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THE ECONOMIC PROBLEMS

The political debates concerning Russia's policy in Central Asia were interwoven with the discussions of the resumption and development of new economic relations with the states of the region.
Russia no longer wanted to be the donor for Central Asia and, being in the words of Russian economist L. Fridman "a second-rate great power" /28/, could not afford pumping money into the economies of the more backward states of the region, for which the severance of economic contacts proved very painful.
Among the main characteristics of the Central Asian countries the International Monetary Fund experts assigned the first place to the high degree of specialization and integration of their production into the economy of the USSR. The result of specialization was a very high level of foreign trade in each republic: in Kazakhstan at the end of the 1980s it made up some 34 per cent of the gross national product, in Turkmenia and Uzbekistan 39.5 per cent each, in Tajikistan 41.6 per cent, and in Kyrghyzstan 45.2 per cent. The proportion of trade within the USSR surpassed for all republics 80 per cent, sometimes rising up to 90-95 per cent. Exporting raw produce and minerals, all republics were compelled to import a considerable part, and sometimes almost all, of the required foodstuffs and consumer goods /29/.
The specificity of connections within the USSR served to preserve orientation to Russia. In 1992 Russia accounted for: 68 per cent of the total import of Kazakhstan, 58 per cent of Uzbekistan, 51 per cent of Kyrghyzstan, and 48 per cent of Tajikistan and Turkmenistan each. Russia imported: 61 per cent of Uzbekistan's exports, 54 per cent of Turkmenistan's exports, 53 per cent of Kazakhstan's, 51 per cent of Tajikistan's, and 39 per cent of Kyrghyzstan's /30/.
The dependence of Central Asia on Russia in the conditions of a growing crisis in Russia's economy itself was, in the opinion of most of the Russian economists gravitating towards the democratic camp, an impermissible burden of which it was necessary to get rid as soon as possible in order to make the Russian economy healthier.
The attempts to stop subsidizing the Central Asian states produced the argument that the Central Asian states were not ready for making reforms after the Russian pattern. This unreadiness (quite natural, in principle, since they cannot and must not repeat all Russian steps) formed the foundation of the theory of "differing speed development", from which both economic and political conclusions were drawn in 1992-93. G.Kunadze, Deputy Foreign Minister of the Russian Federation, pointed out: "those of the needy states that remain in the rouble zone are beginning to be a drag on us, because the emission of money to meet their needs is a heavy burden on the Russian economy" /31/.
As the well-known Russian economist N.Shmelev said, "I am reassured by the compromise that was finally found between the Finance Minister Fyodorov and Gerashchenko at least on such a problem as: 'No more financing the near abroad'. For this is such a drain on our economy. Last year, according to our estimates, 15 per cent of the gross national product went to the near abroad" /32/.
Although in his article Shmelev does not specially single out Central Asia as a region absorbing its part of Russia's gross national product, it is nevertheless clear that the Central Asian countries cannot but be present in his estimates.
An even more alarming forecast of the results of integration of Russia and the Central Asian states was produced by specialists from the International Research Center of the Institute of Foreign Relations: "The potential incompatibility of the economic policy of the states forming the nucleus of the Commonwealth of Independent States is fraught with a delay if not frustration of the market reforms in Russia" /33/.
It should be noted that such a hypothetical course of events would finally depend to a decisive extent on the alignment of political forces in Russia itself and not on the pace of reforms carried out in Central Asia, which is, moreover, not the same in the different states of this region.
At the same time it cannot but be admitted that the "different-speed development" began to bother Russia financially. In 1992, the supply of roubles received by the Central Asian republics was used by them to credit enterprises, which, in the opinion of the finance minister of the Russian Federation, reduced to zero the results of the tough financial policy. The more rigid terms of Russian financial policy towards the Central Asian states was regarded by them as their deliberate ousting out of the rouble zone.
This ousting was to the benefit of the Russian economy, and finallly all states of Central Asia were compelled to introduce their own currency.
Russia's abandoning its donor functions and accepting world prices in trade had an immediate impact on the macroeconomic indices of the Central Asian republics. "Apparently Turkmenistan alone will be able to remain in the group of medium-income states. Uzbekistan and Kazakhstan have less chance of it. Whereas Tajikistan and Kyrghyzstan have already practically slid into the group of less developed countries" /34/.
The conception of "different-speed development" began gradually to be replaced by the conception of levelling of the republics, which did not mean a cardinal change in Russia"s course. It rather occasioned the ruling elite's attempts to reconcile the objective contradictions in the Russian approach. On the one hand, Russia, which does not possess the power of the USSR, will hardly be able to "rescue" the Central Asian states single-handedly. Despite all the talk of the benefits of mutually advantageous cooperation, it is obviously possible only in some branches and by far not with all states of the region. On the other hand, by leaving most of the Central Asian states to their own resources in the conditions of a growing crisis and increasing population, Russia is faced with the danger of obtaining near its frontiers a giant instability zone. The attempts to approach this issue with the market-oriented yardstick (and what economic dividends shall we receive from the promotion of contacts with Central Asia?) are surely doomed to failure.
S.Polyakov, an ethnographer and specialist in Central Asia, wrote of the absence in Moscow of clear ideas concerning Russia's economic role in the region: "The question 'to feed or not to feed' Central Asia has not been answered to this day. Without the solution of this question in principle, the injections into these states of many millions of dollars and roubles (without their being given back) are senseless. This is also important to the Central Asian states themselves, for their aggregate national income within the USSR barely covered 30 per cent of consumption. What are the governments of these states doing to feed the incessantly growing population? This question is important not only to the peoples of Central Asia but also to their neighbours" /35/. The personal consumption structure is being increasingly reduced to the satisfaction of essential needs. The share of expenses on foodstuffs increased from 1991 to 1993 up to 70 per cent in Tajikistan and to almost 60 per cent in Kyrghyzstan /36/.
The Central Asian states are doomed to maintain in the nearest future closest contacts with Russia. This does not mean that they will not continue seeking ways for the achievement of economic independence through joining the system of international and regional economic organizations, obtaining investments, etc. to ensure a structural reconstruction of the one-sidedly oriented economies. However, the reorientation of the economy and searches for new markets and new suppliers require a long transitional period, whereas the deepening economic crisis does not leave to the ruling elites much time in reserve.
The real state of affairs dispelled the euphoria the republics felt at the initial stage of independence. The Kazakh Premier Kazhigeldin stressed: "Today we have all awakened and understood: in the world where we were rushing one by one in the firm belief that we were being waited there with open arms - we are not much wanted there". In the opinion of Kazhigeldin, the creation of a single market space presupposes that the CIS countries must "share their sovereignty with others" /37/.
In the same light can be regarded the sudden political activity of Kazakhstan's business circles, who supported the solution of a number of problems complicating the relations of the republic with Russia. They proposed holding a referendum to find out, in part, the citizens' attitude to making Russian the official language, to changing the article of the Constitution which defines the republic as the form of statehood of the self-determined Kazakh nation, and to introducing private ownership of land /38/.
Equally unproductive were the attempts of Central Asia to outbalance the slowly emerging CIS structures and the failure to carry out agreements between the states with its regional "common market". Beginning from 1992, the states of the region were repeatedly trying to find some form of association. In January 1994, Kazakhstan and Uzbekistan, and later Kyrghyzstan, singed an agreement on the abolition of customs frontiers, citizens' free travel, etc. Later on there was created an Intergovernmental Council and approved the statute establishing a Central Asian Bank.
The intra-regional integration reflects, in principle, the processes taking place throughout the world. At the same time the chances of the Central Asian states to relieve the economic crisis through joining efforts appear doubtful. Reciprocal contacts between them are not developed, interdependence is absent, the levels of economic development are too different. The creation of a Central Asian alliance should be regarded rather as a lever for exerting pressure on Russia in order to spur it on to more active integration than as a means for independent survival.
Practically Russia worries not so much about the intra-regional integration as about the possibility of the post-Soviet republics uniting around power centers. Such apprehensions found their reflection in the report of the Foreign Intelligence Service in September 1994. "One of the CIS states (other than Russia) takes upon itself the 'unifying' functions. Several republics of the former USSR (without Russia) draw closer together... The first course of events can be such as would give a certain impulse to integration processes throughout the territory of the Commonwealth of Independent States, and the initial group becomes a part of the general integration space. Another possibility is the group going into its shell, which inevitably drives it to the external 'centers of influence'" /39/.
In actual fact integration in Central Asia did not lead to the realization of either the first or the second scenario. It did not give an impulse to the integration inside the CIS as a whole, for, as was repeatedly pointed out, neither political nor economic considerations impel the Russian authorities to promote an equal level of relations with all republics of Central Asia. The second possibility has no chance of succeeding owing to the strengthening Russian-Kazakhstan contacts and the formation of the nucleus of the CIS, within the scenario that is now being realized.
On the whole, economic estimates dictate such a line of Russian behaviour with which most of the Central Asian states are doomed to remain for a long time at the periphery of the CIS.
Practically Russia's economic policy in Central Asia, just as its political approaches, is not strictly consistent and is adjusted to the existing situations. Thus, on the one hand, Russia is interested in having access to the transport routes going through Central Asia and to the markets. It wants to retain its control over supply of metals and strategic and raw materials from the region. On the other hand, its limited economic capabilities made Rissia press the Central Asian republics to introduce their own currency which is hardly in line with a proclaimed course to reintegration.
Interests of the Oil-and-Gas Complex

Quite complicated problems for CIS can arise from the appearance of new producers of sources of energy. Turkmenistan, Kazakhstan and Uzbekistan have good prospects in this respect. The production and export of oil and gas will help these states to solve their economic problems but will simultaneously widen the gap in the level of economic development between the separate Central Asian republics, which can lead to a deterioration of relations between them. Thus, more rigid terms of delivery of Turkmen gas have already evoked the dissatisfaction of Kazakhstan and Uzbekistan.
It does make a difference to Russia, too, where the fuel from the region will go. The inclusion of the territory of Russia and the other CIS countries in the communications sys- tem would help the integration and the settlement of the arising disputes. In case gas and oil pipe-lines happen to be outside CIS, the exporting countries will inevitably weaken their contacts with their Commonwealth partners.
The analysis in a separate section of the interests of Russia's oil-and-gas complex in Central Asia is necessitated by the following circumstances.
Firstly, this complex is developing more vigorously as compared with other industries and is successfully overcoming its enclave nature, integrating in the world power economy. Secondly, it possesses enormous resources. Thirdly, it has successfully formed a joint-stock system furthering thereby the creation of a powerful lobby. Fourthly, while pursuing economic advantage, it simultaneously accomplishes one of the strategic tasks - ensures Russian control in the sphere of oil-and-gas production and piping in the "near abroad" and prevents Russia's isolation by building new pipe-lines passing across its territory.
The activity of the Russian oil-and-gas producing companies and associations in Central Asia is growing above all in Kazakhstan, where struggle has already started to control the export of oil and the ways of its delivery, and also to a lesser degree in Turkmenistan and Uzbekistan.
Early in March 1995, the government of Kazakhstan, the "Kazakhgaz" state holding company, the Russian "Gazprom" joint-stock company and the British-Italian "British Gas-Agip" alliance signed an interim agreement on the division of product with the development of one of the world's biggest Karachaganaksky oil-and-gas condensate field (KOGCF) in the south-west of Kazakhstan. The agreement covers the initial period of development of the field and envisages the investment in the project of some 320 million dollars. According to preliminary estimates, the parties' profit from the exploitation of the deposit will equal 40,000 million dollars, of which Kazakhstan will receive 85 per cent, and 15 per cent will be the contractors' share. "Gazprom" will get 900 million dollars. Negotiations with the alliance and the Kazakhstan government on the return of the right to take part in the KOGCF were conducted by the Russian joint-stock company, which had earlier made investments in the development of the deposit, in 1993-94. In December it was able to achieve its goal. The agreement with the Ministry of Oil and Gas Industry of Kazakhstan provided to "Gasprom" equal rights with British Gas-Agip in the development of the field and stipulated the delivery of crude gas and unstable condensate from the field to Russia for processing and the return of cleaned gas to the Central and North-Western areas of Kazakhstan /40/.
The interests of "Gasprom" should be viewed in a much wider perspective than the desire of the joint-stock company to receive dividends. The company's slogan "What is good for Gazprom is good for Russia" is not mere copying the Western corporations. The close connections of the joint-stock company with the government structures (V.Chernomyrdin is former minister of the oil-and-gas producing industry) make possible the creation of a most favourable climate for "Gazprom" activities at the official level. They dictated, to some extent or other, the turn to the extension of the customs union between Russia and Byelorussia through the inclusion of Kazakhstan (January 1995).
In January Kazakhstan, Russia and the Sultanate of Oman signed a protocol on the beginning of construction of the Caspian pipe-line system. The three sides formed the Caspian Pipe-Line Consortium (CPC) for the realization of the pipe-line project, which costs up to 1,200 million dollars. Priority in the distribution of shares will be given to the main oil supplies - Russia and the "Tenghizchevronoil" joint enterprise, 50 per cent of whose capital belongs to the American "Chevron" /41/.
Two years ago the Chevron company doing together with Kazakhstan some work in the Tenghiz field in the northern area adjoining the Caspian Sea, believed that Almaty would long be unable to solve the problem of oil transportation for export, therefore there was no need to hurry with the development of Tenghiz. Through reinvestments from small batches of six to nine million tons a year, Chevron could in 20 years cover the expenses and not pay to Kazakhstan a bonus of 420 million dollars stipulated in the agreement as the guarantee that the company will use the new pipe-line, if it should be built by anyone. The pipe-line will be built by the CPC. The first section will run from Novosibirsk (the Russian terminal on the Black Sea) to Tikhoretsk. Thus Russia ensures the construction of the pipe-line across its territory /42/.
Yet another example of active efforts of the Russian oil-and-gas complex is the agreement of the "Siberian-Far Eastern Oil Company" to include in it one of Kazakhstan's three oil refineries, Pavlodarsky /43/.
The Russian oil-and-gas complex is intensifying its efforts even though the Foreign Ministry's position concerning the Caspian Sea categorically denies the possibility of its division into sectors. Simultaneously Russia's oil-and-gas complex is being gradually integrated into the existing global structures, abandoning its former isolation in the world oil-and-gas industry.
The Russian oil corporations are beginning to act ever more vigorously in Uzbekistan and Turkmenistan, trying to close the main links of the oil-and-gas chain on themselves. Thus a joint Uzbek-Russian enterprise "LUKoil-Uzbekneftegaz" was registered in February 1994; it intends developing gas-condensate deposits, conducting geological prospecting, inviting investments, providing the transportation of fuels, and supplying provisions. In 1994, negotiations were held between the Oil and Gas Ministry of Turkmenistan and "LUKoil" concerning cooperation in the development of the oil-and-gas complex of Turkmenistan /44/.
Oil interests are, naturally, confined only to relations with those states of Central Asia which are producers of fuel. The countries that have nothing to attract the Russian business circles will inevitably be pushed back to the periphery, if only political considerations do not take the upper hand.