By PROFESSOR STEPHEN BLANK

Russia’s aspirations in Central Asia prevent it from acting as a benign hegemon who helps those states to make more liberal economic and political decisions. Since Russia’s ambitions are rooted in its own deformed political economy and politics they thus inhibit such processes in Central Asia; Moscow’s pursuit of hegemony there is a surrogate for, or at times a defense against, liberalizing reforms.

Moscow repeatedly sponsors closed economic and security blocs for Central Asia and explicitly invokes its superior market position as a means for doing so. Russia’s 1999 official strategy for relations with the E.U. submitted by then Prime Minister Vladimir Putin stated that,

Russian specialists also have developed a plan to reestablish a common CIS energy space including and threatening the Baltic states, and, of late, the three South Caucasian Republics. (2) The policy of swapping the debts of CIS members’ firms for Russian equity in their energy and strategic sectors also emerged after 1999. Today this policy is implemented through the efforts of states and corporations, like Unified Energy Systems (UES), to advance their own and Russia’s strategic and economic policy. It is no accident that the chief of the UES, Anatoli Chubais, now advocates "liberal imperialism," while running on the electoral list of SPS, a supposedly liberal but non-imperial party. The swaps of debts for equity aim at achieving an integrated electric grid, and integration of defense industries, national airlines, gas pipelines, etc. which then become transmission belts for reasserting Moscow’s economic leadership in the CIS. Since no major transaction occurs without state approval these swaps mask hegemony behind the rhetoric of regional integration and cooperation.

Leading Russian spokesmen admit openly that the energy policy’s purpose is primarily political. (3)

Moscow recently suggested to the E.U. that all Eurasia become a closed trading region thereby restricting the potential trade opportunities of other CIS members. (4) It also proposes making the ruble the CIS’ currency. As a precondition for accepting Baltic membership in the E.U., Russia demanded compensation from Brussels for the trade penalties Moscow claimed it would endure as a result of Baltic membership in the Union. The Kremlin evidently still seeks compensation from Brussels for losses that further E.U. expansion might entail for Russia. (5) Meanwhile virtually every East European government reports that Russian special services, embassies and energy companies collude with members of organized crime to obtain commanding positions in their economies and to buy compliant politicians. (6)

Moscow’s efforts to compel CIS regimes to ship oil and gas exclusively through Russian pipelines and to organize a CIS gas cartel under its leadership are well known. It already controls a large and growing amount of Kazakhstan’s future energy shipments and Gazprom is making deals with every CIS state to monopolize its gas distribution. Russia’s recent deal with Turkmenistan starkly reveals Moscow’s modus operandi, including the open participation of organized crime syndicates in these transactions. Theoretically regional cooperation might maximize favorable returns for all CIS states; Moscow however, opposes cooperation except on its hegemonic terms, preferring exclusively bilateral ties with states that will support it behind a facade of multilateral cooperation which actually disguises its hegemonic objectives. Although this policy originated under President Boris Yel’tsin, Putin has honed it. This sharpening coincides with the visible improvement in Russian foreign policy’s overall consistency and cohesion. (7)

Neither will Putin support democratization abroad. He has clearly awarded a rising role to the SVR (Foreign Intelligence Service) to coerce and undermine CIS regimes, including support for criminal enterprises linked with the SVR’s activities on behalf of energy interests like Gazprom. (8

Moscow’s recent gas deal with Turkmenistan exemplifies Russia’s approach: A large quantity of Turkmen gas will be shipped through Russia to Ukraine by a little-known gas company, TransUral, whose major stockholder, Semyon Mogilevich, is one of Russia’s most notorious criminal kingpins. The Trans-Ural firm will earn from $320 million to $1 billion from this deal alone. And all the firms involved, including Gazprom, already are contributing to Putin’s reelection.

Russian analysts postulate five goals in Central Asia: (9)

•Promoting stability to prevent threats from the South;

• Fully developing regional transit capabilities to expand trade with China, India, and Iran;

•Preserving a unified Central Asian economic space;

•Using the region’s geostrategic potential to promote Russia as an international and regional great power;

•Securing foreign governments’ recognition of Russia’s special role in Central Asia..

To achieve these objectives they recommend that Russia:

Putin’s government appropriated much of this program, launching efforts to bring these states into a single defense and security organization under its exclusive auspices to exclude the West and particularly the U.S. What has been publicised recently of Russia’s new Security Doctrine includes many of these goals and adds the threat of preemptive military strikes to further their achievement.

However, this is not the whole story. As Russian energy policy in Northeast Asia reveals, energy policy is both highly competitive and contentious. Today the energy companies and the Energy Ministry have become vehicles for Russia’s hegemonic "integrationist policies." Indeed, some legislators and officials insist that Russia should own up to 30% of CIS states’ energy companies, giving Russia decisive leverage over them. While this bureaucratic or factional struggle exemplifies continuing problems in Russia’s foreign policy coordination, it is quite unlike the chaotic policymaking that typified the Yel’tsin era. Meanwhile, energy policy aims at perpetuating the oligarchical illiberal capitalism of the 1990s and the closed political economic system that Putin is consolidating. Thus, Russia supports the authoritarian status quo in Ukraine and Central Asia and opposes anything that strengthens these states’ economic or military independence.

Russian spokesmen openly regard Central Asian energy as a competitor which must be suppressed. The President of Yukos, Mikhail Khodorkovsky (in comments made before his recent confrontation with the Putin admististration), insists that Russia must "push aide" other producers by expanding its pipeline network through which to take their oil. Since Caspian oil is cheaper to produce, Russia cannot compete with it on world markets. Russian policy aims at restricting Central Asian production and infrastructure development lest Russian oil and gas companies be shown as less competitive given their high cost, wasteful monopolistic structure, and dilapidated infrastructure. (10)

Foreign sales of Central Asia’s abundant energy deposits could restrict Russia’s competitive profile in key markets, particularly India, Japan, China, and South Korea which are widely expected to surge through 2020 with vastly increased rates of demand for energy, thus creating a catastrophe for Russia’s economy. Hence the quest for a Moscow-led, OPEC-like gas cartel that limits Central Asia’s gas infrastructure only to outlets compatible with Russia’s.

Geopolitically Russia aims at unilaterally securing Central Asia against any American presence lest Central Asia’s westward energy orientation precede a similar defense orientation. Then, alliance with and bases for the United States and NATO will be deemed by Moscow to threaten Russia’s vital security, political, and commercial interests. As Yevgeni Verlin writes,

Moscow sought to prevent Central Asian states from building corridors to the Indian Ocean (the Tedjen-Serakhs railway) and any transportation axis connecting Turkmenistan and Uzbekistan via Afghanistan and Pakistan. Likewise it has aimed, with mixed success, to obstruct the E.U.’s new "silk road" or TRACECA and INOGATE projects, which plan trade and pipeline routes directly from Europe to Central Asia, bypassing Russia.

Moscow also obstructed Azerbaijan’s drive for energy and political independence, strongly opposing the Baku-Ceyhan pipeline project with a proposed extension to Kazakhstan and possibly Turkmenistan which entailed building pipelines under or across the Caspian Sea that would give all those states options other than Russia and Iran. Likewise, Moscow helped facilitate the abortive coup in Turkmenistan in late 2002 to sideline a planned gas pipeline from Turkmenistan via Afghanistan to the Indian Ocean and Pakistan, and possibly India.

Moscow has few options since it cannot offer these states tangible alternatives to U.S. economic and strategic benefits, either for development or against terrorism. This has suggested a policy of attempted coercion without the necessary means either to coerce or to reward adherents.

Since infrastructure issues are strategically vital, Russia’s Central Asian policies are also conceived strategically to overcome past economic failure throughout Russia’s energy producing regions including the Far East. Infrastructural issues unite Russian interests in Central and East Asia. Local and central leaders understand that Russia can overcome Siberian and Far Eastern afflictions only by robust cooperation with both Central Asia and East Asian states. Foreign observers also share this outlook. In 1998, the Kazakh political scientist Nurbulat Masanov wrote that,

Therefore competitive failure in East Asia seriously weakens Moscow domestically and in Central Asia. Thus, Russia tries strenuously to revive cross-regional trade between these areas. Moscow fully grasps the threat posed by its economic failures in these regions and by a resurgent China. For, if Russia cannot become "a worthy economic partner" for Asia and the Pacific rim, Deputy Prime Minister Aleksei Kudrin warned that, "China and the Southeast Asian countries will steamroll Siberia and the Far East." That would also happen in Central Asia. Consequently, Russian energy policy betrays a definite reserve, if not suspicion, towards giving China too much influence in Russia or Central Asia.

Not surprisingly Putin outlined in 2000 a comprehensive plan to connect Europe and Asia through projected transformation of Russia’s infrastructure. He stressed Russia’s "natural" role as a bridge and hub linking Asia, Eurasia, and Europe through joint development of major projects that transcend energy, electricity, and power engineering, to include rail, sea, air, and space satellites and communications. Putin warned that failure to develop Russian Asia meant Chinese, Korean, or Japanese hegemony there. Moreover, this transportation network must be unified because "a single transportation backbone should span Russia if it wants to develop as a unified, strong, and independent state." He also announced that problems of the development of Siberia on the state agenda were, "key, pressing, [and] strategic ones." (13) But the importance of Moscow’s programs transcends their significance for Russia’s East Asian position to comprise part of the grander design to exploit its geographic location to tie together commerce with Europe, Central, South, and East Asia.

Ultimately these projects also connect with Russian ambitions for North-South corridors linking Russia, Iran, India and Central Asia. This grand design can materialize only with massive foreign investment and support to make Russia the hub of a vast network of Eurasian inland trade and transportation and materially stimulate the growth of inner and Russian Asia, greatly strengthening Moscow’s international political standing. Russian officials see its railroad net as a key link in future East-West transcontinental trade routes, claiming that deliveries through the projected North-South Corridor from Asia to Europe, which would intersect with the East-West routes would take 20 days, as opposed to shipments through the Suez Canal that take 45 days. Allegedly the cost per container will fall by $400-500, giving Moscow hundreds of millions of dollars from transit charges, taxes, and customs revenues while also effectively competing with the Suez Canal and the EU’s TRACECA and Silk Road projects that bypass Russia. One assessment of this projected corridor claimed in 2000 that it would tie together Finland, the Baltics, Russia, several Gulf states, and India.

But while the vision is grandiose, policymakers must confront the real problems that hinder completion of this project and realization of the other partners’ interests: cash shortages, deficient policymaking structures and lack of infrastructure.

Equally, if not more, consequential are the motives stemming from considerations relating to Russia’s domestic political economy. Gazprom and the government’s recent deal with Turkmenistan exemplifies this fact. Russia’s efforts to restrict and control Turkmenistan’s gas exports and obstruct competition with Gazprom are long-standing. Meanwhile Gazprom overtly and successfully refused to reform itself, undoubtedly exploiting and justifying its utility as an instrument of state policy. To evade reform while serving the state’s interests it has made deals to monopolize gas distribution and pipelines for virtually every CIS member. Thus it exploits and seeks to perpetuate Central Asian regimes’ dependence on Russian pipelines. Moreover, it continues the post-1998 pattern of Russian industry to maintain its predatory position in the Russian economy by continuous redistribution of former Soviet property outside Russia, a system that depends on nonmarket state interventions on behalf of Russian corporations.

The Turkmenistan deal reflects both these issues and the larger linkages of Russian domestic and foreign policy. After facilitating an abortive coup in November 2002 to impede Turkmenistan’s energy independence by means of exports through Pakistan to the Indian Ocean, Moscow displayed its power to Turkmenistan and successfully gained the right to sell Turkmen gas, which now lacked other pipeline options, at concessionary terms in return for the strengthening of Sapirmurad Niyazov’s dictatorship. (14) While Turkmenistan thus sold its gas at concessionary terms to Russia through Gazprom and Trans-Ural, Gazprom then sold it back to other Central Asian states.

This procedure offers Gazprom and Russia multiple advantages. Russia can buy Turkmen gas at half price giving it 100% profit before expenses. Gazprom also can continue to sell gas in the Russian domestic market for $21.50 per cubic meter, giving Russian industry a subsidy of about $60 per cubic meter of gas consumed. Since domestic oil costs $6-8 a barrel, Russia is using its energy reserves not to develop industry, but to subsidize its obsolescent industries. The Turkmen deal further allows Gazprom to delay multi-million dollar investments in northern Russian gas fields while cost gas. Turkmen gas thus ensures subsidization of cheap Russian gas to Central Asian states, which cannot pay full cost in cash, so Ashkabad loses billions in revenues as well. Moscow, not Western firms or Turkmenistan, now controls the marketing and transport of Turkmenistan’s gas abroad. This, and subsequent arrangements with other CIS governments, mark a giant step towards Putin’s vision of a Russian-dominated gas cartel.15

Thus Russia’s domestic pathologies drive policy to maintain anti-liberal and anti-democratic regimes and policies in Central Asia and the CIS and to insinuate organized crime into energy policy. These sinister policies cannot but cause alarm about Russia and the future of the CIS, especially in light of Russian analysts’ claims that, at the recent G-8 meetings in Evian, "Russia received responsibility for the post-Soviet space." Moscow now supposedly is responsible for ensuring no CIS government becomes a failed state. Sadly, if the Russian claim is true, the G-8 made the wrong move. Russia’s current policies cannot but lead to failed, anti-liberal, and backward states throughout the CIS. While this may be hegemony, it is hardly benign.

1. Strategiia Razvittia Otnoshenii Rossiiskoi Federatsii s Evropeiskim Soiuzom na Srednesrochnuiu Perspektivu (2000-2010) Diplomaticheskii Vestnik, November, 1999 (www.ln.mis.ru/website/dip_vest.nsf) items 1.1.,1.6, and 1.8.2000, cited in Hannes Adomeit and Heidi Reisinger, Russia’s Role in Post-Soviet Territory: Decline of Military Power and Political Influence, Norwegian Institute for Defence Studies, Forsvarstudier No. 4, 2002, p. 5, "Putin Plans Russian ‘EU,’" Jane’s Intelligence Review, May 16, 2003.

2. Ariel Cohen, "Don’t Punish Latvia," Washington Times, May 5, 2003; Sabrina Tavernise, "Russia Pressures Latvia to Gain Control Over Oil Transit: Latvia’s Oil Routes Dry Up as Russia Alters Flow," New York Times, January 21, 2003; and Gregory Gleason, "Russia and the Politics of the Central Asian Electric Grid," Problems of Post-Communism, L, No. 3, (May-June 2003), p. 43.

3. Mikhail Margelov, "Russia’s National Interests in the Caspian Region," Yelena Kalyuzhnova, Amy Myers Jaffe, Dov Lynch, and Robin C. Sickles, Eds., Energy in the Caspian Region: Present and Future, New York: Palgrave, 2002, p. 207.

4. "Putin to Promote Common Market With EU," The Russia Journal, May 6, 2003.

5. Ibidem.; Tavernise; Cohen.

6. U.S.-Slovakia Action Commission: Security and Foreign Policy Working Group: Center for Strategic and international Studies, and Slovak Foreign Policy Association, Slovakia’s Security and Foreign Policy Strategy, 2001; Czech Security Information Service, Annual Report 2000, (www.bis.cz/eng/vz2000/vz2000_10.html), conversations with U.S. diplomats and Eastern European analysts, Washington, D.C., September 6-7, 2001.

7. Mikhail A. Alexeev, "The Challenge of Relations with Former Republics," Stephen Wegren Ed., Russia’s Policy Challenges: Security, Stability, and Development, Armonk, NY: M.E. Sharpe & Co., 2002, pp. 39-55.

8. Stephen Blank, "Assassins in Gray Suits," Marco Polo Magazine, Acque et Terre, No. 2, 2003, pp. 3-7; Stephen Blank, "Pipelines: Conduits for Terrorism," Asia Times Online, March 5, 2003.

9. Dmitri Trofimov, "Russia and the United States in Central Asia: Problems, Prospects, and Interests," Central Asia and the Caucasus, No. 1 (19), 2003, pp. 74-79.

10. Mikhail Khodorkovsky, "Stabilizing World Oil Markets: Russia’s Role in Global Recovery," Carnegie Endowment for International Peace, February 28, 2002 (www.ceip.org/files/events).

11. Yevgeni Verlin, "The Russian Strategy: Tactics of the Roving Forward," In the National Interest, II, No. 11, March 19, 2003.

12. Cited in Genrikh A. Trofimenko, "The Central Asian Region: US Policy and Problems with Oil and Gas Exports," Moscow, Ssha, in Russian, No. 11, November, 1998, FBIS-SOV, October 6, 1998.

13. Quoted in Nodari A. Simonia, "TKR-TSR Linkage and Its Impact on ROK-DPRK-Russia Relationship," The Journal of East Asian Affairs, XV, No. 2, (Fall-Winter 2001), p. 184.

BBC Monitoring, April 10, 2003 via Lexis-Nexis and "Turkmen-Russian Gas Deal Detailed," Neytralniy Turkmenistan (electronic version), April 16, 2003 via Lexis-Nexis.

15. Ariel Cohen, "The Putin-Turkmenbashi Deal of the Century: Towards a Eurasian Gas OPEC?", Eurasia Insight, May 2002 (www.eurasianet.org).