Kyrgyzstan: The Cameras of June (2010) - Part I

PART I - KYRGYZSTAN: KEY CHARACTERISTICS & THEIR IMPLICATIONS

We are back to Kyrgyzstan - the land of forty tribes.  I hope you enjoyed the preface that I posted a few days back.

Gaspar Noé did a brilliant job with reverse chronology in Irréversible. Perhaps that works only with films though.  Or I am not just good at it.  Thus, if you have not already read my previous post on Kyrgyzstan then I would encourage you to stop right here and read that first.

This part describes the key national characteristics of Kyrgyzstan.  I think it is absolutely essential to understand these.  Even if you disagree, I promise, it will be a fun read.

In the second part, which should be out some time next week, we will discuss the key strategic interests of Russia, China, USA and India -the 4 main foreign players in Kyrgyzstan.  These parts should set stage for explaining how the Cameras of June framed Russia's choice of further actions.

Yours, too sleepy to type more analyst,

AA

KEY CHARACTERISTIC: LOCATION & POLITY

Kyrgyzstan has an area of 200,000 sq. km. It is doubly land-locked and borders with Kazakhstan to its north, China to its east, Tajikistan to its south and Uzbekistan to its south west. Its capital is Bishkek, a city with a million people.

Kyrgyzstan and its neighbors

Kyrgyzstan emerged in 1991 as a sovereign state following the dissolution of the USSR. Newly formed sovereigns tend to adopt political structures of their former masters even when other forms of polities would be more suitable. Kyrgyzstan was no different; it cast itself as a presidential republic even though given its topography, weak center and ethnic fault lines, a governance system based on parliamentary democracy would have been more appropriate. A presidential form of governance in such a state accentuates existing fault lines and raises people’s expectations beyond what the state has the capacity to deliver.

Incidentally, in a constitutional reform referendum on Jun 27, 2010, Kyrgyzstan voted for a move to a system based on parliamentary democracy. We however have serious reservations if the referendum vote will be durable or even, will bring the stability that we just theorized that parliamentary democracy should in Kyrgyzstan! The reason we have our reservations is because the referendum asked two questions (see David Trilling's article) - whether the leader of the provisional government should be confirmed as the president for the next 18 months, while an important question, this has no long term significance; and whether the country should move to a system of governance based on parliamentary democracy, a question with profound structural implications. However the voters were given only a single binary choice - if a voter were to indicate a ‘yes’ then that would be assumed to mean a yes to both questions and similarly, a ‘no’ would be taken to mean a no to both questions!

Clearly, the voters would have a tendency to answer the first question in the affirmative since the leader and several others in her provisional government rode to power just a few months back on the back of popular discontent that overthrew the previous government. Thus the question of parliamentary democracy appears to have gotten a free ride. As a parting remark on this matter, we wonder why a referendum on a matter of such profound importance was conducted at a time when the nation was on a boil. Even if a vote for parliamentary democracy would usher in a utopia, the near-term direct benefits of such a vote would still have been zilch.

KEY CHARACTERISTIC: TOPOGRAPHY

Kyrgyzstan is dominated by the Tien Shan mountain ranges that run in the east-west direction. Forty percent of its territory lies at an elevation of more than 3km. The country is very rich in water resources - it has several thousand glaciers that give rise to numerous rivulets and endows it with well-fed perennial rivers. The rivers are however not navigable as the water flow is rather rapid. Kyrgyzstan therefore lacks natural features needed for intra-country connectivity. 

Kyrgyzstan: Elevation Map

Kyrgyzstan’s topography has profoundly shaped its internal environment and external interests in the region. The ranges fragment the country into multitudes of small valleys that are interlinked only by rudimentary networks, many of which are unsuitable for year-round mechanized transport. The lack of geographic connectivity has fragmented domestic markets and political decision making, rendered nationwide programs ineffective and, helped barter trade flourish, as a result of which, its central bank policy actions are rather ineffective.

On the military front, Kyrgyzstan's mountains are young and therefore have steep rising slopes. This makes the terrain unsuitable for large scale infantry movement and makes the deployment of heavy artillery infeasible. Therefore Kyrgyzstan is not attractive for foreign powers seeking to establish bases to project raw power. Nevertheless, its western and northern borders look over historic routes that are being modernized by China, largely to support of its mercantile, over-the-land trade with Kazakhstan, Uzbekistan and Turkmenistan, and perhaps Iran in the future. Therefore Kyrgyzstan can offer listening sites to foreign powers, the attractiveness of which will grow as China makes further inroads into Central Asia. Kyrgyzstan however is unlikely to see commensurate benefits as it itself is not in a position to put these bases to effective commercial or military use.

KEY CHARACTERISTIC: DEMOGRAPHICS

Kyrgyzstan has 5.4 million people, 70% of which are ethnic Kyrgyz, 15%, ethnic Uzbeks, and 9%, ethnic Russians. The Uzbeks are concentrated in the west and the Russians in the north. Muslims are 80% of the population and those belonging to the Russian Orthodox Church, 15%.

Kyrgyzstan - population growth trend

Since independence, the ethnic composition of the country has changed significantly mainly because of emigration of non-Turkic people, particularly the ethnic Russians who now comprise 9% of the population, down from 20% 1991. Fertility rate differential has been the other main contributory factor for the share of ethnic Kyrgyz population rising from 54% in 1991 to 70% today. The demographic change has had a profound economic and social impact.

Impact of Demographic Changes on Agriculture During the Soviet era, collective agriculture was the norm. This allowed economies of scale which in turn permitted cost-effective deployment of the technical know-how. Traditional skills were however lost in the process and replaced by veterinarians, agriculture and logistics experts, civil engineers and traders, most of whom were ethnic Russians. Their emigration caused production and transportation systems built on the foundation of the ideology of collectivity to collapse. The domestic market was fragmented. Agriculture, once a commercial success, was reduced to a subsistence-level activity and has, despite two decades since independence, largely failed to recover.

Impact of Demographic Changes on Internal Stability The ethnic fault lines in Kyrgyzstan run deep and trace their origins to the Soviet policies of large scale population resettlement and redistribution of land between ethnic groups to achieve the twin goals of internal stability and economic progress. In Kyrgyzstan, fertile lands in the Fergana valley that were traditionally owned by the Kyrgyz were transferred to Uzbeks for agriculture. As a result, Kyrgyz discontent simmered during the Soviet era. When it surfaced, it was directed at the Uzbeks. Ethnic Russians were seldom targeted as they were seen as the local presence of the powerful Soviet state and because they were considered critical to the economy. Their presence also ensured stability between the Kyrgyz and the Uzbeks as they had the ability to incentivize deals between the two peoples whenever such a need arose. With its demographic transformation however, Kyrgyzstan has lost its traditional balancer. Therefore, relations between the Kyrgyz and Uzbek peoples of Kyrgyzstan come to a boil more often, and with greater intensity.

Regional Security Ramifications of Demographic Changes As the demographic transformation continues and its lagged effects begin to be felt, the Kyrgyz society could look far more polarized in the future than it is today. Such a polarization would have a security impact that would ring far beyond the borders of Kyrgyzstan itself. Let us see how.

A country can tolerate only a limited amount of polarization amongst its principal groups without its institutions giving into the centrifugal forces such a polarization would generate. The center could however adapt to check the increasing competition amongst the polarized groups. How would the center adapt in the case of Kyrgyzstan? - While ethnic identities divide, Islam is the religion of over 80% of Kyrgyzstan's population; an overwhelming majority of both, ethnic Kyrgyz and ethnic Uzbeks, are Sunni Muslims. Islamism, the political philosophy based on the axioms that a shared Muslim identity transcends all other forms of societal divisions, that the problems in Muslim societies are caused by an incomplete adherence to Islamic tenets and that such problems can only be resolved through a vigorous projection of the religion of Islam into the political sphere, has provided an attractive rallying point in other countries with large Muslim populations where the social, political and economic mechanisms have failed to deliver societal equilibrium. Thus despite the current strong separation between the Mosque and the State in Kyrgyzstan, at some point in future, the center could fall back on Islamism to check the growing ethnic polarization and thereby, strengthen the hand of regional Islamists who seek to establish a Central Asian caliphate. Should that happen, the expansion of China into Turkmenistan and Uzbekistan and, to some extent into Kazakhstan, that is powered by its enormous dollar reserves and surplus productive capacity would unwind, Islamist movements in Uzbekistan will receive a morale boost, Russia’s ability to play as a balancer will be even reduced even further and US' cost for projecting power into Afghanistan and northwest Pakistan will rise.

ECONOMY


GDP Prior to 1991 nearly all of Kyrgyzstan’s output was consumed locally or in other Soviet states. The dissolution of the USSR disrupted traditional trade linkages, the emergence of new sovereign borders fragmented the markets, Soviet-instituted subsidy programs that formed the bedrock of agricultural activity disappeared and people with technical skills emigrated. Kyrgyzstan’s GDP sharply contracted for several years following independence. Today it remains a low-income country, ranked at 146 out of 180 countries in 2009 by the IMF based on nominal per capita GDP. The five pillars of its economy are subsistence-level agriculture, hydroelectric power generation, mineral exports, remittances and international aid.

Kyrgyzstan - real GDP growth rate

Agriculture Agricultural output contributes 35% of Kyrgyzstan’s GDP. Only 8% of Kyrgyzstan is arable but 45% can be used for rearing, thus making animal husbandry a major component of the output. Agricultural efficiency has fallen significantly since with the collapse of the USSR came the collapse of collective farming, disappearance of a guaranteed export market and a sharp fall in both state-subsidies and capital investments. As sovereign boundaries emerged, winter grazing grounds in Kazakhstan were cut off. As a result, transhumant grazing suffered leading to an unsustainable cull of large herds of sheep.

Energy Kyrgyzstan has almost no fossil fuel though is endowed with significant hydroelectric power potential. At present, only about 10% of this potential has been exploited. Despite that, it has surplus power which it swaps with Uzbekistan and Kazakhstan for fossil fuels. Energy prices however remain highly volatile (In the case of Kyrgyzstan, energy price volatility affects more than just the economic output - sharp rise in utility prices in 2009 caused popular discontent that lead to the overthrow of the Bakiyev government in April 2010.) due to four reasons: (i) oversupply of electricity, even at the current level of generation, (ii) electricity is not a fungible form of energy, (iii) the export market is limited and, (iv) the unstable nature of intra-state relations in Central Asia limits Kyrgyzstan to only short-term or small-scale swap agreements.

Contrary to the generally held view, it is not capital investments but the low fungibility of its electricity that limits the full realization of Kyrgyzstan’s hydroelectric potential (At full potential, Kyrgyzstan’s electricity exports could increase at least 10-folds to reach 20% of its 2009 GDP.).  Its electricity exports are priced at about US¢3.1/kW-hr which is less than one third the price of electricity generated by gas or oil fired plants in its export markets. Improving the fungibility of its electricity exports will lead to a significant rise in capital investments. Fungibility can be significantly enhanced through the construction of a regional power grid to supply electricity to large but deficient markets in Afghanistan, India, Iran and Pakistan. The plans for a regional power grid however remain infeasible due to the difficult security environment in the region and because the balance of geopolitical imperatives of the key regional and international players remain tilted against the enhancement of Central Asia’s economic linkages in the direction of warm water ports in the Indian Ocean.