Caspian Business Journal

Updating U.S. Policy in Central Asia

Washington policy makers are beginning to reassess U.S. policy in Central Asia, in recognition of the regional changes and power shifts that have happened over the last decade. Speaking before a U.S. senate subcommittee last week, Dr Martha Brill Olcott pointed to the wane of Russian influence in the region and an increasing Chinese presence. If the U.S. does not want to fall behind, the Obama administration will need to make a dramatic effort to expand U.S. trade and investments programs in the ‘stans’.

Olcott highlighted how cash flow problems in Russia, as a result of low oil and gas prices, means that the Kremlin has now reached the threshold of the economic and military influence that it may wield in the region.She considers the new customs union between Kazakhstan, Russia and Belarus “a sign of the competitive weakness of these economies rather than their economic strengths.”

So who is filling the void left by Russia? Firstly, Iran has been turning East, working hard to develop more substantial trade links with the region. Turkmen gas exports to Iran are set to double, and Uzbekistan is also sending an increasing amount of it’s cotton harvest to the IRI.

Trade with the Arab world is also growing, notes Olcott, and has a increasing influence on small and medium size businesses in Uzbekistan.

But the main actor is China. Olcott highlighted how the attention that the U.S. has payed to Central Asia has paled in comparison to Beijing’s increased clout in the area. China, she notes, has been drawing on its substantial cash reserves to offer financial packages to governments in the region. It has granted $3 billion to Turkmenistan for the development of a gas deposit at Yuzhnii Iolatan. It  is now the largest single foreign owner of onshore oil and gas assets in Kazakhstan, following it’s purchase of shares in MangystauMunaiGaz.

Dr Stephen J. Blank, a professor at the Strategic Studies Institute who also spoke at the hearing, questioned whether the U.S. can compete, noting the lack of, “any truly strong push for enhanced U.S. trade and investment programs to counter the Russian and Chinese quests for lasting influence there.”

One of the most recent developments, that the U.S. should seek to capitalize on and could provide a major boost for local economies, is the NDN route. Blank suggested that,”the NDN project falls squarely into that category of exemplary infrastructure projects that may serve purposes other than economic stability and global and regional integration, but which ultimately can facilitate these objectives and outcomes.”

It was a view that was backed up by Deputy Assistant Secretary of State George Krol: “Operation of the NDN will demonstrate regional trade opportunities and highlight existing impediments. We seek to promote transportation infrastructure development to improve the capacity and reduce the cost of trade among the Central Asian countries and to promote trade with global markets in all directions.”

To access full transcripts of the hearing, click here.