12 February 2009

Why Kyrgyzstan is Getting Cozy with Russia

This is the second article in what's developing into a series. Scroll down and read the previous post for background information.

I may be a college graduate though I feel like I'm in middle school giving a report on a Central Asian nation...albeit with some college level analysis to finish it off.

Kyrgyzstan, a landlocked former soviet bloc nation, is located in the heart of Central Asia with China, Kazakhstan, Uzbekistan, and Tajikistan for neighbors. This mountainous region and democratic republic has been called the Switzerland of Asia by some. This Euro-centric label is not only the result of Kyrgyzstan's geography but also as a result of the countries democratic institutions, which are generally considered both the strongest and oldest in the region. The economy is predominantly agricultural with the export of gold and other natural resources playing an important part.

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The country has a population of 5.4 million and is dominated ethnically by Krygys (65%) followed by Uzbeks (14%) and Russians (12.5%). On the religious end, Muslims dominate as 75% of the population followed by Russian Orthodox at 20%.

Economically the countries GDP (ppp) is 11.66 billion dollars growing at a healthy rate of 6% in 2008. This equates to an average annual income of $2200/per person. The gini coefficient is a low 30.3. This relatively egalitarian and growing economy provides hope for the educated population in which literacy stands at 98.7%

For international trade, Kyrgyzstan mainly exports and imports with its neighbors (with one exception). Its top-six export partners in descending order are Russia (20.7%), Switzerland (19.9%), Kazakhstan (18%), Afghanistan (10.4%), Uzbekistan (7.6%) and China (5.5%). These six nations receive over 80% of all goods exported. In contrast, the United States' top-six export partners receive only 50%. For imports, Kyrgyzstan relies greatly on Russia (40.5%) followed by China (14.7%). In contrast, the US imports only 16.9% of goods from its top trading partner China.

The governments budget is 1.17 billion with military expenditures 1.4% of that.

With these basic facts we begin to understand how developed Kyrgyzstan is and geopolitically what are its greatest challenges. From there we can begin to answer the questions posed in my previous post (questions reprinted here).

1. Money. Russia is offering 2 billion in loans plus 150 million in aid dollars which is a good deal more than what the United States has been giving. Show me the money!
2. The ethnic makeup of Kyrgyzstan considers more tenable Russian relations rather than US relations?
3. Kyrgyzstan wants to see US efforts in Afghanistan fail.
4. Not only is Russia offering more money, but is pressuring Bishkek (capital city) in other ways to comply.
5. The United States is disliked by the Kyrgyzstan population
6. Kyrgyzstan is jockeying for points with China and sees this as a way to improve relations.
7. Kyrgyzstan president Kurmanbek Bakiyev, (elected in 2005 while base opened in 2001) sees the US differently than his predecessor and is using the recent Russian offer as an excuse to execute what he has wanted to do since elected.

1. Money. Kyrgyzstan, with a government budget of only 1.17 billion, is a geopolitical bargain for any developed country. Beginning in 2001 and continuing through 2005 when President Bakiyev assumed government reins and up until now, the United States has "purchased" use of an air base near the capital city Bishkek. Since 2005 the US has been providing approximately 150 million dollars annually to the economy; 18 million of this amount was explicit payment for use of the Manas Air Base though in reality about 63 million/year is paid for the base according to the Defense Department. The connection between the remaining 87 million in aid and the Manas Air Base is far more ambiguous.

The Russian aid package offered to Kyrgyzstan stands in contrast to the 150 million offered annually by the US. Totalling over 2 billion dollars in assistance, it consists of about 180 million in loan forgiveness, 150 million in aid, 300 million in loans at a nominal interest rate, and a 1.7 billion investment in the countries hydroelectric sector. (Note: the Russians deny any connection between these dollars and the closure of the Manas Air Base).

2. The people of Kyrgyzstan have neither close cultural or religious ties to either Russia or the United States. With 65% of the population Kyrgys versus only 12.5% Russian and 75% Muslim (more culturally than daily practitioners) versus only 20% Russian Orthodox, the Russian-Kyrgyzstan ties are generally secular and only that which has developed during 100+ years of occupation. The penchant of Kyrgyzstan to lean towards the west is only, though importantly, a result of its political economy. Kyrgyzstan can swing East or West.

3. The people of Kyrgyzstan have nothing to gain if operation in Afghanistan drag on for many years (unless they are renting out their Air Base); on the other hand, the regional instability and opportunity cost of lost bilateral trade will only hurt.

4. Russia is looking to increase its sphere of influence and by pushing American pressure points in the region, the Kremlin can both demonstrate its power and exact concessions from The West. The degree with which Russia is attempting to win this geopolitical coup is not entirely known. The pressure Moscow is exerting on Bishkek to close the Manas Air Base is likely to extend quite a bit beyond the two billion aid package as I will later argue. Certainly Russia's role as Kyrgyzstans largest export partner (20.7%) and import partner (40.5%) can not go overlooked as President Bakiyev makes some difficult decisions.

5. The people of Kyrgyzstan, though Muslim, hold little animosity towards the United States. With the exception of a 2006 incident in which an American Serviceman shot and killed a Kyrg deliveryman thought to be armed, the US presence there is tolerated.

6. Any improvement in relations between Kyrgyzstan and China over the base closure are minuscule in comparison to loss of American and Western goodwill.

7. President Bakiyev is interested in and has attempted to increase his presidential powers, though such steps have been met by large protests. With that in mind, certainly cozier Russian-Kyrgyzstan relations would support his authoritarian leanings far more than US-Kyrgy relations.

Where this leaves us

The recent events in Kyrgyzstan and threatened closure of the Manas Air Base is really about two things: money and who will take the role of Kyrgyzstan's closest ally--Russia or The West. If we consider the monetary offerings by both nations it is obvious that this deal is not just about money. Russia has offered 330 million for free, 300 million with essentially no interest and 1.7 billion in assistance for building a hydroelectric plant. For the 1.7 billion, though a sizable sum, there is no guarantee that the project will get off the ground if we consider a similar offering by Russia to Tajikistan a few years ago which was eventually scrapped. The Russian offer is in essence 330 million dollars, plus some loans of undetermined amount to help during these trying economic times. The United States is offering 63 million annually for the coming years. We can imagine that as operations in Afghanistan increase under the Obama administration, the US would be very open to increasing this assistance amount. Even if this did not occur, at the current 63 million rate, 315 million would be paid out during the next five years, certainly an amount of time that the US would like to continue using the base for. With a higher that 63 million annual dollar amount and longer than five-year timeframe, Kyrgyzstan stands to receive more aid money than the Russian offer. If President Bakiyev is genuinely strapped for cash right now during the economic downturn he could reasonably ask the US for loan and/or infrastructure assistance which it would likely receive due to American interest in Afghanistan. The Russian deal, though sounding generous, is no better than what the US would likely offer if asked. Further, the Russian deal could turnout far worse, if we consider that the 1.7 billion may never materialize. And this brings us to the second factor.

With money neither the deal clincher nor deal breaker, it is relations that will cause the Kyrgyzstan to break right or left. And in this is where geopolitics comes to the forefront. If Kyrgyzstan was located in Eastern Europe it would exist as a promising young democracy primed for EU and NATO membership. Instead, Kyrgyzstan is sandwiched between China, the Russian sphere of influence, and US geopolitical ambitions. In this equation Russia has the practical upper hand as the primary trading partner and neighbor in the region. The United States has the ideological upper hand with values and a mode of governance far more closely aligned. At this point in time Bishkek is swaying towards Russia though negotiations over the base are still being conducted, and the situation could swing back in favor of the US. I expect that the United States' interest in the region is strong enough that Washington will offer Bishkek a sweeter deal which will rival Russia's, so continued use of the base can be secured. Whether that will be sufficient depends on how much back-channel Russian arm twisting is occurring; things may look promising, though unfortunately all is not readily apparent.

Statistics generally from CIA World Facts database.

1 comment:

I.M. Patient said...

It is about time. I have been going through "policy wonk fixes withdrawal. Finally some more substance to use or ab-use.

I. M. Patient