BISHKEK (TCA) — The prevailing calm in Gorno-Badakhshan in Tajikistan’s remote east does not rule out the prospect of a clash between local powerbrokers and Dushanbe authorities. To mitigate the risks of a local flare-up and regional power rivalry, China and Russia should communicate with each other and nudge Tajik President Emomali Rahmon toward a smooth transition of power, according to new findings presented at International Crisis Group’s briefing, Rivals for Authority in Tajikistan’s Gorno-Badakhshan, on March 14.

Following a 10-day research trip, Crisis Group has found Tajikistan’s little known and remote eastern territory of Gorno-Badakhshan Autonomous Oblast (GBAO) to be at the nexus of significant security problems, including Uighur unrest in China’s Xinjiang region, Afghanistan’s war and opium trafficking, and jihadists’ potential return from Iraq and Syria to China, Central Asia or Russia.

Gorno-Badakhshan is one of the most strategically sensitive areas in Central Asia. Situated high in the Pamir mountains, this autonomous region (or oblast) of eastern Tajikistan is bordered to the south and west by Afghanistan and to the east by China’s Xinjiang Uighur Autonomous Region. Beijing’s security presence in the region appears to be increasing, likely motivated by concerns about Uighur militants operating across the border in Afghanistan or returning from the Middle East. Since the 1990s, Gorno-Badakhshan has sought to strengthen its self-rule, including through armed struggle. For now, it is relatively quiet, but that could change without warning. At some point soon, perhaps as early as 2020, Tajik President Emomali Rahmon is expected to hand over power to a younger family member. A rocky transition could lead Gorno-Badakhshan powerbrokers to seek a more influential role in the new dispensation. Their track record suggests they may be willing to use force to achieve their ends.

Complicating matters is that the Tajik government’s control of Gorno-Badakhshan is tenuous at best. Irregulars loyal to local powerbrokers known as “the Authorities” have clashed with government forces in the past and may do so again if challenged, particularly in the event of a disorderly political transition in Dushanbe, Crisis Group says.

Meanwhile, Beijing appears to have established a security presence in GBAO. Local officials and residents say China has built an installation in a remote corner of the oblast, near both Xinjiang and the Afghan border. The location is not surprising, given China’s concern about Uighurs fighting in Iraq and Syria, some of whom could return through Afghanistan or Central Asia. Yet Beijing’s presence has provoked some local concern, and increasing Chinese influence in the region could needle Russia, which traditionally has stronger ties to Tajikistan.

Officials in GBAO and Dushanbe confirmed Beijing’s security presence in the oblast. “There are quite a lot of Chinese soldiers here”, one said, adding that they keep a low profile. Another spoke of some form of Chinese security installation in the settlement of Shaimak, near the border with Xinjiang and the Wakhan corridor, a high mountain valley in Afghanistan separating Tajikistan and Pakistan. He described the installation as “a joint counter-terrorism centre” housing Tajik forces as well. Neither the Tajik government nor the Chinese Embassy in Dushanbe responded to further inquiries by Crisis Group.

Crisis Group has found that Rahmon’s government resists outside advice, but Moscow and Beijing, which have some influence and fear upheaval in Tajikistan, could perhaps nudge the president toward a transition that minimizes risks of violence. China also should communicate more clearly its concerns and interests in the region, to both Russia and local inhabitants.

ASTANA (TCA) — On March 14 Astana hosted the 17th meeting of the Joint Intergovernmental Commission on Bilateral Cooperation between Kazakhstan and Uzbekistan, co-chaired by First Deputy Prime Minister of Kazakhstan Askar Mamin and First Deputy Prime Minister of Uzbekistan Ochilboy Ramatov, the official website of the Prime Minister of Kazakhstan reported.

The parties noted the high dynamics of mutual trade growth. The trade turnover between Kazakhstan and Uzbekistan in 2017 amounted to $2 billion, which is 31.2% higher compared to 2016. Exports from Kazakhstan to Uzbekistan in 2017 grew by 35% to $1.3 billion. Imports to Kazakhstan from Uzbekistan increased by 25.1% to $735.2 million.

The parties agreed to take further coordinated measures to ensure the growth of trade turnover to $3 billion in 2018 and to $5 billion by 2020.

The interaction of business circles and investments plays an important role in bilateral cooperation. Over the past year alone, two large business forums have been held, and commercial agreements worth more than $1 billion have been signed. Joint ventures (four trading houses) operate in the areas of food supplies, petrochemicals and chemistry. The constituent documents on a trading house of the pharmaceutical industry have been approved.

Within the framework of the Agreement on long-term cooperation between Uzbek automobile producer Uzavtosanoat SC and Kazakh carmaker SaryarkaAvtoProm LLP, a joint project is being implemented to export products to foreign markets, including the EEU market.

The meeting paid particular attention to the Year of Uzbekistan in Kazakhstan. It is planned to hold more than 200 events in the sphere of economy, tourism, cultural and humanitarian area.

“The decision of the Heads of our States to hold the Year of Uzbekistan in Kazakhstan in 2018 and the Year of Kazakhstan in Uzbekistan in 2019 is a clear indication of the unprecedentedly high level of trust and partnership relations between our countries,” First Deputy Prime Minister of Kazakhstan Askar Mamin emphasized.

The parties agreed to consider building an international Cross-Border Cooperation Center, a transport and logistics center (Dry Port) in the border areas of Kazakhstan and Uzbekistan.

Following the 2017 results, the growth of mutual volumes of rail transportation by 8% was recorded, amounting to more than 20.5 million tons. During the first two months of 2018, traffic volumes increased by 44% compared to the same period of 2017.

The parties also agreed that regular railway passenger trains along the Samarkand—Astana route will start operation in April this year.

BISHKEK (TCA) — Supporting the Kyrgyzstan government’s pursuit to unleash the country’s export potential, the UN Food and Agriculture Organization (FAO) conducted a one-day workshop on March 14 in Bishkek to discuss with participants how to diversify agrifood exports and to enter the European and Chinese agricultural markets.

The broad range of participants could have a large positive effect on Kyrgyz exports. The workshop was attended by representatives of government authorities, such as the Ministry of Economy and the Ministry of Agriculture, Food Industry and Melioration, and various exporters and commercial and agricultural associations.

The workshop was aimed to facilitate the exchange of information among national and international experts, government agencies, and the private sector that might lead to joint action in the future.

Participants worked to identify further actions for the successful implementation of policies and programs to promote the export of agricultural products in Kyrgyzstan.

“Serving as a baseline for today’s workshop are guidelines that FAO developed for Kyrgyzstan in 2017 on its priority export products to the European market and an analytical overview from FAO of the specifics of accessing the Chinese agrifood market,” said Iryna Kobuta, FAO economist.

A number of products from Kyrgyzstan are attractive to consumers in the European Union, including dried fruits, honey, walnuts, and kidney beans. Requirements for the export of these products, along with information about the EU’s agrifood market structure, served as additional topics for discussion.

Participants also learned about the specifics of entering China’s market, especially for animal products, and recommendations will be provided on authorizing national production capacities as exporters of agricultural goods to China.

In 2015, Kyrgyzstan adopted its first plan to improve its competitiveness and realize the country’s export potential for a sustainable economic growth. Since then, FAO and other international partners have been supporting the government in this area. The main concerns are the competitiveness of agrifood products, export support measures, and food quality.

TASHKENT (TCA) — A round table discussion on “Cooperation between Uzbekistan and the European Union: Vision to the Future” was held on March 14 in Tashkent. The event was organized by the Institute for Strategic and Regional Studies under the President of Uzbekistan, the European Union and the Friedrich Ebert Foundation in Uzbekistan with the support of the Ministry of Internal Affairs, the Delegation of the European Union to Uzbekistan said.

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ASTANA (TCA) — A court in Astana on March 14 sentenced former Economy Minister of Kazakhstan, Kuandyk Bishimbaev, to 10 years in prison after convicting him on charges of bribery and embezzlement, RFE/RL’s Kazakh Service reported.

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ASTANA (TCA) — As Kazakhstan remains heavily dependent on hydrocarbon production and export, and the country’s banking sector remains weak and dependent on state support, economic diversification is perhaps the main task facing the Kazakh government. We are republishing this article on the issue by George Voloshin, originally published by The Jamestown Foundation’s Eurasia Daily Monitor:

In January, Kazakhstan’s Ministry of National Economy reported that oil production in the country had risen from 78 million to 86.2 million metric tons year-on-year, whereas only six months earlier, in July 2017, the annual forecast had stood at just 81 million. The giant Kashagan oilfield contributed 8 million metric tons to the 2017 total output and is expected to chip in another 10 million this year. Production from the deposit over time should exceed 13 million metric tons on an annual basis. The field was idle from mid-2013 to late 2016, after corrosion of the offshore pipelines had caused gas leaks and prompted the replacement of the entire pipe infrastructure. Kazakhstan’s government pins much hope on Kashagan and on increased production from two other key deposits located off the Caspian coast—Tengiz and Karachaganak—to shore up its finances and spur economic growth. Nonetheless, economic diversification remains an officially proclaimed priority and has been at the top of the domestic agenda for more than a decade (Rambler.ru, February 8; Eadaily.com, January 12; Tengrinews.kz, July 10, 2017).

In October 2017, the Minister of National Economy Timur Suleimenov acknowledged his country’s high dependence on hydrocarbon exports, albeit adding that the share of oil and natural gas had shrunk during the past eight years. He also said that insufficient investment in the non-energy infrastructure was the leading cause of Kazakhstan’s failure to diversify away from the extractive industries. In January, the Kazakhstani capital saw the inauguration of the brand-new Astana International Financial Center (AIFC), whose aim is to attract additional foreign direct investments (FDI) into Central Asia’s largest economy. AIFC Managing Director Kairat Kelimbetov, a former governor of the central bank, held a press conference earlier this year where he said that the AIFC should attract up to $5 billion in FDI by no later than 2023 and up to $40 billion in a decade or so. The government sees it among the top 20 financial centers of Asia by 2028 and among the global top 30 by 2033–2038 (Primeminister.kz, January 31; Bnews.kz, October 24, 2017).

The AIFC has its own stock exchange, which is currently co-owned by the government of Kazakhstan and two foreign partners—NASDAQ and the Shanghai Stock Exchange. It has concluded partnerships with Microsoft and IBM, among others, and has agreed to receive institutional support from the European Bank for Reconstruction and Development (EBRD). It nurtures the ambition to become a pole of attraction for Eurasian investment banking, green finance, Islamic finance and financial technology. The AIFC’s activities are governed by a special statutory law, which has carved out a unique place for it in the general legislative and regulatory landscape. For instance, AIFC residents are exempt from taxes and visa restrictions for the next 50–60 years. The financial center’s working language is English and court system is staffed with Western nationals. Two prominent British judges took the helm of the AIFC International Court and the Court of Appeals in December 2017 and February 2018, respectively (365info.kz, February 27; Kursiv.kz, December 11, 2017; Mir24.tv, December 6, 2017).

While Kazakhstan seeks to take a page from the books of Dubai and Singapore, both of which have well-developed financial services for non-residents, it is saddled with legacy problems of its own making. In a recent frank interview with the local media, Umut Shayakhmetova, the CEO of the country’s largest financial institution, Halyk Bank, admitted that close to 80 percent of all Kazakhstani banks depended on the state or state-owned companies for survival. She criticized most banks’ tendency to sit on a pile of cheap cash and to restrict lending to the real economy. Despite significant progress in cleaning up the post-2009 banking sector mess, Kazakhstan’s financial institutions still face multiples deficiencies and a fair amount of structural fragility. Last year, the central bank had to intervene to save RBK Bank, whose shareholders President Nursultan Nazarbayev publicly accused of deliberate fraud. The matter has yet to be investigated. Several months earlier, Halyk Bank swallowed up its closest rival, Kazkommertsbank, paying one Kazakh tenge (less than one cent) for its net assets (Forbes.kz, March 3; Inform.kz, November 3, 2017; Informburo.kz, July 11, 2017).

With the domestic financial sector in tatters, Kazakhstan must make a strong case for the orderly privatization of its flagship companies to implement a robust diversification program. The authorities view the AIFC as the primary platform for listing such strategic enterprises as KazMunayGas, Kazakh Railways, Air Astana, Kazatomprom (uranium mining), Samruk Energy (power generation and distribution) or Kazakh Telecom. However, the situation here is far from certain. On the one hand, foreign investors are familiar mostly with Kazakhstan’s energy riches and have little to no experience with venturing out into other sectors. Recent media reports suggest that Royal Dutch Shell, an oil major, is considering acquiring a minority stake in KazMunayGas, amid a total lack of interest from other multinational companies in the assets offered for sale. On the other hand, the present-day uncertainty surrounding the future of the Nazarbayev administration makes a direct bet on Kazakhstan’s continued stability and prosperity a relatively risky affair (Kursiv.kz, March 6; Total.kz, July 13, 2017). Presdient Nazarbayev is 77.

Kazakhstan’s economic diversification will undoubtedly remain a strategic priority for years to come. It is essential for the country’s future stability as the volatility of oil prices is unlikely to go away in the context of electric vehicles’ growing appeal and the ongoing disruption caused by the shale-oil production in the United States. But it is also a key to keeping the country as a safe and stable linchpin of regional security, at a time when Russia’s geopolitical standoff with the West has had a distinctly negative impact on its immediate neighbors and trade partners. The Eurasian Economic Union (EEU) has yet to bear first fruit concerning economic integration, stretching beyond the near-term gains from lowered tariffs. Meanwhile, Russia itself is heavily handicapped by its own high level of dependence on oil exports and has mostly failed to make its economy more advanced technologically. The apparent failure of the Skolkovo innovation center—touted by former president Dmitry Medvedev (2008–2012) but then largely forgotten and ignored under Putin—is a good illustration of the strong correlation between growth and liberalization, both political and economic.