The 10 mosT impoRTanT Things you need To know on Caspian sea Region
the caspian daily newsletter Receive your daily roundup of Caspian Region news and analysis from sources around the globe
#CaspianDaily
CONTENTS
05
CAN KAZAKHSTAN PROVE HUNTINGTON WRONG? THE SILK ROAD SUPERHIGHWAY KAZAKH TRANSPORTATION AS GEOPOLITICS THE TRANS-CASPIAN PIPELINE GEOPOLITICS NEAR AND ABROAD FINANCIAL INSTITUTIONS TO SUPPORT RUSSIA-AFRICAN BUSINESS PROJECTS AN INTERVIEW WITH DMITRY GOLOVANOV KAZAKHSTAN’S JOURNEY FROM PAST TO FUTURE THE FOUNDATION OF CENTRAL ASIA THE HYDRA OF THE CASPIAN SEA IRAN’S NAVAL STRATEGY THE "BRICS BANK" MANY CHALLENGES AND MANY OPPORTUNITIES
THE CASPIAN PROJECT A WEEKLY EDITION FROM THE MODERN DIPLOMACY
www.moderndiplomacy.eu Caspian@moderndiplomacy.eu
PROJECT TEAM DiMiTRis GiAnnAkOPOulOs DR. MATThEw CROssTOn PETRA POsEGA TEJA PAlkO luísA MOnTEiRO ninA lAvREnTEvA GAbRiElA PAsChOlATi DO AMARAl TAylOR MORsE JEAnETTE JJ hARPER DiAnnE A. vAlDEz
CAN KAzAKHSTAN PROvE HUNTINgTON WRONg? GeoGrAphy AnD poliTicS undoubtedly conditioned Kazakhstan as a country. It is home to 140 ethnic groups and 17 religions in the intersection of different regions, continents and surely, civilizations, making it a very diverse, polyglot and multireligious nation in the median it remains to this day.
MD STAFF
And although the conditions for the country were pre- written, the code of conduct had yet to be established and was dependant on the ruling authority and the Kazakhstan people. Luckily, the country chose the way of interreligious and intercultural dialogue, which keeps its many diverse hearts and minds in harmony. Kazakhstan was therefore able to piece together the mosaic of many different ethnics, religions, languages and nations that constitute it, creating a diverse but unified land everyone can call home. Fresh in the independent years, this approach was largely under way inside the state borders, assuring a stable future for the newly introduced political entity. But in the aftermath of 9/11, Kazakhstani President Nursultan Nazarbayev decided to more aggressively and visibly promote the need for greater understanding among peoples in the global arena. Consequently, year 2003 saw the continuation of these domestic policies to the international community with the introduction of Astana- based Congress of Leaders
of World and Traditional Religions, which has since become a prominent triennial platform for interfaith dialogue and was last held this year on June 10th and 11th. The purpose of this Congress is predominantly the interaction between different religious leaders and the peaceful addressing of common threats such as terrorism, extremism, violence and other maleficent sprouts of religious beliefs. The purpose of the conference is also genuine effort to set the course for a more harmonious development of the world, break the hostile stereotypes and inspire many ways in which different beliefs can compliment, learn, grow and cooperate with one another. Kazakhstani president has emphasized many times that religious leaders have always played an integral role in strengthening their societies and now more than ever, considering the current situation in the world, they must work together towards greater regional and global stability.
WWW.MODERNDIPLOMACY.EU THE CASPIAN PROJECT
MANY ExPERTS AgREE THAT THE ROLE Of THE MEDIATOR AND PEACEMAKER PRESIDENT NAzARbAYEv HOLDS AND PROMOTES IS bOTH AN OPPORTUNITY AND A CHALLENgE All of the above is of course intertwined with the ever present promotion of non- proliferation, prevention of drug trafficking and strengthening of the environmental security by Kazakhstan and its president. Since Kazakhstan is home to an 80% Muslim population with additional 20% cacophony of various religious beliefs, all of them peacefully coexisting, it is a perfect country to host and initiate such events. In 2012, Astana was a host city of the International Forum, devoted to launching the International Decade for the Rapprochement of Cultures, starting from 2013 all the way to 2022. The Forum was attended by many high ranking UN officials, prominent members of the UNESCO High Level Group for Peace and Dialogue of Cultures and experts of ethics and cross- cultural communication, discussing the further development of intercultural dialogue and cultural diversity. In this frame, Kazakhstan was applauded for its considerable skill with commencing and fostering inter- ethnical communication inside the country and the potential of the spill- over effect such successful inter- state policies can provide for the global community. This unique experience of inter-ethnic, inter-religious and intercultural communication, accumulated by Kazakhstan, can surely set an example to many countries.
The Kazakhstan government also continuously strives to provide for all the necessary elements and conditions for the evolvement of various different cultures and traditions, inside and outside state borders alike. As a result of these efforts, more than 800 different ethno- cultural associations operate in Kazakhstan, in addition to 384 missionaries from all over the world. Therefore, instead of separating, Astana is very keen in building bridges. Being located on the intersection of civilizations, Kazakhstan likes to see its global role as the gateway to rapprochement of East and West, Europe and Asia, Christianity and Islam and much more. The relevance of this is additionally determined by the course of history itself, hereby especially referring to the globalization processes of the modern world, increased migration flows, the emergence of new national, cultural, religious and other minorities, ethnic and religious conflicts. In such terms efforts, continuously made by Kazakhstan and its leadership, are even more important. In the recent years, the activities of Kazakhstan in promoting inter- cultural dialogue among civilizations and nations have escalated and its reputation as a tolerant and open- minded country seems to have solidified in the eyes of the international community. Astana also has a solid record of international mediation efforts so far and consequently, the role the country has in global politics has risen vertically and expanded horizontally. Many experts agree that the role of the mediator and peacemaker president Nazarbayev holds and promotes is both an opportunity and a challenge. Thorough the years he has proved to be a reliable partner and an active international player.
In his efforts to show that Kazakhstan can play the international communication platform between the East and the West, combined with the country`s support for nonproliferation efforts, he tried to initiate to host talks on Iranian nuclear issue in Almaty. Furthermore, he continues to work towards normalization of relations between Russia and Ukraine and since Kazakhstan has very fruitful and cooperative relations with both Russia and Europe, the efforts are met with high hopes from the bystanders. As a result, Astana was already host to four- way summit between Russia, Ukraine, Germany and France. Therefore, not accidently, in the last grand strategy of Kazakhstan “Kazakhstan 2050”, it is clearly stated: “The world is undergoing an acute crisis of outlook and values.
We increasingly hear voices heralding the clash of civilizations, the end of history and the failure of multiculturalism. It is critically important that we stay away from this kind of discourse, preserving our time-tested values. We know exactly how we turned what was called our Achilles heel – multi-ethnicity and multi-religious reality – into an advantage. We must learn to live in co-existence of cultures and religions. We must be committed to dialogue between cultures and civilizations. Only in dialogue with other nations our country will be able to succeed and gain influence in the future. In the 21st century Kazakhstan must strengthen its position of a regional leader and become the bridge for dialogue and interaction between East and West. “
WWW.MODERNDIPLOMACY.EU THE CASPIAN PROJECT
The silK roaD sUperhiGhWaY KazaKh TransporTaTion as GeopoliTics
It Is entIrely CoMMon for a federal government to make budgetary promises to improve infrastructure. Indeed, every country around the world is full with both promises and jokes lampooning said promises to ‘fix roads, fill potholes, and make it easier to get around and do business.’
Dr. Matthew Crosston Senior Editor Matthew Crosston is Professor of Political Science, Director of the International Security and Intelligence Studies Program, and the Miller Chair at Bellevue University
Kazakhstan in 2015 is no different in that case from any other government. But there are some interesting regional, transregional, and truly global infrastructure projects Kazakhstan is including alongside the standard local fixes that could carry significant geopolitical weight moving into the future. Indeed, just how successful Kazakhstan is in ‘fixing the potholes’ across its country could become incredibly important to countries like Russia, China, Turkey, Germany, and the United States. Who knew road work could be so exciting! First consideration goes to the Western Europe – Western China International Transit Corridor, which is a massive construction endeavor aiming to reinvigorate what is basically a modern ‘Silk Road,’ only with all the amenities of modern highway construction. The 7.5 billion USD infrastructure investment will basically connect Western Europe with an efficient superhighway to Western China (and subsequently through China’s highway system all the way, theoretically, to the Pacific Ocean) through Kazakhstan.
The 2,840 km transit system has approximately 2/3 of the cost coming from the World Bank, ADB, EBRD, and IDB. Kazakhstan for its part highlights the importance of this corridor not just in its economic reports but in its foreign policy and national security briefings, with its ultimate goal to decrease the delivery of goods from China to Europe from the current road travel time of 45 days down all the way to just 10. This new Silk Road ostensibly rests on Kazakhstan for being the crucial ‘middle passage’ that makes the Europe to Asia connection possible. In its own policy briefings Kazakhstan emphasizes this need not just as a better conduit for improving business and trade but literally connecting the world via roadway in a peaceful and open endeavor. It is somewhat surprising much of the Western world has not capitalized on this massive human geopolitical transportation project more heavily.
WWW.MoDernDiploMacY.eU The caspian proJecT
KazaKhsTan eMphasizes This neeD noT JUsT as a beTTer conDUiT for iMprovinG bUsiness anD TraDe bUT liTerallY connecTinG The WorlD via roaDWaY in a peacefUl anD open enDeavor Kazakhstan also intends to improve its national rail system, hoping to increase its operating efficiency and reach by being the main connector of the Caspian Sea to the Pacific Ocean and the chief conduit for China to reach Central Asia and beyond to Western Europe. Many fine scholars and analysts in the past have made note of Kazakhstan’s irrefutable central location as the connection point between Europe and Asia. While history has often made reference to Istanbul (nee Constantinople) as the ‘Gateway to the East,’ that is largely a contextual reference based on a history that is now past. The true ‘gateway’ with proper infrastructural development, both economically and politically, could be Kazakhstan. It finally seems fully aware of this potential, given the new emphasis within its budget, foreign policy, and national security policies. More interesting still will be to see, if this comes to fruition, how much there will be a cascade or copycat effect on the rest of the Central Asian ‘Stans. Kazakhstan perhaps more than any other Central Asian country has focused on open trade, transnational communication, participation within the global economy, and the rejection of radicalization and extremism.
Perhaps most importantly, it has done this with a much less heavy-handed approach when compared to its immediate neighbors in the region. Even more fascinating has been the launch of a completely new project called the ‘Kazakhstan-Turkmenistan-Iran’ (KTI) railway. In the past decade this project could have run afoul of the United States, what with its adamant stance on keeping Iran limited and constrained in terms of economic development as long as it was still under suspicion with its nuclear energy/weapons program. Recent improvements in Iranian-American relations, or at least the prospect of those relations warming up and becoming more tenable, could prove to be of tremendous benefit to Kazakhstan and especially the KTI railway. Most in the West have viewed the softening of relations between Iran and the West strictly from the much larger perspective of global geopolitics and conflict. Much less time and attention has been paid to the numerous payoff effects such a thaw may have on the immediate region. Kazakhstan clearly has not missed this relevance and is deftly trying to position itself to capitalize on potentialities. Kazakhstan is not without its problems. Any country that has been ruled by the same leader, and his commensurate favorites, uninterrupted since 1991 cannot be absent the typical corruption, nepotism, waste, and bureaucratic inefficiency notorious with any government so dominant and assured of its place and future. But time and accomplishment has clearly shown Kazakhstan to be a fairly ‘dull’ country.
And in this case, ‘dull’ is quite positive: it means it is relatively stable, reliable, and absent the turbulence that has been seen more than once in several of its neighbors: Uzbekistan, Kyrgyzstan, Afghanistan, and Iran just to name several. Kazakhstan may not be the most open or the most perfectly democratic of systems. But it clearly values calm stability and economic progress, not in the sycophantic and somewhat irrational way that Turkmenistan does, but in a way that sees its future as an active member of the global economic system and wanting to be considered a valued partner in the larger global community of politics.
Until recently, only Azerbaijan in the Caspian region could consistently lay claim to that goal. Kazakhstan seems intent on making that club now a twosome. As the saying goes - once could be an accident, but twice would be a trend. If Kazakhstan continues to play out this new role as Central Asia’s stable giant, as the Caspian’s reliable ‘Stan, then it may just end up finding itself in a much more important geopolitical role: the conduit from West to East, the solidifier of a new Silk Road, and the foundation upon which a new era of communication, trade, and transportation develops between the two dominant civilizations in human history. Not bad for a strategy that basically started with a desire to just fix a few potholes.
WWW.MoDernDiploMacY.eU The caspian proJecT
tHe traNs-caspiaN pipeliNe Geopolitics Near aNd abroad
Russia’s eneRgy contRol appears to be soon coming to a halt as Caspian members, Turkmenistan and Kazakhstan, plan on gaining control over vital areas of the Caspian Sea. Ongoing deliberations over assigning specific demarcations to the five outlying regional members of the Caspian threaten to impede on Russia’s years of energy control within the region and across the EU. Peaceful discussions amongst Caspian members display a warm and sentimental approach towards an issue that can easily impact Russia’s economic and political success. Although Russia has gone on record to demonstrate public support of sea demarcations, behind-the-scenes negotiations with Turkmenistan and Kazakhstan’s leaders appear to be fueling Russia’s agenda in Ukraine, providing a warning to the possibilities of a successful TransCaspian Pipeline initiative that does not offer Russia a significant role. Dianne a. ValDez The building of Caspian alliances commuDianne Valdez nicates a desire for dynamic partnerships just completed her that are dismissive of one dominant player. Master’s degree in the Russia’s public support of a unilateral deciInternational Security sion-making power is being quickly outand Intelligence voted as plans carry forward toward more Studies Program at innovative models that would elevate the Bellevue University in Omaha, NE, USA and economic and political influences of neighcontinues her boring countries. interests in the Beginning almost twenty years ago, plans geopolitics of this to come to an agreement have been conimportant region, tinuously stalled over explicitly defining realong with political gional access to the Caspian Sea, mostly strife in Africa. due to the abundance of natural oil and gas reserves under its waters.
Out of the five neighboring countries Russia’s interests are the least benefited by the TransCaspian Pipeline (TCP). “Big countries, especially, have found it easier to make private deals with President Vladimir Putin’s government. And that has done little for Europe’s most vulnerable economies, whose infrastructure is designed only to take in supplies from Siberia.” (Klapper & Lee) Russia continues to strictly maneuver its agendas amongst EU nations, by manipulating energy distributions as a form of reprisal for ill-approved political advancements concerning the Ukrainian crisis. The attitudes toward the TCP proves not only a demonstration against long-term Russian constraints on the EU but also the possibility that such a plan could prove effective to relieving future economic and power crises amongst EU countries. Locally, Turkmenistan and Kazakhstan have been joined by Azerbaijan, all of whom are openly leading TCP initiatives, as support by the EU grows stronger.
WWW.ModerNdiploMacY.eU tHe caspiaN proJect
pipeliNes, ports aNd poWer plaNts are tHe WeapoNs of WHat coUld prove a GeNeratioN-defiNiNG coNflict betWeeN tHe U.s. aNd rUssia over HoW eUrope Heats aNd electrifies its HoMes EU positions are in favor of the TCP with hopes to break away from Russian-imported gas supplies. “The Kazakh-Turkmen maritime demarcation deal strengthens Turkmenistan's claim on rights to use its sector for whatever purposes it wishes -- building a pipeline, for example -- without consulting the other littoral states. Turkmen and Azerbaijani authorities have already said if both countries agree to build such a pipeline there is no need to seek approval from the other three coastal states,”(Ovozi). Such actions have tried to basically oust Russia, pushing its government to oppose progress on the TCP, citing implications of negative environmental effects and even resorting to possible threats against its diplomatic relations with Caspian members.
According to the Itar-Tass news agency, the countries agreed to increase Russian corporate participation in the development of Iranian oil and gas deposits (such as the South Pars gas field), as well as to cooperate in marketing policy in oil and gas exports and setting up capacity for producing, storing and exporting natural gas in Iran,” (Berti). However the burdens of Iran’s woes are very much different from Russia’s in that Iran may have the ability to change its own fate on the Caspian issue. With relations with the west easing and talks of years of sanctions being lifted, it appears that opportunities for Iran’s recruitment to join the alliances of the TCP are alive and present. “Iran still says that the Caspian and its resources must be subject to joint supervision. Analysts however say that Tehran could moderate this position in exchange for greater involvement in oil and gas export routes. Tehran has been presenting its own pipeline network to the Persian Gulf as the cheapest and shortest export route for Caspian oil,” (MacWilliam). Should Iran decide to change its mindset, the TCP could present an amicable solution to its own economic instability. As a partner in the TCP, Iran would attain the political advancement that could rebuild its geopolitical reputation.
Russia’s sentiments seem to be shared by Iran in the disadvantages of the TCP in that it also cannot take part in the main spoils. “The current standing of the two countries in the summit indicates that Russia and Iran -- at least in this phase -- can capitalize on their common concern…
For the U.S., concerns over developing the TCP demonstrate an ulterior motive against its longtime rival, Russia. “Pipelines, ports and power plants are the weapons of what could prove a generation-defining conflict between the U.S. and Russia over how Europe heats and electrifies its homes.
Success, U.S. officials say, would mean finally “liberating” former Soviet states and satellites from decades of economic bullying by Moscow.” (Klapper & Lee) Not only would the success of the TCP aid in the demilitarization of Russian economic presence over the EU, it would also push alliances toward EU countries to bid against Russian energy provisions and rely on American counterparts for alternative energy solutions. Hence, though plans for the TCP continue to remain the excitement of media reports and offstage political meetups in the region, the world’s major power players - Russia and the U.S. - appear to be stacking their chips in a political game of poker.
Though initial discussions for the TCP really only involved Russia and its Caspian neighbors, its longtime rival to the far west has found comfort in trying to diminish Russia’s influence. The building of the TCP would mark for the first time a remarkable union between East and West that would see the U.S. try to use it as a “debunker” of Russia’s longtime natural resource coercion within the region and further out amongst EU states. The TCP could even provide some political relief for the crisis being witnessed in Ukraine as it may make Russia more pliable in its negotiations. However, history also demonstrates that Russia tends to not be so eager to lay its concerns to rest and doesn’t stay backed into a corner very long.
WWW.ModerNdiploMacY.eU tHe caspiaN proJect
FInAnCIAl InStItUtIonS to SUPPort rUSSIA-AFrICAn BUSIneSS ProJeCtS An IntervIew wIth DmItry GolovAnov
russian financial institutions have shown high interest in helping to raise the economic and business profiles both ways, Russian business in Africa and African business in Russia. For example, Eximbank of Russia has expressed readiness to take advantage of huge opportunities and existing growth potential in both regions. Eximbank of Russia is always open for a dialogue and discussion of projects of various degree of complexity. In this exclusive interview, Dmitry Golovanov, Chairman of the Management Board of Eximbank of Russia, believes “there is everything necessary for that – significant experience of implementation of complicated infrastructural projects accumulated from Soviet days.”
Kester Kenn Klomegah Kester Kenn Klomegah is an independent researcher and writer on African affairs in the EurAsian region and former Soviet republics.
He further advocates for an increased economic partnership between Russia and African countries, reaffirms the desire to continue developing business dialogue with interested companies in efforts to pursue active involvement in international programmes and projects for Africa. In addition, he raises some specific proposals necessary for facilitating business between Russia and Africa.
www.moDernDIPlomACy.eU the CASPIAn ProJeCt
how do you assess the level of activity of Do you think that russian authorities economic cooperation between russia should support the business in cooperation between russia and africa? can such and africa today? support become a driver of growth of For the purposes of visibility, I would like to business activity between russia and proceed to figures right ahead. Goods africa? What is the role of the banking secturnover between Russia and countries of tor in this process? Africa to the south of Sahara is today only about US$1.5 bn. Export – less than US$1 bn., Russian authorities provide considerable among almost 50 countries real countera- support to the business – moreover, at presgents in export operations are less than 10. ent support of its export initiative is a priority We can see that the structure of Russian ex- for the Russian Government. We, as a state port has deformed significantly towards ex- bank oriented towards support of exporters, port of raw materials. One more impressive provide one of the efficient instruments castatistics is that about 80% of Russian invest- pable to give a new impulse to economic coments into Africa relate to exploration and operation between Russia and Africa. In addition to specific proposals from exportmining of natural resources. ing companies, in aggregate with deep unSkeptics will probably call such situation as derstanding of needs of the African market, "pessimistic". We, Eximbank of Russia, see in our portfolio contains a line of various finanthe current situation high opportunities – a cial products – this may be loans to Russian growth potential, on account of develop- exporters, loans to foreign purchasers, leasment of export of products other than raw ing offers, financing involving foreign banks, materials. There is everything necessary for all this is supplemented with a line of insurthat – significant experience of implementa- ance products of EXIAR – so, the state protion of complicated infrastructural projects vides significant support to export. and development of the territories accumulated from the times of the USSR, experience As regards to the banking sector, today there of Eximbank of Russia (financing of the proj- is no designated product line for the Russian ect for construction of the satellite commu- exporters. Banks experiencing a difficult econications system), comprehensive approach nomic situation prefer only short-term profto achievement of the objective: a line of its and cannot afford development of credit and insurance products developed to- business models which will become efficient gether with the Export Insurance Agency of in the long term. The state oriented towards Russia (EXIAR) especially for exporters, effi- timely support of export understands that it ciency of taking decisions on issue of loans, is necessary to invest into and develop this market expertise and individual approach to direction which will further become a driver of economic growth. every client.
It is very important that cooperation between Russia and Africa can and should be developed on account of expansion of the export potential of companies which are now operating in the domestic market only. Eximbank of Russia has taken negotiations with companies willing to expand their business on account of achievement of foreign markets which need our financial support for this purpose. Now we are taking negotiations for implementation of projects in such directions as supplies of geological equipment, equipment for washing plants, metal structures for construction of mining modules at the carrier Katoka (the 4th diamond deposit in the world by size). There are some perspective projects for supply of mineral fertilizers to Senegal, Togo and Benin, supply of medical goods, we discuss the possibility of financing of construction of social residential facilities in the region etc.
experts believe that the share of russian export to african countries is very low, first of all, due to insuďŹƒciently developed infrastructure in the industrial sector and problems with the production base. Do you agree to such an opinion? how the situation may be improved in the long term? Obviously, Russia has faced some problems associated with poor development of the industrial base, however such problems are much less critical compared to the situation in the beginning of the 2000's. Tasks set to our country may be resolved by means of implementation of joint projects. In addition to the standard set of instruments for support and stimulation of export being implemented by national development institutes, the experience of our cooperation also includes such a solution as cooperation of Russian and African companies aimed at implementation of projects for export to third countries.
www.moDernDIPlomACy.eU the CASPIAn ProJeCt
Cooperation will provide additional opportunities for investments; ensure additional load of production capacities; improve competitiveness of products on account of cooperation with other companies; become a catalyzer of expansion of sales markets by means of implementation of the strategy of "joint reach" of new markets. Competitiveness of joint projects will be ensured by advantages of our economies and instruments for support of private initiative. We should not forget about accessibility of financial instruments regardless the level of development of the industrial sector and perspectives of a company interested in international trade, if the instrument necessary for that, for example, a loan is accessible at the rate of 17-20%, implementation of business plans will be postponed till stabilization in economy. Although we speak about the reserve dynamics – first we should support export, and in the long term, this will facilitate stabilization of economy.
how do you assess the potential of african producers interested in the russian market? What may attract them to russia? Russia is a large developing market with growing purchasing capacity, interested in development of competition and improvement of quality of products supplied from abroad. We can surely say that companies which are ready to try the Russian market have a chance to gain much profit. It is to be noted that the Russian market has its own peculiarity, so companies entering the market should clearly understand economy, political components and legal issues. We often face a problem that companies willing to enter international markets cannot simply find foreign purchasers for their products. I suppose that the same problem is experienced by African businessmen. Provision of consulting services, thanks to development of special state institutions, - they would facilitate their activity in Russia.If such support would be useful on our part, we are willing to provide it to our African partners.
You pronounced at the annual meeting of the afrocom at Vnesheconombank some of specific solutions and proposals to improve the business climate between russia and africa – what steps do you suggest? It is necessary to arrange large-scale RussianAfrican forums/summits. This format proposed by partners from China, USA and European Union, has proved itself – personal communications and contacts at all levels favor dynamics of cooperation development. A significant effect can be caused by formation of general registers of businessmen interested in cooperation. This will allow to facilitate the task of importers/exporters search for counteragents for placement of orders or sale of products. Besides, joint implementation of projects in the area of infrastructural development will positively influence development of contracts between Russian and African companies. However, transparency and possibilities for medium and small business to access contracts within the framework of implementation of major projects are required. Such projects generally have significant multiplicative effect in terms of comprehensive development of territories.
exImBAnk oF rUSSIA hAS tAken neGotIAtIonS wIth ComPAnIeS wIllInG to exPAnD theIr BUSIneSS on ACCoUnt oF AChIevement oF ForeIGn mArketS whICh neeD oUr FInAnCIAl SUPPort For thIS PUrPoSe One more direction of stimulation of cooperation may be provision of Russian and African companies with assistance in creation of value added chains, including creation of joint ventures which base their competitive potential on the use of country advantages. Eximbank of Russia works in this direction to the extent of creation of financial infrastructure to procure such projects. The Bank plans to develop cooperation with institutions for development of countries of the region. We are always open for a dialogue and discussion of projects of various degree of complexity.
www.moDernDIPlomACy.eU the CASPIAn ProJeCt
KazaKhsTan’s JourneY FroM PasT To FuTure The FoundaTion oF CenTral asia
Of tHe five Central asian states – Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan – Kazakhstan was the last Soviet Republic to leave the USSR. This was most likely due to its close economic ties to Russia.
It is also known for being a secular, modern, prosperous, and racially tolerant country. For a state as young as Kazakhstan, the progress the country has made is nothing short of miraculous despite its history of suffering, tragedy, colonization, domination, crackdowns, and brutality. Jeanette JJ Harper
Jeanette JJ Harper is a graduate student in the International Security and Intelligence Studies program at Bellevue University in Omaha, NE, USA.
Kazakhstan has a highly controlled and centralized polity and, as is commonplace for this type of government, has a reputation for being wasteful and corrupt. However, its leader Narsultan Nazarbayev – who has been in place since the country’s independence – is quite popular. In fact, recently, he was ranked as one of the top five great leaders of the world. His vision and policies has resulted in stability and higher standards of living in Kazakhstan’s short life. Even while dealing with some tension from separatists among the ethnic Russian population, Kazakhstan has managed to remain exempt from many of the problems experienced in the other former Soviet Republics.
Because of its stability, deregulation, and more liberal trade regulations, Kazakhstan has attracted foreign investors – some of which come from Britain, the United States, and France – who seek to capitalize on its vast reserves of resources such as oil, uranium, and minerals. New oil pipelines have been built which have allowed Kazakhstan to reach markets it could not access before. Previously, Kazakhstan’s oil and gas industry depended on Russia’s demand for crude oil. However, since the breakup of the Soviet Union, there has been a drop in production from Russian refineries. Now, with projects such as the Caspian pipeline that links the Tengiz oilfield across the Caspian Sea to the Russian Black Sea port of Novorossiysk and the Kazakhstan-China pipeline that pumps oil to Alashankou and western China, Kazakhstan has become one of the largest producers of oil in the world. It is also quite possible that, in time, Kazakhstan will also become the world’s foremost producer of uranium.
WWW.ModerndiPloMaCY.eu The CasPian ProJeCT
KazaKhsTan’s gianT sTeP FroM being a soCialisT eConoMY To beCoMing a Free MarKeT eConoMY Was FraughT WiTh all Kinds oF Challenges While Kazakhstan’s future certainly seems very bright, it still faces many challenges. Thanks to the Soviet industrial period, it is one of the most polluted nations in the world. The pollution from industrialization combined with the demands placed on the environment from the extraction of natural resources, agricultural demands, increasing urbanization, and previous Soviet nuclear testing have forced the country to attempt to alter its economy and revamp its entire economic infrastructure. Kazakhstan is aware that sites associated with former defense industries and test ranges are radioactive and chemically toxic and pose a serious health risk to the local population and wildlife. The country has been very proactive on this issue and has signed international environmental agreements with the UN Convention on Biological Diversity, the UN Conference on Environment and Development, and the Kyoto Forum on Climate Change. It is very committed to becoming more eco-friendly and recently announced that its Green Economy Concept policy is to become part of its comprehensive national development.
Another problem Kazakhstan faces is the drying up of the Aral Sea. This tragedy is often described as one of the world’s worst environmental disasters. This was once a rich and fertile body of water that supported traders, hunters, and fisheries. In fact, it was the fourth largest lake in the world. Now, it is composed of three smaller separate lakes that are toxic to the people and wildlife that once depended on it. It is saturated with chemicals from pesticides and fertilizers. Kazakhstan and its neighbors – who are also affected by the disaster – are trying to reverse the trend as part of their efforts to become more environmentally conscious. Following the break from the USSR’s statecontrolled employment system, Kazakhstan had to undergo an enormous challenge to construct a functioning economy within a moderately short period of time. Kazakhstan’s giant step from being a socialist economy to becoming a free market economy was fraught with all kinds of challenges. In the few years following independence, the country floundered and finally hit rock bottom in 1994-1995. Then, in 1996, things took a turn for the better when the country’s economic policies started to bear fruit. The spirit of entrepreneurship took hold in this new economic climate and demand for goods and services increased. The country has continued to make positive steps on the road to economic independence ever since. The country must now deal with a typical obstacle for states that find themselves suddenly very prosperous: wealth inequality.
Even though the country has grand designs for the future in regards to addressing the wide poverty gap and lack of access to health care and essential services like sewage, clean water, and central air, the reality is that only people living in large urban cities are enjoying the benefits of Kazakhstan’s sustainable development. To address the issue of people living in remote regions, the country has a plan to diversify its economy by moving into areas such as light diversity and banking. This will help realize its more grandiose plans to become a regional financial and trading center and maybe even aspire to return to its ancient Silk Road roots to become a hub for international commerce (for more on this see Crosston’s article in this issue). Politically, Kazakhstan is sluggishly dragging its feet in becoming more democratic. President Nazarbayev has been very vocal in his belief that democratic change must be a slow process or else the country risks being damaged by hasty or ill-considered decisions. The plan does include strengthening the parliament, reforming local government, improving judicial and law enforcement agencies, and developing political parties. But the focus remains on the economy being the country’s first priority. During a speech to the Joint Session of the Chambers of the Kazakh Parliament in 2007, the President promised that “the next stage of democratization and reform would include reforms to enhance the effectiveness, transparency and accountability of the executive branch,
anti-corruption measures as well as steps to decentralize state administration and develop local government.” The United States has looked favorably upon these reforms. Even though President Nazarbayev will remain in office for life, the US State Department believes Kazakhstan is taking a step in the right direction. In fact, even though it is still relatively speaking in its political infancy, Kazakhstan has proved that it can withstand the strains resulting from rapid political and economic change. The general global consensus regards it as the most stable of all the Central Asian states. Thus, Kazakhstan is unique in that it has found itself faced with the monumental task of building an independent nation, a market economy and democracy all at the same time but has largely remained stable and positively-viewed by the world community. So far, it has managed to beat the odds. For a country that aspires to become one of the top 30 competitive developed countries in the world by 2050, Kazakhstan seems to have achieved the foundation necessary to begin such a lofty goal. WWW.ModerndiPloMaCY.eu The CasPian ProJeCT
tHe HyDra Of tHe CasPIan sea Iran’s naval strategy
The IranIan MIlITary is predominately thought of for its capabilities and strategy in the Gulf. Though the competitors differ in the Caspian Sea, the Iranian Military has a similar composition and strategy in this theater.
Taylor Morse
Taylor Morse is currently a graduate student in the International Security and Intelligence Studies Program at Bellevue University in Omaha, NE, USA.
The Strait of Hormuz is a global chokepoint for the flow of oil in which Iran is able to leverage the asymmetric tactics of its comparatively small navy to conduct area-denial operations. Although the Caspian Sea doesn’t have a chokepoint that would be the focus of the Iranian military, it utilizes these same tactics and capabilities to enforce their holdings and claims in the Caspian Sea. Although the Caspian Sea states haven’t officially come to terms on their respective maritime claims, Iran currently firmly controls about 12% of the Caspian Sea. The current Iranian holdings are very difficult from an economic perspective as they are resource rich but also much deeper than the rest of the Caspian Sea, which makes extracting these resources far more difficult. This is a major contributing factor to the Iranian claim to fully 20% of the Caspian Sea, which conflicts with other states’ claims. There are essentially two threats to Iran in the Caspian Sea over these territorial claims: Russia and Azerbaijan.
During the Russian Empire and the Soviet Union the Caspian Sea was primarily under Moscow’s control. Even after the dissolution of the Soviet Union, Russia has consistently sought to be the major power in the Caspian Sea. This is reflected in three ways. The first way is that the Russian Navy maintains the largest fleet in the Caspian Sea. The second way is through gearing the other Caspian states against Iran, being Russia’s main regional competitor, through soft power moves such as joint military exercises and trade agreements. The third way is through overtly blocking Iranian attempts to build up its navy in the Caspian Sea, such as when Russia denied Iran the use of its rivers to transport a warship from the Gulf to the Caspian Sea. Being that Russia is the major military power in the Caspian Sea, an asymmetric defense similar to Iranian strategy in the Gulf would translate well.
WWW.MODernDIPlOMaCy.eU tHe CasPIan PrOJeCt
even tHe MIgHty Us navy, tHe WOrlD’s strOngest anD a sIgn Of glObal aMerICan POWer, Is frUstrateD by tHe IranIan navy The second threat to Iranian claims in the Caspian comes from Azerbaijan. Although not a large military threat, Iranian claims in the Caspian Sea overlap mostly with the Azeri claims. This is primarily due to the contested areas having prime depth for resource exploitation. In particular the proposed Western-backed pipeline, which Iran opposes, would traverse this area and head through Azerbaijan towards the West. Iran has tested these waters with an incursion by an oil platform which was virtually unopposed by the lackluster Azeri Navy. With this type of incursion Iran has shown it is ready to engage in its preferred naval strategy of area-denial to enforce new acquisitions. Even the mighty US Navy, the world’s strongest and a sign of global American power, is frustrated by the Iranian Navy. The Strait of Hormuz is able to be blocked off by Iran due to its leveraging of asymmetric tactics to conduct area denial. Although this scenario hasn’t been tested in actual combat it has shown to be worrisome to the US with the adoption of doctrines such as AirSea Battle which focus on countering anti access/ area denial capabilities. Therefore it is logical that this Iranian strategy would be employed in the Caspian Sea to enforce its claims against local neighbors.
The Iranian chain of command is decentralized in that small unit commanders have enough autonomy to carry out the overarching strategy even with infrequent communication between itself and central command, which creates capacity to absorb attempts to decapitate the command structure from its constituent units. The Iranian military copies this strategy with all of its serving units beyond the navy, meaning its entire military could operate in this manner within a Caspian Sea conflict. To supplement the decentralization of the Iranian military command structure is a culture of sacrifice within the Iranian military. This is in reference to the motivation for service-martyrdom that is highly emphasized within the Iranian military. To get the most out of its asymmetric strategy it is important that the Iranian military is able to rely on their personnel to put everything on the line to be able to accomplish their mission even if they are cut off from their command structure. This is also rumored to involve the planned usage of suicide attacks as part of Iran’s military strategy. Regardless of the use of suicide attacks or not, the Iranian military has plenty of tools at its disposal to secure its claims in the Caspian Sea. Iranian surface ships are capable of extensive mine-laying operations which deny an area to their enemy and serve as a deterrent to any other waters that the Iranian Navy operates. Iranian submarines also serve this purpose in that their existence is a deterrent to enemy naval movements.
Closer to the coastlines, small attack boats have the capacity to ambush naval ships from concealed positions in suicide or hitand-run attacks. Further inland Iran still has land-based missiles and aircraft which are able to be deployed to secure and deny their claims against enemies. Finally, Iran has the ability to deploy Special Forces to conduct sabotage, hit-and-run, and suicide attacks against enemy military facilities. Therefore, the Iranian military has the ability to at least significantly frustrate the ability of an aggressor to encroach upon Iranian claims within the Caspian Sea, similarly to their strategy in the Gulf, even when faced by a supposedly superior military rival like the United States or Russia.
The growing geostrategic importance of the Caspian Sea has been reflected in the growing Iranian military emphasis on it. Whether it is the threats of the powerful Russian Caspian Flotilla wanting to retain power over the Caspian or Azerbaijan’s overlapping claims with Western backing, Iran feels backed into a corner. Thus having a doctrine of being able to operate with ‘the command head cut off’, pushing a martyr morale throughout their military, and emphasizing tools to conduct area-denial operations makes the Iranian military a formidable opponent. It is potentially the hydra lurking beneath the surface of the Caspian’s contested waters, making an impact far beyond the immediate region.
WWW.MODernDIPlOMaCy.eU tHe CasPIan PrOJeCt
The "BRICS Bank"
ManY ChaLLengeS anD ManY OPPORTUnITIeS The New DeveloPmeNT BaNk (NDB) that was set up in July 2014 promises to be at least for now an important part of the discourse on how the primacy of the developed economies in global affairs needs to be challenged by developing economies.
Pallavi Roy Pallavi is a lecturer in International Economics at CISD, SOAS with ten years of experience covering policy, infrastructure and metallic commodities as a senior financial journalist in India.
Popularly known as the BRICS Bank the NDB is operated by five of the larger developing economies to build a multilateral development bank (MDB) that will first attempt to address a portion of the members’ development funding gaps and at some later point lend to other developing economies. The coming together of China, Russia, India, Brazil and South Africa to form this bank is not without a sound rationale. These countries have only 11 percent of the votes at the International Monetary Fund (IMF) despite recent reforms of its voting pattern. However together the countries account for 40 percent of the world’s population and their combined GDP is over 25 percent of the total global GDP. Having said that each country has a different incentive and the implications for each are different too. China stands to gain the most emerging from this as a strongly dominant world player that is also effectively able to engage multilaterally with other large developing economies, or at least signal so.
Given the souring of its relationship with the West post the country’s involvement in Ukraine, Russia stands to gain credibility by being a part of the New Development Bank’s (NDB) founding membership. Brazil and South Africa both have ailing economies, the latter even more so, and this might help the two countries shore up some confidence, though the effect might not be long lasting. India is in an interesting position given that it sees China both as a threat and an opportunity. Being a founder member, however, also adds to the perception that the country is now a leading player among emerging economies. A significant challenge for the Bank is to not let the strategic interplay of China and India affect its working. The first few months since the announcement have seen no major hiccups but as the Bank grows in scale this will be something to watch out for.
WWW.MODeRnDIPLOMaCY.eU The CaSPIan PROJeCT
a SIgnIfICanT ChaLLenge fOR The Bank IS TO nOT LeT The STRaTegIC InTeRPLaY Of ChIna anD InDIa affeCT ITS WORkIng The Bank recently even announced the appointment of its first president KV Kamat a veteran and respected banker from India. On the other hand the opportunities for a financial institution that brings together five key developing countries are immense. For instance the Bank can serve as a platform for outlining financing strategies to deal with issues of productivity growth and employment generation, an area other MDBs do not concentrate on directly. However given that the scope of the Asian Infrastructure Investment Bank (AIIB) is much larger in terms of capital and membership and that China seems to be more ambitious about the AIIB because its capital contribution to that bank is larger than the NDB’s initial capital of $ 50 billion could mean the NDB risks being somewhat overshadowed. In terms of financing of the NDB the subscribed capital of $50 billion is certainly not suďŹƒcient for funding significant portions of the infrastructure requirements for most of these countries, barring China which mobilized resources internally for infrastructure financing.
Of course this is the first time that a widely diverging set of developing countries have come together in the interests of financial cooperation, (though calling Russia a developing country might be not be very accurate) and this is quite significant despite the challenges. Also the Comprehensive Reserve Arrangement of $100 billion which is to be used in times of balance of payment (BoP) crises might be useful to the member countries subject to the conditionalities that are put on the borrowing, in the sense they would need to be less restrictive than those usually imposed by the IMF for loans it makes to countries with BoP crises. The IMF and the World Bank are still an accurate reflection of US-led global power structures, despite the rise of China and hence it is highly unlikely that these two will be competed away by the NDB. The threat to the Asian Development Bank which reflects Japanese interests in Asia will come from the AIIB and not the NDB. Amidst talk that there is a possibility of Greece joining the NDB if there is to be a Greek exit from the Euro what also remains to be seen is how the NDB will invite participation from other developing countries in the future. Yet it is clear the BRICS countries realise that together they wield considerable political and economic clout and will be taken more seriously as one unit and hence are certainly in a position to challenge the primacy of the existing MDBs.
The 10 mosT impoRTanT Things you need To know on Caspian sea Region
the caspian daily newsletter Receive your daily roundup of Caspian Region news and analysis from sources around the globe
#CaspianDaily