CBS Weekly Review: Turkmen and Uzbek Intrigues

The main financial markets in the CBS region have of course been starkly affected by the market turmoil of recent days. Kazakh and Ukrainian equity and fixed-income markets have roughly tracked the roller-coaster ride of the Russian markets, while Turkey has followed a similar course but with far less volatility. In the weeks ahead we will be looking more closely at the implications of the new world of tight credit for these markets, and for specific sectors within them.

This week we take a quick look at some recent events affecting some of the more obscure countries of the CBS region – obscure at least in the sense that they are not very integrated into global capital markets. September’s financial crisis has passed without much notice in Turkmenistan or Uzbekistan, but other events of significance have picked up the slack.

Turkmenistan: What lies behind the Battle of Khitrovka?

The internal politics of Turkmenistan are typically uneventful. Not much of note has happened in the past decade apart from the death of the late President Niyazov in December 2006, which was followed by a surprisingly stable transition of power to the current ruler, Gurbanguly Berdimukhamedov. By keeping a tight lid not only on democracy but on any form of political dissent, Turkmenistan has managed to create a political system which appears, to the naked eye, extremely stable.

Thus it was a shock when reports started to trickle out earlier this month that what was described as a "shootout" had taken place in a suburb of the capital Ashgabat. There have been various conflicting reports in the media, but we can state a few things on the basis of information from our own trusted sources. What happened can hardly be described as a shootout: It was in fact a pitched battle lasting for a few days in which dozens were killed. The fighting, which started on 9 September, took place in a zone of new construction in Khitrovka, an unappealing suburb to the north of Ashgabat which is known as a centre of the drugs trade. Government forces, eventually including numerous troops, armed personnel carriers and light artillery, prevailed only after sustaining significant losses, much of it from what appeared to be professional sniper fire.

In such dramatic circumstances even the secretive Turkmen government felt obliged to make a public statement. Official statements on 15 and 16 September referred to a successful "operation to disarm and detain" a "criminal group involved in illicit drug trafficking" and acknowledged that some law enforcement officials had been killed in the process. Not surprisingly given the government’s poor record for transparency, its explanation has been widely doubted, and other theories – many focusing on some sort of armed Islamic insurgency – have circulated.

All explanations related to any sort of anti-government uprising, Islamic or otherwise, have no evidence to support them and can be dismissed out of hand. To the extent there is any organized opposition within Turkmenistan, they are certainly not heavily armed. In fact the core of the official line – that this was a battle with drugs traffickers – is most probably true.

That being said, there is a lot more to this story than has been revealed by official statements. It has been well understood for years within the drugs enforcement community that Turkmenistan emerged during the Niyazov era as a major transit country for narcotics from Afghanistan, with Turkmen law enforcement bodies (specifically the Ministries of Internal Affairs and National Security) acting as de facto partners in this business.

Upon Niyazov’s death the heads of these two ministries were part of the small group that elevated Berdimukhamedov (at that point not a particularly powerful figure) to the presidency. However the new president soon turned against his backers, sacking both ministers and installing his own people. Apparently, however, the president was unable to reach deep enough to touch the pre-existing drugs trafficking arrangements. This prompted Berdimukhamedov in April 2008 to create a new agency called the State Committee for Drug Control which took over the narcotics-related responsibilities of the two relevant ministries.

The Battle of Khitrovka seems to have been a manifestation of this bureaucratic fight, although why exactly a sizeable group of heavily armed traffickers was hanging around in a construction zone remains mysterious. Perhaps the Internal Affairs and National Security Ministries set up some of their erstwhile partners in order to demonstrate to the president that his new agency was out of its league; perhaps this simply a case of the new State Committee (with military backup) flexing its muscles. I won’t offer any opinion on a question that will be of keen interest to some observers: whether we are witnessing a real crackdown on drugs trafficking in Turkmenistan or simply a struggle for control of a lucrative business.

However, one thing is more or less clear: this should not be taken as a sign of political instability in Turkmenistan, or of any fundamental weakness of the Berdimukhamedov government. At worst this is a particularly nasty outbreak of the sort of bureaucratic fighting, usually invisible, that tends to be particularly acute in authoritarian states like Turkmenistan. It is however a useful reminder that Turkmenistan is not the monolithic one-man state that it was under Niyazov. Berdimukhamedov’s position at the top of the system is for now undisputed, but beneath him a fight for political power and economic rents is raging among various different clans and factions. The president can mediate this fight but he cannot fully control it. This makes Turkmenistan a more complex place to do business that it once was – and it suggests that Berdimukhamedov’s very limited efforts at reform and modernization of the political and economic system are guaranteed to be halting at best.

Uzbekistan: The succession struggle is quietly underway

With 27 million people, Uzbekistan is Central Asia’s sleeping giant. It has enormous economic potential, due largely to the fact that the economic policies of its government have singularly failed to tap this potential over the course of the past 17 years. It is correctly taken for granted that nothing major will change in Uzbekistan until its president Islam Karimov leaves the scene. However, what may come after Karimov – and whether it is likely to lead to a successor who pushes market reforms and begins opening up Uzbekistan’s economy – has tended to be a topic for idle speculation rather than informed commentary.

The widespread perception (for which there are some hints of evidence) is that Karimov hopes to engineer the succession of his 36-year old daughter Gulnara Karimova, who currently holds the title of Deputy Foreign Minister. The challenges to this dynastic succession are seen to be twofold. The first, Karimova’s deep unpopularity, may not be very relevant, since a democratic transition of power is not in the cards in any case. The second problem is more serious: Rumours of fierce opposition to Karimova from the upper reaches of the political establishment, due mainly to the hostility engendered in recent years by the rapid and indelicately managed growth of her own business empire inside Uzbekistan, which has left less and less scope for other senior officials to enjoy the economic benefits of power.

One recent episode provides for the first time some tangible evidence of opposition to Karimova from the most powerful institution in Uzbekistan, the National Security Service (known as the SNB). At the start of September a supposed "defector" from the SNB named Ikrom Yakubov appeared in London and began giving interviews in which he claimed direct knowledge of the Uzbekistan government’s responsibility for various crimes. Many of Yakubov’s allegations were old news but a few of them were potentially quite damaging (for instance, an allegation that President Karimov had ordered the murder of a UN official responsible for monitoring Uzbekistan’s compliance with anti-narcotics cooperation programs).

Yakubov also gave his support to long-standing (and unverifiable) rumours that Karimov is dying of chronic leukaemia – and he offered one more or less new piece of information: that the plans to ensure Gulnara Karimova’s succession are in place, and that her succession will be ensured by a special elite militia under the command of a notorious Tajik warlord, Mahmud Khudaiberdiev.

It is pointless to wade too deeply into this information morass, but it can be said with certainty that Yakubov is telling tales. It has been confirmed that he was indeed a SNB agent, but his Zelig-like stories of being in Karimov’s presence as the president gave various orders as far back as 2002 are extraordinarily unlikely to say the least (particularly given that Yakubov is just 27 years old).

What, then, lies behind his sudden appearance and his allegations? They answer can be seen in the fact that he has linked most of the crimes he alleges (including relatively obscure incidents that would have been handled at a lower level) directly with President Karimov while generally avoiding, in both public interviews and private conversations, any discussion of orders given or deeds carried out by his fellow officers in the SNB. What we are in fact seeing is almost certainly a shot across Karimov’s bow by the SNB – a clear signal that the SNB and its powerful boss, Rustam Inoyatov, do not want the president (dying or otherwise) to pass the throne to his daughter, and that they have the means and the inclination to do serious damage to Karimov.

All of this makes very clear that a smooth transition from father to child, in the style of Azerbaijan or Syria, is not at all likely. It cannot be ruled out that Karimova could succeed her father, but it is not at all a sure thing, and in any case it would not happen without a fight. However the idea that the SNB might play a decisive role does not bring much clarity either: Inoyatov himself is a Tatar rather than an Uzbek and thus probably not himself a candidate for the presidency.

The bottom line of all of this for investors, however, is negative: An contested transition of power, whenever it comes, is not likely to bring to power a stable regime for whom economic liberalization is a top and early priority.

Best regards,
Laurent Ruseckas
Director, Eurasia Research
Trusted Sources

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