Analytical Articles

As the United States is engaging in regime change in Iraq, the political turmoil in the Middle East is driving up the oil prices. Kazakhstan is flush with oil and gas revenues. However, without targeted government policy, the long term economic consequences of the hydrocarbon boom may lead to crowding out investment in the non-petroleum sectors and appreciation of the Kazakh currency, the tenge. If President Nazarbaev’s administration will continue to preside over increases in income disparities and underdevelopment, it eventually may face political instability due to inflated popular expectations. Kazakhstan has done little to prevent the Dutch disease, despite warnings from the World Bank.

Iran has sought with varying success since the mid-1990s to implement oil swap deals with Kazakhstan and Turkmenistan. In January, the Russian company Lukoil announced that it would increase its own contract signed in November 2002 with the National Iranian Oil Company (NIOC) for such swaps. This development will not kick-start Iran’s energy sector. However, it does hold the prospect not only for re-balancing the energy equation around the Caspian Sea littoral in the medium term but also for restructuring the geo-economics, and hence geopolitics, of Central Eurasia in the longer run.

The eighth session of the special working group for drawing up a convention on the Caspian Sea\'s legal regime was held in Baku on February 26-27. The attending deputy foreign ministers of the five littoral countries discussed a proposed draft convention, which sought to lay grounds for an acceptable legal regime to all of them. While its proposals such as the shared use of Caspian waters for navigation may satisfy their common interests, certain others on the division of the Caspian seabed and undersea pipelines will likely create disincentive for Iran, Russia and Turkmenistan to accept it in its current format.

Al Qaeda is on the run and as the Taliban movement withers away, Mullah Omar has seemingly lost his political role. Meanwhile, the U.S. has been successful in slightly reducing the extent of the power grab of the Panjshiri Tajiks in Afghanistan’s government. This all bodes well for Afghanistan, but the battle is not over. Pashtun disaffection in the South or the country remains a reality, which has not yet been channeled or addressed. Gulbuddin Hekmatyar, whom America tried and failed to kill, is now using the underlying frustration to confront America in southern Afghanistan, posing a clear and present danger to stability and to U.S. forces.

On 23 February 2003 the Tajik armed forces celebrated the tenth anniversary of the creation of independent military forces within the Republic. Colonel-General Sherali Khairulloyev, Tajik Defense Minister, believes that the Tajik army has made promising improvements within its first decade. Recently interviewed in Krasnaya Zvezda, the official publication of the Russian Ministry of Defense, Khairulloyev expressed his satisfaction with the progress of the military, even speaking of entering a qualitatively new phase in its further development. Nonetheless, its capabilities are limited and Tajikistan continues to rely on military assistance primarily from Russia to preserve its regional security credibility.

Recent difficulties with the flagship Tengiz oil venture project are emblematic of problems that foreign investors fear will become general conditions under the new foreign investment regime in Kazakhstan, bringing international concern over the business environment there to a head. In early January, President Nursultan Nazarbayev signed a new foreign investment law to replace the one adopted in 1994. The new law removes guarantees against changes in government agreements with foreign concerns in the future, although protecting such guarantees for contracts already signed. It also puts into question the right of foreign investors to have automatic recourse to international arbitration courts and other forums outside Kazakhstan in case of contractual dispute.

Following the death of Amir Ibn al-Khattab last spring, there was speculation as to whether the foreign Islamist mujahidin would continue to play a large role in the Chechen struggle for independence from Russia. Khattab appears to have been replaced by a 35 year old Saudi, Abu al-Walid. Unlike the often flamboyant Khattab, al-Walid\' has a more reclusive style. Ample speculation surrounds him, incuding whether he exists at all. Al-Walid is an experienced and worthy successor to Khattab in the field. What remains to be seen is whether al-Walid can preserve the supply networks of volunteers and money under enormous international pressure is being applied to terminate these conduits.

As China continues its impressive economic growth, access to natural resources and raw materials is becoming increasingly vital, and will feature more prominently on the policy agenda of the decision makers in Beijing. If China seeks to maintain its economic growth rate of 1985-2000, it will face a major raw materials shortage and will be forced to focus on Eurasia as a source of major energy resources, water and food. This is likely to lead to growing economic and political involvement in Russia and Central Asia.

During the first three weeks of January, something extremely unusual occurred in Uzbekistan. An individual who appeared to have close knowledge of the inner workings of the secretive and opaque Uzbek regime made numerous postings, containing sensational allegations about President Islam Karimov\'s health, elite corruption and factionalism, to an Internet site. Despite the government\'s attempts to block access to the site, the stories spread quickly around Tashkent and beyond within days, creating the biggest domestic political debate for years. Whilst the allegations remain unproven and their origin not definitively sourced, the speed with which they circulated and the interest with which they were received, may indicate a significant undercurrent of popular opposition to Karimov\'s regime.

On January 19, the Indo-Iranian defense cooperation agreement was signed in Tehran by India\'s Navy chief and chairman of the Chief of Staff Committee, and the Iranian minister of defense. The pact was said to be a prelude to the January 26 visit of Iranian President Mohammad Khatami to New Delhi. The Iranian armed forces attaché in India Brig Gen Ali Motaghi said, \"We need India\'s help in all military aspects\" and called the agreement a milestone in defense ties between the two countries. This emerging Indo-Iranian strategic alliance could dramatically alter the political landscape in South Asia.