Wednesday, 05 October 2011


Published in Analytical Articles

By Bernardo Teles Fazendeiro (10/5/2011 issue of the CACI Analyst)

On September 1, President Islam Karimov delivered his customary speech at the celebrations of Uzbekistan’s 20th anniversary of independence. The emphasis on independence and on the “Uzbek Model” for economic development continues to be expounded as the general principle for how Uzbek authorities wish to engage with international actors.

On September 1, President Islam Karimov delivered his customary speech at the celebrations of Uzbekistan’s 20th anniversary of independence. The emphasis on independence and on the “Uzbek Model” for economic development continues to be expounded as the general principle for how Uzbek authorities wish to engage with international actors. The address therefore has demonstrated the Uzbek government’s persistence in applying those two pillars in its relations. President Karimov thus signaled that little will change in Uzbekistan’s reluctance to commit wholly to partnerships with foreign actors, a fact which has become clear in Uzbekistan’s relations with two important Western states, Germany and the U.S.

BACKGROUND: In the early 1990s, Uzbekistan developed the “Uzbek Model” for economic growth. Once Russia unilaterally announced it would no longer offer legal tender to the ruble in 1993, Uzbek authorities, like their Kazakh counterparts, had to find alternative solutions for their beleaguered economies. The Uzbek worldview was rapidly asserted, and by 2000 Uzbek students were required to take compulsory courses on the compiled independence ideology (Mustaqillilk Mafkurasi) and its implications for economics and geopolitics.

One of the basic tenets of Uzbekistan’s independence ideology and its path to economic growth was articulated in President Karimov’s 1993 work: Uzbekistan—sobstvennaya model’ perekhoda na rynochnyye otnosheniya. Theoretically, the state would fulfill a leading role in the economy, by ensuring a gradual path to growth. Still, this is just part of the overall concern, since authorities have also designed a series of other important limitations.

Two words for independence exist in the Uzbek language: Istiqlol and Mustaqillik. The former could perhaps be translated as formal independence and the latter as genuine independence. According to Uzbekistan’s 2010 Popular Scientific Independence Dictionary (Mustaqillik: Ilimy - ommabop Lug’at), Mustaqillik is the true goal of Uzbek authorities, meaning that the state should seek to have both its independence recognized and also remove all traces of political submission and economic dependence. This suggests that Uzbek authorities seek to preserve control over a gradually growing economy and obtaining equal treatment from any state, regardless of its international status. These caveats could easily lead to isolationism, given their emphasis on avoiding subordination and on preservation of control. Yet, President Karimov has also argued that Uzbekistan’s independence provides opportunities for the country to find its place in the international community.

In sum, Uzbek authorities wish to ensure profitable relations with other countries, while simultaneously not compromising their control over the country. This is a complicated endeavor since foreign capital both requires reduced state supervision in order to guarantee turnover, and hinders the state’s ability to completely control labor and financial markets once it actually enters the country. It is important to note that, due to a lack of transparency, it is not clear what the main reasons are for Uzbekistan’s foreign policy orientation. However, it could plausibly be conceived as the best way of allowing former Soviet elites to maintain control over lucrative economic sectors; a product of economic thinking by President Karimov who was a Gosplan official in the Soviet Union; the best way of balancing competing interests between patronage networks; or finally a complex mix of all these concerns.

IMPLICATIONS: These aspects of Uzbekistan’s foreign policy orientation can shed some light onto how its relations with two important western states have developed. Regarding the U.S., President Karimov was particularly keen to obtain investment during his June 1996 visit to Washington D.C. Joining the U.S.-supported GUUAM in 1999 was also viewed as an opportunity for Uzbekistan to obtain assistance from the Silk Road Strategy Act of 1999 – sponsored by Senator Sam Brownback and intended to improve Eurasian transportation corridors. Nevertheless, Uzbekistan’s disillusionment with the lack of Western interest in the country gradually increased in the late 1990s and Uzbekistan left GUUAM in 2002, since the membership did not bring any noticeable advantages. On a similar note, Uzbekistan refused loosening control over its currency in the late 1990s. Currency liberalization without the increased investment Tashkent desired was most likely contrary to the aims of control and stable growth it intended to pursue.

The relationship with Washington D.C. changed, however, after 9/11. Uzbekistan signed a Strategic Partnership Agreement with the U.S. in 2002, wishing to obtain stronger aid from the U.S. As Martha Brill Olcott later argued in a 2007 testimony to the House of Representatives, the level of economic investment President Karimov was seeking was similar to what Pakistan was receiving at the time. Still, the fact that U.S. aid was tied to congressional approval and thus to an improvement in the human rights situation made Uzbek authorities grow increasingly wary about the relationship by 2004, since it was compromising its control over political events in the country and was not delivering the expected level of direct investment. Also, after President Karimov signed a letter of intent with the IMF to re-launch currency liberalization in 2002, import restrictions placed to ensure currency reserves increased popular discontent, which later contributed to the Andijan insurgency in March 2005. Given that the U.S. State Department was particularly vocal in its condemnation of Uzbekistan’s economic management and, more importantly, the death toll following the Andijan crisis, Uzbek authorities rapidly expelled American forces from the K-2 Military base in October 2005.

Recent relations with the U.S. have improved, especially after President Karimov endorsed the plan for the Northern Distribution Network (NDN) in 2008. However, difficulties still remain as Uzbek authorities are skeptical of bringing the country into the limelight and face increased criticism, which may compromise their internal political and economic control. Recently, President Karimov was quite disappointed with the lack of support he received from EU officials in his visit to Brussels in January 2011.

Germany is an interesting case because it has been able to maintain its military base in Termez in southern Uzbekistan after 2005. Berlin, unlike Washington, was not vocal on human rights issues, and some German construction companies actively worked with Zeromax, a Swiss based company, to invest in Uzbek infrastructure. Subsequently, Germany fit the requirements of Uzbekistan’s foreign policy orientation in that it propounded investment without demanding restrictions on Uzbek control. For example, Berlin allowed for the military agreement and its financial contributions to remain confidential, unlike the U.S..

Still, even Uzbekistan’s relationship with Germany has been deteriorating since the end of 2010, after Zeromax’s bankruptcy. Much like other international companies working in Uzbekistan for longer periods, such as Newmont inc. in September 2006, and Oxus Gold in 2010, their increased success and influence most likely led to nationalization of their assets. Zeromax inc. was no exception since the Swiss based company grew too big, compromising Uzbek control over the economy. While the nature of these nationalizations and Zeromax’s bankruptcy remains elusive, the company’s termination damaged German economic interests in the Uzbek construction sector. In August 2011, a successful German bakery company, owned by Steinert industries, came under increased scrutiny by Uzbek authorities. This event culminated in German Ambassador Wolfgang Neuen being blocked from entering the headquarters of the company – an occurrence which may also have been a reprisal for the inquiry on Human Rights that Uzbekistan’s Foreign Minister Vladimir Norov was subjected to in the Bundestag in May 2011.

CONCLUSIONS: Little has changed in the priorities of Uzbek authorities over the last twenty years. The principle of maintaining complete control whilst engaging simultaneously with foreign states is a contradictory principle, which has greatly affected Uzbekistan’s relations with various actors. Moreover, the Arab Revolutions have certainly alarmed the Uzbek government and have not at all led to any signals of increased liberalization, but may instead have increased its awareness of foreign activity in the country. Consequently, President Karimov’s speech at the 20th anniversary of independence, endorsing the success of the “Uzbek model”, shows that little is expected to change. Preserving control at the same time as seeking profitable economic relations with foreign actors remains the underlying foreign policy orientation, given that it upholds the essentials of the independence ideology propagated by the regime and perhaps is one of the main pillars of its legitimacy. The lessons learnt from 1991 to 2010 show that actors wishing to explore Uzbekistan’s great economic potential should trail cautiously, invest discretely, and keep the public showcase to a minimum.

AUTHOR’S BIO: Bernardo Teles Fazendeiro is a PhD Candidate at the Middle Eastern and Central Asia Security Studies Institute (MECASS), University of St. Andrews. 
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