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Central Asia: Islamic Militant Uprisings Jeopardize Investments

Boston, 3 September 1999 (RFE/RL) -- The security crisis in Kyrgyzstan has added a new dimension to Central Asia's problems, posing a difficult choice for the future of foreign investment, experts say.

An uprising by Islamic militants has sparked reactions by neighboring countries from Kazakhstan to Turkmenistan, which fear that similar outbreaks on their territories could disrupt their authoritarian styles of rule.

Analysts say it is too soon to tell whether the violence will lead to further delays in critical foreign projects including oil and gas pipelines, or whether fear of instability will convince national leaders to compromise on other issues that have previously stood in the way.

"It does complicate the pipeline question," said Julia Nanay, director of Petroleum Finance Company in Washington, an industry consulting firm. "It's not clear whether it will drive countries together to make things work, or whether things will fall apart and nothing will work."

The fear is that the governments of the five Central Asian nations may be dealing with forces similar to those that have turned Afghanistan into a virtual desert for development, despite its rich potential as a transit country for gas exports to Pakistan and India.

Although the parallels may be limited, there appear to be similarities between the emergence of hostage-takers in Kyrgyzstan and the rise of Afghanistan's Taliban from a tactical standpoint. Both have been driven by Islamic fundamentalism that defies repression, and both have crossed national borders to further their goals.

The idea that Uzbek insurgents could move east into Kyrgyzstan has already alarmed Turkmenistan, although it lies far to the west. On Wednesday, the government of President Saparmurat Niyazov announced that Turkmenistan will tighten its borders with Uzbekistan and Kazakhstan, as well as on the Caspian Sea.

The government insisted that the move was not prompted by the fighting in Kyrgyzstan, although there seems to be little doubt about the general cause. Turkmenistan only has to look farther west to see a much greater clash between Russia and cross-border forces from Chechnya in Daghestan.

The issue of borders has special relevance for pipeline planners because of the oil industry adage that both risks and costs multiply every time a border must be crossed. Transit fees and security are two major problems holding pipeline projects back.

As with Turkey's earthquake last month, the militants in Central Asia have placed a new burden on problems that were already complex enough. The question is how governments will respond.

The initial reaction has been to turn toward Russia for security cooperation, a remarkable development, particularly for defiant Uzbekistan. With small armies and vast areas, the Central Asian nations may have little choice. If their pipeline projects with the West had been completed, they might seek security from Western structures like NATO. But for now, there seems to be little chance of Western help.

But Russia's poor success rate in dealing with Islamic separatists may ultimately provide little comfort to Central Asian nations. Russia is also likely to exact a high price in terms of bending the region's pipeline options toward its territory in return for protection. The issue could be touchy for Turkmenistan, which stands on the verge of building a trans-Caspian gas pipeline to the west. The new factor in the power struggle over export outlets could lead to further delays.

The alternative is to accelerate progress on issues that have so far stalled pipeline development. One example would be the Caspian border dispute between Turkmenistan and Azerbaijan, which has frustrated an agreement on the trans-Caspian gas line. While the two countries have wrangled, Azerbaijan has gained the time to find gas in its own sector, threatening to displace Turkmenistan as a supplier to Turkey.

Farther west, Turkmenistan could find an example in Azerbaijan where President Heydar Aliyev has pursued private personal talks with Armenian President Robert Kocharian on settling the dispute over Nagorno-Karabakh.

Turkmenistan has recently signaled that it may make concessions on its own border demands in the interest of completing a pipeline pact with Baku. Logic suggests that there may be more reason now to ease investor uncertainty, now that graver security problems loom.

But the Central Asian nations may also be especially vulnerable to the recent threats because of their reliance on one-man rule. The region has many problems but only a few decision-makers. In the coming weeks, their fears may drive them together, if their ambitions do not drive them apart.