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CAN KAZAKHSTANPROVE HUNTINGTON WRONG?

THE SILK ROAD SUPERHIGHWAYKAZAKH TRANSPORTATION AS GEOPOLITICS

THE TRANS-CASPIAN PIPELINEGEOPOLITICS NEAR AND ABROAD

FINANCIAL INSTITUTIONSTO SUPPORT RUSSIA-AFRICANBUSINESS PROJECTSAN INTERVIEW WITH DMITRY GOLOVANOV

KAZAKHSTAN’S JOURNEYFROM PAST TO FUTURETHE FOUNDATION OF CENTRAL ASIA

THE HYDRA OF THE CASPIAN SEAIRAN’S NAVAL STRATEGY

THE "BRICS BANK"MANY CHALLENGESAND MANY OPPORTUNITIES

CO

NTE

NTS

05

www.moderndiplomacy.euCaspian@moderndiplomacy.eu

PROJECT TEAM

DiMiTRis GiAnnAkOPOulOsDR. MATThEw CROssTOn

PETRA POsEGATEJA PAlkO

luísA MOnTEiROninA lAvREnTEvA

GAbRiElA PAsChOlATi DO AMARAlTAylOR MORsE

JEAnETTE JJ hARPERDiAnnE A. vAlDEz

THE CASPIAN PROJECT

A WEEKLY EDITIONFROM THE MODERN DIPLOMACY

And although the conditions for the coun-try were pre- written, the code of conducthad yet to be established and was depen-dant on the ruling authority and the Kaza-khstan people. Luckily, the country chosethe way of interreligious and interculturaldialogue, which keeps its many diversehearts and minds in harmony. Kazakhstanwas therefore able to piece together themosaic of many different ethnics, religions,languages and nations that constitute it,creating a diverse but unified land every-one can call home.Fresh in the independent years, this ap-proach was largely under way inside thestate borders, assuring a stable future forthe newly introduced political entity. But inthe aftermath of 9/11, Kazakhstani Presi-dent Nursultan Nazarbayev decided tomore aggressively and visibly promote theneed for greater understanding amongpeoples in the global arena. Consequently, year 2003 saw the continua-tion of these domestic policies to the inter-national community with the introductionof Astana- based Congress of Leaders

of World and Traditional Reli-gions, which has since becomea prominent triennial platformfor interfaith dialogue and waslast held this year on June 10thand 11th. The purpose of thisCongress is predominantly theinteraction between differentreligious leaders and the peace-ful addressing of commonthreats such as terrorism, ex-tremism, violence and othermaleficent sprouts of religiousbeliefs. The purpose of the con-ference is also genuine effort toset the course for a more har-monious development of theworld, break the hostile stereo-types and inspire many ways inwhich different beliefs can com-pliment, learn, grow and coop-erate with one another.Kazakhstani president has em-phasized many times that reli-gious leaders have alwaysplayed an integral role instrengthening their societiesand now more than ever, con-sidering the current situation inthe world, they must work to-gether towards greater regionaland global stability.

GeoGrAphy AnD poliTicS undoubtedly conditioned Kaza-khstan as a country. It is home to 140 ethnic groups and 17 reli-gions in the intersection of different regions, continents andsurely, civilizations, making it a very diverse, polyglot and multire-ligious nation in the median it remains to this day.

CAN KAzAKHSTAN PROvE HUNTINgTON WRONg?

MD STAFF

WWW.MODERNDIPLOMACY.EU THE CASPIAN PROJECT

All of the above is of course intertwined withthe ever present promotion of non- prolifer-ation, prevention of drug trafficking andstrengthening of the environmental securityby Kazakhstan and its president.Since Kazakhstan is home to an 80% Muslimpopulation with additional 20% cacophonyof various religious beliefs, all of them peace-fully coexisting, it is a perfect country to hostand initiate such events. In 2012, Astana wasa host city of the International Forum, de-voted to launching the International Decadefor the Rapprochement of Cultures, startingfrom 2013 all the way to 2022. The Forumwas attended by many high ranking UN offi-cials, prominent members of the UNESCOHigh Level Group for Peace and Dialogue ofCultures and experts of ethics and cross- cul-tural communication, discussing the furtherdevelopment of intercultural dialogue andcultural diversity. In this frame, Kazakhstanwas applauded for its considerable skill withcommencing and fostering inter- ethnicalcommunication inside the country and thepotential of the spill- over effect such suc-cessful inter- state policies can provide forthe global community. This unique experi-ence of inter-ethnic, inter-religious and inter-cultural communication, accumulated byKazakhstan, can surely set an example tomany countries.

The Kazakhstan government also continu-ously strives to provide for all the necessaryelements and conditions for the evolvementof various different cultures and traditions,inside and outside state borders alike. As aresult of these efforts, more than 800 differ-ent ethno- cultural associations operate inKazakhstan, in addition to 384 missionariesfrom all over the world. Therefore, instead ofseparating, Astana is very keen in buildingbridges. Being located on the intersection ofcivilizations, Kazakhstan likes to see its globalrole as the gateway to rapprochement ofEast and West, Europe and Asia, Christianityand Islam and much more. The relevance ofthis is additionally determined by the courseof history itself, hereby especially referring tothe globalization processes of the modernworld, increased migration flows, the emer-gence of new national, cultural, religious andother minorities, ethnic and religious con-flicts. In such terms efforts, continuouslymade by Kazakhstan and its leadership, areeven more important.

In the recent years, the activities of Kaza-khstan in promoting inter- cultural dialogueamong civilizations and nations have esca-lated and its reputation as a tolerant andopen- minded country seems to have solidi-fied in the eyes of the international commu-nity. Astana also has a solid record ofinternational mediation efforts so far andconsequently, the role the country has inglobal politics has risen vertically and ex-panded horizontally. Many experts agreethat the role of the mediator and peace-maker president Nazarbayev holds and pro-motes is both an opportunity and achallenge. Thorough the years he has provedto be a reliable partner and an active inter-national player.

MANY ExPERTS AgREETHAT THE ROLE Of THE MEDIATOR

AND PEACEMAKERPRESIDENT NAzARbAYEv

HOLDS AND PROMOTESIS bOTH AN OPPORTUNITY

AND A CHALLENgE

In his efforts to show that Kazakhstan canplay the international communication plat-form between the East and the West, com-bined with the country`s support for non-proliferation efforts, he tried to initiate tohost talks on Iranian nuclear issue in Almaty.Furthermore, he continues to work towardsnormalization of relations between Russiaand Ukraine and since Kazakhstan has veryfruitful and cooperative relations with bothRussia and Europe, the efforts are met withhigh hopes from the bystanders. As a result,Astana was already host to four- way summitbetween Russia, Ukraine, Germany andFrance. Therefore, not accidently, in the lastgrand strategy of Kazakhstan “Kazakhstan2050”, it is clearly stated: “The world is under-going an acute crisis of outlook and values.

We increasingly hear voices heralding theclash of civilizations, the end of history andthe failure of multiculturalism. It is criticallyimportant that we stay away from this kindof discourse, preserving our time-tested val-ues. We know exactly how we turned whatwas called our Achilles heel – multi-ethnicityand multi-religious reality – into an advan-tage. We must learn to live in co-existence ofcultures and religions. We must be committed to dialogue betweencultures and civilizations. Only in dialoguewith other nations our country will be ableto succeed and gain influence in the future.In the 21st century Kazakhstan muststrengthen its position of a regional leaderand become the bridge for dialogue and in-teraction between East and West. “

WWW.MODERNDIPLOMACY.EU THE CASPIAN PROJECT

Kazakhstan in 2015 is no different in thatcase from any other government. But thereare some interesting regional, transre-gional, and truly global infrastructure proj-ects Kazakhstan is including alongside thestandard local fixes that could carry signifi-cant geopolitical weight moving into thefuture. Indeed, just how successful Kaza-khstan is in ‘fixing the potholes’ across itscountry could become incredibly impor-tant to countries like Russia, China, Turkey,Germany, and the United States. Who knewroad work could be so exciting!First consideration goes to the Western Eu-rope – Western China International TransitCorridor, which is a massive constructionendeavor aiming to reinvigorate what is ba-sically a modern ‘Silk Road,’ only with all theamenities of modern highway construc-tion. The 7.5 billion USD infrastructure in-vestment will basically connect WesternEurope with an efficient superhighway toWestern China (and subsequently throughChina’s highway system all the way, theo-retically, to the Pacific Ocean) throughKazakhstan.

The 2,840 km transit system hasapproximately 2/3 of the costcoming from the World Bank,ADB, EBRD, and IDB. Kazakhstanfor its part highlights the impor-tance of this corridor not just inits economic reports but in itsforeign policy and national se-curity briefings, with its ultimategoal to decrease the delivery ofgoods from China to Europefrom the current road traveltime of 45 days down all theway to just 10. This new Silk Road ostensiblyrests on Kazakhstan for beingthe crucial ‘middle passage’ thatmakes the Europe to Asia con-nection possible. In its own pol-icy briefings Kazakhstanemphasizes this need not justas a better conduit for improv-ing business and trade but liter-ally connecting the world viaroadway in a peaceful and openendeavor. It is somewhat sur-prising much of the Westernworld has not capitalized onthis massive human geopoliti-cal transportation project moreheavily.

It Is entIrely CoMMon for a federal government to makebudgetary promises to improve infrastructure. Indeed, everycountry around the world is full with both promises and jokes lam-pooning said promises to ‘fix roads, fill potholes, and make it easierto get around and do business.’

The silK roaD sUperhiGhWaY

Dr. MatthewCrosstonSenior Editor

Matthew Crosston isProfessor of PoliticalScience, Director of

the InternationalSecurity and Intelli-

gence StudiesProgram, and the

Miller Chair atBellevue University

WWW.MoDernDiploMacY.eU The caspian proJecT

KazaKh TransporTaTion as GeopoliTics

Kazakhstan also intends to improve its na-tional rail system, hoping to increase its op-erating efficiency and reach by being themain connector of the Caspian Sea to the Pa-cific Ocean and the chief conduit for China toreach Central Asia and beyond to WesternEurope. Many fine scholars and analysts inthe past have made note of Kazakhstan’s ir-refutable central location as the connectionpoint between Europe and Asia. While his-tory has often made reference to Istanbul(nee Constantinople) as the ‘Gateway to theEast,’ that is largely a contextual referencebased on a history that is now past. The true‘gateway’ with proper infrastructural devel-opment, both economically and politically,could be Kazakhstan. It finally seems fullyaware of this potential, given the new em-phasis within its budget, foreign policy, andnational security policies. More interestingstill will be to see, if this comes to fruition,how much there will be a cascade or copy-cat effect on the rest of the Central Asian‘Stans. Kazakhstan perhaps more than anyother Central Asian country has focused onopen trade, transnational communication,participation within the global economy, andthe rejection of radicalization and extremism.

Perhaps most importantly, it has done thiswith a much less heavy-handed approachwhen compared to its immediate neighborsin the region.

Even more fascinating has been the launchof a completely new project called the ‘Kaza-khstan-Turkmenistan-Iran’ (KTI) railway. Inthe past decade this project could have runafoul of the United States, what with itsadamant stance on keeping Iran limited andconstrained in terms of economic develop-ment as long as it was still under suspicionwith its nuclear energy/weapons program.Recent improvements in Iranian-Americanrelations, or at least the prospect of those re-lations warming up and becoming more ten-able, could prove to be of tremendousbenefit to Kazakhstan and especially the KTIrailway. Most in the West have viewed thesoftening of relations between Iran and theWest strictly from the much larger perspec-tive of global geopolitics and conflict. Muchless time and attention has been paid to thenumerous payoff effects such a thaw mayhave on the immediate region. Kazakhstanclearly has not missed this relevance and isdeftly trying to position itself to capitalize onpotentialities.

Kazakhstan is not without its problems. Anycountry that has been ruled by the sameleader, and his commensurate favorites, un-interrupted since 1991 cannot be absent thetypical corruption, nepotism, waste, and bu-reaucratic inefficiency notorious with anygovernment so dominant and assured of itsplace and future. But time and accomplish-ment has clearly shown Kazakhstan to be afairly ‘dull’ country.

KazaKhsTan eMphasizesThis neeD noT JUsT

as a beTTer conDUiTfor iMprovinG bUsiness

anD TraDe bUT liTerallYconnecTinG The WorlD

via roaDWaY in a peacefUlanD open enDeavor

And in this case, ‘dull’ is quite positive: itmeans it is relatively stable, reliable, and ab-sent the turbulence that has been seen morethan once in several of its neighbors: Uzbek-istan, Kyrgyzstan, Afghanistan, and Iran justto name several. Kazakhstan may not be themost open or the most perfectly democraticof systems. But it clearly values calm stability and eco-nomic progress, not in the sycophantic andsomewhat irrational way that Turkmenistandoes, but in a way that sees its future as anactive member of the global economic sys-tem and wanting to be considered a valuedpartner in the larger global community ofpolitics.

Until recently, only Azerbaijan in the Caspianregion could consistently lay claim to thatgoal. Kazakhstan seems intent on makingthat club now a twosome. As the saying goes- once could be an accident, but twice wouldbe a trend. If Kazakhstan continues to playout this new role as Central Asia’s stablegiant, as the Caspian’s reliable ‘Stan, then itmay just end up finding itself in a much moreimportant geopolitical role: the conduit fromWest to East, the solidifier of a new Silk Road,and the foundation upon which a new era ofcommunication, trade, and transportationdevelops between the two dominant civiliza-tions in human history. Not bad for a strategythat basically started with a desire to just fixa few potholes.

WWW.MoDernDiploMacY.eU The caspian proJecT

Peaceful discussions amongst Caspianmembers display a warm and sentimentalapproach towards an issue that can easilyimpact Russia’s economic and political suc-cess. Although Russia has gone on recordto demonstrate public support of sea de-marcations, behind-the-scenes negotia-tions with Turkmenistan and Kazakhstan’sleaders appear to be fueling Russia’sagenda in Ukraine, providing a warning tothe possibilities of a successful Trans-Caspian Pipeline initiative that does notoffer Russia a significant role. The building of Caspian alliances commu-nicates a desire for dynamic partnershipsthat are dismissive of one dominant player.Russia’s public support of a unilateral deci-sion-making power is being quickly out-voted as plans carry forward toward moreinnovative models that would elevate theeconomic and political influences of neigh-boring countries.Beginning almost twenty years ago, plansto come to an agreement have been con-tinuously stalled over explicitly defining re-gional access to the Caspian Sea, mostlydue to the abundance of natural oil and gasreserves under its waters.

Out of the five neighboringcountries Russia’s interests arethe least benefited by the Trans-Caspian Pipeline (TCP). “Bigcountries, especially, havefound it easier to make privatedeals with President VladimirPutin’s government. And thathas done little for Europe’s mostvulnerable economies, whoseinfrastructure is designed onlyto take in supplies from Siberia.”(Klapper & Lee) Russia contin-ues to strictly maneuver itsagendas amongst EU nations,by manipulating energy distri-butions as a form of reprisal forill-approved political advance-ments concerning the Ukrain-ian crisis. The attitudes toward the TCPproves not only a demonstra-tion against long-term Russianconstraints on the EU but alsothe possibility that such a plancould prove effective to reliev-ing future economic and powercrises amongst EU countries.

Locally, Turkmenistan and Kaza-khstan have been joined byAzerbaijan, all of whom areopenly leading TCP initiatives,as support by the EU growsstronger.

Russia’s eneRgy contRol appears to be soon coming to ahalt as Caspian members, Turkmenistan and Kazakhstan, plan ongaining control over vital areas of the Caspian Sea. Ongoing de-liberations over assigning specific demarcations to the five outly-ing regional members of the Caspian threaten to impede onRussia’s years of energy control within the region and across theEU.

tHe traNs-caspiaN pipeliNe

Dianne a. ValDez

Dianne Valdezjust completed her

Master’s degree in theInternational Security

and IntelligenceStudies Program at

Bellevue University inOmaha, NE, USA and

continues herinterests in the

geopolitics of thisimportant region,

along with politicalstrife in Africa.

WWW.ModerNdiploMacY.eU tHe caspiaN proJect

Geopolitics Near aNd abroad

EU positions are in favor of the TCP withhopes to break away from Russian-importedgas supplies. “The Kazakh-Turkmen maritimedemarcation deal strengthens Turk-menistan's claim on rights to use its sectorfor whatever purposes it wishes -- building apipeline, for example -- without consultingthe other littoral states. Turkmen and Azer-baijani authorities have already said if bothcountries agree to build such a pipeline thereis no need to seek approval from the otherthree coastal states,”(Ovozi). Such actionshave tried to basically oust Russia, pushingits government to oppose progress on theTCP, citing implications of negative environ-mental effects and even resorting to possiblethreats against its diplomatic relations withCaspian members.

Russia’s sentiments seem to be shared byIran in the disadvantages of the TCP in that italso cannot take part in the main spoils. “Thecurrent standing of the two countries in thesummit indicates that Russia and Iran -- atleast in this phase -- can capitalize on theircommon concern…

According to the Itar-Tass news agency, thecountries agreed to increase Russian corpo-rate participation in the development of Iran-ian oil and gas deposits (such as the SouthPars gas field), as well as to cooperate in mar-keting policy in oil and gas exports and set-ting up capacity for producing, storing andexporting natural gas in Iran,” (Berti). How-ever the burdens of Iran’s woes are verymuch different from Russia’s in that Iran mayhave the ability to change its own fate on theCaspian issue. With relations with the westeasing and talks of years of sanctions beinglifted, it appears that opportunities for Iran’srecruitment to join the alliances of the TCPare alive and present. “Iran still says that theCaspian and its resources must be subject tojoint supervision. Analysts however say that Tehran couldmoderate this position in exchange forgreater involvement in oil and gas exportroutes. Tehran has been presenting its ownpipeline network to the Persian Gulf as thecheapest and shortest export route forCaspian oil,” (MacWilliam). Should Iran decideto change its mindset, the TCP could presentan amicable solution to its own economic in-stability. As a partner in the TCP, Iran wouldattain the political advancement that couldrebuild its geopolitical reputation.

For the U.S., concerns over developing theTCP demonstrate an ulterior motive againstits longtime rival, Russia. “Pipelines, ports andpower plants are the weapons of what couldprove a generation-defining conflict be-tween the U.S. and Russia over how Europeheats and electrifies its homes.

pipeliNes, portsaNd poWer plaNts

are tHe WeapoNsof WHat coUld prove

a GeNeratioN-defiNiNGcoNflict betWeeN tHe U.s.

aNd rUssia over HoWeUrope Heats aNd

electrifies its HoMes

Success, U.S. officials say, would mean finally“liberating” former Soviet states and satellitesfrom decades of economic bullying byMoscow.” (Klapper & Lee) Not only would thesuccess of the TCP aid in the demilitarizationof Russian economic presence over the EU, itwould also push alliances toward EU coun-tries to bid against Russian energy provisionsand rely on American counterparts for alter-native energy solutions.

Hence, though plans for the TCP continue toremain the excitement of media reports andoffstage political meetups in the region, theworld’s major power players - Russia and theU.S. - appear to be stacking their chips in apolitical game of poker.

Though initial discussions for the TCP reallyonly involved Russia and its Caspian neigh-bors, its longtime rival to the far west hasfound comfort in trying to diminish Russia’sinfluence. The building of the TCP wouldmark for the first time a remarkable unionbetween East and West that would see theU.S. try to use it as a “debunker” of Russia’slongtime natural resource coercion withinthe region and further out amongst EUstates. The TCP could even provide some po-litical relief for the crisis being witnessed inUkraine as it may make Russia more pliablein its negotiations. However, history alsodemonstrates that Russia tends to not be soeager to lay its concerns to rest and doesn’tstay backed into a corner very long.

WWW.ModerNdiploMacY.eU tHe caspiaN proJect

russian financial institutions have shown high interestin helping to raise the economic and business profiles both ways,Russian business in Africa and African business in Russia. For ex-ample, Eximbank of Russia has expressed readiness to take advan-tage of huge opportunities and existing growth potential in bothregions. Eximbank of Russia is always open for a dialogue and dis-cussion of projects of various degree of complexity.

In this exclusive interview, Dmitry Golovanov, Chairman of theManagement Board of Eximbank of Russia, believes “there is every-thing necessary for that – significant experience of implementa-tion of complicated infrastructural projects accumulated fromSoviet days.”

He further advocates for an increased economic partnership be-tween Russia and African countries, reaffirms the desire to con-tinue developing business dialogue with interested companies inefforts to pursue active involvement in international programmesand projects for Africa. In addition, he raises some specific propos-als necessary for facilitating business between Russia and Africa.

FInAnCIAl InStItUtIonSto SUPPort rUSSIA-AFrICAnBUSIneSS ProJeCtS

www.moDernDIPlomACy.eU the CASPIAn ProJeCt

An IntervIew wIth DmItry GolovAnov

Kester KennKlomegah

Kester KennKlomegah

is an independentresearcher and writer

on African affairs inthe EurAsian region

and formerSoviet republics.

how do you assess the level of activity ofeconomic cooperation between russiaand africa today?

For the purposes of visibility, I would like toproceed to figures right ahead. Goodsturnover between Russia and countries ofAfrica to the south of Sahara is today onlyabout US$1.5 bn. Export – less than US$1 bn.,among almost 50 countries real countera-gents in export operations are less than 10.We can see that the structure of Russian ex-port has deformed significantly towards ex-port of raw materials. One more impressivestatistics is that about 80% of Russian invest-ments into Africa relate to exploration andmining of natural resources.

Skeptics will probably call such situation as"pessimistic". We, Eximbank of Russia, see inthe current situation high opportunities – agrowth potential, on account of develop-ment of export of products other than rawmaterials. There is everything necessary forthat – significant experience of implementa-tion of complicated infrastructural projectsand development of the territories accumu-lated from the times of the USSR, experienceof Eximbank of Russia (financing of the proj-ect for construction of the satellite commu-nications system), comprehensive approachto achievement of the objective: a line ofcredit and insurance products developed to-gether with the Export Insurance Agency ofRussia (EXIAR) especially for exporters, effi-ciency of taking decisions on issue of loans,market expertise and individual approach toevery client.

Do you think that russian authoritiesshould support the business in coopera-tion between russia and africa? can suchsupport become a driver of growth ofbusiness activity between russia andafrica? What is the role of the banking sec-tor in this process?

Russian authorities provide considerablesupport to the business – moreover, at pres-ent support of its export initiative is a priorityfor the Russian Government. We, as a statebank oriented towards support of exporters,provide one of the efficient instruments ca-pable to give a new impulse to economic co-operation between Russia and Africa.In addition to specific proposals from export-ing companies, in aggregate with deep un-derstanding of needs of the African market,our portfolio contains a line of various finan-cial products – this may be loans to Russianexporters, loans to foreign purchasers, leas-ing offers, financing involving foreign banks,all this is supplemented with a line of insur-ance products of EXIAR – so, the state pro-vides significant support to export.

As regards to the banking sector, today thereis no designated product line for the Russianexporters. Banks experiencing a difficult eco-nomic situation prefer only short-term prof-its and cannot afford development ofbusiness models which will become efficientin the long term. The state oriented towardstimely support of export understands that itis necessary to invest into and develop thisdirection which will further become a driverof economic growth.

It is very important that cooperation be-tween Russia and Africa can and should bedeveloped on account of expansion of theexport potential of companies which arenow operating in the domestic market only.Eximbank of Russia has taken negotiationswith companies willing to expand their busi-ness on account of achievement of foreignmarkets which need our financial support forthis purpose.

Now we are taking negotiations for imple-mentation of projects in such directions assupplies of geological equipment, equip-ment for washing plants, metal structures forconstruction of mining modules at the car-rier Katoka (the 4th diamond deposit in theworld by size). There are some perspectiveprojects for supply of mineral fertilizers toSenegal, Togo and Benin, supply of medicalgoods, we discuss the possibility of financingof construction of social residential facilitiesin the region etc.

experts believe that the share of russianexport to african countries is very low,first of all, due to insufficiently developedinfrastructure in the industrial sector andproblems with the production base. Doyou agree to such an opinion? how the sit-uation may be improved in the long term?

Obviously, Russia has faced some problemsassociated with poor development of the in-dustrial base, however such problems aremuch less critical compared to the situationin the beginning of the 2000's. Tasks set toour country may be resolved by means of im-plementation of joint projects. In addition to the standard set of instrumentsfor support and stimulation of export beingimplemented by national development insti-tutes, the experience of our cooperation alsoincludes such a solution as cooperation ofRussian and African companies aimed at im-plementation of projects for export to thirdcountries.

www.moDernDIPlomACy.eU the CASPIAn ProJeCt

how do you assess the potential of africanproducers interested in the russian mar-ket? What may attract them to russia?

Russia is a large developing market withgrowing purchasing capacity, interested indevelopment of competition and improve-ment of quality of products supplied fromabroad. We can surely say that companieswhich are ready to try the Russian markethave a chance to gain much profit. It is to benoted that the Russian market has its ownpeculiarity, so companies entering the mar-ket should clearly understand economy, po-litical components and legal issues. We often face a problem that companieswilling to enter international markets cannotsimply find foreign purchasers for their prod-ucts. I suppose that the same problem is ex-perienced by African businessmen. Provisionof consulting services, thanks to develop-ment of special state institutions, - theywould facilitate their activity in Russia.If suchsupport would be useful on our part, we arewilling to provide it to our African partners.

Cooperation will provide additional oppor-tunities for investments; ensure additionalload of production capacities; improve com-petitiveness of products on account of coop-eration with other companies; become acatalyzer of expansion of sales markets bymeans of implementation of the strategy of"joint reach" of new markets. Competitive-ness of joint projects will be ensured by ad-vantages of our economies and instrumentsfor support of private initiative.

We should not forget about accessibility offinancial instruments regardless the level ofdevelopment of the industrial sector andperspectives of a company interested in in-ternational trade, if the instrument necessaryfor that, for example, a loan is accessible atthe rate of 17-20%, implementation of busi-ness plans will be postponed till stabilizationin economy. Although we speak about the reserve dy-namics – first we should support export, andin the long term, this will facilitate stabiliza-tion of economy.

You pronounced at the annual meeting ofthe afrocom at Vnesheconombank someof specific solutions and proposals to im-prove the business climate between rus-sia and africa – what steps do yousuggest?

It is necessary to arrange large-scale Russian-African forums/summits. This format pro-posed by partners from China, USA andEuropean Union, has proved itself – personalcommunications and contacts at all levelsfavor dynamics of cooperation development.A significant effect can be caused by forma-tion of general registers of businessmen in-terested in cooperation. This will allow tofacilitate the task of importers/exporterssearch for counteragents for placement oforders or sale of products. Besides, joint implementation of projects inthe area of infrastructural development willpositively influence development of con-tracts between Russian and African compa-nies. However, transparency and possibilitiesfor medium and small business to accesscontracts within the framework of imple-mentation of major projects are required.Such projects generally have significant mul-tiplicative effect in terms of comprehensivedevelopment of territories.

One more direction of stimulation of coop-eration may be provision of Russian andAfrican companies with assistance in cre-ation of value added chains, including cre-ation of joint ventures which base theircompetitive potential on the use of countryadvantages. Eximbank of Russia works in thisdirection to the extent of creation of financialinfrastructure to procure such projects. TheBank plans to develop cooperation with in-stitutions for development of countries ofthe region. We are always open for a dia-logue and discussion of projects of variousdegree of complexity.

exImBAnk oF rUSSIA hAS tAken neGotIAtIonSwIth ComPAnIeS wIllInG to exPAnD theIr BUSIneSS on ACCoUnt oF AChIevement oF ForeIGn mArketS whICh neeD oUr FInAnCIAl SUPPort For thIS PUrPoSe

www.moDernDIPlomACy.eU the CASPIAn ProJeCt

It is also known for being a secular, modern,prosperous, and racially tolerant country.For a state as young as Kazakhstan, theprogress the country has made is nothingshort of miraculous despite its history ofsuffering, tragedy, colonization, domina-tion, crackdowns, and brutality.

Kazakhstan has a highly controlled andcentralized polity and, as is commonplacefor this type of government, has a reputa-tion for being wasteful and corrupt. How-ever, its leader Narsultan Nazarbayev – whohas been in place since the country’s inde-pendence – is quite popular. In fact, re-cently, he was ranked as one of the top fivegreat leaders of the world. His vision andpolicies has resulted in stability and higherstandards of living in Kazakhstan’s short life.Even while dealing with some tension fromseparatists among the ethnic Russian pop-ulation, Kazakhstan has managed to remainexempt from many of the problems expe-rienced in the other former Soviet Re-publics.

Because of its stability, deregu-lation, and more liberal traderegulations, Kazakhstan has at-tracted foreign investors – someof which come from Britain, theUnited States, and France – whoseek to capitalize on its vast re-serves of resources such as oil,uranium, and minerals. New oilpipelines have been built whichhave allowed Kazakhstan toreach markets it could not ac-cess before. Previously, Kaza-khstan’s oil and gas industrydepended on Russia’s demandfor crude oil. However, since the breakup ofthe Soviet Union, there hasbeen a drop in production fromRussian refineries. Now, withprojects such as the Caspianpipeline that links the Tengiz oil-field across the Caspian Sea tothe Russian Black Sea port ofNovorossiysk and the Kaza-khstan-China pipeline thatpumps oil to Alashankou andwestern China, Kazakhstan hasbecome one of the largest pro-ducers of oil in the world. It isalso quite possible that, in time,Kazakhstan will also becomethe world’s foremost producerof uranium.

Of tHe five Central asian states – Kazakhstan, Kyrgyzstan,Tajikistan, Turkmenistan, and Uzbekistan – Kazakhstan was the lastSoviet Republic to leave the USSR. This was most likely due to itsclose economic ties to Russia.

KazaKhsTan’s JourneYFroM PasT To FuTure

Jeanette JJHarper

Jeanette JJ Harperis a graduate student

in the InternationalSecurity and Intelli-

gence Studiesprogram at Bellevue

University in Omaha,NE, USA.

WWW.ModerndiPloMaCY.eu The CasPian ProJeCT

The FoundaTion oF CenTral asia

While Kazakhstan’s future certainly seemsvery bright, it still faces many challenges.Thanks to the Soviet industrial period, it isone of the most polluted nations in theworld. The pollution from industrializationcombined with the demands placed on theenvironment from the extraction of naturalresources, agricultural demands, increasingurbanization, and previous Soviet nucleartesting have forced the country to attemptto alter its economy and revamp its entireeconomic infrastructure. Kazakhstan is awarethat sites associated with former defense in-dustries and test ranges are radioactive andchemically toxic and pose a serious healthrisk to the local population and wildlife. Thecountry has been very proactive on this issueand has signed international environmentalagreements with the UN Convention on Bio-logical Diversity, the UN Conference on Envi-ronment and Development, and the KyotoForum on Climate Change. It is very commit-ted to becoming more eco-friendly and re-cently announced that its Green EconomyConcept policy is to become part of its com-prehensive national development.

Another problem Kazakhstan faces is thedrying up of the Aral Sea. This tragedy isoften described as one of the world’s worstenvironmental disasters. This was once a richand fertile body of water that supportedtraders, hunters, and fisheries. In fact, it wasthe fourth largest lake in the world. Now, it iscomposed of three smaller separate lakesthat are toxic to the people and wildlife thatonce depended on it. It is saturated withchemicals from pesticides and fertilizers.Kazakhstan and its neighbors – who are alsoaffected by the disaster – are trying to re-verse the trend as part of their efforts to be-come more environmentally conscious.

Following the break from the USSR’s state-controlled employment system, Kazakhstanhad to undergo an enormous challenge toconstruct a functioning economy within amoderately short period of time. Kaza-khstan’s giant step from being a socialisteconomy to becoming a free market econ-omy was fraught with all kinds of challenges.In the few years following independence, thecountry floundered and finally hit rock bot-tom in 1994-1995. Then, in 1996, things tooka turn for the better when the country’s eco-nomic policies started to bear fruit. The spiritof entrepreneurship took hold in this neweconomic climate and demand for goodsand services increased. The country has con-tinued to make positive steps on the road toeconomic independence ever since.The country must now deal with a typical ob-stacle for states that find themselves sud-denly very prosperous: wealth inequality.

KazaKhsTan’sgianT sTeP

FroM being asoCialisT eConoMY

To beCoMing aFree MarKeT eConoMY

Was FraughT WiThall Kinds oF Challenges

Even though the country has grand designsfor the future in regards to addressing thewide poverty gap and lack of access tohealth care and essential services likesewage, clean water, and central air, the real-ity is that only people living in large urbancities are enjoying the benefits of Kaza-khstan’s sustainable development. To ad-dress the issue of people living in remoteregions, the country has a plan to diversify itseconomy by moving into areas such as lightdiversity and banking. This will help realizeits more grandiose plans to become a re-gional financial and trading center andmaybe even aspire to return to its ancientSilk Road roots to become a hub for interna-tional commerce (for more on this seeCrosston’s article in this issue).

Politically, Kazakhstan is sluggishly draggingits feet in becoming more democratic. Presi-dent Nazarbayev has been very vocal in hisbelief that democratic change must be aslow process or else the country risks beingdamaged by hasty or ill-considered deci-sions. The plan does include strengtheningthe parliament, reforming local government,improving judicial and law enforcementagencies, and developing political parties.But the focus remains on the economy beingthe country’s first priority. During a speech tothe Joint Session of the Chambers of theKazakh Parliament in 2007, the Presidentpromised that “the next stage of democrati-zation and reform would include reforms toenhance the effectiveness, transparency andaccountability of the executive branch,

anti-corruption measures as well as steps todecentralize state administration and de-velop local government.”The United States has looked favorably uponthese reforms. Even though PresidentNazarbayev will remain in office for life, theUS State Department believes Kazakhstan istaking a step in the right direction. In fact,even though it is still relatively speaking in itspolitical infancy, Kazakhstan has proved thatit can withstand the strains resulting fromrapid political and economic change. Thegeneral global consensus regards it as themost stable of all the Central Asian states.

Thus, Kazakhstan is unique in that it hasfound itself faced with the monumental taskof building an independent nation, a marketeconomy and democracy all at the sametime but has largely remained stable andpositively-viewed by the world community.So far, it has managed to beat the odds. Fora country that aspires to become one of thetop 30 competitive developed countries inthe world by 2050, Kazakhstan seems tohave achieved the foundation necessary tobegin such a lofty goal.

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The Strait of Hormuz is a global chokepointfor the flow of oil in which Iran is able toleverage the asymmetric tactics of its com-paratively small navy to conduct area-de-nial operations. Although the Caspian Seadoesn’t have a chokepoint that would bethe focus of the Iranian military, it utilizesthese same tactics and capabilities to en-force their holdings and claims in theCaspian Sea.Although the Caspian Sea states haven’t of-ficially come to terms on their respectivemaritime claims, Iran currently firmly con-trols about 12% of the Caspian Sea. The cur-rent Iranian holdings are very difficult froman economic perspective as they are re-source rich but also much deeper than therest of the Caspian Sea, which makes ex-tracting these resources far more difficult.This is a major contributing factor to theIranian claim to fully 20% of the CaspianSea, which conflicts with other states’claims. There are essentially two threats toIran in the Caspian Sea over these territorialclaims: Russia and Azerbaijan.

During the Russian Empire andthe Soviet Union the CaspianSea was primarily underMoscow’s control. Even afterthe dissolution of the SovietUnion, Russia has consistentlysought to be the major powerin the Caspian Sea. This is re-flected in three ways. The firstway is that the Russian Navymaintains the largest fleet in theCaspian Sea. The second way is throughgearing the other Caspianstates against Iran, being Rus-sia’s main regional competitor,through soft power moves suchas joint military exercises andtrade agreements. The thirdway is through overtly blockingIranian attempts to build up itsnavy in the Caspian Sea, such aswhen Russia denied Iran the useof its rivers to transport a war-ship from the Gulf to theCaspian Sea. Being that Russia isthe major military power in theCaspian Sea, an asymmetric de-fense similar to Iranian strategyin the Gulf would translate well.

The IranIan MIlITary is predominately thought of for its ca-pabilities and strategy in the Gulf. Though the competitors differin the Caspian Sea, the Iranian Military has a similar compositionand strategy in this theater.

tHe HyDra Of tHe CasPIan sea

Taylor Morse

Taylor Morse iscurrently a graduate

student in theInternational

Security and Intelli-gence Studies

Program at BellevueUniversity in Omaha,

NE, USA.

WWW.MODernDIPlOMaCy.eU tHe CasPIan PrOJeCt

Iran’s naval strategy

The second threat to Iranian claims in theCaspian comes from Azerbaijan. Althoughnot a large military threat, Iranian claims inthe Caspian Sea overlap mostly with theAzeri claims. This is primarily due to the con-tested areas having prime depth for resourceexploitation. In particular the proposedWestern-backed pipeline, which Iran op-poses, would traverse this area and headthrough Azerbaijan towards the West. Iranhas tested these waters with an incursion byan oil platform which was virtually unop-posed by the lackluster Azeri Navy. With thistype of incursion Iran has shown it is readyto engage in its preferred naval strategy ofarea-denial to enforce new acquisitions.

Even the mighty US Navy, the world’sstrongest and a sign of global Americanpower, is frustrated by the Iranian Navy. TheStrait of Hormuz is able to be blocked off byIran due to its leveraging of asymmetric tac-tics to conduct area denial. Although thisscenario hasn’t been tested in actual combatit has shown to be worrisome to the US withthe adoption of doctrines such as AirSea Bat-tle which focus on countering anti access/area denial capabilities. Therefore it is logicalthat this Iranian strategy would be employedin the Caspian Sea to enforce its claimsagainst local neighbors.

The Iranian chain of command is decentral-ized in that small unit commanders haveenough autonomy to carry out the overarch-ing strategy even with infrequent communi-cation between itself and central command,which creates capacity to absorb attempts todecapitate the command structure from itsconstituent units. The Iranian military copiesthis strategy with all of its serving units be-yond the navy, meaning its entire militarycould operate in this manner within aCaspian Sea conflict.

To supplement the decentralization of theIranian military command structure is a cul-ture of sacrifice within the Iranian military.This is in reference to the motivation for serv-ice-martyrdom that is highly emphasizedwithin the Iranian military. To get the mostout of its asymmetric strategy it is importantthat the Iranian military is able to rely on theirpersonnel to put everything on the line to beable to accomplish their mission even if theyare cut off from their command structure.This is also rumored to involve the plannedusage of suicide attacks as part of Iran’s mili-tary strategy. Regardless of the use of suicideattacks or not, the Iranian military has plentyof tools at its disposal to secure its claims inthe Caspian Sea.

Iranian surface ships are capable of extensivemine-laying operations which deny an areato their enemy and serve as a deterrent toany other waters that the Iranian Navy oper-ates. Iranian submarines also serve this pur-pose in that their existence is a deterrent toenemy naval movements.

even tHe MIgHty Us navy,tHe WOrlD’s strOngest

anD a sIgn Of glObalaMerICan POWer,

Is frUstrateDby tHe IranIan navy

Closer to the coastlines, small attack boatshave the capacity to ambush naval shipsfrom concealed positions in suicide or hit-and-run attacks. Further inland Iran still hasland-based missiles and aircraft which areable to be deployed to secure and deny theirclaims against enemies. Finally, Iran has theability to deploy Special Forces to conductsabotage, hit-and-run, and suicide attacksagainst enemy military facilities. Therefore,the Iranian military has the ability to at leastsignificantly frustrate the ability of an aggres-sor to encroach upon Iranian claims withinthe Caspian Sea, similarly to their strategy inthe Gulf, even when faced by a supposedlysuperior military rival like the United Statesor Russia.

The growing geostrategic importance of theCaspian Sea has been reflected in the grow-ing Iranian military emphasis on it. Whetherit is the threats of the powerful RussianCaspian Flotilla wanting to retain power overthe Caspian or Azerbaijan’s overlappingclaims with Western backing, Iran feelsbacked into a corner. Thus having a doctrineof being able to operate with ‘the commandhead cut off’, pushing a martyr moralethroughout their military, and emphasizingtools to conduct area-denial operationsmakes the Iranian military a formidable op-ponent. It is potentially the hydra lurking be-neath the surface of the Caspian’s contestedwaters, making an impact far beyond the im-mediate region.

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Popularly known as the BRICS Bank theNDB is operated by five of the larger devel-oping economies to build a multilateral de-velopment bank (MDB) that will firstattempt to address a portion of the mem-bers’ development funding gaps and atsome later point lend to other developingeconomies. The coming together of China,Russia, India, Brazil and South Africa to formthis bank is not without a sound rationale.These countries have only 11 percent of thevotes at the International Monetary Fund(IMF) despite recent reforms of its votingpattern. However together the countriesaccount for 40 percent of the world’s pop-ulation and their combined GDP is over 25percent of the total global GDP.Having said that each country has a differ-ent incentive and the implications for eachare different too. China stands to gain themost emerging from this as a strongly dom-inant world player that is also effectivelyable to engage multilaterally with otherlarge developing economies, or at least sig-nal so.

Given the souring of its relation-ship with the West post thecountry’s involvement inUkraine, Russia stands to gaincredibility by being a part of theNew Development Bank’s (NDB)founding membership. Braziland South Africa both have ail-ing economies, the latter evenmore so, and this might helpthe two countries shore upsome confidence, though theeffect might not be long lasting.India is in an interesting posi-tion given that it sees Chinaboth as a threat and an oppor-tunity. Being a founder mem-ber, however, also adds to theperception that the country isnow a leading player amongemerging economies.

A significant challenge for theBank is to not let the strategicinterplay of China and India af-fect its working. The first fewmonths since the announce-ment have seen no major hic-cups but as the Bank grows inscale this will be something towatch out for.

The New DeveloPmeNT BaNk (NDB) that was set up in July2014 promises to be at least for now an important part of the dis-course on how the primacy of the developed economies in globalaffairs needs to be challenged by developing economies.

ManY ChaLLengeS anD ManY OPPORTUnITIeS

Pallavi Roy

Pallavi is a lecturerin International

Economics at CISD,SOAS with ten years

of experiencecovering policy,

infrastructure andmetallic commodities

as a senior financialjournalist in India.

WWW.MODeRnDIPLOMaCY.eU The CaSPIan PROJeCT

The "BRICS Bank"

The Bank recently even announced the ap-pointment of its first president KV Kamat aveteran and respected banker from India. Onthe other hand the opportunities for a finan-cial institution that brings together five keydeveloping countries are immense. For in-stance the Bank can serve as a platform foroutlining financing strategies to deal with is-sues of productivity growth and employ-ment generation, an area other MDBs do notconcentrate on directly. However given thatthe scope of the Asian Infrastructure Invest-ment Bank (AIIB) is much larger in terms ofcapital and membership and that Chinaseems to be more ambitious about the AIIBbecause its capital contribution to that bankis larger than the NDB’s initial capital of $ 50billion could mean the NDB risks beingsomewhat overshadowed. In terms of financ-ing of the NDB the subscribed capital of $50billion is certainly not sufficient for fundingsignificant portions of the infrastructure re-quirements for most of these countries, bar-ring China which mobilized resourcesinternally for infrastructure financing.

Of course this is the first time that a widelydiverging set of developing countries havecome together in the interests of financialcooperation, (though calling Russia a devel-oping country might be not be very accu-rate) and this is quite significant despite thechallenges. Also the Comprehensive ReserveArrangement of $100 billion which is to beused in times of balance of payment (BoP)crises might be useful to the member coun-tries subject to the conditionalities that areput on the borrowing, in the sense theywould need to be less restrictive than thoseusually imposed by the IMF for loans it makesto countries with BoP crises.

The IMF and the World Bank are still an ac-curate reflection of US-led global powerstructures, despite the rise of China andhence it is highly unlikely that these two willbe competed away by the NDB. The threat tothe Asian Development Bank which reflectsJapanese interests in Asia will come from theAIIB and not the NDB. Amidst talk that thereis a possibility of Greece joining the NDB ifthere is to be a Greek exit from the Euro whatalso remains to be seen is how the NDB willinvite participation from other developingcountries in the future. Yet it is clear theBRICS countries realise that together theywield considerable political and economicclout and will be taken more seriously as oneunit and hence are certainly in a position tochallenge the primacy of the existing MDBs.

a SIgnIfICanTChaLLenge

fOR The BankIS TO nOT LeT

The STRaTegICInTeRPLaY Of

ChIna anD InDIaaffeCT ITS WORkIng

The 10 mosT impoRTanT Things you need To know on Caspian sea Region

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