of Uzbekistan’s bilateral relations with neighbors have decreased the appeal of its higher education. Kyrgyzstan comes third in terms of number of higher educational establishments. It has 52 uni- versities; 31 of them are run by the state; the others are private.12 There are several private universities with a high level of instruction that are rich enough to give grants to their students. It stands to reason that this makes them highly competitive in the education market. This competitive situation has been created by the state’s highly liberal policy in the education sphere. In 2013, there were 7,768 foreign students in Kyrgyzstan,13 their share being higher than in Kazakhstan with three times more universities. The low tuition fee is one of the attractions for stu- dents with average and low incomes from different, including Central Asian, countries. Tajikistan, which in the 1990s was shattered by political storms and socioeconomic disasters, has certain problems in the education sphere: there are not enough schools, qualified teachers, or good textbooks; planning at all levels leaves much to be desired.14 Despite the current problems, there are 2,130 foreign students in Tajikistan in 2013, according to the figures cited by its Ministry of Education; the larger part of them came from Iran (626 students), followed by students from Turkmenistan (311), Kazakhstan (149), Uzbekistan (255), Afghanistan (234), and Kyrgyzstan (137).15 Students from Afghanistan, Iran, and Turkmenistan are attracted by Tajikistan’s linguistic and geographical proximity. Turkmenistan does not attract students from Kazakhstan, Kyrgyzstan, or Uzbekistan; recently, however, Russian universities, the Gubkin Oil and Gas University among them, opened their branch- es in the country. In 2012-2013, preliminary talks on a Turkmen-American university in Ashghabad began. International universities might attract more foreign students and upgrade the quality of high- er education.

Kyrgyzstan: Its Role in Regional Cooperation

Due to its place in the region’s geopolitical configuration, Kyrgyzstan can add more vigor to regional cooperation in Central Asia. It has vast experience in conflict moderation and settlement, as well as in implementing foreign policy initiatives: it was involved in brokering the ceasefire in Nagorno-Karabakh and in the recogni- tion by the 56th and 57th U.N. GA of 2002 as The International Year of the Mountains and 2003 as The Year of the 2200th Anniversary of Kyrgyz Statehood.

11 [http://www.edu.uz/ru/tashkent_list/higher-education-institutions/]. 12 See: “V Kyrgyzstane imeetsia 31 gosudartsvenny i 21 chastny vuz,” available at [http://www.knews.kg/ society/3334_v_kyirgyizstane_imeetsya_31_gosudarstvennyiy_i_21_chastnyiy_vuz/], 13 See: “V vuzakh Kyrgyzstana obuchaiutsia bolee 7 tys. inostrannykh studentov,” IA K-News, available at [http://www. knews.kg/society/37312_v_vuzah_kyirgyizstana_obuchayutsya_bolee_7_tyis_inostrannyih_studentov], 29 July, 2013. 14 [http://allinschool.org/wp-content/uploads/2014/08/Tajikistan-OOSCI-Country-Report-En.pdf]. 15 See: “Vuzy Tajikistana stanoviatsia privlekatelnymi dlia inostrantsev,” Radio Ozodi, available at [http://rus.ozodi. org/content/article/24910280.html], 29 July, 2014.

88 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

The Bishkek Protocol on Ceasefire in the zone of the Nagorno-Karabakh conflict signed on 5 May, 1994 can be described as the country’s most successful foreign policy initiative; it was initiated by the parliament of Kyrgyzstan and supported by the Interparliamentary Assembly of the CIS and Russia’s Federal Assembly and Foreign Ministry. Today, Kyrgyzstan’s positive and negative images abroad are created by numerous factors, including the fact that two of its presidents had to flee the country to settle in Russia (in 2005) and in Belarus (in 2010) and that an ethnic conflict flared up in the south in June 2010, twenty years after a similar ugly incident. There are positive factors as well: the Constitution of Kyrgyzstan adopted late in June 2010 by a nationwide referendum and described by the Venice Commission as having no analogies in Central Asia, as well as the peaceful transfer of power from the third to the fourth president that took place in 2011 and had no precedence in the Central Asian countries. This means that Kyrgyzstan is ready to become the driving force behind regional cooperation, play a greater role in creating a legal regulatory framework of transboundary cooperation, teaching social and humanitarian sciences, and introducing international standards of border crossing, and become the regional logistics operator. Its potentially greater role in these fields rests on the following:  Liberal laws;  Liberal monetary policy;  Good “Doing Business” conditions;  Convenient flight changes to Europe and America at the Istanbul airport, to Southeast Asia in Dubai, and alternative flights via Moscow and Beijing;  Efficient cargo logistics (Kyrgyzstan is the region’s biggest logistics operator of re-export and intermediary operations);  Developed information-communicative technologies (fast Internet access, web-design, pro- gramming, etc.);  Flexible, student-oriented education system;  Relatively more liberal rules for temporary residence in the republic.

Regional Cooperation: Its Future

Experts have pointed out that education and tourism are two of the most attractive and, there- fore, most promising spheres of cooperation. Today, Kyrgyzstan and Kazakhstan are the only coun- tries that offer grants to students from neighboring countries. In Kyrgyzstan, students are attracted mainly by the OSCE Academy, American University of Central Asia (AUCA), International Univer- sity of Central Asia (IUCA), and University of Central Asia (UCA). Students from other Central Asian countries are attracted by the relatively low fees and possible grants. Young people are also attracted by the fact that Kyrgyzstan is a multinational state with over 100 ethnic groups. Kyrgyz constitute 72.2% of the country’s five and a half million-strong population; 14.3% are Uzbeks, 6.8% are Russians, and 6.7% belong to other ethnic groups.

89 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Identity issues, the language of instruction (Russian, English, Turkish, and Uzbek), kinship, and geographic proximity are obviously the main reasons for choosing Kyrgyzstan and its universities. The cooperation potential of higher education, however, has not yet been fully tapped. Today, students from Kazakhstan constitute the largest group of foreign students in Kyrgyzstan (2,844), followed by Tajikistan with 637 students, while there are 569 students from Uzbekistan and 229 from Turkmenistan (see Fig. 1).

Figure 1

The Number of Foreign Students at the Universities of Kyrgyzstan between 2005 and 2014

20,000 18,000 16,000 14,000 12,000 10,000 Kazakhstan 8,000 Tajikistan Turkmenistan 6,000 Uzbekistan 4,000 2,000 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

S o u r c e: The National Committee for Statistics and the Ministry of Education and Science of the Kyrgyz Republic (letter of Ministry of Education and Science of the Kyrgyz Republic of 20.06.2014 No. 06-9/3767).

Tourism is another promising sphere of cooperation in the post-Soviet space, in which Kyrgyz- stan holds a very good position needed to further develop this economic branch. There is a visa-free regime between it and its Central Asian neighbors: Kazakhstan and Tajikistan (this regime was intro- duced by the 2000 Agreement among the Countries Participants in EurAsEC) and Turkmenistan and Uzbekistan (the agreements were signed on a bilateral basis). This has already had a positive impact on the tourist business: for many years citizens of the CIS and Central Asian countries constitute the main tourist flow to Kyrgyzstan (see Fig. 2). It is expected that Kyrgyzstan’s EurAsEC membership will make the country even more attractive. An analysis of the tourism market in Kyrgyzstan shows that the flow of tourists, especially from the CIS countries, is increasing. In 2013, there were 2 450 77 tourists from Kazakhstan; ac- cording to the border guard service of Kyrgyzstan, there were 325,406 tourists from Uzbekistan and 137,468 tourists from Tajikistan.

90 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

Figure 2 Kyrgyzstan has established the visa-free regime with 45 mainly pros- Import of Tourist Services, by CIS Countries and Outside pering countries (with per capita GDP Them (in percent of the total) over $7 thou.), which has made it even more attractive.16 100% Interregional and transboundary cooperation was and remains one of the most promising spheres. Trans- 80% boundary cooperation, which should include a set of legal, administrative, and economic measures, would help to 60% distribute productive forces more ra- tionally, level out the standards of liv- ing in different countries, and satisfy the requirements of the Central Asian 40% countries for goods, raw materials, and services. The mechanism of border coop- 20% eration can be used to create an inter- state regional market of goods, servic- 0% es, capital, and labor. The border terri- 2008 2009 2010 2011 2012 tories can be used for creating special economic zones, carrying out joint in- CIS countries Countries outside CIS vestment projects, ensuring the optimal use of these territories, engaging in S o u r c e: National Committee for Statistics of the Kyrgyz Republic. joint environmental protection mea- sures, efficient water use, settlement of border disputes, etc. In order to develop, regional cooperation should rely on an integration dialog rather than on dialogs on specific issues.

A p p e n d i x. Corruption Perceptions Index in Central Asian Countries

There are different methods used to measure the level of corruption; here we rely on the CPI for the Central Asian countries. Assessed on the basis of the CPI, the Central Asian countries are highly corrupt. The following diagram shows how the corruption level changed between the late 1990s and 2013 (see Fig. 3). According to the results of the Doing Business studies of 189 countries based on the WB meth- odology, the Central Asian countries demonstrated different results (see the table).

16 See: Law of the Kyrgyz Republic on Visa-Free Regime for the Citizens of Certain Countries for up to 60 Days of 14 June, 2012.

91 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Figure 3

CPI in the Central Asian Countries

3.5

3

2.5

2

1.5 Scores of CPI*

1

0.5

0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Kazakhstan 2.3 3 2.7 2.3 2.4 2.2 2.6 2.6 2.1 2.2 2.7 2.9 2.7 2.8 2.6

Kyrgyzstan 2.2 2.1 2.2 2.3 2.2 2.1 1.8 1.9 2 2.1 2.4 2.4

Tajikistan 1.8 2 2.1 2.2 2.1 2 2 2.1 2.3 2.2 2.2

Turkmenistan 2 1.8 2.2 2 1.8 1.8 1.6 1.6 1.7 1.7

Uzbekistan 1.8 2.4 2.7 2.9 2.4 2.3 2.2 2.1 1.7 1.8 1.7 1.6 1.6 1.7 1.7

* The CPI score reflects the level of corruption as perceived by businessmen and analysts and assesses it according to a scale where 10 means very clean and 0 indicates highly corrupt.

Table

Place of the Central Asian Countries in the Doing Business Rating by Country Based on the WB Methodology

Country 2014 2013

Kazakhstan 50 53

Kyrgyzstan 68 70

Uzbekistan 146 156

Tajikistan 143 141

N o t e: There is no information for Turkmenistan.

S o u r c e: Data were borrowed from [http://doingbusiness.org/].

92 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 TAJIKISTAN-CHINA: TWENTY-FIVE YEARS OF DIRECT RELATIONS

Rashid ABDULLO Independent Expert (Dushanbe, Tajikistan)

ABSTRACT

his article analyzes Tajikistan’s rela- partner, and gave the PRC direct access to tions with the People’s Republic of Tajikistan’s raw materials, particularly min- T China (PRC) in the almost twenty-five ing resources. At that, implementation of the years since direct and broad relations were first of the Chinese strategies, the New Silk restored between the two countries in the Road, raised employment in Tajikistan, sat- context of two overlapping trends. One of urated its market with cheap Chinese con- them is the striving of the Tajik leadership to sumer goods, and, consequently, promoted acquire a reliable source of foreign funding social stability. Implementation of the third for the republic’s economic development in strategy is fortifying China’s status as Tajiki- light of its own extremely limited financial re- stan’s strategic partner even more. sources. The second is the consistent imple- Nevertheless, China’s stronger posi- mentation by the Chinese leadership of re- tion in the republic is fraught with substan- ciprocal economic-political strategies—the tial risks, the main one being the lack of a New Silk Road, Going Out, and the Silk practical alternative to the Republic’s broad Road Economic Belt. economic cooperation with its great East- Implementation of the first two strate- ern neighbor. Tajikistan must continue to gies restored direct economic relations be- follow a multivectoral course, not only in its tween the two countries, made it possible for strictly political, but also in its economic re- Tajikistan to carry out several of its strategic lations with the outside world in order to infrastructural projects, turned China into avoid unilateral dependence on its strategic Tajikistan’s strategic political and economic partner.

KEYWORDS: Tajikistan, China, strategic partnership, new initiatives, Silk Road, Going Out, multivectoral policy.

Introduction

The territories belonging to contemporary Tajikistan and China have, from time immemorial, been joined by direct and sufficiently developed political, economic trade, and cultural ties that were long interrupted.

93 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Ways to restore relations between Tajikistan and its neighboring republics with China began to emerge as the Soviet state weakened in the aftermath of Gorbachev’s perestroika. Kazakhstan was the first republic of the region able to take most advantage of the opportunities presented in its own interests. According to Kazakh expert Adil Kaukenov, between 1986 and 1989, trade turnover be- tween Soviet Kazakhstan and China rose from $3 million to 45.6 million, and by 1991, China ac- counted for 52% of the republic’s export beyond the Soviet Union. In 1989, Kazakhstan and the Xinjiang-Uighur Autonomous Region (XUAR) signed an agreement on economic, technical, and trade cooperation for 1989-1995. The total cost of all the transactions envisaged under the agreement amounted to more than $1.5 billion, while the trade turnover between them was to rise to $220-260 million.1 In July 1991, during the visit of the then Soviet Kazakhstan’s president to the XUAR, an Agreement on the Principles and Main Development Trends of Cooperation between the Kazakh S.S.R. and Xinjiang was signed.2

Dushanbe-Beijing: The Formation of Strategic Partnership Relations in the Economy

After the collapse of the Soviet Union, the PRC government promptly recognized the indepen- dence of the post-Soviet states of Central Asia (CA). It established diplomatic relations with them and opened embassies in all the capitals of the region, including in Dushanbe. Since that time, their relations with China have risen to a qualitatively new level due to the mutual interest of each country in establishing contacts with China. Admittedly, this interest did not immediately blossom into something more significant. After gaining their independence, the former Soviet republics of Central Asia needed to prompt- ly build sovereign stable national states as a necessary condition for ensuring their own security and creating ways to overcome the socioeconomic difficulties generated by perestroika and the disintegra- tion of the Soviet Union. The internal aspect of resolving this problem was and remains related to reinforcing the political and socioeconomic foundations of the newly independent states, as well as to strengthening their national identity. The external aspect lies in comprehensive implementation by the regional states of a multivectoral foreign policy. This course lies in the post-Soviet regional states establishing as ex- tensive and diverse relations as possible with the outside world, primarily with the world poles, which are independent civilizational spaces. For the CA states, these are not only Russia and China, but also the U.S. and its Western allies, as well as the Islamic world. These poles-spaces have political and financial-economic potential that could be tapped for resolving the political (primarily strengthening independence and statehood) and economic problems facing the Central Asian states. A multivectoral policy makes it possible for these countries to avoid becoming too dependent on any one pole. Dependence invariably means restriction or even actual loss of national sovereignty and independence.

1 See: A. Kaukenov, “Kazakhstansko-kitaiskie ekonomicheskie otnosheniia: mekhanizmy i printsipy,” available at [http://www.kazenergy.com/ru/2-26-27-2009/3022-2011-11-23-10-57-53.html], 1 June, 2015. 2 See: Ibidem.

94 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

China borders on three (Tajikistan, Kyrgyzstan, and Kazakhstan) of the five regional states and is also a relatively close neighbor of the other two (Uzbekistan and Turkmenistan). However, when they first gained their independence, none of these states regarded China as a top priority. Hydrocar- bon-rich Turkmenistan and Kazakhstan (the latter also being rich in many other raw resources) strove to weaken their comprehensive dependence on Russia inherited from Soviet times by accelerating the development of relations primarily with Western countries. Here they hoped to find a solvent sales market for their resources, as well as a source of investments, contemporary technology, and political guarantees of preserving their acquired independence. The Western countries themselves showed a high interest in the region’s resources. Gaining extensive access to them was seen as a way to weaken the dependence of the West European countries on deliveries of Russian oil and gas and to resolve the interrelated task of eliminating Russia’s mo- nopoly on access to the raw resources of Central Asia. The latter made it possible to weaken Russia’s position in the region and, in so doing, make it more difficult to integrate the post-Soviet region under its auspices. Stronger independence for the new CA countries was to be the concomitant result. Before the civil war, the Tajik authorities looked toward Iran, China, and the West and the secular opposition toward Iran and the West, while the religious opposition set their sights on Iran and the Islamic world as a whole. All the political forces acting in Tajikistan believed that the linguis- tic, cultural, and civilizational (pre-Islamic and Islamic) features Tajikistan and Iran have in common are good enough for successfully establishing Tajik-Iranian political and economic relations. The choice of priorities Turkmenistan, Kazakhstan and Uzbekistan made during the establish- ment of multivectoral relations with the outside world essentially proved correct, particularly for the initial period of their independent existence. This largely eased them gently into their state of inde- pendence without political upheavals. The leaders of Soviet Tajikistan were unable to follow suit. As a result, the republic gained its independence in a state of political dissidence, which has been continuously expanding and intensify- ing ever since. In May 1992, the political standoff in the republic had transformed into a civil war, in which the former state ultimately went up in flames, while the country itself distintegrated into es- sentially independent regions. The former economy disappeared along with the former state. By the end of 1992, the country was teetering on the brink of political and economic survival. Restoration of the country’s political and territorial unity and unified legal sphere began at the parliamentary session held from 16 November to 2 December, 1992. This was when the parliamen- tary deputies, who represented all the opposing forces, formed a new power system headed by Emomali Rakhmon in the presence of the warlords of the opposing sides. Civil war has its own logic. It is not easy to begin, but, once done, it is much harder to bring to an end. The civil war in Tajikistan lasted for another four-and-a-half years. However, the legitimacy of the decisions made at the parliamentary session in Khujand were never seriously contested by the armed opposition, which found itself ousted from the country right after the session, primarily to Afghanistan. Abroad, it rebanded, regrouped, and, after penetrating into the republic’s territory, re- newed the hostilities. As the subsequent course of events showed, the continued conflict was not aimed at the opposition seizing power in Tajikistan, but at creating political conditions favoring a dignified return home for all those who had been forced to leave, with subsequent reintegration into the country’s life as its full-fledged citizens. On 5 December, 1993, the new parliament formed in Khujand began performing its functions in the country’s capital, Dushanbe, and immediately encountered numerous problems. The political situation in the country remained extremely difficult. The civil war continued. The economy lay in ruins. It had begun disintegrating during the last years of the Soviet Union under the impact of the perestroika reforms, while the collapse of the Soviet Union and the civil war brought it to its ultimate ruin. The country was in dire need of considerable foreign economic assistance.

95 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Tajikistan’s position was also complicated by the fact that it was far from easy for the republic’s authorities to receive this assistance. The U.S. and its Western allies could have been a source of the desired assistance. However, the established opinion about the post-Communist nature of the new Tajik government had a restraining influence on the U.S.’s attitude toward Tajikistan. What is more, there were many people in the government itself who personally, or as the representatives of certain forces, had a negative attitude toward the very idea and possibility of developing relations with the West. As for Russia, which after the collapse of the Soviet Union continued to be perceived as a friendly country in the CA states, two approaches were very evident in its attitude toward Tajikistan at that time: (a) that of the liberal politicians and (b) that of their opponents. The position of the liberal politicians who, until the first elections to the State Duma in Decem- ber 1993, possessed full political power, essentially coincided with the position of the Western coun- tries. In contrast to the liberals, their opponents, known as advocates of a strong state, including a large part of the leadership of Russia’s defense and security structures, were inclined to cooperate with the new authorities of Tajikistan and render them help and assistance. However, the possibilities here were seriously restricted by the political influence of the liberals. What is more, Russia was fac- ing economic difficulties itself, so it was unlikely it could render any significant economic support to Tajikistan torn by perestroika, the collapse of the Soviet Union, and the civil war. Mutual caution bordering on disdain prevented the establishment and development of wide- spread cooperation between Tajikistan and the rich Islamic states. The Islamic states perceived the new leadership as pro-Communist, that is, anti-Islamic, as they understood it, and were in no rush to develop economic relations with Tajikistan. And the Tajik authorities themselves at that time were suspicious of the Islamic states, justifiably believing that they were not only providing the Tajik op- position with refuge, but were also rendering them all kinds of assistance. Nor did influential international organizations experience any particular desire to establish co- operation with the Tajik authorities for precisely the same reasons as the Western countries. It was even very difficult to arrange meetings between official representatives of the Tajik authorities and representatives of international organizations. Finding itself in such a challenging situation only eighteen months after its acquiring indepen- dence, and without any other real choice, Tajikistan was essentially the only country in the region that decided to place the stakes on China in its striving to procure significant foreign political and eco- nomic support. In March 1993, China was the destination of Tajik President Emomali Rakhmon’s first international visit. From the political viewpoint, the visit was entirely successful. The pragmatic Chinese leaders gave Emomali Rakhmon a warm reception at the highest level. On 9 March, 1993, the heads of the two states signed a Joint Communiqué on Principles for Establishing Tajik-Chinese Interrelations in Beijing. The most important thing was that the leaders of the Chinese nation, which was rapidly gain- ing economic and political clout in the world, made it clear to everyone that they considered Tajiki- stan a dignified member of international community and its new authorities entirely legitimate, and that they intended maintaining the closest relations with it. As for economic cooperation, the visit showed that at that time the Chinese side was in no hurry to develop economic relations with Tajiki- stan, or with any other country of the region, in the form and volume they desired. China was fully satisfied with the existing state of affairs.

96 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 Beijing’s Strategies The New Silk Road

At the beginning of the 1990s, China adopted a strategy aimed at creating the so-called New Silk Road. It was conceived as a major infrastructural project called on to ensure China’s transport access to Central Asia.3 As practice shows, at the time Emomali Rakhmon visited Beijing, China’s project or strategy to revive the Great Silk Road, with respect to Tajikistan, envisaged no more than support by the Chi- nese authorities of the trade exchange that had been spontaneously developing since the late perestroi- ka time between the two countries. For Tajikistan, China became one of the main sources for saturat- ing the local markets with consumer goods. After the fall of the Soviet Union, shuttle trade with the Eastern neighbor began to develop at even faster rates. Mutual interest helped merchandise from the Celestial Kingdom to flood the country’s markets. At the initial stage of independence, Tajikistan, like the other countries of the region, had to deal with the problem of hard currency in the country. But a solution was found. This was barter. In ex- change for consumer goods, commodities the Chinese market needed began trickling into China, ranging from specially bred dogs to all kinds of semi-finished products and raw materials, from cotton yarn to metal items, particularly those made from non-ferrous metals. Everything that had the slight- est market value found a sales outlet in China, which acquired from the region much of what it needed for its economy for a mere pittance. China was essentially interested in the CA countries when they first gained their indepen- dence,  first, as a sales market for goods and,  second, as “sponsors” capable of boosting the development of its western regions. Since the Chinese leadership was mainly concentrating on the coastal regions during its eco- nomic reforms, manufacturing goods for the Central Asian countries and, correspondingly, the recip- rocal money-commodity flows that ensued promoted the development of the provinces adjacent to the borders of post-Soviet CA. In the situation that developed, the Chinese side did not feel any real need to spell out eco- nomic issues with the governments of the Central Asian states. For China, things were perfect the way they were. What is more, the level and nature of China’s development at the beginning of the 1990s had not reached the point where it required access to the region’s resources, accompanied by the need to make large investments. Another factor conducive to China’s wait-and-see position in developing economic relations with the CA countries, including Tajikistan, should also be mentioned. Legitimate development of economic relations between the region’s countries and China could not begin until the territorial- border disputes were resolved. The 1990s, particularly their second half, saw intensified settlement of the existing territorial and border disputes. It is correct to say that political and economic interest in developing relations with China, on the one hand, and the difference in the political and other potential of the negotiating sides, on the other, prompted the Central Asian countries to reach an agreement on the territorial-border issues.

3 See: M. Antonov, “Vertikal vlasti i integratsiia Rossii” (quoted from: R. Alimov, Tadzhikistan i Kitai: kursom strate- gicheskogo partnerstrva, Ves mir, Moscow, 2014, pp. 181-182).

97 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS Going Out

By the beginning of the 2000s, the Chinese economy had reached a level that made gaining access to hydrocarbon and other raw material resources worldwide attractive. And Central Asia was no exception. Objective interest in solving this task gave rise to the need to develop a corresponding strategy. It was drawn up and called the Going Out strategy. As early as March 2000, it was examined at the third session of the All-Chinese Assembly of People’s Representatives of the ninth convoca- tion. In addition to assisting the export of goods, services, and technology, the strategy directly envis- aged supporting development of the resources the country needed abroad.4 Within the framework of this strategy, CA was regarded not only as a sales market for goods and services, but also as a source of raw (ores and concentrates of non-ferrous metals, as well as the metals themselves—aluminum, copper, and so on) and energy (oil, gas, electricity) resources. Chi- na’s interest in Central Asian resources grew in tandem with Western Europe’s growing interest to- ward them, which was striving to weaken its dependence on energy supplies from Russia. As China’s interest in Central Asia’s resources grew, the regional countries themselves, primar- ily Kazakhstan, began concentrating all the more on diversifying economic cooperation, including with China. Beginning in the second half of the 1990s, the composite development of all these pro- cesses made it necessary to move to broader and more diverse forms of economic relations between the region’s countries and their great neighbor. All the same, the CA countries’ economic relations with China did not begin developing as desired until after the events of 9/11, when the U.S. and its NATO allies added a significant military presence to their political presence in the region. U.S. air bases were established at Manas in Kyrgyz- stan and Khanabad in Uzbekistan. A German Bundeswehr base was deployed in the Uzbek city of Termez. A contingent of French airmen was based at the airport in Dushanbe. The Western countries also manifested their military presence in the form of direct participation of American and West Eu- ropean servicemen in implementing different joint programs with the region’s countries. In light of the growing threats relating to the rising military presence of the West in CA, China deemed it necessary to step up implementation of the Going Out strategy. The wait-and-see policy was replaced with diverse activation of an entire set of relations—political, economic, military, in- formation, and so on—with the Central Asian countries, both at the bilateral and multilateral level, and within the Shanghai Cooperation Organization (SCO) created on 15 June, 2001. China’s interest in developing and significantly diversifying relations with the CA countries grew even more after the Color Revolution technologies began taking their toll in the CIS countries. The Rose Revolution of 2003 in Georgia and the Orange Revolution of 2004 in Ukraine led, in addi- tion to a change in leadership in these countries, to immense fortification of the position of the U.S. and NATO in these countries. It stands to reason that China did not welcome this, but that is as far as its response went. After all, Georgia and Ukraine are not that close to its back door. However, the Tulip Revolution that occurred in March 2005 in neighboring Kyrgyzstan, during which Askar Akaev was overthrown, aroused extreme concern in Beijing. This concern grew even more after the well- known events in Andijan. Beijing clearly saw “America’s hand” in what happened in Kyrgyzstan and Uzbekistan. Its suspicions were confirmed when, after the Andijan events, a campaign unfolded in the U.S., and at its initiative in Western Europe as well, condemning the leadership of Uzbekistan, whereby all kinds of sanctions were introduced against the country itself. Immediately after the tempestuous events of the spring of 2005, the Chinese leadership saw fit to increase its support of the actions of the governments of the Central Asian republics aimed at ensur-

4 See: M. Antonov, op. cit., pp. 120-121, 125-126.

98 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 ing socioeconomic stability and, correspondingly, political stability in their countries. In so doing, the Chinese leaders sensibly considered that political stability in the territories to the west of their borders would fully serve the tasks of ensuring political stability and, consequently, security of their own western regions. In the economic respect, assistance and support was carried out by helping to imple- ment economic programs and projects in each of the Central Asian countries. For Tajikistan, China’s decisive move toward participation in implementing economic develop- ment plans, programs, and projects in the CA countries was manifested in its lending and investment activity in Tajikistan. Within the framework of the Going Out strategy, 2006 and 2009 were peak years. In 2006, Tajik-Chinese investment agreements on reconstructing the Dushanbe-Khujand- Chanak highway were signed and began being implemented, as well as construction of the Shakhristan Tunnel, building of the South-North Power Transmission Line-500 and the Khatlon-Lolazor PTL, and construction of the Shar-Shar Tunnel of 2.23 km in length. The proposal to build a hydropower plant on the Zerafshan River was approved. Chinese funding of these projects amounted to a total of almost $1 billion. In 2009, Tajikistan and China signed agreements on building the Nurabad-1 Hydropower Plant ($560 million), a central heating and power plant in Dushanbe ($400 million), and a cement factory with a capacity of 1 million tonnes a year, carrying out additional work at the Khatlon-Lolazor and South-North power transmission lines, and reconstruction of the Dushanbe-Dangara highway. These agreements amounted to a little more than $1 billion. Execution of most of the Chinese-Tajik agreements signed yielded fairly good results for Tajikistan. With the help of Chinese money and Chinese specialists, the country succeeded in cre- ating a unified republic-wide electricity grid. It should also be noted that the turbines and genera- tors for Sangtuda-2 Hydropower Plant built by the Iranians were manufactured at Chinese enter- prises. Extensive modernization of highways was carried out and a whole network of tunnels built with China’s financial and technical participation, which made it possible for the first time in contemporary history to establish an internal republic-wide year-round functioning network of modern roads in Tajikistan. What is more, the country acquired an alternative to the only transport access to the out- side world through Uzbekistan remaining from the Soviet Union, which was always being periodi- cally closed down. It was largely Chinese money and Chinese technical participation that made it possible, first, to stay afloat and then to develop such a strategically important branch of the national economy for Tajikistan as mining, including gold extraction. The very same thing can be said of the par- ticipation of Chinese companies in the development of the telecommunications sector, including mobile, and in the modernization of infrastructure of the capital of Dushanbe and other cities of the republic. Summing up the implementation by the Chinese side of the New Silk Road and Going Out strategies, the following main results can be verified.  First, trade between Tajikistan and China increased rapidly to more than $2 billion a year. This process had its special features. Trade relations primarily developed at this time in the form of the shuttle business engaged in by a mass of individual businessmen seized by the spontaneity of risky, very indeterminate, and often dangerous commercial activity. Thanks to the activity of the shuttle businessmen, the republic’s markets were inundated with a flood of Chinese commodities, which made it possible to promptly resolve the problem of the acutest shortage of consumer goods. At the beginning of the 2000s, the mass shuttle business saw its last days. It was replaced by trade companies and a corresponding trade infrastructure.

99 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

 Second, Chinese companies gained direct access to Tajikistan’s mineral resources and their development with the aim of exporting them to their own country.  Third, China carried out, or participated in, the modernization of existing and building of new facilities in the energy sphere (central heating and power plants, power transmission lines, and so on), as well as the creation of transport infrastructure (modernizing existing and building new highways and railways, tunnels, bridges, airports, etc.) and communica- tions infrastructure (traditional, fiber-optic, and mobile) relating to China’s corresponding infrastructural facilities.  Fourth, Tajikistan, from all possible viewpoints, stopped being a terra incognita for China.

The Silk Road Economic Belt or One Belt-One Road

On 16 September, 2013, when talking at the international Nazarbaev University in Astana, PRC Chairman Xi Jinping proposed a new initiative, the gist of which was that not only the old Silk Road should be revived, but a corresponding economic belt should be created along it. The initiative rap- idly began to acquire the outlines of a project that, with its land and sea components together, was to encompass almost the entire world. However, at the time it was made public, it was perceived more locally, as a new way to intensify cooperation among China, the CA states, and Russia.5 With respect to Tajikistan and the Central Asia region as a whole, the initiative of the Chinese leader is a natural continuation of the above-mentioned New Silk Road and Going Out strategies. During their implementation, vital parts or segments of the economic belt to be created along the revived Great Silk Road have already been built. They are already serving well the current demands of both China and the countries of the region. They are permitting the latter to solve not only strictly economic tasks, but also to strengthen their independence, since they are providing them with additional and alternative sources of political support, investments, and economic access to the outside world. However, development logic has prompted the Chinese side to join all of these separate parts and segments into a unified and well-functioning system, as well as ensure its further development. The initiative of the PRC Chairman is a step in this direction. It is providing the primary political prerequisites and is well enforced by the impressive potential of China’s growing economy. The initiative of the Chinese leader was positively received by the presidents of the Central Asian states. They have every right to believe that its implementation will bring a significant flow of Chinese money into the economy of their countries and that Chinese investments will ultimately make these countries prosperous and stable, and the population happy. This is particularly pertinent, since promulgation of this initiative was preceded by what we might call advances, whereby very substan- tial ones. A week before he spoke at the Nazarbaev University, Chinese Chairman Xi Jinping paid a state visit to Uzbekistan (8-10 September, 2013). A practical result of the visit was signing agreements on the implementation of different projects totaling $15 billion.6 A year later, during Uzbek President

5 See: A. Lukin, “Ideia ‘ekonomicheskogo poiasa Shelkovogo puti’ i evraziiskaia integratsiia,” Mezhdunarodnaia zhizn, No. 7, 2014, available at [http://igpi.ru/bibl/other_articl/1406820606.html], 2 July, 2015. 6 See: “Sotrudnichestvo Respubliki Uzbekistan so stranami ATR. Uzbeksko-kitaiskie otnosheniia,” available at [http:// www.mfa.uz/ru/cooperation/countries/61/], 3 June, 2015.

100 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

Islam Karimov’s state visit to the PRC, on 19-20 August, 2014, another set of agreements was signed totaling $6 billion.7 On 13-14 September, 2014, the Chinese leader paid a state visit to Tajikistan. The official talks ended in the signing of agreements, under which the Chinese side pledged to issue Tajikistan loans and grants totaling $6 billion in the next three years. Of this sum, $3.2 billion went to building the 400-km Tajik section of the fourth branch of the Central Asia-China gas pipeline, which the leaders of the two countries reached agreements on a year earlier during the SCO summit in Bishkek. During his stay in Dushanbe, Xi Jinping and Emomali Rakhmon launched the building of the gas pipeline branch.8 Keeping in mind that the institution of presidential power in the region’s states has a certain influence on all aspects of life, the likelihood of successful realization of the initiative frequently mentioned in the media as the One Belt-One Road project or strategy is relatively high in this part of the modern world. Nevertheless, this initiative could face challenges, which, if ignored, might have negative reper- cussions for its implementation in CA and place in doubt not only regional, but also broader expecta- tions, hopes, and calculations. In this respect, it is legitimate to ask two questions.  First, will implementation of the initiative make it possible to join different elements into something that could be defined as the Central Asian segment?  Second, will implementation of the initiative make it possible to transform the existing in- frastructure into a full-fledged Central Asian transport corridor between China and the outside world beyond the region’s northern, southern, and western borders, for which Chi- na is so striving? There can essentially only be one answer to both questions from the financial and technical viewpoint—yes. It stands to reason that China has the necessary funds and, as the initiator of the One Belt-One Road project, is willing to become the main sponsor of its implementation in Cen- tral Asia. Nor should we forget the financial infrastructure, through which Chinese money will be allotted for implementing specific projects within the framework of the initiative. It includes both national Chinese financial institutions—China’s EXIM Bank, which is widely involved in funding the projects being carried out in CA with participation of the Chinese side, the Chinese State Development Bank, and so on—and multinational financial institutions, such as the re- cently established Asian Infrastructure Investment Bank, of which 57 countries are founding members, and other similar structures within the framework of the SCO, and now also BRICS. There are no technical problems that cannot be successfully resolved with the financial resourc- es and the scientific, technical, and technological possibilities of China and the Central Asian countries. The difficulties involved with putting Xi Jinping’s initiative to form an economic belt of the Silk Road in CA into practice belong to an entirely different category. No matter what the co-development projects are, the positive attitude of the leaders of the Cen- tral Asian countries to this initiative alone is not enough to ensure successful implementation of these projects in the region, or in any of its separate countries. One factor that might throw a spanner in the works is the complicated relations among the region’s countries.

7 See: Ibidem. 8 See: R.G. Abdullo, “Politichesky sentiabr v Dushanbe,” available at [http://www.islam.news.tj/ru/newspaper/article/ politicheskii-sentyabr-v-dushanbe].

101 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

The rather complicated relations between Tajikistan and Uzbekistan are having far from the best impact on Tajik-Chinese relations. For example, due to Uzbekistan’s negative position, the project to build a hydropower plant on the Zerafshan River has fallen through. As we know, the countries on the lower reaches of the Central Asian rivers are worried about the striving of the upstream countries to expand the development of their hydropower potential. It stands to reason that China must take into account the position of the downstream countries—Uzbeki- stan, Kazakhstan, and Turkmenistan. China is refraining from, but has not rejected, participation in the Tajik hydropower projects. It has made it clear that it is ready to begin implementing the signed agreement on building a hydropower plant on Zerafshan, but only after the region’s countries reach a consolidated position on this issue. The Chinese side has been compensating for its lack of involve- ment in implementing the project by participating in building Tajik central heating and power plants. As of the present, the first line of Dushanbe Central Heating and Power Plant-2 has been built and put into operation and building of its second line has begun. It can also be presumed that this is influencing China’s cool attitude toward a new railway being planned, which should provide it with additional access to CA and further, passing through Tajikistan. Nor does China wish to participate in building a hydropower plant in Kyrgyzstan, or in implementing any large projects in Kyrgyzstan and Tajikistan in general, which Uzbekistan might feel does not correspond to its interests. As for relations between Tajikistan and Kyrgyzstan, throughout President Askar Akaev’s rule, they developed in the best way possible. They also developed fairly well during Kurmanbek Bakiev’s presidency. Unfortunately, territorial-border, water, and transport-communication dis- putes have been mounting recently. Of course, these disputes and problems have existed through- out the independence of both republics. But it is only recently that they began to escalate and even turned into clashes accompanied by mass disorder and even violent action with the use of weapons. At the time this article was written, the latest in a series of such events was the clashes involving throwing stones, gunfire, and the use of Molotov cocktails on the Isfara-Batken section of the Ta- jik-Kyrgyz border.9 Certain problems are clouding Kazakhstan’s relations with Kyrgyzstan, Uzbekistan, and Turk- menistan. Uzbekistan has problems with all of its regional neighbors, sometimes simply because it has a common border will all the former Soviet CA republics, and relations between neighbors, as we know, are always fraught with conflict. It should be emphasized that the problems clouding the relations among the region’s countries are objective and due to the growing pains the countries are experiencing as they make the transition from being components of a former superpower—the Soviet Union—into stable independent states. To one extent or another, all these problems can significantly complicate the practical implementation of the Chinese initiative. Tajikistan, more than any other CA state, does not wish to find itself outside the Chinese proj- ects that are part of Xi Jinping’s initiative to create the Silk Road Economic Belt. The difficulties the Russian economy is currently experiencing significantly reduced the amount of remittances labor migrants send from Russia home, by 32% (in dollar equivalent), in the first six months of 2015 com- pared to the same period in 2014.10 Apart from Chinese investments, there are essentially no other significant sources of compensation for these losses.

9 See: P. Chorshanbiev, “Tadzhikistan obviniaet mestnoe rukovodstvo Kyrgyzstana v konflikte na granitse,” available at: [http://www.islam.news.tj/ru/news/tadzhikistan-obvinyaet-mestnoe-rukovodstvo-kyrgyzstana-v-konflikte-na-granitse], 5 August, 2015. 10 See: P. Chorshanbiev, “Obe’m denezhnykh perevodov v Tadzhikistan za polgoda snizilsia na 32%,” available at [http://www.news.tj/ru/news/obem-denezhnykh-perevodov-v-tadzhikistan-za-polgoda-snizilsya-na-32], 21 July, 2015.

102 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

China needs and will continue to need energy imports. Tajikistan, which has substantial re- newable hydropower resources, could be of great interest to China. The PRC also needs CA to become a developed transport corridor for it. Tajikistan is interested in becoming part of this cor- ridor in order to finally withdraw from the transport impasse it has found itself in for two decades now. Specific projects must be carried out for this interest to be transformed into reality. Tajikistan indeed has such projects, and it has long been proposing that China participate in their implementa- tion. However, advance of these projects is being hampered, as emphasized above, by the compli- cated relations between Tajikistan and its neighbor Uzbekistan. Keeping this in mind, Tajikistan must do everything possible to convince its Chinese partners to change their customary stance of observer to the position of an active mediator interested in positive resolution of the problems, which are not only having a negative impact on relations among the CA countries, but are also capable of causing serious conflicts in these relations. This position is usually associated with the U.S., Russia, and even the European Union, but in no way with China so far. More active Chinese participation/mediation in resolving the contradictions among the CA countries will meet not only the interests of Tajikistan and CA as a whole, but also of China itself.

China: An Attractive Partner and Reliable Ally

When talking about China’s extensive involvement in the economy of Tajikistan and other CA states, it should be emphasized that it is the product of the interest of the CA states themselves. There is no need to talk of expansion or of China imposing itself on their economic life. Corre- spondingly, we wonder what makes cooperation with China so attractive for its Central Asian neighbors. From the economic viewpoint, the Central Asian states are primarily attracted by China’s finan- cial investment potential. Second, China never rejects outright specific economic projects in need of its financial support. Attractive aspects, real or potential, can always be found in any project. The fact that the Chinese officials who do the decision-making are cautious people is a positive aspect in cooperation with China. They have a responsible attitude toward the tasks they face and are guided by pragmatic end results, and not by transitory considerations and emotions. Another important and attractive aspect for the Central Asian states and their leaders in cooperation with China is the fact that the Chinese are not tying economic cooperation to political, ideological, and other conditions. After making a decision, the Chinese do not wait long to put it into practice. If, on the other hand, for some reason, it is impossible to execute the decision made, as happened with implementation of the agreement signed with the Tajik side on building the hydropower plant on the Zerafshan River, they find a way to compensate for the damage to the other side. This is how it was in Tajikistan at least. In other words, China is a reliable economic partner. It should also be emphasized that the Central Asian states initially regarded and continue to regard their great Eastern neighbor as a world power capable of balancing the influence of two other world powers—the U.S. and Russia—and, if necessary, toning down any possible political pressure on their part. China has already confirmed that it can be a reliable political ally. After the events in Andijan in May 2005, the U.S. and European Union put immense pressure on the Uzbekistan leader- ship, demanding that it immediately carry out an international investigation of the tragedy that oc-

103 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS curred. When this demand was refused, they began instigating sanctions against Uzbekistan. At that time, Beijing rendered political, moral, and material support of the stringent position of the Uzbek leadership regarding the demands of the Western countries. The leaders of the Central Asian states regard China as a reliable partner in combating internal and regional forces that could be seen as destructive not only by the leadership of these countries, but also by the Chinese leadership, regardless of the ideas and political views—Islamic, liberal-demo- cratic, separatist, etc.—that these forces espouse.

Are There Risks in Cooperating with the Great Neighbor?

Nevertheless, China’s growing presence in the CA countries makes both its strategic rivals in the region and the region itself nervous. The strategic rivals are worried not only about China’s mass presence in the region, but also about the growing striving of the leading political elites of the region to look to Beijing in search for support when serious economic and political problems arise. By re- sponding efficiently and positively to the requests of the CA leaders, China is not only strengthening its position in CA, but also undermining to the same extent the competitive capabilities of other world forces in the region. The latter cannot look calmly at what is going on, but have to react. Unable to compete with China in offering their services, they are left with no other choice but to convince the CA population and society that multivectoral and broad development of relations with their huge neighbor is harmful and dangerous for their countries. The arguments are built on the fact that the Chinese do not do anything without some ulterior motive, that they are trying to inflict eco- nomic bondage on the region’s countries, are making claims to their territories, will carry out creep- ing expansion, create China towns, and so on, and so forth. These arguments are finding an audience in the provinces. And this audience is fueling them with their own fears and concerns. What is more, a big fuss is only being made about the Chinese threat in the countries bordering on China—mainly in Kazakhstan and Kyrgyzstan, and to a lesser extent in Tajikistan. No critical statements toward China have been heard from Turkmenistan or Uzbekistan so far. What are the countries bordering on China afraid of? Kazakhstan’s public is worried that while their country is one of the largest contemporary states in terms of territory, it is underpopulated. Some Kazakh experts have expressed the concern that Kazakhstan’s security can only be ensured if its population is no less than 60 million people. Kazakh society is also worried that Chinese companies own or control up to 40% of the country’s oil and gas industry. This is all superimposed with his- torical memory, which is used to perceiving China as a source of existential threat. China does not feature in the historical memory of the Tajiks as an existential threat. Neverthe- less, the republic does not think that everything is favorable in its relations with China. A case in point is a comment posted by Khanifa Sadriddinzoda on the Centrazia.ru website, which lists all the main claims against China. They boil down to the following. Chinese expansion is expressed in an increase in the number of Chinese citizens employed in different spheres of the republic’s economy—in consumer goods, the implementation of infrastruc- tural projects, and in agriculture, where they are building farms. After first renting relatively small parcels of land (of no more than several dozen hectares), they then try to rent land of several tens of thousands of hectares. The Chinese use toxic chemicals, thus doing irreparable damage to culti- vated areas.

104 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

In order to ensure their own business interests, Chinese businessmen actively bribe the local authorities. They are unwilling to hire local residents. Due to the inflow of foreigners, finding a job and housing in Tajikistan is becoming a serious problem for the indigenous population. The number of mixed marriages is growing—Tajik women are marrying Chinese men, includ- ing non-Muslims. Poverty prompts them to do this. And it allows wealthy Chinese to obtain Tajik citizenship in five years.11 It should be said that at the end of perestroika and the beginning of the 1990s, when the borders opened, almost the same thing was said about the Afghans, who ended up in hordes in Tajikistan. People complained that there were too many of them, that they were depriving Tajiks of a living by ousting them from commerce, that they were causing the price of housing to rise, making it unafford- able for local residents, that, being more successful and wealthy, the Afghans were overtaking local residents in matrimonial affairs, that by marrying Tajik women, they were striving to obtain Soviet and then Tajik (after the country gained its independence) citizenship, and so on. The only difference is that they are Muslims, which, for Tajik citizens brought up in the Soviet spirit, is also unacceptable, since Afghans, in their view, are far too religious. There are still not that many Chinese in Tajikistan. True, Chinese engineers and workers are mainly employed in those projects implemented by the Chinese. According to Tajik laws, up to 70% of the people hired to work on these projects should come from among the local residents. This is what the Chinese did at first. But after a while, the local workers begin leaving, simply because they could not adapt to the way the Chinese worked—at high speed, from early morning to late at night, and with minimum breaks. Chinese workers take no more than 15-20-minute lunch breaks and eat right in the workplace. As soon as they have finished, they go straight back to work at the same high speed. And so it goes, day in, day out. No one in Tajikistan, or anywhere else in the post-Soviet space for that matter, is used to work- ing like this. So here we see a conflict between the Chinese managers and local workers in terms of mentality and work ethic. The locals are not satisfied with wages they receive either. As a result, they end up quitting the projects implemented by the Chinese and going to Russia in search of a job, where they earn more working in the “Soviet” conditions they are used to and where the level of mutual understanding with Russian employers is much higher. Worries about the risks related to developing relations between Tajikistan and China expressed in the above-mentioned comment are primarily aroused by the emotional response of the indigenous residents to the changes going on around them. One such change is keeping the presence of Russians and Russian-speakers to a minimum, to whom Tajiks are already accustomed, and the appearance of new ethnicities, to whom they must still adapt. This is not an easy process and entails demolition of the established and formation of new models of ethnic relations. What is more, there is not only an emotionally-induced sense of the risks generated by the rapid development of relations with China. There are also risks of an entirely objective nature. Ac- cording to the author of this article, one of the main risks for all the CA countries is the real lack of alternative to intensifying relations with China, which is creating conditions for forming the CA countries’ unilateral dependence on China. The lack of alternative to developing relations with China for the region’s countries, which carry out the hydrocarbon export that is the basis of their wellbeing and prosperity, is due to the fact that these relations make it possible for them to diversify not only the sales markets of their hydro- carbons and other types of raw materials and products, but also gain access to the larger outside world.

11 See: Kh. Sadriddinzoda, “Tadzhikitan v kotgiakh kitaiskogo drakona,” available at [http://www.centrasia.ru/newsA. php?st=1420447680], 11 February, 2015.

105 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

In addition, developing relations with China is the only real way to lower its dependence on Russia in terms of delivering hydrocarbons to markets outside the CIS. After all, export of CA raw resourc- es to markets beyond the CIS has mainly been carried out and continues to be carried out through Russian territory and by means of Russian transport-communication and other infrastructure poten- tial. All other opportunities, apart from those generated by developing relations with China, are no more than a palliative. But this only way of ensuring real diversification of sales markets and access to the larger outside world through relations with China makes the Central Asian states dependent on their great neighbor. For resource-poor Tajikistan, only developing relations with China can provide it with a reliable source of funding for its transportation and mining projects, as well as its projects in energy, the build- ing material industry, and so on. The dependence of Tajikistan’s social stability on the level and nature of relations with China is becoming increasingly obvious. Due to the rapid social stratification currently going on in Tajiki- stan, cheap Chinese goods the poor strata of the population can afford make the social inequality less obvious, which is quite important for preserving political stability. Nor should we forget that China and Chinese commodities gave the thousands of merchants who used to travel between their own states and China the opportunity to engage in trade. Today this kind of small shuttle business has essentially disappeared. But many thousands of residents of Ta- jikistan still make a living by delivering Chinese goods from wholesale markets right to the remotest corners of the republic, selling them at their stalls and shops, as well as at bazaars and in the street. Trade with China also has an impact on the exchange rate. Whenever China closed its borders for a few days, during holidays for instance, and, correspondingly, commercial flows slowed, this immediately had an effect on the local currency rate. Such a high lack of option in Tajikistan’s and other CA countries’ relations with China, as well as the dependence of socioeconomic stability on relations with their giant neighbor, is making the CA countries rather vulnerable in their relations with China. However, at the moment there is no way to overcome this vulnerability. Offering Tajikistan participation in the EEU will not solve the problem, since by lowering its dependence on relations with China, it will significantly raise its dependence on Russia, which is fraught with the loss of a substantial part of its sovereignty. Turning to the Western world will not solve the problem either. To some extent, lowering rivalry between the two orientations—either toward Russia, or toward China—could promote the development of relations with Iran, Pakistan, and the Arab states of the Persian Gulf. But Tajikistan is very reticent, to say the least, about this possibility. Of course, Tajikistan is going to have to develop cooperation with its regional neighbors, as well as develop interregional cooperation as a whole. However, this looks utopian today due to the existing contradictions among the CA countries.

Conclusion

Despite the fact that Tajikistan still has no option to intensifying economic relations with China, it must try to follow a multivectoral course not only in political, but also in economic relations with the outside world simply to avoid becoming too dependent on China. Russia’s example, with its ex- treme orientation toward the West that has developed over the past twenty-five years and caused many of its problems, serves as a lesson for Tajikistan, as it does for all the region’s countries.

106 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

Successful access to the world economy and ensuring Tajikistan’s national interests requires a constant and unrelenting search for ways to comprehensively diversify international relations, which is impossible without resolute rejection of the crippling ideological and political prejudices, precon- ceptions, clichés, and concerns inherited from the past or acquired in the present.

107 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

GEOPOLITICS AND REGIONAL SECURITY

THE “RUSSIAN IDEA” VS. THE “AMERICAN DREAM”: “SOFT ARM WRESTLING” IN THE CIS

Parviz MULLOJANOV Independent Expert (Dushanbe, Tajikistan)

ABSTRACT

he author analyzes different aspects and values, being of a fundamental nature. of the “soft power” phenomenon— The tools, target groups, and social bases T ideological, humanitarian and cultu- are likewise different. Today, Russia’s soft ral—that the main geopolitical players use in power predominates in the post-Soviet post-Soviet Central Asia. He compares the space and in Central Asia as its part, yet it “soft power” policy of the United States and remains to be seen for how long. the Russian Federation and their key pa- The author points to several factors rameters: its ideologies and values; the tools that restrain and will continue to restrain the and institutions through which this policy is impact of Russian and American “soft pow- implemented; and the target social and oth- er” in the region. In the foreseeable future, er groups that, under the impact of “soft the Western/American ideological impact power,” become its convinced supporters will remain limited, while the current domina- and promote it in their countries. tion of Russia’s soft power looks shaky: it The author reveals several specific relies on social groups and institutions that features and distinctions between the Rus- have already exhausted their potential. This sian and American soft power strategies, gives other external players a chance, ISIS many of them, rooted in different ideologies and its “soft power novelties” in particular.

108 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

KEYWORDS: “soft power,” U.S. foreign policy, foreign policy of the Russian Federation, post-Soviet Central Asia, ISIS.

Introduction

So far, the rivalry between the great powers for world domination has been described as a “tug- of-war” between teams of professional politicians, diplomats, economists, and financiers. Today, so-called soft power has moved to the fore in the battlefield to push confrontation into the spheres of ideology and culture. In other words, this is a battle for the minds and hearts of the people and the ruling elite or, to put it differently, a competition of ideas and basic values. Victory in this “non- material” ideological clash will ensure long-term domination in the region or even throughout the world. In fact, this route is much shorter than direct military interference or economic pressure. Here I have compared the specific features and prospects of the mounting confrontation of the soft powers of Russia and the United States unfolding across the post-Soviet space. Today, the ideological and philosophical postulates of these geopolitical centers have moved so far apart that the future of the post-Soviet region and Russia as its part depends on the answer to the question: Whose soft power is harder?

Soft Power Defined

In 2002, Joseph Nye Jr. described soft power as “the ability to get what you want through at- traction rather than coercion or payment.”1 He was talking about persuasion as a geopolitical tool and an image that attracts allies and raises the country’s international prestige. This attractive image, otherwise called “soft power,” includes the following factors: high and comfortable living standards; education; moral authority; attractive ideology and values; a rich history and culture; and prominent sportsmen, scientists, and writers. They arouse the respect of other nations, and stir up interest and the desire to embrace the same principles and values at home. There is an opinion that “soft power” should be combined with “hard power” (which implies military might) to coerce opponents and force potential allies, satellites, or even rivals, driven by fear or pressure, to join. It should be said that any country willing to defend its interests, territory, and independence has to keep its “hard power” at a certain level. On the other hand, the considerable international weight and influence of a number of states are unrelated to their far-from-large armies. Abuse of hard power produces far-from-expected results and, in fact, decreases the country’s soft power and tars its image. In the last ten to twelve years, starting with the Iraq War, U.S. soft power has been repeatedly dented. In 2003, the attractiveness of the United States among the loyal Euro- pean population dropped by one-third or even more.2 The same is happening to Russia’s soft power today in the wake of the Ukrainian developments (at least, outside the CIS countries). The Global Peace Index 2014 ranked Russia 152nd among 162 countries, that is, one of the eleven most danger-

1 J. Nye, Soft Power, the Means of Success in World Politics, Public Affairs, New York, 2009, p. x. 2 Ibidem.

109 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS ous and potentially aggressive, as perceived by public opinion, states in the world.3 Even if this is not true, the low rating speaks of a serious ideological defeat, plummeting international prestige, or po- tential geopolitical collapse. It comes as no surprise that Teddy Roosevelt noted, “when you have a big stick, it is wise to speak softly.”4 Soft power is gaining weight in the contemporary world, while its definition and measuring instruments have become a target of study at the national and interna- tional level. Here I intend to measure soft power using three main criteria:  First. By means of ideology and values. Clear and logical ideologies and values (moral, legal, religious, etc.) hold a lot of attraction; their messages are stronger and their perception inside and outside the country is highly positive.  Second, the tools or institutions of soft power are of huge importance. I have in mind all kinds of organizations and structures ranging from state bodies and universities to NGOs and the media used to popularize soft power inside the country and outside it. The results depend on the capacities of these institutions and their tuning.  Third, the social basis and target groups of soft power are no less important. The social basis consists of social groups (intelligentsia, migrants, and ethnic groups) prepared to suc- cumb to soft power and become its vehicles and defenders in other places. Target groups might be found outside the social base and yet might become another factor of soft power influence.

Soft Power of the Russian Federation

Today, most Russian and foreign experts agree that Russia’s soft power remains undeveloped and that the RF is trailing behind its main geopolitical rivals. Speaking at a meeting of Russian ambas- sadors and permanent representatives, President Putin said in particular: “Russia’s image abroad is not formed by us and, as a result, it is often distorted and does not reflect the real situation in our country, or Russia’s contribution to global civilization, science, and culture. Our country’s policies often suffer from a biased portrayal these days … our fault lies in our failure to adequately explain our position.”5 The Institute for Government (U.K.) and the Monocle monthly in their “The New Persuaders: An International Rating of Soft Power” did not rank Russia among the first 25 countries.6 This can be explained by the persisting post-Soviet ideological vacuum; there is no logical and consistent ideological system or a universal national idea to serve as the foundation of soft power applied inside and outside the country. Russia’s soft power today is a vague combination of so far ill-adjusted ideological bits and pieces. Its leaders have no choice but to adjust concepts and ideo- logical formulas to specific situations, regions, or audiences. Opposition politician Vladimir Ryzhkov from Russia has offered the following description: “The Kremlin takes one scalpel to use in Crimea: it is labeled ‘the Russian World.’ Then it takes out a different scalpel in Astana, and it is labeled ‘the Eurasian Union.’ It takes out a third scalpel in Beijing and use the BRICS concept, by which it means, ‘anything that is not the West.’ It is honing it for use against the West. These ideological concepts are

3 See: A. Naumov, “‘Miagkaia sila’ i vneshnepoliticheskiy imidzh Rossiiskoy Federatsii,” Geopolitika.ru, available at [http://www.geopolitica.ru/en/node/6914#.VWYOqGpFAqM], 3 April, 2015. 4 J. Nye, op. cit., p. 67. 5 [http://en.kremlin.ru/events/president/news/15902]. 6 [http://www.instituteforgovernment.org.uk/sites/default/files/publications/The%20new%20persuaders_0.pdf].

110 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 simply incompatible. Each operating theatre has its own set of instruments.”7 The critics of Russia and the Kremlin believe that the impact of Russia’s soft power abroad leaves much to be desired precisely because the country has not yet acquired a universal ideological basis. Today, there are three main ideological blocs, for which Russian political technologists are try- ing to find a more or less integral and universal construct:  First, the Russian World concept, which still needs its last touches. In the past, it was used to describe the unity of the Russian-speaking, Slavic, and Orthodox community. Today, it has become a global civilizational phenomenon covering the 300 million people who speak Russian, are interested in the Russian culture, and live in Russia and the Near and Far Abroad.8 According to President Putin, “the Russian World can and should encompass all who cherish Russian literature and Russian culture, no matter whether they live in Russia or outside it.”9 Putin, in line with the ideas of his favorite philosopher Ivan Ilyin, spoke of the Russian idea as “the great mission of Russians to unite and bind civilization.”10  The doctrine of Eurasianism, or rather neo-Eurasianism, is the second component that puts Western Europe and Russia on opposite sides. Its supporters invented a new concept—me- dian Eurasia—to describe practically the entire territory of the former Soviet Union. They argue that it was a very distinctive civilization, with Russia as its core: “‘Russia-Eurasia’ not only shares the historical destinies of its peoples and kindred cultures, but has a com- mon economic-political future,” which might perish if subjected to Western-style modern- ization.11 These people believe that the CIS countries cannot achieve true independence and that, therefore, the choice is not between independence and Russia’s hegemony, but be- tween taking commands either from Russia or its rivals. The Russian world and Eurasia are bound together by obvious anti-Western feelings and their close attention to geopolitics and the conspiracy theory (Eurasia-Russia stands opposed to the worldwide conspiracy of the United States and the West), as well as idealization of the Soviet past—the Soviet Union as an Eurasian power and certain elements of neo-Stalinism. The ideologists of Eurasianism regard the state as a tool of coercion that is indispensable in Eurasia where liberalism, de- mocracy, and weak power have been rejected by the majority as alien.  The system of values is the third component based on traditionalism as opposed, to an in- creasing degree, to Western values. Western democracy is associated with double stan- dards, social inequality, moral degradation (unisex marriages, the culture of unisex in schools, and sexual minorities) and decline of religion. Russia-Eurasia, on the other hand, is presented as an outpost of traditional religious and family values common to all mankind and public morals. In his latest addresses to the Federal Assembly, Putin described Western values as “so-called tolerance, neutered and barren” and “a kind of Amoral International,” while the destruction of traditional values from above is an undemocratic process being carried out contrary to the will of the majority.12

7 “Senseless and Merciless: ‘The Russian World’: The Ideology of a Russian Crusade,” available at [http:// henryjacksonsociety.org/wp-content/uploads/2015/02/Senseless-and-Merciless.pdf]. 8 See: E.I. Pivovar, “Russkiy iazyk i russkiy mir kak faktory sotsiokulturnogo dialoga na postsovetskom prospranstve,” Likhachevskie chtenia, 2007, pp. 167-169. 9 “Senseless and Merciless…,” p. 8. 10 “Russia: The National Question,” available at [http://www.rt.com/politics/putin-immigration-manifest-article-421/]. 11 S.P. Mamontov, Osnovy kulturologii, Olimp, Moscow, 1999, available at [http://www.countries.ru/library/russian/ evraz.htm], 20 September, 2014. 12 [http://en.kremlin.ru/events/president/transcripts/messages/19825].

111 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

The tools and institutions of Russia’s “soft power.” So far, the Russian and pro-Russian media, or to be more exact, the unified information, cultural, and linguistic space of the entire territory of the former Soviet Union, have been and remain the most efficient tool of Russia’s soft power—one of the main and the most efficient tools inherited from the Soviet Union. So far, Russian TV and radio, the press, and the Russian-language Internet dominate the post-Soviet countries. The greater part of the educated and socially active citizens of the CIS countries has a good command of Russian. Most people, likewise, prefer the Russian media and Internet and trust them. Thus, they have become the vehicles of Russia’s soft power outside Russia’s borders. The CIS countries’ people borrow their ideas about the world from the Russian media. The higher education system, which offers opportuni- ties to tens of thousands of students from all over the world, can be described as another active and effective soft power tool. There are state, semi-official, and public organizations, such as the Russian World Foundation, that are still tuning up and, for the moment, lag behind their Western partners. The Russian Orthodox Church and the muftiats have a special role to play; in the new conditions, they have become de facto tools used by the state in the struggle for “traditional and religious values.” The numerous “Eurasian” groups and alliances constitute a specifically Russian phenomenon. Abandoned to linger on the political margins, today they have suddenly acquired the status of an influ- ence group. Their leaders came to the forefront of Russia’s soft policy; they travel from one post- Soviet country to another and from one university to another giving lectures and contributing to scholarly conferences. It is not surprising that they are the most consistent supporters of the present political course as a visual realization of their most cherished dreams. Alexander Dugin, the main ideologist of Eurasianism, has said that nobody opposes Putin’s course any longer, while those who are still doing this should be certified as mentally ill and treated accordingly, and concluded: “Putin is everywhere, Putin is everything, Putin is absolute, Putin is irreplaceable.”13 Social basis and target groups. The middle-aged and older groups of the population living in the CIS countries form the main social basis of Russia’s soft power. They were born in the Soviet Union and have found it hard to adjust to the market economy. Nearly all of them are nostalgic and nearly all of them idealize the Soviet past. They associate democracy with the lawlessness and plun- dering of the 1990s, unbridled corruption, poverty, and instability; they withdrew their support of the democratic parties and movements in the post-Soviet countries that have found themselves in the backyard of local politics. The democratic project has failed across the post-Soviet region, while people are willing, to a greater extent than before, to embrace the idea of restoring the former em- pire. So far a considerable number of Russian speakers finds it hard to accept the new, post-Soviet conditions. The local Communist parties, shreds of the C.P.S.U., are another target group and even the basis of Russia’s soft power. Their members are the most consistent and ideologically motivated sup- porters of integration, a process that Moscow has launched and is supporting. The same can be said about the post-Communist national political elites now in power: they are genetically related to the past, closely connected with the Russian elite, and share much of its ideological principles and meth- ods of governance. Experts talk about an integral post-Soviet political and economic model typical of practically all the CIS countries: governance by command and administration; institutions of pow- er and property that have become a single whole; over-centralization of resources in the hands of a limited elite group; the high level of corruption, economies geared toward the export of raw materials, etc. The national elite would have preferred to preserve this type of power system, but it will not survive under the pressure of democracy. This explains why it accepts the anti-Western rhetoric of the Russian leaders and puts it into practice.

13 “Senseless and Merciless…,” p. 6.

112 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 Soft Power of the United States and the West

Ideologies and values. Unlike Russia, the United States has a historically confirmed and logical ideological system designed to present a positive image to the world and consolidate its influence and international prestige. The soft power of the United States is rooted in the American bourgeois revo- lution of the late eighteenth century. It adopted the famous Bill of Rights, which, for the first time in human history, obligated all state structures to respect the rights of all citizens. The country respond- ed with rapid economic growth that went on for many centuries and created the positive image of a country of unrestricted entrepreneurship, freedom, and equal opportunities for all. This attracted and still attracts millions of migrants from all corners of the world. American soft power rests on the idea of the American dream firmly rooted in the minds of the people—a country of equal opportunities for all who are ready to work. This is the philosophy of individualism, which considers the rights and interests of the individual to be of primary importance. The Eurasian system of values treats the interests of the state as the highest priority. This is main dif- ference and contradiction between the East and the West. The principle of a law-governed state is registered in the constitutions of most countries, but only the most developed countries have put this principle into practice. This means that the United States, and the West as a whole, claims the honor of the main protec- tor of liberal-democratic values—freedom of speech, freedom of entrepreneurship, freedom of con- science, the right to work, etc.—across the world. This can be said about the basic principles of de- mocracy, such as the separation and election of powers, accountability of the government to the public, transparency, limitation of corruption and nepotism, etc. These principles have been recog- nized by the international community and registered in international documents and agreements. All states are expected to observe these principles, otherwise the international community (in which the West plays the main role) has the right to introduce economic sanctions against the violators and plunge them into international isolation. The universality of American-Western values is one of the main resources and sources of soft power of the United States and the West. Civil society is a component of the soft power of the West; this concept is applied to the non- governmental sector, that is, the space between the government and the man-in-the-street occupied by various public organizations (political parties, NGOs, and independent media). Civil society is ex- pected to protect the interests of the people in government structures and against the arbitrary rule of the people in power. It is commonly believed that it is impossible to set up a state ruled by law without a strong civil society; it is absolutely indispensable in curbing corruption and creating conditions for higher standards of living. This explains why the United States and the EU assumed the mission of promoting and developing civil society and liberal-democratic values throughout the world. Tools and institutions. American soft power is rooted in the phenomenon of mass culture (pop- culture) shaped under the pressure of America’s mass industry, Hollywood being one of the main tools. Today, seven out of ten films shown in Russia were made in America; the top 100 out of 400 best known films in the world were filmed in the United States.14 The English language plays the same role: today, about 1.5 billion use English as their native tongue, while over 1 billion study it. The GDP of the United States and Western Europe is about $40 trillion, which enables the Western countries to sponsor most of the international financial institutions, cultural and sports events, mega projects, etc.

14 See: A. Khudaykulova, “V chem zakliuchaetsia miagkaia sila SShA?” available at [http://ushistory.ru/esse/1054-is- soft-power-of-usa-the-same-as-americanization.html], 14 May, 2015.

113 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

This explains why the U.S. and the West largely influence the policy of the main international organizations—from the U.N. and IMF to small international agencies. Most international organiza- tions are also determined to promote liberal-democratic principles and values all over the world. There is a system of assessments of how human rights are observed in different countries, the condi- tions of doing business, etc. The states and governments with low ratings run the risk of being pushed into the group of “rogue countries” to share it with North Korea. Social base and target groups. The local and still developing middle class, that is, people with a fairly stable social and financial status, is the main social group in the CIS countries that supports the system of liberal values, is ready to develop it, and is, therefore, receptive to Western soft power. This group consists of medium and small businessmen, shop owners, the intelligentsia, jour- nalists, actors, etc. who have acquired property and gained a certain social status, mainly through work and knowledge. They want to limit the power of the bureaucrats, lower the level of corruption, and create transparent and clear rules for business. They want a stronger civil society to put bureau- cracy under effective control; they are setting up NGOs, as well as civil and non-governmental in- stitutions. In short, the stronger the middle class, the stronger civil society, and vice versa. In the countries of developed democracy, where the middle class constitutes up to 70-80% of the total population, civil society is fairly influential. It is much smaller in the CIS countries; however, the middle class and non-governmental sector are the consistent supporters of democratization and the law-governed state. This explains why the post-Soviet autocratic elites are working hard to neutral- ize the non-governmental sector funded from abroad: they dismiss it as foreign agents and accuse it of stirring up color revolutions. In fact, NGOs are not a threat, most of them are loyal to the govern- ment and stay away from politics. Their activities are geared toward developing a strong civil soci- ety incompatible with the authoritarian system that rules by commands. The ruling elites across the CIS are well aware of this.

What Next? Conclusions

Today, Russia’s soft power still dominates across the CIS, Ukraine being the only exception. The events unfolding in this country have demonstrated that, when used, hard power invariably de- feats soft power. Indeed, when Crimea, the bulwark of Russia’s soft power in Ukraine, was detached from it, the pro-Russian Party of the Regions and the Communist Party of Ukraine (the recent rulers) were defeated and demoralized; the pro-Russian social base shrank from 50 to 15-20%, while anti- Russian feelings have been spreading far and wide across Ukraine. Russia is still using its soft power elsewhere in the CIS, while anti-West sentiments have been on the rise in recent years. This can be explained by the following: First, the positive image of the United States throughout the world was dented during the presi- dential terms of George W. Bush and Barack Obama. The Americans are fully aware of this, Joseph Nye, the author of the “soft power” concept, in particular. The critics of America’s policies write that in the last fifteen years the United States has been relying on the double standards policy and has sac- rificed the principles and values of its soft power to its geopolitical interests. Washington has seri- ously blundered in its foreign policy: it is enough to mention the invasion of Iraq in 2003 under the false pretext of preventing the production of weapons of mass destruction and the very doubtful cam- paign of regime change in Libya and Syria that left a political vacuum filled by radical fundamentalists. The public is very disappointed by the reports about the ties between the Bush family and the oil lobby in the United States (this information has not been disproved); there is information that Colonel Qad- dafi funded Sarkozy’s presidential campaign, that Jabhat al-Nusra and ISIS use the latest American armaments, and that in its relations with authoritarian regimes Washington uses double standards.

114 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

To a certain extent, most international organizations and donor-countries are not alien to double standards when dealing with civil society, NGOs, and the independent media of the CIS countries. Their funding of the civil factor is shrinking to the accompaniment of statements that civil society and democratic values should be supported and encouraged. In real life, USAID cut back Central Asian project funding from $436 to 126 million in 2011, while in 2013, this sum dropped to $118 million (a drop by 12% against the 2012 level).15 It comes as no surprise that the number of sustainable NGOs is steadily decreasing, while the local governments are sparing no effort to neutralize independent civil society and media. Western donors are pouring more and more money into reforms (mainly simulated by the local elites) of the state sector. The West has lost the basis of its soft power in the region: civil society is in a permanent crisis, while the local middle class (in its classical interpretation), which needs a law-governed state, is nonexistent. There is one more factor that curbs the soft power of the West in most of the CIS countries, the Central Asian countries in particular. The contemporary set of Western values is presented in its “extreme liberal” or leftist-radical form, which has raised the right of the individual to express and realize his “Ego” to an absolute magnitude. The Charlie Hebdo phenomenon is one of the outcomes, the liberal radicalism of which invited an equally radical response from the traditional community of the CIS and the Muslim world as a whole. This set of values, however, is offered as an ultimatum, irrespective of local conditions and in disregard of local sentiments. It is hardly surprising that this set is rejected. The local governments and anti-Western propaganda machine have learned to exploit this in their interests by attracting attention to the most repulsive aspects. The man-in-the-street ac- quires a negative image of the West, closely tied with moral degradation and decline; it is seen as a threat to the local family and moral traditions, religion, etc. In the long-term perspective, however, the future of Russia’s soft power in the CIS is not that bright, despite the current wave of anti-Western sentiments. Russia is relying on a social basis that has essentially no future: the ruling kleptocracy, political elites and leaders (Yanukovich being the best example) steeped in corruption and simulating reforms, communist parties living on the political margins, and labor migrants who dream of Russian pensions, visa-free regimes, and the abolishment of licenses. These “support groups” belong to the post-Soviet model, which has outlived itself and should be modernized and reformed. The pro-Russian elites now in power either can or cannot start modernization; they either change or fail to change themselves and will disappear from the political scene. In either case, Russia will lose the social basis of its soft power. Today, Russia is largely plac- ing its stakes on nostalgia and disappointment in the democratization of the 1990s. The Soviet Union, where poor regions lived at the expense of rich ones and where there was social albeit illusory equal- ity, cannot be revived. This realization will come as a bitter disappointment, which will deprive Rus- sia’s soft power of its future in the post-Soviet region. This might create a vacuum that will attract a third force: the Islamic Caliphate will move into the Muslim regions of Central Asia and Russia. It relies on soft power, a combination of medieval fanaticism and political high tech, a new form and new content of soft power, a unique phenomenon that should be studied and opposed by the coordinated and concerted efforts of all the international players—from the United States and the European Union to the CIS countries, including the Russian Federation.

15 See: V. Odintsov, “NPO SShA in Tsentralnaia Azia,” NEO, 8 January, 2015, available at [http://ru.journal-neo.org/ 2015/01/08/npo-ssha-i-tsentral-naya-aziya/], 4 August, 2015.

115 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS THE DIPLOMACY OF QUALIFYING INDUSTRIAL ZONES An Alternative Scenario of American Brokerage between Armenia and Turkey

Rouben SHOUGARIAN Former Ambassador of Armenia to the United States, Research Fellow at the Fletcher School of Law and Diplomacy, Tufts University (Medford/Somerville, U.S.A.)

ABSTRACT

he author investigates an alternative, der regions of geographical neighbors di- indirect settlement between Armenia vided by political conflicts. T and Turkey expected to lead the nego- This article offers for discussion the tiations out of the dead end into which they Qualifying Industrial Zones (QIZ) project the were pushed by the refusal of Ankara and Clinton Administration proposed in 1996 to Yerevan to ratify the Zürich Protocols. On the Israel, Palestine, Egypt, and Jordan to be one hand, American-Swiss mediation and applied within the framework of normalizing the shuttle diplomacy of 2008-2009, crowned Armenian-Turkish relations. The author con- by the sensational signing of the Turkish-Ar- templates the possibility of limited opening menian protocols, inflated international ex- of the Armenian-Turkish border as a natural pectations. On the other, the euphoria creat- and necessary result of QIZ in the -Gyu- ed by what looked like a fundamental solution mri border region and looks further into the to one of the most complicated conflicts of the political feasibility of setting up two more twentieth century proved to be short-lived. QIZs. One of them can be set up at the bor- In the rapidly changing geopolitical sit- der between Armenia and the Nakhchivan uation around the Southern Caucasus, the Autonomous Republic (an exclave of Azer- opening of the Turkish-Armenian border has baijan), the other, at the meeting point of the acquired a new meaning in the context of borders of Georgia, Armenia and Azerbai- regional and global security. This problem jan. In both cases this might prove to posi- calls not for mind-boggling initiatives inevita- tively affect the Nagorno-Karabakh conflict bly doomed to loud diplomatic failures (this and intensify integration in the Black Sea is what happened to the signed and not rati- region and the Southern Caucasus. At the fied protocols), but for less ambitious, albeit same time, these developments might con- implementable programs.1 We must study tain Baku’s negative response to the open- and apply the successful experience of trade ing of the Armenian-Turkish border. An Ar- and economic programs elaborated for bor- menian-Turkish QIZ set up with the U.S. brokerage might become a serious stabiliz- ing factor against the background of new 1 See also: R. Shougarian, “Armenian-Turkish Diplomacy: Track I Failures and Track II Prospects,” challenges to regional and global security Armenian Review (Boston), Vol. 54, No. 1-2, Spring- and the deepening dividing lines in the Summer 2013. Southern Caucasus and around it. 116 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

KEYWORDS: international mediation, normalization of the Armenian-Turkish relations, the American-Swiss initiative, opening of borders, Qualifying Industrial Zones (QIZ), Free Trade Agreement (FTA), the U.S., Obama, Clinton, Israel, Palestine, Egypt, Jordan, Georgia, Azerbaijan, Nakhchivan Autonomous Republic, Nagorno-Karabakh conflict, Russia, Customs Union, regional cooperation.

Introduction

The Turkish-Armenian reconciliation of 2009 was one of President Obama’s first foreign poli- cy initiatives; it relied on confidential talks organized with the help of the Foreign Ministry of Swit- zerland with the obvious aim of scoring an impressive foreign policy success at the beginning of the president elect’s first term. Under the pressure of President Obama’s ardent desire to play a decisive role in the compli- cated dialog between Ankara and Yerevan before the 100th anniversary of the , America poured unprecedented diplomatic efforts into the process to achieve the Turkish-Armenian Protocols signed in Zürich. The prospects of establishing diplomatic relations between the two coun- tries and opening the Armenian-Turkish border looked like a tectonic geopolitical shift in the Black Sea/Southern Caucasus region and an important factor in the context of global security and protection of American interests at the crossroads of Europe and the Middle East. Yet what began as a sensational piece of news about the Turkish-Armenian Roadmap, which led to the historical ceremony of signing the documents in Zürich, ended in a diplomatic impasse. The protocols turned out to be another castle in the air—they were never ratified. Today, new approaches to mediation of normal relations between Armenia and Turkey have become vitally important.

Euroatlantic Interests and the Closed Turkish-Armenian Border

The following factors of geopolitical semantics of the Turkish-Armenian border as seen from Washington clarifies the logic of the Euroatlantic interests in the Black Sea/Southern Caucasus region and the reasons behind America’s sudden interest in and active mediation of a dialog between An- kara and Yerevan: — the closed gates between Armenia, a young country with a million-and-a-half-strong dias- pora in the United States, and Turkey, America’s main ally in the Middle East; — the closed central gates between the countries of the Black Sea basin and the Southern Cau- casus; — the closed central gates between Armenia (the Southern Caucasus) and NATO; — the closed central gates between the country-candidate of the EU and the countries involved in the European Neighborhood/Eastern Partnership program;

117 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

— the closed gates between Turkey and Central Asia; — the closed gates that block direct access to the historical Silk Road, communications and energy sources; — the closed gates that block direct access of the United States to the region bordering on Iran, Iraq, and Afghanistan; — the last and only closed border in Europe.2

Certain Regional Arguments in Favor of Opening the Armenian-Turkish Border

The economic expediency and mutual profitability of opening the Turkish-Armenian border are obvious. In his article “Economic Impacts of Re-opening the Armenian-Turkish Border,” Haroutiun Khachatrian writes: “Right now, the only regional markets accessible to Armenian producers are the Armenian domestic market of 3.2 million people and Georgia with its 4.5 million inhabitants. As both countries are poor, this poses weighty restrictions on Armenia’s economic activity. Two other neigh- bors, Azerbaijan and Iran, are well nigh inaccessible to Armenian exports, the former for political reasons, the latter because of its high trade barriers. Thus, opening the Turkish market to Armenia would greatly improve the country’s investment rating, which is presently stymied by the narrow limits imposed on its foreign trade… “The opening of the Turkish-Armenian border would benefit Turkey, too. First of all, it would stimulate the regions of Turkey bordering on Armenia. The provinces of Erzurum and Agri are among the least developed in Turkey with a per capita GDP of less than half the Turkish average (and also less than in Armenia).”3 International intermediaries should create maximally clear political and economic mechanisms to arrive at an efficient Armenian-Turkish settlement. The academic community of the European Neighborhood and the EU countries started talking about corresponding integration mechanisms even before Georgia, Armenia, Ukraine and Moldova were invited to join the Free Trade Area within the Eastern Partnership project in 2013. This means that Turkey and Armenia, likewise, should create a corresponding infrastructure before moving toward normalization of their bilateral relations. As is said in the Europe Report the International Crisis Group (ICG) submitted in 2009: “The 325-km land border was closed throughout most of the Soviet period. There are two main crossing points: the rail link between Kars and Gyu- mri and the Markara/Alican road bridge over the wide Araxes River near Yerevan. The rail link opened in the 1980s, when passenger trains began to go both ways once a week. Turkey stopped the service on 3 April, 1993 as part of sanctions when Armenia captured the Kelbajar district of Azerbai- jan. No road link has been formally opened in modern times. Although the roads themselves exist,

2 See also: R. Shougarian, “Evoliutsia interesov SShA v Chernomorskom-Iuzhnokavkazskom regione i posrednichestvo v armiano-turetskikh otnosheniakh,” Voprosy regionalnoy bezopasnosti: 2011, SPECTRUM, Tsentr startegicheskogo analiza, Yerevan, 2012. 3 H. Khachatrian, “Economic Impacts of Re-Opening the Armenian-Turkish Border,” 13 May, 2009, available at [https://www.boell.de/en/navigation/europe-north-america-6760.html], 11 October 2012.

118 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 investment will be required to open up the two crossings, as well as significant capacity building and training of local officials to deal with customs, taxes, trade and border traffic for which there has been little preparation.”4

The Sources of the QIZ Concept

Regional cooperation is of key importance at all times; it is even more important for the coun- tries locked in a political crisis, as well as the countries burdened by memories of the common tragic past. There is nothing new in this. After the failed ratification of the Zürich Protocols, the United States might try to revive the idea of QIZ; in 1996, the Clinton Administration elaborated it for the Middle Eastern countries, Israel, Palestine, Egypt, and Jordan, in particular. It was expected to maintain peace in the region by encouraging regional economic integration and cooperation, in particular, between the countries that were at daggers drawn. The QIZ sanctioned and specified by the American Congress opened duty-free access of Egyptian and Jordanian products to the American markets. Under the Israeli-Jordan QIZ agreement, Israel’s quota was 8%, while an 11.7% quota was presupposed by the Israeli-Egyptian QIZ agreement. According to the Congressional Research Service of U.S. Congress, as distinct from the free trade areas where decision-making and the right to establish conditions of functioning belong to the host country, QIZs “(a) have operations in two countries (Israel and either Jordan or Egypt); (b) produce goods solely for export to the United States; and (c) operate under both the authority of the host countries and the oversight authority of the United States...”5 In the early 2000s, this mechanism was used for Chile, which joined NAFTA through QIZ. The Chilean QIZ has no political component, but it has confirmed that the usefulness of trans- boundary industrial parks is not limited to the countries involved in political conflicts and that neighbors wishing to widen their economic cooperation will also profit from them. “The QIZ initia- tive began to take shape in 1994-1995. It resulted from the strong conviction of both the Congress and the Clinton Administration that the economic aid requirements of the West Bank and Gaza at the post-Oslo Agreement stage, and Jordan at the post Israel-Jordan Treaty of Peace stage, well exceeded the significant, yet insufficient, funds that the United States was able to provide. Both the Congress and the Administration were, therefore, looking for ways in which they could assist the economies of the West Bank, Gaza, and Jordan without having to raise the annual foreign assis- tance level.”6

4 International Crisis Group Europe Report No. 199, Turkey and Armenia: Opening Minds, Opening Borders, 14 April, 2009, available at [http://www.crisisgroup.org/~/media/Files/europe/199_turkey_and_armenia___opening_minds_opening_ borders_2.pdf], 6 November, 2013. 5 M.J. Bolle, A.B. Prados, J.M. Sharp, Qualifying Industrial Zones in Egypt and Jordan, CRS Report for Congress, Foreign Affairs, Defense, and Trade Division. Order code RS22002, updated 5 July, 2006, available at [http://www.au.af.mil/ au/awc/awcgate/crs/rs22002.pdf], 14 November, 2013. 6 J. Singer, “The Qualifying Industrial Zone Initiative—A New Tool to Provide Economic Assistance to Middle Eastern Countries Engaged in the Peace Process”, Fordham International Law Journal, Vol. 26, Issue 3, 2002, Art 3, p. 560.

119 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS Geopolitical Repercussions of QIZ in the Black Sea/Southern Caucasus Region

QIZ has been intended for textile and high-tech industries, the products of which are exported and realized in the United States on a duty-free basis. If Armenia reaches an agreement on this issue with the Customs Union, this trade initiative and transboundary industry can be used in relations between the EU and the European Neighborhood/Eastern Partnership countries and Turkey. Its positive effect on conflict settlement and European integration can hardly be overestimated. It will be indispensable for the protection of American geopolitical interests in the strategically important region, especially if Tur- key and Armenia and, later, Turkey, Armenia, Georgia, and Azerbaijan set up joint QIZs with the long- term prospect of signing individual FTA with Washington. These mechanisms will make a single region out of the Black Sea basin and the Southern Caucasus, a possibility hinging not on the obsolete for- mula of ethnic kinship between Azerbaijan and Turkey, but on real improvement of relations between Armenia and Turkey; in the final analysis, this may bring reconciliation between the two peoples. Even partial opening of the Turkish-Armenian border, without any political stipulations, will completely change the region’s geopolitical identity. After carefully studying the functioning of QIZs in Jordan, Israel, and Egypt and readjusting them to South Caucasian specifics, the question of a QIZ in the Kars-Gyumri border area can be resolved with support of the U.S. Congress without much trouble. Limited access to joint production and trade (which will require partial border opening) will become the first important step toward normalization of bilateral relations. There is no need to wait for ratification of the Zurich Protocols (with each passing day this looks less and less likely). As soon as the Turkish-Armenian border is open with the help of a QIZ or any other industrial-trade mecha- nism, the region will acquire a new and geopolitically justified name—the Black Sea/Southern Cau- casus. Prior to that, it will remain on maps that do not reflect the geopolitical reality and come in handy only for academic discussions and creative games.

Prehistory of the QIZ Project in the Armenian-Turkish Public and Official Diplomacy

David Phillips, former coordinator of the Turkish-Armenian Reconciliation Commission, writes: “(QIZ) could be established to catalyze joint enterprises between Turks and . A QIZ is an industrial park and a free-trade zone, which is linked to a free-trade agreement with the United States. Goods qualify when partners contribute raw material, labor, or manufacturing. Kazan, an area in Armenia on the Turkish border, would be a suitable destination for joint ventures in textile and piece goods manufacturing.”7 It should be said that back in 2002 Turkey made a failed attempt to acquire permission to start its own QIZ in the east of the country. Its diplomats and its lobby in the United States tried to capital- ize on the laws that had been already passed by the Congress to join the functioning Israeli-Jordan QIZ. In his comprehensive study of the Middle Eastern QIZs and their fates, Joel Singer has written: “The QIZ initiative has enjoyed great success on the ground, and the United States should be guard-

7 D. Phillips, “Armenia and Turkey at Loggerheads,” 26 March, 2013, available at [http://www.huffingtonpost.com/ david-l-phillips/turkey-and-armenia-at-log_b_2957700.html], 12 June, 2014.

120 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 edly optimistic that the extension of the QIZ concept to other borders in the Middle East could encour- age parties to resolve differences through political negotiations. Due, in large part, to the success of the QIZ initiative, the U.S. Congress is presently considering a second amendment to the U.S.-Israel FTA Implementation Act that would authorize the President to also extend duty-free treatment to goods produced in QIZs to be established in Turkey.”8 Significantly, in 2008, the behind-the-scene talks in QIZ were revived in Turkey with an impor- tant new element that radically changed the format of this initiative. In the old format, it could not be squeezed into the agenda of the 107th and 108th Congress. This time Turkey was not seeking a QIZ for itself, but suggested sharing this zone with Armenia, its geographic neighbor. It is equally sig- nificant that this discussion ended very soon after the peak of the Armenian-Turkish “football diplo- macy.” Here is what Hurriet Daily News wrote: “The Turkish Armenian Business Development Council, or TABDC, which has been operating on a non-official basis since 1997, proposed the es- tablishment of a Qualified Industrial Zone, or QIZ, between Turkey and Armenia that would allow co-produced goods to enter the U.S. without customs duties and taxes. The proposal was based on a similar model used between Jordan and Israel, which had political disputes. “The establishment of a QIZ concept has been our leading assignment since 2003. A group of textile professionals visited Turkey and Armenia to promote this concept as the best out of the ordi- nary model to bring the two nations together, said the co-chairman of the TABDC, Krikor Salbashian. Although the QIZ proposal was not discussed during the first-ever meeting between President Abdul- lah Gül and his Armenian counterpart Serge Sargsian, Salbashian said they had used this historic opportunity to promote their proposals after Sept. 6. Since then, the TABDC has been receiving en- couraging response from Turkey, Armenia and the U.S., Salbashian said. “In order for a QIZ to be established the U.S Congress would need to pass a special law. ‘We believe opening the border between Turkey and Armenia is the key to further promote it with the U.S. Congress,’ Salbashian explained.”9 Kaan Soyak, Turkish co-chair and founder of the TABDC, confirmed the above and went into the details of the proposed QIZ. He specifically pointed to the textile sector as the most promising: “We can use this to the advantage of both sides. …In Turkey, we have machines and fabrics, and there is a labor force in Armenia. It is possible to produce cost-effective textiles and sell them in the United States without taxes and customs tariffs.”10 It should be said that the idea of joint Armenian-Turkish QIZs reappeared on the horizon in the latter half of 2008 within the framework of public diplomacy when the Zürich Protocols accepted the final touches within official diplomacy. It seems that at that time the TABDC looked like a mechanism of secondary importance to be used for comprehensive reconciliation. The amendments to the U.S.-Israel FTA Implementation Act, which extended the duty-free regime to commodities produced in Turkish territory, were not included in the agenda of the 107th and 108th Congress in 2002-2003.  First, the textile companies of California were dead set against them;  second, it was feared that the American Armenian lobby, likewise, would bury the amend- ment as soon as it appeared on the agenda.

8 J. Singer, op. cit., p. 569. 9 “QIZ Proposal for Turkey-Armenia Trade,” Hurriet Daily News, 22 September, 2008, available at [http://www. hurriyetdailynews.com/default.aspx?pageid=438&n=qiz-proposal-for-turkey-armenia-trade-2008-09-22], 12 January, 2013. 10 Y.P. Dogan, “Turkish-Armenian Businessmen Await Normalization of Relations,” Today’s Zaman (İstanbul), 9 February, 2009, available at [http://www.todayszaman.com/newsDetail_getNewsById.action?load=detay&link=167060], 14 January, 2013.

121 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

In fact, the Armenian leaders were not surprised by the idea of a QIZ on the Turkish border. In 2003, a top-ranked delegation of the Armenian Foreign Ministry visited the United States and Israel to gather all the relevant information.11 In Washington, Tel Aviv, and Jerusalem, the sides informally discussed the possibility of a joint Armenian-Turkish QIZ, along with other relevant issues, including the possibility of sending a fact- finding mission to Jordan, which, very much like Israel, had an FTA with the United States and hence the right to become the provider of a Turkish-Armenian QIZ. Politically, the Israeli version was much more attractive, but Jordan as the provider was a neu- tral, stable, and secure option. The informal consultations in Washington, Jerusalem, and Tel Aviv, likewise, looked positive or even promising; their follow-up proved to be less consistent, while the final decision was delayed indefinitely. The reports and even the memory of these consultations were lost in the whirlpool of another bout of American-Swiss brokerage and “football diplomacy.” The QIZ initiative was pushed into the shadow of pipe-dreams about fast and comprehensive normalization of Armenian-Turkish relations. It seemed that the international mediators and the sides in the talks should have performed a U-turn after the failed ratification of the Zürich Protocols and moved to a gradual settlement between Ankara and Yerevan. As long as Turkey continues to correlate its relations with Armenia with public opinion in Azerbaijan and its political pressure, a package solution will remain out of reach. I have already written above that we have come close to less ambitious, albeit more realistic solutions. QIZ, an instrument that has already proved its efficiency in the Middle East, might point to a way out of the impasse and become an important step toward an open border between the two countries.

QIZ in Egypt: A Success Story

In 2004, after signing the QIZ agreement in Cairo with the Israeli vice premier and an American trade representative, Rachid Mohamed Rachid, Minister of Foreign Trade and Industry of Egypt, summed up the political and economic components of transboundary projects in the Middle East started with American mediation: “We have high hopes that this arrangement will contribute to eco- nomic prosperity in the region. Indicators for success are very promising. No less important is the fact that the signing of this protocol today will help us start negotiating with our U.S. counterparts for a free trade agreement. However, economic interests are not our only goal for cooperation. “It is our deep belief that the establishment of Qualified Industry Zones will contribute to just and comprehensive peace in the region — a peace that started many years ago with Egyptian-Israeli peace treaty. The time has come now to work hard, to spare no effort, and to leave no stone unturned as we strive to further the progress of peace in the region.”12 Within a very short period, seven more QIZs were set up in Cairo and Alexandria, as well as in the Suez Canal area. The United States has FTAs with twenty countries: it takes about five years to reach an agree- ment with the candidate country and enact the agreement, a fairly long process if not supported by

11 The present author headed the delegation and participated in detailed consultations with the American and Israeli diplomats and QIZ experts. 12 [http://www.ustr.gov/about-us/press-office/speeches/archives/2004/december/remarks-after-signing-qualified- industrial-zon], 11 May, 2012.

122 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 special efforts and political motivations. In fact, good relations with a candidate country and the prospects of prompt economic gains do not accelerate the bureaucratic machine. Chile was a NAFTA member when the U.S. signed a bilateral FTA with it in 2003, a fact taken into account by Congress when it discussed a FTA with Chile. Panama, Colombia, and South Korea were the last countries that managed to squeeze into the exclusive FTA club.

Obama’s Administration and FTA

The crisis of 2008-2009 dampened the Obama Administration’s desire to start negotiations and extend the list of the U.S. FTA partners. It seems that tiny Georgia, the regional neighbor of Armenia and Turkey, will become the only exception, at least in the near future, and with serious limitations. In January 2012, President Obama decided to start FTA negotiations with President Saakashvili for purely political reasons: Georgia is the 113th on the list of America’s trade partners. In their article called “U.S.-Georgia Free Trade Agreement: Time to get Moving,” Ariel Cohen and James M. Rob- erts wrote: “Although recent U.S. trade agreements with Colombia, Panama, and South Korea took more than five years to implement, there is no reason why the U.S.-Georgia FTA cannot be done in a fraction of that time… Georgia has greatly contributed to U.S. and allied security in international peacekeeping missions in Afghanistan and Iraq, punching ‘above its weight...’ An FTA would be a win-win for the U.S. and Georgia. It would benefit Georgia by making the country a more attractive destination for interna- tional investment. It would also send an additional signal to Russia that Georgia is viewed by Wash- ington as a friend and partner. Georgia needs and deserves America’s continuing strong support.”13 It should be said that the U.S. Administration invited Georgia to the exclusive FTA club in early 2012 when the efforts to revive the Turkish-Armenian protocols on an open border became hopelessly stuck in an impasse. Since the central gates to the countries of the Black Sea/Southern Caucasus remained closed, Washington revived its interest in a side entrance into the region. On the one hand, it was a politically motivated decision: the White House wanted to reward Saakashvili for his loyalty to Washington. On the other, the signed and not ratified Zürich Protocols were rapidly losing their geopolitical relevance. The Zürich failure was no longer splendid, while the United States still had to protect its interests in the Black Sea and the Southern Caucasus: “Moving in a timely man- ner to implement a Georgia-U.S. free trade agreement (FTA) would promote economic freedom and prosperity in both countries and would serve U.S. security goals in Eurasia.”14 All of a sudden, in the first half of 2012, American support of Georgia practically reached the level of the eve of the August 2008 war in . The near future of the American-Turkish FTA is dim, not only because the Obama Administra- tion has been avoiding new FTA talks with individual countries after the 2008-2009 crisis, but also partly because it is busy readying a much bigger economic deal, a FTA with the European Union with possible direct and indirect repercussions for Turkey’s economy. In their article “U.S.-EU Trade Talks Risk Damaging Turkey Ties,” Cenk Sidar and Tyson Barker wrote: “Turkey formed its customs union with the EU in 1995, with a view to eventually joining the bloc. The terms of this union stipu- late that the government in Ankara can’t pursue a bilateral free-trade agreement with any country

13 A. Cohen, J.M. Roberts, “U.S.-Georgia Free Trade Agreement: Time to Get Moving,” 27 July, 2012, The Heritage Foundation, Issue brief 3684, available at [http://www.heritage.org/research/reports/2012/07/us-georgia-free-trade-agreement- time-to-get-moving], 19 October, 2012. 14 Ibidem.

123 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS until the EU has established one already. By contrast, when the EU signs a trade deal with a third country, it gives access to Turkey’s market without Turkish consent... “Turkey will have to negotiate its own agreement with the U.S., or else find itself lowering tariffs on imports from the U.S. with nothing in return. The U.S., meanwhile, would have little eco- nomic incentive to sign a separate deal with Turkey once a trade pact with the EU is in place, because it would already get the benefits of such an agreement. This has been the result when the EU signed trade deals with several other countries.”15 Opening the central gates to the Black Sea Basin and the Southern Caucasus remains a U.S. foreign policy priority. If Washington is ready for a politically motivated exception for Georgia, then a corresponding Congressional decision on Turkish-Armenian QIZs on the border between the two countries could be a possibility. No matter how strange it looks, influential Armenian-American lobbyists might close ranks around this draft law. In fact, the expected negative response from this lobby failed the amendment to the U.S.-Israel FTA Implementation Act because it was limited to Turkey. Nearly all organizations of the Armenian diaspora were openly displeased with the Zürich Protocols, or even objected to them. Today, there are no reasons to expect a similar response to a less binding method of normalization of Armenian-Turkish relations. The Armenian Interest Group of 140 members, which carries a lot of weight in U.S. Congress, and the Turkish Interest Group, which recently swelled to 157 members, could have moved forward with an unprecedented initiative to co-sponsor an amendment on the Armenian-Turkish QIZs. Sen- sation-seekers will love this even more than the Zürich Protocols. What is really important is the possibility that this course and its political success will prove to be more viable and less contradic- tory than the Armenian-Turkish “football diplomacy.” In view of the current situation in the Middle East, the state of Turkish-Israeli relations and a certain amount of political constraint in relations between Yerevan and Tel Aviv, the American Jordan FTA looks like a more reliable source of a corresponding amendment on a Turkish-Arme- nian QIZ. The American-Georgian FTA, which stands a good chance of being signed any time soon, will offer new opportunities to the Black Sea/Southern Caucasus region and new alternatives of eco- nomic and political development. During Vice President Biden’s visit to Ankara and Istanbul in December 2011, it became clear that Turkey had practically no chance of signing an FTA with the United States: “The United States is currently not open to signing a free trade deal with Turkey, which would boost mutual trade, ac- cording to a top Turkish business representative. The focus for the U.S. is Asia today, senior U.S. trade official confirms.”16 It should be said that even before Armenia joined the Customs Union of Russia, Belarus, and Kazakhstan, it tried, with the help of its strong support group in the Congress and during the working visit of Prime Minister Tigran Sargsian to California, Boston, and Washington, to find out whether there was any chance of signing an FTA with the United States. The answer was vague, neither positive, nor negative. Today, the delimitation of borders and Armenian-Turkish QIZs (if the U.S. Congress passes a corresponding law) looks like the most realistic roadmap leading to modest, although sustained suc- cess and normalization of bilateral relations between Yerevan and Ankara.

15 C. Sidar, T. Barker, “U.S.-EU Trade Talks Risk Damaging Turkey Ties,” 12 May, 2013, available at [http://www. bloomberg.com/news/2013-05-12/u-s-eu-trade-talks-risk-damaging-turkey-ties.html], 12 August, 2014. 16 G. Kurtaran, “No U.S.-Turkey Free Trade Zone Deal in the Pipeline,” Hurriet Daily News, 4 December, 2011, available at [http://www.hurriyetdailynews.com/no-us-turkey-free-trade-zone-deal-in-the-pipeline.aspx? pageID=238&nID= 8422&NewsCatID=344], 26 January, 2013.

124 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 Afterword The Prospects of Post-Zürich QIZ Diplomacy. Wider Geography of Peacebuilding

After the complete failure of the official “all or nothing” diplomacy, the QIZ initiative could have moved to the fore as the main factor of normalization. Indeed, both Armenia and Turkey meet all the necessary conditions for setting up a QIZ, either under the aegis of the American-Jordan FTA, or if a necessary amendment to the U.S.-Israeli FTA Implementation Act is finally adopted. Turkey and Armenia belong to the WTO and have the status of the Generalized System of Preferences (GSP), which ensures duty-free access of a limited number of their products to the American market. It is an open secret that from the very first days of “football diplomacy,” ratification of the Zürich Protocols was doomed: under the strong pressure of Azerbaijan, Turkey tied the open frontier and diplomatic relations issue to progress in the talks on Nagorno-Karabakh. This made comprehen- sive normalization impossible and failure inevitable. All of the countries involved in the process—the international brokers and the sides in the conflict, Turkey in particular—extracted tactical advantages, however the strategic goals of “football diplomacy” remained beyond their reach. This means that, on the one hand, informal/public diplomacy should move forward once more, while, on the other, the sides involved in official talks should abandon their maximalist approaches to concentrate on separating Armenian-Turkish normalization from the Nagorno-Karabakh peace

S o u r c e: National Geographic magazine.

125 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS process. On the one hand, Ankara will be free in its talks with Yerevan, while on the other, it will be no longer able to justify the absence of free will by the political pressure of Baku. Delimitation of the borders and a QIZ at Kars-Gyumri, the geography of which is best suited to this purpose, will bring the sides closer to the desired aim. The economic situation in both regions is far from perfect; they need new jobs, while their infrastructure is best suited to partial/limited opening of the border between Turkey and Armenia. Later, Azerbaijan might be invited to join the Turkish-Armenian QIZ as one of the sides in mutually profitable regional cooperation. This calls not for a simplistic explanation of avoiding po- tential losses, but is a pragmatic step otherwise described as containment through involvement in projects geared at peace and economic stability in the region. These programs and these approaches will help avoid dependence on Baku and its position and, at the same time, will give it a chance to profit from the gradual settlement between Ankara and Yerevan. Turkey, in turn, will acquire a unique opportunity to be involved in the Southern Caucasus, if the regional project of its cooperation with Armenia and Azerbaijan is implemented. A future Con- gressional amendment might permit one more QIZ on the border between Armenia and the Nakhchi- van Autonomous Republic, a poor and barely developed exclave of Azerbaijan. Delimitation of the borders and a Georgian-Armenian-Azeri QIZ (with Turkey or without it) in the vicinity of the city of Kazakh, where the borders of the three South Caucasian states meet, is a matter of the more distant future. The project looks logical and possible since Georgia has already launched talks on an FTA with the United States.

S o u r c e: National Geographic magazine.

126 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

It should be said that Armenian-Turkish QIZs will help the United States to protect its geopo- litical interests in the Black Sea/Southern Caucasus. Even mid-term, temporary normalization of rela- tions between Ankara and Yerevan might prove to be highly important for Washington. Turkey and Armenia will find the project absolutely profitable, both as a confidence-building tool and a long-term trade and industrial program that goes beyond the usual limits of world construc- tion. The QIZs will continue functioning even when the borders have been opened and the two coun- tries establish diplomatic relations. In light of the unprecedented intensification of the political and economic contacts between Turkey and Russia after the 2008 Georgian-Ossetian war and because of Moscow’s obvious intention to prove its usefulness during the talks in Zürich, Russia might be interested in the Kars-Gyumri QIZ. Indeed, in December 2012, President Putin went as far as inviting Turkey to join the Eurasian and the Customs Union of Russia, Belarus, and Kazakhstan. This means that none of the regional actors, international brokers, or sides in the official talks on the Armenian-Turkish roadmap, who profited, albeit briefly, from the splendid failure of “football diplomacy,” have any reason to oppose the less splendid, yet more realistic projects. Conflict settle- ment, especially settlement of complicated and painful problems, such as Armenian-Turkish rela- tions, calls for the wiser policy of moving from one small aim to another. It is too easy to miss far- away targets. We should keep in mind that each lost opportunity worsens the situation and decreases the chance for reconciliation.

THE EVER-CHANGING DYNAMIC OF CONFLICTS IN GEORGIA: THE INTERPLAY BETWEEN INTERNAL AND EXTERNAL FACTORS

Fareed SHAFEE Holds master’s degrees from the Kennedy School of Government of the Harvard University; independent expert (Baku, Azerbaijan)

ABSTRACT

n this article, I will trace the dynamics ture views the two conflicts as internal. How- and changes in internal conflicts in ever, after the war in August 2008 that saw I Georgia (Georgian-Ossetian and Geor- visible intervention from Russia, the con- gian-Abkhazian conflicts), and investigate flicts, I argue, have turned into intra-state the role of external factors and their interplay conflict between Georgia and Russia. My with internal factors affecting the dynamic of further argument is about the decisive role of the conflicts. Mainstream academic litera- external factors in the conflicts. The Western 127 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS and Georgian media tend to emphasize the gia, to Tbilisi’s wrongdoings. However, over- role of Russia in the conflicts; academic lit- all, the presence and influence of external erature is divided over the issue of the influ- factors, on at least two occasions, modified ence of external factors. I acknowledge that the dynamic of the conflicts. Here, along with sometimes Russia’s role is exaggerated and Russia, other outside players, such as the that less attention is paid, particularly in Geor- United States, contributed to the conflicts.

KEYWORDS: Georgian-Ossetian conflict, Georgian-Abkhazian conflict, ethnonationalism, Javakhetia, Abkhazians, , South Ossetia, Abkhazia, Nagorno-Karabakh.

The Roots of the Conflicts

The roots of the Georgian-Ossetian and Georgian-Abkhazian conflicts are complex. Scholars point to a set of factors which ignited the two conflicts—the conflicts which resemble others in the post-Soviet space: the Armenian-Azerbaijani conflict over Nagorno-Karabakh, and Transnistrian in Moldova. One of the main culprits is ethnonationalism, which was on the rise after the collapse of the Soviet Union. Modern theories of nationalism in turn highlight various environmental variables: modernity (Ernst Gellner1), ethnosymbolism (Anthony Smith2), political symbolism (Stuart Kaufman3), and “imagined communities” (Benedict Anderson4). The collapse of the Soviet Union opened up the way for the expression of nationalism which was coupled with political turmoil and, later, economic hardship. Although a usual suspect, economic difficulties cannot explain the conflicts in the post-Soviet arena. A number of scholars rightfully pointed out that people in the Soviet repub- lics enjoyed relatively good social, safety, and economic development until the collapse of the U.S.S.R.5 Among many factors, ethnonationalism seems to have been the main driving force behind con- flicts in the post-Soviet states. However, this factor alone cannot explain why some conflicts and grievances have turned into violent wars. Nationalism was expressed by almost all ethnic groups in the former U.S.S.R. Zürcher, Cornell,6 and other scholars argue that ethnonationalism found its path to violence through ethnofederalism. In those areas of the former Soviet Union where ethnic com- munities or groups enjoyed an autonomous administrative status, they launched separatist projects. Georgia, for example, avoided conflicts with the Armenian minority in Javakhetia, and the Azerbai- jani minority in where there was no autonomy, despite the fact that the number of Arme- nians and Azerbaijanis in Georgia was no less than that of Abkhazians or Ossetians.

1 See: E. Gellner, Nations and Nationalism, Cornell University Press, Ithaca, 1983. 2 See: A.D. Smith, Nations and Nationalism in a Global Era, Polity Press, Cambridge, 1995. 3 See: S. Kaufman, Modern Hatreds: The Symbolic Politics of Ethnic War, Cornell University Press, Ithaca, 2001. 4 See: B. Anderson, Imagined Communities: Reflections on the Origin and Spread of Nationalism (Revised and extended edition), Verso, London, 1991. 5 See: Ch. Zürcher, The Post-Soviet Wars: Rebellion, Ethnic Conflict and Nationhood in the Caucasus, New York University Press, New York, 2007; A. Yamskov, “Ethnic Conflict in the Transcaucasus: The Case of Nagorno Karabakh,” Theory and Society, No. 20, 1991, and others. 6 See: Ch. Zürcher, op. cit.; S. Cornell, “Autonomy as a Source of Conflict: Caucasian Conflicts in Theoretical Perspective,” World Politics, Vol. 54, No. 2, 2002.

128 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

However, in Moldova, Russian-populated Transnistria was successful in its separatist aspira- tions even though it had not enjoyed any autonomy under the Soviets. Therefore, ethnofederalism alone, although a powerful factor, cannot serve as a self-sufficient argument about the cause of conflicts in Georgia and the post-Soviet states in general. We have to add another variable to our equation—external support. Transnistria received all kinds of backing from Russia—political, mil- itary, and financial. As I argue below, the success of South Ossetia and Abkhazia was due to foreign support. Some of the separatist movements in the post-Soviet states were, as a matter of fact, irredentist projects—Nagorno-Karabakh (backed by Armenia), South Ossetia (backed by the North Ossetia Autonomous Republic in Russia and, indirectly, by Russia itself), and Transnistria (backed directly by Russia). An external influence, among the important factors which helped to propel the conflict, brought significant manpower and financial resources. This made military actions sustainable by the separatists whose numbers were considerably less than those of central governments.7 The most strik- ing common denominator of all the violent conflicts in Azerbaijan, Georgia, and Moldova is that small separatist groups were able to achieve victories over central governments. This mere fact is sufficient to encourage reflection about the players who stood behind such successes. The answer to this conundrum lies in the investigation of external factors and the players in the conflicts. The separatist movements were used by regional powers and the countries concerned, par- ticularly so-called “kin-states,” to advance their political agenda. The importance of the external support of the separatists is acknowledged and investigated in the work of several experts.8 Ostap Odushkin opines: “Support (both political and financial) for separatists usually comes either from a kin-state of the national minority (Crimea), or diaspora (Northern Ireland) or from countries which are rivals of the state from which separatists want to secede. It is rarely backed and financed exclu- sively by locals (either businesses or ordinary people).”9 Odushkin believes that separatism became a factor that could be traded off by some govern- ments to get better treatment for those states’ diaspora, or to expand their geopolitical influence. The latter was important in driving Russian interest toward Georgia. Initially, during the Soviet period, Moscow wanted to quell the national-liberation movement through a web of internal clashes within Georgia, and later, after the collapse of the U.S.S.R., Russia was interested in keeping Georgian for- eign policy objectives under control. While highlighting the external factors inspiring separatism in Ossetia and Abkhazia, I am not inclined to diminish internal factors. Many scholars argue, rightfully, that Georgian nationalism, es- pecially President Gamsakhurdia’s rhetoric such as “Georgia is for Georgians,” fuelled ethnic griev- ances among minority groups. What I am trying to manifest here is that, without external support (and I mean substantial support), the events in Georgia might have gone a different way. Power-sharing agreements which were discussed and negotiated, especially with the Abkhazian separatists, could have been implemented, and bloodshed avoided. Due to an external influence, both Georgian nation-

7 There were less than 120,000 Armenians in Nagorno-Karabakh against seven million Azerbaijanis; 67,000 Ossetians, and 100,000 Abkhaz vs. five million Georgians. 8 See: B. Wardhani, External Support for Liberation Movements in Aceh and Papua, Paper presented at the 15th Bien- nial Conference of the Asian Studies Association of Australia, Canberra, 29 June-2 July, 2004, available at [http://coombs. anu.edu.au/SpecialProj/ASAA/biennial-conference/2004/Wardhani-B-ASAA2004.pdf]; R. Griffiths, Globalization, Devel- opment and Separatism: The Influence of External and Internal Economic Factors on the Strategy of Separatism, Paper presented at the annual meeting of the ISA’s 49th Annual Convention, Bridging Multiple Divides, Hilton San Francisco, San Francisco, 26 March, 2008, available at [http://www.allacademic.com/meta/p252789_index.html]; St. Saideman, “Discrimi- nation in International Relations: Analyzing External Support for Ethnic Groups,” Journal of Peace Research, Vol. 39, No. 1, 2002, pp. 27-50. 9 O. Odushkin, “Problem of Separatism in the Post-Communist Space: Internal and External Sources. ‘The Case of Ukraine’,” Slovak Foreign Policy Affairs, No. 2, 2003, pp. 30-54.

129 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS alism, and Abkhazian and South Ossetian separatism, hardened and became intransigent. For the separatists, Russian support was instrumental in building local resistance, and their position on the negotiation table lost flexibility as more time passed. For Georgian hardcore nationalists, the percep- tion that Abkhazian and South Ossetian separatism was merely a game for the Russian empire, cre- ated the impression, incorrectly, that there was an absence of real grievances on the side of the mi- norities. Another factor was the phenomenon of a weak or failed state, as successfully argued by Jack Goldstone,10 which created a breeding ground for the loss of legitimacy by the government, but not necessarily for the final outcome—insurgency and violence. However, conflicts in Georgia started when the Soviet administration was in power—Georgia was by no means a weak state. In this domain, we have to consider the important context of perestroika—the final years of the Soviet Union were characterized by attempts at reformation. The ethnic conflicts in the post-Soviet states emerged against the background of national-liberation movements (only perhaps in the case of Azerbaijan, the national-liberation movement started after, and on the wave of, a secessionist demand from the Ar- menian population of Nagorno-Karabakh). Moscow viewed the potential of Georgia’s secession from the Soviet Union cautiously, and the internal clashes with minority groups played out well for the Soviet authorities. Last but not least, historical factors had negative effects on the post-Soviet conflicts. However, in the case of Georgia, their influence was less visible. While history played an important role in the conflict between Armenia and Azerbaijan, minority groups in Georgia had no previous experience of what can only be called massive bloodshed, something which might have left a strong imprint on ethnic memories. Georgians and, particularly, Ossetians enjoyed a peaceful co-existence, and even symbiosis. Much of their troubled relations were with Abkhazia, and this history was related to their conquest by the Russian Empire and the exodus of the Muslim population from Georgia. The Abkha- zians complained that, during the Stalin era, Abkhazia suffered from “Georgianization.” Georgians argued nevertheless that the Abkhazian autonomous status became stronger under the Soviets. Still, those grievances were not enough, or, at least, were less painful and of insufficient importance, to fuel a civil war.

Civil Wars in Georgia (1989-1993)

The civil wars in Georgia went through three stages: the first was between 1989-1993, a period of war and military clashes which can in turn be subdivided into two—Soviet (1989-1991), and post- Soviet (1991-1993). The conflicts between Tbilisi and the separatists in South Ossetia and Abkhazia can be regarded as classical civil wars though, as I would argue, these wars were marked tremen- dously by Russian interference. The second stage (1993-2003), dubbed as “frozen,” lasted until the Rose Revolution in Georgia, and was marked by the absence of both progress at the negotiation table, and significant clashes along the ceasefire line. The outbreak of war in August 2008 was neither -ac cidental nor sudden. Therefore I argue that the third stage (2003-2008) began after 2003 with the ascent of Mikhail Saakashvili to power, an occasion which was characterized by evolving tension, and ended with Russian intervention. The current, fourth, stage is not a more classical civil war or internal conflict, rather it has become an intra-state conflict between Georgia and Russia. In subse- quent sections, I will follow the trail of external influence and factors in the Georgian conflicts.

10 See: J. Goldstone, “Pathways to State Failure,” Conflict Management and Peace Science, Vol. 25, No. 4, 2008, pp. 285-296.

130 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

The first turmoil in Georgia began in April 1989 in the autonomous region of Abkhazia with a claim to independence, which was followed by the same from South Ossetia. Georgian nationalists responded with demonstrations in Tbilisi, which eventually turned into an anti-Communist protest, and was brutally crushed by Soviet troops who killed about 20 people. On the wave of anti-commu- nist sentiments, former Soviet dissident, Zviad Gamsakhurdia, won the first democratic election in Georgia. His tenure was marred by authoritarianism, and the rise of chauvinism. The conflict in South Ossetia became violent after the Ossetian local authorities passed a bill aimed at transforming the Ossetian Autonomous Oblast into an Autonomous Republic in August 1990, and then an independent entity within the U.S.S.R. The war of bills and laws was particularly sharp between Georgia and Abkhazia as well. At this critical juncture of legal battles, Moscow, in order to pressure the rebellious Georgians under Gamsakhurdia, backed the separatist movements in South Ossetia and Abkhazia. The South Ossetians received a great deal of support from their compatriots in the North Ossetian Autonomous Republic in Russia. Gamsakhurdia, miscalculating its military potential, sent troops into South Ossetia to tame the separatists, but failed. He was unwilling to accept any compromise, and forced the Georgian parlia- ment to abolish South Ossetia’s autonomous status. This, along with the many other failures of the Gamsakhurdian regime, inspired the coup d’état in Tbilisi. The new president of Georgia became Eduard Shevardnadze, a former leader of Soviet Georgia, the former Minister of Foreign Affairs of the U.S.S.R., and one of the major proponents of perestroika. The collapse of the U.S.S.R. in December 1991 led to a tense fight in January 1992 between Georgians and Ossetians. Russia was on the brink of war with Georgia in order to defend South Os- setia, and Ruslan Khasbulatov, chairman of the Russian parliament, warned that, if Georgia did not stop the bloodshed, Russia would consider granting South Ossetia a status within Russia. At the same time, the Russian vice-president, Vladimir Rutskoi, telephoned Shevardnadze and threatened to bomb Tbilisi. On 22 June, 1992, Russian President Yeltsin and Shevardnadze met in Dagomys, Russia, and, along with North and South Ossetian representatives, signed the Sochi Agreement which called for a ceasefire and the deployment of joint Russian, Georgian and Ossetian peacekeeping forces. Shevard- nadze admitted that the conflict in South Ossetia was the mistake of Gamsakhurdia, and pledged to work on a resolution to the conflict. While Shevardnadze accused Gamsakhurdia of wrongdoings, his own policy toward Abkhazia also failed (Gamsakhurdia was much more successful in negotiating with the Abkhaz leadership). However, it was not solely Shevardnadze’s fault. The renewal of the Georgian-Abkhazian conflict was inspired by both sides: the Abkhazian leadership of Ardzinba, and Georgian nationalist para- military groups under Kitovani (although Kitovani reacted to the declaration of independence by Abkhazia in June 1992). During 1992-1993, the most violent period of the Georgian-Abkhazian conflict, Russia supplied the Abkhazian side with weapons and mercenaries, particularly during the takeover of Sukhumi, the capital of Abkhazia.11 North Caucasian volunteers en masse, including Shamil Basaev,12 were fighting against Georgia. Eventually, Georgia, after a long negotiation under the auspices of the United Nations, and with Russian mediation, had to sign a memorandum of cease- fire in December 1993 in Geneva, Switzerland.

11 The Russian involvement, particularly in the air strike campaign to take Sukhumi from Georgians is well docu- mented by a number of sources (see: Th. Goltz, Georgia Diary: A Chronicle of War and Political Chaos in the Post-Soviet Caucasus, Routledge, New York, 2006; T. Cooper, “Georgia and Abkhazia, 1992-1993: The War of Datchas, 29 September, 2003, available at [http://www.acig.org/artman/publish/article_282.shtml]). 12 Shamil Basaev later became the prominent warlord of the Chechen separatists.

131 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

What can we extract from this brief overview of the civil wars? Firstly, it is the direct presence of Russia at all negotiations, mostly fulfilling the duties of a gendarmerie rather than a neutral broker. Secondly, Russian officials openly sided with the separatists, and even threatened Georgia. Interest- ingly enough, tension in Abkhazia and South Ossetia was never simultaneous—it seemed as if both conflicts “waited in a queue” to spark once one conflict had calmed down. When Abkhazia’s first turmoil passed (1989-1990), South Ossetia was on the rise (1990-1992), just to be followed by an- other round of bloodshed in Abkhazia (1992-1993). However, during this period (1989-1993), much of the bloodshed could have been avoided if the Georgian leadership had not been so nationalist, and “it is equally wrong to attribute all of Geor- gia’s misfortune to a malicious, well-planned imperial policy.”13 At the juncture of the collapse of the U.S.S.R. and the first year of the breakup (August 1991-end of 1992), Moscow lost control not only over the former Soviet republics, but even its own territories. During this period, in neighboring Ar- menia and Azerbaijan, a war was on the rise as well. Initially, after the Soviet breakup, the Armenians were successful in the ethnic cleansing of Nagorno-Karabakh from Azerbaijanis (August 1991-June 1992). After that, the new Azerbaijani leadership launched an offensive and took many territories back (July-September 1992). Nevertheless, by the beginning of 1993, Moscow managed to install some internal stability in a new house called the Russian Federation, and later showed muscle in the South Caucasus. 1993 was marked by the great defeat of Georgia and Azerbaijan at the hands of Abkhazia and Armenia, respec- tively. Both Georgia and Azerbaijan at that time were defiant, they did not support the Russian-led Commonwealth of Independent States (CIS) (an organization created by Moscow to unite all post- Soviet republics), and joined it only in the fall of 1993.

A Frozen Stage (1993-2003)

In the 1990s, the conflicts in Georgia (and between Armenia and Azerbaijan) were dubbed “frozen.” By 1994, all conflicts in the South Caucasus ended with a ceasefire and various interim agreements. A volume of research was conducted by scholars to analyze the frozen status, and offer the best option for a resolution. Academics and scholars viewed them as potentially flammable and, as was put by Svante Cornell with a far-sighted prediction, “virtually all conflicts are frozen along ceasefire lines ... in fact not a peace but perhaps a mere interruption in the conflict area.”14 There were several factors that stopped the conflict: — Exhaustion of the parties involved, ripeness of the conflict. De-escalation was preceded by escalation to the highest point, and the impetus for change came from the toll taken on all sides from the losses suffered in combat15; — A clash of regional and global powers, particularly Russian pressure that caused either inac- tion or interference in the conflict, and, in turn, balanced the power of the parties to the conflicts. The consequence was that the conflicts were not solved, but lived on in a passive form without violence. Hence, unrecognized mini-“states” were allowed to consolidate their control over the ter-

13 Ch. Zürcher, op. cit., p. 146. 14 S. Cornell, “Peace or War? The Prospect for Conflicts in the Caucasus,”The Iranian Journal of International Affairs, Vol. IX, No. 2, Summer 1997, p. 209. 15 See: M. Mooradian, D. Druckman, “Hurting Stalemate or Mediation? The Conflict over Nagorno-Karabakh, 1990- 1995,” Journal of Peace Research, Vol. 36, No. 6, 1999, pp. 709-727.

132 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 ritories they had conquered militarily. Even if no independent state granted recognition to either Abkhazia or South Ossetia during that period, power in these territories continued to be exercised by the political organs of the separatists, and was backed from the outside, namely Russia. The latter, besides providing military and economic support, embarked upon an important legal exercise, offer- ing Russian citizenship to the population of the breakaway regions. Both the Georgian leadership, under Shevardnadze, and the separatists had many incentives to seek a resolution to the conflicts, though on terms favorable to the respective parties. The severe economic situation in Georgia, including territories under the control of the separatists, was a factor which kept the adversary parties formally at the table, and gave them impetus, at least, to search for ways of enforcing stability which, in turn, was aimed at easing the economic hardship. Lack of rec- ognition by the international community was another factor which forced the separatists to seek a solution to the conflicts. At the same time, the status quo was also somewhat comfortable to Shevardnadze, helping him to keep a grip on power. Definitely, it was in the interests of Russia, too, to maintain leverage over a shattered Georgia by keeping the conflicts frozen and unresolved. Re-escalation of the conflict and the opening of armed hostilities were not in Shevardnadze’s plan as he was preoccupied by his personal power (and it also served the interests of the Georgian state, as events in August 2008 proved). The failure of military actions against the separatists might have led to internal political instability and/or the possibility of the opposition’s success. Further- more, Shevardnadze realized that he could not fight against the Russians who would immediately intervene in the case of re-escalation. Some factors, present at that time, were conducive to defrosting the conflicts. Arms supply was among the factors influencing the balance of power in the region. Much emphasis was placed on a Georgian purchase, while Russia was also arming the local separatists, in addition to its direct pres- ence in the regions, under the guise of peacekeeper. However, I believe the most acute factor for the re-escalation of conflict was revanchism, par- ticularly among refugees and internally displaced persons. Since the central governments (Gam- sakhurdia, in the case of South Ossetia, and Shevardnadze, in the case of Abkhazia) had suffered humiliating defeats against the separatists who were significantly weaker in number, intolerance for the status of the lost wars was growing increasingly. The frozen period was also characterized by a lack of international attention to the conflicts in the South Caucasus. Initially, the Balkan wars were blamed for diverting attention from the bloodshed in the region—which was no less intense and brutal than that in the Balkans. Later, the international community stepped up its efforts to resolve the conflict, but still lacked either vigor or considerable interest. It must be noted that the region, situated between Europe and Asia, is an important strategic location, has neighbors such as Russia, Iran, and Turkey, and possesses rich mineral resources, par- ticularly oil and gas (in Azerbaijan). However, despite this, the South Caucasus remained less impor- tant for major players, for example, the United States and the European Union, whose attention was primarily focused on the Balkans or the Middle East. At the same time, Russia was increasing its grip on the region, and declared the zone part of its inalienable interests.16 Despite overall passiveness, we cannot deny the fact that there were attempts to find solutions to the conflicts. In 1993, the United Nations Secretary-General proposed a comprehensive peace plan that included negotiations under the auspices of the United Nations, and international control by peacekeepers. Only Georgia agreed with the U.N. peace plan, while Russia and the Abkhazian side expressed reservations about the peacekeeping operation—they wanted the exclusive presence of Russian peacekeepers, which was finally agreed to by Georgia in 1994.

16 See: K. Fedarko et al., “In Russia’s Shadow,” Time, 11 October, 1993.

133 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

In 2000, several proposals on the establishment of a security system in the Caucasus were made. These systems included regional countries, as well as regional and global powers such as Russia, the U.S., and EU. Turkey’s President Süleyman Demirel proposed the idea of a Stability Pact for the Caucasus on 16 January, 2000 at a speech in Tbilisi during a meeting with President She- vardnadze. Shevardnadze himself had also made a number of speeches in favor of regional peace initiatives. The EU encouraged regional cooperation with and among all three South Caucasus countries, and mounted significant regional projects such as the Transport Corridor Europe-Caucasus-Asia (TRACECA) network. However, as Michael Emerson mentioned, “the first needs are to set out the essence of the alternative mechanisms that are conceivable, and clarify what might be the name of the game in strategic and geopolitical terms.”17 The geopolitical rivalry between, first of all, Russia and the United States, made it impossible to clarify such essence. While Azerbaijan and Georgia tended to favor cooperation with the West, Armenia and the separatists in Abkhazia and South Ossetia were naturally opposed to such a move. Their separatist projects thus were dependent on Russia. Bruno Coppieters noted in this regard that “if the existing balance of power in the Caucasus remains, it will create a deadlock for all parties involved.”18 While relations between Tbilisi and the separatist regions were frozen, domestic policy in the country was characterized by tension which resulted in two attempts on Shevardnadze’s life and oc- casional mutinies. Shevardnadze’s popularity was diminishing, and this led to the Rose Revolution in 2003, and the relevant change in the dynamic of the conflicts with Abkhazia and South Ossetia.

From Roses to Thorns (2003-2008)

The change in Georgia’s leadership after the Rose Revolution had tremendous implications for both domestic and international policy. Much is written about the nature and real benefit of those changes—some praised Saakashvili, some doubted the real success, but one thing is obvious: Georgia became more assertive in its internal and foreign policy objectives. One of the first successes of Saa- kashvili’s government was Ajaria, which had been ruled by the local omnipotent lord, Aslan Abashid- ze, for some time. The peaceful change of Ajaria’s leadership is explained by the non-confrontation- al nature of differences between Georgians and Ajars (Georgian Muslims). By the spring of 2004, Abashidze was gone, and this success inspired Saakashvili to start working on a resolution to the South Ossetian conflict. In the meantime, Saakashvili openly declared a pro-western, pro-NATO, and pro-EU policy which was at odds with Russian interests. In the media and academic literature, there is an opinion that Saakashvili provoked Russian interference, and miscalculated Russia’s (un)willingness to openly encroach on Georgian territory. Opponents of such an approach argue that Russia provoked the Georgian attack on South Ossetia, and it would have found any pretext to interfere in Georgia anyway. Cornell, Starr et al. show that the Kremlin was provoking the Georgian side for many months before the August 2008 war.19 But before going into detail about the August 2008 war, we should understand the context of the geopolitical shift which occurred in the first decade of the 21st century in the Caucasus, and the post-Soviet states at large.

17 M. Emerson, Approaches to the Stabilization of the Caucasus. Brainstorming Session: The Future of the Caucasus after the Second Chechnya Conflict, Center for European Policy Studies (CEPS), Brussels, 27-28 January, 2000. 18 B. Coppieters, “A Regional Security System for the Caucasus,” Caucasian Regional Studies, Vol. 5, No. 1 & 2, availavle at [http://poli.vub.ac.be/publi/crs/eng/Vol5/coppetiers.htm]. 19 See: S. Cornell, F. Starr, The Guns of August 2008: Russia’s War in Georgia, M.E. Sharpe, Armonk, N.Y, 2009.

134 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

The first factor influencing change was a wave of so-called “color revolutions” (Georgia (2003), Ukraine (2004) and Kyrgyzstan (2005)), which brought internal transformation and threatened Rus- sian domination. The second factor was Russia’s growth—under President Vladimir Putin, the coun- try was able to regain internal control and stability, and thanks to petrodollars, to boost its economy and military potential. Exactly, in this period, Russia was threatened by the color revolutions, and decided to act more aggressively. The third factor was a growing disagreement between Russia and the West over many issues, including the U.S. anti-missile program and the status of Kosovo. Grant- ing Kosovo an independent status in February 2008 ran contrary to the Russian position, and Putin was contemplating retaliation—the Georgian August crisis was an opportunity that he could not miss. The fourth factor (actually a post-factor) was the U.S.-Russian “reset” declared by the Obama admin- istration, which made relations with Russia much more significant for the American administration and its Western allies, than relations with other former communist states. By August 2008, the outgo- ing Bush administration was backtracking and reluctant to engage in meaningful action with regard to the crisis. Against this background, Georgia launched an offensive in South Ossetia, though it claimed that it sent troops to the region after the Russians had already crossed the Georgian-Russian border. There are still competing versions of the events of August 2008. What is clear is that Saakashvili had some success in reaching out to the South Ossetians, and this made the Russians nervous—one of the South Ossetian settlements, Kurta, had a round of successful negotiations with Tbilisi. (Even now, Moscow has difficulty controlling South Ossetia. In February 2012, under Moscow’s pressure, the election results of a regional leader were abolished because of the victory of an opposition candidate.) There- fore, for the Kremlin, it was highly desirable to break, once and for all, any possibility of reconcilia- tion between Tbilisi and the breakaway regions. For the time being, before August 2008, Russia ac- celerated the process of granting citizenship to South Ossetians and Abkhazians, and enhanced eco- nomic support.20 The Kremlin frequently invited the leaders of the separatist regions—Abkhazia, South Ossetia and Transnistria (Moldova) to the consultations. Regardless, while Russia’s true intention was contemplated long before August 2008, we should also note the mistakes on the Georgian side. Was Saakashvili trapped in a Russian game? My answer is yes, and this was his mistake. Saakashvili miscalculated the Russian reaction—he hoped that once the Georgian forces were deployed and fully controlled the region (and he said as much to the French President Nicolas Sarkozy), Moscow would not act openly against Tbilisi. But, for Vladimir Putin, it was a moment to retaliate against a personally disliked Georgian leader and the West (for Kosovo), and to put an end to any Georgian aspiration for NATO membership. The media reported that, during a telephone conversation after the resolution of the crisis in Ajaria in 2004, in response to Saakash- vili’s gratitude for Russia’s contribution to the peaceful resolution of the crisis, Vladimir Putin said: “Now remember, we did not intervene in Ajaria, but you won’t have any gifts from us in South Os- setia and Abkhazia.”21 Thomas de Waal opines that Saakashvili’s youthful behavior, lack of elderly and experienced advisors, and the presence of young hawkish ministers paved the way to the August 2008 crisis. “In 2008, Georgia went to war with Russia with a forty-year-old president, thirty-six-year-old prime- minister, a thirty-one-year-old foreign minister, and twenty-nine-year-old defense minister.”22 Fur- ther, there is the impression that Saakashvili was much too reliant on his Western allies, and the United States in particular. The latter carries its portion of responsibility for non-clarification of its

20 See: A. Illarionov, “The Russian Leadership’s Preparation for War, 1999-2008,” in: S. Cornell, F. Starr, op. cit. 21 “Saakashvili’s Account of Events that Led to Conflict,” Civil Georgia, 25 August, 2008, available at [http://www. civil.ge/eng/article.php?id=19282]. 22 Th. de Waal, The Caucasus: An introduction, Oxford University Press, New York, 2010, p. 196.

135 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS potential, and its willingness to act in the Russian “near abroad”, although it is reported that U.S. of- ficials, including President Bush, advised Saakashvili to resolve the conflicts peacefully.

Conclusion

The result of the August 2008 war, I believe, revealed the main player behind the separatism in Georgia. Russia’s genuine desire with regard to the Georgian separatist regions was clearly mani- fested, not only by the operation in South Ossetia, but also by the military advancement in Abkhazia. If Russia’s goal was to enforce peace in South Ossetia, as it declared, why had it helped and encour- aged the Abkhazian offense against Tbilisi? The real goal was to cut off both the republics from any possible return to Tbilisi’s control. After the war, Russia solidified the result of the military occupa- tion. On 26 August, 2008, Moscow officially recognized both regions as independent, and moreover, launched an international campaign to achieve recognition of Abkhazian and South Ossetian inde- pendence by the international community, which thus far has resulted in acceptance by Venezuela, Nicaragua, and Vanuatu. At every stage of the conflicts within Georgia, authorities in Moscow played a crucial role in instigating and maintaining them. While blaming Moscow, I do not limit my criticism of Georgian leadership and nationalism. Nor do I intend to ignore the Western bloc—the U.S., NATO, and EU— either for inaction, or for sending the wrong message to the authorities in Tbilisi. However, this article argues that, without external factors, the conflicts in Georgia would have played out differently, not necessarily more peacefully, although that would most probably have been the case. Definitely, the sides to the conflicts might have had a more flexible approach in seeking resolution to their disagreements.

136 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

REGIONAL ECONOMIES

GOVERNMENT BUDGET REVENUES IN AZERBAIJAN: THE TAX BURDEN AND THE ROLE OF THE OIL FACTOR

Ilkin ASLANOV Ph.D. Candidate at the Department of State Economic Regulation at the Academy of Public Administration under the President of the Azerbaijan Republic (Baku, Azerbaijan)

ABSTRACT

his article examines the two main for the budget, and explores various sce- sources of the state budget in Azer- narios for evaluating the sustainability of T baijan: taxes and oil revenues. government budget revenues in the medi- In particular, it analyzes variously mea- um term. sured indicators of the tax burden on the Based on his assessments, the author Azerbaijan economy compared to other shows that steady growth of the non-oil sec- countries in the region and the world, as- tor by 7%-9% per year is a major condition sesses, based on a regression model, the for maintaining the stability of government role of the oil factor in generating revenue revenues in the medium term.

KEYWORDS: government budget, tax burden, oil factor, scenario analysis.

137 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS Introduction

Depending on the range of functions assumed by the state, its fiscal policy can have a significant effect on the allocation of resources in the economy. On the one hand, the state uses taxes and govern- ment budget spending for active intervention in the distribution of income and thus performs its social function in reducing income inequality between different groups of the population,1 and on the other, it ensures the production of public goods through government spending2 and is thus able to play an important role in maintaining economic stability,3 fighting the crisis,4 and supporting economic growth.5 In recent years, an important factor behind the high rates of economic growth in Azerbaijan, along with the “oil boom,” has been the dynamic development of the non-oil sector driven by this very “boom” and sustained by fiscal expansion. The most favorable conditions for expanding the state’s financial capacity were created by the rapid increase in oil production in 2004-2010 (in that period, annual oil production rose from 15.5 million tons to 51 million tons) and the jump in oil prices in the world market (in 2004-2008, oil prices tripled, and despite a drop under the impact of the global financial crisis, they subsequently recovered in line with the global economic reco- very. Financial resources that increased without an increase (but, on the contrary, with a reduction) in the tax burden expanded government spending and enabled the state to implement large infrastruc- ture projects, which helped, on the one hand, to create the basic conditions for the development of the economy as a whole, and on the other, to maintain aggregate demand at the necessary level, thus paving the way for rapid growth of the non-oil sector and for ensuring the country’s stability in the face of global economic fluctuations. At the same time, all these processes have made it necessary to study the problems of govern- ment revenue sources and their stability in the medium and long term.

Government Revenue Dynamics

In recent years, the dynamic development of the Azerbaijan economy has also had a positive effect on the state budget. In 2000-2013, government revenues grew rapidly, a process which found its reflection in a 12.2-fold increase in the country’s economy. During that period, with the exception of the year of the financial crisis (in 2009, government revenues fell by 4.1%), the average rate of revenue growth was 34.5% per year, so that the revenue side of the budget increased from 714.6 mil- lion manats (AZN) in 2000 to AZN 19.5 billion in 2013 (or 27.3-fold).

1 See: International Monetary Fund Fiscal Policy and Income Inequality, IMF Policy Paper, 23 January, 2014, available at [http://www.imf.org/external/np/pp/eng/2014/012314.pdf]. 2 See: J. Stiglitz, Economics of the Public Sector, 3rd ed., W.W. Norton & Company, New York, 2000. 3 See: A.J. Auerbach, The Effectiveness of Fiscal Policy as Stabilization Policy, July 2005, available at [http://eml. berkeley.edu/~auerbach/effective.pdf]. 4 See: A. Spilimbergo, St. Symansky, O. Blanchard, C. Cottarelli, Fiscal Policy for the Crisis, IMF Staff Position Note, SPN 08/01, 29 December, 2008 [https://www.imf.org/external/pubs/ft/spn/2008/spn0801.pdf]. 5 See: W. Easterly, S. Rebelo, Fiscal Policy and Economic Growth: An Empirical Investigation, NBER Working Paper Series, Working Paper No. 4499, October 1993, available at [http://www.nber.org/papers/w4499.pdf].

138 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

Figure 1

The Dynamics of Government Revenues in Azerbaijan

70.0 33.8 35.0

31.6 60.0 30.1 29.0 57.7 30.0 26.8 26.9 54.7 50.0 52.1

25.0 40.0 42.5 40.1 21.2 20.6 35.6 30.0 20.0 17.7 28.4 17.1 19.5 16.4 17.3 20.0 15.7 15.1 14.8 15.0 18.7 11.4 10.8 10.3 15.0 8.5 10.0 6.0 6.1 7.1 12.5 4.7 5.3 3.9 2.1 0.7 0.8 0.9 1.2 1.5 0.0 10.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

GDP (AZN billion) Government revenues (AZN billion) Government revenues as a share of GDP (%, right axis)

S o u r c e: Compiled based on data from the State Statistical Committee of the Azerbaijan Republic [www.stat.gov.az].

Since government revenues have increased faster than the size of the economy, they have also increased as a share of GDP, with the result that this relative measure of public finance has risen by 18.7 percentage points (from 15.1% in 2000 to 33.8% in 2013). Like many other economic indicators, this ratio helps to get a better idea of the problem if we use comparative analysis. An analysis of the distribution density of government revenues (excluding grants) as a percentage of GDP (see Table 1) based on World Bank data for 116 countries shows that about a third of them (39 out of 116) have government revenues in the range of 20%-30% of GDP. The world average for this indicator (24%) also falls within this range. The 30-40 percent range group, which includes Azerbaijan, is the second largest group in terms of the number of countries. It includes both developed countries such as Sweden (31.9), Ireland (32.0), New Zealand (36.1), Austria (36.9), United Kingdom (38.3), Italy (38.5) and Finland (38.7), and developing countries such as Poland (30.7), Rumania (30.7), Estonia (33.3), Croatia (34.1), Tur- key (34.6), Serbia (37.4) and Slovenia (38.7)—a total of 32 countries. The average indicator for the European Union (35.6) is also within this range.

139 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Table 1

Government Revenues as a Percentage of GDP: Density Distribution across Countries of the World

Cumulative Cumulative Number of Percent of Percent Range Number of Percent of Countries Total Countries Total

[0, 10) 4 3.45 4 3.45

[10, 20) 28 24.14 32 27.59

[20, 30) 39 33.62 71 61.21

[30, 40) 32 27.59 103 88.79

[40, 50) 11 9.48 114 98.28

[60, 70) 2 1.72 116 100.00

Всего 116 100.00 116 100.00

S o u r c e: Based on World Bank data (2012).

A comparative analysis shows that the amount of government budget revenues in Azerbaijan in relation to the size of its economy is significantly higher than the world average (by 13.4 percentage points). This result can be interpreted in different ways: as an indicator of the scale of government intervention in the economy (with the state assuming even greater functions), on the one hand, and as an indicator of its increased financial capacity, on the other.

The Structure of Government Revenues, Transfers and Taxes

Under Art 5.1 of the Law on the State Budget of the Azerbaijan Republic, “state budget reve- nues shall include taxes, duties, tariffs and other income as established by the legislation of the Azer- baijan Republic.”6 If we look at the structure and dynamics of government revenues in Azerbaijan, we will find significant changes in this area, especially since 2008. Starting in 2008, against the background of growing transfers to the budget from the State Oil Fund of Azerbaijan, there was a rapid reduction in the share of tax receipts, the main source of government revenues in 2000-2007 (in that period, taxes accounted, on average, for 76.6% of these revenues). In 2008, due to transfers from the State Oil Fund in the amount of AZN 3.8 billion, the share of taxes in the budget fell from 80.8% to 57.4%. The global financial crisis that began in 2008 continued to influence the Azerbaijan economy in 2009 as well, so that the amount of tax revenues that year fell by 25.2%. Since transfers from the State Oil Fund (AZN 4.9 billion in 2009) continued to increase, the share of tax revenues in the budget fell

6 See: Law of the Azerbaijan Republic on the State Budget of the Azerbaijan Republic, available at [http://e-qanun.az/ files/framework/data/4/f_4756.htm] (in Azeri).

140 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 to 44.8%. Although in the following few years tax revenues began to recover, they increased slower than transfers from the State Oil Fund, with the result that in 2013 the budget share of tax revenues was down to 35%.

Figure 2

The Structure and Dynamics of the Government Budget in Azerbaijan (AZN million)

2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 0 2.000 4.000 6.000 8.000 10.000 12.000 14.000 16.000 18.000 20.000

Total tax revenues State Oil Fund transfers Revenues from foreign economic activity Other revenues

S o u r c e: Compiled based on data from the State Statistical Committee of the Azerbaijan Republic [www.stat.gov.az] and the State Oil Fund of the Azerbaijan Republic [www.oilfund.az].

In the ten years from 2003, when the State Oil Fund made its first transfer to the country’s bud- get, the amount of such transfers multiplied 113.5-fold, so that the budget share of revenue from this source increased by 50 percentage points. At present, State Oil Fund transfers are the main source of government revenues. In 2013, the State Oil Fund transferred AZN 11.35 billion to the government budget, which amounted to 58.2% of total government revenues. Together with all taxes, money transfers from the Fund made up 93.2% of total government revenues. If we look at the dynamics of tax receipts, we will see high rates of their nominal growth, especially prior to 2009: in 2000-2008 (base year 1999), their average nominal growth rate was 37.3%, with a resulting 15.5-fold increase in this type of financial receipts. As noted above, in 2009—

141 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS at the height of the global financial crisis—government tax revenues fell significantly, and although their growth resumed in 2010, it was now slower than before. Despite all that, in the period under review there was an increase in government tax revenues from virtually all sources. Significant growth of revenue was recorded, in particular, for taxes on value added, corporate profits, personal income, excises and property (real estate). From 2000 to 2013, revenue from value added tax (VAT) increased 14.2-fold, personal income tax (Azerbaijani term “income tax”) 18.9-fold, corporate income tax (“profit tax”) 9.1-fold, excise tax 26.5-fold, prop- erty tax 10.6-fold, severance tax (“mineral extraction tax”) 2.4-fold, and land tax 4.9-fold.

Figure 3

The Structure and Dynamics of Government Tax Revenues in Azerbaijan (AZN million)

2,710.0 2,374.8

859.7 593.3 125.1 121.5 33.1 3,000.0 2013 2,500.0 599.9 355.4 317.4 2,000.0 141.0 40.4 53.5 15.3 2005 1,500.0 1,000.0 190.8 125.9 500.0 94.0 22.4 11.8 50.4 6.7 2000 0.0 Land tax Excise tax Property tax Severance tax Value added tax Personal income tax Corporate income tax

S o u r c e: Compiled based on data from the State Statistical Committee of the Azerbaijan Republic [www.stat.gov.az].

Today, VAT is the main source of tax revenues in the budget structure: it accounts for 40% (AZN 2,710 million) of total tax revenues. It is followed by corporate income tax with a share of 35% (AZN 2,374.8 million), personal income tax with 12% (AZN 859.7 million) and excise tax with 9% (AZN 593.3 million). The overall share of revenue from taxes on property, mineral extraction and land is only 4.1% (AZN 279.7 million).

The Tax Burden in Azerbaijan: A Comparative Analysis

After 2009, the slowdown in the growth of tax revenues was also caused by tax reform in the country, including an optimization of tax rates and a reduction in the tax burden. In 2010, for example,

142 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 the highest rate of personal income tax—the third largest source of tax revenue—was reduced from 35% to 30%, and in 2013 from 30% to 25%; the highest rate of corporate tax—the second largest source of tax revenue—was also reduced: from 22% in 2010 to 20% in 2013. These changes led to a reduction in the tax burden.

Figure 4

The Tax Burden: Dynamics and Components (%)

20.0 17.1 15.3 15.4 16.0 12.6 12.5 13.1 12.2 13.0 12.2 13.7 11.8 11.5 11.2 12.0 10.6 12.7 11.4 11.3 11.2 10.4 11.0 9.2 9.3 9.5 9.4 9.2 8.9 8.7 9.1 8.7 9.1 8.0

5.2 5.4 5.0 4.4 4.0 3.7 3.6 3.9 4.1 3.1 3.5

0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Total tax burden Personal income tax burden Corporate income tax burden VAT burden

S o u r c e: Compiled based on data from the State Statistical Committee of the Azerbaijan Republic [www.stat.gov.az].

From 2008, tax revenues as a share of GDP—one of the most general indicators of the tax bur- den—began to decline. From 2007 to 2013, the tax burden calculated by this method fell by 5.3 percentage points to 11.8% of GDP. Starting in 2008, there was also a decline in the similarly mea- sured personal income tax burden (ratio of personal income tax revenues to total wage income) and the corporate income tax burden (ratio of corporate income tax revenues to total profit generated in the economy). As a result, from 2007 to 2013 the tax burden on corporate income fell from 11.2% to 5.4%, and the burden on personal income, from 13.7% to 9.1%. The VAT burden (government rev- enue from VAT as a percentage of total retail trade) began to decline in 2009, falling by 4.6 percent- age points to 13.5% in 2013. Along with an analysis of tax burden dynamics, international comparisons in this area are of particular importance. Figure 5 shows the tax burden (total tax rate split by type of tax) in the coun- tries of Eastern Europe and Central Asia (including Azerbaijan) calculated using a methodology7

7 See: PwC and World Bank/IFC Paying Taxes 2014: The Global Picture, pp. 139-145, available at [http://www. doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Special-Reports/Paying-Taxes-2014.pdf].

143 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS based on the microeconomic approach and applied by PwC and World Bank experts in international comparisons of the tax burden.

Figure 5

The Tax Burden in Eastern Europe and Central Asia (Total Tax Rate, %)

100.0 90.0 80.0 70.0 60.0

50.0 43.1 40.0 39.5 30.0 20.0 10.0 1 0.0 Israel Serbia Turkey Russia Kyrgyz Kyrgyz Albania Kosovo Belarus Ukraine Georgia Armenia Moldova Republic Tajikistan Azerbaijan Macedonia Uzbekistan Bosnia and Bosnia and Kazakhstan Montenegro Herzegovina

Profit taxes Labor taxes Other taxes Global average Regional average

S o u r c e: Compiled based on data from Paying Taxes 2014 report.

In the region of Eastern Europe and Central Asia, which includes 19 countries, the lowest tax burden is in Macedonia (8.2%) and the highest in Uzbekistan (99.3%). Azerbaijan is 12th with a total tax rate of 40%, which is slightly above the average for the region (39.5%) and below the global average (43.1%). If we look at each of the three components of the tax burden separately, it becomes clear that there are no significant changes in Azerbaijan’s position: it ranks 13th in profit taxes, 13th in labor taxes, and 12th in other taxes. According to the estimates of the report’s authors, the average rate of profit taxes paid by enterprises in Azerbaijan is 12.9% of their total profit. The average profit tax figure for the region is 11.7% (due to differences in tax systems, Tajikistan and Uzbekistan are a special case and were not included in our ranking). The average labor tax figure is 24.8% for Azer- baijan and 20.2% for the region, and the figures for other taxes (Tajikistan and Uzbekistan are not included for the same reason) are 2.3% and 2.34%, respectively.

144 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

According to these estimates, the tax burden in Azerbaijan is relatively higher than the average figure for the region in which it is located. But if we make a comparison based on the above-men- tioned methodology (tax revenues as a share of GDP), we will get a totally different picture.8 Accord- ing to these results, Azerbaijan is the country with the lowest tax burden in the region: its ratio of tax revenues to GDP is only 13%.9 For Georgia (the country with the third lowest tax burden—“total tax rate”—according to the World Bank’s Paying Taxes report), the ratio of tax revenues to GDP is 24.1%. Macedonia, which topped the rankings in the Paying Taxes report, is fourth in terms of tax revenues to GDP, with Russia and Belarus well ahead of it.

Figure 6

The Tax Burden in Countries of Eastern Europe and Central Asia: Degree of Correspondence between Different Methodologies

60.0 Belarus Ukraine

50.0 Russia

Azerbaijan Moldova Turkey 40.0 Serbia Armenia Kyrgyz Republic Israel 30.0 Bosnia and Herzegovina

and World Bank 20.0 Georgia

Macedonia

Tax burden calculated by PwC 10.0

0.0 12.0 14.0 16.0 18.0 20.0 22.0 24.0 26.0

Tax burden calculated based on tax revenues as a percentage of GDP

S o u r c e: Compiled based on World Bank data.

The absence of equal (or even close) values can be considered normal because they were cal- culated using different approaches and indicators: either as the amount of taxes and mandatory con- tributions paid by hypothetical enterprises in relation to their commercial profit or as the actual total amount of taxes and mandatory contributions as a percentage of GDP. Although the figures differ, one would expect a positive correlation in the country rankings on the tax burden. But the results obtained show the opposite: the correlation coefficient between tax burdens is –0.45, and the rank correlation coefficient (Pearson’s correlation coefficient) is –0.48. The results of similar calculations for 131 countries show that the average level of negative correlations has a random nature: the cor- relation coefficients both between tax burdens and between their rankings are actually equal to zero;

8 Since data were available for only 13 countries, calculations were made only for these countries. 9 The difference between the tax burden in Azerbaijan calculated at the beginning of this section (11.4% in 2012) and the figure given above (13%) is due to the fact that the World Bank takes into account not only tax revenues as a percentage of GDP, but also the entire range of state duties and other mandatory payments.

145 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS in other words, there is no correlation at all between the tax burden results obtained by these two methods of measurement. It would be more appropriate to look for the source of this variance in the initial assumptions behind the calculations made by the World Bank together with PwC. According to these assump- tions, they take into account the taxes and contributions paid by a standardized medium-sized com- pany (60 employees), its form of ownership, length of time in business, start-up capital, turnover, gross margin, and other similar factors.10 But all these conditions do not reflect the actual state of the economy in all countries of the world and apparently are unable to do so by their very nature. For example, medium-sized enterprises do not necessarily constitute the basis of the economy in all countries. Differences in the structure of the economies (from the perspective of the ratio between small, medium and large enterprises) lead to differences in the acceptance or non-acceptance of the above-listed hypothetical assumptions, and these in turn determine the degree of correspondence between the tax measured in this way and the actual state of affairs. Considering the above, we will continue our analysis based on the tax burden calculated as the ratio of tax revenues to GDP. Azerbaijan, which in accordance with this indicator ranks first in East- ern Europe and Central Asia, has turned out to be 30th in the ranking of 131 countries. The tax burden density distribution shows that for about a third of the 131 countries analyzed (43 countries) the tax burden is in the range of 15%-20% of GDP. In 37 countries (the second highest density), including Azerbaijan, the tax burden is in the range of 10%-15% (see Table 2).

Table 2

Tax Revenues as a Percentage of GDP: Tax Burden Density Distribution across Countries of the World

Cumulative Cumulative Number Percent Percent Range Number Percent of Countries of Total of Countries of Total

[0, 5) 6 4.58 6 4.58

[5, 10) 5 3.82 11 8.40

[10, 15) 37 28.24 48 36.64

[15, 20) 43 32.82 91 69.47

[20, 25) 25 19.08 116 88.55

[25, 30) 11 8.40 127 96.95

[30, 35) 2 1.53 129 98.47

[35, 40) 2 1.53 131 100.00

Всего 131 100.00 131 100.00

S o u r c e: Based on World Bank data (2012).

Both a separate analysis of the tax burden in Azerbaijan and its comparison with other states allow us to say that at present the tax burden in the country is relatively low. Nevertheless, the tax system can be significantly improved if we determine the optimal level (Laffer points of the first and

10 See: PwC and World Bank/IFC Paying Taxes 2014: The Global Picture, p. 140.

146 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 second type) of the tax burden, which can prove to be particularly useful for both different kinds of taxes and the economy as a whole.11 But this is a subject of special investigation.

The Role of the Oil Factor in the Government Budget of Azerbaijan Government Oil and Non-Oil Revenues

As already noted, transfers from the State Oil Fund are another major source of revenue for the state budget in Azerbaijan along with tax revenues. Today, these transfers amount to 58.2% of the

Figure 7

The Share of the Oil and Non-Oil Sectors in Government Revenues

25,000 80.0 71.3 71.8 72.3 70.0 63.5 20,000 57.9 60.0

47.9 50.0 15,000 39.3 36.6 40.0 35.0 34.2 33.8 34.1 30.5 10,000 30.0 27.7 20.0 5,000 10.0

0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Non-oil revenues (AZN million) Oil revenues (AZN million) Share of oil revenues (%, right axis)

S o u r c e: Compiled based on data from the State Statistical Committee, State Oil Fund, and State Oil Company of the Azerbaijan Republic.

11 For more details see: A.B. Laffer, “The Laffer Curve: Past, Present and Future,” Heritage Foundation, No. 1765, 1 June, 2004 (see also: Iu. Ananiashvili, V. Papava, Nalogi i makroekonomicheskoe ravnovesie: Laffera-Keinsianskiy sintez, CA&CC Press®, Stockholm, 2010).

147 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS budget. Naturally, these are by no means the only oil revenues in the budget. The figure is even larger if we include taxes paid by companies engaged in oil and gas production in Azerbaijan. Data on tax payments made by such companies to the state budget are available only for the State Oil Company of the Azerbaijan Republic (SOCAR): in 2013, it paid about AZN 1.6 billion. Together with transfers from the State Oil Fund, this constituted 66.4% (AZN 13 billion) of budget revenues. Due to the lack of actual data on the amount of payments to the state budget of Azerbaijan from other oil and gas companies, they can be replaced with data on the minimum amount of corporate taxes set for the contractor by appropriate production sharing agreements (such data are available only for 2011-201312). In this case, the share of oil revenues in the budget for 2011-2013 will exceed 70%. In subsequent analysis, we will tentatively consider as government oil revenue the entire amount of transfers to the budget from the State Oil Fund and SOCAR payments (with the exception of 2011- 2013). At the same time, there is no doubt that government oil revenues are actually several percent- age points higher than the figures we use. Analysis shows that while government revenues increased 27.3-fold from 2000 to 2013, gov- ernment oil revenues multiplied 64.7-fold, so that their share of total revenues more than doubled: from 30.5% to 72.3%. This allows us to speak of the budget’s high dependence on the oil factor. Nevertheless, this share provides little information about the degree (form) of dependence of government revenue on the oil factor (the amount of oil produced and its market prices) and about the pattern of this dependence in the medium term. To find out more about the budget’s dependence on the oil factor and to have an opportunity to analyze different scenarios of revenue behavior in the medium term, below we provide an economet- ric analysis of the generation of government revenues.

An Econometric Analysis of Government Revenue Generation Government Revenues in Relation to GDP: sensitivity Analysis

In order to measure the direct dependence of the amount of government budget revenues on the production of goods and services in the economy, primarily the sensitivity of revenues to changes in GDP, we will use a simple two-variable regression model. The results of calculations based on data for the period from 2000 to 2013 are presented below:

LnBg = 1.31*LnUDM – 4.55 – 0.15*FD, (1) where LnBg is the natural logarithm of government budget revenues; LnUDM is the natural logarithm of GDP; and FD is a dummy variable (included in the model to remove the effect of the structural shocks caused by the oil boom in 2006, 2007 and 2008).

12 See: Decrees of the President of the Republic of Azerbaijan on the Application of the Law of the Azerbaijan Republic on the State Budget of the Azerbaijan Republic for 2011, 2012, and 2013.

148 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

Table 3

Dependence of Government Revenues on GDP: Results of Regression Analysis

Variable Coefficient Std. Error t-Statistic Prob.

LnUDM 1.310340 0.014904 87.91634 0.0000

C –4.551179 0.147338 –30.88943 0.0000

FD –0.149049 0.033300 –4.475949 0.0009

R-squared 0.998582 Mean dependent var 8.302275

Adjusted R-squared 0.998324 S.D. dependent var 1.248807

S.E. of regression 0.051125 Akaike info criterion –2.921691

Sum squared resid 0.028751 Schwarz criterion –2.784750

Log likelihood 23.45183 F-statistic 3,872.816

Durbin-Watson stat 2.500021 Prob(F-statistic) 0.000000

S o u r c e: Results of calculations using EViews software package.

If we look at the qualitative characteristics of the model (see Table 3), we will find both reliable regression coefficients and a high coefficient of determination R-squared (at a significance level of 0.01). For its part, the Durbin-Watson statistic points to the absence of autocorrelation in the residu- als: it should be in the range of 1.35-2.65 for 14 observations at a significance level of 0.05 k( = 1; n = 14; dU = 1.350)13; the DW statistic (2.50) for our regression falls within this range. At the same time, according to the results of a cointegration test (the test used in this case was the Engle-Granger two-step test14), there is a statistically significant long-run relationship between the two variables. Estimates show an elasticity of government revenues to GDP greater than one: assuming all other variables remain unchanged, an increase in GDP by 1% leads to an increase in government revenues by 1.3%. Moreover, the results of an assessment of revenue changes make it clear that al- most all of them—99.9% (R2 = 0.999) are explained by changes in GDP. Similar calculations for other government revenues (excluding transfers from the State Oil Fund) produce the following results:

LnBg_nfs = 0.95*LnUDM – 1.41 + 0.24*FD, (2) where LnBg_nfs is the natural logarithm of government budget revenues (excluding transfers from the State Oil Fund); LnUDM is the natural logarithm of GDP; and FD is a dummy variable (included in the model to remove the effect of the struc- tural shocks caused by the oil boom in 2006, 2007 and 2008).

13 See: D.N. Gujarati, Basic Econometrics, Fourth edition, McGraw-Hill, 2004, p. 970. 14 See: J.G. MacKinnon, Critical Values for Cointegration Tests, Queen’s Economics Department, Working Paper No. 1227, p. 2.

149 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Table 4

Dependence of Government Revenues (Excluding Transfers from the State Oil Fund) on GDP: Results of Regression Analysis

Variable Coefficient Std. Error t-Statistic Prob.

LnUDM 0.946785 0.016560 57.17431 0.0000

C –1.409292 0.161911 –8.704141 0.0000

FD 0.37855 0.036998 6.428841 0.0000

R-squared 0.997007 Mean dependent var 7.952010

Adjusted R-squared 0.996462 S.D. dependent var 0.930290

S.E. of regression 0.055332 Akaike info criterion –2.763513

Sum squared resid 0.033678 Schwarz criterion –2.626572

Log likelihood 22.34459 F-statistic 1,831.857

Durbin-Watson stat 2.052798 Prob(F-statistic) 0.000000

S o u r c e: Results of calculations using EViews software package.

As in the previous model, the qualitative characteristics of this model are highly reliable. The regression coefficients and the coefficient of determination remain significant at a significance level of 0.01 and there is no autocorrelation in the residuals (DW = 2.05, see Table 4). Based on the results of regression analysis of the variables included in the model, changes in GDP explain 99.7% of changes in government revenues in the period under review. One can say that GDP growth of 10% (assuming all other variables remain constant) increases government revenues by almost as much: by 9.5%.

Government Revenues, Oil Production and Oil Prices: Scenario Analysis

After assessing the responsiveness of government revenues to changes in the economy as a whole (in GDP), we will try to measure how responsive they are to the main determinants of the oil sector—oil production and changes in oil prices— and also their sensitivity to changes in the non-oil sector. For this purpose, we will analyze the results obtained using a regression model of government revenue dependence on oil production, oil prices and non-oil GDP:

LnBG = 0.55*LnNH + 0.28*LnNQ + 0.995*LnQNUDM – 7.5, (3) where LnBg is the natural logarithm of government revenues; LnQNUDM is the natural logarithm of non-oil GDP; LnNH is the natural logarithm of oil production; and LnNQ is the natural logarithm of oil prices.

150 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

Table 5

The Oil Factor in Government Revenue Generation: Results of Econometric Analysis

Variable Coefficient Std. Error t-Statistic Prob.

LnNH 0.544582 0.093408 5.830154 0.0002

LnNQ 0.278864 0.099075 2.814683 0.0183

LnQNUDM 0.995025 0.074777 13.30653 0.0000

C –7.502454 0.572222 –13.11109 0.0000

R-squared 0.998100 Mean dependent var 8.302275

Adjusted R-squared 0.997530 S.D. dependent var 1.248807

S.E. of regression 0.062062 Akaike info criterion –2.486416

Sum squared resid 0.038517 Schwarz criterion –2.303829

Log likelihood 21.40491 F-statistic 1,751.210

Durbin-Watson stat 2.426517 Prob(F-statistic) 0.000000

S o u r c e: Results of calculations using EViews software package.

As we see from Table 5, the qualitative characteristics of the model (the t, F and DW statistics) show that it is admissible to use the results obtained. The LnNH and LnQNUDM coefficients, the coefficient of determination R( 2), and LnNQ are significant at a significance level of 0.05. The DW statistic in the range of 1.35-2.65 shows the absence of autocorrelation in the residuals. Our calculations show that 99.8% of the variations in government revenue are explained by the variables included in the model: variations in oil production, oil prices and non-oil GDP. At the same time, all other things being equal, a 10% increase in oil production will lead to an in- crease in government revenue by 5.4%, and a 10% increase in oil prices, by 2.8%. With non-oil GDP growth of 10%, government revenues will increase by 9.95% (assuming constant oil produc- tion and oil prices). Overall, a 10% change in the oil factor (by 10% in both oil production and oil prices) will lead to an 8.2% change in government revenues, which suggests a high level of de- pendence. Since we have already constructed a regression model of government revenue dependence on oil production, oil prices and non-oil GDP, we can also analyze government revenues in the medium term based on certain scenarios. For this purpose, we will consider four scenarios that project govern- ment revenues over the medium term (2014-2020). Let us note that in these scenarios all unspecified factors (tax rates, duties, etc) are assumed to be constant.  Scenario 1. The current level of oil production stabilizes at about 43 million tons (in 2013, it was 43.457 million tons). Oil prices fluctuate around $100 per barrel. Annual real growth in the non-oil sector is 7%,15 and the annual inflation rate is 3%. Scenario 1 is taken as the baseline scenario in our calculations.

15 Real growth rates in the non-oil sector are approximated to the annual average growth rates for the non-oil sector set as goals in the Development Concept “Azerbaijan 2020: Outlook for the Future” (See: Development Concept “Azerbaijan 2020: Outlook for the future,” p. 11, available at [http://www.president.az/files/future_az.pdf] (in Azeri).

151 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

 Scenario 2. Starting in 2014, oil production decreases at a rate of 10% per year. The as- sumptions about growth in the non-oil sector and oil prices are the same as in Scenario 1. The purpose of Scenario 2 is to measure the medium-term effects of possible oil production shocks.  Scenario 3. Oil prices fall to the level of 2009 (the most acute phase of the latest global crisis, when they were at $60 per barrel) and stay at that level. The assumptions about growth in the non-oil sector and oil prices are the same as in Scenario 1. The purpose of Scenario 3 is to measure the medium-term effects of possible oil price shocks.  Scenario 4. Starting in 2014, oil production decreases at an annual rate of 10% while oil prices stay at about $60 per barrel. The assumptions about growth in the non-oil sector and oil prices are the same as in Scenario 1. The purpose of Scenario 4 is to measure the medi- um-term effects of possible oil production and oil price shocks. Table 6 shows model-based scenarios of how oil production and oil price shocks (taken sepa- rately and together) can affect government revenues in the medium term.

Table 6

Government Revenues in the Medium Term: Results of Scenario Analysis (in nominal terms, AZN million)

Scenario 1 Scenario 2 Scenario 3 Scenario 4

2013f 19,496 19,496 19,496 19,496

2014h 20,863 19,813 18,093 17,182

2015h 22,982 20,608 19,930 17,872

2016h 25,316 21,436 21,955 18,590

2017h 27,887 22,296 24,184 19,336

2018h 30,719 23,191 26,641 20,112

2019h 33,839 24,122 29,347 20,919

2020h 37,276 25,090 32,327 21,759

N o t e: The letter “f” in the year column means the actual figure for the year in question, and the letter “h” means the figure expected under a particular scenario.

S o u r c e: Author’s calculations.

According to the baseline scenario, government revenues will reach AZN 37.3 billion by 2020 if the current level of oil production remains stable throughout this period, oil prices fluctuate around $100 per barrel, the inflation rate is 3%, and non-oil GDP grows at an annual rate of 7% in real terms. Compared to 2013, government revenues will increase 1.9-fold in nominal terms and by more than 55% in real terms (adjusted for inflation of 3%). Under the second scenario, which is meant to measure the possible effect of a decline in oil production while all other factors remain constant (oil prices at $100 per barrel, real growth rate of non-oil GDP at 7%, and annual inflation at 3%), an annual decline in oil production by 10% in the period to 2020 will give a slow increase in government revenues to AZN 25.1 billion in 2020. Com- pared to 2013, government revenues will increase by 29% in nominal terms and only by 5% in real terms.

152 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

The third scenario, designed to measure the medium-term revenue effects of a sharp drop in annual average oil prices to $60 per barrel for the entire period to 2020, all other things being the same (annual oil production at 43 million tons, the real growth rate of non-oil GDP at 7%, and annual infla- tion at 3%), projects an increase in government revenues to AZN 32.3 billion. Compared to 2013, revenues will increase by 66% in nominal terms and by more than 35% in real terms. According to the “worst-case” scenario (Scenario 4), which is designed to measure the negative effect on government revenues that will result from a possible sharp drop in both oil production and oil prices (with oil production falling by 10% per year and oil prices fluctuating around $60 per bar- rel), all other things being the same (real growth of non-oil GDP at 7% and annual inflation at 3%), government revenues in 2020 will total AZN 21.8 billion. This means that, compared to 2013, gov- ernment revenues will increase by 12% in nominal terms and decrease by 9% in real terms. As we see, although government revenues today are closely linked to the oil factor, in the me- dium term an annual growth rate of 7% in the non-oil sector will make it possible to restore the nominal amount of current government revenues already from 2017. But restoring government rev- enues (in different years) to their 2013 level in real terms will require totally different amounts of additional funds under different scenarios.

Table 7

The Recovery Rate of Real Government Revenues and the Amount of Additional Funds Needed to Maintain the 2013 Revenue Level under Different Scenarios (2013 price level, AZN million)

Scenario 1 Scenario 2 Scenario 3 Scenario 4

2014 759 –260 –1,931 –2,814

2015 2,166 –71 –710 –2,650

2016 3,671 120 595 –2,484

2017 5,281 313 1,991 –2,317

2018 7,002 508 3,484 –2,148

2019 8,844 705 5,081 –1,977

2020 10,813 904 6,789 –1,804

S o u r c e: Author’s calculations.

Our calculations show that real government revenues can return to their 2013 level by 2016 under the second and third scenarios (see Table 7). Before they do so, maintaining the 2013 revenue level will require additional funds in the amount of AZN 331 million under Scenario 2 and AZN 2.6 billion under Scenario 3. When the 2013 revenue level is restored, in 2016-2020 the budget will have at its disposal additional funds (compared to the real government revenues generated in 2013) totaling AZN 2.6 billion under Scenario 2 and AZN 18 billion under Scenario 3. The situation projected under Scenario 4 is relatively complicated. According to this “worst- case” scenario, the actual amount of government revenues generated in 2013 will not be restored by 2020, and it will take AZN 16.1 billion of additional funds to maintain the 2013 revenue level for seven years through 2020. Estimates show that if these trends continue into the future, the actual amount of revenues generated in 2013 will be restored only by 2030, and maintaining real revenues at the 2013 level until that time will require AZN 24.4 billion.

153 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Thus, if processes run according to the latter scenario, the amount of additional funds needed to maintain the stability of the budget will be quite large. But Azerbaijan’s current foreign exchange reserves are 1.7 times larger than this required amount. Moreover, the maximum annual amount of required funds is less than 5% of 2013 GDP and tends to decline from year to year. And this is not regarded as a dangerous budget deficit level. In Scenario 4, there is also another way to stabilize the situation, and it is apparently the best way: to ensure even higher rates of real growth in the non-oil sector. According to estimates, if we can ensure annual real growth of 9% in this sector, the real level of government revenues generated in 2013 can be restored in only five years (in 2019). In this case, the amount of additional funds for the period to 2019 is less than one third of the previous estimate (additional funds needed to restore revenue by 2030): about AZN 7.4 billion. Naturally, current processes are more consistent with the baseline scenario. The purpose of the other scenarios is mainly to provide an opportunity for assessing the role of the oil factor in generat- ing government budget revenue and for measuring the stability of government finance in the face of possible shocks in this area. Estimates for the baseline scenario show that there are opportunities for real growth of government revenues (with the exception of 2014) by about 7% per year, which means an opportunity for additional expenditures over seven years through 2020 totaling AZN 38.5 billion (at the 2013 price level).

Conclusion

An analysis of the formation of the state budget in Azerbaijan (government revenue generation) shows that transfers from the State Oil Fund are currently the main source of government revenues, constituting up to 60% of the total. Taxes, the second largest source of revenues, make up 35% of the total, with the most significant part of the taxes (about 40%) coming from the oil sector. And this means that more than 70% of total government revenue is generated by the oil sector. This figure, which points to the budget’s close interdependence with the oil factor (including changes in oil pro- duction and oil prices), is evidence of its high sensitivity to changes in this factor in the medium and long term. A regression analysis of the revenue side of the budget shows that a 10% change in the oil fac- tor (10% changes in oil production and oil prices taken separately) results in an 8.2% change in rev- enues in the same direction. The elasticity of government revenues to changes in the non-oil sector is close to unity, which means that 10% growth in this sector of the economy will lead to an increase in government revenues by up to 10%. In addition, based on the results of an analysis of the medium-term stability of government revenues in case of stresses associated with the oil factor (a sharp drop in oil production and oil prices), we find that faster growth in the non-oil sector (with real growth rates of 7%-9%) will allow the government budget to maintain its stability in the face of oil shocks. Moreover, Azerbaijan has sufficient financial resources to ensure the stability of its budget in the medium term, as well as to maintain high rates of growth in the non-oil sector. Stability of government revenues and dynamic growth in the non-oil sector depend not only on an abundance of financial resources, but also to a large extent on an improvement in the business environment (however populist this may sound). The first thing that comes to mind in this context is to reduce the tax burden on the economy. Our analysis shows that the tax burden in Azerbaijan is already quite low. In accordance with this analysis, based on the results of calculations made by the World Bank and PwC, Azerbaijan has a

154 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

40% ratio of tax payments to profit and is in the middle of a list of 131 countries (rank 72).16 But the results obtained with this methodology, which has a number of shortcomings, differ significantly from the results obtained by ranking countries based on actual tax payments as a percentage of GDP. According to the latter methodology, the economy of Azerbaijan, considering its size, is at least 30th (among 131 countries) in the rankings for actual tax payments. In recent years, significant progress has been made in improving the country’s tax system. Tax rates have been reduced and tax adminis- tration has improved. At the same time, it is important to continue focusing on a further expansion of tax incentives. Important conditions of the business environment include protection of property rights, further reform of the country’s legal and judicial system, efforts to create a competitive environment, sim- plification of foreign trade, primarily export conditions, continued work to improve both the sphere of production (power supply, etc.) and the transportation infrastructure, and measures to ensure high and steady growth rates in the non-oil sector. Along with the resources of the State Oil Fund, the main economic guarantee of budget stability is sustainable growth of the non-oil sector in the medium term.

16 The Paying Taxes 2014 report compares tax systems in 189 economies worldwide, but since data for an alternative indicator of the tax burden—tax revenues as a percentage of GDP—were available for only 131 countries, in order to verify the results we analyzed only this group of countries.

GEORGIA: PROBLEMS OF INCREASING NATIONAL ECONOMIC SELF-SUFFICIENCY (Sectoral-Structure Aspect)

Vakhtang BURDULI D.Sc. (Econ.), department head, Paata Gugushvili Institute of Economics (Tbilisi, Georgia)

ABSTRACT

his article examines the problems of here is on evaluating the level of national increasing the self-sufficiency of the economic self-sufficiency. T Georgian economy through an im- The level of self-sufficiency of the provement in its sectoral structure, diversifi- Georgian economy is studied in terms of cation and expansion of exports, and in- broad sectors (groups of industries), and creased import substitution. In this context, ways to improve its sectoral structure the author explores the concept of structural (through accelerated growth of priority sec- effect (mainly its sectoral-structure aspects) tors/industries) are suggested on this basis. and the methods of its evaluation. The focus The author charts ways to improve the stra-

155 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS tegy and instruments of Georgia’s sectoral delines, prescriptions) of the Association structural policy, taking into account the op- Agreement between the European Union portunities provided by the provisions (gui- and Georgia.

KEYWORDS: Georgian economy, national economic self-sufficiency, sectoral structural policy.

Introduction

The post-communist economic transformation of the economy began more than 20 years ago, but the country’s macroeconomic indicators are still less than satisfactory. The relatively high rates of economic growth recorded in the first decade of the 21st century (in some years) are explained by the fact that the recovery started from a very low point after an economic collapse. In the 1990s, output in many industries (including those producing sufficiently competitive prod- ucts) fell dramatically; for a number of reasons,1 there was a massive decline in agriculture. It should be noted that imports of goods and services exceeded exports (and in some groups of industries, even total local production), which indicates an extremely low level of the country’s economic self-sufficiency. Speaking at a political forum entitled “Growth Challenges for Georgia,” held in Tbilisi on 18 February, 2014, Prime Minister Irakli Garibashvili noted the need to enhance the international competitiveness of the Georgian economy and to expand and diversify exports and the production of import substitutes (including food products)2 in order to ensure high rates of real economic growth oriented toward a radical improvement in macroeconomic indicators. To improve the situation, the sectoral structure of the economy should be changed radically (through accelerated growth of priority sectors/industries); this will make it possible to achieve a significant structural effect, determined by an improvement in key macroeconomic indicators. In order to ensure the economic dynamism required for this purpose, it is evidently necessary to make a detailed analysis of the deficiencies of the current sectoral structure of the economy and outline ways to improve (restructure) it by improving state and market coordination mechanisms.

The “Structural Effect” and Its Evaluation

As noted at the beginning of the article, the Georgian economy lost many important industries after the post-Soviet collapse. In a number of our works,3 we characterized some of the deficiencies

1 Most of the reasons for the decline in agriculture are set forth in our works: V. Burduli, “Genezis i puti preodoleniia agrarnogo krizisa v Gruzii,” Proceedings of International Scientific-Practical Conference Dedicated to the 90th Birth Anniversary of Professor George Papava “Actual Problems of Economies of Post-Communist Countries at Current Stage,” Tbilisi, 2013, pp. 20-27; R. Abesadze, V. Burduli, Strukturnye i innovatsionnye problemy ekonomicheskogo razvitiia, Publishing House of Paata Gugushvili Institute of Economics, Tbilisi State University, Tbilisi, 2014, Chapter VII, §7.2, “The Causes of the 2006-2012 Agricultural Crisis in Georgia,” pp. 206-216, and others. 2 I. Garibashvili, “The Country’s International Competitiveness Is Very Weak,” available at [http://www.radiokalaki. ge/index.php?cid=39&act=view&id=11892] (in Georgian). 3 V. Burduli, R. Abesadze, “Sectoral, Technological, and Institutional-Organizational Structures of the Georgian Economy: Development Issues in the Context of Globalization,” The Caucasus & Globalization, Vol. 7, Issue 1-2, 2013;

156 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 of the current sectoral structure of the Georgian economy and discussed ways to both revive the most traditional sectors and create new ones. But a relatively small country lacks the capacity to restore all industries that are currently in decline or to create new ones. In some sectors of the economy (as in agriculture and the food indus- try), all subsectors that are part of them should be fully operational, which will enable them to meet the needs of the country’s population to the maximum possible extent and, where possible, to increase exports of products (such as citrus, other fruits and wine). In some other sectors (as in light industry and production of building materials), it would make sense to develop (or revive), as evenly as pos- sible, most of their subsectors with due regard for their export and import-substitution potential. Meanwhile, Georgia lacks the capacity to successfully develop all sectors of the power industry or high technologies. In this situation, it is necessary to select the top priority sectors and focus the efforts of entrepreneurs and state coordinators on their accelerated development. That is why when the government makes decisions on coordinating development and when entrepreneurs make invest- ment decisions, it is important to assess both the situation as a whole (through the prism of the entire sectoral structure) and the state of affairs in groups of industries. At the same time, sectoral restructuring should be geared to achieve a “structural effect,” which “should underlie the construction and implementation of a ‘national economic model’.”4 According to Professor Teimuraz Beridze, the content of the “structural effect” (which needs to be further specified by economists) could be spelled out as “an optimal combination of economic sectors and subsectors ensuring maximum economic efficiency.” But in response to his question of how to measure the structural effect, it is very difficult to find a simple answer. Evidently, this implies definiteness, the share of key (core) industries in total GDP, with possible changes in the content of the structural effect in view of progress.5 As I see it, the structural effect can be assessed using indicators such as an increase in export potential and import substitution, manufacture of high-tech products, etc. (including based on sector priority criteria), which are systematized in the first section of our article.6 However, in my opinion, the most important characteristic of the structural effect is the level of economic self-sufficiency. Its main indicators are: — a high level of self-sufficiency for groups of industries (for some sectors of light and food industry, building materials industry and energy industry, it is also important to calculate the self-sufficiency ratio); — a positive balance of exports and imports (trade surplus) for groups of industries. Economic self-sufficiency (measured as “local production including exports minus imports”) in some groups of industries can be achieved through rapid growth of production not in all industries of the group, but only in a “selected few.” In this case, exports of their products will offset imports of items in the product mix of other industries in this group (or at best, total exports of goods in this group will exceed imports). Hence, this article analyzes the state of the sectoral structure of the economy (in terms of groups of sectors/industries such as the energy industry, agriculture, food industry, metallurgy, high tech- nologies, etc.) and assesses the prospects for the development of some of them.

V. Burduli, “Ways of Development of the Sectoral and Technological Structure of the National Economy under Globalization,” Ekonomisti, No. 3, 2012 (in Georgian); R. Abesadze, V. Burduli, op. cit., and others. 4 T. Beridze, “National Economic Model: An Alternative to Globalization?” The Caucasus & Globalization, Volume 1 (3), 2007, p. 61. 5 Ibidem. 6 V. Burduli, R. Abesadze, op. cit.

157 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Let us note that for some sectors (broad groups of more specific sectors/industries), such a grouping is to some extent conditional (for example, the statistics for high technology industries do not take into account machine tool building, which currently does not exist in Georgia; for lack of some data in statistical reports, in the process of grouping indicators it was impossible to include in the aggregated sectoral indicators, for example, data on genetic engineering and some other high- tech industries more associated with biochemistry, medicine, pharmaceuticals and agriculture, even though their share in the aggregated sectors is very small). Nevertheless, it allows us to assess the state of the economy from the perspective of sectors and, consequently, to prioritize their constituent industries for development purposes. Thus, Georgia needs a purposeful transformation of the structural content of its economy. In this paper, the deficiencies of the sectoral structure are identified and discussed in terms of groups of industries (taking into account local production, exports and imports of goods), and the suggested guidelines for its improvement are aimed to achieve a significant effect. Coordination of purposeful changes in the sectoral structure should be based on an appropriate improvement of gov- ernment and business regulation mechanisms, as described in the final section of this article. The current relevance of the structural approach used in this article is indicated, in particular, by an Internet publication7 that presents the recommendations of the OECD (in this case for Russia) designed to increase GDP in the next two or three years, listing them in order of priority (improve- ment of the sectoral structure, structural changes in coordination mechanisms). A similar approach to the identification of development priorities based on an analysis of domestic production, exports and imports (viewed from a broader, aggregate perspective) is used in an article by the well-known re- searcher V. Obolenskiy8 (particularly, in sections of that article entitled as follows: “The Reproduc- tive Openness of the Russian Economy”; “Is There a Chance to Reduce Dependence on Foreign Markets?”; “What Should Be the Role of the State in the New Industrialization?”; “Input-Output Balance”; “Investment, Monetary Policy and Industrialization,” etc.). From this it follows that such a study is well justified.

Analysis of the Economic Structure in Terms of Sectors (Groups of Industries) and Their Components

An analysis of the dynamics of the composition of GDP by economic activity allows us to es- tablish the extent of progressive structural changes in aggregated groups of industries. This analysis is based on data from a statistical reporting table showing the percentage structure of GDP by type of economic activity9 and a table for chain-linked volume indices of GDP growth10 (in these tables, the percentage structure of GDP by economic activity is calculated at current-year prices, and the chain indices, at constant 2003 prices). As we see from these tables, the share of agriculture, hunting, forestry and fishing in the coun- try’s total GDP fell from 16.7% in 2005 to 8.8% in 2011. In absolute terms, agricultural GDP declined

7 “OESR: Uskorenie rosta VVP v RF vozmozhno lish v sluchae strukturnykh reform,” Novosti Google, 19 Novem- ber, 2013. 8 V. Obolenskiy, “Vneshneekonomicheskie sviazi Rossii: nekotorye uroki globalnogo krizisa,” Voprosy ekonomiki, No. 5, 2012. 9 National Accounts of Georgia 2011. Statistical Publication, National Statistics Office of Georgia, Tbilisi, 2013, p. 26. 10 Ibid., p. 28.

158 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 as well: in 2010, GDP in agriculture amounted to 77.3% of the figure for 2005, and in 2011, to 83.5%.11 The mining and quarrying industry, which has little prospect (except in producing raw materials for the construction industry), has a steadily low share of total GDP: 0.9-1.2%. In the electric power industry, there have been virtually no capacity additions since the construction of the Khudoni Hydro Power Plant came to a halt. In spite of that, the GDP share of the production and distribution of elec- tricity, gas and water was sufficiently stable (2.8%-3.2%; in 2008, 2.6%). From the standpoint of improving macroeconomic indicators, the most important thing is to ensure accelerated development of manufacturing industries. But their contribution to total GDP changed very little in the period under review, ranging between 9.1% and 9.9% (in 2007, it was 8.1%). At the same time, manufacturing GDP increased by 68.3% from 2005 to 2011 (outpacing the 37.6% increase in total GDP). Nevertheless, due to the relatively low initial level of manufacturing GDP, such a rate of growth was not satisfactory. At the same time, the manufacturing industry mainly consists of the manufacture of food prod- ucts, beverages and tobacco (in 2011, its share was 40.8%). Metallurgy accounted for 17.4% (of total industrial output), and the manufacture of “other non-metallic mineral products” stood at 10.2%12 (more complete information on various branches of manufacturing is given below). From 2007 to 2011, the share of construction in total GDP fell from 9.1% to 6.7%. This was due,  first, to the low level of construction of industrial facilities in the country and,  second, to the decline in the demand for housing among a significant part of the population with very low income. The GDP share of trade and some other services is increasing, which is now characteristic of successfully developing countries. Simultaneously, the consumer market for information technology has to some extent been saturated, so that its share of total GDP is beginning to decline. Based on an analysis of the dynamics of the sectoral structure of GDP, it can be concluded that in 2005-2011 the total share of real production (industry, agriculture, construction,13 transport and communications), which accounts for the bulk of exports, gradually declined as it lost ground to the service sector (trade, public administration, healthcare, social assistance, etc.). With more favorable initial parameters of the sectoral structure, this would have been not so bad. But in today’s conditions, a real improvement in macroeconomic indicators (especially in the export-import balance, since bal- anced foreign trade is of crucial importance for the country’s sustainable development) will become possible only if industry and agriculture grow faster than the service sector (where the only exception is tourism, whose accelerated development could also play a significant role in improving the export- import balance). This is precisely why the following analysis of statistical data includes a study of the situation with the development of industrial and some other sectors. In this case, a sectoral structural analysis is performed for aggregated industries (i.e. sectors/groups of industries), with a comparison of their production indicators with exports and imports of products (in monetary terms) characteristic of the sector in question and an assessment of the level of self-sufficiency for groups of industries and, where it makes sense, of the self-sufficiency ratio.

11 The problems of agriculture and related industries are examined in detail in some of our works (see, for example: V. Burduli, op. cit., and others). That is why in this article the reasons for the decline in this sector and the ways to revive agricultural production are described only briefly, to the extent necessary to maintain the logic of this study. 12 Calculated based on data from the table, “Industry: Output by Economic Activity,” Statistical Yearbook of Georgia 2012, National Statistics Office of Georgia, Tbilisi, 2013, pp. 140-141. 13 Naturally, construction does not contribute to exports.

159 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

In statistical reporting, there are sets of balance sheets for basic food products, which allow us to assess the degree of self-sufficiency in various food items. As an example, let us consider a table showing the meat balance in terms of weight (see Table 1).

Table 1

Meat Balance Sheet (in thousands of metric tons)

2006 2007 2008 2009 2010 2011 2012

Local production 83.3 73.0 57.3 54.3 56.4 49.3 42.6

Imports 32.9 53.3 62.1 61.9 61.9 71.3 77.5

Exports 1.2 0.8 0.2 0.7 1.2 0.9

Total resources = 128.1 123.3 118.8 120.2 123.1 122.4 Total utilization

Self-sufficiency ratio, % 58 48 47 48 41 36

S o u r c e: Agriculture of Georgia 2012. Statistical Publication, Tbilisi, 2013, p. 78.

Table 1 clearly demonstrates the changes in the situation with meat production and consump- tion; meanwhile, the construction of such balances for non-food products makes little sense (except in some branches of light industry and building materials industry). As noted above, the increase in imports of some items from various commodity groups (groups of industries) compared to local pro- duction can be quite significant. In countries with an effective sectoral structure of the economy, this is usually compensated by increased exports of other goods produced by a particular industry in this sector (group of industries). That is why in order to assess the effectiveness of the sectoral structure of the country as a whole, it is necessary to compare production volumes for groups of industries with exports and im- ports of goods grouped into corresponding groups. This allows us to estimate the level of self-suffi- ciency for a particular group of industries (energy, food and light, etc.), aggregated for the purposes of research. Let us first consider the energy sector. It is known that there are virtually no oil or natural gas fields in Georgia, which is why the share of oil and gas in total imports is very high: in 2011, it was 16.3% (12.9% + 3.4%) or GEL 1,893 million (1,503 million + 390 million14).15 At present, the local production of oil and oil products in Georgia is insignificant, and their share of total industrial output does not exceed 0.01%. In these conditions, it is very important to increase the local production of electricity, which should be done not through the use of imported raw materi- als but by using renewable resources, primarily hydropower. In 2011, the production and distribution of electricity, gas and water (“electricity, gas and water supply”) amounted to 13.8% (GEL 888.3 million) of total industrial output. Thus, an improvement in Georgia’s energy balance (with a view to reducing the trade deficit) is possible only by accelerating the development of the hydropower industry. Meanwhile, the development of hydroelectric power in Georgia has been neglected throughout the entire post-communist period, so that today more than half of the electricity in the country is generated with the use of imported hydrocarbons (mainly gas).

14 In order to compare exports and imports with local production, statistical data for aggregated commodity groups were converted from U.S. dollars to Georgian lari (GEL) at the 2011 exchange rate of 1.65 lari per dollar. 15 External Trade of Georgia 2012. Statistical Publication, National Statistics Office of Georgia, Tbilisi, 2013, p. 136.

160 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

A certain role can also be played by solar energy, and this option should be taken into account in developing Georgia’s sectoral structural policy (particularly in defining the strategy for the devel- opment of energy industries). Let us now consider the structural parameters of the food sector. In statistical reporting,16 ex- ports and imports of food products are presented under four headings of the Harmonized Commodity Description and Coding System (Harmonized System or HS): (1) live animals; animal products; (2) vegetable products; (3) animal or vegetable fats and oils; (4) prepared foodstuffs, beverages and tobacco. In order to get an idea of the relationship between production, exports and imports, it is neces- sary to compare output of agriculture (together with fishing, forestry and hunting) with the sums of exports and imports for the first and second of these commodity groups. For its part, output of the food industry (together with beverages and tobacco) should be compared with the sums of exports and imports for the third and fourth commodity groups. In 2011, agricultural output totaled GEL 2,674.0 million17; of this, crop production accounted for GEL 1,237.9 million, and livestock production for GEL 1,336.8 million. Imports for the first two of the above commodity groups added up to GEL 910 million (7.8% of the country’s total imports), and exports for these two groups totaled GEL 374.9 million (i.e., imports for these groups were 2.4 times larger than exports). Output of enterprises in the food industry (together with beverages and tobacco products) amounted to GEL 2,161.6 million (or 33.6% of total industrial output. For comparison: in 1990, the share of the food industry was 38.9%).18 Imports for the third and fourth of the above commodity groups added up to GEL 1,059.6 mil- lion, or 49% of total local production (9.1% of total imports), and exports amounted to GEL 364.2 million (10.1% of total exports). Thus, imports of food products make up a significant share (16.9%) of the country’s total imports. At the same time, export earnings from food products manufactured in these sectors do not offset the cost of their imports (imports of food products are 2.6 times larger than exports). A sharp decline in food-producing industries was recorded in the early 1990s. Gradually, the situation in agriculture began to improve, and by 2005 the country reached a level of production that was more or less satisfactory for that period. But after the 2005 tax reform, the authorities made a number of mistakes in coordinating the development of agriculture and the food industry (particularly in the area of tax regulation and pric- ing) and ignored the requirements of the relevant EU organizations in implementing the national food security policy. All of that led to a sharp drop in local food production. The relatively large share of food production can be explained by two reasons.  First, the volume of industrial production as a whole is still not large enough (compared, say, to 1990), and  second, many food products are made from imported raw materials, often of low quality and with low consumer properties.

16 Statistical Yearbook of Georgia 2012, pp. 250-255. 17 Ibid., p. 153. 18 R. Abesadze, N. Arevadze, “The Georgian Economy at the Turn of the 1990s,” Proceedings of Paata Gugushvili Institute of Economics of TSU, Vol. IV, Tbilisi, 2011, pp. 236-237 (in Georgian).

161 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

In other words, local raw materials are replaced with imported ones, reducing the options for domestic agricultural producers. During the post-Soviet slump in the economy in the early 1990s, light industry production plummeted. At first, its share (of total industrial output) was 23.6%,19 but very quickly it fell to near zero. As regards clothes and footwear, the reasons for the decline in production in these industries are quite understandable. As we know, their products were not quite competitive and simply could not compete with foreign goods: consumers virtually stopped buying local products. For a number of reasons, production at quite competitive light industry enterprises (such as some large textile factories) also fell; the technological process of silk making was disrupted. Let us consider the current situation in light industry. The Statistical Yearbook of Georgia includes a table showing output in industry.20 Data for light industry are presented under three hea- dings: (1) manufacture of textiles; (2) manufacture of wearing apparel, etc.; (3) manufacture of leather, leather products and footwear. In 2011, light industry produced GEL 92.9 million worth of goods (1.4% of total industrial output). So it turns out that over the last 23 years, despite the use of new technologies, these industries have not been revived even in part. Hence the massive imports of the respective products, amounting to GEL 637.5 million (the sum of several rows of the corresponding table),21 and the insignificant volume of exports, amounting to GEL 54.4 million. Thus, imports are 11.7 times larger than exports and 6.9 times larger than local production. During the post-Soviet collapse of the economy, the chemical industry was least affected com- pared to its other key sectors (in 1990, chemicals and petrochemicals constituted 4.9% of total indus- trial output). This is because the Azot production association and some smaller enterprises managed to stay afloat; in addition, a plant producing metal plastics began operating in the country.22 In 2011, this industry produced GEL 457.3 million worth of output (7.1% of total industrial output). Exports (naturally, for the most part included in the volume of output) amounted to GEL 377 million, and imports to GEL 841.6 million. The local production of rubber and plastics was GEL 116.8 million, imports of polymers amounted to GEL 486.6 million, and exports to only GEL 7.6 million. Thus, the trade balance for chemicals and polymers is very negative. At the same time, im- ports in these industries far exceed their own (local) production. Metallurgy accounts for a relatively large share of total industrial production. In 2011, its output (together with the manufacture of fabricated metal products) was GEL 996.3 million (15.5% of total industrial output). Imports of base metals and articles thereof amounted to GEL 942.5 million, and exports to GEL 877.2 million. Thus, it is quite obvious that in terms of a balance between exports and imports and the degree of self-sufficiency, the situation in metallurgy is better than in other industries. In spite of this, it is also in need of expansion and modernization. In particular, metal products are currently being replaced with metal plastics, which will require the creation of new production fa- cilities in the future.

19 R. Abesadze, N. Arevadze, op. cit., pp. 236-237. 20 Statistical Yearbook of Georgia 2012, pp. 140-141. 21 Ibid., pp. 250-255. 22 It is unclear under which heading its products are included in statistical reports: as chemical, polymer or metallurgical products.

162 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

Before the post-Soviet decline, Georgia had a well-developed building materials industry. In 1990, it accounted for 5.3%23 of total industrial output. At present, there are virtually no statistics for this industry. Output under the heading of “manufacture of other non-metallic mineral products”24 includes, along with building materials, such items as ceramic products; let us note that there is an opportunity to estimate the balance for this local industry (including exports and exports-imports). In 2011, output under the heading of “manufacture of other non-metallic mineral products” was GEL 606.6 million (9.4% of total industrial output). Imports of “articles of stone, plaster, cement, asbestos, mica or similar materials, ceramic products, glass and glassware” amounted to GEL 167.3 million, and ex- ports to GEL 12.6 million. Thus, the situation in the production of building materials is relatively favorable and, in the case of a targeted sectoral structural policy, it will be possible in the near future to achieve a trade surplus in this area. The situation in industries associated with woodworking is unfavorable. In the table showing output by economic activity,25 these industries are presented under three headings: — “manufacture of wood and products of wood and cork, except furniture” with GEL 88.5 mil- lion worth of output in 2011 (compared to GEL 26.6 million in 2010); — “manufacture of pulp, paper and paper products” with output of GEL 45.0 million (GEL 27.6 million in 2010); — “manufacture of furniture; manufacturing not elsewhere classified” (unfortunately, data on furniture are not shown as a separate item) with output of GEL 84.6 million. In 2011, there was a sharp increase in production in all these groups. For each of these groups, I have tried to summarize the data on exports26 and imports27 for 2012 (by converting US dollars into Georgian lari): — processed wood, panels, plywood, paperboard, building materials of wood, articles of cork, etc.: exports GEL 38.6 million, imports GEL 172.2 million; — paper, cellulose, paper products (except printed matter), etc.: exports GEL 17.6 million, imports GEL 158.3 million; — furniture: exports GEL 19.1 million, imports GEL 179.8 million. As we see, in this group of industries the situation is also very unfavorable. Although the indica- tors of local production (including exports) are given for 2011, and export-import indicators for 2012, we can say that imports in this group are several times higher than local production and, consequent- ly, exports. As a result, the country’s overall trade deficit increases significantly. An interesting situation has arisen with exports and imports of transport vehicles. In the condi- tions of low domestic production (“manufacture of other transport equipment” stood at GEL 157.7 million),28 exports of transport vehicles amounted to GEL 901.8 million (or 24.5% of total exports), and imports to GEL 2,228.7 million (19.1% of total imports). The point is that export and import figures include the value of re-exported motor cars, which in 2011 was $444.8 million,29 or about GEL 733.9 million. A more objective estimate of the balance of exports and imports (both for this industry

23 R. Abesadze, N. Arevadze, op. cit., pp. 236-237. 24 Statistical Yearbook of Georgia 2012, pp. 140-141. 25 Ibid., pp. 140-141. 26 External Trade of Georgia 2012. Statistical Publication, pp. 37-39, 58. 27 Ibid., pp. 85-88, 121. 28 Statistical Yearbook of Georgia 2012, pp. 140-141. 29 External Trade of Georgia 2012, p. 137.

163 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS and for the economy as a whole) can be obtained by deducting the value of re-exported cars from the respective figures. What is the situation in the production of high-tech consumer goods or the provision of high- tech services? In the table showing the volume of production in various industries (“output by eco- nomic activity”),30 high-tech products (apart from transport vehicles) are given under the following headings: — “manufacture of machinery and equipment;” — “manufacture of office machinery and computers” (GEL 0); — “manufacture of electrical machinery and apparatus;” — “manufacture of radio, television and communication equipment and apparatus;” — “manufacture of medical, precision and optical instruments, watches and clocks.” Output here adds up to only GEL 94.7 million (or only 1.47% of total industrial output). In the corresponding table,31 exports and imports of such goods are given under the following headings: — machinery, electronic and other equipment, etc.; — various instruments and apparatus. Imports of such items amount to GEL 1,297.2 million (11.1% of total imports), and exports to GEL 87.8 million (2.2% of total exports). These data clearly show that the worst situation in the Georgian economy is in the high technology sector, which is badly in need of massive imports of information technologies and other high-tech products and equipment. At the same time, it is evident that the cost of these imports cannot be offset by the production and export of similar (high-tech) products. Such products manufactured in 1990 for the most part became obsolete very quickly, with the exception of trucks, aircraft, television sets, etc. Today, many enterprises are implementing modern technologies that allow them to produce entirely new types of products. This takes place in the face of serious competition between countries for the location of high-tech enterprises in their territory. As regards Georgia, until recently it had little opportunity to attract capital (both domestic and foreign).

General Guidelines for Developing a Progressive Sectoral Policy

From the standpoint of attracting both national and foreign investors to the real production sec- tor, the following countries have an advantage: (1) Countries where domestic prices for food and other necessities (clothes, footwear, housing and electricity) are lower than world prices. In this case, companies save on wages and, consequently, on sales of products, thus earning higher profits (in order for agricultural product prices in the country to be lower than the world average, it is important to achieve a high degree of self-sufficiency in basic foodstuffs and energy resources). (2) Countries with a high potential for the production of relatively cheap electricity, which are becoming increasingly attractive.

30 Statistical Yearbook of Georgia 2012, pp. 140-141. 31 Ibid., pp. 250-255.

164 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

(3) Densely populated countries with large markets for goods produced by new enterprises (this condition is important in attracting multinational enterprises). (4) Countries with effective mechanisms designed to assist and stimulate local businesses, primarily in applying new technologies and ensuring sustainable production of appropriate products (in this case, opportunities for stable exports of the goods produced are very im- portant). (5) Countries that provide various tax incentives and a favorable organizational environment (either established by law or determined by contracts between the government and corpora- tions). It should be noted that countries in the first three of these groups are particularly attractive to multinationals. Georgia has significant opportunities for developing the power industry, and their realization can have a positive effect on the efforts to “correct” the country’s trade balance. At the same time, the production of electricity from coal mined in Georgia is currently of no importance (due to the relatively high cost of production). The country can also achieve significant successes in developing hydroelectric power; another option is to use solar panels (with modern technologies, they could generate 10% of the country’s electricity). But, as already noted, from 1990 to 2012 the authorities paid no attention to hydropower. To- day, the country’s new government is developing both a strategy for the hydropower industry and measures for its implementation. At the same time, new small and medium-sized hydropower plants (HPPs) with a total capacity of 500-700 MW (this refers to projects meeting environmental requirements) will hardly be able to satisfy the country’s growing demand for electricity (for comparison: Turkey is currently building several nuclear power plants with a capacity of 4,800 MW). That is why, in my opinion, it is neces- sary to return to the construction of the Khudoni HPP, but the implementation of this project, devel- oped by the Saakashvili Government, may bind the country to the investor company by onerous long-term commitments. For example, as former energy minister David Mirtskhulava writes in his article, the agreement provides that out of the annual electricity output of the Khudoni HPP (1.5 billion kWh) only 20% will be sold to the government during the four winter months at a reduced rate of 5.4 cents or 9.6 tetri per kWh (for comparison, in 2013, the price of electricity imported from Russia during peak hours was 9.5¢ per kWh). At the same time, he rightly notes that “cheap electricity is one of the main factors of enterprise competitiveness.”32 As noted above, the availability of cheap electricity is a key factor in attracting production in- vestment to the country. That is why the agreement on the construction of the Khudoni HPP should provide for the sale of all the electricity it generates to the country’s population at relatively low prices, in accordance with the cost of its production (for example, the cost of electricity produced by the Inguri HPP is 1.18 tetri per kWh).33 At the same time, in order to ensure that profits from the operation of the HPP stay in Georgia, it is advisable to conclude an agreement with the lead investor on the terms of a “co-investment fund.” Under its rules, a co-founder who withdraws from the project after a certain period (according to the

32 D. Mirtskhulava, “Khudoni HPP Will Pay $410 Million in Corporate Tax to the Budget over 20 Years,” 30 September, 2013, available at [http://www.bpn.ge/ekonomika/1270-davith-mirckhulava-khudonhesi-biujetshi-20-tselitsadshi-410- milioni-dolaris-mogebis-gadasakhads-sheitans.html?lang=ka-GE] (in Georgian). 33 Ibidem.

165 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS rules of the fund) will gradually have to sell most of its stake to the state (since the Khudoni HPP is a strategic facility). Today, there is no other economically sound option for the construction of a large hydroelectric facility in Georgian territory (for example, the construction of a very large HPP is hypothetically possible on the Rioni River, but the reservoir required for this purpose would cause significant eco- nomic and environmental damage to a number of population centers and agricultural lands located in the area to be flooded). There is also an opportunity to build one or two HPPs with an average capacity of 100-150 MW. As we saw above, today the output of high-tech industries is insignificant compared to the pe- riod preceding the collapse of the post-Soviet economy. Although it is impossible to create many high-tech enterprises in a relatively small country, it is nevertheless necessary to select a number of priority areas and to formulate and implement a development strategy in these areas. At the same time, it is necessary to find ways to revive previously existing high-tech enter- prises (as in the machine tool industry) based on new technology and to look for opportunities to establish new enterprises. The adoption of modern technologies and the deployment of a full production cycle on their basis to produce certain products is a very complicated process, which requires not only business coordination, but also government support. Today it is particularly difficult to set up large domestic enterprises because there is serious competition even between countries already producing quality products. But this does not rule out the possibility of setting up and operating large high-tech compa- nies in a relatively small country. Take, for example, the Finnish company Nokia, which is among the world’s largest high-tech companies. There is also strong competition between countries for the location of enterprises of leading multinational corporations. From this it follows that expanding the high-tech industry in a small country is a very difficult task whose solution requires the development of a sectoral structural policy (earlier known as “indus- trial policy”), which should be implemented by appropriate government organizations, and also by representatives of the business community or large private entities (the recently established Georgian Co-Investment Fund is of interest in this context; one can say that it is an important vehicle of sectoral structural policy involving private entities). As already noted, it is necessary to revive some traditional high-tech industries on the basis of new technology. As for new industries, along with the development of some areas of the information technology sector (for example, by restoring the production of computer monitors and TV sets; in the past, Georgia had a television manufacturing plant, but since monitors are now produced on the basis of new technology, this sector can be regarded as a new one), more attention should be paid, in my opinion, to products that have not yet reached the stage of mass production (in some countries, the consumption of such products has tended to increase). Here is a case in point. As mentioned above, some developed countries (especially Germany) have recently seen an increase in the share of energy (including electricity) obtained from solar pan- els. That is why, in my view, it would make sense to arrange the production of modern solar panels in the country by providing appropriate incentives to businesses coupled with a government campaign to promote their use by the population (as in the U.S. or Germany). On a global scale, there is now a significant shift of focus in the provision of financing toward clean energy (renewable energy sources). For example, on the very eve of the U.N. Climate Change Summit (which opened on 23 September, 2014), representatives of the Rockefeller Brothers Fund announced the Fund’s intention to divest from fossil fuel industries (to sell off assets worth $800 million) and invest in clean energy. Together with the Rockefeller Brothers Fund, some 180 institu- tions and 650 individuals joined the coalition of investors who pledged to divest their holdings in fossil fuels (a total of $50 billion). That was done as part of the global Divest-Invest initiative, which

166 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 provides an economic platform for those who wish to divest from “dirty” fossil fuels and invest in- stead in clean energy projects.34 In my opinion, along with the production of electricity from clean energy sources, in planning new industries in Georgia we should focus on technologies for the production of “super batteries” and composite materials. Three years ago we noted that with the development of small and sufficiently powerful batteries, electric vehicles could come into common use along with other modern technologies.35 American scientists have already created lithium-ion batteries where the lithium metal anode is coated with a monolayer of hollow carbon nanospheres and which are much lighter, smaller and more powerful than conventional batteries. In practical terms, the capacity of such batteries could be four times that of conventional batteries. They will help technologies to enter a new era. One can say that the internal combustion engine has acquired a real competitor.36 Of course, the production in Georgia of the battery created by American researchers is so far impossible for lack of access to the technology of its production and because of the relatively high cost of the manufacturing process.37 It would be advisable to recruit a group of Georgian researchers to analyze this new technology (say, under a government grant) so as to help entrepreneurs to start producing such batteries (they can be used not only in electric cars, but also in laptops, smartphones, etc.). Another area of modern technological development required for sectoral restructuring is the production of composite materials (including metal plastics) and articles thereof. Thus, the creation of composite materials and sophisticated products of such materials is an area of economic development that is highly relevant today. That is why Georgia should create a business environment that would encourage businesses to invest in the development of such industries (primar- ily through inclusion in appropriate international company and industry value chains). It is also necessary to monitor the production of new high-tech products and, based on a serious analysis, take decisions on the advisability of using a particular kind of product. Let us now turn to agriculture and industries that, for the most part, process its products, i.e. the food and light industries. As we see from the above analysis, the level of their self-sufficiency is quite low. The reasons for this have been analyzed in a number of our publications38 and should be studied separately. The next group of industries mainly produces products for intermediate consumption and use (or processing): metallurgy, chemical industry, polymer industry (manufacture of plastics and rubber and articles thereof), production of metal plastics, and building materials industry. Global demand for their products (especially for fertilizers, metal plastics and building materials) has been growing steadily. In the event of a rational choice of development areas for this group of industries, the total export-import balance for its products could turn positive in the foreseeable future (today it is nega- tive), and this regardless of the availability of the necessary feedstock in the country. Particular atten-

34 “Rokfellery reshili izbavitsia ot neftianykh aktivov,” 23 September, 2014, available at [www.interfax.ru/ business/398170]; “Rokfellery reshili investirovat v VIE,” available at [http://greenevolution.ru/2014/09/24/rokfellery-reshili- investirovat-v-vie/]. 35 V. Burduli, “Vzaimosviaz razvitiia tekhnologicheskikh ukladov i transformatsii ekonomicheskikh system,” Proceedings of International Scientific-Practical Conference Dedicated to the Foundation of Paata Gugushvili Institute of Economics “Actual Economic Problems under Globalization” (21-22 October, 2011), Tbilisi, 2011, p. 24. 36 “Teper akkumuliatory rabotaiut v chetyre raza dolshe,” 24 July, 2014, available at [www.gazeta.ru/ science/2014/07/28_a_6148149.shtml]; “Uchonye sdelali revoliutsionnyi proryv v zariadke akkumuliatorov,” available at [http://appress.com/science/7043-uchenye-sdelali-revolutsionnyi-proryv-v-zaryadke-akkumulatorov]. 37 Ibidem. 38 R. Abesadze, V. Burduli, Structural and Innovation Problems of Economic Development, Chapter VII, “The Need for Coordinated Development of Related Branches of Industry and Agriculture;” V. Burduli, op. cit., and others.

167 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS tion should be paid to metal plastics and articles thereof, and also to quality building materials, includ- ing for export purposes. Wood and wood products (building materials, furniture, paper, etc.) play an important role in meeting the needs of the economy and the population. As shown above, imports account for a sig- nificant share of such products available in the country. That is why the development of local produc- tion in this sector is one of the most important ways to achieve a positive structural effect on the economy. Unfortunately, uncontrolled logging and export of rough timber were a frequent occurrence throughout the period from 1990 to 2012. As a result, the opportunities for selective logging for the needs of the said industries were significantly reduced. One of the ways out of this situation is to organize production (primarily of furniture) based on imported raw materials with simultaneous use of local opportunities for timber supply. In order to increase local timber supply to meet the demand of woodworking enterprises, it is necessary to take proper care of the country’s forest areas and establish plantations of fast-growing trees (for example, eucalyptus trees have been planted along the perimeter of the Colchis swamps), as practiced in some countries. In the efforts to achieve a positive structural effect, a certain role could also be played by ratio- nal development of the service sector, primarily tourism, whose accelerated growth could lead to significant positive changes in the trade balance (provision of services to foreign tourists in the coun- try amounts to exports of services). The prospects for the development of this industry are a subject of special investigation; various aspects of this problem are considered in the works of K. Kveladze.39 The education system also has some potential in terms of serving foreign clients. An obvious conclusion from the above is that the “reorientation of the economic structure”40 in Georgia should proceed along the following lines41: (1) Expansion of power generation capacity mainly through the construction of HPPs. In addi- tion, drawing on the experience of Germany and the United States, we could move toward the use of solar energy. Gradually, its share in the country’s electric power balance could reach 10%. (2) Increase in the production of high-tech products (as a share of total industrial output) from its current share of 1.5%. This will make it possible to significantly increase the degree of national economic self-sufficiency, primarily by increasing exports. It is necessary to select several priority areas of development, with a revival of some traditional industries (for example, a multi-product machine tool factory using flexible, information and other ad- vanced technologies or a modern plant making TV sets, monitors and other computer equip- ment could be opened in the country) and the creation of new ones. It should be borne in mind here that the niche market for the products of such industries should not be oversatu- rated. At the same time, it is impossible to locate the entire manufacturing cycle in a single country. This is why the state should help national firms to integrate into international in- dustry-level value chains.

39 See, for example: K. Kveladze, “Policy of Innovations in Tourism Development,” Proceedings of International Scientific-Practical Conference Dedicated to the 90th Birth Anniversary of Professor George Papava “Actual Problems of Economies of Post-Communist Countries at Current Stage”(in Georgian). 40 T. Beridze, op. cit. 41 This article examines the sectoral structure only by economic activity, but structural content can also be viewed from other angles such as the distribution of enterprises by size.

168 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

(3) Coordinated development of related branches of agriculture and the food industry in order to enhance their import-substitution functions and export orientation. (4) Coordinated development of related branches of agriculture and light industry as the most urgent, top-priority task. (5) Accelerated development of production facilities (by modernizing and expanding existing facilities and building new ones) in the chemical, polymer and metallurgical industries and in the production of building and composite materials (including metal plastics). The goal here should be to achieve, after a certain period, a trade surplus for these industries as a whole. (6) Development of enterprises in the woodworking industry, primarily those producing furni- ture and building materials. (7) Development of service industries with an orientation toward an increase in their import- substitution and, if possible, export potential.

Sectoral Structural Policy (Strategies and Instruments)

Some modern principles of neoliberal policy formulated in a number of scientific works (by Joseph Stiglitz, John Williamson, and others) have already found their reflection in the rules and guidelines of global international organizations, which enable states to modernize, within certain limits, their economic policy and to respond correctly to the emerging realities. In formulating a sectoral structural policy and improving its instruments, today it is necessary to take into account the regulations and preferences provided for by the Association Agreement between the European Union and Georgia. It is precisely within the framework established by its provisions that Georgia has to develop and improve the coordination (strategy and instruments) of economic develop- ment designed to support the formation of an innovative neo-industrial (new sectoral) structure. After the collapse of the economy in the early 1990s and up to 2013, there was virtually no consistent, targeted improvement of the sectoral structure of the economy, which was largely due to the shortcomings and deficiencies of the mechanism for coordinating economic development. One of the main problems is that the country still lacks a sectoral structural policy and an economic mecha- nism for coordinating its implementation that meets current requirements. Back in the 1990s, I studied the experience of developed countries and argued the need for an industrial policy in Georgia with an appropriate mechanism for its regulation.42 In developed coun- tries, such mechanisms imply the existence of financial and credit institutions (excluding various investment funds), fiscal instruments, a sectoral development strategy (or indicative planning), insti- tutional measures such as the adoption of special laws, etc. Some economists believe that industrial policy in its initial sense no longer exists,43 but this is not quite so. To be more precise, some elements of government regulatory instruments of industrial

42 V. Burduli, “Industrial Policy: Institutional Framework and Economic Implementation Mechanism,” Proceedings of the Georgian Academy of Sciences. Economic Series, Nos. 1-2, 1996; V. Burduli, “Foreign Economic Relations and Industrial Policy,” Politics, No. 3, 1999 (both in Georgian). 43 See, for example: O. Ananyin, R. Khaitkulov, D. Shestakov, “Vashingtonski konsensus: peizazh posle bitv,” World Economy and International Relations, No. 12, 2010, pp. 17, 29.

169 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS policy (including private and public-private financial mechanisms) have been restricted mainly by international organizations, on the one hand, and this policy has acquired a new quality, on the other. The point is that today it is no longer possible to coordinate only the development of various branch- es of industry in the strict sense of the word without taking into account the service sector (including research and innovation) and agriculture, since all of these are in close interaction. Thus, industrial policy has now developed into sectoral structural policy. It covers the develop- ment problems not only of various branches of industry, but also of the whole economy. It should be noted that WTO rules have significantly restricted the use of industrial policy in- struments such as government financial support for exports, including in the form of subsidies de- signed to increase agricultural production (nevertheless, many states continue to use such subsidies). In addition, the opportunities for tariff protection of local production (customs tariffs on competing imports) have been significantly reduced. In spite of this, all developed and successful countries in the world have adopted some kind of policy for the development of sectoral structure, using various mechanisms for its implementation. To coordinate this policy, they use instruments of financial, credit and tax regulation, as well as pric- ing instruments and measures to create a proper institutional framework meeting current requirements (recently, post-Soviet countries have also shown increased interest in industrial policy).44 At the same time, sectoral structural policy and its instruments are now taking ever more ad- vanced, often new forms. The need to pay more attention to sectoral structure is confirmed by a number of provisions of the EU-Georgia Association Agreement. The Agreement says, in particular, that “Georgia shall strive to establish a functioning market economy and to gradually approximate its economic and financial regulations to those of the EU, while ensuring sound macroeconomic policies” (Title V, Chapter 1, Art 277.2). “To that end, the Parties agree to conduct a regular economic dialogue aimed at: (a) ex- changing information on macroeconomic trends and policies, as well as on structural reforms, includ- ing strategies for economic development” (Art 278). Chapter 5 of Title VI of the Agreement is devoted entirely to “Industrial and enterprise policy and mining.” It says: “The Parties shall develop and strengthen their cooperation on industrial and enterprise policy, thereby improving the business environment for all economic operators, but with particular emphasis on small and medium-sized enterprises (SMEs) as they are defined in the EU and Georgian legislation respectively” (Art 313). For the implementation of an effective sectoral structural policy in Georgia, it is very important to take into account the following provisions of this chapter: “To these ends, the Parties shall cooper- ate in order to: … (c) simplify and rationalize regulations and regulatory practice, with specific focus on ex- change of good practices on regulatory techniques, including the EU’s principles; (d) encourage the development of innovation policy, via the exchange of information and good practices regarding the commercialization of research and development (including support instruments for technology-based business start-ups, cluster development and access to fi- nance); … (g) facilitate the modernization and restructuring of the EU and Georgian industry in sectors, where appropriate” (Art 314). The sectoral structural approach is reflected in the provisions of Chapter 12 (“Cooperation in research, technological development and demonstration”) of Title VI: “The Parties shall promote

44 See, for example: A. Kalinin, “Postroenie sbalansirovannoi promyshlennoi politiki: voprosy strukturirovania tselei, zadach, instrumentov,” Voprosy ekonomiki, No. 4, 2012.

170 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 cooperation in all areas of civil scientific research and technological development and demonstration (RTD) on the basis of mutual benefit and subject to appropriate and effective levels of protection of intellectual property rights” (Art 342). “Cooperation in RTD shall cover: (a) policy dialog and the exchange of scientific and technological information; (b) facilitating adequate access to the respective programmes of the Parties; (c) increasing research capacity and the participation of Georgian research entities in the re- search Framework Programme of the EU; (d) the promotion of joint projects for research in all areas of RTD” (Art 343). As we see from these excerpts, the general strategy of national economic development can in- clude more or less specific strategies, primarily sectoral structural policy (in a narrower sense, under- stood as industrial policy), a policy for the coordinated development of related branches of agriculture and industry, and more detailed sectoral (sector/industry-specific) policies. As for the location of large enterprises (especially divisions of multinationals) in the country, this requires special coordination,45 but under the terms of the EU-Georgia Association Agreement (which pays particular attention to cooperation in developing small and medium-sized enterprises) this does not quite fit into the framework of modern principles for regulating industrial policy. Post-Soviet countries are particularly in need of a general strategy for the development of sec- toral structure (with the identification of specific strategies within it) and mechanisms for its imple- mentation because in a situation of increasing competition for real investment it is impossible to create an economy with an effective sectoral structure (or, more precisely, to restore the effective sectoral structure with due regard for the new technological requirements). After 2004, along with a reform of the tax system in Georgia, some of the already existing in- struments of economic coordination were used incorrectly (or even abolished). For example, the authorities abolished the mechanism of indicative planning (although without a proper mechanism to promote the development of the sectoral structure of the economy, the achievement of targets set by indicative planning would have been impossible anyway). There were numerous violations in other, especially institutional, mechanisms. In particular, property rights were often violated, and large- scale privatization involved serious breaches of law. Abuses of antitrust law restricted competition, and frequent distortions of legislative initiatives led to a distortion of relations between employers and employees, which is clearly inconsistent with EU requirements for regulating labor relations.46 Despite EU requirements, no measures were taken to regulate food security or ensure proper coordination of the development of agriculture implying the use of various fiscal, financial and cred- it instruments. Moreover, cases where agricultural lands were sold to foreigners (many of whom ac- quired land for speculative purposes and did not cultivate it) became more frequent, which had a very negative effect on the production capacity of local farmers (in 2013, the authorities announced a one-year moratorium on the sale of land). All of that had an adverse effect on the state of the sectoral structure, with the result that the economy became even less self-sufficient in most sectoral and product groups. Under the previous Georgian government, limited government resources were mainly used to finance projects whose implementation made the structure of the economy even less diversified and less self-sufficient. Bidzina Ivanishvili characterized the situation very clearly: “The economy was

45 Ways to coordinate the location of multinational enterprises in Georgia were discussed in our article: V. Burduli, R. Abesadze, op. cit. 46 V. Papava, “Georgia’s Economy: Post-Revolutionary Development and Post-War Difficulties,”Central Asian Survey, Vol. 28, No. 2, June 2009.

171 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS managed by wrong methods, and the quantitative growth achieved in the country was mainly due to the activity of government structures and decisions taken by one person. Some public investments were effective. I mean the small infrastructure projects implemented by the state, whereas all other construction projects, including the parliament building in Kutaisi, the Batumi Tower, the water park in Anaklia, and other similar facilities, were of inferior quality.”47 There was also an increase in the amount of funds used to meet external debt service obliga- tions, which significantly complicated the implementation of measures to remedy the economic situ- ation. But in the spring of 2013, serious measures were already taken to revive agriculture by provid- ing financial and technical assistance to farmers, and this has enabled them to increase output. “The Ministry of Economy and the economic team are developing a medium-term economic development plan”48; steps are being taken to create investment and other funds designed to promote economic growth (co-investment fund, landscape fund, etc.). In 2013 and 2014, production growth rates were quite acceptable but clearly insufficient for the solution of the tasks facing Georgia. That is why, in order to overcome the problems associated with the global challenges in achiev- ing sustainable and accelerated innovative neo-industrial development (such as forming a modern sectoral and technological structure; raising the level of national economic self-sufficiency and, ac- cordingly, improving the trade balance; ensuring priority development of export-oriented and import- substitution sectors; accelerating the development of agriculture and high-tech industries; diversify- ing production in the country and its regions; developing a system of services for core production, etc.), it is necessary to continue improving the systems for coordinating and financing the develop- ment of the country and its regions. The first thing to do is to develop an appropriate strategy and upgrade existing mechanisms (and establish new ones) to financial and support development. The strategy for the development of Georgia’s sectoral structure should be formulated taking into account the current realities of transition to a new technological order, and also the requirements and preferences of the EU-Georgia Association Agreement, WTO, IMF, and other international or- ganizations. In this process, we should start from the following basic tasks: — outline ways of implementing structural policy with due regard for national priorities and the need for a level of diversification of production, R&D and the social sector acceptable for a small country, so as to increase employment and drastically reduce poverty; — take account of the need for gradual and constant restructuring of the economy based on the requirements of the modern technological order, with an orientation toward a gradual in- crease in the degree of its self-sufficiency; — define the tasks to be addressed in the establishment of the modern technological order, which include the selection of priority sectors on a national and regional level (taking into account regional peculiarities), the development and implementation of a policy to stimulate the formation of growth centers (industrial hubs, innovation centers, etc.), and choice of ways to develop export-oriented, import-substitution and other sectors of particular relevance through the creation of ancillary facilities required for their operation; — take account of the need to identify national priorities for ensuring an improvement in the quality of economic development and an increase in employment so as to unlock the intel- lectual potential of employees; — balance the production and social components of economic development. By social compo- nent is meant both a satisfactory level and quality of employment (against the background of

47 “Bidzina Ivanishvili Believes There Is Speculation Over Economic Recession,” available at [www.interpressnews. ge], 4 September, 2013 (in Georgian). 48 Ibidem.

172 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

a significant reduction in unemployment) and public consumption, i.e. a balanced reproduc- tion process (“population/employees-labor market-production-market of goods and public services-public consumption”49); — ensure a balanced structural economic policy at different territorial levels (municipalities, regions and the country as a whole); — take account of the need to provide financial support for economic restructuring (including grants, the activity of appropriate funds and of fiscal, financial and investment sectors); — outline ways to mobilize funds (private, public and foreign) and investment resources; — ensure balanced development of the economy in terms of economic activities with special emphasis on the comprehensive development of agriculture in conjunction with industries processing agricultural products, especially with top-priority (primarily high-tech) indus- tries; — ensure an improvement in the institutional structure for state and market coordination of the efforts to upgrade production, including the financial and other support sectors (taking into account the need to coordinate the development of the social component of the economy); — ensure coordination of policy in the development of international relations in the field of investment activity and trade in assets and consumer goods. It is also possible to develop specific, more detailed strategies (as is evident from the above excerpts from the EU-Georgia Association Agreement) in areas such as innovation activity, new high-tech industries, and related sectors of industry and agriculture, as well as national food security and employment. Let us take a brief look at ways to improve the instruments for coordinating the development of sectoral structure. An improvement in the fiscal mechanism so as to ensure effective development of sectoral structure implies, in the first place, an improvement in the system of tax rates. This refers, in particu- lar, to the introduction of a progressive tax scale for income and profits taxes (as is customary, say, in the EU countries) in order to collect sufficient funds for public development financing. It is also necessary to introduce a system of tax incentives to accelerate the development of businesses operat- ing in priority sectors.50 The fiscal mechanism in Georgia should also be improved at the regional (territorial) level. For example, Prime Minister Irakli Garibashvili said at the political forum “Growth Challenges for Geor- gia” that “steps should be taken toward decentralization in order to enhance the role of regional units in stimulating economic processes.”51 In this connection, government agencies should consider the principles of mobilizing budget funds at the regional level. Let us now look at the financial mechanisms that support development. It should be noted that both members of the business community, the government and other organizations often make unconventional decisions in this area taking into account the latest trends observed in the organization of various funds and institutions in developed countries. First of all, let us note that in October 2013 the authorities established a Landscape Fund at the initiative of the Patriarch of Georgia. Its main task is to restore the country’s forest potential, which is necessary, among other things, to provide the economy with timber.

49 N. Glazyrin, “Ob innovatsionnykh sotsialno-proizvodstvennykh kompleksakh,” Ekonomist, No. 1, 2008, p. 47. 50 A more detailed analysis of the problem of improving the fiscal mechanism is given in: V. Burduli, A. Abesadze, op. cit. 51 I. Garibashvili, op. cit.

173 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

In attracting investment resources and improving the country’s sectoral structure, a significant role can be played by the Georgian Co-Investment Fund (GCF), established by a group of major domestic and foreign investors “taking into account current Western practices and standards.”52 This Fund is, in fact, a new modern tool for implementing sectoral structural policy capable of handling very large investments on a national scale. Experienced specialists taking part in its work can make a proper assessment of investment projects and select the soundest ones. In addition, the Fund shares the risks of the project participants (25%-75%). At the same time, in the next five to seven years after its establishment, the Fund will begin to withdraw from the project, which will be possible in the following cases: 1. Transfer (sale) of the Fund’s stake in the project to a co-owner or partner. 2. Transfer (sale) of the Fund’s stake in the project to a strategic or financial investor. 3. Initial public offering on local or international stock exchanges. An advantage of this type of investment is that instead of using bank loans to finance projects, which implies the need to pay interest (and principal) as scheduled, such a fund invests money in business companies, shares their risks, and does not require interest payments. In my opinion, another advantage of the Georgian Co-Investment Fund is that major investors taking part in concrete projects can provide access to their niches in world markets for products made by the new companies established with their participation. Clearly, a significant part of investments will be made with the assistance of the Fund, which does not rule out the need to create an investment (or development) bank as is the practice in many countries, as well as other modern investment funds with the participation of public and private capital (in various forms). Another fund operating in Georgia (since 2011) is the Partnership Fund, which uses the re- sources of several large state-owned corporations for investment purposes. But its resources are clearly insufficient for providing proper government financial support for rational structural reform. That is why in December 2013 the Georgian government decided to establish a Sovereign Wealth Fund, and a bill to that effect was drafted pursuant to that decision. Later on, in April 2014, it was decided to reorganize the Partnership Fund and establish a Development Bank of Georgia JSC, but this was not done because many believed that the Fund still had potential. Today, the Partnership Fund continues to operate in accordance with the Law of Georgia on Joint Stock Company “Georgian Partnership Fund” (No. 5746 of 2 March, 2012; updated on 20 September, 2013). The Development Bank of Georgia will be founded in the near future, when the work on its constitutional documents is completed. Thus, an analysis of the final section of this article leads to the following basic conclusions: 1. Georgia needs a strategy for the development of sectoral structure. A simple return to in- dicative planning is no answer to the problem: for effective development of sectoral struc- ture, it is necessary to set clear guidelines for the operation of instruments used to coordi- nate this process. The formation of an effective sectoral structure of the economy is impos- sible without government support and assistance. 2. Within the strategy for developing sectoral structure in terms of groups of industries (high- tech industries, related sectors of agriculture and industry, building materials industries, etc.), it is necessary to determine and validate priority areas of development, clearly indica- ting the factors that can ensure accelerated development of a particular sector from the

52 T. Karchava, “Co-Investment Fund Has Already Accumulated $6 Billion,” 30 September, 2013, available at [www. for.ge/view.php?for_id=27126&cat=1]; “Co-Investment Fund: We Will Finance All Good Projects,” 7 October, 2013; E. Tukhi- ashvili, “Direct Investment in the Country Will Amount to $6 Billion,” available at [www.kvirispalitra.ge/economic/18928- thanainvestirebis-fondi-yvela-karg-proeqts-davafinansebt.html] (all in Georgian).

174 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

perspective of import substitution, an increase in the export potential, and greater self-suf- ficiency of the economy as a whole. It is necessary to identify the opportunities for self-fi- nancing and loans to businesses that would allow them to implement intended effective projects, and also to “activate” appropriate support instruments for attracting the necessary multinational enterprises. In order to reduce investment risks, the sales opportunities for the products to be produced in the event of the implementation of a particular project should be assessed in advance. 3. For the recovery and development of some sectors of industry and agriculture, it is advis- able to adopt special laws (as in Japan). As for general laws (such as the Tax Code), they should provide for methods of stimulating innovation and investment activities (as in Swe- den). 4. It would make sense to establish a development (investment) bank using public and private resources, with the principles of its operation written into law. The simultaneous activities of the above-mentioned investment funds and the development bank should “supplement” private capital and ensure a high level of investment activity in Georgia.

Conclusion

Thus, for all groups of industries considered above (energy, food, chemical, polymer and light industries, agriculture, building materials, high technologies, etc.), the level of self-sufficiency of the Georgian economy is more or less low. At the same time, for the group of high-tech industries (in accordance with statistics, I have included in this group a relatively wide range of industries from the automotive and machine tool industries to information technologies) and light industry this level is extremely low. In order to achieve a tangible structural effect in the near future (primarily by increasing the self-sufficiency of the economy), it is necessary, in particular, to focus attention on the construction of hydropower plants and to accelerate the creation and development of import-substitution and ex- port-oriented production facilities in the food and light industries, paying much attention to their re- source base. Without a transition to accelerated development of mainly export-oriented high technology industries meeting the criteria of priority areas (such as the production of CNC machine tools, solar cells, etc), any significant improvement in the country’s trade balance is impossible. To promote effective sectoral restructuring of the economy, it is advisable to develop a sectoral structural policy with a set of instruments of both government and business coordination. The Geor- gian Co-Investment Fund, established by major Georgian business entities, will evidently make a serious contribution to increasing investment activity in the country with focus on appropriate sec- toral restructuring of the economy. At the same time, banking mechanisms used in some countries to promote investment in the construction of production facilities that make economic sense for obtaining a significant structural effect should not be rejected either. It is necessary to establish a bank for reconstruction and develop- ment (or an investment bank) to provide long-term soft loans to finance attractive projects (based on a thorough preliminary study of these projects), with joint public-private investment.

175 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS CHINA IN THE OIL AND GAS BRANCH OF TURKMENISTAN

Vladimir PARAMONOV Founder and Director of the Central Eurasia Analytical Project [www.ceasia.ru] (Tashkent, Uzbekistan)

Alexei STROKOV Member of the Expert Council of the Central Eurasia Analytical Project (Tashkent, Uzbekistan)

ABSTRACT

n the 1990s, China showed practically years (2006-2009), Beijing built up its pres- no interest in Turkmen oil and gas. It de- ence in Turkmenistan and, after the agree- I veloped this interest in the middle of the ments of September 2013, became an un- first decade of the twenty-first century and contested leader in the Turkmen oil and gas has been widening it ever since. In three industry.

KEYWORDS: China, Turkmenistan, Xi Jinping, oil and gas industry, CNPC, the South Iolotan gas fields, Osman, Yashlar and Minara, the Galkynysh project, the Bagtiyarlyk territory, Turkmengaz State Concern, Gazprom, the Seydi Refinery, the Turkmenistan-China gas pipeline, the TAPI gas pipeline, the Nabucco gas pipeline.

Introduction

Until the middle of the first decade of the twenty-first century, China and Chinese companies displayed no interest in Turkmenistan, its energy sector, or its oil and gas, despite China’s rapidly in- creasing demand for energy resources and the fact that the two countries established diplomatic rela- tions on 6 January, 1992 (immediately after the Soviet Union’s demise). This was largely explained by the distances separating the two countries and the poorly developed transportation infrastructure. This also explains the poorly developed bilateral trade which, until 2006, remained practically un- noticed in the tiny volume of the Turkmen economy. Indeed, between 1992 and 2006, the volume of its bilateral trade with China never went beyond $125 million, or 1.8% of the republic’s total trade turnover. In the latter half of the first decade of the twenty-first century, China began demonstrating much more political and economic interest in Turkmenistan and developed a strategic interest in its gas reserves. In April 2006, during President Niyazov’s visit to China, the sides signed seven bilateral documents, the main being an agreement between the Ministry of Oil, Gas and Mineral Resources of

176 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

Turkmenistan and the Chinese National Petroleum Corporation (CNPC) on cooperation in the oil and gas sphere. It should be said that Beijing’s interest in the gas resources of Turkmenistan coincided with Ashghabad’s intention to diversify its foreign economic ties in many fields, including oil and gas. For a long time, the republic had been trying to decrease its pipeline dependence on Russia, that is, Gaz- prom, to build a more balanced economy and decrease its dependence on the raw materials sector. It seems that the coinciding strategic interests and the bilateral agreement in the oil and gas sphere in- vigorated China’s interest in Turkmenistan and extended it from the oil and gas sector into other branches of primary importance for Ashghabad.

Table 1

Trade between China and Turkmenistan (1997-2014)

Trade Turnover, Supplies from China Supplies from Turkmenistan Year $m to Turkmenistan, $m to China, $m

1997 19 — —

1998 24 — —

1999 29 22 7

2000 37 26 11

2001 47 — —

2002 91 88 3

2003 122 (100) 103 19

2004 117 (102) 100 17

2005 105 (114) 89 16

2006 125 (133) 107 18

2007 377 (400) 314 63

2008 663 (680) 568 95

2009 1,652, (1,700) 1,472 180

2010 1,566, (1,650) 1,040 526

2011 2,350, (2,460) 1,440 910

2012 3,980, (4,000) 1,450 2,530

2013 4,225, (4,800) 1,680 2,545

2014 4,895, (5,000) 2,245 2,650

S o u r c e s: The figures for 1992-2001—the Asian Development Bank (ADB) with reference to the national boards of statistics of Turkmenistan; the figures for 2002-2012—The Economist Intelligence Unit with reference to the national boards of statistics of Turkmenistan; the bracketed figures for 2003-2014 were supplied by the Ministry of Commerce of the People’s Republic of China.

Bilateral trade has been gaining momentum: in 2007, trade turnover between the two countries increased 3-fold: from $125 million in 2006 to $377 million in 2007. In 2008, trade turnover rose by

177 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

76% to achieve a figure of $663 million. In 2009, trade volume rose 2.5-fold against the previous year to reach $1.6 billion. In 2010-2014, Chinese-Turkmen trade turnover increased over 3-fold to come close to $4.9 billion in 2014 (see Table 1). The diagram offers a much more graphic picture of China-Turkmenistan trade dynamics in the post-Soviet period (see Diagram 1).

Diagram 1

Trade between China and Turkmenistan (1997-2014, $m)

6,000

5,000

4,000

3,000

2,000

1,000

0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

China’s interest in Turkmen gas (the reserves of which are fairly large) explains the rapid inten- sification of the two countries’ bilateral trade. Moreover, Turkmenistan is the only post-Soviet coun- try with a high export potential: it can afford to export over three quarters of the gas it produces. Turkmenistan assesses its gas reserves at 25-50 trillion cu m; seen from abroad this looks like an overestimation. The International Energy Agency, British Petroleum, etc. talk about 3 to 4 trillion cu m of proven gas reserves, not counting the discovered in the post-Soviet period (in 2006-2009) and still unexplored South Iolotan, Osman, Yashlar, and Minara gas fields, on which Turkmenistan pins its hopes. Their volumes are still unknown (they have been developing since 2011 within the Galkynysh project), although according to Turkmen sources, they are considerable—from 18 to 26 trillion cu m. Even if Ashghabad deliberately overestimates its gas resources, it can export a larger share of the gas it produces—its population is small (slightly over 5 million), large-scale industry is limited to the oil and gas sector, and the heating season is short—which attracts China and its companies to the Turkmen market. This was fully confirmed in September 2013 when, during PRC Chairman Xi Jinping’s visit to Turkmenistan, the sides reached several fundamentally important agreements on China’s greater presence in Turkmenistan’s oil and gas sphere. The sides signed a set of bilateral documents on

178 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 wider cooperation between the Peoples’ Republic of China and Turkmenistan, mainly in the gas sec- tor, related to the development of the most promising gas fields, the construction of gas-processing facilities, and the extension of the gas transportation system toward China. So far China is not interested in Turkmen oil and the country’s oil export potential, nor will it acquire this interest any time soon: the oil reserves are moderate and, therefore, not enticing. Turk- menistan insists on 15 to 20 billion tons of oil reserves, which is probably a gross exaggeration. The figures supplied by independent international structures and companies (the International Energy Agency, British Petroleum, etc.)—from 200 to 400 million tons—look more plausible. Whatever the case, Turkmenistan cannot supply China with adequate volumes of oil: it exports several million tons a year; the exported volumes are steadily decreasing because the country tends to refine the steadily growing amounts of oil at home. In short, China has no interest in Turkmenistan’s oil sector. China and its companies are actively involved in the gas segment. Since 2007, the CNPC has been developing several gas-related projects; it is involved in building gas-processing plants and lay- ing the Turkmenistan-China main gas pipeline designed to ensure considerable and long-term sup- plies of Turkmen gas to China.

Oil and Gas Production

The specifics of the Chinese projects being implemented in Turkmenistan confirm that China has come to the country to concentrate on gas production and that the insignificant oil reserves hold no interest for it. This explains Beijing’s very logical policy of securing for itself as large amounts of Turkmen gas as possible, as well as the two very logical schemes it uses in a country that does not trade in its oil and gas assets. China provides loans for production projects (which are repaid by means of gas exports to China) and the CNPC’s steadily increasing involvement in Production Sharing Agree- ments (PSA).  First, after beginning commercial production of gas in late 2009, in 2010, China produced 8.7 bcm of gas; in 2011, 12 bcm; in 2012, 13 bcm; and 2014, about 24 bcm, or about 30% of the total amount of gas produced in Turkmenistan (80 bcm). So far, China has been and remains indifferent to Turkmen oil: the CNPC shows no interest in oil production. On the one hand, the local recoverable oil reserves on the conti- nent and offshore are too small to merit attention. On the other, Ashghabad is steadily cut- ting back on the volumes of exported crude oil and increasing oil refining inside the coun- try. This is explained by the fact that Turkmenistan (unlike Kazakhstan) has enough facili- ties to refine the total volume of oil produced in its territory. There is no oil pipeline infra- structure between the two countries, while moving the very limited volumes of oil by rail across Uzbekistan and Kazakhstan is hardly profitable. This means that China will not de- velop an interest in Turkmen oil, at least not any time soon.  Second, China’s policy aimed at a steadily growing volume of gas production in Turk- menistan is affected by different or even contradictory factors. On the one hand, China’s desire to increase its share in gas production in Turkmenistan is limited by the state policy of Turkmenistan, which prefers to remain in control of its oil and gas sphere, the country’s main source of money. On the other, Ashghabad meets China, willing to increase its share in gas production, half-way by willingly reserving considerable volumes of gas to settle China’s loans; it as willingly enters into PSA with the CNPC.

179 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

This means that in the absence of competition in the gas sector of Turkmenistan and its very limited possibilities to diversify its gas export China is increasing gas production volumes and reserving the steadily growing amounts of gas delivered to its territory.  Third, in the future, too, China will probably retain its high profile in the gas sector of Turkmenistan and in the short (up to 3 years) and mid-term (up to 10 years), it will remain willing to increase gas production in Turkmenistan. Amid the deepening world financial and economic crisis and the low gas prices, China will demonstrate even more determina- tion to invest in new projects. Consistent gas supplies are of fundamental importance for the Chinese economy, which is gradually replacing coal in its energy balance with gas. This means that Beijing will be guided by strategic rather than commercial interests. In the short and mid-term, Turkmenistan stands a good chance of remaining the largest supplier of natural gas to China. Russia, another possible supplier of large amounts of gas, is so far unwilling to sell its gas on China’s conditions. The much cooler relations between Moscow, on the one hand, and the U.S. and Brussels, on the other, in the latter half of 2014 onwards, the Western sanctions, the lower hydrocarbon prices, and the weaker ruble will probably force Russia to retreat on the gas price issue. In 2015, the share of China in gas production in Turkmenistan will increase and con- tinue to grow due to the unfolding gas deliveries from the newly commissioned South Io- lotan, Osman, Yashlar and Minara (the Galkynysh project) developed with the help of the CNPC. It is expected, and with good reason, that they will produce from 25 bcm to 30 bcm of gas every year, which will be moved to China to pay off the loans that made the Galkynysh project possible. When completed, the project’s second stage is expected to produce 60 bcm of gas a year. This means that in the short term the Chinese companies operating in Turkmenistan (within the Galkynysh project and in the Bagtiyarlyk territory) will probably produce about 40 bcm of gas every year (which is equal to the total capacity of the first and second lines of the Turkmenistan-China main pipeline). According to official information, which comes from Turkmenistan, Beijing plans to reach these gas production/export to China figures in 2016. It is hard to say today how much gas China will produce in Turkmenistan in the mid-term (up to 10 years) and long term (up to 20 years). The official figures of gas reserves of South Iolotan, Os- man, Yashlar, and Minara look grossly exaggerated. On the other hand, Turkmenistan has officially announced that by 2021 Beijing expects to reach an annual figure of 65 bcm of gas produced/ex- ported to China (the total capacity of the first, second, and third lines of the Turkmenistan-China pipeline). On the other hand, local oil will not interest China either in the short, mid-, or long term. Turk- menistan will refine locally produced oil itself, while oil export from the country will either be dis- continued or drop to insignificant volumes. There is no reason to expect a more or less considerable increase of oil production in Turkmenistan. Several European and Asian companies engaged in oil prospecting in the Turkmen sector of the Caspian offshore have not yet come back with promising results.

Refining Oil and Gas

China is involved in hydrocarbon refinery in Turkmenistan on a large scale, which looks im- pressive since no other states or companies are involved in refining projects. On the other hand,

180 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

China has limited its activity to reaching the tank gas stage needed for export, as well as to refining small amounts of Afghan oil at the Seydi Refinery.  First, China’s involvement in hydrocarbon refinery in Turkmenistan is part of Beijing’s strategy in the country, viz. large and steadily growing volumes of gas production and ex- port to China. China is helping to develop gas fields, has opened a credit line within the Galkynysh project, and is steadily moving into gas processing: — In 2007-2009, the CNPC built a gas processing plant with an annual capacity of 5 bcm in the Batiyarlyk territory; — In 2011-2014, the Chinese company added another gas processing facility in the same territory of an annual capacity of 9 bcm; — In September 2013, the State Concern Turkmengaz and the CNPC signed an agreement in R&D and construction of a plant near South Iolotan with an annual capacity of 30 bcm (construction began in May 2014).  Second, China’s active involvement in gas processing in Turkmenistan means that it has come to stay: Beijing plans to build more large gas processing plants in Turkmenistan, very much in line with Ashghabad’s intentions to increase gas production. In view of the part- ners’ identical long-term interests—both want to produce, process and export to China the maximally large volumes of gas—China will continue building gas processing facilities in Turkmenistan.  Third, it seems that in the future China will not go beyond the tank gas stage. In the short (up to 3 years) and mid-term (up to 10 years), Chinese companies will be steadily increasing the volumes of gas processed in Turkmenistan. This is confirmed by China’s plans related to gas exports. In 2016, the volumes of Turkmen gas export to China will grow more than 1.6-fold: from 24 bcm in 2014 to 40 bcm. As mentioned above, in 2021, the planned annual volumes of Turk- men gas exports to China will reach 65 bcm, the plans based on the huge volumes of gas produced within the Galkynysh project and in the Bagtiyarlyk territory. At the first stage (2014-2016), Turk- mengaz will supply from 17 to 27 bcm of tank gas exported along the Turkmenistan-China pipeline. In any case, the present gas processing facilities in Turkmenistan will not be able to cope with the expected annual amounts of 65 bcm. Today, two gas processing plants, which the CNPC built in Turkmenistan in the Bagtiyarlyk territory, process 14 bcm of gas every year; the plant in the South Iolotan territory (within the Galkynysh project), which is still being built, will bring the combined annual processing capacity up to 44 bcm. China should not only accelerate construction of one more gas processing plant with an annual capacity of 30 bcm (the second stage of the Galkynysh project), but also start planning more gas processing plants to be able to process the required 65 bcm of con- tracted gas to end its dependence on Turkmengaz. The fourth line of the Turkmenistan-China pipeline, which is still being laid (annual capacity of 30 bcm), will increase China’s need for gas processing. It seems that the pipeline agreements be- tween the two countries include certain plans for tank gas production. If the gas reserves currently developed within the Galkynysh project turn out to be large and fairly close to Ashghabad’s assess- ments, China and Turkmenistan will start talking about the fifth line of the same pipeline. Long-term (up to 20 years) prospects remain dim: the volumes will depend on China’s need and Turkmenistan’s real gas reserves and volumes of gas production. It seems that in the future, too, China will not be interested in local oil: on the one hand, Chinese companies will not build new oil refineries in Turkmenistan which, unlike Kazakhstan, has not

181 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS enough crude oil to load all oil refineries now operating on its territory. On the other, Ashghabad will hardly sell its oil refineries to any other country, including China: it needs them as the second (after gas exports) largest source of income: it exports oil products (petrol, kerosene and diesel fuel). China’s contribution to oil refinery in Turkmenistan will be probably limited to selling it, on credit, oil refining equipment.

Transportation of Oil and Gas

Beijing’s plans to build and service the gas pipeline infrastructure in Turkmenistan are obvi- ously long-term; it is seeking the largest volumes of gas export and domination of, if not monopoly on, the Turkmen gas market. Suffice it to mention its consistent efforts to increase the carrying capac- ity of the Turkmenistan-China gas pipeline: while construction of the third line is being hastily com- pleted, an agreement on the fourth line has been already signed. It seems that the fourth line of the Turkmenistan-China gas pipeline should be interpreted not only as China’s desire to buy practically all the gas Turkmenistan is ready to export, but also as Bei- jing’s strategic plans to radically strengthen its economic/energy and, hence, political position in Uzbekistan, Tajikistan, and Kyrgyzstan. Turkmen gas will probably play a very special role in these plans.  First, China’s involvement in pipeline construction, which we have been observing since 2007, is significant and adequate to its involvement in developing the gas fields and build- ing gas processing plants in close proximity to gas fields. Between 2007 and 2011, China invested in two lines of the Turkmenistan-China gas pipeline with a total annual capacity of 40 bcm. It was expected that the third line of the same pipeline with an annual capacity of 25 bcm would be commissioned in the first half of 2015. In September 2013 the two countries signed an agreement on the fourth line which would by-pass Kazakhstan and cross Uzbekistan, Tajikistan and Kyrgyzstan, its expected annual capacity being 30 bcm. The CNPC is paying for certain extra elements of the gas pipeline system (local gas pipelines) to increase the volumes of gas sent into the main pipeline from the gas fields in the east (the Bagtiyarlyk territory) and southeast (the Galkynysh project) of Turkmenistan.  Second, the gas transportation system is an important part of China’s gas strategy for ensur- ing a long-term and consistent inflow of imported gas into the country. In view of the fact that Turkmenistan is China’s biggest gas supplier (and will probably remain such at least in the mid-term), China will have to concentrate on the construction and development of the gas pipeline system in Turkmenistan and the region as a whole. The planned fourth line of the Turkmenistan-China gas pipeline will help Beijing ensure its gas-related and strategic interests in Central Asia. The fourth line will allow China to address three important tasks. First, and probably most important: it will increase the annual volumes of imported Turkmen gas from 65 to 90 bcm, or the lion’s share of Turkmenistan’s gas exports. This will reduce to naught possible rivaling projects to move gas to South Asia and Europe. Second, gas supplies from Turkmenistan will be diversified: the fourth line will bypass Kazakhstan overloaded with pipeline infrastructure. Third, and no less important: the gas moved across Kyrgyzstan and Tajikistan will heat these countries in winter and create cer- tain prerequisites for resolving a problem that causes a lot of anguish in the region and is acutely felt in Kyrgyzstan, Tajikistan, and Uzbekistan. It will help to restore the Soviet

182 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

water and energy exchange scheme, this time under Chinese, not Russian, arbitration. Bei- jing will acquire powerful pressure levers on Bishkek, Dushanbe, and Tashkent and much greater local support of its initiatives in Central Asia.  Third, in the short term (up to 3 years), China will bring the annual carrying capacity of the Turkmenistan-China gas pipeline up to 65 bcm: Turkmenistan has enough gas to increase the exported volumes even if it turns out that its gas reserves were deliberately overesti- mated. During the last Soviet years, Turkmenistan produced about 90 bcm of gas every year and ex- ported, on average, about 65 billion. Today, with the proven gas reserves being two times bigger than the 1990 level, Turkmenistan can double the volume of production/export: from 90/65 to 180/130 bcm a year. This looks more optimistic than what the International Energy Agency says about the Turkmen gas reserves. It forecasts that by 2025 Turkmenistan will produce about 140 bcm of gas a year and will export about 100 billion. The two forecasts, however, do not contradict one another: either of them promises stable annual gas supplies to China of no less than 65 bcm, both in the mid- (up to 10 years) and long term (up to 20 years). This will be enough to load the three lines of the Turkmen- istan-China pipeline to capacity. Turkmenistan sells its gas to Iran (from 8 to 16 bcm every year) and to Russia (from 8 to 9 bcm), but China will remain the largest consumer of Turkmen gas in the short and probably the mid-term, and, what is more, not be a rival either to Iran or Russia. Both countries have huge gas reserves; they can easily cover their domestic needs, so they do not need huge amounts of Turkmen gas. There are no other buyers of Turkmen gas on the horizon, either in mid- or long term. For sev- eral reasons, no large-scale projects—either the TAPI (Turkmenistan-Afghanistan-Pakistan-India) or Nabucco gas pipelines—are likely to be implemented in the near future. In fact, the fourth line of the Turkmenistan-China gas pipeline deprives TAPI and Nabucco of their hitherto slim chances of being built. The four lines of the pipeline to China and the export obli- gations to Russia and Iran will leave Turkmenistan no exportable volumes of gas. On the other hand, it remains to be seen whether China will go on buying 65 bcm of gas or even 95 bcm every year in the long term, after the fourth line has been commissioned. It is still unclear how much imported gas China will need in the future. Today, it is trying to cut down the high share of coal (over 70%) in its energy balance by switching to imported gas. Its needs for imported gas are steadily growing, a trend that will continue in the short and mid- term. It, however, might disappear in the long term: China is implementing its ambitious atomic- and hydro-power projects to fully satisfy domestic demands for cheaper energy.

Production of Oil and Gas Equipment

In the first decade of the twenty-first century, China and Turkmenistan, probably on the initia- tive of Ashghabad, were planning to start production of certain types of Chinese oil equipment in Turkmenistan (in the city of Balkanabat). The project was not realized probably because Turkmeni- stan was not ready to develop machine-building and because China did not need oil-and-gas related production capacities in Turkmenistan. Joint projects in this sphere might be revived, probably in the mid-term.  First, the issue was repeatedly discussed and remained on the joint agenda. The country’s needs for oil and gas equipment are steadily increasing, which means that Ashghabad, with

183 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

no experience of its own, will insist on attracting Chinese technologies and money. In fact, China looks like the only logical option.  Second, the plans to start production of oil and gas equipment are stalling because Turk- menistan has no adequately trained engineers, managers, or skilled workers: in Soviet times the republic had no oil and gas machine-building. The failure of the Balkanabat project is partly explained by the fact that China is not interested in industrialization of Turkmenistan. It is also possible that China wants Turk- menistan to be fully dependent in terms of technology on its producers.  Third, Turkmenistan, however, stands a good chance of acquiring oil and gas machine- building with Chinese assistance. China has come to stay in the gas sector of Turkmenistan, which gives Ashghabad a chance to promote its requirements. If construction of the fourth line of the Turkmenistan-China pipeline begins, Beijing will need additional guarantees of stable gas deliveries. This means that Ashghabad might include a clause in the agreement on the financial and technological involvement of China or Chinese companies in the de- velopment of oil and gas machine-building in Turkmenistan.

Conclusion

Despite the fairly impressive Chinese presence in the oil and gas sector of Turkmenistan, China has limited it to the development of gas fields, gas production and processing, and gas pipelines.  First, China controls at least 30% of the gas produced in Turkmenistan with the greatest involvement, compared with other external players, in production, processing (dehydration and sweetening of natural gas to the stage of tank gas), and the construction/exploitation of gas pipelines. China is consolidating its position in Turkmenistan by means of large-scale financing of future amounts of supplied gas, as well as designing of and investing in gas production, processing and transportation. The scope of China’s presence will probably increase: it intends to move to the gas fields in the country’s east and southeast, which look most prom- ising from Ashghabad’s perspective. At the same time, China, or other players for that matter, has no and does not seek a prominent position in oil production and transportation; its position in oil refining is weak for the simple reason that the oil reserves of Turkmenistan hold no impressive export prom- ises. China’s presence in the oil segment is limited to the Seydi oil refinery where the CNPC refines the oil it produces in Afghanistan. As soon as the oil refinery now being built in Afghanistan has been commissioned (2016 being the expected date), the Chinese company will abandon the Seydi refinery. The CNPC might refine some of Afghan oil in Uzbekistan, the oil refineries of which are underloaded.  Second, the scope of China’s presence in the Turkmen oil and gas industry is wide enough: China controls over one quarter of gas production and has accumulated no less than two- thirds of foreign investments. China’s presence is one-sided and limited to gas production and export, which reduces the Turkmen oil and gas industry and the country’s economy to a raw-material status. So far, there are no signs that China will contribute to advanced pro- cessing of hydrocarbons in Turkmenistan to arrive at products of oil and gas refinery with a high rate of added value.

184 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

So far, China is mostly concerned about exporting the largest possible volumes of gas. It is lending to other spheres of the Turkmen economy on a grand scale in the hope of re- turning its money in gas supplies. Since the country does not trade in its oil and gas assets, China is actively buying the products of the oil and gas branch: the CNPC is actively in- volved in geological prospecting and development of newly discovered gas fields on a PSA basis. Ashghabad, which needs Chinese investments, is satisfied with this state of affairs; today China is the only country ready to offer large loans and large-scale investments.  Third, nothing much will change in the oil and gas branch of Turkmenistan in the short (up to 3 years) and mid-term (up to 10 years), however its scope will steadily grow. In 2015- 2016, Turkmenistan will move up to supplying China with 40 bcm of gas every year, that is, the combined carrying capacities of two lines of the main gas pipeline. Starting in 2021 and in the mid-term, Turkmenistan will probably supply China with 65 bcm (the carrying capacity of three lines of the Turkmenistan-China pipeline). The third line will probably be commissioned in 2015, which means that staring in 2016 Turkmenistan will be able to export 65 bcm of gas (the total carrying capacity of the three lines) every year. These vol- umes, however, will not be moved before 2021, which means that there are not enough gas processing capacities in Turkmenistan to produce the necessary amounts of tank gas. It is hard to forecast the nature and scope of China’s presence in the oil and gas sector of Turk- menistan in the long term (up to 20 years). Much will depend on the required volumes of Turkmen gas. Theoretically, the commissioned fourth line of the Turkmenistan-China gas pipeline (with a carrying capacity of 30 bcm a year) will bring its annual carrying capacity up to 95 bcm of gas; in practice, however, the volumes might be smaller or larger. On the whole, the changing and unpredictable dynamics of the economic/energy situation in China, Russia, and Europe, as well as in the rest of the world for that matter, make it hard to cor- rectly assess the long-term perspective for gas supplies from Turkmenistan to China.

185 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

RELIGION IN SOCIETY

KYRGYZSTAN’S ISLAMIC REFERENCE POINTS: THE ROLE OF FOREIGN RELIGIOUS TRENDS

Nurgul ESENAMANOVA Ph.D. (Political Science), Assistant Professor of the Kyrgyz Law Academy (Bishkek, Kyrgyzstan)

ABSTRACT

his article examines Kyrgyzstan’s Is- Iran, and the states of the Indian Peninsula. lamic reference points that formed un- It identifies the institutionalization aspects of T der the influence of the Islamic move- these Islamic movements and how Kyrgyz ments coming from Turkey, Saudi Arabia, society perceives them.

KEYWORDS: Sunnism, Shi‘ism, Hanafi madh’hab, Nurcular, Salafism, jamaat, daawat, Kyrgyzstan, Turkey, Saudi Arabia, Iran, Pakistan.

Introduction

Islam came to Kyrgyzstan in the form of the Hanafi madh’hab. Sufism played a significant role in its spread among the nomadic Kyrgyz. During Soviet times, the Muslims of Kyrgyzstan were not well acquainted with the other Islamic movements that emerged in other Muslim countries in re- sponse to the historical, political, and cultural processes (for example, as national liberation move- ments). After the collapse of the Soviet Union, various Islamic movements formed under the influ- ence of different factors began penetrating into the Kyrgyz Republic (KR) from Muslim countries. The current religious situation is distinguished by the fact that almost all the Islamic trends coming from the outside acquire their followers in Kyrgyzstan. The geopolitical interests of particu-

186 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 lar Central Asian states largely define the religious situation and processes going on in the KR. These states take advantage of religious organizations and movements to realize their geopolitical interests. Today, there are Islamic movements in Kyrgyzstan that came from Turkey, Saudi Arabia, Iran, and the Indian Peninsula. Of these countries, Turkey, Iran, and Saudi Arabia claim to have an ideal and successful development model of a Muslim country and leadership in the Muslim world. What is more, all of these countries are relatively close geographically to Central Asia (CA), and this means that instability in the region will have an effect on the security of these states. So they are interested in the region’s stable development. This also explains their involvement in and attempts to influence the regional processes, as well as their vying for leadership in the Muslim world. Control over CA would give them additional economic, political, and energy advantages over competitors. Religion is one of the main levers for achieving their goals in the region. It should be immediately stipulated that most of the religious movements that come to the KR from the outside are not officially registered as organizations. They are often represented as learning and educational establishments, funds, cultural representative agencies, and so on. They began ac- tively penetrating into Kyrgyzstan and spreading after the country gained its independence. During the 24 years of its sovereignty, these distinctive ways of understanding and explaining the Islam coming from various Muslim countries have acquired their own followers in the KR. It is impossible to determine the precise number of followers of any particular movement in the KR today, since many of them do not openly admit their affiliation to a particular jamaat, trend, or movement. Due to their religious illiteracy, many of them do not know what trend they belong to. Neither religious organizations, nor government bodies have yet to define precise criteria for deter- mining affiliation to a specific trend. Those who know they belong to a particular jamaat confess to it in private conversations and only anonymously. Law enforcers note that there are more than 20 different Islamic jamaats in the KR at present: the Tablighi Jamaat, Adyl Mansur’s Jamaat, the Karasu Jamaat, Uzgen Jamaat, Abdu- shukur Narmatov’s Jamaat, and others. When writing this article, the author used documents and the results of her empirical studies in the form of in-depth interviews with experts, law enforcers, and representatives of other government structures, theologians and representatives of the Spiritual Administration of the Muslims of Kyrgyz- stan (SAMK). The documents of an expert survey of a pilot study called “Religious Security of the KR” were partially used under a contract with the National Institute of Strategic Research of the KR Government carried out with E. Nasritdinov, Doctor of Anthropology of the American University of Central Asia.

Turkey

The collapse of the Soviet Union put new geopolitical players on the political stage who strove to fill the vacuum formed in CA, mainly for raising their status on the international arena. One such country was and still is Turkey, which offers its own model of social development and claims leadership in the Muslim Turkic-speaking world. Turkey’s open claims to the role of Eurasia’s “energy switchboard” form the fulcrum of its foreign policy.1 In order to achieve its geo- political goals, Turkey is employing a foreign policy strategy based on neo-Panturkism and neo- Ottomanism.

1 A.B. Burashnikova, “Neopantiurkizm i neoosmanizm vo vneshnei politike Turtsii,” Proceedings of Saratov University, New Series: History. International Relations, Vol. 13, Issue 2, 2013, p. 65.

187 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

According to researcher A. Burashnikova, the foundation of neo-Panturkism was laid by means of the following principles: unification of nations according to their ethnic affiliation to the Turks, adherence to Islam, common language, historical culture, and Eastern mentality. Neo-Ottomanism, on the other hand, presumes a significant revision of the above-mentioned provisions, as well as several innovations in the foreign policy sphere.2 M. Laumulin notes that the neo-Ottomanism doctrine was formed by means of the following factors. “Turkey is surrounded by Middle Eastern, Caucasian, and Balkan countries. Instability is seen in all of these regions, particularly since the end of the Cold War. Territorial disputes are still unresolved in the post-Ottoman area. None of this was evident during the time of the Ottoman Em- pire, when stability reigned. Moreover, the , although it was similar to a theocratic state, corresponded more to a contemporary secular model from the viewpoint of relations between the state and religion.”3 The gist of neo-Ottomanism lies in “intensifying Turkey’s foreign political role in the region for the sake of stability.”4 It should be said that the West encouraged the idea of the Central Asian states adopting the Turkish model as an alternative to Communism or Iranian-style Islamism. Turkey was endowed with forming “a bridge between the Western world and the CA countries, which should have promoted the integration of these countries into the world community and the formation of Western values.”5 There is no denying that Turkey has its specific geopolitical goals in Kyrgyzstan and in the Turkic-speaking countries of the post-Soviet region as a whole. However, some experts in Turkey itself doubt that it has enough resources to maintain the above-mentioned projects. As Professor of Istanbul University Ilter Turan notes, “Turkey has set off on the road to revisionist rhetoric and prag- matic everyday actions in foreign policy. An average kind of nation is forming with an ambitious leader, which at times overestimates its potential.”6 When carrying out its policy of influence, Turkey places the main emphasis on cultural-civili- zational factors: common language, religion, and origin of the people. On the whole, Turkey’s reli- gious influence in the KR encompasses the following spheres: religious education and building mosques in the KR. The largest project (amounting to $20 million) funded by Turkey is building a central mosque in Bishkek, which will be completed in 2016. The most widespread Turkish Islamic trends in the KR include Hizmet, the followers of Turkish official Fethullah Gülen, Nurcular, the followers of the Turkish academic Said Nursi, and Sulaymancılar, the followers of Turkish academic Süleyman Hilmi. All of these trends are among the most influential in the religious sphere in Turkey itself. It should be noted that Hizmet is the most influential of them in the KR. Hizmet is perceived ambiguously in the KR. On the one hand, it is seen as a religious organiza- tion spreading ideas of religious modernism and appealing to liberal values, while on the other, it is represented as a social-civil movement that unites Gülen’s followers. Since the beginning of the 1990s, the activity of Hizmet in the KR has been focused on opening educational institutions of the Sebat network, the main founder of which was Fethullah Gülen. “From 1992 to 2012, Fethullah Gülen’s supporters opened 22 educational institutions of the Sebat network,

2 See: A.B. Burashnikova, op. cit., p. 67. 3 M. Laumulin, “Turkey and Central Asia,” available at [http://carnegieendowment.org/2012/10/22/%D1%82%D1%8 3%D1%80%D1%86%D0%B8%D1%8F-%D0%B8-%D1%86%D0%B5%D0%BD%D1%82%D1%80%D0%B0%D0%BB% D1%8C%D0%BD%D0%B0%D1%8F-%D0%B0%D0%B7%D0%B8%D1%8F/e8p0]. 4 Ibidem. 5 Zh.B. Samanchina, Uchebnaia migratsiia v razvitii mezhgosudarstvennykh otnoshenii Kyrgyzstana i Turtsii, Synopsis of a thesis for a PhD in Political Science, Bishkek, 2014, p. 17. 6 Quoted from: S. Tarasov, “‘Neoosmanizm’ vo vneshnei politike Turtsii slabeet,” available at [http://www.iarex.ru/ articles/48013.html].

188 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 as well as the international Silk Road school, and the private university Atatürk Ala-Too7 in Kyrgyz- stan.” According to the information at the end of 2013, “more than nine thousand people are taught in the institutions of the Sebat Association in Kyrgyzstan. Their main advantage over the local schools is that they emphasize the study of exact sciences and English. For example, in 2012, six people from Kyrgyzstan were sent to the international physics contest: five of them were representatives of Turk- ish lyceums.”8 It cannot be denied that lessons in the Sebat schools are taught in English and Turkish, at a high level, and in keeping with world standards. However, it is mainly children of the elite and wealthy Kyrgyz citizens who attend them, since the tuition is very high. Foundations. In addition to educational establishments, the Adep Bashaty Public Foundation and journals belonging to and financed by Gülen’s followers are active in the KR. The Adep Bashaty Foundation is officially registered and has branches in every region of the KR. According to some expert data, this Foundation has tens of thousands of consolidated followers in every region of the KR. However, the Foundation directors deny its affiliation with Gülen’s fol- lowers. According to researcher D. Berdakov, “the high prestige of the participants of this movement among the population (particularly of the southern regions and new housing developments) is ensured by their qualitative distinction from the political class, their willingness to assume social responsibil- ity, and their business entrepreneurship.”9 At the same time, Turkish and local researchers say that the Adep Bashaty Foundation belongs to the Nurcular movement. It should be noted that in Kyrgyzstan, Gülen’s followers are also called Nurcular, meaning that Gülen is one of Nursi’s students. This may be because that S. Nursi’s teaching is presented as one of the fundamental ideological principles of the Hizmet movement. However, there are also follow- ers of S. Nursi in Kyrgyzstan who are representatives of the classical trend of his teaching and spread his ideas. Another Turkish trend that is widespread in Kyrgyzstan, called Sulaymancılar, consolidates the followers of Süleyman Hilmi in its ranks. It was also formed under the influence of S. Nursi’s teach- ing. The Sufi order of Sulaymaniyah has formed a network of Sufi madrasahs, schools for studying and reciting the Quran, as well as for teaching Arabic grammar.10 Whereas the Hizmet movement was institutionally registered as a system of educational institu- tions and foundations, the ideas of the latter two movements are mainly taught in rented private apart- ments for a certain fee and are not yet institutionally registered. The fee for Nurcular’s courses is twice as high as that for Sulaymancılar’s courses and amounts to 5,000 soms.11 In the past few years, the F. Gülen’s teaching in Turkey itself has been officially banned. How- ever, at the same time, according to several experts, the movement itself and its ideas are unofficially encouraged by Turkey for advancing Turkish foreign policy interests. According to M.N. Davydov, “despite the restrictions imposed in Turkey on the activity of the sect as threatening the secular system of the state, Nurcular continues to enjoy the unofficial protection of high-ranking state and political officials of the Turkish Republic. In so doing, by encouraging and directing the sect’s ‘enlightening’

7 See: R. Veytsel, “Vliianie Turtsii na islam v gosudarstvakh Tsentralnoi Azii,” available at [http://www.islamsng.com/ sng/analytics/7367#_ftn2]. 8 D. Berdakov, “Sravnitelnyy analiz turetskoi, rossiiskoi, kitaiskoi, amerikanskoi SoftPower v Kyrgyzstane,” available at [http://enw-fond.ru/ekspertnoe-mnenie/5830-denis-berdakov-sravnitelnyy-analiz-tureckoy-rossiyskoy-kitayskoy- amerikanskoy-soft-power-v-kyrgyzstane.html]. 9 Ibidem. 10 See: K. Malikov, Kratkoe posobie no Islamu, Bishkek, 2013, p. 74. 11 From an interview with an expert.

189 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS activity beyond Turkey, where the movement realizes the idea of Turkic supremacy and the need for uniting the Islamic world under Ankara’s aegis aimed at creating a ‘pure state’ based on the ‘enlight- ened Sharia,’ the Turkish authorities are also pursuing the goal of reducing the sect’s activity in their own country.”12 Despite certain differences and their own special features, all three movements derive from the official Turkish model of religious-state relations. Perception in Kyrgyzstan. The perception of Turkish religious movements by the Kyrgyz state and society is ambiguous. The following points of view exist:  Some see the Turkish model as being the ideal alternative for Kyrgyzstan and representing an effective model of religious-state relations. This model meets contemporary require- ments and reduces risks to religious security since the main emphasis is primarily placed on high-quality secular education. The idea of implementing the Turkish model also seems attractive to the official authorities and representatives of the Kyrgyz clergy.  Others are suspicious about the Turkish model and Turkish influence in Kyrgyzstan and think that the Turks are “working for the future.” The results of their influence will not be seen until the generation of graduates from Turkish schools and universities matures and begins to occupy high posts in the administration, and pro-Turkish and Islamic political parties form. The risk is that political forces, politicians, and civil servants might fall under the control of external forces, which will use them to advance their interests (geopolitical, economic, etc.). So the attitude toward Turkish movements in the KR is ambiguous. On the one hand, part of society is suspicious of them and accuses the Turks of forming a fifth column and promulgating their ideology among young people. While on the other hand, there are supporters and followers of these movements who laud Gülen’s ideas as a model of progressive and enlightened Islam. These are pri- marily the graduates of Turkish schools, as well as local and Turkish theological universities. The influence of Sulaymancılar has spread in the KR and is also being disseminated via students studying at Turkish religious educational establishments.

Iran

The Islamic Republic of Iran (IRI) is another country that sees itself as a leader and ideal model of development for other countries of the Muslim world. Iran’s foreign policy is also based on pragmatism, striving to gain advantages from cooperating with the Central Asian countries, primar- ily economic, energy, and transport. Iran’s geopolitical interests also focus on security issues accom- panied by withdrawal from isolation, and it is actively appealing to the general cultural and historical traditions of the region’s countries to achieve these goals. Iran understands that it cannot put the emphasis on spreading its religious ideology in Kyrgyz- stan. According to researcher V.V. Khutorskaia, “it stands to reason that Tehran would also like to spread Islamic values in Central Asia, since Iran has leadership ambitions in the Islamic world, but the Iranian leadership is sensible enough not to stress political and ideological issues in its relations with these countries.”13

12 M.N. Davydov, “Deiatelnost turetskoi religioznoi sekty ‘Nurdzhular’,” available at [http://www.iimes.ru/rus/ stat/2007/03-11-07b.htm]. 13 V.V. Khutorskaia, “Vzaimootnosheniia IRI i stran Tsentralnoi Azii,” available at [http://farsiiran.narod.ru/analitics/ iranasia.htm].

190 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

In our opinion, this is related to the fact that the IRI is a Shi‘ite country, in contrast to Kyrgyz- stan, where there is no significant Shi‘ite influence; there is only one Shi‘ite mosque in the entire republic. Cultural and linguistic features are another obstacle; in this respect, Kyrgyzstan is part of the Turkic-speaking world. In addition, after the country gained its independence, students from the KR went to study and obtain a religious education in the theological centers of Turkey, Pakistan, Egypt, Saudi Arabia, Jordan, and Lebanon, with only a few going to the IRI. During their education, they mainly referred to Sunni works, and not those of Iranian thinkers. There is also a psychological factor. We agree with V.V. Khutorskaia’s opinion that “Iran often emphasizes its superiority over the Central Asian republics and tries to present itself as a ‘big brother,’ competent to give these countries lessons in Islam, culture, and language, as in the case of Tajikistan, which irritates the Central Asian states.”14 This was seen at universities where Islamic and Persian departments were established and differences between students and professors arose. In this respect, the IRI is largely placing the stakes on reviving the common cultural and his- torical traditions of the past, but not on common religious grounds. In the KR, Iranian religious trends are institutionally registered and mainly represented through the educational and culture structures: the Cultural Representative Agency at the Iranian Embassy in Kyrgyzstan; Iranian Study Centers at Kyrgyz universities; and the Islamic Kousar Cultural Enlightenment Foundation. As mentioned above, Iran’s influence in the KR is manifested in the educational and cultural spheres, and it stands to reason that it is much smaller in scope than Turkey’s. The main goal of the activity of the Cultural Representative Agency at the Iranian Embassy consists of implementing a policy of cultural-historical rapprochement and mutual influence, as well as reviving historical traditional ties by spreading and promulgating the monuments of Iranian cul- tural tradition: the Persian language, poetry, and study of the Quran in Farsi. The Cultural Representative Agency of the IRI in the KR is carrying out work in the following areas: book stores of Iranian publishing houses are opening; students studying Persian are being sent to Iran on internships; cultural meetings and events are being held; conferences and symposiums on different topics, primarily religious, are being arranged; days of Iranian culture are being held; a magazine is being published; and language courses are being given, while celebrations of , Ramazan, book exhibitions, folk crafts, etc. are also being organized. Information on the events held by the Cultural Representative Agency at the Iranian Embassy in Kyrgyzstan can be found on this organization’s official website page on Facebook. Experts are concerned that the diplomatic status of the Cultural Representative Agency at the Iranian Embassy in Kyrgyzstan will provide it with immunity and make it possible for it to bring in its imams and engage in hidden religious propaganda. Iran carries out much of its cultural and enlightenment work through education. Iranian study centers and departments at several KR universities have opened and been operating since the 1990s: — an Iranian study center was opened at the Kyrgyz-Russian Slavic University in July 1997 on a grant from the Iranian embassy; — a Center of Islamic and Iranian Studies was opened at Bishkek Humanitarian University on 20 March, 2012 with the active cooperation of the Iranian side; — an agreement on cooperation in training teaching and scientific-teaching staff of the high- est caliber and implementing joint study, methodological, and research projects was signed between the Kyrgyz Arabaev State University and the Iranian Embassy on 7 February, 2007;

14 Ibidem.

191 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

— in 2002, the Institute of Integration of International Educational Programs of the Kyrgyz Balasagyn National University and Iranian Kousar Enlightenment Foundation signed an agreement on cooperation in education (the same year, under this agreement, an Islamic Studies division was opened at the Oriental Studies Department of the Institute and students were enrolled in the first course, while in 2008 a Kyrgyz-Iranian scientific educational center was opened at the Institute engaged in a scientific research program, as well as in training specialists in various fields); — on 6 February, 2009, Danaker, a youth cultural and educational magazine, began coming out at the Kyrgyz Balasagyn National University.15 The Iranian side is fully financing the repair of classrooms for the study centers and providing material and technical assistance, as well as a library of scientific literature and fiction in Farsi. It is sending Persian-language teachers to the republic’s universities, organizing advanced training cours- es and internships for professors and practical courses for students, holding seminars, and so on. Iran’s educational and cultural activity in the KR is also manifested in the opening and function- ing of Islamic cultural and enlightenment foundations. However, sometimes their cultural and en- lightenment activity turns into religious and propagandistic efforts, which violates the regulations of a secular state and arouses a response from the government structures. For instance, the activity of Iran’s Kousar Cultural Enlightenment Foundation, which was in operation from 2002 to 2014, was stopped by an interdistrict court of Bishkek on a claim from the State Commission for Religious Affairs On Elimination of the Kousar Public Islamic Cultural and Enlightenment Foundation and Kousar Public Cultural and Enlightenment Foundation.16 The Foundation’s double name is due to the fact that when it first began functioning, this orga- nization was called the Kousar Public Islamic Cultural and Enlightenment Foundation. In 2012, ac- cording to the results of an inventory of the register of religious organizations, centers, foundations, and educational establishments carried out by the State Commission for Religious Affairs of the KR, it transpired that the Kousar Public Foundation was carrying out its activity in violation of KR legis- lation.17 On 11 January, 2013, it was re-registered with the KR Ministry of Justice as a legal entity and became known as the Kousar Public Cultural and Enlightenment Fund, which excluded any kind of religious activity.18 However, during the customary inspections, instances of illegal religious activ- ity were discovered once more, whereby the State Commission drew up a statement of claim on its elimination.19 The results of an expert survey reveal that there is a negative perception and assessment of the Iranian influence in Kyrgyzstan. This might be related to the cultural and civilizational characteristics of Iran and Kyrgyzstan, as well as to the classical opposition between Sunnism and Shi‘ism, which sometimes goes beyond confessional boundaries and acquires more vivid geopolitical hues. Moreover, Iran’s presumed destabilization efforts aimed at splitting the global Sunni commu- nity are seen as the main geopolitical threat. One of Iran’s main goals in Kyrgyzstan and in the region as a whole is to improve the image of Shi‘ism among ordinary Muslims, gain their trust, and introduce deference of the deceased in keeping with Iranian religious tradition into the local religious practices.

15 See: A.L. Saliev, “Vostochnyy vector vneshney politiki Kyrgyzstana: Aziatsko-Tikhookeanskiy region i Blizhniy Voskok,” 2011, available at [http://4i5.ru/library/uchebnik-mejdunarodnie-otnosheniya/vvedenie20169.htm]. 16 See: S. Moiseeva, “Sud prinial reshenie o likvidatsii dvukh religioznykh organizatsiy,” available at [http://www. vb.kg/260545]. 17 See: Ibidem. 18 See: Ibidem. 19 See: Ibidem.

192 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 Saudi Arabia

Saudi Arabia also sees itself as a leader and center of the universal Muslim umma. According to researcher G. Kosach, “Saudi Arabia considers itself to be ‘the central link in the Muslim com- munity’ and gives primary attention in its foreign policy to developing relations with countries it defines as Muslim. The Saudis include Azerbaijan and the Central Asian states among these countries (correspondingly interpreting historical facts), which is why they strive for full-fledged contacts with these states and for incorporating them into the ‘universal Muslim umma’.”20 After the collapse of the Soviet Union, Saudi Arabia regarded the CA Muslims as Muslims who have lost Islam and saw its main mission to be assisting the revival of Islam in the region. “The Saudi interpretation of the purpose of this assistance implied ‘awakening Muslim consciousness’.”21 Saudi Arabia’s religious influence in Kyrgyzstan is manifested in the following:  building mosques;  teaching students;  the activity of various foundations. Building mosques, Islamic organizations, and Saudi Arabian foundations in the KR. There are no precise data about the number of mosques built in the KR at Saudi Arabia’s expense. How- ever, it finances the building of mosques through a variety of different foundations and organiza- tions. An expert from one of the government structures notes that the World Assembly of the Mus- lim Youth (WAMY) under the supervision of Omar al-Bayoumi is one of the main institutions fi- nancing the building of mosques in the KR. According to unofficial data, around 70% of the mosque building in the KR has been financed by this organization, and the other 30% by the local popula- tion.22 Some media representatives think that “WAMY allots around $5 million annually to the build- ing of religious facilities. More than 400 mosques have been built in the south of Kyrgyzstan with the help of these funds.”23 According to the data for 2012, WAMY has built more than 300 mosques in the south of Kyr- gyzstan. “During this period, new mosques accommodating from 500 to 2,000 parishioners have been built using WAMY’s funds in the villages of Tepakurgon, Chertak, and Mangit in the Aravan district of the Osh Region. And at the end of August 2012, construction of a new mosque in the vil- lage of Teskei-Kozhok in the Nookat district of the Osh Region financed by WAMY was finished. WAMY also built a new mosque in the Jalalabad Region opposite the Safed-Bulan Shah-Vazil mausoleum in the Ala-Bukin district. WAMY allotted $150,000 to its construction. Another new mosque accommodating 4,000 parishioners was built in the village of Karazhygach in the Suzak district. It cost WAMY $100,000. On the initiative of WAMY’s directors, construction began of a new mosque on the grounds of an old-age pensioner’s home in Bishkek, which will hold more than 500 parishioners.”24

20 G. Kosach, “Politika Saudovskoi Aravii na postsovetskom ‘musulmanskom’ iuge: tseli i itogi kursa,” Vestnik Evrazii, No. 2, 2005, p. 151. 21 Ibid., p. 152. 22 From an interview with the expert. 23 Zh. Usenov, “Kyrgyzstan—kak osnovnoi importer chuzhdoi kultury,” available at [http://www.centrasia.ru/newsA. php?st=1416209580]. 24 A. Osmonaliev, “Kyrgyzstanu nuzhny vrachi i inzhenery, a ne mully i imamy,” available at [http://www.paruskg. info/2012/12/28/73098].

193 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

In 2014, “several more religious facilities were built in the Osh, Jalalabad, and Chui districts. And another prayer room is being set up on the third floor of the government building at an acceler- ated rate using $200,000 allotted by WAMY.”25 In addition to this organization, other institutions are also engaged in mosque building. For example, the Umm al-Qura University of Saudi Arabia funded the building of a mosque in Uzgen and provided free schooling for children from poor families. The International Islamic Foundation has also expressed its willingness to finance the building of several mosques in Kyrgyzstan.”26 Other organizations, such as Muassasatul Haramain, Al Waqf Al Islami, the International Cen- ter of Islamic Cooperation, and the Youth Initiative Foundation,27 are also doing their part. In 2014, Saudi Arabia asked for four hectares of land in Bishkek to build an Islamic cultural center. According to Ambassador of Saudi Arabia to Kyrgyzstan Abdurahman bin Saeed Al-Juma’ah, “the Saudi side will take full responsibility for the financing, while both sides will supervise the proj- ect. In practice, such centers include a mosque, school, gym, conference hall, and other facilities.”28 The ambassador also noted that “unfortunately, many countries are under the impression that an Is- lamic center means a mosque and propaganda. But we would like to show that an Islamic center can bring together a gym, medical center, school, library, and so on.”29 Education sphere. Since the country gained its independence, there are no specific figures on the number of students going to Saudi Arabia from Kyrgyzstan to attend religious schools. Although the law requires that the corresponding structures must be informed, most people leave the country on a tourist visa and do not always provide notification that they are leaving to study at a religious institution. According to the data for 2013 alone,30 around 150 students from Kyrgyzstan studied at religious establishments in Saudi Arabia. In 2014, ten Islamic institutions functioned in Kyrgyzstan; most of them were opened with the direct support of a variety of different foundations from the Persian Gulf countries and Saudi Arabia. One of them functions under the SAMK. Most of them function according to the madrasah principle with an extensive curriculum.31 Perception in Kyrgyzstan. The influence of Saudi Arabia in the KR is also perceived unequivo- cally. Experts and the public see the threat of the influence of Saudi Arabia and other countries in the following. The widespread activation of different trends of Salafism is one of the consequences of Saudi Arabia’s influence in Kyrgyzstan. The religious influence from Saudi Arabia largely comes from various Salafi teachings, both moderate and radical. Our survey showed that all the experts unani- mously saw Salafism as a threat to the state’s security. Although some experts noted that a distinction should be made between moderate and radical Salafism, most of the experts polled think that any manifestation of Salafism is potentially dangerous and requires special attention in Kyrgyzstan and CA as a whole. The main radical features of Salafism are the following: literal understanding and following of the ayats of the Quran, calling to return to the time of the righteous ancestors, calling to reject the

25 Zh. Usenov, op. cit. 26 Ibidem. 27 S. Keldibekov, “Kyrgyzstan. ‘Arabizatsiia’ pod prikrytiem islama,” available at [http://www.centrasia.ru/newsA. php?st=1415864520]. 28 [http://ansar.ru/rfsng/2014/09/23/53485]. 29 Ibidem. 30 See: A. Kasybekov, “Zhusupbek Sharipov: Korol dal 3 milliona na stroitelstvo posolstva KR,” available at [http:// www.vb.kg/255555]. 31 See: U. Nazarov, “V Kyrgyzstane zaimutsia nauchnym issledovaniem islama,” available at [http://centralasiaonline. com/ru/articles/caii/features/main/2014/06/04/feature-01?mobile=true].

194 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 later developments in Islam, and so on. All Muslims who do not carry out these requirements are considered to be infidels. The “Islamic State” that functions in Iraq and Syria could be a vivid ex- ample of this. The contradictions between Salafism and the local clergy are extremely important. The repre- sentatives of the local clergy present no authority for Salafis and they are constantly arguing with the representatives of other jamaats, as well as calling for rejecting national traditions and Islam localiza- tions. Salafis are also known for their non-recognition of local academics and madh’habs, as well as orientation toward sheikhs from Saudi Arabia who are popular on the Internet. The most radical and main goal of Salafism is building a caliphate and calling for transforming the secular state into a theocratic one, whereby violent, aggressive, and terrorist methods are to be used for implementing this goal. At the moment, many extremist and terrorist ideologies come from Russian cities, such as Ekat- erinburg, Astrakhan, and others. Influence also comes from Kazakhstan, where Salafism has become extremely active and is gradually acquiring increasingly aggressive and violent forms. Today, the fact that many who leave to earn a living end up in extremist networks and are recruited in the Salafi mosques in these countries. There is information that extremist organizations are helping these people to draw up their documents and find work. The attraction of the Salafi ideas in Russia, Kazakhstan, and Kyrgyzstan also lies in their protest rhetoric. Radical Salafis (Wahhabis) are among the extremists in the KR, just as throughout the entire post-Soviet expanse. According to French academic Fabrice Balanche, “many leaders of al- Qa‘eda were trained in Saudi Arabia’s Jeddah, where Salafi imams are put on the training conveyer and then sent throughout the Islamic world as far as the central regions of Africa. Thanks to Saudi Arabia’s financial assistance, they are easily able to oust the traditional imams and spread the Wahhabi ideology.”32 Experts do not think well of the opening of the Saudi Arabian embassy in 2011 and the Qatar embassy in 2012 in the KR. According to well-known expert K. Malikov, “the opening of Saudi Arabian and Qatar embassies and the cancellation of visas has made it possible for the supporters of Wahhabism from these countries to advance their ideology more actively in our republic. The King- dom is rendering financial aid to Kyrgyzstan’s Islamic institutions. Priests and religious experts are invited to study and funds are allotted for building mosques directly in the republic.”33 According to the polled experts, moderate Salafis in the KR are not striving for power today; they have chosen the tactic of ubiquitous infiltration of their people. Salafis are also working actively among prisoners in Kyrgyz prisons. However, despite the fact that Saudi Arabia’s influence is largely evaluated as negative, some people also regard this country as the custodian of the two main Muslim shrines, Mecca and Medina, and as a protector of Islam and the Muslims.

Countries of the Indian Peninsula (India, Pakistan, Bangladesh)

The Islamic Republic of Pakistan is one of the countries of the Indian Peninsula that shares cultural and civilizational features with Kyrgyzstan. Researchers note that Pakistan is one of the

32 A. Sadykov, “Aktivizatsii ekstremistov v Kyrgyzstane sposobstvuiut zarubezhnye fondy,” available at [http://www. vesti.kg/index.php?option=com_k2&view=item&id=27069&Itemid=125]. 33 Ibidem.

195 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

U.S.’s key allies in Central Asia, seeing itself as a leading regional power and Central Asia’s gateway to the world markets through the Indian Ocean, where Iran is its main competitor.34 One of Pakistan’s main geopolitical goals is to engage in economic integration with the region’s countries and draw them into its political orbit.35 Pakistan is also trying to make use of the cultural-civilizational factor to achieve its goals in the region.36 According to B. Narbaev, former adviser of Kazakhstan’s Ministry of Foreign Affairs, the at- tempts to take advantage of religion were related “primarily to the active role and activity in Pakistan itself of well-known international extremist groups, such as Hizb ut-Tahrir and Jamaat-i-Islami, which have close ties with several Pakistani political parties and radical groups.”37 This aroused a response in the CA countries. “Throughout 2001 and the first half of 2002, the special services of these countries carried out a series of arrests of the active participants of these organizations. The operations and investigation efforts showed that the leading centers are located in Pakistan. So Islam- abad’s plans to take advantage of the Islamic factor regarding the CA states proved to be not entirely viable, since their leaders put economic interests first, thus essentially rejecting the idea of “Islamic unity.”38 However, Pakistan’s cultural and civilizational influence is being manifested not only at the radical level, but also by moderate trends, such as Tablighi Jamaat, which “do not present any threat to Kyrgyzstan’s national security in the mid-term.”39 The religious influence coming from India, Pakistan, and Bangladesh is mainly manifested by the Tablighi Jamaat movement, which is better known in Kyrgyzstan as “Daawat” (the call to Islam). Muhammad Ilyas Kandhlawi was the founder of the Tablighi Jamaat movement. The movement emerged in India, near Mewat not far from Delhi, in the 1920s. It has since spread throughout the world and is now present in almost every country. However, the main centers of the movement are still India, Pakistan, and Bangladesh. In India, the center is located in New Delhi, in the Nizamuddin district. In Pakistan, the center is in Raiwind, and in Bangladesh it is situated in the capital of the country, Dakka. Ishtimayi (congresses) are held in Raiwind and Dakka, to which hundreds of thou- sands of Tablighi Jamaat followers come from all over the world. The main principles of Muhammad Ilyas Kandhlawi’s teaching were formed in the conditions of colonial India. According to him, the Muslims’ problems cannot be resolved by political methods. The position of the Muslim community and society as a whole can only be improved by ibadat—wor- ship, correction of moral behavior, and daawat—the call to religion.40 The Dawaat movement espouses the revival of Islam, and those who call for Islam and belong to the Tablighi Jamaat movement are called daawatchiks in Kyrgyzstan. In the 1990s, daawatchiks from Kyrgyzstan often traveled to Pakistan where a visa could be obtained upon arrival. A stricter visa regime was introduced around 2002, making travel more difficult, so people began going to India and Bangladesh.41 Most of the movement’s members are ordinary Kyrgyz citizens who have never studied in a madrasah. They go to daawat in order to acquire basic religious knowledge—the fundamental prin-

34 See: G. Yuldasheva, “The Iranian-Pakistani Factor in the Geopolitics of Central and South Asia,” Central Asia and the Caucasus, Vol. 15, Issue 2, 2014, p. 33. 35 See: Ibidem. 36 See: B. Narbaev, “Islamskaia Respublika Pakistan v kontekste razvitiia geopoliticheskikh protsessov v Tsentralnoi Asii,” available at [http://kisi.kz/img/docs/1095.pdf]. 37 Ibidem. 38 Ibidem. 39 K. Malikov, op. cit., pp. 62-63. 40 See: E. Nasritdinov, N. Esenamanava, Religioznaia bezopasnost v Kyrgyzskoi Respublike, Bishkek, 2014, p. 46. 41 See: Ibid., p. 54.

196 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 ciples of faith, namaz, recital of a few short surahs from the Quran, and study of Islamic etiquette regarding nutrition, sleep, and washing. After acquiring the basic fundamentals, many members stop going to daawat, but continue to read the namaz at home, attend the juma namaz (Friday namaz) at the mosque, and so on. Those who do keep going to daawat continue to increase their religious knowl- edge by studying the hadiths in the two main books used by the daawatchiks—Fazail-e-Amaal and Collection of Hadiths—while the book Stories of the Sahaba is also sometimes used.42 During their trips, the participants replenish their practical Islamic knowledge and exchange information throughout the day. The absence of extensive knowledge is compensated for by daawat- chik methodology. When preaching, their sermons are built on six main concepts, which they call the six sifats (qualities): faith, namaz, knowledge/zikr, relations with Muslims, sincerity of intention, and daawat-call. These concepts and their basic definitions are recited during the talims, while it is strict- ly recommended that inexperienced daawatchiks do not depart from this simple structure and do not say anything superfluous. In addition, over time, the number of daawatchiks who gain a full-fledged religious education increases. According to the information obtained from Sirazhidin-domle, one of the movement’s leaders and the head of 52 madrasahs in the borough of Archa-Beshik near Bishkek, there are already more than 150 Islamic daawatchik academics living in Kyrgyzstan.43 The Tablighi Jamaat movement is not officially registered with the corresponding state struc- tures in Kyrgyzstan. However, the SAMK has a daawat department and Maksat Toktomushev, the current mufti of Kyrgyzstan, “is known among the Muslims as the leader of the Tablighi Jamaat movement.”44 Issues relating to Tablighi Jamaat have been raised at the highest state level in the KR. For example, at the KR Defense Council, where the question of state policy in the religious sphere was discussed on 3 February, 2014; “the activity of the ‘Tablighi Jamaat’ movement in the republic was designated as a threat. However, a final decision regarding it was not made.”45 Nevertheless, accord- ing to experts, Toktomushev’s arrival in the SAMK to some extent signifies legalization and that the authorities recognize Tablighi Jamaat as a moderate movement. Experts have different opinions about the characteristics of the movement itself. Some note its exclusively positive influence, while others are more critical. The movement’s positive characteristics include work with the Muslim community at the level of the ordinary population, efficacious reha- bilitation influence on people with addictions, and de-politicization of a large part of the Muslim community. The negative characteristics include the fact that Tablighi Jamaat is limited in size and does not offer opportunities for intellectual Muslim development. The members of the movement itself do not have sufficient religious knowledge, so representatives of other more radical movements can worm their way in. They irritate the secular part of the population with their appearance and dress. Experts also question the functioning of the movement’s administration center beyond Kyrgyz- stan. The movement’s instability should also be noted, because its adherents often transfer to other religious organizations. Experts explain this by the fact that Tablighi Jamaat cannot offer anything other than daawat, and those who want to go further and are looking for answers to political questions move on to such organizations as Hizb ut-Tahrir or join Salafism. In this respect, the number of per- manent adherents of this movement changes, even though most believers come to Islam through

42 See: Ibid., p. 51. 43 See: Ibid., p. 52. 44 U. Egizbaev, “V Kyrgyzstane izbran vremenny mufti,” available at [http://rus.azattyk.org/content/article/25223449. html]; “Osmonaliev: Predstavitel ‘Tabligi dzhamaat’ stanet muftiem?” available at [http://www.knews.kg/dajdzhest_ kyrgyzskoj_pressy/zhany_agym/43252]. 45 R. Veitsel, “V Kyrgyzstane proiskhodit kardinalnoe izmenenie gosudarstvennoi politiki v otnoshenii religii,” Part 2, available at [http://easttime.ru/analytics/kyrgyzstan/v-kyrgyzstane-izmenenie-gosudarstvennoi-politiki-ch2/6787#sdfootnote1sym].

197 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Tablighi Jamaat. However, the question of whether they remain faithful to daawat to the end remains open. It is impossible to reveal the number of permanent members of Tablighi Jamaat in Kyrgyzstan today. According to experts and theologians, the movement has members in essentially every popula- tion settlement today. “According to the information of the Spiritual Administration of the Muslims of Kyrgyzstan, in 2011 6,270 went to daawat (sermons) throughout the whole republic, while in 2012 this number had already reached 9,313 people. As for 2013, there are only precise data for Bishkek. Whereas in May 2012, 243 people from the capital went to sermons in the regions, by May 2013, this number had risen to 1,325 people.”46 However, according to our latest observations and according to members of Tablighi Jamaat themselves, it can be said that the mass inflow of people to daawat has ceased and the backbone that organizes and performs daawat on a systemic basis has already formed. The social composition of the movement consists mainly of the poor strata of the population with secondary education. At the movement, people go to daawat who are in need of rehabilitation from alcoholism, drug addiction, and so on. Some medical drug addiction rehabilitation centers use daawat as one of the effective methods of treatment. It is a well-known fact that the Tablighi Jamaat movement is banned in the Russian Federation, Kazakhstan, Uzbekistan, and Tajikistan. According to expert K. Malikov, “the Tablighi Jamaat move- ment is banned as an extremist organization in the Russian Federation and Tajikistan more for po- litical reasons. However, this movement is neither extremist nor even political in its characteristics and ideology, and is not a threat to the security of these countries, including Kyrgyzstan.”47 All the local48 and Russian49 experts polled confirm that Tablighi Jamaat does not present a threat to security in Kyrgyzstan in the religious sphere.

Conclusion

The government structures and secular part of Kyrgyz society have an ambiguous and even suspicious attitude toward religious movements from different countries. The countries representing these religious trends are even accused of penetrating the country primarily in pursuit of their own interests. Nor are there entirely friendly relations among the religious trends themselves; there have even been instances of disputes among them. One of the reasons the Kyrgyz government and society has this attitude toward these religious movements is that the countries they come from are trying to play the role of “big brother” and pro- posing their own model of how relations between Islam and the state today should develop. They are also teaching correct Islam and how to become a true Muslim, for, in their opinion, Kyrgyzstan lost its connection with the Muslim world during the years of Soviet power and is in need of the necessary assistance to revive Islam. It should also be noted that competition, geopolitical rivalry, and the struggle for leadership in the Muslim world among Turkey, Iran, Saudi Arabia, and the countries of the Indian Peninsula in the republic are also being manifested in the form of a dispute among the jamaats of the KR. Worldviews are clashing, and debates and discussions are going on. In so doing, the members of each trend believe

46 R. Veitsel, “Pravda i vymysly o ‘Dzhamaat Tablig’ na primere Kyrgyzstana,” available at [http://www.islamsng.com/ kgz/analytics/7471]. 47 From an interview with K. Malikov and A. Malashenko. 48 From an interview with PhD. (Polit. Sc.) O. Moldaliev, D.Sc. (Polit. Sc.) K. Malikov, and PhD (Hist.) A. Saliev. 49 From an interview with A. Malashenko.

198 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015 that precisely their way of understanding Islam is the correct and true one and should be seen as a model for emulation. The Kyrgyz government structures favor the Turkish model of relations between the state and religion. The Turkish influence today is generally seen as positive and moderate, although in the longer term, the prospects for evolution of the Turkish political system toward its Islamization are not entirely clear. It is not yet possible to identify the opinion of the broad public regarding the religious influence from Turkey, Iran, Saudi Arabia and the Indian Peninsula. This is mainly due to the population’s low awareness about the different ways to understand and explain Islam and the current religious trends. Most of the Kyrgyz population is unable to distinguish among them. Most of the Kyrgyz population perceives all the trends from other Muslim countries as true Islam. This uncritical, direct perception of Islamic methods of understanding other Muslim countries is primarily related to the fact that since gaining its independence, Kyrgyzstan has only just begun to form its own local method for understanding Islam.

199 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Contents of the Central Asia and the Caucasus Issues Volume 16, 2015

Issue 1 Page

Jannatkhan Eyvazov. UKRAINIAN CRISIS-2014: POLITICAL STRUCTURE OF THE POST-SOVIET REGION AND NATIONAL SECURITY OF AZERBAIJAN 7

Murat Laumulin. BELARUS IN THE EURASIAN SECURITY SYSTEM 23

Igor Himelfarb, Neli Esipova. EXPLORING THE PATTERNS OF RELIGIOUS OBSERVANCE IN POST-SOVIET CENTRAL ASIA AND AZERBAIJAN 37

Vladimir Paramonov, Alexei Strokov. THE MAIN PROBLEMS ON THE WAY TO COOPERATION IN CENTRAL ASIA: FOREIGN POLICY FORECAST FOR THE REGIONAL COUNTRIES 58

Sergey Zhiltsov, Aynur Bimenova. CENTRAL ASIAN POLITICS REGARDING WATER USE OF TRANSBOUNDARY RIVERS 78

Dosmir Uzbekov, Ilyas Kurmanov. CONTEMPORARY KYRGYZSTAN: THE ONTOLOGICAL ROOTS OF INSTABILITY 88

Dariko Mazhidenova, Timur Urazaev. ARE THE AFGHANS TO BLAME FOR THE AFGHAN PROBLEM? 95

200 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

Page Maxim Kirchanov. KARTVELISM AS A DEVELOPMENT PARADIGM OF GEORGIAN ETHNIC NATIONALISM 102

Shokir Khakimov. THE FORMATION OF PARLIAMENTARIANISM IN TAJIKISTAN: PAST, PRESENT, AND FUTURE 114

Saule Emrich-Bakenova. JANUS-FACED DYSFUNCTIONAL LAW: CASE OF KAZAKHSTAN’S SOCIOECONOMIC SUPPORT TO REFUGEE COMMUNITY 125

Zharkyn Samanchina, Aynura Elebaeva. THE PROSPECTS FOR EDUCATIONAL MIGRATION FROM KYRGYZSTAN TO TURKEY 135

Issue 2

Dmitri Malyshev. THE EURASIAN ECONOMIC UNION: DEVELOPMENT PROSPECTS 7

Abdurafi Aslamov. DEVELOPMENT PROSPECTS FOR THE INTEGRATION PROCESSES WITHIN THE EURASIAN ECONOMIC UNION: A TAJIKISTAN CASE STUDY 16

Feruz Bafoev. MID-TERM STIMULI, BASIC PRINCIPLES, AND READJUSTMENTS: AMERICA IN CENTRAL ASIA 26

Farkhod Tolipov. MICRO-GEOPOLITICAL SEMIOTICS OF CENTRAL ASIA: “CROSSROADS” AND “BRIDGES” 35

Evgeny Polyakov. STRUCTURE OF POLITICAL VIOLENCE AND TERROR IN THE NORTHERN CAUCASUS IN THE 1990S-2000S 42

Tatyana Perga. THE KERCH TRAFFIC INTERCHANGE: A GEOPOLITICAL DIMENSION 54

Ilkin Aslanov. THE MACROECONOMIC EFFECTS OF BUDGET SPENDING IN AZERBAIJAN’S ECONOMY 61 201 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Page Vladimir Paramonov, Alexei Strokov. THE CHINESE PRESENCE IN KAZAKHSTAN’S OIL AND GAS INDUSTRY 81

Tabasum Firdous. CONTEXTUALIZING CIVIL SOCIETY: A KYRGYZSTAN CASE STUDY 94

Inomzhon Bobokulov. STATE-BUILDING IN AFGHANISTAN: DECENTRALIZATION VS. CENTRALIZATION 107

Botagoz Rakisheva. CERTAIN ASPECTS OF ETHNICITY OF THE OF CHINA 115

Oleg Bubenok. THE ADYGHE FACTOR IN THE ETHNOPOLITICAL DEVELOPMENT OF THE NORTHERN CAUCASUS 131

Chinara Sultanalieva, Eric Freedman. PRESS COVERAGE OF ENVIRONMENTAL NEWS IN KYRGYZSTAN AND THE ROLE OF ECO-NONGOVERNMENTAL ORGANIZATIONS 144

Issue 3-4

Nikolay Borisov. POTENTIALS AND LIMITS OF POLITICAL COMPETITION: INSTITUTIONAL TRANSFORMATIONS IN GEORGIA AND ARMENIA IN THE 2000S 7

Ali Salgiriev. POLITICAL ELITES IN THE CONTEXT OF THE ETHNOPOLITICAL PROCESSES IN THE NORTHERN CAUCASUS 25

Kenan Allahverdiev. THE NATIONAL IDEA AND NATIONAL IDEOLOGY IN THE SUSTAINABILITY OF ETHNOCULTURAL IDENTITY 32

Beka Chedia. THE GEORGIAN POLITICAL ELITE: MAIN TRENDS OF ITS CIRCULATION 42

202 CENTRAL ASIA AND THE CAUCASUS Volume 16 Issue 3-4 2015

Page Asyl Bolponova. POLITICAL CLANS OF KYRGYZSTAN: PAST AND PRESENT 50

Sergey Zhiltsov. THE GREAT OIL AND GAS ROAD: FIRST RESULTS AND PROSPECTS 63

Valeria Gandzhumian. “THE GAS PIPELINE WAR”: ON SEVERAL GEOPOLITICAL CONSEQUENCES OF THE TANAP AND TURKISH STREAM PROJECTS 73

Chinara Esengul, Sheradil Baktygulov, Asel Doolotkeldieva, Bermet Imanalieva. PROSPECTS FOR REGIONAL COOPERATION IN CENTRAL ASIA AS SEEN TODAY 82

Rashid Abdullo. TAJIKISTAN-CHINA: TWENTY-FIVE YEARS OF DIRECT RELATIONS 93

Parviz Mullojanov. THE “RUSSIAN IDEA” VS. THE “AMERICAN DREAM”: “SOFT ARM WRESTLING” IN THE CIS 108

Rouben Shougarian. THE DIPLOMACY OF QUALIFYING INDUSTRIAL ZONES. An Alternative Scenario of American Brokerage between Armenia and Turkey 116

Fareed Shafee. THE EVER-CHANGING DYNAMIC OF CONFLICTS IN GEORGIA: THE INTERPLAY BETWEEN INTERNAL AND EXTERNAL FACTORS 127

Ilkin Aslanov. GOVERNMENT BUDGET REVENUES IN AZERBAIJAN: THE TAX BURDEN AND THE ROLE OF THE OIL FACTOR 137

Vakhtang Burduli. GEORGIA: PROBLEMS OF INCREASING NATIONAL ECONOMIC SELF-SUFFICIENCY (Sectoral-Structure Aspect) 155

203 Volume 16 Issue 3-4 2015 CENTRAL ASIA AND THE CAUCASUS

Page Vladimir Paramonov, Alexei Strokov. CHINA IN THE OIL AND GAS BRANCH OF TURKMENISTAN 176

Nurgul Esenamanova. KYRGYZSTAN’S ISLAMIC REFERENCE POINTS: THE ROLE OF FOREIGN RELIGIOUS TRENDS 186

204