RUSSIA'S REGULATION OF LABOR MIGRATION SET TO HURT CENTRAL ASIAN ECONOMIES, by Nurzhan Zhambekov
MOSCOW CFE KILL THREATEN CAUCASUS STABILITY, by Richard Weitz
CAUCASUS EMIRATE FACES FURTHER DECLINE AFTER THE DEATH OF ITS LEADER, by Emil Aslan Souleimanov
KAZAKHSTAN AND NEIGHBORS SEEK STRATEGIES TO COUNTER EMERGING THREATS, by Jacob Zenn
KYRGYZSTAN'S PRIME MINISTER RESIGNS, by Arslan Sabyrbekov
ISLAMIC STATE REACHES OUT TO GEORGIA, by Eka Janashia
ARMENIA'S PRESIDENT VISITS THE VATICAN, by Erik Davtyan
AZERBAIJAN DEMOTED TO EITI CANDIDATE, by Mina Muradova
By Sergei Gretsky (06/10/2015 issue of the CACI Analyst)
The creation of the Eurasian Economic Union (EEU) was presented as a vehicle for economic development of Belarus, Kazakhstan, and Russia as a result of the removal of barriers to free movement of goods, capital, and labor between the three states and creating a common market. Its inauguration on January 1, 2015, happened at a very inopportune moment as Russian economy, the largest of the three, was sharply contracting due to falling global commodity prices and western sanctions over Ukraine. Economic recession in Russia has had a negative ripple effect on Belarusian and Kazakhstani economies, which led some in Kazakhstan to second-guess the benefits of joining the EEU.
By Nurzhan Zhambekov (04/01/2015 issue of the CACI Analyst)
Azerbaijan and Kazakhstan face a tough year as oil prices plummet. A dramatic shift has occurred in the international oil market in recent months as oil supply has gone up, particularly with the U.S. oil production increase, and demand has weakened with the economic slowdown in China and the EU. Saudi Arabia, the world’s second largest oil producer, did not reduce its oil production despite the oil price decline, indicating that it would like to maintain its international oil market share. The precipitous decline in oil prices has resulted in a sharp fall in export revenues for Azerbaijan and Kazakhstan, the third and second largest oil producers respectively in the former-Soviet Union after Russia. This dramatic price drop has put the two countries’ currencies under severe pressure.
By Oleg Salimov (02/18/2015 issue of the CACI Analyst)
Tajikistan’s President Emomali Rakhmon addressed the parliament in his annual speech on January 23, 2015. Rakhmon reviewed Tajikistan’s accomplishments in the socioeconomic sphere in 2014 and outlined his proposals for the country’s development in 2015. Rakhmon presented a highly detailed review of the work done by the Tajik government in 2014, highlighting numerous improvements supported by meticulous statistical data. In the speech, summaries of specific accomplishments were followed by appeals for further improvement.
In his annual address, Rakhmon focused mostly on economics, social problems, energy independence, transportation infrastructure, water resources, education and youth problems, and terrorism. Rakhmon specifically addressed the importance of developing a strong ideological basis in order to unify the people of Tajikistan and enhance their patriotism. Rakhmon also announced 2015 as the “Year of the Family,” translating into a separate set of tasks for the government and legislature in 2015. The president only cursorily mentioned Tajikistan’s parliamentary elections, even though these are scheduled to take place on March 1, 2015.
A few points in Rakhmon’s speech require closer attention. When speaking about economics, Rakhmon stressed the role of heavy industry, natural resources extraction, and Tajikistan’s hydroelectric power potential as it seeks to find its niche in the global market. In Rakhmon’s vision, the development of the agricultural sector is essential mostly for the country’s internal consumption and substitution of imported produce. According to Rakhmon’s speech, Tajikistan’s mid-term goal to transform from a largely agricultural society into a resource-supplying country with a perspective, in the long-run, to become a self-sufficient industrialized economy.
This enormous task can encounter such problems as insufficient human capital, technological deficiency, and inability of the state to attract necessary financial investments. Rakhmon touched on these problems as part of Tajikistan’s broader socioeconomic challenges, yet he made no direct reference to his proposal for economic transformation. The country’s transportation gridlock creates another obstacle for Tajikistan on its way to industrialization. The Turkmenistan-Afghanistan-Tajikistan railroad project, which started in March 2013 and would have provided Tajikistan with access to the Caspian and South-Asian markets, stalled as the participating countries disagree on the route of the railroad.
Tajikistan also continually suffers from an energy crisis. Although the country possesses a significant hydroelectric power capability, it suffers from a constant deficit of electricity vital for industrialization. While Rakhmon reports a significant increase in electricity production, the power limit for residential consumption remains at 6 hours daily in the winter time. Additionally, the hydroelectric power company Barki Tojik, which Rakhmon sees as an important player in advancing Tajikistan’s energy independence and hydroelectric power export, struggles with considerable financial difficulties. The company’s debt to suppliers and Tajikistan’s Taxation Department totals US$ 300 million as of August 2014. Tajikistan’s state budget is also cash strained as the export of aluminum, the main income-generating item, was cut from 216,000 tons in 2013 to 121,200 tons in 2014, according to the Minister of Economic Development and Trade Sharif Rakhimzoda.
Another significant part of Rakhmon’s speech was an appeal for constructing an ideological platform for Tajikistan, which must encourage patriotism, pride of the national and cultural heritage, and loyalty to the country’s interests. This task was in large part delegated to the Tajik Academy of Sciences. The ideology has to counterbalance propaganda hostile to Tajikistan. Rakhmon also underlined that, among other tasks, the Academy has to intensify its efforts to study the Tajik Civil War of 1992-97 and presenting more accurate and objective information on the issue as compared to other sources. It should be noted that last year a Tajik scholar from Canada was arrested in Tajikistan when trying to conduct research on the Tajik Civil War, unauthorized by the Tajik government. The apparent motive behind these proposals is to increase the legitimacy of the current regime. Rakhmon’s image as a peacemaker has helped him retain power for almost two decades and he intends to continue to do so in the future.
In general, Rakhmon’s annual address to parliament presented the same set of issues that the country has been trying to resolve since independence. As in last year’s speech, the current proposals for export increases, industrialization, energy independence, and resolution of the transportation impasse lacked specific plans for action and follow-up reviews. Besides, several factors and actors supposedly assisting the economic development process have collapsed or struggle to function, as seen in the example of the TAT railroad and Barki Tojik. Therefore, Rakhmon’s proposals constitute the acknowledgment of problems rather solutions to them.
By Eka Janashia (01/22/2015 issue of the CACI Analyst)
At the beginning of 2015, Russia’s state-owned oil producer Rosneft entered Georgia’s oil retail market by purchasing a 49 percent stake of Petrocas Energy Ltd. Petrocas’ affluent assets include an oil terminal in Georgia’s Black Sea port of Poti with a capacity of 1.9 million tons per year as well as a network of 140 gas stations in Georgia under the Gulf brand.
By launching a joint venture with Pertocas, Rosneft will gain high-quality storage capacity in one of the major oil and oil products hubs in the region, enrich supply routes options and enhance its operations in the Central Asia and South Caucasus oil market. “[It] is a new milestone that will highlight the strategic importance of the South Caucasian energy corridor,” the main shareholder of Petrocas, Russian businessman David Iakobashvili said.
The opposition United National Movement (UNM) party insisted that Rosneft plans to acquire a controlling interest in Petrocas and called on the government to revoke a deal damaging to state interests. The government responded that it was during UNM’s term in power that Russian investments penetrated strategic areas of Georgia’s economy such as finances, electricity, chemicals, ore industry, food and dairy products. For example, at that time, the Russian state-owned electricity trader, Inter RAO, obtained 75 percent of Tbilisi’s electricity distribution company Telasi, thermal power generating plants, as well as the management right of two hydro power plants; Khrami I and Khrami II. The government also lamented that it has no right to influence private business, especially the decisions of Petrocas, which is registered in Cyprus and manages its operations from there.
UNM counter-argued that Rosneft operations in Abkhazia breach the Law on Occupied Territories and that the government is obliged to cancel the agreement granting the Russian company “the most important communications on the country’s Black Sea shore.”
Indeed, in 2009 Rosneft started offshore explorations and development of oil and gas fields in Abkhazia under an agreement signed between the company and Abkhazia’s de facto government. Against this background, three of Georgia’s government agencies began to study the legitimacy of the Rosneft-Petrocas deal. The results are yet unknown.
The recent deal reflects Russia’s strategy to strengthen its infrastructure capabilities in the South Caucasus to ensure an uninterrupted delivery of oil as well as other products to Armenia, which recently became a member of Eurasian Economic Union (EEU) but lacks land access to other EEU members in the absence of common borders. The reconstruction of the railway through Abkhazia and the planned Avro-Kakheti highway from Dagestan to eastern Georgia and then to Armenia, can be understood in this light.
While improving Armenia’s situation is Moscow’s key rationale, the Kremlin is also interested in consolidating its position in the Georgian market. UNM asserts that the Rosneft-Petrocas deal is only the beginning of “a big process” and unless countervailing measures are taken, “Moscow will have no obstacles at all.”
On January 17, Iase Zautashvili, the General Director of Airzena, Georgia’s national airlines, disclosed correspondence between Georgian and Russian state agencies regarding the prospect of restoring flights between the two countries. These clandestine negotiations aim to grant Russian companies a monopolistic position in Georgian airspace, Zautashvili said.
Referring to other covert correspondence taking place between the Russian and Georgian sides via the Swiss Embassy, UNM claims that 11 Russian companies, including Vladimir Putin’s Private Company, will enter Georgia’s airspace by dumping prices and eliminating the competition, including the national airlines, in order to obtain a monopolistic position in the Georgian market. The UNM also claims that some of these companies fall under the international sanctions against Russia while others have violated the Law on Occupied Territories.
The Enguri hydropower plant with a total capacity of 1,300 megawatts could become another target of Russian strategic interest. Russia allegedly intends to register Georgia’s most powerful hydroelectric station in the region in Abkhazia. Although Georgia’s Ministry of Energy categorically denies that the plant’s ownership is under discussion, Aslan Basaria, Director of Abkhazia’s power company Chernomorenergo, claims that negotiations have already been launched with participation of the Georgian side. “The plant is located on Georgian territory and belongs to the Georgian state. The Chernomorenergo Director General’s statement is far from reality,” the Ministry of Energy says. Despite the denial, Sokhumi in fact raised the question of the Enguri hydropower plant’s ownership a month ago when Abkhazia’s de facto leader Raul Khajimba said “what is located on our territory should be owned by the Abkhaz people.”
In fact, the Enguri generators are located on the territory of occupied Abkhazia while its arch dam is in the Georgian-controlled area. According to the informal agreement reached between Tbilisi and Sokhumi in the 1990s, Abkhazia gets 40 percent of the electricity generated by the plant free of charge while the rest goes to Georgia. The fact that the agreement terms are rather favorable to the Abkhaz side suggests that the questions raised over the plant’s ownership comes from Moscow, rather than Sukhumi.
Taken together, signs are emerging of several steps taken by Russia to make inroads into vitally important sectors of Georgia’s economy.
The Central Asia-Caucasus Analyst is a biweekly publication of the Central Asia-Caucasus Institute & Silk Road Studies Program, a Joint Transatlantic Research and Policy Center affiliated with the American Foreign Policy Council, Washington DC., and the Institute for Security and Development Policy, Stockholm. For 15 years, the Analyst has brought cutting edge analysis of the region geared toward a practitioner audience.