Karimov-Nazarbayev Rivalry Pervades Bilateral Summit
Richard Weitz

Kazakh leaders see establishing good ties with neighboring Uzbekistan as essential for advancing their regional integration agenda. In March 2006, President Nursultan Nazarbayev observed, “The geopolitical situation in our region and the future of integration processes among our neighbors depends on Kazakh-Uzbek relations.” The April 22-23 summit between Nazarbayev and Uzbek President Islam Karimov, however, demonstrated that Uzbekistan will not soon endorse Kazakhstan’s multinational initiatives.

BACKGROUND: Since Kazakhstan and Uzbekistan became independent in 1991, their governments have signed approximately one hundred bilateral agreements. The most important include the Strategy for Economic Cooperation between Kazakhstan and Uzbekistan for 2007-2016 and the Program of the Economic Cooperation between Kazakhstan and Uzbekistan for 2006-2010.

Yet, relations between Uzbekistan and Kazakhstan have long been strained. Many of their bilateral agreements have been implemented partially, if at all. The two countries, along with their presidents, have become perennial competitors for regional primacy. Uzbekistan has the largest population and strongest military, but Kazakhstan enjoys the richest natural resources (especially oil) and most successful economy.

Kazakhstan has become Uzbekistan’s major trading partner, accounting for 8.4% of its foreign trade. According to the latest figures, trade between the two countries reached $1.4 billion in 2007, a 60% surge over 2006, but still below the level desired by the two countries.

Furthermore, Uzbek and Kazakh investors have established a number of joint business ventures. At present, 167 firms in Uzbekistan are financed in part though Kazakh capital, whereas 94 joint ventures in Kazakhstan involve Uzbek partners. These joint ventures operate in such sectors as food, pharmaceuticals, construction, chemicals, and manufacturing. In Uzbekistan, Kazakh capital is currently concentrated in the cotton fiber production, construction, and chemical industries.

Kazakhstan’s southern regions traditionally rely on Uzbek natural gas, especially in the winter, both for heating and for electricity generation. Under the terms of a recent deal, the Uzbek state energy company Uzbekneft has agreed to supply 5 billion cubic meters of natural gas to southern Kazakhstan in 2008. The two countries are engaged in various multinational projects that would increase the flow of gas from and through their territories to Russia, China, and other countries. Kazakh and Uzbek officials have recently coordinated their energy polices to induce Russian firms to pay more for their oil and gas exports, which Russian middleman often resell to European consumers with a huge markup.

IMPLICATIONS: Nonetheless, the similar economic profile of both countries, along with their excessive customs duties and border controls, unduly constrain their bilateral commerce. Kazakh business managers complain about an unwelcome investment climate in Uzbekistan, especially compared with the opportunities available in other Eurasian countries. “Unlike Russia, Kyrgyzstan, and Georgia, where Kazakhstan`s economic presence has been expanding, the Uzbek government is closed to its neighbor,” observed one Kazakh entrepreneur who has chosen to make his fortune in Bishkek rather than Tashkent.

Another complication is the large number of illegal Uzbek immigrants that work in Kazakhstan, especially at urban construction sites and in the cotton fields of southern Kazakhstan. Tashkent and Astana have also found it difficult to manage the Aral Sea, which borders both countries. Inefficient use of the Syrdarya and Amudarya rivers, that feed the sea, for fertilizing cotton production has led to a disturbing shrinkage in its surface area, increasing harmful atmospheric dust. Nazarbayev has called for establishing a water energy consortium among Central Asian countries to help manage such problems.

On the other hand, Kazakhstan and Uzbekistan do share interests regarding regional water management. The two countries use Central Asian water supplies primarily to irrigate crops as well as for direct consumption. By contrast, Kyrgyzstan and Tajikistan seek to convert the region’s water resources into electricity, some of which they could sell to neighboring countries.

The two countries’ interests seem to overlap most on issues of national security, especially countering threats from Muslim extremists. When they met most recently on April 23, 2008, Nazarbayev affirmed the commitment of both countries to “combine efforts in the fight against extremism and drug trafficking from Afghanistan.” During Nazarbayev’s March 2006 state visit to Uzbekistan, he told his Uzbek hosts that they “defended the peace ... not only of Uzbeks, but also Kazakhs, Kyrgyz and Tajiks” by confronting “trained extremist groups” in Andijan the previous May. A few hours after Karimov concluded his most recent visit to Kazakhstan, moreover, the Kazakh authorities arrested an asylum seeker whom the Uzbek government had accused of participating in the Andijan events.

Even so, Kazakhstan has not always followed Uzbekistan’s lead on these issues. In March 2006, Kazakh authorities allowed one of Karimov’s fiercest domestic opponents, dissident Imam Obidkhon Qori Nazarov, to leave Kazakhstan for asylum in Europe a few days before Nazarbayev visited Uzbekistan rather than accede to Uzbek extradition requests.

From April 22-23, 2008, President Karimov conducted his first official visit to Astana since September 2006. In a joint media appearance following his talks with Nazarbayev, Karimov observed that, “Kazakhstan and Uzbekistan may play a crucial role in solution of a number of principal matters, connected with the stability in the Central Asian region and prospects of its sustainable development.” The two leaders agreed to authorize their governments to draft an agreement on a bilateral free trade zone, which Karimov said would “increase volume of mutual trade significantly” by unifying customs duties and other trade practices of both countries. Nazarbayev noted that, since he visited Uzbekistan two years earlier, bilateral commerce doubled. “Economic integration is growing,” he added enthusiastically, “and it excites us.” A working group headed by the Kazakh and Uzbek Prime Ministers is now drafting the precise terms of the bilateral free trade zone and clarifying how it would integrate with the region’s other multinational economic frameworks.

Yet, Karimov again dismissed as premature the concept of a Central Asian Union, something Nazarbayev has long championed. Before the April 2008 trip, Karimov observed that, “Seeking cheap popularity, some colleagues of mine make high-flown speeches on cooperation and come up with all sorts of slogans. Unfortunately, nothing at all is being done in practice.” The Uzbek president continued to employ rather undiplomatic language even during his sojourn in Astana: “As far as Uzbekistan is concerned, this initiative is unacceptable. I`m saying it right here and now to prevent any further speculations on the matter.”

Karimov justified his objection on socioeconomic rather than geopolitical grounds: “In order to establish a union between the states, their socioeconomic development level and potential should be comparable,” Karimov told the media. “Secondly, policy and directions the countries` leaders work at should be comparable as well.” Karimov also argued that, “Unfortunately, we have too many matters to address yet... all and any alliances are therefore untimely.”

Furthermore, Karimov also surprisingly insisted that Uzbekistan provided more favorable conditions for international business than Kazakhstan, a claim that reflects the often fierce competition between the two countries for foreign investment and international business opportunities. According to Karimov, “international rating agencies place Uzbekistan above Kazakhstan from the standpoint of business,” adding that “no other post-Soviet country could match the preferences businesses enjoy in Uzbekistan.”

CONCLUSIONS: Karimov’s pessimism regarding Nazarbayev’s Union of Central Asian States may reflect the problems the two countries experienced after agreeing to establish a bilateral customs union in 1994. Karimov recalled during his April 2008 trip to Astana that issues with this framework led the two governments to join additional regional economic structures (e.g., the Central Asian Cooperation Organization and the Eurasian Economic Community), which likewise proved largely ineffective. We`ve been through it already,` he remarked to journalists.

Karimov’s opposition also likely reflects longstanding Uzbek aversion to Kazakh-led regional initiatives, which Uzbek leaders perceive as efforts to strengthen and legitimize Kazakhstan’s primacy in Central Asia. At some point, economic imperatives might induce Karimov or his successor to offer greater support for Kazakhstan’s regional integration initiatives, but for the moment Uzbekistan will remain at best an unenthusiastic neutral observer of these endeavors.

AUTHOR’S BIO: Richard Weitz is Senior Fellow and Director of Project Management at the Hudson Institute.