Central Asian Pipelines Inhibit Prosperity

Following the collapse of the Soviet Union, Central Asia experienced limited progres and relative isolation. According to the European Bank for Reconstruction and Development, which currently has a number of long term development strategies in place across the region, macroeconomic performance has improved over the last decade, particularly in the largest and most populous state, Kazakhstan. However, the post-Soviet hangover has left the economies of the colloquially known ‘Stans’ with an acute over-reliance on raw materials and primary industry. Diversifying the region’s economy is imperative, as is the need to develop small to medium size enterprises and the microfinance sector of each state.

The need for diversification is made difficult by the most significant factor in the Central Asian economy: the pipelines which transport natural gas and oil across the region. The Central Asia to China (CAC) Gas Pipeline, the third generation of pipelines across the region, has been likened to economic lifelines bringing sustenance across the vast land of Central Asia. The pipeline begins in Saman-Depe, Turkmenistan, running right across Uzbekistan and into Southern Turkmenistan; it then crosses the border at Khorgos into China, ending in Horgos, Xinjiang Province. Under an agreement signed in June 2010, Uzbekistan provides 10bcm of natural gas to China per annum; Turkmenistan and Kazakhstan also contribute to this supply. With this steady income pumping through the region, the economic benefits are beginning to emerge. The construction of roads and train lines across each state show that state infrastructure is improving, albeit at a slow pace.

A once isolated region again becoming the important link within Eurasia, the Stans are no longer in the shadow of their previous occupant, Russia. The region now has a voice on the world stage as a new, more reliable source of oil. The CAC pipeline brings invaluable choice to the oil importing countries, which have long been at the mercy of precarious suppliers and price volatility. On one side of the coin, the pipelines bring wealth and international clout to Central Asia; but what do they mean for the domestic politics of the Stans?

All five states are autocracies, and each has a long way to go in terms of democratic progression. The parties in each country bear such resemblance that the ‘five party systems’ are more for show, with the possible exception of the region’s poorest state, Kyrgyzstan. Presidents serve long terms, and any opposition is quickly squashed, as evidenced by the 2010 attempted uprising in Uzbekistan, which was trounced by Islam Karimov, President since 1989. The pipelines afford greater power to these authoritarian regimes and enhance the authority of long serving leaders. A culture of elitism still endures from Soviet rule, strengthening the possibility that increased power and wealth will make power sharing less likely and political transitions all the more difficult. As is the case for a number of the world’s top oil producing countries, despite being oil rich these states suffer from a high level of corruption and natural resources have hindered their development and further widened the gap between rich and poor.

Will this happen in the Stans, as well? There are a number of donor aided schemes in place, so there is hope for continued development. However, the geopolitical position of the region makes it more vulnerable to terrorist attacks and Islamist rebellion. The enhanced profile of the Stans could be more detrimental than advantageous. This possibility was the fate of another ex-Soviet state, Azerbaijan, which became a hub for terrorist activity following the construction of the Baku-Tbilisi-Ceyhan pipeline. According to Global Research, Al-Qaeda had set up a base in Baku for operations and used the city as a crossroad for heroin trafficking. Azerbaijan continues to suffer from widespread corruption and political instability.

When considering that the pipelines carry increased risk of political instability and that sales are vulnerable to price volatility in the world oil and gas markets, the Stans would be wise to take heed of the donors still present in the region. Diversifying their economies is crucial for the continued economic growth of the region and for greater participation in international trade and foreign relations. With increasing power transferred to elitist autocracies, the chances of genuine democratisation grow thin and foreign investment becomes less likely. The future of the five Stans is still uncertain. The only thing that can be known is that these states would do well to learn from their own lessons in history, as well as that of neighbouring states. Oil production and advantageous geography can prove both a blessing and curse.

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Categories: Central Asia, Natural resources

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