The Times of Central Asia - update of 17 June 2010

In this issue:

1. POINT OF VIEW: Restoring order absolute priority for Kyrgyzstan

4. Uzbeks switching from gasoline to gas fuel

1. POINT OF VIEW: Restoring order absolute priority for Kyrgyzstan (Kyrgyzstan, June 17, 2010-issue 621) By Giorgio Fiacconi TCA publisher

BISHKEK (TCA) — The ongoing unrest in the south of Kyrgyzstan, the thousands of people that are fleeing the country, and the increasing number of killed and wounded citizens pose a serious question as to the feasibility of the announced referendum for the approval of a new Constitution to be held on June 27 and the subsequent parliamentary election scheduled for October 10.

Although the Provisional Government has said it will hold the referendum on the set date, the fact remains that security in a large part of the country cannot be guaranteed and tens of thousands of people in the south have been displaced from their places of residence. The request for external military help would make the situation even worse and it is clear that the provisional government, though trying its best, is not able to control the situation and stop the violence that has engulfed the southern regions of Osh and Jalal-Abad. The Kyrgyz request for peacekeeping troops made to Russia has been declined. The ongoing unrest has much to do with property redistribution, political connection, and finally with ethnic conflict. The ethnic factor has certainly been used as justification of a situation that only proves the evident crisis of the government that was unable to solve the economic discrepancies and employment problems of the country. Kyrgyzstan has always been surviving between the benevolent approach of the international community, with their geo-political interests, and the internal reality made of political opportunists, often with clear ties with organized crime, millions of poor people struggling to survive, and hundreds of thousands looking for their future outside the country. Even if the ongoing disorder was really organized by criminal structures and external provocateurs, politicians in power are not less guilty. There is a fertile soil around Bishkek and in the south to produce revolutions now and then, and the instrumental use of the latent ethic conflict can only explode in violence. Kyrgyz and Uzbeks of the Ferghana Valley have lived together in peace for centuries, and to explain today’s unrest and violence only by interethnic reasons is certainly not correct if external provocation is not considered. Whether this provocation comes from the Bakiyev clan or criminal groups or some other interested parties is not clear — probably there is a combination of factors. What is important today is how to resolve the present situation. The damage to the people and their properties is so extensive that it will take a lot of time, patience and money to normalize the situation and to restore order. The request of the provisional government that Russian troops step in makes sense, but though this may bring the situation under control, it will certainly not solve the problem. Whatever development we will see in the next few weeks, it is clear that people are living under fear and any referendum conducted in such conditions will not reflect a transparent and fair expression of their intentions. Today, two weeks before the referendum, we can say that the provocateurs, whoever they are, have achieved their goal of bringing the country on the brink of collapse, fear and chaos, and if things get worse in the next two weeks, they would possibly achieve their objective to derail the constitutional referendum and the legitimization process of the provisional government. Also, the priority of a new Constitution over the parliamentary election is not appropriate. In actual fact, there was no need to write a completely new Constitution. Instead, the approval of some amendments to the existing Constitution by a new parliament would be more than enough. Sooner parliamentary elections to provide legitimization of the provisional government would be more important to restore legality. Probably the two-step process (constitutional referendum and parliamentary election) has been chosen for a lack of unity between the various parties of the provisional government, but the current developments may jeopardize completely this process. Today the priority is to bring the country back to a civil and peaceful condition, with or without the help of external forces. The referendum should be postponed or cancelled, and return to legality by electing a new parliament must be implemented as soon as possible. In any case, it will take a long period of time until the economy will start picking up and the public opinion is convinced that the shift of power to new people will also bring new governance. Here in Kyrgyzstan people are used to think that politics and business are going together and that very often parliament deputies might have a sponsor that is not always too far from the criminal world.

2. Kyrgyzstan’s Maxim Bakiyev seeking political asylum in UK (Kyrgyzstan, June 17, 2010-issue 621)

LONDON-BISHKEK (TCA) — The online edition of the English newspaper the SUN has reported that Maxim Bakiyev, the 33 years old son of ousted Kyrgyz President Kurmanbek Bakiyev “was captured by UK Border Agency officials after touching down in a privately hired jet at the small airport of Farnborough in Hampshire”.

Immediately the news was spread in Kyrgyzstan and it was said that the General Prosecutor’s Office is already preparing the necessary documentation to request Maxim Bakiyev’s extradition to Kyrgyzstan. At the same time Kyrgyz Interim President Roza Otunbayeva has declared that the matter of extradition from the United Kingdom to Kyrgyzstan will be decided by the UK court given the fact that now Maxim Bakiyev is under British jurisdiction. Kyrgyzstan will do everything it can to create a criminal case and put together the necessary documentation to prove that any action against Maxim Bakiyev is not politically motivated but based on actual facts of abuse of power, corruption, property misappropriation, and eventually terrorist acts. Maxim Bakiyev was outside Kyrgyzstan from the day of the tragic event of April 7, when he was due to be in Washington for a meeting with American authorities. Later it was announced that with his mother, wife and child he was in Latvia and free to travel to other countries. His new whereabouts in the UK is certainly a surprise and it is hard to believe that it is due to the efforts of the Kyrgyz Provisional Government that he has been located and made arrested by a foreign country. It makes more sense to believe that the entire operation has been organized with the advice of some expert legal firm that has suggested the fugitive son of the ousted Kyrgyz president to hand himself over to the British authorities and apply for political asylum. The fact remains that after having completed the necessary formalities, Maxim Bakiyev left the Farnborough Airport in a private limousine to a destination known to the UK Border Agency officials. In the meantime the unrest continues in the south of Kyrgyzstan, and according to official data of the Kyrgyz Ministry of Foreign Affairs, 1,103 foreigners have already been evacuated from the area. Pakistan and China have sent their own aircraft to rescue their citizens while many others have been transported to Bishkek. The death toll has already officially reached the number of 179, but the real number is estimated to be much more. More than 1,000 injured and wounded people have been placed in various hospitals of the south. There were also reports that southern hospitals are discriminating in admitting patients between Kyrgyz and Uzbeks. Presently the government is preparing to receive more injured citizens at Hospital No. 4 of Bishkek. The number of people that have fled their homes is increasing every hour and it is estimated that more than 100,000 people are seeking for a safe place elsewhere, including in Uzbekistan. Russia has been officially asked to send peacekeeping forces to Kyrgyzstan but the Russians have decided to provide support only within the framework of the Collective Security Treaty Organization (CSTO) which includes Russia and other former Soviet countries. The Kyrgyz provisional government has refused from such a multilateral intervention, saying that presently they have the situation under control and that they will go ahead with the proposed referendum on the approval of a new Constitution to take place on June 27. This decision to refuse from the intervention of CSTO peacekeeping forces and to hold the referendum on the set date before the country reaches normalization has been criticized. In any case, although the situation in the north of Kyrgyzstan and the capital Bishkek seems to be normal, some sort of unrest may be expected since all the military and police forces have been moved to the south. Maxim Bakiyev is the second son of the official (Russian) wife of ousted Kyrgyz President Kurmanbek Bakiyev. He was the head of the Central Agency for Development, Investment and Innovation of Kyrgyzstan and masterminded a restructuring of the country’s economic development through the Kyrgyz Development Fund. He has been accused of abuse of power, embezzlement of public funds, and of having misappropriated several companies and real estates. It was also reported that he controlled several Kyrgyz banks and built a financial empire.

3. Tajikistan needs ban on cotton export to encourage domestic processing (Tajikistan, June 17, 2010-issue 621) By Rakhim Nazarov

DUSHANBE (TCA) — Tajik textile enterprises are lacking raw materials due to growing prices for cotton.

Tajikistan’s cotton processing enterprises are short of raw cotton. According to the Ministry of Energy and Industry, after the price for cotton on world markets has risen, local cotton producers began to export raw cotton. As a result, cotton processing enterprises are lacking raw materials. Last year, when one ton of cotton fiber cost $800, local businesses did not take the opportunity and did not stock enough cotton. Now, when it costs $1,378 per ton, local businesses can not afford it. Cotton can be imported, but the situation is difficult as the local processing plants do not have market outlets, regular customers, and they work only to orders, that is seasonally. The ministry noted that the State, particularly the Ministry of Economic Development and Trade, should assist domestic producers in selling their products within the country and abroad. Experts believe that one of the ways might be a ban on the export of cotton fiber. In this case, local processing and textile companies will work on a regular basis. The first step could be the production of yarn, which is always in demand. Gradually, it will be possible to produce finished textile products. Exports of cotton fiber made up 12.2% of Tajikistan’s total exports and amounted to 33,300 tons worth $45.9 million. Cotton fiber is exported to Turkey, Iran and Russia. Economists offer various options to address the crisis, which has affected cotton processing enterprises. Firstly, the government should assist in establishing cooperation between processing enterprises and cotton growers. In particular, during the planting season, the enterprises could make prepayments to farmers, so that they could use these funds to purchase fertilizers, seeds, fuel and spare parts for agricultural machinery. According to Agriculture Minister Kasym Kasymov, difficult access of farmers to financial resources, lack of quality seeds, agricultural equipment and innovative technologies are among the industry’s problems. According to the Ministry of Agriculture, this year due to high interest rates on loans, financing of the cotton industry has dropped significantly. This has influenced the course of the sowing campaign. Currently, 164,500 hectares of land, which is 90% of the plan, have been sown with cotton in Tajikistan. The plan has been implemented in all cotton growing regions of the country, except for the Khatlon region where 101,200 hectares of land, which is 83.5% of the plan, had been sown. Bad weather, the destruction of cotton fields by recent floods, and the delay of rail wagons with fuel in Uzbekistan caused the lag in schedule in the Khatlon region. Cotton fields in some parts of Kulyab zone of the Khatlon region, washed away by recent floods, will be used for growing other crops. Farmers have already got maize seeds for sowing.

4. Uzbeks switching from gasoline to gas fuel (Uzbekistan, June 17, 2010-issue 621) By Dilshod Ashurmatov

TASHKENT (TCA) — With the increasing shortage of gasoline, Uzbekistan has intensified its national program to switch part of the country’s motor vehicle fleet to gas fuel. However, the implementation of the program may clash not only with the interests of existing gasoline stations owners and oil suppliers, but also exporters of hydrocarbons.

Because of the shortages of traditional fuel (gasoline) at gas stations, especially noticeable in the early 2000s, the Uzbek government had to replace gasoline with gas. In 2007, the government adopted a program worth US $200 million to switch part of motor vehicles to gas fuel. The program plans to switch 198,000 vehicles from gasoline to liquefied and compressed gases by the end of 2012. With an average 30% annual increase in Uzbekistan’s motor fleet, the percentage of vehicles using new fuels would increase to 16%. 138 gas filling compressor stations (GFCS) with a total capacity of 708 million cubic meters of compressed gas and 952 gas filling stations (GFS) with a total capacity of 476,000 tons of liquefied gas will be built throughout Uzbekistan by the end of 2012. During the program’s implementation, a total of 71 GFCS and 359 GFS have been put into operation. Currently, about 10% of all vehicles – 2.3 million – run on gas. Analyst Sergey Konyukhov believes that it is necessary to develop a market of cost-effective gas fuel in Uzbekistan. “The government has developed a program which aims to attract serious investment in this segment. With increasing number of filling stations, there will be more people willing to switch to this type of fuel,” he said. In February, Korea’s Kogas gas corporation and Kolon signed an agreement with the Uzbek national oil and gas company Uzbekneftegaz to establish a joint venture for the construction and operation of a GFCS network in Uzbekistan. The project, estimated at $50 million, includes the construction of 30 GFCS in all regions of the country. The project is meant for four years. To ensure regular supply of all component parts for the project, Uzbekistan has set up a joint venture, UB Energy, with Korea’s Blitix Co. Ltd, to produce equipment and automobile gas tanks. However, experts believe that the program may confront not only the interests of existing gas stations owners and oil suppliers, but also of hydrocarbon exporters. According to the Uzbekneftegaz, the number of vehicles retrofitted for gas fuel is growing by 10% annually. The reason for switching to gas fuel is its cost efficiency. According to analyst Zakirjan Salimov, investment in gas stations construction is a profitable business. Experts say it is better to fill cars with a short monthly run with propane-butane at GFSs and cars with longer run with methane at GFCSs. For long-run vehicles, the purchase of gas equipment pays back faster — up to two years on average. However, there is a sort of inconvenience — heavy gas cylinders, whose content is enough only for 200-250 kilometers of road. Western manufacturers try to solve the problem by using more durable composite materials instead of metal. With all obvious advantages of alternative fuel, only the government is now interested in the construction of new gas-filling networks. New members of this market restrict themselves to running 2-5 filling stations. "Attempts to introduce gas filling stations in the Soviet Union were unsuccessful," said Ilkhat Tushev, an analyst at Central Asia Investments. He believes that the problem was not only in low prices for gasoline at that time, but mainly in the impossibility of stealing fuel for its subsequent resale bypassing the state. Most gas stations had been sold to private owners in the mid-1990s on condition that they will only sell imported gasoline. "Now as the state makes gas stations’ owners sell imported gasoline at fixed prices, they compensate for their losses by underfilling gasoline," believes Tushev. In his opinion, the situation compels them to quietly boycott the construction of gas fueling stations. Moreover, according to analyst Dilmurad Kholmatov, reducing the import of gasoline, and oil, does not meet the interests of business elites supervising this import. Experts believe that in order to make gas filling stations profitable, the number of cars using gas fuel must exceed 20% of the total motor fleet. To achieve this, Uzbekistan has neither technology nor resources. By 2012, the GM Uzbekistan JV will completely switch the production of Damas minivans to the use of liquefied gas. However, as Uzbek-made Isuzu buses are pushing Damases out of the commercial passenger transportation market, this goal will hardly be achieved. Another issue is the supply of raw materials. Under the program, expanding the GFCS network will increase domestic consumption of methane from 280 million cubic meters to one billion cubic meters per year, which is comparable with the gas export to neighboring countries. As for liquefied gas, the domestic demand for this fuel will rise from 210,000 tons in 2007 to 638,000 tons by 2012. According to analyst Anvar Jumayev, the above does not fit in with the development program for natural gas processing. In particular, projects to increase liquefied gas production in Uzbekistan will bring its production from 240,000 tons in 2009 to 640,000 tons by 2013. Given that about 50% of this total is meant for export, it is obvious that the gas filling stations market may be affected not only by a lack of natural gas but also by a clash of interests in this sector.

For further information: The Times of Central Asia