Central Asia Report: July 7, 2003

HUMAN RIGHTS CONCERNS, CORRUPTION ALLEGATIONS OVERSHADOW KAZAKH LEADER'S VISIT TO CANADA... On 27 June, Kazakh President Nursultan Nazarbaev wrapped up a five-day trip to Canada. The visit showed Canada trying to balance concerns about Kazakhstan's worsening democracy and human rights record, which is too egregious to disregard, and its interests in Kazakhstan's hydrocarbon resources, which are too vast to ignore.

Strengthening bilateral economic cooperation was the main subject of talks between Nazarbaev and Canadian Prime Minister Jean Chretien in the Canadian capital Ottawa, Khabar news agency reported on 27 June. Chretien pledged to consider increasing investments in Kazakhstan, especially in the high-technology sector, and to help develop its small and medium-sized enterprises. Bilateral agreements were signed on strengthening economic partnership and on mutual legal assistance in civil and criminal cases. Furthermore, Nazarbaev obtained Canadian agreement to assist in reforming his country's judicial system and training Kazakh peacekeeping specialists (see "RFE/RL Newsline," 27 June 2003).

According to state-controlled Khabar TV, Chretien praised Kazakhstan's economic and political reforms and opined that they should serve as models for other post-Soviet republics. If true, such remarks set the prime minister painfully at odds with critical voices among Canadian human rights groups, local press, and even some politicians. Jason Kenney, shadow finance minister of the opposition Canadian Alliance, protested in a 19 June letter to Chretien that it was "unacceptable that the government of Canada intends to welcome this man [Nazarbaev] to our nation's capital with open arms. The only result of this visit will be to strengthen the dictator's rule by providing him with another useful propaganda tool." A statement by Human Rights Watch's Toronto Committee was similarly scathing about Ottawa's friendly reception of Nazarbaev. "Kazakhstan's vast energy wealth has made it an important geo-strategic partner for many countries, but it has not made the country more democratic," the statement said. "As the country's wealth grows, the government is misusing revenue, consolidating power, and closing political space. Kazakhstan is starting to look like another case study in how oil windfalls bolster dictatorships rather than foster democracy."

On a side note, Kazakh Foreign Minister Qasymzhomart Toqaev was also pressed on the need for human rights, press freedoms, and election reforms during a meeting in Washington on 1 July with U.S. Secretary of State Colin Powell, Reuters reported. Kazakhstan was urged to redress "last year's downturn" in the field of democracy and human rights, according to a senior State Department official. Toqaev said his country was committed to go forward, but "to go forward probably slowly.... We cannot do things overnight while the democratic build-up in some countries took more than 200 years. It's not so easy."

The Canadian government clearly shared some of the concerns about Nazarbaev. According to the Russian daily "Vremya novostei" on 27 June, the Kazakh president was received in Ottawa at a lower level than would have been expected for a foreign head of state. He was granted a "working visit," rather than a "state visit" due to Canadian reservations about Kazakhstan's human rights record and the so-called "Kazakhgate" scandal, the newspaper commented (see "RFE/RL Newsline," 27 June 2003). The scandal encompasses allegations that Mobil Oil Corp. (now ExxonMobil), which obtained a 25 percent stake in Kazakhstan's Tengiz oil field in 1996 for $1.05 billion, arranged for bribes totaling $78 million to be paid into the bank accounts of two unnamed top Kazakh officials, generally assumed to be Oil Minister Nurlan Balgymbaev and Nazarbaev himself. Merchant banker James Giffen, chairman of the New York-based Mercator Corporation, stands accused of handling the payments. He was arrested on 30 March and charged with violating the U.S. Foreign Corrupt Practices Act. A pretrial conference with prosecutors has been scheduled for 5 September, eurasianet.org reported on 1 July, adding that the arraignment of Giffen is only part of a wider corruption probe by U.S. law-enforcement agencies to investigate the dealings of oil conglomerates in Kazakhstan.

...WHERE NAZARBAEV UNVEILS PLANS TO QUADRUPLE OIL PRODUCTION. It is against this background that Nazarbaev's visit, and the clamor of criticism that accompanied it, must be seen. Kenney's intervention is particularly significant since he is the representative from Calgary, Alberta, in the House of Commons. Calgary hosts the head office of PetroKazakhstan Inc., which lobbied strongly to get Nazarbaev invited to Canada. The company gave the president an extra boost on 23 June (the day of his arrival in Canada) by announcing the construction of a $77 million, 178-kilometer pipeline in western Kazakhstan, eurasianet.org noted on 2 July.

Nazarbaev in turn chose to come to Calgary to deliver a major address on his country's energy-sector development efforts. On 27 June, at an international investments conference titled, "Kazakhstan, the Crown Jewel of Central Asia: Growing Market Opportunities and Business Development," Nazarbaev announced plans to almost quadruple annual oil extraction by 2015. "At the moment we are producing 50 million metric tons a year. By 2010 we plan to reach production of 120 million tons, and by 2015 -- to 180 million tons," he said as quoted by Interfax. As for getting all that oil to market, the Kazakh leader acknowledged that the main transportation route was currently the Caspian Pipeline System (with project capacity of 67 million tons), but he noted that a wealth of other options were in the offing. The Baku-Tbilisi-Ceyhan pipeline would eventually be a conduit from the Caspian to the Mediterranean Sea. "A very profitable route is the one from Kazakhstan through Iran to the Persian Gulf," he added. He also noted the possibility of building a pipeline from Kazakhstan to western China.

Nazarbaev's strategy to boost production is linked to concerns that, as Iraqi oil comes on stream, Western oilmen's attention will stray from Kazakhstan, according to the Institute of War and Peace Reporting on 28 June. A presidential decree issued in May approved a program to accelerate the division and development of Caspian oil fields, and plans for commercial extraction from the giant Kashagan field to begin in 2005. When members of the consortium developing Kashagan indicated that this timetable might be overambitious, and that 2006 or 2007 would be more realistic, the president threatened them with heavy fines if they failed to meet his deadline, the "Financial Times" reported on 9 June.

Meanwhile Turkmenistan and Kazakhstan are reportedly close to signing a bilateral deal on dividing up Caspian resources, following three-day negotiations last week in the Turkmen capital Ashgabat, AFP reported on 26 June. Described as "successful" and "fruitful," the negotiations paved the way for a follow-up meeting to take place in the Kazakh capital Astana later this summer. Azerbaijan, Kazakhstan, and Russia already signed a deal in May to divide the northern and central parts of the sea among themselves, eliciting at the time strong criticism from Turkmenistan and Iran.

The spat over the production timetable for Kashagan was the most recent manifestation of growing tensions between Astana and international investors, who have repeatedly voiced concerns that the government, far from considering contracts with foreign companies as carved in stone, are eager to revise them whenever it feels in retrospect that it negotiated poorly and got a bad deal. Nazarbaev stressed to energy executives in Calgary on 27 June that this was not the case. Yet only three days later, Prime Minister Daniyal Akhmetov told a joint session of the Kazakh parliament that his administration intended to raise taxes in the oil-and-gas sector, Interfax-Kazakhstan reported on 30 June. A government working group is now supposed to draft amendments to the existing Tax Code by 1 September. Akhmetov said that in revising the Tax Code the Kazakh government was copying Norway, where the government controls pricing processes in the hydrocarbon sector. Although the prime minister has declared there are no current plans to rework agreements with foreign companies, last week he reportedly agreed with parliamentarians that some existing contracts in the hydrocarbon industry were now inadequate, even if they helped attract foreign investment in the past (see "RFE/RL Newsline," 1 July 2003).

However bold Nazarbaev's oil plans may be, the threat of scandal, gloom about the regime's worsening democratization record, and continuing ambiguity whether the Kazakh government's word really is its bond, can only exacerbate corporate concerns about investing in the country.

PRESSURE ON ISLAMIC RADICALS UNABATED, DESPITE PLEA FOR TOLERANCE. The Geneva-based World Organization Against Torture (OMCT) sent an open letter to Kyrgyz President Askar Akaev on 24 June asking him to put an end to official harassment of members of the Muslim extremist movement Hizb ut-Tahrir (see "RFE/RL Newsline," 26 June 2003). While the group has radical aims -- to unite the entire Islamic world community into a single caliphate, to be regulated by the precepts of the Sharia -- it has long claimed that it wants to achieve its objectives through nonviolent means. But since those objectives include the removal of the secular governments in Central Asia, they have become the targets of a vigorous crackdown.

According to the letter by OMCT (for the text, see http://www.omct.org), Hizb ut-Tahrir members in Kyrgyzstan "are being targeted for their religious and political beliefs, [and] subjected to harassment, arbitrary arrest and detention, ill-treatment, and potentially torture." It highlighted the cases of two brothers, Yakubjan and Akmedjan Haldarov. Both were recently sentenced to three-year prison terms by the Bazar-Korgon regional court. Yakubjan was sent to a high-security facility, OMCT said, "for calling [on] people not to vote in March [2003] for akims [mayors], since they were not elected according to Islamic law; for calling for the establishment of an Islamic country; and for opposing the U.S. war in Iraq," the letter said. "These incidents are part of the wider repression of the Hizb ut-Tahrir party, which has increased since the beginning of 2003, notably in the period prior to and during the conflict in Iraq," the watchdog organization said. It pointed out that such actions and the disproportionate prison sentences being handed down to movement members violated international law. It consequently condemned the violent repression of Hizb ut-Tahrir, calling for the release of those of its members detained without valid legal charges, for good treatment of all detainees, and for trials that were prompt and fair.

On 1 July ITAR-TASS reported that officers of Kyrgyzstan's National Security Service had exposed another nest of Hizb ut-Tahrir activists, when they raided a house in the southern city of Osh and discovered printing and copying equipment. Hundreds of leaflets, calling for the creation of a theocratic state based on the Ferghana Valley, were confiscated and the owner of the print shop arrested. Interior Ministry sources told the news agency that about 1,200 activists of the banned party had been rooted out in Kyrgyzstan, but that the actual number of Hizb ut-Tahrir supporters in the country could be 10 times as large. The law enforcement officials added that, in their opinion, Kyrgyzstan's "excessively liberal laws" were responsible for preventing them from eliminating the Islamists more quickly and effectively.

Meanwhile in Tajikistan, two alleged activists of Hizb ut-Tahrir were arrested while distributing leaflets in the town of Gafurov in northern Tajikistan's Sughd Oblast, ITAR-TASS reported on 29 June. While searching the homes of the detainees, police reportedly found 50 copies of "Wahhabi" publications and several hundred copies of proclamations, including appeals to Muslims to ignore secular law. Law enforcement sources in Tajikistan assert that since the beginning of the year, more than 20 Hizb ut-Tahrir activists have been detained in Sughd Oblast and two underground printing facilities have been discovered. Both equipped with state-of-the-art computers, giving credence to allegations that Hizb ut-Tahrir cells in Tajikistan are being financed from abroad (see "RFE/RL Newsline," 30 June 2003).

Although Hizb ut-Tahrir has not been involved in any known terrorist activities to date, Russia's Federal Security Service (FSB) has long accused the group of links with separatist fighters and alleged mercenaries fighting Russian troops in Chechnya. The FSB more recently began claiming that the ranks of Hizb ut-Tahrir had been augmented by recruits from the Islamic Movement of Uzbekistan (IMU). Russian authorities allegedly arrested 55 of its members in one swoop on 6 June in Moscow. Russian media reported that hand grenades, explosives, and ammunition had been discovered, as well as Islamic propaganda leaflets (see "Russia: Security Forces Dismantle Alleged Moscow-Based Cell Of Hizb Ut-Tahrir," rferl.org, 10 June 2003). But according to an expose by Vitalii Ponomarev of the Memorial human rights group, published by AP on 24 June and summarized in "The Moscow Times" on the following day, the operation was a fraud. "A triumphant announcement by security officials that 55 members of a banned Islamic group had been detained was a sham designed to show that Russia is fighting terrorism," AP said. Ponomarev claimed that only two of the detainees were charged, and the first time they ever heard of Hizb ut-Tahrir was from the lips of the policemen arresting them.

UZBEKISTAN PROMISES CONVERTIBILITY BY END OF 2003. At a press conference in the Uzbek capital Tashkent on 27 June, Economy Minister and Deputy Prime Minister Rustam Azimov announced a new timetable to liberalize the national currency. The Uzbek som will be fully convertible by November 2003, Azimov said, according to Uzbek TV. According to other sources, however, Azimov said it would be "almost fully convertible" by November. "Uzbekistan plans to wrap up the process of fully liberalizing the currency market by the end of the year. Then, it will make commitments on conversion in current international transactions," he said as quoted by Interfax. Tashkent's foot-dragging on the issue of currency convertibility became a major sticking point with the International Monetary Fund (IMF) last year, when it declined to renew a staff-monitored economic reform program in Uzbekistan after Tashkent missed two deadlines to introduce convertibility and make other promised changes to liberalize trade and agriculture. The lack of a freely convertible currency is frequently cited as the single greatest barrier to Uzbekistan's economic development.

Azimov made the announcement as he and Central Bank Chairman Fayzullo Mullajanov signed a new letter to IMF chief Horst Koehler, describing a fresh economic action plan designed to get back into the IMF's good books by pushing reforms along. The action plan will be implemented in July and August. An IMF mission will then come to Uzbekistan to review progress in September and October. The action plan, Azimov said, was dedicated to removing all barriers to currency convertibility, including exchange limits and trade restrictions. To this end, the current requirement that companies pre-register import contracts with the government will be lifted. "Soon private enterprises and all companies with less than 50 percent of state shares will not need to pre-register their contract." Azimov promised, according to uza.uz. The head of the IMF mission in Tashkent, Erik De Vrijer, highlighted currency exchange and abolishing the pre-registration provisions as two top priorities for the country's reform program. The next issues on the list, De Vrijer said, should be to liberalize local wholesale and international trade, reform the banking sector, and improve the business climate.

That is a tall order for a government that has enacted little market economic reform over the last decade. Having failed to keep its promise to introduce currency convertibility in 2002, few financial analysts in Tashkent sound sanguine about Azimov's latest pledge. De Vrijer struck an optimistic note on 27 June: "I have a sense of achievement. It is crucial that the government is undertaking these measures and implementing them," he said. But despite his rah-rah attitude, the skeptical business community has mostly decided to just wait and see.