Contribution at a conference held in Boulder, USA, April 11th. 1998. Copyright: �ystein
Interlocking Political Risk Dimensions.
This article discusses the political risk involved in developing the oil and gas resources
of the Caspian Region and Central Asia and in bringing the oil and gas to the market. The
risks involved should be analyzed from at least three angles: the transportation problems,
the great power involvement and the potential instability of the regimes in place. These
three dimensions interlock. The transportation problems invite interference from
neighboring states for both economic and political reasons. Hence the solutions affect the
great powers involved. The potential instability of the regimes in place makes them seek
allies outside the region. Hence the internal politics of the new states of the Caspian
Region and Central Asia also affects the great powers. These interlocking dimensions of
political risk make the region perhaps the worlds most complex environment for the
oil industry. Nevertheless, the stakes are enormous.
If the Caspian Region and Central Asia had not been landlocked or had freely
available transit routes, the region would be one of the worlds most favorable oil
provinces. A reasonable bet is
that the geological potential is underestimated, so that the region may contain much more
oil and gas than generally anticipated today. Hence the potential is for a rising output
of oil and gas at declining costs. The prospect is thus for huge profits, but their
division remains an open question, linked to the transportation issue.
The potential economic gain and the strategic importance of the Caspian Region and
Central Asia cause the interest of outside powers, whether they are neighboring or not.
Indeed, the great game of the 19th century between Russia and the United
Kingdom over the control of Central Asia seems to reappear over oil at the turn of the 20th
century. This time, however, the United States appears as the chief contender to
Russias interests, with Iran and Turkey in secondary roles.
external powers have similar and competing interests, that is access to and control of the
regions oil and gas, but their means are not equal. The United States has a
disadvantage because of remoteness and hence needs a partner for the transit of the oil.
Russia and Iran have an advantage because of proximity, adjacent markets and easy transit.
Turkey is at a disadvantage because of costly and potentially vulnerable transit routes.
Furthermore, Armenia, a traditional ally of Russia and Iran, is in a key position
representing a potential threat to both Azerbaijan and Turkish oil interests. So far, the
United States has chosen Turkey as a partner, but this is hardly sufficient, as Russia or
Iran or an alliance of the two could upset any Turkish transit route. Hence investment in
new pipeline systems may not be sufficient to secure outlets and the free flow of oil and
gas. This enhances the economic risk for the oil investors.
the regimes in place in the Caspian Region and Central Asia are all potentially unstable.
Since independence, these countries have not become democracies.
Their post-Soviet political life has striking similarities with Soviet times, indicating a
remarkable continuity in social relations, in spite of spectacular formal and
institutional changes. Common features are the smooth transition of the local Soviet power
elites into nationalist ruling elites, with ideology changing rather than substance or
methods, as well as an extreme centralization of power, often with authority vested in a
single person. Such political systems
are inherently unstable. They have no mechanisms for dialogue and compromise. Authority
vested in dispensable and mortal individuals is more fragile than the authority of more
lasting and solid institutions. This point is of a critical relevance to the region and to
the oil industry.
other oil and gas exporters are that the petroleum revenues easily lead to a distorted
economic development. In many oil and gas
exporting developing countries there is a propensity for autocratic regimes with an
extreme centralization of power that hampers gradual adjustment and over time leads to
political instability and discontinuities.
Even if there
is reasonably little risk of nationalization of oil and gas facilities, there is a
considerable risk of difficult operating conditions due to deteriorating political
circumstances. The situation in present Algeria or in Iran in the late 1970s is a relevant
reference. In the Caspian Region and Central Asia the monopolies of the Soviet times have
been replaced by patron-client relationships, that due to their discretionary and
selective character bear little resemblance with open markets. This is a real problem for
oil investors, who risk betting on the wrong horses or even the wrong riders. It is an
open question to what extent the immediate post-Soviet regimes in these countries
represent a transitory phase or a more lasting solution. This is also pertinent to the
interests of the great powers.
petroleum point of view, the regions salient cases are Azerbaijan, Kazakhstan,
Turkmenistan and Uzbekistan. These countries have autocratic governments of various
degrees of harshness. They all face fundamental political problems. They have a much
higher level of education than the oil exporters of the Middle East and North Africa.
Hence autocratic governments may be less acceptable, especially insofar as they do not
deliver economic progress. The very survival of these regimes may thus depend upon their
ability to attract oil investors.
risk should induce oil investors to apply a higher than usual risk premium when assessing
investment opportunities in the region. This risk premium in addition to the cost of
transportation could mean that oil and gas development in the region is economically less
attractive than what appears from the geological potential.
new countries in the Caspian Region and Central Asia
are at a different stage of development from the Middle East and North Africa.
The region is politically important because it may have the geological potential to become
a leading new oil
province. The political entities are new and immature. Their oil industry
is in most cases young. Like Iran,
they lack democratic traditions. So far, their institutions are only nominally democratic.
As was already pointed out, servants of the old, communist regime who have changed their
political label have kept power. They have also maintained their autocratic preferences.
Indeed, throughout the Caspian Region and Central Asia,
the democratic process, timidly begun in 1991, seems to have stalled. Hence insofar as
these countries develop substantial oil
and gas exports, they have good chances of not only developing rentier economies, with
detrimental effects on other industries, but also rentier states. This
would make their emerging private sectors parasites upon the oil state. Chances are
therefore that the distribution of wealth and income will become more unequal. Chances are
also that mounting conflicts over distribution of income and power will push the new
rulers toward more repressive methods to stay in power. The new rulers may even choose to
secure their positions with new alliances with the old colonial power. In other cases,
they seek alliances with outside partners.
A New Oil Province with Heavy Risk Factors.
attraction of the Caspian Region and Central Asia is simply huge oil reserves in countries
whose governments are in need of revenues, investment and trade. Hence the international
oil industry apparently has a favorable bargaining position. Oil and gas development has
the potential to significantly help the new republics to economic prosperity as well as
political stability and independence. Indeed, the key economic assets of Azerbaijan,
Kazakhstan, Turkmenistan and Uzbekistan are oil and gas reserves.
The value of these assets is, however, somewhat diminished by the difficult outlets
to world markets. The land-locked position of the countries mentioned severely limits the
choice of markets. In principle, the regions oil and gas could be exported by
pipeline to the growing markets of China, India and Pakistan, but the capital cost would
be extremely high and some transit routes, for example through Afghanistan, would mean a
risk of disruptions due to political strife. An alternative transit route would be through
Iran to the Gulf. At least for the regions oil this may be the most economical
outlet. From Iranian ports the oil could then be shipped to the growing Asian markets.
Such a solution would, however, strongly reinforce Irans position in both the world
oil market and in the political context of the Middle East.
Hence a route through Turkey is in the planning. The project is for an oil pipeline
for Azeri and eventually Kazakh crude through Georgia to the Turkish Mediterranean port of
The point is to avoid Armenia, Iran and Russia, all of which are actually or potentially
on less than good neighborly terms with Azerbaijan. The capital cost for the 1700
kilometer line is estimated to be at least $ 2.5 billion, possibly much more. This is the
most costly way out for Azeri and Central Asian oil. Hence it is justified by political
considerations, hardly by economics. Turkey and its regional rivals Iran and Russia see
the control of pipeline routes as an important tool for strengthening their influence in
the Caspian basin. The United States supports this route as this apparently would reduce
Russias influence and as it avoids Iran.
This benefit may be more apparent than real. Georgia remains a weak link. The route
proposed would have to pass fairly close to the Armenian border. Armenia has comparatively
strong armed forces, being Russias traditional ally in the region. Armenia also
received support from Iran during the conflict with Azerbaijan. Georgia is, by contrast, a
weak state on both political and military accounts, although its democracy seems to be
consolidating. Even as a post-Soviet
independent country it is subject to heavy Russian pressures. Hence the pipeline proposed
would run the risk of interruption by Armenian forces, directly or by proxy, if desiring
to cut Azerbaijans revenues. For such a purpose, Iran or Russia might also act
through an Armenia proxy.
An alternative, less costly and politically less risky route has been proposed by
Russia, requiring tankers to load Azeri and eventually Central Asian crude from Black Sea
terminals for shipment through the Bosporus to markets in the west. Turkey opposes any
increase in oil tanker traffic through the Bosporus pointing to serious safety and
environmental dangers. Turkey, evidently, also wants to avoid any shipment through Russia.
In addition to complex risk factors due to foreign policy, there is also the
potential problem of internal instability.
Great Game Continued.
The great game
over Central Asia is being continued on the verge of a new century, this time with the
United States replacing the United Kingdom. In this game, Russia is a constant factor,
seeking to regain both economic and political control of the region. Oil is evidently the
key factor. Iran is a new factor in the fame. It is emerging as an independent actor,
seeking economic and political control, trade and transit for the oil. In this game, Turkey is essentially an old
outsider, seeking trade and transit for the oil. Turkey apparently also has an ambition to
exercise economic and political control of the region, but with more limited means than
either Iran or Russia. The United States is a newcomer to the region and an outsider. It
is seeking economic and political control as well as oil and gas.
In this new
version of the great game, there are essentially two distinct rivalry dimensions: the
United States versus Russia for the oil, and Turkey versus Iran for the transit routes.
interests are briefly a preferential access to Central Asian oil to offset decline in
Siberia and regaining economic and political control of the region. Insofar as
Russias political and economic development lags five to seven years behind that of
neighboring Poland, Russia is likely to see a strong increase in its oil and gas
requirements during the first two decades of the next century. Russia will most probably
need more oil for a quickly growing park of cars and trucks. Presumably, Russia will also
experience a rapid increase in electricity demand in its residential and service sectors,
for which natural gas is likely to be the most favorable source of generation.
Russia is the
worlds second oldest oil province after the United States. The Russian oil industry
generally suffers from low productivity and high costs, in addition to an outdated
technology and generally poor management. Output at the large West Siberian oil fields has
peaked. Hence the most favorable geological sites have been explored and developed. For
Russia, getting oil from Azerbaijan and Central Asia could thus be a favorable alternative
compared to expensive development in Eastern Siberia or in offshore Far Eastern Russia.
Moreover, Azerbaijan and Central Asia are connected to European Russia by oil and gas
economic interest is thus to capture part of the economic rent from the regions oil
and gas through a preferential access and prices below those of the world market and
eventually through transit fees.
political interest in relation to Azeri and Central Asian oil and gas seems first of all
to be to deny other external powers control of the region. This does not mean
barring access to foreign oil investors, provided that Russia keeps a large stake. Indeed,
by first giving the new countries some leeway to negotiate directly with Western oil
interests and then reasserting some dominance of the region, Russia seems to divulge a
devious strategy. It seems be to attract Western capital and technology to modernize the
Azeri and Central Asian oil industry, but to some extent for her own benefit. To prove the
point, Russia has put fairly blunt pressure on Kazakhstan to choose an oil transit route
through Russia rather than Turkey and to get a share in the Azerbaijan oil consortium,
apparently without payment.
Russia has the means to foment troubles and put pressure on Georgia, through ethnic
minorities and factional groups. Against this backdrop, the desire to control the pipeline
for Azeri oil to the Black Sea may explain Russias ferocious fight against the
Chechen secession. Because of oil, this war may not be over, in spite of the truce in
Russia has an interest in controlling Caspian and Central Asian oil and gas exports to
improve her own bargaining position with Western oil investors. The stakes are access to
capital and market power. The oil and gas export pipelines are the instruments giving
Russia a political leverage.
This is regardless of the fact that for the populations and political elites in Azerbaijan
and Central Asia, nationalism is on the agenda, not any new subservience to Russia.
Russia apparently also has the means to obstruct or disturb any oil or gas transit through
Georgia and hence maybe in practice any transit route through Turkey. Russias
connection with Armenia is important in this respect, but this is not Russias only
means of pressure.
States as Russias chief contender in the region has less vital interests. The United
States nevertheless as the worlds only superpower has universal interests. As the
worlds leading oil importer harboring the major part of the worlds oil
industry, the United States has a persistent interest in a stake in and preferably a
control of the worlds major oil provinces, wherever they are. The United States has
an interest in Caspian and Central Asian oil reaching the world market and in investment
opportunities for U.S. oil companies. On this basis, the United States has an evident
interest in getting an economic and political foothold in Azerbaijan and Central Asia.
So far, the
U.S. policy has been to avoid any understanding between the regions oil and gas
exporters and Iran, to prevent the latter from serving as a transit point. Since the end
of the Cold War the United States has viewed Iran as one of the major adversaries. Hence
for years the U.S. policy towards Azerbaijan and Central Asia has apparently been aiming
at isolating Iran, if needed complying with some of Russias interests. For example,
in 1995, the United States government vetoed any Iranian participation in the Azerbaijan
oil consortium, but accepted a Russian participation. With Russia asserting her interest
in the regions oil, the U.S. position will be under increasing pressure to change.
The dilemma is that the United States seems to have an overriding concern to avoid the oil
from Azerbaijan and Central Asia reaching the Gulf.
The interest of
the United States is apparently also to get the Azeri and Central Asian oil to the
Mediterranean. The reason seems to be partly to put a downward pressure on Atlantic crude
prices, partly to reduce the overall supply and price risk in the world oil market due to
the dependence on the Gulf. Insofar as the U.S.
position in the Middle East and especially in the Gulf weakens because of the protracted
breakdown in the peace process between Israel and Palestine, the U.S. interest in an
alternative route to the Gulf is likely to strengthen.
interest also seems to be to assist Turkey economically by getting transit revenues and
eventually to help Israel getting secure oil supplies from a Turkish port nearby.
The United States in any case has formidable means to play a role in Azerbaijan and
Central Asia through its oil industry, technology, capital and trade opportunities. In
this respect the U.S. oil companies in the region, such as for example Chevron and Unocal,
are also political actors, with an increasingly important role in the region.
The problem for the United States is that the partners chosen for the oil transit route,
Georgia and Turkey, may be in a weak position to deliver.
second-rank external actors, Iran has got fairly little attention, in spite of the recent
success of the Turkmen gas transit. Irans interests are briefly to getting the
Caspian and Central Asian oil to the Gulf and establish close political and economic ties
with the region. First, Iran has a desperate need for foreign exchange and would benefit
from oil and gas transit fees. Second, with oil and gas transit, Iran would be in a better
position to develop trade with the region. Central Asia could eventually become an
important market for Iranian manufactured goods. In turn the combination of oil and gas
transit and trade could establish Iran as regional power in Central Asia. Third, with oil
transiting from Central Asia to Iranian Gulf ports, Iran would strengthen its position in
the Gulf, essentially in relation to Saudi-Arabia, potentially also in relation to Iraq.
Emerging as a Central Asian power would also reinforce Irans position in relation to
the Gulf neighbors.
relations with Azerbaijan merit a special attention. The present republic of Azerbaijan
was part of the Persian Empire until conquered by Czarist Russia between 1796 and 1828. It
shares language and religion with the neighboring Iranian province of Azerbaijan. There is
indeed roughly the same number of Azeri speakers on both sides of the border. Relations
between Azerbaijan and Iran are nevertheless troubled. Iran has consistently
supported Armenia in the war against Azerbaijan. Azerbaijan, in turn, in the early 1990s
under a nationalist government, made fairly overt claims for a unification of the two
parts of the Azeri speaking region, amounting indirectly to a territorial claim on Iran,
although there is hardly any record of Azeri separatism in Iran. Finally, Azerbaijan in
1995 under pressure from the United States cancelled the Iranian participation in the
Azeri oil consortium. Hence in the Iranian perspective, Azerbaijan appears at best as an
unreliable partner, at worst as an adversary and a threat to Irans integrity.
Potentially, an economic success in Azerbaijan could make the country a greater risk for
Iran. Against this backdrop, controlling the flow of oil from Azerbaijan would help Iran.
has sought to develop close relations with Turkmenistan. For Iran, Turkmenistan represents
the bridgehead to Central Asia for trade and political links.
means are favorable transit deals and trade. As already mentioned, transit routes through
Iran offer the least costly world market access for Azeri and Central Asian crude. Hence
by choosing an Iranian outlet, as opposed to the Georgia-Turkey route or any easterly
route to China, India or Pakistan, Azerbaijan and the Central Asian oil exporters could
thus keep more of the economic rent. This fact enhances Irans position. Turkmenistan
has evidently realized it when signing the deal on the gas pipeline through Iran. For
Azerbaijan and Central Asia, Iran also represents the outlet that is the most secure from
Russian interference and pressure. Both Azerbaijan and Turkmenistan have a common border
with Iran. Turkmenistan could eventually transit Kazakh and Uzbek oil and gas to Iran.
final trump card is closer relations with Russia, which remains a historical partner and a
great regional power. Iran and Russia have together supported Armenia against Azerbaijan.
They now share influence in Turkmenistan. Iran and Russia have a common interest in
excluding outside powers from exercising a political influence in the Caspian Region and
Central Asia. They could also have a common interest in preventing an alliance of the
Turkic speaking countries of the region, eventually supported by Turkey.
interests are briefly political and economic ties with Central Asia as well as transit
revenues and access to oil and gas. A major preoccupation for Turkey is to reduce the
dependence upon Arab Middle Eastern oil. This is the reason why
Turkey apparently buys any quantity of oil delivered to the Georgian port of Batumi.
Turkeys quickly rising energy needs also means that the country is a large and
expanding market for gas from Central Asia.
means are less favorable transit routes, trade and the support of the United States. As
already pointed out, the transit route through Georgia and Turkey is both costly and
politically vulnerable compared to an outlet through Iran.
evidently aims at developing the Caspian and Central Asian markets for her industrial
goods and in the longer run to become a major investor in the region. Even if a certain
religious and linguistic community undeniably favors economic and political links, Turkey
is in some respects in an ambiguous position.
Turkey trade with Russia and Ukraine is too important to be compromised by open attempts
to cross Russian interests in remote and poor Central Asia.
cultural links between Turkey and Turkic Central Asia are weak and may remain so because
of Central Asian ambitions of a distinctive cultural and linguistic development. Likewise,
in Azerbaijan, linguistic links with the Azeri minority in Iran have the priority over
linguistic links with Turkey. In this part of the world, language is politics. Only nearby
Azerbaijan has some real affinity with Turkey, but even this link is weakened by
differences in religion and history. So far, Turkey has been unable to exert much
influence in Central Asia.
Turkish transit of Caspian and Central Asian crude might perhaps be compromised by
Turkeys Kurdish problem. The proposed pipeline from Georgia through eastern Turkey
to the Mediterranean will not only traverse difficult mountainous territory, it will also
cross Kurdish land that might cause occasional problems. The south-eastern part of Turkey
has been in a state of semi-insurrection for many years. Kurdish guerrilla fighters have
on several occasions attacked pipelines carrying oil from Iraq, although so far never with
a lasting damage.
the Azerbaijan oil consortium backed by the U.S. government has its way, the oil pipeline
through Georgia and Turkey is likely to be built, regardless of cost and political risks.
Insofar as the United States pushes for a transit route through Georgia and Turkey for
Caspian oil, it could provide ground for at least a tacit alliance between Iran and
Russia. When Iran was excluded from the Azerbaijan oil consortium in 1995, there were
signs of an understanding between Iran and Russia. Subsequently, Iran and
Russia have co-operated in arms deals and trade between them is expanding. Turkmenistan
has to some degree joined these projects. The recent gas pipeline deal with Iran is a sign
that Turkmenistan for the moment does not refrain from closer ties with Iran, nor with
Russia, which remains an important transit country for Turkmen gas.
is an evident risk of oil and gas transit politics splitting the region into two camps,
one with Azerbaijan, Turkey and the United States, the other with Iran, Russia and
Turkmenistan, possibly also Kazakhstan and Uzbekistan. Such a constellation would put
Azerbaijan and the outlet of Azeri oil at great political risk.
be little doubt of Russias incentives and abilities to defend its interests in the
region. Russias and Irans potential maneuvers for disturbing the flow of
Caspian oil to the Mediterranean are legion, using proxies such as Armenia, Georgian
dissidents or Kurdish guerrillas. In such a constellation, the internal political
stability of Azerbaijan could also be at risk. If Russia could help unseat the preceding
Azeri regime, it could eventually also make the position uncomfortable for the present
Central Asian Economic Policy and Internal Political Risk.
Soviet background enhances the likelihood that when resources are available, the new
Central Asian states will opt for a capital intensive economic strategy based on oil and
gas, quite like most Middle Eastern and North African oil exporters. The eventual choice
of a labor-intensive economic development, as in East Asia, would most likely be out of
necessity, in spite of their relatively good human resources. The risk is that a
capitalist development would imply the rise of a genuine private sector and a merchant
class threatening the position of the present ex-Soviet rulers.
Indeed, for these countries, a development like in Iran under the shah or in
Algeria may appear more likely than not, with the ensuing problems of unemployment, income
distribution and political stability. It could also be in Russia's interest that the new
Central Asian states make this choice, to avoid competition in labor intensive
Azeri oil politics work out in this context. Azerbaijan has large proven oil
reserves, but no immediate outlets. The immediate object of Russia's attention is
Azerbaijan. Here, the issue of pipeline outlet relates to Russia's influence and
indirectly to the domestic political development. With a delicate ethnic balance due to a
large number of resident Russians, Kazakhstan seems more prone to stay under Russian
influence, eventually with an autocratic government supported by a semi-democratic Russia.
Turkmenistan with more gas and fewer Russians already seems to be in this position, with
an autocratic government seeking Russian support. In Uzbekistan, relations with Russia
seem more strained, even with an autocratic government. Here, conditions may be the ripest
for an Islamist development, meaning the emergence of a socially radical political
movement referring to Islam.
The comparison with the Middle East and North Africa is useful. The governments of
the Central Asian republics in the mid 1990s seem to correspond to the earlier stages of
the FLN government in Algeria or of the shah government in Iran. At the time of
post-Soviet independence, the Central Asian states had no merchant class. Hence they will
have to create one, essentially from the old communist nomenklatura,
that is public sector technocrats and party bureaucrats. This will necessarily mean an
increasing inequality of wealth and income and redistribution from the poor to the new
rich. This has been evident in Russia for a number of years. In a context of a relatively
high level of education and Islamic resurgence, filling the ideological void after the
collapse of Communism could be politically unsettling. To the extent that the economic
hopes from independence lead to disappointment, economic policy will become even more
After independence, all Central Asian republics suffer from high and rising
unemployment and declining living standards. The extensive damage
to the environment causes serious health hazards for the population. Social conditions are
deteriorating quickly. Privatization has barely begun. Where it has proceeded, as in
Uzbekistan, it has essentially benefited the ex-Soviet nomenklatura.
Practically all enterprises are still owned and operated by the state or the old nomenklatura disguised
as private owners or managers. A new merchant class is yet to rise. Hence private
initiative is still under severe restrictions from the old ruling class, which is
transforming itself into a new class on the model of the Middle East and North Africa.
None of the new states has even started to tackle land ownership.
The old state and collective farms are still essentially intact. As investment has
virtually ceased since the late 1980s, the equipment deteriorates and output is falling.
The result is recurrent food shortages. The effort to move away from the traditional
cotton monoculture has barely begun. It will require both massive investment and a
redistribution of land. Hence the move away from cotton has important political
In Central Asia, the traditions of the bazaar economy represent a potential
economic asset. Throughout the Soviet
period, Central Asia had a large underground economy. This was the major reason for
recurrent economic scandals and political reshuffles. By bringing these trading circuits
into the official economy, the new Central Asian states could make an important step
toward economic stabilization. Such a move is politically difficult, because giving more
freedom to the bazaar economy would mean encouraging the rise of a merchant class. It
would compete for resources and influence with the established technocrats and
bureaucrats. It could also foster the rise of Islam.
The Potential Role of Islam.
Central Asian republics, independence was the occasion for the local Soviet nomenklatura
to take power. Essentially, political power was transferred from Moscow to local
autocratic rulers. There is little popular participation in the political processes.
At the same time, Islam has an increasing audience in the region. Furthermore, Islam also
represents a common cultural denominator, across the artificial state borders and
Insofar as the autocratic rulers are identified with the Soviet past and with Russia, they
could provide Islam with a chance to represent both social grievances and the assertion of
national identity. Eventually, Islam could be a force working in the direction of Central
Asian unity. This is especially relevant for Sunni Central Asia.
For example, more militant Uzbek Islamist movements could aspire to influence the
and parts of neighboring Transcaucasus are generally Sunni
speaking Turkic languages. One exception is Azerbaijan which is Shia Muslim,
but Turkic. The other exception is Tajikistan which is Persian speaking, but Sunni. Hence
Azerbaijan has stronger religious links with neighboring Shia Iran
than with Sunni Turkey. Likewise, Tajikistan has closer religious links with the Sunni
Turkic neighbors than with Shia Iran. These facts have a cultural and political
Throughout the region, Islam
is either an already active factor in politics or is latently present. One country,
Tajikistan has fought a civil war where Islam was an important issue. Uzbekistan, the
region's most populous country, has an active Islamist
opposition. Indeed, the Uzbek regime apparently chose to intervene in the Tajikistan civil
war on the side of the ex-Soviet rulers against a coalition of nationalists, democrats and
Islamists out of fear that such a coalition might also be politically successful in
Uzbekistan itself. In this process, the Uzbek regime managed to convince the Russian
military to participate in crushing the new Tajik Islamist regime. In the other states
there is a potential for social unrest and political discontent finding an outlet in
The new states of the Caspian Region and Central Asia
risk political instability because of their ethnic balance. Soviet authorities under
Stalin drew their borders in a way that made each state contain a number of different
ethnic groups. Immigration of Russians
and other Europeans
as well as deportations subsequently compounded the ethnic diversity. The present outcome
is ethnically divided political entities. This was a way for the Soviet masters to divide
and rule. They split the republics by ethnic cleavages, as they split each nationality on
several republics. The purpose was to prevent any ethnic group from having its exclusive
political and administrative entity. Stalin's objective was to divide the nationalities to
promote the Soviet notion of progress. For example, there
are substantial Uzbek minorities in Kyrgyzstan, Tajikistan and Turkmenistan. In at least
one case, Kyrgyzstan, the new nation received its official identity and language from the
Soviet masters in the 1920s. The motive was a Soviet attempt at dividing the Kazakh nation.
Insofar as the post-Soviet regimes of the Caspian Region and Central Asia do not
deliver an economic success, rising living standards and improved social conditions, their
legitimacy will suffer. Insofar as they continue their autocratic ways of government,
there is an apparent risk that political opposition will be driven underground and to some
extent into the mosque. Just like in the Middle East and North Africa, Islam could also in
the Caspian Region and Central Asia appear as a useful reference in a struggle for social
justice and the assertion of a post-colonial national identity. Even if Islam evidently
means different things to different people in different situations, it could under certain
circumstances serve as a common denominator for a broad specter of opposition to the
as such circumstances should coincide in several Caspian and Central Asian countries,
there could perhaps be a common ground for some kind of political association across
present Soviet-made borders, even if that today seems a remote possibility. In any case,
such an entity would eventually have a huge territory and considerable human and natural
resources. This raises the specter of a new, powerful political entity in the region that
eventually could fend off both Iranian and Russian attempts at gaining influence.
Uzbekistan would be the place to watch in this respect because of size of the population,
the urban tradition, the strength of Islam and the presence of sizeable Uzbek minorities
in the neighboring countries. Even without an Islamist revival, Uzbekistan has the
potential to play an increasingly powerful role in Central Asia.
the ethnically most homogeneous state, Azerbaijan, the dominant nationality, Azeris, make
up 83 per cent of the population.
By contrast, Kazakhs in Kazakhstan only represent 40 per cent of the total. Here, half the
population is Russian
and other European,
including Ukrainians and Germans. Indeed, for the whole region, they make up the second
largest ethnic group, outnumbered only by Uzbeks. About two thirds of the Russians and
other Europeans are, however, in Kazakhstan, mostly in areas contiguous with Russia. In
all the new states, there is, anyway, a large number of Russians and other Europeans. They
are economically important because they are generally more skilled than the indigenous
Hence all the new states have substantial minorities of both Russians and neighboring
political significance is a high likelihood of ethnic tension within each of the new
states and between them. The dominant nationality will in each case be tempted to assert
its power of the new institutions and the reorganized economy. This would be at the
expense of both Russians
and other minorities. Ethnic tension with the republics is likely to lead to tensions
between them. Governments are likely to come under pressure to defend the interests of
their nationalities in the neighboring states. This could be a recipe for regional
conflict and political instability. It could also strengthen Russia's position in the
Political instability would compromise economic reform and growth. To start with,
prospects are not good for economic reform aiming at a market economy. The generally
ex-Soviet leaders of the new states have shown a preference for maintaining their
positions rather than introducing reforms that could decentralizes power.
In hindsight, the Caspian Region and Central Asia
suffered economically from the Russian
and later the Soviet occupation through its distorted development. The Czarist regime
built railways and started developing the local cotton industry. In Azerbaijan it
developed a huge oil
industry, measured by the standards of the times. Indeed, because of oil, Azerbaijan
embarked on a different path of economic development
from the Sunni
Central Asia across the Caspian Sea. In both cases the Czarist regime imposed unequal
exchange relations and economic monoculture. In Azerbaijan the oil industry
soon dominated economic life.
In the rest of Central Asia, cotton became the dominant crop and cash earner. After
serfdom was abolished in Russia, millions of Russians moved to Central Asia, but much less
to the Caspian Region.
During and after the Second World War there was also a huge migration of Russians
and other Soviet Europeans
to Central Asia.
This happened concurrently with the industrialization of the region. After 1945 living
standards improved markedly throughout Central Asia, even if they on several accounts
lagged behind those of the European parts of the Soviet Union.
Health and education also improved markedly, but both lagged behind the European
The persistently high birth rates and declining mortality rates among the Central
caused their share of the population
rise again. This was a significant trend in the 1980s, the last decade of the Soviet Union.
The changing ethnic balance in some cases caused the number of locals who claimed to speak
stagnated or even declined during the 1980s. This is a sign that
the education of Russian in schools was slipping behind and of a rising unwillingness to
use Russian. It has relevance for intergenerational relations. In the 1990s, after
independence, the use of Russian is receding quickly throughout Central Asia, as in
Generational politics in the Caspian Region and Central Asia
is complex because of the Soviet past. Generally, the older generation of politicians rose
to prominence and power under Brezhnev. They were essentially Soviet politicians with
local roots, born before 1935. Their formative political experiences were the Soviet
victory in 1945, Stalin's death in 1953 and especially Khrushchev's speech in 1956. His
destitution in 1964 was another important event. Under Brezhnev they became the executors
of increasing incompetence and hypocrisy, building up frustrations, tensions and even
In all republics there is a numerous middle generation that has witnessed the decay
of the Soviet Union
and sees independence as an opportunity to achieve power. They were born between 1935 and
1965. Their major formative political experiences were Khrushchev's fall in 1964, for the
older ones, the Soviet invasion of Afghanistan in 1979 and in the late 1980s Gorbachev's
liberalization. The Soviet Union's Afghan war was especially important for this
generation. Throughout the region there is also a young generation, born after 1965. Their
major formative political experience was independence after the dissolution of the Soviet
Union in 1991. In most cases, the present leaders of the new states have strong Soviet
roots. Their entourage also to a large extent belongs to the former Soviet nomenklatura.
is historically Russia's
and the Soviet Union's
province. The development of its oil industry
caused huge investment, but the republic also had other assets. The development of the oil
industry caused large-scale investment in infrastructure and education. By the time of the
collapse of the Soviet Union, Azerbaijan enjoyed a high level of education, especially in
science and technology.
After independence Azerbaijan at first in 1992 elected a nationalist democrat,
Abulfaz Elchibey, as president. Born in 1939, Elchibey for practical purposes belonged to
the middle generation. He had no Soviet political background, but close links with Turkey.
He had been active in the Popular Front, the democratic and nationalist opposition of the
late 1980s. Azerbaijan's independence was from the outset compromised the war with
Armenia. As the war dragged on and the economic and political situation of Azerbaijan
deteriorated, rebel military forces made Elchibey leave in June of 1993. His replacement
was Heidar Aliyev, an older and erstwhile prominent Soviet politician and member of the
Politburo under Brezhnev. The change at first seemed to serve Russian
interests and represented a setback for Turkey. One reason why Elchibey had to leave was
Russian military assistance to Armenia, assuring a de facto military defeat for Azerbaijan.
Rigged elections in November of 1995 indicate that Azerbaijan is stepping back from
the road to democracy.
Hence the country has a considerable potential for intergenerational strife with both
social and nationalist accents. Indeed, the secular and authoritarian Aliyev regime is an
easy target for criticism that it represents the corrupt and despotic Soviet past, present
interests and the interests of the surviving Soviet-Azeri nomenklatura.
Corruption is reportedly rampant, press censorship heavy and human rights groups report a
large number of political prisoners. Unemployment is widespread and living standards have
fallen significantly. This is likely to alienate the middle generation with nationalist
aspirations and the younger generation with limited memories of Soviet rule. Islam
represents a tempting alternative. The Shia
offers a hierarchical structure opposing the ex-Soviet nomenklatura.
Hence it also represents a tempting alternative to the middle and younger generation.
In the ideological void after the Soviet and Marxist collapse, there is a revival
in Azerbaijan. Insofar as the Aliyev
regime suppresses political opposition and the regime becomes more repressive, chances are
that the mosque
becomes the center of discontent. This is a serious issue insofar as the secular
government that pursues unpopular policies is seen as linked to Russia.
Hence in Shia
Azerbaijan the clergy
potentially represents a powerful political force in spite of the countrys
essentially secular tradition. In the future this could serve the interests of Shia Iran
rather than those of Sunni
Turkey, especially if Iran moderates its political course. Historically, the religious
ties with Iran through Shia Islam have been more important in shaping Azeri mentality and
behavior than have the linguistic ties with Turkey. Today, by contrast,
links with Turkey are more important than are those with Iran.
The development is likely to affect Azeri oil
politics. Control of Azeri oil was evidently an important motive for Russia
to unsettle the Elchibey government. By 1995, under the Aliyev government, Russia had got
a stake in the Azeri oil. Foreign intervention enhances the political risk of Azerbaijan.
It could become another case where oil indirectly forces the political opposition into the
Oil is at the same time Azerbaijan's promise and menace. The oil
resources represent potentially high future export revenues. The oil development could
bring resources that would help raise living standards, improve social services and
moderate ethnic strife with the Armenian minority. Hence oil revenues
could even help stabilize the political situation and favor democracy.
Such a path of development would require a political leadership committed to income
distribution and respectful of democratic rules. The survival of the present regime seems
to depend essentially on the flow of foreign investment in the oil industry, but it does
not appear highly committed to democracy.
The alternative is that oil
development brings resources that disproportionately favor a minority of public sector
including the military,
and a parasite merchant class.
Hence there is a risk that oil revenues
could exacerbate economic differences and social tensions. The outcome could be further
political unrest provoking more repression. The condition is a government not respectful
of democratic rules and that is bent on filling its own pockets rather than improving the
overall economic and social situation.
Against this backdrop, Azerbaijan seems to have the qualities required for
developing into a classical rentier state. The non-oil
related sectors of the economy suffer. The merchant class
is not independent. The military has already played a key role in replacing Elchibey by
Aliyev. The potential role of Islam
as a force of opposition makes an important parallel with the rentier states of the Middle
and North Africa.
The other part of the menace is that oil
will attract foreign intervention, interfering with Azerbaijan's ability to develop
according to its own interests and needs. Russian
interference in the country has long traditions.
also has much oil
but its politics are different. The country's dictator, Saparmurad Niyazov, born in 1940,
belongs to the middle generation. He took power in 1985, the same year as Michael
Gorbachev took over in Moscow, but Niyazov has proved more authoritarian and more lasting.
His entourage also mostly represents the middle generation. In spite of a severe economic
and social crisis in the late 1980s, the divided opposition was unable to unseat Niyazov.
Under Niyazov's leadership Turkmenistan declared its independence in two stages, in
August of 1990 and in October of 1991, after the failed Moscow coup. Since independence,
the Niyazov government has systematically silenced all opposition. The press censorship
also applies to matters printed abroad. Hence Niyazov represents a secular and highly
authoritarian regime, based on the younger parts of the former Soviet nomenklatura.
The Soviet regime was fairly successful in eradicating Islam
in Turkmenistan. The Niyazov regime actively controls an official version of Islam. It has
outlawed Islamic movements that could represent an opposition.
Turkmenistan should have economic resources to buy off popular discontent.
Nevertheless, failed economic policies have caused declining living standards and
considerable hardship. Riots against shortages have been suppressed.
In the longer run, the younger generation could represent a source of dangerous
discontent. The condition is that their economic and social situation deteriorates or that
in the future a higher level of education makes an authoritarian regime less acceptable.
So far, religious propaganda from neighboring Shia
has had a limited impact on the nominally largely Sunni
In practice it is fairly secular. The Uzbek minority could represent a potential source of
trouble, but it is not indispensable to the Turkmen economy. So far, Turkmenistan seems to
indicate that oil
do not necessarily lead to an Islamist
Turkmenistan already has developed into a classical rentier state. The government
is a distributor of favors rather than a tax collector and redistributor. The small
has a parasite life. Here oil
are substitutes for a democratic development. Insofar as oil and gas revenues are ample
and benefit large parts of the population,
prospects for an Islamist
opposition do not seem promising.
represents yet a different case, with so far less proven reserves of oil
but much more religious activity. It is also the most populous of the new states.
Historically, Uzbekistan is the direct successor of the Muslim
of Bukhara and Khiva. Hence Uzbekistan has stronger Islamic
roots than most other Central Asian
states, with the possible exception of Tajikistan. The state has a Tajik minority, which
in the past has played an important cultural role as a carrier of Islamic tradition. The
Samanid dynasty founded an Islamic state in Bukhara already in 874.
Bukhara subsequently developed into one of the leading centers of learning in the Islamic
world. The city kept this position for centuries, well into Russian
After the revolution the Soviet authorities were fairly successful in reducing
religious activity. Already in the 1920s, the Soviet government launched a vigorous
campaign against Islam
and local cultural traditions. Many Uzbek intellectuals were arrested and later perished
in Stalin's camps. The new government closed 99 per cent of the mosques.
During the Second World War the Soviet government wanted to enlist the support of Central
against the German invasion. Hence the Soviet government relaxed restrictions on religious
After the war, there was at first little religious activity in Uzbekistan. In the
late 1960s a new generation of Uzbeks emerged. Without the personal experience of Stalin's
purges, they felt more confident to assert an Uzbek identity.
Hence religious life in Uzbekistan had a gradual revival, but it was mostly limited to
The turning point for Uzbek Islam
was the year 1979, which saw both the Iranian
and the Soviet invasion of Afghanistan. The new government in Iran stepped up religious
propaganda aimed at the neighboring Central Asia.
It met a positive welcome in parts of the Uzbek population,
wary of Russian
dominance. The war in Afghanistan caused Soviet military activity to increase in
Uzbekistan. The Soviet military command even sent a considerable number of Uzbek troops
into the battlefield. The effect was
political and ideological unrest. Some Uzbek troops deserted and joined the Afghan Islamic
religious activity intensified. It provoked a vigorous government effort to fight Islam,
describing it as a reactionary religion.
The government propaganda soon backfired.
In Uzbekistan this coincided with a large-scale corruption scandal that further
compromised the moral authority
of the local Soviet rulers. The scandal concerned, bribery, nepotism and the embezzlement
of receipts from the sale of cotton. It caused a thorough reshuffle of the leading state
and party organs. In the process, Uzbeks lost their traditional majority to Russians.
Hence the campaign against Islam
coincided with an apparent Russian take-over of the levers of power. This was sufficient
to stimulate a combined religious and nationalist revival.
In the late 1980s Moscow viewed the religious activity in Uzbekistan with
apprehension. The religious activists were often much younger than the Soviet-Uzbek
leadership. The cautious
liberalization of the Soviet economy in the late 1980s caused the re-emergence of Uzbek
traders and merchants.
They soon supported religious charities, proving again the link between the bazaar and the
By the late 1980s, as the Soviet Union
went towards its disintegration, Uzbekistan had become a hotbed of religious activity. It
had distinctive political and nationalist accents. At this time, the economic and social
situation was quickly deteriorating. Unemployment
was rising and the population
suffered from serious supply problems.
In 1989 the opposition founded a broad nationalist movement, Birlik. It soon became
popular, especially among intellectuals. The Soviet response was a reshuffle of the Uzbek
party, putting an Uzbek of the middle generation, Islam
Karimov in power. In the last two years before independence, the opposition split and
Karimov strengthened his power.
Independence in 1991 led to strong inflation, rapidly declining living standards
and broad political protests. Because the government needed international recognition, it
had to give the opposition considerable freedom of expression and organization. The
rapidly deteriorating social conditions
and the civil war in neighboring Tajikistan stimulated the Islamic
opposition. The Karimov government in 1992 intervened militarily in the Tajik civil war to
help the secular government, issued from the ex-Soviet nomenklatura,
against its Islamist
contenders. At the same time, the Uzbek government restricted the activities of the
opposition, especially the Birlik movement, which it accused of Islamist tendencies.
In the late 1990s Uzbek society is under tight political control.
The local leadership has origins in the Soviet nomenklatura. The new leadership is overwhelmingly
and other Europeans
have left the political and administrative structures. In principle,
Uzbekistan is a democracy
with strongly centralized rule by the president. In practice it is a dictatorship run by
Karimov and his close associates. The parliament is as
obedient as it was under Stalin and Brezhnev. Freedom of expression and assembly is
deficient. Censorship is strictly practiced. The secret police is everywhere.
The opposition is split between secular and religious groups. There is an equally
important division between groups with semi-legal activities, which are suspended, and
those that the government has outlawed. Even if Uzbek law
forbids political-religious organizations, many do exist. Like in Egypt,
organizations are actively supplementing the deficient public services.
Since independence, Uzbekistan has become a chief target for Saudi
religious influence. Saudi Arabia
has funded mosques
and religious schools, madrasas. It is also spreading the Wahhabi version of
Islam and thus contributes to religious sectarianism. Inadvertently, as in
other places, Saudi Arabia
could foster the growth of Islamist
groups in Uzbekistan.
Since independence, Uzbeks have replaced Russians
at the levers of power with remarkable speed. Hence the Karimov government can reasonably
well claim to defend national interests against Russia, even if Karimov at first supported
the Kremlin coup in 1991. Uzbekistan quickly managed to renew the links with its
cultural traditions. New legislation
explicitly recognizes the social role of religious organizations. This is evident in arts
as in religious activity. The surge in cultural and religious activity leads to a upsurge
groups. Their diversity is remarkable. Some of these groups
are moderate. Others are more extreme and potentially violent.
In the religiously active Uzbek population,
these groups find a fertile ground. Insofar as the economy does not improve, they could
find more fertile ground. The risk is evidently that the dictatorship channels discontent
and opposition underground and into the mosque
into Islamist organizations. This could lead to political polarization and unsettle the
regime. So far, thus risk seems to be mitigated by a relative economic success. In
Uzbekistan living standards seem to have declined less than in the rest of Central asia.
Karimov's model is evidently a secular state like Turkey. The question is whether
the objective is false and the methods wrong. Uzbekistan is not Turkey. It is a different
society with a distinctive history and culture. In Turkey, Atat�rk could impose a secular
republic after the defeat of the Islamic
Ottoman Empire. In Uzbekistan, Islam is part of the national revival after the collapse of
the Soviet Empire. In this perspective, the Uzbek minorities in the neighboring states
could also represent a political risk. Today Tashkent is the major metropolis in Central
It plays a cultural role in Central Asia reminiscent of ancient Bukhara.
Because an economic recovery would help stabilizes the political situation, the
Uzbek government would have all interest in developing quickly any oil
reserves. Then the monoculture of cotton would have a supplement in one of oil and gas.
Hence the question of Uzbekistan developing into a rentier state depends less upon
politics than upon geology. Without large oil and gas revenues, the Uzbek government would
have to consider the interests of the merchant class.
Political consequences include a political and religious liberalization. By contrast, with
large oil and gas revenues, the government wopuld be more immune to the requests of the
In this perspective oil
revenues could strengthen autocratic rule,
like in the Middle East
and North Africa.
With a population
of twenty million, Uzbekistan would have to find and develop much oil and gas for the
government to be able to overlook the need to develop market capitalism and strengthen the
Insofar as the Karimov government fails to liberalize political life, a protracted
dictatorship could strengthen the Islamist
movements against the secular opposition.
From an ethnic and geographical point of view, Kazakhstan is
the most composite case in the region. Indeed, the country is a republic of minorities.
More than with any other Central Asian
republic, its borders were drawn arbitrarily by Stalin when considering ethnic groups. The
ethnic diversity has since been strengthened by deportations and immigration of Russian,
Ukrainians and Germans, as well as many other nationalities. The Kazakhs, after whom the
republic is named, are a minority. One half of the population
is Central Asian, the other one is European.
There is an approximate balance between Kazakhs and Russians. The country covers a huge
territory, but the northern and western parts, the major agricultural lands, which also
contain much of the oil, have a solid Russian majority. They represent a risk of
secession. Hence they also force any Kazakh government to carefully balance Kazakh and
Russian interests. The most obvious sign of such ethnic policy considerations is the
recent decision to move the capital city from Almaty to Akmola, closer to the Russian part
of the population.
Kazakhstan is a recent entity on both cultural and political accounts. Islam
arrived late among the Kazakhs. The Caliphs
conquered southern Kazakhstan in the 8th century, but it remained a peripheral
part of the Caliphate. Conversions to the new religion
were few and superficial. Many Kazakhs practiced Muslim
rituals, but did not have any knowledge of the religion. The largely nomadic
life-style prevented the full impact of an essentially urban religion. This represents a
major contrast with neighboring Uzbekistan. Mass conversion to Islam only happened in the
19th century. The spread of Islam to some extent coincided with Russian
rule. The new Czarist masters sponsored by conversion to Islam because they saw religion
as a tool of governing the Kazakh masses. For this purpose, the
Russian authorities encouraged the spread of practically any religion in the conquered
As a curiosity, a Russian
governor general in the middle of the 19th century even tried to design a new religion
for the Kazakhs. He wanted to use Judaism
as its basis. The Czar Nicholas I
cut short the attempt, remarking that religions unlike laws could not be designed.
In the first decades of Russian rule, the government forbade the Russian-Orthodox church
to conduct missionary work in Central Asia.
By contrast, a number of Russified Kazakhs converted to Christianity
to benefit from extended civil rights.
At the time of the Soviet revolution in 1917, the Kazakhs were still to a high
degree nomadic. Their conversion to Islam
was recent. Insofar as the Kazakhs were practicing Muslim
rituals, Islam hardly had a profound grip on the people. Hence the anti-religious campaign
of the Soviet government in the 1920s and 1930s was a fairly easy task compared to the
neighboring republics. By the time of the German attack in 1941, Soviet authorities had
closed or destroyed most mosques,
burnt most holy books and imprisoned or killed most of the religious personnel.
In the 1940s religious life got gradually better terms from the Soviet government.
The response was a timid resurgence of Muslim
activity. A few mosques
could open. The Kazakh Muslims had to await the comprehensive liberalization of cultural
and political life under Gorbachev to expand their activities. In the late 1980s many more
mosques and Koran
could open. The more liberal political environment permitted a latent undercurrent of
Kazakh nationalism and religious feeling to appear openly. There was a growing feeling
was an important part of the Kazakh cultural heritage, which distinguished Kazakhs from
At this time Moscow managed to commit a serious political blunder with an ethnic
significance, like in neighboring Uzbekistan. The erstwhile Kazakh party leader,
Dinmuhammad Kunayev, was of the old generation and had been a friend of Brezhnev's. His
attachment to the old policies caused a clash with Gorbachev. In December of 1986, Kunayev
was replaced at the head of the Kazakh party by Gennadi Kolbin, a native Russian
with no links with Kazakhstan.
The move sharpened tensions between Kazakhs and Russians
even within the communist party. More seriously, it provoked large violent demonstrations,
where especially young people denounced Russian interference in Kazakh affairs. In the
following crack-down the communist youth league was the key victim of repression.
This sharpened the political polarization as ethnic, religious and intergenerational
cleavages increasingly coincided. For several years the political situation in Kazakhstan
remained unstable. There were many riots, followed by repression. The deteriorating
economy caused youth unemployment.
Hence opposition to Moscow was increasing with a combination of economic, ethnic,
religious and administrative grievances. Finally, in 1989, Moscow had to put a Kazakh in
the leading party position in the republic. The choice fell on Nursultan Nazarbayev, a
Kazakh engineer of the middle generation. His political origins were, of course, in the
Nazarbayev immediately set out to assert Kazakh interests to pacify the opposition.
He substantially enlarged the limits to political and religious activity. The response was
rising opposition. When the government feared losing control, it started to crack down.
Nevertheless, a number of nationalist, democratic and religious parties and groups had
appeared on the political scene. The surge of Kazakh nationalism and Islamic
activity also caused apprehension among the Russian
Hence the increasing assertion of a Kazakh and Muslim
identity could compromise the territorial integrity of the country. Kazakhstan in 1990 got
its separate Islamic administration and no longer operated under the auspices of the
Tashkent religious authorities. The new Kazakh religious administration is moderate. It
has close links with the government.
Kazakhstan achieved independence in 1991 in the middle of mounting economic and
social problems. Social unrest was rising, as was religious activity. Militant Islamist
groups staged demonstrations against the moderate Islamic leadership, backed by the
government. These groups claimed both respect for democratic rights, such as the freedom
of the press, and the assertion of Kazakh culture and language.
Among the new states in Central Asia,
Kazakhstan is, besides Kyrgyzstan, the one where Islam
has the shortest traditions and the least impact on people's thinking and behavior.
Many Kazakhs considers themselves Muslims,
but in a superficial way, without knowing the reasons or the consequences. Even so, the
Kazakh government fears the religious opposition, as it fears any opposition. Hence it
tries to keep Islam under control and encourage the moderate faction. The administration
of Islamic affairs is a government department, following the Russian
and Soviet tradition. For the Kazakh government, the major risk is that deteriorating
economic conditions increasingly will channel social and political discontent into
groups, that could challenge the official and bureaucratic version of Islam. In this
respect, there are some important parallels with some Middle Eastern
Because of the large Russian
the Kazakh government faces a more delicate political balance than in any other Central
republic. The economy is
dependent on skilled Russian personnel. With open ethnic and religious strife, there would
be a risk of the Russians leaving, with considerable economic damage. The risk is further
that the territories with a Russian majority would secede and join Russia, leaving an
ethnically more homogeneous Kazakhstan, but which would be much poorer in economic terms.
On the other hand, the government also has to take the Kazakh grievances into account and
make sure that there is no Russian dominance of political life.
The ethnic diversity could in this perspective represent a political asset for
Kazakhstan. Because no ethnic group dominates, politics has to seek compromise. No
compromise is possible without a dialogue. Hence the need to balance different ethnic
concerns could represent a certain preference for pluralism and democracy,
because neither of the two major ethnic groups would accept a dictatorship of the other.
Typically, the Nazarbayev government is authoritarian, but hardly a dictatorship. To his
credit, Nazarbayev in 1991 opposed the Moscow coup. His rule pretends to
above parties and ethnic groups. Even if elections have been rigged, there seems to be, so
far, more freedom of expression and assembly than in most other Central Asian
states. Hence the choice for Kazakhstan seems to be either a system of countervailing
powers or a split. The major risk to the country's integrity could be a deteriorating
economy, with increasing income differences between Kazakhs and Russians.
Such a development could push young Kazakhs into the Islamist
camp. Another issue is whether the Kazakhs, without much urban and commercial tradition,
would be able to develop an indigenous merchant class
to compete with the emerging Russian capitalists in the country.
Since independence, Kazakhstan desperately needs export earnings. The huge natural
resources, including oil
could provide revenues insofar as investment comes forth and outlets are available. On
this condition, Kazakhstan seems to have the brightest economic prospects of all Central
Hence the Kazakh government has an interest in developing quickly oil and gas reserves. A
Kazakh rentier state would have resources to distribute on both major ethnic groups.
Without large oil and gas revenues, the Kazakh government would have to consider the
interests of the largely Russian
In this perspective, unlike in neighboring Uzbekistan, oil and gas revenues could
paradoxically improve prospects for pluralism and democracy.
The alternative could be the secession of the oil-rich and largely Russian populated
north-western part of the country, eventually its inclusion in Russia, which would benefit
in terms of both people and resources. Oil investors would then be dealing with the
Russian government instead of the Kazakh one, most probably in a weaker bargaining
Political Risk and Cost.
The new version
of the great game over Central Asia is likely to go on for years, possibly for decades,
until a balance of power emerges that would secure oil and gas investment as well as
transit routes. Insofar as the U.S. backed route from Azerbaijan through Georgia and
Turkey proves to be an insufficient solution, due to high costs and political risks of
disruption, the United States as Russias and Irans main antagonist in this
game, will face a difficult choice, favoring either Iran or Russia.
a transit route through Iran, the United States would not only recognize Iran as a major
power in international oil politics, in the Gulf and in Central Asia, but also renounce on
its ambition to get the Azeri and Central Asian crude to the Mediterranean. Hence the
position of the Gulf in the world oil market would be reinforced, also strengthening the
supply and price risk. To sum up, for oil supplies and prices the United States would face
an even more significant Gulf, but with a stronger Iran.
a stronger Russian stake, eventually the transit through Russia to Central and Western
Europe, the United States would achieve its objective of diverting the Azeri and Central
Asian crude from the Gulf. This would, however, also strengthen Russias position in
the world energy markets and imply at least a tacit acceptance of the return of Russia as
the dominant power in the Caspian Region and Central Asia. Russias position would be
further strengthened by the combined control of the Caspian and Siberian oil resources. To
sum up, for oil supplies and prices, the United States would face a more resourceful and
more self-confident Russia.
meantime, until these issues are settled, the risk is that many oil investors will lose
much money in the region. The geology indicates the potential for a handsome return on oil
exploration and development in the Caspian Region and Central Asia, but this is hardly
sufficient as long as safe and inexpensive outlets are not available. Hence participating
in the oil game around the Caspian and in Central Asia seems best suited for a small
number of oil companies. Only those with a solid capital base, the ability to bear losses
for years, a diversified international upstream portfolio as well as a solid experience of
operating in unusually complex and difficult political circumstances are likely to remain
in the region. To hedge their bets, oil companies investing in the Caspian Region and in
Central Asia might have an interest in improving their relations with both Iran and
Russia, eventually through investment.
political level, the United States to some extent remains the arbiter of the situation,
but with the uneasy choice between recognizing the constant of Russias dominance in
the region or Irans position as a rising regional power. A protracted U.S.
hesitation could even lay the ground a closer understanding between the two. By sharing
the control of Caspian and Central Asian oil and gas, Iran would still be a stronger
regional power and Russia would recover some of the position lost by the collapse of the
In the meantime, the West, first of all the United States and the oil industry, should be
careful not to identify too closely with autocratic regimes whose economic success and
political survival may be doubtful. The West, again essentially the United States and the
oil industry, should realize that the present regimes are not necessarily the most stable
partners. Indeed, the West could help its own cause by encouraging economic and political
reform that would help stabilize the regimes. At the geopolitical level, the struggle for
influence and investment in the Caspian Region and Central Asia does not have to be a
zero-sum game. Indeed, any apparent victory for the West would be more durable insofar as
Russia and eventually also Iran would be partners. Hence the issue should be less
exclusive options than multiple ways for transporting Caspian and Central Asian oil and
gas to the markets. Finally, it is also in the long-term interest of the Caspian and
Central Asian oil and gas exporters to eventually balance close relations with the West
with links with neighboring Iran and Russia.