Saturday, February 21, 2009

US Foreign Assistance in Central Asia and the Supply Route to Afghanistan: Will Obama Repeat Bush’s Mistakes in the Region?


Yesterday, the Century Foundation posted a white paper I wrote on U.S. democracy assistance policy in Central Asia. One of my major points in the paper is that the U.S. lacks a long-term strategy for the region, and, as a result, democracy assistance has been dictated too often by the ebbs and flows of America’s immediate needs from the Central Asian states. In the context of America’s present desire to engage the region as part of its increased involvement in Afghanistan, this paper offers some important warnings for the Obama administration. At present, the U.S. appears to be undertaking a strategy in Central Asia that is beginning to look like a repeat performance of mistakes made in the aftermath of the September 11, 2001 tragedy. While the short-term memory of Americans may easily lead us down a path already taken, Central Asians’ memories are a bit better. They remember too well American policy in the region following September 11th, and Kyrgyzstan’s recent decision to close the U.S. airbase on its territory is very much related to some of the past mistakes in that policy. The policy in the region following September 11th, however, was merely indicative of larger problems in the U.S. approach to Central Asia, which as I outline in my paper, includes remaining inconsistent in its policy in the region and tying its development assistance too closely to the ever changing short-term goals that govern this policy. While I encourage people to read the actual paper, let me summarize some of USAID’s past history in Central Asia, which are covered in the manuscript, since it is pertinent to the argument I want to make about the proposed overland supply route to Afghanistan and the new US engagement of Central Asia.

During the early 1990s, USAID’s strategy in Central Asia was similar to those in all of the former Communist states assumed to be “in transition” at this time. Projects aimed to make quick changes that could help transform Soviet institutions into democratic and capitalist models. While there were some successes in some countries, overall the projects faced a major obstacle in the form of people’s attitudes. In short, Central Asians (and most former Soviet citizens outside the Baltics) were not prepared to interact with a new system that was based on citizen participation in governance and a transparent merit-based economy. While it took USAID some time to recognize that local attitudes were rendering interventions ineffective, they finally did so in the later 1990s as they shifted their focus.

In the late 1990s, USAID adopted a long-term gradual strategy for its development objectives in Central Asia. This was not only true of democracy programs, but it reflected a general understanding that all forms of development in the region would take time and concerted effort from the international community and must be focused on attitudinal change. While this strategy was slated to inform U.S. assistance policy in the region from 2001 to 2005, it was never really implemented. September 11th happened, and our military mission in Afghanistan needed Central Asia’s immediate assistance and buy-in. Suddenly, USAID budgets increased by leaps and bounds, and the Agency was forced to quickly think of how the money should be spent. While the Central Asian USAID mission did come up with some innovative ways to put these resources to use, such as an expansive community development project, many resources went to revitalize defunct projects and approaches that had previously failed. In Uzbekistan, for example, USAID went back to the business of paying consultants to promote economic liberalization on the policy level with government only a couple years after it had ceased such work due to a lack of political will. By 2003, therefore, many of the same banking, macro-economic, and trade projects that had been abandoned in 1999, were back in business in Tashkent, and the Uzbek government was about as receptive to what the projects were promoting as they had been in 1999.

More importantly, the U.S. Defense Department came to the region in full force at this time. Not only did it sign agreements with the Kyrgyz and Uzbek governments to establish air bases serving Afghanistan, but it also offered substantial military aid and training to these countries and others in the region. Likewise, other U.S. government agencies provided security assistance to the Central Asian states on everything from border security to preventing terrorist financing from passing through the region’s financial institutions. While some of these programs were important in the context of the Global War on Terror, they also brought the US precariously close to propping up the region’s continuum of authoritarian rule and strengthening the foot soldiers of this authoritarianism in the security and military sectors.

The answer to this quandary that U.S. policy makers offered was to simultaneously provide increased democracy assistance to the region. While democracy assistance programs were in dire need of resources, the sudden desire to counter-balance America’s new military and security relationships with less-than-democratic governments in the region meant that these resources couldn’t only serve the long-term democracy strategy that was in place. Instead, USAID and the State Department needed to show that the U.S. cared about democracy; in other words, they needed to focus on visible symbols of democracy understood by Capitol Hill such as political parties, elections, and human rights. Unfortunately, the region was not ready for such aggressive programs, and they essentially backfired.

The result of these policies became quite obvious by 2006 as the Central Asian states began to push back against U.S. democracy assistance. In Uzbekistan, the government methodically ejected virtually every U.S. NGO working in the democracy field from the country. In Kazakhstan, the government prevented foreign assistance to political parties. In Tajikistan, people working for U.S.-funded democracy projects were subjected to various forms of harassment. More generally, the Central Asian states became increasingly suspicious of U.S. intentions in their countries, especially in the aftermath of the so-called “color revolutions,” which the Russian media portrayed as USAID-led conspiracies aimed at installing pro-American leaders throughout the former Soviet Union. In Uzbekistan, the government levied thinly veiled accusations of U.S. involvement in the Andijan protests turned massacre, and the Uzbek state subsequently closed the U.S. airbase on its territory. Now, the Kyrgyz government is taking a similar step. Through all of this Russia, which has been extremely concerned about the U.S. military presence in Central Asia, has been fanning local fears about American intentions.

This history is particularly relevant now because the evolving U.S. plans for Central Asia now appear to be replicating these past mistakes. In hopes of establishing a large overland route for bringing supplies to Afghanistan, the U.S. is already increasing its assistance and is contemplating a return to strong military and security assistance programs. Most recently, there have been suggestions that the US military may try to regain access to an airbase in Uzbekistan due to the closure of the base in Kyrgyzstan. As an article in Slate last week noted, such a renewal of close military relations with Uzbekistan could create a serious human rights quandary for the Obama administration. It could also increase tensions between the U.S. and the Central Asian states once again, hindering rather than fostering the engagement we desire.

In my opinion, the key to avoiding past mistakes depends on the question of US military involvement in the region. Unfortunately, current trends suggest that this involvement will be substantial once again as we ramp up efforts in Afghanistan. The defense department already appears to be at the forefront of the new US engagement in Central Asia. General Petraeus was the person sent to Central Asia to negotiate the overland route, and – as already mentioned – there is talk of a new base in Uzbekistan. There is also evidence that plans for military assistance are being folded into all of the agreements that seem to be hastily put together for the region. If these trends continue, we can expect a similar scenario that played out in the years following 2001. There will be a need for the USG to demonstrate measurable and visible political reforms in order to justify its increasingly close military relationship, leading to aggressive democracy policies that will likely backfire. Russia will be once again disturbed at the U.S. military presence and will attempt to subvert it. And, the assumptions of many Central Asians that the primary US interest in the region is aggressive and militant will be reconfirmed.

Fortunately, it is not too late to prevent a repeat of history, but avoiding past mistakes will require some thoughtful planning. USAID presently has several solicitations for assistance programs to the region, especially in Tajikistan which will be a critical country to America’s plans for Afghanistan. To date, the majority of these projects focus on resolving critical, yet mostly uncontroversial problems in the region such as maternal and child health, community development, agricultural development, and local economic development (see, for example, these solicitations: 1, 2, 3, 4, 5). All of these interventions reflect attempts to establish gradual long-term development in the region, and one would hope that similarly focused democracy programs would also be designed and funded in the near future. To be truly effective, however, the US needs to ensure that all of these interventions are part of a coherent long-term strategy of engagement and development and not just carrots to get short-term concessions in the service of objectives in Afghanistan.

The overland supply route through Central Asia could be a critical part of such a strategy if the U.S. develops it with Central Asia in mind as well as Afghanistan. If this supply line does not carry weapons and munitions and is driven by commercial carriers, as already promised, it could be a force for development in the region, engaging Central Asian vendors and labor and offering opportunities for the development of local economic activity along the route. This requires a concerted effort to find development opportunities in the establishment of the supply line and ensuring that these opportunities do not only serve corrupt elites, but translate into better livelihoods for regular citizens. It also requires, therefore, efforts to bolster citizen participation in these local development projects and to support local media and civil society activities that hold local officials and the central government accountable and prevent state corruption in connection with the supply line.

In order to realize such a coherent long-term strategy, however, the U.S. government needs to take several steps uncharacteristic of its bureaucracy. First, it needs to make a clear decision to limit the involvement of the Pentagon in Central Asia outside Afghanistan. The Pentagon should realize that this serves its interests in the long-run. If a well thought-out commercially oriented supply link devoid of U.S. military involvement is created between Central Asia and Afghanistan, it will not only create a more cost effective way for the U.S. to bring supplies into the country; it will also encourage increased Central Asian commercial involvement in Afghanistan, especially from Kazakhstan. Furthermore, it would essentially remove the need for a U.S. airbase in the region since supplies could be brought overland at lower cost than by air through either Kyrgyzstan or Uzbekistan. While I am sure that many military strategists will continue to insist on the necessity of a base, the arguments I have heard in the past for its need were based on the high cost of bringing supplies directly from Germany, and presumably a land-route would resolve that problem. Furthermore, the increased stability in host government support for (and hopefully decrease in Russian objection to) the overland supply line that would likely result from avoiding a base would ultimately better serve U.S. interests in Afghanistan over the long term.

Besides keeping the Pentagon away from the nuts and bolts of the running of a supply line through Central Asia and forgoing any plans to establish yet another military base in the region, the U.S. should not consider ramping up military assistance in Central Asia (if such assistance has not already been promised by General Petraeus). As already noted, this will inevitably create an impression that the U.S. is helping armies that could be used against local citizens as was the case in Andijan in May 2005. In short, while the supply line is certainly entangled with the Defense Department’s goals in Afghanistan and will inevitably involve DOD input in its design and planning, the engagement with Central Asians should primarily be run through two of the three D’s – diplomacy and development. Otherwise, as the former Kyrgyz ambassador to the U.S. noted Friday in a Washington Post op-ed about the Kyrgyz base, the long-term development goals of sustainable free markets and good governance will be lost to an over-emphasis on short-term military interests.

While limiting the Pentagon’s involvement in Central Asia is probably the most challenging step the U.S. would need to take to realize the plan I mention above, it is certainly not the only one. Secondly, USAID needs to engage the many people who have been working on the ground in the region on development issues for the last decade and a half in the formulation of a coherent long-term development strategy for Central Asia. Such a strategy needs to be cognizant of local cultural issues and history while also being aware of the regional context and the symbiotic relationship between democracy and economic development.

Finally, the U.S. government as a whole needs to commit to the long-term resources to realize this strategy. While the U.S. is usually reticent to make any financial commitments that extend beyond one year, it must be understood that this is a critical aspect of any strategy to rebuild Afghanistan, where we are already prepared to be involved over the long-term. If USAID is given the opportunity to use increased resources for the establishment of long-term projects focused on gradual changes in all sectors from economic reform to democracy, the agency may find a willingness on the side of host governments to buy into these development efforts when appropriate. Ideally, such buy-in would also create more tolerance on the part of host governments for projects engaging citizens on freedom of information, civic involvement in governance, and the protection of human rights, especially when they stress gradual change and citizen development over short-term regime change.

Although this may sound like a radical and ambitious plan for a region on the margins of Americans’ attention, the new administration should also keep in mind that it was voted in on a platform promising change and “out-of-the-box” thinking. The last thing the Obama administration should want to do is repeat the mistakes of its predecessors. Unfortunately, if current trends in the recent increased engagement of Central Asia continue, that will be exactly what the administration is doing. If it makes the effort to do things right this time, however, the Obama administration could make more in-roads in the region than any U.S. government since the fall of the USSR and help make a sustained impact on Central Asia’s development while they are at it.

Friday, February 13, 2009

New Video: Understanding Central Asia

Simon James, a video documentarian at The Refugee Studies Center at Oxford University, has produced an interesting introductory educational/informational aid on Central Asia, entitled "Understanding Central Asia" that is worth sharing with you. It a basic video that highlights interviews with various experts in the field of Central Asia studies, providing commentary on some basic issues as they relate to Afghanistan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. I serve as the primary interviewee for the Uzbekistan section. Mr. James has hosted the video on a free video hosting site if people would care to access the video for educational purposes. On the same hosting site, he has posted a video on the IMU. While these pieces are not really for those who already follow events in the region, they are useful aids for those who are new to the region, but would like a good intelligent overview of major political, social, and economic issues. The link to the "Understanding Central Asia" video is here.

Wednesday, February 04, 2009

Will the global economic crisis bring down the “Kazakh Miracle”?

Kazkah Banking crisis
About a month ago, I spoke with a financial consultant close to the Kazakhstan market who said that things looked very bad. He said that the major banks, especially BTA (Bank Turan Alem) and KKB (KazKommertz Bank) were in serious trouble. He thought they were beyond “bailout,” and that the country was headed for serious trouble. This situation, of course, is not unique. Around the world, financial institutions are crumbling as governments try to find ways to prevent them from failing outright. In Kazakhstan, however, this financial crisis could potentially spin out of control, especially coupled with the drop in oil prices.

Monday, the first signs of a serious banking crisis became apparent in Kazakhstan as the government effectively nationalized the country’s largest bank, BTA, by buying up a large majority of its shares. BTA’s chairman, Mukhtar Ablyazov (of DCK fame), was also relieved of his position, an act that led him to lash out against the government stating that “the actions taken toward BTA Bank by the government are arbitrary and state theft.” If the financial consultant with whom I spoke a month ago was correct, however, this was not as much a political move against Ablyazov as it was an act of desperation to forestall an impending crisis. Furthermore, the government buy-out occurred in the midst of speculation that Russia’s state owned “SberBank” was poised to buy BTA out, and the Kazakh government would likely want to bear the burden of the bank’s problems before allowing its largest financial institution to be taken over by Russia.

As the news of the BTA buy-out hit the international financial sector, the Fitch rating agency downgraded Kazakhstan’s sovereign rating to BBB-. While Fitch noted that Kazakhstan’s oil fund had set aside 5 Billion dollars to help the country’s banks weather the financial crisis, it was concerned that this may not be enough. Besides BTA, the Kazakhstan government is also pumping money into Alliance bank, the country’s third largest lender, and is considering buying a majority of its stakes. Meanwhile, there is little talk about what will happen to KKB and Halyk Bank (numbers two and three in the sector), which like BTA have substantial international investments that must be losing money at a rapid rate. Both received 1 Billion dollars in bailout money each from the government in January, but it is not clear that they are not still in trouble. An interview with the Executive Director of KKB this week did not provide much more clarity. While he was careful to not alarm people about the banking sector’s future, he did suggest that things remain tenuous and that more would likely need to be done to avert a crisis. Meanwhile, rumors abound that Russia’s “SberBank” may now be interested in buying out Halyk Bank.

The upheaval in Kazkahstan’s banking sector raises serious questions about the future of the country’s economy and its political stability at the same time that it is poised to increase its international visibility as the president of the OSCE. To Kazakhstan’s credit, the government has worked hard to facilitate the development of a strong banking sector, and the country survived the financial crisis that hit Russia in 1998 with few scars. This time, however, the affect will likely be more severe. What was once called the “Kazakhstan miracle” may be in serious jeopardy.

Politically, upheaval in the banking sector could create serious waves. First, the long tenuous alliance between the government and the country’s financial oligarchs could be in jeopardy. This could lead to serious intrigue in the political arena. Meanwhile, the population has already felt the affects of the crisis. The housing market bottomed out over a year ago, and people’s real estate investments took a serious hit. The evolving banking crisis is already adding to people’s anxiety as jobs are in jeopardy and prices are on the rise. A friend in Almaty has told me that this winter has brought back a certain meanness to the streets of the city that has not been visible since the late 1990s. Gypsy cabs that passed people by on the street only a year ago are beginning to fight for clientele, and few people are out on the streets at night. While the people of Central Asia have incredible tolerance for suffering, the people of Kazakhstan have enjoyed rising economic expectations over the last decade. Nothing creates more popular political discord than rising expectations not met.

Meanwhile, President Nazarbayev has written a thought piece on the crisis in “Rossiiskaya Gazeta” that offers his opinions on the ways out of crisis, most of which depend heavily upon Russia, China, and the SCO to champion his “Plan for Radical Renewal” to the international community. In doing so, he suggests that Kazakhstan, as a bridge between east and west, could play a critical role in resolving the entire global economic crisis. While these lofty ideas born of Nazarbayev’s “Eurasianism” are interesting indeed, they could soon sound like Nero’s violin notes while Rome is burning. For the sake of the people of Kazakhstan, and the rest of Central Asia for that matter, let’s hope not.

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